1 minute read
Reverse mortgage industry performance metrics continued their 2025 softness on the basis of endorsement volume and securities issuance, February data shows.
Home Equity Conversion Mortgage (HECM) endorsements and HECM-backed securities (HMBS) issuance saw declines in February, although the number of endorsements managed to come in higher than those in the month of February from each of the past two years. Meanwhile, HMBS issuance dropped by $118 million to settle at $470 million.
This is according to HECM endorsement data compiled by Reverse Market Insight (RMI), and HMBS issuance data from public Ginnie Mae data and private sources compiled by New View Advisors.
HECM volume
HECM endorsements fell on a per-unit basis by 6.1% to a total of 2,481 for February, an improvement on the totals seen in the same month of 2023 and 2024 but still below the numbers the industry posted in January.
It marks an improvement in the endorsement environment since the Federal Reserve started raising interest rates in its ongoing battle against inflation, according to RMI’s commentary to accompany the new data.
When asked about that difference, Jon McCue, RMI’s director of client relations, said that it all comes down to rates, with a bit of an asterisk.
“It may not be what you think, as the 10-year CMT (constant maturity Treasury) is higher now than at either of those prior years, but it has more or less leveled out,” he said. “This would align with other observations about us being in a new ‘normal,’ and the rate fluctuations are not having as severe of an impact on volume given they are not as steep as they were from 2020 to October 2023.”
The only segment truly impacted by rate increases, according to McCue, is HECM-to-HECM refinances.
“Since that bubble burst a while ago now, we are seeing business starting to figure out the current rate environment,” he added.
When asked about this movement compared to recent years, McCue said the January data was not too surprising due to the application data up through October 2024. But since rates began to rise at that time, he expected a larger drop in February.
“If we would have had the two or three extra days like any other month, the drop may not have even been what it was,” he said. “This just continues to prove that we are probably in more of the new normal that I spoke about before. The rise in rates are having smaller impacts on endorsements than the prior couple of years.”
HMBS issuance
When asked about the way that the issuance data compares to the past two years, New View Advisors partner Joe Kelly told HousingWire’s Reverse Mortgage Daily (RMD) that 2023 and 2024 started off very weak.
Issuance in the first half of the year has the potential to benefit from lower rates observed at the end of 2024, but it remains to be seen just how long this dynamic can last, he added.
Speaking to the ongoing question of the implementation of HMBS 2.0 — which New View previously told RMD could have the potential to “double” HMBS issuance — Kelly said that the current liquidity environment is sufficient if the program is not implemented by Ginnie Mae.
“But beyond [2025] that remains to be seen,” he said. “HMBS 2.0 is very important, especially given the potential changes at HUD/FHA.”
All major HMBS issuers posted declines in February.
Finance of America (FOA), the largest issuer, dropped to $125 million, down $35 million from January. Mutual of Omaha Mortgage issuance decreased to $95 million, down $10 million from the prior month. And PHH Mortgage Corp. issued $90 million, down $29 million, according to New View’s commentary on the new data.
When asked about why each major issuer posted losses, Kelly said that January’s data was reflective of the more favorable rate environment observed at the end of last year.
“Last month’s issuance reflected the higher rates earlier in the year and December,” Kelly said. “Also, February had a very low [business] day count of 19.”
During Ellington Financial’s earnings call last month, the Longbridge Financial parent touted that it had successfully completed its third proprietary reverse mortgage securitization. When asked about how this contributes to the health of the overall industry despite not being part of the HMBS program, Kelly said it’s key.
“Proprietary securitization is the essential liquidity tool for proprietary loans, which are in turn essential for the industry so long as HECM languishes with low volume,” he said.
And when asked about what the industry should keep in mind or any priorities that should be maintained in 2025, Kelly pinpointed the need for a lower upfront mortgage insurance premium on the HECM program. “HECM volume will not recover until this happens,” he said.
This year, those two or three extra days of February would have started last Saturday, so I am not as certain that HECM endorsements would have been 6.1% higher. I know RMI has this thing about the number of work days in a month but some months like last month, this argument has less meaning.
While the number of workdays do influence the HECMs endorsements in a month, so do the workschedules of mortgagees sending in closed HECMs for endorsement. The volatility can be seen when there is fewer closed HECMs coming into HUD during a month or far too many coming in at the end of the month, HECM endorsement production at HUD can be erratic as is from time to time reflected in the HECM endorsements for lenders going from a few HECM endorsements one month to multiple that number the next. Many events impact the count as COVID once did when HUD National Headquarters was closed.
As to interest rates, the industry suffered its lowest fiscal year for HECM endorsements last fiscal year for any fiscal year since fiscal year 2003. The fiscal year to date HECM endorsement trend is now on course to reach just over 30,000 which if that happened would make it the second worst fiscal year for HECM endorsements since fiscal year 2003; yet there is some hope that this fiscal year can do better than that but without case number data for the industry as a whole, that argument is hard to confidently make since February was just the fifth month of this fiscal year. Normally we would have the case number assignment data through December 2024 if not January 2025. With January 2025 case number assignment data relatively tight projections of HECM endorsements for March, April, and May could be made. This time, none of the HUD related production reports have been published and posted on the HUD website.