Reverse Mortgage Industry Hopeful for Private Product Expansions

Proprietary reverse mortgage products that are not reliant on the Federal Housing Administration (FHA)-backed Home Equity Conversion Mortgage (HECM) program remain a major source of industry optimism for those within it as of the beginning of 2020. This is according to Reverse Mortgage Daily’s Outlook Survey and Report, conducted online in December 2019.

The survey solicited the input of more than 330 reverse mortgage professionals at multiple levels to offer their thoughts on the HECM and proprietary reverse mortgage landscape in 2020.

A plethora of new, proprietary reverse mortgage products from major lenders continues to serve as a major source of industry optimism according to respondents, with 37% of them attributing the development of more proprietary options to be the industry’s biggest opportunity in 2020. Nearly 95% of all respondents expressed that proprietary products will be important to the industry’s future.

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Nearly half of survey respondents (49%) believe that proprietary reverse mortgage products will be “very” important to the future growth of the industry, while over 45% believe they will be “somewhat” important. However, most lenders are still primarily focused on the origination of HECM loans, with over 40% of respondents reporting that less than 10% of their total volume consists of proprietary loans. Approximately 17% say that their proprietary volume makes up between 10 and 20% of total volume.

In terms of positioning for further growth, 27% of respondents shared that embracing additional proprietary product options will be a prime avenue that will be explored, while nearly half of respondents (47%) say that their 2020 growth plan will primarily include refined product education and marketing efforts.

Some aspects of the reverse mortgage industry landscape in 2020 could not be accounted for in this survey due to its timing. Between the time the survey was taken and the end of March 2020, the makeup of the proprietary product landscape has changed for a couple of major reasons. First, One Reverse Mortgage – a division of Quicken Loans – has paused operations due to the parent company’s desire to redirect resources from the reverse mortgage business into its burgeoning Rocket Mortgage brand.

The exit of One Reverse Mortgage takes with it both a top 10 reverse mortgage lender, as well as the proprietary product known as the Home Equity Loan Optimizer (HELO), which One Reverse introduced in 2018. Additionally, the proprietary products offered by Liberty Reverse Mortgage and Reverse Mortgage Funding (RMF), respectively, have been temporarily suspended due to volatility in financial markets stemming from the economic impact of the COVID-19 coronavirus pandemic.

Still, respondents in the RMD Outlook Survey and Report expressed general optimism that the reverse mortgage industry will continue to thrive in 2020, as over half of respondents report that their outlook has improved in the past year, while roughly 30% report that it has neither improved nor declined. 11% of respondents say that their outlook about the industry’s future has gotten worse.

While it’s too early to tell exactly how the current crisis will affect the reverse mortgage industry in the long-term, early indications from lenders appear to point that inquiries from prospective borrowers are on the rise, while industry leaders remain confident that the service provided by reverse mortgage lenders will be important for seniors attempting to navigate the economic landscape stemming from the pandemic.

“We’re critical to the new economy on the other side of this, and the interim crisis dynamic we’re very critical to is not going to change,” said American Advisors Group (AAG) CEO Reza Jahangiri in a recent town hall event hosted by the National Reverse Mortgage Lenders Association (NRMLA). “People need to access their home equity and to have access to their assets. That’s to be able to weather the storm here, especially when their incomes, their 401Ks and their savings are being hit really hard right now as we speak.”

Download the full results of RMD’s 2020 Outlook Survey and Report.

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  • This industry is much like taxes. What appears logical, many times is not how something works.

    Back in fiscal 2007 following HECM Case Number Assignment (HCNA) we saw a pull through rate exceeding 95%. Meaning that for every 105 HCNAs 100 endorsements were generated. Last fiscal year the same pull through rate was 62%. That means that for every 161 HCNAs, just 100 endorsements were generated. From that we deduce that it takes 53% more HCNAs to produce the same number of endorsements as it did in fiscal 2007.

    So do more inquiries mean more endorsements? In looking at the case above, not necessarily. Yet there is little question that the cash needs for seniors are greater today than last year. So more inquiries should result in more endorsements but like taxes, rational and logical conclusions do not always pan out.

    As to the survey, who has the same outlook on 4/1/2020 that they did on 1/1/2020? While there is interesting information in the survey results, they certainly do not represent our current view of how things will work out for fiscal 2020. This is especially true for proprietary reverse mortgages.

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