While there is still little data to show the relative success of the HECM Saver since its launch in October, a panel of lenders at the National Association of Reverse Mortgage Lenders conference in Newport Beach, Calif. provided insight as to the Saver’s strengths—and challenges.
The timing for the saver, said Generation Mortgage Chairman Jeff Lewis, couldn’t be better. “Everyone is missing the boat here on the urgency of this value proposition,” he said. “What is available right now is unbelievable. The amount of money available is more than has been in the life of this industry.”
With Saver endorsements hovering around 4.3% of all HECM endorsements according to the most recent data from the Department of Housing and Urban Development (HUD), application data is lagging, so it is uncertain exactly how much the Saver is catching on. Reverse Market Insight estimates Saver applications may comprise as many as 10% of all applications, and some lenders have estimated their proportion is closer to 20%.
The typical Saver borrower, however, has a different makeup from the Standard borrowing population. “It’s definitely not a need-based borrower,” said Jeff Garcia, of Carlsbad, Calif.-based LibertyStreet Financial Group. “The Saver borrower has a lot less urgency…They want more information and they’re going to do more analysis, which creates a longer selling cycle. It’s definitely a longer cycle before they make up their mind.”
They may also be using the Saver for a different objective, including a single use purpose. “It’s usually not an issue of cash flow over time,” Garcia said. “Several have just wanted to do a remodel.”
The hope, across the panel, is for the Saver to broaden the market with these new, “less needy” borrowers, and perhaps incorporate reverse mortgages into the conversation about retirement planning.
“We look at this program as an opportunity to integrate this into what we already do… More often than not, we are integrating the benefits of the Saver into the HECM program as a whole,” said John Mlekush, of Wells Fargo Home Mortgage. “There is an opportunity to postiion this program as that true bridge we’ve always been trying to create between a reverse mortgage and retirement tool.”
“We’re dicussing the industry game changer with the HECM saver,” said MetLife’s Greg Laks. “We’re not longer one-size-fits-all.”
For all the positive feedback from those doing Saver loans, however, there is caution when it comes to the secondary market for the loans. Lewis noted the importance of gathering data on the Saver to give an accurate picture of the investment pool, and thus, reassure those who are investing in the product. Despite that challenge, he agreed the Saver has the potential to make a difference in the way reverse mortgages are viewed overall.
The term “last resort” has been a misnomer for reverse mortgages, said Lewis. “The Saver makes that more obvious. We need to get people for whom it is not a last resort. Eradicating this myth of last resort is the most important thing we can do for this industry and i think the Saver is going to be a big part of that.”
Written by Elizabeth Ecker