February 2019 issue by HousingWire

$ Page 42: Alitsource, FICS, LERETA, Manley Deas, Proctor, Safeguard HOUSINGWIRE MAGAZINE ❱ FEBRUARY 2019

2019 OUTLOOK Lenders have many factors to prepare for, and in some cases overcome, in 2019.

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TRIBUTE TO BUSH A tribute to former President George H.W. Bush and his contributions to housing.

HOUSINGWIRE MAGAZINE ❱ FEBRUARY 2019

P.50

THE END OF

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HOUSINGWIRE FEBRUARY 2019 EDITORIAL

CONTENT SOLUTIONS

EDITOR-IN-CHIEF Jacob Gaffney

MANAGING EDITOR Sarah Wheeler

EDITORS Ben Lane Jessica Guerin Caroline Basile

CONTENT WRITER Alyssa Stringer

ASSOCIATE EDITOR Kelsey Ramírez REPORTER Alcynna Lloyd

CREATIVE GRAPHIC DESIGN Traci Cortez

CONTRIBUTORS Nate Schultz, Ralph McLaughlin, Mark Fleming, Matt Clarke

SALES

CORPORATE

NATIONAL SALES DIRECTOR Jennifer Watson Laws jlaws@HousingWire.com

PRESIDENT AND CEO Clayton Collins

INTERIM COO Diego Sanchez CALIFORNIA MARKETING MANAGER Christi Lingard Caren Karris clingard@HousingWire.com MARKETING CENTRAL COORDINATOR Mark Adams Lauren Neaves madams@HousingWire.com CLIENT SUCCESS SOUTHEAST MANAGER Tamara Wren Haley Hess twren@HousingWire.com CONTROLLER MOUNTAIN WEST Michelle Monroe Bill Brown bbrown@HousingWire.com

HAPPY NEW YEAR Rising interest rates. Rising home prices. Shortage of housing starts. Happy New Year, everyone. As 2019 looks to be a tough year in lending, we are already seeing shifts in the market. The first full week of January saw two major origination acquisitions: AmeriSave buying the lending platform from TMS and Movement Mortgage buying Eagle Home Mortgage. There is more to come, but also more to worry about. As Matt Clarke, from Churchill Mortgage, writes in our guest feature: “In the immediate future, however, it looks as though the housing market will be awash with ‘amateur loan officers,’ many of whom are shifting their business from refinances to purchase loans. This will further add to the competition on price and increase pressure on profit margins. Long-time professional lenders will have to work that much harder to maintain their market share, much less expand.” Servicers will also struggle in 2019 as interest rates rise and they deal with new changes such as the end of LIBOR. Associate Editor Kelsey Ramírez writes that this London-based rate could cause trouble as $1 trillion in ARMs are linked to the rate, which is set to expire by the end of the year with no new option in site. Also moving in to the New Year, we are going to try something new in the back departments, starting with this issue. We are now going to devote sections to the latest from our growing communities in the mortgage lending, multifamily and reverse mortgage spaces. Check it out, and enjoy!

GREAT LAKES Lorena Leggett lleggett@HousingWire.com

Jacob Gaffney Editor-In-Chief 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 1-800-869-6882 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.

@JacobGaffney

Tweets From The Streets In an all hands email today, I informed my staff that we will continue to use the CFPB logo and acronym going forward. In other news, feel free to call me Kathy. 18

114

by @CFPBDirector

HOUSINGWIRE ❱ FEBRUARY 2019 5

YOU + UWM = YOUNITED | 800.981.8898 | UWM.COM This information is provided to mortgage and real estate professionals only and is not intended nor is it authorized for consumer distribution. NMLS #3038

CONTENTS

THE LINEUP 10 PEOPLE MOVERS

CoreLogic announced the addition of Ralph McLaughlin as its deputy chief economist. 12

EVENT CALENDAR

NEXT holds its first biannual women’s mortgage tech conference of 2019 in Dallas. 13

ON THE SHELF

Todd Herman talks about activating your alter ego to transform your life. 14 DISPATCH 1 Optimal Blue’s product and pricing becomes the mortgage industry’s system of record.

Lenders weigh in on loanDepot CEO allegedly telling his loan officers to stop acting entitled. 60 REVERSEREVIEW An FHA report reveals challenges within its reverse mortgage program. 64 CFPB WATCH The CFPB has a new director at its helm, and Kathy Kraninger is already making her mark.

69 Q&A1

TAKE 5

18 THE A LIST

Servicers - there’s a new sherrif in town, Maxine Waters, and she has concerns.

Cities that competed for Amazon HQ2 may end up having 2019’s hottest housing markets.

How will the tug-of-war between competing trends impact the housing market in 2019?

56 LENDINGLIFE

Primary Residential Mortgage sent its employees to Guatemala to volunteer for Habitat for Humanity.

22 NEW SHERRIF

26 TUG-OF-WAR

By all accounts, 2018 was a solid year for multifamily. Here’s what will happen in 2019.

Capsilon IQ reduces cost, time and risk by automating up to 80% of the process.

Lima One Capital Founder and Chairman John Warren answers five questions.

Can the housing market weather the next recession? Will there be a continued bull market?

RENTWIRE

68 KUDOS 16 DISPATCH 2

VIEWPOINTS

24 NEXT RECESSION

BACK DEPARTMENTS

CoreLogic’s AutomatIQ Borrower gives lenders a single integrated solution to improve underwriting. 70

Q&A 2

Rick Thornberry on the launch of his company’s new brand identity — One Radian.

20 HOT OR NOT

Government shutdowns are on the rise; HELOC originations are tumbling.

Chad Mosley and Marti Diaz discuss how MCS is preparing its technology, processes and people for growth.

Q&A 3

KNOWLEDGE CENTER

Docutech gives three key 2018 trends shaping the future of mortgage lending. 74

KNOWLEDGE CENTER

Leveraging smart home equity options for more profitable lending.

COMPANIES/PEOPLE INDEX

AD INDEX

PARTING SHOT HOUSINGWIRE ❱ FEBRUARY 2019 9

Ralph McLaughlin CoreLogic

10 HOUSINGWIRE ❱ FEBRUARY 2019

VINCI

FELLOWS PENDERGIST

STIENNON DECKER

enderClose named Erika DeMers s a l e s a s s o c i a t e a n d Dav id Stiennon senior front-end developer. DeMers joined the company from Collins Community Credit Union in Des Moines. Stiennon worked previously for Ameriprise Financial Services in Minneapolis. Cloudvirga named James Vinci execut ive v ice president of technolo g y. Vinci has 25 years of experience at mortgage technolog y companies, w o r k i n g p r e v i o u s l y a t Equator, Altisource and Xerox. Ellie Mae hired Dan Madden as executive v ice president and chief f ina nc ia l of f icer. M adden joi n s t he mor tgage tech prov ider f rom Revel Systems, where he ser ved a s ch ief financial officer. Prior to his time at Revel, Madden was the chief financial officer at Cepheid and vice president of finance and corporate controller at Symmetricom. Embrace Home Loans app oi nte d Jodi Viniello as chief innovation and transformation officer. Viniello has

COOKE

DEMERS CHAKARUN

CoreLogic announced the addition of Ralph McLaughlin as its deputy chief economist. McLaughlin joins from Veritas Urbis Economics, which he founded. Before that he served as chief economist at Trulia and is recognized as an expert in the housing and mortgage industries.

executive operations and IT experience and worked previously as head of transformation and portfolio delivery at Citizens Bank. Berkadia announced Mark Feldman has become the first investment sales resource for its San Francisco-based of f ice. P r ior to joi n i ng B e rk ad i a , Feldman worked at Ground Matrix. Feldman also served as executive vice president of marketing and sales for Universal Paragon Corporation. Rea ltor.com a p p o i n t e d Tracey Fellows as the president of global digital real estate. Fellows w ill resig n from her position as the chief executive officer of REA Group, but remain a director on the behalf of News Corp. Roost if y a n n o u n c e d Cou r t ney Chakarun joined the company as its chief marketing officer. Prior to the new posit ion, C ha k a r u n ser ved a s CoreLogic’s senior v ice president of marketing and innovation. Chakarun also spent more than a decade in various leadership roles at GE Capital, most recent ly leading new product

innovation, mobilit y and consumer research insights for its capital retail finance division. Cloudvirga announced Jesse Decker joined the company as its chief customer success officer. Prior to the new position, Decker ser ved as the v ice president of client services at Roostify and as a management consultant for Booz Allen Hamilton. Ocwen Financial na med Timothy Yanoti as its new executive vice president a nd chief g row t h of f icer a nd Al Celini as its senior vice president, chief risk and compliance officer. In his new role, Yanoti will be responsible for leading Ocwen’s lending business and operations, including forward and reverse mortgage lending, mortgage servicing rights purchases and ser vicing business development efforts. And prior to the position of chief growth officer, Celini worked as chief risk and compliance officer of PHH Corporation. Auction.com named Kevin Cooke senior vice president of business development. Cooke has more than 20 years of experience in mortgage ser vicing and finance, including positions at Altisource and LenderLive. Sabal Capital Partners appoi nted Jason Pendergist as president and chief operating officer of term lending. Prior to his new position, Pendergist served as executive vice president and head of real estate and commercial banking with Banc of California, president of consumer and commercial banking at Luther Burbank and held the title of senior vice president at JPMorgan Chase.

REO

EVENT CALENDAR

NEXT FEBRUARY 7-8, 2019 Host: NEXT Location: Hotel ZaZa, Dallas, Texas Cost: $425 - $1795 On the agenda: The NEXT conference is a mortgage tech event created by women for women. The semi-annual event gathers executive women in the mortgage industry for two days of networking, informative talks and educational technology demos. HousingWire is a media sponsor for this monthâ&#x20AC;&#x2122;s conference.

DALLAS, TEXAS The NEXT Conference takes place only a few miles away from the American Airlines Center, an exciting entertainment venue. This year, concertgoers can enjoy the musical stylings of Fleetwood Mac during the conference dates. The Grammy-award winning group will be performing its newly announced line-up, starting at 8 p.m. on February 7th. americanairlinescenter.com

NATIONAL MORTGAGE SERVICING CONFERENCE & EXPO FEBRUARY 25-28, 2019 Host: Mortgage Bankers Association Location: Hyatt Regency Orlando, Orlando, Florida Cost: $1,050 - $2,500 On the agenda: The Mortgage Bankers Association hosts the National Mortgage Servicing Conference & Expo. The annual event immerses industry servicers in an environment of networking and discovery. The event extends an invitation to all residential mortgage loan servicers, including senior management, servicing managers and staff, default managers, customer service managers, attorneys and more.

ORLANDO, FLORIDA The Sunshine state is rich with nature, so what better way to experience its beauty than a wildlife tour? The National Mortgage Servicing Conference & Expo takes place in Orlando, home to the Exotic Animal Experience. This interactive animal tour features some of the most exotic animals from all around the world. Attendees beware, this is surely a once in a lifetime experience! exoticanimalexperience.net 12 HOUSINGWIRE â?ą FEBRUARY 2019

ON THE SHELF Digital Minimalism: Choosing a Focused Life in a Noisy World BY CAL NEWPORT PORTFOLIO

Newport draws on a diverse set of real-life examples to identify and explain the common practices of digital minimalists and the ideas that underpin them. In our constantly connected world, Newport uses his latest book to explain that technology is intrinsically neither good nor bad. Instead, he explains that the key is to use technology to support your goals and values, rather than letting it use you. Newport offers readers strategies for integrating these practices into their life, starting with a “digital declutter” process.

The Alter Ego Effect: The Power of Secret Identities to Transform Your Life BY TODD HERMAN HARPERBUSINESS

Top performance expert Todd Herman outlines what he says is the secret that many top athletes and executives use: creating a heroic alter ego to activate when things aren’t going according to plan. Herman, who works with executives and professional athletes, shares his own story and others to explain how to use, maintain and control an alter ego to fight insecurity, negativity and self-doubt to become your best self.

OPTIMAL BLUE | SPONSORED CONTENT

Optimal Blue’s product and pricing becomes the mortgage industry’s system of record Its PPE network now includes more than 2,000 clients

ver the last two years, Optimal Blue has strategically acquired several companies, built an extensive API network, and invested heavily in automation and technology with one goal in mind: to create an entirely automated secondary marketing ecosystem for mortgage originators and investors, as well as the technology providers they rely upon every day. Those efforts have established Optimal Blue’s product and pricing as the mortgage industry’s system of record — from leads at the beginning of the process to hedging and selling into the secondary market — approximately one of every three mortgages is facilitated by the company’s Digital Mortgage Marketplace. Optimal Blue’s recent acquisition of LoanLogics’ PPE business unit, LoanDecisions, is just the latest in a series of strategic buys, including its purchase of Comergence in 2017 and Resitrader earlier this year. Comergence enables Optimal Blue to offer a wide array of comprehensive due diligence and oversight capabilities, while the acquisition of Resitrader assets created the industry’s largest digital loan trading platform, allowing Optimal Blue to support more than $750 billion in transactions across its marketplace. With the LoanDecisions acquisition marking the beginning of what seems to be a consolidation trend in the PPE space, Optimal Blue has expanded the reach of its PPE network to a client count exceeding 2,000+. These customers are already in the process of migrating to the Optimal Blue PPE and the company will continue to expand its partnership with LoanLogics to automate correspondent loan transactions. Essential to all of this innovation is Optimal Blue’s expanding universe of APIs, created over the last 18 months by a dedicated team of developers. The company has more than 50 customers using their APIs directly, with more than 40 vendors providing solutions that allow originators and investors to build a custom set of solutions that maximize opportunity at every critical inflection point throughout the mortgage process. Originators are using Optimal Blue APIs for best execution product and pricing, loan and pipeline management, configuration, search results, and lock management, while investors are leveraging them for counter party oversight, NMLS verification, historical production, prospect marketing, compliance questionnaires, and FHA performance scores. In September, Optimal Blue launched the latest in its series, a set of post-lock management APIs that enable users to easily incorporate worse case evaluations, change request submissions, and historical pricing for any loan or scenario. Erin Wester, senior product manager at Optimal Blue, ex14 HOUSINGWIRE ❱ FEBRUARY 2019

plained how the new post-lock APIs fit into the company’s initiative to fully automate everything within the Optimal Blue user interface via an API.

