Posts Tagged ‘reverse mortgage wholesale’
As we wind down the summer with Labor Day in the rear view mirror, it’s perhaps only fitting that the rest of the year is coming into view. If July’s numbers are any indication of what’s to come, the long rumored shift in business momentum toward large institutional shops and away from small brokers appears to be well under way.
Both Retail and Broker/Wholesale volumes were up in July (albeit off the pace of a furious bounce back in June), but the contrast couldn’t be clearer: Retail growth was more than 3x as fast as Broker/Wholesale, further widening the lead Retail only recently gained in total volume.
Among lenders, there’s a very interesting divergence happening as well. From a combined Retail/Wholesale perspective, many of the top 10 lenders are under-performing the industry’s growth rate since the May low point, but 3 lenders are striking exceptions:
- Genworth is up 228% to 581 units, with much of the growth coming from Wholesale
- Metlife is up 85% to 1,062 units
- Wells Fargo is up 37% to 1,460 units
Doing some quick math, it’s clear that these three lenders alone accounted for 97% of the increase in units from May to June for the entire industry. That’s perhaps the best example we’ve ever seen of a very narrow recovery in volume, which begs the question why these three are succeeding so much more than the rest of the industry together.
These are large institutions but there are other large institutions here that did not see similar growth, and 1 of the 3 isn’t an HMBS issuer so that argument has holes too. We don’t have an answer to this riddle for you this month, but for now we’re content to simply live in interesting times and hope someone does a case study someday.
Be sure to click the link below to access the full report:
After a very tough May for the reverse mortgage broker business, June provided a welcome bounce that almost kept pace with retail/direct endorsements. Broker volume grew 15.2% while retail/direct grew slightly faster at 17.6% as the overall business regained some traction from May’s trough levels. Retail/direct volumes have continued to outpace broker loans, continuing the trend started last month but we’ll wait a while before calling this the new world order for reverse.
One of the interesting trends we’re watching is the consolidation of lending in the reverse mortgage market toward fewer, larger lenders. We’ve written about this before, and it’s an interesting complementary perspective to the count of active lenders and average loans per lender.
Here’s a good illustration:
- In 2008, there were 2,950 active lenders, compared to 3,151 in 2009
- The 100 largest lenders for 2008 shrank -6.8% in 2009, but the other 2,850 lenders actually grew by 4.6%
- The number of lenders shrank from 2,483 in Jan-Jun 2009 to 1,883 in 2010
- The 100 largest lenders for Jan-Jun 2009 shrank -42.2%, while the other 2,383 shrank a smaller -32.6%
So if the number of lenders is shrinking but the largest lenders aren’t staying ahead of the market as a group, what is the tradeoff? Survival.
- Only one among the top 100 2008 lenders was not active in 2009 (1%), compared to 827 disappearances among the other 2,850 (29%)
- It got worse for both groups in 2010, with 3 of the top 100 2009 lenders gone (3%), but a whopping 1,136 (47.7%) of the smaller lenders leaving the business
Of course, there were certainly some big winners among the survivors among non top 100 lenders in both years, otherwise the growth rates would be lagging the top 100. It’s never been easy to be small, but right now the risk/reward is more exaggerated than ever.
Big may not be beautiful these days but it’s a lot less ugly than being small.
Be sure to click the link below to access the full report:
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:
