Reverse Mortgage Funding, LLC (RMF) has announced changes to its Equity Elite proprietary reverse mortgage product, specifically on the “Equity Elite Term Payment” option. Now, the Term option will have one set of rates for all terms between 2 and 10 years (or 24 and 120 months), and the required upfront draw will decrease from 60% to 25%. This change is being made to allow for more monthly proceeds for a borrower with a lower upfront loan balance, according to the company.
These changes, which went into effect as of Friday February 5, are part of an effort to streamline the ability for originators to present proprietary reverse mortgage options while enhancing the choices of borrowers who seek a private product out, according to representatives of RMF.
The changes, and why the time is right for them
Prior to these new changes, Equity Elite stood as the only fixed rate reverse mortgage product in the industry allowing for future disbursements directly to the borrower, and these changes are made in an effort to enhance that offering even further. This is according to Joe Demarkey, strategic business development leader at RMF in an interview with RMD.
“We took something that is unique in the space, and we improved upon it,” he explains. “And we expect that there are going to be more of these loans that are originated, and maybe more importantly, more conversations with borrowers about more options that they might want to consider as they’re making their buying decision.”
In terms of where the reverse mortgage industry currently is when it comes to the proprietary product marketplace, there are primarily two “flavors” of proprietary offerings: a fixed-rate lump sum, and an adjustable-rate line of credit option, Demarkey says. Those offerings all feature a 25% upfront minimum draw, and RMF’s recent changes take action on its term product.
“What we just did to our fixed-rate Equity Elite Term product is align that minimum draw requirement with all of the line of credit options that are available in the industry today,” Demarkey says. “Now, when we or our partners are talking to prospective borrowers, they can talk about two different options where future advances are made to borrowers: one is a variable rate, and one is a fixed rate. One is a line of credit payment plan, and one is a term payment plan.”
It was harder to be able to do that when RMF’s fixed-rate term product had a 60% minimum upfront draw, Demarkey explains. Now, the conversation with prospective borrowers should be easier for retail originators and partners, he explains.
The competitive advantage
With several lenders providing proprietary reverse mortgage product options, the uniqueness of Equity Elite — particularly after these changes — should help retail originators at RMF as well as its third-party origination partners make a compelling case for this product, Demarkey says.
“We’re not aware of any other lender that has a fixed-rate product with future disbursements to the borrower, so we had that competitive advantage last week,” he says. “But now with the modifications that we’re making, we think we have an even larger competitive advantage.”
The relative uniformity of product features among some other lenders should help this option with fixed-rate, partial draw upfront with future disbursement options stand out, he says.
“I think we’re going to be able to satisfy more borrowers’ needs or wants with these changes,” he says. “This is good news if you’re an originator, since this gives them the ability to service more types of potential borrowers than prior to the changes being made. We want originators, whether they’re our own retail folks or our partners, we believe they’re going to increase their business with these changes.”
Biggest impacts from these changes
The biggest impacts on borrowers from these changes should come in the forms of additional options to consider, as well as broadening the type of options available to a borrower who is averse to selecting an adjustable-rate product, for instance.
“If [a borrower] had a really low mortgage balance relative to the amount of money that they qualify for, they might be turned off by a minimum draw requirement of 60% of the initial principal limit,” Demarkey says. “They just don’t want or need all that money up front. They love the idea of supplementing their cash flow, and receiving monthly disbursements for a period of time after origination.”
By lowering the upfront draw from 60% to 25% should make the prospect attractive for those already predisposed to selecting a fixed-rate option, he says. For those borrowers who select a term between two and 10 years, they no longer need to choose a higher rate to extend their monthly payment past 72 months with the same principal limit.
“It’s really going to vary from borrower to borrower,” he says. “The structure of receiving monthly disbursements for a period of time between two and 10 years selected by the borrower might prove to be a very, very attractive feature to some borrowers who are looking to, again, supplement their cash flow, supplement their income.”
Partners who wish to inquire about these new options are advised to contact their account executive for additional information. These changes went into effect as of Friday, February 5 according to RMF.