Scott Gordon of Open Mortgage

    We Spoke to Scott Gordon of Open Mortgage on How to Navigate the World of Finance

    had the pleasure of interviewing Scott Gordon, CEO of Open Mortgage

    Scott Gordon is the CEO of Open Mortgage, a mortgage banking company with more than 90 retail offices in 47 states that offers wholesale and correspondent services for banks and credit unions. Within the space, Open Mortgage excels at traditional mortgages and is a top-10 reverse mortgage lender.

    A self-proclaimed serial entrepreneur, Gordon has a professional education in software engineering and an interest in start-ups and business investing. He previously served as Founder and CEO for various tech startups and is currently a board member for several financial organizations across the country.

    Additionally, Gordon is a devoted advocate for technological development and is always seeking ways to improve Open Mortgage’s adoption of industry-leading innovation that benefits the customer and lender.

    Gordon has earned the HousingWire Vanguard Award, one of the top achievements for housing and mortgage finance professionals, and has been recognized by Mortgage Professional America Magazine’s Hot 100 list as a “mover and shaker in the mortgage industry.”

    Thank you for joining us Scott! Can you tell us a bit about your ‘backstory’ and how you got started?

    In my teens, I worked at my family’s kennel cleaning cages. I learned valuable lessons in hard work and life there, but ultimately the kennel convinced me I should go to college! I pursued my bachelor’s degree in software engineering at Arizona State. I liked writing software and became a well-paid consultant at a relatively young age. I’m also somewhat of a serial entrepreneur. I started three companies while I was an engineer, so I eventually figured out that I liked start-ups better than coding.

    At 40, I gave up coding as a profession and focused on my own company and investing in others. All my companies started because I saw a need in the market and how I could use technology to compete.

    Currently, I’m the CEO of Open Mortgage. We’re a mortgage banking company that has more than 90 retail offices in 47 states where we offer wholesale and correspondent services for banks and credit unions. We excel at traditional mortgages and are a top-10 reverse mortgage lender.

    Can you share a story about the funniest mistake you made when you were first starting?

    I’ve made lots of mistakes over the years, but none of them seemed very funny at the time. When I was about 35, I was consulting by day and trading stocks and commodities on the side. One day, I lost more money on wheat futures than my whole net worth. It didn’t seem funny at the time, but I laugh about it now. Fortunately, I was able to dig out quickly.

    Can you tell us what lessons or ‘take aways’ you learned from that?

    Seeing how fast I lost everything sure got me serious about building up my equity. You can’t build up savings if you spend too much, or risk too much. So, I stopped carrying credit card debt, then auto. Now I pay cash for everything. Looking back, I’m glad I learned that lesson when I did.

    Is there a particular book that you read, or podcast you listened to that really helped you in your career? Can you explain?

    I’m a business book junky, but if I had to pick one, I’d say “Good to Great” by Jim Collins. One of the things that come up over and over in life is his observation that successful people “face the brutal truth but remain hopeful.” As I’m writing these notes, mortgage companies are at threat of extinction because of the coronavirus economic shutdown. If we can’t close loans and continue to pay hundreds of employees, it will crush the industry’s cash flow and potentially bankrupt many companies in our industry. That’s the brutal truth. But facing that truth lets me see the worst case and that I need to take action now to be sure it doesn’t happen. And thanks to “Good to Great,” I’ve learned to be hopeful during trying times like these. In fact, I hope to see opportunities for growth if we continue to keep our heads while weathering this storm.

    Are you working on any exciting new projects now at Open Mortgage? How do you think that will help people?

    Besides surviving the crisis, Open Mortgage is focused on implementing technologies that allow us to help more people more efficiently. Tech for tech’s sake can be an expensive rabbit hole. But if you can build tech that really helps you deliver value, you are onto something. In my opinion, it’s imperative for companies to continuously innovate because when they don’t adapt and grow with the changing market, they risk becoming irrelevant. That’s why innovation is the cornerstone of any successful business.

    Extensive research suggests that “purpose driven businesses” are more successful in many areas. When you started your company what was your vision, your purpose?

    When I started Open Mortgage, I really wanted to build a company where people liked to come to work, a place with a great culture. I really felt that if loan originators enjoyed working with us, then more would come. Our mission is “to empower the American homeowner through an operational engine and network of retail branches, mortgage brokers, community banks, and credit unions.” Open Mortgage is the engine behind the originators delivering that dream. We included the cause, “Home Ownership,” because homeownership actually does drive communities to be better and can change people’s lives. The thing I have learned, though, is that it’s not what your culture is, but how well you get people aligned to it. Keep the people who get it, and let the others go.

    Do you have a “number one principle” that guides you through the ups and downs of running a business?

    Don’t dwell on the past, good or bad, but learn from it. Make changes now to be better going forward.

    Lead generation is one of the most important aspects of any business. Can you share some of the strategies you use to generate good, qualified leads?

    We have tried a lot of lead generation techniques with mixed results. Even at one moment in time, things that work in one region might not work in others. As a mortgage company, we constantly have a mix that includes everything from personal relationships and social media, to buying leads. For every source, you need to track results and compute ROI (return on investment). Keep trying new things, and keep doing what’s working, knowing it can change any time. We are also working on some tech projects that will create future lead sources.

    If a fellow CEO would ask you for advice about whether to bootstrap or to look for VC capital, how would you help them weigh the pros and cons of that decision?

    I have invested in a number of companies, and I love to talk to entrepreneurs about their ideas and companies. I have to say that I am personally biased toward starting up on a low budget, or a bigger budget if you have the cash, but not going for venture capital (VC) dilution. If you can build some value first, you are so much better off. But I’m the first to admit it’s a strategy that could cost your success if you don’t have enough funding or you miss a market window. Sometimes speed is worth the dilution, I just feel like people who take VC money pour too much on the ground and don’t learn lessons they need to learn.

