The California Connection to the HECM

by Shannon HicksOctober 24, 2022October 18, 2022

California HECM program reverse mortgage

<span data-mce-type="bookmark" style="display: inline-block; width: 0px; overflow: hidden; line-height: 0;" class="mce_SELRES_start"></span><span data-mce-type="bookmark" style="display: inline-block; width: 0px; overflow: hidden; line-height: 0;" class="mce_SELRES_start"></span><span data-mce-type="bookmark" style="display: inline-block; width: 0px; overflow: hidden; line-height: 0;" class="mce_SELRES_start"></span><span data-mce-type="bookmark" style="display: inline-block; width: 0px; overflow: hidden; line-height: 0;" class="mce_SELRES_start"></span><span data-mce-type="bookmark" style="display: inline-block; width: 0px; overflow: hidden; line-height: 0;" class="mce_SELRES_start"></span><span data-mce-type="bookmark" style="display: inline-block; width: 0px; overflow: hidden; line-height: 0;" class="mce_SELRES_start"></p> <h2 class="p1"><span data-mce-type="bookmark" style="display: inline-block; width: 0px; overflow: hidden; line-height: 0;" class="mce_SELRES_start"></span>Without audience targeting are Google Ads Dead? Think again…</h2> <p class="p1"><span class="s1">Early this month Google announced new restrictions for targeting specific audiences. The restrictions apply to content related to housing, employment, credit, and those who are disproportionately affected by societal biases. The news of these restrictions created quite a stir among industry brokers and lenders who heavily rely upon targeted Google ad campaigns.<span class="Apple-converted-space"> </span>All which may have you asking if these changes will kill future reverse mortgage advertising on the world’s most popular search engine. In just a moment we’ll hear from our online SEO expert Josh Johnson to find out.<br /> </span></p> <p class="p1"><span><a onclick="read_toggle(1532537730, 'Read More', 'Read Less'); return false;" class="read-link" id="readlink1532537730" style="readlink" href="#">Read More</a></span> <div class="read_div" id="read1532537730" style="display: none;"></p> <p class="p1"><span class="s1">Google’s restrictions are not necessarily novel nor unexpected. It was just over two years ago Facebook faced scrutiny from federal regulators for allowing those offering credit or housing finance to restrict ad audiences by race or religion among other questionable metrics that would violate HUD’s fair housing rules. An investigation by ProPublica broke this news in October 2016. It was nearly two years later in August 2018 that HUD filed a formal complaint against the social media giant for discriminatory advertising practices. Seven months after HUD’s complaint Facebook announced sweeping changes. Both Facebook and later Google, took a blunt approach much to the chagrin of lenders and service providers.</span></p> <p class="p1"><span class="s1">What ad filters are going away? In its official release Google revealed, “credit products or services can no longer be targeted to audiences based on gender, age, parental status, marital status, or ZIP code.” </span></p> <p class="p1"><span class="s1">Is this the end of Google ads for reverse mortgages? To answer that question I reached out to Josh Johnson who heads up Reverse Focus’ Online Dominance SEO program and Google marketing. Here’s his explanation.</span></p> <p class="p1"><span class="s1">Here’s what makes Google unique from other platforms and why reverse mortgage Google ads will continue to reach the intended audience. </span></p> <p class="p1"><span class="s1">To summarize, older homeowners are intentionally seeking out reverse mortgage information on Google which means, yes-your ads will be seen by your target audience, even though you can no longer target specific age groups.<br /> </span></p> <p><img class="wp-image-21372 alignnone" src="https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.004-300x169.jpeg" alt="" width="691" height="389" srcset="https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.004-300x169.jpeg 300w, https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.004-768x432.jpeg 768w, https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.004-1024x576.jpeg 1024w, https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.004-960x540.jpeg 960w, https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.004-711x400.jpeg 711w, https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.004-585x329.jpeg 585w" sizes="(max-width: 691px) 100vw, 691px" /><img class="alignnone wp-image-21373" src="https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.001-1024x576.jpeg" alt="" width="681" height="383" srcset="https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.001-1024x576.jpeg 1024w, https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.001-300x169.jpeg 300w, https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.001-768x432.jpeg 768w, https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.001-960x540.jpeg 960w, https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.001-711x400.jpeg 711w, https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.001-585x329.jpeg 585w" sizes="(max-width: 681px) 100vw, 681px" /></p> <p><img class="alignright size-large wp-image-21374" src="https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.002-1024x576.jpeg" alt="" width="1024" height="576" srcset="https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.002-1024x576.jpeg 1024w, https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.002-300x169.jpeg 300w, https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.002-768x432.jpeg 768w, https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.002-960x540.jpeg 960w, https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.002-711x400.jpeg 711w, https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.002-585x329.jpeg 585w" sizes="(max-width: 1024px) 100vw, 1024px" /> <img class="alignright size-large wp-image-21375" src="https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.003-1024x576.jpeg" alt="" width="1024" height="576" srcset="https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.003-1024x576.jpeg 1024w, https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.003-300x169.jpeg 300w, https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.003-768x432.jpeg 768w, https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.003-960x540.jpeg 960w, https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.003-711x400.jpeg 711w, https://hecmworld.com/reverse-mortgage-news/wp-content/uploads/2020/09/In-post-pix.003-585x329.jpeg 585w" sizes="(max-width: 1024px) 100vw, 1024px" /></p> <p class="p1"></div> <p> </p> <p><span data-mce-type="bookmark" style="display: inline-block; width: 0px; overflow: hidden; line-height: 0;" class="mce_SELRES_start"></span><br /> </span>

