Reverse Mortgage Industry Reaches 2% Market Penetration

RMI Logo1 The reverse mortgage industry has crossed the 2% overall penetration level according to Reverse Market Insight

The penetration level is the total active reverse mortgages in servicing today as a percentage of all senior homeowner households.

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Through November, states with the highest level of penetration are DC with 7.3% followed by NV and CA at 3.9% and 3.8% respectively.

RM Insight’s November Industry Trends report also shows that since the lending limits were raised to $625,500, the areas of strength have mostly been concentrated in high value neighborhoods such as Brooklyn, NY, San Francisco and San Jose and Orange County, CA.

Despite the sharp drop in home values in California, overall volume in the state is up 8% compared to 2008. 

November 2009 – Industry Trends

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  • Thanks for your response. What I was trying to get at is that I believe we are at or near the bottom of the R.E. market, which would indicate that FHA insurance losses should subside when value increase in two to three years.nreversemortgagessouthfloridaFHAhudn

  • tishman,rnrnI clearly disagree with your analysis. FHA is not making up for losses from other years per some prominent independent analysts. While I am not as pessimistic about the situation as they claim to be, the amount of surplus the HECMs endorsed during this fiscal year should not be excessive. Based on the logic of the HECM model assuming no reductions to PLFs, this should be a year of endorsements that would be expected to result in an overall loss. The reduction to principal limit factors (u201cPLFu201d) was a way of avoiding that loss which it just might do.rnrnWhile negative press never helps a situation, it is my opinion that the biggest contributor to lower volume is the combination of lower (and falling) home values with lower PLFs. It is this awful combination that is producing lower qualified demand throughout most of the country. I cannot ignore or discount negative press but we have always overcome it quite successfully in the past; I expect we will see the same in the near future. But when we cannot provide sufficient PLs to consumers, how can any lender overcome that situation? rn

  • I really don’t think FHA is going to take huge losses over the long-term because they are going to make it up on anyone taking out an RM today.nMy problem is that FHA is making today’s seniors pay for the potential losses from loans made 2 yrs ago. nWhy is business off so much in FL? Is it the low home values, or the negative press? This is a serious question. Please respond.nreversemortgagessouthfloridaFHAhud

  • At a 2 percent market share, reverse mortgages remain a niche product, despite efforts from the industry to portray it as a mainstream solution. nnIn my 19 years of experience originating reverse mortgages, very few customers used theirs for discretionary spending or as a financial planning tool, save for that anecdotal childless homeowner who didn’t want to leave it to the state.nnHonestly, most of us hope we’ll never “need” a revere mortgage. To some, it’s a stigma of admitting to having failed to plan adequately for their later years. But it’s nice to know the safety net is there should circumstances arise that make such a loan indispensable.

  • While 2% is better than 1%, it is no major achievement. rnrnThe regional information that Admin emphasized is critical in analyzing the HECM program. Right now too much analysis is being placed on a national analysis approach. Since the amount of loss can far exceed the amount of limited gain FHA can earn, an analysis by local market concentration seems very appropriate. rnrnPutting it clearly there is far more risk for the HECM program in California and Florida than even DC. How home appreciation is doing in Texas, despite its high population base, has little to do with the loss issues the HECM program faces in California or Florida. Even then, there are places of high concentration within those states where both the risk of loss and its size varies substantially.rnrnIf one wants to value the portfolio of HECM loans in the hands of FHA on a national basis in a somewhat reliable manner (and though it is difficult), it should be done as an aggregation of a local market by local market analysis.rn

  • While 2% is better than 1%, it is no major achievement.

    The regional information that Admin emphasized is critical in analyzing the HECM program. Right now too much analysis is being placed on a national analysis approach. Since the amount of loss can far exceed the amount of limited gain FHA can earn, an analysis by local market concentration seems very appropriate.

    Putting it clearly there is far more risk for the HECM program in California and Florida than even DC. How home appreciation is doing in Texas, despite its high population base, has little to do with the loss issues the HECM program faces in California or Florida. Even then, there are places of high concentration within those states where both the risk of loss and its size varies substantially.

    If one wants to value the portfolio of HECM loans in the hands of FHA on a national basis in a somewhat reliable manner (and though it is difficult), it should be done as an aggregation of a local market by local market analysis.

    • I really don't think FHA is going to take huge losses over the long-term because they are going to make it up on anyone taking out an RM today.
      My problem is that FHA is making today's seniors pay for the potential losses from loans made 2 yrs ago.
      Why is business off so much in FL? Is it the low home values, or the negative press? This is a serious question. Please respond.
      <Ahref=”http://www.fhareversemortgagesofsouthflorida.com>reversemortgagessouthfloridaFHAhud

      • tishman,

        I clearly disagree with your analysis. FHA is not making up for losses from other years per some prominent independent analysts. While I am not as pessimistic about the situation as they claim to be, the amount of surplus the HECMs endorsed during this fiscal year should not be excessive. Based on the logic of the HECM model assuming no reductions to PLFs, this should be a year of endorsements that would be expected to result in an overall loss. The reduction to principal limit factors (“PLF”) was a way of avoiding that loss which it just might do.

        While negative press never helps a situation, it is my opinion that the biggest contributor to lower volume is the combination of lower (and falling) home values with lower PLFs. It is this awful combination that is producing lower qualified demand throughout most of the country. I cannot ignore or discount negative press but we have always overcome it quite successfully in the past; I expect we will see the same in the near future. But when we cannot provide sufficient PLs to consumers, how can any lender overcome that situation?

      • Thanks for your response. What I was trying to get at is that I believe we are at or near the bottom of the R.E. market, which would indicate that FHA insurance losses should subside when value increase in two to three years.
        <Ahref=”http://www.fhareversemortgagesofsouthflorida.com>reversemortgagessouthfloridaFHAhud

  • At a 2 percent market share, reverse mortgages remain a niche product, despite efforts from the industry to portray it as a mainstream solution.

    In my 19 years of experience originating reverse mortgages, very few customers used theirs for discretionary spending or as a financial planning tool, save for that anecdotal childless homeowner who didn't want to leave it to the state.

    Honestly, most of us hope we'll never “need” a revere mortgage. To some, it's a stigma of admitting to having failed to plan adequately for their later years. But it's nice to know the safety net is there should circumstances arise that make such a loan indispensable.

  • Thanks for your response. What I was trying to get at is that I believe we are at or near the bottom of the R.E. market, which would indicate that FHA insurance losses should subside when value increase in two to three years.nreversemortgagessouthfloridaFHAhudn

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