Reverse Mortgage Refinance Volume Shows Upward Growth

Two months into the year home equity conversion mortgages (HECMs) fell from last year’s comparable period, but HECM to HECM refinance figures climbed, the latest Reverse Market Insight (RMI) report shows.

HECM endorsements are down by 5.5% in February from February 2014, while refinances made up 11% of endorsements compared to 10% in January and 4% in February 2014, data show.

“HECM refinances have been a significant theme in the past six months, sparked by the increased principal limit factors (PLFs) from FHA in August 2014 coupled with rising home prices in the past few years,” says RMI President John K. Lunde. “We expect the refis to taper off since there are only so many loans that show significant refinance benefit right now, but as of February endorsements it hasn’t happened yet.”

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Falling HECM endorsements reflect the same trends seen in RMI data comparing February to January 2015 reverse mortgage volume, notes Lunde.

“It’s not a huge decline, but it’s always something to keep an eye on,” Lunde says. “We don’t expect to see big swings until August/September when the financial assessment starts impacting endorsement numbers.”

Top three states California, Florida and Texas improved their year-to-date growth rates from January, with California and Florida also being the only states showing growth over last year so far — at 3.1% growth and 16% growth, respectively.

“It’s somewhat surprising that only two of the top 10 states have grown year to date, but it just means that the industry decline is mostly being felt in the states ranked 3 to 10,” he says. “To give a sense of this, the 367 loan drop in these states is 65% of the national decline. There were 20 other states outside the top 10 that grew or stayed flat, like Nevada (+58.9%) and Idaho (+32%).”

Virginia improved from January, but showed the worst year over year decline among the top 10 states.

View the latest Reverse Market Insight data.

Written by Cassandra Dowell

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  • It is interesting that John finds such significant solace in decline this year over last, when last year was our worst year for endorsements since 2005. Rather than finding solace one would think that there is room to be ill at ease, especially with financial assessment coming on line this year. Sometimes these optimistic outlooks in the midst of such abject endorsement failure is like looking out onto a field filled with ostriches with their heads buried in the ground.

    So that it is clear, the endorsement pattern for this year is worse than last. Last year was so bad that we also saw the extinguishment of the ad portion of the Extreme Summit. My mom always told me that my actions speak much louder than my words. It seems this industry believes that the cheerier the outlook, it does not matter what is really happening to the industry. If the industry really believed its “talk” about a New Reverse Mortgage, then it would be putting its money where its mouth is. In fact just the opposite has happened.

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