October/November 2017 Issue by HousingWire

HOUSINGWIRE MAGAZINE ❱ OCTOBER/NOVEMBER 2017

A conversation with

HUD Secretary

Ben Carson

HOUSINGWIRE OCT/NOV 2017 EDITORIAL EDITOR-IN-CHIEF Jacob Gaffney MANAGING EDITOR Sarah Wheeler ASSOCIATE EDITOR Caroline Basile SENIOR FINANCIAL REPORTER Ben Lane DIGITAL REPORTER Brena Swanson REPORTER Kelsey Ramírez CONTRIBUTORS Rick Arvielo, Casey Cunningham, Deborah Huso, John Levonick, Joe Tyrrell, Kevin Wall

CREATIVE CREATIVE ASSOCIATE Chantae Arrington COVER PHOTOGRAPHER Stephen Voss

SALES AND MARKETING NATIONAL SALES DIRECTOR Jennifer Watson Laws jlaws@HousingWire.com MARKETING DIRECTOR C. Scott Smith DIGITAL MARKETING SPECIALIST Caren Karris SALES DIRECTORS Christi Lingard clingard@HousingWire.com Mark Adams madams@HousingWire.com Tyson Bennett tbennett@HousingWire.com

THE D.C. CONNECTION WHAT HAPPENS in Washington affects every one of us in the mortgage finance industry, which is why we are excited to feature HUD Secretary Ben Carson on our cover this month. HousingWire worked closely with the administration to make the interview happen, timing it to provide additional insight in the run-up to Carson’s keynote address at the MBA Annual Convention this month. Carson is the 17th person to hold the top post at the Department of Housing and Urban Development, whose mission is to “create strong, sustainable, inclusive communities and quality affordable homes for all.” Each secretary has interpreted that mission in their own way and we were eager to find out what the newest secretary planned to emphasize. What should the industry expect from a HUD chief who has spent most of his life in neurosurgery? In a wide-ranging interview with HousingWire Editor-in-Chief Jacob Gaffney, Carson reveals one of his main priorities, along with the surprising welcome he received at HUD. Find out more starting on page 46, and enjoy the terrific photo essay by photographer Stephen Voss. And there is so much more in this issue! Our feature story on banking and marijuana-related businesses, Weed Wager, is a fascinating next chapter in HousingWire’s ongoing coverage of the issue. Associate Editor Caroline Basile provides an update on how some banks are managing to serve this growing, lucrative market. We also explore the impact of foreign buyers on the U.S. real estate market, profile six companies that are Market Makers and outline which regulators are involved in investigating the Equifax data hack. That’s just the tip of the iceberg in this packed issue of news and features you’ll find nowhere else. Happy reading!

AD OPERATIONS MANAGER Jessica Fly

CORPORATE PRESIDENT AND CEO Clayton Collins OFFICE ADMINISTRATOR Stephanny Morales

Subscriptions are available for $149.00 for one year. A subscription includes the print magazine and online access to the digital magazine. Canada and foreign are only eligible to purchase the “Digital Only” subscription plan at $149 for one year. For subscription orders, call 1-800869-6882 or email HW@kmpsgroup.com. Postmaster: Send change of address to HW Media, P.O. Box 47627, Plymouth, MN 55447. Subscribers: Please send last magazine label along with change of address requests. The information contained within should not be construed as a recommendation for any course of action regarding legal, financial or accounting matters. All written materials are disseminated with the understanding that the publisher is not engaged in rendering legal advice or other professional services. HW Media does not guarantee the accuracy of information provided, and is not liable for any damages, losses or other detriment that may result from the use of these materials. © 2017 by HW Media, LLC • All rights reserved

Sarah Wheeler Managing Editor @swheelerHW

TWEETS FROM THE STREET $700 billion unpaid mortgage balances in Hurricane Harvey and Irma disaster areas zerohedge @zerohedge HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 11

OCT/NOV ’17

HUD SECRETARY BEN CARSON “Growing up, with a lot of economic deprivation, seeing what it did to people, I saw a lot of single women with children, and it was a terrible thing. We have had that fall upon ourselves.When my parents got divorced, my mother and us, we went out of the home and we found some relatives in Boston to stay with. And it was in a tenement, but at least it was a roof over our head. Just remembering how all this impacts people makes me want to eliminate homelessness. And I think we have the possibility to finally do that.” By Jacob Gaffney

Photographs by Stephen Voss

HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 13

FEATURES

FOREIGN RELATIONS In a housing market restrained by tight inventory, what impact are foreign buyers having on U.S. real estate? By Deborah Huso

MARKET MAKERS What characterizes companies that are leading out in our space? We profile six remarkable companies to find out. By Sarah Wheeler

COMPANY SPOTLIGHT LoanCare: A trusted subservicer deploying customer-focused technology.

UNIQUE SOLUTION

THE WEED WAGER With recent changes, banks are finding ways to serve lucrative marijuana businesses. By Caroline Basile

DEVAL: Hispanic-focused servicer expands to include origination channel.

MORTGAGE MAVERICKS LenderLive: Partnering to solve today’s mortgage challenges. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 15

CONTENTS 20 THE LINEUP 20 PEOPLE MOVERS Alight promotes Jared Huff to CFO, while Freddie Mac adds Stacey Goodman as CIO.

22 EVENT CALENDAR MBA’s biggest event of the year, its Annual Convention and Expo, kicks off in Denver.

23 ON THE SHELF

VIEWPOINTS

Discover the principles that made Ray Dalio successful and how to build a side hustle.

34 DIGITAL MORTGAGE

24 HOT SEAT

Joe Tyrrell of Ellie Mae on the components you really need for a true digital mortgage.

Radian’s chief franchise officer, Brien McMahon, talks about reaching underserved markets.

36 GET INVOLVED

26 DISPATCH 1

Rick Arvielo of New American Funding on how the industry should influence policy.

Veros explains when AVMs make the most sense for lenders.

38 REPLACING LIBOR

28 DISPATCH 2

John Levonick at Clayton Holdings on what should replace LIBOR as a new benchmark.

Chronos Solutions outlines why lenders should be bundling origination services.

40 EDUCATION

30 DISPATCH 3

Casey Cunningham of Xinnix on the benefits of investing in education for you and your clients.

How NAMB’s KickStart grant fuels the dreams of independent mortgage brokers.

42 APPRAISALS

32 DISPATCH 4

Kevin Wall of First American Mortgage Solutions on meeting a high bar in appraisal quality.

United Wholesale Mortgage discusses the advantages of wholesale versus retail.

TWEETS FROM THE STREET Student debt is delaying millennials’ home buying by 7 years by Bloomberg @business

HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 17

CONTENTS

88 BACK DEPARTMENTS 88 INSIDE BASEBALL Federal regulators, state attorneys general and more investigate Equifax.

94 KUDOS

94 TWEETS FROM THE STREET The founder of Reebok is selling his 14-acre Brookline estate for $90,000,000. The mortgage is $340,922 a month. by Only in Boston @OnlyInBOS

Mortgage industry businesses step up to help victims of Hurricane Harvey and Irma.

96 INDUSTRY PULSE The appraisal industry suffers from a clear lack of unity. Here’s what should be done.

100 KNOWLEDGE CENTER Chronos Solutions on how to succeed in a mortgage market without precedent.

102 KNOWLEDGE CENTER National General on why claims handling is so important.

104 Q&A

100

• Auction.com • United Wholesale Mortgage • Sutherland Mortgage Services

108 COMPANIES/ PEOPLE INDEX 109 AD INDEX 110 PARTING SHOT

HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 19

Jared Huff Alight

20 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

DECIANTIS

GOODMAN YOLLES

DALPORTO MASTIONI

TEWART Information Services has appointed David Hisey as the company’s new chief financial officer. Hisey, who will also serve as Stewart’s secretary and treasurer, succeeds Allen Berryman, who announced his retirement plans earlier this year. Barbara Yolles has joined the leadership team at The Money Source and its wholesale lending division, Endeavor America Loan Services, as its new chief marketing officer. Yolles previously served as the CMO for United Shore Financial Services. The former acting commissioner of the Federal Housing Administration, Biniam Gebre, has joined Accenture. Gebre will serve as a managing director for Accenture Federal Services and will oversee the company’s management consulting group, which provides advisory services to government clients. Freddie Mac has announced Stacey Goodman joined the company as executive vice president and chief information officer. She will be a member of the senior operating committee and will report di-

VALLADARES

BIEHLE HISEY

Alight has promoted Jared Huff to chief financial officer. Huff previously served as group head of Alight Mortgage Solutions. Prior to joining the company, he held roles with Russell Investments and Weyerhaeuser.

rectly to CEO Donald Layton. She brings more than 25 years of technology experience to Freddie Mac. Altisource has announced the appointment of Marcello Mastioni to the newly formed position of president, real estate marketplace. He will be responsible for driving growth by focusing on digital experience and strategy across Altisource's consumer- and investor-focused marketplaces, including Owners.com and Hubzu. ServiceLink, a Black Knight company, has announced the addition of Eva Tapia as its senior vice president of foreclosure operations for ServiceLink Auction. Tapia will be responsible for the management of all foreclosure auction services for ServiceLink. She previously served as the senior vice president of foreclosure, trustee operations at Ten-X, formerly known as Auction.com. LendingTree has announced the promotion of its chief financial officer to its board of directors, replacing him with the company’s senior vice president of corporate development. Gabe Dalporto, who

served as the LendingTree’s CFO since 2015 and who previously served as the company’s chief marketing officer from March 2011 to June 2015, was promoted to the company’s board of directors in early September. Replacing Dalporto as CFO will be J.D. Moriarty, who joined the company earlier this year as SVP of corporate development. United Wholesale Mortgage announced t he promot ion of Sa ra h DeCiantis to chief marketing officer, where she will oversee marketing and strategy for the company. DeCiantis previously served as vice president of marketing since joining the company in 2014. Sherry Valladares joined LenderLive as a correspondent lending regional account manager. Valladares will cover the Northeast region and work with current and prospective clients participating in, or considering, LenderLive’s correspondent program. LoanLogics has announced Cary Burch has joined the company's board of directors. Most recently, Burch served as chief innovation officer with Thomson Reuters and his other previous roles include CEO of mortgage technology provider Lender Support Systems; COO of Fidelity National Information Services; and CIO of First American’s Consumer Information Group and president of First American CreditNet. Informative Research, a tech-driven mortgage industry solutions provider, has brought on Blair Biehle as its vice president of national sales. Biehle previously served as a top strategic account executive at CoreLogic for four years. Prior to that, he held a high-level position at DataVerify.

EVENT CALENDAR

MBA ANNUAL CONVENTION AND EXPO OCT. 22-25, 2017 Host: Mortgage Bankers Association Location: Denver Convention Center Cost: $675-$2,495 On the agenda: The industry's biggest event of the year features breakout sessions on topics like digital mortgages, regulation updates and expanding affordable housing. Attendees will also get to hear from industry leaders like HUD Secretary Ben Carson (check out HW’s exclusive interview with him on page 46) and featured speakers such as Mohamed El-Erian, chief economic adviser at Allianz, and NFL quarterback Peyton Manning. 22 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

DENVER Forney Transportation Museum’s slogan is “Anything on wheels,” and that is embodied in its collection of more than 500 different exhibits dedicated to transportation. The museum’s collection includes Big Boy, the world’s largest steam locomotive, an Amphicar and Amelia Earhart’s 1923 Kissel “Gold Bug.” forneymuseum.org/

ON THE SHELF Principles: Life and Work RAY DALIO SIMON & SCHUSTER

In 1975, Ray Dalio founded Bridgewater Associates, an investment firm, out of his two-bedroom apartment in New York City. Today, Bridgewater has made more money for its clients than any other hedge fund in history. How did Dalio grow his company into the fifth most important private company in the U.S., according to Fortune? Dalio attributes his success to the principles outlined here, rather than to anything special about himself. The book contains hundreds of practical lessons and outlines the most effective way to make decisions, approach challenges and build strong teams.

Side Hustle: From Idea to Income in 27 Days CHRIS GUILLEBEAU RANDOM HOUSE

Chris Guillebeau uses hundreds of case studies to provide a step-by-step guide to creating and launching a profitable project in less than a month. Guillebeau claims that an average person — without a business degree, coding experience, marketing knowhow and large amounts of venture capital — can use his information to not just launch a new business but earn actual income, almost immediately. Whether you dream of quitting your day job, or just need multiple streams of income, this book has the answers.

HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 23

HOTSEAT

SPONSORED CONTENT

Brien McMahon Chief Franchise Officer

Radian

he demographic makeup of the U.S. is shifting, providing new opportunities to offer sustainable homeownership to the growing segment of minority borrowers now in the market. Brien McMahon, chief franchise officer at Radian, sat down with HousingWire to discuss how Radian is supporting lenders in meeting this challenge. HW: How does Radian support diverse lending segments? Brien McMahon: Radian is dedicated to ensuring that homeownership is possible for all deserving borrowers. Throughout our country’s history, a diverse population has brought vitality, creativity and growth. As housing professionals, we should do all we can to ensure that future generations have the same opportunity as past generations to enjoy the many benefits of affordable and sustainable homeownership. At Radian, in our efforts to serve a variety of lending segments, we have forged exclusive partnerships with many of the top real estate trade associations, including the National Association of Real Estate Brokers, the National Association of Hispanic Real Estate Professionals and the Asian Real Estate Association of America. Working hand-in-hand with the people who know and serve these communities best enables us to support our lender partners as we strive to make the dream of sustainable homeownership come true for many Americans.

Q&A

HW: Why is this an important focus for Radian? BM: To best serve our customers, we must have a complete understanding of the housing market. Harvard University’s Joint Center for Housing Studies estimates that nearly 75% of our nation’s household growth over the next decade will come from minority-headed households. As a comparison, as recently as 2012, fewer than 30% of U.S. households were headed by minorities. In addition, the 2015 Home Mortgage Disclosure Act reported that the Asian American/Pacific Islander 24 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

community is the fastest growing segment of the U.S. population. We want to bring additional value to our customers by addressing these diverse markets with the training, products and services they need to promote sustainable homeownership. In fact, NAHREP Co-founder and CEO Gary Acosta has said that Radian’s training programs are some of the best and most relevant in the market and that the partnership has proven to be extremely valuable to NAHREP members. HW: How can mortgage insurance be a game changer for underserved segments? BM: Many people today simply can’t break into the housing market. For many, it is still a challenge to get approved for a mortgage. And there aren’t enough homes for sale to meet high consumer demand, especially when it comes to more affordable, lower-cost homes. Lastly, saving enough money for a large down payment continues to be the greatest hurdle to homeownership. Many of these challenges continue to be especially acute for first-time homebuyers, including minorities. Private mortgage insurance, which helps low- to moderate-income borrowers purchase a home with less than a 20% down payment, is a financial tool that can allow deserving homebuyers to purchase a home sooner, with less money down. HW: What benefits do your clients get by using the integrated resources of Radian and Clayton? BM: It’s all about being a valuable business partner. Given our unique combination of companies, we have an opportunity to leverage our market-leading mortgage insurance franchise combined with our core capabilities across the Clayton family of companies. Our customers are seeking solutions across the entire mortgage value chain, from origination and loan fulfillment, to servicing and securitization. And while we’re talking to our customers about the mortgage insurance products and services they know and value, we have an opportunity to introduce our other services, including residential loan due diligence, valuations, servicing surveillance, title and escrow services. In one conversation, we can answer multiple needs.

VEROS | SPONSORED CONTENT

When do AVMs make the most sense? Lenders save money and drive efficiencies for the growing HELOC market

ome prices are on the rise across the United States. Veros’ VeroFORECAST reported residential market values will continue their rising trend during the next year, with overall annual forecast appreciation of +3.7%, which is slightly higher than last quarter's +3.5% forecast appreciation. The fast-rising values, combined with record low homes listed for sale and rising mortgage rates, have more homeowners choosing to stay in their current homes. A February 2017 survey released by LightStream Home Improvement found that 59% of homeowners plan to increase spending on renovations during this year, with 42% of the planned renovations costing $5,000 or more, and 23% planning to spend $10,000 or more. The survey also shows many homeowners will tap into varying strategies to pay for these renovations. Of those strategies, 60% plan to use savings, 29% will utilize credit cards, and 9% are expecting to use a Home Equity Line of Credit (HELOC). REDUCING COSTS IN A GROWING MARKET One of the largest origination costs for lenders is the appraisal product. Many lenders have determined that the “cost” of the valuation is not commensurate with the “value” of the information in the underwriting process. This is why AVMs are returning to dominance in the valuation space for home equity lending. AVMs today utilize advanced analytics, are constantly being refined, and pull together massive amounts of rich data to produce a real-time market value estimate — providing greater speed and efficiency while maintaining responsible levels of risk management. If time and origination costs are critical and revenue streams are uncertain at best, why engage in costly valuations like drive-by appraisals? AVMs should be used where it makes the most sense — in equity lending, where time and cost is critical, and a low-cost but accurate solution is needed. NOT ALL HELOCS ARE CREATED EQUAL Today, lenders require absolute control over their valuation workflow and credit policies. For added confidence, they require transparent risk management that creates audit trails for decision logic changes related to AVM implementation and usage. VeroSELECT lets lenders put all their decision criteria into the system and it will make the right decision that is consistent with the lender’s credit policy every time. No matter what AVM you choose, VeroSELECT is the best option. DEFINING WHERE ACCURACY MATTERS Some argue that AVM accuracy cannot be trusted, hence the need

26 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

for an appraiser. AVMs provide a great deal of statistical rigor that no appraiser is capable of. As a lender, if you know the level of valuation “accuracy” you desire, there is an AVM solution that will get you there. The only variable in that equation is that higher levels of valuation accuracy tend to be associated with lower AVM hit rates and the subsequent use of more expensive valuations. In the end, the trade-off between risk and cost is one that can easily be made at the lender level and executed with AVMs and a powerful AVM platform like VeroSELECT. MINING FOR LEADS At today’s volume levels, finding households that are interested in either refinancing or purchasing a new home can be gold. Consumers with large amounts of home equity have many options. They can sell their existing home to trade-up or trade-down, or get a home improvement or equity loan. Estimating equity for a given property has never been easier as AVM speed and accuracy have improved significantly in the past few years. Top-tier AVMs can estimate home values (in a blind purchase transaction) within 10% about 80% to 90% of the time. Having determined the level of home equity, then the astute lender marketer would start to segment loan offers based on the demographics of the homeowner. Some lenders monitor their portfolio for trigger events like making a credit inquiry to another lender. When that occurs, the lender can take the credit trigger households and use AVM analysis to quickly ascertain their equity position. Then, contact that household to see if your firm can help them with a possible new loan. HOME LOAN LEAD GENERATION ON YOUR WEBSITE Everyone knows about real estate sites that provide a generalized valuation estimate. It may or may not surprise you to know that today’s top-tier AVMs are more accurate than these free sites because they are better tested, and have lower mean and median absolute errors. We suggest that lenders add property valuation (AVM) technologies from a tried and tested AVM provider to their website just as some of the largest lenders have done. With this utility, you will know when your customers are in the market for a refinance or purchase. Knowing when and how to use an AVM solution to support future deals and protect bottom lines is in the best interest of everyone involved in the origination process. Businesses need to ensure that the valuation tools being used are producing the most accurate value possible. And, in the current environment of tight inventory and tight credit boxes, AVMs are a crucial ingredient for success.

