Reverse Mortgage Lenders Enter ‘New Era’ for Volume Post-Financial Assessment

August was the last—and highest—month for Home Equity Conversion Mortgage (HECM) endorsements in 2015 before the reverse mortgage industry felt the real impact of the Financial Assessment on volume. And on the wholesale side, the pre-FA volume ride translated into some huge growth for the channel, according to the latest industry data tracked by Reverse Market Insight (RMI).

Compared to July, total HECM endorsements in August were up 14.4% to 5,749 loans. Broken down by channel, the industry reported a 21% increase in wholesale to 2,820 loans during the month, whereas retail grew 8.7% to 2,929 units.

Wholesale’s performance in August was the second time the channel posted growth of more than 20% this year—the last time being in June, when wholesale endorsements grew 29.6% from the previous month.

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In terms of unit growth over the 12-months trailing August, Reverse Mortgage Funding ranked at the top among lenders. The company reported 1,936 wholesale units during this period. In total, the RMF added 2,900 loans over the course of the last 12 months through August 2015. Among top-10 industry lenders, the company ranks sixth overall with 3,498 total endorsements through August.

Live Well Financial, Inc. also experienced a significant volume increase in wholesale, reporting 1,208 loans in the channel from September 2014 through August 2015. This brought the company’s total HECM endorsements to 1,867 loans added over the trailing 12 months from August.

Also reporting sizable growth through August, Liberty Home Equity Solutions saw its total volume jump 46%, as the company endorsed 851 loans during the month—falling just seven loans shy of Urban Financial of America, which held down the number two spot with 858 endorsements.

Now with August out of the way, and the Financial Assessment’s impact already being felt on September volume, reverse mortgage lenders are entering a “new era” of endorsements.

“We’ve been talking for months now about the impending drop in HECM endorsement volumes resulting from FA, but now we know that September was the first month of that new era from the endorsements volume perspective,” writes RMI.

In September, HECM endorsements dropped 18.8% to 4,671 loans, signaling the end of a three-month run of volume that was inflated by borrowers rushing to get HECM case numbers before the Financial Assessment effective date of April 27.

View the HECM Originators August 2015 report.

Written by Jason Oliva

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  • While some believe that the time for the average HECM to go from case number assignment to endorsement somehow decreased to three months (through improved technology and systems) over the last few years, the September drop clearly shows that the industry rule of thumb of four months remains reasonably correct. It was the case numbers assigned during May 2015 which had the large drop at least partially reflected in the September 2015 endorsement numbers.

    Based on the poor monthly totals of case numbers assigned during June, July, and August, it is likely that the total monthly and quarter totals for the three consecutive months ended December 31, 2015 will see at least one month with less than 4,000 endorsements and total endorsements for the quarter at less than 12,000 endorsements.

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