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Proprietary reverse mortgages essential to helping more homeowners access equity

Expert panel predicts more products will emerge to fill HECM's void

Proprietary reverse mortgages are key to helping American homeowners unlock the wealth in their homes, and we’ll likely see more of them come to market, said panelists at the National Reverse Mortgage Lenders Association’s annual meeting on Monday.

David Peskin, president of Reverse Mortgage Funding – which released its own proprietary reverse mortgage earlier this year – said it’s important that lenders create products to fill voids left by the HECM.

For example, homes with values that exceed the Federal Housing Administration’s federal loan limits are ineligible for a reverse mortgage, and borrowers must also pay off their existing mortgage in order to get the loan.

“The idea is to grow the overall market. It’s very important that we’re constantly looking at opportunity to fill that void,” Peskin said. “I think it’s important that we diversify.”

Peskin and his fellow panelists agreed that equity release can be important for seniors looking to better manage their finances in retirement.

“The average debt out there today for households over the age of 62 is around $140,000, so it’s a very big market,” Peskin said. “If we can find a product like our proprietary products that could pay off that debt, come in at the right PLF and introduce lower closing costs, I think there’s a much bigger audience.”

Chris Mayer, CEO of Longbridge Financial – which also recently brought a proprietary reverse mortgage to market – said a plethora of options on the table for consumers is good for everyone in the reverse mortgage industry.

“I think we all benefit to the extent consumers recognize and are willing to look at using their home to help finance retirement,” Mayer said. “I think that approach lifts all boats, so it’s important to have a variety of things on the docket.”

Jonathan Scarpati, vice president of wholesale at Finance of America Reverse, said the lender is working to create products that reverse professionals can use to help more clients.

FAR has been a leader on the proprietary front.

For the last few years, its HomeSafe product was the only non-agency reverse on the market, and this year, it released three iterations of the product – a non-lump sum, a HELOC and a second-lien reverse mortgage.

“Ultimately, what we’re trying to do is create solutions for borrowers and give them flexibility and choice,” Scarpati said.

Scarpati said the latest developments in private label reverses have invigorated the industry.

“As sales people, you guys have a lot to talk about right now,” he said. “It’s a great, exciting time in the market because we really just changed the conversation quite significantly. Helping you guys cast a larger net is what we’re looking to accomplish.”

Mayer said having non-agency products is more than helpful, it’s essential to keeping lenders in the space afloat. Too many program changes have damaged the bottom line for lenders, he said, who have been reliant on government to create a healthy product.

“It’s very hard to run a business as an industry and as a company when there are changes that come down the pike and you end up looking at 30 to 40% hits to what you’re doing,” he said. “Part of the value of developing a liquid market for non-FHA products is that any industry needs to have its own products that are not solely reliant on government for the industry’s success.”

Mayer drew comparisons to the non-QM market, which was also an underdog that has recently seen an uptick in volume.

“We are going to build products that solve specific problems, but hopefully broadly enough that it creates liquidity in the private label market so that we can start to do it in enough scale so that it really becomes material and matters,” he said. “The non-QM has taken a number of years to build, and so it’s sort of a good analogy.”

But Mayer said that having the right products in the marketplace isn’t going to be enough to gain the material volume the industry so desperately needs. Professionals in the space must also find new ways to engage consumers about equity use.

“Products will help us, but they’re not going to be the only solution,” he said. “We have to figure out how to have the conversation in a way that moves the needle and in a way that has more acceptance.”

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