CHRONOS SOLUTIONS | SPONSORED CONTENT

Here’s why you should be bundling origination services Chronos Solutions delivers time and cost savings with outstanding customer service

enders looking to reduce per-loan origination costs should consider the benefits of bundling origination services with Chronos Solutions. The efficiency of bundling with Chronos not only yields average cost savings of 15-20%, but improves quality throughout the loan process. And unlike some larger companies, these benefits are delivered without sacrificing customer service. “The economic lift that clients get from bundling is important in this purchase market,” Matt Slonaker, executive vice president of business development and marketing at Chronos Solutions, said. “Reducing costs is the No. 1 reason that lenders are looking to bundle, but there are many other benefits they get as a result.” One of those benefits is the quality of the products themselves. Chronos spent the last few years strategically acquiring companies to build an end-to-end process with best-in-class solutions. The company now provides a complete range of customized mortgage and real estate services, from verification and valuation to HOA solutions, REO asset management and disposition,

28 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

tax monitoring, lien release, online marketing and auctions, title and more. For example, Taxdoor is an automated tax transcript retrieval process that cuts IRS 4506-T rejection rates in half. Instead of lenders relying on consumers to accurately fill out the form — and then spending QA resources to verify that accuracy — Taxdoor puts the lender in the driver seat. When a top 30 mortgage originator implemented Taxdoor earlier this year, Chronos centralized the company’s tax transcript process so that instead of each branch ordering transcripts, the company could consolidate that into just three locations. The top 30 originator not only reduced its rejection rates, but also improved efficiency throughout its loan operations. Another significant advantage of bundling is the efficiency of using one vendor for multiple solutions. “Companies achieve greater business continuity by bundling solutions,” said Michelle Steinmetzer, senior vice president of operations, outsourced and origination solutions at Chronos. “Even with multiple products, our clients will have the same customer service group, giving them one point of contact to interface with us.” With fewer vendor relationships to manage, companies gain efficiency while getting a compliance boost. Chronos is a Data Validation Service provider for Fannie Mae’s Day 1 Certainty program, so lenders receive rep and warrant relief at the outset of the loan. And because Chronos is SaaS 16 compliant, bundling is totally compatible with security. Most importantly, Chronos bucks the trend of many larger providers today which are raising their prices while offering an inferior level of service. Chronos’ excellent customer service is one reason lenders and servicers who have previously been with larger solution providers are making the switch to Chronos. “We’re having some serious conversations with top 10 servicers around the tax business,” Slonaker said. “A larger player has the business today, but these companies are very frustrated with the level of service they’re receiving and the costs associated with buying from the larger supplier.” Steinmetzer agreed. “Those competitors are going out with price increases right now, but offering less customer service. We’re more flexible so we customize and tailor our services to each company and we can still go out with competitive pricing,” she said. This competitive pricing includes offering companies one simple fee structure for multiple solutions. “The way we tailor solutions and services for our clients is what really sets us apart,” Chronos CEO Mark Hikel said. “We truly are large enough to execute but small enough to care.”

NAMB | SPONSORED CONTENT

NAMB’s KickStart fuels independent mortgage businesses Startup funding gives brokers the opportunity to pursue their dreams Chris Freck is president of EstaR mortgage in the San Francisco Bay Area. A licensed mortgage professional with more than 14 years of experience in residential lending, Freck was one of the first loan officers to receive an NAMBKickStart grant to open his own mortgage broker shop in October 2016.

ersonally, I’m not that different than a lot of loan officers out there. I’ve got a support system that I want to thank right now, they know who they are, you can’t do it alone. I take pride in doing my job well. I’m detail-oriented and always try to under-promise and over-deliver, all with the aim of making sure my clients and referral partners have a positive experience. I’d call myself a lifelong learner, committed to pursuing knowledge and additional education that ensures I’m able to differentiate myself in the mortgage business. For the first 14 years of my career, I was a loan officer and manager at a variety of mortgage banks. I got my real estate broker’s license in 2004 to give myself options. One company I worked at even required me to have the license to serve as branch manager. The mortgage business kept me busy. But like many in the industry, I always had an entrepreneurial itch. I felt comfortable with the income and benefits that mortgage banks provided. I felt like it was too risky to pass up the stability I had as a mortgage banker to pursue my dreams of being an entrepreneur. When you have a family to provide for, it’s easy to err on the side of caution. My priority as a loan officer has always been providing great service to my clients. The ability to open my own independent mortgage brokerage in today’s environment was an ideal opportunity for me to accomplish two things at once – run my own mortgage business and have access to a wide range of technology and pricing to best serve all my clients and referral partners. I finally made the switch to wholesale in October 2016, after NAMB launched its KickStart program, which provides up to a $10,000 grant to help with startup costs. KickStart wasn’t my primary driver to starting my own business, but it was the boost I needed to make it happen. To apply for the grant, a full business plan was required, which turned out to be incredibly helpful as it crystallized my priorities. It gave me the road map with the details necessary to get it launched in a timely manner. One of the scariest thoughts about starting a business is the upfront costs – and the possibility of that money essentially being thrown away if you fail. KickStart alleviates that fear by providing start-up capital that you aren’t required to pay back. I’ve since learned that the initial sponsorship for the program came from United Wholesale Mortgage. It is part of UWM’s goal to provide independent mortgage solutions in the United States. I under-

30 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

stand that NAMB is now adding more wholesale lenders around the country to support KickStart, as well. I’ve been fortunate to enjoy success since opening my business at the end of 2016. Our team funded 39 units for $15.1 million in loans in the first six months. That’s pretty good for a startup. My goal now is to fund 90 units for $30 million in loans this first year and have sustainable growth to fund 120 units in 2018. It has been a gratifying feeling to live my dream of running a successful business. There hasn’t been any “secret to success.” It’s just been a matter of focusing on the basics: have good systems, be an expert, be good to your word, hit your timelines, and then ask for more business. Make no mistake, the broker/wholesale space isn’t necessarily for everyone. But loan officers who are motivated by sourcing their own business (and the risk and reward associated with that) can do well. If a retail-oriented loan officer is already on a commission-only pay structure, why wouldn’t they want to give themselves the flexibility to get the right products and competitive rates by being a mortgage broker instead of limiting themselves to one bank or point of access to products for their client base? I’m not that different than other loan officers. My focus is on doing the little things very well, working hard and doing the right thing so my clients have a great experience. For loan officers looking for an excuse to pursue their own entrepreneurial dreams, let KickStart be your starting point.

UNITED WHOLESALE MORTGAGE | SPONSORED CONTENT

Wholesale is the best option for loan officers Grow your business by matching borrowers with the best mortgage for their needs

areer advancement is at the top of everyone’s mind every single day in the mortgage industry. Whether that means growing your business, finding a more efficient process, using technology more effectively, or providing better client service – everyone is thinking the same thing: “How do I get better?” The mortgage business is great for sales professionals who have an entrepreneurial spirit and are relationship-driven. It is a line of work that showcases professionals who excel at competing for business by wowing clients. Every day is a series of completely fresh competitions where the winner gains a new client, whether a borrower or real estate agent. Mortgage professionals are doing whatever they can to stand out in a crowded field and attract new clients. When comparing both sides of the wholesale vs. retail debate – or mortgage broker vs. bank – there is no doubt that the best way for loan officers to grow their business and take greater control over their career is through the wholesale channel. The mortgage process is such an individualized experience – it’s different for every homebuyer because everyone has a different set of circumstances surrounding their purchase. Borrowers are completely unique from the standpoint of FICO scores, debtto-income ratio, savings, personal preferences, and so on. Because of all those differences, a loan officer can’t be expected to cram all their clients into one set of products, pricing or guidelines. Their job is to make the lending process as smooth and easy as possible for their clients by advising them on how to 32 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

select the best mortgage for their specific situation. That’s why the wholesale side of the business is the best way to go. Loan officers at broker shops have an advantage over those at big banks and mega retail lenders because they have access to hundreds of lending options. They can shop around on behalf of their borrowers to find the best mortgage for their needs. One borrower’s top priority might be to find the lowest rate possible, whereas another borrower may be most concerned with using the lender that can close their loan the fastest. Whatever the situation, loan officers in the wholesale channel have that flexibility to match their clients with the right lender, program, price and guidelines. This means that they can provide better service to more borrowers, giving them a great sales pitch for growing their business. With the ability to accommodate more peoples’ needs, it makes sense for loan officers or bankers to choose the wholesale route. The current landscape of the mortgage industry is an extremely competitive business that is stockpiled with hundreds of mortgage lenders striving to be the fastest and most accurate in the field. Companies of all different sizes and specializations are flooding the marketplace with new technology and systems with the goal of setting themselves apart from the competition. The real answer to the question “How do I advance my career?” – from the perspective of a loan officer or banker – is to take control of your own career by making the jump into the wholesale channel.

VIEWPOINTS

By Joe Tyrrell

The true digital mortgage Automation can help lenders generate more leads and close loans faster

We hear a lot these days about the benefits of the “digital mortgage.” The term is widely overused, yet its promoters have largely under-delivered on its true promise. Often they are simply referring to the online applications that have been available for well over a decade. Others define digital mortgage as an eClosing, again merely citing one moment in the lending process. If the digital mortgage really streamlines that process, why does it still take up to 60 days to close a loan? A true digital mortgage must encompass the entire loan lifecycle, from targeted marketing automation and lead generation to automated investor delivery. Only then will the promise of the digital mortgage pay off for both borrowers and lenders. A DIGITAL MORTGAGE FOR HOMEBUYERS To better understand the preferences of U.S. homebuyers, Ellie Mae surveyed more 34 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

than 3,000 Millennials, Gen-Xers and Baby Boomers. The Ellie Mae Borrower Insights Survey found that across generations and genders, homebuyers want a mortgage experience that combines speed, convenience and security with personal interaction. When Millennials were asked what could improve the experience, nearly a quarter said they would like a faster mortgage process. Not just the application pro-

cess, but the entire process. While that response was expected, what was surprising is that the same number also desire more personal interaction. Today’s borrowers expect transparency, service and speed, and a human touch. To meet these requirements, lenders must offer an experience that continues even after the application has been submitted. Lenders should have access to current and historical data on every individual borrower and provide an intuitive borrower portal that offers simple, transparent interaction, the ability to easily upload documents and real-time status updates. A DIGITAL MORTGAGE FOR LENDERS As lenders learn what it takes to engage new-age borrowers, they must also adjust to a purchase-centric market with lower volumes, shorter origination windows and tougher scrutiny of the bottom line. In this

Joe Tyrrell is executive vice president of corporate strategy at Ellie Mae.

environment, the savvy lender is focused on origination cost and recognizes the need for automation, exception-based processing and the ability to better leverage data throughout the origination process. This is where the true digital mortgage earns its name. Through the use of automation, the true digital mortgage helps lenders not only generate more leads, but also manage loan processing on an exception basis in order to fund and close more loans faster. Conventional wisdom says that to fund more loans, you need more applications. In reality, local and regional lenders today are having to compete at the point of sale with the multimillion-dollar national marketing campaigns of the few largest retail originators. Given the stacked competitive landscape, generalized marketing campaigns struggle to meet response and pull-through rates necessary to capture market share. Rather than more applications, the smart lender goes after the right applications. By employing new tools that allow them to engage the consumer earlier in the process, at the “point of thought,” the lender can offer solutions and support the moment the homebuyer begins embracing the idea of a transaction. This strategy starts with the lender’s most competitive advantage, their own data. Lenders have critically important information on the borrowers they have worked with to purchase or refinance a home. By augmenting rich lender data with public records, current market information, servicing data, psychographic and social media data in a single, private data repository, the lender can apply predictive analytics to determine which consumer may be ready to downsize, upsize or refinance. SMART ORIGINATION Once the lender engages the borrower, the online application becomes a pivotal point of differentiation in the borrower experience. If the borrower has a history with the lender, they simply validate their existing data rather than re-entering it. When the lender has employed predic-

tive analytics and marketing automation to drive the consumer to their online engagement solution, the data used for the identification, scoring and marketing of that consumer seamlessly populates the application. Any additional information the consumer enters is automatically assessed, in real-time against the rules resident in the lender’s system of record. Of course, not every consumer wants to interact with a website, as many still want to talk with someone. Predictive analytics leveraging behavioral data can help identify these consumers and provide them with their preferred experience. Survey data shows that today’s borrowers want a mortgage experience that combines speed, convenience and security with personal interactions that are both reassuring and convenient. This means the digital mortgage has to be more than just an online application. Here’s an example. A lender has two borrowers with very different expectations and needs. One, who is a more anxious borrower, calls their lender every four days to make sure the process is going smoothly, even if no additional information is needed or requested. The other, the experienced borrower, is too busy to talk and simply wants to get a text from the lender once the appraised value is verified and a closing appointment is set. If the lender has previously helped either of these borrowers in the past, data available through call logs, audit trails, or notes in the system of record will trace past borrower behavior and indicate best practices for future interactions. If the borrower is new to the lender, there is likely enough consumer behavioral data in the system of record to identify a cohort profile that will allow the lender to predict likely preferences. But most lenders do not have the data scientists to build such a profile. This is where machine learning comes in. Machine learning consumes internal and external data, builds a borrower profile, and predicts the preferred experience for each borrower. The more data it consumes, the more the machine learns, and

the more it learns, the smarter and more precise the results. This example only scratches the surface of what is possible. Imagine the different secondary market execution options the lender can now employ at the point of origination, creating unique, personalized risk or secondary market-based workflows. Think of all the services that need to be ordered, received and reviewed in order to originate a mortgage. Credit reports, appraisals, fraud reports, income verification, title reports, flood certification and virtually every other service can all be ordered through automation. THE FUTURE OF THE DIGITAL MORTGAGE The true digital mortgage allows for a fundamental shift from “checkers checking checkers” and “stare and compare” reviews to exception-based processing. Now personal document review is required only when a loan does not meet established rules and an exception is identified. Each opportunity to leverage automation reduces time to originate and lowers the cost of origination. Automation also supplies loan agents with everything they need to know in order to be connected to the loan process in order to provide that personalized human touch that consumers want. Faster processing and improved customer satisfaction lead to higher pullthrough rates and better business results. The technology and capabilities discussed here are available in our industry today, but they are vastly underutilized, as many lenders’ digital mortgage strategy has been limited to presenting a website with an online application. To realize the potential of the digital mortgage and the value it can deliver to lenders and borrowers alike, we need to expand our vision of the digital mortgage to encompass all phases of the origination lifecycle, with each milestone informing the next. The market will require lenders to adapt, as the pressure to meet closing dates, increased competition, and the emerging high-tech and high-touch expectations of Millennials continue to drive the use of the next generation of technology. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 35

VIEWPOINTS

By Rick Arvielo

Time to get involved What the mortgage industry should be doing to influence the political process

It’s a pivotal time for the mortgage industry. With the arrival of a new presidential administration, a new perspective now frames the debate in our country. As policymakers look to confront the challenges facing our nation, they will be considering legislation that will greatly influence the direction of the housing industry as a whole, and the mortgage industry in particular. It is vital that the mortgage workforce, from entry-level loan officers to CEOs, gets involved in the process. As professionals who earn a living in this industry, it’s our responsibility to let our voice be heard as important decisions are made that will shape the future of mortgage banking. The best policy is made when those of us who have the boots on the ground and work with consumers make our voice heard. 36 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

Rick Arvielo is CEO of New American Funding.

lators every day to bring balance to the regulations that govern our industry, to lower costs, and to expand affordability for the home buyers that we serve. One of the most important issues before Congress today is the reform of the government sponsored enterprises, Fannie Mae and Freddie Mac. They have been under federal control since 2008, when the U.S. intervened and provided billions of dollars in taxpayer assistance during the Great Recession. After nine years in conservatorship, we need permanent legislative reform that levels the playing field, invites competition from private capital to the secondary market, and creates certainty so that bond investors from around the world continue to participate in the U.S. mortgage market. It’s important for Congress to pass GSE reform in order to lock in the positive changes that regulators have already made to ensure a stable lending environment.

