California Reverse Mortgage Lender Files for Bankruptcy

January 20th, 2010 | by John Yedinak Published in News, Reverse Mortgage | 134 Comments

Sacramento Business Journal is reporting that New Horizons Reverse Mortgage has filed for Chapter 7 bankruptcy liquidation.

According to the article, the California based reverse mortgage lender leased a 8,600 square of office space at the beginning of 2009 and had trouble paying the rent after business disappeared.

The company in April signed a lease to move to smaller quarters in November. But by May, New Horizons had difficulty paying rent on the larger space.

Michael Carroll, president and founder of New Horizons told the Journal that “Everything shifted, and it shifted really quick.”

“People thought with the baby boomers coming in, the market would double. But with the economy the way it is, it is just very difficult,” he said. “In the beginning, people were jumping in the boat. Now, you can fish all day and you don’t catch anything.”

According to HUD data, New Horizons volume dropped 38% in 2009. The company endorsed 184 HEMCs in 2009 and 321 HECMs in 2008. For more data on the company see its listing on ReverseBase.

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jamesanelson

jeff39: Are you stating that 60% of your employees (Loan Originators) were dishonest? Amazing, if true. I fail to understand how one could remain in the mortgage business with such a record.
jamesanelson

Damn, my Wife is right–I am getting senile: That should have been jeffz39, not jeff 39.
The_Cynic

Jeff,

Wow!! I guess I should give up my online name; I am but a pretender. Even I am not THAT cynical.

I have met several dishonest HECM originators but I have always thought of them as the exception, certainly not the general rule. My attitude related to the forward mortgage market is somewhat more cynical but nothing like this.

I have met more than my match and concede you are a far greater cynic than I.
Anonymous

Well written and interesting by a loyal employee (I am curious, though, didrnyou work part-time at New Horizons or at the real estate agency? Did you consider reverse mortgages something you did on the side to make a little extra, or in addition to, while selling real estate? The most important words were “a human failure to cut costs (otherwise known as expenses) drastically”. If everyone involved were (and are still, I’m sure) are as outstanding as you indicate, I’m sure all will bounce back rather handsomelyrnin time.
Guest

There will be more companies closing down or consolidating as they deal with the currently depressed market as well as the new regulatory environment. Unfortunately, some really good people are going with the flow, closing their businesses and going to work for the large banks; others are leaving the industry entirely.
The_Critic

James,

You need to contact formeremployee2 about your certification program. Our industry would be better off if there was just one certificate program that actually had some worth. Certainly all employer issued certificates are less than credible; I have a few hidden away in my closet.

I wish NRMLA the best in getting its program off the ground. I just wish they had taken a harder line on educaton; it is definitely its weakest quality.
Anonymous

As a former employee of NHRM, I can say that the customers were treated ethically and fairly…I wish I could say the same about the former employees. I believe that the former employee with the post above, would be the only 1 to feel warm and fuzzy.
Former New Horizon Employee

jamesanelson: Thank you for the compliment. I think my story may not be unique: As a long time real estate sales licensee when I saw the landscape of California real estate turn to almost exclusively foreclosure and short sales I knew I wanted absolutely no part in those kinds of sales, the heartbreak one sees as families are displaced from their homes is profound. rnI researched the reverse mortgage product and thought is was a terrific product that would work well for certain seniors. I then researched companies to find those with ethical and long established histories. New Horizons was one of them. They happened to be advertising for a loan officer. I closed my real estate business and became a full time reverse mortgage loan originator and sold no real estate once being hired by New Horizons. To sell real estate at the same time originating any FHA product, here in California, is a license violation. I really liked working with my senior borrowers and always tried to serve with heart, and as a regular reader here I have read many of the posts over time: you also serve with heart, it comes through in your posts. Thank you again for the best wishes, I have my resumes out, and fingers are crossed!
Anonymous

Great post. Good luck and let me know if I can help.
Anonymous

Former New Horizon Employee,rnrnWhile I am very sympathetic to your plight, your post has some significant misinformation. rnrnFor example, it is not just equity that dropped by as much as 2/3s; I really think you meant to say values fell that much. If it was merely equity that dropped by 1/3 to 2/3, far more seniors could be helped than we are able to help here in California. Many seniors have suffered irrecoverable equity losses with these kinds of losses in values. In San Bernardino County, California, alone, if houses increase in value to 300% of their present values, they will in many cases still be slightly less than their peak values about three short years ago. Senior homeowners, who could not react quickly enough (and all but a minute few could), lost immense amounts of equity, many times seeing it go negative. rnrnIt seems you agree with The Cynic, the company reacted in a Pollyanna fashion to clear signs of problems in the marketplace. That is truly a sad epitaph. It is the job of management to react to the changing circumstances in the market. When that cannot occur quickly enough, significant financial loss can result.rnrnHowever, that does not mean this is not a sad event and that we do not share the loss you and the entire New Horizon team have experienced; many of us have experienced the same. We wish all of you the best. It is too bad New Horizon is one of the latest victims of the current economic devastation.rn
Former New Horizon Employee

lancejackson,HECM_Dude, Louise321, thank you ever so much for your well wishes!!
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Anonymous

James,rnrnInteresting observation but like other comments this former employee stated, he got it partially right in his comment to you below. Like employing HECM originators as independent contractors is against FHA policy so is allowing HECM originators to sell real estate requiring a real estate license. However, this is not just a California specific rule; the main letter on point is one written from the Atlanta HUD HOC to a regional real estate licensee.
lancejackson

