FAR Releases Jumbo HELOC Reverse Mortgage ‘HomeSafe Select’

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.

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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

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  • As to its line of credit, this is the Lehman Brothers/Financial Freedom’s Cash Account. Using 84 months as the number of periods of compounding and an annual rate of 5%, in fact, $305,234 grows to $432,833 off by $10 from FAR’s computation.

    So if the gross proceeds available are $350,400 with a origination fee of $6,000 and upfront junk fees of $5,847, then the gross proceeds less upfront costs and after paying off the existing mortgage of $80,000 leaves just $258,553. At this point we are left with no idea as whether or not a servicing fee set aside is being used or not. Is it included in the upfront junk fees of $5,847? We do not know.

    We know that starting with a line of credit of $258,553 at an annual rate of 5%, that amount grows to $300,302 which is far less than $305,234.
    To get to $305,234 the line of credit at close would have to be $262,800. So what is this $4,247 ($262,800-$258,553) difference?

    Can someone please explain why the future value from the beginning of year 4 to the end of year 10 (i.e. 7 years) at 5% works but that net line of credit to the end of year 3 does not?

  • Going to a maximum of 11% (Eleven Per Cent).
    On a $350,000. Loan, that is MORE than
    $40,000. Interest (APR).
    A potential borrower needs to add up all the
    other continuing expenses ( payment on
    principal, property taxes, insurance, utilities,
    home maintenance, groceries/clothing,
    holiday and trip spending, non-insured
    medicals, etc.). A couple will need an
    annual income of $90,000. – $115,000. after
    federal & state taxes.
    For most couples, this will be a giant risk of
    losing your home. Please meet with several
    experts regarding pre-debt counseling and
    pay serious attention to their advisements.

    • Robert,

      The title is misinforming. No reverse mortgage is a HELOC; that makes no sense. The author is obviously unaware of the old Lehman Brothers/Financial Freedom “Cash Account.” The product looks more like the reintroduction of the Cash Account with some significant changes than a HELOC.

      As with all reverse mortgages, no payment of either principal or interest is required until loan termination.Technically the new product is nothing more than an adjustable rate proprietary reverse mortgage with a (modified) growth in the line of credit. However if that option is not available with this product, that means it is not a reverse mortgage.

      While you are correct that at 11% this reverse mortgage product will be expensive, it is also true that the loan may never see a note interest rate of even 8%.

      This product like all reverse mortgages is a cash flow and debt management product. Use its proceeds wisely and prudently.

  • LFZ,

    First there are NO fixed rate reverse mortgages with a line of credit. Hereafter unless otherwise noted the term “reverse mortgage” refers to the FHA insured adjustable rate reverse mortgage known as a HECM.

    Show me a HELOC or line of credit where no periodic payments are due from borrower. Show me a line of credit where the amount available to the borrower can exceed the original amount agreed to.

    All reverse mortgages must be nonrecourse per federal law which is not necessarily true of HELOCs and in particular, lines of credit. As to the borrower, the available line of credit cannot be frozen or reduced.

    I could go on and on but I recommend you seek out a reputable reverse mortgage lender and let them take you through even more differences including how available proceeds are NOT necessarily impacted by equity.

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