South River Mortgage is one reverse mortgage lender you may not have heard much about in RMD stories, but they are a notable presence in the business. After benefiting from the major refinancing boom of home equity conversion (HECM) mortgages into HECM, the lender ranks ninth in the industry among Federal Housing Administration (FHA) and non-FHA lenders, according to data from Reverse Market Insight (IRM).
Recently, South River launched its own proprietary reverse mortgage called “HomeForLife”, and Tyler Plack, the company’s president, sat down with RMD to discuss the ins and outs of the product and how he could avoid some problems encountered by recently.
HomeForLife operates as a fixed-rate loan, with a minimum age requirement of 55 (echoing similar steps taken by other lenders) and what Plack describes as a “more aggressive” version of financial testing .
“We’re able to do a lot of things that other owners are able to do, but the financial evaluation is a bit more aggressive with our product,” he says. “We specialize in condos and other types of things that are a bit outside the traditional HECM box. I know everyone is talking about condos, but we also do other things like manufactured homes, properties in a flood zone, things that might cause a denial but maybe not for the right reason.
HomeForLife went live with a “soft launch” in December 2021, Plack says. Currently, the product is active in 13 states while the company is globally active in 21 where it can offer a HECM loan, as well as the District of Columbia. The goal is for the proprietary product to join all other states in which the company’s HECM offering is currently active, he explains. Although it operates primarily on the retail side, South River has wholesale ambitions which it plans to explore further over the next two months.
When asked to estimate the split between proprietary volume and HECM volume, Plack drew the distinction at about 75% being HECM volume, with the rest being HomeForLife loans. However, as more loans have been made recently to borrowers new to the reverse mortgage business, Plack believes these customers are actually about 50/50 between HECM and homeowner.
Accelerating interest in proprietary products has become a new feature of the reverse mortgage landscape in recent months, with representatives from several major lenders all reporting increased customer interest and commensurate volume increases. .
However, with this growing interest has also come new challenges for the proprietary product landscape. With economic volatility increasing recently, major reverse mortgage lenders have been forced to adjust to the environment. Plack said the company remained full steam ahead when asked if that made South River nervous about its prospects in the space.
“I think a lot of the difficulties they encountered were because people were very reluctant to update their core limits and rate structures, given the Fed’s interest rate changes,” says Plack. “We’ve been a bit more aggressive in making these updates. We updated our principal and interest rates earlier, and now we know that was a pretty wise move.
This is because the product has managed to avoid bottlenecks in the market, he says.
“We avoided this problem where we see that the whole market stops and everyone has to understand,” he says. “We made a lot of these changes quickly, tweak by tweak.”
When asked why the lender can act quickly on such matters, Plack attributes it to efficient handling, he says.
“We moved quickly, mainly because we have a retail rotation channel that really allows us to process loans and close them very quickly,” he says. “And in doing so, borrowers who might be at some of the rate structures that were coming out of the market, we were able to move forward and close those loans. We have been able to update fee structures without having to make the changes to a wide range of brokers who will be unhappy with the key elements that are lost.
Where to go from here
Plack also mentions that difficulties with investors have been avoided thanks to a smaller and very accommodating investor. In terms of the larger goals the company has for its private label product, increasing the number of states in which the offer is active is the number one priority. Additional product variants are also listed.
“We’d like to introduce a line of credit here soon for other payment plans, especially those not offered by anyone else,” he says. “From there, it’s a volume game. We want to continue to collect more volume, help more people and close more loans. »