Reverse Mortgage Investment Trust (RMIT), the parent company of leading reverse mortgage lender Reverse Mortgage Funding, LLC (RMF) has announced the successful completion of its acquisition by an affiliate of Starwood Capital Group, a global private investment firm which is focused on real estate investments and which maintains more than $60 billion of assets under management. Terms of the deal have not been disclosed.
Originally announced over a year ago, Starwood plans to position RMIT and RMF for greater levels of growth, and stated that it was encouraged by the increasing prevalence of proprietary reverse mortgage products according to RMIT Chairman and CEO Craig Corn upon the original announcement of the acquisition.
Reacting to the current moment
One of the major occurrences since the original announcement of the acquisition has of course been the widespread impact of the COVID-19 coronavirus pandemic, which has been at least partially attributed to an increase of interest in the reverse mortgage product category by American seniors.
Citing the increased interest the pandemic appears to have generated in reverse mortgages, Corn says that RMF’s new association with Starwood will help to further allow the lender to take advantage of growth opportunities in the reverse mortgage space stemming from new product category interest.
“Given the pandemic, demand for reverse mortgage products has continued to climb as older Americans access home equity for a myriad of reasons including more safely aging in place, leveraging low interest rates, and accessing standby emergency funding,” Corn said in the announcement of the deal’s completion.
Specifically in terms of the new resources that RMF will have access to as a result of this deal, Corn describes that the lender can expand its consumer communications, educational initiatives and ability to create new kinds of products to meet the growing needs of senior consumers, he says.
“Becoming part of the Starwood Capital family of companies enables RMF to accelerate the growth of this market with expanded marketing opportunities and product development capabilities,” Corn explains. “Over the last few years, Starwood Capital has been an innovator in non-agency mortgages, spurring the growth of the industry into the success it is today.”
Making reverse ‘mainstream,’ recent history
Also expressing excitement about the possibilities presented by the new deal, RMF President David Peskin says that members of the RMF leadership team are remaining in place as the company prepares for business in 2021.
“RMF’s parent company (RMIT) was acquired as a standalone entity and our entire management team remains in place,” Peskin explained. “With the culmination of this transaction, we’re pleased to be an affiliate of Starwood Capital Group — a firm whose values and innovative spirit align with ours — as we continue our mission to make reverse mortgages a mainstream financing tool for older Americans and an attractive alternative to home equity and traditional loans, especially for those who are retired or working part-time.”
RMF is the third largest reverse mortgage lender in the industry, recording 4,108 Home Equity Conversion Mortgage (HECM) endorsements in calendar year 2020 according to data from Reverse Market Insight (RMI). This marks a 64% increase over total calendar year 2019 recorded endorsements, leading the lender to a 9.2% market share in 2020.
Recently, RMF reintroduced its “MAX5” HECM offering, described by the lender as the industry’s first monthly adjustable rate, Constant Maturity Treasury (CMT)-based HECM with a lifetime cap of 5% over the initial rate. A previous version of MAX5 was introduced by RMF in 2014, based on the London Interbank Offered Rate (LIBOR) index.
The reintroduction of MAX5 tied to CMT was motivated by the impending restrictions on the eligibility of HECM-backed Securities (HMBS) for adjustable rate loans operating off of LIBOR, announced last September with the implementation recently having been pushed to March.
Last summer, RMF announced a new product variation to its “Equity Elite” line of proprietary reverse mortgages that would have a line of credit (LOC) feature, available to seniors at or over the age of 60 in some states while also featuring a reusable line of credit that grows at 1.5% annually for seven years, with a lending limit of $4 million. RMF launched the Equity Elite LOC product in August.
On January 1, a new HECM lending limit of $822,375 went into effect. Executives at other lenders recently expressed to RMD that such a high HECM lending limit could potentially mitigate some proprietary reverse mortgage volume in 2021, at least in the short-term.