Reverse mortgage retail channel outpaces wholesale in June

Overall origination volume increased, but new data shows a stark difference between retail and wholesale

Home Equity Conversion Mortgage (HECM) endorsements in June spiked nearly 25% when compared with May’s figures, a welcome bump for a struggling industry. New data shows that the retail channel powered the market in June, while wholesale endorsements fell, according to Reverse Market Insight (RMI).

The industry overall saw an increase to 2,561 loans for the month of June. Retail loan production rose to 48.7% to 1,581 loans for the month, while the wholesale channel recorded a drop of 0.7% from May’s figures to 980 loans for the month.

For this report, RMI combined the totals for American Advisors Group (AAG) and Finance of America Reverse (FAR) for all loans registered after the closing of the companies’ merger deal, from April onwards. While on a 12-month average the pre-merger AAG still maintains market share dominance of 21.5%, FAR’s share is likely to rise over time while the company continues its consolidation of AAG’s assets under its own corporate umbrella.

John Lunde, reverse mortgage industry analyst and president of Reverse Market Insight (RMI).
John Lunde

RMI President John Lunde told RMD that the changes observed in the origination channels warrants monitoring.

“Wholesale is always more reactive to short-term changes than retail, so we’ll just have to see how that channel evolves,” Lunde said. “[This is] particularly [important] as the most recent increases in the all-important 10-year CMT over the past three months aren’t fully baked into the June endorsement figures.”

As FAR seeks to fully leverage all the elements of its AAG purchase, the newly-combined entity is well-positioned to take a dominant industry position, Lunde said. The acquisition of Cherry Creek Mortgage by Guild Mortgage makes Guild similarly well-positioned to expand its reverse business.

“FAR registered the highest lender endorsement total in June, which bodes well for their combination with AAG and befits their strong positions prior to the acquisition,” he said. “I think both FAR and Cherry Creek/Guild are very well positioned to grow their business for the rest of the year and beyond, albeit for very different reasons.”

For FAR, it comes down to size and tenure while with Guild, it comes down to its teams business dexterity.

“FAR is a unique combination of the biggest retail channel and a longtime leader in wholesale prior to the combination, so this is a reverse-specific rollup with considerable heft,” Lunde said. “I put Cherry Creek in a different category as a well-placed team [that is] able to capitalize on the advantages of Guild’s servicing portfolio and forward loan origination franchise. We’ve seen that work well multiple times in the past, with Fairway being a notable example of that.”

As has been the trend for a while now, “equity takeout” cases — meaning HECM loans that are neither purchases nor refinances — continue to be the industry’s driving force. Based on issued HECM case numbers, these made up 3,100 in June while refis (867) and purchases (230) lagged significantly.

Should that trend continue, the industry will benefit, Lunde said.

“I think the equity takeout (new customers) figure is driving the industry, which is very healthy,” he said. “Purchases are reflective of the broader challenges in that market, and refis have faded into the background in this environment. We’ll hope to see totals and the equity takeout segment rise in future reports, as that’s the future of the industry.”

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