Reverse Mortgage Market Sees Surprising Uptick Following MetLife Exit

Despite MetLife’s exit from the Reverse Mortgage sphere, the industry’s outlook  shows optimism when considering the increase in case numbers issued for May and an increase in HECM endorsements in June, according to a recent report from Reverse Market Insight.

With MetLife’s exit, the industry could have followed the same downward pattern that resulted from last year’s Wells Fargo exit.  There has instead been a 16.9% increase in endorsement growth and an increase in number of cases issued, totaling 6,992, according to the report.

“The single most optimistic thing is that the number of cases issued went up in May, and we were expecting them to fall,” said John Lunde, President of Reverse Market Insight, Inc. “To see that number go up was encouraging. It really suggests that there’s a consumer demand and that the exit of MetLife isn’t harming the distribution.”

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Projections for the duration of 2012 are not expected to change despite these numbers or the exit of MetLife, said Lunde.

“It is only going to be four or five months this year without MetLife. A single month wouldn’t cause us to change our forecast, but from our perspective this has a much more positive effect for next year,” said Lunde. 

The 16.9% increase in endorsement growth is not a landslide increase, but it is helping the industry make its way from the bottom of the range into the upper half, according to Lunde. “To be seeing a demand is always a good thing,” said Lunde.

Some lenders are directly benefitting from the presence of consumer demand and market share left by MetLife. According to the report, Urban Financial totaled a June volume of 357, which tied with December 2011 as the company’s highest volume in the past 12 months. American Advisors Group saw a 12.7% increase in loans. 

The Southeast/Caribbean still leads regions in market performance with 1,025 loans. 

View the Reverse Market Insight report. 

Written by Erin Hegarty

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  • While the HUD generated data above is correct, let’s take a fresh
    look at its meaning.

    First the increase in endorsements for June 2012 has much more
    to do with seasonality than anything from which we can find any meaningful encouragement.  For at least the last five fiscal years, June endorsement volume is higher than May no matter if the total endorsements for that entire fiscal year is higher or lower than the prior fiscal year.  The total increase for June 2011 from May 2011 was 669, while for this fiscal year the increase for June 2012 over May 2012 was slightly higher at 748.  Yet the total endorsements for June 2011 were 11.44% higher than June 2012.  June 2011 was the eighth highest monthly endorsement total for fiscal 2011 and June 2012 is the second highest total in the nine months so far this fiscal year. 

    The seasonality issue reflects the volume of case number assignments taken in January and the immediate weeks surrounding it versus the volume of case numbers assigned during February and the immediate weeks surrounding it, based on the simple four month lag rule of thumb.  That rule states that it takes on average approximately four months for an application following case number assignment to get endorsed.

    For some of us the total for case number assignments in May
    2012 was well within the range of expectation. 
    Once again using the four month lag rule of thumb, no significant number
    of applications which receive their case number assignments after May 31, 2012 will be reflected in the
    total endorsements for fiscal 2012.  The
    total of case numbers assigned during the twelve month period ended May 31, 2012 is 18.4% lower than that same total for the twelve month period ended May
    31, 2011.  Add to that the
    lower conversion rate (applications with case numbers assigned becoming
    endorsements in a twelve month period) so far this fiscal year and our new
    adjusted reduction from last fiscal year is 22%.

     

    In a comment made last year on June 21, 2011,
    in the thread related to the RMD article titled “NY Times: Wells Exit Could Make
    Reverse Mortgages Harder to Obtain” and posted June 19, 2011, I
    projected the total endorsement for this fiscal year at 61,800.  The projection now stands at 57,050 which is
    7.69% lower than estimated over a year ago.  
    More about the projected 57,050 and its make up in a more formal presentation later this month.

  • Thanks James for your accurate comments and looking through the smoke and mirrors.

    Reverse Mortgage Insights reports sounds like a jobs or housing report coming out of the Obama administration. Looking through rose colored glasses.

    Everyone from Metlife was still closing out their pipelines in May/June and with the 4 month lag from application to endorsement their numbers are still showing in the report. How many case numbers were assigned in June? We will know by Sept/Oct the impact of Metlife’s departure. 

    Let the dust settle and let’s see what it looks like then. I hope they are right but it sounds like a liitle bit of wishful thinking at present.  

    • Tomreverse,

      Thanks for the confirmation and insight as to what is happening at MetLife.  Like Wells Fargo and Bank of America, we will see months and months of sliding endorsement activity from MetLife most likely until sometime in the first calendar quarter of 2013.

      Just because a few indicators are improving is no sign our industry is ready to take off in the next eighteen months; in the long run trying to talk about ragweed as if orchids may temporarily make the situation seem better than it is but in the long run generally backfires.  Some think the take off will be in 2013, others in 2014, while still others believe it is 3 to 6 years into the future.  Because I am an accountant and still wear my green eye shade in well lit rooms while looking at numbers and reading, I can see through early fiscal 2013 but have some hunches about next fiscal year.  Going beyond that will have to be presented by someone at a higher pay grade just as it has done in the past. 

      While the CFPB Study was flawed, I believe Shannon Hicks summary is insightful.  Where the Study was very good was in its even handed approach in looking at the industry and the problems we have faced and are still addressing.  It did not ignore them or seem to blow them up out of proportion.

      Where it was flawed is in its description of the product and its uses.  The_Cynic does a fairly good job at looking at some of those issues in the comments to Shannon’s overview of the Study in a recent video on HECMWorld.

       

  • I’m not so sure we got through all the smoke and mirrors.
     Yes, endorsements in June were up 16.9%, but if you remove Met Life, they dropped by 28%.
    When mighty Met finally leaves the table (and takes their food with ’em), the remaining potluck will be scarce, at best.
     

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