As home equity among seniors continues to balloon, the pace of government-insured reverse mortgage lending has slowed. But several proprietary programs have been created to pick up the slack — including a new second-lien product.
Data from the National Reverse Mortgage Lenders Association indicate that homeowners who are at least 62 years old had $6.9 trillion in equity as of the second quarter of this year.
Compared to the first quarter, senior home equity has expanded by $130 billion. Behind the improved equity positions of older Americans are home values, which increased by $143 billion.
But despite the growing opportunity for originators,
endorsements by the Federal Housing Administration of home-equity conversion mortgages during fiscal-year 2018 — which ends this month — are on track to decline to $16 billion from nearly $18 billion in fiscal-year 2017.
Chris Mayer, PhD, chief executive officer of
Longbridge Financial LLC, said at NRMLA’s recent 2018 Eastern Regional Meeting that government dominance of the sector isn’t good.
“The idea that nearly our entire industry relies on the federal government for what it does, in addition to all of the state rules … it’s really hard to run a business that’s so heavily dependent on Washington,” Mayer was quoted by NRMLA as saying.
Even the CEO of the country’s biggest HECM originator,
Reza Jahangiri, says it’s time move beyond FHA.
“We can’t keep doing what we’ve been doing in the past, and proprietary product innovations are a great step in the new direction,” Jahangiri was quoted as saying at the same NRMLA event.
So Mahwah, New Jersey-based Longbridge, along with some other well-known reverse mortgage brands, have recently been stepping in to launch their proprietary programs.
Longbridge unveiled its Platinum Mortgage Program last month. The program allows up to $4 million in up-front cash. Longbridge claims that its program has the “highest LTVs in the market for many borrowers using comparable interest rates,” better home purchase options, and financing for condominiums not approved by FHA. No mortgage insurance is required.
Quicken Loans Inc.-subsidiary One Reverse Mortgage LLC has created Home Equity Loan Optimizer. The HELO has no mortgage insurance requirements, quicker equity access and higher lending limits than HECMs, according to One Reverse. In addition, properties not approved by FHA are eligible. “There are no property restrictions.”
Reverse Mortgage Funding LLC is promoting its Equity Edge product. RMF says the minimum age for the product is 60, more funds are available for access, and there are lower up-front costs than HECMs. Condos and townhome not FHA-approved are eligible.
On Tuesday,
Finance of America Reverse LLC joined the fray.
The Tulsa, Oklahoma-based organization revealed its HomeSafe Second.
While the proprietary HomeSafe program has been around for four years,
the new offering is “the first-ever second lien reverse mortgage.”
Customers can leave low-rate first mortgages in place while accessing equity with no additional monthly payment. Proceeds are available up to $4 million, and property values are allowed up to $10 million.
FHA approval isn’t required for condominiums valued at more than $500,000, and there is no mortgage insurance required.
Finance of America Reverse President Kristen Sieffert noted in the announcement that while reverse mortgages might
not be the first tool seniors use when considering how to integrate home equity into wealth management plans, the junior lien program gives them the flexibility to access additional funds.
Peter Bell, NRMLA’s president and CEO, is optimistic about Finance of America’s offering.
“Their development of a subordinated-lien loan that is structured as a reverse mortgage is an innovative and useful addition to the offerings in this market,” Bell said in a written statement to Mortgage Daily. “I can envision a lot of applicability for this concept.”
