Jan-Feb2020

LENDERS NATIONWIDE SEE a growing menu of proprietary products attracting borrowers, especially in areas with higher home values where traditional Home Equity Conversion Mortgages (HECMs) are less attractive. The products, many lenders say, could soon overtake government-backed HECMs in terms of market share, much as non-government- backed loans dominate the forward market. Growth, however, is limited by the patchwork of state regulations—proprietary products are allowed in some states but not others. And while proprietary products have lower upfront costs than traditional HECMs, other features can be a turnoff, such as requirements that borrowers take a lump sum rather than a line of credit, lenders and industry observers say. (In late November, New Jersey-based Longbridge Financial introduced a product that offers an option for a line of credit.) Nonetheless, industry figures expect proprietary products to continue multiplying and their features to become more diverse and appealing. “That is an area where I suspect there will be continued improve- ment...as people look at how to make their offerings different,” says John Button, president and CEO of ReverseVision, a San Diego, CA-based provider of origination technology for the reverse mort- gage industry. Proprietary, or private, loan products have long existed alongside the government-backed HECM. But they have generally represented a small slice of the reverse market. In recent years, they have been seen primarily as a product for areas with high home values. Borrowers with substantial home equity can get more money from a proprietary product than they can from a HECM. Traditional HECMs were capped at $726,525 in 2019, but some proprietary products go up to $4 million. (The national HECM loan limit was raised to $765,600 in 2020.) Growth also has been fed by lenders’ needs for alternative products in the wake of the 2017 federal changes to standards for HECM borrowers, observers say. The changes have depressed HECM originations, which remain far off their pre-recession peaks. Nationally, HECM endorsements totaled 41,690 in 2018, down from a high of more than 115,000 in 2008, according to figures from Reverse Mortgage Insight. It is unclear what the pace of growth has been for proprietary products, as lenders generally do not disclose their numbers. But because the loans are typically larger, Button adds, the growth in dollar volume has been exponential. The market may even have briefly eclipsed John Button Bursting Onto the Scene The Search for New Products Is Nationwide as Lenders Seek Alternatives to HECMs By Joel Berg 18 REVERSE MORTGAGE / JANUARY-FEBRUARY 2020