Reverse Mortgage Funding (RMF) is one of the nation’s largest reverse lenders, standing as a top 5 company based on Reverse Market Insight’s list of the industry’s top lenders by volume and is a pioneer in the proprietary product market.
Since he first entered the reverse mortgage space from the forward origination side, RMF President David Peskin has observed a lot of industry ups and downs on both the FHA-insured side, and the rapidly-developing proprietary reverse mortgage space.
In a conversation with RMD on the very first episode of The RMD Podcast, Peskin charts a course that the industry has taken since his point of entry, identifying the biggest challenges and opportunities he’s observed in the space, while also identifying what the biggest potential opportunity could be in the entirety of his career.
RMD: What do you think accounts for the biggest forward strides that the industry has made over the course of your career?
David Peskin: With the changes that came on 10/2 , they forced the industry to rethink what its direction should be. And now, movement into proprietary products is actually the biggest break, the biggest opportunity [I’ve seen] since I’ve been in the industry.
I think that you’re going to see a lot of interesting products coming out, I think it’s going to become a very liquid market, and I think it’s going to bring a lot more security to the market, meaning we have to be less reliant on the government and the changes that they want to make relatively quickly. I think it just brings a safer environment for everybody.
RMD: How have recent changes made by both FHA and the rising prevalence of proprietaries affected the operations, outlook, and even strategy at RMF?
DP: From an operations standpoint, nothing really changes dramatically outside of the secondary team having to get much more involved as compared to traditional HECMs. But, let’s put that aside for a moment. With respect to strategy and opportunity, you’re now dealing with a much lower upfront cost product, so it allows you to go after that wants-based client again. And, even though it’s a lower PLF or LTV compared to the HECM, it’s a much bigger, broader market.
As you know, FHA limits you with a max claim regardless of home value, whereas proprietary products, there really is no limit, per se, outside what your own guidelines are. So, there’s lots of interesting opportunities to open up the market. I think that’s really exciting for everyone in the industry, including the forward guys that are out there, meaning the forward lenders that are not currently in the reverse business today, but who have always wanted to entertain getting into the reverse space.
RMD: Between greater education and the increasing prevalence of proprietary products, which do you think the future of the industry will most thrive off of?
DP: If the professional world out there, specifically the financial advisors, if they start to promote this product within their own customers as a way to think about your retirement, there’s credibility there. And, of course if we start to see what we’re seeing, which is some of the largest builders in the country offering this as a mainstream product as a way for you to buy a home in a community, it starts to bring a level of credibility.
And then, lastly of course, if banks start to offer the product again, it brings another level of credibility. So, it really just needs to be a product that starts to get offered through many of the same ways that you can get a traditional loan today. When it starts to become a product that is part of everybody’s arsenal with respect to home financing for people over the age of 62, it starts to become a mainstream important product.
RMD: How far do you think the industry has come in educating those professionals about the potential for reverse mortgage products? And, by that same token, how far do you think it still has to go?
DP: I think we’ve gone lightyears compared to where we first started, and I think we were picking up a lot of momentum up until 10/2 of 2017 when the changes came about. And then, there were a lot of people that got sidetracked on the education because the cost for a reverse mortgage, for those that are not looking for a lot of money, are not proportioned to what you need. It’s just too expensive.
Now that proprietary products are coming out and becoming more relevant in the marketplace, we’re starting to see more education of the product to financial advisors. I know that we at RMF do that, we have a team that does nothing but that. As we educate, and financial advisors fully understand and comprehend the product, they get really excited about it.
RMD: Are you still okay with the term ‘reverse mortgage,’ or should it evolve into something else?
DP: I think it would be easier for everybody in the industry if we could call it something else, just because the obvious reasons of the misperceptions of the product. Unfortunately, we can’t. But, it’s going to take time for somebody to be able to sit at the dinner table and brag about the fact that they got a reverse mortgage. I think we would all agree that if I went for 5% on my mortgage to 3%, at dinner I’m going to be telling the world.
RMD: Do you have a vision for what private reverse mortgage products could look like down the line?
DP: I think in general, you’ll start to see some variation of how the borrowers can access their funds, very similar to what’s being done on a HECM today. Whether it’s lump sum or line of credit, or a fully-drawn fixed rate loan, I think you’ll start to see different variations of the products over time.
RMD: What do you think the biggest opportunity is for the reverse mortgage market right now?
DP: I would say that it’s the typical homeowner over the age of 62 that is carrying a mortgage balance, that is thinking about refinancing because they’re having a challenging time with their cash flow, and are either looking at trying to lower their monthly payment, or thinking of going to a bank to get that home equity line of credit, and they’re clearly not in a situation where they have to do a loan but would love to do a loan to help them.
And, when they think about doing a reverse mortgage, they’re typically turned off because of the costs associated with the HECM, but with a proprietary product and costs very similar to what a traditional loan looks like, I think you’re going to see a big turnover in the market. I think you’ll find a lot more people looking at thinking about refinancing into a proprietary loan, just because of the flexibility of the payments, and because of the costs associated.