March home equity conversion mortgage (HECM) returns rose 3.8% to 4,220 loans in March. It’s another month of more than 4,000 loans taken out. This is another increase after the first drop in volume since December and January in February. HECM volume was previously declining in the final months of 2020 leading up to December, according to data from Reverse Market Insight (RMI).
In addition, the production of new Home Equity Conversion Mortgage (HECM) backed securities (HMBS) saw an HMBS issue of $ 858 million as issuers continued to move LIBOR-indexed loans out of their pipelines. In total, HMBS issued a total of $ 10.6 billion in 2020, which is an industry high of $ 10.5 billion in 2017, according to Ginnie Mae publicly available data and private sources compiled by New View Advisors surpasses.
This follows generally positive news for the industry related to the HECM program’s position in the Mutual Mortgage Insurance (MMI) fund, which shows that the program has a trend towards overall budget positivity as the volume compared to Q4 2020 has decreased.
Reverse Mortgage Endorsement Volume
The spike in volume is an encouraging sign for the reverse mortgage industry as a whole, and while some analysts try to view that volume with cautious optimism, RMI President John Lunde dismisses the idea that the volume currently seen is a sign of a “Bubble” is. ”
“On the contrary, I think the continuation of the industry above 4,000 is a good sign that can be continued,” he told RMD in an interview. “Although the biggest threat has now changed to the rising interest rate environment, which is putting pressure on PLFs and lender margins.”
Reverse Mortgage Funding (RMF) and Finance of America Reverse (FAR) are battling it out for second place for HECM endorsements this month, with RMF leading the rankings for the past 12 months. FAR had more endorsements for the month overall, but for the twelve month period ending March, RMF remains ahead of FAR with a total of four endorsements.
“I think it’s good competition that is healthy for the industry, especially if AAG is at the top so far when lenders improve the rankings,” says Lunde of the direct competition between FAR and RMF for second place. “Both lenders have proprietary products, so HECM isn’t the whole story for them, but I’d still rate it positively.”
There were a few surprises in terms of regional growth. The New England region saw a 31.4% increase from February to March while the Central Atlantic gained 20.5%. The Pacific / Hawaii region – the most active reverse mortgage region in the country – also saw an increase of nearly 12%. However, regional changes in the data, like in March, may not be much more than statistical noise, explains Lunde.
“The month-to-month regional changes are usually just noise, especially for smaller regions like this,” he says. “While the signal is in multi-month trends like Pacific / Hawaii, which have been on the up recently, beating the peak of the COVID catch-up surge from last May.”
However, overall, in terms of the jump in the Pacific region, it managed to beat the very high May 2020 total, the first major volume spike for the industry since the COVID-19 coronavirus pandemic began.
“I think there has to be a stronger growth spurt for the industry as a whole to return to last May and surpass it when it was an artificial surge from COVID catching up,” says Lunde of that total. “I believe this is the focus and intent of many of the leading lenders and participants in the industry, but it is better to go down the path that enables ongoing relationships with other companies and educating potential customers and stakeholders than quick hits like Past spam mailers that don’t create a lasting volume approach for the industry. “
The $ 858 billion HMBS issue in March was the first month after existing LIBOR-indexed credit pipelines expired. February 2021 was the last month in which the Government National Mortgage Association (GNMA or “Ginnie Mae”) allowed the pooling of new HMBS pools supported by LIBOR-based HECMs. This emerges from a comment by New View Advisors based on publicly available GNMA data and the company’s own sources.
After the reverse mortgage industry shifted back to the Constant Maturity Treasury (CMT) index as the only applicable metric for HECM floating rate loans, March continued with the resurgence of HMBS, indexed through to CMT Loans was secured. 91 pools were issued in March, including 35 CMT pools with first-time participation. No new initial participation pools were issued for several years prior to January 2021, supported by CMT.
“Production of the original new loan pools in March was $ 671 million, compared to $ 693 million in February, $ 552 million in January, $ 878 million in December, and $ 765 million in November. In March 2020, new credit pools of approximately $ 455 million were originally issued, ”New View commented.
New View also commented on the latest news regarding the Effects of the HECM portfolio on the MMI fund detailed in the U.S. Department of Housing and Urban Development (HUD) report to Congress on the Federal Housing Administration (FHA) QI programs for MMI fund programs.
“Earlier this week, the HECM industry received the good news that the FHA’s MMI fund is now in surplus of 2.39% on the HECM portion of the fund,” read the comment on its mortgage insurance program and was supported by it Forward mortgage program “subsidized”. “
New view previously described why it found these earlier claims by HUD to be inaccurate.
“We predicted that the FHA would soon have a significant excess of HECM, and it already has,” New View said in his latest comment. “The FHA should now be under less pressure to take action to reduce the risk of HECM, program changes that could have come in the form of higher mortgage insurance rates (MIP) or lower credit limits.”
HUD Secretary Marcia Fudge stated shortly after the report was released that HUD has no “short-term” plans to change MIP prices, although the department will continue to oversee future strategy.
When New View Advisors asked Michael McCully for additional information on the HMBS data recorded for March, he declined to comment and referred RMD to the company’s comment instead.