“We took a look at the API products we have today and some common use cases — how our clients are using them,” explained Wester. “With the post-lock APIs, users can now execute searches, create and manage loans, and submit lock requests. You can lock and register the loan through our APIs.” The new offerings include APIs for change requests and APIs related to historical pricing results. The latter allows searching for a loan ID with a desired date and time, or even searching for a specific scenario based on a certain date and time. Optimal Blue also recently introduced a direct data access option for its business intelligence suite, which provides users with a robust data that contains an extremely granular history of every change that has taken place within the Optimal Blue platform — including who requested a change and when, who accepted it, who denied it, etc. The direct data access option lets users connect internal data warehouses, support custom analytics, and uniquely integrate to any in-house visualization solution. This includes data visualizations on locking analytics and change request analytics. For example, users will be able to see how many times a lock desk is having to touch a loan, as well as average cost and days per lock extension. “The direct data access product is an automated way for the user to gain access to their organization’s unique raw data and run their own in-house, custom analytics,” Wester said. “This competitive and actionable insight is then reported to internal data warehouse solutions within the institution, opening the door for any mortgage professional to quantify and transform operational data into an advantageous asset.” In reflecting on the previous year and the extensive progress that the company has achieved, CEO Scott Happ explained, “2018 has been a prolific year for Optimal Blue, both from an acquisition and product development perspective. Not only have we strengthened our offering with substantial new capabilities, we’ve expanded our network with scores of new client and vendor relationships.” It has, in fact, been a noteworthy year for Optimal Blue, as the company continues to thrive in its quest to fully automate the secondary marketing function.

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CAPSILON | SPONSORED CONTENT

Production costs still too high? Don't forget the back end

Capsilon IQ reduces cost, time and risk by automating up to 80% of the process tive tasks, allows for better available data and recaptures 10+ hours per employee, each week. With a new Data Audit productivity app, Capsilon creates an Intelligent Work Experience where technology maximizes employee productivity and makes lenders’ existing systems more powerful. “The app frees up staff time spent searching for docs and comparing data, eliminating the dreaded ‘stare and compare’ function that can take up 50% or more of an employee's time,” Obsitnik said.

CAPSILON DATA AUDIT ELIMINATES TIME-CONSUMING MANUAL DATA COMPARISON KEY BENEFITS:

• Automate data comparison: See data mismatches for assessment and conditioning • Simplify review: Instantly see the portion of the document where data came from

n order to meet the increasing pressure from consumers to deliver quicker, easier mortgages, lenders have relied on an array of consumer-facing solutions to improve the borrower experience. But production costs continue to rise and companies who want to compete successfully in this environment need to adopt new technologies that drive significant business transformation from the back end. Capsilon, a 2018 HW Tech100 winner, is driving that transformation with the launch of Capsilon IQ — a platform that combines Intelligent Process Automation with the company’s patented data recognition and extraction technology to automate up to 80% of the mortgage process, creating massive efficiencies at every stage of the mortgage lifecycle. 16 HOUSINGWIRE ❱ FEBRUARY 2019

“We believe Capsilon IQ is at the heart of the next-generation mortgage operating model,” said Jim Obsitnik, Capsilon’s chief operating officer. “It transforms the way mortgage companies work, enabling them to create intelligent work experiences that help people be more productive and existing systems be more powerful.” The next-gen mortgage operating model goes beyond just digitizing the mortgage process by using emerging technologies to make significant business process improvements that reduce cost, time and risk. This model is in line with the larger trend noted by a recent McKinsey study, which showed that 90% of enterprise companies will adopt intelligent processes by 2020 and move from people-powered to software-powered business. Capsilon IQ automates manual, repeti-

• Distribute clean data: Select the verified data source for use in your business applications Big data is at the heart of the mortgage process. Companies spend a significant amount of staff resources managing documents and data, including intaking documents, extracting, validating, storing data and using that data for decisions. This impacts operational efficiencies across all channels; origination, correspondent and servicing. “In this competitive environment, a data-driven automation engine is now a necessity,” Obsitnik said. “Capsilon dramatically reduces manual work and flags exceptions for human review to enable better, faster decision making – transforming the face of the mortgage lifecycle.” Request a demo today and learn how you can say goodbye to ‘stare and compare.’

TAKE 5

Lima One Capital Founder and Chairman John Warren spent four years and 300 combat missions in Iraq and Afghanistan before joining the mortgage industry. A 2018 HW Vanguard winner, his story is unique. This section takes a snapshot of industry executives, giving you just a peek into their world as they answer five questions you might not have previously known about them.

1. If I had picked a different career path I would be a… Lead singer of a successful rock band 2. Relaxation means… Being on my boat at Lake Keowee with my family 3. The book I can’t stop recommending is… Fields of Fire, by James Webb

4. The best thing about Saturdays is… Going to breakfast at Stax Original with my family and watching my three-year-old son eat strawberry pancakes 5. The last concert I attended was… Mumford and Sons at Madison Square Garden

HOUSINGWIRE ❱ FEBRUARY 2019 17

 THE 

A-LIST

DALLAS,

Amazon is the gift that keeps giving, especially for the metros that competed to host its HQ2. In fact, Zillow’s latest Home Price Expectations Survey indicates that the housing markets of Amazon’s HQ2 finalists are expected to see their home-value growth outpace the rest of the nation in 2019. The Home Price Expectations Survey reveals the predictions of more than 100 real estate economists across the country, detailing their perceptions about the housing market for the coming year. These cities are expected to out perform the national average rate of home value appreciation in 2019, according to Zillow.

TEXAS

PHOENIX,

CALIFORNIA GEORGIA

LAS VEGAS,

SAN JOSE,

ARIZONA

NEVADA

18 HOUSINGWIRE ❱ FEBRUARY 2019

D.C.

COLORADO

ATLANTA,

DENVER,

WASHINGTON

TOP HOUSING MARKETS IN 2019

June 13-14, 2018 | Charlotte, NC

A summit to bring marketers of all experiences into the same space to build relationships, identify best practices, and gain the necessary knowledge to execute a successful marketing strategy.

LEARN MORE! engage.housingwire.com

HOUSINGWIRE â?ą FEBRUARY 2019 19

Hot SIZZLE? Not FIZZLE? 1 1 WHY THE

WHY THE

GOVERNMENT SHUTDOWN



Government shutdowns are increasing as it happened three times in 2018. The latest was a partial shutdown in December. Congress would not pass a spending bill that included the president’s requested $5 billion in funding for a border wall, and President Donald Trump refused to sign any bill that did not include that funding. This shutdown affected the housing industry through delays due to partial staff furloughs at HUD, the Department of Agriculture, the FHA and the IRS.



HOUSING FINANCE REFORM GSE reform may be just around the corner as talk has been heating up in Washington. The House Financial Services Committee recently held a hearing discussing its Bipartisan Housing Finance Reform Act of 2018. During this hearing, the committee called on key members of the housing industry to testify. And Trump nominated Mark Calabria to lead the FHFA. Calabria has long been a vocal proponent of GSE reform, and his appointment could lead to serious winds of change at the GSEs and for the U.S. housing economy.

THESE REAL ESTATE MARKETS Knock, a home equity company, predicted that half of 2019’s top 10 markets will be located in the South. It says Miami will have the highest rate of deals, at 89%. Houston and Chicago follow, with Houston seeing an average savings of 4.84% and an 84.2% rate of deals, while Chicago sees 5.11% in savings and an 83.5% rate of deals. Jacksonville, Florida (No. 4); New Orleans (No. 5); Hartford, Connecticut (No. 6); and St. Louis (No. 7) each projected to see savings in the 5% range. Pittsburgh, Tampa, and Cincinnati round out the bottom three on the company’s top 10 list.

20 HOUSINGWIRE ❱ FEBRUARY 2019

FEMA



FEMA was in hot water after it ruled that the National Flood Insurance Program could not be renewed during the December government shutdown. Previously, the NFIP extension was wrapped into a spending bill that funded the government until December 21, 2018. Once the government shut down, the NFIP expired and could no longer sell or renew policies, while existing policies remained in effect until their expiration date. The housing industry was furious, saying it was “deeply disappointed” over the “short-sighted” and “ill-advised” ruling. FEMA later reversed its decision.



HELOCS After soaring to a near 10-year high, HELOC originations took an unexpected tumble in the third quarter of 2018, falling 14% from the previous quarter and 11% from the year before. According to a data from ATTOM Data Solutions, a total of 313,744 residential HELOCs were originated in the third quarter. HELOC origination decreased year over year in 67% of the metropolitan statistical areas analyzed in the report. But Daren Blomquist, senior vice president at ATTOM Data Solutions, said he is optimistic that HELOC originations will rebound in 2019.

DREAMERS GETTING FHA LOANS Senate Democrats demanded answers from HUD on whether Deferred Action for Childhood Arrivals recipients are being denied FHA loans. Buzzfeed News posted a comprehensive follow-up to a story first covered by HousingWire’s own Ask the Underwriter, Dani Hernandez. Back in September, Hernandez wrote that HUD was quietly denying FHA mortgage insurance for DACA recipients, also called Dreamers. That led to Buzzfeed picking up the thread and exposing the issue even more, and now Senate Democrats want to know just what exactly is going on here.

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HOUSINGWIRE ❱ FEBRUARY 2019 21

VIEWPOINTS

By Nate Shultz

ServicersThere’s a new sheriff in town, and she has concerns

As a new Congress is seated and Democrats take control of the House of Representatives, one of the favorite new parlor games for mortgage market observers has been predicting what the priorities will be of the House Financial Services Committee under the leadership of its new Chairwoman, Representative Maxine Waters. While much of the discussion regarding those priorities has centered on GSE reform, Consumer Financial Protection Bureau oversight, affordable housing and financial institution investigations, mortgage servicers should be mindful that they, too, may find their industry impacted by the chairwoman’s priorities. In fact, even before it became certain that she would take the committee’s gavel, Waters introduced legislation that signaled her intent to address concerns regarding servicer loss mitigation and foreclosure activities. 22 HOUSINGWIRE ❱ FEBRUARY 2019

Making servicer oversight a priority In the last Congress, Waters introduced two bills related to servicer oversight. In April, she introduced the Federal Housing Administration Foreclosure Prevention Act of 2018. Then, in June, she introduced a bill entitled the Homeowner Mortgage Servicing Fairness Act of 2018, which included similar provisions to those found in her previous FHA bill, but for conventional loans. Both of these bills demonstrate a strong commitment to preventing foreclosures, and evidence that she believes servicer failure to provide adequate and compliant loss mitigation too frequently yields unwarranted foreclosures. The FHA Foreclosure Prevention Act of 2018 includes a number of requirements

Nate Shultz is vice president of government and regulatory affairs for TMS, an independent mortgage bank. Previously, he has served in leadership roles at the Colorado Housing and Finance Authority and at the Federal Housing Administration.

for the U.S. Department of Housing and Urban Development to ensure that servicers of FHA-insured loans are properly engaging with borrowers and are following FHA loss mitigation requirements. Specifically, the bill would: • Require servicers to document compliance with FHA’s loss mitigation requirements prior to payment of a claim • Enable FHA to order servicers to take corrective actions, “including barring foreclosure and cancelling from the borrowers [sic] account balance and from any insurance claim any interest and other fees that accrued during periods of non-compliance” • Mandate that HUD create a loss mitigation complaint procedure for borrowers, including a website for receipt of such complaints, an appeals process for borrowers who disagree with HUD’s determination regarding their complaint and a prohibition on foreclosure for any borrowers whose complaints are under review by HUD • Require servicers to provide notices to borrowers prior to initiating foreclosure that detail the servicer’s application of FHA’s loss mitigation waterfall and reasons that the borrower was not determined to be eligible for any home retention options available under the waterfall The Homeowner Mortgage Servicing Fairness Act of 2018 would require FHFA to develop regulations that set forth specific requirements for servicers of loans guaranteed by a GSE. Provisions of the bill include: • T he creation of regulations that govern servicer internal controls, risk management, internal audit systems, solicitation and review of borrower complaints and documentation of borrower contact and loss mitigation • Requiring servicers to submit corrective action plans for any failures in

complying with the aforementioned regulations • Granting FHFA the authority to take action to correct any uncured deficiencies on the part of the servicer, including the imposition of civil monetary penalties, mandatory transfer (without compensation) of servicing rights to another servicer and limiting deficient servicers from doing business with the GSEs • Permitting FHFA to collect a fee to cover costs associated with the mandates of the bill One priority among many Despite Water’s interest in correcting what she sees as lax servicer oversight, it remains to be seen when and how she might seek to address these issues in light of the myriad number of pressing matters that are of interest to the committee’s members and their constituents. There are also some considerations that could pose obstacles to the reintroduction of these bills as currently drafted. For example, how would GSE reform impact the feasibility of the Homeowner Mortgage Servicing Fairness Act? Or, does HUD have the staffing and technology resources to implement the borrower complaint system envisioned in the FHA Foreclosure Prevention Act? How would the expected increase in servicing cost and corresponding deterioration of MSR value impact origination pricing, and are Democrats willing to risk limiting access to credit for new borrowers to protect existing homeowners? There is also the issue of the Republicancontrolled Senate’s willingness to even consider such a bill if it were to make it out of the House. What is certain is that this is an issue that isn’t going away. The concerns that form the basis for both of these bills are ones that have repeatedly been raised by consumer advocacy groups – which will have substantially greater influence now that the Democrats have retaken the House. Servicers should expect these issues to continue to be of interest to Waters.

