Because of the demographic primarily served by the industry, sometimes the reverse mortgage business can get a reputation as one that is too “old fashioned” or resistant to a progressive kind of change in terms of the processes that it uses to accomplish the goals of its practitioners and clients. One company that has tried to push the industry into a more technological direction is Austin, Tex.-based Open Mortgage, led by CEO Scott Gordon.
With a great deal of attention given to both the advancement of technological processes and the creation of devoted company culture, Gordon shows a keen interest in the ability of the reverse mortgage business to help its clients in new ways while strengthening the core processes that the business operates with. Open Mortgage stands out as a top 10 reverse mortgage lender based on endorsement volume, but Gordon aims to make clear why purpose needs to be the guiding light for any business, including a business that competes in the reverse mortgage arena.
This is one of the reasons we’re honored to select him as a member of the 2021 class of Changemakers.
RMD: What is a component of change that you feel should be being made in the reverse mortgage industry that is not being done currently?
Scott Gordon: Improvements to the way we interface to clients, and specifically, the hybrid of high tech and high touch. How do you use tech to enable personal relationships? Because everything starts with personal relationships. Across our forward and reverse channels, we want to enable what I would call “big fish in little ponds,” loan originators who are in communities and have relationships in those communities.
So, we look for how tech can help people grow their business in their local community because that’s relationships and that’s where they are. Certainly, compared to some loan originators probably on both sides, many want to buy a bunch of leads and do loans all over their state. But buying leads in that way to me feels like a hamster wheel compared to building up the relationships in your community.
RMD: Does that tend to go toward the idea that grassroots work in terms of facilitating those kinds of connections just tends to forge stronger bonds with clients?
SG: Yeah, for sure. And I think another influence for me is the question, “what are you building?” So if you’re just doing $5 in and $5 out, and you’re buying and working leads, are you really building anything? So we try to think of what we want Open Mortgage to be, so that we can build that or fund it. Where do we want it to be? If we’re just doing a product to do the product, but we’re not building anything, that doesn’t seem like a good idea.
RMD: Do you feel like this is a business that is conducive to change, or as an industry leader do you find that you and others have to exert too much pressure to try and force change out of it?
SG: My quick answer is yes. Is it harder to change things in the reverse space? I don’t know if that’s really true. I’ve started eight or nine companies and been in different industries, and there’s always some impediment to change.
I want to be careful not to sound ageist, but a lot of reverse mortgage loan officers tend to be closer in age to their clients. So, some of them are less excited about innovations that come from technology. These days, a lot of changes simply come from tech: it comes from platforms, IT systems, social media, so sometimes it feels a little like people are happy enough to keep doing what they’ve been doing. So, you have to build up a little energy around it.
That’s all great, but what else could we do? How could we make this better? And not just for borrowers, but also so changes can be better for the loan officer. There, we look at how we can make the pipeline go faster, and how we can make the loan officers’ lives simpler so they can go originate more loans if they want to.
RMD: As the leader of a multi-channel lender, do you think there should be more solid walls between the forward and reverse sides of the mortgage business? Or, should there at least be more communication between both sides? How do you guys tend to approach that travel distance between the forward and reverse sides at your business?
SG: We have, and I’m sure, a bunch of companies have, a program where if you’re a forward loan originator, someone else can help you get the loan done. You shouldn’t go help a client without being really knowledgeable about how to do that. So, we have the range to say that we can just do it for you. Or, we can have somebody help you, and can help bring you up to speed if you want to do more of a particular kind of loan.
I think the difference between forward and reverse comes down to where you go hang out to find more clients, it’s different between the two. Some people might say “well, it’s just a different product, so why not do reverse as well as FHA, 203K, conventional, etc.?” The idea that “it’s just one more thing.”
But where you go find all those borrowers [is different]. You want to build up momentum in a flywheel hanging out in the right places, communicating with the right people doing the right things, and that’s different for forward and reverse. So if you try to do both, it can water down each other. The two halves can water down each other. I think that’s maybe the rub, and why you don’t see too many people who do both at the same time.
RMD: As someone in your position is all too aware, the reverse mortgage industry suffers from some reputational issues. We’ve had a couple of instances over the past eight-to-10 months where national regulatory bodies have come down on reverse lenders. When you see things like that happen, what does that tell you? How might you be able to expand a leadership position in the industry from a cultural perspective, or do you take other lessons from that when considering that this is a product that has had reputational concerns?
