As Finance of America Reverse LLC (FAR) continues to innovate in the proprietary reverse mortgage market, it becomes increasingly essential to meet the needs of your clients with various rates and pricing solutions. As a result, FAR introduced a premier suite of financial tools, called HomeSafe®, that empower customers with personalized plans to meet their retirement financing needs.
HomeSafe® Product Suite
HomeSafe® tools allow borrowers 62 and older to maximize loan proceeds or provide an alternative for prospective borrowers who do not otherwise qualify for a HECM, offering a maximum principal limit of $4,000,000. HomeSafe® also has an added benefit of being able to use loan proceeds to pay off debt at funding to meet the residual income guidelines. The HomeSafe® provides a tiered product structure that offers the following options:
- If the borrower is more rate sensitive, we have a low-rate option
- If the borrower is more cost-sensitive, we have an option that maximizes lender credits
- We can also maximize principal limits if that is a concern
- For a borrower who fails Financial Assessment, there is the HomeSafe LESA option that has a bump up of a .25% in the interest rate
The HomeSafe® suite includes the HomeSafe® Standard, HomeSafe® Flex, for Purchase, HomeSafe® Second, and HomeSafe® Select. This article will provide a deep dive into the scenario where the HomeSafe® Standard product maximizes the borrower’s benefits.
HomeSafe® Standard Solution
The HomeSafe® Standard product provides an ideal financial solution for borrowers who are looking for a fixed rate option to increase their cash flow without paying a lot of fees. This solution delivers the lowest cost, along with the largest cash payout. HomeSafe® Standard is a non-recourse loan like the HECM; however, there are lower fees with no mortgage insurance premium. FAR uses similar counseling and disclosures requirements as HECM’s to protect the borrower.
HomeSafe® Standard is available in 6 loan-to-value (LTV) interest rate tier options to accommodate individual financial situations. FAR will pay an additional lender credit on selected tiers to cover the customary closing cost, excluding counseling fees and state, city tax, and recording fees. Within tier 1, FAR introduced a lender credit option, which allows the borrowers who want to limit their proceeds to select a slight rate increase to access a closing cost credit. Please note that the HomeSafe® to HomeSafe® refinances are excluded from this credit. Additionally, tier 6 is not available on these transactions.
HomeSafe® Standard product does not have initial disbursement limitations. Additionally, HomeSafe® does not follow the HUD lien seasoning guidelines for refinances within the past 12 months – the HECM guidelines indicate that a refinanced lien cannot be considered a mandatory obligation if it was taken out within the past 12 months and they took more than $500 out at closing. The HomeSafe® allows for the proceeds to be used to pay off debt.
Ideal Borrower Scenario
To help illustrate how the HomeSafe® Standard can be used, here is an example scenario where the HomeSafe® Standard maximizes the borrower’s benefits:
Mr. Williams is looking to pay off his mortgage and credit card debt. He would also like additional funds for some home improvement and liquidity.
Mr. Williams’ home is valued at $2,000,000, with an outstanding mortgage of $500,000. Also, he has $50,000 in credit card debt.
Using the HomeSafe® Standard solution, Mr. Williams has a principal limit of $685,011. After paying off the mortgage, Mr. Williams has $185,011 to meet his financial goals (this illustration assumes 7.250 interest rate and $4,473.95 lender credit).
HomeSafe® Standard Benefits
In this scenario, the HomeSafe® Standard solution helped Mr. Williams achieve his financial goals of paying off his existing mortgage and credit card debt, as well as provided him with cash for home improvements and liquid funds.
Please note that this example is for educational purposes only. With any reverse mortgage, the borrower must meet all loan obligations, including living on the property a principal residence and paying property charges, including property taxes, fees, and hazard insurance. Also, the borrower must maintain the home. If the homeowner does not meet these loan obligations, the loan will need to be repaid.
FAR follows the same Financial Assessment qualifications as the FHA HECM product. The HomeSafe® is a non-recourse loan, and the borrower or their heirs have no personal liability for repayment of the loan. They can never owe more than the loan amount or appraised value, whichever is lower. There are no prepayment penalties; however, on the fixed-rate HomeSafe®, a borrower cannot redraw prepaid funds.
Reverse mortgages, with their built-in consumer safeguards and flexible options for accessing equity, are transforming the way people approach retirement. With any financial decision, it is essential to consider your options carefully. FAR is here to help you guide your clients to a great decision that works with their financial goals.
*Minimum age of 62 required in Texas and Utah
Oregon Only:·When the loan is due and payable, some or all of the equity in the property that is the subject of the reverse mortgage no longer belongs to borrowers, who may need to sell the home or otherwise repay the loan with interest from other proceeds. FAR may charge an origination fee, mortgage insurance premium, closing costs and servicing fees (added to the balance of the loan).·The balance of the loan grows over time and FAR charges interest on the balance.· Borrowers are responsible for paying property taxes, homeowner’s insurance, maintenance, and related taxes (which may be substantial). We do not establish an escrow account for disbursements of these payments. A set-aside account can be set up to pay taxes and insurance and may be required in some cases. Borrowers must occupy home as their primary residence and pay for ongoing maintenance; otherwise the loan becomes due and payable. The loan also becomes due and payable (and the property may be subject to a tax lien, other encumbrance, or foreclosure) when the last borrower, or eligible non-borrowing surviving spouse, dies, sells the home, permanently moves out, defaults on taxes, insurance payments, or maintenance, or does not otherwise comply with the loan terms. Interest is not tax-deductible until the loan is partially or fully repaid.
©2020 Finance of America Reverse LLC is licensed in 50 states and D.C. | Equal Housing Opportunity | NMLS ID # 2285 | www.nmls.consumeraccess.org | 8023 East 63rd Place, Suite 700 | Tulsa, OK 74133 CNot all products and options are available in all states | Terms subject to change without notice | AZ Mortgage Banker License #0921300 | Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act | Georgia Residential Mortgage Licensee | Illinois Residential Mortgage Licensee | Kansas Licensed Mortgage Company | MA Lender/Broker #MC2855 | Licensed by the Mississippi Department of Banking and Consumer Finance | Licensed by the New Hampshire Banking Department | Licensed by the N.J. Department of Banking and Insurance | Licensed Mortgage Banker — NYS Banking Department where Finance of America Reverse is known as FAReverse LLC in lieu of true name Finance of America Reverse LLC | Rhode Island Licensed Lender | HUD HECMS REQUIRE PAYMENT OF INITIAL AND PERIODIC MORTGAGE INSURANCE PREMIUM.