A broker in CA operating with a CFL license may only broker to lenders that also have a CFL license, and most RM wholesalers do not. I don't know if this applies to you (you may work for a direct lender), but if it does you should take a closer look.
Anonymous

I have been in the loan business for 27 years, A broker for 19 years and the sole owner of a mortgage company for 17 years.rnI find 60% of the poeple in our industry are dishonest, yet they truley believe themselves to be honest. Its amazing to listen to their B.S.
Former New Horizon Employee

Jeff39 rnplease advise what B.S. are you describing, as stated above by me: in California you MUST be a real estate licensee to originate reverse or forward loans, but once you are orignating any kind of FHA loan you may NOT sell homes, period.
Anonymous

The worse thing the employees or management of New Horizon could do is feel sorry for themselves. That would be pathetic at best. rnrnHere in California we saw one reverse mortgage retailer almost go under due to potential liablities from their forward mortgage operations. A white knight came along acquiring its assets and sunk a few tens of millions of dollars —- NOT into its reverse operations but —- trying to set up forward mortgage operations in anticipation of a return of the forward mortgage industry. By the end of 2008, less than one year later, operations were discontinued and with no assets other than a few HECMs in process, former management took back the reverse mortgage operations placing it into the old entity and now that company is among the top ten reverse mortgage retailers in the country.rnrnThe best advice one can give is that now is the best time to start over. If management has stood by its employees, things can be turned around even if New Horizon is no more.rn
Anonymous

I found new employment with a terrific mortgage bank before NHRM closed its doors. In fact any employee left at NHRM was given the opportunity to move over to the new lender. Unfortunately, there are only 2 of us left. I have been fortunate to be a reverse mortgage advisor since 2005. I am in the process of obtaining my reverse mortgage advisor certification. I love the product and love the clients, and plan to be around for the long haul! Good luck to all other reverse mortgage advisors! The business is out there!
Anonymous

Former New Horizon Employee,rnrnI actually had sympathy for your plight. Your inaccurate responses are taking away some of that.rnrnAgain you got it wrong. Most mortgage originators in California do not have real estate licenses and legally originate mortgages day in and day out.rnrnI am a California real estate broker but I set up the branch of a California Financial Lender which can hire anyone to be a mortgage originator; there is no license requirement other than to be qualified as a CFL. Federally and California state chartered bank employees and employees of credit unions do not have to hold California real estate licensees to originate reverse mortgages in California. In this state we also have California Residential Mortgage Lenders which are also exempt from real estate licensing laws.rnrnYou are better off sticking to your story about New Horizon than trying to instruct us on licensing laws which apply to mortgage lenders in this state.rnrnI still hope you end up on your feet and have great success in this industry as I do for all of us.
formeremployee2

Check NRMLA website. Certified Reverse Mortgage Advisor.
Former New Horizon Employee

Yes Critic, I understand the licensing differences for mortgage brokers and banks, relax, I was speaking of mortgage brokers.
Anonymous

Congratulations!!!rnrnWhat in the world is a reverse mortgage advisor certification??? It seems there are as many different kinds of certificates as there are HECM originators. Soon they will all be worthless.
Anonymous

jeff39: Are you stating that 60% of your employees (Loan Originators) were dishonest? Amazing, if true. I fail to understand how one could remain in the mortgage business with such a record.
Anonymous

Damn, my Wife is right–I am getting senile: That should have been jeffz39, not jeff 39.
Anonymous

Jeff,rnrnWow!! I guess I should give up my online name; I am but a pretender. Even I am not THAT cynical.rnrnI have met several dishonest HECM originators but I have always thought of them as the exception, certainly not the general rule. My attitude related to the forward mortgage market is somewhat more cynical but nothing like this.rnrnI have met more than my match and concede you are a far greater cynic than I. I feel little more than a cynical Pollyanna.
Anonymous

James,rnrnYou need to contact formeremployee2 about your certification program. Our industry would be better off if there was just one certificate program that actually had some worth. Certainly all employer issued certificates are less than credible; I have a few hidden away in my closet.rnrnI wish NRMLA the best in getting its program off the ground. I just wish they had taken a harder line on educaton; it is definitely its weakest quality.
Anonymous

A broker in CA operating with a CFL license may only broker to lenders that also have a CFL license, and most RM wholesalers do not. I don’t know if this applies to you (you may work for a direct lender), but if it does you should take a closer look.
The_Critic

The name of the NRMLA designation has been Certified Reverse Mortgage Professional for well over a year. It is also referred to as the CRMP. That is why I asked.
The_Critic

You are correct and I am currently working for a mortgage banker.
The_Critic

I was simply responding to your statement: “…in California you MUST be a real estate licensee to originate reverse or forward loans,…” That statement is false.
Anonymous

Check NRMLA website. Certified Reverse Mortgage Advisor.
Anonymous

formeremployee2,rnrnThe name of the NRMLA designation has been Certified Reverse Mortgage Professional for well over a year. It is also referred to as the CRMP. That is why I asked.
Anonymous

You are correct and I am currently working for a mortgage banker.
Anonymous

I was simply responding to your statement: “…in California you MUST be a real estate licensee to originate reverse or forward loans,…” That statement is false. rnrnOne can be a mortgage broker in California and not be a licensed real estate licensee. Most CFLs are mortgage brokers.

California Reverse Mortgage Lender Files for Bankruptcy

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