The key points we’ll cover in this blog, along with the best banks are:
Lenders fall into two categories - banks and non-bank lending institutions.
The vast majority of reverse mortgages available today are insured by the Federal Housing Administration (FHA), which means there is no advantage in using a bank to secure a reverse mortgage over a non-bank reverse mortgage lender or broker.
Large national banks exited the reverse mortgage space in 2012, citing difficulties with the regulatory environment and the lack of underwriting overlays at the time.
Small banks still offer reverse mortgage loans, but usually as a correspondent through larger reverse mortgage wholesale lenders.
- It is wise to compare reverse mortgage rates and fees with both banks and non-bank lenders, as each can set its own margins.
Banks and non-bank lenders
When it comes to lending, there are two primary categories of lenders - banks and non-banks. Banks typically accept deposits and investments from consumers and lend out that money to other borrowers.
In contrast, non-bank lenders or finance companies rely on alternative funding sources such as bonds, asset-backed securities, or other investors to fund their loans.
One significant distinction between banks and non-bank finance companies is that banks are subject to more extensive regulation than non-bank lenders.
These regulations ensure that banks operate in a safe and sound manner, adhere to strict underwriting standards, and protect consumer deposits.
Additionally, banks carry insurance from the Federal Deposit Insurance Corporation (FDIC), which covers up to $250,000 per depositor in case the bank fails.
While some reverse mortgage lenders fall solely into one of these categories, others straddle both as both banks and non-bank lenders offer reverse mortgages.
As we explore banks that offer reverse mortgages, we'll also delve into non-bank lenders that provide this financial product.
Why don’t big banks offer reverse mortgages?
In the past, several major banks, including Bank of America and Wells Fargo, offered reverse mortgages as part of their financial product offerings. However, after the financial crisis of 2008, both banks discontinued their reverse mortgage operations.
Bank of America was the first to announce its exit from the reverse mortgage business in February 2011. The bank stated that reverse mortgages were not a part of its "core" business and that it would instead focus on its core banking products and services.
Wells Fargo made a similar announcement later that year. The bank had originated over 16,000 reverse mortgages the year before but cited uncertainty in home prices and the ability of reverse mortgage borrowers to meet their loan obligations as the primary reasons for its exit from the market.
Although these exits signaled a significant shift in the reverse mortgage landscape, they did not mark the end of reverse mortgages altogether.
Many other banks and non-bank lenders stepped up to fill the void, and today there are still many options for those interested in obtaining a reverse mortgage.
In the next section of our blog, we'll explore some of the banks and lenders currently offering reverse mortgages and what borrowers should consider when choosing a lender.
Top 5 Banks that Offer Reverse Mortgages in 2023
If you're considering a reverse mortgage, it's important to choose the right lender. While several banks offer reverse mortgages, not all of them are created equal.
To help you navigate the landscape, we've compiled a list of the top five banks that offer reverse mortgages in 2023.
We based our selection on the following factors - years in business, number of reverse mortgages originated in the last 12 months, review ratings, and BBB ratings.
- Years in Business - 15
- Reverse Mortgages Originated (Last 12 Mo.) - 170
- Review Rating - 4.7/5
Movement Mortgage has been in business for 15 years and originated 170 reverse mortgages in the last 12 months. The bank boasts a strong review rating of 4.7/5 and has a BBB rating source.
The Federal Savings Bank
- Years in Business - 12
- Reverse Mortgages Originated (Last 12 Mo.) - 135
- Review Rating - 4.48/5
The Federal Savings Bank has been in business for over a decade and originated 135 reverse mortgages in the last 12 months. The bank boasts a strong review rating of 4.48/5 and has a BBB rating source.
- Years in Business - 104
- Reverse Mortgages Originated (Last 12 Mo.) - 131
- Review Rating - 3.43/5
Magnolia Bank has been in business for over a century and has originated 131 reverse mortgages in the last 12 months. While the bank has a lower review rating of 3.43/5, it has been positively reviewed by customers.
Bank of England
- Years in Business - 124
- Reverse Mortgages Originated (Last 12 Mo.) - 87
- Review Rating - 1.62/5
Bank of England has been in business for over a century and originated 87 reverse mortgages in the last 12 months. However, the bank has a low review rating of 1.62/5 and a rating source from the BBB.
- Years in Business - 35
- Reverse Mortgages Originated (Last 12 Mo.) - 33
- Review Rating - 2.5/5
Townebank has been in business for over three decades and originated 33 reverse mortgages in the last 12 months. While the bank has a review rating of 2.5/5, it has been positively reviewed by some customers.
Choosing the right bank to provide your reverse mortgage is essential to ensuring a smooth process and a beneficial outcome.
The above list highlights the top five banks offering reverse mortgages in 2023, based on factors such as years in business, number of reverse mortgages originated in the last 12 months, review ratings, and BBB ratings.
When selecting a lender, be sure to do your research, read reviews from other borrowers, and compare rates and fees to find the best fit for your needs.
Frequently Asked Questions
Here are some of the most frequently asked questions about Reverse Mortgages.
Which banks currently offer reverse mortgages?
At present, there are several financial institutions that provide reverse mortgages as a financial option for senior citizens.
The list of banks that offer reverse mortgages is extensive, and it includes The Federal Savings Bank, Magnolia Bank, Bank of England, University Bank, and Townebank.
Reverse mortgages are loans that allow seniors aged 62 years or older to convert a portion of their home equity into cash.
