Borrower inquiries related to proprietary reverse mortgage offerings appear to be steady in the early days of 2020 compared with their figures in late 2019, according to reverse mortgage counseling professionals. While steady for the moment, lenders and industry observers have noted increased levels of business activity that can be at least partially attributed to the increased investments that lenders are making in the creation of new proprietary product offerings, while additional changes to the Home Equity Conversion Mortgage (HECM) program are being considered by the federal government.
This is taking place as lenders have introduced a series of new product offerings over the last several months, while other existing proprietary reverse mortgage products have been expanded with new features, and into new territories.
Counseling inquiries
Inquiries related to proprietary reverse mortgage products from incoming clients to counselors are relatively steady compared with figures observed in the final months of 2019. This is according to Jennifer Cosentini, Cambridge Credit Counseling Corp. in Agawam, Mass.
“In terms of inquiries, we are still at about 80% HECM and 20% [proprietary],” she says. “I am curious to see how many more products will be rolling out this year. We are now doing counseling for six different proprietary reverse mortgages now.”
By this time last year, Cambridge offered counseling for four different proprietary products, illustrating that the industry remains focused on the creation of new private products.
Other counseling agencies had previously seen a minor difference in the divide between inquiries related to HECM and proprietary reverse mortgages. Last September, Kathy L. Conley, stakeholder engagement specialist at GreenPath Financial Wellness in Farmington Hills, Mich. shared that the divide was roughly estimated to be about 70% for HECM and 30% for proprietary. Now, that figure at GreenPath has skewed further in the direction of the HECM product, she says, falling more closely in line with the figure observed by Cosentini and Cambridge Credit Counseling.
“Over a 13 month period, ending January 31, 2020, the reverse mortgage counseling GreenPath conducted breaks down to 83% HECM, and 17% proprietary,” Conley tells RMD in an email after verifying GreenPath’s internal data.
Recently-introduced new products, private volume increases
Expanding the proprietary reverse mortgage presence appears to be a priority for lenders based on some of the new products and features that they have unveiled over the last few months. Longbridge Financial announced a new variation of its “Platinum” proprietary reverse mortgage in November that features a line of credit, which was motivated by the poor fit that Home Equity Lines of Credit (HELOCs) can be for older borrowers, along with the 2017 principal limit factor changes to the HECM program according to CEO Chris Mayer.
Finance of America Reverse (FAR) has indicated that it’s aiming to expand the offerings under its HomeSafe proprietary reverse mortgage product suite, which currently includes four different variations including HomeSafe Standard; HomeSafe Flex, HomeSafe Second; and HomeSafe Select.
“We are always looking towards the future and monitor trends in population and demographics so we can develop additional products that can enhance the overall borrower experience,” said Scott Norman, VP of field retail and director of government relations at FAR recently to RMD.
Also affecting the stature of private reverse mortgages in the industry is that in terms of raw origination dollars, private products are taking up more and more of the total amount of reverse mortgage originations. This is according to a recent report by New View Advisors, and has the potential to lead to proprietary originations to ultimately surpass more traditional HECM originations at some point in the future.
“Private reverse mortgages, most of them jumbo-sized, now make up more than 25% of new origination by dollar volume,” New View wrote in a January report on HECM-backed Securities (HMBS) issuance.
Recent proprietary product expansions
Lenders are also expanding the operations of existing proprietary products to increase the potential of expanding the reverse mortgage market. One such example is Reverse Mortgage Funding (RMF), which recently introduced a new 4.99% interest rate option to its Equity Elite product offering specifically designed with market expansion in mind.
“That’s exactly the point of this product,” said RMF President David Peskin to RMD when the 4.99% option was introduced. “This is to go after the 94% of the market that is choosing not to get a [reverse mortgage] loan because the rates are too high. This is to, hopefully, broaden the market. It’s not to shift the customer from one product to another. It’s to get that customer that just didn’t want to move forward with either a HECM or [proprietary] loan. That’s where we have to be innovative.”
In December, Longbridge launched a new origination channel for its Platinum reverse mortgage line, offering the ability for those who have their own third-party networks to offer Platinum products to their partners as part of their previously-existing product lines. This allows Platinum products to be extended to a wider pool of originators that would not have access to the program unless they worked directly with Longbridge.
FAR also recently expanded the reach of its HomeSafe products, making them available for the first time in the states of Hawaii and Texas, while adding additional HomeSafe variations in Colorado making the full product suite available in that state. After making the HomeSafe Select product available in the state of Florida this past summer, FAR enhanced that offering in January to now allow eligible Florida borrowers to receive a portion of their loan’s proceeds as an open-ended LOC, without requiring monthly payments.
