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.

Click the image below to access the full report:

Last month we showed a chart that illustrated the impressive growth of TPO loans and the clear lead of a few sponsors in this channel. The updated chart shows continued growth as TPO loans made up 30% of all wholesale loans in April, and also the more competitive nature of the business as many sponsors raced to catch up.

Metlife ran out to a big lead in March but grew slower in April, while Urban, Genworth, Generation, BofA and Security One all grew significantly to more than double TPO business from 360 to 735 loans. We’re hoping in the future to analyze just how much TPO business is coming from originators new to the industry, but for now it’s clear that the sponsor side is becoming a much more competitive market.

This month’s report also raises a point in the discussion about industry consolidation, as the table on top of page 2 illustrates that some of the largest lenders declined much faster than the industry in April. We don’t put too much weight in any one month’s results, but it’s startling to see that 88% of the industry’s decline this month came from just 2 lenders: Wells Fargo and Metlife.

The 2 lenders were 44% of the industry in March, so their decline is far larger than their market share. The smallest originators didn’t catch a break though: top 10 lenders Urban and One Reverse both saw 12 month highs and Security One came in just one loan shy of their recent peak.

Click the image below to access the full report:

• Broker/Wholesale endorsements for January came in at 2,413 units, up 9.3% from December but down 45.8% from a year ago
• Retail endorsements totaled 4,049 units, down 6.8% from last month but up 27.7% from last year
• Brokers contributed 37.3% of all units, up from 33.7% last month but down from 58.4% a year ago

The divergence between channels is particularly striking this month because Retail was entirely responsible for the industry decline. It’s way too early to attribute the weakness to BofA’s exit (we won’t see that effect until at least March or more likely April endorsements, so we can probably expect some bounce-back from Retail in February results if our client conversations are any indication.

Indeed, BofA has had its two best endorsement months since February 2010 as the chart below illustrates.

What’s most interesting is that broker/wholesale business has grown very little from the lowest levels in last years for BofA, while retail has recovered with the rest of industry. We’ve heard from several people in the industry that this directly related to the decision not to pursue certain types of broker/wholesale business, and whatever the cause the effect has been clear on this chart.

There was a wide divergence among other top 10 lenders in January, as Genworth and Urban both saw strong recoveries from what now look like hiccups in December, while Financial Freedom had the most notable decline to a multi-year low.

Click the image below to access the full report:

Thankfully (if you’re among the survivors), there was an even greater decline in active lenders (down 7%) that translates to an almost imperceptible uptick in average loans per lender. It’s nothing to write home about, but at least it’s helping keep some heads above the water.

• Several regions saw modest volume increases in April, including the Mid Atlantic region that includes Baltimore. If you missed our prior newsletters about what’s occurring in the Orioles’ city and what might be driving the numbers, check out our prior pieces here and here)
• Midwest and Great Plains also showed strength, but their relatively low volumes couldn’t make up for significant declines in Pacific/Hawaii and NY/NJ
• Pacific/Hawaii in particular is struggling, as volume has dropped 44% since December
• Of all 82 metros we track, just 2 show positive volume growth year to date vs. last year: Houston and New Orleans.  We’ve talked about the relative strength in Texas before, and perhaps New Orleans is simply doing its best to welcome all of us to town for NRMLA’s annual convention later this year…

The story is similarly stark (and no that’s not an Iron Man 2 reference, even though we are excited to see the movie next week) among lenders, as you might expect given the broad industry decline in recent months. On a year to date basis, only 2 of the top 10 lenders show positive volume growth:

• Urban Financial (recently purchased by Knight Capital) saw retail volume grow 48%, perhaps benefiting from relative strength in the Midwest where they’re based, despite their top volume state continuing to be Florida
• Genworth is seeing positive trends in their retail business, up 41% vs. 2009

The full report is available by clicking the image below.  Enjoy!

Genworth also gained in February with a more attractive fixed rate product offering to underline the point, although they saw less pickup than Generation.  Rounding out the trio of higher performers this month is Urban, recently bought by Knight Capital Group.  Their wholesale volume of 653 units put them in 3rd place for the month, behind Generation and Bank of America.

What are some other trends to point out for February?

• Wholesale endorsement volume dropped 12.6%, vs a 1.5% decline in Direct Endorsements.  One month does not a trend make, particularly since this still leaves broker/wholesale activity considerably above direct retail lending given the better figures in Dec & Jan, although we’ll continue to watch closely for signs of a trend given that the current environment seems tilted toward direct retail lenders right now.
• Another way to look at whether big lenders are faring better than small is the combined market share of top 10 lenders.  On that score, we’re getting early indications that the big are getting bigger as a full 92.5% of all volume in February went through either retail or wholesale channels at the top 10.  That may not surprise anyone who has been in the business a while, but it underlines the point that smaller volumes point to more concentration as smaller players exit the business.

• February proved a volatile month for lenders’ combined endorsement volumes, with 7 of the top 9 lenders (excluding WAF) having moves of 30% or more up/down.
  • Wells Fargo and Bank of America saw relatively steady volumes, up 11% and down 12% respectively
  • Generation, Urban and Genworth were the winners as outlined above, each up 36-88%
  • The remaining lenders saw declines ranging from 40-47%

Be sure to click the link below to access the full report:

No region was spared, with the “best” performance belonging to New York/New Jersey, down 22.7% through the first three months of the year. Following closely on its heels is the Mid-Atlantic region, posting a 23.6% decline. The Southeast holds the honor as the worst performing area, dropping 38.8% thus far.

