Reverse mortgage originators wonder: To merge or not?

Staring down the double-barreled regulatory changes facing them, smaller reverse mortgage originators are weighing their options for survival, among them merger with other companies.

“It could be devastating to brokers,” declares Owen Lee, co-owner, 1st Financial Reverse Mortgages, referring to elimination of the mini-Eagle program this month and the new Federal Reserve compensation guidelines, affecting loans originated after April 1 next year. Lee’s former company, Success Mortgage Partners in Plymouth, Mich., merged with 1st Financial earlier this year. “We felt our ability to get the HECM full-Eagle endorsement was greater with [1st Financial] as a partner,” he explains, adding that “it gave us more control over the [origination] process and provides us with a far superior business model, in light of new regulations.”

Michael Gruley of 1st Financial sees two, typical broker-related situations that suggest merger. “One is a mortgage broker-owner who no longer wishes to shoulder the financial and legal risks and management of a business, and wishes to focus more on the sales and production aspect of the industry.” The other, he says, “is a successful reverse mortgage originator who works for a mortgage brokerage firm and feels his or her future success may be limited by working for a broker, as apposed to a lender.”

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Merging also has its emotional aspect. “For my business, this step was always in the cards, so there wasn’t a feeling of loss, to the contrary, it was a feeling of long-awaited progress,” Gruley relates. “For those who never expected to make this type of change, they have to first get their heads around it.”

Mergers and acquisitions expert John Guzzo, managing director at BerkeryNoyes, in New York, says for an acquisition or merger to be successful, each side must “specify the qualities and features they are looking for in a company that would match the partnership requirements. It is also important to market a company the right way, so it is well positioned when competing for buyers or investors. And, the best way to make a firm attractive to buyers is by offering a healthy or attractive price,” he counsels.

Written by Neil Morse

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  • NMLS requirements, special underlying licenses such as real estate licenses for some lenders in California, image, and many other factors will enter into these considerations. One of the biggest is as always compensation.

    If the industry is to expand, it needs far more than a few large lenders who are but specks in the operations of their overall organizations. We need the agility to be flexible that only small and dedicated lenders can provide. While the larger lenders will always be with us it is the innovation and ingenuity which small lenders provide that will keep us from becoming stagnant and decayed.

    It is always good to get rid of deadwood. It is best if driftwood flows into the larger holding tanks. While ol’ folks like me hate change, it is what produces growth and excitement in the industry.

    We need a breath of change. We need to see new groups forming. It is good to see some of the mergers bringing in new blood into old operations.

    If we are going to see the 98% of seniors accepting our products, change must come. It is sad to read some comments pining for the bygone. I am excited by the Saver, the new challenge, and an answer to the problem which until recently almost all denied – Traditional HECMs eating away the FHA reserve.

    Last year there were screams heard throughout the industry that money was being taken from the HECM funds to support other programs. It was good to see that finally there was an accounting entry showing that we needed the support of the others in the amount of $1.73 billion. We need to take that to heart and forget about our silly notations. It is time to move on and build for the future – NOW!!!

  • NMLS requirements, special underlying licenses such as real estate licenses for some lenders in California, image, and many other factors will enter into these considerations. One of the biggest is as always compensation.

    If the industry is to expand, it needs far more than a few large lenders who are but specks in the operations of their overall organizations. We need the agility to be flexible that only small and dedicated lenders can provide. While the larger lenders will always be with us it is the innovation and ingenuity which small lenders provide that will keep us from becoming stagnant and decayed.

    It is always good to get rid of deadwood. It is best if driftwood flows into the larger holding tanks. While ol’ folks like me hate change, it is what produces growth and excitement in the industry.

    We need a breath of change. We need to see new groups forming. It is good to see some of the mergers bringing in new blood into old operations.

    If we are going to see the 98% of seniors accepting our products, change must come. It is sad to read some comments pining for the bygone. I am excited by the Saver, the new challenge, and an answer to the problem which until recently almost all denied – Traditional HECMs eating away the FHA reserve.

    Last year there were screams heard throughout the industry that money was being taken from the HECM funds to support other programs. It was good to see that finally there was an accounting entry showing that we needed the support of the others in the amount of $1.73 billion. We need to take that to heart and forget about our silly notations. It is time to move on and build for the future – NOW!!!

  • small and dedicated lenders like the one advertising on the left of the screen here that says they put the kibosh on reverse fees when you know the only way they are doing it is pushing someone into a fixed program when a LOC could work best (but then, hey, how will they get rid of the fees)

    you mean the small and dedicated lender that before I hit send on their online application gave me a 94% qualified quote, said I fit but before I go, would I be interested in long term care? you mean that small and dedicated lender?

  • small and dedicated lenders like the one advertising on the left of the screen here that says they put the kibosh on reverse fees when you know the only way they are doing it is pushing someone into a fixed program when a LOC could work best (but then, hey, how will they get rid of the fees)

    you mean the small and dedicated lender that before I hit send on their online application gave me a 94% qualified quote, said I fit but before I go, would I be interested in long term care? you mean that small and dedicated lender?

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