Reverse Mortgage Volume Sinks as MetLife Shoe Drops

Home Equity Conversion Mortgage (HECM) endorsements hit a monthly low in July, down more than 25% from June at 3,868 loans. 

The decline is largely attributable to MetLife’s exit from the reverse mortgage business earlier this year, according to a report from Reverse Market Insight, which counts the volume lost from MetLife to be 76% of the monthly drop. 

When comparing the drop off of MetLife volume versus the drop from lenders Bank of America and Wells Fargo following their exits from the industry, the MetLife exit shows a more pronounced decline than in the case of Wells Fargo, but the volume is likely to fall off the books completely after July, RMI writes. 

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Despite the dismal numbers overall, two lenders showed strong growth in July: Generation Mortgage and American Advisors Group. Generation grew its volume 17.6% over the course of the month for 6.7% market share, while AAG grew its business 9.1% for 6.5% market share. 

Looking ahead, case numbers issued will be an important indicator of future volume, RMI writes, now that the final MetLife shoe has dropped. The data for June and July is not yet available but, RMI writes, if last month’s application numbers can be matched or grown, the worries about low endorsements will be “significantly lessened.” 

View the Reverse Market Insight Report. 

Written by Elizabeth Ecker

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  • Case Number Assignments for June 2012 were released a few hours ago.

    There is absolutely no reason to doubt the opinion of RMI as to the meaning of the number of endorsements coming from MetLife for July 2012 but if RMI is right, that opens many questions in other areas.  For example, based on its findings, one must question the validity of the “four month lag” rule.  That rule has long been held to explain how long it takes the average endorsed HECM to go from Case Number Assignment to endorsement.

    Normally we would say that the vast majority of the HECMs endorsed during July received their Case Number assignment in late February through early April.  Is RMI saying that the length of time is now significantly less than 90 days or just those coming from the last days of the origination operations of MetLife?  Perhaps RMI is saying MetLife had a much smaller origination and wholesale operation after February 2012 than was previously believed.  If it it the last reason, it seems that most industry rules of thumb remain as valid today as they were on January 1, 2012.

    Then there is the estimated “pull through” rate.  If RMI is right, the inventory of outstanding applications with case numbers assigned is much smaller than previously believed since most have believed there is four months of applications with case numbers assigned rather than 90 days or less.

    It was thought that the MetLife endorsement numbers for April and May 2012 reflected the stringent financial assessment policy of MetLife which ended in January 2012 with a transition through February as MetLife regained what it had lost.  The increase for June 2012 was thought to reflect the return to the previous financial assessment policy along with some increased activity coming from their Saver initiative.  It seems all that reasoning may have been bogus and the increase in June was due to expedited closure of the MetLife reverse mortgage operations than anything else.

    If few endorsements will be forthcoming from MetLife in the next two months, then the endorsement total for the year could be less than 55,000.  Per RMI, the total endorsements for the twelve months ended July 31, 2012, is about 58,400.  Looking at the twelve month total for each month we find it has been dropping since June of last year from 74,735 all the way down to 58,411 for July 2012.  This trend combined with the statistics on Case Numbers Assigned each month is what has made it so clear that the total endorsements this fiscal year (2012) will be lower, significantly lower, than the total for last fiscal year (2011).

    The total case numbers assigned during June 2012 was another bad month.  While it was a less than 1% increase from May 2012, it was almost a 20% drop from June 2011.  With a lower “pull through” rate than last fiscal year, the outlook for endorsements for fiscal 2013 is starting off on a bad foot as expected.  Again fiscal 2013 is expected to be have lower growth for most lenders than fiscal 2012 although it will remain positive for many; but the outlook for industry total endorsements for fiscal 2013 looks to be down, significantly down in comparison to fiscal 2012.

    It would be nice if the industry would yield better numbers to report.  Perhaps RMI can find some silver lining in city and zip code breakdown information.

  • OK, so I’m a lowly LO — the guy that brings in the RM “bacon” for a dwindling commission and pays his own way all the way. I’m expected to understand how we could bring ANY business in through the maze of obstacles in the way, including the general assumption that the guy that originates the business is dirty, greedy and, let’s see, what else — how ’bout hungry because several lenders in a row have dumped them and walked away from the business saying they can’t succeed in the current regulatory enviornment. Something is wrong, of course, or these businesses wouldn’t call it quits with a 2 week notice to LOs. Does anybody know how long it takes for an LO to get started again? No reason to listen to this unless you want to know why RMs are in the toilet when there’s so much demand in the field. Don’t ask the borrowers. They might tell you the truth.

  • Tom,

    This is nothing new.  We had this going on with both former Bank of America and Wells Fargo last year.  Most prospective employers processed their leads and they were paid through an increased signing bonus once they got their licenses.

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