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New Product Could Springboard Reverse Mortgages Into the Mainstream

Armed with a new product, there was a sense of optimism over the panelists during the National Reverse Mortgage Lenders Association annual conference in New Orleans.

Jeff Lewis, Chairman of Generation Mortgage told RMD during the conference he believes the industry will grow by 30% during fiscal year 2011.  “We’re going to grow like crazy being able to provide more choices to borrowers,” he said.  “We all know there is a need for our product and the HECM Saver should help bring in different kinds of clients.”

During a panel discussing the new HECM Saver, Vicki Bott, Deputy Assistant Secretary for HUD said the agency believes the Saver will be very popular, but its up to lenders to educate consumers so they understand which product is best for their situation.

“Don’t see the HECM Saver as a temporary product because it can be re-financed in the future,” she said.  “If you’re selling it as a short term product it can disrupt the secondary market.”

Without any data on how the HECM Saver performs, investors remain cautious about how quickly the loan could pay off and whether it’s a “stepping stone” to refinance into the HECM Standard.  However, as long as the industry puts the interest of borrowers first, the combination of the Saver and Standard “has the potential to springboard the industry into the mainstream,” said David Fontanilla, Trader at Knight Capital Group.

The company is holding HECM Saver loans on its balance sheet until it can figure out what the market looks like said Fontanilla.

“This has always been a small industry but we also aspire to get that acceptance of the mainstream,” he said.  “We’re on the cusp of that and if we make the right choices for the borrower, the rest will come together.”