April Top 100 HECM Lenders Report

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1 comment

James E. Veale, CPA, MBT May 3, 2021 at 3:20 pm

This month was impressive not as to volume but as to its conversion rate. At 75%, this was the highest annualized and modified conversation rate since June 2009 (almost 12 years ago). This is the first time since June 2011, there has been 8 months in a row where the conversion rate exceeded 70%. June 2011 was the end of a fourteen month period where the conversion rate was over 70%. No doubt, the current rate reflects the high volume of HECM Refis that the industry is experiencing.

About a week ago I heard a very experienced operations person speaking about fiscal 2007 as a huge fiscal year for endorsements of HECM Refis. The problem is that the total HECM endorsements for that entire fiscal year were just 6,737 out of 107,558 total endorsements for about 6.3% of that fiscal year’s total volume.

As of this evening (7PM EDT), HUD has only posted breakdowns of endorsements and case number assignments through February 2021 (five months of this fiscal year). Yet through the first five months, we have already passed total HECM Refis endorsed in fiscal 2007 with 7,077 HECM Refis endorsed out of just 19,816 total endorsements for 35.7% of all HECMs endorsed in this five month period.

Due to the high percentage of HECM Refis, which some attribute to a higher percentage of forward mortgage originators now participating in HECM originations, we are in a totally different situation than at any time in the last three decades. By the way, the first HECM Refi was endorsed in fiscal 2004.

HECM Refi activity is truly skewing the statistics for this fiscal year. After the first seven months of fiscal 2018, total HECM endorsements were just 18,517. Last fiscal year that total was 20,413 but this fiscal year, it is 28,402. Total HECM endorsements for the first seven months this year is up over 53.3% of what they were in fiscal 2019 and also up over 39.1% what they were last fiscal year. Even though much of the credit to this rise must go to HECM Refis, it is great to see total HECM endorsements on the rise and returning to the levels seen in fiscal 2016.

(The annualized and modified conversion rate for April 2021 was determined by dividing the total HECM endorsements for the twelve months ended April 30, 2021 by the total HECM Case Numbers assigned during the calendar year 2020. The reason for using twelve months of activity in the both the numerator and denominator is to mitigate the effects of seasonal activity. The 4 month difference in the twelve month periods used is the normal period of 4 months for the average HECM to go from HECM Case Number Assignment to Endorsement.)

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