A move by HomEquity Bank to lower the eligibility age for its reverse mortgages to 55 is set to increase broker originations by as much as 10 per cent, company president Steven Ranson told MortgageBrokerNews.ca, at the same time expressing confidence in the company’s current compensation structure for brokers.
“Our understanding of the broker market is that their client base skews younger than our traditional client base, he said, “and our move to lower the eligibility age to 55 should see referrals through brokers – and all other referrals sources – increase by as much as 10 per cent.”
This week, HomEquity announced its CHIP Home Income Plan would now be made available to Canadian homeowners as young as 55, and five year lower than the previous minimum.
The move comes primarily in response to a significant demand by couples where one spouse is over 60 while the other may be a few years younger. By lowering the eligibility age to 55, HomEquity Bank also positions itself to capitalize on the growing number of well-heeled baby boomers planning early retirement, a type of client many brokers are also pursuing.
Responsible for some 700 leads in 2010, Brokers are already playing an increasingly important role in reverse mortgage originations at HomEquity, helping clients pull out as much as 40 per cent of the equity in their homes. Accrued interest is then tabbed onto the loan’s balance as the mortgage grows. When the client dies or sells their home, that money is then paid back to HomEquity.
Ranson is now responding to broker suggestions that their referral numbers could, in fact, be further increased if HomEquity bumps up finder’s fees and raises the maximum LTV above its current 40 per cent. Neither move, he said, is in the works.
“We’ve comfortable with our compensation for brokers -- we think it’s competitive and it also reflects the more-modest demands we place on brokers in terms of the application process compared to conventional mortgages,” Ranson told MortgageBrokerNews.ca.
The current LTV will also be maintained, he said, calling it in line with marketplace demands and a consideration of the deferred interest plan characterizing the reverse mortgage.
HOMEQ's numbers for the three months ending March 31, 2011, largely matched company expectations. While the lender’s mortgage portfolio of $1.1 billion increased 16 per cent, its originations grew by one per cent to $47 million.