How Wholesale Reverse Mortgage Lenders Help Brokers Adjust to FA

As the dust settles following June’s surging month for reverse mortgage endorsement volume and the industry moves further into the Financial Assessment landscape, wholesale lenders are taking several initiatives to help their broker partners better adjust to the new guidelines.

Endorsements for Home Equity Conversion Mortgages (HECMs) rose 24% in June, boosted by heightened application activity as borrowers rushed to get reverse mortgage case numbers before the Financial Assessment deadline in late April, according to recent data tracked by Reverse Market Insight (RMI). Broken down by channel, June growth was driven by a nearly 30% boost from wholesale.

Since then, the industry’s largest wholesale lenders by volume have been feeling the come down after June’s high, as they close out their pipelines of those pre-FA loans and see more loans come with case numbers after April 27.


“There was a huge rush to get files in before the deadline, then it felt like there was a real lag,” says Sherry Apanay, chief sales officer at Urban Financial of America.

Compared to the rest of the industry, Urban recorded the highest wholesale volume in the 12 months trailing June with 4,794 total units, according to RMI data. On the retail side, the company produced 1,387 loans over the course of that time period.

But since the Financial Assessment deadline, Apanay noted that production has dropped by an estimated 25-30% in the wholesale channel as its loan originator (LO) partners started adjusting to doing business under the new guidelines.

“There was probably a 30- to 45-day lag time where LOs were either scared or unsure,” she said. “They just weren’t originating at capacity after the deadline.”

Like other reverse lenders, Urban offered training to its personnel to prepare them for the Financial Assessment. But documenting things like extenuating circumstances and compensating factors has created a lot of back-and-forth between originators and underwriters as they try to piece together a borrower’s file.

“The Financial Assessment is like putting a puzzle together,” says Kim Smith, senior vice president of wholesale lending at American Advisors Group (AAG).

While it is too early to tell what the true impact of the Financial Assessment will be on AAG’s wholesale production, Smith says the channel’s volume is closer to where it was prior to the “FA boom levels” the industry saw in June. In the 12 months trailing June, AAG reported 3,514 total units in its wholesale channel, according to RMI data.

In efforts to help its wholesale partners adjust to the new guidelines, AAG’s “credit desk” serves as a resource to help brokers understand certain FA processes, like allowing them to submit documentation to see whether a prospective borrower will need a full or partial life expectancy set-aside (LESA), among other areas of education and training.

“It’s a popular way for our partners to reach out to us and learn more about the Financial Assessment,” Smith says.

AAG is constantly looking to build its training platforms to support all of its wholesale partners, Smith added.

“Ultimately, it’s our job as a wholesale lender to educate our partners and help them improve not only with the FA guidelines, but with the sales process as well because that has also changed,” Smith says.

Urban also offers several online resources to assist its wholesale partners with the Financial Assessment.

The company has broken down its own process into clear “nuggets” of information, where wholesale brokers can log-on to Urban’s website and look up 15-20 minute training segments on specific pieces of the Financial Assessment. The company also constantly updates its Frequently Asked Questions to share information with its partners as issues come up, Apanay says.

“We’re trying to provide as many tools for our LOs as possible so they can understand FA and implement processes as necessary,” she says. “We are seeing improvement with understanding as to what is required and how to underwrite a new HECM with FA. I think that over the next 30 to 60 days, things will start to smooth out and everybody will be more on the same page than they have been so far.”

Written by Jason Oliva

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  • Ms. Smith seems on point when she says: “…the channel’s volume is closer to where it was prior to the ‘FA boom levels’ the industry saw in June. In the 12 months trailing June, AAG reported 3,514 total units in its wholesale channel, according to RMI data.”

    In December 2014 and January 2015, applications receiving case number assignments were 7,680 and 6,537 respectively. Into the rush to get case number assignments before the 4/27/2015 deadline, there were 9,758 applications with case numbers assigned in February, 9,331 in March, and 13,488 in April. Then in May case number assignments dropped to a ten year low of 4,184 and in June rose of 6,183.

    The case numbers in June may sound like a recovery but when you look at the conversion rate for last month of 57.548%, one can only expect less than 3,600 endorsements in October and beyond from this cohort of applications. Further no one is certain if the conversion rate will hold at 57.548% or drift significantly lower due to financial assessment rejections.

  • While June was a great month for endorsements, per HUD August was even better with 5,750 endorsements. This is the first time since we had six months in a row of 5,000 endorsements in fiscal 2013 that we have had three months of endorsements exceeding 5,000. The total endorsements for the eleven months of fiscal 2015 now exceeds the total endorsements for all of fiscal 2014 by 3.3%.

    There are strong indications that the endorsements for the month of September 2015 will not reach 4,600 and even a high probability they will not reach 4,000. While fiscal 2015 will finish better than last year and most likely fiscal 2012, the total endorsements for fiscal 2015 will be the third worst such total for a fiscal year in a decade.

    With poor totals in case number assignments for both May and June, it seems as if not only will fiscal 2015 end poorly as to September endorsements but that the start of fiscal 2016 will be less than stellar as well.

    Few genuinely expect fiscal 2016 endorsement numbers to be any better than the endorsement totals we have seen in the last three years and there is little supporting the idea that they will be better than this fiscal year either.

    The industry needed the Extreme Summit to work in order to create more interest in the investor community but another lack luster year for endorsements seems in the works. This will be a year to find out if the improvement in the media and investment in the financial advising, Realtor, and home building communities will actually pay off in higher HECM endorsements for the industry.

    HUD should be releasing the total case numbers assigned in July soon. Hopefully that total will change the outlook for the better.

  • I feel Jim Veale and The-Cynic covered the statistical end of the article terrifically! I could not even begin to add to their comments, great job you two!
    My comment is a simple one and it has to do with the training companies like AAG and Urban are offering. They are excellent and I can say that first hand because I am taking them constantly, both from AAG and Urban. If everyone does not take advantage of what these two firms are offering to their wholesale partners, people, you are missing out on a lot!

    John A. Smaldone

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