Do National Bank Exits Signal the End of the Reverse Mortgage Branch Model?

With the recent exits of what were formerly the industry’s largest brands, reverse mortgage lenders are adapting to the new world as they know it: a world without competition from national bank branches.

With an estimated 6,000+ Wells Fargo retail branches and nearly the same number of Bank of America retail banking centers, they provided a great amount of product recognition for reverse mortgages, and have since left very public void. Without those 10,000-plus branches, does the reverse mortgage lose legitimacy?

“There is a certain percentage of loans [the big banks] did because they were in their branch that the customer went to every day,” says Mike Gruley, of Plymouth, Mich.-based 1st Financial Reverse Mortgages. “I find it hard to believe those loans will all be done, but I think the majority will be done somewhere else.” The exposure and awareness may suffer, he says, but ultimately will be a net positive for businesses that are left.

How does the industry make up for the loss?

It may not have to. The big bank branch for reverse mortgages may be on the way out, but other versions are popping up around the country. Some, smaller regional banks with branches that resemble the traditional model. Others, may be even more far flung.

White Plains, N.Y.-based Residential Home Funding Corp. and its network of 40-plus branches served as a merger opportunity for reverse mortgage executives Alex Farber and Mario Martirano, who rolled their former company into RHFC. The branches present an opportunity for the company to expand its reverse mortgage footprint, Farber says.

Earlier this year, 1st Reverse Mortgage USA told RMD it was leveraging the “forward” footprint of its parent company, Cherry Creek, in order to grow its reverse business. That includes working with its branch network of 50 locations.

First National Bank of Layton is another example of a small bank that is working to expand its branch network in light of recent industry changes.

“FNB has several reverse mortgage production centers today, and that network is growing quickly as a result of today’s regulatory environment, and the uniquely attractive value proposition we currently offer to brokers that wish to become First National Bank Production Centers,” says Joe Hansler, national manager for reverse mortgage lending for First National Bank.

Working with these new “branches,” which might not necessarily resemble the old, brick-and-mortar branch model, however, is not without its challenges.

“On the flip side, the challenge is that being a smaller company it was easier to keep quality control,” Farber says. “Now we have to address 45 branches and 175 loan officers. We have a system now for how and when you are allowed to originate a reverse mortgage loan.”

And while the exit of large lenders hurts from a product recognition standpoint, Farber says it helps from a competition angle.

“We’re not going to have those big, big guys that have the auto name recognition,” he says. “When people are looking at mid-tier companies, they will look at us and our 15 years of [reverse] experience. That should assure prospective borrowers that they’re not dealing with a Johnny-come-lately.”

FNB notes a similar challenge in working with branches that may be familiar with the forward market, but new to reverse.

“As a federally chartered bank, we need to have the right controls in place to make sure the reverse mortgage product is presented to senior borrowers in a way that reflects the core values of both the bank and the industry,” Hansler says. “While we are comfortable with the product, we understand the scrutiny around it and the reputational risk that comes with it, so we’re very careful selective about who we bring on as a reverse mortgage specialist.”

Just because large banks are no longer offering reverse mortgages, does not mean their branches cannot continue to work as a first point of contact for borrowers, he says.

“I think seniors will continue to walk into their local banks to consult with a trusted adviser, and regardless of whether those banks currently offer reverse mortgages, they will continue to provide the borrower with the resources and options that best suit their needs,” Hansler says.

Gruley notes a similar experience as a non-depository lender.

“We have have had the experience of someone who found out [about the product] through Wells Fargo but then did the business with the independent lender,” he says.

Regardless, the branch model, in some form, offers what other models cannot: face-to-face interaction with the customer.

“I think there is value in the branch model, particularly with the reverse mortgage product, as it keeps us close to the borrower and delivers the highest level of customer service,” Hansler says. “While originating through a call center works well for many borrowers, some of our borrowers prefer to meet face to face with a local reverse mortgage professional, and it’s important as a lender to be able to offer that option.”

Written by Elizabeth Ecker

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