Heartland Bank saw a 43% increase in reverse mortgage payments in New Zealand over the past year as its customers took advantage of the smoking house market to sell and earn income on their properties.
But despite what he described as “high” repayments, Heartland (worth $ 93 million) had a record year for new reverse mortgage business in New Zealand ($ 102 million, i.e. more than 30% more than the previous year). It increased the size of its reverse mortgages here by 7.4% to $ 602 million, with New Zealand reverse mortgage net operating income rising 3.6% to $ 24.4 million.
Heartland Group Holdings, the parent company of Heartland Bank reported after-tax profit of $ 87 million for the year June 2021, up nearly 21% compared to the previous year after a very good second half. The group is targeting an annual profit for 2022 of $ 93 million to $ 96 million.
Heartland Bank Managing Director Chris Flood said the high level of reverse mortgage repayments in New Zealand was “a product of our older borrowers who took the opportunity to sell their properties at levels or at prices that two or three years ago they thought were impossible to achieve “.
“This then gives them more options to finance their next stage of retirement in a different way, either by entering a village or in a smaller but better place outside of their original home,” did he declare.
“It has happened in Australia too, but not quite to the same extent as we have lived here in New Zealand.”
So, is the level of reimbursements in New Zealand a concern or an issue?
“No, I don’t think so – the 7.4% growth is still very strong and the pipeline continues to build,” Flood said.
“… The baby boomer cohort is really starting to move now into an area we’re going to get them interested in. It goes from 57 to 75 – obviously a demographic bubble – and our average customer is 72.
A solid pipeline
“So we think there’s going to be a real, solid pipeline of potential borrowers who are asset-rich and cash-poor – and particularly given the inflation in house prices in recent years, will want to access to some of that equity and experience a better retirement. we’re really excited about the product, ”Flood said.
Regarding the upcoming reverse mortgage business, Flood said Heartland has “record level pipelines.”
“The past three months have been at their peaks for us in terms of new loans… This foreclosure will slow things down.”
During the Level 4 foreclosure last year, Flood said Heartland observed that the normal monthly withdrawals by reverse mortgage customers declined because they were unable to spend. Execution of new loans has slowed down. And getting assessments had been problematic.
“But what we’ve noticed – and it’s only been a week – is the actual level of investigation and the number of phone calls or packs we’re sending out to customers to give them more information. has not really declined in this lockdown. “
Heartland places a lot of emphasis on the development of its digital platform. And he’s now using it to selectively target the regular mortgage market. He has been aggressive in cutting interest rates this year. Specifically, he is interested in refinancing activities, where he targets loans below 80% loan-to-value ratio that can be easily made online.
Flood says about $ 5 billion of the $ 9 billion in loan refinancing that occurs each month would be the type of loan Heartland is targeting.
“I’m really excited about this. As the CEO of a small bank here in New Zealand, offering the rates that we are compared to the rest of the market is not something I expected to be able to do three or four years ago. and it is really the development of our digital platforms that have given us the opportunity to do so.
“So when we first launched, we had a philosophy of operating in areas where we could be ‘the best or the only’ – so reverse mortgages and auto were clearly two areas where we paid a lot of attention. We have grown our asset finance portfolio over time. And we really see that it’s starting to grow at a pretty rapid rate. I think this has good prospects for the coming year. But now what we’re seeing is that we can’t just have the best or the only product, but potentially the best delivery platform. “
Regarding the $ 5 billion in mortgages refinanced each month that Heartland “would be interested in,” Flood said they “only needed a small percentage” of those clients to evaluate an online proposal, “it is frictionless which takes much less time it does not require them to move all their facilities from one bank to another but simply to obtain the mortgage they want at the rate they want easily and efficiently” .
“… The technology, or the borrower, does most of the heavy lifting. We are now digitizing the back-end of our platforms, so we focused on creating a front-end that made it easy for a customer to come to us and be approved – but we had manual processes in it. the whole company that required us to employ staff. for – which has now been replaced by end-to-end technology and processes. So a pretty exciting proposition.
“… So we only need a small number of that $ 5 billion – keeping in mind that Heartland is a $ 5 billion bank – to assess this proposal so that it has meaning to us. “
Flood said the bank “is seeing a lot of investigations” and has approved “hundreds of millions of dollars” in new loans.
“… What we’re seeing is two things: our pipeline of approved and customer-accepted installations increases – then the monthly draw amount we increase. Prior to this foreclosure, we were expecting drawdowns of about $ 16 to $ 17 million. It was $ 12 to $ 13 million the month before and our pipeline indicated that next month would be higher again. So we’ll just have to see how that goes in terms of level four lockdowns across the country. But the signs are all very positive. “
Late last year, Heartland revealed that it was considering the possibility of pulling out its auto finance business as a separate branch.
Asked if this was still under review, Flood said: “No decision has been made to do so.
“Can split the automotive business if we want”
“But what we’ve done is build the business so that we can split it up if we want to.
“It means creating stand-alone systems and dedicated staff and one of the perks that Heartland has always had, I guess, is that we’ve been very narrow in our proposition, so we have people who are very good at selling loans. automobiles to car dealerships, we have people who are very good at selling reverse mortgages to reverse mortgage borrowers and the same goes with our asset finance and ranch finance proposals. example.
“So having a dedicated resource in certain areas is something we’ve really started with now, making sure we have stand-alone systems and can operate that way – if we choose to. “
Regarding the overall result that the Heartland Group produced for the year June 2021, Flood said that “it was a very good second half for Heartland”.
“We have continued to build on this and obviously we are focusing on growth in terms of profitability and ROE. [return on equity] and in terms, clearly, of balance sheet.
“… So that kind of continuing annoying trend that Heartland is rolling out, which represents 10% growth across the board, continues until next year.”
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