Posts Tagged ‘reverse mortgage wholesale’
This report will be known as “HECM Originators” starting next month to identify it as the best source of rankings of all companies originating HECM loans, regardless of FHA approval status.
While the rest of the world is deciding just how much the rating agencies matter 3 years after the 2008 debacle, volatility in the reverse mortgage world is looking relatively calm by comparison.
Retail endorsements were up 13.8% on the month, while Wholesale/brokers endorsed 11.7% more loans. This marks three consecutive months where the performance gap between channels has been relatively low, with both channels moving up/down together after a much bigger performance gap in the wake of regulatory changes at FHA and the federal/state levels. The trend may not continue given how much change we’ve seen lately, but it looks reasonable to assume for now that we’ve seen the FHA approval and loan officer compensation changes fully baked into the endorsement numbers by channel.
At this point it looks as though we’ve settled into a new normal of 60% Retail (defined as the same company taking application and closing loan) and 40% Wholesale. That compares to an average of 47% in 2009, with most months in a range from 41-50% (two months over 50%). The range in 2010 was considerably wider around a higher average of 54%, encompassing everything from 42% in January to 66% in December. That last month looks like an outlier right now, as the 2011 average thus far is 61% with a relatively tight range of 59-63%.
Housekeeping Notes:
- This report will be known as “HECM Originators” starting next month to identify it as the best source of rankings of all companies originating HECM loans, regardless of FHA approval status
- As of next month the Retail Leaders 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.
- Industry Trends will be re-named “HECM Trends” in keeping with the above changes
Click the image below to access the full report:
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
Click on the image below for this month’s report.
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.
Click the image below to access the full report:
