A Day of Reckoning is Coming


A reset is coming to the U.S. housing market and reverse mortgage lending
A return to the ‘New Normal’

A day of reckoning is coming. It’s not doom and gloom. It’s an economic reality. Think of it as the natural end result when a series of mistakes and irrational decisions must be paid. After an unparalleled run the economy and the housing market always seek equilibrium. Now how that exactly plays out we don’t know. But what we can be certain of is there will be an adjustment.

The surge in housing prices has provided an umbrella for many. Extra cash for those who’ve taken a cash-out refinance. A line of credit for homeowners who’ve secured a home equity line of credit. Or a first-time reverse mortgage for older homeowners who are looking to take advantage of today’s ideal market conditions. Then, of course, there are the 4 out of 10 reverse mortgage applicants who are refinancing their existing HECM loan into another to harvest more of their home’s value, and perhaps secure a lower starting interest rate.

Each have benefited although not equally.

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2 comments

Roger Howell July 26, 2021 at 5:57 am

Its like any refi boom, it will end one day and those who have only done H2Hs will find themselves out of clients one day soon.

Establishing and maintaining relationships with referral sources and realtors will get you through the rough times ahead. There is always some business, either purchase or refi that is not necessarily rate driven. The key is to be the last man standing when all the competition leaves for greener pastures.

Reply
James E. Veale, CPA, MBT August 1, 2021 at 9:09 pm

Refis have distracted us from our goals for more penetration into the senior community. As some say, refis currently are the low hanging fruit for HECM originators.

I am not against refis. They have immense value to originators and to a much lesser degree, borrowers.

BUT please do not tell me how the industry is seeing real growth from referrals from financial advisors. While the number of refi endorsements expands, there is absolutely no overall growth in traditional HECMs which the vast majority of these referrals turn into, if they close. For example, the total Traditional HECMs endorsed in the first 8 months of HUD’s fiscal 2021 total 18,561 while this total for last fiscal year was 5.8% higher at 19,634. Yet total refi endorsements for the first 8 months are 12,424 which is 298% higher than for the same time last fiscal year.

Refis do not increase the number of HECMs in the MMIF portfolio of HECMs. Refis have no significant influence in the senior community. If our Traditional HECM endorsements are shrinking, it is extremely unlikely that we are seeing our efforts with the financial advisors resulting in more HECM endorsements. In fact it seems just the opposite is true. Remember how we were being told over the last few years how proprietary reverse mortgage volume was quickly growing but when looking into the HMDA Report for last year, that propaganda proved to little more than “expedient exaggeration” by those who wanted to paint a far different picture than exists. It turns out that the statements were neither optimistic nor close to realistic.

I am a retired CPA and it is hard to swallow…..

Reply

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