Wells Fargo, Largest Reverse Mortgage Lender to Exit Retail Business [Update]

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

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    • 2545,

      It is much harder to feel as sorry for the WF originators (their real name) than the originators of so many small brokers which have suddenly gone under.  WF will work with their employees while the small brokers which have gone out of business were there one day and gone by evening.

      I wish all of the WF reverse mortgage employees the best and hope they will all land on their feet.  As you well know many employers are interested in speaking to you.  Some of you were wise to get NMLS licensed and others chose another way.  Those with their licenses will find many more opportunities and get up tomorrow without missing a beat. 

      • Do you really believe WF is going to work with their employees its simply a media pitch to make “you” believe they are a caring employer.  Out of the 1000 who lost their jobs there will be a couple handfuls that will get help the rest of the consultants will be on the streets just like the small broker you referance.

      • 2545,

        Let’s say you are right.  You forget many things about the small brokers who shut down.  There are usually lawsuits with no capital to always pay employees.  They do not stay open until the end of the month to get loans in.
        1,000 originators (forget the over used and much abused term “consultants”) is a goodly number but not much in the scope of things.  Even if just 3% of the originators stay on that is 3% more than at most small lenders.
        Wells has always been a grinder.  Those who join rarely stay.  Some claim the training was great while others claim they did not understand the industry until they left.
        Wells is Wells.  Remember it is you who accuse them of lying about placing employees.  It sounds like you have an axe to grind.

      • 2545,

        I think you need to apologize for your statements.  Please see those of azbarbu below.  Your statements are outrageous and needlessly harsh.

      • Uuumm, no apologizing, it’s not needed? Who wants to leave the reverse mortgage industry and become an HMC? Unless the employee believes the industry is going down? Who in their right mind would want to deal with realtors on a day to day basis?

      • Uuumm, no apologizing, it’s not needed? Who wants to leave the reverse mortgage industry and become an HMC? Unless the employee believes the industry is going down? Who in their right mind would want to deal with realtors on a day to day basis?

  • The demise of B of A and Wells is a fact complete.  Can they come back?  Their ability to do as they will in our industry is no secret.    
    So why not sell their operations to another bank after all they were profitable turn key operations with some of the best of the best in the reverse mortgage space as their employees and management?  Shortly after B of A announced the closure of their reverse mortgage operations, its stock value rose.  Was there any correlation?  It seems no one actually noticed.  Did either CNBC or FBN spend 1 minute on the topic?
    The problem was not with the operations.  The problem was with support from senior management.  There was so little knowledge or understanding about his own reverse mortgage division that on June 10, 2008, American Public Media posted the text of an interview with John Stumpf in which he said:  “We never participated in some of the real exotic things that the industry and others participated in.  For example: we never understood why it made sense to make someone a loan, a home mortgage with negative amortization.”  Really???
    I know of no major entity which would have ever allowed a subsidy or division go under without at least attempting to sell them unless after selling costs they had no value in the market.  The total employees at the B of A reverse mortgage operations was less than 1% of its employment base.  Is that percentage significantly larger at Wells?
    The reverse mortgage operations at each of these banks may have been the blue whales of our industry but inside their own banks they probably little more than grunion.  In the years they were part of our industry not once were neither John (no not Jeff) Lewis nor John Stumpf keynote speakers at NRMLA or at the meetings of the reverse mortgage division of the MBA.  Even more conspicuous not even one of the minor members of senior management from either of these companies even bothered to show up.  Were they important to these banking behemoths?  You be the judge.

  • The_Cynic is right.
    As someone who was tangentially involved in the mergers and acquisition unit of a strategic planning group of a Forbes 100 company and the liquidation unit of a Fortune 250 company, not even attempting to sell these units says more than the related announcements.  That should have been the headline for both stories.    
    Bank of America has divested itself of a unit it acquired by paying millions to Seattle Mortgage.  To them the percentage benefits of a tax write off is sufficient.  That in itself is incredible.  Talking about buy high, sell low….
    Wells on the other hand had a much smaller investment in acquiring Directors Mortgage.  They are giving up a profitable operating unit for nothing.  That also says a lot.
    The Big Three (Bank of America, Wells Fargo, and Financial Freedom) are now all gone.  What was the total gross sales price paid for all three combined?  That speaks mounds.

