May marked a new, big month for HECM reverse mortgage securities, or HECM mortgage-backed securities (HMBS). According to the most recent reports, $857 million in new pools were created during May alone, says a New View Advisors report.
April capped off at $775 million respectively, but was unable to top its previous year mark of $874 million, according to data that was compiled by Ginnie Mae in addition to data pools that were provided by private sources, namely the largest lenders. As of last month, 95 pools were sold that included 43 original ones and 51 tails.
An HMBS pools is created when the FHA and the HECM is initially securitized. Tails are pools that are created from the uncertified parts of the HECMs but have original issuance from the HMBS.
Still, new pools are low, accounting for just $449 million for May. But $196 million of the pools were backed by LIBOR and CMT loans that were aged 7 and 8 years, helping improve the overall haul for May.
All told, tail issuances were the strongest performers for May, coming in at $211 million. New production is estimated to be between $400 and $500 million each month, with the tails accounting for an estimated $200 million per month.
HMBS currently total about $54.3 billion, a slight increase from the $54 billion they totaled at the conclusion of April.
Clearly, the reverse mortgage market is getting hotter, matching pace for the rising summer heat nationwide. As new pools continue to become healthier and larger in volume, it could spell the resurgence of an industry some experts claimed was dwindling.
For borrowers, a reverse mortgage can be a financial lifeline during retirement. They require that you are age 62 or older and are the primary occupant of your home. These unique home loans do not have to be repaid until after you die and are not based income or credit, but rather the equity of the home. What’s more, they can eliminate the current monthly payment, giving borrowers more financial freedom.
Like any large loan, a reverse mortgage is a big decision that should be fully discussed with your financial advisor before pursuing. Third-party credit counseling is mandated under new reverse mortgage laws, and borrowers must demonstrate the ability to pay for home upkeep, property taxes and insurance.