In a change that is likely to make many in the reverse mortgage industry turn their heads, Reverse Mortgage Funding, LLC (RMF) announced on Wednesday that it is lowering its minimum eligible age for its Equity Elite proprietary reverse mortgage product suite to 55, making it the only product in the American reverse mortgage industry that can be offered to people under the age of 60 across 19 eligible states and the District of Columbia. This is according to both an official announcement from the company and personnel interviews with RMD.
Following a series of changes introduced to the Equity Elite product line earlier this year, the move to lower the eligible age to 55 is being made in an effort to broaden the potential borrower base particularly to seniors who live in age-restricted communities for people 55 and older, as well as to begin the reverse mortgage industry’s eventual preparation for serving borrowers in the younger “Generation X” cohort born between 1965 and 1980, depending on one definition.
How the idea emerged, age-restricted communities
One of the ways that RMF approached the decision to tackle lowering the minimum age requirement on Equity Elite came from the product development team pursuing different options to enhance its offerings, similarly to the way the idea to streamline borrower qualification came about. This is according to Joe DeMarkey, strategic business development leader at RMF in an interview with RMD.
“Interestingly, this idea was actually born out of a conversation that we were having about the age-restricted communities that you can find in almost every state across the country,” DeMarkey tells RMD. “And we were [thinking] it would be really neat if we could help all of the homebuyers or residents of these age-restricted communities.”
First up on the “idea list” was implementing the streamlined borrower qualification, which RMF implemented back in July by changing the order at which conversations with borrowers happen. That order now focuses first on assets and proceeds dissipation before moving to traditional income sources. Next on the “idea docket” was lowering the minimum age for Equity Elite to 55, DeMarkey says.
“The last time that you and I spoke, we were rolling out our streamlined underwriting approach,” he says. “And this minimum age change was next for us to tackle. It took a lot of resources in the company, and I’m proud of the team and how much hard work they put into making this change become a reality.”
The focus on age-restricted communities is one that was also mentioned by RMF President David Peskin in the announcement of the move.
“Residents in age-restricted communities now have more financial flexibility to plan their retirement, whether that’s using a reverse mortgage for a new home purchase, paying off expensive pre-existing debt or covering health care bills and additional expenses,” Peskin said in the announcement. “The nation’s largest home builders may now offer more financial products, like RMF’s Equity Elite, to help residents purchase their new homes – a significant achievement for the industry.”
Generation X
Of course, a byproduct of the lowering of the minimum age is the fact that members of the Generation X cohort — which had only just begun to qualify for other proprietary options this year, as previously explored on RMD — will now become more instantly accessible to RMF through its Equity Elite program if they choose to seek out reverse mortgage options. While the Gen X component was not the primary driver of this move, the potential is difficult to ignore, DeMarkey says.
“As an industry, we have been thinking about how to serve Gen X with the products that were in the market,” DeMarkey says. “We’ve just accelerated our ability to service Gen Xers who might be interested in a reverse mortgage product by lowering the age of eligibility to 55 on Equity Elite. So, if I’m doing the math right, people who currently are age 55 and 56 are part of that Gen X cohort, and they are now eligible if they live in any of the states that we’re rolling it out in to explore the utility of a reverse mortgage, and see if it might make sense for them to borrow money against their home with our product instead of conventional mortgage products.”
Since older members of Generation X are preparing for retirement, their levels of home equity are very high and speaks to the potent opportunity that exists for RMF to lower the age of eligibility, DeMarkey says. It also goes beyond the bounds of RMF as a company, however, and serves as a move that can potentially provide a boon to the wider industry.
“For the industry from a growth perspective, it presents a huge opportunity for us to lead in educating another generation of homeowners about the benefits of using home equity in their retirement planning, and specifically with our Equity Elite product,” DeMarkey says. “We’re excited about it for a lot of reasons, starting with being able to begin some conversations with Gen X’ers. That is really, really exciting for us.”
Availability: 19 states and D.C., with more to come
The lower minimum age requirement applies to 19 states and the District of Columbia, according to RMF. Those states are: Arizona; California; Colorado; Connecticut; Florida; Georgia; Hawaii; Illinois; Michigan; Montana; New Jersey (for lump sum and line of credit variations only); New Mexico; Nevada; Ohio; Oregon; Pennsylvania; Rhode Island; South Carolina; and Virginia.
RMF plans on rolling out the new minimum age requirement to other states in the future, but certain legislative and/or regulatory restrictions need to be properly taken into account before they decide to offer additional details, DeMarkey says.
“It’s sort of premature to talk about any other specific states that we’re going to be launching in,” he says. “I will say, generally, we’re going to continue to launch in more states in the weeks and months ahead. And if they don’t have any age restrictions, then we’re going to be launching in those states with a minimum age of 55, as well.”
According to initial outreach conducted by RMD, at least one reverse mortgage professional — John Luddy of Norcom Mortgage in Avon, Ct. — has already identified at least one couple who can benefit from this new minimum age requirement. Though the borrower himself was over 60 and already in discussions for an Equity Elite loan, his wife was not quite yet that old and would’ve had to be listed as a non-borrowing spouse on the loan. That is no longer the case once this age requirement is implemented, Luddy said.
