Urban Financial of America is rolling out a new, proprietary reverse mortgage that will be made available to borrowers beginning September 2.
The new, fixed-rate loan, called the “HomeSafe,” will be focused on borrowers with high-value homes, with a maximum loan amount slightly more than $2 million. It will roll out initially in five states: California, Florida, Hawaii , New Jersey and Texas, with more states anticipated in the coming months.
A private investor group has partnered with UFA on the product, which has long been in the making, says Urban Financial President and CEO Steve McClellan.
“There is a lot of investment interest in this market and we have been working on it for quite some time,” he tells RMD, declining to comment on whether the product will be securitized.
The reverse mortgage market has, for several years, offered just a single proprietary reverse mortgage: Generation Mortgage’s Generation Plus jumbo loan, which was reintroduced in 2010. The Generation product is offered to borrowers with homes valued between $500,000 and $6 million, well outside the bounds of the Federal Housing Administration’s Home Equity Conversion Mortgage lending limit.
Other lenders have talked about the potential for more proprietary products, but none has yet to offer one.
Urban sees the Home Safe as an opportunity to work with borrowers who own non-FHA approved condos as well as high-valued homes.
“We view this as a complementary product, not a replacement product,” McClellan says. “It doesn’t apply for everybody, but it will allow for more participants in the market.”
The pricing of the product, which will include a credit underwrite for borrowers, will be more competitive than what is currently offered, he adds.
“Our product is priced a lot more attractively than the market. It will be a lot more price-friendly to clients,” he says.
It will launch at an initial interest rate around 7% and will be made available through Urban’s wholesale and correspondent channels, with Urban doing the underwriting of the loans.
“If you are a younger senior and you have a $700,000 condo that is not FHA approved, you can’t get anything out of that home with the HECM,” he says, noting the 140,000 senior homeowners in California with homes valued at more than $1 million.
Urban is mum on details of the loan-to-value ratios that will be available under the Home Safe loan.
“That’s a big part of our secret sauce,” McClellan says.
Hinting as to the possible loan amounts, however, Urban says the loan amount will be driven by age and home value.
“The older you are, the more you can access,” McClellan says.
Under one sample scenario, a homeowner with a $1.5 million home with a $100,000 mortgage can qualify to borrow roughly $410,000 under the fixed rate HECM program including a $246,000 upfront draw. With the HomeSafe, the same borrower can access $575,000, all upfront.
On purchase reverse mortgages, the HomeSafe will allow for seller credits, which are not allowed under the HECM program, offering an additional advantage to those utilizing the product.
Written by Elizabeth Ecker