HECM growth in 2022 may hinge on one word

If at a glance you said that the growth of HECM endorsements in the fiscal year 2021 was impressive you’d be mostly right. After all, FHA reported 49.207 federally-insured reverse mortgages were endorsed in the fiscal year 2021 which was an 18-percent increase from the prior year. However, one chart inside FHA’s Annual Report to Congress on the performance of the Mutual Mortgage Insurance Fund tells a different story. Over 20-thousand of last year’s 49,207 endorsements came from the refinance of an existing reverse mortgage. Looking closer we see that over four-in-ten HECMs were refinanced and that   HECM-to-HECM refinance volumes more than doubled from the fiscal year 2020.

Knowing this it’s natural to ask ‘how do we expand our market reach, not just the number of HECM transactions’?

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The answer may be summed in one word- inflation. While the likelihood of inflation was dismissed in early 2020 by financial experts and teleprompter-reading celebrities on the news, it turns out the minority of disbelievers have been proven right. And how we wish their predictions were wrong. Inflation is surging and where or when it stops remains to be seen. And despite a historic 6-percent Social Security benefit Cost of Living Adjustment to be enacted in 2022 many retirees may still find themselves coming up short, thanks to actual inflation and the risk of continued price hikes. As a result, retirees will have to stretch every penny or find new sources of cash flow. We expounded on the challenges Social Security beneficiaries face in a mid-October episode of this show.

How severe has inflation become? General Mills announced a 20-percent across-the-board price increase on all their products. Year-over-year the national average of gas prices surged 42 percent. Last week’s Thanksgiving turkey cost 27-percent more than it did last year. And most recently, the Dollar Store announced its intention to increase its prices to $1.25. That’s a 25% jump in prices at the now-ironically named retailer.

While we cannot stop inflation we can find a creative means to help curtail its impacts. That—- should be the mantra of our industry as we move into 2022. On a more local level, you could host local workshops on how retirees can fight back against rising prices so they can preserve their quality of life in their non-working years. Get on your local radio station’s talk shows. Meet with financial professionals. Submit articles to your local newspaper. Say it again and again. Inflation is here and it is real. Now, what are you going to do to deal with it? What’s your plan? Are you willing to reduce your standard of living? These are the pointed questions you must be willing to ask prominently in your community.

While inflation is not transitory the opportunity to reach retirees who suffer its effects is. 2022 presents a potential win-win for both older homeowners and retirees and the occasion for authentic growth and increased market share.

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