Reverse Mortgage Volume Tanks 14% in May, Echoes 2014 Low-Point

Reverse mortgage volume continued its downward trend in May, plummeting to one of the lowest single-month endorsement totals in recent history, according to new industry data.

HECM endorsements fell 14.1% in May to 3,646 loans—the lowest monthly total since August 2014, when the industry struggled with the implementation of initial utilization restrictions, according to recent data released by Reverse Market Insight. In August 2014, HECM endorsements totaled 3,256 units.

May, which now represents the lowest month for volume recorded in 2016 thus far, follows several months of declining endorsements in both March and April. And further declines could likely be in store as the rest of the year unfolds.

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“I think we’re going to struggle for volume in 2016, [considering] the fact that we’re almost in the middle of the year and haven’t seen a real pick-up from an application and volume perspective—we’ve seen a little bit, but it hasn’t been strong,” RMI President John Lunde told RMD.

Unanimous declines among the top-10 regions tracked by RMI dragged down May volume. The Great Plains, which reported 71 HECM endorsements during the month, saw its volume fall 37.2%, followed by the Rocky Mountain region, whose 210 loans represents a 34.5% monthly decrease.

All 10 of the regions in the country were down in May, however, several top lenders saw their volumes increase during the month, including Finance of America Reverse, which grew to 330 loans, signaling a 22.2% increase from last month when they had 270 loans endorsed.

High Tech Lending increased by 15.6% to 104 loans, compared to 90 loans in April. Reverse Mortgage Funding (RMF) and Synergy One also saw growth from April to May. RMF saw a 5% increase and Synergy One saw a 2% increase.

On the flip side, there were a few companies in the top 10 lenders group that reported significant drops in their endorsement volumes.

American Advisors Group endorsed 796 loans in May, a decline of 17.6% compared to 966 loans in April. Meanwhile, Liberty Home Equity Solutions reported 225 endorsements, down 49.6% from the previous month; and Reverse Mortgage Solutions/Security One Lending saw its volume fall 58.6% to 67 units, down from 162 units in April.

A year ago, reverse mortgage volume was on the upswing in March prior to the implementation of the Financial Assessment, but has fallen 108 loans short of March 2015 and just 88 loans shy of March 2014 levels, RMI noted in a HECM Trends report this week.

Industry endorsement volume is still recovering from the aftermath of the Financial Assessment. Given the lag time between endorsement and loan funding, the vast majority of the rule’s impact was not felt until the later half of 2015, leaving the industry with considerable ground to make up heading into 2016.

“We’re coming into the year underperforming,” Lunde said. “The industry is still finding its footing in some ways.”

Written by Alana Stramowski

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  • LET US TURN HECM ORIGINATOR CONVENTIONAL
    WISDOM ON ITS PROVERBIAL HEAD!!!

    For about the last 18 months, we have had far too much pessimistic talk about how poor business would do and was doing after financial assessment was implemented. For a month, some of us have been patiently waiting to see if the industry would discover a set of fascinating facts. So far if any discovered them, none reported them.

    BUT if we compare HECM endorsement numbers for the twelve months ended April 30, 2015 to HECM endorsement numbers for the twelve months ended April 30, 2016, how did we fare? Did endorsements go down by 25% or even 10%?

    The answer is they went up (yes up) by 4.35%. There is much to be said about why that is true but raw numbers state, that on a twelve month by twelve month basis, business literally went up!!

    Now let us look at the facts which the entire industry has had at its disposal through Reverse Marketing Insight’s (RMI) Total Endorsements for the Twelve Trailing Month ended April 30, 2015 and then ended April 30, 2016. The first twelve month trailing report (ended April 30, 2015) which RMI posted on 5/1/2015, states that there were 52,569 endorsements in that twelve month period. On May 2, 2016, RMI reported that there were 54,854 endorsements for the twelve month period ended April 30, 2016. The two reports can be found at:

    http://www.rminsight.net/wp-content/uploads/2015/05/Lenders_201504.pdf

    AND

    http://www.rminsight.net/wp-content/uploads/2016/05/Lenders_201604.pdf

    Being realistic requires being unbiased in analysis, i.e., not caring what lenders, originators, HUD, FHA, or NRMLA may like or dislike. Yet does that mean that our businesses are better off by having financial assessment? In that 12 month period the answer is a resounding “yes” (but from very few other current business perspectives).

    • Jim, how much of the increase do you think was due to everyone scrambling to get case numbers before FA kicked in? Still, if what you are saying is correct then that is good news.

      • EricSD,

        In another comment, I alluded to this issue but did not directly address it. Some have made a big deal out of a year passing since the implementation of financial assessment; yet missed the endorsement comparison for the 12 months ended April 30, 2015 to the 12 months ended April 30, 2016 entirely; however, the endorsements during the twelve months ended April 30, 2016 is a mix bag of endorsements with their HECM applications with case numbers assigned before 4/25/2015 and after 4/24/2015.

