Quicken Loans subsidiary One Reverse Mortgage is rolling out a private-label alternative to the Federal Housing Administration's Home Equity Conversion Mortgage that offers higher loan limits and more flexible underwriting terms.
The product is called the Home Equity Loan Optimizer and is already available in the lender's consumer-direct channel and will soon be available to mortgage brokers. The loan was designed to fill the void where the FHA's product has fallen short of what some borrowers are looking for, said Gregg Smith, president and CEO of One Reverse Mortgage.
"We've been exclusively a HECM shop, but we've been working on our own version," he said in an interview.
Customers have been divided as to whether they want to discuss loans over the phone or face-to-face, so One Reverse Mortgage will be offering the product through both channels to meet the needs of the two different types of clients, Smith said.
The fixed-rate, closed-end loan gives borrowers more leeway than the standard product in some areas, but less in others. For example, the new loan allows for higher loan limits up to $4 million and for debt to be paid off to qualify. It also offers more flexibility for borrowers to use a reverse mortgage to buy a home, as well as when a condominium property is involved. It doesn't require mortgage insurance.
"We built a program that speaks to a larger audience. You can have seller concessions and you can consolidate debt," Smith said.
In addition, the program makes all funds available at closing, and does more to accommodate solar panels, within certain restrictions. The loan lacks a seasoning requirement for previous cash-out mortgages.
But the program also has some underwriting restrictions that HECMs don't. For example, properties must be worth at least $350,000, and two appraisals are required if the value exceeds $2 million. Borrowers must have a minimum credit score of 640, and nonborrowing spouses are prohibited.
The company plans to securitize the new product. It also is considering offering other variations on the private-label reverse mortgage in the future, including an adjustable-rate loan.
More proprietary reverse mortgages are being launched in the market overall in response to a more pessimistic outlook for HECM volume.