New Fiscal Year Brings New Reverse Mortgage Top 10

With the 2009 fiscal year ending on September 30, this month’s HECM volume report revealed a new list of the top 10 reverse mortgage lenders, very much changed from that of last fiscal year. The list is below, compared to that of 2009 FY. However, given how close many of the lenders are to each other in terms of the number of HECMs they endorsed, it is by no means clear how the list will shake out over the next few months.

October 2009:

1. Wells Fargo

2. Bank of America

3. MetLife Bank

4. Financial Freedom Acquisition

5. One Reverse Mortgage

6. 1st AAA Reverse Mortgage

7. First Mariner Bank

8. Security One Lending

9. Harvard Home Mortgage

10. Stay in Home Mortgage

Fiscal Year 2009:

1. Wells Fargo

2. Bank of America

3. World Alliance Financial Corp

4. Financial Freedom

5. One Reverse Mortgage

6. MetLife Bank

7. Countrywide Financial

8. Generation Mortgage

9. Urban Financial Group

10. 1st AAA Reverse Mortgage

Thus, from last year’s top 10, only 6 remain in the top 10 for October. The complete list for October can be found on the HUD website. The changes will also be reflected on the Reverse Mortgage Guides website in the Lender Directory in the near future.

September Sees Large Jump in HECM Applications, As Expected

We knew that reverse mortgage applications were likely to jump to new levels in September, but we did not know how much- until now. September’s FHA Outlook report shows a 72.4% increase in HECM applications in September versus August. 19,055 HECM applications were submitted in September, versus 11,051 in August.

Therefore, while only 9,473 reverse mortgages were endorsed by the FHA in September, up from 8,933 in August, the number appears poised to climb in October and November, as those who applied before the principle limit factors fell 10% on October 1st complete their applications. It is also interesting to note that the number of purchases and refinances made up a very small percentage of the reverse mortgages endorsed, with 137 HECMs for Purchase and 790 HECM Refinances endorsed in September.

Finally, as the fiscal year ended, it is good to see that the FHA’s predictions were fairly in line with the actual results. 162,619 HECM applications were filed, as opposed to the 165,000 projected in FY 2009. Of those, 114,691 HECMs were endorsed in FY 2009. This is an increase of 2.3% from last year, though still below the projected 119,700 endorsements. Nonetheless, it appears that the reverse mortgage industry grew in FY 2009, despite the recession, and appears poised for a strong beginning to FY 2010.

HECM Volume in September Increases Over August

September’s HECM volume report as published by HUD (U.S. Department of Housing and Development) showed that the number of HECMs endorsed increased by about 500 loans from August to September. The number of HECMs endorsed in September was 9,473, while 8,933 HECMs were endorsed in August. However, this number does not reflect the dramatic increase in the number of case numbers assigned the last week in September during the final days of the former PLF limits. As such, the number of HECMs endorsed should rise rapidly in October and November, as they are processed and closed.

In the meantime, the HECM lenders in the top 10 remained unchanged from August. These top 10 lenders are measured by the total number of HECMs endorsed so far this year, explaining why some lenders that have left the reverse mortgage business are still in the top 10. The list is as follows:

1. Wells Fargo

2. Bank of America

3. World Alliance Financial Corp

4. Financial Freedom

5. One Reverse Mortgage

6. MetLife Bank

7. Countrywide Financial

8. Generation Mortgage

9. Urban Financial Group

10. 1st AAA Reverse Mortgage

It will be very interesting to see if this list changes in the next two months as the number of HECMs endorsed increases dramatically. The complete list for September can be found on the HUD website. The changes will be reflected on the Reverse Mortgage Guides website in the Lender Directory within the next week.

Advertising Changes to Come for HECMs

HUD announced that a new mortgagee letter will be coming in the next 60 days. The mortgagee letter will likely be about advertising, as HUD is apparently not pleased with advertisements that promote borrowers using the proceeds from a reverse mortgage for a vacation or expensive personal items.

