Reverse Mortgage Securities Issuance Declines Again in November

The production of new Home Equity Conversion Mortgage-backed securities (HMBS) declined in November to approximately $298 million in issuance for the month, down from $325 million in October and $360 million in September. Total issuance hit a four-year low, at $521 million in issuance and 84 pools, according to data compiled and released by New View Advisors and Baseline Reverse.

American Advisors Group (AAG) continues to lead the charge among issuers, with nearly $100 million in new production during the month and $50 million in tail pools.

“The market has yet to find its new normal,” writes New View Advisors in monthly commentary in response to the decline. “Reverse mortgage lenders face a new era of reduced volume, primarily due to the new lower Principal Limit Factors (“PLFs”) for [HECMs] effective last year. Rising interest rates will not help either, as they generally require lower PLFs.”

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The top five producers of new HMBS include AAG with $96 million of new production at 32 percent market share; Ocwen with $49.7 million at 16.7 percent; Finance of America Reverse (FAR) with $47.7 million at 16 percent; Reverse Mortgage Funding (RMF) with $44.8 million at 15.1 percent; and Longbridge with $43.3 million at 14.5 percent.

Three of the top five lenders in this tabulation actually experienced new production growth when compared with each of their respective October tallies, but the overall total of HMBS issuance still declined by roughly $27 million over the previous month

This year has seen more declines than gains in HMBS issuance overall, with a particularly sharp drop occurring between February ($605 million in new production) and March ($422 million), with declines continuing through August ($338 million). In September, there was a slight climb again to $360 million before beginning a new downward trend in October that persists into the November data.

Find Baseline’s data report and New View’s commentary.

Written by Chris Clow

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  • These stats could portend of even lower monthly endorsement counts than that of November 2018 (the smallest monthly total for any month since January 2004, almost 15 years ago). It is also the worst endorsement count for any November since November 2003. The count was 46.4% lower than the endorsement count for November 2017. It was also 10% worse than the endorsement count for October 2018.

    For those readers who think we hit the bottom for endorsements after 10/2/2017 last month, be aware of the stats in this article. Endorsement results run slightly behind time wise securities results and generally follow the same pattern.

    While some have recently been claiming that the current monthly endorsement pattern shows we are on the path to a rocky recovery, both the endorsement count and the securities issuance for November 2018 say otherwise. For those who follow endorsement patterns, just remember that endorsements total since April 2018, the first incorrectly declared nadir following the 10/2/2017 changes, other than the endorsements for May 2018, no month since April 2018 has exceeded the endorsements for April 2018. This pattern speaks volumes and shows that we have a ways to go before we can clearly say we have hit bottom since 10/2/2017.

  • It is obvious why the HMBS issues are declining. As I said in a previous comment, we are still feeling the effects on origination’s and endorsements due to the 2017 ruling.

    I agree with George Owens, we may have not seen the bottom for endorsements, in fact, I am on the same page with George on this.

    However, as I stated in another comment I made, there is still a lot of life left in the HECM and it can make a comeback, as long as we make and let it happen!

    The proprietary product and the HECM can have a harmonious life together, they each compliment one another.

    One needs to study the component parts of each, match it up with senior needs, you will see how the two can live easily with one another. Both fill gaps that the other can’t fill!

    Don’t give up on our industry, anyone who does, may be making a major mistake!

    John A. Smaldone
    http://www.hanover-financial.com

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