Counselors See ‘Trickle-Down’ Decline in Reverse Mortgage Demand

Last fall, reverse mortgage counselors stepped up their operations to handle the influx of borrowers looking to secure loans before the implementation of new rules on October 2. Now, several months later, demand is naturally down — but the numbers aren’t completely grim.

“We have definitely seen less demand for counseling since the October 2 change,” Jennifer Cosentini, housing director for Cambridge Credit Counseling Corp. in Agawam, Mass., told RMD. “It’s unfortunate, but expected.”

Between August and September of last year, demand for reverse mortgage counseling services spiked 62%, according to data from Ibis Software Corporation. Potential borrowers flooded counseling agencies across the country in the hopes of securing a case number before principal limits fell and mortgage insurance premiums changed in early October.


Some counselors took initiative by reaching out to homeowners who had expressed interest but not completed the program, and the Department of Housing and Urban Development issued an urgent message to all approved counselors in late September asking for their ability to take on additional clients.

At Money Management International, demand for HECM counseling sessions between November and mid-January is down 12% this year, according to director of housing and bankruptcy counseling Jackie Boies.

“Despite thinking that any reduction we’re experiencing is due to the HECM changes, I believe seasonality may be part of the effect as well,” Boies said. “When I compare volumes for the same time from year to year, we aren’t that far off.”

Boies expects counseling volume to return to early 2017 levels by the fall, though she pointed out that the 12% decline is part of a longer-term drop in interest over the last few years: Compared to 2015, counseling demand from last November through January is down about 25%.

“We’re not expecting to return to those levels,” Boies said. “There’s just been too many changes since 2015.”

Cosentini, meanwhile, said she’s seen some counseling agencies stop offering HECM sessions since the changes took place — or close altogether. Now that lenders and originators are making less money per loan, they may not be able to invest in finding more leads. The result, she said, is a “trickle-down” suppression effect on counseling demand.

“This has greatly affected the industry as a whole,” she said. “Borrowers are qualifying for less money, and initial fees are higher than they once were. This makes the product less appealing to many, and is causing a higher cancellation rate for us.”

As for the content of the post-October 2 sessions, counselors say little has changed outside of new principal limit factors and fee structures.

“We’re not taking any trips down memory lane to show today’s client what their loan might have looked like before October 2017,” Boies said.

But while the lessons remain largely the same, the borrowers themselves are changing — even more so than when Financial Assessment was implemented in 2015.

“The October 2 change has been more difficult,” Cosentini said. “I had a horrible feeling that it was going to bring the product back to being more of a loan of necessity, and that is what we are seeing once again.”

Written by Alex Spanko

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  • “Trickle down” comes from the idea that some have gained a lot and the impact of those benefits “trickle down” to the less fortunate. But “trickle down” hardly describes what is going on in the industry today.

    In October 2017 there were only 2,750 case numbers assigned. At a 65% pull through rate, that means less than 1,800 endorsements will flow out from October 2017 case number assignments. Even though November 2017 case number assignments were 30% higher, expected endorsements from those applications is less than 2,324 endorsements. The average endorsements for fiscal year 2017 was 4,610 endorsements per month. The expected endorsements from November 2017 case number assignments is a little over half of average monthly endorsements for fiscal year 2017. (HUD is not expected to provide case number information for December 2017 for a few more weeks.)

    Somehow the message from counselors does not seem to be matching up with the message we are getting from HUD. Perhaps the difference can be accounted for through the lower number of counseling agencies offering HECM counseling as mentioned in the post. Mr. John Lunde believes that the loss in business in 2018 will be about 30%. Early case number assignment results seem to say that Mr. Lunde’s low estimate may be too high.

    We hear how things are better for H4P and working with financial advisors but if that is the case, the rest of the market seems devastated based on case number assignment numbers.

    Remember only a few of the applications that receive their case number assignments after May 31, 2018 will turn into endorsements in fiscal 2018 based on the four month rule of thumb of the average endorsed HECM going from case number assignment through endorsement; in fact, September 2017 case number assignments show that the rule or thumb may need to increase to 4.5 months. No matter what May 31, 2018 is slightly less than four months away. That leaves just four months to turn fiscal year 2018 around. That kind of turn around is very doubtful in our present situation.

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