The refi market continues to be anemic as higher rates are persisting, with refi volume dropping 3.4% compared to the prior month. Seven of the top nine lenders recorded gains in April, with Plaza Home Mortgage, Liberty Reverse Mortgage/PHH and Guild Mortgage standing out for their gains between 36% and 48%.
When asked about whether or not these gains lead to overarching optimism for the direction of the industry or if caution should remain, RMI President John Lunde said he’d split the difference.
“I’ll call it cautious optimism,” he said. “Nothing we’ve seen recently suggests rampant growth, but if we can manage steady gains that would be a big step in the right direction.”
H4P gains are particularly encouraging, which likely stems from renewed industry attention likely brought about by rule changes announced in 2023 and 2024 by the Federal Housing Administration (FHA).
“I do think there’s more focus and attention on it this year with the changes by FHA, which gives originators a reason to take a fresh approach and energy into that niche,” he said.
When asked about where refi business is still taking place despite high rates and falling share of total volume, Lunde said it comes down to the concentration of home price appreciation in a given area of the country.
“Refi is generally going to happen where home price appreciation has been the strongest for the past several years, which can outpace the decline in principal limit factors from higher interest rates,” he said. “I’d expect to see these endorsements continue to whither though, as the recent increase in the 10-year CMT took away the benefit of the declines in the fourth quarter.”
As for what industry professionals should be keeping in mind, purchase may be the name of the game in the near future, Lunde said.
“I continue to think it’s all about purchase business, and getting in front of borrowers that are looking at a forward mortgage right now,” he said. “In many cases, reverse-eligible borrowers will see a lot more benefit for their financial goals from a reverse than a new forward or HELOC.”
HMBS issuance
The top HMBS issuer for April was Finance of America Reverse (FAR), which will soon consolidate under the overarching Finance of America brand. It created $155 million in new issuance, outdoing its March figure by $15 million. Longbridge Financial increased its own issuance to $107 million, while Liberty Reverse Mortgage/PHH and Mutual of Omaha Mortgage jumped to $95 million and $88 million, respectively.
“April’s original (first participation) production of $322 million was $54 million higher than March’s $268 million, though lower than that of April 2023, when approximately $379 million in original new HMBS pools were issued,” New View said in one of its two HMBS commentaries.
When asked about HMBS performance for the month, New View Partner Joe Kelly said that while performance is improved, “it’s not much of a bounce back but a period of relative stability and tightening spreads helps.”
A healthier first-participation pool market — in this case 20 of the month’s 89 pools — could be a good sign for the industry, but it largely “remains to be seen,” he said. “There is enough so far to keep reasonable liquidity and pricing.”
Mandatory purchase of HMBS loans out of pools — required when a loan reaches 98% of its maximum claim amount (MCA) — is generally stable, at least relatively speaking, Kelly explained, according to data shared in a second commentary. The payoff rate for April beat the 12-month average, and when asked how that factors into overall HMBS market health, Kelly explained the benefits.
“Payoff rates have stabilized at a lower rate for non-assignment payoffs,” he said. “The reduction in refinancing risk has had a beneficial effect on overall pricing.”
In terms of trends that New View is observing now, Kelly said that prepayments and losses are tracking low versus historical averages, which is largely healthy for the market. He added that he cannot “recall a time when there were so many proprietary reverse mortgage issuers.”