By Financial Markets News Desk
The market for federally insured reverse mortgages experienced a challenging conclusion to the third quarter, marked by broad-based contractions in both origination activity and secondary market liquidity. According to newly released industry data, September saw a continuation of downward trends that have gripped the sector for much of the year, driven by a combination of macroeconomic headwinds, shifting consumer pipelines, and increasingly stringent product guardrails.
Industry analysts point to a complex web of pressures facing senior homeowners, originators, and capital markets participants alike. While demand for liquidity among older Americans remains structurally robust, the translation of initial interest into finalized transactions has hit persistent roadblocks. As lenders navigate a volatile interest rate environment and persistent inflation, the reverse mortgage ecosystem is being forced to adapt to a changing paradigm where safety measures designed to protect borrowers are simultaneously constraining volume.
Main Facts: September Contractions Across the Board
The latest figures published by Reverse Market Insight (RMI) and New View Advisors paint a clear picture of a contracting market in September.
- HECM Endorsements: Federally insured Home Equity Conversion Mortgage (HECM) endorsements fell by 6.7% month-over-month in September, dropping to 1,790 units. This compares with 1,919 endorsements in August and represents the lowest monthly total recorded since April 2020.
- HMBS Issuance: HECM Mortgage-Backed Securities (HMBS) issuance suffered an even steeper decline, tumbling 17% from the prior month to settle at $446 million—a $91 million decrease compared to August.
- Pipeline Dropouts: Despite steady application volumes averaging roughly 3,000 case numbers per month between May and July, a high attrition rate within lender pipelines has directly translated into fewer closed loans in the subsequent months.
- Market Consolidation: The "Big 3" lenders—Finance of America (FOA), Mutual of Omaha Mortgage, and Longbridge Financial—have tightened their grip on the sector, commanding a combined HECM market share of 59.1% through the first three quarters of the year, up from 55.9% during the same period in 2025.
Chronology and Pipeline Dynamics: From Application to Attrition
To understand September’s trough, industry analysts look back at the trajectory of loan applications earlier in the year.
During the late spring and early summer months—specifically from May through July—reverse mortgage originators experienced a solid baseline of incoming interest. Case numbers, which serve as the primary indicator of submitted applications for new HECM loans, held steady at approximately 3,000 per month. For market participants, these figures initially signaled a potential stabilization or rebound in borrower demand.
However, a critical bottleneck emerged between the initial application phase and final closing. A significant portion of prospective borrowers dropped out of lender pipelines before reaching endorsement. Industry experts attribute this attrition to various factors, including changing financial calculations among seniors, appraisal challenges, and the psychological impact of fluctuating macroeconomic indicators.
By the time late summer arrived, the diminished conversion rate caught up with origination tallies. August saw endorsements slip to 1,919, which at the time was considered a soft month. September’s drop to 1,790 endorsements confirmed that the pipeline leakage was more than a temporary anomaly, dragging monthly production down to levels not seen since the initial economic disruptions of the COVID-19 pandemic in early 2020.
Concurrently, the secondary market felt the immediate ripple effects of these origination declines. New View Advisors’ September report noted that overall HMBS volume fell to $446 million, down from August’s figures. First-participation pool production—representing newly originated loans bundled into securities—similarly slid to $266 million in September, down from $309 million in August and $313 million in September 2025.
Supporting Data: Lender Rankings and Market Share
Despite the broader market contraction, top-tier lenders continue to capture significant portions of dwindling origination volume, while a handful of mid-sized institutions demonstrate localized growth.
September 2024 Top Lenders (HECM Endorsements)
- Finance of America (FOA): 408 endorsements
- Mutual of Omaha Mortgage: 366 endorsements
- Longbridge Financial: 342 endorsements
- Fairway Home Mortgage: 65 endorsements
- South River Mortgage: 63 endorsements
Year-to-Date Performance (First Three Quarters)
Looking across the first nine months of the year, Finance of America widened its lead at the top of the leaderboard with 3,838 total endorsements. Mutual of Omaha followed closely with 3,709 endorsements, while Longbridge Financial secured third place with 3,151. Goodlife (806) and South River (634) rounded out the top five.
When comparing year-over-year performance for the first nine months, divergence among the leaders becomes apparent. Longbridge Financial and South River experienced marginal growth in endorsements, up 1% and 5% respectively. Conversely, other top-tier competitors saw year-over-year declines ranging from 6% to 24%, underscoring the severity of the broader market slowdown.
Further down the rankings, certain lenders managed notable monthly gains. Movement Mortgage doubled its production from 17 loans in August to 35 in September. Similarly, Plaza Home Mortgage expanded its monthly endorsements from 28 to 41.
