More than 55,000 homeowners took out reverse mortgages last year. But the big banks are mostly out of the reverse mortgage business, which means that if you're shopping for a reverse mortgage, you might be choosing among lenders you’ve never heard of.
Here’s a look at the five of the top reverse mortgage lenders and a few pointers on choosing one.
American Advisors Group
American Advisors Group, based in Orange County, Calif., was the biggest home equity conversion mortgage (HECM) lender by volume in 2017 according to Reverse Market Insight, a research company focused on the reverse mortgage industry. The HECM is the most popular of the three types of reverse mortgages and accounts for 95% of reverse mortgages in today’s market.
AAG is licensed in all 50 states, plus the District of Columbia. Its website states that the company has been in business for more than 13 years and has a 96% customer satisfaction rating based on the company’s own surveys. The company has an A- rating with the Better Business Bureau (BBB) and 40 closed complaints in the past three years. That’s far more complaints than the other reverse mortgage lenders described in this article, but AAG also closed more than twice as many loans as its closest competitor. AAG also has numerous complaints at ConsumerAffairs, an independent web-based consumer news and resource center. While you should take online reviews with a grain of salt, ConsumerAffairs does moderate user-submitted reviews, require users to create an account, and try to filter out fake and spam reviews. It also gives companies a chance to respond to complaints.
AAG belongs to the National Reverse Mortgage Lenders Association (NRMLA). Should that mean anything to you? NRMLA has a code of ethics and professional responsibility that its members must sign and agree to follow when they join or renew their membership. Members are supposed to “interact with consumers in an ethical, professionally responsible and lawful manner.” They are also supposed to describe both the costs and benefits of reverse mortgages to consumers, encourage them to seek outside professional guidance about whether to obtain a reverse mortgage and uphold many other standards. NRMLA is also a political lobbying organization for the reverse mortgage industry and has a policy of responding to any negative or inaccurate media portrayals of reverse mortgages. So while NRMLA holds its members to standards that are supposed to protect consumers, it is also looking out for the reverse mortgage industry’s best interests (one of which, arguably, is to serve consumers). Most reverse mortgages are originated by NRMLA members.
AAG’s website also offers both video and written testimonials that AAG states are from real AAG clients. In addition, the company’s blog features “real borrower stories.” Assuming that AAG is following NRMLA guidelines, these testimonies are real. Check them out and see if you find them compelling. The site also offers answers to numerous frequently asked questions about reverse mortgages and invites consumers to request a free information kit that will be mailed to them. (For related reading, see 5 Signs a Reverse Mortgage is a Good Idea and 5 Signs a Reverse Mortgage is a Bad Idea.)
Finance of America Reverse LLC
The lender with the second highest volume of HECM reverse mortgages on the Reverse Market Insight list in 2017 is Finance of America Reverse, LLC (FAR). The company was founded in 2003 as Urban Financial of America and operates out of Tulsa, Okla. It is licensed to operate in 43 states. FAR also offers proprietary or jumbo reverse mortgages for owners of high-value homes, who can take out more than $2 million in equity with FAR’s HomeSafe loan. However, these loans, unlike HECMs, are not federally insured.
The FAR website has articles about how seniors can tap their home equity for everything from covering healthcare costs and living well while living alone to diversifying retirement investments and paying off debt. FAQs address common reverse mortgage questions, and there are minimal customer testimonials on the site.
The Better Business Bureau gives Finance of America Reverse an A+ rating, with three reported complaints in the past three years. The lender is listed on the ConsumerAffairs website, where there are more than 1,000 comments. FAR is also a member of NRMLA.
Reverse Mortgage Funding LLC
Reverse Mortgage Funding LLC, headquartered in Bloomfield, N.J., was the third largest HECM lender by volume in 2017. Although a relative newcomer to reverse mortgages – it was founded in 2012 – RMF is licensed to do business in all 50 states, Washington, D.C., and Puerto Rico. It is also one of the few lenders to receive the endorsement of the American Banker’s Association.