WHAT’S AT STAKE? There are a few key issues on the horizon that stand to have a significant impact, and the industry needs a united voice. The Mortgage Bankers Association helps us to speak with one voice by representing the entire real estate finance industry. MBA represents all institutions that lend in both the residential and commercial mortgage markets. MBA is working on Capitol Hill and with the regu-

A SEAT AT THE TABLE As I said, it’s the responsibility of all of us to personally get involved. That involvement can take many forms, and there’s a role for everyone to play. I’m currently supporting our industry’s advocacy efforts by serving as Chairman of MORPAC, the political action committee of the MBA. MORPAC contributes to U.S. House and Senate candidates on behalf of the entire real estate finance industry, and as Chairman, I raise funds to support the PAC. It’s vital that we’re involved in the process and support Members of Congress and congressional candidates who understand and respect our perspective. Others get involved by volunteering their time. My wife, Patty Arvielo, president and co-founder of New American Funding, has taken a leadership role on MBA’s Diversity and Inclusion Committee. In conjunction with a great team of volunteer leaders, she’s working to advance the interests of

women and minority members of our industry, and to help represent those needs to policymakers. This year, she accepted an appointment for a three-year term as a member on the Consumer Financial Protection Bureau’s Consumer Advisory Board. As a board member, Patty will serve as a consumer expert who is outside of the federal government, advising CFPB’s leadership on a broad range of consumer financial issues and emerging market trends. It’s essential for the mortgage industry to be well-represented before the CFPB. We need a seat at the table whenever important discussions are taking place that are affecting our housing consumers and framing our future. ONE INDUSTRY, ONE VOICE But everyone in the industry has a chance to get involved and make a difference. The Mortgage Action Alliance is the MBA’s grassroots lobbying organization. MAA members get the chance to directly communicate with elected officials about important legislative issues impacting our business. MAA is open to all mortgage industry professionals and it is free to get involved. It is important for members of Congress to understand the large role our industry plays in the communities they represent. Once you’re a member, you will be alerted with a ‘Call to Action’ when an important issue arises and you will be able to reach out to your elected officials with a few simple clicks. YOUR VOICE COUNTS MAA membership can make a big impact. Our industry is nearly 300,000 members strong – yet we have about 18,000 active MAA members. Imagine the impact we could have if we had 100,000 members sending letters to their elected officials at the same time? That’s why each of us has to stand up and let our voice be heard if we want to make a difference. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 37

VIEWPOINTS

By John Levonick

What should replace LIBOR? Gauging the impact of a new benchmark index for ARM mortgage lending

As changes and deadlines go, the decision to phase out the London Interbank Offered Rate (LIBOR), the primary benchmark for short-term interest rates, is significant for the global and the U.S. consumer finance and mortgage industries. According to the Bank of England, approximately $350 trillion worth of financial derivative contracts, mortgages, bonds, and retail and commercial loans have interest rates tied to the current global benchmark. Yet, despite the logistical and technological changes it will result in, a four-year 38 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

deadline for the switch over should be manageable, assuming the lending and

servicing sectors can quickly agree on a replacement and get to work on implementation sooner rather than later. For decades, LIBOR has been the key index for the consumer finance industry in making adjustable rate loans. As many know, a recent scandal demonstrated the index to be susceptible to manipulation, prompting regulators to “sunset” LIBOR. The benchmark rate will no longer receive the backing of regulators and, as a result, the global financial markets now require

John Levonick is director of regulatory compliance at Clayton Holdings LLC.

a new benchmark for setting interest rates. The Financial Conduct Authority (FCA) is the regulatory agency that is responsible for overseeing LIBOR and publishing the rates. In July, FCA announced its recommendation to set an expiration date for LIBOR, effectively putting the public on notice that the FCA was stepping away from its oversight of LIBOR. It set 2021 as the deadline in an effort to give U.S. financial markets sufficient time, four and a half years, to adopt a new benchmark. In the U.S., the Federal Reserve has identified the Alternative Reference Rate Committee (AARC) as the group responsible for the transition from the U.S. Dollar LIBOR to a new rate index. ARRC has proposed that the replacement rate in the U.S. be a new index known as the Broad Treasury Financing Rate (BTFR). BTFR is a Treasuries’ repo rate (non-currency based rate like LIBOR). It will reflect the cost of overnight loans secured against U.S. Treasuries. The Federal Reserve Bank of New York is the entity proposed to publish BTFR, along with the Treasury Department’s Office of Financial Research (OFR). ARRC expects BTFR to be ready in early 2018. Economists may choose to debate whether the overnight rates of BTFR, or iterations of BTFR based on similar maturity expectations, will be as predictable and stable as the term structure of LIBOR that carries a similar, if not the same maturity. What isn’t debatable, however, is the impact this new benchmark rate will have upon mortgage lending and servicing and upon tech providers. Originators presumably will determine the BTFR implementation schedule and logistics once industry standards and customs leaders, such as FHFA and the FHLBs, conclude BTFR is acceptable and has been adopted as a benchmark for rate setting. The challenge will be for the technology managers and third-party providers of the loan origination systems and loan servicing systems. Perhaps the greatest uncertainty, and risk, will be in assessing whether a comparable replacement index can be unilat-

erally changed, for an existing contractual obligation, by the note holder. In the event that the chosen comparable replacement index proves to be more volatile than LIBOR, this could open up the lender to liability. Consumers would claim that they agreed to the loan based upon a less volatile index, seeking damages based on increased costs that flow from the decision to replace LIBOR with a more volatile index. NEW ORIGINATIONS For new originations to be delivered to Fannie Mae and Freddie Mac, the impact will not be as overwhelming. Most product and pricing engines (PPEs) already provide for LIBOR-alternative products. For example, the most popular ARM products (10/1, 7/1 and 5/1 ARMs) qualify as a Fannie Mae Standard ARM under either the 1-Yr Wall Street Journal LIBOR or the 1-Yr Weekly Constant Maturity Treasury (CMT) Index. Fannie Mae will likely review historical performance data, among other performance metrics, for BTFR before it adopts it as a replacement benchmark index for the 1-Yr WSJ LIBOR, and only permit the use of the 1-Yr Weekly CMT until it can affirm the new benchmark’s stability. For LOSs that have built in PPEs, the impact will be minimal to adjust to another fully vetted index. For LOSs that only use LIBOR, there will have to be a shift to another comparable, commercially accepted index. This will require them, first, to fully test the ability to print the appropriate index onto the notes, and then to accurately pull historical values based upon the disclosed note look-back period to accurately calculate the fully indexed rate for use in the Truth in Lending Act loan estimate and closing disclosures. EXISTING MORTGAGES But what about ARM Loans that have been originated referencing LIBOR prior to the 2021 cut off? In the event that the mortgage uses a Fannie Mae/Freddie Mac Multistate Adjustable Rate Note WSJ OneYear LIBOR, Uniform Instrument, Section

4(B) provides that “[i]f the Index is no longer available, the Note Holder will choose a new index that is based upon comparable information” and “[t]he Note Holder will give me notice of this choice.” This begs the question of comparability. Is BTFR comparable to LIBOR? Or is the 1-Yr WSJ LIBOR more comparable to the 1-YR CMT, or the 11th District COFI, the 6-Month Treasury Bill or the 6-Month Certificate of Deposit? The determination of the index is ordinarily based upon the lender’s desire to match the cost of lending to its cost of funds. So, to determine a viable replacement, the Note Holder will have to determine which index is comparable to its supporting obligations. As noted above, a prudent lender should also take into consideration the lack of volatility that the consumer may have relied upon in entering into the obligation. Servicers will have the obligation to replace LIBOR with the new comparable index for assessment of future payment adjustments, as determined by the Note Holder. Moreover, servicers will have to ensure that, if they are going to use BTFR, the payments will be calculated accurately and disclosed in a timely manner according to the contractual notice of change obligations. Presumably, notice of change of the index could occur concurrently with the notice of an interest rate change. The shift away from LIBOR in the U.S., as it applies to consumer finance, will require attention by all interested parties in the lifecycle of the asset. The manufacturing and the servicing of these assets will require the most attention. The industry must also determine if BTFR is sufficiently comparable, or if an existing index is a more appropriate alternative replacing LIBOR as the industry standard and benchmark. Probably the biggest risks in shifting away from LIBOR involve TILA disclosures, and errors in reset calculations by servicers. These could create new liabilities, exposure to lawsuits and result in regulatory enforcement. But the good news is, as an industry, we have four and a half years to get this right. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 39

VIEWPOINTS

By Casey Cunningham

Inside the mind of a top producer Lori Richardson invests in education for herself and her clients

No matter how much success they have attained, true top producers are passionate students of their trade. This is true of Lori Richardson, vice president at Cornerstone Home Lending. Working in Colorado, Richardson has built an incredible track record. A 26-year mortgage industry veteran, she is a recognized industry leader and coach in creating scalable systems. In the last two years, she put nearly 400 families into homes and achieved loan production of over $110 million. With numbers like these, many would 40 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

assume that Richardson has nothing else to learn about the mortgage industry. She would be the first to disagree. “I’m a lifelong learner,” she explained. “I just love learning. I think going back through programs, like the XINNIX IGNITE program, keeps me motivated because I learn something new every time. It’s kind

of like reading scripture, right? Every time I read it, I get something different out of it.” Through her considerable experience and dedication to continued learning, Richardson has developed some definite practices that she believes are responsible for her great success. CREATE A VISION AND SHARE IT For Richardson, the most important step in her journey to becoming a top producer was creating a clear vision for what she wanted to accomplish.

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

same way that we did.” That led her to create a document that helps her agents understand and follow her vision of service. “We say, ‘Hey we really want to be the best partner we can possibly be and help you be as successful as you can be, and here’s 15 ways that we can do that.’” She runs through these practices with all new partners a few times during the year to ensure everyone is one the same page. According to Richardson, this shared vision is key. “That’s probably one of the most important disciplines, just making sure that I’m working with the people that are in it to win it the way that we are.”

“I started with the big why. I sat down and said, ‘What is that? How do we want our clients to feel?’ I literally wrote on a piece of paper what I wanted it to feel like to work with my team and on my team. Then we set out to create it.” Starting with this vision was integral for attracting the right referral partners to work with. She found that a relationship only worked when she and her partner shared the same goals and ideals. “I had to fire a couple of agents over the years. They just didn’t treat people the

MAINTAIN RELATIONSHIPS TO CREATE CUSTOMERS FOR LIFE When Richardson starts a new relationship with a homebuyer, she wants to be more than a one-time lender. She wants her team to be the customer’s “everything financial people.” That’s why she stays in communication with customers long after the closing. “I’m calling at least five past clients per day and just asking them how they are, what changes have occurred in their families and lifestyles over the last 12 months, and what changes they anticipate coming in the next 12 to 24 months,” she said. “Then I just kind of shut up and let them talk.” While these conversations do not always create immediate results, Richardson said, “Sometimes, I hang up the phone, and there’s not necessarily an, ‘Oh my gosh, I need to refinance my house right now.’” But she plants the seeds for future business. “I’ll say, ‘Unless you’ve outgrown your home or you don’t like your neighborhood anymore, you are in great shape.’ Two weeks later I get people calling back saying, ‘You know, we’re expecting twins,’ or ‘We’ve outgrown this neighborhood and it’s just not the way it used to be. Can we start talking about what a new home would look like for us?’”

Richardson easily admits that this strategy might not seem groundbreaking, but it has helped seriously set her apart from the competition. “It doesn’t sound so unique to say I call my clients to check in and see how they’re doing, but the more people I talk to, the more I realize that a lot of folks aren’t doing it. This has absolutely been one of my favorite tools.” BRING VALUE TO PARTNERS AND CUSTOMERS Richardson also works to bring value to her customers outside of the requirements of the traditional mortgage process. “We do a lot with education. We feel like if we share information without obligation, it will help people make better decisions.” By offering these free resources to her clients, she builds deeper relationships built on trust and care. One way she brings this additional value for her referral partners is by hosting mastermind groups. In these monthly meetings, Richardson brings top producing agents together for no other reason than to share ideas. “Somebody will have a really great idea or strategy about open houses or overcoming price objections. Right now, we’re talking about helping people grasp the value of building their net worth through owning more expensive assets.” The group will discuss how to implement these ideas and get messaging out to their clients. The agents benefit greatly from these new strategies, and for Richardson, “Putting those people together in a room allows me to connect with them and add value at a higher level.” Bringing incredible service to customers is the crux of her business strategy. “When I first started in the business, I decided that I really wanted to be my own best referral source. I figured the best way to do that was to take really, really great care of people.” HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 41

VIEWPOINTS

By Kevin Wall

Making the choice between fast, highquality and cost-efficient appraisals? Lenders should be able to get it all without trade-offs

When it comes to valuations, every lender wants reasonable cost, highquality and timely turnaround. However, we have been conditioned that the appraisal process has trade-offs—you can have two items on the list, but not all three at once. These trade-offs have been heavily influenced by the realities of manual processes, which greatly influence cost and turnaround time. Fortunately, as we have seen happen with countless other industries and even within most stages of the 42 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

mortgage loan lifecycle itself, data-driven technology and innovation are creating new opportunities never before possible. The appraisal industry is experiencing a paradigm shift. Process transformation is opening the door for appraisers to

work differently, leading to smarter valuations and more choices for lenders. Here are three key factors driving this change: TECHNOLOGY’S IMPACT – GOING MOBILE Appraisal technology has traditionally come in the form of desktop software, but in recent years it has shifted to the cloud, providing access to appraisal applications on any device. This movement has allowed appraisers to be more flexible,

Kevin Wall is president of First American Mortgage Solutions.

and deliver increased quality, speed and cost-efficiency. Historically, appraisers would spend hours visiting the county court house for public records, combing through hard copy and online records for past and present listings, and recording measurements on a paper form after physically inspecting the property. Then, the completed appraisal would be shared back and forth between the appraiser and lender until alignment was reached on the details. Today, there are several valuation options where an appraiser can gather information on a property more efficiently. The availability and accessibility of data— such as prior appraisal records, public property information, listing sources, Google Earth mapping service, and other resources—eliminates the need for an appraiser to personally inspect the property. In certain cases, a visual inspection may not be needed at all. Current appraisal applications have advanced to the point of asking appraisers “rule-based” questions even as the report is being developed. If information entered on the appraisal does not match the public record, the application will trigger a rule and let the appraiser reconcile the data instantaneously. SILVER LINING IN THE CLOUD Cloud technology connects the industry to massive amounts of data via desktop and mobile devices, which appraisers can access to drive computations and leverage rules-based tools. This allows for quality crosschecks to be conducted well before the report is ever delivered to the lender, representing a move from quality control— which has traditionally happened at the end of the process—to quality assurance. In a quality assurance model, these quality checks begin the moment the appraiser gets and accepts the order, and continue as he or she completes research, begins analysis and writes the report. With the maturity of mobile technologies and expanded access to cloud connectivity, the marriage between collecting data with an inspection and infusing that data into

the report-writing process in real time has greatly accelerated. Without the use of these technologies, 60% to 70% of appraisals are returned with revision requests. If the appraisal comes back from the lender several times before it meets client expectations, the turn time is significantly increased. Quality assurance allows for errors to be corrected before they ever reach the lender, cutting down on administrative back and forth and creating greater efficiency. Once an appraisal report has been delivered, lenders are able to utilize the same cloud-based interface to look at the report instantly and have real-time communications with the appraisers in order to resolve any questions or concerns that remain within minutes. Second, web-based services and the cloud have made it easier for appraisers to access the data they need to apply their knowledge of the market and make more accurate valuations. One area where this has been especially helpful is comparable selection. Comparable sales data was once considered muddy, but with enhanced data standards and cloud-based tools that allow appraisers to filter, sort and select comps from thousands of sales and listings, this process has been significantly improved. Appraisers can spend more time on analyzing the properties to find the most relevant comps, and less time driving to visit them all. Analytics also play an important role in appraiser selection and collateral validation. Lenders are turning to service providers who can leverage data and analytics to quickly identify the most qualified appraiser for a particular assignment. This helps ensure the most accurate and timely collateral valuation possible because the appraiser is already familiar with the area and property type. As an added layer of validation, data analytics can help confirm new pieces of property information, such as an addition to a home. This gives both the lender and the investor greater confidence in their lending decision.

MARKET CONDITIONS SPEED THE TRANSFORMATION Finally, real estate market conditions have provided a strong tailwind to the transformation of the appraisal process. According to the Mortgage Bankers Association, U.S. mortgage originations are at a current level of $463 billion as of the second quarter of 2017. Although refinancing originations are down slightly from earlier in the year, purchase originations are up nearly 50% from the first quarter of this year, when mortgage rates first started to tick up following the presidential election. In addition, the long-awaited entrance of millennials into the housing market stands to unleash years of pent-up demand in purchase originations. Not to mention, this generation is the most comfortable with the emerging mobile technologies that the appraisal industry is moving toward. Alongside these market dynamics, some lenders and investors are allowing appraisers to use technologies and processes to improve efficiencies that they didn’t allow previously on certain loan applications, ultimately resulting in the lending trifecta: a high-quality valuation delivered quickly and at a reasonable cost. THE CHANGING ROLE OF THE APPRAISER In this new paradigm, the appraiser remains critical and central to the valuation process. New technology helps speed the process and provides easier access to data for assessing the property, but ultimately only a knowledgeable professional familiar with the human element in the market equation can deliver a robust, high-quality valuation. With these new tools, appraisers are more efficient than ever and the accuracy of their valuations is much improved. Appraiser focus on data analytics provides lenders with a better quality report, resulting in fewer addendums and completion of the appraisal in a timeframe that consumers and lenders have not previously seen. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 43

A conversation with

HUD Secretary

Ben Carson By Jacob Gaffney

Photographs by Stephen Voss

t’s a cold and rainy morning in Washington, D.C. and the streets outside the Robert C. Weaver Building, home to the U.S. Department of Housing and Urban Development, are puddled up with rainwater. A group of people waiting for the next bus huddle together, their umbrellas interlocking like a Roman Tortoise formation, just a few feet away from the sheltered bus stop, which is being regularly splashed by passing taxis. The mildly irritating rain shower suits the so-called “soft” brutalist architecture of the HUD headquarters; its load-bearing, precast concrete façade seemingly absorbs the bad weather so much so that I convince myself more than one spot inside is probably leaking. Surely somewhere there must be a handy bucket deployed to catch drips from the ceiling, the water level constantly monitored by the maintenance crews.

HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 47

“There are lots of doctors, not that many secretaries.” — On why he prefers Secretary Carson to Dr. Carson

Indeed, inside the lobby there are several maintenance workers gathered in front of the elevators. Although their clothes are lightly soiled with sheetrock, grout and even a splash of white paint, their work is — through no fault of their own — slow moving. Ever since the Weaver Building made the National Register of Historic Places, there are limits to the type of work they can do. Large-scale renovations of any kind are almost certainly out of the picture. Even the tiles in the bathrooms must be carefully removed, not to crack a single one, as every object is deemed worthy of preservation.

48 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

The Weaver Building serves as HUD’s spiritual home because most HUD employees are in field offices across the nation, not regular attendants in the building. Secondly, the physical conditions of the interior are routinely panned by workers on the department’s online message board. There is no love lost by workers when it comes to the design of the Weaver Building, so any of their affection toward HUD comes from the mission itself, not the location of their desks. Back in 2014, one worker published a post titled “Petition to move out of HUD HQ Building or do a Complete Remodel”: “The morale in HUD is down because of a number of factors, but once you walk through the halls of the HUD building you’ll know one reason why right away — the depressing building. People need a good work environment, better atmosphere, and a place where they can come to everyday without becoming depressed or sick.” This prompted a reply from HUD’s general counsel at the time, Helen Kanovsky. “I want to be unequivocally clear on this one: HUD strongly supports a complete remodel of the Weaver Building that would ensure our headquarters employees are working in a safe, clean, modern office building… “In recent years, we’ve worked with GSA [General Services Administration] and Congress to secure funding for a move or remodeling of this scale, and unfortunately haven’t received it. Absent that funding, there’s simply nothing we can do by ourselves to make this happen. Apologies for the bad news, but just know

that we are working tirelessly to secure some of that money for future years, and hope to one day have better news on this front.” Kanovsky never fulfilled that hope and would later jump ship for the Mortgage Bankers Association in 2016. Indeed, the role the Weaver Building physically exemplifies is not unlike the general opinion of HUD itself: clunky, underfunded and unloved. This architectural rock and a hard place makes for a challenging work environment, and current Secretary Ben Carson was braced for a fight for loyalty from the moment he started. But before getting into his first day experience, one question needed an answer, more than any other. Why would the famed neurosurgeon, prolific author and unsuccessful 2016 presidential candidate hold even a remote interest in entering the public position of a cabinet member to the very guy he lost the Republican nomination to?

