Year-to-Date Reverse Mortgage Volume Up 18%, Western Growth Strong

Home Equity Conversion Mortgage lenders have endorsed 29,072 loans through the end of June 2017, an increase of 18.0% from the same time last year — continuing an overall upward trend despite month-to-month declines.

After a slow January and February, endorsements have now outpaced their 2016 figures for the fourth consecutive month, according to the most recent data from Reverse Market Insight. In addition, refinances have accounted for 16% of all endorsements thus far — a 100% increase over the same mark in June 2016.

The positive yearly totals stand in contrast to an RMI report from earlier this month, which showed a 0.3% drop in endorsements between May and June 2017 — with a 1.6% decline in wholesale lending wiping out a 0.8% bump in retail. Month-to-month endorsements have been on a steady decline since the blockbuster March total of 5,355, a 21.2% increase over February; however, June represented the smallest monthly decline of the past 12 months.

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On a state-by-state basis, the Mountain West and Pacific Northwest continued to show impressive signs of growth, with endorsements in Colorado riding 76.6% higher than the total this time last year. Oregon’s boost came in at 44.3%, followed closely by Washington state at 43.7%.

The number of active originators in the industry remains significantly higher than at this time last year, with the 719 players in the market representing a 14.9% jump from June 2016. Last month, after an RMI report indicated a more than 23% increase in active originators, RMI president John Lunde speculated that forward lenders and brokers — frustrated by stagnant refinance demand — have entered the reverse market in search of business, contributing to the uptick.

Read RMI’s most recent report here.

Written by Alex Spanko

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  • As we look at the downward sloop of the peak to valley style of classical but secular stagnation we find ourselves in, we would expect about 56,000 endorsements for this fiscal year (a drop of 2,000 endorsements, each peak year). Based on monthly endorsemend case number assignment reports and the monthly but modified annualized conversion rate, it looks as if total endorsements for this fiscal year will be about 54,700 or about 1,300 less than predicted by just looking at our pattern of stagnation for about a 2.3% difference. I do not remember any form of secular stagnation that is as predictable as the pattern we have seen over the past five years.

    Last year, the number was more predictable. The first to second years of valleys fell by 3,180 endorsements. Since total endorsements for fiscal 2014 were 51,642 so the predicted total for last fiscal year was 48,462 while the actual count was 48,902 for a 0.9% difference. For predictions, 2.3% and 0.9% are so close to actual that hardly seem worth mentioning.

    Why our current endorsement pattern is so predictable is unknown. Some just throw up their hands and declare that sales (sometimes said to be education that is not working) are elusive. In fact they are not elusive, they are predictable.

    Then they complain that those of us who see the predictable pattern of peak to valley secular stagnation are harping on it. Perhaps that is an expression of their own inadequacy in not being able to see it first. One in particular says we should not fight over opinions but over facts. That seems to be a convenient argument since when the facts do not go his way, he resorts to personal attacks even admitting he wants to eliminate the expression of views he personally disapproves of. What an admission and what tolerance.

  • As of last week HUD posted both the May and June 2017 monthly FHA Production Reports. In them are HECM case numbers assigned by month. Using the May report, we find that the case numbers assigned during the normal application period for endorsements,total case numbers assigned between June 1, 2016 and May 31, 2017 which were about 81,700 and for the prior fiscal year they were approximately 76,700. This is an increase of 5,000 case number assignments pertaining to endorsements for fiscal year 2017.

    Using the modified annualized conversion rate of 63.77% for fiscal year 2016, the total endorsements for fiscal 2017 should be about 52,000. The rate in July 2017, however, rose to 66.71%. so we will use that and the total rises to 54,500. Could the rate rise further? Yes, it can but if the rise is 0.6%, the increase would only be 490 endorsements. So if we split the difference, a fairly good estimate is 54,745.

    What is surprising from the June report is that case number assignments for June 2017 is the third month of rising case number assignments. It is not that it is a rise but that it is so significant from beginning to end at 17.76%. Last year there was a rise in case number assignments over the same three months but back then it was only a 5.66% rise.

    What this could mean is that for the first time since October 2010 (seven years now), we might see a fiscal year start with a month having over 5,000 endorsements.Could this be the first sign of breaking the peak to valley pattern of and ultimately secular stagnation, itself? It is far too early to say any of that but it is the first time in years of having any hope of breaking the 5,000 endorsement level for an October.

    It will take months before there is any assurance that next fiscal year has the strength and vitality to move the industry forward but it is good once again to see even a possible sign of breaking the chains of stagnation. No doubt, this will be a subject to be explored over the next year.

    • Mr. McSherry,

      If you are looking month to month, the answer is a ringing less but if you look at the total endorsement numbers for fiscal 2016 and the expected total for 2017, and compare the total for those two years to the total endorsements for the two fiscal years of

      • The point is that the number of endorsements are up this year, standalone.

        If the FA was driving the numbers down, this would be the second consecutive year that endorsements would have been down. Unless there is a case to be made by you that endorsement numbers are up this year, despite the FA.

        There was a previous, recent article stating that there are a significant number of affluent borrowers this year who are attracted by the financial integrity aspects of the Financial Assessment. Maybe that’s what’s driving-up the endorsement numbers this year.

      • Mr. McSherry,

        How can a year be described as “up” on a true stand alone basis? You must be comparing it to something in concluding that endorsements are up?

        This is the second year that endorsement numbers will be lower than fiscal 2015, the last fiscal year in which the vast majority of endorsements were HECMs that did NOT undergo financial assessment.

