Reverse mortgage volume increased in July, while securitizations declined
According to data from industry analysts, the reverse mortgage industry’s key performance indicators broke down in July.
Letters of support for Home Equity Conversion Mortgage (HECM) rose 8% from June to July, with the total of 2,274 fairly in line with Federal Housing Administration (FHA) HECM case numbers. This is according to data composed by Reverse market insight (RMI).
Meanwhile, issuance of HECM-backed securities (HMBS) fell by $47 million in July to a total of $450 million for the month. 80 pools were issued, six fewer than in both May and June. This is according to Ginny Mae data and private sources collected Through New viewing advisors.
HECM data is currently a ‘yo-yo’
RMI’s HECM Lenders report describes the HECM approval data over the past few months as a “yo-yo” when looking at the up and down numbers over the past few months. Analysts said another month of data is likely needed to establish a firmer trend for how the sector is performing.
But the assignment of FHA case numbers did contribute to last month’s increase, said Jon McCue, director of client relations at RMI.
“I would say that, yes, the case numbers predicted this jump, as between February and May each of those months had well over 3,000 case numbers, with March and April leading the way,” McCue said. HousingWire‘s Reverse Mortgage Daily (RMD). “That would generally be in line with the timing of approvals in July.”
Four of the industry’s top 10 lenders recorded month-on-month declines in endorsements, but looking further down the list, McCue noted that there were several examples of notable HECM volume growth since the start of the year.
“Guild Mortgage is up over 1,700%, but that’s mainly because they didn’t do much last year until they made the acquisition Cherry Creek Mortgageso a lot of this has to do with that acquisition and others,” he said. “Movement Mortgage is another one with a similar story, considering the team moved there, and now they’re up 257%.”
CrossCountry Mortgage also posted year-to-date growth of 171%, driven by renewed efforts in reverse mortgage operations and additional team members CMG Financial has made greater investments in the space, as evidenced by the 500% HECM increase through the first seven months of the year.
Finally, Guaranteed rate – which has recently been renamed Rate – “They also made news last year when they added new leadership and are now up 870%,” McCue said. “These all compare the first seven months of 2024 [the same period in] 2023, and you can see that the investments these companies have made have had an impact.”
With talk of mortgage rate cuts gaining momentum in recent days, this could also impact the year’s HECM business if it comes to that.
“As with any mortgage, a rate cut would make it easier for businesses to qualify more borrowers, but what will also be very interesting is what effect that could have on HECM-to-HECM (H2H) refinancings,” McCue said.
H2H refis have been a low source of revenue since interest rates have risen substantially from their historic lows. In the pandemic-induced low rates, H2H refis accounted for as much as 50% of total HECM activity before declining significantly in subsequent years.
HMBS issuance drops ‘strongly’
New View Advisors characterized July’s decline in issuance as “sharp,” as HMBS securitizations are near all-time lows for the Ginnie Mae-backed program since 2010.
One source of hope is the development of “HMBS 2.0,” a supplemental securities issuance program for which Ginnie Mae recently issued a term sheet – and for which industry participants recently submitted comments.
“Once implemented, HMBS 2.0 should substantially increase HMBS issuance by financing most mandatory buyouts, which last month showed just under $500 million. Recursion,” New View said in its commentary on the issuance data.
Regarding the ranking of issuers, Finance of America (FOA) took the top spot again in July with $139 million in issuance, which still accounted for a $20 million decline from June levels. Longbridge financial was No. 2 with $104 million, recording a less severe decline of $4 million for the month.
PHH Mortgage Corp. was next with $98 million, followed by Mutuality of Omaha Mortgage with $63 million. The former Reverse Mortgage Financing (RMF) portfolio, now under Ginnie Mae’s control, once again issued no pools.
Despite low activity in the issuance market, the overall HMBS program is currently quite healthy, according to New View partner Michael McCully.
“[Low issuance levels and HMBS program health are] not really related,” McCully said. “HMBS continues to perform well.”
But a rate cut could have immediate consequences, assuming the drop is substantial enough, he said.
“A meaningful reduction in 10-year government bond yields will benefit industry production volumes, and thus HMBS issuance, once the lag between customer acquisition and closing is taken into account,” McCully said.
