Reverse Mortgage Application Volume Continues to Slide Says FHA

201002241030.jpgThe Federal Housing Administration’s latest Outlook Report shows that reverse mortgage applications continue to slide. In January, the agency reported it received 5,805 applications for reverse mortgages (HECM), down 16.2% from the prior month and 54.2% lower than the same period in 2009.

Reverse mortgage applications weren’t the only product showing a decrease in volume. According to FHA, it received 126,043 total applications in January, a sharp decrease from the 243,511 it received during January 2009. FHA says the drop in volume may be in part because of its tightened underwriting standards from streamline refinancing and the severe weather conditions the country experienced during December and January.

In January the industry endorsed 7,628 HECMs, consisting of 6,911 traditional HECMs, 113 HECM for purchase loans, and 605 HECM refis. Total maximum claim amounts came in at $2.1 billion in January, down from $2.3 billion in December.

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  • Tim,rnrnYou have it wrong. Its greatest impact will not be on applications but rather closed loans. While applications may go down some, closed loans will be decimated (used in its true Latin classical meaning) or worse. This change will no doubt result in lower principal limits for most borrowers.rnrnI do not mean to imply that the industry will be devasted but this change will result in more seniors being disqualified and less seniors completing HECMs because of lower principal limits. I do not believe that even Pollyanna can find a positive spin on this one, other than a very minute portion may receive higher appraisals (doubtful). rnrnThere are rumors that HUD may be rethinking this change. Let’s hope they abandon it.

  • Bill,rnrnIt is easy to speak in extremes. There is a very old story that explains the difference between a recession and depression like this: A depression is when my neighbor losses his job but a depression is when I lose mine.rnrnFor some the market is bleak; for others, there is an immediate bright and shining future. I talked with some reverse mortgage loan officers who have talked about how 2009 was their highest production year ever. At our branch total production for 2009 was down when compared to 2008 even though my personal production was up. One loan officer I know has a very full part-time job and saw her production go from just under 60 for 2008 (her best year in 7 years) and for 2009 she exceeded 70 in an area of the country where total production dropped.rnrnThe sky is dark and foreboding but it is not falling in — at least not for now. Over the years I have worked at firms that did relatively better in bad times than good. Hopefully this downturn will cause us to readdress our relatively ineffectual marketing methods and find new sources for HECMs. Some of that is happening now. rnrnStay flexible. Some need to quit. Most will find ways to survive and a few will thrive and see their best year in 2010. But there is absolutely no question, overall national 2010 production will be down in comparison to the totals (including proprietary) funded in 2007, 2008, and 2009.

  • Lance,rnrnPlease reread the report. What would weather conditions in December have to do with Case Numbers? On the forward side which is the vast majority of case numbers issued, case numbers are issued when applications are taken. I really believe these are the funded loans that are applying for endorsement.rnrnMaybe they are talking about applications as we think of them but I believe this is FHA speak. Their language differs from ours. Usually they do not refer to applications taken by loan officers; they refer to case numbers issued, etc.rnrnIt would be good if HUD had some definitions with these reports.

  • Treverse,rnYou are right on target with interest rates…Most forget about it because we have been at low rates since this program really took off. It makes a tremendous difference between 5% and 7%. Seniors soon will have very little $$ available and the cost is going to become even more expensive than what it already it! Not good!

  • Yes, sounds like the numbers relate to case numbers. Might sound hard to believe, but the coming changes in Oct 2010 will likey decrease volumes more than what we are now experiencing from the Oct 2009 change, as we cut even further into the pool of eligible customers. You make a good point about increasing interest rates too.

  • treverse,rnrnI do not believe there will be “another 5% haircut.” It is my understanding that the reduction would be around 5% rather than 10%. Two questions remain. The first is if the 1.25% ongoing MIP proposal is needed even if Congress gives the program a $250 million subsidy or if this is needed despite what Congress does. Second, is the 5% due to the increase of the MIP rate to 1.25% or is that a separate calculation reduction.rnrnAs I understand it the 5% reduction would replace the 10% reduction as of 10/1/2010 depending on the actions of Congress. The same is true of 1.25% MIP rate.

