Is There a Silver Lining in the Big Bank Reverse Mortgage Exits?

Many in the industry have lamented the loss of Wells Fargo and Bank of America from an educational and brand awareness standpoint, but the exits are driving new referral business to lenders who remain.

Reports have shown larger lenders saw a boost in volume following the exits, it also appears that some much smaller originators are beginning to see an uptick in business as well, and it’s largely due to new referrals they say otherwise would have gone to the big bank competition.

“In a weird way, I’m getting more referrals now from mortgage companies that don’t do reverses,” says Alain Valles, founder and president of Norwell, Mass.-based Direct Finance Corp. Valles said he has received more referral calls recently from mortgage companies that don’t do reverse mortgages, and estimates that roughly 20% of his reverse business comes from those kinds of calls.

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Those referrals, he suspects, are increasing due to the large bank exits. Where non-reverse lenders might have referred potential customers to the big bank branches in the past, now they are going directly to smaller shops and the remaining, boots-on-the-ground players. That, or in the absence of those branches, borrowers are simply seeking smaller brokers for their loans.

“We are seeing more activity since the Wells Fargo/Bank of America departures,” Mike Gruly, 1st Financial Reverse Mortgages, told RMD in an email. “We think what is happening is that the banks used to receive many referrals from accountants, financial planners, investment advisors, housing specialist, Realtors, non-profit groups, etc. due to their brand recognition and geographic locations. Now that they are gone, these professionals are looking elsewhere to send their clients for reverse mortgages.”

Several other originators have told RMD the same: they are getting more referral calls, and from different kinds of people, from forward lenders to financial planners and accountants.

The numbers have yet to shake down when it comes to the volume lost by the large lender exits. While some recent data seemed to indicate that the industry had recovered losses following the Bank of America exit in February, a report from Reverse Market Insight noted factors that made the data look better than it initially appeared.

The jury is still out on how the Wells Fargo Exit will impact overall volume, but RMI has noted a trend showing that the Top-10 lenders have gained in the wake of those exits.  From MetLife and Urban Financial to American Advisors Group and Security One Lending, those Top-10 lenders are seeing a boost in overall volume.

But with more than a handful of even smaller originators telling RMD that their business is also benefiting, the new referrals that stem from those exits are also boosting the other end of the spectrum. The influx may have to do with the fact that Wells Fargo had the ability to draw referrals with its broad presence in the industry, one retail originator told RMD.

A promotion from Wells Fargo in February offered 2% of the max claim amount as a referral fee—no appraisal, processing or application needed. With Wells now gone from the industry, it’s unknown how successful such a campaign could have been. But one thing is clear: The referral business is flowing.

“Remaining reverse mortgage lenders with experience and good reputations seem to be getting these referrals now,” Gruley says.

Written by Elizabeth Ecker

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  • With over 42% of the total endorsement pie up for grabs if other lenders did not pick up some of the slack that would show it is not the need for the product which drives demand in our industry but rather the large scale marketing media and branch referral system platforms of a few big lenders.  It is, however, unbelievable that without the presence of the Big Three, overall endorsement total will rise over the next twelve months.  In fact it may take several years before seniors adjust to the new market but that does not mean that those who remain will not benefit from their loss.   For those of us who believe in the product, seniors will eventually adjust and many smaller lenders should see better volume.  It is my belief that the Top Thirty or Forty will be the primary beneficiaries of the vacated portions of the endorsement pie in the short term.  If the smaller lenders are seeing an uptick this shows seniors and their advisors understand the need and see the product as a viable alternative. It is an insult to one’s intelligence that many “in the industry have lamented the loss of Wells Fargo and Bank of America from an educational … standpoint.”  Does this industry actually educate in the purest or most traditional sense of that word?  One could argue that standpoint if explaining an unusual non-recourse mortgage and telling seniors loan proceeds “can be used for anything” is actually considered educating.  What our industry does is help seniors overcome preconceived notions through providing information about a product.  Sometimes this education is nothing more than the good old marketing game of “overcoming” objections (i.e., “outwitting” or exhausting the other “guy”).  Some of the “best” sales people I have met in this industry never finished high school.  As an industry we provide product marketing education and little more. The stunning growth in our industry in the middle of the last decade did not come as a result of better “education” but as a result of better marketing and better presentations about the product.  If anyone believes that Wells or B of A provided better training for “educating” seniors, one needs to spend time with their former employees to find out that it was more about the odd American flag and stagecoach with their grossly inadequate branch referral systems than superior education.  Or just look at the 2% of the MCA “referral” program Wells offered in February.  Does that sound like superior education or a potentially “effective” marketing tactic?  Does anyone remember the groan in the industry heard from Wells when HUD got 12 USC 1715z-20(n)(2) into HERA which effectively ended the “HECM Advisor” program?  Now that program was a real effort to increase education to seniors, not increase sales (LOL).  Face it; Wells and B of A were terrific marketing forces, not white palaces of education. Take if from a cynical realist, it is really hard to believe that anyone other than its current and former employees –along with NRMLA and some brokers — are actually “lamenting” the loss of the Big Three.  The days for those of us who remain should be brighter.  We now have five major celebrities “educating” seniors about our products not just one or two.  Most of the five related companies are not giants like Wells or B of A but companies which were insignificant in our market just five years ago (including believe it or not MetLife).  We also have major “education” campaigns by MetLife and “THE” financial planner (who has NO significant college education other than at a community college and whatever minimum financial education he took to get a CFP and some salesperson licenses). 

