Wells Fargo announced on Thursday that it was exiting its reverse mortgages business, as Bank of America did earlier this year.
Reverse mortgages, in which banks loan money to seniors that is payable upon death or sale of a house, have become unprofitable amid declining home prices. But last straw for Wells was a disagreement with the Department of Housing and Urban Development.
An email from Wells VP Phil Bracken, obtained by American Banker, expresed concern that HUD would force banks to foreclose on insolvent seniors: “The last straw in our decision was the recent HUD decision to require servicers to initiate foreclosure on the Senior Reverse Mortgage customers [who] could not pay their taxes and insurance. When a product or program creates more reputation risk than value … well … you get the picture.”
For Wells it’s a nice bit of news to leak, which makes it seem like the bank cares about your seniors. However, the move is motivated by the bottom line. Banks would rather keep grandma in the home for another few years while the property value recovers.
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