Rising Tides – HECM Lenders March 2013

HECM endorsements climbed 20.8% in March to their highest level since June 2011. That date is significant, in that it was the last month Wells Fargo was fully active in the industry, although their endorsements were reflected for a few more months after their exit announcement. Either way, it’s a significant hurdle for the industry to cross and shows the power of recovering housing markets to drive reverse mortgage volume.

The rebound in reverse mortgage volume (from depressingly low levels to be sure) is coming from two primary drivers. The first is increased consumer demand, as evidenced by HECM case numbers issued by FHA, which is the industry’s approximation of applications. Figures are only available for entire industry through January, but those reflect increasing demand as shown in chart below.

January cases issued came in at 8,593, roughly in line with the last month of Wells accepting applications for reverse in June 2011 and 48% above the low from January 2012 at 5,795.

Conversions of case numbers issued into endorsements is also improving lately, likely resulting from better appraisals as housing markets improve.

Using our 4 month lag rule (cases issued turn into endorsements 4 months later), conversion rates for November cases issued (the most recent period at least 4 months seasoned) were 79%, a figure we also haven’t seen since early 2011.

Putting these trends together, it’s no surprise that endorsement volumes are trending higher. In our view the suspension of HECM standard fixed won’t change this trend meaningfully, but 2014 and beyond could show significant impact from changes FHA makes to the HECM program by September 30 to respond to MMI fund weakness and legislative pressure.

From a regional perspective, 7 of 10 regions were at 12 month highs – and significantly it was the top 7 regions where volumes are meaningful to national trends.

Among lenders, Liberty Home Equity Solutions continues to power ahead as the largest lender, reaching a second all time high in the past 3 months. Proficio joins the top 10 with its own all time high as well, on a run rate that would put it 8th.

HECM Originators and HECM Trends are expected back shortly, hopefully this month. ¬†Cross your fingers that doesn’t fall to the sequestration ax!

Please click the image below for the full report.