Home equity heats up: finance of America dominates as reverse mortgage market reinvents retirement lending

By early 2026, traditional reverse mortgage activity, particularly HECM endorsements, showed a modest rebound of 16.3% month-over-month to 2,117 loans in March but remained below levels seen since August 2025 and nearly flat year-over-year, signaling persistent softness in the segment. This tepid recovery was mirrored in HMBS issuance, which in March rose slightly to $441 million yet lingered near historic lows not seen since 2009, underscoring constrained market conditions for FHA-backed mortgage securities.

The decline in HECM activity is largely attributable to intensified competition from proprietary, non-FHA reverse mortgage products, which have captured most of the growth following the 2018–2022 HECM refinance waves. This competitive shift prompted strategic moves within the industry, such as Onity Mortgage's exit from HECM originations after selling assets to Finance of America, which in turn expanded its private second-lien draw products to additional states, illustrating how market dynamics are reshaping lender portfolios and product focus.

Despite a 6% increase in HECM endorsements from May to June 2026, the year-to-date figures remained down nearly 10%, reflecting ongoing headwinds from elevated mortgage rates and heightened FHA underwriting scrutiny. This environment has accelerated market consolidation, with the top 10 HECM lenders dominating endorsements while smaller players lag significantly, concentrating market power and risk. Correspondingly, HMBS issuance remained fragile, dropping to $456 million in June—the second weakest June since 2009—with Finance of America leading issuance, highlighting liquidity challenges and concentrated risk among a few large issuers.

By early 2026, home equity solutions have transitioned from niche offerings to cornerstone growth strategies for mortgage originators, driven by a record $35 trillion in tappable equity and the widespread prevalence of low-rate first mortgages—70% of borrowers hold rates below 5%, effectively freezing traditional cash-out refinances. Tom Davis of Deephaven underscores this shift, stating that home equity products like second liens, HELOCs, and closed-end seconds now address diverse borrower needs such as home renovations, debt consolidation, and business funding, all while preserving borrowers' prized low-rate first mortgages.

This evolution has prompted originators to pivot from refinancing-centric models toward advisory roles that emphasize equity solutions, leveraging tools like blended rate calculators to highlight the financial prudence of second liens over full refinances at today’s higher rates. Davis illustrates this with the example of a homeowner holding a $500,000 mortgage at 3% who needs $50,000; refinancing the entire balance at current rates rarely makes sense, making second liens a strategic alternative that preserves low-rate debt while unlocking liquidity.

The expanding home equity market demands a broad product portfolio, including closed-end seconds, DSCR second liens, and digital HELOCs, to capture growth and meet borrower preferences. This diversification not only fuels originator growth but also serves as a critical retention and recapture strategy in an industry where over 70% of borrowers do not return to their original loan officer, positioning equity products as key tools to maintain long-term borrower relationships.

HELOCs and proprietary reverse mortgage products like Finance of America’s HomeSafe Second are gaining momentum as cycle-resistant earnings drivers, especially amid subdued traditional refinance and purchase activity. FOA’s expansion of HomeSafe Second into four new states by mid-2026, coupled with the integration of the AI-powered Joy platform to streamline applications for the 55+ demographic, exemplifies how lenders are innovating to meet rising retiree demand for liquidity without disrupting low-rate first mortgages—second-lien equity withdrawals surged 22% quarterly at the start of 2025, reflecting this growing market segment.

By mid-2026, Finance of America (FOA) had aggressively consolidated its position as the dominant player in the reverse mortgage and home equity space through a series of strategic acquisitions and portfolio expansions. Notably, FOA acquired servicing rights for approximately 20,000 HECM loans with a $5.2 billion unpaid principal balance from Onity Mortgage Corp., which simultaneously exited the HECM origination market, signaling a clear industry consolidation trend. This acquisition, coupled with FOA’s earlier purchase of American Advisors Group (AAG) and its expanded private second-lien draw products into additional states, propelled FOA to nearly 2,500 HECM endorsements in the first half of 2026, capturing a commanding 23.3% market share by June.

FOA’s consolidation strategy was further bolstered by significant financial and operational maneuvers, including revising its planned $5.1 billion purchase of reverse mortgage servicing rights from PHH Mortgage and repurchasing Blackstone’s equity stake to consolidate ownership control. These moves underpinned a robust financial rebound with a $35 million net income in Q1 2026 and an upward revision of full-year EPS guidance to $4.50–$5.00, reflecting strong confidence in its market positioning and growth trajectory amid a recovering HECM endorsement environment.

Recognizing the importance of brand strength and product innovation in sustaining its market leadership, FOA strategically enhanced its executive team by appointing Colm Murphy as chief brand officer, Jordan Baucum as senior vice president of communications, and Mike Urban as chief product officer. These hires were designed to accelerate consumer education on retirement financing and drive innovation in home equity product offerings, aligning with FOA’s broader goal of deepening consumer engagement and expanding its retirement solutions platform.

