Reverse Mortgage Wholesale Leaders – June 2010

After a very tough May for the reverse mortgage broker business, June provided a welcome bounce that almost kept pace with retail/direct endorsements. Broker volume grew 15.2% while retail/direct grew slightly faster at 17.6% as the overall business regained some traction from May’s trough levels. Retail/direct volumes have continued to outpace broker loans, continuing the trend started last month but we’ll wait a while before calling this the new world order for reverse.

One of the interesting trends we’re watching is the consolidation of lending in the reverse mortgage market toward fewer, larger lenders. We’ve written about this before, and it’s an interesting complementary perspective to the count of active lenders and average loans per lender.

Here’s a good illustration:

  • In 2008, there were 2,950 active lenders, compared to 3,151 in 2009
  • The 100 largest lenders for 2008 shrank -6.8% in 2009, but the other 2,850 lenders actually grew by 4.6%

  • The number of lenders shrank from 2,483 in Jan-Jun 2009 to 1,883 in 2010
  • The 100 largest lenders for Jan-Jun 2009 shrank -42.2%, while the other 2,383 shrank a smaller -32.6%

So if the number of lenders is shrinking but the largest lenders aren’t staying ahead of the market as a group, what is the tradeoff? Survival.

  • Only one among the top 100 2008 lenders was not active in 2009 (1%), compared to 827 disappearances among the other 2,850 (29%)
  • It got worse for both groups in 2010, with 3 of the top 100 2009 lenders gone (3%), but a whopping 1,136 (47.7%) of the smaller lenders leaving the business

Of course, there were certainly some big winners among the survivors among non top 100 lenders in both years, otherwise the growth rates would be lagging the top 100. It’s never been easy to be small, but right now the risk/reward is more exaggerated than ever.

Big may not be beautiful these days but it’s a lot less ugly than being small.

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

Wholesale Leaders