New Reverse Mortgage Applications Up 10% in August

Reverse mortgage applications saw a strong uptick in August—up nearly 10% to 8,105 applications. The increase was seen over July’s total 7,374 applications tracked by the Department of Housing and Urban Development and marks the fourth month of increase for Home Equity Conversion Mortgage applications. 

The monthly total also represents a 2% year-over-year increase over the August 2011 total of 7,940 HECM applications. 

Chart: Reverse Mortgage Application Trends

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Reverse Mortgage Application Trends

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Total Federal Housing Administration applications including forward and reverse mortgages, however, fell 2% during August to 178,314 total. 

View HUD’s Outlook report for August

Written by Elizabeth Ecker

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  • Applications (i.e., case number assignments) are up month-over-month, not only for this month but also for the fourth month in a row.  We started out the first month (June 2012) of the inventory of applications for endorsement purposes for next fiscal year 1,700 applications short of what it was for the first inventory month of fiscal 2012.  However, despite that bad start after three months the inventory level compared to fiscal 2012 is only 1,800 applications short.  So things are looking up as to how bad endorsements looked for fiscal 2013 in July.

    Yes, for the fourth straight fiscal year, we lack the inventory which would indicate that endorsement levels for the next fiscal year will be better than EVEN this fiscal year.  But even if the application numbers for this month (September 2012) turn out to be even better yet so that we have more applications in inventory than for the start of last fiscal year (an unlikely outcome), there is still the other factor when it comes to endorsements, the conversion rate.

    The annualized conversion rate for August 2012 is to put it mildly, miserable.  For the first time in recent memory it is below 66% on an annualized basis.  Just two months ago it was in the mid 67% range.  Less than five years ago the rate was over 95.9%.  This means that for every 100,000 applications we now bring in only 65,734 endorsements where less than five years ago, 95,915 endorsements would have resulted.  That is a potential loss of over 30,000 endorsements.  While some may yawn over this loss, it is perplexing and should be a major issue of concern for lenders, marketing leadership, and, yes, even NRMLA.

    The question on the industry’s mind should be, why the loss, not just in applications, but also in conversions?  While we hear appraisals are the problem, that is not the real issue because if that is all it was, then to some degree it could be offset and reduced by better management of expectations.  Yes, FIT reports create about 4,000 of those reduced endorsements but on the other hand, revised counseling education seems to bring up the numbers (i.e. before case number application) by over 2,000, a good thing.

    So what is the cause?

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