Huntington Beach, Calif. — The reverse mortgage industry has “accepted” the Home Equity Conversion Mortgage Financial Assessment following its successful implementation over the the last two years, a Department of Housing and Urban Development official said Tuesday, and new loans following the assessment are on the upswing.
The rule was necessary and the outcomes have begun to level off, said Phil Caulfield, housing program policy specialist, home mortgage insurance division for HUD, during the National Reverse Mortgage Lenders Association’s Western Meeting in Huntington Beach, Calif. on Tuesday.
“It is here to stay,” Caulfield said. “It’s a tribute to all of you [industry members] that we have gotten this process under way in only two years. … If we hadn’t done this, there probably wouldn’t be a HECM program. It’s that important.”
The effects of the Financial Assessment, which resulted in a sharp decline in loan volume reported by lenders due to its more stringent lending criteria, have been realized, and volume is starting to level off, HUD officials continued. The reverse mortgage conversion rate is trending upward based on issued counseling certificates that have become endorsed loans, as well as overall endorsement volume that appears to be on the upswing, according to HUD data.
There were 92,139 certificates issued in fiscal year 2016 and 48,867 endorsed HECM loans, the data shows, resulting a conversion rate of 53%. By comparison, to date in fiscal year 2017, the conversion rate is 61% based on 51,877 certificates netting 31,622 endorsed loans.
“Initially we saw big disparities before and after Financial Assessment,” Caulfield said. “We think that the effect is less [now with] the recent numbers getting closer, getting up into the general range where we have been. [The industry is] doing a better job of screening applicants. That comes back to ‘acceptance.’”
Similarly, reverse mortgage endorsements to date in 2017 have ticked up slightly year-over-year, seeing a 6% increase over 2016.
“It does look like the volume is up a bit in 2017,” said Karin Hill, HUD senior policy advisor for single family housing, noting seasonal factors and lender timing can influence endorsement data.
HUD continues to monitor the performance of program changes, and plans to clarify and implement guidance on the HECM final rule this summer and fall based on a previously announced timeline. In particular, HUD representatives pointed to an increase in the percentage of HECM-to-HECM refinance loans versus recent years, as well as appraisals.
“A major risk to this program is the quality of appraisals,” Hill said.
Written by Elizabeth Ecker