Implications for servicers When these bills were introduced, I and others in the industry sought to make clear to Financial Services Committee staff that the ends the congresswoman sought would best be achieved not by adding to the cost and burden of servicing FHA and conventional loans, but by leveraging technology to give regulators greater transparency into the outreach and loss mitigation options made available to borrowers. Continued reliance on servicer-reported data does little to mitigate the risk of poor or fraudulent reporting by servicers. And the potential for increased servicing costs, reduced MSR values, and/or diminished access to credit resulting from heightened reporting and compliance requirements warrants a different approach to achieving the congresswoman’s goals. Implementation of the right technology solutions could offer transparency that virtually eliminates the chances for fraud or errors in reporting, providing the kind of borrower protection and servicer oversight Waters seeks. The automation of mandatory reporting actually decreases compliance burdens. I expect that future iterations of these two bills will focus on the utilization of technology to document compliance with servicing guidelines. To prepare for such requirements, servicers should evaluate their IT capabilities and look to invest in the development or acquisition of robust reporting and analytic mechanisms that could be used to electronically deliver servicing and loss mitigation data to insurers and regulators in real time. Not only will this be necessary from a compliance standpoint, but these are smart investments from a business perspective – automating reporting and analytics functions creates efficiencies, reduces costs and errors, and strengthens compliance. Servicers have made substantial investments to improve processes and technology that contributed to the widespread failures that occurred in the aftermath of the housing crisis. Now, it’s time to move beyond correcting past failures and to recstart preparing for the future of servicing. HOUSINGWIRE ❱ FEBRUARY 2019 23

VIEWPOINTS

By Ralph McLaughlin

Can the housing market weather the next recession? Exploring the likelihood of a continued bull market

Housing economists are at a near consensus that the U.S. housing market is softening, but bull markets might be more likely than bear markets over the coming decades. Lately, it seems like the roof of the housing market might cave in. Major indicators point to a significant slowing in the market. For instance, the CoreLogic Home Price Index fell for six straight months, with October data showing only a very modest increase. Existing home sales also fell for six consecutive months with only a small rebound in October. What’s more, new-home sales dropped 12% on an annual basis in October, housing starts are down approximately 7.9% from their post-recession peak in January 2018 and the month’s supply of new homes is now at an 8.5-year high. As such, it is understandable why some might think that the housing market cycle is coming to an end. 24 HOUSINGWIRE ❱ FEBRUARY 2019

While it’s looking like the housing market peaked last year, there are reasons to remain optimistic about housing. First, broad and deep troughs in housing prices are the exception, rather than the rule, to long-term price trends. Second, housing inventory struggles to keep pace with demand. Lastly, the demographic structure of the United States should continue to support prime-household growth over the next two decades. First, let’s look at historic trends of home-price growth. The Great Recession brought substantial devaluation to the housing market because it led to sustained home-price decline. However, persistent periods of declines aren’t common during recessions. For example, prices grew 6.6% over a nine-month period during the DotCom recession in 2001. During the 1980 and 1981 recessions, prices grew by 6.1% and 3.5%, respectively. In fact, just two of the past five recessions brought decreases in home prices. There was a 1.9% drop during the 1991 recession, and, of course, the massive price drop during the Great Recession: a

Ralph McLaughlin holds the title deputy chief economist for CoreLogic in the Office of the Chief Economist. McLaughlin has more than a decade of experience in the housing and mortgage market. Prior to joining CoreLogic, he served as chief economist at Trulia, where he led their housing economics research team and provided house hunters with key insights about the economy, housing trends and public policy.

19.7% decline during the recession itself, and a 33% crash measured from the homeprice peak to trough. Though the sample size of recessions discussed here is small, combined they put the chances of negative price growth during the next downturn at 40%. Second, a structural shift in U.S. housing inventory may help set a high floor for home prices over the next few decades. Looking at historical trends of the two components of housing inventory – new and existing homes for sale – it’s clear there’s a substantial lack of inventory relative to historic norms. Total single-family inventory, the sum of newly-built and used homes, sits at just 15.7 homes per 1,000 households. This is up slightly from the record low of 14.9 set in December 2017. The fact that we’re at historically low inventory is important because it means we’re in a very different supply environment compared to the massive run up in inventory that appeared before the onset of the Great Recession. This sharp increase in supply exacerbated price declines as demand waned. Because inventory is so low today, prices are unlikely to fall sharply if the market continues to slow and sets a high platform for prices to rise during the next expansionary period. Third, the demographic structure of the United States looks like it could support strong growth of prime-age households (households with individuals between

ages 35 and 54) through 2035. Currently, just under 46% of the U.S. population is under 35, and this cohort has historically low homeownership rates compared to older generations. As this cohort ages and gets their housing-market sea legs, we should expect them to form new households as they enter into their peak marital and child-bearing years. The Harvard Joint Center for Housing Studies estimates Millennial households are expected to grow from about 18 million households in 2018, to 39 million in 2025 and 50 million by 2035. Regardless of whether their aspirations for homeownership materialize, this surge in household growth will continue to support both the owner-occupied and renter-occupied sectors of the housing market. Furthermore, there are recent signs that young households are starting to own more homes – households under 35 have been the primary driver of the increasing homeownership rate over the past year. While these factors provide points of optimism for the housing market, it is important to recognize important headwinds that might dampen long-term prospects for a healthy owner-occupied housing market and its positive contributions to gross domestic product. For starters, the same forces that support long-term price growth, namely low existing inventory and sluggish homebuilding, could put downward pressure on

the ability of younger households to buy homes. Slow growth of such owner-occupied households matters for GDP growth in two ways. First, the multiplier effect on consumer demand is likely larger for new owner-occupiers than renter households. In other words, new homeowners tend to buy more household goods for their home than new-renter households. Second, since owner occupants are more likely to make substantial additions and alterations to existing homes – and reside in homes that are larger or have more amenities – future contributions to GDP from single-family homebuilding and home improvements will be less. The other headwind is what I might refer to as “animal timidness,” which is the opposite of the “animal spirits” that John Maynard Keynes coined to describe the human emotion that drives consumer confidence. Though most recessions have benign effects on the housing market, consumers that lived through the collapse of the housing market might develop recency bias which could affect behavior during the next recession. Both Gen Xers and Millennials, who saw their first major recession end with the bottom falling out of the housing market, could pull back their desire to engage in the housing market should the economic cycle trend downward. While it’s unlikely that animal spirits are driving demand today, there is at least a moderate risk that younger households will exhibit animal timidness during the next correction. Given their cohort size, apprehension among these buyers is something to watch out for; it may lead to a self-fulfilling prophecy that housing markets don’t weather recessions well. The takeaway here is that the housing market appears to be in good shape to weather a downturn, and long-term prospects for growth look solid through 2035. Beyond 2035, an aging population introduces some degree of systemic risk to growth in the housing market and broader economy and, as such, is something economists and industry players alike should keep a close eye on. HOUSINGWIRE ❱ FEBRUARY 2019 25

VIEWPOINTS

By Mark Fleming

How will the tug-of-war between competing trends impact the housing market in 2019? 4 trends to watch for

Competing trends heavily influenced the housing market in 2018. We witnessed a surge in Millennial demand against the backdrop of a strong labor market. But mortgage rates rose consistently, increasing the squeeze on affordability and furthering the supply shortage to a historically low level. This made both buyers and sellers increasingly hesitant to participate in the housing market. The tug-of-war between these competing trends is poised to continue in 2019. Given that, what is the outlook for the housing market, and what does the future hold for consumers and real estate professionals?

There are four major trends that stand out. Let’s take a look: 1. Rates will continue to rise We’re seeing a transition from a declining-rate to a rising-rate environment, which has been one of the biggest drivers of change in the mortgage market. Mortgage rates are almost a full percentage point higher than a year ago. Without a doubt, this has impacted affordability negatively for both potential and existing homeowners. However, we need to take a pause before asserting that this is entirely bad news. Rates have been artificially low in the past decade, in part because of the quantitative easing policy implemented by the Fed in response to the Great Recession. In 26 HOUSINGWIRE ❱ FEBRUARY 2019

fact, even though rates are rising, it helps to keep in context that they are still below their historic average of 8%. Quantitative easing has kept interest rates low for the past decade, allowing the housing market to recover from the housing crash. But, there is a very good reason why rates are now rising - they are normalizing against

the backdrop of a very strong economy. In 2018, we’ve seen an almost 50-year low in unemployment, and the pace of wage growth increasing toward the end of the year. While wage growth has not fully mitigated the loss of affordability stemming from rising rates, it has helped mitigate declining affordability to some degree.

Mark Fleming serves as the chief economist for First American Financial Corporation. In his role, he leads an economics team responsible for analysis, commentary and forecasting trends in the real estate and mortgage markets.

Here are some predictions we can make when looking ahead to 2019. In 2018, rising rates priced certain potential home buyers out of the market, and they dis-incentivized many existing homeowners from selling their homes. However, the desire for homeownership has not gone away. In fact, according to the American Enterprise Institute’s first-time buyer index, more than half of all homes were purchased by first-time buyers in 2018. Even if rising rates lead to affordability challenges, the reason underpinning the rising rates – a strong economy – may still pave the way for many to realize their American Dream. 2. Low supply will continue to plague the market While the discussion around rising rates mostly focuses on the impact to first-time buyers, their impact on existing homeowners is just as important. In a rising rate environment, existing homeowners, particularly those that bought or refinanced over the past few years, will become much less likely to sell their homes – after all, why should they buy a new home at a higher interest rate? Unfortunately, this calculation exacerbates the supply shortage that has plagued the market for most of 2018. The vast majority of residential purchase transactions are sales of existing homes, so homeowners’ reluctance to sell their home, combined with historically low inventory, places great pressure on

the housing market. Even if there is a surge in demand and a strong economy, buyers can’t buy what’s not for sale. Naturally, mortgage rates returning to 3.5% would help bring some relief to the market. However, with rates forecast to continue rising, that is unlikely to happen. That leaves us with only one option: an increased supply of new homes. In 2019, we might see more discussion about how to increase supply, including making homebuilding more productive, and overcoming regulatory and zoning challenges around building affordable new homes. Until then, it won’t be an easy decision to sell a home financed with a low mortgage rate, nor will it be easy to buy one. 3. Millennials will drive homeownership demand The perception that Millennials are a renter generation is just that: a perception. 2018 has seen strong demand for homeownership from Millennials. Compared to Generation X, which graduated into homeownership in their late 20’s, Millennials have delayed homeownership into their early to mid-30’s. As increasing numbers age into that cohort, we will continue to see Millennial demand for homeownership in 2019. One might ask whether Millennials can afford homeownership. That is not only the wrong assumption, but also the wrong question. Economically speaking, Millennials, who have delayed marriage

and having children in favor of education, have the highest average household income across generational cohorts. And, although marriage and children, arguably the biggest drivers for homeownership, come later in life for Millennials, they are still taking these steps with time. As increasing numbers of Millennials are preparing to tie the knot and have children in 2019, they will be the most important demographic driving homeownership. 4. Coastal cities will lose to more affordable inland markets First American’s analysis shows that the 80th percentile renter in San Francisco, with a house-buying power of $822,000 and an income of $135,419, can afford to buy only 20% of the available homes. Over the long-run, if affordability challenges in high-priced coastal areas continue, households will migrate from expensive coastal areas to more affordable, up-andcoming cities where homeownership is more achievable. Cities like New York, San Francisco and Seattle will face increasing competition for labor and employers from cities like Austin, Phoenix, Denver and Dallas. Migration will go beyond those seeking affordable homes – employers can migrate too, choosing to relocate to markets with lower housing costs, where they can pay less and still attract qualified employees. Over time, we will see the creation of new employment hubs and housing market growth opportunities in more affordable and homebuilding-amenable locations. We’re under no illusions that it will be smooth sailing for the housing market. Looking ahead to 2019, affordability challenges stemming from rising rates will continue. This will likely make it more challenging for certain potential buyers to enter the market, not to mention making existing homeowners more reluctant to sell. However, there are some strong currents propelling the housing market forward, including a strong labor market and demand from an influx of well-educated, high-income Millennials seeking the American Dream of homeownership. HOUSINGWIRE ❱ FEBRUARY 2019 27

$ $

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THE END OF

LIBOR $

CHANGE$ EVERYTHING FOR MORTGAGE $ERVICER$ Servicers prepare for rough waters By Kelsey Ramírez

$ $

HOUSINGWIRE ❱ FEBRUARY 2019 29

The past couple years have been smooth sailing as delinquencies continue to fall, and, for the most part, Americans make their mortgage payments with ease.

30 HOUSINGWIRE ❱ FEBRUARY 2019

Each month foreclosures and delinquencies decrease again, and are now at or above decade lows, according to data from Black Knight. Americans have enjoyed a period of economic prosperity and perfect housing conditions – a much-needed relief after the most recent recession that ended homeownership for so many. The most recent report from Black Knight showed the number of loans in active foreclosure fell 24% annually, while the number of mortgage delinquencies dropped to a 12-year low. These improvements occurred even amid a continued struggle from hurricane-related delinquencies. In fact, as mortgage originations decrease and lenders struggle with a decreased buyer interest and increased competition, servicing departments have kept lenders making a profit. Lenders earned $480 per loan during the third quarter of 2018, down from $580 per loan in the second quarter of 2018, an even more significant drop from $929 in the third quarter of 2017, according to the latest Quarterly Mortgage Bankers Performance Report from the Mortgage Bankers Association. This was an allnew third quarter low for lender profits. But despite this decrease, lender profits did not go negative like in the first quarter of 2018, when they reported a loss of $118 per loan because of the increase in competition and decrease in homebuyers. Lenders were able to remain in the black during the third quarter, and this was due, in part, to servicing revenues. “Including all business lines, both production and servicing, 71% of the firms in the study posted a pre-tax net financial profit in the third quarter,” said Marina Walsh, MBA vice president of industry analysis. “Without servicing, that percentage would have dropped to 52%.” Overall, mortgage servicers have had it easy the last few years. But that could be about to change due to rising interest rates, an increase in FHA loans and, of course, LIBOR.

RI$ING INTERE$T RATE$

LIBOR

Now, for the first time since the Great Recession, the housing market is facing a rising mortgage rate environment. Most experts are predicting the average 30-year fixed rate mortgage in 2019 will have an interest rate at or above 5%. These rising rates could mean trouble for consumers who took out an adjustable-rate mortgage to keep their initial mortgage costs low. Now, as mortgage rates increase, those ARMs could hit unsuspecting borrowers with a huge jump in their mortgage payment. A further rise in mortgage rates could reduce the number of loan modification options servicers have at their disposal, as borrower rate reductions and deferrals may no longer be feasible. Principal deferments may be more practical solutions because they are non-interest-bearing and will not be affected by changing interest rates, servicers noted during a roundtable with Fitch Ratings. Of course, due to regulations, such as the Know Before You Owe rule passed after the last recession, more consumers are aware of what is about to hit them, but that may not make mortgage payments any easier to meet for some. Cue an increase in delinquencies and even foreclosures. “Higher rates could also make borrowings more expensive for the servicers even as the value of their mortgage servicing rights increase,” Fitch Ratings explained. “The movement in interest rates has not had a dramatic impact on mortgage performance so far this year. This, however, could become more of an issue if interest rate increases take place quicker and become more sizable.”

