Reverse Mortgage Funding lays off 119 in Melville
Reverse Mortgage Funding is laying off 119 employees at its Melville office, according to a state WARN notice. Credit: Newsday/John Paraskevas
Reverse Mortgage Funding, a New Jersey-based lender, is laying off 119 Long Island employees following its declaration of Chapter 11 bankruptcy, according to a filing with the state Department of Labor.
RMF, based in Bloomfield, New Jersey, filed for Chapter 11 bankruptcy on Nov. 30 in U.S. Bankruptcy Court in Delaware. The day before the filing, it notified the New York State Department of Labor it would be laying off 119 employees in Melville, according to a state WARN notice.
The company has assets between $10 billion and $50 billion and liabilities in that same range, according to its bankruptcy filing.
U.S. Bankruptcy Judge Mary Walrath authorized the company last week to make certain payments to cover employee compensation, payroll taxes and benefits. A spokeswoman for the company declined to comment on employment matters beyond RMF’s public filings, but a different spokeswoman said Tuesday night that “all terminated employees received a final paycheck which paid them for all hours worked and any accrued but unused paid time off.”
Reverse mortgage lenders provide cash to borrowers with significant equity in their homes. The loans are paid off when the borrower dies or moves out of the house. RMF was the country’s fourth-largest reverse mortgage lender in the first half of this year, according to Inside Mortgage Finance, a Bethesda, Maryland-based research firm and publisher. It controlled about 5% of the market for the most common type of reverse mortgage, a Home Equity Conversion Mortgage.
Home Equity Conversion Mortgages allow homeowners 62 years or older to cash in on their home's equity. This type of reverse mortgage, issued by private lenders such as RMF, is insured by the Federal Housing Administration and can be sold on the secondary market to purchasers such as the Government National Mortgage Association, or Ginnie Mae.
A steep jump in interest rates this year has made reverse mortgages less attractive to potential borrowers because they stand to make less money for a reverse mortgage, said Guy Cecala, executive chair of Inside Mortgage Finance. As demand for reverse mortgages declines, lenders have fewer loans to package into HECM-backed securities that they can sell to investors.
“It’s like everything in the mortgage market these days — there’s over-capacity and declining demand,” Cecala said. “That’s particularly true in the reverse mortgage space.”
The Consumer Financial Protection Bureau notes there are several alternatives seniors who need access to cash should consider when thinking about a reverse mortgage. They include taking out a home equity loan, refinancing a traditional mortgage or downsizing to a more affordable home.
Reverse mortgages were attractive after home prices — and homeowner equity — rose in the years that followed the onset of the COVID-19 pandemic. After a strong 2021 and start to 2022, the total volume of Home Equity Conversion Mortgages fell by 22.8% in the third quarter compared with the previous quarter, according to data from Inside Mortgage Finance.
“The last few years have been record-breaking periods for mortgage lending in general, including reverse mortgages. As a result, you had more players in the marketplace,” Cecala said. “That’s fine as long as there’s a record amount of business to spread around. If you cut that in half, there’s not enough to support the lenders.”
Jonathan LaMantia covers residential real estate and other business news on Long Island. He previously covered the business of health care for Crain's New York Business.
