How Much Would You Pay For A Reverse Mortgage Lender?

image Reverse mortgage lenders are hot right now. Even with all of the negative press our industry has received over the past few months, companies are still acquiring reverse mortgage lenders. I cant say I’m surprised either… as we all know succeeding in the reverse mortgage business requires a different approach than the forward world and it’s easier to acquire a reverse mortgage company vs. starting from scratch.

Within the past year, there has been 5 different announcements of reverse mortgage lenders being acquired. Below is a list of them which should give you a better overview of what has happened:

Four out of five of the companies acquired are all currently in the top 10 list of lenders in terms of HECM production. Among the current top 10 HECM lenders, the only independent reverse mortgage lender that remains is Omni Home Finance. I’m just speculating here but I wouldn’t be surprised if they are the next company we hear about being acquired.

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But how much are people paying for reverse mortgage lenders? The only acquisition that gave an actual figure was the Genworth/Liberty deal, which according to the press release was $50 million at closing along with potential additional performance-based financial consideration. Does that mean that a company with more production than Liberty (ie.Omni) will fetch more than the Genworth deal?

No other company has disclosed what they paid, so it leaves the door open… how much are reverse mortgage lenders worth? Any ideas?

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  • $50-Million for Liberty is due to the fact they were organized into a very profitable system that can be duplicated elsewhere, so their upside potential was tremendous. They also had unbelievably high profit margins by controlling marketing costs and paying single digit loan officer commissions. Liberty also presented a detailed business plan that “sold” investors at a time when the M&A market was red hot. We are in a little different environment and other lenders are organized and operate differently. Just because a company has alot of loans closing, doesn’t mean they are tremendously profitable.

    I would expect most Reverse Mortgage companies will sell for 7 to 12 times annual profits or (projected annual profits that the investor expects to materialize). That said, Liberty is expected to earn $5,000,000 or more a year in the near future based on a $50-Million price tag.

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