Wholesale Reverse Mortgage Volume Rebounds After Dismal November

After posting one of the lowest volume totals all year this past November, the reverse mortgage wholesale channel rebounded to close 2015 on a positive note and finally put an end to its three-month streak of declines. 

Reverse mortgage volume on the whole struggled in the last few months of 2015 as the everlasting impact of the Financial Assessment in late April continued to drag down production, with the wholesale segment taking the biggest hits. 

Overall, on an industry wide basis, endorsements for Home Equity Conversion Mortgages (HECMs) jumped 5.2% in December to 4,229 loans, following a string of three consecutive months of falling volume, according to recent industry data tracked by Reverse Market Insight (RMI).

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Since September, which saw a massive 18.8% drop in endorsements, industry volume has steadily declined each month with October’s numbers falling 7.3% and November dropping 7.1% to 4,020 loans—the lowest single-month volume total in all of 2015.

Meanwhile, wholesale volume plummeted during this Sept-Nov timeframe. In September, wholesale volume suffered a 26.2% decline to 2,080, and since then monthly volume has yet to eclipse 2,000 units per month in the wholesale channel. 

Retail on the other hand dropped 11.6% in September, but was able to regain some lost ground come November when the channel grew 1.6% to 2,467 units. 

December’s numbers, however, offer a breath of fresh air for the HECM endorsement volume, especially the embattled wholesale segment. 

Wholesale endorsements for December grew 9.8% to 1,705 loans, whereas retail increased 2.3% to 2,524 loans. With December’s numbers in the books, wholesale accounted for 43.4% of total industry HECM endorsement volume in 2015. Retail represented approximately 56.6%.

While the industry wide bump in volume during December was reassuring, given that January’s volume declined 8.1%, it is apparent that December did not signal the start of the Financial Assessment recovery just yet for the reverse mortgage industry, noted RMI in the newsletter for its latest data release.

As usual, December was a better month for some lenders compared to others. 

For one, Home Point Financial Corporation saw a 40% increase in December to 105 loans, bringing its full-year 2015 endorsement tally to 1,278 units. 

RMS/Security 1 Lending also saw a big jump during the month, rising 35.8% to 501 loans, reaching third place on the month and the company’s highest monthly total since August, when it reported 527 units. Year-to-date, RMS/Security 1 finished 2015 with a total of 5,333 units. 

Also showing strong growth to close out the year, Cherry Creek Mortgage Company saw its endorsement volume increased 25.4% to 74 loans in December—propelling the company to finish 2015 in the tenth ranked spot among the industry’s top lenders. Year-to-date in 2015, Cherry Creek reported a total of 1,111 units.

View the RMI data for additional lender rankings and December wholesale/retail channel splits.

Written by Jason Oliva

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  • No matter how one colors it, endorsements for the last calendar quarter last year were miserable. Financial assessment continues to take its toll. There is absolutely nothing coming near term that says we will see much better endorsement numbers until at least after March, no matter what improvement there is to retail or wholesale. Based on October and November case number assignment data, “the fix is in” for February and March.

    What we are seeing is some TPOs and lenders doing better at the expense of others based on a shrinking pie. The first six months of fiscal 2015 had 28,537 endorsements. The projected total for the first six months of this fiscal year is just 24,530 endorsements or a drop in endorsements of 14%. If that rate of loss holds for this fiscal year, we should have about 49,900 endorsements for this fiscal year. We have not seen a fiscal year of less than 50,000 endorsements since fiscal 2005. The worse fiscal year total since fiscal 2005 was fiscal 2014 which had 51,642 endorsements.

    It is tiring to hear how seniors are showing greater interests in HECMs with so many greater safeguards. We have not had a single fiscal year of more than 60,100 endorsements since fiscal year 2011, long before fixed rate Standards were eliminated. Stats speak louder than the optimistic euphemism of many industry orators trying to twist the actual demand for our product.

    Listening to financial planners who became aware of HECMs through the early writings and speaking of Harold Evensky and actually understand the recent history of our product have noted that for them working on their clients’ planning since the end of fiscal 2013, HECMs have become more expensive (current upfront MIP versus that of Savers), there are fewer choices of products, approval is procedurally more difficult (financial assessment), and during the first year the mortgage is ridiculously more restrictive with its first year disbursements limitation rule. To them, this product is now more frustrating and less pliable in their clients’ situations. Yet they agree for individuals without competent advisers, HECMs may in fact be safer and better.

    Some of the planners with an understanding of our recent history have noted many of the recent articles and strategies since the end of 2013 are not much more than PR for the industry without much research backing their ideas or approaches. They believe that unfortunate.

    .

  • I do agree with my friend The_Cynic, especially on the first two paragraphs. However, even though FA has had taken its toll on the industry, dramatically I must say, all of us should have known it would, we had enough warning!

    In fact, loan officers, processors and underwriters themselves are now just starting to truly understand the FA ruling and how to deal with it., 9 months later!

    On the brighter side and this is where The-Critic and I may have some differences of opinions.

    Yes, many of our seniors today are not embracing the new changes with joy. Especially when those that were looking at the product prior to April 27th. What they have known about the product in the past is making it more difficult for these seniors to cope with the new changes of today.

    However, those that still can qualify under FA, even though more complex than it was, will still go for the program when seeing the benefits they will receive.

    Sure, The- Critic is right in the statement made, which was:

    “HECMs have become more expensive (current upfront MIP versus that of Savers), there are fewer choices of products, approval is procedurally more difficult (financial assessment), and during the first year the mortgage is ridiculously more restrictive with its first year disbursements limitation rule”.

    Grant you, we face these problems with the same market we have gone after for years. However, even with the same market, we can over come a good share of them with a positive attitude and knowing the HECM will serve those same seniors who can qualify under FA with benefits that will improve their quality of life!

    Anyone that is wanting to stay in our industry need to realize that these changes were needed for the sake of the borrower and the program itself. We also must realize in order to stay and be successful in our industry that mind sets need to change!

    We are not a product of last resort any more, in fact, I never looked at it that way since I have been in the reverse mortgage space. What we are now more than ever is an industry that offers a product to fit many needs from the lower income to middle class and the upper class as well as the professional industry.

    We need to recognize this and start changing our strategy to call on a more diverse range of clients. Data is available to find those homes in the upper price range with either a lot of equity in them or with higher debt. Either way, these people are intelligent enough to see how the HECM can assist them in leveraging their assets, one in particulate, their home!

    The -Critic is also right by saying:

    “We have not had a single fiscal year of more than 60,100 endorsements since fiscal year 2011, long before fixed rate Standards were eliminated”.

    Does this mean we will never exceed that figure, heck no! Our industry as a whole needs to recognize the opportunities ahead of us and capitalize on them.
    We must accept change and be prepared to accept more change in the future and use change in our favor, not against us.

    We as an industry should take heed in the comment and statistics The-Critic pointed out to us but not take them negatively but positively.

    We will break the 60,100 endorsement figure, maybe not this year or next but we will break it, I truly believe that and I will force myself never to think otherwise!

    John A. Smaldone
    http://www.hanover-financial.com

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