December 2021 HECM approvals rose 5.4% to 5,218 loans, a final batch that made December the highest-volume month of the year after it experienced a very slight decline the previous month. This is according to data compiled by Reverse Market Insight (RMI).
In July, the streak of monthly volume above the threshold of at least 4,000 units the industry had seen since late 2020 appeared to be coming to an end. However, the surge in volume in September completely overcame this shortfall, and successive volume levels for the month of October put the industry back in a strong position. The slight dip seen in November did not dampen the support momentum observed since the beginning of the fall, culminating in the best month of the year in December in terms of raw volume.
Again, production of new home equity transfer mortgage-backed securities (HECM) hit a record high, in December reaching $1.5 billion in HMBS issuance in the 10th month of the period after the London Interbank Offered Rate (LIBOR) “era.” The total of $13.2 billion in HMBS issued in 2021 easily surpassed the previous industry record of $10.8 billion set in 2010, according to publicly available Ginnie Mae data and private sources compiled by New View Advisors.
Finally, 2020 saw total issuance of HMBS total $10.6 billion, surpassing the previous industry high of $10.5 billion in 2017.
HECM volume for December: High of the year
Now that 2021 is fully visible in the rearview mirror, the industry’s overall performance for the year helps confirm that business aims to take more advantage of stronger mortgage fundamentals — including rising home prices and lower interest rates — despite the difficulties. a period. That’s according to John Lund, president of RMI.
“It really brought out the silver lining of the pandemic cloud,” Lund told RMD. “2020 was about transitioning to remote work and keeping customer transactions safely away through swift actions by the government and everyone in business, while 2021 demonstrated the benefits of skyrocketing home prices and lower interest rates on one product as consumers benefit from both.”
Of course one of the headlines this year revolves around the share of HECM-to-HECM refinances making up the overall share of the industry size – at or more than 50% – but the dynamics of refinancing as a whole aligns at least reasonably well with similar dynamics on the mortgage side forward, he said.
“[These dynamics] It means refinancing that is comparable to future industry dynamics, but it also underscores the place of home ownership in financial planning talks going forward.”
Now that the cap on reverse mortgage lending of $970,800 is in place as of January 1, it can be easy to assume that loan volumes could see a decline before returning stronger in the new year to take advantage of higher levels of loan returns for borrowers. However, December may have been too early to see this trend, according to Lunde.
“The imminent increase in the lending limit was a big reason that we could see the turnover at the end of the year decrease somewhat, although the endorsement may appear to be more in January than in December given it was announced on November 30,” he said. “So while there may be more to this story, the strong backing for December only confirms the industry’s performance in 2021 and especially the fourth quarter.”
Another trend in the December data is that while the overall volume of the reverse mortgage industry was higher, only four of the country’s 10 largest lenders were able to post gains in volume compared to November’s performance. In fact, six of the top 10 lenders saw a slight decline in loan production.
“We welcome the broader industry distribution signs, and that might be a small sign,” says Lundy of the inconsistency. “If we continue to see the industry grow faster than the top 10 lenders, that will be a healthy effect for a growing market.”
HMBS version, order upside down by last sale
The long-anticipated decline of the HMBS release record from 2010 occurred in November, but there is a chance that the industry is ready to break the record again in 2022 if some of the current industry dynamics continues. That’s according to Michael McCauley, partner at New View Advisors.
Overall, the case for the reverse mortgage industry appears to be solid and leads to an optimistic New View perspective, but there is still an early warning of that optimism in the form of HECM refinancing into HECM, McCauley said.
“We are pleased to see record volume; but we remain concerned about the fact that refinancing has remained as strong as it was,” McCauley told RMD.
He said that when it comes to 2021 performance and its role in shaping short-to-medium-term views of 2022, current trends and fundamentals give reason for HMBS’ strong performance perspective at the start of the year. When asked if 2022 could also be another record-breaking year despite the previous gap between HMBS release records between 2010 and 2021, McCauley noted that the possibility exists.
“With the new maximum amount for higher claims in effect on January 1, home values stable or rising, and prices relatively low, we expect strong HMBS issuance to continue to start 2022,” McCauley said. “If prices remain low and home prices stabilize, expect another strong year for HMBS.”
New View also released revised HMBS issued tables, which saw Reverse Mortgage Finance (RMF) become the top HMBS issuer in 2021 with a $4.09 billion share and nearly 31% of the total market share. Its rise to number one position is due in large part to its recent acquisition of Mortgage Service Rights (MSRs) from American Advisors Group (AAG), a deal comprising of more than 75,000 loans and $12.1 billion in unpaid principal balances (UPB). This single transaction makes up approximately 10% of the total UPB industrywide.
“Ginnie Mae gives full release credit to the remaining/purchased HMBS issuer,” New View noted in its comment accompanying the statements.
Read RMI’s Lenders HECM Report, HMBS Issuissement and HMBS Issuer Tables on New View Advisors.