Due in no small part to 2017’s reductions in principal limit factors (PLFs) as well as the institution of a collateral risk assessment sometimes requiring a second property appraisal, the reverse mortgage industry has been very active in seeking to find potential alternatives to the government-sponsored Home Equity Conversion Mortgage (HECM) program. One of the results of this is that many of the industry’s largest lenders have come out with their own proprietary reverse mortgage alternatives, which are neither reliant on or sensitive to the federal government and the changes it can bring to the HECM program.
While private reverse mortgage alternatives are gathering steam according to the lenders’ demonstrated eagerness in introducing new reverse mortgage loan products, substantiated data regarding the actual figures related to proprietary endorsements have not been released. That makes it difficult to gauge exactly how prominent a part private alternatives are becoming in the larger reverse mortgage market, but that’s not to say that the lenders themselves are entirely without perspective to share concerning how their products are being used.
Finance of America Reverse: the ‘HomeSafe’ product suite
HomeSafe’s prominence in the proprietary reverse mortgage space has been carved largely by the company’s consistency in introducing new variations of their product to the larger catalog of private offerings.
In addition to “HomeSafe Standard,” FAR offers variations it calls “HomeSafe Select,” HomeSafe Second” and “HomeSafe Flex,” all designed to meet different kinds of needs for a wider segment of reverse mortgage borrowers. Select is designed for those who wish to have access to a line of credit, and is advertised by FAR as “the only proprietary HELOC reverse mortgage loan.” HomeSafe Second is the first second-lien reverse mortgage, while HomeSafe Flex offers borrowers access to future funds with an option to take out a lower lump sum with monthly payouts up to five years.
While FAR is encouraged by the way it says the entirety of its HomeSafe catalog is being received by both borrowers and the industry, HomeSafe Select was singled out as a major potential growth area by Scott Norman, VP of field retail and director of government relations at FAR.
“We are extremely excited how our multiple product lines are being received across the country. Fixed is still the most prevalent due to the fact it has been available in the most states,” Norman said in an email to RMD. “We strongly believe HomeSafe Select is the product of the future because it is a more responsible way to tap equity if a borrower doesn’t have a use for all of the cash on day one. Over time we would expect our line-of-credit products to account for the majority of our proprietary originations.”
Longbridge Financial: ‘Platinum’ reverse mortgages
Late last year, Longbridge Financial introduced a new product to its “Platinum” line of private reverse mortgages with a line of credit feature, identifying a need for such a product because of both the poor fit that home equity lines of credit (HELOCs) can be for older borrowers, and the 2017 principal limit factor changes to the Home Equity Conversion Mortgage (HECM) program.
The Platinum LOC product is already proving to be a popular option for Longbridge borrowers, according to company CEO Chris Mayer. In fact, in the few months since Platinum’s launch, it has already made up a sizable portion of new proprietary production for Longbridge.
“In November 2019, we introduced a new Platinum Line of Credit product to help provide borrowers more financial flexibility and at a lower cost than a HECM. The LOC product is already taking hold as a more attractive alternative to widely-used HELOC and cash-out refinancing,” Mayer told RMD. “It now constitutes nearly half of our Platinum production.”
The Platinum is ideal for borrowers with high-priced homes who have a wider variety of needs in terms of when they need to draw on the loan’s proceeds, based on what they wish to accomplish. Longbridge expects Platinum LOC demand to increase, Mayer said.
“Most borrowers with high-priced homes do not need all of their cash at one time, so the product is often more appropriate to their needs, such as extending the life of their retirement assets,” he said. “We expect the share of Platinum LOC to grow as the market and borrowers become more aware of its benefits and features. At Longbridge, we believe that the future of our industry will increasingly rely on non-FHA products and we will continue to enhance and improve our Platinum programs in the days and months ahead.”
American Advisors Group: ‘AAG Advantage’
While staking its place in the proprietary reverse mortgage space through a correspondent partnership with FAR to offer HomeSafe loans under its own banner, American Advisors Group (AAG) is nonetheless aiming to position itself in a very visible way in the wider proprietary landscape. One of the more visible ways it accomplished this recently was in a television ad featuring spokesman Tom Selleck, aimed at potential borrowers with high-value homes.
In terms of which versions of AAG Advantage are being used the most, “Advantage Base” appears to have the largest share of use, according to the AAG spokesperson who spoke to RMD.
“Advantage Base, which is the standard fixed rate, lump sum disbursement jumbo reverse mortgage loan is the most popular,” the company spokesperson said. “This is followed by Advantage Select, a newly updated and released jumbo reverse mortgage loan that provides the option for a line of credit that grows over time. Select has an adjustable rate and a minimum draw of 25% of their available proceeds, with the remaining (up to 75%) being available as a line of credit. Base is a full draw product.”