Reverse Mortgage Applications Trend Higher, When Will Volume Follow?

NewImage.jpgThe Federal Housing Administration reported that reverse mortgage applications were up 2.3% in May, coming it at 8,169 units during the month.  For FY 2010, reverse mortgage applications are down 49.3% from the previous year.

May marks the fourth straight month over month increase, but the industry has yet to see the increase result in more volume.

“I think we’ve seen most of the short term increase in applications from reduced upfront costs,” said John Lunde, President of Reverse Market Insight.  With lenders continuing to reduce costs and therefore provide more proceeds to borrowers, several major reverse mortgage lenders are expecting to report volume increases.

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“We generally see endorsement trends trail applications by about 4 months,” he said.  “Given that apps hit their low in January, May would make perfect sense as the low point for endorsements.”

RMI published a great chart showing HECM Applications vs. Endorsements with a 4 month lag.  See a larger version of the chart here.  Looking at the chart, one could expect an uptick in volume coming soon.

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During May, 4,554 HECM’s were insured, the lowest HECM endorsement volume since September 2005.

Overall, the 124,754 mortgages for $22.3 billion were insured for the FHA Single-Family Program during the month.

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  • 2545,rnrnUnless enabling legislation is passed, how will the ongoing MIP move from an annual rate of 0.5% to 1.25%? You seem to have reached the legal conclusion that HUD has the right to make that change now. That might have been true while HECMs were in the General Insurance Fund but it probably is not true now.rnrnOveracting is never good for anyone. Not long everyone was screaming the real problem was bad publicity. Yes, bad publicity is something which must be overcome but the real problem is when our products see reductions in their financial value and benefits. That cannot be overcome without external change.rnrnSo while I agree with certain of your points, others are mere speculation but are presented as if equal.

  • That is the question the industry is trying to figure out!rnWas it the principal limit reduction in Oct of ’09? If so, we are really in for a ride come this Oct with all the changes that will take place. Anyone who thinks our national advocates are going to get the $$ we need to not have these changes take place are crazy. The government is not giving money to anyone for anything. They are going to increase the MIP from .5 to 1.25 and give us another principal reduction…No question about it. rnMany believe products will then be developed but none will compare to our HECM as we know it. Volume will drop again regardless. Write loans now while you can and save the money you make…we are all going to need it to stay in this industry.

  • Low-hanging fruit already has been picked. Fixed-rate competition enables originators to go a little higher up the trunk, resulting in a soon-to-be short-lived bump in applications.

  • If AMCs continue to churn out poor quality appraisals with overly conservative and low-balled values, we will continue to see low volumes of endorsed loans. Reduced costs are meaningless if their property is undervalued in the appraisal report. It is such a shame that we are wasting so many needy seniors’ money on appraisal “gambles”.

    • That is the question the industry is trying to figure out!
      Was it the principal limit reduction in Oct of '09? If so, we are really in for a ride come this Oct with all the changes that will take place. Anyone who thinks our national advocates are going to get the $$ we need to not have these changes take place are crazy. The government is not giving money to anyone for anything. They are going to increase the MIP from .5 to 1.25 and give us another principal reduction…No question about it.
      Many believe products will then be developed but none will compare to our HECM as we know it. Volume will drop again regardless. Write loans now while you can and save the money you make…we are all going to need it to stay in this industry.

      • 2545,

        Unless enabling legislation is passed, how will the ongoing MIP move from an annual rate of 0.5% to 1.25%? You seem to have reached the legal conclusion that HUD has the right to make that change now. That might have been true while HECMs were in the General Insurance Fund but it probably is not true now.

        Overacting is never good for anyone. Not long everyone was screaming the real problem was bad publicity. Yes, bad publicity is something which must be overcome but the real problem is when our products see reductions in their financial value and benefits. That cannot be overcome without external change.

        So while I agree with certain of your points, others are mere speculation but are presented as if equal.

  • If AMCs continue to churn out poor quality appraisals with overly conservative and low-balled values, we will continue to see low volumes of endorsed loans. Reduced costs are meaningless if their property is undervalued in the appraisal report. It is such a shame that we are wasting so many needy seniors' money on appraisal “gambles”.

  • Low-hanging fruit already has been picked. Fixed-rate competition enables originators to go a little higher up the trunk, resulting in a soon-to-be short-lived bump in applications.

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