Proprietary reverse mortgage alternatives gain broader momentum

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Private-label versions of the Federal Housing Administration's Home Equity Conversion Mortgage have spread to the point where a widely-used loan origination system has added technology to handle the product.

"After several consecutive years of responding to HECM program changes, lenders are eager for an opportunity to stabilize their operations and fill borrower needs not addressed by the HECM program," said Wendy Peel, vice president of sales and marketing at LOS provider ReverseVision, in a press release. "The double-digit growth we're currently witnessing in the proprietary products niche of senior lending closely resembles the trajectory of non-QM lending in the traditional mortgage space."

While proprietary reverse mortgages still represent less than 10% of the market, their volume has been growing rapidly. Quicken Loans recently launched a new jumbo product allowing loan amount up to $4 million, and other lenders such as Longbridge Financial have as well.

The increase in proprietary programs is a response to a decline in reverse mortgage volumes following the FHA's latest HECM reforms. The drop in volume has made it more difficult to address secondary market demand for the product.

The volume of HECM mortgage-backed securities recently dropped to a low not seen since 2014, according to Ginnie Mae, the government agency that guarantees securitized FHA loans. There were $545 million in HMBS issued in July. Volume hasn't been that low since August 2014, when $518 million in HMBS were issued.

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