Proprietary Reverse Mortgages Open Doors for New, Existing Borrowers
As the industry eagerly awaits the introduction of new proprietary reverse mortgages, jumbo loan originators credit these products with helping borrowers in a variety of situations—some more predictable than others.
For a jumbo borrower, the needs are often very similar to those of a Home Equity Conversion Mortgage borrower, said Christina Harmes, a certified reverse mortgage professional and assistant manager for C2 Reverse in San Diego.
“Just because a home is valued in the millions doesn’t mean that they were necessarily wealthy during their working years,” she said. “Property values may have appreciated or they may have inherited a very expensive home. They are facing the exact same issues as the HECM market, but their property happens to be in the millions.“
One such issue facing these borrowers is medical expenses.
Ellen Skaggs, a CRMP and the reverse national sales manager with New American Funding in Tustin, Calif., closed a Finance of America Reverse HomeSafe loan in June for a couple who needed funds for their son’s medical bills. Their home was valued at $1.385 million.
“Their son was very ill and apparently did not have insurance, so they pulled out a couple thousand dollars for his surgery,” Skaggs said.
She said the borrowers were “extremely happy” to have this option available to them.
“It enabled them to not have to sell the family home but take care of his needs,” she said.
Harmes said she also is working on originating a HomeSafe that will be used to access funds for medical expenses. In this situation, a husband is in need of financial assistance for his wife’s Alzheimer’s care.
Another use for a proprietary loan is to refinance a Home Equity Conversion Mortgage in order to access more funds.
Harmes recently closed a HomeSafe jumbo for this purpose. In this scenario, the client had lived in her San Diego house for decades.
“When her husband was alive, he did really well,” Harmes said. “They had the lifestyle you’d expect. When he died, her brother took over the finances and just took everything.”
About eight years ago, the client had taken out a fixed-rate, lump sum HECM and since then had run out of funds. She was looking to refinance but was unqualified for a HECM to HECM refinance because her balance was around $500,000.
“But we could do a jumbo,” Harmes said. “She ended up getting a little over $300,000.”
Halfway through the origination of this loan, FAR improved the HomeSafe and the client got about $50,000 more than what was originally quoted.
“She was thrilled, and it really made a big difference in her life,” Harmes said, adding that the extra funds allowed the woman to replace a broken down car.
Jesse Brewer, a CRMP and branch manager for Nationwide Equities in Las Vegas, also recently originated a HomeSafe after reaching out to a client with an existing HECM.
Brewer said the jumbo loan was not available in Nevada when the client had taken out the HECM about five years ago. Since then, the client’s multi-million dollar home had also appreciated.
“His primary objective was to be able to access more equity, which the HomeSafe allowed him to do,” Brewer said. “Now he’s able to access twice as much equity as he could with the HECM.”
Article by reversemortgagedaily.com