HOUSINGWIRE MAGAZINE ❱ FEBRUARY 2018
THE SECRETS OF VALUE Understanding what features buyers want in new builds and remodels.
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POWER PLAYERS: SERVICE PROVIDERS HOUSINGWIRE MAGAZINE ❱ FEBRUARY 2018
Five companies delivering outstanding quality in the servicing sector.
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THE RISE OF
MULTIGENERATIONAL LIVING pg. 30
HOUSINGWIRE FEBRUARY 2018 EDITORIAL EDITOR-IN-CHIEF Jacob Gaffney MANAGING EDITOR, HW CONTENT SOLUTIONS Sarah Wheeler ONLINE EDITOR Caroline Basile SENIOR FINANCIAL REPORTER Ben Lane REPORTER Kelsey Ramírez CONTRIBUTORS Nate Baker, Katie Brewer, John Gonos, Deborah Huso, Steven Kaplan, Laurence Platt and Jon Van Gorp
CREATIVE CREATIVE ASSOCIATE Chantae Arrington
SALES AND MARKETING NATIONAL SALES DIRECTOR Jennifer Watson Laws jlaws@HousingWire.com MARKETING DIRECTOR C. Scott Smith DIGITAL MARKETING SPECIALIST Caren Karris SALES DIRECTORS Christi Lingard clingard@HousingWire.com Tyson Bennett tbennett@HousingWire.com Mark Adams
WHAT DO BUYERS WANT? THE SUPPLY OF EXISTING HOMES hit an all-time low in November 2017 at 3.4 months, according to NAR. And experts expect that number to only get worse in the first few months of this year. But that doesn’t mean buyers will settle for a house that doesn’t look anything like their expectations. The question for lenders and builders remains: what do buyers want? One answer to that question — which is the subject of our cover story — reflects the growing Hispanic and Asian populations in the United States: multigenerational housing. HousingWire reporter Kelsey Ramírez explores how homebuilders are adapting their floor plans to fit three generations under one roof as a long-term option for families who put a premium on living together, whether from cultural preference or necessity. On another front, writer Deborah Huso looks at what features buyers of existing houses are looking for, and what they value most in a remodel. Is the trend toward a smaller footprint really taking hold, or do buyers want a McMansion after all? With the MBA Servicing conference this month, this issue also highlights five companies who provide outstanding services and solutions in that vertical of our industry in our Power Players section. In addition, senior financial reporter Ben Lane outlines how the NYDFS is enforcing state laws on preserving zombie homes, which has included levying a six-figure fine for neglecting one foreclosed property. Find out more in our Industry Pulse section. From homebuilding trends to servicing updates, HousingWire has you covered.
madams@HousingWire.com AD OPERATIONS MANAGER Jessica Fly SALES AND CLIENT SUCCESS COORDINATOR Haley Knighton
CORPORATE PRESIDENT AND CEO Clayton Collins
Sarah Wheeler Managing Editor, HW Content Solutions @swheelerHW
OFFICE ADMINISTRATOR Stephanny Morales
Subscriptions are available for $149.00 for one year. A subscription includes the print magazine and online access to the digital magazine. Canada and foreign are only eligible to purchase the “Digital Only” subscription plan at $149 for one year. For subscription orders, call 1-800869-6882 or email HW@kmpsgroup.com. Postmaster: Send change of address to HW Media, P.O. Box 47627, Plymouth, MN 55447. Subscribers: Please send last magazine label along with change of address requests. The information contained within should not be construed as a recommendation for any course of action regarding legal, financial or accounting matters. All written materials are disseminated with the understanding that the publisher is not engaged in rendering legal advice or other professional services. HW Media does not guarantee the accuracy of information provided, and is not liable for any damages, losses or other detriment that may result from the use of these materials.
Tweets From The Streets Researchers find that one person likely drove Bitcoin from $150 to $1,000 12
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by TechCrunch @TechCrunch
© 2018 by HW Media, LLC • All rights reserved
HOUSINGWIRE ❱ FEBRUARY 2018 3
FEBRUARY ’18 36 THE SECRETS OF VALUE Experts unpack what buyers want most in new homes and remodels. By Deborah Huso
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THE RISE OF MULTIGENERATIONAL LIVING How to meet the growing demand for a different kind of home. By Kelsey Ramirez
42 POWER PLAYERS SERVICE PROVIDERS Five companies delivering outstanding service in the mortgage industry. By Sarah Wheeler HOUSINGWIRE ❱ FEBRUARY 2018 5
CONTENTS 10 THE LINEUP 10 PEOPLE MOVERS
12 VIEWPOINTS 24 SERVICING HEADWINDS Katie Brewer, COO of Green River Capital, discusses the amended CFPB servicing rules regarding Regulation Z.
26 2018: THE YEAR OF THE TITLE COMPANY
20 2.6K
MBA’s National Mortgage Servicing Conference runs Feb. 6-8 in Grapevine, Texas.
13 ON THE SHELF Timothy Ferriss keeps it short and sweet in a new book of life advice from top performers.
14 DISPATCH 1 Village Mortgage details their success running financial scenarios with Alight software.
16 DISPATCH 2 Mortgage brokers launch BRAWL to combat wholesale lenders pitching their clients.
28 ELEVATING EMERGING LEADERS
18 DISPATCH 3
John Gonos, director of training and development at Safeguard Properties, reveals the company’s strategy for growing leaders.
Optimal Blue provides endto-end secondary market automation.
20 TRIBUTE Valentine Dickerson retires from Proctor Financial after 40 years in the industry.
After my 12 years of education I still don’t know how mortgage or taxes work but hey at least I know about the cells inside a leaf.
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12 EVENT CALENDAR
Nate Baker, CEO of Qualia, outlines why real estate professionals can’t afford business as usual.
Tweets From The Streets
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Freddie Mac promotes Jacqueline Welch to chief diversity officer.
by Bae@GirlfriendNotes
22 HOT OR NOT The student loan debt crisis might be worse than first thought. HOUSINGWIRE ❱ FEBRUARY 2018 7
CONTENTS 50 BACK DEPARTMENTS 50 INSIDE BASEBALL Executives from Mayer Brown provide a post Dodd-Frank primer on the mortgage industry.
56 KUDOS BBMC Mortgage pays off a veteran’s mortgage and Vendor Surf launches a search engine.
58 GSE REPORT Fannie and Freddie get to keep $3 billion in capital reserves.
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62 KNOWLEDGE CENTER Arch MI offers strategies to counter false barriers for buyers.
64 KNOWLEDGE CENTER XDOC warns about the dangers of lending in a digital world.
66 KNOWLEDGE CENTER Altisource details a better way for servicers to make decisions on FHA disposition channels.
68 INDUSTRY PULSE
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Servicers beware: NYDFS fines PHH six figures for noncompliance on a single home.
72 Q&A
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LenderLive United Wholesale Mortgage
76 COMPANIES/ PEOPLE INDEX 77 AD INDEX 78 PARTING SHOT HOUSINGWIRE ❱ FEBRUARY 2018 9
Jacqueline Welch Freddie Mac
10 HOUSINGWIRE ❱ FEBRUARY 2018
JOHNSON
KOLEGRAFF VISCONTI
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L E A R C A PI TA L added Nick Kolegraff as the company’s director of machine learning and artificial intelligence. Kolegraff will lead the company’s push to bring AI and machine learning to property valuations. Kolegraff joins Clear Capital from Rackspace, where he held several senior positions. Kolegraff previously served as principal scientist at Accenture. PHH appointed Albert Celini, whom it recently hired as senior vice president, risk and compliance, as the company's new chief risk and compliance officer, taking the reins from Leith Kaplan, who stepped down at the end of 2017. Most recently, Celini was a risk management consultant with Newbold Advisors, and Common Securitization Solutions, the joint venture between Fannie Mae and Freddie Mac. Mortgage process automation provider Cloudvirga hired Stephen DeSantis as its new chief financial officer. DeSantis joins Cloudvirga from ShiftPixy, a human capital management services provider. Mortgage giant Freddie Mac has elected
VACCARO
DACOSTA SCHWARTZ
Freddie Mac promoted Jacqueline Welch to lead its human resources, diversity and inclusion division and serve as its chief diversity officer, reporting directly to CEO Donald Layton. Welch joined Freddie Mac in December 2016 and has more than 20 years of HR experience.
Grace Huebscher to the company’s board of directors. Huebscher brings decades of executive experience in the real estate and capital markets industries. Previously, she served as president of Capital One’s Multifamily Finance subsidiary and as an advisor of Capital One Commercial Bank. Veteran executive Phil DaCosta joined Cook & James as vice president of business development. Previously, DaCosta served as the customer experience director for Cbeyond, helping to grow its net worth from $100 million to $700 million. As senior manager of online operations for Home Depot, he streamlined a $24 million integration project that helped the company move from $450 million to $3.5 billion in revenue. Fintech company FormFree added Faith Schwartz to its board of directors. Currently, Schwartz, a HousingWire Woman of Influence, serves as a senior advisor to the leadership team of Accenture Credit Services. She is principal and co-founder of Housing Finance System Strategies, a housing finance strategic
advisory firm, and has played a firsthand role in shaping current housing finance best practices and public policy. Dart Appraisal recently brought on Christie Visconti as vice president of finance, where she will oversee the company’s finance, accounting and human resource operations. Visconti brings more than 10 years of experience to the role, having most recently served as finance manager/controller for MB Technologies' U.S. division. Sales Benchmark Index hired Matt Slonaker as principal and managing director of financial services. Slonaker brings more than 25 years of experience in the financial industry to SBI, most recently serving as executive vice president of sales and marketing at Chronos Solutions. Waterstone Mortgage announced two new appointments to its leadership team, bringing on Jodi Johnson to serve as vice president of risk and audit and Ed Vaccaro as regional vice president of retail production. Johnson brings more than 25 years of banking and financial services experience to Waterstone. Vaccaro will oversee operations and retail growth throughout northern California for the lender. He has more than 20 years of senior management experience and before joining Waterstone held a position with Banc Home Loans. LoanLogics promoted Craig Riddell to executive vice president and chief business officer. Riddell, a 2016 HousingWire Vanguard award winner, previously served as senior vice president and chief business development officer. He will now be responsible for growing the company’s LoanHD App Network of data services and integration partners.
EVENT CALENDAR
Welcometo
Grapevine MBA’S NATIONAL MORTGAGE SERVICING CONFERENCE & EXPO FEBRUARY 6-8, 2018 Host: Mortgage Bankers Association Location: Gaylord Texan, Grapevine, Texas Cost: $600-$2,500 On the agenda: This year’s MBA servicing conference features an opening address from MBA’s 2018 Chair and Colonial Savings President J. David Motley, who will also be joined by bestselling author Brad Meltzer. Other conference sessions will cover a wide range of topics, including natural disaster preparedness, information sharing and data security. Several standouts include a deep-dive workshop on the CFPB's servicing rules, which requires special registration, and a networking event with Lisa Sun, founder and CEO of Project Gravitas. 12 HOUSINGWIRE ❱ FEBRUARY 2018
GRAPEVINE, TEXAS A city full of 19th and 20th-century restored buildings, Grapevine is also home to a vintage railroad line that tours the Dallas-Fort Worth area. Hop onboard an authentic 1920s Victorian coach for a trip along Texas’ historic Cotton Belt Route, which travels from Grapevine to the Fort Worth Stockyards. grapevinetexasusa.com/grapevine-vintage-railroad/
ON THE SHELF Tribe of Mentors: Short Life Advice from the Best in the World TIM FERRISS HOUGHTON MIFFLIN HARCOURT
The best-selling author of The 4-Hour Workweek is back with the ultimate choose-your-ownadventure book: a compilation of tools, tactics, and habits from more than 130 of the world's top performers. Ferriss' book features profiles from iconic entrepreneurs to elite athletes, and from artists to billionaire investors. These short profiles seek to give readers a window into life's most challenging questions, with insight to achieve extraordinary results.
Brunch Is Hell: How to Save the World by Throwing a Dinner Party RICO GAGLIANO AND BRENDAN FRANCIS NEWNAM LITTLE, BROWN AND COMPANY
Gagliano and Newnam, hosts of public radio’s The Dinner Party Download, wittily argue that brunch (yes, brunch) is the absolute worst and is a threat to society. What is the best way to fight back? Throw dinner parties. Laced with celebrity advice and tongue-in-cheek humor, the authors walk future dinner party hosts through the ins and outs of throwing a memorable (and perhaps worldsaving) dinner party, from scheduling to guest list to menu.
ALIGHT | SPONSORED CONTENT
Millennials, modernization and technology A recipe for success at Village Mortgage
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aurel Caliendo, president and CEO of Connecticut-based Village Mortgage, is a force of nature. What began as a fledgling mortgage brokerage business run from Caliendo's home in the early 1990s, Village Mortgage is now a thriving mortgage bank and premier lender in New England — 20 branches strong — that recently extended its reach with wholesale operations in Nevada and Florida. Village’s bustling Avon, Connecticut, headquarters buzzes with collaborative camaraderie in a setting that blends years of mortgage experience with Millennial enthusiasm. “We look for ways to attract young innovators to Village Mortgage,” Caliendo said. “Our industry — the mortgage industry — really needs that infusion of fresh ideas and talent. A strong proponent of technology adoption, Caliendo is always looking at innovations that will help Village improve efficiencies and allow her to better manage risk and make more money.
THE CHALLENGE: ACHIEVING MAXIMUM PROFITABILITY “In one of my early meetings with Michele [McGovern, Alight’s CEO], she asked me what keeps me awake at night,” Caliendo said, “well, when growing a business — any business — profitability, liquidity and cash flow are always top of mind.” To facilitate cost cutting and preserve cash while growing the top line, Caliendo and the team need to quickly find answers to questions like:
• How will volume changes affect margins? • How much are branches discounting? • What is the impact on cash flow 30, 60 or 90 days out? • What happens to P&L and cash flow if volumes drop and market bids for MSRs are trading lower? • What effect will changes have on servicing and warehouse credit? The finance team was running scenarios in Excel, but the process was time consuming. And Village needed a technology solution that would allow Laurel to keep her finger on the financial pulse of the enterprise from anywhere at any time.
THE SOLUTION: VISIBILITY INTO FUTURE FINANCIALS With Alight Mortgage Lending, Caliendo and senior executives are integrating operational and financial data and running financial scenarios in real time to streamline decision making. User permissions allow branch managers and other team leaders to access data relevant to their pieces of the business so they can keep financials updated. Analysis is visualized through Alight Enterprise dashboards. “Alight is now providing us all our financial data,” Caliendo said, “I can view financials — including cash flow — and run my own volume scenarios from anywhere, at any time.” Now, each branch manager provides monthly volume numbers that are incorporated into Alight forecasts to help management gain visibility into expected profits for every branch, each month. “Alight helped us identify what was driving branch profitability down and what we needed to do to improve our overall margins,” Justin Girolimon, Village CFO, said. The team is now able to forecast at branch and company level, looking at different channels like retail or wholesale, and analyze expected volume, and then run scenarios upwards or downwards to see how changes could affect bottom line. “With Alight, we can lock down a pro-forma P&L out for a year, make constant revisions and run scenarios quickly,” Girolimon concluded.
THE FUTURE: TACKLING LEAKAGE But the biggest change is on the horizon: soon, capital markets data will be integrated via Alight to provide pull through rates and volume at each branch, helping the team pinpoint fallout costs and more closely monitor, identify and correct leakage. And Alight-streamed data from Village’s capital markets provider will help the team set tiered pricing. “Being able to run my business like an investment portfolio — managing assets and cash through real-time scenario analysis and being able to more closely predict financial outcomes — is a game changer,” Caliendo said. And she would know. 14 HOUSINGWIRE ❱ FEBRUARY 2018
BRAWL | SPONSORED CONTENT
Mortgage brokers launch BRAWL initiative Taking aim at wholesale lenders that are focused on retail loans
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network of independent mortgage brokers throughout the country banded together in October 2017 to launch a national movement in the mortgage industry, Brokers Rallying Against Whole-tail Lending (BRAWL), an initiative focused on stopping the unethical practices used by “whole-tail lenders.” The term “whole-tail lender” was coined by BRAWL to swipe at mortgage lenders that offer both wholesale and retail services on paper, when in reality, their primary business objective is to feed stolen prospect information directly to their affiliate companies. “Mortgage brokers are beyond tired of various wholesale lenders acting like they’re on our team, when they’re actually just leveraging our relationships to steal our clients for their own retail divisions,” said Anthony Casa, president of Garden State Home 16 HOUSINGWIRE ❱ FEBRUARY 2018
Loans and a founding member of BRAWL. “Mortgage broker shops come in all different sizes, and many rely on the technology and resources of wholesale lenders to keep their businesses operational, let alone competitive,” Casa said. According to data published by Inside Mortgage Finance, through the first six months of 2017, nearly two-thirds of the top 25 wholesale lenders actually focus primarily on retail loans. Since the housing crisis in 2008, mortgage brokers have steadily increased market share from a low point of 6% to nearly 14% currently. The increase can be attributed to factors such as reformed public perception of brokers, regulatory changes that have leveled the playing field with retail lenders and banks, and advancements made in technology by partnering wholesale lenders.
