Yet another household name has given up making reverse mortgages — loans that let borrowers age 62 and older tap the equity in their houses without having to make monthly payments. The lenders get their money back once the borrowers move or die (and their relatives sell the house).
MetLife said recently that it would stop making reverse mortgages, as part of a general exit of the banking industry. MetLife, a major insurance provider, cited the burden of having to comply with banking regulations even though its MetLife Bank represented a small portion of its business. “We’re an insurance company,” said a MetLife spokesman, John Calagna.
MetLife follows Bank of America and Wells Fargo, both of which stopped offering reverse mortgages to consumers last year.
In general, the loans, at least for now, are less attractive to some homeowners because of the decline in home equity as a result of the housing crisis, as well as a regulatory change that lowered the maximum payout that most reverse-mortgage borrowers could receive.
Borrowers who may benefit from a reverse mortgage to help finance their retirement can still find one. An overwhelming majority of reverse mortgages are insured by the Department of Housing and Urban Development’s Federal Housing Administration arm, through its “home equity conversion mortgage,” or H.E.C.M, program. So just because a specific lender exits the market doesn’t mean the product has gone away.
But the retreat of brand-name banks means borrowers may have to rely on lenders with names that are less familiar. “To the extent there are fewer players, there’s a chance it may be harder to access somebody in your neighborhood — a local lender — who could sit with you, face to face,” said Barbara Stucki, vice president of home equity initiatives with the National Council on Aging.
Peter Bell, president and chief executive of the National Reverse Mortgage Lenders Association, said the exit of large banks opened the door for more specialized lenders, like Urban Financial Group, One Reverse Mortgage (a unit of Quicken Loans) and Generation Mortgage, to gain more business. Borrowers may have to shop around to find the specific variety of reverse mortgage they want, since not all lenders may offer every option.
The new prevalence of lesser-known lenders, however, means it is even more important that borrowers do their homework, and complete free or low-cost mandatory counseling before applying for a reverse mortgage, Ms. Stucki said. “We continue to urge people to talk to a H.U.D.-approved reverse-mortgage counselor, before they talk with a lender,” she said. A list of approved counselors is available on H.U.D.’s Web site.
Have you sought a reverse mortgage recently? What was your experience?