Shaping Up – HECM Originators June 2012

HECM endorsements were up significantly in June to 5,182 loans, 17.1% higher than May. We speculated in last month’s HECM Lenders report about the possibility of Metlife pushing to close and insure as many loans as possible before their 6/30 exit date from the industry (for closing loans). Given the more detailed numbers now available in our HECM Originators report below, our theory appears confirmed.

What is perhaps more interesting is how Metlife’s exit has impacted industry overall volume. It’s entirely too early to have any final conclusions but it would appear to be a more positive trend than we were expecting. Earlier this month we focused on endorsements, so this time we’re focusing our attention on case numbers issued (applications).

Bank of America and Wells Fargo had significant bank and mortgage branch networks that generated part of their reverse mortgage volume and largely disappeared as lead generators for the industry once those companies exited. Metlife never allowed cross-sell from their insurance business, so it would seem reasonable to expect better retention of their reverse mortgage volume but still see declines from some loan officers leaving the business and others with lower volume temporarily as they find new employers in the industry and get licensed.

The chart above shows a long range perspective on case number issuance, including the lender exits in the past 18 months. May 2012’s 7.4% increase to 6,992 case numbers was unexpected in light of Metlife’s last applications being submitted in April. June continued in the same vein, up 0.6% to 7,032.

Two out of three Junes from 2008-2010 showed an increase from May so the increase is underwhelming from that perspective but does confirm the industry’s resilience after Metlife’s exit.

The trend is a bit clearer when we remove the effect of varying business days per month in the chart above. May 2012 now shows slightly down (still impressive post Metlife) and June shows a similar rise to 2011 although all of 2012 has been below 2011 thus far.

This last chart has our attention for the rest of the year:

Looking at the case numbers by lender underscores our theory that the one factor keeping the industry from seeing year over year volume growth is major lender exits. Case numbers from 2011 show that each of the first six months of 2012 would have shown an increase over last year if Wells Fargo and BofA are excluded.

This chart suggests that reverse mortgages are still a growth business – something that might be more obvious from top line numbers once major brands/lenders stop exiting and perhaps other bold companies jump into the fray.

Click the image below to access the report.