Direct Lenders Continue to Take Market Share from Reverse Mortgage Brokers

Broker business continues to lag behind direct retail lenders business according to the latest data from Reverse Market Insight.  During August, overall reverse mortgage volume was up 13%, with retail up 18% (3,969 units) and broker business up just 6% (2,672 units).

Retail direct lenders volume surpassed reverse mortgage broker business in May and hasn’t looked back since.  The change shouldn’t come as a huge surprise considering many of the larger brokers are merging with mortgage bankers.

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Wells Fargo remains the largest lender, endorsing 2,000 loans for the first time since April 2009.

“While that might be small comfort to anyone whose compensation isn’t tied to Wells Fargo’s performance this year, our industry can benefit from the success of large, visible brands as we’ve seen time and again over the years,” said John Lunde, President of RMI in the report.

During August, the top 10 lenders saw a broader recovery, with 7 of the top 10 seeing volume according to RMI.

For wholesale, MetLife remained number one with 567 units, followed by Genworth with 444 units according to data from the Department of Housing and Urban Development.

Rounding out the top five is Bank of America (428 units), Generation (285), and Urban Financial (282).

To view the full report, click here.

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  • “‘…our industry can benefit from the success of large, visible brands as we’ve seen time and again over the years,’ said John Lunde, President of RMI in the report.”

    While I have not done research in this area, I wonder how many times this phenomenon has been observed where the increased volume has to do not only with an increase in the number of endorsements but also due to such an extreme reduction in smaller competitors? Since most of the results are a result of reduced competition, the benefits may not be as industry broad as before.

  • As we all know John Lunde is predicting about a 20% to 27% increase in this fiscal year’s volume of endorsements over last. While that might be somewhat aggressive, it is not without precedent. The fiscal year percentage change in endorsed HECM volume compared to that of the prior fiscal year over the last 20 years has ranged from a low of -31% last fiscal year to a high of 162% for the fiscal year ended 9/30/1992. If all of the annual percentage changes are added together and divided by 20, the resulting average percentage is just over 45%.

    While we have only had 8 years with increases greater than 45%, we have had 11 years greater than 27% and 12 years greater than 20%. So in other words, John is projecting an average year in HECM land.

    We now know HECMs will not sell themselves. We have to reach out and find those who need them and those who do not know what they are and educate them. We need to help not only seniors but also financial planners and advisors to see through the stigma that is associated with reverse mortgages and realize their real value not merely in terms of the amount of proceeds they provide but in terms of cash management, security, and a cornerstone in retirement planning.

    Targeting to specific geographic areas is now more critical than ever. Why dedicate a high percentage of marketing dollars to an area where home values are still falling? A few years ago we did not have to pay a whole lot of attention to as many marketing variables as we do today. Before last year we knew some areas were better than others but we could find sales almost anywhere in metropolitan areas and to some degree even beyond. Understanding markets is imperative in reaping the expected increased volume.

    Not all will be good news in the near term. More foreclosures will come on market, home value appreciation should remain suppressed, and HECMs for purchase should remain a growing “novelty item.” HUD should have some policy statements about HECMs in “technical default” and many expect there will be problems with the long-anticipated Mortgagee Letter on coops IF one is released this fiscal year. Counseling is now more cumbersome than ever and now requires prepping prospects. There will be no miracles and despite the wishes of some, we will never see the return of the good old days.

    BUT despite dire predictions to the contrary, the industry survived a very difficult year and there is good reason for guarded optimism for the future. And beyond all else we are still helping seniors obtain and enjoy a better quality of life.

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