    What measures do you use to determine the value of a company? What advice would you give to other leaders about how to get an optimal evaluation of their business?

    Company valuation has always been a mystery to me; maybe because I don’t have an MBA. I will say that creating value for your customers and partners makes you worth more. And oftentimes you can get the most out of your company through strategic relationships, such as better prices from strategic buyers. I try to think about who I can really help besides just who is the customer.

    What would you advise to a founder who initially went through years of successive growth, but has now reached a standstill. From your experience do you have any general advice about how to boost growth and “restart their engines”?

    “Face the brutal truth but remain hopeful.” See how that comes back around? If growth is flat something is up. Maybe the world changed, and your product didn’t. What’s the brutal truth? Where can you add value now? Is your staff tired? Worse yet, did your company outgrow the current staff and you need to upgrade? I have a great senior staff at Open Mortgage, but I’m using some of their time to help set up a commercial lending conduit. It’s a way to leverage their skills to set up another company that is a diversification away from a residential mortgage.

    What are the most common finance mistakes you have seen other businesses make? What should one keep in mind to avoid that?

    One of the biggest mistakes to watch out for is putting accounting over finance. Accounting tells you exactly what happened, but finance tells you what might be about to happen, and hopefully how likely it is. If you don’t focus on finance, which I can say from experience, you will only be reactive.

    Ok, here is the main question of our discussion. Based on your experience and success, what are the five most important things one should know in order to succeed in the modern finance industry? Please share a story or an example for each.

    In a Vistage CEO coaching group, I learned that “all of us know more than any of us,” so I called a good friend, Sal Mirran, to help me give a useful answer to this question. Here’s what we came up with:

    1. Everything changes: The current environment is as good (and terrible) an example as any! But a pandemic is not the only thing that can send you into the land of the unknown and unrehearsed. So can the Soviet collapse, the dotcom bust, 9/11 and the Great Recession. In a matter of days, the prior week of high margins and smooth operations can become the good old days. Ironically, black swans are not rare at all. With that being said, it’s important to be aware of the change and be prepared to adapt accordingly at a moment’s notice.

    2. It is not about the money: There are cycles when there is no money or “negative money” in our sector — the most recent was 2018. If you only do your work for money, it won’t last. Mission and vision statements are not silly or passé. They are defining notions and provide purpose, and your best employees don’t just work for the money. My best employees turn down offers from competitors because they want to stay where they are.

    3. There really is no “I” in team: In our hyper-specialized world, you cannot function alone. In a mortgage, there are originators, tech and ops, underwriters, processors, funders, closers, etc. They all have tasks to perform and ideas to share, sometimes contradictory. For example, the dynamic tension between a loan originator and an underwriter. One fighting to do good loans, the other fighting not to do bad ones. The dangers described above cannot be navigated without their combined voices. You need to build, nurture and constantly up-skill your teams, not groups of individuals.

    4. Do not underestimate experience, expertise and knowledge: We all want the “new new things” that can be the silver bullet, software app or magic wand that fixes everything, lowers errors, increases margins and works 24/7. But there is no such thing. You can certainly be on top of tech and tools and ensure you are up to date, but there is no replacement for skills and knowledge. At Open Mortgage, we almost jumped into expensive software solutions, but some detailed analysis by experienced people revealed the software to have negative ROI. Again, the above events are not survivable through just a bot.

    5. Have a plan, with a long view: Ours is a complex world with every problem encapsulated within it: public policy, business cycles, geopolitics, monetary risk, operation risk, credit risk, brand risk, legal risk, compliance risk and on and on. The idea is not to be paralyzed by that, but to embrace it and develop scenarios and plans. At Open Mortgage, I like to “time surf,” which just means to have a long-term plan, but then consider long, intermediate and short time frames. Eisenhower said, “Plans are worthless, but planning is everything.” Plan, communicate and execute. Enjoy the good times, while you are prepared for the bad. It is not a sprint — it is a marathon.

    Which tips would you recommend to your colleagues in your industry to help them to thrive and not “burn out”?

    The mortgage industry is going through tough times. We have a constant pull between automation and human relationships. If leaders don’t keep pushing change and implementing technology, they will die of inefficiency. If they spend too much on tech they will die of inefficiency, and if they only value tech they will alienate the humans. It’s a tough balance. Face the brutal truth but remain hopeful.

    You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger.

    The mortgage industry is a little like a chicken that learns a bizarre dance to get a pellet of food. A huge number of people prepare applications, process a loan, underwrite it, prepare for closing, fund the loan, package it and ship it. All in ways that we have come to trust as standard practices that make investors feel safe but are really a chicken dance.

    I was the lead investor for a company called Open Lending, which provides repossession loss insurance. It protects a car lender from a loss if they must repossess a car. Open Lending has amassed enough data and algorithms to accurately price the risk on car loans, and then insure against the loss. Statistically, they can tell a lender exactly what interest rate to charge to cover the expected loss on a loan.

    An industry-changing idea would be to develop similar algorithms for mortgage lending, which would be difficult, but someone will do. Using those algorithms, the entire mortgage industry could be simplified. A private equity firm could offer up capital for mortgages because they could trust their losses would be covered by their gains, plus the desired margin because they charge the correct rate. If that were the case, much of the application, processing, appraisal, underwriting, closing, funding and shipping that we do now, the chicken dance, could go away. The industry would be simpler, faster and cheaper.

    How can our readers follow you online? and