But rising interest rates aren’t the only storm about to hit the servicing industry. Servicers are about to face a new struggle coming from the other side of the Atlantic – the end of LIBOR. LIBOR, the London Interbank Offered Rate, dubbed the world’s most important number, is a scandal-plagued benchmark that undergirds about $350 trillion in loans, and it is about to be phased out. LIBOR is a common benchmark for determining short-term interest rates. ARMs, for example, are often linked to LIBOR. When borrowers take out on ARM on their home, they lock in a lower interest rate for a set period of time, typically about five years. After that, the interest rate will fluctuate depending on an index like LIBOR. “LIBOR is a benchmark interest rate for global financial markets and many adjustable-rate mortgages are linked to LIBOR so they will need to be linked to a new replacement interest rate once LIBOR is phased out at the end of 2021,” explained Roelof Slump, Fitch Ratings managing director in the company’s U.S. RMBS group. LIBOR has a long, complicated history, but for years, traders at some of the largest banks in the world worked interest rates illegally in order to make a profit. LIBOR is set to terminate at the end of 2021. Fitch Ratings noted that, with many ARMs linked to LIBOR, servicers say these mortgages will need to be linked to a new replacement benchmark once it is phased out. However, the industry has yet to establish a clear path for its replacement. There are about $1 trillion in LIBORbased adjustable-rate forward mortgages, or 2.8 million mortgages, which represent close to 10% of the outstanding mortgage market, according to the Urban Institute. The greatest concentration is in loans held in bank portfolios and in private-label securities. In the U.S., the New York Federal Reserve announced the creation of

FHA LOAN$ A recent survey from Altisource Portfolio Solutions, a provider of real estate and mortgage technology services, which surveyed more than 200 mortgage default servicing professionals, shows about 86% of servicers service FHA loans. The 2018 State of the Servicer Industry report from Altisource shows that about 72% of servicers expect their FHA loan portfolio to increase over the next 12 to 24 months, and 77% of those surveyed expect the increase to be more than 25%. FHA loan limits increased at the beginning of 2018 and again at the beginning of 2019, making them even more attractive to consumers, Altisource explained in its report. The loans have remained popular as they allow borrowers with lower credit scores to be eligible, and require lower down payments. While FHA mortgage delinquencies remain low, they are still higher than conventional rates, and servicers must prepare for the expected increase. “Based on the survey results, recent economic indicators suggest that the housing market is approaching an inflection point,” said Patrick McClain, Altisource senior vice president of Hubzu Auction Services and Equator. “While delinquency and foreclosure rates remain low, home price appreciation is slowing and interest rates are rising,” McClain said. “With lower origination volumes and an expanding credit box, servicers expect to see growth and increased delinquencies in their FHA portfolios.”

“

“LIBOR is a benchmark interest rate for global financial markets and many adjustable-rate mortgages are linked to LIBOR so they will need to be linked to a new replacement interest rate once LIBOR is phased out at the end of 2021.”

HOUSINGWIRE ❱ FEBRUARY 2019 31

“If SOFR was substituted for LIBOR, we estimate that, over the entire $1 trillion forward ARM market, this differential would give borrowers a change in cumulative payments and investors an increased cost of $2.5 to $5 billion a year, or $15 to $30 billion on a present-value basis.”

SOFR, the Secured Overnight Financing Rate, that could take the place of LIBOR over the next several years – or so it hopes. This rate uses Treasury securities as collateral. SOFR is a secured rate, making it historically lower than the unsecured LIBOR rate and less volatile. The Urban Institute estimates that the one-year SOFR rate will be 25 to 50 basis points lower than the one-year LIBOR. By switching to this rate, LIBOR-indexed ARMs could actually drop 25 to 50 basis points. “If SOFR was substituted for LIBOR, we estimate that, over the entire $1 trillion forward ARM market, this differential would give borrowers a change in cumulative payments and investors an increased cost of $2.5 to $5 billion a year, or $15 to $30 billion on a present-value basis,” the Urban Institute stated. While some have proposed adding on a certain number of basis points to make the rate more closely align with LIBOR, the Urban Institute explained why that could be problematic. “Any add-on may work on average or ‘ex ante,’ but it is subject to dispute,” the institute stated. “Reasonable people may come up with different estimates of the add-on, and even one basis point on $1 trillion is $100 million a year.” “We have seen litigation over smaller amounts,” it continued. “It may also be difficult for the mortgage market to use an add-on if the larger $200 trillion LIBOR market does not make this adjustment.” But SOFR is just one option, and although the deadline is quickly approaching, there remains to be a clear consensus on what should replace LIBOR. “Finding a suitable replacement for LIBOR is proving to be a somewhat contentious process thus far,” Slump told HousingWire. “And until a replacement rate for LIBOR has been determined, mortgage servicers are likely to hold off on developing formal implementa-

“

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tion plans.” The legal documents on most adjustable-rate mortgages allow for the substitution of a new index based on comparable information if the original index is no longer available, the Urban Institute explained. But contract language for most mortgages is largely silent on how to define a reasonable substitute and what it means for LIBOR to be unavailable. As they do move forward, servicers will likely look for guidance from entities such as U.S. Department of the Treasury, the Federal Housing Finance Agency and the government-sponsored enterprises – Fannie Mae and Freddie Mac. In fact, the FHFA revealed that one of the targets for the GSEs in 2019 will be to find a replacement for LIBOR as its end nears. The FHFA released the information in the GSEs’ Scorecards for 2019. These Scorecards tell Fannie and Freddie what the FHFA expects of them each year, and what they will be graded on. Many of the 2019 Scorecard’s initiatives are carried over from previous years, and instruct the GSEs to “continue” in their current efforts, such as supporting access to single-family mortgage credit for creditworthy borrowers. However, there were also new items on the list, such as preparing for the end of LIBOR, assessing its impact and performing industry outreach to inform policy and implementation plans. The problem, however, is that as the deadline approaches, servicers need to begin implementation of a new benchmark now. When asked when the servicing industry should start phasing in a replacement for LIBOR, Slump said, “The short answer is ‘now.’ Among servicers’ primary focuses and challenges will be to effectively communicate the transition away from LIBOR to borrowers, many of whom are not anticipating an index change and are not aware of its potential impact.” Not only is the deadline for LIBOR to expire quickly approaching, but the Urban Institute warns that there is also the possibility that the LIBOR will become increasingly unreliable before it expires. As

banks begin to pull back from providing information, they may create what has been nicknamed a “Zombie LIBOR,” which would be an unreliable LIBOR index and a real risk. When a new replacement for LIBOR is decided, it could significantly impact mortgage payments, a shift that borrowers may not be prepared for. “Monthly mortgage payment amounts could change. Comprehensive communication to mortgage borrowers far in advance of these changes is imperative so they are not broad-sided with a substantially higher monthly mortgage payment,” Slump said. “A LIBOR replacement could also affect company financing tools like credit lines, repurchase agreements and warehouse lines so mortgage servicers may have to change their advancing strategy if a new benchmark has a material impact on their borrowing costs used to fund the advances,” he said.

HOW TO WEATHER THE STORM But even as conditions worsen, there is still hope for mortgage servicers to be able to weather the upcoming storm that rising interest rates, the end of LIBOR and other costs and burdens the market will soon bring. “Now is the time for servicers to review their internal capabilities and ensure they are partnered with the best vendors to effectively manage their FHA delinquent loans to avoid unnecessary cost, increased risk and to maximize returns,” McClain said. Servicers at Fitch’s roundtable noted that increased emphasis has been placed on technology in an effort to counteract the impact of higher funding rates and other costs including regulatory compliance. More than 50% of the servicers expect to make material changes to their systems within the next five years, while some are considering using blockchain technology to help reduce costs. Some participants noted that servicers may be forced to adopt blockchain technology to align with the origination market over time. “U.S. RMBS servicers operate in a competitive environment and are eagerly looking for opportunities to demonstrate superior performance against their industry peers in the face of economic pressures,” Slump said. “This is leading some servicing entities to be more proactive in early stage collections and other default management processes on loans in non-prime/non-qualified mortgage transactions, especially where issuers are still cultivating investor confidence in the product.” Many servicers are also considering moving some of their key operations off-shore, replacing some domestic operations. More than half of Fitch’s roundtable participants said they planned to expand some parts of their operations to off-shore services in the next five years, but these functions would be primarily non-customer facing. Fitch explained that while the majority of U.S. servicers primarily utilize on-shore staff and vendors for customer-facing positions, many offshore for back-office functions. As such, servicers can face risks from events outside the U.S. that may affect the domestic servicing landscape. Servicers would prefer all servicing functions to be brought on shore. However, as costs mount, moving some operations offshore may be one of the few remaining options left to them as they seek to reduce costs and stay afloat admists challenging market conditions.

BY THE NUMBERS

$1t the amount of LIBOR-based ARMs

$2.8m the amount of LIBOR-mortgages

SOFR estimated at 25 to 50 basis points lower than LIBOR

10% mortgage market represented by LIBOR-based ARMS (Source: The Urban Institute) HOUSINGWIRE ❱ FEBRUARY 2019 33

A LOOK AHEAD TO 2019 MORTGAGE MARKET TRENDS What lenders will have to overcome in year ahead By Matt Clarke

Many mortgage businesses are shutting their doors, merging with other companies or selling their business – a bleak start to the new year. But while some mortgage lenders fail to keep up with the changing times, others are excelling, capitalizing on the change and those who weren’t ready for it. So what’s their secret? Customer service? Technology? An innovative approach to loan originations, and who to lend to? It’s actually all of the above, and more. But it’s not too late to make sure you can keep up with the changing mortgage environment. With the start of the new year, many in the mortgage industry are left wondering what to expect in 2019. This list will help mortgage executives better prepare for the year to come. It shows trends that they will likely have to manage, or in some unique cases overcome, over the next 12 months.

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HOUSINGWIRE ❱ FEBRUARY 2019 35

LOAN VOLUMES UNDER PRESSURE A number of factors will conspire to put downward pressure on mortgage volumes this year – especially as it applies to refinance loans. Those lenders that avoid a significant drop in volume next year are likely going to be those that ramp up their sales departments and take volume from competitors. Within this new, more competitive environment, some factors to consider include: Rising interest rates The Federal Reserve has all but promised that it will continue to increase rates in 2019, and while most lenders do not expect to see rates rise too dramatically, it will indeed have an adverse impact on refinance businesses, and could also influence new home purchase decisions, particularly with first-time homebuyers. As a result, loan volumes aren’t likely to grow dramatically in the coming year — at least not outside the realm of improved or expanded operations. Housing inventory challenges Low housing inventory continues to be a problem that will 36 HOUSINGWIRE ❱ FEBRUARY 2019

put downward pressure on the purchase originations market well into the year. Inventory is at lower levels across the board, but this is a particularly daunting dilemma when it comes to affordable housing. Higher home prices have created a significant affordability challenge for borrowers in multiple markets across all income brackets, but it has become a major factor for those in the market for lower- to middle-income housing. In many areas — particularly major urban markets — older, more affordable housing is being systematically demolished and replaced with higher priced properties, all of which is pushing housing inventory out of reach for most lower income consumers. Additionally, natural disasters continue to play a role in negatively impacting inventory levels. Historic hurricanes, flooding and wildfires all caused record levels of devastation in 2018 and that troubling trend could continue this year. Beyond the initial devastation, these events wreak

havoc with the mortgage process overall, forcing lenders to put deals on hold, reassess property values or even cancel loans all together. Rising home prices For the past few years, lenders have seen an increasing number of sellers over-pricing their homes in an effort to realize a meaningful profit on the sale. The effect has been that many homes have remained on the market longer than they ordinarily would have, had they been priced more reasonably. The unrealistic expectations of sellers is a reaction to the dramatic increase in home values in some markets like California, Oregon, Seattle and Colorado, and has ultimately resulted in a drain on sales across all states. While some of the increase in home prices is in response to valid growth in home values in certain areas, when paired with overpricing, it has resulted in an unwelcoming home buying environment for first-time buyers and renters who might otherwise have attempted to buy had they not been priced out of the market.

how things have been done, even if they were highly successful in the past. This requires the courage to make significant changes that challenge the status quo and create a unique competitive edge.

RESPONDING TO A CHALLENGING ENVIRONMENT All of these factors will come together to make originating loans more challenging in the year ahead. As competition for purchase loan originations heats up, it simply won’t be enough for lenders to offer the same low rate as every competitor. Rather, lenders will need to bring more value to the table, including guidance and support for borrowers throughout the mortgage process. Great lenders this year will go beyond just telling borrowers what they can afford, but also help them identify homes available in their price range and help them make a successful offer. In the immediate future, however, it looks as though the housing market will be awash with “amateur loan officers,” many of whom are shifting their business from refinances to purchase loans. This will further add to the competition on price and increase pressure on profit margins. Long-time professional lenders will have to work that much harder to maintain their market share, much less expand. Lenders should expect to see their peers approaching these challenges in a number of ways, including:

quickly and easily close loans for borrowers will be a necessity. This all hinges on smart investments in technology with a demonstrable ROI that allows lenders to readily track and trend every transaction to drive continuous improvements, even marginal ones. In this way, they can make the mortgage process an educational and perhaps even more pleasant one for borrowers. On the reverse end, however, this also means lenders will need to avoid chasing expensive, flashy investments with low returns. In 2019, a strong mortgage lender will be defined by their ability to challenge

CHANGING CREDIT REQUIREMENTS Until now, many lenders have failed to differentiate between low-score borrowers and no-score borrowers, but it is important to remember that these two are fundamentally different, particularly as lenders look to target niche markets. Low-score borrowers are those who may have made poor financial decisions in the past which damaged their credit score or have had significant life events that strained their financial resources. Noscore borrowers, however, are those who may have a strong financial background or who may have demonstrated in the past their ability to eliminate debt from their life or avoid it altogether. As new, potential consumers impacted by the last financial crisis enter the housing market in 2019, no-score borrowers are going to make up a larger portion of the market as financial literacy grows in prominence.

FOCUSING ON COST-SAVING OPERATIONS With the cost to originate at historic highs for most lenders, there should be room to economize next year. Lenders be better positioned for success in 2019 if they invest in seamless lending processes, employ expert managers and utilize a solid operations team to support their loan officers. Having the infrastructure necessary to HOUSINGWIRE ❱ FEBRUARY 2019 37

products with more options enables lenders to better optimize loan structures to fit their borrowers’ needs.

