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 IHSABUJA 2020

Are more borrowers really taking out non-agency reverse mortgages? Originators weigh in

In the past year, the reverse mortgage industry has seen a number of non-agency reverse mortgages come to market.

While they are not insured by the Federal Housing Administration like their HECM counterpart, they can cater to homes that exceed FHA’s claim amount – offering up to $4 million of home equity in cold hard cash – and they come free of the costly mortgage insurance that can be a deterrent for the HECM.

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Now, five lenders offer proprietary reverse mortgages with varying features not available on a HECM, like a second-lien and a line of credit, and word has it one more is about to come to market.

But while most lenders say interest in their jumbo reverse products has been strong – with some saying it has even surpassed expectations – data is sorely lacking on just how many of these non-agency reverse mortgages the industry is actually closing.

To shed some light on what’s really happening, we reached out to a handful of active reverse originators to learn about what they’re seeing in the field.

Are more borrowers approaching them about proprietary reverses? Are they encountering a sizable number of borrowers who would even qualify? Do they see these products as the saving grace for a struggling industry?

Here’s what they had to say:

PATRICIA WHITLOCK

I get a number of reverse mortgage inquiries from owners of Long Island and New York City co-ops (and other higher-value properties), and 10 years or so ago I was able to offer jumbos through a couple of lenders. But even if we do see a product emerge in New York, I suspect it may not be available for co-ops. I have also seen interest from real estate brokers interested in purchase loans for non-FHA condos.

In my area (Long Island, New York), because property values can be very high, a jumbo could offer a bigger line of credit for the owner of a multimillion-dollar property. But the HECM will always reign. Borrowers like the idea of government oversight and insurance, and I suspect HECM rates will always be lower than proprietary loan rates. Given the increased lending limit, current Principle Limits are adequate for most prospects in my area.

BETH PATERSON

Reverse Mortgages SIDAC 

Minnesota

There is plenty of interest in proprietary reverse mortgages here in Minnesota as well as across the country. This comes from working with financial planners and some of the restrictions on the HECMs, condos for one. I have some borrowers waiting for lenders to make them available here in Minnesota. And I know there are others waiting for them in states where they are not yet offered. 

There is a future for private reverse mortgages, especially as they become more competitive with the HECM. I remain optimistic about HECMs, but if Principal Limits Factors are lowered, it will become even more challenging to qualify borrowers. This opens the door where proprietary reverses could come into play. It won’t happen overnight, but I believe the private market will become more competitive with the HECM – maybe not overtaking the HECM, but in the game.

 

There is plenty of interest, but they’re not available in all states

KEVIN DELGUADIO

Jet Direct Mortgage

New York

I am not seeing much interest at this point. I don’t think the general public even knows what a “proprietary” reverse mortgage is yet, even if they are looking for one. I believe there will be significant market potential for proprietary reverses. There is an unfulfilled need for higher-priced homes and in higher-priced communities. Make the public aware of these reverse mortgages, and there will be a significant market. 

While I certainly believe there is a market for the proprietary reverse, I believe that the HECM will remain supreme, much like the forward market where FHAs far outnumber jumbos.

The potential is there, but the awareness is not

MARK ERSKINE

Commerce Home Mortgage

California

I am absolutely seeing sizable interest from borrowers in proprietary reverse mortgage. We are seeing a whole new group of borrowers enter the marketplace. Borrowers who didn’t qualify for a traditional reverse mortgage now have alternative programs designed to meet their needs. With lower fees, and the elimination of mortgage insurance, we are seeing financial planners and CPAs starting to take a second look at what I prefer to call a “retirement mortgage.” 

With most of the proprietary reverse mortgages focused on borrowers who live in homes valued above the max lending limit ($726,525) of the traditional reverse mortgage, California is ripe with opportunities. Keep in mind that 47 of the top 50 most expensive zip codes in the U.S. are in California.  

Without a doubt, one of the best opportunities to address the looming retirement crisis in America is for the private sector to create innovative reverse or retirement mortgage programs.The opportunity in California is major

PATRICIA WHITLOCK

Quontic Bank

New York

I get a number of reverse mortgage inquiries from owners of Long Island and New York City co-ops (and other higher-value properties), and 10 years or so ago I was able to offer jumbos through a couple of lenders. But even if we do see a product emerge in New York, I suspect it may not be available for co-ops. I have also seen interest from real estate brokers interested in purchase loans for non-FHA condos.  

In my area (Long Island, New York), because property values can be very high, a jumbo could offer a bigger line of credit for the owner of a multimillion-dollar property. But the HECM will always reign. Borrowers like the idea of government oversight and insurance, and I suspect HECM rates will always be lower than proprietary loan rates. Given the increased lending limit, current Principle Limits are adequate for most prospects in my area.

There’s a big opportunity for NY co-ops

Source: By Jessica Guerin

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