Reverse mortgage transaction volume increased in October while HMBS issuance declined

It was speculated that FHA issues may have contributed to the decline in reverse mortgage approval data recorded in September, but the October figures may have exaggerated such an impact. indicates that

Home equity conversion mortgage (HECM) approvals increased 8% to 3,504 loans in October, falling below 4,000 units for the second month since November 2020. This is according to data compiled by Reverse Market Insights (RMI).

Meanwhile, new HECM-Backed Securities (HMBS) issuance in October fell again to $824 million from the previous month’s HMBS issuance of $966 million. October marks his 20th month since the London Interbank Offered Rate (LIBOR) ‘era’ as the industry began adopting the Secured Overnight Financing Rate (SOFR) index for new loans.

However, according to publicly available Ginnie Mae data and a private source compiled by Newview Advisors, issuance is still on track, surpassing the total numbers seen in 2021.

HECM Approved Volume Has Slightly Increased

Six of the top 10 reverse mortgage lenders recorded increases from September, and nine of the ten tracked regions also saw volume increases in October. The best performers among lenders were American Advisors Group (AAG), HighTechLending and Reverse Mortgage Funding (RMF), all of which posted returns of around 30%.

John Lande

Despite improvements from September, none of the top 10 lenders were able to overcome losses for the month. We were only 5-9% apart and were the closest of the major lenders.

Asked to characterize where the industry currently stands in light of this new volume data, RMI President John Lande told RMD that this could be an immediate “new normal” for the reverse mortgage industry. He said he showed

“Monthly deals are always a little noisy with endorsements,” Runde told RMD at the National Reverse Mortgage Lenders Association’s (NRMLA) annual meeting and expo in Atlanta on Thursday. “The bigger thing I see from here is that there were thoughts and a little question at the end of September and early October as to whether technology issues impacted and created the September volume data. I think it’s a very dramatic drop of over 40 percent.

A possible technical issue on the Federal Housing Administration’s (FHA’s) end appears to have been resolved, he said.

“I think the October data solved that,” he explained. “Even if there were technical issues, it didn’t have any meaningful impact. Unless it’s still in progress, but I’ve never heard of anyone suggesting that.”

HECM volume as a stronger industry health indicator

There is a lively debate between HECM volumes and HMBS issuances as to which metric indicates the health of the broader industry. For now, Lunde believes trading volume is a strong indicator of the current state of the business.

“I think the September approval was actually a precursor to what was happening on the issuing side of HMBS,” he said. “We’re seeing it fade much more slowly. Whereas there was support, we’ve seen a fairly immediate fix.”

The bottom line is that this will likely continue through the end of 2022 and into 2023.

“I think [October’s data] We just emphasize that this is where we are,” he said. “We’re him in the low 3,000s [for monthly unit volume], and that is the new normal. ”

Interestingly, Finance of America Mortgage (FAM) recorded 47 reverse mortgage approvals in October. Earlier that month, parent organization Finance of America Companies (FOA) Confirmed It will close FAM and focus primarily on its specialty financial and services businesses (SF&S), including Finance of America Reverse (FAR), a leading reverse mortgage lender.

of Q1 and Q2 2022 On this year’s earnings call, company officials reiterated the viability and commitment of the reverse mortgage product category through FAR.

The industry as a whole saw a modest increase in transaction volume in October, but none of the top 10 lenders managed to exceed 1,000 units in a month. His AAG’s HECM volume tally for October came at 812 loans, with Mutual of Omaha at 479 and Longbridge Financial at 285.

HMBS issuance on track for record year despite losses

According to a commentary accompanying the data shared by New View Advisors, HMBS issuance totaled $824 million, $144 million less than the figure recorded in September and the sixth straight month of decline. increase. It is the third time in 19 months that total issuance has fallen below $1 billion.

Yet despite the loss, the full-year record is still in sight.

“With nearly $12.5 billion issued in 10 months, HMBS is on pace to set another new volume record in 2022,” reads the commentary. “But in the near future, rising interest rates will challenge the reverse mortgage market, pushing down home prices and the principal limit factor (PLF) that determines how much HECM lenders can lend against those home prices.”

The interest rate environment is unlikely to change, or at least to the downside, so industry activity in this sense will rise too much above what we have seen in the last month or two. will be gone, says New View partner Michael McCully.told RMD at September.

“A significant increase in monthly issuance is unlikely for the remainder of 2022 unless interest rates fall significantly,” he said.

The last month showed that house price gains eased significantly. In 2021, reverse mortgage books in the Mutual Mortgage Insurance (MMI) fund positive area First time since 2015.

New data on the state of HECM’s business could emerge later this month when the US Department of Housing and Urban Development (HUD) issues its annual report to Congress.

Read HECM render report When issuing RMI and HMBS report At New View Advisors.

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