Margins on adjustable-rate reverse mortgages have continued to inch higher after a nine-month descent that began last March, suggesting that perhaps the industry is beginning to recover after a rough year and a half.

Margins in February averaged 2.02%, according to Baseline Reverse’s latest Margin Report.

In December, Baseline data revealed that margins were finally on the upswing, rising from 1.95% to 1.97% before climbing to 2.03% in January. (Click chart below to enlarge; image courtesy of Baseline.)

Baseline President Dan Ribler said that while a number of factors likely play a role in this increase in lender margins, it’s safe to say that the industry is not seeing a “race to the bottom” as some had speculated, referencing the fear that, in the wake of October 2017 program changes, lenders would be forced to reduce profits dramatically in order to compete for loans.

Ribler also pointed out the HECM Index has remained relatively flat over the past month.

“Just looking at these two items in isolation tells me lenders might be making a little bit more profit margin month over month. As ARM margins rise, the gain on sale generally increases. Since the HECM Index has remained flat – meaning market pricing hasn’t worsened materially – this suggests total execution has increased slightly,” Ribler said. “Obviously, there are other factors to consider, but these two factors combining are certainly a positive sign for lenders.”

Ribler said that as of now, the HECM market appears to be steadily improving after a rough 2018.

“It’s steady as she goes. I’m hearing from a few lenders that things are ‘starting to improve’ while others are ‘cautiously optimistic,’” he said. “In general, there’s a more positive tone in the space these days than there was a few months ago.”