Reverse Mortgage Application Volume Yet to Recover says HUD Data

image Reverse mortgage applications have taken a dramatic turn for the worse since the Federal Housing Administration lowered principal limits for its reverse mortgage (HECM) program.

According to data from RM Insight, applications shot up in September 2009 and took a jump off a cliff in October (see chart below, click for larger version).

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“The most concerning thing about this is the underwhelming ‘recovery’ from the expected slump in October,” said RM Insight.  The four month period from Sep-Dec is 13.4% below the prior four months.

Based on recent trends, RM Insight estimates that possible application volumes for the year could end up as much as 20-30% lower than 2009 (avg 8,000-9,000 per month).

However, they do feel that factors like the HECM for purchase, new lenders as FHA removes correspondent approvals, could improve application volume.  They ask a very difficult question at the end which I’ll extend to RMD readers, see below.

December 2009 – App Trends Update

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  • It's hard to imagine that the extremely short final notice lenders got regarding the principal limit reduction on Oct 1st resulted in such a spike. Didn't that notice happen around Sept 23rd? (And, yes, I know there were comments earlier in the year that there might be a change, but the official notice was <10 days.)

  • Peter,

    Those who attended the NRMLA policy conference last year have stated that there was an open discussion of this issue back in June of last year. It is rumored that Bank of America was changing ReverseWare to account for the difference as early as July of last year.

    HUD did the right thing. It did not want to take the action so it wanted until the Senate made it clear that it would not fully fund the subsidy and made it clear that in reconciliation they would compromise and follow the House version.

    A number in this industry were working with their clients in the months before October to be sure that if the change was announced they were prepared for it. I know my clients were prepared.

    Some prepare when storm clouds come. Others wait for the rain and complain that the rain took them unaware. I'm from California and normally I do the latter; that time I didn't.

  • Picture this. An 80 year old senior, living on $750 a month Social Security income, investigating the prospects of a reverse mortgage to pay off the small balance of their current mortgage and put a few dollars in their pocket to fix the roof and other neessities,learns that before he or she can see if there is sufficent equity in their home, must spend $415 (in Florida) for an appraisal. This represents 55% of the monthly income. Even if the home was in foreclosure, as many are, the senior could not proceed unless he or she is willing to give up eating for the month or the lender is willing to advance the appraisal fee. Neither will happen inasmuch as the lender no longer has the ability of asking an appraiser for an opinion of value. Not asking any favors, just asking for an opinion of value. And everone is wondering why the program has lost volume. The government was way off base in their approach to appraising. Now we will be getting inferior appraisal as must quality appraisers will not work, or do a good job, for $200 an appraisal.

    • So well spoken!! We never have charged the client up front for appraisals because we work with fabulous appraisers who would take the time to look at a property to see if we were in the ballpark of value needed. If not, the client walks away with their $400 still in their pocket and the appraiser with a good feeling of knowing they were helping a senior. Now, we have no choice. $400 up front please. Sorry, no idea if we can help you or not. We'll have to see where the appraisal comes in. Oh sorry, your home didn't appraise for enough. Sorry you won't be able to pay your mortgage or eat this month. Wish I could have helped.

      • We must all put pressure on Washington to require the national companies to open an “opinion of value” desk where we can go for a preliminary value. Otherwise, those seniors most in need, will de denied the benefits of the program. Are you in Florida? kenneth

        R. Kenneth Bluh
        Vice President

        FHA Approved Mortgage Lenders

        300 Sevilla Avenue
        Suite 202
        Coral Gables, FL 33134
        (305)444-9730 Office
        (305)445-5232 Fax
        Kenneth@bwcmb.com

        Please visit my website http://www.rkbluh.com

        — THIS E-MAIL MESSAGE IS FOR THE SOLE USE OF THE INTENDED RECIPIENT(S) AND MAY CONTAIN CONFIDENTIAL AND PRIVILEGED INFORMATION. ANY UNAUTHORIZED REVIEW, USE, DISCLOSURE OR DISTRIBUTION IS PROHIBITED. IF YOU ARE NOT THE INTENDED RECIPIENT, PLEASE CONTACT THE SENDER BY REPLY E-MAIL AND DESTROY ALL COPIES OF THE ORIGINAL MESSAGE.

      • No I am in Washingto state and also licensed in ORegon. I agree. Nice
        to see someone else who is actually advocating for the seniors.
        Tracie

    • Ken,

      What does the new appraisal rules have to do with originations that occurred in October, November, December, or January? I'm lost in your little story. On an ongoing basis you have a great point.

  • rk:
    I understand the appraisal problems but I have never gotten an opinion of value. With a little research I know the ball park and whether 99% of my loans will work. If you are doing phone apps. and not looking at the condition of the house than you are taking a crap shoot with the seniors money.

