Jumbo Reverse Mortgage Helps Couple Sidestep FHA Condo Hurdles in SF

The rise of the proprietary reverse mortgage has been trumpeted a key industry response to lower principal limit factors enacted last year, but a San Francisco couple used Finance of America Reverse’s private HomeSafe product to avoid another pesky Department of Housing and Urban Development rule: restrictions on condos.

The unnamed buyers took out a HomeSafe because their three-unit building had never undergone the Federal Housing Administration approval process, according to a recent column in the San Francisco Chronicle.

The couple’s CPA had initially referred them to mortgage advisor John Holmgren, of the Oakland-based Holmgren & Associates, after the accountant determined that the homeowners did not have enough savings to cover their expenses in retirement. Holmgren originally identified the Home Equity Conversion Mortgage as the best option before discovering that the condo, a $1.3 million unit in San Francisco’s Nob Hill neighborhood, wasn’t on the approved list.

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“Holmgren has worked with homeowners’ associations to get projects approved, but this can be a lengthy process,” the Chronicle noted. “With the need for financing being very urgent in this case, there wasn’t time for that process to be followed.”

Part of that urgency came from the fact that the couple required home care, but had “depleted their savings,” according to their CPA.

Holmgren was then able to originate a $546,000 HomeSafe mortgage at a rate of 7% and with an origination fee of $17,000, the Chronicle wrote. The couple chose that structure over a rate of 5.99%, which would have netted them a lower total amount of proceeds.

“Given that these funds were going to have to support their living costs for the rest of their lives, they elected to go with the highest rate/highest cash option to make sure they had a healthy financial cushion,” the Chronicle concluded.

Written by Alex Spanko

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  • This is a prime example of why the Jumbo propitiatory programs will fill certain gaps the the HECM can’t provide. As I have said in the past, I feel the Proprietary program can put life back into the HECM, which we need dearly.

    If the Jumbo proprietary program along with the HECM is utilized and presented properly, the ability to have these options will help tremendously! Especially with financial planners, CPA,s, attorneys and many others in the professional field that deal with the senior sector!

    John A. Smaldone
    http://www.hanover-financial.com

    • John,

      I am not so certain about adding life to HECMs but the Home Keeper constantly was used in situations like this back in its heyday before fiscal 2009. It made us more useful originators to our clients. I allowed me to gain a number of loans in Laguna Woods, CA that would have, otherwise, been lost.

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