Seeking shelter from the regulatory storm, smaller brokerages that originate reverse mortgages are joining larger entities, often federally chartered lending institutions, to remain profitable.
Case in point is Cooper and Shein, LLC of Timonium, Md., which was doing business as Great Oak Lending Partners, and has since mid-August been merged with First Maryland Mortgage, based in Damascus, Md. The new firm will have its headquarters in Timonium, reports Josh Shein, CEO, whose company has been in the mortgage business since 2001, always as a broker.
It began originating reverse mortgages “a few years ago,” Shein says, about the same time he “saw the writing on the wall [indicating] that brokers would have a tough time.” More recently, he says it was apparent “we had to make a change to thrive and grow.” Several avenues were explored. “We looked at buying a federally chartered bank [or] rolling up under [one] and we looked at getting our own FHA full eagle and warehouse lines,” Shein says. “We ultimately decided to merge with First Maryland, which already had a full eagle and warehouse lines so that we can now be a direct lender.”
Another merger story is told by First Financial Reverse Mortgages, Northville, Mich., which joined Success Mortgage as a division, earlier this year. Mike Gruley, vice-president of reverse mortgage operations, who has been in the lending business for 25 years – the reverse space since 2001 – tells RMD, the merger gives his firm “the ability to prepare for the regulatory changes that lie ahead, and a chance to position ourselves to capitalize on new opportunities that will be created as the ‘new world order’ goes into effect.” Gruley is grim about “a contracting economy that has choked loan volumes, and created a fractionalized industry of many small players who each have an overabundance of capacity, because they were previously building infrastructure and preparing for significant growth in loan volumes.”
As to the future of brokers, he maintains that they “won’t necessarily go away completely, but there will be fewer to stay, and those that do will experience continual upstream swimming. Unfortunately, in the future I see consumers having fewer choices and paying more for loan services.”
A more upbeat Josh Shein says his merger has produced “a real shift at how we look at loans and relationships with borrowers; it’s a good thing for the industry,” he maintains, “because there will be more accountability and responsibility. Shein speaks optimistically of bringing on more loan officers, adding 20 or 30 by the end of 2010, to the current total of 42.
Written by Neil Morse
