Finance of America is beefing up its reverse mortgage programs, announcing Monday plans to launch a second-lien product to consumers 55 and older.
The product, dubbed Homesafe Second Loan, will allow borrowers to tap their home equity via a second mortgage. HomeSafe Second will be available through FoA’s direct-to-consumer division, which consists of recently acquired American Advisor Group, and its wholesale division.
By rolling out this loan, the reverse mortgage lender says it will be giving older homeowners an upper hand in accessing their home wealth. Other options of doing so, such as applying for a home equity line of credit, have elevated rejection rates, with about 47% of applicants not getting approval, they said.
“Today’s market conditions are uniquely challenging, and innovative financing is needed to fill gaps between consumers and traditional loan products,” said Kristen Sieffert, president of Finance of America, in a press release. “This is especially true for homeowners over 55 who are not well served by typical home equity solutions despite home equity generally hitting record highs.”
Consumers will be able to opt for this product starting next month in California, Colorado, Connecticut, Florida, South Carolina, and Texas, the lender said.
FoA’s announcement comes in the midst of the company’s strategic shift to being a “retirement solutions company.” The company’s transformation was kickstarted in October 2022 when it announced ending its forward mortgage originations.
Though some stakeholders see the company’s metamorphosis in a positive light, the cost of Finance of America’s repositioning has led Fitch Ratings to revise the company’s long-term issuer default rating.
Operational losses related to FOA’s acquisition of AAG and a decline in tangible equity to negative $5 million drove the slight drop in already speculative-grade rating to CCC+ from B-. Fitch explained that the downgrade hinged on concerns around how the lender’s weaker financial position will affect its ability to borrow. The total capacity of its warehouse financing and lines of credit was $1.8 billion in the second quarter, down from $5.5 billion a year earlier. Finance of America did not respond to a request for comment.