HUD: Case Binders ‘Flood’ Offices, Reverse Mortgage Volume Outpaces 2019

The U.S. Department of Housing and Urban Development (HUD)’s Homeownership Centers (HOCs) have seen notable increases in reverse mortgage volume since the onset of the pandemic, though physical case binders for Home Equity Conversion Mortgage (HECM) endorsements continue to pile up in empty offices despite the ability for binders to be submitted digitally.

This is according to HUD officials who provided an update on what the HOCs have been seeing since the pandemic, during a panel discussion at the National Reverse Mortgage Lenders Association (NRMLA) Virtual Summer Conference last week.

Volume in key HOC already surpassed fiscal year 2019 total

The HUD HOC based in Santa Ana, Calif. is one of the most pivotal reverse mortgage offices in the country. Processing HECM endorsements across the west coast as well as places like Alaska, Nevada, Idaho and Arizona, the Santa Ana HOC is responsible for processing 40-42% of total national HECM volume. Already in fiscal year 2020 with several months remaining, volume is higher than it was in the entirety of fiscal year 2019. This is according to Thomas Rose, Director of the Santa Ana HOC during the discussion.


“In April, the Santa Ana HOC endorsed 622 HECM loans. This was a month that we all got started with Catalyst,” Rose said, referring to the FHA Catalyst platform which contains the functionality to accept and process the electronic submission of case binders and supplemental claims.

The following month showed a notable spike in HECM endorsements at the Santa Ana HOC alone, Rose described.

“In May we endorsed 1960 loans, and in June 1962 loans. So, we have endorsed 4500 HECM loans in the last three months. […] In fiscal year 2019, Santa Ana endorsed 11,360 loans. But already this year, fiscal year 2020 through the end of June, we’ve endorsed 12,211. So our volume is way up.”

That total through the end of June represents approximately $5.8 billion in endorsements. Of the 12,211 endorsements recorded at the Santa Ana HOC through the end of June, roughly 3,300 of those endorsements were HECM refinances, Rose said.

HECM professionals are ‘power users’ of FHA Catalyst

Additionally, though HECM makes up only a minority of total users on the FHA Catalyst platform, the HECM side of the mortgage business is actually quite over-represented in terms of endorsement volume that is processed through Catalyst. This is according to Scott Bice, director of the HUD’s Denver HOC.

“One of the things I did want to point out that will basically reiterate in your whole conference – not only your dedication to automation, but to the industry itself – is 15% of the users of Catalyst are HECM producers,” Bice explained. “It’s basically 655 forward users and 59 HECM users, total. So even though the reverse mortgage industry [makes up] 15% of users, you do 36% of the volume.”

The reverse mortgage trade association has made a lot of efforts in terms of advocating automation, Bice said, which could account for the disproportionate sample of HECM usage on the platform when compared with the forward side, Bice said.

“So, I really do have to commend the reverse mortgage industry for the use of Catalyst. Our top couple of users are reverse mortgage producers,” he explained.

Paper case binders ‘piled up’ in HOCs

Nevertheless, while the reverse mortgage business accounts for well over a third of Catalyst originations, that has not stopped the influx of physical paper case binders that have been coming into the mailrooms of the various HOCs, both officials said.

Although FHA announced in an April Mortgagee Letter that acceptance of digital case binders would be allowed for HECM loans in an effort to reduce the impact of the pandemic on the endorsement process, that has not stopped physical case binders from being mailed into the HOCs which are severely understaffed at the moment because of COVID-19.

“Towards the end of March, HUD made the decision to move all staff to mandatory telework,” Rose explained. “But we still had endorsements to do, and had cases in the office to endorse. So, the [Santa Ana] HOC stayed open for a few weeks with limited staff and contractors […] hoping that we could stay open and continue endorsing until Catalyst came online.”

Catalyst was being beta tested during this time, and while the hope to continue endorsements of paper case binders was present, the prospect simply became too problematic to continue because of the risk presented by the pandemic, Rose said. The move to telework was ultimately the right move and as Catalyst came online, some of the difficulty of endorsing loans went away. However, during this entire time with staff remaining home, paper case binders have not stopped coming into the HOC.

