2023 is in the rearview mirror — a year of tumult, reduced volume and a wave of industry exits and consolidations. While most have their eyes on the horizon, HousingWire’s dedicated reverse-centric publication, Reverse Mortgage Daily (RMD), will look back one more time at a year of challenge.
Here, RMD takes stock of three of the biggest reverse mortgage industry stories of the year and how they helped change the face of the business as we head further into 2024.
The collapse of RMF and its ongoing ramifications
The collapse of Reverse Mortgage Funding (RMF) in 2022 technically originated as a hold-over from that year’s top industry stories. However, the business continued to feel the ongoing impact of RMF’s collapse throughout 2023, and it will likely persist well into the new year.
Ginnie Mae, the government-owned corporation backing the HMBS program, seized RMF’s sizable Home Equity Conversion Mortgage (HECM)-backed Securities (HMBS) portfolio at the very end of 2022. Although leaders at the company assured that borrowers expecting reverse mortgage payments would not feel the impact, the repercussions on Ginnie Mae itself have continued to be strongly felt.
The RMF collapse has added to a liquidity strain the reverse mortgage industry is still feeling, but Ginnie Mae also publicly explained in multiple instances how the assumption of the RMF portfolio has necessitated the company to have access to more financial and staffing resources.
The RMF portfolio on its own comprises roughly one-third of all HMBS issuance, according to a mid-year analysis by New View Advisors, though the total outstanding share of the market has declined slightly for 2023.
While Ginnie Mae President Alanna McCargo has commended Ginnie Mae’s staff for their management of the RMF portfolio and called the transition “seamless,” the U.S. Department of Housing and Urban Development (HUD) Office of the Inspector General (OIG) has taken a more critical look at the situation.
2023 proved to be a challenging year for both longtime industry veterans and those who had taken a recent interest in entering the reverse mortgage business more fully. Nowhere was this more visible than in the entrance and abrupt exit of a lender like Cardinal Financial, and the shuttering of the reverse mortgage lending division at Open Mortgage.
In the case of Cardinal, indications were that it had only just begun scaling its new reverse mortgage lending operation by mid-2023, but by the fall it had decided to exit the business. Only a handful of employees were remaining in the division by mid-October to assist with closing out the pipeline of reverse mortgage loans in process, according to multiple sources who spoke with RMD upon the closure.
While that story was certainly an attention-grabber, the bigger industry surprise was the exit of Open Mortgage. A longtime fixture of the top 10 industry lenders, company CEO Scott Gordon explained for RMD that lower origination volumes combined with lower closing pull-through rates made the cost to close reverse mortgage loans too high.
“We made a public announcement today that we are shuttering the reverse division,” Gordon said, referring to an all-hands call on Nov. 20. “It was a very difficult decision because we believe in the product and we had some of the best reverse folks in the industry, both in ops and in the field.”
Industry professionals who have worked with Open Mortgage in the past expressed dismay at the news of its exit.
“It was sad to see that they’re leaving the space,” said Tyler Plack, president of broker-turned-direct lender South River Mortgage in an interview with RMD last month. “That being said, there are a lot of really incredible people at Open Mortgage; a lot of great people that I’d love to work with.”
While the industry tumult has been a challenge across the entirety of the business, one silver lining appeared to come from HUD and the Federal Housing Administration (FHA): the HECM program benefitted from a lot of attention from the government’s housing leaders.
From having three key leaders for FHA, Ginnie Mae and HUD’s Office of Housing Counseling appear at a major industry event, to a series of reverse mortgage product and guidance updates and Ginnie Mae policy changes, the government had its eye on the reverse mortgage business to a degree the industry is unaccustomed to.
FHA Commissioner Julia Gordon spoke about this additional HECM attention with RMD during the National Reverse Mortgage Lenders Association (NRMLA) Annual Meeting and Expo in Nashville this past October.
“It’s important to us that the HECM program be as helpful and safe for borrowers as possible, so that people can understand that it can be an important part of what we do to help seniors across the government,” Gordon said.
“Certainly, in the White House more than anywhere, there is great awareness both of the aging of the American public and of the financial straits in which many seniors find themselves,” she added. “And what we want to do is make sure that this program is seen as a component of how we help seniors as a government.”