The resurgence of alternative home equity-draining firms in recent years has been of interest to the reverse mortgage industry because of the potential companies have to compete for senior business. Whether through arrangements such as sale-leasebacks or shared equity investments, such products can serve as an alternative to a debt-based option for those looking to unlock some of their home’s equity and access additional cash flow.
To gauge how that company is performing, particularly among seniors following the COVID-19 coronavirus pandemic, Reverse Mortgage Daily reached out to leaders from three companies: Point, QuantmRE (both of which offer equity investment products) and EasyKnock (which offers a sale leaseback). offer) . While the average customer age of these leading alternative stock companies has remained stable over the past 18 months since the start of the pandemic, all companies are seeing both increased awareness of senior demographics and interest in serving them.
Seniors’ response to alternative stock tapping since COVID-19 get started
At each of the three companies RMD spoke to, most agree that interest in their alternative products has increased universally, as opposed to an increase in a single demographic.
“Over the past 18 months, we’ve seen a significant increase in inquiries from all homeowners, including those from seniors who now realize there are alternative debt-free financial instruments available to them,” said Matthew Sullivan, founder and CEO of QuantmRE. “These Home Equity agreements allow them to access their increased equity without incurring monthly payments or additional debt.”
At Point, CEO Eoin Matthews notes that the company is on track for a year of explosive growth in 2021, thanks in no small part to senior interest in the company’s offerings.
“Demand for Point’s Home Equity Investment (HEI) has grown tremendously over the past 12 months, and seniors are a big part of that,” Carr said. “This was particularly the case in 2021, where we are on track for 400% growth since the beginning of the year.”
For EasyKnock, the company declined to share details regarding a demographic breakdown, instead reporting that its sale-leaseback offerings are of particular interest to seniors compared to other stock tapping options. This is according to EasyKnock CMO Jeff Carr.
“They really like the product, have the flexibility to stay, but enjoying life is paramount,” Carr told RMD. “Our product can be particularly useful for seniors. More often than not, we help them unlock the opportunity to stay in the home they know and love, where they invested their time and money, where they raised their children, where they feel comfortable .”
In terms of the realization that seniors are demonstrating these alternative options, both QuantmRE and EasyKnock describe the increased interest in their offerings growing uniformly across multiple demographics as these products do not come with an age restriction, although QuantmRE notes that it has seen additional requests from seniors. In Point’s case, however, the vast majority of the customers it serves are in or near the reverse mortgage demographic, according to Matthews.
“Over 65% of Point’s customer base is made up of seniors and older adults (50+), so there’s definitely a strong adoption among older homeowners,” he explained. “As seniors explore equity release solutions, higher education institutions are becoming an increasingly attractive option, especially for seniors who want to maintain a low-cost first mortgage or who fall outside the Home Equity Conversion Mortgage (HECM) box.”
While seniors are more likely to be approved for a reverse mortgage compared to more traditional stock tapping options, according to recent research from the Urban Institute, QuantmRE’s Matthew Sullivan notes that more than 8 million homeowners did not get a mortgage in 2020 and that an average FICO credit score of 760 among most borrowers can increase the difficulty of qualifying for mortgage financing.
“Home Equity Agreements can help homeowners with sufficient equity to qualify for a reverse mortgage if they have previously been rejected due to credit score issues,” Sullivan said.
As pandemic emergency response programs end, seniors can look for more alternatives
As both the federal government and those at the state, state, and local levels begin to phase out certain aid programs designed to help homeowners with financial difficulties brought on by the pandemic, the availability of wiretapping options is increasing. of equity outside the debt-based mortgage realm is something these companies all anticipate to varying degrees.
“As many pandemic relief programs come to an end, homeowners who have not yet recovered financially from the impact of the pandemic are looking for solutions,” Matthews said. “Whether it’s pandemic-related or not, we’re seeing many more homeowners come to us who have been referred by family or friends and have extensively reviewed the HEI product online.”
Similar trends are seen at QuantmRE, Sullivan said.
“We have found that more people have responded to our advertising and marketing and are willing to learn more about Home Equity Agreements as their other options have become limited,” he said. “As the pandemic has forced more people to get used to doing their research online, we’ve seen a greater response to our online ads and podcasts.”
Part of that new motivation may come from higher house prices now compared to the start of the pandemic, he said.
“Homeowners seem more motivated to take advantage of the increased equity in their homes since the start of the pandemic and are attracted to the prospect of receiving a lump sum of cash with no associated monthly payments. As a result, we believe the use of Home Equity Agreements is historically high across all demographics.”
The future of seniors and tapping into alternative stocks
As the reverse mortgage industry continues to look for ways to innovate in product development and consumer education to raise awareness for reverse mortgage products among seniors in the United States, alternative equity tapping firms appear poised to focus more on seniors as a resource for seniors. potential growth.
“76 percent of households aged 50 and older have their own home. Thanks to the home’s appreciation and years of principal repayment, these homeowners have significant net worth,” Matthews said, citing data from Harvard University’s Joint Center of Housing Studies, which has a median of $115,000 in equity. for households age 50 and older, and a median of $143,500 for households age 65 and older.
For EasyKnock’s sale-leaseback offerings, seniors remain a powerful target for potential growth, Carr said.
“As our senior population grows and more and more people want to age in place, EasyKnock is an attractive option that allows them to convert equity into cash while staying in the comfort of their home,” he said. “Any homeowner looking for a solution is important to us, but we certainly recognize that our product can be particularly helpful for seniors. Making sure we adequately address the needs of seniors is a constant priority.”
Likewise, seniors at QuantmRE will be a major focus of the company’s operations going forward, Sullivan said.
“The senior demographic has and will be an important part of the company’s future,” he explained. “Usually senior demographics indicate higher stock ownership compared to other age groups, but […] this is changing. As the education level of seniors increases (whether through direct marketing or through trusted third parties such as financial intermediaries), we expect increased adoption of senior home equity agreements.”