Reverse Mortgage Volume Slumps to 12-Month Low as AAG Bucks Trend

Endorsements for Home Equity Conversion Mortgages (HECMs) reached their lowest level of the past 12 months this April, according to the latest report from Reverse Market Insight (RMI).

HECM endorsements tallied 4,170 loans in April, down 9.7% from the previous month.

But American Advisors Group demonstrated a recent record for monthly volume, nearing 1,200 loans and more than doubling the volume of Liberty Home Equity Solutions, which took the No. 2 spot for volume during April.

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April’s data is in line with previous RMI reports that predicted volume declines would continue in the following months. In March, endorsements fell 10.6% from February and 20.9% when compared on a year-over-year basis.

“We’ve been suggesting for a couple months now that endorsements were headed lower based on application and funding volumes since the FHA changes on 9/30/2013 and now we’re here,” states RMI.

Volume declines were widespread across eight of the 10 regions tracked by RMI, with the Pacific/Hawaii and Rocky Mountain areas as the only exceptions.

The Pacific/Hawaii tallied the most endorsements for the month with 926 loans, a 4.3% increased compared to the 888 the region recorded in March.

Meanwhile, the Rocky Mountain region posted a monthly gain of 8% in April, reporting 216 loans.

For the top-10 HECM lenders, April fared as a better month for volume gains for only four companies: American Advisors Group, One Reverse Mortgage, Associated Mortgage Bankers and Open Mortgage.

The real story there, according to RMI, was AAG hitting 1,194 loans during the month—rocketing the company to the number one spot and more than doubling the next lender, One Reverse, which reported 409 loans.

View the RMI report

Written by Jason Oliva

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  • With endorsement numbers for the industry looking bad for April, case number assignments during January and February seem to all but guarantee just as bad and most likely much worse endorsement numbers for May and June.

    The trouble is with revenues significantly down per closed HECM, keeping up with endorsements from last year means the industry as a whole is seeing a deterioration in revenues that can only be replaced with greater endorsements, not less.

    With costs up due to the Extreme Summit, inflation, and a greater need for advertising campaigns, fiscal 2014 MAY be a year where endorsements hold steady but not revenues or profits from reverse mortgage operations. Fiscal 2014 will be known as a year when revenues and profits for the industry as a whole hit the skids and are now in significant decline.

  • AAG spending big on advertising, hopefully they’re profitable. Volumes will drop further once income qualification rolls out.

  • With endorsements significantly lower and case number assignments looking bleak, it is interesting to read the pessimism regarding the yet to be published financial assessment. Until we have a well defined and verified financial profile on current borrowers, i.e., those currently attracted to the new HECM and financial assessment mandated, it is very difficult to say what the negative impact will be to our current endorsement volume other than to say it will definitely be negative. Whether the exact of the impact will be as is generally agreed it should be or much worse, we have no idea.

    Right now the need is to focus on the growth of revenues. Focusing on something that has yet to be realized seems counterproductive.

    (The opinions expressed in this comment may not necessarily be those of RMS or its affiliates.)

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