Genworth Temporarily Suspends Certain Reverse Mortgage Products

Genworth Financial Home Equity Access (GFHEA) is temporarily eliminating a range of reverse mortgage products offered through its wholesale and correspondent channels, the company announced late Wednesday night in an email to customers that was obtained by RMD.

The products include adjustable rate HECMs (both the Standard and Saver) as well as fixed rate HECM products for manufactured homes.

The company said the changes were effective immediately for closed loan and broker channels until market conditions allow for GFHEA to reintroduce the offerings. No new applications will be accepted until further notice.


For brokers who have loans in the pipeline with GFHEA, the change causes concern in cases where loan types that have been discontinued have not yet closed.

“Any applications received by GFHEA that do not have closing documents drawn by 10/19/2011 will have to be moved to a fixed rate product offering,” the email stated.

Brokers who spoke with RMD expressed concern that a fixed rate loan may not be appropriate in all cases, and that the decision would cause a delay in their loan pipelines as well as for borrowers waiting for loans to close.

RMD contacted GFHEA for more information, but our requests had not been answered as of press time.

The company rolled out a closed loan seller program in early July, which allowed its customers to sell loans to GFHEA while maintaining existing broker responsibilities in addition to closing and funding their own loans. Its wholesale business currently comprises 12.3% of the industry’s market share, according to data from Reverse Market Insight.

GFHEA has not made any statement regarding its retail channel.

RMD will provide updates as more information is made available.

Written by Elizabeth Ecker

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  • Elizabeth,
    The article is a little confusing.

    Can you separate what is available at Genworth on a retail versus wholesale level?

    As to wholesale and closed HECMs, it seems you are saying Genworth will only do fixed rate HECMs on new applications taken today or thereafter.  Also starting today as to new applications, Genworth will no longer provide HECMs for manufactured homes as to wholesale or closed loans.

    So what will Genworth do as to retail? 

    • Perhaps it is being done because the risks of carrying TPOs is not worth the rewards they provided.  Perhaps it seems I am angry with TPOs and in fact that is true.  HECM Advisors never made the ridiculous demands TPOs are trying to place on HUD and the industry today.

      • Cynic – again, I disagree with your comparison of HECM Advisors to TPO’s, they are totally different animals. 

        The TPO business exists because it allows wholesale lenders to scale up production without the related fixed overhead risk, and TPO’s often provide a higher level of service at a lower cost than some higher fixed overhead retail operations (multiple outlets and fewer layers of managers).  With regard to reverse mortgages, the credit risk profile of retail versus wholesale production is likely neglible.

        I’m confident that everyone will soon learn that Genworth’s temporary suspension of some wholesale products is not a result of pricing in the marketplace or investor demand in general, or a shift in origination strategy.

      • Always from the perspective of company profit and efficiency…who cares about what might be most beneficial to the senior? (well, me for one) TPO operations do not benefit the senior. The industry needs to take a step back and reconsider what is best for the people we serve. (and that’s not just us)

      • Hi Jerry.  I would be interested to hear the reasons behind your comments. 

        I also care about what is most beneficial to the senior (I got into this business 10 years ago to help people).  Competition and lower costs always benefit the customer.  TPO’s create competition.  Before Todd-Frank we were able to offer a lower cost RM to most borrowers than the banks (at least until they offered $0 origination fee ARMs, which couldn’t happen forever).  Our customers also love us for the ethical and knowledgable service we provide (we have thousands of happy customers that could attest to that).

      • Mr. Jackson,
        Early Wednesday afternoon, I received a call from a friend who read a supposed quote from a senior executive at Genworth in which it was stated that he believed all HECM financing for manufactured homes will be gone within a matter of months.  Although the exec did not say for how long the general industry withdrawal might last, the caller believes it is indefinite.
        Since the information was third party and could not be authenticated, I chalked it up to speculation.  It seems the topic of manufactured homes was on low simmer late last fall and has risen to high heat right now.  The announcement later that evening was very surprising.  When I called my friend back yesterday, he was all but in shock.  He had no idea Genworth was taking the action it did.  I think all lenders are concerned about manufactured homes.
        I have heard absolutely nothing about the Genworth pull back on adjustable rate HECMs.  There is little doubt there will be many question for Genworth at the NRMLA Boston Convention.  It will be interesting to see if Genworth provides any response or insight on the dominant reason for the adjustable rate HECM pullback.  Will Genworth reveal what it is doing on the retail side? 

