July 2017 Issue

HOUSINGWIRE MAGAZINE ❱ JULY 2017

PRIME STATUS The state of luxury housing 10 years after the Great Recession.

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OCWEN FIRES BACK The mortgage servicer fights for its life after coordinated action by regulators.

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HOUSINGWIRE MAGAZINE ❱ JULY 2017

FANNIE MAE:

FROM LEGACY TO STARTUP

Andrew Bon Salle on the GSE’s evolution into a smart, agile company P. 30

HOUSINGWIRE JULY 2017 EDITORIAL EDITOR-IN-CHIEF Jacob Gaffney MAGAZINE EDITOR Sarah Wheeler ASSOCIATE EDITOR Caroline Basile SENIOR FINANCIAL REPORTER Ben Lane DIGITAL REPORTER Brena Swanson REPORTER Kelsey Ramirez CONTRIBUTORS Casey Cunningham, Jeffrey Hayward, Deborah Huso, Greg Robinson

CREATIVE CREATIVE ASSOCIATE Chantae Arrington PHOTOGRAPHER Stephen Voss

SALES AND MARKETING NATIONAL SALES DIRECTOR Jennifer Watson Laws jlaws@HousingWire.com MARKETING DIRECTOR C. Scott Smith DIGITAL MARKETING SPECIALIST Caren Karris SALES DIRECTORS Christi Lingard clingard@HousingWire.com Tyson Bennett tbennett@HousingWire.com AD OPERATIONS MANAGER Kristy Figueroa

IT ALL ADDS UP WHY IS IT THAT EVEN WHEN FACTS COUNT, THEY NO LONGER MATTER? We live in an age where social media is doing more to promote the echo chamber of repeating often ill-informed ideas than to push meaningful facts.

In other words, in the fact-versus-fiction category, it is becoming commonplace to call out news outlets when there is any perceived mistake. Even if 99% of the content is accurate, that 1% of perceived error starts getting all the negative attention.

However, this issue underlines a great problem facing the mortgage industry. We don’t have a tech problem, or a credit problem; we have a people problem.

The divisions are now cast as either “with us” or “against us,” with a veritable no-man’s land filling the gap in between. Think of any problem your business is currently facing and I’m sure it can be fixed by allocating the right people to do the job. That’s why we’re beginning to highlight power positions other than the CEO. For this issue, we take a look at Andrew Bon Salle, executive vice president of single-family at Fannie Mae. And it’s not because we already had the CEO Timothy Mayopoulos on the cover. It’s because Bon Salle is going places, we predict, and can rise above the white noise and get some serious work done.

Remember, you heard about it here, first! Enjoy.

Jacob Gaffney Editor-in-Chief @jacobgaffney

SALES COORDINATOR Lydia Bellows

CORPORATE PRESIDENT AND CEO Clayton Collins CONTROLLER Kimberly Hudson OFFICE ADMINISTRATOR Stephanny Morales Subscriptions are available for $149.00 for one year. A subscription includes the print magazine and online access to the digital magazine. Canada and foreign are only eligible to purchase the “Digital Only” subscription plan at $149 for one year. For subscription orders, call 1-800869-6882 or email HW@kmpsgroup.com. Postmaster: Send change of address to HW Media, P.O. Box 47627, Plymouth, MN 55447. Subscribers: Please send last magazine label along with change of address requests.

The information contained within should not be construed as a recommendation for any course of action regarding legal, financial or accounting matters. All written materials are disseminated with the understanding that the publisher is not engaged in rendering legal advice or other professional services. HW Media does not guarantee the accuracy of information provided, and is not liable for any damages, losses or other detriment that may result from the use of these materials. © 2017 by HW Media, LLC • All rights reserved

TWEETS FROM THE STREET Wells Fargo is accused of quietly changing mortgages to extend the terms of borrowers’ loans by decades.

by The New York Times @nytimes HOUSINGWIRE ❱ JULY 2017 5

JULY 2017 36 PRIME STATUS The state of the luxury real estate market 10 years after the recession.

By Deborah Huso

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42

FANNIE MAE Andrew Bon Salle, executive vice president of single family at Fannie Mae, explains the GSE’s evolution into startup mode.

By Sarah Wheeler

OCWEN FIRES BACK The mortgage servicer’s response to a coordinated attack by regulators.

By Ben Lane HOUSINGWIRE ❱ JULY 2017 7

CONTENTS

12 THE LINEUP 12 PEOPLE MOVERS Brian Schneider takes over at Stearns Lending and Amy Brandt named COO and president at Docutech.

14 EVENT CALENDAR

24 VIEWPOINTS 24 AFFORDABLE HOUSING CRISIS

15

ALFN Answers kicks off at the Hyatt Regency in Cedar Creek, Texas, on July 16.

15 ON THE SHELF Sheryl Sandberg and Adam Grant talk about finding joy again in Option B.

16 HOT SEAT Robert Behrend of Auction.com explains how the company educates new investors.

Jeffrey Hayward of Fannie Mae offers solutions to the crisis in affordable rental housing.

18 DISPATCH 1

26 NEVER TOO BIG TO SERVE

20 DISPATCH 2

Greg Robinson of Safeguard on the importance of high-touch servicing.

28 CONVERTING LEADS Casey Cunningham of Xinnix on beating the competition to new business.

Altisource leverages end-to-end product suite for servicers.

Factom releases new solutions to leverage blockchain technology.

22 DISPATCH 3 United Wholesale Mortgage discusses how mortgage tech makes mortgage brokers even more valuable.

TWEETS FROM THE STREET Shocker! Women-led tech startups hire more women

by Fast Company @FastCompany

HOUSINGWIRE â?ą JULY 2017 9

CONTENTS

50 BACK DEPARTMENTS 50 INSIDE BASEBALL In the midst of stagnating volume, companies look to M&A for growth.

54 KUDOS

56 TWEETS FROM THE STREET

More than 30 financial institutions joined Zelle, a new peer-topeer payment service.

56 INDUSTRY PULSE Is there really a shortage of appraisers? The industry sounds off on this hot-button topic.

60 KNOWLEDGE CENTER

Amazon to buy #WholeFoods for $13 bln in its largest deal, biggest foray into brick-andmortar retail sector

by Reuters Business @ReutersBiz

Floify shares strategies from top-performing loan officers on growing annual volume.

62 KNOWLEDGE CENTER

#

Ellie Mae outlines what’s changing with new HMDA rules and how to stay in compliance.

64 CFPB WATCH The House passes the Financial Choice Act.

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64

68 COMPANIES/ PEOPLE INDEX 69 AD INDEX 70 PARTING SHOT HOUSINGWIRE ❱ JULY 2017 11

David Schneider Stearns Lending

12 HOUSINGWIRE ❱ JULY 2017

CIMINO

FACLE OTTAWAY

BURNS LIENERTH

D

OCUMENT and compliance tech company Docutech has named Amy Brandt as its new president and chief operating officer, Brandt brings more than 20 years of experience to the position. Most recently, Brandt served as president of originations and corporate technology at New Penn Financial. She also has served as the chief operations officer at Prospect Mortgage.

Mortgage field servicer Safeguard Proper ties has appointed Sheilla Lienerth as the company’s assistant vice president of client relations. Prior to joining Safeguard, Lienerth held several leadership roles in sales, customer engagement, and performance and business analytics and is also a trained Six Sigma Black Belt. Her previous positions include working with Bridgestone’s credit division and KeyBank.

Safeguard also named Lisa Nicholas as director of finance and accounting, where she will manage Safeguard’s accounts receivable and loss management teams.

Before joining Safeguard, Nicholas managed various areas of accounting with

NICHOLAS

BRANDT HURT

Schneider has been named the new CEO of Stearns Lending, replacing Brian Hale, who stepped down on May 15. Schneider recently served as executive vice president and chief operating officer of Walter Investment Management Corp. and president of Ditech Financial.

increasing responsibility at Forest City Realty Trust, Avery Dennison and Barnes Distribution, where she oversaw strategic process improvement initiatives, operational efficiency and developing standard process and internal control frameworks.

Wholesale and correspondent lender JMAC Lending has hired industry vet Michael Falce as vice president of correspondent lending. He will be responsible for building the lender’s delegated and non-delegated correspondent business and expanding non-agency product and service offerings for mid-sized mortgage companies, credit unions and banks. Falce has more than 27 years of correspondent lending experience and prior to joining JMAC Lending he served as vice president of enterprise sales for OpenClose.

Clarocity has hired Carol Trice as director of quality review services. In this role, Trice will lead the company’s valuation quality and audit division. Trice comes to Clarocity from Caliber Home Loans, where she served as vice president and held various roles overseeing

default risk management, compliance and valuations.

Black Knight Financial Services has added industry veteran Dave Hurt to its Data & Analytics division. Hurt, who has extensive industry experience over a 40year career in the primary and secondary markets, will lead business development activities in the capital markets and government sectors for the company. In this role, he will work with BKFS’ sales teams, developing new and existing client relationships.

Flagstar Bank has expanded the role of Andrew Ottaway, its current executive vice president and head of lending, to the additional role of president of the bank's Michigan market. In his expanded role, Ottaway will oversee Flagstar's retail platform and 99 branches in Michigan.

The Financial Services Roundtable has named Anthony Cimino as its new head of government affairs, where he will oversee FSR's government affairs operations. Cimino joined FSR in 2012 and previously served as its senior vice president of risk management. Prior to joining FSR, Cimino served as senior professional staff for the House Financial Services Committee, where he helped develop the congressional response to the financial crisis and worked on the Dodd-Frank Act. FSR has also added Meg Burns as its senior vice president of mortgage policy to bolster its housing finance reform advocacy efforts. She joins FSR as a partner of The Collingwood Group. Prior to the Collingwood, Burns served as the senior associate director of the Office of Housing and Regulatory Policy at the Federal Housing Finance Agency where she managed various policy and regulatory initiatives.

EVENT CALENDAR

ALFN ANSWERS 2017 (INVITATION ONLY) JULY 16-19, 2017 Host: American Legal & Financial Network Location: Hyatt Regency Lost Pines Resort and Spa, Cedar Creek, Texas Cost: $595-$1,500 On the agenda: This 15th annual invitation-only event focuses on mortgage servicing and regulatory compliance and brings together more than 300 mortgage banking professionals, executives from servicing, government-sponsored enterprises, national banking institutions and other organizations. The conference opens with a welcome party featuring live music, food trucks and mechanical bulls. In addition to the sessions and networking opportunities, the conference boasts a special keynote luncheon presented by AFLN’s Women in Legal Leadership, featuring Tujuanna B. Williams, vice president and chief diversity officer at Fannie Mae. The conference is open to all ALFN members and invited guests.

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AUSTIN, TEXAS The live music capital of the world offers something different for everyone. Austin has several bustling, vibrant entertainment districts with unique options to match every taste. The Red River entertainment district is the most popular three blocks in the city, hosting local and national artists on a nightly basis. Sixth Street offers a walkable experience with a colorful variety of restaurants, bars and live music venues. Conference attendees can find Austin’s welcoming charm in the South Congress neighborhood, home to one-of-a-kind restaurants like the Magnolia Café, a 24-7 fresh food diner. For those wanting to just kick back, relax and take in the atmosphere, Rainey Street offers bungalow-style bars housed in renovated homes. www.austintexas.org

ON THE SHELF “The Radium Girls: The Dark Story of America's Shining Women” KATE MOORE SOURCEBOOKS

When the Curies discovered radium, the element lit up the nation, literally.

Before its effects were known, the luminous element became a popular ingredient in beauty products, a wonder drug of the medical community and was used to illuminate the dials of clocks. Hundreds of girls worked in coveted positions in radium-dial factories where dust from the paint covered them head to toe, causing them to shine brightly in the night. Not too long after, repeated exposure caused many to become gravely ill and die. In The Radium Girls, Kate Moore details how these young women fought against their employers, who denied any wrongdoing, and changed workers’ rights.

“Option B: Facing Adversity, Building Resilience, and Finding Joy” SHERYL SANDBERG AND ADAM GRANT KNOPF

After unexpectedly losing her husband, Facebook COO Sheryl Sandberg felt she would never find joy again but co-author and psychologist Adam Grant showed her the steps people can take to recover from loss and grief. Option B uses personal insights and anecdotes with Grant’s research on finding strength and resilience in the face of adversity, exploring how people have overcome hardships including illness, sexual assault, natural disasters and war. Their stories reveal the capacity of the human spirit to persevere and to rediscover joy.

HOUSINGWIRE ❱ JULY 2017 15

HOTSEAT

SPONSORED CONTENT

Robert Behrend SVP Customer Engagement

A

Auction.com

s a wave of new investors begins to buy real estate at auction, educating them on what to expect becomes more important than ever. Robert Behrend, senior vice president of customer engagement at Auction.com, explains how his company is making communication with buyers and sellers a top priority.

HOUSINGWIRE: How is Auction.com’s approach to disposition different from a traditional disposition strategy? What is Auction.com’s solution to disposition?

ROBERT BEHREND: Our solution to disposition centers on a holistic strategy which centralizes the use of an online transactional platform, asset management services, and engagement with local real estate agents into one unified place.

Our approach is to take the expansive reach of our online transactional platform and partner with the expertise of the REO asset management company along with the local market intelligence from the real estate agent community. As a result, this provides for a more streamlined and optimized disposition strategy.

We are the nation’s leading online real estate marketplace and have invested significantly in servicing and educating buyers. An example of this continued investment is our Customer Engagement team, which works to meet the needs of prospective and returning buyers.

The team delivers a multitude of services including customer service for buyers of distressed assets, guiding high-value buyers through the VIP team and educating all buyers on properties and the auction process.

Q&A

HW: What does each of the Customer Engagement Team’s responsibilities entail?

RB: Our Customer Engagement team works to deliver the best results for both the asset buyers and sellers.

Within that team, Customer Care, the customer service arm, gains valuable insights through buyer feedback, which allows us to improve our strategies, 16 HOUSINGWIRE ❱ JULY 2017

technology or other processes that help buyers achieve their real estate goals.

In any given month, Customer Care fields over 50,000 in-bound calls, makes more than 8,000 outbound calls, and coordinates upwards of 10,000 chats and emails from buyers with feedback that is valuable for us to know and share with sellers.

Additionally, Customer Engagement’s VIP buyer team helps 1,200 of the top buying customers, who purchase multiple properties during any given month or year, find the best properties that match their portfolios. Through this approach, we not only help buyers, but also gain ground-level insight around the environment of the local market, property conditions, and more, which we pass along to our sellers in order to help them optimize their strategy and support their decision process with the goal to ensure positive return or outcome.

HW: What is Auction.com’s “Go Beyond the Question” strategy? And how does it help both buyers and sellers?

RB: The “Go Beyond the Question” strategy drives additional questions back to the buyer to help shape their understanding of both the particular property they are interested in as well as the process itself.

So whether it’s how the bidding will take place on the site, or how they should consider approaching a valuation model, we work to help make them as “auction ready” as possible.

We are seeing sizeable growth among burgeoning investors who have aspirations of real estate investment and as you might expect, those newer entrants into the market have questions, yet don’t have the experience to know which questions they should be asking about an asset.

We are constantly communicating with buyers, whether face-to-face at a foreclosure sale or concierge event or through inbound requests from buyers that are consistently bidding on – and hopefully winning – assets in our marketplace.

The mantra of “Going Beyond the Question” continues to drive our team every day as we strive to help buyers achieve their real estate goals and "Bid with Confidence."

ALTISOURCE | SPONSORED CONTENT

Uncertain times call for the proven experience of a trusted industry leader Altisource leverages end-to-end product suite for mortgage servicers

C

hange is the new normal in the mortgage servicing landscape. The financial crisis firmly established a local, state and federal framework for increased regulation and oversight. While newly enacted rules offered additional protections for borrowers and taxpayers, they also created a more complex and challenging environment for servicers, driving up their costs.

Additional regulatory changes may be on the horizon with the new administration, but the final outcome is still unknown. Some industry analysts anticipate a rollback while others expect continuity of the current approach.

Whatever the outcome, servicers must be ready to observe an ever-evolving set of complex guidelines while origination and servicing volumes continue to grow.

Altisource believes in staying a step ahead of the industry’s constantly changing needs — with solutions from real estate, mortgage and technology services to specialized offerings to support FHA loans. By leveraging our end-to-end product suite, combined with innovative technology, we’re able to help improve controls and mitigate risk throughout the lifecycle of servicing your portfolio. Our approach is distinguished by: PROVEN EXPERIENCE Altisource brings together some of the most experienced leaders in the financial and mortgage industries. With their knowledge, we’ve developed leading-edge products and technology solutions that help meet the needs of a very diverse client base.

COMMITMENT TO INNOVATION Our infrastructure enables us to leverage enterprise-wide capabilities to create bundled services directed to solve complex problems. Today, Altisource continues to grow its servicer solutions product suite, increasing its offerings to existing clients and significantly expanding its client base.

OPERATIONAL EXCELLENCE Through our deep investment in products, technology and controls, along with an unwavering commitment to quality service, we’ve developed integrated solutions that help our customers manage risk so they can remain competitive and focus on growing their client base.

