May 2020 Issue by HousingWire

HOUSINGWIRE MAGAZINE ❱ MAY 2019

ZILLOW The speculation is over - Zillow is going all-in on mortgage lending.

P.32

SECONDARY SOLUTIONS Solutions from Compass Analytics and Optimal Blue. HOUSINGWIRE MAGAZINE ❱ MAY 2019

P.38

Connect Better. Close Faster. Let our technology improve your relationships, shift your expectations, and deliver a flawless digital experience.

HOUSINGWIRE MAY 2019 EDITORIAL

CONTENT SOLUTIONS

EDITOR-IN-CHIEF Jacob Gaffney

MANAGING EDITOR Sarah Wheeler

EDITORS Ben Lane Jessica Guerin Caroline Basile

CONTENT WRITER Alyssa Stringer

REAL ESTATE EDITOR KK Howley ASSOCIATE EDITOR Kelsey Ramírez

CREATIVE GRAPHIC DESIGN Traci Cortez

REPORTER Alcynna Lloyd CONTRIBUTORS David Schroeder, Dustin Brohm, Leora Ruzin, Rich Swerbinsky

SALES

CORPORATE

NATIONAL SALES DIRECTOR Jennifer Watson Laws jlaws@HousingWire.com

PRESIDENT AND CEO Clayton Collins

CHIEF REVENUE OFFICER 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 AD OPERATIONS GREAT LAKES COORDINATOR Lorena Leggett Matthew Stafford lleggett@HousingWire.com CONTROLLER SALES COORDINATOR Michelle Monroe Emilio Flores

EVER-EXPANDING HOUSINGWIRE UNIVERSE EVER since I moved to HousingWire 10 years ago, we’ve had our share of ups and downs, like any small business. But what we’ve grown to today is a staggering accomplishment. And I’m still surprised by the new highs we continue to reach. Our online readership continues to grow, as does our magazine community. So, that’s why we’re expanding our coverage, for the increasing number of readers in our print and digital communities. Even today, your No. 1 source of premium content for the housing finance industry is expanding news coverage to directly cover the real estate agent community. We recognized that real estate agents face a myriad of challenges in simply earning a living. The emergence of real estate service and search engines as well as the advent of the iBuyer movement both pose major challenges to the ability of these agents to grow their businesses and serve homeowners in their local communities. HousingWire’s coverage will better equip agents to help their clients make more informed home purchase and financing decisions, build stronger referral relationships and build sustainable businesses. “As we recognize where the housing economy is today and the direction it is headed, we believe that alignment of mortgage, real estate and technology professionals has never been more important,” HousingWire President and CEO Clayton Collins said. This is why we’ve brought in veteran journalist KK Howley to help us cover the market. Need more of a reason? Look no further than what’s happening at Zillow – arguably the biggest disruptor to the real estate agent space, at least for now. When Zillow acquired Mortgage Lenders of America last summer, it led to a lot of industry speculation as to what their future aspirations were related to the financing side of real estate transactions (much more in this issue’s feature story). Then, at the beginning of April this year, Zillow announced that it is launching its own mortgage lending operation, which it is calling Zillow Home Loans. Zillow is now facing competition from other iBuyer firms like Opendoor and Offerpad. In short, the disruptor is being disrupted. This is the new normal. And we’re here to make sense of it for you. The markets may change, but our mission will not. With the help of Howley and the rest of the imitable HousingWire staff, we’ll keep Moving Markets Forward.

Jacob Gaffney Editor-in-Chief @jacobgaffney Subscriptions are available for $149 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. Visit www.housingwire.com/subscribe for more information. The information contained within should not be construed as a recommendation for any course of action regarding legal, financial or accounting matters. All written materials are disseminated with the understanding that the publisher is not engaged in rendering legal advice or other professional services. HW Media does not guarantee the accuracy of information provided, and is not liable for any damages, losses or other detriment that may result from the use of these materials.

Tweets From The Streets I have a new idea to tackle our housing crisis and provide relief to families in Nevada and across the country. We need big, structural changes in our country—like building 3.2 million new housing units—and I’m fighting for them.

303

1.1K

4.1K

by @ewarren

HOUSINGWIRE ❱ MAY 2019 5

SHINING THE LIGHT ON

NON-QM L E NDI N G

Millions of potential borrowers are locked out of today’s conventional mortgage market. Deephaven Mortgage is shining the light on Non-QM lending by providing products specifically designed to address the needs of millions of borrowers who are unable to obtain a traditional mortgage. In return, this allows lenders to expand their business by reaching out to a broader group of borrowers. To become a Deephaven partner, and help shine the light on Non-QM for your potential borrowers; contact us today at sales@deephavenmortgage.com or visit www.deephavenmortgage.com Deephaven Mortgage® LLC. All rights reserved. This material is intended solely for the use of licensed mortgage professionals. Distribution to consumers is strictly prohibited. Program and rates are subject to change without notice. Not available in all states. Terms subject to qualification. For more information on Deephaven’s state licensing, visit the NMLS Consumer Access webpage at http://nmlsconsumeraccess.org/. NMLS #958425

MAY ‘19

NON-QM: BUZZWORD OF 2019 Will this be the year that lenders embrace a controversial but necessary option in the mortgage market? By: Leora Ruzin

32 ZILLOW The real estate giant is going all-in on mortgage lending. By: Rich Swerbinsky

SPOTLIGHT: SPOTLIGHT: OPTIMAL BLUE VRM

SECONDARY SOLUTIONS

SPOTLIGHT: INFINITY IPS

The pace of secondary market tech disruption significantly increased in the last year.

Infinity IPS provides high- Optimal Blue automates VRM delivers solutions touch service and the entire secondary that benefit both cliconsultative relationships. marketing process. ents and communities

HOUSINGWIRE ❱ MAY 2019 7

UNLOCK THE SECRETS TO

SUCCESSFUL LIFE OF LOAN SERVICES

Challenge NTC To Be Your Preferred Partner to Support Your Life of Loan Process.

Â®

CONTENTS 15

THE LINEUP

BACK DEPARTMENT

10 PEOPLE MOVERS

48 RENTWIRE

Gateway Mortgage Group brought on Christopher Treece as chief financial officer.

Will rent control be the multifamily industry’s new challenge? 52 LENDINGLIFE

EVENT CALENDAR

The 2019 NRMLA’s Eastern Regional Meeting will unite mortgage industry professionals. 13

ON THE SHELF

Journalist Julie Satow delivers a thrilling history of one of America’s most illustrious hotels. 14 DISPATCH 1

19 VIEWPOINTS

ARIVE boasts strong network of 100-plus wholesalers aiming to bolster broker market share. 16 DISPATCH 2 How fast does your subservicer pick up their phone lines and represent your company?

22 MARKETING

18 SOUNDING BOARD

Five strategies that won’t break the budget for brokers.

Overheard at a hearing before the House Financial Services Committee.

24 LEADS

19 TAKE 5

These 12 scripts will get a lead’s attention.

Five things you never knew about Paul Akinmade, chief marketing officer at CMG Financial.

20 HOT OR NOT Trump signs an order directing HUD and the Treasury to look at housing fiance reform.

Government seemingly stops supporting DACA mortgages. 56 REVERSEREVIEW Will rising equity grow the proprietary reverse mortgage market? 60 CFPB WATCH Kraninger reverses Mulvaney’s changes to advisory boards. 64 INSIDE BASEBALL New privacy laws pose looming threat to lenders. 68 KUDOS Guild Mortgage gave $300,000 to three San Diego-based charities. 70 Q&A Servicers must adjust policies to meet HUD conveyance deadlines. 72 KNOWLEDGE CENTER Home Point Financial cuts review time by 33%. 74 KNOWLEDGE CENTER Are properties ever unsuitable for an AVM? 76

COMPANIES/PEOPLE INDEX

PARTING SHOT

78 HOUSINGWIRE ❱ MAY 2019 9

Christopher Treece Gateway Mortgage

10 HOUSINGWIRE ❱ MAY 2019

BRUNER

BARRY HARRISON

MAXWELL SIMONELLI

Mortgage Contracting Services promoted Chad Mosley to the company's newly created role of chief relationship officer. Notably, the company also expanded the responsibilities of its Chief Operational Officer John Maxwell. In his new position, his responsibilities will now include supervision of the company’s internal processes and workflow, as well as vendor management. TRK Connection appointed Chris Bruner as its senior vice president of national sales. Bruner is an industry veteran who brings nearly 20 years of experience in the mortgage industry. He most recently served as a managing principal at financial services tech company Fiserv. Bruner also previously worked in business development at AppIntelligence and as a sales director in Interthinx’s compliance department. Sabal Capital Partners welcomed several executives to its commercial real estate lending team. These new appoint-

DAMMEN

MOSLEY LUTZ

Gateway Mortgage Group brought on Christopher Treece as chief financial officer. Treece is an industry veteran, previously serving in both public accounting and bank holding companies. Prior to joining Gateway’s team, Trecce served as the chief financial officer for Guaranty Bancorp.

ments include James Barry, Patrick McNulty and Christina Frey. Each of these executives have been appointed to the position of managing director. Prior to joining Sabal, Barry served as a director at Dexia Credit Local, McNulty served as a managing director at Cantor Commercial Real Estate and Frey served as vice president and head of underwriting at Bedrock Capital Associates. LRES tapped Peter Lutz to serve as the company’s vice president and national sales manager. Lutz is an industry veteran with more than 20 years of executive experience, most recently serving as president of Qualfon DSG. Notably, he also served as the founder and president of Data Control Group, a full-service litigation funding company. Rea log y welcomed Cha rlot te Simonelli as its executive vice president and chief financial officer. In this position, she will also serve as a member of the company's executive leadership team.

Prior to joining Realogy, Simonelli most recently served as the vice president and chief financial officer of medical devices at Johnson & Johnson. Simonelli has also held various finance roles at organizations like Kraft Foods, Reckitt Benckiser, Unilever USA and PepsiCo. Summit Valuation Solutions appointed Jayson Dammen to the position of vice president of national accounts. Prior to joining Summit, Dammen served as Valuation Partners' vice president of western sales. Dammen also held executive titles at Deutsche Bank and GMAC RFC. Built Technologies hired Raymond Ritz as senior vice president of technology. Prior to joining Built’s team, Ritz served as naviHealth vice president of software engineering, and as a senior director at Xerox. Coldwell Banker Commercial named Daniel Spiegel as its managing director. Spiegel comes to Coldwell Banker from global commercial real estate services company Colliers International, where he served as an executive vice president of U.S. operations. Notably, Spiegel is an active member of the commercial real estate industry, including involvement with CRE Tech and Urban Land Institute. Gateway Mortgage Group named Ken Harrison vice president of agency relations. Harrison worked previously as customer account team leader at Fannie Mae. Prior to that, he worked at Freddie Mac in strategic client management, external operating risk management, servicing relations and performance management.

CIFS THE COUNCIL FOR INCLUSION IN FINANCIAL SERVICES

*Pricing increases to $750 after 05/15/2019

EVENT CALENDAR

MBA NATIONAL SECONDARY MARKET CONFERENCE & EXPO MAY 19-22, 2019 Host: Mortgage Bankers Association Location: New York, New York Cost: $1050 - $3375

HOUSINGWIRE ENGAGE. MARKETING JUNE 13-14, 2019 Host: HousingWire Location: Charlotte, North Carolina Cost: $595 On the agenda: HousingWire's engage.marketing is designed to bring industry marketers together to build relationships, identify best practices, and find out what it takes to build a successful marketing strategy this day and age. It is a two-day summit for the housing industry's top marketing minds. www.engage.housingwire.com

12 HOUSINGWIRE ❱ MAY 2019

On the agenda: The Mortgage Bankers Association’s National Secondary Market Conference & Expo boasts one of the largest forums for industry networking. This must-attend event will allow attendees to connect with the top deal makers and industry shakers. MBA’s conference and expo is designed for all members of the mortgage industry, including senior-level executives, mortgage investors, investment bankers and mortgage lenders. www.mba.org

NEW YORK, NEW YORK While you're in the Big Apple, there are many sites to see and events to take up your evenings. While stopping in on all the events at the conferece, make sure you join HousingWire and Berkey Noyes for a fête to New York during MBA Secondary. The party will be held at Royalton Bar 44 on Monday May 20th. Save the date and stop by from 6 p.m. to 8 p.m. Mingle with the HousingWire crew and some of the top executives in the housing industry. We can't wait to see you there!

Your brand’s message delivered directly to industry decision makers’ inboxes every day. ON THE SHELF

HousingWire.com/Newsletter

The Plaza: The Secret Life of America's Most Famous Hotel BY JULIE SATOW TWELVE

In her new book, The Plaza: The Secrety Life of America's Most Famous Hotel, real estate journalist Julie Satow delivers a thrilling history for one of America’s most illustrious hotels and how it has shaped our understanding of glamor and money. She starts with F. Scott Fitzgerald, taking readers through the hotel’s memorable fountain to nowPresident Donald Trump’s ownership that bankrupted the Plaza, Satow spells out the history of the building that sits at New York’s Fifth Avenue and 59th Street.

Every Tool's a Hammer: Life Is What You Make It BY ADAM SAVAGE ATRIA BOOKS

Best known for Discovery Channel favorite Mythbusters, Adam Savage reflects on life in a new book that is part advice, part autobiography. Savage discusses his own journey of persisting as a creator, offering up advice for those on the same path. He also features lessons from other makers, giving readers bits from those like actor Nick Offerman, filmmaker Guillermo del Toro and others.

HousingWire.com Moving Markets Forward

HOUSINGWIRE ❱ MAY 2019 13

ARIVE | SPONSORED CONTENT

ARIVE boasts strong network of 100-plus wholesalers aiming to bolster broker market share With over 13,000+ originators pre-registered, tremendous partnership opportunities exist for lenders and brokers, alike

here’s good news and better news for mortgage brokers in the midst of 2019. The good news is that mortgage brokers continue to outpace their retail counterparts in business growth, a trend that has lasted the better part of two years now, especially as the market has been so heavily dominated by purchases. The better news is that brokers will see their competitive advantage intensify following the January launch of ARIVE, the industry’s first centralized digital platform that connects independent loan originators with a network of wholesale lenders, third-party vendors and borrowers. ARIVE, which was announced by Association of Independent Mortgage Experts (AIME) founder Anthony Casa at AIME’s October Fuse event in Las Vegas, has already established multiyear contracts with a network of more than 20 wholesale lenders that are committed to integrating to align with ARIVE. That includes five of the most widely used wholesale lenders in the country: United Wholesale Mortgage (#1), Caliber Home Loans (#2), Stearns Lending (#3), Flagstar Bank (#7) and Home Point Financial (#8). Combined, these lenders make up nearly half of 14 HOUSINGWIRE ❱ MAY 2019

wholesale market share. Top renovation lender AFR Wholesale, reverse lender Finance of America Mortgage, and Paramount Residential Mortgage Group are among the additional 20 wholesale lenders connecting to ARIVE. More than 80 additional lenders are on a waiting list to be added to the platform, with ARIVE expecting to add 15-20 lenders each month. Over 13,000 independent loan originators are pre-registered for ARIVE, with more to come, so partnership opportunities look promising for both sides. Lender and user adoption began in January and has continued throughout the first quarter of 2019. A great deal of excitement and anticipation surrounded the launch of ARIVE, as independent mortgage brokers have waited a long time for an all-inclusive platform that simplifies transactions. Instead of abiding by different processes and systems of each respective wholesale lender they send loans to, ARIVE will now allow brokers to more easily shop on their borrowers’ behalf and connect them with the products and pricing that best fit their needs with a standardized end to end manufacturing process. Visit ARIVE.com for additional information.

