Austin, Texas-based multi-channel lender Open Mortgage announced earlier this month that it would expand and “double” its reverse mortgage business segment, after appointing the lending industry veteran Reverse Mortgage Charith Rodrigo as one of two new National Reverse Mortgage Directors. sales, the other being Open Mortgage’s longtime reverse professional Patty Wills.
A company spokesperson also previously confirmed to RMD that it plans to double existing reverse mortgage staff, with “a focus on expanding the retail division’s footprint. adding and supporting new branches and loan originators,” the company said in a statement.
For more context on the reasoning behind the move, RMD spoke with Scott Harkless, Open Mortgage’s recently appointed chief revenue officer and himself a veteran of the reverse mortgage industry.
Culture Informed by the Reverse, Challenging Business Environment
One of the things that initially drew Harkless to the Open Mortgage organization was its focus on culture, something he now sees firsthand as he helps facilitate this expansion of the reverse mortgage business. , he said.
“I’m very happy with the culture at Open Mortgage,” he says. “The industries are obviously strong, but one of the areas that isn’t always considered in business – and certainly in the mortgage industry – is culture. We always look at profitability and revenue lines, you spend a lot of time at work. Do you enjoy working with the people you work with? Does it create a family setting? This is also reflected in the way the customer is treated. That’s what Open Mortgage does, and I’m very, very happy with the family I’ve joined.
Rising term mortgage rates as a factor
Beyond his satisfaction with the corporate culture, Harkless also acknowledges that the traditional term lending space is currently being challenged by a high-rate environment. By pouring more resources into a business channel that isn’t as heavily influenced by rates as the traditional mortgage space, the value proposition for American seniors increases.
“I would say that in the context of rising inflation and rising rates, and a very tight housing market in terms of inventory, it’s very challenging for traditional lending operations right now. “, says Harkless. “It’s not impossible, but it’s hard. These complicating features of traditional lending in many ways improve the value proposition of the reverse mortgage product, particularly with respect to home equity.
Older homeowners – who as a cohort are more likely to have higher levels of capital than their younger counterparts – have experienced record levels of home price appreciation very recently, only highlighting that their workable capital increased proportionally, says Harkless. The other major element of this situation is the record level of inflation seen in the economy, which can have a disproportionate impact on anyone living on a fixed income.
“For people who actually have equity in their home that they can free up through the reverse mortgage product, inflation heightens the need to tap into that equity because most people – regardless of income bracket – want a fixed income when they retire,” he says. “Do you want inflation to change your retirement goals, or do you want to find ways to improve your ability to meet those goals despite what’s happening in the market?” So I think inflation accentuates [the reverse mortgage need].”
Post-pandemic retirement and a new need for a reverse mortgage
The other factor playing into this decision is the impact of the COVID-19 coronavirus pandemic on American seniors. As documented in many previous covers, congregate care facilities became less appealing prospects for seniors at the height of the pandemic and shifted seniors’ priorities more towards the concept of aging-in-place.
This has led to increased interest in reverse mortgage products that continues to linger for some lenders, and is a factor that helps inform Open Mortgage’s strategy in expanding its reverse mortgage business, Harkless says. .
“After going through a pandemic, there is much greater interest [for people choosing to] stay home,” he said. “It also contributes to the challenges on the front side, because people are not downsizing their houses, so they are not moving as they would have done before. The older population is much more inclined to stay put now than to do some of the things they would have done in the past. This also improves the reverse mortgage.
With more and more seniors in the United States and around the world communicating a desire to age in place, some may find that a plan needs to be in place before a solid decision can be made. That plan can include a reverse mortgage, another reason why such an expansion makes more sense for Open Mortgage, he says.
“How are they going to age in place?” Harkless asks rhetorically. “Is their house equipped for them to stay there long term? What if they have a medical event or certain other needs? Does their financial situation correspond to the needs they have? If not, and they don’t want to sacrifice some of their larger retirement goals, they need to find a way to achieve them. Unlocking the equity in your home through a reverse mortgage is a tool that could have a very profound impact on their toolbox. »
The Immediate Reverse Mortgage Strategy
Such investment and expansion of the company’s reverse mortgage channel cannot happen overnight, and Harkless makes it clear what steps will be needed for Open Mortgage to achieve its new reverse mortgage goals.
“Our immediate strategy is to ensure that, first, we have the operational excellence capability to deliver,” he says. “One of the reasons we offer a wholesale model to our mortgage broker partners, and one of the reasons we invest heavily from a retail model, is that Open Mortgage wants to be held locally accountable. We are not afraid of it, we want it. It’s because we believe people who are retiring deserve this kind of local accountability.
This means that the service provided to partner wholesale brokers must be of a high standard and must be able to absorb and facilitate the entry of new players into the reverse mortgage industry, he says.
“We have the ability to walk them through the process until they develop their own expertise and get to the point where reverse mortgages are second nature to them,” he says. “But, they have to see the same things as me, which is that there is a deep need in the market that is not being met.”
Look for more information on Open Mortgage’s reverse mortgage expansion soon.