Bottom Falls Out of HECM Market with Just 3,345 Loans in April

After a March that saw significant declines in reverse mortgage originations, April brought a shower of more bad news for volume.

Federal Housing Administration-approved lenders generated just 3,345 Home Equity Conversion Mortgages in April, according to the most recent stats from Reverse Market Insight — or a drop of 22.2% from March.

“In case you haven’t been paying attention these last few months, HECM volume is seriously hurting after the October 2, 2017 changes from the FHA,” RMI observed in its data release.

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The Dana Point, Calif.-based firm tracks HECM lending trends in part by geographic area, and all 10 regions saw double-digit declines last month; the New York/New Jersey metropolitan area suffered the worst losses, with a 17% dip, though even the usually robust Pacific region endured a volume drop from 1,204 to 964.

Industry leader American Advisors Group went from 1,158 loans in March to 890 last month; Nationwide Equities Corporation, which had originated as many as 140 loans in a single month during the trailing year, had just 43 in April, the lowest of any top-10 lender.

The post-October 2 hangover carries over into another month, as the surge of borrowers looking to land higher principal limit factors gives way to the anticipated dearth of demand for the “new” product with lower PLFs and a restructured mortgage insurance premium system. RMI founder and president John Lunde predicted a volume drop of anywhere from 25% to 30%, and this strikingly low month may not be as far as the HECM market sinks before things turn around.

“The question now is whether this is the bottom for endorsements, and based on funding data collected through our industry data repository, I’d suspect we’re close — but might not be there yet,” RMI observed. “Applications appear to have bottomed in December, but with fundings continuing to make lower lows in March, it’s too early to definitively say we’re on the road to recovery yet.”

RMI’s data comes the day after New View Advisors released a similarly bleak set of statistics about HECM-backed securities, in which depressed production was classified as “the new normal.”

Written by Alex Spanko