Wells Fargo stops making reverse mortgages
NEW YORK (Reuters) - Wells Fargo & Co (WFC.N), the fourth-biggest U.S. bank, said it will no longer make reverse mortgages because home prices are too unpredictable.
Wells Fargo was the biggest maker of reverse home loans in the United States. Reverse mortgages allow senior citizens to receive monthly payments from a bank that are essentially loans backed by the borrower's home. The loan is usually due when the borrower moves or dies.
Reverse mortgages are supported by a government program designed in 1987. The loans are complicated by unpredictable home prices and restrictions that make it difficult to know if borrowers will be able to make payments on property taxes and insurance policies.
"The government's ... reverse mortgage program was designed in a different economic time," Wells Fargo said in a statement.
These loans made up 2.2 percent of Wells consumer mortgage volume, the bank said. Some 1,000 people who worked for Wells on the product will be offered other jobs, the statement said.
Demand for the loans declined sharply last year after the government reduced the amount of cash that borrowers could take out on loans it backed, said John Lunde, president of Reverse Market Insight, a collector of industry data based in Aliso Viejo, California.
Wells has been the market leader with nearly 25 percent of all reverse mortgage loans to consumers in the 12 months through May, according to Lunde.
Wells said it will continue to service existing reverse mortgages.
(Reporting by David Henry; Editing by Gary Hill)