Reverse Mortgages: Where Are We Now?

This year, like any, we have seen change in the reverse mortgage business.

To take a better look at some of the trends to date, RMD sat down with Reverse Market Insight’s John Lunde to find out what’s on the table and where we have come so far this year.

Mid-size lenders become the new top-10

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This year, rather than brokers joining lenders or companies rolling into one as has been more typical in the past, we have seen lenders getting bigger by hiring displaced loan officers following big bank exits. And they are still growing.

“The most interesting thing is how consolidation is shrinking toward the middle lenders,” says Lunde. “Before, we had the top tier of big lenders tied to mega institutions or decent sized banks. Now we’ve got a thinner top tier.”

Some lenders, including American Advisors Group and Security One Lending have seen a triple-digit increase in loan volume during fiscal year 2012. And they don’t appear to be slowing down. AAG grew its volume from around 200 on average monthly to closing more than 500 loans in July. Security One made more than 100 new hires to grow its team in the wake of MetLife’s exit from the business, solidifying its place in the top-10.

“What’s fascinating is to watch Security One, Generation, AAG and what used to be the middle tier of lenders—growing into the leadership roles in the industry,” Lunde says.

Brokers regain market position

From a year ago when many brokers thought they’d buckle under the regulatory pressures brought upon by the Dodd-Frank Act, today many are able to maintain their businesses comfortably based on the premiums paid for reverse mortgages on the secondary market.

“This is a double-edged sword,” Lunde says. “Interest rates are so low, presenting a weird incentive for the fixed rate loan. It’s helping brokers with many reinvesting a good portion into growing their business. Some are using it to heal the wounds incurred over the last couple of years.”

Previously, many brokers thought they may need to become branches or join up with larger companies as the cost of compliance rose and large lenders snapped up many independent professionals. This was all in the wake of the new Consumer Financial Protection Bureau getting its teeth through the appointment of Director Richard Cordray in January.

The secondary market has enabled brokers to stay in business, with Ginnie Mae playing a crucial role as the force behind HMBS.

“This year, we are seeing how resilient it has been in the face of the MetLife exit. That’s a big difference from the reaction to the B of A announcement last year,” Lunde says. “It speaks to the maturity of the HMBS; now that it has been around a while, people are starting to get it.”

All about the call center

With the growth of several mid-size lenders to the Top-5 in reverse mortgage lending, also has come the rise of the reverse mortgage call center. By allowing companies to keep all operations, personnel and compliance under one roof, concentrating their fixed costs, the call center has proven a way for lenders to scale their operations and grow over a short period of time.

But despite the rise of several call centers including growth by AAG as well as One Reverse Mortgage and others, both of which have increased hiring efforts and expanded office spaces this year, there is no indication that the call center is killing boots on the ground originators.

“There is no reason to believe that the model where retail people sit down in homes at kitchen tables can’t be profitable,” Lunde says. “There is still a lot that happens at the broker level.”

New wholesalers make a play at the market

This year, the industry saw new wholesalers popping up in all places. Lenders like Nationwide Equities, High Tech Lending, Continental Home Loans, Silvergate Bank and WCS Funding, in addition to AAG have launched wholesale channels.

Whether there are enough loans to sustain them, remains a question.

“There are two questions,” Lunde says. “Warehouse capacity and HMBS approvals. The number of wholesalers is going to be a function of how many companies are approved to issue HMBS.”

Right now, that list is growing, with new additions such as Security One Lending and Live Well Financial. Whether they will issue securities remains a question, but an important one, Lunde says.

“The more companies are able to meet the capital and liquidity requirements for GNMA approval and think about issuance, that is a healthy thing for the industry.”

This edition of RMD Report is brought to you by Landmark, a leading national appraisal management and compliance company serving the reverse mortgage lending industry.

Written by Elizabeth Ecker

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  • As call center operations have grown, the number of endorsements have fallen but the proportion of reduced counseling sessions has been much less.  The pattern has been interesting to follow.  

    Can lenders continue to grow as endorsements fall if no major lenders move out of the industry?

    John is right that the industry is emphasizing the things which produce the highest revenue over what may be best for the consumer.  The percentage of fixed rate Standards is still on the rise.

    Then there are those pesky conversion rates….  

  • The new call center model is probably the reason for the large gap between applications (case nuber assignments) taken and closings. Many loans are being started, but because of teh lack of face to face connection, many o fthese loans have no chance to close from the beginning or the borrowers don’t feel confident enough to go through with it.

    • I agree 100%. As a boots on the ground RMP my business has never been better because many seniors simply do not want to make one of the most important decisions ever over the telephone. Call centers have been using notaries to actually pick up the signed documentsand give a personal touch but I question this practice because I have never met a notary with an in depth understanding of the reverse mortgage. When the senior has questions they are unable to answer them. Also, reliance on AVM’s to determine value and not actually visually viewing the property can pose valuation problems and increase fallout. I think “company spokespersons” backed up by call centers play an important role but lenders need to also have licensed and trained backup support on the ground. This will be especially important as interest rates rise and payouts to brokers is reduced.

  • Why are call centers allowed to exist in the first place? How anyone can feel comfortable dealing with a voice on the other end of the phone and an uneducated Notary is beyond me.

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