New Partnership Brings Reverse Mortgages to Credit Unions Nationwide

Credit unions nationwide will now be able to refer their members to The Federal Savings Bank for their Home Equity Conversion Mortgage needs through a new partnership established this week. The bank is among the largest privately held federally chartered banks in the U.S. and has a defined focus on residential home lending, which led in part to this partnership to expand its reach for HECM loans.

“We think the market is wide open,” Mike Crossett, executive vice president, tells RMD. “If a credit union is not offering [HECMs] to their members and they have a population of people that have a need, those are opportunities for us to partner so they can serve those members.”

The partnership operates strictly on a referral basis, allowing the Federal Savings Bank to educate more prospective borrowers about the virtues of reverse mortgages, when they may not otherwise have ready access through their credit unions.

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Further, the partnership allows those credit unions to direct members to the HECM as a financial tool without having to take on the responsibility associated with offering the loans directly, Crossett says.

“There are some [credit unions] that do offer reverse mortgages to their members, but they may be struggling with keeping up with the education and doing business in a sound and safe manner,” he says.

Credit unions across all states have access to the partnership, which has been in development since 2017. However, the timing of a concerted effort to launch now is tied to a new lending environment brought on by recent product changes implemented on October 2, 2017.

“The product has never been more safe and secure,” Crossett says. “I know a lot of [originators] in the industry are struggling because we have to have more conversations with more people who are going to qualify, but when you look at the macro [landscape] and how The Federal Savings Bank is set up, we are primarily focused on residential mortgage origination. The credit unions very much mirror our ethos. They want to serve.

Written by Elizabeth Ecker

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  • A couple of questions.

    Credit unions have a well deserved reputation for offering “a better deal” on many financial products: car loans (especially), better interest rates on savings accounts, lower/no fees compared to banks, etc. How will the credit unions fulfill this “public expectation” for a better deal through credit unions, with regard to the HECM?

    Is the plan to have lower origination fees (now that they’re back, due to the “October Change”), and/or margins? And Federal Savings Bank will accept this because they gain on bulk-volume?

    Or none of the above, and there would be no difference in HECM terms, in general, by going through the credit union. Then, why would all the credit unions agree to refer all their HECM inquiries to Federal Savings Bank; what’s their (the credit unions’) “consideration”?

    Second question: would Federal Savings Bank be doing their own “servicing.” Instinctively, I see an upgrade in the quality of customer service in this case; obviously, this isn’t necessarily true, but it might be.

    If Federal Savings Bank developed a reputation for excellent customer service in servicing, I’d predict that they’d get a lot of refi business (although I’m not sure how this reputation would “get-out” to the general, HECM, refi-hunting public).

    Which, of course, begs another question: what has the “October Change” done to HECM refinancing?

  • Why is it now legal for a federally insured bank to “refer” customers for reverse mortgages, for a fee I would suppose, but mortgage brokers cannot pay a fee to a bank for the same thing ? We are allowed to pay a company for “leads”, but we cannot pay individuals. How is this fair ?

  • My questions were of two (2) categories. Each had corollary inquiries that were directly related to the subject matter.

    Your confusion about this obvious format wasn’t anticipated, and it’s doubtful that anyone else needed an explanation.

    However, you did manage to contribute with this answer:

    Quote:
    “So while you ask a relevant question regarding the demand for refinanced HECMs post 10/1/2017, the answer is very murky and too full of opinion until more facts are available.”

    If only you could always be so concise.

  • No, I am not sure “referral fees” will be paid, but gratuitous referrals have always been allowed, so why is this such news ? The credit unions could become brokers without ever incurring the costs of being the final lender, and they would reap the profits of originating. It should be a perfect fit except for a few drawbacks; the time and intense energy it takes to originate an app and take it to funding. I don’t think banks or credit unions are well suited for front line originating; theirs is a much swifter and controllable method for profits. I am not here to argue, but I am an observer who has seen the cruel effects of CFPB since inception and more particularly since last October. I believe the statistics speak for themselves over the past six months.

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