For several years I have had borrowers tell me that this is the last-ditch pitch that they received from a loan originator from a well -known competitor when that company was unable or unwilling to match or beat the rate and fee structure, we offered the client for their reverse mortgage transaction.

They argued with the borrower that the borrower should close a loan with their company because they were not selling the servicing on their loans, even though the loans cost more in fees and in most instances the rates were higher and it often meant that they received less money on their loan as a result.

HUD Guarantees Terms, Not the lender

That alone confused me because both loans are HUD insured and whether servicing is sold or not, the terms of the loan are set in the loan documents before the loan closed and could not be changed afterward, regardless of whether or not the underlying holder of the loan changed at some point in the future.

I would point out that literally EVERY lender who had been the #1 lender for reverse mortgages (including Wells Fargo & Bank of America) had changed their plans at some point and did end up selling some or all of their servicing, even if they did not in the beginning or did not intend to at time, they originated the loan.

I explained that selling the servicing was commonplace in the world of lending/mortgage banking and that did not endanger the borrower as the terms were already set and could not be altered by a new lender.

I showed borrowers the difference between the loan being offered by our company and the competitor, sometimes thousands of dollars in differences at closing and even more over time with the lower rates we were offering, and yet some still chose to stay with the competitor based on the fear of having their servicing sold to an unknown lender at some point and the promise of staying with one lender, even if it was going to cost them dearly.

Again a Top Reverse Mortgage Lender by Volume Sells Their Servicing Portfolio

To those borrowers I can only say I am truly sorry.  Today came an announcement that this competitor (AAG) just agreed to sell their servicing portfolio!  And if you read the comments by the newly appointed President and COO, Ed Robinson, “Servicing transfers are a common business transaction in the mortgage industry… The transfer does not alter the terms of the loans or interrupt the servicing of those loans.”  Mr. Robinson is 100% correct and is now saying exactly what we have been telling borrowers for years.

It’s just a shame that many borrowers did not have the wisdom of Mr. Robinson’s words to consider as their loan officer told them they should take their loan offering rather than a lower rate, lower fees option on the promise that they don’t sell servicing and that somehow, they were in grave danger if they went with a company that did.

They may not have been selling servicing at the time, but no one can promise that they never will in the future and that is why the servicing disclosure given to all borrowers only tells them the percentages of loans on which the company transfers servicing at that time – it makes no promises of future actions.

Is it Bad If Your Lender Sells Your Mortgage?

The bottom line is that the servicing transfer disclosure will tell you what a company is currently doing but it won’t guarantee that their future goals or needs will not change.  AAG just joins all the other top reverse mortgage companies that have now sold off their servicing portfolio.  Does this make AAG a bad company or does it imply problems?

No, it doesn’t.  It just means that they made the decision for whatever reason that now was the right time to sell their servicing and whether they sell more in the future or start to build again, only they know for sure but as a borrower, you need to look at the loan terms being offered to you and compare to other companies and take the terms that are best for YOU.

Don’t fall into the trap of “we don’t sell our loans” to close a more expensive loan with one company and then find yourself receiving the same notification that more than 75,000 borrowers did that are now working with a new lender even though some of them undoubtedly are among the ones who chose not to close with us on the promise of never moving lenders.

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