  • wealthone,

    That is the problem with being in an industry where the largest players are specks in their own companies.  Even John Stumpf did not seem to realize he had a division which originated mortgages which result in negative amortization.

  • 1.2% of their total business,thats like throwing a beachchair off a battleship. Its a niche market,a niche business so its time for niche vendors to take over.

  • Obviously it is terrible that people are losing their jobs.

    My question to everyone is this a good or bad thing for the future of our industry?

    I was told yesterday that seniors behind on T&I payments for values 300k, and under are pretty bad. Could this have anything to do with the  big banks getting away from reverse?

    • Richard,

      Where are these stats coming from?  Who has these home values tied to T & I defaults?  Are they MCAs or approximate current FMVs?

  • It would be great if HUD issued a statement regarding their intent to continue to make the HECM available.  That would help to calm everyone down.

    • Agreed. I just spoke to an elderly homeowner the other day, prior to the WF announcement, that said he heard the government was getting out of the reverse mortgage business and won’t be offering them anymore. I assured him that I didn’t believe that was the case, but I couldn’t find any supporting articles or material to mail to him to reassure him further.

    • Lance (by the way why is the The_Critic calling you Norman?)

      Why would it help for HUD to say anything?  Then everyone would worry it was as valid as Wells’ statement about continuing its retail operation immediately after shutting down its wholesale unit. 

      Let HUD keep still.

      • If Wells is worried about home values and T&I delinquencies, then it’s pretty obvious that HUD is too. 

  • John.

    There will be problems but how many newspapers actually reported the withdrawal of B of A from the industry and if they did, how much space did they use doing it?  The withdrawal of Wells may get some space but unnecessary worry can make the situation far worse than it is. 

    Will CNBC spend 30 minutes on this subject today?  If they do, then you are right.  What if FBN does?  We have things to be concerned about.

    Senior management always puts a spin on what they do.  What was the real reason is rarely revealed.  People who want to feel big always can tell us why this happened and why that happened.  This is not even 2% of their revenue base and who knows what percentage of their profits.

  • As a WF Reverse Mortgage employee, the saddest part will be leaving my co-workers who have been incredibly supporting and like a family. WF Mgmnt has provided an initial overview of our “displacement package” which is reasonably good, and has a program in place for preferential hiring of those people whose jobs have been eliminated. Transitioning back to Forward HMC’s looks like the primary option for most in Sales, We have been spending the past few days advising our past clients and those currently in the pipeline about the changes.

    Wells had over 2500 loans in T&I default which we had been trying to “work through” to avoid foreclosure. However, HUD told us to pull the plug and we will have to do so. The reputational cost to Wells Fargo will be very high with the negative publicity of seniors being evicted by sheriffs while the TV cameras roll, being shown on the evening news with a newscaster in front of a Wells Fargo Bank branch. Painful.

    Coupled with the the inability of HUD to develop T&I risk analysis tools on the front end, Wells Fargo management saw this as a program that did not sustain homeownership and increased risk to us and the communities we serve.

    We will close out the loans we have and find new places for our drive and passion and I bet most of us still have stagecoaches on our new business cards.

    • azbarbu,
      Thank you for the picture you bring to this thread.  The statements of 2545 are outrageous and needed to be put in their place.
      While I have never been crazy about the ridiculous hubris of some members of the Wells Fargo reverse mortgage management team, it is good to see that overall bank management is empathetic to the needs of its employees.  I wish the best for all of you.
      We will miss most of the WF RM management team and all of the origination team who no longer choose to stay a part of our little industry.  Best to all in future endeavors.

  • Invisible Hand,
    How quickly we forget.
    The real estate markets were not yet recovering from the Tax Reform Act of 1986 when the HECM program was being designed.  The value of real estate was dropping everywhere.  Little new construction was going on anywhere.
    If one is simply referring to the condition of the secondary market, the situation was similar because the GSEs were not in their heyday yet.  I think you might be surprised how similar the home markets were.  What is different today over then are the potential liabilities lenders accept when doing a HMBS versus selling a HECM to Fannie Mae.  It is the latter which seems to have pushed HUD and the banks into the situation we find today. 
    Wells is looking to bow out with as little flak as possible.  That quote is a platitude not an insightful assessment.   
    The quoted statement was probably more true in 2006 than right now.  It is very unclear if any of the information we have received to date provides any insight into why Wells left the industry.  We may never know for sure.  That may be something WF never discloses.

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