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Punching Above Weight – Industry Trends March 2011

We’ve been asked many times where was the best place for a reverse mortgage company/consultant to spend precious marketing dollars. While we can’t claim to have solved that question (if we could answer that question we’d have retired already), we do see some things that work at the industry level that benefit our clients.

Whenever we hear this question, it reminds us of the boxing term for a fighter that does better than their weight-class suggests they should. So we went looking for places where our clients might do better than they might otherwise expect with their marketing budget.

Big City, Big Volume?

Looking at our top 10 list of cities by loan volume, you might think that these cities are here simply because they have the most senior homeowner households. It’s a good theory, so we tested it. The table below shows these same 10 cities with their senior homeowner household totals and the rank updated to reflect households rather than loan volume:

Most of the top 10 cities are in here, but they’re not in order and there are some true outliers here as well. If we think about loan volume similar to a response rate on a marketing campaign, we can calculate an adoption rate by looking at what percentage of eligible households completed a reverse mortgage. In this table we’ve shown it in basis points (percentage multiplied times 100) and annualized it. The “New Adoption” simply removes refinances from the equation to see just new reverse mortgage borrowers.

On this basis the differences are stark, as Baltimore is generating over four times as many loans per household as Chicago. So it would seem that huge numbers of seniors are important (mostly top 10 cities here) but not the end of our story.

Past Performance = Future Results?

One of the other metrics we like a lot is penetration rate, which shows what percentage of eligible households have a reverse mortgage at any point in time. We noticed while looking at this table that all of these top 10 cities had penetration rates (as of December 2010) higher than the national average of 2.24%. Our industry had done a good job focusing on the cities with the most eligible households, and seen success doing so, but what does that tell us about the future?

Washington DC and Baltimore both have high penetration rates and saw very high adoption rates (good for our hypothesis), but Miami had relatively little volume in Q1 (as measured by adoption rate) despite having a high penetration. Given how many cities there are, we thought it best to do a correlation analysis rather than continue our eyeball test, and discovered that higher penetration in Q4-2010 was strongly correlated (above 0.5 for you statistical types) with adoption rates in Q1-2011.

In other words, all other things being equal your marketing dollars are more likely to result in loans where the product has already done well.


We’d be the last ones to tell you that correlation equals causation, but it makes sense given high customer satisfaction ratings that our product does better in areas where potential borrowers already know friends or family in their local area with good experiences. If you’re looking for a way to test out this idea, feel free to use the tables in page 2 of this month’s report (click the image below) to tune your marketing to areas with higher penetration rates.

And if you’d like to see what penetration rates are for every county in your state (or states), it’s in our Market Opportunity Report for clients. Many clients use it do their marketing analysis every quarter, and if you’re shy about numbers we’d be happy to lend a hand with the statistical heavy lifting.

Click on the image below to view the full Industry Trends report for this month.

Industry Trends - March 20110