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Bank Exits & Market Recovery
Now What? Reverse mortgage industry sales volume is down 27% in the wake of big bank exits. How can we regain marketshare and where do opportunities lie? How do we rebuild trusted brands and lost distribution networks?
8 Comments
Shannon – I love your enthusiasm – and thank you for these video updates and the encouragement!
Over the last 18 months I have lost more reverse deals than won – and the one’s I have closed have taken up to a year to close.
The biggest issue is the lack of equity due to a lowering of the values and the fact that the homeowner was talked into a refi less than 10 years ago.
I am so depressed at the lack of potential prospects – after investing a lot of resources including mailers, TV commercial, PR releases, blogs, email blasts, buying leads, warm transfers etc etc. that I have been redirecting my efforts to other financial services.
The exit of Wells and Bankster of America didn’t create the opportunities I had hoped.
What it did create is yet another opportunity to spin misinformation about the program by the media or lenders that want the refi business.
“If Wells Fargo and B of A quit the business – you know there are big problems….”
Together with Sean Donovan’s total lack of interest in the HECM – and the changes in the qualification and costs – I would not be surprised if the total number of reverse mortgages will be way under the 50,000 mark by year end.
Malcolm!
Thank you Malcom. Indeed there are two sides to this coin: opportunity and challenge. I hope the projected number of HECMs do indeed reach at least 60,000 endorsements this year. I think HUD has a sincere interest in the HECM but has been placed in a position to shore up the areas that are problematic. That said I think we have a healthy and viable product for seniors for many years to come. Home values are definitely impacting the percentage of potential borrowers who do qualify.
Malcolm,
About a year now, it was clear that this fiscal year would be the year of the lender. It was also clear that without B of A, Financial Freedom, and Wells, overall endorsement production would be down about 20% this fiscal year. So far this fiscal year, our pace is down only about 20%. We are on course to hit about 58,500 unless the conversion rate drops as dramatically as HUD has indicated it should.
The reason for naming this the year of the lender is that it was generally unclear what would happen with brokers although that looked somewhat promising but it did not look bright for originators unless most of the retail originators of those who left the industry, also dropped out. When it was clear lenders were paying premiums for these originators and most of those originators were staying in the industry, it did not seem likely originators would have high production years.
There are several ways to look at this fiscal year. A decade ago, our production was not even 25% of the endorsement production it looks like we will have for this fiscal year. There is also a high probability that we could end up with not reaching even 50% of the peak volume for a fiscal year which was fiscal year 2009 at over 114,000 endorsements.
There is nothing, absolutely nothing which promises higher endorsement production for some time to come. Per a recent MetLife MMI survey, interest in HECMs among eligible seniors has dropped from 18% in 2008 to 12% today.
It is not just home values which are hurting the industry. It is the direction of home value appreciation which seems to be killing interest. Also conversion or pull through rates in the last decade (and more) have never been worse.
The industry will be pushing back but there are a lot of questions as to when we will see fiscal years where endorsements exceed 100,000 again. Many of us are starting to believe that fiscal year 2013 will in all likelihood be another low endorsement volume year.
Good luck in whatever you decide to do.
Mr. Hicks,
I have no idea where the 27.5% is coming from. While 60,000 seems slightly too high, that would be about 82% of what it was last fiscal year at 73,130. That is about a 18% drop, not 27.5%. My ongoing projection of 58,500 for this fiscal year is based on a 20% drop from last fiscal year. If the amount was down 27.5% for the fiscal year, total endorsements would be 53,000, a somewhat pessimistic number. If it is a 27.5% drop for the calendar year that total would be just about a 49,800 total for the calendar year. Could we be under 50,000 for the calendar year? I want to say no but it is a possibility, particularly if originations starting in June are as bad as home appreciation seems to indicate it could be.
Also the official HUD estimate of HECM endorsements for this fiscal year is reflected on the October 2011 Outlook report at 84,000. A lower projection has yet to be reflected on the Outlook report. Some were saying a little while ago that the official HUD estimate had dropped to 70,000 but that amount was never reflected on the Outlook report.
Within two weeks we should know a lot more about how things looked through the 10 months of originations which will impact the endorsement total for this fiscal year the most. I am an optimistic holding out the hope that our total endorsements for this fiscal year could still exceed 60,000; however 70,000 is the dream of fairy tales and 50,000, the thoughts of those who are far more pessimistic than I. The calendar year is another story and currently there is insufficient information to rationally predict where calendar year endorsement numbers will be in a little over 8 months.
I have no idea where Ms. Ecker or RMI came up with a 27.5% drop in endorsements.
Shannon, good stuff. I worked for one of the banks and the major problem was lack of experience at the management level. Most managers transferred from the forward retail side and did not have a clue as to how to market reverse mortgages. The business came by happenstance, they barely averaged one closed loan per branch per year.
This caused misinformation as to the inner workings of the bank and lack of cooperation within the system. The banks leaving the industry just made it more difficult for the industry because of the negative publicity.
The industry needs a fresh breath of creativity that the large banks smothered. Upon questioning my manager once about innovation, his response was simply “a large ship takes a long time to turn one degree.”
We who love the industry should keep pressing for marketing and operational innovation. God knows the need is there.
Shannon,
Thanks for the update. I’m planning on being in this business along time. Here is the way I see this thing working. You have to get out of your office, hit the street and go see people. In fact, I just had a couple of pairs of dress shoes resoled. Most seniors who see a Reverse Mortgage ad on TV will also call the bank that they deal with. I have made hundreds of calls on bank branches in the last year. Some branch managers and bankers I know, some I do not, but I approach them with “Just wanted to make sure you know that you still have a resource for your Reverse Mtg inquires”. The vast majority are interested, you get their business cards, put the info in your database and send out regular infomational emails to show you are the expert. There is a wealth of things to send. Then you go a see the same bankers again and again.
The financial planners and advisors are more difficult to get an audience with, but not impossible. If you know one financial advisor visit with him/her to teach them on Rev Mtg. Then ask them if they know anyone else in the business who might have an interest. Ask them to do you a favor and call that person. Follow the same scenario with the next financial advisor. Rinse and repeat! Rinse and repeat!
Thanks,
Great inputs. Readers take note of these pointers.
The financial community is less difficult today than even last year. Hopefully it will be as open as the bankers you have met with, in the not too distant future.
Great advice.