The industry has not seen an endorsement count this low for the month of October since October 2002. It is 10.3% down from October 2024 and that fiscal year (2024) now historically stands as the worst fiscal year for HECM endorsements since 10/1/2003. Will fiscal year 2025 be worse than that? It is now all but certain that the endorsement count for the first quarter of this fiscal year will be worse than that same count last fiscal year. If we do not see a substantial reduction in the expected rate index of over 70 basis points by mid November 2024, we are most likely to see not only the second quarter of fiscal 2025 be the worst quarter for HECM endorsements since fiscal 2003 but the total HECM endorsements for the first half of fiscal 2025 will most probably be the worst first six months for any fiscal year since 2003. 

 

Despite the claims that with a big drop in interest rates by the Fed we would see a large increase in HECM case number assignments AND HECM endorsements, we have seen a drop at least in HECM endorsements. (As of late last night, HUD has not released Case Number Assignment data for any time period after August 31, 2024). 

 

When trends get this bad, affected industries, see normally reasonable sales “prognosticators” start grasping for straw. Our industry is not immune from the beginnings of such behavior. Last week I read an article by a very experienced and well educated individual trying to make the case that things are better than they seem. To do this, he averaged HECM endorsements from a six year period when HECM endorsements averaged over 93,000 along with HECM endorsements between those years and fiscal 2018 together with the HECM endorsements since 10/2/2017. But even that was not good enough so he added 10% to the average for proprietary reverse mortgages when for about a decade, proprietary reverse mortgage closings were most likely less than 2% of HECM endorsements (if not 1% or even less). He provided one year of data on proprietary reverse mortgages to verify his 10% estimate. The unfortunate thing is that there is little other public data on proprietary reverse mortgage closings produced by this industry since those lenders who provide them have done their best to conceal that data not only from their competitors and thus from the public.

 

Averaging is a great technique to evaluate trends; however, the HECM of the mid aught years to the start of the 2010s is not nearly the same HECM as we have had for the last seven plus fiscal years. Today’s proprietary reverse mortgages are far less robust. It is almost as if the HECMs as well as the proprietary reverse mortgages were on steroids back in those years. We even had a proprietary reverse mortgage that had overlap with and was at the same time complementary to HECMs up until a few months after Congress passed a law (and Present G. W. Bush signed it into law on July 30, 2008) that allowed HUD to insure HECMs on coops. (However, HUD refused to implement that change to the law). Those proprietary reverse mortgages were called Home Keepers. Here in California, a few of us originated several Home Keepers through Financial Freedom on coops (no, not condos) in Laguna Woods, a large senior community in south Orange County.