The Wholesale Leaders report for May 2011 from Reverse Market Insight focuses on the changing industry dynamic following the exit of the major lenders, Wells Fargo, Bank of America and Financial Freedom.
The total number of applications taken, after increasing 8.5% in March, have dropped in April (-9.5%) and May (-8.3%). Tracked from a perspective of number of HECM applications per day reveals the developing trend specifically from the wake of Bank of America's Exit.
The impact of Wells Fargo's exit on application trends will begin to unfold after an expected final boost in June as their originators were given until the end of the month to take applications. Similarly, the impact of their production from industry numbers will be revealed late in the year as their pipeline was cleared. With Financial Freedoms gradual decline in production numbers and final exit, the impact has been much less apparent.
However, the three combined have accounted for 30-35% of recent retail market share, mostly from Bank of America and Wells Fargo. In May, total endorsement growth including both retail and wholesale production decline by -15.3%. At the same time, Bank of America's production saw a big drop off as their wind down takes effect, falling off by nearly two-thirds.
As other lenders gain market share in the wake of the exit by there lenders, production numbers have declined. MetLife has been the initial beneficiary, claiming the top spot for total endorsement volume in May, the first time Wells Fargo has not held that position in a long time. However, even as they wind down in the third quarter, Wells Fargo may still finish the year as the top producing lender of endorsed HECMs for 2011.
The second half of the year could present growth challenges as the industry strives to fill those voids. From a year-over-year perspective, the result of these exits will lead to the third consecutive year that HECM endorsements have declined.
How long it takes to absorb and replace the volume lost will be the lingering questions. The interesting trends to follow will be how the dynamic of the top lenders changes along with the distribution of endorsement volume.