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Rhode Island historian uses a reverse mortgage as an estate planning tool

An honorary historian laureate of Rhode Island aimed to bequeath his home to a nonprofit historical society he founded. After they returned it, it was secured by a reverse mortgage

A proprietary reverse mortgage from Finance of America Companies (FOA) now secures the home of Rhode Island’s honorary historian laureate after the property was returned to the owner after attempts to bequeath it to a nonprofit historical society he founded. This is according to reporting from The Providence Journal.

The original reporting described the amount of the loan as nearly one-fifth higher than the current $4 million limit for “HomeSafe,” the private-label product offered by FOA’s reverse mortgage division Finance of America Reverse (FAR). The company later told RMD, however, that the loan was within current product lending limits.

The bequest asset

Patrick Conley, who was previously named Rhode Island’s honorary historian laureate, aimed to leave his waterfront home located in Bristol, R.I. to the Heritage Harbor Foundation. It is an organization Conley founded to “augment the audience, impact, or sustainability of existing programs, projects or initiatives aimed at increasing familiarity with Rhode Island history,” according to its official website.

Under the terms of the bequest, Conley and his wife would be able to remain in the home while the foundation continued to pay “one or more of their mortgages, totaling $880,000, according to a board member and a fundraising letter written by Conley,” the reporting said.

The terms of the bequest sound similar to those of an early-recorded instance of a reverse mortgage.

“The couple could potentially live out their lives mortgage-free,” the Journal reported. “The foundation would get what was described, in a January 2023 fundraising package, as a ‘prestigious headquarters … [and] site for small scale, but elegant events’ with its ‘voluminous library on American legal and constitutional development’ as a resource for nearby Roger Williams University‘s law school.”

Existing mortgage troubles

However, the foundation later returned the home to the Conleys in mid-2023, citing the existing mortgages as “encumbrances” that diminished the foundation’s ability to accomplish its grant-giving goals.

“We all voted happily to accept the gift when it was first offered,” said Kenneth Dooley, a foundation board member, to the Journal. “We again voted unanimously to return it when the mortgage payments cut into our grant-making ability. […] The Conleys returned all of the mortgage payments, with interest.”

The pandemic-era run-up in home prices and the property’s reappraisal made the burdens of the mortgage payments too high when deducted from the gift itself, Dooley explained to the outlet, despite the Conleys continuing to pay for taxes, utilities and renovations for the property.

Enter FAR/FOA

Conley did seek alternative means to satisfy the debt, but when those came up short he turned to the reverse mortgage industry.

After re-obtaining the property, “the Conleys applied for and received a $4.99-million reverse mortgage with Finance America that paid off the two existing mortgages” which also gave them a “substantial line of credit,” according to the reporting. However, the company clarified for RMD that the originally-reported amount is incorrect.

The 2023 reverse mortgage limit for Federal Housing Administration (FHA)-insured Home Equity Conversion Mortgages (HECMs) stood at $1,089,300, but proprietary reverse mortgages are not subject to FHA limits. The property is instead secured by FOA’s “HomeSafe” proprietary reverse mortgage product, where the loan amounts go up to $4 million.

When asked about the reportedly higher lending limit for this loan, a FOA spokesperson told RMD that the reporting on the loan amount is simply incorrect and that it is “within current HomeSafe lending limits.”

Estate planning application

The company also explained that this application of its private product emphasizes the utility of HomeSafe according to Paul Fiore, chief retail sales officer at FAR.

Paul Fiore, chief retail sales officer at Finance of America Reverse.
Paul Fiore

“It is gratifying to see our team help a borrower like Dr. Conley creatively use home equity to establish a living legacy,” Fiore said. “Because Finance of America has the widest range of home equity products designed for homeowners at or near retirement, we were able to create the financial flexibility the Conleys were seeking.”

Reverse mortgage industry professionals have long emphasized the potential for a reverse mortgage to serve as a retirement or estate planning tool, and Conley’s loan helps illustrate that, he said.

“We are thrilled that our HomeSafe product enabled these estate planning goals and generous philanthropic gift,” Fiore said. “It’s another real-life example of how our solutions can empower individuals and their families to take control of their financial futures and secure their legacies.”

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