Introducing Our 17th HUD Secretary To answer that last question, and more, Carson arrives early to our interview in his office. It’s as dated as the rest of the building, with 60s-era wood paneling covering the walls. There are comfortable furnishings, however, and the secretary has made himself at home, adding four pictures of his family to the walls. A copy of the Israel Test is stacked on the bookshelf behind his desk, cover facing out. The tome by economist George Glider

makes the case that Israel is the most tested capital market and tech heaven in the world. With a collective mentality among its citizens to lead the hostile nations around it into freedom and success, the Israel Test judges global societies by their attitudes toward the controversial Jewish state. To own it is a must for anyone interested in gaining financial acumen, but to openly display it? Purely bold. Carson’s people, who agreed to the exclusive sit down with HousingWire, are a testament to the environment of cooperation Carson clearly wants. His people include 50 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

new hires as well as the old guard, working together to try to spread an honest assessment in the housing finance industry’s most respected publication. I would have settled for a phone call, but to meet in person, at his office? “We like to under-promise and over-deliver,” one of his staffers explained. The secretary invites me to sit in one of the chairs arranged around a coffee table in his office; not at his desk, not in the nearby conference area. Just two guys settling in for a chat. We briefly speak for a moment about his books and then jump right in, as I

don’t want to waste the extra 10 minutes Carson’s earliness allows for, and ask why he took the job. Like any good public speaker, Carson opens the answer to his first question with a joke. “I was determined I was not going to take a job in this administration,” he said with a bit of a chuckle. However, his family felt the opportunity was too important. The issues HUD deals with strike too close to Carson’s need to cure people of whatever sicknesses they face. As a doctor, his natural instinct is to heal and do no harm.

❱ TABLE TALK HousingWire Editor-in-Chief Jacob Gaffney, left, sits in conversation with HUD Secretary Ben Carson and his staff.

day on the job proved full of surprises, as has every day since. “I was told that it was a culture of inefficacy and laziness and to expect a lot of people to try to sabotage what I was doing; and that is the history of the place and that’s just the way it’s going to be. And, I didn’t find it to be that way at all.” What he did find was an eager staff, regardless of tenure, be it four months at HUD or 40 years. The core belief in the mission was a strong part of the culture there — difficult office conditions or not. “They all had this calling to help others, so as long as you include them, not talk down to them, they can prove to be extremely valuable allies to have. The fact that career people could stand up, not do what others told them to do, was quite pleasantly surprising.” But as recent events in Washington show, the impressions and opinions of the movers and shakers in the nation’s capital don’t always align with the customs and behaviors of the nation at-large. And, if his experience inside the Weaver Building was pleasantly surprising, it was his experience in the field that really blew him away. His early travels as HUD secretary included time spent in field offices, but his time on the ground during the unprecedented hurricane season this year impacted Carson the most.

Storm Surge “We have to change the way we treat some of the disadvantaged in our society,” Carson said. And he was braced for a struggle; Carson felt going into the role on day one, there would be some resistance from staffers. Certainly people enter into civil service with a mindset to serve their fellow Americans. Would the unexpected decision to place a world-renowned neurosurgeon in the role of the most powerful person in housing strike a wrong nerve with the more senior people at HUD? Carson thought perhaps so, but his first

Hurricane Harvey made landfall near the Gulf Coast town of Rockport, Texas, on Aug. 25. It was the first hurricane to cross an American shoreline in 12 years and it made up for that absence with a vengeance. Federal Emergency Management Agency Administrator Brock Long would later refer to Harvey as a wake-up call and say it could end up as the worst disaster in Texas history. Economic losses are staggering, with a large portion of the losses sustained by uninsured homeowners. Black Knight predicted the mortgage

industry could see up to 300,000 new delinquencies as a result of the storm, with 160,000 borrowers becoming seriously past due. Recovery may take years. The federal government quickly pushed through legislative aid packages with unprecedented bipartisan support, uncharacteristic for today’s modern political climate. Carson visited Houston on Aug. 29 and experienced firsthand how HUD employees respond in times of a real crisis. The amount of manpower humbled Carson, as did the attitudes he encountered. He was there to make sure he could help ensure things went as smoothly as possible, but without getting in anybody’s way. “There are more HUD employees outside this building than inside this building. And I want to hear from them. What are your problems between your field office and the central office?” “In terms of Texas, I’ve been there two times and will be going many more times, they’ve really jumped on the situation,” he said, adding that in the wake of Hurricane Harvey, HUD quickly accounted for not only the safety of field staff, but also of related housing authorities and of course, the people who call HUD-assisted housing their home. At this point, Carson paused to recall the precise numbers and allow for the appropriated rumination into the scope of operations at the Houston field office. “There are actually 48,534 families [affected by Harvey], and that’s not to mention the families involved in multifamily, which is another 20,971. That’s a lot of folks, who our folks are still in the process of getting a handle on.” Texas HUD workers are impressive and energized in times of great need, Carson stated. And it’s an attitude the entire city seemed to adopt after Harvey. “I’ve never seen anything quite like it, and it’s not just staffers, it’s neighbors helping neighbors. This is very different than like for Katrina where that was every HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 51

man for himself. We’ve gone into some of these neighborhoods and everyone is hugging each other. ‘I’m over helping this neighbor and we’re going to clean up his stuff and after, they’re going to help clean up my stuff.’” “I wish I could bottle that and sell it, so that when all of this is over, people continue to treat each other this well.”

A Personal History Benjamin Solomon Carson Sr. was born in Detroit in 1951. His father moved the family up north from Georgia and worked at an automotive plant in the Motor City. Most of his grammar school education took place at public schools there before his parents parted ways. Carson spent large portions of his childhood living in multifamily housing. “Growing up, with a lot of economic deprivation, seeing what it did to people, I saw a lot of single women with children, and it was a terrible thing. We have had that fall upon ourselves. When my parents got divorced, my mother and us, we went out of the home and we found some relatives in Boston to stay with. “And it was in a tenement, but at least it was a roof over our head. Just remembering how all this impacts people makes me want to eliminate homelessness. And I think we have the possibility to finally do that.” By the fifth grade, Carson struggled with success in school, once declaring that his “D” in math was proof that at least he wasn’t getting any worse. His mother began to switch his television time with book study times and the more he read, the more he learned. It became the catalyst for a major turning point in his life, as he recalls in his memoir, Gifted Hands: “The very kids who once teased me about being a dummy started coming up to me, asking, “Hey Bennie, how do you solve this problem?” Racism persisted throughout his youth, sometimes overtly when street gangs 52 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

called him racial slurs and sometimes more subtly, as when teachers “bawled out” white students for underperforming next to Carson. The affronts only fed his determination. Carson served as director of pediatric neurosurgery at the Johns Hopkins Children’s Center, a position he assumed when he was just 33 years old, becoming the youngest major division director in the hospital’s history. In 1987, he successfully performed the first separation of twins

who pick up trash along the highways,” he writes. “The federal government set up a jobs program, mostly for inner-city students.” Discipline was the toughest issue to confront, or rather the lack thereof. Carson explains the excuses were rampant: too hot, low pay, no recognition or satisfaction in one’s work — anything to try to get out of actually doing the work. While most crews of six men were bringing in around 12 bags of garbage per day, Carson’s crew regularly

“The policies we’re developing are now aimed at developing human capital and not just aimed at putting somebody under a roof.” conjoined at the back of the head, the medical term for which is called “craniopagus.” He also performed the first fully successful separation of type-2 vertical craniopagus twins in 1997 in South Africa. Some could argue this history of running large, technical teams — he led 70 specialists in his first conjoined-separation surgery 30 years ago — make him the perfect candidate to run HUD. Healthy living depends on stable housing, after all, but some argue comparing the two sciences are like comparing apples to oranges. But after studying Carson’s personal history, one realizes he is not easily defined as a surgeon-turned bureaucrat. In fact, his role as HUD secretary isn’t his first federal job. Much is made of his surgical background, and rightfully so, but people may be surprised to learn Carson spent some time doing hard labor. In “Gifted Hands,” Carson explains that after his first year at Yale he took a position as a supervisor to a highway crew: They were “the people

delivered between 100 to 200. So what did he do differently? He understood that the men hated doing this kind of work, but even when pressed, he didn’t give a full explanation of his successful plan to his supervisors, lest they put an end to his practice. He understood that the men needed to be motivated to do more, and they also couldn’t stand picking up litter when drivers were simply going to keep throwing rubbish out of their windows regardless. He knew that for every moment those men stood out on that highway, they wanted to be somewhere else, so he came up with a solution to indulge that feeling. If the men started before dawn, before it got hot, Carson would say that they were free to go home once they collected more than 100 bags of garbage as a team. If they finished in less than three hours, they still got a full day’s pay and the rest of the day off. Soon it got to a point where Carson’s crew would start so early that they’d be

In short, the jobs came and went, private, public, corporate, but Carson’s resolve and ethic never wavered. The words of his beloved mother rang in his ears: “The kind of job doesn’t matter,” he writes in his memoir. “The length of time on the job doesn’t matter, for it’s true even with a summer job. If you work hard and do your best, you’ll be recognized and move onward.”

His public policy

finishing up, and returning back to the bag drop, just as the other crews were starting to arrive, around 9 a.m. This way, they could taunt the other crews and show off their superior results; it became more fun for his workers and Carson’s supervisors turned a blind eye even though they knew his crew was working in an unorthodox fashion. The results were just too good for the top brass to mess with. “Some people are born to work, and others are pushed into it by their moms. But doing what must be done as quickly and as well as possible has been my strategy for everything, including medicine. We don’t necessarily have to play by the strict rules if we can find a way 54 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

that works better, as long as it’s reasonable and doesn’t hurt anybody. Someone told me that creativity is just learning to do something with a different perspective. So maybe that’s what it is — being creative.” However, leveraging creativity into success for the highway department led to Carson being offered the same spot the next year. But talk is cheap — the very next summer Carson remained unemployed, the promise of a job proved empty. The following summer proved more fruitful, as Carson assembled fender parts for Chrysler. He worked hard and loved it, and even earned a promotion in three months.

“The policies we’re developing are now aimed at developing human capital and not just aimed at putting somebody under a roof,” Carson explained. The secretary mentioned that society as a whole is becoming coarser in the way people treat each other and it’s wearing down the resolve of the nation as a whole. In HUD’s capacity as the steward that provides a place to call home for some of the most vulnerable families in the nation, Carson feels this is where the best impact can be felt to the greatest extent. One of Carson’s main initiatives is establishing “envision centers” of learning, especially for teenage mothers who, more often than not, end their educational trajectory once they give birth. New York City is seen as a potential spot for one of the first such centers where young, low-income parents can access day care while learning to code and “balance a checkbook or unclog a toilet,” the secretary told me. The project remains far from being piloted, especially considering recent cuts to HUD’s budget. The plan, at least what we know so far, is that the centers will also offer U.S. Department of Education STEM concept videos, designed to help students learn pivotal concepts in science, technology, engineering, and/or mathematics. But before he can fix the nation’s problem, Carson acknowledged that he needs to work on the operations within the Weaver Building to lay the foundation of future success.

“One of the things I’ve learned is you can have a whole bunch of good ideas, but if you don’t have an operator, nothing is going to happen.” And when it comes to his current policy, as when the administration cancelled plans to reverse the Obama-era decision to do away with the FHA “life of the loan” insurance premium, Carson had a quick response. “Ask yourself, why is it there? Well, obviously, it’s there to help create a backstop that you need to enter the program. When we’re talking about the FHA, we’re talking $1.3 trillion [emphasis his] in taxpayer money that has to be protected. A few years ago we had to go to the Treasury and get $4.7 billion; I don’t ever want to see that under my watch.” Carson added that he wants to get to a place where policies are being enacted because they have been discussed at length and they are the solutions that make the most sense in the long run. He’s not interested in short-term fixes to gain political brownie points, as his move on reverse mortgages proves. After months of considerations, HUD finally changed the requirements around its reverse mortgage program, announcing plans in late August to raise premiums and place tighter loan limits. T he gover n ment ’s Home Equ it y Conversion Mortgage program has long faced scrutiny due to the high risks associated with the loans. While improvements have been made on it, it still is one of the most volatile parts of the Mutual Mortgage Insurance Fund, which is the Federal Housing Administration’s flagship fund. The program, created for seniors aged 62 or older who are still living in their homes, allows seniors to withdraw a portion of their home’s equity. If FHA backing is for someone’s first home, HECM is for their last home. For some older homeowners that are potentially in need of additional income, a reverse mortgage allows them to take

the equity out of the house through lumpsum withdrawals, regular payments or a line of credit. This FHA/HECM combination fully exemplifies what HUD stands for in this country: the loan bookends of either side of our lives. But neither should proceed with a mobility of purpose above an abundance of caution, in Carson’s mind. “Reverse mortgage is an excellent idea for a lot of people to let people age in place, but when it was thought of, people were taking huge chunks of money out in the beginning and continuing to take out large chunks after that. So we fixed it and we changed the rules,” Carson said. “It goes back to the same principle we

field getting their ideas, and taking that to our senior staff to come up with things that actually make sense. “Again, the purpose now is to develop people. Housing is only a part of the development of the human capital. Of course, now we define successes in public housing not by how many people get into it but how many people get out of it.” Dealing with complicated constructs and lifting heavy loads with a delicate touch is a place of comfort for Dr. Ben Carson. You could argue that it’s not unlike being a neurosurgeon, but a better understanding is to concede it is more like being Ben Carson. Understand that for all his life’s work, he’s still a learner as much

“The whole purpose is running things like a business instead of a bureacracy and basically we’re forming it from the bottom up.” talked about: protecting the taxpayers, protecting the next generation. The next generation can’t be paying for the excesses of this generation.” So his role is two-fold: preserve the vision of HUD while providing a level of corporate responsibility. Carson wants to add a CFO, CIO and COO, to help balance these two edicts. And he thinks he has the talent to do it; meaning these roles could be filled once all of his undersecretaries fully move into their positions. There’s some progress to report on that front, as his main No. 2, Deputy Secretary Pam Patenaude recently sailed through her Senate confirmation. “The whole purpose is running things like a business instead of a bureaucracy and basically we’re forming it from the bottom up. We’re talking to the people who have been here 10, 20, 30, 40 years getting their ideas, talking to people in the

as a teacher. He still looks upon the world with a gaze of wonderment. Be it the slums of Boston, or the grey, wet Washington morning, or the artwork adorning his office — to Carson, life is something beautiful to behold. As the interview transitions into a photoshoot, Carson suggests to the HousingWire photographer, “be sure to get the pretty Italian painting in the shot,” referring to the framed landscape on the wall above him. Indeed, it’s not just an Italian painting, but a depiction of Rome, with the Castel Sant’Angelo occupying the foreground in front of a shining Vatican. It’s a fitting observation: on one end the Vatican symbolizes salvation, and the Castel once served as a fortification the pope could retreat to when Rome would come under siege. As of now, Carson sits in a place of comfort, time will tell if he will need the fortress. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 55

FOREIGN RELATIONS

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Foreign buyers of U.S. residential property increased their spending in the first quarter of this year by 50%. In a housing market restrained by tight inventory, what impact are those buyers having on U.S. real estate? BY DEBOR AH HUSO

HOUSINGWIRE â?ą OCTOBER/NOVEMBER 2017 69

hen Lawrence Yun, chief economist with the National Association of Realtors, saw the annual stats on residential real estate purchases by international buyers at the end of the first quarter of 2017, he couldn’t help but be surprised. Despite rising home prices and a stronger U.S. dollar,

foreign buyer transactions in the United States had increased dramatically from a year ago — by almost 50%, in fact.

Foreign purchasers grabbed up 284,445 residential properties between April 1, 2016 and March 31, 2017. 70 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

“Overall the report was somewhat surprising,” Yun said. “With the U.S. dollar being strong, I expected a drop in foreign buyers.” However, as of the end of March, foreign buyer home sales stood at $153 billion, which represents 5% of residential transactions and 10% of dollar volume nationwide. That surpasses the highest foreign buyer purchase volume of $103.9 billion recorded in NAR’s annual survey in 2015. The survey has been published since 2009. Most of the increased activity from foreign buyers occurred in the second half of 2016. According to NAR’s 2017 Profile of International Activity in U.S. Residential Real Estate, the U.S. dollar may have strengthened against other currencies like the British pound and Chinese yuan, but residential real estate values, while climbing in the U.S., have not been doing so as quickly as other places, making American soil a better investment in many cases than Canada, for example. All in all, foreign purchasers grabbed up 284,445 residential properties between April 1, 2016, and March 31, 2017. The largest overseas buyers were, unsurprisingly, the Chinese, who account for $37.1 billion of those dollars. They’ve been the top foreign investor

in U.S. residential real estate for three consecutive years. The next strongest foreign buying group was Canadians at $19 billion since the same time last year, more than doubling Canadian purchases the previous year. While some economists were predicting foreign sales would slump, at least a little, with the strengthening of the American dollar, that hasn’t been the case. “The commonality,” said Yun, “is that China and Canada have experienced a strong price run-up in their countries.” As a result, they’ve garnered substantial wealth and feel confident about investing outside their home countries, where real estate prices, while growing, are not escalating as quickly or to the same degree as in places like Toronto and Vancouver, where prices have escalated by 21% and 17%, respectively, year-overyear compared to an overall 5% increase in residential property values in the U.S. Yun said China and Canada, in particular, “are cranking out millionaires, who are looking for a place to park their money.” And the respect for private property rights in the U.S. is particularly appealing to the Chinese. “The U.S. has always provided a safe haven,” he added. “The foreign presence is not something to ignore.”

