After the boom of HECM-to-HECM (Home Equity Conversion Mortgage) refinance activity dried up in 2022, the reverse mortgage industry has struggled to regain the ground it lost. While March saw a notable spike in endorsement volume accompanied by a caveat, the endorsement volume in April experienced a notable drop-off — but with a few qualifiers.

HECM endorsements fell in April by 48.2% to 1,963 loans, a sizable drop from the 3,789 endorsements recorded one month ago, according to Reverse Market Insight (RMI) data. As with the month prior, the wind-down of American Advisors Group (AAG) played a sizable role in the drop, according to RMI President John Lunde.

Meanwhile, the production of new HECM-backed securities (HMBS) increased slightly last month, according to data from New View Advisors. In April, new HECM-backed securities production reached $534 million, up from $442 million the month prior.

Endorsement volume takes a hit

In March, the impending fold of AAG, under the corporate umbrella of Finance of America Companies (FOA), pushed the company to clear as much of its pipeline as possible — which occurred prior to the consolidation from an acquisition deal announced late last year.

“Judging by the drop under 2,000 loans on the endorsement side, the February increase in case numbers issued is still working its way through the system – and we don’t have March or April cases data to confirm any upturn yet either,” RMI said in its commentary. “With that said, the remaining lenders in the industry had a much better performance as AAG represented 106% of the April decline.”

The implementation of AAG into FOA is the main culprit, Lunde said.

“The drop is entirely AAG,” Lunde said. “If we exclude AAG from March and April data, endorsements were up slightly for the rest of the industry.”

While the disruption is being felt, it’s not necessarily a unique occurrence when considering the industry history, Lunde said — and historically, these events have been an opportunity for other companies to assert themselves.

“We’ve seen the number one lender exit the industry before, and it’s typically a period of opportunity for the remaining companies,” Lunde said. “This case is a bit different in that much of AAG’s ongoing business operation was acquired by FAR, but any big transition creates movement of key people which can lead to loan volume shifts.”

The months ahead

In terms of the case numbers that are still working their way through the system, Lunde said there are indications they could eventually show as volume increases.

“A lot depends on the interest rate and housing markets, but if we see continued recovery in case numbers issued, I’d expect that to show up in endorsement volume growth as well,” he said.

Still, the key — according to Lunde and others — is for the reverse mortgage industry to expand its focus on bringing borrowers into the industry who have not previously engaged with the product.

“It remains most important for lenders and loan officers to focus on bringing new borrowers into the industry, capitalizing on reverse mortgage product strengths to meet concerns about inflation, insecure liquidity alternatives, and outliving their savings,” he said.

Among the gainers in April, Fairway Independent Mortgage Corp. posted a 70.5% increase to 133 loans. Cherry Creek Mortgage posted a 59.5% gain to 126 loans, which marks its highest monthly volume level since June of 2022, and which follows its recent acquisition by Guild Mortgage.

Rounding out the top 10 is FAR, which posted a 31.3% increase to 189 loans.

HMBS issuance is up but still low

In April, the new-issue HMBS market posted its best month of production so far for the year, but the overall figure remains low by recent standards, according to New View Advisors.

Still, a month-over-month issuance gain has not occurred in over a year, and the 80 pools issued in April exceeded the 53 in March.

The creation of new, first-participation production also saw increase to $379 million, a better showing than what has been seen so far in 2023: $259 million in March, $322 million in February and $347 million in January.

The figure remained low by recent historical standards, however, falling far below the record $1.4 billion in new issuance recorded in April of 2022.