Has Christmas Come Early for Reverse Mortgage Lenders?

NewImageOn the heels of big bank exits from the reverse mortgage industry, smaller lenders tell American Banker that the exits have presented an unexpected surge in their business with a strong upside for those who are more specialized in reverse mortgage products. One even said it was like getting an early Christmas present.

“I’m picking up business now that I never would have had,” Richard Booth of America’s First Funding Group told American Banker. “As an independent lender, this was like getting a Christmas gift early.”

The article, titled “Big Banks Flee Reverse Mortgages, Leaving Industry Void,” notes the departures of Wells Fargo and Bank of America, as well as MetLife’s move away from other mortgage and banking operations, as actions that created some apprehension within the industry, even “overshadowing” the most recent National Reverse Mortgage Lenders Association annual conference in Boston. Wells Fargo, which originated one out of every five reverse mortgages in 2010, attributed only 1.2% of its business to its reverse division, the article states. But while “specialty reverse mortgage lenders will have a difficult time completely filling the bigger banks’ shoes,” there is a silver lining, American Banker points out.


The exit of Wells Fargo and Bank of America “has created a growth opportunity for the next tier of players,” NRMLA President and CEO Peter Bell told American Banker.

“Any time you have a company that specializes in one program they tend to react more quickly to the market, and to come up with solutions to fill needs quicker,” Mary Jo Lafaye, who worked at Wells until 2008, said in the article, noting that her business has doubled since Wells left the industry.

Another lender, Parsippany, N.J.-based lender Reverse Mortgage Network, has also seen strong gains, going from 16 loans per month in October to 30 in November.

“There are fewer feet on the street and unfortunately [seniors] don’t know where to turn,” said the company’s Dino Guadagnino, another Wells Fargo former employee.

Read the American Banker article (by subscription) here.

Written by Elizabeth Ecker

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  • What would have been a pleasant surprise would have been to read how reverse mortgage leaders were prepared but were either a little over or under prepared for the increase they actually experienced.  This article is more jarring than enjoyable to read.  This article is less about successful, planned capture of market share abandoned by the largest lenders than those celebrating about presents from Santa.  It is a sad comment on the ability of our industry to adjust to market conditions.
    The article does not demonstrate how nimble lenders and brokers in our industry are in responding to predictable trends.  It shows just the opposite with its reference to Christmas. 
    In fact it is the largest lenders which have shown themselves to be quite flexible in the midst of change.  We all witnessed the sudden move by Wells Fargo and Bank of America to divest themselves of their interests in our industry.  With no pressure from regulators or creditors, their moves were surprisingly swift.  They made these moves with no apparent regard for the turnkey value these businesses might have captured in the open market.  Or witness the almost “supersonic” speed in the implementation of financial assessment by MetLife.  Like the MetLife position or not, none of the less diversified lenders have made such a bold move to establish their own form of financial assessment.  No, it is clear that the more diversified entities are far more willing and able to make dramatic moves in our industry than those whose emphasis is in reverse mortgages.
    It is interesting how we perceive the actions and unfortunately reactions of the members of our industry so differently.  Personally, it seems smaller more reliant reverse mortgage business entities are reactive and fail to take bold or innovative steps forward while the banks and insurance companies have shown that propensity not only in the last year but also with their proprietary products some three to four years ago.

  • The article preliminarily confirms that this is the year of the lender and, of course, that is good news.  The October 2011 FHA Single Family Outlook report, on the other hand, demonstrates why it is yet another year of downward endorsement production for the industry as a whole.  (Why it took until today to release the report was not explained by HUD/FHA.) 
    First, the assignment of case numbers fell by 1% month over month but by over 11% comparing assignments in October 2010 to those in October 2011.  The total number of case numbers assigned between June 1, 2011 and October 31, 2011 is down by over 10,000 assignments when looking at the same five month period in 2010.  That is a decline of over 20% and combining that with an increase in the dropout rate that means for approximately the first five months of this fiscal year, endorsement totals should be down by about 24% when compared with the same five month period last fiscal year. 
    Saver endorsements were less than 7.5% of all endorsements for October 2011, down from 9.7% for September 2010.  The 23% relative decline in the percentage of Saver endorsements combined with the over 11% decline in total endorsements makes up the 35% loss in Saver endorsements for October 2011 on a raw number basis.  Using the four month rule of thumb of application to endorsement, the 35% loss indicates in part how much Saver endorsements were dependent upon the origination activities of Wells Fargo and Wells Fargo alone; however, there is little doubt that some Wells Fargo Saver endorsements are reflected in the October 2011 Saver endorsement number meaning the actual percentage of Wells Fargo Saver origination was probably at 40% when compared to the market as a whole.
    Despite all of the renewed fervor about HECMs for purchase being a significant part of the market, endorsement totals fell by over 32% from September 2011 to October 2011; the drop from September 2010 to October 2010 was less than 14%.  It was surprising to see that the HECM for Purchase monthly endorsement total for October 2011 was 40% higher than same total for October 2010.  However, as a percentage to total monthly endorsements, HECMs for Purchase are still less than 3%.
    Rather than bristling with euphoria in realizing some of the market share left behind by the Big Three, our market should be soberly addressing how to increase endorsement production.

  • My comment would be that until the market finds “a market” for the Saver product, enough to allow for no origination fee on the adjustable version, then its not really worth all the fuss about the Saver.  Hence the reason you see the drop off since Wells left the biz.  They weren’t charging origination on anything with the exception of a brief period in the late spring when rates jumped up for a bit.  I’ve seen a slew of recent referrals from financial sources all wanting a reverse mortgage with approximately $3300 closing costs (in DC).  That’s an inexpensive proposition for the right folks.

  • I have seen this happening in our North Carolina reverse mortgage market.  Wells Fargo and BofA departed, but my counseling requests have not decreased at all.  Instead, we have several new lenders who are obviously entering the market very actively.

    • While there are geographical areas in the country seeing better activity than others, the last 25 issues of the monthly FHA Single Family Outlook report paint a far different picture for the industry as a whole.  An industry in contraction is not very inviting to new players unless significant market share has been vacated as was the case last fiscal year.

      Good to hear your part of NC is doing well; however, the general rule of thumb is as California goes so goes the HECM industry.

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