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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.

“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