I’ve always been fascinated with the pace and magnitude of change that the reverse mortgage industry has faced in the last few years. From the days when Fannie Mae was the dominant buyer, to the development of the private-label securitization market, to today’s Ginnie Mae HMBS market, the winds of change have ended the business of some firms and accelerated the business of others. Moreover, such change has threatened the viability of the industry itself. The fact that the industry continues to exist and has several firms that are thriving is truly a remarkable accomplishment and speaks to the resiliency in which all of us who have worked in reverse mortgages have always taken pride.
Today, it is not a surprise that the firms prospering are those that adapted swiftly and correctly anticipated how to capitalize on market changes, as well as important legal and regulatory changes that affected the mortgage market. But perhaps the single most important determinant of success has been the ability or inability of a reverse mortgage firm to obtain approval to be an HMBS Issuer from Ginnie Mae. After the exits of Wells Fargo, Bank of America, Financial Freedom and KBC Bank (which owned the Senior Lending Network), as well as Goldman Sachs’ short-lived attempt at being an HMBS Issuer, the HMBS market was left with so few issuers that it had taken on the look of an oligopoly.
The active issuers consist of MetLife, Urban Financial Group, Reverse Mortgage Solutions, Generation Mortgage and Sun West Mortgage Company. Given this dynamic, the traditional mortgage broker has been left with a lot less leverage in terms of pricing. Furthermore, correspondents, even those with significant scale, have had to be very prudent in terms of how they deal with the “big five.” But this is the reverse mortgage industry, where the one true constant is change (and usually the sweeping, massive, completely surprising type of change).
The change I’m referring to is the recent announcement that after a three-year wait in the approval cue, Live Well Financial has received approval from Ginnie Mae to be an HMBS Issuer. Although other firms including One Reverse Mortgage (affiliated with Quicken Loans) and Genworth have received HMBS Issuer approval from Ginnie Mae within the last year, the Live Well Financial news is significant because the company intends to begin issuing HMBS immediately despite the existence of potential sale treatment/accounting issues and the additional financing needs that will arise.
By doing so, Live Well Financial can once again change the market dynamics by adding another much-needed competitor to the mix. Moreover, it will be interesting to see if Ginnie Mae continues to approve new HMBS Issuers that may already be in the approval cue. Will the previously approved firms mentioned above end up issuing Ginnie Mae HMBS sooner than they would have liked to? Will brokers and correspondents align themselves with Live Well Financial to add another whole loan takeout option? Will pricing power once again shift back to the whole loan originators instead of the aggregators?
The answers to these questions will be revealed over the next few months or years. Thankfully, industry participants should take comfort that this potential game changer is a positive development because having more HMBS Issuers should help even the playing field for originators. The industry will have to adapt once again, and new winners and losers will be revealed over time. So sit back, relax, and get your popcorn ready, because the latest installment of this reverse mortgage movie is coming to a theater near you.