Retail reverse mortgage production took a hit in January

While reverse mortgage volume in 2024 got off to a rocky start, new data that breaks out retail Home Equity Conversion Mortgage (HECM) endorsements versus wholesale production showed that it was the former that took the bigger hit in the first month of the year, based on new data compiled by Reverse Market Insight (RMI).

According to RMI’s newest HECM Originators report, wholesale endorsements gained 2% from December to January, while retail/direct endorsements fell by 3.7%, dragging the total average HECM endorsements for the month down by 1.7% on a per-unit basis.

“That’s mildly interesting given the lag time for endorsements, but case numbers issued in January rose to their highest level since October,” RMI said in its commentary accompanying the data. “[This is] a much more important signal that reverse is looking up.”

Breaking things down

While HECM case numbers as measured by the Federal Housing Administration (FHA) have been lagging in recent months, the total share rose in January by nearly 30% to 2,923 endorsements. So-called “equity takeout” cases — endorsements that are neither refinances nor purchases — also rose by 23.5% to 2,414.

The HECM for Purchase (H4P) program also managed to gain ground in January, rising 13.5% to 135 loans in what RMI describes as a “seasonally bad month.” The key point of the new data, however, likely rests in HECM-to-HECM (H2H) refinance figures.

“H2H refinance case numbers showed the ongoing alignment of reverse to 10-year [Constant Maturity Treasury (CMT)] rate nuances, rocketing 87.9% to 374,” RMI said. “There are loans to be done here, but keep in mind that with how low volume has been the past two years at the higher expected rates, this isn’t something to build your business around.”

Four of the top 10 industry lenders also gained ground for the month. These increases were led by Goodlife Home Loans (up 25% to 50 loans), followed by Fairway Independent Mortgage Corp. (up 21.6% to 107 loans), Finance of America Reverse (up 17.4% to 682 loans) and Longbridge Financial (up 4.7% to 358 loans).

FAR maintained its position as a market leader for the month, ranking first across retail and wholesale origination metrics over the past 12 months with an industrywide market share of 33%, as well as an even split of 23.9% of the market share across individual channels, according to the data.

According to outreach conducted by RMD, sentiments expressed by loan originators and managers since the start of the year appears to be reflected in this data. LOs across a variety of housing markets reported that inbound reverse mortgage inquiries appear to have risen since the beginning of the year, keeping them busy.

“I think things have definitely picked up,” said Tane Cabe, a broker with C2 Financial Corp., said in a recent interview. “That seems to be the general feeling. I’ve talked to some leaders in this space recently and they’re telling me they’ve definitely seen an increase in volume. It just seems like the morale is better out there, for sure.”

Also noting a spike in business was David Heilman, principal for HomeGrown Financial in Mount Pleasant, South Carolina.

“I don’t know if there’s really anything to really point to [why that’s the case],” Heilman told RMD in February. “I’ve certainly seen more inquiries already. Typically, this is a slower time for me; January and February have always been slower months. In springtime, people start moving again, but so far in 2024 I feel like I’ve at least been getting more proposals out, which as we all know, results in more applications eventually.”

In some of the nation’s higher-priced housing markets, reverse mortgage professionals also reported a stronger start to business at the start of the year despite the seasonal norm.

The H4P factor

HECM for Purchase is a largely underutilized variation of the HECM product, but after the FHA announced a seller credit for the program late last year — to the delight of many reverse mortgage professionals — LOs in different areas of the country are keeping an eye on it as a path toward growth.

“I’m working with a couple of brokerage firms on a multipart agent training series,” Frank Borg, a Seattle-based originator with Fairway said in a February interview. “I’ve done a lot of CE (continuing education) classes on a one-off, and it’s just not enough to prepare a real estate agent to really even see the opportunities to refer or to speak about the possibilities where a client can use a reverse for purchase.”

Fairway is a lender that is making its intentions in H4P plain, expanding its focus in this area and saying in February that it has a “commitment to leveraging its award-winning service and extensive experience in the purchase market to meet the unique needs of retirees looking to buy homes, setting a new benchmark for excellence and innovation in the reverse mortgage sector.”

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