Lack of Warehouse Funding Hurts Reverse Mortgage Sector

Growth in the reverse mortgage sector requires warehouse funding, which has gone virtually AWOL during the past 15 months of worldwide economic contraction. Warehouse lenders provide liquidity by allowing lenders to temporarily fund mortgages at the closing table. But, estimates indicate a severe drop in the number of warehouse lines – down from nearly 115 at its peak in 2005 to less than 30.

“Two years ago there were warehouse lenders galore and now there are very few,” laments Michael Wallace, branch manager, Upstate Capital, East Syracuse, N.Y. “The [providers] that are out there are either cutting back on their lines or requiring very large minimums,” according to Wallace, who says he is “going out to local banks and trying to educate them on the reverse mortgage so they can provide [this] funding.”

Wallace – whose company wrote 700 reverse loans last year and is averaging about 80/month this year – said he wants part of the federal economic stimulus package to be directed to providing this warehouse funding. “Congress should say to HUD and Fannie Mae ‘start providing these lines’ to guys like us who want to become a Full Eagle.”

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Even established reverse mortgage lenders like JB Nutter have had problems with its warehouse providers.  Due to capacity “issues”, the 2nd largest wholesale reverse mortgage lender was forced to suspend new submissions from brokers in February.  The company started accepting new submissions from certain customers but wouldn’t comment on when things would be back to normal.  

Looking to address the problem, last week the Mortgage Bankers Association came out in favor of federal “steps to help maintain existing lines of warehouse credit and creating new warehouse lending by providing a short-term federal guarantee of warehouse lines that are collateralized by Fannie Mae, Freddie Mac, FHA, VA and RHS [Rural Housing Services]-eligible mortgages.”

Neil J. Morse has been a communications professional working in the mortgage finance industry for more than a decade, currently specializing in the reverse mortgage sector. He can be reached at [email protected]

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  • Hey critic,

    Just wondering if you have ever closed a reverse mortgage? Not sure how that would be possible with the amount of time you seem to appear on this site. You seem to waste alot of time being Mr. KNOW IT ALL…..how does the old saying go….”those that can DO”…”THOSE that cannot teach…or in your case BLOG” ha.

  • Hey Wallace,

    I don’t know where you are gettng your imaginary numbers from.Looks like a case of FUZZY MATH..Mr.WALLACE errr BUSH. The greatest thing about HECM’s is that you can’t BS your numbers. (See HECM endorsement Data below)..NOt quite 700 and not quie 80 per month….644/12 is a tad bit closer to 54 loans a month or about 2/3 of the 80 you inflated in this article. Nice try though…80 LOANS…what a joke, just cuz you hit 80 loans in one month does not mean you close 80 loans a month.

    UPSTATE CAPITAL INC 23577 ALBANY 25 162
    UPSTATE CAPITAL INC 23577 NEW YORK 16 114
    UPSTATE CAPITAL INC 23577 BUFFALO 8 92
    UPSTATE CAPITAL INC 23577 TAMPA 2 87
    UPSTATE CAPITAL INC 23577 JACKSONVILLE 16 84
    UPSTATE CAPITAL INC 23577 ORLANDO 7 74
    UPSTATE CAPITAL INC 23577 MIAMI 3 20
    UPSTATE CAPITAL INC 23577 PITTSBURGH 9 9
    UPSTATE CAPITAL INC 23577 PHILADELPHIA 2 2

    NATIONAL: 88 644

  • Mr.Rmaniac, Wow, you must be pretty proud of your imput on this site today, two personal attackss and not substantive comments. Gotta hand it to you, your a great lesson in do as I say and not as I do. Oppps, I just realized, I followed your lead and made a personal attack, deep appologies.

  • They originated 723 in the past 12 months which is an average of 60. Very respectable numbers for a regional player (NY and FL). If more warehouse lines disappear, this up and comer will not be able to help as many of the folks that need it most. Who will pick up the slack? It is my opinion that most folks aren’t aware a reverse mortgage can help them, even after being bombarded by Robert Wagner ads and daily direct mail offerings. They need trusted advisors to help define and clarify for best effects. If the little guys that spend the most time with their clients can’t offer the product due to market conditions, its not helping the very folks they’ve dedicated their lives to.

