Bank of America to Exit Reverse Mortgage Business (Update)

Bank of America told employees it’s leaving the reverse mortgage business on Friday.

The company left the “forward” wholesale business last year, but at the time, told RMD it remained committed to the reverse mortgage wholesale channel.  Rumors began swirling early Friday and RMD confirmed with several people within the company that it’s leaving all channels (wholesale, correspondent, retail).

A spokesperson for BofA told RMD in a statement that it’s closing the operation to focus on its core mortgage business and is moving the operational unit  into other critical areas serving customers.

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“We made the strategic decision to exit the reverse business due to competing demands and priorities that require investments and resources be focused on other key areas of our business,” said Doug Jones, Consumer Sales and Institutional Mortgage Services executive for Bank of America Home Loans.  The company said it will continue to serve the needs of existing reverse mortgage customers and those with loans in process, as well as maintain their servicing portfolio.

“We fully understand the critical sensitivity of ensuring that our senior customers are provided with the same level of excellent customer service that we have provided in the past,” Jones said.

Earlier this week, BofA announced the sale of its Balboa Insurance organization to the QBE Insurance Group Ltd, the exit from reverse mortgages is an additional step in the effort to focus on its core mortgage operations they said.  The division employed 600 people and if they’re not redeployed, they will have the opportunity to apply for other open positions at the bank.

After operating a small retail operation, BofA moved into the industry in a big way when it purchased Seattle Mortgage’s reverse mortgage business for $220 million in 2007.

The latest data from Reverse Market Insight shows the bank’s retail channel — down 29.4%during the year — was the second largest reverse mortgage lender in the country, behind only Wells Fargo.  Retail controlled 9.4% of the market.

BofA was the second largest wholesale lender and despite volume being down 25.7% during 2010, the company still controlled 18.3% of the wholesale market.

All the information we’re receiving makes it sound as though the decision to exit was a surprise to employees.  One vendor told RMD they set up a meeting with a BofA executive for next week on Monday and they announced improved pricing for wholesale this morning.

It’s odd they would do both of those and then close later in the day.  RMD will continue to post more information as we get it.

Updated with BofA’s comment.

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  • Shock and awe. Have worked with BofA’s RM division since they were Seattle Mortgage. This is a little disorienting. Best wishes to all of you at BofA that you land on your feet in these hard times.

  • Shock and awe. Have worked with BofA’s RM division since they were Seattle Mortgage. This is a little disorienting. Best wishes to all of you at BofA that you land on your feet in these hard times.

  • Not good for the industry if its positioned as a result of the product instead of BofA’s instability as a whole. Hate that good folks could be losing more jobs but hopefully they can put them over the loan mod side- heavens knows they need help there.

  • Rather than running off to speculation, this announcement cannot be easy on those at B of A who have worked so hard for and with the industry. Here is wishing the very best for each of them through whatever transition they are facing. With their experience and talent, no doubt they will land on their feet.

    It will be interesting to see if this is a spin off, the division is being sold to another lender, or it is a management buyout. It is hard to believe that B of A is merely shutting it down although that could be what is happening. It is such a small piece of B of A, that it cannot be considered much of a shakeup within B of A by itself. Was there some kind of rift between the Countrywide part of B of A versus the Seattle Mortgage group?

    The ramifications for our little industry will be immense including its impact on NRMLA. Maybe this shakeup will calm down some of the big bank conspiracy talk within the industry.

  • I never felt that BofA was committed to the Reverse once it put CW people in at the top. Yet another failed CW endeavor. I had heard that Reverse was profitable for them. Hate to see any competitor leave the business.

  • I was thinking BOA and Wells had the most to gain after April 1st. To say I’m a little surprised would be an understatement. It would be nice to have a little stability in this industry, but I guess those days are long gone.

  • If the Consumer Finance Protection Bureau investigates how reverse mortgages are transacted TODAY, not 2 to 20 years ago, they should reach the conclusion the product is safe and effective. Like anything else, it can be used improperly: You don’t use a screwdriver to drive in a nail.

