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Is the HECM Refi boom a sign of a healthy market?
Historically-low interest rates have pushed up HECM-to-HECM refinances to nearly one-third of all loan volume. Originators share their thoughts on what the refi boom means for our industry.
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2 Comments
If the HECM refi boom resulting from low interest rates was resulting in INCREMENTAL business on top of a surge in NEW originations stemming from the same factor, I would be encouraged about the “strength” of the reverse market. As it is, the refis appear to be REPLACEMENT volume allowing the industry to continue to tread water. Aside from a rising tide in the H4P segment, I am seeing few signs of encouragement re the adoption/use of reverse mortgages as other than needs-based product.
Jim,
Your points are well taken with one exception. The national increase in H4P endorsements, for this fiscal year over last, is projected to be about 136 H4P endorsements. Yet on a regional basis, that percentage will vary.
Currently, total HECM endorsements are projected to be about 40,944 for this fiscal year (ending September 39, 2020) or approximately 30.9% greater than total HECM endorsements for last fiscal year (ended September 30, 2019) with its 31,274 total HECM endorsements. That percentage increase is composed of an increase of 0.4% from H4Ps, 10.4% from Traditional HECMs, and 20.1% from HECM Refis. On the other hand, if we just look at H4P endorsements for last fiscal year of 2,282 and compare that to the projected H4P endorsements for this fiscal year 0f 2,418, H4P endorsements, that percentage increase is about 6.9% greater this fiscal year over last. The most recent data gives a slightly better picture for this fiscal. It shows that even if HECM Refis for this fiscal year were the same as last fiscal year, total HECM endorsements would have ended up being almost 11% higher than the total HECM endorsements for last fiscal year which better than projected even a few weeks ago.
All projected endorsement information for this fiscal year is based on the most recent HECM endorsement and HECM case number assignment data available to the public on HUD’s website (plus an assumed conversion rate of 67% for the percentage of applications with assigned case numbers assigned that are expected to become HECM endorsements).