In addition to HECM loans with annual or monthly adjustable and fixed rates, RMF offers what is known as a “HECM for purchase,” a loan insured by the Federal Housing Administration that can be used by homeowners who are 62 or older to buy a new home that, for example, may be closer to family or better fits their needs.
In addition to FAQs, the RMF website lists pros and cons of reverse mortgages and a step-by-step description of the loan process. However, there are few tools (such as a loan calculator), and only after submitting your information online will you be sent educational materials with helpful case studies that illustrate how people came to the decision to get a reverse mortgage.
RMF is a NMRLA member and has a Better Business Bureau rating of A+, with just one complaint in the past three years. It is not listed on ConsumerAffairs.
Liberty Home Equity Solutions
In fourth place by 2017 HECM volume, according to Reverse Market Insight, is Liberty Home Equity Solutions. Based in Sacramento, Calif., Liberty was formerly Genworth Financial Home Equity Access, or GFHEA, and was originally founded as Liberty Reverse Mortgage. It has been in business since 2004, and its sole focus is on HECMs. The company has helped 50,000 seniors obtain access to the equity in their homes since its founding. Liberty is licensed nationwide.
Like AAG, Liberty has a number of video and written testimonials from satisfied customers. It has an A+ rating from the Better Business Bureau, with six customer complaints in the last three years. The company is listed at ConsumerAffairs. Liberty’s website has lots of educational materials available for prospective customers, and Liberty is a NRMLA member.
Liberty offers consumers an “Iron Clad Guarantee” of fair and competitive pricing that matches or beats its competitors. The company also promises to close your loan within 60 days, offering a $500 credit toward closing costs if it misses that deadline.
One Reverse Mortgage
The fifth-largest HECM lender by volume in 2017 was One Reverse Mortgage, a Quicken Loans company based in San Diego. Quicken Loans is an Internet-based lender. That means you’ll need to be comfortable going through the entire process online and by phone and not meeting with anyone in person except, perhaps, at the closing. Interest rates and fees can be lower with an online lender, but this isn’t a universal truth so you’ll still want to shop around.
One Reverse Mortgage has been around since 2001. The company is licensed in every state and currently operates in 47 (excluding Rhode Island, Vermont and West Virginia). At its website, you’ll find the usual invitation to order an information kit with free DVD, along with a wealth of educational materials. One Reverse Mortgage has also set up a separate website focused entirely on rave reviews that it says are real, uncensored and come from surveys sent to customers after closing. However, its claim that 100% of its customers would recommend One Reverse Mortgage to a friend or family member seems unrealistic.
The company has an A+ rating with the BBB and five complaints in the last three years. One Reverse Mortgage is an NRMLA member.
The Bottom Line
Take the educational materials at reverse mortgage lenders’ websites with a grain of salt because they are, after all, trying to sell you something. And keep in mind that just because a company closes lots of loans or has favorable reviews it doesn’t automatically mean it can offer you the best deal. AARP recommends shopping around for a lender because reverse mortgage costs can vary significantly. (To learn about the problems some consumers have with reverse mortgages, see Beware of These Reverse Mortgage Scams.)
The HECM is the only type of reverse mortgage insured by the Federal Housing Administration, but FHA loan insurance protects lenders, not consumers. Any lender that uses “FHA insured” as a selling point is misleading consumers about the benefits of an HECM. The up-front mortgage insurance and monthly mortgage insurance premiums associated with HECM loans do not vary from lender to lender because these fees are set by the government, but each lender will have different origination fees, third-party closing costs, monthly service fees and interest rates.
Your borrowing experience will also have a lot to do with the specific loan officer with whom you work, not just the company that banker works for. Seek out someone who is experienced with reverse mortgages, who doesn’t pressure you, and who is patient and knowledgeable in answering your questions. To find a reverse mortgage lender, use the U.S. Department of Housing and Urban Development's Lender List search tool and check the HECM box.
Disclaimer: The author neither recommends – nor disapproves of – any of the companies mentioned in this article. Do your own research and consult a professional financial advisor before taking out any reverse mortgage.
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