ABA Banking Journal - August 2011 - (Page 38)

Mortgage Lending: Reverse Engines Will local players win reverse mortgage turf? By Steve Cocheo, executive editor A bout a year ago, Susquehanna Bank found itself at a tipping point in its reverse mortgage efforts. The $13.8 billion-assets bank, with offices in Pennsylvania and Maryland, had been making the atypical loans since 2007, and had three mortgage officers devoted to handling them. But the federal program they are made under was going through changes, real estate markets were going through spasms, and reverse mortgages were becoming more challenging to make. “Susquehanna was caught between having to insource the whole thing or outsource the whole thing,” says Chad Neiss, senior vice-president and mortgage sales division manager at Susquehanna. A solution was found—one that points up a potential advantage in this space for community banks. But first, what makes reverse mortgages such a challenging choice all around? Not your average home loan Reverse mortgages, for many banks, have been like that unusual cousin that you see at annu- al family reunions. You either find yourself drawn to the cousin, or you try to hide behind a pillar in the catering hall when you spot him. First, there’s the concept. It’s not one that everyone can immediately get their mind around. A reverse mortgage is a special type of home loan that allows a qualifying homeowner to convert a portion of the equity in the home into cash, made available in a number of ways. Unlike a traditional second mortgage or home equity loan or line of credit, there is no repayment cycle during the homeowner’s remaining use of the home as a primary residence. While the various financial obligations any homeowner and borrower must pay—such as insurance and taxes—continue to be due as usual, no principal or interest must be paid while the homeowner lives in the house or dwelling unit (such as a condo) securing the loan. Evaluation of the equity in the home serves as the primary lending criteria, rather than, say, borrower assets and income. The loan is paid off through 38  |  ABA BANKING JOURNAL  |  August 2011

Table of Contents for the Digital Edition of ABA Banking Journal - August 2011

ABA Banking Journal - August 2011
Content
Chairman’s View
Editor’s Column
The Economy
Bank Notes
ABA Community Banking
Pass the Aspirin
Tech Topics
Cover Report: Branch Banking
Branch Design Portfolio
Will Local Players Win Reverse Mortgage Turf?
Compliance Clinic
Compliance Inbox
ABA Resources
Legal Issues
First Person

ABA Banking Journal - August 2011

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