NewDay to Exit Reverse Mortgages in Wake of New Changes

Top-15 lender NewDay USA has decided to completely exit the reverse mortgage industry in the wake of upcoming changes to the federally-insured home equity conversion mortgage program, according to sources with knowledge of the situation. 

Company executives announced on September 7 that the reverse mortgage division would stop originating new HECMs effective immediately, an executive familiar with the situation told RMD. NewDay will not close any more loans and plans to transfer its entire reverse mortgage pipeline to another company. The exit has been attributed to the HECM program overhaul, which begins October 1. 

The Fulton, Md.-based company did not wish to make a statement on the topic, a public relations spokesperson told RMD on Wednesday.


NewDay Financial, which began doing business as NewDay USA in 2012, was ranked ninth in endorsement volume for July 2013 according to Reverse Market Insight data, with 87 loans that month. Overall, it was the 13th-largest lender for loan volume in 2013, with 508 loans comprising a 1.3% market share. 

In addition to its reverse mortgage division, NewDay USA also originates VA, FHA, and conventional forward mortgages. 

Written by Alyssa Gerace 

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  • With reduced volume, this is a welcome opportunity to grasp more market share.

    While this may be the first significant lender to leave this space in awhile, it will not be the last due to the changes. While we all wish the originators and staff the best and expect them to land on their feet, the only certainty for our dinky industry for 2014 is that as a whole revenues and profits will go down as we learn to adjust to our new reality.

    • For some of us this isn’t a new reality – this is a move of the program back to its original intent. The industry will just have to do what we have always done and adapt and market the product differently.

      • Geri,


        Please describe when in the past originators had to be concerned about financial assessment or upfront payout issues. When in that period of original intent did you offer such low PLFs with such high lending limits?

        Please describe when in the past consumers paid more for upfront MIP if they took 61% in proceeds rather than 60% in the first year? When in the past were borrowers limited from taking all available proceeds at any time they wanted? It was not until 10/4/2010 that HECM borrowers had to face ongoing MIP of 1.25%.

        This could go on and on but the point is, it is only first year payouts which might reflect the dream world of the past. It seems you have bought the current line of reason hook line and sinker. Much of that “line” is lost in the world of absurdity.

  • Critic: ” With reduced volume, this is a welcome opportunity to grasp more market share.” We are talking 508 loans so far in 2013. I don’t know if I would call that market share in any industry. I believe they made a wise choice early and many more will follow. As I stated many times this will become a niche market unless a few step up with proprietary products which seems unlikely.

    This is an industry that is determined by the actions of one party HUD. It’s like being in a business that sells one product. You may be doing OK until the supply line shuts down and you are out of business overnight.

  • No wonder reverse mortgage purveyors are beginning to exit. The announced changes have rendered the product uncompetitive with conventional mortgages, especially in light of higher insurance premiums, set-asides and lower cashouts. Moreover, the financial assessments will eliminate access for many seniors on pensions or social security.

    • Richard, you need to seek clarification on the new rules. The financial assessment is to make sure they are able to pay HOI and property taxes, as well as other financial obligations. This is a return to the original intent of the program. We originated them then, now will be no different – the industry will adapt as it has always done.

      • Geri,

        What you forget is that those early days, the program is growing. For the last three out of four years it has decreased from the endorsements of the prior years. Last fiscal year we did less than one-half of the number of endorsements we did in fiscal 2009. Friends tell me this fiscal year endorsements are up but not by that much.

        By making the proposed changes, no one expects industry revenues to rise for a number of years. A very credible industry prognosticator estimates that average Unpaid Balances Due at initial funding could be 49% lower next fiscal year than they are this. If that is true combined with lower endorsements and average lower market HECM premium rates, lender revenues could plummet to less than 50% of what they are this fiscal year without increased market share.

        So I hear you but we disagree.

  • As I’ve warned for a long time now and will continue to say, originators that rely on advertising-generated leads, which is a sizeable percentage of overall industry volumes, will be taking a very hard look at the economics of their business models.

  • We that have been in the industry for some time never likes to see companies exiting the business. It causes confusion, concern and over estimates the real impact of the change.

    However, I can agree to a point with some of my colleagues, it is an opportunity to capitalize on more market share available. I am surprised New Day is calling it quits so quickly, especially since they have been doing so well in the short time they have been at it. I will say this, as an observer of New Day, they could no way have been committed to the reverse mortgage industry.

    Change is not easy to handle, this one in October and the one in January are the worst I have seen. Certain amount of changes were needed but not all them. We have no choice but to live and accept them or get out of the business, period!

    If you are going to stay in the industry, stop complaining about the changes and learn everything you can about them so you will be educated and so you can still sell the product with confidence, knowing you will still be helping many!!

    The glass of water is still half full my friends.

    John A. Smaldone

    • John,

      I doubt if too many of the top five lenders are really that sorry that Met Life, B of A, and Wells Fargo left the industry. That is the only way they could grown so quickly. They never could have effectively with the marketing budgets and facilities those entities employed to generate the leads they did.

    • We will need a lot more than 1 company to get out to see market share growth by anyone….

      2004 Calender Year
      40,093 endorsed loans by 471 Companies

      2012 Calender Year
      52,883 endorsed loans by 1,221 Companies

      These changes could bring us back to the #’s seen in 2004 for endorsements. Couple that with reduced revenues and people will have to decide whether this is a viable business to stay in.

  • Guest,

    No, PLFs are cut 85% across the board. If the expected interest rate is 6% what do the current or future PLFs at 5.56% have to do with the new PLF at 6%?

    When it comes to financial assessment HUD may be saying exactly that; however, watch what that “statement” does to turn times, resistance to provide information, lost originations, and the size of tax and insurance set asides.

    If even on average 500 of these 10,000 seniors turning 65 each day became borrowers, our present industry would be hard pressed to meet demand. The fact is at the present rate we will not see any 200 of these new seniors get HECMs. No one expects the present rate to be up for 2014 but significantly down, way down.

    So, no I do not agree with your observations about HECMs.

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