TMS | SPONSORED CONTENT

Take the 800 # customer service challenge How fast does your subservicer pick up their phone lines and represent your company?

o on. Call your subservicer. Are they answering in 60 seconds or less? Or, did they leave you on hold for 10, 20, or even 45 minutes? If your wait time felt like forever, guess what? That’s the exact same type of infuriating situation that you’re putting your customers through. And worse. They’re telling everyone they know about it, and the person they’ll blame for the terrible service won’t be the servicer. They’ll blame you, the lender, since your customers don’t know your subservicer isn’t you. To your customers, there’s no “sub” in subservicing. Customers tell an average of 15 people about a poor service experience, according to the American Express 2017 Customer Service Barometer. And they’ll likely splatter it across all the social platforms too. Then, with a few rapid-fire negative reviews now online, a complaint to the BBB, you just lost everything you invested in that customer, along with prospective customers. It’s vital to your customers — and you — that you partner with a subservicer who’s one step ahead of your customer and provides 16 HOUSINGWIRE ❱ MAY 2019

meaningful value to you both. Great subservicing is about great customer service. And in today’s fast-paced environment, customers don’t just expect great customer service, they demand it. Fail to deliver great customer service and it could cost you brand loyalty. Approximately 62% of Millennials will switch brands after one bad experience, the NewVoiceMedia Serial Switchers Study in 2015 found. Make sure you’re picking the right partner. If you’re serious about wanting a subservicer who will value your customers as much as you do, consider the TMS customer service check list. It breaks down everything you and your customers need to build a trusting and lifelong relationship. Make the call. Put your subservicer to the test. And while you’re on the phone, see if they deliver on the TMS checklist. Don’t risk your customers, past, present and future, by partnering with a subservicer who doesn’t know a thing about great service. At TMS, one of our Core Values is Rock Solid Service, and we strive to deliver on that every single day.

..,

KEEP UP WITH THE PULSE OF THE HOUSING ECONOMY HOUSINGWIRE MAGAZINE. PRINT AND DIGITAL.

,i ,, /)/)////1111/!ll!/IIII

.----�-' .,_.....,�-•-;;� ,_,:...�� -"JfOUSINGWIRE.COM/SUBSCRIBE c:

_·..;_.

HOUSINGWIRE

:;;,,;t--.::·\�-:--·•. -

•

Where experts and pundits sound off on a key industry issue

AT A H E A R I N G B E F O R E T H E H O U S E FINANCIAL SERVICES COMMITTEE “Wells Fargo’s ongoing lawlessness and failure to right the ship suggest the bank, with approximately $1.9 trillion in assets and serving one in three U.S. households, is simply too big to manage.” –Rep. Maxine Waters

"You have a duty to treat your customers well – not cheat them. But I’m also not here to say Wells Fargo should be dissolved because you made some mistakes. We should give you a chance to mediate and improve and move forward.” –Rep. Sean Duffy

“I can’t promise you perfection, but what I can promise you is that… the substantive changes that we’ve implemented since I became as CEO are going to prevent them from occurring as best we can.” - former Wells Fargo CEO Timothy Sloan

“We continue to be disappointed with Wells Fargo Bank N.A.’s performance ... and its inability to execute effective corporate governance and a successful risk management program,” – OCC Spokesman Bryan Hubbard “Yesterday we learned the Securities and Exchange Commission is taking new action against your business. Each time a scandal breaks, Wells Fargo promises to get to the bottom and promises to make sure it doesn’t happen again, then a few months later we hear about another case of gross mismanagement.” –Rep. Patrick McHenry

18 HOUSINGWIRE ❱ MAY 2019

Paul Akinmade, chief marketing officer at CMG Financial and 2018 HousingWire Rising Star, leads the marketing department for all lending channels, including retail, wholesale and correspondent. But his career has held more than just mortgages. Akinmade served as an external consultant for then 2016 Presidential Candidate, now HUD Secretary Ben Carson for during the last election, working directly with Carson’s campaign director, Ken Dawson.

1. My workout playlist includes… Audible books, strategy podcasts, and everything from Calvin Harris to Stevie Wonder. 2. Signature phrase… Stole it from Patton… “A good plan violently executed now is better than a perfect plan executed next week.” 3. My favorite thing to do with my employees is… Creative brainstorming and white-boarding sessions 4. My bucket list includes… Mastering the hydrofoil kiteboard, skydiving in a wingsuit, launching a nonprofit and learning the piano 5. The future is… Exciting to think about and will be filled with many challenges, evolutions and opportunities.

HOUSINGWIRE ❱ MAY 2019 19

Hot SIZZLE? Not FIZZLE? 1 1 WHY THE

WHY THE

HOUSING FINANCE REFORM



President Donald Trump directed the U.S. Department of Housing and Urban Development and the U.S. Department of the Treasury to compile reports on the reform of government-sponsored enterprises Fannie Mae and Freddie Mac. Earlier in the year, the White House – which has been a vocal proponent of taking Fannie and Freddie out of conservatorship – said it was working on a framework for an overhaul of the current housing finance system, but has not issued any progress on that front.





DACA MORTGAGE BORROWERS While it appears that the Federal Housing Administration may not be backing mortgages for Deferred Action for Childhood Arrivals recipients, Fannie Mae declared that it supports mortgages for DACA recipients. Fannie Mae announced its policies surrounding DACA borrowers have not changed. It will back mortgages for Dreamers, as long as certain lending criteria are met. Fannie Mae said that it is issuing the bulletin to provide “additional guidance to help lenders determine eligibility for non-U.S. citizen borrowers” in response to customer feedback on the issue.

20 HOUSINGWIRE ❱ MAY 2019

Office of the Inspector General for the Department of Housing and Urban Development is looking into whether the White House interfered with aid approved for Puerto Rico as the island recovered from 2017’s Hurricane Maria. The investigation is part of the watchdog’s broader look into disaster grants, HUDOIG attorney Jeremy Kirkland said. Kirkland said the watchdog will be meeting with congressional lawmakers to request a probe into whether the Trump administration slowed aid to the ravaged island.



EXURBS While the housing market on the whole has experienced a slowdown, there are some unexpected markets that are heating up. They’re called the exurbs – or remote areas just beyond affluent suburbs – and Millennials and retirees in areas near Dallas, Atlanta, Las Vegas and San Francisco are flocking to them. Why? Because rising home prices and high mortgage rates are driving some homebuyers out of urban centers toward remote locations where homes are more affordable. Plus, low gas prices make longer commutes a bit more palatable.

PUERTO RICO DISASTER AID

FEMA’S SECURITY The Federal Emergency Management Agency revealed it mistakenly leaked the banking information of 2.5 million U.S. disaster survivors. FEMA shared sensitive, personally identifiable information of disaster survivors who previously used the company’s Sheltering Assistance program, officials stated. Information was shared from victims of Hurricanes Harvey, Irma and Maria, and victims of the California wildfires in 2017. While transferring data to a contractor, FEMA shared more information than was necessary. FEMA declined to identify the contractor.

THE SELLER’S MARKET Real estate agents say many of their buyers are encouraged by an expected surge of supply this spring, and a number of them are taking a wait-and-see approach. This market shift that puts the control in the hands of the buyer was revealed by a recent Credit Suisse survey of 500 real estate agents around the country. The report noted that buyer traffic in February was up one point from the previous month, but down 11 points from last year. The results appear to be in line with expectations, Credit Suisse said, with responses indicating moderate activity across the country compared with last year.

VIEWPOINTS

By David Schroeder

Marketing strategies that won’t break the budget for brokers Five strategies to help you succeed

Every day, people in your community are looking for a new place to call home. But in the age of the digital shift, they are now getting most of that information from their mobile devices rather than more traditional sources. The right marketing plan will put you ahead of your competition and could serve as the difference between growth and failure. The good news is you don’t have to spend a lot to make a big impact. So, how do you develop a strong marketing plan to reach your target? 22 HOUSINGWIRE ❱ MAY 2019

HERE ARE FIVE STRATEGIES TO HELP YOU SUCCEED: 1. Determine what’s unique about your business For clients looking for a local broker, the decision isn’t just based on pricing and products, as many brokers in your neigh-

borhood offer many of the same benefits. You want clients coming to YOU. What can you offer that sets your business apart from the competition? Your marketing must highlight that added value. When developing your marketing strategy, create your own brand. All successful companies and brands have a unique selling proposition. Determine yours and promote it. Does your business have a strong com-

David Schroeder is vice president of Quicken Loans Mortgage Services, a mortgage lender serving the needs of brokers, regional banks and credit unions.

mitment to quality? Do you provide a combination of local expertise and digital technology? Are you committed to personal service from preapproval to closing? For example, SD Capital Funding is proud of the local and industry top workplaces awards it has received. The company uses this as a selling point because it’s known that happy team members provide better client service. SD Capital also has a detailed list of FAQs, do’s and don’ts of when buying a home, a full list of documents needed to close a mortgage and an explanation of the appraisal process. It knows that this detailed, up-front information will create more informed clients, which will help the brokers provide a smooth, quick mortgage process. 2. Create an effective email strategy Email marketing is one of the most effective ways to communicate, and it’s surprisingly affordable. You can personalize your email messaging by targeting specifically to your client base and measuring your return on investment. The first step to developing an email marketing strategy is to create a strong list of clients. Focus on quality, not quantity. Make sure you remain in contact with your engaged clients. After sending a few emails, consider eliminating less-engaged clients so you’re focusing your time – and money – on the consumers more likely to engage. You should also optimize email effectiveness, test subject lines, content and call-to-action messaging. As a local broker, another option is to partner with a company that has extensive marketing experience. Some larger lenders offer services and technology that helps smaller brokers achieve their goals such as email, social and flyer templates to which brokers can add their logo and contact information. 3. Know your audience, target your audience Who’s your target audience? Homebuyers? Refinancing homeowners? You should develop separate campaigns

for your distinct audiences. For example: First-time homebuyers need more guidance and want an expert who understands their wants and needs. Create messaging to emphasize your personal service. Refinancing homeowners, on the other hand, respond more to rate-based messaging. By tailoring the messaging specifically to your target audience, you’re positioning your business as the right choice. Now that you’ve established your target audience, narrow it further. Where are your potential clients in the home buying process? Just thinking about buying? Ready for preapproval? Texas Farm Credit is a lender that does a great job of focusing on its audience. It has locations all across Texas and products that Texans are looking for – including agriculture and real estate land loans. But that’s not the only thing that’s unique about the company. It also has a patronage program that pays dividends to clients based on how much business they do with Texas Farm Credit. The company can use both of these things to differentiate itself in the market and have a strong selling point to local Texas farmers. 4. Focus on relationship-building You should always be building strong relationships within your local community. Are you sponsoring a local high school baseball team? Is your business involved with a fundraiser or charity events? Include these activities in your marketing efforts. This is the first step to getting consumers to know you before they need you. Also, remember that your clients are more than just leads – they’re in the middle of one of the biggest financial decisions of their life. To create a strong relationship, you should be a trusted ally, advocate and expert. “If you want to be interesting, be interested,” said David Ogilvy, one of America’s advertising icons. So, put your client hat on. What do clients care about? You’re offering a service to real people with real concerns. Go beyond

pricing and rates. A strong marketing program takes time and effort, but the rewards can be powerful. Last, as you talk to your clients, get feedback on social media and measure results. You’ll see what’s working and what’s not so you can adjust as you go. Just stick with it. Marketing takes a daily commitment. You can’t expect overnight success. 5. Enhance your social media More than 81% of Americans are using at least one form of social media. In fact, consumers often look to social media before they even view your website, so developing a social media plan is critical for local brokers. If you’re an established broker, you’re probably already promoting your business on social media. But did you know you can target your audience by demographics, ZIP codes or personal interests? Best of all, social targeting is very affordable. Make sure you’re emphasizing the visual aspects of social media. Give them something to “stop the thumb” when they’re scrolling through their social newsfeeds, since you only have a few seconds to capture their attention. You could try posting quick videos with one of your clients who recently bought a home with your help, or a video with mortgage tips and FAQs. One good example of this is LoanSimply. This broker is less than two years old and has less than 10 team members, but it is very active on all the main social platforms. It even has recurring shows on Instagram, including, “Ladies Doin’ Loans” and “Two Fact Tuesday.” Whatever is right for your company, implement it and keep improving. Stay upto-date on new social media formats, and measure engagement and reach. Then, adjust your content regularly to improve results. Keeping all of these strategies top of mind will help you create effective marketing that will make the people in your community think of you when they need a mortgage, and ultimately, keep your company growing. HOUSINGWIRE ❱ MAY 2019 23

VIEWPOINTS

By Dustin Brohm

12 scripts that will get a lead’s attention Forget the phone call, it’s all about the text

Data now shows that texting your leads first and calling them only as a follow-up to the text is the best way to respond to your real estate and mortgage leads. We are not the same society we were three years ago. We’ve been trained well by Amazon and Netflix. We want everything to be convenient and on-demand. So when a lead comes in, text them! Ask if it’s a good time to talk, or if they prefer to text. 24 HOUSINGWIRE ❱ MAY 2019

Then, only after you send that text, give them a call if they haven’t responded. Don’t believe me? That’s cool, I get it. But you should definitely take Agentology’s word for it. They’re the No. 1 real estate lead response service out there, working for realt estate agents and soon, for mort-

gage loan originators, too. Agentology used to call leads first as a matter of protocol, but over time, their data was pointing to a better option: texting first. When they looked at the lead response data they received, and saw what was more effective at getting the lead to respond, they switched tactics to texting first and only calling as a follow-up. WHAT TO SAY? Below you’ll find different text message

Dustin Brohm is the host of the Massive Agent Podcast and founder of the Massive Agent Society Facebook ad lead gen coaching program for agents and loan officers. Brohm, who has been actively been selling real estate since 2011, is a national speaker and trainer for real estate and mortgage company conferences.

scripts that work extremely well for real estate agents and loan officers. Remember, you’re not trying to get them to fill out an application or sign a Buyer Broker agreement right off the bat. Pump the brakes! All you’re trying to do is to get them to respond to you, to get a dialogue going. Keep it short, ask a question that’s easy to respond to, and start a laid-back, helpful “textversation” with a potential new client. These text scripts will work for a number of different types of leads: brand new leads, prospects, and for all those “cold leads” that you let fall through the cracks months ago. BUT FIRST, HERE ARE SOME RULES OF THUMB: 1. Personalize the text with their name while also introducing yourself. If you don’t introduce yourself, you run the risk of being a weirdo sending the equivalent of a random Facebook Poke. Or even worse, the always charming “hey” text from an unknown number. Anonymous texting = no bueno, you creepy weirdo. 2. Keep it simple. Ask one easy-to-answer question and leave the door open for them to respond. 3. Be casual. Use an emoji or two. Throw in a smiley. If you sound too stiff and proper, it doesn’t feel authentic, and they may just ignore it. 4. Automate. If you don’t already have one, find a CRM that has the ability to mass text a large group of contacts at once. Seriously. Being able to send mass texts via your CRM is such a great tool, and there’s no excuse to not have that ability in 2019.

