Prepayment speeds for non-conforming reverse mortgages have always been higher than HECM products according to New View Advisors. The company’s prepayment index shows that HECM prepayment speeds have stayed relatively even over the years and has fallen with the collapse in home values.
Jumbo reverse mortgages are a whole different story. As you can see from the chart below, prepayment speeds for non-conforming products rose dramatically starting in the middle of 2006.
New View tells RMD the increase in prepayment speeds was driven by the addition of several new proprietary products that offered higher LTVs, creating a mini-refinance boom. When home values started to drop, borrowers became less mobile and prepayment speeds have declined dramatically.