There’s a Silver Lining in HECM Endorsements That is Overlooked
The chorus of dismay from reverse mortgage professionals lamenting declining reverse mortgage loan numbers began after the Great Recession and continues through today. Consequently, a sense of frustration and futility has set in for some who believe our industry was decimated in the aftermath of the housing crash, product restrictions and the Financial Assessment. But do we have it all wrong? In other words when considering HECM endorsement volumes are we comparing apples to oranges? Do mere annual sales numbers reflect the true state of our industry?
Jim Veale is more than an industry veteran- he’s a numbers guy. Not surprising considering his background as a CPA with a Masters in Business Taxation. While often outspoken on industry issues, Jim has been my personal go-to guy when it comes to the more technical aspects of the HECM market. His recent Op-Ed in Reverse Mortgage Daily does not disappoint.
“Most sales managers, originators, and other participants in the Home Equity Conversion Mortgage industry are longing for significant validation that the sales efforts of this decade have had any meaningful results.
4 Comments
As a Reverse Mortgage Professional Loan Officer, I find it harder to make a living on this downward slope of Reverse Mortgages. An average increase works with the long term, like investments, but as a sales person swings up and down are natural but this feels as if the downward slope has been going on way too long. Thoughts on what might turn this around faster?
B Donner,
It would take a different mind set at the lenders. It would require unvarnished and more importantly unslanted truth about the improvement on property charge payment defaults and a demand from the lenders to revise financial assessment which is doubtful.
It is expected that principal limit factors will remain unchanged. The first year limitations rule may be somewhat revised by new regulations or in the new handbook. Many are hoping for rule changes to H4Ps but it is very doubtful if we see much benefit in endorsement numbers for some years to come from such changes.
Rather than complete acceptance from the financial advising community there is some blowback that a percentage of our originators are becoming less welcomed since many are acting more like the financial adviser than part of the support team for the financial adviser to draw from.
The biggest positive news is that the last generation began getting HECMs in their mid 70s. The oldest Baby Boomers are just now turning 71. This largest cohort of seniors should have a positive impact on endorsements and based on the practice of the last two generations, Baby Boomers should begin getting HECMs in earnest over the next 20 years or so.
We need to learn how to reach the mass affluent and the less affluent and demonstrate how HECMs can answer their cash management needs throughout retirement. While the outlook for the present is somewhat bleak, the outlook for the next decade is not.
Yesterday, I apologized to Shannon for not notifying him of my change to the RMD story that Shannon rightfully used as his primary source in the vlog above. The updated oped is at:
http://reversemortgagedaily.com/2017/07/26/opinion-the-silver-lining-in-the-new-endorsement-volume-of-this-decade/#more-26751
Here are the relevant data CHANGES from that update (Shannon had a chance to use some of the new info in his screen shoots above but not in his narrative):
“Aggregate endorsements over the last 10 years are on pace to be about 204.32%* more than what they were as of the start of business on October 1, 2007, when they totaled about 346,177. By September 30, 2017, that total should be about 1,053,500, an increase of 707,323 (or 204.32%) new endorsements in this decade.
During the prior decade that ended on September 30, 2007, the aggregate HECM total went from about 19,863 to 346,177 for an increase of about 326,314 during 10 fiscal years of impressive and substantial annual growth, trends, and stats. Despite weak growth trends and even years of horrific losses, this decade has seen an even greater increase to the aggregate endorsement total over what had ever been seen since program inception to September 30, 2007. When presenting this to Shannon Hicks, president of Reverse Focus, Inc., he referred to the comparison as the total endorsement picture before the Great Recession and then in the decade that followed.
We had not even reached 350,000 in total endorsements by the end of the prior decade, September 30, 2007. Yet not only did we reach 500,000 total endorsements early this decade, but also early this fiscal year we celebrated reaching the mark of 1,000,000 total all-time endorsements. The average number of endorsements per year in the prior decade was 32,631 per year and 70,732 in this decade, which is an increase of 38,101 endorsements or 116.76%. Put another way, a 116.76% increase in average annual endorsements for an entire decade that started with two years of stagnation, followed by three years of horrific losses, and ended with five straight years of downward-sloping stagnation is not bad.”
*Indicates that this version is the final one I edited.
No worries Jim. Thank you for your much-needed perspective for our industry. #context