HECM Case Numbers Reach Two-Year High Driven by Equity Takeout Transactions

In October 2024, HECM case numbers soared to a two-year high, driven by equity takeouts and strong wholesale growth, despite a decline in H4P loans.

In October 2024, the world of Home Equity Conversion Mortgages (HECM) experienced a remarkable resurgence, as detailed in a recent analysis by Reverse Market Insight (RMI).

The figures indicate a strong recovery, with HECM endorsements climbing impressively by 11.3%, totaling 2,392 processed loans for the month.

However, what’s even more striking is the surge in HECM case number assignments from the Federal Housing Administration (FHA), which saw a phenomenal 17% increase, bringing the total to 4,331—an achievement that hasn’t been reached in over two years.

Significance of Case Number Assignments

These case number assignments represent a crucial first step in the reverse mortgage origination process.

Once a loan application is submitted, the Department of Housing and Urban Development (HUD) provides these assignments, which serve as a potential indicator for future loan volumes.

While there can be some disconnect between endorsements and case assignments, the recent growth signals optimism in the HECM market.

This uptick in case number assignments can largely be attributed to equity takeout transactions—new reverse mortgages that are not classified as either purchases or refinances.

This segment alone experienced an impressive 18.1% boost, amounting to 3,399 cases.

In parallel, the HECM-to-HECM refinance category also saw a notable rise, increasing by 18.6% to reach 765 cases.

While refinances are expanding, equity takeouts play a vital role in ensuring the industry’s sustainable development, especially following a downturn attributed to the post-pandemic refinance wave.

Challenges in the H4P Segment

On the flip side, the HECM for Purchase (H4P) segment didn’t share in the growth.

It faced a decline of 7.2%, with case numbers dropping to 167, which accounted for just 3.8% of the overall figures for October.

Despite ongoing efforts to boost H4P participation, this sector has struggled to gain a meaningful foothold in the reverse mortgage arena.

An analysis of the Mutual Mortgage Insurance (MMI) Fund found that the volume of H4P transactions is still too low to warrant its own distinct classification within the overall HECM program statistics.

The disparity between retail and wholesale HECM originations also became evident, as the wholesale channel outpaced its retail counterpart with an 18.6% growth compared to just 6.7% for retail in October.

Interestingly, only half of the top ten lenders reported increased volumes compared to the preceding month, highlighting a mixed landscape.

Leading Lenders and Future Prospects

Leading the pack in loan growth for October were Longbridge Financial and Goodlife Home Loans, boasting growth rates of 51.6% and 50.5%, respectively.

Goodlife, the standout operator primarily in the wholesale market, contributed significantly to this surge.

Fairway Independent Mortgage Corp. also made headlines with a respectable 31% increase in loan volumes for the month.

Overall, the October report signals a pivotal moment for the HECM market, suggesting that despite some challenges, there are encouraging trends pointing towards a revitalized interest in reverse mortgages.

Source: Housingwire