HighTechLending markets EquitySelect as reverse mortgage alternative

HighTechLending is marketing a home equity line of credit (HELOC) targeted at older homeowners as an alternative to traditional reverse mortgages, amid a long-term decline in federally insured loan volume.

In a recent webinar, “Beyond Reverse — Winning the 55+ Borrower,” Paul Fiore, vice president of sales at HighTechLending and a former executive at American Advisors Group, positioned HighTech’s EquitySelect product as one option for borrowers 55 and older who want to tap home equity but are wary of reverse mortgages.

Fiore noted that annual Home Equity Conversion Mortgage (HECM) endorsements have fallen “about 78%” from their 2009 peak, now standing at roughly 25,000 to 30,000 loans a year.

“The 55-plus community is doing HELOCs and cash-outs, about a million loans a year,” he said. “If you just sell reverse mortgages today, you’re only capturing 50,000 of the borrowers that over a million are currently transacting in the demographic that you are marketing to.”

Recent data supports Fiore’s claims. Reverse Market Insight (RMI) reported that the top 100 HECM retail lenders logged 2,064 loans in June, a 6% increase from May but down 9.8% year to date. And while retail lender endorsements were up in June, HECM Mortgage-Backed Securities (HMBS) issuance fell to $456 million, ranking as the 10th-lowest month for HMBS issuance since the program began in 2009, according to New View Advisors.

Fiore cited higher interest rates, increased closing costs and ongoing perception issues as reasons many older borrowers who inquire about reverse mortgages ultimately do not close on them. “No matter how much we advertise, no matter how much we educate, the borrowers are choosing different products,” he said.

EquitySelect is structured as a HELOC that can be set up in a first- or second-lien position. According to Fiore’s presentation, line-of-credit sizes can reach up to $4 million in first position and $1 million in second position, with the product generally aimed at borrowers with combined loan-to-value ratios below about 60%.

Borrowers select a minimum payment based on a percentage of the outstanding balance. For borrowers 60 and older, plans range from 1% to 5% annually, and the selected plan is fixed for the life of the loan.

Fiore described EquitySelect as a “non-recourse, non-recast, no prepayment penalty loan” with a 40-year balloon term. It includes a seven-year draw period for first liens and five years for second liens.

Qualification is based on a capped minimum payment rather than a fully amortizing principal-and-interest payment, which changes how debt-to-income ratios are calculated.

“What that means is they will likely qualify for more money than they would have with a traditional mortgage lien, and they might actually qualify in situations where they otherwise would not have,” Fiore said.

As of Thursday, the EquitySelect 1st and 2nd Lien HELOC is now available in Illinois and Michigan, per a company press release.

Fiore framed the product as part of a broader strategy to give loan officers more options for older borrowers. “People buy outcomes, not products,” he said. “If you can have optionality in what you present, it boosts your credibility with the borrower.”

The product mirrors other offerings in the reverse space, including Longbridge Financial‘s HELOC for Seniors and Finance of America’s HomeSafe Second line of credit.