The reverse mortgage figures show little movement in November
While there has been something of a yo-yo of gains and losses in the reverse mortgage industry’s performance metrics in recent months, there are some mixed signals on the horizon – such as higher interest rates that could depress production volumes, along with the potential implementation of HMBS 2.0 – let 2024 end on an active note for the company.
Home Equity Conversion Mortgage (HECM) recommendations increased 0.7% between October and November, with 2,408 loans approved last month. according to data composed by Reverse market insight (RMI).
Meanwhile, issuance of HECM-backed securities (HMBS) fell by $15 million during the month, reaching a total of $83 million in November. 71 pools have been issued, seven fewer than in October Ginny Mae data and private sources collected Through New viewing advisors.
HECM recommendations are largely flat
Of the 10 geographic regions RMI monitors for HECM lending, only four managed to post gains in November. But the South East/Caribbean region posted a 19.7% increase compared to October, after a slump in the previous month.
According to RMI, the movement among the top 10 HECM lenders was evenly split. The biggest gains were made by Guild Mortgage (increase of 40.4% to 80 loans); Plaza Home Mortgage (up 32.5% to 53 loans) and Liberty Reverse Mortgage (up 32.1% to 111 loans). Of the three largest lenders, the only one with a profit was in November Longbridge financialwhich booked only six more loans in November than in October.
While the sector will launch in the final weeks of 2024, RMI President John Lunde said HousingWireAccording to the Reverse Mortgage Daily (RMD), the rise in mortgage rates is likely to put downward pressure on HECM support in early 2025.
“I expect us to get back to around 2,000 monthly expressions of support as the recent rate hikes flow through these numbers,” he said.
When asked what may have gone under the radar in November’s numbers, Lunde said refinancings could be an element to keep an eye on.
“Both of the largest regions were the best performers geographically, which could indicate more refinancing activity behind the increases,” he said. “December’s numbers could be consistent with those of the past two months at higher levels, or show some impact from the normal seasonal slowdown and even some early, small impact from rate hikes.
“Very early in 2025 we will see the full effect of the recent rate hikes and from there we will have to see how some of the recent larger term lenders will step in more aggressively.”
Mutuality of Omaha Mortgage appears to have expanded its number 1 position Finance of America (FOA), but competition remains fierce, Lunde said – something that may not be explained by the HECM approval numbers.
“It’s still early, but the momentum seems to be with Mutual of Omaha right now,” he said. “On the other hand, FOA has substantial volume of its own that is not reflected in these numbers and that would likely tilt it in their direction given how tight the race between them is now.”
In terms of action plans, Lunde recommends that industry participants take into account interest rate fluctuations as 2025 inches closer.
“I’ve said it so many times over the years, but the recent rollercoaster of interest rates keeps it at the forefront,” he said. “We should all have action plans for what we’re going to do that will work in 2025, regardless of where rates end up. Clearly, lower rate scenarios would make most things work better, but we must focus on actions and tactics that advance our goals, even if higher rates could make them less effective.”
HMBS issuance decreases slightly
When asked about the performance of the major issuers when it comes to the broader factors impacting the HMBS market, New View partner Michael McCully said low production volume is generally a telltale sign.
“With HECM production in the doldrums, there is material overcapacity,” he said.
FOA led HMBS issuers in November with $156 million, down $14 million from October. Longbridge was the second largest issuer with $149 million, up from $125 million in October. Mutual of Omaha Mortgage Issues fell $42 million to $109 million, while Liberty parent PHH Mortgage Corp. Added $10 million to reach $98 million in November.
As has been the case since Ginnie Mae took control of the former portfolio Reverse Mortgage Financing (RMF), the so-called ‘issuer 42’, did not issue any pools in November.
“Volume returned to recent historical norms in November, but overall issuance is declining due to lower new issuance over 12 months ago,” McCully said.
But a bigger potential point of impact on the market is HMBS 2.0. Ginnie Mae recently released the program’s final term sheet and the program is now moving toward implementation. In terms of impact on HMBS issuers, long-standing players with seasoned portfolios have the most to gain from the additional program, McCully said.
“The issuers with the most experienced portfolios will benefit the most from HMBS 2.0,” he said.
When asked about the performance of the HMBS market compared to previous years, McCully reiterated that New View has consistently forecast that 2024 issuance will not exceed 2023 totals. And these volumes had already fallen sharply from the record-breaking levels of issuance seen in 2022.
