Reverse Mortgage Interest Surges, Could Double as March 2 Approaches

The reverse mortgage industry is seeing a surge in borrower interest — from a 21% increase in counseling sessions to an uptick in phone calls from concerned borrowers — and some say the resulting loan volume could surpass record highs.

As the March 2 Financial Assessment (FA) implementation date draws near, industry analysts are tracking the changes, anticipating even more interest from borrowers this month.

In January, the number of reverse mortgage counseling sessions increased 21% from December, or 15.3% on a working day basis, according to data collected by Ibis Software Corporation.


The number of counseling clients logged each week that month shows a steady increase, starting at 1,671 for the week of Jan. 5, to 2,129 for the week of Jan. 26.

In preparation for this increased interest, counseling agencies have been ramping up their training efforts, investing considerable time and resources to help staff adjust to the new Financial Assessment guidelines.

But this month will see even more borrower interest, says Ibis President Jerry Wagner.

“I expect counseling sessions to pick up materially over the next couple of weeks,” he says.

In fact, the number of reverse mortgage case numbers issued this month could double, as borrowers take action before the Financial Assessment is implemented, says John K. Lunde, president of Reverse Market Insight (RMI).

“Given that we’re seeing what I would consider a major change to the program with accompanying major change to the borrowers’ available funds, I think it’s reasonable to expect roughly double the case numbers issued in February ahead of the March implementation of FA,” he says.

The average total of case numbers issued in September and November — the most recent months for which data is available — is 7,750, meaning that if there is a large increase this month, the number of case numbers could top 15,000, nearing record highs.

“If we get over 16,006 then we’d have the highest total since September 2009 and likely the second highest total ever for the program,” Lunde says.

Previously, there have been comparable events that have led to case number issuance surges, he says, noting three instances in particular.

Measuring the increase against the average of the prior three months, the industry has seen jumps anywhere from 46% for the minor tweaks to principal limit factors (PLFs) in October 2010 to 118% ahead of the initial utilization restrictions going into effect in September 2013, he says.

The other more recent change last August saw a 92% jump in case numbers issued for August 2014 as PLFs rose slightly for most borrowers and fell for some younger borrowers.

“In the past we’ve seen similar activity trends ahead of PLF reductions when borrowers could get more money by counseling and getting a case number issued before the effective date,” Lunde says. “The same principle is in place here with the added incentive of some borrowers being completely disqualified from the program under the new rules.”

Because of that risk, some borrowers who may have been on the fence about getting a reverse mortgage are now taking action.

While some lenders aren’t expecting the Financial Assessment to have a huge impact on loan volume, many are still experiencing an increased interest from borrowers.

Mike Gruley, director of reverse mortgage operations at 1st Financial Reverse Mortgages, a division of Success Mortgage Partners, says he’s seeing a spike in the number of calls from prospective borrowers.

“Interest may not relate to an application, but we are getting more calls. There’s more interest because people are concerned that they may not qualify,” he says, noting that 90% or more of borrowers with 1st Financial would still qualify after the Financial Assessment takes effect.

Still, this surge in interest may not equate to a surge in closed loans, Lunde cautions.

“Part of the challenge in the past is that many of these ‘surge’ cases don’t turn into loans, so we might get a jump in funding and endorsement volumes, but it has generally been much smaller than the [increase in] case numbers issued,” he says.

Written by Emily Study

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  • We need to resist the urge to frantically stampede our clients into reverse mortgages to “Beat these never ending Program changes”. Our handlers look at these mini crises as opportunities to boost production but we accomplish very little by this type of “Hard Sell” tactics.
    We jam up the system with junk loans that should never have been put into the system. We create bottlenecks in all ancillary services like counseling, AMC’s and processing that make our legitimate pipeline suffer to accommodate all the junk loans.

    • But those hard sell tactics are part of the education we provide. Right? We may not know that our non-borrowing spouse rhetoric of just a few years ago was not in accordance with the law but we all know the hard sale script. Boy, we’ll “educate” those seniors; “no one gets out of my seminars without knowing….” Now that is education?

      Don’t you just love the myth pocked truth and high pressure sales pitches in this industry that is so heartily declared as “education.” While education may be our method of presenting, the content is little more than marketing script.

  • Does the article author really think that there will be increased interest in HECMs due to lender Financial Assessment? Here is what she says: “In preparation for this increased interest, counseling agencies have been ramping up their training efforts, investing considerable time and resources to help staff adjust to the new Financial Assessment guidelines.” Counseling agencies are preparing for the lender Financial Assessment change not in anticipation of increased monthly counseling but due to the need to explain it to counselees although many do not agree what that need is.

    Jerry Wagner is right that the number of counseling sessions will rise although probably not double as John Lunde suggests. John, however, is right that the pull through rate on the counseling sessions given in February will be lower than the average for the fiscal year; that is not unusual at all.

  • What is happening now is a normal reaction. Companies and loan officers are pushing for business before the March 2nd date and borrowers are hearing the news as well.

    It is true, many seniors feel they will not qualify after March 2nd but that may not be entirely true. There are many compensating factors that may take the fear out of both borrowers and loan officers.

    Sure the change is a major one but anyone who is not taking advantage of every course available out there and understand those changes may not be long for the business?

    John A. Smaldone

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