Reverse Mortgage Applications Fall Sharply Following FHA Changes

Following the April 1 suspension of the fixed rate standard reverse mortgage, the lending community says it is seeing far fewer applications for new loans. 

With some of the fallout to be expected following the change, the most recent data available from the Department of Housing and Urban Development indicates applications for April and May are well below their pre-April 1 levels. 

“Based on numbers we’ve run through end of May it looks like applications are down much more significantly post April 1 than our conversations with lenders originally led us to believe,” says John Lunde, president of Reverse Market Insight.

Anecdotally, some lenders are reporting double-digit losses spanning as high as 40%, with RMI seeing applications down at least a quarter by its informal tally.

“When we compare application volumes from January-February to April-May we’ve seen roughly 30% declines,” Lunde says. 

The loan mix has shifted from a vast majority of fixed rate loans to nearly 95% adjustable rate loans following the implementation of the moratorium. While lenders expected a surge of application volume in the months leading up to April, many said they were shifting marketing attention as well as training toward the new origination mix. 

But losses around 30% may lead to more serious changes among lenders, should the application decline prove more steadfast than a short-tem reduction. 

“Taken in conjunction with expected lower revenue per loan post April 1, I would imagine there are a lot of serious conversations happening at this point about where to tighten business models for more efficiency,” Lunde says. 

Written by Elizabeth Ecker

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