Reverse Mortgage Lenders ‘Swing Big’ as July Volume Slumps

Reverse mortgage volume dipped slightly in July, however, a few lenders reported big swings in their endorsement totals for the month, with one reporting a gain of nearly 50%, according to recent industry data.

Home Equity Conversion Mortgage (HECM) monthly endorsements fell 5% in July to 5,029 loans, says Reverse Market Insight in its HECM Lenders July 2015 report released Monday.

Four of the top-10 reverse mortgage lenders posted endorsement growth in July, with Urban Financial of America leading the pack, jumping 46.6% to 478 loans—the company’s highest level in over 12 months, according to RMI’s analysis.

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Reverse Mortgage Funding grew 25.5% to 251 loans in July, which RMI notes was just below their record April performance of 259 loans.

Meanwhile, RMS/Security One grew 13.4% to 389 loans during the month, while American Advisors Group saw HECM endorsements grow 4.6% to 1,256 loans. AAG continues to lead the top-10 lenders with 13,290 total loans in the 12 months trailing July.

Despite the overall volume decline, July still signals the second-highest endorsement level of the past 12 months—second only to June’s surge of 5,296 loans.

The high numbers for June and July are not seasonality so much as the surge of loans left over from before the Financial Assessment (FA) went into effect, RMI President John Lunde tells RMD.

“That might last another month, or we could see the declines from FA impact start as early as this month [August] for endorsements,” he said. “I suspect we’ll be back below 4,000 for at least one month in the next three months. But early indicators like applications, case numbers and counseling sessions all indicate the recovery in volumes started fairly quickly and should put us back to pre-FA levels well before year end on those early indicators, although maybe not fundings and endorsements.”

Several regions, including the Mid-Atlantic (601) and New England (232) led the way for endorsement growth during July, each reporting 18.3% and 13.2% more loans than the previous month, respectively. The only other region to post an increase in July was the Southeast/Caribbean, which was up 2.4% to 1,081 loans during the month.

The Rocky Mountain region, after posting an 86% growth in June with 329 loans compared to May’s 177, saw endorsement volume drop 20% in July to 263 loans.

Written by Jason Oliva

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  • The article has some meat but it also has fluff.

    If one actually has a handle on the current number assignment (CNA) picture, what additional insight or understanding is gained though knowing either application or counseling certificate numbers when projecting endorsements over the next three months?

    The last time the monthly endorsement count reached 5,000 before June 2015 was February 2014. So what additional information is found in stating that there is no month with 5,000 endorsements in the 12 trailing months to either June or July 2015?

    The latest month for which HUD has published a total HECM CNA count is May 2015 and the 4,184 CNAs for that month are the worst monthly total for HECM CNAs since January 2005, more than a decade ago. It is odd that was not mentioned in the article since those CNAs should have a significant impact on what the endorsements for September 2015 will be.

    Surprisingly, the conversion rate for July 2015 at 59.263% is the lowest conversion rate since December 1992 (the third fiscal year of the program). This means at that rate during July 2015 we needed 1,676 applications with CNAs to produce just 1,000 endorsements. In October 2006, it took 1,043 applications with CNAs to produce that same 1,000 endorsements when the conversation rate for that month was 95.915%. Even worse the overall conversion rate trend is still heading down and as of yet no monthly conversion rate includes HECMs that have been subjected to FHA mandated financial assessment.

    So while stating that there is a possibility we could “be back below 4,000 for at least one month in the next three months” looks significant, chances are in that same 3 month period (particularly September 2015) for the first time since July 2005 we could have a month bringing in less than 3,256 total endorsements. Based on 1) a recent month’s 59.263% conversion rate, 2) total CNAs of 4,184 in May 2013 (the first full month of CNAs beings assigned to applications whose applicants are subject to FHA mandated financial assessment), and 3) a general slowdown in both processing and underwriting during May and June caused by financial assessment, there is even a reasonable possibility that for one of those three months (once again most likely September 2015), total endorsements will be less than 3,000.

    So most likely by October 1 or November 1, we will know what the early returns on financial assessment really are. The good news is that the endorsements for September and October are likely to be distorted in part because of generally slower processing and underwriting times in May, June, and July as operations became accustomed to doing financial assessment on HECMs.

    The quotations of Mr. John Lunde ends with the following: “‘But early indicators like applications, case numbers and counseling sessions all indicate the recovery in volumes started fairly quickly and should put us back to pre-FA levels well before year end on those early indicators, although maybe not fundings and endorsements.'” That quotation seems like a prediction that endorsements for either fiscal or calendar 2016 will be about the same or better than 2015. If that turns out true, the industry is in better shape than most surveys have indicated.

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

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