While it has been in the marketplace for several years, the reverse mortgage for Purchase has never quite taken off. However, some lenders say they are having success with the product as it meets the needs for certain outside-the-box borrowers.
Aside from the obvious situation of a borrower looking to downsize or relocate in retirement out of want, originators report they have seen situations where the Home Equity Conversion Mortgage for Purchase works well; sometimes when they really need an alternative solution.
Life events often come into play, said Pamela Kirkpatrick, reverse mortgage advisor with Genworth Financial Home Equity Access, speaking on a panel during the National Reverse Mortgage Lenders Association annual convention in October. More often than not, a reverse mortgage can help when individuals—and couple—may least expect it.
One of those life events: divorce.
“Selling in a down market can pose asset risk,” Kirkpatrick says. “Both parties still need a place to live. This can be answered in several ways. For example, one person keeps the home and takes a traditional HECM, then takes some of that equity to do a HECM for Purchase on a new home for the moving spouse. This is a good way [to solve the problem with the least amount of risk leveraging the asset.”
The purchase also comes with some other considerations for those who have had success in making the deals happen.
“It often goes unlooked at,” Kirkpatrick says. “It really opens the door to have the opportunity to speak with attorneys, title companies and people participating in the process. Inevitably you will find people saying ‘I wish I would have known.'”
The product, having launched in 2008, has averaged around 130 endorsements per month, according to the latest data from the Department of Housing and Urban Development. Many think it has performed under potential due to the lack of education on the part of Realtors and other business people involved in the HECM for Purchase process.
“As the housing market continues to rebound, the HECM Purchase offers tremendous opportunities,” said Sarah Hulbert, retail business development manager at 1st Reverse Mortgage. “It has been around for four years, but has been slow to catch on.”
From an originating standpoint, the loan also comes with many differences from the Standard product, including some benefits. It may mean turn times of less than average. Kirkpatrick says she sees an average turn time of 30 to 45 days—much faster than a conventional purchase or a traditional reverse mortgage.
Ultimately, it can serve the borrower better whether there is a separation taking place or not.
“There may be greater value and less stress rather than adapting the home,” Kirkpatrick says.
Written by Elizabeth Ecker