VARYING LOAN STRUCTURES In the coming years, the structure of the mortgage will matter much more than it has in the past. While the 30-year fixedrate loan will likely remain the industry standard, consumers now recognize that it is not necessarily the best option for every borrower. Lenders will need to accept this evolution in order to bring additional value to the table. Lenders today have the unique opportunity to truly go above and beyond by helping borrowers identify the loan option best suited to their unique financial situations and goals. And it’s not only about the rate – the structure and type of loan is also important. Lenders should keep in mind that some borrowers may be better suited to a 15-year fixed-rate loan or a variety of other 38 HOUSINGWIRE ❱ FEBRUARY 2019

mortgage products or features available today. The key is asking great questions and partnering with customers to review the analytics required to identify the borrower’s long-term financial goals. Just as they always have, first-time homebuyers, in particular, will need extra help in understanding how to structure their loans, access down payment assistance programs and explore various loan scenarios. They may have questions about which government-sponsored loan programs are now available that may not have been in the past. Lenders should be prepared to discuss not only basic loan product distinctions with borrowers, but also help them incorporate their long-term goals into their home purchase decisions. Offering more

TECHNOLOGY AT THE CENTER OF RELATIONSHIPS AND CONVENIENCE The mortgage industry is shifting, and will continue to shift, toward an increasingly digital environment. Technology has already had a major impact on the industry by changing not only how we process and originate loans, but also how lenders actively engage with borrowers. Regardless of the specific technologies employed, the goal of any modernization must be to make the borrower’s experience simpler and more efficient. This has already happened in the document verification process, for example, which has been streamlined to the benefit of both borrower and lender. Research has shown that borrowers (particularly first-time homebuyers) want to work with a mortgage expert who understands their unique financial needs as well as the specifics of any loans they are considering. Despite increasing reliance on technology, however, as a group they still crave face-to-face interaction. It is becoming increasingly clear that technology is not here to replace the human-to-human connection between lenders and borrowers – it’s here to enhance it. While there will continue to be a subset of individuals interested solely in a fully digital mortgage, the majority of the population is looking for the right advice from a loan officer as they make their decisions. Every borrower wants a convenient process to see those decisions to completion and when executed properly, it is this combination that will lead to lasting relationships with borrowers, and of course, referrals. Technology has already changed how loan officers engage and work with borrowers. Lenders need to start actively exploring how technology can be utilized to improve not only the overall borrower experience, but also how it can enhance the borrower-lender relationship. This is particularly true when it comes to providing borrowers with tools that can help improve

A lender’s connections with other businesses can add value to the borrowers they serve, particularly as they look to receive a range of insight and advice into an effort as complex as their mortgage. their search for the right home, not just the right mortgage. Market opportunity is going to increasingly exist at the intersection of relationship and convenience, and it is important that lenders not be distracted from that goal. PRIORITIZING PARTNER RELATIONSHIPS Finally, a major part of lender operations will likely be focused on building stronger partner relationships with local businesses, the real estate community and other industry partners. This will, of course, require some effort on the lender’s part in order to see a significant impact, but reaching out to related and local businesses can allow a lender to expand their network and identify new leads. After all, the employees of local businesses are oftentimes the lend-

er’s customers themselves. Whether it’s hosting monthly or quarterly workshops or a flyer on a bulletin board, such efforts can pay dividends down the road as closer community ties and a more public profile allow lenders to engage with a diverse range of borrowers. Likewise, lenders next year will also want to expand their relationships with financial advisers, consultants and, of course, real estate professionals. This means fostering a true relationship in every sense of the word as the two organizations work together to not only share leads, but also give back to the communities they serve. These relationships with other participants in the lending process can also bring the benefit of enhancing the borrower experience. A lender’s connections with other businesses can add value to

the borrowers they serve, particularly as they look to receive a range of insight and advice into an effort as complex as their mortgage. And, as we have seen, lenders who want to survive — and thrive — in the current and coming market must focus on providing more value to their borrowers. While some of the trends anticipated for the coming year do not point to increasing loan volume for most lenders, there are changes lenders can make in their operations now that will protect their businesses. There are also many opportunities for lenders to increase their service levels and meet future borrower expectations. By identifying multiple areas, such as the ones discussed, where lenders can make marginal enhancements, they can better combat margin compression and see growth overall.

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C O M PA N Y S P O T L I G H T:

SERVICELINK | SPONSORED CONTENT

EXOS Technologies lets you connect with borrowers from origination through servicing ServiceLink’s end-to-end consumer digital platform enables a lasting relationship with borrowers

019 is going to be a pivotal year for mortgage companies. Those who want to stay competitive in a low-volume environment need tech solutions that not only make them more efficient, but allow them to build customer relationships based on outstanding consumer experiences. EXOS Technologies, a ServiceLink company, provides an agile end-to-end consumer digital platform that lenders can use at any point in the digital process, enhancing every critical consumer touchpoint from origination all the way through servicing. “The industry is focused on POS, but that’s a one-time loan app, and often the digital journey ends right there,” said Kiran Vattem, chief digital and technology officer at ServiceLink. “What we provide is a true end-to-end digital journey. The challenge is to help our clients think through all the downstream workflows, and how to digitize them while they are solving the front-end loan app — and that is where EXOS fits in precisely. It addresses their need to have that complete digital journey.” Leveraging REST APIs and micro-service architecture, EXOS Technologies brings what were traditionally offline processes, such as title, appraisal, closing and servicing-related functions, into the digital realm. Powered by artificial intelligence and machine learning, the EXOS platform is constantly evolving to drive better decisioning and fulfillment. “EXOS is not just one product to meet a specific need, it’s an end-to-end consum40 HOUSINGWIRE ❱ FEBRUARY 2019

er digital platform that lenders can plug into their consumer digital strategy — either as a whole or in parts,” Vattem said. “EXOS provides a digital touchpoint for loan officers, real estate agents, appraisers, signing agents and consumers from the origination process through servicing of the loan.”

EXOS APPRAISAL EXOS Appraisal, for example, transforms one of the most frustrating parts of the loan process — getting a timely, accurate appraisal — into a transparent interaction for the consumer, lender and real estate agent. EXOS Appraisal is the first solution to offer an instant calendar feature, which synchs with the schedules of the most qualified appraisers in a given area. Borrowers can now easily set an exact date and time that works for them through mobile apps, voice assistants and wearable technology, such as a smartwatch. “Our cloud-based architecture allows us to expand channels very quickly because it separates our user engagement layer from our platform — it’s plug and play. Our focus is on enabling the consumer to choose the engagement layer that they prefer. We keep adding new user engagement layers as they become more popular,” Vattem said. EXOS provides the kind of seamless experience homeowners now expect, sending the appraiser’s name, photo and contact information, as well as the make and model of their car, as soon as the appointment is made.

Kiran Vattem Chief Digital and Technology Officer Kiran Vattem Chief Digital and Technology Officer

The app makes it just as easy for appraisers, who can download the EXOS mobile office management suite at no charge and immediately start sharing their calendars. This maximizes appraisers’ productivity and reduces delivery times by as much as 40%.

C O M PA N Y S P O T L I G H T:

EXOS CLOSING The robust EXOS technology platform also supports the EXOS Closing solution, extending consumer engagement into one of the most critical parts of the loan process. Homeowners often feel a lot of stress as closing approaches, and EXOS smooths the way with real-time appointment scheduling that also sends homeowners their closing agent’s personal profile and signing updates. Lenders can choose EXOS Closing as their national signing solution — presenting the signing service as a separate and distinct fee — or utilize their existing digital platforms and private label the solution for consistent branding. Lenders can reinforce the positive closing experience when it’s still fresh in the mind of consumers with a convenient, customizable survey served through the app. Survey results provide lenders with another consumer touchpoint as well as valuable insight on the consumer’s overall satisfaction. “The goal of our EXOS product is to reengineer all of the traditional consumer touchpoints in the loan life cycle to drive soaring consumer satisfaction and to build brand loyalty for our customers,” Vattem said.

EXOS SERVICING While many efforts to digitize the mortgage process have concentrated on the beginning stage of origination, very few have continued that effort into servicing — missing the opportunity for lenders who portfolio their loans and for investors/ servicers meeting homeowners for the first time. For lenders, EXOS makes it easy to transition their homeowners from a transparent, fulfilling home-loan experience into an equally positive servicing relationship. Utilizing the same technolo-

SERVICELINK | SPONSORED CONTENT

gy that was so helpful with their appraisal and closing, homeowners can manage their account in a familiar, friendly format. For servicers just beginning their relationship with homeowners, EXOS Servicing delivers an ideal first impression, and gives them immediate access to self-serve options. EXOS SERVICING GIVES HOMEOWNERS REAL-TIME, 24/7 MOBILE ACCESS SO THEY CAN:

• See account status • Check payment due dates • Make a new payment • See pending payments • View monthly statements • View escrow details The ability to easily see and control their account not only increases customer satisfaction, but has a bottom-line impact for servicers by reducing call center and email volumes.

ServiceLink designed EXOS Servicing in partnership with its LoanCare division, a top subservicer that serves over 1 million customers, and uses the software itself. ServiceLink’s deep expertise has been baked into the design and continues to inform its evolution. “Any product we roll out to the market has already been vetted by our business and is of industrial strength,” Vattem said. “The EXOS engagement layers were built based on significant feedback from innovation council meetings and the product went through multiple iterations of user testing.” EXOS Ser v icing maintains the personal connection with homeowners throughout the life of their loan, communicating with them through their favorite devices with customized alerts for push notifications, emails and text messages.

THE BOTTOM LINE EXOS Technologies — whether leveraged for appraisal, closing or servicing — solves the inefficiencies that exist in the mortgage process through one agile and scalable digital platform. In the midst of a very challenging mortgage landscape, lenders and servicers can forge real relationships with their customers and extend that over the life of their loan — serving as trusted advisors ready to help with any future financial needs. HOUSINGWIRE ❱ FEBRUARY 2019 41

2019 Loan

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. Servicers are tasked with finding ways to implement automation and innovation at a time when maximizing ef-

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Servicing

ficiencies is more important than ever. The six companies profiled in this section are leveraging technology to drive operational efficiencies, achieve cost savings and increase structural improvements for the dynamic mortgage servicing market.

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Sponsored Content

Loan Servicing Solutions: Altisource

A MISSION Altisource is an integrated service provider and marketplace for the real estate and mortgage industries. Combining operational excellence with a suite of innovative products and scalable technology, we help solve the demands of the ever-changing markets we serve. Altisource altisource.com

s the size and composition of distressed portfolios change, maintaining compliant processes and systems, as well as a trained staff of experts, creates an increasingly difficult challenge for servicers. Instead, mortgage servicers are turning to a partner with the technology and experience to tailor client-specific strategies and engagements for ongoing success. Altisource, an industry-leading integrated service provider, delivers customized solutions powered by scale and offers REO support, short-sale asset management, Claims Without Conveyance of Title (CWCOT) auction services, plus a bundle offering to help manage FHA assets.

• • • • • • • •

Altisource’s suite of servicer solutions includes: CWCOT Second Chance Auction and Foreclosure Auction Services Field Services and Renovation Hubzu Online Real Estate Marketing Platform Premium Title and Settlement Services REALHome Services and Solutions, Inc. Brokerage REO and Short Sale Asset Management Springhouse Valuations Equator Default Servicing Platform

“Our ability to leverage multiple service offerings enables us to customize a tailored solution for any size client,” said Patrick McClain, senior vice president, commercial leader for Equator and Hubzu at Altisource. “We have the ability to manage engagements of any size from component services to a full end-to-end asset management solution with resources committed to each of our clients.” The company is focusing on lowering the barriers to entry for clients and customers while also improving workflows and its clients’ ability to manage those configurations. In 2019, Altisource will continue to invest in mobile platforms, more features for buyers on the Hubzu platform and compliance related projects. Altisource is expanding access to its suite of services and creating solutions tailored to the needs of mid-size servicers and other institutional holders of real estate including REITS, single family rental management companies and large real estate brokerages. “Our ability to provide targeted, component services personalized to fit specific needs for a variety of clients helps put us and our clients one step ahead while driving results,” McClain said.

Executives: John Vella Chief Revenue Officer John Vella ser ves as chief revenue officer at Altisource. Vella began his financial career with the FDIC and Freddie Mac, later serving as chief sales officer for H&R Block’s mortgage company, as well as CEO of Household International’s Automotive Business and president and CEO of Bear Stearns’ EMC Mortgage Company.

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Marcello Mastioni Chief Operating Officer Marcello Mastioni is responsible for driving growth at Altisource by focusing on product experience and strategy across Altisource’s marketplaces. Mastioni joined Altisource from HomeAway where he led the company’s operations throughout Europe, the Middle East and Africa as vice president and managing director of EMEA.

Patrick McClain SVP Commercial Leader, Equator and Hubzu Patrick McClain is responsible for driving the growth of Equator and Hubzu, a leading online real estate marketing platform. McClain oversees product innovation for the company’s Online Auction, Live Auction, Short Sale, Claims Without Conveyance of Title and National Brokerage Services businesses, along with Hubzu’s client management program and business development strategy.

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Loan Servicing Solutions: FICS

ost mortgage lenders are looking for ways to automate their mortgage servicing operations in order to cut costs, maintain profitability and effectively manage their compliance and reporting to the various agencies. FICS provides clients with the necessary software to accomplish these goals while simultaneously improving the borrower experience. FICS provides residential and commercial mortgage servicing software with Mortgage Servicer and Commercial Servicer, for lenders, banks, credit unions, housing agencies and niche lenders. Both software systems support agency investor reporting, including Fannie Mae, Freddie Mac and Ginnie Mae, as well as other industry standard and private reporting methods. “When you automate mortgage servicing operations with Mortgage Servicer or Commercial Servicer, you will save money through a low initial investment, nominal monthly support and maintenance fee, paperless servicing, real-time processing and enhanced productivity,” said Susan Graham, president and COO at FICS. Both software systems are able to meet the specific needs of both small and large companies and automate the following servicing operations: • Payment processing • Escrow administration • Investor reporting • Custodial accounting • Imaging • Report writing • Workflow The consumer-facing web applications for Mortgage Servicer and Commercial Servicer give borrowers and investors complete online access to loan information and documents, thereby reducing the time staff spends answering the phone. “For more than three decades, FICS has delivered exceptional automation, performance, system support and value,” Graham said. “We provide the most cost-effective, efficient, flexible software solutions on the market today.” The company recently completed a multi-year rewrite of all FICS servicing and origination software systems to a Microsoft .NET platform and a new user interface — representing the third generation of FICS systems. “We have always asked our customers to vote on what they feel is most important regarding system enhancements,” Graham said. “Our priority is to implement these enhancements as well as develop other functionality to allow our customers to easily adapt to new or changing regulations and take advantage of modern technology that benefits both the servicer and consumer.” The company plans to continue the development of its consumer-facing web applications and loan officer portal to Microsoft ASP.NET in 2019, a change that will provide a more modern interface and facilitate more functionality for clients and their borrowers. “As the mortgage industry evolves and more Millennials enter the workplace, we look forward to providing FICS’ expertise, leading-edge system technology and unparalleled system support to help this new generation of servicing customers succeed in the ever-challenging mortgage business,” Graham said.

MISSION To provide reliable, efficient, economical and accurate loan processing and servicing software to the mortgage industry. Our customers deserve, and will receive, the finest service, training and support ever offered by any software organization. FICS 14285 Midway Rd., Suite 200 Addison, TX 75001 fics.com

Executives: Susan Graham President and COO As president and COO of FICS, Susan Graham is responsible for the overall management of the company’s day-to-day operations, strategic planning, customer relations and product development. Graham successfully managed the rewrite of FICS’ main software solutions to Microsoft’s .NET Framework and Windows Presentation Foundation user interface.