BRAWL | SPONSORED CONTENT
BRAWL was formed in an effort to accelerate that positive momentum for brokers by raising awareness of whole-tail lenders that are stymying continued growth of individual mortgage broker shops and the wholesale channel, alike. “It is important that mortgage brokers take a stand against these large whole-tailers that are ultimately hurting us in the long term more than they ever help us in the short term,” Casa said. “Want to send whole-tailers a strong message? Send your business someplace else.” BRAWL penned an open letter to voice the frustrations felt by the broker community over the years, including it with the group’s creation of a petition on Change.org. The petition asks mortgage brokers to sign their names in support of the group’s rallying cry against “lenders who appear to offer both wholesale and retail services, when the truth is that their wholesale divisions exist for one reason only: to feed their retail machines.” Nearly 500 people signed the petition in the first few weeks it was available. An excerpt from BRAWL’s open letter:
Let’s get to the truth about lending. Whole-tailers are stealing our customers, but we’re the ones handing them the keys to the front door. Let’s pledge to partner only with true wholesale lenders until the whole-tailers put an end to their selfish and greedy ways. Let’s work together in the best interest of our borrowers and ourselves. Let’s keep wholesale true. And the group didn’t stop there; they also named names. “The data is out there on what kind of business each lender does,” said Casa. “Right there in fine print you can see the names of companies that call us every day talking about how we’re their top priority. And then you look them up and see that the majority of their overall business is retail. It makes you wonder how many clients you’ve lost to them over the years when you thought they had your back.” The group has submitted a BRAWL-endorsed list of wholesale lenders that do wholesale business the “right way” – wholesale lenders that support the broker channel and do no more than 20% of their business on the retail side. The good wholesale lenders include: • Angel Oak • MB Financial • Nations Direct Mortgage • Orion Mortgage • Parkside Lending • Plaza Home Mortgage • United Wholesale Mortgage On the flip side, they also named the lenders that are notorious for flipping leads over to their retail channels and permanently stealing customers. To label a lender as a committed wholesaler versus a wholetailer, BRAWL evaluates companies using a five-part checklist. If a wholesale lender does no more than 20% of its business in retail and checks the following boxes, they’re viewed as the “good guys”: • Route all customers originated by brokers through the wholesale channel back to the originating broker, with no time limit • No solicitation by the retail division, under any circumstances, of customers originated by brokers through the wholesale channel • Communicate to broker when a previous customer orders or requests a payoff • Non-compete policy for lender retail division on any customer registered through a wholesale channel that contacts the lender directly • No solicitation of any broker employees for any employment opportunities with the lender After years of quietly falling back, mortgage brokers are speaking up louder these days. And from the looks of things, this BRAWL is just getting started. According to BRAWL, it’s ultimately up to mortgage brokers to make the decision not to use any lenders on the whole-tailers list. HOUSINGWIRE ❱ FEBRUARY 2018 17
OPTIMAL BLUE | SPONSORED CONTENT
Optimal Blue provides end-to-end secondary marketing automation, market responds Achieves significant speed, accuracy and compliance advantages
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ptimal Blue experienced incredible growth in the past year by offering a unique, end-to-end secondary marketing automation solution for originators. The company automates the entire secondary marketing operation — from content through commitment — which has created an entirely new mortgage technology category in the marketplace. “Secondary marketing is an enterprise-wide function that touches every aspect of the mortgage lending process, from lead generation through application, closing and delivery,” said Bob Brandt, vice president of marketing and alliances at Optimal Blue. “What makes Optimal Blue different is that, with one end-to-end 18 HOUSINGWIRE ❱ FEBRUARY 2018
system integrated tightly with the various systems our clients rely upon, we’ve taken a more holistic approach to automating secondary marketing that covers the full gamut of the lending process.” Through a single, unified technology and value-added platform, Optimal Blue’s Enterprise Secondary Marketing Solution incorporates every critical secondary marketing function throughout the loan process in a user-friendly, feature-rich way, including:
• CONTENT Optimal Blue’s end-to-end platform replaces manual processes with real-time, automated ingestion of loan program and pricing
OPTIMAL BLUE | SPONSORED CONTENT
data. Because content is fully automated for a wide array of investors, originators can quickly activate new investor relationships and self-configure mortgage loan programs with embedded investor guidelines and company policies, or by blending the best pricing available from multiple investors.
• ELIGIBILITY AND PRICING Optimal Blue’s platform renders real-time loan quotes by instantly evaluating up-to-date investor content, and also delivers best execution results that display all eligible products ranked by price. In addition, originators can control and track pricing exceptions as well as mortgage insurance integration, which enables borrowers to obtain accurate total loan cost information.
• LOCKING Replacing manual lock desk functions with automation provides an immediate boost to an originator’s efficiency, giving them the ability to initiate rate lock requests and receive instant lock confirmations through a highly configurable, auto-accept process. Automating the change request function allows lock desk personnel to allocate more time handling exceptions, which results in a reduction of errors and ensures a pipeline position that is always current.
• PIPELINE RISK With Optimal Blue’s Enterprise Secondary Marketing Solution, pipeline positions are updated with real-time market and lock data feeds, providing secondary marketing managers with continuous visibility into risk positions. The platform includes strong error examination routines, identifies eligibility problems as loan characteristics change, and leverages native investor content to generate precise, mark-to-market reports for managers, auditors and regulatory authorities.
• HEDGING Optimal Blue enables risk managers to perform “what-if” analyses to understand how various actions affect their risk position, as well as model the P&L impact of market changes. Positions and market values are constantly updated, so potential hedging actions may be evaluated and positions modified at any time, allowing the secondary desk to react promptly to incoming locks or market changes. Additionally, it supports note rate hedging for those who sell forward commitments through the Fannie Mae and Freddie Mac cash window.
• COMMITTING For originators that access the popular bulk bid market execution, automation helps streamline an otherwise tedious process. If system-to-system integration exists with the investor, committing can be initiated from within the Enterprise Secondary Marketing Solution once an execution is selected, resulting in substantial time and cost savings. Commitment automation also eliminates
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Replacing manual lock desk functions with automation provides an immediate boost to an originator's efficiency..."
the need to reconcile two systems, reduces error rates and ultimately risk levels by enabling the offsetting of incoming locks more quickly.
• BUSINESS INTELLIGENCE Secondary marketing managers are required to make quick, high-impact decisions but often lack access to the data and analytical tools necessary to operate effectively. To address this issue, Optimal Blue offers impressive business intelligence capabilities that provide instant access to broad data sets along with analytical tools that help users understand and evaluate opportunities. These systems also provide access to real-time production, performance and competitive data, as well as insight on competitive positioning and market share. One of the most valued aspects of Optimal Blue’s Enterprise Secondary Marketing Solution extends well beyond the robust functionality. The API-first strategy of Optimal Blue led to the development of the industry’s first comprehensive RESTful API platform that supports automated product eligibility, pricing, lock desk and pipeline management integrations with the third-party technology providers the industry relies upon. Optimal Blue clients can directly gain access to the company’s API library and develop an integration on their own, or they can choose from a library of turnkey APIs developed in partnership with a wealth of leading providers focused on lead generation, marketing, CRM, consumer-direct, point-of-sale (POS), loan origination (LOS) and more. “Throughout the loan lifecycle, no matter what system is relied upon, the originator has the confidence that they are quoting accurate, compliant, and real-time product eligibility and pricing,” said Brandt. “With our robust API capabilities and the numerous leading mortgage technology vendors who have built to them, Optimal Blue is breaking down the integration barriers that have held back the industry.” Optimal Blue has pioneered the full range of capabilities required to offer true, end-to-end secondary marketing automation with the emergence of its Enterprise Secondary Marketing Solution. Early adopters report significant efficiency and profitability improvements, all imperative in the compliance-critical, competitive environment in which we operate today. HOUSINGWIRE ❱ FEBRUARY 2018 19
PROCTOR FINANCIAL | SPONSORED CONTENT
Valentine Dickerson, SVP of compliance at Proctor Financial, retires after 40 years in the industry Embodies the company's mission of unwavering integrity and dedication to excellence
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company is only as effective as the teammates comprising the team: those who embody an organization’s mission and lead with a vision that drives the organization to success. Valentine Dickerson, an executive who exemplifies such characteristics, has announced her retirement after over 40 years of service to the mortgage industry. A highly respected leader, Dickerson has served Proctor Financial since 1996. For over 20 years, Dickerson has embodied Proctor Financial’s mission of unwavering integrity, dedication to excellence, commitment to service, superior performance and high value execution in the mortgage servicing industry. It is with sincere gratitude that Proctor Financial honors her dedication and contributions to the organization. Dickerson has held various positions at Proctor Financial and most recently served as the firm’s senior vice president of compliance. Prior to joining Proctor Financial, Dickerson held progressively more responsible positions at First Federal of Michigan. Her experience as a client of Proctor Financial provided valuable insight for her customer-centric approach to service delivery. Dickerson’s vision has helped propel Proctor Financial to its current status as a highly competent organization delivering compliant products and services to its clients. Realizing a need for a comprehensive approach to compliance, Dickerson accepted the challenge to launch and develop Proctor Financial’s compliance department. Today, her team of professionals proactively monitors state and federal legislation, regulations, and litigation that affect lender-placed insurance and mortgage servicing. The efforts of her team ensure that Proctor Financial’s clients remain in full compliance with all regulatory matters. Under her guidance, Dickerson invited third-party organizations to critically review Proctor Financial’s business practices to prove the company’s competence and commitment to excellence. Dickerson championed Proctor Financial’s ISO certification, SOC 2 audit, and CFPB pre-audit. The ISO certification signifies the implementation of a quality assurance system that addresses client satisfaction and dedication to efficient processes and continuous improvement. Proctor Financial obtained ISO 9001:2008 certification for the servicing of lender-placed insurance in 2011, expanding the scope to include claims in 2013 and policy production in 2014. Most recently in 2017, Proctor Financial updated this certification to the new ISO 9001:2015 standard. 20 HOUSINGWIRE ❱ FEBRUARY 2018
Under Dickerson’s direction, these self-imposed audits have confirmed Proctor Financial’s superior performance and adherence to the highest standards of quality. Paul Glantz, president of Proctor Financial, characterizes Dickerson as the consummate professional and describes her retirement as melancholy after many years of having the privilege to work with a senior executive so strongly dedicated to the company’s success. In his comments on her retirement, he noted, “Val Dickerson is a role model of exemplary service to the mortgage industry. We are honored and blessed to have benefitted from her wisdom and professionalism.” Proctor Financial is indebted to Dickerson’s contributions and remains confident that the company’s compliance team will continue to flourish from the legacy of her leadership. On behalf of all of her teammates at Proctor Financial: Congratulations Val! Happy retirement. You will be missed dearly.
Hot SIZZLE? Not FIZZLE? 1 1 WHY THE
WHY THE
RENTING
Although buying a home is cheaper than renting in a majority of housing markets, most Americans actually live in areas where renting is still cheaper than buying, according to the 2018 Rental Affordability Report from ATTOM Data Solutions. Buying a median-priced home is more affordable than renting a three-bedroom property in 240 out of the 447 U.S. counties analyzed in the report, or in 54% of counties. However, when broken down by population, this data shows that the majority of the U.S. population, 64%, live in markets that are more affordable to rent than to buy.
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STUDENT LOANS
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GSE CAPITAL RESERVES Fannie Mae and Freddie Mac have capital reserves again thanks to a new agreement between the FHFA and Treasury. Now each of the GSEs can withhold billions from the Treasury to ensure they have enough capital on hand to “cover other fluctuations in income in the normal course of each Enterprise’s business.” Previously, the Preferred Stock Purchase Agreements prohibited the GSEs from rebuilding capital and their capital base was required to be reduced, with reserves scheduled to be drawn down to $0 in January. Read more in our GSE Report on page 58.
CREDIT RISK TRANSFER BONDS One of the top bond trades of 2017 is expected not only to continue but become more popular in 2018 as more and more traders bet that homeowners won’t default on their mortgages. In order to reduce risk for American taxpayers, Fannie Mae and Freddie Mac created programs that allow reinsurers to cover part of a loss in case of borrower defaults. Bank of America data shows the riskier credit-risk transfers returned more than 10% through Dec. 1, 2017. This year, portions of the bonds could return 3% on top of government debt, a Morgan Stanley analyst said.
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As it turns out, the student loan debt crisis could be worse than anyone thought. Currently, at nearly $1.4 trillion in outstanding loans, student debt is the second-largest source of household debt after housing, and the only form of consumer debt that continued to grow after the Great Recession, according to a recent report from The Brookings Institution, a nonprofit public policy organization. In fact, for all students who entered college in 2004, nearly 40% of them could default on their student loans by 2023, which could negatively impact their ability to buy a home.
EQUIFAX It would seem the credit reporting agency is still not off the hook for its recent data breach which exposed the personal information of 145.5 million U.S. consumers. In addition to facing various legal, regulatory and financial consequences, now, two top Senate Democrats are calling for much stiffer penalties should any credit reporting agency, Equifax included, fail to protect consumer data again. Sens. Mark Warner, D-Virginia, and Elizabeth Warren, D-Mass., introduced a bill that would to impose financial penalties on the agencies for failing to secure consumer data.
BIG BANKS IN MORTGAGE SERVICING Many of the big banks are among the nation’s top mortgage servicers by portfolio volume, however, they are slowly beginning to release their hold on the market. Ongoing regulatory scrutiny is continuously pushing banks further away from servicing residential mortgage loans even as nonbanks continue to grow stronger, according to Fitch Ratings’ U.S. RMBS servicer handbook. Portfolios for the largest bank servicers such as Wells Fargo, JPMorgan Chase, Bank of America and CitiMortgage dropped by 1.6% in the third quarter 2017.
VIEWPOINTS
By Katie Brewer
Mortgage servicers still face headwinds with CFPB amended rules Billing statements and servicing transfers represent continued risk
The amended CFPB Servicing rules regarding Reg Z, which fully take effect in April 2018, cover a range of servicing topics, from defaulted borrower communication and billing statements to insurance, loss mitigation and servicing transfers. 24 HOUSINGWIRE ❱ FEBRUARY 2018
Clayton is in a unique position to observe and share our thoughts about potential risk exposure given the number of servicing quality control reviews we’ve conducted on behalf of our clients. Most notably, we’ve found two main areas of particular
Katie Brewer is chief operating officer of Green River Capital, a wholly owned subsidiary of Clayton Holdings LLC. Clayton Holdings is a wholly owned subsidiary of Radian Group, Inc.
concern: billing statement accuracy and servicing transfer related issues. In addition, we’ll discuss another area of potential risk related to the CFPB amendments — the accuracy of escrow statements. BILLING STATEMENTS The amended CFPB rules specifically focus on billing statements and the new requirement to send billing statements to borrowers in active bankruptcy. Everyone knows that managing bankruptcies is a complicated process with multiple nuances, and many servicing systems are not equipped to meet the specific compliance requirements. Most servicers will need to create new data fields within their tracking systems to produce accurate billing statements for bankruptcy-related loans. This, in turn, will trigger additional monitoring and oversight to maintain compliance. We’ve found that the handling and posting of payments during bankruptcy has been a widespread issue in our testing environment. Specifically, there is increased risk exposure in pre-and post-petition payment application and treatment, both inside and outside of the bankruptcy plan. Servicers and sub-servicers have created manual workflow workarounds to address the issue, however, it does open the servicer up to more exposure to calculation errors. Another challenge servicers face with regard to the preparation of the billing statement is the inability to reconcile sums reflected in their system of record with contract terms or with amounts received. We’ve found that foreclosure information, when applicable, is often incomplete. The new rule requires the statements to include 1) the monthly post-petition payment amount, 2) the total sum of any post-petition fees imposed since the last statement, 3) any post-petition payment amounts that are past due, and 4) the pre-petition average amount disclosure, which is missing from the billing statement in instances where the servicer has
commenced legal action. To address this, Clayton has developed a new testing module specific to the requirements of billing statements for loans in active bankruptcy. We stress to our clients that a robust servicing quality control program is essential to identify these potential issues with billing statements. SERVICING TRANSFERS Servicing transfer-related issues continue to present high-risk exposure for servicers and subservicers. As we know, the CFPB has been focused on data integrity for some time – both for general servicing and specifically, related to servicing transfer data. Transfers, by their very nature, are complex, and can be further complicated when the data being transferred to the new servicer is not accurate or the documents provided are not complete. This is especially true when the loan being transferred is in “in-flight” loss mitigation review. The amended CFPB rules specifically call out acknowledgement windows for loss mitigation applications as well as reviews of completed applications when servicing transfers occur. In some cases, when the loss mitigation application is received shortly before the transfer or is pending at the time of transfer, these loans can become lost in the shuffle. Clayton has conducted several data validation reviews for our clients to help ensure that critical data elements transferred onto the system match the applicable loan and/or servicing documents. Scrutinizing the data helps to prevent issues like required data points not being captured in the transferee servicing system, or that the data and/or codes are being used in a slightly different manner. These types of issues can occur even when both servicers are using the same servicing platform. Despite the common platform, each servicer has its own nuances on how the data structure is being used. Our familiarity with these nuances allows us to focus on the areas we have discovered where the highest chance for
potential error exists. A looming risk – escrow statements Although not explicitly called out in the amended CFPB rules, we’ve observed another area of risk in the accuracy of escrow statements. Escrow-related issues have plagued servicers for quite some time and regulators have been placing scrutiny on this topic over the past few years. Servicers try to create efficiency by automating the statements much like they do with billing statements. However, we’ve often discovered inaccurate figures being sent to borrowers on their annual escrow statements, especially when the borrower is in default. To address this, Clayton’s testing covers a recalculation of the dollar amounts represented on the statement as well as a recalculation of the escrow analysis. Finally, we’ve observed two escrow-related disbursement issues. The first is where servicers have submitted delayed tax disbursements resulting in penalties being assessed, which is a violation of many investor guidelines. Secondly, some figures included in the estimated annual escrow disbursements have not been supported by documents and/or systems output. Per the CFPB, all estimated annual disbursements must be supported by evidence. The challenges detailed above cover a small portion of the topics included within the amended CFPB rules. Servicers should be prepared to align their internal processes and systems to meet the complex requirements of the ever-evolving CFPB rules and guidance. The challenges are not insurmountable, but should be taken into consideration when internally reviewing or externally hiring a trusted compliance/risk management partner. Clayton has performed more than 500,000 loan reviews of over 50 servicers and sub-servicers since 2012, focused on servicing and regulatory compliance. Where applicable, our testing modules incorporate servicing and regulatory requirements as outlined by Fannie Mae, Freddie Mac, VA, FHA and the CFPB. HOUSINGWIRE ❱ FEBRUARY 2018 25
VIEWPOINTS
By Nate Baker
2018: The year of the title company Why real estate professionals can’t afford to continue with business as usual
The real estate industry made significant movement in 2017 toward improved communications between all the professionals and consumers that are required for a property sale. At the core of this is a concerted effort by the title industry to apply technology to modernize and upgrade the closing process. One may even look back at the Fidelity National Financial Q1 2017 earnings call to pinpoint a specific event that solidified 26 HOUSINGWIRE ❱ FEBRUARY 2018
the importance of the industry’s investment in technology. Bill Foley, chairman of the board, highlighted the value of con-
solidating transactions to a single technology platform while discussing strategies “to develop an end-to-end program from the time the Realtor gets the listing to the time when the transaction closes and we interface with the lenders.” In the not-so-distant past, technology powerful enough to drive the real estate industry’s impending step-change evolution would have only been available to the largest enterprises and institutions.
