The New York Times reported over the weekend that Wells Fargo’s inability to assess borrowers’ financial health was the biggest factor in leaving the reverse mortgage business.
With both Wells and Bank of America —the two largest lenders— leaving the industry, seniors could find it harder to obtain the loans.
“We are on new ground here,” said Franklin Codel, head of national consumer lending at Wells Fargo during an interview with the New York Times. “With house prices falling, you reach a crossover point where they owe more than the house is worth and it creates risk for us as mortgage servicers and for HUD.” He was referring to the Department of Housing and Urban Development, whose Federal Housing Administration arm insures the vast majority of these loans through its Home Equity Conversion Mortgage program.
“We are not allowed, as an originator, to decline anyone,” added Mr. Codel of Wells Fargo. We “worked closely with HUD to find an alternative solution and we were unable to find one with them, which led to this outcome.”
After the collapse of the financial markets, the world for many seniors has changed dramatically according to Sue Hunt, director of reverse mortgage counseling at CredAbility. HUD requires that borrowers receive counseling prior to obtaining the loan and go over requirements like paying taxes, insurance and keep the property in good repair.
“We don’t tell consumers what decision to make, but we do try to give them the tools to make a decision,” said Hunt. “Outside factors are affecting people who thought five or six years ago that they were in pretty good shape,” she added. “The world has changed a bit around them.”