Aaron Lynch Senior Vice President and CTO Aaron Lynch serves as senior vice president and CTO of FICS, where he is responsible for technical research and strategic analysis. Lynch has spearheaded the successful development and implementation of numerous FICS software solutions, including the architecture and design of the third generation of FICS’ software.

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Sponsored Content

Loan Servicing Solutions: LERETA

T MISSION LERETA’s mission has been and continues to be extraordinary customer service, accuracy, responsiveness and advanced technology. That mission, combined with our commitment to changing the tax service business through innovation, is what differentiates LERETA, making it the industry’s premier tax service provider. LERETA, LLC 1123 Park View Drive Covina, CA 91724 lereta.com

he tax service industry is a notoriously complicated business, resulting in very few national tax providers in the industry. As servicers further develop a digital strategy, they need partners who will remain at the forefront of their innovation initiatives. LERETA, a national tax service provider, is committed to helping the industry evolve through innovation, transparency and partnership. With more than 9 million tax loans and over 14 million flood loans under service, LERETA is an industry leader committed to customer service and cost-effective property tax and flood solutions. “We are making significant investments in our technology and infrastructure that will enable us to continue to react to the evolving demands of the digital mortgage landscape,” said John Walsh, CEO at LERETA. “We listen intently and then thoughtfully contemplate new solutions to make tax servicing easier on our customers.” Over the last several years, LERETA has introduced a number of solutions designed to increase efficiencies, reduce penalties and liabilities and to ultimately make it easier for clients to provide exceptional service to their customers. These solutions include LERETA’s new advanced parceling solution, Tax Status Report (TSR), as well as a new core operating and workflow system, Total Tax Solutions (TTS), that improves the efficiency, transparency and accuracy of tax service for both outsource and standard (reporting) clients. “LERETA’s diverse list of services are designed to meet the needs of all mortgage originators and servicers, large or small,” Walsh said. LERETA has been able to achieve the highest customer service levels in the tax service industry. Over the past 18 months, the company has met 99.7% of all customer Service Level Agreements (SLA). “LERETA is committed to meaningful innovation that helps our customers dazzle their customers,” said Eric Christensen, CSO at LERETA. “One of the best examples of this is seen in the call center activity and results. LERETA clients boast industry-leading first call resolution and the shortest call times.” The company experienced tremendous growth over the course of 2018 and is looking to continue growing into the new year. LERETA will also be announcing more industry innovations over the course of 2019. “We are committed to listening to our customers’ needs and creating meaningful solutions to enhance the old and antiquated tax processes,” Walsh said. “We are and will strive to be the industry’s best tax service provider.”

Executives: John Walsh Eric Christensen Jonathan Willen Executive Vice CEO Chief Strategy Officer President and National Sales Director John Walsh assumed the role of CEO of LERETA in September 2015. Walsh leads the executive leadership team focused on providing the mortgage and insurance industries accuracy, responsiveness and innovative technology. Walsh has more than 20 years of senior management experience in the financial services industry and more than 10 years leading technology firms.

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E r ic C h r i ste n s e n i s chief strategy officer of LERETA, responsible for product development, corporate strategy, marketing and M&A transactions. Christensen has more than 25 years of mortgage industry experience and has spent his career developing knowledge around financial software, predictive modeling and analytics, credit risk technology and decisioning software.

Jonathan Willen is the executive vice president and national sales director of LERETA, responsible for leading all sales efforts for the company. With more than 15 years of experience working with top-tier national mortgage origination and servicing organizations, Willen has built and managed high performing sales teams as well as developed creative go-to-market strategies in consultative strategic sales environments.

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Loan Servicing Solutions : MDK

efault servicers are faced with the challenge of maintaining a national network of attorneys that will meet compliance standards and provide quality legal work on a consistent basis. Manley Deas Kochalski, a provider of default litigation services, provides servicers with a single firm solution across multiple jurisdictions. “We believe in redefining the typical attorney-client experience, by thinking like business professionals and attorneys,” said Ted Manley, Partner at MDK. “That means we carefully consider each individual legal matter entrusted to us, while analyzing trends, opportunities and risks — something we call portfolio management.” MDK provides a full complement of default legal services, including foreclosure prosecution, consumer litigation defense, appellate and major motion practice, mediation, commercial collections, bankruptcy motion practice and bankruptcy adversary litigation. MDK’s innovative business approach and technology-driven processes led to the development of its proprietary technology platform, Casee. Designed to streamline processes, Casee elevates MDK’s technological capabilities and allows the firm’s legal experts to create customized workflows while remaining efficient. Casee recognizes the details of every jurisdiction, allowing the company’s attorneys and business professionals to bring a new level of sophistication and compliance to legal work. Its robust reporting capabilities provide clients with performance data needed to easily make projections, manage timelines and hedge risk. “We believe it’s possible to do great work fast and our case management system, Casee, makes it possible,” Manley said. MDK has utilized this time of lower default volume to optimize their case management technology, quality control processes and compliance — while also prioritizing integration with client systems and its vendor network portal. MDK’s regional focus allows the company to effectively manage client portfolios in a strategic area rather than in one jurisdiction. “Offering regional expertise will remain our priority,” Manley said. “We look forward to expanding our services with our existing clients to include national bankruptcy practice, legal services related to other asset types, and continued growth in our regional footprint.”

MISSION We believe in an innovative approach to the practice of law: that quality legal services can be delivered efficiently, economically and on a large scale. We embrace change by creating and supporting a culture of continuous professional growth. We treat all parties with compassion and respect while thoughtfully striving to improve the legal system. Manley Deas Kochalski LLC PO Box 165028 Columbus, OH 43216 manleydeas.com

Executives: Theodore K. Manley Partner Ted Manley is a founder and principal of MDK and its related companies. Manley’s legal background includes corporate structural and transactional work as well as representing creditors in bankruptcy and related state court proceedings. His bankruptcy experience ranges from routine matters involving servicers of credit card, automobile and mortgage assets to more complex Chapter 11 workout and liquidation matters. Manley leads MDK’s Strategic Planning, Relationship Management and Business Development groups.

rian T. Deas B Partner Brian Deas is a founder and principal of MDK and its related companies. Deas began his legal career with a oneyear judicial clerkship with Justice J. Craig Wright of the Supreme Court of Ohio and a two-year judicial clerkship with the Honorable John D. Holschuh of the United States District Court, Southern District of Ohio. After his judicial clerkships, Deas was an associate for five years with a large, national law firm, practicing in the areas of securities and business law. Deas serves as MDK’s General Counsel and also focuses on the firm’s technology initiatives.

Mark A. Beeson Chief Operating Officer Mark Beeson has been the chief operating officer at MDK since 2011. He has more than 25 years of experience leading and managing companies. Prior to joining MDK, he owned a consulting firm that specialized in assisting growing companies with strategy, operations and acquisitions. Prior to founding his firm, Beeson was CEO of a $100 billion asset management firm, CFO of a multibillion-dollar financial services firm and a partner at a “big four” accounting firm. Beeson obtained a Bachelor of Arts in Accounting from the University of Cincinnati and a certified public accountant certificate from the State of Ohio.

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Sponsored Content

Loan Servicing Solutions: Proctor Financial

MISSION “To be the market leader,

unique in service, unwavering in integrity and dedicated to excellence. Through a commitment to establishing partnerships with its clients, suppliers and employees, Proctor delivers sustained superior performance, providing the highest value attainable in its industry.” Proctor Financial, Inc. 5225 Crooks Rd. Troy, Michigan pfic.com

ortgage servicers are looking for more ways to automate and innovate processes in order to lower costs, increase efficiencies and revamp the life of a loan. Proctor Financial provides mortgage servicers a host of solutions for insurance tracking operations with a unique blend of automation and human intervention to ensure timely and accurate insurance policy tracking. Proctor’s risk-management programs protect commercial, residential, mobile home, condominium and REO properties. These programs include: • Mortgage Guard: Lender-placed hazard and optional premises liability • Bridge60: Lender-placed flood • REO Guard: Real Estate Owned hazard and optional premises liability • Portfolio Guard: Blanket hazard • EquiShield: Blanket home equity • KwikRisk: Hard-to-place property program • Mortgage Impairment: Errors and omissions • Excess Flood • Investor/ REO Rental Program: Property and liability coverage “These services, coupled with Proctor’s proprietary tracking system, Intelligent Insurance Manager (IIM), relieve clients’ administrative burden for a compliant, streamlined insurance management program,” Mike Cox, CEO of Proctor, said. IIM was created to prevent borrower harm. Servicers utilizing IIM will benefit from a system capable of identifying insurance exposures and intelligently correcting them with compliant lender-placed practices. With one click, clients can perform independent vendor management tasks to ensure their outsourced insurance tracking program is performing properly. This accessibility is vital when a servicer is audited. Proctor’s process includes a rules-based tasking workflow for policy procurement, document/ mail processing and disbursement processing. “This gives our teammates optics on those particular conditions, which require special attention and assists our teams in ordering work with intelligent prioritization,” Cox said. Compliance, technology, IT security and borrower experience remain top concerns for servicers. Proctor is able to maintain clients’ compliance through each of its programs along with its robust infrastructure to ensure system uptime and enable nimble change management. Proctor will continue to invest in technology in 2019, focusing on advancing the client and borrower experience through new products and services. “Our Client Technology team is currently building a robust borrower communication portal to manage and track loan information and activities, redesigning Proctor’s lender-placed insourcing administrative program and strengthening the automation process,” Cox said. “In addition, we are introducing an HOA lien tracking service.” Proctor continues to create and implement enhancements that facilitate lender-placed insurance administration for mortgage lenders. “Tracking insurance can be a costly administrative burden for mortgage servicers,” Cox said. “When servicers outsource their insurance tracking operation to Proctor, they elect a compliant program that delivers a borrower-focused, benefits-driven insurance and risk management solution.”

Executives: Mike Cox CEO Mike Cox joined Proctor in 1985, ascending to the role of Senior Vice President of Lender Services in 2006. Over the years, Mike has provided leadership in underwriting, insurance programs and exposure management and will continue to lead Proctor forward with his 33 years of experience and expertise in the industry.

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Mohamed Elewa President & COO Mohamed Elewa joined Proctor in 2001, acting in various financial roles, including CFO. In his prior role as executive vice president, Elewa increased operational efficiencies, improved accuracy and quality in processing, and invested heavily in technology.

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Loan Servicing Solutions: Safeguard

s the largest provider of mortgage default field services, Safeguard Properties leads the industry by delivering a full spectrum of services on vacant, defaulted and foreclosed properties across the country. As an industry leader, Safeguard’s commitment to technology has pushed the field services industry forward. “Safeguard is more than a property preservation company — we protect the communities where you work and call home,” said Alan Jaffa, CEO at Safeguard. Safeguard continues to enhance its SafeView Field Services Platform with advanced video and audio capabilities and a next-generation multimedia mobile application, utilized by Safeguard contractors out in the field. “We have added these capabilities to our suite of systems and included mobile offerings that remain at the forefront of the mortgage field services industry over the past couple of years,” Jaffa said. “The addition of video, audio and panoramic will provide servicers with valuable information necessary to assess property damage and validate bids.” Designed to meet the ever-changing needs of the mortgage servicing industry, the platform improves the timeliness and quality of all Safeguard services. SafeView provides order processing, routing, invoicing and reporting services to ensure quality results to clients through a dynamic rules-based engine. The platform delivers end-to-end automated order management, mobile data collection, workflow, billing and analytics through its integrated software within five modules: • SafeView Connect: Serves as the integration gateway, allowing configurable work orders, results and invoicing data exchange to connect vendors, clients and other partners. • SafeView Inspect: An integrated mobile inspection app and administrative portal designed to provide full-service field support to the company’s inspectors. • SafeView Preserve: An integrated mobile property maintenance app and administrative portal utilized by contractors to receive, assign and complete work orders. • SafeView Access: Designed for clients to manage their portfolio by providing the property-level details including the status of work orders, bids and the results of work done. • SafeView Analytics: Provides customizable current, historical and location-based data analytics and reporting of field services operations throughout the property life cycle. Safeguard has optimized technology through mobile location, business intelligence and tracking to help identify location accuracy, quality-check data and ensure the right work is being done to support compliance requirements. The company is also the first to begin utilizing multimedia capabilities within its app. “Advancements in video and enhancing our SafeView Field Services Platforms will continue to be our focus in 2019,” Jaffa said. For the past 14 years, Safeguard has hosted the annual National Property Preservation Conference, bringing together industry leaders to discuss current issues in the industry and to develop solutions. “Since our founding, Safeguard has developed and maintained a reputation as an industry leader to advance best practices through innovation, raise the profile of the industry and open lines of communication between the servicing industry and government officials across the country,” Jaffa said.

MISSION 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 all cycles of the housing market. Safeguard Properties Management LLC 7887 Safeguard Circle Valley View, OH 44125 safeguardproperties.com

Executives: Alan Jaffa CEO A lan Jaffa joined Safeguard in 1995 and was named CEO in 2010, steering the company to become the mortgage field services industry leader. He also serves on the board of advisors for SCG Partners.

ichael Greenbaum M COO M ichael Gre enbau m joined the company in 2010 as vice president of REO and was promoted to COO in 2015. Under his leadership, all operational departments have reviewed, updated and enhanced their business processes.

Linda Erkkila General Counsel and Executive Vice President Linda Erkkila oversees responsibilities for the legal, human resources, training, compliance and audit departments at Safeguard. She was named an HW Women of Influence in 2017.

HOUSINGWIRE ❱ FEBRUARY 2019 49

A TRIBUTE TO FORMER PRESIDENT

George H.W. Bush

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leadership skills even at that young age. On his 18th birthday, Bush enlisted with the armed forces, becoming the youngest pilot in the Navy. When he received his wings - a badge awarded to personnel who serve as aircrew members on military aircraft - Bush flew 58 combat missions during World War II. At one point, he was even shot down by Japanese anti-aircraft fire and was rescued from the water by a U.S. submarine. He was awarded the Distinguished Flying Cross for bravery in action, and would later become the last WWII veteran to serve as president of the United States.

George Herbert Walker Bush served as the 41st president of the U.S. from 1989 to 1993. After years of service to his country, the former president passed away at the age of 94 on November 30, 2018. Bush had vascular parkinsonism, a condition caused by one or more small strokes, and was often seen in a wheelchair during his later years. He was laid to rest in Houston at the Presidential Library and Museum in College Station, Texas. Memorial services were held for him in both his home state of Texas and Washington, D.C., and December 5, 2018, was held as a national day of mourning in his honor.