  • Patty:rnrnYou are right on target! What happens if we get another 5% haircut and the monthly MIP is increased 150% in October?rnrnAnother BIG factor that no one seems to be mentioning is the expected increase in interest rates. If the 10 year libor swap rate starts to move upwards over the next year as expected the principal limits will be reduced even further!

  • As I understand it, the applications are actual applications, case number assignments, not funded HECMs. January may be down more than it would have been otherwise because of bad weather and the beginning of the new GFE which sidetracked some originators. But overall, potential borrowers simply cannot get enough money with the new HECM factors and the low home values. And this is before we begin to feel the effects of the national appraisal companies. Their only motivation is to show a low value to reduce their risk. rnWe could help a lot more people if the lenders and investors currently holding mortgages were more willing to work with the borrowers and HUD changed their interpretation of the subordination policy so that we could help seniors work our their current mortgages. A mortgage modification along with a reverse mortgage could save many homes. Seems like a win win.rnrn

  • TBWS reported yesterday from the Mortgage Brokers meeting in Wash. D.C. that the new head of the FHA is concerned about appraisals. Hopefully he will do something to correct the current situation. There should be some adjustment made for the use of short sales and foreclosures. I am just closing the sale of my mother’s house. We are selling for $175K cash. We are so lucky, as I got an estimate of value from an appraiser I know for $140-$145. We are fortunate as this is a cash deal, so there is no appraisal.nThe Realtor thought we should get $230K in September ’09. However there have been sales as low as $100K to $130K, and as high as $200K in the same development for the same size home. I feel that a factor should be used by FHA to increase the value for appraisals, Perhaps short sales, and foreclosures + 40-50% to equal arms length transactions. Why did the house sell for $200K? Probably a cash deal, and the seller was not willing to “give it away” ie. no pressing need to sell. The way the market and appraisals are set up there is only one way for prices to go, and that is down. How many homeowners are willing to put there foot down, and not accept these lower prices, or just stay where they are?nPretty soon cars will cost more than houses!nThis is why Reverse Mortgage apps are down. We’ll see in the next several months if the Critic is right about app levels, or if they continue their slide due to lower “unacceptable (to the borrower) values.nreversemortgagessouthfloridaFHAhudn

  • Critic,rnYour comments are true. You mention “it will be some time before volume reaches pre 10/1/2009 rates.” I agree and when you say some time I believe you are saying many many years.rnCompanies that keep hiring new hires are wasting $$ and giving a false since of hope…its sad really. To expect a new hire to go out and get consistant business in this environment is crazy. Instead of hiring more they need to take care of those who have been in the business for awhile. For some strange reason several of the big companies believe things are going to continue to grow and grow and grow. Wake up!

  • The applications recieved in January no doubt are funded HECMs from applications signed at least 60-120 days before being received. While low, it is not surprising. Many of us think applications for the next three months should show improvement but it will be some time before volume reaches pre 10/1/2009 rates.

  • Tim,rnrnYou have it wrong. Its greatest impact will not be on applications but rather closed loans. While applications may go down some, closed loans will be decimated (used in its true Latin classical meaning) or worse. This change will no doubt result in lower principal limits for most borrowers.rnrnI do not mean to imply that the industry will be devasted but this change will result in more seniors being disqualified and less seniors completing HECMs because of lower principal limits. I do not believe that even Pollyanna can find a positive spin on this one, other than a very minute portion may receive higher appraisals (doubtful). rnrnThere are rumors that HUD may be rethinking this change. Let’s hope they abandon it.

