Reverse mortgages will not cease to exist following the departures of large lenders from the industry, and suitability will be a “key factor” for the loans going forward, MarketWatch reported in an article this week.
The article, titled “Banks abandon reverse-mortgage business,” presents an industry update following the announcement by Wells Fargo that it will no longer offer reverse mortgage products. Wells Fargo and Bank of America will continue to service its existing portfolio of loans.
Thus, current borrowers have “no need to worry,” Peter Bell, National Reverse Mortgage Lenders Association president, said in a statement quoted by MarketWatch.
As for the future of the program, the absence of large banks may mean a greater presence of small, independent lenders in the industry, the article says.
“Homeowners interested in a reverse mortgage will still have plenty of providers from which to choose,” said Bell. “Wells Fargo’s departure means that a significant portion of market share will be re-distributed among other participants in the reverse mortgage business.”
Those smaller lenders may provide an additional benefit, Jeff Lewis, Generation Mortgage chairman and CEO told MarketWatch. “Actually, [borrowers] can continue to expect to get more personalized service from smaller organizations, as they have in the past,” he said.
With concerns surrounding the issue of tax and insurance defaults, MarketWatch notes the importance of borrower education and suitability.
“Suitability and a deep knowledge of how these products work, how they combine with and positively affect other life planning tools will be the key factors in continuing acceptance by the public,” said Colette A. Gray, a senior loan officer and reverse mortgage specialist at Home Safe Reverse Mortgage, in the article.
Additional considerations outlined by MarketWatch are expiring loan limits set for a potential decrease in October, as well as an upcoming financial assessment developed by the Department of Housing and Urban Development that could allow lenders to differentiate borrowers who can live up to their obligations of reverse mortgage loans.
Finally, Gray noted that waiting for the housing market to rebound may not make a difference for borrowers. “Those who have been waiting for real estate values to recover to pre-recession values before obtaining a reverse mortgage are likely to find this to be a poor strategy,” she told MarketWatch. “That being said, on the off chance that real estate values could return to pre-recession rates much faster than anyone thinks, the HECMs can be refinanced in that event.”
Read the MarketWatch article.
Written by Elizabeth Ecker