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   James E. Veale, MBT

   May 1, 2023 at 9:56 am

   Illusion versus fact

   Illusion — When Generation X becomes eligible for RMs (reverse mortgages), they will immediately increase demand because they have no pensions.

   Fact — The oldest segment of Generation X first became eligible for RMs (reverse mortgages), i.e., specifically PRMs (proprietary RMs) on 1/1/2020. Even with lower interest rates and “no pensions,” they made no appreciable difference in the low volume in PRMs. As to pensions, a large portion of government employees and a small portion of NG (Non Government) employees are still covered under DB (defined benefit) pension plans. Even many NGEs (NG employers) provide pensions through Internal Revenue Code Section 401(k) plans which are nothing more than a type of DC (defined contribution) pension plan. Some 401(k) plans even have employer contributions into the profit sharing portion of those plans with others providing employer matching contributions and still others provide no employer contributions at all.

   The fact is DB pension plans of NGEs were on the skids in the 1980s. Most NGEs have never offered DB pension plans to their employees. It is highly unlikely that the “no pensions” of Generation X illusion will drive the annual HECM endorsement up beyond the volume of fiscal 2022, if it will reach that volume. The fiscal 2022 HECM endorsement volume can be achieved with the return of a substantial HECM Refi (known previously by the name of HECM to HECM Refis) annual endorsement volume [or through a return of 1) higher PLFs and 2) a higher expected rate floor].

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