After the reverse mortgage industry’s key performance metrics rallied in May, June fared slightly worse than previously telegraphed by case number assignments.
Home Equity Conversion Mortgage (HECM) endorsements fell by 14.4% in June to 2,105, while HECM case numbers for May dropped 7.9% to 3,214. This is according to data compiled by Reverse Market Insight (RMI).
Meanwhile, HECM-backed Securities (HMBS) issuance also fell by $29 million in June to a total of $497 million for the month. There were 86 pools issued, the same number as in May, and only slightly less than the 89 pools issued in April. This is according to Ginnie Mae data and private sources compiled by New View Advisors.
HECM volume: Some major lenders buck trend
Despite the industrywide drop in volume, four of the top 10 reverse mortgage lenders in the country recorded gains in June.
Finance of America (FOA) added 4.1% to its endorsement tally to finish at 534 loans, after lagging behind Mutual of Omaha Mortgage in recent months. Guild Mortgage also posted a gain of 19.1% to 56 loans, while South River Mortgage and HighTechLending also managed positive growth in June.
When asked if the decline in case numbers could lead to a more tepid summer of originations, RMI President John Lunde said it was likely.
“From a case number perspective I don’t think we’ll see dramatic growth in endorsements this summer, but more of a sideways action in the recent range,” he said.
Each type of reverse mortgage use case also declined in June. “Equity takeout” loans — reverse mortgages that are neither purchases nor refinances — dropped by 4.8% from May. Purchases fell by 10.8%, while HECM-to-HECM refinances saw a large drop of 27.5%.
“It doesn’t surprise me that refis declined since it was likely driven primarily by the lending limit increase earlier this year, which was always a very limited opportunity without rates declining significantly,” Lunde said of the data. “Purchase is one we’re watching closely with the recently implemented tweak to closing costs that we expect to open that door more fully. Equity takeout is the most stable as the largest segment so the lower volatility in May makes perfect sense.”
When asked how four of the top 10 lenders managed to avoid decreases in their endorsement totals in June, Lunde said that geography is a key predictor of how such things can play out. Individual choices that lenders make in appealing to potential clients often dictates their own performance.
“Geographic regions are usually more aligned with overall industry trends, whereas individual lenders can create significant performance gaps purely from business decisions like marketing spend increase/decreases, prioritizing or de-emphasizing endorsements from a resource perspective, or farming attractive in-house sales niches (like forward loan officer relationships or servicing portfolios),” he said.
Geographically, the region that endured the least severe drop is the industry’s most prominent one. The Pacific/Hawaii region fell by only 2.6% to 594 loans for the month.
As FOA and Mutual of Omaha continue to battle for reverse mortgage industry supremacy, Lunde and RMI will be watching closely, he said.
“I do watch with interest as these two compete for the top spot for the foreseeable future as they are very different stories,” Lunde explained. ”Mutual of Omaha has a great brand and customer base outside of reverse that provides a tailwind while FOA has led the industry for several years in wholesale and acquired the largest lender with a particular strength in retail. We’re excited to see both challenging to be the champion.”
HMBS issuance: Moderate dip maintains historic low
As has been the case for a while, HMBS issuance remains at historically low levels, and is not expected to reach anywhere near the records set in 2022 by the time this year winds down, according to New View commentary that accompanied the data.
HMBS issuance fell by $29 million from May to a total of $497 million in June, but the same raw number of pools were issued in June as in May (86 pools). Among leading companies, FOA again claimed the top issuer spot with $159 million, a $2 million increase over May’s figure.
Longbridge Financial saw an $8 million month-over-month dip to $110 million, while Mutual of Omaha and PHH Mortgage Corp. — which will soon rebrand to Onity Mortgage — issued $95 million and $85 million in June, respectively.
When asked about the variance between the issuance levels of the top companies, New View partner Michael McCully said it doesn’t play much of a role.
“There is nothing to be read from any variance in issuance between the top four issuers; in the aggregate they have maintained a market share between 90% and 95% for years,” he said. “But, 11 issuers overall is over-capacity for an industry projecting to originate less than $6 billion in 2024.”
June’s original, first-participation production also saw a decline in June to $331 million, down from $361 million in May. Year over year, new loan production was substantially lower when looking at data from the same period in 2023, New View explained. Of the 86 pools issued in June, 24 were first-participation pools while 62 were tail pools with subsequent participations.
Changes on a monthly basis, McCully said, are largely immaterial.
“The industry is not in a good place with such low volume,” he said. “Let’s see how HMBS 2.0 affects the industry, and whether rates start to trend down more permanently.”
When asked about how New View is projecting issuance for the end of the year, McCully said it’s pretty simple to do.
“All else equal, doubling first half production gives a reasonable proxy for full year issuance,” he said.
New View also published updated HMBS issuer league tables for the first half of 2024, showing FOA with 31.9% of the overall market. It was followed by Longbridge (21.4%), Mutual of Omaha (18.4%), PHH (18%) and Traditional Mortgage Acceptance Corp. (3.6%).