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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.”

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