How some are surviving or thriving in a down HECM market
“It’s tough to make predictions, especially about the future”, said baseball great Yogi Berra. Prognostications as how the reverse mortgage industry will recover and grow are often fall flat. An Industry initiative called “The Extreme Summit” set their sights high aiming to increase annual HECM endorsements from 50,000 to 300,000 units by 2018. The group was comprised of several industry CEO’s, many who in a secret ballot committed to financially back the effort investing $30-150 million over five years. While this was a laudable goal the initiative could never anticipate the headwinds that would soon befall the industry. Despite these challenges one wind of change blows at our backs and could help increase adoption of the Home Equity Conversion Mortgage in the years to come.
Last Thursday USA Today reported that more seniors 75 and older are carrying debt into retirement. This is a far cry from the borrowers many of us met with a decade ago who typically had few if any debts, yet found themselves house-rich and cash-poor. “We’ve seen instances of seniors foregoing required medications … because they can’t afford it,” said Lori Lucas, president and CEO of the Employee Benefit Research Institute. “More seniors are carrying debt into retirement than ever before.” While lower than their younger counterparts, the median debt carried by those 75 and older is $20,900. The Employee Benefit Research Institute reports that nearly half of retirees in this group have outstanding loans. The most significant increases of those carrying debt are among the lower-income seniors.
This trend comes as no surprise as our oldest Americans find themselves squeezed between the forces of…
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This vlog has two important segments.
The first is the inability of NRMLA and its activities to increase sales. Specifically, the one part of the ES (Extreme Summit) that NRMLA was responsible for was the three to one good to bad press. NRMLA achieved this goal through not only responding to bad press but also by recategorizing press that only had factual problems from bad press to good. Yet this part of the ES has not produced any change in the last four plus years in the current endorsement pattern of downward sloping, tip to dip, secular stagnation.
Remember the nonsense about industry collaboration surrounding the ES. Less than two years before ES, several of these same lenders had promised MetLife Bank that when its reverse mortgage operations started FA (financial assessment) so would they. Like the collaboration that following MetLife’s implementation of its own form of FA, lender enthusiasm towards ES died when it came to performance. Those who believed in the ultra optimistic ES were simply naive based on the conduct of lenders less than 24 months before.
I am looking forward to the FHA report on case numbers assigned this month that will give us 300,000 endorsements for fiscal 2018 (or even total endorsements since fiscal 2013 reaching 300,000 endorsements by the end of fiscal 2018). Anyone who believes that garbage, are too naive and need real help. All the optimism in the industry, promotion of collaboration, and recatagorization of bad press as good did not generate new demand. Was there any real basis to look for success from ES with so much lender inertia?
The last segment is focused on seniors who are at least 75 and their growing debt; however, few of these in the Silent Generation just entering retirement. Without substantial COLA increases to Social Security benefits, debt has become the norm even among the Silent Generation, the youngest of whom are 72 and the oldest, 93 (the very oldest of the Baby Boomers are 72). It is not clear that debt alone will incentivize the Silent Generation to adopt HECMs as the best debt option. Like a mirage in the desert, the closer you get into this new growing debt, the less it looks like an incentive for getting HECM.