HMBS Growth May Signal Slow Reverse Mortgage Recovery

Another potential sign of recovery for the reverse mortgage industry, Home Equity Conversion Mortgage-backed securities issuance grew for the second month in a row, according to the latest data from analytics firm Baseline Reverse.

A total of $360 million in new production issuance was recorded in September, up from $340 million in August.

Four of the top five lenders all grew in production, with leader AAG taking more than 27.3% of the market share and producing $98.4 million in HMBS issuance. In August, the company issued $94.1 million. Finance of America Reverse followed with 19% market share, and a jump to $68.3 million of new production bonds in September from $47.3 million in August.


Baseline founder Dan Ribler told RMD said the dip after last year’s HECM rules changes is similar to the pattern after other rules changes, where production begins to slowly recover.

“Everybody takes a bit of time to tweak their marketing, makes some updates, and then it very slowly creeps back up,” he said.

Ribler that he doesn’t want to bet on what’s in store for October but he wouldn’t be surprised to see the uptick continuing.

“A lot of folks are looking at issuance totals and saying its the end of HECM as we know,” he said. “I continue to believe in it.”

Ribler noted in the report, “It’s still too early to tell if this is the start of a genuine recovery or if it’s just a blip; for now let’s just count the two consecutive months of improvement as a winning streak and continue to focus on helping seniors.”

This growth joins the recent HECM endorsement increases reported by Reverse Market Insight.

“Volume is creeping up, which is what I’d expect in the next several months,” RMI’s John Lunde told RMD. “I’d compare it to the recovery from Financial Assessment that took so long — which says as long as the demand is there for cash flow in retirement, the capability is there, and the product makes sense, then we’ll see continued volume.”

Written by Maggie Callahan

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  • Again we are hearing far too much talk about “volume is creeping up” along with “compare it to the recovery from Financial Assessment.” I am not so sure.

    RMI declared April 2018 as the nadir for endorsements for the post 10/2/2017 period but then just a few days after that announcement we were over 15% lower for the month of June 2018. Since then not one month has equaled or exceeded the HECM volume for April 2018. Worse last month had a drop of 10% from the August total.

    At only 42 endorsements better than the endorsement count for June 2018 (our worst endorsement count for fiscal 2018), the September 2018 month’s endorsement count marked the third time in the last five months that the endorsement count could not even reach 3,000 endorsements. It has been 13 years that we have had even one month that could not reach 3,000 endorsements. Yet that occurred
    three times in the last five months.

    Some are talking about low demand that will turn into endorsements in the next quarter, being lower than the endorsement total for the quarter just ended. No one is yet talking about a quarter where endorsements will greatly exceed the almost 9.000 endorsements we saw last quarter. “I guess we will see what we see.”

  • George is right on with his statistical account of the current and past endorsement patterns. However, we need to stay positive and find ways to increase volume and endorsements once again.

    As I keep saying, the statistics show that the potential business is out there, enough to increase endorsement levels over what they have been.

    In fact, the statistics on the potential senior homeowners that could qualify for a HECM or proprietary product could put us well over the statistics George has outlined.

    The $64,000 question is will originators in the business today have enough enthusiasm and staying power to do the research and leg work necessary. The work necessary to locate those potential senior borrowers and capitalize what could be on the horizon for them?

    John A. Smaldone

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