Reverse Mortgage Volume Trending in the ‘Right Direction’

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

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  • A HECM cannot be endorsed without first obtaining a case number. HUD stated at its webinar on financial assessment that from August 27, 2015 through August 31, 2015, there have been just 23,246 case numbers assigned; all of the related applications and applicants are the first to undergo financial assessment. Case numbers assigned through May 31, 2015 were just 4,608, leaving 18,638 case numbers assigned in the three months ended August 31, 2015.

    Looking at the total case numbers assigned in the three months ended August 31, we have to go back to the three months ended August 31, 2004, before we find any such period below 18,638. Even our worst fiscal year for endorsements in the last ten, fiscal year 2014, had over 3,421 more endorsements in the three months ended August 31, 2014 than the three months ended August 31, 2015. Based on the four month lag rule for the average HECM to go from case number assignment to endorsement, most applications which will be endorsed and received case numbers in June, July, and August will obtain endorsement in October through December, the beginning of fiscal year 2016.

    With lenders wanting good news, it is not unimaginable that their vendors are putting their best spin on the numbers they gather but they are not numbers from HUD. Even New View Advisors, LLC are telling woes about lower securitization numbers so as we all know, endorsements tell the tale and they are less than 3 months away.

    With the conversion rate (generally a less volatile measure than the pull through rate) at the end of this fiscal year, at a low of under 60% for the first time since the fiscal year ended September 30, 1996, things do not appear as rosy as Mr. Button indicates they are. Again let us hope things are better than the numbers HUD provides. It will be told in our endorsement numbers next quarter but HUD numbers are the best indicators we have at this time.

  • Perhaps John’s data is extremely reliable but there is nothing to show that is true. Now that John has provided this data, we have the means to tell how accurate his data is a predictor of things to come but that will take time.

    Rarely has a single source of data which is less than comprehensive proven to be reliable. Perhaps John has data to prove out the reliability of what he predicts. .

  • I see everyone’s point of view as far as the time line of an application flow. However, if you look at the additional amount of investigative time, paperwork, processing and underwriting time, it is logical we are going to face a longer loan cycling time.

    When the FA ruling took effect, every one was running to the gate to get every application they could get in under the wire. This effected new applications coming in initially plus the time it took for everyone to embrace the new ruling.

    To many, the FA ruling brought to our space a foreign method of doing business. Those that had only been in the reverse mortgage space during their lending career never had to deal with credit issues or residual income tables. To add insult to injury the term compensating factors, extenuating circumstances and having to do an income analyses on the borrowers was a nightmare in the making!
    However, after it has all been said and done, most of us in the industry have either embraced the FA ruling positively or got out of the business entirely. Many people I know have done just that!

    In ending, I do want to say that I am optimistic that future originations will continue to grow and I feel the reverse mortgage space for all of us to enjoy and do good for our seniors will be around in our future for a long time!

    John A. Smaldone

    The opinion expressed above is that of
    John Smaldone’s and does not necessarily
    Reflect that of Willow Bend Mortgage

    • John,

      Getting a case number is much simpler than closing. Completing an application for case number assignment purposes does not mean that the application was completed correctly. So the easy part should be getting those case number assignments. Yes, indeed, the time from case number assignment to endorsement has most likely increased unless the pipeline following case number assignment until endorsement is as light as many of us believe it is on an industry wide basis.

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