    • In the area i am in, looking at comps, valuation websites, and tax value, we have still seen appraisers come in 20%+ off of our estimates since HVCC was enacted. Maybe I just seem to have bad luck, but it is hard to prepare for that. Most loans still went through, just with the borrower receiving less money back, but if any of those were borderline deals, they would be toast.

  • What did congress/HUD think would happend when they lowered the principle limit during a time when home values are down so sharply and hardly anyone has any equity anymore? Does not take a rocket scientist to understand that when the economy and values stink, it makes no sense to cut a large portion of the market out by lowering the limit. This is precisely the time seniors desparately need this loan and they cannot get it. If the intent is to eliminate the program, just do it and be done rather than piece mealing it away. Great job democrats screwing the seniors because congress refused to do its job in the first place by helping to cause the mortgage meltdown! Again — where is NRMLA during all this?

  • >>It's hard to imagine that the extremely short final notice lenders got regarding the principal limit reduction on Oct 1st resulted in such a spike.

    Not for me – I lived it, and so did most of my peers. Everybody I was working with had 9 days to get a case number, and I felt like a bait-and-switch Loan Officer when I told them “do it now or you'll lose 10% of your benefit”. Most consumers who were sitting on the fence jumped off and scheduled Counseling, but there was a bottleneck because tens of thousands of homeowners were trying to schedule Counseling at the same time. My pipeline went from 4 to 14 files, but hasn't been the same since. This is the slowest period I've experienced during the past 6 years.

    • rainmand,

      “…tens of thousands…”

      Where do you get your stats? I think you need to go back and read the comment of counselors. There was a pinch but nothing they could not handle.

      • I didn't say they couldn't handle it. In fact they did quite well. Do a little research Critic and you'll find some supporting stats too. It didn't take me long to find this:

        With the principal limit factor decreasing by 10% tomorrow, the number of reverse mortgage case numbers assigned has surged in the last few days. A letter from Peter Bell, President of NRMLA, announced that 60,784 case numbers had been requested in “the last few days.” That is more than half the number of HECMs endorsed in all of FY 2009.

        The good news is that, so far, the system seems to be working. Of the 60,784 case numbers, 58,631 were issued in less than two seconds, and an additional 1,800 were issued in less than 10 seconds. These turnaround times are a good omen for those concerned about the FHA Connection system’s ability to handle the increase in demand. However, with about 12 hours until the deadline, it’s too early to alleviate all concern.

      • rainmand,

        Research after the fact is OK but certainly leaves a lot to be desired.

        Most of us are more than aware of the remarks Peter Bell made. However, Peter was not commenting on the number of counseling sessions but rather the effectiveness of HUD in issuing case numbers.

        Where is the research that relates to the number of counseling sessions done or requests made between the HUD announcement and the October 1 deadline. Now that would be valuable information.

        It is interesting you rely on this statistical information. Peter also indicated this year that issuance of case numbers was substantially up in comparison to loans endorsed. We encouraged many seniors to sign apps and get counseling before 9/1/2009 who later fell out because of feeling too much pressure.

        To a small degree we experienced counseling being stretched to the limits in that short period but no one has come out to call it tens of thousands, like you. See if you can provide stats that are on point.

  • And now how about all the condos that are in-eligible? I cannot understand how the government can fund cash for clunkers, have a huge stimulus, and REFUSE to fund the relatively small deficit in the FHA insurance fund, which I remain positive will turn positive within the next several years as home prices rebound. It is shameful that the government has sold seniors down the drain with this reduce principal limit at this dire time in our economy.
    <Ahref=”http://www.fhareversemortgagesofsouthflorida.com>reversemortgagessouthfloridaFHAhud

  • I have to agree with Pass2You – where is NRMLA? The FHA Reverse program is getting whacked at the knees at a time when there is true need. Yes, our numbers have gone down dramatically thanks to a number of issues but it certainly feels like we are alone out here with FHA and/or NRMLA not speaking up. And if they are, not garnering much press to offset the negative articles. We need their help and their voice.

  • All so true. Just today I had to tell a customer that she was $25k short. She has her adult Down Syndorme son living with her and has refinanced so many times that her mortgage is quite large. Combined with the lower principal limit and declining property value, she will now have to either sell or rent the house and move in with her sister. Very Sad.

  • rainmand,rnrnResearch after the fact is OK but certainly leaves a lot to be desired. rnrnMost of us are more than aware of the remarks Peter Bell made. However, Peter was not commenting on the number of counseling sessions but rather the effectiveness of HUD in issuing case numbers.rnrnWhere is the research that relates to the number of counseling sessions done or requests made between the HUD announcement and the October 1 deadline. Now that would be valuable information.rnrnIt is interesting you rely on this statistical information. Peter also indicated this year that issuance of case numbers was substantially up in comparison to loans endorsed. We encouraged many seniors to sign apps and get counseling before 9/1/2009 who later fell out because of feeling too much pressure. rnrnTo a small degree we experienced counseling being stretched to the limits in that short period but no one has come out to call it tens of thousands, like you. See if you can provide stats that are on point.

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