Major
reverse
mortgage
companies
like


Finance
of
America
(FOA)
and


Ellington
Financial
—
the
parent
of
reverse
lender


Longbridge
Financial
—
recently
released
their
third-quarter
2024
earnings
results,
with
FOA
in
particular
posting
strong
numbers
while
Ellington
continues
to
tout
the
versatility
of
Longbridge
in
its
overall
portfolio.

Recently,

HousingWire’s
Reverse
Mortgage
Daily
(RMD)
sat
down
with

UBS
analyst
Douglas
Harter
to
take
a

closer
look
at
investors’
attitudes
toward
these
companies
in
the
here
and
now.

When
looking
ahead
at
the
future,
there
are
some
unsettled
questions
regarding
the
outlook
of
certain
details
within
the
Home
Equity
Conversion
Mortgage
(HECM)
program,
as
well
as
other
recent
priorities
in
both
the
public
and
private
sectors.

Past
issues
shaping
future
response

When
asked
about
the

2022
collapse
of
top-five
reverse
mortgage
lender

Reverse
Mortgage
Funding
(RMF)
and
the
resulting
liquidity
crisis
that
ensued,
Harter
was
asked
whether
something
like
that
can
trigger
either
investor
pessimism
regarding
the
fact
that
it
happened,
or
confidence
considering
the
government’s
response
to
it.

Ultimately
it
depends,
he
explained.

“I
think,
initially,
it
leans
toward
concern
over
the
near-term
impact
on
liquidity
and
potential
contagion
to
other
areas,”
he
said.
“There’s
also
the
question
of
how
existing
players
will
be
impacted.
But
as
these
issues
are
addressed
and
potential
government
actions
like
HMBS
2.0
improve
industry
dynamics,
it
can
create
new
opportunities.”

That’s
because
an
event
like
this
could
signal
how
an
entity
like


Ginnie
Mae
could
approach
working
with
other
liquidity
providers,
which
could
be
a
source
of
optimism.
But
investors
need
time
to
absorb
and
assess
the
impacts.

“These
kinds
of
questions
tend
to
arise
after
the
initial
aftermath,
once
the
market
begins
to
see
how
stakeholders
and
investors
are
responding,”
he
said.

But
it’s
also
likely
that
investors
could
see
what
the
companies
are
seeing,
and
that
is
additional
product
viability
for
the
lenders’
proprietary
reverse
mortgage
offerings.
Both
FOA
and
Ellington
emphasized
the
strength
of
their
proprietary
products
in
the
recent
earnings
calls.

“When
looking
at
the
proprietary
side,
there’s
clear
potential
for
growth
and
efficiency,
especially
with
jumbo
loans,”
Harter
said.
“If
you
can
reduce
origination
costs
through
scale,
that
can
be
beneficial.
This
fits
well
with
Ellington’s
strategy,
as
they’re
a
balance
sheet-heavy
business
focused
on
creating
long-term
investments
to
support
their
dividend.”

There’s
more
potential
volatility
at
FOA,
since
that
company
aims
“to
be
less
capital-intensive
than
Longbridge
or
Ellington,”
Harter
said.
“This
has
historically
caused
more
fluctuations
in
their
financial
reports,
with
market
adjustments
playing
a
significant
role—positive
this
quarter,
but
negative
in
previous
ones.”

But
as
FOA’s
originations
business
scales,
that
volatility
could
diminish,
he
said.
The
key
will
lie
in
the
company’s
ability
to
find
long-term
investors.

Impending
changes

Since
a
large
segment
of
the
reverse
mortgage
industry
is
intertwined
with
the


Federal
Housing
Administration
(FHA)’s
HECM
program,
the
impending
transfer
of
power
in
the
federal
government
does
have
some
implications
on
the
viability
of
the
space
depending
on
the
kind
of
policy
the
next
HUD
secretary,
Ginnie
Mae
president
or
FHA
commissioner
will
choose
to
pursue.

As
of
now,
Ginnie
Mae
is
pursuing
a
final
term
sheet
for
HMBS
2.0,
a
complementary
reverse
mortgage
securities
program

first
telegraphed
by
Ginnie
Mae
at
the
beginning
of
this
year.

An
initial
term
sheet
was
released
by
Ginnie
Mae
this
summer,
with
a
final
term
sheet
expected
sometime
in
the
near
future
according
to
a
timeline
offered
by
Acting
Ginnie
Mae
President
Sam
Valverde

in
an
interview
with
RMD.

But
with
the
impending
change
of
administrations,
and
the
insistence
from
some
congressional
allies
of
President-elect
Donald
Trump
to

cease
policymaking
activity
until
the
transfer
of
power
takes
place,
it
remains
to
be
seen
how
things
will
progress.
As
far
as
investors
are
concerned,
HMBS
2.0
and
proprietary
product
performance
could
play
a
role
in
their
outlooks
on
the
reverse
mortgage
business.

“I
think
the
resolution
of
HMBS
2.0,
and
assessing
the
potential
ongoing
balance
sheet
or
liquidity
benefits
that
might
come
from
it,
is
definitely
something
people
are
watching,”
he
said.
“As
we
discussed
earlier,
the
success
of
proprietary
products
or
the
HomeSafe
Second
are
other
key
areas
of
interest.
People
are
looking
for
indications
of
whether
the
market
can
grow.
Of
course,
interest
rates
will
fluctuate,
which
is
largely
beyond
anyone’s
control.”

As
for
whether
or
not
investors
have
a
stake
in
the
specifics
of
the
actual
transfer
of
power,
it
does
not
command
a
lot
of
time
in
the
conversations
Harter
has
with
investors,
he
said.

“It
doesn’t
seem
like
people
have
a
strong
view
yet
on
what
might
actually
change,”
he
explained.
“On
the
forward
side,
there’s
more
focus
on
considering
the
potential
impact
of

ending
conservatorship
for

Fannie
Mae
and

Freddie
Mac.
That
seems
to
be
where
the
current
conversations
are
centered.

“No
one
really
knows
what
that
would
mean
yet,
or
how
much
can
be
accomplished
with
or
without
Congress,
and
what
could
get
through
Congress.
It’s
definitely
on
people’s
minds,
but
there
isn’t
a
clear
sense
yet
of
what
it
would
look
like.”

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