The predominant factor driving HECM volume today is not the reduction in the PLF (it certainly affects business, nonetheless). Currently depressed home values are the main reason.

Unlike the early '90s, when most HECM borrowers owned their homes free and clear and were seeking an income supplement, today's inquiries come from homeowners who wish to eliminate the burden of a mortgage payment by refinancing with a HECM. We find the majority of those who call us (and they probably called and will call other originators as well) seeking a HECM cannot qualify because the existing mortgages on their homes are too large, relative to the current market value.

In early 2008, we began to accumulate a list of prospective borrowers who would have qualified for a HECM to refinance their mortgage had the single national limit for HECMs of $417,000 been implemented within a reasonable amount of time after it first had been passed by one of the houses of Congress. By the time the limit finally was put into effect later that year, we had to tell more than 150 prospective customers we no longer were able to assist them because the value of their homes had fallen.

I do not foresee as significant increase in HECM origination volume until the housing market begins to recover. Once this happens, higher expected interest rates probably will begin to affect the PLF as well.

In the meanwhile, the large, direct lenders (mostly owned by depository institutions) will increase and consolidate their market share at the expense of smaller, less well-capitalized lenders and brokers. This is partly the result of recent legislation and regulatory changes meant to benefit the consumer. Let's see how much the consumer will benefit once competition and consumer choices have been eliminated.

sherischmitz,
How about 2011 and 2012?

Its all doom and gloom lol... I am not a love and peace kinda gal, but realistically- we need to stay positive. Is 2010 going to be tough- you bet! Are we going to make millions- probably not! However, nose to the grind and hard work will allow those of us who are good at what we do, love the product and the client base to survive. There will always be someone who needs and qualifies for a reverse mortgage.

I was closing 100 HECMs a year back in '03, '04, and '05 when there was very little volume in this industry, and the media didn't even know what a reverse mortgage was. With the new appraisal procedures, with home owners going to need to provide a check, or credit card, just to order an appraisal, whichi n many cases will be too low to qualify the client for enough money to pay off the curren mortgage, with the reduced LTVs, with the prospect of rising interest rates further decreasing LTVs, with the new regs running the smaller brokers out of business, etc. I predict we will be lucky to close 70K reverse mortgages during 2010.


This will be a time of many people leaving the industry, while those who stay in the business will be scrambling to find new ways to find (qualified) clients.

I am normally optimistic, but I see a great decrease in volume for at least the next two years, unless some positive rule changes are implemented.

I sure hope this article is wrong. I've been doing this since August, had a great month in September. Terrible month in October, terrible November, December is looking decent so far.

"According to the report, FHA estimates the industry will endorse 106,875 HECMs during HUDs fiscal year 2010. Those numbers are about 7% lower than the 114,691 HECM endorsements in FY 2009."

I would love to know how FHA comes up with these numbers. Can anyone cite the projected FY2009 figures published this time last year for comparison to the actual of 114,691?

Shannon, no need for a crystal ball - if you don't see lower volume now for your originators, let me know. If you don't think that this business is going through some major changes ( most due overall to the mortgage world's wake after the boom), and that volume will suffer as a result, you are asleep at the wheel! The ONLY thing that seems to be in our favor are the demographics mentioned, but how that overcomes the message that is being sent out to the public is yet to be seen. NRMLA claims that they are in our collective corner when it comes to the media. I mentioned this at the NRMLA event and was met with a response that left me and others dumbfounded. Just today, check this out:http://www.newjerseynewsroom.com/economy/reverse-mortgages-the-latest-financial-scam
"THE LATEST FINANCIAL SCAM"!!! - Now tell me, does your ad budget in NJ outweigh the heft of this article this morning?!?!?

The media has buckets full of ink and writers who are paid to sell stories. We have....ummmm.....well.....promises from above that we are all going to be aok.

Please keep in mind that I do agree that the other issues with counseling, values, rates, and another 10% decrease in PL will bog this down even further in 2010, but I have to take the kids to school, so Ill keep this short - my prediction is simple.

The pretenders run for the hills and all of these changes make the first Q of 2010 the most difficult, and scary, yet. The numbers will be dramatically down. The hope for purchase numbers will continue to be low, as the real estate world in general will continue to falter at best. I'm ready to continue, however, and hope that you are too!

Those of you that know me personally know that I am an upbeat, optimistic guy, but the reality of the day is here.....

