Broker Volume Continues to Fall in December, Consolidation Ahead?

Wholesale reverse mortgage endorsements fell 13.3% during December, while retail originations gained 8.5% according to data from Reverse Market Insight (RMI).

Broker business fell to 2,207 units during the month while retail endorsements came in at 4,343 units. Overall, combined totals show a flat line from November to December 2010, falling by a single endorsement from 6,651 in November to 6,650 in December.

RMI suggests the decrease in broker business stems from increased regulatory pressure and higher costs for brokers. If that’s the case, RMI says, the industry is likely to see consolidation as brokers join up with bankers in the coming months.

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“Because of the revenue disadvantage created by the regulation, brokers are finding ways to become a lender closing their own loans, which usually means consolidation with either an existing bank or multiple brokers coming together to form one new lender,” says John Lunde, RMI president.

In terms of specific wholesaler positioning, according to Department of Housing and Urban Development (HUD) data, MetLife maintained its number one wholesale lender spot with 707 HECM units. Bank of American followed in the second position with 452 reverse mortgages in December, just months before announcing its exit from the business in February. Generation Mortgage was third with 240 HECM units and Urban Financial a close fourth with 237 units. Wells Fargo rounded out the top 5 with 152 HECM units.

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View a full copy of the RMI report here.

Written by Elizabeth Ecker

 

 

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  • For those not familiar with the color coded chart above, the yellow part of each bar is wholesale production by month while the blue is the retail production of those wholesalers. For the calendar year 2010, the total production from industry wholesale activities was 33,493 and total retail for those wholesalers was 39,190 for total endorsements for the calendar year 2010 of 72,683. No matter how you spin it, the endorsements for the calendar year 2010 were less than the fiscal year ended September 30, 2010 (78,757). How can that be a good sign or indicator for this fiscal year? In fact, HECM endorsements in the last calendar quarter of 2010 were 6,402 less than the last calendar quarter of 2009.

    Add to that harbinger the drop in endorsements for January 2010 from 7,629 to the January 2011 endorsements of 6,454. For the current four month period ended January 31, 2011, there were 24,856 HECMs endorsed. Last year the number for the four months ended January 31, 2010 was 32,423. That is a startling difference of 7,567 which is over 10% of the entire endorsement volume for the calendar year 2010. There has NOT been one month in this current fiscal year where HECM endorsement production has been higher than the corresponding month in the prior fiscal year. Now does that sound like a fiscal year of increase? It is most certainly not starting out that way.

    I keep seeing graphs and reading documents expounding that 2011 will be an up year. So now we are hearing that applications were up for the first three months of this fiscal year. That is absolutely right in fact they were up by 5,300 assignments. But let us say we will see not 3,000 more endorsements for the period of February through April, 2011 than we had for the same three month period last year as the prognosticators are saying but rather 4,200 more endorsements. That still means total endorsements will be down in total by 3,367 endorsements by April 30, 2011 — this fiscal year over last.

    Accepting the endorsement estimates of the prognosticators through April 30, 2011, with five months to go until September 30, 2011, it will require 47,500 more HECMs to be endorsed in those five months to get to 95,000 total endorsements for the fiscal year ending September 30, 2011. Using the widely accepted time lag of four months from case number assignment to endorsement, that translates into needing almost 60,000 FHA Case Number Assignments between January 1, 2011 and May 31, 2011. Does anyone believe that without Bank of America that is a reasonable prognostication?

    The industry produced 36,369 FHA Case Number Assignments between January 1, 2010 and May 31, 2010 inclusive. I sincerely doubt if total HECM FHA Case Number Assignments generated during the month of January 2011 came close to 12,000 (the average needed per month to reach 60,000). FHA Case Number Assignments for January last year (2010) totaled just 5,805.

    With eight more months to go in this fiscal year, let me be the first to publicly say that 95,000 HECM endorsements for this fiscal year is not a reasonable projection; in fact it almost looks like irrational exuberance. I really hope I am proven wrong BUT….

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