DENVER, CO – Finance of America Reverse’s (FAR) has lowered the minimum age requirement for their second-lien, fixed-rate, private-label reverse mortgage – known as HomeSafe Second – to 55 years old, opening up the loan to a wider array of individuals who may stand to benefit.
The announcement was made by FAR’s president, Kristen Sieffert, after the program was suspended in 2020 for almost three years due to the economic upheaval caused by the COVID-19 pandemic. Having only recently become available once again, Sieffert noted that lowering the minimum age requirement for HomeSafe Second would help those adversely impacted financially by the pandemic.
HomeSafe Second Debuted in 2018 as the home loan industry’s first-ever option for a second-lien reverse mortgage, which is essentially a proprietary fixed rate reverse mortgage that enables qualified borrowers to tap their homes equity without impacting the interest rate on a primary traditional mortgage. Aside from the usual costs associated with reverse mortgages – such as property taxes, fees and homeowner’s insurance – there are no monthly payments associated with HomeSafe Second.
FAR announced that originator training for the advanced version of HomeSafe Second will commence on February 6; individuals who wish to participate can register for the training on the program’s website.
Sieffert said that one of the main driving forces behind FAR’s decision to revive the HomeSafe Second program – and for lowering the age of eligibility – was the need that many seniors have for an additional source of revenue, especially as they approach retirement age.
“Today, older homeowners are grappling with inflation, high interest rates, depleted retirement accounts and rising healthcare costs, and many are finding themselves in need of cash,” she said. “At the same time, we’re seeing higher levels of home equity among senior homeowners, which provides a significant opportunity for retirees to unlock that wealth and use it for their immediate retirement planning needs.”
Sieffert said that the types of loans used previously may not meet the unique needs of borrowers in today’s current economic climate, due to skyrocketing inflation and the potential of a global recession looming; that is where HomeSafe Second comes in, which is a unique type of alternative loan that is sorely needed in today’s day and age.
“HomeSafe Second addresses this growing, largely unmet customer need and provides more homeowners the opportunity to access their home equity without impacting their monthly budget or changing the interest rate on their first mortgage,” she said. “Given today’s higher interest rates and the current economic environment, many homeowners would not benefit from refinancing their first mortgage, and their budgets may not allow for adding another monthly payment. HomeSafe Second is a much-needed alternative to other second-lien mortgages, HELOCS, or taking on more debt via a personal loan or credit cards.”
The HomeSafe Second product is also a versatile type of loan that can be utilized not just by reverse mortgage professionals, but by the layman as well or just about anyone who could benefit from the financial assistance it could provide, Sieffert said.
“HomeSafe Second is a tool for all originators, not just reverse mortgage professionals. It provides another option for all originators, including reverse mortgage professionals, to give their clients more flexibility when choosing products that best suit their retirement needs,” she said. “This product is a much-needed alternative to solutions that would either impact the homeowner’s interest rate on a first mortgage or their monthly budget, and it fills a gap in the market by providing a financing solution for older homeowners who either don’t qualify for, or can’t benefit from, a HECM or another HomeSafe product.”
Senior-held home equity is currently holding at approximately $11.81 trillion, according to NRMLA/RiskSpan data; with that being the case, FAR notes that a HomeSafe Second loan could serve multiple uses for qualifying borrowers, such as paying down high interest debt from medical bills or credit cards, providing funding for much needed home renovations or improvements, property or business investments, or satisfying financial liabilities from taxes, insurance policies, or annuities.
Despite its high degree of versatility, there are some limits associated with a HomeSafe Second loan; for example, FAR said that it cannot be used to pay off the first-lien mortgage loan balance.
“Loan proceeds are income-tax-free and funds are distributed via a lump-sum payment at closing with a maximum loan amount of $4 million,” the company said. “The homeowner or their heirs will never owe more than the value of the home, as it is a non-recourse loan, and there is no minimum home value to qualify.”
Currently, FAR is uncertain when it will continue to expand HomeSafe Second into other states. HomeSafe Second will initially be available in California, Colorado, Connecticut, Florida, South Carolina, and Texas, although the plan is to eventually expand it – and there are currently no plans for any variations on the program to be introduced for the time being. However, the program is available in the states already mentioned above – with its revised age qualifications – it can be utilized by qualified borrowers immediately.
In closing, Sieffert noted that the revival of the HomeSafe Second program clearly illustrates FAR’s education to keep abreast of current market conditions and adapt to them as needed.
“The home is often one of the largest assets for retirees, and they should be given the opportunity to consider whether a reverse mortgage or other home equity financing solutions are appropriate for them,” she said. “With HomeSafe Second, more homeowners will be able to tap the equity in their homes to accomplish financial and personal goals that will enable them to thrive in their retirement years.”