Recent earnings results for top 10 reverse mortgage lenders in the U.S. stock market, such as Finance of America (FOA) and Ellington Financial, have been released for the third quarter of 2024.
FOA, the industry leader, reported robust earnings attributed to the performance of its proprietary loan products and positive trends in the Home Equity Conversion Mortgage (HECM) space.
On the other hand, Ellington’s results were softer, but company leaders are optimistic about the profitability prospects for Longbridge Financial and the industry as a whole.
To gain insights into investor interests in these results and the outlook for these companies and the industry, HousingWire’s Reverse Mortgage Daily (RMD) interviewed UBS equity research analyst Douglas Harter.
Company performance
According to Harter, FOA has made significant progress in cleaning up its balance sheet, which has improved its financial metrics and profitability. The integration with American Advisors Group (AAG) has enhanced earnings potential for FOA.
Ellington, on the other hand, has continued to securitize across its platforms, leading to portfolio growth and increased earnings, despite challenges in the credit markets.
Investor attitudes on reverse
Investor attitudes towards the reverse mortgage space are influenced by the industry’s unrealized potential, demographic trends, regulatory changes, and market challenges. Some investors remain skeptical about the industry’s scalability, while others see opportunities in the under-savings of seniors and their home equity.
Changes in regulations, such as the reduction in principal limit factors (PLFs) and the upcoming HMBS 2.0 program, impact investor sentiment towards companies like FOA and Ellington.
Investors are closely monitoring the liquidity implications of HMBS 2.0, particularly for FOA, as it could improve their balance sheet and overall financial position.