Too many older Americans face roadblocks when it comes to accessing their home equity — not because of poor credit, but because traditional lending products often don’t align with the realities of life after 60.
Join Chris Mayer, PhD, CEO of Longbridge Financial, for an exclusive webinar where he will introduce a groundbreaking home equity solution tailored specifically for seniors. This innovative product offers distinct advantages for older borrowers, addressing the unique financial challenges of living on a fixed income while creating new opportunities for your clients.
#HomeEquity #RetirementPlanning #SeniorLiving #FinancialSolutions
Join Chris Mayer, PhD, CEO of Longbridge Financial, for an exclusive webinar where he will introduce a groundbreaking home equity solution tailored specifically for seniors. This innovative product offers distinct advantages for older borrowers, addressing the unique financial challenges of living on a fixed income while creating new opportunities for your clients.
#HomeEquity #RetirementPlanning #SeniorLiving #FinancialSolutions
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NewsTranscript
00:00Welcome, everyone. Today we have a very exciting webinar, Unlocking Home Equity, a New Solution for Seniors.
00:11I'm Allison LaForgia, the Managing Editor of HousingWire's Content Studio, and today I'm so excited to jump into today's webinar, which we are doing in partnership with Longbridge Financial.
00:22Before we dive in, and I hand things over to our incredibly talented panel, I want to point out a few housekeeping notes.
00:28This is meant to be an interactive webinar. We want your participation. You can submit questions in the chat or in the Q&A at any time.
00:37We'll do our best to answer as many questions as we can at the end. Don't worry if you missed something. A recording of today's session will be sent to all registrants later.
00:48Now, today's webinar about Unlocking Home Equity will be moderated by Clayton Collins, CEO and founder of HW Media. Clayton, I'll turn things over to you to introduce today's panel and to kick us off.
01:00Good afternoon, everyone, and thank you for joining today's webinar titled Unlocking Home Equity, a New Solution for Seniors.
01:07We're thrilled to jump into this incredibly timely conversation about how homeowners in or nearing retirement can make the most of their home's value.
01:17As more Americans choose to age in place, tapping home equity has become an increasingly important topic, one that graces the pages of HousingWire, our newsletters, and our event stages every single day and year.
01:31In today's discussion, we're going to explore demographic trends driving demand for senior-focused home equity solutions, and we're also going to talk about new emerging HELOC options designed specifically for older homeowners.
01:45We'll look at how these products compare, what's fueling innovation in this space, and how the industry can adapt to meet the evolving financial needs of today's homeowners and today's seniors.
01:56Two amazing guests today, guests that have been on the stage at HousingWire events, have been on our podcast and video series, and I'm thrilled to bring them to this webinar today.
02:06Mr. Chris Mayer, the Chief Executive Officer of Longbridge Financial, and Michael Tannenbaum, the CEO of FIGURE.
02:13Chris, Michael, welcome to this HousingWire webinar.
02:17Great to be here, Clayton.
02:18All right, gentlemen, before we jump into the planned conversation, I have to go back to a topic that Chris talked to me about at our gathering event last year.
02:29Chris, how did you and Michael originally meet?
02:34So we first met when Michael, I was a professor at Columbia at the time, and Michael found his way over to the business school, which at the time was in the middle of Columbia's campus,
02:45and was interested in doing work and doing research on mortgages and housing.
02:53This was in the middle of the global financial crisis soon afterwards, and he was just really interested.
03:00We don't have undergraduates in the business school, typically, but Michael found his way over and wanted to do some work on some of the stuff I was working on,
03:10and turned out to be simply one of the best students that I've ever worked with in my many years of teaching at Columbia.
03:19So he and I stayed in touch over the years as his career progressed, and as he transitioned at SoFi, eventually leading the mortgage business there,
03:34and then through at Brax, where he was one of the first employees and the COO of the company.
03:42And when he went to figure, we actually bumped into each other in Ellington's offices, but we would have breakfast periodically.
03:50And that was how we kind of reconnected, although, as I said, we talked periodically over the years.
03:57So, Michael, did you have a clear idea in your head as you were sneaking your way into the Graduate School of Business
04:01that you were going to pursue a path to become such an influential and prominent fintech and housing executive?
04:08I certainly knew, and thank you for that nice intro, Chris.
04:11I certainly knew I was interested in housing.
04:14I wanted to go to the Graduate School of Business because that's where the money was.
04:20And frankly, as an undergrad, if you want to get paid to do research, it's better to be at the business school
04:25because they have just more money in general.
04:28But, of course, I think what Chris was doing was very interesting.
04:32He noted that this was at the time of the financial crisis, and mortgage was very, very topical.
04:38And I was very interested in the intersection of housing and finance.
04:42And so I thought he had a research lab, and why not, as someone with a lot of genuine interest in the topic,
04:50try and get into working there?
04:53And actually, at that time, I was thinking about becoming an economist and getting a PhD.
04:58Chris had taken that path and obviously has a PhD and is an economist.
05:03And so that was one of the – but I also knew that Chris was working in the private sector as well.
05:11And so I was interested in working for him for those reasons.
05:14So it was a great experience.
05:16You can't really replicate that moment in time for the housing space and for the market
05:22and obviously having the chance to do so much exciting research and then to be here on this call
05:26is obviously a really nice round trip.
05:28So glad to be here.
05:30Love it.
05:30And I love a good origin story.
05:32And one of the origin stories that always sticks out to me is Chris's story of getting into the senior lending space
05:39and founding Longbridge, a story that's grounded in demographic trends.
05:44Chris, can you give us a view into the demographic trends that are driving demand for senior home equity solutions today?
05:53Sure.
05:54So I will date myself, but the first research I did in housing and retirement goes back to the 1990s.
