Data Points to Potential Bottom for Reverse Mortgage Market Plunge

A week after releasing bleak data for March, the industry’s top volume-analysis firm indicated that May might signal the nadir of the post-October 2 slump.

Endorsement growth among Federal Housing Administration-approved lenders actually increased by 0.4% last month, Reverse Market Insight reported this week; the 3,359 Home Equity Conversion Mortgages endorsed in May represented a 14-unit increase over April.

“This is the biggest sign yet that HECM volume may have bottomed following the substantial program changes that took effect Oct. 2, 2017,” the Dana Point, Calif.-based firm noted in its monthly analysis.

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The effect of the changes, which saw principal limit factor cuts along with an overhauled mortgage insurance premium structure, have been apparent since January, when the first wave of endorsements from the pre-change surge hit: That month saw 6,313 endorsements, a significant increase over previous months and the highest total since March 2011.

After a robust February, with 5,201 loans, the bottom fell out in March, with numbers dropping below pre-change levels before the very slight uptick in May.

On a lender-by-lender basis, the month also had up-and-down returns: Live Well Financial had a gain of 26.3%, while American Advisors Group surged 13% to generate triple the volume of any of its competitors. Five of the top 10 lenders, however, suffered volume drops in the month, including second-place Finance of America Reverse and fourth-place Liberty Home Equity Solutions. 

Should this truly represent the bottom of the post-October 2 hangover, the pre-change surge will have been relatively brief: March’s volume was already below March 2017, and January’s volume marks the only significant month-to-month spike since the changes took effect.

RMI’s most recent stats come after an earlier report on first-quarter origination data, which showed that year-to-date originations through March were higher than this time last year — but were moving in a downward direction with “tough sledding ahead” for reverse mortgage originators.

Written by Alex Spanko