Posts Tagged ‘HECM refinance’
Much like clouds, ink blots, and famous impressionist paintings, an observer can see pretty much any shape they want in the reverse industry these days. Saver is looking up, lender exits are looking down, and everything else seems in between.
A potential government shutdown has come and gone, and HUD still managed to post application volumes for March in a timely fashion! The application headline number is good news considering the 8.5% increase in applications, a second consecutive monthly increase.
Unfortunately, we don’t have to look far for negative impressions either. The increase was entirely due to more business days in March than February (24 vs. 21), so apps per business day actually declined 5.1%.
The outlook report also provides our monthly reading on HECM Saver endorsements, which were up 38.2% from February to 409, and represented more endorsements than refinance transactions (5.6% vs. 5.1%). Saver is continuing to grow at a steep rate after a slow start, and at this pace could be in double digits for market share later this year.
In looking to the Industry Trends pdf report linked at bottom, we can see that Pennsylvania stands out as the fastest growing among the top 10 states, up 27.2% vs. Jan-Feb 2010. There’s been a strong assist from Philadelphia, which has continued to grow since we profiled it last October.
In contrast with Baltimore, which is now declining fast as refinance activity dries up, Pennsylvania has always had a broad base to support industry growth: 5th largest number of senior homeowner households in the nation, and the lowest of the top 5 in penetration rate (% of these households with a reverse mortgage) as of December 2010.
Demographics isn’t always destiny, but it’s very useful to understand how our industry is tracking to its demographic potential. We put this type of demographic information alongside volume and loan size information together for easy reference in positioning your reverse mortgage business for success in our Market Opportunity Report. See a free sample on our website and subscribe today for quarterly updates.
Click on the image below to view the full Industry Trends report for this month.
We already knew that September was a down month for endorsements in the industry overall, but now we can look at the tally in a bit more detail. We’ll talk more next week about different markets around the country in our Industry Trends report, but this week we’re focused on retail/direct vs. broker/wholesale and other views on competition.
After several months of the broker/wholesale channel losing the volume battle, the down market showed less decline there (-4%) compared to retail/direct (-14%). One month isn’t going to change the tide of regulation and resulting transformation of some brokers consolidating into direct lenders while others become loan officers at larger institutions. That said, brokers are nothing if not scrappy and we’ll see more than a few stay in the broker/wholesale side as it transitions to TPO.
We’ve also been following closely the breadth of our industry’s recovery from the May volume lows, as measured by lenders above/below their May volume figures. We’ll be the first to caution that normally you shouldn’t look at individual months as especially important when using endorsement data, but in this case the decline and recovery have each been severe enough and long enough to make for interesting comparisons. Among the top 10 lenders specifically, several companies seemed to lag behind in increasing loan volumes while others leaped forward. The chart below shows that as of September almost all are well on the recovery path:
As you can see, 9 of the top 10 lenders have increased volume since May, with several showing dramatic increases. As of just two months ago, only 5 lenders had increased volumes at an almost identical industry volume (1.4% higher in September). Whatever your thoughts about each of these lending leaders, we can all agree that it doesn’t progress our industry forward to see volume declines wash out major lenders from our business.
Click the image below to access the full report:
Thanks for all the feedback and questions about our industry forecast earlier this month. We’ve heard many different perspectives from industry participants about the recently announced HECM changes and how it affects our customers and business volumes. Forecasting is always a guessing game (hopefully an educated one) but by far the most interesting part is the sharing of opinions that inevitably follows once a number is thrown onto the table.
As we dive deeper into August’s year to date results, an interesting city stands out this month, similar to how Baltimore bucked the trend earlier this year. Many areas of the country are still fighting their way back from low volumes in the past year, but Philadelphia has recovered faster than many others. It’s the only city in our top 10 this year that is growing year to date (+4.3%). Check out the chart below:
Not only is Philly up year over year, but it’s also trending higher. The difference is more notable year over year when comparing each month:
So what changed? Another familiar story from Baltimore: Refinances.
Non-refinance endorsements were down 11.4% from 2009 through August. There are at least two easy thoughts from this. First, we’ve seen a few times now that the best performing markets in 2010 are those where refinance is driving a significant portion of volume. That might be a good or bad thing, depending on your perspective.
Given that we’ve only addressed a small portion of our potential target market so far (see our sample report on this page for a reference check), we tend to see refinance similar to getting addicted to cough syrup. It probably feels great for a while, but sooner or later someone is going to take it away. Given continued home value issues and concern in the secondary market over refinances taking away the incentive for paying well for these loans, you should enjoy refis when you run into them but don’t count on them to make your 2011 numbers.
Now, let’s keep in mind that this is all happening before any of the HECM Saver and changed principal limits took effect. So this doesn’t say much about what will happen to the refinance volume with those changes. It probably says more about Philadelphia’s housing market than anything else, as Zillow shows a relatively healthy market.
Second, and as you might expect given the overall industry volume is down 38% year to date, refinances are much more of a localized phenomenon than an industry trend. Check out our refinance table in the left column (gray) of page 2. Refinances are down 45% year to date nationally.
The bigger story here is that non-refinance originations are down only 11% compared to 38% nationally. Proof yet again that it matters where you market. If you want to get these numbers for your markets to target your marketing where the return is highest, check out our services for reverse mortgage marketing and sales professionals.
Click on the image below to view the full Industry Trends report for this month.
