In a sleazy market, Liberty’s parent is optimistic about reverse mortgages

Ocwen Financial Corporation, the parent company of PHH Mortgage Corp. and leading reverse mortgage lender Liberty Reverse Mortgage, has moderately improved profitability, but the mortgage business is in the midst of a generally challenging operating environment. I admit it’s inside.

This extends to our reverse mortgage business, where we remain bullish on the reverse mortgage outlook given potential demographics and the resilience of US home price inflation (HPA). The company said this week that it will consolidate its forward and reverse operating platforms for both origination and services.

Reverse Mortgage Prospects and Resilience, Forward/Reverse Platform Integration

Ocwen CEO Glen Messina said the company is looking to become leaner and more agile in a difficult market, including its reverse mortgage business.

“We expect lower origination volumes in the fourth quarter and are committed to further adjusting capacity and costs as needed,” Messina said on this week’s third-quarter earnings call. . “In addition, we are consolidating our forward and reverse operating platforms for both origination and services. is placed.”

Messina said such a combination would bring “economies of scale” for both businesses.

“We are one of the few Reverse Space competitors that can execute this strategy,” he said. “Initial results are promising and as we continue to refine and optimize our approach, we expect to see further benefits heading into 2023.”

Messina also noted that Liberty’s position as an end-to-end reverse mortgage provider from origination to servicing could enable the creation of new reverse-centric partnerships in the future, although it No further details were disclosed.

Reverse Origination, Service Profitability

According to Sean O’Neil, Chief Financial Officer of Ocwen, the company suffered marginal losses on reverse servicing and a small loss on reverse origination in the third quarter.

“Long-term reverse mortgage opportunities remain attractive, largely due to borrower demographics and the behavior of reverse mortgage servicing rights (MSRs), which are counter-cyclical when house prices fall, but in the short-term will continue to face the same headwinds that we have introduced last quarter,” he said. “First, mortgage rates continue to rise. This reduces opportunities for HECM refinancing.

This has made both proprietary reverse mortgages and non-Ginnie Mae HECMs less attractive to investors, he said, which is explained in the third quarter pre-tax loss statement. Reverse service is still profitable, but at a lower level.

“[This is because] We incurred some expenses in integrating this business into our forward services business,” said O’Neill. “Reverse Services business volume was relatively flat quarter-over-quarter, but based on today’s pipeline, we see strong growth in the first quarter of 2023. Going forward, we will maximize productivity. To do this, we will integrate both reverse origination and reverse service businesses into their respective forward businesses.”

Challenges of Reverse Mortgage Distribution, Interest from Forward Mortgage Businesses

During the Q&A session, Messina discussed the specific challenges and new opportunities facing the reverse mortgage business.

“One of the challenges that the reverse industry has always faced in origination has been product distribution,” says Messina. “By integrating the sales team supporting the forwarding platform, especially the correspondents and the wholesale channel, we get tremendous distribution effect by distributing the product to all forwarding clients interested in selling it. I think he will be able to do the same with his existing reverse clients.”

At the MBA’s annual event in Nashville, Messina said there was a high level of interest among attendees instead.

“I just got back from the MBA conference two weeks ago and [we saw] There’s a lot of interest on the forward customer side about the reverse product,” Messina said. “There’s a group called the Liberty Academy that trains people on how to sell the reverse product. But having the ability to not only buy an asset, but possibly service or sub-service it, really puts us in an advantageous position. [to provide] An end-to-end solution for forward providers looking to enter the reverse space. ”

Addressing the forward mortgage business and providing a more direct pathway for forward practitioners to enter the reverse space has been around for a long time. was a priority While the reverse mortgage business is developing to scale the industry, there is no single consensus among reverse mortgage professionals on how that goal can be achieved.

According to HECM Approval data Liberty Reverse Mortgage, compiled by Reverse Market Insights (RMI), is currently the sixth largest reverse mortgage lender in the nation with 4,182 loans in the 12 months to October 2022.

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