Bank of America (BAC)
said Friday it will no longer originate reverse mortgages as it continues to shake up its core business.
A reverse or Home Equity Conversion Mortgage allows the borrower, who must be at least 62 years old, to convert a portion of the equity in the home for cash. No repayment is required until the borrower no longer uses the home as a principal residence or does not meet the obligations of the loan.
BofA entered into the business in 2006 and expanded its footprint when it acquired Reverse Mortgage of America
in 2007 and Countrywide Financial Corp.
a year later. But with the sale
of the Countrywide subsidiary Balboa Insurance Co.
and the creation of a unit
dedicated to servicing legacy nonperforming mortgages, the bank has moved in a stark direction this week away from what these acquisitions used to do.
According to the Texas Mortgage Bankers Association
, there are more than 72,000 reverse mortgages outstanding in the U.S. The loans are touted as a way to aid senior citizens struggling under the rising cost of living. But these loans are not without their risks. Former Florida Attorney General Bill McCollum warned senior citizens in 2008 about several scams that target them directly. Predatory lenders, he said, can often engage in deceptive practices and use high-pressure sales tactics to steer borrowers into "inappropriate loans."
"We made the strategic decision to exit the reverse business due to competing demands and priorities that require investments and resources be focused on other key areas of our business," said Doug Jones, consumer sales and institutional mortgage services executive for Bank of America's home loan division.
Write to Jon Prior
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