Reverse Mortgage Borrower Age Creeping Up Amid New Rules

The sample size is small, but a new set of data shows that demand for reverse mortgages among younger borrowers may be declining under the new principal limit factor structure.

Of the 2,910 Home Equity Conversion Mortgages funded in January and pooled in February, loans originated under the 2017-era PLFs accounted for 1,345, according to the most recent data from Baseline Reverse — or about 46%, showing that major lenders are still working through the remaining 2014-PLF loans in the pipeline.

But while demand among borrowers 75 and older remained fairly consistent, the 74-and-under numbers reveal a gap: Among the loans from the old 2014-era PLFs, 960 borrowers were aged 74 and under, while that number was 809 for the new PLFs.


“The lower PLFs may make it harder for younger borrowers to qualify,” Baseline Reverse founder Dan Ribler told RMD, though he added that it’s too early to play “Chicken Little” and say that “the sky is falling.”

Ribler also pointed to a wider range of margins for adjustable-rate loans under the new PLF tables: While the 2014-PLF loans predominately had margins in the 2.75% range, the 2017-PLF loans had a wider range of potential margins, going as low as 1.08% and as high as 3.38%.

Other key data takeaways

For January fundings, the average original principal limit for the 2014-PLF loans was $338,080, compared to $211,468 for the loans originated under the new rules; for maximum claim amounts, the figures were $571,240 and $412,038, respectively.

In addition, only Live Well Financial had more 2017-PLF loan fundings than HECMs from the old rules. Industry leader American Advisors Group, meanwhile, saw 698 loans funded under the old rules and 547 under the new as the industry continues to clear out the pipeline.

“AAG did about three times more ’14 [loans] than the next-closest guy, so they’re still clearly working those loans,” Ribler said.

Still, Ribler cautioned that it’s still too early to tell if these month-level trends indicate a major sea change in the makeup of reverse mortgage borrowers nationwide.

“So it’s probably pretty early to draw any major conclusions about the direction of the industry, but it is a good early read,” he said.

Written by Alex Spanko

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  • If this age trend holds, then all of the talk of how younger average ages are pointing to more financial planning clients becoming HECM borrowers is being reversed by lower PLFs and perhaps even higher interest rate margins on adjustable rate HECMs. Perhaps this will turn the tide for the industry to address with HUD the problem of lower rates of borrowers being advised by financial advisers in obtaining a HECM. That would not be a trend that HUD should be happy with.

    Further we see much lower demand. If that does not turn around then even more of the good people that John Smaldone talks about currently leaving the industry will also be leaving. The endorsement picture for the remainder of fiscal 2018 is looking bleaker with the gathering of applications with case number assignments for fiscal 2019, starting less than three months from now.

    The start of the gathering of applications with case number assignments for the new decade is less than 27 months away. Even though that is more than sufficient time to make our case to HUD in order to see results, it seems like those can make this difference are in disbelief and taking little action. Such lack of proactivity was seen in the excuses heard for not preparing the industry for Mortgagee 2017-12, that is, not being put on notice, a clearly passive stance. Yes, HUD is being more cautious in this Administration but that should not be an excuse for the kind of inactivity that arises from malaise which we are currently seeing in the industry.

  • “For January fundings, the average original principal limit for the 2014-PLF loans was $338,080, compared to $211,468 for the loans originated under the new rules; for maximum claim amounts, the figures were $571,240 and $412,038, respectively.”

    Those are some surprisingly high numbers; if accurate, must show the dominance of California in HECM originations.


      California certainly is not dominant but does have a highly disproportionate influence on both the financial planning community as well as HECMs.

  • The samplings and statistics presented are understandable, especially since the new ruling went into effect. The younger borrower is having a tougher time qualifying for the amounts they need.

    This will make states more attractive that have higher home values and much lower loan to value ratios. Those younger borrowers who are more affluent and have plenty of equity in their homes are the ones we need to target. These are the borrowers that are prime retirement planning prospects.

    The January funding average principal limit of $211,468 for the loans originated under the new rules was bound to be much lower. The new ruling just going into effect and the markets not having time to adjust was enough to handle.

    In time we in the industry will adjust, we will know how to better target the right markets, plus, all of us must accept what it is in effect today and plan differently.

    Hopefully one day we can convince HUD that the PLF adjustment lowering was to extreme. We need plenty of lobbying going on for this to happen. The HECM is needed for our senior population, social security will not take care of most senior’s retirement years. The Federal government and HUD knows this only to well!

    The more we bring our case to the forefront and before HUD the more of a chance we will get some common sense action taken! Taken in our favor but more so for our seniors!

    John A. Smaldone

    • John,

      You seem like a great human being but your message was more fitting for 2011 when we were first discovering how bad the endorsement drop had been for fiscal 2010.

      We heard from NRMLA leadership about Mortgagee Letter 2017-12, their collective response was, don’t blame us for not notifying the industry in advance of its posting. NRMLA may be reacting now but it is too little too late to change HUD policy on HECMs.

      Leadership is out of step with its workers. While Ginnie Mae issuers have the luxury of enjoying revenue from tails, its workers do not. The originators in this industry need to know that those revenues are being used to find a way out of the secular stagnation of endorsements that has plagued us for the last 5 fiscal years. It is now that originators need to know that Ginnie Mae issuers are willing to extend a grateful hand out those who created that tails revenue.

      We have not demand so low in the last calendar quarter of 2017 for over a decade. Even your comment, John, provides no real map out of this malaise. Will the HECM survive, yet I will not speculate beyond that.

    • John,

      Let me put this as simply as possible.

      Since the age of the youngest borrower is climbing, doesn’t that also indicate that financial planning practitioners are stepping away from recommending HECMs at least to some degree?

      The aging of the youngest borrower is a worrisome trend for the industry. I picture it as more than younger borrowers getting less available gross and net proceeds at closing. Mortgagee Letter 2017-12 may also have harmed our relationship with financial planners as removing Savers did on September 30, 2013.

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