Posts Tagged ‘Bank of America’
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.
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:
We suggested in last month’s report that we expect endorsement volumes to get worse before they get better, and May certainly proved that point. It would have been more fun to be wrong in this case: May volume came in at just 4,554 loans, down 17% from April and the lowest monthly volume since September 2005.
For the second straight month there was an even greater decline in active lenders (down 23%) which has continued a nice upward trend in average loans per lender. The lower volumes certainly encourage consolidation and outright exits by smaller brokers/lenders, but it wouldn’t surprise us if there is also another major factor at work here in new regulations/licensing requirements causing small shops to preemptively exit the business or consolidate.
We’ve seen a few headlines on this already, and it makes perfect sense we’ll see a lot more – and a whole lot more that don’t make headlines but go quietly into the night nonetheless.
This month looks a lot like an uglier version of last month, but let’s dive in a bit to see what’s hiding below the surface:
- All 10 regions declined in May, led by Rocky Mountain (-37%) and Great Plains (-35%) while Northwest/Alaska (-2%) and New York/New Jersey (-6%) escaped relatively unscathed
- Of the 82 metros, only New Orleans managed an increase in volume (+1%), while Houston was basically unchanged with just one less loan endorsed
- The magnitude of change in the industry landscape is particularly apparent on page 2, where you can see just 3 of the top 10 lenders grew volume in May
- Generation, Bank of America and Metlife each grew more than 10%, although all are still down significantly from their December volumes
- Generation will be particularly interesting to watch in coming months to see if their recent proprietary product announcement has a ‘halo’ effect in raising their HECM volumes as well (we are also keen to see who will follow suit – just look at how fast the industry participants came up with $0 fee products). We won’t see proprietary volumes in this report, so check out our data repository if you want to learn more about how we’ll continue our comprehensive industry coverage as HECM’s market share slides below 99.9%
- Also on page 2, the charts for Active Lenders, Endorsements per Lender and New Lenders all tell the story that the number of competitors is shrinking dramatically as volumes decline and regulations increase. By our count, just 25 lenders endorsed their first HECM in May!
The full report is available by clicking the image below. Enjoy!
