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Reverse Mortgage Volume Plummets in April Amid COVID-19 Crisis

Reverse mortgage endorsement volume fell sharply in April amid the COVID-19 crisis that continues to derail the U.S. economy and impact businesses and households in unprecedented ways. 

Yet the downturn in Home Equity Conversion Mortgage volume — which posted a 45% decrease to 1,601 loans during the month — does not tell the full story, say industry advisors based on Department of Housing and Urban Development data, with some lenders posting zero closings during April. 

The decline comes at a time when many originators report borrower inquiries are up and conversations with financial planners and other referral sources are gaining momentum. The loan volume alone is not the only indicator of market health, says Reverse Market Insight co-founder and president John Lunde in his monthly endorsement report published this week. 

“While we’d normally be very concerned about this level of drop, we have many other reliable indicators that the reverse mortgage business is actually holding up well in the pandemic,” he writes. 

Delving deeper into the month’s loan tallies, RMI notes several positive indicators, including an uptick in retail applications in March over February, as well as 50% more applications year over year during March. Further, March fundings were on par with February totals, which marked a significant annual increase. 

The data can be used as a point of reference, RMI writes, “… but keep in mind that things aren’t as bad as HECM endorsement numbers show and we’ll likely see a bump back up in endorsements similar to past government shutdown backlogs clearing through the pipeline.”

Financial services advisory New View advisors echoed the perspective around the strong bearing of the COVID-19 crisis on April loan volume, also noting that the investor market for HECM-backed mortgage securities (HMBS) is stabilizing, but not expected to return to pre-COVID levels “any time soon.” 

Across the U.S., most regions experienced the sharp declines in reverse mortgage volume, and several lenders didn’t register any endorsements. 

“Time will tell whether April’s low endorsement count will be overshadowed by new opportunity to provide HECM loans to seniors, those most affected by Covid-19,” New View writes in its monthly commentary.