The loan amount is based on the borrower's age, the value of the home, and the interest rate, among other factors. The funds can be used for any purpose, such as paying for healthcare expenses, home repairs, or travel expenses.
Does Chase Bank offer reverse mortgages?
As of May 2023, it appears that Chase Bank currently does not provide reverse mortgages to its customers.
While Chase Bank is a reputable financial institution that offers a variety of financial products and services, including home loans, personal loans, and credit cards, reverse mortgages are not among them.
It is possible that Chase Bank may consider offering reverse mortgages in the future or may partner with other lenders to provide this type of financial product to its customers.
If you are interested in obtaining a reverse mortgage, it is important to research and compare different lenders and loan products to find the one that best fits your financial needs and goals.
You may want to consider working with a HUD-approved counselor who can provide guidance and information on the costs, risks, and benefits of a reverse mortgage and help you make an informed decision.
Why don’t big banks offer reverse mortgages?
The reasons why big banks do not offer reverse mortgages are not entirely clear, although there are several theories as to why this may be the case.
In the past, Wells Fargo and Bank of America offered reverse mortgages, but they eventually ceased originations of such loans.
One theory is that the absence of financial requirements related to credit and income from the Department of Housing and Urban Development (HUD) as a requirement to obtain a reverse mortgage led to the larger banks withdrawing from offering the program.
This lack of financial assessment guidelines meant that borrowers did not have to meet certain credit or income requirements to qualify for a reverse mortgage.
Some experts suggest that this may have led to higher risk for lenders and made the loans less attractive to the big banks.
It is important to note that HUD did not implement any financial assessment guidelines until 2015, which was many years after the big banks had exited the industry. This means that there were no guidelines in place to assess the borrower's ability to repay the loan or to evaluate their financial stability.
Another possible reason for the big banks' absence from the reverse mortgage market is that the loans may not be as profitable as other types of loans.
Reverse mortgages are designed to provide seniors with a way to access their home equity without having to sell their homes, but the loans often have higher fees and interest rates than traditional mortgages.
Despite the lack of involvement from big banks, there are still many lenders that offer reverse mortgages to eligible borrowers.
These lenders may include smaller banks, credit unions, and private lenders. It is important for potential borrowers to do their research and compare different lenders and loan products to find the one that best fits their needs and financial goals.
Consulting with a HUD-approved counselor can also provide valuable guidance and information on reverse mortgages.
Is there an advantage to working with a bank over a mortgage lender?
When considering a reverse mortgage, it is important to weigh the pros and cons of working with a bank versus a mortgage lender.
In the reverse mortgage industry, approximately 90% or more of completed loans are Home Equity Conversion Mortgages (HECM) insured by the Department of Housing and Urban Development (HUD). The parameters and requirements for HECMs are the same for both banks and mortgage lenders.
However, there may be advantages to working with a bank over a mortgage lender if the bank offers a proprietary product that is not available from a lender.
Proprietary reverse mortgages are loans that are not insured by HUD and are instead offered by private lenders, including some banks.
These loans may have different terms and conditions than HECMs and may be better suited to certain borrowers' needs. Another advantage of working with a bank is the convenience of having all of your accounts in one place.
If you already have a banking relationship with a particular institution, it may be more convenient to obtain a reverse mortgage from that same bank. This may also help to simplify the loan application process and make it easier to manage your finances.
On the other hand, mortgage lenders may offer more competitive rates and fees than banks. Since mortgage lenders specialize in home loans, they may have a better understanding of the reverse mortgage market and be able to offer more favorable terms.
Additionally, some mortgage lenders may be more flexible in their underwriting guidelines than banks, which may make it easier for some borrowers to qualify for a loan.
Are there any proprietary reverse mortgages that banks offer that mortgage lenders do not?
Proprietary reverse mortgages are loans that are not insured by the Department of Housing and Urban Development (HUD) and are instead offered by private lenders.
While banks may offer proprietary reverse mortgages, as of April 2023, there do not appear to be any proprietary products that are exclusively offered by banks and not available through mortgage lenders.
It is worth noting that proprietary reverse mortgages offered by mortgage lenders can have varying terms and conditions.
These loans may have different eligibility requirements, interest rates, fees, and loan limits than Home Equity Conversion Mortgages (HECMs) insured by HUD.
Some proprietary products may also offer unique features, such as the ability to borrow more money or to obtain a reverse mortgage on a non-Federal Housing Administration (FHA) approved property.
While banks may not currently offer exclusive proprietary products, it is important to research and compare different loan options to find the one that best fits your needs.
Working with a mortgage lender may offer access to a wider range of proprietary products and potentially more competitive rates and fees.
However, if you have an existing banking relationship with a particular institution, it may be more convenient to obtain a reverse mortgage from that same bank.
Does the Bank take your home with a Reverse Mortgage?
When you take out a reverse mortgage, the bank does not take ownership of your home. Instead, the reverse mortgage is a loan that uses your home's equity as collateral.
As the homeowner, you retain the title to your home and are responsible for maintaining the property and paying property taxes and homeowners insurance.
One of the benefits of a reverse mortgage is that you have the flexibility to sell your property or pay off the loan at any time.
If you decide to sell your home, the proceeds from the sale can be used to pay off the reverse mortgage, and any remaining funds can be used as you see fit.
Alternatively, if you want to keep your home, you can pay off the reverse mortgage with other funds, such as savings or proceeds from other investments.