Jumbo RMs and those caught in the middle
Two months ago we asked if private reverse mortgages would stop the slide in our industry’s overall loan production with the increasing popularity of the jumbo or proprietary- this as the HECM’s volume has dropped considerably.
That question was raised again most recently in Reverse Mortgage Daily, but with a twist. One of the more interesting observations in that piece comes from the director of Cambridge Credit Counseling. Jennifer Cossentini said, “I do think there is a strong possibility that the reverse mortgage landscape that we know now will flip in the next few years. I think the proprietary products have the potential to evolve and change to fit the consumer’s needs much faster than the HECM can.”
While private lenders can be much more responsive in meeting older homeowner’s needs, presently only those in higher-valued can benefit from proprietary products.
But do private or proprietary jumbo reverse mortgages truly compete with the HECM? It’s really not a question of one loan versus the other, but rather how each may complement each other in terms of total industry volume. So where can the jumbo reverse provide relief?
3 Comments
Another great broadcast. I would like to add however, then after a very slow year for me my. HECM production is now as high as it’s ever been. From talking to my processor she’s busier than ever also with HECM loans. By the way, some proprietary loans are available to those with lower value homes. They seem to be getting very popular with high-value affluent clients due to health care concerns
Jay- thank you for the feedback and perspective on HECM production.
Jay,
It is great to hear you are doing so well.
With the industry projected to be down about 33% at fiscal year end from where we were at the end fiscal of 2018, it is no wonder that the FHA Commissioner is saying that the endorsement projection this year will produce a smaller loss to the MMIF than last year.
It is also true that interest rates are doing better than most expected and with a 10% lower PL on most HECMs endorsed during fiscal 2018 (remember that over 51.3% had case number assignments dated before 10/2/2017), fiscal 2019 could end up with the second consecutive positive fiscal year for overall results.
Just remember that all of the positive results for fiscal 2018 were from adjustments made during fiscal 2018 to fiscal years prior to fiscal for 1) an undisclosed assumption change and 2) a unspecified book change according to Page 3 of the actuarial report on HECMs in the MMIF for fiscal 2018. There is strong belief that the continued lower interest rates during fiscal 2018 will make a positive adjustment to the interest assumptions for prior years. Expect other adjustments as well.
Perhaps fiscal 2020 will have better HECM endorsement results but due to poor and very, very late responses to the shift to some of the largest losses in HECM endorsements for any fiscal year (during fiscal 2019) such gain will not be materially large, meaning 40,000 endorsements in fiscal 2020 is almost out of reach.