Tiny Sliver of Silver Lining in February 2017 HECM Endorsement Count

Even though the HECM endorsement count for the month of February 2017 was the worst for any February in over a decade, the count was high enough that total endorsements for the first six months of fiscal 2017 (ending March 31, 2017) now look to be the second worst such endorsement total in the last decade rather than the worst. Without a significantly improved modified and annualized conversion rate for February, the chances of total HECM endorsements for the first six month period of fiscal 2017 being the worst such total in over a decade would have been much higher. But the industry is not out of the woods yet.

The endorsement count for Fiscal 2017 is critical to either the continuation of a downward sloping (irregularly shaped M) secular stagnation or the start of a loss trend in fiscal year endorsements. Why fiscal 2017 endorsements could be the start of a loss trend is that fiscal year 2016 was the bottom of the (irregularly shaped M) downward sloping secular stagnation trend we are currently experiencing in fiscal year endorsement counts but if fiscal 2017 endorsements are less than the total endorsements for fiscal 2016, then a fiscal year endorsement loss trend is created. A trend is created when two consecutive pieces of data are first headed in the a direction is different than the direction of the consecutive two pieces of data that immediately precedes the last piece of such data.

One reason for looking at the endorsement activity of fiscal 2017 as a continuation of downward sloping secular stagnation is that the case number assignments for the month of November 2016 are 7.5% higher than the case number assignments for the month of November 2015. At least 4,113 endorsements are needed in March 2017 to make total endorsements for the first six months of fiscal 2017 the second worst such count in over a decade. Since endorsements for March 2016 was 4,526 and the related case number assignments (those from November 2016) for March 2017 endorsements is 7.5% greater than the case number assignments related to March 2016, there is a high degree of probability that total endorsements for the first six months of this fiscal year will not be the worst such total in over a decade; that will be relatively good news from the endorsement expectations at the end of last month.

Let us hope for the best for fiscal 2017 endorsements even though for now that is the continuation of downward sloping secular stagnation.