Just two months after unveiling its HomeSafe Select – the only reverse mortgage HELOC on the market – Finance of America Reverse has eliminated a key feature of the loan.
The HomeSafe Select is a non-agency reverse mortgage that allows homeowners with properties valued as high as $10 million to borrow up to $4 million of their equity.
Originally, the Select offered borrowers up to 25% of their proceeds upfront with the remainder available in a line of credit that had a 5% growth rate, which could be drawn upon or repaid anytime. It was a feature not available with any other proprietary reverse mortgage.
“HomeSafe Select can help people leverage part of their home equity today, while at the same time growing their available funds for future needs,” FAR President Kristen Sieffert said at the time.
Now, Select borrowers can establish a line of credit, but it will no longer grow.
In mid-December FAR issued a notice that it was discontinuing this feature and making a number of other changes to the Select, including raising the minimum origination fee from $2,500 to $5,000, lowering the lifetime interest-rate cap from 5% to 3% above the initial rate, and eliminating the 25% upfront draw requirement.
For one California-based senior who was about to close on a HomeSafe Select just as the changes were announced, the news was disappointing.
“Suddenly, without any prior notice, my broker notified me that the lender had decided to suspend that program, even to those applicants ready to close!” the borrower told HousingWire. “I went through all of the requested procedures, obtained an appraisal, paid fees and provided the requested documents.”
“It changed everything for me and my financial basis for doing the reverse mortgage,” the borrower said, adding that she was considering not moving forward with the loan. “That was an extremely important option for me and I am sure for many others.”
Britany Luth, FAR’s VP of Best Practices, told HousingWire that the lender collected feedback from borrowers, partners and stakeholders following the Select’s launch, and that product adjustments became necessary to ensure its long-term viability.
“With the limited investor pool in the market right now, FAR made the decision to remove some features that were originally included, but we were also able to make an improvement in the interest rate cap,” Luth said. “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.”