WELLS FARGO to Stop REVERSE Mortgages.....

May 2010
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Wells Fargo Home Mortgage said Thursday that it will no longer make so-called reverse mortgage loans, citing unpredictable home values and restrictions that make it difficult to determine if borrowers can afford homeowners' insurance and other financial obligations.

Reverse mortgages are typically sold to people over age 62 who want to access the equity in their homes for personal expenses, such as medical bills. But unlike home equity loans, reverse mortgages don't have to be repaid until the homeowner sells the property or passes away.

However, the housing downturn has made it harder for banks to gauge the trajectory of home values, and thus how much they should loan. Foreclosures have contributed to falling home prices, often vaporizing the amount of equity that borrowers have in their home. In addition, reverse mortgages aren't subject to the same types of tests as traditional loans. Eligibility is determined by an FHA formula that calculates age and the home's appraised value. Seniors aren't subject to the same types of income and credit score restrictions that protect banks making traditional loans. Wells Fargo said that makes it difficult to figure out if seniors are able to afford property tax and homeowners' insurance payments.

In February, Bank of America also announced that it would exit the reverse mortgage origination business.

Wells Fargo to stop making reverse mortgages - Yahoo! News

Plus as they do this they are cutting out jobs.....guess they will be stopping most of those commercials. Think what this is going to do to seniors who were looking to do this. Or were planning on it in a few years. Not to mention they are talking about the end of 30 yr mortgages. Thoughts?
 
Jan 2007
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If property values are tougher to estimate, then one could easily reduce allowable LTV's to cover that risk. I wonder if they will still offer HECMs (Home Equity Conversion Mortgages)?

Suspect the problem is more related to the number of seniors with sufficient equity in their home to access the product and thus the potential profit for Wells Fargo and Bank of America. And if that is the case, that should be scary news for those who desire to shift the tax cut for the rich burden onto the shoulders of the elderly.