Finance of America Reverse released a new version of its proprietary reverse mortgage product, unveiling the HomeSafe Second – the first jumbo reverse mortgage to allow homeowners to retain an existing mortgage lien.
The HomeSafe Second enables borrowers with property values that exceed FHA’s lending limits to access their home equity without first using proceeds to pay off an existing mortgage, which is a mandatory condition of a traditional reverse mortgage loan.
Homeowners with a low-rate mortgage in place can use the HomeSafe to tap their equity without incurring a monthly payment. According to FAR, borrowers can “maintain their equity position and protect against interest rate volatility with the product’s fixed-rate, non-recourse features.”
The HomeSafe Second is available for properties valued up to $10 million, offering loan proceeds as high as $4 million.
Like the other HomeSafe products – the Standard and the FLEX – the Second is a non-recourse loan, has no prepayment penalties and no mortgage insurance premiums.
FAR said HomeSafe Second is available now through its retail and wholesale channels to borrowers in California, Florida and Texas, and that it will be available in more states soon.
FAR President Kristen Sieffert told HousingWire that while the company believes home equity is a critical piece of a retirement planning strategy, it also understands that reverse mortgages may not be the first tool people over 62 reach for when creating their wealth management plans.
With the new product, Sieffert said the lender aims to make equity access more appealing for these borrowers.
“People will have the flexibility of access to additional funds and the protection of a reverse mortgage without giving up the choice to leave existing financing with low rates in place,” she said.
“We hope that the availability of this product will broaden the reverse mortgage conversation to people who aren’t participating in it today – including both people planning for retirement and forward mortgage loan originators who may be talking to their clients about HELOC products,” Sieffert added.
This year, the reverse mortgage industry has seen a wave of proprietary reverse mortgage products come to market as lenders work to find ways to help homeowners who want to access their equity but are shut out of the federally insured HECM program.
FAR has been especially instrumental in leading this charge. It launched its HomeSafe product in 2014, and after confirming real investor interest, it was able to release the HomeSafe FLEX earlier this year.
The HomeSafe Second is the next phase of FAR’s strategy to help reverse mortgages seep into the mainstream.
According to a working paper by the researchers at the Center for Retirement Research at Boston College, homeowners over 60 were three times more likely to have a mortgage in 2015 than they were in 1980.
Jamie Hopkins, co-director of The New York Life Center For Retirement Income, said FAR’s new product could appeal to this segment of consumers.
“We’re seeing more and more people in their 60s carry mortgages into retirement, so it makes sense to discuss something that might work with that strategy,” Hopkins said.
Hopkins said he expects to see more activity on the proprietary reverse mortgage front in the coming year.
“With the traditional reverse mortgage market not growing right now, everyone is looking around and saying, ‘OK, what else can we do?’ Hopkins said. “I would expect to see more of these products roll out this year and into next year.”
He also said the current HECM market has pushed lenders toward real innovation.
“I think people went back to the drawing board and said, ‘No idea is too crazy. Let’s think about this outside of the HECM box. What else can we come up with?’ Because for a long time, it was just people basically reproducing the HECM for larger homes, and now we're actually seeing more mortgage product development than we’ve ever seen before.”
Sieffert said the HomeSafe Second is another step in the movement to help homeowners build a better retirement.
“Our goal at FAR is to put people in the driver’s seat and help them get to work on retirement,” she said. “One of the key ways we’re delivering on this commitment is by continuing to expand our product options. The launch of HomeSafe Second is another step in that direction and we’re very excited to bring it to market.”