        The clearest picture we will get about actual increased or decreased business since financial assessment will come on the weekend of October 1, 2016 when HUD posts the endorsement outcome for September 2016. While some HECMs with applications that received case number assignments before April 25, 2015 were no doubt endorsed after September 2015, the number of such HECMs endorsed between October 1, 2015 and September 30, 2016 are most likely so de minimis as to present only insignificant distortion issues on the picture of the change to our business activity since the implementation of financial assessment.

        As a realist, it is my view that the loss in endorsements measured by endorsement for fiscal year 2016 in comparison to those for fiscal year 2015 will show a loss in endorsements of between 12% and 15%. The predicted range would be smaller but as of this morning (6/6/2016), HUD still has not posted any HECM case number assignment information for any month after February 2016. Once the case number assignments for May 2016 are posted, we will know a lot more.

  • A HECM Streamline would be a boom for the industry. There has to be a way to make it happen, not only for the benefit of the senior, but for HUD/FHA as well.

    • ravens9111,

      Perhaps you can explain what a HECM Streamline is (HECM to HECM refi, etc.) and how in short it will benefit each party.

      • A HECM Streamline does not currently exist, but it should if HUD is looking to make the HECM more stable. Just like for forwards where there is an FHA Streamline or VA IRRRL, a HECM Streamline would be a way for a senior to reduce their current margin or fixed interest without an appraisal or FA. There would be no additional PL provided, but any NPL would then transfer to the new loan. The caveat is there would be no closing costs. No fees could be charged to the borrower and HUD/FHA would collect a premium at closing. HECM’s that currently have the 0.5% MIP would be able to keep their current MIP rate.

        Since FHA already insures these HECM’s, it would not put the MMI Fund at risk. If anything, it would put it in better position while at the same time preserving more equity for the senior.

    • Mr. Strycker,

      When you wrote your comment you probably did not have the benefit of the posting of the RMI data quoted in my comment above. You should also realize that the 12 month trailing phenomenon is not new to the total endorsements for the 12 months ended April 2016. It has been going on for now 11 months including May 2016. If it continues into June, it will only do so on a very tight basis as discussed at the end of this comment.

      On the total 12 month trailing endorsement basis, endorsements are higher now than during the same twelve month period the year before.

      The 12 month period ended April 30, 2016 is particularly interesting since it started on May 1, 2015 which was AFTER financial assessment was implemented.

      The 11 month consecutive trend is even more interesting since the current 12 month periods are running against the 12 month periods in which endorsements drew from the positive change of non-borrowing spouses and the principal limit factor changes that were both implemented on 8/4/2014.

      The result can only mean that financial assessment alone is not a principal cause of our current declining endorsement count. Wait until the end of this month when if the normal four month lag rule of thumb applies, we should see a significant rise in monthly endorsements from May 2016 to June 2016 based on the increase of case number assignments from January 2016 to February 2016.

  • The industry has had a lot to digest over the past 12 months with FA. Now other issues with the new proposed changes, one thing after another has hit us.

    However, we have to look on the bright side of the Mountain. Look at the optimism Jim Veale is pointing out to us all in his comment. Jim got me revved up!

    Endorsements will pick up, will 2016 be a banner year, probably not but it does not have to be a flop either. We have the opportunity over the next 7 months to lay a lot of ground work for future years.

    We must capitalize on the new markets that are available to us. We have had a lot of publicity and door openers to go after the financial planners and advisors. Target the real-estate market with the H4P program, not a lot of originators are. The one’s I talk to that are focusing on realtors and doing it the right way have been successfully with it! Small community banks are open to ideas that can increase their customer base, I can go on and on, it is out there and we have more senior homeowners at or disposal than ever before!

    That is my take on it for this Friday my friends!

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

  • ugotjc10,

    Understand that NRMLA is nothing more than a group of lenders loosely held together through a staff of hard working individuals. No doubt the action was taken due to comments out of HUD in regard to what they were starting to view as an unacceptable practice; however, I have no direct knowledge about any such comments.

    If you want to find out why the position was taken, I suggest you speak directly with Mr. Steve Irwin at NRMLA headquarters.

  • ravens9111,

    Since the current streamline requirement is that the FHA loan must be current, the balance due on the loan will be less at refinance than when closed. The opposite will generally be true of the balance due with a HECM, making refinancing a HECM using the same streamline methodology a greater risk if it is not at least dependent upon a reappraisal and current principal limits. So the risk is much different.

    • Yes, the loan must be current with an FHA Streamline. If a HECM is in default, they would not be eligible for a HECM Streamline. However, HUD/FHA already insures the existing HECM so doing a HECM Streamline would not bring any additional risk, it would reduce it by converting a monthly to an annual or reduce the accrual rate with an annual to annual or fixed. The NPL on the new HECM would not increase so there is no additional risk brought on by the HECM Streamline. FHA is already insuring the HECM so an appraisal or FA would not be needed.All proceeds and set-asides would be transferred to the new loan, including if there is an existing LESA already in place.

      • ravens9111,

        Really? The investors would see this as an additional threat to the premium they paid for the HECM. HUD also potentially stands to lose on interest during assignment.

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