Irrelevant HECM endorsements and recent developments
The Irrelevancy of Historical Volumes
A sense of frustration can set in for those expecting rapid expansion of loan volume back to our pre-recession levels. After several years of rapid expansion culminating in 2009’s record endorsement tally of 114,629 loans, last year’s endorsements were a sum total of 48,000 endorsements. Such comparisons are suspect for a number of reasons- a simpler product offering, rapid home appreciation, generous underwriting guidelines, increased loan complexity, lending ratio reductions, and the post-recession and housing crash.
Considering the headwinds the HECM has endured we can claim both a modicum of success and a measured optimism for future market expansion. However, fixating on the apple and oranges comparison of historic volumes ignores larger macroeconomic forces and serves only to distract us from more pressing matters.
Too good to be true?
One hurdle to increased consumer adoption of the HECM is the fear that if it sounds too good to be true, it probably is. The ability to leverage an illiquid asset and transform it into a potential source of predictable cash-flow is an attractive yet counterintuitive proposition for many Americans wanting to age in place. Sweetening the deal is the fact that the HECM’s unused available funds, or principal limit, grows each year based on the current interest rate plus the MIP. Caution must be exercised when making claims as to just how large