Following the introduction of several new reverse mortgage products this year, there’s another proprietary loan on the market. Finance of America Reverse today announced the addition of a proprietary HELOC reverse mortgage to the company’s HomeSafe lineup — the ‘HomeSafe Select.’
Available for borrowers aged 62 and over, the non-recourse, non-FHA reverse mortgage features an initial closed-end draw of 25% of the loan proceeds at closing. The remainder of the funds are available as an open-ended line of credit with a 5% internal rate of growth to be drawn and repaid at any time, the company stated in a press release. Currently available in California through both FAR and AAG via the companies’ existing partnership, HomeSafe Select joins the ‘HomeSafe’, ‘HomeSafe Flex‘, and ‘HomeSafe Second’ in FAR’s product lineup, all available through the company’s wholesale and retail channels. Additional states are expected to be added soon.
FAR and AAG began partnering in March to expand the reach of new private products. AAG markets the jumbos as ‘Advantage’ in its retail channel and HomeSafe in its wholesale channel.
FAR president Kristen Sieffert told RMD in an email that she believes the HomeSafe Select is the final bridge between HECMs and proprietary products.
“In designing HomeSafe Select, we wanted to speak to a borrower who was ready to access some funds but who doesn’t necessarily need all the proceeds available with our HomeSafe products,” she said. “With HomeSafe Select, people can start planning for retirement today and also benefit from a growing line of credit that can be accessed when they need it.”
This is currently the only adjustable rate proprietary reverse mortgage on the market, with the open-end adjustable rate based on the Wall Street Journal 3-month LIBOR index.
To illustrate the use of the loan, FAR provided the example of a 72-year-old in California with a home worth $800,000 and a $80,000 balance on the forward mortgage. This prospective borrower may be able to receive $270,400 in loan proceeds after paying off the first mortgage. This is in contrast to being able to receive 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.
This example factors in a loan with a principal limit of $350,400, and a variable rate initial APR of 5.977%, which changes quarterly up to a maximum lifetime APR of 10.977%. It also assumes a loan origination fee of $6,000, remaining loan fees of approximately $5846.95, and a monthly loan servicing fee of $30. Terms may vary and conditions apply, the release specifies.
As for fees, allowable origination fees are 2% of the max claim amount up to $200,000, 1% for MCA over $200,000 with a maximum of $6,000 and a minimum fee of $2,500, Sieffert explained via email.
The HomeSafe Select is available for properties valued up to $10,000,000, features proceeds up to $4,000,000, has no monthly or annual mortgage insurance premiums, and has no prepayment penalties. In addition, condos valued over $500,000 require no FHA approval. There is no minimum home value for HomeSafe Select borrowers, but Sieffert said that there must be a benefit to choosing the HomeSafe Select over a HECM.
In the press release, Sieffert praised the partnership between FAR and AAG this year.
“Our tremendous partnership with AAG and their contribution of volume has played a significant part in enabling us to build the HomeSafe suite and we look forward to continued success together,” she said.
AAG founder and CEO Reza Jahangiri told RMD in an email that partnering with FAR has allowed AAG to focus efforts on marketing and customer service, as well expanding into forward lending.
“In the reverse mortgage space, the biggest uptick we’re seeing is in the proprietary jumbo products for high-value homeowners,”Jahangiri said. “Since introducing the new proprietary loans this year, AAG has seen a significant increase in jumbo loan funding. We’re particularly excited about the new Select loan, as it gives high-value homeowners lifetime access to a jumbo reverse mortgage line of credit.”
Written by Maggie Callahan