July 2019 Issue by HousingWire

HOUSINGWIRE MAGAZINE ❱ JULY 2019

DOWN PAYMENTS The average down payment is much smaller than you think.

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TOP LAW FIRMS Black Mann & Graham, Manley Deas Kochalski, Gross Polowy LLC HOUSINGWIRE MAGAZINE ❱ JULY 2019

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E I D D E FR C: MA

ON THE

RIGHT TRACK Looking to the future

LOAN ORIGINATORS: WORK FOR THE BORROWER, NOT THE BANK. Independent mortgage brokers are in full control of running their businesses. With less built-in margins, theyâ&#x20AC;&#x2122;re able to shop for competitive rates, while also establishing strong relationships with their clients.

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

HOUSINGWIRE JULY 2019 EDITORIAL

CONTENT SOLUTIONS

PUBLISHER Clayton Collins

MANAGING EDITOR Sarah Wheeler

EDITORS Ben Lane Jessica Guerin

DIGITAL CONTENT STRATEGIST Alyssa Stringer

REAL ESTATE EDITOR Kathleen Howley

CREATIVE

ASSOCIATE EDITOR Kelsey Ramírez

GRAPHIC DESIGN Traci Cortez

REPORTER Alcynna Lloyd

COVER PHOTOGRAPHER Stephen Voss

CONTRIBUTORS Dan Van Der Meulen, Mark Wai

SALES

CORPORATE

NATIONAL SALES DIRECTOR Jennifer Watson Laws jlaws@HousingWire.com

PRESIDENT AND CEO Clayton Collins

CHIEF REVENUE OFFICER Diego Sanchez CALIFORNIA MARKETING MANAGER Christi Lingard Caren Karris clingard@HousingWire.com MARKETING CENTRAL COORDINATOR Mark Adams Lauren Neaves madams@HousingWire.com CLIENT SUCCESS SOUTHEAST MANAGER Tamara Wren Haley Hess twren@HousingWire.com AD OPERATIONS GREAT LAKES COORDINATOR Lorena Leggett Matthew Stafford lleggett@HousingWire.com CLIENT SUCCESS SALES COORDINATOR COORDINATOR Emilio Flores Talia Quigley CONTROLLER Michelle Monroe

NEW ERA FREDDIE MAC is forging a new path forward as former CEO Donald Layton steps down and the new CEO David Brickman takes the helm. The transition also represents the closing of an era. As I spoke with Layton in Washington, D.C., at Freddie Mac’s headquarters, he stressed the various eras the company has been through since the housing crisis. This month’s cover story details the era as the company struggled to survive after the crisis, dealing with the foreclosure crisis and then the transformation era. Now, a new era is dawning – the era of removing the GSEs from conservatorship. Read through the cover story to see the future of Freddie Mac under its new CEO. Also, check out our commentary section for our own Editor Ben Lane’s take on a recent congressional hearing where U.S. Department of Housing and Urban Development Secretary Ben Carson confused REOs with the sandwich cookie, Oreos.

Kelsey Ramírez Associate Editor @kels_ramirez

Subscriptions are available for $149 for one year. A subscription includes the print magazine and online access to the digital magazine. Canada and foreign are only eligible to purchase the “Digital Only” subscription plan at $149 for one year. Visit www.housingwire.com/subscribe for more information. The information contained within should not be construed as a recommendation for any course of action regarding legal, financial or accounting matters. All written materials are disseminated with the understanding that the publisher is not engaged in rendering legal advice or other professional services. HW Media does not guarantee the accuracy of information provided, and is not liable for any damages, losses or other detriment that may result from the use of these materials.

Tweets From The Streets For too many Americans, the largest portion of their paychecks goes to housing. Over 37 million renter and owner households spend more than 30% percent of their household income on housing; over 18 million of which spend more than half of their income on housing.

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by @SecretaryCarson

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Big changes are coming to URLA. We’ve paved the way so lenders have a smooth journey. Start preparing now. We are facing one of the biggest industry changes to hit the market in the last 20 years. Are you ready? Ellie Mae is known for delivering comprehensive support for major industry changes. You can count on us as your trusted partner to get you prepared for the Uniform Residential Loan Application (URLA). Stay connected by joining our “I LOVE URLA” email list to get the latest information and education for a seamless transition. Visit ellie.me/iloveurla and start preparing today.

JULY ‘19

FREDDIE MAC: ON THE RIGHT TRACK Freddie Mac’s transformation and future as a new CEO takes over. By: Kelsey Ramírez

DOWN PAYMENTS

TOP LAW FIRMS

The average down payment is much smaller than you think.

In order to stay compliant, mortgage companies need trusted counsel with experience in regulation.

By: Dan Van Der Meulen HOUSINGWIRE ❱ JULY 2019 7

YOU’RE BUSY CLOSING DEALS. WE’RE BUSY PROTECTING THEM.

When it comes to your mortgage business, hedging your pipeline should be as important as building it. At Bank of Oklahoma, our team of experienced traders makes markets in TBA contracts, helping you hedge your production more effectively.

Bank dealer services offered through Institutional Investments, Bank of Oklahoma which operates as a separately identifiable trading department of BOKF, NA. NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE

CONTENTS THE LINEUP

BACK DEPARTMENT 46 RENTWIRE Landlord charged with running Ponzi scheme in massive multifamily mortgage fraud probe.

10 PEOPLE MOVERS

The American Land Title Association named Diane Tomb its new CEO.

EVENT CALENDAR

NEXTSummer19 is an intimate conference designed for senior executives.

Ex-MLB Commissioner Bud Selig takes a look inside professional baseball today. 14 DISPATCH Servicers embrace digital empowerment to boost customer retention.

62 CFPB WATCH

DISPATCH

Here are five things the Consumer Financial Protection Bureau will focus on in 2019. 66 KUDOS Plaza Home Mortgage donates $41,000 to breast cancer research.

16 HOTSEAT What does it really look like to take humans out of the mortgage process?

18 SOUNDING BOARD

HUD Secretary Ben Carson apparently doesn’t know what an REO is.

58 OPENHOUSE Homeowners get reprieve as Congress rescues flood insurance program.

VIEWPOINTS

24 REO OR OREO?

54 REVERSEREVIEW

ON THE SHELF

Are you a part of the servicing technology revolution? Take this test to see how you rate.

The digital future of mortgage: Do you see what we see?

Where have all the refis gone? Mortgage originations fell to four-year low in first quarter.

Reverse mortgage companies make moves to support growth in tough market.

22 DIGITAL MORTGAGE

50 LENDINGLIFE

The Federal Housing Administration wants more banks to participate in its mortgage program.

68 BY THE NUMBERS The monthly payment required to purchase a home slipped 6% in the past six months. 70 Q&A Freddie Mac helps lenders bring self-employed underwriting into the digital age.

19 TAKE 5 Kristen Sieffert works to shed light in a sometimes controversial industry.

20 HOT OR NOT Remote areas just beyond the more affluent suburbs have seen a wave of activity.

72 KNOWLEDGE CENTER Challenges of loan origination: Estimating accurate property tax amounts. 74 KNOWLEDGE CENTER With new tech solutions, you can meet consumer demand for easy payments. 76

COMPANIES/PEOPLE INDEX

PARTING SHOT HOUSINGWIRE ❱ JULY 2019 9

Diane Tomb American Land Title Association

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STEARNS

LAKE NUNNINK

EGENHOEFER EVANS

The Federal Housing Finance Agency appointed Clinton Jones, Lynn Fisher and Matt Grinney as senior advisors. A former staffer at the U.S. Department of Housing and Urban Development and Fannie Mae, Jones worked previously as senior counsel and staff leader for insurance and housing in the U.S. House of Representatives Financial Services Committee. Fisher comes to the agency from the American Enterprise Institute, where she was a resident scholar and co-director of the Housing Center. T he F H FA a l s o h i re d Me g h a n Patenaude and Christopher Bosland as senior advisors. Patenaude, who previously served as the senior policy analyst at the J. Ronald Terwilliger Foundation for Housing America’s Families, will assume the position of senior policy advisor. Bosland, who has been appointed as the senior advisor for regulatory affairs, comes to FHFA from the Department of the Treasury’s Office of the Special Inspector General for the Troubled Asset Relief Program, where he previously worked as the deputy chief of staff.

CASE

GREENWOOD URGO

American Land Title Association named Diane Tomb its new CEO. Tomb has over 20 years of experience in housing, working previously as the executive director of the National Rental Home Council, and as president and CEO of the National Association of Women Business Owners.

T h e F H FA a p p o i n t e d S h e i l a Greenwood as director of external relations. Greenwood previously worked as policy associate director at the Consumer Financial Protection Bureau. Prior to that, she was chief of staff to HUD Secretary Ben Carson and assistant secretary for congressional and intergovernmental relations at HUD. Waterstone Mortgage founder Eric Egenhoefer joined Panorama Mortgage Group as co-managing partner, launching a new brand extension, Novus Home Mortgage. Egenhoefer, who sits on Ellie Mae’s Executive Advisory Board, founded Waterstone Mortgage Corporation in 2000 and relinquished his role as president last summer. CBRE hired Leah Stearns as its next chief financial officer. Stearns, who previously served as the senior vice president and chief financial officer for American Tower Corp.’s U.S. division, is stepping into the role as the company’s current chief financial officer, James Groch, transitions his focus to responsibilities as the company’s global group president and chief in-

vestment officer. OpenClose welcomed Tom Buenz to its team as the new vice president of enterprise sales. Buenz is an industry veteran with more than 20 years of experience managing accounts and accelerating business development. Prior to joining the company, Buenz served as a strategic account executive at Ellie Mae, as well as a senior sales executive at Finastra. JPMorgan Chase appointed its chief financial officer, Marianne Lake, to the position of CEO of its consumer lending business. Prior to her role as chief financial officer, Lake served as the investment bank’s global controller from 2007 to 2009 and held a number of roles in the consumer bank and investment bank in New York and London. Replacing Lake as chief financial officer is Jennifer Piepszak, who is currently CEO of the bank’s card services business. Piepszak joined Chase in 1994 and has held a number of positions during her time with the bank. Prior to leading card services, Piepszak served as CEO of the bank’s business banking unit. Freddie Mac expanded its multifamily mortgage banking team, appointing Geri Borger Urgo, Catherine Evans, Michael Case and Amanda Nunnink to newly expanded vice president positions. Urgo previously served Freddie Mac as a senior director, and will now lead as its vice president of production and sales. Evans has been with Freddie Mac since 2017 and has been appointed as the vice president of SBL underwriting. Case previously served as a senior director of pricing, and will now fill the role of vice president of multifamily capital markets. Nunnink will now serve as vice president of multifamily investor relations.

EVENT CALENDAR

NEXT SUMMER AUGUST 26-27, 2019 Host: NEXT Location: The Gwen, Michigan Avenue Chicago Cost: $595 On the agenda: NEXTSummer19 is an intimate conference designed specifically for senior executives navigating the mortgage lending industry. This biannual technology summit aims to educate attendees on new and emerging products and services. This year, conferencegoers will attend lender-centric educational sessions that focus on topics like compliance, production, sales, corporate culture and more. Learn more at nextsummer19.splashthat.com

CHICAGO, ILLINOIS NEXT’s 2019 conference will be held in Chicago, Illinois. While in the city, make sure you head down to Chicago’s Navy Pier and find a spot on a Spirit cruise ship. Whether you’re there for the great food, amazing music or grand views, Spirit promises a fun-packed evening. After all, who would pass up a chance to witness the beauty of Lake Michigan? Learn more at themagnificentmile.com 12 HOUSINGWIRE ❱ JULY 2019

ON THE SHELF For the Good of the Game: The Inside Story of the Surprising and Dramatic Transformation of Major League Baseball BUD SELIG WILLIAM MORROW

Ex-MLB Commissioner Bud Selig takes a look inside professional baseball today, detailing how he helped bring the more-than-century-old game into the modern age and revealing interactions heâ&#x20AC;&#x2122;s had along the way with players, managers, fellow owners and fans across the country. More than a century old, the game of baseball is resistant to changeâ&#x20AC;&#x201D;owners, managers, players and fans all hate it. Yet, now more than ever, baseball needs to evolve.

Talking to Robots: Tales from Our Human-Robot Futures DAVID EWING DUNCAN DUTTON

Science journalist David Ewing Duncan outlines 24 possible human-robot futures, featuring scenarios involving teddy bear robots, politician bots, warrior bots and others. In this book, Duncan explores the human-robot relationship, talking to several experts about it and what it means for our future. Will they usher in a fantastic new future, or destroy us? What do some of our greatest thinkers, anticipate about our future?

