Reverse mortgage endorsements see a sharp drop as HMBS issuance falls modestly in November

Reverse mortgage performance enters the final month of the year on a down note before higher HECM limits kick in for 2024

As the reverse mortgage industry prepares to enter a new year with hopes pinned on a higher HECM limit and a potentially friendlier rate environment, industry performance metrics for November proved generally soft.

Home Equity Conversion Mortgage (HECM) volume dropped 15.4% to 2,257 loans issued in November, a development on the back of reduced case number assignments, according to data compiled by Reverse Market Insight (RMI).

HECM-backed Securities (HMBS) issuance dropped modestly, from $565 million in October to $561 million in November, with 110 issued pools outdoing the figure of 87 pools issued one month ago, according to public Ginnie Mae data and private sources compiled by New View Advisors.

High rates continue depressing endorsements

Much of the lower HECM endorsement volume is likely to come from near-record highs in the 10-year Constant Maturity Treasury (CMT) rate index, according to RMI.

“Given the delay we’ve seen in case issuance data, this volume is our best sense of where the industry is at, even though it’s lagging and lumpy,” Lunde said.

Case number issuance data has been absent since August, and only one of the 10 tracked geographic regions — New England — recorded an increase in volume. Among the top 10 lenders, which looks different from the makeup in January, four lenders managed to record volume increases.

John Lunde, reverse mortgage industry analyst and president of Reverse Market Insight (RMI).
John Lunde

“We did notice the lower volume regions last year tended to hold up better so far this year, likely because refis weren’t as prevalent in those areas but also likely a more moderate home-price scenario, both on the upside last year and the downside this year, likely impacted results,” Lunde said when asked about New England’s resiliency in November.

Longbridge Financial, Liberty Reverse Mortgage and Fairway Independent Mortgage Corporation are No. 3, 4 and 5 in the top 10 rankings, respectively, each managing to bring in more loan volume than they did in October.

The fourth increase for the month came from Guild Mortgage, which only records volume data from August onwards due to its recent acquisition of Cherry Creek Mortgage earlier this year.

But major players including American Advisors Group (AAG) and Reverse Mortgage Funding (RMF) are of course no longer present in the top 10, and Open Mortgage will fall off in the months ahead due to the recent announcement of its reverse division’s closure.

“It will be fascinating to see how the lender changes evolve the industry,” Lunde said. “It’s clear at this point that Mutual of Omaha has been more successful in adapting this year to the changing environment, which makes perfect sense given their brand, distribution, and existing customer base.

“What we see as most impactful looking forward is how additional companies enter the space that shares some of those same advantages and help evolve the perception of the product and industry.”

HMBS issuance sees a modest drop

High interest rates again continue to depress HMBS issuance, according to New View Advisors.

Still, November issued a handful of new HMBS pools when compared to October, and Finance of America Reverse (FAR) again took the top spot among HMBS issuers.

“FAR was the top issuer in November with $185 million – down from October’s $216 million and September’s $197 million; issuance from Longbridge and Mutual of Omaha each increased approximately $10 million – $134 million and $102 million respectively,” New View said in its commentary accompanying the new data.

While HMBS issuance reached a record in 2022, getting anywhere near that record — nearly $14 billion issued — was always going to be a tall order, a fact that was clear before 2022 even came to an end.

Now, it is clear that 2023’s issuance is very unlikely to reach even half of 2022’s record, New View explained, as year-to-date production has barely cracked $6.1 billion through the end of November.

“The 110 pools issued in November consisted of 19 first-participation or original pools, 88 tail pools and 3 pools with both new production and tail participations,” New View explained. “Last month’s tail pool issuances totaled $204 million, below the typical range.”

However, November did feature 38 aggregate HMBS pools with sizes of $1 million or less, the products of an All Points Memorandum issued by Ginnie Mae in February that reduced the required minimum size from $1 million to $250,000 for all HMBS pool types.

Ginnie Mae designed the guidance “to relieve this pressure and decrease the amount of time Issuers must carry balances between the HECM loan origination disbursement and HMBS securitization,” according to the February APM.

“This represents $21.8 million of UPB that may not otherwise have been issued in November,” New View said. “Ginnie Mae recently issued APM 23-11, which now allows participations from the same loan to be pooled more than once in the same month.”

Warehouse financing relief to HMBS issuers is the primary goal for both measures, New View explained.

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