South River Mortgage is a reverse mortgage lender you may not have heard much about in the stories of RMD, but they are a notable presence in the business. Having taken advantage of the sizable Home Equity Conversion Mortgage (HECM)-to-HECM refinance boom, the lender stands at the ninth-largest in the industry among Federal Housing Administration (FHA) and non-FHA lenders according to data from Reverse Market Insight (RMI).
Recently, South River launched its own proprietary reverse mortgage called “HomeForLife,” and Tyler Plack, the company’s president, sat down with RMD to discuss the ins and outs of the product and how it might be able to avoid some of the issues faced by other products in the private-label reverse mortgage space recently.
HomeForLife operates as a fixed-rate loan, with a minimum age requirement of 55 (echoing similar moves made by other lenders) and what Plack describes as a “more aggressive” version of the financial assessment.
“We’re able to do a lot of the stuff that the other proprietaries are able to do, but financial assessment is a little bit more aggressive with our product,” he says. “We’re specializing in condos, and other kinds of things that fit a little bit outside of that traditional HECM box. I know everybody talks about the condos, but we’re also doing other stuff like manufactured homes, properties in a flood zone, things that might cause a denial but maybe not for the right reason.”
HomeForLife was brought online with a “soft launch” in December of 2021, Plack says. Currently, the product is active in 13 states while the company overall is active in 21 where it can offer a HECM loan, as well as in the District of Columbia. The goal is for the proprietary product to join all of the other states that the company’s HECM offering is currently active in, he explains. While primarily operating on the retail side, South River does have wholesale ambitions which it plans to explore more thoroughly in the next couple of months.
When asked to estimate the breakout between proprietary and HECM volume, Plack put the distinction at about 75% being HECM volume with the remainder being made up of HomeForLife loans. However, as more loans have been catered recently to borrowers new to the reverse mortgage space, Plack estimates that those customers are actually about 50/50 between HECM and proprietary.
Acceleration of proprietary product interest has become a new feature of the reverse mortgage landscape in recent months, with representatives of several major lenders all reporting increased proprietary interest from customers and a commensurate bump in volume.
However, with that rise in interest has also come some new challenges for the proprietary product landscape. With economic volatility having increased recently, major reverse mortgage lenders were forced to adapt to the environment. Plack said the company remains full steam ahead when asked if that makes South River nervous about its prospects in the space.
“I think that a lot of the challenges that were faced were due to people being very reluctant to update their principal limits and their rate structures, given the Fed’s interest rate changes,” Plack explains. “We’ve been a little bit more aggressive in making those updates. We updated our principal and our interest rates a little bit sooner, and we now know that it was a pretty wise decision.”
That’s because the product managed to avoid issues of market gridlock, he says.
“We avoided this issue where we see that the entire market stops, and everyone has to have to figure things out,” he says. “We made a lot of those changes quickly, adjustment by adjustment.”
When asked about why the lender can move quickly on such issues, Plack attributes it to efficient processing, he says.
“We moved quickly mainly because we have a retail rotation channel which is really allowing us to process the loans and get them closed really quickly,” he says. “And in doing so, the borrowers who might be at some of the rate structures that were going off-market, we have been able to push through and get those loans closed. We’ve been able to update the rate structures without having to make the changes to a wide range of brokers where they’ll be upset about key elements that are lost.”
Where to go from here
Plack also mentions that difficulties with investors have been avoided due to a smaller and very accommodating investor. In terms of broader goals the company has for its private-label product, increasing the number of states the offering is active in is the number one priority. Additional product variations are also on the list.
“We’d like to introduce a line of credit here soon to the other payment plans, especially the ones that are not offered by anyone else,” he says. “From there, it’s a volume game. We want to continue to pick up more volume help more people and close more loans.”