Because of the demographics that the industry primarily serves, at times a reverse mortgage business can get a reputation for being “old fashioned” or resistant to some kind of incremental change in terms of the processes it uses to achieve its practitioners and clients. One company that has tried to push the industry in a more technological direction is Austin, Texas-based Open Mortgage, led by CEO Scott Gordon.
With a great deal of attention given to both advancing technological processes and creating a dedicated corporate culture, Gordon shows a keen interest in the ability of the reverse mortgage business to help its clients in new ways while enhancing the core processes the business works with. Open Mortgage stands out as a top 10 reverse mortgage lender based on the volume of endorsements, but Gordon aims to explain why purpose should be a guiding light for any business, including businesses that compete in the reverse mortgage space.
This is one of the reasons why we are honored to be selected as a member of the 2021 Class of Changemakers.
RMD: What element of change do you feel needs to be made in the reverse mortgage industry that isn’t currently being made?
Scott Gordon: Improvements to the way we interact with customers, specifically, the combination of high tech and high touch. How do you use technology to empower interpersonal relationships? Because it all starts with personal relationships. Through our forward and reverse channels, we want to enable what I would call the “big fish in the small ponds,” the loan originators who are in the communities and have relationships in those communities.
So, we’re looking at how technology can help people grow their businesses in their local community because these relationships and that’s where they are. Certainly, compared to some likely loan originators on both sides, many would like to purchase a range of potential clients and provide loans across their state. But buying leads this way to me feels like a hamster wheel compared to building relationships in your community.
RMD: Does this tend towards the idea that grassroots works in terms of facilitating those kinds of connections only tend to form stronger bonds with customers?
SG: Yes, certainly. And I think one of the other influences for me is the question, “What are you building?” So, if you’re just making $5 in and $5 out, and you’re buying leads and working with them, are you really building anything? So we try to think about what we want the open mortgage to be, so we can build that or finance that. Where do we want it to be? If we’re just making a product to make the product, but we’re not building anything, that doesn’t seem like a good idea.
RMD: Do you feel that this is a business that is conducive to change, or as an industry leader, do you find that you and others have to put a lot of pressure into trying to force change into change?
SG: My quick answer is yes. Is it difficult to change things in reverse space? I don’t know if this is really true. I’ve created eight or nine companies and worked in different fields, and there are always some barriers to change.
I want to be careful not to look too old, but a lot of reverse mortgage loan officers tend to be closer in age to their clients. So, some of them are less enthusiastic about the innovations that come from technology. These days, a lot of changes simply come from technology: they come from platforms, IT systems, and social media, so sometimes it seems like people are happy enough to keep doing what they’ve been doing. So, you have to build a little energy around it.
This is all great, but what else can we do? How can we make this better? And not only for borrowers, but also changes can be better for the loan officer. There, we look at how to make the pipeline go faster, and how we can make loan officers’ lives simpler so they can get 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 front and back sides of a mortgage business? Or should there at least be more communication between the two sides? How do you guys tend to approach this travel distance between the front and back sides of your work?
SG: We have, I’m sure, a handful of companies have, a program where if you’re a term loan originator, someone else can help you get the loan done. You should not go to help a client without knowing how to do it. So, we have the scope to say we can do it for you. Or, we can get someone to help you, and they can help you expedite if you want to make more of a certain type of loan.
I think the difference between front and back stems from where you go to 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 the opposite like FHA, 203K, conventional, etc?” The idea that “that’s just another thing”.
But where do you go find all these borrowers [is different]. You want to build momentum in the flywheel hanging in the right places, connect with the right people doing the right things, and that varies forwards and backwards. So, if you try to do both, you can calm each other down. The two halves can water each other. I think that’s probably the problem, and why you don’t see a lot of people doing both things at the same time.
RMD: As anyone in your position is well aware of, the reverse mortgage industry has some reputation issues. We’ve seen a few cases over the past eight to 10 months where national regulators have pulled back from reverse lenders. When you see things like this happen, what does that tell you? How do you broaden an industry leadership position from a cultural perspective, or do you take other lessons from that when considering this is a product with reputation concerns?
SG: To me, it’s a cautionary tale. Do you remember “The Caliphate?” They were pretty pictures with a little business idea underneath?
