Not many people in the reverse mortgage industry today can say that they’ve been in the business for a quarter-century without a name change. One company that can lay claim to this is Novato, Calif.-based Bay Docs, LLC and its founder, president and CEO Megen Lawler.
That’s not to say that the entirety of the past 25 years has been without a fair share of changes, however. Rapidly-evolved technological standards and the introduction of its own Loan Origination System (LOS) are just two of the developments that Bay Docs has experienced over the course of the company’s lifetime, evolving beyond being just a reverse mortgage document provider.
The company also offers a unique perspective as a front-line observer in terms of how the reverse mortgage industry has changed since 1994, less than a decade after the law that gave birth to the Home Equity Conversion Mortgage (HECM) program was signed by President Ronald Reagan. RMD sat down with Lawler on the occasion of Bay Docs’ recent 25th anniversary to see where the company has been, and to chart where the industry at-large is still going.
Bay Docs just passed its 25th anniversary! Congratulations.
What does it mean for you and for the company to have been in business for 25 years?
I think for me, personally, it’s quite a milestone to have started Bay Docs way back when reverse mortgages just basically took off and got started. Having been in the industry [for a] longer period [of time] than most people in it today, it’s been a nice ride. It’s interesting to see all the changes in the industry, the changes in the players coming and going, and we’re just proud of ourselves. I think we’re the only company that’s been around this long with the same name.
That’s definitely an achievement! In what ways has the landscape of the business changed most compared with the landscape when you first started?
The entire financial assessment piece, that’s a huge change from the first 10-15 years of the industry, where it was kind of just business as usual. One of the very first big changes in the industry was a change to the margin, because we always had static margins. Lowering the margin created a big stir in the industry. Then we saw a switch over from the adjustable-rate product to the fixed-rate product, then back to the adjustable-rate product.
Of course, the introduction of the financial assessment, the non-borrowing spouses, there’s just been a lot in the last 5-7 years. We’ve really, as an industry had to buckle down, go through the changes and weather the storm. Then, [we’ve had to] retrain loan officers, processors and underwriters. Luckily we don’t have to [take on] that part of it at [Bay Docs], but we’ve had to help them and accommodate them from a document perspective, and create tools that can help them to describe the changes to their teams and make them work better together. And then, with our origination system, we’ve just been adapting to all of the changes as they come down the pipeline.
Our origination system is newish to the industry having been launched in 2008, with more of a public interface in the last three years. It’s been an interesting ride that way. One thing we’re looking to work on and to help the industry as a whole know better is that Bay Docs isn’t just a document provider, but that we also have an origination system.
Many people still don’t realize it, and we’re trying to do what we can to get that in the eyes and in front of the industry so that there are options out there for people.
You once told RMD that one of the biggest challenges facing Bay Docs was all of the changes in regulation and compliance rules. Do you find that’s gotten easier over the past 25 years, or is it just as difficult as it always has been?
I think the challenge at that time was really that we’d gone so many years without state-specific regulations that reverse mortgages now operate under, and different regulatory agencies coming into the industry. For a long time we were always this industry that sat in the corner, and now we have regulators and the CFPB and the FDIC coming in and looking more closely at our lenders, and auditing [in some cases].
It’s always been a challenge teaching regulators about reverse mortgages, meaning we don’t do certain things, or [regulatory provisions] that the HECM is exempt from, and just trying to get everyone on the same page. We’re not a lender, but we provide a lot of compliance documents to the lender, so we want to make sure that what we’re putting out there is what the industry wants.
From an ongoing compliance standpoint, I think it’s much more complex than it used to be, and staying on top of state, industry, regulatory and calculation changes makes it feel like there’s always something we have to keep our eye on.
What new opportunities exist for you now that may not have existed when you first started?
Certainly technology accounts for the biggest change. We joke with people that we started out as a “fax in your request” business, and we’d then type it into some type of spreadsheet we had, then we would somehow merge the documents, print them out, and then FedEx them to you, and hope there’s not a storm between California and New York that would delay the package going out there.
Then the technology started growing, and growing fast. So, we went from those kind of humble beginnings to today, where we have electronic signatures, and we can send secure emails to people where they can just click on a button and sign their disclosures. That’s quite different from my first application, where I counted 52 signature lines, and my borrower fell asleep at the table. So now, there are things that exist to show we’ve streamlined the packages, we’ve worked with HUD to get rid of document duplications.
