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Reverse Mortgage Broker Roll Up: Attractive For Some, Not All

With $5 million in capital including an investment from a private equity group, National Senior Home Equity is off and running, looking to aggregate reverse mortgage volume in hopes to sell to a institutional investor in the future.

In order to gain market share, the company has been working to roll up brokers across the country and recently told RMD it had signed on 18 reverse mortgage lenders to join. Since then, RMD has learned these “commitments” are, rather, a non-binding expression of interest letter and not much more according to several sources who have spoken with NSHE.

But by signing the letter, brokers are able to receive enhanced pricing from MetLife on fixed rate HECM loans. Several brokers told RMD that while they’re interested in hearing more about the new company, they felt signing on made sense since they would receive improved pricing.

“By signing the expression of interest letter, [our company] gets a little better pricing with MetLife on the fixed rate,” said one of the brokers who asked not to be named. “There is no obligation to join the company once everything is set up.”

On the broker side, buying into the new company is not without some hesitation. Of the broker concerns, some wonder if they join the company, whether they will have to change the way the do business.  “I like having my processing here. We package loans and I don’t want to have to ship a loan off somewhere else only to have it be underwritten by another lender somewhere else,” one broker said.

Brokers will likely have to give up their company licenses as well, which makes it difficult to leave considering how long it can take to get approved in certain states.

Other brokers, like Oakland, Calif.-based Trinity Mutual, decided against signing the expression of interest letter because they don’t want to lose the ability to operate on their own.

“I would never join a roll-up, because you’re now an employee,” said Michael Fullam, president of Trinity Mutual.  However, Fullam admits that from long-term perspective, it can be an attractive opportunity for some companies.

“At the end of the day, do you want the end game—meaning the ability to cash out if and when the company is sold,” he said. “For our company, we’re doing enough volume already to get premium pricing from wholesalers, so the current attraction is zero.”

Details on NSHE are slim as the company works to obtain the necessary licensing to move forward with the bringing on brokers for good. None of the brokers we spoke with who signed expression of interest letters have heard anything from NSHE since, but are happily receiving their improved pricing from MetLife.

“The attraction for anybody they talk to is that you have nothing to lose, besides better pricing right now,” said Fullam. “Whether brokers join down the road is unclear because no one knows what their agreement will look like.”