Retail losses lead February decline in reverse mortgage volume

Reverse mortgage volume dropped in February compared to the month prior, and new data compiled by Reverse Market Insight (RMI) shows that the primary culprit for the month was retail reverse mortgage originations.

The retail channel volume decrease of 15.7% effectively “masked” a gain of 3.9% posted on the wholesale side of the business, according to RMI. To get a better idea of the dynamics driving this data, RMD spoke with Jon McCue, RMI’s director of client relations, for additional perspective and a breakdown of why business moved this way.

Retail vs. wholesale drop

When asked about why retail suffered a heavier drop for the month, McCue said it could stem from a few different factors.

“I know some companies have gone back to brokering their loans because the volumes are not high enough to support their own staff to compete in the full correspondent space, so I’m sure there is an uptick in part to that,” McCue said. “Outside of that, a one-month decline like this is really too early to weigh in heavily with speculation. If this becomes a trend, then I think that would tell us more.”

Jon McCue

Four of the top 10 lenders in the space — South River Mortgage, Goodlife Home Loans, Longbridge Financial and Liberty Reverse Mortgage — managed to post gains for the month. When asked about why the bigger lenders sustained drops in the retail and consumer-direct business channels compared to the wholesale side, McCue said part of it is data visibility.

“Given that the vast majority of brokers in the space only do zero to one loans a month, it is easier to see the significant decreases in the larger players since their volumes are more visible to the entire space,” he said.

“Because of this fact, when there are industry headwinds, we tend to see it first in the larger lenders simply because it is easier to see. However, if we go back to the November and December case number assignments, the writing was sort of on the wall that a month like this was coming.”

That’s because those were the two lowest case number assignment months in all of 2023, McCue said. South River Mortgage does not have a wholesale channel, so its growth was due entirely to retail, but for the other lenders it was a bit more channel-driven, with the exception of Longbridge, he added.

“Longbridge led the wholesale channel in February and was No. 3 in retail, so when combined it gave them a nice boost month over month,” McCue said. “Goodlife was all from their wholesale channel, and Liberty was a little bit of a combined effort as well from both its channels.”

Case numbers, product types

In terms of case numbers, the low-issuance months at the end of 2023 served as a bit of a telegraph, McCue noted.

“Since we are speaking of February endorsements, we need to go back to around the November and December case number assignments, which happened to be the lowest in all of 2023 at just over 2,600 and 2,200 respectively,” he explained.

“With that said, you shouldn’t be too surprised to see endorsements fall off in February. However, ever since the start of the year, we have seen an uptick in case numbers, which correlates to the uptick in activity LOs have been seeing and that [RMD has] reported on.”

Earlier in the year, RMD spoke to reverse mortgage managers and loan officers across the country, who did in fact report a more steady stream of inbound inquiries and product interest. Part of that was also due to an apparent increase in originator sentiment around the HECM for Purchase (H4P) product, which RMI hopes to see more of in the months ahead.

“We are firm believers that the H4P product is prime to take off,” McCue said. “When looking at H4P volumes over the years, interest rates have had very little to do with its success. In fact, the lowest levels of H4P were in the lowest rate environment during the 2020 pandemic as inventory tightened and seniors were not interested in moving given all that was happening.”

Industry perseverance

But other data suggests that seniors may be more willing to move again. He cited the 2024 Generational Trends report from by the National Association of Realtors (NAR), which indicated that the senior demographic made up the second-largest portions of buyers and sellers.

“This tells me [seniors] are moving again, so what are their options? For the right people in this high interest rate environment, an H4P may just be what they need,” McCue said. “And now that the program has gone through some recent changes, it is more closely related to its forward counterpart.”

The reverse mortgage industry, he added, is adding its own brand of perseverance to the table.

“With the rate environment we are in, it is tough, but case number assignments have been on the rise since January, the H4P product got some much needed improvements, and in speaking with LOs, it sounds like they are keeping busy,” McCue said. “Currently, all signs are pointing in the right direction, but that isn’t because of rates. It’s because of the hard work of all the professionals in this space working very hard to help their clients.”