BLACK KNIGHT | SPONSORED CONTENT

Servicers embrace digital empowerment to boost customer retention

Black Knight’s Servicing Digital provides robust information about customer real estate assets decisions independently. Armed with everything needed to determine choices, and the ability to crowdsource information from online reviews for feedback, today’s customer prefers to make decisions without the advice of a traditional expert.

ustomer satisfaction and engagement are critical for servicers to build lasting relationships and retain clients. Servicer retention rates dropped to 10-year lows in 2Q 2017, with servicers losing business from nearly 80% of their borrowers. Improving mortgage retention rates increases the likelihood a consumer will continue working with their existing bank or mortgage provider on their next financial decision, such as a home equity loan or their next mortgage. Black Knight, a leading mortgage industry fintech, has developed a unique solution to aid servicers in building these relationships, increasing retention and achieving future business growth. DEFINING THE PERSONAL CONNECTION Black Knight began developing this solution by asking how a servicer with thousands of customers could find an economical way to create a meaningful, personal connection with each one. In today’s world of instant access to unlimited information, the best way for a mortgage servicer to build a personal connection with their customers is to empower them with the information and functionality they need to make their own decisions regarding their home wealth. Research has shown that customer empowerment has a positive impact on customer engagement. Consumers expect to have the tools necessary to access information, analyze results and make 14 HOUSINGWIRE ❱ JULY 2019

CONTINUOUS, MEANINGFUL ENGAGEMENT One of the most promising ways for servicers to build and maintain long-lasting customer relationships is to harness the power of digital technology and put it into the hands of customers. This allows for open, quick and continuous engagement by giving customers access to the information they need to make decisions— with or without the servicer’s direct involvement. Black Knight’s Servicing Digital is a robust, mobile customer retention and engagement tool. Servicers can offer customers the Servicing Digital tool to provide detailed, timely and highly personalized information about their home’s value and how much wealth can be built from their real estate assets. Servicing Digital can centralize this information and enable customers to access everything they need to know about their property, mortgage and market area. Servicing Digital features intuitive and interactive home, loan and neighborhood dashboards allowing customers to easily access important property- or loan-related information, evaluate options or perform vital tasks. Servicing Digital has the ability to tap into aggregated public records and deliver customers the most current analytics on their home’s value. Customers can also find out their current home equity, look at refi options and view the time-to-payoff impact if they were to make additional payments. By accessing market or neighborhood overviews, customers can compare their home to neighboring houses. This information helps them to understand why their home value may be different than the average value of nearby houses and see how the attributes of their home compare to others. Servicing customers could also look at the price and characteristics of houses that recently sold in their area in considering whether to list their own home. MEETING CUSTOMERS AT THEIR POINT OF NEED Ultimately, customer retention is about meeting customers at their point of need. Servicers offering this kind of customer experience can build and strengthen personal connections each time their customer opens the Servicing Digital tool, leading to positive impacts on retention and keeping the servicer’s lending arm top of mind when the customer is ready to refinance, apply for a home equity loan or purchase another home.

TMS | SPONSORED CONTENT

Are you a part of the servicing technology revolution? Take this test to see how you rate and accessing loan-level customer details on demand? Are you leveraging data to help your customers avoid foreclosure and loss of their home? Great technology provides great data and insights so your customers can have an amazing experience and you can maximize your portfolio and your business. Make sure you partner with a subservicer who can deliver on that. Take the Subservicer Health Check to determine where you and your subservicer stack up:

ust as Airbnb and Lyft radically disrupted the hotel and transportation industries, the mortgage servicing industry is ripe for a technology revolution of its own. The truth is the proliferation of technology in the mortgage servicing industry is breathing new air to customers that have otherwise experienced nothing more than a great paper exchange – as long as payments are made on time. Otherwise, your customers are experiencing long call-wait times, and a faceless, emotionless experience. No wonder only 9% of borrowers return to their original lender, according to the Mortgage Bankers Association’s 2018 Servicing Operations Study and Forum. The mortgage industry delivers one of the lowest retention rates of any category. We’re selling homes, not hamburgers and french fries! Great technology that can deliver great insights and data can be the difference between great customer experience and subpar subservicing. The technology wave doesn’t just redefine the experience for customers, it can and should redefine the experience for the lender in terms of loan management and portfolio performance. We live in a big data world. And, your portfolio is rich with big data and insights. From a business standpoint, is your portfolio performing for you and your investors? Are you minimizing your servicing advances? Are you maximizing net servicing income and mitigating losses? Are you retaining customers, monitoring payment trends,

DOES YOUR SUBSERVICER DO THIS FOR YOU… • Give you instant access to daily reports and ability to drill down to loan-level details • Monitor borrower payment habits to avoid delinquencies • Perform escrow analysis early in the loan boarding cycle to help with escrow advances and cash flow • Robust modification practices that help more delinquent borrowers get current while increasing your servicing net income • Utilize an innovative subservicing platform like SIME which offers real-time transparency into your portfolio • P rovide you on demand access to call recordings with your customers DOES YOUR SUBSERVICER DO THIS FOR YOUR CUSTOMERS… • Welcome them when they’re onboarded • Answer their calls in 60 seconds or less • Achieve 80% or higher initial call resolution • Deliver and track a superior customer experience – utilize NPS on every call • Execute specialized outbound outreach campaigns for events, such as natural disasters • Provide a user-friendly, intuitive website to manage their account, including uploading and downloading documents • Deliver ongoing communications and education that help them be successful homeowner HOW DID YOUR SUBSERVICER SCORE? 1-4 Consider why the total was so low. Could you and your customers be happier? 5-8 Not a bad score, but there’s room for improvement 9-13 Sounds like your subservicer is more of a Customer Servicer. Great job! You have happy customers Didn’t score as well as you thought? It’s time to take the “subpar” out of subservicing. Partner with someone who can deliver great customer service and loan portfolio management. Because when you settle for 9%, you settle for stale, never fresh service. You deserve repeat customers, and you need someone who understands we’re selling homes. HOUSINGWIRE ❱ JULY 2019 15

HOTSEAT

SPONSORED CONTENT

Ari Gross CEO

SoftWorks AI

here’s a lot of talk about automation in our industry, but what does it really look like to take humans out of the mortgage process? We sat down with Ari Gross, CEO of SoftWorks AI, to talk about how lenders can automate without sacrificing accuracy in the process. HousingWire: Why is automation so important right now? Ari Gross: Digital lending in other verticals is progressing rapidly. For example, student loan and automobile lease lending decisions are largely paperless and made in minutes or hours. The average time to close on a mortgage is about 40 days.

Q&A

HW: Why are lenders still using humans to oversee supposedly automated processes? AG: Naturally, lenders and insurers and other mortgage stakeholders are very concerned about the cost and time involved in on-boarding, analyzing and pricing a loan opportunity. However, the first priority is to make sure that the loan diligence process is rigorous so that each loan is given the level of scrutiny that’s required. We believe that digital lending is like any other industry with respect to knowledge worker automation. Automation is always desired provided that the quality of the process does not degrade and, hopefully, improves. Applying automation methods to mortgage lending has been very much biased towards having the system maximally classify documents and extract data, without a corresponding emphasis on touchless automation. This produces mounds of automated data, most of which needs to be manually reviewed with uncertain benefits from an ROI perspective. This lack of reliability and confidence in automated solutions and the underlying OCR technology is why lenders are still using humans to oversee supposedly automated processes. 16 HOUSINGWIRE ❱ JULY 2019

HW: What are some of the problems lenders encounter using traditional OCR technology? AG: OCR technology is strongly relied on for classification and data extraction but unfortunately is still error prone. A typical, relatively high accuracy for an OCR engine is 99.5%. That still amounts to 1 character error per 200. On a normal form or document, there are typically at least 2,000 characters that must be recognized, meaning on average there are at least 10 errors per processed page. With an average loan packet being about 300 pages, there are on average 3,000 OCR errors in the converted loan packet output. Without more advanced computer vision and AI methods applied to mortgage processing, it is very hard to advance the state of automation. In particular, maximizing touchless automation requires that the system knows the accuracy around each operation it performs, including classification, splitting, stacking, and data extraction. Moreover, OCR technology for mortgage processing is based largely on a static process, rather than a dynamic process which supports follow-up queries. In essence, for a typical OCR engine, a single character misread negates its ability to auto-process a document. A more robust OCR process is clearly needed. HW: How does your Trapeze software go beyond OCR to get more accurate results? AG: Our Trapeze software goes beyond OCR technology, incorporating computer vision and AI methods. Typical OCR is static so that if OCR fails to recognize all the characters on a page, there is no way to recover this content. Computer vision, by comparison, is the technology used in driverless cars and other smart devices to dynamically understand captured images, often in 3D, iteratively trying to understand the relevance of each pixel. AI technology can be used to determine if the OCR output of a document page is considered less reliable, and computer vision can interrogate documents that seem incomplete and can “pull” or force OCR information from areas where the normal OCR process failed. This ability to detect likely OCR failures and force/pull OCR information leads to much higher process automation rates.

Experience it Live OCT 27–30 | AUSTIN, TX

The rhythm of MBA Annual19 can’t be beat! Join us this October in the Live Music Capital of the world — Austin, Texas. Get energized by our experts and innovators, leaders and trailblazers. Leave with the solutions that will keep our industry going strong. Feel the pulse of it all — register today and experience it live.

REgisterNow!

mba.org/annual19

Where experts and pundits sound off on a key industry issue

F E D E R A L H O U S I N G A D M I N I S T R AT I O N The Federal Housing Administration wants more banks to participate in its mortgage program and it’s clarifying its rules to ease their compliance concerns. The FHA recently released proposed clarifications to its annual and loan-level certification requirements, as well as updated language describing what constitutes a defective loan and how such problems can be remedied. FHA Commissioner Brian Montgomery said banks now contribute to just 13% of FHA’s origination volume, down from about 44% in 2010. “A key focus of this administration and of my tenure at HUD has been to improve the clarity, certainty, and transparency of our regulations and requirements. While HUD will preserve its strict enforcement authority where our requirements are violated, we will continue to reduce unnecessary burdens on stakeholders across our programs.” – HUD Secretary Ben Carson

“We are confident that the changes will lead to more lenders participating fully in the FHA program, making these mortgages available to even more Americans — particularly first-time homebuyers. We look forward to reviewing the revisions in detail and presenting our comments.” –MBA President and CEO Robert Broeksmit

“We are looking to bring clarity to our compliance rules that continue to discourage many lenders – including banks – from doing business with FHA. We’re hoping to be more transparent in how we do business with lenders by letting them know what the potential remedies are for mistakes or errors they may make in the origination and servicing of FHA loans.” – FHA Commissioner Brian Montgomery

“These particular policy documents and tools are well overdue for review and revision, and HPC appreciates that FHA is dedicating resources to focus on this important upgrade to their policies and practices. Successfully addressing these issues will give lenders more confidence in participating in the FHA program and enable participating lenders to better serve homebuyers seeking an FHA loan.” –Housing Policy Council president Ed DeMarco

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“We appreciate the efforts by the Department to add clarity and transparency to the certifications processes. NRMLA is reviewing the documentation on the Drafting Table and will be coordinating a submission of comments with the NRMLA Risk and Compliance Committee and the NRMLA HUD Issues Committee.” – NRMLA Executive Vice President Steve Irwin

1. The book I can’t stop recommending is… “Grit – The Power of Passion and Perseverance” by Angela Duckworth.

Finance of America Reverse President and 2017 HousingWire Women of Influence winner Kristen Sieffert works to shed light in a sometimes controversial industry. Sieffert has worked to build trust in an industry that at times has been in the crosshairs of consumer-rights groups while providing older Americans with the tools they need to obtain financial independence in retirement. Here are five personal questions that give you a deeper look into Sieffert’s life:

2. My favorite thing to do with my employees is… to hear their stories about how they make a difference in the lives of everyday people. 3. After I am finished with my career I hope people remember… that I helped create a more purpose-driven approach to work and empowered my team to go after their dreams. 4. I would tell my younger self… that the self-doubt you carry around is more normal than you think. 5. Our biggest business success this year was… seeing our new mission and vision start to blossom within our company culture. HOUSINGWIRE ❱ JULY 2019 19

Hot SIZZLE? Not FIZZLE? 1 1 WHY THE

WHY THE

EXURBS



Welcome to the exurbs: remote areas just beyond the more affluent suburbs that have seen a wave of activity from builders and home shoppers. According to a recent report by the National Association of Home Builders, the exurbs were the only regions that saw an annual increase in single-family permits in the first quarter of 2019. Posting a 1.6% year-over-year gain, the exurbs are home to just 9% of the nation’s single-family construction. But while this might not seem like much, its share is growing – a fact that some analysts say is raising red flags.



CYBER SECURITY



GSE REFORM Now that he is officially installed as the director of the Federal Housing Finance Agency, Mark Calabria is taking GSE reform head-on. Calabria spoke at length about possible methods for getting the GSEs out of government hands. First up will likely be the suspension of the net worth sweep, where Fannie and Freddie send their profits each quarter to the the Treasury. The privatization of the GSEs may not happen at the same time, Calabria told Reuters. Calabria said one of the paths under consideration is staggering the schedule for privatization.

iBUYERS The term iBuyer has exploded across the internet as major companies like Redfin and Zillow expand their reach into the business of buying homes directly from sellers. An iBuyer is an online real estate investor who seeks to reduce transactional property costs via digital tools, minimizing the involvement of real estate agents in favor of their own listing services. “iBuyers have been expanding at breakneck speeds,” writes ATTOM CTO Todd Teta. “What started as a moonshot idea six years ago has now blossomed into a massive, billion-dollar homebuying market in its own right – and it’s not showing any signs of slowing.”

