NY Times: Wells Exit Could Make Reverse Mortgages Harder to Obtain

The New York Times reported over the weekend that Wells Fargo’s inability to assess borrowers’ financial health was the biggest factor in leaving the reverse mortgage business.

With both Wells and Bank of America —the two largest lenders— leaving the industry, seniors could find it harder to obtain the loans.

“We are on new ground here,” said Franklin Codel, head of national consumer lending at Wells Fargo during an interview with the New York Times. “With house prices falling, you reach a crossover point where they owe more than the house is worth and it creates risk for us as mortgage servicers and for HUD.” He was referring to the Department of Housing and Urban Development, whose Federal Housing Administration arm insures the vast majority of these loans through its Home Equity Conversion Mortgage program.

Advertisement

NewImage

“We are not allowed, as an originator, to decline anyone,” added Mr. Codel of Wells Fargo. We “worked closely with HUD to find an alternative solution and we were unable to find one with them, which led to this outcome.”

After the collapse of the financial markets, the world for many seniors has changed dramatically according to Sue Hunt, director of reverse mortgage counseling at CredAbility.  HUD requires that borrowers receive counseling prior to obtaining the loan and go over requirements like paying taxes, insurance and keep the property in good repair.

“We don’t tell consumers what decision to make, but we do try to give them the tools to make a decision,” said Hunt.  “Outside factors are affecting people who thought five or six years ago that they were in pretty good shape,” she added. “The world has changed a bit around them.”

2 Big Banks Exit Reverse Mortgage Business

Join the Conversation (3)

see all

This is a professional community. Please use discretion when posting a comment.

  • Invisible Hand,

    Wells had a built in, convenient, way of providing originations for its customers.  Removing that advertising and convenience will harm the endorsement production. 

    John Lunde estimates that loss at 50% of the Wells current production.  I am in no position to question that estimate.  Even though John and I openly disagree at times, he is one credible, knowledgeable, and bright guy.  Maybe you can explain why you do not agree.  Although there is no practical way to disprove his theory, I agree with John that the loss will be significant but I have no pragmatic way to estimate it.

  • I want to express my personal thanks to 1) Mr. Codel for his frank and straightforward remarks and 2) NYT for printing them.  His statements are a real service to our industry. 
     
    Mr. Codel was a CFO for what appears to be a subsidiary of Wells Fargo and it clearly shows in his remarks.  For those who have wondered if anyone would speak out about her/his concerns about the contingent liabilities which come when issuing HMBSs here is one such answer.
     
    The projection by Mr. John Lunde of essentially losing about 17.6% of the current retail HECM volume is fascinating and significant.  Using this prediction plus the HUD estimate of endorsements for the next fiscal year, the industry could experience an endorsement level of just 61,800.  That level was first achieved during the fiscal year ended September 30, 2006 and has never been that low since (per the NRMLA website).
     
    It was also interesting to see the unverified redeployment and continued employment of almost half of the reverse mortgage employees at Bank of America, answering in substantial part the claims of at least one reader that these banks were merely talking about redeployment of employees for PR purposes and had little intention of honoring their statements.

string(110) "https://reversemortgagedaily.com/2011/06/19/ny-times-wells-exit-could-make-reverse-mortgages-harder-to-obtain/"

Share your opinion