However, reverse mortgage proceeds are for the borrower to spend at their discretion. While HUD has been very suspicious of borrowers using reverse mortgage proceeds for annuities or other insurance products, there is nothing to keep them from doing so. Further, a recent article actually promoted seniors putting money from a reverse mortgage into life insurance policies so as to be able to pass the money to their heirs tax-free–an interesting way to use a reverse mortgage for estate planning.

Ads in other countries with similar reverse mortgage programs also use advertising focusing on a vacation or luxury item. The philosophy is that the money is the senior’s to use at their discretion. These are some ways a senior might choose to do so. As a result, it will be very interesting to see what (if any) guidelines on advertising HUD releases with the next round of mortgagee letters. While a reverse mortgage is a loan like any other and does need to be taken seriously as a financial investment, one hopes seniors are still free to take out a reverse mortgage– regardless of whether they take it out for something serious (medical expenses, home repairs) or something more luxurious (yacht, vacation, car).

HECM Volume Rebounds in June, but Leaves Predictions in Jeopardy

After falling from 11,660 HECMs endorsed in April to 8,396 HECMS endorsed in May, HECM volume increased slightly in June to 8,633 HECMs endorsed. As the graph indicates, HECM volume for the year still looks like it is on track to be higher than last year. However, one wonders if the number of HECMs endorsed will be as high as was previously thought. While the trend through April might have led one to believe that the industry would see a 144,000 HECM volume year, these trends show something more like 120,000.

Once again, the volume of HECMs is concentrated in the top few lenders, decreasing dramatically on down. Wells Fargo, the top lender, has endorsed more than twice as many loans as the number 2 lender, Bank of America. Many other lenders have only endorsed one HECM last month.

The FHA’s complete HECM volume report for the month of June can be found here.

WSJ Features Front Page Story on Reverse Mortgages

The reverse mortgage industry received a pleasant surprise this morning when the Wall Street Journal wrote a big feature on reverse mortgages on the front page of the personal journal section. While much of the article explains what reverse mortgages are and how they work, an interesting piece for lenders is the section on how much money the FHA has lost through reverse mortgages. HUD asked for $800 million taxpayer dollars to boost its loan-loss reserves as housing prices continue to decline. Jeff Lewis, the chairman of Generation Mortgage, mentioned that about 1/3 of the borrowers who might have closed reverse mortgages two years ago would no longer qualify today due to the declining home values. Perhaps in connection with this, the article mentions how sudden pricing changes by Fannie Mae have recently disrupted some reverse mortgage transactions, as borrowers realize they will qualify for less money at closing than they did when they began the application process, sometimes even having a shortfall.

The stresses on the industry are noteworthy, especially as interest in HECMs increases. The number of reverse mortgages being closed has proliferated in recent months, yet housing values do continue to decline. Hopefully these financial considerations will not too greatly imperil the government programs.

Fannie Mae Will Discontinue CMT Based Reverse Mortgages in September

Fannie Mae announced yesterday that it will no longer buy CMT based reverse mortgages beginning September 1, 2009. This means that CMT based reverse mortgages are therefore much less likely to be offered starting on that date. While on the surface this might look problematic, most lenders and borrowers are already using LIBOR based products, which currently have lower interest rates than the CMT based products.

Fannie Mae said the reasoning behind the discontinuation of CMTs was to help standardize and simplify the HECM product offerings, build liquidity for the product, and move the market towards securitization. However, another likely factor is that the CMT is based on the US treasury bond, which has been plummeting in value recently due to the recession. The LIBOR, on the other hand, is based on the London Inter-Bank Offered Rate, which is an international index. As a result, it is arguably a more stable rate in the current economic climate, dependent on the international situation as opposed to only on the US.

Lenders will be able to continue to obtain pricing and commitments for CMT based HECMs from Fannie Mae until August 31, 2009.