“Our solutions leverage company-wide capabilities combined with extensive industry experience, a compliance and control environment, along with innovative technology and data analytics, enabling us to deliver inventive approaches which help 18 HOUSINGWIRE ❱ JULY 2017

our clients monitor and mitigate risk exposure while improving their bottom-line results,” said John Vella, chief revenue officer at Altisource.

CUSTOMIZED SOLUTIONS Altisource brings together a robust auction process and our powerful market presence as a residential real estate leader to support our customers while seeking out new ways to maximize revenue.

Our customized solutions scale easily and offer support for REO and short sale asset management, Claims Without Conveyance of Title (CWCOT) auction services, plus a bundled offering to help manage FHA assets.

“We are deeply committed to customizing our mortgage and real estate solutions to the unique needs of our customers to help them get results fast,” said Joe Davila, president of servicer solutions at Altisource.

SERVICER SOLUTIONS Leading financial institutions are choosing Altisource Servicer Solutions:* • REO and Short Sale Asset Management • Field Services and Renovation • Title Insurance and Settlement Services • Brokerage • Online Real Estate Marketplace • Property Valuations • Default Technology • CWCOT and Foreclosure Auction Services *Several leading financial institutions ranked by U.S. assets use at least one Altisource servicer solution.

FACTOM | SPONSORED CONTENT

Factom releases new solutions that leverage blockchain technology Works with existing doc management solutions for a secure record

F

actom, a blockchain-as-a-service (BaaS) technology company, released a new suite of products designed to work with existing imaging or document management solutions to create a secure, transparent and unalterable record for final loan documents.

Built and housed within the company’s mortgage-based solution, Factom Harmony has a new suite of products includes Audit Room, Due Diligence Room and Servicing Room. Factom’s new

20 HOUSINGWIRE ❱ JULY 2017

document management technology works as a simple extension of existing imaging technology. Harmony is a practical blockchain solution, working with existing document management solutions to create an unalterable record for loan documents.

Mortgage industry veteran, Jason Nadeau, saw the potential of using the unimpeachable data locking technology as a way to solve many of the industries toughest and most costly problems.

He said, “We created Harmony as a way to lock documents and

data in time. That's powerful in our industry because it lets us look back and see what we used to decision a loan file, without reassembling it. It's not magic. It's just a better way of keeping and sharing records.”

DigitalVault, Harmony’s core product, provides a complete record catalog of each file and every document related to the closed loan. By having an accessible history of every file, from origination to closing, the need to re-audit a file is eliminated, saving time and money.

“When we transfer loan files from one organization to another, things just get lost and it's hard to put everything back together,” Nadeau said. “We created a mortgage suite of products that is based on a blockchain technology. Harmony creates new ways for lenders to meet regulatory compliance, quality control, due diligence, and servicing audits needs while lowering cost and bridging gaps in data.”

Audit Room is designed to support compliance evidence, quality control functions and allow internal and third parties to audit files, facilitate origination, and support post-closing reviews based upon the immutability of blockchain technology. The tool allows users to share, in just a few clicks, any or all loan files being requested. Audit Room provides the auditor with the complete loan history and all relevant loan documents used in origination.

The new Due Diligence Room is designed for loan sales, securitization, and non-performing loan trading. It builds upon the power of blockchain technology to create a perfected chain of credit, collateral and compliance review data and documents.

The Due Diligence Room also enables users to prepare and assemble complete loan file quickly and prevents unnecessary duplicate documents from being “dumped” into new files, streamlining the process and making it more efficient. Since all loan files are locked in Harmony, any issues found by Due Diligence can be resolved in a quick and easy manner. Users are able to easily search and share documents with the third-party, eliminating the hands-on search to find the correct record in dozens of pages of documents.

The new Servicing Room solution creates a unique and unalterable record of borrower communications, documentation, and data. Designed for both current and delinquent loans, the Servicing Room creates an indisputable and permanent record of all servicing events with a public witness via the Factom blockchain.

The Servicing Room, a powerful compliance and audit evidence tool, is able to quickly send all necessary notices to the courts.

Because it is built with blockchain technology, Servicing Room also provides certain, indisputable proof of compliance.

“The Servicing Room significantly reduces servicing costs by creating provable evidence of compliance. It also reduces the preparation time and risks of audits, servicing transfers, and foreclosure processes,” said Tiana Laurence, co-founder and CMO of Factom.

Laurence went on to explain, “The Factom blockchain creates

“

Factom Harmony streamlines the coordination and collaboration on an agreed version of a file.” ­— Tiana Laurence, Factom co-founder and CMO

provable evidence by leveraging technology developed by the NSA to secure data. We use this in combination with a distributed network to allow systems to trust and share information. The mortgage industry has lots of parties that need to coordinate on an agreed upon version of a file over an extended period of time.

Right now that means a lot of manual work and auditing for the industry. Factom Harmony streamlines the coordination and collaboration on an agreed upon version of a file.”

WHAT IS BLOCKCHAIN AND WHAT DOES IT DO? Blockchain is a distributed and continually growing public ledger of transaction records arranged in cryptographically secured blocks (hence the name) that link themselves together. Each block references and recognizes the previous block by a hashing function, forming an unbroken chain that cannot be altered.

This means that once a transaction is recorded in the ledger, it can’t be updated or changed and it’s permanently linked to the previous block. Anyone with access to the ledger can see the same transaction history as other users.

Factom CEO and co-founder Peter Kirby explained that the system of checking and then checking those who check has caused an increase in the cost of making a mortgage.

The benefit of a ledger system that uses blockchain is that it keeps everything finalized and follows a chain, allowing for lower mortgage production costs and cleaner record keeping, an important facet for the industry following the financial crisis.

“We have a system where every piece of paper is touched constantly and checked and then the checkers get checked. It tripled the cost of a mortgage,” he said. “We’ve got a way to say, ‘This is final, final, final.’”

There are numerous benefits of using blockchain technology in the financial sector. It keeps those who have access to it abreast of what is exactly in the ledger and because everything in that ledger is finalized, there is peace of mind knowing it reflects the exact information it should.

“It’s really useful to know you have exactly the right thing and that vastly improves the cost of keeping a mortgage on the books,” Kirby said. “Blockchain lets us know it’s correct and it’s not going to change.”

Factom is headquartered in Austin, Texas and has a global team implementing enterprise solutions.

HOUSINGWIRE ❱ JULY 2017 21

UNITED WHOLESALE MORTGAGE | SPONSORED CONTENT

Mortgage tech enhances value of brokers Technology may be king, but the value of human touch will never lessen

T

echnology is the best thing that has ever happened to the mortgage industry. Any industry, really. As mortgage companies consistently build and launch innovative tools and programs designed to gain momentum in market share, it’s clear that technology will continue to elevate the industry. From paperless mortgages to the increasing use of borrower-driven mortgage applications, the mortgage industry of tomorrow will be a night-and-day difference from the industry today.

All of the tech advancements are perfect for consumers, who have shown a strong desire for the mortgage process to be made as fast, easy and streamlined as possible. Those kinds of advancements are great for the industry as a whole, but the fear is that it could one day put mortgage brokers on the outside looking in.

We’re living in an era where people are using the Amazon app to shop instead of driving to the mall. The concept of working with a travel agent to plan a trip isn’t nearly as popular as it used to be.

And programs like TurboTax are preferred over visiting your local H&R Block. Along those lines, isn’t there a real concern that the appeal of brokers could similarly fall by the wayside?

No, not at all. The concepts of “working with technology” and “working with a mortgage broker” don’t need to be mutually exclusive items when it comes to buying a home. Even though technology is king across the industry, the mortgage business will always be a people business. The value of the human touch on important, high-involvement financial decisions will never wear off.

The entire loan process can be automated, but there is no substitute for the sound advice a borrower can receive from a broker on the different kinds of products and pricing that different lenders can offer..

That’s why UWM brought Blink to market – an all-digital, multi-functional loan portal that combines the expertise of a broker with the convenience of a mobile app. By using Blink, borrowers have the capability to start the loan application process, pull their credit, e-sign documents, verify assets and track the status of their loans – from anywhere.

It gives borrowers the option of completing the mortgage process on their own or to seek real-time assistance from their broker at any time. At any point of the process, if a borrower would feel more comfortable with the human-to-human interaction and guidance that brokers offer, they can still meet in person and complete the application online together.

It’s not a matter of “brokers vs. technology.” The two go handin-hand and make one another stronger. Brokers are licensed gurus who singularly focus on things like rates, products and regulations on a daily basis. They are able to partner with lenders that are focused on staying in front of industry technology

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and new advancements. If consumers think that technology empowers them to find the best loan options for their specific situation, just imagine the high quality of products and rates could be discovered by professionals who know exactly what they’re looking for.

While an automated mortgage process is an attractive option for consumers, nothing about technology affects the pricing of a loan. There’s no question that borrowers can find the best deals by working with a broker – not just because they have access to more lending options, but because they also have access to wholesale pricing that retail lenders just can’t provide.

Tech-savvy borrowers interested in the simplicity that mortgage apps provide can experience the best of both worlds. They can do their own research on finding the perfect home, but let the expert find the right lender.

Mortgage brokers can find the most favorable pricing and are a source of comfort for people making one of the biggest decisions of their lives.

Technology is unquestionably reshaping the way that mortgages are done – making things easier, faster, hassle-free and more streamlined for borrowers to be self-sufficient. But the key to achieving the ultimate loan experience is in combining the expertise of mortgage brokers with the automation of technology.

VIEWPOINTS

By Jeffrey Hayward

The crisis in affordable rental housing How we got to this point

Across America, millions of households are struggling to find a place to rent they can afford. Fewer than half will find affordable rental housing; fewer than one in four of our poorest renter households will do so. And even those who find a rental will likely face rent hikes in the near future that may eat up any increases in their income. This crisis threatens household stability, education, health, the environment, and the quality of our neighborhoods.

The cost of the crisis is very real to me. In the 1960s, my father lost his job. He got sick at the factory where he worked and he was not part of a union – our home was foreclosed on. We moved around a bit before we settled into public housing in South Philadelphia.

We were lucky. Our rental home was affordable; it was a safety net for us. But I saw so many others struggling to find jobs with decent wages, good schools and safe neighborhoods. All while grappling with the lack of stable, affordable housing.

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At Fannie Mae, we provide affordable housing opportunities for renters and owners. It’s what we focus on every day.

This focus gives us some insight into the causes and potential solutions to the current affordable rental crisis. To help spark creative solutions, we must better understand the scope of the affordability problem, how we got here, and what some communities are doing to address the issues.

WHAT IT MEANS TO BE COST BURDENED More than one-third of U.S. households –

about 44 million – are renters, and nearly 60% are classified as low income, very low income, or extremely low income. These are the families most likely burdened by rent costs. Households that spend more than 30% of their income on rent are considered “cost burdened.”

While about half of all renter households are cost burdened, an estimated three-quarters of extremely low-income renters are in that category.

Households spending more than half their income on rent are considered to be “severely cost burdened.” About one quarter of all renter households fall in that category, yet that percentage soars to 59% of extremely low-income renters.

That’s because there’s a disconnect between the units being built (the supply) and who’s able to rent them (the demand).

While it costs about as much to build an apartment project for low-income tenants as a market-rate project, many builders are

Jeff Hayward is Fannie Mae’s executive vice president and head of its multifamily business.

focused on projects that will command higher rents. According to the Dodge Data & Analytics Construction Pipeline, about 343,000 apartment units were completed in 2016, with another 400,000 units expected to come online in 2017. Most of this new supply is high-income rentals located in large cities.

When it comes to new affordable units, about 100,000 are built each year on average, says the National Housing Trust. Yet the market supply is not going to keep up: For every new affordable unit added, two are lost from deterioration, abandonment, or conversion to market-rate housing.

Further, according to the National Low Income Housing Coalition, about 360,000 privately owned, federally subsidized units have been converted to market-rate housing since 1995, with another 10,000 to 15,000 units leaving this inventory every year. And more than 2 million units are at risk of loss over the next decade.

HOW DID SUPPLY DRY UP? During the Great Recession, multifamily construction fell sharply. After the recession ended, demand started to rise, but multifamily construction didn’t rebound in a significant way until 2013, and has been playing “catch up” ever since.

In addition, construction of subsidized housing has declined as a percentage of all new multifamily construction and now represents only around a fifth of new construction annually – not enough to keep pace with demand.

Finally, costs of construction, including rising wages for construction workers nationally, have increased across the country, not just in strong metropolitan areas.

As a result, without a subsidy, developers are only willing to undertake new projects where they can generate higher rents.

DRIVING DEMAND Increased demand for rental housing stems from several factors. Millennials are one of the biggest drivers of current rental housing demand. In record numbers, they are deferring homeownership, choosing to rent rather than buy.

High-income renters, typically those who can afford to buy a house, are choosing to rent an apartment instead. They now represent more than 20% of all renter households. Collectively, this contributes to a 26% increase in estimated national rent levels since 2005.

WAGE GROWTH IS STARTING TO LINE UP WITH RENT INCREASES Wages and asking rent levels are two factors that play a big role in affordability. All other things being equal, it’s more affordable to rent when wage growth keeps pace or stays ahead of rent increases.

It looks like that’s starting to happen.

Over the next two years, growth in household income is likely to outpace growth in asking rents by about 2%, cumulatively.

But that’s based on projections showing that median household income might grow by nearly 7% while rent growth returns to more normalized levels in the 2 to 2.5% range.

While the need to build more affordable units is urgent, we can’t simply build our way out of the rental housing crisis.

Instead, we need to find a way to help lower-income households afford the housing that is available to them. Communities are doing this with a variety of tools.

• Inclusionary Zoning Many cities and some states now require that new apartment projects include units that are affordable to renters with low to moderate incomes, a practice called inclusionary zoning. While popular, this has been controversial because it is expensive for the developers. We need to find ways to make inclusionary zoning effective for low-income renters while not penalizing developers.

• Housing Choice Vouchers Another strong policy tool to help tenants pay for rental housing is the “Section 8” Housing Choice Voucher Program. Lowincome renters pay 30% of their incomes toward housing, with the federally funded program paying the balance to the landlord up to a set maximum. Demand is so great, however, that thousands of families can linger for years on waitlists in some

cities with no assurance they will ever receive a voucher.

• HUD Rental Assistance The housing community also can support efforts to modernize aging public housing stock by participating in HUD’s Rental Assistance Demonstration program. The program allows local housing authorities to leverage private sector financing to improve the physical condition and extend the useful life of public housing properties throughout the U.S. • Federal Low-Income Housing Tax Credit Projects Continuing to provide loans for federal low-income housing tax credit (LIHTC) projects, which attract private capital to the low-income housing rental market, is another critical component of affordable housing. The LIHTC program has built nearly 3 million apartment units, housing about 6.7 million low-income families and currently finances the construction and rehabilitation of almost all subsidized housing in the U.S. MOVING FORWARD TOGETHER There is no panacea for solving this crisis.

Solving this puzzle will require multiple solutions and multiple partnerships. We’ll need the collective wisdom of lenders and renters, developers and housing experts, and advocates for health, education and the environment.

Fannie Mae wants to work with all those who have a stake in affordable housing to take a fresh look at the path forward.

Specifically, we want to bring together affordable housing investors and state and local government representatives to identify the best ways to create more units that are affordable to low and moderate-income renters. More broadly, we want to expand our network of affordable housing partners to include more investors, lenders, and other organizations with a vested interest in addressing the affordable housing crisis.

We want above all else to help more people in America find safe, affordable options across the nation – new places they can call home.

HOUSINGWIRE ❱ JULY 2017 25

VIEWPOINTS

By Greg Robinson

Never too big to serve Successful field services companies are designed for the high-touch needs of small servicers

The mortgage servicing industry has seen a seismic shift over the past few years as a result of the enhanced regulatory environment brought on by the housing crisis. As a result of these new regulations and restrictions, many financial institutions have been exiting loan servicing and there has been a proliferation of nonbank servicers entering the market and/or buying portfolios or servicing rights and gaining a greater market share.

Today, servicers are tasked with many obligations, including managing field services activities, dealing with oversight and compliance mandates, managing continual changes within the regulatory environment, unfunded mandates resulting in expansion of responsibilities, and ensuring adherence to strict budgets and heightened cost controls.

For years, national field services companies have been working in partnership with both large and small servicing shops 26 HOUSINGWIRE â?ą JULY 2017

to provide a comprehensive default services outsourcing model that enables the smaller servicing organizations to deploy compliant practices in a timely and cost-effective manner.

National field services providers, like Safeguard Properties, have developed tools and resources that provide value-added service and information regardless of a client’s portfolio size.

While some servicers see national field services companies as too large to handle

their portfolios efficiently, nothing could be further from the truth.

For example, at Safeguard, our clients range from smaller local banks, small servicers and sub servicers, governmental agencies and large blue chip financial institutions.

Under a true outsourcing model, smaller volume servicers have the benefit of operating in a state-of-the-art default servicing platform environment at no additional cost to them; with the customer centric

Greg Robinson is the CFO and executive vice president of Safeguard Properties, the largest mortgage field services company in the U.S.

focus and resources one would expect from a local provider.

