Some Reverse Mortgage Originators See Stability Ahead This Year

As the reverse mortgage industry continues to adjust to the rule changes issued late last year by the Department of Housing and Urban Development, originators are seeing signs of renewed stability in the market — and even opportunities for expansion.

Asked to gaze into their crystal balls for the remainder of 2018, originators contacted by RMD had to first look back to the final few months of 2017.

HUD shook the reverse mortgage industry with new regulations for mortgage insurance premiums and principal limits, framing these rules, in part, as making it more difficult for borrowers to have credit lines worth more than their homes by prolonging the balance growth on their properties.

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As the second quarter of 2018 looms, the adjustment period to those new rules is giving way to a new stability, some originators say.

“We expect that, after an adjustment period through the first quarter, the loan volume will start to return for the reverse professionals that continue to execute their marketing plan and do the heavy lifting,” said Des Lenz, reverse mortgage director at American Pacific Reverse Mortgage Group. “The need for the loan product did not go away and it will be a possible source of stability for those invested in the stock market, when that market is volatile.”

One longtime observer of the reverse mortgage industry anticipates a more competitive market in the wake of those HUD rule changes.

“The lowered rate floor will most likely result in a more competitive reverse mortgage market,” says Jamie Hopkins, an associate professor of taxation at the American College of Financial Services in Bryn Mawr, Pa. “It will encourage lenders to offer lower lender margins in order to maximize principal limits for borrowers.”

Originators also predict that the coming year will bring a bigger share of the market for Home Equity Conversion Mortgage for Purchase transactions, and even a notable entry of less experienced originators as senior reverse mortgage loan officials leave the industry. No doubt the HUD changes and the reaction to them will dominate the rest of the year, but the industry will deal with them and find ways to grow and profit, some originators say.

“We are experiencing changes in our industry due to the recent updates by HUD. However, [changes] have been going on for years and it is not the end of the world,” says Ed O’Connor, marketing manager at FirstBank’s HECM Division. “We have a good, solid product and now is the time for smart leaders to expand their operations.”

Written by Thad Rueter

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  • The article was disappointing. Rather than reading the comments of true originators, the comments are those of originating lender mid level management and someone who is not employed in the origination process at all. The stated opinions of mid level management are hardly those who currently either sit across the table from prospects or those who take the calls from and follow up with prospects at calling centers. Their stated views are generally self modulated to be more representative of the positions of their employer’s senior management.

    No doubt, Thad, the author of the post, is correct in saying: “… the HUD changes and the reaction to them will dominate the rest of the year, but the industry will deal with them and find ways to grow and profit, some originators say.” New View Advisers has pointed out in its February 2018 commentary that “HECM loans can generate profits through its [sic] monthly tails for years, helping HMBS issuers in challenging periods like this year.” So are profits still possible? Absolutely, yes. But are profits from origination still possible at all lenders (since Thad is focused on lender mid level management and not who many of us would call originators at this point in their careers)? Very questionable without substantial changes in their cost structures. It is pointed that Thad did not quote one most of us would see as our originating peer in talking about profits.

    Thad also states the following: “As the second quarter of 2018 looms, the adjustment period to those new rules is giving way to a new stability, some originators say.”

    In analyzing the last quotation and based on HUD and its case number assignment information, we are literally near the end of the second quarter of fiscal 2018 and if after four months of the new fiscal year, we have not seen a single month with 4,000 case number assignments, demand speaks far more than some might like. There is little hope that these four months will result in even 10,000 endorsements. Let us hope this is not the “new stability” these originators are speaking of. That would result in less than 30,000 endorsements from a fiscal year of case number assignments. The industry has been in stability for the last five fiscal years when it comes to the pattern of endorsement growth we are in, classic stagnation. Stability is hardly a term reflecting growth.

    In using the term “some originators” twice, is Thad speaking of 1) those who sit across the table or take the calls in call centers or 2) is he is speaking of mid-level management at lenders? Then again, how many is “some?” That is certainly not the majority of originators or all. The article results from the views of “some” which is a poor standard to use except to express the views of unnamed parties.

  • I guess stability means more endorsement stagnation? Why are we so focused on stability when what is needed is endorsement growth. Some find stability at the cemetery. I’d rather be involved in the turmoil of growth than the rest of stagnation or more endorsement loss.

  • Things are more stable than I want to believe. Today I was looking through some past stories and found the following: “Principal Limit Reduction Update & Interview with Peter Bell.”

    The blog was dated 4/12/2010. That is right 2010.

  • I can understand how my colleagues, The _Critic and George Owens were not only disappointed in the article but also saw flaws in the comparisons with certain industry players.

    Their points were good ones and should be taken in consideration, especially the way the article was presented!

    However, we do have a solid product, we have more equity in the hands of senior homeowners than ever before and more seniors of age who own homes!

    Now is the time for a smart lender to expand their operational base either into reverse mortgages or expand what they already have.

    Many lenders probably will not, in fact, a majority of lenders will most likely not expand their reverse mortgage operations! Why? They don’t recognize the potential or they will not commit the proper investment it will take to be successful at it!!

    However, those few smart ones will expand! They will expand by bringing professional loan originators that know how to work with and plan with professionals in other fields. They will seek out professionals have have as their base of clients and customers, primarily seniors.

    The professionals originators we will be looking for to join our companies or to make changes from the companies they are with, will know how to communicate with these professionals. They will be the caliber of loan originator that will understand that they need to learn as much as they can about the businesses these professionals are in!

    The professionals of our new market I am talking about are the financial planners, advisors, elder law attorneys, long term health care providers, realtors, churches and many more. We have a large playing field out their for us to go after, we just need to know how to go after them properly!

    The Crystal Balls the article refers to should not be one for only dwelling on last few months of 2017, we should learn from it. However, the Crystal Ball we want to keep and focus on is the one that will lead us down the future path to success!

    I truly believe in what I am about to say! Please, don’t give up on the reverse mortgage space, those that do give up on it, will be the one’s that will regret it in the end!

    John A. Smaldone
    http://www.hanover-financial.com

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