The quarterly Mortgage Employment Index tracked by MortgageDaily.com reported today that in spite of nearly 5,000 mortgage hirings, new jobs weren’t enough to offset the 5,000-plus layoffs conducted in the second quarter.

Leading the pack for layoffs was Wells Fargo, which let 2,000 mortgage employees go over that time period. While the index does not specify reverse versus forward mortgage employees, Wells Fargo’s exit from the reverse mortgage business prompted 1,000 Wells Fargo employees to seek new jobs earlier this year. At the time, Wells Fargo said its reverse team members were provided with opportunities to apply for other open positions within its 80-plus businesses.

MortgageDaily.com noted that Wells Fargo cut fulfillment staffing in addition to closing its reverse business.

While the index shows job contraction in the second quarter was less severe than in the first quarter, the year-to-date loss is well below its year-earlier total.

Companies representing the greatest number of hires were JP Morgan, which added more than 2,500 jobs, US Bank, with a near-300-job gain, and MetLife, which added 200.

The site predicts that hirings could pick up in light of historic low rates, and that small- to mid-sized mortgage bankers and brokers are likely to quickly capitalize on the refinance wave.

View the full jobs index.

Written by Elizabeth Ecker

Reports have shown larger lenders saw a boost in volume following the exits, it also appears that some much smaller originators are beginning to see an uptick in business as well, and it’s largely due to new referrals they say otherwise would have gone to the big bank competition.

“In a weird way, I’m getting more referrals now from mortgage companies that don’t do reverses,” says Alain Valles, founder and president of Norwell, Mass.-based Direct Finance Corp. Valles said he has received more referral calls recently from mortgage companies that don’t do reverse mortgages, and estimates that roughly 20% of his reverse business comes from those kinds of calls.

Those referrals, he suspects, are increasing due to the large bank exits. Where non-reverse lenders might have referred potential customers to the big bank branches in the past, now they are going directly to smaller shops and the remaining, boots-on-the-ground players. That, or in the absence of those branches, borrowers are simply seeking smaller brokers for their loans.

“We are seeing more activity since the Wells Fargo/Bank of America departures,” Mike Gruly, 1st Financial Reverse Mortgages, told RMD in an email. “We think what is happening is that the banks used to receive many referrals from accountants, financial planners, investment advisors, housing specialist, Realtors, non-profit groups, etc. due to their brand recognition and geographic locations. Now that they are gone, these professionals are looking elsewhere to send their clients for reverse mortgages.”

Several other originators have told RMD the same: they are getting more referral calls, and from different kinds of people, from forward lenders to financial planners and accountants.

The numbers have yet to shake down when it comes to the volume lost by the large lender exits. While some recent data seemed to indicate that the industry had recovered losses following the Bank of America exit in February, a report from Reverse Market Insight noted factors that made the data look better than it initially appeared.

The jury is still out on how the Wells Fargo Exit will impact overall volume, but RMI has noted a trend showing that the Top-10 lenders have gained in the wake of those exits.  From MetLife and Urban Financial to American Advisors Group and Security One Lending, those Top-10 lenders are seeing a boost in overall volume.

But with more than a handful of even smaller originators telling RMD that their business is also benefiting, the new referrals that stem from those exits are also boosting the other end of the spectrum. The influx may have to do with the fact that Wells Fargo had the ability to draw referrals with its broad presence in the industry, one retail originator told RMD.

A promotion from Wells Fargo in February offered 2% of the max claim amount as a referral fee—no appraisal, processing or application needed. With Wells now gone from the industry, it’s unknown how successful such a campaign could have been. But one thing is clear: The referral business is flowing.

“Remaining reverse mortgage lenders with experience and good reputations seem to be getting these referrals now,” Gruley says.

Written by Elizabeth Ecker

The DOJ has started a probe into Wells Fargo’s lending practices and is preparing a case against the lender for allegedly preying on African-American borrowers during the housing bubble and inappropriately directing them to high-cost subprime loans.

