Top 10 reverse mortgage industry lender South River Mortgage is aiming to focus on its strengths. In addition to offering a proprietary reverse mortgage product option and transitioning last year from a broker to a direct lender, the company is focusing on its core business while staying engaged with the broader industry dynamics.
South River president Tyler Plack recently discussed the elements of business in the current market environment with HousingWire’s Reverse Mortgage Daily (RMD). Now, the conversation turns to the wider industry. Despite the well-documented challenges being faced by the industry, Plack and South River chief strategy officer Matthew Hagen said that the reverse mortgage business is pressing ahead.
Plack also discussed the ramifications of Open Mortgage’s exit from the industry late last year, and how alternative equity products add to the competitive landscape of the reverse mortgage business.
Chris Clow/RMD: In terms of the health of the industry, where we are at the midpoint of 2024, and considering some of the doom and gloom that might have been predicted at the end of last year, how do you think the industry at large is doing?
Tyler Plack: I think the industry has shown incredible resilience. At the end of last year and the beginning of this year, we were anticipating three rate cuts in 2024. As of today, it doesn’t appear that the market is pricing those in as much, meaning that the mortgage market is considerably more difficult than I would have anticipated at the beginning of the year.
With that being said, I am so impressed not just with South River, but with the industry as a whole, and how resilient the space has been and how resilient the originators in the space have been. If you look at the number of originators, we didn’t see the level of fallout in 2024 that we did in 2022 or 2023. It’s been much more stable.
Clow: What do you think is driving that kind of stability?
Plack: I think part of that stability comes from some of the Fed comments about being done raising rates, which is good. But I am really impressed with the rest of the industry and their ability to keep things moving, even though volumes are down. Everyone is still working hard, still originating loans, and a lot of people are still in business, and that’s a really good thing.
Clow: Industry consolidation has certainly been a big topic of conversation. We’ve also seen other forward lending players starting to show more interest in reverse, and I know your company was a big partner of Open Mortgage. First of all, how has their absence affected you? And what do you make of the way that consolidation has progressed in the industry?
Plack: If you look at Open Mortgage, we used to broker a lot of business to them, and they shut down in December 2023. By the time they had shut down, we had already completed our broker-to-lender transition, meaning we weren’t doing any business with them at the time they closed their doors for the reverse business. Frankly, we’ve been a net beneficiary of some of the talent we were able to pick up from Open.
There were a lot of really good people left out of work as a result of them closing the reverse department, and we were lucky to pick up some great underwriters, a couple of closers and operations team members that would have been difficult to find otherwise. So, certainly, when one door closes, another door opens, and we’re really happy to be able to welcome them here at South River.
Matthew Hagen: The other thing I would add there is that Open Mortgage was a very good partner to us as we were building our business. We were really sad to see them leave the marketplace, not only because of the partnership we had with them but also because we were always hoping they would get to a position where they could be a closed loan purchaser of our loans.
They never quite got there, but that was our hope so we could continue to do business with them. In this environment, it’s a terrible outcome when anybody leaves the market. There’s a big available pipeline, and we don’t need fewer people in this industry — we need more. Having Open leave was a real disappointment and we were sad to see them exit.
Clow: It seems like home equity is having a larger stake in conversations, even among forward lenders. They’re more interested in traditional instruments like HELOCs, and there’s also a niche of shared equity investments and sale-leasebacks that are trying to stake a claim in the equity lending market. I’m curious whether this adds to the competitive landscape in terms of what you’re trying to do, or is that just noise that you’re tuning out?
Plack: It’s certainly not just noise that we’re tuning out. We’re working with some home equity product providers and are interested in the space. I think you run the risk of contaminating or misplacing someone who would be best suited for a reverse mortgage into a home equity product. There’s a risk there, but it’s important that the best product wins. If home equity is the product that the consumer needs, then we should give them that home equity investment product rather than a reverse mortgage.
At the same time, one of the great things about those equity products is that many of them don’t have an age restriction. If you’re 18 and can legally enter the contract and have the title to the home, you are eligible for this product. With reverse mortgages, legality varies by state, which complicates things. So, the total addressable market is significantly larger for these home equity investment products. I think any reverse originator should be looking at these products to see how they can add them as another arrow in their quiver.