Nate Baker is the founder and CEO of Qualia, overseeing strategic vision for the company and executing the mission to provide a seamless real estate closing process for all transaction participants.
Today, however, thanks to advances in how technology can be built and distributed, it is available to businesses of all sizes. In the year ahead, real estate professionals operating in disconnected silos simply cannot afford to continue with business as usual — the risk of losing a substantial amount of business is just too big. Digital transactions that provide con-
nections between transaction parties have slowly become not only a normal way of doing business, but the requirement. Case in point is Zillow, a cloudbased product built to help buyers and sellers find each other online, which has more than 160 million monthly users, over 100 million homes in its database and has quickly displaced traditional methods for starting a home search. The ease at the front end of the transaction from products like Zillow heightens the pressure to improve the actual operations of a transaction on the back end. It’s what is expected. For title companies specifically, slow adoption of the latest technology brings a significant risk of losing business. Partners and customers will abandon companies providing legacy settlement service levels for a better experience. The most frustrating part of this risk to those slow to adapt is that they won’t even see their relationships with lenders and real estate brokerages slipping away until it’s too late to rehabilitate them. Title companies should look hard at being the drivers behind a unified real estate transaction platform if they don’t want diminished control of their business. Leaving it to the lenders or brokerages to “own” a shared system that manages transactions puts the title agent at significant business risk. Title companies would see a deteriorating bottom line driven by the following pressures: 1. Market consolidation Margins will compress as larger national title operations that previously relied on the refi business pivot towards consolidating the purchase market. 2. Lead consolidation As information about transactions become more accessible and consumers drive more of the purchasing decisions, there will be an increasing consolidation
of the source of leads that slip away from being exclusive word-of-mouth referrals. 3. Margin compression The fees currently charged by RealEC, Ellie Mae, and many eMortgage software products are good examples of the type of margin compression to expect. It’s important to point out here that “owning” the real estate transaction platform of record isn’t only about the players supporting the property sale. The consumer will play an increasingly influential role in consolidating transactions to a single technology platform. Companies that focus on customer-first experiences will quickly gain their unfair advantage and expand their market share. According to a recent American Bankers Association survey, two thirds of Americans use digital banking channels, which is representative of the indisputable trend that consumers and service professionals alike want easy, fast, and digital. They’re managing their credit, savings, and checking accounts online and increasingly venturing into cloud-based lending. Lender products such as Blend, Roostify, and Encompass Consumer Connect are evidence that consumers are fully engaged in the trend. While digital mortgages will play a big part in the consumer-first transition (and especially in the marketing around it), adoption will remain below 1% of the market throughout 2018 as service providers test out the waters. Title companies must explore taking the lead on implementing technology that drives the real estate industry forward. If they don’t, the coming year will be one that marks the beginning of business challenges that will remain with companies for years to come rather than one that marks a time they expanded their presence while taking the customer experience to new heights. HOUSINGWIRE ❱ FEBRUARY 2018 27
VIEWPOINTS
By John Gonos
Elevating emerging leaders Developing internal talent is beneficial in the evolving mortgage servicing industry
How do you prepare an organization for the future? How can you best address unknown business needs in two years? Five years? A decade? These are interesting questions, especially when you do not know what you do not know about the future and what it will bring. In reality, there are many things that we must always keep an eye on. Regulations and oversight, advances in available technology, and contraction and expansion of the housing market are just a few within the mortgage servicing industry. Training and organizational development are vital to the success of any industry-leading organization. It is imperative to maintain a team of learning and developing professionals tasked with addressing educational needs within the 28 HOUSINGWIRE â?ą FEBRUARY 2018
organization. A strategy that can help with the uncertainty of the future is developing the existing talent within your organization. Keeping an eye on the talent in-house is critical to developing a strong organization and building a skilled leadership team. This includes providing customized training, developing industry-based educational programs, leadership development, and identifying emerging leaders within your organization.
CUSTOMIZED TRAINING Creating customized training courses for each position is key to effective employee development Each position in the company has a menu of mandatory operational, systems, compliance, procedural and leadership (where applicable) learning materials. Each position also has a collection of required materials to complete and a smaller collection of optional materials closely related to their unique, individual role. This type of training is foundational to each person and his or her long-term success. Each curriculum is reviewed annually and updated so that the most current and applicable material is included. Everyone learns a specific way. To address as many learning styles as possible,
John Gonos is the director of training and development for Safeguard Properties, the nation’s leading mortgage field services provider. He can be reached at john.gonos@ safeguardproperties.com.
it is important for a company to offer its employees a variety of delivery methods. One of the most efficient ways of delivering the material is by utilizing a multimedia library to accomplish learning goals. Safeguard Properties maintains a library of more than 6,000 videos, an online curriculum of more than 350 e-learning courses designed to educate on a wide selection of topics, as well as more than 200 different classroom and webinar offerings. EXAMPLES OF INDUSTRY EDUCATION Employee development is critical in the mortgage servicing industry, especially for property preservation companies tasked with keeping servicers in compliance with changing guidelines and regulations. Examples of successful employee development strategies Safeguard has implemented include in-house industry training, regularly scheduled mandatory training courses, and tracked learning. Mortgage servicing and property preservation are such niche sections of the housing industry that there is very little offthe-shelf training content specific to their processes, procedures, and job functions. Therefore, the servicing training content must be created in-house. Our in-house created content is reviewed at least annually and updated with changes in content dictated by the industry. Regulations and oversight are a considerable concern for the mortgage servicing industry. At Safeguard, regularly scheduled mandatory training courses are implemented to stay ahead of changes affecting how properties are serviced and preserved. All employees are required to complete two phases of annual compliance training, which keep our staff up to date on the updated and evolving rules, regulations and guidelines the industry must implement. To execute the most effective educational experience for employees and the business itself, all learning needs to be tracked and evaluated on a regular basis through a Learning Management System (LMS). An LMS gives a company the ability to review any individual employee’s progress in re-
al-time, in addition to identifying areas of opportunity for additional instruction. It also helps distinguish those employees who have the potential to become leaders within the company and could benefit from leadership development courses. LEADERSHIP DEVELOPMENT Another critical component in the growth of in-house talent is leadership development. To remain at the top of an industry, a company must have effective leaders that understand the business, its challenges, and identify change that needs to take place. From the beginning of their career as key member sof the leadership team, the company should provide learning opportunities for both the experienced and inexperienced leader. Developing those within the organization creates leaders with company and industry history, expertise, context, experience and strong management skills. In a complex and ever-changing industry like mortgage servicing, history and knowledge are extremely important and the key to a successful business. Similar to the foundational and position-based learning all employees receive, a considerable amount of effort at Safeguard is put into designing leadership development programs that are beneficial to each leader individually. Leaders are constantly exposed to new paradigms and philosophies around all the major components of being an emerging leader. IDENTIFYING EMERGING LEADERS In many organizations, a person is often put into a leadership role as a promotion because they did well in their individual role. On a Friday, they are doing what they have always done, adding value as an individual contributor. On Monday, they have been promoted and are now leading others. They quickly realize it is more challenging than they anticipated. Preparing these key individuals in advance, before they hit the streets, helps limit their frustration. Safeguard devotes significant resources to assist internal leaders to become stronger and more effective. We assess and de-
velop key individuals within the organization through a mix of formal and informal development programs, including our Emerging Leaders Program. Senior leadership annually assess all current leaders on two metrics, performance and potential. Those that rank highest in those two arenas are chosen to participate in a year-long program designed to prepare them for the next level of management challenges they are likely to encounter. Whether it is more or new responsibility, or a new position altogether, the ELP affords the participants the opportunity to work through a pre-determined curriculum of leadership activities, stretch assignments, interactive classes and team building. The participants participate in regular meetings with their fellow program members and discuss current challenges to them and the company. They have open discussions in a safe environment about challenges they face on all business fronts. They share ideas, experiences and challenges confronting them. The ELP members also participate in one-on-one coaching on a regular basis with an internal coach who helps them become very self-aware of what their strengths are and how to bring them into play while managing people and processes in a very fluid and dynamic business. CONCLUSION Preparing current and future leaders at all levels makes any company nimble and able to address changes in industries like the mortgage servicing and property preservation industry quickly. These well-trained and developed internal leaders have had the opportunity to explore their strengths and learn new and effective management skills that will pay dividends personally for their entire careers, in addition to being a major benefit for their companies. Industry knowledge and experience is valuable to businesses navigating through fluid and evolving industries like mortgage servicing, therefore spending time to develop existing talent pays big dividends and sets companies up to meet the future head on. HOUSINGWIRE â?ą FEBRUARY 2018 29
THE RISE OF MULTIGENERATIONAL LIVING 30 HOUSINGWIRE ❱ FEBRUARY 2018
HOUSINGWIRE ❱ FEBRUARY 2018 31
T
HE SMELL OF GRANDMA’S COOKING SLOWLY MAKES its way upstairs to where you’re finding your way out of your own bed. The smell isn’t surprising. Ever since your grandparents moved in a few weeks ago, they’ve been doing their share of pitching in with household duties. The sound of heavy banging near the back of the house is a reminder that the move is permanent, as contractors are working to add on a second master suite to the back of the house. And from overhearing the contractors’ conversation a few days before, you know your family is not alone in its new lifestyle – far from it. Multigenerational living, where two or more adult generations live under the same roof, is becoming a rising trend in the U.S. Currently about one in five, or 19%, of Americans now live in a multigenerational household. This is the highest level of multigenerational living in the U.S. since 1950, when 21% of Americans lived with their family, according to the U.S. Census Bureau. But even in 1950, 21% of the population amounted to just 32.2 million people. In 2014, about 60.6 million adults lived with their family in the U.S., up from 57 million adults in 2012, according to the Pew Research Center’s analysis of Census Bureau data.
This shift toward multigenerational living makes sense when considering the coinciding shifts in U.S. demographics and even homeownership rates. Harvard University’s Joint Center for Housing Studies indicates that immigrants have made up 40% of housing demand in the U.S. since 2010. And within a few decades, housing analysts expect immigrants and their progeny to be responsible for the majority of the net growth in households in this country. What’s more, from 2000 to 2013, immigrants or the children of immigrants have accounted for 57% of the country’s population growth, according to a 2014 white paper from the Immigration Task Force of the Bipartisan Policy Center called “Immigration and Housing: Supply, Demand, and Characteristics.” HousingWire’s April 2016 magazine feature “Why immigrants are crucial to the housing market” points out that Asians are the fastest growing group of immigrants. And in another minority group where multigenerational living is popular, homeownership is on the rise. The current homeownership rate in the U.S. currently rests near a 50-year low, according to the U.S. Census Bureau. But while the homeownership rate for every other demographic is decreasing, the rate for Hispanics is increasing.
“The stigma around living at home is not what it was years ago.” Will Mitchell, CEO of Contract Simply Some areas are more saturated with multigenerational families than others. Metrostudy, a company which provides insight to the housing industry through its comprehensive database of housing market information, released a map showing the top markets for multigenerational housing. Some of the top markets hold more than 6% of the U.S. multigenerational households, with the two top cities tying for 6.1%. The reason for this growing trend? Experts have pointed out various possibilities including rising home prices, child care expenses, student debt, longer life expectancies and the growth of minority communities where it is more common for families to live together, according to realtor. com. Data shows that Asians are the most likely to live in multigenerational households at 28%, followed by Hispanics at 25%, blacks at 25% and then whites with just 15%. 32 HOUSINGWIRE ❱ FEBRUARY 2018
In fact, the Hispanic homeownership rate accounted for 74.9% of the total net growth in the overall homeownership rate in the U.S. in 2016, according to a report from the National Association of Hispanic Real Estate Professionals. And realtor.com pointed out that even if these demographics don’t have family living with them full time, they often need to accommodate for extended stays from family members, which could stretch out for months at a time. Of course, the increase in the population of various ethnic groups living in the U.S. isn’t the only thing driving this rise in multigenerational living. Rising home prices are also contributing to the trend as Millennials looking to buy a home are met by limited inventory and outrageous prices. Young adults today are both more likely to live at home and to live at home for longer periods than previous generations, according to Pew Research Center analysis of
Top Markets for Multigenerational Housing | Salt Lake City, UT
6.1%
Denver, CO
5.3% Raleigh, NC
5.3%
Atlanta, GA RiversideSan Bernardino, CA
5.4%
Dallas-Ft. Worth, TX
5.7%
5.9% Austin, TX
5.4%
San Antonio, TX
5.5%
U.S. Census data. In 2016, 15% of 25 to 35-year-olds were living in their parents home, up five percentage points from Gen Xers who lived at home in 2000 and nearly double the share of the Silent Generation in 1964. One expert pointed out that key aspects to living at home have changed since previous generations. “The stigma around living at home is not what it was years ago,” Contract Simply CEO and Co-founder Will Mitchell told HousingWire, saying it gives many Millennials the chance to save money.
A HOUSING SOLUTION As this trend began to rise, the housing market took notice, creating homes that are made specifically for multigenerational households. Mega homebuilder Lennar introduced its Next Gen home, calling it a home within a home with two distinct living spaces under one roof. “Imagine having both privacy and togetherness,” the company advertises on its website. “Both independence and help nearby when needed. Lennar is the first home builder to offer a home specifically designed for multigenerational living.”
Houston, TX
6.1%
Orlando, FL
5.4%
The homes are single-family homes designed to house one family, but give each generation their own privacy. The homes have two garages, two front doors, two kitchens and even two master bedrooms. The homes could also have their own private living room. But although the homes are “separate,” they are together under one address, and have an internal door connecting the two spaces. While the floor plan varies by size and location of the home, the sample floor plan on the next page shows what the multigenerational home could look like. The space highlighted in blue represents the add-on area that makes up the “second home.” Lennar gave several examples of families who could utilize this type of home, including families moving an elderly parent into the home, or giving a special needs child their own space and independence. The price range for these homes is on the high side. In the Dallas area, for example, a Next Gen home ranges from about $400,000 to around $600,000. In other, more expensive markets such as San Francisco, Next Gen homes start in the mid-$600,000 range and go up from there. HOUSINGWIRE ❱ FEBRUARY 2018 33
to 30 and those with living parents. Among respondents with grown children, 14% already have “boomerang kid” roommates, a young adult who moves back into their parent’s home after a period of independence, but a full 31% expect that at least one child will be returning to their home in the future. On the other end of the scale, among the younger generation 15% of the survey respondents said they already have aging parents living with them, but more than twice that number, 32%, expect to eventually share their home with a parent. Mason explained that as the PulteGroup constructs homes for multigenerational households, the homes are bought up at the same rate as other single-family homes, despite the more specific characteristics. When determining where to construct the homes, Mason explained the builders look at suburban areas with good schools, and retail outlets which attract both Millennials and older generations and are attractive for raising a family. Interestingly, PulteGroup’s research showed that while financial reasons are a common cause for the multigenerational trend, the company found that a high number of households had parents move back in as a deliberate choice to enhance familial relationships and build a better bond among the generations. Whatever the reason, as both Baby Boomers and Millennials plan for their adult children or parents to move back in, builders are becoming increasingly conscious of the trend, and don’t expect it to let up any time soon.
