Do National Bank Exits Signal the End of the Reverse Mortgage Branch Model?

With the recent exits of what were formerly the industry’s largest brands, reverse mortgage lenders are adapting to the new world as they know it: a world without competition from national bank branches.

With an estimated 6,000+ Wells Fargo retail branches and nearly the same number of Bank of America retail banking centers, they provided a great amount of product recognition for reverse mortgages, and have since left very public void. Without those 10,000-plus branches, does the reverse mortgage lose legitimacy?

“There is a certain percentage of loans [the big banks] did because they were in their branch that the customer went to every day,” says Mike Gruley, of Plymouth, Mich.-based 1st Financial Reverse Mortgages. “I find it hard to believe those loans will all be done, but I think the majority will be done somewhere else.” The exposure and awareness may suffer, he says, but ultimately will be a net positive for businesses that are left.

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How does the industry make up for the loss?

It may not have to. The big bank branch for reverse mortgages may be on the way out, but other versions are popping up around the country. Some, smaller regional banks with branches that resemble the traditional model. Others, may be even more far flung.

White Plains, N.Y.-based Residential Home Funding Corp. and its network of 40-plus branches served as a merger opportunity for reverse mortgage executives Alex Farber and Mario Martirano, who rolled their former company into RHFC. The branches present an opportunity for the company to expand its reverse mortgage footprint, Farber says.

Earlier this year, 1st Reverse Mortgage USA told RMD it was leveraging the “forward” footprint of its parent company, Cherry Creek, in order to grow its reverse business. That includes working with its branch network of 50 locations.

First National Bank of Layton is another example of a small bank that is working to expand its branch network in light of recent industry changes.

“FNB has several reverse mortgage production centers today, and that network is growing quickly as a result of today’s regulatory environment, and the uniquely attractive value proposition we currently offer to brokers that wish to become First National Bank Production Centers,” says Joe Hansler, national manager for reverse mortgage lending for First National Bank.

Working with these new “branches,” which might not necessarily resemble the old, brick-and-mortar branch model, however, is not without its challenges.

“On the flip side, the challenge is that being a smaller company it was easier to keep quality control,” Farber says. “Now we have to address 45 branches and 175 loan officers. We have a system now for how and when you are allowed to originate a reverse mortgage loan.”

And while the exit of large lenders hurts from a product recognition standpoint, Farber says it helps from a competition angle.

“We’re not going to have those big, big guys that have the auto name recognition,” he says. “When people are looking at mid-tier companies, they will look at us and our 15 years of [reverse] experience. That should assure prospective borrowers that they’re not dealing with a Johnny-come-lately.”

FNB notes a similar challenge in working with branches that may be familiar with the forward market, but new to reverse.

“As a federally chartered bank, we need to have the right controls in place to make sure the reverse mortgage product is presented to senior borrowers in a way that reflects the core values of both the bank and the industry,” Hansler says. “While we are comfortable with the product, we understand the scrutiny around it and the reputational risk that comes with it, so we’re very careful selective about who we bring on as a reverse mortgage specialist.”

Just because large banks are no longer offering reverse mortgages, does not mean their branches cannot continue to work as a first point of contact for borrowers, he says.

“I think seniors will continue to walk into their local banks to consult with a trusted adviser, and regardless of whether those banks currently offer reverse mortgages, they will continue to provide the borrower with the resources and options that best suit their needs,” Hansler says.

Gruley notes a similar experience as a non-depository lender.

“We have have had the experience of someone who found out [about the product] through Wells Fargo but then did the business with the independent lender,” he says.

Regardless, the branch model, in some form, offers what other models cannot: face-to-face interaction with the customer.

“I think there is value in the branch model, particularly with the reverse mortgage product, as it keeps us close to the borrower and delivers the highest level of customer service,” Hansler says. “While originating through a call center works well for many borrowers, some of our borrowers prefer to meet face to face with a local reverse mortgage professional, and it’s important as a lender to be able to offer that option.”

Written by Elizabeth Ecker

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  • Even if every full-time HECM originator was counted to be equal to a single branch of B of A and Wells and then all of the actual bank branches of remaining lenders were totaled it is doubtful if that total would be greater than the number of branches these two banks hold.  It is laughable to believe that the value of the Wells and B of A branches can be quickly replaced by the existing and new entrants into the marketplace. 
     