SG: It’s, to me, a cautionary tale. Do you remember “Successories?” They were beautiful photographs with a little business idea underneath?
RMD: Oh, yeah.
SG: One of my employees, president of a company I owned, gave me one for boss’s day with a sailboat that said, “don’t wait for your ship to come in, swim out to it.” But there was another line of those that were all humorous in a negative way. One is a ship that’s grounded on the shore, and it says, “sometimes your purpose in life is to serve as a warning to others.”
So, when I see stories of people getting in trouble, this is important. Mortgage for anybody is important, it’s a huge financial transaction. But for seniors, It’s even more important, because they’re a protected class but specifically, they are people who might be more vulnerable or easier to take advantage of. So if I see people get in trouble, my first thought is, “we have to make sure that we’re not that,” if that person or company did anything wrong.
But whether they did or not, we have to make sure that we’re doubly careful that we don’t do something wrong. Yes, we want to close loans and make money, but we have to be helping people, and it can’t be about churn. That was something to think about here with COVID-induced low-interest rates. Before COVID, HECM-to-HECM refinances were certainly a thing, but the industry, the servicers and issuers pushed back on refis. But the rates got so much lower during COVID, that it was such an advantage to people that you couldn’t push back. It was a really reasonable thing to do.
So, that’s going to be another thing to watch for that as interest rates rise, we don’t want to be a company that’s trying to squeeze out the last HECM-to-HECMs when there’s going to be a place where they’re really not benefiting people. So, when I read those stories, I’m just mostly thinking, “I don’t want to be in that situation.”
RMD: In terms of current refinance volume, where do you find the balance between an idea that says this might not be the best move for the industry at-large, but at the same time, if there is a tangible benefit to the borrower, you should go through with it? How does the current refi situation coalesce for you?
SG: I think that’s always a conversation with loan officers, about how much benefit has to be there for seniors. You don’t want to do a loan where the seniors hardly getting any benefit, and you don’t want to be causing churn. It doesn’t make any of us look good to be refinancing loans that don’t need to be refi’d, and that hurts issuers. So not on the human side, but on the business side of it, we want to be a good partner in the industry, and not have a bad reputation, just like I try to have a good FICO score in my personal life.
And then on the personal side, I do think it’s a discussion we have with loan officers about making sure there’s a lot of benefit. We’re pretty fortunate, I know, I can think of a person who was with us quite a few years ago, who we split up with because of his churn. But for the people we have now, I don’t see anybody really trying to push.
As you said, HECM-to-HECMs come along, and people have a benefit, and that’s great. And there’s more and more of that when interest rates are so ridiculously low. But, I don’t have anybody who’s just focused on that. It’s like the forward side we still have a surprisingly high purchase percentage, because we didn’t want to focus on anybody who wants to live on refis.
RMD: If you had to nail down what it is you think separates Open Mortgage from other competitors who operate in the reverse mortgage space, is culture the one core attribute you think helps to distinguish the company? Or, is it a series of things?
SG: With any mortgage product, it’s really hard to distinguish yourself. I think culture and service are the two things that pop up in mind, and maybe they’re the same thing. One of our core values is being “of service.” If all of my employees don’t think about being of service – and sometimes it’s to each other, the underwriter, the processor, and the closer – but if you don’t think about being of service, then how are you going to great do a great job for those other people? Or the borrower, or the loan officers?
So, I think culture can lead to the big differentiator as much as there is because the product we’re helping with is purely a commodity. So, it’s just about closing on time, having less headaches, thinking ahead to be helpful. It’s tough, because sometimes I think why didn’t I get into something where there’s more differentiators? [laughs]
RMD: In terms of what you said about mortgage in general in that it’s hard to have a lot of distinguishing qualities, would you say that is more, less or equally true of reverse?
SG: It’s less true of reverse. I think it’s easier to do a better job on the reverse side than the forward side. It’s not as commoditized. I still love reverse and want to grow and be bigger. But, the other thing that popped in the back of my head when I said culture and service, it’s melded like a Venn diagram of the overlapping circles, is people.
I think – and I’ve known this for a long time – the older you get, you’ve lived them and experienced them to where you don’t just know it, but you really believe it. So, I’m in that phase with Open Mortgage, where we are remodeling, shifting around our entire senior staff to have a team that’s ready to take the company to the next couple of big levels. And it’s so much easier with the right people. But the definition of “right people” gets back to service and attitude.
Look for an exclusive interview on RMD with Joe Stephenson, the recently-appointed president of Open Mortgage in early 2022.