A DEEPER ANALYSIS
“Lennar’s Next Gen - The Home Within a Home opens the door to an array of financial and logistical benefits, while providing the opportunity to share the comfort of your home with loved ones,” Lennar says on its website. This multigenerational trend does not look to die down anytime soon, and in fact, builders are expecting it to grow. “It’s, as our best guess, not going to reverse itself,” said Jay Mason, PulteGroup vice president of market intelligence, in reference to the trend. PulteGroup, a home construction company which also constructs multigenerational homes, recently surveyed two demographics: those with children aged 16 34 HOUSINGWIRE ❱ FEBRUARY 2018
These specially built multigenerational homes would have little impact on mortgage lenders as most would require funding specifically from the builder for the product. Due to the high cost levels of the homes, and the specificity of the product, one expert explained it would likely not be funded by Fannie Mae, Freddie Mac, the Federal Housing Administration, or any other QM lender. “I don’t know that it will be much of a trend for the mortgage banker, because the builders won’t get financing in the consumer’s name,” said Eli Peltzer, Land Gorilla executive assistant of the risk management department. Peltzer also explained these homes would be limited to key areas where the builder had special zoning to be able to construct multigenerational homes. The home
would fall under a single-family home with an accessory dwelling unit. When builders apply for zoning for new homes, the process could take years to complete. Even in order to add an accessory dwelling to an existing home would take months to get zoning permission, Mitchell said. But this is a necessary evil as zoning is key to being able to construct the added unit. In some areas, even adding an extra bar sink and fridge can violate zoning laws, Mitchell explained. In many cities, homes must reach a certain square footage to be able to add a second kitchen. And this requirement leads to one of the key reasons why these homes are sold on the more expensive end of the market. Because they are larger homes, and must remain large in order to keep the extra kitchen, these homes will not appear in more affordable forms. What’s more, as several generations come together to live in the same unit, a smaller home with less space to spread out is typically not what these families are searching for, meaning builders are not likely to make multigenerational homes smaller or more affordable. But there are ways homebuyers can better afford these homes as they look to qualify for the mortgage. For example, borrowers who are renting out the accessory dwelling could add this income to the loan, allowing them to qualify for a higher loan amount, Mitchell pointed out. Also, because these homes house several generations under one roof, they typically have more income owners per household, meaning they can afford and qualify for a larger mortgage payment. In fact, these homes would be more affordable for each party involved than if they each bought their own, separate home. But some experts remain skeptical, and predict that despite the rising share of multigenerational households, this type of home will remain a niche product. “My assessment is it will stay relatively niche,” Mitchell said, saying most cases of multigenerational households, such as bringing in an older family member or even a Millennial as they look to save for a home themselves, is a short-term situation. He pointed out much of the multigenerational situations are not tied to long-term life decisions, but rather, short-term life circumstances and cash flow. While nearly one in five Americans are living in multigenerational households, many of those are likely temporary situations that would not create the need for a multigenerational home.
Mitchell also pointed out that reselling the home later on could become a problem as fewer people are likely to buy this niche product. “When I go to sell a house, the number of people who want a house with two kitchens in it is a lot smaller than the number of people who want one kitchen,” he said. Of course, Mitchell pointed out that if immigration increases, these circumstances could change. And while some experts may still be wary of jumping on the trend, more and more builders are beginning to construct multigen homes, and homebuyers are buying them.
THE OPPORTUNITY As multigenerational households grow, both those in temporary and long-term situations, lenders have the opportunity to capitalize on the trend. Currently, if a household wants to buy a specialized multigenerational home, they would go through the builder to fund it. However, there is opportunity within this market to create products that would serve households in both temporary and long-term multigenerational housing units. In several different reports, the Urban Institute continues to draw attention to the current credit box, saying it is way too tight, and there is plenty of room to expand safe access to credit. As this trend grows, lenders have to opportunity to expand their credit box and create products catered toward multigenerational living, and toward minority groups that are more likely to live together, and also typically have lower access to credit. Lenders creating a product to enable homebuyers more options when purchasing homes as a family could also open up the door for more builders to begin experimenting with the product. While larger builders such as Lennar are able to fund their own homes through its lending channel, this would open the door for smaller builders which have less access to funds. Of course, other larger builders will also have more opportunities to sell this product as the number of adults living with their family members continues to rise. Multigenerational living may not be ideal for everyone. It may not even be ideal for almost everyone. But as home prices continue to rise, and our nation sees an influx in immigrants from cultures where families are more inclined to live together, this trend could have real staying power. HOUSINGWIRE ❱ FEBRUARY 2018 35
The Secrets of
Value
Will smaller sell faster? Is energy
efficiency mainstream? Experts unpack the secrets of value in today’s housing market.
By Deborah Huso
I
f conventional wisdom about Millennials and Baby Boomers is to be believed, our nation’s homebuying aspirations are getting smaller, square footage-wise that is. Purportedly, these two generations sandwiching Gen Xers and outnumbering them by more than 2-to-1, according to the latest data from the Pew Research Center, want smaller homes in communities where they can walk to entertainment, shopping, and, in the case of Millennials, work. Housing industry pundits have also claimed the Great Recession soured Americans’ belief that homeownership can generate wealth. Appreciation is no longer a given, and fancy remodels probably aren’t going to pay you back when you sell your home like they did 15 years ago.
IS IT ALL TRUE? Well, not exactly. In 2015, Americans spent $340 billion remodeling their homes, according to the National Association of Realtors 2017 Remodeling Impact Report. That doesn’t exactly sound like a cohort that’s worried home upgrades are a waste of money.
DOES SIZE MATTER? It’s true today’s buyers are thinking smaller. And that’s in large part because the largest generation of homebuyers right now are Millennials. “They’re 36 HOUSINGWIRE ❱ FEBRUARY 2018
HOUSINGWIRE ❱ FEBRUARY 2018 37
facing affordability issues,” said Jessica Lautz, NAR’s managing director of survey, research and communications. She added, “They tend to buy older homes at about 1,800 sq. ft.” But it’s less about idealism than necessity. “They’re typically buying in suburban areas and pushed out of city centers by affordability factors and school concerns,” Lautz noted. Millennial buyers shouldn’t be ignored. According to NAR’s 2017 Home Buyers and Sellers Generational Trends Report, they make up some 35% of today’s homebuyers and more than 65% of first-time buyers. They are the largest generational cohort of homebuyers today, and they’re only going to get larger as more of them build careers, marry and start families. Half of Millennial buyers have children under 18. And while Millennials might like to think they’re different from their parents in their purchasing decisions, and they may reject the McMansions that gained popularity among Baby Boomers and Gen Xers, the numbers tell a different story. “Millennials are not as different from their parents as they may want to be,” said
“There is a positive relationship between income and size of home. People are feeling more affluent as we distance ourselves from the Great Recession.” — Ed Hudson, Home Renovation Research Labs 38 HOUSINGWIRE ❱ FEBRUARY 2018
Lautz. “They’re purchasing pretty traditional homes with three bedrooms in a suburban location.” And while Millennials may want a smaller footprint, they’re not necessarily buying one. In 1987, the first year NAR collected data on home size, the typical home purchased (including multifamily as well as single-family) was 1,720 sq. ft. That figure rose to 1,900 sq. ft. by 2011 and has remained flat since. So in reality, today’s buyers are buying bigger, and Gen Xers are buying the biggest, with the average size of their purchased homes coming in at 2,100 sq. ft. Home Innovation Research Labs’ Ed Hudson, director of market research, said that if one looks at the U.S. Census, single-family home buyers are still buying relatively large residences. “We’ve been hearing for 20 years now that homebuyers want smaller,” he remarked, “but that hasn’t played out except for a couple of time periods.” Hudson said in the years directly following the Great Recession, average American house size went from 2,700 sq. ft. to 2,500 sq. ft., but now the numbers are up again. “There’s a positive relationship between income and size of home.” he explained. “The highest income earners buy the biggest homes.” Right now that means Gen Xers because Millennials haven’t reached the high arc of their career paths yet. Currently, Hudson said, average American home size is 2,650 sq. ft. Hudson believes the home size buyers choose is “more affluence-based than ideologically based.” The one exception to that rule, he said, is the Baby Boomer desire to downsize. Lautz pointed out, however, that the lack of any downsizing in home size purchases may not necessarily be the result of preference. “Inventory is really constrained at lower price points,” she said, “So smaller homes are not available for purchase.” According to NAR data, 86% of buyers are purchasing previously owned homes, not new construction. The result is that if buyers still buy, the market will necessitate they buy bigger.
One area where one can expect to see larger homes lagging in popularity is in the high-end space. Dan Fries, SRA, president of Daniel Fries & Associates in Cumming, Georgia, said, “the 15,000-sq. ft. homes are not popular anymore.” That’s not to say high-end buyers don’t want big, but “after about eight to 10,000 sq. ft., you almost get penalized for that square footage,” he noted. Fries also said that residences in the $1 million+ market have decreased in size by about 500 sq. ft. on average when it comes to new construction.
REMODELS STILL MATTER Meanwhile the idea that remodels don’t add value anymore is also a misnomer. “We are seeing that kitchens and bathrooms are popular when you think about resale of properties,” said Lautz. And kitchen upgrades are still the No. 1 way to give a home more market appeal. In fact, of Realtors surveyed by NAR, 54% had suggested a seller complete a kitchen upgrade before listing a home. Based on the 2017 survey, the average cost of a kitchen upgrade was $35,000 with $20,000 of that cost recovered at the point of sale, which translates into a cost recovery of 57%. Meanwhile complete kitchen renovations saw an average cost of $65,000, with sellers recovering $40,000, or 62%, of the renovation expense when selling the home. Bathroom renovations saw an average cost recovery of 50%. “Kitchens are a big seller,” Hudson agreed. “Cabinets and countertops are showpieces that are getting a lot of attention as well,” he added. “The average number of cabinets per house continues to grow.” And buyers increasingly want highend countertops. Granite occupies 45% of the market share with quartz at 15%. Hudson believes the luxury details are part of a new post-downturn mindset: “People are feeling more affluent as we distance ourselves from the Great Recession.” And their home-buying preferences are reflecting that. In fact, Lautz noted that even sellers with older kitchens who are feeling cash-
strapped should consider putting in new countertops, refacing cabinets or upgrading lighting and faucet fixtures before putting a home on the market. But even though kitchens are the most popular way to upgrade a home, the upgrade with the highest return on investment is actually the roof. “That’s a big dollar value to a first-time home buyer,” Lautz pointed out. A new homeowner isn’t going to have the funds to replace a leaky or inefficient roofing system, so they’ll go for a home with new shingles over one with a spanking new kitchen. Sellers spent an average of $7,500 on new roofs, according to NAR’s 2017 sur-
“The second-time buyer is still looking for 2,500 to 3,000 sq. ft. for new construction in the suburb,” said Fries. That story is a little different in revitalized areas where an older, two-bedroom home is the norm. “Millennials think two bedrooms are fine,” he said. “Porches and terraces are higher on their list than a big bonus room.” Off-street parking is also a big factor, so garages are important. Millennials are more likely, Fries contended, to spend money on energy efficiency over square footage. “They like walkability to shopping and things to do. The more walkable the neighborhood, the higher density, and it means smaller square footages.”
“Eighty-four percent of buyers now consider heating and cooling costs central to their evaluation of a home for sale. The more modest the buyer’s budget, the more important energy efficiency is.” vey, and experienced a cost recovery of 109%, making new roofs the single best home upgrade for not only increasing marketability but enjoying a profit from the upgrade at time of sale. Hudson said there is evidence the average buyer has shifted to wanting space over features. “My theory, based on HIRL’s builder practices survey and the Census is the mix of single-family housing has changed somewhat in 2016,” he remarked. “In 2015, 25% of new homes were considered luxury homes by builders; that number fell to 18% in 2016.” Fries, who works in the Atlanta market, agreed, noting that tract builders constructing homes in the $300-$400,000 price range are “putting out bigger homes for less money.” Fries added, “They’re building boxes with less fenestration.” That means fewer corners, angles, complicated roof lines, and architectural features. Instead, they’re including huge master bedrooms with big closets and bathrooms.
Fries framed it succinctly: “Young Millennials want style; second-time buyers want space.” Fries said if he were to rank the changes/upgrades most likely to add value to a home, he’d vote for a kitchen renovation first, followed by the master bathroom, with energy efficiency improvements ranking third. He believes energy efficiency has finally arrived in terms of being a mainstream consideration when it comes to home buying. Eighty-four percent of buyers now consider heating and cooling costs central to their evaluation of a home for sale. The more modest the buyer’s budget, the more important energy efficiency is. What should not be overlooked, however, is that survey data from HIRL indicates buyers will sacrifice proximity to work and shopping as well as more expensive materials for greater home affordability. Size matters, yes, but price is still the biggest factor. HOUSINGWIRE ❱ FEBRUARY 2018 39
UPGRADED KITCHENS with solid surface, light-colored countertops, painted solid wood cabinets, on-trend faucets (think brushed nickel) and lighting, and center islands with stools instead of an attached breakfast room rule. High-end, commercial-grade appliances are on the way out.
FORMAL LIVING ROOMS ARE OUT, TOO. Buyers want kitchens that open onto a family room.
Top home features
for adding value and marketability*
A
PAINT is an inexpensive way to modernize a home. Today’s popular colors are grays, whites and pastels. Get rid of wallpaper and paint the trim. 40 HOUSINGWIRE ❱ FEBRUARY 2018
tlanta appraiser Dan Fries said how much a homeowner sees in return on investment in renovations or upgrades “depends on how much you spend.” But he cautioned against overdoing it, particularly if one doesn’t plan on staying in the home long-term. “A good rule of thumb to follow for a kitchen renovation is don’t invest more than 10% of the market value of the home,” he explained. “More than that is red flag.” And focus on upgrades people really want like solid surface countertops. Also consider the features of other homes in the neighborhood. A seller doing a complete kitchen renovation isn’t going to see a good return on investment if he lives in a neighborhood of older homes where 1970s kitchens are the standard and no one else is upgrading.
* Data provided by NAR 2017 Remodeling Impact Report and surveys from Home Innovation Research Labs.
HOME SECURITY SYSTEMS and smart homes are becoming the norm, not the exception.
SPACIOUS, RENOVATED MASTER BATHROOMS ARE ALWAYS IN. Addition of a new bathroom in a home with only one or two helps.
ENERGY-EFFICIENT WINDOWS AND DOORS are now standard and expected features, too, though custom doors and windows are out. Twothirds of all new homes (including luxury homes) now feature vinyl windows, though wood windows still dominate northern climates. HIGH-DENSITY FOAM INSULATION, which not only dramatically increases energy efficiency but also reduces traffic noise, has become the expected standard in new construction. New, high-efficiency HVAC SYSTEMS add value by reducing utility costs.
HARDWOOD and engineered wood floors in main living areas, including kitchens, are a mainstream preference now. Hardwood outranks all other flooring types in market share. Buyers want carpets in bedrooms only.
NEW ROOFS are worth the investment and will almost always lead to recouping costs.
INTEGRATED INDOOR AND OUTDOOR SPACES with walls of windows, rolling doors, screened porches or patios, and outdoor kitchens are high on Millennial preference lists. HOUSINGWIRE â?ą FEBRUARY 2018 41
POWER PLAYERS S E R V I C E
P R O V I D E R S
Mortgage service providers walk a tightrope of regulatory demands that they must meet while delivering a full spectrum of services and solutions to their clients. In this section, we profile five companies creating new products, new efficiencies and new opportunities in a dynamic mortgage servicing market. 42 HOUSINGWIRE â?ą FEBRUARY 2018
44 BLACK KNIGHT 45 DIMONT 46 FIRST AMERICAN MORTGAGE SOLUTIONS 47 MORTGAGE CONTRACTING SERVICES 48 SAFEGUARD PROPERTIES MANAGEMENT
HOUSINGWIRE ❱ FEBRUARY 2018 43
POWER PLAYERS | SPONSORED CONTENT
Black Knight
601 Riverside Avenue, Jacksonville, Florida 32004 BlackKnightInc.com
The
FAST FACTS: • Black Knight (NYSE:BKI) is a leading provider of integrated software, data and analytics solutions that facilitate and automate many of the business processes across the homeownership lifecycle. • Black Knight’s industry-leading servicing system, LoanSphere MSP, is used to service over 33 million active loans, more than any other provider in the U.S. • LoanSphere MSP helps servicers increase operational efficiency, reduce operating costs and improve risk mitigation.
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Black Knight is a leading provider of integrated software, data and analytics to the mortgage and consumer loan, real estate and capital markets verticals. For mortgage servicers, the company provides proven, reliable and comprehensive solutions that support all aspects of servicing and default – from loan boarding to disposition. Black Knight’s solutions help its clients address regulatory requirements, and enable servicers of all sizes to better manage and mitigate risk, realize greater efficiencies and drive improved financial performance. The core of Black Knight’s servicing solutions is LoanSphere MSP — the mortgage industry’s leading servicing system — which supports all sizes of portfolios, loan types and processes. The system automates all areas of loan servicing, including setup and maintenance, customer service, cashiering, escrow administration, investor accounting and default management. The broad-based functionality of MSP supports a wide range of loan products, including fixed-rate mortgages, adjustable rate mortgages, construction, home equity loans and lines of credit, and biweekly and daily simple-interest loans. The highly secure and reliable system has a proven track record — it has been on the market for more than 50 years and currently helps servicers manage over 33 million active loans every day. “MSP delivers tremendous benefits to our clients, helping them improve performance and efficiencies, and better manage risk,” said Joe Nackashi, Black Knight’s president. “In addition, the system is continually enhanced to provide the advanced capabilities, functionality and support, as well as the innovation servicers need to compete in an ever-changing market.” Integrated with MSP are Black Knight’s suite of LoanSphere default solutions, which include: LoanSphere Loss Mitigation, LoanSphere Bankruptcy, LoanSphere Foreclosure, LoanSphere Claims and LoanSphere Invoicing. “Black Knight provides a comprehensive suite of technologies tailored for servicing non-performing loans,” said Nackashi. “Not only do they greatly streamline default processing, but also deliver end-to-end support via integration with MSP. No other provider can match the broad spectrum
of solutions to support servicers across the loan lifecycle.” All of Black Knight’s servicing and default solutions support evolving regulatory requirements and provide an audit trail of activities occurring on the loan to help with compliance reviews. The company invests in its technologies to deliver innovative products with superior capabilities. The company is focused on delivering integrated, data driven and intelligent solutions that enhance automation and support clients’ digital strategies. In addition, Black Knight sees great opportunity in its enterprise business intelligence platform, which enables servicers to take advantage of the vast amount of data they possess not only within their servicing operations, but also across their organization. Using a client’s loan data, Black Knight now has the ability to link it with public records information and proprietary industry data to provide servicers with unsurpassed views into their operations, helping turn information into opportunities for revenue, growth and risk mitigation. “Our solutions can provide access and deeper insight into data at any point in the loan lifecycle — from prospect capture to final mortgage disposition,” Black Knight CEO Tom Sanzone said. “Our innovative business intelligence technology can help make data easier to view, understand and act upon, getting the right data to the right person at the right time.” The
EXECUTIVES
TOM SANZONE, CEO Tom Sanzone has more than 30 years of experience in the financial services industry. Prior to joining Black Knight, Sanzone was executive vice president at Booz Allen Hamilton. He has also served as chief administrative officer at Merrill Lynch and as chief information officer for Credit Suisse and Citigroup. JOE NACKASHI, PRESIDENT Joe Nackashi has more than 25 years of experience providing innovative technology solutions to the financial services industry. Previously, he served as chief information officer and head of the servicing solutions division of Lender Processing Services.
