After three solid months of inflated volume, endorsements for Home Equity Conversion Mortgages (HECMs) finally felt the impact of the Financial Assessment in September. But while the industry saw volume drop nearly 19% during the month, the post-FA fallout hit some markets hard, while others actually saw production increase.
Endorsement volume rode high during the three months before September, propelled by a rush among borrowers getting HECM case numbers before the new underwriting requirements of the Financial Assessment took effect April 27.
Although endorsements reached their highest monthly level seen since July 2013 during this time—August’s 5,750 loans—September was the first month to reflect the Financial Assessment’s true effect on volume, given the lag times between funding and endorsing loans, according to the most recent industry data tracked by Reverse Market Insight (RMI).
The impact was widespread, with nearly all regions seeing HECM endorsements decline in September—except for the Rocky Mountain region, which held steady with 231 loans during the month.
Among the cities seeing the biggest decline in monthly HECM endorsements was Honolulu, Hawaii which saw volume fall 67.7% in September to just 10 loans, compared to the 31 units reported in August. Year-to-date, Honolulu’s endorsement volume was down 3.9% at 148 loans through September. Last year at this time, the city reported 154 units.
But the city wasn’t alone, considering every other market in the Pacific/Hawaii region reported volume declines, with Los Angeles—the region’s largest producer—down 37.8% in September to 338 loans, compared to the prior month’s total of 543 loans. Overall, volume for the region was down 31.7% in September to 1,427 loans.
The impact of the Financial Assessment on HECM endorsements were also felt strongly up the Pacific coastline in Seattle. The Northwest/Alaska region’s top market in terms of loan count, Seattle reported 100 loans in September, representing a 47.6% shortfall from August’s 191 loans. However, despite the monthly drop, Seattle’s 2015 year-to-date endorsement tally of 876 loans is 27.9% higher than where it was for the same period last year.
Overall, HECM endorsements in the Northwest/Alaska region declined 38.8% in September compared to August, dragged down by lower endorsement volumes from Seattle, Portland (-38.3%), Boise (-23.5%) and Spokane (-13.3%). Within the region, only Anchorage reported higher volume in September, rising 20% to 12 loans.
Although nearly all of the regions tracked by RMI posted endorsement declines in September, there were some markets that bucked the trend.
The Rocky Mountain region’s steady endorsement numbers were bolstered considerable growth in half of its six markets and small declines among its biggest cities.
Namely, it was Sioux Falls, S.D. that saw the most substantial increase, more than doubling its volume from two loans in August to five in September, representing a 150% increase.
Casper, Wyo., which also reported five loans during the month, saw endorsements grow 66.7% from three units in August; while Helena, Mont. reported 21 loans, or 10.5% higher than the 19 loans recorded in the prior month.
The region’s largest markets, Denver and Salt Lake City, declined 0.8% and 4.9%, respectively in September.
Elsewhere, another notable growth story happened in Bangor, Maine. In September, the market produced 29 loans, signifying a 141.7% increase from the prior month’s total of 12 units.
Also of note in the New England region, Providence, R.I. grew endorsement volume 125% to 18 loans, up from eight the prior month.
Written by Jason Oliva