Reverse mortgage volume in March hits highest monthly total in over 10 years, HMBS issuance remains healthy

Monthly volume reaches highest total since March of 2011, though rising rates could make for a turbulent time ahead

Those following the regular performance metrics for the reverse mortgage industry know that 2021’s full-year volume was pushed higher by a record December. What followed in January actually managed to hit even higher, before a slight dip took place in February. In March, however, industry activity has been elevated to a level not seen in over a decade.

Home Equity Conversion Mortgage (HECM) endorsements rose in March 2022 by a sizable 26.3% to 6,510 loans, a volume level that has not been approached since March of 2011. This is according to data compiled by Reverse Market Insight (RMI). Industry volume back in March of 2011 reached 7,306 units, and while the March 2022 figure is reasonably far off from that threshold, the new data indicates an even stronger month when compared with recent industry health.

The production of new Home Equity Conversion Mortgage (HECM)-backed securities (HMBS) nearly reached another record, in March coming in once more at nearly $1.4 billion in HMBS issuance in the thirteenth month of the period after the London Interbank Offered Rate (LIBOR) “era.” As previously stated total of $13.2 billion in HMBS issued in 2021 easily overtook the previous industry record of $10.8 billion set in 2010, according to publicly available Ginnie Mae data and private sources compiled by New View Advisors.

Pronounced reverse mortgage endorsement volume

While it is not yet apparent how the new March data breaks out among different loan types, the different elements related to rising interest rates and pricing realities likely helps to play into this sudden volume spike according to Jon McCue, director of client relations at RMI.

Jon McCue of Reverse Market Insight, a reverse mortgage data company.
Jon McCue

“With a single-month volume not seen since March 2011, our industry surged in March 2022 with 6,510 loans,” McCue tells RMD. “At this time it is too soon to tell how much of that volume came from HECM-to-HECM (H2H) refinances. So, the questions other than that could be whether there has been a push in the industry to close loans before rates went up.”

Other questions include whether or not there could have been a delay in endorsements as lenders moved to close as many loans as possible prior to an increase in rates, or if the current market conditions (including a surge in inflation) are driving more general public interest in reverse mortgages, McCue adds.

“All this should become much clearer in the weeks ahead,” he explains.

While the oft-discussed H2H refinance boom has not shown signs of outright dissipation, natural questions rise about what rising rates will do to the pace of refinance volume the industry has observed for much of the past year. The nature of rising rates may muddy the waters a bit on the refi front, McCue says.

“Our industry has done a fabulous job through the first 3 months of the year with volume, but with the 10-year CMT rate rising, one can assume there may be some turbulence ahead especially for those looking to do H2H,” he explains. “Now is a great time to be shifting business models back to new reverse mortgages and H4P as ways to continue to drive volume going forward.”

Regional and lender reverse mortgage endorsement rankings

All of the 10 regions across the country tracked by RMI recorded volume gains, but those gains were led primarily by the New York/New Jersey region as opposed to the normal hotbed of Southern California. That region jumped over 50% ahead of February totals to settle at 206 loans, followed by New England rising just under 41% to 145 loans. The Mid-Atlantic jumped just over 40% to 272 loans, while the Southeast/Caribbean region jumped 38.4% to 1,075 loans.

Among the major industry lenders, eight of the top 10 recorded gains over February volume totals. Finance of America Reverse (FAR) rose 62% to 562 loans, overtaking the second place position on the rankings.

Other major risers among the top 10 include Fairway Independent Mortgage Corp. (+38.7% to 265 loans); Liberty Reverse Mortgage (+30% to 503 loans); and American Advisors Group (AAG, +30% to 1,944 loans).

HMBS issuance steady, on pace with recent months

March’s HMBS issuance was stable when compared with February data, according to New View.

“[HMBS] issuers continued their record pace in March 2022, again issuing nearly $1.4 billion in new HMBS, again almost setting a record for new original loan pools for the sixth month in row,” New View said. “Refinancing activity remains strong.”

Last month when HMBS issuance figures for February were similar to those recorded in March, RMD asked New View about whether or not there could be a trend emerging in the data. At that time in early March, New View Partner Michael McCully explained that unlike reverse mortgage endorsement data, establishing a firm trend for HMBS issuance requires more time in the year to have elapsed, he explains.

“Until a majority of 2022 is in the books, it is difficult to project volume for the year, especially because so much of it is HECM-to-HECM refinance,” McCully explained in early March. “Low rates and simultaneous high home values have contributed to the surge in volume since 2020. Rising rates and/or falling home values would likely slow originations in general, and refinance volume in particular.”

Original production of HMBS is “remarkably consistent” in 2022 thus far, according to a commentary accompanying the new data from New View. There’s also a notable difference between issuance levels observed one year ago, according to the commentary.

“March’s production of original new loan pools totaled $1.13 billion, just above February’s $1.12 billion and consistent with January’s record $1.18 billion, December’s $1.14 billion, November’s $1.08 billion and October’s $1.07 billion,” New View explained in its commentary. “Approximately $671 million in original new loan pools were issued a year ago, in March 2021.”

Read the HECM Lenders report at RMI, and the HMBS Issuance report at New View Advisors.

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