Reverse Mortgage Volume and HMBS Issues Rise in March as MMI Fund Position Improves
Home equity conversion mortgage (HECM) endorsements in March increased in March, rising 3.8% to 4,220 loans. This is yet another month recording more than 4,000 loans, marking another increase after February saw the first volume reduction since December and January. HECM volume had previously trended downward in the final months of 2020 before December, according to data compiled by Reverse Market Insight (RMI).
Additionally, the production of new Home Equity Conversion Mortgage Backed Securities (HECMs) (HMBS) recorded $ 858 million in HMBS issuance as issuers continued to withdraw LIBOR-indexed loans from their pipelines. In total, 2020 saw $ 10.6 billion in total HMBS emissions, eclipsing a recent industry peak of $ 10.5 billion in emissions in 2017, according to publicly available data from Ginnie Mae and private sources. compiled by New View Advisors.
This follows generally positive news for the industry related to the HECM program’s position in the Mutual Mortgage Insurance Fund (MMI), showing that the program is showing a trend of overall fiscal positivity as volume has fallen by fourth quarter 2020 report.
Reverse Mortgage Endorsement Volume
The increase in volume is an encouraging sign for the reverse mortgage industry as a whole, and while some analysts may try to examine such volume with cautious optimism, RMI Chairman John Lunde is dismissing the idea according to the report. which the currently observed volume is a sign of a “bubble”. . “
“On the contrary, I think keeping the industry above 4,000 is a good sign that can continue,” he told RMD in an interview. “Although the biggest threat has now turned to a rising interest rate environment that puts pressure on PLFs and lender margins.”
Reverse Mortgage Funding (RMF) and Finance of America Reverse (FAR) rank second in the HECM endorsements this month, with RMF taking the lead in the rankings over the past 12 months. The FAR had more overall endorsements for the month, but in the 12-month period ending in March, RMF remains ahead of the FAR with a total of four endorsements.
“I think it’s good competition that’s healthy for the industry, especially with AAG so far in the lead, to have lenders moving up the rankings,” Lunde says of the direct competition between FAR and RMF for second place. “Both lenders have exclusive products and so HECM is not the whole story for them, but I would always view it positively.”
In terms of regional growth, there have been some surprises. The New England region saw an increase of 31.4% from February to March, while the central Atlantic increased by 20.5%. The Pacific / Hawaii region – which is the most active reverse mortgage region in the country – also saw an increase of just under 12%. However, regional changes in the data like those seen in March may not be much more than statistical noise, says Lunde.
“Regional changes from month to month are usually just noise, especially for small areas like these,” he says. “While the signal is in multi-month trends like the Pacific / Hawaii which has tended to increase lately and peaked since the COVID catch-up peak last May.”
However, in terms of the jump seen in the Pacific region, as a whole, it managed to beat the very high total seen in May 2020, the first major volume spike for the industry after the start of the COVID coronavirus pandemic. -19.
“I think for the industry as a whole there has to be more of a sustained growth spurt to come back and surpass last May when it was an artificial peak by COVID catching up” , Lunde says of that total. “I think that’s the goal and intention of many of the major lenders and industry participants, but it’s best to go the route that builds ongoing relationships with other businesses and educates clients. and potential stakeholders rather than quick hits like spam emails from the past that fail to build a sustainable volume approach for the industry. “
The total HMBS issue of $ 858 billion in March took place the first month after the phasing out of existing LIBOR-indexed loan pipelines, with February 2021 being the last month for the Government National Mortgage Association (GNMA, or “Ginnie Mae ”). enabled the pooling of new HMBS pools supported by LIBOR-based HECMs. This is according to a comment from New View Advisors based on publicly available GNMA data and the company’s own sources.
With the reverse mortgage industry now reverting to the Constant Maturity Treasury Index (CMT) as the only applicable metric for variable rate HECM loans, March continued with the reappearance of HMBS backed by index-linked loans. CMT. 91 pools were issued in March, including 35 first participation CMTs. No new CMT-backed first participation pool had been issued for several years prior to January 2021.
“March production from the original new loan pools was $ 671 million, up from $ 693 million in February, $ 552 million in January, a record high of $ 878 million in December and $ 765 million in November. About $ 455 million of new original loan pools were issued in March 2020, ”New View notes in its commentary.
New View also commented on the latest news related to the Impact of the HECM portfolio on the MMI fund detailed in the US Department of Housing and Urban Development (HUD) Federal Housing Administration (FHA) MMI Fund Programs Q1 Report to Congress.
“Earlier this week, the HECM industry received good news that the FHA MMI Fund is now showing a surplus of 2.39% for the HECM portion of the Fund,” the comment read: “This report comes only four months ago. after the FHA said the HECM program was a drag on their mortgage insurance program and was “subsidized” by their term mortgage program. “
New view previously described why he determined that these previous claims by HUD were inaccurate.
“We predicted that the FHA would soon have a significant HECM surplus, and it has happened before,” New View said in its latest comment. “The FHA should now be under less pressure to take action to reduce the HECM risk, program changes that could have taken the form of increased mortgage insurance premiums (PMI) or lower limits on mortgage insurance. ready.”
HUD Secretary Marcia Fudge explained shortly after the report was released that HUD did not have “short-term” plans to change MIP prices, although the Ministry will continue to monitor the strategy at the same time. ‘to come up.
When asked for additional information on the HMBS data recorded for March, Michael McCully of New View Advisors declined to comment, instead referring RMD to the company’s comments.