Bank of America is shuttering the reverse mortgage portion of its business. Image: Flickr / MoneyBlogNewz / CC-BY
Tuesday morning, Feb. 8, Bank of America announced it will no longer write reverse mortgages. The reverse mortgage business has dropped off significantly in the last year. A rising number of reverse mortgages are also ending up in technical default.
Bank of America and reverse mortgages
Bank of America first started offering reverse mortgages in 2006. In 2007, Bank of America purchased Reverse Mortgage America. In 2008, Bank of America purchased Countrywide Financial Corporation and took over its mortgages and reverse mortgage operations in Reno, Nevada, and around the nation. As of early 2011, Bank of America will close down all reverse mortgage operations and move the 600 employees to other divisions within the bank. All those who hold or are currently applying for Bank of America reverse mortgages will still be serviced by the bank.
A reduction in the reverse mortgage business
Reverse mortgages — in which homeowners sell their home back to the bank over time — have dropped in popularity. The number of new reverse mortgages written dropped by more than a third in 2009, and dropped again in 2010. The number of homeowners who are technically in default on their reverse mortgages is also increasing. A reverse mortgage default is more difficult to parse, because going into “default” means not paying taxes on the property or keeping it maintained. Many seniors are facing the choice of taking out no fax payday loans to keep their home maintained or lose their main source of secondary income.
The benefit of reverse mortgages
Reverse mortgages are currently losing popularity. Many senior citizens are outliving their reverse mortgages, or defaulting from lack of maintenance on the home. In some situations, however, a reverse mortgage can help individuals pull equity out of their homes without having to try to sell the home. In short, reverse mortgages may be helpful at times, but they are often extended beyond the intended use of the product.