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DIMONT
18451 Dallas Parkway, Suite 200, Dallas, TX 75287 dimont.com
The
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DIMONT, a leading provider of insurance claims management and adjustment services for mortgage lenders, servicers and investors, recently released its Loss Draft service, which leverages DIMONT’s industry knowledge of insurance claims, inspection reviews and repair processes, and provides a self-service web portal offering an efficient collateral protection solution to the mortgage industry. Built in partnership with Indisoft, the portal enables borrowers, mortgage institutions, and DIMONT claims personnel to upload claims-related documentation and to share case status information electronically, while allowing servicers to maintain direct borrower contact through existing call centers. “The Loss Draft service is important because it provides the mortgagee peace of mind that the proper claims management process is being followed and that remedial efforts are monitored, ensuring the repairs are made using the disbursed funds, and the collateral is protected. Mortgage servicers often struggle with managing this complex process efficiently and effectively both internally and externally facing to the borrower, so the Loss Drafts service is a much-needed solution for them,” said Valerie Elkins, vice president, business innovation. “Additionally, customizable and real-time reporting offers servicers further insight into the status of loans within the loss drafts process.” DIMONT’s experience in insurance claim management, superior technology, proactive file management, and predictable client cost model results in a smoother loss draft process for both servicers and borrowers. In addition, the customer service experience for the borrower is enhanced because of the education provided by the guided process, as well as the continuity in relationship management provided by the servicer. Looking ahead, DIMONT President and CEO Denis Brosnan sees the company’s suite of Collateral Loss Mitigation (CLM) solutions as its biggest near-term opportunity, as it enables servicers to go beyond the ordinary efficiency/ effectiveness concerns and proactively reduce losses on the disposition of collateral. “We look forward to offering our unique CLM
suite to customers — the linking of our hazard and investor claims management departments with additional servicing offerings designed to identify issues and resolve them before they can cause curtailments or reconveyance,” said Brosnan. “Servicers gain access to a unified technology and processing platform than enables DIMONT to provide parallel processing and enhanced quality control. This solution will be disruptive in the marketplace.” The
EXECUTIVES
DENIS BROSNAN, PRESIDENT AND CEO Denis Brosnan was named president and chief executive officer of DIMONT in July 2015. He brings more than 15 years of executive leadership experience in technology and technology-enabled services firms for the financial services industry. Prior to joining DIMONT, Brosnan served as the chief executive officer of Prommis Solutions, one of the largest national providers of technology-enabled default-related processing services. Brosnan began his professional career as a practicing attorney and served in the JAG Corps of the U.S. Army Reserve. VALERIE ELKINS, VICE PRESIDENT, BUSINESS INNOVATION Valerie Elkins joined DIMONT in 2016 and serves as vice president, business innovation. Elkins brings 20 years of leadership experience in operations, technology and change management in the financial and legal services industries. Prior to DIMONT, Elkins served in executive leadership positions with default law firms Kozeny & McCubbin, L.C. and Buckley Madole, P.C. as well as Fidelity National Title Company. STACIE RANKEY, VICE PRESIDENT, CLIENT DEVELOPMENT Stacie Rankey joined DIMONT in 2016 and serves as vice president client development. Previously, Rankey served in executive positions at the ALFN, LOGS and eMASON. She brings 17 years’ experience in sales, client relations, and marketing within the mortgage banking industry. Rankey’s focus is on delivering client-focused proactive solutions to DIMONT clients.
FAST FACTS: • ●Founded in San Diego in 1996. • ●A leading provider of insurance claims management and adjustment services for mortgage and auto lenders, servicers and investors nationwide. • ●Since 2010, DIMONT has recovered more than $2 billion in insurance claims proceeds for its clients. • ●DIMONT is a trusted partner for its clients, providing specialty technology-enabled insurance and claims-related solutions on collateral assets.
HOUSINGWIRE ❱ FEBRUARY 2018 45
POWER PLAYERS | SPONSORED CONTENT
First American Mortgage Solutions 3 First American Way, Santa Ana, CA 92707 800.333.4510 firstam.com/mortgagesolutions
The
FAST FACTS: • Single-source post-closing and servicing solutions covering performing and non-performing loans. • Nationwide property data, homeownership information, 6 billion recorded document images. • Backed by the stability, sustainability and scalability of First American.
46 HOUSINGWIRE ❱ FEBRUARY 2018
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Lenders, servicers and investors need to work with a partner they can trust. In a time when so many service providers are closing their doors, it is becoming increasingly important to pick a reliable company that will be there for the long haul. As part of the First American family of companies, First American Mortgage Solutions provides direct access to one source of tools, expertise and the richest document repository in the industry, numbering 6 billion document images. Backed by First American’s rich industry heritage and strong financial position — with total revenue of $5.6 billion in 2016 — the company is able to offer convenience, confidence and certainty throughout the mortgage lifecycle. “No one in the industry has assembled the assets that we have in post-closing and servicing, and only our solutions are backed by the stability, sustainability and scalability of First American,” said Kristen Songrath, vice president of division operations at First American Mortgage Solutions. As a result of making continual investments, including strategic acquisitions across the business, First American Mortgage Solutions has further strengthened its ability to serve lenders, servicers and investors. A major benefit of working with a company of this size and magnitude, versus a smaller boutique firm, is tactical capacity. For example, because of last year’s natural disasters, banks are projecting thousands of additional loan modifications in affected areas. To meet the needs of one of their customers — a large bank — First American Mortgage Solutions was able to allocate training and resources to process the influx of orders. “We are the one source for comprehensive solution sets, while our competitors offer pieces or parts,” Songrath said. “Our customers also benefit by leveraging the deep industry experience and cohesive operations among all of our assets, which work together instead of in isolation.” In addition, First American continues to lead the industry with its best-in-class CleanFile Solutions business, which spans both origination
and servicing. This single, vertically integrated suite combines post-closing document management, quality control services, file perfection, and lien release generation and recording. “With CleanFile Solutions, lenders and servicers can seamlessly order lien releases, assignment services, property information reports, document research, title policy retrieval and replacement, and collateral file perfection products — all in one place,” said Chris Brinkley, also a vice president of division operations. “We will continue to integrate our legacy and newly acquired assets to bolster the superior depth and breadth of our post-closing and servicing solution sets.” First American Mortgage Solutions continues to innovate to meet the changing needs of its customers. In October 2017, the company launched an interactive platform, Digital Gateway, to provide seamless access to application programming interfaces (APIs) for its data and solutions, enabling customization, automation and the creation of new applications throughout the loan lifecycle for its customers. The company, together with First American’s broader capabilities, serves as a single source for title and settlement, data and analytics, fraud and verification, regulatory compliance, valuation and collateral risk, quality control, fulfillment services and default services. First American is proud to have been named by Fortune magazine in 2017 to the Fortune 500, Fortune 100 Best Companies to Work For and the Best Workplaces for Women lists — one of only 15 companies named to all three lists. The
EXECUTIVES
CHRIS BRINKLEY, VP, DIVISION OPERATIONS Chris Brinkley oversees the CleanFile Solutions team responsible for post-closing and servicing products and services for curing, perfecting and completing collateral files. KRISTEN SONGRATH, VP, DIVISION OPERATIONS Kristen Songrath oversees default title products for modifications, servicing QC, deed in lieu, foreclosures, signing and trustee services, nationwide posting and publication, and REO asset closing.
POWER PLAYERS | SPONSORED CONTENT
Mortgage Contracting Services 813.387.1100 MCS360.com
The
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Mortgage Contracting Services provides property preservation and inspection services for banks and mortgage servicers throughout the U.S. and its surrounding territories. MCS’ services include property inspections, property preservation, REO property maintenance, vacant property registrations, valuation services, title and closing services, steel security products and other mortgage-related services. The company works with its nationwide network of vendors to ensure properties are preserved and maintained in a manner that complies with regulatory guidelines. “By working together we are able to mitigate client risk and lessen neighborhood blight on the properties we manage,” said Caroline Reaves, CEO of MCS. “In addition to our quality service, MCS adds value to our clients by being a reliable partner in anticipating our clients’ needs. From adding new service offerings to reinvesting in our technology enhancements; we are constantly on the lookout of how we can better serve our clients.” MCS recently streamlined multiple operational processes to increase productivity in protecting and preserving properties. Through this enhancement, the company will be able to continue focusing on enhancing its reporting abilities and quality assurance. “MCS has built a management team with more than 750 years of combined experience in the mortgage services industry and through that experience we have gained long-tenured relationships with many of the largest financial institutions in the industry. “Our clients trust us to perform services on their behalf based on the emphasis we place on quality assurance at every level of the organization,” Reaves said.
The
EXECUTIVES
CAROLINE REAVES, CEO Caroline Reaves was named CEO of MCS in October 2009, and her leadership extends to being an active member of MCS’ board as well as the chairperson of MBA’s P&P Work Group, a position she has held for over 15 years. Reaves has been in the mortgage industry for over 30 years. She joined MCS in March 2007 as president and chief operating officer, leading the expansion of the company’s Dallas office. JOHN MAXWELL, COO OF MCS John Maxwell has been COO of MCS since October 2010 and is responsible for the management of strategic organizational operations to ensure consistent company growth, as well as for building and maintaining relationships with financial institution leaders. Maxwell has more than 40 years in the industry, and his experience includes management roles in loan servicing acquisitions, default management and more. Before being named to his current position, he was MCS’ executive vice president of operations. CHAD MOSLEY, COO OF MCS SOLUTIONS Chad Mosley is COO of MCS Solutions, the division of MCS providing property valuations, title and closing services, vacant property security and other mortgage-related services. Mosley joined MCS in the summer of 2008 as assistant vice president of business development and in 2012 was promoted to senior vice president. Promoted to chief operating officer in 2016, Mosley now assumes executive responsibility for MCS Valuations, MCS Title and Vacant Property Security (VPS). He has more than 15 years of industry experience managing all sides of the mortgage process from originations to the disposition of REO properties.
FAST FACTS: • MCS was founded in Tampa, Florida in 1986. Privately held, it has grown into a full-service, nationwide mortgage services provider. • MCS has grown from 100 employees in 2007 to over 800 employees in 2017 and continues to expand its service offerings with the addition of valuation, title and closing and steel security services. • MCS focuses on building long-term relationships with our clients built upon trust and integrity.
HOUSINGWIRE ❱ FEBRUARY 2018 47
POWER PLAYERS | SPONSORED CONTENT
Safeguard Properties Management LLC 7887 Safeguard Circle, Valley View, OH 44125 safeguardproperties.com
The
FAST FACTS: • Founded in 1990 by Robert Klein and based in the suburbs of Cleveland, Ohio. • The leading mortgage default field services company in the U.S. • Safeguard provides its clients with excellence in the industry through leadership on key issues, ongoing training for employees, resources for contractors, the development of industry-leading technologies, and providing outstanding client service. Safeguard will remain true to its founding spirit and corporate motto of Customer Service = Resolution. 48 HOUSINGWIRE ❱ FEBRUARY 2018
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Safeguard Properties, founded in 1990 by Robert Klein, provides its clients with excellence in the field services industry through leadership on key issues, ongoing training for employees and resources for contractors, the development of industry-leading technologies and providing outstanding client service. Technology plays a strategic role at Safeguard, which inspects and preserves vacant and foreclosed properties throughout the U.S. The company is proactive in developing technologies to ensure compliance with local, state, and federal regulations and in creating systems to assure the highest rate of clean audit findings. “Safeguard has long been in the forefront of bringing creative thinking to the industry,” said Alan Jaffa, Safeguard CEO. “By critically looking at current issues and those on the horizon, Safeguard provides solutions to minimize risks to clients and properties.” The company’s technologies improve quality of work using geo-location services, big data analytics and workflow distribution, state-of-theart data centers and mobile capabilities. And Jaffa credits the company’s philosophy — Customer Service = Resolution — as the foundation of Safeguard’s success. Jaffa said the phrase is more than just a motto; it’s a promise to deliver the highest level of quality service. “Safeguard has identified critical issues within the industry, convened national discussions, and led working groups with representation from the mortgage industry, the field services industry, and government to find resolutions,” Jaffa said. “In addition, Safeguard hosts the annual National Property Preservation Conference, bringing together industry leaders to discuss current issues and to develop solutions.” By introducing major advances in its mobile platform, the company is creating a real-time two-way conversation with its contractors, who can now capture the property condition in real-time from the property and communicate it back to Safeguard within minutes. The company’s next goal is to work with mortgage servicers and investors to extend this automation into their back-office workflow, enabling
them to have better visibility and make important time-sensitive decisions. The
EXECUTIVES
ROBERT KLEIN, FOUNDER AND CHAIRMAN Robert Klein is the founder and chairman of the board for Safeguard. Under Klein’s leadership, Safeguard grew from a handful of employees in 1990 into the largest field services company in the industry. Klein assumed the role of chairman in May 2010. Klein serves as chair of the National Vacant Properties Registration Committee of the MBA and he represents not only Safeguard, but the industry as a whole in national associations including MBA, USFN, CMBA and REOMAC. He also is the founder of the National Property Preservation Conference. In 2009, Klein received the prestigious Ernst & Young Entrepreneur of the Year Award. ALAN JAFFA, CHIEF EXECUTIVE OFFICER Alan Jaffa is the CEO for Safeguard, a role he assumed in May 2010. Previously he served as chief operating officer. He also serves on the board of advisors for SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complementary markets. Since joining Safeguard in 1995, Jaffa has worked in virtually every department of the company. Under his leadership, Safeguard has doubled in size and, in 2010 and 2011, was recognized as the fastest-growing large company in Northeast Ohio. GREGORY ROBINSON, CPA, CHIEF FINANCIAL OFFICER AND EXECUTIVE VICE PRESIDENT Gregory Robinson directs all accounting and financial management activities for Safeguard, as well as overseeing quality assurance, information security, internal audit, corporate communications and support services. He also serves on the board of advisors for SCG Partners. Prior to joining Safeguard, Robinson led successful consulting practices at CGI Inc., NetGov Inc. and ORION Consulting. In 2010, Robinson was recognized by Crain’s Cleveland Business as CFO of the Year.
Inside Baseball
50 HOUSINGWIRE ❱ FEBRUARY 2018
Inside Baseball
A primer on the post DoddFrank mortgage market HERE’S AN OVERVIEW OF REGULATED RESIDENTIAL MORTGAGE LENDING BY STEVEN KAPLAN, JON VAN GORP AND LAURENCE PLATT
AN INCREASING number of nonbank financial participants are considering an entry or re-entry into the mortgage finance market as the financial crisis, which commenced a decade ago, starts to recede from view. This turnabout results from more than short-term memories. The economic conditions necessary to support a normalized residential mortgage finance market have improved significantly. Housing prices have stabilized throughout the United States. Some markets even show signs of newly formed housing bubbles. This positive home price appreciation has created refinancing opportunities for mortgagors who were previously underwater on their mortgage loans and ineligible for special refinancing programs through government programs. Substantial improvement in the U.S. economy has produced low unemployment, resulting in more steady jobs. This allows potential borrowers to save the down payment necessary to finance the purchase of a new home or to refinance an existing mortgage. More importantly, jobs produce the sus-
tainable income and stable employment history needed to satisfy today’s more stringent mortgage underwriting criteria. Interest rates seem poised to rise, creating compelling opportunities for writing long-dated financial instruments, such as mortgages. Finally, technology has created highly scalable ways to originate new mortgage loans, thus increasing competition and decreasing the cost of running a large mortgage loan origination network. Each mortgage finance participant faces a different regulatory framework that governs and impacts their activities. Although there are similarities, the regulatory framework governing and impacting each of these activities varies significantly. Each participant considering entering or re-entering the market should have a strong understanding of the regulatory risks it faces in order to design a program that achieves regulatory compliance.
