May’s ‘Dramatic’ Reverse Mortgage Volume Recovery Led by Retail

Home Equity Conversion Mortgage (HECM) endorsements rose dramatically by 214.8% in the month of May 2020, for a total of 5,027 loans according to the latest HECM Originators report from Reverse Market Insight (RMI). The rise was led by the retail endorsement segment of business, which experienced an increase of 235.5% that month, while wholesale levels recorded a smaller — though still substantial — increase of 193.4%.

This posted rise in endorsement levels is at least partially due to extenuating circumstances in the prior month, according to RMI in its commentary accompanying the data.

“HECM endorsements recovered dramatically in May after HUD and lender operations challenges related to the pandemic constrained volume in April,” RMI writes. “Rather than comparing May to April, it makes more sense to compare Apr/May average to the Q1 average for each lender to see how their endorsement volumes are trending.”

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In that respect, three specific top-10 lenders stand out when compared to their endorsements in the first quarter of the year. Finance of America Reverse (FAR) leads with growth of 30.7%, which solidifies “their number two ranking” according to RMI. Industry-leading lender American Advisors Group (AAG) shows an increase of 26.6% to an average of 1,194 loans in April and May, described as “impressive” by RMI.

Continuing an impressive endorsement streak is Fairway Independent Mortgage Corporation, posting an 18.6% increase to an average of 174 loans in April and May.

The overall increase in endorsements observed in May constituted the best monthly total the industry has seen in over two years. While encouraging, RMI President John Lunde advised moderation of expectations due to the way the figures are calculated.

“I’d say [May’s endorsement increase is] almost all from the backlog catching up, although the average of the two months put together being on the higher end of prior 10 months’ range suggests we do have a modest growth trend in place still,” Lunde told RMD in June. “I don’t think we’ve had enough time pass yet for pandemic-fueled interest to show up in endorsements.”

Lunde previously detailed for RMD that the HECM Originators report is useful in seeing the splits in and health of the retail versus wholesale channels, which helps to illustrate how lenders are doing from a more individualized and channel-specific perspective.

Read the HECM Originators report at RMI for specific breakdowns and more regional performance data.

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  • As a friend used to say: “Old news!” This is a very poor year for HECM endorsements. Just because this fiscal year is better than last, does not make fiscal 2020 a great year for endorsements.

    The article is overly focused on HECM endorsements for two of the nine months of monthly HECM endorsements. So let us look at a larger milestone. Total HECM endorsements in the nine months ended June 30, 2020 are just 29,660. That total is the second worse for any nine month period ended June 30 since the nine months ended June 30, 2004, 16 fiscal years ago.

    It is likely that the same count in fiscal 2021 will be better than that count for fiscal 2019 but worse than that count for fiscal 2020. It could be that fiscal 2020 and 2021 are two years of stagnation for HECM endorsements.

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