Proprietary reverse mortgages have been around for years, but they’ve become increasingly more important to the future growth of the reverse mortgage industry because of the innovative ways they allow home equity to be used as part of a broader retirement plan.
What they’re saying: During the Western Regional Meeting in Irvine, CA earlier this month, NRMLA President Steve Irwin interviewed executives from three of the largest lenders that originate proprietary reverse mortgages to discuss the ongoing evolution of the marketplace.
Growing the Investor Base: “If you bring in new investors, it creates innovation, new products, new features, and expands the marketplace,” says Adrian Prieto, SVP, Wholesale Lending & Third-Party Affiliates, at Longbridge Financial.
- “We need to broaden investor appetite. Our last securitization at Longbridge had an oversubscription of investors, which is a great sign for the business.”
Consumer Acceptance and Demand: “We have focused on creating a product that is not a HECM loan but rather something that has more of a conventional flavor that people can understand and makes more sense to consumers and originators,” says Kimberly Smith, Senior Vice President of Wholesale at Smartfi Home Loans.
- “HECM is a phenomenal product, but it doesn’t meet the needs of every consumer,” says Jonathan Scarpati, Chief Production Officer at Finance of America. “The goal of proprietary is to continue to cast a wider net and add more opportunities and more customers.”
Filling Gaps With HECM: “When FHA rolled out Financial Assessment, the way it was written has created opportunities for the prop market to look at common sense rules and guidelines and tweak those where FHA has been unwilling to come and hear what we think might work better,” says Smith.
Is the Sales Process Different Between HECM and Prop?
- The sales process isn’t different,” says Smith. “Learn what your client’s needs are, what their situation is, and then fit the right product to those needs. Regardless of the product(s) that you’re offering, learn about your client first, then create solutions.”
- “In the prop world, consumers tend to shop more,” says Scarpati. “I’ve seen customers who speak with eight or nine companies at the same time. I agree that it’s important to understand the client’s needs, but I also think there should be a greater emphasis on building trust in a relationship upfront, knowing that many prop borrowers shop.”
- At Smartfi, we’re closing prop loans in half the time it takes to close a HECM,” adds Smith, “and that’s probably because of the more common sense, conventional approach we have to [processing/underwriting] guidelines.” Prieto and Scarpati confirmed similar closing timelines for their products.
What attribute(s) would you like to see added to prop products?
- “We’ll soon be rolling out a product that is focused more on the speed of a transaction — quick turn time, quick closing, limited paperwork, a quick underwrite,” says Prieto. “We’ve been chasing this LTV, low rate thing in the market for a long time, which I can appreciate, but we need to push the envelope and do something different.”
- “There’s a tremendous amount of loans being done today that come by way of a second lien. Creating products that look closer to home equity lines of credit will sell in this market. Timing is everything and we’re going to continue to innovate and you’ll see some new things from FAR as well,” says Scarpati.
