Reverse mortgage volume, HMBS issuance in January rise beyond 2021 highs

In a very strong year for reverse mortgage production — albeit with some well-documented caveats — Home Equity Conversion Mortgage (HECM) volume hit a record high for 2021 in December, reaching over 5,200 loans. The beginning of 2022, however, has pushed things even further.

Home Equity Conversion Mortgage (HECM) endorsements rose in January 2022 by a surprising 10.6% to 5,771 loans, eclipsing 2021’s all-year high and placing the reverse mortgage industry on a strong footing at the beginning of a new year. This is according to data compiled by Reverse Market Insight (RMI). A slight reduction seen in November did little to tamp down endorsement momentum observed since the beginning of the fall, culminating in the year’s best month in December in terms of raw volume before the higher totals seen at the start of 2022.

Once more, the production of new Home Equity Conversion Mortgage (HECM)-backed securities (HMBS) reached a record, in January coming in at nearly $1.4 billion in HMBS issuance in the eleventh month of the period after the London Interbank Offered Rate (LIBOR) “era.” As previously stated total of $13.2 billion in HMBS issued in 2021 easily overtook the previous industry record of $10.8 billion set in 2010, according to publicly available Ginnie Mae data and private sources compiled by New View Advisors.

Reverse mortgage endorsements: fluke no more?

In the commentary published by RMI accompanying its data for January, it was speculated that this new high in volume beginning the year with quite a strong showing may help to change the conversation regarding the overall perception of how long higher industry volume can persist.

“[January’s performance could be] shifting the conversation from a possible fluke in year-end volume to wondering how much farther the industry can run in the near term with very favorable home prices, low interest rates, and newfound inflation worries powering the way,” the commentary reads.

Of course, another potential factor in the increased loan production for January may come from the fact that with a new year comes a new HECM lending limit. At the end of November 2021, the U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA) announced that the 2022 HECM maximum claim amount (MCA) would sit at $970,800, a sizable increase when compared to the pace seen in prior years largely fueled by 2021’s blistering home price appreciation (HPA) rates.

The regional data also indicates a notable jump in activity, with nine of the 10 tracked areas of the country — all but the Great Plains, which recorded a sizable increase in December — posted gains in January compared to their totals from one month prior. Leading the pack on the regional side is New England, posting a 47.8% jump to 126 loans.The Mid-Atlantic region also recorded an increase of nearly 40% to 265 loans.

Among major lenders, the most improved in January was Longbridge Financial with a volume increase of 47.8% to a total of 550 loans, giving it a market share of 9.5% second only to industry leader American Advisors Group (AAG)’s 28.4% share. Reverse Mortgage Funding (RMF) also saw a notable spike of 24% to 480 loans, with 8.3% market share so far in 2022.

HMBS issuance

January’s HMBS issuance set a record for new, original loan pools for the fourth month in a row, according to New View.

“January’s production of original new loan pools was a record $1.18 billion, edging December’s $1.14 billion, November’s $1.08 billion and October’s $1.07 billion. Approximately $552 million in original new loan pools were issued in January 2021,” New View’s accompanying commentary reads.

Of particular note in the January data is the entrance of a new HMBS issuer: Mortgage Assets Management, LLC, taking the place of Reverse Mortgage Solutions (RMS) after acquiring the company and its portfolio from its former parent Ditech Holding Corporation after a protracted, court-supervised process in 2019. MAM has since sold the RMS company to Ocwen Financial Services, parent company of Liberty Reverse Mortgage as a part of Liberty’s effort to become a fully end-to-end reverse mortgage lender.

MAM issued three HMBS tail pools in January, according to New View.

All in all, 2022 performance seems to be off to a strong start for the reverse mortgage space. In January, New View Advisors Partner Michael McCully indicated that the possibility existed for 2022 to be another record-setting year for the space. Ccurrent trends and fundamentals give reason to a perspective of strong HMBS performance in the beginning of the year, he said.

“With the new higher maximum claim amount limits in effect January 1, home values stable or rising, and rates relatively low, we expect continued strong HMBS issuance to start 2022,” McCully said in January. “If rates remain low and home prices stable, expect another strong year for HMBS issuance.”

Read the HECM Lenders report at RMI, and the HMBS Issuance report at New View Advisors.

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