06:02When – for my first job out of MIT, when I got my Ph.D., was working at the Federal Reserve,
06:08I had some wonderful colleagues, including Chip Case, who spent a bunch of time there
06:13and had the opportunity to meet lots of different and interesting people.
06:17But I wrote a paper that predicted that home equity would become a more and more important part of the retirement landscape.
06:28And I was wrong about that.
06:31And – but, you know, at the time, it was very – you know, it was clear that home equity was going to be –
06:38represent a larger and larger part of people's assets.
06:44And that meant that as people were struggling to save, that people ought to be able to use home equity in retirement.
06:52The prediction that that was going to be important, that was five years after the HECM program,
06:56the reverse mortgage program got going, you know, and was started during the Reagan administration.
07:03And I got a call, you know, as Michael said, I've had a couple of different, you know, startup businesses that I, you know, worked on.
07:12But I got a call, you know, soon after he and I were working together from somebody, you know, a student of Bob Schiller's at Yale who was working on building a business in senior lending and reverse mortgages.
07:26So that was kind of how I ended up doing this.
07:29But when you look at the demographics, the data just particularly post-COVID look more and more like, you know,
07:37older Americans are playing a critical role in the housing market.
07:41A couple of stats, and I may throw too many stats out at different times in the process.
07:47The average age of a home buyer today is – you and many people reported – is 59.
07:52The average age of a first-time home buyer is 40.
07:56A third of all homes are owned by people who are age 65 and older, and that's growing by about three-tenths of a percent a year.
08:06And so there's an enormous amount of home equity sitting in retirement.
08:13And so if you're going to be in the mortgage business, thinking about lending to older Americans seems like a really critical part of that business.
08:22Yeah, and it's a critical part.
08:25The demographic trends are prominent.
08:27If we're not careful, even the first-time home buyers are going to qualify for a HECM product.
08:33But I think we're going to do what we can do on the demand side to hopefully prevent that from becoming an issue.
08:39But, Chris, let's go a little bit deeper on, like, the HECM product that you saw as you were starting your business,
08:45the traditional reverse space versus what you're seeing today with home equity solutions.
08:50So, you know, I mean, I don't want to talk a lot about reverse mortgage in this sense because we're here to talk about other solutions,
08:58but I do think it's a useful thing to set up the, you know, to set up the discussion.
09:03If you look at data from last year, there were just about 250,000 people who were rejected for a mortgage of any type who were age 62 and older.
09:15That's a lot of people who are left by the side of the road.
09:20And if you look at the people who are left by the side of the road, the average – if you look at people who just applied for open-ended credit,
09:29the average home value of people who are rejected for an open-ended line of credit – these are 2023, not 2024 data, but they're pretty similar – the average home value is $562,000.
09:43The average income of that attempted loan was $91,000.
09:47The majority had a CLTV below 60 percent.
09:50And the primary reason for the rejection was that to income.
09:56So we are not – these applicants are not the bottom of the market.
10:02These are really strong applicants.
10:04There are 118,000 people that I was just describing.
10:07That's open-ended credit.
10:09And if you look at closed-end credit, which is mostly first mortgages but some closed-end seconds, that gets you to the $249,000 total.
10:22Just the one thing about reverse mortgages, more than half of those $249,000 people could apply for a reverse mortgage.
10:28But we know that many of them – many of them are looking for something else, and they're looking and they're used to loans which involve payments.
10:39They're used to loans like traditional mortgages and HELOCs.
10:43And so trying to design – sometimes you can say, well, you should look at X for people.
10:49But sometimes when consumers say they want something, you should actually try and give it to them.
10:53And so the data suggests that there's an opportunity to give people a product that they want, and our goal should be to do that as business people.
11:04So as you think about building the products that people want, what shifts are you seeing in how Americans and specifically older Americans are using their home equity or desire to use their home equity?
11:17So it's clear, and Michael can probably give some statistics from the larger HELOC market, so maybe we can start there and then I'll add on some pieces from the senior market.
11:32But it's clear that this is a large and growing market that he and figure have really pioneered new solutions to serve.
11:41Yeah, I mean, there's about $35 trillion of home equity outstanding, which is a huge number.
11:49It's staggering.
11:51And it's gone up dramatically as home prices have gone up post-COVID.
11:57And you have about 40% of homeowners own their home free and clear, meaning they don't have any mortgage on the property anymore.
12:05Most of those people are older.
12:07And because most of those people have paid off their mortgage.
12:12And so you have that combination.
12:15And in general, you see in data that most of the people that own homes tend to be older.
12:22And so the combination of all this means that the home equity opportunity is particularly robust among this senior demographic.
12:32And I think what is interesting about what Chris and I have done is figure has, of course, being the market leader, the largest non-bank lender in home equity, and certainly being the first to put home equity loans on a blockchain to take out.
12:52You know, we take out a ton of cost and time in the home equity process broadly.
12:56We do a home equity loan in five days versus industry average of 45, and we do it in about $1,000 versus industry average of 12,000.
13:08And so because of that, we have this very innovative kind of approach to home equity.
13:12But what we don't necessarily do, especially being so technology-oriented, is focus on the demographic that has the most home equity.
13:21And that's because, you know, naturally in the tech orientation that we have, we're leaning towards a tech-forward audience, at least in our direct-to-consumer efforts, whereas Chris has that expertise.
13:35So I think that's one of the foundations of the partnership.
13:40And I think another thing that's probably worth highlighting and may not be obvious to folks listening is the fact that most of what Figure does, in fact, 80% of what we do, is partnering with folks like Chris or other people who originate mortgages or home loans.
13:57And we are just the technology and the capital markets rails for that, but we aren't necessarily doing the marketing or the customer acquisition.
14:08And so because of all of that, I think that's a nice backdrop for this partnership and also helps explain the broader market opportunity and the demographic that we're targeting.
