Guild Mortgage announced on Wednesday the introduction of a new product line called the “Flex Payment Mortgage,” which includes Federal Housing Administration (FHA)-sponsored Home Equity Conversion Mortgages (HECMs), refinances, proprietary jumbo options and HECM for Purchase (H4P) loans.
“Guild’s Flex Payment Mortgage is a suite of products combining federally-insured [HECMs] with options for larger loan amounts as well as the reverse mortgage for purchase,” the company stated. “With a Flex Payment Mortgage, aging homeowners are empowered to draw funds from the equity they have built over the years without having to sell their home.”
Citing data that indicates an overwhelming desire among older Americans to age in place in their homes, the company said that the product line will allow “a homeowner 62 years or older to pay off the remaining balance on their existing mortgage, supplement living expenses, pay for lifestyle improvements or renovations, or stay closer to their family and community.”
Converting equity into available cash can be accomplished without impacting Social Security or Medicare benefits, the company said. HECM loan proceeds do not qualify as income for tax purposes. The company is aiming to position this product line as an alternative option to more traditional home equity loans or home equity lines of credit (HELOCs), which are equity-tapping products that typically have a higher penetration rate than reverse mortgage products.
“These mortgages are different [from] home equity loans or lines of credit because they are based on the value of a customer’s home rather than their ability to make monthly principal and interest payments, or their credit score,” the announcement explained.
“There is no minimum credit score required for a Guild Flex Payment Mortgage. As with most federally-insured HECMs, the loan’s balance, including interest, will never surpass a borrower’s home’s value, providing assurance they will never owe more than their home is worth.”
The same obligations of a traditional HECM — namely, keeping up with property taxes, insurance maintenance and (if applicable) HOA fees — must be maintained to avoid foreclosure.
Jim Cory, managing director of Guild’s reverse division, said that the company’s growth in the space necessitated additional product options for a larger base of borrowers.
“Our reverse mortgage business has grown greatly in the past year and a half as Guild answers this demand with options like Flex Payment Mortgages, including reverse for purchase, and retaining reverse mortgage servicing,” said Cory, who transitioned to Guild when the company purchased Colorado-based Cherry Creek Mortgage and folded its reverse division into its own operations.
“As part of our relationship-based, customer-for-life approach, we are committed to helping educate our partners and aging homeowners across the nation on the best ways clients can use their home equity in retirement.”
The Flex Payment Mortgage line contains multiple disbursement options for loan proceeds, including advanced funds for a home purchase; a lump sum; a line of credit (which Guild describes as a “flexible” option); regular monthly payments; or a customized combination.
“Customers can continue living in their home without making payments on the loan if they comply with the Flex Payment Mortgage terms,” the company explained, describing similar terms that already apply to HECM loans.
“Alternatively, they may choose to make voluntary payments to minimize the accumulating interest or to reduce the overall loan balance, potentially leaving more equity in the home for their heirs.”