Finance of America Reverse (FAR), Reverse Mortgage Funding (RMF) and Longbridge Financial all responded to market volatility affecting their private reverse mortgage product offerings this past weekend, RMD has learned. While FAR and Longbridge suspended new applications for its products, RMF instituted immediate changes to respond to market volatility.
While FAR has since resumed new applications for its “HomeSafe” and “EquityAvail” private products, loan-to-value ratios have been reduced and rates have increased according to additional communication and perspective shared with RMD from industry professionals.
Sources of disruption
RMF attributes product changes to a widening of credit spread and general disruption in the overall market, according to a partner communication. Similarly, Longbridge has attributed the suspension of its “Platinum” proprietary products to the volatility seen in current market conditions, which necessitated “immediate” changes that are still in process.
Existing applications for Longbridge’s Platinum loans can still be submitted to the lender, but will be placed on hold upon intake. Loans that have not been scheduled to close as of June 16 will be subject to forthcoming product changes, the lender said.
New pricing for RMF’s “Equity Elite” products has been made available within the last 24 hours, but the lender is currently working on incorporating the changes into its loan origination systems. Brokers with these loans in process are encouraged to reach out to applicants to inform them of product changes by RMF.
RMD reached out to representatives of all three lenders. Longbridge had no comment.
RMF President David Peskin responded to RMD saying that Equity Elite was not suspended.
“RMF did not place a hold on its Equity Elite suite of products; all products are currently available to borrowers,” Peskin told RMD. “RMF has made some changes to the products to reflect the current market landscape. Those changes have been implemented in our proprietary loan origination system (Tango), and we are waiting for the changes to be instituted in the Reverse Vision (RV) system.”
FAR VP of Wholesale Jonathan Scarpati told RMD that the changes instituted for its proprietary offerings are in the interests of its partners, investors and customers.
“We are always committed to delivering for our partners and making appropriate, strategic pivots that take the whole lending picture into consideration, including the role of secondary in sustaining our product suite,” Scarpati said in a statement. “To ensure that we could offer the most updated terms, we and many of our peers in the industry opted for a momentary pause on new applications for HomeSafe to allow our systems to be updated for pricing adjustments. FAR has now resumed accepting new applications and will evaluate and respond to any new developments as appropriate.”
Affected professionals in each communication are encouraged to reach out to their account executives with any specific questions, and some lenders will even provide communications for affected applicants.
When soliciting different industry leaders for reactions to these developments, Steven Sless, reverse mortgage division president at Primary Residential Mortgage, Inc. (PRMI), responded to RMD and opined that proprietary reverse mortgages have basically moved back into the realm of “jumbo” loans as opposed to operating within the means of both wealthier borrowers and those who can also qualify for a HECM loan.
“Yesterday, there was really no private products to sell,” Sless tells RMD. ”Today, that changed when HomeSafe came back with lower LTVs and higher interest rates. I get it, but what the market is basically telling us is these proprietary loans are back to jumbo loans.”
Sless describes his own concern about how these shifts could create new reputational risks for the reverse mortgage industry, and how it could create new difficulties for purchase reverse mortgage customers.
“As of right now, we don’t know if there’s going to be special carve-outs for those purchase loans,” Sless says. “And if you look at the new LTV, one of our borrowers that’s supposed to close this coming Friday, they’d have to come to the table with $60,000 more after we’ve already sourced and seasoned funds, and this borrower doesn’t have $60,000 more. So my concern as an industry leader is how many senior buyers or borrowers are going to be put out on the street, literally, with nowhere to go because of these changes.”
If such a thing transpires and those borrowers end up going to media outlets describing their experience, that could do damage to a lot of the work the industry has put in on the reputational front recently, Sless says. In terms of PRMI’s institutional response, the leaders at the lender have started what Sless calls “crisis management” to determine next steps from here. As of right now, PRMI is telling its LO corps that the organization remains “full steam ahead,” Sless explains.
“We have over 1000-plus forward mortgage originators whose volume is severely impacted by the rising interest rate environment, inflation and a lack of inventory in the purchase market,” Sless says. “And reverse remains a fantastic way for them to diversify their product offerings. So our message is when the market is tough, focus on your personal brand, develop your niche, and we’re certainly encouraging that their niche becomes reverse mortgage lending.”
Private products prone to changes with economic volatility
Reverse mortgage professionals previously saw the suspension of proprietary products with the last major period of economic turmoil caused by the initial onset of the COVID-19 coronavirus pandemic.
At the end of March 2020, both EquityIQ from Liberty Reverse Mortgage and Equity Elite from RMF were suspended due to increased volatility in financial markets, but those suspensions at the time were also only viewed as temporary disruptions for the products. By the middle of the summer that year, both products were being actively offered once again, albeit with changes to rates and LTVs.
In the case of RMF, the return of Equity Elite also brought with it a new product variation Its reintroduction is now bolstered by the introduction of a new product variation with a line of credit (LOC) feature, according to the company at the time.
The economic shock of the early pandemic was not only reserved for private-label reverse mortgages, as Home Equity Conversion Mortgage (HECM) pricing saw notable fluctuation in the earliest days of the pandemic as well. This ultimately stabilized, leading to a period of vibrant activity for the industry and a boom in HECM-to-HECM refinance transactions.
Editor’s note: An earlier version of this story reported that RMF had suspended availability for Equity Elite when it had in fact made quick product changes, and is incorporating a new pricing model into its LOS systems. RMD regrets the error.