January Reverse Mortgage Volume Highest Since ’11

After months of waiting for evidence of a surge, reverse mortgage origination numbers set a recent record in January.

Federal Housing Administration-approved reverse mortgage lenders logged 6,313 endorsements last month, making it the best month for the industry since March 2011 according to the most recent numbers from Reveres Market Insight.

That’s a 32.5% growth in endorsements, and 48 new lenders entered the fray compared to the previous month. With this most recent data release, the industry can begin to see the breadth of the demand in the weeks leading up to October 2, when the Department of Housing and Urban Development instituted lower principal limits and a new mortgage insurance premium structure.

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Still, RMI cautioned that the fall is coming soon.

“We’ll see next month if that’s the peak endorsement month for this latest product change, but we already know subsequent volume will be greatly reduced given the much lower application and case numbers issued figures after September,” the Dana Point, Calif.-based RMI noted in its analysis.

In previous months, RMI president John Lunde has predicted that endorsement volume could drop by 25% to 30% once the pre-October bump works its way through the system. That would put the decline on track with the drop after HUD and FHA implemented the stricter Financial Assessment rules in 2015.

Demand for Home Equity Conversion Mortgage counseling sessions has also declined since the new principal limits took effect, with one provider saying the “new” reverse mortgage product is more of a loan of last resort.

Leaderboard breakdown

Liberty Home Equity Solutions saw its production triple, with 576 loans — as compared to 192 in December — for fourth place on RMI’s overall leaderboard for the 12 months ended January. Industry leader American Advisors Group logged 1,218 loans last month, compared to 1,141 in December; Finance of America Reverse and Reverse Mortgage Funding rounded out the top three lenders for the month.

In terms of geography, the Northwest region saw the largest gains with a 86.9% jump from month to month. Portland, Ore., for instance, saw reverse mortgage originations go from 71 to 222 — a 212.7% gain — while nearby Seattle had a 146.3% jump in volume.

Written by Alex Spanko

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  • Here we see the emphasis on effect, not cause. What started this huge temporary increase (not growth) was the highest case number assignments ever seen in this industry of over 20,400 in September 2017; it resulted from the pull forward effect that Mortgagee Letter 2017-12 had on prospects (and originators).

    The high number of case number assignments shows that the release of the Mortgagee Letter in late August 2017 provided sufficient time to fill and drain the pipeline from counseling and application clear through case number assignment in less than forty days. It was horrible and a shame to hear so many blame HUD and NRMLA for late notification when the result was the greatest number of HECM case number assignments ever seen for a single month in this industry.

    As is usual and a true rule of thumb, it takes at least four months for the average HECM to go from case number assignment to endorsement. There is a strong possibility that there maybe another 6,000 (or more) endorsements to come out of the September 2017 case number assignments during February and March, 2018.

    So while January 2018 produced the highest number of endorsements in almost seven years, multiplying that number by 12 still leaves the result short of 100,000. Even if the mathematical product were 30% higher than it is, it would still be short of 100,000 and 100,000 is still less than the total annual endorsements for our three best fiscal years.

    The case number assignments for October and November 2017 were respectively 86.5% (2,750) and 82.5% (3,575) lower than the September 2017 total of 20,405. We will not know for at least two weeks what the total for December 2017 was and about 4 to 5 weeks from that what the January 2018 case number assignments were.

    Since the modified annualized conversion rate ran at about a 64.2% average in fiscal 2017, the total endorsements from the 6,325 total case number assignments of October and November 2017 should produce less than 4,100 endorsements in the second and third quarters of this fiscal year. Based on the 30% drop in new fiscal year 2018 business predicted by Mr. Lunde, several are looking at endorsements of slightly more than 50,000 for fiscal year 2018. If that total is reached, we will have at least ended the downward slope of the current hill to valley secular stagnation for annual fiscal year total endorsements.

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