Reverse Mortgage Volume Up 20% as New Top-10 Lenders Emerge

Reverse mortgage volume rose more than 20% in March marking the highest level of lending since June 2011, new Department of Housing and Urban Development shows. The rebound can be attributed to both new consumer demand and a sustained level of home price increases, according to analysis by Reverse Market Insight.

Also coming into play is a last minute push reported by lenders and industry vendors during the weeks and days leading up to April 1—the date which marked the beginning of a suspension of the fixed rate standard reverse mortgage product under the Federal Housing Administration.

At 8,593 endorsements, March marks the highest level since June 2011, also aligning with the last month of Wells Fargo originations before the former largest lender exited the business in 2011.

Advertisement

“It’s a significant hurdle for the industry to cross and shows the power of recovering housing markets to drive reverse mortgage volume,” writes RMI in its report.

Supporting the recovery is stronger consumer demand, resulting in higher case number conversions, measured at 79%—also comparable to levels not seen since 2011, RMI writes. Combined with a sustained home price rebound seen in many regions across the country, the upward movement is putting positive pressure on the market for reverse mortgages for the time being.

That pressure could be interrupted by the current changes, and more critically, but future changes that are expected from FHA by year-end.

“Putting these trends together, it’s no surprise that endorsement volumes are trending higher,” RMI writes. “In our view the suspension of HECM standard fixed won’t change this trend meaningfully, but 2014 and beyond could show significant impact from changes FHA makes to the HECM program by September 30 to respond to MMI fund weakness and legislative pressure.”

Lenders repositioned among the top 10, with Proficio Mortgage joining the ranks at No. 7 with 522 loans year to date.

Maintaining the highest endorsement volume among lenders was Liberty Reverse Equity Solutions (formerly Genworth Financial Home Equity Access) at 2302 year to date, followed by Security One Lending and American Advisors Group in year-to-date terms.

Regionally, RMI reports, seven of 10 regions saw 12 month reverse mortgage volume highs including the seven regions that are meaningful to national trends.

View the full report.

Written by Elizabeth Ecker

Join the Conversation (8)

see all

This is a professional community. Please use discretion when posting a comment.

  • Rather than looking at endorsement number trends and finding where Mr. Lunde and I differ, a far more relevant topic is the impact of a possible turnaround in endorsement numbers for this fiscal year on the HECM MMI Fund Net Position. The problem is the impact is not necessarily positive for the HECM program.

    We need a different view of the market. The fact is the fiscal year endorsement totals have not done nearly as badly after Wells Fargo, Bank of America, Financial Freedom, MetLife, and a few others left the industry as it did when the fixed rate HECM (there was no Saver back then) became the rage of the industry during fiscal 2010. The downturn during fiscal year 2010 is the very worst on record both in terms of the number of endorsements and the percentage decrease in endorsements. While last fiscal year saw a downturn in endorsements of 18,309 (25%), fiscal year 2010 saw a downturn in endorsements of 35,586 (31% of a much bigger number). And yet it seems the loss of one of those banks, Wells Fargo, is far more significant to many in the industry than what transpired in fiscal 2010. Why?

    Focusing on calendar year information is far less important than in the past. The program is entrenched in the fiscal year. By the time the endorsement numbers for calendar year 2013 are released, we will have read and digested the actuarial report, the FHA annual report, and most likely, the outside auditors’ report for fiscal year 2013. Calendar year endorsement numbers are a distraction at this point in the industry. The heart of what is really happening in the industry is now tied more than ever to fiscal year information. It is about time we pay attention to and focus on what is important rather than emphasizing what is not.

    Seeing strong endorsement numbers for this winter and better case number assignments for December 2012 and January of this year, there is a strong possibility that endorsement numbers for this fiscal year could be about as good as last fiscal year. Based on stronger endorsement numbers and the prediction in the actuarial report for last fiscal year, the HECM MMI Fund Net Position could experience an even greater negative balance at the end of this fiscal year than it did last fiscal year at $2.799 billion. The FHA Commissioner took too long to implement the consolidation for it to have any material impact on the ending HECM MMI Fund Net Position balance for this fiscal year. That could prove very unsettling to Senator Corker (R-TN), Senator McCaskill (D-MO), and other members of Congress.

