Reverse Mortgage Volume Bounces Back in September, HMBS Approaches Annual Record

It looked like the days of reverse mortgage volume over 4,000 units in a single month may have been behind us, but the latest industry performance data indicates that it’s not quite over yet.

Home Equity Conversion Mortgage (HECM) endorsements jumped sharply in September 2021 by 17.6% to 4,326 loans. This is according to data compiled by Reverse Market Insight (RMI). While July may have marked the end of a streak of monthly volume above a threshold of at least 4,000 units that the industry has seen since late 2020, September’s volume spike managed to overcome the shortfall observed in August completely. It may indicate that heightened volume will be around for at least a while longer.

Once more, the production of new Home Equity Conversion Mortgage (HECM)-backed securities (HMBS) recorded a record $1.03 billion in HMBS issuance in the seventh month of the period after the London Interbank Offered Rate (LIBOR) “era.” Prior year records will almost certainly fall by the end of 2021 since a total of $9.3 billion in HMBS was issued in the year’s first nine months, according to publicly available Ginnie Mae data and private sources compiled by New View Advisors. All told, 2020 saw $10.6 billion in total HMBS issuance, eclipsing a recent industry high of $10.5 billion of issuance in 2017.

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The industry’s general bolstering by refinancing volume remains a concern for the growth of the reverse mortgage business sector, according to analysts who spoke with RMD, as the share of refinance volume in August was said to have reached over 50% of HECM endorsements for the first time that month according to analysts.

HECM volume makes a comeback

When asked about the appearance of a sharp volume bump following a notable monthly decline and whether or not that causes concern about industry stability, it is simply something that has occurred too often to warrant significant consideration, according to John Lunde, president of RMI.

“No, we’ve seen it too many times to worry about month-to-month volatility in endorsements,” he told RMD. “[This is true] particularly when case numbers issued, applications and fundings are showing more stability. I just look at it as lumpiness inherent in these figures.”

All of the tracked national regions saw nearly universally increased performance levels, with the Midwest region jumping by 50.3% to 242 loans; the Southeast/Caribbean growing 24% to 646 loans; and the Mid-Atlantic rising 20.5% to 200 loans. The notable bump in regional performance suggests that the slump recorded in the prior month’s data may have been a bit overstated, Lunde says.

“That again suggests that August wasn’t as bad as it looked, and it’s more of a timing issue, possibly with vacations impacting staffing, etc.,” Lunde explained.

Regarding specific lender performance, all but two of the lenders in the top 10 recorded volume increases in September, with the exceptions being Reverse Mortgage Funding (RMF) and Fairway Independent Mortgage Corporation, respectively. In the case of RMF, it managed to endorse 28 fewer loans in September than it did in August, while Fairway saw 39 fewer loans for the month.

Leading the performance increases of the top 10 included Liberty Reverse Mortgage (rising 110.4% to 303 loans); HighTechLending (increasing 71.2% to 125 loans); and Longbridge Financial (gaining 68.8% to 265 loans).

“Longbridge and HighTech both stand out [among their peers in the top 10] as hitting new monthly high levels compared to the last six months or more,” Lunde said of lender performance for the month.

When asked if it was possible that HECM endorsement volume could remain above 4,000 units for the remainder of 2021, Lunde was optimistic.

“[That threshold is] very realistic until we see more of a pattern for multiple months below that level,” he said.

HMBS issuance on track for a record year

In terms of HMBS issuance in 2021, the month of September stands out as a banner year, according to New View Advisors.

“HMBS issuers posted record totals in September, with the highest monthly issuance volume this year, and another record for new loan pools,” New View described in its commentary accompanying the month’s issuance data. “They issued just over $1.2 billion in new HMBS, as refinancing activity continued to be strong.”

While the prior all-time HMBS annual volume year was 2010 with $10.8 billion in issuance recorded, the situations between now and that year are only comparable on a raw issuance level and come with a whole host of specific differences, according to Michael McCully, partner at New View Advisors.

“2020’s issuance volume of $10.6 billion is the relevant volume record,” McCully told RMD. “2010 volume was before principal limits were lowered, or financial assessment established, so 2010 performance is not comparable [to what we see in 2021].”

Be that as it may, the specific issuance record for that year is almost certainly on track to fall, given the issuance levels seen in the first nine months of 2021 alone. In that period, issuance stands at over $9 billion. Still, the rampant activity in HECM-to-HECM (H2H) refinance activity should remain an industry concern, McCully says.

“H2H refinances remain stubbornly high,” McCully says. “We’d like to see origination volume from new customers increasing more. [The industry should] be mindful of deteriorating appraisal quality and misleading marketing campaigns.”

In the roughly $1.03 billion of new issuance recorded in September, 107 pools were issued, including 47 first-participation CMT pools, which is very similar to the prior month’s data as noted by New View. Before the beginning of 2021, no new CMT pools had been issued in several years due to the transition to the LIBOR index.

Read the HECM Lenders report at RMI and the HMBS Issuance report at New View Advisors.

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