Reverse Mortgage Volume Lags Behind Recent Years, But the Gap is Closing

Reverse mortgage volume started 2016 well-below year-ago levels in both 2015 and 2014. But as the industry continues its recovery from the biggest program changes it has seen in recent years, that volume gap is starting to close.

Compared to last year, Home Equity Conversion Mortgage endorsements began 2016 with 3,890 loans, approximately 21% lower than January 2015, according to industry data tracked by Reverse Market Insight (RMI). The following month, a nearly 18% jump in volume brought the total endorsement count for February just 3.5% lower than its 2015 level.

March endorsement data, which reported just a 1% decrease from February’s numbers, helped compress the year-over-year gap even smaller. On a year-ago basis, March’s 4,535 loans are now just 2.3% lower than where they were in March 2015.


“HECM endorsements have been lower than 2014 and 2015 for each of the first two months (and March will continue that pattern), but the gap is at least narrowing,” writes RMI in its HECM Trends report for February 2016 released Wednesday. “That makes year over year comparisons a little rosier, particularly if we drill into some of the warmer markets as Spring thaws more of the country.”Screen Shot 2016-04-20 at 4.24.13 PM

Source: Reverse Market Insight

While most of the top-10 states for volume are trending lower endorsements year-to-date through February 2016, some have been seeing notable growth this year so far.

With 318 units year-to-date, Colorado is up 45.9% through February. The state, which has the highest growth among the top-10, is propelled by Denver, whose 58 units signal a 47.4% increase compared to last year.

Washington state is also up 20.9% compared to last year’s numbers with 237 units through February—enough to tie North Carolina in terms of unit count as the seventh largest state for volume.

RMI also highlighted two adjacent zip codes in St. George, Utah, both of which made the top-10 list nationally. Even more impressive, RMI notes, is that 29 of the area’s 45 loans were HECM for Purchase loans.

View the RMI data.

Written by Jason Oliva

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  • RMI is trying to paint a rosy picture. First, it is using a different reporting period than HUD but no matter how you put it, the total endorsements for the three month period ended March 31, 2016 is THE worst endorsement total for the first three month period of any calendar year in over a decade.

    Case number assignments are the most accurate indicator of future endorsement trends. Based on the four-month lag rule of thumb, April and May 2016 endorsements are expected to be lower than February 2016 with May 2016 endorsements looking at a 25% potential drop unlike endorsements in May 2015 when compared to endorsements in February 2015.

    While RMI uses the calendar year to report year-to-date endorsements, HUD reports its data on a fiscal year starting on October 1 of the prior year ending September 30 of each year. Will April and May 2016 provide the industry with sufficient case number assignments to overcome the latest trend in case number assignments? HUD should provide those April results in late June and May endorsement numbers in late July.

    So while the endorsement count for calendar year 2016 is still open to question, fiscal 2016 is looking firmer. In all likelihood total endorsements for fiscal 2016 will turn out to be among the three worst such totals since October 1, 2005 and most likely the worst such endorsement total in 11 fiscal years.

    While lenders have traditionally questioned the conservative endorsement estimates of HUD’s actuaries in the past, even at times the actuarial endorsement estimates have looked overly optimistic to actual outcomes since fiscal 2009.

  • Jason, encouraging article to start the day! I am optimistic about the future. Sure, we have gone through a lot with all the changes and uncertainties. In fact those uncertainties still hang out there and probably will continue for quite some time to come.

    The bright spot on all of this is that we are just about a year into the FA ruling and its major change to our industry. I truly believe that because of the FA ruling, our product has more credibility to it than it has had in many years.

    In talking to many originators around the country, they tell me originations and closings are picking up, which falls in place with this article.

    Another major plus we now have is new found opportunities available to us within the financial planning professional arena’s. Not to mention the amount of baby boomers turning of age daily that qualify for a HECM. To go along with that, just look at the vast amount of equity seniors have accumulated in there homes.

    With retirement being the main goal of most seniors in their 60’s, along with the other pluses I just mentioned, we could not be in a better position to take advantage of the opportunities at hand today in our industry !

    John A. Smaldone

    • John,

      HUD just reported case number assignments for February 2016. These applications are expected to form the base for endorsements for June 2015. The count was 6,256 case numbers assigned. That is a marked increase from January 2016 of 19.5% but when compared to February 2015, there is a drop of 38.9%. Could June 2016 be another month where endorsements are less than 4,200?

      The modified annualized conversion rate is marginally creeping up which is good news. For March 2016 it was again over 60% at 61.4%. A 1% increase is over 700 endorsements in a 12 month period based on current monthly case numbers assignments..

      While there is a common belief that higer application and endorsement numbers will result from the warmer months, few applications which receive case number assignments after May 31 will be endorsed in this fiscal year. There is little chance that applications receiving case number assignments after August 31, 2016 will be endorsed in this calendar year.

      While it is possible that this fiscal year will see more endorsements than the two worst fiscal years to date for HECMs endorsed in the last ten years, it is also very likely that fiscal 2016 will be the worst fiscal year for endorsements in over a decade.

      If we cannot be realistic about where we stand as an industry when it comes to originations that we believe will close where will we be realistic? A well respected trainer in the industry had to rebuke his class a few years back telling them that for them to benefit from his training, they needed to stop trying to impress others with their puffed up pipeline numbers and be real so that he could help them grow. Being optimistic has a place but more often it replaces facts when trying to understand trends and where our industry actually stands.

      A lot of the anecdotal noise we are hearing about better numbers is little more than puff. It is discouraging to get all hyped about what a great year this is only to be disappointed by the numbers HUD releases monthly.

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