“I was in the office a couple weeks ago, and the mail room is bursting,” Rose said. “And we will have to work through those files. As we come back into the office, we have case binders that need to be endorsed and we will focus on getting those. But, we have case binders that wanted to be endorsed but have now gotten endorsed through Catalyst.”

A lot of work remains and the case binders submitted physically but ultimately resubmitted and processed through Catalyst will also have to be weeded out of the binders, which will be a priority when staff returns to the office. Rising rates of infection across the country and in California specifically make the timing for that difficult to predict, however.

“When we do go back, our number one priority is going to be to sort through those binders and find the ones that are waiting to be endorsed,” Rose explained. “There’s going to be so many that have already been endorsed through Catalyst, but we’re going to work through that. When that’s going to happen, I don’t know. In California, we haven’t progressed in phase one [of the state’s reopening plan]. And I don’t know when we will.”

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  • So as believed, the low endorsement count for April 2020 was the direct result of the effect of the pandemic. Yet the story about case files so backed up at the HOCs may mean that a significant number of closed HECMs that would normally be processed in the current fiscal year will not be endorsed until fiscal 2021 which distorts HECM data for both fiscal 2020 AND fiscal 2021.

    Nationally the total HECM endorsement count for the first three quarters of fiscal 2020 is 29,660. The total HECM endorsement count for fiscal 2019 after three quarters was 23,759 and the total HECM endorsement count for all 12 months of fiscal 2019 was but 31,274.

    Of course last fiscal year was the worst total for HECM endorsements for any fiscal year since fiscal 2003. This fiscal year, total HECM endorsements is predicted to be slightly over 40,000 which makes it the second worst HECM endorsement total for any fiscal year since fiscal 2004. So even though the HECM endorsement workload at HUD has grown, HECM endorsement volume is still way behind what it was even two fiscal years ago. Yet even HUD must realize the impact that the 300% increase in HECN refis over last fiscal year has had on their endorsement production.

  • “In California, we haven’t progressed in phase one [of the state’s reopening plan]. And I don’t know when we will.”

    This explains why the work is piling up. In California we effectively have a silent strike / work slowdown by government employees still drawing a paycheck. Teacher’s union is viciously fighting any reopening of the schools and is now pushing for healthcare for the undocumented, drastic class size reduction, and defunding the police.

    Governor makes arbitrary pronouncements of what business get to operate today and then are shut down tomorrow. The roads into the local mountains managed by the US Forest Service have been closed for months – somehow due to Covid-19. And good luck getting into the Recorder’s office or court house to pull records.

    I’d venture another reason for the pile up of binders is fear of paper. California Association of Realtors decreed we can not put flyers on sign posts or leave inside the home, or hand out marketing materials, to reduce virus transmission. MLS comments by agents are now commonly specifying paperless documents only.

    The nightly fear mongering on the local and national news probably makes those binders as attractive to handle as a pile of turds.

  • In reading this article, it is apparent volume has increased since the start of the pandemic. However, the way the direction of the industry is going is most definitely automated.

    the FHA Catalyst platform, even though not widely excepted as of yet appears to be the thing of the future. I realize it will be difficult or possibly impossible for some to adapt, but we may not have a choice as time goes on?

    As Jim Veal pointed out, the predicted endorsements for this fiscal year, even though vastly improved over last year, still makes it the second worst HECM endorsement total for any fiscal year since fiscal 2004.

    We also have to realize a vast amount of the increases have come from refinances. This is a problem because rates can’t go much lower so the refi stream will be ending!

    Those in the industry have to go after different avenues of business, the financial advisor, the insurance companies, small community banks ETC.

    This means that it will be more important than ever to focus on education, present and on going. Dealing with the professional sector requires us to be professionals, it requires us to be on our Toes and understand our product as well as all the in’s and out’s of the technical aspects of our industry! Our future does not have to be so bleak, there are plenty of light’s at the end of the Tunnel!

    That is my two cents for the day, stay safe all!

    John A. Smaldone

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