In today’s economy, mortgage rates and housing expenses have consistently risen. As a result, older citizens are tapping into their retirement savings to cover costs—if they have it. However, homeowners have a unique advantage with home equity products—designed to let residents tap into their home’s equity for cash. Mortgage professionals must keep up with the new demand for home equity products in the new market.
In an exclusive executive conversation, HousingWire sat down with Jonathan Scarpati, senior vice president of Wholesale Production at Finance of America, to explore home equity products, opportunities for mortgage professionals to leverage them, and more.
This interview has been edited for length and clarity.
HousingWire: How did you get into Finance of America and the industry?
Jonathan Scarpati: I started with Senior Lending Network out of New York. I had a pretty unique path into the space, and I started out selling leads from national TV. Later, I joined Urban Financial Group. They were a customer of mine, and I made the transition there.
HW: What do you see as the biggest opportunities for mortgage professionals in leveraging home equity products, especially as senior homeowners become such a large and growing demographic?
JS: The home equity wealth of our senior homeowners now exceeds 14 trillion, reflecting a growing market. That growth presents an opportunity for reverse mortgages and home equity loans. Life expectancy is also increasing, with the average sitting around 77 and a half, although many live into their 90s. Retirement planning has shifted to longevity planning, making home equity access essential for financial security.
Senior-friendly financial products, like those from Finance of America, allow seniors to age in place while leveraging their home value to cover retirement healthcare, daily expenses, and more. These products address the unique needs of that growing demographic.
HW: How do you envision home equity products evolving to meet the needs of both traditional loan originators and underserved borrowers in the coming years?
JS: We’re seeing more home equity products in the marketplace, and they’re serving a wider range of borrowers, including those from underserved communities. I think the additional features and optionality grants more access to helpful solutions. Technology will also play a big role in simplifying and speeding up the process for everyone.
A great example would be our HomeSafe Second mortgage, the only second-lien reverse mortgage product that’s ever been available.
HW: How can mortgage professionals best position themselves to capitalize on this growing market?
JS: The key for most mortgage professionals today is educating themselves and customers about the different product types, like reverse mortgages. We offer several free educational resources that explain the pros and cons.
Also, many loan originators go against the grain. They think they need to go out and find new customers to sell reverse mortgages. Truthfully, the biggest opportunity for them is returning to past customers.
HW: Can you talk a bit about how equity can be a proactive financing tool?
JS: Home equity can be strategically used to manage financial challenges, debt consolidation, home improvement, and health care costs, particularly for aging homeowners. Promoting home equity as a proactive financial strategy for retirement planning and significant life events helps clients plan beyond needs and emergency use. I think a great example is something called portfolio sequence of returns. When interest rates and other investments are down, a homeowner can tap into home equity instead of selling investments when they’re down.
HW: How is the broader mortgage industry adapting to the demand for home equity solutions, and what role does innovation play in driving this change?
JS: The industry is focused on home equity products in response to the increase in demand. Also, senior homeowners face unique financial challenges, including a widening retirement savings gap due to higher interest rates, inflation, and rising healthcare costs. The traditional retirement dependent on pensions or social security is becoming less viable, making home equity a more critical alternative.
Innovative lending models are driving more accessibility and efficiency in home equity financing options. That is something that Finance of America wants to focus on. We’re going to expand our portfolio with our proprietary reverses, including our HomeSafe suite of products, and our second mortgage with reverse mortgage features.
HW: What do you believe is the long-term impact of home equity products on the mortgage market, and how should professionals or LOs prepare for the future of lending?
JS: I think they’re here to stay. It’s going to become a core component for mortgage offerings delivering sustained value to borrowers and lenders alike.
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