Archive for May, 2009
April’s Industry Trends report is finally out, a bit later than normal, but still chock full of interesting statistics. Two record months in a row of endorsements has moved the reverse mortgage industry from a negative 1% relative performance to a +4.5% increase over YTD volume last year. While it’s not a large increase, we should see some more strong endorsement months in May, June, and perhaps July as record HECM applications work through the system.
If you’re not familiar with the report itself, refer back to the initial Industy Trends post for a quick overview of what’s included and how to read the report.
Florida and California are virtually tied for the top spot for endorsments YTD, with Florida eeking out a 13 unit advantage to retake the lead.
Sounding like a broken record from last month, but Illinois continues to impress us — of the top 10 states, it has the strongest growth (+41%), has the second largest city in terms of volume and growth (Chicago at 642 units and 46.6% YoY growth), and has the top zip code in volume (60628 at 76 units YTD). It appears as though lenders are flocking to this area, as there are currently 223 lenders active in Chicago, second only to Miami, FL.
Higher value communities continue to work well with the new lending limits. In New York (Brooklyn and Staten Island) and in California (San Jose and San Francisco), cities with higher average home values have large increases in the total MCA dollar amounts. (shameless self-promotion: You can find areas that have higher average home values using our Market Opportunity Report.)
California has the dubious distinction of having 7 of the top 10 highest penetrated cities in the nation.
We hope you find some good nuggets of information in this month’s report. Keep the feedback coming – we really enjoy the questions and comments we receive from our readers. If you have a question and don’t know where to find the answer, give us a shout!
Our Wholesale Leader’s Report is now up for April. Recent trends are continuing, as retail endorsement growth once again came in stronger than the wholesale channel (+9.9% for Retail, -3.1% for Wholesale).
April’s wholesale numbers showed the impact of the JB Nutter warehouse line issues, and it hit their business hard as wholesale endorsement volume fell sharply to 233 loans from 1331 in the prior month. The majority of the top 10 wholesale lenders saw some volume increases due to this, but the biggest beneficiaries of the Nutter issues were Generation Mortgage and Genworth. Maybe they capitalized on some good information…
Keeping our focus on JB Nutter for a second, we’d like to point out that they have done a very good job of capturing their broker’s business thus far. The box on the lower left of page 2 says it all — for the past 12 months, JB Nutter captured almost half of the business of every broker that submitted a loan to them, and is a full 9 percentage points higher than Financial Freedom, the closest competitor in this metric. This is a decline from last month, but it goes to show how faithful their correspondents were.
It will be interesting to see if JB Nutter is able to get back to their prior volumes, and if so, how long it takes to get there. Or will brokers be wary of going back to the same well that left them dry for a period of time? One thing is certain, there are still a lot of broker loans up for grabs.
We periodically receive questions about various HECM rate types and how prevalent they are in the marketplace. One of the specific questions we’ve seen resurrected lately has to do with fixed rate HECMs and just how much market share they have in the reverse mortgage industry.
The short answer is that it’s a surprisingly small amount for anyone expecting a forward mortgage type figure of 50%+, but there are some interesting trends happening lately that make us wonder if this won’t become a more important part of the reverse business, at least in the short run.
The chart above displays rate type trends back to 2007, showing fixed rate as bright red, annual adjustables as the dark blue and monthly adjustables as light blue. Before anyone gets too excited, notice that we’ve chopped off the top 90% of this graph (all monthly adjustables) to show what’s happening in the fixed/annual share of the world.
But there are still a few important points to notice here:
- Fixed rate HECM volumes are down from their peak early last year just after introduction, but recently have regained some additional volume
- Annual adjustables are starting to gain as the margin gap shrinks between annuals and monthlies
So what might be driving these changes? Well, for one thing we’ve been hearing several clients and readers mention that with current pricing from Metlife, situations are becoming increasingly common where a HECM fixed can offer comparable or improved cash availability to a borrower with a comparable current interest rate, plus comparable economics for the broker. After reviewing a current rate sheet this seems reasonable, and if it lasts would seem to be a very favorable situation for the industry in aligning originator and borrower interests if both expect rising interest rates.
And as we checked deeper, the numbers support the story as well. The chart makes it pretty obvious that brokers are paying attention to their rate sheets, and Metlife’s aggressive fixed rate pricing is picking up steam.
We’re not sure how they’re able to offer their rates, but as long as they do, I’d imagine we might see fixed rate volumes heading back up again. And if other wholesalers join the party, the industry just might open up a whole new class of customers who have historically viewed adjustable rates on reverse mortgages as a deal breaker.
