Key facts
- HighTechLending is offering its EquitySelect product as a home equity line of credit (HELOC) for homeowners aged 55 and older.
- The product is positioned as an alternative to traditional reverse mortgages, which have seen declining loan volumes.
- EquitySelect can be set up in a first- or second-lien position with line-of-credit sizes up to $4 million.
- Borrowers select a fixed minimum payment percentage (1-5% annually for those 60+) for the loan's duration.
- Qualification is based on a capped minimum payment, potentially allowing borrowers to access larger loan amounts.
- The EquitySelect HELOC is currently available in Illinois and Michigan.
HighTechLending is introducing its EquitySelect product, a home equity line of credit (HELOC), as an alternative for homeowners aged 55 and older who may be hesitant about traditional reverse mortgages. This move comes as federally insured Home Equity Conversion Mortgage (HECM) endorsements have significantly declined, falling approximately 78% from their 2009 peak.
Paul Fiore, vice president of sales at HighTechLending, highlighted in a webinar that the 55-plus demographic is actively using HELOCs and cash-out loans, with about a million such transactions annually. He suggested that focusing solely on reverse mortgages means missing a large segment of potential borrowers. Recent data indicates a decrease in HECM retail lender endorsements year-to-date, and HMBS issuance has reached one of its lowest points since 2009.
Fiore attributed the decline in reverse mortgage uptake to factors including higher interest rates, increased closing costs, and persistent perception issues. He noted that borrowers are increasingly choosing alternative products. The EquitySelect HELOC can be structured as a first or second lien, offering line-of-credit sizes up to $4 million and $1 million, respectively, generally for borrowers with a combined loan-to-value ratio below 60%.
Borrowers using EquitySelect select a minimum payment based on a percentage of the outstanding balance, which is fixed for the loan's life. This qualification method, based on a capped minimum payment rather than a fully amortizing principal-and-interest payment, may allow borrowers to qualify for more funds or in situations where they might not with traditional mortgages. The loan features a non-recourse, non-recast structure with no prepayment penalty and a 40-year balloon term, including a seven-year draw period for first liens and five years for second liens. The EquitySelect HELOC is now available in Illinois and Michigan. Fiore views this product as a way to provide loan officers with more options to meet the needs of older borrowers.