Reverse mortgage industry performance metrics have been showing gains and losses for several months, but a more favorable interest rate environment and optimism about potential business growth in 2025 have arrived, along with generally positive news for October.
Approvals for Home Equity Conversion Mortgage (HECM) increased 11.1% between September and October, with 2,392 loans approved last month. according to data composed by Reverse market insight (RMI).
Meanwhile, HECM-assisted securities issuance (HMBS) posted its largest figure since September 2023, rising $98 million during the month to a total of $598 million in October. 78 pools have been issued, one less than in September. This is according to Ginny Mae data and private sources collected by New viewing advisors.
Approval volume
When asked about the primary source of the spike, RMI’s director of customer relations Jon McCue pointed to a previously predicted increase in Federal Housing Administration (FHA) case number assignment.
“As always, we turn to case number assignment to answer this question,” he said. “We predicted a rise in endorsements given the sharp comeback in cases between June and July, and with another surge in August we should most likely see another rise next month if this is true.”
Geographically, volume gains occurred in the ten regions monitored. But the gains weren’t as pronounced as they would have been if all else was equal, McCue explained.
“Given that all regions showed an increase, as you would expect with a nice month-on-month increase in the number of recommendations, [geographic activity is] not [telling us] a lot,” he said. “There is one exception to this rule, however, and that is that the Southeast/Caribbean region was the only region to decline this month.
“The only big difference there came from the hurricanes, so you would have to suspect those storms had a big impact on volumes, but otherwise we saw pretty strong gains across the board.”
Again in October Mutuality of Omaha Mortgage surpassed Finance of Americawith the former overtaking the latter at the top of the rankings for year-to-date totals. When asked if this is a sign that Mutual of Omaha is catching up to FOA, McCue said he wasn’t entirely sure.
“These are both strong companies with their own strengths,” he said. “It’s hard to say that one is overtaking the other for a top position when the numbers are so close. However, it looks like a neck-and-neck race heading into the 2024 finish line. I would say that we as an industry are fortunate to have two strong companies like these leading the way for others, and hopefully their momentum will continue through 2025.”
Many analysts predict that the Federal Reserve will make another modest interest rate cut on Thursday. When asked if this could have a positive effect on the upside sector, McCue pointed out that rates would rise again after the previous Fed rate cut. A bigger impact could come from another major event happening this week.
“It didn’t have the impact that so many people thought,” McCue said of the rate cut. “However, one thing that is potentially bigger for rates is what happens during elections. That could have a bigger impact than any rate cut by the Fed. It really is a matter of waiting, and election years are always interesting.”
HMBS issuance
HMBS issuance saw a bigger rebound in October compared to other recent months, but that hasn’t changed the overall math. Emissions are still at historically low levels, and the final figure for 2024 is likely to be significantly lower compared to recent years.
“HMBS issuance set a record in 2022, with nearly $14 billion issuance,” New View said in its report. commentary at the data. “Total issuance for 2023 was approximately $6.5 billion. Total issuance for 2024 through October totals $4.9 billion – $579 million lower than this time last year and $7.6 billion lower than at this time in 2022.”
But in terms of what moved the proverbial needle, Mutual of Omaha’s total issuance is up noticeably, from $75 million in September to $161 million in October.
The month’s largest issuers remained relatively stable. FOA remained in first place with $170 million (up from $151 million in September), followed by Mutual of Omaha, Longbridge financial ($126 million, up from $105 million) and PHH Mortgage Corp. ($88 million, down from $108 million).
‘Issuer 42’, the designation given to the former portfolio of Reverse Mortgage Financing (RMF), again no pools issued.
Not only did last month’s gain push Mutual of Omaha to No. 1 in year-to-date totals, but the additional activity was also cited as a key reason for the sector’s overall monthly gain.
“The increase in HMBS issuance volume in October is primarily attributed to Mutual of Omaha’s $88 million in tailpool issuances,” said Michael McCully, partner at New View Advisors.
The tails are not from new loans, New View said, but do represent new loan amounts and are consistent with “subsequent holdings.” But overall, the tail issue is “burning out,” McCully said.
“The average monthly issuance in 2017 was $235 million; For 2024 to date, that is $174 million,” he said.
One potential area to watch remains Ginnie Mae’s planned HMBS 2.0 program.
“If HMBS 2.0 is implemented, you can expect HMBS volume to increase in 2025 compared to 2024, as many loans will be securitized twice,” McCully explains.
