January Reverse Mortgage Data Shows Continued Post-Oct. 2 Bump

A pair of new reports on January reverse mortgage endorsements reveal that the bump in volume ahead of the October 2 rule changes continued to pay dividends into the new year.

Home Equity Conversion Mortgage originators — including Federal Housing Administration-approved firms and their non-approved counterparts — saw 32.9% endorsement growth in the first month of 2018, turning in 6,308 loans according to the most recent data from Reverse Market Insight.

The surge was buoyed primarily by a 56.1% gain in wholesale loans, while retail endorsements saw a more modest 16% increase. In all, January’s production easily surpassed all of the previous 12 months, including a recent-record 5,355 loans endorsed last March.

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All of the top 10 lenders saw gains in January, including a 211% increase for Liberty Home Equity Solutions, an 88.8% surge for Longbridge Financial, and a 76% boost for Nationwide Equities — which recently rebranded its retail reverse mortgage channel to Reverse Loans USA.

As for the statistics on regional growth, released a few days later by the Dana Point, Calif.-based RMI, the story remained largely the same: It’s the western states and then everybody else. Originators in Oregon saw a 212.7% gain over January 2017, while Seattle led all cities with 181.8% increase.

The HECM heat map continues to align fairly closely with recent state-by-state home equity reports, with the most impressive gains coming from the Rockies and westward. In addition to Oregon’s surge, the state of Washington logged a 132.1% increase, while California saw a 64.7% gain. The city of Portland, Ore. also closely trailed Seattle with 161.1% growth, and no ZIP code or county east of Colorado made either of those top-10 endorsement lists.

RMI pointed squarely at the Department of Housing and Urban Development’s decision to cut principal limit factors as the reason for the gains, as originators continue to sort through the glut of loans generated under the old rules.

“The new year started with a bang, showing a spike in endorsement driven by FHA’s HECM product changes that took effect October 2,” RMI observed in its analysis.

Written by Alex Spanko

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  • Yet despite the 20,400 case number assignments in September 30, 2017, the pull forward phenomenon is not reflected in the conversion rate on the related applications four months after case number assignment where we normally expect to find it. Because of the lower conversion rate, we are experiencing lower endorsements than would be expected from the startling pull forward of applications that saturated the industry just before the end of fiscal 2017.

    The endorsements for February 2018 indicate how much longer it took to process all of the application of September 2017. Five months is an unusually long period of time to process applications after case number assignment but it is what it is. Certainly three months is hardly the time it takes the average endorsed HECM to go from case number assignment to endorsement.

    Yet none of the monthly totals in case number assignments from September 2017 to January 2018 have reached above 3,900 case number assignments. That certainly does not bode well for the next three to four months of endorsements.

    • Jim,

      These are very good points and statistics you pointed out. I hope you are wrong about the next four months of endorsements but the statistics are pointing in that direction!

      Unless, some powerful optimism takes over and origination start to perk up quickly!

      Thanks Jim for your expert advise, have a very Happy Easter, you and your family my friend.

      John Smaldone

      • John,

        The problem is that too many are pessimistic, not realistic. I look forward to the rest of this month, not for a great deal of change but because I hope to see some consoling information about the last decade and the contribution of originators over the last five years.

        My family had a great weekend as I hope you and your family did.

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