Last week, the Federal Reserve filed a suit against Wells Fargo amidst accusations from Baltimore-area African-American borrowers that they were steered into expensive subprime mortgages, or had loan documents falsified by bank personnel. In this case, HuffPo reports, the bank agreed to pay $85 million to the Reserve to settle the charges, but did not admit to any wrong doing.

“We have a very strong commitment to serving all customers along the credit spectrum, and we do so without bias,” Vickee Adams, a spokeswoman for Wells Fargo, was quoted as saying in the Huffington Post article regarding the Baltimore case. “That’s the type of responsible lending that we practice.”

The DOJ is currently in pre-lawsuit negotiations with the bank, which may seek to settle the accusations and avoid a public lawsuit, says HuffPo. The probe, which is being led by a Civil Rights division, the Fair Lending Unit, and overseen by Assistant Attorney General Thomas E. Perez, reportedly brings credence to Baltimore’s suit.

The Huffington Post article lists a number of incidents it says are marring the bank’s “once-pristine” reputation, including alleged illegal foreclosure proceedings and Department of Housing and Urban Development audits regarding questionable foreclosure practices.

Read the full article here.

Written by Alyssa Gerace

The fact that two well-known institutions have bowed out of the industry could have significant repercussions on reverse mortgage numbers, says Prescott Cole, the senior staff attorney for California Advocates for Nursing Home Reform.

“I think that it’s really going to set the reverse mortgage industry back, losing these giants, because the perception of stability and value and honesty and trustworthiness that these banks have spent hundreds of millions of dollars on over the years, trying to instill confidence in the community, is lost,” says Cole.

Wells Fargo, which commandeered 26.2% of the reverse market at the time it left the industry last month, officially attributed its exit to the inability to assess seniors’ ability to maintain the tax and insurance requirements of reverse mortgage loans. Bank of America, which was the second-largest reverse lender behind Wells Fargo, finished out 2010 with 17.8% of the reverse market share before bowing out of the business in February of 2011, saying it closed the operation to “focus on its core mortgage business.”

As for how Wells Fargo’s departure shapes consumers’ attitudes toward the reverse product, Norma Garcia, a senior attorney for Consumers Union says her best guess is that it creates uncertainty about the ability of lenders to meet the needs of borrowers.  She also wonders whether the launch of the Consumer Financial Protection Bureau as a reason for leaving the market.

Cole questions whether consumers perceive reverse mortgages as a product that’s here to stay, and Wells Fargo and Bank of America leaving the industry doesn’t do much to solidify that viewpoint, he says.  ”The industry is going to be left struggling to regain the acceptance or perception that this is a mainstream product. If it’s such a mainstream product, why did the ‘big guys’ get out of it?” Cole asks.

However, he continues, there’s always going to be a demand for reverse mortgages, especially for seniors who may be cash-strapped but equity-rich.

“I don’t think the reverse mortgage market is going to collapse, it’s just going to be a different kind of growth,” says Cole, adding that the number of those who may have considered a reverse mortgage for quality-of-life enhancement will probably decrease significantly. “I think, really, for the smaller groups that were involved, they’ll do well. They’ll do better, because the people who needed a reverse mortgage will probably go down to one of these smaller institutions. But the growth overall, I think it’s going to slow down a lot.”

Barbara Stucki, Vice President of Home Equity Initiatives, agrees that reverse mortgages will continue to be an option, but consumers’ attitudes toward the product’s role in their retirement planning may change.

“There’s still some key players in the business; by having the big banks leave, the folks who are left are more likely to be specialists,” says Stucki. “MetLife [Bank] and Genworth [Financial Home Equity Access] are organizations or companies that tend to focus on the retirement security side of things. This may sort of shift the conversation to looking at this more not so much as a home loan but as retirement financing, and I think that is the way to go. The nature of the conversation may change somewhat, more than necessarily people’s willingness or ability to take out a reverse mortgage.”

Regardless of whether consumers view the product as a home loan or part of retirement financing, the fact remains that for seniors who need cash and have nowhere else to turn, a reverse mortgage may be their best bet.

“There are a lot of people entering retirement who haven’t saved for retirement, but have equity,” says Tony Webb, a senior economist on Boston College’s research staff. “A reverse mortgage is obviously an option; the question is whether households will actually make use of that product.”

