Liberty Reverse Mortgage: Aiming for Proprietary Market Growth Amid New Leadership

In 2024, Liberty Reverse Mortgage emerged as the fourth-largest reverse mortgage lender in the United States, based on issuance data from Home Equity Conversion Mortgage (HECM)-backed Securities (HMBS). This achievement indicates the company’s strong presence within a competitive market.

Exploring New Business Frontiers

Glen Messina, CEO of Liberty’s parent company, Ocwen Financial Corporation, highlighted a significant opportunity for growth in the proprietary reverse mortgage market. Unlike the HECM program, which has set lending limits, proprietary products offer the potential for higher loan amounts. Currently, Liberty holds an 18% share of the HECM market but has yet to penetrate the proprietary sector at all.

Historical Context and Product Development

Liberty’s initial foray into proprietary products began in 2007 with the launch of Liberty Preferred; however, this product was later discontinued. It was not until 2019 that Ocwen revealed a new proprietary offering, EquityIQ. Despite facing challenges, including a temporary suspension during the COVID-19 pandemic and a subsequent withdrawal in 2022 due to bond market instability, the company is enthusiastic about reentering the proprietary landscape.

Competitive Landscape and Future Plans

As Liberty prepares to reintroduce proprietary mortgage offerings, it will face seasoned competitors such as Finance of America and its HomeSafe products, along with Longbridge Financial’s Platinum line. While the development of Liberty’s new product is underway, no specific launch timeline has been disclosed.

Profitability Insights

In their recent financial updates, the leadership team provided insights into the profitability ratios across different segments of the business. Although the reverse mortgage sector represents a smaller portion of Onity’s overall operations, it boasts a significantly higher adjusted revenue margin per basis point compared to the traditional forward channel. In FY 2024, the forward correspondent channel achieved an adjusted revenue margin of 24 basis points, while the reverse division remarkably posted 341 basis points.

Strategic Importance of Reverse Mortgages

Onity stands out in the market as a public entity that actively originates, services, and subservices its own reverse mortgages. This vertical integration not only provides a hedge against forward Mortgage Servicing Rights (MSRs) but also reinforces the company’s overall financial portfolio. O’Neil, a key executive, emphasized the strategic appeal of the reverse segment, which includes its robust profitability, potential for growth, and the ability to provide a comprehensive solution for correspondent partners.

• Strong profitability and consistent performance in reverse mortgages.
• Upward trajectory potential for origination volumes if interest rates decrease.
• Partnering opportunities for clients seeking a unified service for reverse mortgage functions.
• Acquisition of reverse assets is facilitated by pricing advantages and servicing expertise.
• Growth opportunities are highlighted by significant home equity held by seniors.

Additionally, O’Neil reported the strategic acquisition of HMBS assets from Waterfall Asset Management, marking a positive development for the company that was first shared in a earnings call for Q2 2024.