What would you do after selling your reverse mortgage business to Bank of America? In times like these the decision is tough, but after selling servicing rights on about 40,000 reverse mortgages totaling $4 billion you should have a few options. With the housing market in the dumps Seattle Savings Bank (SSB) is taking profits from selling their reverse mortgage business to BofA and are getting into business banking services with an emphasis on small and medium-sized businesses.
I’ve always been interested in how the Seattle Mortgage and BofA deal happened and recently Seattle Bizjournals published "Seattle Savings shed its reverse mortgage arm before downturn, bank aims for business loans" where journalist Kristen Grind writes about the banks future plans and gives us some insight into how the deal instantly made BofA one of the largest reverse mortgage lenders in the country.
Back in 1995 SSB didn’t have any real intentions of getting into the reverse mortgage business but when they hired their first employee who understood the product all of that changed. "One of the problems with reverse mortgages is no one knew how to do them," said Rob Story Jr., the president of Seattle Financial Group. Starting with that one employee the bank began offering reverse mortgages and the company continued growing by educating and adding other loan officers. Only two years later the company was originating 30 to 40 loans a month and became the second bank in the country after Financial Freedom to start servicing their own reverse mortgages.
Over the next 10 years SSB business grew so rapidly that they decided to approach BofA about a partnership where BofA would securitze their reverse mortgage production. When they met with BofA about the partnership, BofA said that they would rather buy the business instead. This wasn’t the first time someone offered to buy the reverse mortgage business, Story said that the company had fielding dozens of offers to buy the business. "Things got hot really fast," said Story. "We could see we were getting our hands full."
By the time the business and servicing rights were sold to BofA for an undisclosed price, the reverse mortgage division was originating between 1,500 and 1,700 loans a month and employed over 400 employees. Overall the BofA deal made the most sense SSB not only profit stand point but all of the employees were able to keep their jobs when the business moved over to Bank of America. "From our family-owned business perspective, that’s good for us," said Story.