October Reverse Mortgage Volume Saw “Artificial” Decline, Upswing Ahead

With October showing a mere 1% increase over the number of reverse mortgage endorsements in September, many lenders say there were contributing factors that dragged volume down from what would have otherwise been an improved month for volume. And, they say, the drag on October could lead to a much stronger month for November. 

Hurricane Sandy leading to government closings across parts of the Eastern Seaboard and impacting for some as much as 20% to 50% of business or more, was a major influence for some.

“The endorsements were definitely impacted because the Homeownership Centers in Philadelphia and Atlanta were not operational during the storm,” Paul Fiore, vice president of sales for American Advisors Group told RMD. “My post closing department is telling me that they are a still backed up from an insuring and endorsement perspective.”

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But in addition to Sandy’s wake, the rollout of the Federal Housing Administrations new HERMIT technology presented a learning curve for those processing endorsements. While they say the new technology is a vast improvement overall, it may shift some volume onto the books in November rather than October. 

“Sandy didn’t have all that much of an impact,” says Gregg Smith, President of One Reverse Mortgage. But, he says, regarding the new technology, the company saw some delays. 

“With any rollout of technology you’re going to have hiccups,” Smith says. “We love it. I think everybody in the industry is really thrilled with HERMIT, but it is software. The vendor and HUD have done a fantastic job being on top of things but it has caused some delays in endorsing.”

Volume during the month saw a 1.1% increase over September, marking one of the lowest months for reverse mortgages since 2005. 

HUD says it is unlikely the hurricane had much of an impact, despite closing local offices for two days. 

“Headquarters was closed for two days,” a HUD spokesman told RMD in an email. “However, only one of our four Homeownership Centers was closed (Philadelphia), so the impact would have been minimal.” 

Barring those two influencers, more volume should be seen on the horizon, lenders say. 

“I imagine we’ll be caught up in November,” Smith says, noting a very strong month of endorsements for One Reverse. “This is an artificial decline.”

AAG, which posted 470 loans in October also expects November to pick up in light of an unusual month.

“A lot of funding delayed in October will fund in November,” Fiore says. “We may now artificially see some people have decent funding numbers in November.” For AAG, he says, it could be as many as 100 loans, due to many borrowers being in the impacted areas following Hurricane Sandy.

November, which typically lags slightly from a volume standpoint due to Thanksgiving, may stand to see some gains, says John Lunde, president and co-founder of reverse market insight. Based on very rough estimates, he says, the industry could see a notable gain.

“It looks like HERMIT/Sandy issues might have depressed October by 20% or so,” Lunde says. “Given that, we’d expect November to be substantially better than October, even with the holiday impact.”

Written by Elizabeth Ecker

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  • Most of the excuses are just that.  You cannot create endorsements out of thin air.  There is only way an endorsement comes into existence and that is the result of a case number that on average was assigned four months before and was “pulled through the system.”

    Total case numbers assigned in July, August, and September 2012 are at record lows for the last eight years.  Perhaps even worse, pull through rates following case number assignment are at industry all time lows.  So where is this miraculous number of endorsements going to come from.  Are they are talking about 4,200 endorsements or 10,000 endorsements?

    Endorsements are endorsements.  There is magic in projecting what they will be.  It seems those in this article have lost touch with how they get generated.  Of course in the last four fiscal years, how is that news?

    While some lenders might have better internals next month over this, it will be quite surprising if endorsements reach 4,800 for November 2012.  Too many people in this industry make claims with no foundation in fact; such are the excuses we read above.      

  • Month over month endorsement stats are interesting but they tell no significant story.  Here is the story for the quarter endorsement totals for the three months ended September 30 2008, 2009, 2010, 2011, and 2012 respectively:  

    2008 — 28,288
    2009 — 28,237
    2010 — 18,512
    2011 — 16,908, and
    2012 — 11,696

    Yes, even though fiscal 2008 had fewer endorsements than 2009, the last quarter of fiscal 2009 was smaller than the same total 2008.  The downward trend did not begin in 2010 with the change in principal limit factors but in fiscal 2009.

    The trend for fiscal 2012 was horrible.  At that rate we would see about 52,000 endorsements for a fiscal year.  But nonetheless let us estimate the number of endorsements which could have been delayed.

    Let us say that hurricane Sandy disputed endorsement activities for 4 days. Even HUD is saying that National Office and the Philadelphia HOC were only shut down two days.  But at four days, that would be about 20% of the endorsement activity of one HOC.  Philadephia had 993 or about 1,000 rounded.  That would make the number delayed at 200 using a four day loss in manpower in the last week of October 2012.  That would make the total for October 2012, 3,945 for a 6.4% increase over the prior month but a 15% drop (rather than a 19.5% drop) from October 2011.  

    The recasted total (revised for the delay) is still short of 4,000 endorsements for October 2012.  That is an endorsement pace of less than 48,000 for this fiscal year.

    Those who claim that somehow the delay in endorsements had a significant impact on endorsements for the industry as a whole seem more interested in finding excuses than preparing readers for the hard fact that fiscal 2013 will not be a good year for endorsements as a whole although some lenders may see their best fiscal year yet for endorsements.  How bad will endorsements be for fiscal 2013?  There is a possibility that endorsement totals for this fiscal year could be better than for fiscal 2012 but even that possibility is quickly fading with time.

  • All of these numbers make my head spin.

    Here is how I look at it.  How many of the HECMs which were endorsed in October were funded in October?  The answer if not none, is very, very close to none.

    So how would Sandy impact endorsement production for last month?  Since only the Philadelphia HOC was impacted and there were 22 working days in October (excluding Columbus Day), how many HECMs were not endorsed during October 2012?  Even if that number was 300, are 4,045 endorsements a great way to start the new HUD endorsement year?

    The appraisal issue is only an issue for those HECMs which were not funded before hurricane Sandy.  Very few of the endorsements for November will not have been funded before Sandy.  While Sandy will have impacted some part of the endorsements for December still the majority will also have been funded before Sandy.

    It seems much of the “information” provided in the quotations above is more misdirection than reasonable explanation of the miserable start to the new endorsement year.

    Based on the statements in the article, November will be an amazing month for endorsements.  The delayed endorsements will be seen in the endorsement count for November and none of the impact of Sandy will show up in the endorsement count for November since those endorsements will be for HECMs which were funded BEFORE Sandy.

    So what will the excuses be for low endorsement numbers for November?  Thanksgiving?  As we all know that is a rare occurrence for any November (LOL).

     

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