Reverse Mortgage Volume On Pace to Fall Short of 2012 Level

Following very low years for volume in 2013 and 2012, it’s still unclear as to whether volume in 2014 is on pace to surpass its previous years’ totals. 

Cumulative Home equity conversion mortgage (HECM) volume between January and May is down 12.6% compared to the same period last year, and down 2% compared to the same period in 2012, according to the latest Reverse Market Insight (RMI) report.

When trying to predict this year’s overall HECM endorsement volume RMI says, “It’s tempting to say that 2014 will come in near 2012 totals, but the downside scenario is closer to 2005.”

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The year 2012 finished with 52,883 endorsements, meaning an average of 4,240 HECM endorsements would need to be generated per month from July through December to match that number. For 2013, the total was 60,091.

In May, HECM volume was down 15.6% compared to the same month last year, but had increased 1.5% compared to the same month in 2012.

While Federal Housing Administration (FHA) program changes to HECM products appear to play a role in short-come volume activity, such as the consolidation of the HECM saver and standard products (essentially eliminating the fixed standard reverse mortgage), lender exits appear to have had a greater impact on medium- and long-term activity.

“The tempting conclusion to draw here is that FHA program changes are the major driver of volatility – and on a short term basis that would be true,” RMI says. “What gets a bit lost in this monthly perspective is the medium/long term ceiling being lowered by the lender exits as the industry loses distribution.”

Active originators declined this May compared to the same month last year by 13.2% with 616 originators this year compared to 710 last year. Year-to-date up until May, American Advisors leads as the top originator with 4,034 units, followed by One Reverse Mortgage with 2,037 units.

Sand states continue to lead the way in overall mortgage endorsements this year through May. California generated the most volume among states with 3,999 units and a 6.6% growth rate. The Lone Star state ranks second with 1,695 units; Florida third with 1,668 units; New York fourth with 1,464 units and Pennsylvania fifth with 1,036 units.

During that same period, Philadelphia, Pa. had the most HECM endorsements among city with 247 units. However, Philadelphia’s growth declined by 15.1%. Other cities that top the list are Los Angeles, Calif. with 177 units; Miami, Fla. with 172 units; Brooklyn, N.Y. with 170 units; and San Diego, Calif. with 167 units.

Read the full RMI report here.

Written by Cassandra Dowell

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    • ReverseGuru,

      What empirical evidence do you offer that there is any relationship (other than a temporary one) that changes in the number of originating employers results in permanent changes in the number of registered and licensed reverse mortgage originating employees?

      You are promoting the idea that when a large employer like Wells Fargo leaves the world of reverse mortgages, its originating employees permanently leave the industry and do not return. Yet most of the originating employees from Wells Fargo who were there in June 2011 are here today working for different originating employers such as my own employer, Reverse Mortgage Solutions/S1L.

      What is true is that the major banks which left the industry had numerous brick and mortar buildings where customers who had no reverse mortgages (the vast majority of their customers) came to do their banking and similar business and by posters, brochures, pamphlets, etc. were reminded again and again that their bank did reverse mortgages on top of other bank marketing and advertising; this was besides other marketing and advertising including TV ads. It is this level of marketing to so many who do not have reverse mortgages which none of the other originating employers in the industry have been unable to duplicate and thus this level of exposure to reverse mortgages has yet to be replaced.

      I know of no significant reverse mortgage lender who would not hire a producing originator who has originated at Wells Fargo, Bank of America, or MetLife at the drop of a hat (unless their compensation demands were unrealistic).

      (The opinions expressed in this reply are not necessarily those of RMS or its affiliates.)

      • I asked a question, James. You asked me what evidence I have. Notice my question marks? I was waiting for a response from Mr. Lunde.

  • Even though I have a great deal of respect for the opinions of Mr. Lunde, it is hard to support the idea that total endorsements for this fiscal year will be anything close to 43,131, the endorsement total for fiscal year 2005. Current trend information puts the count right around 52,000 as The_Cynic describes in a comment at http://rmdaily.wpengine.com/2014/07/27/retail-still-outperforming-wholesale-in-reverse-mortgage-volume/

    To come in at 43,131 endorsements for this fiscal year, total endorsements for July through September would be only 6,545 or less than 1,637 endorsements on average for this month and the next three. Realistically, the average monthly total seems to be about 3,900 endorsements based on the current inventory of applications with case numbers assigned through May 2014 and projections of the applications which get case number assignments in June through September and can turn into endorsements before October 1, 2014 (which will only be a small percentage of the applications which received and will receive case numbers in that four month period before October 1, 2014).

    Yet unless the Extreme Summit is at least moderately successful next fiscal year, fiscal 2015 could be the first fiscal year since fiscal 2005, our endorsement volume goes under 50,000 endorsements and perhaps under the fiscal year 2005 total endorsements of 43,131 (although the latter is not likely). Without the Extreme Summit, the HECM endorsement total for fiscal 2015 could be expected to be as low as 46,000.

    A lot is riding on the success of the Extreme Summit particularly
    during the next 12 months.

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

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