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!

Click the image below to access the full report:

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

Click the image below to access the full report:

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 looked at endorsement volumes from October 2010 through March 2011 (the last 2 quarters where Wells, BofA and FF were fully represented) to see how much market share the three collectively had by state. Top 10 states by total volume and national total are in the table below, displaying endorsements and market share from the three exiting lenders.

The results were logical, but surprising for their size. With California continuing to have the most HECM volume, the fact that exiting lenders held almost 50% market share means a huge amount of volume is potentially available. Also among the top 10 states, NC and NJ were above 50% market share.

It’s a huge opportunity for the remaining lenders and one that hasn’t been lost as the aggressive push to hire loan officers from these companies has mostly abated. That’s certainly the most straight-forward strategy, but there is likely to be significant volume still up for grabs in several of these states for those that know where to look.

From an industry perspective, it also means we should expect some of these states (especially NC) to have volumes decline more due to these market share concentrations. The combination of restrictive regulations and large market share for departing lenders means big opportunity for lenders that can do business in NC, but also adds up to opportunity lost for consumers and the industry if there aren’t enough lenders available to serve that 62%.

If you’ll be in Boston for NRMLA’s Annual Convention, don’t miss the HECM by the Numbers panel. We’ll be speaking more on this topic and Purchase/Saver opportunities, currently scheduled for Monday, Oct 24 @ 1 pm.

Click on the image below to view the full HECM Trends report for this month.

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.

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.

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:

We have another shoe dropping when it comes to analysis of these industry numbers given Wells Fargo’s 6/30 exit has yet to be baked in to any of the application or endorsement numbers we’ve seen yet, but we think the title of our post is appropriate given what the remaining lenders in our industry are experiencing.

Out of the 8 largest lenders not named BofA or Wells, just one declined in June. Looking at them collectively, these 8 lenders experienced a 37.9% increase in volumes from April to June, while the industry total declined -4.4% over that same period. Metlife appears at this point to be the biggest grower since the BofA exit, joining the 1,000 loan club this month for the first time.

Compared to the impact of HUD’s changes to the HECM program in October 2009, it’s very clear which had a larger impact on the industry. If anything, this highlights the importance of HUD’s pending news on financial assessment of borrowers and policy for T&I defaults.

Looking regionally, we saw improvement in all 10 regions tracked with Mid-Atlantic and Southwest seeing particularly strong growth from last month. From a year to date perspective, many areas continue to see growth:

• New York/New Jersey continues to ride the Q1 surge to show 15.9% growth from last year. Delaware and upstate New York have grown more than 25%, including both Albany and Buffalo.
• Great Plains, Southwest and Rocky Mountain are growing at double digit rates
• Midwest, New England and Northwest/Alaska are declining so far this year
• Detroit, Miami and Chicago have been the biggest decliners at the market level, all off by more than 25%

A bit of housekeeping: As HUD changes their data reporting in the wake of broker licensing changes, please note that brokers not closing loans in their own name are rolling off the active lender list over the next few months. As such, we will not be emphasizing active lender counts and changes until this stabilizes, likely toward year end. After that transition is complete, Retail Leaders will reflect the number of lenders closing HECMs in their own name.  For a report including brokered loan activity attributed to the broker, please see our Wholesale Leaders reports.

Click on the image below for this month’s 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: