As the reverse mortgage industry continues to adjust to the rule changes issued late last year by the Department of Housing and Urban Development, originators are seeing signs of renewed stability in the market — and even opportunities for expansion.
Asked to gaze into their crystal balls for the remainder of 2018, originators contacted by RMD had to first look back to the final few months of 2017.
HUD shook the reverse mortgage industry with new regulations for mortgage insurance premiums and principal limits, framing these rules, in part, as making it more difficult for borrowers to have credit lines worth more than their homes by prolonging the balance growth on their properties.
As the second quarter of 2018 looms, the adjustment period to those new rules is giving way to a new stability, some originators say.
“We expect that, after an adjustment period through the first quarter, the loan volume will start to return for the reverse professionals that continue to execute their marketing plan and do the heavy lifting,” said Des Lenz, reverse mortgage director at American Pacific Reverse Mortgage Group. “The need for the loan product did not go away and it will be a possible source of stability for those invested in the stock market, when that market is volatile.”
One longtime observer of the reverse mortgage industry anticipates a more competitive market in the wake of those HUD rule changes.
“The lowered rate floor will most likely result in a more competitive reverse mortgage market,” says Jamie Hopkins, an associate professor of taxation at the American College of Financial Services in Bryn Mawr, Pa. “It will encourage lenders to offer lower lender margins in order to maximize principal limits for borrowers.”
Originators also predict that the coming year will bring a bigger share of the market for Home Equity Conversion Mortgage for Purchase transactions, and even a notable entry of less experienced originators as senior reverse mortgage loan officials leave the industry. No doubt the HUD changes and the reaction to them will dominate the rest of the year, but the industry will deal with them and find ways to grow and profit, some originators say.
“We are experiencing changes in our industry due to the recent updates by HUD. However, [changes] have been going on for years and it is not the end of the world,” says Ed O’Connor, marketing manager at FirstBank’s HECM Division. “We have a good, solid product and now is the time for smart leaders to expand their operations.”
Written by Thad Rueter
