Quicken Loans to close One Reverse Mortgage

Posted: 27 February 2020 4:38 pm
News

A conceptual image showing a reverse mortgage with a home sitting on a pile of money and a hand dropping coins slowly in a piggy bank.

The nation’s largest online mortgage lender has folded its bet on reverse mortgages.

Quicken Loans has announced that its reverse mortgage platform One Reverse Mortgage will be folded into its online mortgage platform Rocket Mortgage. Rocket Mortgage is the largest online provider of mortgages in the United States.

The move encompasses the transfer of all One Reverse Mortgage accounts and employees to Rocket Mortgage. One Reverse Mortgage will cease originating new reverse mortgages, with Rocket Mortgage taking full responsibility for the servicing of One Reverse Mortgage’s existing portfolio.

“As the nation’s largest lender, we are constantly evaluating our portfolio to make sure we are delivering the most sought after financial solutions to our clients at all times,” Quicken Loans said in a statement, per HousingWire.

“As the Rocket Mortgage brand continues to grow, and we see demand shifting from the reverse mortgage market, we have made the decision to pause reverse mortgage originations and transition all current One Reverse Mortgage team members to positions with Rocket Mortgage. This move will allow us to leverage the skill and expertise of our ORM team members to quickly scale and meet the unprecedented demand Rocket Mortgage is experiencing as it grows its position as America’s largest mortgage lender.”

Reverse mortgages

Reverse mortgages, or home equity conversion mortgages, are personal loans that use personal homes as collateral. These types of mortgages differ from traditional mortgages in several important ways, most notably that they convert the homeowner’s equity into payments to the homeowner rather than converting payments from the homeowner into equity. Reverse mortgages usually have a growing principal in the form of a line of credit or an installment-based loan, like an annuity or term-based loan. This differs from traditional mortgages, which have a fixed principal paid in one lump sum. The payoff for the reverse mortgage, however, can never exceed the value of the home. If the payoff does become more than the home value, the loanee or the loanee’s estate is not responsible for the difference.

Second, repayment on a reverse mortgage is not due until the loanee moves or dies. Reverse mortgages are limited to loanees 62 years old or older. At that time, the loan is activated, with failure to pay off the loan resulting in the foreclosure of the collateral. If the house is sold, the proceeds of the sale go toward paying off the reverse mortgage, plus any associated fees. The loanee’s estate is typically given a chance to satisfy the loan in order to keep the house.

As HECMs typically carry a higher interest rate than traditional forward loans, the popularity of reverse mortgages has been dropping. This is buoyed by the record-low mortgage interest rates. If one has good credit and the means to make the monthly payments, it can be financially beneficial to avoid reverse mortgages.

This reality is not lost on the industry. In May, Live Well Financial also stopped the origination of new reverse mortgages. The company would shut down shortly after that, following improprieties from the company’s leadership.

In February, the Urban Institute found that reverse mortgages were one of the worst-performing home equity-extracting products. “At a time when seniors are sitting on a mountain of housing wealth and have anxiety about their finances, this should be a well-used program,” the researchers wrote. “Instead, despite rising senior population, participation [in the reverse mortgage market] decreased between 2011 and 2018, from 73,112 to 33,000 mortgages.”

The institute credits this to the complexity of the product, the optionality of many of its features and the fact that many seniors are unnerved by the idea of giving up their equity.

Photo credits: Wikimedia

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