  • With over 42% of the total endorsement pie up for grabs if other lenders did not pick up some of the slack that would show it is not the need for the product which drives demand in our industry but rather the large scale marketing media and branch referral system platforms of a few big lenders.  It is, however, unbelievable that without the presence of the Big Three, overall endorsement total will rise over the next twelve months.  In fact it may take several years before seniors adjust to the new market but that does not mean that those who remain will not benefit from their loss.   For those of us who believe in the product, seniors will eventually adjust and many smaller lenders should see better volume.  It is my belief that the Top Thirty or Forty will be the primary beneficiaries of the vacated portions of the endorsement pie in the short term.  If the smaller lenders are seeing an uptick this shows seniors and their advisors understand the need and see the product as a viable alternative. It is an insult to one’s intelligence that many “in the industry have lamented the loss of Wells Fargo and Bank of America from an educational … standpoint.”  Does this industry actually educate in the purest or most traditional sense of that word?  One could argue that standpoint if explaining an unusual non-recourse mortgage and telling seniors loan proceeds “can be used for anything” is actually considered educating.  What our industry does is help seniors overcome preconceived notions through providing information about a product.  Sometimes this education is nothing more than the good old marketing game of “overcoming” objections (i.e., “outwitting” or exhausting the other “guy”).  Some of the “best” sales people I have met in this industry never finished high school.  As an industry we provide product marketing education and little more. The stunning growth in our industry in the middle of the last decade did not come as a result of better “education” but as a result of better marketing and better presentations about the product.  If anyone believes that Wells or B of A provided better training for “educating” seniors, one needs to spend time with their former employees to find out that it was more about the odd American flag and stagecoach with their grossly inadequate branch referral systems than superior education.  Or just look at the 2% of the MCA “referral” program Wells offered in February.  Does that sound like superior education or a potentially “effective” marketing tactic?  Does anyone remember the groan in the industry heard from Wells when HUD got 12 USC 1715z-20(n)(2) into HERA which effectively ended the “HECM Advisor” program?  Now that program was a real effort to increase education to seniors, not increase sales (LOL).  Face it; Wells and B of A were terrific marketing forces, not white palaces of education. Take if from a cynical realist, it is really hard to believe that anyone other than its current and former employees –along with NRMLA and some brokers — are actually “lamenting” the loss of the Big Three.  The days for those of us who remain should be brighter.  We now have five major celebrities “educating” seniors about our products not just one or two.  Most of the five related companies are not giants like Wells or B of A but companies which were insignificant in our market just five years ago (including believe it or not MetLife).  We also have major “education” campaigns by MetLife and “THE” financial planner (who has NO significant college education other than at a community college and whatever minimum financial education he took to get a CFP and some salesperson licenses). 

    • I just talked with a friend in AZ who was offered the 2% program in February.  His understanding of the program was no different than Elizabeth portrayed it above.  You could do absolutely nothing for the 2%.  Why doesn’t that violate the anti-referral provisions of RESPA?

      The concept was just the opposite of the HECM Advisor program where you had to do some work to justify the fee received.  Perhaps Wells was going to do it through their wholesale unit; that was never made clear.

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