FO R EI G N I N V E S TM EN T I N 1Q2017 $153 billion for 284,445 residential properties

CHINESE

CANADIANS

BRITISH

MEXICANS

$37.1B

$19B

$9.5B

$9.3B

W H AT A R E T H E Y B U Y I N G , AND WHERE? According to NAR’s foreign buyer survey, nearly half of all purchases by foreign buyers are occurring in three states — Florida, California and Texas. The bulk of foreign buyers in Florida are Canadians, while Chinese investment is highest in California and Mexican investment is highest in Texas. New Jersey and Arizona also have a significant number of foreign purchasers of residential real estate. While Canadian and British buyers tend to be non-resident purchasers, those from the other top three countries for foreign investment in U.S. real estate — China, Mexico, and India — tend to be resident buyers. Aaron Terrazas, senior economist at Zillow, says foreign buyers represent three main groups: traditional real es-

“They’re buying a home to live in when they’re here for business or for kids who will be attending school. Those are the two main demographics. Investors are actually pretty low.” — Aaron Terrazas, chief economist at Zillow.

tate investors, vacation homebuyers, and those coming to the U.S. to work or study. While Canadians, like their North American cousins in the Upper Midwest and New England, are principally buying vacation properties in warm weather climates like Florida and Arizona, Chinese investment is a mixed bag, representing not only vacation homeowners but also real estate investors, foreign workers and students. Yun said a lot of Chinese home purchases in California are either work or education related. Most are looking to purchase new construction, single-family homes, as compared to Canadians, who, Terrazas said, gravitate toward condo living. About a third of Chinese buyers purchase real estate in California. Matthew Felt, vice president and HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 71

LUXURY D I GS

AVER AGE SPENT BY FOREIGN BUYERS

$536,852 72% in cash

AVER AGE SPENT BY U.S. BUYERS

$277,733 Source: National Association of Realtors 72 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

project director with Polaris, said about 10% of buyers of their properties in the San Francisco Bay Area are Chinese. He added that most Chinese buyers tend to have some kind of connection with the location in which they’re purchasing — they may be doing business there or have a child attending a California university. “They’re buying a home to live in when they’re here for business,” he explained, “or for kids who will be attending school. Those are the two main demographics. Investors are actually pretty low.” And that’s no small surprise given that Polaris’ price point is generally over $1 million, a cost at which it’s harder to obtain a substantial return on investment. Foreigners buying homes to occupy while they work or study abroad are also purchasing in places like New York City and Boston, according to Terrazas. Meanwhile those purchasing real estate as a long-term investment do not always gravitate toward pricier markets, but, as Terrazas said, “those with good growth — parts of Florida or Seattle, for example.” While he noted that investors may purchase for lease as well as resale, “the biggest returns are in resale.” Felt said he’s seen the biggest uptick in foreign purchases in Arizona. “It’s tied to the value of the Canadian dollar,” he explained. “In 2016, we saw a dip in the Phoenix and Scottsdale markets, but in 2017, that market has come back with buyers looking for vacation and retirement homes.” While Great Britain ($9.5 billion) was once the top foreign country purchasing U.S. residential real estate, due both to the language affinity and easy availability of flights across the Atlantic to sunnier destinations like Orlando, their ranking has fallen to third. Meanwhile Mexico ($9.3 billion), which is the fourth largest foreign buyer of U.S. real estate, has routinely been among the top five but with most of those purchases focused on border states like Arizona and Texas. Mexicans’

investment aspirations also have mainly to do with employment, and they steer toward more affordable housing; whereas, Chinese, Canadians, and Europeans put their dollars mainly at the upper end of the U.S. housing market.

WHY HERE? WHY NOW? Yun credits a lot of the uptick in foreign buyer investment in the U.S. over the last year, particularly among Chinese, to foreign buyer taxes in other locales, most significantly British Columbia, which recently instituted a 15% foreign buyer tax with hopes of slowing down foreign investments in hotspots like the Vancouver area. “That’s $150,000 more for a $1 million residence,” Yun noted. “That’s quite substantial. [I think] the Chinese are seriously redoing the math on Vancouver and going to the U.S.” Te r r a z a s i s le s s c o n v i n c e d : “Vancouver’s prices dropped earlier this year, but now they’ve ticked up again strongly, so we don’t think it’s had an impact on foreign buyers really.” He doesn’t believe the 15% tax is deterring investment and says foreign buyer taxes are not uncommon. “New South Wales has a 4% buyer tax,” he added, “and it’s had no impact on the market.” Paris is another city that has implemented a foreign buyer tax to little effect. He said if Vancouver’s city government hoped to stem the tide of foreign buyers entering the local residential real estate market with the tax, they likely will be disappointed. “However, if Vancouver wants to raise revenue, it’s an efficient way to do so because there’s very little demand response.” Felt is on par with Yun, however, and believes the Vancouver tax has had an impact, pushing more Chinese buyers into Seattle where prices are lower. He said Polaris has seen an upswing in Chinese demand for single-family homes and upscale condos in the city. Terrazas thinks what’s driving foreign investment in U.S. residential real estate, however, is much bigger. “If you

look around the world at low global interest rates,” he said, “the U.S. along with Canadian real estate offer some of the safest, highest returns out there.” Thus, he’s really not surprised by the uptick in foreign purchasers, regardless of foreign buyer taxes. Yun said the noticeable presence of foreign buyers in the U.S. residential market is never going to go away, though he thinks the coming year will see a retreat in foreign purchasers. He also feels increasing strictures on overseas investment by foreign governments, along with uncertainty about future U.S. policy on immigration and trade, could put a damper on things. Terrazas agreed: “I don’t think any of the fundamental drivers of this are going to disappear over the next year, though there are more headwinds than a year ago.” He pointed to the strengthening of the U.S. and Canadian dollars as well as the euro and the yuan. “That makes it more expensive to buy in the U.S.,” he added, as do the recent restrictions on capital outflows of more than $50,000 imposed by the Chinese State Authority on Foreign Exchange. As the Asian nation’s economy continues to grow slowly, the government has looked to reduce the flight of Chinese investors to foreign properties while also endeavoring to lure foreign investment at home. According to the NAR survey, foreigners spent an average of $536,852 per property between April 1, 2016, and March 31, 2017. That is substantially higher than the average purchase price for U.S. residential properties overall, which stood at $277,733. Seventy-two percent of foreign buyers purchasing U.S. residential real estate did so in cash. Terrazas said that foreign buyers don’t have a significant impact on the average American homebuyer though. “Most foreign buyers are competing in a different price bracket,” he explained. “They’re looking at homes in the 76th percentile and above, where the average American buyer is looking in the 56th.”

Foreigners, if they’re having any impact on price appreciation, are only doing so at the highest level, where they compete with affluent American buyers. “They’re having negligible impacts on the overall market,” he added. According to the 2017 Q2 Zillow Home Price Expectations Survey, housing experts and economists claim foreign buyers can have a significant impact on values in the luxury home market. A year ago, surveyed panelists indicated they expected home price growth of 3.4% in 2017. As of this latest report, however, they’ve upgraded that forecast to 4.8%. That forecast change has much to do with an anticipated downgrade in foreign buyer interest that hasn’t panned out so far. But housing experts see foreign influence sagging a bit in the coming year with Millennials reaching homebuying age having a greater effect on values than foreigners. The reality remains, however, that home starts are still not up to historical norms, even with foreign buyer influence. Nevertheless, the Zillow report indicates home equity growth in the U.S. will hit $1 trillion for the sixth year in a row this year. Yun’s concern is less that foreign buyers are pricing out domestic buyers (though it happens in some markets like L.A. and Miami) than he is concerned that a downturn in international buyers could slow the housing economy in some areas of the country. “Much of the new construction in Miami wouldn’t happen in the absence of foreign buyers, or you’d see price depreciation,” he said. Yun does not, however, expect any coming retreat among foreign purchasers to have anything to do with Trump administration policies or proposed policies. “There’s been a lot of rhetoric,” he remarked, “but I doubt there will be any meaningful policy from the administration. Americans always respect the rights of private property ownership.”

“If you look around the world at low global interest rates, the U.S. along with Canadian real estate offer some of the safest, highest returns out there.” — Aaron Terrazas HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 73

WEED

WAGER WITH RECENT CHANGES, BANKS ARE FINDING AN

OPENING TO SERVE LUCRATIVE MARIJUANA BUSINESSES BY CAROLINE BASILE

58 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 59

he legal marijuana business is blooming, with plentiful profits and the promise of exponential growth as more states legalize weed. But with federal laws still tying the hands of financial institutions, can the banking industry find a way through the muddy waters of regulation so that its relationship with marijuana can flower?

Nationally, 29 states have legalized marijuana in some form, either recreationally, medicinally, or both, generating billions of dollars in sales. These billions of dollars mean there is much that banks could make from this booming industry, but federal laws and guidance have made things complicated for financial institutions who want to participate. Banks are missing out on the money that legal marijuana-related businesses (MRBs), such as dispensaries and growers, bring in. And the MRBs miss out because they are unable to benefit from safe, regulated financial services. Using banking services means safer handling of money and the ability to pay bills electronically or by check, instead of cash. But for now, these businesses have to contend with unorthodox methods of dealing with their cash and paying bills, such as using armored vehicle cash services or depositing the cash via bitcoin.

60 HOUSINGWIRE â?ą OCTOBER/NOVEMBER 2017

FEDERAL OVERSIGHT In 2013, both Washington state and Colorado legalized the use of marijuana, setting up the battle between state and federal statutes, since marijuana is still illegal under federal law. To try to reconcile these conflicting legal stances, Deputy Attorney General James Cole issued what became known as the Cole Memo to reassure banks that they were unlikely to face any federal penalties for providing services to marijuana businesses in states where it is legal, as long they screened accounts for signs of money laundering and ensured that customers followed state guidelines. The Cole Memo was met with serious skepticism from financial institutions who didnâ&#x20AC;&#x2122;t want to run afoul of federal regulators. In February 2014, the U.S. Treasuryâ&#x20AC;&#x2122;s Financial Crimes Enforcement Network tried again to clarify the federal position, releasing guidelines for financial institutions outlining what they can do in regard to these businesses and their financial activities. Specifically, the guidance sought to clarify how financial institutions can provide services to marijuana-related businesses consistent with the obligations to uphold the Bank Secrecy Act. The 2014 guidance stated that banks and credit unions are allowed to do business with marijuana-related businesses as long as they monitor and screen accounts for signs of money laundering and file suspicious activity reports on any illicit activities.

This position enabled some credit unions to open accounts with MRBs, but major banks largely stayed away from the industry. When the guidance was issued, only 51 financial institutions were conducting business with MRBs. According to FinCEN’s data outlined in their most recent Marijuana Banking Update, released in June, more than 350 financial institutions are now providing banking services to marijuana-related businesses. That’s an estimated 620% increase, but that number represents only a small drop in the vast ocean of financial institutions. However, the tide seems to be shifting, and big banks are now testing the waters. In January 2017, American Banker published research findings from MRB Monitor, a marijuana-related business intelligence company, that showed that despite previous denials, several big banks have worked with multiple marijuana-related businesses in at least one state: Massachusetts. The group’s analysis covered applications that were filed between June 2015 and September 2016 and found that out of 84 applications to operate medical marijuana dispensaries in the state, 29 applicants reported having access to funds in at least one account at Bank of America, Citibank, Wells Fargo or JPMorgan Chase, or one of their subsidiaries. Of those 29 applicants, 17 of them had a connection to Bank of America. How can other banks safely navigate this path?

A SAFE-R WAY In May, nine senators joined together to propose the Secure and Fair Enforcement (SAFE) Banking Act of 2017, a bipartisan bill that, if passed, would solve the lack of access to basic financial services in states that have legalized weed. “Conflicting federal and state marijuana laws make it difficult for legitimate businesses to use the basic financial services they need access to and this bipartisan legislation gives them that access they need,” Sen. Cory Gardner, R-Colo., said in a statement about the bill. The bill focuses not only on banking access but also employee safety and risk. “We must also take into account the risk to public safety as these businesses are being forced to carry around bags of money to pay for their employees and rent. Legal businesses

should not be treated like this, and I’m glad that Republicans and Democrats are working together to address this issue.” The bill, which is co-sponsored by several other senators, including Sen. Elizabeth Warren, D-Mass., and Sen. Rand Paul, R-Ky., would prevent federal banking regulators from: • Prohibiting, penalizing or discouraging a bank from providing financial services to a legitimate state-sanctioned and regulated cannabis business, or an associated business (such as a lawyer or landlord providing services to a legal cannabis business); • Terminating or limiting a bank’s federal deposit insurance solely because the bank is providing services to a state-sanctioned cannabis business or associated business; • Recommending or incentivizing a bank to halt or downgrade providing any kind of banking services to these businesses; or • Taking any action on a loan to an owner or operator of a cannabis-related business. But even with the support of senators like Warren and Paul, this bill is unlikely to pass, receiving only a 6% chance from legislation tracking service GovTrack. The prediction on the bill, made by Skopos Labs, stated “The overall text of the bill decreases its chances of being enacted. The bill is assigned to the Senate Banking, Housing, and Urban Affairs Committee. The bill’s primary subject is Finance and financial sector,” according to the site. A more promising path might be seen in the House of Representatives, where several members have submitted two amendments to be included in the House appropriations bill. Submitted by Reps. Denny Heck, D-Wash., Barbara Lee, D-Calif., and Dina Titus. D-Nev., the amendments are poised to serve as a temporary fix until the SAFE Banking Act is passed into law. Both amendments focus on banking services for legal MRBs. The first amendment prohibits any funds in the appropriations bill from being used to penalize banks for serving MRBs that are legal under state law and the second amendment prohibits the Treasury from changing FinCEN’s guidance to financial institutions on providing services to legitimate marijuana businesses. If the amendments are included in the bill, it would allow for a legal marijuana-related business to operate according to state laws while still having access to the banking system. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 61

A STUDY OF SERVICES NOTE: Several of the reports contain more than one key phrase, which accounts for the numbers for each key phrase being greater than the total.

20,288

Suspicious activity reports from filers in 45 states, Washington, D.C., and Puerto Rico using the key phrase “Marijuana Limited.”

CREDIT UNIONS

368 BANKS FinCEN reported that as of March 31, 2017, more than 350 financial institutions are now providing banking services to marijuanarelated businesses. That’s an estimated 620% INCREASE from the 51 institutions just two years earlier.

7,326

2,007

SARs from f ilers in all 50 states, Washington, D.C., and Puerto Rico using the key phrase “Marijuana Termination.”

SARs from filers in 40 states, Washington, D.C., and Puerto Rico using the key phrase “Marijuana Priority.”

SOURCE: U.S. Treasury’s Financial Crimes Enforcement Network 62 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

inCEN’s latest report on marijuana banking shows a jump in the number of institutions working with marijuana-related businesses, based on the number of suspicious activity reports received.

FILING TYPES LIMITED The “Marijuana Limited” filing means the MRB doesn’t raise any of the red flags as defined in the Cole Memo and is compliant with the appropriate state’s regulations regarding marijuana businesses. The financial institution is providing banking services to the business.

28,651 Total SARs using the key phrases associated with marijuana-related businesses.

PRIORITY The “Marijuana Priority” filing means the MRB may raise one or more red flags as defined in the Cole Memo, or may not be fully compliant with the appropriate state’s regulations. The financial institution is providing banking services to the MRB while further investigation is being conducted.

NUMBER OF DEPOSITORY INSTITUTIONS ACTIVELY BANKING MARIJUANA BUSINESSES IN THE UNITED STATES

285

305

319

317

337

368

JAN. ’16

APRIL ’16

JULY ’16

OCT. ’16

JAN. ’17

MARCH ’17

TERMINATION The “Marijuana Termination” filing means the financial institution decided to terminate its relationship with the MRB for one or more of the following reasons: The business raises one or more of the red flags as defined in the Cole Memo, the business is not compliant with appropriate state regulations, or the financial institution has decided not to have marijuana-related customers for business reasons. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 63

“Conflicting federal and state marijuana laws make it difficult for legitimate businesses to use the basic financial services they need access to.” – Sen. Cory Gardner, R-Colo.

WHAT ABOUT TRUMP? Despite attempts to undo other Obama-era regulations, President Donald Trump and Attorney General Jeff Sessions, a staunch anti-marijuana advocate, haven’t exactly been clamoring to rescind the Cole Memo or to impose tougher regulations on financial institutions or MRBs. But the uncertainty of what the administration might or might not do on the issue has put banks and legal marijuana businesses in a holding pattern. Recently, PNC Bank closed the account of nonprofit organization The Marijuana Policy Project, a group that lobbies for the drug’s policy reform, after 22 years. According to a Washington Post article by Nicole Lewis, the group said they were notified in May 2017 by PNC Bank that the bank would close the accounts after an audit revealed that the organization received funding from marijuana businesses that handle the plant directly. “They told me it is too risky. The bank can’t assume the risk,” Nick Field, MPP’s chief operating officer told the Washington Post. During his January 2017 Senate confirmation hearing for the position of attorney general, Sessions, then a Republican senator from Alabama, was unclear about how he would approach legal marijuana businesses, despite his previous criticisms of the Obama administration’s approach to cannabis laws. During the hearing, Sessions was asked by 64 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

Sen. Patrick Leahy, D-Vt., about using federal resources to prosecute those abiding by state marijuana laws and said: “I won’t commit to never enforcing federal law. But absolutely it’s a problem of resources for the federal government.” Sessions furthered commented on the 2013 Cole Memo, saying that some of the guidelines from the Obama administration are “truly valuable in evaluating cases.” With all this smoke, it doesn’t appear that Sessions’ attitude on marijuana will mellow out any time soon, despite a Justice Department recommendation that he not take any action against states with legalized marijuana. According to an August 2017 Associated Press article by Sadie Gurman, the government’s Task Force on Crime Reduction and Public Safety “has come up with no new policy recommendations to advance the attorney general’s aggressively anti-marijuana views.”

FINANCIAL WORKAROUNDS While banks are forced to watch from the wings, other players are reaping the rewards from this industry. Recently, Jennifer Kaplan from Bloomberg reported that marijuana dispensaries are turning to the increasingly popular digital currency bitcoin as a way to get rid of the excess cash from sales. This deters the use of cash at dispensaries or other MRBs by providing consumers another option. The article points out that two financial-technology startups, POSaBIT and SinglePoint, use the cryptocurrency as an intermediary step that allows pot consumers to use their bank-issued credit cards to buy weed. “There’s no industry — whether it’s the production and sale of cannabis or the production and sale of a cup of coffee — that can operate safely, transparently or effectively without access to banks or other financial institutions and traditional services,” Jon Baugher, co-founder of POSaBIT, told Bloomberg. His company’s technology is currently being used by 30 dispensaries in Washington state. Bloomberg further reports that POSaBIT has taken steps to comply with federal and state laws regulating both marijuana sales and digital

currency. Customers must present a valid ID that is scanned, encrypted and stored and buyers are only allowed to purchase $150 in bitcoin in an effort to prevent money laundering. POSaBIT also boasts a nine-point fraud-detection program that is designed to deter criminals.

