In January, reverse mortgage lender Live Well Financial announced it had received approval to issue Ginnie Mae HECM Backed Mortgage Securities after a three-year-plus wait time. With the landscape for issuers having changed in recent months, is the timing of the approval a coincidence with two of the large HMBS issuers quitting the reverse mortgage business last year?
The top three issuers as of quarterly data reported in November 2011 measuring original principal balance were Urban Financial ($178 million), MetLife ($136 million) and Reverse Mortgage Solutions ($117 million). This compares with the top three issuers as of November 2010: Bank of America ($246 million), Wells Fargo ($229 million) and Reverse Mortgage Solutions ($135 million).
Ginnie Mae says that despite the changes, the outlook for HMBS issuance is bright, with several lenders stepping in to begin issuing in 2012 or already with issuance under way.
“When those issuers left, others stepped up to help volume,” says Ted Tozer, president of Ginnie Mae, noting the entries of Knight Capital Group and Quicken Loans into the issuer landscape. “People are getting out, people are getting in, but people perceive that seniors are going to need to tap into equity in their home to supplement retirement savings and social security,” he says. “The capacity is there.”
One such lender, Urban Financial Group, received its approval in the first quarter of 2011 and began issuing shortly thereafter. It has since risen through the ranks to the top-5 issuers and completing the greatest issuance of that group according to Ginnie Mae’s issuance tracking as of November 2011.
Urban has attributed much of its recent success to its HMBS pools, and reported in its fourth quarter and annual earnings conference call in January that it completed $450 million in HMBS during that quarter.
“We are very pleased that we were among the top issuers of HMBS and we fully expect to be a leading issuer in 2012,” Steve McClelland, Knight managing director and Urban Financial’s chief executive told RMD.
Another Top-10 lender received approval in 2011, but has yet to complete any issuance. One Reverse Mortgage, a division of Quicken Loans, has its approval and plans to begin issuing soon, but is mum on the details of when that will happen.
“We are following our plan and are looking at it closely this year,” Gregg Smith, One Reverse president. “It’s one of our initiatives. We’re growing.”
The newer Ginnie Mae issuers have been subject to increased capital requirements, which has ruled out some potential issuers.
The changes, along with a moratorium on new issuers, seem to have done what they set out to do, says Michael McCully, partner with New View Advisors.
“The whole point of capital requirements being revised was to level the playing field,” McCully says. “The folks coming in are relatively sophisticated. They’re all sensitive to it being a big deal and they understand the capital requirements.”
As for what Ginnie Mae is seeking, that capital is key.
“People need to be aware under Ginnie Mae rules, once the balance is 98% a loan must be re-bought,” Tozer says. “They must be prepared to show us how they’re planning to fund that buy. That’s the biggest challenge.”
Written by Elizabeth Ecker