    The opinion expressed in this comment is not necessarily that of Security One Lending or its affiliates.

    • Very much agree that HECM is a political animal Jim, and the view of MMI fund is crucial to understanding where our industry is headed especially in the short term.

      What surprises me a bit is your view that increased endorsements in FY2013 would have a negative impact on MMI fund. It wouldn’t appear from reading the FY2012 Actuarial Review that recent vintages since the PL reductions are the cause of negative impacts on MMI fund, but rather the vintages prior to PL cuts in October 2009.

      Secondly, if home price increases are what is truly driving increased HECM volume as we suggested, then that would be a positive impact on MMI fund for two primary reasons:
      1) HECM termination speeds (how fast loans payoff) would likely increase. The first factor cited in FY2012 Actuarial Review that negatively impacted value of the MMI fund was slower termination speeds.
      2) HECM conveyance rates would drop, with fewer loans being assigned to FHA and/or generating an REO loss to the MMI fund. This was the second factor cited as leading to negative/declining economic value of MMI fund in same report.

      Lastly, I think it’s worth pointing out that FY2012 AR assumed that FY2012 would see home price declines, whereas we actually saw increases. That should give us some comfort that so long as these factors are included in FY2013 AR, the picture will likely look considerably prettier if nothing else changes.

      • Mr. Lunde,

        Perhaps speculation without any mathematical presentation has its place but what I was addressing was what competent actuaries actually reported in their fiscal 2012 report to FHA. To derive the information one must read the report and do a little math. Perhaps you believe the actuarial report is full of politics; it seems far less so than anything else on the subject.

        Per the estimate of endorsements provided by the actuaries for fiscal year 2013 on Page 10 of their report, endorsements will go up almost 20% of what they actually were for fiscal 2012 at 54,820 to 65,533. Yet based on the projections of the actuaries, the HECM portion of the MMI fund will be $4.534 billion short of meeting the 2% Capital Reserve Requirement as of the end of fiscal 2013 rather than the $4.363 billion short that is estimated they were as of the end of last fiscal year.

        Let us see. The actuaries predict that endorsements will go up for fiscal 2013 by almost 20% but they also indirectly predict that the difference between what the 2% capital reserve requirement for the HECM portion of the MMI Fund and what it actually is will grow. That means FHA will have more difficulty meeting the 2% capital reserve requirement for the HECM portion of the MMI Fund this fiscal year (2013) than it did last (2012), yet endorsements for this year are predicted to be almost 20% higher than last.

        What do you call that? Since it is obvious you have ignored the 2% capital reserve requirement, here is how the shortages are computed from the fiscal 2012 report.

        To meet the codified 2% capital reserve mandate, the HECM net position in the MMI Fund should have been a positive $1.564 billion based on an estimated $78.2 billion of insurance in force as of September 30, 2012 per the chart on Page ii of the fiscal 2012 Actuarial Report. It is short of that mandate for fiscal year 2012 by $4.363 billion since the net position was an estimated negative $2.799 billion again per the chart on Page ii. ($1.564 billion minus a negative $2.799 billion equals $4.363 billion.)

        Now let us look at the actuarial projection for fiscal 2013. Per page ii, the net position for HECMs in the MMI Fund will be an estimated negative $2.668 billion. Although the net position is a little better, the 2% capital reserve requirement grows to $1.866 billion based on an estimated $93.3 billion of insurance in force as of September 30, 2013. Thus for fiscal year 2013, the actuaries are predicting the HECM net position is $4.534 billion short of the 2% capital reserve requirement. ($1.866 billion minus $2.668 billion equals $4.534 billion.)

        Again this comment is not necessarily the view of Security One Lending or its affiliates.

      • Hard to know conclusively whether the new endorsements are contributing positively or negatively to MMI fund balance given the limited schedules presented in AR report. But I would suggest that it is more likely that older vintages harm the total MMI fund value in the first year of projections by the decline in home prices than the new endorsements. If that’s the case then it could also be the case that new endorsements are contributing positive economic value to the fund, even as the older vintages weigh heavily enough to more than offset that value and produce a negative MMI impact in first projection year.

