Home Mortgage Reverse mortgage volume fell while HMBS issuance rose slightly in September

Reverse mortgage volume fell while HMBS issuance rose slightly in September

by Joshua Garcia

The reverse mortgage industry experienced a dip in volume while issuance slightly rose in September, as it continues to adapt to the current rate environment and new Ginnie Mae issuer landscape. According to data compiled by Reverse Market Insight (RMI), Home Equity Conversion Mortgage (HECM) endorsements fell by 12.3% to 2,614 loans in September. This decrease was expected due to a noted lag in HECM case number assignments based on Federal Housing Administration (FHA) data.

On the other hand, the production of new HECM-backed Securities (HMBS) issuance saw a slight increase in September, primarily because one issuer pooled four months’ worth of production, according to Ginnie Mae data and private sources compiled by New View Advisors.

Although the slowdown in case number assignments was evident, they actually rose by 18.5% in September, which is an encouraging sign. However, industry experts like John Lunde, president of RMI, warn that the endorsement drop may not be in line with expectations and the industry may still face challenges in the future.

Lunde also expressed surprise at the weak performance of the top geographical regions. He pointed out the missed potential in the New York/New Jersey area, which consistently ranks at No. 8 in these reports despite having significant untapped potential.

Given the current market challenges, Lunde emphasized the importance for industry professionals to focus on how they appeal to potential customers. Adapting the message and customer process to the interest-rate environment is crucial, as the product still offers great planning opportunities for clients when presented properly.

In terms of HMBS issuance, while it ticked up in September, it still remains historically low. New View reported that $638 million worth of HMBS was issued in September, with 103 pools. This increase was largely attributed to Guild Mortgage pooling four months’ worth of issuance after acquiring Cherry Creek Mortgage.

Michael McCully, partner at New View Advisors, noted that the trend in 2023 HMBS issuance aligns with expectations. Rising interest rates and flat-to-falling home values impact all mortgage lending, including reverse mortgages. The record-breaking issuance levels in 2022 were driven by a historic HECM-to-HECM refi boom, but it’s uncertain when the market will fully recover.

Industry professionals need to consider the current rate environment, as HECM volume is highly correlated to the 10-year Treasury index rate. With the rate currently at 4.75%, the highest since 2007, it is important to navigate the market accordingly.

Overall, the reverse mortgage industry continues to adjust to the challenges posed by the rate environment and Ginnie Mae issuer landscape. While there are some signs of improvement in certain aspects, industry professionals should remain vigilant and adapt their strategies to meet the needs of potential customers in order to sustain growth and success in the industry.

related posts