Wells Fargo has announced that it will no longer originate reverse mortgages, saying that changed economic times no longer allow for the transaction that enables senior homeowners to use a portion of a home’s equity as collateral and repay the loan out of their estate upon death[1]. Since the repayment of the loan is based on the estate’s ability to sell the property and pay off the balance, many lenders have expressed concern that reverse mortgages will actually go underwater, making them a loss for the lender who made the loan. However, Wells Fargo has cited its main concern as homeowners’ inability to make payments on taxes and insurance – usually the homeowners’ responsibility for the life of the homeowner and the reverse mortgage. “The reverse mortgage program was designed in a different time,” explained the lender in a public statement, adding that existing reverse mortgages will still be serviced and that the banks 1,000 reverse team members would still be able to apply for other positions within the bank’s operations.
Wells Fargo was the biggest originator of reverse home loans in the United States. These loans made up 2.2 percent of the lender’s consumer mortgage volume[2]. The bank continued to lead the market up to the point when it decided to stop making the loans, with 25 percent of all reverse mortgage loans being made through Wells Fargo. Do you think that Wells Fargo is making a good decision? How will senior home owners pull equity from their homes?
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[1] http://www.cutimes.com/2011/06/17/wells-fargo-getting-out-of-reverse-mortgage-busine
[2] http://www.reuters.com/article/2011/06/16/us-wells-reverse-idUSTRE75F7HZ20110616
It is about time to stop this government program!
This is just one more example of the government getting something going with no real idea of what could happen and then having the businesses they talked into it realizing they are going to lose their butts if they continue the program.
Reverse mortagages have always been little more than a scam, preying on the elder to take advantage of them. The people I have known with them really regretted becominf involved and had a hard time with the banks after signing the loan docs.
Homes are not for taking equity out of, or hasn’t anyone been listening? What is the reason for underwater mortagages, and the inflated prices that have lead to them?
People demand the banks be more responsible, then they are they are sued, when they are less responsible because the government tells them to be with their lending, they are sued! If you are a bank, you are going to be sued, because people like to hate banks, but most have no understanding of what banks are required to do or why!
Banks spend half of the money they take in just attempting to stay in compliance with the regulations, regulations which are changing on a daily basis. How many businesses could stay in business that way. Should they have been bailed out, no! Not much would have really happened, a downturn for awhile and then things would have worked out like they were designed to, it is called bankruptcy court!
Not more reverse mortgages, good riddance, the way equity is taken out of a piece of property is by selling the piece of property. Worked pretty well for centuries that way!!
Seems like it could create an opportunity for private investors with a long time horizon. Forbes and other magazines have suggested doing this within the family for estate planning. The big caution is for all parties to make intelligent informed decisions about what they are getting into. Thats what was ignored to create our current mess.
Chris B:
You’ve obviously not been involved in the life-saving accomplishments of those who have helped seniors that really benefitted by an RM.
Like any financial product, an RM is one more financial tool – and there are many people that it works/worked for better than any other solution.
Having been involved in the use of this for over five years, I feel qualitied to make the comment that you are making statements that reflect judgemental, narrow-minded thinking. IMHO the decision of Wells on this is just one more example of the banks’ putting their interests first, regardless of whom it hurts.
Besides, the $5,000 (or so) up-front HUD insurance was supposed to protect the homeowner, and the bank, from a future situation of decreasing home value, or over-loan proceeds being taken. So I fail to see how a bank would get hurt anyway.
So, in summary — sorry, but I strongly disagree with your comments.
Reverse Mortgtages are reflective of the time where the American home reflected the bulk of what Americans saved for retirement! Up to the ’70′s, Life Insurance and Homes comprised over 75% of what Americans saved for their Retirement! That was befor the Media’s Wall Street Shills challenged the Savings that Life Insurance represented ( i.e.,, “Buy Term and Invest the Difference!”) and when a Home actually was protected from those same Wall Street shills ( Glass – Stegal still protected the Homeowner from Wall street speculation ) But the last three Revese Mortgages I have provided Seniors were to Seniors who had no living heirs, figured to spend the E
RM are great for seniors that want to be able to enjoy some of their equity before they kick the bucket. While it may have strong opposition from the heirs, i say I want to spend the last of my money that i worked for til the end.