Wholesale reverse mortgage volume totaled 4,450 units in January 2010, up 2.9% from the previous month according to data from Reverse Market Insight.

While wholesale volume was up from the previous month, units are down 15% compared to January 2009. Below is the top 5 wholesalers for January 2010.

1. MetLife – 1052
2. Bank of America – 783
3. Generation – 604
4. Financial Freedom – 573
5. Urban/Reverseit – 475

In addition, RM Insight reported that MetLife took over as the top wholesale reverse mortgage lender from Financial Freedom on a trailing 12 month basis. Bank of America climbed into the number 2 spot while Financial Freedom slipped into 3rd. Rounding out the top five were JB Nutter and Generation at numbers 4 and 5 respectively.

Wholesale Leaders – January 2010

The parent company of reverse mortgage lender Financial Freedom (OneWest Bank) purchased La Jolla Bank from the Federal Deposit Insurance Corporation (FDIC) last week.

La Jolla Bank, FSB had approximately $3.6 billion in total assets and $2.8 billion in total deposits as of December 31, 2009 said the FDIC.   

OneWest Bank, FSB did not pay the FDIC a premium for the deposits of La Jolla Bank, FSB. In addition to assuming all of the deposits of the failed bank, OneWest Bank, FSB agreed to purchase essentially all of the assets.

The FDIC and OneWest Bank, FSB entered into a loss-share transaction on $3.31 billion of La Jolla Bank, FSB’s assets. OneWest Bank, FSB will share in the losses on the asset pools covered under the loss-share agreement. The loss-share transaction is projected to maximize returns on the assets covered by keeping them in the private sector.

“We are pleased to be able to work with the FDIC to complete this transaction. This continues our mission of building OneWest Bank as a premier regional bank focused on customer service,” said OneWest Bank’s Chairman Steven Mnuchin. “We welcome La Jolla Bank customers to OneWest Bank and look forward to serving them through our expanded branch footprint in Southern California and our personalized, community based banking approach,” added Terry Laughlin, CEO & President of OneWest Bank.

La Jolla Bank FSB was one of four banks that failed last week. 

Wholesale reverse mortgage volume came in at 3,900 units in November, down 17% from October.  November’s volume is the lowest the industry has seen in 2009 and brings YTD total to 54,609.

MetLife retained its #1 spot in November with 1,123 units but still saw its volume decline a bit from October.

The only reverse mortgage lender in the top 5 who saw volume increase in November was Bank of America with 851 units.  Below is a chart of the top wholesale lenders in November.

OneWest Bank announced Friday afternoon that it purchased the banking operations of First Federal Bank of California from the Federal Deposit Insurance Corporation (FDIC).

Under the terms of the transaction, OneWest acquired $6.1 billion in assets, including $5.3 billion in loans, and $4.5 billion in deposits of First Fed.  OneWest also picks up 72 branches in the Los Angeles area and over $11 billion of deposits and creates one of the largest Southern California headquartered banks.

“This transaction is consistent with our strategy to expand the OneWest footprint in our home market of Southern California,” said OneWest Bank’s Chairman Steven Mnuchin.

“We are committed to continue providing First Fed customers with the same high level of service they have received at First Fed over the past 80 years and we welcome them to OneWest Bank,” added Terry Laughlin, CEO & President of OneWest Bank.

The FDIC estimates the failure of First Federal Bank of California will cost the deposit insurance fund $146.3 million.

OneWest Bank purchased reverse mortgage lender Financial Freedom in March.  

Investment funds are buying up billions of dollars worth of loans discounted from the original value and are reducing homeowners mortgage balances to enable borrowers to refinance into FHA loans.

This allows the firms to generate pocket sizable profits by reselling new government-insured and then bundling the mortgages into securities for sale to investors says the New York Times. 

As an example, the Times writes that

a fund might offer to pay $40 million for a $100 million block of mortgages from a bank in distress. Then the fund could arrange to have some of those loans refinanced into mortgages backed by an agency like the F.H.A. and then sold to an agency like Ginnie Mae. The trick is to persuade the homeowners to refinance those mortgages, by offering to reduce the amounts the homeowners owe.

The profit comes when the refinancings reach more than the $40 million that the fund paid for the block of loans.

They provide a great graphic here which helps explain how it works. 

This type of thing isn’t only happening in the “forward” business either.  When the the FDIC approved a letter of intent to purchase IndyMac earlier this year, a portfolio of $1 Billion of proprietary reverse mortgage loans started being shopped around but the consortium couldn’t find a buyer.

About a month before the IndyMac deal closed, HUD announced it was raising the national loan limit for HECMs to $625,000.

Sources close to the investors purchasing IndyMac told RMD that the purchase of Financial Freedom was going to be very profitable because of the new loan limits and the discount the buyers were receiving on the portfolio of proprietary reverse mortgages (Cash Accounts).

Starting in June, Financial Freedom’s retail division began contacting Cash Account borrowers offering to refinance those loans into HECMs by reducing the outstanding balance.  The discounted purchase price of the loans allowed them to do this on a substantial amount of the portfolio. 

All in all, it turned out to be a great deal for many borrowers as well as the One West since the company was able to refinance the loans off their balance sheet and sell the production generating a significant amount of revenue for the company. 

Wall St. Finds Profits by Reducing Mortgages