In the mid-2000s, Mark Reeve co-owned a mortgage brokerage company in southern California that sold forward mortgages to Plaza Home Mortgage, Inc., San Diego. When Reeve closed shop to specialize in reverse mortgages, he began compiling a list of companies where he could start a reverse mortgage division. Plaza was at the top of his list.
When he spoke with Plaza’s owners – Kevin Parra, James Cutri and Mike Fontaine – they were open to new ideas, reverse included. It was a little surprising, because lenders were going out of business in 2008 or pulling back on product offerings. After all, the housing market was imploding, and the economy was headed toward a recession.
Even though reverse mortgages carried a bit of a negative connotation at the time, the owners remained open-minded and saw that the program could benefit older homeowners and create new opportunities for Plaza’s business clients, especially with the growing Baby Boomer demographic.
Fourteen years later, Plaza Home Mortgage’s reverse mortgage business is still going strong with Reeve at the helm.
Reverse Mortgage magazine sat down with Reeve to learn more about his company, marketplace issues, and where he sees the business headed.
Reverse Mortgage: How did you get into the reverse mortgage business?
Mark Reeve: I did my first reverse mortgage in 2006. I was co-owner of a mortgage brokerage shop and received a lead from a family friend. I saw the positive impact that the HECM program had on this person, and I was immediately hooked just like that.
RM: After all that time, what’s the one guiding principle that you follow that has contributed to your success?
MR: As far as guiding principles or philosophies go, the one that has helped us succeed, and that we instill in all our associates, is to take care of the borrower. We want to ensure that we’re helping individuals, putting them in the right place and that nothing goes on that doesn’t appear completely on the up and up.
RM: Tell our readers about Plaza Home Mortgage. Is your footprint national or primarily on the West Coast? How many employees do you have in the whole company and just in reverse? What percentage of your reverse business is retail vs. wholesale?
MR: Plaza is a national, independent mortgage lender that focuses on wholesale and correspondent lending. Plaza has about 500 employees, of which 20 are dedicated to the reverse mortgage division. As far as our reverse-mortgage production goes, almost 100 percent is correspondent, non-delegated, principal-agent and broker business.
RM: What types of business partners do you try to attract to your platform?
MR: We’re seeing more traditional lenders taking on and originating reverse mortgages. Whereas in the past they may have referred them to somebody in their office who specialized in reverse mortgages, or maybe they didn’t want to take on the loan because of the time constraints, or uniqueness of the program, now everybody is gravitating towards this program. We have a wide range of clients, whether they’re first-time reverse to those managing a handful a year.
RM: What types of training do you offer your partners?
MR: Like our peers, we offer monthly training courses. Classes are recorded so the brokers can pull them down from our website at any time and watch them. We teach several topics. Completing the classes is not required, highly encouraged, but not required. We also offer shorter videos on the basics, such as the loan comparison, amortization schedule, billing, loan calculations, max claim, principal limits and so forth.
RM: You started the reverse mortgage division at Plaza from the ground up. What was that process like? Was it tough to get senior management on board?
MR: Going back to 2008, it was a very difficult environment for all of us in the lending business. Mortgages, in general, didn’t have the best reputation with consumers. There were a lot of foreclosures. Lenders were closing or exiting the residential mortgage business. While all of this was going on, I decided to get into reverse full-time. Plaza didn’t offer them, but I knew the owners. They were completely on board, completely supportive. It was just a very difficult environment to step into at that time, but we were able to get it off the ground. A lot of it was triage and working through issues. For instance, we needed two different loan origination software systems, one for forward and one for reverse. Where could they work together? Where could they not? Warehouse lines were extremely difficult to come by. Reverse mortgages were looked upon as a very niche product. Traditional warehouse banks would not lend on it. That’s not the case today, almost all do without blinking an eye. Our overall success can be attributed to the leadership, who stood by me and the product. Coming from a forward bank, operations, compliance, all those things, reverse mortgages are not necessarily a friendly loan program to implement into a traditional mortgage lender. You need to have the support of the whole organization to pull it off.
