FOA launches new reverse mortgage line of credit product

Reverse mortgage lender Finance of America is offering a new product that allows older homeowners to access their home equity without, they say, adding another monthly expense.

The lender launched HomeSafe Second Line of Credit, a second-lien reverse mortgage line of credit that allows homeowners 55 and older to draw funds as needed after an initial draw of 25% at time of origination, Finance of America announced. The product also preserves the borrower's first mortgage, and its potentially lower mortgage rate, without requiring the new monthly payments of a traditional home equity line of credit.

This is currently available in California, as of Wednesday, with additional states set to receive it throughout the year.

"HomeSafe Second Line of Credit could solve a real market need in California," said Kristen Sieffert, president of Finance of America, in a press release. "The cost of living is rising amid continued market volatility, and homeowners are looking for solutions. This product gives borrowers the ability to access their home equity on their terms, when they need it, without adding a new monthly mortgage payment." 

Nicholas Barrett

Nearly 75% of California residents own their home, with mid-tier homes valued at $775,000, among the highest in the country, according to Zillow. Many homeowners built substantial equity during the pandemic when mortgage rates were historically low, but liquidating that equity has been difficult without refinancing, according to the release. 

HomeSafe Second Line of Credit allows homeowners to establish a line of credit to take out cash as needed, whether that be for planned or unexpected demands, the release said.

The product provides flexibility within a 10-year draw period and a 1.5% growth rate on an unused line of credit for the first seven years. It also has a $1 million loan limit and requires a minimum credit score of 640, according to Finance of America.

The loan is typically repaid when the homeowner moves out of the home, no longer meets the loan requirements or passes away. At that point, the loan can be paid off by selling the home or, if the homeowner or heirs prefer to keep the property, by using other assets. Neither the borrower nor the heirs will be liable for more than the home's value on the second lien, Finance of America said.

The demand to access equity has been evident, as second-lien equity withdrawals increased 22% year-over-year in the first quarter of last year, reaching the highest volume in 17 years, according to ICE Mortgage Technology.

"Because we stay close to changing consumer needs and market dynamics, we're able to design products for where demand is headed," a Finance of America spokesperson told National Mortgage News. "Our first‑mover ability comes from the way our compliance and legal teams work proactively with state regulators to bring innovation to market responsibly."

Finance of America posted a loss in the fourth quarter of last year, but made a few notable moves. It bought Onity's PHH Mortgage Corp.'s multibillion-dollar reverse mortgage servicing rights portfolio and partnered with Better to offer home equity loan and HELOC products using Better's proprietary Tinman AI platform. 

The lender also secured a $2.5 billion commitment from Blue Owl in December.