These benefits can provide value to the smaller volume servicers in that they can share risk with their field services provider by ensuring timeliness of service, compliance with applicable rules and regulations, as well as leveraging comprehensive data analytics and a cutting edge technology platform.

These servicers are enabled to do more with less as they outsource typical inhouse functions to their field services provider.

Field services companies need to remain committed to providing the highest level of service to their mortgage servicing clients regardless of their portfolio size and to ensure that all work is performed in accordance with their clients’ agreed-upon criteria and investor/GSE requirements.

KEEPING SERVICERS IN COMPLIANCE THROUGH OUTSOURCING There has been much change in the servicing industry since the housing crisis.

Numerous regulations have been enacted by Dodd-Frank, Federal Housing Administration, Fannie Mae, Freddie Mac, Veterans Administration, and the Consumer Financial Protection Bureau (CFPB), designed to protect borrowers and provide guidelines for those maintaining defaulted inventory.

This has put many organizations in a situation where they do not have the resources to comply with these unfunded mandates.

A full outsourcing model provided by a field services company enables smaller servicers to maintain compliance without any additional cost.

For instance, an outsourcing model with a field services company typically provides for some or all of the following activities: • Managing and tracking of allowables to ensure efficient preservation of properties in compliance with investor guidelines • Managing the bid process, when applicable, by submitting bids to the investor using the investor’s bid submission program (such as P260/Yardi for FHA loans) • Ensuring conveyance extensions are

submitted and managed when necessary • Managing cost-to-date information • Managing and remediating customer complaints and ensuring proper tracking, disposition, and auditability of results An added benefit is that the servicer can leverage their field services provider’s relationships with communities around the country to efficiently address code violation issues enhancing their reputation in the community and can take advantage of the company’s industry knowledge where quite often they have helped to shape policies, regulations and guidelines through direct partnership or committee participation with investors and GSEs. By leveraging a field services company’s outsourcing options, mortgage servicing organizations have been able to decrease the size of their internal default staff, saving time and money, as they fulfill their servicing responsibilities.

TECHNOLOGY FOR EFFICIENT OPERATIONS Investing in new technology has been key for field services companies in providing innovative solutions. Through mobile adoption by vendors, investing in data centers and piloting new technology, like video in the field, field services companies continue to ensure quality and innovation for the mortgage servicing industry: a major benefit for all sizes of servicing organizations.

When deciding on a partner to work with, servicers should pay particular attention to determine if the field services company: • Has invested in latest infrastructure, security, applications, and database technologies; • Has deployed business process management systems that provide order and loan level processing automation to ensure efficient service delivery; • Has deployed mobile technologies to provide timely, comprehensive, and accurate property results from the field; • Offers full-service, secure Internet portals for servicers and contractors with access for ordering, communicating, reviewing work order/photo results and

reporting; • Utilizes integrated data warehousing capabilities that provides web-based reporting, extensive portfolio data analytics and automated report scheduling capabilities; • Has integration plug-ins to communicate with third-party order processing and invoicing platforms such as Aspen Grove, Equator, Black Knight, and iClear; • Utilizes an incident management platform to accurately track client requests and compliance status; • Has state-of-the-art data centers with 24/7 monitoring; and • Utilizes a centralized call center supporting multiple service center locations.

Of particular value to servicers, both large and small, is having a secure client portal. This comprehensive web-based site should offer a wide array of reports that can be scheduled to run on a daily, weekly or monthly basis.

These reports can be configured to track and report on problem resolution activities and change requests. Once access is granted, each person should have historical loan level information of the services conducted at the property including work orders and updates, photo documentation and audit support, detail of all bids provided and their disposition, expenditure details including cost-to-date and problem-resolution timelines.

CONCLUSION Mortgage servicers, both large and small, have come to rely on their field services companies as an extension of their own staff’s duties and responsibilities.

In times of tight budgets and cost containment initiatives, it is imperative that that smaller servicing organizations leverage the tools and resources that a national field services company can provide.

As compliance mandates continue to proliferate, it is only prudent to investigate what your field services company provides today and determine if the value add technology and outsourcing services that a national provider provides as part of their suite of services can benefit you as well.

HOUSINGWIRE ❱ JULY 2017 27

VIEWPOINTS

By Casey Cunningham

Convert leads like a top producer Speedy first contact is critical to beating the competition

Becoming a top producing mortgage professional in today’s saturated market is a feat that requires strategic planning, dedication, determination and work ethic. In my many years in the mortgage business, I have talked with countless loan officers who feel they have plateaued, unsure of what they need to do to take their business to the next level.

One major area of concern for today’s originators is conversion. They may work tirelessly to obtain qualified leads, but what are the best practices to convert these leads into the new customers that will grow their production?

Creating a strong conversion strategy is an area of development that is commonly overlooked.

By learning how to improve in this one 28 HOUSINGWIRE ❱ JULY 2017

area, loan officers can reduce the time they spend pursuing new leads and focus instead on capturing more business from the leads they have currently.

What you will read here are some of the best strategies for converting leads that are used by the most elite top producers across our industry. As I have worked with loan officers throughout the nation, I have seen these practices put into action and

the incredible difference they can make on production.

By implementing these conversion strategies, loan officers at any level can increase their production by learning to maximize every lead they receive.

One critical action to immediately increase lead conversion is executing an optimal response strategy. There are three components that comprise this strategy: • Speed-to-call • Number of attempted contacts • Time of day SPEED-TO-CALL Most mortgage professionals know that the client feels a sense of loyalty to the first person they speak with. When they

Casey Cunningham is the founder and CEO of Xinnix, the No. 1 mortgage academy in the nation.

NUMBER OF ATTEMPTED CALLS Mortgage professionals are often guilty of underestimating the power of persistence whenever calling prospects. An analysis of over 15 million sales leads by Velocify reveals that whenever salespeople make two calls instead of one, their chances of contacting a lead increase by more than 87%.

By attempting to contact a lead six times, they improve their probability of conversion by more than 500%! Most of the time when prospects say “no,” what they are really saying is “not yet.” By continuing to make contact, loan officers will find that a “no” can turn into a “yes.”

Properly timing the contact of leads greatly impacts the success of conversion.

Try this strategy: contact them three times on day one, once on day three, again on day four, and the final time on the 11th or 12th day.

Both my personal experience and the experiences of countless other top producers have proven that conversion percentages see a serious increase when loan officers contact new leads immediately and again in two subsequent time windows during the first day until contact has been made. establish themselves as the first contact, loan officers gain a critical sales advantage. In fact, speed-to-call is the single largest driver of conversion for new customer leads.

Studies show that returning a call from a new customer within the first 30 minutes produces an average of a 62% increase in conversion rates. If called within one hour, this percentage drops to a 36% increase. If called within the first 24 hours, the increase drops to 17%.

This means 88% of lead conversion happens when contact is made within the first 24 hours. Every loan officer should share this one ambition: return every single customer phone call as quickly as possible!

TIME OF DAY Many salespeople are under the assumption that prospects do not want to be contacted after normal business hours. Actually, research shows that when leads were received and responded to outside of traditional work hours, prospects were 11% more likely to be converted.

More specifically, prospects who received a response between 7 p.m. and 11 p.m. are 42 to 92% more likely to convert. Even if the typical workday is over, responding on the day of lead capture is still a much more effective strategy than waiting until the next business day.

Another assumption many salespeople make is that they should never contact a prospect over the weekend. In reality, for

loan officers who want to make first contact, immediately calling a lead they receive on a Saturday or Sunday is a key strategy for conversion.

Studies show that weekend mortgage leads are 20% more likely to close than those who are contacted throughout the week. For one, these leads are likely more serious about wanting to do business. Also, the number of loan officers who are actively connecting with customers is severely reduced on Saturday and Sunday, meaning the competition to make first contact is significantly lower.

In fact, more than 60% of mortgage companies do not have a strategy in place for following up with the leads they receive during the weekend. As a result, it takes them 71% longer to reach out to these customers.

By picking up the phone on the weekend, loan officers can gain a serious head start over their competitors. With most sales teams waiting until Monday morning, the originator who calls a lead on Saturday has a huge advantage.

The numbers do not lie. Executing an optimal response strategy is crucial for originators who want to maximize their lead conversion.

Whenever loan officers begin making their conversion strategy a priority, they no longer have to spend all their time fishing for leads and can instead cultivate the leads they have into sustainable business. This does not mean they have to immediately hold a full a conversation with a customer or complete a loan application. Simply talking to a prospect for a few minutes in order to schedule a follow-up call to have a more indepth conversation at a later time can make all the difference.

By implementing these best practices and prioritizing the contact of new leads within the same day they are received, mortgage professionals are sure to see a serious increase in conversions and loyal customers.

HOUSINGWIRE ❱ JULY 2017 29

30 HOUSINGWIRE ❱ JULY 2017

FANNIE MAE:

FROM LEGACY TO STARTUP

Andrew Bon Salle on the GSE’s evolution into a smart, agile company

By Sarah Wheeler

Washington, D.C. is a long, long way from Silicon Valley, and not just geographically. Bureaucrats are the opposite of entrepreneurs and a congressional charter makes it hard to move fast and break things. So, you’d be forgiven for thinking that a federal agency founded in the 1930s is the last place you’d describe using words like innovative or agile.

But you’d be wrong.

HOUSINGWIRE ❱ JULY 2017 31

D

“We spent time to make sure we have leaders here who are empathetic and understand our customers. We purposely went out and added executives from the industry ...

— Andrew Bon Salle

32 HOUSINGWIRE ❱ JULY 2017

efying all stereotypes, Fannie Mae’s recent actions read a lot more like a startup than a $2.8 billion federal agency with more than 7,000 government employees. In the last two years, the company has implemented a user experience strategy, adopted design thinking and accelerated time to market for an innovative array of products. And it has done all this while in conservatorship, amid a vigorous effort by former investors to see it recapitalized and released from government control.

Transforming a behemoth federal agency is akin to turning the Titanic and requires a powerful executive vision and strategy. Andrew Bon Salle, executive vice president of single-family business at Fannie Mae, sat down with HousingWire to explain how the venerable institution is charting a new course.

A TEAM APPROACH

The first thing you notice about Bon Salle is his height. At 6’6”, the former American

University forward walks with a certain authority, translating his experience as a team player into success as a team leader.

“I know there are a ton of clichéd sports analogies in business, but I really believe that kind of experience is transferable to the workplace,” Bon Salle said. “I learned how to be competitive, how to fail, how to get knocked down and then get back up, how to be coached, and how to fulfill my role on a team. It has benefited me in terms of my leadership style and how we at Fannie Mae lead and motivate employees.”

Bon Salle graduated from AU with a Bachelor of Science in business administration, then received his MBA in finance from the university’s Kogod College of Business Administration.

He has spent most of his career at Fannie Mae, joining the company in 1993 and serving in a number of roles within capital markets, including most recently senior vice president and head of underwriting and pricing and capital markets.

That kind of longevity gives him an

WHAT IS DESIGN THINKING? expertise in single-family issues and the long view of Fannie Mae’s place in the market but also presents some challenges.

After decades at the GSE, the pivot for Fannie Mae also meant a pivot for Bon Salle personally.

“Change is hard for anybody — including me. But when we embarked on a new strategy for the company, and specifically in [our] single family business, we started thinking about who we wanted to be as a company, and how we wanted to serve the market and fulfill our mission,” Bon Salle said.

“Right now we’re at a very interesting crossroad, with advancements in technology and a new focus in the industry on better serving the consumer. I don’t think these stars have aligned before, and it’s exciting to see how we at Fannie Mae can help the industry achieve these things.”

Bon Salle retains something else from his basketball days that helps in this effort.

“I like to compete and I like to win — for us and our customers, and that’s a motivation for me, on top of all the other things we’re doing.”

DEFINING SUCCESS

Fannie Mae was established in 1938 as a federal government agency and then converted into a public-private corporation by congressional charter in 1954. In 1968, Fannie Mae became a public corporation at President Lyndon Johnson’s direction.

It continued as a public company until 2008, when the Federal Housing Finance Agency famously placed it in conservatorship during the mortgage meltdown.

Although its core mission — to support homeownership by providing liquidity in the mortgage market — has never changed, with every new iteration Fannie Mae has had to redefine what success looks like. In its current state of conservatorship, with a pretty cozy corner on the loan-buying market, success could have been defined as just maintaining the status quo.

But that’s not what happened.

Instead, the company took a very Silicon

Valley approach, and, in a market where it presently has very little competition, decided to up its game.

“Success for us is serving the needs of our customers. It’s serving the market by having the right products to meet the needs of the next generation of homebuyers, and doing that in a sustainable way,” Bon Salle said.

And to serve the needs of its customers, Fannie Mae had to first find out what those needs were. The company’s big breakthrough, according to Bon Salle, came in the process of listening to and learning from its customers. This was part of the company’s overall embrace of design thinking, a method of solving problems widely adopted by tech companies (see sidebar) but rarely seen inside government agencies. It required a huge adjustment in both mindset and operations.

“This is a definite strategy shift for us,” Bon Salle said. “We are now incorporating customer insights into everything we do.”

Fannie Mae hired design thinkers and trained employees in how to approach problems differently. It also hired leaders from within the mortgage industry who brought the perspective of lenders and servicers to the GSE. “We spent time to make sure we have leaders here who are empathetic and understand our customers,” Bon Salle said.

“We purposely went out and added executives from the industry to our single-family leadership team.”

The company launched a user experience initiative and began sitting with customers to watch how they worked with Fannie Mae’s technology. These UE team members asked questions about why customers used the technology the way they did and what they would change if they could. They even asked customers what five things they hated the most about the process to identify the biggest pain points.

And then Fannie Mae started designing solutions that addressed these pain points, bringing lenders into the development

It’s a process made famous by Silicon Valley companies, but which can be adopted by any company. As defined by FastCompany, design thinking includes these four steps:

1

DEFINE THE PROBLEM. This looks easy, but is actually a difficult first step.

“Another way to say it is defining the right problem to solve.

Design thinking requires a team or business to always question the brief, the problem to be solved.” It also requires “relentless questioning” until the simple answers are disposed of and the true issues are revealed.

2

CREATE AND CONSIDER MANY OPTIONS. This is like a typical brainstorming session, but on steroids, and with a no-judgement attitude. In this stage, it’s imperative to get different perspectives, which means a variety of people have to be invited to the meeting, or be in the building in the first place. Getting diversity of thought around solutions and protecting them until they have a chance to be heard is the difficulty here.

3

REFINE SELECTED DIRECTIONS. “A handful of promising results need to be embrace and nurtured…Design thinking allows

...Continued on page 35

HOUSINGWIRE ❱ JULY 2017 33

“In everything we do, we ask if it aligns with our strategy to help our customers improve how they manufacture loans.”

— Bon Salle

34 HOUSINGWIRE ❱ JULY 2017

lifecycle and getting feedback from them during production. Fannie Mae gave employees tech tools and new authority to solve customer problems.

“Our employees get requests all of the time from customers, and we wanted to equip them to solve problems in a way that provides better service. This was a definite change in the company, and this approach requires a leader to coach those employee teams to make the right decisions,” Bon Salle said.

Clearly the approach is working, yielding programs such as Day 1 Certainty and the company’s cash-out refinance program for student loan debt.

The company has fundamentally changed the way it brings products to market in other ways too, developing software in teams that can respond quickly to needed changes.

“We went from 90 Agile teams to 145 Agile teams,” Bon Salle said. “We aren’t waiting to gold-plate our software anymore — we are focused on getting it to market so we can test and learn, and then making it better. We are on our third ver-

sion of HomeReady, and we continue to improve it.”

Fannie Mae also set its own goal to reduce the time it takes for customers to close a mortgage, a process that on average takes from 50 to 70 days from application to funding with Fannie Mae. The company wants to cut that down to 10 days, and that desire became one of the driving forces behind Day 1 Certainty.

“In everything we do, we ask if it aligns with our strategy to help our customers improve how they manufacture loans. This is how we see the world — it’s our North Star,” Bon Salle said.

But Fannie Mae applies that mindset to more than just lending. Earlier this year the company leveraged design thinking to update its Servicing Management Default Underwriter tool with a new user interface. It also began implementing significant investor reporting enhancements to standardize the timing, systems and processes for collecting loan-level data on mortgage-backed securities.

And Fannie Mae leveraged its innovative approach when faced with one of its most

daunting tasks to date: creating a new credit market. In the past, Fannie Mae kept all the credit risk associated with loan acquisitions, but the company developed its Connecticut Avenue Securities program in 2013 and its Credit Insurance Risk Transfer program in 2014 to sell a portion of its credit risk to investors.

In this entirely new asset class, Fannie Mae acts as an intermediary between lenders and investors to set standards, provide credit risk management oversight and maintain stability.

On May 31, 2017, the company reached a milestone, completing the transfer to private investors of part of the credit risk on single-family mortgages with an unpaid principal balance of $1 trillion.

“We’ve been in capital markets since the early 1990s, but here we built a new credit market from scratch — it’s a big change for the industry and a big change for us,” Bon Salle said.