20 HOUSINGWIRE ❱ JULY 2019

First American shut down external access to an application after cybersecurity expert Brian Krebs alerted the title insurer that millions of records were exposed online. “The digitized records – including bank account numbers and statements, mortgage and tax records, Social Security numbers, wire transaction receipts, and drivers license images – were available without authentication to anyone with a Web browser,” Krebs wrote. But there is no evidence the security hole was exploited, First American said in a regulatory filing.

STUDENT LOAN DEBT The lack of affordability has especially impacted America’s first-time buyers, many who tend to fit in the Millennial category. With more than $1.5 trillion in student loan debt, new LendingTree research shows an overwhelming majority of first-time homebuyers are considering purchasing fixer-upper homes to combat costs. In fact, 88% of homebuyers that are grappling with student loan debt are now more likely to consider a fixer-upper home, the data. Notably, Millennial homeowners are the most likely generation to have improved their home, sitting at nearly 58%.

TRANSGENDER PROTECTIONS HUD proposed a new rule that has the potential to leave transgender Americans without shelter. It is one of the administration's attempts to limit protections for transgender Americans. In 2017, the HUD website removed links to documents that guided emergency shelters on how to serve transgender people facing homelessness. When questioned whether or not LGBTQ people should receive protections under fair housing laws, Secretary Carson reportedly said it was a congressional duty “to do something different” about the definition of gender.

VIEWPOINTS

By Mark Wai

The digital future of mortgage: Do you see what we see? Consumer expectations continuing to rise

possible way there must be a platform that connects every piece of the process in one place.

It’s no secret that the mortgage industry is continuously evolving, with speed and convenience taking precedence. Last year, I wrote a piece about consumers’ demand that mortgages be easy to transact – anytime, anywhere they want and at the best possible prices. Today, the evolution of the mortgage industry continues to center on the behaviors of a digitally minded, at-your-fingertips consumer experience. A fast, transparent and personalized homebuying process is rapidly becoming the new normal, with consumer expectations continuing to rise. The mortgage process has historically been considered daunting for many home22 HOUSINGWIRE ❱ JULY 2019

buyers. But the traditionally long and siloed mortgage process of making it from homebuyer to homeowner is no longer sustainable. Mortgage consumers expect a well-packaged, one-stop shop and single point of contact that allows homebuying to fit comfortably into their lifestyle, not the other way around. The mortgage industry has made progress on many fronts, but modernization and technology advances have still left much to be desired. For technology to truly serve the mortgage consumer in the best

START FROM THE END Technology has streamlined much of our daily lives, and consumers expect the mortgage process to be no exception. When a homebuyer is ready to apply for a mortgage, they want the application process to be relatively simple. These days, technology has advanced the process to the point where mortgages can be started at home on a computer or via a smartphone, with most anyone being able to fill out the application in several minutes. While these technologies have made significant advancements – even cutting out some parts of the process altogether – homebuyers are still waiting months to close on a property and customer satisfaction is nowhere near where mortgage professionals and homebuyers would like it to be. And in many cases, the homebuyers still need to interact with many different vendors, with significant wait times, uncoordinated efforts and are asked to submit the same documents again and again. The home inspection, appraisal and title searches, closing disclosure review, and everything else in between, remain a long and unpleasant experience. When compared to innovation such as Amazon, Expedia and Airbnb, the mortgage industry is still in search of the one breakthrough that knows how to connect all the disparate parts for homebuyers. WE MUST THINK END-TO-END On New Year’s Eve in 2009, a group of friends were looking to hire a private driver to make several stops throughout the evening. Realizing the night’s notoriety for taxi demand, a driver would eventually charge the friends a hefty bill of over

Mark Wai is Chief Technology Officer at Radian Group Inc. He is the recipient of an Informatica Innovation Award, in recognition for delivering an innovative Customer 360 analytics application in nine months.

$800, which didn’t sit right with passenger Garrett Camp. Using this experience as motivation, Camp would later go on to found Uber and kick-off a revolution in the ride-hailing industry. This single experience led to a company now valued in the billions. We have also seen similar impact in the consumer retail industry with Amazon, travel with Expedia and the hospitality industry through Airbnb. All of these companies have an end-to-end technology platform, providing the right level of information to the customers, in real time, that takes the customer experience to a whole new level of satisfaction. The mortgage industry has seen many newcomers in recent years. A lot of these entrants focused on the front-end, mortgage application process. Other startups have created new, digital experiences but in single use cases, such as eClosing. Moreover, none of these new entrants connect all the dots. The key pain-points in the mortgage industry, for the most part, remain unresolved. We have seen a small number of innovations that attempt to connect the broader mortgage ecosystem and reduce the number of disjointed processes, using technology such as blockchain, artificial intelligence and advanced analytics. Unfortunately, due to technology immaturity, non-uniform industry standards and difficulties in gaining agreements among all participants within the mortgage ecosystem, we are still scratching the surface of what is possible. THE UBER OF MORTGAGE Throughout the mortgage industry, many stakeholders are using their own platforms, making the processes siloed. There is a real need to unite each of these platforms through a single, jointed application. This type of collaboration could be groundbreaking for the mortgage industry. So what exactly would this end-to-end solution look like? The blueprint for what would satisfy consumers throughout the mortgage process might already be in the hands of ride-hailing customers — The

Uber app. For mortgage professionals across the industry, one of the leading advantages of a single application is information sharing. But because there are so many layers and moving parts within the mortgage process, many companies will often ask for varying degrees of the same information or documents, focusing on different risk points, resulting in a poor customer experience and low satisfaction. Such collaborative technology, however, could be resolved by joint-partnership, industry standardization and new technology integrations that can provide better automation, security and information sharing. As mentioned above, another key gap in the mortgage industry is lack of real-time information, something that has become the new normal when it comes to eCommerce. For example, simple things, such as mortgage application status, are surprisingly lacking in this day and age. In addition, homebuyers desire access to upfront pricing, status and approval updates, continuous knowledge of the next steps in the process and even reminder notifications. Similar to the Uber app, mortgage professionals and homebuyers are looking for an app that can communicate to all parties where the mortgage application is in the process and that offers access to all of the necessary information, including property history, credit reports and homebuyer information. This is the key feature that we have come to love about Uber – all the information about the ride at your fingertips, in real-time and in one place. Another major feature in Uber that appeals to consumers but is not yet available in the mortgage space is transparency in consumer options. Uber provides consumers with price transparency, various car types to choose from, the driver’s rating, when and where to meet the driver, a map of the route to the destination and the time you will arrive. On the contrary, during a mortgage application, the vast majority of homebuyers do not know, nor are informed of, the options that they may be entitled to, such

as the choice of their title insurance company. Unlike other successful industries that were disrupted, the mortgage process, by and large, still does not offer up-front information and choices. This often results in surprises in mortgage costs, as well as extends the time to close a mortgage. To provide homebuyers the type of upfront choices and options that Uber offers, a mortgage app would need to provide all of the homebuyers’ options upfront, as well as offer an explanation of each option and the cost associated with it. The app would provide instant status updates to all parties involved. It would find the closest and most effective way for processes such as closing a mortgage and finding a notary, and the entire process would be clearly illustrated in real-time, similar to the map that Uber provides, so that the homebuyer and all parties involved will know exactly where they are at in the process, what the next steps are, what appointments need to be made, which people need to be seen, and finally, the time needed to complete the application. NEXT STEPS The problems that we see today in the mortgage industry are decades old problems. We know that a revolution must happen in order for the mortgage industry to evolve. We know the problems and we have the advantage of also having learned what has not worked. We should avoid wasting precious money, time and resources, further delaying our progress. We also have the opportunity to witness how other industries have been able to successfully revolutionize and reinvent themselves, leveraging technology and focusing on end-to-end solution and customer needs. If we are able to come together as an industry, connect the missing pieces, collaborate within the eco-system and utilize today’s advanced technologies from an end-to-end perspective, we are poised to execute the straight-through mortgage process and digitally transform the mortgage industry. HOUSINGWIRE ❱ JULY 2019 23

VIEWPOINTS

By Ben Lane

HUD Secretary Ben Carson apparently doesn’t know what an REO is Under questioning from Rep. Katie Porter, Carson confuses REO with Oreo try term with a cookie. Yep. You read that right. During the hearing, Carson was questioned by Rep. Katie Porter, D-Calif., who served as California’s independent monitor in the nationwide $25 billion National Mortgage Settlement from 2012 to 2014 and spent a great deal of time speaking directly to the mortgage industry, such as advocating for how servicers can change the conversation with consumers, before running for Congress. Porter asked Carson about the disparity between the REO rates of the Federal Housing Administration and those of Fannie Mae and Freddie Mac, but before moving to the meat of her question, asked Carson if he knew what an REO was. Carson’s response: “An Oreo?” No, Secretary Carson, not the sandwich cookie. As Porter would explain, REO stands for “real estate owned.” Basically, it’s a home that’s been foreclosed on. It’s one of those terms that you learn pretty early on when you start working in the housing business. I’m pretty sure I learned what REO meant on about day three of my time at HousingWire. Carson has been the secretary of HUD for more than two years and apparently doesn’t know what REO means. But for many this comes as no surprise, as the controversial start to Carson’s term as HUD secretary was due to his lack of knowledge in the housing sector. While some experts congratulated the The U.S. Department of Housing and Urban Development Secretary Ben former brain surgeon on his nomination, Carson had a bit of a rough day recently. others were appalled. At the time, Brandon Friedman, who Carson appeared on Capitol Hill to testify before the House was the former public relations expert at Financial Services Committee, and during questioning from the the department sent out a tweet about what experts at HUD were committee member with the most housing knowledge, turned saying that day: himself into a punchline by confusing a common housing indusHUD folks today on Ben Carson: 24 HOUSINGWIRE ❱ JULY 2019

Ben Lane is the editor for HousingWire. In this role, he helps set a leading pace for news coverage spanning the issues driving the U.S. housing economy and helps guide HousingWire’s overall direction. Previously, Lane worked for TownSquareBuzz, a hyper-local news service. He is a graduate of University of North Texas.

“It hurts” Like asking “an affordable housing expert to perform brain surgery” “Makes zero sense” “Troubling” Many were confused about Carson’s nomination to HUD, given his background as a neurosurgeon, and some even went as far as to say the nomination proved the new administration didn’t care about housing. At the hearing, Porter corrected Carson’s misunderstanding of the term, and proceeded to explain the definition of an REO. “No, not an Oreo,” Porter replied to Carson’s cookie query. “An R-E-O. REO.” Carson then offered up: “Real estate...?” getting the first two letters of the acronym correct. But then replied “organization” when asked by Porter what the “O” stands for. Now, as my colleague Kathleen Howley pointed out in our HousingWire Slack chat, it’s possible that Carson is familiar with the term OREO, as in “other real estate owned,” the term that the Federal Reserve uses for REO properties. Because of that, OREO is also the term that many bankers use when referring to REO properties. Regardless, the last “O” in that term does not stand for “organization,” and it was fairly clear in the remainder of Porter’s questioning of Carson that the HUD secretary was not familiar with REO, OREO, or any other similar acronym. “Real estate owned – that’s what happens when a property goes into foreclosure, we call it an REO,” Porter explained to Carson, adopting the college professor persona she learned while studying under Sen. Elizabeth Warren, D-MA, at Harvard. After serving as California mortgage monitor, Porter became a professor of law at the University of California-Irvine. “FHA loans have much higher REOs, that is, they go into foreclosure rather than into loss mitigation or to non-foreclosure alternatives like short sales, than comparable loans at the GSEs,” Porter continued. “So I’d like to know why we’re having more foreclosures that end in people losing their

homes, with stains to their credit and disruption to their communities and their neighborhoods at FHA than we are at the GSEs.” Carson then offered to have Porter “work with the people who do that” at the FHA. But Porter had an answer for that. “Well, Mr. Carson, respectfully, that was my day job before I came to Congress. So now, it’s my job to ask you to work with the people,” Porter said. And that’s really the bottom line here. It’s Carson’s job to lead HUD. That means he’s one of the most powerful and important people in all of housing. And that means he should know the industry terms and what they stand for. QM, DTI, LTV, TRID, REO, GSE, ARM, PMI, just to name a few. The Secretary of Housing should know what they all mean. Regardless of your politics, I don’t think that’s too much to ask for. If Carson needs some help learning those acronyms or a bunch of other housing industry terms, he need look no further than his own department’s website. On HUD.gov, there is literally a page that explains all those little housing industry acronyms: https://www.hud.gov/about/ acronyms. The page is titled “COMMON HUD TERMS AND ACRONYMS.” And there, about three quarters of the way down the page, is “REO,” with the definition: “real estate owned (in reference to defaulted FHA-insured properties).” Carson, for his part, tried to turn the faux pas around and embrace the Oreo flub. After finishing his testimony, Carson tweeted out: “OH, REO! Thanks, @ RepKatiePorter. Enjoying a few post-hear-

ing snacks. Sending some your way!” The tweet was accompanied by a picture of Carson holding up a package of Oreos. And as brands are wont to do these days, Oreo even tried to get in on the “fun,” before quickly seeing the error of its ways. With “Oreos” trending on Twitter, the Oreo Twitter account tweeted out: “REO stands for ‘Really Excellent OREO (cookie).’ Everyone knows that.”

