Following a similar move by the second-biggest originator of government-insured reverse mortgages, No. 1 is throwing in the towel — a move that will impact a thousand employees. A total of three players have now said they are done in the sector, and those three firms accounted for nearly half of all federal reverse mortgages that were originated over the past year.
Wells Fargo Home Mortgage disclosed in March that it was getting out of the wholesale reverse mortgage business. A statement indicated that the decision was made following a “detailed review and evaluation of volume and goals for 2011.”
But the move wasn’t supposed to impact retail reverse mortgage originations, which were to continue through the direct-to-consumer channel.
Apparently, the Des Moines, Iowa-based lender had a change of heart.
A news release Thursday indicated that Wells would stop originating home-equity conversion mortgages.
Around 1,000 employees will be impacted by the decision. Wells said that they will be offered an opportunity to apply for other jobs within the conglomerate.
HECMs are insured by the Federal Housing Administration. Wells said that HECMs accounted for 1.2 percent of its total 2010 originations. Given the $387 billion that Wells reported in overall production last year, HECM volume amounted to around $4.6 billion.
“The decision was made based on today’s unpredictable home values along with the restrictions associated with reverse mortgages that make it difficult to determine seniors’ abilities to meet the obligations of homeownership and their reverse mortgage, e.g., payment of property taxes and homeowners’ insurance,” Wells explained in the statement. “The government’s HECM or reverse mortgage program was designed in a different economic time.”
During the 12 months ended April 30, Wells Fargo Bank, N.A., originated 19,257 HECMs, according to data from Reverse Market Insight. The next biggest player — Bank of America, N.A., closed 12,801 during the same period.
In February, Bank of America Home Loans said it would exit the reverse mortgage business entirely, while OneWest Bank subsidiary Financial Freedom disclosed plans a month later to end reverse mortgage originations.
BofA, Financial Freedom and Wells account for 46 percent of the total HECM market, and their exit will have a substantial impact on the diminishing sector.
In today’s statement, Wells said it would continue to service reverse mortgages and continue to offer home-equity options for senior citizens.