When considering a reverse mortgage, choosing the right lender is crucial.  While you may be familiar with big national or regional banks for traditional mortgage loans, reverse mortgages work a little differently.  Some smaller regional banks do offer reverse mortgages, but major players like Wells Fargo, Chase, and Bank of America typically do not.

If you visit one of these large banks for a reverse mortgage, they might refer you to an outside loan specialist.  As with any mortgage, it’s important to shop around and find a lender specializing in reverse mortgages and one you feel comfortable working with.

The Shift Away from Reverse Mortgages: Why Major Banks Stepped Back

In the past, some of the largest banks—like Bank of America, Wells Fargo, and Metlife Bank—were major players in the reverse mortgage market.  However, these big names stopped offering reverse mortgages after the financial crisis.

Bank of America announced in February 2011 that it would no longer offer reverse mortgages, stating it wasn’t part of its “core” business.  Wells Fargo followed later that year, citing concerns about home price fluctuations and borrowers’ ability to meet loan obligations.  Around the same time, MetLife exited the banking industry entirely, selling its deposit business to GE Capital Retail Bank.

Before exiting, Wells Fargo had originated over 16,000 reverse mortgages in the previous year.  More recently, American Advisors Group (AAG), a major national player in the reverse mortgage market, sold its servicing portfolio, reflecting a broader trend among financial institutions to rethink their role in the reverse mortgage space.

This shift highlights changes in market conditions, regulatory challenges, and strategic decisions by large financial institutions to realign their focus away from reverse mortgages.

Banks vs. Non-Bank Lenders: What’s the Difference?

When it comes to reverse mortgage lenders, they generally fall into two categories: banks and non-banks.  Banks, which take deposits or investments from customers, use that money to offer loans.  Non-bank lenders, like finance companies, are funded through other means.

One major difference is that banks face stricter regulations and are required to carry insurance for consumer deposits through the Federal Deposit Insurance Corporation (FDIC).  Non-bank lenders, while still regulated, don’t offer the same FDIC insurance protections for deposits.

Interestingly, some reverse mortgage lenders can fall into both categories, operating as both banks and non-banks, depending on how they’re structured.

Evaluating Non-Bank Lenders for Reverse Mortgages: Pros and Cons

Regarding reverse mortgages, there isn’t much difference between banks and non-bank lenders in terms of loan structure.  Most reverse mortgages today are HUD Home Equity Conversion Mortgage (HECM), which means they all follow the same HUD guidelines, regardless of the lender.

Since all HECM loans follow the same rules, the decision largely depends on the pricing and service the lender offers.  Even if you typically prefer working with banks, it’s also worth considering non-bank lenders.  Be sure to check customer ratings and the services provided by non-bank lenders like All Reverse Mortgage, Inc., where you can often find better pricing and superior service—while still getting the same loan terms.

In 2024, several banks continue to offer reverse mortgages.  The Federal Savings Bank, in business for 13 years, has originated 96 reverse mortgages in the past year with a review rating of 4.49/5 and 89.8% positive reviews.  Magnolia Bank, in business for 105 years, originated 39 reverse mortgages, receiving a 3.00/5 rating with 60% positive reviews.  Bank of England, with 126 years of service, has not originated any reverse mortgages recently and holds a low review rating of 1.67/5 with 33.4% positive reviews.  University Bank, in business for 28 years, has originated 88 reverse mortgages but lacks review data.  Allied First Bank, with 29 years in business, originated 29 reverse mortgages, earning a 3.92/5 rating and 78.4% positive reviews.

This summary overviews each bank’s reverse mortgage activity and customer satisfaction in 2024.

Top FAQs

• Lenders offering reverse mortgages fall into two categories: banks and non-bank lending institutions.
• Since FHA insures nearly 99% of reverse mortgages through the Home Equity Conversion Mortgage (HECM) program, there is no real advantage to choosing a bank over a non-bank lender or broker for a reverse mortgage.
• Most large national banks left the reverse mortgage market in 2012, citing regulatory challenges from Dodd-Frank and the lack of financial assessment guidelines at that time.
• Today, smaller banks may still offer reverse mortgages, typically working as correspondents with larger wholesale reverse mortgage lenders.