Wendover Financial Services Corp. has sold its reverse mortgage origination business to a Florida lender and plans to focus on the servicing of such loans.
Senior Homeowners Financial Services of Fort Lauderdale acquired Wendover's approximately 17-employee wholesale staff, which has relationships with 150 correspondents around the country.
A reverse mortgage is a type of home equity loan geared to the elderly. It enables homeowners to convert their equity into cash. Repayment is generally due when the borrower dies or moves out of the home.
Wendover, a unit of Electronic Data Systems, originated 5,700 reverse mortgages last year, about 60% of the market. The dollar amount of these loans is hard to determine because it is not known how long the borrower will remain in the house, and therefore how big the mortgage balance will grow.
Terms of the sale were not disclosed. Wendover retained its $1 billion portfolio of servicing rights on reverse mortgages. But from now on, Senior Homeowners will keep the servicing rights on all loans originated by the wholesale production department, and hire Wendover to subservice the loans.
Prior to the acquisition, Senior Homeowners was strictly a retail originator. But now it will phase out its retail production and get all its loans from the wholesale channel, which will remain in Greensboro, N.C., where Wendover is based.
"We are not going to compete with our correspondents," said Richard Gangel, chairman and chief executive of Senior Homeowners.
The company will, however, share the marketing expertise it has honed as a retail originator with its correspondents, and train them in the idiosyncrasies of the reverse mortgage market.
"We can lend a new dimension to the loan correspondents doing business out there," Mr. Gangel said. "Because we come to it from a retailer's point of view, we can serve our correspondents from their perspective."
Mr. Gangel added that the deal with Wendover makes sense because "they're transaction- and process-oriented, and we're marketing-oriented."
Michael Hyman, senior vice president at Wendover, said his company decided to focus exclusively on servicing of reverse mortgages because the business has become more complicated in recent years as Congress, the Department of Housing and Urban Development, and Fannie Mae have added consumer protections. "To properly address them, we need to boost capabilities of our program and focus specifically on servicing," he said.
With baby boomers aging, the reverse mortgage market has great potential, Mr. Hyman said. And reverse lenders' volumes have not been affected by the rise in interest rates, which has curtailed the conventional mortgage market. Higher rates reduce the proceeds a reverse borrower can get, but they don't affect the decision to get a reverse mortgage, Mr. Hyman said. "It's an excellent contracyclical program," he said.