      • We’ll see what happens with manufactured homes, there apparently is an investor demand issue with them.  I think that suspension of the other products is related to a different issue, we’ll see.

      • Mr. Jackson,

        Some who advance the problem focus on the section in book, The Big Short, which describes how one investor got his clue things were headed south.  He used defaults on manufactured homes as his measuring stick.

  • Retail origination and fundings offer some additional points of profit that can offset the increased risk of the increased liability, so it can make sense that a lender with both retail and wholesale channels would want to minimize liabilities, particularly on the wholesale side where they have lower profit potential and a lower level of control over originators and their applications.

     This could also be an investor-driven change. Manufactured homes represent a larger risk of loss of value than a single family residence. Even with the HUD mortgage insurance, it takes more work and longer to get your final settlement money and this would mean additional losses to these costs. And fixed rate HECMs mean that the maximum loan amount is earning maximum interest for the investor for the entire life of the loan with far fewer potential servicing issues and costs than an ARM with a fixed margin on a variable rate.

    • Bill,

      On adjustable rate HECMs, the risk is generally lower because of some available credit line.  It seems on these loans the issue is about profits versus potential loss.

      On manufactured homes, I agree with you.  Not many other things can explain the Genworth decision.

  • I don’t understand the big deal. MetLife stopped offering MFH last month and no big announcement went out about that. All you see here is a mid level lender pulling back products that dont make sense to offer at today’s profit to risk environment. Plus they received their HMBS ability a few months ago. Did anyone think about that they might be making the move to start issueing their own GNMA securities?

    I see MetLife closing down their bank, then their forward side as more of a risk to this industry. Then Genworth streamlining their product offerings, out of low margin high risk loan products.

    • GreatTx007,

      Adjustable rate Savers are anything but high risk.  They are certainly less high risk than fixed rate standards.  There is no word the Genworth got rid of any of these loans on the retail side per the information Elizabeth provides above.

      MetLife is another story. 

      • Critic,
        When I referred to risk I was looking at it as a product from an investor point of view. The tail let over after you securitize a ARM product is a liability to the HMBS issuer. Because when you securitize an ARM you only are selling to drawn amount. The tail or remaining equity that can be drawn remains a liability to the issuer. Which means ARMs are a higher risk loan type for lenders. that’s one reason why you see better pricing on Fixed rate products versus ARMs.

      • GreatTx007,

        Perhaps the better pricing also has to do with the concept that prepayments are far more likely with an adjustable rate than a fixed rate.  Also there is little premium on an adjustable rate because its interest rate is so much lower than a fixed and during the holding period it looks unlikely that the effective interest on an adjustable rate will even reach the nominal rate on a fixed rate.

        Risk not the only factor in pricing.  The primary factor is the earnings rate versus other opportunities with equal risk.

  • I find the move by Genworth concerning, especially for the borrowers who have not closed as of yet. The warning given was such a short fuse. They say any application received and closing docs were not drawn by 10/19/2011 will have to be switched to a fixed? Today happens to be 10/21/2011!

    Another concern is if other lenders will follow down the same path? Any lender that has its own GNMA ticket should not have to but that is only an assumption on my part.

    The last concern I want to mention is when Genworth comes back to the market with a full menu of products, when will they pull the rug out from everyone again with very little notice as they did in this case? It will be interesting to see what other players in the field do!John A. Smaldone

  • Believe or not, the LIBOR product is about half of what I’ve been seeing lately and half of THOSE are Saver opportunities.  Glad that some folks still offer it.

  • Some Investors understand manufactured homes/properties better then others.  I’d be concerned if JB Nutter stopped doing manufactured, more then the other Investors, because they know that property type better then the rest (in my opinion).

  • I heard that Genworth bought their arm products from MetLife.  It was MetLife that pulled the plug on Genworth.  I got that from an AE who works at Genworth.  No where do I see mention of MetLife’s involovlement in thi.

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