Equitable Reverse Mortgage Company announced it will be closing its doors on April 30, 2010. Based in Chicago, IL the company had a total of 26 offices in 12 states said the company website.
According to data from the US Department of Housing and Urban Development, Equitable endorsed 425 reverse mortgages in 2009 and 38 loans in January 2010.
The company was started in January of 2007 and despite being able to grow into the 16th largest reverse mortgage lender in the country during 2009, Nix told RMD in an email that he “had serious doubts about Equitable’s ability to grow to the next milestone in light of the reduction in the principal limit in 2009 and other proposed changes coming in 2010.”
He added that the only way Equitable could expect to continue to grow in 2011 and beyond was by developing “into the platform of a nationwide lender with the associated underwriting and servicing functions.” However, in order to make that happen, Nix said “we would need to raise an extraordinary amount of capital and commit to a long, uphill struggle against better-capitalized, more experienced players such as Wells Fargo, Bank of America, and Generation Mortgage.”
With HUD expected to raise net worth requirements for mortgagees to $2.5 million in the near future, others face a scenario much like Equitable.
Between October and February the company had considered its options and ultimately decided it was not well positioned for long term success said Nix. He added, “rather than maintain the status quo while waiting for the inevitable decline, we decided to close down the company while we were still on a strong footing and able to take care of our employees.”
The company announced its intentions to staff on February 5th and has been able to work successfully with partners to establish transition options for its employees.
When asked about the future of the reverse mortgage industry, Nix told RMD, “I believe that the reverse mortgage industry has a long and healthy future ahead of it, but I don’t think the world needs 2,500 reverse mortgage brokers.”
Nix left RMD with a final note that said:
I expect the industry to consolidate rapidly toward the top-20 over the next five years and I believe that the consumer will be served well by this coming consolidation. With twenty lenders, competition will remain sufficiently intense for consumers to enjoy the competitive benefits but regulators will be able to apply a new level of healthy oversight that is impossible today. I look forward to seeing that happen.
You can see more data on the company and other reverse mortgage lenders at ReverseBase.