There is an attack underway on the smaller lenders in the reverse mortgage industry, says Jeff Lewis, Chairman of Generation Mortgage, in his conversation with RMD.
According to Lewis, the proposed net worth and REG Z changes favor the larger depository lenders over the little guys. “It is not clear why the government is favoring depository businesses in the reverse mortgage process,” says Lewis, “It is going to make it more difficult for the smaller independent provider to maintain themselves.”
Lewis believes that regulation of the industry should be focusing on fostering increased competition rather than further regulating itself, noting that customers are “protected much more by competition than by regulation.” For example, the increase in the number of pages in the necessary disclosures is one example of a regulation that is not likely to have a large effect on consumers. “Is there anybody who can understand the insane reams of paper they’re dealing with?” he quips.
Rather, Lewis believes the best way for the industry to be regulated is for everyone to be competing for business. When multiple loan officers contact a prospective borrower, the borrower has the opportunity to listen to all the products available and find the best deal. In addition, competition between the brokers can push origination fees lower, amongst other advantages.
Lewis points out that while the big lenders have more lobbying power, Wells Fargo and Bank of America would not be able to exist if not for the independent operators. Reverse mortgages wouldn’t be what they are today if not for the small operators in the field who didn’t have enormous overheads and could spend time proselytizing and educating seniors.
With such a large portion of the industry’s volume coming from the little guys, Lewis adds, “we need to let 1,000 flowers bloom.”
Write to Reva Minkoff