The latest report from the Reverse Market Insight, Inc. revealed a slowing down of reverse mortgage endorsements. The numbers have been going down these past few months, and with the current data, it’s really beginning to look bad.
Lenders approved by the Federal Housing Administration to dispense HECM or Home Equity Conversion Mortgages saw the endorsements falter by 0.4 percent in June. That’s a total of only 4,837 new HECM mortgages.
The RMI noted that the current data is “neutral at best on the face of it” but it’s still a surprise that only one out of nine regions saw a growth in June.
The Pacific/Hawaii region gained 8 percent to a total of 1,521 loans. All else decreased in their number of HECM endorsements, with the Great Plains recording the most drop – a -18.9 percent down to 77 loans.
The top HECM lenders collectively gained 1.5 percent in endorsements, but this also pushed the numbers for the rest of those in the industry. The FAR made 52.9 percent of endorsements, with 532 loans. Synergy One Lending rose by 35 percent to 332 loans. Nationwide Equities also increased by 21.7 percent to 140 loans.
The equity conundrum
This does not make much sense, with today’s low interest rates. Although rates have hiked since last year’s Brexit, it’s still considered within historically-low range. Add that to the fact that the rising home prices have increased equity among many senior borrowers across the country. These factors alone are enough motivation for anyone to refinance, or for seniors to tap into their home equity via a reverse mortgage loan. But it doesn’t seem to be the case.
Unlike the conventional forward mortgage, a reverse mortgage loan allows seniors aged 62 and above to borrow against their home equity. The loan is disbursed either by lump sum, a line of credit, or a combination of both. It is only repaid once the borrower moves, sells the home, or passes away.