Reverse Mortgage Volume Off to Sluggish Start in 2016

If the reverse mortgage industry is a car, the road following the Financial Assessment has been a hilly one shaped by various peaks and valleys. But although April 27, 2015 continues to fade farther away in the rear view mirror with each passing month, the resonant impact of FA continues to drag down industry volume even now at the start of 2016.

Home Equity Conversion Mortgage (HECM) endorsements fell 8.1% to 3,890 loans in January, following a small uptick in December, according to the latest industry data tracked by Reverse Market Insight (RMI). On a year-over-year basis, HECM endorsements were 21.4% lower in January 2016 compared to January 2015.

January’s endorsement total, which is the smallest single month tally over the past year, now puts FA impact at a 32.3% decline from volume’s most recent peak in August 2015, when endorsements were somewhat “artificially inflated” by a rush of borrowers seeking HECM case numbers ahead of the April 27 deadline, noted RMI.

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Compared to the previous month, endorsement declines were widespread and affected each region—all except for the Rocky Mountain area, which saw volume increase 6.6% to 241 loans.

The Northwest/Alaska region saw the biggest monthly decrease with endorsement volume dropping 17.4% to 190 loans; while the Southeast/Caribbean followed in close succession, falling 15.6% to 758 loans—though the region did rank second overall in terms of total unit count.

Near-unanimous declines were also prevalent among the industry’s top-10 lenders, only two of which bucked the trend to start off 2016.

Liberty Home Equity Solutions bounced back from a rather weak December when the company reported just 78 loans, to 291 loans in January.

For the second consecutive month, Home Point Financial Corporation grew its monthly volume, increasing from 71 units in November to 99 in December, to finally 110 loans in January.

In another notable mention, Synergy One Lending, Inc. cracked into the top-10 lenders this January, reporting 141 loans to start the year, despite the near 30% decrease from its December’s endorsement count of 200 units.

View RMI’s HECM Lenders January 2016 report.

Written by Jason Oliva

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  • So…all the reverse mortgage company executives and bright ‘pundits’ who foresaw only a modest 10% decline in RM production were perhaps wearing rose-colored glasses.

      • Mr. Denton,

        The number of refinance transactions endorsed in November 2015 (the last month FHA reported on refinance endorsements) was only 454 endorsements. So even if the refinance business dropped in half, the overall loss to total HECM endorsements would be greater than total H4P endorsement production for last fiscal year but it would only total about 2,700 endorsements over a 12 month period (or an average of 227 endorsements per month).

        So while there is no question that a significant drop in HECM refinance endorsements would impact fiscal year endorsement totals, it would not be anything close to the business drop we are experiencing due to financial assessment.

  • It is hard to believe but based on the four month endorsement rule of thumb, a four month annualized conversion rate of 60.2%, and total case numbers of just 13,376 assigned in October and November 2015, logic says total endorsements for the first calendar quarter of 2016 will have less than 12,000 endorsements.

    The other day RMD reported a major bank as predicting that 2016 will be a year of growth for reverse mortgages. To grow means we will need at least 56,437 endorsements during calendar year 2016. So will HECMs see at least 44,400 endorsements in the last three calendar quarters of this calendar year? That will require an average of almost 5,000 endorsements per month. The problem is the case numbers assigned in November were 10,2% less than October. How bad will December, January, and February turn out to be?

    It seems industry leaders with exceptions ignore things like case number assignments and their trends when they declare that this year or that is the year of growth. Even if we reach 60,000 endorsements this calendar year, how can we call that growth if calendar year 2015 grew by 9.27%?

    Let us stop trying to be more optimistic than the last prognosticator and start speaking to where we actually are. We need to drive growth, not out-promote it. The more we out-promote one another, the less professional and the less accountable our industry looks to financial advisors and the mass affluent.

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