Urwin, who entered the mortgage space in 2017 when he was Fairway Home Mortgagesays C2 Financial completed just 16 refinances of Home Equity Conversion Mortgages (HECMs) last year, with about 40% of its business coming from proprietary products. C2 is one of the nation’s largest brokerages, with 1,115 licensed loan officers, 111 branches and $4.85 billion in revenue last year.
In a candid interview, Urwin discusses why the industry sometimes hurts itself, its great opportunities and how the vendor relationship evolved.
Editor’s note: This interview has been edited for length and clarity.
Flávia Furlan Nunes: How do you view the current reverse mortgage landscape?
Shain Urwin: The market hasn’t changed much. Obviously, we didn’t see anything from the US Department of Housing and Urban Development (HUD) as of October 2017.
I’m on board National Reverse Mortgage Lenders Associationand I am part of the NRMLA education committee. I’m seeing a lot of talk and things that might be in the works, but we haven’t seen any major changes or changes in terms of the downside of the industry. We go back.
If you take the last few decades, the numbers have decreased almost every year. The problem is that, as an industry, we are hurting ourselves. Not just the consumer world – lenders, all of us. We turn to the same customers. We are simply funding and not bringing in enough young people. The overall landscape is not beautiful.
Nunes: Where do you see the biggest growth opportunities in this sector?
Urwin: We are starting to see work with affluent clients. Most of the loans we close as a company are for wealthy clients. We are also seeing a big change in mortgage lending happening across the country.
But since C2 Financial is based in San Diego, most of our loan officers are based in California. We have about 1,200 loan officers at C2 – I would say about 70% of them are based in California. And about 40% of our business is proprietary products. I just closed on one – the house was $14 million free and clear. You don’t get this every day. That client is rich. They had a $14 million home with cash and chose to get a mortgage.
Nunes: How are these borrowers different from traditional mortgage clients?
Urwin: For the reversionary client, there are two different perspectives: One is the needs-based client who no longer has anything but their house. They used their goods. They are looking at home.
In California, there are a lot of “rich people, poor people” – they have a $2 million house, but they have no money, so they look to retreat out of necessity. Then we become very rich. And I would say that the net worth of the client is about $2 million to $6 million, and those clients are looking at them for tax strategies – maybe being able to efficiently deduct interest by making mortgage payments when they want to instead of when they have to. We have some that use it as a buffer property, or what we call an unrelated property.
Nunes: What is the impact of this world on lenders and sellers?
Urwin: I don’t think lenders and brokers are very different in how the industry affects us. When it comes to pricing, sellers have more autonomy – they can make things happen more easily than lenders, in part because of the higher fees.
I work from my home office. I don’t have a brick and mortar building. But the lenders own the market. If you look at the facts, Mutual of Omaha, Longbridge and American Finance – those three own the market. They do more than all of us put together.
We are one of the largest retailers in the country. There are only a few great sellers in the space, and we close hundreds while they close thousands. But to be honest, if you were to take the best – Mutual of Omaha – what will they cover, 5,500 units? It’s really sad.
Nunes: Some reverse lenders are revising their agreements with consumers. What are the main pain points driving these conversations?
Urwin: As brokers, we do not create loans. We buy loans and use different investors. That relationship must be two-way. The industry is full of one-sided relationships. Lenders call all guns blazing and have been that way for years.
I sat down with Alex Pistone, president of Mutual of Omaha Reverse Mortgage, about two years ago at the NRMLA conference. He said, “How come you don’t send us any work?” I said, “We would not send you business because you will come and take our business.”
This seller-lender relationship needs to be a two-way street. We need to know that we are going to send the loan to someone else, and that client will not be taken from us, especially if the refund happens. I told him that what we need is protection. We want to make sure that you are not soliciting our customers, that you are trying to repay the loan, and that we can put our name on the statements.
United Wholesale Mortgage who developed that. And Alex came back and created Broker Protect. He took that out of C2 and gave it to the factory. That was the domino that needed to fall, and it allowed us to have control for the first time – less power.
Nunes: What is the current status of these agreements?
Urwin: We went to all our investors and said, “We need the same thing. If not, we can’t do business with you.” We had to part ways with a few relationships for a while, and two big names were that Freedom/PHH and Longbridge. It wasn’t done right, but I know that both of those companies, as well as other companies that we work with, all wanted to give us a version of that. We are finally here.
We have that agreement in place with every single investor we choose to do business with. Longbridge and we return together today (March 19). About four months ago, we decided to take a break until we figured this out. They were in the process of doing this, but I said, “Until it’s done, we don’t want anyone asking for our customers.”
I understand the borrower’s side. They don’t want to lose that client to someone else who is aggressively marketing. There are three companies that are very aggressive in conducting business. They don’t care about NRMLA waiting periods of 12 or 18 months. Once the loan closes, they will market it.
Companies like Longbridge will do everything they can to keep it, which makes sense. That relationship now, I see a big change that happened in the last two years. Brokers now have lenders to have our backs.
Nunes: What positive changes do these agreements bring?
Urwin: Great communication. I haven’t worked with Longbridge on this yet. We will be back in business with them now. But I can give you an example with Traditional Mortgage Acceptance Corp. and Mutual of Omaha, with whom we have closed a great deal of business. When someone wants to be paid, they tell us right away, “Hey, this loan is being paid.” Often, they even know who is ordering the payment.
One thing that is happening in the market is that, with the new legislation going forward, very few people will know when a credit draw is happening – but employees will still know. They chose to opt out of that. A word in a statement, that doesn’t make me so happy, because in the end, it’s written collaboratively. In fact, I don’t want them to call us — we’re not hired like them.
To answer your question: I think it’s perfect the way it is. If we’re going to market and we’re going to co-market with the seller, and they’re going to protect the client if someone tries to get a refund, that’s the heart of the matter. We both want to keep that client.
Nunes: What makes the lender confident that the loan will be delivered to them?
Urwin: I would say that is a loose understanding. No. 1, it is impossible to be the police – I could not do that, and it would be a violation of the law. You will get into the steering wheel. We don’t have an agreement that we will repay the loan from Longbridge or Mutual, but since you and I are good people, and I want that investor to keep that loan, I want to do what I can to make that happen.
If a customer says, “I need to take this loan somewhere else. I don’t like Mutual or the way they’ve been treating me,” I’ll tell Mutual, frankly. But I’m not trying to direct the money elsewhere. The truth is, we will try our best to maintain relationships and relationships with people. And I don’t mind looking at my client and saying, “Hey, we closed this loan at Mutual. I’d like to keep this loan here; if you want to look at other options, we can.” But 99% of people will be fine.
As a partnership, you try to do what you can to protect each other. That’s the whole point of it. But not to the detriment of the client, to the benefit of the client.
Nunes: How do these agreements support efforts to attract more diverse customers?
Urwin: Unfortunately, most of these are for refi. I don’t think it’s bad to have that. And, to get the message out, many of these people are financing with very little profit.
Today, if you think about it, Federal Housing Administration forward mortgages and US Department of Veterans Affairs advance loans have hard, fast rules— you can’t repay the customer unless there’s enough net profit. The reverse rules are iffy. They are very open to interpretation and we need more guidance, from the state level or NRMLA.
