Mike Holton was one of Nashville’s top professional trumpet players for 20 years when a friend convinced him he could make more money selling mortgages. It turns out the friend was right. Holton soon realized that he had found his calling in the mortgage industry. He stayed mostly on the management side of the business, leading sales teams to a high level of success. It was around 2006 when he first heard about reverse mortgages.
He gathered as much information as he could about reverse mortgages and, seeing an opportunity, asked his boss for permission to open a reverse mortgage division. The owner refused, so Mike and his wife Catherine, applied for, and obtained, their own mortgage broker license and opened New Castle Mortgage in April 2007. Although they had never done a reverse mortgage prior to the opening, they set out to purely specialize only in reverse mortgages.
Opening a business in 2007 was challenging. Opening a mortgage company in 2007 was worse. Opening a mortgage company to only specialize in this very small niche product was almost crazy. But, fast forward 12 years and New Castle Mortgage is still helping retirees in Middle Tennessee with their reverse mortgage needs.
Reverse Mortgage Magazine sat down with Holton to learn how he has remained successful and how his marketing and business philosophy has changed over time.
Reverse Mortgage: You and Catherine originated traditional mortgages for a decade when you became interested in reverse mortgages. What attracted you to this product?
Mike Holton: We both worked for a company that only originated FHA streamlined mortgages. We had just four originators, but we closed over 50 loans a month. Nobody else was doing streamlines, nobody knew what they were. That was 1997. Nine years later, everybody was doing them. I was trying to figure out what to do next. FHA streamlined mortgages had been a niche product, so I wanted to do something similar, a new niche. Oddly enough, this fellow called and asked me, ‘Do you do reverse mortgages?’ I said ‘no.’ I had no idea what they were. I spent several days researching them and submitted a plan to the owner of the company. He passed on the opportunity. A month later, Catherine and I had the LLC for New Castle Mortgage. I did not want to jump into the fray, like everyone else, of being a full-service lender. I thought reverse mortgages would be different, plus we had already proven to ourselves that we could specialize in one mortgage product and succeed. We opened New Castle Mortgage to be a reverse mortgage company and, so far, that’s all we’ve done.
RM: Despite frequent regulatory changes and diminished volumes, you’re still as committed to reverse mortgages as you were in 2007. What motivates you to do this?
MH: This is what we picked. Reverse mortgages. This is what we do. Even though business has been funky, with diminished volumes and the underwriting guidelines getting stricter, at this point I am 66 years old. We are not old enough to quit working, but too old to start something new. Honestly, after 12 years of only originating reverse mortgages, we’re pretty good at it. We’re visible in Nashville. A lot of people know about us. Catherine and I work well together and have been business partners for 23 years. We each have our strong points and we stick to them. I do the administrative stuff – licensing and compliance – while Catherine is really the face of reverse mortgages in Nashville, TN. We like what we do and enjoy working with each other. And we like working with seniors. We feel like we’re changing their lives for the better.
RM: Many companies that once specialized in reverse mortgages have started originating forward mortgages to stay solvent. Have you contemplated diversifying?
MH: We opened New Castle to only do reverse mortgages. I am proud to say that during this whole time that’s all we’ve done. But it is likely that we are going to branch out and, in a few months, add non-Qualified Mortgages (also known as non-agency loans) to our product lineup. Again, we don’t want to be a full-service company that offers forward mortgages, FHA and VA loans, etc. Our success has been due partly to the fact that we have chosen a specific product – originally it was streamlined mortgages, now reverses – and we have become very good at doing them. Currently, we specialize in reverse mortgages for seniors and soon will add non-QM loans for people who don’t qualify for a typical conventional mortgage. We are now going to have two specialties instead of just one.
RM: What steps have you taken to keep your costs down and your revenues steady to remain competitive?
MH: I’ve saved thousands of dollars in expenses over the past year-and-a-half by cutting out advertising. I peaked in 2012 at about $28,000/month, which for a small company was a lot of money. I spent $300,000 a year for television alone. It was good when it was good, but eventually it became too expensive and less effective. As far as competition goes, there are two levels: local and national. We don’t have any local competition. Because of the advertising and promotions that we’ve done throughout the years, people know us as a local reverse mortgage company, “THE reverse mortgage company of Tennessee,” with the emphasis on the word THE. If there are companies offering reverse mortgages in the middle Tennessee region, then they’re doing it as a sideline. We always win out against them. National lenders are a different story. They still have the advertising strength and monetarily we can’t beat them on fees. However, it’s amazing how many times we still do beat them. Being local, our prospects can meet us in their homes or at our office rather than talking with someone in a call center. We’re also 12-year members of the BBB (Better Business Bureau). Consumers see that we don’t have any complaints on the BBB web site. Note to everyone: If you haven’t already, you should become a full-fledged member of the Better Business Bureau. You’d be surprised at the number of people who visit the BBB before they even call us. It is money well-spent to boost your credibility and most of the time when you’re up against somebody in a tight race, it does come down to credibility.
RM: How do you reach consumers today? How has your marketing plan evolved over time?
