Volume was up all across the nation with the exception of New England dropping -8.8%. Rocky Mountain (28.2%) and Pacific/Hawaii (24.9%) fared particularly well, leading 6 of the 10 regions to double digit percentage growth. Rocky Mountain was also the only region to increase from January 2011, up 1.6% while the industry overall dropped -19.9%.

• Salt Lake City grew 50.7% from last January, powering the Rocky Mountain region totals
• Caribbean, which includes Puerto Rico, grew 26.9%

Among lenders, we saw 6 of the top 8 active lenders increase volume and 4 of those by double digit percentages:

• Security One led the way with a 27.9% increase
• Genworth saw a 26.1% increase
• Both companies posted their highest monthly total on record, although these numbers do include TPO business that wasn’t counted in historical numbers before 2011
• American Advisors (23.4%) and Generation Mortgage (17.2%) rounded out our double digit percentage growers for the month

Active lenders dropped significantly from last year, but that is almost entirely the result of FHA’s move to stop approving brokers which results in those companies not being counted in this total.

Click on the image below for this month’s report.

October gave us reason to doubt that expectation, with the first half of Wells volume decline coinciding with a larger drop in wholesale/TPO volume than retail/direct. November brought us full circle as the second half of Wells volume decline saw wholesale/TPO rise to the challenge of replacing the former market leader.

Total endorsements were virtually unchanged in November, but wholesale/TPO grew 22.7% while Retail/direct dropped -11.8%. This stunning disparity brought wholesale/TPO share of the total market to the highest level in over a year at 42.5%.

From a lender perspective, there was plenty to cheer about on the leaderboard, as all but 2 of the 8 largest active lenders (ex Wells & BofA) showed gains in the month, with One Reverse and Security One being the only decliners. Metlife and Genworth both saw volume rise by triple digits.

November also saw big volume increases for some lenders outside the top 10, as Money House, iReverse and Cherry Creek all saw increases over 100% from October. Be sure to check page 4 to see where your company placed among the top 100 originators in November!

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December finished on a modest down note, with HECM endorsements down -0.4% from November to 4,636. Active lenders increased 4.4%, although this measure of competition remains at a low level since stabilizing earlier this year.

We’ve been saying that fewer competitors yields benefits for surviving lenders for at least a year, and Metlife provided a poignant demonstration of this effect. The company’s November and December totals were its two highest endorsement figures of the year, with each month higher than the low months for Wells Fargo before their exit announcement in June.

Of the 10 regions we track, 5 were up including the 2 largest, Southeast/Caribbean and Pacific/Hawaii. And in a year when national volume fell -5.6%, it’s worth noting the winners among our market rankings:

• Jackson, MS took top growth honors, finishing up 41.3% from last year. Honorable mentions go to booming metropolis Casper, WY, up 39.4%, and Shreveport, LA, up 29.8%
• New York rose to the top market in the country with 3,133 loans, up 1.2% from 2010. The big apple swapped spots with Los Angeles, which dropped -10.7% to 2,960.

Now that we have details available to report, it’s perhaps even more interesting that the broker/wholesale channel still declined faster than retail/direct, even though Wells Fargo’s decline was almost entirely felt on the retail side (Wells was 93% retail). Wholesale declined -18.3% vs. -16.1% for Retail, marking the fifth consecutive month of under-performance.

It’s logical then, to assume that other retail lenders did better in October than brokers in aggregate, and page 4 of our report makes it clear how each of the top 100 fared (although the list doesn’t distinguish retail lenders vs. brokers). A few notables:

• American Advisors Group (#4) was up 49.3% in the month (and 132.5% year to date) – Retail
• New Day Financial (#11) was up 34% – Retail
• Great Oak Lending (#17) was up 34.8% – Retail
• Open Mortgage (#23) was up 25% – Broker

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HECM endorsements for October were down -16.8% to 4,653, the lowest total since the industry bottomed out in May 2010 from the first principal limit reductions. Wells Fargo wasn’t totally absent from October’s endorsements, with 787 loans still good for second place behind Metlife, but that’s probably more bad news than good.

We’re almost sure to break last year’s bottom next month as Wells volume declines further, and if other lenders can’t pick up some of the loans Wells isn’t doing, we could be looking all the way back to July 2005 for the last time monthly endorsements were under 4,000.

