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The Bright Side, The Dark Side, and Everything In Between

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Making Sense of it All

When it comes to mortgage lending- reverse mortgage lending, it’s easy to feel there’s not much to celebrate. A slide in HECM endorsement volumes since November 2023 followed by two months (March and April) of modest but notable growth may assuage the discontent many feel but that’s not the end of the story.

Today we examine the key performance indicators of our industry’s overall sales volume and what we may expect in the coming summer months.

Seasonality:

The arrival of Fall brings falling leaves and typically falling HECM application activity. To illustrate this let’s compare the twelve-month periods of March 2022-2023 and March 2023-2024. Each year as the temperatures drop so do case number assignments (CNAs) for new HECM applications assigned an FHA case number. Examining August through December 2023 case number assignments we observe a steady downward staircase that typically reaches its nadir in December. During the same period we see a similar pattern albeit with an uptick in October 2023. The impact of rising interest rates cannot be ignored in 2023 so let’s look to August through December 2018 and we find again a nearly identical trend line as we did in 2023.

The point is that HECM production has shown itself to be prone to seasonal similarities. But here’s the good news. 

 

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Future HECM Endorsement Volume

The latest HECM endorsement volume for April generally pulls from HECM FHA case numbers assigned in December last year. It’s not a perfect science but typically there’s a four-month lag between the time a HECM case number assignment is issued (CNA) and endorsement. Looking back to HECM CNAs in January, February, and March we find month-over-month growth of 18%, 4%, and 14% respectively. This bodes well for increasing endorsement totals in May, June, and July.

Watching the Spread

 

August 2022 was the crossover month as HECM application activity began to drop as the keystone index (The 10-Year Constant Maturity Treasury Rate) steadily climbed and refinances of existing HECMs receded. Sustained high rates have suppressed the number of HECM applications since the fall of 2022. The spread between HECM applications and rising interest rates is an expected consequence of reduced principal limit factors which likely disqualified many would-be applicants.  

Final Thoughts

If there’s one thing reverse mortgage professionals are it’s resilient. Take a deserved pat on the back, keep your hand to the plow, and remember that today’s market and economy are unlike any we’ve seen thanks to the lingering effects of a worldwide pandemic. 

Chime in the comment section below and let us know your thoughts on this data and be part of the conversation.


Shannon Hicks

Editor in Chief: HECMWorld.com
 
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.
 
Readers wishing to submit stories or interview requests can reach our team at: info@hecmworld.com.

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Editor in Chief: HECMWorld.com
 
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.
 
Readers wishing to submit stories or interview requests can reach our team at: info@hecmworld.com.

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