Written by John K. Lunde, Torrey Larson, Gregg Maske & Hank Rhodes, as originally published in The Reverse Review.

The Few, the Proud, the Survivors John K. Lunde Reverse Market Insight

It isn’t often that I feel the urge to write a magazine-length article, given that I spend a few days each month creating short newsletters about reverse mortgage industry trends and lender rankings. It’s not that I don’t enjoy writing (I do), but in my opinion, a certain amount of passion needs to be present to produce written words worth reading. This month I found a muse in the subject that has been on all our minds more than once in the past year: the exit of Wells Fargo, Bank of America and Financial Freedom from our industry in 2011. The situation has left me to wonder what the impact of this exit will be in 2012 and beyond.

Many of us in the industry have looked at the overallvolume trends with some dismay and even pessimism.After all, who could look at three consecutive years of endorsement declines without some level of concern about what the future holds?

The chart above paints a gloomy picture of case numbers issued (we use this interchangeably with applications). December in particular was a sour end to the year. Since case numbers are our best indication of future endorsement volume, it’s hard to feel any enthusiasm here. However, below the surface of these numbers, there is a picture that is perhaps more encouraging as we separate the effects of lender exits listed above.

This second chart suggests a very different storyline than the first. Exiting lenders decline dramatically (as can be expected), but at the same time we see surviving lenders increasing volume substantially – especially in the months after exiting lenders withdrew. That suggests to me that the lenders remaining in our industry are slowly but steadily backfilling the distribution niches that were vacated by their exiting counterparts. The storyline becomes not a decline, but ongoing reclamation of what was lost in 2011.

So let’s put December’s application numbers in context. Instead of the lowest volume since January 2010 for the industry, it is just as correctly understood as a fallback to May 2011 volumes for the surviving lenders. While we’d all like to see volumes bounce back in January, even if they don’t, it’s only giving back what survivors gained from exiting lenders in recent months.

Lastly, there is a rightful discussion of who might be benefiting most from lender exits. To answer that, we look again at case numbers issued, but this time by originator. The chart is a bit messy since we’ve included all eight of the remaining top 10 lenders by origination volume (excluding broker/TPO).

It’s clear that a couple of lenders have seen huge increases in retail/direct volume in the past two years, especially MetLife, One Reverse and American Advisors Group. But what’s equally impressive is that each of these eight lenders has substantially increased its volume in the past two years, and most have seen their profits more than double in size. When we look at the trends for our industry, it’s important to remember that while we’ve been through some battles in the past few years, there are some very talented people in this industry that still know how to grow volumes and companies. There may be fewer of them, and they may have a thousand-yard stare at times, but the survivors can be proud of their accomplishments in tough times.

Torrey Larson Security One Lending I remember February 4, 2011, as if it were just last week. It was the first of two major events to hit the reverse mortgage industry last year and alter its landscape. Bank of America had officially announced its exit from the reverse mortgage industry. My first thought was, “What do they know that I do not know?” The industry had experienced so many changes in the previous two years, and I initially thought that the exit was a result of program-related issues.

Last year was the tipping point for many privately held firms, as Wells Fargo also announced its exit from the industry. No doubt the change will be viewed as the largest market share play the industry has seen in many years. Originators were aggressively courted by many lenders, and firms took various approaches to recruiting non-restricted free agents. Some paid large signing bonuses, while others struggled with that offering and extended more aggressive compensation plans. All in all, everyone benefited.

The next challenge was to adequately support the additional loan volume from an operational and integration perspective. The key to providing great customer service is to measure capacity levels in terms of both staffing and liquidity, and ensure that you stay ahead of the curve.

2012 should be a great year for reverse mortgage lenders, originators and vendors. Everyone has the opportunity to have a positive or negative impact on this industry. We all have an obligation to be great stewards of the foundation established by the leaders before us. Just remember that with great opportunity comes great responsibility.

Gregg Maske First Bank Mortgage Partners Most people in the mortgage industry have had to deal with significant change over the past few years. Like many, I had to deal with one such change when Wells Fargo decided to eliminate its Reverse Mortgage Division. I was serving as the sales manager for Alabama and Georgia at the time, and the news was shocking to me, considering the success we were having in the reverse market. During all of my recruiting conversations I would talk about the commitment Wells had to reverse mortgages and the stability of such a sound company. Needless to say, over the next few days I questioned whether to stay in the reverse business or move back to the forward world at Wells.

Even though Bank of America and Wells both decided to exit the reverse business, I decided to stay and seek new employment. I decided to work with FirstBank, a smaller bank that realized the need for this product and was willing to separate this product line into its own division.

Reverse mortgages have provided me with a great sense of truly helping borrowers, more than I felt during my 26 years in the mortgage business. There is a definite need for this product, and a need for professionals to deliver it to the customer. This product can truly change the quality of life for so many seniors, and this cannot be said about most mortgages. Don’t get me wrong; the product is not the answer for everyone. But for the qualifying senior who understands the benefits, it is a one-of-a-kind product. For those of you who have sat with a senior and watched his or her relief during closing, you know there is no greater feeling.

In my opinion, we are just now seeing the beginning of what is to become a very large industry. People are living longer and the need for this product continues growing each and every day. Educating the public, as well as the seniors, and correcting misinformation are the main challenges we face. I have yet to address a group, organization or individual that completely understands the reverse mortgage. My hope is to stay in the reverse mortgage industry and keep educating and providing assistance to seniors, as this is my passion.

Hank Rhodes Genworth I was a top producer at Wells Fargo and enjoying the best year of my career when I received the news that Wells was going to leave the reverse mortgage industry. I remember how hard the first few mornings were after that announcement, not knowing what would come next. I felt shell-shocked and lost, and I even questioned whether I wanted to stay in this industry. Then I considered how much I had achieved professionally and how many seniors I had helped over the years, and I knew I wanted to be in this business for the long haul.

My search for new opportunities ended with Genworth Financial Home Equity Access (GFHEA). I really wanted to be part of a company that had a reputation for having a great customer experience, along with a strong brand and leadership position in the industry.

I’ve had great success growing my business since I joined GFHEA. Low interest rates are making it easier for seniors to afford the product, and I expect the need to continue to grow as more and more seniors reach retirement age.

I worked very hard over the years to build and nurture relationships with my associates, community resources and customers. This has made my transition to another company very easy and seamless. The name on my business card may have changed, but people still know me for who I am and the reputation I have built during my career.