Palo Alto, Calif.-based Point, a shared equity reverse mortgage alternative that gives homeowners the ability to sell a small fraction of their equity, recently announced it has secured a $115 million Series C funding round. The company — which has previously described a desire to partner with the reverse mortgage industry — will continue to pursue such partnerships in individualized and potentially formal capacities.
This is according to Eoin Matthews, co-founder and CBO of Point in a recent interview with RMD. While the funding round just secured will have a more immediate impact on the operating capital of the business, Point clearly sees ongoing potential in both positioning its product for the senior demographic, as well as to create a two-way partnership with reverse mortgage companies so that seniors who may not qualify for one product can have a path to seek the other.
A ‘stepping stone’ to a reverse mortgage
While home equity investment products do not typically have an age requirement attached, the senior demographic still proves to be a very important group for companies like Point to serve since that is a demographic more likely to have built up equity in their homes, Matthews says.
“The 55-plus [demographic] is right around 40% of our homeowners at this point,” Matthews says. “So it’s a big, big segment for us, and that covers the gamut from folks who are just entering retirement to pre-retirement in their 50s, right through to folks who are in their late 80s and 90s in some cases. It’s a full array of the age and demographic spectrum.”
One of the ways that Point customers interact with a reverse mortgage is by using the equity investment product as a method to tap home equity in the years preceding the moment a customer becomes age-eligible for a Home Equity Conversion Mortgage (HECM) at age 62, Matthews says.
“We do see the complement of reverse mortgages happening where some homeowners are using this as a bridge to get to a reverse mortgage,” he says. “They’re going to get the reverse mortgages in the future, but they want to access [their equity] today, or want to take down some money to balance their finances, or get a kid some money. We see a lot of different use cases. Maybe they’re six or seven years out from a reverse mortgage, and they use our product as a stepping stone.”
As a tech-focused company, Matthews says that the senior customers they serve are all generally well-equipped to use certain tech-oriented solutions. However, Point also aims to cater to those who may be less technologically inclined in order to capture the highest share of customers in both camps.
“You get some seniors who are very technologically advanced, very comfortable doing everything on their phone, and then you get some people [who ask if we] can send somebody to pick up their documents,” Matthews says. “You have to actually support both, and I think that’s the big piece that many tech companies will paper over. The reality is you’re going to get the full spectrum of technical abilities, and we [aim to] support all of them.”
In instances where a customer is not as comfortable with an interaction that is not in-person, Point might use referral partnerships to facilitate those face-to-face interactions.
“That’s often what you’ll see in the reverse mortgage broker community, and the MLO community,” he says. “What they really thrive on is the one-on-one, and a lot of homeowners value that. So in our referral partnerships, that’s a big component to it.”
Senior-held equity and reverse industry interest
In reacting to the recently-published statistic by the National Reverse Mortgage Lenders Association (NRMLA) and RiskSpan attributing $10.6 trillion in home equity to the senior demographic, Matthews isn’t surprised and actually thinks that figure might be a bit understated.
“It’s totally consistent with our observations in the market,” he says. “Seniors [have] lived in these very high-value homes, and there’s a lot more aging in place than there was before. And so, it makes total sense that seniors would be sitting on nearly $11 trillion of an overall market of $23 trillion. In fact, I think when we’ve looked at the numbers, you will see that seniors are much more likely to own their homes free and clear. It’s a huge segment of the demographic. So if anything, I’d probably say that number feels a little low on our end.”
Regarding reverse mortgage industry interest in partnering with Point, Matthews says that the company is eager to engage in such partnerships on a broader level while also describing reverse industry interest as accelerating.
“It’s accelerating now, and I think it’s a function of the rate environment,” Matthews says. “Some of the factors we talked about before in the last year, in particular, included how a lot of reverse folks are just super busy with what was a pretty small category before, which is reverse refinances. They were a big deal last year, and they remain an engine of growth for a lot of reverse originators. That may be dying off now, but if you’ve built out the infrastructure and you’ve got the sales teams, you’re going to want to keep them busy.”
While still currently strong, potential tapering off of refinancing activity has led to more inbound interest, Matthews says, and could even lead to more formalized relationships with reverse mortgage companies. Such relationships are in-process, Matthews says, but he declined to name the companies involved when asked.
“We’re actually seeing an awful lot more inbound interest,” he says. “Last year, we had some interested parties, but it didn’t turn into anything at scale because everyone was just slammed with their existing work. It’s not the case right now, whether it’s on the forward mortgage or reverse mortgage side. We’ve seen an awful lot more in that partnership interest because the folks who are trying to get ahead of real volume declines are looking at the next wave of products.”