With reverse mortgage lenders preparing for the April 1 suspension of the most popular reverse mortgage loan offered under the Federal Housing Administration’s Home Equity Conversion Mortgage program, many are reporting a spike in business as the cutoff approaches.
Those in the business liken the influx to past FHA program changes which have changed the product availability for potential borrowers one way or another—historically through changes in mortgage insurance premiums or principal limit factors.
Lenders as well as others involved in the reverse mortgage process report they have been “swamped” with interest leading up to April 1, from counseling agencies to appraisal management companies. One appraisal management company told RMD that reverse mortgage appraisal volumes have nearly doubled this week.
Lenders, too, are counting best-ever months for volume as the most popular product goes away—at least for the time being as the changes are effective for all fixed interest rate case numbers assigned on or after April 1 for loans that must close by July 1, 2013.
“We have had a recording breaking two months of applications,” says Dave Bancroft, reverse division manager for Irvine, Calif.-based Greenlight Financial. “Now we just have to bring it home.”
The pressure on lenders has been building especially in light of more requests for counseling as the deadline approaches.
“It has been extremely busy this month and borrowers are very informed with regards to the change,” says Josh Shein VP for Maverick Funding. “In addition, as we are approaching the end of the month, borrowers are calling to inform us that no counseling is available at all until next month so clearly this is having a major impact.”
One top-10 lender reported that while it is too soon to tell how things will rebalance long-term, new reverse mortgage applications in the week leading up to April 1 are shifting to a 50%-50% split between the HECM Saver and the remaining adjustable rate HECM standard product.
HUD data is not yet available for the months preceding April 1, but many are anticipating the rush could subside with a rebalancing of new applications as the market adjusts in response to the changes, the depth of which remains to be seen.
“My expectation would be that applications don’t fall from their trend from the past six months, but if we’ve pulled some demand forward with marketing then that will make for a decline all by itself,” says John Lunde, Reverse Market Insight president.
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