August 4, 2010
We’re a few days behind our usual schedule as we enjoyed a quick trip out to Dallas for Reverse Mortgage Day in Texas. As always, it was very well organized and if you were busy networking in the halls or didn’t attend, you can find our presentation on current trends in the reverse mortgage space here.
July saw another double digit increase in HECM endorsement volumes over June, up 11.3% to 5,901 loans. Still well off last year’s pace, but gaining traction as the application volume increases indicated a few months back.
- July’s strength was broad based, with the 8 higher volume regions all showing increases and only Rocky Mountain and Great Plains declining. Both of the decliners have consistently been the smallest volume regions anyway, so they didn’t slow the overall industry growth significantly.
- Competition increased in July although at a much slower rate (+3.5%) that continues to illustrate a trend toward the larger companies surviving best in this environment.
- Despite just 4 of the top 10 lenders increasing volume from June, the top 10 as a group grew faster than the overall market, up 15.1%. Triple digit jumps from Wells Fargo and Metlife led the way, with Genworth continuing its recent growth streak by almost doubling for the second month in a row.
- In spite of the continuing lower volume levels the industry is actually approaching a 2 year high in average monthly endorsements per lender, due entirely to the drastic reduction in competitors.
- Among the 81 markets tracked here, several large cities stand out for having the highest monthly productivity figures per lender (endorsements per lender): Houston, New York and San Francisco each are among the top markets year to date. Of course, if you can overcome the regulatory/licensing restrictions in North Carolina or the Caribbean, Greensboro and Puerto Rico are both off the charts…
We don’t talk too much about our paid client services in this space since we know most readers are just looking for a quick (free) update on the reverse mortgage market. For those of you who are looking to identify the top zip codes in your territory to target your marketing (seminars, mail, etc.), head over to our Retail & Brokers page to check out a new service we’re offering for just $20 per month: Sales Territory Scorecard.
Just tell us where you do business and start targeting your efforts where your sales and marketing efforts are most productive.
The full report is available by clicking the image below. Enjoy!
July 26, 2010
In last week’s report, we talked about how younger borrowers (read: Baby Boomers) are changing the face of the reverse mortgage industry by selecting reverse mortgages in greater numbers than their elders. Today, let’s dive a little deeper into reverse mortgage borrower dynamics.
One of the first questions that arises when looking at the age distribution chart from last week’s report is whether there was any difference between genders from an age perspective. As you can see from the chart below, single males are much more highly represented in younger ages than single females, with couples even further skewed to the young side.
In many ways this makes perfect sense given the shorter life expectancy for males, which naturally leads to fewer couples (assuming these are mostly married couples) and males at older ages. There are simply more single females that survive to higher ages as potential borrowers.
What’s perhaps less intuitive is that fixed rate borrowers are skewed younger as well, clearly evidenced in the chart below.
Perhaps younger borrowers are less daunted by the full draw requirement of a fixed rate loan because they’re more likely to be using proceeds to payoff an existing forward mortgage? As we start considering how potential usage of funds impacts borrower age, it makes sense to consider payment plan types, as in the chart below.
Since Line of Credit (LoC) is the payment plan option selected by a vast majority of borrowers and is currently mandatory on Fixed HECMs due to full draw requirements, we’ve narrowed our focus to just the HECM ARM population and chopped off the top 60% of the chart to see the change more clearly.
Under 8% of HECM ARM borrowers in their 60s select one of the four monthly payment options (excluding LoC), whereas 32% of those over 100 select a monthly payment option. Given the greater tenure payments available to older borrowers this would seem more attractive to older borrowers, but the level of change surprised us.
So what does all this mean? We suspect that many will see product development opportunities and others likely see sales and marketing implications. We’re as interested as everyone else to see what this means for our market, but the resounding bottom line remains that the reverse mortgage market is in great need of market segmentation and diversity in our approaches to growing the business.
We’d love to hear your thoughts in the comments below, or use our contact form to email us privately.
July 19, 2010
We just got back from the NRMLA Irvine Roadshow and as always, heard some very interesting ideas and discussions about the industry’s current opportunities and challenges. One of the most interesting points we heard came from John Nixon at Bank of America, discussing an analysis he had done of borrower age.
Many of us who have been in the industry for a while have watched average age drop from 77 a decade ago, to 74 five years ago and roughly 72 last year. What has been masked by that “average” (or mean for the mathematically precise amongst us) is that the number of borrowers at each age has changed dramatically. John mentioned that in the past few months, 62 year olds were the most common among his borrowers, which frankly shocked many folks in the audience.
We did an analysis of our own once we got back to our office and what we found suggests that Nixon’s comment is indicative of the industry as a whole rather than just at BofA, even if the industry’s peak age was 63 in 2009 rather than Nixon’s 62. (To be fair, John may be looking at loans we won’t see for a few months due to the timelines associated with loan endorsement.) The chart below show the percentage of borrowers (youngest borrower) in each year at each age.
As you can see, there has indeed been a dramatic shift toward younger borrowers in the past few years, and particularly in the most recent year. Whereas in 2000 there were more borrowers age 76 than any other age, that figure has shifted downward much more dramatically than the average age: 74 in 2003 and 71 in 2006 to 63 in 2009.
So what does this mean for the industry? Well, it suggests that a common refrain of baby boomers being much more likely to use reverse mortgages than the WWII generation and those before is coming true. At the very least, baby boomers seem to be less put off by recent changes to the product and industry that have dropped overall industry volume by -39% in the first six months of 2010.
This could be from higher expectations of living standards in the baby boomer generation, lower retirement savings preparation (and lower pension availability) or a greater receptivity to debt. We simply don’t know from the data we’re analyzing today.
But it did bring up some other interesting thoughts about fixed vs. ARM HECMs, payment plan types, and borrower gender that we’ll explore further in next week’s edition. In the meantime, let us know what you think this shift in borrower age might mean for the industry in comments below, or email us here.
For part 2 of this analysis, please click here: Reverse Mortgage Borrower Analysis, Part 2.