“

(I recommend Wise Agent.) 5. Persist. If they don’t respond after 10 minutes, send a follow-up “let me know” text to remind them to respond. Sometimes, people just get too busy, or they’re in the middle of something. This can serve as a gentle reminder to reply. TEXT SCRIPTS TO LIVE BY Use your imagination here with these, and don’t totally ignore a text because the example is written for an agent, and you’re an LO. In most cases you can change the message a smidge and it will still apply. For new leads: Hey what’s up [FIRST NAME]? Thanks for requesting some info about our interest rates on our website. Have you ever bought a home before? Hey [FIRST NAME], I see you were checking out homes for sale in [AREA]. Are you only focused on [AREA], or are you open to checking out other nearby areas as well? What’s up [FIRST NAME], how long have you been planning to buy a place? How’s it going, [FIRST NAME]? Thanks for searching for homes on our website, [WEBSITE NAME]. Are you looking for an actual home, or a townhouse or condo? Hey [FIRST NAME], thanks for checking out our [WEBSITE/FB PAGE/WHATEVER]. Have you ever applied for a home loan before? For property-specific inquiries: Hey [FIRST NAME]. Thanks for reaching out about [PROPERTY]. I actually have an opening at [DATE & TIME] to show you the home. Will that work for you, or is another time better?

Keep it short, ask a question that’s easy to respond to, and start a laid-back, helpful ‘textversation’ with a potential new client.”

For prospects: [FIRST NAME], I just came across 4 homes that fit what you’ve been looking for. Do you have some time to go take a look at them on [DATE]?” Hey there [FIRST NAME], we are just about to list a couple new homes on the MLS that may fit what you’re looking for. Do you have time tomorrow or Wednesday to take a look before they hit the MLS? Hey [FIRST NAME], I’m just working on your home valuation. Real quick, have you done any remodeling or improvements to your house since you bought it? Old leads: Hey [FIRST NAME], are you still looking for a home to buy in [AREA]? - [YOUR NAME AND COMPANY] Hey [FIRST NAME], are you still doing your research on home loans, or have you bought a place already? - [YOUR NAME AND COMPANY] Hey there [FIRST NAME], do you still need to sell your house? I actually have a buyer looking for a similar home in your area. H OW O N E T E X T L E D T O E I G H T APPOINTMENTS In closing, I’ll leave you with a true story that might inspire you to get started on a texting campaign. Recently, I sent a single text to about 400 old leads that were sitting in my CRM. Some were over a year old, some just a few months old, but they were not being contacted regularly for whatever reason. They were just siting there, sad and lonely. So I sent a mass text asking if they were still looking to buy a house. Of those approximately 400 leads, 73 responded, 26 said they still plan to buy or sell at some point, and eight appointments were set. I’ve already closed a few of those deals that I brought back to life with that one random text. Not a bad ROI, eh? Shoot me a DM @massiveagent on Instagram and let me know how these texts are working for you!

HOUSINGWIRE ❱ MAY 2019 25

By Leora Ruzin

26 HOUSINGWIRE ❱ MAY 2019

During a time in the mortgage market where companies are seemingly chasing after the same borrowers and basis points, it is no surprise that the search is on to capture additional business. Attend any of the myriad of mortgage conferences available, you will find there is a common theme that has been emerging for the last several months: “niche.” Niche products are easily definable as any product that does not fit into the credit box for delivery to the GSE’s, whether it be subordinate liens, jumbo, reverse mortgages or products with recent credit or housing events. The biggest niche product of all, however, just may be non-QM (depending on who you ask). So why is it taking so long for non-QM products to become more widely adopted by lenders, and will 2019 be the year where it all changes?

HOUSINGWIRE ❱ MAY 2019 27

of their production line. With a wide variety of delivery options available (broker, non-delegated and delegated correspondent), coupled with new tools that help automate the underwriting process, lenders are feeling more comfortable venturing into this space. As more investors play in this space, competition becomes fiercer, which is only a good thing for lenders, as it will bring the rates down to areas that are more palatable for borrowers.

getting into the details,

it is important to understand what a non-QM product is. With the advent of the Dodd-Frank Rule in 2010, Title X was established to create the Consumer Financial Protection Bureau. Title XIV of Dodd-Frank governs the ATM/QM Rule, which clearly defines the loan characteristics required for a loan to be considered a “qualified mortgage,” such as:

Loan must be fully-amortizing (no interest-only, negative amortization or other risky loan features), with a loan term that does not exceed 360 months Loan must have a debt-to-income ratio that does not exceed 43%, unless the loan qualifies for delivery to one of the GSE’s with acceptable AUS findings (GSE patch) The points and fees charged on the loan must not exceed 3%, unless the loan amount is less than $102,894 The loan must meet the definition of the Ability-to-Repay rule, which consists of eight underwriting rules that are used to determine if the borrow has enough income to cover their debts About the Author: Leora Ruzin is VP of Secondary Marketing at Guaranteed Rate, based in Chicago. An industry veteran, she has extensive experience in secondary and capital markets, with a specialized focus in compliance and technology. Over her 12-year career in the industry, she has devoted much of her time advocating for fair and equal home lending, and pushing for a more consumer-friendly home-buying experience. 28 HOUSINGWIRE ❱ MAY 2019

Without a QM designation, lenders are exposed to increased liability and risk if a borrower defaults on their loan. This is because the borrower can claim that they were sold a loan that they could not afford, and the lender did not adequately determine and document that the borrower could repay their debt. If a lender is unable to prove they documented the borrower’s ability to repay, they will be found in violation of the ATR/QM rule. Does this mean that if a loan is deemed non-QM, it is considered a bad loan? No, and there are several primary and secondary marketing investors who have made non-QM products the focal point

Not your father’s subprime Many lenders are quick to equate non-QM loans to the subprime loans that were largely responsible for the housing collapse in 2008, but the reality is that non-QM loans have a real need in the housing ecosystem. In looking under the hood of the nonQM products available today, and it is easy to see that most of the loans under this product set are just a hair outside of the QM box. When the box is so small to begin with, it does not take much for a loan to spill out into the non-QM space. What most lenders don’t realize, however, is that non-QM is not always subprime, and many borrowers who opt for these loans are very savvy, have a ton of money in the bank, and are otherwise being penalized for having an alternative income source. As the market continues to focus on QM lending, the availability of credit for otherwise creditworthy borrowers falls even further behind. Slap on the stigma that non-QM carries with it, and it is no surprise that many lenders are cautious to get into the fray. Of course, subprime lending does still exist, and there are hard money investors out there who have the risk appetite to venture into far riskier loan types (think stated income.) With that said, most non-QM lending is coming from a common-sense approach of defined underwriting standards, coupled with ensuring loans are still meeting the Ability-to-Repay rule. One of the top non-QM lenders in the market today is NewRez, (formerly New Penn Financial), which has been so successful in originating in this space that they participated in a few securitizations in the last two years. The contents of NewRez’s first non-QM securitization, (New Residential Mortgage Loan Trust 2018-NQM1) was made up of 581 loans, for a total volume of $310.74 million. About 74% of the pool was designated as non-QM. Of that 74%, 28% of the pool consisted of loans that carried a DTI that was higher than 43%, with 5% of those loans carrying a DTI of 50%. The one item to note is that borrowers in the pool were able to sufficiently document over

$234,000 in liquid reserves. The high amount of liquid assets, combined with the weighted average (WA) credit score of 731 and the WA combined loan to value ratio of 73%, prompted Fitch Ratings to assign a AAA rating to the senior-most class of A-1 notes. While 54% of the loans were made to self-employed borrowers, utilizing the company’s reduced documentation bank statement program, the rating agency assigned the bond of having near prime credit quality. These findings are certainly not what one would expect when thinking of a subprime product, which further demonstrates that non-QM does not necessarily belong in the same kind of category as no-documentation/no-verification products. Granted, Fitch did assign an assumed probability of Ability-to-Repay claims that was two times the normal probability, which was due to the reduced documentation that was used to qualify the income of those loans who were underwritten to the bank statement program. Yes, non-QM is still a risky product, and the level of perceived risk needs to be considered when lend-

ers decide whether to offer these products to their loan officers.

To offer non-QM, or to not offer non-QM: that is the question Lisa Schreiber is the senior vice president of correspondent lending with NewRez, and has been with the company for nearly a year. During this time, she has helped spearhead the evolution of their non-QM product suite, known as the Smart Series. According to Schreiber, their most popular non-QM products are “Factors to consider when finding a non-QM investheir bank statement and tor are product training, marketing, having access to investor prodoperational tools like a non-QM AUS and support ucts. Schreiber desks. Overall, there should be the assurance that has been on loans originated will be purchased quickly.” the front lines of the non-QM -Lisa Schreiber movement since 2014 and is able to provide keen insight on how this product has evolved over the years, and what the future could look like. As lenders continue to determine if offering non-QM products makes sense, there are several barriers that used to hinder this expansion that are longer in play. In the past, there were barriers of entry involving finding warehouse lenders that would house these loans, along with the uncertainty of production value, Schreiber said. Those barriers have gone away, and many lenders now see the value HOUSINGWIRE ❱ MAY 2019 29

of these products in recruitment and retention. Now, they are looking for ways to implement the products effectively and efficiently with a partner that has expertise. Lenders who have been on the sidelines, waiting to get into the game, could benefit from creating a non-QM working group. This group would be responsible for fully vett ing t he non- QM “The risk factors, including the ability to needs of the lender, in repay, are addressed, and in some cases, addition to identifying are documented more than agency the risk appetite and platform that would be products. It shouldn’t surprise anyone that serve their needs. If the these loans are performing.” working group can develop a strong business case, show empirical data to justify the risk of offering, and can align with like-minded investors, venturing into the non-QM space could be a winwin for all involved. Still, lenders are wary of underwriting and documenting the ability-to-repay, combined with the risk of having a non-QM loan stuck on their warehouse line. If a lender is new to the non-QM space, it might make sense for them to walk before running, by partnering with a wholesale lender that can take on most of the originating risk. The lender would not have to worry about warehousing the loans, as the wholesale partner would fund them. “Factors to consider when finding a non-QM investor are product training, marketing, having access to operational tools like a non-QM AUS and support desks,” Schreiber said. “Overall, there should be the assurance that loans originated will be purchased quickly.” At the end of the day, perhaps the most important aspect when it comes to finding a non-QM investor is that the investor provides the lender with a level of comfort that comes with being on the same page regarding risk appetite and providing

30 HOUSINGWIRE ❱ MAY 2019

a quality service to borrowers.

The future of non-QM in an unknown universe The future of non-QM is a bit hazy, in that the very definition of what makes a loan non-QM could change. Throughout 2018, the CFPB issued a series of twelve requests for information, aimed at seeking comments on the practices of the bureau and the laws that the bureau oversees. One of these RFI’s covered adopted regulations and new rulemaking authorities, of which the ATR/ QM Rule would live. In response to the RFI, the Mortgage Bankers Association issued recommendations specific to the treatment of non-QM loans. In a recent white paper issued by the MBA entitled The Roadmap to CFPB 2.0, the issue with the ATR/QM credit box and how it has negatively affected access to credit is explained a bit deeper. “The uncertainty surrounding the potential liability associated with non-QM lending has impeded the development of a robust secondary market for non-QM loans, motivating most lenders to concentrate, mostly exclusively, on QM lending,” the white paper explained. In the white paper, the MBA identified a potential solution to this disparity, by recommending to “not only extend the GSE patch indefinitely (currently set to expire in 2021), but to also expand to cover jumbo loans that meet GSE purchase or guarantee criteria except for the loan amount (i.e., loans too large for GSE purchase or guarantee.)” Until the CFPB provides a clear rule change that solves for this disparity, the need for nonQM loans for creditworthy borrowers will not be going anywhere. The version of non-QM products we now see today have been in existence for nearly five years, which means we are able to glean from years of borrower payment data to determine the rate of delinquency. According to recent data from DBRS, the majority of loans have remained current since origination, and 60-day delinquency is hovering around 4% (data is as of August 25, 2018). Compared to the delinquency rate for conventional loans at 3.45% and FHA loans (8.7%), it is easy to see that non-QM loans are performing at or better than experts’ expectations. “If you think about it, these loans may be fully documented, or when utilizing alternative documentation, are well-constructed,” Schreiber said. “The risk factors, including the ability to repay, are addressed, and in some cases, are documented more than agency products. It shouldn’t sur-

prise anyone that these loans are performing.” Prepay speeds are hovering between 30% to 40%, which is high, but this is most likely due to borrowers being able to correct credit issues and refinance into a lower-rate agency product. What does the future of non-QM look like? In one universe, the CFPB re-writes ATR/QM, and non-QM may evolve (or devolve) back into a true subprime product. In our current universe, it is business as usual, albeit a business that continues to struggle with market compression, tight credit guidelines, and an uncertain economy. The next 12-18 months will be the true test of market-wide adoption and the embracing of non-QM. In her final thoughts, Schreiber said she sees non-QM no longer being an anomaly, but a product that is offered by most lenders. “Additionally, those lenders that were initially unsure of offering in-house will move to banking the products instead of brokering them out, effectively offering more structure and competitiveness to their loan officers,” she said. Venturing into unfamiliar territory is always scary and entering the non-QM space is no exception. While the purpose for these products is to provide real solutions for borrowers who do not fit into the agency credit box, if they are not managed correctly, there is also a real risk of damaging an entire organization. The exposure to reputational, compliance, operational and financial risk is great, and is further compounded by faulty and lacking controls. With that said, lenders who employ sound compliance practices can benefit greatly from adding non-QM products to their loan officers tool belts. Lenders just need to remember that they are in control of how much (or how little) risk they are willing to expose themselves to, and with the right investor partner, originating non-QM loans truly can be a win-win for all involved.

