The reverse mortgage industry’s key performance indicators were split in July, according to data from industry analysts.
Home Equity Conversion Mortgage (HECM) endorsements increased by 8% from June to July, with the total of 2,274 falling reasonably in line with Federal Housing Administration (FHA) HECM case numbers. This is according to data compiled by Reverse Market Insight (RMI).
Meanwhile, HECM-backed Securities (HMBS) issuance fell by $47 million in July to a total of $450 million for the month. There were 80 pools issued, six fewer than in both May and June. This is according to Ginnie Mae data and private sources compiled by New View Advisors.
HECM data is a ‘yo-yo’ right now
RMI’s HECM Lenders reported described the past few months of HECM endorsement data as a “yo-yo” when considering the rising and falling numbers over the past several months. Analysts said another month of data is likely required to establish a firmer trend for how the industry is performing.
But FHA case number assignments did help to telegraph last month’s increase, according to Jon McCue, director of client relations at RMI.
“I would say that, yes, case numbers predicted this jump given that between February to May, each of those months had well over 3,000 case numbers, with March and April leading the way,” McCue told HousingWire’s Reverse Mortgage Daily (RMD). “That would fall in line typically with the timing of July endorsements.”
Four of the top 10 lenders in the space recorded month-over-month declines in endorsements, but looking further down the list, McCue noted that there were several instances of notable year-to-date growth in HECM volume.
“Guild Mortgage is up over 1,700%, but that is mostly because they were not doing much last year until they acquired Cherry Creek Mortgage, so a lot of this has to do with that acquisition and others,” he said. “Movement Mortgage is another one with a similar story given the team that moved over there, and now they are up 257%.”
CrossCountry Mortgage also recorded year-to-date growth of 171% with renewed reverse mortgage business efforts and additional team members, while CMG Financial has been making larger investments in the space as evidenced by its 500% HECM increase through the first seven months of the year.
Finally, Guaranteed Rate — which recently rebranded to Rate — “also made news last year when they added new leadership and are now up 870%,” McCue said. “All of these are comparing the first seven months of 2024 to [the same period in] 2023, and one can see that the investments these companies performed have made an impact.”
As talk of mortgage rate decreases has accelerated in recent days, this could also have an impact on the year’s HECM business if it comes to pass.
“Like any mortgage, a drop in rates would make it easier for companies to qualify more borrowers, but what will be very interesting in addition is what effect that could have on HECM-to-HECM (H2H) refinances,” McCue said.
H2H refis have been a low source of business ever since rates substantially increased from their historic low points. In the pandemic-fueled low-rate environment, H2H refis accounted for as much as 50% of total HECM business before falling significantly in subsequent years.
HMBS issuance drops ‘sharply’
New View Advisors characterized the July drop in issuance as “sharp,” as HMBS securitizations remain near historic lows since 2010 for the Ginnie Mae-backed program.
One source of hope is the development of “HMBS 2.0,” a complementary securities issuance program that Ginnie Mae recently released a term sheet for — and for which industry participants recently submitted comments.
“Once implemented, HMBS 2.0 should increase HMBS issuance substantially by financing most mandatory buyouts, which were just under $500 million last month according to Recursion,” New View said in its commentary accompanying the issuance data.
In terms of issuer rankings, Finance of America (FOA) once again took the top spot in July with $139 million in issuance, which still accounted for a $20 million dip from June levels. Longbridge Financial was No. 2 at $104 million, recording a less severe drop of $4 million for the month.
PHH Mortgage Corp. was next at $98 million, followed by Mutual of Omaha Mortgage with $63 million. The former Reverse Mortgage Funding (RMF) portfolio, now under the control of Ginnie Mae, again issued no pools.
Despite the low activity in the issuance market, the overarching HMBS program is currently pretty healthy, according to New View partner Michael McCully.
“[Low issuance levels and HMBS program health are] not really related,” McCully said. “HMBS continues to execute well.”
But a moderation in rates could come with an immediate impact, presuming the drop is substantial enough, he said.
“A meaningful reduction in the 10-year Treasury rate will help industry origination volume, and therefore HMBS issuance, once the origination lag between sourcing customers and closing is factored in,” McCully said.