After returning home, Bush left public service return to school and raise a family. During this time, he worked in the West Texas oil industry. But soon, Bush became interested in politics, thrusting himself into public service once more. Bush served two terms as a U.S. Representative from Texas. He ran for Senate twice without success. He was then appointed to a series of high-level positions, including ambassador to the United Nations, chairman of the Republican National Committee, chief of the U. S. Liaison Office in the People’s Republic of China, and director of the Central Intelligence Agency.

Bush served one four-year term as president, but his service to our country began long before that, and even before his two terms as vice president.

In 1981, Bush was elected vice president when he ran with Ronald Reagan. In 1988, he won the presidency and served one term from 1989 to 1993.

Bush was born in Milton, Massachusetts, on June 12, 1924, and later became a student leader at Philips Academy in Andover, showing his

Bush was an advocate for affordable housing, creating an advisory commission under the U.S. Department of Housing and Urban

Development to reduce regulations that added to the cost of housing. He also worked on privatization proposals for the public housing sector. He also created a $5,000 tax credit for firsttime home buyers; called for penalty-free withdrawals from IRAs for the purchase of a first home; urged changes in the passive loss tax rules to spur real estate and housing development; and called for an extension of mortgage revenue bonds and the low-income housing tax credit. Now, the housing industry mourns his passing. “On behalf of all the members of NAHB, I wish to extend my deepest condolences to the Bush family,” said Randy Noel, chairman of the National Association of Home Builders. “President Bush was an American war hero, a great statesman and an American patriot who embodied the ideals of our nation.” “He was also a true believer in housing,” Noel continued. “President Bush hosted the NAHB board of directors on the South Lawn of the White House to commemorate the association’s 50th anniversary. He said that ‘strong housing can help a strong economy’ and ‘the dream of homeownership keeps the American dream alive.’” “President Bush summed up the importance of a strong housing industry to America when he said, ‘The old adage is coming true: As housing goes, so goes the economy. Owning a home helps America, makes it better, and more caring,’” Noel added. “The nation’s home builders salute his legacy of a lifetime of service to America.”

HOUSINGWIRE ❱ FEBRUARY 2019 51

RentWire

52 HOUSINGWIRE ❱ FEBRUARY 2019

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RentWire

Here’s what will happen in multifamily this year BY ALL ACCOUNTS, 2018 WAS A VERY SOLID YEAR FOR MULTIFAMILY REAL ESTATE BY BEN LANE RENTS continued to climb for the majority of the year, tapering off a little as the weather turned colder, but hardly to a concerning level. Additionally, commercial and multifamily mortgage originations hit record highs, but despite outstanding commercial and multifamily mortgage debt being higher than ever, delinquency rates on those mortgages stayed near historic lows. Add all that up and you have a very solid mix for multifamily. But will the good times keep rolling this year? Experts certainly think so. In fact, most experts view 2019 as a year where multifamily could even take another step forward as rising mortgage rates are expected over the course of the year, which may keep many people renting for the considerable future. According to Zillow, the 30-year mortgage will only continue to rise throughout 2019. Zillow is now forecasting that the 30-year mortgage will finish up 2019 around 5.8%. And that’s good news for landlords, who will see increased demand for rentals as some people are priced out of home buying by higher interest rates. Zillow is predicting rent growth will pick back up in 2019 thanks to continually rising interest rates.

“The higher rates will limit what people can afford to pay, and those who are financially stretched but considering buying a home may decide to continue renting,” Zillow wrote in its 2019 forecast. “The recent downturn in rent appreciation will reverse course due to the additional demand on the rental market.” Beyond mortgage rates rising to the highest level since the recession, Zillow is predicting that home prices will continue to grow, albeit at a slower pace than in years past. Combine all of that and you have an even bigger squeeze on affordability than we have now, and that will likely keep people renting. “The central storylines in the U.S. housing market didn’t change much over the past few years, but a series of emerging trends are setting up a much different narrative for 2019,” Zillow Senior Economist Aaron Terrazas said. “Certain headwinds – including rising mortgage interest rates, higher rents and stiff competition for housing in the most desirable areas – will only grow stronger over the next year, but that won’t necessarily be a bad thing.” The issue for renters faced with higher rents, higher interest rates, and higher home prices is that it makes it even more difficult for them to save for a down payment, which in turn will likely HOUSINGWIRE ❱ FEBRUARY 2019 53

RentWire force them to continue renting for the foreseeable future. “Over the past several years, home price growth has largely outpaced income growth, making for an increasingly unaffordable home-buying environment,” Trulia noted in its 2019 forecast. “And (this year), even as growth in home prices cools, limited supply will continue to help push prices up to some degree,” Trulia continued. “The financial impediments of homeownership are acutely felt among renters who wish to buy: 53% say that saving enough for a down payment is the number one obstacle to homeownership, while 36% cite rising home prices.” Another issue, as stated before, are rising interest rates, which are projected to continue climbing in 2019. According to Trulia, rates will rise throughout the year, eventually reaching 10-year highs. And that’s going to hurt renters who want to become homebuyers. “Mortgage rates on 30-year, fixed rate loans have been less than 5% since the end of the recession, helping to buoy housing demand and keep monthly payments relatively cheap even as prices themselves rose,” Trulia said in its report. “But those record-low rates will come to an end in 2019. Rising mortgage rates will take a bite out of affordability on top of an already supply-constrained and high-priced housing market.” And that will certainly be welcome news to landlords, property owners, developers and the like. In fact, rents are forecasted to rise above their record-breaking levels in 2018. A year-end report from HotPads showed that U.S. renters paid a record $504.4 billion in rent in 2018, topping 2017’s total by $12.6 billion. That increase is in spite of the fact that there were fewer rental households in 2018 than in 2017. According to the report, there were approximately 43.2 million renter households in the U.S. in 2018, nearly 100,000 less than there were in 2017. But despite that decrease, renters still paid out a record high total in rent in 2018, more than the entire gross domestic product of Belgium ($494.7 billion), as rents rose throughout the year. According to the HotPads report, the current median rent is $1,475, up 3% from 2017. HotPads data showed that rents rose about 3% yearover-year throughout 2018, continuing a gradual slowdown in rent appreciation that began in mid-2016.

“

Over the past several years, home price growth has largely outpaced income growth, making for an increasingly unaffordable home-buying environment.” - Trulia, 2019 forecast

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RentWire

The total rent actually increased year-over-year in nearly every major market included in HotPads report, with only Pittsburgh, Pennsylvania; Austin, Texas; and Oklahoma City, Oklahoma showing yearly declines in total rent paid out. HotPads Economist Joshua Clark paints a slight rosier picture than his colleagues at Zillow and Trulia do. “After several years of a booming economy, more Millennials became financially able to become home owners in 2018. However, rent affordability continues to be a challenge, as those who still rent are paying even higher prices now than they were a year ago,” Clark said. “If interest rates continue rising in 2019, more would-be homebuyers may decide to continue renting, which could put additional pressure on rent prices,” Clark added. “Fortunately for renters, the housing market is also cooling nationwide, signaling that the entire market may be leveling off and making it easier for renters to keep up with housing expenses.” So, while landlords can expect higher rents coupled with higher demand this year, what about investors? Where should they plan on putting their money in 2019? Research from CBRE suggests that there is one class of multifamily housing that represents a significant opportunity for investors – workforce housing. According to CBRE, workforce housing, rental communities that are affordable for low- to median-income workers, has actually outperformed the overall multifamily market in each of the last four years, thanks to relatively low vacancy rates and above-average rent growth. According to the report, approximately 13.5 million households currently live in workforce housing, most of whom are individuals and families who are “renters by necessity” because they are paying off student debt or perhaps saving to buy a house and do not have the financial means for homeownership or for higher-quality multifamily housing. And in 2019, market conditions are positioning workforce housing for continued return on investment. “Slow wage growth over the past decade contributing to a high number of potential renters, an extreme lack of new supply and limited alternative options means strong and sustained demand for workforce housing apartments is expected to continue in 2019,” CBRE said in its report. According to the report, workforce housing has brought in nearly $375 billion in investment over the last five years, more than 51% of the total for all multifamily asset classes. Brian McAuliffe, CBRE’s president of Institutional Properties, Capital Markets, said that there is still a significant opportunity for investors, if they’re smart. “The balance of the market forces points to continued strength in workforce housing, justifying the strong investment appeal. Investment in this segment is also very good for the housing market by helping to preserve much-needed accommodation for lower income renters,” McAuliffe said. “Value-add investment, in particular, helps to preserve workforce housing inventory directly by improving the physical quality of the asset through renovation.” HOUSINGWIRE ❱ FEBRUARY 2019 55

LendingLife

56 HOUSINGWIRE ❱ FEBRUARY 2019

DID YOU KNOW LendingLife updates twice a week by email? Go to HousingWire.com to sign up and stay informed!

LendingLife

LendingLifers respond to alleged loanDepot CEO criticism LENDERS DIVIDED IN THEIR SUPPORT OF LOANDEPOT BY JACOB GAFFNEY

LOANDEPOT CEO Anthony Hsieh is reportedly fed up with un- Article was humorous happy loan officers at the top mortgage lender, according to an I am a former loanDepot employee. I have no axe to grind. Rather, internal email he allegedly sent to his sales staff in December. I am grateful that they gave me a new career. I survived 18 months, If the email is to be believed, a copy of which was provided to gained tremendous experience and was actually awarded the, HousingWire to share with the LendingLife community, Hsieh is “ALL IN” award one month. displeased with the morale of some staffers as loanDepot transiI have always wondered why some employers sponsor an anontions into a modern mortgage lender. ymous survey of their employees and then complain about the In the email,Hsieh allegedly told his loan officers, “Stop acting results of the survey. So I found Jacob Gaffney’s article about loanentitled and understand this industry has ups and downs, but all Depot this morning humorous. will average out great.” A couple of years ago, the CEO of loanDepot penned an article His email is reportedly a reaction to the results of an internal on LinkedIn grousing about job hoppers in our industry. What survey among 200 loanDepot staffers, where nearly half of the was funny is that his boiler room is (along with Quicken’s) an questioned staffers reported a less-than-positive experience industry leader in loan officer churn. I’m surprised that an inworking at the firm. dustry publication like yours has not taken the time to report on/ After HousingWire covered the email, we received a flood of investigate this industry phenomena. The data should be readily letters-to-the-editor both in support and opposition to loanDepot. available in the NMLS. My guess is that loanDepot has a 200% Here are the best of the batch, and we will go from bad to better… churn annually or greater. HOUSINGWIRE ❱ FEBRUARY 2019 57

LendingLife

This bullet list… LoanDepot will be gone 1. They steal brokers’ clients 2. Non QM will rule the market 3. Amazon lending will crush them 4. Their MLOs get paid nothing 5. The CEO has no clue or future

Why do you need to spend thousands of dollars on an employee survey when it only takes a few seconds to see how many LOs have come and gone in the most recent month or year? All of us (LOs) are looking for a stable environment that will allow us to make a good living. I think I have finally found that. And while my current employer has burned through its share of LOs, there are many here with multiple years of tenure. I wished the industry published numbers around this issue. 58 HOUSINGWIRE ❱ FEBRUARY 2019

LendingLife

Anthony is a dictator? I worked there for just under two years back in 2014. Anthony is a dictator, he is highly intelligent don’t get me wrong and he saw some of what we are dealing with now back in 2014. However, his flaw will be that he doesn’t believe in the retail model, he believes he can survive any market on pure refinance business. What is funny is that he now has started to purchase retail shops and has expanded loanDepot’s retail presence. Guess that refi only model wasn’t working out so well. It’s a slave ship, and at the time I joined it was the better alternative to Quicken Loans. Better life balance, better pay, better leads. Now it is the opposite. I would say 70% of the original loan officers that opened to Scottsdale site have since left due to the changes in comp, lower quality leads and poor work environment. It’s a great place to get training and start your career but long term it’s no way to live. Anthony always has a star boy also. Recently Chad Smith left for Caliber, many LO’s said in their exit interview they were leaving due to Chad’s leadership, and it took Anthony about two years to actually listen and fire him. Same thing happened with Mike Berte. He always picks someone that’s his favorite and then when he is done, he disposes of them. He is super arrogant. Those are my thoughts, hope that helps!

The grass is not always greener I think some people won’t be happy anywhere they go. The grass is not always greener either. The market is changing, price compression is real and loanDepot has been doing everything possible to position us to win. I know a lot of people who have lost their jobs with different companies and am thankful we are as strong as we are. While his message may be harsh and not as Ra! Ra! as everyone would like it’s important to remember that a bad apple can spoil the bunch. Also, this was not a press release, this was straight talk to a group of managers. I am thankful every day for what my company does for my family and me. I believe in our leadership team and will keep being proud to say I work at loanDepot.

Spot on I read your article titled loanDepot CEO tells his “unhappy” LOs: Stop acting entitled. I have to tell you that your article is pretty “spot on.” I currently work for loanDepot and if the internal survey referenced in the article went to more employees, I believe the numbers would be worse when it came to the “less-than-positive” experience. Morale at our company is pretty low. Many of us have watched friends walk out the door. The division I work for in Scottsdale used to be called imortgage. The owners of that company went out of their way to make the employees feel wanted, special and unique. Under this leadership, you are not thought of the same way. The perks imortgage had have gone by the wayside. During a meeting a couple of years ago, one of the vice presidents was talking to us about some changes (before this round of layoffs). The attitude during the meeting was, “You are either on the bus, or you get off.” During the round of layoffs in May, the same vice president said that “if we were not comfortable with this, you can move on.” Some people on my team who have been with the company for two years have not had a raise. I have not had a raise since March 2015. My position has gone from one where what I did made a difference to the mortgage industry version of flipping burgers. So, yes....morale is low. No one feels as though they are wanted or special. The joy has been sucked out of all us and for those of us who were around when it was imortgage, it has just turned into another job. Just so you know, I do not work in any production or sales position. I am sending this to you to let you know that though I am not privy to the email you talk about, that morale at the company is low. The fact that Anthony is not liking what he is seeing should be no surprise because his actions have created the situation. HOUSINGWIRE ❱ FEBRUARY 2019 59

ReverseReview

60 HOUSINGWIRE ❱ FEBRUARY 2019

DID YOU KNOW ReverseReview updates twice a week by email? Go to HousingWire.com to sign up and stay informed!

