Last November, Figure Technologies announced the availability of a new sale leaseback offering as an alternative method of home equity tapping when compared to a reverse mortgage. It also makes plain that it seeks to compete with reverse mortgage offerings, since navigating to the product’s dedicated page on Figure’s website immediately greets visitors with a proclamation that reads it is, “Better than a reverse mortgage.”
Figure Home Advantage is a sale leaseback product, where Figure purchases the home. At that point, Figure grants seller(s) a lease that renews annually. Homeowners then get the proceeds from the sale in one lump sum, with Figure claiming the borrower can get up to 90 percent of the home’s value. As the new home-owning entity, Figure covers property taxes, homeowner’s insurance, and any other costs associated with ongoing maintenance of the property.
While many in the reverse mortgage industry seem to believe that alternative methods of home equity tapping are not necessarily competitors with reverse mortgage products, Figure seems to have a different take on the home equity conversion space.
One of the reasons behind the competitive messaging is that, according to Figure’s Chief Marketing Officer Wendy Harrington, reverse mortgages on their own can’t completely answer all the problems being faced by the modern retiree.
A “growing crisis”
“We created this product originally because we saw this growing crisis among retirees in that they just didn’t have enough income,” said Wendy Harrington, Figure’s Chief Marketing Officer. “And when we started to look at it, it’s interesting that two-thirds of homeowners over 65 own their own home without a mortgage. So, they’re debt-free from that perspective, but really so much of their equity is tied up in their home.”
When it comes to the idea of competing with reverse mortgage offerings, Harrington also explained that some customers who fall through the proverbial cracks of the government-insured products now have an alternative option they can explore to serve their undermet needs. One of the opportunities for Figure through the new Home Advantage offering is the poor reputation that follows reverse mortgages.
“As we were looking at what’s going on for retirees and how we could help, there’s not a lot of options today,” she said. “Reverse mortgages don’t have a good reputation, and can’t help a lot of people because of the age demographic, or just the math if it works out. People don’t want to leave their home, and they don’t want to take on debt. It can put people in a conundrum. So, I think people are excited to hear that there’s another option out there, and I would also say that this is a situation that’s going to evolve over time.”
One of those demographics Harrington says is underserved by existing reverse mortgage offerings are those who may be in their late 50’s, have said goodbye to their children, and sit in an empty nest without having a traditional form of access to their home’s equity if they need to make ends meet in new ways. Figure also claims that their product can serve those who may retire at a younger age.
“That’s the thing about retirement: people can start it sometimes earlier than they’ve even planned,” Harrington explained. “People in the 55-to-60 range, and you also often have couples where one person is a little bit younger. I think that’s one of the challenges with reverse mortgages,” she said.
Her allusion relates to the continuing bafflement plaguing rules concerning non-borrowing spouses in the reverse mortgage space, which RMD has reported on extensively in the past.
Concerning those in the age ranges not covered by reverse mortgage offerings, Harrington says Figure’s product is “age-agnostic,” and allows for home equity release for those who don’t fit into the mold of reverse mortgage products.
A bigger payout
Figure also advertises that the potential payout from their product is higher than that offered by a reverse mortgage, and since it is a leaseback product, the customer can stay in their home for as long as they stay current on the terms of the lease.
“You get up to 90 percent of the home’s value, which is a much better payout than you can get with a reverse mortgage, you stay in your home for as long as you like,” Harrington said. “It’s an annual lease that auto-renews as long as you want to be there and as long as you’re current on the terms of the lease.”
Figure then picks up the tab for property tax and general maintenance, but also says that those who have a change in their situation also have a way out if they so choose.
“We do give people the option to buy their home back if they so choose,” she said. “Maybe it’s that someone’s plans are to move, or that they need the money now. Maybe a situation just changes in three or four years, and they decide they really want to stay and buy it back. So, we wanted to provide that as an option for folks as well.”
Proprietary products vs. FHA insurance
While private products like Figure Home Advantage and the recently-highlighted QuantmRE have the potential to help those who may not be covered by existing reverse mortgage products, they are also without the protections that come from standard Home Equity Conversion Mortgages (HECMs) that are insured by the U.S. federal government.
Private and alternative offerings do have the potential to fill in some gaps of the existing program, however, as seen in other areas including the increasing prevalence of proprietary reverse mortgage products.
“We, as a country, just have to try and do other things to offer more innovative solutions to try and help [retirees],” Harrington said.
Former staffers from HUD, FHA and the GSEs weigh in on how to press ahead in this volatile reverse mortgage climate.