Wells Fargo has confirmed it will no longer offer reverse mortgages to customers.
The decision to close down its retail channel stems from economic uncertainty and restrictions associated with reverse mortgages that make it difficult to determine seniors’ abilities to meet the obligations of homeownership.
“Home values are pretty unpredictable right now, and when you combine that with the restrictions of the HECM program, it’s difficult to determine whether [borrowers] can meet their obligations,” said Greg Gwizdz, EVP/National Sales Manager at Wells Fargo Home Mortgage during an interview with RMD.
While it is closing down its origination channel, Wells Fargo will continue to service the loans of existing customers.
The largest reverse mortgage lender in the country, Wells Fargo has 26.2% market share according to the latest data from Reverse Market Insight. In April, it endorsed 1,317 reverse mortgages, and its annual total for 2010 came to 16,213 HECM units. While its monthly average was down slightly, overall volume did not appear to have any substantial change leading up to the exit.
The company has used its retail branch network to drive the majority of its overall business. Until recently, Wells Fargo operated a small wholesale channel, which it announced in March was closing. Following the wholesale announcement, the company indicated it would continue its retail operation and would transition its support team to the retail channel.
Wells Fargo’s decision to now leave the retail business comes on the heels of the decision by Bank of America to exit the industry in February of this year, as well as the exit of One West, which announced in March would shut down Financial Freedom. Financial Freedom CEO Michelle Minier said at the time that the decision was based on the regulatory environment and the desire to focus on the bank’s core businesses. Similarly, Bank of America said it was closing its reverse mortgage operation to focus on its core mortgage business.
The timing of the exit is in line with increased regulation throughout the industry including recent changes to loan officer compensation and what some have said will be unprecedented oversight of large banks by the Consumer Financial Protection Bureau, mandated under Dodd-Frank and scheduled to launch on July 21.
Additionally, the Department of Housing and Urban Development has stated it is in the process of developing a financial assessment that will be included in the HECM loan process, and loan limits in the program could return from $625,500 to $417,000 in October.
As for as the profitability of the operation, Wells Fargo said it was not a factor in the decision to shut it down. Rather, the decision was based more on the HECM program having been designed in a different economic time.
Wells Fargo said the company’s 1,000 reverse mortgage team members will be provided with opportunities to apply for other open positions within it’s 80-plus businesses.
It will continue to accept reverse mortgage applications until June 30, 2011 and the last day to fund is September 30, 2011.
Written by Elizabeth Ecker