Last week, Guild Mortgage announced a suite of products under the name “Flex Payment Mortgage.” The brand includes Home Equity Conversion Mortgage (HECM) reverse mortgage products alongside refinances, proprietary jumbo options and HECM for Purchase (H4P) loans.
After acquiring the robust reverse mortgage division of Cherry Creek Mortgage in early 2023, Guild has used its expertise in the industry to secure a place as a top 10 reverse mortgage lender. It was recently listed as the No. 7 largest lender as of Aug. 31, based on data from Reverse Market Insight (RMI).
To get a better idea of what the Flex Payment Mortgage suite will aim to accomplish for the company, HousingWire’s Reverse Mortgage Daily (RMD) sat down with Jim Cory, managing director of Guild’s reverse division.
Fresh look, branding through ‘flexibility’
When asked about the key purpose behind the line, Cory said it’s all about trying to give the reverse mortgage product a proverbial “new coat of paint” to draw the attention of more consumers.
“With the Flex Payment Mortgage, Guild is looking to give the reverse mortgage product a new, fresh look and branding,” Cory said. “Our thinking is really to focus on flexibility. We kept coming back to the word ‘flexible’ and the flexibility of the program — whether we’re offering a loan that allows a borrower to stay in their home, gives them a line of credit or other access to home equity.”
Bolstering H4P business is also a priority since Guild — and many other members of the industry — see that product as severely underutilized even in comparison to a traditional HECM loan.
“We really wanted to focus on that,” Cory said of H4P. “It’s basically the same product, but so much is different in terms of what they offer the client.”
Aligning all reverse mortgage product options — HECM, H4P and proprietary jumbo options — under a unified brand will allow the company to offer a more holistic slate of services to prospective clients, Cory said.
A ‘regular mortgage option’
The company is eager to display a reverse mortgage product option in an effort to normalize reverse mortgages in its wider product suite, something that companies across the mortgage business have hoped to do for some time.
“We’re really focused on looking at this as a regular mortgage option, something we can roll out to more and more of our Guild regional and branch loan originators,” he said.
He compared it to specialized mortgage options available to military veterans as ensuring they are aware of U.S. Department of Veterans Affairs (VA) loans is a key element of the strategy in bringing them aboard as customers. With reverse mortgages, the element of specialization for borrowers 62 and older has some similar attributes. And such options may not necessarily be limited to reverse mortgage options.
“We really feel like every single mortgage customer that comes to our branches who is 62 or older, we should be offering them this other option,” he said. “We prefer calling it a ‘Flex Payment Mortgage.’ That’s our new branding and that’s how we’re going to present it.
”It’s still a reverse mortgage in most cases, but we may have other ideas on what falls into that ‘flex payment’ category.”
Broadening access to forward LOs
As many forward mortgage players have signaled over the past year, incorporating reverse into their existing product suites has been a key area of interest as they start dipping their toes into reverse. Guild’s new branding is also designed to ease the path for forward loan originators to start offering more reverse options, Cory said.
“Much of this has to do with our traditional forward loan originators,” he said. “That’s our biggest area of growth and our biggest focus: how we can get them involved. My personal goal is that I want to see every single one of our almost 3,000 loan originators fund a reverse mortgage at some point. It’s a huge goal and a huge mountain to climb, but it’s very exciting.”
Having the ability to present a reverse mortgage option to those 62 and older — or 55 and older for certain proprietary loan options — only helps add to the repertoire of options that could capture a particular customer, he said.
“There’s another option here, just like if you’re a veteran,” Cory said. “There’s another option you may qualify for. Let’s see how that would look.”
This particular form of rebranding is odd and not all that profound even though it is understandable. The rebranding has a taste of defensiveness to it, not the taste of being proactive. Yet adjustable rate HECMs in particular do need rebranding. If people like me are wrong and this takes Guild to new heights, then the rest can simply follow.
With the era of the relatively high federal income tax Standard Deduction, the adjustable rate HECM has the potential of not only being a great cash flow product but even more so of being a great income tax planning product. While all this era may come to a swift end as part of the sundown portion of the Tax Cuts and Jobs Act of 2017, there many bipartisan political reasons to extend it.
Most income tax planners know how to work with Excel or any number of income tax planning software tools but there are few mortgage products that are flexible enough to allow for what an adjustable rate HECM allows for in its very design.
There is much more that adjustable rate HECMs are capable of doing in the field of income tax planning but that would require a restructuring of the prepayment waterfall allocation method. As to that allocation method, there is absolutely no justification for servicing fee accruals and MIP accruals being paid down (or off) before accrued but unpaid interest.
Those who are gullible enough to believe that HUD wants the amounts owed it to be paid first are blind to how HECMs actually work. The initial MIP is paid in full to HUD within days of closing and ongoing MIP is paid off monthly by servicers. Even gigantic prepayments result in very little MIP being paid to HUD. So in truth it is the servicers who are understandably trying to get paid first.
With so little HECM prepayment activity, why allow the cart to lead the horse? HUD should be encouraging prepayment activity, not discouraging it. If the servicer needs to be paid off quickly why not let the servicers have an agreement with the lenders stating that lenders will pay the interest paid through prepayments to servicers on the related HECM for accrued but unreimbursed MIP and make full disclosure of that agreement in the HMBS documents? Old servicing fee accruals related to servicing fee set asides are another topic altogether but MIP reimbursement should be the second category of accruals to be paid in full before accrued servicing fees in a new prepayment waterfall allocation method. Such a change would have little impact on the cash flow to the entities that hold HMBSs.
Yet on the other hand how many HECMs with servicing fee set aside adjustments have not yet terminated? May be 40,000??? This is a dying issue and will soon go away.
Allowing interest to be paid down first is but another step towards making HECMs look more “normalized” and more like a forward mortgage.