Few homebuyers over 62 want to take out a traditional forward mortgage. However, they may not have the cash for a new home, Camargo says. “And if they do pay cash, now they’ve tied up all of that money just sitting there in equity,” he says. “And, at some point in the future, if they need to tap into it or borrow against it, they’re going to need to look at a home equity loan, home equity line of credit or a traditional HECM.” If buyers choose a HECM for Purchase instead, they can put less money down and draw on their equity as needed, Camargo says. If they prefer, they also can choose to make mortgage payments. The typical down payment on a HECM for Purchase is between 29 percent and 63 percent, according to NRMLA. The rest comes from a HECM loan. Camargo cited the example of a couple that netted $550,000 in cash from the sale of a $1.6 million home and are able to buy a home in the range of $850,000 to $900,000 with no mortgage payments. Another benefit is that HECM for Purchase borrowers don’t have to draw on other savings, which could be a consideration at a time when stock market returns are weak, Camargo says. Borrowers also are drawn to the optional mortgage payment feature of the HECM for Purchase unlike traditional loans and lines of credit that require mandatory monthly payments, Camargo says. The best candidates for a HECM for Purchase are people who can make a down payment of at least 50 percent, according to Kelly McCabe, underwriting retail team lead and HECM for home purchase product lead at Reverse Mortgage Funding LLC (RMF). She has been working with the product since it was rolled out. The government-backed loan, however, is no longer the only option on the market. RMF offers a reverse for purchase option for borrowers as young as 55 as part of its Equity Elite line of products in states where it has been approved. Some Details Despite the advantages of a HECM for Purchase, the product has been slow to gain traction, largely due to a lack of understanding. The product made up 4.2 percent of all HECM endorsements in 2021, according to Reverse Market Insights. As a comparison, refinancing made up 45.9 percent. Industry observers, however, feel that the HECM for Purchase is well-positioned for the current housing market, which has been buffeted by rising interest rates and record inflation. But they also point to statistics on older homeowners. One statistic is often used to illustrate the potential for HECMs more generally: the buildup in home equity among older homeowners is estimated to be in the trillions of dollars. Another relates to the share of people over 55 who are buying homes. They represent more than 30 percent of U.S. homebuyers over the past five years, and the trend is expected to continue through 2035, according to Rob Cooper, national director of the Builder/ Realtor HECM for Purchase program at RMF, citing data from the National Association of REALTORS®. “We have a large target audience with an extremely low penetration rate for reverse mortgage for purchase financing,” he says. “In other words, the opportunity for growth is enormous.” But it is an opportunity that will take work to cultivate. “The biggest effort and focus for us at RMF has been educating real estate agents and builders,” Cooper says. “We want them to understand that this loan is an option for their potential homebuyers and customers looking to list their homes for sale.” That has been the approach taken by Camargo and Hansen, as well. When Camargo began originating the HECM for Purchase, he focused on teaching real estate agents. He became a trainer for the Ventura County Coastal Association of REALTORS®—and continues as one today. “My primary goal is to educate and inform the referral partners, in this case, real estate professionals, about the HECM for Purchase continued on page 26 Rob Cooper Kelly McCabe Carlos Camargo REVERSE MORTGAGE / SEPTEMBER–OCTOBER 2022 25
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