He’s not a celebrity. You’ve never heard his name; you’ve probably never heard of his company.
But if you watch late-night TV you’ve seen his company’s ads. They’re the spots that feature Tom Selleck, the mustachioed star of “Blue Bloods” and, long-ago, “Magnum P.I.,” as the pitchman for reverse mortgages.
Reza Jahangiri knows the power of celebrity. He’s used it to push his Orange-based company — reverse mortgage lender American Advisors Group — to No. 1 in the nation.
In recent years, revenue at AAG has more than tripled, from $63 million in 2012 to $216 million last year. The number of jobs he’s created has jumped even faster, from 300 five years ago to more than 1,200 today. A new batch of recruits joins AAG every two weeks. Two-year veterans say they feel like old timers.
But those reassuring Tom Selleck ads are just one reason AAG originates one fourth of the nation’s reverse mortgages.
Jahangiri — the skateboarding, guitar-playing son of Iranian refugees — is another.
“I think Reza has tremendous vision, and he sees where his company and the entire industry can go,” said Jim Mahoney, a long-time industry leader and chairman of Celink, a reverse-mortgage servicer.
“He brought in the best talent possible to build a first-class organization. … He’s a person who rolls up his sleeves on any topic and finds the best solutions.”
The product Jahangiri sells, the reverse mortgage, is a mirror image of its home financing counterpart.
With regular mortgages, borrowers mail monthly payments to their lenders, paying down their loan over time. With reverse mortgages, lenders pay borrowers, and the debt increases over time.
With regular mortgages, the loan is retired when all the debt has been paid off. With reverse mortgages, the loan isn’t settled until the borrower sells his or her home, moves out or dies. Then the loan is repaid or the home is sold to pay off the debt.
If all the conditions are met, the borrower — who must be at least 62 when he or she takes out the loan — can live in the home as long as he or she wants. That holds true even if the debt (insured by the Federal Housing Administration) exceeds the home’s value.
But make no mistake, run afoul of the terms of either mortgage type, and the lender can take your home.
Reverse mortgages peaked in 2008, with about 115,000 a year nationally. But since then, in the wake of the economic downturn, the number has dropped by about 58 percent, according to Reverse Market Insights, an industry data firm based in Dana Point.
Now, some believe, reverse mortgages are making a comeback.
Federal reforms over the past several years, including assessments to make sure borrowers can pay property taxes and insurance premiums, have tightened rules on who qualifies. Loans dipped last year in response to those reforms. But this year so far, reverse mortgages are up 18 percent from 2016.
Reverse mortgages haven’t been without controversy, with high foreclosure rates and complaints of high-pressure sales tactics and deceptive advertising tarnishing the industry’s reputation. But industry insiders and some retirement planning experts say they can be a legitimate solution to the growing gap in retirement finances.
One in three U.S. households have nothing saved for retirement, The Associated Press reported last fall. The average amount saved among the remaining two-thirds is $73,200.
“People are drastically under-saved. Half of seniors pass away with less than $10,000 of liquid assets,” Jahangiri said.
That creates “a very large growth opportunity” for reverse mortgages, he said.
A couple of data points back his position.
Right now, reverse mortgages account for just 1 percent of $11.5 trillion in outstanding home loans, federal statistics show. Yet the number of people potentially eligible to take out reverse mortgages — people over age 62 — is projected to nearly double by 2050, creating a vast potential market for Jahangiri’s product.
“We think this is the early days for home equity being used for retirement planning,” he said.
Jahangiri’s family fled Iran and the religious revolution in that country in 1978, when he was just 3 months old. He grew up in Newport Beach, his days filled with beach outings, piano lessons, tennis matches and jam sessions at his house.
He graduated from Corona del Mar High and enrolled at UC Irvine, majoring in economics.
He later enrolled in law school at Loyola Marymount University, attending classes at night while working with his father and brother in a startup company involved in cardiac imaging.
Jahangiri first heard about reverse mortgages from a friend in the banking industry in 2004, and soon decided to take a deeper look.
“The more I dug in, the more I fell in love with the product,” he said, calling reverse mortgages “an elegant solution” to the retirement gap.
In 2004, the 26-year-old Jahangiri founded American Advisors Group. He liked the two A’s in the acronym so his company’s name “would show up on the front of any directory.” He set up shop in a 300-square-foot office at his father’s healthcare business near John Wayne Airport. By 2007, he was devoted full-time to AAG.
That year, AAG sold 286 loans, ranking 56th in the nation, according to Reverse Market Insight. A year later, AAG jumped to 23rd with 538 loans. In 2009, Jahangiri raised $5 million in additional capital, using $1 million to get the company’s first celebrity spokesman, “Mission Impossible” actor Peter Graves. But in March of 2010, Graves died unexpectedly of a heart attack.
The recession also hit full force that year, and reverse mortgage sales started dropping.
“We stuck with it, and we doubled-down,” Jahangiri said, adding that the company also stuck with its celebrity-based advertising formula.
“We brought in (the late actor and Sen.) Fred Thompson in May, right after Peter Graves died.”
