What will it take for our industry to bounce back?
Despite the increasing need of retirees whose largest asset is typically their home, our industry volume continues to languish. Is it because our market is dysfunctional as the Mortgage Professor opined due to fear, confusion, and ambiguity? It is the increasing burden of regulation, product changes, and reduced lending ratios?
Mark Miller penned a column in WealthManagement.com that warrants consideration and reflection for HECM professionals entitled “Are reverse mortgages on the comeback trail?”. He asks the question, “will financial planners resuscitate the reverse mortgage?”. One could argue that recent changes to the HECM program have pushed the loan into the realm of…
Download a transcript of this episode here.
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7 Comments
Shannon,
It was significant that you identified two ways that the industry can grow but did not even mention HECMs for Purchase. That might have been an oversight but if not, we agree. HECMs for Purchase may come along but they will not significantly increase monthly endorsement totals much at all (at least not for another decade or so).
We are currently caught in downward secular stagnation. With alternating years of endorsement increase and decrease, we have just experienced the worst fiscal year total for endorsements in over a decade. Psychologically, the total was much worse than being the worst in a decade since it was less than 50,000 endorsements (at 48,902) . That was a milestone few wanted to “achieve.”
Since we have just experienced a loss year, it is natural that we would see a year of increase in fiscal 2017; however, since the stagnation is in a slightly downward slope, total endorsements will most likely be less than 58,053 (the total for fiscal 2015). The total for fiscal year (which started last Saturday, two days ago) is most likely to be in the 56,000 range.
BUT all of this is dependent on how soon HUD issues new rules. The sooner implementation, the lower the endorsement total for fiscal 2017.
By the way, a great vlog.
The financial planning community will never “resuscitate the reverse mortgage,” as Mark Miller phrased it. Never, as in… not a chance in the world.
Now, that is not to say that financial advisors shouldn’t be educated on the HECM product, nor does it mean that financial advisors will never play a role in the HECM decision making process, but as to driving or “resuscitating” anything… it’s simply not a possibility.
I could explain why in great detail, but since I know you agree with me, I’ll just leave it there.
Great post, Shannon. By nature, I’m an optimist. However, I see us swimming against the tide right now. Some of the changes effective this week will have a material impact on endorsements, and there are more changes to come. However, I’ve seen the eyes of financial planners, CPAs, and tax planner when they realize how a proper application can help their clients. They’ve come to me with untapped strategic uses that haven’t been written in white papers…yet. They estimate less than 5% market penetration in their financial services communities. My own surveys find closer to 1% market penetration within the, more difficult, Real Estate community. I agree that neither market will alone will resuscitate, but they may allow us to swim against the tide.
I’ve been saying this for a while now. All of the “Tinkering”, “Adjusting” and “Changes” under the guise of “making the HECM product more mainstream” are because, HUD WANTS HECM endorsements to be a smaller number. They’ve openly and repeatedly admitted it! There’s a very old by unbelievably true statement: “When someone (or organization) shows you who they really are, you have to believe them”. HUD has been “Showing” our industry very clearly over that past half a decade that they want HECM endorsements around 55,000 per year. Unless and until HUD decides to change their thinking, this will be our new normal. Period.
Forward in Reverse,
HUD has indeed declared its interest in keeping the program vital but limited. Yet to blame the current bouncing around in endorsement numbers all on HUD is odd. The endorsement predictions made by their actuaries do not confirm your assertions.
Perhaps you can provide empirical evidence in achieving your stated goals. I have never heard HUD say it wanted just 55,000 endorsements per year.
That’s always been your M.O. Cynic, everything has to have some sort of long, complicated, scientific formula.
Here are the last 5 years Annual Endorsements:
FY 2016–48,902
FY 2015–58,043
FY 2014–51,642
FY 2013–60,091
FY 2012–54,822
Total: 273,500
Average: 54,700
You might want it to be more complex, but it’s crystal clear to me.
Forward in Reverse,
So are you saying that HUD can predict endorsements for a fiscal year on policy tweaks?
It is not your opinions that matters but what empirical evidence you provide. There is coincidental evidence but no empirical evidence. You are like the guy at the ball park who claims the guy two seats down stole your popcorn because that guy (two seats down) is holding an almost empty bag of popcorn and you cannot find yours.
So why did HUD allow endorsements to go up in fiscal 2013?