Posts Tagged ‘reverse mortgage 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’re a week later than our usual schedule this month, but after seeing how wild the French Quarter was this past week (the Realtors’ convention overlapped with NRMLA’s Annual event), we’re just happy we made it back without permanent injuries! It was a great time in New Orleans and we really enjoyed catching up with many of you in a new city.
October started the new federal fiscal year (and everyone else’s fourth quarter) with a whimper at just 5,279 endorsements, down -11.5% from September. That’s a bit disappointing given recent application volumes have been trending back upward.
It’s still early to draw major conclusions but check out the trend of applications vs. endorsements recently and you’ll see what has us starting to ask questions about cancellation rates and fallout.
We’ll just have to see how this develops over time, but just looking at the last two months (May-June applications) implied cancellation rates from endorsements (Sep-Oct) have increased from 29% to 42%. The first figure is roughly in line with historical experience but the second suggests we might be paying the piper for several months of very low cancellation rates earlier this year. Hopefully we get this behind us before year end!
This month’s regional drilldown shows the decline was very widespread, with only Southwest and Great Plains increasing from September. Declines were heaviest in the higher volume regions, with each of the top 3 falling faster than the overall industry.
Top lenders were a slightly better story, with 4 of the top 10 increasing volume, with 1st AAA and Bank of America gaining significantly (up 27% and 16%, respectively). The top 10 lenders as a group fared only slightly better than the industry, down -11.1% vs. -11.5% overall. Active lenders in the month was just over 600 and barely above the multi-year low set in May.
You can access the full report by clicking the image below. Enjoy!
If you want to see a telling visual of our industry’s pain, check out page 1 of this month’s report. The first graph showing year over year endorsement trends shows just how tough the road has been recently for reverse mortgage professionals from a volume perspective, with a huge gap opening up between the blue line representing 2009 and 2010′s sickly purple line. (To make it easier for all to see, we are referencing the graph below:)
It certainly doesn’t help the comparison that we had a nice rise in March 2009 resulting from the $625K lending limit increase. We’ve been talking recently about the encouraging uptick in application volumes, but that will take at least another month or two to show up here due to endorsement lag times.
So now that we have the bad news out of the way, let’s talk about some bright spots. In keeping with the increased lending limits mentioned above and our recent analysis of refinance volumes, you might be surprised to find out just how effective the lending limit increases still are at affecting the dollar volumes of different markets and lenders around the country – even one year after our last lending limit increase.
Baltimore is a great example of refinance success in a market by enterprising lenders, and this month’s report shows another good opportunity in growing markets. To highlight, let’s look at the MCA Growth Table at bottom of page 2:
Every city on this list has seen significant increases in dollar volumes that drive revenue and profit for lenders (and put dollars in senior borrowers’ pockets), with many doubling compared to last year. Since we’re showing you the result of lenders’ collective efforts in these areas it goes without saying that you won’t be the first to discover these growth opportunities, but the scale of these markets suggest that there could easily be more potential here than is currently being tapped.
We’ve consistently noticed that despite the large numbers of active lenders in big markets, many metro areas still look relatively under-served compared to rural communities when we look at senior households per active lender on our Market Opportunity Report, but it also is evident on this report in a more bottom line measure: average loans per lender. Check out the table below for a quick look:
It’s worth pointing out that Brooklyn shows up at the top of the MCA chart and here as well, but notice that Chicago has both the most active lenders and second highest loans per lender average. Sure, it’s hard to make a living just originating three loans a month in Chicago if that’s all you’re doing, but remember that’s the average – there are a lot of lenders doing much more than that in just that one market. Same goes for the other cities listed here, which have more active lenders than every other city but still show decent volumes per lender.
For those inclined to be pessimistic we freely admit that there are also a lot of lenders that do less than average in each of these cities, just as there isn’t a silver lining without a dark cloud. In the meantime, our optimistic clients can keep thinking about how lower upfront costs can reach a whole new customer base that doesn’t want every last dollar in their hands today.
If there’s any truth to the long touted statistic that 4 out of 5 senior homeowners don’t have a mortgage (and we think there is), then it stands to reason that lenders offering an efficient means of making that equity available for future emergencies at little cost today breaks new ground for where this industry can go from here.
Click on the image below to view the full report for this month.
