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We expect to see now-exited Live Well Financial’s loans in the report for the next 3-4 months as their pending pipeline of loans are insured. May endorsements are down 8% month-to-month but volume is only down modestly when considering the second half of FY 2018. We have the same top-ten lenders in May as in April with some minor ranking changes. YTD endorsements are down 39% from May 2018.
This report was compiled from data courtesy of Reverse Market Insight.
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As a prominent commentator and Editor in Chief at HECMWorld.com, Shannon Hicks has played a pivotal role in reshaping the conversation around reverse mortgages. His unique perspectives and deep understanding of the industry have not only educated countless readers but has also contributed to introducing practical strategies utilizing housing wealth with a reverse mortgage.
Shannon’s journey into the world of reverse mortgages began in 2002 as an originator and his prior work in the financial services industry. Shannon has been covering reverse mortgage news stories since 2008 when he launched the podcast HECMWorld Weekly. Later, in 2010 he began producing the weekly video series The Industry Leader Update and Friday’s Food for Thought.
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3 Comments
In reading various commentary on HECM endorsement production, there is now a deliberate attempt to lose perspective on the three major trends occurring in this decade ending on September 30, 2019.
In the first three years of this decade we saw three straight fiscal years of loss in HECM endorsements. It dropped from an all time high of 114,692 at the end of the last decade (fiscal 2009) down to 54,822 by the end of fiscal 2012. That is a drop of 59,870 (or about 60,000) for a percentage drop of 52.2%. That means that during fiscal 2012 the HECMs endorsed were less than half the HECMs endorsed during fiscal 2009. Yet the drop is clearly seen over a three year period; it did not happen in just one fiscal year alone.
The next six years were years of slightly downward sloping, hill to valley, secular, stagnation. Fiscal 2018 was the nadir for the six year period of stagnation at 48,359 endorsements. That means that the worst loss for any year in that six year period was fiscal 2018 with a loss of just 6,462 from the fiscal year 2012 endorsement total at the end of the three years of loss or about 5.6% of the total production for fiscal 2009.
So what does fiscal 2019 look like. It, by itself, is likely to produce a 15,000 endorsement loss from the endorsement total for fiscal 2018 or a drop of about 13.1% when looking at total production for fiscal 2009 of 114,692. If we add 13.1% to 5.6% and then to 52.2%, we get a percentage total of 70.9% loss from the endorsement total of fiscal 2019. That means the industry is at about 29.1% of the volume it had in fiscal 2009. So multiplying 29.1% times the 114,692 endorsements for fiscal 2009, we get 33,375 endorsements for fiscal 2019 which is in line with what several prognosticators are predicting. Of course, CBO predicts that the fiscal year 2019 endorsement volume will be in the 36,100 range for about a 7.5% difference from the 33,375 prediction. In statistical terminology, either is possible but both are highly dependent on the total case numbers assigned in May 2019 (which HUD has NOT posted) and the conversion rate (for the next four months) which was fairly high in May 2019 and several other prior months.
What is disturbing is if fiscal 2018 is not the end of secular stagnation but the start of a new loss trend in endorsements. The basis for deciding if fiscal 2018 is the end of stagnation or the start of another loss era is less scientific and mathematical than judgmental. Based on the hill to valley flow of the last six fiscal years one can easily decide that fiscal 2018 is the end of the six years of stagnation but that does not mean that those who argue it is the start of a loss trend are completely wrong. The main thing that gives credence to the argument that it belongs to the stagnation cycle is that total endorsements for fiscal 2018 are less than total for the prior valley year of fiscal 2016 but that loss is not so large as to make the endorsements for fiscal 2018 stand out as a loss year in the manner the loss in endorsements for fiscal 2019 will make fiscal 2019 stand out as the start of a new loss era. Of course, at least for now, the unknown factor in this determination may be the endorsement total for fiscal 2020. Whatever the case by the end of fiscal 2018, the six year era of secular stagnation in HECM endorsements has ceased.
Fiscal 2019 is clearly another year of horrific loss for HECM endorsements. What has caused this loss in fiscal 2019 is not clear. Some blame it on the addition of both 10/2/2017 changes plus a contingent appraisal requirement. Time will tell.
Here in CA many would be HECM borrowers are going with the multitude of proprietary reverse products. Once the two groups are totaled I don’t believe we are doing so bad.
John,
Until an official count that can be verified is provided monthly to the public in a manner similar to HUD with HECM endorsements, such confidence is misplaced. Many talked about the high volume of proprietary products (other than FNME Home Keepers) during 2006, 2007, and 2008 without any verifiable proof. The proprietary reverse mortgage activity (again other than FNME Home Keepers) was about a third of H4P endorsements. Currently H4P endorsements from 2009 to date are about 20,000 endorsements.
There is a reason why the term salesman’s puff was created.