The federally insured reverse mortgage market experienced a notable contraction in September, as evidenced by a dual decline in both loan endorsements and the issuance of mortgage-backed securities. According to recent industry data, the number of Home Equity Conversion Mortgage (HECM) endorsements fell by 6.7%, while the issuance of HECM Mortgage-Backed Securities (HMBS) plummeted by 17% compared to August. These figures represent some of the lowest levels of activity seen in the sector in several years, highlighting the ongoing challenges posed by high interest rates, inflationary pressures, and a tightening secondary market.
The monthly HECM data, released by Reverse Market Insight (RMI), indicates that total endorsements for September reached only 1,790. This is a significant drop from the 1,919 endorsements recorded in August and marks the lowest monthly total since April 2020, a period defined by the initial disruptions of the global pandemic. The decline is particularly striking given that application volumes—often referred to as case numbers—had shown relative stability earlier in the year. From May through July, case numbers were consistently hovering around the 3,000-per-month mark. However, a substantial portion of these applicants failed to move through the lender pipelines to final endorsement, suggesting that economic volatility and changing borrower circumstances are leading to higher fallout rates during the closing process.
The Landscape of HECM Endorsements and Lender Performance
The consolidation of the reverse mortgage market remains a dominant theme, with a handful of major players commanding the vast majority of the volume. In September, Finance of America (FOA) maintained its position as the industry leader, securing 408 endorsements. It was followed closely by Mutual of Omaha Mortgage with 366 endorsements and Longbridge Financial with 342. The gap between these "Big 3" lenders and the rest of the field remains wide, as the fourth and fifth spots were held by Fairway Home Mortgage and South River Mortgage, which recorded 65 and 63 endorsements, respectively.
An analysis of the first three quarters of the year provides a broader view of the competitive landscape. Finance of America has solidified its lead with a total of 3,838 endorsements YTD. Mutual of Omaha (3,709) and Longbridge Financial (3,151) remain the primary competitors, while Goodlife (806) and South River (634) round out the top five for the year. Interestingly, the year-over-year data shows a diverging trend among these top firms. While Longbridge and South River managed marginal growth of 1% and 5% respectively compared to the same period in 2025, other top-tier lenders saw their endorsement volumes shrink by as much as 24%.
The market share of the "Big 3" continues to grow, rising to 59.1% through the first nine months of the year, up from 55.9% during the same period in 2025. This concentration suggests that larger institutions with more robust capital structures and marketing reaches are better equipped to navigate the current headwinds, even as the overall market pie shrinks. Despite the general downward trend, some mid-tier lenders showed signs of localized growth in September. Movement Mortgage notably doubled its production from 17 loans in August to 35 in September, and Plaza Home Mortgage increased its endorsements from 28 to 41.
Secondary Market Strains: HMBS Issuance Trends
The secondary market for reverse mortgages, where individual loans are pooled into securities to be sold to investors, also faced significant headwinds in September. Data provided by New View Advisors, based on an analysis of Ginnie Mae and private source disclosures, revealed that HMBS issuance volume totaled $446 million for the month. This represents a $91 million, or 17%, decrease from August’s figures.
Despite the drop in total dollar volume, the number of pools issued actually increased, rising from 65 in August to 70 in September. This discrepancy suggests that the average size of the pools is decreasing as lenders struggle to aggregate enough volume for larger issuances. Finance of America led all issuers with $175 million in September, though this was a sharp decline from the $257 million it issued in August. Longbridge Financial ($134 million) and Mutual of Omaha ($92 million) experienced more moderate declines.
A critical metric for the health of the industry is "first-participation" pool production, which represents the securitization of new loan originations rather than "tails" (additional draws on existing loans). First-participation volume dropped to $266 million in September, down from $309 million in August and significantly lower than the $313 million recorded in September 2025. New View Advisors noted that maintaining even this level of production will be a challenge for issuers as the 10-year Treasury yield—a key benchmark for reverse mortgage pricing—remains at its highest levels since 2002.
The composition of the 70 pools issued in September further illustrates the market’s current state. Only 17 were first-participation pools, while 50 were "tail pools," and three were a combination of both. Tail pools do not represent new borrowers but rather additional funding provided to existing loan holders. Volume for these tail pools also saw a decline, falling from $227 million in August to $179 million in September.