        As to this recent article you mention in your latest response, what evidence did they show? I go to the one place and there was no Holocaust and to another and there is. Verified evidence means everything.

        We used to have an upscale department store nearby in Lakewood, CA that most everyone in my community went to see what was in vogue. The more the store spent on marketing, the greater their foot traffic; however, the net profits from their increased sales due to this increased marketing were less than the costs of such marketing. Increased interest is great unless there is not a point in which there are increased profits from those efforts.

        Do you have any verified evidence showing the allegedly higher volume of seniors looking at HECMs are affluent? HUD does show that there are incremental increases in each of the higher categories of MCAs in this fiscal year over last but that does not mean these seniors are affluent. As Dr. Barry Sacks says, these are most likely the not quite affluent or as I say most likely not even quite the mass affluent.

        Endorsements numbers just are not where you keep trying to force them to be. The financial assessment that HECM borrowers endure today seems too harsh for the little additional benefit it brings in lower rates of defaults on property charge payment defaults. You would do better if you actually tracked the endorsement numbers.

        As long time staff at HUD correctly state, the benefits of financial benefit cannot be reasonably measured for several years. I laugh as I read that defaults were almost nonexistent in the first year following financial assessment. That is true for all fiscal year cohorts of endorsed HECMs. You see before a HECM can close, both insurance and property taxes must be paid for the following year.

        Since this is Saturday, my response probably will not be posted online until Monday. So I hope you had a great weekend.

      • I merely referenced the article that stated that 2017 endorsements are higher than 2016 endorsements. I’ve chosen to believe it. You haven’t been convincing in asserting that that is not a fact. You’ve “lost me” with regard to what exactly you’re arguing.

        Also, I only stated that there was an article stating that there is a significant increase in affluent borrowers. I’ve chosen to believe it, but somehow you think I’m wrong because you think that “they” have to “prove it” before anyone should believe them. Am I getting warm? I really don’t follow your objection in all this.

      • Mr. McSherry,

        You did more than reference an article that correctly stated that year to date endorsements for 2017 is higher than at the same time in 2016. BUT if what you concluded from that which I fully disagree with you: “If the FA was driving the numbers down, this would be the second consecutive year that endorsements would have been down. Unless there is a case to be made by you that endorsement numbers are up this year, despite the FA.” 2017 is the second consecutive year that endorsements are down when compared to endorsements for 2015, the last year that the vast majority of HECMs which were endorsed in that year did not undergo financial assessment.

        Mr. McSherry, you have the right to believe anything you want. I just like my assertions to be verifiable. I see from your last comment, that is not as important to you.

        So I encourage you to believe anything you want. You have that right and no one should be able to convince you otherwise if that is how you see it.

        Take care.

    • Ed,

      If you can show that, it is time to break out the champagne and caviar. Sometimes it takes fresh eyes. I know I have been looking and looking for such proof. Please help me out because like James I can’t get there from the article above.

      All I want to do is show that financial assessment has turned things around for the industry but the info in the article just won’t do that unless I am reading it wrong or something.

  • Alex,

    There is nothing which shows the following is true: “In addition, refinances have accounted for 16% of all endorsements thus far — a 100% increase over the same mark in June 2016.” The total percentage of HECMs endorsed for the six months ended June 30, 2016 was 11.01% and for the same six month period for June 30, 2017 was 14.5%. That takes care of the “thus far” for those two six month periods.

    If we look at the four months ended June 30, 2016, that percentage is 10.27% and for the four months ended June 30, 2017, the percentage is 14.9%.

    If we look at the nine months ended June 30, 2016 (fiscal year), the percentage is 11.1% and for the nine months June 30, 2017, the percentage is only 13.9%. So the three periods of comparison show nothing like what you are claiming. Those are the only “thus fars” (sic) I can see in the article to that point.

    If we go to the month of June 2017, we find the percentage of refis to total HECMs endorsed during the month is 16.4% BUT the same percentage for the month of June 2016 was 10.6%. Yet 16.4% is not a 100% increase.

    So I give up, where are you getting your refi percentages from that make the quotation accurate?

      • Hey Alex,

        Found it quickly thanks to your help but as shown below, I cannot see where RMI gets the 100% from.

        The figures are supposedly for the month of June 2017 refi endorsement production. While the June 2017 FHA Production Report does show the refi ratio to total endorsements for the month as 16.4%, the June 2016 report shows that refi to total endorsements for that month as 10,6%. So the RMI 16% is correct.

        Last I checked even in Calculus, 16.4% is NOT 100% greater than 10.6%.

        What I also determined is that the number of refis endorsed in the month of June 2017 was 708 but the number of refis endorsed in June 2016 was 418 but again that is not a 100% increase from June 2016 to June 2017.

        So it is my conclusion that of all things RMI could be wrong. You might find out for us what that 100% represents.

        Thanks for your reply. I hope they can show where they correctly derived that percentage so that I will not have to start checking their numbers before I use them although I probably need to become that skeptical.

      • Alex,

        Thank you for your citation. It is unclear where the 100% is coming from or what it relates to. Even if we look at the endorsements for the month of June 2016 of 419 and endorsements for the month of 793, there is still no 100% change.

        Can you find out from RMI what the 100% is supposed to represent?

        Thank you,

        Jim Veale

    • Ed,

      OK. Comparing one financial assessment year to another and saying that the reason for increase in the latter year is because of financial assessment makes no sense. You’re logic loses me.

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