CFPB requests for information

The Consumer Financial Protection Bureau issued 12 requests for information in 2018 after former Acting Director Mick Mulvaney took over. These requests for information were issued to, “provide an opportunity for the public to submit feedback and suggest ways to improve outcomes for both consumers and covered entities.” The bureau requested information on these 12 topics:

Handling of consumer complaints and inquiries

CONSUMER FINANCIAL EDUCATION

Guidance and implementation support

4 Bureau rules not under assessment Inherited Rules 5 Rulemaking process 6

Usefulness of its consumer complaint database

8 External engagement 9 Supervision process 10 Enforcement process

ADMINISTRATIVE ADJUDICATIONS

12 Civil investigative demands

HOUSINGWIRE ❱ MAY 2019 31

32 HOUSINGWIRE ❱ MAY 2019

Zillow going all-in on mortgage lending What are the company’s future aspirations? By Rich Swerbinsky

When Zillow acquired Mortgage Lenders of America last summer, it led to a lot of industry speculation as to what its future aspirations were related to the financing side of real estate transactions. The need to hypothesize is no longer necessary. As laid out in its annual 10-K filing with the U.S. Securities and Exchange Commission, significant expansion of mortgage originations is a critical component to Zillow’s strategy to transform their organization.

HOUSINGWIRE ❱ MAY 2019 33

New (former) leader, new vision Zillow announced a change at the top of their org chart back in February – co-founder and former CEO Rich Barton would be taking back over as CEO, replacing fellow co-founder Spencer Rascoff. Barton founded Expedia in 1994, co-founded Glassdoor in 2007 and has served as Zillow’s executive chairman since stepping down as CEO in 2010 to let Rascoff take the helm. Barton will lead the planning and execution of a fairly substantial metamorphosis of the company. Currently, the vast majority (96% in 2018) of Zillow’s revenue comes from the sale of advertising products and services for real estate, rental and mortgage professionals. But their recent 10-K filing makes it clear, their three-to-five year plan calls for dramatic expansion to their Zillow Offers home buying/selling platform and their mortgage origination business.

Moving further down the funnel This quote from the 10-K filing says it best: “On October 31, 2018, we completed the acquisition of MLOA, a licensed mortgage lender,” the filing stated. “This acquisition is consistent with our strategy of moving further down funnel and closer to the real estate transaction to create better consumer experiences. The total purchase price for the acquisition of MLOA was approximately $66.7 million in cash.” In the event that doesn’t make it clear, the word “mortgage” appears 340 times in the filing. Zillow plans to grow mortgage revenue by roughly 30% to 40% in 2019 versus 2018, when they generated just $80 million in that bucket. More broadly, Zillow’s stated three to five-year plan is to grow annualized revenue of their “homes segment” to $20 billion (yes, billion with a “b”) through the purchase of 5,000 homes a month through Zillow Offers and to originate 3,000 mortgage loans per month. These 3,000 loans per month at the average national new mortgage loan amount of $260,000 would total $9.4 billion in annual mortgage originations, making Zillow Home Loans one of the largest retail mortgage originators in America.

Walking the tightrope What Zillow is clearly doing is positioning themselves for the evolving state of real estate transactions and financing. It’s a fine line they’re walking, as their strategy of controlling more of the point of sale of both real estate transactions and real estate financing flies in the face of the profitable Premier Agent, Mortgage Marketplace and Zillow Rentals services that produces the vast majority of their current revenue. Even before Zillow Offers and Zillow Home Loans, an inherent tension existed between Zillow and many of the real estate agents and mortgage loan originators that provide that revenue. But as they say in hockey, Zillow is skating to where the puck is going, not where it’s at currently. Zillow goes out of their way to lay out the risks of this inherent challenge in the recent 10-K filing in the “Risks Related to Our

34 HOUSINGWIRE ❱ MAY 2019

About the Author:

Business and Industry” portion In Rich Swerbinsky’s of the report. Within that section, role with The Mortgage they lay out their current reliColaborative, he serves ance on advertising income and as the full time, point the pressures to that model from person to execute on competitors, emerging technoloTMC’s business strategy gy, and its reliance on maintainrelated to member ing relationships with real estate recruitment, member brokerages, real estate listing support and strategic aggregators and multiple listing alliances. Swerbinsky services. also manages the day-to-day business There’s also a section of that dealings and third-party risks segment titled “Our Entry business relationships into the Mortgage Lending of the network. Business Could Fail to Achieve Expected Results and Cause Harm to Our Financial Results, Operations, and Reputation.” After cycling through the regulatory and general “constantly change” aspect to the mortgage industry, they end that section with this statement: “Our recent entry into the mortgage lending business may also cause a negative reaction within the mortgage industry, including among some of our mortgage advertisers, which could harm our reputation, results of operations and financial condition.” It’s already started. The real estate agent community is already in general disbelief over Zillow’s access to the MLS and the threat it poses to the traditional Realtor model. This threat has been challenged in court and sets up an eventual showdown of some sort between the National Association of Realtors and Zillow. Also, in early January, the National Association of Federal Credit Unions sent a letter to House Financial Services Committee Chairwoman Maxine Waters, D-Calif., and Ranking Member Patrick McHenry, R-N.C., calling on lawmakers “to continue to scrutinize the growing fintech sector” to ensure a level playing field between fintech’s and regulated financial institutions. NAFCU’s underlying point was a valid one – mortgages originated by Zillow and other fintech lenders should be regulated just as intensely (if not more intensely) than credit unions given their connection to other aspects of the real estate transaction, the amount of customer data they preside over, and the fact that they’re not subject to the same cybersecurity examinations depositories are under as part of the Gramm-Leach-Bliley Act.

The Netflix of mortgage If this all sounds like a shift to move Zillow from an advertising service to an all-inclusive online platform for all components of the real estate transaction process, that’s because it is. Barton foresees Zillow as “the winner in online real estate 2.0,” clearly aiming to fully disrupt the housing industry just as Amazon and Netflix have done in their spaces. Barton has been on the Netflix board of directors since 2002. Consider this nugget from a recent interview Barton did with GeekWire:

Zillow

Facts: Zillow acquired Mortgage Lenders of America

Zillow is now a mortgage lender, launches Zillow Home Loans

Zillow got into the home buying business with Zillow instant offers

HOUSINGWIRE â?ą MAY 2019 35

Zillow plans to grow mortgage revenue by roughly 30% to 40% in 2019

Zillow’s stated three to five-year plan is to grow annualized revenue of its homes segment to $20 billion

36 HOUSINGWIRE ❱ MAY 2019

Zillow announced a change at the top – former CEO Rich Barton would be taking back over as CEO

Zillow

Facts:

“This is why we founded Zillow, to actually change the way people bought and sold houses, and the way they found a new place. This was our original conception, something like this to actually solve the headaches that we were experiencing, that our moms and sisters and brothers were experiencing.” Zillow has 195 million monthly unique visitors to their website, and 80% of all US homes have been viewed on Zillow. Every single day, home buyers get younger and more comfortable with online transactions, even on purchases as significant as a home. Zillow has the clear potential and obvious desire to evolve into one of the largest mortgage lenders in America, with upside on par with what Amazon and Netflix have achieved.

Zillow Offers – grand plans, and how they want it to feed their mortgage business In January, Zillow announced that they were going to start buying and selling homes in five new markets in 2019 through their expanding Zillow Offers platform. Still just a little over a year old currently, Zillow Offers will be buying and selling homes in at least 15 major metropolitan markets in America by the end of 2019. Consider this from Rascoff from their 2018 second quarter earnings call transcript, which came just after their acquisition of Mortgage Lenders of America: “So just to give you some napkin math for a second – about 400,000 homes sell a month in the United States,” Rascoff said. “If Zillow Offers is buying and selling, say, 10,000 homes a month, that’s about 2.5%, 2% or so of the market. If we’re doing that type of home buying and selling volume, homebuilders typically have a 75% attach rate on their in-house mortgage of homes that they’re selling. At a 75% attach rate on 10,000 homes a month at 9,000 in revenue per mortgage origination, that’s $67 million a month of mortgage origination revenue or about $800 million a year. So for anybody who is wondering why we just bought a mortgage lender, just to hit some of those numbers again, at a mere 10,000 homes sold a month from Zillow Offers, a 75% attach rate gets to over $800 million a year of revenue opportunity for mortgage origination.” Clearly, Zillow will want to control the mortgage loan process and fee income on homes they sell through Zillow Offers, a program they are rapidly expanding. Zillow’s massive online following will also see Zillow Offers homes featured more prominently on their platform. Recently, a Zillow spokesperson said that the company is running “tests” on Zillow.com and its various mobile apps that show its own forsale homes at the top of its home search pages, ahead of other competing listings.

Zillow recently announced purported enhancements to the accuracy of Zestimates A little over a year and a half ago, Zillow launched a contest to see if anyone could create an algorithm that could beat the one they were currently using to form “Zestimates,” the online real estate giant’s property value estimation tool. If anyone was successful,

they’d give them $1 million. On January 30, Zillow announced that a team of people had succeeded in creating a model that they said bested the Zestimate. The winning team included data scientists and engineers from around the world: Chahhou Mohamed of Morocco, Jordan Meyer of the United States, and Nima Shahbazi of Canada. Zestimates are a primary driver of Zillow web traffic, which leads to familiarity with the site, which leads to home searches, which will eventually lead to more Zillow Offers purchases and sales and more Zillow Home Loans business. If only for the publicity alone, this was a smart $1 million investment.

Zillow starting to position themselves as a thought leader on the lending side of the housing industry If you spend some time scrolling through the archives of the “Research” page of Zillow’s website, you’ll see an interesting transformation starting to take place. Prior to 2019, Zillow Research was primarily limited to reporting of housing industry related indicators like new and existing home sale data, home appreciation indices and tracking of the direction of mortgage rates and rents. Then starting in January, in a clear departure from their “simply report the housing numbers” media strategy, Zillow began posting a series of op-ed columns on affordability, age/race, the environment and other social and thought leadership issues that impact the housing industry.

The 800-pound gorilla is in the room Zillow’s connection to the point of sale of real estate transactions is staggering. Their leadership has a strong track record of growth and innovation at Zillow and in other ventures. Home buyers continue to get increasingly more comfortable with online transactions each day. As the mortgage industry continues to slowly muddle through a complete digital transformation, Zillow now has the framework in place to continue to accelerate their home buying, selling, and financing arms. And they now have aggressive stated growth goals for those platforms. What they’re trying to pull off is risky, for all the reasons noted. Their growth plans largely conflict with their current revenue sources. The mortgage industry is heavily regulated and experiences constant change. With great risk comes great reward. With their online following, Zillow has the opportunity to become one of the largest mortgage lenders in America, just a few years after entering the space.

HOUSINGWIRE ❱ MAY 2019 37

Secondary Market Solutions The pace of tech disruption in the secondary market has significantly increased in the last year, bringing a number of new solutions that look to facilitate the buying and selling of loans quickly and compliantly. In this section, we highlight two companies pioneering the secondary market tech revolution through transparency, automation and integration.

Compass Analytics

Optimal Blue

38 HOUSINGWIRE â?ą MAY 2019

HOUSINGWIRE ❱ MAY 2019 39

SPECIAL REPORT: COMPASS ANALYTICS

EXECUTIVES: JAMES BAUBLITZ, PRODUCT MANAGER OF PIPELINE ANALYTICS James Baublitz is product manager of pipeline analytics at Compass Analytics. Baublitz joined Compass Analytics in 2012 and has over ten years of capital markets experience. As product manager of pipeline analytics, his responsibilities include helping clients optimize their loan sale and pooling strategies, contributing to the development of Compass Analytics’ pipeline risk management analytics and providing software demonstrations for prospective clients. FRANK POIESZ, CHIEF REVENUE OFFICER Frank Poiesz is a financial services industry expert with a 30+ year track record leveraging technology to drive innovation in the financial services industry. As chief revenue officer at Compass Analytics, Poiesz is responsible for sales and marketing, leveraging his background in the capital markets and origination technology to support the mortgage banking industry through the company’s risk management, valuation and product pricing and eligibility technology services. NANCY POLLARD, MANAGING DIRECTOR OF PRICING TECHNOLOGIES Nancy Pollard has over 30 years of experience in mortgage finance and is currently the managing director of pricing technologies for Compass Analytics. Pollard was previously the chief operating officer of REMARQ Corp, a startup venture in shared equity financing for residential housing and executive vice president at Impac Mortgage. 580 California Street, Suite 1725 San Francisco, CA 94104 (415) 462.7500 compass-analytics.com 40 HOUSINGWIRE ❱ MAY 2019

echnology is disrupting the secondary market, allowing lenders to bend the ever-growing origination cost curve and implement measures that reduce risk and save time. Industry innovator Compass Analytics, the leading provider of loan pricing technologies, focuses on automation and integration as the primary means to save clients time and allow them to cut cost. The company offers a suite of products that give lenders the tools and transparency they need to profitably grow their business. Compass Analytics’ suite of products includes CompassPoint for risk management and MSR valuations, and CompassPPE for product, pricing and eligibility determination. Both products revolutionize the way home loans are priced, hedged and sold. “As the only market participant offering pipeline risk and best execution analytics, a fully integrated product, pricing, and eligibility engine and an MSR cash flow model, CompassPoint is unique in the market,” Compass Product Manager James Baublitz said. Compass Analytics’ focus on automation simplifies the complex quantitative calculations that underlie a successful originator’s risk policy. All done within an intuitive framework, allowing lenders of all sizes and profiles to use the system. CompassPoint clients range from small community banks originating $8-10 million a month up to large aggregators and even government agencies. CompassPoint is an integration hub for mortgage originators, with technology touching several key capital markets functions. Compass’ APIs and pooling optimization algorithms allow sellers to automate agency cash window sales. Bi-directional integrations with LOS providers along with CompassPoint’s mobile capabilities allow real-time position management. Lenders selling servicing-released use Compass Analytics’ proven bulk-bidding features to automate the transfer of loan sale data, with billions of dollars’ worth of loans traded each week. “Compass Analytics is re-defining what secondary professionals can accomplish in a day, week and month by introducing automation and providing transparent outputs that eliminate guesswork,” Baublitz said. Compass Analytics’ pricing and eligibility engine, CompassPPE, offers support for desktop and mobile devices, allowing originators to automatically lock, re-lock, and extend loans from their desk or from a phone. Capital markets users are granted full administrative access and comprehensive margin management capabilities from wherever they are. “CompassPPE is changing the role of a pricing engine in the secondary market by automating common pricing and lock desk functions with unprecedented ease-of-use and accuracy. And by offering capital markets professionals unrivaled mobile capabilities, CompassPPE responds to the way work is being done in the industry today—anytime, anywhere,” Compass Managing Director Nancy Pollard said. With its extensive mobile capabilities and state-of-the-art margin management, CompassPPE empowers lenders provide the best possible product and pricing options at the point of sale. This gives senior management a compelling recruiting tool to attract top originators. CompassPPE adheres to an aggressive and nimble development schedule that allows the pricing engine to be regularly updated in response to the constant changes in the industry. “The industry-leading analytics of CompassPoint and the innovative technology of CompassPPE provides a powerful combination of a trusted team and cutting-edge functionality,” said Frank Poiesz, chief revenue officer. “Lenders leverage the Compass Analytics technology ecosystem from initial price quote to final loan payoff.”

SPECIAL REPORT: OPTIMAL BLUE

he mortgage industry is aggressively pursuing the digital mortgage while margins are tight and competition is at an all-time high. Additionally, vendor integration is a must and consumers are requiring transparency like never before. Because of all of these challenges, the industry is calling for an integrated platform, as well as more granular automation and functionalities. Optimal Blue, a pioneer in secondary marketing automation, offers an innovative, integrated, end-to-end platform that lenders rely on to meet and exceed their secondary marketing needs. With the largest resource commitment to secondary marketing technology in the industry, Optimal Blue is used more widely than any other solution and is exclusively focused on helping lenders streamline the entire secondary marketing process, from content to commitment, and everything in between. “Our comprehensive secondary marketing automation platform sits at the center of our Digital Mortgage Marketplace, which breaks down silos between industry participants – lenders, investors, and mortgage technology providers – and brings them together for mutual success,” said Optimal Blue CEO Scott Happ. The Optimal Blue platform includes a robust content management application, a product eligibility and pricing engine (PPE), a hedge analytics and digital loan trading system, data and analytics, and the only social media compliance automation platform designed specifically for the mortgage industry. In addition, Optimal Blue offers a comprehensive set of APIs and automatic connections to a broad network of best-of-breed mortgage technology providers and strategic partners. Due to Optimal Blue’s size and reach, participants benefit from the “network effect.” Investors and originators benefit from a larger pool of both buyers and sellers, while technology providers benefit from being connected to the largest networks of originators, investors and real-time content versus a “closed network” strategy. By bringing loan buyers and sellers together – along with best-ofbreed mortgage technology providers – on a single, unified technology platform, Optimal Blue equips every player in the secondary market to compete and thrive.

FAST FACTS 1. Optimal Blue was founded in 2002 and is headquartered in Plano, TX – one out of six offices across the country

2. With over 2,000 clients and 180,000 users, Optimal Blue is the largest provider of secondary marketing automation in the mortgage industry

3. Supports more than 56% of the industry’s top 50 lenders and more than 45% of the top 500 lenders

4. In 2018, the company made 894 new sales and added over 18,000 new users — recording a +16% growth in revenue as of Q3 2018.

EXECUTIVES: SCOTT HAPP, CEO Scott Happ has 30 years of experience in financial services and mortgage lending technology. He founded Mortgagebot in 1997 and built the company into a nationally recognized SaaS solutions provider, selling the company to D+H in 2011. In 2016, Happ teamed with GTCR, a leading private equity firm, to acquire Optimal Blue, where he serves as CEO. SUE BAKER, VP OF PRODUCT & CLIENT SERVICES Sue Baker brings over 30 years of experience in the mortgage industry, beginning as a loan officer and later assuming responsibility for sales and training for a network of over 200 loan officers. She also designed a software solution that allowed loan officers to gather applications and request online underwriting approval electronically at the point of sale. Baker served as chief product officer at Mortgagebot. BOB BRANDT, VP OF MARKETING & ALLIANCES Bob Brandt has more than 20 years of experience in the financial services industry. Prior to Optimal Blue, Brandt established and managed the sales and marketing organization at Mortgagebot, where over 15 years he helped the company acquire productive, multi-year relationships with more than 1,500 banks and credit unions nationwide and was named to the Inc. 500 list of America’s fastest growing companies.

5340 Legacy Drive, Building 2, 2nd floor Plano, TX 75024 (972) 781.0200 optimalblue.com HOUSINGWIRE ❱ MAY 2019 41

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

INFINITY IPS | SPONSORED CONTENT

A boutique approach to mortgage due diligence Infinity IPS provides high-touch service and consultative client relationships “Investors know our results have been vetted by the rating agencies, who trust us to provide a high-quality level of review.”

ortgage originators feeling the pressure from low loan volumes and low margins are showing a renewed interest in non-QM loan products for borrowers outside the conforming credit box. But no one has forgotten the painful lessons of the financial crisis, and lenders and investors alike recognize that high-quality originations — whether QM or non-QM — are key to a healthy real estate and mortgage market. To ensure loan quality, investment banks, mortgage companies, government agencies and mortgage insurers are using Infinity IPS for residential mortgage credit and compliance due diligence, pre-fund and post-close quality control, and mortgage servicing reviews. T he compa ny, founded in 2003, has been approved to perform RMBS third-party due diligence reviews by Fitch, Moody’s, DBRS, Kroll and, most recently, by Morningstar. “Our work has been reviewed by experts at the respective rating agencies who rely on accurate, detailed reports on a loan level basis,” said John Hutchison, Executive Vice President of Operations. 42 HOUSINGWIRE ❱ MAY 2019

A BOUTIQUE APPROACH Infinity IPS takes a consultative approach with its clients, taking time to clearly understand what each client needs at both the executive and operations level. The company provides hightouch service from the very beginning of their relationship with clients, spending substantial time ensuring critical items such as turn times, reporting, and communications needs have all been agreed to during the on-boarding phase. “At Infinity we provide a boutique approach to all our clients, whether they are small or large. We believe all small firms aspire to be big firms and we want to be part of their success as they grow,” CEO Chandresh Mehta said. “And, while large firms may be managing tremendous volumes monthly, we manage their expectations and ensure we home in on the problematic loans that need that special attention for our clients.” Throughout a transaction review, Infinity IPS stays in constant contact with clients, noting trends, issues, and consistent process status. It also manages expectations to ensure there are no surprises along the way. Once Infinity IPS has completed their QC and due diligence findings, the company goes beyond just reporting what it finds, taking the time to write up comprehensive narratives that clearly explain the issues they find in the file. “While our underwriting software fires system-generated responses to issues and conditions with a loan, we

realize that there is often much more to an issue than what the system presents, and we do a great job of illustrating what the system has found, so our clients do not have to look back in the file or interpret what the system has reported,” Hutchison said. INVESTING IN LEADERSHIP While Infinity IPS has enjoyed continued growth each year, the company is careful to maintain a “controlled-growth” strategy that ensures its operational staffing needs will meet its clients’ demanding quality standards. Infinity IPS has also continued to invest in its senior management team in sales and operations. These additions have brought a tremendous level of experience from both the transactional management side — from some of the largest loan acquisition buyers in the industry — and senior management on the operations side. Due diligence and quality control are critically important to ensuring a healthy, stable mortgage market. Infinity IPS’ commitment to providing the highest quality due diligence in the industry, combined with its dedication to client success, has earned it the honor of working with some of the most successful lenders and investors in the industry. “With our culture, which caters to our clients’ individual needs from a boutique standpoint, we feel the combination of process and talent will resonate through the industry and allow Infinity IPS to continue to gain market share in a space that currently has many firms to choose from,” Mehta said. “Our goal at Infinity IPS is not to be the biggest — just the best!”

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

INFINITY IPS | SPONSORED CONTENT

THE EXECUTIVES: Chandresh Mehta CHIEF EXECUTIVE OFFICER Chandresh Mehta is an entrepreneur and business leader with over 25 years in the mortgage industry. Mehta has generated more than $350 million in revenue and managed more than 100 global clients. As the CEO of Infinity IPS, Mehta is responsible for budgeting, strategic decision-making, organizational structuring and the overall accountability of the company. His leadership and dedication for constant process improvement and business optimization is what makes Infinity IPS one of the most trusted mortgage due diligence firms.

John Hutchison EXECUTIVE VICE PRESIDENT, OPERATIONS, DUE DILIGENCE John Hutchison has over 25 years of experience in the financial markets, including due diligence, transaction management, compliance, and fraud investigation. He understands that market volatility continues to make fixed income securities an attractive option and is aware that comprehensive risk analysis is a necessary component to any secondary market transaction. Before joining Infinity, Hutchison ran American Mortgage Consultants’ servicing and due diligence platform and spent time at Household International and The Clayton Group.

Rick Bissen SENIOR VICE PR ESIDENT, SA LES, DUE DILIGENCE Rick Bissen brings over 15 years of mortgage due diligence, staffing, and related services to the firm, as well as 16 years in the technology, information and document management industry. In his prior role as the executive vice president of corporate development at JCIII, his responsibilities included the oversight of contract and vendor management, HR, marketing and the legal and risk teams.

Sandra Penichet S E N I O R V I C E P R E S I D E N T, SALES, MORTGAGE SERVICES Sandra Penichet brings over 25 years of experience working in the investment banking industry to Infinity, with extensive knowledge in RMBS, whole loan transaction management and mortgage warehouse financing. Penichet has superior client service skills, along with technical due diligence expertise. Most recently, she managed due diligence teams for Barclays, JPMorgan and Credit Suisse.

Kurt Eaton SENIOR VICE PR ESIDENT, SA LES, DUE DILIGENCE Kurt Eaton brings over 30 years of experience in mortgage banking to Infinity with in-depth knowledge of mortgage originations, capital markets, securitizations, servicing and asset management. His experience includes 12 years as a senior manager in the Deloitte Securitization practice, where he managed the securitization due diligence of hundreds of asset and RMBS issuances.

Michael Monti SE N IOR V IC E PR E SI DE N T, S TA F F I NG SOLUTIONS Mike Monti brings over 15 years of experience in the mortgage due diligence business and is responsible for overseeing professional service engagements with Infinity’s clients. Prior to joining Infinity, Monti served as the vice president of staffing solutions for AMC, and as director of recruiting for JCIII & Associates, where he was a strategic partner with operations and was responsible for internal talent acquisition.

Ian Rogers VICE PRESIDENT, BUSINESS RELATIONS & SALES, DUE DILIGENCE Vice President of Business Relations Ian Rogers joined Infinity in 2010. In his professional life, he has worked extensively throughout the mortgage banking industry, starting as a business development executive and then rising through the ranks to vice president. Rogers has more than 10 years’ experience with a core background for mortgage due diligence and quality control reviews.

HOUSINGWIRE ❱ MAY 2019 43

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

OPTIMAL BLUE | SPONSORED CONTENT

Optimal Blue automates the entire secondary marketing process

The company’s suite of products provide a transparent process for buyers and sellers

he last 18 months have seen a significant shift in both the primary and secondary mortgage markets. Facing shrinking loan volume and compressed margins, lenders have broadened their loan products for borrowers who fall outside of traditional government or conforming guidelines, prompting investors to add programs that incorporate these loans. But these new opportunities present real challenges. The number of investors has grown significantly since the financial crisis, with 150 organizations now actively buying loans. And the types of loans available for purchase have also multiplied. Combined, these factors have compounded the complexity of the secondary marketing function, demanding sophisticated automation for accurate content management and execution. Fortunately, Optimal Blue has spent the last several years relentlessly automating the entire secondary marketing process — from content to commitment, and everything in between — and can meet these challenges head-on. Optimal Blue, founded in 2002, provides not only industry-leading solutions for originators and investors but also an enterprise-level, end-to-end platform that processes more than $750 billion worth of transactions each year. Its Digital Mortgage Marketplace connects mortgage buyers and sellers in an efficient, transparent process that facilitates a broad set of secondary market interactions. The company’s view into the data associated with these transactions led it to develop the Optimal Blue Mortgage Market 44 HOUSINGWIRE ❱ MAY 2019

Indices (OBMMI) to provide consumers and mortgage professionals with greater visibility into key drivers of mortgage pricing. Based on actual locked rates with consumers across more than 30% of all mortgage transactions nationwide, OBMMI provide the most extensive and accurate interactive analysis of pricing ever conducted in the mortgage industry. OBMMI aggregates data from 2 million transactions a year between 800 lenders, 3,000 brokers, and 200 buyers of loans and synthesizes that data into 16 primary and detailed mortgage rate indices. Updated daily through a robust API, the indices can be compared with each other to isolate specific market movements and spot trends. “For close to two decades, Optimal Blue has led the mortgage industry with pricing automation technology designed to facilitate transactions between consumers and lenders,” explained Bob Brandt, vice president of marketing and alliances at Optimal Blue. “Complete with the industry’s largest product eligibility and pricing library, and backed by an unparalleled commitment to accuracy, Optimal Blue’s platform ensures that consumers are presented with the best-fit financing alternatives and that lenders consistently deliver the best price.” Optimal Blue continues to evolve its platform, providing lenders and investors with inspired technology that automates key functions of the secondary marketing process.

