Post-October 2 Recovery in Line with Previous Reverse Mortgage Changes

The reverse mortgage industry’s leading volume tracker says the decline in originations may have reached bottom as the trend lines follow a similar pattern seen after other key program changes.

Home Equity Conversion Mortgage endorsements ticked up slightly among Federal Housing Administration-approved lenders in July, rising 2.5% to reach 2,908 for the month according to the most recent set of statistics from Reverse Market Insight.

That small bit of good news comes after a bleak June for the HECM marketplace, which saw the lowest endorsement levels since 2005 as the industry continues to adjust to the lower principal limit factors introduced last fall.

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“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 RMI noted in its analysis.

Still, it’s not time to declare an official recovery just yet: Case number assignments, which lag behind endorsement data, have remained persistently low, settling at about 194 to 209 per business day between February and May.

“For all intents and purposes, we’ve seen a stall in the recovery of HECM cases being issued in the last four months,” RMI observed. “That means we won’t see meaningful growth in endorsements for at least a few more months absent a significant change in how many cases become endorsed.”

For comparison purposes, RMI plotted out the recovery patterns for the most recent change along with other industry-shaking program updates, including Financial Assessment and the 2014 principal limit factor updates. Controlled for overall declines in volume that each of those changes ushered in, RMI found, the industry is on a familiar — if slow — track back to higher volumes.

“It appears we’re on a similar recovery path in percentage terms to prior product changes, although not absolute volumes,” RMI wrote.

That said, the October 2 changes have produced the most sluggish recovery when compared to those other events.

“Volume in the month after is lowest in the most recent change, which makes sense given it was both the largest change in the program’s history and came on the heels of other changes that cumulatively have reduced HECM volume over the years significantly,” RMI noted.

Other bright spots in RMI’s regular roundup of FHA-approved lenders include a gain of 16 new active lenders in the space, and volume increases for seven of the top 10 lenders in the space. American Advisors Group, which saw a small decline between June and July, still easily leads the pack with 12,577 loans endorsed over the trailing 12 months, followed by Finance of America Reverse at 5,204 and Reverse Mortgage Funding at 4,072.

Written by Alex Spanko