Reverse Mortgage Borrower Age Creeping Up Amid New Rules

The sample size is small, but a new set of data shows that demand for reverse mortgages among younger borrowers may be declining under the new principal limit factor structure.

Of the 2,910 Home Equity Conversion Mortgages funded in January and pooled in February, loans originated under the 2017-era PLFs accounted for 1,345, according to the most recent data from Baseline Reverse — or about 46%, showing that major lenders are still working through the remaining 2014-PLF loans in the pipeline.

But while demand among borrowers 75 and older remained fairly consistent, the 74-and-under numbers reveal a gap: Among the loans from the old 2014-era PLFs, 960 borrowers were aged 74 and under, while that number was 809 for the new PLFs.

“The lower PLFs may make it harder for younger borrowers to qualify,” Baseline Reverse founder Dan Ribler told RMD, though he added that it’s too early to play “Chicken Little” and say that “the sky is falling.”

Ribler also pointed to a wider range of margins for adjustable-rate loans under the new PLF tables: While the 2014-PLF loans predominately had margins in the 2.75% range, the 2017-PLF loans had a wider range of potential margins, going as low as 1.08% and as high as 3.38%.

Other key data takeaways

For January fundings, the average original principal limit for the 2014-PLF loans was $338,080, compared to $211,468 for the loans originated under the new rules; for maximum claim amounts, the figures were $571,240 and $412,038, respectively.

In addition, only Live Well Financial had more 2017-PLF loan fundings than HECMs from the old rules. Industry leader American Advisors Group, meanwhile, saw 698 loans funded under the old rules and 547 under the new as the industry continues to clear out the pipeline.

“AAG did about three times more ’14 [loans] than the next-closest guy, so they’re still clearly working those loans,” Ribler said.

Still, Ribler cautioned that it’s still too early to tell if these month-level trends indicate a major sea change in the makeup of reverse mortgage borrowers nationwide.

“So it’s probably pretty early to draw any major conclusions about the direction of the industry, but it is a good early read,” he said.

Written by Alex Spanko

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