Reverse Mortgage Applications Rise in June, All Products See Uptick

Home Equity Conversion Mortgage (HECM) applications showed a slight uptick in June, to 7,032, up 0.6% from 6,992 loan applications in May, according to the latest data from the Federal Housing Administration released Friday. 

Both Saver applications and HECM Purchase applications also saw increases during the month, according to FHA’s Single Family Outlook. Saver applications reached 424 in June over May’s total of 351. Purchase reverse mortgages, too, saw an uptick, rising from 132 to 173—more than 30%.

With the latest reverse mortgage endorsement data indicating a very strong downturn due to the exit of MetLife from the reverse mortgage business, application data will be looked to as a strong indicator of future volume, said Reverse Market Insight in a recent report. 

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MetLife announced its exit in April 2012 and closed business at the the month’s end. 

Written by Elizabeth Ecker

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  • Are we actually looking at the same data?  The “good news” does not take into account seasonality or trends.  Saying this is good news shows how desperate the industry actually is for some good news from somewhere.

    Case Numbers Assigned in May and June for the last four years are as follows:

    May 2009     10,739
    June 2009    11,427  

    May 2010       8,354
    June 2010      9,088 

    May 2011       7.473
    June 2011      8,755 

    May 2012       6,992
    June 2012      7,032 

    Obviously Case Number Assignments have risen from May to June for each of the four years shown.  In 2009 the increase was 688; in 2010, it was 734; and in 2011, it was 1,282.  The increase from May 2012 to June 2012 was just 40 Case Numbers Assignments.  Does that really sound like good news?  Hardly!!!!

    HOWEVER, the real story is in the year over year drop in June Case Number Assignments for the last four years.  The drop for June 2012 was the second worst of those four years at 1,723 (or a 19.7% drop from June 2011).  The worst such drop was June 2010 at 2,339 (or a 20.5% drop from the total Case Numbers assigned in June 2009).

    Let us hope this is NOT a strong indicator of future volume as it seems to be.  This is the first significant indication substantiating that endorsements for fiscal 2013 could be several thousand less than 50,000.

    Perhaps it is time for those who have been declaring that “things are starting to get better” over the last three years to start analyzing why our situation continues to weaken when other sectors of the housing and mortgage industry are beginning to show signs of recovery and strength.  Months and months of positive “fairy tales” of better days just ahead makes our industry look like it is desperately grasping at straws.While our future may not be “Grimms’ Fairy Tales” neither is it “Happy Days Are Here Again.”  

    This comment is a call for less “figurin'” and for more realistic optimism even if that means stating that the numbers indicate harder times in the near-term and perhaps mid-term while demographics and history point to and promise brighter days in the years to come.  What is so wrong with that?

    • Always good to look at the historical baseline.  The industry has been in a volume decline for several years now, that’s not a surprise to anyone.

      I would suggest that the reason for the large drop from June 2011 to June 2012 is much smaller than we feared it would be.  Let’s not forget that June 2011 included applications from both Wells Fargo and Metlife retail sales forces, both of which were absent in June 2012.

      I don’t disagree the industry is in a tough spot that has everyone looking/hoping for silver linings, but I do believe this is genuinely positive news given the negative exits already baked into the June 2012 figures.

      • Mr. Lunde,

        I respect what you and RMI do.  Your insights and explanations are valuable to the industry.  That has been the case and remains so. 

        However, to this day, I still hear people state they are surprised by how poor endorsement production has been since September 30, 2009 and how surprised they are that they are going still lower despite the projections and assurances of some over the last few years.

        If one does not know that in the last four years, the increase in Case Numbers assigned between May and June has been historically much higher than for this year, one might conclude that something good just happened when in historical context that just is not the case.  Then looking at year over year June monthly production, the outlook on what occurred becomes even clearer.

        In June 2011, I predicted that the endorsement total for this fiscal year would be 61,400 hardly a bleak view of the situation despite what some claimed at the time.  It turns out that prediction was an overestimate by probably over 10%.  I believe those who predict industry volume in the short-term should be accountable for such predictions.

        I am a CPA who looks at numbers in a historical context not what I perceive to be people’s current opinion about those numbers.  I try not to color my interpretation of those numbers by the outlook or demands of others unless it is clear my view is wrong.

        There are many ways to look at these numbers.  By profession, I choose to look at them in a historical context and allow people to make up their own minds about how we are doing as an industry.  I hope endorsement production will soon allow me to upgrade my own prediction from 47,000 for next fiscal year to a much higher number.  So far nothing is saying that especially in light of the June 2012 Case Numbers assigned and the statements of some in HUD that we should expect the pull through rates to drop below where they are now.

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