Reverse Mortgage Volume On Pace to Fall Short of 2012 Level

Following very low years for volume in 2013 and 2012, it’s still unclear as to whether volume in 2014 is on pace to surpass its previous years’ totals. 

Cumulative Home equity conversion mortgage (HECM) volume between January and May is down 12.6% compared to the same period last year, and down 2% compared to the same period in 2012, according to the latest Reverse Market Insight (RMI) report.

When trying to predict this year’s overall HECM endorsement volume RMI says, “It’s tempting to say that 2014 will come in near 2012 totals, but the downside scenario is closer to 2005.”

The year 2012 finished with 52,883 endorsements, meaning an average of 4,240 HECM endorsements would need to be generated per month from July through December to match that number. For 2013, the total was 60,091.

In May, HECM volume was down 15.6% compared to the same month last year, but had increased 1.5% compared to the same month in 2012.

While Federal Housing Administration (FHA) program changes to HECM products appear to play a role in short-come volume activity, such as the consolidation of the HECM saver and standard products (essentially eliminating the fixed standard reverse mortgage), lender exits appear to have had a greater impact on medium- and long-term activity.

“The tempting conclusion to draw here is that FHA program changes are the major driver of volatility – and on a short term basis that would be true,” RMI says. “What gets a bit lost in this monthly perspective is the medium/long term ceiling being lowered by the lender exits as the industry loses distribution.”

Active originators declined this May compared to the same month last year by 13.2% with 616 originators this year compared to 710 last year. Year-to-date up until May, American Advisors leads as the top originator with 4,034 units, followed by One Reverse Mortgage with 2,037 units.

Sand states continue to lead the way in overall mortgage endorsements this year through May. California generated the most volume among states with 3,999 units and a 6.6% growth rate. The Lone Star state ranks second with 1,695 units; Florida third with 1,668 units; New York fourth with 1,464 units and Pennsylvania fifth with 1,036 units.

During that same period, Philadelphia, Pa. had the most HECM endorsements among city with 247 units. However, Philadelphia’s growth declined by 15.1%. Other cities that top the list are Los Angeles, Calif. with 177 units; Miami, Fla. with 172 units; Brooklyn, N.Y. with 170 units; and San Diego, Calif. with 167 units.

Read the full RMI report here.

Written by Cassandra Dowell

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