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HECM Loan Origination Drops

Mortgage RiskHome Equity Conversion Mortgage (HECM) loan originations continued to decline in March according to the latest data from Reverse Mortgage Insights [1].

In March, the overall HECM originations stood at 2,573 loans registering a month-over-month decline of 35.7%. The decrease in HECM originations, according to the report, were led equally by retail and wholesale lenders.

While retail HECMs declined 36.1% to 1,497 loans, the wholesale market stood at 1,076 loans registering a month-over-month decline of 35.1%.

The report indicated that the top 10 lenders in this segment all saw declines during the month "without the tailwind from loans built up during the government shutdown." The combined wholesale and retail volume among the t0p 10 lenders stood at 2,336 loans, a decrease from 3,567 loans originated in February 2019.

Since April 2018, these lenders originated a total of 30,281 loans. However many of the smaller lenders saw a spike in their HECM volumes during the month, according to the report, leading to a jump in their rankings among the top 100 HECM lenders.

While the Federal Savings Bank's volume jumped 366.7% to 14 loans, Ocean Lending grew 150% to 10 loans and tied with Federal Savings Bank for 27th place in Reverse Mortgage Insight's rankings along with C2 which doubled up during the month to 10 loans.

DS News reported [2] earlier that, according to LendingTree and data from the Federal Housing Authority’s HECM program, HECMs originated in the 100 studied cities at an average rate of 7.1 loans per 1,000 homeowners over the age of 60 between 2012 and 2017. The top city, Virginia Beach, boasted a rate of 13.8 loans per 1,000 homeowners over the age of 60.

HECM loans were also one of the issues highlighted by the Consumer Financial Protection Bureau (CFPB) in its latest Supervisory Highlights report [3] on mortgage servicing on how lenders dealt with issues in the case of a deceased homeowner.

The report noted that when a homeowner with a HECM dies, his or her successor must pay the loan balance in full if he or she wishes to keep the home, or the home will be foreclosed. Successors may, however, file for extensions on the loan balance.

In some instances, successors received notices specifying the documents necessary to file for an extension on the loan balance due but did not include a deadline for the documents. Alternately, some successors were not notified of all the documents necessary to file an extension. The CFPB clarified that it “did not find that this conduct amounted to a legal violation,” but it could fall into the category of “a deceptive act or practice.”