California: The lynchpin of the HECM’s economic outlook

Since 2009 California has led all states for total HECM endorsements. In fact, according to the Fiscal Year, 2021 Independent Actuarial Review of the Mutual Mortgage Insurance Fund, California accounted for 26% of all HECM endorsements in the fiscal year 2021. Florida, Arizona, Colorado, and Texas trail significantly in endorsements accounting for 7-8% of overall loan volume respectively. California is home to some of the nation’s highest-valued homes and also has seen some of the most rapid growth in Home Price Appreciation. Consequently, any broad declines in home values in the Golden State will have a marked impact on the 2023 and 2024 economic valuation of the HECM Program.

FHA acknowledges this sensitivity in its 2021 report. “HPA is a lagging indicator that tends to overstate
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the health of the economy during good times and the weakness of the economy during bad times. Because the MMI Fund Capital Ratio is so closely tied to HPA, the assessment of FHA’s financial health represented by the ratio can change materially and quickly with changes in both actual and projected home values.” The operative word is overstated. To further illustrate this point the Mutual Mortgage Insurance Fund’s capital ratio is three times more sensitive to a one percent drop in home price appreciation than a one percent decrease in interest rates.

All of which begs the question, where does the California home market stand today? After a decade of generally consistent gains, home values have turned negative. Zillow reports that home price in Southern California is now 6% below the all-time high reached in May.

For a closer examination, we’ll go to Fortune’s interactive map which shows the markets most likely to see a drop in home prices in the coming year. Markets in dark red are very likely to see home price reductions, those in light pink are rated high, purple is medium, and light blue are the markets less likely to see home price drops. Now moving over to Shasta County California and Redding the county seat, I can see my hometown is very likely to see price drops which I can confirm first hand having seen dozens of listings drop their asking price and closings coming in 10-17% lower. However, we’re not alone with most of the southern California markets also showing a high probability of a fall in home values. Many of these at-risk markets have already seen significant erosion in home values. Between May 2022 and August Shasta county saw values fall by -2.78%, Sacramento values fell by -6.03%,

San Francisco values dropped by -7.8%, and San Jose fell over 10.5%! Los Angeles, Riverside and San Diego also saw values fall.

Looking at metros in other states we can see some of the previous hottest markets poised for a fall. For example, Boise Idaho. The median sales price of single-family homes in the greater Boise area has fallen from a high of $550,000 in May to $510,000-a drop of 8 percent. In the same time period, Reno sale prices also dropped 8% from $625,000 to $580,000. Austin Texas appears to be in a free fall collapsing from a median sales price of $720,000 in May and plummeting to $620,000- a drop of 14% in just three months! If that pace continued Austin prices would fall by 56% year-to-year. It should be noted that two forces have not been factored into this forecast which may accelerate the fall of home values; a recession and continued inflation increasing foreclosure filings.

In conclusion, we’ve been on this journey before; at least those of us who were originating prior to the 2008 housing crash. Whether it’s a coming housing crash or correction our willingness to look at market signals and acknowledge their likely outcome only serves to help us prepare for the future and adjust our mindset and business strategy to succeed. How do you expect California home values will impact reverse mortgage lending? Let us know in the comment section below.

Redfin Monthly Housing Market Data (Charts shown in video)

2021 FHA Annual Report to Congress

Odds of falling home prices in your local housing market, as told by one interactive map

Rising mortgage rates are sending home prices lower

Shannon Hicks

Shannon Hicks - Shannon is a cofounder of Reverse Focus, Inc. He draws from his experience as a reverse mortgage originator and prior work in the financial services industry. Shannon has been covering reverse mortgage news stories since 2008 when he began podcasting and in 2010 with weekly video updates. He has spoken nationally at industry events and is host of the nation’s only weekly podcast for reverse mortgage professionals “Reverse Focus Weekly”. For more information, call 1.800-805-9328 x 3-3 or visit www.ReverseFocus.com .

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