Reverse Mortgage Broker Volume Falls 25%, Moves to Banks

Origination volume of reverse mortgage brokers fell 25.8% during May and marks the first time in 12 months that direct retail volume has surpassed broker business according to data from Reverse Market Insight.

“If nothing else it shows the continuing impact of smaller originators getting washed out by lower industry volumes and new licensing requirements,” said the company in its latest report.

New SAFE Act requirements are putting additional financial strain on brokers due to all of the classes and licensing costs associated with the process.  Some states like Arizona and Florida are even requiring mortgage brokers undergo credit and criminal background checks.  “Increased compliance costs which include new federal, state, and bonding requirements make it very difficult for brokers to sustain,” said Jason Levy, CEO of Guardian First Funding Group.

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During May, 54% of the industry volume came from direct retail lenders and financial institutions.  Wells Fargo continued its dominant retail presence at number one, followed by Bank of America and MetLife.  However, it’s worth noting that companies like MetLife and Bank of America both cater to brokers as well, with 77% and 53% of their respective total volume coming from wholesale.

If brokers want to make the transition to banker they face increasing net worth requirements that are out of reach for most and allow “the large institutions to gain a considerable amount of new market share,” said Levy.  “Retail is the way of the future and the wholesale market will shrink over time as more smaller brokers will not be able to survive,” he said.  “The pro consumer movement is driving the boutique style operator out and large institutions will need to have a strong retail presence to be in the Ginnie Mae HMBS business.”

While the drastic drop in broker business is big, retail endorsements also saw a drop of 8.4% during May.  But the source of overall business is clearly shifting to the direct retail lenders.

“Retail is where companies create lasting franchise value,” said RMI.  “We’re all in favor of a healthy industry with both retail and wholesale channels, but the trends right now are increasingly showing strain in the broker/wholesale side of the industry.”

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  • …new licensing requirements the depository institutions don't have to worry about. The government could have better protected the consumer by having a consistent licensing strategy.

  • Don't give up the ship. For small brokers looking to stay in the business, it will come back. I agree it's going to be difficult, it is already but these are the times when you need to focus and create your world around you. Don't worry so much about the other guy, give him a passing glance every now and then but stay focused on your customer service, your value and always be knowledgeable and helpful to your prospects. Arizona just put up the worst numbers in the country last month, down 63.8% and the big banks have well over 75% of the market share, here, so I feel your pain but it can be done. My phone is still ringing and every customer I talk to wants a competitive bid and a trustworthy loan officer. Keep prices low and work, work, work on volume.

  • I agree that we brokers should not give up the ship (yet) but have two thoughts.
    First, is it possible that we need a new Reverse Mortgage Broker organization to address our specific needs? I believe that the consumer is best served with a market that includes small brokers. We can be flexible and will put in the extra effort to work with a borrower when a big bank will walk away. I also think that indivudal licensing can be an asset to our industry by creating a better educated origination team. We have it and banks don’t, we need to promote our license.
    In addition, what about a specific REQUIRED license for ALL originators providing reverse mortgages. It could be a way to safeguard our seniors and provide a way to promote our industry as aware of both perceived and real industry problems. There is so much misinformation out there. Let's start by making sure our own originators know both the product and basic communication skills for working with an older clientele. I understand that NRMLA has a test and certification. But the education requires traveling around the country and attending NRMLA conferences to obtain the education. This can be prohibitive for most originators. And the industry experience requirement does not allow any new blood. A certification such as NRMLA’s shows expertise and that is great but we need to be sure that ALL originators have a strong understanding of this product with education and testing before they talk to seniors about reverse mortgages. Then the PR group hired by NRMLA would really have something to tout. Maybe the professional brokers can to lead the way.

    • Hi Patty: I agree but I am so mad at this regime and their stupid regulations.Fanny and Freddie still haven't been punished and our leader is punishing our business LO's with fees and tests which neither Barney Frank or Chris Dodd could pass. Thanks Jerome

  • The underlying theme of this article is the effects of recent legislation (licensing) and regulation (changes to and increased capital requirements). It is only tangentially economic.

    The policies and legislation of our current ruler and his Congress by their philosophical foundations and principles favor big business. We are just a small picture of what is happening in all industries, even CNBC (not just Fox Business News) is focused on this.

    The tendency of this community organizer and his Congress is to increase licensing and costs for smaller businessmen and to glorify and by it exempt big business. Unions cannot grow and thrive if small businesses dominate. Because our commander and chief and the vast majority of his Cabinet have so little business experience, they are captivated and mesmerized by size and asset base. They see value in having few entities to oversee, tax, and control. Unemployment will be cured if big business and government can just manage to get bigger even if that means swallowing up small business.

    Our President believes in resolution through conflict and confrontation. Survival of the fittest should prevail even it that takes interference through legislative action and new regulation and thus by “nature” to the victor should go the spoils.

    Many are surprised by our executive leader. The question is why. He is merely working toward the goals he fundamentally believes in and desires. Perhaps the problem is not our President or his Congress but rather the electorate who chose to see what they want and ignore “the rest.” It is generally “the rest” that comes to be the problem in any Administration, whether Democrat or Republican.

  • The licensing test requirements are ridiculous. In Illiois we already had a test which I passed six years ago. The idea that bank officers don't have to test when they never did is wrong.With the deep recession it is the wrong time to put all this regulation on LO's. This administration could screw up a one car funeral and they obviously know nothing about business. Seniors are suffering from all this stupid regulation and the fees are just an excuse for a tax by any other name it is just a tax. Also reverse mortgage poeple don't need to know about forward mortgages unless they are going to make them. This is mean and it is causing unnecessary anxiety. But it is part of Frank/Dodd administration.

  • Hi Patty: I agree but I am so mad at this regime and their stupid regulations.Fanny and Freddie still haven’t been punished and our leader is punishing our business LO’s with fees and tests which neither Barney Frank or Chris Dodd could pass. Thanks Jerome

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