AAG focused on offering information about reverse mortgages, adjusting to the mindset of the senior demographic, Jahangiri said.
Then in 2011, three of the nation’s top reverse mortgages lenders — Wells Fargo, Bank of America, and OneWest’s Financial Freedom — got out of the business, citing falling home prices and increased risk, increased regulation and a desire to focus on their core businesses. Life insurance giant MetLife Inc. stopped originating reverse mortgages in 2012 as part of a move away from banking. The four firms at the time handled 61 percent of the business, leaving the field open to nonbank lenders like AAG.
While industrywide sales remained flat, AAG reverse mortgage originations have steadily increased. By 2014, AAG moved to No. 1, with almost 13,300 loans approved by the FHA, or 25 percent of the market, Reverse Market Insight reported.
“From 2010 to 2015, it became a massive, amazing growth story,” Jahangiri said.
As his fortunes rose, Jahangiri married his girlfriend of eight years, actress Kate Levering, who starred in the Lifetime TV show, “Drop Dead Diva.” “People” magazine documented their wedding, though Jahangiri was identified as “Levering’s husband.”
In June, Forbes estimated the AAG stake owned by “Levering’s husband” at $100 million.
In the AAG ads, the 72-year-old Selleck reassures viewers that reverse mortgages aren’t what they think.
“It’s not another way for banks to get your house,” he says. “And it’s also not too good to be true.”
A reverse mortgage, Selleck says, is a simple concept: You use your home to get tax-free cash — cash for paying off debts or covering costs like medical bills and home improvements.
A reverse mortgage, he says in the spots, “helps people gain financial independence.”
Industry observers say the ads with Selleck, and Fred Thompson before him, are a key reason AAG is No. 1 in reverse mortgages.
Shelley Giordano, who chairs the Funding Longevity Task Force, an independent retirement research group, attributes AAG’s success to TV and Internet marketing.
“They’re certainly on TV a good bit and have skilled people in their call centers,” Giordano said. But, she added, “it cuts both ways. Some people are turned off by the ubiquitous TV presence.”
AAG isn’t alone in using celebrity pitchmen.
“Happy Days” star Henry Winkler and actor Robert Wagner did spots for AAG competitors for years. AAG ads, apparently, were more successful, generating 430,000 senior interactions a year.
“It might be what (Selleck) says, his pitch. It might be that they do more advertising,” said Steven Sass, a research economist with the Center for Retirement Research at Boston College.
“Maybe they’re very effective at explaining the product.”
Jahangiri says, however, advertising is just one factor behind AAG’s success. His team spent years honing the company’s business model, which relies on highly trained loan officers working in call centers in New York, Atlanta and at the company’s headquarters in Orange.
Selleck goes on the air, gives out the phone number, and the calls pour in.
As part of their training, employees go through an exercise called “generation swap.” They perform tasks with one arm behind their backs, open pill bottles while wearing gloves and wear glasses that blur their vision so they can understand what seniors are going through.
“We know how to market and talk to seniors. We understand the senior demographic,” Jahangiri said. “We understand their needs.”
Paul Fiore, AAG’s sales chief, said loan officers are encouraged to take their time with potential borrowers. The company, in fact, doesn’t allow offers to land the so-called “one-call close.” Instead, some loans take months to finalize.
“It should be as if you’re sitting at the kitchen table,” Fiore said.
As part of a controversial industry, AAG isn’t unscathed.
In 2008, Massachusetts state regulators ordered AAG to cease operations in that state for allegedly marketing its product as a government benefit. Today, the company doesn’t operate in Massachusetts.
In December, the company agreed to pay a $400,000 fine, without admitting guilt, after the Consumer Financial Protection Bureau determined that old AAG ads featuring Fred Thompson, who died in 2015, wrongfully claimed consumers couldn’t lose their homes.
Jahangiri said the current ads, featuring Tom Selleck, has solved that problem.
Borrowers can lose their homes if, for example, they fall behind on tax and insurance payments. A U.S. Housing and Urban Development analysis issued in November estimated that 89,064 reverse mortgages around the country faced foreclosure because borrowers were a year or more behind on property tax and insurance payments. Probable default rates for reverse mortgages issued since 2009 were estimated at 18 percent, more than triple the default rate for all FHA-issued loans, according to federal data.
Still, many argue that industry’s biggest problem, right now, is lack of demand. Barely 2 percent of households who qualify for a reverse mortgage actually take one out.
“There’s a lot of room for reverse mortgages to grow and become more common,” said Wade Pfau, a professor at the American College of Financial Services and author of a book on reverse mortgages.
Jahangiri agrees and plans to transform AAG from a reverse mortgage provider into a firm offering a range of services that can help senior home owners tap into their equity. That plan includes traditional mortgages, home equity lines of credit and helping seniors sell their homes and relocate if reverse mortgages aren’t appropriate for them.
“We want to be agnostic from a product standpoint,” Jahangiri said.
“We want to be more of a solutions business versus a single-product business. We’re morphing. … Home equity solutions for seniors. It’s a new category.”