Why Mutual of Omaha Bank Bet on Reverse Mortgages in Stormy Times

Mutual of Omaha Bank made a major move into the reverse mortgage space earlier this month with the acquisition of Synergy One Lending and its Retirement Funding Solutions brand.

If the timing seemed suspect to industry watchers — with plummeting demand for the products amid lower principal limit factors — the executive in charge of overseeing Mutual of Omaha’s new reverse mortgage operation says the October 2 changes didn’t derail the bank’s plans to diversify.

“That was a good long-term change for the product, and it’s still a very attractive product for a lot of borrowers,” Terry Connealy, president of Mutual of Omaha Mortgage, told RMD. “We’re excited to jump into the space. We just think the timing is right.”

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Mutual of Omaha and Synergy One first entered talks last summer, ahead of the principal limit factor cut that took many players in the industry by surprise.

But executives at the Nebraska-based bank were heartened by other moves to shore up the Home Equity Conversion Mortgage over the past few years, Connealy said, which have turned the government-backed reverse mortgage into a “much more customer-friendly and safer product.”

“When there’s been the regulatory changes, the major ones, there’s always a swell of business because you steal business from the future,” he told RMD. “Immediately afterwards, the volume goes down a bit, and then it normalizes. I think we’re seeing that right now. Just with the overall penetration of the HECM product, it’s so small among eligible borrowers that even with these changes, we think that the market actually should grow.”

Agnostic approach

Much like reverse mortgage industry leader American Advisors Group — which has embarked on a plan to become a “product agnostic” company with a wide variety of offerings, including a real estate brokerage and forward loans — Mutual of Omaha intends to position itself as a one-stop shop for potential borrowers.

“We’ll be somewhat agnostic,” Connealy said. “If a reverse mortgage is the best solution for that borrower, we’ve got that in our product lineup, but if it’s a traditional forward mortgage, that’s an option going forward as well.”

The bank thus becomes the most recent adopter of the “generational lending” strategy, the idea that a single lender or broker can serve borrowers at any stage of their lives — while also potentially generating new leads through customer referrals, such as a HECM borrower recommending a specific shop for their child’s first-time home purchase. Reverse Mortgage Funding, for instance, last year rolled out software aimed at brokers looking to work in both forward and reverse, while Baseline Reverse created a position management program for the same purpose.

“Just having the full product suite is really an advantage — product diversification so that you can fit that customer’s needs, no matter what it is,” Connealy said, adding that Mutual of Omaha Bank will also suggest home equity lines of credit (HELOCs) as part of the full-suite push. “It’s not just a reverse mortgage — oftentimes that might be the right solution, but many times it’s not right.”

New reverse brand ahead?

While the terms of the deal were not disclosed, Connealy noted that the experience of the Synergy One management team played a role in Mutual of Omaha’s decision to acquire an existing lender rather than strike out on its own. For now, Synergy One will be largely in charge of marketing the HECM for Mutual of Omaha, maintaining its office in San Diego and continuing to originate loans under the RFS brand.

But eventually putting the Mutual of Omaha name on reverse mortgages is part of the company’s long-term plan in the space, Connealy said,

“I would call that a phase-two right now. We’ve got to obviously close the transaction and let the dust settle and get our feet on the ground,” he said. “I certainly think that’s a possibility in the future, that we certainly could put the brand — and probably will put the brand — on the product, but we don’t have any definitve plans just yet.”

Written by Alex Spanko

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  • While Alex did the best that could be expected, the acquisition story reeks of being too shallow and artificial. Yet it is not that I have a better story to tell.

    Corporate culture and mission statements are handy ways to explain mergers and acquisitions that occur years later. Don’t incorporate without them.

    It is interesting that Mutual of Omaha determined it needed a bank with mortgage operations. It is that strategy that is not explained in this very well written story. While Torrey Larsen is a great guy by all accounts, I doubt if it was his charm alone that made the Synergy One buyout happen. Now that would a tale worth reading.

  • With all due respect to the Mortgage President of Mutual of Omaha, Terry Connealy, on his remark about positive changes to the industry. He either doesn’t know the industry well enough, or because he is new to the reverse mortgage industry, there is a certain sense of naivety. The changes implemented on Oct 2nd of last year by ambush, without the industry having a right to review them and submit comment to HUD has been nothing but devastating to the industry. There is no long term positive in those changes as the industry has already experience. If continues drop in production months after months is a positive long term affect, then I don’t know the meaning of ” a good long-term change”. Those changes have hurt seniors that depend on the equity of their homes to sustain them in their retirement years. Many that would have qualified previously to October 2nd, do not at this time, and that’s a travesty, not a positive change.

  • I have a completely different view on things than Nick has, I can’t really comment on what carmine’s comment stated!

    I feel that Terry Connealy of Mutual of Omaha Bank has pegged it right! The strategy plan he has presented in this article not only has an excellent chance come to fruition but makes a lot of common sense as well!

    Mutual of Omaha Bank can be and I feel will be a major player in the months and years ahead in the HECM world.

    They are positioned just right, they are a bank, they will fund their own product, I am sure they will be the GNMA issuer and being a full product provider will give them a major edge in the market!

    Another advantage I see Mutual of Omaha Bank having is the ability to do the construction lending in conjunction with doing the H4P program!

    I feel this is a positive move for our industry as well as opening up career opportunities for many.

    I realize time will tell but I agree with Terry Connealy, the timing is right. I am exited for them and Torry Larson!!

    John A. Smaldone
    http://www.hanover-financial.com

    • John,

      What will be interesting is to see their marketing campaigns and their selling strategies develop. As a lender dedicated to making beachheads into the financial advising community, it seems the choice of Synergy One is a good one.

      Let us hope MOOB is dedicated to fund the reverse mortgage operations sufficiently so that new roads can be paved into the 98% of the senior population that the industry has been so far ineffective at doing.

      Success will not come easy but should come with time. Torrey Larsen and his hand picked executive team should be able to navigate through the next few fiscal years and be prepared to leap into action as the dust created over the last five years of HUD changes clears.

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