Reverse Mortgage Endorsements Splashed with ‘Cold Water’ in August

Home Equity Conversion Mortgage (HECM) endorsements fell by 15 percent to 2,341 loans for the month of August 2019, a disappointing figure considering that the past six months have seen more positive endorsement activity spinning out of the uncertainty exhibited at the start of the year. This is according to the August HECM Lenders report compiled by Reverse Market Insight (RMI).

However, a favorable interest rate environment could indicate that August’s endorsement levels may be an outlier as opposed to the start of a new downward trend, according to RMI President John Lunde.

“[August’s endorsements are] throwing a little cold water on the industry after 6 months of relatively optimistic endorsement volumes,” Lunde writes in his commentary accompanying the data. “This could easily be a blip given the lower interest rates easing lenders’ path to higher principal limits, but that’s always the trouble with endorsements being such a lagging indicator.”

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The performance drop was observed across all recorded regions of HECM activity, indicating that it was not an isolated occurrence. The Great Plains region was least impacted, recording only a 3.8 percent fall to 50 loans. Meanwhile the Pacific/Hawaii region fell 6.8 percent to 711 loans, while the Southeast/Caribbean region dropped 10.8 percent to 413 loans.

From a lender-specific perspective, several companies managed to outperform specific regional endorsement levels, with five of the top 10 reverse mortgage lenders recording overall gains in endorsement activity. For instance, HighTechLending recorded a 171.4 percent jump to 76 loans, which has come very close to overtaking Longbridge Financial’s position at number 9 on the top 10 list.

However, Longbridge is no pushover, holding off HighTech and maintaining its position by recording 36 percent growth to 68 loans. One Reverse also recorded a gain of 3.8 percent to 249 loans.

Although it has dropped to number eight on the top 10 list, embattled former lender Live Well Financial has managed to hold its position in the top 10 even with no recorded endorsements for the month of August. According to RMI data, Live Well recorded 97 endorsements in the month of May when it closed its doors, and recorded 1 endorsement each in both June and July, respectively.

Read the full HECM Lenders report for August at RMI for specific breakdowns and detailed regional performance data.

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  • Are we going to treat months when it sprinkles in California as outliers since California produces more closed HECMs than any other state in the union by far? Suggested categories for low months for endorsements are now bordering on the less than credible.

    It is reasonable to call months when HUD is closed by a federal government shutdown lasting more than a few days, outliers. So as to December 2018 and January 2019 the endorsement production during those months should rightfully be treated as outliers.

    But months with interest variations are outliers? Really? Nothing stopped the production of endorsements in any related months after the affected HECMs were closed. I am just not on board on this new reasoning. Just because total endorsements for a month turns out to be lower than the RMI floor does NOT make that month an outlier unless that is the definition for an outlier.

    The August endorsements had the interest rates offered for HECMs in March, April, and a little of May 2019. So what interest rates is RMI saying were reflected in the August 2019 endorsements? Remember it takes four months for the average endorsed HECM to go from case number assignment to endorsement.

    Throwing out the actual outliers of December 2018 and January 2019, and you have to go to January 2004 to find a lower endorsement total for a month than August 2019. The closest August with an endorsement total lower than 2,341 was August 2003, 16 years ago.

    If you can find good news as to endorsement information for fiscal 2019, then you are a true optimist. The problem is the percentage loss when comparing the endorsements for this fiscal year to last’s is that this year’s is expected drop at least 32%, the worst such percentage loss in the history of the industry. In answer to how secular endorsement stagnation would end, in loss or gain, we now know it is NOT gain.

    For the eleven months ended August 31, 2019, total endorsements have not reached 29,000. Do those who were pontificating during the fourth quarter of calendar 2018 that total endorsements for this fiscal year will be no less than the total for last fiscal year really think that the total endorsements for September 2019 will be over 19,500? August 2019 was the 19th straight month that the related trailing 12 month endorsement total was lower than the month that preceded it; now that is news (just the wrong kind).

    In line with the expected percentage loss for endorsements for this fiscal year, the endorsements for August 2019 are 26.8% lower than the endorsements for August 2018.

  • I was double-checking the August top 100 lenders report for Live Well ranking at for the month. It should be ranking #8 for the year despite their exit.

    “Although it has dropped to number eight on the top 10 list for August, embattled former lender Live Well Financial has managed to hold its position in the top 10 even with no recorded endorsements for the month of August.”

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