But the company’s new mindset embraces change. In May, Fannie Mae announced a proposed enhancement to its Connecticut Avenue Securities credit risk transfer program by structuring future CAS offerings as notes issued by trusts that qualify as Real Estate Mortgage Investment Conduits (REMICs). This would expand the potential investor base for these securities, attracting REITs and other investors. The company would facilitate this change by making a REMIC tax election on a majority of single-family loans that it acquires and guarantees.

“Four years ago we started developing a vehicle and a market launching Connecticut Avenue Securities. We rolled it out and got a ton of feedback from our customers, and now we are rolling out the next iteration of these securities based on that feedback,” Bon Salle said.

For Fannie Mae, success now means leading from the front, focused on continuous improvement.

“We are always asking ourselves — how do we develop new programs, deliver new

technologies and how do we do that so it’s easy for our customers to use them and adopt them?

THE RIGHT PEOPLE

Every startup knows that making the right hires is key to a company’s success. But how does a company in conservatorship, with capped salaries and limited perks relative to Silicon Valley, attract the best and the brightest?

Bon Salle maintains that the company’s employees are driven, as they have always been, by Fannie Mae’s mission and its important place in enabling the American dream.

“What attracts people to Fannie Mae is what we stand for, and the impact they can have here on the whole industry,” Bon Salle said. “This is a unique company with a special purpose in the economy.”

And one area where Fannie Mae clearly excels is in its diverse workforce, with 53% identifying as minority and 47% female.

But the raw numbers aren’t the point, Bon Salle maintains.

“This is who Fannie Mae is,” Bon Salle said “It didn’t happen overnight. What we do here and how we do it attracts diverse employees to the company and the fact that we’re open to and value diverse thoughts and opinions, and are inclusive — that benefits us immensely as an organization in serving markets across the country. We want our workforce to mirror the industry we serve.”

Fannie Mae, especially now, is focused on the future. But how does it accomplish that when everyone from investors to those in Congress seems intent on restructuring it?

According to Bon Salle, it all comes down to the larger mission.

“People here are focused on what we can control: building a better company, serving our customers. We are focused on bringing value to the industry. If change happens, well, we’re getting pretty good at change.”

their potential to be realized by creating an environment conducive to growth and experimentation, and the making of mistakes in order to achieve out of the ordinary results.”

This, of course, might be the hardest culture change for any company, much less a GSE, to make: mistakes are a welcome part of the process. That means a company has to be willing to take risks, and be nimble enough to pivot when products or processes don’t work out.

4

PICK THE WINNER, EXECUTE. This is where resources are committed. “Prototypes of solutions are created in earnest, and testing becomes more critical and intense. At the end of stage 4 the problem is solved or the opportunity is fully uncovered.”

This all seems pretty straightforward, but the hard part is in the execution. Defining the problem, for instance, is often taken for granted. But design thinking requires knowing what your customers think is a problem, which requires engagement, as well as time, effort and money. It would be so much easier to just let your business leaders decide what the problem is.

And when it comes to structuring your workplace to be a safe place to make mistakes, that’s a complex shift for most companies. It requires a system that invests small amounts of time and money in several ideas at the early stages, instead of one toobig-to-fail solution.

“Design thinking describes a repeatable process employing unique and creative techniques which yield guaranteed results — usually results that exceed initial expectations.” To get truly exceptional solutions, companies will have to rethink their processes.

HOUSINGWIRE ❱ JULY 2017 35

PRIME

STATUS:

AN UPDATE ON LUXURY RESIDENTIAL

I

n the years leading up to the housing bubble of 2007, it seemed like everyone was getting a piece of the American Dream of homeownership (or maybe even sec-

ond homeownership). McMansions filled America’s suburbs, real estate values were skyrocketing and luxury homeownership was becoming an expected norm, particularly among the upper middle class.

But when the bubble burst and housing prices tanked, luxury residential real estate took a hard hit. In the wake of the Great Recession, residences listed at $750k or higher were sitting on the market for months...if not years.

A decade out from the worst recession in three generations, how is luxury residential real estate faring? Was the recent market slowdown just a temporary blip on the radar and will the sector continue to draw the aspirational interest of buyers as it did in the early to mid-2000s?

Lawrence Yun, chief economist with the National Association of Realtors, said luxury real estate, by its very nature, is “a slower moving market.” Even though housing on the low end of the market is moving very fast right now in most places,

Slowly and steadily growing, the luxury residential real estate market is just beginning to catch up with the rest of the housing economy.

things remain slower in luxury housing.

But Yun doesn’t consider that cause for concern given that luxury real estate only appeals to about 10% of the market. And it’s always the last segment to recover after an economic slowdown. In fact, he points to not insubstantial growth in luxury

BY DEBO R AH HUSO

home sales.

HOUSINGWIRE ❱ JULY 2017 37

Reason for Confidence — or Not “We’ve seen much improvement year-overyear in the number of home sales at $750,000 and over,” he said. “The data shows a 15 to 20% increase in sales compared to the same time a year ago.”

Jonathan J. Miller, CRE, CRP, president and CEO of Miller Samuel Inc. in New York, also acknowledged that housing is typically softer at the top, but said the luxury market saw a tremendous boom in both luxury construction and sales between 2011 and 2014 because foreign investors were seeing the U.S. as a safe market for investment after the Recession. The market has softened a bit since then, occupying what Miller calls “the hangover phase.”

Miller has been writing market studies for the last 20 years for Douglas Elliman that have frequently been used by the Federal Reserve, Federal Housing Administration and other agencies. His real estate appraisal and consulting firm serves New York, Los Angeles and Miami.

Meanwhile, sales price increases on lower-end homes have moved up only slightly. That being said, lower- to mid-priced homes are also selling quickly in many metro areas, with an average of one month to 45 days until going under contract.

Yun said the average supply for luxury residential real estate right now is about nine months. A year ago it was 12 months.

“Things are not flying off the shelf in luxury real estate,” he remarked, “but it’s improving.”

Yun said a major reason for the growing confidence in luxury home purchasing is the strong stock market. “That makes people in the top 10% much more financially comfortable,” he pointed out. “They may be buying first and second homes or even diversifying their investments by buying real estate.”

Luxury buyers largely disappeared with the onset of the Recession, but now the economy has seen almost seven consecu38 HOUSINGWIRE ❱ JULY 2017

“Things are not flying off the shelf in luxury real estate but it’s improving.”

— Lawrence Yun, chief economist for the National Association of Realtors

tive years of expansion, including new job creation. Meanwhile, income growth has largely been among those making higher salaries and, in some cases, benefiting from stock options.

However, the luxury market recorded slower growth in 2016. According to Knight Frank’s Prime International Residential Index (PIRI), luxury home values in 100 key markets worldwide rose 1.4% in 2016 compared to 1.8% in 2015. The index also reveals an ever-widening gap between the top and bottom of the luxury residential real estate market — a vast 49 percentage points.

China and Canada lead the pack with Shanghai showing the largest luxury market growth — more than 27% yearover-year. Compare that to the PIRI’s highest ranking U.S. city, Los Angeles, which grew by 5.3%.

Where It’s Hot... and Where It’s Not

Yun points to the San Francisco Bay Area as one of the country’s strongest housing markets and credits much of the growth in sales prices and short housing supply to workers with technology industry stocks.

Boston is another region with strong job growth and luxury homes sales as is, surprisingly, Dallas. “Dallas’ housing economy used to be exposed to oil prices,” Yun explained. “Oil prices are low now, but the city has other industries that are growing.

It’s all tied to the strength of the job market.” Dallas is no longer just about oil.

The North Texas city has seen substantial growth in information technology, telecommunications, logistics and the relocation of company headquarters to the area.

Denver and Seattle are also hot markets, according to Yun. The average home price in Denver increased by over 10% in the course of the last 12 months, driven in part by Millennials relocating to the city to take advantage of new jobs in information technology and renewable energy.

In the case of Seattle, the city has benefited from its status as home base to tech giants like Amazon and Microsoft as well as Starbucks.

Yun also attributes a lot of growth in the West Coast luxury market to foreign buyers, particularly the Chinese, who have invested heavily not just in San Francisco and Seattle but also Los Angeles and Portland. “They have become the dominant foreign buyers,” Yun explained.

“Their GDP is rising much faster compared to that of other countries, plus the Pacific region has cultural ties to our West Coast.”

Another reason for increased Chinese interest in the U.S. luxury market is the recent institution of a 15% foreign property buyer tax in Vancouver, British Columbia, Canada. The tax has curbed Chinese real estate investment in this multicultural seaport city and coaxed many into the American market.

Miller said it’s hard to say just how much of an impact Chinese buyers are having

on the luxury market. “There’s very little capture of country of origin associated with real estate purchase,” he noted. But he also pointed out that NAR surveys of foreign buyers tend to correlate with tourism numbers in the U.S. with Chinese typically being the major foreign investors in American real estate.

Over the course of the last three decades, foreign buyers have typically made up about 15% of luxury home sales in New York City, specifically Manhattan, according to Miller. However, in the current real estate cycle, he said foreigners now make up about 30 to 35% of luxury real estate buyers in the city.

Nevertheless, the New York City metro area market is not as hot as it was a few years ago. While Miller said the luxury market in Brooklyn is strong, that’s not the case in Manhattan. “It’s about where the regional economy is faring well,” he explained. “California’s economy is booming, and while New York also continues to HOUSINGWIRE ❱ JULY 2017 39

have a strong economy, there’s still too much product in a narrow niche.”

The area’s luxury housing market has generally been fueled to a large degree by large bonuses given to executives and employees working in financials. But Yun posits that increased scrutiny of big Wall Street players has reduced the prevalence of big bonuses and, indirectly, made the city’s luxury real estate market soft. That softness has spilled over into bedroom communities in Connecticut as well.

Miller said one way to assess the health of a market is to look at the listing discount — that’s the percent difference between the home’s list price at the time of contract and the actual contract price. “In weaker luxury markets, like New York and Miami, you’re seeing that discount widen,” he explained. “The sellers are traveling further to meet the buyer; they’re not meeting in the middle.”

However, Miller acknowledges the overall health of a market has more to do with volume of sales than prices. “When you have a slowdown in activity, that means buyers and sellers are too far apart on price,” he said. What’s gradually disappearing from the market are “aspira40 HOUSINGWIRE ❱ JULY 2017

tionally” priced listings. Developers are starting to see that buyers are looking for real value. “That’s healing,” Miller noted.

“Then you have transactions.”

Russia’s recession has also impacted the New York City luxury market. Whereas Russian oligarchs were once investing heavily in U.S. real estate in New York as well as Miami, they’ve stopped buying.

Sagging Latin American economies have also hurt Miami’s luxury market, which was formerly powered to a large degree by investors and immigrants from Mexico as well as Central and South America.

Miller noted that when a housing market slows, developers and real estate agents have a tendency to try to drive sales with creative marketing attempts: offering to pay transfer taxes or a year’s worth of homeowners’ association dues, for ex-

ample. The reason for that is an effort to protect the asking price of a home. “They want the closing to show that list price to avoid cannibalizing the remaining sales in their project,” he explained. But these tactics rarely work. “The buyer doesn’t want a free Ferrari,” he chuckled. “He just wants a price cut on a home.”

Real estate industry professionals shouldn’t assume “the buyer has disappeared” when sales slow down. “The buyer is there. He or she is just going to pay his or her sales price,” Miller noted.

“When you adjust the price to the current market value, properties sell.”

“I think it’s more about timing,” said Miller. “Some markets are just farther along the cycle than others.” Miller said that three years ago, he would have said Miami was outperforming LA in luxury home sales, but “now Miami has more supply at the high end,” he noted. “We’re seeing activity, but it’s still softer than the balance of the market. In LA, [the luxury market] is just getting going.”

LA’s luxury market has also shifted inventory during the last decade. Today it’s all about new condo towers, whereas the luxury residential market in the City of

Angels used to be dominated by high-end, single-family homes.

Stephen Kotler, president, Douglas Elliman’s western region, said the surge of interest in mixed-use condos in LA reflects the same shift in values and lifestyle of other metro areas in recent years.

Millennials want to live in the city and be within walking distance of work and entertainment, while empty nesters are shedding the maintenance headaches of large estates.

While Kotler said the market in and around LA hit a slowdown during the third and fourth quarter of 2016, sales volume is up 25% year-over-year.

He said the market currently has a 6.7month supply. That’s up 19% from last year. And while movement in overpriced properties has slowed, Kotler attributes that to unrealistic expectations on the part of sellers. “The responsibility of brokers is to help sellers understand where the market is now,” he said. “Things are selling if priced correctly.”

According to Kotler, 15 to 20% of luxury buyers in LA are foreigners, primarily Asians and Britons. “The pricing here in LA and Beverly Hills compared to a place like New York City makes for an attractive purchase,” he explained. The top of the market in Southern California is $3,000 per square foot for a condo; in New York, it’s over $10,000.

Foreigners are also attracted to the lifestyle and climate of LA, and most, says Kotler, are buying second homes in which they plan to reside a portion of the year.

Kotler said he recently saw a property in Malibu go to an Asian buyer for $60 million, and the buyer intends on being the end user of the property.

Miller noted that there is also a glut on luxury new construction in many metro areas, especially New York. “The pipeline is still full,” he said, pointing out that financing of new development projects didn’t slow down until a year ago. “You still have another year of product that will continue

“The responsibility of brokers is to help sellers understand where the market is now.”

— Stephen Kotler, president of Douglas Elliman to hit many of these markets,” he added. “In the interim, developers are trying to modify product while it’s in the pipeline to reflect a lower price point in luxury real estate.”

That’s because there has been an overabundance of properties in New York in the $10 million+ range. “How many buyers are there for that?” Miller asked. Developers and sellers are seeing the light, however.

More and more luxury properties in New York are listing in the $1 to $3 million range.

Luxury Will Live On Those who said post-Recession the luxury market was dead due to shifting values, lifestyles and expectations about the benefits of homeownership were wrong. “It’s just an ebb and flow,” Miller explained.

“Record low interest rates as a general concept inflate asset prices.”

Meanwhile there is an overall shortage in low to mid-priced homes. “The home-

owner who is house-rich but credit-poor doesn’t qualify for a trade-up home,” Miller said, and that impacts the luxury market, too. “Credit conditions for mortgages at the high end of the market have not eased,” he added. “Lenders are still grappling with the legacy of bad lending decisions in the last cycle.”

He acknowledges there has been too much emphasis on luxury housing for too long, which means the market is correcting right now. He expects the high-end market to remain soft in most places for some time to come due to oversupply on the high end and under-supply on the low end.

Yun doesn’t fully agree, however, and believes the luxury market nationwide is on the upswing and will continue to grow unless there is a sudden stock market correction or an international trade war that curbs investment by foreign buyers, who tend to concentrate their money in highend properties.

“The luxury market is always going to be somewhat unique because it only caters to certain individuals,” said Yun. “But we are off the lows from the financial Recession.

Home price growth has been much stronger on the lower end and saw faster recovery. Now we are seeing the upper end market beginning to move,” Yun added.

“There is more pent-up growth potential on the upper end these days.”

HOUSINGWIRE ❱ JULY 2017 41

OCWEN, UNDER FIRE, FIRES BACK The mortgage servicer’s response to regulators’ coordinated attack

By Ben Lane

For some people, especially those living in California, Colorado, Oregon, and Washington, April 20 (4-20) is a day to celebrate, shall we say.

42 HOUSINGWIRE ❱ JULY 2017

But for Ocwen Financial, April 20, 2017 was a day that saw its business go up in smoke.

First, nearly two dozen state banking regulators blasted Ocwen’s mortgage servicing practices, saying that the company could not appropriately manage its consumer mortgage escrow accounts.

Each of the 22 state regulators issued cease-and-desist orders that prohibit Ocwen from acquiring new mortgage servicing rights, and some states effectively banned the company from operating in the state altogether (see infographic, page 46-47).

Then, within one hour of the state banking regulators’ joint announcements, the Consumer Financial Protection Bureau announced that it was suing Ocwen Financial for “failing borrowers at every stage of the mortgage servicing process.”

The CFPB’s lawsuit alleges that Ocwen cost borrowers money, and in some cases, their homes, with its years of “widespread errors, shortcuts, and runarounds.” In its

lawsuit, the CFPB said that Ocwen “botched basic functions like sending accurate monthly statements, properly crediting payments, and handling taxes and insurance.”

On the same day, the state of Florida also announced that it separately sued Ocwen, which is based in West Palm Beach, along with the company’s subsidiaries Ocwen Loan Servicing and Ocwen Mortgage Servicing, for “mortgage servicing misconduct.”

According to the complaint filed by Florida Attorney General Pam Bondi and Florida Office of Financial Regulation Commissioner Drew Breakspear, Ocwen “harmed Floridians by filing illegal foreclosures, mishandling loan modifications, misapplying mortgage payments, failing to pay insurance premiums from escrow and collecting excessive fees.”

