Reverse Mortgages Minus Big Banks, Where are We Now?

The reverse mortgage business looks very different from how it was a year ago. As the anniversary of Bank of America’s exit came and went in February and Wells Fargo’s one-year departure date approaches in June, the industry has seen volume fall—substantially in some months—to what many have decided will be a much lower volume level than in years past.

Just how much industry volume is down: about 27.5%. But how much is attributable to those exits is a slightly different story.

Bank of American and Wells Fargo previously comprised 36.6% of retail volume, according to Reverse Market Insight data. Today’s volume only recovers roughly a quarter of that loss, from a strict numbers comparison.

It’s not just the big bank exits that have led to a decline in volume, says John Lunde, RMI president and co-founder.

“It’s tough to know exactly, but there are really only a couple of options. Either people left the industry who were generating that volume, or we’re seeing the loss of distribution networks that would have made referrals, like bank branches, mortgage branches or wealth advisors. Or, there’s the brand perspective or whatever marketing those companies were doing.”

The bank exits spurred a kind of musical chairs for employment with originators and brokers taking business from one lender to another. The effect on volume should be minimal at this point, Lunde says.

Projections from several sources including the Federal Housing Administration and RMI place 2012 volume below 2011, with RMI’s estimate likely below 60,000. Several industry executives from MetLife, Genworth Financial Home Equity Access and Urban Financial Group estimated in March that volume in the range of 100,000 loans annually is likely at least two years away.

But despite the loss of the two largest lenders and volume being down more than a quarter year-over-year, lender sentiment remains fairly positive, Lunde says. Some lenders have seen record monthly volume in 2012 with growth in the double—and even triple—digits.

“From an individual company perspective, it has been a growth story since the first quarter of 2010. Lender exits just helped that growth story,” he says. “Add to that the fact that secondary market premiums have been healthy and there is a lot to like.”

Written by Elizabeth Ecker

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