Written by Alyssa Gerace

The article, titled “Banks abandon reverse-mortgage business,” presents an industry update following the announcement by Wells Fargo that it will no longer offer reverse mortgage products. Wells Fargo and Bank of America will continue to service its existing portfolio of loans.

Thus, current borrowers have “no need to worry,” Peter Bell, National Reverse Mortgage Lenders Association president, said in a statement quoted by MarketWatch.

As for the future of the program, the absence of large banks may mean a greater presence of small, independent lenders in the industry, the article says.

“Homeowners interested in a reverse mortgage will still have plenty of providers from which to choose,” said Bell. “Wells Fargo’s departure means that a significant portion of market share will be re-distributed among other participants in the reverse mortgage business.”

Those smaller lenders may provide an additional benefit, Jeff Lewis, Generation Mortgage chairman and CEO told MarketWatch. “Actually, [borrowers] can continue to expect to get more personalized service from smaller organizations, as they have in the past,” he said.

With concerns surrounding the issue of tax and insurance defaults, MarketWatch notes the importance of borrower education and suitability.

“Suitability and a deep knowledge of how these products work, how they combine with and positively affect other life planning tools will be the key factors in continuing acceptance by the public,” said Colette A. Gray, a senior loan officer and reverse mortgage specialist at Home Safe Reverse Mortgage, in the article.

Additional considerations outlined by MarketWatch are expiring loan limits set for a potential decrease in October, as well as an upcoming financial assessment developed by the Department of Housing and Urban Development that could allow lenders to differentiate borrowers who can live up to their obligations of reverse mortgage loans.

Finally, Gray noted that waiting for the housing market to rebound may not make a difference for borrowers. “Those who have been waiting for real estate values to recover to pre-recession values before obtaining a reverse mortgage are likely to find this to be a poor strategy,” she told MarketWatch. “That being said, on the off chance that real estate values could return to pre-recession rates much faster than anyone thinks, the HECMs can be refinanced in that event.”

Read the MarketWatch article.

Written by Elizabeth Ecker

While the departure of Wells Fargo initially rattled those in the industry and beyond, it appears the investor community for Ginnie Mae’s HMBS program has responded to the exit without incident—and the response may even been “encouraging.”

“The market feel is actually much better in this short time frame versus when Bank of America stepped out,” says Jeff Traister, managing director and head of agency and non-agency reverse mortgage trading for Cantor Fitzgerald. “Large originator trades widened out initially, then started coming back in again…and we expect spreads to tighten,” he says.

Across the market, the sentiment is generally positive, with relief that the market today does not resemble the market turbulance in February.

“It has been interesting to watch the market since the Wells Fargo announcement,” says Mike Kent, senior vice president of Reverse Mortgage Solutions (RMS), who handles HMBS trading for the company. “There was not the dramatic reaction in the capital markets that there was when Bank of America stepped away,” he says.

While the investor reaction has been positive, brokers have noted a marked decrease in pricing in recent days, a change which could be attributed to caution from wholesalers in response to Wells Fargo’s departure or perhaps as well changes in Ginnie Mae’s servicing fee structure.

“When Wells Fargo made the announcement, all lenders immediately reduced rebates on fixed rates (effectively raising rates), and eliminated the lower margin ARM rates and reduced their rebates,” says Lance Jackson, president and CEO of Castle One Reverse. “This was out of concern that the financial markets might lose their appetite for HECMs, at least temporarily, with Wells Fargo’s announcement. Pricing has come back a little, but is still not where it was prior to the announcement.”

The earlier reaction to Bank of America’s decision and the market’s subsequent rebound may also be the reason for less reaction this time around.

After Bank of America’s exit, Kent says, investors were reassured that the industry didn’t retreat and fall into a hole. Instead, they saw it was still a very good investment. “It was very encouraging,” Kent says of the difference in response following Wells Fargo’s departure.

While others say it is not clear whether the Bank of America exit coincided with or caused a decline in secondary market pricing in February, HMBS pricing at the time took a downward turn and had finally showed signs of improvement in May, due in part to the entry of new investors into the market.

