After Raising $11 Million, Reverse Mortgage Lender Shuts Down

NewImage.jpgGolden Gateway, an Oakland, CA based reverse mortgage lender is shutting down after opening its doors in 2007.  Founded by Eric Bachman, the company reportedly went through two rounds of funding with Menlo Ventures, raising a total of $11 million.

The company made quite and entrance into the industry when it launched its online calculator, which lead to major media outlets covering the tool, praising it for its ease of use and interactive features.  After the launch, it continued to develop its online presence by releasing several budget tools and calculator data at the end of each quarter.

It also developed a Prepaid Mastercard partnership with Bancorp Bank that allowed borrowers to immediately and and securely receive their monthly proceeds on a reloadable prepaid card instead of a check.  The account was opened up at closing and cardholders were able to login online to check their funds balance and transaction history.  No other non-bank lender offered anything comparable.

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Within the last year it signed partnerships with several large credit union clients and technology ventures, but it wasn’t enough. The company sold its life settlement business to Policy Options in August for an undisclosed sum, but sounded like it planned to stay in the reverse mortgage business.

We reached out to Bachman several times for comment but have been unable to reach him or anyone at the company.  Several different wholesale lenders confirmed with us that the company is no longer in business and the 800 number listed on the website is no longer in service.

The company was the 44th largest reverse mortgage lender in the country according to data from Reverse Market Insight.

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    • Bob,

      The only thing I read that was transparent regarding GGF was their press releases which showed how little they actually knew about what they were doing. Not only were simple things wrong but more importantly they consistently oversold the importance of the information they compiled from their calculator. It seems like they believed their own propaganda over their internal financial statements. Unfortunately they seemed better at promoting than managing.

      GGF as an entity is not a model; it is its antithesis.

      • Mr./Ms. Anonymous Critic, you speak with authority while knowing little about GGF, its model or its people. Venture-backed start-ups by their very nature look to break the rules of a current paradigm to offer something better in the hopes that they will grow large and profit from providing that something better. To identify the death of a start-up as caused by poor financial management is facile at best. Start-ups don’t look to build a nice little business, they look to grow to 10-100x the investment. Doing that costs money and takes time, money that oftentimes produces no return and time that occasionally disappears through no fault of the company.

        In GGF’s case that “something better” was to create trust, first by offering more information online without demanding personal identification information and second, by not incenting salespeople to go after the most profitable deal whether it was right for the senior or not. GGF’s model and its execution allowed us to create partnerships with leading credit unions (incredibly jealous guardians of their members’ well-being) to provide services to their members in an official capacity. The result? An independent resource polled 100 of our borrowers at random and 98%+ said that they would recommend GGF to their family and friends.

        GGF as an entity tried a new model during a time of much upheaval in the industry driven by an increasingly fluid government regulatory climate. That model earned the trust of many. If GGF was the antithesis to anything it was to the same ole, same ole model used by most everyone else that created an image of reverse mortgage as “the next sub-prime”. Given less tumultuous times I believe that our model would have become very successful not only in financial terms, but human terms. Alas, we’ll never know.
        Good luck to you all.
        Joe Nagy, speaking unofficially as former VP of Sales & Biz Dev, GGF

      • I totally agree.

        Whether or not you think GGF’s calculator was the best thing, it was something brand new and huge step forward in terms of how retail and lead providers provided information to their consumers.

        Sure, it might not have been as detailed as some other calculators but hands down it was the best looking and easiest to read. They took the risk to try something new and people criticized them for it because it wasn’t done the “traditional” way.

        Just look at a NY Times article that referenced GGF as one of the largest reverse mortgage lenders in the country. We all know that’s not true, but the fact they were able to present themselves as such and get mentioned in the same group as MetLife and Bank of America is a credit to the company. That wasn’t possible because they did things the old way…

        Sure PR helped, but when else have you seen the WSJ/NY Times and other big publications reference a lenders calculator right next to AARP? Never… the reason is because GGF was the easiest to use and best looking.

        Personally, I’m bummed it didn’t work out. Eric was one of the people in the industry who tried new things on a large scale and I have no doubt the industry is better because of it.

        While it might not have worked out as planned, the company made its mark on the industry and probably generated more press coverage from the NY Times and WSJ than ANY other lender.

        Eric and his team came to the industry to do big things and they did. Unfortunately, it didn’t work out as planned and the company had to fold… but at the end of the day, they swung for the fences and you’ve got to respect that.

  • Technology means little. They were outwardly sharp. The problem was not in the gathering information but rather interpreting it (based on press releases). The thing that seemed missing was a firm foundation in financial fundamentals.

    It is surprising to hear how well capitalized they were. Hearing that this company has gone under is not a happy day for the industry.

