Onity Group, parent company of top five reverse mortgage lender and servicer Liberty Reverse Mortgage, will acquire reverse mortgage assets from Mortgage Assets Management, LLC (MAM), a subsidiary of investment funds managed by Waterfall Asset Management.
The deal, initially announced by Onity during its Q2 earnings call, suggests that Waterfall is committed to the reverse mortgage space. The assets at the heart of the agreement are already subserviced by PHH Mortgage, itself a subsidiary of Onity and the parent company of Liberty.
The assets have “a projected unpaid principal balance of approximately $3 billion,” Onity announced in its Q2 report. “The company intends to issue $51.7 million in par value of new, non-convertible, cumulative preferred stock to Waterfall in consideration of the acquisition.”
“This strategic partnership combines our capital and expertise with Onity’s operational capabilities, enabling us to seek exceptional investment opportunities. We look forward to expanding this collaboration to leverage our complementary strengths,” Leo Wong, a partner at Waterfall, said in a statement.
Wong added that from Waterfall’s perspective, this deal is illustrative of the company’s desire to grow its presence inside the reverse mortgage industry. Onity — previously known as Ocwen Financial Corporation — has worked with Waterfall for years.
“We are excited about today’s announcement and what it means for our ability to continue growing our Home Equity Conversion Mortgage (HECM) activities,” Wong added. “We see HECMs as a valuable tool for homeowners in today’s environment, many of whom have accumulated substantial equity but also benefit from low mortgage rates so want to access that equity without selling their home, and [we] are pleased to be able to support the growth of this dynamic sector of real estate finance.”
HousingWire’s Reverse Mortgage Daily (RMD) reached out to Onity for comment. A company spokesperson referred the inquiry back to comments made by Onity leadership in its Q2 2024 earnings information, where CEO Glen Messina expressed satisfaction with the deal. An inquiry to Waterfall was not immediately returned.
“We expect this transaction to be accretive to earnings and cash flows immediately upon closing, while strengthening our position in reverse servicing as a hedge to forward [mortgage servicing rights (MSRs)], providing incremental asset management opportunities, and improving our capital structure,” Onity CEO Glen Messina previously said in a statement.
Messina went on to call MAM a “valued subservicing client.” And Sean O’Neil, Onity’s chief financial officer, offered further details during the earnings call.
“This transaction strengthens and expands an already healthy relationship between our two firms“ O’Neil said last week. “The Waterfall affiliate MAM has been a subservicing client of ours for some time now, so we know these assets well from a performance perspective.
“This deal is also accompanied by seller-provided financing, and it is accretive to both earnings per share and cash. Our intent is that, on close, we use the proceeds to further reduce corporate debt by an anticipated amount of $40 million.“
Onity became involved in reverse mortgage servicing with a $12.4 million deal in 2021 to acquire HECM lender-turned-servicer Reverse Mortgage Solutions (RMS) from its owner, MAM, after a roller coaster of ownership changes and legal disputes following the end of RMS’ time as a reverse mortgage lender in 2017.
Servicing has been a consistent point of emphasis in Onity/Ocwen’s earnings presentations, including reverse mortgage servicing, as a business arm that contributes to profitability and portfolio diversity for the company.
In a previous interview with RMD, Waterfall’s Wong explained that the development of a new reverse mortgage-backed securities program by Ginnie Mae helps to add to the company’s overall confidence in the future of the reverse mortgage industry.
“I think, from our vantage point, this is one event that we were pretty excited to hear the news from, as are most industry participants,” Wong said in July. “I think, as a whole, the industry is reacting pretty favorably to this. Ginnie Mae has demonstrated a real commitment to the reverse mortgage products through their HECM-backed Securities (HMBS) program.”
