The Federal Housing Administration reported that reverse mortgage applications were up 2.3% in May, coming it at 8,169 units during the month.  For FY 2010, reverse mortgage applications are down 49.3% from the previous year.

May marks the fourth straight month over month increase, but the industry has yet to see the increase result in more volume.

“I think we’ve seen most of the short term increase in applications from reduced upfront costs,” said John Lunde, President of Reverse Market Insight.  With lenders continuing to reduce costs and therefore provide more proceeds to borrowers, several major reverse mortgage lenders are expecting to report volume increases.

“We generally see endorsement trends trail applications by about 4 months,” he said.  “Given that apps hit their low in January, May would make perfect sense as the low point for endorsements.”

RMI published a great chart showing HECM Applications vs. Endorsements with a 4 month lag.  See a larger version of the chart here.  Looking at the chart, one could expect an uptick in volume coming soon.

During May, 4,554 HECM’s were insured, the lowest HECM endorsement volume since September 2005.

Overall, the 124,754 mortgages for $22.3 billion were insured for the FHA Single-Family Program during the month.