Southfield, Mich.-based 1st Nations Reverse Mortgage, a division of Midwest Loan Solutions, is eyeing a broader national “debut” within the reverse mortgage industry by rolling out a new television advertising campaign, as well as introducing its own proprietary reverse mortgage product.
With an eye toward increasing its presence in the reverse mortgage market nationally, 1st Nations has fashioned its “Premier” proprietary product offering in a strategic way, with a lower loan limit in comparison with competitors, but which is designed to capture where the company believes the overwhelming majority of proprietary business is being done.
1st Nations also hopes to emphasize its competitive pricing engine as a way to streamline the process of business for brokers.
While it’s aiming to make itself more broadly known in the national reverse mortgage space, one of the things that 1st Nations is hoping to emphasize through its new, broader initiatives is its commitment to 24-hour turn times, and a pricing engine that allows for side-by-side comparisons between the company’s proprietary and Home Equity Conversion Mortgage (HECM) offerings. This is according to Ken Krajewski, head of reverse mortgage lending at 1st Nations.
“We’re the only lender in the industry that has a pricing engine that does a side-by-side comparison of our non-agency Premier product with the HECM product,” Krajewski tells RMD in an interview. “It doesn’t require the broker to have to select a specific product, or go back and forth between and price out the difference between the HECM and Premier. Basically, what our pricing engine does is the broker logs into our pricing engine, they put in the very basic information – date of birth, property value, zip code – and the pricing engine will recognize ‘does this product qualify for both HECM and our Premier?’”
If it does qualify for both, the broker can delve deeper into whether or not the zip code for the property can allow for a line of credit, and the broker can then see all of the pricing options side-by-side between the lender’s HECM and non-agency products.
“What the pricing engine does is it gives the broker the principal limit, the available loan balance, and it also calculates the broker compensation based on what our yield spread is for all of our products, both non-agency and HECM,” Krajewski says. “So, the loan officer can just hover over each particular product, and they can see exactly how much the broker compensation is going to be, what the yield spread is going to be, what the principal limit will be, and it breaks down the first year distributions that are allowed.”
1st Nations also has a commitment to 24-hour turn times along with no-fee processing for partners, features which may help a broker to better manage additional volume in the pipeline without incurring additional costs.
“We see an opportunity to grow our business through both channels, both non-agency and through the HECM,” Krajewski explains. “One thing that we advertise and that we’re very proud of is that we offer no-fee processing. We will take out a broker’s loans, process it for them with very high-level, experienced processors, and not charge them to do that. But, we also do that with some of the most competitive pricing in the industry.”
Some of 1st Nations’ competitors can charge between $500-800 to process a loan, but are then adjusting their pricing slightly downward. In some equivalent situations, 1st Nations’ pricing can be equivalent while offering fee-free processing, Krajewski says.
“We can cater to both sides of the companies that do volume,” he says. “The companies that do a smaller amount of volume that are running across reverse mortgages on occasion, [but] don’t have the processing platform or the reverse processing experience to get those loans done. They can submit the loan to us, utilize our experienced processing, and we will take it from submission to close without involving them on the operations side.”
For brokers who may not have the tools to manage sometimes inflated loan pipelines, 1st Nations’ says it designs its tools to allow processing to take place without adding additional expenses.
“What we realize is that with today’s mortgage volume, a lot of brokers are at a capacity that they can’t handle the volume that they currently have,” Krajewski says. “And instead of hiring another full-time processor and taking on that expense, we’re happy to take that overflow for them. They’re not incurring any more expense for hiring another full-time processor, and [can] just use our platform of processing to handle their overflow, which can alleviate the volume in the pipeline that they’re managing.”
‘Premier’ proprietary product
As a proprietary offering, 1st Nations’ “Premier” product may look very similar to its competitors in terms of product features, but with a lower lending limit than some others. That choice has been made by the company for a very strategic reason, Krajewski says.
“We’ve done our market research as to where we believe what market segment is really being attracted to these proprietary products, or the non-agency products,” Krajewski explains. “And in our initial rollout, we have a loan limit right now of $1.5 million, which I understand is lower than what our competitors are doing.”
That lending limit was chosen by 1st Nations based on its own research, where it has determined that the $1.5 million level can be competitive with other private reverse mortgages active in the space today, Krajewski says.
“We believe we can still capture a vast majority of where the loan amounts of what the majority of those non-agency products are doing, and we believe that $1.5 million is a spot that we’re comfortable with,” he says. “But, we will continue to manage what we see as a need for our brokers and customers. And we could see that change in the future.”
Premier is available to borrowers in 24 states total, has a minimum property value of $450,000 and a minimum age of 62. Additionally, it has fewer requirements for condominiums, and the fixed-rate option is available for borrowers who prefer to take a full draw. The pricing engine is also a component that the company believes will be a differentiating factor, which it believes could help Premier stand out from the competition.
Ad campaign, 2020 and beyond
To help further facilitate its larger reverse mortgage “debut,” the company will also be rolling out a series of television ads designed to catch the attention of different potential customers, from both the consumer themselves as well as the typical trusted advisor in the family, Krajewski says.
“We’ve filmed three commercials,” he says. “Two are directed toward the consumer themselves, one is directed to the adult child. […] They will be airing first where we’re based in Michigan, and then, our intent is to roll these out in markets that we’ve identified that we can make an impact in, to strategic markets that we want to air these commercials in and try to increase our market share.”
While Krajewski only just joined 1st Nations earlier this year, the company has seen record volumes for 2020 internally and are using that momentum to try and make itself more well-known in the reverse industry. Those fortunes, however, have not diminished the fact that people – and seniors, specifically – have had a rough 2020 for a multitude of reasons, not least of which being the COVID-19 coronavirus pandemic.
“2020, everyone knows, has been as challenging of a year as most of us have ever had, and it’s especially challenging on the older people in our communities,” he says. “The need for reverse mortgages due to the pandemic, I believe, may be at an all-time high. We’ve got older people who have lost money that they don’t have the time to recover in their retirement accounts. They’ve lost part-time jobs due to the pandemic, and businesses have been closing. We believe that the opportunity is there. We’re seeing more interest from the adult child, we’re seeing more interest from the consumer who’s actually reaching out to investigate a little bit more.”
They have also been seeing additional interest in reverse mortgages from referral partners, including financial planners who are trying to find new ways to assist their own clients in maintaining their lifestyles.
“Sometimes a reverse mortgage is the answer to be able to do that, so that’s what we’re trying to get out there,” he says. “We want to continue to educate the public, as well as their trusted advisors, as to considering an option they may not have considered prior to the pandemic.”
According to September 2020 endorsement data as compiled by New View Advisors, 1st Nations Reverse (under the Midwest Loan Solutions name) has endorsed 90 HECM originations over the period of the prior 12 months.