Reverse Mortgage Volume Falls 35% During 2010

While reverse mortgage volume remained fairly flat during the last month of 2010, overall units for the year painted very different picture.

The number of HECM endorsements fell slightly to 6,554 units during December, down 0.1% according to data from Reverse Market Insight.  However, reverse mortgage volume fell 35% during 2010, with 72,748 units being endorsed in 2010.

Lower home values have played a role in the drop in endorsements, but the number of lenders originating reverse mortgages fell 28.9% during the year said RMI.  In December, the number of active lenders fell to 560, down 47% from last year and the lowest since September 2006.  While the numbers might seem depressing, the lenders who remain —or its fair to say survived — are starting to reap the benefits.

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The number of units per lender rose to 11.7 in December, the highest since July 2007 according to RMI.  As far as industry sentiment goes, John Lunde, President of RMI said it’s improving.  “As a simple indicator of the health of our industry, we would suggest that over 10 loans per month is a good reflection of the general sentiment,” he said.

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When it comes to the leading reverse mortgage lenders, not much changed except for one new company breaking into the top 5.  During December, Wells Fargo remained the top lender with 1,820 units, followed by Bank of America with 864 units and MetLife rounding out the top 3 with 638 units.

Quicken’s One Reverse Mortgage was the fourth largest lender with 386 HECM units and 1st AAA Reverse Mortgage out of Austin, TX broke into the top 5 for the first time with 129 units in December.

For a full report, see here.

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  • There is another side to the RMI statistics. While the volume of the top firms declined from 46,058 endorsements during the calendar year 2009 to 37,652 endorsements during the calendar year 2010 for a drop of 18.25%, the remainder of the industry fared far, far worse.

    During calendar year 2009, the remainder of the industry had 65,866 endorsements but for the calendar year 2010, that volume dropped to 35,096 endorsements for a 46.72% drop.

    What has helped the industry through this hard time are the high profits in fixed rate HECMs. But there is no question that the smaller lenders have been hit and hit hard in 2010. While the smaller lenders produced 58.85% of all endorsements during 2009, that percentage has dropped to 48% in 2010.

    In actual number of endorsements, the Top Ten saw their share shrink by 8,406 but the smaller lenders saw their share shrink by 30,770. In actual volume, the Top Ten Lenders had more HECMs endorsed during 2010 than all other lenders combined. That is a significant shift in business.

    If we look at just the Two Top Lenders, their volume dropped by 6,532 endorsements or 21.67% while the remainder of the industry dropped by 32,644 endorsements for a percentage drop of 39.92%.

    Most importantly the Two Top Lenders went from doing a little over one-quarter of all endorsements in 2009 to doing almost one-third of all endorsements in 2010. That is a dramatic change in market domination.

    Finally, the picture becomes even more striking when we just look at Wells. Its representation has gone from a little over one in six endorsements in 2009 to over 2 out of every 9 endorsements in 2010.

    So while the endorsements per lender may have increased, the influence and domination of the market by the Top Ten, particularly the Top Two, is rising. One is an interesting statistic for cocktail parties, the other, a clear indication that the larger lenders are dominating our industry.

    • Good comments Cynic. No doubt that industry consolidation is helping large lenders disproportionately, particularly with the regulatory changes pushing many small lenders/brokers out of the business entirely.

      We have a two year trend graph of top 10 market share at top of page 2 of our Industry Trends report that tells the consolidation story: http://www.rminsight.net/hecm-endorsement-archive/Industry_201010.pdf

      It’s very interesting to compare last December’s report to this one. Speaking purely from a ranking perspective:

      Unchanged: Wells, BofA
      Higher: Metlife, One Reverse, Generation, Urban, 1st AAA
      New to top 10: Genworth, Guardian First
      Lower: Financial Freedom
      Dropped out of top 10: World Alliance, Security One

      It’s an interesting micro picture of our industry, and shows that while current trends are benefiting large lenders more than smaller lenders, it’s still a horse race even at the top.

      • I am a fan of the Kentucky Derby because of the seeming democracy of it all. Apparently any of the competitors given the field of contenders and conditions on any given day might have the possibility of winning. I don’t bet, but I do know a little bit about the oddsmakers just from watching year after year. Two out of every 9 endorsements as TC says of Well Fargo gives a pretty big edge in our particular “horse race.” And its not just an interesting micro picture, it is a stark reality and wake up call to any of those who are not in the top tier of “racehorses.”

        There is no upside to this picture. The little guys and even the intermediate guys are being squeezed out of the market by the two ton gorilla in the room. While I prefer not to give in to doom and gloom, what The Cynic did with the information Admin provided has lowered my tolerance for a candy coated poison pill happy ever after view of the future as provided by some of the Pollyannas of our industry.

        So while you find your comparisons very interesting, I find them as depressing as if I were the guy who bet his shirt and lost it. All of us little guys are the losers in this “interesting micro picture.”

      • Louise321,

        I did not mean to paint doom and gloom. I guess a cynic even a rank amateur like me just can’t help it.

      • John,

        Thank you for your reply. You provide a very necessary service to us all and do it well. Keep up the good work.

        I just have a different way (nothing profoundly special) in looking at and restructuring the data you summarize. My analysis piggy backs off of yours. The interpretations are my own.

      • John,

        Since the make up of the Top Ten from one year to the other did not seem to change their influence, I ignored their make up and the changes within their rankings, simply using the Top Ten for calendar year 2010. Any concern about the make of the Top Ten seemed even the more irrelevant when looking at the stats for the Top Two, which did not change from year to year.

        Your reply adds what my presentation lacks.

  • 2010 has been a terrific year for me and my clients. When the secondary market was strongest, lots of folks across the country received a true 100% no cost Reverse Mortgage. And I did really well with LIBOR’s too. I feel 2011 will be better.

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