Trends in HECM Volume and Market Dynamics
Recent data from Reverse Market Insight (RMI) indicates a decline in Home Equity Conversion Mortgage (HECM) endorsements, attributable to increasing interest rates, particularly the 10-year Constant Maturity Treasury (CMT) index. This trend was consistently noted across the industry, as evidenced by the endorsement figures for March.
Notably, nine out of the ten leading HECM lenders experienced a decrease in their endorsement activity, with HighTechLending being the exception, registering a notable increase of 29.3% to 53 loans—the highest monthly total since September. The leading lender, Mutual of Omaha Mortgage, reported a 2.1% decrease in endorsements, totaling 476 loans, while competitor Finance of America (FOA) continued to closely follow with its endorsement count.
According to Jon McCue, the director of client relations at RMI, the recent revival of performance reports from the Federal Housing Administration (FHA) has shed light on the diminishing application volumes. “Before this week, we faced uncertainty regarding how significantly the increased CMT was impacting the market due to a lack of recent data. The update from HUD demonstrating a 41% decline in applications provides clarity,” McCue stated. This rise in interest rates ultimately led to a correlation between dropping applications and endorsements, although the slowdown in endorsements appears to lag behind that of applications.
Despite the downturn, McCue highlights a potential renaissance in the need for reverse mortgages, indicating that financial necessity is driving some homeowners to consider these loans. “Our discussions with loan officers reflect a growing demand, especially in light of rising insurance premiums and market volatility,” he added.
HMBS Issuance Trends
March also saw an increase in Home Equity Conversion Mortgage-Backed Securities (HMBS) issuance, reaching $487 million, an uptick of $17 million from February’s figures, according to New View Advisors. However, it is important to note that this increase occurred over a shorter day count, suggesting unease in the market’s overall health.
FOA dominated the HMBS issuance landscape in March, climbing $26 million to a total of $151 million. Other significant issuers included Longbridge Financial, which saw a slight gain, and PHH Mortgage Corp/Liberty Reverse Mortgage. Conversely, Mutual of Omaha’s issuance decreased to $81 million, down from $95 million the previous month, while Reverse Mortgage Funding (RMF) reported no issuances during this period.
Michael McCully, partner at New View, remarked on the resilience of the capital markets, asserting that “Issuance generally follows lockstep with endorsements,” indicating that market conditions remain stable despite RMF’s current inactivity.
First-participation HMBS pools also gained momentum, rising to $317 million, with 21 out of 70 total pools being original issuances. McCully further cautioned market participants against expecting significant upticks in reverse mortgage volume in the near term, emphasizing that any changes will likely remain minimal amidst current economic volatility.
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