14:18Yeah, Michael, from your interview with Diego Sanchez, our president of HousingWire at NBA Annual, that stat, 80% B2B, was one of the things that had jumped out to me, most surprisingly and prominently.
14:32What about Figure's tech stack or capabilities is fueling that B2B adoption rate or unlocking new capabilities for your B2B partners?
14:42I think what's doing that is clarity of mission, actually.
14:47Because we're so focused on the capital market in particular, I think what we've done is we've combined technology with a capital market.
14:58And I think that's very different than what most people do in the mortgage and really in the fintech space broadly.
15:06They innovate on the front end, but they don't change that back end.
15:09And a lot of people rely on Fannie Mae.
15:12And there's this concept that when you use Fannie Mae, and I'm sure Chris has seen this because most of Reverse is a non-government product.
15:18It's like you can only be as good at, you know, you're sort of digitizing a bad process.
15:24And I think that's a lot of what other people do in like the mortgage tech space.
15:29Whereas for Figure, because we've built a capital market that goes hand in hand with our technology, we're able to get around some of the limitations.
15:38And that's why those cost and time savings numbers I shared are so staggering.
15:43So for us, because we've offered this very differentiated approach, I think that people are saying, well, I want some of that, right, as a partner.
15:52And so it's less about the fact that it's more about the clarity of the mission that we're doing and the way we've constructed the product.
16:00And that allows someone like Longridge to benefit from that without fearing that we're going to infringe on their marketing and acquisition efforts because people are aware of what our focus is and what our focus, frankly, is not.
16:16So let me, I'll add into what Michael said, because I think I can sort of both do the senior focus.
16:25But I think the point of Figure as a partner just becomes really clear.
16:30You know, so much of mortgage lending is operating in antiquated technologies and with antiquated processes.
16:39And so if the idea is to build a product to serve this market and just to put some numbers on it, Michael talked about $35 trillion of a home equity, 14, over 14 trillion of that is owned by people 62 and older.
16:56And if you look at the addressable market, because lots of younger people have, you know, owe a lot of debt on the homes, it's well more than 40 percent of the total addressable equity market.
17:09It's a majority of that total in terms of what you can actually capture.
17:15So it's clear that there's an opportunity in that space.
17:19But then the question is, how do you do that and how do you put together a product to serve the market?
17:26And also, how do you think about the technology?
17:29Because one of the other questions that people think about, and we're still learning as we go into market with this product, is how older Americans think and operate relative to, you know, younger borrowers.
17:43So if you look at the, you know, if you look at the HELOC market as a whole, while 40 percent of the home equity sits with older borrowers and a majority of the addressable home equity does, about a quarter of HELOCs are originated to people who are 62 and older.
18:02So of about the $180 billion plus or minus a little bit that will be done this year, only a quarter of it is to people who are 65 and older.
18:11And so that's the market, which is how do you get those people and make it easy and affordable for them to get that product?
18:19So we've hit the demographic side of the market backdrop.
18:23We've also talked about the just staggering amount of home equity that's out there, $30 trillion overall, $14 trillion with seniors.
18:31Let's hit one third component of the market backdrop and talk about the rate environment.
18:36So how are mortgage rates impacting demand for home equity products among seniors?
18:43I can start there just given what we've seen.
18:47I think the moment for HELOC for sure in the last couple of years has been in part as a result of the fact that rates are rising.
19:00And so people don't want to refinance their existing properties or, excuse me, their existing loans.
19:06But I think that is too simple of a story because, one, as we talked about, a huge number of people own their home free and clear.
19:16And so that means that those people are not making the decision to do home equity necessarily because they see a really lower rate loan and want to build on top of that.
19:31And so I think what we've done, and I figure in Longbridge is leveraging this, is we've made it so efficient to access that home equity.
19:40And as a result, you kind of need to broaden the approach and think about, from a rate perspective, what are the other consumer debts that are outstanding?
19:51And often the home almost always is going to be the most efficient way to finance anything because you, one, have a 30-year market, so you're going to have a smaller payment.
20:02And both, two, you're collateralized by something that's relatively valuable and liquid, which is different and doesn't depreciate, it tends to appreciate, versus, say, a car or all of the unsecured lending that you see in the market.
20:16So because of that, you have this concept that people who have home equity would be theoretically better off using that home equity to pay off other liabilities, for example, credit cards, personal loans, auto loans, that are all going to be at a higher rate.
20:31So when you zoom out and think about that, you said $30 trillion, I said $35 trillion, what's $5 trillion among friends?
20:38But if you say that, that market is so large and you start to think about these other consumer debts, it really puts the perspective of rates and the size of that opportunity together.
20:51And that's also one of the reasons why you see a lot of people use home equity to pay off these higher rate products.
21:00And so that's something that, you know, figure has seen people's FICO scores tend to go up 20 points, for example, when they do something like that.
21:09And I know what Chris is focused on is leveraging that because there's lots of seniors taking out high rate, you know, personal loans and credit cards and probably should be using home equity.
21:22And this is a much faster and simpler way, but I'll let you elaborate, Chris.
21:25Yeah, no, I completely agree with that assessment, Michael.
21:30There are certainly people who are using, who are, you know, using other more expensive forms of credit.
21:37But the predominant challenge in our demographic is people who are doing nothing.
21:41And the doing nothing means that they really don't have the ability or they're taking on loans that are really inappropriate for what their demographic is.
21:52The idea that you're going to use a closed-end second or a cash-out refinancing, you know, or even a traditional HELOC, those loans all require you to amortize the loan to pay it down.
22:06So you're in retirement, your income is falling, and the expectation is that you are going to pay off debt in retirement.
22:16And that doesn't really make sense.
22:17It's not what any professionals think seniors should be doing is paying off the debt.
22:23You should be using the home equity to retire better than you could otherwise.
