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Reverse mortgage numbers don’t tell the full story

reported reverse mortgage volume is just the tip of the iceberg

Reverse mortgage endorsement volume for April as reported by the Department of Housing and Urban Development earlier this week indicated a month-over-month decline of roughly 45% — to just over 1,600 loans. But the numbers aren’t reflective of what’s happening in the market, several industry sources have shared with RMD, particularly at a time when many originators are seeing renewed interest among prospects as a result of the COVID-19 pandemic.

The difference could be due to a few different factors including longer endorsement timelines both on the part of lenders and the Department of Housing and Urban Development, industry participants say.

“The endorsements shown for our company, as I suspect for most if not all lenders, do not reflect the actual volume of loans currently being closed,” says All Reverse Mortgage CEO Mike Branson in an email to RMD.

All Reverse, a direct-endorsement lender based on Orange, Calif., which ranked No. 14 on the list of top reverse mortgage lenders by volume based on year-to-date loan counts tracked by Reverse Market Insight, saw only 35% of its loans closed in April as reported in the data. The company saw a similar but less severe discrepancy in the previous months as well, with February numbers off by around 25% and March numbers off by around 30%.

“We can only speculate why the endorsements are lagging but since they only reflect approximately 35% of our actual closings and we didn’t drop down to the bottom of the rankings for the top 100, we can see that it is an industry-wide issue at the present time,” Branson says. “I have not seen a confirmation of this in the form of a written announcement from HUD, but it appears that HUD has gotten behind in this area due to the COVID situation.”

Despite HUD’s ongoing endorsement efforts, a backlog of loans due to remote-working transitions and adoption of electronic case binder submissions to HUD is possible, the agency says. During the COVID-19 pandemic, HUD began allowing digital delivery of reverse mortgage case binders for the duration of the national state of emergency.

“It’s possible that some of the drop in volume is due to remote work transitions during the end of March and beginning of April, and the transition away from paper-based processes,” writes a senior HUD official in an email to RMD. “However, we continue to endorse case binders, including HECM files, through our new electronic process implemented through our April 6 Mortgagee Letter 2020-07. We are working closely with HECM lenders to ensure any backlogs of paper file submissions are being addressed.”

There’s also some volume decline to be expected as the industry continues to originate non-HECM reverse mortgages with several lenders having introduced new proprietary products and competitive product updates in recent months and years.

While proprietary volume is not reported by lenders, reverse mortgage technology company ReverseVision says it is an important part of the overall picture of the reverse mortgage origination landscape.

“While it may be noted that endorsement volumes for FHA loans may have slowed, this may be more in terms of administrative challenges due to the global pandemic, and to the mix of Reverse Mortgages that are HECM vs. Private Loan products (PLP),” says Joe Langner, ReverseVision president. “The endorsement numbers do not include any representation for Private Loan Products and as they gain more popularity in the market there should a natural adjustment to the HECM endorsements…At ReverseVision we actually have seen solid growth in new proposals and applications with our customer base, in part due to the value of a reverse mortgage during times like these [with] lower interest rates, and the growth of the private loan products in the market.”

This article originally appeared in Reverse Mortgage Daily.