As interest rates continue to rise and the refinancing market continues to be weak, refinancing volume fell 3.4% from the previous month.Seven of the nine largest banks recorded earnings in April, including Plaza Home Mortgage, Liberty Reverse Mortgage/PHH and guild mortgage Its gains ranged from 36% to 48%.
Asked whether the gains would lead to overall optimism about the direction of the industry or whether caution should be exercised, RMI President John Lunde said he would give it a split.
“I call it cautious optimism,” he said. “We haven’t seen any signs of rapid growth recently, but if we can achieve steady growth, that would be a big step in the right direction.”
H4P gains are particularly encouraging, likely stemming from renewed industry attention likely to come from rule changes announced in 2023 and 2024. federal housing administration (Federal Housing Administration).
“I do think there’s been a lot more focus and focus on this this year with the changes at FHA, which gives sponsors a reason to take a new approach and energy in this niche,” he said.
Asked where refinancing business was still going on despite higher interest rates and a declining share of total transaction volume, Lund said it was down to rising house prices being concentrated in a particular part of the country.
“Refinances typically occur in places where home price appreciation has been strongest over the past few years, which may outweigh any reduction in principal constraints caused by rising interest rates,” he said. “However, I expect these recognitions to continue to decline as recent gains in 10-year CMT offset the benefits of the fourth-quarter decline.”
As for what industry professionals should keep in mind, Lund said purchasing may be a gaming theme in the near future.
“I still think it’s all about buying the business and getting in front of borrowers who are currently considering forward mortgages,” he said. “In many cases, borrowers who qualify for a reverse will find that they achieve significantly more financial goals from a reverse than from a new forward or HELOC.”
HMBS issuance
The largest HMBS issuers in April were American financial reverse (FAR), will soon be consolidated under the overall framework American Financial brand. It issued $155 million in new shares, $15 million higher than March’s figure. Longbridge Financial increased its own issuance volume to $107 million, while Liberty Reverse Mortgage/PHH and Omaha Mortgage Mutual That jumped to $95 million and $88 million respectively.
“Initial (first participation) production in April was $322 million, $54 million higher than March’s $268 million but lower than April 2023,” New View said in one of its two HMBS reports. Output, approximately $379 million of the original new HMBS pool was issued at that time.
Asked about HMBS’s results this month, New View partner Joe Kelly said that while results had improved, “the rebound was modest, but a period of relative stability and tighter spreads would help.”
He said a healthier first-time pool market (in this case 20 out of 89 pools this month) could be a good sign for the industry, but much of that “remains to be seen.” “So far, there is sufficient funding to maintain reasonable liquidity and pricing.”
Based on data shared in the second commentary, Kelly explained that the forced purchase of HMBS loans from the pool is generally stable, at least relatively speaking, when the loan reaches 98% of the maximum claim amount (MCA). April returns exceeded the 12-month average, and when asked how this affected the overall health of the HMBS market, Kelly explained the benefits.
“The payout rate for non-distributed compensation has stabilized at a lower level,” he said. “The reduction in refinancing risk has had a beneficial impact on overall pricing.”
In terms of the trends New View is currently observing, Kelly said advances and losses are at lower levels compared to historical averages, which is largely healthy for the market. He added that he “can’t recall ever having so many self-operated reverse mortgage issuers.”
