Reverse Mortgage Broker Roll Up: Attractive For Some, Not All

With $5 million in capital including an investment from a private equity group, National Senior Home Equity is off and running, looking to aggregate reverse mortgage volume in hopes to sell to a institutional investor in the future.

In order to gain market share, the company has been working to roll up brokers across the country and recently told RMD it had signed on 18 reverse mortgage lenders to join. Since then, RMD has learned these “commitments” are, rather, a non-binding expression of interest letter and not much more according to several sources who have spoken with NSHE.

But by signing the letter, brokers are able to receive enhanced pricing from MetLife on fixed rate HECM loans. Several brokers told RMD that while they’re interested in hearing more about the new company, they felt signing on made sense since they would receive improved pricing.

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“By signing the expression of interest letter, [our company] gets a little better pricing with MetLife on the fixed rate,” said one of the brokers who asked not to be named. “There is no obligation to join the company once everything is set up.”

On the broker side, buying into the new company is not without some hesitation. Of the broker concerns, some wonder if they join the company, whether they will have to change the way the do business.  “I like having my processing here. We package loans and I don’t want to have to ship a loan off somewhere else only to have it be underwritten by another lender somewhere else,” one broker said.

Brokers will likely have to give up their company licenses as well, which makes it difficult to leave considering how long it can take to get approved in certain states.

Other brokers, like Oakland, Calif.-based Trinity Mutual, decided against signing the expression of interest letter because they don’t want to lose the ability to operate on their own.

“I would never join a roll-up, because you’re now an employee,” said Michael Fullam, president of Trinity Mutual.  However, Fullam admits that from long-term perspective, it can be an attractive opportunity for some companies.

“At the end of the day, do you want the end game—meaning the ability to cash out if and when the company is sold,” he said. “For our company, we’re doing enough volume already to get premium pricing from wholesalers, so the current attraction is zero.”

Details on NSHE are slim as the company works to obtain the necessary licensing to move forward with the bringing on brokers for good. None of the brokers we spoke with who signed expression of interest letters have heard anything from NSHE since, but are happily receiving their improved pricing from MetLife.

“The attraction for anybody they talk to is that you have nothing to lose, besides better pricing right now,” said Fullam. “Whether brokers join down the road is unclear because no one knows what their agreement will look like.”

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  • It is this type of reporting which distinguishes RMD from other sources. By some wild and less than rational predictions just months ago, there were to be no brokers by this point in time. Many brokers seemed to have bailed unwisely and prematurely perhaps due to thin capitalization or a wasteful marketing strategy such as that seen in some operations like Golden Gate Financial and some smaller Internet based marketing operations. There is little doubt that dramatic drops in overall endorsement volume due to lower principal limit factors and the reduced number of entities offering warehouse lines have all contributed to the reduction. But nothing has been so harmful as low home values. This is not the end of brokers but perhaps a vast reduction in and regrouping within their ranks with other entities gradually replacing them — including community banks and credit unions. It seems the less radical marketing broker operations are surviving and have the ability to continue even after the institution of the Fed comp rules on April 1st. Not all can be Liberty Streets but there is little doubt that many like Trinity Mutual would like to try. It will be interesting and instructive to see who will survive and how they will fare in our ever changing business environment. But it does seem that those brokers with marketing highly dependent upon Internet based operations have suffered most. I know at least one of those who have terminated their brokerages with an overreliance on Internet/social media will once again feel as if he must lash out. Why he feels he must attack is odd.

    • Lance,

      Whenever you edit on this system the edit has to be approved and in between you lose that comment. Sorry to disappoint.

      Respectfully,

      The Real Zorro (per Lance Jackson)

    • Lance,

      Whenever you edit on this system the edit has to be approved and in between you lose that comment. Sorry to disappoint.

      Respectfully,

      The Real Zorro (per Lance Jackson)

    • Lance,

      Whenever you edit on this system the edit has to be approved and in between you lose that comment. Sorry to disappoint.

      Respectfully,

      The Real Zorro (per Lance Jackson)

    • Lance,

      Whenever you edit on this system the edit has to be approved and in between you lose that comment. Sorry to disappoint.

      Respectfully,

      The Real Zorro (per Lance Jackson)

    • Lance,

      Whenever you edit on this system the edit has to be approved and in between you lose that comment. Sorry to disappoint.

      Respectfully,

      The Real Zorro (per Lance Jackson)

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