Economy grows broker interest in reverse mortgages

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Brokers are increasingly the lead referral source for the country’s top reverse mortgage provider –  something evident in its third quarter but also a reflection of the economy, said its VP.

“Brokers in the current market conditions are looking for ways to stabilize their revenue and as a result, I think, we’ve been having great support from the broker channel that is pacing higher than the aggregate. Greg Bandler, senior VP of HomEquity Bank, told “It’s also a result of efforts to build a strong working relationship with brokers and to educate them about the product."

That product – CHIP reverse mortgages for homeowners aged 55 and over – led the company to five per cent growth in originations over the same 2010 period. Its adjusted net income climbed 36 per cent higher than the year-ago quarter, while the overall portfolio grew by 16 per cent.

Broker-recommended business is an increasingly important contributor to that solid bottom line. Growth in those client referrals once again outpaced those of Bandler’s other key referral partners, including banks and investment advisors. It’s a trend that has developed over the last three years, said Bandler, and was only broken in the second quarter when another referral partner edged ahead. Q3 saw brokers once again assume the lead.

Part of the appeal for brokers are recent changes not only to the real estate market, making it harder to land originations, but also changes to the CHIP program.

This spring, HomEquity also made official its longstanding willingness to go up to a loan-to-value of 50 per cent, another enticement for brokers looking to diversify revenue streams as new home purchases slow across much of the country. Here again, Canada’s aging baby boomers are also spurring interest among brokers looking to better tap into that lucrative market. Under HomEquity’s CHIP Home Income Plan, accrued interest on the reverse mortgage gets tabbed onto the loan’s balance as the mortgage grows. When clients die or sell their homes, that money is then paid back to HomEquity.

Broker compensation at 50 basis points reflects the “the more modest demands we place on brokers in terms of the application process compared to conventional mortgages,” said Bandler.

Brokers may increasingly agree, with HomEquity poised to improve its 2010 originations numbers. As a group, mortgage professionals, represent 134 firms, brought in around 700 leads last year.


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