BACKGROUND In the United States, there are significant differences among the regulatory frame-
works governing consumer residential mortgage loans for origination, servicing, ownership and financing. Each regulatory regime is distinct, with materially less regulatory oversight governing financing and ownership than for the origination and servicing of consumer residential mortgage loans. The type of residential mortgage loan determines applicable requirements. For example, one relevant factor is whether the loans are originated to be insured or guaranteed by the federal government or to be pooled or sold with or to federal government or federal government-related entities. Loans may be insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs or the Rural Development branch of the Department of Agriculture. Those insured or guaranteed loans may be eligible to be pooled into securities guaranteed by the Government National Mortgage Association. Conventional loans — that is, loans that are not government insured or guaranteed HOUSINGWIRE ❱ FEBRUARY 2018 51
Inside Baseball
— may, in turn, be pooled with or sold to the government-sponsored enterprises known as Fannie Mae or Freddie Mac. Conforming conventional is the term used for conventional loans that meet the purchase criteria of Fannie Mae or Freddie Mac, while non-conforming conventional is the term for those conventional loans not meeting such purchase criteria. The eligibility and other criteria pertaining to these categories of loans are not in all cases regulatory in nature; rather, they are often grounded in contract, but they drive the manner in which such loans are originated, serviced, purchased and sold and financed. Regardless of a loan category, there may be unique regulatory requirements based on the features, terms and characteristics of the loans. Examples include adjustable rate versus fixed rate loans, regularly amortizing versus balloon loans, and closed-end versus open-end credit. 52 HOUSINGWIRE ❱ FEBRUARY 2018
The original purpose of the loan — such as owner occupancy, second home or investment — is another factor that impacts the applicability of certain laws and regulations. Similarly, the applicable regulatory requirements depend on payment status, such as current versus in default. The point is that there is not a single, monolithic regulatory framework that applies to all aspects of the origination, servicing, ownership or financing of consumer residential mortgage loans. Instead, the profile of the loan will inform the applicable regulatory requirements. For purposes of this article, however, we are highlighting differences among the regulatory frameworks at a high level.
CONSUMER RESIDENTIAL MORTGAGE LOAN ORIGINATION AND SERVICING ACTIVITIES Generally speaking, financing the purchase of a home is the largest consumer
credit transaction in which the average consumer engages. Since the consequence of defaulting on a home loan is the loss of the consumer’s home, there’s little wonder that the home finance industry is highly regulated. In the U.S., the origination and servicing of consumer residential mortgage loans is regulated at both the state and federal levels, including such areas as advertising, required disclosures, anti-discrimination, underwriting, closing and default servicing. At the state level, every state in the U.S. regulates some aspect of originating and servicing consumer residential mortgage loans in that state. Not all of the origination and servicing state laws on the books, however, apply across the board to all entities. Most do not apply to depository institutions. Some may only apply to nonbank state-chartered entities that are required to be licensed in that state. And some state laws
Inside Baseball
may apply without regard to the type of entity. At the federal level, most consumer financial protection laws are interpreted and enforced by the Consumer Financial Protection Bureau, which Congress created by the Dodd-Frank legislation that followed the U.S. credit crisis. The CFPB has sweeping authority across most consumer residential mortgage loan origination and servicing activities, regardless of the state in which they are conducted. Other federal regulators and government authorities, including the Department of Housing and Urban Development, the Federal Trade Commission, the Department of Justice, the Federal Deposit Insurance Corporation, the Federal Reserve Board and the Office of the Comptroller of the Currency have authority to enforce certain laws affecting consumer residential mortgage loans. Licensing is required in most states for state-chartered entities to originate and service mortgage loans. Licensing approval requires significant background information on the officers, directors and other control parties that will control a licensed entity, as well as the continuing legal education of the employees of the entity performing the loan servicing and origination activities. Licensing is also required of mortgage loan officers originating consumer residential mortgage loans. State regulators have rights to periodically audit the origination and servicing activities of the licensed entity. Licensed lenders generally are subject to substantive requirements, limitations and prohibitions pertaining to the origination and servicing of consumer residential mortgage loans to which only such licensees are subject. At the federal level, no licenses are required for state-chartered entities, but the CFPB has significant authority to supervise the activities of state-chartered non-depositories and audit compliance
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Entities that own licensed mortgage originators and servicers, commonly known as control persons, may also be subject to disclosure and enforcement at the state and federal levels.�
with, and address violations of, federal consumer financial protection laws related to consumer mortgage loan origination and servicing. Entities that own licensed mortgage originators and servicers, commonly known as control persons, may also be subject to disclosure and enforcement at the state and federal levels. Violations of law may result in, among other remedies, restitution, fines and penalties assessed against the licensed entity or control person and, in certain circumstances, disqualification from participation.
OWNERSHIP OF CONSUMER RESIDENTIAL MORTGAGE LAWS Entities that solely own consumer residential mortgage loans and do not participate in the origination or servicing of those loans have more limited licensing requirements at the state level and are probably not subject to supervisory oversight by the CFPB. Additionally, provided the loans are not considered to be high-cost loans under federal or state laws and do not finance the purchase of retail goods or services, such as loans to purchase a new roof or siding sold by a dealer, the legal authority of a borrower to raise or pursue claims related to violations of law committed by the originator generally is limited. A purchaser of residential mortgage loans is, however, directly subject to a limited number of federal consumer regulatory laws. For example, when a person becomes the owner of an existing mortgage loan by acquiring legal title to the
debt obligation, that person must provide a written transfer of ownership notice to the borrower within 30 days of the date of transfer. Purchasers of loans and owners of servicing rights are also subject to antidiscrimination laws and certain privacy and information security laws. In contrast, the holder could be subject to certain state and federal consumer credit laws if it participated in the initial credit decision of the originator, such as loans purchased on a prior approval basis before the originator elects to make the loan, or provided the funds with which the originator made the loan. In these cases, the line between origination and purchase may be blurred, and, in some cases, the law treats the purchaser as an indirect lender. Many secondary market mortgage loan purchase programs are structured so that these laws are not triggered. An entity that purchases a non-defaulted residential mortgage loan in good faith without knowledge of the violation of law is not legally subject to claims and defenses that may be asserted against the originator. There are, however, a few exceptions to this rule. For example, affirmative and defensive claims may be brought against an owner of a loan for certain violations of the Federal Truth in Lending Act committed by the originator that are apparent on the face of the documents being assigned to the purchaser. Purchasers generally protect themselves from this risk by performing due diligence on the mortgage loans they purchase. HOUSINGWIRE â?ą FEBRUARY 2018 53
Inside Baseball In addition, a holder could be subject to defensive claims by the borrower in a foreclosure action that the lender failed to satisfy the ability to repay or loan originator compensation requirements under TILA. At the state level, there are also a limited number of broadly drafted consumer residential mortgage loan origination statutes that appear to also apply to the mere ownership of consumer residential mortgage loan. In these situations, it is prudent for an owner of consumer residential mortgage loans to either own those loans through a licensed entity or to use an alternative holding vehicle that is not subject to state licensing. That vehicle is commonly a trust where title to the mortgage loans is held by a national bank or federal savings bank trustee exempt from the underlying
licensing statute because of its status as a federally chartered banking institution. This is why so many nonbank-sponsored secondary market buyers of consumer residential mortgage loans have opted to own their loans through trusts as opposed to other legal entities. In the highly developed RMBS market that existed prior to the credit crisis, securitization trusts holding consumer residential mortgage loans in the name of the trustee were the most common issuers of RMBS securities. In addition to the risks noted above, a consumer residential mortgage loan purchaser should consider certain derivative legal risks. For example, under the DoddFrank Act, the CFPB may seek to hold a person liable for knowingly or recklessly providing substantial assistance to a covered person who engaged in unfair, deceptive
or abusive acts or practices. This generally is analogous to aiding and abetting prohibitions under common law, which are discussed below, although there is no private right of action under the Dodd-Frank Act for such substantial assistance.
FINANCING CONSUMER RESIDENTIAL MORTGAGE LOANS Financing pools of consumer residential mortgage loans is the least regulated of all the various activities from a consumer credit law perspective. Financing arrangements, whether a repurchase transaction or a regular-way loan agreement, sidestep most of the regulatory requirements mentioned above because they are wholly commercial transactions. If appropriately structured, the regulation generally is not implicated, be-
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cause the loan is extended against a pool of consumer residential mortgage loans. There are two caveats to this general principle. First, should the lender be so embedded in the approval process for the origination of consumer residential mortgage loans that ultimately will be financed through a lending arrangement, it is possible that the lender could be implicated as an aider and abettor in a regulatory violation brought by a state or federal regulator against the mortgage loan originator. The Dodd-Frank Act includes a provision regarding aiding and abetting. However, aiding and abetting claims require knowingly or recklessly providing substantial assistance in the violation of law, and the facts and circumstances surrounding this type of extension of regulation would be at the extreme margins of ordinary consumer
residential mortgage loan origination and finance activities and could easily be prevented by proper protocols established by a lender for funding a consumer residential mortgage loan origination program. The second caveat is that the exercise of remedies by the lender may require the temporary ownership by the lender of consumer residential mortgage loans prior to arranging for the disposition of those loans. In this situation, the regulations mentioned above relating to the origination, servicing and ownership of consumer residential mortgage loans could apply. If the lending entity is a bank, then the lender could easily own loans without further concern about the reach of state licensing statutes to its loan ownership activities. If the lending entity is not a bank, it could form a loan ownership trust with a
national bank trustee similar to what we have described above in order to facilitate the disposition of repossessed mortgage loans. Mortgage loan servicing could be handled by a licensed third-party servicer to the extent that servicing on the repossessed loans was moved away from the original servicer.
CONCLUSION There are significant differences between the regulations governing originating and servicing, owning and financing pools of consumer residential mortgage loans. Nonbank financial participants considering an entry or reentry into the residential mortgage finance market should be mindful of these differences and how the varying regulatory frameworks will impact their activities.
Kudos GIVING BACK
• SUPREME LENDING’s San Diego, California, branch has partnered with MAY WE GIVE FOR LOVE, a nonprofit organization that provides financial contributions and volunteer support to several local charitable causes. May We Give for Love was started by Supreme Lending loan officer MAY NGUYEN and since its launch it has raised more than $12,000 through events such as charity balls, bowling tournaments and golf tournaments. The organization has donated to CORAZON DE VIDA, a nonprofit that provides support for orphaned and abandoned children in Baja California, Mexico; FRIENDS OF DOWNTOWN, a nonprofit organization that provides scholarships to SAN DIEGO CITY COLLEGE students and donates holiday gift bags for homebound senior citizens; and RANCHO DE LOS NIÑOS, an orphanage in Baja California, Mexico. Its board takes regular trips to the orphanages it supports and encourages volunteers to get involved by visiting the facilities. BBMC MORTGAGE selected Army veteran Waymon Hannaman as the winner of the company’s “We’ve Got Your Six” sweepstakes, which pays the mortgage of a military veteran for one year. 56 HOUSINGWIRE ❱ FEBRUARY 2018
Hannaman and his wife, Lana, received the good news just before the start of the Army-Navy football game on Dec. 9 at Lincoln Financial Field in Philadelphia. BBMC’s President of Retail Mortgage, Todd Jones, a former Army captain, made the announcement after former Navy SEAL Kaj Larsen, host of the tailgate experience, drew Waymon Hannaman’s name from a Christmas hat. As of October 2017, BBMC has given more than $2 million through its Patriot’s Charity Initiative to partner charities in support of military and veteran services. For the third year in a row, MORTGAGE NETWORK sponsored the Polar Express Family Holiday Event at The Cabot Theatre in downtown Beverly, Massachusetts. Proceeds from the event, held Dec. 3, will benefit the ROSE MARINO CHARITABLE FUND and the Kids at The Cabot concert series. The event began with a Polar Express Fair that included raffles, a visit from Santa Claus and a book signing by Chris Van Allsburg, author of the beloved children’s book, “The Polar Express.” Attendees, including family, friends and employees of Mortgage Network, then attended a screening of the 2004 film version of the book.
“We are proud to once again sponsor this family event targeted to benefit the children of our community during the holiday season and also to support a local revitalization project whose mission is to enrich the cultural life of our entire community,” said Robert McInnes, chairman and CEO of Mortgage Network. “We thank all of our employees, their families and our clients who helped to make this event another great success.”
Kudos
LAUNCHES • St. Louis-based VENDOR SURF has launched a search engine, located at VendorSurf.com. The search engine encompasses the entire mortgage ecosystem – from originations through secondary markets – and features an industry-wide vendor directory that supports all industry roles and departments. Vendor Surf features custom filters that span 75+ different vendor categories which can be used to narrow down the field to only those value-added partners that best answer the unique
requirements of individuals. GUARANTEED RATE has teamed up with REALOGY for a
joint venture that markets Guaranteed Rate’s mortgages across Realogy’s real estate network.
GUARANTEED RATE AFFINITY is now led by the newly-hired David Dickey.
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GSE Report
Fannie and Freddie now allowed to hold $3B capital reserve CHANGE TRIGGERED BY TAX REFORM LAW BY JACOB GAFFNEY AND BEN LANE
IT’S OFFICIAL. Fannie Mae and Freddie Mac have capital reserves again. As expected, the government-sponsored enterprises on Dec. 29 made their quarterly dividend payments to the Department of the Treasury. But, thanks to the new agreement between the Federal Housing Finance Agency and the Treasury, each of the GSEs withheld billions from the Treasury to ensure that each has enough capital on hand to “cover other fluctuations in income in the normal course of each Enterprise’s business.” Under the previous version of the Preferred Stock Purchase Agreements that went into effect when the government took the GSEs into conservatorship, Fannie and Freddie sent dividends to the Treasury each quarter that they were profitable. The PSPAs also stipulated that the GSEs were prohibited from rebuilding capital and each of the GSEs’ capital base was required to be reduced, with their capital reserves scheduled to be drawn down to $0 in 2018. But that all changed in December when the FHFA announced a new agreement with the Treasury that allows the GSEs to hold a $3 billion capital reserve. Collectively, the GSEs made dividend payments in December to the Treasury of $2.897 billion. Of that, $2.249 billion came from Freddie Mac and $648 million came from Fannie Mae. But those amounts are far less than the amount of profit that
each GSE made in the third quarter. Freddie Mac’s profit was $4.7 billion, while Fannie Mae’s checked in at $3 billion. Based on some rough calculations, Freddie withheld $2.451 billion from the Treasury, while Fannie withheld $2.352 billion. With the $2.897 billion sent to the Treasury for the third quarter, Fannie and Freddie have now paid approximately $278.783 billion to the Treasury in dividend payments since the fourth quarter of 2008. The move by the FHFA was triggered by the passage of tax reform right before the Christmas holidays. As Freddie Mac explained to HousingWire when the legislation was anticipated: “A reduction in corporate tax rates would require us to measure our net deferred tax asset using the new rate in the period in which the rate change is enacted, resulting in a one-time charge through the tax provision in the period the tax rate was changed. This increase in tax expense could significantly increase the risk of a draw.” The new tax reform law reduces the corporate tax rate from 35% to 21%, the first reduction to the rate in 15 years. Because of that reduction, the GSEs would need to make a draw from the Treasury. In the third quarter of 2017, Freddie posted earnings of $4.7 billion, while Fannie made $3 billion, but under the PSPAs, the GSEs would be prohibited from rebuilding capital, meaning that that $7.7 billion would be headed to the Treasury. HOUSINGWIRE ❱ FEBRUARY 2018 59
GSE Report
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Bottom line: This agreement delivers an acceptable win for both sides.”