  • Bill,rnrnIt is easy to speak in extremes. There is a very old story that explains the difference between a recession and depression like this: A depression is when my neighbor losses his job but a depression is when I lose mine.rnrnFor some the market is bleak; for others, there is an immediate bright and shining future. I talked with some reverse mortgage loan officers who have talked about how 2009 was their highest production year ever. At our branch total production for 2009 was down when compared to 2008 even though my personal production was up. One loan officer I know has a very full part-time job and saw her production go from just under 60 for 2008 (her best year in 7 years) and for 2009 she exceeded 70 in an area of the country where total production dropped.rnrnThe sky is dark and foreboding but it is not falling in — at least not for now. Over the years I have worked at firms that did relatively better in bad times than good. Hopefully this downturn will cause us to readdress our relatively ineffectual marketing methods and find new sources for HECMs. Some of that is happening now. rnrnStay flexible. Some need to quit. Most will find ways to survive and a few will thrive and see their best year in 2010. But there is absolutely no question, overall national 2010 production will be down in comparison to the totals (including proprietary) funded in 2007, 2008, and 2009.

  • Lance,rnrnPlease reread the report. What would weather conditions in December have to do with Case Numbers? On the forward side which is the vast majority of case numbers issued, case numbers are issued when applications are taken. I really believe these are the funded loans that are applying for endorsement.rnrnMaybe they are talking about applications as we think of them but I believe this is FHA speak. Their language differs from ours. Usually they do not refer to applications taken by loan officers; they refer to case numbers issued, etc.rnrnIt would be good if HUD had some definitions with these reports.

  • Treverse,rnYou are right on target with interest rates…Most forget about it because we have been at low rates since this program really took off. It makes a tremendous difference between 5% and 7%. Seniors soon will have very little $$ available and the cost is going to become even more expensive than what it already it! Not good!

  • Yes, sounds like the numbers relate to case numbers. Might sound hard to believe, but the coming changes in Oct 2010 will likey decrease volumes more than what we are now experiencing from the Oct 2009 change, as we cut even further into the pool of eligible customers. You make a good point about increasing interest rates too.

  • treverse,rnrnI do not believe there will be “another 5% haircut.” It is my understanding that the reduction would be around 5% rather than 10%. Two questions remain. The first is if the 1.25% ongoing MIP proposal is needed even if Congress gives the program a $250 million subsidy or if this is needed despite what Congress does. Second, is the 5% due to the increase of the MIP rate to 1.25% or is that a separate calculation reduction.rnrnAs I understand it the 5% reduction would replace the 10% reduction as of 10/1/2010 depending on the actions of Congress. The same is true of 1.25% MIP rate.

  • Patty:rnrnYou are right on target! What happens if we get another 5% haircut and the monthly MIP is increased 150% in October?rnrnAnother BIG factor that no one seems to be mentioning is the expected increase in interest rates. If the 10 year libor swap rate starts to move upwards over the next year as expected the principal limits will be reduced even further!

  • As I understand it, the applications are actual applications, case number assignments, not funded HECMs. January may be down more than it would have been otherwise because of bad weather and the beginning of the new GFE which sidetracked some originators. But overall, potential borrowers simply cannot get enough money with the new HECM factors and the low home values. And this is before we begin to feel the effects of the national appraisal companies. Their only motivation is to show a low value to reduce their risk. rnWe could help a lot more people if the lenders and investors currently holding mortgages were more willing to work with the borrowers and HUD changed their interpretation of the subordination policy so that we could help seniors work our their current mortgages. A mortgage modification along with a reverse mortgage could save many homes. Seems like a win win.rnrn

  • TBWS reported yesterday from the Mortgage Brokers meeting in Wash. D.C. that the new head of the FHA is concerned about appraisals. Hopefully he will do something to correct the current situation. There should be some adjustment made for the use of short sales and foreclosures. I am just closing the sale of my mother’s house. We are selling for $175K cash. We are so lucky, as I got an estimate of value from an appraiser I know for $140-$145. We are fortunate as this is a cash deal, so there is no appraisal.nThe Realtor thought we should get $230K in September ’09. However there have been sales as low as $100K to $130K, and as high as $200K in the same development for the same size home. I feel that a factor should be used by FHA to increase the value for appraisals, Perhaps short sales, and foreclosures + 40-50% to equal arms length transactions. Why did the house sell for $200K? Probably a cash deal, and the seller was not willing to “give it away” ie. no pressing need to sell. The way the market and appraisals are set up there is only one way for prices to go, and that is down. How many homeowners are willing to put there foot down, and not accept these lower prices, or just stay where they are?nPretty soon cars will cost more than houses!nThis is why Reverse Mortgage apps are down. We’ll see in the next several months if the Critic is right about app levels, or if they continue their slide due to lower “unacceptable (to the borrower) values.nreversemortgagessouthfloridaFHAhudn

