Reverse Mortgage Endorsements Crater in February, Drop 17.6%

The post-October 2 hangover is here.

Originators of Home Equity Conversion Mortgages — including both Federal Housing Administration-approved lenders and their non-approved counterparts — suffered a decline of 17.6% in February, according to the most recent set of numbers from Reverse Market Insight.

That’s a major shift from January, which saw the effects of the boom in originations created by people rushing to lock in the higher principal limit factors prior to the October 2 deadline. January saw a 32.9% increase from December, with a total of 6,308 loans.

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But the bottom fell out in February with a total of just 5,195 loans, with 2,649 HECMs through the retail channel and 2,546 wholesale loans — a decline of 16.9% and 18.4%, respectively.

Only High Tech Lending saw increases among the top 10 lenders, turning in an impressive 82.9% jump to finish with 192 loans.

When the Dana Point, Calif.-based RMI removed wholesale broker volume from the analysis, American Advisors Group actually saw a 2% gain despite an overall dip of 5.3%, while ReverseMortgages.com leapt by 70.4% to 92 HECMs.

Still, the 5,195 loans originated in February represents something of a high water mark over the trailing 12-month period; despite representing a 17.6% drop from January’s high, it was actually the third-highest volume of the last year, bested only by January and March 2017, which saw 5,355 loans.

Check out the full stats at Reverse Market Insight.

Written by Alex Spanko

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  • February 2018 endorsements were the best since fiscal 2013. It is better than any monthly total for all of fiscal 2016 and fiscal 2014. There is only one month in fiscal 2017 that had more endorsements than the total for February 2018. The total for the first five months of fiscal 2018 is the best since fiscal 2011. Total endorsements for February 2018 is 17.1% higher than the total for February 2017.

    But of course we know that the total for the first six months of fiscal 2018 is the best such total since fiscal 2011. On the other hand the total for the month of March 2018 is lowest since September 2005. It is also 17% lower than February 2018 and 19.2% lower than March 2017.

    No doubt we will see the real fall in endorsements starting this month. A week from Monday we should have April’s endorsements. The next three months of endorsements could be less than 8,000 endorsements in total.

    With few exceptions, May 31 (39 days from now) will mark the end of the period for an application to be assigned a case number and still be endorsed before the start of fiscal 2019. While the fiscal year end of September 30 has no particular significance for most of us, it is an important date for HUD tracking and comparative purposes.

  • The decline in HECM endorsements will continue to plummet. HUD has effectively killed the program, unwittingly or not. The vast majority of prospects with whom I speak simply do not qualify due to insufficient equity, and those that do qualify are aghast at the up front costs and take a pass. Sadly, the older American’s who need this loan the most have been thrown under the bus. I know personally two HECM loan officers who have resigned from the business in recent months. You all should dust off your resume’
    O. Bruce Coffman, New Orleans. 49 years experience

    • Regardless of what HUD has done and will do to the program there are always going to be seniors who will benefit from getting a Reverse Mortgage. As originators it has always been our job to find and help them. Instead of dusting off resumes, how about rededicating ourselves to finding new ways to reach these seniors. I am in my 11 year in the industry and have seen every change that has been made and after everyone of them it has been said that the program has been killed and yet here we are still originating, still closing loans. Focusing on what the individual can do for his or her own business instead of what the industry numbers are saying might be better use of ones time.
      This has never been an easy career, and it will never be.

    • Mr. Coffman,

      I do not question your 49 years of experience but yet HECMs have not yet been offered to the public for even 30 years. It is also clear that you were not around in the industry 11-15 years ago.

      Proportionately the upfront costs of a HECM are cheaper than they were for the first 18 years that the HECM was first offered to the public. Not only was the upfront MIP 2%, but due to the small back end profit on HECMs since we were selling to Fannie Mae, everyone charged a 2% origination fee. Back then there was no limitation on the origination fee and it had no tapered rate after the first $200,000 of MCA.

      We heard the same concerns about how costly the HECM is back then but things were worse sincethe lending limit was by county and in places like New Orleans under $300,000 for almost all of those early years.

      Sure financial assessment has ripped out a great deal of the traditional HECM market but that is what lenders lobbied HUD for. Financial assessment is here to stay.

      No one expects originators in the middle section of the country especially in places like southern Louisiana to fare as well as they did in the past. The product was poorly designed to meet the needs of seniors with low home values without going broke in the process. Time and being in the MMI Fund has clearly proven that. People like me who thought the program was self-sustaining are still feeling the pain of being so fooled by our marketing types whose sole guiding principle seems to be “expedient exaggeration” (North by Northwest movie).

  • Wow, Bruce came off strong with his comment. Jim Veale, as usual is right on target with his figures, Jim is a hard one to argue with when it comes to statistics!

    However, Bruce, you came off in a way that would discourage anyone originating HECM’s to want to leave their home in the morning. Especially when they have to go see a deserving senior that needs our advise and guidance!

    I am sorry, I don’t buy all of what Bruce says! Yes, the changes that have occurred have hurt, especially those of October 2nd, 2017.

    Frankly, I was hit the hardest with PLF adjustments, that hurt more than the closing costs.

    Those that emphasize closing costs are making excuses, in my opinion that is. There are other factors we need to recognize. If we take the time with our seniors and explain to them that prior to the 2% leveling off of the MIP we had a low of .50% and a high of 2.5%, depending on the 60% ruling, this will help ease the pain.

    Also, we need to point out the annual reduction in the MIP from 1.25% now down to .50%. We can look at the Glass of water either half empty or half full!

    The reduction in the PLF is one that eliminates many of the borrowers in the markets most of us were going after.

    We need to change our thinking on how to approach the market in this changing environment. We need to go after homes with low LTV’s or no liens at all. Go after higher value properties, concentrate more on the HECM being a retirement planning tool!

    Look more toward the professional sector to call on, professionals that deal with seniors. When a client comes from one of these sources, half your battle is over! Trust, they trust you because they were sent to you by someone they trust with possibly their life savings!!

    We can look at and listen to all the negative talk and media push out there on our industry and we can walk away being negative toward our career and our entire industry. We can also wind up like the 2 loan officers Bruce talked about, the 2 that resigned from the reverse mortgage space!

    The choice is yours my friends, I am optimistic and staying in the reverse end of the business for the long haul. Sure, there will be hurdles to get over but in the end, those that stick it out, keep the program going and talk as well as being positive daily, will come out on the positive end of the stick when it is all said and done!

    Bruce, I also am going on 50 years experience in mortgage banking with over 20 of the last of those years in the reverse mortgage end of the business.

    One last thing, I have learned a long time ago that I am smart enough to know, that I am not smart enough!

    This is why I will learn something new everyday and love doing it!

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

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