While the reverse mortgage industry has shifted somewhat toward lenders that are more specialized, and away from large banks, federally chartered banks may be uniquely positioned during a time of industry change. And one Illinois-based bank is eyeing the future of the product as an area of growth.
The Federal Savings Bank, based in Chicago and with loan production centers across the country, has been active in the reverse mortgage space for several, but as of 2012 has made a concerted growth effort in the space, and today says it has its sights on becoming a mainstay top-10 lender at a time when the industry can benefit from the presence of federal banks.
“We’re very very serious about the [reverse mortgage] business,” Federal Savings Bank CEO Steve Calk tells RMD. “We think it’s a tremendous service to seniors and we see a tremendous need for this product. On many levels it’s a way for people who have worked their whole lives to be paid back on the biggest investment they have made.”
The company closed just a handful of reverse mortgage loans in 2014, according to data from Reverse Market Insight, and had already closed 32 loans in 2015 according to RMI’s most recent data analysis as of January 2015.
With origination operations across the country and a federal charter that allows it to close loans in every state, The Federal Savings Bank says the time is right for growth. Since its launch in 2011, the bank overall has grown from nine employees and one office to approximately 600 employees throughout 18 offices, with its reverse mortgage division being led by executive vice president Mike Crossett.
“Our goal over the next three years is to fund hundreds of reverse mortgage loans monthly, with the highest quality originators who educate our customers and represent The Federal Savings Bank and the industry in the highest regard,” Crossett says.
Product changes such as the introduction of a borrower financial assessment have caused some setbacks, he says, but will ultimately present an opportunity for borrowers and the industry alike.
“There have been a lot of changes to the product, and many are saying that implementing financial assessment will result in volume declines of 10-20%,” he says. “But the reality is when you look at the number of seniors who can and should consider a HECM as part of their overall financial plan, the industry should grow substantially this year and for many years to come. It is our mission and passion to help educate seniors on how a HECM can and should be an instrumental component to their overall financial plan.”
But program stability will be an essential component not just for growth within the bank’s reverse mortgage channel, but for the industry as a whole, he says.
“HUD has made a lot of positive changes to the program, with the non-borrowing spouse issues figured out and with financial assessment coming. While these changes are positive, the number of changes, and speed at which they’ve been implemented, have made it difficult to deliver a simple, consistent message to the seniors. I would love to see the program stabilize for a couple of years so the industry can deliver a consistent message to the consumer.”
While the changes are under way, the bank is busy targeting growth overall and through calculated reverse mortgage decisions.
Earlier this year it acquired Baytree National Bank & Trust Company in Lake Forest Illinois, which will add to its footprint for reverse mortgages, its executives say.
New product introductions may also fuel growth for the bank.
“We’re committed to the business and continue to find ways to do it smarter and better and will develop proprietary products to serve seniors in this space,” Calk says. “We haven’t even scratched the surface yet, but we think the industry is screaming for a strong federal depository to get behind the business and show we are committed to it.”
Written by Elizabeth Ecker