It’s always more fun to report good news (since no one shoots the messenger in these cases!) and August continued a welcome trend higher in reverse mortgage business volumes. Endorsements were up 12.6% from July, again coming in ahead of increases in competition since the trough in May.
We also saw modest success in applications, coming in at 8,961 for the month of July. While that’s lower than June’s figure by 1.4%, there is a reason to be hopeful here. First, the updated chart with applications and endorsements (with timing adjusted 4 months for endorsements):
This first chart shows endorsement volumes following nicely along our application path, but the second chart shows a more optimistic trend in applications than the raw number suggests:
July had 2 fewer business days than June, which turns a -1.4% decline in the raw number to 8% growth in the per business day results. If we maintained the same pace in August (with 23 business days like June), then we would have been over 9,800 applications.
Lots of additional trend data and analysis is available in the full report by clicking the image below. Enjoy!
Another month in the rear view mirror, and we’ve officially reached the halfway point for the year. We’ve already seen a bounce in volumes from the May low and signs of life from the broker side of our industry, but who are the winners and losers among the states and metro markets around the country?
- Texas and Maryland continue to outperform among the top 10 states, down -26% and -23%, respectively
- Maryland’s strength is mostly attributable to the mini refi boom in Baltimore, which remains the only positive performer among the top 10 cities, up 12%
- Houston is the engine for Texas, down just -11%
- Philadelphia is a surprising metro we haven’t talked much about lately, but is down just -5% from last year at this time
- California has a virtual lock on average loan size growth, with 9 of the top 10 cities – but looking at total loan volume growth is an entirely different story. New Orleans, Baltimore, Tulsa and Santa Fe all rang up more loan volume by Maximum Claim Amount dollars than last year.
Click on the image below to view the full Industry Trends report for this month.
In last week’s report, we talked about how younger borrowers (read: Baby Boomers) are changing the face of the reverse mortgage industry by selecting reverse mortgages in greater numbers than their elders. Today, let’s dive a little deeper into reverse mortgage borrower dynamics.
One of the first questions that arises when looking at the age distribution chart from last week’s report is whether there was any difference between genders from an age perspective. As you can see from the chart below, single males are much more highly represented in younger ages than single females, with couples even further skewed to the young side.
In many ways this makes perfect sense given the shorter life expectancy for males, which naturally leads to fewer couples (assuming these are mostly married couples) and males at older ages. There are simply more single females that survive to higher ages as potential borrowers.
What’s perhaps less intuitive is that fixed rate borrowers are skewed younger as well, clearly evidenced in the chart below.
Perhaps younger borrowers are less daunted by the full draw requirement of a fixed rate loan because they’re more likely to be using proceeds to payoff an existing forward mortgage? As we start considering how potential usage of funds impacts borrower age, it makes sense to consider payment plan types, as in the chart below.
Since Line of Credit (LoC) is the payment plan option selected by a vast majority of borrowers and is currently mandatory on Fixed HECMs due to full draw requirements, we’ve narrowed our focus to just the HECM ARM population and chopped off the top 60% of the chart to see the change more clearly.
Under 8% of HECM ARM borrowers in their 60s select one of the four monthly payment options (excluding LoC), whereas 32% of those over 100 select a monthly payment option. Given the greater tenure payments available to older borrowers this would seem more attractive to older borrowers, but the level of change surprised us.
So what does all this mean? We suspect that many will see product development opportunities and others likely see sales and marketing implications. We’re as interested as everyone else to see what this means for our market, but the resounding bottom line remains that the reverse mortgage market is in great need of market segmentation and diversity in our approaches to growing the business.
We’d love to hear your thoughts in the comments below, or use our contact form to email us privately.
