(Bloomberg) — Starwood Capital-backed Reverse Mortgage Funding LLC has filed for Chapter 11 bankruptcy, the latest to succumb amid rapidly rising mortgage rates.
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The reverse mortgage company listed assets and liabilities of at least $10 billion each in its bankruptcy filing. Chapter 11 bankruptcy allows companies to continue operating while they work out a plan to repay creditors.
Reverse mortgages, a type of home loan for the elderly, allow borrowers to convert equity in their home into cash without having to sell or pay additional monthly bills.
The mortgage industry is facing a severe slowdown in business as sky-high interest rates deter new borrowers. Many homeowners locked into low rates for the past two years, and now they don’t want to give them up.
In addition to serving as a lender and servicing more than 84,000 reverse mortgage borrowers, Reverse Mortgage Funding is also a regular seller of mortgage-backed securitized bonds. That business has also been under strain lately: late last month, the company halted sales of $290 million in bonds amid market volatility.
Starwood, led by Barry Sternlicht, owns the majority of Reverse Mortgage Financing through investment vehicles, court documents show.
“While this has been a difficult decision, filing for Chapter 11 protection is necessary and appropriate for RMIT in light of adverse trends in the mortgage industry,” a Starwood representative said in a statement. declare. “We will continue to work closely with our management, advisors, and corporate stakeholders on the best path forward for the company and our investors, in line with the our fiduciary responsibility.”
The main case is Reverse Mortgage Investment Trust Inc., 22-11225, United States Bankruptcy Court for the County of Delaware.
–With support from Dan Wilchins and Carmen Arroyo.
(Updated with Starwood’s comment in the seventh paragraph.)
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