There’s a Silver Lining in Reverse Mortgage Volume, Despite 9-Year Low

Home equity conversion mortgage (HECM) endorsements fell to just 3,256 in August, the lowest number since July 2005, according to data by Ibis Software Corporation, which tracks HECM counseling sessions, case numbers and endorsements. 

“Monthly endorsements are the lowest they’ve been in the last 9 1/4 years,” says Ibis President Jerry Wagner. “People are saying, ‘Hey it’s a turnaround,’ but I’m saying, ‘Well, maybe not.’” 

The 3,256 HECMs endorsed in August represents the lowest figure for both a month and for three trailing months since July 2005, when just 3,139 HECMs were endorsed. 

Although some reports indicate reverse mortgage volume may be trending up, Wagner notes that reverse mortgage program changes sometimes result in a flurry of applications, but not necessarily a corresponding number of endorsements.

For example, when the Federal Housing Administration (FHA) announced an upcoming 15% reduction in principal limit factors (PLFs), more than 16,000 reverse mortgage applications were taken in September 2013. But those extra 6,000-plus applications didn’t seem to translate into any additional endorsements, even when taking into account the five- to six-month lag time from application to endorsement, Wagner says. 

Even when taking into account the five- to six-month endorsement lag time, the extra 6,000-plus applications didn’t turn into endorsed HECMs or closed loans, Wagner says. 

“What scares me is that we had this big flurry here in August and September 2013, and five to six months later, there’s no change in endorsements — in fact, they’re falling,” he says.

But there may be a different silver lining in looking at the recent volume indicators: Reverse mortgage counseling sessions are on the rise, meaning that people are still interested in — and may be gaining interest in — the product.

A wave in baby boomers becoming eligible to take out a reverse mortgage may be contributing to this increased interest.

June saw a 10% rise from May in daily Ibis Reverse Mortgage Analyst (RMA) counseling clients, July saw a 3.1% increase and August saw a 4.9% increase in counseling clients. While there was a 10% rise in counseling sessions in June, there was also a 4.9% rise in case numbers — or applications — in June, according to the most recent Ibis data. 

“The good news I see is that counseling sessions per day are growing and applications in June were up 5% over May,” he says. 

Written by Emily Study

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