As always, though, there are pockets of strength, especially when we look at the data with more granularity. Houston, TX has posted a gain of 12+%. The Bay Area of San Francisco is only 5% off the pace from last year after a very strong 2009 performance. The Baltimore area, highlighted a few weeks ago, is down a little over 7%. What’s disconcerting about this though, is that of all the HOC’s, just two are positive vs the prior year (the other being Shreveport).

Despite the industry’s weakness, some companies are still managing to do well and increase their market share:

• Urban Financial is the #4 retail lender, with volume up 55% vs 2009 (Congratulations on their recent acquisition announcement!)
• 1st AAA Reverse is up 42%
• Genworth Financial’s volume grew 104%
• New Day Financial, with no volume endorsed in 2009, is up to the #10 spot on the list
• There are many more, just look at the list of the Top 100 lenders on page 5

The full report is available by clicking the image below.  Enjoy!

Enough with our word play, there are a few interesting points to note in this month’s report. Highlights:

• Leading off with some good news, we can welcome Financial Freedom back to the 4 digit club for the first time in a while, as they recovered from what was probably a misleadingly low June performance (369 loans) to 1,151 in August
• As the financial services industry continues to consolidate in spite of all the hand-wringing about ‘too big too fail’, our little corner of the world saw some of the same trends despite the increased broker activity noted above. For the first time since April, we had 4 separate lenders each with over 1,000 loans in August. We just missed having 5 lenders in the club for just the second time ever (Dec 2008), as Genworth’s recent product additions and wholesale sales force investments are bearing fruit – 934 total loans in August
• It’s no surprise to anyone who’s been reading this column that Metlife is the fastest growing wholesale lender in the past twelve months, but what might be more surprising is Generation, Genworth and Urban close behind at 2-4, respectively. Seems Sherry and Bob won’t ever tire of competing with each other, and I’m sure there are plenty of brokers out there happy to be benefiting from the friendly rivalry!
• And in case anyone doubts the power of distribution and brand in the retail side of this business, Bank of America is proving every day that bank branches are a superb source of reverse mortgage business. Not only is BofA the fastest growing retail lender in the country, they’re growing more than twice as fast as the runner up.
• That being said, the second fastest growing retail lender is proof that bank branches are not the only way to do business. One Reverse Mortgage is taking the direct to consumer approach and thriving.

Click the report link below for full details.

The following tables show how different the landscape looks on a current month vs. trailing twelve month basis. Metlife has certainly seen quite a bit of lift from being the first to offer the 5.56% fixed rate loan, and WAF was right behind with their 5.63% offering. Given the commodity nature of this business, we have seen others begin offering the same rates lately, so it’ll certainly make for more changes in these lists going forward.

Top 10 – Trailing Twelve Months

Top 10 – Month of July, 2009

If nothing else, the stark difference between these two lists should point out that you really should be looking at the most timely information possible to run your wholesale business.  We humbly suggest our Wholesale Analytics Reporting service is the tool you’re seeking.

Continuing Trends

Other top gaining Wholesale Leaders include Generation Mortgage, Urban Financial and Genworth Financial, all more than tripling their Wholesale volume over the past year.  The turmoil in the Wholesale side of the business has been much commented all around our industry, but these numbers certainly drive home the changing realities as opportunitistic competitors pick up business while some of the historical leaders struggle.

Check the report below for more details and don’t be afraid to drop us a line if you’d like to compare notes on what this might mean for your business.

Many of you might have already guessed that ‘Retail’ performance by the direct lenders was stonger than ‘Wholesale’ performance by the broker channel in March based on our earlier comments about market concentration increasing, but the numbers right at the top of the report make it plainly obvious:

• Retail volume by direct lenders increased 33.4% from February to March, while broker volume through the Wholesale channel increased 15.4%

• A big part of this is due to a re-surgence by Wells Fargo in March, with a 700+ endorsement improvement from February to March that was bigger than total volume for all but the top 5 lenders in March.  Endorsements can be volatile due to insuring delays and other issues, but it’s still a pretty impressive boost.

• Over the last 12 months there have only been 2 where Retail volume outpaced Wholesale: March 2009 and May 2008.  We’ll be watching closely to see if the trend lasts, as I suspect many brokers might be also…

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Several companies continue to benefit from turmoil in the Wholesale market, as both Generation Mortgage and Urban Financial have more than doubled their total volume from last April.  Both have benefited greatly from increased Wholesale volume, although Urban has been notably more balanced in their approach to the two channels  with 52% Retail vs. 40% for Generation.

Money House Inc continues a remarkable climb into the top ranks of reverse mortgage lenders, ranking 17th (up from 23rd last month) nationally over the past twelve months.  They’ve generated 620 loans without any Wholesale volume, and even more amazing is that they’ve done it all in the territory of Puerto Rico.  This got me thinking about Puerto Rico, and the results are very interesting:

• Jumped from 31st ranked state in 2008 ( loans) to 21st in Q109 (425 loans)

• Popular Mortgage used to dominate the rankings here (they were the only lender back in 2005-06), but Money House has capitalized on recent challenges at Popular to take a dominant position in the market with 270 loans in Q1 vs. 55 for their nearest competitor (AAA Concordia) and just 10 for Popular

• Puerto Rico has already generated almost half as much volume in Q1 as it did in all of 2008 – one of the strongest growth markets in the country!

• We’re not sure how hard it is to get a lending license in Puerto Rico, but if you don’t know it’s probably worth checking into it…

Enjoy the report and let us know if you want to find more strong markets like this.