The tweet was deleted after about an hour (but not before we captured a screen capture of it), probably after someone told the social media team that joking about foreclosures wasn’t the best idea. With all due respect to Oreos (they’re delicious, after all), maybe it’s best to sit this one out, pal. But in a later interview with the Hill, Carson defended himself, saying of course he knows what an REO is. “She asked me what the O is,” Carson said in the interview. “We throw around acronyms all the time, particularly in government. You don’t really think about, ‘What do the letters mean?’ Of course I know what an REO is. Of course I know what the foreclosure portfolio is.” He also said that perhaps the representative’s question was due to her lack of knowledge about the current status of REOs at HUD, saying she was a subject matter expert 10 to 15 years ago. Carson offered to let her meet with HUD employees to gain a better understanding. “At that time we did have a lot of REO properties, we had over 65,000 of them,” he said. “Now we have only about 6,500 and we do everything we can to keep families who are affected from foreclosure,” Carson continued in his response. “That’s why the number is down so low. I think that she obviously is thinking about the way things used to be and has no idea what’s going on now.”

HOUSINGWIRE ❱ JULY 2019 25

26 HOUSINGWIRE ❱ JULY 2019

E I D D FRE C: MA

ON THE

RIGHT TRACK Looking to the future BY KELSEY RAMÍREZ

HOUSINGWIRE ❱ JULY 2019 27

“I’M GOING TO LEAD FROM THE FRONT, BUT I’M GOING TO LEAD SHOULDER-TO-SHOULDER WITH THE 10,000 FOLKS HERE AND THE 100,000 FOLKS IN THE INDUSTRY,” SAID FREDDIE MAC CEO DAVID BRICKMAN.

“It’s almost like we were an athlete that had a major car accident. We were injured, we were rushed to the emergency room and we were in the intensive care unit. It was not clear whether we were going to make it or not.” -Brickman

28 HOUSINGWIRE ❱ JULY 2019

Brickman takes to helm of one of the largest mortgage companies in the U.S. today, and while times at the government-sponsored enterprise are filled with uncertainty, Brickman sees nothing but excitement for the future of Freddie Mac. Brickman is taking over for retiring CEO Donald Layton, known affectionately as Don to his collegues, who is leaving as one era for the company sunsets, and another era begins. Layton explained the company has gone through several eras, including just after the financial crisis, from about 2008 to 2012, which was the era of dealing with the foreclosure crisis; the era during Layton’s seven years with the company, from 2012 to 2019, which was the era of reform while in conservatorship. And now, the former CEO explained, Freddie Mac will move into the era of coming out of conservatorship. Back in 2012, after having already retired twice, Layton came out of retirement once again to serve as CEO of Freddie Mac. Layton led E*Trade in 2008 and 2009. During his reign, E*Trade was a top 50 mortgage servicer, with $18 billion worth of mortgages serviced in 2009 and $23 billion in 2008. He was brought on to the GSE to begin its reformation, and was expected to transform Freddie Mac’s practices and business model. Over the next seven years, that’s exactly what he did. Early during Layton’s tenure, he asked the company’s acting head of single family what the servicing standards were. The answer? There is an annual survey. While this shocked Layton, who expected to hear statistics such as, “We answer 90% of phone calls after x number of seconds, etc.,” he had vowed not to make any changes during his first six months at the company as he watched and waited, learning everything he could. Soon, it was time for the results of the one servicing standard – the annual survey. “Who do you survey?” Layton asked. “Freddie’s customers,” was the simple reply. Already, this showed Layton a bias in the results. The third party conducting the survey would never hear from the people that were dis-

satisfied with the company and didn’t use them. The presenter continued, showing, on each slide, bar charts. In one, Freddie Mac would be slightly above Fannie Mae, in the next, Fannie Mae beat out Freddie Mac. This dance continued, throughout the presentation – sometimes Freddie lost, sometimes it won against its GSE competitor. “Do you do any of these surveys for the large banks or insurance companies?” Layton asked after a while. “Yes,” the survey presenter answered. “Where are they?” Layton braced himself for the reply. “Oh, they’re up here,” the presenter pointed to a spot on the bar chart that put the GSEs to shame. Through the shock at how far behind Freddie Mac had fallen in its quest to simply be better than Fannie, Layton let the impact of that moment steer his direction going forward. He implemented servicing standards. A six-month wait time for certain items turned into days. Seven years later, Freddie Mac’s bar chart now competes with the big banks.

FORECLOSURE CRISIS ERA On September 7, 2008, the housing system as we know it changed forever. Then President George W. Bush signed a bailout for Fannie Mae and Freddie Mac after the housing system crashed, placing them into conservatorship under the Federal Housing Finance Agency. Originally, the U.S. Department of the Treasury bailed out Freddie Mac for $71.3 billion and Fannie Mae for $116.1 billion. Since then, the government-sponsored enterprises have more than paid back their debts to American taxpayers – as of the fourth quarter of 2018, Freddie Mac has paid $116.5 billion back to the Treasury, and Fannie Mae paid made payments totaling $175.8 billion. But the bailout was just the beginning. In the years that followed, homeowners were either forced to stay in their homes after the values plummeted, or were foreclosed on, starting what is now referred to as the foreclosure crisis.

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30 HOUSINGWIRE ❱ JULY 2019

SOME OF THE

IMPROVEMENTS

Freddie Mac made under Layton’s leadership include:

•SINGLE SECURITIZATION

•CREDIT RISK TRANSFER

The GSEs officially began issuing the single security, called the Uniform Mortgage-Backed Security, on June 3, 2019 after years of work. In fact, the first meeting on single security occurred less than a month after Layton took the helm. And it has the potential to create a lot of change. It should change pricing, all the investors will be doing things differently, lenders will be doing things differently in terms of hedging and their opportunity to make Freddie and Fannie compete better because it’s a more level playing field. These are major changes.

The GSEs have been working to sell off the risk to the loans it holds in its portfolio. Freddie Mac lays off 80% of the capital risk of its new single family flow. Freddie Mac explained it reduces risk for taxpayers, and therefore future shareholders, but doesn’t give up that much income to do so. This also positions the GSEs to exit conservatorship as the amount of capital it will need to support its book will shrink each year.

•TECHNOLOGY Freddie Mac has made several technology advancements over the past several years. For example, Freddie Mac added some technological mu`scle to its Loan Advisor Suite back in 2017, partnering with LoanBeam to improve the income verification capabilities of its underwriting program.

What’s more, during this time, employees from Freddie Mac lived in uncertainty, not knowing if the company could survive the crash. “It’s almost like we were an athlete that had a major car accident,” Brickman, who has been with Freddie Mac for more than 20 years, explained. “We were injured, we were rushed to the emergency room and we were in the intensive care unit. It was not clear whether we were going to make it or not.” “[It] was very much a period of just stabilizing the patient and ensuring that we were able to survive and continue to do some of the basic functions we had,” Brickman said of the foreclosure crisis era.

TRANSFORMATION ERA But the company did make it through. In fact, after it stabilized from the fall, it began to transform. Brickman explained that when Layton came on the scene, he started retraining the company and transforming it into the Freddie Mac that we see today. “It was really training to be a different kind of institution to transform who we are and become more commercial, focus on running the business in ways that had been less of a focus in the past,” Brickman said. “You really can’t understate the tremendous impact that Don has had on Freddie Mac,” he said. “He was…the perfect leader for Freddie Mac. He has had such a singular focus transforming the company, making us better, changing, or helping contribute to change in the housing finance system, and he has been dogged about that.” Layton explained that it is important that while a company is getting bigger, that it also continues to improve, and get better with each expansion. That was his goal at Freddie Mac – to make the company better. When he began his tenure as CEO, Layton began making sweeping changes throughout the company. He currently has 10 divisions under him as the company is structured. Of those, eight of the leaders were outside hires since he began at the company. Layton was searching for a competitive edge. Leaders that drove change and innovation. When he didn’t find it, he found someone else who could. “You can’t do a great job unless you have great people,” Layton said. In order to be a great leader, Layton explained you have to have a thorough knowledge of your field, you have to be competitive and you have HOUSINGWIRE ❱ JULY 2019 31

to have a vision. “I had a vision,” he said. “And the vision was a well-managed FI…and it means competitive and aggressive with the customers you do business and high service standards and technology, you upgrade the technology. But now, Layton is leaving the transformed company, and retiring for a third (and final?) time. From here, he will stay busy and involved in the housing industry by engaging in nonprofits, corporate boards and a think tank. Through the think tank he will write and speak about topics in housing finance. “One of the problems I’ve noticed in conservatorship, there’s a giant knowledge gap between what we in the conservatorship know is going on and the changes made and how things work and the outside world’s knowledge,” Layton said. “I’m not quite sure why, but it just doesn’t seem to get out there adequately, so people are just unaware of what changes have been made and how things work because the communication is not there.” But Layton intends on changing that, saying starting July 1st, he will have no more rules on what he can and can’t say. “I don’t think people, even in the housing system, understand how the housing system really works in terms of not the theory but the real- what’s efficient, what’s not, where the subsidies are, where they’re not,” he said.

LEAVING CONSERVATORSHIP ERA As the sun sets on Layton and his transformation era at Freddie Mac, a new dawn is beginning for Brickman as he sets new goals for the company’s next era: leaving 32 HOUSINGWIRE ❱ JULY 2019

conservatorship. Brickman is not new to the company, serving there more than 20 years and even consulting for Freddie Mac before he was employed there, which gave him an in-depth perspective of many areas of the company. Brickman started his career at Freddie Mac as a senior economist in the financial research area. He has worked his way through the organization, through the different levels, different sets of responsibilities and even different parts of the organization. For the past few years since the Great Recession, Brickman has run the GSE’s multifamily business. While the rest of the leaders at Freddie Mac focused on improving various parts of Freddie Mac’s single-family business, Brickman quietly worked on the multifamily business with much less restrictions from the FHFA. “The whole housing finance policy tends to be on single family, and he [Brickman] went and did it on his own as a different business model in multifamily starting four years earlier than I did, before I got here,” Layton said. “Multifamily was sort of left alone by the policy conservatorship stuff, so he could actually change the business model in very forward looking ways without being interfered unduly.” Multifamily saw significant growth under Brickman’s watch. “We were able to watch that transformation which also accompanied, not coincidently, significant growth from about 300-some odd people when I’d just joined to over 1,000 people in that line of business today,” he said. But now, Brickman will use his time running multifamily as a guide to steer him as he takes the helm in this new era. And while Brickman doesn’t think the rest of Freddie Mac will need the same level of transformation that he oversaw in the multifamily division, he hopes to utilize his experience managing through change. As Freddie Mac enters the end of conservatorship era, it comes with a lot of uncertainty surrounding the future of the company, but Brickman is ready for the challenge. “I think that’s what makes it exciting and makes it a great time to be at the helm

of Freddie Mac,” he said. “I think there’s a lot of people who can get concerned and worried about what the outcome of the process might be and I’m going to reassure them.” Brickman said it is important during this time to focus on the company’s role functionally and economically, and less in terms of organizationally or what the corporate structure is. “It’s an exciting opportunity to help demonstrate that we are a transformed company,” Brickman said. “There’s nothing that the employees of Freddie Mac would like better than to be able to compete and be able to innovate in a less constrained manner and to return to private ownership and the ability to be judged by the markets in terms of our actual performance.” Brickman is prepared to turn uncertainty into opportunity. To push competitiveness in the company. To, as Brickman said, be judged by the market. “We think we’re ready for it, we think we’re up for the challenge,” he said. And the opportunity to prove themselves could be coming sooner rather than later. FHFA Director Mark Calabria continues to drive talks on housing finance reform, saying the status quo isn’t an option. At the Mortgage Bankers Association Secondary conference in New York City at the end of May, Calabria emphasized that the time for housing finance reform was now, while the economy and the housing market are strong. Calabria said he is awaiting a report from President Donald Trump, which will help him develop a roadmap for reform. He said he anticipates collaborating with the Treasury Department and working with Congress, but, “the centerpiece of this plan has to be a strategy to end conservatorship of Fannie and Freddie. I want to move to a new reform structure, one that’s more competitive and works for taxpayers and supports financial stability.” “I just hope they build on the positive change and keep it going, rather than starting differently and making new mistakes,” Layton said.

