Update: Three leading reverse mortgage lenders are changing their private products due to market volatility
Finance of America Reverse (FAR), Reverse Mortgage Funding (RMF) and Longbridge Financial all reacted to market volatility affecting their private reverse mortgage product offerings last weekend, RMD has learned. While FAR and Longbridge suspended new applications for its products, RMF instituted immediate changes to respond to market volatility.
While FAR has since picked up new applications for its private “HomeSafe” and “EquityAvail” products, loan-to-value ratios have been reduced and rates have increased based on additional communications and insights shared with RMD by industry professionals. ‘industry.
Sources of disturbance
RMF attributes the product changes to a widening of the credit spread and a general disruption of the whole market, according to a partner communication. Similarly, Longbridge attributed the suspension of its proprietary “Platinum” products to volatility seen in current market conditions, which necessitated “immediate” changes that are still ongoing.
Existing applications for Longbridge Platinum Loans can still be submitted to the lender, but will be placed on hold upon admission. Loans not scheduled to close on June 16 will be subject to upcoming product changes, the lender said.
New pricing for RMF’s “Equity Elite” products has been made available over the past 24 hours, but the lender is currently working to incorporate the changes into its lending systems. Brokers with these loans in progress are encouraged to contact applicants to inform them of product changes by RMF.
RMD has contacted representatives of the three lenders. Longbridge had no comment.
RMF President David Peskin responded to RMD saying Equity Elite was not suspended.
“RMF has not put any restraint on its Equity Elite product line; all products are currently available to borrowers,” Peskin told RMD. “RMF has made some changes to the products to reflect the current market landscape. These changes have been implemented in our proprietary lending system (Tango), and we are waiting for the changes to be instituted in the Reverse Vision (RV) system.
FAR Vice President of Wholesale, Jonathan Scarpati, told RMD that the changes instituted for its exclusive offerings are in the interest of its partners, investors and customers.
“We remain committed to providing our partners and making appropriate strategic pivots that take into consideration the full lending picture, including the secondary’s role in sustaining our product lineup,” Scarpati said in a statement. communicated. “To ensure we could offer the most up-to-date terms, we and many of our industry peers have taken a momentary pause on new apps for HomeSafe to allow our systems to be updated for price adjustments. FAR has now resumed accepting new applications and will assess and respond to any new developments as appropriate.
Professionals involved in each communication are encouraged to contact their account managers with any specific questions, and some lenders will even provide communications to affected applicants.
In soliciting various industry leaders to react to these developments, Steven Sless, President of the Reverse Mortgage Division at Primary Residential Mortgage, Inc. (PRMI), responded to RMD and felt that proprietary reverse mortgages were essentially income in the field of “jumbo” loans. instead of operating within the means of the wealthiest borrowers and those who are also eligible for a HECM loan.
“Yesterday there really wasn’t any private product for sale,” Sless told RMD. “Today that changed when HomeSafe came back with lower LTVs and higher interest rates. I get it, but what the market is basically telling us is that those proprietary loans are back to being jumbo loans. .
Sless outlines his own concern about how these changes could create new reputational risks for the reverse mortgage industry and how it could create new challenges for customers buying reverse mortgages.
“At this time, we don’t know if there will be any special exclusions for these purchase loans,” Sless says. “And if you look at the new LTV, one of our borrowers who is supposed to close this next Friday, they should come to the table with $60,000 more after we’ve already sourced and seasoned funds, and that borrower doesn’t have $60,000 more. So my concern as an industry leader is how many senior buyers or borrowers are going to be thrown out on the street, literally, with nowhere to go because of these changes.
If something like this happens and these borrowers end up taking to the media to describe their experience, it could undermine much of the work the industry has been doing recently on the reputation front, Sless says. In terms of PRMI’s institutional response, the lender’s executives have launched what Sless calls “crisis management” to determine the next steps from here. At present, PRMI is telling its LO corps that the organization remains “full steam ahead,” says Sless.
“We have over 1,000 term mortgage originators whose volume is being severely impacted by rising interest rates, inflation and lack of inventory in the buy market,” says Sless. “And the reverse is still a fantastic way for them to diversify their product offerings. So our message is that when the market is tough, focus on your personal brand, grow your niche, and we certainly encourage their niche to become the reverse mortgage.
Private products subject to change with economic volatility
Reverse mortgage professionals have already seen the suspension of proprietary products with the last major economic turmoil caused by the initial outbreak of the COVID-19 coronavirus pandemic.
In late March 2020, Liberty Reverse Mortgage’s EquityIQ and RMF’s Equity Elite were suspended due to increased volatility in the financial markets, but these suspensions at the time were also considered only temporary disruptions to the products. By mid-summer of that year, both products were again actively offered, but with changes in rates and LTVs.
In the case of RMF, the return of Equity Elite has also resulted in a new product variant. Its reintroduction is now bolstered by the introduction of a new product variant with a Line of Credit (LOC) feature, according to the company at the time.
The economic shock of the first pandemic was not just reserved for private label reverse mortgages, as home equity conversion mortgage (HECM) prices also saw notable swings in the early days of the pandemic. This eventually stabilized, leading to a period of buoyant activity for the industry and a boom in HECM-to-HECM refinance transactions.
Editor’s note: An earlier version of this story stated that RMF had suspended the availability of Equity Elite when it had in fact made rapid changes to the product and incorporated a new pricing model into its LOS systems. RMD regrets the error.