And with zero capital on hand and a reduced corporate tax rate potentially taking effect, another bailout would have been likely, if only for that quarter, an investigation by HousingWire revealed. Here is how Fannie Mae explained it in its third-quarter 10-Q filling with the Securities and Exchange Commission : The current Administration proposes reducing the U.S. corporate income tax rate. Under applicable accounting standards, a significant reduction in the U.S. corporate income tax rate would require that we record a substantial reduction in the value of our deferred tax assets in the quarter in which the legislation is enacted. Thus, if legislation significantly lowering the U.S. corporate income tax rate is enacted, we expect to incur a significant net loss and net worth deficit for the quarter in which the legislation is enacted and we could potentially incur a net loss for that year. As noted above, if we experience a net worth deficit in a future quarter, we will be required to draw additional funds from Treasury under the senior preferred stock purchase agreement in order to avoid being placed into receivership. So when the corporate tax cut passed, Fannie and Freddie wouldn’t have enough profits in that given quarter to cover the reduction in the value of their deferred tax assets, nor would they have any capital on hand to cover the losses. That means Fannie and Freddie would need another draw from the Treasury in order to make up the difference. Freddie described the situation in their SEC filing: “A reduction in corporate tax rates would require us to measure our net deferred tax asset using the new rate in the period in which the rate change is enacted, resulting in a one-time charge through the tax provision. This increase in tax expense could significantly increase the risk of a draw.” As Fitch Ratings noted earlier this year when broaching this topic, the GSEs’ deferred tax assets consist primarily of “deferred fees, basis differences related to derivative instruments, mortgage related assets and allowance for loan losses.” When Fitch calculated the estimated impact of a reduced tax rate in February, it based its calculations on Fannie’s DTA of $35.1 billion and Freddie’s DTA of $18.7 billion. Under that scenario, if the corporate tax rate was cut from 35% to 20%, Fannie would write down its DTA by $15 billion, while Freddie would write down its DTA by $8 billion. However, each of the GSEs current DTA is less than it was in 60 HOUSINGWIRE ❱ FEBRUARY 2018
February. A review of each of the GSEs’ third-quarter earnings materials shows that Fannie’s DTA is currently $30.45 billion, while Freddie’s DTA is $14.58 billion. So the write down would be less than Fitch originally projected, but the likelihood of Fannie and Freddie needing another bailout significantly increased under the new law because each of the GSEs’ profit in the given quarter is likely to be less than the write-down amount. And taxpayers would be left covering that difference. Now, as Fitch also noted, Fannie and Freddie each have additional funding available to them under the PSPAs that would likely cover the needed draw. Jim Vogel, fixed income strategist at FTN Financial told HousingWire that the one-time tax hit and subsequent draw would likely be counteracted by future profitable quarters for the GSEs, which would also benefit from the lower future tax rate. And as Fannie noted in November, it “expects to remain profitable” for the foreseeable future. “It will lead to a draw as deferred tax assets are reduced in value, if for no other reason the entire change is recognized in one quarter and any quarter’s results can trigger the Treasury backstop,” Vogel told HousingWire. “Then, dividend flows will gradually ‘pay back’ the draw to Treasury as net income rises based on the lower rate. In economic terms, taxpayers will see little net difference due to their backstop of the GSEs in conservatorship.” The details of the new capital reserve agreement were laid out in the announcement from the Treasury: • Fannie Mae and Freddie Mac will be allowed to maintain a capital buffer of $3 billion each. • The dividend payment owed to Treasury will be calculated each quarter using the $3 billion capital buffer as a baseline. • To compensate taxpayers for the dividends they would have received absent these letter agreements, Treasury’s liquidation preference for the Preferred Stock held in Fannie Mae and Freddie Mac will increase by $3 billion as of December 31, 2017. • Any failure by Fannie Mae or Freddie Mac to declare and pay a full quarterly dividend will result in the automatic, immediate termination of its capital buffer. “The Federal Housing Finance Agency, as conservator of Fannie Mae and Freddie Mac, and the Department of the Treasury have agreed to reinstate a $3 billion capital reserve amount under the Senior Preferred Stock Purchase Agreements for each enterprise beginning in the fourth quarter of 2017,” said FHFA Director Mel Watt. “While it is apparent that a draw will be necessary for each enterprise if tax legislation results in a reduction to the corporate tax rate, FHFA considers the $3 billion capital reserve sufficient to cover other fluctuations in income in the normal course
GSE Report
of each enterprise’s business. We, therefore, contemplate that going forward enterprise dividends will be declared and paid beyond the $3 billion capital reserve in the absence of exigent circumstances.” Also in exchange for the capital cushion change, Treasury gets an additional $3 billion a piece in senior preferred stock as of December 31, 2017, according to Vogel. “Bottom line: This agreement delivers an acceptable win for both sides,” Vogel said. “FHFA gets some capital flexibility and reduces the potential headache of GAAP earnings fluctuations that could cause unnecessary, annoying draws that are likely to be repaid shortly thereafter. “Treasury moves this two-year, nagging issue off its agenda and gets to focus on newly stirring congressional efforts at GSE reform in 2018,” Vogel said. Vogel wasn’t alone in declaring the announcement as good news overall. “The FHFA director could have chosen to create a $3 billion capital buffer on his own. He had such authority in HERA. The fact that Secretary Mnuchin and the UST worked with him on
this initiative is a big positive and a proactive statement that Treasury is now focused on the issue,” said Joshua Rosner, an analyst with Graham Fisher. “The FHFA and Treasury just, jointly, told Congress: ‘We have heard you say the GSEs don’t need capital and argue that UST lines of credit are capital, we don’t agree. We are reversing the Obama administration’s direction that they have zero capital beginning in 2018’.” Fannie Mae said that it expected the tax reform to bring solid economic growth over the next couple years. “We expect the tax bill to strengthen growth, though the amount of growth acceleration is a matter of significant debate among macroeconomists,” Fannie Mae Chief Economist Doug Duncan said. “Our view is that it could add half a percent or more to annualized economic growth above baseline each of the next couple of years,” Duncan said. “If that growth comes from investment increases driving productivity gains resulting in real income growth, a patient Fed can play its part in extending the expansion.”
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W H I T E PA PE R: A rch M I | SP ONSOR E D CON T E N T
Knowledge Center
Rising rates require new lender strategies FLEXIBLE MORTGAGE OPTIONS, COUNTERING “FALSE BARRIERS” KEY TO OVERCOMING AFFORDABILITY CHALLENGES THE HOUSING INDUSTRY has been surfing on a wave of histori- could reach or exceed 5% by the end of 2018 and 6% by the end cally low interest rates as home sales have posted gains for each of 2019. Rising interest rates have a profound impact on the affordability of the past four years. Many housing forecasters are predicting mortgage interest rates will rise from the current level of just of housing by diminishing a borrower’s purchasing power. With under 4% to about 6% within the next two years. Any increase each 0.25% increase in interest rate, the value of the home you in mortgage interest rates adds to the challenges for first-time can afford decreases by 2.5%. What can lenders do to encourage more first-time homebuyers homebuyers, who are already contending with the impact of five even as lending costs seem poised to increase? It’s clear interest straight years of sizeable home price increases. In an environment of rising costs for borrowers, how can the rates will frustrate some potential buyers, but lenders can spur action by countering widely held misconceptions about the amount mortgage lending industry persuade renters to buy homes? By bringing the conversation around to down payments – which of savings needed to close on a home. surveys reveal to be the biggest hurdle for first-time homebuyers – lenders can offer solutions to the many qualified individuals and “FALSE BARRIERS” STAND IN THE WAY OF HOME-BUYING families who want to buy a home, but don’t currently believe a MILLENNIALS mortgage lender will support their dream of home ownership. Millennials (ages 25 to 34) make up the largest segment of homebuyers, but the home-ownership rate for those under the age of 35 is currently 34.3%, down significantly from its pre-recessionary HOME PRICES ARE RISING IN TANDEM WITH BORROWING 43% level, according to the U.S. Census Bureau. COSTS Economists blame the situation on tighter credit standards, a The U.S. housing market has been solidly on the upswing for seven years. Sales of existing homes in the U.S. have increased decrease in high-paying jobs and lifestyle choices by younger cusfrom 4.18 million in 2010 to a predicted 5.78 million in the cur- tomers. Millennials, also known as Generation Y, tend to get marrent year — a 38% increase in the annual rate of sale, according ried and have children at a later age than the previous generations. “Millennials have been fairly slow to get into the market, but to Statista.com. A very limited supply of lower-priced homes for first-time buy- we are seeing an uptick in Millennial buyers (in 2017) — which ers is fueling price growth at an even faster rate than the median is a good sign, because as home values rise, we want a wider home price, which Zillow reports has shot up by 4% or more a year number of people to participate in this housing recovery,” said for five years in a row. More competitive real estate markets have Lawrence Yun, chief economist at the National Association of Realtors (NAR). “There’s a pent-up demand and as the economy seen even larger increases. Some housing market analysts say price increases haven’t re- continues to improve, we expect to see more people in their early duced demand appreciably because interest rates have remained 30s … begin to look for their own housing units.” at historically low levels. The 30-year fixed mortgage rate at the end of 2010 was 4.687% and has largely stayed below that level for the past seven years — with occasional dips as low as 3.55%. To read the entire white paper, Economy.com is forecasting that 30-year fixed mortgage rates visit the Knowledge Center at knowledge.housingwire.com. HOUSINGWIRE ❱ FEBRUARY 2018 63
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W H I T E PA PE R: X DOC | SP ONSOR E D CON T E N T
The dangers of lending in a digital world MORTGAGE LENDING IS A TEMPTING TARGET INTRODUCTION The mortgage lending industry is an ever-growing target for data thieves. Given the number of potential victims at risk, and the value of the data they hold, organizations that operate within the lending industry are sitting ducks for the criminals who seek to exploit them. Worryingly, things look set to get worse before they get better: Increased adoption in web-based and mobile technologies in the workplace, exacerbated by the growing sophistication of cyber criminals, culminate in a level of threat that many lenders are struggling to deal with. While it’s easy to point to technology as the problem, in reality it’s the people responsible for managing those technologies who should be placed under closest scrutiny. Lenders rely heavily on technology to function — the onus is on them to ensure those technologies are used responsibly, so that they do not become a gateway for unwanted guests. An investigation into U.S. mortgage lenders undertaken in 20141 found that 70% of mortgage lenders may be putting sensitive data at risk through their application processes, by allowing applicants to submit personal and financial information via unencrypted email. The investigation concluded two key points: Firstly, there is a general lack of security knowledge among mortgage lenders; and secondly, lenders would sooner prioritize customer convenience over security. The intention of this guide is to help mortgage lenders better understand cybersecurity, and the risks that exist in today’s rapidly evolving landscape.
REASONS TO BE FEARFUL 1. Financial services are in the top three industries affected by data breaches The 2016 Data Breach Investigations Report by Verizon lists financial services in the top three industries affected by a data breach (an incident that resulted in conformed disclosure to an unauthorized party) or security incident (any event that compromises the
confidentiality, integrity, or availability of an information asset). While no industry is immune to security failings, the fact that financial services has also placed in the top three in previous editions of this report is no coincidence. 2. The cost of data breaches is rising According to IBM and Ponemon Institute’s 2016 Cost of Data Breach Study, the average cost of data breach in the U.S. has increased by approximately 10% in three years. What’s more, the average per capita cost of a data breach within the financial industry specifically is the third highest of all industries, at $221. 3. Cyberattacks are becoming increasingly sophisticated There is much evidence to suggest that cyberattacks are becoming more technically sophisticated, as the criminals who look to infiltrate organizations seek new ways of outsmarting equally sophisticated security systems. If you asked someone to picture a cyber criminal, they would most likely conjure up an image of a lone amateur operating from their basement: while such individuals do exist, at the other end of the spectrum exists highly organized teams of cyber criminals, who operate in broad daylight, mirroring the organizations they seek to exploit. The modern cyber criminal is highly skilled and should not be underestimated.
UNDERSTANDING THE THREATS Lenders need to familiarize themselves with the types of data breach that they may come up against, understand how they occur, and know how to prevent them. Data breaches very rarely occur at a single point in me, but are more commonly part of a complex chain of events. Organizations must mitigate all possible paths an attacker can take, not just the direct path from point A to point B.
To read the entire white paper, visit the Knowledge Center at knowledge.housingwire.com. HOUSINGWIRE ❱ FEBRUARY 2018 65
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Knowledge Center
Beyond waterfall resolutions A BETTER WAY FOR SERVICERS TO MAKE DECISIONS ON FHA DISPOSITION CHANNELS EXECUTIVE SUMMARY As the popularity of Federal Housing Administration (FHA) insured home loan lending expands, servicers are looking to refine their strategy for managing foreclosed homes under FHA’s Claims Without Conveyance of Title (CWCOT) program. FHA developed the CWCOT program to help build stronger communities by preserving the condition and accelerating the sale of its real estate owned (REO) properties. To accomplish FHA’s objectives, the CWCOT program provides the servicer with two primary claim channels: sale at foreclosure auction (or shortly thereafter as a so-called “second chance” auction) and conveyance to the Department of Housing and Urban Development (HUD). This paper lays out a road map for an effective and efficient CWCOT program strategy — one that incorporates elements of decision theory and risk modeling to simplify and streamline processes while decreasing loss severity for servicers.
HISTORY OF THE CWCOT PROGRAM As HUD’s primary insurer for single-family home loans, the FHA faced challenges with limiting losses and quickly returning homes to communities in cases of mortgage default. The FHA created the CWCOT program in 1987 to reduce HUD-owned inventory by providing an alternative disposition channel. Prior to the implementation of the CWCOT program, servicers had two options after foreclosure: • Convey the property to HUD after meeting asset condition requirements or • Forego the mortgage insurance claim payment and keep the property (i.e., not convey the property to HUD) The CWCOT program created a third option permitting third-party sales with the reserve price established at the full debt outstanding on the loan in order to seek deficiency judgment against borrowers as an alternative to conveyance. In theory, this option should have further decreased HUD-owned inventory by
allowing servicers to sell properties in as is condition and thus reduce timelines and repair costs. In reality, the addition of third-party sales resulted in only minor improvements to the program given that the full debt sale price was often higher than the market value of the home and that the process to seek deficiency judgment against borrowers created additional layers of complexity and cost for lenders. Following the 2008 housing crisis, HUD adjusted its guidelines to give the CWCOT program more flexibility. The revised program allowed servicers to accept offers for less than the full debt owed on the loan by utilizing a HUD-approved discounted value. This value-based pricing strategy allowed sales to occur at or below a property’s market value as opposed to requiring the full debt as the minimum acceptable sale price. The current program reflects this pricing policy change and has reduced the number of properties conveyed to HUD.
CURRENT LANDSCAPE AND INDUSTRY-WIDE CHALLENGES Housing prices have now stabilized nationally, appreciating on average 5.5% annually since 2012. The economy continues to strengthen and foreclosure rates have reached pre-crisis levels, currently standing at 1.4%. While foreclosure rates are expected to remain low for the foreseeable future, the pipeline of FHAinsured mortgages is increasing and could represent the next wave of defaults due to its expanded credit box. With their relaxed credit and down payment requirements, FHA-insured mortgages are in high demand. These loans require only 3% of the purchase price as a down payment and a minimum credit score of 580 compared to the minimum credit score of 720 required for most conventional loans.
To read the entire white paper, visit the Knowledge Center at knowledge.housingwire.com. HOUSINGWIRE ❱ FEBRUARY 2018 67
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Servicers beware NYDFS FINES PHH SIX FIGURES FOR A SINGLE FORECLOSED HOUSE BY BEN LANE
BACK IN 2016, the state of New York enacted sweeping new laws aimed at reforming the state’s foreclosure process and addressing the state’s issues with zombie homes. Under the laws, lenders and mortgage servicers are required to report vacant and abandoned properties to the state, and are required to maintain properties they believe to be vacant and abandoned. And if a lender or mortgage servicer doesn’t properly maintain the zombie home, as determined by the New York Department of Financial Services, the lender or servicer could face a fine of $500 per day, per property. In December 2017, the NYDFS showed that the threat of a fine for improperly maintaining a zombie home is not an empty one. The NYDFS announced on Dec. 14 that it was imposing a sixfigure fine on PHH Mortgage for failing to properly maintain a single zombie property. Specifically, the NYDFS is hitting PHH with a $119,000 fine after an investigation found that PHH failed to maintain a property in New Lebanon for at least 238 days from the time the property was registered in the DFS registry as being vacant and abandoned. In a statement, NYDFS Superintendent Maria Vullo warned that this fine is not likely to be an isolated occurrence. “The announcement of this enforcement action puts banks and mortgage servicers on notice that if they do not maintain vacant and abandoned properties, they will be held accountable by DFS,” Vullo said. “It is also crucial that banks and mortgage servicers provide DFS correct and timely information and updates on vacant and abandoned properties to ensure full compliance with the law and
correction of violations,” Vullo continued. “Anything less will be met with swift enforcement action.” In a statement provided to HousingWire, PHH said that it has worked with its property preservation vendor to address the subject property. “We are committed to adhering to all state laws and regulations on this matter and take our obligations to property preservation very seriously,” PHH said in a statement. “In fact, PHH has spent over $19 million on property preservation and maintenance services over the past three years in the state of New York alone,” the company added. “With regard to the property in question, we have worked with our property preservation vendor, on whom we rely to track, secure and maintain vacant properties, to resolve this matter and the property is now up to code.” In its announcement, the NYDFS reminded lenders and servicers of their duties to maintain properties under state law. According to the NYDFS, it “continues to see errors” in how lenders and servicers are reporting applicable properties to the state’s zombie property registry, including listing incorrect properties, as well as a lack of updated information on previously registered properties. NYDFS said that over the last year, it has worked with local government officials and lenders and servicers to resolve 497 complaints regarding vacant and abandoned properties. The PHH fine was issued under the state’s “Vacant and Abandoned Property Law,” which requires lenders and mortgage servicers to fulfill certain maintenance obligations on zombie properties. HOUSINGWIRE ❱ FEBRUARY 2018 69
Industry
Pulse breaking ‘zombie’ legislation that will provide real relief to communities all across the state,” Vullo said in 2016. “DFS will take necessary and appropriate action to make sure this law is followed and those responsible are held accountable.” New York has taken numerous steps to fight the effects of zombie homes and neighborhood blight. In July 2016, New York Attorney General Eric Schneiderman announced a program to help New York’s city governments track and address zombie homes in their respective cities. Called the Zombie Remediation and Prevention Initiative, the program provides grants to local governments to fight zombie homes. Before that initiative, NYC announced plans to launch a “firstof-its-kind” program to buy a number of delinquent loans from the Federal Housing Administration as part of an effort to keep struggling homeowners from losing their homes to foreclosure in the first place. According to the office of New York Mayor Bill de Blasio, the “Community Restoration Program” will see the city purchase 24 distressed mortgages for one- to four-family homes – with a total of 41 residential units – in the Bronx, Brooklyn, Queens and Staten Island. The goal of the program? According to de Blasio’s office, the program is designed to stabilize neighborhoods that are not yet recovered from housing crisis. And what makes this program unique, according to de Blasio’s office, is that it marks one of the first times that a municipality buys distressed Federal Housing Administration mortgages that would otherwise have been sold at auction to the highest bidder. “We are fighting to help homeowners stay in the neighborhoods they helped build. And we won’t let predators force them out,” de Blasio said. “The Community Restoration Program is the first of its kind, and New York’s 2016 laws impose a pre-foreclosure duty on banks and servicers to maintain zombie homes, expedites foreclosure it puts government squarely on the side of struggling families so for vacant and abandoned properties to get them back on the mar- they can keep their homes.” The program will cost $13 million, which according to de ket and created an electronic registry of abandoned properties. Under these laws, lenders and mortgage servicers must com- Blasio’s office is being funded by a variety of sources, includplete an inspection of a property subject to delinquency within 90 ing $1 million in seed money allocated by the New York City days and must secure and maintain the property where the bank Council, $6.9 million in private financing from Goldman Sachs’ or servicer has a reasonable basis to believe that the property is Urban Investment Group, and a $2.2 million grant from the Local Initiatives Support Corporation, a major national affordable housvacant and abandoned, the NYDFS said. Additionally, lenders and mortgage servicers are required to ing group, that was funded by a bank settlement obtained by the report all vacant and abandoned properties to the NYDSFS and New York attorney general. The program will also be funded by $2.9 million received from submit quarterly reports detailing their efforts to secure and Morgan Stanley as part of its $3.2 billion settlement for “decepmaintain the properties and any foreclosure proceedings. If the NYDFS determines that an abandoned or vacant house is tive” mortgage bond practices, which was announced in February. According to details released by Schneiderman at the time, New not “properly maintained” by the lender or mortgage servicer, the NYDFS will “exercise its authority” to hold the bank or mortgage York state was to receive $150 million from Morgan Stanley as part of the settlement. servicer “accountable,” including the $500 a day fine. The plan was initially launched in 2015, after the Department “Under Governor Cuomo’s leadership, New York passed ground70 HOUSINGWIRE ❱ FEBRUARY 2018
Industry Pulse
of Housing and Urban Development announced changes to the DASP program that gave cities the opportunity to buy pools of distressed FHA mortgage notes for one-to-four family properties located in their jurisdiction through a direct sale instead of through an open auction to the highest bidder. In response to those changes to the DASP program, New York began working with the Center for NYC Neighborhoods, MHANY Management, Neighborhood Restore Housing Development Fund Corporation, the National Community Stabilization Trust, and Preserving City Neighborhoods Housing Development Fund Corporation, to create this program. The program will “strive to achieve neighborhood stabilization outcomes” for 100% of the notes, which would “far surpass” the 50% required by the federal government when distressed mortgages are sold at an open auction. “Preserving affordable housing is essential for the health of our families and the economic strength of our communities and that’s why New York City’s Community Restoration Program is so important,” said Sen. Chuck Schumer, D-NY, who took part in the announcement.