NEW LEADER, NEW FOCUS Not only is Freddie Mac entering a new era, but a new leader is also taking the helm. And Brickman brings his own views, val-

ues and mission to the company. Brickman notes that one of the key changes he will look to instill is greater efficiency. “We’re a large company, we touch trillions of dollars, but I hold out the hope that perhaps there is opportunity and perhaps changes that might occur in terms of our structure might enable us,” the new CEO stated. “That we could focus a little more on execution, on driving change a little faster.” “I don’t know that we’re ever going to be Silicon Valley and a tech firm that’s spinning new products out every week, but I’d like to see us be a little more agile in terms of our ability to do new things and drive change and bring new ideas to market,” he continued. Brickman also said he would like to place more focus on the affordable housing market and perhaps more in the rental housing market. “I think there are even more challenges on the affordable housing side,” he

said. “So rental housing does tend to be where more low- and moderate-income Americans reside and where they look to for housing, and if that’s where the problem is most acute, then there’s probably more opportunity for us to contribute.” Currently, the FHFA puts loan production caps on each of the GSE’s multifamily business to further the goal of maintaining multifamily activities while not impeding on the participation of private capital. However, the FHFA designed exclusions from the cap to support affordable and underserved multifamily segments of the multifamily market, saying these segments are not being adequately served by the private sector. Even outside of conservatorship, Freddie Mac could continue to serve this sector as it fills the gaps not being served already. While there are many changes coming, Brickman also pointed out there are things about the company that he loves and hopes to maintain during his tenure. After 20 years at the company, he saw many ups

and downs, many leadership changes, entering conservatorship and now, perhaps soon, exiting it, but through it all there he said the essence of the company has remained the same. “We have great culture,” he said. “It drives it from our mission, a little bit. We are focused on serving the housing market, we’re focused on driving innovation, we’re focused on being thoughtful about what we do.” “It’s a powerful thing as a business when you know there is no other market I can go into,” he said. “There’s no credit card trading or auto loans or foreign exchange or money management, we’re just in housing, not going anywhere, so we’ve got to be good at that.” Freddie Mac will continue to innovate, transform and adopt to its coming changes as housing finance reform looks to become a real possibility in the near future. And as it continues on its journey, Brickman is ready, saying it’s an exciting time to be at the helm.

We have great culture. It drives it from our mission, a little bit. We are focused on serving the housing market, we’r e focused on driving innovation, we’re focused on being thoughtful about what we do. -Brickman

HOUSINGWIRE ❱ JULY 2019 33

The average down payment is

much smaller than you think

34 HOUSINGWIRE â?ą JULY 2019

DOWN PAYMENTS ARE

5.3% OF PURCHASE PRICE ON AVERAGE

By: Dan Van Der Meulen

HOUSINGWIRE ❱ JULY 2019 35

hen buying a home, many Americans consider a 20% down payment to be the norm, the ideal amount of money to put down to get a conventional mortgage with no private mortgage insurance and to keep monthly payments reasonably affordable. However, a majority of homes are actually bought with far less than 20% down, although opportunities for low down payments are more widespread in certain parts of the country than others. What is the average mortgage down payment? Lodestar Software Solutions’ loan estimate calculator has collected over 600,000 loan cost estimates from across the U.S. containing detailed information about home prices, loan amounts and locations. “From working with nearly a thousand lenders throughout the country, LodeStar has collected a wealth of real estate transaction information over the past year,” LodeStar Software Solutions CEO Jim Paolino said. “This data can tell us a lot about market behavior and trends in the industry.” Analyzing this data set, the median down payment amount in the U.S. in 2018 was $15,490, which is 5.37% of the median price of $270,000. In the previous year, 2017, the median down payment was $15,150, which is 6.06% of the median price of $250,000. Since the median indicates the middle value if all the prices were lined up in order, this means that half of the searches run in LodeStar’s calculator were for loans with a down payment of less than 5.37%. Not only is the median down payment today far below the benchmark of 20%, but more than two-thirds, 68%, of 2018 home purchases in

Distribution of Down Payment Percent

36 HOUSINGWIRE ❱ JULY 2019

LodeStar’s data had a down payment of less than 20%. About 43% of homebuyers put less than 5% down for their home, and 26% put at least 5% down but less than 20% down. As for larger down payments, 15% of home purchases had a down payment of exactly 20%, and the remaining 17% were greater than 20% down. Looking at the overall distribution of the down payments, the largest concentration of down payments is at or below 10% with another distinct spike at 20% and smaller spikes at 10% and at 100%, a payment in full. Down payment trends over time Over the past two years, a median down payment of 5% to 6% is not out of the ordinary. Comparatively, historical data from ATTOM Data Solutions shows that over the past 18 years, the median down payment has consistently remained less 10%, fluctuating between 9% and just under 3%. The median down payment was hovering around 7% in the early 2000s, however it dropped to just 3.3% in late 2006. From there, the median down payment rose to 6.6% in 2007 before bottoming out at 2.6% in 2009. After these wider variations, which were likely related to the Great Recession, the median down payment has stabilized in the 5% to 7% range over the past five years. “For many Americans, accumulating a 20% down payment is simply too burdensome,” Res/ Title National Sales Manager Brooke Solomon said. “In some of the more expensive markets, it can take a decade or more for a home buyer with an average income to save for a 20% down payment. For others who already have the money,

Median Down Payment in the U.S. Over Time

they often choose to use it in other ways such as savings for retirement or paying off other loans.” Average down payment percentages by state While the median down payment is consistently in the single digits, down payments vary considerably depending on geographical location, both as a dollar amount and as a percentage of home price. When grouping the LodeStar data by state and focusing on 31 states that have at least 1,000 purchases per year in the data set, a ranking of median down payments as a percentage of median home price puts California in first place with a median down payment of 20.18%. Only 10 of the 31 states have a median down payment that is more than 10%. Georgia has the smallest median down payment of all 31 where homebuyers purchase a home with a median down payment of just 2.52%. The differences in home prices across and states and different percentages put down in each state mean that the down payment amounts also have a wide range. California, an expensive state with a median purchase price of $570,000, has a median down payment amount of $115,000, 20% down, while at the low end, the median home buyer in South Dakota buys a $190,000 home with a down payment of $5,250, or 2.57% down.

these are not available to general consumers. The Department of Agriculture offers loans in rural or suburban areas with 0% down but has income restrictions as the program is meant to help borrows of modest means. Finally, Fannie Mae and Freddie Mac offer conventional 97 loans with a 3% down payment, but there is a strict loan limit amount of $424,100 and only single-family homes are eligible, meaning that these programs are less useful in urban and high-cost areas. “It is incredibly important for mortgage and real

Top 5 states by median down payment percent

STATE

MEDIAN DOWN PAYMENT MEDIAN PERCENT PRICE

MEDIAN DOWN PAYMENT

California Maine Arizona Rhode Island Massachusetts

20.18% 18.00% 15.78% 14.51% 12.07%

$114,998 $45,000 $59,978 $36,990 $45,850

$570,000 $250,000 $380,000 $255,000 $380,000

Average Down Payment by State

Factors affecting median down payment This data raises the question of why the average down payments vary so much by state. To get a loan with a small down payment, buyers have several different options. The Federal Housing Administration insures loans with as little as 3.5% down, although there are loan amount maximums which may not be enough in high-cost real estate markets such as Manhattan. The Department of Veterans Affairs offers loans with as little as 0% down to veterans, but HOUSINGWIRE ❱ JULY 2019 37

estate professionals to educate consumers on the amount to save for down-payments, especially first-time homebuyers,” said Peter Benjamin, Lafayette Federal Credit Union senior vice president of mortgage lending. “Having to pay even a few thousand dollars less than they thought can translate into them buying a new home months ahead of time.” Taking into account the different options home buyers have for obtaining a loan with a small down payment, some possible variables at the state level that could affect median down payment percent are:

is eligible for VA loans.

Average Home Price The average price of purchasing a home in the state. Price could influence down payment percentages because some areas may be too expensive for some types of low down payment loans.

Taken together, these variables approximate the affordability of housing in each state, and factors such as urban vs rural which impact loan eligibility. For this analysis, data for these variables was gathered from multiple sources including the U.S. Census Bureau, Department of Veterans Affairs and LodeStar’s own data set. After gathering the external data, the next step was to calculate correlations between the variable and median down payment percentage. Correlation is a measure of the strength of a relationship between two variables, whether positive or negative. The image below shows how the different variables are correlated with down payment percentage. Stronger positive correlations are to the right and stronger negative correlations are to the left, while weaker correlations fall in the middle. Of the variables selected for this analysis, median home price has the strongest correlation with median down payment percentage. The strong positive correlation indicates that when home price increases, the percent of money down also increases. More specifically, as the average home price increases by $100,000, the average down payment percent increases by 3.39%. Visualizing the relationship between median home price and median down payment percent shows a cluster of less expensive states with lower percentage down payments, while other more expensive states have

Percent in single family homes The percent of state residents who live in a single-family house, as opposed to a multiple unit dwelling such as a condo or coop. Condos or multifamily houses could have more stringent lending requirements which require more money down. Percent of homeowners The percent of state residents who own their own home. This is another metric than can help to approximate the amount of owner-occupied housing, as investment properties and rental properties may have different requirements for borrowing. Percent of first time homebuyers The percent of homebuyers who are buying a home for the first time. Repeat homebuyers often put equity from a previous property into the new purchase, so more first-time homebuyers could be associated with smaller down payments. Also, some low down payment loans are only available to first time homebuyers. Percent of veterans The percent of the state population who are veterans, which is also tied to the percent of the population who

38 HOUSINGWIRE ❱ JULY 2019

Average household income The average income of a household in the state. Along with median home price, median household income is a factor in determining the affordability of purchasing a home. Property type The percent of state residents living in an urban or suburban area, as opposed to a rural area. This may be related to the availability of USDA loans, which are only applicable to rural homes.

Median Down Payment vs Median Home Price

a higher percent of money put down on average. While median price is positively correlated, the percent of single-family home dwellers and the percent of homeowners are negatively correlated with median down payment percent, indicating that down payment percentages decrease in states with more single-family housing and homeowners, and conversely increase in states with more multi-family housing and rentals. The remaining variables have weaker correlations with down payment percent, but there are weak indications that more urban states and states with higher household income have higher down payment percentages, while states with larger veteran populations have lower down payment percentages. Perhaps counterintuitively, the firsttime homebuyers variable is positively correlated with higher down payment percentages, indicating that states with more first-time homebuyers typically require a higher percent down payment than states with fewer first-time homebuyers. What this means The median down payment in the United States is closer to 5%, rather than 20%, so there are plenty of opportunities for homebuyers to buy with little money down, although some prospective homebuyers might not be aware of these options. While a higher down payment removes the need for mortgage insurance and lowers monthly payments, a lower down payment can allow homebuyers to spend less time saving for the down payment or can free up the money for other in-

vestments or debt reduction. “The loan officer is uniquely positioned to have these conversations with potential borrowers,” said Kimberly London, USALLIANCE Financial vice president of real estate lending, closing and servicing. “We train all our LO’s to take into account all aspects of the borrower’s situation to determine any factors they can utilize to their advantage.” However, the prevalence of low down payment loans is not evenly distributed – some states have far lower down payments than others. The average down payment percent in each state is most closely related to the average home price, and an increase in average home price is associated with a higher down payment percent. Further, the average percent down payment also increases in areas with more multi-unit housing and decreases in states with more single-family housing. This indicates the possibility that loan requirements generally get more stringent at higher purchase prices as well as for multifamily homes and condos. ABOUT THE AUTHOR: Dan Van Der Meulen is a graduate of Columbia University with a Master of Science in applied analytics. He was an intern at Lodestar while pursuing his Masters. Van Der Meulen specializes in sourcing and merging disparate data sets, manipulating and analyzing data and developing visualizations to uncover business insights. He previously worked for five years in the legal technology industry as a project manager for large-scale data discovery projects. HOUSINGWIRE ❱ JULY 2019 39

Top Law Firms 42 p43 p44 p

Compliance for mortgage companies continues

counsel with experience in regulation, enforce-

to be more complicated than ever as federal

ment, litigation, transactions and licensing.

enforcement priorities change and state regu-

In this section, we highlight a select group of

lators ramp up their oversight. In order to stay

the top law firms in the mortgage and housing

compliant, mortgage companies need trusted

industry.

