Reverse Mortgage Refinances Increase, With Interest During Pandemic

While lenders have reported an increase in general interest around reverse mortgages during the COVID-19 pandemic, both from prospective borrowers and financial planning professionals, several factors are also leading to an increase in refinances of existing reverse mortgages at the same time.

Given the pre-pandemic climate and subsequent economic downturn, the market has seen an uptick in existing borrowers looking to refinance their Home Equity Conversion Mortgages, according to data tracked by Reverse Market Insight, a reverse mortgage industry research firm in Dana Point, Calif.

HECM-to-HECM refinance transactions were 18.8% of endorsements in the first quarter of 2020, up from 4.2% a year earlier and 13% in the fourth quarter of 2019, RMI data analysis shows. 


“We’ve definitely seen an increase in reverse-to-reverse refinances in the past few months,” says John Lunde, RMI president and co-founder.  

Some of the uptick may be due to factors present prior to the pandemic, while some interest may be related to the crisis itself.

In terms of interest in refinance transactions prior to the pandemic, Lunde attributes the increase to two things.

First, interest rate margins on HECMs had a period of increase as lower index rates allowed lenders to maximize lending limits for borrowers at higher revenue levels.

“This provides funds for paying costs at closing for borrowers and also marketing initiatives to reach more existing borrowers for refinance,” Lunde says.

Second, an onslaught of proprietary product enhancements introduced as market competition increased in the private market prior to the pandemic created higher PLFs and lower interest rates for many borrowers. Some of those with existing proprietary loans found an incentive to refinance them largely due to the interest rate environment.

“The movements to increase PLF and reduce interest rates on proprietary products have gone away in the pandemic so we’ll just have to see what happens on this front as things normalize,” Lunde says. 

Scott Harmes, national sales manager for the C2 Reverse division of C2 Financial Corp. in San Diego, Calif., has noticed an increase in interest in reverse-to-reverse refinances across his client base, some of which may be directly related to the stay-at-home orders in place to prevent disease spread.

“There’s definitely more interest,” Harmes says. “People have downtime at home right now, and they’re being more circumspect. They want to make sure they’re safe.”

In addition to being in a more cautious, planning state of mind, COVID-19 has caused people to really take stock of their assets, according to Harmes.

“The pandemic is making people look more deeply at their assets, the stability of their assets and how to access those stable assets — [and] home equity is one of those assets,” he says.

Written by Meredith Landry

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  • Total HECM endorsements for the first half of fiscal 2020 are higher than for the same period in fiscal 2019 by 3,196.

    Total HECM refi endorsements for the first half of fiscal 2020 exceed those for the same period in 2019 is 2,300. This means that 72% of the growth in HECM endorsements for the first half of fiscal 2020 versus the first half of 2019.

    So let us isolate the growth in total HECM endorsements for the first calendar quarter of 2020 over the same period in fiscal 2019 which turns our to be 1,993. The increase in HECM endorsement refis for those periods was 1,555 meaning that 78% of the increase in total HECM endorsements comes solely from HECM refi endorsements.

    Since we have no RELIABLE data on industry wide proprietary reverse mortgage originations, there is no way to tell how many proprietary reverse mortgages are being refinanced into HECMs. The same is true of HECMs being refinanced into proprietary reverse mortgages and how many proprietary reverse mortgages are being refinanced into proprietary reverse mortgages.

    There is a lot of potential errors in extrapolating what is going on at a primarily California TPO to the overall industry. Afterall there are many states in which NO proprietary reverse mortgages are currently being offered and even without stats there is little doubt that California disproportionately remains the state with the largest number of originations of proprietary reverse mortgages when compared to the volume for each of the other 49 US states and DC.

  • I can see why interest in reverse mortgages are greater now due to the pandemic.

    As I said in a previous comment, now is an ideal time for many senior Homeowners to consider a reverse mortgage. Not only will the equity in ones Home serve as a future cushion for the unknown, but it could also be used to increase the amount of cash flow coming in on a monthly basis for seniors!

    Also, the proceeds from a reverse mortgage can be used as a hedge in a downturn market as we face today. Instead of cashing in investments when market values are so low, the proceeds of a reverse mortgage can stay off the heavy losses some seniors could face!

    Jim Veale brings up good points on the proprietary industry data origination’s, there is no reliable sources on it! As Jim points out, there is no way to tell how many proprietary reverse mortgages are being refinanced into HECMs. The same is true of HECMs being refinanced into proprietary reverse mortgages and how many proprietary reverse mortgages are being refinanced into proprietary reverse mortgages as Jim points out. All of this is very true!

    Getting back to why the increase in reverse mortgage applications during the present pandemic crisis. Seniors are more concerned than ever about the financial stability of the economy and their retirement needs. A reverse mortgage can solve many of these fears seniors have today.

    If seniors are approached properly by originators and patients on the part of originators is shown to our seniors when pointing out the benefits they could get with out product, many senior s needs will be satisfied!

    As I ended my previous comment with, It is true, a reverse mortgage is not for every senior, but more and more, especially in today’s environment, we find more seniors are finding a reverse mortgage is the right path for them to take. They are finding a reverse mortgage is provide them exactly what they need for retirement!

    John A. Smaldone

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