AUTOMATING THE SECONDARY MARKETING FUNCTION Product Eligibility & Pricing Optimal Blue is the largest product eligibility and pricing (PPE) provider in the industry, serving more than 50% of the market and processing $600 billion worth of rate locks every year. The company has made significant investments to automate this functionality and the result is a robust system that delivers a single source of compliant pricing with 99.995% accuracy, making Optimal Blue’s PPE the system of record for the mortgage industry. That accuracy is a hallmark of Optimal Blue, which uses an extensive set of product filters to identify applicable loan programs and then evaluates best execution pricing among eligible products. This capability is even more critical given the growing number of non-QM loan products in the market. In addition to the execution, content, and margin management that Optimal Blue’s flagship PPE is known for, the

C O M PA N Y S P O T L I G H T: OPTIMAL BLUE SPONSORED CONTENT

company recently rolled out a new innovation — a “lights-out” lock desk functionality that can automatically lock the loan, change the lock, change the product type, grant exceptions, and more. “When it comes to secondary marketing, the lock desk is a high-cost function,” said Optimal Blue CEO, Scott Happ. “We’ve automated the entire process. Lenders can configure auto-accept policies for locking and relocking products with characteristics that don’t require a manual touch, thereby reducing lock desk involvement in scenarios where automated policies can do the work instead.” Hedging Optimal Blue’s sophisticated hedge advisory and analytics platform integrates seamlessly with its PPE and digital loan trading platforms. This automated collaboration provides Optimal Blue clients with a tremendous competitive advantage. First, interest rate locks from the PPE flow into the pipeline in real time, ensuring that the hedge position is always fully updated. Second, the broadest possible set of executions is available, ensuring that lenders will always discover the best price. In addition, automating the loan trading and committing process through the Resitrader system reduces costs and error rates. “By combining exceptional analytics with unmatched system integration, Optimal Blue is uniquely positioned to help lenders succeed when deploying a mandatory execution strategy,” Happ said. Loan Trading In July 2018, Optimal Blue acquired

Resitrader, creating the mortgage industry’s largest mortgage loan trading platform. Resitrader’s interactive trading environment enables buyers, sellers, and their advisors to transact in real time using an auction process and replaces the widely-used method of exchanging bid tapes via email. The solution also helps traders optimize executions by supporting shadow-bidding, the posting of axes, chatbased communication, and color reports. Resitrader has achieved remarkable success with its trading platform over the past year, recording a 400% increase in transactions. Optimal Blue has made it easy for investors to use Resitrader through the recent launch of another robust API designed to integrate with investors’ existing, internal systems. The APIs embed and trigger the market-leading capabilities of Resitrader into whatever trading application the investor is currently using, similar to the API plug-in capability offered through Optimal Blue’s PPE. “Most clients are perfectly fine with coming into the Resitrader system to do their business,” explained Happ. “However, the largest investors look to our highly functional and real-time APIs to integrate with their own infrastructure and technology, so they are still able to take advantage of the benefits of the Resitrader platform. This is just another step for us to integrate into investor and origination businesses to maximize the efficiencies they require.” Social Media Platform Social media is an extremely powerful business development tool for lenders and Optimal Blue provides the only fully automated social media compli-

ance platform designed specifically for the mortgage industry. The comprehensive platform enables lenders to manage the social media activities of loan officers through audits, monitoring, and collaboration. The audits are point-in-time, comprehensive reviews, while automated monitoring constantly evaluates social activity and proactively identifies trigger terms and keywords to isolate compliance concerns requiring remediation. Optimal Blue has recently released a publishing tool that enables the LO to schedule and post content to any network from their corporate department, using approved templates and other corporate assets. The tool is developed around the NMLS database, so it is pre-loaded with every licensed mortgage professional in the country, enabling originators to quickly take advantage of the solution and save time managing their users. Data Intelligence As a marketplace, Optimal Blue has accumulated a massive amount of data which it now leverages to help clients decide on the most profitable execution strategies for the secondary market through a host of core data solutions. In addition to the OBMMI mentioned earlier, lenders and investors can leverage Optimal Blue’s data solutions to benchmark their rates and pricing to determine how competitive they are in the market. These reports can be run in real time at a moment’s notice, giving clients important intelligence at the right time. Optimal Blue also supports additional benchmarking tools for lock activity, margin management, market share, and volume. Optimal Blue’s platform automates the entire secondary marketing process with innovative solutions for product eligibility and pricing, hedging, loan trading, social media compliance, and data intelligence. Optimal Blue is playing a critical role in expanding opportunities for lenders and investors in this competitive purchase market. HOUSINGWIRE ❱ MAY 2019 45

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

VRM | SPONSORED CONTENT

VRM delivers solutions that benefit both clients and communities

The company focuses on customizing processes and systems for the needs of specific end-users

n 1981, Keith Murray, a licensed appraiser, established PCV Murcor, Inc. — a valuations company headquartered in Southern California providing residential and commercial valuation services nationwide. In 2006, Murray recognized that mitigating the housing market challenges started with valuing markets correctly and developing the best disposition strategy to mitigate losses, so he launched Vendor Resource Management, Inc. (VRM) — an REO disposition company. Murray effectively used his 30-year valuations experience to develop REO disposition strategies that lead to VRM becoming one of the largest companies within this space, handling in excess of 10,000 REOs per month. Since its inception, VRM has managed and sold more than 600,000 corporate residential foreclosed assets. In 2008, VRM began to expand its service offering to include more than REO disposition services. Murray established a leadership team of seasoned industry professionals who have become solution providers, by developing service offerings that respond to client-specific needs, versus convincing customers to adapt to pre-established processes. Murray identified that this approach was so effective that he began to build a full servicing solution. He supported the establishment of VRMU, a real estate professionals training platform, in 2008, built a loan servicing solution in 2011, started High Tide Settlement Services in 2011, a property 46 HOUSINGWIRE ❱ MAY 2019

preservation solution in 2015, launched VRM origination services in 2015 and established the Mortgage Collective — a thought leadership and networking platform — in 2013. To reflect the evolution of VRM’s service offerings, the company was rebranded VRM Mortgage Services in 2012. VRM REAL ESTATE ALLIANCE Today, the combined capabilities of the VRM family of companies provide a full servicing solution for clients. Murray recently launched VR M Real Estate Alliance, to make it easy for clients to find everything they need in one place. Cheryl Travis-Johnson, VRM’s executive vice president and chief operating officer, said, “This platform will allow us to cost-effectively leverage the core competencies of the alliance partners to deliver the best possible solution to any industry pain point.” Instead of out-of-the-box solutions that might provide too much or too little for clients, VRM focuses on tailoring its processes and systems to support the needs of particular end-users. The company uses its own proprietary technology for its front-end valuations as well as sales and marketing. “We built our own systems and we have a very dynamic IT team to support each system. The beauty in that is the knowledge is ours — the team that built it is the one maintaining it, so we can make changes or fixes very quickly and clients don’t have to pay to get it done, our system is part of what you get when

you choose us,” Travis-Johnson said. The VRM Real Estate Alliance not only includes Murray’s family of companies, but also highlights companies he partners with to deliver services or philanthropic events. Murray is committed to providing services that promote neighborhood stabilization and celebrate communities and veterans. Murray launched a nonprofit, PCV/ VRM Seeds of Hope, in 2008 and is one of the sponsors of the Council for Inclusion in Financial Services (CIFS), an organization committed to financial literacy and educating financial professionals on the economic benefits of diversity and inclusion. The CIFS third annual Financial Services Expo will be held June 3-5 at the Irving Convention Center in Irving, Texas. Along with several donations to veterans through Seeds of Hope, Murray’s companies have invested a staggering $90 million in veteran-owned businesses since 2012. WHAT’S NEXT In April, Murray launched Vendor Resource Ma nagement Investor Insurance, in partnership with OSC. This product is an insurance policy for investors of residential assets and is a complete online product offering and delivery. Almost 50% of the assets that VRM oversees are bought by investors, and the company realized that many small real estate investors are unaware of the kind of insurance coverage they need for

property that’s not their primary residence. With a number of natural disasters in diverse geographies in the last few years, proper insurance is more important than ever. “T hese investors are not necessarily real estate professionals, and they might be using standard homeowner’s policies, or renter policies that don’t have proper coverage,” Travis-Johnson said. “There is an inherent risk when someone else uses the property, and the owners need to treat it like an investment.” VRM launched another initiative in April — the VR M Communit y First Prog ram, which is designed to assist investors purchasing assets through Conveyance Without Conveyance of Title (CWCOT) programs or purchasing loans from the GSEs or other financial institutions. Through this program, an investor can get propert y-related analy tics, title curative specifications,

and the best marketing/retention strategy on assets pre- and post-purchase. “I believe communities are ser ved best when investors have a method to quickly address title curative issues so properties can be quickly occupied by either a tenant or owner,” Murray said. “Simply put, properties sitting unoccupied cause blight.” I n fact, a re cent Urba n Institute report outlined the price paid by communities in the conveyance process, noting that “the longer a property sits vacant and unoccupied, the more likely it is to be damaged, vandalized, or affected by bad weather, thus requiring new repairs…Drawn out timelines also harm the neighborhoods where these properties linger unoccupied for years, resulting in neighborhood blight and neglect.” Instead of a long, drawn-out process, Investors using the VRM Community First program

can have the title cured, preservation efforts started and the final disposition strategy implemented immediately upon purchase. Ultimately, he will enhance the program to include a consumer-facing solution that could even help reduce the number of foreclosures through an online valuation tool that gives homeowners data analytics about their home, loan programs and a lower cost method to sell their home pre-foreclosure. This consumer-facing tool would also help sellers identify relocation options. For Murray, the diverse companies he has founded or partnered with all reflect the values that have characterized his vision from the beginning. “We want to continue what we started over 35 years ago, delivering solutions that help our clients mitigate losses while aligning our service delivery with community preservation efforts.”

EXECUTIVES:

KEITH MURRAY CEO President of VRM Real Estate Alliance

CINDY NASSER EVP, COO of PCV Murcor

JON VAN DEUREN COO of Hightide Settlement Services

CHERYL TRAVIS-JOHNSON EVP, COO of VRM Mortgage Services HOUSINGWIRE ❱ MAY 2019 47

48 HOUSINGWIRE ❱ MAY 2019

DID YOU KNOW Caroline Basile sends RentWire twice a week by email? Go to HousingWire.com/newsletter to sign up and stay informed!

RentWire

Will rent control be the multifamily industry’s new challenge? STATES ON THE WEST COAST ARE FEELING THE BURN BY CAROLINE BASILE AND BEN LANE

AS housing affordability issues plague the nation and rents continue to increase across the country, rent control is quickly becoming another hot-button issue facing both state and local governments, and the multifamily industry, in 2019. And it isn’t difficult to see why this is such a touchy subject among renters and the multifamily industry. Rent prices are not moving at a record clip but they aren’t exactly slowing down – they’re holding a steady pace of growth. The average price of rent increased $2 in February to $1,426 and has grown 3.6% since 2018, according to the latest Yardi Matrix National Multifamily Report. States on the West Coast are certainly feeling the burn from rising rents. Housing affordability for renters and buyers in hot markets such as Portland and San Francisco have been a longstanding issue facing the housing industry. In February this year, Oregon became the first state to enact a rent control law.

The law, which places an annual limit on rent increases of 7% plus inflation, was signed into effect by Oregon Governor Kate Brown, who signaled that this won’t be the state’s only step toward addressing affordable housing. “This legislation will provide some immediate relief to Oregonians struggling to keep up with rising rents and a tight rental market,” Brown said in a statement. “But it does not work alone. It will take much more to ensure that every Oregonian, in communities large and small, has access to housing choices that allow them and their families to thrive.” Brown isn’t stopping at curbing rising costs for renters. She also called on the state legislature to authorize $400 million in new investments “aimed at ending homelessness for Oregon’s children, providing permanent supportive housing for the chronically homeless, housing Oregon’s veterans and accelerating the growth of housing supply by tripling the existing pipeline of affordable housing by 2023.” HOUSINGWIRE ❱ MAY 2019 49

And while those measures are still under consideration, the in place that explicitly prohibit local municipalities from implerent control law went into effect immediately, according to The menting rent control laws,” he added. “Reversing course is counOregonian. terproductive and will not solve the crisis. Oregon lawmakers The Oregonian also reported that law also contains other should focus on holistic solutions that encourage more housing rent-related restrictions, as well as other eviction protection supply, facilitate public-private partnerships to tackle many of measures, outlined below: the existing barriers, and increase direct assistance to renters.” The rent increase restrictions exempt new construction for 15 Robert Pinnegar, National Apartment Association president years, and landlords may raise rent without any cap if renters leave and CEO, echoed Bibby’s sentiments. of their own accord. Subsidized rent also is exempt. The bill also “Today’s regrettable action by the Oregon State House of requires most landlords to cite a cause, such as failure to pay rent Representatives on SB 608 will lead to unintended, but pre-emior other lease violation, when evicting renters after the first year nently predictable negative consequences for housing affordabilof tenancy. ity in the state,” Pinnegar said. Some “landlord-based” for-cause evictions are allowed, includ“Rather than focusing on the onerous regulatory environment ing the landlord moving in or that constricts the diversity a major renovation. In those of housing needed to meet cases, landlords are required the surging demand for to provide 90 days’ notice rental housing, Oregon’s and pay one month’s rent to public officials chose to the tenant, though landlords slide backward by enactWhile the intent of rent control with four or fewer units would ing a failed policy that has be exempt from the payment. historically proven to hurt laws is to assist lower-income As the Oregonian notes, resident s a nd housi ng populations, history has shown that the bill moved quickly supply alike,” Pinnegar through the state’s House adde d . “ T he Nat ion a l rent control exacerbates shortages, and Senate thanks to a Apartment Association and makes it harder for apartment Democratic supermajority the National Multifamily in both houses. Housing Council will conowners to make upgrades and And while the Democrats tinue to promote sustaindisproportionally benefits higherin Oregon’s legislature supable, responsible solutions ported the bill, the multithat lead to more apartment income households.” family housing industry construction, and oppose appears not to. reckless and ill-advised Both the National policy approaches like rent Mult ifa mily Housing control.” Council and the National Meanwhile, further down Apartment Association blasted Oregon’s new law, claiming that the West Coast, California legislators and the state’s voters have it will actually have the opposite effect on affordable housing in tossed the issue of rent control back and forth in what now looks the state. like a game of hot potato. “There is no doubt that housing affordability is a crisis in Months after the state’s voters wholeheartedly defeated a rent Oregon,” said Doug Bibby, National Multifamily Housing Council control initiative during the 2018 mid-term election, the issue of president. “However, SB 608 will worsen the imbalance between expanding rent control in California has returned to the state’s housing supply and demand by allowing for rent control across legislature after a group of Democratic lawmakers unveiled a sethe state.” ries of bills designed to tackle the issue from another angle. “While the intent of rent control laws is to assist lower-income The bills aim to cap annual rent increases across the state to populations, history has shown that rent control exacerbates prevent unjust evictions and to return to cities the authority to shortages, makes it harder for apartment owners to make up- adopt their own rent control policies. grades and disproportionally benefits higher-income houseAccording to reporting from the San Francisco Chronicle, holds,” Bibby continued. supporters of the rent control measures said that urgent action “That is why Oregon and a majority of other states have laws is needed to address what has become a statewide emergen-

“

50 HOUSINGWIRE ❱ MAY 2019

RentWire

cy, as families face soaring housing prices and the prospect of homelessness. According to the Chronicle, almost 50% of Californian renters spend more than 30% of their income on housing, which experts consider to be a cost burden, and more than 25% spend at least half their income on housing. Back in 1995, the state limited the use of rent control when it passed the Costa-Hawkins Rental Housing Act, which prohibits local governments from imposing caps on single-family homes and condos, as well as rental rates for apartments built after the law went into effect. As the Chronicle’s Alexei Koseff noted in his reporting, despite the measure’s defeat in November, California Governor Gavin Newsom said he would still sign a rent control bill if presented to him. “Get me a good package on rent stability this year and I will sign it,” Newsom said in his State of the State address in February. According to the report, the series of bills that state Democrats unveiled would roll back parts of Costa-Hawkins but leave it in place, with details to be hashed out further in the legislature. Here are details on each bill: AB36, if passed, would allow cities in California to enact rent control on buildings built after 1995 that are more than 10 years old and would clear the way for cities to limit rent raises on single-family homes and condos that are more than 10 years old. AB1481, if passed, would prevent landlords from evicting tenants without a valid reason. AB1482, if passed, would prevent California landlords from increasing rents by more than an unspecified percentage above inflation each year, according to the Chronicle. The author of the bill, San Francisco Assemblyman David Chiu, said he is figuring out a cap that would help a broad swath of renters while still allowing landlords to earn a return on their investments. Again, the multifamily industry isn’t exactly behind these initiatives but are willing to work on the issues with lawmakers. Bibby and NMHC told HousingWire that the council is ready to work on a “comprehensive” approach to housing affordability with the Golden State. “In California, we aren’t just in a housing affordability crisis, we’re also in a housing availability crisis and rent control is the wrong approach for both,” Bibby told HousingWire. “California lawmakers should recall that voters sent a clear message about rent control just last fall when they overwhelmingly rejected Proposition 10 which, studies have shown, would have limited new construction and made affordable housing options even more scarce. We stand ready to work with lawmakers, including Gov. Newsom, who understand that the solutions to these challenges need to be big enough to solve them – and that means taking a comprehensive approach.” HOUSINGWIRE ❱ MAY 2019 51

