The reverse mortgage industry’s performance data for the month of July is out, and it’s a tale of two sides: the volume of new HECM endorsements going up, while securities issuance has fallen.

Home Equity Conversion Mortgage (HECM) endorsements rose in July by 9.4% to 2,802 loans, the best monthly total since November when March’s merger-fueled spike in the data is excluded. This is according to data compiled by Reverse Market Insight (RMI).

While endorsements for the month rose, the production of HECM-backed Securities (HMBS) fell for the month, continuing the trend of challenges faced by the reverse mortgage secondary market according to Ginnie Mae data and private sources compiled by New View Advisors.

HECM endorsements

Interestingly, the HECM endorsement data is, in and of itself, a tale of two sides: on the geographic side, eight of the top 10 regions tracked by RMI saw an increase in their own endorsement levels while only three of the top 10 lenders recorded volume increases for the month.

All three of the largest regions for reverse mortgage business saw higher endorsement levels, but smaller regions posted gains as well, including the Midwest (up 27.1% to 221 loans), New England (22.1% to 105 loans) and the Mid-Atlantic (22% to 161 loans).

The three gainers within the top 10 lenders included Goodlife Home Loans (which is still working its way up from a sharp volume drop seen in June), Mutual of Omaha Mortgage (which gained 20% to 599 loans) and Longbridge Financial (up 16.3% to 285 loans).

The clear leader of the industry is the combined entity resulting from the merger of American Advisors Group (AAG) into Finance of America Reverse (FAR), the data shows. The combined entity recorded 1,012 loans in July, though they were reported separately with AAG remaining in the lead while FAR is No. 4 on the top 10 list.

Reverse Mortgage Funding (RMF) remains on the top 10 for the moment with no endorsements recorded since February. Its 12-month total currently stands at 1,129 loans, putting it in eighth place on the top 10.

Industry outlook

RMI President John Lunde told RMD that based on the most recent data, there may be cause to look ahead with a sense of tempered possibility.

“Cautious optimism seems reasonable, with an uptrend over the past few months and the highest level [of endorsements] since November,” he said. “Continuing pressure from the 10-year CMT rate index will be a challenge.”

In terms of the geographic growth being more widely distributed in July, Lunde said that the larger regions make more of an impact on business but that growth anywhere is welcome.

“The biggest regions are always the most important to industry volume, as they’re up to 10 times the size of the smallest,” he said. “But it’s always encouraging to see new growth. And I think it speaks further to the healthy ‘new customer’ focus in the absence of refi business for the industry.”

Regarding the disconnect between regional volume and lender performance, Lunde surmises that it could still be related to the impact on the industry of major merger and acquisition activity.

“Some [of that disconnect] is likely due to the cleanup of pipeline loans from AAG, which we’re not counting as an ongoing lender anymore,” he said. “But we’ll have to wait to see if it indicates more significant stress at individual companies against a backdrop of industry recovery.”

Although we’re well over the halfway mark for 2023 now, the recent spike in merger activity will likely continue to shuffle the top 10 lender rankings until the very end of the year, Lunde said.

“I expect a further change in the top 10 as the effect of corporate actions in the past year continues to play out,” he said. “RMF will drop out soon, and Guild Mortgage likely replaces Cherry Creek, while AAG will take a bit longer to drop out.”

HMBS issuance

Eighty-seven HMBS pools were issued to total $518 million in issuance in July, down slightly from levels observed in June, a month that remains a high point of HMBS issuance for the 2023 calendar year according to New View. However, that month’s spike and July’s slight reduction does little to diminish how far off the full-year 2023 total is likely to be when compared to the record-breaking tally observed in 2022.

“HMBS issuance set a new record in 2022, with nearly $14 billion issued,” New View said in its commentary accompanying the July data. “In 2023, HMBS issuers will not come anywhere near those numbers; the first seven months totaled just over $3.7 billion.”

Both new loan production and tail issuance fell in July, and the sharp drop is most visible when looking at recent trends related to new production.

“July’s original (first participation) production of $335 million was down sharply from June’s $384 million, May’s $353 million, and April’s $379 million,” New View said. “July was very weak by historical standards, barely one-third of July 2022’s $1.2 billion in new issuance.”

Of the 87 HMBS pools issued in July, 65 were tail pools while 22 were new, first-participation pools.