With October showing a mere 1% increase over the number of reverse mortgage endorsements in September, many lenders say there were contributing factors that dragged volume down from what would have otherwise been an improved month for volume. And, they say, the drag on October could lead to a much stronger month for November.
Hurricane Sandy leading to government closings across parts of the Eastern Seaboard and impacting for some as much as 20% to 50% of business or more, was a major influence for some.
“The endorsements were definitely impacted because the Homeownership Centers in Philadelphia and Atlanta were not operational during the storm,” Paul Fiore, vice president of sales for American Advisors Group told RMD. “My post closing department is telling me that they are a still backed up from an insuring and endorsement perspective.”
But in addition to Sandy’s wake, the rollout of the Federal Housing Administrations new HERMIT technology presented a learning curve for those processing endorsements. While they say the new technology is a vast improvement overall, it may shift some volume onto the books in November rather than October.
“Sandy didn’t have all that much of an impact,” says Gregg Smith, President of One Reverse Mortgage. But, he says, regarding the new technology, the company saw some delays.
“With any rollout of technology you’re going to have hiccups,” Smith says. “We love it. I think everybody in the industry is really thrilled with HERMIT, but it is software. The vendor and HUD have done a fantastic job being on top of things but it has caused some delays in endorsing.”
Volume during the month saw a 1.1% increase over September, marking one of the lowest months for reverse mortgages since 2005.
HUD says it is unlikely the hurricane had much of an impact, despite closing local offices for two days.
“Headquarters was closed for two days,” a HUD spokesman told RMD in an email. “However, only one of our four Homeownership Centers was closed (Philadelphia), so the impact would have been minimal.”
Barring those two influencers, more volume should be seen on the horizon, lenders say.
“I imagine we’ll be caught up in November,” Smith says, noting a very strong month of endorsements for One Reverse. “This is an artificial decline.”
AAG, which posted 470 loans in October also expects November to pick up in light of an unusual month.
“A lot of funding delayed in October will fund in November,” Fiore says. “We may now artificially see some people have decent funding numbers in November.” For AAG, he says, it could be as many as 100 loans, due to many borrowers being in the impacted areas following Hurricane Sandy.
November, which typically lags slightly from a volume standpoint due to Thanksgiving, may stand to see some gains, says John Lunde, president and co-founder of reverse market insight. Based on very rough estimates, he says, the industry could see a notable gain.
“It looks like HERMIT/Sandy issues might have depressed October by 20% or so,” Lunde says. “Given that, we’d expect November to be substantially better than October, even with the holiday impact.”
Written by Elizabeth Ecker