September’s Home Equity Conversion Mortgage (HECM) volume drop came in at 43.5%, or 3,235 loans, dropping under 4,000 for the first time since November 2020. That level has not been seen since the onset of the COVID-19 coronavirus pandemic in April 2020.
The September retail channel drop was slightly lower than the wholesale drop, with retail falling 39.8% compared to wholesale’s 47.3%, according to data compiled by Reverse Market Insight (RMI). However, breaking out the per-channel endorsement data could help give the drop-off additional context. To better understand the new data and what it could signal for the months ahead, RMD gained perspective from RMI President John Lunde.
Wholesale led the drop
Neither the top 10 reverse mortgage lenders nor any of the tracked geographic regions were spared from a drop in reverse mortgage business activity. However, the drops varied in severity, according to the data.
The drops recorded by all top 10 lenders were “dramatic” compared to August, according to RMI, and additional data regarding September’s loan types signal a general trend regarding a fall-off of HECM-to-HECM (H2H) refinance volume and the total share of new-to-reverse borrowers.
“Equity Takeout cases issued (new reverses that are neither purchase nor refinances) fell to 3,592 – consistent with the rest of 2022 except March and August which look like outliers relative to expectations going forward,” RMI said in its commentary about the data.
This further emphasizes how volume was bolstered by H2H activity, as FY 2022 reverse mortgage volume outperformed the total endorsement activity seen in 2021, according to the recently-released FHA Annual Report to Congress.
Meanwhile, HECM for Purchase (H4P) did not move the endorsement needle, as the 213 H4P case numbers in September were the same as August, or 6.6% of the monthly total.
Moment of pain as opportunity
At the National Reverse Mortgage Lenders Association (NRMLA) Annual Meeting and Expo earlier this month in Atlanta, Lunde sat down with RMD to discuss recent volume trends and the general tenor of discussions he was having with other professionals in light of the volume drop-off.
“I always love these conferences, and in good times, frankly, there’s just more hot air blowing around,” Lunde said. “There’s still some in bad times, but I think you have very real conversations in this kind of a moment. And so, I’m very encouraged. I think we have a great opportunity, and part of that is because we are in the middle of pretty severe pain.”
The frank and pointed conversations help contextualize the pain surrounding often-negative consumer perceptions as well as confronting troubling demographic trends, he said.
“Pain motivates change,” Lunde said. “Change is uncomfortable, and so if you’re already comfortable, why would you make yourself uncomfortable? It’s just not a natural human reaction. But when you’re in pain, you change and try to adapt and evolve and adjust to the circumstances. I think that’s where we’re at.”
This is also a reality for the larger mortgage industry, Lunde said, as the forward mortgage industry is undergoing its own difficult period.
“The other really interesting thing about it is that we’re not alone. The forward industry is also in at least as much pain right now as we are,” he said. “And so, I’m pretty excited thinking about how that creates opportunities. I think we’ve laid a pretty good foundation for educating beyond the needs-based borrower. Now is the time when we actually are going to try some stuff, and as an industry see if we really believe that that’s where our opportunity is.”
As noted in the general HECM endorsements for October, the industry managed to slightly recover the following month, with a business increase of 8%, though that did little to make up for September’s more pronounced losses. Individual channel data for October remains forthcoming.
Read the HECM Originators report at RMI.