Endorsement Gap Widens for Reverse Mortgage Volume in 2016

The gap continues to widen between reverse mortgage volume in 2016 compared to recent years as Home Equity Conversion Mortgage (HECM) endorsements sunk to their lowest single-monthly total this summer. Despite the broader industry declines, certain major metro markets continued to buck the trend of falling volume with some notable growth, according to recent industry data.

Through July 2016, HECM endorsements of 28,164 total units year-to-date (YTD) represent a decrease of 15.6% compared to the same period in 2015, when the industry produced 33,368 loans, as evidenced by the latest data report from Reverse Market Insight.

The decline can be attributed, in part, to July 2016 being the single lowest month for endorsement volume in 2016, with just 3,534 loans. Declines among most of the top-10 states for volume can also be pegged for the widespread dip in endorsements.screen-shot-2016-09-27-at-4-26-57-pm


(Source: Reverse Market Insight)

Only four states report YTD volume growth in 2016 compared to last year, with California leading the way with 6,319 total loans, an increase of 2% over 2015.

The Golden State continued to reign supreme among all other states as it was propelled by sizable growth in three top-10 cities, including Los Angeles, where endorsements (464) rose 42.8% year-over-year; San Diego, whose 271 units puts the city’s volume 27.2% higher than what it was last year during this time; and Riverside, which reported 131 loans YTD for an increase of 87.1% over 2015.

Continuing its growth story, Colorado remained a hotspot for reverse mortgage volume through July 2016 with 1,038 loans, representing a year-over-year increase of 25.7%.

The state was driven by the performance of its largest city, Denver, which reported 229 units through July 2016, a growth of 51.7% compared to last year, pushing the Mile High City to the third ranked spot overall among cities.

In keeping with the trend out west, Washington also posted year-over-year gains in endorsement volume. The state, which ranked seventh overall YTD through July, reported 796 loans, an increase of 13.6% from last year.

See where other states, cities and zip codes are producing the most HECM volume here.

Written by Jason Oliva

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  • Yesterday HUD provided endorsements through 9/30/2016. The total revealed what most originators who have participated in surveys about lost business due to financial assessment were right; the loss was about 15%. September 2016 was the end of the first consecutive 12 month period in which in every month almost all borrowers of HECMs endorsed in that month had gone through financial ssessment. This is also the same 12 month period that HUD uses as its fiscal year.

    Total endorsements for last fiscal year (we are now in fiscal year 2017) were under 48,902 versus 58,943 endorsements for fiscal year 2015, a drop of 15.8%. Fiscal year 2015 was the last 12 consecutive month period in which financial assessment did not impact a significant number of borrowers whose HECMs were endorsed in that twelve month period. The last time we have had total endorsements less than 50,000 was fiscal year 2005 when total endorsements were just 43,131. It is official; HUD has provided endorsement information that proves that fiscal year 2016 is the worst fiscal year for endorsements in more than a decade.

    Ever since late last summer, some have been telling us that they have seen signs of recovery. In fact things have only gotten worse. For example endorsements for September 2016 at 3,741 were 19.9% less than endorsements for September 2015 at 4,671. Also September 2016 was 14.7% less than endorsements for August 2016 of 4,387.

    We have also had many telling us that any loss that creates a better image of HECMs was worth the price in long-term endorsements. It is common for those who beg for change, get it, and find it was a horrible result, normally say that long-term, it is for the best. One notable reminder is New Coke versus Classic Coke. Unfortunately since financial assessment was not instituted by lenders as HUD had wanted, lenders finally got their way in demanding HUD creates one financial assessment for the industry even though HUD was reluctant to get involved at all. It is doubtful if lenders will now go back to HUD with hat in hand asking HUD to eliminate or greatly change financial assessment.

    Fiscal year 2016 had five months of endorsements of less than 4,000 endorsements. The last time that occurred was fiscal year 2005.

    The modified annualized conversion rate for fiscal year 2016 was just 63.8%. That is the third worst such percentage for a fiscal year since fiscal year 1992. Many thought financial assessment would improve the conversion rate since many lenders are offering a pre-qualification determination; unfortunately that has not been the case. Fiscal year 2015 had that the worst such percentage at 59.5% with fiscal year 2014 at 63.1% as the second worst such fiscal year.

    So will fiscal 2017 be better? If we are in the downward secular stagnation cycle it appears we are in, the answer is a resounding “yes” with fiscal year 2017 endorsements coming in some where between 55,000 to 57,000.

  • If one uses the information in the article and looks at the graph, it seems as if the graph shows a pattern much closer to calendar 2014 than calendar 2015. It also was a low year for endorsements.

    Why doesn’t the graph include August 2016 endorsements since we have had that data for over a month? (Even total endorsements for September 2016 was released by HUD on October 1, 2016, the day before this article was posted.)

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