Industry Leaders Push for New, Streamlined Reverse Mortgage Products

Innovation in the reverse mortgage product space in both proprietary and Home Equity Conversion Mortgage (HECM) categories always stays on the minds of lenders. Lenders who have jumped into the proprietary space have been actively rolling out new additions to their product catalogs in hopes of standing out when compared with their competitors, but room for additional innovations to products and/or processes always persists.

To discuss innovations in the reverse mortgage marketplace, RMD enlisted the input of several industry leaders on-site at the National Reverse Mortgage Lenders Association (NRMLA) Annual Meeting in Nashville, Tenn.

Growing the reverse mortgage ‘pie’

Understandably, some of the leaders RMD spoke with were interested in being leaders of product innovations themselves, but did speak more broadly about what the current trends and themes are that currently drive innovation in the reverse mortgage industry.

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“As we move into 2020, if I were to point to a single thing: we’ve certainly seen that the proprietary products, for the most part, have been things that have really lowered the upfront cost and in some cases, have paid most or all of the closing costs for borrowers,” says Chris Mayer, CEO of Longbridge Financial. “So, if we can be simpler, if we can be lower cost, particularly lower closing and upfront costs, those are things that I think will help a lot in terms of expanding that market and growing the size of the pie, which is really the most important thing.”

Innovations that help broaden the market and “grow the size of the pie” are also on the mind of David Peskin, president of Reverse Mortgage Funding (RMF).

“I think we need to talk about going after the bigger, broader market,” he says. “A lot of times, I will hear lenders or loan officers say that when they think about a [proprietary reverse mortgage], they think jumbo. They think that they have to do these big loan amounts because they need to make a lot of money. Or, that’s the only product to go after, because FHA does the lower home value. That’s not the case.”

Shaping products around the needs of that “bigger, broader market” is about lower rates, lower loan-to-value (LTV), and an ultimately lower cost product, Peskin says. While some lenders may be put off by loans that make less money, making it up in volume serves the bigger market while also making the industry more flexible, he says.

Ways to streamline the reverse mortgage process

Still aiming to find innovations on what is already out there should be a chief concern for everyone in the proprietary space, according to Kristen Sieffert, president of FAR. While FAR oversees several different proprietary reverse mortgage options under the HomeSafe brand, additional options to serve a broader class of potential consumers is a persistent goal. One potential path toward additional innovation, however, is streamlining the reverse mortgage process even further, she says.

“I think one of the challenges is that when you’re dealing with a different product, you’ve got to educate the consumer or the broker on that new product, and then the process can be really cumbersome,” she says. “So, if we can find ways to cut the processing time in half, for example, and make that process a lot easier for consumers, I think that would help lift the industry as well.”

Streamlining the Home Equity Conversion Mortgage (HECM) process is also a goal, but that is more difficult considering the rules that govern the HECM program, she says.

Broadening demographics, HECM options

While American Advisors Group (AAG) is more focused on other areas of reverse mortgage business beyond proprietary product innovations, AAG CEO Reza Jahangiri is nonetheless interested in accessing a broader part of the senior demographic.

“We’re working on repositioning the home equity extraction offering to the consumer, and getting them to look at home equity differently,” Jahangiri says. “And, [attracting] the retirement ecosystem, financial planners and retirement accounts.”

Still, hearing feedback from AAG’s different sales channels offers a possible vision for welcome innovations.

“In terms of what I hear from a feedback loop from our different sales channels, a flexible LOC that allows seniors to access the proceeds [which are] not all forced on day one [is a possibility],” Jahangiri says. “I think moving more to a Home Equity Line of Credit (HELOC) alternative that looks more like a HELOC in terms of the offering in the future is going to open up a piece of the demographic we haven’t been able to address.”

Additional product options that offer a line of credit would also be a welcome addition to the marketplace according to Mike Kent, president of Liberty Home Equity Solutions. Product innovations that target the HECM side of the business would also be welcome, he says.

“I think innovations around the use of a HECM on second homes would be good,” he says. “And then, I think something similar to the Saver product where the PLFs are lower for those borrowers who really need a higher amount of money – maybe they have a one-time need – but which has lower MIP, and stands as a lower cost transaction [would be welcome].”

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  • One way to streamline the HECM loan process is simply by streamlining financial assessment in a manner suggested by Dr. Moulton from Ohio State University.

    If increasing the pie is a real goal of the industry, there is no excuse for what has occurred in the last 10 fiscal years: 1) three straight of horrible losses in endorsements, 2) followed by six years of downward sloping, peak to valley, secular stagnation in endorsement growth, and 3) the worst percentage loss in fiscal year endorsement counts in the history of the industry.

    While HUD shares in the loss in volume in HECMs, so does the industry. Yes, some newer originators talk about their growth but last year the industry saw a 35.3% plummet in fiscal year HECM endorsements. Even fiscal 2008 and 2009 were not stellar years of growth in HECMs. In fact both years were years of stagnation.

    So what is the solution? Lenders want to see growth and midway through the last decade promoted the idea that by 2018 the industry would see 300,000 HECM endorsements. Most of us would have been happy to see 20% of that number in fiscal or calendar year 2018 HECM endorsements. But then to take a huge drop just before coming into fiscal 2020 was miserable.

    We have heard talk about growth in proprietary reverse mortgages back in 2007 and early 2008. In fact Home Keepers, a proprietary reverse mortgage, did well from 2004 to 2008.

    We have fallen on low volume times. Thankfully, the lenders have been enjoying the benefit from HECM tails with little cost to their bottom lines. Proprietary reverse mortgages have been a God send to several of the largest lenders as well.

    So after a decade, what is the industry doing today that is contributing to growth in HECM endorsements that it was not doing in fiscal 2007? Paraphrasing Einstein, continuing to do the same thing over and over and expecting different results is the very definition of insanity.

    We don’t just need a call for growth, we need a plan with measurable milestones not subjective and speculative achievements such as receiving less negative reactions from financial advisers or there are fewer negative articles and comments about the industry today — even if that is true.

    Still in the article I read nothing about accountability and definite goals. If you keep shooting for nothing, well, I guess you should NOT be expecting growth.

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