Nutter Home Loans offers more details about closure

The pioneering reverse mortgage lender will shut down as it deals with a protracted reverse mortgage-related lawsuit from the DOJ

Reverse mortgage pioneer Nutter Home Loans, also known as James B. Nutter and Co., has provided RMD with additional details about its impending layoff and shutdown.

“Sadly, after more than 70 years of helping people across the country achieve the American dream of homeownership, the Nutter family has made the very difficult decision to exit the mortgage business,” a company spokesperson said. “The family will remain active in its other business and civic interests in the Kansas City community.”

Employees who have been impacted by the closure are being directed to resources to assist in their transition, the spokesperson said.

“We are currently working diligently to take great care of our many loyal and longtime employees by providing them with professional outplacement services to pursue other opportunities to continue their careers,” the spokesperson said.

Response to the ongoing lawsuit

The company also addressed the ongoing Department of Justice lawsuit regarding reverse mortgages originated between 2008 and 2010, reiterating that recent actions have delayed the progress of the matter.

“James B. Nutter & Company continues to deny all allegations in the Justice Department’s complaint,” the company said. “The case is currently in discovery and, recently, at the Justice Department’s request, the Court extended the close of all discovery to September 2023.”

The DOJ filed a suit in late 2020 alleging that the lender forged certifications and used unqualified underwriters to approve Federal Housing Administration (FHA)-backed Home Equity Conversion Mortgage (HECM) loans originated between 2008 and 2010.

The company again called the accusations “meritless,” saying that the initial complaint filed in September 2020 does not allege that “any of Nutter’s borrowers were ineligible or unqualified to receive any loan, nor that any action taken by Nutter hurt any borrower, in any way,” the company spokesperson said. “Reduced to its core, the Justice Department seeks to obtain an improper windfall and recover damages not due to the Government.”

The company remains committed to challenging the allegations and is prepared for the case to progress to trial, the company told RMD.

“While Nutter is disappointed in the Justice Department’s decision to bring this case in the first instance, it intends to vigorously defend itself, through trial if necessary, and is confident that it will prevail,” the statement said.

The allegations, if true, would damage the financial viability of the HECM program inside the Mutual Mortgage Insurance (MMI) Fund, and this action signals that the federal government takes seriously any threat to the integrity of the HECM program, according to HUD Inspector General Rae Oliver Davis.

“Lenders who willfully disregard FHA requirements for HECM loans expose the program to significant financial losses that threaten the future availability of this important program to seniors,” said Davis in after the initial complaint was filed in late 2020. “This complaint is evidence that we will tirelessly investigate allegations of abuses of the HECM program by FHA lenders.”

Recent history

The news of Nutter Home Loans’ closure was first reported this past Monday by local Kansas City, Miss.-area media. Anonymous sources who spoke with the Kansas City Star said that the lengthy nature of the upcoming trial, combined with company CEO James Nutter Jr.’s ongoing health issues, is why the company is closing.

The lender ceased originating mortgage loans on Oct. 20, according to the Star. The company, which has an estimated 125 employees, will keep only a small number on hand while the remainder will be laid off, the story said.

Nutter Home Loans is considered a pioneer in the reverse mortgage industry due to its quick adoption of the HECM program after it began following the passage of the Housing and Community Development Act of 1987. In 1989, the first FHA-insured HECM was issued to Marjorie Mason of Fairway, Kan. by the James B. Nutter Company.

In its heyday, Nutter serviced about $7 billion a year in mortgages. According to mortgage software Modex, Nutter has originated just $102 million in mortgages year-to-date. In 2021, it originated $503 million in mortgages and $590 million in 2020.

These days, just a small percentage of the firm’s originations are reverse mortgages.

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