The Financial Assessment dragged down reverse mortgage volume following its implementation in late April, but now it appears the industry is headed in the “right direction” as applications are starting to bounce back, according to recent real-time loan data.
After a strong April through June, closed loan volume was “expectedly down” in July and August—basically, the FA effect, said ReverseVision President and CEO John Button during the company’s latest Town Hall Meeting this month.
September closed loan volume was up 17% over August, according to Button’s analysis of the aggregate day-by-day data coming through ReverseVision’s systems.
“I can also tell you that we appear to be recovering volume as an industry at a pretty modest pace in September,” Button said, based on the daily data so far this month. “Some leading indicators that give me considerable confidence for what the industry might be doing in the fourth quarter also seem to be there.”
Applications sharply increased in February through April before plunging in May, which Button attributes to the “FA effect.” But, volume recovered to more “normal” levels in June and July, with growth above that normal level in August. And so far, September looks to be a modest increase from August, Button noted.
Application volume grew each month from January to April up to a peak of 10,000, which is just less than double the “typical” monthly volume, Button said.
“After an unusually low May, application volume immediately jumped up in June and continued to grow each month in August and September at approximately 5% monthly,” he said. “So, we’ve got a trend headed in the right direction.”
Another unintended effect of the Financial Assessment has been an increase in the average loan cycle time, that is, the time from application generation to loan closing. According to loans coming into the ReverseVision systems, this timeframe has increased from an average of around 61 days in May 2015, to a peak of around 76 days in July, only to decrease somewhat in August to 73 days.
“So we’re adding as an industry somewhere around 12 days, on average, per loan from application to closing,” Button said. “Clearly, FA is having a material effect on loan cycle time.”
But keeping in mind the 73-day cycle time, applications will be appearing as closed loans in about 2 to 2.5 months, Button notes, thus providing encouragement that November and December volumes will likely improve.
August also had the highest proposal volume on the RV Exchange platform for the entire year of 2015, which based on an 80-day proposal to closed loan cycle time, indicates “strong” December volume, Button said.
“I’m very encouraged the fourth quarter will be a good one for us all,” he said.
Written by Jason Oliva