Archive for the ‘Wholesale Leaders’ Category
After a very tough May for the reverse mortgage broker business, June provided a welcome bounce that almost kept pace with retail/direct endorsements. Broker volume grew 15.2% while retail/direct grew slightly faster at 17.6% as the overall business regained some traction from May’s trough levels. Retail/direct volumes have continued to outpace broker loans, continuing the trend started last month but we’ll wait a while before calling this the new world order for reverse.
One of the interesting trends we’re watching is the consolidation of lending in the reverse mortgage market toward fewer, larger lenders. We’ve written about this before, and it’s an interesting complementary perspective to the count of active lenders and average loans per lender.
Here’s a good illustration:
- In 2008, there were 2,950 active lenders, compared to 3,151 in 2009
- The 100 largest lenders for 2008 shrank -6.8% in 2009, but the other 2,850 lenders actually grew by 4.6%
- The number of lenders shrank from 2,483 in Jan-Jun 2009 to 1,883 in 2010
- The 100 largest lenders for Jan-Jun 2009 shrank -42.2%, while the other 2,383 shrank a smaller -32.6%
So if the number of lenders is shrinking but the largest lenders aren’t staying ahead of the market as a group, what is the tradeoff? Survival.
- Only one among the top 100 2008 lenders was not active in 2009 (1%), compared to 827 disappearances among the other 2,850 (29%)
- It got worse for both groups in 2010, with 3 of the top 100 2009 lenders gone (3%), but a whopping 1,136 (47.7%) of the smaller lenders leaving the business
Of course, there were certainly some big winners among the survivors among non top 100 lenders in both years, otherwise the growth rates would be lagging the top 100. It’s never been easy to be small, but right now the risk/reward is more exaggerated than ever.
Big may not be beautiful these days but it’s a lot less ugly than being small.
Be sure to click the link below to access the full report:
May’s volume was notable for being the lowest on record for 5 years, but the difference between broker/wholesale volume and retail/direct was just as stark. For the fourth consecutive month now, brokers bore the brunt of declining volumes, down -25.8% vs. an -8.4% decline for retail. If nothing else it shows the continuing impact of smaller originators getting washed out by lower industry volumes and new licensing requirements.
As we suspected in last month’s report, we did indeed see retail units surpass wholesale units in May, with 54% of volume coming from retail/direct originations. Given that the downtrend the past 6 months has unambiguously hurt broker/wholesale volume more than retail, we’ll be looking closely to see if the increased volume in June (and hopefully the next few months as well) continues to favor retail or swings back in favor of brokers.
So where are lenders placing their bets? One way to look at it is with the fastest growing lenders in both retail and wholesale:
- Of the 5 fastest growing retail lenders, only one (Metlife) also has wholesale business, although they do happen to be the number 1 wholesaler
- Of the 5 fastest growing wholesale lenders, all five have retail originations as well, although none has more than 23% of business from retail
- Also of note, 2 of the largest wholesale lenders with the longest track record in the space, Bank of America and Financial Freedom, are flat and down -60% respectively in wholesale volume
In many ways today’s report illustrates what has long been considered a truism in the mortgage industry: wholesale is much faster to grow, but retail is where companies create lasting franchise value. We’re all in favor of a healthy industry with both retail and wholesale channels, but the trends right now are increasingly showing strain in the broker/wholesale side of the industry.
Be sure to click the link below to access the full report:
For the third straight month now, wholesale/broker endorsements shrank more than retail/direct endorsement volumes. In April, brokers saw 7.4% less volume while retail lenders shrank by 3.3%. Given what we already know about May’s low volume levels, we expect we’ll still be talking about declines in both business channels next month as well.
Brokers still hold a slight edge in total volume over the retail channel, but the gap is closing each month and could easily flip the other direction at any time with how close we are now. Large lenders continue to dominate the volume totals, accounting for 88.9% of volume in April. This is up a minor amount from March, continuing above trend for past 12 months.
We’ve heard a lot about licensing and testing requirements at non-bank originators driving many loan officers to move to national banks to escape these burdens, but at least so far we haven’t seen it affect volumes in the industry.
- Of the top 10 lenders, only 3 have grown retail volume in the last 12 months and 2 of those are non-banks: Generation and One Reverse
- The strongest retail grower over the same period is Metlife (national bank), which continues to grow strongly in both retail and wholesale channels, up 82% and 102%, respectively
- Looking at the fastest growing retail/direct lenders, 4 of the top 5 are non-banks – New Day, Guardian First, and Cooper and Shein (in addition to One Reverse above)
It’s still very early to close the book on this, but at the very least the incremental benefits bank originators should see from licensing requirements is getting muddled among the many other factors affecting retail volumes.
Be sure to click the link below to access the full report:
