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Reverse Mortgage News for Seniors

Wells Fargo Becomes Second Big Bank to Discontinue Reverse Mortgages for Seniors

WF will continue to service existing reverse mortgages held by senior citizens

June 20, 2011 - The reverse mortgage program for senior citizens is in serious trouble. Last week banking giant Wells Fargo announced it will discontinue issuing these special mortgages, joining Bank of America, who did the same earlier this year. These two banks were providing about 43 percent of all reverse mortgages in the U.S.

Wells Fargo said the decision was made based on “today’s unpredictable home values along with the 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.”

 

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Maggie Shader, reporting for Consumer Reports, said, “Wells Fargo reported that the inability to evaluate homeowner’s financial health was a large factor in its decision to end its reverse mortgage program.”

“The government’s HECM, or reverse mortgage program, was designed in a different economic time,” according to Wells Fargo.

The Home Equity Conversion Mortgages (HECM), commonly known as reverse mortgages, is a U.S. Department of Housing and Urban Development reverse mortgage program that was designed for senior citizens in 1987.

HUD reports 50,000 reverse mortgages have been made since last October.

Wells Fargo Home Mortgage began originating reverse mortgages in 1990. As of 2010, the funded volume of reverse mortgage business was approximately 2.2% of our retail mortgage volume and represents about 1.2% of overall mortgage volume.

Consumer Reports says, “Reverse mortgages let homeowners at least 62 years old use their home equity to take out a payment-free loan. The lending bank does not pay the homeowner based on income, but rather on age, property value, and loan interest rate. Generally, the older you are, the higher the value of your home, and the lower the interest rate, the more money you can borrow. The bank gets its money back when you die or permanently move out and the home can be sold.”

“Wells Fargo will continue to service the loans of existing (HECM) reverse mortgage customers,” said Franklin Codel, executive vice president, head of National Consumer Lending, “We will continue to provide options for seniors who wish to determine ways to access the equity in their homes.”

Wells Fargo’s news release said it “takes great pride in the exceptional work that its reverse mortgage team has done to build the HECM business over the past 20 years. The company’s 1000 reverse team members will be provided with opportunities to apply for other open positions within Wells Fargo’s 80 plus businesses.”

Wells Fargo Home Mortgage customers with reverse mortgages may call the company with questions at 800-472-3209. Wells Fargo Home Mortgage customers with a reverse mortgage loan application in process may call their reverse mortgage consultant with questions. New applications will not be accepted after June 30, 2011.

Consumer Reports says, “For seniors reverse mortgages can carry big risks and come at a high cost. At the end of 2010 advocates called for stricter oversight of the reverse mortgage market. Consumers Union, the non-profit publisher of Consumer Reports, supported the action.

“Earlier this year, the AARP sued the Department of Housing and Urban Development over reverse-mortgage foreclosures. The lawsuit stated that confusing rules and unfair policy changes for federally insured reverse mortgages have forced some borrowers into foreclosure.”

About Wells Fargo (company statement)

Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.2 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 9,000 stores, 12,000 ATMs, the Internet (wellsfargo.com and wachovia.com), and other distribution channels across North America and internationally. With approximately 280,000 team members, Wells Fargo serves one in three households in America. Wells Fargo & Company was ranked No. 23 on Fortune’s 2011 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially.

>> For the bottom line when it comes to fixed-rate reverse mortgages click here. From the March issue of Consumer Reports.

>> Mortgage Giants Wells Fargo and Bank of America Opt Out of Reverse Mortgage Business [Time]

>> 2 Big Banks Exit Reverse Mortgage Business (New York Times)

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