Reverse Mortgage Company to Rent a Bank Charter?

SWMCMockup I was sitting at home on Sunday reading my favorite financial publication and I ran into a want ad similar to the one posted here. If you want to see the real thing, grab a copy of Barron’s or a Wall Street Journal from about a week ago (or email us and we’ll tell you who it is if you don’t know… lets just say the sun shines out west… hint hint).  Earlier last week, a friend and colleague told me that someone was in the market place shopping indiscreetly for a national bank charter.  After seeing the want ad, indiscreetly is an understatement.  As a former owner and Senior Lending Officer of a federal savings bank (FSB), a thrift charter is a great tool to use in the mortgage business for powers provided to a Savings and Loan through the Home Owners Loan Act of 1933 that allows it to operate on a national level and avoid state by state regulation among other nifty powers.

20051015163716A guy named Angelo Mozilo also knows the power of the thrift charter; notice how Countrywide is beginning to consolidate its forward mortgage business under the FSB charter (all the HECMs and Simple Equity are funded there now). Speaking from experience on the side of working with entrepreneurs (the Banker) and being an entrepreneur attempting to do a joint venture(a broker), partnering with a Federal Savings Bank or National Banking charter is an intensely complicated process and involves more than a post of a classified ad in the business opportunities section. After the mortgage meltdown of the summer, it is highly unlikely that the Office of Thrift Supervision, Federal Reserve, and FDIC are going to look favorably on any kind of mortgage joint venture or acquisition of a mortgage bank even if it is a Reverse Mortgage Company. The only thing that matters to the OTS and the regulators is Capital. Rapid growth of any kind of operation is not going to be looked upon favorably from a Safety and Soundness perspective so rein in your expectations and those crazy business plan projections. I think that the OTS will think twice before approving any more acquisitions of a Bank by a mortgage company for the foreseeable future.

Another suggestion is to call my sister who works as an Investment Banker for Keefe, Bruyette and Woods (KBW). Lindsay, remember that I get two points on front and one on the back.

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