Austin, Tex.-based multi-channel lender Open Mortgage announced earlier this month that it will be expanding and “doubling down” on its reverse mortgage business segment, having appointed reverse mortgage industry veteran Charith Rodrigo as one of two new national directors of reverse sales, the other being longtime Open Mortgage reverse professional Patty Wills.
A company spokesperson also previously confirmed for RMD that it is planning on doubling the existing reverse mortgage staff, with an “emphasis on expanding the retail division’s footprint by adding and supporting new branches and loan originators,” the company said in a statement.
For additional context on the reasoning behind this decision, RMD sat down with Scott Harkless, the recently-appointed chief revenue officer of Open Mortgage and himself a veteran of the reverse mortgage business.
Culture informed by reverse, a tough business environment
One of the things that initially attracted Harkless to the Open Mortgage organization was its emphasis on culture, something he is now seeing firsthand as he helps to facilitate this reverse mortgage business expansion, he says.
“I’m very happy with the culture of Open Mortgage,” he says. “The business lines are obviously strong, but one of the areas that doesn’t always get accounted for 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 that you’re working with? Does it create a family setting? That translates to how the client is treated, too. Open Mortgage does that, and I’m very, very happy with the family I’ve joined.”
Rising forward mortgage rates as a factor
Beyond his satisfaction with the company culture, Harkless also recognizes that the traditional, forward lending space is currently challenged by a high-rate environment. By pumping more resources into a business channel that is not as heavily influenced by rates as the traditional mortgage space is, the value proposition for American seniors increases.
“I would say in the context of rising inflation and rising rates, and a very tight housing market in terms of inventory, it’s very tough on traditional lending operations right now,” Harkless explains. “It’s not impossible, but it’s tough. Those things that make it tough for traditional lending in many ways enhance the value proposition of the reverse mortgage product, particularly when it comes to high home equity.”
Senior homeowners — who as a cohort are more likely to have higher levels of equity than their younger counterparts — have seen record levels of home price appreciation very recently, only emphasizing that their tappable equity has commensurately increased, Harkless explains. The other major component of this is the record levels of inflation being observed in the economy, which can disproportionately impact anyone living on a fixed income.
“For people who actually have equity in their homes that they can release through the reverse mortgage product, inflation accentuates the need to tap into that equity, because most people — no matter their income bracket — want a fixed income when they hit their retirement days,” he says. “Do you want inflation to alter the goals that you have for retirement, or do you want to figure out ways to enhance your ability to achieve those goals despite what’s happening in the market? So, I think inflation accentuates [the reverse mortgage need].”
Post-pandemic retirement and a new reverse mortgage need
The other factor that plays into this decision is the impact of the COVID-19 coronavirus pandemic on American seniors. As has been documented much in prior coverage, congregate care settings became less appealing prospects for seniors during the height of the pandemic and shifted more seniors’ priorities to the concept of aging in place.
That led to heightened reverse mortgage product interest which continues to persist for some lenders, and this is one factor helping to inform Open Mortgage’s strategy in expanding its reverse mortgage business, Harkless says.
“Having come through a pandemic, there’s a much greater interest [for people choosing to] stay in their homes,” he says. “That also contributes to challenges on the forward side, since people are not downsizing their homes, so they’re not moving like they would have before. The senior demographic is much more prone to staying in place now versus doing some of the things that they would have done in the past. That also enhances 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 any solid decision can be made. That plan can include a reverse mortgage, yet another reason why such an expansion makes further sense for Open Mortgage, he says.
“How are they going to do age in place?,” Harkless asks rhetorically. “Is their home outfitted for them to be there in the long-term? What if they have a medical event, or certain other needs? Is their financial situation consistent with the needs that they have? If it’s not, and they don’t want to sacrifice some of their broader retirement goals, then they have to figure out a way to achieve them. Releasing your home equity through a reverse mortgage is one tool that could very profoundly impact their toolkit.”
The immediate reverse mortgage strategy
Such an investment in and expansion of the company’s reverse mortgage channel is not something that can happen overnight, and Harkless is clear in pointing out what the necessary steps will be for Open Mortgage to achieve its new reverse mortgage goals.
“Our immediate strategy is to make sure that number one, we have the operational excellence capacity to deliver,” he says. “One of the reasons why we deliver at a wholesale model for our mortgage broker partners, and one of the reasons why we’re investing heavily from a retail model is that Open Mortgage wants to be held accountable at the local level. We don’t fear it, we want it. That’s because we believe that the people who enter into retirement deserve that sort of local accountability.”
That means that the service provided for wholesale broker partners needs to deliver at a high level, and needs to be able to absorb and facilitate the entrance of new players into the reverse mortgage business, he says.
“We have the ability to handhold 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 need to see the same things that I see, which is that there’s a profound need in the marketplace that’s being unaddressed.”
Look for more on Open Mortgage’s reverse mortgage expansion soon.