  • Yeah but they still aren’t doing 80….nothing like exagerrating your numbers by 33% tomake you look like a liar and an idiot. Speaking of numbers, Critic you never responded to my last quote….how many numbers do you add to the HECM endorsement list per month? IF the amount of time you spend vomitting information on this site is any indication I would guess very little if any….

  • Aha, Wealth One shows his Golden Colors again. “Liitle
    Guys” he calls them: “Those guys who spend the most
    time with their clients”. What do you do Wealthone– spend your time devising methods to make more “Wealth” off Seniors? What have you done to make “most folks” aware of how reverse mortgages can help them?

  • J. Nelson,

    I can tell you what I think, it wouldn’t take much for him to do more than Critic. Maybe have him close 1 HECM a year and he’d be blowing Good OLE Critic’s numbers outta the water.

  • Mr. Nelson,

    I notice on several occations you have mentioned an issue with reverse mortgage consultants making money? Honestly I enjoy doing this job and making money. If I were not making money I would not be working with HECM’s. That is what work is all about…making money. This does not mean I or others who make money are doing anything wrong. Because we make money from doing HECM’s does not mean we are ripping anyone off. If the program will not benefit the borrower its not something I suggest strongly for them to pursue. But we are all making money…if you don’t like it quit and enjoy your retirement.

    Maybe if you do want to retire I can help you with a HECM? Although, there are fees.

  • Seems to me that diminishing warehouse lines is the major concern here. Like the critic, I am interested to know what hope the MBA gives its proposal. Could we concentrate our blogging efforts on some constructive ideas? No one wants to be caught with their warehouse line down and borrowers they cannot help. Does anyone have a better idea than the MBA’s? How do we make it so?

  • Nothing wrong in making money, John Doe: It’s what makes our capitalistic society function. It’s the Money Grubbers I resent. I’m all for doing “well” by doing good. The focus shold be first on helping Seniors, not yourself. Kidreverse had it right a few days ago. Sorry you’re too late–with the increasing limit I was able to sell myself, FHA HECM here we come. As far as fees, I always emphasize that the homeowner isn’t paying those fees, his house and the growing economy in this great Nation will. I don’t have much patience with Seniors who bought a home for $20,000 40 years ago and its’s now worth $200,000 ($300,00; $400,000; $500,000) and they think it’s costing them money. Others should be so lucky. Sometimes hard facts just have to prevail and an underscoring of the FHA HECM benefits.

  • JNelson,

    Plus it should also be noted with regard to fees, the fees are set by HUD, max origination on these loans is fairly light, this is far from a cheap loan to originate, whether by time or money (Critic you probably would not know too much about either of those, since most of your day is spent salivating over this website, and not out on the front lines.) and in the end a great service is being provided. Very few people are getting rich on this loan. The investors are the ones cleaning shop with a loan that has the guarantee of the US of A on it’s back.

  • Hey Kevbo,

    Maybe we should all raise our right hands and swear on a bible that we are all tellig the truth, the whole truth and nothing but the truth so help us GOD. This is a blog not confession, buddy.

  • Reversemaniac posing as the critique:

    BLAH BLAH BLAH BLAH BLAH LONG WINDED COMMENTS BLAH BLAH BLAH MORE LONG WIND…BLAH BLAH BLAH LONGER WIND.

    Back as Reversemaniac:

    So Johnny Law, I tell you this I have closed far more than one per month, unlike yourself. For doing such LITTLE volume you sure seem to have a BIG opinion. By te way how many is far more than 1 loan? Two maybe, that’s a 100% increase which I would say is far more than 1 yet far less than anything that would warrant such a large wordy mouth on this site. I’m in the hundreds my man.

    You are like one of those talking bobble heads on FOX, or MSNBC, all opinion, however little action by which should be alloed to form an opinion as strongly as you pontificate on this site.

    Spend less time preaching and more time doing and then we will have something to talk about

  • Reversemaniac posing as the critique:

    BLAH BLAH BLAH BLAH BLAH LONG WINDED COMMENTS BLAH BLAH BLAH MORE LONG WIND…BLAH BLAH BLAH LONGER WIND.