    • Ken,

      Why advertise being a CSA? Most responsible senior related organizations warn about the use of such designations but that is not the purpose of this reply. What does your comment on the CFPB have to do with the subject? I also have misposted but generally erase and note it as such. Maybe you can either relate it to this thread or erase it noting it was a mispost? Just a suggestion.

  • This really hurts our trade association NRMLA as B of A has been an anchor partner in sponsoring events and loaning executive help to NRMLA’s Board, like John Nixon & Sarah Hulbert. I truly hope all of the good folks from B of A will land safely.

  • This leaves Wells Fargo and MetLife Bank to compete. Both are fine companies and they will miss BOA. It’s a benefit to have worthy competitors work for better programs and practices within the industry.

  • All things must end I guess….I will miss being part of this product. I was with SMC, and with Reverse through thick and thin. Cheers to you my BOA family we will be okay.

  • John Nixon has been a great co-Chair of NRMLA and his departure will be a huge loss to the Association as well as to the industry. I sure hope he lands someplace soon where he can continue to be a strong and vocal supporter of what we do every day on behalf of our country’s seniors.

    As for NRMLA, this is is going to be a big hit financially and it will take considerable time for the Association to recover from this devastating loss.

  • I’ve worked with some really great people at BofA in the reverse division, and especially those who were there with Seattle Mortgage. They’ve been a big part of our RM production over the years, and we’ll miss them.

  • Companies exit from businesses because they are not sufficiently profitable or do not demonstrate sufficient potential for future growth. Every company deploys its available assets in what for it is the most efficient and productive (i.e., profitable) manner.

    BofA continues to suffer from severe Countrywide indigestion, and its management apparently decided it needs to get its arms around its non-performing mortgage problem. The RM business simply didn’t seem to make a sufficient contribution to the bottom line, so it was axed.

    Are any of us business owners actually making a fair profit in the reverse mortgage business? Or are we working for nothing, possibly putting in more capital, just keeping the doors open in hope conditions will improve?

    • HECM Dude,

      When John Stumpf testified before Congress, under oath he stated that Wells Fargo had never originated a negatively amortized mortgage…. Do you really think upper management at B of A even knows the names John Nixon or NRMLA? I doubt it. We have ants at our house. We don’t hunt them when they are on our property; we only notice them when they become a problem or a potential one.

      Here is a nothing unit that could create headline risk from throwing seniors out of their homes. So if there was any flak from any other unit, what would anyone do, especially if the removal of the unit would not have a significant impact on earnings per share either way? In fact one report on Wall Street cited the announcement as a reason for the rise in stock price. Management decisions cannot be better rewarded.

  • After reading about this at other resources it really does appear they are in really bad shape and to stay tuned for more divisions of a once great institution to be cast aside- can anyone say firesale? The CW contagion would probably keep someone from trying to pick up BofA’s RM biz for fear of the unknown- a shame for folks currently in some stage of RM biz with them. This is not me dancing on their grave- sad to see them go.

      • After Seattle Mortgage sold the Reverse Mortgage of America division to BoA in 07, SMC retained a small group of their original LOs, to continue originating RM loans, which were in turn sold to the BofA operation, just across the lake. We continued to have a ongoing wonderful relationship with that group, loved everyone of the crew, they were like an extension of my family. I will truly miss doing business with them, and hope that BA keeps them together, as a unit, in place at the Bellevue office, to help the BIG Bank resolve the problems in the forward mortgage unit. So, SMC never got out of the RM business, we just dramatically downsized. One year ago, Sarah and Susan came back to the company, with the intentions of developing the small but viable unit into a regional powerhouse, but it wasn’t to be. Alas, we are all gone, to the winds, and an era has ended. It was quite a ride.

  • My heart goes out to all of my friends and former colleagues at BofA reverse. I wish everyone nothing but the best!

    Reversemaniac: SMC is exiting the reverse mortgage business effective the end of this month. The decision was made several weeks ago, although no public announcement was made.

    • Mrs. Hulbert,

      While the Bank of America decision is unrelated to division operations, your announcement comes as a real surprise. I know you will land on your feet. The best to you and the SMC reverse mortgage employees.

    • Now I am even more sad. First John Nixon, and now you, Sarah. I feel so bad for both of you, and I feel you both represent a terrible loss to the industry.

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