  • Critic,rnYour comments are true. You mention “it will be some time before volume reaches pre 10/1/2009 rates.” I agree and when you say some time I believe you are saying many many years.rnCompanies that keep hiring new hires are wasting $$ and giving a false since of hope…its sad really. To expect a new hire to go out and get consistant business in this environment is crazy. Instead of hiring more they need to take care of those who have been in the business for awhile. For some strange reason several of the big companies believe things are going to continue to grow and grow and grow. Wake up!

  • The applications recieved in January no doubt are funded HECMs from applications signed at least 60-120 days before being received. While low, it is not surprising. Many of us think applications for the next three months should show improvement but it will be some time before volume reaches pre 10/1/2009 rates.

  • The applications recieved in January no doubt are funded HECMs from applications signed at least 60-120 days before being received. While low, it is not surprising. Many of us think applications for the next three months should show improvement but it will be some time before volume reaches pre 10/1/2009 rates.

    • Critic,
      Your comments are true. You mention “it will be some time before volume reaches pre 10/1/2009 rates.” I agree and when you say some time I believe you are saying many many years.
      Companies that keep hiring new hires are wasting $$ and giving a false since of hope…its sad really. To expect a new hire to go out and get consistant business in this environment is crazy. Instead of hiring more they need to take care of those who have been in the business for awhile. For some strange reason several of the big companies believe things are going to continue to grow and grow and grow. Wake up!

  • TBWS reported yesterday from the Mortgage Brokers meeting in Wash. D.C. that the new head of the FHA is concerned about appraisals. Hopefully he will do something to correct the current situation. There should be some adjustment made for the use of short sales and foreclosures. I am just closing the sale of my mother's house. We are selling for $175K cash. We are so lucky, as I got an estimate of value from an appraiser I know for $140-$145. We are fortunate as this is a cash deal, so there is no appraisal.
    The Realtor thought we should get $230K in September '09. However there have been sales as low as $100K to $130K, and as high as $200K in the same development for the same size home. I feel that a factor should be used by FHA to increase the value for appraisals, Perhaps short sales, and foreclosures + 40-50% to equal arms length transactions. Why did the house sell for $200K? Probably a cash deal, and the seller was not willing to “give it away” ie. no pressing need to sell. The way the market and appraisals are set up there is only one way for prices to go, and that is down. How many homeowners are willing to put there foot down, and not accept these lower prices, or just stay where they are?
    Pretty soon cars will cost more than houses!
    This is why Reverse Mortgage apps are down. We'll see in the next several months if the Critic is right about app levels, or if they continue their slide due to lower “unacceptable (to the borrower) values.
    <Ahref=”http://www.fhareversemortgagesofsouthflorida.com>reversemortgagessouthfloridaFHAhud

  • As I understand it, the applications are actual applications, case number assignments, not funded HECMs. January may be down more than it would have been otherwise because of bad weather and the beginning of the new GFE which sidetracked some originators. But overall, potential borrowers simply cannot get enough money with the new HECM factors and the low home values. And this is before we begin to feel the effects of the national appraisal companies. Their only motivation is to show a low value to reduce their risk.
    We could help a lot more people if the lenders and investors currently holding mortgages were more willing to work with the borrowers and HUD changed their interpretation of the subordination policy so that we could help seniors work our their current mortgages. A mortgage modification along with a reverse mortgage could save many homes. Seems like a win win.

  • Patty:

    You are right on target! What happens if we get another 5% haircut and the monthly MIP is increased 150% in October?

