A year ago, many reverse mortgage brokers said they were looking at their businesses and wondering whether they’d be able to maintain them as they had previously. As federal and state regulations became more abundant and the cost of compliance rose, many looked to join larger lenders as an alternative. Then, increased regulatory burden combined with loan originator compensation changes and the implementation of many new rules under Dodd-Frank made it even harder for reverse mortgage brokers to do business and see any profit.
But today, at least some of that has changed.
With secondary market premiums remaining high, brokers are again positioned to gain in the current climate for reverse mortgage lending, they say.
“The interest has changed, absolutely,” one broker told RMD. “I know a broker who recently sold his business to become a lender, and has since gone right back in the other direction.”
Having more access to different products in the market positions brokers to gain, adding products to a varied “toolbox” that lenders themselves may not be able to offer.
However, risk exists in the uncertainty surrounding new and pending legislation that has the potential to change things for small, independent businesses in particular, originators say.
“Brokers being satisfied makes sense based on the pricing available in today’s market,” says Mike Gruley of Plymouth, Michigan-based 1st Financial Reverse Mortgages. “Brokers can make a living on very low volume, but should the pricing retreat to normal levels, brokers an lenders may feel the strain.”
The impact on consolidation may still be on the horizon, Gruley says.
“It is possible that the higher back-end pricing stalled the national consolidation that was occurring in 2010 – 2011, but if/when pricing finds more normal levels; the consolidation may continue unless volumes are much higher than they currently are,” he says.
The biggest question right now, many believe, is how the Consumer Financial Protection Bureau will change things for the reverse mortgage business. The bureau is working on changes to loan originator compensation rules, as well as a study of the reverse mortgage industry, under a July 21 deadline.
“It will be interesting to see what changes the “Bureau” has in store for us all in the coming weeks/months,” Gruley says. “The potential changes from the CFPB may force lender and brokers to restructure their business models and procedures. It is difficult to anticipate how this will affect each of the industry participants.”
But at least in the short term, brokers don’t seem to be going anywhere.
“I do think it’s a good time to be a broker,” a former broker told RMD. “I don’t know that it’s ever been [better].”
Written by Elizabeth Ecker