Finance of America Reverse (FAR) has eliminated a feature of its HomeSafe Select proprietary reverse mortgage, RMD has learned, in addition to several product changes rolled out in December. The changes were made in response to feedback from borrowers, investors and partners, and are seen by the company as “net positive.”
The changes, announced last month through FAR’s broker channel, include an elimination of the line of credit growth feature previously offered, as well as changing the loan’s origination fee minimum, a reduction in the lifetime interest rate cap and elimination of the former upfront draw requirement.
Combined, these changes make the product more viable long-term, the company says.
“FAR introduced HomeSafe Select, which is the first adjustable rate, proprietary product to enter the market in a number of years, in October of 2018,” the company said in a statement emailed to RMD. “We spent the first 30 days collecting feedback from borrowers, partners, and other stakeholders to make necessary updates to ensure this important and appealing product is sustainable and viable for the long haul. With the limited investor pool in the market right now, FAR made the decision to remove some features that were originally included but were also able to make an improvement in the interest rate cap.”
FAR also added that the decision to change the product had a partial basis in information gleaned from customers.
“Based on borrower feedback and how important it was for them to protect their equity over time, we believe this outcome was a net positive,” FAR said. “By providing this product as a tool that helps people get to work on retirement, we are helping our borrowers achieve their retirement goals in an innovative way.”
Announced in late October 2018 as the third product in the firm’s ‘HomeSafe’ line of offerings, HomeSafe Select began as a non-recourse, non-FHA proprietary HELOC reverse mortgage loan available to borrowers aged 62 and older.
One of the original features was an initial closed-end draw of 25 percent of the loan proceeds at closing, while the remainder of the proceeds were available as an open-ended line of credit with a 5 percent internal rate of growth to be drawn and repaid at any time.
FAR also announced a shift to private label servicing for its HomeSafe product line in December.
The product today has changed according to the December notice to the broker channel, chiefly through the removal of the 5 percent internal growth feature originally found in the line of credit.
The optional origination fee has also increased from a minimum $2,500 to $5,000, and the lifetime interest-rate cap has been reduced from 5 percent to 3 percent above the initially-defined rate. Additionally, borrowers who fail a financial assessment and require a Life Expectancy Set Aside (LESA) will not qualify for a HomeSafe Select loan.
The alterations to the product were made because of “changes to the secondary market,” and in order to “ensure the sustainability of the Select product over the long term,” according to the notice.
Editor’s note: A previous version of this article related inaccurate information concerning a change in HomeSafe Select’s origination fee. RMD regrets the error.