    Back as Reversemaniac:

    So Johnny Law, I tell you this I have closed far more than one per month, unlike yourself. For doing such LITTLE volume you sure seem to have a BIG opinion. By te way how many is far more than 1 loan? Two maybe, that’s a 100% increase which I would say is far more than 1 yet far less than anything that would warrant such a large wordy mouth on this site. I’m in the hundreds my man.

    You are like one of those talking bobble heads on FOX, or MSNBC, all opinion, however little action by which should be allowed to form an opinion as strongly as you pontificate on this site.

    Spend less time preaching and more time doing and then we will have something to talk about.

    With regards to the alias, your is fitting as well. Bobble bobble.

  • Critic,

    Again, how many “real” reverse borrowers have “you” actually dealt with.

    “First I have closed far more than a single reverse mortgage.” Critic.

    Which could easily be 2. Right buddy boy. You are out there making it HAPPEN. 1 senior per 26 week period.

    Quit bobbling and start doing.

  • My experience with warehouse lines is about $40,000,000 of them and a few hundred million in fundings. I had a line with First Collateral and IMB. Now we simply broker. Although we are in the process of getting our line with a local bank.

    As for the apology, who died and made you god. I only apologize to the readers of this site for having to hear the mouth of someone who has only closed 2 reverse mortgages in their life, yet has the audacity to constantly voice their loud inexperience to everyone around them. Insightful as you think you might be, do everyone a favor and slow the bobble down.

  • Now Children, can’t we all just get along?

    Reversemaniac:

    We all know you are a star, leave it at that and stop messing with “The Critic”.

    The Critic:

    Reversemaniac is just messing with you. Apparently he loves to jab! If you don’t mess with him, he will leave you alone.

    James Nelson:

    Props for giving me props!

    Kevin:

    I thought you were a little more tech-savy than that? You should know how a blog works, alias’ all the way!

    Everyone chill…And I am the “Kid”?

  • Store your nastiness away for some other time. The point I was making about the little guys was missed by you. The little guys, the ones that have the time to spend with their clients until the end of time are are the one’s most affected by a shortage of warehouse lines. The bigger guys at the banks don’t have time to spend 4 hours in their client’s living room, they have too many reports to fill out and more fish to fry, they have their own resources and aren’t affected as much. You’re a little guy, take the compliment and be quiet.

    Wealthone is just the name of a company that I refer Seniors to that that need help with their taxes or elder law help. Myself, I average between 3-5 reverse mortgages a month and I am the guy spending 4 hours in the living room, meeting with the kids and the financial planner, helping their attorney understand the product and getting the contractor to reduce his fees so the repairs are less than 15% of home’s value and I’m the guy that gets Christmas cards from the family members because their mom can now sleep at night and doesn’t think the bank is taking her home away because she can’t pay her mortgage anymore. You don’t know what I do on a daily basis but you think my blog name is inappropriate? Is that what this is really about? I have maybe made 6 comments on this board in 2 years and they all been positive and now I’m defending myself because of the name wealthone.

  • Very good, Wealthone: Now who are you, really. Surely
    with that background you should be proud of your name.
    I’m sorry it took so long to respond: At my age, a nap in the afternoon is always nice. Now I have to walk the Great Pyrenees who thinks I sleep more than She. This has been a Happy Day: The Wife with the million Dollar home agreed to let her Husband do an FHA HECM to reduce his stress; a Structual Engineer called to say Mr. Smith’s Manufactured Home”s foundation doesn’t look to bad– now if only the Appraiser’s Home Value will allow the FHA formula to work for the man and his wife; and, finally, I found a Legal Beagle (who is a fellow Pilot) who will take the
    Veteran”s Egress case . Things are wonderful, Wealthone. If only you would end your masquerade,
    life would be almost perfect.

  • I guess no one else cares if the MBA’s proposal has a valid chance or not, but I’d like the warehouse lines to stabilize. Otherwise, our choice of lenders dwindles down to a precious few.

    Is anybody there? Does anybody care? Does anybody see what I see? (Quoting John Adams, who would have made a terrific blogger, bye the bye.)

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