Reverse Mortgage Investment files bankruptcy with over $10 billion in debt

By Sarah Lizee

Olympia, Wash., Nov. 30 – Reverse Mortgage Investment Trust Inc. and four affiliates filed Chapter 11 bankruptcy on Wednesday in the U.S. Bankruptcy Court for the District of Delaware.

The company said in a press release that it is hoping to preserve value and monetize its assets through the Chapter 11 process.

The debtor is in discussions with its mortgage servicing rights secured lender and other industry players, including Ginnie Mae, to achieve an agreement that “ensures a smooth landing” for its servicing portfolio, as well as other obligations, the company said.

In the meantime, the company has started working to transfer the remaining loans in its pipeline to other lenders.

“The company made this decision after weeks of negotiations with its constituents, and has begun notifying its borrowers, regulators, and other pertinent parties,” the company said in the release.

“RMIT and the broader mortgage industry are facing a number of adverse trends, in particular unprecedented interest rate hikes combined with credit spread widening and overall volatility in fixed income markets, including agency mortgage markets.”

The company said the market disruption has increased capital requirements to originate and finance new loans and support the company's servicing portfolio, which severely strained its liquidity position and depleted its book value.

Earlier this month, the company paused all origination activities, and most recently, conducted a reduction in its workforce.

To fund operations during the Chapter 11 process, the company is in the process of securing debtor-in-possession financing from parent BNGL Parent, LLC. The proceeds would provide for near-term liquidity to operate and cover administrative expenses as the company pursues restructuring options, once approved by the bankruptcy court.

In its petition, the debtor listed $10 billion to $50 billion in assets and $10 billion to $50 billion in liabilities.

The company said that after administrative expenses are paid, no funds will be available for unsecured creditors.

The debtor listed its largest unsecured creditor as Compulink, doing business as Celink and based in Lansing, Mich. It has an unliquidated trade claim. Next on the list is a $1.03 million trade claim from Lowenstein Sandler, LLP, based in Roseland, N.J.

Sidley Austin LLP is general bankruptcy counsel, Benesch Friedlander Coplan & Aronoff LLP is local bankruptcy counsel, and FTI Consulting, Inc. is financial adviser.

The Bloomfield, N.J.-based reverse mortgage issuer filed Chapter 11 bankruptcy under case number 22-11225.

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