Archive for January, 2010
Below you’ll find the Wholesale Leaders report with data updated through November 2009.
Wholesale volume dropped almost 17% from October, to 3,901 endorsements. This brings the YTD wholesale volume to 54,609 units, a 6.4% decline from 2008 levels, but we’ll still end the year with the second highest wholesale volume on record. Unfortunately, if the current application trends continue into 2010, there is a decent chance that wholesale volume could slip back to the levels of 2006 (which would mean wholesale volume around 40,000 units). Of course this is not something we all want to hear, but if you are not at least considering this possibility in your plans for 2010 and ready to take the appropriate actions, you may be in for a surprise, and not the pleasant kind.
As a wholesale lender, one way to buffer the potential drop in volume in the next year is to focus on your existing customers and do what you can to win more of their business. If you look at the table at the bottom of page 2, Wells Fargo is currently doing the best job of that (currently capturing 40% of their brokers’ volume), followed by Financial Freedom and Bank of America at 35%. Of course, that only tells part of the story, and the volume Wells does on the wholesale side should indicate that most of their clients are in the smaller volume group – Metlife, Bank of America, and Generation all have fewer customers with a lower capture rate, but do far larger amounts of volume in the wholesale market.
As a vendor to the reverse mortgage industry, the challenges and the opportunities are very similar to those the wholesale lenders face. Understanding which lenders you are missing out on and where they are doing business are both key to growing your market share. If a decline in volume is in the cards, the only way to keep above water is to win more business, both from your current customers as well as those you are completely missing. We have tools available to help you do just that – don’t hesitate to contact us if you want to learn more.
Click here or on the graphic below for this month’s report.
Our “Industry Trends” report is now available, with data updated through November ‘09.
The stories haven’t changed much throughout the year – since the lending limits were raised to $625,500, the areas of strength have mostly been concentrated in high value neighborhoods such as Brooklyn, NY, San Francisco and San Jose and Orange County, CA. In fact, if we look at the table at the bottom of page 2 on this report, 8 of the top 10 zip codes and 5 of the top 10 cities in terms of total MCA $ growth are in California.
Interestingly, the areas that have the highest MCA $ growth also top the list of areas that have the largest % of hecm to hecm refinance transactions:
Top 25 Zip Codes (>50 endorsements in 2009)
Another interesting fact: by our calculations, our industry has just crossed the 2% overall penetration level, though there are some areas that are significantly higher than that (DC 7.3%; NV 3.9%; CA 3.8%; MD 3.7%; UT 3.6%, FL 3.2%; On the city level, it’s even more striking: Opa Locka, FL 16.8%; Compton, CA 14.2%; Hialeah, FL 11.8% and so forth).
Click the image below for this month’s Industry Trends report.
Hope everyone had a great weekend and is either enjoying a relaxing holiday or at least enjoying the reduced distractions if you are sneaking in some work today! We thought our readers might be interested in an update to our graph of application trends since the principal limit reductions. Without further ado, here it is:
The most concerning thing about this is the underwhelming ‘recovery’ from the expected slump in October. October’s excuse is that half of those applications were pulled forward into September to beat the principal limit reduction. That starts wearing thin in November since the average of the Sep-Nov (post PL announcement) is 6.4% below that of Jun-Aug (pre-announcement).
But by the time we get to December we have to start searching for a new, lower ‘normal’. The four month period from Sep-Dec is 13.4% below the prior four months. Two key questions come to mind: 1) Are there other reasons besides Principal Limit reductions behind the drop?; and 2) What might the new ‘normal’ application level settle at?
On the first question of other potential reasons behind the reduction, we’ve heard a long list of factors:
- Appraisal reviews leading to fewer closed deals – this would seem to suggest higher fallout rates and fewer endorsements, not necessarily lower applications
- Operational distractions from RESPA changes and NMLA licensing
- Lower broker economics leading to reduced marketing – the continuing shift to fixed rate products would seem to improve broker economics but the trend of originators leaving the industry could be plausibly expected to reduce aggregate marketing support for the product
- Fewer wholesale lenders – fallout from the World Alliance Financial and 1st Reverse shutdowns, plus funding constraints at JB Nutter have reduced the list of available wholesale lenders for reverse
These all might be just interesting sideshows to the main event of principal limit reductions reducing seniors’ demand for HECMs, but there’s no question that some combination of events is reducing HECM demand significantly in the last few months. Based on recent trends it’s possible application volumes for the year could end up as much as 20-30% lower than 2009 (avg 8,000-9,000 per month). There are many factors that could contribute to stronger volume (coops, HECM purchase, new lenders as FHA removes broker license requirements, etc.), but there’s another question that’s less speculative here too:
Would you and/or your company leave the reverse mortgage industry if your volume declined 30% from 2009?
Comment below or Contact us directly if you’d prefer not to comment publicly, but we’re very interested how many people would expect to survive that level of decline.
And for reverse mortgage loan officers, don’t forget to share your thoughts in our State of the Reverse Mortgage Originator Survey.
