Applications Rise But Reverse Mortgage Volume Falls 11.5% in October

Reverse mortgage lenders endorsed 5,279 HECM units in October, down 11.5% from September.  According to Reverse Market Insight, the decline was widespread, with the Southwest and Great Plains seeing the only increases during the month.

Considering that the number of applications has been rising consistently, it’s a disappointing month.

Looking at the chart of applications compared to endorsements – with a 4 month lag – it shows fallout has increased and could be the reason for the decline during October.  According to RMI, the cancellation rates from endorsements in September to October have increased from 29% to 42%.

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As far as top 10 lenders go, four of the top 10 lenders increased month over month.  The top 10 was only slightly better than the rest of the industry, down 11.1% vs. -11.5% overall.

To check out the full list and report, see here.

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  • It should also be pointed out that this fall out rate is increasing with increased advertising on the Internet and social media. One only has to point to Golden Gate Financial to be reminded of the allure of that style of marketing and its results.

    Until there is an analysis completed of the application fall out rates by its marketing source, we will blindly be wondering if one of the significant factors in fallout is the marketing source. As an “ol’ school” proponent, I firmly believe the fall out rate from electronic media sources is high. I do not see it nearly as effective as many in the industry claim.

    Like smart book sellers, we all need a website with good features but there is not much room in the book selling industry for 4 or 5 Amazon.coms. Even Amazon.com is not all about books.

    Who can forget the real estate gurus? Yes, most of all them were successful in real estate at one time but they turned to “teaching” because it was far more profitable. Over the last few years we have seen a rise in this type of “trainer,” especially in electronic marketing. One has to wonder why.

  • Critic,
    You usually have legs to stand on with your comments, but this time you are showing your age. Allow me to enlighten you about where we are and where things are going when it comes to the internet as a lead generator, and furthermore, the ability to become transparent to potential clients in a way that you might not be aware of.

    First, to call the internet a “fallout source” is laughable. Those who use this marketing tool know that the nailing down of a potential client includes dozens, if not hundreds, of other “inquiries”, “hits” or “visits”. We also understand that done correctly, the internet is indeed a source of business that translates to transactions. (YES, it really does work!)

    I’m not talking about setting up a pretty site, and paying for google adwords, which seems to be the norm!

    I’m talking about setting up an online presence that shows who the company or LO is, with complete transparency. With all of the bad apples being talked about these days, I’d think you’d find someone who is willing to put their name, face, and reputation as someone who you WILL NEVER see doing things outside of the interest of the senior, their families, and ‘suitability’ as something positive for this industry.

    Then again, no one knows who you are, so you are obviously on a totally different page!

    I, for one, can document the internet as a valued source of loans. If I am in Florida, and my latest loan came from an internet user in NY, what can I credit other than the internet!!!!???? (and a site that shows people WHO I am!)

    The training piece you mention is in play as a proven model in many industries over the years. Why is it that are you surprised that in tough times, entrepreneur types like myself and others take a swing in order to add to what was a shrinking bottom line? Last year, I set up an entire business in this model, only to find that no companies were interested in anything other than SURVIVAL!!! (I took a big bite of humble pie on that one, but sure learned quite a bit!)

    Lastly, you should know that the yellow pages will die soon. Experts claim that in less than 3 years, the cell phone will be completely replaced by the web-ready smartphones. So, Yp ads will become for naught, and some of us are preparing for this inevitability, regardless of your OLD SCHOOL opinions!

      • Raymond,

        As a long time discounter, it seems you might have some idea who is most likely to fallout from an application. What is your experience as to marketing source? Are Internet leads more, less or just as likely to fall out than leads from other sources?

  • I’d say the number one reason for the disparity between applications and endorsements is conservative underwriting. I’ve never had so many loans declined or values slashed by an underwriter. It’s hard enough to get an appraisal back that meets your customer’s expectations. It’s definitely a tough time to be an originator.

    When did we decide as an industry that a BPO or AVM is more accurate than the opinion of a randomly assigned appraiser that lives < 20 miles from the subject property (and has passed FHA's testing requirements)?

  • Kevin,

    By your comment you are claiming that the pull through is principally coming from Internet and social media traffic. Is that correct?