22:27And so that feature of how do I use a home equity and not pay it off, you know, it's a little bit, when I think about products, when we have first-time homebuyers, nobody thinks that it's a goofy idea to offer first-time homebuyers lower down payments.
22:43And I know, you know, you could talk about all the political things, but in fact, very few people have put down a 20% home of people who are homeowners today, and they all somehow manage to get and become homeowners over time.
22:57So we design products for first-time homebuyers, we design products for people at other stages in their life, but we create a HELOC where, for example, a traditional bank HELOC is going to require a borrower to go from interest-only for 10 years or 5 years to a fully amortizing loan.
23:17So you're 65, you take out a HELOC, you're now age 70 or 75, and your payments are going to jump 40%.
23:25But when you're 70 or 75, the data say you're no longer working.
23:30And if you're not working, because conditional on hitting age 70, the average age of retirement in the United States is actually age 65.
23:41So all these people are going to be taking a mortgage out and then retiring, and we're forcing them to effectively save by amortizing down the loan.
23:51And so that loan doesn't make sense for people in this demographic.
23:56So we should create loans and products that are designed to responsibly serve the market.
24:02And so that idea of not having a loan where the payment jumps up a bunch.
24:07I mean, if I told you CFPB is effectively dead, but if I told you I'm going to create this great product for seniors, it's a product where, great product for anybody, I'm going to give you the loan, you're going to retire, and I'm going to increase your payments 40%.
24:22Is that really a responsible product?
24:25Most banks will say, oh, great, that's the product we got.
24:29And we don't want to offer special products for older Americans.
24:31This product is saying that isn't a responsible product, a product where somebody sees this huge increase in payments at a point where they're retiring, that's a suboptimal product.
24:43That's not a responsible way of lending to this demographic.
24:46Let's build and create products that are about understanding the unique needs of seniors and designing it to responsibly serve that market.
24:55And the word responsible is a critical part of this conversation.
25:00Can I just acknowledge Michael's best one-liner of the webinar so far of what's $5 trillion between friends?
25:08I hope that makes it into the show notes somehow.
25:12Loved that one, Michael.
25:14But from there, we did go into talking about some of the market drivers and product innovation that has brought us to this point of having a HELOC for seniors' product.
25:24And Chris, this is something that you started to introduce from the stage at the gathering this past summer.
25:31And I know you're in market with Traction.
25:35So is there anything else you want to give us about the inspiration for building this product and just make sure we introduce it properly in this format?
25:43So I will say our head of marketing, Eve, actually bought the domain HELOC for seniors back in 2018.
25:54So this is a product that we've been looking at and thinking about.
26:00And actually, as an academic, I can sort of say for a long time, one of the things about doing research and thinking about things is that, you know, you develop ideas in the academic world.
26:10The great thing about being in the business world is you actually get to do things.
26:14And so the fun part of my job is I went from thinking of ideas and publishing papers and talking to policymakers who never really listened to what economists say anyway, for the most part, to actually spending time saying, we have ideas, let's do them.
26:28Let's bring these ideas into the marketplace and actually implement them.
26:33So we've owned the domain HELOC for seniors and all the various domains since 2018.
26:37But it wasn't until actually sitting down at breakfast with Michael where we started talking about how can we bring this effectively into market?
26:47Because for me, just bringing a product into market where you can't distribute it in scale isn't really very helpful.
26:54This is a large market and it has large potential.
26:57So we should do it in a way that is scalable, that is cost effective and uses technology.
27:03And so while we are sitting around with the idea, an idea without implementation is worth nothing.
27:10And so you need both of them.
27:11And so that was what showed up when we sat down at breakfast.
27:15And Michael came back and, you know, talked to his team a little bit and said, is this the direction we want to go?
27:20And we talked an hour, an hour and a half later and was like, all right, well, this seems like a thing that we can collaborate and work on and bring to market.
27:28And so the combination of a great product and a great technology and scalability, they're all really critical.
27:37You know, if we're talking about a market that is, you know, we could debate, you know, hundred billion, hundreds of billions of dollars, whatever you think about it, forget about the $14 trillion.
27:48That only works if you can grow it, if you can offer it to wholesale clients, you don't have to hire a whole new set of people to, you know, to take applications that originate.
27:58And I don't have to hire a whole lot of, you know, underwriters.
28:01And how do you build a new product from scratch?
28:04You have to do it around technology and scalability.
28:07That's like, you know, if there's one lesson of successful modern companies, it's that.
28:12And that's really where this partnership is the rubber hitting the road, launching a great product without the ability to do it in scale is not really very exciting.
28:24And so that's what this partnership is really all about, is using great technology and scalability to allow us, but allow wholesale clients.
28:35And I'll sort of say we launched live today with the wholesale version of the product.
28:40And if you're interested, you should reach out to me and our team to sign you up and talk about it.
28:44But we've already talked to, you know, and are launching with some of the largest forward players in the business that we already have signed contracts to launch some of the largest IMBs.
28:55But we couldn't be talking to them as a company, our size and scale without having technology solutions that allow them to grow and scale.
29:05And that's been the success of Michael's business is the ability.
29:09How do you get to, you know, many billions of dollars originated from zero?
29:14It has to be a scalable process.
29:18And that's the critical part.
29:20That is as much of a critical part as the idea itself and the product.
29:25All right.
29:28So you tackled.
29:29Okay.
29:29Jump in, Michael.
29:30Go ahead.
29:31I think scalability is very interesting because, you know, there's lots of good ideas.
29:37And I think that one of the things that we see in the mortgage space broadly and really in all lending is this constant issues around funding and liquidity and, you know, kind of people having to, if you've been in this space,
29:55you'll understand that you need to, if you're not going to have the government backing, which is a non-agency product, right?
30:04And most lending is non-agency, right?
30:06Fannie Mae just covers a portion.
30:09And then Ginnie Mae, they cover a portion of housing.