Economic Catalysts: Inflation, Rates, and the Bond Market
The downturn in the reverse mortgage sector cannot be viewed in isolation from the broader macroeconomic environment. Inflation remains a persistent concern for both lenders and the senior demographic that utilizes HECM products. Dan Ribler, Vice President of Capital Markets and Strategy at Longbridge Financial, recently highlighted the impact of the Personal Consumption Expenditures (PCE) index. The August PCE data showed annual inflation at 3.4%, or 3% when excluding the volatile food and energy sectors.
This inflationary environment has direct consequences for the bond market, which in turn dictates the interest rates available for reverse mortgages. Ribler observed a "bull steepener" in the bond market response, where yields on the front end of the curve (shorter-term rates) are coming down while 10-year yields remain relatively flat. This dynamic is driven by expectations regarding Federal Reserve policy. Cooler inflation data reduces the likelihood of further aggressive rate hikes, but the long-term yields—which are critical for the HECM program—remain elevated due to broader fiscal concerns and global economic factors.
For the reverse mortgage borrower, high interest rates are a double-edged sword. Not only do they increase the cost of borrowing, but they also reduce the "Principal Limit," or the amount of equity a senior can actually access. When rates are high, the mathematical formula used by the Federal Housing Administration (FHA) to determine loan amounts results in lower payouts. This often leads to "sticker shock" for applicants who may have started the process when rates were lower, contributing to the high pipeline fallout mentioned by RMI.
Chronology of Market Shifts and Regulatory Impact
The current stagnation in the reverse mortgage market is the result of several years of cumulative changes. Following the 2008 financial crisis, the HECM program underwent a series of reforms designed to protect the Mutual Mortgage Insurance Fund (MMIF) and ensure the product was used as a sustainable retirement tool rather than a loan of last resort. These reforms included the introduction of Financial Assessment requirements, which mandate that lenders evaluate a borrower’s ability to pay property taxes and homeowners insurance.
While these changes successfully reduced default rates and stabilized the program, they also made the product more complex and harder to qualify for. Michael McCully, a partner at New View Advisors, noted that the HECM product has become so "safe" through these various "belt-and-suspenders" reforms that it has inadvertently caused origination to stall. The stringent requirements, combined with high interest rates and lower principal limits, have made the product less attractive or less accessible to a significant portion of the target demographic.
The timeline of the past three years shows a clear correlation between Federal Reserve rate hikes and the decline in HECM volume. As the Fed began its aggressive tightening cycle in early 2022 to combat post-pandemic inflation, the reverse mortgage market—which is highly sensitive to the 10-year Treasury yield—saw an immediate and sustained contraction. The September 2026 data is a continuation of this trend, showing that even as inflation begins to cool slightly, the "higher-for-longer" rate environment is keeping a lid on market growth.
Broader Implications for the Industry and Seniors
The contraction in the HECM market has significant implications for both the industry and the American senior population. For lenders, the decrease in volume is leading to further consolidation and a focus on efficiency. The recent sale of reverse mortgage servicing rights by Onity Mortgage Corp. to Finance of America is a prime example of how firms are repositioning themselves in a low-volume environment. Smaller lenders are finding it increasingly difficult to compete, leading to a market dominated by a few large-scale specialists.
For seniors, the decline in HECM endorsements suggests that a vital financial tool is becoming less accessible at a time when they may need it most. With traditional retirement accounts impacted by market volatility and the cost of living remaining high, home equity is the largest asset for many older Americans. The inability to efficiently tap into that equity through a federally insured product may force some seniors toward less regulated or more expensive private alternatives.
Looking forward, the industry is watching for any signs of a pivot in Federal Reserve policy. A sustained decrease in long-term yields would likely revitalize the HECM market by increasing principal limits and making the loans more appealing to consumers. However, until the "bull steepener" translates into significantly lower 10-year yields, the market is expected to remain in a period of low activity. Ginnie Mae’s provision allowing for smaller pool sizes (as low as $250,000) has provided some relief to issuers, allowing $12.7 million in unpaid principal balance to be securitized in September that might otherwise have been delayed. While helpful, such technical adjustments are small comfort compared to the broader economic forces currently shaping the reverse mortgage landscape.
