When I first joined Reverse Mortgage Daily a little over one year ago, I had a hard time telling a HECM from a ham sandwich. Perceptions about the reverse mortgage industry on my end were probably not too dissimilar from the perspectives encountered by originators having exploratory conversations with clients, or initial counseling sessions trying to offer people a basic understanding of the complexities inherent in reverse mortgage products.
Having come from an undergraduate academic field of study that was primarily focused on American politics, one of the things that immediately attracted me to the job of covering the reverse mortgage industry was its regular interactions with that world in Washington, D.C. I’ve come to realize that a unique perspective on the reverse mortgage industry emerges when it is looked at through the prism of politics, but seeing how those in the industry aim to shape it on its own terms is also very interesting.
Still, as an industry observer it seems as if the proliferation of private alternatives to traditional HECMs is learning from the most popular features found in the FHA-backed product, and is bringing them forward in an efficient way that frames the beginning of new product formulation around much of the “borrower-first” framework that has shaped the HECM in recent years, and that focus will likely mean positive things for the industry in the years to come.
Proprietary promise
Coupling that with the accelerated pace of research that indicates that reverse mortgages have a legitimate place in the future of American retirement, and you have a viable, possible path toward retirement stabilization for a cash-strapped generation of older Americans. Independent research sponsored by the non-profit Brookings Institution has concluded that reverse mortgages have cause to serve an expanded role in retirement for American seniors, while recognizing and acknowledging that the product category comes with imperfections that people inside and outside the industry continue to try and address.
Not only do you have a plethora of proprietary offerings from Finance of America Reverse (FAR) that are given further reach through a correspondent partnership with American Advisors Group (AAG), but you also have more companies jumping into the private reverse mortgage fray at Reverse Mortgage Funding (RMF), Longbridge Financial, One Reverse Mortgage and Liberty Home Equity Solutions.
Those companies are increasingly shaping their non-government offerings off of the template established by the modern HECM program, which is an efficient choice considering how HECMs have been forged under the weight of scrutiny from many different perspectives and stakeholders.
Products forged by years of HECM reform
One thing that the government-sponsored reverse mortgage product cannot escape from is additional reforms made at the legislative and administrative levels with an eye toward program stabilization, which always has the potential to disrupt the industry significantly. This is demonstrable when looking at changes including the principal limit factor (PLF) cuts from October 2017, and the collateral risk assessment introduced the following year.
Those who express concern about what the government may want to do to the program now find themselves with additional options by leaning further into the increasing prominence of proprietary products.
Fiscal 2019 has shown reduced volume when compared to the year before, and most providers of proprietary reverse mortgages are not yet willing to share data on private originations with the rest of the industry (much to the chagrin of RMD). Still, many of the emerging political realities – including vocal support from powerful, former program opponents – coupled with the increasing availability of private reverse mortgages, should be encouraging for an industry that could likely use some good news.
Of course, what the industry does with the presentation of these potential paths is anyone’s guess, but it should make 2020 an interesting year to watch. After a year on the job of covering the “beat” of reverse mortgages, it’s been nothing short of fascinating meeting such a diverse array of personalities, all sharing an overriding, predominant concern for the seniors they’re dedicated to serving.
My hat’s off to you, reverse mortgage industry. You’re full of surprises, and I’m looking forward to seeing how you prepare to reinvent yourself yet again as we now say hello to the year 2020.
