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.


“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

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  • It seems just two months ago, RMI was saying the same thing about April 2018 being the low point for monthly endorsements for the foreseeable future when less than 30 days later, June 2018 results came in showing a drop of over 15% in endorsements. While it seems doubtful that August or September 2018 will see a 15% monthly drop from June 2018 HECM production, it would not come as a total surprise if production was lower for either August or September 2018 than the 2,838 endorsement total for June 2018.

    2018 will not end with HECM endorsements totaling 300,000 or even 100,000 endorsements as once heralded by the industry. We will be most fortunate if fiscal 2018 ends with even 50% of 100,000 endorsements. If someone had said in early 2009 that the industry would see two months in a row of less than 3,000 endorsements per month in 2018, the resulting laughter would seem endless; yet despite predictions to the contrary even less than 60 days ago that is where we are today.

  • The information is not difficult to read but is difficult to comprehend. Who has any idea what the significance is of the average number of case numbers assigned on an average business day each month? So why bring it up, unless there is some comparative information provided? As to predictions, RMI seems at a loss.

    Yet we find it again — talk about recovery. In the midst of six years of hill to valley stagnation, one year looks like it is in recovery while the next year looks like a year of loss. Those of us with a business econ background know about such problems even if we are not experts on the topic. What we do know is that the monthly CNA totals are bad. They are leading to poor endorsement months.

    It would not be surprising if the endorsement total for August was somewhere between the 70 endorsement difference of the monthly endorsement counts for June 2018 and July 2018. It is highly unlikely the endorsement count for August 2018 will reach the count for April 2018, the prior alleged nadir for endorsements.

    2019 is not going to be a go-go year for endorsements. In the first four months of fiscal 2018 over 44,500 case numbers were assigned. In the last eight months less than 31,300 were assigned (i.e. less than 4,000 per month). September 2017 was the best single month ever for CNAs at over 20,400; the CNA pull forward effect of the 10/2/2018 pending changes was enormous. Even if PLFs were going to be lowered on 10/1/2018, the effect would be much, much less for September 2018 CNAs. At least for now, HECM demand has taken flight. Shannon Hicks has been covering the CNA count for several months now when releasing the Top 100 Report each month. He has some interesting insights.

  • Carmine, much of what you say makes logical sense and it would hard to debate your statistics.

    However, the bright spot is that that 16 new FHA approved lenders entered the reverse mortgage space. This could help the figures for 2019 along with industry players getting out to bust tail, find new sources of business and make 2019 a banner year!

    Carmine may be entirely right about 2019 but I am not going to look at it that way, instead, I am going to stay optimistic, like I hope many of you do!

    Wouldn’t it be great to prove Carmine wrong!

    John A. Smaldone

    • John,

      Where you get there are 16 NEW active lenders? What the RMI reports is that there are 16 additional active lenders who had endorsements in July but none in June.

      RMI counts lenders who originate each month. They compare that to the prior month and report as positive or negative active lenders. Some maybe new. It is not clear if RMI knows.

      Let us hope we see a few hundred lenders added to the active lender list next month. Doubtful but we can hope.

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