The reverse mortgage industry leaderboard has been reasonably stable over the past several years. American Advisors Group (AAG) has been at the top of the pile for its ubiquitous brand and call center outreach model, Finance of America Reverse (FAR) has aimed to lead on the proprietary product front for years while lenders like Open Mortgage and Cherry Creek maintained respectable leadership spots.
This year, however, things got shaken up. AAG and FAR became one entity, Cherry Creek and its leading reverse mortgage division was acquired by Guild Mortgage, and Open Mortgage elected to close up its reverse mortgage division citing elevated costs to close loans.
As we get ready to enter a new year with a changed leadership landscape, here are some of the biggest shifts the industry has seen throughout 2023 as it relates to the top 10 reverse mortgage lenders.
Top 10 lenders shift due to exits and consolidations
The industry has had to reckon with notable pull-backs and exits from the space. A top five lender, Reverse Mortgage Funding (RMF), halted originations and filed for bankruptcy at the end of last year, which has continued to reverberate throughout the industry, as well as through the government after Ginnie Mae assumed control of the RMF portfolio last December.
While certain players like PrimeLending entered the space and forward lender Guaranteed Rate announced it would be expanding its reverse mortgage presence, Cardinal Financial Services both entered and exited the reverse mortgage space within 2023.
Finance of America Reverse (FAR) acquired former industry-leading lender American Advisors Group (AAG). The AAG brand is now being used for FAR’s direct-to-consumer retail division according to a recent product expansion announcement.
Another top 10 lender in the reverse mortgage space, Austin, Texas-based Open Mortgage, announced it had shuttered its reverse mortgage division late last month. CEO Scott Gordon cited lower origination volumes combined with lower closing pull-through rates as factors that made the cost to close reverse mortgage loans too high.
This was a notable blow according to certain industry professionals.
“I will say it’s particularly troublesome to see Open Mortgage [exit the industry] because we were brokering to them almost exclusively at one point in time,” said Tyler Plack, president of broker-turned-direct lender South River Mortgage based in Annapolis, Md. “It was sad to see that they’re leaving the space. 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.”
‘Fascinating’ evolution
The leaderboard shakeup is intriguing to John Lunde, president of Reverse Market Insight (RMI).
“It will be fascinating to see how the lender changes evolve the industry,” Lunde said earlier this month. “It’s clear at this point that Mutual of Omaha has been more successful in adapting this year to the changing environment, which makes perfect sense given their brand, distribution, and existing customer base.”
That company has also solidified its spot as the second-largest HECM lender in the country after the consolidation of AAG and FAR, a position Lunde says is also the result of its adaptability to the current market conditions.
“What we see as most impactful looking forward is how additional companies enter the space that share some of those same advantages and help evolve the perception of the product and industry,” Lunde added.
FAR: becoming the new leader
FAR is committed to the reverse mortgage space for the long haul based on its recent actions. This is according to Scott Norman, VP of field retail and director of government relations.
“Having worked in this industry for over 25 years, the landscape is ever-changing,” Norman told RMD. “It’s those who commit to continuous innovation to ensure their business can best serve its customers that will thrive in the long-term. Our commitment to this space is demonstrated by our recent acquisition of the AAG retail platform, and we remain dedicated to guiding the industry through our active involvement with groups like the National Reverse Mortgage Lenders Association (NRMLA) and the Mortgage Bankers Association (MBA).”
Norman added that FAR prides itself on its industry leadership and product education efforts, saying that its multiple product offerings including private-label reverse mortgages have demonstrated its commitment to borrowers across the senior demographic.
“With AAG, we have yet another platform to help grow awareness of our products and reach more customers,” he said. “As we look ahead to 2024, we’re encouraged by the opportunity we have to educate older homeowners about the benefits of home equity and the interest we’ve seen in products like HomeSafe Second.”
Private-label second-lien reverse mortgage HomeSafe Second returned. It was also rolled out to the direct-to-consumer arm — which assumed the AAG brand name — in November.
The association recently re-elected Norman as NRMLA co-chair, who is entering his fifth consecutive term in the position.
Finding the ‘best seat in the house’
That said, new entrants also have their eyes on growing in the space. Plack said that while it’s easy to become discouraged when seeing other companies running for the exits, that also crystallizes an opportunity for other, comparatively smaller players.
“You’re looking around and like ‘goodness, everyone is getting out of the space.’ We don’t take that same approach,” Plack says of South River. “We look at it more in terms of ‘everyone is getting out of the movie theater, so let’s find the best seat in the house.’ From there we can hunker down and position ourselves the best that we can.”
That way, when demand for the product rises, the company can be ready to capitalize.
“We’re already seeing that in the bond market, just look at November’s performance,” he said. “We’re going to be really well-positioned, so I think that’s our strategy.”
Other more well-established individual players who may find themselves at a new corporate home also see opportunities to bolster their companies’ presence in the space, but the opportunity is also there to accelerate the amount of seniors served by reverse mortgages according to Harlan Accola, the national director of reverse mortgage lending at Movement Mortgage.
“I feel badly for some of those companies that went out, and that their volume has dropped dramatically, or went to zero if they left,” he said. “Because there’s never been a better opportunity to help people, or in [Movement’s] terms love and value people, in the senior space.”
Avoiding the refi ‘hangover’
Accola himself got his own reverse mortgage as soon as he turned 62 years old, and he said his experience has only further emphasized the potential flexibility a reverse mortgage could offer for the right borrower. But Movement is also seeking to avoid some of the product pitfalls that have stung other companies.
“The next huge mistake was there were entire businesses that were built on HECM-to-HECM [refinances] when the rates went down,” he said. “They got drunk on that, and now they’re dealing with a hangover that many of them won’t recover from.”
The data bears out the collapse of the refinance market. According to the Federal Housing Administration (FHA), refinance business in the reverse mortgage program makes up a much smaller percentage of overarching business now, a reflection of the reality.
While in fiscal years 2021 and 2022 HECM-to-HECM refinance activity constituted at or over 50% of total industry volume, in FY 2023 refinance volume dropped to only 13.7% of industry volume as elevated rates took hold of the mortgage industry broadly.