I still think we can do better at that, and as an industry we should uniform a lot of the disclosures so that everybody’s on the same page and sending out the same documents, so that if someone gets an audit, there’s strength in numbers, like we’re all doing it one way. That’s what I look forward to coming down the pipeline, and I work hard with the committees at NRMLA and the other vendors to try and get us all on the same page.
Would you say that the introduction of new technologies account for the biggest adjustment you’ve had to make to the function of the business, or would you say that there are other adjustments you’ve made that are just as, or perhaps bigger?
With technology, you have to grow with it. That’s for sure. I think the biggest thing we have in our business environment is when we have our industry changes that aren’t just system changes, but that also impact documents like the security instrument, where there’s at least 150 versions of them.
If we’re not given enough time from notifications as to when certain notifications become effective, we have to scramble to make sure we’re up-to-date on the live date so that all of our customers who depend on us for compliance packages get what they want.
Do you think there are still some adjustments that can be made going forward?
I think there’s always going to be adjustments going forward, but the introduction of proprietary products makes [the current industry landscape] interesting. In the past there were several proprietary products that were available, but never really got off the ground. Now we’re seeing a need and want for proprietary products, where people can either tap into higher home values to get more equity, or maybe they didn’t qualify under a different program but now can qualify for a proprietary.
So, I think it’s great for the industry and for the borrowers, since there’s a whole market of seniors that have choices. But, as those come out, there’s more we have to learn. Doing a proprietary isn’t as simple [for us] as just taking an existing document and removing the words ‘HUD,’ and then calling it proprietary.
There’s regulatory nuances where the HECM program has certain exemptions that a proprietary product does not have, and so you have to really look at what’s out there both from a document and a compliance standpoint, and really make sure you’re hitting all of those requirements for proprietary products.
How does reaching this anniversary affect your outlook for the future of both Bay Docs and the industry at-large?
The nice thing about having been here for 25 years is that when we first started as a brand new product in the financial space at various conferences, there would be experts that would get up and say that it takes about 10 years for a financial product to become viable in the financial space. We passed the 10 year mark and were still going, then we hit a blip for a couple of years.
Now, the fact that it’s all stayed, and is even progressing and getting better, and now that volumes are going back up again, I think it’s starting to speak to the health and viability of the industry. I think that’s great.
Is there anything you plan to do with the business in light of reaching this milestone?
Just keep pushing forward. We really want to push our origination system, we want users on it and to share what we have with the industry, since we do things that a lot of the companies don’t realize we do. Our goal is to really shine a light on Reverse Express, which is our proprietary LOS system, what it can do for brokers, correspondents and lenders. A lot of the larger lenders have their own proprietary platform, and so the origination platform is primarily for customers that don’t have the resources of the larger companies that are out there.
There are options out there for people, and I think people stay with an option [without realizing] there are other options to look at. We can integrate with the majority of all the investors and wholesale lenders in the industry today. We love being known as the doc prep company, and as Bay Docs which has been in business now for 25 years, but we’re also an origination company. I’d like that part of our services to be pushed as we move into the next 25 years.
I likely don’t need to tell you about some of the difficulties the industry has been facing, between reduced PLFs, depressed volume, etc. Where do you think the reverse mortgage industry goes from here?
I’m always an optimist. I think that there’s a lot of growth potential, and have always thought there’s a lot of potential in our industry. I’ve listened to a lot of speakers over the years, and remember someone saying when the financial assessment first came out that the industry had to get through that rocky road, right the wrong, create better underwriting guidelines to sustain this product. I believe we’re there, and that the next steps are going to be to add new products, or growing the HECM and proprietaries that we have out there to make the reverse mortgage a commonplace name, and also one with a good reputation.
I feel sometimes when I talk to people and tell them I’m in the reverse mortgage industry that I still get [reactions of incredulity]. I’ve been in it so long that I really stand by the product, and I really think that for the people who get the reverse mortgage, that it’s a real need and a want. I think it works great for them, but I also don’t think it’s for everybody. I think groups like NRMLA and the marketing committees work really hard in trying to change the look of the reverse mortgage to be positive, and something that works for borrowers that need and want it.
Anything I haven’t asked you that you wanted to speak to?
We’re proud of the fact that we’re still here, and that regardless of industry changes – even though we’re on the service side – we think we’ve done it well, and will continue to do so. And, we’re happy to be woman-owned. It’s a female-owned business, and that’s something to be proud of.