Reverse Mortgage Refinance Figures Climb 39% In 2014

Home equity conversion mortgages (HECMs) fell in December of last year, but HECM to HECM refinance figures climbed, the latest Reverse Market Insight (RMI) report shows.

HECM endorsements finished down -13.1% for the calendar year 2014 at 52,949 loans, data show. But the decline was to be expected, says RMI President John K. Lunde, adding that the good news is that 2014 finished on an upswing. Both October and December exceeded both 2013 and 2012 figures.

The initial utilization restrictions implemented late last year by FHA likely contributed to the decline.


“FHA implemented restrictions on borrowers with case numbers issued on or after 9/30/13 such that they could draw the greater of 60% of the initial principal limit or the mandatory obligations plus an additional 10% of initial principal limit during the first year of the loan,” he says. “These restrictions made the product less attractive for borrowers seeking more cash at closing and created less revenue per loan for originators to market to new borrowers.”

Continuing a trend seen year after year, HECM to HECM refinance figures are heading up, with 8% of all loans falling into this category for December, up 39% from Dec 2013 — which was itself more than quadrupled from Dec 2012, data show.

“The refinances were an opportunity created by rapidly rising home prices in 2013/14 and secondarily by the principal limit factor (PLF) adjustments in August,” he says.

But whether this trend will continue upward throughout the year remains to be seen.

“Given that home price appreciation has slowed considerably in the past six to nine months we’d expect refinances to drop back down as a percent of endorsements over the first half of this year barring a new house price surge and/or PLF increases from FHA,” he says.

The top five states leading the charge in endorsement growth for December include California at 9,374 units; Florida at 3,834 units; Texas at 3,780 units; New York at 3,050 units; and Pennsylvania at 2,389 units.

Ranking at No. 1 for endorsement growth among cities is Philadelphia at 567 units; followed by Los Angeles at 440 units; Chicago at 414 units; Miami at 412 units; and Washington at 389 units.

View the latest Reverse Market Insight data.

Written by Cassandra Dowell

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  • When endorsements are as low as they are for HECM Refinances (formerly known as HECM to HECM refis), is it any wonder that a few endorsements here or there would produce this kind of growth? Yet HECM Refis are not substantial as to total endorsements.

    There is little doubt that H4P advocates are more than just a little jealous over this kind of performance. Yet home sales are down and builders are weak. With home inventories at lows in most of the US, home values should still be rising. It seems like in places like California and Nevada, there is virtually none of the pent up inventory we had in the past.

    What will it take for H4P endorsements to get to even 8% of total endorsements? So far it is the Edsel of our industry but this is not an argument to eliminate this product but simply a comment on the constant noise we hear about H4P despite how little demand there is for it. It is as if some members of the industry are convinced by their own propaganda that H4Ps are our future. So far these advocates are consistent about telling us not to look at the past even though the only thing we have to trust is their vision of our future which by the way now has six years of history and its track record is much less than mixed (meaning poor, very poor).

    Things are so bad in the H4P camp that they are divided over whether the best chance for growth lies with Realtors alone or through builders and their dedicated real estate licensees. What will these folks be saying is the way to growth when after another two years we are doing little better than today?

    So that we are fair let’s not hold them fully accountable for their incredible claims until the law permitting H4P has been with us for one decade. With three and one-half years to go, let us hope these advocates can pull it off and make the Edsel of 2014 into the Mustang Shelby Cobra of 2018.

    Last calendar year 6,810 endorsements were Standards which is almost 13% of the total of 52,949 and yet H4P endorsements were not even one-third of the number of endorsed Standards. So H4P advocates, in case you have forgotten the history, you have a lot to do. And as Nike says: “Just….”

    • The_Cynic,

      Why do you hate H4P? We are merely trying to help seniors buy a more useful home! All of your arguments are wrapped up in numbers not ideas of how to help seniors. If you could get through all of your numbers you might actually see the mesmerizing wonder of H4P. So open your eyes.

    • I feel the volume would increase if the Seller was able to pay their traditional portion of the fees. That’s the only complaint I’ve heard about the program. Make that portion of the program the same as Forward FHA purchases and volume will improve.

  • the Reverse Business has been morphing into the more mainstream Forward Business as I predicted 5 years ago. NMLS testing content underscores that. Isn’t it time that we stopped acting like a cute little Cottage Industry and start using Conventional terminology like our brothers and sisters in Forward? HECM Traditional is Categorically a Refinance program, in sharp Contrast to H4P which is Categorically a “Purchase Money” loan.

    Tracking HECM to HECM loans is akin to tracking how many homeowners with traditional Home Equity Loans paid off those loans with a brand new Home Equity loan from a different source. Who Cares!

    HECM to HECM Trend Analysis is Also skewed by the fact that people are living longer, so the likelihood that one might want to capture new equity in a RE market value rebound, increases over time.

    Too many of our kind have our “Heads under the Hood” debating the impact of Metric Tools on Auto Repair, instead of getting behind the wheel and hitting the Open Road to “Sell” something.

    H4P is a market to be Made. You Mechanics in the Shop will be the last to know, and the first to be amazed.

    • H4Pguy,

      I am sure five years from now we will be hearing from YOU once again about how accurate your 2015 predictions were (even though we will be reading them for the first time five years from now as well). You are just too insightful for words??

      The key reason why H4P did so badly last year is because of guys like you. H4P should be growing even when the market stumbles. Stumbling exactly the same as the market shows that the marketing skills of the loudest promoters are generally inept. This product has a lot of potential. Unfortunately it is being promoted and mishandled by too many just like you who are harming those who really have the ability to push H4P endorsement growth forward and get it done right. Neither you nor I are that person.

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