The HomeSafe® Second Mortgage is the first proprietary reverse mortgage loan that allows for 2nd position. Like the Home Equity Conversion Mortgage (HECM), it is a non-recourse loan, meaning neither the borrowers nor their heirs shall have personal liability. The HomeSafe® Second allows borrowers to keep a forward first lien in place while accessing the remaining equity available for additional funds. It also offers lower closing costs by instituting an origination fee cap and bases title and mortgage coverage requirements off lower amounts than the government insured HECM or other jumbo reverse mortgages.
- Rate of 6.99% is available (subject to change based on market conditions), and the LTV (Loan to Value) structure, which determines the loan proceeds, is the same as the Jumbo Reverse Mortgage structure.
- Loan amounts up to $4 million minus the balance of the first lien Financial Assessment:
- The HomeSafe® Second is subject to a full Financial Assessment review. Borrowers that fail Financial Assessment and would require a Life Expectancy Set-Aside (LESA) are not eligible for the HomeSafe® Second.
- Unlike the HECM product, HomeSafe® borrowers can use loan proceeds to pay off debt at closing to income qualify
- No upfront or monthly Mortgage Insurance Premium
- Same non-recourse product feature as the FHA HECM product
The HomeSafe® Second is available when the borrower’s first lien is a closed-ended, fixed rate, forward lien, and the balance of the existing mortgage is less than the maximum loan proceeds available through the HomeSafe® Second. The first lien may remain in place, but the balance plus the available second lien proceeds may not exceed the HomeSafe® Plus LTV structure.
Eligible First Liens
Eligible liens that may remain in first lien position are:
• Fixed rate loans in the borrowers’ names
Ineligible First Liens
Liens that may NOT remain in first lien position are:
• Forward adjustable rate mortgage (ARM) liens
• Interest-only, or negatively amortized loans
• HECM or other reverse mortgage liens
• Private mortgages
• Deferred taxes under a state-allowed tax deferral program
Borrowers may not fail Financial Assessment or have a required or voluntary LESA. Since the first mortgage will not be paid off, the payment is NOT removed from the Residual Income test. The first mortgagee clause on any insurance policy must remain as the first lien-holder.
The documentation required to document the eligibility of the first lien includes the:
- Credit report
- Note for the first lien
- Monthly statement for the first lien
Note: The statement must be dated within 90 days of the loan closing.
The origination fee for the HomeSafe® Second is calculated as 2% of the principal limit with a cap of $6,000. The HomeSafe® Second principal limit is the same as the principal limit available through the HomeSafe® Plus LTV structure minus the amount of the borrower’s first lien.
The borrower has:
- An available principal limit based on the HomeSafe Plus structure of $332,000.
- An existing mortgage of $200,000.
The HomeSafe Second principal limit would be determined as follows:
$332,000 – $200,000 = $132,000