Finance of America Reverse (FAR) on Monday announced to its partners a series of changes to its line of proprietary reverse mortgage products, called “HomeSafe.” Among these changes is a reduction in the lending limit from $4 million to $3 million, suspension of availability to borrowers aged 60 and 61, and a temporary suspension of the “HomeSafe Second” and “HomeSafe Flex” loan options.
Navigating the current market environment has been difficult, and that is where many of these changes come from. However, they’re also designed to be temporary, and FAR’s commitment to HomeSafe as a product concept continues to be strong. This is according to Kristen Sieffert, president of FAR.
“As we navigate these challenging economic times, we want our customers and partners to know that FAR is committed to offering our proprietary HomeSafe products,” Sieffert tells RMD. “However, given the current volatility in the capital markets and an abundance of caution we have decided to curtail certain aspects of HomeSafe for the time-being so that we can continue to offer borrowers a viable product.”
The duration of the changes will be based on market conditions, she says, but the current climate also emphasizes the role of home equity in the finances of retirees.
“These measures are prudent and necessary. We are monitoring the market daily and are hopeful that these program changes will only be temporary,” Sieffert says. “Even if this market reshapes our environment, we believe that now more than ever, people will look to home equity to help them achieve more stable retirement outcomes.”
In addition to “simplifying” loan-to-value (LTV) offerings, the company announced that LTV’s for the three highest tiers will be reduced by 1%; and both HomeSafe Second and HomeSafe Flex would be suspended temporarily.
Additionally, FAR is suspending HomeSafe availability to borrowers aged 60 and 61. In November of 2019, the proprietary products were first made available to borrowers in these age ranges for HomeSafe Standard, HomeSafe Second and HomeSafe Flex. The Standard variation is the only one affected by this change, since the Second and Flex variations have been temporarily discontinued.
This temporary discontinuation of Flex and Second is not expected to impact the majority of borrowers, since volume on these variations is “minimal” compared to other versions of HomeSafe, a FAR spokesperson says. “HomeSafe Flex has mostly been replaced with HomeSafe Select over time by consumer choice,” the spokesperson adds.
HomeSafe Flex was introduced in June 2018 and allowed borrowers to draw 60% of their loan’s proceeds upfront, then receive the remaining 40% in the form of monthly term payments spread out over a period of up to five years. HomeSafe Second was introduced in September of 2018 as the first-ever second-lien reverse mortgage, primarily aimed at borrowers carrying debt into retirement.
In November of 2017, FAR raised its HomeSafe lending limit from $2.25 million to a maximum of up to $4 million. In light of these changes, FAR is now reducing the maximum lending amount to $3 million. Like the suspension of the Flex and Second variations, the reduction in the lending limit is also described as temporary by FAR.
“Temporarily we did reduce the maximum lending limit from $4 million to $3 million,” the spokesperson says. “This change will not impact the broad majority of our borrowers.”
Partners have been advised that any loans that close by May 8, 2020 can be honored under the original terms from prior to these changes. However, all new applications made on or after April 7, 2020 will have to be made under the changes described.
American Advisors Group (AAG) offers its proprietary reverse mortgage, “AAG Advantage,” in conjunction with FAR in a correspondent partnership. FAR’s HomeSafe proprietary product is offered by AAG using the Advantage name through that company’s retail channel.
As of December, 2019, FAR ranks at number 2 on a list of the top 100 reverse mortgage lenders by wholesale and retail HECM volume, tabulated by Reverse Market Insight.