March-April 2021

who don’t always benefit from a HECM,” says Jonathan Scarpati, vice president of wholesale lending for Finance of America Reverse, based in Tulsa, OK. Its proprietary products are offered under the HomeSafe brand. To capitalize on opportunities in the proprietary mar- ket, companies like FAR plan to add features to existing products, create new products and plunge into newmarkets. “Lending is not one-size-fits-all,” Scarpati says. “It’s important to innovate and offer a wider selection of prod- ucts to help more consumers. On the forward side, there’s an array of lending products. The reverse industry has really only had one product, for the most part. A more diverse selection opens up the industry to a whole new set of customers.” Product development is only part of the recipe for expanding proprietary products, says Michael McCully, a partner with Naples, FL-based New View Advisors, which analyzes the reverse mortgage market. A robust capital market is another key ingredient. Lenders need a critical mass of production to success- fully package proprietary reverse mortgages into bonds for sale to investors, known as securitization. If the volume is too low, lenders may encounter problems. “If a lender can’t find an investor for the loans or securi- ties, the lender can’t originate or fund them,” McCully says. High Expectations At the end of 2019, forecasts called for the dollar vol- ume of proprietary products to exceed the dollar volume for HECMs, McCully says. Those forecasts did not come to fruition, due largely to the dramatic fall in interest rates early last year, he adds. The rate drop helped fuel interest in traditional HECMs, which performed well in 2020. The pandemic only intensified interest in all reverse mortgages since they allow borrowers to age in place rather than move to a senior living facility. Nursing homes, in particular, suffered significant outbreaks of COVID-19. “I think a lot of borrowers decided, ‘I’m not sitting on the fence any more,’” McCully says. But the drop in interest rates was less positive for pro- prietary products, which are self-insured and, as a result, have higher interest rates. In late 2019, proprietary products would compete on reverse loans for homes valued roughly between $400,000 and $800,000, depending on the age of the borrower, McCully says. After the drop in interest rates, the indif- ference point—the home value at which HECM and proprietary product proceeds are equal—rose to home values between $900,000 and $1.4 million. “As a result, a Prospering with Proprietary continued on page 30 REVERSE MORTGAGE / MARCH-APR I L 2021 29