52 HOUSINGWIRE ❱ MAY 2019

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

The American Dream? Not for everyone LENDERS, DREAMERS BECOME PAWNS AS GOVERNMENT SEEMINGLY STOPS SUPPORTING DACA MORTGAGES BY BEN LANE

THERE appears to be a sea change underway surrounding mortgage lending to Deferred Action for Childhood Arrivals recipients, otherwise known as Dreamers. Under DACA, people who came to the United States illegally when they were young (typically brought by their parents) are protected from deportation and given a work permit. In recent years, Dreamers were able to obtain mortgages backed by the Federal Housing Administration, Fannie Mae, Freddie Mac and others, but that doesn’t seem to be case anymore…at least at the FHA. Under President Donald Trump, the federal government tried to end the DACA program, but the program was saved by the courts, although the legal fight is far from over. And while Dreamers are left in the wind wondering whether they’ll be allowed to remain in the U.S. legally, their mortgage options seem to be drying up. The U.S. Department of Housing and Urban Development, FHA and U.S. Department of Agriculture told HousingWire earlier this year that their policies have not changed in regard to mortgages

for Dreamers, but multiple lenders and mortgage industry participants later told HousingWire that HUD seems to be saying one thing and doing another. In fact, numerous lenders said that they’ve been told directly by a HUD representative that DACA recipients are no longer eligible for FHA mortgages. One lender passed along a message that appears to be from a HUD employee who states that C33 visa holders (Dreamers) do not meet FHA guidelines because DACA status does not grant legal residency in the U.S. Another lender told HousingWire that they contacted FHA directly and were told, point blank, that DACA borrowers are not eligible for a FHA mortgages. Yet another lender asked the FHA’s customer service team whether DACA borrowers are eligible for an FHA mortgage. The response from the FHA: “No we do no(t) lend to DACA borrowers.” Another lender told HousingWire that they’ve chosen to stop FHA lending for Dreamers because they (along with others) have collectively interpreted HUD’s guidance to mean the FHA will not HOUSINGWIRE ❱ MAY 2019 53

back mortgages for Dreamers. Others say they’ve received mixed messages from HUD about FHA lending for Dreamers. And therein lies the rub. By not declaring definitively one way or the other on whether Dreamers are eligible for FHA mortgages, HUD is allowing that mystery to serve as their answer. By not providing a direct answer, HUD is leaving it to the mortgage industry to interpret what they are supposed to do about it. Basically, it appears that HUD wants things to be ambiguous, thereby discouraging all parties from writing loans for DACA borrowers for fear that they won’t be able to do anything with the loans in the secondary market. And that’s leading to lenders not writing mortgages for DACA borrowers because they don’t want to be on the hook if/when the FHA denies the mortgage. One lender tells HousingWire that “no one” in the lending in-

54 HOUSINGWIRE ❱ MAY 2019

dustry is doing FHA loans for DACA borrowers because of that confusion. According to that lender, only one investor they work with is willing to buy C33 loans right now, but only if they are conventional loans, i.e. those backed by Fannie Mae or Freddie Mac. Outside of that, the lender says that lenders are simply not doing

“

Fannie Mae purchases and securitizes mortgages to non-citizens who are lawful permanent or non-permanent residents of the United States under the same terms available to U.S. citizens.”

FHA mortgages for Dreamers. The risk is just too great. Fannie Mae, for its part, declared (in apparent reaction to questions from the lending industry about its policies) that it will back mortgages for Dreamers, as long as certain lending criteria are met. “We have a longstanding policy on eligibility for non-U.S. citizen borrowers,” the government-sponsored enterprise said in a lender bulletin. “Fannie Mae purchases and securitizes mortgages to non-citizens who are lawful permanent or non-permanent residents of the United States under the same terms available to U.S. citizens.” Fannie Mae said that it is not changing its existing policies. Rather, the purpose of issuing the bulletin was to provide “additional guidance to help lenders determine eligibility for non-U.S. citizen borrowers” in response to customer feedback on the issue. According to the sample scenario laid out by Fannie Mae, if a borrower has “current, unexpired” DACA status and meets the following criteria: has an Individual Tax Identification Number; is a salaried borrower with acceptable employment history, has nontraditional credit acceptable per the Selling Guide; meets all other Selling Guide requirements, will have a manually underwritten loan; and has an Employment Authorization with C33 status; that borrower is eligible for a Fannie Mae loan. To repeat, if those criteria are met, Fannie Mae considers that Dreamer’s mortgage eligible to be purchased. And while Fannie Mae has officially declared that it will back mortgages for Dreamers, the FHA’s lack of clear information is leading lenders to take matters into their own hands. In fact, a HousingWire investigation uncovered lender bulletins or guidelines from a dozen different lenders each stating that Dreamers are not eligible for FHA financing.

Those declarations were likely made at each lender independently, absence of official guidance from HUD. Without a buyer or backer for the mortgage, the lender can’t originate another one. That’s how lenders make money. And investors aren’t going to buy a mortgage if they don’t think the FHA is backing it. That’s leading lenders to not originate FHA mortgages for Dreamers. In most cases, the lenders do not list a reason for why Dreamers are ineligible for FHA financing, but two state housing finance agencies did provide a reason. The Connecticut Housing Finance Agency, for example, published a lender bulletin that states, “FHA now stipulates that NonPermanent Resident Alien Guidelines require lawful residence for FHA loans. Although Deferred Action for Childhood Arrivals (DACA) immigrants are in the United States legally, under the new administration they are not considered to have lawful residency.” According to the bulletin, as of earlier this year, “DACA applicants will not be eligible for first or second mortgage loan financing approval in any CHFA mortgage loan product, conventional or government.” A similar notice was posted on the website of the Idaho Housing and Finance Association. The IHFA notice stated: Effective immediately, Idaho Housing will not allow loans to be locked for DACA borrowers. Gateway Mortgage Group also provides a more detailed explanation on its policies surrounding DACA borrowers. In an announcement on Aug. 3, 2018, Gateway states that it is no longer accepting mortgage applications for DACA borrowers: Due to recent Executive Orders and court actions regarding the Deferred Action for Childhood Arrival program (“DACA”), Gateway has reviewed the complex issue of whether we will purchase loans to participants in the DACA program. Based upon its review of relevant agency, investor and insurer guidelines and requirements, Gateway has determined that unless and until there is formal action taken which clearly provides that DACA loans are eligible to be purchased, insured, guaranteed and securitized, Gateway will not accept loan applications or purchase loans for borrowers who are subject to a DACA (C-33 designation). Other lenders, including NewRez (which recently changed its name from New Penn Financial); loanDepot; JMAC Lending; CMG Financial; Land Home Financial Services; and American Financial Network state simply that DACA borrowers are not eligible for FHA financing. Add all of this together and one begins to see that it’s becoming increasingly more difficult for a Dreamer to get any kind of mortgage, let alone an FHA one. In fact, one potential DACA borrower actually applied for a mortgage after reading that the FHA told HousingWire that its rules for DACA mortgages had not changed. He was denied. HOUSINGWIRE ❱ MAY 2019 55

ReverseReview

56 HOUSINGWIRE ❱ MAY 2019

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

ReverseReview

Will rising home equity totals equate to growth in the proprietary reverse mortgage market? LENDERS ADJUST PRODUCT OFFERINGS TO BROADEN EQUITY ACCESS BY JESSICA GUERIN

U.S. homeowners continue to rake in records amounts of equity. In fact, a recent report from CoreLogic revealed that in the fourth quarter of 2018, the average homeowner gained $9,700 in equity in one year’s time. This equates to an 8.1% increase year over year, CoreLogic noted, and represents an aggregate gain of $678.4 billion since the fourth quarter of 2017. For the senior set, equity levels are equally impressive. Home equity levels for homeowners 62 and older reached a record $7.05 trillion in the fourth quarter of 2018, according to the National Reverse Mortgage Lenders Association/RiskSpan Reverse Mortgage Market Index. This represents a 1.4% growth from the previous quarter and

shows the highest level of growth since the index was established in 2000. A RENOVATION BOOM CoreLogic said that rising home prices coupled with increasing equity could convince more homeowners to access their home equity in order to finance renovations. “As home prices rise, significantly more people are choosing to remodel, repair or upgrade their existing homes,” CoreLogic President and CEO Frank Martell said. “The increase in home equity over the past several years provides homeowners with the means to finance home remodels and repairs.” For older homeowners, this could be especially true. HOUSINGWIRE ❱ MAY 2019 57

ReverseReview

A recent study by the Joint Center for Housing Studies at Harvard University revealed that households headed by those ages 55 and older account for half of all current home improvement spending. And, as Baby Boomers reach their 70s and 80s, researchers say Rising house prices are good news for their investments in home modifications to enhance accessibility the remodeling market in that they will soar. Home improvement spending set a new high in 2017, reaching are associated with higher home $424 billion, according to the report, which attributed the upward improvement spending. Knowing trend to a steady increase in home prices and an aging population. “Rising house prices are good news for the remodeling marthat their homes are increasing in ket in that they are associated with higher home improvement spending,” the report stated. “Knowing that their homes are invalue provides owners an incentive creasing in value provides owners an incentive to invest in their to invest in their properties.” properties.” Older homeowners are also living longer, Harvard noted, and they are increasingly willing to spend money on home improvements that will allow them to age in place. The facts led the Harvard researchers to conclude that home- industry, but also help to preserve and modernize the nation’s owners need access to more ways to finance their home improve- aging housing stock,” the report concluded. ment projects, especially as it becomes critical that the dated housing stock be updated to accommodate an aging population. THE PROPRIETARY REVERSE MORTGAGE SOLUTION “Expanding the ability of owners to pay for improvement proj- How will these older homeowners finance their home improveects over time – whether through home equity loans or lines of ment projects? credit, cash-out refinances or contractor-arranged financing – For some, a proprietary reverse mortgage could be the answer. would not only generate considerable growth in the remodeling At least, that’s what a number of reverse lenders are banking on.

“

58 HOUSINGWIRE ❱ MAY 2019

ReverseReview

CURRENTLY, FIVE LENDERS OFFER PROPRIETARY REVERSE MORTGAGE PRODUCTS: • FINANCE OF AMERICA REVERSE: THE HOMESAFE FAR offers seven different versions of its HomeSafe proprietary reverse mortgage, including a second-lien version and a HELOC option. The HomeSafe is available for properties valued up to $10 million and offers loan proceeds up to $4 million.

• AMERICAN ADVISORS GROUP: THE AAG ADVANTAGE Billed to retail clients as the AAG Advantage, this loan is technically FAR’s HomeSafe Standard. The two lenders teamed together last year to work together to create more volume for the product and therefore spur greater innovation on the proprietary front.

• REVERSE MORTGAGE FUNDING: THE EQUITY ELITE RMF’s proprietary fixedrate, full-draw offering is unique in that it caters to borrowers as young as 60, whereas other proprietaries and the HECM have a minimum age requirement of 62.

Currently, five lenders offer proprietary reverse mortgages, or reverses that are privately insured and not backed by the Federal Housing Administration. And word has it that one more is about to jump in on the game. Financial documents released recently by Ocwen Financial, parent company of leading HECM lender Liberty Home Equity Solutions, revealed that the company has successfully piloted a proprietary product. A source close to the matter says the lender will be unveiling its product sometime this year. A MORE APPEALING PRODUCT Among the lenders with proprietary products currently on the market, two recently adjusted their offerings in March to reduce the costs. Finance of America Reverse, an innovator on the proprietary front with several iterations of its HomeSafe product available to borrowers, announced that it was reducing the cost of two of its most popular proprietary reverse mortgage products. The two products it is reducing the cost of includes the HomeSafe Standard and the HomeSafe Flex. The lender said it has dropped origination fees – reducing overall cost by about $7,000 to $8,000 – and is offering lender credits on customary closing costs on certain products for eligible borrowers. FAR said the change is intended to offer borrowers more cost-effective loan options when considering a reverse mortgage, a move that directly combats the long-held criticism that reverse mortgages are too expensive. And Reverse Mortgage Funding soon followed suit, announcing that it had also decided to reduce the fees on its Equity Elite product. The Equity Elite is a full-draw, fixed rate, privately insured reverse mortgage that has a maximum loan amount of $4 million. It is unique to the market in that it caters to homeowners as young as 60, whereas the HECM and other proprietaries have a minimum age of 62.

• LONGBRIDGE FINANCIAL: THE PLATINUM The Platinum offers borrowers access to up to $4 million of their equity with no origination fees, no monthly servicing fees and no mortgage insurance premiums.

• ONE REVERSE MORTGAGE: THE HELO Like its counterparts, ORM’s Helo offers access to up to $4 million in proceeds but does not require borrowers to take a lump sum at closing.

RMF announced that it had reduced origination fees and closing costs for the loan. The savings range from $1,400 to $10,000, according to the lender, depending on the borrower’s coupon and home value. RMF National Wholesale and Correspondent Sales Leader Mark O’Neil said that reducing the cost associated with taking out a proprietary reverse will help attract borrowers who are closing-cost sensitive. And, because reverse mortgages are often criticized for being expensive, the move will help align it more closely with traditional lending products. “Having a product that looks and feels and is priced a lot more like a traditional mortgage is very appealing,” O’Neil said, adding that refinements to the Equity Elite and other such products on the market is “a big step toward proprietary products being looked at as more of a mainstream mortgage and not as much of a niche, like the HECM.”

HOUSINGWIRE ❱ MAY 2019 59

CFPB Watch

60 HOUSINGWIRE ❱ MAY 2018

CFPB Watch

CFPB’s Kraninger reverses Mulvaney’s changes to advisory boards UNDOES MULVANEY’S ACTIONS BY STRENGTHENING COMMITTEES BY JESSICA GUERIN, JEREMIAH JENSEN

IT appears Kathy Kraninger is determined to leave her mark on the Consumer Financial Protection Bureau, nixing yet another move made by her predecessor Mick Mulvaney. Recently, the new CFPB director announced that she is lengthening the tenure of members serving on the Consumer Advisory Board and three other committees, allowing half of the existing membership to continue serving, and upping the number of in-person board meetings from two to three a year. Kraninger’s move reverses previous action by Mulvaney, who dismantled the Consumer Advisory Board and two other committees that advise the agency on policy and economic and financial issues in June 2018 to the dismay of several consumer advocacy groups. Previously, Mulvaney gutted three CFPB Advisory Boards: The Consumer Advisory Board, Community Bank Advisory Council and the Credit Union Advisory Council.

