HECM Endorsement Analytics – January 2020

HECM Endorsement Analytics – January 2020

HUD’s January 2020 HECM Endorsement Summary Report shows 3,919 endorsements, a strong start for the year, though volume may include backlogged pipeline from year-end. Our summary can be found here: NV Endorsement 2020_01. The increase in volume is evenly distributed geographically. Compared to December, the Atlanta field office volume increased 66%, from 452 to 751 units; the Denver field office increased 40%, from 573 to 801 units; the Philadelphia office increased 89% from 380 to 718 units; and the Santa Ana field office saw its unit volume increase 56%, from 1,056 to 1,649 units. Overall, January volume increased 59% from December, and it is the highest monthly endorsement volume since February 2019.

AAG continues to hold its lead with more than 30% of origination volume, or 1,141 endorsements. After Liberty’s uncharacteristically tiny endorsement volume in December, it bounced back with 475 endorsements in January, its strongest performance since February 2018. Reverse Mortgage Funding came in third with 361 endorsements. The top six originators each had market share exceeding 5%, with a combined market share of roughly 67%. The market has consolidated over the last 12 months; one year ago, the top six originators had a combined 62% market share.

HUD just released its December Endorsement Snapshot Report and RMF sponsored 243 loans originated by another lender. Finance of America Reverse and AAG followed with 187 and 160 such loans respectively. Fairway sold 48 loans to another sponsor in December; like other smaller players, Fairway’s production has been in a downward trend over the last 12 months.

HMBS January 2020: Beginnings of a Happy New Year?

HMBS issuance totaled $760 million in January 2020, as lower rates continued to strengthen new production. 87 pools were issued in January, including about $550 million of new unseasoned HECM first participation pools, continuing a strong upward trend in production. There were no highly seasoned new issues. For comparison, HMBS issuers sold 97 pools totaling $614 million in January 2019.

Reverse mortgage lenders weathered a long period of reduced new origination volume, primarily due to the new lower PLFs for Home Equity Conversion Mortgages (“HECMs”) in effect since the beginning of FY2018. However, over the last year new production of HECMs and HMBS has slowly climbed back to its long-term average range of $500 – $600 million.

The HMBS market totaled about $8.3 billion for calendar year 2019, down from $9.6 billion in 2018 and $10.5 billion in 2017. However, securitization of private reverse mortgages is a much bigger factor now. As a result, we estimate that the total issuance of reverse mortgage securities backed by new collateral in 2019 was about the same as 2018.

New production issuance is in a strong upward trend: January’s production of original new loan pools was about $550 million, compared to $484 million in December, $506 million in November, $426 million in October, $393 million in September, $390 million in August, $321 million in July, and barely $300 million in January 2019. Last month’s tail pool issuances totaled $210 million, within the range of recent tail issuance.

January issuance divided into 40 First-Participation or Original pools and 47 tail pools. Original pools are those HMBS pools backed by first participations in previously uncertificated HECM loans. Tail HMBS issuances are HMBS pools consisting of subsequent participations. Tails are not from new loans, but they do represent new amounts lent. Tail HMBS issuance can generate profits for years, helping HMBS issuers during challenging times.

(Editor’s note: The following was republished with permission from New View Advisors, which compiled this data from publicly available Ginnie Mae data as well as private sources.)