AAG Details Updates to Private Reverse Mortgage Use Trends

In early 2019, American Advisors Group (AAG) revealed some surprising statistics related to the ways in which its proprietary reverse mortgage offering – AAG Advantage – was being employed by borrowers.

Now, the company has shared updates to the ways its non-FHA offering is primarily being leveraged by a more recent class of borrowers. This is based on data collected by the company itself from its corps of dedicated loan officers who originate AAG Advantage loans, and the company’s own internal data.

Previously, AAG reviewed the data surrounding more than 250 of the initial pool of Advantage proprietary customers and determined the primary reasons they chose to avail themselves of the product.

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2020 use patterns update

The top five reasons for employing an AAG Advantage product among the borrower base one year ago were to make home modifications or repairs; to buy an investment property or a vacation home; to help children purchase a property; to provide children with an early inheritance; and to create college funds for grandchildren, respectively.

Some of these reasons make a reappearance in the top 5 as of February 2020, but there are a few key differences. As of February, AAG loan officers shared the top five reasons why borrowers were opting for the use of the proprietary AAG Advantage product as opposed to a more traditional Home Equity Conversion Mortgage (HECM).

The top 5 reasons as of early 2020 are:

  1. To have more financial liquidity
  2. To maintain their current lifestyle
  3. To pay off existing debts
  4. To make home modifications or repairs
  5. To cover in-home medical care costs

Other major reasons that a borrower may want to opt for the proprietary option were also explained by an AAG company spokesperson.

“Other popular reasons include: using the funds to purchase a second property and to provide financial assistance to family,” the spokesperson told RMD in an email. “Some emerging trends among our jumbo reverse mortgage borrowers include using home equity proactively to protect against fluctuations in the stock market and to prolong the use of IRA funds.”

The higher lending limit among most proprietary reverse mortgage offerings have led to some lenders looking to borrowers with higher-value homes that can be served by the same fundamentals as traditional HECM products. When AAG Advantage was first launched in 2015, that was a priority for the product according to Paul Fiore, then serving as the company’s EVP of retail lending and now serving as AAG’s chief retail sales and operations officer.

“Our intent here is to try and help those consumers with home values in excess of $1 million or more who are looking to access additional proceeds above and beyond what is offered by a traditional HECM,” Fiore told RMD in 2015.

Shifts in the data between 2019 and 2020

While there are clearly notable changes in the way some borrowers are employing the use of the AAG Advantage product, none of the changes in the trends over the past year are necessarily eyebrow-raising to those within the company, according to the AAG spokesperson.

“Compared to the data we released in January 2019, there have been some definite shifts, but we wouldn’t call them surprising,” the spokesperson tells RMD. “Last year, AAG’s proprietary jumbo loan was still relatively new and the top use case was ‘to make home modifications or repairs.’ Now, we are seeing use cases like, ‘to have more financial liquidity’ and ‘to maintain their current lifestyle,’ rise in popularity.”

That’s not to say that a shift in how borrowers apply the use of the product has no impact on the way that AAG will attempt to appeal to new segments of borrowers in the future, however. Changes in some of the most popular use cases can absolutely inform the ways in which the company makes the case for why AAG Advantage is a product that seniors with higher-value homes should consider using in the future.

“From a marketing perspective, however, we pay just as much attention to the emerging use cases,” the spokesperson says. “We are seeing more and more affluent homeowners using reverse mortgages to guard against sequence of returns risks, in order to preserve or protect their retirement or investment fund(s).”

AAG Advantage is available in Arizona, California, Colorado, Connecticut, the District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Louisiana, Michigan, New Jersey, Nevada, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Texas, Utah, and Virginia. Additional states will be added to the program in the future, the company has previously said.

AAG Advantage is offered in conjunction with Finance of America Reverse (FAR) in a correspondent partnership. FAR’s HomeSafe proprietary product is offered by AAG using the Advantage name through the company’s retail channel. Last year, the company rolled out a new TV advertisement for AAG Advantage featuring company spokesman Tom Selleck.

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