As the leader in the reverse mortgage industry, number one lender American Advisors Group (AAG) is often looked at as a standard-bearer for the entire business due to its reach and ubiquity in the space among the public.
To get the lay of the land from the industry leader’s perspective, RMD sat down with AAG President Ed Robinson and SVP of Wholesale Kimberly Smith during the National Reverse Mortgage Lenders Association (NRMLA) Western Regional Meeting in Irvine, Calif.
Robinson and Smith both discussed growth in wholesale, the need to further expand the base of senior homeowners that can be served by the reverse mortgage industry in light of new economic challenges, reduced volume and a new focus on improving the customer experience.
Reverse mortgage ‘inflection point’
The rapidly-changing reverse mortgage environment has brought a semblance of focus to the way that AAG conducts its business, Robinson explained.
“I’d say we’re at a bit of an inflection point not only in our business, but in the industry as a whole,” he says. “Number one is, with what’s going on with interest rates and the forward mortgage market, you’re seeing a little bit of an ebb and flow in both at the same time, especially in the retail space. So, there’s an element of higher interest rates causing people to lean less into forward mortgage, and ergo some of the refinances you would have seen move more towards reverse mortgage.”
However, the reality of higher interest rates also means that borrowers are not able to see the amount of loan proceeds they had been able to previously, which has helped to emphasize the need for AAG to remain nimble, Robinson adds. Something they are seeing, though, is increased activity on the wholesale side.
“We’ve seen a lot of really good momentum in the wholesale space, I know that Kim specifically has seen a nice uptick in volume, even as we’re repositioning ourselves in the wholesale market more holistically,” Robinson said. “That’s been very favorable.”
Part of the uptick in wholesale volume, Smith says, comes from inflation and new economic uncertainty.
“We’re at a point right now where this product is needed more than ever,” she said. “Inflation is killing people, especially anybody on a fixed income.”
Refining customer experience at AAG
In a prior interview Robinson held with RMD, he spoke about a major 2022 priority being centered on improving customer experience. When asked how that initiative was progressing, Robinson said that new information will help to improve existing customer processes.
“We brought in an industry expert in the realms of customer experience, journey mapping and marketing to help us literally map out the entirety of the customer journey,” Robinson said. “As we continue to update our processes and technology, we plan on leveraging that new information so that we can actually retrofit those attributes to meet customer experience needs. At this point, we’re a couple of months into the project and have already identified several friction points that we’re actively looking to remove.”
The project has also identified new opportunities to streamline processes aimed at improving adoption rates and enhancing the consumer “want” for engagement with AAG and its product offerings, Robinson added.
“The initial results are good,” he said. “We’ve also done some recent survey work with our own customers that are in the pipeline as we speak, and have gotten really good feedback that is either justifying or negating some of our assumptions. We’re then taking that work and applying it to that customer experience/journey mapping exercise as well.”
Smith added that these initiatives also ring true for the company’s broker/lender customers in addition to borrower customers, and that pain points on the wholesale side are similarly being identified and acted upon.
“We’re doing the same work with our wholesale clients: surveying, interviewing, finding pain points and opportunities to get better,” she said. “So it will impact not only will the client journey and help our wholesale clients’ borrowers, but we’re also looking through the lens of B2B relationships. I’m really excited about the initial results.”
Diminishing refi volume, AAG wholesale activity
While remaining at historically high levels, reverse mortgage industry activity nonetheless saw a drop in the month of May, coming off of a prior volume reduction in April. Robinson noted that the volume reduction seen industry-wide has affected the retail and wholesale channels of AAG, but also describes that reality as a learning experience for the company and the industry.
“We are definitely seeing a significant reduction on our retail side of the house as well as a reduction of sorts in our wholesale side,” he said. “This would indicate that the industry more broadly is seeing reductions in refi. The one thing I will say is that it’s allowed us to ask ourselves from both a business and an industry perspective, what do we do to truly enlarge the pie? I love to be able to help consumers have access to more liquidity, regardless of their status as an existing or new borrower.”
At the same time, refocusing the industry on “expanding the pie” of the addressable market and increasing the penetration rate among senior homeowners is a byproduct that could come from a diminished emphasis on HECM-to-HECM refinance transactions.
“At that point, we need to help more consumers so they can battle inflation, who can battle rising interest rates, etc. We can make sure they have another arrow in their quiver to be able to use, and this is the way that we actually make that happen.”
Still, if refis provide a tangible benefit to a borrower, they won’t be turned away. But turning broader attention to shifting economic dynamics is key, he says. Smith adds that as rates inch up, the wholesale side of AAG has seen an increase in inbound inquiries because of shrinking forward business leading to a need to backfill lost refi business.
“We don’t have to call [those partners] right now,” she said. “They’re calling us because they have this gap in their business they need to fill. They see the need and the opportunity. It’s a direct correlation: rates increase, then wholesale phones start ringing.”
This interview with Robinson and Smith was conducted prior to news of a workforce reduction at AAG last week. As reported by HousingWire Managing Editor James Kleimann and Mortgage Reporter Flávia Furlan Nunes, the company confirmed that layoffs took place but did not specify any additional details or numbers of affected employees.
“AAG asks its business unit leaders to continually evaluate their department’s overall costs and staffing needs. After analyzing market trends, AAG has made some organizational changes,” a spokesperson for AAG Holding wrote to RMD and its sister publication HousingWire. “We regret any negative impact that organizational changes have on AAG employees and their families.”
Recent layoff activity in the reverse mortgage space has not been isolated to AAG, as multi-channel lender Open Mortgage confirmed that 14 employees were let go as part of a reduction in force (RIF) affecting that company’s forward mortgage operations team on the heels of the exit of its president. Layoff activity in the forward mortgage space has also accelerated recently with big shifts in the rate environment and sharply reduced demand, as reported recently at RMD sister publication RealTrends.
Look for more from Robinson and Smith on RMD soon.