Starwood, led by Barry Sternlicht, owns most of Reverse Mortgage Funding through investment vehicles, court papers show. — Bloomberg
NEW YORK: Starwood Capital-backed home lender Reverse Mortgage Funding LLC filed for Chapter 11 bankruptcy, the latest company to succumb amid a rapid run-up in mortgage rates.
The company, which makes reverse mortgages, listed assets and liabilities of at least US$10bil (RM44.8bil) each in its bankruptcy petition.
Chapter 11 bankruptcy allows companies to keep operating while they work on a plan to repay creditors.
Reverse mortgages, a type of home loan geared toward seniors, allow borrowers to convert equity in their homes into cash without needing to sell or pay more monthly bills.
The mortgage industry is contending with a massive slowdown in business as sky-high rates deter new borrowers.
Many homeowners locked in low rates during the last two years, and now they’re reluctant to give them up.
In addition to being a lender and servicer of more than 84,000 reverse mortgage borrowers, Reverse Mortgage Funding has been a frequent seller of securitised bonds backed by mortgages.
That business came under strain recently as well: late last month, the company shelved a US$290mil (RM1.28bil) bond sale amid market volatility.
Starwood, led by Barry Sternlicht, owns most of Reverse Mortgage Funding through investment vehicles, court papers show.
“While a difficult decision, filing for Chapter 11 protection is necessary and appropriate for Reverse Mortgage Investment Trust Inc, given the adverse trends in the mortgage industry,” a representative for Starwood said in a statement. — Bloomberg
