These Reverse Mortgage Markets Had a Strong Start to 2016

Home Equity Conversion Mortgage (HECM) endorsements may have started 2016 at a low point relative to recent years, but with a couple of months worth of volume already in the books, this year is serving as a fresh start for some reverse mortgage metropolitan markets.

On an industrywide basis, HECM endorsements began 2016 with 3,889 units, roughly 21% lower than their year-ago level in January 2015, according to industry data tracked by Reverse Market Insight (RMI).

January’s total was also one of the lowest volumes recorded in a single month in the last two years, higher only than August and September 2014, when endorsements were 3,256 and 3,762 units, respectively. Although March endorsements will tell if volume is on the rise, the 17% volume bump in February is reassuring for now.

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Geographically speaking, January served as a strong jumping-off point for some markets to have a clean start to 2016.

At the state level, nearly all of the top-10 states tracked by RMI reported year-over-year endorsement declines in January. The only exceptions were Colorado and Washington, which posted volume that was 34% (138 units) and 14.6% (102) higher, respectively, than their January 2015 totals.

Drilling down to a more local level, volume among the top-10 cities fared better compared to states’ performances, with only four cities reporting declines—the largest of which was Brooklyn, whose 21 units in January are 40% lower than they were a year ago.

Seeing the largest year-over-year increase was Denver, which grew 85.7% to 26 loans this past January. Overall, Denver ranked eighth among cities for endorsement volume year-to-date through January 2016.

In terms of growth, The Mile High City was followed closely by Phoenix, which reported an increase of 77.8% to 32 total loans recorded during the month.

San Jose, Calif. also reported a strong showing in January with 29 loans, an increase of 26.1% from January 2015. Overall, the San Jose ranked sixth among the top-10 cities for reverse mortgage volume in January 2016.

View the RMI data to see where other markets ranked.

Written by Jason Oliva

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  • The totals for the month and year to date are identical because RMI reports year to date data on the calendar year basis. Knowing what endorsements were for February and case number assignments were for November, December, and January, the expectations after February are endorsements levels will be lower than February by about 10% for March, 13% for April, and a miserable 25% for May.

    This is not great news for the industry but one that was generally anticipated by originators following the staggering impact of financial assessment. Even though the industry is trying to put lipstick on the pig, endorsement totals only look to get worse over this and the following two months; there is no pessimism in that statement just a growing sense of realism.

    While many are finding comfort in the changes since April 27, 2015, our customer base is not. Many are saying that they are looking at the long-term improvement that the changes will make but few are any longer talking about even 100,000 endorsements in 2018 let alone 300,000.

    Many have glorified collaboration as the key to a turn around but most of us know how that went. Others are once again selling education and still others are hoping that our growing relationship with financial planners will get us there. Some are so desperate that they are chatting up H4P as the savior of our industry.

    What has been ignored since fiscal 2010 is determining the primary cause of the devastation of HECM volume. Some today excuse it to the poor image that the public has about HECMs which has always been true about HECMs, bad press which has generally been good in the last three years, and on and on but few of the reasons are different than they were in 2007, 2008, and 2009, our best fiscal years for endorsements.

    Our industry needs an honest look at what is going on. We need a credible, unbiased, and statistically valid study by an independent third party who are known for their competence. Although many of the reasons given have a measure of truth, we need to choose the most prominent and find solutions for them first, before just trying to find anything that works because for eight long years that approach hasn’t. The current overall trend since fiscal 2010 needs to be reversed and so far we have failed at doing that despite better press, higher senior home equity, better home values, positive promotion of our products by financial planners, one national high lending limit, generally well received changes to the basic HECM, availability of H4P, a tsunami of Baby Boomers turning 62 since 1/1/2008 and many other positives. We could only hope for such a positive environment on so many fronts back in early 2005 yet our endorsement volume was growing back then.

    Let’s detect our most pressing causes of endorsement failure and turn them around.

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