May 19, 2023
We haven’t been shy about promoting our belief that there will be opportunities in the market this year. Optimism that a debt limit deal will happen in the Capitol and hope that the Fed will finally pump the brakes on its recently aggressive interest rate policy have more than a few thinking ahead to how to capture their share of the forecasted $1.3 trillion in origination volume for 2023.
For lenders, that could be emerging markets. Or expansion of their geographic footprints. For many, it will be a more diverse product mix. In recent years, we’ve seen initiatives emphasizing Non-QM products, HELOCs and any variety of purchase products. We wouldn’t be surprised to see in increase in marketing efforts promoting the Adjustable Rate Mortgage (ARM), a category of products that carried the mortgage world for a few years in the early 2000’s.
The product lenders are excited about
And then there’s the reverse mortgage.
A good number of mortgage lenders were already ramping up their reverse mortgage marketing just prior to the housing meltdown and recession of 2008 and the early 2010’s. There was (and is) good reason to do so. While Millennials may have become the largest percentage of homebuyers, the largest percentage of homeowners remains Americans over age 55 at 54%. That’s a mix of Generation X and Baby Boomers. Some believe that Baby Boomers and even Gen X’ers will prefer to “age in place” as they enter their 50s, 60s and beyond.
All of these indicators strongly suggest there will be a substantial market for older Americans seeking to maintain some level of financial means as they reach or near retirement age.
While there are a number of types of reverse mortgage, it’s the Home Equity Conversion Mortgage (HECM) that we believe lenders will be gravitating toward. That’s because it’s the only type of reverse mortgage that can be insured by the FHA. And just as the requirements for HECM eligibility (for both lenders, who must be FHA-approved lenders, and borrowers) are a bit more specific, so too are the requirements for settlement and closing.
Not everyone can close a HECM loan
One of the major requirements for a HECM closing is that all participating borrowers, non-borrowing spouses and attorneys-in-fact must receive HUD-approved counseling and a Counseling Certificate prior to opening escrow. That includes a series of paperwork requirements and consultation with HUD qualified counselors.
Here, again, is another great example of why the most successful mortgage lenders choose their third party service providers (including closers and title firms) carefully. With reverse mortgage volume way down during the refinance boom, it hasn’t been the priority of many title and closing firms to earn their reverse mortgage credentials or get acquainted with HECM-focused requirements and technology.
Thus, not every title agency is approved to conduct or even capable of conducting a HECM closing. Not every agency has the technology and expertise to conduct a HECM closing efficiently.
For a lender seeking to grow into this product line, therefore, it will be important that said lender is partnered with HECM-caliber closing companies.
Kriss Law/Atlantic Closing & Escrow has some exciting news coming on that front. We can’t share all of the news yet. However, here’s a hint. We will be one of those title agencies with the capability of serving and counseling mortgage lenders who seek to grow into the high potential market of HECMs and reverse mortgages.
Stay tuned for the details!