ReverseReview

FHA report reveals reverse mortgage issues WHILE PAST PROGRAM REVISIONS APPEAR TO BE HELPING, MORE CHANGE LIKELY TO COME BY JESSICA GUERIN

THE FEDERAL HOUSING ADMINISTRATION released its 2018 “WE EXPECT TO SEE ADDITIONAL IMPROVMENTS” Report to Congress in November, which revealed that the reverse FHA Commissioner Brian Montgomery said the HECM program mortgage program continues to be a drain on its flagship Mutual is still experiencing the impact of policy changes made last year, Mortgage Insurance Fund. and that the agency is optimistic it will continue to improve over The actuarial report showed the fund to be in good health with time. a positive economic net worth $34.86 billion, up $8 billion from “Revisions to the HECM principal limit factor that we implelast year. mented in October 2017 have shown some progress in improving But the HECM picture wasn’t quite as rosy. the financial performance of the 2018 HECM book of business, The report revealed that the reverse mortgage program had and we expect that we will see additional improvements with our a negative capital ratio of 18.83% and a negative economic net 2019 book of business,” Montgomery said. worth of $13.63 billion in the last fiscal year. “We fully recognize the burden we’ve placed on the industry The portfolio’s total capital resources were $2.11 billion, which and our network of housing counselors,” he added. “Every year the FHA said was offset by a negative $15.75 billion in cash flow we more or less rewrite the script. So one of our guiding principles net present value. this year was we want to protect the PLF, we want to stave off any However, despite this drain, the agency said it will not be issu- additional premium increases.” ing further reverse mortgage program changes just yet. Unlike last year, it will keep the current principal limit factors and mort- MORE CHANGES TO COME gage insurance premiums intact. While current PLFs will stick, Montgomery alluded to other poThis is a welcome relief to HECM lenders. tential changes down the road, including rules to address some HOUSINGWIRE ❱ FEBRUARY 2019 61

ReverseReview Montgomery also discussed the impact of FHA’s second appraisal rule on select HECM loans. He noted that so far, only 22% of HECMs have required a second look, calling this figure “a little less than we originally estimated.” Department of Housing and Urban Development Secretary Ben Carson said the HECM’s poor performance is among some of the troubling trends highlighted in the report that the agency will be monitoring. “Younger borrowers with forward mortgages continue to subsidize senior borrowers in our HECM program to an unsustainable degree,” Carson said. Carson added the agency has already taken steps to improve problems within the HECM program, including tax and insurance defaults and issues with non-borrowing spouses. “We’re just now, really over the last six months, seeing the positive effects of those things,” he said. “We will see the full effect in the coming years, and there are multiple other things that are being looked at.” Montgomery said that Financial Assessment and other program changes instituted in 2014 appear to be having their intended effects, as the number of tax and insurance defaults on HECM loans has decreased in recent years. “We are committed to maintaining a viable HECM program so that seniors can continue to age in place, but we cannot continue to see future HECM books be subsidized by borrowers using our forward mortgage programs – it’s not beneficial to anyone, including taxpayers,” he said. “The good news is we’ll have the benefit of a full year of impact of the changes from last year, which directionally are positive,” Montgomery said. “So we again remain optimistic that the quality of the book will continue to improve.”

of the program’s back-end servicing issues. “Changes will be made on the back end as well, will be announced through a mortgagee letter,” he said. “So, certainly we still have work to do, but we are continuing to monitor the performance of the book and the impact of those changes over the last 12 to 14 months.” Montgomery also said the agency is looking to address problems with non-borrowing spouses, which he said has attracted the attention of Capitol Hill. “In one of our many hours of triage that we spent looking at our forward and reverse books, the one thing we feel strongly – and we will have announcement on this soon – is we need a proper THE INDUSTRY REACTS inventory of the occupants in those homes for HECMs [originated While the inevitability of future policy changes isn’t exactly welin] 2014 and earlier,” Montgomery said. come news for an industry that can’t seem to catch its breath,

“

We are supportive of FHA’s changes to improve the health of the MMI Fund and recognize that there is more work that needs to be done. RMF and other industry leaders are ready and willing to assist HUD and NRMLA in any way possible. We appreciate FHA’s continued support and commitment to the HECM program.”- David Peskin, president of Reverse Mortgage Funding

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ReverseReview

reverse execs offered a measured response to the FHA’s report. Most said they recognized the need for continued change, and many reaffirmed their commitment to working with the FHA to get the proper rules in place. “We are supportive of FHA’s changes to improve the health of the MMI Fund and recognize that there is more work that needs to be done,” said David Peskin, president of Reverse Mortgage Funding. “RMF and other industry leaders are ready and willing to assist HUD and NRMLA in any way possible. We appreciate FHA’s continued support and commitment to the HECM program.” Kristen Sieffert, president of Finance of America Reverse, said that possibility of future program changes highlights the need for more development of non-agency reverse mortgage products, a charge FAR has been leading with fervor this year. “In an effort to protect the longevity of the HECM program, FHA has been forced to make changes to the product almost annually,” Sieffert said. “While this long-term process is an effort we fully support, we also made a commitment to product innovation in order to provide more options to people choosing to take action to live a better retirement.” Sieffert said the wave of proprietary reverses that have hit the market lately give the industry good reason to be optimistic. “As we look to the future, we believe that product innovation and a continuous elevation of the borrower experience will be critical to breaking down barriers that are keeping people from achieving a fulfilling retirement,” she said. Don Currie, president of HighTechLending, also said non-agency products are a bright spot for the industry. “The reality is the reverse mortgage program is a necessity for many seniors. Although we’ve seen contractions in HECM guidelines, I’m very encouraged by the new proprietary programs being offered by a major lenders like RMF and FAR,” Currie said. “These programs have good legs and I’m already seeing positive results.”

“

As we look to the future, we believe that product innovation and a continuous elevation of the borrower experience will be critical to breaking down barriers that are keeping people from achieving a fulfilling retirement.” -Kristen Sieffert, president of Finance of America Reverse

For its part, the National Reverse Mortgage Lenders Association pointed out that while the drain was “concerning,” it is still better than last year, when the association questioned the FHA’s math. This time, though, the association took a less combative approach, praising the FHA for recognizing that 2017 policy changes need time to take root before the HECM’s books of business could show marked signs of improvement. It also reinforced its commitment to working with the agency to navigate future policy adjustments: “NRMLA will need to remain focused on addressing the issues that continue to affect the HECM impact on the insurance fund and, as an organization, work with HUD to find solutions that eliminate all concerns going forward and protect the availability of reverse mortgages as an essential option for retirement financing.” HOUSINGWIRE ❱ FEBRUARY 2019 63

CFPB Watch

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CFPB Watch

Kathy Kraninger set to make her mark on the CFPB KRANINGER SQUASHES BUREAU’S NAME CHANGE BY BEN LANE AND JESSICA GUERIN

LONG the target of Republican ire, the Consumer Financial Protection Bureau is now run by the Republican president’s handpicked choice. In what amounted to an anticlimactic vote in a nearly empty Senate chamber, the Senate, voting along party lines, approved Kathy Kraninger as the next director of the CFPB. Kraninger replaced Mick Mulvaney, who now serves as Chief of Staff and served as CFPB director on an interim basis since former CFPB Director Richard Cordray stepped down in 2017, just a few months before his term ended, to unsuccessfully run for governor of Ohio. Kraninger, who worked closely with Mulvaney in his other position as the director of the Office of Budget and Management, was nominated last year by President Donald Trump.

KRANINGER MAKES HER MARK Kraninger will serve a five-year term as CFPB director, placing her in a position to dramatically reshape the bureau during that time. And it seems she is already making her mark. In her first official act as the CFPB director, Kraninger told bureau employees that she is suspending any efforts to change the

bureau’s name from the CFPB to the BCFP, or Bureau of Consumer Financial Protection. “As of December 17, 2018, I have officially halted all ongoing efforts to make changes to existing products and materials related to the name correction initiative,” Kraninger said in an email to bureau employees, which was obtained by HousingWire. According to Kraninger, the bureau will use the BCFP name and seal on “statutorily required reports, legal filings and other items specific to the office of the director,” but for all other materials, the bureau will still be the CFPB. Think of it this way, for the nuts and bolts of the government, the bureau will be the BCFP, but for the rest of us, from the finance industry experts to the average consumer, the bureau will still be called the CFPB. “In other words, we have a legal name but will be using our colloquial name and the branded acronym ‘CFPB,’” Kraninger said in her email. “Many of us have legal names but use nicknames without much confusion. My birth certificate says Kathleen, but I also answer to Kathy. I think we can do the same here. I believe this decision is most efficient and effective for our continued work together.” HOUSINGWIRE ❱ FEBRUARY 2019 65

CFPB Watch

“

If...your whole theme is going to be, ‘we’re going to follow the statute,’ I thought it was a good, small way – but a very visible way – to send a message.” - Mick Mulvaney

A “VERY VISIBLE WAY” TO SEND A MESSAGE The move puts a stop to a rebranding campaign first started by Mulvaney. Mulvaney said the name change was an effort to realign the bureau with its statutorily defined name within the Dodd-Frank Wall Street Reform and Consumer Protection Act. The law refers to the bureau as the “Bureau of Consumer Financial Protection,” although that name had not been used at any point in the bureau’s history. Mulvaney issued a new seal, which was reportedly created under Cordray, but Mulvaney revealed it with the adjusted name and erected new signage at the bureau’s headquarters that read “BCFP.” The bureau even asked the Associated Press, the organization that provides news articles to thousands of news outlets all over the world, to change its official style guide to call the bureau the BCFP, not the CFPB. “If...your whole theme is going to be, ‘we’re going to follow the statute,’ I thought it was a good, small way – but a very visible way – to send a message,” he said in an interview. In that same interview, Mulvaney also said the change would cost nothing, but an internal analysis conducted by the agency suggests otherwise.

A $300 MILLION PRICE TAG According to the report, which was obtained by The Hill, finan66 HOUSINGWIRE ❱ FEBRUARY 2019

cial services firms, banks and lenders that are subject to CFPB oversight might be forced to spend millions of dollars updating materials with the new name. The report indicated that banks, mortgage lenders, credit card companies and payday lenders could be required to spend approximately $300 million to update their databases, change regulatory filings and revise disclosure forms to accommodate the new name. The rebrand would also cost the agency between $9 million and $19 million in order to finance updates to internal materials and to its website. This will amount to a hefty bill for the Federal Reserve, which funds the CFPB. The report caught the attention of Sen. Elizabeth Warren, D-Mass., who called for an internal investigation into the name change. In a letter to the Inspector General of the CFPB, Warren wrote that her office is concerned that the name change “imposes un-

CFPB Watch

necessary and significant costs on taxpayers and the business to the rebrand. community, deprives the CFPB of funds it can use to protect con“There are myriad implications to a piecemeal name change, all sumers and violates legal requirements.” of which to me would signal to the press that we’re not making Warren said this expense to the agency would eat into its al- thoughtful and coordinated decisions,” Doyle wrote. “Without ready limited budget, meaning that it would have to cut the funds a coordinated strategy that lets the public and the press know used for its oversight actions by nearly half. what we are changing (or not changing) and when (and knowing “These cuts would severely limit the number of investigations any associated cost of doing so), we risk looking like we haven’t and examinations the CFPB can undertake, the number of com- thought this through.” plaints it can handle, and the number and scope of cases the CFPB Now, all that is moot, as Kraninger has killed the name change. can bring on behalf of consumers,” Warren wrote. Kraninger said that she while she understands while Mulvaney Finally, Warren called out the agency for the “poorly planned” “emphasized following the letter of the law” with regard to the and “incomplete” roll-out, saying the effect is confusing to bureau’s name, after receiving input from bureau staff, members consumers. of Congress and other stakeholders, she decided to put an end to In internal documents obtained by HousingWire, CFPB staff the bureau’s rebranding. discussed the potential repercussions of the uneven rollout. “To be clear, I care much more about what we do than what we In an email to select staff, Office of Management and Budget are called,” Kraninger said in her email. “I look forward to our Chief of Staff Emma Doyle urged for a more coordinated approach continued work together at the CFPB in the years to come.”

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Kudos GIVING BACK • PRIMARY RESIDENTIAL MORTGAGE PARTNERS WITH HABITAT FOR HUMANITY GUATEMALA Primary Residential Mortgage sent 30 of its employees to Guatemala to volunteer for Habitat for Humanity. While there, the volunteers assisted in building “Valle de Las Flores” in Palin, Esquintla, a community built for the survivors of the recent volcanic eruption, Volcano de Fuego, in June last year. The team contributed to the construction of 24 homes and laid the foundation for a new community for the disaster victims. “In spite of unimaginable tragedy, the community members from San Miguel Los Lotes welcomed us with open arms, displaying a spirit of resiliency I’ve rarely seen,” said PRMI President and CEO Dave Zitting. “Working with these incredible families was a life-changing experience for all of our volunteers, and we’re honored that Habitat for Humanity Guatemala invited PRMI to be part of their project in such a meaningful way.”

• JPMORGAN TO INVEST $30 MILLION TO CREATE ECONOMIC OPPORTUNITY IN FRANCE JPMorgan Chase pledged $30 million to be distributed over the course of five years to help underserved residents and local entrepreneurs across Île-de-France, specifically in Seine-Saint-Denis. The philanthropic effort is part of the company’s $500 million, five-year AdvancingCities initiative that invests in

urban areas that have not benefited from economic growth. The company said its plans for France follow the firm’s successful investment model in U.S. cities, like Detroit, Chicago and Washington, D.C. The investment in France will be used to create jobs, fund skills development and aid in small business expansion. JPMorgan has a long history of philanthropy in France

“Since 1868, we have served our clients and local communities in France in good times and the toughest of times,” said JPMorgan Chase Chairman and CEO Jamie Dimon. “We are deepening our commitment to Greater Paris because we know that when communities thrive, business thrives. We are excited to work together with local leaders to focus our investments on helping more people benefit from the area’s economic growth.”

LAUNCHES • VELOCITY MORTGAGE CAPITAL has teamed up with HGTV’s Nicole Curtis to launch WIRE, an initiative to encourage more women to participate in real estate investment. Curtis is a real estate investor and star of the show “Rehab Addict.” She said women are often 68 HOUSINGWIRE ❱ FEBRUARY 2019

too fearful to take risks in real estate. “I’ve made more money in real estate than I have from being a TV star,” she said. “Real estate is a business, and being in business involves risk. My advice to women: ‘Toughen up, buttercup.’ By this I mean, figure it out, find

the right lender, make it happen!” Velocity Mortgage CEO Chris Farrar said there’s a problem in the financial services industry that the company wants to fix. “At Velocity, we believe every borrower deserves the opportunity to invest in real estate – especially women, who often

have higher credit scores and lower default rates,” said Farrar. “We’re offering special incentives for female investors and womenowned businesses that include a free appraisal, discounts on underwriting fees, and a credit on closing costs on their first loan with Velocity.”