In response to Wells Fargo Home Mortgage’s disclosure that it will abandon the origination of home-equity conversion mortgages, reverse lenders are addressing issues tied to borrowers’ ability to pay taxes and insurance.
Wells Fargo issued a statement Thursday indicating that it would discontinue HECM production.
In addition to home values that have been unpredictable, the lender cited “restrictions associated with reverse mortgages that make it difficult to determine seniors’ abilities to meet the obligations of homeownership and their reverse mortgage, e.g., payment of property taxes and homeowners’ insurance” in its decision to exit HECM lending.
Late yesterday, the National Reverse Mortgage Lenders Association responded to the devastating news, noting in an announcement that both reverse mortgages and HECMs “are readily available to seniors.”
The Washington, D.C.-based organization assured existing Wells Fargo HECM borrowers that their funds will continue to be available.
The NRMLA also said that it has been working with the Department of Housing and Urban Development to create and implement procedures that lenders can use to assess prospective borrowers’ income and expenses and determine if they will be able to pay taxes and insurance charges after closing on an HECM.
The trade group is discussing the possibility of establishing “set-aside of funds” to pay taxes and insurance.
The NRMLA expects HUD to issue a rule change to give HECM lenders the discretion to make necessary underwriting changes.
“Wells Fargo Home Mortgage will be missed by the industry,” the news release stated. “The reverse mortgage professionals at Wells Fargo have been good corporate citizens, sharing knowledge, business insight and educational resources.
“We wish them all the best as they transfer to new opportunities.”
The number of potential layoffs at Wells related to the company’s exit from reverse lending is around 1,000 — the same number of people who are NRMLA members.