Later in the month, the number of state banking regulators taking action against Ocwen swelled to nearly 30, and Massachusetts, which had already prohibited Ocwen from acquiring new MSRs, prohibited it from originating new loans, prohibited it from servicing any mortgages in the state, and ordered Ocwen to transfer all mortgages it services to other servicers, piled on by suing Ocwen for widespread “abusive” mortgage servicing practices.

The tidal wave of regulatory actions left the nonbank fighting for its right to do business in courtrooms from coast to coast.

The news could not have come at a worse time for Ocwen, which was on the verge of being able to acquire mortgage servicing rights again, thanks to a recently signed agreement with the New York Department of Financial Services.

The NYDFS put Ocwen out of the MSR acquisition business in 2014, restricting the company’s right to acquire MSRs as part of a $150 million settlement over the company’s servicing practices and its relationships with its affiliated companies, Altisource Portfolio Solutions, Altisource Residential, Altisource Asset Management, and Home Loan Servicing Solutions.

The news got a little better earlier this year when the California Department of Business Oversight removed the state’s mortgage servicing restrictions on Ocwen, which stemmed from licensing issues in the state.

To get out from under the California restrictions, Ocwen is required to make a cash payment of $25 million. The company is also required to provide an additional $198 million in debt forgiveness through loan modifications to existing California borrowers over a three-year period.

Despite the release of the California restrictions, the NYDFS settlement still precluded Ocwen from buying new MSRs.

“Ocwen has repeatedly made mistakes and taken shortcuts at every stage of the mortgage servicing process, costing some consumers money and others their homes.”

— CFPB Director Richard Cordray It seemed like there might finally be some light at end of the MSR tunnel for Ocwen, after the nonbank announced in late March that it reached a new agreement with the NYDFS that would have paved the way for the complete removal of the MSR restrictions.

Then April 20th happened.

THE CFPB ACCUSES OCWEN OF TOTAL FAILURE AS A MORTGAGE SERVICER In its announcement, the CFPB claims that it uncovered “substantial evidence that Ocwen has engaged in significant and systemic misconduct at nearly every stage of the mortgage servicing process.”

The CFPB also claims that Ocwen “illegally foreclosed on struggling borrowers, ignored customer complaints, and sold off the servicing rights to loans without fully disclosing the mistakes it made in borrowers’ records.”

The lawsuit charges Ocwen with a raft of servicing violations, including (excerpted in full from the CFPB, emphasis added by HousingWire): • Serviced loans using error-riddled information: Ocwen uses a proprietary system called REALServicing to process and apply borrower payments, communicate payment information to borrowers, and maintain loan balance information. Ocwen allegedly loaded inaccurate and incomplete information into its REALServicing system. And even when data was accurate, REALServicing generated errors because of system failures and deficient HOUSINGWIRE ❱ JULY 2017 43

programming. To manage this risk, Ocwen tried manual workarounds, but they often failed to correct inaccuracies and produced still more errors. Ocwen then used this faulty information to service borrowers’ loans. In 2014, Ocwen’s head of servicing described its system as “ridiculous” and a “train wreck.”

• Illegally foreclosed on homeowners: Ocwen has long touted its ability to service and modify loans for troubled borrowers. But allegedly, Ocwen has failed to deliver required foreclosure protections. As a result, the Bureau alleges that Ocwen has wrongfully initiated foreclosure proceedings on at least 1,000 people, and has wrongfully held foreclosure sales. Among other illegal practices, Ocwen has initiated the foreclosure process before completing a review of borrowers’ loss mitigation applications. In other instances, Ocwen has asked borrowers to submit additional information within 30 days, but foreclosed on the borrowers before the deadline. Ocwen has also foreclosed on borrowers who were fulfilling their obligations under a loss mitigation agreement.

• Failed to credit borrowers’ payments: Ocwen has allegedly failed to appropriately credit payments made by numerous borrowers.

Ocwen has also failed to send borrowers accurate periodic statements detailing the amount due, how payments were applied, total payments received, and other information. IT has also failed to correct billing and payment errors.

• Botched escrow accounts: Ocwen manages escrow accounts for over 75% of the loans it services. Ocwen has allegedly botched basic tasks in managing these borrower accounts. Because of system breakdowns and an over-reliance on manually entering information, Ocwen has allegedly failed to conduct escrow analyses and sent some borrowers’ escrow statements late or not at all. Ocwen also allegedly failed to properly account for and apply payments by borrowers to address escrow shortages, such as changes in the account when property taxes go up. One result of this failure has been that some borrowers have paid inaccurate amounts.

• Mishandled hazard insurance: If a servicer administers an escrow account for a borrower, a servicer must make timely insurance and/or tax payments on behalf of the borrower. Ocwen, however, has allegedly failed to make timely insurance payments to pay for borrowers’ home insurance premiums. Ocwen’s failures led to the lapse of homeowners’ insurance coverage for more than 10,000 borrowers. Some borrowers were pushed into force-placed insurance.

• Bungled borrowers’ private mortgage insurance: Ocwen allegedly failed to cancel borrowers’ private mortgage insurance, or PMI, in a timely way, causing consumers to overpay. Generally, borrowers must purchase PMI when they obtain a mortgage with a down payment of less than 20%, or when they refinance their mortgage with less than 20% equity in their property.

Servicers must end a borrower’s requirement to pay PMI when the principal balance of the mortgage reaches 78% of the property’s original value. Since 2014, Ocwen has failed to end borrowers’ PMI on time after learning information in its REALServicing system was unreliable or missing altogether. Ocwen ultimately overcharged borrowers about $1.2 million for PMI premiums, and refunded this money only after the fact.

• Deceptively signed up and charged borrowers for add-on products: When servicing borrowers’ mortgage loans, Ocwen allegedly enrolled some consumers in addon products through deceptive solicitations and without their consent. Ocwen then billed and collected payments from these consumers.

• Failed to assist heirs seeking foreclosure alternatives: Ocwen allegedly mishandled accounts for successors-in-interest, or heirs, to a deceased borrower.

These consumers included widows, children, and other relatives. As a result, Ocwen failed to properly recognize individuals as heirs, and thereby denied assistance to help avoid foreclosure. In some instances, Ocwen foreclosed on individuals who may have been eligible to save

“Ocwen strongly disputes the CFPB’s claim that Ocwen’s mortgage loan servicing practices have caused substantial consumer harm. In fact, just the opposite is true.”

—Ocwen

44 HOUSINGWIRE ❱ JULY 2017

these homes through a loan modification or other loss mitigation options.

• Failed to adequately investigate and respond to borrower complaints: If an error is made in the servicing of a mortgage loan, a servicer must generally either correct the error identified by the borrower, called a notice of error, or investigate the alleged error. Since 2014, Ocwen has allegedly routinely failed to properly acknowledge and investigate complaints, or make necessary corrections.

Ocwen changed its policy in April 2015 to address the difficulty its call center had in recognizing and escalating complaints, but these changes fell short. Under its new policy, borrowers still have to complain at least five times in nine days before Ocwen automatically escalates their complaint to be resolved. Since April 2015, Ocwen has received more than 580,000 notices of error and complaints from more than 300,000 different borrowers.

• Failed to provide complete and accurate loan information to new servicers: Ocwen has allegedly failed to include complete and accurate borrower information when it sold its rights to service thousands of loans to new mortgage servicers. This has hampered the new servicers’ efforts to comply with laws and investor guidelines.

The CFPB also accuses Ocwen of failing to “remediate borrowers for the harm it has caused, including the problems it has created for struggling borrowers who were in default on their loans or who had filed for bankruptcy.”

In a statement, CFPB Director Richard Cordray recapped Ocwen’s alleged failings.

“Ocwen has repeatedly made mistakes and taken shortcuts at every stage of the mortgage servicing process, costing some consumers money and others their homes,” Cordray said. “Borrowers have no say over who services their mortgage, so the Bureau will remain vigilant to ensure they get fair treatment.”

OCWEN TAKES THE GLOVES OFF AND FIGHTS BACK Ocwen hit back at the CFPB in a lengthy statement on the same day, alleging that the CFPB filed the lawsuit against the company to serve as a distraction from the political climate surrounding the bureau, basically stating that the CFPB was trying to prove its worth as Republican sharks circled the long-debated agency.

Ocwen also said that the CFPB’s claims were “inaccurate” and “unfounded.”

“Ocwen strongly disputes the CFPB’s claim that Ocwen’s mortgage loan servicing practices have caused substantial consumer harm. In fact, just the opposite is true,” Ocwen said in its statement.

“Ocwen believes its mortgage loan servicing practices have and continue to result in substantial benefits to consumers above and beyond other mortgage servicers.

The substantive allegations in today’s suit are inaccurate and unfounded,” Ocwen continued.

“Indeed, the company is unaware of the CFPB conducting any detailed review of Ocwen’s loan servicing files,” Ocwen added. “Rather, the CFPB suit is primarily based on the CFPB’s flawed review of data and its self-serving conclusion about isolated instances where Ocwen self-identified ways we can do better.”

In its statement, Ocwen said that the company fully cooperated with the CFPB’s inquiries and tried to find a fair and reasonable solution to what the CFPB identified as legitimate concerns.

“Indeed, Ocwen continued to work with the CFPB until the suit was filed,” Ocwen said in its statement. “Under these circumstances, Ocwen has a responsibility to its customers, shareholders, and employees to vigorously defend the Company against these unfounded claims.”

Ocwen claimed that, despite what the CFPB said, a borrower has a much better chance of avoiding foreclosure if their loan is serviced by Ocwen rather than by any other But, the company said that the CFPB is choosing to “completely ignore” the positive impact that the company has.

“The alleged penalties and relief the CFPB seeks, if awarded, would likely harm the very consumers whom the CFPB is sworn to protect because they would needlessly divert money and time which would be better spent on helping our customers better afford and remain in their homes,” Ocwen said. “This unreasonable action is an unfortunate example of overreaching by the CFPB.” According to Ocwen, many of the issues brought up by the CFPB were previously addressed by the company as part of its participation in the National Mortgage Settlement.

“In addition, Ocwen believes the CFPB’s allegations concern only a small percentage of Ocwen’s 1.3 million customers, and Ocwen has repeatedly assured the CFPB that it will remediate, and in many instances already has remediated, any legal harm experienced by these customers,” Ocwen said.

Then, Ocwen dropped the hammer.

“Given these facts, today’s suit can only be viewed as a politically-motivated attempt by the CFPB to grab headlines in reaction to the change of administration and recent scrutiny of the CFPB’s activities,” Ocwen said.

HOUSINGWIRE ❱ JULY 2017 45

HERE’S A DETAILED BREAKDOWN OF OCWEN’S NEW RESTRICTIONS BY STATE

A

ll in all, Arkansas, Connecticut, the District of Columbia, Florida, Hawaii, Idaho, Illinois, Maine, Massachusetts, Mississippi, Montana, Nebraska, Nevada, North Carolina, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, West Virginia, Wisconsin, and Wyoming each placed restrictions on Ocwen’s business, according to the Conference of State Bank Supervisors.

But several states’ restrictions were not equal to the others– namely Massachusetts, South Dakota, and Montana.

The servicing issues at Ocwen are allegedly so widespread that several states are placing stricter restrictions on the nonbank that go beyond freezing the company’s ability to acquire new mortgage

46 HOUSINGWIRE ❱ JULY 2017

servicing rights.

On April 20, a group of state business regulators issued joint cease-and-desist orders to Ocwen. The main announcement from the states shows that an examination into Ocwen’s servicing shows “several violations of state and federal law, including, but not limited to, consumer escrow accounts that could not be reconciled and willful and ongoing unlicensed activity in certain states.” Texas joined the states a few weeks later, filing a cease-and-desist order in early May against the servicer.

The orders also showed that the regulators are concerned with Ocwen’s ability to continue operating due to financial constraints, an issue that Ocwen denies.

OCWEN TURNS ITS CFPB CHALLENGE UP TO 11

LEGEND Ocwen must cease acquiring new mortgage servicing rights.

Ocwen must cease acquiring or originating new residential mortgages.

Ocwen must cease servicing mortgages and must transfer all current mortgages to other servicers.

Ocwen wasn’t content to simply wage a PR battle against the CFPB. It also fought back in court.

Just as PHH did recently, Ocwen tried to play the unconstitutional card in its fight against the CFPB, asking the U. S. District Court for the Southern District of Florida to declare the CFPB unconstitutional and toss out the CFPB’s lawsuit against the company.

In a series of court filings, Ocwen asked the court to render an expedited ruling on the CFPB’s constitutionality and asked that the Department of Justice be allowed to contribute to the case so the court could “consider fully the attorney general’s (recent) conclusion that the CFPB is unconstitutionally structured.”

The DOJ filed an amicus brief in the PHH vs. CFPB case, asking the court to rule the CFPB’s leadership structure unconstitutional and grant President Donald Trump the authority to fire the CFPB director at will, and Ocwen wanted the court to allow the DOJ to weigh in on its case as well.

“Ocwen believes that the CFPB is unconstitutionally structured because it vests too much unfettered power in the hands of the CFPB’s director and the bureau itself, without any meaningful oversight by the president or Congress,” the company said a in a statement.

In June, the court shot down Ocwen’s challenge to the CFPB’s constitutionality, but the question of allowing the DOJ to participate in the case remains open.

STATE REGULATORS TAKE AIM Ocwen must cease all foreclosures Ocwen must cease any ongoing unlicensed activity

FLORIDA The state filed a separate lawsuit over Ocwen’s servicing practices alleging “mortgage servicing misconduct.” According to the complaint filed by Florida Attorney General Pam Bondi and Florida Office of Financial Regulation Commissioner Drew Breakspear, Ocwen “harmed Floridians by filing illegal foreclosures, mishandling loan modifications, misapplying mortgage payments, failing to pay insurance premiums from escrow and collecting excessive fees.”

Florida’s complaint alleges violations of the Real Estate Settlement Procedures Act, the Florida Deceptive and Unfair Trade Practices Act and Chapter 494, Florida Statutes. The complaint claims that Ocwen “failed to adequately perform basic mortgage servicing functions that resulted in widespread errors and financial harm to borrowers.”

While Ocwen fights back against the CFPB, the company is also dealing with the ramifications and implications of the state banking regulators.

The group of state banking regulators zeroed in on the consumer escrow accounts cited by the CFPB, along with the company’s “deficient financial condition.”

The orders prohibit the acquisition of new MSRs and the origination of mortgage loans by Ocwen Loan Servicing, a subsidiary of Ocwen, until the company is “able to prove it can appropriately manage its consumer mortgage escrow accounts.”

According to the main cease-and-desist order from the North Carolina Commissioner of Banks, Ocwen “has engaged in, or is engaging in, or is about to engage in, acts or practices constituting violations of state and federal law and applicable regulations.”

The N.C. Commissioner of Banks’ office stated that the orders are the “culmination of several years of examinations and monitoring that revealed the company is mismanaging consumer mortgage escrow accounts.”

HOUSINGWIRE ❱ JULY 2017 47

Ocwen is also accused of operating unlicensed mortgage servicing facilities in certain states in apparent violation of state licensing statutes over a period of several years.

Additionally, the announcement states that some of the state orders also require Ocwen to cease any unlicensed activity.

“As regulators, we encourage and advise companies to remain compliant with state and federal laws,” N.C. Commissioner of Banks Ray Grace said. “However, Ocwen has consistently failed to correct deficient business practices that cause harm to borrowers. We cannot allow this to continue.”

According to the order, a multi-state investigation identified “several violations of state and federal law, including, but not limited to, consumer escrow accounts that could not be reconciled and willful and ongoing unlicensed activity in certain states.”

The investigation also determined that Ocwen’s financial condition was “significantly deteriorating.”

The order also states that the states were unable to gather “comprehensive documentation of the extent of unlicensed activity because Ocwen’s management failed to respond to requests for information in a timely manner,” but the examinations still found that Ocwen subsidiaries were conducting unlicensed servicing activity in numerous jurisdictions.

The examination found that Ocwen was “unable to accurately reconcile many of the consumer escrow accounts in its portfolio,” and that Ocwen “failed to make timely disbursements to pay for taxes and insurance from escrow accounts on numerous loans.”

Ocwen also routinely sent consumers inaccurate, confusing, and/or misleading escrow statements, the investigation found.Additionally, the order claims that in 2015, Ocwen failed to provide key financial documents and reconcilements of its financial statements to regulators.

Based on the findings of the examinations, the order states that the states and Ocwen entered into a

“Memorandum of Understanding” on Dec. 7, 2016, which required Ocwen to retain an independent auditing firm to perform a comprehensive audit and reconciliation of all consumer escrow accounts.

But Ocwen didn’t provide that audit, claiming that reconciling the escrow accounts would be extremely cost prohibitive. According to the order, the reconciliation of escrow accounts would cost $1.5 billion. That’s beyond Ocwen’s financial capacity to fund. In short, Ocwen just doesn’t have that kind of money.

The Memorandum of Understanding also stipulated that Ocwen provide a “viable going forward business plan that encompassed an analysis of its financial condition going forward,” but Ocwen’s submitted business plan “did not provide a complete assessment of its financial condition.”

