Interview: Jeff Taylor Discusses Reverse Mortgage Data and Growth

image After stepping down from his position as the head of Wells Fargo’s reverse mortgage business, Jeff Taylor announced that he was joining Reverse Market Insight as Chairman to help expand the companies consulting business.

With HUD’s decision to reduce the principal limits for its FHA insured reverse mortgage product, Taylor is confident there is growth out there but it will require a different approach.

Taylor spoke with RMD about this approach and how an independent third party data repository is critical to helping the industry grow.

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Q:  Why was now the right time to step down from Wells Fargo?

A:  I had been working on a retirement plan for two years.  I left on great terms and had mentored a great leadership team to replace me.  I am excited about new and different challenges to help the industry grow.

Q: Right now, what is the biggest challenge facing the industry?

A:  Capital and Warehouse Lines!

Q:  Speaking of capital, we’ve seen AAG raise $4 million and there continues to be talk of others raising money to scale their business.  With your experience at Wells, what advice can you give these companies looking to ramp up volume?

A:  Building on a message and educating their sales force on how to reach and communicate to the other 98% of seniors who have no existing real estate debt on their residence.  This group requires a different approach to reach, maybe through a financial advisor and or trusted advisor.

This is the group, when ready will provide the greatest lift to the reverse mortgage concept and our industry.

Q:  Companies are all looking for growth right now but with the state of the economy do you think it’s possible?

A:  Yes, the growth will come from reaching many seniors who do not have to achieve a specific dollar amount to pay off their existing mortgage. Primary uses will be Line of credit for emergencies or other financial needs to subsidize their monthly income.

Q: Despite the medias efforts to paint the industry as a place lenders enter because of the big profits being made, I’ve yet to see them.  With origination fees being capped and legislators threatening to eliminate YSP for reverse mortgages, where does the industry see the profits needed to grow?

A:  This question is probably best addressed to lenders directly, but in our recent client work we can generally say that institutions with low cost of capital and high liquidity are enjoying substantially larger advantages as our industry evolves.  Further fee restrictions, such as the YSP limits being rumored now, would likely increase these advantages.

Q:  Originally you planned on forming your own consulting company, but decided to join Reverse Market Insight.  Why did this make more sense for you?

A:  RMI is a unique opportunity to help the entire industry grow effectively into the next stage of its evolution. I am honored to join the company and offer my experience to our team and their clients.  There are many areas where data, benchmarks and a performance management capability will dramatically affect the industry’s prospects, as well as individual lenders.

For example, in regards to Ginnie Mae, the industry needs to increase investor, regulator, originator and servicer understanding of the significant capital and profitability implications of HMBS issuance.

This will encourage additional capacity to support the industry’s capital needs, and help prevent the potentially negative collective impact of individual participants under-estimation of these costs leading to an emergency scenario.

For servicing, cost and service benchmarks will be key to driving economies of scale in this business and providing customers with consistently high levels of service and support.

The bottom line is, every other large scale industry has access to the types of insights generated by an industry data repository.  There are a vast number of vital business questions facing the industry today that can be assisted or entirely answered by a third party data repository.

Also, joining RMInsight is a great way to leverage my experience in a way that doesn’t compete with the company I helped build, other reverse mortgage lenders, and leaves a legacy for the future.

Q:  I agree that the industry needs a data repository, but according to RM Insight’s website only 15% of the industry has signed up to participate.  What needs to be done in order to get more to take part?

A:  I think the primary reason is that many of the initial players in the reverse space are not used to performance metrics.  Also, I don’t think it has been a priority for lenders who are simply relying on the HECM endorsement numbers as their benchmark.

Bottom line is that for an increase in participation it will take an all out educational and promotional effort for lenders, servicers, investors and rating agencies to demand more metric specific info on the performance of Ginnie Mae HECM HMBS. It is now and it is the future.

That said, it is also evident that it has not been a priority in the past for NRMLA or major lenders.  The largest retail reverse mortgage lender has approved participation, but I’m sure they would not send in any data if others were not participating.

I am confident that it will take a minimum of 5 of the top ten lenders to participate before any meaningful reports would be produced. Data integrity and confidentiality are critical for this metric benchmark.

Q: We wrote about NRMLA and MERS collaborating on an effort to collect data on the industry as well.  Is this competition for the RM Market repository?

A:  Our understanding is the NRMLA/MERS relationship is designed to make it easier for lenders to interact with vendors and MERS through a common “Reverse MISMO” type of data exchange standard.  The agreement does not directly contemplate a repository storing that data, but NRMLA would be a better source of the definitive goals and scope of the relationship.

Q:  Is there a reason to have more than one repository?

The general rule is that one big repository is a much better resource for the industry than multiple smaller repositories, simply because the opportunities for analysis and understanding of trends is greatest across a larger set of loans.  The key to success is a comprehensive cross section of loans with the correct information flowing into the repository for analysis, which is why we’re working with many lenders to ensure that their hot button questions are being designed in throughout the initiative.

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  • Mr. Taylor is a long-time respected leader of this industry so this interview was of particular interest. While a single repository can be a tremendous benefit to the industry, Mr. Taylor is absolutely correct it will only be effective if there is sufficient industry participation in providing reliable data.

    In 18 years, our CPA firm went from being one of many repositories for general sales data in the radio industry to becoming the dominant repository. Once in that position, radio groups began providing detailed sales information that once gathered, accumulated, analyzed, and reported helped participating radio stations nationwide negotiate higher advertising revenue and spot new opportunities. The result was a significant benefit to the entire radio broadcasting industry. There is no reason that the same general benefits should not apply to the reverse mortgage industry.

    While it was interesting to read that the next phase in the growth in our industry will come from trusted and financial advisors, it was disappointing that this subject was not further expanded. Certainly this approach is not new; however, to be successful it will require discipline and a new level of sophistication in marketing. “Let the house pay you…” will do little to intrigue or spark their interest. Exploiting this opportunity is an important topic that Mr. Monte Rose tackles in his latest book.

    The groups of advisors Mr. Taylor cites are greatly diversified. It would be helpful if Admin interviewed Mr. Taylor again but this time focused on his vision on how to successfully gain advisors as sources of referral.

    Good job, Admin.

  • It's going to be 'tough sledding' with financial advisors as long as their own trade pubs continue to print not only negatively biased but mis-informed and inaccurate articles on reverse mortgages. Our Taylors and Bells need to train their sights on the editors of these publications and appeal for at least a technical review of their material prior to publication.

  • REVGUYJIM,

    There is no way the editors would allow the Taylors and Bells perform a “technical review” of their material prior to publication.

  • It’s going to be ‘tough sledding’ with financial advisors as long as their own trade pubs continue to print not only negatively biased but mis-informed and inaccurate articles on reverse mortgages. Our Taylors and Bells need to train their sights on the editors of these publications and appeal for at least a technical review of their material prior to publication.

  • REVGUYJIM,rnrnThere is no way the editors would allow the Taylors and Bells perform a “technical review” of their material prior to publication.

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