Liberty, RMF Suspend Private Reverse Mortgages Over Pricing Volatility

Two proprietary reverse mortgage products – EquityIQ from Liberty Reverse Mortgage and Equity Elite from Reverse Mortgage Funding (RMF) – have been ‘temporarily suspended’ by the lenders due to current levels of volatility in financial markets caused by the COVID-19 coronavirus pandemic. This is according to communications that both lenders separately issued to their partners, both of which were obtained by RMD.

Both lenders describe these suspensions of originations for their proprietary products as temporary, with each expressing a commitment to restart originations for both EquityIQ and Equity Elite respectively once financial markets stabilize.

EquityIQ and Equity Elite originations temporarily suspended

In a notice issued to its partners late last week, Liberty describes the discontinuation of EquityIQ as temporary, saying to its partners that private securitizations are currently unstable and that the proprietary offering will be made available to borrowers once more after the current turbulence has passed.

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“Due to the lack of stability in the private securitization market, effective immediately, Liberty Reverse Mortgage will temporarily suspend new originations of our proprietary reverse mortgage product (EquityIQ),” the notice to partners reads. “We will fund any EquityIQ loans that have closed as of [March 26, 2020] and plan to resume originations of EquityIQ as soon as market conditions stabilize. However, any loans that are currently in process will be canceled until further notice.”

In terms of RMF’s Equity Elite, the lender similarly describes pricing volatility as a primary motivator for the company to similarly suspend its proprietary offering for the time being, issuing its notice to partners on Monday.

“Due to the current instability in the financial markets (including credit) caused by the impact of the coronavirus (COVID-19) pandemic, the Equity Elite reverse mortgage product has been suspended until the financial markets stabilize, particularly in the non-Qualified Mortgage (non-agency, non-government mortgage) space,” RMF told its partners in the notice. “RMF is closely monitoring developments to identify opportunities to restart the Equity Elite reverse mortgage product as soon as the financial markets stabilize.”

Equity Elite terms, HECM applications

For Equity Elite, RMF advises partners that while no new applications will be accepted at this time, the discontinuation also applies to all in-process loans that are not in “clear to close status.” However, approved applications that are in clear to close status and which meet all guideline requirements will be permitted to progress, as long as such loans close on or before April 1 and are on track to fund prior to April 6, 2020.

All loans that have been closed prior to April 1, 2020 will be funded as planned. Any Equity Elite applicants that are eligible for a Home Equity Conversion Mortgage (HECM) are encouraged to re-apply for that product, though those applications will be new transactions adhering to different disclosure requirements. They will also require HECM-specific counseling, and an appraisal that meets FHA guidelines.

Recent history

Liberty Reverse Mortgage launched a proprietary product pilot program in late 2018, which was announced by its parent company Ocwen Financial Services during an investors call in February of 2019. The product, EquityIQ, was officially launched that July, and allowed access to funds of up to $4 million. EquityIQ featured lower upfront costs with no mortgage insurance premium, and was described as having easier eligibility requirements for home purchases when compared to its more traditional reverse mortgage offerings.

Earlier this month, Liberty rebranded under the Liberty Reverse Mortgage name after operating for several years as “Liberty Home Equity Solutions,” and also began operating as a division of PHH Mortgage Corporation which was acquired by Ocwen in late 2018. Both measures were effective as of March 15.

RMF launched its first proprietary reverse mortgage in mid-2018 under the name “Equity Edge,” updating the product last March to reduce origination fees and borrower closing costs. Shortly afterward in mid-2019 it introduced both lump sum and term disbursement options for borrowers under a fixed rate, and late last year sought to expand the reverse mortgage market by introducing a new 4.99% rate option. That new rate also came with a 200 basis point origination fee on principal limit, and the same principal limit factors (PLFs) as other Equity Elite options.

According to RMD’s Outlook Survey conducted at the end of 2019, over 40% of respondents reported that less than 10% of their total volume consists of proprietary loans, while approximately 17% say that their proprietary volume makes up between 10 and 20% of total volume.

RMD reached out to both Liberty Reverse Mortgage and RMF for comment on the temporary discontinuation of their proprietary offerings. RMF informed RMD that the company has nothing to add on top of the alert that was distributed to its partners, while Liberty did not respond as of press time.

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  • The history of proprietary reverse mortgages in this industry is that after a few years of seeing much of any activity at all, they are gone. This time proprietary reverse mortgage closings do not seem to have reached 5,000 (last calendar year, their highest year for volume since 2008). Even HECM Savers were about as popular (if not, more so), despite most HECM originators ignoring the existence of HECM Savers.

    What this occurrence shows is that history repeats itself despite the cause for the withdrawal being so different (the mortgage meltdown vs. a down turn in the economy from the effects of a virus, Covid-19).

    A lesser known withdrawal of a type of reverse mortgage was the Fannie Mae Home Keeper in late 2008. That was withdrawn because of the changes made to HECMs under HERA of 2008, making the HECM far more competitive with the Home Keeper. Home Keepers are by far the most popular proprietary reverse mortgage that the industry has seen.

    So will the current proprietary reverses that have been withdrawn return quickly or will this be like in 2008 when all proprietary reverse mortgages were withdrawn? Time will tell.

  • My friend Jim Veale brings up some excellent points. We are going through rough times at the present, a lot of unknowns lye ahead!

    I personally feel during good times, the Proprietary products were showing good signs of improving in popularity as well as filling many gaps.

    I am optimistic the Proprietary products will come back to life when all of the Coronavirus issue is resolved. However, that is my opinion, as Jim stated, time will tell!

    John A. Smaldone
    http://www.hanover-financial.com

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