Lender Name: Liberty Home Equity Solutions
Headquarters: Rancho Cordova, California
States licensed: 48, plus the District of Columbia
Company leadership: President Mike Kent
Product offerings: HECM, proprietary reverse mortgages
Lender ranking: #2 based on HECM endorsement data compiled in January, 2020
Brief history: One of the few major entities in the reverse mortgage industry to be a part of a publicly-traded company, Liberty Home Equity Solutions in recent years has been something of a bright spot when compared with fellow companies owned by Ocwen Financial Services. While Ocwen has been going through a financial reorganization to try and return to profitability it has not seen in some time, the general business performance of Liberty – its reverse mortgage arm – is continually hailed by Ocwen CEO Glen Messina in conference calls with company investors.
Founded in 2003 simply as “Liberty Reverse Mortgage,” the company operated for about four years before it was eventually acquired by Genworth Financial in November of 2007 in a deal reportedly valued at $50 million.
“This acquisition is a natural extension of our commitment to the senior market and our vision to deliver financial security to consumers,” said Pam Schutz, EVP of Retirement and Protection for Genworth Financial at the time. “Liberty will allow Genworth to offer senior market consumers new products that provide liquidity, retirement income, and enable funding of their retirement safety net.”
A little over the year after the acquisition, the new parent company renamed the lender “Genworth Financial Home Equity Access,” to better reflect its ownership by the larger Genworth Financial. However, by 2012, Genworth began to entertain the prospect of selling the lender, and Ocwen Financial Services started to more aggressively look into ways it could expand its own footprint in existing mortgage-related endeavors it was already present in.
“Genworth’s reverse mortgage business is a top-notch operation with a very strong management team and culture that emphasizes customer-service and superior quality,” said John Britti, chief financial officer & EVP of Ocwen to industry publication Reverse Mortgage Daily. “As a result, we believe this acquisition positions Ocwen well in the reverse mortgage business, which has enormous long-term growth potential.”
The deal for Ocwen’s acquisition was reportedly valued at $22 million at the time, a drop in value of over 50% compared with what Genworth initially paid for the company in 2007.
Just prior to the final sale in April of 2013, Genworth Financial Home Equity Access changed its name yet again, this time to “Liberty Home Equity Solutions.” This name references the original name of the company, while also broadening the scope of the services it aims to provide seniors.
Ocwen was one of the largest mortgage servicers at the time of its acquisition of Liberty, with a $128 billion portfolio of loans. While Ocwen was certainly optimistic concerning its acquisition of Liberty its dedication to the reverse mortgage business has seemingly expanded and contracted several times in recent years. In 2017, Ocwen had even publicly floated the idea of selling Liberty before changing its mind in early 2018.
“After a strategic review, we have decided to remain in the reverse mortgage lending business, and are excited about its future coming off a strong year in 2017,” CEO Ron Faris said in a February 2018 earnings call with shareholders and analysts. “It is a challenging environment for reverse mortgages — some of the HUD rule changes that went into effect last year are expected to reduce volumes in 2018 — but we still believe that we have one of the premier platforms and are excited about that business going forward.”
The rule changes Faris was referring to did not only adversely affect Liberty, as widespread reductions to principal limit factors and the institution of a collateral risk assessment by the U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA) depressed industry volume significantly.
In the following months, however, the reverse mortgage industry began more actively pivoting to private reverse mortgages making up a larger share of overall business. While traditional Home Equity Conversion Mortgages (HECMs) are still the largest component of reverse mortgage lenders’ volume levels, private alternatives are beginning to make up a larger share as more new products are introduced.
In February of 2019 on another earnings call, it was revealed that Liberty had successfully piloted its own jumbo, private reverse mortgage product and were looking at methods to expand its reach. That July, Liberty launched “EquityIQ,” designed to allow access to funds of up to $4 million. It also features lower upfront costs with no mortgage insurance premium and is described as having easier eligibility requirements for home purchases when compared to its more traditional reverse mortgage offerings.
There is also an option available that does not include origination or servicing fees, and EquityIQ maintains the non-recourse feature found in a traditional HECM.
“For us, our goal with EquityIQ is not necessarily to compete with the HECM product,” said Mike Kent, Liberty’s president to Reverse Mortgage Daily. “Our goal is to both serve a larger customer base, and to use this product in a way to expand distribution, working with many of the forward originators today that already sell reverse mortgages.”