- BLACK, MANN & GRAHAM - MANLE Y DEA S KOCHAL SKI - GROSS POLOWY LLC

40 HOUSINGWIRE â?ą JULY 2019

HOUSINGWIRE ❱ JULY 2019 41

- SPECIAL REPORT -

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s mortgage regulation continues to evolve, financial institutions need legal guidance from firms that understand the mortgage industry at a deep level to not only minimize risk but maximize their opportunity while still being compliant. Manley Deas Kochalski LLC offers a full complement of default legal services, including bankruptcy services on a national scope through seamless integration with client operations. MDK’s expertise includes foreclosure prosecutions, consumer litigation defense, appellate and major motions, mediation, commercial collections, bankruptcy motion practice and bankruptcy adversary litigation. “Our clients’ choice to have MDK as their designated bankruptcy vendor allows for consolidated communication and continuity of service,” said MDK’s Director of Relationship Management and Business Development Megan Spanner. “Our extensive quality control measures and experienced staff allow our clients to redeploy resources while maintaining a high standard of work product.” MDK’S NATIONAL BANKRUPTCY SERVICES INCLUDE: • Proofs of Claim • Reaffirmation Agreements • Notices of Pay Change • Responses to Notice of Final Cure MDK has had a long history of year-over-year growth by making diversification a strategic priority. The company first diversified geographically into six states and in the past three years it has emphasized diversification of its service offerings, which have expanded to provide clients with legal services related to other asset types, such as auto bankruptcy matters. In 2017 MDK also opened an Orlando, Florida, office and began developing a timeshare foreclosure practice. MDK’s diversification strategy has allowed for the firm to remain financially stable throughout all cycles of the housing market. Through leveraging technology, MDK developed legal service delivery models that provide budgeting certainty, compliance and quality control for default services aimed at mortgage, auto loan and timeshare servicers. These models can easily be translated into other practice areas such as commercial real estate closings and commercial default services. “We will continue to invest in technology-enabled services as they allow us to provide a higher value of service and take on more complex and varied tasks,” Spanner said. Voted as one of the best places to work in Central Ohio, MDK is distinguished by its company culture, which cultivates an environment that embodies the company’s values of education, diversity, health and community — while also developing and retaining attorneys who are well credentialed, experienced and pragmatic. MDK partnered with Besa in October 2016 and has since partnered with 53 nonprofits and volunteered for 196 services projects spanning food security, children’s advocacy, senior welfare, animal welfare, cancer prevention and more. “As a firm we are continually seeking opportunities to contribute to not only the mortgage industry, but to our local communities as well,” Spanner said.

MANLEY DEAS KOCHALSKI LLC P.O. Box 165028 Columbus, OH 43216 manleydeas.com (614) 220-5611

FA ST FAC TS

u M DK

was founded in 2002 in Columbus, Ohio

u M DK

provides clients with services in a regional footprint, covering six states (Ohio, Kentuck y, Indiana, Illinois, Pennsylvania and Florida), 536 counties and 1,300+ judges

Mission: We believe in an innovative approach: that quality legal services can be delivered efficiently, economically and on a large scale. We embrace change by creating and supporting a culture of continuous growth. We treat all parties with compassion while thoughtfully striving to improve the legal system.

- THEODORE K. MANLEY -

- B R I A N T. D E A S -

- M EGA N SPA N N E R -

Partner

Director of Relationship Management and Business Development

Ted Manley is a founder and principal of MDK and its related companies. Manley’s legal background includes corporate structural and transactional work as well as representing creditors in bankruptcy and related state court proceedings. Manley leads MDK’s strategic planning, relationship management and business development groups.

44 HOUSINGWIRE ❱ JULY 2019

Brian Deas is a founder and principal of MDK and its related companies. Deas began his legal career with a one-year judicial clerkship with Justice J. Craig Wright of the Supreme Court of Ohio and a twoyear judicial clerkship with the Honorable John D. Holschuh of the United States District Court, Southern District of Ohio. Deas now serves as MDK’s general counsel and focuses on the firm’s technology initiatives.

Megan Spanner is MDK’s director of relationship management and business development. Her team serves as a single point of contact for clients, coordinating client needs and expectations with MDK’s legal and operational management teams. Spanner is also responsible for the strategic growth and development of the firm’s existing lines of business as well as newly identified opportunities.

LENDINGLIFE The newsletter designed with Loan Originators in mind.

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46 HOUSINGWIRE ❱ JULY 2019

RentWire

Top U.S. landlord charged with running Ponzi scheme in massive multifamily mortgage fraud probe DOJ AND SEC FILE MULTIPLE CHARGES AGAINST ROBERT MORGAN FOR MULTIMILLION-DOLLAR SCAM BY JESSICA GUERIN, BEN LANE

ROBERT Morgan was hit with multiple charges recently by the U.S. Department of Justice and the Securities and Exchange Commission for allegedly running a Ponzi-type scheme that involves shuffling around money from investors and falsifying loan documents. Morgan – one of the largest landlords in the country who purports to have 140 properties across 14 states – was hit with criminal charges by the DOJ for conspiracy to commit bank fraud, wire fraud and insurance fraud, and then slapped with civil fraud charges from the SEC for siphoning and misusing investor funds. The charges are the culmination of a cross-agency investigation that came to light in August that looked into fraud allegations

involving loans backing $1.5 billion in mortgage securities issued by Fannie Mae and Freddie Mac. Back in August, it was discovered that there could a deep, dark secret at the core of multifamily lending that could destroy the market. And in a truly sad bit of irony, the secret could be very similar to the one that crushed the single-family housing market 10 years ago. Fake residents, fake incomes, and inflated mortgages. Sound familiar? A report from the Wall Street Journal detailed how the Federal Bureau of Investigation, the Department of Justice and the Office of the Inspector General for the Federal Housing Finance Agency HOUSINGWIRE ❱ JULY 2019 47

were in the middle of an investigation that the WSJ calls “one of the biggest mortgage-fraud probes since the financial crisis.”

From the WSJ article: Owners of an apartment complex near Pittsburgh, who wanted to take out a mortgage on the buildings, allegedly made vacant units look occupied by turning on radios, placing shoes and mats outside doors and in one instance having a woman tell inspectors her boyfriend was asleep inside. The owners obtained a $45.8 million loan, which was wrapped into mortgage securities and sold to investors. Practices such as these—which were alleged in a federal search-warrant application—have sparked one of the largest mortgage-fraud investigations since the financial crisis. It focuses on whether income from commercial properties was falsified, a move that would enable owners to get larger mortgages and take out cash or expand their businesses faster.

48 HOUSINGWIRE ❱ JULY 2019

That led to the indictment of four individuals for allegedly conspiring to falsify loan information in order to obtain more than $167 million in multifamily loans, and two of those individuals are related to Morgan – the owner of the properties entangled in the mortgage fraud. The indictments, which were disclosed earlier that summer, allege that Frank Giacobbe, Patrick Ogiony, Kevin Morgan and Todd Morgan conspired to defraud Fannie Mae, Freddie Mac, Arbor Commercial Mortgage and Berkadia Commercial Mortgage by faking much of the information that the lenders and government-sponsored enterprises count on when issuing or buying the mortgages. ACCORDING TO THE DOJ, THE FOUR MEN STAND ACCUSED OF: • Conspiring to provide lending institutions with false rent rolls suggesting that properties had more occupied units, at higher rental rates, and generated more income than they, in fact, did. • Conspiring to provide false information about other income received at the complexes. On one occasion, when one defendant asked another where storage space income figures came from, another defendant replied, “Magic” • Conspiring to provide lenders with fraudulently altered leases • Conspiring to prevent inspectors touring the properties from discovering vacant units by, among other things, turning on radios inside vacant units, placing mats and shoes outside apartment doors, and, on at least one occasion, hiring someone to stage an apartment as lived in and pretend to be a tenant of an inspected unit

“

Most of those loans were in turn sold to Fannie Mae or Freddie Mac, entities which were created by Congress to perform and an important role in our country’s housing finance system. As a result of the fraudulent conduct alleged in this indictment, defendants’ conduct not only unjustly enriched them but threatened to undercut the very foundations upon which our mortgage banking and investment systems are based.” - U.S. Attorney James Kennedy

The apartments in question are located in New York and Pennsylvania. “The defendants are charged with fraudulently obtaining over $167.5 million worth of loans relating to seven residential apartment complexes located here in New York and in Pennsylvania,” U.S. Attorney James Kennedy said back in May when the charges were announced. “Most of those loans were in turn sold to Fannie Mae or Freddie Mac, entities which were created by Congress to perform and an important role in our country’s housing finance system,” Kennedy continued. “As a result of the fraudulent conduct alleged in this indictment, defendants’ conduct not only unjustly enriched them but threatened to undercut the very foundations upon which our mortgage banking and investment systems are based.” According to the U.S Attorney’s Office, the men conspired to defraud financial institutions including Evans Bank, UBS Securities, M&T Bank, Arbor Commercial Mortgage, SteepRock Capital, and Berkadia Commercial Mortgage by providing false information about apartment communities in several states that were owned by Morgan Management. Two of the men charged are related to Morgan, the owner of the properties in question. The other men supposedly worked at Aurora Capital Advisors and acted as the mortgage brokers on the deals in question. Now, it seems the authorities have shifted their focus to Morgan himself. According to the WSJ report, Morgan nearly tripled his company’s apartment holdings since 2010, and with that growth, came some allegedly

questionable practices. According to the DOJ, Morgan conspired with three others over the span of 10 years to “fraudulently obtain moneys, funds, credits, assets, securities, and other property” from Fannie Mae, Freddie Mac, and other financial institutions, including Arbor Commercial Mortgage and Berkadia Commercial Mortgage. Morgan and his associates allegedly provided false information to those entities to obtain larger loans than they would have otherwise received on multiple properties, even going as far as to submit fraudulent construction contracts and invoices that inflated contractor payments, and faking contracts for property purchases that inflated sales prices. The DOJ alleges that Morgan and his crew kept two sets of books, one with accurate accounting, and the other thoroughly cooked for lenders that needed information for servicing and refinancing the loans. The SEC’s complaint adds more to the heap, alleging that Morgan raised more than $110 million by promising an 11% return to investors and then diverted much of that cash to pay other investors in a Ponzi-like scheme. The SEC said Morgan’s investors are still owed $63 million, while the DOJ says lenders are holding the bag for more than $25 million and insurers are out $3 million as a result of the scheming of Morgan and his associates. Will this investigation be the canary in the coal mine, the first step to showing that there’s much more fraud going on in the multifamily industry than it appears? Or will the issue be isolated and contained? Only time will tell. Buckle up.

HOUSINGWIRE ❱ JULY 2019 49

50 HOUSINGWIRE ❱ JULY 2019

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

Where have all the refis gone? MORTGAGE ORIGINATIONS FELL TO FOUR-YEAR LOW IN FIRST QUARTER BY BEN LANE RECENTLY released data from the Federal Reserve Bank of New York’s Center for Microeconomic Data revealed that the first quarter of this year was the mortgage business’ worst quarter in more than four years, but a deeper dive into the data shows that on the refinance side of things, it may have been the worst quarter since the financial crisis. The Fed report, which looks at mortgage originations as appearances of new mortgage balances on consumer credit reports and includes refinances, showed that the first quarter had the lowest dollar amount of mortgage originations in any quarter since the third quarter of 2014. According to the Fed report, there were only $344 billion in mortgage originations in the first quarter, down from $401 billion in the previous quarter. That’s the lowest dollar amount of mortgage originations in any quarter since the third quarter of 2014. It’s also the second straight quarter where mortgage originations have fallen. Mortgage originations came in at $445 billion in the third quarter of last year. Then, originations fell to $401 billion in the fourth quarter. And, in the first quarter, they fell again to levels not seen

since midway through 2014. That news came as a bit of shock, especially considering that mortgage interest rates fell throughout the first quarter, leading some to predict that there may be a rise in refinances. But as foretold by the Fed data, it appears the exact opposite happened, at least on mortgages backed by Fannie Mae and Freddie Mac. In fact, according to a report from the Federal Housing Finance Agency, Fannie and Freddie refinanced fewer mortgages in the first quarter than they have in any quarter since at least 2008. According to the FHFA report, Fannie and Freddie refinanced a total of 234,716 mortgages in the first quarter of this year. And a review of 10 years’ worth of data from the FHFA shows that that is the fewest number of refinances completed by the government-sponsored enterprises in any quarter since the financial crisis. The number of refinances completed by the GSEs has decreased fairly steadily since 2016, with minor jumps during several quarters. But overall, the number of refis from the GSEs has declined for the last several years. And that trend led to the lowest level of refis since the crisis. HOUSINGWIRE ❱ JULY 2019 51

According to the FHFA report, Fannie and Freddie refinanced 245,619 mortgages in the fourth quarter, which was the previous low over the last 10+ years. In the first quarter of 2018, the GSEs refinanced 356,001 mortgages, more than 120,000 refinances above the first quarter of this year. Two years ago, the GSEs refinanced twice as many mortgages (510,075 in 2017) in the first quarter as they did in 2019. For a real shock, consider what happened in the first quarter of 2013 when the GSEs refinanced 1,395,383 mortgages in a threemonth period. That spike coincided with historically low interest rates. Back in November 2012, interest rates fell to approximately 3.35% and stayed near that level for several months, leading to the massive total of refinances in the first quarter of 2013. And that’s really the bottom line here. It’s possible that there just aren’t that many refinance opportunities left out there. Even with interest rates recently falling to around 4%, there just isn’t that much financial incentive for many borrowers to refinance if they haven’t already, or if they got a mortgage in the last few years. Although it should be noted that earlier this year when mortgage rates saw largest single-week decline in 10 years, a report

from Black Knight suggested that 4.9 million homeowners with a mortgage could reduce their interest rate by at least 0.75% by refinancing. Now, it’s possible that there could still be a refi surge. In fact, the FHFA report notes that refis actually rose in March, just as mortgage rates were experiencing that historic drop. And the mortgage industry could really use a refi boom, considering, as Black Knight noted, that 2018 saw the lowest refi volume since 2000. According to the Federal Reserve report, mortgage underwriting “remained tight” in the first quarter, with only 10% of mortgages being originated to borrowers with credit scores under 647. The median credit score of borrowers who took out a mortgage in the first quarter was 759. The report also showed that mortgage delinquencies improved slightly in the first quarter, with 1% of mortgage balances at 90 or more days delinquent, down from 1.1% in the fourth quarter. Mortgage performance also improved, with approximately 0.9% of current balances transitioning to delinquency during the first quarter. Beyond that, transitions from early delinquency improved as well, with just 11.7% of mortgages in early delinquency, 30 to 60 days late, transitioning to more than 90 days delinquent, the