CANNABIS CAPITAL In addition to traditional banking services, MRBs also need access to capital just like any other business, for things like land, buildings and equipment. So where do MRBs turn for this kind of capital? When traditional banks and credit unions are unable to lend to MRBs, especially grow warehouses, those interested in investing in property that will then be leased to marijuana-related businesses either put the cash up themselves or they look to hard money lending. Denver-based Montegra Capital Resources is a hard money lender that’s been in the business of private capital for real estate loans for 46 years. In 2014, the company opened the Montegra Warehouse Fund, which lends money strictly for marijuana-related real estate deals. In March of this year, Montegra Warehouse Fund reported that it has raised $11.7 million since opening, according to the company’s most recent disclosure with the Securities and Exchange Commission. “There are a variety of reasons why borrowers can’t get loans from banks, not necessarily because of bad credit. Banks are somewhat restricted by regulations,” said Bob Amter, co-founder and president of Montegra. “In 2014, we decided that there’s one kind of loan that is impossible to get from the bank. Banks are not allowed to lend to marijuana-tenanted properties because marijuana is still against federal law, but it is legal under Colorado law,” Amter said. Montegra Warehouse Fund is open to accredited investors with $100,000 minimum input. The company offers loans up to 60% of appraised value on cannabis-tenanted warehouses. After Montegra’s fees, the fund returns around 10% to investors, Amter explained. The company does not make loans directly

to MRBs or the tenants that may use the warehouses. Instead, they lend to the owners of the warehouse who will then add the necessary agricultural equipment to the property and lease it to a marijuana-related business. “We are making loans to the owners of a warehouse and they are the owners of the real property,” Amter said. “We are taking a first-mortgage loan against the warehouse, so really we’re making a loan to the landlord. They own the building and lease it to the marijuana business tenant, a grower, for instance.” It’s not cheap to equip the warehouse and set up the proper tools and equipment for growing marijuana. Amter said it can cost upwards of $50 to $75 per square foot to equip a warehouse with everything from security systems, lights, irrigation equipment, electrical wiring, ventilation and more. Once these warehouses are fully equipped and ready to rent, they represent a profitable opportunity for investors. “You might get $8 per square foot for a widget tenant, but if you have a marijuana business tenant you could get $20 to $25 per square foot,” Amter said. “They can get rents that are more than double, or three times, than a normal manufacturing or storage tenant. It’s an incredible increase in rental income, which is why the warehouses owners like to do this — they double or triple the income they get from the building they own.” What kind of risk do investors face with this kind of investment? “We’ve never had a single borrower be one day late, everyone has had a terrific payment history,” Amter said. “We think we’re providing a useful service in the real estate capital market by being able to help people who want to buy these warehouses by giving them the funding to do it.”

The uncertainty of what the administration might or might not do on the issue has put banks and legal marijuana businesses in a holding pattern. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 65

SPONSORED CONTENT

BLACK KNIGHT • CHRONOS SOLUTIONS • FACTOM FIRST AMERICAN MORTGAGE SOLUTIONS • INFORMATIVE RESEARCH • LRES

74 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 75

SPONSORED CONTENT

BLACK KNIGHT

601 Riverside Avenue Jacksonville, FL 32204 844.474.2537 AskBlackKnight@BlackKnightInc.com BlackKnightInc.com

THE COMPANY The mortgage industry is undergoing massive changes – from skyrocketing costs and increased regulatory pressure to making sense of enormous amounts of data, all while responding to consumer demands for a more digital, mobile and transparent process. To help lenders and servicers with these business challenges, Black Knight’s LoanSphere offers a unique, end-to-end platform of integrated software, data and analytics that supports the mortgage and home equity loan/line lifecycle – from origination to servicing and default. “No other platform in the industry integrates innovative lending and servicing systems with powerful data like LoanSphere to help clients optimize results,” said Black Knight CEO Tom Sanzone. Black Knight built the LoanSphere Data Hub to help mortgage lenders and servicers gain incredible insights into their portfolio. The Data Hub links each client’s origination and servicing data with vast public records and real estate listing datasets. Black Knight then delivers these insights through its proprietary technology channels, such as its LoanSphere solutions, including MSP, SalesEdge, Empower and LendingSpace, so lenders and servicers get this information where and when they need it. For example, Black Knight’s Motivity Solutions use information aggregated by the Data Hub to alert financial institutions that have both a bank and a mortgage division when bank customers put their homes on the market. This information can then be delivered directly — in real time — to the loan officer’s desktop, so outreach can begin immediately. This valuable insight can help the mortgage company potentially gain two new customers: the initial bank customer listing a home and the person purchasing that home. In addition, Black Knight has extended the standardized approach and technology of its LoanSphere Empower loan origination system (LOS) through its REST API framework. This enables lenders to provide digital capabilities to consumers and loan officers, who inter76 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

act with Empower data and other LOS capabilities from internet-enabled devices, such as tablets, smartphones or laptops, without needing to directly access the LOS. These critical mobile capabilities mean lenders can offer the ability to apply for a loan online to their customers from virtually any mobile device – and change devices during the process. For example, a consumer may start a loan application on their smartphone, review it on a tablet and complete the application on a computer. Similarly, mobile options give servicers access to information and analytics so they can provide complementary property information, valuation analysis and targeted refi and other offers to their customers on the channel they access most frequently – such as their mobile device. Mobile technology can also help servicers respond to their customers’ questions via the channel the consumer prefers. “By offering integrated capabilities across the loan lifecycle, Black Knight supports clients with their most complex business challenges by helping them mitigate risk, increase operational efficiency, support compliance and improve financial performance,” said Black Knight President Joe Nackashi.

THE EXECUTIVES

 Tom Sanzone, CEO Tom Sanzone is the CEO of Black Knight, Inc. and has more than 25 years of experience in the financial services industry, serving as chief information officer and chief accounting officer at some of the world’s largest global financial institutions. Prior to joining Black Knight, Sanzone was executive vice president at Booz Allen Hamilton. He also has served as chief administrative officer at Merrill Lynch, where he was responsible for global technology, operations and corporate services, representing a team of over 20,000 people. Prior to Merrill Lynch, Sanzone served as chief information officer for Credit Suisse and Citigroup.  Joe Nackashi, President Joe Nackashi, president of Black Knight, Inc., has more than 25 years of experience providing innovative technology solutions to the financial services industry. Previously, he was executive vice president, chief information officer and head of the servicing solutions and technology division of Lender Processing Services. Prior to LPS, Nackashi was senior vice president and chief technology officer for FIS.

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CHRONOS SOLUTIONS

800.647.1190 chronossolutions.com

THE COMPANY Chronos Solutions continues to innovate in real estate financial services by anticipating client needs and developing business solutions proactively. Most recently, the company demonstrated its agility when lenders were left in a quandary after the result of a civil court case made it illegal in most states for the three national credit bureaus to provide liens and judgement histories as part of their credit reports. Research presented in that case showed that this factor had negatively affected credit scores — sometimes wrongly — by up to 100 points. However, although that information can’t inform credit scores from the national credit bureaus, it’s still an important factor as lenders determine a borrower’s creditworthiness. To provide that valuable information, Chronos now offers liens and judgement histories as a supplement to its Funding Suite Credit Report offerings, either as a standalone service or as an add-on. “Now, without any connection to the consumer’s credit scores, lenders — without having to research it manually — have access to the data they need to make a solid decision,” said Michelle Steinmetzer, senior vice president of operations, outsourced and originations solutions at Chronos Solutions. The mobile-friendly Funding Suite was already a favorite among lenders, allowing them to order credit reports, access fraud and identity reports, control spending, analyze credit files and monitor spending patterns — all within the same secure data management platform. Now the software delivers even more value to help lenders mitigate their risk. Chronos Solutions’ quick response in developing and deploying this solution reflects its commitment to providing lenders with the critical tools they need to run their businesses effectively. Another example of the company’s flexibility is Chronos’ recent deployment of Fannie Mae’s Day 1 Certainty program into Taxdoor, its automated, mobile-enabled tax transcript verification technology, which is capable of reducing IRS rejection rates by as much as 75%. Chronos Solutions did months of testing, including a pilot program with a major national lender, after Fannie Mae’s February certification of Taxdoor as a qualified provider of loan production using Day 1 Certainty. Taxdoor is now integrated into DU as a DU Validation Service (DVS) provider, joining Chronos’ Day 1 Certaintyqualified VODAchek automated verification product on Oct. 3, 2017.

The company’s rapid pace of innovation is one reason that more and more lenders are choosing to bundle origination services with Chronos, which offers everything from verification and valuation to HOA solutions, REO asset management and disposition, tax monitoring, lien release, online marketing and auctions, title and more. Bundling with Chronos Solutions can save lenders 15% to 20% in per-loan origination costs, while giving them access to best-in-class technology. It’s a winning strategy for any lender in this competitive environment.

THE EXECUTIVES

 Mark Hikel, Chief Executive Officer Mark Hikel is a visionary and innovative business leader with more than 28 years of experience in executive management positions for multi-site operations, turnarounds, startups, and Fortune 500 companies. Previously, Hikel served as CEO of Spokane Valley, Washington-based UPF Services. The company was subsequently acquired by Chronos Solutions in July 2016. Prior to joining UPF Ser vices, Hikel was the president of Mortgage Investment Associates, where he was responsible for architecting and executing the organization’s short and long-term corporate operations, sales, marketing and e-commerce strategies. In addition, Hikel was co-founder and president of HomeAmerica Financial Services, Inc., and has held executive positions with Loraca International, Bank One Financial Services, The CIT Group and Commercial Credit Corporation.  Michelle Steinmetzer, SVP of Operations, Outsourced and Origination Solutions Michelle Steinmetzer has more than 16 years of experience in mortgage banking and real estate. She has worked within the wholesale mortgage industry as a senior manager and currently leads all of Chronos Solutions’ production departments in the Spokane Valley office. She is also responsible for the design, implementation and management of policies and procedures used to control the fulfillment platform. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 77

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FACTOM

factom.com/products/harmony

THE COMPANY Huge data breaches compromising sensitive consumer information are becoming more and more common. Data gathered and stored for financial transactions is particularly vulnerable. In this insecure environment, Factom delivers a practical blockchain solution that allows mortgage companies to safeguard their data, providing security for consumers and certainty for regulators. Factom’s Harmony suite of products creates a digital process that allows each party to not only retain their documents, files, and data securely within their data centers, but also provide trusted transactions with full confidence in the integrity of the information being shared or accessed. Act ing a s a d ig ita l reg ist ra r, Factom Harmony is a powerful tool for your digital assets. Built upon the Factom Network and utilizing SmartProvenance, Harmony is a complete digital platform to manage your documents, data, decisions, files and all other digital assets in a single, powerful solution. Key features of Harmony include utilizing it as a collaborative platform for verification and validation of digital assets originality and integrity. Confirming the asset ownership and supporting transfers of that assets ownership. It also allows for the managing of complex transactions through the use of due diligence and audit features for groups of assets. “Because Factom Harmony only publishes cryptographic proofs of the borrower’s private data it never leaves a lender’s secure environment, a full security audit is straightforward,” CEO Peter Kirby said. When paired with Factom’s SmartProvenance technology, any digital asset recorded with Factom is forever preserved. Factom SmartProvenance is a blockchain based set of tools that ensure digital records are original and unaltered, along with keeping private data private. Originally used to track works of art, Provenance’s primary purpose has been to trace an item or entity from its origin. By tracking the sequences of its formal ownership, custody, and places of storage along with the integrity of 78 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

the item, the importance of Provenance has been respected by multiple industries over centuries. Applying this concept to the mortgage industry assets is not a far leap, doubling down by applying it with Blockchain technology is what makes it game changing. Factom Harmony was designed with a simple security model that makes it easy to get started. It is simple to use, straight-forward to integrate, and built by people with decades of experience who understand the unique and complex problems of the industry. “Lenders can finally prove to consumers that their data has not been breached or tampered with, which is why the industry reaction so far has been ‘wow!’” executive vice president Jason Nadeau said. “One of the biggest challenges that industry leaders are facing right now is just where to start using it first.” Factom Harmony was built from the ground up for straight-forward integration with an intuitive API, an easy-to-follow integration guide, and a simple pricing model. It plugs right into existing systems and gives them an immutable blockchain back-end. “The collaborative Harmony platform is what mortgage companies need to publish evidence,” Nadeau said.

THE EXECUTIVES

 Jason Nadeau, Executive Vice President Jason Nadeau leads the company’s strategy for the mortgage industry including revenue growth, strategic partnerships and business development strategy. Nadeau comes to Factom from Corsair Associates, where as senior director he provided strategic consulting to mortgage technology companies. Prior to Corsair Associates, he served as group president at Stewart Title and CEO of Stewart Lender Services. Nadeau also served as founder, president, and CTO of RealEC Technologies (now a Black Knight company).  Laurie Pyle, Executive Vice President Laurie Pyle works with Factom, Inc. to lead the creation of a suite of products for the mortgage industry based upon the Factom technology. Pyle came to Factom from Corsair Associates, where she served as managing director. Previously, Pyle was executive vice president and CIO for Stewart Lender Services. and was named a HousingWire 2013 Women of Influence. As a founding executive team member at RealEC Technologies, Pyle managed product strategy, product design and oversight of client solutions.

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FIRST AMERICAN MORTGAGE SOLUTIONS

3 First American Way Santa Ana, CA 92707 800.333.4510 firstam.com/mortgagesolutions

THE COMPANY First American Mortgage Solutions gives lenders and servicers the ultimate competitive advantage in today’s challenging market: One source for end-to-end solutions across the loan spectrum, and direct access to the most data, the latest technology and the best people. “We’re continuing to invest in every area of our business to assist lenders, servicers and investors in achieving their goals and improving loan quality and consumer experience,” said Kevin Wall, president of First American Mortgage Solutions. “By going straight to the source, our customers can lever our unique assets to achieve speed, compliance and accuracy.” As a single-source real estate research and document retrieval solution, DataTree.com, a First American product, benefits the entire mortgage lifecycle. It makes it simple for mortgage lenders and servicers to work better and faster by harnessing the power of the industry’s largest property ownership database, plus information amassed from more than 6 billion recorded real estate documents. This industry-leading repository of data and documents lays the foundation for CleanFile Solutions, a single, vertically integrated suite launched by First American Mortgage Solutions to cure, perfect and complete collateral files. It combines post-closing document management, loan quality control, file perfection, lien release preparation and recording. By building data assets into all of its offerings, First American Mortgage Solutions has bolstered every one of its solution categories across the loan lifecycle—the latest being valuations. After seeing an increased demand from lenders for a valuation partner that could deliver more accurate, data-enabled appraisals, First American Mortgage Solutions took action. “Through the use of data and analytics, we now have the ability to use the right appraiser at the right time to get the most accurate and timely collateral valuation possible,” Wall said. “We’re on the forefront of transforming valuations and bringing exciting possibilities for the mortgage industry by levering data, mobile technology and reconfigured workflows.” DataTree.com, Cleanfile Solutions and valuations are examples of innovation on a large scale, but First American Mortgage Solutions is also committed to finding solutions to specific business challenges faced by lenders and servicers. Here are two examples of how the company shares its industry expertise to build unique, customized solutions for clients.

One top national lender sought First American’s assistance to gain efficiencies and reduce expenses in originations fulfillment. This lender’s previous strategy was to order all loan products (including title, appraisal, flood, HOA, 4506-T and others) immediately after accepting an application. Many others also use this approach believing it is more efficient, when it often adds expense by increasing staff to receive and review these products as part of credit underwriting. By collaborating with First American’s originations experts, the lender identified ways to balance the ordering process, reduce costs and achieve a quicker closing. In another instance, First American mapped out scenarios with a regional lender who wanted to best utilize assorted equity products, including uninsured and insured, while maintaining tolerance for risk and cost. First American identified the best product combinations for different loan and line amounts, from uninsured valuations and various property information reports to traditional title insurance offerings. “Our comprehensive offerings translate into more options and greater flexibility for lenders and servicers to create efficiencies and help mitigate risk,” Wall said. “It’s what sets First American apart from other service providers, and is a strength they can use to their advantage.”

THE EXECUTIVE

 Kevin Wall, President Kevin Wall is president of First American Mortgage Solutions, a subsidiary of First American Financial Corporation, which was recognized in both 2016 and 2017 by Fortune magazine as one of the 100 best companies to work for in America. Wall is responsible for strengthening the company’s alignment with lenders, servicers and investors, and strategically positioning the company to offer innovative, data-driven solutions focused on providing accuracy and transparency throughout the mortgage loan lifecycle. Prior to First American Mortgage Solutions, Wall gained deep industry knowledge through his decades of service at First American, CoreLogic, Wells Fargo, Morgan Stanley, and other major companies. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 79

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INFORMATIVE RESEARCH

13030 Euclid Street Garden Grove, CA 92843 800.473.4633 informativeresearch.com

THE COMPANY Advanced technology is critical to the many custom solutions Informative Research provides. While many entities within the mortgage industry still utilize outdated legacy systems, Informative Research has opted to build more efficient, forward-thinking systems that speed up the loan process for lenders by incorporating more digitization and automation. This supplies the much-needed flexibility and customization that the market’s been looking for in product development, especially when it comes to their unique verification bundle. IR’s verification bundle can incorporate multiple products from its wide range of solutions and data partners, from an enhanced fraud solution to social verifications; basically, everything but the credit report and non-consumer charged fees. “Informative Research’s verification bundle gives clients better security and accuracy in the disclosure amounts and it keeps more money in their pocket because it has a more affordable, straightforward credit report fee and helps them manage additional spend throughout the loan life cycle,” explained Patrick Kelly, executive vice president of national sales for Informative Research. During the funding process IR also eases the logistical stress of correlated fees from multiple vendors with non-variable fees. Not only is this more cost-effective for the lending community, it also helps create a more streamlined process since it delivers just a single invoice for all solutions. For Informative Research, understanding the competitive environment lenders operate in is key to developing future-proof solutions that assist in bringing a more qualified borrower into the loan process. One of these solutions is SoftQual – a more affordable mortgage scored, mortgage tradelined soft inquiry credit report that features either one or two FICO scores. “By cutting costs by 30% to 40%, it’s an inexpensive alternative that accurately reviews a consumer’s ability to qualify for a mortgage loan based on their current credit profile. We’ve noticed that lenders utilizing this 80 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

tool have seen a dramatic reduction in their credit spending, as well as lowered the number of nonqualified loans entering their system.” IR also provides an enhanced lead generation solution utilizing predictive modeling and propensity scoring, allowing a lender to market to consumers who are actually in or about to enter the home mortgage arena. This solution is based on historic patterning and offers a score – not unlike a FICO score – that helps guide a lender to the right consumer. “In essence, the top 20% of consumers scored have an 80% likelihood to pursue a mortgage. Especially as we shift into a purchasing market, this is huge for lenders looking to build a more effective marketing effort with better spend,” commented Tony D’Eccliss, executive vice president of regional sales. Informative Research’s agile technology also comes with a robust compliance context. With their Merged Logic and dedication to customer protection, IR has taken definitive steps to being one of the only providers to achieve EI3PA and PCI certifications, as well as passing the SOC 2 audit. “These certifications prove why the industry considers Informative Research as a company that does everything necessary to protect consumer data,” stressed Kelly. “Compliance is at the heart of our operating process and we are steadfast in our resolve to stay at the forefront of this effort.”

