If you are deciding on whether a reverse mortgage loan is right for you, you’ll naturally want to determine which lending institution to go with, especially when it comes to the most beneficial terms and the associated costs. Obviously, one of the easiest things you can do is to simply go to the bank you already transact with for daily financial tasks to see if they offer reverse mortgages, but chances are that your own bank may not offer such reverse mortgage loans to its senior customers.
A lot of internet searches may also yield some inaccurate information concerning banks which may have offered reverse mortgages at one point, but which no longer do. For instance, major banking institutions like Wells Fargo and Bank of America offered reverse mortgage loans in the past and opted to discontinue their offerings several years ago. However, because of those banks’ ubiquity in American finance, searches may still associate those organizations with reverse mortgages.
Still, there are some banks that offer reverse mortgages today.
In this article you will learn:
- The difference between banks and other lenders when it comes to reverse mortgages
- Which banks offer reverse mortgages
- Why some big banks exited the reverse mortgage business
What is the difference between banks and other reverse mortgage lenders?
When asking which kind of institution someone should get a reverse mortgage from, one natural question that may arise is whether a bank offering such a loan has any material advantage over other kinds of reverse mortgage lenders that exist. The truth is, though, that there is not an abundance of difference between the kind of reverse mortgage you can get at some banks which offer them, and other dedicated reverse mortgage lenders except for the staff that you would deal with, as well as the possibility that a bank has its own private version of a traditional reverse mortgage product.
As of early 2021, no bank in the United States offers its own proprietary reverse mortgage product. The banks which participate in offering reverse mortgages instead offer the traditional Federal Housing Administration (FHA)-sponsored version of the reverse mortgage, which is called a “Home Equity Conversion Mortgage (HECM).”
So, in the end, there is no real difference between the kind of reverse mortgage you could get at a bank, or the kind you can get from another lender. In fact, if you own a higher-value home and will need a proprietary reverse mortgage with a higher lending limit than the HECM’s $970,800 limit, you may have fewer reverse mortgage options at a bank when compared with a dedicated reverse mortgage lender.
On top of this, because FHA sponsors and insures most reverse mortgage loans, there really is no material difference between getting such a loan from a bank, or from a non-bank lender or broker. Banks also have a different set of regulations they must conform to when compared with non-banks, both at the federal and state levels.
Which banks offer reverse mortgages?
As of April 2021, there are several regional banks across the country which offer reverse mortgages. These include Quontic Bank; M&T Bank; The Federal Savings Bank; Townebank; FirstBank; and Goldwater Bank. Before deciding to transact with any reverse mortgage lender including banks, it is a good idea to thoroughly research their reputation and customer ratings as well as to shop around for the best rates.
Up until late 2019, an additional bank called Resolute Bank offered reverse mortgages to customers across the country, but they exited the reverse mortgage industry only days before they were forced to close by the Federal Deposit Insurance Corporation (FDIC). All depositors at Resolute were moved to another banking institution, and that successor bank does not offer reverse mortgages.
Why did the big banks get out of the reverse mortgage business?
There is no one, single reason that big banks like Bank of America and Wells Fargo decided to exit the reverse mortgage business. One reason may be that reverse mortgages are highly regulated by the federal government which may have added to the difficulty for larger, less-focused institutions to hold onto reverse mortgage business. Many of the major banks that exited the reverse mortgage industry did so only a few years after the recovery from the 2008-2009 financial crisis began in earnest, which may have caused banks to take a harder look at the products and services they offered.
Another reason may just be that because a big bank’s focus will naturally be on more conventional products that serve large numbers of people, they just decided to focus their efforts on more traditional offerings. It is also possible that the lack of financial assessment requirements on the part of the government may have made larger banks reluctant to be involved in the industry, though financial assessment requirements were introduced into the reverse mortgage industry back in 2015. Big banks have not returned to offering reverse mortgages since then, however.
In the end, the type of lender you choose is a personal decision and you will find many options among smaller banks which do offer the loans or dedicated reverse mortgage lenders or brokers.