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February 23, 2024

The Coming Evolution in Reverse Mortgage Product

As lenders continue to search for new sources of revenue, new reverse mortgage products offer significant benefits.

The reverse mortgage industry, traditionally known for its first-lien products, is undergoing a transformation. Changes in the legal requirements and an influx of new investors has created an environment conducive to innovation.

Lenders are now developing innovative product types tailored specifically for older homeowners. This will make this year an exciting time for lenders who have the tech stack to streamline the loan origination process for these borrowers.

What’s most exciting is that these new offerings are not just variations of existing products, but rather represent a significant shift in how reverse mortgages function and serve senior homeowners.

We’re watching these changes with great interest, and here is what we’re seeing now.

The Strategic Response to Rising Interest Rates

Older homeowners who wish to tap into their home equity without relinquishing their favorably rated first mortgages now have a viable option in the 'reverse mortgage second.'

This product diverges from the traditional reverse mortgage model, which typically requires the product to be the first lien on the property and thereby addressed the homeowner’s need for additional cash through a solution that was previously unavailable in the reverse mortgage space.

This novel product comes as a strategic response to the current financial climate, marked by higher interest rates and inflation. The product allows homeowners to retain their existing forward mortgage, usually at a lower interest rate, while still accessing their home equity through a reverse mortgage product.

Beyond preserving lower-rate first mortgages, the reverse mortgage second provides significant advantages. Unlike a traditional home equity line of credit (HELOC), which might require interest-only payments and face a balloon payment after a 10-year draw period, the reverse mortgage second eliminates the need for ongoing mortgage payments.

Predicting an Increase in Reverse Mortgage Lending

We expect to see more innovation in this space in the years ahead. That’s why it’s important for lenders to make sure their existing tech stack can originate these loans easily.

The Mortgage Cadence offering can originate both forward and reverse mortgages with equal ease, as well as home equity and a range of other loan products.

As lenders continue to search for new sources of revenue, MCP and new reverse mortgage products offer significant benefits.

The proliferation of new reverse mortgage products, like the reverse mortgage second, is a clear indication of the industry's commitment to evolving with the times and catering to the diverse needs of senior homeowners.

This trend is very likely to result in an increase in reverse mortgage lending, offering more options and greater flexibility to those seeking to leverage their home equity, especially given the demographic trends that are steadily increasing the number of potentially qualified reverse mortgage borrowers.

If you’re ready to talk about what adding reverse mortgage products to your product menu could mean to your business in 2024 and beyond, now is the perfect time to get in touch. Even if you don’t consider yourself a “reverse mortgage lender,” MCP makes it as easy for you to originate these in-demand products as you currently originate forward mortgages. Find out more by contacting us at Mortgage Cadence today.

By George Morales, National Sales Director at Mortgage Cadence 

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Media Contacts

Mortgage Cadence: 
Alison Flaig 
VP, Marketing 
(919) 906-9738