With large banks Wells Fargo and Bank of America deciding to exit the reverse mortgage business, and issues about tax and insurance defaults, some have suggested that reverse mortgages have an uncertain future.
In the "Your Money" column in The New York Times, columnist Ron Lieber discusses these developments and notes that HUD has continued to stand by the program. He quotes Vicki Bott, who left her post as deputy assistant secretary for the FHA single-family housing on Friday, as stating that people should not be concerned about HUD's intent for continuing to support the HECM program.
In fact, Lieber writes, with the aging population, insufficient Social Security and retirement funds, reverse mortgages will likely gain prominence as a financial tool in retirement.
For the large banks, the question regarding the reasoning of their exits remains. To both Wells Fargo and Bank of America, their reverse mortgage units were extremely small compared to other business units. Their decisions could easily be interpreted as business decisions based upon focusing their resources on much larger units. Lieber notes that Wells Fargo was more poignant in included a statement that the inability to property assess borrowers ability to maintain their responsibilities, and the size of the business did not warrant taking on the associated headline risk should the banks begin to be forced into foreclosing on reverse mortgage holders.
Of course, Wells Fargo's exit occurred at the same time that HUD is working on new rules regarding the assessment of a HECM borrowers ability to maintain payment of their responsibility of taxes and insurance. For the big banks, it may have just taken too long for HUD to complete this rulemaking process.
The exits of the large institutions may leave some consumers questioning the stability of the HECM product and reverse mortgage industry, but remaining lenders will seek to position themselves as specialists of a unique product, rather than just providing a menu options in a long list of available products and services.
At the end, Lieber notes that reverse mortgages are not the "best income-generating product for retirees," but a last resort for "strapped older people." A seemingly out of place comment in an otherwise balanced article about the current state of the reverse mortgage industry.
