Reverse mortgage applications rose to the highest levels all year in September, up 39.1% from October according to a report from the Federal Housing Administration.

During September, FHA received 255,938 applications, with HECMs making up 13,478 and the rest being “forward” purchase and refis.  The sharp increase was likely driven in the amount of money borrowers receive from FHA’s reverse mortgage product being reduced starting Oct. 4th.

Even with the dramatic increase, reverse mortgage applications for fiscal year 2010 were down 40.4%.

In September, 5,966 HECM loans were insured, with 5,587 being traditional reverse mortgages and the remainder as refinance or purchase transactions.  For the year,79,106 HECM loans were endorsed with a max claim amount of $21.1 billion.

Of those loans, 72,855 were traditional reverse mortgages, 4,862 were refinanced HECM loans and 1,389 were HECM for purchase transactions.  The agency said 31% of the HECM loans endorsed were adjustable rate, down 66% from the prior year.