Reverse Mortgage Industry Sees Signs for Positive Growth Ahead

Close followers of reverse mortgage endorsement numbers know recent growth has been slow at best: Despite some recent months that harkened back to the pre-Financial Assessment days, overall Home Equity Conversion Mortgage endorsement numbers have remained stubbornly below the salad days of years past.

But pure endorsement figures don’t tell the entire story, and data from software company ReverseVision shows some alternate signs of hope for the HECM industry. The San Diego-based firm has recorded a 14% increase in its active user base between November 2016 and March of this year, a metric that ReverseVision vice president of sales and marketing Wendy Peel says is a more accurate indicator of demand in the reverse mortgage marketplace.

“I don’t base what I’m doing on endorsements,” Peel told RMD in a recent phone interview. “What I’m finding in the industry right now is that there’s a lot of growth.”

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Peel indicates that the spike in active users — based on ReverseVision logins over that period — is particularly impressive given the size of the brokers that tend to use the company’s loan origination and servicing software. 

“If you give context to that, the average company has five users. That’s a huge amount of growth into our software,” Peel said, adding that 320 new brokers and 12 lenders have begun using ReverseVision since the beginning of the year — and all of those lenders were forward companies looking to expand into HECMs.

Among those companies was Skyline Financial Corporation, a top-50 mortgage lender that is seeking to bolster its presence in the reverse marketplace. 

“The Home Equity Conversion Mortgage is often overlooked as viable home-equity alternative, and it’s especially underutilized as a means of purchasing a home,” said Joe Renner, Skyline’s reverse-mortgage division vice president, in a release announcing the Calabasas, Calif.-based firm’s partnership with ReverseVision. “By growing our retail efforts and expanding HECM products to our wholesale channel, we can better serve the needs of Skyline customers.”

It’s a model that’s gaining increasing traction in the industry: As RMD reported last week, C2 Financial — California’s largest forward mortgage broker and the second-largest in the nation — has rapidly accelerated its HECM program this year, partnering with Liberty Home Equity Solutions, Finance of America Reverse and Reverse Mortgage Funding to develop HECM training materials for its forward brokers.

The emerging partnership between forward and reverse lenders is focused in part on a novel concept: “generational lending.” The idea is that no mortgage broker operates in a vacuum, and that a wide knowledge of the various options available to potential borrowers can lead to overall growth on both sides of the equation.

Peel gave the example of a traditional forward broker or lender offering first-time homebuyer programs. He or she isn’t likely to make a huge profit from a Federal Housing Administration-backed loan for a young couple looking to make their first purchase, but that’s not the goal, Peel said. If the company made a good impression with the first transaction, the couple will return when it’s time to move into a bigger home — and bring a bigger payday along with it.

“That’s the loan they make money on,” Peel said. “That’s the loan they want.”

The same concept applies to offering the HECM alongside a typical array of forward options. If you did your job well with earlier forward mortgages, the homeowners could turn to you for a reverse mortgage once they turn 62 — or younger homeowners can refer you to their aging parents, or even vice versa.

“You’re engaged with seniors, and guess what? They have kids and grandkids,” Peel said.

The hurdle, of course, is “normalizing” the HECM in the minds of older borrowers, which Peel said could be accomplished by comparing the FHA-backed reverse mortgage to government loans designed to help first-time buyers. Both forward and reverse FHA products offer flexibility, but instead of a lower down payment and a more forgiving credit-score requirement, the HECM offers older borrowers the flexibility to access their equity and make payments only if they can. 

“It’s that simple,” Peel said.

Written by Alex Spanko

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  • Here we go again. Another round of industry leaders disappointing those hoping for and groping for recovery. If what Reverse Vision is saying is true, let it provide verifiable data showing a clear positive correlation between use of their product and endorsements. Jerry Wagner at Ibis can provide that verification based on the assumption that Reverse Vision is providing reasonably accurate data.

    If Reverse Vision is right, total endorsements for this fiscal year should be outside the range of stagnation. The total should exceed 60,100 by some significant amount say, 5% – 10%. If not, this is nothing more than some speculators trying to call attention to their software.

    My doubts about the accuracy of the usage of the Reverse Vision software will be assuaged, if the endorsement total for fiscal year 2017 exceeds 63.000. With so much confidence and praise for this new means of measuring future endorsements through the use of Reverse Vision’s software, even 66,000 seems to be in a reasonable confidence range. BUT of course where are the facts showing us to have reliance on these statements?

    I do plan to hold the feet of those to the fire who would so delude the industry. If they are right, we all win. If not, this is but another useless exercise in not being realistic about where the program is and where it is headed. The tired and true method projects to less than 54,000 total endorsements for fiscal 2017.

  • “But pure endorsement figures don’t tell the entire story, and data from software company ReverseVision shows some alternate signs of hope…, a 14% increase in its active user base between November 2016 and March of this year, a metric that … is a more accurate indicator of demand in the reverse mortgage marketplace.”

    But a 14% increase in comparison to what? The usage for July 2016 to October 2016, or November 2015 to March 2016 or any other time period? A 56,000 endorsement prediction was made at the beginning of this fiscal year based on nothing but endorsement information from before October 1, 2016 which is an approximately 14.5% increase in total endorsements for fiscal 2017 over total endorsements for fiscal 2016. (It was based on the total endorsements for the peak of the current stagnation pattern of fiscal 2013 being 2,000 higher than endorsements for fiscal 2015 and endorsements for fiscal 2015 being 2,000 endorsements less for fiscal 2017. Fiscal 2013, and fiscal 2015 (and now fiscal 2017) endorsements were both uplegs in this phase of the current stagnation pattern.

    If Ms. Peel is saying that she expects a 14% increase in endorsements this year over last, she is not saying anything new. She is simply confirming the current pattern of secular stagnation as a downward sloping irregularly shaped M at about 55,750 which is a rather poor estimate at this date but still within the range of reason. In the actual fiscal year pattern for the last four years we have seen a peak of just over 60,000 (fiscal 2013) endorsements and a trough of 48,900 (fiscal 2017). Based on case number assignment data related to expected endorsement count for this month and July, it is hard to imagine HECM endorsements by fiscal year end exceeding 54,000 by very much, if at all.

    Ms. Peel does not tell us if her 14% is seasonally or new user adjusted. In all reality, she tells us nothing about the 14% other than her software had determined that much increased software usage during the previously stated months. Interesting but hardly profound. Hers is but another voice in the chorus singing the ongoing secular stagnation story in the continuing pattern that first developed about five years ago. Perhaps her signs of growth in usage is nothing more than a confirmation of a much richer source of data, endorsement patterns.

    It is easy to be caught up in irrational exuberance, yet as professionals, we have seen that and its effect time and again. We need to put that practice in its proverbial place. Is there any real need to go back in history and be reminded of all the predictions of irrational growth? In the past decade we have some predictions come with unrealistic expectations while seeking full media coverage but all collapsed far short of their stated goals.

    It is time to move on and look for answers. We will not find them in once again being told that “this year’s” endorsements are somehow growing at an “unexpected rate.” Failed irrational exuberance seldom results in rational behavior.

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