Seniors Money - An Update
Seniors Money launched in Canada just over a year ago. What timing.
As Canada's second major player in reverse mortgages, the company's launch was soon met by one of the most challenging credit markets of the last century. As a result, the company was forced to halt new business earlier this year because it ran out of capital sources.
Despite these challenges, however, Nick DiRenzo--president and CEO of Seniors Money Canada--is seemingly as optimistic as ever. In an interview last week, it was quite clear that the company's goal is to re-launch as soon as possible.
At the moment, Seniors Money's priority is to secure a solid ongoing source of funding. To that end, it is talking to various parties that can't be disclosed just yet.
Finding the right financing partner hasn't been the easiest of tasks. 'Mortgage' has been a bad word to most big investors for the last several months. It's something that's been frustrating to the company because Seniors Money is very well established in other parts of world. It's a global company founded in New Zealand and its loans perform very well.
Furthermore, the company is financially stable. There are "lots of people willing to give us equity," says DiRenzo. "That is not the problem." It's financing individual new deals that's the problem.
Another challenge facing Seniors Money comes from being the new kid on block. As a result, the company has found it tougher to raise capital than a company like CHIP, Canada's biggest and oldest reverse mortgage lender.
**********So what will it take to get Seniors Money back in full swing?
It's likely that the institutional lending market will first need to open up again says DiRenzo. That means the life insurance companies, pension funds, etc. will have to become more willing to lend in the mortgage market. In the meantime DiRenzo said, "While we're not originating new loans at the moment, we are managing our portfolio and it's performing very well."
DiRenzo feels the opportunity that exists is considerable once funding is secured. "A reverse mortgage is like buying a bond," he says. "It's a sound investment made at 25% of value on average." With that kind of security, it's just a matter of waiting for the right investor to realize that Seniors Money's business model makes good sense.
Whatever the case, the reverse mortgage market will grow in leaps and bounds as Canadians age and save less. Having Seniors Money back in the market could benefit investors, as well as Canadian borrowers who desperately need choice in this segment.
