As we offer up the last of our 2009 Wholesale Leaders report, it is perhaps fitting that in the year of “too big to fail” we ended with yet another counter-trend uptick in broker/wholesale volume. December saw broker/wholesale volume grow 10.9% from November, compared to a 3.1% growth for direct lender’s “retail” volume.
Despite continuing (and maybe growing) advantages for large financial institutions during the year, we’ve seen broker/wholesale reverse mortgage loan volume outpace direct lender “retail” activity in all but 1 month (March). Sure, broker/wholesale volume started the year with an advantage here given that it comprised 55% of 2008 loans, but 2009 remains a very respectable showing regardless.
The disparity introduced by the early availability of fixed rate product through broker channels is at least partially responsible, but perhaps the demise of brokers has been oversold? Time will tell (and we’ll keep you posted through these reports), but at least in the first round of our new world financial order, the brokers have survived to see another year.
A few other highlights from the full report:
- Broker/wholesale volume comprised 52.7% of all 2009 loans, down from 55.1% in 2008
- All four of the largest wholesale lenders in 2008 (Financial Freedom, JB Nutter, Bank of America and World Alliance Financial) saw broker volumes decline in 2009, as the industry broadened to include both more wholesale lenders and a more even distribution of volume amongst them
- Notable wholesale winners in 2009 include:
- Metlife – up 156% to finish a close 2nd for the year to longtime leader Financial Freedom
- Generation – up 209% to finish 5th
- Genworth – up 242% to finish 6th
- Urban Financial – up 170% to finish 7th
- It’s a testament to just how large a lead Financial Freedom’s wholesale business enjoyed to see them still come in number 1 after 2 consecutive years of over 40% declines in volume.
Click the image below for the full report.
Hope everyone had a great weekend and is either enjoying a relaxing holiday or at least enjoying the reduced distractions if you are sneaking in some work today! We thought our readers might be interested in an update to our graph of application trends since the principal limit reductions. Without further ado, here it is:
The most concerning thing about this is the underwhelming ‘recovery’ from the expected slump in October. October’s excuse is that half of those applications were pulled forward into September to beat the principal limit reduction. That starts wearing thin in November since the average of the Sep-Nov (post PL announcement) is 6.4% below that of Jun-Aug (pre-announcement).
But by the time we get to December we have to start searching for a new, lower ‘normal’. The four month period from Sep-Dec is 13.4% below the prior four months. Two key questions come to mind: 1) Are there other reasons besides Principal Limit reductions behind the drop?; and 2) What might the new ‘normal’ application level settle at?
On the first question of other potential reasons behind the reduction, we’ve heard a long list of factors:
- Appraisal reviews leading to fewer closed deals – this would seem to suggest higher fallout rates and fewer endorsements, not necessarily lower applications
- Operational distractions from RESPA changes and NMLA licensing
- Lower broker economics leading to reduced marketing – the continuing shift to fixed rate products would seem to improve broker economics but the trend of originators leaving the industry could be plausibly expected to reduce aggregate marketing support for the product
- Fewer wholesale lenders – fallout from the World Alliance Financial and 1st Reverse shutdowns, plus funding constraints at JB Nutter have reduced the list of available wholesale lenders for reverse
These all might be just interesting sideshows to the main event of principal limit reductions reducing seniors’ demand for HECMs, but there’s no question that some combination of events is reducing HECM demand significantly in the last few months. Based on recent trends it’s possible application volumes for the year could end up as much as 20-30% lower than 2009 (avg 8,000-9,000 per month). There are many factors that could contribute to stronger volume (coops, HECM purchase, new lenders as FHA removes broker license requirements, etc.), but there’s another question that’s less speculative here too:
Would you and/or your company leave the reverse mortgage industry if your volume declined 30% from 2009?
Comment below or Contact us directly if you’d prefer not to comment publicly, but we’re very interested how many people would expect to survive that level of decline.
And for reverse mortgage loan officers, don’t forget to share your thoughts in our State of the Reverse Mortgage Originator Survey.
Summer is gone and apparently the reverse mortgage market cooled down a bit early as well. We already knew that total industry activity was down 9.2% in August from July from the Retail Leaders report, but what we didn’t know is that the weakness was almost entirely in the direct lender side of the business rather than wholesale/broker volumes. This is somewhat against the trend we’ve seen so far this year, but given all the recent news out of FHA regarding broker approval process changes and net worth requirements increasing, perhaps this is will be a one month trend (would that be a trend or a point?).
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.
