BNY Mellon to Shutter Reverse Mortgage Operations

After two years in the reverse mortgage business, Bank of New York Mellon is calling it quits and plans to fully liquidate its holdings in the sector by the end of this month, the company told RMD this week.

The decision to terminate reverse mortgage operations stems from BNY Mellon’s desire to put greater focus on its core asset management business, which primarily includes institutional and intermediary retail investment solutions, according to a company statement emailed to RMD on Thursday.

“After careful consideration BNY Mellon has decided to close its reverse mortgage business, Home Equity Retirement Solutions,” BNY Mellon said in the prepared statement. “At this time, BNY Mellon Investment Management has decided to focus on its core capabilities within asset management. BNY is working with its partners to carefully exit the business and to ensure a smooth transition.”

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Though BNY Mellon did not originate reverse mortgages, the company purchased Home Equity Conversion Mortgages and served as a closed loan buyer to Mahwah, N.J.-based reverse lender Longbridge Financial. Longbridge will continue to operate as a licensed FHA lender and servicer originating and purchasing closed HECMs with the support of its major investor, Ellington Financial, LLC (NYSE: EFC), the company confirmed to RMD.

The company’s total reverse mortgage portfolio was valued under $100 million, RMD has learned from BNY Mellon.

BNY Mellon launched its reverse mortgage business in June 2014. At the time, the company was the first new entrant into the space following the exodus of the sector’s big bank lenders such as Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC) and MetLife (NYSE: MET) in the years prior.

Previously, BNY owned a reverse mortgage channel, which was sold in 2007 to EverBank, which was then later acquired by MetLife Bank.

The company finally began participating in the reverse mortgage market in March 2015, nearly one year after first announcing its reentry into the sector, under the platform dubbed Home Equity Retirement Solutions (HERS), which had the goal of purchasing, securitizing and servicing reverse mortgages. The HERS business also provided advisory services to brokers, financial advisors and asset managers on how reverse mortgages fit into retirement plans.

BNY Mellon told RMD that it will exit its existing loan positions and reverse mortgage investments by selling them to third-party bidders. The company anticipates a full exit from the reverse mortgage space by August 31, 2016.

The exit decision arrives six months after BNY Mellon told RMD that it was bullish on reverse mortgage growth in 2016.

Written by Jason Oliva

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  • Sorry to lose the “legitimacy” that BNY Mellon could have brought to the reverse mortgage industry; glad that their abortive attempt flew below the radar of most folks outside the industry.

  • Statements like the following show how out of touch big bank decision makers are to the environment of boutique markets especially those whose business is dependent upon the rulings of regulators: “The exit decision arrives six months after BNY Mellon told RMD that it was bullish on reverse mortgage growth in 2016.” It seems like they played into the optimistic outlook of industry leaders rather than expending their efforts or resources into due diligence.

    Now those who encouraged BNY to enter our industry must ask THEMSELVES if the reputation wake of its quick entry and departure was worth the effort. In my eyes as well as many others, this latest entry by a major bank only goes to prove that our industry RIGHT NOW is no place for entry by big banks. So why are exaggerating our situation only to hurt our industry in the long-term?

    Those who encouraged the action of BNY need to be examined by their peers for how this silly optimism about endorsement volume really impacts the industry. We have heard this same nonsense about endorsements in early fiscal 2011. Then came the Liberty projections of fiscal 2018 as the year we see hundreds of thousands of endorsements due to the Extreme Summit. Now BNY is telling us of increased volume in 2016, which is far more than unrealistic with completely unsubstantiated calls of recovery at least two times previously in this fiscal year.

    The question becomes when will our cries of great endorsement totals this year or that year totally stop being listened to. When this occurs who do we blame? There is a reason why after two millenniums “The Boy Who Cried Wolf” is still taught to children. Exaggeration can and generally will backfire. It is time we stop showing our ignorance about short-term trends in out own industry!!!

  • “The exit decision arrives six months after BNY Mellon told RMD that it was bullish on reverse mortgage growth in 2016.”
    Unfortunately these Holding Companies are as honest as our Presidential candidates-

  • Sad to see BNY Mellon bail out on us or maybe not? disqus_nWIsNzhoKh may be right. BNY Mellon tells the industry how bullish they were going to be in 2016 and then shuts the doors!

    Sounds like they could not handle the FA ruling challenges and changes on the drawing board. Also sounds like they did not have the true passion for our industry to stick it out and stand by our seniors when the toughest of times we all have faced!

    I know it sounds as if I am throwing a lot of stones at BNY Mellon but I am really not. They were in the reverse mortgage space, got out, got back in and now out again. Sounds like they tried, wanted it to work but did not have the time, patients or the right staff to stay on the front line!

    In short, they probably did themselves and our entire industry a favor by exiting our industry when they did!

    We have to many positive points to focus on, all the negativity with declining endorsements and this one and that one closing shop should not be effecting us the way it is. I mean it when I say, the glass of water is half full for all of us. just look at the positive statistics we have to analyze on behalf of our industry!

    Everything that has been shown us spells success if we go out and change our attitudes, go after the different markets that have opened up to us and stick to a logical game plan!

    I close my case my fellow friends and colleagues!

    John A. Smaldone
    http://www.hanover-financial.com

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