From the order: If the going for ward plan accurately accounted for known or anticipated regulatory penalties and other operat ional costs, including, but not limited to, the expenses of moving to a new servicing platform and complete reconciliation of consumer escrow accounts with restitution to impacted borrowers, it would indicate that Ocwen continuing as a going concern would be in doubt.

Therefore, the order stipulates the following: • Ocwen shall immediately cease acquiring new mortgage servicing rights, and acquiring or originating new residential mortgages serviced by Ocwen, until Ocwen can show it is a going concern by providing a financial analysis that encompasses all of the liabilities Ocwen currently maintains, as well as liabilities it has knowledge it will incur in the course of its business • Ocwen shall immediately cease from acquiring new mortgage servicing rights, and acquiring or originating new residential mortgages serviced by Ocwen, until Ocwen can provide the state regulators with a reconcilement of its escrow accounts showing that consumer funds are appropriately collected, properly calculated, and disbursed accurately and timely.

“No mortgage servicer is perfect – to the extent mistakes are made, we have a process to identify and remediate consistent with other mortgage servicers.”

— Ocwen

48 HOUSINGWIRE ❱ JULY 2017

OCWEN’S RESPONSE TO STATE REGULATORS “As with the recent CFPB enforcement action, Ocwen strongly disputes the key allegations made in the state regulators’ cease and desist orders that Ocwen’s mortgage loan servicing practices have caused substantial consumer harm,” Ocwen said in its statement.

“Ocwen will not sign unfair and unjust consent orders that make impractical demands that no other market participant could rationally accept, and which would harm consumers,” Ocwen continued.

Ocwen also provided detailed responses to each of the state regulators’ charges.

One of the main issues brought up by the state regulators is that Ocwen is “unable to accurately reconcile many of the consumer escrow accounts in its portfolio.”

In a response to the Multi-State Mortgage Committee’s original investigation, Ocwen said that the reconciliation of escrow accounts would cost $1.5 billion, which the company claims is beyond its financial capacity to fund.

But the states regulators did not take that response well, suggesting that Ocwen could potentially have “a vast number of consumers with unaudited and inaccurate escrow accounts.”

In response to the charges, Ocwen said that its escrow administration practices are “subject to frequent review or examination by independent third parties acting on behalf of mortgage loan investors and rating agencies.”

Ocwen said that these independent reviews “consistently confirmed Ocwen’s escrow practices are in line with common industry standards for timeliness and accuracy.”

Ocwen added: “No mortgage servicer is perfect – to the extent mistakes are made, we have a process to identify and remediate consistent with other mortgage servicers.”

Ocwen claims that it provided the estimate of the expected expense of an individual loan escrow account review for approximately 2.5 million loans over a four-year period to be an estimated to be $1.5 billion, or approximately $600 per file, as provided by a third-party.

Ocwen said that it also provided an alternative of a “statistically sound sampling methodology recommended by an independent third party.” According to Ocwen, this option is “consistent with methods used in other regulatory settlements and with the Multi-State Mortgage Committee’s examination manual practices.”

To the charge made by state banking regulators that Ocwen is financially unsound, Ocwen replied: Ocwen disagrees with any allegation it is not financially sound. Despite significant operating losses from 2014 to 2016 driven by a shrinking portfolio and $171 million of

state and national regulatory monitoring expenses, Ocwen generated over $1.4 billion of positive operating cash flow.

The company ended 2016 with $257 million of cash on the balance sheet.

Additionally, in December 2016, Ocwen refinanced its corporate debt, significantly extending the maturity dates and demonstrating significant lender confidence in Ocwen. Over this time period, Ocwen reduced its corporate debt by over $942 million, or 58%, dropping its corporate debt-to-equity ratio from an already conservative 1.6x in 2014 to 1.0x in 2016. Ocwen remains one of the least levered non-bank servicers today.

Ocwen said that it provided the state regulators with “remarkable transparency” into its operations.

“Ocwen provides a variety of financial information to select individual states as well as the MMC, such as recurring liquidity reports, monthly results, and future financial and cash projections,” Ocwen said in its statement.

“Additionally, it completed a comprehensive business plan in December 2016, and provided a robust going concern analysis prepared in conjunction with the issuance of Ocwen’s annual report.

“Despite this remarkable transparency, the MMC continues to ask Ocwen how it would handle ‘contingent liabilities’ such as a hypothetical settlement with CFPB and the escrow analysis.”

Another issue brought up by the states is Ocwen’s alleged operating of “unlicensed mortgage servicing facilities in certain states in apparent violation of state licensing statutes over a period of several years.”

Ocwen states that there have been issues in the past with the company’s licensing, but that those issues are settled.

“Ocwen has worked diligently to correct perceived licensing concerns and has entered into recent settlements with three states, without admitting or denying wrongdoing. Ocwen believes it is properly licensed in all states where it conducts business and welcomes the opportunity to demonstrate its compliance to any state regulators who may still have questions or concerns.”

Ocwen added that the company has been in “regular communication” with the state regulators in question for the last two years and progress has been made.

“In fact, the state regulators informed the company that its cooperation and the amount of information provided by the company over the past 18 months had been constructive in building stronger supervisory relationships and solidifying Ocwen’s place as a necessary market participant in servicing mortgage loans and keeping borrowers in their homes,” Ocwen said in its statement.

HOUSINGWIRE ❱ JULY 2017 49

Inside Baseball

50 HOUSINGWIRE ❱ JULY 2017

Inside Baseball

M&A picks up CONSOLIDATION CONTINUES ACROSS THE INDUSTRY

BY BEN LANE AND BRENA SWANSON

IN THE MIDST OF stagnating volume, companies in the mortgage industry continue to look to M&A to fuel their growth. The first half of 2017 witnessed significant deals, including these three that were either announced or finalized since May 31.

STEARNS LENDING BUYS MORTGAGE PRODUCTION CHANNELS FROM PRIMARY CAPITAL MORTGAGE When Stearns Lending hired David Schneider as its new CEO back in May, the company said that Schneider would lead the company through its “next phase of growth.”

On June 7, Stearns Lending followed up on that claim, announcing that it acquired the mortgage production channels of Primary Capital Mortgage.

Specifically, Stearns acquired Primary Capital’s wholesale, non-delegated correspondent, and consumer direct lending businesses. Prior to the acquisition, Stearns focused on wholesale, retail, strategic alliances and consumer direct lending.

According to details provided by Stearns, Primary Capital saw “significant growth” over the past four years, and originated $1.9 billion in loans in 2016.

Stearns said that the company has offered positions to the Primary Capital mortgage production related employees that impacted by the deal. Anthony Coniglio, Primary Capital’s CEO, said that the Stearns represents an “ideal partner” for the company.

Financial terms of the deal were not disclosed.

In March, Stearns sold off its delegated correspondent lending business to Flagstar Bancorp. Under the terms of the deal, Stearns’ employees and subcontractors associated with the delegated business will transition to Flagstar, the companies said when they initially announced the deal earlier this year.

According to details provided in February by Flagstar, Stearns correspondent business includes approximately 250 correspondent relationships, which produce more than $7 billion of agency and governmental residential mortgage loan production annually. After the acquisition was announced, analysts Paul Miller and Tim Hayes at FBR & Co. said the deal with Stearns Lending will make Flagstar the fourth largest correspondent mortgage loan

originator in the country.

Beyond that, the FBR analysts wrote that they believe the Stearns acquisition could be the first in a series of acquisitions for Flagstar as it looks to grow its business.

“We view this transaction to be a positive for the company and believe that it will be the first of several tuck-in acquisitions to come as the company looks to deploy excess capital and expand its mortgage banking business,” Miller and Hayes wrote.

The analysts note that Flagstar did not provide any formal guidance to investors about the deal, but Miller and Hayes stated that they believe the deal will be accretive to Flagstar’s earnings and will strengthen the bank’s third-party origination platform.

Miller and Hayes also wrote that Flagstar should see an advantage from a “cost of funds perspective” moving forward, and provide options for expansion.

“Additionally, this acquisition could open up doors into other markets, such as selling mortgage servicing rights lines and warehouse lines to these newly acquired customers,” the analysts wrote.

Overall, the FBR analysts say they are positive on the deal for Flagstar, and they reiterate their “outperform” rating for the bank’s stock.

“We believe that this transaction won’t necessarily change the landscape for Flagstar, but that it will be a net positive for earnings and likely will not be that expensive nor pose much integration risk,” FBR’s analysts noted.

“Flagstar has been a net seller of MSRs over the past few quarters, but we expect the company may continue to expand its MSR portfolio following a seemingly more favorable interest rate and regulatory environment,” the analysts concluded.

HOME POINT FINANCIAL COMPLETES STONEGATE MORTGAGE ACQUISITION Home Point Financial Corp.’s $211 million acquisition of Stonegate Mortgage Corp. is now complete, as Stonegate disclosed in a filing with the Securities and Exchange Commission that the acquisition became final on May 31. As a result of the deal, Stonegate is HOUSINGWIRE ❱ JULY 2017 51

Inside Baseball

“

The deal with Stearns Lending will make Flagstar the fourth-largest correspondent mortgage loan originator in the country.”

now wholly owned direct subsidiary of Home Point.

“The successful completion of this acquisition is an important milestone for us,” said Willie Newman, Home Point’s chief executive officer.

“Home Point will now have full coverage in all channels of origination, as well as warehouse lending offerings. In addition, the acquisition brings an in-house servicing platform to Home Point, giving us the ability to directly manage relationships with our customers,” Newman added.

But that’s hardly the only change for Stonegate.

Many of the company’s executives stepped down in conjunction with the completion of the Home Point acquisition.

Specifically, Jim Smith from his positions as chief executive officer and president of Stonegate; Carrie Preston as chief financial officer; R. Douglas Gilmore as chief information officer; and Kelly Henry as chief risk officer.

Additionally, David Dill stepped down as executive vice president of loan servicing; David Kress as general counsel and secretary; Steve Landes as director of national sales and as president of NattyMac; and John Macke as executive vice president of capital markets.

Smith will also be stepping down from Stonegate’s board of directors, as well as all of the other members of the board, including: Richard Kraemer, Kevin Bhatt, James Brown, Sam Levinson, Richard Mirro, and J. Scott Mumphrey.

According to Stonegate’s SEC filing, “none of these resignations were as a result of any disagreement with Stonegate, its management or its board of directors.” Smith will serve as the combined organization’s chief operating officer. In replacement of the departed Stonegate execs, Newman, Agha Khan, Stephen Levey, and Eric Rosenzweig became the directors of Stonegate.

Newman will also be taking on the roles of CEO and president, while Howard Nathan will take over as Stonegate’s chief financial officer and treasurer; Matthew Goodman will take over as secretary; and Sheryl Johnson will step in as chief legal officer.

Additionally, the deal, which was first announced in late January, will see Stonegate’s shareholders receive $8 for each share they own. Stonegate’s shares, which were previously trad52 HOUSINGWIRE ❱ JULY 2017

ed on the New York Stock Exchange under symbol “SGM,” were officially delisted on June 1.

HOWARD HANNA BUYS 1ST PRIORITY MORTGAGE Hanna Holdings, the parent company of Howard Hanna Real Estate Services, Nothnagle Realtors, and RealtyUSA, announced in June that it acquired 1st Priority Mortgage.

The acquisition comes on the heels of Howard Hanna’s 2016 acquisition of RealtyUSA, the largest real estate broker in New York. That deal made Howard Hanna, already the largest real estate broker in Pennsylvania and Ohio, into what the companies called the “third-largest real estate company in the United States.”

And now Howard Hanna is acquiring 1st Priority Mortgage, which also recently merged with Nothnagle Home Securities, a mortgage broker based in Rochester, New York.

According to the companies, the combined 1st Priority and Nothnagle groups funded $387,060,225 in mortgage lending in New York in 2016.

With the addition of 1st Priority and Nothnagle Home Securities to the rest of the Hanna mortgage companies, the combined group expects to originate over $2 billion in mortgage volume in the next 12 months, the company said.

Brooke Anderson-Tompkins will continue as president of 1st Priority, while former owner Merle Whitehead will remain as chairman of the board with Christine Nothnagle as director of strategic engagement.

According to the companies, the acquisition of 1st Priority concludes the process that began when RealtyUSA merged with Hanna last year.

“We have been awaiting regulatory approval for close to a year and over that time, I have gotten to know Brooke and Merle and their team at 1st Priority to be great professionals in our industry, I am proud that they are on our team,” stated F. Duffy Hanna, president of Howard Hanna Financial, the financial services arm of Hanna Holdings.

TIAA FINALIZES ACQUISITION OF EVERBANK Completing a process that began nearly a year ago, TIAA announced June 12 that it finalized its acquisition of EverBank Financial Corp. and its wholly owned subsidiary EverBank, a nationwide consumer and commercial bank with $27.8 billion in total assets and $19.3 billion in total deposits.

Last July, EverBank revealed it was in advanced talks to be acquired, but did not provide any details. Then, in August, the company announced that TIAA was the buyer.

At the time, the company said that EverBank stockholders would receive $19.50 per share in cash, or an approximate total of $2.5 billion, as part of the deal.

For TIAA, the company said that the acquisition “significantly

Inside Baseball

expands” its existing retail banking and lending products and complements the company’s full suite of retirement, investment and advisory services.

According to TIAA, the new, combined bank’s legal entity name will be TIAA, FSB, but the bank will continue to use the TIAA Direct and EverBank brands for the time being.

The combined bank will be headquartered in Jacksonville, and TIAA said that it plans to continue to expand its digital capabilities for banking customers.

Additionally, the company also announced several management changes in coordination with the completion of the acquisition. The company said that Blake Wilson, who served as EverBank’s president and chief operating officer, will now serve as president and chief executive officer of TIAA, FSB. Robert Clements, who served as EverBank Financial Corp’s chairman of the board and chief executive officer, retired from the company upon the completion of the acquisition. Kathie Andrade will continue to serve in her role as chief executive officer of TIAA’s Retail Financial Services business. Andrade also will now serve as chairman of the board of the new bank, TIAA, FSB.

Following the announcement of the acquisition by TIAA, the Federal Reserve Board terminated its enforcement action against EverBank Financial Corp. issued in April 2011 related to residential mortgage loan servicing and foreclosure processing.

Along with the termination, the board also announced a $1.8 million civil money penalty against EFC for its mortgage servicing deficiencies related to that enforcement action. The enforcement action required EFC to enhance its oversight over the mortgage servicing and foreclosure processing of its thrift subsidiary, EverBank.

EverBank’s enforcement action came in conjunction group of other enforcement actions against other major mortgaging servicing organizations, along with a separate enforcement action, also issued in April 2011, from the Office of the Comptroller of the Currency.

However, the OCC terminated its action in January 2016 after it determined EverBank had complied with the action’s requirements. This new enforcement action termination reflects that Federal Reserve supervisory teams have found sustainable improvement in EFC’s oversight over EverBank’s mortgage servicing practices.

Kudos AWARDS • In May, FORMFREE founder and CEO Brent Chandler presented the Education Hero award at the Hometown Heroes luncheon, an annual event sponsored by the AMERICAN RED CROSS OF NORTHEAST GEORGIA. Chandler presented the award to members of the UNIVERSITY OF GEORGIA’s Student Veterans Resource Center, an organization that helps 250 veterans at the university prepare for entry into the workforce or graduate school. Chandler, a member of the board of directors for the American Red Cross of Northeast

Georgia, served for six years in the UNITED STATES MARINE CORPS. THE TEXAS MORTGAGE BANKERS ASSOCIATION honored W. Scott Norman of FINANCE OF AMERICA

LAUNCHES

GIVING BACK

• More than 30 financial institutions have joined together to participate in new peer-to-peer payment service ZELLE. Zelle, owned by EARLY WARNING SERVICES, allows users to send funds from one bank account to another in minutes, using only a recipient’s email address or mobile number, so no sensitive account information is exchanged. Banks using Zelle include ALLY BANK, BANK OF AMERICA, BB&T, FIFTH THIRD BANK, JP MORGAN CHASE, WELLS FARGO and many more.

• BESTBORN BUSINESS

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SOLUTIONS, creators of the Loan Vision mortgage accounting solution, recently awarded a technology grant to a local school, AQUINAS ACADEMY, in Greensburg, Pennsylvania. Loan Vision co-owners Martin Kerr and Igor Pchelnikov established the grant to fund modern technology in local schools in celebration of the company’s 10th anniversary.

Aquinas Academy used the funds from the grant for new Smart Boards for its elementary classrooms.

The 2017 ELLIE MAE CLASSIC will be held at TPC Stonebrae Country Club in Hayward, California. The Web.com tour event, which runs from July 31 to August 6,

REVERSE with the 2017 Larry E. Temple Distinguished Service Award during the TMBA’s 100th anniversary celebrations in San Antonio, Texas. Norman is the vice president of field retail for Finance of America Reverse and

is also a past president of TMBA, AUSTIN MBA and the TEXAS ASSOCIATION OF REVERSE MORTGAGE LENDERS. UNITED SHORE FINANCIAL SERVICES, United Wholesale Mortgage’s parent company, recently added two national accolades to its list of achievements so far this summer.

