Not Even August’s Big Gains Could Shrink the Reverse Mortgage Volume Gap

August proved to be a big month for reverse mortgage volume in both retail and wholesale channels, but the 24% single-month increase was not enough to lessen the gap between this year’s endorsements and 2015’s numbers, according to recent industry data.

Home Equity Conversion Mortgage (HECM) endorsements totaled 32,542 loans year-to-date (YTD) through August 2016, representing a decrease of 16.8% compared to the same YTD period in 2015, when the industry tallied 39,117 units, as indicated in the latest HECM Trends report published by Reverse Market Insight this week.

Despite the 24% increase in August—the largest monthly increase seen this year—the volume gap actually widened since July, when HECM endorsements totaled 28,164 loans YTD and represented a decrease of just 15.6% from the comparable period in 2015.

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“HECM endorsements were up by a surprising amount in August, as we pointed out in our HECM Lenders report last month, but pessimists and cynics alike can take comfort that year to date industry volume remains down at -16.8% as of August,” RMI writes in its HECM Trends report for August 2016.

Like July, only two of the top-10 states for volume report growth through August: Colorado and Washington. With 1,259 loans as of August 2016, Colorado strengthened its volume from the previous month, as the state is now up 32.9% compared to last year; while Washington’s 925 loans YTD represent an increase of 2% over 2015.

As for the top cities, Denver ranks third overall in terms of units with 285 loans, but trumps all other cities with a growth of 55.7% year-over-year. And like the Mile High City, much of the growth among the top-10 metros remained out west.

Top-ranked Los Angeles reports 512 loans through August, an increase of 24% over the comparable period last year; while San Diego ranked second overall for unit count with 300 HECMs and a growth of 7.5%.

While reverse mortgage industry volume may be trending lower in 2016 compared to the last two years, on the bright side, August’s big bump in production helped lift HECM endorsements past the 2014 trend line for the second time this year.

Monthly HECM volume in 2016 has lagged behind both 2015 and 2014 on a year-over-year basis. But while single-month volumes this year haven’t yet surpassed any single month from 2015, there were two occasions where 2016 endorsements exceeded those in 2014.

This occurred in April 2016, where the month’s 4,243 HECMs were roughly 2% higher than April 2014’s volume of 4,170 loans; and August 2016, which reported 4,387 loans, representing an increase of approximately 35% over August 2014’s volume of 3,256 loans.

View the full RMI report to see where other states, cities and zip codes ranked for HECM volume through August 2016.

Written by Jason Oliva

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  • There is a long long road ahead in this industry for those who want to stick it out…I think all the major banks saw the direction this industry was headed years ago and may be a reason why they are no longer in it.

      • REVGUYJIM,

        We agree but there is some room for speculating on the reasons why we have seen no real move by any major bank to enter the industry since Wells Fargo left.

    • Jim,

      We agree.

      Even the actuaries have been warning us that our growth has been in trouble. Here are the predictions for fiscal year 2016 endorsements by the independent actuaries of HUD by the year of prediction:

      2009 — 151,593
      2010 — 131,603
      2011 — 121,058
      2012 — 101,389
      2013 — 66.906
      2014 — 59,206
      2015 — 55,000

      Actual endorsement count for fiscal 2016 48,902 —

      less than one-third of the actuarial prediction for the endorsement total of fiscal 2016 made back in 2013.

      It has taken years of poor performance for the actuaries to reach the conclusion it did in November 2013 and yet it did that in the face of the industry hyping its Extreme Summit. While fiscal year 2013 had 60,114 endorsements, the actuaries did not believe that with the loss of Standards, fiscal 2016 would show much growth at all despite the noise about the Extreme Summit.

      Our actuaries apparently understand our capabilities better than we or our industry leaders do. Even our chief marketing analytical company is distracted by opening up a witch hunt for cynics and pessimists rather than report on the market as it is (as if getting rid of cynics and pessimists will change our endorsement outcome for the good).

      All in the industry may not agree on some minor points about where we are but the results of last fiscal year should stand as an awakening for the industry not as a reason to be turn on each other.

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