While reverse mortgage origination volume saw a bit of a dip in August, 2021 when compared to previous months falling below 4,000 monthly units for the first time since late last year, becoming too reliant on such a metric without a trend can be counterproductive. It also may not be wholly indicative of the state of the business in the moment or into the near future, and shouldn’t distract a reverse mortgage lender from aiming to meet its business or customer satisfaction goals.
This was a perspective shared by Jesse Allen, EVP of alternative distribution at American Advisors Group (AAG) in the latest episode of The RMD Podcast, available now. In a wide-ranging discussion, Allen talks about some of the current initiatives that AAG is developing, what trends the company aims to stay on top of in its business, the data metrics that remain important for the purposes of business planning, and how the reverse mortgage industry has changed in the 14 years that Allen has been in the business (across two separate stints).
Home Equity Conversion Mortgage (HECM) endorsements fell in August, 2021 by 14.3% to 3,679 loans, with July now having marked the end of a streak of monthly volume above a threshold of at least 4,000 units that has been observed since late 2020. This is according to data compiled by Reverse Market Insight (RMI).
When examining the data on behalf of AAG, Allen points out that the major lenders all saw a precipitous drop in endorsements, with the majority of the top five lenders actually underperforming in relation to the wider reverse mortgage industry.
“If you look at the top five lenders, and we’re in that mix, only one of the top five were up month over month,” Allen explains. “The top five are actually down more than the industry overall, month over month. So, my view on that is that we all know HECM endorsement flows — there are a lot of things that impact endorsement counts versus originations and funded volume. There’s math and lag time, and different lenders have packaging, shipping and endorsement delays along the way.”
This naturally brings up reasonable doubts about how indicative the new data is in observing an industry-wide trend, and whether or not something which is a “blip” in the data until other, succeeding months emerge should be a concern for a major reverse mortgage lender going forward.
“So I’m not sure, number one, is it indicative of just the process of endorsements? Or, is it indicative of originations and fundings? But the bigger picture is that we are focused on the long haul.,” Allen explains. “And so to me, a month over month blip – I notice it, [and I] pay attention to it, [and obviously we] don’t want to string a bunch of them together – but it’s inconsequential to me in the bigger picture.”
Ranking highly in separate sales channels
Because of AAG’s general ubiquity in the reverse mortgage space, separate business channels at the lender account for very high rankings in the individual business sectors that the company is focused on.
“Each of our sales channels are dominant players in their respective spaces,” Allen explains. “We have three core sales channels: direct to consumer – which everyone knows dominates the retail space, that’s our call center and the most mature of our channels, and it’s a machine. They do a great job servicing clients, and pushing back on the theory that you can’t sell this product through the phone. So, they dominate the retail space. And then my field sales channel as a standalone retail entity has gone from nowhere to probably the number four player in retail.”
The growth of AAG’s distributed retail group gives a unique perspective on the ability of the company to answer the needs of a broad client base, Allen says.
“We’re a top four lender – the distributed retail group, my field sales group all by ourselves as a standalone – and the same is true of wholesale, [which is] in the number three or four spot,” Allen says. “So if you think about AAG, not only do we have considerable market share, we have a very long-term view on the customer and providing a service to our loan officers and our customers. And so, a month over month blip for us is sort of just that. Each of our channels are top four players, and so we’re committed to the long game. And so, we tend to focus less internally on going long on those month over month changes in endorsements, as an example.”
The tech gap in reverse mortgages
It is also important to recognize any current or emerging shortcomings that the entirety of the reverse mortgage industry may have on an institutional level, and one such area that the whole business sector can likely improve is the incorporation of technology, Allen says.
“The challenge of evolving our capabilities is more acute in this industry than other more mainstream industries,” Allen says. “Take technology as an example, and I think the pandemic really brought this to light for a lot of folks: this [has been] been such a niche industry, there hasn’t been the robust investment in how we use technology to take out cost, improve manufacturing quality, and deliver a great loan officer and customer experience. That dialogue [and] investment hasn’t happened as vigorously in reverse as it has in traditional mortgage, as an example.”
Because of that, the potential for the reverse mortgage industry at-large in the United States is very high in terms of modernizing and streamlining its technological capabilities, even in spite of other issues that might hold that side of the business back on the regulatory front, he says.
“There’s more [discussion about technology] going on today than ever before, which is really exciting,” he says. “And I think the industry will figure that out. But, I do think that is one thing that we have to figure out if we’re really going to serve more of those 78 million potential buyers in the age 55-and-up demographic, and what they’re growing to. By definition, that means we have to begin to solve some of these things where the industry has been a little bit late to the game just because of the nature of the history, the journey we’ve been on together. So I think that’s when you think about operationalizing the challenges beyond just loan manufacturing and fulfillment.”
Finding the right places to invest in technological development for the reverse mortgage lender, broker and borrower presents a challenge, but a potentially rewarding one for everyone involved because of the possibility it can bring in terms of streamlining operational efficiencies, he says.
“I think that’s a big strategic opportunity for the industry,” Allen says. “And I am very bullish that we’ll figure it out. Because again, there’s a lot of effort around that more people talking about it than ever before.”
Listen to the latest episode of The RMD Podcast for the full discussion with Jesse Allen.