Archive for April, 2009
It struck me the other day that we don’t talk nearly enough about applications here, especially since most of the endorsement information we do talk about is generally 1-3 months delayed from funding. We’ll certainly correct that and look for ways to put more application information in our reports, but the truth is that there is precious little information available out there today.
What we do have though, suggests that this is an interesting time to introduce applications, as recent trends are showing a record application month in March as well as a record endorsement month. You may have also seen a small item recently in the March issue of Reverse Mortgage Magazine by NRMLA that showed application and funding volume from 26 surveyed lenders showing roughly 30% drops in both areas.
Granted, the survey information was just for January and February, but even on that basis the overall HECM application volume was up 13% in January and 7% in February. So that leaves a couple of big questions:
- If we assume the 26 surveyed lenders were representative of the overall industry, was proprietary volume really big enough to offset the difference reported between overall HECM applications and survey results?
- Or, were the 26 surveyed lenders (we’re assuming larger lenders) simply not representative of the industry? If we assume the surveyed lenders were larger institutions, this would be exactly the opposite of what we would expect given the recent trend back toward larger lenders gaining more share in the marketplace.
- We’re not privy to the survey results or methods by NRMLA, but is it possible the surveyed lenders were shading reality a bit for some competitive advantage?
As unsatisfying as it is (and it is) to not have a good answer to the questions posed above, let’s leave it on a brighter note. March application and endorsement data were both very positive. Each set a new record and together suggest that Q2 could shape up as a very nice quarter indeed for the industry.
The only caveat is that you’ll notice the last time we saw a spike to a record in HECM applications (October 2008), we didn’t see the resulting increase in endorsements until March 2009, as endorsements generally trail applications by 2-4 months. If there were any backlogs in operations around the industry these last few months, it’s likely that the March endorsements showed the bulk of the October application strength. And that might mean we won’t see endorsement volumes spike again until Q3…
We’ll just have to see how things turn out, but count us optimistic that March’s records and resulting Q2 performance bode good things for all of us.
We’ve already talked extensively about the volume increase in March, so check out the Retail Leaders and Industry Trends posts if you’d like to see more on top line volume. Something we haven’t talked about a lot yet, however, is how Wholesale is trending.
Many of you might have already guessed that ‘Retail’ performance by the direct lenders was stonger than ‘Wholesale’ performance by the broker channel in March based on our earlier comments about market concentration increasing, but the numbers right at the top of the report make it plainly obvious:
- Retail volume by direct lenders increased 33.4% from February to March, while broker volume through the Wholesale channel increased 15.4%
- A big part of this is due to a re-surgence by Wells Fargo in March, with a 700+ endorsement improvement from February to March that was bigger than total volume for all but the top 5 lenders in March. Endorsements can be volatile due to insuring delays and other issues, but it’s still a pretty impressive boost.
- Over the last 12 months there have only been 2 where Retail volume outpaced Wholesale: March 2009 and May 2008. We’ll be watching closely to see if the trend lasts, as I suspect many brokers might be also…
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Several companies continue to benefit from turmoil in the Wholesale market, as both Generation Mortgage and Urban Financial have more than doubled their total volume from last April. Both have benefited greatly from increased Wholesale volume, although Urban has been notably more balanced in their approach to the two channels with 52% Retail vs. 40% for Generation.
Money House Inc continues a remarkable climb into the top ranks of reverse mortgage lenders, ranking 17th (up from 23rd last month) nationally over the past twelve months. They’ve generated 620 loans without any Wholesale volume, and even more amazing is that they’ve done it all in the territory of Puerto Rico. This got me thinking about Puerto Rico, and the results are very interesting:
- Jumped from 31st ranked state in 2008 ( loans) to 21st in Q109 (425 loans)
- Popular Mortgage used to dominate the rankings here (they were the only lender back in 2005-06), but Money House has capitalized on recent challenges at Popular to take a dominant position in the market with 270 loans in Q1 vs. 55 for their nearest competitor (AAA Concordia) and just 10 for Popular
- Puerto Rico has already generated almost half as much volume in Q1 as it did in all of 2008 – one of the strongest growth markets in the country!
- We’re not sure how hard it is to get a lending license in Puerto Rico, but if you don’t know it’s probably worth checking into it…
Enjoy the report and let us know if you want to find more strong markets like this.
A record endorsement month in March has generated lots of excitement in the industry, so let’s get below the headline and see where the profitable stories are to be found. Year to date volume is just about even with last year’s pace at this time (down 1%), but that masks a flat January, weak February and strong March – so as they say, the trend is good!
If you’re not familiar with the report itself, refer back to last month’s post for a quick overview of what’s included and how to read the report.
Some highlights for the month:
- California continues to outperform Florida in unit volumes, but the real story among the top 10 states is Illinois, New York and Virginia each growing more than 20% from Q108. Florida has the dubious distinction of biggest volume decline among top 10 states, losing 25% from last year.
- Speaking of Illinois, Chicago also shows up in several other positive places in this month’s report, including:
- Volume Leaders: state, county, city and 2 zip codes on page 1
- 2nd highest Average Loans Per Lender on top of page 2
- Biggest increase in Total Max Claim Originated on bottom of page 2
- Despite Florida’s decline this year, Miami continues to look attractive on a market size and competitive basis as it still claims the top spot among cities for volume, and remains one on the top end of the Average Loans per Lender metric.
- Check out the action in once sleepy cities like San Francisco, San Jose and Brooklyn. Each of these three has benefited tremendously from higher loan limits increasing both volume and deal sizes, with San Francisco going from just over $5 million in Max Claim originated Q108 to over $20 million this year. If you’re not marketing in these higher loan value areas yet, you might be missing a great opportunity.
Let us know if you could use some help putting these numbers to work in your company. We enjoy staring at the numbers everyday but it’s always more fun when we can see it in action!
