Archive for the ‘ReverseIQ’ Category
Surviving and thriving in the reverse mortgage industry these past few years has required adaptation and flexibility:
- Where ARMs once dominated the landscape (all at a single margin of 150 on the same CMT index no less!) fixed rate HECMs have been 2/3 or more of volume for over 2 years. That change happened in less than 6 months.
- Where this business was once powered by “kitchen table” salespeople at Wells Fargo, Bank of America, Metlife and Financial Freedom, we saw 2 of the top 3 lenders in March (page 4) were independent reverse mortgage lenders exclusively originating through their call centers.
- Where there previously was one HECM (Standard) focused on one customer niche (immediate cash), we now have two more HECM products that better suit financial planning (Saver) and home purchases (Purchase).
Beyond the shifts mentioned above everyone has had to adjust to an industry with fewer loans in the past few years, even if many companies are doing better than ever. That volume shift became most apparent to us this month when we noticed our top 10 zip code rankings were only returning 6 entries.
To make a long story short, we realized we had restricted the rankings to only zip codes averaging 5 or more loans per month. This made sense a few years back when there were several hundred zip codes each month with this level of volume but that list was down to 24 in March and most of these were lower Jan-Feb resulting in just the 6 zip codes with 5+ on average in Q1.
This volume decline is not groundbreaking news to anyone since we’ve been reporting on it for years now, but it does highlight the need for everyone to adapt. The report below has some great information to follow the industry nationally and we’re happy to provide it if that’s all you need.
If you would like to see local statistics that can help you work smarter and target your sales and marketing efforts for optimum results, this week is a great time to learn more in person. Schedule some time to sit down with us at NRMLA Irvine this week, or just give us a call if you’re not planning to attend.
Click on the image below to view the full HECM Trends report for this month.
The past few days have been dominated by Metlife’s exit announcement, but regardless of how you feel about that news the impact on industry numbers simply hasn’t been felt yet. We mean that in the best possible way, as April endorsements rose 4.9% to 4,595 loans after the horrible, no good, very bad month in March (apologies to one of our favorite children’s books).
From a regional perspective it was an even 5 up, 5 down month, with the two biggest regions (Southeast/Caribbean and Pacific/Hawaii) both snapping back to February levels.
March case numbers issued also had a bit of good news for us, rising 4.1% from Feb to 7,075. Oddly enough Feb-Apr all have the same number of business days, so it’s a clean comparison to see business trends this time of year.
We aren’t going to weigh in on the Metlife news/rumor mill – we’ll stick with the likely volume implications in coming months based on what we’ve seen happen in last year’s lender exits. Barring any immediate big announcements we can expect May and June case numbers issued to drop 11-15% as loan officers close out their pipelines without taking new applications. After that, the best case scenarios for industry volume might see an additional 1-2 months of transition during hiring/training/licensing/marketing ramp up at a new firm.
The less optimistic scenarios would just extend those timelines out and/or show a number of loan officers leaving the industry, both of which would push application and endorsement expectations lower.
Pretty much any way you slice it, we should all be expecting <60,000 endorsements for calendar year 2012. Taking the under was already a slightly better bet before Metlife’s announcement, so from here the pessimistic scenario would land us at just over 55K loans. That assumes no new case numbers post 4/30 from the Metlife retail team and a stable level per business day from all other companies. Lots of other better scenarios are possible, but very unlikely for any of them to produce 60K or more endorsements in 2012.
Click on the image below for this month’s report.
We’ve been asked many times where was the best place for a reverse mortgage company/consultant to spend precious marketing dollars. While we can’t claim to have solved that question (if we could answer that question we’d have retired already), we do see some things that work at the industry level that benefit our clients.
Whenever we hear this question, it reminds us of the boxing term for a fighter that does better than their weight-class suggests they should. So we went looking for places where our clients might do better than they might otherwise expect with their marketing budget.
Big City, Big Volume?
Looking at our top 10 list of cities by loan volume, you might think that these cities are here simply because they have the most senior homeowner households. It’s a good theory, so we tested it. The table below shows these same 10 cities with their senior homeowner household totals and the rank updated to reflect households rather than loan volume:
Most of the top 10 cities are in here, but they’re not in order and there are some true outliers here as well. If we think about loan volume similar to a response rate on a marketing campaign, we can calculate an adoption rate by looking at what percentage of eligible households completed a reverse mortgage. In this table we’ve shown it in basis points (percentage multiplied times 100) and annualized it. The “New Adoption” simply removes refinances from the equation to see just new reverse mortgage borrowers.
On this basis the differences are stark, as Baltimore is generating over four times as many loans per household as Chicago. So it would seem that huge numbers of seniors are important (mostly top 10 cities here) but not the end of our story.
Past Performance = Future Results?
One of the other metrics we like a lot is penetration rate, which shows what percentage of eligible households have a reverse mortgage at any point in time. We noticed while looking at this table that all of these top 10 cities had penetration rates (as of December 2010) higher than the national average of 2.24%. Our industry had done a good job focusing on the cities with the most eligible households, and seen success doing so, but what does that tell us about the future?
Washington DC and Baltimore both have high penetration rates and saw very high adoption rates (good for our hypothesis), but Miami had relatively little volume in Q1 (as measured by adoption rate) despite having a high penetration. Given how many cities there are, we thought it best to do a correlation analysis rather than continue our eyeball test, and discovered that higher penetration in Q4-2010 was strongly correlated (above 0.5 for you statistical types) with adoption rates in Q1-2011.
In other words, all other things being equal your marketing dollars are more likely to result in loans where the product has already done well.
Conclusion
We’d be the last ones to tell you that correlation equals causation, but it makes sense given high customer satisfaction ratings that our product does better in areas where potential borrowers already know friends or family in their local area with good experiences. If you’re looking for a way to test out this idea, feel free to use the tables in page 2 of this month’s report (click the image below) to tune your marketing to areas with higher penetration rates.
And if you’d like to see what penetration rates are for every county in your state (or states), it’s in our Market Opportunity Report for clients. Many clients use it do their marketing analysis every quarter, and if you’re shy about numbers we’d be happy to lend a hand with the statistical heavy lifting.
Click on the image below to view the full Industry Trends report for this month.
