Jan/Feb 2022 RMM

STRONG LOAN GROWTH last year helped shatter records in the secondary market for reverse mortgages. In September, the production of new loan pools totaled $1.03 billion, up from $880 million in August and $693 million a year ago in September 2020, according to data from New View Advisors, a research and consulting firm that tracks the secondary market. And for the first nine months of 2021, issuers of Home Equity Conversion Mortgage-backed mortgage securities (HMBS) posted volume of $9.3 billion, putting them on pace to reach $12 billion, which would break the $10.84 billion record set in 2010. This performance is a testament to the work the reverse mortgage industry has done to educate borrowers on the value of the HCEM. But it also reflects the steady, if less recognized, evolution of the secondary market for reverse loans. It is smaller than the secondary market for forward mortgages, and it can be more complicated for investors to understand, experts say. But it plays a similar role: helping fund more loans. “There’s an education factor for people who are entering the reverse market,” says Laurie McCloskey, vice president of secondary markets for AAG, which is among the largest issuers of HMBS. Other top issuers include Finance of America Reverse, Longbridge Financial and Reverse Mortgage Funding. Investors used to the forward market must master new terminology and new processes, McCloskey says. And transactions are less automated. “But besides the additional facts that the pools are smaller and the market is a little less standardized, a forward investor can easily understand it.” How It Started The HECM was created under a broader housing law signed in 1988 by former President Ronald Reagan. The first loans were made in 1989. That same year, the Federal National Mortgage Association (Fannie Mae) launched a pilot program to buy the loans for its investment portfolio, according to Michael McCully, a partner at New View Advisors in Naples, FL. The government-sponsored enterprise offered a standard price for loans, though it evolved over time, McCully Secondary Market Matures Investors Notice Reverse Mortgage Benefits By Joel Berg Laurie McCloskey 24 REVERSE MORTGAGE / JANUARY-FEBRUARY 2022