Posts Tagged ‘Generation Mortgage’
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.
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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!
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There’s a new sheriff in town, and that sheriff is Generation Mortgage. Ok, that may be a little extreme, but on an endorsement volume basis we saw Generation take the lead on the wholesale side of the business in February, with 831 loans endorsed during the month. This is a major improvement over where they were in the second half of 2009, where they were a little late in getting a competitive fixed rate product to market. With over 70% of the reverse mortgage business being fixed rate product in the latter portion of the year, not having it proved costly. However, it appears they have fixed that, and in a big way. However, before we anoint them as the new kings of the wholesale biz, it’s worth a wait of a few months to see if the performance is consistently good, or if there was some catching up in endorsements from prior periods.
Genworth also gained in February with a more attractive fixed rate product offering to underline the point, although they saw less pickup than Generation. Rounding out the trio of higher performers this month is Urban, recently bought by Knight Capital Group. Their wholesale volume of 653 units put them in 3rd place for the month, behind Generation and Bank of America.
What are some other trends to point out for February?
- Wholesale endorsement volume dropped 12.6%, vs a 1.5% decline in Direct Endorsements. One month does not a trend make, particularly since this still leaves broker/wholesale activity considerably above direct retail lending given the better figures in Dec & Jan, although we’ll continue to watch closely for signs of a trend given that the current environment seems tilted toward direct retail lenders right now.
- Another way to look at whether big lenders are faring better than small is the combined market share of top 10 lenders. On that score, we’re getting early indications that the big are getting bigger as a full 92.5% of all volume in February went through either retail or wholesale channels at the top 10. That may not surprise anyone who has been in the business a while, but it underlines the point that smaller volumes point to more concentration as smaller players exit the business.
- February proved a volatile month for lenders’ combined endorsement volumes, with 7 of the top 9 lenders (excluding WAF) having moves of 30% or more up/down.
- Wells Fargo and Bank of America saw relatively steady volumes, up 11% and down 12% respectively
- Generation, Urban and Genworth were the winners as outlined above, each up 36-88%
- The remaining lenders saw declines ranging from 40-47%
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