The broader HECM market itself is experiencing pronounced consolidation, with the top 10 lenders, led by FOA, dominating endorsements and HMBS issuance despite fragile liquidity conditions. FOA’s leadership in HMBS issuance amid a second weakest June since 2009 underscores both its expanding influence and the concentrated market risk among a few large issuers, highlighting how strategic corporate moves are reshaping competitive dynamics in the home equity lending landscape.

By early 2026, the mortgage industry was embracing AI-driven platforms and innovative products like HELOCs to diversify offerings and build cycle-resistant earnings, as highlighted in a May 2026 opinion urging Independent Mortgage Banks to leverage these technologies amid subdued core refi and purchase markets. This technological integration not only broadens product portfolios but also enhances mortgage professionals’ ability to engage borrowers beyond traditional transactions, enabling more proactive and advisory roles.

A pivotal transformation in borrower engagement emerged through empowering mortgage professionals with radical transparency, education, and technology that amplify their visibility and client outreach. Ryan Grant and related analyses emphasize treating loan officers as business owners by providing them with tools and economic clarity, thereby shifting their role from mere transaction facilitators to trusted advisors capable of offering differentiated products and fostering long-term client relationships.

This evolution demands a unique blend of financial literacy, advisory acumen, and charismatic marketing skills from mortgage professionals, who must transcend traditional roles to connect deeply with clients. Grant underscores that while many loan officers possess financial expertise, their limited business development skills hinder client engagement; thus, enhancing their ability to tell compelling stories and actively participate in community and realtor events is critical to sustaining advisory relationships.

NEO’s strategic shift since 2018 towards early education and long-term financial guidance exemplifies the industry’s move from transactional services to comprehensive wealth planning, addressing a glaring market gap where 92% of Americans lack access to financial planners or estate attorneys. Complementing this trend, Finance of America’s 2026 integration of the AI-powered Joy platform for its HomeSafe Second reverse mortgage product demonstrates how technology facilitates advisory engagement, particularly for retirees seeking to enhance financial security without liquidating assets.

By mid-2026, New American Funding (NAF) had dramatically expanded its reverse mortgage division from just three to 85 dedicated loan officers, reflecting a strategic push to integrate home equity as a mainstream retirement planning tool rather than a last-resort debt option. Shannon Robinson, a seasoned expert with over 20 years in reverse mortgages who joined NAF in 2023, emphasized educating financial advisors and referral partners to position these products as instruments of financial independence amid a demographic surge where over 11,000 Americans turn 65 daily and seniors hold upwards of $15 trillion in housing wealth.

Finance of America Reverse LLC's expansion of its HomeSafe Second reverse mortgage product into four additional states by July 2026, bringing availability to 18 states plus D.C., underscores growing retiree demand for innovative home equity solutions that avoid refinancing or new monthly payments. This growth was catalyzed by a 22% quarterly increase in second-lien equity withdrawals starting in early 2025, and was further enhanced by the introduction of the AI-powered Joy platform, which streamlines access and application processes, enabling retirees to bolster their financial positions without selling their homes, as noted by FOA President Kristen Sieffert.

By mid-2026, mortgage brokers have strategically diversified their product mix to navigate refinance constraints, increasingly incorporating second-lien products like HELOCs and HELOANs. As Reno Hind of Spring EQ explains, these options allow borrowers to tap into home equity without disturbing their favorable first mortgage rates secured during 2019-2022, which has been pivotal to Spring EQ's success. This multi-product approach extends beyond home equity loans to include purchase loans, DSCR loans, bank statement loans, and other non-QM products, enabling brokers to maintain robust pipelines amid a stable yet challenging rate environment.

Successful brokers are not only expanding their product offerings but also leveraging partnerships and marketing strategies to sustain growth. By cultivating strong relationships with realtors and builders and actively engaging customers through social media, brokers are effectively shifting focus toward purchase loans while simultaneously marketing refinance opportunities via home equity and non-QM products. This dual approach ensures they capture both purchase and refinance demand, as highlighted by Reno Hind and industry observations emphasizing the importance of these diversified channels.

Despite the growing prominence of equity products, brokers face challenges due to misconceptions about loan sizes and compensation structures. Tom Davis of Deephaven Mortgage counters these myths by noting that their average equity loan exceeds $200,000 and that HELOCs can yield substantial commissions—up to 2.5 points, translating to $25,000 on a $1 million deal. This education is crucial as second-lien originations surged to their highest first-quarter pace in nearly two decades, underscoring equity products as a vital revenue stream in a drying refinance market.

The expanding equity product market, projected to reach around $150 billion in 2026 and rival the non-QM sector, is becoming indispensable for brokers aiming to retain clients. Tom Davis warns that brokers who fail to offer these options risk losing borrowers to competitors, as half of refinance equity extraction now occurs through such products. By providing a variety of tailored solutions—including draws, fixed payments, and interest-only options—brokers can meet diverse borrower needs and sustain growth despite refinance headwinds.