As reverse mortgages become more mainstream, it will become increasingly important for mortgage brokers to master their intricacies. To assist in that, HomEquity Bank has launched a new reverse mortgage certification.
The Mortgage Broker Direct program is a no-fee certification process that provides approved brokers with:
- a professional designation as a Certified Reverse Mortgage Specialist
- 2.5 continuing education (CE) credits, and
- specialized marketing support.
Certified brokers will have two products available to them: HomEquity’s classic CHIP Reverse Mortgage and the Income Advantage (which is the more flexible of the two). HomEquity Bank says more than 500 brokers have already been certified in the program, and it expects another 500 will earn the designation by the end of October.
“Being a HomEquity Bank Certified Reverse Mortgage Specialist gives clients the confidence that their mortgage broker is presenting all options to them,” said Fiona Campbell, Partnership Director, HomEquity Bank. Other potential options (reverse mortgage alternatives) include HELOCs, taking on a renter, asset liquidation and/or downsizing, but each of these has their own pros and cons.
Perhaps the most enticing part for brokers is that certification lets them earn referral fees that are on par with selling a standard 5-year fixed mortgage. That’s a significant pay increase versus HomEquity’s old model. Moreover, brokers who sell these products enjoy virtually no rate competition (or buydown concerns) since HomEquity Bank has no major competitors. In exchange, certified brokers are expected to submit applications directly to the bank via D+H Expert, versus the simpler referral process of old.
HomEquity has been slowly but surely increasing its market penetration. Earlier this year it increased its maximum loan-to-value on reverse mortgages to 55%, and in some cases slightly more. This latest initiative should further pad the company’s annual originations, which rose 23% to $309 million in 2014.
Interested brokers can learn more about the company’s certification program here.
Earlier this year HomEquity Bank increased its maximum loan-to-value on a reverse mortgage to 55% (in some cases slightly more). It was a change made with little fanfare, but one that will provide necessary cash to thousands more senior homeowners.
Prior to this change, the bank lent up to one-half of a property’s appraised value. Now, qualified seniors can access at least $20,000 more on a $400,000 property, for example. This money can be a lifeline when an elderly homeowner has immediate expenses (e.g., medical costs), but no other source of liquidity and a need to stay in their home.
“We are rather conservative,” said Yvonne Ziomecki, SVP, HomEquity Bank in response to why the bank hasn’t offered this high of an LTV in the past. “Having 29 years of actuarial history on repayments, etc., gave us comfort to move in that direction.”
The company confirms that these higher lending ratios are here to stay. “We wouldn’t have offered it up if we didn’t believe we can continue offering it,” she explains. Note that qualifying for a 55% LTV reverse mortgage requires that a borrower be more than 75 years of age and have a marketable home in a good location.
Sidebar: HomEquity Bank is getting ready to launch its new “Mortgage Broker Direct” service in September. For the first time, mortgage brokers will be able to submit deals directly to the bank via D+H Expert. The company will offer an official designation for approved brokers called the “Certified Reverse Mortgage Specialist.” Brokers will receive continuing education (CE) credits for completing the certification, specialized marketing support and compensation equal to that of selling a regular five-year fixed mortgage.
There’s been a slow but sure trend in our business. Lenders are very gradually cutting back on sales compensation.
Reverse mortgage provider HomEquity Bank is an exception. It has just boosted the referral fee it pays brokers by 30%, regardless of their volume.
“We value the business and want to ensure that advising consumers on the CHIP Home Income Plan is worthwhile for brokers,” Greg Bandler, SVP of Sales & Marketing, told us.
The new OSFI underwriting guidelines make reference to a 65% loan-to-value limit for reverse mortgages.
When that guideline came out, it got some people worried. The concern was: What happens if a reverse mortgage grows above 65% LTV after origination?
Fortunately, reverse mortgage borrowers will be unaffected.
Greg Bandler, HomEquity Bank’s Senior Vice President, Sales and Marketing, tells us:
Today’s 5-year fixed CHIP reverse mortgage rate is the lowest we’ve ever seen.
It’s now down to 5.50%, effective last week.
That’s a spread of 2.50 percentage points over prime rate, compared to a whopping 6.00 percentage point spread just three short years ago.
(Click chart to enlarge)
From an investment standpoint, few mortgage lenders present a better risk/reward than HomEquity Bank, a subsidiary of HOMEQ.
Its product, the CHIP reverse mortgage, has enormous upside in terms of growth, with extraordinarily low loss rates.
HOMEQ’s largest shareholder, Maxam Capital, agrees. It owns 14% of the company and sees “dramatic growth opportunities.”
So does Birch Hill, the company currently trying to acquire HOMEQ.
Despite both of them having a strong belief in HOMEQ’s future, they are not on the same page.
CHIP reverse mortgage rates are relatively “sticky.” They don’t change as often as regular mortgage rates.
That makes HOMEQ’s recent rate cuts all the more notable.
On Friday it slashed its 1-year CHIP rate by 75 basis points to 4.50%. This is a special promo meant to run until May 31.
Most interest rates have dropped to historic lows in recent years…but not all of them.
One that hasn’t is the rate on CHIP reverse mortgages.
On October 12, 2009, CHIP parent HomEquity Bank announced its receipt of bank status. Bank status helped it significantly cut rates down to 5.90% for a 5-year term in October 2009 (that compared to almost 9% a year earlier).
Today, CHIP’s 5-year rate is 5.95%, which at first glance seems unreasonable considering that interest rate benchmarks like the 5-year government yield have nosedived 1.46 percentage points since October 2009.
But, as is often the case, there’s more to the story.
One of the most evident trends in financial services is the growing demand for reverse mortgages.
HomEquity Bank confirmed that trend (again) by posting a 42% year-over-year surge in Q4 reverse mortgage volume.
President and CEO Steven Ranson commented: “…The (seniors demographic) wave is here…tremendous market demand is fuelling our strong growth in originations.”
Noteworthy reverse mortgage stats from the Globe’s Rob Carrick:
- 36% — Average amount of home equity borrowed with a reverse mortgage
- 50% — Average equity remaining when a reverse mortgage holder sells his/her home
- 72 — Average age of a reverse mortgage customer
- 55 — Minimum age to get a reverse mortgage
- 12 — Average number of years people remain in their homes after getting a reverse mortgage