Will Local Reverse Mortgage Growth Signal National Turnaround?

While reverse mortgage volume remains down year-over-year with 2012 endorsements at the lowest level in recent memory, a recent uptick in some areas could stand to reverse that downward trend.

For the first time, home values increasing in some areas is beginning to drive reverse mortgage growth, according to the latest report from Reverse Market Insight. The growth could lend itself to a national trend.

Detailing HECM trends through August 2012, RMI lists three cities where total maximum claim amounts (MCA) have grown beyond that of the national level.

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Kansas City, Missouri tops the list, having grown 70% in total max claim amount since January 2012, with increases in both loans and average loan sizes (up 17.9%). Jamaica, New York holds down the second spot with a total growth of 16.4% in terms of max claim, and loan sizes up 5.2%. Pensacola, Florida was the only city in among the top three to exhibit a decrease in loan units. Still, Pensacola’s 22.2% average loan size increase contributed to the city’s total overall growth of 15.6%.

The increase in those areas stems from home values making a turnaround, says John Lunde, RMI co-founder and president.

“I think these three cities are showing abnormally better performance than the national picture, which is why they’re in the top 10 of our rankings for these measures,” Lunde says. “That said, if we continue to see stabilization and/or growth in home prices across the nation I think the trends we’re seeing in these cities could easily translate into a broader national growth of HECMs.”

Even in spite of home value declines, the biggest growth inhibitor over the course of the past two years has been large lender exits, Lunde says.

“The biggest deterrent to that is companies exiting the industry, which is the only thing that has kept the industry from growing year over year in past 2.5 years,” he says.

Written by Jason Oliva

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  • As Mr. Lunde indicates there are several significant causes for the prolonged downturn in endorsements but it is the extent of their impact where differences of opinion lie.  The very best part of this article is the analysis Mr. Lunde provides on the link between home appreciation and higher endorsement volume and Maximum Claim Amounts.

    Will the current turnaround seen in some parts of the country turn into a national turnaround?  In the coming months, we will all be eagerly awaiting further news Mr. Lunde brings us on these trends.

    Improved home appreciation will go a long way to cure many things which need improvement in the industry particularly if home appreciation improves substantially in the areas where HECMs are the most concentrated and where home values have been hit the worst over the last five years.

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