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   The_Cynic

   January 3, 2015 at 3:11 pm

   The first quarter of this fiscal year has over 1,000 endorsements over the same quarter last fiscal year. Probably all of that increase and more comes from borrowers who “pulled back” from getting their case number assigned before August 4, 2014 so that they could enjoy the higher principal limits offered to most seniors in Mortgagee Letter 2014-12. {It takes the average HECM four months to go from case number assignment to endorsement; very few, if any, of these applications would have been endorsed before October 1, 2014 (a period of just 57 days).}

   While it is far too early in the fiscal year to latch onto any developing trends, case numbers assigned (CNsA) during October 2014 were better than normally should be expected. There is no known event causing this increase but it could be from expected implementation of financial assessment on HECM application CNsA on (or even before) 1/1/2015. With the posting of Mortgagee Letter 2014-22 on November 10, 2014, some of the increase in CNsA seen in October may have died down in the last two months; we will have to wait to find out the results. As usual there were a lot of industry myths floating around about some senior (or favorite) HUD official saying implementation of financial assessment would be mandated on all applications with CNsA after 12/31/2014 (or some time before that date). We even heard of at least one large lender holding wholesale and retail webinars making these kind of nonsensical claims of insider information.

   The expected negative effects of financial assessment on the endorsement count for the last quarter of this fiscal year will come from 1) delays, 2) rejections of applications, 3) an increased percentage of seniors who will not close, and 4) indecision and poor decisions (most of which should go down over time). The endorsements lost will be somewhat offset by the last of the “August 4th pull backs” of last fiscal year and a slight increase in applicants who will go forward this quarter (or have already gone forward last quarter) with their HECMs to avoid financial assessment that might have otherwise delayed getting a HECM until sometime beyond 9/30/2015.

   So while there is little likelihood endorsements will be more than 55,200 or less than 46,000, at this point that is a large range of possible endorsement total outcomes for this fiscal year. That range will significantly narrow over the next six months. It would seem that in either case, it will be our most significant traditional market segment (needs based seniors) which will suffer the most. While the overall loss percentage should be less, the loss to this segment should be over 9% and perhaps much more.

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