Wells Fargo to stop offering reverse mortgages
UPDATED REPORT
JEREMY HOBSON: Well here in this country Wells Fargo is getting out of the reverse mortgage business. A reverse mortgage allows senior citizens to turn the value of their homes into a stream of monthly income. But Wells Fargo which is the nation’s biggest reverse mortgage lender says they’ve become too risky.
Marketplace’s Jeff Horwich reports.
JEFF HORWICH: Reverse mortgages gained popularity during the housing boom. If you’re at least 62 you could get a loan, based on the value of your house. And instead of you sending a monthly mortgage check to the bank, they send one to you. When you die — or if don’t keep up with property tax or home insurance payments — the house is sold to pay off the loan.
Nicolas Retsinas is director of the Joint Center for Housing Studies at Harvard.
NICOLAS RETSINAS: This is a great product in a time of rising home prices because your collateral every day gets stronger and stronger. In the environment we’re in now, there is a danger that the value can go down.
Wells Fargo says it became too difficult to predict the risk of seniors losing their home prematurely. Bank of America got out of the reverse mortgage game earlier this year.
I’m Jeff Horwich for Marketplace.
ORIGINAL REPORT
STEVE CHIOTAKIS: First this morning, the country’s biggest reverse mortgage lender, Wells Fargo, says it’s done with them.
Marketplace’s Jeff Horwich now. The bank found those types of mortgages were too risky.
JEFF HORWICH: In a reverse mortgage, instead of you sending a mortgage payment to the bank, the bank sends a check to you. Basically the bank gives you a loan based on the value of your paid-off house — you can get one if you’re at least 62. Now Wells Fargo is out, and Bank of America stopped writing new reverse mortgages earlier this year.
Nicolas Retsinas is director of the Joint Center for Housing Studies at Harvard.
NICOLAS RETSINAS: One more door is shut in terms of how seniors can find the money to survive as they age. It wasn’t a product that was wildly popular, but for a number of seniors it was an option.
The problem is home values. A reverse mortgage ends when the senior dies, or fails to pay property taxes or home insurance. In whatever case, somebody — either an heir or the bank — has to sell the house and pay off the loan. Nowadays, Retsinas says that’s not so easy.
RETSINAS: It’s a wonderful product in a time of rising home values. When values are falling, it becomes a more difficult product.
Reverse mortgages are still available from a dwindling number of banks.
I’m Jeff Horwich for Marketplace.
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