2 Comments

1. 

   David Edel

   November 6, 2020 at 5:57 am

   Shannon – Perfect message today! Thank you!

   • Reply
   • Link
2. 

   James E. Veale, CPA, MBT

   November 6, 2020 at 6:12 pm

   The Byrds were famous for making the song “Turn! Turn! Turn,” very popular three years after its first release by the Limeliters. The main point of that song and the related verses in the Bible is that there is a season for everything. While we have been focused on COVID-19 and better HECM endorsement numbers so far in 2020, there is now a need to refocus our energies onto our business plans for the next six months or so.

   So let’s look at the reason why reducing unnecessary costs is so vital to your bottom line in 2021. The principal reason is likely lower monthly HECM originator commissions from the four following possible sources:

   1) in the near term, lower commissions due to the index change to CMT,

   2) the current trend in lower monthly HECM endorsements and their possible source,

   3) the anticipated lower home values that could result from a substantial increase in resale home inventory from foreclosures related to defaults
   resulting from the inability of a significant number of homeowners to meet increased mortgage obligations when forbearance ends, and

   4) the possible reduction in monthly HECM Refi closings at some point in 2021.

   According to John Lunde in RMD, there are some preliminary indications that senior concern regarding their finances in this time of COVID-19 may be lessening; however, John also stated that as of yet, there is NO direct solid evidence of this behavior. On the other hand, starting with June 2020, there has been an unexplained decline in monthly HECM endorsements except for July which had an increase of 46 HECM endorsements over the June totals (for a modest increase of just 1.1%).

   The October 2020 HECM endorsement count is 25.8% lower than the HECM endorsement count for May 2020, the peak HECM endorsement count for any month since February 2018. Of course many believe that the May 2020 HECM endorsement count was a catch up for the disruption to HUD operations from the initial HUD reaction to COVID-19. BUT even the July 2020 HECM endorsement total was larger than the HECM endorsement total for any month since March 2018, other than May 2020.

   Calendar year 2020 has been a great year for HECM endorsements but we are moving quickly into 2021. Things could change not only as to a reduced number of HECM closings but also commissions earned per HECM closed. Be aware of this probability and adjust your spending accordingly. Stay flexible as to your business plan so that you can adjust as circumstances change.

   Moving forward may hurt a bit but many of us believe that HECM closings have risen from their floor in late 2018 and all of 2019 and should grow slowly over the next five years. Industry leaders hope that the investor margins are better than anticipated. Most believe that when the powers that br accept the SPFR interest rate index, higher investor premiums should return.

   • Reply
   • Link