Archive for November, 2009
We may not think of Q3 as having any surprises left for us, but rather than harping on the continued HECM volume move to higher home value areas, let’s shift gears a bit.
HECM refinances are not a new story for anyone who has been reading our newsletter for the past year, and indeed that story is pretty well played out. As you can see from the chart below, the volume of refinances is tapering off and can only be expected to taper further since the perfect setup of increased lending limits and lower interest rates doesn’t look likely to occur again anytime soon.
Two obvious points:
- Refinances are heading down – no surprise to anyone given the factors noted above
- Fixed rate HECMs are taking a proportionate share of refinances at this point, as would be expected since refinancers are the most likely to want to access all the money upfront and thus remove one of the only reasons borrowers would prefer an adjustable product offering lower principal limits (cash to borrowers). Fixed rate accounted for 64% of all refinance transactions last month, and is a good bet to continue heading higher in share, although perhaps not absolute volume.
Beyond the refinance market, let’s look at the same graph for the overall industry:
Again, a few obvious points:
- Overall volume has been stuck at just about the 10,000 loans per month level since home prices peaked and the financial crisis really started hitting hard in 2007
- Fixed rates have been an even bigger story than refinances in 2009, accounting for fully 61% of all HECMs last month
- Despite the dramatic impact of fixed rates and the expected boost from refinances, the industry is still laboring at about the same volume levels achieved in mid-07
The next step in the thought process is equally clear: where do we go from here? Forecasting is devilishly difficult and a source of much anguish, but can be very useful in thinking through the likely scenarios for the coming year and beyond. And since most of our clients are knee deep in the process of planning and budgeting for next year, this seems an appropriate time for the thought process.
We’ll publish a follow up piece by the end of the month with our best thoughts for 2010 and we look forward to seeing all of you in San Diego!
Click the image below for the full report:
Wholesale results are in for the month of September, and of course that means the HUD Fiscal Year as well. Overall wholesale volume for the month was 5,567 units, up 6.1% from August, marking the 6th highest wholesale volume month on record. For the fiscal year, wholesale endorsements hit 60,798 loans, dropping just under 1% from the prior year.
Looking at specific lenders, we’ve seen a bit of a resurgence at Financial Freedom after they introduced their fixed rate HECM. Though still not even close to their previous highs, they’ve gained quite a bit of ground from the low endorsement month of June, and remain the #1 wholesale lender (and #3 overall) on a trailing twelve month basis.
On a combined retail and wholesale perspective, Bank of America took the top spot for the month of September, though they remain #2 overall with 16.4% market share for the year. Holding on to the top spot was Wells Fargo, with an 18% share.
Click on the image below to view the report.
October numbers are in and the month proved more trick than treat for HECM volume, down 7.4% from September. This isn’t a reflection on the demand that was pulled forward into the last week of September by the announcement of a very fast principal limit reduction implementation, as we don’t expect that surge and subsequent slowdown in volumes to flow through these numbers until December.
One bright spot is that competition went down considerably more than unit volume, which is positive news for everyone left standing (though not for those that didn’t see any loans and might have left the business entirely).
- Volume: We’re now off last year’s pace by 1.8% after several months of break-even performance. We’re still within striking distance of logging another growth year for the industry, but it’s looking more and more likely that we may put in the first negative calendar year performance as an industry since 2000 and only the third down year ever (1996 being the other).
- Pacific/Hawaii: Almost all of the decline from September was in the Pacific/Hawaii region that has been in recovery mode this year after two very tough years in 2007-08. The region accounted for 63% of the volume drop, although volume per lender is still up 11% from last year, reflecting reduced competition. The story continues to be a move toward the coast, as Fresno and Las Vegas are both down more than 50% while San Francisco is up 88% and LA is up 26%.
- Lenders: Just 3 of the top 10 lenders increased their volume in October, with Wells Fargo taking the biggest leap in unit terms while Metlife and One Reverse both saw impressive percentage growth gains. Despite having more decliners than gainers, the top 10 still increased their share of the total market to 44% from 40% last month.
Click the image below for the full report.
