According to HousingWire, the reverse mortgage market is facing some real headwinds right now. Reverse Mortgage Insight reported that federally insured reverse mortgage endorsements dropped 6.7% in September, landing at 1,790 loans. That's the lowest monthly total we've seen since April 2020, which tells you something about the momentum we're losing in this space.
What's particularly interesting is what happened in the pipeline leading up to this. Case numbers, which represent new applications coming in, were running pretty steady at around 3,000 per month back in May through July. But here's the thing: a lot of those applicants dropped out along the way before their loans actually closed and got endorsed. So you had promising activity upfront that didn't translate into finished business. Finance of America continues to dominate with the most endorsements in September, followed by Mutual of Omaha and Longbridge Financial.
The HECM mortgage-backed securities market has also softened considerably. New View Advisors found that HMBS issuance fell 17% in September, bringing volume down to $446 million. First-participation pool production, which represents new lending, dropped significantly from the prior month and year-over-year as well. New View's analysis suggests that issuers are going to struggle maintaining current production levels given where we are with the 10-year Treasury yield.
Looking at the bigger picture through the first three quarters of the year, the top three lenders have actually consolidated their market share, growing from roughly 56% to 59%. However, most of these major players are posting year-over-year declines in production, with only smaller players like Longbridge and South River showing modest growth in endorsements.
Industry observers point to several factors at play. Dan Ribler from Longbridge noted that inflation and mortgage rates continue to be headwinds across the entire mortgage business. Meanwhile, Michael McCully from New View made an interesting observation: the reverse mortgage product has become so safe and well-protected that it may actually be creating some barriers to originations. It's a counterintuitive problem to have in the lending world.
What I am seeing locally in the Bay Area is that reverse mortgages remain an important tool for our mature homeowners, particularly given our higher home values, but the overall slowdown in the category is real. Fremont and the East Bay generally have aging populations with substantial home equity, so this segment matters for our local market. The challenge right now seems to be getting qualified borrowers through the full application process rather than having a shortage of potential candidates who could benefit from this product.
