Wells Fargo Home Mortgage says it will discontinue its origination of Home Equity Conversion Mortgages (HECMs), bringing to a close the company's more than 20-year run originating the reverse-mortgage product.
Wells Fargo began originating reverse mortgages in 1990 – three years after the U.S. Department of Housing and Urban Development launched the HECM program. The funded volume of Wells Fargo's reverse-mortgage business last year was approximately 2.2% of the company's retail mortgage volume, representing about 1.2% of overall mortgage volume.
The company will continue servicing the accounts of existing HECM borrowers, and Wells Fargo's approximately 1,000 reverse mortgage specialists will have opportunities to apply for other open positions at the company.
Wells Fargo says unpredictable home values, as well as the difficulty that the company had assessing seniors' abilities to meet the obligations of their HECMs (e.g., paying property taxes and homeowners' insurance), led to the decision to stop originating reverse mortgages.
"The government's HECM, or reverse-mortgage, program was designed in a different economic time," the company said in a statement.
Responding to the announcement, Petere Bell, president of the National Reverse Mortgage Lenders Association (NRMLA), said Wells Fargo's presence in the space would be missed but that demand for HECMs remains strong. Citing HUD's recently introduced HECM Saver product, Bell noted that the government's reverse-mortgage program has evolved in step with a changing economy.
He also suggested more changes may be on the way.
"NRMLA has been working with HUD to develop and implement procedures to undertake a financial assessment of prospective borrowers' income and expenses to determine their ability to pay taxes and insurance charges after obtaining a HECM or to establish a set-aside of funds to pay such charges," Bell said. "It is anticipated that the department will be issuing a rule change in the future to provide HECM lenders with the discretion to make these necessary underwriting changes."