    Another BIG factor that no one seems to be mentioning is the expected increase in interest rates. If the 10 year libor swap rate starts to move upwards over the next year as expected the principal limits will be reduced even further!

    • treverse,

      I do not believe there will be “another 5% haircut.” It is my understanding that the reduction would be around 5% rather than 10%. Two questions remain. The first is if the 1.25% ongoing MIP proposal is needed even if Congress gives the program a $250 million subsidy or if this is needed despite what Congress does. Second, is the 5% due to the increase of the MIP rate to 1.25% or is that a separate calculation reduction.

      As I understand it the 5% reduction would replace the 10% reduction as of 10/1/2010 depending on the actions of Congress. The same is true of 1.25% MIP rate.

    • Yes, sounds like the numbers relate to case numbers. Might sound hard to believe, but the coming changes in Oct 2010 will likey decrease volumes more than what we are now experiencing from the Oct 2009 change, as we cut even further into the pool of eligible customers. You make a good point about increasing interest rates too.

      • Lance,

        Please reread the report. What would weather conditions in December have to do with Case Numbers? On the forward side which is the vast majority of case numbers issued, case numbers are issued when applications are taken. I really believe these are the funded loans that are applying for endorsement.

        Maybe they are talking about applications as we think of them but I believe this is FHA speak. Their language differs from ours. Usually they do not refer to applications taken by loan officers; they refer to case numbers issued, etc.

        It would be good if HUD had some definitions with these reports.

    • Treverse,
      You are right on target with interest rates…Most forget about it because we have been at low rates since this program really took off. It makes a tremendous difference between 5% and 7%. Seniors soon will have very little $$ available and the cost is going to become even more expensive than what it already it! Not good!

    • Bill,

      It is easy to speak in extremes. There is a very old story that explains the difference between a recession and depression like this: A depression is when my neighbor losses his job but a depression is when I lose mine.

      For some the market is bleak; for others, there is an immediate bright and shining future. I talked with some reverse mortgage loan officers who have talked about how 2009 was their highest production year ever. At our branch total production for 2009 was down when compared to 2008 even though my personal production was up. One loan officer I know has a very full part-time job and saw her production go from just under 60 for 2008 (her best year in 7 years) and for 2009 she exceeded 70 in an area of the country where total production dropped.

      The sky is dark and foreboding but it is not falling in — at least not for now. Over the years I have worked at firms that did relatively better in bad times than good. Hopefully this downturn will cause us to readdress our relatively ineffectual marketing methods and find new sources for HECMs. Some of that is happening now.

      Stay flexible. Some need to quit. Most will find ways to survive and a few will thrive and see their best year in 2010. But there is absolutely no question, overall national 2010 production will be down in comparison to the totals (including proprietary) funded in 2007, 2008, and 2009.

    • Tim,

      You have it wrong. Its greatest impact will not be on applications but rather closed loans. While applications may go down some, closed loans will be decimated (used in its true Latin classical meaning) or worse. This change will no doubt result in lower principal limits for most borrowers.

      I do not mean to imply that the industry will be devasted but this change will result in more seniors being disqualified and less seniors completing HECMs because of lower principal limits. I do not believe that even Pollyanna can find a positive spin on this one, other than a very minute portion may receive higher appraisals (doubtful).

      There are rumors that HUD may be rethinking this change. Let's hope they abandon it.

  • Tim,rnrnYou have it wrong. Its greatest impact will not be on applications but rather closed loans. While applications may go down some, closed loans will be decimated (used in its true Latin classical meaning) or worse. This change will no doubt result in lower principal limits for most borrowers.rnrnI do not mean to imply that the industry will be devasted but this change will result in more seniors being disqualified and less seniors completing HECMs because of lower principal limits. I do not believe that even Pollyanna can find a positive spin on this one, other than a very minute portion may receive higher appraisals (doubtful). rnrnThere are rumors that HUD may be rethinking this change. Let’s hope they abandon it.

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