In our third and final part of our wide-ranging interview with American Advisors Group (AAG) President and COO Ed Robinson, a wide variety of industry topics and AAG’s posture toward them are explored. This includes the prevalence of refinances taking up a large share of Home Equity Conversion Mortgage (HECM) volume, the potential future of the HECM for Purchase (H4P) product, potential new business opportunities the leading lender could explore and the guiding philosophy for Robinson in a key leadership position at the industry’s leading lender.
Robinson cites his long career in the U.S. military as a major influence on his leadership philosophies, the importance of AAG’s role as a reverse mortgage industry leader as well as the responsibility he feels as a provider of senior-focused services.
RMD: We just came out of 2021, and it was a year of record recent record for the reverse mortgage industry, at least in terms of loan production. Now, the lending limit is rising on the back of record home price appreciation, though a lot of the record in ’21 seemed to come from the heightened production of HECM-to-HECM refinance transactions. How is AAG planning on keeping pace in 2022, as early indications show rising rates, which will likely bring a reduction in refis?
Ed Robinson: I’ve spent a lot of time over the past few months thinking about this. Spending most of my business career in the forward mortgage space, I’m used to seeing this rapid shift in production, and also staffing levels both up and down as rates shift. Unfortunately, that generally leads to big swings in profitability in that industry, but it’s also led to some real process and technology innovations and digitization. Those [kinds of developments] have led to some really positive changes. So in reverse, one might see these high refi rates as a double-edged sword.
From a consumer perspective, there’s definitely the ability to put more money into the pockets of seniors, which is an absolute positive and I’m ecstatic we can do that. But from an industry perspective, I think there are some challenges that have also emerged. One is direct downward pressure on MSRs. There’s pressure on margins and gain on sale. What I believe many have missed in the industry, is the fact that the industry is actually missing a real opportunity to expand new production because of being able to go after the easy refi money if you will. So, it’s with that lens — especially with the lens that we don’t just want to chase easy money — but with the view that rates will indeed rise.
It’s that lens that you use to develop a number of strategic priorities to focus on growing the pie for AAG and the industry for new production while not taking our eyes off the still-existent refi production. We know there’s still a fair amount [of business] there. So, the way that we’re thinking about this is that it’s a “plus-and” between really new production and refis, and not a “but-for” for in lieu of refis.
We’re maintaining an immense focus on marketing and awareness, repeating partnerships, especially in distributed retail and becoming more efficient and customer-centric to gain momentum on both inside-out and outside-in perspectives, so that we can truly tap into the refi market for the consumers [and make sure they can] utilize them the best. But, we also want to make sure that we’re actually turning our attention to growing the pie more holistically for new production.
Another product that I try to keep an eye on is HECM for Purchase (H4P). At last count it was still in the 6-7% penetration range in terms of total reverse mortgage industry volume, which is low already for what many people consider to be a niche mortgage product. How important do you expect H4P could become in the future for AAG? Do you think there’s an untapped opportunity there, or are you guys simply focused elsewhere?
We do believe [H4P is] an interesting consideration for AAG and the industry, but it comes down — I believe — to timing, which is largely dependent upon ancillary industries such as home sales and building.
They’ve got to get on board with the understanding that this product takes longer to originate. In the forward space, if you take longer than 30 days to originate a loan for a purchase, you’re dead in the water because the vast majority of contracts are written on 30-day paper. So, I think we’ve really got to do more as far as connectivity with those ancillary industries and the system if you will. They’re still quite immature in understanding what it takes to do a HECM for Purchase.
If you look at the market dynamics right now, all signs are pointing to people working later in retirement, which is complemented by the shift to more people working from home. Home prices continue to rise, which is a great thing in this space, but there’s also a massive migration of folks moving to states and locations that are either a better fit for their lifestyle, their retirement or just the general cost of living.
Does AAG have any business ambitions beyond being a leading reverse mortgage provider or is the company planning on staying primarily focused on that business?
Akin to how I spoke about proprietary products, I can’t get into deep specifics about our business strategy. But what I can say is that a real focus of AAG now and into the future is how we [further develop] what I would refer to as an entire ecosystem of products and services that serve seniors’ needs.
At the center of that ecosystem is, of course, the Home Equity Conversion Mortgage to leverage for these broader needs because reverse mortgages are our core and our foundation. But, we do believe there are plenty of other products and services we can absolutely bring to bear more broadly to support holistic needs for seniors.
Is there anything that I didn’t touch on that you think our industry audience of originators, underwriters, brokers, other executives and government officials should know about your position now?
If there’s one thing I think it’s important for folks to understand about me and my leadership at AAG, it’s really my passion for service. I’ve spoken a lot about my thoughts on customer service and delighting the customer. That really comes from a place of having served the country for a couple of decades in the military and seeing firsthand what prior generations, especially the greatest generation, have done and the sacrifices they’ve made for this great country. The best country in the world. Our seniors deserve all the respect, caring and service we can provide. And we definitely need to do what we can to give them that.
Secondarily, I would say that being a little bit of an outsider to the reverse part of the industry, I’m sure folks are questioning a little bit about how I plan on going forward. The simple answer is with integrity. I think I can make this come to life with what I refer to as my “Bubba test.”
My son Wyatt just turned 10 this week. And ever since he was a little roley poley baby, I’ve used the term “Bubba” as a term of endearment for him. He’s a strapping lad now, thin and athletic, but he was definitely a little chunky baby. Ever since he was born, I’ve taken on this mantra for any major decision I make.
I need to be able to look Wyatt or Bubba in the eye and be proud of that decision, and know that he’ll be proud of that decision, and that he’ll adopt sound decision-making himself with that same modicum of integrity going forward. So it’s with that lens that I am taking serving seniors and the industry with passion and frankly, I see it as an honor. I’ll ensure AAG continues to be the leader in the industry, doing great things for seniors with absolute integrity and passion.
Read part 1 and part 2 of our exclusive interview with Ed Robinson.