It’s not just the housing market that’s poised for a big shift. So is reverse mortgage lending. While industry participants have typically concerned themselves with potential changes to the federally-insured Home Equity Conversion Mortgage program or state regulations another sea change is approaching the horizon.
There’s an old investing adage that says, “don’t fight the Fed”. In other words, wise investors align their financial decisions with the current monetary policy of the Federal Reserve. Mortgage originators of all stripes did just that. Mortgage lenders certainly did.
years refinance transactions have been the rage as the central bank slashed interest rates in the effort to stave of a recession due to Covid-19 shutdowns and stay-at-home orders. However, by late April after a series of rate hikes by the Fed, mortgage refinance volume collapsed to 68% less than it was one year ago. Can we expect the same for HECM refinances?
Quite honestly it’s too early to tell. FHA’s March HECM snapshot shows that 48% of all HECM transactions were for refinances. In the same month, 40% of FHA case number assignments for submitted HECM applications were for HECM-to-HECM refinances. What’s notable is that are nearly 10% fewer applications for a refinance than in January of this year and that may actually be good news.
In March traditional non-refinance and purchase applications accounted for 59% of all case number assignments. That’s a notable increase from January when only 50% of case numbers were for traditional and purchase HECM applications. Anecdotally this seems to indicate with fewer refinance opportunities available originators returned their focus to finding new first-time HECM borrowers.
To even the casual observer it’s quite obvious that rising interest rates and flattening home values will splash a modest amount of cold water on both traditional and mortgage lending volumes. However, reverse mortgage professionals have a unique advantage over traditional mortgage lenders. While unfortunate, inflation will thwart the ability of many middle-aged Americans to adequately save for retirement. While retirement deposits decline home equity will continue to accrue with the forced-savings plan which required mortgage payments require; all to the homeowner’s benefit; a benefit which they may be able to tap into using a reverse mortgage.
It would be both prudent and desirable to see non-refinance HECM volume continue to increase to replace what was once a reliable source of funded loans. After all, like the seasons bring hotter days and chilly nights, HECM refinances will become the notable exception rather than the rule. Despite rising rates and uncertain home values, our turbulent economy is increasing the necessity for additional cash flow. And that is where we ultimately stand.
*Please pardon our focus issue this week. The problem is being resolved.
In a few short days, the National Reverse Mortgage Lenders Association’s 2018 Annual Meeting and Expo will begin in sunny San Diego, California. What should you expect? Here’s a sneak peek of the upcoming attractions for this year’s annual pilgrimage of over 400 reverse mortgage professionals.
Changes:
What’s new? There are several notable changes this year, one being the start date. In years past conferences were in November and began on Monday and concluded Wednesday afternoon, however, this year we are moving forward one day beginning on Sunday, October 28th and concluding Tuesday the 30th.
As the HECM landscape becomes increasingly competitive branding is key. Two workshops will get you started off on the right foot- at 1:00 p.m. Grassroots Marketing presented by Jim McMinn with Finance of America will explore generating business from five unique lead sources. How to create a unique brand is presented at 2:00 p.m. with Darius Aram from ARAMCO Mortgage, Steven Sless- national reverse mortgage director for U.S. Mortgage Corp, and Norcom Mortgage’s VP of Reverse Mortgage Lending John Luddy. Many of you have come to follow John’s weekly sales tips videos here on HECMWorld each Thursday.
The most popular topics this year will focus on the new 2nd appraisal rule as part of the Collateral Risk Assessment and private or proprietary reverse mortgages. At 3:15 p.m. Sunday a panel led by Scott Norman of Finance of America will look at the implications of FHA’s new appraisal policy change enacted earlier this month.Monday morning at 10:00 a.m. New Product Options will feature a panel discussion on the latest private reverse mortgage products and alternate home equity loans…
What if gratitude became the focus of your life for a year? This world-bridging wisdom can serve as both template and platform from which to approach your HECM service — and your life.
The remaining months of summer are certain to accelerate further changes to the federally insured reverse mortgage program. First is the long anticpated and often delayed Financial Assessment…