30:11And then, so there's plenty of non-agency housing loans and there's all kinds of loans that don't have this liquid capital market there.
30:19And I think that's a big, big issue.
30:20And I've been, as Chris mentioned, you know, I was at SoFi where we were doing a lot of student loans.
30:26There's no government market for that.
30:27I was at Brex, which is in the corporate credit card space.
30:32There's no government backing there.
30:34And in all of these, in order to scale, which is also true for this partnership that Chris and I are talking about today, this year lock for seniors, you need to have the capital markets ready to buy.
30:46You need to have the operations, the technology, all these things need to talk to each other because the reality is all of that is very complex with regulatory as well.
30:56And so bringing these things together in a product that's ready to scale and ready for enterprise partnership and ready for compliance across 50 states when you're touching seniors, which we know is fraught with potential pitfalls.
31:16And as a result, I think that the scalability that Chris is highlighting is something that, you know, we really focus on at Figure.
31:22It's something I focused on for my whole career because sometimes when you're in that mortgage space, you don't appreciate actually how much work you have to do when you don't have someone like Fannie Mae there.
31:33And so this is, I think, a great example of that.
31:37And we are prepared to do a serious amount of volume in this product.
31:42All right, awesome.
31:45I got a few follow-up questions, but I do want to thank our audience for dropping some awesome questions in here that we're going to get to in just a minute.
31:53Mike, James, Mary, Phil, some great questions.
31:57So we're going to come back to these in just a sec.
32:00But before moving forward, I want to follow up.
32:03Chris, you talked about the channel path of working with IMBs and wholesale partners.
32:09You also mentioned one of the biggest, like, challenges in the go-to market is that your borrower, your consumer's alternative is doing nothing, not using a home equity product.
32:22How do you tackle the awareness challenge and bring awareness of the HELOC for Seniors product to the market to, you know, help originators actually get these loans into the hands of the right borrowers?
32:37So I think that's a great question.
32:39How you market and sell is always critical.
32:42I will say I'll answer it in a couple of different ways.
32:45The first is if you look at where the rejected applications are, actually, the majority of them are not IMBs.
32:53The majority of them are at banks and credit unions.
32:57People go to places where they think they have a relationship and expect to be served and find they're not.
33:02That's a great opportunity for IMBs to serve borrowers.
33:06And IMBs who have existing, you know, first liens out that Michael talked about with 2% or 3% or 4% interest rates, you know, why they're not going and offering those customers a tailored product to their needs seems a little bit crazy.
33:21And instead saying, well, why don't you just go to the credit union or the bank?
33:25You know, those are those are incredible opportunities.
33:29But we just you know, we just launched a couple of tasks on the marketing side because we launched this in retail a few months ago.
33:37But really, just as a way of testing this and understanding, you know, getting a few of the kinks out the name he locked for seniors, the idea of a product designed for seniors is generating tremendous interest.
33:51So when we send out marketing, we find whether it's mail and again done in limited tasks, whether it's on whether it's in, you know, people who looked in our database of people who are looking for a reverse mortgage, whether we do it, we actually have done some very small scale testing with streaming TV.
34:13First time we've ever been on TV and we found incredibly strong numbers of people who apply like the response rate.
34:21It's a really high relative to people who are used to those channels, just the name, the idea that there's actually a product designed for seniors that meets their needs.
34:33It rolls off the tongue and it's the kind of thing that people are reacting to really quickly.
34:39So I expect as we scale and as you know, the many wholesale partners out there start to scale, I think they're going to find the same thing, which is there's a huge demand for this.
34:50People want products that are designed for their unique needs.
34:55They understand that existing products really aren't and they want to know more.
35:00And so I think it is going to be the kind of thing where the marketing on this is going to almost, you know, lead itself.
35:06And, you know, again, we're early stages on what that's going to look like.
35:09We have, you know, all these different ways of thinking about this and we're testing some of them.
35:14But, you know, our goal in launching in wholesale is to let everybody do this.
35:18We want to scale.
35:19We want to grow.
35:20We want to let different people, different IMBs, different heads of marketing departments try and figure out what's the right way to do this.
35:27If we limit it to what our marketing team can run and think about, and they're amazing, it's not going to be as many ideas, as many customers, as, you know, the tens of millions of, you know, customers that are out there and exist in the IMB space and the really creative marketing teams that exist out there.
35:47So I think the name and the product are really clear advantages.
35:53We spent a lot of time working on that, but it's really, I think this is the kind of product that isn't going to require, you know, and we have a bunch of questions in the chat about, and we haven't defined what the product is, so I should probably say something about that.
36:08But I do think the marketing and scalability of it combined, I saw some, one person say, unleash the beast.
36:16That's what we're doing.
36:17As of today, we're unleashing the beast and letting everybody take a run at it.
36:22But maybe I should, maybe I should jump in and talk about some of the features of the product, just at least at a high level, since we have a lot of questions.
36:31Yep, absolutely.
36:32Let's go in and talk about the features of the product and let's make sure we do it kind of through the lens that an originator would need to differentiate between a traditional HELOC and a HELOC for seniors.
36:43Do a little, a little sales coaching as we, as we go into this.
36:47All right.
36:47Now we have, we have, we have marketing pieces that talk about traditional, if you go to our website, you'll find traditional HELOC, HELOC for seniors.
36:56We've laid it out, I think, really, really clearly.
36:59The first is it's interest-only for the life of the loan.
37:03As long as you're living in the home, it's a primary residence, it is an interest-only loan.
37:08It also has protections for a non-borrowing spouse or for somebody who sits on title with the property that will, that we will be able to transition the loan and servicing to allow a spouse who's not on the loan to continue to serve, to keep the loan and make payments.
37:24And that's built into, that's built into the servicing.
37:28In fact, it's built into the documentation that you will get as soon as you get the loan.
