The decision by Wells Fargo to close down its retail reverse mortgage business shocked the industry and continues to send a ripple effect to smaller banks, other lenders and brokers whose businesses are positioned to change—and benefit—as a result.
With many questions lingering from the composition and impact of a financial assessment from HUD that aims to address the question of borrowers’ ability to make tax and insurance payments, to the departure of Wells Fargo’s brand presence and branch model, many lenders say while they’d prefer to have Wells Fargo in the business, the exit presents an opportunity for growth and expansion.
“For us, it’s a real opportunity,” says Richard Mandell, vice president of mortgage banking for One Reverse Mortgage, which has for some time been the fourth-largest lender behind MetLife Bank, Bank of America and Wells Fargo, and is now poised to become No. 2. “We’re running a business that’s very efficient and in a position to grow quickly. Our plan is to continue helping make a difference in seniors’ lives. There are a lot of people entering the age group for reverse mortgages and we are excited about the future of our company.”
Some industry players are already ramping up efforts in response to Wells Fargo’s exit, and others say their expansion plans are are aptly timed to benefit from the void in market share.
“On the retail side of our business, we’ve increased our advertizing and staffing to help seniors who would otherwise have purchased a reverse mortgage from Wells Fargo or BofA,” says Pete Engelken, president of Genworth Financial Home Equity Access, Inc. “For our wholesale partners, we have introduced additional ‘community-oriented’ marketing materials and expanded the availability of our On-line Leads Program.”
First National Bank of Layton, Utah recently announced it had hired a national reverse mortgage manager with strong plans to grow nationally. The timing now seems very opportune for the bank.
“While this is not good news for the industry, First National Bank is in growth mode and is uniquely positioned to provide a home for Wells Fargo’s originators immediately and capture significant market share in all 50 states,” says Joe Hansler, national manager for reverse mortgage lending at the bank. First National’s structure and capacity as a bank that will not require new originators to go through the licensing process puts it in an opportune position, says Hansler.
“We feel the timing couldn’t be better to strengthen our support and our place as an industry leader,” he says.
Many industry players note the void Wells Fargo will leave as it has continually provided a recognizable brand presence for reverse mortgage products.
“It’s always sad to see an industry leader pioneer leave the space, especially someone of Wells Fargo’s stature and size,” says Reza Jahangiri, CEO of American Advisors Group. “But we think in the long run the product has a positive outlook and we see it as a longer term opportunity.”
GFHEA’s Engleken also believes the departure will create new growth opportunities for historically smaller players in the reverse mortgage market.
“GFHEA has robust retail and wholesale channels, but we have rarely overlapped with Wells business which was mostly generated through their branches. We, and other industry participants, will reach out to help the consumers who no longer have Wells as an option,” he says.
Another outcome of the exit has been a signal to lenders that the industry must come together in response to Wells Fargo’s challenge in assessing borrowers’ ability to meet the obligations associated with reverse mortgage loans, which the bank cited as an important reason for its decision.
“Wells Fargo’s exit sends a resounding message to HUD that the industry needs guidance around financial assessment if the HECM is to remain viable, and I think we as an industry need to unite around that to avoid the loss of another major reverse mortgage lender,” Hansler says.
HUD has said it is working on the development of a financial assessment that will consider HECM borrowers’ ability to keep up with their obligations with respect to the loans.
“We do thnk it’s important to address the T&I issues, and we need to work diligently with HUD so it will not limit seniors,” says Jahangiri. “For the people that are high-risk, we want to make sure we have a protection mechanism there for them. We think it’s important to be addressed for the long term.”
Engelken notes that counseling and education is still going to be essential, as it always has been.
“Significant safeguards exist in the reverse mortgage origination process including mandatory HUD counseling to ensure that seniors understand the reverse mortgage process, the features of the product and their contractual requirements including making tax and insurance payments,” says Engelken.
Upon Wells Fargo’s exit on the heels of Bank of America’s decision to exit the business in February, smaller lenders are positioned to assume the top industry spots. Mainstream media coverage in the days following the Wells Fargo announcement pegged MetLife, historically the No. 3 lender in terms of volume, to assume the top spot.
MetLife Bank declined to comment for this article.
Written by Elizabeth Ecker