    Once again I point you to GGF. Its failure is spectular. They were experts in the “new school” approach. Looking at the increased business for the top retailers, most of whom are structured upon an ol’ school model, your argument seems very shaky.

    Ol’ school is far more than Yellow Pages. It includes referrals, following up on old leads, seminars, writing articles, setting up a discipline in “farming” financial professionals and credit unions and on and on.

    If the fall out rate is increasing as Internet and social media presence is climbing, that says much in itself. In the book selling industry a website is a useful but defensive marketing mechanism. The same applies to our industry as well.

    • I am claiming that a certain amount of viable business is generated as a result of the having an internet presence and showing transparency.

      GGF is nothing more than an example of what NOT to do online. That is, spend HUGE ad dollars generating traffic, with no real acquisition model behind the traffic! I’m not sure about operating expenses, but I do have inside info about exactly how they spent their ad dollars. (a drunken sailor comes to mind)

      The YP example was to illustrate that the internet is becoming more widely used each day for everything, including research.

      This is where you lose me – you are claiming that the decrease in RM business is a direct correlation with the growth of the internet and social media? And then you want to compare our business to the book selling industry??! This makes zero sense to me!

      Lastly, to counter you point further, go and google Reverse mortgages, you will see that the top ten lenders are all using the internet to gain exposure and market share. In addition to the old school methods you mention (which most still use as well) It is a piece of the marketing picture for all of us, large or small!

      • Kevin,

        Even “us old guys” understand and have employed defensive marketing tactics for several decades. Amazon and other book sellers combined are but one example. Most legal, engineering, architectural, accounting, and other professionally state licensed firms have defensively used Internet marketing and websites for almost as long as there has been a HECM.

        Unlike GGF, very few major lenders use the Internet as their principal means of marketing for good reason. You may want to attribute the GGF problems to incorrect ways of marketing on the Internet but it is my contention that their mistake was to rely on either the Internet or social media as THE primary means of marketing. There are very few Amazons in the world.

        We are not selling products. We provide financing and the principal means is by building trust no matter what its source. That is why you stress “transparency.” But when it comes to Internet website and social media transparency, perception seems to be a much bigger factor than most other forms of marketing. For example on your online reverse mortgage school website, you recommended yourself by using the pronoun “we.” That was not transparent but a declaration similar to the following would have been objectively transparent: “I as an online reverse mortgage school am recommending myself as a reverse mortgage originator.” You relied on perception not transparency.

        If a form of marketing is measurably on the rise and fall out is also measurably on the rise, it is rare there would be absolutely no correlation between the two. I understand many would find it less than desirable to associate the two but you advise on marketing issues especially those related to the Internet so I would have expected you to have shrugged it off with an objectively, well reasoned and ready answer (an ol’ school principle – “Be objectively prepared, especially for objections”) but you didn’t..

        It is my very subjective opinion that those who initiate their contact with an originator through the Internet are more likely to fall out than those who come from other sources. “Fall out” does not mean the applicant does not obtain a HECM; it simply means the applicant does not obtain the loan through that particular originating broker/lender. I see more Internet related applicants willing to continue shopping after taking an application than those coming to us from any other marketing source. But this, of course, is all anecdotal. We need objective analysis; this is one area where NRMLA could be more helpful.

  • Golden Gate Financial (GGF) worked as if they were a RM telemarketing company in Oakland, CA. They may have worked in another way in other areas. I have been in their Oakland, CA office. Their employees worked on the telephone only. They had no on-on-one contact with the RM Client or the Professional Community. They did have one of the best calculator programs in the business. We can not rely on one method to grow a business. Person to person, face-to-face, telephone, etc., etc., is needed for our business to suceed. Relationships!!!!

    • 1950ford,

      There are several examples of successful brokers and at least one lender who use that methodology. Several FDIC deposit lenders use that tactic in some of their underemployed reverse mortgage retail offices. One successful example stands out in particular, One Reverse Mortgage.

      Over and over, the GGF calculator is mentioned. What was so valuable to you about it? Do you really think it made a difference in selecting a lender? I have yet to hear of GGF selling it to anyone. So what is its monetary value?

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