    The number of seniors entering into B of A and Wells Fargo branches daily is enormous.  Nothing in our market can replace that.
     
    I could not help but chuckle reading some of the hubris, puff, and wishful thinking expressed in the comments above.  Face it.  John Lunde is right.  It is a simple fact of life that we will see a significant loss in endorsement volume due to the disappearance of the formal branch reverse mortgage referral systems which were at Wells and B of A. 

    I know, I know.  Some very well respected leader will stand up at the NRMLA convention this year and yell out how we will reach 100,000 endorsements next fiscal year just like the same claim was made last year.  While it is not silly to expect such things at sales conventions, it is somewhat breath taking to expect it at NRMLA conventions.

  • Even if every full-time HECM originator was counted to be equal to a single branch of B of A and Wells and then all of the actual bank branches of remaining lenders were totaled it is doubtful if that total would be greater than the number of branches these two banks hold.  It is laughable to believe that the value of the Wells and B of A branches can be quickly replaced by the existing and new entrants into the marketplace. 
     
    The number of seniors entering into B of A and Wells Fargo branches daily is enormous.  Nothing in our market can replace that.
     
    I could not help but chuckle reading some of the hubris, puff, and wishful thinking expressed in the comments above.  Face it.  John Lunde is right.  It is a simple fact of life that we will see a significant loss in endorsement volume due to the disappearance of the formal branch reverse mortgage referral systems which were at Wells and B of A. 

    I know, I know.  Some very well respected leader will stand up at the NRMLA convention this year and yell out how we will reach 100,000 endorsements next fiscal year just like the same claim was made last year.  While it is not silly to expect such things at sales conventions, it is somewhat breath taking to expect it at NRMLA conventions.

    • Cynic,

      I think you should read the headline of the above article again. Neither the article or comments above attempt to state that the BofA and Wells branches are replaceable, but rather that the branch model is still alive and sustainable in our industry. I think it’s obvious to anyone that the exposure that those brands brought to the product is not replaceable, and I don’t think anyone is arguing with that, so why beat a dead horse?

    • >>due to the disappearance of the formal branch reverse mortgage referral systems which were at Wells and B of A.

      Bank of America didn’t have a “formal reverse mortgage referral system” that made sense … which is why they were unsuccessful (in my opinion).  “low hanging fruit” wasn’t available from the branches.

      • Raymond,

        I heard similar remarks made about Wells Fargo a few years ago.  It was surprising to hear that then and although somewhat less so now, still somewhat surprising to read it applied to B of A.

        My tendency is to agree with the assessment of John Lunde but your statement is still a little troubling. 

  • The Cynic is correct. I left Financial Freedom after 3 years to join Wells Fargo, solely to benefit from their lead-generating machine: local branches and massive multimedia advertising. I quit three weeks later because the nearest bank referring to me was over 60 miles from my home. Within Wells was the continual struggle between the forward and reverse mortgage departments as to which one better served clients 62 and older. I guess we know who won. Wells and B of A haven’t died and gone away. They are simply going to market seniors with forward mortgage products, which are often an easier – and better – solution.
    I much preferred them as RM competitors. As forward competitors, the potential market for reverse mortgages will do nothing but shrink even further. When they left, they not only took their share of the pie, but now they will go after the rest of it.

  • It is sad to see the big boys go, but we will be fine. The most resourceful and most profitable company in the industry before the financial Katrina of 2008 was not a BoA or a Wells; it was Financial Freedom. We were a cottage industry, and we are probably back to being one again. Seniors are here to stay, so are the needs reverse mortgages were designed to meet. It is a new environment, and opportunities abound.

  • Ms. Ecker —

    “Does reverse mortgage lose legitimacy?” is the wrong question. The product serves a legitimate need in the marketplace. It was designed, and it is policed, by the U.S. government (what financial product can be more legitimate than that?).

    Focused, talented, and well-capitalized specialists (like Financial Freedoms of old) are what the industry needs. Our best days are still ahead.

    Thanks!

    Atare

     

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