THE EXECUTIVES

 Patrick Kelly, Executive Vice President of National Sales With over 45 years of experience in the mortgage industry, Patrick Kelly has played an important part in building Informative Research’s current sales team. Having been with the company for over three years, his expertise covers all aspects of the mortgage industry and process, from appraisal and operations to loan production and support. Previously, Kelly worked as a vice president of sales for both First American and CoreLogic Credco.  Tony D’Eccliss, Executive Vice President of Regional Sales For over 30 years, Tony D’Eccliss has been vital to growing and managing many of IR’s long-term, key accounts. Focused on developing customer and partner relationships, D’Eccliss supplies strategic guidance to the regional sales team with his leadership and business development skills. He first joined Informative Research as an account executive.

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LRES

765 The City Drive South, Suite 300 Orange, CA 92866 714.872.5877 lres.com

THE COMPANY In the midst of a challenging mortgage environment, LRES is helping clients to effectively manage the compliance and financial risks associated with mortgage origination, servicing and default markets. To do so, LRES provides a broad array of real estate valuation, HOA and REO management solutions for the residential and commercial markets. Compliance and security, or lack thereof, are the single biggest risks that most lenders and mortgage servicers face. Through various regulatory mandates, companies in the financial services industry are not only required to keep their own house in order but to ensure that their third-party service providers are also compliant. LRES makes this easier for clients by focusing on two areas: • Ensuring that it closely monitors relevant regulations and works through the ensuing challenges with clients as proactively and as expeditiously as possible. • Spending a tremendous amount of time and focus on compliance related documentation. “We want to be able to quickly and thoroughly provide an extremely high level of confidence to our clients and their investors that our systems and processes are acutely tuned to what the regulatory framework requires.” Roger Beane said. Recognizing that clients need options based on a variety of factors: product, program, investor, transaction status or state regulations; LRES has developed core services that meet those needs. “Our clients need a supplier who can confidently work with them to balance risk, cost and compliance as well as ensure that the client, and its borrowers where applicable, receive the optimum result for each situation,” Mark Johnson added. Whether the challenges are within the traditional dayto-day processes or brought through massive intrusions such as Hurricanes Harvey and Irma, companies need leadership and experience to continually and successfully weave through whatever is brought forward. “One thing that distinguishes LRES from others is that LRES grew its business lines and reputation by providing services for a variety of difficult and non-conforming clients and transactions. Essentially, we cut our teeth on the toughest properties and toughest situations,” Roger Beane said. LRES has always had the attitude and ability to “accept every order.” Ultimately, the company developed its service roadmap from these experiences and built solutions accordingly.

“We now have a strong reputation in the industry as the team that solves problems that others can’t, or won’t,” Beane added. “Our motto has always been ‘Find a way to find a way.’”

THE EXECUTIVES

 Roger Beane, CEO, Founder Roger Beane is the founder and chief executive officer of LRES Corporation. He leads an extraordinary team of professionals committed to providing real-world solutions that impact the operational efficiency of LRES and our customers. With over 20 years of experience, Beane possesses a deep understanding of the banking, real estate finance and default management sectors. He is a proven leader with extensive executive management experience and a solid understanding of business.  Mark Johnson, Chief Strategy Officer Mark Johnson has more than 20 years of executive experience working for various Fortune 500 companies within the mortgage industry. He is fulfilling a similar role with LRES by establishing strategic goals and leading innovation strategies. Prior to LRES, he served as division president, valuation services of Nationstar Mortgage Holdings. Prior to that, he served as division president and chief operating officer at Lender Processing Services (now Black Knight Financial Services).

We now have a strong reputation in the industry as the team that solves problems that others can’t, or won’t. Our motto has always been ‘Find a way to find a way.’”

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Company Spotlight: LoanCare The subservicer develops customer-focused technology to deliver results

tech revolution is underway in the mortgage industry as financial institutions look to meet consumer and investor demand for transparency, accountability and efficiency. But agile technology by itself won’t be enough to meet this challenge. To win in this environment, financial institutions need to partner with a trusted subservicer who combines innovative technology with outstanding attention to customer service. LoanCare, a ServiceLink company, is leading in the development and deployment of customer-focused technology for its clients, which include mortgage companies, capital market investors, credit unions and banks. “Ou r m ission is to E xceed t he Expectations of the clients for who we service,” said LoanCare President Dave Worrall. “We create brand value for our clients by building enduring, loyal, relationships with their borrowers.” The value of customer service is instilled from LoanCare’s orientation of new hires to the ongoing training it provides for longtime employees and is emphasized in offsite management meetings, town halls and communications from company executives. It is a pervasive, top-down focus that influences how the company sees its role in helping clients and the consumers they serve. And that approach continues to pay dividends in the kind of innovation the company is known for.

A CLEAR ADVANTAGE For example, listening to clients and understanding their needs led LoanCare to develop proprietary systems like its borrower portal, MyLoanCare, which is available in English or Spanish. Borrowers now have an easy way to schedule payments, look at their loan history and ask questions about their loan. The borrower portal features a built-in audio/visual application of an avatar 82 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

Dave Worrall, LoanCare President

speaking either in English or Spanish and addresses scripted questions when the borrower is experiencing payment challenges. The site also allows the borrower to upload an insurance declaration document to demonstrate collateral coverage and to avoid lender-placed insurance. This borrower portal can be private label, so that clients build brand value through continued engagement with their borrowers. And LoanCare’s mobile platform lets borrowers access loan information from smartphones and tablets, improving their experience as they interact with LoanCare on their favorite devices. Another example of smart solutions is LoanCare’s TeleVoice system, which is available in English and Spanish and provides a complete solution for borrowers to self-serve through a telephone call. However, if the borrower wants to talk to a customer service advocate, they can choose to be transferred to either the company’s English or Spanish team. “The Spanish-speaking population continues to grow nationwide and we experience that through our call center. Some of our clients have Spanish-speaking mortgage borrowers and have requested we have technology and advocates to ad-

dress this population,” Worrall said. “We listen to our clients, and hence within our call center we have a dedicated and trained group of advocates conversant in Spanish.” In fact, the investment in Spanish language services and solutions will be a critical differentiator in the years to come. While the overall homeownership rate in the U.S. continued to drop in 2016, the homeownership rate among Latinos increased to 46%, up from 45.6% the year before. Latinos were the only ethnic demographic with an increase in their homeownership rate and they also lead the nation in household formations, with a net increase of 330,000 households in 2016. Providing exceptional customer service to Latinos homeowners will be a game-changer for financial institutions as they seek to increase their reach in this demographic.

MORE INNOVATION AHEAD Going forward, LoanCare is driving by 2020 to deploy automation in the form of Robotic Process Automation (RPA) scripting, workflow tools and partner automation capabilities. The company is moving to cloud models for several key areas and automating repeatable processes. LoanCare is currently beta testing RPA in one of its functional areas. That knowledge will enable a much broader and informed roll-out. “Our approach will allow us to place controls around critical business tasks, increase efficiencies, and prepare to scale simultaneously,” Worrall said. “This investment and provocative move will enable our people to do more with less through automation throughout functional operation areas.” By focusing on exceptions identified through automation, LoanCare can improve services and reduce risk. “We think RPA allows us to perform our

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work faster and with less errors,” Worrall said. “Because errors are what create work for mortgage servicers, we expect RPA to materially reduce our cost to service loans, allowing us to provide our clients with even more cost effective pricing of our services.” LoanCare is also moving forward on a next generation document management and imaging platform, increasing its data capabilities for greater insight into customer needs, adding new products and expanding mobile capabilities with some exciting new features. For many in the servicing industry, developing these kinds of innovative solutions would be hindered by legacy systems customized for previous versions of regulations. But LoanCare has been careful not to customize systems in a way that prevented it from upgrading or moving to new or more modern platforms. “We do not face the significant legacy baggage issues that are common across the industry. Instead, we are committed to having an agile and flexible platform that enables us to change with the regulatory environment and customer needs,” Worrall said.

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THE BENEFIT FOR INVESTORS All this innovation doesn’t just benefit the end consumer — investors reap the rewards as well. Many of the tech advances that keep consumers happy had their genesis in the regulatory changes of the last decade. Before the financial crisis, servicers were gatekeepers to the ownership information of the investor; if investors wanted something, they had to call to get a report, for which they would be charged. Today, LoanCare gives investors freedom of access to their information. If they want to pull documents off the company’s repository of images, they have that option. If they want to see certain oversight of information, they simply go to its client-facing website to view policies and procedures, SSAE-16, annual reports, rating agency reports, etc. “We provide tools today that give our investor clients greater transparency and filtering to access data in so many ways and to do so remotely. No longer is it required to call us and for us to be the gatekeeper of their information; which they own,” Worrall said. LoanCare has developed a number of proprietary systems so clients have self-help technologies to access loan data and track

and trend their portfolios. And the company releases enhancements throughout the year, as opposed to a once-a-year major revision that requires considerable internal and external training and reprogramming.

A STRONG FOUNDATION LoanCare has been a pioneer in the subservicing business, operating first as a publicly held thrift in the 1990s. Now one of the country’s three largest subservicers, the company combines its understanding of bank culture with the power of its publicly held NYSE parent company, Fidelity National Financial. LoanCare has access to use many of FNF’s products and services and their shared services interface with LoanCare’s internal services, such as accounting, legal, HR and compliance. As a public firm, Fidelity requires its significant subsidiaries, such as LoanCare, to comply with the standards and compliance of a public entity, so LoanCare is rated by S&P, Moody’s, Fitch, DBRS and Kroll, something no other subservicer can say. Adhering to this higher standard is typical of LoanCare’s commitment to providing the very best people, processes and technology for financial institutions and consumers. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 83

U N I Q U E S O L U T I O N : D E VA L | S P O N S O R E D C O N T E N T

DEVAL launches new origination channel Hispanic-focused servicer expands services to include origination

EVAL, a national loan servicing company that focuses on the high-touch Hispanic market, has announced the launch of an origination channel, Your Home Now Mortgage. The launch of Your Home Now Mortgage means the company is able to participate in every part of the loan lifecycle, from origination to servicing. Over the past 15 years, DEVAL has serviced and monitored more than 700,000 loans and been a steadfast advocate for housing counseling and increasing homeownership to underserved Hispanic communities. For example, Deborah Garcia-Gratacos, the founder and president of DEVAL, has worked to ensure that loan documentation is available in Spanish to its Hispanic consumers. As the company continues to evolve, the next step for DEVAL is adding loan origination to its plate of available services. “It’s really about ensuring long-term homeownership assistance by offering our customers the best loan products available; and by providing stellar servicing once homeownership is accomplished.” Garcia-Gratacos explained. The platform, Your Home Now Mortgage, launched on October 1. Your Home Now Mortgage features a Spanish language counterpart, Su Casa Ahora Mortgage, that was designed specifically for the Spanishspeaking market. Su Casa Ahora Mortgage brings a range of borrowers communications and disclosures in Spanish, to effectively communicate with them about the needs of their loan. Hispanics are an essential market for the mortgage lending industry. With all the signs showing a rebound in the hous84 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

ing market, now is the time to ensure that the customer communication is strengthened, positioning the mortgage finance market to prosper by serving the Hispanic community and providing Hispanic families the opportunity to build long term wealth. Garcia- Gratacos explained that the word “Confianza” or “trust,” is very important in the Spanish language. While having a bilingual origination team is very important, having a personal local presence with expertise in originations and homeownership programs, who is a native Spanish speaker or fluent in Spanish, is invaluable. As an industry, there is a lot of catching up to do, but it can be done. Like most Americans, Hispanics see homeownership as a pathway to stability and wealth building, whether they are first or third generation Americans. A marketing and business strategy that

understands how to serve this particular range of buyers will only lead to more success, a growing customer base and significantly increased revenue. “Our strategy will enable us to reach multiple diverse markets and offer competitive loan products and provide documents in Spanish,” Garcia-Gratacos explained. Garcia-Gratacos said she is excited about this opportunity for the company to branch out and offer more services to the Hispanic borrowers that the company already knows so well. “We’re enthusiastic for what this means for the industry and the marketplace — because of the need in our community for bilingual services,” she said. “We have a much better understanding of diverse borrowers needs and what they look for; it makes perfect sense for us to develop something and offer something on the front end.”

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“Partnering” to solve today’s mortgage challenges

n July, Rob Clements and John Surface, two veteran bankers who had led EverBank Financial for more than two decades, joined LenderLive Holdings as chairman and CEO and president and COO, respectively. HousingWire recently sat down with Clements to discuss his new role and his and Surface’s vision of how to take LenderLive to the next level. Q: What prompted you and John to join LenderLive? A: Over the past 18 years, LenderLive has grown into an impressive, diversified services provider to mortgage companies, banks, auto loan servicers and other financial services firms. Today, our company is the leading onshore provider of private-label fulfillment services for banks, credit unions, and wealth management companies that want to offer mortgages, but don’t want to be in the mortgage industry. At the same time, our services business supports banks, nonbanks, and servicers that need the capabilities to efficiently provide title services, electronic documents and highly compliant critical borrower communications. LenderLive is a great platform and one that John and I believe is poised to evolve and grow. We see similarities to EverBank, a company we grew from $200 million in assets to a nationwide $28 billion diversified financial services company. We plan to use that experience to take LenderLive to the next level. Q: What opportunities do you see for the company? A: On t he pr ivate-label side, our opportunities will come from meeting customers’ changing needs. Mortgages are a cornerstone product for banks and credit unions, but the business itself is

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challenging. In the last year, mortgage lending volume has fallen by about 20%, while the cost to originate a loan is now nearing $9,000—up from $3,400 just five years ago. Compliance is driving much of the cost increase and there are few signs that this is going away. Meanwhile, the banks’ customers are changing. Many are younger and digitally sophisticated who want to explore their options online and not talk to a loan officer, at least not at the beginning of the process. This means banks have to invest in new front-end consumer direct solutions while maintaining and continually updating their mortgage infrastructure. Partnering with LenderLive gives these banks the ability to leverage our investments in technology, compliance and infrastructure to lower their costs and shift their investments to front-end solutions that level the playing field. As we add new fulfillment clients, we get the benefits of scale and new customers for our document management and title services businesses. Both businesses have a strong and deep list of blue chip clients. Our services business is also poised for continued success working with mortgage servicers to provide integrated document management services. Our current clients represent 65% of the servicing market, and we are excited about the new clients in our sales pipeline. Another point that I’d like to make is that “partnering” to expand capabilities is a new paradigm that many businesses are moving towards. What makes this possible is the ability to align or integrate new technologies that streamline processes more seamlessly. This is far different from the old concept of outsourcing, and it is an approach that we are emphasizing. We’re encouraging our clients to think of us as a partner, an extension of their organization.

Q: Last year, the largest player in the private-label fulfillment space announced it was exiting. What has this meant for the sector and your business? A: Basically, it’s created new opportunities for us. LenderLive assumed PHH Mortgage Corporation’s private-label fulfillment operations, which allowed us to add a significant number of talented mortgage professionals and establish a new operations center for our company in Jacksonville, Florida. That team is handling loan processing, underwriting and closing activities for current PHH clients until the contracts are completed or transitioned to LenderLive. Q: LenderLive recently reorganized into two divisions—LenderLive Network and LenderLive Services. What’s the strategy behind this move? A: Because our businesses have achieved significant growth, creating two divisions allows us to improve our operations and better focus on the needs of our clients. LenderLive Network handles mortgage fulfillment and secondary market execution for lenders who want to outsource mortgage

M O R T G A G E M AV E R I C K S :

fulfillment. LenderLive Services allows us to provide a complete and compliant document management and delivery solution from origination through default to banks and mortgage companies that are committed to lending and servicing. The new structure makes it easier for us to work with regulators and accelerate the expansion of our title operations, while still benefitting from synergies between the businesses. The divisional focus has helped us identify new business opportunities. For example, we have now created a new business line called LenderLive Compliance Solutions that provides a customized compliance offering in addition to our traditional bundled service of compliance and document fulfillment. The new customized offering gives regional banks and credit unions doing smaller volumes of mortgage and auto loans access to our compliance solutions on an a-la-carte basis. This leverages the investment and talent that we’ve put into our document and critical borrower communications businesses. Q: As a former banker, what do you see as the challenges that regional and smaller banks are facing in terms of their mortgage operations? A: Regional and smaller banks face many operational challenges today. The most obvious is compliance. A relatively small bank that engages in mortgage lending has to comply with the same level of regulation— at both the federal and state level—as the largest mega-lenders. The scale may be different, but the needs and costs are the same. And the costs are escalating all the time. Based on discussions with clients, the cost of compliance for a regional bank originating 150 loans per month ranges between $25,000 and $30,000 per month, or roughly $200 per loan, when you factor in the cost of relatively high-paid compliance officers and outside counsel, infrastructure and technology. Regardless of size, we are able to provide clients with the ongoing regulatory support that helps improve efficiency and reduce costs. Working with us, they can

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leverage our significant in-house expertise along with our extensive template library, which includes origination documents for all 50 states, as well as borrower communications for loss mitigation, pre-foreclosure/default and general servicing. In addition, regional and smaller banks are competing against the megabanks and mortgage companies for qualified compliance specialists, underwriters, processors and closers. To support growth, many face the burden of continually recruiting and maintaining staffing. As banks grow, private-label fulfillment can help shift a significant portion of costs to a third party that can absorb the additional expenses because they’re spread across a number of clients. The cost of origination changes to a predictable, variable cost, fixed fee—enabling a bank to scale up or down, knowing what their costs will be. Of course, banks still have the obligation to maintain oversight of their fulfillment partners, to monitor their vendors’ policies and practices, and to be alert for consumer complaints. Because we work with the nation’s leading banks, we help to make that process easier and more efficient as well. Q: Since the enactment of the DoddFrank Act, the mortgage industry has been almost entirely focused on compliance. Do you think deregulation will happen and result in the industry reducing their emphasis on compliance? A: The short answer is no. While leaders in Washington, D.C. are considering diminishing the authority of the CFPB, regulators are busier than ever. In fact, there have already been 17 CFPB enforcement actions to date in 2017, up from eight last year. Of course, if some relief does come at the federal level, we expect state regulators to continue pursuing an aggressive regulatory agenda. States like New York and California have a strong appetite for increased regulation and no pressure to end oversight. These larger and politically influential states can have a quasi-federal impact in terms of regulatory requirements, and actions taken by these states will dilute any softening of federal rules.

