The number of HECM reverse mortgage endorsements moved lower for the second consecutive month in September. The 7,695 HECM loans endorsed in September was the lowest monthly total since November 2006 and represented a steep 14% drop below the 12-month moving average trend line for HECM loan growth.

On a year-to-date basis, 83,599 HECMs have been endorsed by HUD/FHA, a 36% increase over the 61,612 HECMs endorsed during the first nine months of 2006. September 2007 HECM endorsement (7,695) represent only a modest 8% increase over the 7,100 HECMs endorsed in September 2006.

A number of factors can be cited that likely have contributed to the recent slowdown:

Mortgage Market Problems - While the reverse mortgage niche is frequently cited as a shining star in an otherwise downcast mortgage industry, no doubt many consumers have shied away due to ubiquitous press coverage of “mortgage” problems.

HECM 100 Downfall - Availability of the popular HECM 100, which provides significant cost savings to reverse mortgage borrowers, has contracted dramatically in recent months due in large measure to the overall credit crunch. Many potential reverse mortgage borrowers may feel that with the demise of the HECM 100, the rug has been pulled out from underneath them.

Falling Home Values - Another by-product of the sub prime mortgage fiasco, falling home values may be giving potential borrowers further reason to pause in their borrowing decisions. Although taking on a reverse mortgage can be a sensible strategy in a falling market, the more typical consumer attitude may be to cautiously wait things out on the sidelines. In recent years, reverse mortgage growth has been fueled largely by red-hot housing markets in Florida and California. Now that these markets have cooled off, it’s not surprising to see the number of reverse mortgages fall off as well.

Whether the recent trend is a short-term aberration or the start of a plateauing for HECMs remains to be seen. We will explore these trends further in coming posts.

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A Few More Related Articles of Interest:

California HECM Activity Down

Growth in HECM Loans

HECM Growth By State

HECM Market Comparison 10/31/2007 vs 10/31/2006

Reverse Mortgage Industry Growth