Reverse Mortgage Funding files for bankruptcy

Reverse Mortgage Funding and its parent company Reverse Mortgage Investment Trust have filed for Chapter 11 protection in the U.S. Bankruptcy Court for Delaware.

RMF suspended all origination activity earlier this month; more recently, the company conducted layoffs. A statement from RMIT did not specify how many positions were terminated, but a published report in National Mortgage Professional indicated approximately 400 people were let go.

The initial bankruptcy filing indicated RMIT now has 111 employees. Other RMIT units also sought bankruptcy protection.

RMF made Worker Adjustment and Retraining Notification filings in the three states it has offices: New Jersey, where its Bloomfield headquarters are located; New York; and California.

Year-to-date through October, RMF was the fifth most active Home Equity Conversion Mortgage lender in 2022, based on insurance endorsements, according to Reverse Market Insight.

RMIT, a non-publicly traded real estate investment trust, made the decision to file for bankruptcy after negotiating with what it termed “constituents.”

“RMIT and the broader mortgage industry are facing a number of adverse trends, in particular unprecedented interest rate hikes combined with credit spread widening and overall volatility in fixed income markets, including agency mortgage markets,” a statement from the company said. 

“The market disruption has increased capital requirements to originate and finance new loans and support the company’s servicing portfolio, which severely strained RMIT’s liquidity position and depleted the company’s book value.”

It is currently negotiating with several parties, including Ginnie Mae, to find a new home for its mortgage servicing rights portfolio.

RMF’s pipeline of loans in progress will be transferred to other lenders.

RMIT is in the process of securing debtor-in-possession financing, the statement said.

The filing lists reverse mortgage subservicer Celink as the largest debtor but did not list a claim amount. The next largest debtor is the law firm of Lowenstein Sandler, at over $1 million.

Legal advisors for RMIT, RMF and the other companies in the filing are Sidley Austin, Bradley Arant Boult Cummings, and Benesch, Friedlander, Coplan & Aronoff with FTI Consulting as financial advisor.

Among other reverse mortgage lenders that have made layoffs are American Advisors Group and Open Mortgage. Nutter Home Loans shut its doors because of legal issues around its reverse mortgage program, although it was no longer actively originating those loans. On the other hand, Finance of America shuttered its forward-lending business to concentrate on reverse mortgages.