More Going To Reverse Mortgage Counseling, but Fallthrough Still Surges

The rate at which people interested in reverse mortgage counseling end up with a closed loan has fallen as low as 53% over the past 12 months, according to the latest data compiled by Ibis Software Corp., which tracks new counseling clients entered into the company’s Reverse Mortgage Analyst program each month. While it appears to now be rebounding, the number has seen a downturn in recent months—a change which some attribute to the implementation of new counseling protocols in 2010.

Others, however, say that low home appraisals are driving the low rate of closings with respect to those potential borrowers who go through counseling. One reverse mortgage counselor told RMD that in follow up calls with borrowers, he, too, has seen the pull through rate drop, largely due to not enough equity to close the loan.

While the number who are entered into Ibib RMA and take an application is still more than three-quarters, the bottom line considers those who actually end up with a reverse mortgage loan, explains Jerry Wagner of Ibis.

“There are three things to consider,” Wagner says. “Say 78% of counseling sessions resulted in applications. While 68% of those may result in closing, overall the counseling to closing proportion is only 53%.”

Yet there is some good news on the counseling front: the number of people entering into the system is on the rise—up more than 11% from July to August based on Ibis’ analysis of its data.

The increase of the number of new counseling clients is a positive trend and further underscores an observation noted by Reverse Market Insight in August: reverse mortgage counseling sessions, used as a leading indicator, should indicate a rise in reverse mortgage endorsements as the counseling clients move through the loan closing process. RMI referenced case numbers specifically to show the relative impact of lender exits on the reverse mortgage business.

Correction: A previous version of this article stated the Ibis findings were based on HUD’s tracking of counseling sessions. Rather, Ibis analyzes its own data based on clients entered into its Ibis RMA. RMD regrets the error. 

Written by Elizabeth Ecker

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