Home equity conversion mortgages (HECMs) fell in December of last year, but HECM to HECM refinance figures climbed, the latest Reverse Market Insight (RMI) report shows.
HECM endorsements finished down -13.1% for the calendar year 2014 at 52,949 loans, data show. But the decline was to be expected, says RMI President John K. Lunde, adding that the good news is that 2014 finished on an upswing. Both October and December exceeded both 2013 and 2012 figures.
The initial utilization restrictions implemented late last year by FHA likely contributed to the decline.
“FHA implemented restrictions on borrowers with case numbers issued on or after 9/30/13 such that they could draw the greater of 60% of the initial principal limit or the mandatory obligations plus an additional 10% of initial principal limit during the first year of the loan,” he says. “These restrictions made the product less attractive for borrowers seeking more cash at closing and created less revenue per loan for originators to market to new borrowers.”
Continuing a trend seen year after year, HECM to HECM refinance figures are heading up, with 8% of all loans falling into this category for December, up 39% from Dec 2013 — which was itself more than quadrupled from Dec 2012, data show.
“The refinances were an opportunity created by rapidly rising home prices in 2013/14 and secondarily by the principal limit factor (PLF) adjustments in August,” he says.
But whether this trend will continue upward throughout the year remains to be seen.
“Given that home price appreciation has slowed considerably in the past six to nine months we’d expect refinances to drop back down as a percent of endorsements over the first half of this year barring a new house price surge and/or PLF increases from FHA,” he says.
The top five states leading the charge in endorsement growth for December include California at 9,374 units; Florida at 3,834 units; Texas at 3,780 units; New York at 3,050 units; and Pennsylvania at 2,389 units.
Ranking at No. 1 for endorsement growth among cities is Philadelphia at 567 units; followed by Los Angeles at 440 units; Chicago at 414 units; Miami at 412 units; and Washington at 389 units.
View the latest Reverse Market Insight data.
Written by Cassandra Dowell
