Archive for October, 2009
What makes the difference between a successful originator and someone who is getting out of the business in 2009? In our humble opinion it probably has a lot to do with an old saying that “all markets are local.” It’s never been more true in the reverse mortgage industry, as the combination of changes to lending limits, principal limits, and eligible property types among other things is creating an intensely varied marketplace for originations. Originators that saw boom years in one locale and customer base in past years are now struggling for growth or even shrinking, while areas that previously had little activity are suddenly booming.
This has been clear for several months as we look at the Industry Trends updates, and this month is no exception. We’ve used California, and Orange County in particular, in recent months to drive this point home, but it’s also true in other places as well.
- Illinois overall is up 32% over last year, with Cook County up 35% (65% of IL volume) and Chicago up 44% (65% of Cook County volume). But even within Chicago, it’s a short 7 mile drive (as Google Maps indicates) from zip code 60628 (up 52%) to 60620 (down 1%). Given how concentrated the volume is in Illinois, it obviously makes sense to focus on Chicago – but given these numbers it’s clear your success can be determined just as much by where in Chicago you choose to focus.
- Florida is down 30%, with Miami-Dade County down 32% (24% of FL volume) and Miami down 32% (59% of Miami-Dade County volume). Just outside of Miami, zip code 33012 (down 32%) is 16 miles from 33175 (up 4%). Florida is a bigger state with higher volumes and more dispersed reverse mortgage activity than Chicago, but again we find how critical it is to target your efforts appropriately.
Both of these examples are trailing indicators since we’re talking about volume that has already happened. We’re not saying Chicago (or a specific Chicago zip code) is a better place to focus your origination efforts than Florida, or vice versa. But at the risk of tooting our own horn, we’ll take a stand to say that this type of information should be in front of your sales and marketing decision makers on a regular basis, and you should regularly look at your origination results in the context of the rest of the market.
This business is hard enough these days without the frustration of wondering if your campaign failed because potential customers aren’t buying rather than an outdated marketing/sales message. Click on the link below for the rest of the report and give us a call to see how our information can help you originate more loans in 2010.
Summer is gone and apparently the reverse mortgage market cooled down a bit early as well. We already knew that total industry activity was down 9.2% in August from July from the Retail Leaders report, but what we didn’t know is that the weakness was almost entirely in the direct lender side of the business rather than wholesale/broker volumes. This is somewhat against the trend we’ve seen so far this year, but given all the recent news out of FHA regarding broker approval process changes and net worth requirements increasing, perhaps this is will be a one month trend (would that be a trend or a point?).
Enough with our word play, there are a few interesting points to note in this month’s report. Highlights:
- Leading off with some good news, we can welcome Financial Freedom back to the 4 digit club for the first time in a while, as they recovered from what was probably a misleadingly low June performance (369 loans) to 1,151 in August
- As the financial services industry continues to consolidate in spite of all the hand-wringing about ‘too big too fail’, our little corner of the world saw some of the same trends despite the increased broker activity noted above. For the first time since April, we had 4 separate lenders each with over 1,000 loans in August. We just missed having 5 lenders in the club for just the second time ever (Dec 2008), as Genworth’s recent product additions and wholesale sales force investments are bearing fruit – 934 total loans in August
- It’s no surprise to anyone who’s been reading this column that Metlife is the fastest growing wholesale lender in the past twelve months, but what might be more surprising is Generation, Genworth and Urban close behind at 2-4, respectively. Seems Sherry and Bob won’t ever tire of competing with each other, and I’m sure there are plenty of brokers out there happy to be benefiting from the friendly rivalry!
- And in case anyone doubts the power of distribution and brand in the retail side of this business, Bank of America is proving every day that bank branches are a superb source of reverse mortgage business. Not only is BofA the fastest growing retail lender in the country, they’re growing more than twice as fast as the runner up.
- That being said, the second fastest growing retail lender is proof that bank branches are not the only way to do business. One Reverse Mortgage is taking the direct to consumer approach and thriving.
Click the report link below for full details.
Sometimes it seems that the more things change, the more things stay the same. Despite tremendous changes underneath the surface this year (lending limits increased, HECM for purchase authorized, principal limit reductions, etc.) the top line in the reverse mortgage business is in a dead heat with last year’s results. As of September, 2009 volume of 87,130 is just 0.4% lower (393 loans) than 2008 at the same point. For those of you keeping score, the next three months need to be as good or better than September to avoid showing a negative growth rate for the year.
Of course, for those of you that just can’t adjust from the federal fiscal year to our unorthodox calendar year approach, your year is already over and we finished up 2.3% from fiscal 2008.
A few highlights of the report this month:
- Volume in September was up 6% from August, in lock step with last year’s similar increase in the same months. For a good sense of seasonality (or lack thereof) in the reverse mortgage business, check out the Endorsement Volume chart toward the middle of page 2.
- Endorsements per lender improved after falling off a cliff last month but remains below all other months in 2009. Good news is that both Active Lenders and New Lenders ticked down, with New Lenders continuing its downtrend since peaking in March 2008. We haven’t seen a meaningful increase in Active Lenders (by month) since early 2008, so the declining level of New Lenders should eventually stop replacing the companies exiting the business and start declining on an overall basis. Remember, 1/2 of the new lenders exit the business within 6 months of their first loan.
- Industry concentration increased in September for the first time since April, as the top 10 lenders collectively originated 40% of all loans last month
- Security One and OmniHome are combined in the report and jump back into the top 10 on the strength of that combination, coming in at 9th for the trailing twelve months
Click the report for full details.
