To help reverse mortgage professionals keep tabs on the market, analytics firm Baseline Reverse last week released a daily HECM index that tracks Home Equity Conversion Mortgage bond prices.
Specifically, the index reflects “real-time HECM mortgage-backed securities (bond pricing) for a basket of 2017 PLF Annual LIBOR loans,” according to the company’s website. Baseline Reverse founder Dan Ribler told RMD that the St. Johns, Fla.-based firm keeps the makeup of the basket constant to develop a “clear reflection of the rate curve and spread changes.”
Until the release of this index, Ribler said it was difficult for the reverse market to stay on top of the numbers day to day.
“It was a challenge,” Ribler said. “Issuers can get indications from the street; originators can get indications from issuers, but it was more like a game of ‘telephone,’ whereas now participants can FaceTime.”
Unlike the forward mortgage industry, which has numerous similar resources, the difficulty of price discovery for the reverse world had led to many industry professionals asking Ribler for a tool like this.
“It’s pretty far overdue,” Ribler said. “We get a lot of requests, so it seemed like the time.”
The move isn’t the first expansion for Baseline this year: The company this spring launched proprietary position management software designed to open up the industry to forward players who may not be as familiar with the reverse market. That move also coincided with the hiring of Tanner Clements — formerly of Liberty Home Equity Solutions, Ocwen, and SunTrust — to build Baseline’s reverse mortgage pipeline management services. At the time, Ribler identified independent originators as a key source of potential growth in the HECM industry.
“[Clements] will play an integral part of our effort to grow the reverse space by making it easier for traditional forward mortgage lenders to add HECMs to their product menu,” Ribler told RMD at the time.
According to the company’s website, Baseline’s new index information comes from its “market-leading HECM pricing engine.”
“We update forward rate curves throughout the day and run cashflows at loan level to return bond and reverse mortgage servicing rights pricing,” the company noted. “The HECM Index level includes only the bond levels.”
Ribler cautions professionals that the index is not meant to be a loan-level pricing tool.
“It’s just designed to say, directionally, if it is getting better or worse day after day,” he said. “It’s not meant to tell you the exact pricing.”
Overall, Ribler said he hopes the index, which he said should be updated daily by 11 a.m. Eastern time, becomes a resource for the greater reverse mortgage community.
“Rates and spreads can move dramatically from day to day,” he said. “The index should help eliminate pricing surprises.”
Written by Maggie Callahan