Biggest Banks Cut Reverse Mortgages

Wow, never thought I’d see this day! 

Bank of America and Wells Fargo, the two biggest providers of reverse mortgage will no longer be offering reverse mortgages.  Bank of America was the first to depart in February with Wells Fargo following late June.

These two biggest players represented 43% of the business according to Reverse Market Insight.  Prospective borrowers will most likely find it difficult to access the mortgages.

The point of reverse mortgages is to allow people age 62 and over to tap what might be there biggest asset without having to make payments.  The bank pays the borrowers and the borrowers continue to be responsble for property taxes and homeowner’s insurance.

Banks are not allowed to assess borrowers’ ability to keep up with their payments and more borrowers have difficulties paying their property taxes and homeowner’s insurance, which have both gone up.

Why in the world are property taxes and homeowner’s insurance going up NOW?  It just doesn’t seem like a good time…

Regardless, these new property taxes and homeowner’s insurance have increased the number of foreclosures and Bank of America saw at least 4 to 5% of reverse mortgage in default.

I’m not sure what affect this will have on the segment of the population over 62.  Wells Fargo and Bank of America have had to lay off about half of the staff working on reverse mortgages.  So we have less 62+ with reverse mortgage options and we have less people employed.