Finance of America Reverse has released yet another addition to its suite of proprietary reverse mortgages, unveiling Friday the HomeSafe Select.
Unlike other non-agency reverse mortgage loans on the market – some of which are fixed-rate, full draw – the HomeSafe Select offers borrowers access to 25% of their proceeds upfront, with the remainder available in a growing line of credit. The open-ended line of credit has a 5% internal growth rate and can be drawn or repaid at any time.
Like the HECM, HomeSafe Select is a non-recourse loan, meaning that the borrower is not responsible should a drop in property value mean the loan balance will exceed the price of the home.
Unlike the HECM, the HomeSafe Select – and its counterparts, the Standard, Second and FLEX – accommodate higher property values.
While the Federal Housing Administration’s HECM is confined to federal lending limits that max out at $679,650, proprietary reverses are jumbo loans that cater to borrowers with higher home values.
FAR’s HomeSafe products are available for properties valued up to $10 million and offer loan proceeds up to $4 million.
Proprietary reverse mortgage products are also free of the mortgage insurance premiums that come attached to federally insured loans like HECMs.
FAR provided this example of how the HomeSafe Select could be useful:
With HomeSafe Select, a 72 year old in California with an $800,000 home value and an $80,000 balance on the first mortgage may be able to receive $270,400 in proceeds after paying off the first mortgage versus receiving approximately $220,000 with the HECM. The borrower’s value in the line of credit could be $305,234 at the end of year three and $432,843 at the end of year 10.
FAR President Kristen Sieffert said homeowners looking to incorporate home equity into their retirement plans want flexibility and growth.
“In building this latest addition to our product suite, we saw an opportunity to bridge the last gap between HECM and existing proprietary products while also staying true to our mission to help people get to work on retirement,” said Sieffert, who was also a 2017 HousingWire Magazine Woman of Influence.
“HomeSafe Select can help people leverage part of their home equity today, while at the same time growing their available funds for future needs,” she added. “We are incredibly excited to continue to be a trusted partner in removing the barriers that prevent people from achieving a fulfilling retirement.”
The Select is the latest in a slew of non-agency reverse mortgages that have hit the market this year from FAR and other lenders in the HECM space.
With program changes made last year affecting profitability for reverse mortgage lenders and limiting access to potential borrowers, some lenders have channeled their efforts into growing the proprietary market, hoping to target borrowers with higher home values who are locked out of the HECM.
FAR, which is backed by Blackstone Group, has been instrumental in leading this charge.
“We have worked hard to build what has become the most comprehensive suite of proprietary products available in the industry,” Sieffert said. “While driving this innovation is a big part of moving our industry forward, getting these tools into the hands of people who can benefit is also incredibly important.”
To pick up the volume it needs to find success with the HomeSafe, FAR partnered with American Advisors Group, this spring.
As the No. 1 lender in the reverse mortgage space with 25% of market share, AAG operates a massive call center and touts its products with Tom Selleck’s stamp of approval.
AAG CEO Reza Jahangiri said the lender has seen an uptick in interest in jumbo reverses, and that FAR’s product advancements are helping cater to this important segment of the market.
“FAR’s ability to continuously and quickly innovate the proprietary product line has enabled AAG to keep up with growing demand in the high-home value market for jumbo reverse mortgage products,” Jahangiri said. “Since partnering with FAR, AAG’s jumbo loan sales have increased significantly.”
FAR said its HomeSafe select is available through its retail and wholesale channels to borrowers in California, and that it expects this latest iteration to be available in additional states soon.