A mortgage firm is laying off scores of Long Island employees in the wake of a Chapter 11 bankruptcy filing.
Reverse Mortgage Funding is laying off 119 people from its Melville office, Newsday reported. The New Jersey-based lender informed the state Department of Labor about the layoffs the day before the Nov. 30 bankruptcy filing.
A spokesperson for the company told the publication that terminated employees’ final paychecks included compensation for unused paid time off.
Four days before Thanksgiving, employees were told to immediately stop originating mortgages, Reverse Mortgage Daily reported. A week later, executives informed 472 people that they were being laid off. They kept 100 workers on to keep the firm functioning through bankruptcy.
Prior to its bankruptcy, RMF was the fifth largest reverse mortgage lender in the country, according to Reverse Mortgage Daily. Rising interest rates and the Federal Reserve’s tightening of monetary policy dealt blows to the company, though.
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The company’s assets and liabilities are both between $10 billion and $50 billion, according to its bankruptcy filing.
Reverse lenders provide cash to borrowers who have significant equity in their homes. The loans are typically secured by the property and are marketed to seniors. Instead of making monthly payments on the loan, borrowers cede home equity to the lender, which ultimately recovers the principal and interest by selling the home when the borrowers die or move out.
Reverse mortgages grew in popularity at the start of the pandemic as home prices and homeowner equity surged. But the shifting market has made it a less popular option in recent months.
The volume of Home Equity Conversion Mortgages — the most common type of reverse mortgages — dropped 22.8 percent from the second quarter to the third, according to Inside Mortgage Finance.
Traditional mortgage companies have also been gutted by the rapid rise of mortgage rates and decline in mortgage applications in the past nine months. JPMorgan Chase, Wells Fargo, Tomo, Mr. Cooper, Homelight, Keller Williams, Movement Mortgage and Better.com are among the many mortgage companies to resort to layoffs this year.
— Holden Walter-Warner