While there has been something of a “yo-yo” of gains and losses in the reverse mortgage industry’s performance metrics for the past several months, some mixed signals on the horizon — such as higher interest rates that could depress origination volumes along with the potential implementation of HMBS 2.0 — leave 2024 winding down in an active way for the business.
Home Equity Conversion Mortgage (HECM) endorsements increased by 0.7% from October to November, with 2,408 loans endorsed last month, according to data compiled by Reverse Market Insight (RMI).
Meanwhile, HECM-backed Securities (HMBS) issuance decreased by $15 million during the month for a total of $83 million in November. There were 71 pools issued, seven fewer than in October, according to Ginnie Mae data and private sources compiled by New View Advisors.
HECM endorsements mostly flat
Of the 10 tracked geographic regions RMI monitors for HECM lending, only four managed to post gains in November. But the Southeast/Caribbean region posted a 19.7% jump compared to October after a slump in the prior month.
Movement among the top 10 HECM lenders was evenly split, according to RMI. The biggest gains were seen by Guild Mortgage (up 40.4% to 80 loans); Plaza Home Mortgage (up 32.5% to 53 loans) and Liberty Reverse Mortgage (up 32.1% to 111 loans). Among the three largest lenders, the only one with a gain in November was Longbridge Financial, which posted only six more loans in November than it did in October.
As the industry commences business in the final weeks of 2024, RMI President John Lunde told HousingWire’s Reverse Mortgage Daily (RMD) that the inching up of mortgage rates will likely put downward pressure on HECM endorsements at the start of 2025.
“I’d expect we’ll be back down around 2,000 monthly endorsements as the recent rate increases flow through these numbers,” he said.
When asked about what may have flown under the radar in the November data, Lunde said refinances may be one element to watch.
“Both of the largest regions geographically were the best performers, which could suggest more refinance activity behind the increases,” he said. “December’s data could be consistent with the past two months at the higher level, or start to show some effect of the normal seasonal slowdown and even some early, small impact from rate increases.
“Very early in 2025 we’ll see the full effect of recent rate increases and from there we’ll just have to see how some of the recent larger forward lenders jumping in more aggressively might play out.”
Mutual of Omaha Mortgage appears to have expanded its No. 1 position over Finance of America (FOA), but the competition remains fierce, Lunde said — something that may not be explained in the HECM endorsement figures.
“It’s early, but the momentum seems to be with Mutual of Omaha at the moment,” he said. “On the flip side, FOA has a substantial proprietary volume that isn’t reflected in these numbers and would likely tip it back their way given how tight the race between them is right now.”
As far as action plans go, Lunde recommends that industry participants keep rate swings in mind as 2025 inches closer.
“I’ve said it so many times in the past few years, but the recent roller coaster of interest rates keeps it front and center,” 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. Obviously, lower rate scenarios would make most things work better, but we have to focus on actions and tactics that push our goals forward even if higher rates could make them less effective.”
HMBS issuance drops slightly
When asked about the performance of the leading issuers when considering the broader factors that impact the HMBS market, New View partner Michael McCully said that, in general, low origination volume is a telltale sign.
“With HECM originations in the doldrums, there is material overcapacity,” he said.
FOA led the pack among HMBS issuers in November with $156 million, which was $14 million less compared to October. Longbridge was the second-largest issuer at $149 million, an increase from $125 million in October. Mutual of Omaha Mortgage issuance fell by $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 assumed control of the former portfolio of Reverse Mortgage Funding (RMF), the so-called “issuer 42” issued no pools in November.
“Volume reverted to recent historical norms in November, however overall tail issuance is declining due to lower new-issue originations 12-plus months ago,” McCully said.
But a larger potential point of impact on the market is HMBS 2.0. Ginnie Mae recently released the program’s final term sheet and it is now progressing toward implementation. In terms of the impact on HMBS issuers, longstanding players with seasoned portfolios have the most to gain from the complementary program, McCully said.
“Those issuers with the most seasoned portfolios stand to gain the most from HMBS 2.0,” he said.
When asked about the performance of the HMBS market in comparison to prior years, McCully reiterated that New View has consistently predicted that issuance in 2024 will not eclipse the totals seen in 2023. And these volumes were already sharply reduced from the record-breaking levels of issuance observed in 2022.