  • This answers the Q: How much money can one company raise and throw away at pay-per-click advertising models? GG simply had a model that allowed an ad budget to vanish while seniors click to see “how much can I get” vs. “who can properly educate me on my options online”
    A: 11 million!

  • What a disaster! If a well capitalized company like Golden Gateway has decided to call it quits, we can only imagine how many small lenders will close up shop in the coming months. Let’s hope the recent changes are all positive for the industry after a 30 percent drop in volume this fiscal year.

  • I am absolutely stunned at this announcement. $11 million down the tubes….oh my!! This is just startling.

    I sure hope JAM Equity Partners is doing better with RMS, AAG, and Security One Lending because we don’t need any more implosions like Gateway’s.

  • This is what happens when expenses exceed revenues for an extended period of time. Good ideas, but their average cost to acquire a client must have been enormous.

  • We have a tendency to believe if a lender is in the reverse world, their problems come solely from their reverse operations. GGF was involved in a lot of areas as its website noted. Did GGF go down because of its RM activity or other issues? The story has yet to unfold.

  • Joe and Admin,

    Forgive me for not sharing your views. I never saw this entity do for the industry what Senior Lending Network did. SLN got the details and the advertising right. For the sake of full disclosure I did not work for either SLN or GGF.

    GGF got the technology right but not the details. I think if you look back on my comments on the prior GGF press releases RMD reported, you will discover why I say what I do.

    Admin got it exactly right. Outwardly it was all about GGF and little else. Like most others in this industry I am sure what they did was for the purpose of helping seniors.

    I did not and do not care for the GGF business model. Like others before, call me “old school.” Ten years from now I might be singing a different tune.

    However, none of my views about the business model has any impact on wishing all who worked at GGF the best. I hope they all land on their feet successfully in the reverse mortgage industry. As I said before — losing GGF was NOT a happy day for our industry. God bless you all.

    • A look back through the stories about GGF yields few comments by you under your current nom de plume. Perhaps you were at one time Question_Mark as well?

      In any case, I guess that we’ll just have to agree to disagree. You believe that the current model that has folks in congress and the media comparing the industry to the sub-prime meltdown is the proper model. Of course, we all realize that they do this in some part out of ignorance and self-promotion or to sell more papers or earn more viewers and votes. Nonethelss, there is enough truth there to keep that meme going. This isn’t about the crooks out there either, those vile people who convince a senior to hand over their RM proceeds to “invest” for them. Every time a salesperson pushes a fixed loan to a person that should really consider an ARM because the back end is higher or provides a loan with a higher interest rate than the lowest in the market because that’s either the only loan they have the ability to provide, or because they have the sort of relationship with the borrower that allows them to sell a higher rate loan and thus make more money, this industry looks bad.

      GGF’s model, which went far beyond the technology, attempted to eliminate the biggest fear that people have about reverse mortgage; that the salesperson is going to rip off a senior. We did this by changing the pay structure. Did that cost us more money than if we simply hired a ton of folks on full-commission? Sure it did, but it created a lot of trust in what we were doing and the result was happy, satisfied borrowers and partnerships with leading credit unions.

      This discussion, which I hope continues in the industry, isn’t about old school vs. new school, technology vs. the human touch; it’s about identifying means by which more people, especially those with microphones, barrels of ink and law-making pens become more comfortable with reverse mortgages and those who provide them. GGF’s methods, I believe, were a step in the right direction. You see it otherwise and I respect your opinion, even if I disagree vehemently.

      I greatly appreciate your thoughts for the people of GGF and wish this industry the best.

      • Joe,

        At one time there was a problem which required a change in names. Yes, most of those under the name Question_Mark were those of the The_Critic but certainly not all. You can reasonably assume that all those which were critical of GGF press releases were those of The_Critic; at this point in time, I cannot accurately point out which were and which were not.

        Please look at all of the press releases which RMD covered. Please point out even one which describes the business model you present in this thread. Those press releases were the public image of GGF and only supported the image GGF as a self promoting reverse mortgage company with little concern for providing unbiased and correct information. Its public image was more sub-prime than ethical and responsible.

        The question is why? Why would a company which had such lofty business practices lower itself to such PR practices? With such great business practices, why didn’t GGF parlay its proper business practices into one of the strongest and successful referral businesses in our industry? Why, oh, why was there such a huge disconnect between firm practices and firm PR? How odd and wasteful!!!!

        I went to the website early last year and looked at the posted press releases and education information provided. I found Admin selected among the best press releases to post. He never tried to paint an ugly picture of GGF. Yet he and I have totally different views on GGF. No doubt he knew the company “under its skin” much better than I.

        Your picture of the internal business practices of GGF makes this failure even more tragic. Why did GGF throw away good money to build a public image which was counter its own internal values? Why didn’t it emphasize its OWN core values?

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