Wells Fargo announced it would no longer accept reverse mortgages through its broker network, and last week it got out of the industry altogether.
Wells Fargo, the nation’s largest reverse mortgage lender, was the kingpin in the industry in more ways than one. It had 26.2 percent market share, according to the latest data from Reverse Market Insight, the largest network of reverse mortgage professionals and a money-making operation.
It simply did not like the road ahead.
HUD has been considering lowering the maximum borrowing amount for its reverse mortgage. In addition, lenders are concerned that if taxes and insurance payments are not kept current on homes, they could be forced to foreclose on cash-strapped seniors. No lender is eager to do so.
A reverse mortgage historically has enabled senior homeowners to convert part of the equity in their homes into tax-free funds without having to sell the home, give up title, or take on a new monthly mortgage payment. Reverse mortgages are available to individuals 62 and up who own their home.
The maximum amount of funds received is based on age, current interest rates and a current home appraisal. Funds obtained from the reverse mortgage are tax-free.
“Reverse mortgages and HECM loans are readily available to seniors as an important tool to help them stay in their homes and to fund their longevity,” said Peter Bell, president of the National Reverse Mortgage Lenders Association. “The decision by Wells Fargo that it will no longer originate new reverse mortgage loans does nothing to change this. The HECM program remains a relevant tool and the vast need for it continues.”
In April, reports show Wells closed 1,317 reverse mortgages and its annual total for 2010 came to 16,213 FHA Home Equity Conversion Mortgages. While its monthly average was down slightly, overall volume did not appear to have any substantial change leading up to the exit.
All of the reverse mortgage industry’s big-name players have left the business this year. Financial Freedom, Bank of America and Seattle Mortgage preceded Wells Fargo’s exit. Like the others, Wells Fargo indicated it was closing the reverse component to focus on its core mortgage business, or “forward” mortgages.
Earlier this week, Vicki Bott, HUD’s deputy assistant secretary for single-family housing, announced she was leaving to focus more time and energy on personal family matters.
Bott hastily uprooted her family in Austin, Texas, and moved to Washington, D.C., to help supervise FHA’s single-family loan programs during a period of unprecedented growth as the nation slowly dug itself out of a housing foreclosure crisis. Although she supervised a staff of hundreds focused primarily on FHA’s “forward” mortgage programs, she had a profound impact on the HECM program.