Low termination rates on reverse mortgages reported

The first meaningful measurement of reverse mortgage performance, expected to be presented this month to select industry members, will reveal surprisingly low termination rates.

The Reverse Market Insight, Inc. “Industry Data Repository” includes information from four of the top 10 reverse mortgage originators in the country and six of the top servicers, according to John Lunde, RMI president, who told RMD that he is hopefully expectant of having seven originators in all on-board and providing data by year’s-end.

At that point, he anticipates being able to collect vital lifecycle information on “60 to 70 percent of [all] national production, which would be a major achievement,” said Lunde, adding that “anything over 50 percent would be a meaningful enough sample.” Besides, he notes, “there was nobody collecting [such] data on the reverse mortgage industry [as recently as] four years ago.”

A recent article by Darryl Hicks, Vice President, Communications, National Reverse Mortgage Lenders Association, noted that, “For 20 years, a void has existed in the reverse mortgage marketplace…while the industry’s largest players supported the idea of having a single data repository, nobody was focused on the data challenges of the industry…”

Lunde was reticent about revealing detailed findings in his forthcoming report ahead of time, but he did tell RMD that “one surprising thing I’ve seen [in the data] are very low termination rates,” i.e. the rates at which loans are being paid off (retired). It is a “phenomenon” that Lunde predicts will be “temporary. We’ll see a move within the next year closer to historical [higher] rates,” he said, noting that the current trend was a result of the broad “housing price correction” being experienced nationwide. “Folks are moving less and refinancing their reverse mortgages less,” he explains, adding that termination rates are less than half of what they were only two years ago.”

One servicer familiar with the repository put the average age of all reverse loans today at “more than seven and a half years.” This professional further explained the overall importance of the data gathering, noting: “It helps us know more about what a loan is worth relative to its potential age.”

Written by Neil Morse

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