The Troy, Michigan-based company won a STEVIE AWARD for Client Service Department of the Year – with external net promoter scores that ranked the lender among the top service companies in America.

United Shore also won a global EMPLOYEE ENGAGEMENT award for “Best Use of Technology.”

will benefit the WARRIORS COMMUNITY FOUNDATION, an organization that supports education and youth development for low-income students in the San Francisco Bay area. The tournament will feature two Pro-Ams and a celebrity shootout featuring

members of the GOLDEN STATE WARRIORS, the SAN FRANCISCO 49ERS and the SAN JOSE EARTHQUAKES. The tournament also includes four days of tournament play, where 156 of golf’s next wave of PGA Tour stars will compete for a $600,000 purse.

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Industry Pulse

Is there really a shortage of appraisers?

OUR READERS SHARE THEIR (VERY STRONG) OPINIONS

BY KELSEY RAMÍREZ

HOUSINGWIRE COVERS THE WHOLE SPECTRUM of mortgage finance, including property valuation in its many forms. The appraisal industry is still picking up the pieces after significant reform legislation, and the battle between appraisers and appraisal management companies rages on.

And rage is the key word, as the reaction to many of our articles on any appraisal topic turns up a lot of latent anger in the appraiser community.

Recently, HousingWire's Kelsey Ramirez wrote a blog discussing the “appraiser shortage.” (It should be noted that a blog is an opinion piece, not a news article.) In response, the appraiser community blasted Ramirez and HW for this “fake news.”

So is there a shortage of appraisers or not?

It all comes down to how you define shortage. Here’s Ramirez’s blog, followed by some of the opinions of our readers so you can decide for yourself.

Appraisers: We read your comments.

You’ve been weighed, you’ve been measured and you’ve been found wanting.

Here at HousingWire we recently published an article which talked about the failing appraisal system and what could be done to improve it.

Before that we wrote that key government agencies finally addressed the critically growing appraisal shortage crisis hamper-

ing the mortgage process, highlighting two alternatives to help areas facing a shortagetemporary practice permits and waivers.

But that didn’t sit well with appraisers, who quickly flooded our comment boards to say there is no shortage; quality appraisers are just unwilling to make, what they say, are unreasonable concessions.

Many complain about the appraisal management companies, and the allegedly excessive fees they demand from appraisers.

Here’s one comment from “wyecoyote”: “Look at the number of appraisers over the last 10 years. There has not been a significant decrease in the appraiser population. What has decreased is those willing to work for a pittance.

“My area fees start at $600. I get emails for ones that want to pay $250 or $300.

Those appraisers willing to work for those fees are going away. Those AMCs struggling to find someone need to up their pay.

If there are loans not closing or waiting to close due to appraiser delay, ask the AMC how much they are really paying the appraiser. I bet not C&R fees.”

Or take this one from “Jacques”: “The problem is that AMCs keep a disproportionate percentage of the fee, unbeknownst to anybody except the appraiser.

Today’s appraiser is often paid less than they were 10 years ago, and the time it

takes to complete an appraisal has doubled or tripled.”

However, appraisers failed to prove that there is not a labor shortage in their field.

A graph from an Urban Institute blog shows the number of certified appraisers fell slightly over the past 10 years, and the number of state licensed appraisers plummeted, however there is still a strong number of workers licensed as appraisers.

However, having a large number of certified appraisers, and having appraisers not willing to do it are two separate things, as our commenters are quick to point out.

The fact is, despite hardships facing the industry, lack of appraisers willing to work is the very definition of a labor shortage.

In 2013, the Upjohn Institute for Employment Research published “How do we know occupational labor shortages exist?” The employment research report defined what constitutes a labor shortage.

"We define an occupational labor shortage as a sustained market disequilibrium between supply and demand in which the quantity of workers demanded exceeds the supply available and willing to work at the prevailing wage and working conditions at a particular place and point in time.”

Despite how many appraisers may or may not be certified, the fact remains that if they are unwilling to work, for any reason, there is a labor shortage.

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HERE ARE SOME OF THE RESPONSES (with spelling and grammar left intact):

JONATHANMILLER:

To the AMC community, like REVAA, there is an appraiser shortage because they have exhausted the supply of appraisers that will work for their fee. Unlike in the real world, the author doesn’t understand that appraiser fees are supposed to rise when there is a shortage of talent and fall when there is a surplus of talent. In this case, the free market does not exist because AMCs have supplanted the market by taking half the appraisers fee. So in a market with other opportunities, appraisers go elsewhere to make more money because AMCs do not respond to the change in supply or demand. Their model no longer works because they can’t grow it by gouging appraisers for half the fee. This is free market capitalism. The only shortage here is in the eyes of the AMC for avoiding paying market rate to the appraiser directly. They’ve simply run out of people to gouge.

MEGAN:

I don’t see this article as critical of appraisers - despite the “you’re wrong” title. I can tell you that in my area, there are licensed appraisers who will do work for attorneys (divorces and estates) but not for banks. The reason being a bank appraisal pays them less and the work involved is often greater (needing to keep up with the specifics of different types of mortgages.) The state requirements to actually become a licensed appraiser are so prohibitive compared to what you might make in the future - the average age of the appraisers I meet in class is probably 75 now! New people are not coming in unless they are family members in a family owned appraisal business. There is a shortage - whether that is caused by licensing, low pay or disinterest - it IS a shortage.

BILL JOHHSON

My county of San Diego alone has nearly 1,000 appraisers who are all within 25 miles of me, and within a few hundred miles there is 6,000+. You can’t paint with a single brush and say there’s a shortage, just like I can’t say there is an oversupply. The powers that be however, will use data from perhaps 5% of the work by volume (Rural ?), and use that to justify how they see fit (tell everyone there’s a shortage, appraisal waivers, etc.).

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JIMMY DEAN:

You contradict yourself. There is not a shortage if they are doing other work. If the bank wants appraisers to work for them, they simply need to pay our fees. I only work for 3 lenders and the VA, and I start at $600 for one lender, which is only because I like them, and the rest are $700-780. I do not work for AMC’s and I make 6 figures with 2 months off a year, and I only work as an appraiser for about 25 hours a week.

TIMOTHY S. EVANS:

I can convince anyone of anything with the right charts, graphs and statistics. You cite the decline of appraisers from 2007 to 2017 which is misleading. In 2007 there was a significant oversupply of appraisers. Correct the chart to show the number of appraisers in 2000, 2007 and 2017 and you will tell the real story.

Also include the number of loans in a chart for each year to tell the complete story.

If there was truly a shortage of appraisers would AMCs still be sending blast e-mails for low fees? If there was a shortage would AMCs still require 48-hour turn times after inspection? If there was a shortage of appraisers would AMCs adapt and change how they treat appraisers in 2017 vs. how they treated appraisers in 2012? If there was a shortage of appraisers would AMCs still be charging appraisers portal fees of up to $30? If there was a shortage of appraisers would AMCs still be using incompetent “reviewers”? If there is a shortage of appraisers then why do some AMCs still take over 30 days to pay appraisers, some up to 90 days?

You are incorrect in your theory of appraisers who aren’t willing to work, they are unwilling to work for AMCs who do not treat them with respect. If you took a poll of appraisers who perform lending work I would be willing to wager that 95% of them would never work for an AMC again if they had the choice.

The existing appraisers are looking for direct-lender work, private party work, government work, litigation work and anything but AMC work. We are willing to work but when we find a client who treats us well we will dump one of the AMC clients.

Industry Pulse

ERIC KENNEDY:

Is there a shortage of AMC’s and the $Millions they are making from a non-suspecting public???

There are at least 150 of them working in my state where before HVCC and Dudd-Fwank there were maybe 5.

The Federal entitlement for AMCs to not disclose their share of “appraisal” fees or even their existence to the borrowing public is quite disturbing. Add this to the decimation of resources and time of the Independent Appraiser who has NEVER had any support in this system but EVERYONE admits they are needed and serve a valuable purpose.

I’m afraid you will have to accept your moniker as FAKE NEWS!!

DAVID WIMPELBERG:

If you want to do additional research, interview those people in lending institutions that have their own appraisal panels. You’ll find that the lending institutions not only have sufficient appraisers on their panel, but often have closed panels because they don’t need anymore appraisers; i.e., no shortage whatsoever.

These appraisers are paid direct, with no middleman taking a portion of the fee.

You’ll find that the Appraisal Management Companies, who are paid by the paid by the lending institution, take a cut of the fee and pay the appraiser the rest. If you had the choice, would you work for 100% of a fee or 50% of a fee? Well, appraisers will have the same answer as you. And that is without consideration of the extraordinary time pressure that these management companies place on appraisers, in addition to endless aggravation regarding revisions, many of which are often nonsensical and not necessary.

I’m one of those appraisers that simply will not work for the people that you interviewed because they don’t pay the appropriate fees for a professional service. And furthermore, I cannot hire anyone to work for these clients, because I can’t split a fee that is insufficient in the first place.

Market forces always win. The issue is that the persons interviewed represent a business model that is failing and can’t figure out how to adapt. And, what always happens in this case, is that they blame others, not themselves.

RON STYLES:

A lot of appraisers such as myself have fired most AMC’s because of the scope creep, unqualified reviewers, useless revisions and yes, LOW FEES well beyond reasonable and customary. I made $350 - $400 per appraisal 15 years ago and now some AMC’s are offering $250 - $300?

I have chosen to market myself to attorneys, agents, estate planners, and individuals. I only work for a few AMC’s and they pay customary and reasonable fees. Yes, AMC’s are the problem with the industry.

They are ripping off the consumer and appraisers, PERIOD! The truth is out there but Housing Wire, similar to most mainstream media outlets refuse to report it.

SHERYL PARDO:

Just to clarify, the Urban Institute blog, which I wrote and which is referred to in this story, does not report on original Urban Institute research. The blog reports on a conversation held at an Urban Institute panel discussion among appraisal experts about the industry.

The data included in the blog also comes from those panelists. You can read the original blog here: http://www.urban.org/ urban-...

The Urban Institute is not the source of the data chart as cited in this story. The source is The Appraisal Foundation.

The panelists did not say and the blog did not say that there is an appraisal shortage. The panelists and the blog said something more nuanced: that there is often a demand and supply mismatch.

According to Pete Carroll from Quicken Loans…. the process is slow in some markets and during certain times because of capacity issues with appraisers. Zach Dawson from Fannie Mae explained that mortgage origination volume is highly variable, while appraisers’ capacity is relatively fixed. This difference leads to unpredictable earning potential for appraisers and volatility in costs and turn times for lenders and borrowers.

Thank you.

HOUSINGWIRE ❱ JULY 2017 59

Knowledge

Center

60 HOUSINGWIRE ❱ JULY 2017

Knowledge Center

W H I T E PA PE R: Floif y | SP ONSOR E D CON T E N T

The path to $100 million in loan volume THE NATION’S TOP-PERFORMING LOAN OFFICERS SHARE CLEAR AND ACTIONABLE STRATEGIES FOR GROWING ANNUAL LOAN VOLUME SUMMARY High loan volume is achievable by anyone willing to learn the methods. The skills gap between a loan officer producing $10 million in loan volume and one producing $100 million is not about intelligence, resources, or geography. The largest predictor of LO success is how well a team understands the growth impact of skill sets, leadership, culture, and systems, their order of importance and when to focus on each.

This white paper covers insights and strategies from two mortgage industry top-performers and coaches, Lisa Wells and Andy Zemon, who drive a combined $130 million in annual loan volume. This paper will break down the path from $10 milion to $30 million to $100 million annual loan volume and reveal how success is achieved through replicable methods and process, not working harder. This paper will cover: • The stages of LO business growth and how to assess which stage you are in. (Hint: it’s not about loan volume or how many hours you work.)

• The role that culture, metrics, hiring, and technology play in how quickly a team grows from one stage to another.

• How business priorities shift as your team journeys through the stages.

• The most important thing you can do for your business right now.

This white paper was produced from a webinar of the same title hosted live with Lisa Wells, Andy Zemon and Floify’s Chief Marketing Officer, Holly Hamann.

FACTORS WE CAN’T CONTROL Creating and building a successful mortgage business is a difficult enough task without the added burden of losing time and focus to topics that are out of your control.

Some factors may need a watchful eye, while others can be discarded altogether.

Interest rates The daily rise and fall of mortgage interest rates has been a hot topic. While it is important to understand this market and some of it’s mechanics, it’s important not to get distracted by this factor.

Political climate Regulatory actions or easements ebb and flow with changes in political power. Similarly to interest rates, it can be wise to understand the possible changes to the business environment when under control of the different parties, but is otherwise a distraction from business growth.

Consumer confidence The likelihood that consumers are willing to spend or access credit, and how that influences mortgage markets can be important to new originators who rely on organic business. The better the relationships, the more insulated a business is from this area.

The economy Economic growth, inflation, and consumer confidence all play a role in the health of a business. While we can’t control these, the key is to make sure your consulting strategies and products are relevant to how your borrowers relate to the economic climate.

Mortgage availability Credit availability, interest rates, borrower qualification, and lender products all influence how many borrowers can be matched with a mortgage product. While this is a constantly evolving factor, adjusting how you qualify borrowers and which lenders you work with can help mitigate impact.

Competition Staying on top of what your competitors offer and how they deliver their customer experience is critical to being able to differentiate your own offerings.

To read the entire white paper, visit the Knowledge Center at knowledge.housingwire.com.

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Center

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W H I T E PA PE R: Ellie M a e | SP ONSOR E D CON T E N T

Knowledge Center

HMDA: The new frontier of reporting UNDERSTAND WHAT’S CHANGING AND HOW TO ENSURE CONTINUED COMPLIANCE SUCCESS

INTRODUCTION On October 15, 2015, the Consumer Financial Protection Bureau published the final rule modifying Regulation C to implement revisions under the Home Mortgage Disclosure Act, as required by the Dodd-Frank Act. The rule was subsequently published in the Federal Register on October 28, 2015. In accordance with their discretionary power under the law, the CFPB also added a few more reporting requirements than specifically mandated by Dodd-Frank.

The implementation period for the changes to the provisions in Regulation C span from Jan. 1, 2017 to Jan. 1, 2020.

REVISIONS BY TIME FRAME The rule also revises how financial institutions are defined and categorized. As a result, some organization will be subjected to additional regulation, while others will be excluded. In 2017, the rule will exempt an estimated 1,400 low-volume depository institutions.

In 2018, by redefining a non-depository institution, the CFPB estimates an increase of 40% in reporting by entities presently excluded as non-depository institutions.

The rule change is intended to expand reportable data for both applications and originated loans, thereby increasing the amount of information available to regulators and the general public.

In 2018, Appendix B (collecting ethnicity, race and sex) will be modified to include additional subcategories for race and ethnicity, which can be self-identified by the applicant.

Institutions will also be required to report whether ethnicity, race

and sex are reported based on visual observation or the surname of the consumer.

The rule adds required reporting for HELOC loans, or any loans provided via an open-end line of credit, which are presently optional until the 2018 collection of data. The rule likewise mandates the reporting of up to four reasons for denial of an application, which is also optional prior to 2018. Financial institutions are only required to report data on open-end lines of credit if they originated 100 or more such lines during the previous two years. Closed-end loans on the other hand, must be reported if the institution originated 25 or much such loans during the previous two years.

The rule also modifies notification of the availability of the data collected. The public notification requirements are revised regarding the language in the Disclosure Statement on how the person or entity can obtain the entity disclosure statement and modified LAR data. This can be done by submitting the request to the organization filing the LAR, which remains optional, or by directing the inquirer to the CFPB HMDA website to obtain this public data.

Last and certainly not least, in 2020 certain organizations will be required to file a LAR on a quarterly basis, if originating loans or taking applications (combined) totaling at least 60,000 per year (75,000 was originally proposed).

To read the entire white paper, visit the Knowledge Center at knowledge.housingwire.com.

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CFPB Watch

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CFPB Watch

Dodd-Frank under siege THE FATE OF THE CFPB HANGS IN THE BALANCE

BY BEN LANE AND BRENA SWANSON

THE U.S. HOUSE OF REPRESENTATIVES voted on June 8 to pass the Republicanled Financial CHOICE Act, H.R. 10, which would abolish the Dodd-Frank Wall Street Reform and Consumer Protection Act. From there, the Financial CHOICE Act moves to the Senate for a vote, where it will likely struggle to succeed without more bipartisan support. A bill of this magnitude would need a filibuster-proof vote in the Senate, which is 60 votes or more, meaning Senate Democrats will need to flip sides and vote to support the act.

Of the 100 seats in the Senate, Republicans make up 52 seats, Democrats make up 46 seats and Independents make up 2 seats (both caucus with the Democrats).

House Financial Services Committee Chairman Jeb Hensarling, R-Texas, first introduced the act last year in an attempt to replace the Dodd-Frank Act. He released an updated version of the act this year on April 19. CHOICE stands for Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs.

“The Financial CHOICE Act offers economic opportunity for all and bank bailouts for none. The era of ‘too big to fail’ will end and we will replace Dodd-Frank’s growth-strangling regulations on community banks and credit unions with reforms that expand access to capital so small businesses can create jobs and consumers have more choices and options when it comes to credit,” Hensarling said.

