One of the more exciting things of 2009 is seeing new companies move up the ranks of top reverse mortgage lenders. Over the next few months I’ll do some short interviews with different companies whose volume continues to grow but might not be as well known as the typical names you see in our top HECM lenders posts.
To kick things off I reached out to Jason Levy, Guardian First’s CEO, to discuss how he made the switch to the reverse mortgage business in late 2006, and has built his company into one of the fastest growing revere mortgage lenders in the country.
In the interview we touch on what Levy had to do in order to transition his “forward” originators to the business and how smaller lenders can compete with the corporate reverse mortgage lenders.
Q: When you made the switch to the reverse mortgage business, what were some of the challenges you faced at the beginning and how you were able to get past them?
A: I decided to transition into the reverse space in late 2006, early 2007 in the height of the forward market just before the forward mortgage started to show declining credit trends. When we made the switch from forward to reverse, I had to retrain our existing core of loan officers and slowly recruit a unique blend of originators with various types of financial backgrounds.
Our main focus is needs based selling. The comprehensive training covers needs recognition with an emphasis on determining a Senior’s eligibility based on an evaluation of their current financial state of health.
Q: Was there a point when you saw things start to click after the initial switch to the reverse business? Did you have to try different things to see what worked?
A: It took 6 months to fully understand the reverse target market. During those months I grew the new business model carefully watching costs and focusing on the shelf life value on new leads. Once our team of originators understood the message that "buyers don’t necessarily buy when a seller is ready to sell" the conversions improved exponentially. Keeping in contact with our potential client base is essential and loans have originated in excess of 7 months since lead inception. Execution is key.
Q: What is the biggest challenge you see reverse mortgage lenders facing this year?
A: Managing costs is crucial. Origination costs are rising and fees in our industry are capped. Lately, the most challenging variable is the yield spread premium. The back end pricing has been erratic and originators have to be very disciplined with spending and managing conversion to survive any future back end drops. Those that navigate through those challenges will gain market share.
Q: What is the biggest opportunity you see for the reverse mortgage industry?
A: The target market is growing at a rate of 10000 per day. We are offering a solution to a needs based problem. Through comprehensive educational efforts seniors are understanding that a reverse mortgage is not simply a last resort product, but strategically a sound financial decision.
Q: I see one of the biggest challenges our industry faces is taking someone new to the business and showing them how to be successful. How have you gone about developing new talent?
A: What I’ve learned is that a forward loan officer will have to reinvent his style early on and realize that the steps to origination for a reverse have a completely different path and time line. These lessons are learned the hard way and most forward shops do not have the financial means to survive the learning curve.
Also, the barrier to entry into our business is high from a stand point considering things like cost per lead, cost per closed loan, licensing costs, compliance, fee caps, technology. Most mortgage shops do not have the sophistication or patience to cultivate a healthy business model with these challenges
How can independent shops compete with the marketing muscle behind the MetLife, Genworth, and Senior Lending Networks of the world?
A. In order for an independent retail shop to compete with companies like Met Life, Genworth, and Senior Lending Network one has to revert to the basic principles of execution.
If your business model is sound and you understand the basic needs of your target market the rest is easy. If you believe in your ability to execute then marketing is just another part of the budget. The key is execution and most companies lack in that department.
Q. Sure, but even with execution someone can’t compete with the MetLife Blimp or Robert Wagner on a mass scale. Do you find targeting more local or niche audiences is more successful?
A: We have spent 18 months building our Guardian First brand through a comprehensive media campaign promoting our reverse mortgage educational video in the same markets that other retail shops that you mentioned.
Our company conversion is as high if not higher then some of the most recognizable celebrity spoke persons out there, but without execution the brand has no value; I say this because we have a lot of experience with celebrity spokesperson campaigns that sold leads to originators like us and we have the data to measure conversion versus our own brand.
The strongest brand in the market place today in my opinion is the Robert Wagner brand, I view it as the coca cola of the reverse mortgage business. I’m proud to say that the Guardian brand generates very similar conversion percentages as the Wagner brand and this data has been measured by comparisons in our own Wagner leads purchasing campaigns
Media buying is very complex and if not done properly can yield very little or no returns at all. I strongly feel that we can continue to reach critical mass with our own guardian first brand as we have been able to demonstrate so far.