Champion Parent CEO: Reverse Mortgages a ‘Smaller Pond,’ Volume Drop ‘Prudent’

The CEO of Champion Mortgage’s parent company described the reverse mortgage servicing and sub-servicing market as a “smaller pond” compared to other aspects of its business, pointing to cratering origination numbers in the Home Equity Conversion Mortgage marketplace.

“It’s just such a smaller pond, right?” Nationstar Mortgage Holdings (NYSE: NSM) CEO Jay Bray said on his company’s second-quarter earnings call Tuesday morning. “If you step back and think about what’s going on in that business, you’ve seen originations shrink dramatically, which we think were prudent steps taken on the origination side of the market. And so it’s just a smaller pond.”

Bray was answering a question from an analyst about the potential for the company to expand its reverse servicing holdings going forward — particularly given the CEO’s sunny outlook for Nationstar’s overall servicing arm, which posted adjusted income of $72 million for the quarter with $20 billion in unpaid principal balance added to its portfolio. The company plans to bring on an additional $65 billion worth of UPB on the servicing side before the year is over, according to Bray.

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But that likely won’t include many reverse mortgages.

“If there are portfolios that make sense for us, we’ll certainly take a look at them, but when we speak to the pipeline, we’re really focused on forward,” Bray said. “We don’t really include reverse in the pipeline because we just see those as more one-off, opportunistic-type transactions.”

The company reported $9.4 billion in net reverse mortgage-related assets for the second quarter of 2018, down from $10.2 billion in the first three months of the year.

Nationstar recently saw its shareholders sign off on a merger agreement with WMIH Corp., the successor company to former U.S. banking behemoth Washington Mutual; Bray will remain as the leader of the combined firm.

The Coppell, Texas-based Nationstar also made waves last year by rebranding its consumer-focused mortgage servicing business as “Mr. Cooper,” a name change that did not affect its Champion reverse mortgage servicing business.

Written by Alex Spanko

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  • Seeing terms used by vendors to describe the position of our industry like smaller ponds and volume drop may not be alarming but it is certainly surprising.

    It is somewhat disarming that servicers are now openly acknowledging that they are looking at reverse mortgage originations as a shrinking source of new business. Since their reverse mortgage operations are highly dependent on new originations to expand overall reverse mortgage servicing operations, how the reverse mortgage originations do has a direct impact on servicers who are looking to grow their reverse mortgage servicing operations.

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