Lenders Urge Permitting Sales of Reverse-Mortgaged Homes

Sente Mortgage and Scott Norman, VP Reverse Mortgage Division, were featured in the following article from austinbusinessjournal.com.

austinbusinessjournal.com (October, 12-18 2012) – Texas is the second largest market for reverse mortgages in the nation, and industry leaders plan to meet here this month for the national convention. But while national reverse mortgage lenders focus on educating the public about their product, Texas lenders are targeting legislators to change the laws that don’t allow the sale of a home with a reverse mortgage. Texas approved reverse mortgage lending in 1999, but it remains the only state in the nation that prohibits selling a home with a reverse mortgage, also called a home equity conversion mortgage, said Scott Norman, the former executive director of the Texas Association of Reverse Mortgage Lenders, which he founded in 1999.

Since 60 percent of Americans are without an individual retirement account or a 401k plan, home equity has become the largest source of capital for many Americans, he said. The government created the reverse mortgage program in 1987 to help house rich, cash-poor senior citizens borrow against their home equity to generate a lump sum or a stream of monthly income. The loan is repaid when the home is sold after the borrower moves or dies. Reverse mortgages, which became available in Texas in 2001, are designed for homeowners 62 and older.

About 625 people are scheduled to attend the annual meeting of the National Reverse Mortgage Lenders Association, or NRMLA, in San Antonio Oct. 15-17. The main focus of the event is expected to be strategies designed to broaden consumer acceptance of reverse mortgages, NRMLA CEO Peter Bell said. Such acceptance has surged nationally this year as financial planners increasingly use reverse mortgages as part of overall money management strategies, he said. Yet some major banks are not on board with the idea. Last year, Wells Fargo & Co. (NYSE: FC) and Bank of America Corp. (NYSE: BAC) exited the reverse mortgage business. San Francisco-based Wells Fargo — which representemd the largest market share in Austin, about 20.3 percent —attributed its decision to “unpredictable home values.” Wells Fargo, the nation’s largest originator of home mortgages, began extending reverse mortgages in 1990. But the bank’s exit signaled the up-ending of business models created over decades of generally rising asset values. Wells officials said the “reverse mortgage program was designed in a different economic time.” In April, the NRMLA reported that senior home equity increased by $30 billion during the fourth quarter 2011. Seniors have $3.22 trillion in home equity available, according to the most recent NRMLA/Risk Span Reverse Mortgage Market Index.

Texas is No. 2 in the nation for the volume of reverse mortgages. Nearly 50,000 senior homeowners have obtained them in Texas. Yet, the Texas Department of Savings and Mortgage Lending hasn’t issued a single enforcement action against a licensed reverse mortgage loan originator during the last six years, Norman said. Some large banks have withdrawn from the reverse mortgage lending because the complexity of such deals is heightened during an economic downturn, said Joe Holt, chairman of the Austin region for JPMorgan Chase Bank NA. “In an economy that’s struggling, it’s even more pronounced for the senior category, which depends on a fixed income for living,” he said.

State Sen. John Corona, R-Dallas, is among the advocates for constitutional changes to allow reverse mortgage purchases. Corona, chairman of the Senate Committee on Business and Commerce, couldn’t be reached for comment. Business and Commerce Committee Director Steven Polunsky said it’s unclear whether Corona plans to introduce legislation during the upcoming session because the committee is dealing with other issues such as water and energy matters. “I think he’d like to see a program that gives freedom to people to invest and handle their finances in the way they choose,” Polunsky said.