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   James E. Veale, MBT

   September 2, 2022 at 12:19 am

   HUD just reported endorsing 61,257 closed HECMs in the last 11 months. At no time in the last decade have we seen so many HECM endorsements in a single fiscal year of HUD. Congratulations to those in the industry who have worked so hard to achieve this landmark. With another month of endorsements to go, we could see a total number of HECMs endorsed during this fiscal year that exceeds 67,000.

   Since fiscal 2011 that saw 73,131 HECMs endorsed, the only fiscal year with more than 60,000 HECM endorsements had been fiscal year 2013 with 60,090. From its start in fiscal 1989, the growth in HECM endorsements has been quite slow not reaching total endorsements of over 20,000 until fiscal 2004. Then suddenly HECM endorsements began to grow reaching over 107,000 HECMs endorsed in fiscal year 2007, then increasing to over 112,000 in fiscal 2008, and arriving at its all time peak of over 114,000 during fiscal 2009. Almost as fast as its rise, total annual HECM endorsements fell in three fiscal years to just 54,822 for fiscal year 2012 as a result of the fiasco in mortgage backed securities in the mid aught years.

   Starting in fiscal 2013 the industry saw seven straight years of a valley to peak pattern of secular stagnation on a slightly downward slope and then came fiscal year 2019 with its loss in endorsement volume to just 31,274 due to the changes made in the HECM principal limit factors, the expected rate floor, and the structure of MIP on October 2, 2017. Thanks to lower interest rates and the growth in HECM Refinances (or HECM to HECM Refinances) during the last two fiscal years endorsements, the industry has only seen growth in HECM endorsements going from almost 42,000 during fiscal 2020 to over 49,000 endorsements last fiscal year.

   With interest rates rising, the opportunity for HECM refinancing has been greatly curtailed and with first time HECM borrower activity at about the same level as it was in fiscal 2019, it seems fiscal year 2023 could be yet another fiscal year of HECM endorsements of less than 40,000, potentially making it the worst year as to a percentage drop in HECM endorsement production (from the prior fiscal year) EVER. BUT then even short-term future facts and circumstances are subject to change and perhaps another year of substantial loss in HECM endorsement volume can yet be averted; yet growth of over 67,000 HECM endorsements in fiscal 2023 somehow simply seems out of question.

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