Kevin Reichard
www.kevinreichardlive.com

Michelle N,

12K turn 62 every day is great. Although, the age of the average senior doing a HECM is probably 68-69...I don't know but the bottom line is 62 years old is not our best hecm client. Many 62 are still working and don't need the reverse mortgage. I appreciate your positive attitude but 12K seniors turning 62 does not mean our industry is going to grow over 2009. If we have higher rates, low home values, decreased limits and possibly 2011 percentage reduction it can't look good regardless of the 12K seniors turning 62 per day.

Some talk about coops and HECMs for Purchase as being the true wild cards for the fiscal year ending September 30, 2010. It is interesting that they overlook the changes underway in HUD rules on condominiums and manufactured homes. They also disregard the trend in marketing away from direct mail and more to a better presence on the Internet and a higher emphasis on financial advisors and others with direct involvement with seniors.

Most agree that the 10% PLF reduction will have a very chilling effect on new endorsements beginning in February 2010. With a preliminary warning from Meg Burns at the NRMLA convention that the fiscal year ending September 30, 2011, may well face the same PLF percentage reduction as now.

It is interesting no one has addressed the impact of the expected changes in appraisal procedures both in HUD requirements and internal lender underwriting practices. Although appraisal changes may not have as big an impact as PLF reduction, many feel its impact will result in a measurably higher application rejection rate than in prior years.

Why in the world is the further expected erosion in home values being ignored? Is it widely believed that this will have only a marginal impact or is it fear that is not allowing this situation to be discussed? Either way, I personally believe the depth of the erosion will have a very significant impact on the number of endorsements this fiscal year, far more than last fiscal year.

Like Shannon, I also wonder when higher interest rates will return. While that may help with refinancing for some adjustable rate HECMs, it will not be good news for traditional or for purchase HECM transactions.

So in the end, the prospects for this fiscal year do not look stellar; it no doubt result in a decline; the question is how much. Like Commentator 2545, it may take a few years before the situation can really turn around.

While I was making some corrections to my Comment, The Critic slipped in. Generally I agree with the outlook by The Critic just below. So I will refrain from adding my own prediction or dissecting the situation all over again. Instead I will focus on two other issues.

It seems there is less hostility at HUD over the higher lending limits than there was at the beginning of this calendar year. In fact HUD is very surprised at the low number of endorsements for homes appraised in the $417,000 to $625,500 value range. The volume of loans in this value range certainly is not creating the risk potential many in HUD thought they would pose by now. In fact this lack of volume is a huge disappointment for many reverse mortgage brokers and originators who geared up to meet the expected demand from senior homeowners with homes in this value range. So unlike Commentator 2545, I am far less pessimistic about problems from either HUD or Congress regarding the continuance of the higher lending limit.

“Purists” who zealously guard history are always annoyed with those they view as revisionists. HUD has never agreed that there was any need to lower the PLFs for this fiscal year. HUD opposed it. It was the Administration that for the first time in HECM history imposed its will over the selection of the home appreciation rate used in determining the need for a subsidy for the HECM program. HUD has and does oppose raising the MIP to cover the alleged positive credit subsidy which this Administration by its act of imposition manufactured. In passing both versions of H.R. 3288, both the House and Senate mandated lowering principal limits to offset the indicated subsidy their respective bills did not fund. Allegedly leaders in Congress warned HUD to lower the principal limits on October 1 or further reductions would be required. So if anyone wants to blame someone for the lower PLFs, blame the source of the problem, the Administration.

Mr. Shannon Hicks may have his broken crystal ball but mine is cracked and clouded. CPAs are notoriously pessimistic so without a decent crystal ball, I will make no prediction and thus hopefully avoid annoying the more optimistic among us.

Interest rates will be a big factor in the next 12-18 months. If the US Treasury's credit rating falls (Moody's hints at lowering AAA rating), then the Fed will have to raise interest rates.

My crystal ball broke years ago.

I agree 2010 will be lower. The new principal limit is the primary reason. When houses begin to appreciate again, hopefully we'll see the principal limit increase once again and volume increase. Until then, we'll at best remain flat.

I disagree, there are 12,000 seniors turning 62 years old every day.

I could not agree more. In addition 2011 and 2012 is going to be lower than 2010. I believe this because we will most certainly begin to have higher rates, with the possibility of the elimination of our currect 625K limit and HUD reducing even further our formula. The next few years is going to be rough. This is going to certainly force many out of the industry(newer originators, brokers and others).