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More or Less? That is the Question

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A Dispassionate Examination of the HECM

Reality-CheckWe’ve all heard the predictions. The industry will bounce back to 100,000 endorsements per year, the baby boomer wave will spur industry growth, etc. A recent article on CNBC’s website predicts that retiring baby boomers will spark reversemortgage demand. Truth be told, reverse mortgage demand may increase but our industry’s volume will most likely not keep pace with the increasing need of future retirees.

A dispassionate analysis of the reverse mortgage program reveals some striking similarities to the traditional mortgage market. Generous lending guidelines combined with growing consumer demand create a boom to bust cycle. During the mid 2,000’s, the reverse mortgage program gained historic momentum as the product was pushed into the public consciousness. The HECM bubble was fueled by…

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2 Comments

  1. Many people do not understand the place of fixed rate Standards in relationship to high endorsement volume. First, Standards did not exist during fiscal 2007, 2008, or 2009. Starting in fiscal 2006, fixed rate HECMs were first being offered and the first 120 were endorsed in fiscal 2007 which was barely above 1% of total endorsements. Fiscal 2008 saw a little less than 2,770 fixed rate endorsements which was about 2.4% of the endorsement volume for the year. Finally fixed rate HECMs began catching on during fiscal 2009 where fixed rate endorsements were 11.6% of the total 114.691 endorsements for that year.

    So never be trapped by the argument that fixed rate HECMs made it possible for endorsements to go over 100,000 in a fiscal year. That simply goes against the facts.

    If we compare the endorsement total for the nine months just ended to the same period last year, we find that total endorsements have dropped by 12.6% or from 42,603 to just 37,237. This is well within the expected range results of a survey taken by RMD over a year ago. The substantial majority of lenders thought the loss in business would be 10% or less due to financial assessment but most others believed it would be between 10% and 15%.

    BUT things will only be worse based on the above average calendar quarter ended 9/30/2015 total endorsements of 15,450. Total endorsements will not be much lower for that same quarter this year since total case numbers assigned between in March and April 2016 were low and with May not expected to be much better (HUD has yet to release those numbers).

    Those who keep telling us that there are 75 million Baby Boomers and that over 10,000 Baby Boomers are turning 62 everyday, need to WAKE UP. Over the last 8 and one-half years of Baby Boomers turning 62, about 31 million Baby Boomers are now 62. Point to any time period this addition to the US senior population has added any significant volume to HECM endorsements. In most of those eight years, annual endorsement numbers have been dropping. In fact it is expected that total endorsements for this fiscal year will not even be half of what there were for calendar 2008 when the first year Baby Boomers began turning 62. Worse, total endorsements for this fiscal year are expected to the lowest for any fiscal year in over a decade!!

    Shannon is right about the 100,000 but then there was the irrational call that with the Extreme Summit, 300,000 endorsements could be reached by 2017. Where do these hyper optimists get their estimates from — Wheaties boxes???

  2. Very well said Shannon, all of FHA’s attempts at “Economic Sustainability” By Their Own Admission, are ABSOLUTLY INTENDED to keep annual HECM Endorsements at a level they deem acceptable. That magic number is 50,000; just enough to keep the program viable and small enough to continue to keep out any potential large players.


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