MH: What helps us right now is the advertising that we did from 2007 to 2013. We did a lot of tv and radio advertising. We were on WSM 650 AM, country music radio. It was started 90 years ago and remains the largest country music radio station in the country. We tagged ourselves as being THE reverse mortgage company of Tennessee. I even trademarked that name. From the get-go, we came out of the gate promoting ourselves as experts in this field. That first year, I spent $2,000 a month with AT&T for sponsored internet ads. So, of course, I was at the top of internet pages with a paid ad. By the end of that first year, I was also positioned in the top three spots but organically. My internet presence is still good today. We have created decent relationships with several financial planners, who still send us business. We’ve also had a lot of satisfied customers who send us referrals. The most recent thing that I stopped doing, after 11 years, was paying for taglines on the two largest television stations in Nashville. NBC and CBS brought to you by New Castle Mortgage, THE reverse mortgage company of Tennessee. That was still going on until about a year ago. People who call us today have gone to the Better Business Bureau or found us on the internet. It’s an odd thing but I’ve recently received calls from two different credit counselors from other states working with people in Nashville who have credit issues. They called us because they have clients who they think might be good candidates for a reverse mortgage. They found us on the internet and checked us out on the BBB. We don’t spend any money on advertising, but we’re still benefiting from what we did a decade ago.
RM: Proprietary reverse mortgages are not allowed in Tennessee because of the way the laws are currently written. I know you’d like to see that law changed soon. Have you done any research into the potential demand for proprietary reverse mortgages in the markets you serve?
MH: I’ve not done real research, but I know the neighborhoods around Nashville, the home values in the areas and the types of consumers who do reverse mortgages. A lot of Tennessee is rural. There’s less of a need for proprietary reverse mortgages in those areas. If you look at Tennessee as a whole, Nashville is the blue dot in the center of the state. Nashville, and Middle Tennessee, is a metropolitan area with the highest home values in the state. Home values in Nashville are higher compared to many cities across the United States. You would not believe how much people are paying for homes in and around Nashville. Nashvillians are also a little more savvy with their finances and don’t shy away from doing a home refinance if it is the right thing to do. We need to be able to do proprietary loans. The new loans offer higher loan limits, and greater flexibility in how a loan can be structured – for example, as a second mortgage – that makes them appealing. The greatest feature is that there’s no mortgage insurance premium, which makes them less expensive compared to a HECM. I wrote to (NRMLA President and CEO) Peter Bell and asked for his advice on what it would take to change the law in Tennessee to allow for proprietary reverse mortgages. He provided an extremely well-written, detailed response. I realized for the first time what we are up against in terms of getting a bill enacted into law. It all boils down to how lucrative the proprietary reverse mortgage lenders see Tennessee. Statewide, it’s not going to be very lucrative, but it certainly will be in Nashville. I look forward to speaking with each lender at the conference in November to get their insight as to what can be done to get behind this effort to change this 25-year-old law.
RM: What is your favorite reverse mortgage borrower story?
MH: Catherine got a phone call from a 90-year-old man and once they started talking, he said, ‘I have a friend who also wants to hear this.’ These two fellows, both 90-years old, have been best friends since elementary school. He said, ‘Can I bring my friend over, because he wants to do this too?’ Catherine got with these two guys, took their applications and their loans closed about a year ago. That was a unique situation that we haven’t encountered before or since. And they both keep in touch with Catherine to this day. When Catherine works with somebody, she wins their heart over and they win hers, and they remain friends forever.
RM: How has your average client changed over the past 13 years?
MH: Our clients are younger. When we first started doing reverse mortgages most of our clients were in their 70s and 80s. Today, we have clients in their early- to mid-60s and even some who are 61 who are getting ready to do a reverse mortgage when they turn 62. Things have evolved over the past decade. The older folks ten years ago were a little slower to come around to the idea of the reverse mortgage, likely because it was a new product or not as visible. They were more conservative; they came from a generation that strived to get out of debt. Post-World War 2. They paid cash for everything. If they couldn’t afford it, they didn’t buy it. Over time, we transitioned to Baby Boomers, who had a more aggressive attitude concerning their finances. They wanted a tv and a car. They took vacations. They wanted a pool in the backyard. They have credit cards and second mortgages. They’re refi savvy. For them, a reverse mortgage is just another vehicle to generate cash. Unfortunately, a lot of these Boomers have a lot of debt and they’re doing a reverse mortgage to ease their monthly pain. We don’t have to talk them into doing a reverse mortgage. It’s a different type of borrower all together.
RM: What is one (positive) take away for the coming year?
MH: From a business standpoint, I still believe the reverse mortgage is an excellent product. I hope it will be around for a long time. Regular people tend to never have enough money. No matter how much they have, they don’t seem to have enough. And as we know, the main way for them to get more money is through their home equity. That was the way it was with forward mortgages and it’s the same with reverses. We are confident that the reverse mortgage still has its place as an effective tool to financially enhance a senior’s life. From a personal standpoint, we are proud of what we do. We know we’re doing it well and we genuinely feel good knowing we help seniors to continue living in their own homes. After all, this is what the program was designed to do. We love doing them. This is what we picked. Reverse mortgages. This is what we do. And, we’re going to keep doing them.