37:33We will give that commitment.
37:34So we're able to, even though there's going to be a single borrower in most states, a co-borrower in a few,
37:39we have protections for a non-borrowing spouse or for somebody else who's on the deed and on the title to be able to continue to hold the loan.
37:50The loan is payable when it's no longer the primary residence of the person in the home, but, you know, it's fairly loosely defined here.
38:00It is not for, we are not at the moment looking at second homes.
38:05It is for the primary residence of the borrower.
38:08It also is a loan which has an 80% minimum draw as opposed to most loans which require 100% minimum draw.
38:15So if you look at the traditional non-bank HELOC market, most of them require you to take the money up front.
38:22It's an open-ended line of credit because if you amortize it and pay it down, you can redraw that.
38:26Here you can start at 80% instead of 100%.
38:29And because of all those features, the debt-to-income requirement is, you know, is going to be easier.
38:39So borrowers, because they don't have to pay principal, borrowers are going to be able to borrow more money for a given payment.
38:49The interest-only feature means that debt-to-income constraint is not going to be binding for as many people.
38:56So when you look at the, when you look at sort of who, and it's 60, sorry, maybe I missed the bunch line.
39:05It's 62 plus.
39:06So you must be, it is a special purpose credit program.
39:09So borrowers must be 62 and older to take out this loan.
39:15We're not in 50 states yet.
39:17I want to say we're in 20 in retail.
39:20We're in, we're launching today five in wholesale.
39:22We will quickly get up to the 20 and beyond.
39:25We expect to launch in most states.
39:28There are a couple of states where, you know, there's a handful of states and figures saw this when they put their product in market as well, where there's a lot more regulatory work to be done.
39:38But the major states, the big states were all approved.
39:42We also have slightly tighter credit box than figure has in its product.
39:47The one thing we do not want to do is put a senior in a product where they're going to face the loss of their home.
39:56Our company as a servicer in the reverse space has serviced lifetime about 56,000 loans.
40:03We have had 10 people over 10 years and 56,000 loans who lost their home for failure to pay property tax and insurance, a record that nobody either in our industry or any industry lending this demographic can have.
40:18We believe in responsible servicing.
40:20In fact, the first question Michael had at breakfast after what we were going to do was how are we going to service and make sure that we're not going to end up in the headlines and that, you know, that this is going to be a responsibly managed product.
40:33That was his first question to me and one that I think we came to pretty close assurances.
40:40So we have a 660 minimum FICO score, which is higher than some of the other products in market, and we have a little bit lower LTV for this demographic for the same reasons.
40:52We want to be in a position that if a borrower has issues, that we're going to be able to work those issues out without putting people out of their homes in retirement because that would be really catastrophic for those borrowers.
41:05I will say one other thing on the credit side, then I'll stop because I've, you know, run on a lot on some of this.
41:11If you go back to 2008 and you look, you know, back at the time when Michael and I were working together or a little after that, and you look at data from the New York Fed, borrowers who were 60 to 69 and 70 plus
41:27had two thirds or less of the default rate on mortgages as younger borrowers, so seniors are much higher credit quality customers.
41:40They will do what it takes to stay in their home.
41:44The problem is we don't want them to have to do what it takes.
41:47In other words, you don't want people to have to, you know, spend every last dollar of their money on their home.
41:54You want them to be able to use that money instead for other things.
41:58But from a pure credit perspective, we feel like these are higher than average credit quality borrowers and will continue to be, even in the worst, you know, financial crisis we had since the Great Depression.
42:13I'll stop.
42:14Catch my breath.
42:15All right.
42:16I'll let you catch your breath for a second.
42:18And I'll ask a few easy questions, get into the nitty gritty from some of our audience members.
42:22And I won't ask you to recite all states, Chris, but we've been asked about Pennsylvania, Texas, Nevada.
42:28Any idea if those states are on the approved list or in queue?
42:33Yes, in queue or approved.
42:35I don't have the list in front of me.
42:37I actually can't multitask very well.
42:39So if I have to go look them up, I will then not be, you know, having the conversation.
42:44So, you know, the approved, I'm virtually certain that, you know, Nevada and I think Pennsylvania are both on our list, but we will, you know, you can take a look.
42:53As I said, you can come to our website and we'll have information about the states listed as well as for those who are in the business and want to do wholesale, we will as well.
43:03But, you know, we've gone through, I think, the 20 largest states other than one or two.
43:09Somebody asked about Texas.
43:11Texas is one of those states which had the Texas Constitution.
43:15You know, the product as written would not meet the qualifications of the Texas Constitution.
43:22We think we'll be able to twist the product, you know, twist around sounds, you know, engineer it.
43:27We think we'll be able to create a solution for the product that will work for Texas, but it will take us time to do it.
43:34So there are certain states which are, you know, I'm sure your listeners all know very well if you're in the mortgage business where lending is, you know, a little bit difficult.
43:43But, you know, we expect to be north of 40 states in the not-too-distant future.
43:48All right.
43:48Excellent.
43:49Another question from Phil.
43:52Are AVM appraisals allowed or a full appraisal required?
43:55Michael, you want to – because we're using the standard figure process.
43:59Yeah, we do an AVM approach, which I think is one of the reasons why a figure is much faster and takes a bunch of costs out of the system.
44:07So we're doing a waterfall of different AVMs to get at the right valuation, but we don't require an appraisal, which I think is one of the things that's going to make this move quickly and also be low cost for the borrower.
44:21Right.
44:22All right.
44:22So we're excited about that, by the way, Clayton.
44:25There's a lot of research about how to think about AVMs, and I did a lot.
44:29If I put my Columbia Business School hat in research on, I've done a bunch of research on what drives housing appreciation across markets, demographics, et cetera, et cetera.
44:39But the AVM, when you lend at lower LTVs, this product is lower LTV than in the sort of larger marketplace.
