Wells Fargo Getting Out of Reverse Mortgage Business
Citing changed economic times, Wells Fargo has announced that it will stop originating reverse mortgages, a product that some credit unions originate as well.
Reverse mortgages are loans for senior homeowners that use a portion of the home’s equity as collateral.
Reverse mortgages generally do not have to be repaid until the last surviving homeowner permanently moves out of the property or dies. At that time, the estate has approximately six months to repay the balance of the reverse mortgage or sell the home to pay off the balance. All remaining equity is inherited by the estate. The estate is not personally liable if the home sells for less than the balance of the reverse mortgage.
As part of the reverse mortgage agreement, home owners usually have to maintain tax and insurance payments on the property, and Wells Fargo expressed doubt about the numbers of senior home owners able to make those payments. It also said that falling home values had made reverse mortgages more risky.
“The government’s HECM or reverse mortgage program was designed in a different economic time,” the bank said in its announcement.
“Wells Fargo will continue to service the loans of existing reverse mortgage customers,” said Franklin Codel, executive vice president, head of National Consumer Lending. “We will continue to provide options for seniors who wish to determine ways to access the equity in their homes.”
The bank said it takes “great pride” in the exceptional work that its reverse mortgage team has done to build the business over the past 20 years and that “the company’s 1,000 reverse team members will be provided with opportunities to apply for other open positions within the bank's operations.”