RM: How long did it take before you were closing loans?
MR: We completed our test cases in about three-and-a-half months, so we were able to get the reverse mortgage division up and running quickly. At that time, there were not a lot of wholesale investors. We worked with Generation Mortgage Company and JB Nutter. Both were extremely helpful in getting us off the ground and teaching us how to navigate the business, underwrite loans, use the right software, pay MIPs, and get loans insured. Today, there’s a wealth of resources to teach these things, but not so much back then.
RM: Were there many regulatory hurdles you had launching the reverse mortgage division?
DH: Surprisingly no. It was 2008 and Dodd-Frank hadn’t come into play yet. One of the big changes with Dodd-Frank, and there was a lot, involved broker compensation and how mortgage banks would be paying mortgage brokers moving forward. That created a lot of angst in the coming years as to how we pay and stay compliant. We had some great support from individuals, like [NRMLA outside general counsel] Jim Milano, coming in and helping us out on things like that, and the resources that NRMLA provided to ensure we operated within the scope of the HECM program were very helpful.
RM: Plaza offers a proprietary reverse mortgage. What percentage of your production is proprietary vs. HECM? What distinguishes your proprietary product from others in the marketplace?
MR: As everyone knows, the last couple of months has seen its share of instability in the reverse mortgage marketplace. Before interest rates increased, roughly ten percent of our production was proprietary. Our proprietary program has been reduced quite a bit by our investor banks, meaning, the principal limit factors were cut, and the coupon rate has gone up, so it has become a more challenging program to market and deliver to the consumer. Our product is like most others in the marketplace in terms of being able to pay off debt to qualify and using loan proceeds as asset dissipation is very beneficial compared to HECM.
RM: Do you see your proprietary product recovering in the short term?
MR: I do once the markets stabilize a bit. Nobody knows what that crystal ball looks like. The optimists are hoping that we get through the fourth quarter and the economics start to stabilize in the first quarter of 2023.
RM: At the time of this interview (August 22), interest rates have increased dramatically. What’s it like right now in the marketplace? How have you adapted to these changes?
MR: With the rise in the ten-year SWAP, we’ve seen compression in principal limits that finally caught up to the massive amount of home appreciation that our seniors have. Home appreciation was outpacing the rate increase for a little while, but it seems like now the expected rates have penciled principal limits down and pushed a lot of people out of the market. Offsetting this somewhat is the decline in forward mortgage applications which are at a 20-year low, so niche program offerings are very favorable right now to all originators. Reverse mortgages and home renovation loans that Plaza offers are gaining a lot of popularity.
RM: That’s great news that you’re seeing more interest from traditional mortgage loan officers wanting to expand into reverse. What’s the biggest challenge in onboarding loan officers and preparing them to be successful?
MR: Loan officers have more time to investigate this program more closely. We have an onboarding process where we show a loan officer some basic numbers, we present a quote, and then we show how the transaction works. We provide training resources on the front end. We get strong attendance for our reverse mortgage webinars companywide. They get familiar with reverse mortgages; they look at the transaction. Then they begin to work closely with our staff to iron out the details of the questions, and so forth, so they can be successful in presenting the program properly.
RM: Are your wholesale partners based primarily in California or all over the country?
MR: Plaza is licensed in all 50 states, but 36 states for reverse. We have account executives, brokers, and correspondents throughout the entire country with strong production on the East Coast, Midwest, and West Coast. It’s evenly split out there. Large markets, like California, the Eastern seaboard, and the Northeast carry a lot of production.
RM: Where do you see Plaza Home Mortgage five years from now?
MR: We want to be the service leader in this program. We will continue to refine our processes so that loans are moved through the system as efficiently as possible. We will continue to provide and enhance the necessary resources for brokers to learn and communicate accurately to the senior clientele. And we want to help our brokers understand the guidelines, as it relates to the underwriting piece so that they can satisfy conditions and move loans through underwriting promptly. We don’t want to be closing loans in 45 to 60 days. We want our turn times to be 20 to 30 days on this program.