Mortgage origination stats

Mortgage originations: $344 billion in Q1

GSEs refinanced 1,395,383 mortgages

2019, down from $401 billion in Q4 2018

in Q1 2013

GSEs refinanced 234,716 mortgages in Q1 2019

52 HOUSINGWIRE ❱ JULY 2019

Mortgage rates fell to 3.35% in Q4 2012

“

The number of refinances completed by the GSEs has decreased fairly steadily since 2016, with minor jumps during several quarters. But overall, the number of refis from the GSEs has declined for the last several years.”

lowest rate observed by the Fed since 2005. Overall, mortgage debt increased in the first quarter by $120 billion to $9.2 trillion. Balances on home equity lines of credit fell slightly, by $6 billion, continuing a trend that stretches back to 2009. HELOC balances now stand at $406 billion. Total consumer debt also continued to rise. According to the Fed report, total household debt increased by $124 billion, or 0.9%, to $13.67 trillion in the first quarter of 2019. That’s the 19th consecutive quarter with an increase, meaning the debt load consumers are facing has increased every quarter for almost five years running. The total of consumer debt is now $993 billion higher than the previous peak of $12.68 trillion in the third quarter of 2008. And while total consumer debt continues rising, there simply aren’t a lot of mortgages being originated these days, relatively speaking, of course. And the impact of the dearth of originations is being felt at lenders all over the country. In one week alone, two different lenders all but completely abandoned mortgages. First, Live Well Financial announced it was terminating its mortgage origination business, abruptly shuttering its operations, leaving approximately 100 of the company’s employees without a job. Then, Bank 34, which operates nine loan production offices in the western part of the U.S., announced it was ending its mortgage business as well. Accord i ng to t he bank, the move will include shutting down

its nine loan productions offices, which are located in El Paso, Texas; Scottsdale, Arizona; Gilbert, Arizona; Tubac, Arizona; Albuquerque, New Mexico; Medford, Oregon; West Linn, Oregon; Puyallup, Washington; and Lynnwood, Washington. The bank expanded its lending operations over the last few years, and as recent as earlier this year, the bank said it expected to keep growing, but the plans apparently changed quite quickly. “Bank 34 believes that this transaction aligns with its strategic goal of reducing its reliance on an earnings stream that can be more cyclical and volatile, while increasing its reliance on the more stable earnings from its core commercial banking business,” the bank said in a filing with the Securities and Exchange Commission. The move was expected to lead to an unknown number of layoffs, although Bank 34 said that “another financial institution” has made employment offers to a “majority of Bank 34’s employees” who are involved in the bank’s mortgage lending operation. The bank wasn’t a sizable lender. According to its SEC filings, Bank 34 originated $317.2 million one- to four-family mortgages in 2018. That was an increase over 2017’s total of $252.8 million in originations. Despite that, staying in mortgages didn’t make financial sense for Bank 34 or Live Well Financial. Now imagine what will happen to the rest of mortgage business if originations keep falling.

HOUSINGWIRE ❱ JULY 2019 53

ReverseReview

54 HOUSINGWIRE ❱ JULY 2019

DID YOU KNOW Jessica Guerin sends home equity and reverse mortgage updates by email? Go to HousingWire.com/newsletter to sign up and stay informed!

ReverseReview

Reverse mortgage companies make moves to support growth in tough market LENDERS, TECH PROVIDERS PARTNER AND INNOVATE TO EXPAND MARKET SHARE BY JESSICA GUERIN

IN the last few months, companies operating in the reverse mortgage space have upped their game, announcing partnerships, platform and product improvements and innovative technology to improve HECM lending. The moves are especially notable considering that the reverse mortgage market has seen volume dip by as much as 35% in recent months as program changes instituted in late 2017 have officially reshaped – and shrunk – the market. But ever-resilient, companies in this space continue to look for ways to elevate their offerings, making investments despite the fact that revenues are down in the hopes that it will all pay off in the end.

HERE ARE SOME OF THE DEVELOPMENTS WE’VE WITNESSED AS OF LATE: Retirement Funding Solutions partners with 55places.com to help older homebuyers get a mortgage Retirement Funding Solutions, a top 10 reverse mortgage lender, has announced a partnership with 55places.com, an online resource for active adult communities. RFS is a division of Synergy One Lending, which was acquired by Mutual of Omaha Bank last year. At the time, Synergy One President Torrey Larson told HOUSINGWIRE ❱ JULY 2019 55

ReverseReview HousingWire that the key to success for HECM lenders in this tough climate would be to “think differently” about how to educate and engage seniors. With this new partnership, it appears the lender is doing just that. Together, the two entities are forming 55places Mortgage, which aims to guide users though the home financing process, presenting both traditional and reverse mortgage options. RFS will use the platform to educate users about the HECM for Purchase, a little-known and underutilized reverse mortgage that allows someone over the age of 62 to purchase a primary residence and obtain a reverse mortgage in a single transaction with one set of closing costs, effectively moving into a new home without incurring a monthly mortgage payment. The deal requires a significant down payment, often more than half the purchase price, and that equity is then used to generate the reverse mortgage. “We are thrilled to partner with 55places and provide our HECM for Purchase expertise to this audience,” said Retirement Funding Solutions President Alex Pistone. “This is an exciting opportunity to educate more active adult homebuyers and guide them to a mortgage that’s best for them.” ReverseVision launches interactive comparison tool for reverse mortgages ReverseVision has long been on a mission to elevate reverse mortgage technology to encourage more borrowers and traditional loan officers to consider the product. Now, the three-time HW Tech100 winner is upping its game with the launch of a new loan comparison product that enables users to weigh a HECM against a HELOC or a first- or second-lien mortgage. Available within the RV Sales Accelerator, the Comparison Calculator is an interactive tool that generates side-by-side comparisons of how a HECM performs against other home equity loan products throughout the life of the loan. ReverseVision said it was compelled to design the tool after a National Council of Aging study found that when presented with a blind comparison of a HECM and a HELOC, seniors chose the HECM 58% of the time. Now, homeowners can review all of their options when considering the best method to access their equity and other resources to support their retirement. “With seniors holding more than $6 trillion in accumulated home equity in the United States, consumers need to know that they have options to tap into their financial resources – and originators need tools to help them describe the differences in how these options perform over the long term,” said ReverseVision 56 HOUSINGWIRE ❱ JULY 2019

Product Manager Jason Price. “We are proud to introduce a tool that takes the Generational Lending concept and puts to practice helping borrowers as their needs change over time.” “Additionally, we are pleased to empower mainstream loan officers with access to this technology by releasing it onto our new platform,” continued Price. “Now any company can leverage these tools in their own portal, CRM or point-of-sale solution.” “The Generational Lending Scenario Builder is exactly what the industry needs to help loan officers reach senior borrowers who would be better served by HECMs than ‘comfortable,’ traditional loan types,” added Wendy Peel, ReverseVision’s vice president of sales and marketing. “Equipped with this tool, originators can visually demonstrate how a HECM can perform against other loan types, thereby empowering borrowers with a more comprehensive understanding of their financial options and strengthening borrower trust in both the HECM product and their loan originator.” Baseline Reverse unveils real-time reverse mortgage pricing engine Baseline Reverse has made a point of advancing technology in the HECM space with its loan-level performance analytics and pricing models. But now, it may have just made its boldest move yet. The Florida-based HW Tech100 winner announced today the release of a new pricing engine called SureLock, which offers instant reverse mortgage pricing scenarios using real-time capital markets data. According to Baseline President Dan Ribler, technology like this is commonplace in forward mortgages but has been sorely lacking in reverse. Until now. “SureLock is designed to process large amounts of pricing data and produce instantaneous responses satisfying the expectations of today’s digital mortgage loan originators and borrowers,” Ribler said. “We’re in an industry where speed and accuracy are integral to a company’s success.” Ribler said SureLock accomplishes two critical things. “It makes loan officers’ lives exponentially easier. They’re able to work through the process faster; they don’t have to follow up with pricing, they can talk about it intelligently on the fly,” Ribler said. “And it helps borrowers get the perfect product for whatever problem they are trying to solve, and that results in a more efficient marketplace.” Baseline developed the pricing engine through a partnership with 1st Reverse Mortgage USA, a division of Cherry Creek Mortgage Company, which will be the first to employ SureLock, incorporating it into its platform for originators. 1st Reverse Mortgage USA Senior Vice President Dan Harder said adding SureLock to its platform will be a major gamechanger

ReverseReview

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This is an exciting opportunity to educate more active adult homebuyers and guide them to a mortgage that’s best for them.”

not only for its reverse originators but also for the traditional LOs at Cherry Creek, who will also have access to the engine. “The implementation of the new pricing engine makes the 1st Reverse Mortgage USA Platform the only offering on the market that collects up-to-the-minute price data, allowing mortgage loan originators to shape the most competitive loan scenarios and view the results immediately on a desktop, tablet or their phone,” Harder said. Harder also said he thinks technology like this is essential to advancing reverse mortgages and helping traditional originators learn how to sell them. “I truly believe that in the next few years, we are going to see reverses go up in volume, only because they are not being offered just by specialty companies anymore. We have evolved and there is a much broader base now,” Harder said. “This product will be the start of simplifying them for a traditional originator so they can offer this just like they do a VA or FHA loan.” American Advisors Group ups reverse mortgage support for brokers American Advisors Group announced the launch of an expanded set of resources designed to help its wholesale partners elevate their reverse mortgage business. AAG said its 700-plus wholesale partners can use the new on-

line portal to access product information, webinars, news and market statistics. AAG is ranked No. 1 in reverse mortgage lending overall with 30% of the market’s share, according to the most recent data from Reverse Market Insight, but it’s No. 4 in wholesale business. It seems the lender’s enhanced commitment to its wholesale partners is designed to help it climb the ranks. Now, brokers who work with AAG have access to sales team development training; a compliance review of marketing content; customizable marketing materials; fixed- and variable-rate proprietary reverse mortgage products; and lender support and expert processing teams. “This year, AAG made significant changes to our operations division to ensure that our wholesale partners receive the highest level of service support possible, including faster and easier loan processing,” said Joe Stephenson, AAG’s SVP of Operations. Reverse Mortgage Funding expands payment options on proprietary reverse product Reverse Mortgage Funding has expanded the payment options on its proprietary reverse mortgage – the Equity Elite – to include term payments. Previously, Equity Elite borrowers could withdraw up to $4 million in their home’s equity in a lump sum only at closing. Now, borrowers can select any number of term payments between 24 and 120 months. RMF said the term option is currently available to borrowers in California and that it expects to rollout in other states soon. Unlike the HECM and the other proprietary, or non-agency, reverse mortgages on the market, RMF’s Equity Elite can accommodate borrowers as young as 60, whereas all other available products have a minimum age requirement of 62. A spokesperson for the lender said it is committed to product development and expanding product features to satisfy the varied needs of older homeowners. In March, RMF announced it was cutting the cost of the Equity Elite by slashing origination fees and closing costs, and making it available to a larger pool of brokers. RMF’s National Wholesale and Correspondent Sales Leader Mark O’Neil told HousingWire at the time that updates to its proprietary offering are important to better align it with traditional mortgage offerings. “Having a product that looks and feels and is priced a lot more like a traditional mortgage is very appealing,” O’Neil said, adding that refinements to the Equity Elite and other such products on the market is “a big step toward proprietary products being looked at as more of a mainstream mortgage and not as much of a niche, like the HECM.” HOUSINGWIRE ❱ JULY 2019 57

58 HOUSINGWIRE ❱ JULY 2019

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OpenHouse POWERED BY

Homeowners get reprieve as Congress rescues flood insurance program NFIP REAUTHORIZED FOR FOUR MONTHS AS LAWMAKERS WRANGLE OVER REFORMS BY KATHLEEN HOWLEY

