November’s Reverse Mortgage Trends: What the Numbers Really Show!
In a landscape that resembles a roller coaster, the reverse mortgage industry has been experiencing an unpredictable mix of ups and downs over the last few months. As we approach 2024, the horizon presents both challenges and opportunities: rising interest rates might dampen origination volumes, yet the anticipated rollout of HMBS 2.0 is injecting excitement into the market.
Home Equity Conversion Mortgage (HECM) endorsements saw a slight uptick of 0.7% from October to November, totaling 2,408 loans endorsed last month, according to data compiled by industry experts.
On the flip side, HECM-backed Securities (HMBS) issuance took a dip, dropping by $15 million to a total of $83 million in November. The market saw 71 pools issued, seven fewer than the previous month, showing a trend worth noting.
A Mixed Bag for HECM Endorsements
Among the ten regions tracked for HECM lending, only four managed to post gains in November. Notably, the Southeast/Caribbean region showcased a remarkable 19.7% increase from October, rebounding from a previous slump.
The dynamics among the top ten HECM lenders were equally compelling. Guild Mortgage led the charge with a staggering 40.4% increase, totaling 80 loans, followed closely by Plaza Home Mortgage with a 32.5% rise to 53 loans, and Liberty Reverse Mortgage with a 32.1% gain, totaling 111 loans. Among the largest lenders, Longbridge Financial was the sole competitor to gain traction in November, adding just six loans to its total.
As we gear up for the final weeks of 2024, industry leaders anticipate that the climbing mortgage rates will exert downward pressure on HECM endorsements come January 2025. RMI President John Lunde predicts a return to around 2,000 monthly endorsements, as the impact of recent rate hikes begins to settle in.
Interestingly, refinancing activity may also play a pivotal role in shaping the upcoming data. “The strongest regions geographically corresponded with increased refinancing activity, which could influence future endorsement numbers,” Lunde observed. “December might mirror the high levels seen in recent months or start reflecting the typical seasonal slowdown combined with the effects of rising rates.”
The competitive landscape remains fierce. While Mutual of Omaha Mortgage appears to be widening its lead over Finance of America, Lunde cautions that the competition is tight, particularly with FOA’s substantial proprietary volume that is not captured in these endorsement figures.
“The momentum is currently with Mutual of Omaha, but FOA is still a strong contender with significant proprietary volume that could shift the balance,” he said.
As we look ahead, Lunde urges industry participants to develop robust action plans to navigate the complexities of 2025, regardless of shifting interest rates. “The recent roller coaster of rates underscores the need for strategic planning that remains effective even in higher rate environments,” he emphasized.
A Slight Dip in HMBS Issuance
Diving into the nuances of the HMBS market, experts highlight that low origination volumes often indicate a broader trend of overcapacity. FOA led the HMBS issuance in November with $156 million, down $14 million from October, while Longbridge followed with $149 million—up from $125 million. Mutual of Omaha Mortgage saw a decrease of $42 million to $109 million, whereas Liberty parent PHH Mortgage Corp. increased its issuance by $10 million, reaching $98 million.
With Ginnie Mae taking the reins of the former portfolio of Reverse Mortgage Funding (RMF), the so-called “issuer 42” did not issue any pools in November, signaling a shift in the landscape.
“As we revert to historical norms, overall issuance is still declining due to lower new-issue originations from over a year ago,” noted industry analyst Michael McCully.
The introduction of HMBS 2.0 could bring about significant changes. With Ginnie Mae moving closer to implementation, seasoned issuers stand to benefit the most. McCully reiterated that 2024 issuance is unlikely to surpass 2023 figures, which were already down from record levels in 2022.
