Secondary Market Lowers Reverse Mortgage Costs, Brings New Opportunity

For the first time in the 20 year history of the HECM program, lenders have started to eliminate servicing fees and lower if not get rid of any origination fee for the HECM fixed product. Most see this as a way for seniors to get access to more proceeds, but some feel the industry is focusing too much on a “proceeds-based approach” with consumers.

According to Michael Hild, CEO of Live Well Financial, most originators focus nearly all their attention on the amount of proceeds available for a specific reverse mortgage product at the expense of nearly all other product features.

“This focus has come at a tremendous expense because it has worked to alienate the majority of seniors who own their homes free and clear and are more concerned about costs than the traditional reverse mortgage customer,” said Hild. The company recently started offering a fixed rate HECM at 4.99% and feels the current secondary marketing environment provides the industry a once in a lifetime opportunity to offer enormous cost savings to borrowers who have been sitting on the fence.

However, he does realize that the inevitable process of rising rates will hurt the changes but he does believe the current environment has “created a meaningful improvement in adoption amongst the free and clear borrowers.”

Without reaching this group of consumers, the industry won’t to see any meaningful increase in the adoption of the product said Hild. While it’s much too soon to be sure, he tells RMD that his company is seeing some hopeful indications and its outlook is “cautiously optimistic.”

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