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Mortgage

Alt equity firm Point says it won’t abandon reverse mortgage space

Introduction of "Home Equity Investment" product will be complementary to HECM products, Point execs say

Point, a shared equity reverse mortgage firm that gives homeowners the ability to sell a small fraction of their equity, recently announced that it has raised over $1 billion in new capital commitments from real estate and mortgage-backed securities (MBS) investors. These companies include Atalaya Capital Management (which made a prior investment in 2018), Kingsbridge Wealth Management, Palisades Group, and Redwood Trust.

Point’s primary product offering is a home equity investment, which centers on the sale of a small fraction of a customer’s home equity, typically in the range between 15-20% of the home’s current value. Within 30 years, the homeowner can then sell the home and pay Point through escrow, or buy back the company’s investment to remain in the home. A potential customer must retain at least 20% of their home’s equity after Point makes its investment.

Alternative equity tapping companies including those offering shared equity investments as well as sale leasebacks have alternated in their postures toward reverse mortgage companies between potential partners sharing information with clients who may only qualify for one over the other, or as direct competitors in terms of relaying potential benefits to borrowers. In an interview with RMD, Point co-founder and chief business officer Eoin Matthews says that the company remains committed to working with reverse mortgage industry participants as opposed to directly competing with the industry.

More than $1 billion in new capital

Point describes the attitudes among customers as enthusiastic in light of many of the events which have caused economic shock to millions of Americans, according to the announcement.

“Point has seen Home Equity Investment (HEI) fundings surge over 100% in the first eight months of 2021, with more homeowners than ever looking for alternatives to traditional home equity loans, HELOCs, and cash-out refinances,” the statement reads. “These recently announced investments in Point’s HEI platform enable the company to support demand as homeowners emerge from the COVID-19 pandemic keen to tap into their home equity.”

Similarly to the reverse mortgage industry, which saw a spike in product interest as a result of the pandemic, Point’s statement is somewhat corroborated by the generally heightened activity on the reverse side as seniors appeared more open to exploring alternative options for facilitating cash flow.

Some of the company’s new investors also commented on their enthusiasm for Point’s platform, including Bo Stern, head of portfolio strategy and risk for Redwood Trust.

“Redwood believes that Point’s innovative solution to enable homeowners to participate in the benefits of home price appreciation without having to sell their homes can significantly improve the quality of life for many households,” Stern said. “We believe this financing alternative for homeowners squarely aligns with our mission to make quality housing accessible to all American households. Redwood is excited to partner with Point.”

Co-founder on working with the reverse mortgage industry

When reached by RMD to ask if this new capital has changed Point’s position in terms of its previously-stated desire to work in a collaborative capacity with the reverse mortgage industry, co-founder and CBO Eoin Matthews said that Point still sees the reverse mortgage business as a potentially valuable partner especially in terms of educating homeowners about the responsible use of home equity in financial matters.

“These capital commitments give us the opportunity to bolster our relationships with partners in the reverse mortgage industry,” Matthews told RMD. “The HEI product is proving itself highly complementary to the Home Equity Conversion Mortgage (HECM) and the proprietary reverse solutions in the market. Point has hundreds of active partners today and a significant portion come from the reverse mortgage industry.”

The capital, he continues, simply provides another opportunity for Point to signal to its partners that there is a degree of camaraderie between the two industries due to the core component of both business models: the home.

“This capital announcement is just one more way for us to signal to partners that we are in this together for the long haul to build a new product class,” Matthews added.

Matthews also describes general feelings of gratitude for the reverse mortgage industry players that Point has partnered with in the past, citing those relationships as key components of Point’s success in recent years.

“From Point’s earliest days, our friends in the reverse mortgage industry have been instrumental to the company’s success,” Matthews says. “The leadership teams at many of the largest RM operators have provided advice, made important introductions, and helped bring the HEI product class to where it is today. These industry leaders recognized early how symbiotic the HEI product is with reverse mortgages, and it’s difficult to underscore just how impactful that support has been.”

Echoing thoughts he shared one year ago at RMD’s event “HEQ: The Future of Home Equity in Retirement,” Matthews describes that home equity investments and reverse mortgages share many of the same goals and that a collaborative posture between the two industries will ultimately help to better serve more seniors seeking options outside of “traditional” forms of financing.

“Ultimately, we’re all trying to serve homeowners and the Home Equity Investment is designed to plug the gaps around the reverse mortgage UW box — HEIs can serve younger homeowners, work in junior lien positions, and are not limited by HUD rules on property eligibility,” Matthews says. “These are just some of the reasons why we’ve seen many reverse operators embrace the HEI — they want to help homeowners they otherwise couldn’t serve. We’ve seen many homeowners use a HEI as bridge financing to a HECM and that’s going to become more common over time. It’s a big opportunity.”

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