“In a move that signals the continuing attempts by Acting Director Mulvaney to destroy the Consumer Financial Protection Bureau from within, leadership at the Bureau informed me, along with other Consumer Advisory Board members and members of two other CFPB Advisory Boards, that we were fired,” California Reinvestment Coalition Executive Director Paulina Gonzalez said in a statement regarding the firings. “The actions by Mulvaney today speak to the direction of the Bureau, which under his leadership have been entirely focused on industry interests, such as dismantling consumer protections, weakening fair lending enforcement, dismantling auto discriminatory lending guidance, and not implementing hard-won payday lending rules,” Gonzalez continued. “By firing the CAB, Mulvaney is taking away an important voice of working-class Californians who have never fully recovered from the Wall Street

financial crisis, and who are still struggling to stay in their homes and access safe, affordable credit and financial products.” At the time, the CFPB’s Anthony Welcher cited these reasons for the terminations in a phone call, according to a statement by former members of the CAB:

• T he bureau cited savings of a few hundred thousand dollars; former members of the CAB estimate this to represent less than .08% of the agency’s overall budget.

• T he bureau cited responses to a Request for Information on External Engagement as a justification for the change. When pressed, Welcher said the decision was made before the RFI had closed, and he could point to no RFI response calling for dissolving the advisory boards. A review of the RFI responses reveals there was no response calling for a

HOUSINGWIRE ❱ MAY 2018 61

CFPB Watch restructuring or dissolution of the current advisory boards, according to former members of the CAB.

• T he bureau cited a desire for a smaller, more diverse, and more inclusive group of people involved.

• T he implementation of a new plan to hold town hall meetings and intimate roundtable discussions, which former members say were two long-standing practices of the CFPB. “While deeply disappointed by this move, the Californian Reinvestment Coalition and our members will continue to work to ensure that Wall Street, big banks, and the regulatory agencies that oversee them, are operating in the best interest of all Californians,” Gonzalez said. “We will not falter in our work to hold Wall Street accountable, nor will stop working to protect the true mission of the CFPB which now seems to be working for the big banks instead of American families.” But the CFPB denied any wrongdoing, and even, at the time, said it didn’t fire anyone. “The bureau has not fired anyone,” a CFPB spokesperson said at the time. “The Bureau will continue to meet its statutory obligation to convene the Consumer Advisory Board meetings as well as enhanced forms of public outreach and engagement as referenced in the announcement this morning. This expansion will include but is not limited to the use of town halls and roundtables throughout the United States.” “The first of these public engagements will occur in Topeka, Kansas, town hall this Friday,” the spokesperson continued. “The outspoken members of the Consumer Advisory Board seem more concerned about protecting their taxpayer funded junkets to Washington, D.C. and being wined and dined by the bureau than protecting consumers.” Congressional statute requires that the bureau establish advisory boards comprising banks, credit unions, community members and academics to help guide policy decisions, and 62 HOUSINGWIRE ❱ MAY 2018

that these boards meet at least twice a year. When Mulvaney took over as acting director, he dissolved the existing boards and populated new ones with hand-picked members. He reduced their tenure from three years to one. He also took the Consumer Advisory Board down from 25 members to nine, arguing that while the bureau must meet with the groups, the director could decide who made up those groups. Many consumer groups stood in opposition to these changes. One big complaint was that decreasing the number of years in each term would destroy any institutional knowledge the boards had since membership would change each year. “That was one of the changes that we had

found most troubling because it reduces the amount of diversity and depth of perspective,” said Chi Chi Wu, a lawyer for the National Consumer Law Center and one of the former members of the Consumer Advisory Board. “The real test will be who gets appointed: will we see strong consumer advocates appointed to the?” Kraninger, apparently, did not agree with the changes, reversing his actions to the delight of consumer groups who feared that Mulvaney’s changes reduced the diversity and depth of perspective board members could offer the bureau. “I’ve seen firsthand how the Bureau benefits from the valuable input provided by commit-

CFPB Watch

“

The actions by Mulvaney today speak to the direction of the Bureau, which under his leadership have been entirely focused on industry interests, such as dismantling consumer protections, weakening fair lending enforcement, dismantling auto discriminatory lending guidance, and not implementing hard-won payday lending rules.”

-Reinvestment Coalition Executive Director in front of Paulina Gonzalez

tee members. I have also seen how the joint committee meeting is resulting in members sharpening their ideas by engaging in a thorough dialogue,” Kraninger said of the moves. “These enhancements demonstrate my commitment to ensuring that the Bureau’s advisory committees are helping to improve our work on behalf of consumers.” Of course, this isn’t the first change Kraninger has reversed since taking over at the CFPB. In December, Kraninger nixed another of Mulvaney’s hotly contested moves, putting an end to the bureau’s name change to the Bureau of Consumer Financial Protection after the cost associated with the change was projected to total millions.

HOUSINGWIRE ❱ MAY 2018 63

Inside Baseball

64 HOUSINGWIRE ❱ MAY 2019

Inside Baseball

New privacy laws pose looming threat to lenders GDPR AND CCPA ARE JUST THE BEGINNING OF INTERNATIONAL AND STATE REGULATION BY SARAH WHEELER

FOR mortgage companies struggling with compressed margins, complying with consumer protection laws is a constant high-wire act. In this precarious environment, privacy laws like GDPR and CCPA represent a looming threat that could knock small and regional lenders right off the tightrope. Four experts tackled the subject of emerging privacy laws at the Mortgage Bankers Association Tech Conference in March: Daniel Hoye, head of privacy at Citizens Bank, Justin Antonipillai, CEO of Wire Wheel, Erin Barry, associate vice president at the MBA, and Jonathan Liu, partner, consumer finance at PwC. The consensus — from the stage and from the room — was that there are no easy answers. Consumer privacy became an important compliance issue with the GDPR law implemented last May, but that was merely the vanguard of a whole slew of consumer privacy laws taking shape at the international, federal and state levels. “The rest of the world has noticed that when it comes to information, most information is being processed and most software companies are U.S.-based,” said Antonipillai, who served as the

under secretary of commerce for economic affairs under President Barack Obama. “When you go around the world, the narrative is that why the U.S. is winning in data processing and cloud computing — it’s because U.S. companies don’t follow the rules, where other countries do.” In reaction, and in a vacuum of leadership from the U.S. on the issue, countries like Japan, Singapore, Canada and Brazil have all proposed or passed consumer privacy laws that recognize an individual’s fundamental right to control their own data. Following a number of data breaches, the concern for consumer privacy has also reached a cultural tipping point, prompting U.S. legislators and regulators to take up the charge. There are serious moves being made by a number of congressional committees to pass laws that give consumers more control over their data. Barry said the committee most likely to get something passed in this area is the Senate Banking, Housing and Urban Affairs Committee, where there is bipartisan support for passing legislation on consumer privacy. HOUSINGWIRE ❱ MAY 2019 65

Inside Baseball

“

The rest of the world has noticed that when it comes to information, most information is being processed and most software companies are U.S.-based.” -Justin Antonipillai

But having one federal mandate — as onerous as that might be — would be a pipe dream compared to the difficulty of navigating individual state laws on the issue. Ironically, those state laws — particularly the California Consumer Privacy Act — are already making it difficult for the federal government to step in. “A national standard would have to be really strong,” Barry said. “The Democrats on the House side, particularly from California, don’t want to weaken a California standard. From their perspective, they’re going to be protecting that framework.” THE CCPA GIVES CONSUMERS FOUR BASIC RIGHTS:

1. The right to know what personal information a business is collecting about them, where they got it, what it’s being used for, whether it’s being disclosed or sold, and to whom. 2. The right to opt out of allowing a business to sell their personal information. 3. The right to have a business delete their personal information. 4. The right to receive equal service and pricing from a business even if they exercise these privacy rights. Companies are scrambling to meet the deadline for CCPA compliance, which takes effect Jan. 1, 2020, but 11 more states have similar legislation in the works, each with their own unique requirements. The panelists noted the incredible difficulty of ensuring these rights, especially in an industry that is leveraging massive amounts of personal consumer data for its sales and marketing efforts, much of it from third parties. As Antonipillai noted, “When it comes to privacy, you have to find [the information] in every system, every data point, all of the vendors — everywhere.” 66 HOUSINGWIRE ❱ MAY 2019

How do lenders even begin the process? The panelists said one starting point is to look at what lenders have already done to comply with GBLA regulations, and noting gaps there, as they may already have some parts of the new privacy laws covered. Another suggestion was to look at the personal data of non-customers first. Lenders can also leverage their own tech stack and mine their vendor risk profiles and cloud security tools to help track what data they’ve acquired from third-party SaaS providers. Another panel at the conference discussed whether lenders should build their tech or buy it. The conclusion? It depends on what lenders are looking fore. “There’s a lot of things to consider when you think about buying versus build,” Robert Orkis, principal at RKO Technical Services, explained during the session. “Everything from the size of the staff you want to manage – a lot of companies, when they look at building, don’t realize how many people they need to add to their

Inside Baseball

organization to both build it out and support it.” As one of the first steps at Citizens Bank, Hoye established an implementation steering committee with the chief marketing officer and the chief data officer to make sure the effort had solid executive sponsorship and bring in the critical stakeholders early in the process. From there, they took implementation and broke it into working teams that decided how they would handle intake requests from consumers, and how privacy compliance would be baked into their policies and training. The panel identified some of the most challenging aspects of complying with the new privacy laws: • The U.S. concept of public information versus the international perception of personal information • The First Amendment right to free speech versus the “right to be forgotten” in newspapers and other public records

•

With increasing cloud adoption, the complexity of matching where data is actually stored with applicable state, federal and international laws • How to validate whether it is a consumer with a legitimate claim to these rights or other non-legitimate parties seeking access or correction, especially when so much data collection is done and mapped by device, not by a person’s name Perhaps the biggest concern is one that surfaces with any compliance issue: the competitive advantage of size. While the smallest institutions will likely be exempted, mid-size lenders will face an avalanche of new requirements without the deep pockets to pay for them. “What worries me is that the small banks can’t compete with the big banks,” Antonipillai said. When it comes to legislation on privacy, he’s “hoping for something meaningful but simple.”

HOUSINGWIRE ❱ MAY 2019 67

Kudos GIVING BACK • GUILD MORTGAGE DONATES $300,000 TO THREE CHARITIES Guild Mortgage raised more than $300,000 for three San Diegobased charities to support the homeless, and disadvantaged women and children. The company donated $100,000 each to the following three charities: Monarch School, which educates homeless youth; Urban Corps of San Diego County, work-learning program that helps young people to finish high school while earning a paycheck; and Home Start, which provides services to women and children living in poverty.

68 HOUSINGWIRE ❱ MAY 2019

• WELLS FARGO DONATES $5.4 MILLION TO SUPPORT ARIZONA NONPROFITS Wells Fargo donated more than $5.4 million to 415 Arizona nonprofits, schools and community organizations in 2018 as part of its commitment to address issues like

affordable housing, small business growth, access to education and supporting tribal communities. The company’s 16,109 Arizonabased team members also donated a collective $2.8 million, bringing the company’s total contribution to $8.2 million last year. “Across our community, many residents are working hard to make ends meet,” said Don Pearson, Wells Fargo lead region president based in Phoenix. “Here in Arizona, we want to help people find a stable place to live, help small business owners expand and help young people gain a quality education that prepares them for the workforce. We are determined to help people and communities, especially in underserved areas, succeed financially. We will continue to provide philanthropy, volunteers, expertise and

other resources to revitalize and strengthen local neighborhoods.” Wells Fargo’s Arizona team members also volunteered more than 115,000 hours in last year to support nonprofits and causes important to them. “Part of what makes Wells Fargo unique is the generosity of our team members who help multiply our community impact,” Pearson said. “Sometimes giving time is even more valuable than money, because it puts our desire to build a strong community into action and gives us a tangible way to personally make a difference.”

Kudos

AWARDS NAHB RECOGNIZES WOMAN OF THE YEAR, 3 OUTSTANDING MEMBERS The Professional Women in Building Council of the National Association of Home Builders has honored a number of its members for their outstanding contributions. Darylene Dennon named chair of 2019 NAHB PWB Council Darylene Dennon, Owner and CEO of Washington-based Solid Energy, was sworn in as the 2019 chair of the National Association of Home Builders Professional Women in Building Council. As chair, Dennon will manage the council’s business and represent the interests of council members throughout NAHB. Dennon said she will focus on mentoring other women and bringing new perspectives to the table. “I am a big believer in mentoring to empower others to empower themselves,” said Dennon. “I look forwarding building upon a great team of women on the council and working together to continue the great work that the council has been doing for the industry.”

• NATIONAL GENERAL LENDER SEVICESWINS TWO STEVIE AWARDS National General Lender Services won two Stevie Awards for sales and customer service. The company received a Silver Stevie Award in the Best Use of Technology in Customer Service category and a Bronze Stevie Award in the Contact Center of the Year category. The judges noted that NatGen had, “an impressive platform and a history of doing it right,” and that it showed, “great results and focus on exceptional customer service by leveraging effective technology.” “NatGen has an enduring commitment to consistently deliver solutions and results that protect our clients’ brand and secure the relationships with their customers,” said Art Castner, National General Lender Services president. “We are so pleased that our focus on the customer experience has been recognized with two prestigious Stevie Awards.”

NAHB PWB Council honors woman of the year The PWB Council recognized several members for their contributions to the industry during the NAHB International Builders’ Show in Las Vegas. The council honored Betsy Sheppard, CEO and president of Gilbert & Sheppard Group, as Woman of the Year for “her dedication to promoting the efforts of women in building-related fields who contribute to, and advocate for, the industry.” “Betsy has been an instrumental PWB leader and a mentor to many women coming into our industry,” said Judy Dinelle, chair of

the NAHB PWB Council. “She’s fully invested in the housing industry, her community and the success of her co-workers, clients and peers.” PWB Council recognizes 3 outstanding members The council also recognized three outstanding members for their notable contributions to the organization and the industry. Alicia Vincent, executive vice president of the Greater Birmingham Association of Home Builders, was honored as NAHB 2018 Executive Officer of the Year. Luellen Smith, chair of the Master

Builders of King and Snohomish Counties, was honored as the NAHB 2018 PWB Member of the Year. Joyce Duerfeldt, office mana ger of Nationwide Contractor’s Alliance, was honored as NAHB 2018 PWB National Member of the Year in order to honor her for her leadership on the national PWB executive board and recognize her service as a regional and area PWB trustee. “Alicia, Luellen and Joyce all bring great vision and energy to PWB,” Dinelle said. “Their passion for PWB and desire to see others in the industry succeed make them effective and productive leaders.” HOUSINGWIRE ❱ MAY 2019 69