The reverse mortgage program can’t seem to find its footing in the wake of program changes issued in October 2017.
Since the endorsement totals began to reflect the new guidelines, volume has been shaky, eeking out slight gains in one month, only to see a near-complete reversal the following.
But so far, December takes the cake, closing out with a steep 31.4% decline – a low the industry hasn’t seen since January 2004.
The latest data from Reverse Market Insight reveals that December saw just 1,751 endorsed loans.
And while the government shutdown meant that no endorsements were issued for five business days at the end of December, RMI President John Lunde said the total would still be low even if there was no shutdown.
Lunde estimated that the shutdown delayed about 580 files from being endorsed, which would still mean that the month would close out at 14-year lows.
In November, HECM endorsements began their descent with a 17.4% plunge, and RMI suggested perhaps proprietary reverse mortgages – which are not accounted for in RMI data – were eating up some of the volume.
But December’s poor performance suggests that’s not likely the case.
“Even the most optimistic proprietary product advocates weren’t painting 700-plus loan per month volume scenarios for 2018, which is what would need to be happening for demand to be relatively stable to growing compared to June-October HECM endorsements volumes,” Lunde said.
Instead, December’s decline is likely an indicator of a “worst-case scenario,” Lunde said, meaning that it may signal a continued trend of reduced volume for the reverse mortgage space.
And while the FHA did raise maximum claim limits for 2019, increasing the limit from $675,650 to $726,525, Lunde told HousingWire he doesn’t expect this to attract a significantly greater number of borrowers.
“I’m not expecting much bump from that, perhaps a small handful more loans each month,” he said.
But the continued government shutdown will be a major disruptor, Lunde said, saying that he thinks it will “cause major noise” in the numbers as the Department of Housing and Urban Development drags into its second week of no HECM endorsements.
But, while Lunde said he predicts a rough 2019, he does see recovery down the line.
“It will be another tough year,” he said. “I think we've already started to climb out of the hole barring any further shocks to the system, but it's just a really slow climb.”