“The acquisition of two dozen distressed FHA-insured mortgages will undoubtedly help keep New Yorkers in their homes and neighborhoods throughout New York City,” Schumer continued. After purchasing the mortgages, the nonprofit partner organizations will do “active outreach” and work one-on-one with homeowners, providing counseling and identifying potential solutions to keep current homeowners in their home. The primary goal is home retention through mortgage modification or refinancing, de Blasio’s office said. “When neither is feasible, for example if a home has been abandoned or a homeowner is not eligible for a modified loan, the fund will work to ensure that the homes are repositioned as affordable homeownership or rental housing opportunities,” de Blasio’s office added. Schneiderman added: “It makes sure that the settlements my office secured from banks are used to mitigate the damage they caused. And it ensures that distressed mortgages don’t end up in the hands of the highest bidders whose goal is to profit off other people’s losses.”
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John Surface is president and COO of LenderLive.
Executive Conversation: John Surface on the increasing interest in outsourcing partnerships LenderLive’s integrated approach optimizes operations and reduces risk HousingWire: An increasing number of originators and servicers are taking a renewed look at outsourcing partnerships, especially around streamlining processes and document management. What’s driving the focus toward a more collaborative approach? John Surface: Competitive and regulatory pressures are driving our clients to focus on their core competencies and reevaluate their operating approaches. For some, this may mean questioning whether to maintain an internal mortgage operation at all; for others, it may mean exploring new ways of handling component functions related to critical tasks within origination and loan servicing. But both groups realize they can no longer operate at sub-optimal scale and be cost-effective and compliant over the long term. By working with LenderLive, our loan origination fulfillment clients create efficiency, improve profitability and enhance quality and compliance by leveraging our operating scale, enhanced process workflows, technology systems and subject matter expertise. This approach allows these firms to take advantage of the significant investments LenderLive has made in these areas to effectively share the cost of ownership. Similarly, our document and compliance services clients realize that the increased oversight and risk associated with using disparate processes and/or multiple providers to address heavily regulated areas like default, loss mitigation and fore72 HOUSINGWIRE ❱ FEBRUARY 2018
closure can be costly and unsustainable. Our compliance monitoring, extensive libraries of state and federal notification templates, control processes incorporated into our document technologies, and integrated print fulfillment capabilities are designed to reduce risk and provide greater efficiencies for our clients. LenderLive’s integrated approach consolidates processes that were previously often managed through separate providers, including in-house operations, outside law firms and other print fulfillment and mail houses. By employing superior, integrated controls to fulfill these critical borrower communications, we align with a company’s resources to optimize operations and reduce risk. HW: From your recent role as a senior bank executive, what keeps executives up at night making decisions around processes, technology, scalability, or compliance? JS: What doesn’t keep them up at night? Concerns over economic policies, industry growth, margin compression and the growing risk of cybersecurity breaches are at the forefront of many executives’ minds. Furthermore, as regulators increase their oversight, executives must constantly re-evaluate their companies’ policies and procedures to stay compliant. There are often no easy management solutions to these issues, but we believe these very concerns enhance the value proposition we offer to our clients. Our services enable our clients to manage regula-
tory and compliance costs more effectively, optimize sub-scale internal processes, enhance subject matter expertise and avoid costly investments in technology systems. Clients can determine which essential internal operations lack the capabilities to deliver consistent results, identify which workflows can be managed better with proven external resources and leverage our capabilities in those areas. HW: How does being the largest on-shore fulfillment provider and offering document services impact your business approach and what you offer to prospects? JS: LenderLive clients value not only the cost management benefits we provide, but also the enhanced quality and compliance that we deliver in our various service offerings. We differentiate ourselves by collaborating with our clients as a partner to understand staffing philosophies, technology platforms and other important business requirements. Our approach puts us in a position to propose unique and innovative solutions that fit client infrastructures and take advantage of each party’s strengths. Clients want to be intimately involved in decision-making and visit our operations and management team frequently, which gives them more confidence and control over their businesses. This greatly enhances our clients’ abilities to meet rigorous vendor management requirements that have become more complex with global operations and multiple vendors.
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Sarah DeCiantis is the chief marketing officer at United Wholesale Mortgage.
Executive Conversation: Sarah DeCiantis on the importance of marketing in mortgages United Wholesale Mortgage’s CMO sits down to talk about the value of marketing HousingWire: What are some of the most important things mortgage brokers need to market themselves well? Sarah DeCiantis : Marketing is one of the most important things mortgage brokers can do to grow their business, but it can also be the most challenging given the limited budgets many of them have. It doesn’t even have to be about expensive mass advertising. Just find ways to communicate with customers and stay connected to them. When doing early research as part of the buying process, studies show that 77% of homebuyers use social media to look for homes, find recommendations, and research real estate agents and lenders. So, pushing relevant, noteworthy content is important, whether it’s original or simply shared from other sources. On top of that, 95% of buyers searched for information and browsed user reviews online. It’s important for brokers to not only to have a strong presence on the different social channels, but also to monitor their reputation on sites like Zillow and Google Plus. Beyond that, it’s very important that brokers stay in front of their past clients in order to drive repeat and referral business. Research we’ve done is eye-opening: 90% of borrowers who used a broker were interested in using the same person for their next loan, but only 10% of them could remember their broker’s name. We’ve made it a point to create partnership tools for our brokers to solve that issue, and our Client Loyalty Manager, UConnect and Unite 74 HOUSINGWIRE ❱ FEBRUARY 2018
tools enable brokers to stay more connected to their customers. HW: UWM recently relaunched its website, building it as a valuable resource for mortgage professionals across the board. What was the thought process behind the change? DeCiantis: The idea for building a new UWM.com came from feedback we’ve received from mortgage brokers. We’re focused on two things: being a true partner to our clients and actioning their feedback so we can make their lives easier. We built the website to serve as a one-stop destination for any kind of tool, resource or bit of information that brokers could need. Generally, there was a high level of frustration out there because brokers had to visit so many websites to do their jobs. Things like comparing rates, using an income calculator, pulling AVMs, reading news, or looking up guidelines or market trends, all required them to browse different websites. It was time-consuming and a hassle. Now, they can do all those things, and more, on UWM.com. HW: It’s clear that UWM values creativity on social media and made a big splash recently with its “Breaking News” video series, in which you got effective messaging across in the form of a satirical news broadcast. Do you plan to do more in the next year? DeCiantis: Absolutely. Social media is a big part of our marketing and communi-
cation efforts. It gives us another platform to engage with brokers and, when appropriate, consumers, and it’s another opportunity for us to differentiate our brand by showing more personality. We saw amazing results with those Breaking News videos in terms of views and engagement, and definitely plan to up the ante in the next year. The videos have been successful because they’re funny, but also based on real data and talk points, such as Millennial homebuying trends, brokers vs. banks, and the idea of “do-ityourself” mortgage apps. They’re some of the most popular things we’ve done on social, so we’re going to keep that series going and want to introduce even more entertaining content that brokers can share. HW: What has been the driving force behind UWM’s success from a marketing perspective? DeCiantis: The reason behind our marketing success is really rooted in our brand platform, You + UWM = Younited. Everything we do is focused on what matters to our clients: partnership. We deliver on this through all the client retention tools we offer, technology that allows our clients to compete with mega banks and big retail lenders, marketing support and elite client service. The success that we have as a company is a result of our clients being successful, so brokers know that when they work with UWM, they’re getting a true partner who puts them in the best position to grow their business.
INDEX COMPANIES
MULTIGEN LIVING
Homebuilders capitalize on new trend. p30
Home Innovation Research Labs................................ 38, 40 Housing Finance System Strategies �����������������������������������10
A Accenture Credit Services..........................................................10 Alight Mortgage Lending...........................................................14 Altisource...........................................................................................67 Angel Oak............................................................................................17 Arch MI..........................................................................................63, 77 ATTOM Data Solutions..............................................................22
B Banc Home Loans.........................................................................10 Bank of America.............................................................................22 BBMC Mortgage.............................................................................56 Bipartisan Policy Center............................................................32 Black Knight......................................................................43-44, 77 Blend.................................................................................................... 27 BRAWL...........................................................................................16-17
C Capital One........................................................................................10 Center for NYC Neighborhoods.............................................. 71 CFPB................................................................12, 20, 24-25, 53-54 CitiMortgage....................................................................................22 Clayton Holdings...........................................................................25 Clear Capital......................................................................................10 Cloudvirga..........................................................................................10 Colonial Savings.............................................................................. 12 Common Securitization Solutions ��������������������������������������10 Contract Simply......................................................................32-33 Cook & James...................................................................................10 Corazon de Vida.............................................................................56
J
E Ellie Mae........................................................................................27, 77 Equifax................................................................................................22
L Land Gorilla......................................................................................34 LenderLive......................................................................................... 72 Lennar...........................................................................................33-35 LoanLogics.........................................................................................10
M May We Give for Love..................................................................56 MB Financial.......................................................................................17 MB Technologies.............................................................................10 Metrostudy.......................................................................................32 MHANY Management................................................................. 71 Morgan Stanley.......................................................................22, 70 Mortgage Bankers Association.............................................. 12 Mortgage Contracting Services..............................43, 47, 77 Mortgage Network.......................................................................56
N National Association of Hispanic Real Estate Professionals...............................................................................................32 National Association of Realtors.................................36, 63 National Community Stabilization Trust ������������������������� 71 Nations Direct Mortgage.............................................................17 Newbold Advisors..........................................................................10 New York Department of Financial Services 69
G Goldman Sachs..............................................................................70 Government National Mortgage Association 51 Graham Fisher..................................................................................61 Green River Capital.......................................................................25 Guaranteed Rate........................................................................... 57
H Home Depot......................................................................................10
76 HOUSINGWIRE ❱ FEBRUARY 2018
U United Wholesale Mortgage.............................................17, 74 U.S. Census Bureau................................................................32, 63
V Vendor Surf....................................................................................... 57 Verizon.................................................................................................65 Village Mortgage............................................................................14
W
Office of the Comptroller of the Currency ����������������������53 Optimal Blue.............................................................................. 18-19 Orion Mortgage..................................................................................1 7
Q Qualia................................................................................................... 27
R Rackspace..........................................................................................10 Radian Group...................................................................................25 RealEC.................................................................................................. 27 Realogy............................................................................................... 57 realtor.com........................................................................................32 Roostify............................................................................................... 27 Rose Marino Charitable Fund.................................................56
S Safeguard Properties...........................................29, 43, 48, 77 Sales Benchmark Index..............................................................10 San Diego City College................................................................56 ShiftPixy..............................................................................................10 Supreme Lending..........................................................................56
J Jaffa, Alan......................................................................................... 48 Johnson, Jodi.....................................................................................10 Jones, Todd.......................................................................................56
K Kaplan, Leith.....................................................................................10 Klein, Robert.................................................................................... 48 Kolegraff, Nick...................................................................................10
L Larsen, Kaj.........................................................................................56 Lautz, Jessica...................................................................................38
X
M
XDOC....................................................................................................65
Mason, Jay.........................................................................................34 Maxwell, John.................................................................................. 47 McInnes, Robert.............................................................................56 Meltzer, Brad..................................................................................... 12 Mitchell, Will..............................................................................32-33 Mosley, Chad.................................................................................... 47
Z Zillow......................................................................................27, 63, 74
PEOPLE
N
B
Nackashi, Joe.................................................................................. 44 Nguyen, May.....................................................................................56
Brandt, Bob........................................................................................18 Brinkley, Chris.................................................................................. 46
P
C Caliendo, Laurel..............................................................................14 Casa, Anthony..................................................................................16 Celini, Albert......................................................................................10
P Parkside Lending.............................................................................17 Pew Research Center.......................................................... 32, 36 PHH................................................................................................10, 69 PHH Mortgage............................................................................... 69 Proctor Financial...........................................................................20 PulteGroup........................................................................................34
Hudson, Ed........................................................................................38 Huebscher, Grace............................................................................10
Waterstone Mortgage.................................................................10
O
F Fannie Mae..................................... 10, 19, 22, 25, 34, 52, 59-61 Federal Housing Administration.....................34, 51, 67, 70 Federal Trade Commission......................................................53 Fidelity National Financial.......................................................26 First American Mortgage Solutions...........................43, 46 Fitch Ratings............................................................................22, 60 FormFree.............................................................................................10 Freddie Mac...........................10, 19, 22, 25, 34, 52, 59-60, 77 Friends of Downtown.................................................................56 FTN Financial..................................................................................60
The Brookings Institution.........................................................22 The Federal Reserve Board.....................................................53 Trulia.....................................................................................................78
JPMorgan Chase............................................................................22
D Daniel Fries & Associates..........................................................39 Dart Appraisal..................................................................................10 Department of Agriculture.......................................................51 Department of Housing and Urban Development 53, 67 Department of Justice................................................................53 DIMONT....................................................................................... 43, 45
T
D DaCosta, Phil.....................................................................................10 David Motley, J................................................................................. 12 deBlasio, Bill.....................................................................................70 DeCiantis, Sarah............................................................................. 74 DeSantis, Stephen.........................................................................10 Dickerson, Valentine....................................................................20 Duncan, Doug...................................................................................61
E Elkins, Valerie...................................................................................45
Peltzer, Eli...........................................................................................34
R Rankey, Stacie.................................................................................45 Reaves, Caroline............................................................................. 47 Riddell, Craig.....................................................................................10 Robinson, Gregory....................................................................... 48
S Sanzone, Tom................................................................................. 44 Schneiderman, Eric................................................................70, 71 Schumer, Charles............................................................................ 71 Schwartz, Faith...............................................................................10 Slonaker, Matt..................................................................................10 Songrath, Kristen......................................................................... 46 Sun, Lisa............................................................................................... 12 Surface, John................................................................................... 72
F
V
Ferriss, Tim......................................................................................... 13 Foley, Bill.............................................................................................26 Fries, Dan................................................................................... 39-40
Vaccaro, Ed........................................................................................10 VanAllsburg, Chris.........................................................................56 Vogel, Jim..........................................................................................60 Vullo, Maria...................................................................................... 69
G Gagliano, Rico................................................................................... 13 Girolimon, Justin.............................................................................14 Glantz, Paul......................................................................................20
W Warner, Mark....................................................................................22 Warren, Elizabeth..........................................................................22
H
Y
Hannaman, Waymon.................................................................56
Yun, Lawrence.................................................................................63
AD INDEX A Arch MI......................................................................................................................................6
B Black Knight Financial Services......................................................................................2
C Colorado Mortgage Lenders Association................................................................23
E Ellie Mae.................................................................................................................................. 4
F Freddie Mac............................................................................................................................8
G Gateway Mortgage Group..............................................................................................13
M Mortgage Contracting Services...................................................................................55
N Nationwide Title Clearing...............................................................................................21 New American Funding.................................................................................................80
O Ocwen..................................................................................................................................... 57 Old Republic Title..............................................................................................................54
A ProTec Solutions................................................................................................................. 71
S Safeguard Properties........................................................................................................61
T TMS............................................................................................................................................11 The Mortgage Collaborative..........................................................................................15
V Ventanex............................................................................................................................... 73
HOUSINGWIRE â?ą FEBRUARY 2018 77
PARTING SHOT
â?ą LUXURY GETS MORE EXPENSIVE As home prices continue to rise across the U.S., the number of $1 million homes have quadrupled since 2002 to make up 4.3% of all homes. In fact, Trulia argues that $5 million is now the new bar for luxury living. But even $5 million homes are becoming less exclusive, as the number of these homes is five times higher than in 2002, especially in places like San Francisco, which tops the list of cities with high-priced homes, followed by Long Island, New York. 78 HOUSINGWIRE â?ą FEBRUARY 2018