Bank of America Changes Course on Reverse Mortgages

Bank of America, one of the leading wholesale reverse mortgage lenders in the country, recently announced that it has opted to limit its involvement in the industry. The reason is the new Housing and Economic Recovery Act.

The new legislation discourages non-Federal Housing Administration-approved Realtors and brokers partnering with FHA approved Brokers and Correspondents to originate HECM loans, Reverse Mortgage Daily reported yesterday.

Peter Bell, president of the National Reverse Mortgage Lenders Association, explained that BofA is hewing the new housing law requirements.

“What is going on here is that the new law requires HUD to allow only FHA-approved entities to participate in loan origination under its Home Equity Conversion Mortgage (HECM) Program,” he says. “This is a new consumer safeguard that Congress has enacted. All BofA is doing here is shifting its origination channels to comply, and leading the industry in doing so. Everyone else in the reverse mortgage business will be doing the same — it’s the law.

“My bet is that BofA will be every bit [as] engaged in the reverse mortgage business as it has been — and I wouldn’t be the slightest bit surprised to find that its market share actually grows as a result of this change,” he says.

[Updated 8/21/08, 9:06 a.m. ET]