Posts Tagged ‘Bank of America’
Lender volume presented on this report includes third party originations (TPO) of any company not FHA approved under their approved sponsor lender. As of next month this report will be re-named “HECM Lenders” to better identify it as the ranking of HECM Lenders closing loans under their own FHA approval. If you are looking for rankings of all HECM origination companies, please see these reports.
HECM endorsements totaled 5,511 in July, down 5.9% from June and -6.6% from July 2010. And while the YTD total is still showing growth, many signs are pointing to a weak second half of the year.
First and foremost, the recent exits of Bank of America,Financial Freedom and Wells Fargo will all be impacting the last six months of this year (at minimum), although Wells Fargo endorsements are likely to continue until at least September or October given closing and insuring timelines.
But July also marked the first time in 4 months that we declined on a year over year basis, as shown in the chart below.
Given the long road to recovery from Oct 2009 principal limit reductions, it’s distressing to see how short and fragile the recovery back to growth mode was. The application declines (compared to last year) point to a continued downtrend for the immediate future, and we fully expect the absence of Wells Fargo in July applications and beyond to extend the trend.
The second graph compares the same year over year growth trends, but with endorsements lagged 4 months as per our usual application-funding-endorsement timeline assumption. If we assume a significantly negative reading in July applications, the industry’s near term future is uncomfortably clear.
All this adds up to a third consecutive calendar year decline as we’ve stated two weeks ago, as the four months of growth simply weren’t strong enough to offset what is likely to be eight months of decline for 2011 (Jan-Feb, Jul-Dec).
Housekeeping Notes:
- As of next month this report will be re-named “HECM Lenders” to better identify it as the ranking of HECM Lenders closing loans under their own FHA approval. Lender volume presented on this report includes third party originations (TPO) of any company not FHA approved under their approved sponsor lender.
- The Wholesale Leaders report will appear for the last time next week, and be known thereafter as “HECM Originators” to identify it as the best source of rankings of all companies originating HECM loans, regardless of FHA approval status
- Industry Trends will be re-named “HECM Trends” in keeping with the above changes
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We promised a closer look at the impact of BofA exiting the industry in our Retail Leaders report earlier this month, so let’s dive in. We’ve heard in many conversations with clients and contacts that the industry has fully absorbed BofA’s volume and didn’t see any decline from the company’s exit. We would love to be wrong about our earlier predictions of losing almost 50% of BofA/Wells retail volume, but let’s see what the numbers say thus far.
The chart above shows applications through May which appear to have held mostly steady since BofA stopped taking applications in February. Since then, applications were up 8.5% in March, and down -9.5% and -8.3% in April-May.
This second chart shows applications per business day, which make a clearer statement of decline once we recognize that March and May had 3 and 2 more business days than February, respectively. Of course, there are always many other variables changing in our industry at the same time that make it tough for precise comparisons, but the broad trend seems pretty clear. With BofA comprising 10-11% of retail market share in endorsements before their exit, a case could be made that the industry has lost more than half of that volume since their exit. Keep in mind that remaining lenders have still gained share of the industry since
Our last chart puts the BofA exit in context with Wells and Financial Freedom. We expect that June application numbers will show a boost given that Wells Fargo allowed loan officers to close out their pipelines and take applications through month end. Once that’s behind us, these three will collectively represent 30-35% of recent retail market share and whatever figure you use for the ultimate net loss to the industry after other lenders step in, that’s a hefty headwind for applications in the last six months of the year. Endorsements won’t really show the impact of Wells Fargo’s exit until Q4, but anyway you slice it 2011 looks to be an unlucky third year in a row of declines in HECM endorsements.
Housekeeping: Since the recent change in licensing requirements for HECM lenders, this report is now the most accurate way to understand retail/broker endorsement activity by originating company. Our Retail Leaders report includes TPO business for wholesale lenders as part of their retail volume, whereas it is correctly attributed to wholesale channel on this report. As part of this change, we will be renaming these two reports and making other slight modifications in the near future. Please let us know if you have a suggestion for new names for these reports.
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Another month is in the books, and while volumes continue to be less than stellar, we’re getting a better picture of what the major lender exits portend for our future volumes. We can officially mark June as the month that BofA left the building from an endorsement perspective, given the decline from 896 retail endorsements in April to just 7 in June. We’ll dive into more detail next week, but perhaps as much as half of last month’s industry volume decline could reasonably be attributed to BofA. June could have been a 1,000 loan improvement from May absent BofA’s exit, but that’s only good for context.
We have another shoe dropping when it comes to analysis of these industry numbers given Wells Fargo’s 6/30 exit has yet to be baked in to any of the application or endorsement numbers we’ve seen yet, but we think the title of our post is appropriate given what the remaining lenders in our industry are experiencing.
Out of the 8 largest lenders not named BofA or Wells, just one declined in June. Looking at them collectively, these 8 lenders experienced a 37.9% increase in volumes from April to June, while the industry total declined -4.4% over that same period. Metlife appears at this point to be the biggest grower since the BofA exit, joining the 1,000 loan club this month for the first time.
Compared to the impact of HUD’s changes to the HECM program in October 2009, it’s very clear which had a larger impact on the industry. If anything, this highlights the importance of HUD’s pending news on financial assessment of borrowers and policy for T&I defaults.
Looking regionally, we saw improvement in all 10 regions tracked with Mid-Atlantic and Southwest seeing particularly strong growth from last month. From a year to date perspective, many areas continue to see growth:
- New York/New Jersey continues to ride the Q1 surge to show 15.9% growth from last year. Delaware and upstate New York have grown more than 25%, including both Albany and Buffalo.
- Great Plains, Southwest and Rocky Mountain are growing at double digit rates
- Midwest, New England and Northwest/Alaska are declining so far this year
- Detroit, Miami and Chicago have been the biggest decliners at the market level, all off by more than 25%
A bit of housekeeping: As HUD changes their data reporting in the wake of broker licensing changes, please note that brokers not closing loans in their own name are rolling off the active lender list over the next few months. As such, we will not be emphasizing active lender counts and changes until this stabilizes, likely toward year end. After that transition is complete, Retail Leaders will reflect the number of lenders closing HECMs in their own name. For a report including brokered loan activity attributed to the broker, please see our Wholesale Leaders reports.
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