Meet Bloom, Canada’s Latest Reverse Mortgage Supplier
There’s a new reverse mortgage provider in town.
Bloom Finance Company launched its reverse mortgage product for homeowners in Ontario aged 55+ this week with plans to expand to other provinces across the country soon. This follows a gentle launch in select provincial markets this summer.
To date, Canada has had two dominant reverse mortgage providers, HomeEquity Bank and Equitable Bank. Both have seen incredible growth in the reverse mortgage space in recent years as a growing number of seniors apply their home equity to support them in their retirement years, especially as home values have skyrocketed.
Ben McCabe, founder of the Bloom Finance Company
“Canadians over 55 have built more than $ 1 trillion in net worth in their homes, but many retire without enough savings to maintain their standard of living throughout their retirement,” said Bloom founder Ben McCabe.
Bloom, which first launched a limited run of its Bloom Reverse Mortgage earlier this summer, is the first fintech entry into the Canadian reverse mortgage market.
“As we expected, there is no shortage of demand for this product and our application volume is growing daily,” McCabe told CMT.
Given the immense growth in reverse mortgages over the past decade, the demand is unsurprising. In 2011, Canada had only $ 898.5 billion in reverse mortgage debt. That’s up more than 367% to over $ 4.4 billion by 2020.
“With real estate price developments, the growing retiree population in Canada and the increasing adoption of this product by Canadians as a powerful tool to support the quality of life in retirement, we anticipate this trend will continue to accelerate,” added McCabe.
What Bloom brings to market
As a key differentiator, Bloom is the only non-bank reverse mortgage provider in Canada, McCabe notes. You’re also a fintech company focused on revolutionizing the way home equity is unlocked.
“We think that accessing home equity should be as easy and convenient as withdrawing funds from any other retirement account,” said McCabe, former COO of Canadian fintech company Thinking Capital.
“The only way to achieve this is to use the technology to avoid friction losses from the process – remove paper, use all available data sources to reduce requests for information directly to the customer and withdraw funds seamlessly when needed” , he called. “As a fintech, this is the platform and solution for which, in our opinion, we are well positioned.”
Another part of Bloom’s mission to provide a “simpler, friendlier” process is to include home valuation as part of their service. Generally, lenders require the borrower to prepay the valuation.
In terms of its product range, Bloom currently only has a 5-year fixed product in the midfield compared to its competitors.
The 5-year fixed rate is currently available at 4.99%, the CHIP product from HomeEquity Bank at 5.14% and the Flex product from Equitable Bank at 4.89%. Equitable’s lump sum product, which releases all funds at once, currently has an even bigger lead at 4.19%.
As the company continues to grow, it will expand its range of products, although McCabe says they have no plans to mimic their competitors’ product lines.
“We are currently working on some new product innovations focusing on how, where and in what amounts of home equity can be accessed,” he said. “Our vision is to make home equity seamlessly accessible as a retirement support tool, similar to any other retirement account.”
Here’s a quick rundown of some of Bloom’s product details and how they compare to other lenders:
- Minimum age: 55
- That is the market standard
- Minimum living value: $ 100,000
- vs. $ 150,000 for HomeEquity (HEB) and $ 250,000 for Equitable Bank
- Credit size: $ 20,000 to $ 2 million
- Penal policy: 4% of the balance in the first year, 3% in the second year, 2% in the third year and then three months of interest up to the 10th year, thereafter without penalty
- This is about 100 basis points lower than HEB for the first three years, while they charge three months of interest after the third anniversary. HEB does not charge a prepayment penalty after the fifth anniversary as long as the client grants a written notice of three months. Equitable’s penalty structure is five months interest in the first year, four months interest in the second year, three months interest in years three through five, and no penalty after the 10th anniversary
- Setup fees: Flat fee of $ 1,200 for processing and $ 450 for evaluation or $ 1,650 flat fee.
- HEB charges $ 1,795 including the closing service, while Equitable charges $ 995 with the closing service, which costs up to $ 600.
- With Bloom bearing its own legal fees, as well as valuation and closing costs, McCabe estimates the net cost to the borrower to be about $ 600 below market value, with the only other cost to the client being their own independent legal counsel.
Broker partnerships will be central to growth
Bloom currently partnered with a Schedule 1 Canadian bank for their funding agreement that will buy the loans the company will provide.
When asked about the company’s ability to meet future demand, McCabe said its funding partner had “huge appetites” for this asset class. “Reverse mortgages are a very attractive asset class for institutional lenders, so we have no concerns that there will be opportunities to diversify sources of funding as we grow,” he said.
As part of that growth plan, McCabe said they are investing in their direct-to-consumer channel, but that broker partnerships will “definitely be central” to their future growth plans.
“We believe that wealth management and financial advisory are a very significant, relatively untapped distribution channel for home equity release solutions in Canada,” he said. “These groups are central to the UK and US markets and their involvement here will be key to truly unlocking the potential of home equity disclosure in Canada.”
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