Reverse Mortgage Volume Down 16% as Product Changes Drag Further

The elimination of the Standard Fixed rate Home Equity Conversion Mortgage (HECM) has begun to show its impact on reverse mortgage volumes, dragging down September endorsements by 15.9%, according to the latest report from Reverse Market Insight (RMI).

The downturn comes in advance of an anticipated drop-off due to the most recent round of reverse mortgage changes, effective October 1. 

Endorsements fell from 5,382 loans in August to 4,527 in September, a decline RMI attributes to a drop in reverse mortgage applications following the April 1 moratorium on the Standard fixed-rate product. 

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But even while the industry began to recover from April’s application plummet, September marks the beginning of what could be a trend of falling volumes related to HECM program changes enacted earlier this year, notes RMI. 

More recent HECM program changes that went into effect September 30, such as principal limit factor reductions, new mortgage insurance premiums and borrower restrictions, could also put an additional damper on reverse mortgage applications. 

“The industry’s recovery from April’s application decline was heartening to see and should extend through September’s case number totals, but it will be short lived due to PLF reductions and utilization restrictions that went into effect September 30,” writes John Lunde, president of RMI. 

Some lenders fared the downturn better than others. Among top-10 lenders in RMI’s HECM Lenders September 2013 report, Security One/RMS, Urban and Reverse Mortgage USA all saw volumes grow—by 6%, 8.7% and 18.7%, respectively. 

Associated Mortgage Bankers saw its volume remain steady in September, while New Day Financial had the largest percentage decline for the month at 49%—which RMI indicates they had a heavy mix of fixed rate loans that likely precipitated the company’s recently announced exit from the reverse mortgage industry. 

Nationally, nine of 10 regions felt the effects of the endorsement drop, while the Northwest/Alaska was the only region to post a gain, up to 203 loans in September compared to 200 in the prior month.

Despite 90% of regions posting declines, there were a number of metros with greater than 50% volume improvement, such as Omaha; Pittsburgh; Detroit; Tucson, Arizona; and Shreveport, Louisiana. 

Columbus, Ohio; Phoenix and Las Vegas were among the three metros reporting volume increases that exceeded 60%.

“In all likelihood, we’re looking at a reasonable ending to the year from an endorsement perspective while there is significant volume, revenue and profitability pressure based on fundings,” Lunde wrote.

Written by Jason Oliva