THERE were 28 waterfront properties for sale in early June on Most of the waterfront properties for sale on Dauphin Island Dauphin Island, a sandy finger of land jutting into the Gulf of wouldn’t have much value if they weren’t protected by the Mexico that markets itself as “The Sunset Capital of Alabama.” National Flood Insurance Program, or NFIP, administered by the One of the more expensive listings was a home priced at $850,000 Federal Emergency Management Agency and used by more than built in 2017. 5 million property owners in the nation. Almost all of Dauphin The five-bedroom house, constructed on pilings to protect it Island is categorized as high-risk for flood damage. from storm surges, has a kitchen with granite countertops and It’s not possible to get a federally backed mortgage in such areas stainless steel appliances. There are French doors that open from without flood coverage, and few people would invest cash in a some of the bedrooms to a porch overlooking the water. The win- property that could be washed away without knowing they’ll be dows have custom-made drapes included in the sale. able to protect it with insurance. Even if a home is built on pilings The description sweetly states, “It’s your own paradise with no that engineers hope will keep it above a storm surge, no one can houses in front or behind.” The view from Google Earth shows predict what will happen when Mother Nature sends a Category the footprints of where neighboring houses used to stand before 5 hurricane through an area. hurricanes with famous names like Ivan, Lili, Dennis and the Communities like Dauphin Island exist because of insurance big one, Katrina, barrelled through. Some homes were trashed subsidized by the government. Most of the houses wouldn’t have by those monster storms and later rebuilt with taxpayer dollars. been built, and in some cases repeatedly rebuilt, without the NFIP. Others simply vanished. But the program, which requires Congress to reauthorize it peHOUSINGWIRE ❱ JULY 2019 59

riodically, has been a political bugaboo since September 2017. That’s when in lieu of a long-term reauthorization, Congress began kicking the can down the road with short-term renewals. On June 3, two days after the start of this year’s hurricane season, the real estate markets in NFIP-reliant communities like Dauphin Island got another reprieve. Congress passed a bill extending the flood insurance program by four months. The move came on top of a stopgap vote on May 30 that kept NFIP from expiring over the previous weekend. While an expiration wouldn’t have affected existing policyholders, it would have kept NFIP from issuing and renewing policies. An absence of flood insurance would nix about 40,000 U.S. home sales a month, according to the National Association of Realtors. “We’re under unprecedented threat from flooding, and hurricane season is upon us,” Sen. John Kennedy, R-LA., said before the final vote. “The American people need Congress to do its job.” In the last few months, violent weather in the Midwest caused record flooding in Arkansas, Louisiana, Illinois, Oklahoma and other states. Earlier this year, about two dozen levee systems were breached after torrential rain caused the Missouri River to top its banks and flood parts of Nebraska, Iowa and Missouri. And more flooding likely is on the way, said Jon Gentile, vice president of the National Association of Professional Insurance Agents. “Hurricane season begins June 1, and several states over the last few weeks have been dealing with disastrous flooding,” Gentile said. “Bringing the NFIP to the brink of lapse is unfair to homeowners who rely on this vital program.” Flood insurance isn’t just for seaside communities. While Florida is the top state for policies, at 1.7 million, and Texas is No. 2 at 599,000, homeowners who live in areas without ocean coastline also need protection from river flooding. Pennsylvania has about 60,000 active NFIP policies, Arizona has about 33,000, and Illinois has over 41,000, according to FEMA data. For most homeowners, NFIP is the only game in town because the market for private flood insurance is in its infancy. A new rule taking effect in July requires lenders to accept private flood insurance policies if they have coverage at least as comprehensive as what is offered by the federal program. Most homeowners policies don’t cover floods. The cost of the NFIP was, for the most part, covered by its premiums until Hurricane Katrina upended the program in 2005. Seven years later, superstorm Sandy, on the nation’s Atlantic Coast, was another budget-buster. In 2017, Congress canceled about $16 billion in NFIP debt, but the fund still owes the U.S. Treasury about $20 billion. For example, in 2003, NFIP policyholders paid $1.7 billion in premiums and the fund paid out $780.8 million in claims. In 2004, the difference between revenue and payouts got a bit skewed by half a dozen hurricanes including Charley, Frances, Ivan and 60 HOUSINGWIRE ❱ JULY 2019

OpenHouse

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Hurricane season begins June 1, and several states over the last few weeks have been dealing with disastrous flooding. Bringing the NFIP to the brink of lapse is unfair to homeowners who rely on this vital program.”

Jeanne. The fund paid out $413.7 million more in claims than it took in. But the next year, when Katrina hit in 2005, the shortfall between premiums and claims soared to $15.8 billion. There have been myriad attempts to improve a program critics say encourages people to build and purchase homes in areas where there’s a high risk of storm damage. And climate change remains at the heart of the issue. President Barack Obama issued an executive order in 2015 requiring states to incorporate in emergency planning the flooding increases over time due to the effects of climate change. In August 2017, President Donald Trump, who has called climate change a hoax, issued an executive order reversing Obama’s order. What’s not in dispute are scientific facts that the earth is warming and the world’s sea levels are rising. In fact, 2016 was the hottest year since record-keeping began in 1880, the third straight year it reached a new high, according to the National Oceanic and Atmospheric Administration and the National Aeronautics and Space Administration. Current sea levels are 5 to 8 inches higher on average than in 1900. A FEMA study estimated high-risk areas where owners with federally backed mortgages are required to purchase flood insurance will grow by 40% to 45% by 2100 because of climate change. That comes as builders expand development to meet the demand for homes coming from a growing population. The average flood insurance claim is about $43,000, according to FEMA. That shows that most claims are not the result of rooftop-level flooding, because damage from just one inch of water in a home can top $20,000. According to FEMA, 90% of all natural disasters involve floods. Hurricane Katrina was the most expensive flood in NFIP history, with $17.8 billion of payouts, followed by 2012’s superstorm Sandy, at $9.5 billion and 2017’s Hurricane Harvey at $8.7 billion, according to FEMA data. But the fund has also had banner years: in 2014, it took in $3.2 billion more than it paid out, in 2013 it made $3 billion, and in 2015 it made $2.4 billion. The long term data puts that in perspective: since 1978, insurance premium payments into the fund have totaled $59.7 billion and payouts for claims have come to $65.1 billion, according to FEMA. HOUSINGWIRE ❱ JULY 2019 61

CFPB Watch

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CFPB Watch

Here are 5 things the CFPB will focus on in 2019 PUBLISHES SPRING 2019 RULEMAKING AGENDA BY: KELSEY RAMÍREZ THE Consumer Financial Protection Bureau recently published its spring 2019 rulemaking agenda, showing the regulatory matters it reasonable anticipates having under consideration during the period of May 1, 2019 to April 30, 2020. The CFPB explained that the new permanent Director Kathy Kraninger is now ready to begin rulemaking activities after having recently completed a listening tour. “A permanent director of the Bureau took office in December 2018,” the CFPB said in a statement. “The director recently completed a listening tour to engage with bureau stakeholders, employees and outside experts, building on feedback submitted through more than 88,000 public comments in response to the Bureau’s 2018 Call for Evidence initiative.” “The bureau expects to communicate further information about future planning and priorities in the coming months,” the bureau continued. “In the meantime, this Spring 2019 Agenda reflects ongoing rulemaking activities, including initiatives to implement statutory requirements

and to address the potential sunset of statutory and regulatory provisions.” The agenda includes finishing propositions from its fall 2018 agenda as well as proposing new ones and future requests for information. There are several different rules in various stages the bureau says it will be focusing on in the coming year, but according to law firm Buckley Sandler, there are five that stand above the rest. HERE ARE FIVE KEY RULEMAKING INITIATIVES THE BUREAU WILL FOCUS ON: 1. Property Assessed Clean Energy Financing: This program allows homeowners to obtain financing to make improvements to their homes to increase the home’s energy efficiency. The new proposal is currently in the pre-rule stage. Back on March 4, 2019, the CFPB published an advanced notice of the proposed rulemaking and requested comments from the industry. The new rule could see an Ability-to-Repay provision added to PACE regulations, much like currently exists in mortgage lending and requires lenders

to make a “reasonable and good faith determination” on whether a borrower can repay a loan before approving them for said loan. PACE programs are typically not regulated as heavily as other financial services, including mortgage lending, however now, the CFPB is looking at increasing its oversight of the PACE industry. The CFPB announcement states that it is looking for information in five categories: (1) written materials associated with PACE financing transactions; (2) descriptions of current standards and practices in the PACE financing origination process; (3) information relating to civil liability under TILA (Truth in Lending Act) for violations of the ATR requirements in connection with PACE financing, as well as rescission and borrower delinquency and default; (4) information about what features of PACE financing make it unique and how the Bureau should address those unique features; and (5) views concerning the potential implications of regulating PACE HOUSINGWIRE ❱ JULY 2019 63

CFPB Watch

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The bureau is taking the next step in the rulemaking process to ensure we have clear rules of the road where consumers know their rights and debt collectors know their limitations.”

financing under TILA. 2. Remittance Transfers: The Remittance Rule imposes requirements on companies which send international money transfers, or remittance transfers, on behalf of consumers. Among its requirements, the Rule mandates that providers generally must disclose the exact exchange rate, the amount of certain fees, and the amount expected to be delivered to the recipient. On April 25, 2019, the bureau issued a request for information to consider if the rule had been effective in achieving its goals. The bureau requested information on two aspects of the Remittance Rule. First, the Bureau asked for information to determine whether to propose changing the remittance transfer providers the rule covers. Specifically, the bureau is seeking information about the number of remittance transfers a provider must make to provide them in the normal course of business, and information on incorporating a small financial institution exception into the rule. Second, the Bureau asked for information about the expiration of a temporary exception in the rule that allows certain insured institutions to estimate the exchange rate and certain fees they are required to disclose when sending remittance transfers. The statutory provision authorizing the temporary exception expressly limits its length and does not provide the bureau 64 HOUSINGWIRE ❱ JULY 2019

the authority to extend the exception beyond July 21, 2020.

3. Home Mortgage Disclosure Act/ Regulation C: The bureau proposed on May 2, 2019, new HMDA rules that would relax regulations for some smaller entities. This new rule is also in the pre-rule stage. Last year, the CFPB relaxed some of the requirements for the data collection and reporting stipulated by HMDA. The policy exempted insured depository institutions and credit unions that originated less than 500 closed-end mortgages or 500 openend lines of credit in each of the two preceding years from certain HMDA reporting requirements. Now, the CFPB is proposing to ease the HMDA reporting requirements even more. The CFPB announced that it is proposing new HMDA rules that would increase the HMDA reporting threshold for mortgages, meaning some smaller lenders and credit unions may not have to report their lending activities, at all. Under the current rules, lenders that originate 25 mortgages or more in a twoyear period are required to report to their HMDA data to the CFPB. The new proposal establishes two new reporting thresholds that are under consideration. According to the CFPB, the new rules would raise the HMDA reporting requirement to either 50 or 100 mortgages originated during a twoyear period. The new rules for mortgages would go into effect on Jan. 1, 2020. 4. Debt Collection Rule: This rule has advanced to the proposed rule stage, and would implement the Fair Debt Collection Practices Act. On May 7, 2019, the CFPB

issued a notice of proposed rulemaking that would provide consumers with clear protections against harassment by debt collectors and straightforward options to address or dispute debts. Among other things, the NPRM would set clear, brightline limits on the number of calls debt collectors may place to reach consumers on a weekly basis; clarify how collectors may communicate lawfully using newer technologies, such as voicemails, emails and text messages, that have developed since the FDCPA’s passage in 1977; and require collectors to provide additional information to consumers to help them identify debts and respond to collection attempts. “The bureau is taking the next step in the rulemaking process to ensure we have clear rules of the road where consumers know their rights and debt collectors know their limitations,” Kraninger said at the time. “As the CFPB moves to modernize the legal regime for debt collection, we are keenly interested in hearing all views so that we can develop a final rule that takes into account the feedback received.” 5. Payday Rule/Delay of Compliance Date: On February 6, 2019 the CFPB proposed to rescind certain provisions of its 2017 final rule governing “Payday, Vehicle Title, and Certain High-Cost Installment Loans.” The bureau announced it is looking to rescind the rule’s requirements that lenders make certain underwriting determinations before issuing payday, single-payment vehicle title, and longer-term balloon payment loans. This is now in the final rule stage. The CFPB explained it found that by rescinding this requirement, it would allow consumers greater access to credit. In October 2018, under the leadership of then-Acting Director Mick Mulvaney, the bureau announced that it would issue Notice of Proposed Rulemakings to reconsider the rule’s mandatory underwriting requirements and to address the rule’s compliance date.

CFPB Watch

Here is a complete list of all the bureau’s rule list for spring 2019: • PRE-RULE STAGE: Business Lending Data (Regulation B)

• PROPOSED RULE STAGE: Home Mortgage Disclosure Act (Regulation C)

• PRE-RULE STAGE: HigherPriced Mortgage Loan Escrow Exemption

• PROPOSED RULE STAGE: Payday, Vehicle Title, and Certain High-Cost Installment Loans

• PRE-RULE STAGE: Property Assessed Clean Energy Financing

• PROPOSED RULE STAGE: Public Release of Home Mortgage Disclosure Act Data

• PRE-RULE STAGE: Remittance Transfers

• FINAL RULE STAGE: The Expedited Funds Availability Act (Regulation CC)

• PRE-RULE STAGE: Home Mortgage Disclosure Act (Regulation C) • PROPOSED RULE STAGE: Debt Collection Rule

• FINAL RULE STAGE: Payday, Vehicle Title, and Certain High-Cost Installment Loans; Delay of Compliance Date

“The bureau is taking the next step in the rulemaking process to ensure we have clear rules of the road where consumers know their rights and debt collectors know their limitations.” -CFPB Director Kathy Kraninger

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