While most new equity-tapping companies view reverse mortgage lenders as competition, one company is taking a very different approach by partnering with them directly.
EasyKnock, based in New York City and last month the recipient of $215 million in investment funding, says it has partnered with eight of the top 10 reverse mortgage lenders on a referral basis. This will allow EasyKnock to capture customers who may not qualify for a reverse mortgage to find an alternative solution to tap their home equity, according to EasyKnock CEO Jarred Kessler in an interview with RMD.
By positioning itself as a company that can pick up potential clients that may not qualify for a reverse mortgage, EasyKnock aims to serve as a partner that could give those clients some additional, and potentially much-needed options.
EasyKnock’s equity release products
EasyKnock has two primary products in its catalog. The first is called “Sell and Stay,” which is a sale leaseback product. It works by the client selling EasyKnock the home for its full market value, which then turns around and gives customers up to 75 percent of that value minus existing forward mortgage payoff and associated costs and fees. The remaining percentage remains with the house in the form of an option, which is included in the lease language. Rent paid by the tenant is calculated and includes homeowners insurance, taxes and fees.
The second product, “MoveAbility,” is designed to allow homeowners to leverage their equity in the purchase of a new home, prior to vacating the home they currently occupy. The equity in a borrower’s current home is released in as little as 13 days after selling the property to EasyKnock, which allows the client to stay in their home paying rent while figuring out how to make the move to their new home. A client can notify EasyKnock when they’re ready to move, and the company will then initiate the process with the realtor of the client’s choice.
“The reverse mortgage product is an amazing product, in many ways cheaper than our product, and we want what’s best for our consumers,” said Kessler. “So, that’s one thing: if they can get [a reverse mortgage], then we encourage them to get it. If their use case is to stay in their house and make no payments for the rest of their lives, we’re not solving that. Our customers have to pay rent. So, it’s a different financial transaction than a reverse mortgage, and the motivations of [meeting] consumers’ needs would dictate that.”
Working directly with reverse lenders
Having alternatives to offer prospective borrowers who can’t quality for a reverse mortgage is appealing to originators, Kessler says, and it shows through the partnerships EasyKnock has already formed with major lenders.
“I would just say out of the top 10, we’re doing business with 80 percent of them,” he said.
In part, these partnerships stem from recent product changes and the fact that fewer borrowers can qualify under today’s program rules than in the past.
“The companies and people who work at [reverse mortgage companies] are very hungry for alternatives, and need to be more of a one-stop shop,” Kessler says. “So, they’re welcoming [us]. […] They’re hungry for innovation and alternatives. That means we’ve gotten a great reception from lenders throughout the country.”
In terms of specific use cases, Kessler described where EasyKnock would be able to step in to help a potential client if, for some reason, they don’t end up qualifying for a reverse mortgage.
“The first one is if they need more cash as opposed to being in their house for the rest of their lives,” Kessler says. “We solve the issue of getting them more cash than a traditional reverse mortgage. So, if their use case involved needing cash for a life event, we’d be a great alternative. Secondly, if they’re restricted by certain lending restrictions like tax delinquencies or it’s just hard to figure out their income, we take a different approach.”
Another thing that EasyKnock’s products try to provide is a much-needed commodity, particularly in the case of their new “MoveAbility” product: time. MoveAbility is designed to allow homeowners to leverage their equity in the purchase of a new home, prior to vacating the home that they currently occupy.
“We can give them the luxury of figuring out their next destination when it comes to MoveAbility, for where they want to move if they decide that staying is not an option for them,” he says.
Designed for those who can’t get a reverse mortgage, or need more time
In terms of the company’s flagship sale leaseback product “Sell and Stay,” it’s designed to operate as a way to bring certain borrowers back into more traditional lending avenues, Kessler said.
“We’ve always marketed [Sell and Stay] as a real companion to the equity marketplace for people who are behind on their taxes and are shut out of the reverse mortgage space,” he said. “Sell and Stay is a great alternative for the loan officers to offer another product. And, when someone’s situation improves, they then can have a better chance of getting a reverse mortgage. So, we’re really working to get them back into the traditional lending ecosystem.”
The bottom line for EasyKnock can also be maintained for reverse lenders that could begin to lean on offering more proprietary products, jumbo or otherwise.
“I think that if businesses can be accepted for their core products, we see ourselves as building a niche in the consumers that they’re not able to service as an alternative,” Kessler said.