Ocwen Financial Corporation (NYSE: OCN), the parent company of leading reverse mortgage lender Liberty Reverse Mortgage, has reported that its reverse mortgage volume has nearly doubled year-over-year and has described anticipation for further incorporating servicing company Reverse Mortgage Solutions (RMS) into its operations to transform Liberty into an end-to-end, full-service lender.

This is according to the company’s earnings results for the third quarter of 2021 and an accompanying earnings call led by company CEO Glen Messina. The company also offered insight into what it hopes to achieve for Liberty and subsidiary PHH Mortgage Corp. in the coming year, and how reverse mortgages continue to be a general bright spot for the company in light of the current uncertainty on the traditional side of the mortgage business.

Volume up strongly, hopes for RMS

The company views the closing of the RMS deal as a company milestone, Messina said, and describes a great deal of potential for Ocwen, PHH and Liberty to capture a portion of the addressable reverse mortgage sub-servicing market.

“In October, we closed our acquisition of the RMS – reverse mortgage servicing platform, and also in October, I’m pleased to announce that we exceeded our recapture rate objective,” Messina said in the earnings call. “We continue to make solid progress on our actions to expand our addressable market. We’re growing in higher-margin channels, services and products, giving us strong momentum, and the RMS platform acquisition gives us access to a potential $86 billion reverse mortgage sub-servicing market, which is an exciting new growth opportunity for us.”

The current market environment is “volatile and unpredictable,” Messina said, but volume across both the forward and reverse channels is up compared to the period one year ago. However, reverse mortgages make up a larger share of volume increases, leading to an expansion of Liberty’s market share in the space, Messina said.

“Year-over-year, consumer direct volume in both forward and reverse is up 61%,” he explained. “Both forward and reverse delivered record retail funding and line of credit (LOC) volumes in October. […] Total reverse originations are up 86% year-over-year. Our team is executing very well. Our reverse market share is up from 6.5% in Q3 2020 to 7% in Q3 2021, and this compares to about 4.2% in the third quarter of 2019, so great progress by the team growing our share and our business.”

Ocwen maintains high hopes for the reverse mortgage sub-servicing market, Messina said, which should be wholly entered once RMS’s integration into PHH/Liberty is complete.

“With the closing of RMS as well, we are positioned to enter the $86 billion reverse mortgage sub-servicing market once the integration is complete,” he said. “So while these opportunities do have a longer sales cycle, I’m nonetheless very excited about the opportunity we have here.”

With the increase in reverse mortgage volume, momentum in maintaining higher volume levels is expected to persist for the remainder of 2021 compared to 2020, Messina explained.

Reverse is seeing volatility headed into 2022

When asked by an investor about trends that the company is observing through the end of the year, Messina made mention of some unpredictability present on the reverse mortgage side of the business.

“In reverse, we’re seeing a little bit of volatility,” he said. “[D]iscount margin affects the tail gains, and that tends to move around a little bit. It’s moved around a little bit during the third quarter with the interest rate volatility I spoke about, so those margins came down a little bit. Generally again, nothing out of line that we would expect to see in this environment, and frankly relatively stable on the forward side.”

Messina was also asked about increasing competition on the reverse side. While he acknowledged that the competitive landscape has widened, he remained bullish on the potential for incorporating RMS to make a big difference for Liberty in the coming months.

“The RMS transaction will position Ocwen as the only reverse originator issuer and direct servicer in the industry,” he said. “We think this unique ability will allow us to capitalize on the demographic outlook and positions us very well as compared to competitors.”

This leads to a perspective of differentiation as the company enters 2022, even taking the new competitive landscape and certain headwinds into account, he says.

“I believe we’re entering 2022 from a position of strength,” Messina said. “We’ve built a very high-performing correspondent, consumer direct, and reverse mortgage business. With that said, we are a new entrant in originations, and we believe we can generate growth by expanding our addressable market, and we’re doing that with expansion into higher-margin products and services and growing our client base.”

After the earnings call, Ocwen Financial’s stock rose 11% in late-day trading.