        Again, I think it’s largely about the path of home price assumptions put into the model. In this case, we already know that the first year of assumptions in the model were too low for what actually transpired.

      • Mr. Lunde,

        RMI does a great job relating the higher increases in home values to increased endorsements. That information requires matching data is not always a simple process.

        However, matching increased home values to concentrations of collateral related to HECMs is very difficult. Interpreting the impact of the increase on the loss reserve is even more difficult. The actuaries will have their hands full deciding how that can be estimated.

        Assuming that a very small increase in endorsements this fiscal year will have any material impact on the longevity of HECMs does not seem realistic.

        HECM assignments may or may not result in larger losses. If the assignment starts when home value is materially increasing faster than the costs of carrying the HECM in assignment and at the time of assignment, the balance due was greater than the value of the home, growth in home value will reduce the expected loss.

        While you address assumptions about the future value of the collateral related to the cohort of HECMs endorsed in fiscal 2012 but you fail to address the assumptions the actuaries used in estimating future values of the collateral on HECMs endorsed after September 30, 2012 in their projections through fiscal 2019. They actually show the negative net position diminishing in every year after fiscal 2012.

        Even if all collateral in the MMI Fund will see their values increase in the current fiscal year beyond what the actuaries assumed, it is not the value of one year which is significant. It is the value at termination in relation to the balances due at that time which is most important.

  • Rather than looking at endorsement number trends and finding where Mr. Lunde and I differ, a far more relevant topic is the impact of a possible turnaround in endorsement numbers for this fiscal year on the HECM MMI Fund Net Position. The problem is the impact is not necessarily positive for the HECM program.

    We need a different view of the market. The fact is the fiscal year endorsement totals have not done nearly as badly after Wells Fargo, Bank of America, Financial Freedom, MetLife, and a few others left the industry as it did when the fixed rate HECM (there was no Saver back then) became the rage of the industry during fiscal 2010. The downturn during fiscal year 2010 is the very worst on record both in terms of the number of endorsements and the percentage decrease in endorsements. While last fiscal year saw a downturn in endorsements of 18,309 (25%), fiscal year 2010 saw a downturn in endorsements of 35,586 (31% of a much bigger number). And yet it seems the loss of one of those banks, Wells Fargo, is far more significant to many in the industry than what transpired in fiscal 2010. Why?

    Focusing on calendar year information is far less important than in the past. The program is entrenched in the fiscal year. By the time the endorsement numbers for calendar year 2013 are released, we will have read and digested the actuarial report, the FHA annual report, and most likely, the outside auditors’ report for fiscal year 2013. Calendar year endorsement numbers are a distraction at this point in the industry. The heart of what is really happening in the industry is now tied more than ever to fiscal year information. It is about time we pay attention to and focus on what is important rather than emphasizing what is not.

    Seeing strong endorsement numbers for this winter and better case number assignments for December 2012 and January of this year, there is a strong possibility that endorsement numbers for this fiscal year could be about as good as last fiscal year. Based on stronger endorsement numbers and the prediction in the actuarial report for last fiscal year, the HECM MMI Fund Net Position could experience an even greater negative balance at the end of this fiscal year than it did last fiscal year at $2.799 billion. The FHA Commissioner took too long to implement the consolidation for it to have any material impact on the ending HECM MMI Fund Net Position balance for this fiscal year. That could prove very unsettling to Senator Corker (R-TN), Senator McCaskill (D-MO), and other members of Congress.

    The opinion expressed in this comment is not necessarily that of Security One Lending or its affiliates.

  • Very interesting statistics and so is the top 10 list! Everyone should click on:

    “According to analysis by Reverse Market Insight”

    Then click on the image chart, it is worth the time to review it.

    John A. Smaldone

  • I’m proud to be part of the success of Proficio Mortgage as we have climbed the ranks from nowhere up to #7. Still much work to be done and hopeful to see us in the top 5 soon.

string(103) "https://reversemortgagedaily.com/2013/04/02/reverse-mortgage-volume-up-20-as-new-top-10-lenders-emerge/"

Share your opinion