RMD: Oh, yeah.
SG: One of my employees, the head of a company I owned, gave me one for President’s Day with a schooner saying, “Don’t wait for your ship to come in, swim to it.” But there was another line from those who were all funny in a negative way. One is a ship moored ashore, and she says, “Sometimes your purpose in life is to serve as a warning to others.”
So, when I see stories about people who got into trouble, it matters. A mortgage for anyone important, it’s a huge financial deal. But for the elderly it is even more important, because they are a protected class but specifically, people who may be more vulnerable or easier to take advantage of. So if I see people having trouble, my first thought is, ‘We have to make sure we’re not,’ if that person or company has done anything wrong.
But whether they do or not, we have to make sure we’re doubly careful not to do something wrong. Yes, we want to close loans and make money, but we have to help people, and it can’t be about pigmentation. This was something to think about here with the low interest rates caused by COVID. Prior to COVID, HECM-to-HECM refinancing certainly mattered, but the industry, providers and issuers have fallen behind the reference. But rates have gone down so much during COVID, that it’s been a benefit to people that you can’t hold back. It was really a reasonable thing to do.
So this is going to be another thing to watch as interest rates go up, we don’t want to be a company trying to squeeze the last HECM-to-HECMs when there’s a place where they are really not benefiting people. So, when I read those stories, I often think, “I don’t want to be in this situation.”
RMD: In terms of the scale of the current refinancing, where do you find the balance between the idea that this might not be the best move for the industry as a whole, but at the same time, if there is a tangible benefit to the borrower, you should move forward with it? How does the current reference situation fit into you?
SG: I think that’s always the talk with loan officers, about how much interest should be available to seniors. You don’t want to take out a loan where seniors get hardly any interest, and you don’t want to cause a disturbance. It doesn’t make any of us look good to refinance loans that don’t need to be refinanced, and it hurts the issuers. So not from the human side, but on the business side of it, we want to be a good partner in the industry, not have a bad reputation, just like I’m trying to get a good FICO score in my personal life.
And then on the personal side, I think it’s a discussion we had with loan officers about making sure there’s a lot of interest. We’re very fortunate, I know, I can think of someone who’s been with us for a few years, and we broke up with him because of his mixing. But for the folks we have now, I don’t see anyone really trying to push.
Like I said, HECM-to-HECMs come in, people have a benefit, and that’s cool. And there’s more and more of that when interest rates are too low. But I don’t have anyone focus solely on that. It’s like the front side that we still had a surprisingly high buyout, because we didn’t want to focus on anyone wanting to live on the ref.
RMD: If you had to identify what you think separates Open Mortgage from other competitors that work in the reverse mortgage space, is culture the only primary characteristic that you think helps differentiate the company? Or is it a series of things?
SG: With any mortgage product, it’s really hard to differentiate yourself. I think culture and service are the two things that come to mind, and are probably the same thing. One of our core values is to be “the service”. If all of my employees are not thinking of being of service—and sometimes it’s to each other, underwriter, healer, and closest—but if you don’t think of being of service, how are you going to do a great job for those others? Or the borrower or the loan officers?
Therefore, I believe that culture can lead to a significant differentiating factor as much as there is because the product we help with is purely a commodity. So, it’s just a matter of closing on time, a little headache, and forethought to be beneficial. It’s tricky, because sometimes I think why didn’t I get into something with more differentiation? [laughs]
RMD: Regarding what you said about mortgages in general in that it’s hard to have a lot of idiosyncrasies, would you say the opposite is more or less or equally?
SG: The opposite is not true. I think it’s easier to do better on the back side than on the front side. It is not a commodity. I still love the opposite and want to grow bigger. But the other thing that popped into my head when I said culture and service, combined like a Venn diagram of overlapping circles, was people.
I think – and I’ve known this for a long time – as you get older, you live with them and experience them to where not only do you know them, but you really believe it. So I’m at that point with Open Mortgage, where we’re redesigning and transforming our senior staff to have a team ready to take the company to the next two levels of big. And it’s much easier with the right people. But the definition of “right people” comes back to service and attitude.
Find an exclusive interview on RMD with Joe Stephenson, The Newly appointed president Opening a mortgage in early 2022.