Plummeting mortgage rates drive Ginnie Mae issuance to a record high

In July, government bond insurer Ginnie Mae helped fund more than $70 billion in loans aimed at helping low- and moderate-income borrowers. The record-high total is likely the result of the record lows in interest rates.

Issuance was up more than 14% during the month, compared to nearly $61.3 billion in June and over 48% from $47.2 billion in July of last year.

New securitized Home Equity Conversion Mortgages, which only borrowers age 62 and up are eligible for, totaled more than $1.4 billion in July. That marked an 85% increase from $766 million the previous month and more than 30% from nearly $1.1 billion a year ago.

Ginnie’s HMBS issuance numbers only partly reflect new loans, but it’s fair to say reverse-mortgage market volumes are running at a good clip in the primary and secondary markets, said Michael McCully, partner at capital markets consultancy New View Advisors.

“Unless there’s some event risk we’re not anticipating, I think we’re going to continue to see high volumes,” he said.

The seasoned component of the HMBS numbers in July was roughly $550 million both years, said McCully.

HECMs have been constrained since last October when the FHA tightened criteria for them and many lenders may be prioritizing the origination of more traditional FHA loans. But low rates and other developments have added to HECMs’ attractions recently, said Mark Reeve, a vice president at Plaza Home Mortgage.

Among these are record-high levels of senior home equity and the fact that alternative sources of retirement income such as investments in securities have become more volatile amid the pandemic, he added.

“It’s a phenomenal time to look at home equity for a source of income in this uncertain environment,” Reeve said.

Collectively, the government loans Ginnie Mae securitizes represented more than 21% of new mortgage applications tracked by the Mortgage Bankers Association in its most recent survey. These include Federal Housing Administration-insured loans at 19.4%, loans guaranteed by the Department of Veterans Affairs at 11.2% and U.S. Department of Agriculture-guaranteed products at 0.6%.