Here’s Why This Community Bank Got Into Reverse Mortgages

The biggest unintended benefit of the Financial Assessment and non-borrowing spouse changes is that the new rules would make Home Equity Conversion Mortgages (HECMs) more appetizing products that welcome new entrants to the reverse mortgage market. Well, it’s working so far, at least for one community bank who says now is the right time to take a closer look at reverse mortgages.

April 27, 2015 began a new era for the reverse mortgage industry following the implementation of the Financial Assessment. That day was also a defining moment for BBMC Mortgage to finally get serious about entering the reverse mortgage business.

“Because the industry made the right decision with those changes, reverse mortgages are now a viable product for us,” BBMC President Jeff Gennarelli told RMD. “It has been a thoughtful process and we’re really starting to sink our teeth into it now.”

Advertisement

Headquartered in the Chicago suburb of Lombard, Illinois, BBMC Mortgage is a wholly-owned subsidiary of Bridgeview Bank, a community bank with 13 locations in across Illinois. The company, which was established in 2010, is licensed in 45 states and employs a ballpark figure of about 300 originators, though only a slim few specialize in reverse mortgages for the time being.

When the HECM program underwent changes that limit the upfront draw in the first 12 months post-closing, updates to its non-borrowing spouse policy, and most recently the Financial Assessment, only then did BBMC begin to look at reverse mortgages through the lens of offering a product that is best for the consumer.

“That is when we decided let’s get into this,” Gennarelli said.

It also didn’t hurt that BBMC’s clientele also fit the bill for the bank to begin offering reverse mortgages, especially considering roughly 40% of its business derives from VA loans, according to Genarrelli’s estimations.

“Bank clientele is typically an aging clientele, and so we thought we could serve our own customers,” Gennarelli said. “About half of the veteran population is over 62 years old, so we can take care of them as well with a reverse mortgage.”

In the six months that BBMC has been actively involved in the reverse mortgage space, the company has originated about 40 HECMs, according to Gennarelli, who estimates that because of the long sales cycle associated with reverse mortgages, the company has a pipeline of similar size right now. BBMC does not currently underwrite HECMs, but plans to eventually do so in the future as the company continues to establish its reverse mortgage operations.

In the short-term, the key strategy right now for BBMC Mortgage is building its team of reverse mortgage specialists and training originators to teach them how to identify when a HECM works best for a particular client, Gennarelli said.

“We have ballpark 300 originators, but they are not experts in reverse mortgages,” he said. “Reverse mortgages are complicated. You have to really understand the product and be educated enough to walk a client through it properly.”

Changes to the HECM program over the past few years have made reverse mortgages safer for borrowers, their non-borrowing spouses as well as the Federal Housing Administration. But these new policy updates have also made reverse mortgages seemingly safer products in terms of reducing reputation risk—a qualm cited by many big banks as their reason for leaving the space in 2011-2012.

But while the reverse mortgage industry awaits the return of big players like MetLife, Bank of America and Wells Fargo, increasing interest from smaller, community bankers is a start.

In the future, BBMC envisions helping community banks, many of which are grappling with the current regulatory environment, by looking at ways to assist these institutions so they may be able to help their own customers by offering reverse mortgages.

“Community banks are a huge untapped resource for these types of potential reverse mortgage customers,” Gennarelli said. “Underwriting standards are very important to banks, but what’s really important to community banks are their clients; they are very protective of their customers and don’t want to put them in a product that will make their situation worse. These new changes will make the reverse mortgage a much more appetizing product for them to offer.”

Written by Jason Oliva

Join the Conversation (8)

see all

This is a professional community. Please use discretion when posting a comment.

  • While HUD was quite concerned about the issues that resulted in the 9/30/2013 changes, there is little evidence that HUD was the driver behind the changes which went into effect on 4/27/2015 or the NBS changes of 8/4/2014.

    The changes of 4/27/2015 were driven by lenders (not necessarily the harshness of the rules) and the Court of Appeals was the motivator to the NBS changes on 8/4/2014 and more particularly those of 6/12/2015.

    Perhaps HUD did not intend for the changes to result in more lenders but the same cannot be said for the strength of existing HECM lenders.

  • This is a great article that Jason wrote today. The article is right on track.

    The community banking industry is an untapped market. They can become great referral partners if approached properly.

    Community banks of today are in troubled times, they have been inundated with Federal Regulations due to the Dodd-Frank Bill and the Consumer Financial Protection Bureau (CFPB).

    Many have either gone under or have merged with larger banks due to the lack of compliance staffs and the money to afford to keep up with all the new Federal regulations that have been coming down on them over the past 5 years.

    What this means is that the community banks that are still standing are looking for any avenue to increase their customer base and retain their existing base.

    Having a good referral partner for reverse mortgages can help them achieve their goal, keep their customers from going to other competitors for a reverse they don’t have. In return, they don’t have to risk losing that customer because you are there for them.

    If approached the right way, you can show them by having a reverse mortgage, how it can increase their customer base, it is a win, win situation all the way!

    Again, great article Jason!

    John A. Smaldone

    This is the expressed opinion of John A. Smaldone only and does not represent an opinion of Willow Bend Mortgage or any of its affiliates.

    • John,

      If you are stating that the example above is a wholesale source of HECMs you are correct but this is not a referral partner to HECM originators; it employs HECM originators.

      Why would a community bank want to be a referral partner when it can share in premiums either as a wholesale customer or a full eagle lender.

      • The_Cynic,

        The main reason a small community bank would not want to be a full eagle lender or participate in the origination and to wholesale their loans is because is because most of them do not want the hassle.

        Especially in today’s changing environment, small community banks have enough problems keeping up with all the compliance issues facing them.
        The small community banker would rather be a referral partner than lose a customer because they can’t offer the product.

        Thanks for asking, I appreciate you.

        John A. Smaldone

  • This post clearly shows why Reverse Mortgages are the most viable products for banks in the US as more and more individuals are considering VA home loans, a feasible option as that is one of the most important and talked about banking product among consumers.

  • It would be better yet if Private Lenders get into Reverse Mortgages with their own products. Say like US Bank. What could be more beneficial for senior homeowners and consumers than competition to the FHA HECM products?

string(101) "https://reversemortgagedaily.com/2015/12/10/heres-why-this-community-bank-got-into-reverse-mortgages/"

Share your opinion