Some of the biggest changes in the bill affect the Consumer Financial Protection

Bureau. The CFPB would be changed to the Consumer Financial Opportunity Agency, an executive agency with a sole director removable at will. The deputy director would also be appointed and removed by the president.

The only hearing on the bill was met with a lot of opposition from committee Democrats, who ended up using a political work-around to schedule a follow-up hearing in order to voice their disproval of what they’ve dubbed the “Wrong Choice Act.” In light of the act passing through the House, House Financial Services Committee Ranking Member Maxine Waters, D-Calif., said, “It’s shameful that Republicans have voted to do the bidding of Wall Street at the expense of Main Street and our economy. They are setting the stage for Wall Street to run amok and cause another financial crisis. I urge my colleagues in the Senate not to move on this deeply harmful bill.”

The manager’s amendment also passed through the House in a vote after debate on Thursday.

With the amendment, the Congressional Budget Office, which offers nonpartisan analyses for the U.S. Congress, said the Financial CHOICE Act would reduce direct spending by $30.8 billion while increasing revenue by $2.8 billion, resulting in $33.6 billion in total deficit reductions over the 2017 to 2027 period. This is $9.5 billion more than the first estimate the CBO reported.

According to the CBO report, “The manager’s amendment would make the oper-

ating costs and collection of fees by the Office of the Comptroller of the Currency, the Federal Housing Finance Agency, and the non-monetary policy expenses of the Federal Reserve subject to the annual appropriations process.

“The amendment also would authorize the Federal Deposit Insurance Corp. to charge additional fees to offset appropriations for the salaries and expenses of certain employees. Under the amendment, certain implementation and administrative costs of the Federal Reserve would be subject to appropriation.”

T h re e ot he r a me nd me nt s a l s o passed through the house from Trey Hollingsworth, R-Ind., John Faso, R-N.Y., and Ken Buck, R-Colo., but the CBO did not issue a report on how much the Financial CHOICE Act would cost with the three amendments added in.

STATE AGS SUPPORT CFPB The vote came despite pressure from state attorneys general, who defended DoddFrank and the CFPB. In a letter sent to the House of Representatives’ senior leadership on both sides of the aisle right before the House voted to abolish Dodd-Frank, the group of state AGs say that they oppose the Financial CHOICE Act, recognize the importance of the CFPB and support its work.

“The proposed act will eliminate many of the critical consumer protections implemented as a result of the DoddFrank Wall Street Reform and Consumer Protection Act in the wake of, and in HOUSINGWIRE ❱ JULY 2017 65

CFPB Watch

“

The CFPB continues to cite the very minimal accommodations it has made in some rules for credit unions.” ­— Jim Nussle, CUNA president

response to the financial crisis,” the state AGs wrote.

“As the chief consumer protection officers in each of our respective states, we write to call your particular attention to those portions of the act that would effectively eviscerate the role of the Consumer Financial Protection Bureau, the only independent federal agency exclusively focused on consumer financial protection,” the AGs continued.

“While the act purports to protect consumers from over-regulation by federal agencies, its far-reaching consequences would make consumers more vulnerable to fraud and abuse in the marketplace,” the AGs add. “The undersigned states support the work of the CFPB and oppose any effort to curtail its authority.

The letter was signed by the AGs of New York, California, Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, Mississippi, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, and Washington, all of whom are Democrats.

Specifically, the AGs letter called out the elimination of the CFPB’s UDAAP authority, the elimination of the CFPB’s supervisory authority, the elimination of the CFPB’s consumer complaint database, and several other restrictions that would “effectively cripple the CFPB from doing the job it has been doing so effectively since its inception.”

The AGs noted the environment that existed before the financial crisis and its 66 HOUSINGWIRE ❱ JULY 2017

impact on consumers and the work the CFPB has done to protect consumers since its inception.

“Our states’ work to protect consumers from unscrupulous marketplace actors and practices is greatly enhanced when the federal government serves as an effective partner,” the AGs wrote.

“In the years leading up to the global financial crisis, residents of our states suffered the consequences of a federal government that failed to fulfill its basic obligations to U.S. consumers to prevent fraud and misconduct by mortgage providers, servicers, and other financial firms,” the AGs continued. “Families nationwide suffered dire financial consequences as a result of lax federal oversight and inaction.”

The AGs add that the CFPB “has emerged as the independent federal consumer watchdog the nation has long needed, and as a key partner in critically important consumer protection work undertaken” by the state AGs. “The exceptional record of the CFPB speaks for itself,” they added.

The AGs specifically mention the CFPB’s recent actions against Ocwen Financial and Wells Fargo among the positive actions taken by the bureau.

Back in April, the CFPB sued Ocwen for “failing borrowers at every stage of the mortgage servicing process.” According to the CFPB, its lawsuit alleges that Ocwen cost borrowers money, and in some cases, their homes, with its years of “widespread errors, shortcuts, and runarounds.” (See article on page 48.)

And in September, the CFPB, the Office

of the Comptroller of the Currency, and the city and county of Los Angeles fined Wells Fargo $185 million for more than 5,000 of the bank’s former employees opening more than 2 million fake accounts to get sales bonuses.

In the view of the AGs, passing the Financial CHOICE Act and its subsequent “crippling” of the CFPB would be dangerous for consumers.

“For these and other reasons, the undersigned States urge you to support robust and engaged consumer protection in the financial services industry by voting against the Act,” the AGs concluded. “A rollback of these significant post-financial crisis rules and regulations would substantially harm consumers and the public in general.”

CREDIT UNIONS DISAGREE That sentiment from state officials doesn’t reflect the opinion of many companies in the mortgage industry, specifically credit unions.

CFPB Director Richard Cordray has denounced the idea that new regulations are killing the banks. In response, the Credit Union National Association submitted a letter on June 2 to the CFPB detailing each of the ways the agency’s rulemakings have affected America’s roughly 6,000 credit unions.

The letter also includes recommendations on how the bureau can improve its regulations to provide relief to credit unions and their members.

“We urge the bureau to take immediate action and implement our suggestions for the protection of credit union members, who have fewer choices and are incurring increased costs due to CFPB rules,” said Jim Nussle, CUNA president and CEO. “CUNA, our state league partners, and credit unions—the original consumer protectors—stand willing to provide the CFPB any further details or analysis necessary to achieve regulatory relief, the ultimate goal of our Campaign for Common-Sense Regulation.

CFPB Watch

“The CFPB continues to cite the very minimal accommodations it has made in some rules for credit unions,” Nussle explained.

“However, in practicality, credit unions’ ability to provide top-quality and consumer-friendly financial products and services has been significantly impeded by a onesize-fits-all regulatory scheme that favors large banks and less regulated nonbank lenders—institutions that have more resources for overly complex compliance requirements,” he said.

While CUNA said it was pleased to hear that the CFPB recognizes the very important role credit unions play in serving consumers, there are still plenty of areas to improve on, which it outlined in the letter and recommendations.

According to CUNA’s Regulatory Burden Study, it found that in 2014, regulatory burden on credit unions caused $6.1 billion in regulatory costs, and an additional $1.1 billion in lost revenue.

And this data doesn’t even include the CFPB’s recent regulatory additions to the Home Mortgage Disclosure Act (HMDA) and Truth in Lending Act/Real Estate Settlement Procedures Act Integrated Disclosure (TRID) requirements.

“The CFPB regularly cites modest thresholds and accommodations it has provided in some mortgage rules and the remittances rule as proof that it is considering the impact its rules have on credit unions and their members,” the letter stated.

“Regrettably however, credit unions continue to tell us that the accommodations the CFPB continues to cite are not sufficient exemptions and they do not fully take into consideration the size, complexity, structure, or mission of all credit unions.”

The letter breaks down the following four categories: 1. Ability to Repay/Qualified Mortgage (ATR/QM) According to a recent survey of CUNA members, 43% cited the QM rule as most negatively impacting the ability to serve

members with mortgage products.

So even though the bureau commonly cites the expanded qualified mortgage (QM) safe harbor for small creditors as proof that it has helped credit unions continue to serve members, CUNA explains that it did not provide full relief for many credit unions.

2. Mortgage servicing The CFPB claims that it has tailored its servicing rules by making certain exemptions for small servicers that service 5,000 or fewer mortgage loans, but the latest survey results from CUNA members say otherwise.

In the recent survey, more than four in 10 credit unions (44%) that have offered mortgages sometime during the past five years indicate they have either eliminated certain mortgage products and services (33%) or stopped offering them (11%), due to burden from CFPB regulations.

3. HMDA CUNA cites that it is hard to say HMDA is tailored to minimize the impact on small entities given that prior to the rule credit unions were not required to report HMDA data on HELOCs. CUNA’s recent survey of its members showed that nearly one in four credit unions (23%) that currently offer HELOCs plan to either curtail their offerings or stop offering them completely in response to the new HMDA rules. And CUNA said it believes this is a conservative estimate.

4. Remittances Although the CFPB regularly cites the exemption to entities that provide fewer than 100 remittances annually as an example of providing relief to small entities, CUNA states that this is probably the clearest example that the CFPB is simply not listening.

Instead, the letter stated, “This rule has made it more expensive for members to remit payment and has drawn consumers away from using credit unions and into the arms of the abusers for which the rule was designed.”

HOUSINGWIRE ❱ JULY 2017 67

INDEX COMPANIES # 1st Priority Mortgage...................................................................52

A Ally Bank.............................................................................................54 Altisource.................................................................................... 18, 43 Altisource Asset Management..............................................43 Altisource Portfolio Solutions................................................43 Altisource Residential.................................................................43 American Red Cross.....................................................................54 Aquinas Academy.........................................................................54 Auction.com......................................................................................16 Austin MBA........................................................................................54

B Bank of America.............................................................................54 Barnes Distribution....................................................................... 12 BB&T.....................................................................................................54 Bestborn Business Solutions..................................................54 Black Knight Financial Services............................................. 12 Bridgestone....................................................................................... 12

C Caliber Home Loans..................................................................... 12 California Department of Business Oversight 43 Chase............................................................................................54, 70 Clarocity............................................................................................... 12 Consumer Financial Protection Bureau........... 27, 42, 63, 65-66 Credit Union National Association..................................... 66

D Ditech Financial............................................................................... 12 DIY Network.....................................................................................70 Docutech............................................................................................. 12 Douglas Elliman......................................................................38, 41

E Early Warning Services...............................................................54 Ellie Mae......................................................................................54, 63 EverBank.....................................................................................52-53 EverBank Financial Corp....................................................52-53

F

FANNIE MAE

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HGTV....................................................................................................70 Home Loan Servicing Solutions...........................................43 Home Point Financial..................................................................51 Howard Hanna Financial..........................................................52 Howard Hanna Real Estate Services ��������������������������������52 H&R Block..........................................................................................22 Hyatt Regency Lost Pines Resort and Spa ���������������������14

J

Warriors Community Foundation.......................................54 Wells Fargo...............................................................................54, 66

X Xinnix....................................................................................................29

Z

L

PEOPLE

Landes, Steve..................................................................................52 Laurence, Tiana...............................................................................21 Levey, Stephen...............................................................................52 Levinson, Sam.................................................................................52 Lienerth, Sheilla.............................................................................. 12

KeyBank............................................................................................... 12

M Miller Samuel Inc...........................................................................38

N National Association of Realtors..................................37-38 National Housing Trust..............................................................25 National Low Income Housing Coalition ������������������������25 New Penn Financial...................................................................... 12 New York Department of Financial Services 43 Nothnagle Home Securities....................................................52

O Ocwen.............................................................................. 1, 42-49, 66 Ocwen Loan Servicing.........................................................43, 47 Ocwen Mortgage Servicing.....................................................43 Office of the Comptroller of the Currency.........53, 65-66 OpenClose.......................................................................................... 12

P PGA........................................................................................................54 PHH....................................................................................................... 47 Primary Capital mortgage........................................................51 Prospect Mortgage....................................................................... 12

A Anderson-Tompkins, Brooke..................................................52 Andrade, Kathie.............................................................................53

B Behrend, Robert..............................................................................16 Bhatt, Kevin......................................................................................52 Bondi, Pam.................................................................................43, 47 Bon Salle, Andrew......................................................1, 5, 7, 31-32 Brandt, Amy...................................................................................... 12 Breakspear, Drew...................................................................43, 47 Brown, James..................................................................................52 Buck, Ken............................................................................................65 Burns, Meg.......................................................................................... 12

C Chandler, Brent...............................................................................54 Cimino, Anthony............................................................................. 12 Clements, Robert..........................................................................53 Coniglio, Anthony...........................................................................51 Cordray, Richard.............................................................43, 45, 66

D Dill, David...........................................................................................52

R RealtyUSA.........................................................................................52

F

S

Falce, Michael................................................................................... 12 Faso, John..........................................................................................65

Safeguard Properties.....................................................12, 26-27 Stearns Lending................................................................ 12, 51-52 Stonegate Mortgage Corp........................................................51

Kerr, Martin........................................................................................54 Khan, Agha.......................................................................................52 Kirby, Peter.........................................................................................21 Kotler, Stephen................................................................................41 Kraemer, Richard...........................................................................52 Kress, David......................................................................................52

Zelle.......................................................................................................54

JMAC Lending................................................................................... 12

K

K

G

M Macke, John......................................................................................52 Mayopoulos, Timothy....................................................................5 Miller, Paul..........................................................................................51 Mirro, Richard...................................................................................52 Mumphrey, J. Scott.......................................................................52

N Nadeau, Jason.................................................................................20 Nathan, Howard............................................................................52 Newman, Willie..............................................................................52 Nicholas, Lisa.................................................................................... 12 Norman, W. Scott..........................................................................54 Nothnagle, Christine....................................................................52 Nussle, Jim........................................................................................ 66

O Ottaway, Andrew........................................................................... 12

P Preston, Carrie.................................................................................52

R Rosenzweig, Eric............................................................................52

S Sandberg, Sheryl............................................................................15 Schneider, David.......................................................................12, 51 Scott, Jonathan..............................................................................70 Smith, Jim..........................................................................................52

Facebook.............................................................................................15 Factom......................................................................................... 20-21 Fannie Mae................................. 1, 5, 7, 14, 24-25, 27, 31-35, 59 Fast Company....................................................................................9 FBR & Co..............................................................................................51 Federal Deposit Insurance Corp............................................65 Federal Housing Administration...................................27, 38 Federal Housing Finance Agency..........................12, 33, 65 Federal Reserve............................................................. 38, 53, 65 Fifth Third Bank.............................................................................54 Finance of America Reverse....................................................54 Flagstar Bank................................................................................... 12 Floify......................................................................................................61 Forest City Realty Trust............................................................... 12 FormFree............................................................................................54

United Shore Financial Services...........................................54 United Wholesale Mortgage..........................................22, 54 University of Georgia...................................................................54

Hamann, Holly.................................................................................61 Hanna, F. Duffy................................................................................52 Hayes, Tim..........................................................................................51 Henry, Kelly.......................................................................................52 Hensarling, Jeb...............................................................................65 Hollingsworth, Trey......................................................................65 Hurt, Dave........................................................................................... 12

H

W

J

Z

Hanna Holdings.............................................................................52

Walter Investment Management Corp. ��������������������������� 12

Johnson, Sheryl..............................................................................52

Zemon, Andy....................................................................................61

68 HOUSINGWIRE ❱ JULY 2017

T Texas Association of Reverse Mortgage Lenders 54 Texas Mortgage Bankers Association ������������������������������54 The Collingwood Group.............................................................. 12 The Financial Services Roundtable ������������������������������������ 12 TIAA................................................................................................52-53

U

Gilmore, R. Douglas......................................................................52 Goodman, Matthew....................................................................52 Grace, Ray......................................................................................... 48 Grant, Adam......................................................................................15

H

T Trice, Carol.......................................................................................... 12

W Waters, Maxine...............................................................................65 Wells, Lisa...........................................................................................61 Whitehead, Merle..........................................................................52 Wilson, Blake...................................................................................53

Y Yun, Lawrence..........................................................................37-38

AD INDEX A Arch U.S MI Services Inc.................................................................................................... 4

B Black Knight Financial Services......................................................................................2

C California Mortgage Bankers Association...........................................................6, 19

E Ellie Mae.................................................................................................................................13

F FICS..........................................................................................................................................53

M M&M Mortgage Services...................................................................................................8 Mortgage Contracting Services (MCS).....................................................................55

N NAWRB.................................................................................................................................. 10

P PHH Mortgage....................................................................................................................67

R Radian.......................................................................................................................................3

T The Mortgage Collaborative.........................................................................................55

V VRM.......................................................................................................................................... 17 HOUSINGWIRE â?ą JULY 2017 69

PARTING SHOT ❱ ALL IN THE FAMILY Chase enlisted Property Brothers Drew and Jonathan Scott to market the bank’s mortgage lending on HGTV and the DIY Network. Ads featuring the brothers promote relationships with Chase’s home lending advisors at physical branches nationwide.

70 HOUSINGWIRE ❱ JULY 2017