44:50And so it means that we're quite comfortable with the AVMs.
44:54Figure has a lot of work and data, and there's been a lot of data in the broader mortgage market to support it, and we're comfortable with that.
45:01I think there are caps at $400,000, so there are some test cases to go higher than that and do more, but $400,000 for the demographic we're looking at is an enormous amount of money, so I don't worry so much about that.
45:15But the AVM, and again, the technology, perfect solution, perfect opportunity here.
45:23So while we're on the topic of technology, and I'll bring one back to Michael for a sec.
45:29Mike, can you please, a question from James, can you please talk more about how blockchain is employed?
45:34Yeah, we are, we're the first to do a mortgage on blockchain.
45:40We did that back in 2018.
45:43The concept of figure is that ultimately all of the capital markets will be standardized on blockchain rails.
45:51And what we did when we started was launch a product direct to consumer to show the market that this could be done.
46:00And then over time, we started adding partners, we have over 200 partners, one of which is Longbridge, and we're talking about that product today.
46:08But because of the capital markets orientation of our mission, which I talked about a little bit earlier, our goal is to ultimately take the cost out of the process using blockchain.
46:21So I think there's a lot of people who talk about blockchain, and I think what's unique about figure is we actually add value by lowering costs and increasing efficiency in doing so.
46:31And so to get into specifically what we do, the attributes of the loans that are done with figures technology are hashed on a blockchain upfront.
46:40And what that does is when there is third-party loan review, and most people know actually in response to the financial crisis that Chris and I have been talking about, most mortgage loan sales are 100% loan file review.
46:57And a loan through its life may go through a couple different owners, into a securitization, warehouse line, et cetera, and each time it's going to be audited.
47:05And the premise behind figure is that those attributes of that loan will be put on a blockchain once and then audited once, and as a result, you don't need to do that multiple times.
47:19And so we save about 80% of the costs in the post-close process.
47:25And then similarly, we talk about ABM.
47:28That's just one example of the approach that we take to mortgage attributes.
47:32But it's important that we don't have humans involved in the process, because what we're trying to do is get away from the, well, is the underwriter experienced?
47:42Is the appraiser experienced?
47:44And more just approach it from a model-based, database approach, which is we sort of describe as displacing trust with truth.
47:54And so when you're looking at a loan done through figures process, you don't have to go back and check these types of things, because you can be fully sure how the valuation, the income, how that was done.
48:11And it was done without human intervention.
48:13And I think that's very powerful, and it's one of the ways that we're able to bring transparency and liquidity into what we do and actually use blockchain for something that adds value to the market.
48:28Home prices and housing continues to get more expensive.
48:30Cost-originated mortgage has gone up 3x to $12,000, as I cited earlier.
48:35And figure is somebody that's taking costs out of that system.
48:39And Chris and this product and the seniors that use it are, of course, reaping the advantage of that.
48:46That's excellent.
48:47Chris, I'm going to bring one back to you.
48:49A product characteristic question.
48:52If a senior does not need the full 80%, can they pay back they don't currently need and still access it later?
48:59So, the answer is yes.
49:04I don't think, you know, I'm not necessarily suggesting that people take a bunch of money and pay it off the next day.
49:10That's not really what the product is designed for.
49:12It's designed for people who want to use those proceeds over time.
49:17But the answer is yes, they can redraw.
49:19I think we have a limit, 27, 29 draws.
49:22So, there is a limit.
49:24This isn't about paying off, you know, and using this in exactly that sense.
49:31You know, actually, bank key locks, if you try and pay them back, you actually have a prepayment penalty on those.
49:36You know, a lot of them.
49:37But it's not designed for, you know, this is a product that's about helping people use home equity and retirement in the longer term.
49:44So, the idea is to use money where they need it for borrowers.
49:49So, not meant to be like a revolving line of credit.
49:53That's not the construct.
49:54This is not a credit card.
49:56If you want a credit card where you borrow money, pay it off, borrow money, pay it off.
50:00This is not designed as a revolving line of credit.
50:03It's designed as a product where you're going to be able to have that outstanding for a longer period of time.
50:09That's the idea is don't pay it off.
50:10Actually use, you know, use that money and use it over time, you know, to launch this.
50:19I will actually comment on a couple of questions.
50:23One of the things about the questions is a bunch of questions that are all basically, I could jump it, bump into the category of questions are, is this a reverse mortgage?
50:34Is this like a reverse mortgage?
50:36This is a HELOC.
50:37This is not a reverse mortgage.
50:39Concepts like, if you know a TISA or a LISA.
50:44Concepts like required counseling.
50:46These are not concepts that apply to HELOCs.
50:49That doesn't mean that we don't want people to understand and have a responsible product, but people understand what a HELOC is, and when they take it out, they take it out.
50:57That's why by following figures process quite closely, it's a loan you can close in five days because it is a, you know, it has many, many commonalities with a HELOC with a few special features, which are really important for the needs of seniors.
51:14And so this is, but this is a HELOC, it is not a reverse mortgage.
51:19At the same time, I will tell you that we think this is a tremendous opportunity for people who are reverse mortgage originators out there to open conversations with borrowers who may or may not be in a position today to look at a reverse mortgage,
51:35and frankly may not be interested in looking at one for perceptions or misperceptions of the product.
51:41It's a very good opportunity to give them a product they want and say they want, and over time, as they hit retirement and go longer, it may be that the right solution for them is a reverse mortgage as a way of getting rid of the payments altogether, and that's something we encourage, not discourage.
52:00So it's a way of opening conversations with more borrowers.
52:03As a lender, you're always supposed to give the borrower the right product for the right circumstance, and that's critically important.
52:12But I will say one other thing, and Michael, I have no doubt that your partners see the same thing, and you see this in your retail.
52:19Two-thirds of our borrowers don't talk to a person.
