Reverse Mortgage Volume, HMBS in December Pushes Industry to 2021 Highs


Home Equity Conversion Mortgage Riders (HECMs) rose 5.4% in December 2021 to 5,218 loans, a latest surge that made December the highest volume month of the year after suffering a very slight decrease the previous month. This is according to data compiled by Reverse Market Insight (RMI).

In July, it emerged that a streak of monthly volume above a threshold of at least 4,000 units that the industry had seen since the end of 2020 had ended. However, September’s volume spike managed to completely overcome such a deficit, and subsequent October volume levels put the industry back in a strong position. A slight drop observed in November did little to dampen the approval momentum seen since the start of the fall, culminating with the best month of the year in December in terms of gross volume.

Once again, production of new home conversion mortgage-backed securities (HECMs) hit a record high, reaching $ 1.5 billion in HMBS issues in December in the tenth month of the period after the rate. interbank offered in London (LIBOR). “time.” A total of $ 13.2 billion of HMBS issued in 2021 easily surpassed the previous industry record of $ 10.8 billion set in 2010, according to public data from Ginnie Mae and private sources compiled by New View Advisors.

In total, 2020 saw $ 10.6 billion in total HMBS issuance, eclipsing a previous record of $ 10.5 billion in 2017.

December HECM volume: a peak for the year

Now that 2021 is fully in the rearview mirror, the overall industry performance for the year helps underscore that the company aimed to make the most of stronger mortgage fundamentals – including higher home price appreciation and lower interest rates – despite a difficult situation period. That’s according to John Lunde, president of RMI.

“It really highlighted the silver lining of the pandemic cloud,” Lunde told RMD. “2020 was about the transition to remote work and secure remote customer transactions thanks to the swift actions of the government and everyone working in the company, while 2021 showed the benefits of soaring house prices. and low interest rates on a product where consumers benefit from both. “

Of course, one of the headlines of the year revolves around the share of HECM to HECM refinancing making up the total industry volume share – at 50% or more – but the dynamics of refi as a whole are in focus. less reasonably well aligned. with a similar dynamic on the term mortgage side, he said.

“[These dynamics] have meant refinances comparable to future industry dynamics, but also underscore the place of home equity in financial planning conversations from now on, ”Lunde said.

Now that the higher reverse mortgage limit of $ 970,800 took effect on January 1, it might have been easy to assume that lending volume could drop before coming back stronger in the new year for take advantage of higher loan levels. product for borrowers. However, December may have been too early to see this trend, according to Lunde.

“The impending increase in the loan limit was one of the main reasons we could see the year-end volume decrease somewhat, although the endorsements may show that there is more in January than in December. given that it was announced on November 30, “he said. “So while there may be more to this story, for now the strong approvals in December only underscore the performance of the industry in 2021 and particularly the fourth quarter. “

Another trend in the December data is that while the overall reverse mortgage industry volume was higher, only four of the nation’s top 10 lenders managed to post volume gains from November’s performance. Indeed, six of the top 10 lenders actually saw small declines in loan production.

“Signs of a wider distribution are welcome for the industry, of which this could be a small signal,” Lunde said of the gap. “If we continue to see the industry growing faster than the top 10 lenders, that would be a healthy effect of a growing market.”

HMBS issue, ranking shaken by recent sale

A long-awaited drop in HMBS’s emission record from 2010 occurred in November, but it is possible that the industry will be on the verge of breaking the record again in 2022 if some existing industry dynamics exist. continue. That’s according to Michael McCully, partner at New View Advisors.

Overall, the state of the reverse mortgage industry appears to be strong and leads to an optimistic outlook at New View, but there remains a pre-existing caveat to that optimism in the form of HECM refinances to HECM, McCully said. .

“We are delighted to see record volume; but we remain concerned that refinancing has remained as robust as it has been, ”McCully told RMD.

Regarding the performance of 2021 and its role in shaping the short and medium term outlook for 2022, current trends and fundamentals justify a prospect of strong performance of HMBS at the start of the year, he said. declared. When asked if 2022 could also be another record breaking year despite the previous gap between HMBS emission records between 2010 and 2021, McCully said the possibility is there.

“With the new, higher maximum claims limits in effect on January 1, home values ​​are flat or rising and rates relatively low, we expect the continued strong issuance of HMBS to begin in 2022,” McCully said. “If rates remain low and home prices stable, expect another solid year for the HMBS issuance.”

New View also released its revised HMBS Issuer Rankings, which saw Reverse Mortgage Financing (RMF) become the top-ranked HMBS issuer in 2021 with $ 4.09 billion and nearly 31% share of total market. Its rise to number one is due in large part to its recent acquisition of Mortgage Management Rights (MSR) from American Advisors Group (AAG), a transaction comprised of more than 75,000 loans and $ 12.1 billion. unpaid capital balances (UPB). This one-time transaction represents approximately 10% of the industry-wide UPB total.

“Ginnie Mae grants full issue credit to the surviving / buying HMBS issuer,” New View noted in its commentary accompanying the data.

Read HECM Lenders report at the RMI, and both the HMBS Issuance report and the classification tables of the HMBS transmitters report at New View Advisors.


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