Does Mutual of Omaha Bank’s purchase signal the return of big banks?
Industry veterans can recall when big banks reigned supreme. Wells Fargo, Bank of America, and MetLife accounted for the majority of reverse mortgage loan production; that is before their ultimate exit from HECM lending. In June 2011 a New York Times column noted the following in the wake of Bank of America’s exit and Wells Fargo’s announced planned departure. “The nation’s two biggest providers of reverse mortgages are no longer offering the loans, as the economics of the business have come under pressure. The loans have increasingly become a riskier proposition. Banks are not allowed to assess borrowers’ ability to keep up with all their payments, and more borrowers do not have the wherewithal to stay current on their homeowners’ insurance and property taxes, both of which have risen in many parts of the country.”
While citing concerns of defaults resulting from nonpayment of property charges, many suspected the banks were apprehensive of reputation risk when foreclosing on defaulted HECM loans. In November 2011 Met Life announced their plans to implement their own financial assessment. A short time later in April 2012 Met Life announced their exit.
Fast-forward to last week’s announcement of Mutual of Omaha Bank’s purchase of Synergy One Lending (the parent company of Retirement Funding Solutions). This came as quite a surprise to industry participants who remember big banks fleeing the space and more so as the industry has struggled to return to significant gains in endorsement volume. According to Reverse Mortgage Daily, Mutual of Omaha entered into discussions last summer- before HUD dramatically curtailed the HECM with changes implemented last October. While many lamented the changes they did not derail the planned purchase. “That was a good long-term change for the product, and it’s still a very attractive product for a lot of borrowers. We’re excited to jump into the space. We just think the timing is right”, said Terry Connealy, president of Mutual of Omaha Mortgage. He added the changes make the HECM a “much more customer-friendly and safer product.”
Just as many regional lenders have embraced the concept of ‘generational lending’- offering mortgage products to their customers throughout all stages of life- Mutual of Omaha is embracing the approach on a national level. More importantly, Mutual brings the power of a trusted and well-known brand to the marketplace. While Synergy One will operate under its own name after the deal is inked, eventually the HECM will be marketed under the Mutual of Omaha brand In addition, they hold the distinct advantage being a federally-chartered bank not being burdened with the requirements of state licensing for their sales force.
Does Mutual of Omaha’s entry signal the eventual return of national brand banks to HECM lending? If so, would their return push our industry closer to a steady footing of sustainable growth in the wake of countless product changes and cutbacks? While counterintuitive on its face, the purchase mirrors the choice of countless corporations to strategically enter an industry in midst of a market downturn. Perhaps Mutual of Omaha’s will be welcomed as long lost friend, one whose help is sorely needed.