Inside the collapse of a top reverse mortgage lender

Reverse Mortgage Funding was forced into Chapter 11 bankruptcy after its warehouse lenders pulled the plug. Are others at risk?

After returning from the Thanksgiving holiday, the roughly 575 staffers at Reverse Mortgage Funding assembled nervously on two separate Microsoft Teams meetings. On the first virtual meeting, 472 employees received the bad news that many expected: they were being terminated. The hundred or so workers on the other Teams meeting were given marching orders: keep the company’s operations functioning during bankruptcy proceedings.

HW Media reporters Bill Conroy and Chris Clow spoke to over a dozen company employees, executives at rival reverse lenders, independent analysts in the space, and pored over hundreds of pages of bankruptcy proceedings and bond documents.

Our story, published Thursday morning on Reverse Mortgage Daily, is in effect a post-mortem. It examines what went wrong, the attempts to save the company, what finally triggered the collapse, and ultimately, the level of risk RMF’s competitors still face.

In many respects, RMF, the nation’s fifth-largest reverse lender, was caught in the perfect storm of financial calamity, one that was precipitated by fast-rising interest rates, tightening Federal Reserve monetary policy, and unforgiving regulations and credit markets. 

The market volatility pushed RMF and its parent, Reverse Mortgage Investment Trust Inc., into a death-spiral liquidity crisis and devastated the lender’s primary revenue-generating channels as well as its credit facilities.

The resulting sea of red ink forced the company to seek protection from the storm through a Chapter 11 bankruptcy reorganization filed in federal court in Delaware.

Read the story of RMF’s downfall here.

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