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One Up Year – HECM Lenders November 2013

HECM endorsements for November rose 12% to 4,690 loans, marking the impact of standard ARM applications taken before the Sep 30th program changes. We expect to see endorsements continue to be relatively strong for the next few months, but turn significantly lower toward the end of Q1 next year. New applications are falling well short of replacing pipeline fundings since principal limits were reduced.

On the bright side, despite all the program changes this year it’s been a growth period for the industry with volume up 15.9% through November, including 9 straight months of year over year increases since March. That coincides fairly closely with housing price upticks over the same time frame, but it’s more a case of no significant lender exits upsetting distribution and marketing reach this year alongside stabilized housing prices (which have been conducive to HECM growth since at least 2011).

Among the regions, 7 of 10 were up in November including a big 206 loan increase (23.6%) in Pacific/Hawaii and 32.3% increase in Mid-Atlantic. Phoenix continues to power a remarkable comeback, up 64.7% over last Jan-Nov and not a single metro is down in the region.

Among lenders, 6 of 10 were up, with another flat for the month.

Click the image below for the full report.

HECM Lenders October 2013

NRMLA’s annual convention is just around the corner. Since we want everyone feeling good and happy next week at the conference, lets look at the numbers on an annual basis, and see what kind of positive things we can find.

  • Despite all of the pessimism and uncertainty and changes and all of the other headwinds the industry has faced, volume is up almost 17% vs last year.  Yes, you read that right, 17% growth in an industry that has seen its main product eliminated and endured another bout of principal limit cuts.
  • All ten of the HUD regions are up for the year.  That is something we haven’t seen for a long time…
  • Only eight of the HUD Field Offices are showing negative numbers year over year.
  • Eight of the top 10 lenders are up for the year.  16 of the top 20.  Not bad!
  • The latest HUD applications report shows case numbers have been increasing nicely since April, and are back up to last year’s levels in August.

(If you are going to NRMLA and want to feel good about the industry, stop reading!)

The devil, of course, is in the details.  In this case, its the monthly trends:

  • October endorsement volume of 4,188 units is down 7.5% vs September, and is the second lowest total seen in the last twelve months.
  • September application volume is probably going to exceed August, but the data we track internally shows that applications fell off a cliff in October with the new Principal Limit factors, and haven’t had any recovery.  We are talking about more than a 50% haircut in application volume.

The takeaway from all of this: Enjoy the numbers for the rest of this year, ’cause next year they are going to get real ugly.

Making Adjustments – HECM Trends March 2012

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.

HECM Trends