Shared home equity investment provider Hometap recently announced an expansion into three additional states — South Carolina, Utah and Nevada — bringing its total footprint to 18 states. These already include high home-value markets including California, New York, Florida and Virginia. In the past, Hometap leaders have described the company’s posture as “complementary” to the reverse mortgage industry as opposed to competitive.
To get a better idea of the continued posture as well as the importance of the senior demographic to its operations, RMD sat down with Hometap CEO Jeffrey Glass to discuss these and other issues related to the company’s expansion.
The importance of seniors to the growth of Hometap
Glass describes the ongoing trajectory of the business currently as very positive, saying it has recorded growth quarter-over-quarter and high levels of customer satisfaction. Unlike reverse mortgages, alternative equity investment products do not typically come with a minimum age requirement, but Hometap describes the senior demographic as an important cohort to help facilitate additional growth.
“We see quite a range of, I would say, demographic and psychographic homeowners,” Glass tells RMD. “I think that what you see across the board is this rapid rise in home values, and homeowners who historically have not been able to tap into this equity in their home without taking on the additional burden of debt. What we’re seeing is in this environment, where you’ve got the combination of rising rates and record levels of equity on the balance sheet of American homeowners, we’re seeing demand to be even stronger than ever.”
One of the things naturally enticing to a company like Hometap is the recently-released statistic from the National Reverse Mortgage Lenders Association (NRMLA) and data analytics firm RiskSpan, which describes the collective home equity of the senior demographic as having recently reached $10.6 trillion.
“It’s an incredible statistic that you quote there, the amount of equity that seniors hold on their balance sheet is at record highs,” he says. “And for many, the idea of being able to tap into some of that equity without the burden of debt is just an incredibly attractive opportunity for them. And I think also, the fact that products like ours have this alignment with seniors and homeowners, where if the home values go up, we would wind up settling eventually for more. And if the home value were to go down, and then we settle for less, and that just creates really great alignment with our homeowners.”
Reverse mortgage adjacency
Glass has spoken in the past about viewing the alternative equity tapping industry as adjacent to the reverse mortgage business as opposed to being directly competitive with it. When asked if the current climate of rising rates and home values has changed that perspective at all, he does not think that it has, he says.
“I think this is one of these things where, as this industry is becoming a little bit more well-known and as this idea of a home equity investment becomes a little bit more popular and understood, it’s becoming something where we and folks inside the reverse industry and other industries are starting to collaborate more and more,” he says. “It’s a big world out there, and there’s a variety of solutions. As we say, just as debt may not be the right answer for some homeowners, our home equity investment may not be the right answer.”
The homeowner’s circumstances are most informative about whether or not strategies like an equity investment or a reverse mortgage may be a better fit, and a sense of collaboration could help better align that homeowner with the right option, he says.
“The ability to be able to put the homeowner first and try to offer a solution that makes the most sense for them based on their circumstances and needs and outlook is really a compelling idea,” he says.
The reverse mortgage ‘bridge’
After describing recent conversations RMD has had with other alternative equity tapping companies’ outlooks and potential partnerships with the reverse mortgage industry, Glass has seen certain similar scenarios play out for Hometap including the use of a shared equity investment product providing a “bridge” toward the eventual origination of a reverse mortgage, he says.
“We have definitely seen that,” Glass says when referring to his product bridging the gap toward a reverse mortgage. “And I think it’s an interesting idea because as you know, there are no age requirements on a home equity contract. So, we do see a lot of people who are in that stage of life where they’re not quite at retirement age and not eligible for reverse mortgage products. But yet, they’ve built up a lot of equity, and they’d like to take some capital out of their home for a variety of reasons. But I think it’s a perfectly solid and thoughtful application for where a home equity contract could make sense.”
In terms of some of the more common uses of Hometap’s solution, Glass describes many customers as falling into one of two “buckets:” someone confronted with challenges in life, or someone confronted with new opportunities.
“On the opportunity side, we see a significant percentage of our homeowners use the capital for things like investing in their small businesses, or in helping pay for their kids’ or their grandkids’ college education,” he says. “We see people sometimes using the capital to renovate their home, or potentially buy a second home.”
On the challenge side of the equation, these could include using the capital to pay down existing debts or to assist family members with unexpected medical expenses.
Collaboration with reverse mortgage companies
In terms of the collaborations that Hometap is currently engaged in with the reverse mortgage industry, much of that activity is focused at the individual level, Glass says. However, the trend of the kinds of reverse mortgage partnerships evolving into a more formal, organizational way has started to become more prevalent, he says.
“I would say in the last six months or so, we’ve really seen a pickup on the more formal company-level partnership side,” he says. “Not just with reverse lenders, but also just broadly across the lending industry of companies interested in being able to offer this kind of product as an additional option for homeowners.”
When asked if he could comment on the reverse-specific companies Hometap is engaged with,Glass declined but said there could be more opportunities for such a discussion in the future. He did say, however, that there is a certain mission alignment between companies like Hometap and the reverse mortgage industry.
“I would say that we share a common interest in putting the homeowner first, and that the mission of Hometap revolves around making homeownership less stressful and more accessible,” he says. “I think most of your audience would probably agree with that mission and probably, to a certain extent, would articulate what they do to be consistent with that mission.”