Home Values: Still Largest Single Reverse Mortgage Growth Barrier

Housing market factors are will be the greatest influence on restoring growth to the reverse mortgage market, several lender executives told industry professionals on Monday. Companies are also waiting out the aftermath following large lender exits that left many loan originators displaced and seeking new employers in the space. 

Speaking on a panel before attendees of the National Reverse Mortgage Lenders Association annual convention in San Antonio, chief executives from Genworth Financial Home Equity Access, Urban FInancial Group, Reverse Mortgage Solutions as well as a former MetLife executive spoke of what needs to happen in order to see growth in reverse mortgage endorsements again and the distinct challenges they face. 

“It’s important to keep in mind we’ve had six really difficult years in the housing market,” said Pete Engelken, president and CEO of GFHEA. “It has taken its toll on origination volumes and home values. We are also continuing to see the impact of lender exits over the last couple of years.” 

Those lender exits—Bank of America, Wells Fargo and most recently, MetLife Bank—sent hundreds of originators to new companies, many of which have different origination models and marketing types from those large, retail branch-based banks. 

“It takes time for loan originators to settle at new places,” Engelken said. “As new applications move through the system, there is a lull right now. But we are seeing signs of improvement. The [recent] increase in case numbers will eventually translate into an uptick in endorsement volume.” 

While industry musical chairs is not an entirely new concept, so many originators moving in a short period is an unusual situation, said RMS President and CEO Marc Helm. 

“Four financial services type players exit, and that has some very unique impact,” he said. “Our industry has been challenged in terms of how to regroup those people.”

But even once those originators settle in, the question of home values remains a major concern of industry leaders. The latest data compiled by Standard & Poors/Case-Shiller Home Price Indeix indicates home prices are beginning to rise slightly in some areas, but they are down substantially in some regions without a bottom in sight. 

“The single reason loans are not making it through to funding is home value,” Engelken said. “Either they are short to close or the value doesn’t come in at a level where the consumer is comfortable. That’s the largest driver.” 

Managing expectations is one part of the issue, but the values themselves are presenting the single-greatest hurdle to growth, the executives say. 

“In our small retail unit, it’s all about the home value,” Helm said. “The customer always thinks home is worth more than it is. In 90%-plus cases it’s related to home value.

Written by Elizabeth Ecker

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