What is more surprising than the Wells decline, which has been expected, is the relative weakness of several other lenders in the month. Metlife, Urban, Generation, and Security One all declined in October. The aggregate decline of these 5 lenders is slightly larger than the total industry decline, while One Reverse, Genworth, AAG and Reverse Mortgage USA helped stem the tide.

These numbers include TPO business under the new HUD system, so we’ll have a better read for retail/broker/TPO trends next month when we can dissect further in our HECM Originators report. For now, we can simply observe that so far, the industry does not seem to be making up for the branch distribution network losses of BofA and Wells.

Click on the image below for this month’s report.

We commented last month on the relatively narrow performance gap between retail/direct and broker/wholesale volumes as the changes from broker approval to TPO and lender compensation regulations worked its way through. This month the gap has opened back up, with retail/direct up 10.5% while broker/wholesale shrank -2.8%. We haven’t seen that large of a gap since February, as you can see from the table on page 1.

We’re not sure what’s causing the change, or even if it will continue, but we’ll be watching closely in the next few months.

Several lenders are seeing impressive growth in their businesses, with most of that coming on the retail side:

• American Advisors Group and Metlife have each grown retail more than 90% so far this year, while One Reverse, Generation and Genworth have all grown 20% or more
• Security One wholesale has grown 38.8% so far, while Urban is up 6.5% on a much larger base
• First National Bank of Layton has been steadily climbing the rankings this year, and reached the top 10 for the month of August with a 9th place ranking.

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While we continue to trend lower than last year on the volume side for the third straight month, what’s starting to emerge from the monthly numbers is the sense of clear winners from the exit of BofA (Wells hasn’t really affected these numbers yet). On the list of winners, Metlife, Genworth and Security One come out near the top given their dramatic jumps since the first quarter.

Regionally, 7 of the 10 regions increased in September in contrast to the overall down month nationally. As we commented upon previously, the highest volume markets lagged: the bottom 6 regions increased 118 units while the top 4 dropped 335, even after accounting for a small increase in Pacific/Hawaii.

• Northwest/Alaska had the largest unit volume increase, up 33 units or 12.0%
• Rocky Mountain had a slightly higher percentage increase, up 12.6% or 29 units

Click on the image below for this month’s report.

July summary

July endorsements showed a continued trend of better results for retail/direct lenders compared to wholesale/brokered volumes, with Retail declining -5.2% while Wholesale shrank -7.0%. We also saw the gap between the two channels remain fairly small, as the past four months (April to present) have shown Wholesale consistently within 3% of overall industry growth rate each month.  In the 8 months prior to April, we only saw that gap under 3% once and one month was as high as 13.6%.

Bottom line, the industry has basically finished the transition to the TPO world and further changes in volume will be related to other factors like lender exits and other events more than the past regulatory changes.

Report Updates – Rankings Description

For long time readers of our reports, you’ll notice the biggest change in our reports is the addition of page 4. We previously provided rankings of top HECM origination companies through our Retail Leaders report, but as FHA is no longer approving brokers, two things happened on that report: companies that are not FHA approved can no longer see their volume ranked against their peers there, and wholesalers can no longer see which of their clients and potential clients are originating HECM in volume.

That change has made the rankings on page 3 of this report which display lender volume by business channel (retail vs. broker) the single best source for ranking origination companies. But it also means the longest running report in our industry (FHA’s HECM MIC report that appears faithfully on the 1st of each month) no longer serves the purpose of broker companies.

We invite you to review the new page 4 on our HECM Originators report which replaces the basic functionality of the old FHA report by showing the single month volume rankings of the top 100 origination companies, but we also added to it by showing calendar year to date totals and rankings for each company along with monthly and YTD growth rates.

Housekeeping Notes:

• The Retail Leaders report has been re-named “HECM Lenders” to identify it as a ranking of FHA approved lenders closing HECM loans and includes both retail and TPO business for these lenders. The report will continue to be published during the first week of each month.
• Industry Trends has been re-named “HECM Trends” in keeping with the above changes. First report will be issued week of 9/19 and during the third week of each month thereafter.

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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:

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.