Reverse Mortgage Lenders See Volume Dive Post-Financial Assessment

Almost all reverse mortgage lenders were anticipating a decline in loan applications and closings as a result of the financial assessment that took effect in late April. Now, two months after its implementation, both lenders and the Department of Housing and Urban Development are beginning to shed light on the immediate effects of the new rule.

The initial projections were varied: In an initial RMD poll conducted as lenders were preparing for the assessment’s implementation, about 12% of lenders reported anticipating a less-than 10% impact to loan volume. More than half, or 56%, said they anticipated losing more than 15% of their loan volume as a result.

Early data shows application volumes are down 40% from March levels before the financial assessment deadline, when application volume surged, according to data provided by Reverse Market Insight. Wholesale is down substantially more than retail, RMI says.

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But the immediate effect may be short-lived.

“The good news is that it’s already trending back upward,” says John Lunde, RMI president, “which is a lot better than the aftermath of September 30, 2013, when we bumped along the bottom volume-wise for several months.”

HUD implemented new principal limit factors on September 30, 2013, resulting in a sustained decline to reverse mortgage volume.

Anecdotally, the financial assessment impact, while still early to make any long-term predictions, appears deeper than initially thought by reverse mortgage professionals who responded to a poll conducted last week on RMD.

Among 190 respondents, a majority, or 54%, are reporting more than 15% volume decline. Among those respondents, 15% say the decline is more than 50%.

[Poll results as of 6/29/15]

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Some appear to be faring better, according to the poll findings. Similar to the predictive poll, 14% says volume has gone down less than 5% and 11% say they are experiencing an 11% to 15% decline in volume.

Lender and broker accounts are also varied. Lenders acknowledge the impact to volume, but remain largely positive on the shift as it promotes long-term reverse mortgage program stability and a safer product for borrowers.

Originators have reported a definite shift in the origination process, but with outcomes that so far have been beneficial to borrowers without being detrimental to business.

Written by Elizabeth Ecker

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  • Conclusions about stability for the industry without being detrimental to overall business is more dream than reasoned deduction. Our business has been hurt and will continue being hurt. Yet according to HUD this was a necessary move in order to protect borrowers.

    While the idea of LESAs is terrific, the term over which they must be capitalized is far too draconian especially for younger borrowers. What is the need for terms of 21 years when so few HECMs have been active for that many years? Having a term not to exceed 10 years seems reasonable.

    In October we should be able to determine pull through rates and other critical stats about this product but it probably will not be until 2016 that we begin to see long-term trends.

    For now all we have is an interesting survey with some preliminary numbers from RMI. We should get a much better picture about the future of our industry in the next 12 months.

  • At HighTechLenidng our reverse production has increased after financial assessment. However, this increase had nothing to do with the impact of financial assessment. In anticipation of the overall industry
    production decline (and with some great advise from my peers), we were able to hire more talent, expand geographically and be more aggressive in the retail/wholesale platform. As a smaller company we can be a bit more maneuverable.

    • Don,

      You point out some very serious flaws in using anecdotal and percentage information. We need actual closing information on HECMs which have case numbers assigned AFTER 4/26/2015.

      As you say your volume is up because you have added originators but another’s volume may be down because you got some of their originators and they have not replaced the ones lost. Your point is well made. That is why we need actual closing numbers rather than percentages because we have no information as to the source of increases and decreases in volume.

  • Many lenders anticipated anywhere from 10 to 15% declines after the FA ruling went into effect. I feel many were overly optimistic, especially because of the surge on pulling case numbers long before April, 27th.

    However, as stated, the good news is that things are starting to look back up again. It will still take time to adjust and adjust one’s mind set as to looking for new market opportunities and they are out there!

    Please don’t take me the wrong way, I am not saying to forget the markets many may have been in, on the contrary. We just have to take more into consideration as we interview prospective borrowers.

    The article was good and it gave us realistic statistics to possibly adjust our thinking for future months ahead.

    John A. Smaldone

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