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Reverse Firm Closing, Warns of Massive Consolidation

Mortgage News

The president of a Chicago-based reverse mortgage firm is shutting down operations and warning that the reverse mortgage market is too crowded with mortgage brokers. He predicts that just a handful of firms will survive.

Equitable Reverse Mortgage Co. opened for business in January 2007.

By last year, Equitable had grown to become the 26th biggest retail reverse mortgage lender — closing 425 loans — according to Reverse Market Insight. In its own marketing material — Equitable said it is licensed in 13 states, claimed to be “the 14th largest reverse mortgage lender in the nation” and projected it would join “the top 10 by January 2010.”

But a reduction in the reverse mortgage limit in 2009, along with other proposed changes to reverse lending this year, had Equitable President Darrin Nix questioning how his firm could continuing growing and competing against much larger players like Wells Fargo and Bank of America, he said in a statement provided to MortgageDaily.com.

“I had serious doubts about Equitable’s ability to grow to the next milestone,” Nix stated. “I eventually came to the conclusion that the only way we could expect to still be a healthy company in 2011 and beyond was to grow into the platform of a nationwide lender with the associated underwriting and servicing functions.”

Nix said he spent October through February considering all options.

But the “extraordinary” capital requirements for building a national platform were apparently too overwhelming.

On Feb. 5, the company’s 35 employees were advised that Equitable would cease operations at the end of April.

“We were not well positioned for long-term success,” Nix explained in the statement. “Rather than maintain the status quo while waiting for the inevitable decline, we decided to close down the company while we were still on a strong footing and able to take care of our employees.”

Nix concluded that despite a healthy future ahead for the reverse mortgage industry as a whole — 2,500 reverse mortgage brokers are too many.

He forecasts a consolidation to just 20 big players over the next five years. .

An affiliate of Equitable is Reverse Mortgage GRP Inc

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