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   James E. Veale, MBT

   February 4, 2024 at 2:40 pm

   As of 2/4/2024, we are now in the fifth month of this fiscal year and its shortest month in terms of number of days at 29. It is being reported that production is so slow in the industry right now, sales management is trying to manufacture the sounds of HECM endorsement production.

   Through the first four months of this fiscal year, total HECM endorsements are only 9,267. That is 23% lower than this time last fiscal year (at 12,048 HECM endorsements) which was the second lowest fiscal year for HECM endorsements in two decades. It is hoped that the upbeat attitude expressed at this year’s NRMLA National Convention was not based on some industry propaganda of a strong outlook for improved HECM endorsement production. Factually that has not been the case since fiscal year 2022.

   Knowing the approximate average HECM conversion rate for the next two months and the HECM CNAs (HECM case number assignments) for October and November 2023, we can estimate the total HECM endorsements for the six months ending 3/31/2024 at 13,500. For comparison purposes the total HECM endorsements for the first six months of the worst fiscal year (2019) for HECM endorsements in over 20 years of 15,616 and for the second worst fiscal year (2023) for HECM endorsements in that same period at 18,019. 13,500 HECM endorsements for the first six months this fiscal year is 13.5% lower than that total for fiscal 2019 and 25% lower than for the same period in fiscal 2023.

   Will a 1% drop (to a 3% level) in the Federal Reserve bank borrowing rate create a sufficient ripple effect in the 10 year CMT that we could expect a return to anything close to reflecting the fiscal 2023 HECM endorsement total? Even if that happened on Monday 2/5/2024 (which has absolutely no chance of happening), there are less than four calendar months to bring in sufficient applications with CNAs to get that done since it takes the average endorsed HECM to go from CNA to endorsement.

   What few have explained is that HUD has not told us what HECM CNA totals for either December 2023 or January 2024 are BUT they are most likely on a par with that for November 2023. That just leaves February, March, April, and May to bring in more HECM CNAs. What is clear is that most anticipated Federal Reserve interest rate drops will have a minimal impact on HECM endorsement production this fiscal year.

   Let us hope that HECM endorsements for this fiscal year will be at least 30,000 although currently even that is in doubt.

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