Reverse Mortgage Applications See 19% December Decline

Reverse mortgage applications submitted to the Department of Housing and Urban Development fell 18.9% in December to 6,092. The total number of applications in the prior month, November, was 7,058, according to the most recent HUD data release in its monthly Federal Housing Administration Single-Family Housing Outlook.

Applications have seen a slow decline since August 2011, with December marking the fourth consecutive monthly downturn for Home Equity Conversion Mortgage applications (see chart), and the lowest level since January 2010.

Chart: Reverse Mortgage Application Trends

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Reverse Mortgage Application Trends

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Year-over-year, December applications fell 26.3% from 8,270 applications in December 2010.

View the FHA Housing Outlook for December.

Written by Elizabeth Ecker

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  • Comparing last December to this, the drop is over 25%.  This is in line with expectations that this fiscal year will see at least a 20% drop in endorsements over last.  Based on the rule of thumb of how many months it takes for endorsement following case number assignment, we now have the count on the number of case number assignments (applications per the article) which are available for endorsement through at least April 30, 2012; that result still puts the anticipated number of endorsements at about 58,500 for the fiscal year ending September 30, 2012.
    With the ever increasing certified counselee drop out rate following case number assignment (now estimated at over 32.5%), it could be this fiscal year will be the first fiscal year ever, where the endorsement total will be 50% lower than the total endorsements for a prior fiscal year.  That mark presently is 57,345 total endorsements or less.  [Our highest endorsement total for any fiscal year to date was the fiscal year ended September 30, 2009 with 114,692 endorsements.] 

    Last fiscal year was the lowest total endorsements for any fiscal year since the fiscal year ended September 30, 2005 when 43,131 HECMs were endorsed; based on current year trends, the total for this fiscal year should be over one-third more than that total.  

    Yet despite less than stellar endorsement totals for the industry, this fiscal year could be a banner year for many, many lenders and TPOs.  We should have endorsement totals for January 2012 by the middle of next week.

  • As late as November at least one professional observer was calling the estimate made by James as pessimistic yet that observer provided no rationale or evidence why he thought it was too low and why he thought this year would be better than last.  So far rather than being pessimistic the estimate looks realistic.

    In the last seven months, there has not been a single month where applications for even one of those months exceeded the application numbers for the same month in the prior calendar year.  Last year the lowest application total was 7,371.  We have already seen two months lower than that so far this fiscal year.

    While we all wish things were better, at least for the next four months, it looks like we will average fewer than 5,000 endorsements per month.  That leaves May through September to pick up the slack.      If the total for this fiscal year is going to exceed that of last fiscal year, applications for January through May will have to be unexpectedly high.  Without substantially better home values such a scenario is very, very unlikely.

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