52:22They don't go anywhere.
52:24They just literally, they show up, you know, they show up at 2 a.m. on Saturday night or something, and they've just gotten themselves through the process.
52:32And, you know, they actually are quite interested in, you know, doing something, and then you can talk to them and, you know, and market to them and show them options over time.
52:42But they actually really like the idea of being able to just go ahead and, you know, take the product on their time and on their, you know, process entirely online.
52:55Yeah, Chris, I know as you've been in market, you've gotten some feedback from borrowers as well as originators here.
53:03And I want to use one of the questions as a chance to hear a little bit more about that feedback through the lens of why would a borrower take this program versus the traditional Peckham program?
53:14Is there a rate difference, a loan cost difference, like help an originator guide and advise a client in the right direction?
53:25Look, rates obviously can change from day to day.
53:28On a first lien product, you have rates in the sevens.
53:31Those rates can be extremely attractive and competitive for borrowers.
53:37And I think for some people, you know, we saw an applicant who had a $1.9 million home who, you know, had $100,000 first and wanted to take some additional money out.
53:48The right solution for that borrower, we do first and second liens for people who look, and we're about to set up direct debt payoffs.
53:57The right solution for that borrower, get rid of the first, do this as a 7-ish percent loan.
54:04And, again, those rates change every day, so I'm not promising, you know, any specific rates.
54:09But for well-qualified borrowers, these are extremely competitive rates that are really attractive for people.
54:17But for people who have, you know, different credit, obviously the rates are going to depend on the credit qualifications of the borrowers, and they can be above that.
54:25They can be, you know, in that range.
54:27It depends on who they are.
54:28But, you know, when you start looking and understanding what the product is and what the options are, they're just really attractive options for people.
54:37It's just something that doesn't exist in the reverse mortgage industry or even in the mortgage industry, period.
54:43And that's what innovation is all about, is creating something that people want and offering it at scale with quality partners that operate responsibly.
54:52And that's the goal.
54:55Perfect.
54:55Okay.
54:56So we're coming up on an hour, and I'm going to go to each of you, Michael and Chris, and ask for a closing remark.
55:02But before we do that, I do want to thank all of our attendees who have been so engaged in chat.
55:08We have dozens of questions we have not been able to get to in this short window.
55:13But I will make sure that both of our panelists have the questions, and we will do our best to address these questions, either in content on Housing Wire or in one-on-one outreach following the webinar.
55:24Michael, Chris, can I turn to you, you know, starting with you, Michael, with any closing remarks as we wrap up this really exciting conversation around HELOC for seniors?
55:33I think FIGURE has been a leader in the home equity space, leader in technology, leader in using blockchain to lower costs and increase efficiency and speed.
55:45And so we're really thrilled to partner with someone like Longbridge who has this great experience with this demographic, this ability to service the loans, maintain compliance.
55:54And so for us, it's a great partnership, and I think builds off of what we have been doing in our broader mission to just continue to bring our technology to more and more partners.
56:05So we are just so grateful to have this opportunity to access such an important demographic that really is facing a lot of challenges in the housing space despite having so much equity.
56:16So it's a perfect partnership in my view.
56:18Yeah, look, I'm going to say the same thing Michael did, which is this is a wonderful opportunity for us to go into the mainstream marketplace and create products that people say they want and to offer them in at a technology and a price point and a cost that really works for them and in a way that can grow and scale.
56:41You know, somebody asked, what about banks and credit unions?
56:44The answer is reach out.
56:46We're happy to work with you.
56:47There's a technology platform, there's a product, and we can all work together to serve this market more efficiently and in a way that makes sense with the experience that we have on the servicing and product side and the work that Michael has on the technology and, you know, the capital markets, you know, come together.
57:06So it's just this is a really great partnership, and this is what technology and innovation is all about.
57:13And I think both of our companies, obviously, Michael, you know, the work that he and figure are doing is well known.
57:20We haven't, you know, talked about, you know, work in whole lots of places.
57:25But even on our end, you know, we have AI bots that can talk to talk to loan officers and describe products and help them understand what's going on.
57:36And we have a product called Bridget that does this and can talk about HELOC for seniors.
57:40So we all in this industry have to be leaning in, not leaning out and thinking about how technology, not just does it save us a few bucks, how does technology really open up the ability to serve more markets and grow revenue?
57:55Because if what we're doing with technology is just saving a few bucks here or there, that's not going to be the end of the story.
58:02The low cost of origination that Michael talks about is really critical, but so is the ability to push buttons and do lending at large scale that was starting at small scale.
58:13And that scalability, which he described, is absolutely critical as well.
58:17And so for me, it's not just the cost side, the scalability drives revenue, and that goes straight to the bottom line.
58:26And that's the thing that is really helpful to, you know, to thinking about how to grow in this business.
58:34Chris, I can't thank you enough for helping bring this webinar to reality and for your leadership in innovating at such an important intersection of market need and demographics.
58:45As we look at the future of housing, look at the future of mortgage, I think there's a lot of innovation our industry needs to do and needs to enable to meet the needs of consumers, prospective homebuyers, and current homeowners.
59:00And this partnership between Figure and Longbridge is a fabulous example of what can be accomplished when technology, capital markets, distribution, and an innovative entrepreneurial view, what it can achieve.
59:13So I am so excited to see this HELOC for Seniors product come to market in its fullest, working with clients across the wholesale, IMB, and potentially even bank landscape.
59:24Thank you, gentlemen.
59:25This has been an excellent conversation.
59:27For those of you that tuned in.
59:27Thank you so much.
59:29Absolutely.
59:30For those of you that tuned in, thank you for the questions.
59:32Thank you for engaging.
59:33This webinar has been recorded and will be distributed to you, and we will do our best to get all these questions answered.
59:38Hope everybody has a great afternoon.
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