Reverse mortgage industry performance metrics have continued their soft trend into the third month of the year, though activity in the secondary market was slightly higher than the month prior.
Home Equity Conversion Mortgage (HECM) endorsements fell in March based on rate increases observed in the late period of 2024, while HECM-backed securities (HMBS) issuance saw an increase in March in a market that remains generally healthy despite lower issuance activity.
This is according to HECM endorsement data compiled by Reverse Market Insight (RMI), and HMBS issuance data from public Ginnie Mae data and private sources compiled by New View Advisors.
Lower HECM volume telegraphed by rate increases
Leaders at RMI have been expecting a lower volume level to emerge in the data due to the observed spike in the 10-year Constant Maturity Treasury (CMT) index observed late last year, and that has come through in the endorsement data for March. Nine of the top ten HECM lenders in the industry — save for HighTechLending — recorded drops in their endorsement activity in March.
HighTech, meanwhile, managed to post a gain of 29.3% to 53 loans, its highest monthly figure since September, according to RMI.
56 loans in March separated leading HECM lender Mutual of Omaha Mortgage with its next closest competitor, Finance of America (FOA). Mutual’s endorsement count fell by 2.1% to 476 loans, while South River Mortgage’s performance drop was generally less severe, falling by 1.5% to 66 loans.
Slightly more clarity has been offered to the industry with the renewed publication of some reverse mortgage performance reports from the Federal Housing Administration (FHA) according to Jon McCue, director of client relations at RMI.
“Up until this week, we would have said that this was expected simply based on the steep increase in the 10-year CMT we saw in the fourth quarter of last year,” he said. “However, HUD had not published any application data since September, with the exception of a brief publishing of October before removing that from the site. [Last] week, HUD updated this data through December of last year, and from the brief publishing of the October data to that of December we see a decline of around 41%.”
Some of this was expected, but it was difficult to tell what the full impact of rate increases would or could be absent the data from FHA and HUD.
“We knew it had to be happening, but other than endorsement data which lags application data we didn’t know how much that increase in the 10-year CMT was affecting the market,” McCue said. “Now, that drop in applications — which we can now see — is lining up with the decrease in endorsements we are seeing. The good news is that endorsements are not dropping as quickly as the applications did.”
In its ongoing conversations with industry participants and loan officers, RMI reports that clients are seeking reverse mortgages out based on a particular need stemming from other expenses that retiree homeowners are facing.
“In conversations with loan officers, they are seeing a greater need for reverse mortgages,” McCue said. “I recently spoke to someone who mentioned they are seeing a substantial uptick in volume due to the rapid increase with insurance premiums and their need to pay them while staying in the home. Also, with the volatility in the market now is a great time to help financial advisors reduce losses in a client’s portfolio by using a coordinated withdrawal strategy.”
HMBS issuance sees an increase
HMBS issuance in March reached $487 million, translating to a $17 million increase over February’s data according to New View. But issuance did come in lower on day count, according to Michael McCully, partner at New View. This means that there was “no modest gain” in overall March issuance totals, he said.
FOA was again the top HMBS issuer in March, rising $26 million to $151 million for the month. They were followed by Longbridge Financial ($111 million, up $4 million) and PHH Mortgage Corp/Liberty Reverse Mortgage ($99 million, up $9 million). Mutual of Omaha saw its issuance levels fall to $81 million from $95 million in February. As has been the case since its portfolio was seized by Ginnie Mae, the HMBS portfolio of Reverse Mortgage Funding (RMF) again issued no pools in March.
When asked if the “holding pattern” that the RMF portfolio remains in has impacted the HMBS market, McCully said that did not appear to be the case.
“The capital markets remain healthy,” McCully said. “Issuance generally follows lockstep with endorsements.”
First-participation production of original HMBS pools also saw an increase in March, rising $14 million to $317 million for the month. Of the 70 pools issued in March, 21 were first-participation pools. 48 pools consisted of “tails,” or pools consisting subsequent participations. One pool consisted of both original and tail participations.
When asked what industry professionals should most keep in mind, particularly in a period of heightened economic volatility, McCully said that no one should expect a spike in reverse mortgage volume.
“There is little prospect for a significant increase in HECM volume for the foreseeable future; small changes month to month will not be significant,” he said.