“At the same time [as Bank of America's exit], there were fewer dealers, so it didn’t take many players pulling back to move prices downward,” says Traister. “Also, in February, there were many investors who were planning on getting the asset approved for purchase but still hadn’t by early 2011 or had just begun to really look at HECMs. There just wasn’t the liquidity there is today.”

Now six months later, the market is a different place.

“When done correctly, HECMS are a very good product from public policy standpoint for the government and can be profitable investments for the private sector. Liquidity has vastly improved over past 6-plus months as the number of dealers and investors has multiplied tremendously,” Traister says. “At the end of the day, HECM markets will still be around.”

Written by Elizabeth Ecker

In an article titled “Reverse Mortgages: Customers Have Little to Fear as Wells Fargo and Bank of America, Two Biggest Players, Exit Business,” ABC speaks with one borrower with a Bank of America reverse mortgage who expressed uncertainty regarding the status of his loan, but stresses that the two large lenders will continue to service their reverse mortgage loans as usual.

Further, the ABC coverage underscores that reverse mortgages are not going away. The article expresses a similar sentiment to New York Times coverage last week following the exit of Wells Fargo from the business.

“These products will continue to play a role for the foreseeable future,” John Lunde, president of Reverse Market Insight, told ABC. People who might need such a loan should have no trouble finding one, he says, although the providers of reverse mortgages could shift toward smaller, specialized lenders, or insurance companies like MetLife.

The article also outlines the experience of a satisfied reverse mortgage borrower who is using the loan to make home repairs with the aim of selling the home and retiring elsewhere, on the heels of a potential market upswing in the future. It also details the reasons cited by Wells Fargo in its announcement that it would be exiting the retail business, including the the unpredictability of today’s home values and Department of Housing and Urban Development restrictions “that make it difficult to determine seniors’ abilities to meet the obligations of homeownership and their reverse mortgage.”

A five-minute video accompanying the article serves as part of ABC’s Retirement Rescue Series. The video features the advice and insight of U.S. New and World Reports expert Luke Mullins, who shares his advice on reverse mortgages.

Read the ABC News article.

Watch the Video.

Written by Elizabeth Ecker

“People certainly shouldn’t be worried,” about the reverse mortgage program, former Deputy Assistant Secretary for Single-family Housing Vicki Bott, who left her post Friday at the Department of Housing and Urban Development, told New York Times columnist Ron Lieber.

Bott’s comment represents the first words of support from HUD since industry giant Wells Fargo exited the business last week. (A request for comment from HUD was not returned to RMD as of press time).

Lieber points to industry exits from big banks Bank of America and Wells Fargo as a juxtaposition to the fact that “reverse mortgages will help millions of people stay in their homes and pay for a variety of retirement expenses in the coming decades.”

But, he writes, both turn out to be true.

The sheer numbers make the product’s use inevitable, Jeffrey Lewis, Generation Mortgage CEO told the New York Times. The savings of the current baby boom population will not be enough for many of them to retire.

The current risks to large banks, however, relating to the pending foreclosures on seniors with reverse mortgages who have failed to meet tax and insurance obligations, have made reverse mortgages a tough sell.

“Banks are really concerned about their headline risk and brand risk,” Torrey Larsen, president of Security One Lending, told the Times. “They don’t want to risk their entire franchise by foreclosing on people, let alone on grandma.”

However, Lewis presented a different view on the situation.

“The idea of reputation risk is such a canard in the hands of these institutions that I don’t even know where to start,” said Lewis in the article. “They took the very interesting strategy of making the government the scapegoat for them deciding to abandon a market that desperately needs them.”

The column notes Wells Fargo’s exit from the industry along with “thinly veiled criticism of the fact that HUD was not yet allowing it to do more traditional underwriting,” as “odd,” given recent indication from HUD that the department is working to develop guidance surrounding a financial assessment for borrowers.

Finally, the column poses the question: “who in the market needs the big banks the most—the customers or the giants’ former competitors?”

Read the New York Times column.

Written by Elizabeth Ecker