Reverse Mortgage Endorsements Record Slight Uptick in September

Home Equity Conversion Mortgage (HECM) endorsements rose by 3.4% to 2,420 loans for the month of September 2019, a lagging figure that has led to a second consecutive month of relatively low endorsement activity in the reverse mortgage marketplace. This is according to the September HECM Lenders report compiled by Reverse Market Insight (RMI).

The new data indicates that the business’ sluggish activity as seen in August is making for an only slightly more favorable comparison to the uncertainty that clouded endorsements at the start of the year due to gridlock in the federal government.

“The last time volume was lower than August-September was during the lingering effects of a partial government shutdown in January,” says Reverse Market Insight in its commentary accompanying the new data.

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Four regions across the nation exhibited a modest amount of growth, while another six recorded declines. The Mid-Atlantic region rose 17.4% to 169 loans, while the Northwest/Alaska rose 12.6% to 223 loans and the Pacific/Hawaii region rose 11.3% to 791 loans. Meanwhile, five of the top 10 lenders recorded gains, including Liberty Home Equity Solutions (110.4% to 101 loans), AAG (18.4% to 791 loans) and Longbridge Financial (16.2% to 79 loans).

“[In terms of] the regions, it’s always a good thing when the big regions are trending upward as Pacific/Hawaii did this past month,” says RMI President John Lunde in an email to RMD. “The problem is if you look at the other 9 regions they were almost exactly the same volume from the prior month. Growth is much more sustainable when it’s broadly based.”

Although it’s still technically listed among the top 10 for year-to-date numbers, excluding shuttered lender Live Well Financial from the list actually makes Austin, Tex.-based Open Mortgage stand as the number 10 lender in 2019 thus far.

While there is still growth to be found, it may be more attributable to non-agency proprietary products instead of the more typical Home Equity Conversion Mortgage (HECM), according to Lunde.

“I think we’re still looking at 2,500 endorsements per month as the default range for the industry right now,” Lunde says. “Growth is happening but it’s coming from proprietary products rather than HECM. The government shutdown [at the start of the year] created timing noise, but didn’t last long enough to create real damage to industry volume for the year in my opinion.”

However, the threat of yet another shutdown of the federal government is looming. While Congress passed a stopgap spending measure late last month to fund the government through late November, a budget battle over the very same southern border security issues that prompted the last shutdown is poised to take place, according to Politico.

Congressional leaders have until November 21 to either reach a new funding deal for the next year, or to pass another stopgap bill that will expire just before Christmas. If Congress fails to act or pass another stopgap bill by that point, it’s possible that a new shutdown could take place at the exact same point in time that the last one did, and for the same overarching reasons.

Read the HECM Lenders report at RMI.

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  • Here we are at the most significant fiscal year end for HECMs in 16 years. Where is that being covered?

    First, this is the worst fiscal year for HECM endorsements in 16 years (fiscal 2003). Second, the HECM endorsements were 35.3% lower than for fiscal 2018. That is the worst such percentage drop in the history of the HECM industry. Third, the actual number of HECMs that were dropped was the third highest in the history of the industry.

    Now we come to the number of HECMs endorsed in the month of September 2019. The count for the month of September 2019 was the lowest such count since September 2003. The endorsements for this September were 16% lower than for the month of September 2018. The count was also 3.2% lower than the 2,500 endorsement per month norm that RMI declared some months back.

    Why is it that anecdotal information on proprietary reverse mortgages (PRMs) has any preference to HECM endorsements? I have heard from “reliable” sources that for every HECM that closes, there is one PRM that closes. I ran that down and found out that information was very bogus. From other sources I have concluded that the total PRM closings in fiscal year 2019 were no larger than 10% of the HECMs endorsed in fiscal 2019. I find that total to be more realistic but very encouraging considering the lesser variety in PRMs being offered today versus back in 2006, 2007, and early 2008.

    Unless condo production drives HECM endorsement up in the last half of fiscal 2020, I cannot find much confidence for the HECM endorsement volume reaching in excess of 36,000 endorsements for fiscal 2020. Oh course, when it comes to predicting HECM volume for a fiscal more than 6 months before the end of that fiscal year, my predictions are normally too optimistic. Nine months ago, I predicted that the total for fiscal 2019 would be 32,600. Optimism has never helped my predictions and fiscal 2019 was no different.

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