Wells Fargo & Co.—the nation’s largest originator of reverse mortgages—is kissing the product goodbye, while another top-ranked lender, MetLife Home Loans, is ramping up.
Late last week Wells confirmed that it is leaving the sector, but noted that it will remain as a servicer. Its official departure date is June 30.
Wells’ exit from reverse mortgages comes four months after its closest competitor in the space, Bank of America, said that it was leaving the business.
Meanwhile, Brian Lewand, senior vice president and managing director of capital markets at MetLife Bank, confirmed to National Mortgage News that his institution is targeting growth in the reverse sector.
Although MetLife isn’t ready to share all the details of its growth plans, it recently began extending warehouse lines of credit to mortgage banking firms that originate reverses.
According to figures compiled by NMN and the Quarterly Data Report, Wells dominated the reverse sector in the first quarter, funding $1.28 billion in product—far ahead of its closet competitor. (MetLife ranked third nationwide with $628 million, growing its volume by a handsome 63 %.)
Although on the surface, the Wells news looks bad for the reverse industry, Peter Bell, head of the National Reverse Mortgage Lenders Association, said new players are still entering the sector but stressed that HUD needs to make underwriting changes that are more lender-friendly.
“The demographics and wealth profile prospects for this business are still good,” he said. “But we also need home prices to stabilize.”
The rumors about Wells leaving reverses began circulating in March.
“The decision was made based on today’s unpredictable home values,” the San Francisco-based bank said in a statement.
Earlier this year, the company had shut its wholesale production channel for Home Equity Conversion Mortgages, a product backed by HUD. Reverse mortgages, the company said, were just 2.2% of retail volume and 1.2% of overall volume.
Franklin Codel, the head of national consumer lending at Wells, said the bank “will continue to provide options for seniors who wish to determine ways to access the equity in their homes.”
Another contributing factor in Wells’ decision is the tax and insurance payment issue. A growing number of seniors are failing to make these required payments and as a result have fallen into default status on their HECM and subject to foreclosure.
In an interview done prior to the Wells announcement, Jeff Lewis, the chairman of Generation Mortgage, called the T&I problem the No. 1 issue facing reverse mortgage servicers. He quoted the HUD inspector general’s office which said HECM is not a program to provide a T&I subsidy to keep seniors in their house, it is a mortgage insurance program.
Roughly 1,000 employees are affected by the move and will be given opportunities to apply for other positions at Wells.
