Last month, Mutual of Omaha Bank finalized its acquisition of California-based reverse mortgage lender Synergy One Lending. The deal was welcome news in the reverse space, where business has been lagging since program revisions caused volume to nosedive in the first half of this year.
Headquartered in San Diego and operating under the brand name Retirement Funding Solutions, Synergy One Lending is a top-10 reverse mortgage lender. It’s president and CEO, Torrey Larsen, sat down with HousingWire to talk about what the entrance of a major player like Mutual of Omaha Bank could mean for the reverse market, and why he thinks traditional lenders will one day be the biggest players in the space.
Q: Congrats on Synergy One’s acquisition! How to you expect the deal to effect business for Retirement Funding Solutions?
A: Thanks, Jessica. The acquisition by Mutual of Omaha Bank is a direct result of our team’s willingness to work hard, stay focused on client education and do what is right for each client/borrower.
Prior to this transaction, there has not been a consumer-recognized brand since 2012. The opportunity for our team is to organize around this trusted brand, which has been developed for over 100 years, and execute a marketing strategy that leverages this valuable asset. We also have the responsibility to be a good steward of this brand and protect its reputation in each local market.
Our origination force now has a clear and comparative advantage in their markets as their clients have a degree of trust around the brand, and most will remember Mutual of Omaha’s Wild Kingdom in a very positive manner. One of our leaders came up with a perspective around this combination of two companies: the girth of Goliath, with the mindset of David.
Q: It’s a tough time right now in the reverse mortgage industry. What do you think allowed Mutual of Omaha Bank to see past what’s happening in the space right now and focus on the market’s potential?
A: One of the things I appreciate about the leadership at Mutual of Omaha is the fact that they take the “long view” on markets. Every industry and market goes through differing levels of change and disruption. Take a look at the traditional mortgage business, as an example. Rates go up, loan volume contracts. Rates go down, loan volume increases. These swings can easily add or extract 30% of volume in any given year. That is simply part of competing in any given industry.
The degree of difficulty in the industry depends upon your perspective of and position in the market. Retirement Funding Solutions has intentionally focused its efforts around HECM for Purchase with builders/Realtors and the financial advisor community. As a result, we have the opportunity to navigate the changes better than many other competing firms, both from a cost of acquisition and a strategic growth perspective.
Equally important, Mutual of Omaha acquired a company that operates both a reverse mortgage operation and a traditional lending platform. In the years ahead, our belief is that these two distinct and unique operations will converge. Meaning, we see “forward” originating companies as the largest market share holders in the reverse business. By design, that is how we constructed our enterprise.
Finally, longevity risk for retirees remains a significant issue. Sequence of returns risk for this group is real and needs to be managed. The reverse mortgage product is a great solution to this complex problem for many retirees. I attended the Housing Wealth Symposium, which was organized by Shelley Giordano and the folks at the Funding Longevity Task Force, this spring in Washington, D.C. To hear speakers like James Lockhart, former deputy commissioner of the Social Security Administration and former director of the Federal Housing Finance Agency; Mark Irwy, former senior advisor to the U.S. Treasury secretary from 2009-2017; and Laurie Goodman, co-director of Housing Finance Policy Center for the Urban Institute, all share their views around the importance of housing wealth management for this demographic leads to the rational assumption that reverse mortgages are important from a public policy perspective.
Mutual of Omaha Bank sees an opportunity to extend its brand, extend its capital resources and grow both the overall market as well as our company’s market share.
Q: Do you think that having a larger bank get involved in the reverse space has larger implications for the industry as a whole? Might this pique the interest of other major players?
A: My view is that other banks and insurance companies continue to look at this industry as an opportunity. The demand/need from a consumer perspective is present and will continue to grow. For companies with a desire to serve the financial needs of their customers’ lives, this product has undeniable appeal.
Just like reverse mortgage customers, large company leaders require an education on the history of this product, how the product has changed over the years to ensure a sustainable market, and the compelling need for this product offers retirees.
Q: What are your thoughts on the state of the reverse market right now? Lenders across the board have taken a hit since HUD’s Oct. 2 changes – what will it take to turn things around?
The market right now is rife for disruption. Over the next 12 months, from my perspective, you will see consolidation among the top reverse companies. Efficiently run organizations that have a dogged determination for improvement and innovation will win market share. Companies that have a strategic marketing plan to engage referring partners, much like traditional mortgage companies, will own local markets.
Think differently. The cheese has moved. Like most things in life, persistence, diligence and consistent execution win the day.