HMBS Issuance and Securitization Breakdown
In the secondary market, Finance of America led all HMBS issuers in September with $175 million in volume, though this was down from $257 million in August. Longbridge ($134 million) and Mutual of Omaha ($92 million) experienced more modest, marginal volume pullbacks.
New View’s data detailed the composition of the 70 pools issued in September:
- First-participation pools: 17 pools
- Tail pools: 50 pools (representing existing loans with new amounts lent, dropping from $227 million in August to $179 million in September)
- Combined pools: 3 pools
An interesting structural feature of September’s issuance was the utilization of Ginnie Mae provisions allowing smaller pool sizes. There were 23 pools issued with an aggregate size of less than $1 million—facilitated by a provision enabling pools as small as $250,000. This flexibility injected $12.7 million of unpaid principal balance into the market that otherwise might not have been securitized during the month.
Official Responses and Macroeconomic Commentary
Industry leaders and capital markets strategists have weighed in heavily on the macroeconomic forces shaping the reverse mortgage landscape.
In his weekly "Ribler on Rates" video series, Dan Ribler, vice president of capital markets and strategy at Longbridge Financial, addressed the overarching pressures of inflation and interest rates that continue to challenge mortgage lenders across the board. Ribler highlighted the August Personal Consumption Expenditures (PCE) index, which revealed an annual inflation rate of 3.4% (or 3.0% when stripping out volatile food and energy components).
"We’re seeing the bond market respond with a bull steepener," Ribler explained. "The front end of the curve, we’re seeing yields come down, where 10-year yields are roughly flat. That makes perfect sense, because on the front end of the curve, cooler inflation data means there’s a lower probability that the Fed will hike rates next time they meet."
Despite potential relief on the horizon regarding Federal Reserve rate hikes, the broader rate environment remains a formidable obstacle. New View Advisors specifically cautioned that "issuers will struggle to maintain this rate of production with the 10-year Treasury yield at its highest level since 2002."
Michael McCully, a partner at New View Advisors, provided additional context on the health of the secondary market during a recent discussion with industry media. According to McCully, the mechanics of the reverse mortgage secondary market remain sound.
"The secondary market is functioning extremely well," McCully noted. However, he emphasized that the root cause of depressed issuance is tied directly to origination volume. "The problem is that the HECM product has become so safe—it’s a belt-and-suspenders product now—and that’s causing origination to stall."
Implications: A "Safe" Product Facing Structural Headwinds
The convergence of tighter underwriting guardrails, elevated interest rates, and macroeconomic uncertainty carries profound implications for the reverse mortgage industry moving forward.
1. The Safety-Versus-Volume Paradox
As McCully pointed out, regulatory and structural reforms over the past decade have transformed the HECM into an exceptionally secure financial instrument for both borrowers and the federal government. Measures such as rigorous financial assessments, reduced principal limit factors (PLFs), and enhanced counseling requirements ensure that defaults are kept to a minimum.
However, this heightened security comes with a trade-off. By limiting the amount of equity seniors can access and introducing higher hurdles to qualification, the product has become less flexible for certain prospective borrowers. This "belt-and-suspenders" approach protects the Mutual Mortgage Insurance (MMI) Fund but simultaneously acts as a friction point, discouraging potential applicants who find the net available proceeds insufficient for their immediate financial needs.
2. Market Consolidation and Scaling Pressures
With endorsement totals hitting multi-year lows, smaller originators face an increasingly difficult operating environment. Fixed regulatory and compliance costs, combined with compressed origination volumes, favor well-capitalized institutions. The strengthening market share of the "Big 3" (FOA, Mutual of Omaha, and Longbridge) demonstrates that consolidation is likely to continue. Smaller players that lack the proprietary technology, diverse capital sources, or national footprint of the industry giants will find it harder to achieve profitability in a contracting market.
3. Capital Markets and Liquidity Outlook
For HMBS issuers, the high interest rate environment—exemplified by 10-year Treasury yields hovering near decades-long highs—creates persistent pricing and pooling challenges. While Ginnie Mae’s structural accommodations, such as sub-$1 million pool issuances, provide vital flexibility for smaller lenders and issuers, overall liquidity is inextricably linked to the origination pipeline. Until application dropouts decrease and closed-loan endorsements rebound, secondary market volume will likely remain subdued.
Conclusion
As the industry turns its attention to the final quarter of the year, stakeholders are watching closely for signs of macroeconomic stabilization. Whether cooler inflation prints will eventually translate into more accommodating rate environments—and whether lenders can find innovative ways to guide applicants successfully through their pipelines—will determine if the reverse mortgage market can emerge from its current autumn slump.
