March 2021 Authors

March 2021

AUTHORS

TROY GARRIS

ROB CHRISMAN DREW WATERHOUSE Troy Garris

Troy Garris is a partner with Garris Horn LLP. Troy deals with federal and state compliance, enforcement defense, company formation, and mergers and acquisitions.

Drew Waterhouse

Drew Waterhouse is chief revenue officer of Model Match. He has over 25 years’ experience in growing and developing businesses as well as sales and leadership teams.

Rob Chrisman

Rob Chrisman began his career in mortgage banking – primarily capital markets – 35 years ago in 1985 with First California Mortgage. Since then, he’s held a variety of high-level positions at mortgage banks across the country. Currently, he writes a daily commentary subscribed to by mortgage leaders nationally. He is on the board of directors of Inheritance Funding Corporation, a financial services company which advances capital to heirs, of Doorway Home Loans, of AXIS Appraisal Management, and of the California MBA. He is also a member of the Secure Settlements Advisory Board, an associate of the STRATMOR Group, and of the Mortgage Bankers Association of the Carolinas and its membership committee. Rob has provided expert witness services for mortgage and real estate-related cases, has lectured to groups around the country. He holds a BS from Cal Poly, San Luis Obispo, and an MBA from UC Berkeley.

MITCHEL KIDER BOB NIEMI Bob Niemi

Bob Niemi is a Senior Advisor for Financial Services at Bradley, a national law firm. He was formerly Ohio’s chief lending regulator . He has served as the NMLS Ombudsman, a state regulator, a mortgage leader, and now a regulatory compliance advisor.

Mitchel Kider

Mitchel Kider is the Chairman and Managing Partner of Weiner Brodsky Kider PC, representing mortgage lenders, banks, settlement service providers and other financial services.

Stable But Fluid

WHY THE FLUCTUATING HOUSING MARKET STILL LEANS TOWARD SELLERS

By DREW WATERHOUSE, MODEL MATCH

After a turbulent 2020, it is oddly soothing to look ahead in 2021 at a housing market that appears, at least on the surface, to be relatively neutral and balanced, albeit incredibly fluid. Lack of inventory and the higher home prices that go along with it seem to suggest a seller’s market, but at the same time, historically low-interest rates for potential borrowers seem to suggest a buyer’s market.

So, which is it?

At this point, it is really a matter of when the transaction occurs, but even in what appears to be a balanced housing market, these types of scenarios still tend to tilt toward sellers. Here is why.

RIDING THE SEESAW

For homebuyers, the ability to get locked into a low rate right now is a great opportunity and a great idea. But at the same time, housing prices are extraordinarily high, so buyers are getting locked into a low rate, but the price is going to be a little bit higher than it should be until the housing market balances itself out. Either way, this dynamic tends to somewhat favor the seller because, thanks to the lower rates, buyers can borrow more and pay less interest over the life of the loan. However, as an example, they’re also far more likely to pay $1 million for a home that might only be worth about $800,000 in a more stable housing market.

TIMING IS EVERYTHING

At the beginning of this year when interest rates dropped dramatically, there was a significant rush on both new home purchases and refinance loans. Relatively early on, buyers had already jumped on most of the available inventory, but at the same time, in response to the pandemic, people who might have been thinking about selling decided instead to hunker down. Others, however, thought about moving to the suburbs in favor of more space as their homes also became offices and schools. So, between a housing inventory that was already low and that added uncertainty about the world in general, let alone the housing market, it all factors into both housing prices and interest rates. It’s all a matter of how soon and how aggressively the construction industry responds to the demand, and we’re starting to see a little bit of that already.

SOMETHING FOR EVERYONE

Whether it ultimately ends up benefitting buyers, sellers, or both, one undeniable and continuing benefit of the fluid housing market is that the mortgage industry has been and continues to be incredibly busy. When it comes to recruiting, sometimes those efforts get pushed back because it is almost always easier to fund another loan than it is to find another loan officer.

But at some point, recruiters and hiring managers are going to have to start reaching out to their contacts if they want to stay busy without sacrificing efficiency. In a fluctuating market, that makes it all the more important for them to integrate their pipelines with a technology platform that uses CRM functionality to track all of their outreach efforts in one collaborative space.

When it comes to what we can expect from 2021, the housing market isn’t much different from life in general: be hopeful and act as though things will start to get back to normal, but always expect the unexpected. Either way, the state of interest rates and the housing market in general seem to suggest that 2021 could offer a little something for everyone, if you know when and where to find it..

Soaring Servicer Standards Likely

By BOB NIEMI, BRADLEY

The new presi- looking at new priorities, ity and compliance to determine whether a dential adminis- though not from changing ad- mortgage company is operating in a safe and tration has been ministrations. Priorities mature sound manner. The use of a single system confirmed, pri- as the evolution regulatory sys- improves efficiency and increases collaboraorities are being tems like the State Examination tion between states. laid out, and all expectations System, Networked Supervision Networked supervision also focuses on forecast a more aggressive and Standards for Nonbank combined efforts when licensing and renewConsumer Financial Protec- Mortgage Servicers. State regu- ing companies with shared review of data tion Bureau (CFPB) in the lators are the prudential regu- from the NMLS, company applications, and next four years. The corona- lator for nonbank mortgage their financial documents. This ‘strategic apvirus pandemic has shown BOB NIEMI companies through the licens- proach’ is meant to leverage the collective some signs of improvement, ing and supervisory process, ex- intelligence from all state regulators. Yet, a but variant strains are racing vaccine efforts aminations, consumer complaint resolution, trust gap still exists between the stated goals while more American families are impacted. and when necessary, enforcement. to reduce rather than increase regulatory The CFPB acting director stated the Bureau The State Examination System or SES has burden and anxiety of wary licensees. will increase its supervision and enforce- been in development for several years and Like both previous topics, the Proposed ment efforts to ensure that companies de- recently has added a complaint management Regulatory Prudential Standards for Nonlivering COVID-19 relief meet their legal system. Through the SES, state regulators bank Mortgage Servicers were first develobligations and are fully protecting families. share supervisory oversight while making oped in 2015 under my term as OmbudsFair lending has also been announced as a the process more efficient using a single man. The state driven effort was to develop top priority. system for industry and regulator. Exami- enhanced examination standards for mort-

State mortgage regulators likewise are nations allow regulators to monitor activ- gage servicers and capital and liquidity baselines. In the years since opening the discussion, increased growth and coordination has occurred. Nonbank mortgage servicing has experienced rapid market share growth and complexity of operations. The new Prudential Standards cover areas including capital and liquidity, risk management, data protection standards, cyber risk, corporate governance, and change of control requirements. Also, increased coordination with federal agencies and the CFPB took place and inclusion of new examination processes related to forbearance and foreclosure responsibilities mandated by the CARES Act. Regulators have shared that these ‘baseline’ standards as the starting point for discussion. Yet Enhanced Standards and supervisory expectations for large entities have also been forecast for entities that require increase regulatory oversight. Application of prudential standards that beyond standards already in place through other federal agencies or guarantors. Regulators must balance the impact caused by heightened prudential standards on the cost and availability of credit for consumers. While all these are footsteps in the evolution of mortgage regulation and supervision, the trend is for growing pains and increased enforcement.