Private reverse mortgages reportedly impacted by bond market volatility

The product impacts come from heightened volatility in fixed income/bond markets, with one impacted product now back online after a brief adjustment period

The proprietary reverse mortgage products offered by reverse mortgage lenders Liberty Reverse Mortgage and Longbridge Financial, respectively, have been impacted by volatility in the bond markets, RMD has learned.

Liberty has suspended new originations of its “EquityIQ” loan, while Longbridge briefly paused the ability to create new applications for its “Platinum” product suite in its loan origination systems (LOS’). However, Platinum applications can now be taken again, according to a company representative.

“Continued volatility in the fixed income markets has created dislocations in the proprietary reverse mortgage market,” Liberty President Mike Kent said in a statement provided to RMD. “As a result, Liberty Reverse Mortgage (Liberty) has temporarily suspended originations of EquityIQ, our proprietary reverse mortgage product. We are closely monitoring the markets and will resume new originations of EquityIQ as soon as conditions stabilize.”

In the case of Longbridge’s Platinum product suite, the company described the need to implement immediate changes to loan-to-values (LTVs) on the products. While these changes were being implemented, the ability to generate new applications inside the LOS systems were “temporarily pending” according to a partner alert reviewed by RMD. The ability to generate and submit new Platinum applications was back up and running on Tuesday, according to a company official who communicated with RMD.

Platinum applications dated on or before September 26 will honor previously disclosed LTVs but must close by October 27, while applications from September 27 and later will be impacted by revised LTVs. Other product “enhancements” may also arrive this week, the communication indicated.

Because of the described conditions under which the products have been impacted, RMD reached out to other lenders which offer proprietary reverse mortgage products to determine if other private products are being impacted by the same volatility. A representative for Finance of America Reverse (FAR) told RMD that applications for HomeSafe are still active.

One reverse mortgage professional who spoke with RMD described that while these impacts are inconvenient, they are not as disruptive as a prior instance of market volatility earlier this year when three reverse mortgage lenders made changes to their proprietary product offerings in response to market turbulence. Two of those lenders suspended their offerings and one lender made product changes to compensate for the market conditions.

At the onset of the COVID-19 coronavirus pandemic in March 2020, reverse mortgage lenders responded to the uncertainty created by that event in the economy by suspending proprietary offerings at that point, as well. The proprietary offerings suspended in early 2020 returned to market by mid-summer.

The economic shock of the early pandemic was not only reserved for private-label reverse mortgages, as Home Equity Conversion Mortgage (HECM) pricing saw notable fluctuation in the earliest days of the pandemic as well. This ultimately stabilized, leading to a period of vibrant activity for the industry and a boom in HECM-to-HECM refinance transactions that only dissipated earlier this year.

RMD will update our audience with any additional developments on this matter as they take place.

Editor’s note: This story has been updated with a statement from Liberty Reverse Mortgage President Mike Kent.

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