Reverse Mortgage Volume Dips Led by Wholesale in October

Home Equity Conversion Mortgage (HECM) endorsements fell by 4.6% in the month of October 2020, for a total of 3,741 loans according to the latest HECM Originators report from Reverse Market Insight (RMI). The fall comes in the midst of generally heightened reverse mortgage industry activity that has been taking place over the past few months as the economic impact of the COVID-19 coronavirus pandemic continues.

In examining the divide between retail and wholesale business, it’s clear that the overall driver of the endorsement drop in October stemmed far more on a performance drop on the wholesale side as opposed to the retail side of the reverse mortgage industry. While retail endorsements dropped a single percentage point to 2,138 loans — 22 fewer loans than in September — the wholesale endorsement segment dropped by over 9% to 3,741.

This is a noticeable gap between the two channels to be sure, but is not the largest gap that’s been observed between them. The trend is also likely to change, according to RMI President John Lunde.

“We’ve definitely seen gaps between the channels in the past, including some as big or bigger than October as recently as June/July,” he tells RMD. “It usually means we can expect some mean reversion the following month where Retail weakens more than Wholesale. Given that November was down -4.7% overall, that’s the most likely scenario.”

In terms of why the timing differences between channels, the cause can stem from a couple of possibilities including general endorsement volatility and the ability for some professionals to react more quickly to market changes, Lunde says.

“Some lenders have historically had more volatility in their endorsement volumes, and they lean more heavily into the wholesale channel,” Lunde explains. “We’ve [also] always suspected that brokers and wholesale are more reactive to changing market conditions than retail/direct lenders that generally have larger organizations and longer range planning processes.”

In the top 10 lenders, only two managed to record gains on their endorsement totals when compared to the previous month. Mutual of Omaha Mortgage managed to rise 7.2% to 238 loans, while Reverse Mortgage Funding (RMF) recorded a 2.9% endorsement increase to 389 loans for the month of October.

Finance of America Reverse (FAR) once again took the top spot in wholesale originations. On the retail side, AAG continued to maintain its position in the top spot, maintaining over 34% of total HECM market share over the 12 month period ending in October.

While still technically the 9th largest reverse mortgage lender by volume over the 12 months ending in October, the now-shuttered One Reverse Mortgage has not recorded any endorsements since May according to the data.

RMI President John Lunde previously detailed for RMD that the HECM Originators report is useful in seeing the splits in and health of the retail versus wholesale channels, which helps to illustrate how lenders are doing from a more individualized and channel-specific perspective.

Read the HECM Originators report at RMI for specific breakdowns and regional performance data.

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