In addition, as the recent enforcement action taken by 20 state attorneys general, in conjunction with the CFPB, against a major nonbank mortgage servicer shows, many states are active in enforcing the CFPB’s agenda. Regardless of the administration, the state regulators are key players in our dual-banking system and will continue to take an active oversight role. That being said, the mortgage crisis brought about a much-needed regulatory framework. While there may be disagreements on implementation and enforcement, there is a general consensus that the current mortgage regulations serve a purpose and strengthen lending organizations, consumers, and the economy overall. Q: Are banks re-thinking their mortgage strategies given the growth of successful digital mortgage products and new fintech entrants? How can LenderLive help level the playing field for banks? A: Advancements in technology certainly have everyone thinking about how to improve the customer experience. We’re seeing consumer demand for the mortgage loan buying experience shifting to digital. The advent of technology now allows for a personal, guided online experience in what may be the single largest investment many individuals will make. However, lenders should not lose sight of a crucial point: when borrowers need guidance, a human loan officer is a necessary component of that buying experience. Moving to a digital mortgage also produces steep cost reductions. The cost of originating and manufacturing a digital loan is a fraction of a traditionally originated, processed, underwritten, and closed loan because it’s much more data-centric and less human-centric, thanks to automated decision making. Historically, loans required a human to make the cognitive decisions. Using a data-enriched process now allows humans to focus only on exceptions. LenderLive is heavily investing in technology and digitization to totally transform the mortgage experience. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 87

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Inside Baseball

Equifax under the gun CONGRESS, REGULATORS WANT ANSWERS AFTER MASSIVE DATA BREACH BY BEN LANE EQUIFAX, one of the nation’s three largest credit reporting agencies, revealed on Sept. 7 that it was the victim of a “cybersecurity incident” that potentially impacted as many as 143 million U.S. consumers. That revelation cascaded into investigations by federal government regulators, members of Congress and state attorneys general that was still unfolding at the time this issue went to press. As part of the initial disclosure, Equifax said that “criminals exploited a U.S. website application vulnerability to gain access to certain files.” Those files included the names, Social Security numbers, birth dates, addresses and, in some instances, driver’s license numbers, of approximately 143 million consumers. In addition, the company said that the credit card numbers of approximately 209,000 U.S. consumers, and “certain dispute documents with personal identifying information” for approximately 182,000 U.S. consumers, were also accessed in the breach. The company said that its investigation did not find any evidence of unauthorized activity on Equifax’s core consumer or commercial credit reporting databases. The company said its investigation found that the unauthorized access took place between mid-May and July 2017 and that it discovered the unauthorized access on July 29, 2017, and “acted immediately to stop the intrusion.” From there, the company said that it engaged an independent cybersecurity firm to conduct a “comprehensive forensic review” to determine how bad the breach was, including the specific data that was accessed. Equifax said that it also reported the unauthorized access to law enforcement and continued to work with authorities.

At the time, the company said that its investigation was “substantially complete,” but remained open, and expected to complete it in a few weeks. Clearly the company had no inkling of what was coming next. Equifax Chairman and Chief Executive Officer Richard Smith said on Sept. 7, “This is clearly a disappointing event for our company, and one that strikes at the heart of who we are and what we do. I apologize to consumers and our business customers for the concern and frustration this causes. “We pride ourselves on being a leader in managing and protecting data, and we are conducting a thorough review of our overall security operations,” Smith continued. “We also are focused on consumer protection and have developed a comprehensive portfolio of services to support all U.S. consumers, regardless of whether they were impacted by this incident.” In the immediate aftermath of the breach, the company set up a website for consumers to gather more information about the breach and see if their personal information may be impacted by the breach. Consumers could also sign up for credit file monitoring and identity theft protection to be provided by Equifax for one year. The offering, called TrustedID Premier, includes 3-Bureau credit monitoring of Equifax, Experian and TransUnion credit reports; copies of Equifax credit reports; the ability to lock and unlock Equifax credit reports; identity theft insurance; and Internet scanning for Social Security numbers – all complimentary to U.S. consumers for one year. The company said that it also engaged an independent cybersecurity firm to review its systems and provide recommendations on HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 89

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❱ EQUIFAX ANSWERS Consumers who checked with Equifax to determine if their data had been compromised were invited to enroll in a free credit monitoring program. what the company can do to ensure that a similar incident doesn’t take place again in the future. “I’ve told our entire team that our goal can’t be simply to fix the problem and move on,” Smith said. “Confronting cybersecurity risks is a daily fight. While we’ve made significant investments in data security, we recognize we must do more. And we will.” But those initial steps taken by Equifax, along with Smith’s apology, were soon overshadowed by more revelations about how the breach occurred, and what top executives at the company did before making the breach public. In reality, the fallout was just beginning. THE CFPB GETS INVOLVED One day after Equifax’s revelation, the Consumer Financial Protection Bureau, the House Financial Services Committee and the office of New York Attorney General Eric Schneiderman each launched an investigation into the breach. In a statement provided to HousingWire on Sept. 8, CFPB Senior Spokesperson Sam Gilford said the bureau was already looking into the situation. “The CFPB has authority over the consumer reporting industry, 90 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

including supervisory and enforcement authority,” Gilford said in the statement. “The CFPB is authorized to take enforcement action against institutions engaged in unfair, deceptive, or abusive acts or practices, or that otherwise violate federal consumer financial laws,” Gilford added. “We are looking into the data breach and Equifax’s response, but cannot comment further at this time.” Additionally, Gilford said the CFPB was looking into the arbitration clause inserted into Equifax’s credit monitoring. As CNN pointed out, consumers who want to take Equifax up on its offer of free credit monitoring for a year have to waive their right to sue, something that the CFPB is currently battling over on Capitol Hill. “Equifax’s credit monitoring product contains a mandatory arbitration clause that denies people their right to join together to sue the company for wrongdoing,” Gilford said. “It is troubling that Equifax is forcing people to waive legal rights in order to receive fraud monitoring after the company’s breach put their personal information at risk,” Gilford concluded. “Equifax could remove this clause so that consumers can receive this service without condition.” The issue of Equifax — including the arbitration clause — had

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already caught the attention of Schneiderman. On Sept. 8, he tweeted: “This language is unacceptable and unenforceable. My staff has already contacted @Equifax to demand that they remove it,” in reference to the arbitration clause. Schneiderman also said that his office was launching an investigation into Equifax, noting that of the 143 million consumers affected by the breach, 8 million were from New York. “The Equifax breach has potentially exposed sensitive personal information of nearly everyone with a credit report, and my office intends to get to the bottom of how and why this massive hack occurred,” Schneiderman said. “I encourage all New Yorkers to immediately call Equifax to see if their data was compromised and to consider additional measures to protect themselves.” On the same day, the House Financial Services Committee also announced that it planned to hold a hearing over the Equifax data breach, and if that committee’s treatment of Wells Fargo offers any precedent, it won’t be a pleasant hearing for the Equifax executives. “This is obviously a very serious and very troubling situation and our committee has already begun preparations for a hearing,” House Financial Services Committee Chairman Rep. Jeb Hensarling, R-Texas, said at the time. “Large-scale security breaches are becoming all too common,” Hensarling added. “Every breach leaves consumers exposed and vulnerable to identity theft, fraud and a host of other crimes, and they deserve answers.” Hensarling’s counterpart on the Democratic side, Rep. Maxine Waters, D-Calif., agreed. “This hack into sensitive information compiled and maintained by Equifax is one of the largest data breaches in our nation’s history and someone has to be held accountable,” Waters said. “Given the important role credit scores play in the lives and financial futures of hardworking Americans, Congress must diligently examine the way our credit reporting agencies are operating and impose additional statutory and regulatory reforms to protect the integrity of the country’s credit reporting system,” Waters continued. “I have long advocated for an overhaul of our nation’s credit reporting system and I will reintroduce legislation that will enhance consumer protection tools available to minimize harm caused by identity theft,” Waters concluded. “Beyond the steps they have already taken, Equifax should at the very least offer free credit freezes to all of those affected by this deeply troubling incident.” On Sept. 12, another state got involved. Massachusetts Attorney General Maura Healey announced that her state’s plan to sue the credit reporting agency for failing to protect the personal information of approximately 3 million of the state’s residents. And that’s not all.

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Every breach leaves consumers exposed and vulnerable to identity theft, fraud, and a host of other crimes, and they deserve answers.” — Rep. Jeb Hensarling, R-Texas

The leaders of the Senate Finance Committee wanted answers too. In a rare moment of bipartisanship, Sens. Orrin Hatch, R-Utah, and Ron Wyden, D-Oregon, sent a letter to Equifax suggesting that the data stolen from Equifax could have “profound consequences” to consumers and federal agencies alike. “The scope and scale of this breach appears to make it one of the largest on record, and the sensitivity of the information compromised may make it the most costly to taxpayers and consumers,” the senators wrote in the letter. “To make matters worse, Equifax is a critical partner of the Internal Revenue Service, Centers for Medicare & Medicaid Services, the Social Security Administration and other federal agencies that are the sources and recipients of the some of the most sensitive information affecting individuals, as well as the targets of the vast majority of identity theft fraud against taxpayers.” According to the senators’ letter, every year stolen personal data is used to commit “billions of dollars against the U.S. Treasury in the form of stolen identity, fraudulent tax returns and Medicare and Medicaid fraud.” And the senators stated that impact of the Equifax breach could be significant. “If the names, Social Security numbers, birth dates, and other information of 143 million Americans are now in the hands of cybercriminals, this breach will cause irreparable harm to programs within this Committee’s jurisdiction by way of stolen identity refund fraud, healthcare fraud, and entitlement fraud,” the senators wrote. The senators included 13 questions that they wanted Equifax to provide answers for by the end of September. The senators said they wanted more information from Equifax to “better understand what occurred, the consequences of the breach, and how we might respond to mitigate the damage.” Included among the senators’ questions: Provide the Committee a detailed timeline of the breach, including when it began, its discovery, the investigation of its scope and source, notification of authorities, efforts to notify customers and HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 91

Inside Baseball consumers, notification to the Equifax board of directors, and notification of Equifax senior executives – including, but not limited to, John Gamble Jr., Rodolfo Ploder, and Joseph Loughran. What steps has Equifax taken to identify and limit potential consumer harm associated with this breach? Please describe the resources that Equifax has focused on its own information security. Does Equifax employ a Chief Information Security Officer? If so, to whom does this person report? How many full-time employees focus on information security? Do any members of Equifax’s board of directors have a background in information security? In the past 24 months, how many times has Equifax employed third-party cybersecurity experts to conduct penetration tests of its internal and external systems? Has the company addressed all of the issues identified by these experts and implemented all of their recommendations? Please provide us with copies of all penetration test and audit reports produced for Equifax by outside cybersecurity firms. Were records related to the Internal Revenue Service, Centers for Medicare & Medicaid Service, and Social Security Administration

compromised in the breach? Has Equifax alerted or will it alert its federal agency customers about the degree and scope to which federal records may have been compromised? THE FTC STEPS INTO THE RING Just two days later, one week after the first revelation by Equifax, the Federal Trade Commission joined the fray. Citing the extraordinary circumstances surrounding the data breach, the FTC broke with normal protocol and confirmed that it was investigating the situation at Equifax. “The FTC typically does not comment on ongoing investigations,” Peter Kaplan, the FTC’s acting director of public affairs, said in a statement. “However, in light of the intense public interest and the potential impact of this matter, I can confirm that FTC staff is investigating the Equifax data breach.” The scope of the FTC investigation is still unknown, but the news of the FTC launching its own investigation came on the heels of a sizable bipartisan group of senators sending a letter to the Securities and Exchange Commission, the Department of Justice, and the FTC asking the agencies to investigate whether

Inside Baseball

three Equifax executives engaged in insider trading in the wake of discovering the breach. As Bloomberg reported shortly after the breach was revealed, three of Equifax’s executives (the company’s chief financial officer, president of U.S. information solutions, and president of workforce solutions) sold some of their stock just a few days after the breach was initially discovered, but more than a month before Equifax told the public that its systems had been hacked. While the company said that the executives were not aware of the breach when they sold their stock, more than a third of the members of the Senate want to know whether that’s actually true or not. “We write to request that the Securities and Exchange Commission, the Department of Justice, and the Federal Trade Commission investigate disturbing reports that senior Equifax executives sold more than $1.5 million in Equifax securities within days of a cybersecurity breach that may have compromised the personal information, including Social Security numbers, of as many as 143 million Americans,” the senators wrote in the letter. “As part of your investigations, we request that you conduct a thorough examination of any unusual trading, including any atyp-

ical options trading, for violations of insider trading law,” the letter continued. “To the extent that your investigations uncover any information regarding whether Equifax management employed reasonable measures to ensure the security of the now compromised data prior to this cyber breach, we would appreciate your sharing these details.” The senators closed by urging the agencies to fully pursue the insider trading inquiry. “We request that you spare no effort in your investigations and in enforcing the law to the fullest extent against anyone who is found to be at fault,” the senators concluded. Additionally, the FTC also warned consumers of a scam targeting potential victims of the Equifax data breach. According to a post on the FTC blog, scammers are calling people and pretending to be Equifax in order to steal their personal information. “Stop. Don’t tell them anything. They’re not from Equifax. It’s a scam. Equifax will not call you out of the blue,” the FTC warned consumers.

Kudos GIVING BACK • Solutions provider CORELOGIC announced that it has seeded Operation HOPE’s new Disaster Fund with $250,000. The fund was launched to enable a first line of response for financial recovery to disaster survivors. COLONIAL SAVINGS held a back-to-school supply drive at the company’s Fort Worth, Texas, headquarters to benefit two area schools. Hundreds of supplies were collected for students at STRIPLING MIDDLE SCHOOL and FORT WORTH ISD LEADERSHIP ACADEMY at Forest Oak. “Colonial’s long history of contributing to the community is inspiring,” said Debbi Spiker, associate vice president of employee relations and benefits. “The generosity and compassion of the Colonial family, in support of these two wonderful schools, was extraordinary and made such a difference in the lives of so many children.” Colonial has a longstanding relationship with Stripling Middle School who recently named their auditorium after Colonial Founder and Chairman Emeritus JIMMY DUBOSE, who attended the school. After the back-to-back disasters of Hurricanes Harvey and Irma, businesses in the housing, mortgage and finance industries all leant a hand for the relief efforts from these two devastating storms. Here are just a few of the contributions: FANNIE MAE and FREDDIE MAC are extending relief to homeowners affected by both

Hurricane Harvey and Hurricane Irma, including suspending foreclosures and evictions. WELLS FARGO is donating $500,000 to the AMERICAN RED CROSS Disaster Relief Fund, and an additional $500,000 to local nonprofits focused on recovery and relief efforts in Texas. JPMORGAN CHASE said

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it is donating $1 million to the American Red Cross and other nonprofit organizations working to provide immediate relief. Additionally, the company said it will match employee donations to these organizations. BB&T CORPORATION is contributing $100,000 to the AMERICAN RED CROSS OF GREATER HOUSTON to help

support disaster relief, along with sending shipments of humanitarian supplies. The company also donated $500,000 to disaster relief efforts for Hurricane Irma. The donation will be split between the American Red Cross and the remainder will be comprised of eight truckloads worth of humanitarian supplies such as bottled water and other basic essentials. CIVIC FINANCIAL SERVICES closed their Redondo Beach, California, headquarters for one day to assemble backpacks with relief items for Hurricane Harvey evacuees staying at the BAKERRIPLEY EMERGENCY SHELTER at Houston’s NRG Stadium. The company’s 100+ employees put together 1,000 backpacks which included essential supplies including towels, socks, toiletry items and snacks – along with a note of

Kudos

GIVING BACK, CONTINUED

support and encouragement. Coppell, Texas-based CALIBER HOME LOANS announced it partnered with the American Red Cross to provide shelter and supplies to families affected by Hurricane Harvey. The lender also established a matching gift program for all Caliber Home Loans employee donations received

through October. Coming to aide in the relief in a different way, NOTARIZE is offering free not arizations to those impacted. “Like many in America, we’ve wondered both individually and collectively how we can do our part to help. Frankly, we weren’t exactly sure what that would be,

LAUNCHES but our team has been searching for ways we could make life even a little easier for those who have lost everything,” the company said. Homebuilder LENNAR also pledged at least $1 million to the UNITED WAY OF GREATER HOUSTON FLOOD RELIEF FUND to help victims of Hurricane Harvey. ASSURANT FOUNDATION, the charitable arm of Assurant, donated $100,000 to the American Red Cross for its Hurricane Harvey relief efforts. BBVA COMPASS, whose holding company is headquartered in Houston and which has a significant presence in the city, announced that its foundation will donate $250,000 to the American Red Cross and the Hurricane Harvey Relief Fund to aid disaster recovery.

• Michigan-based FLAGSTAR BANK has formally launched its charitable arm, FLAGSTAR FOUNDATION. The venture isn’t new, but formalizes a process of giving back to the community that Flagstar has been involved in for decades. The bank said its focus will be charitable giving in specific areas that align with the bank’s community reinvestment activities, employee board memberships, and volunteer activities. “Flagstar has a 30-year tradition of investing in its communities,” said Beth Correa, president of the foundation. “We now want to formalize that investment through a foundation that will support our corporate goals as well as our employees’ involvement in the nonprofit world. Our objective is to make focused, impactful grants in the communities where we do business.”

MILESTONES

AWARDS • LOANDEPOT CEO ANTHO-

CEO ANTHONY HSEIH

NY HSEIH, was recently named Person of the Year by the ASIAN REAL ESTATE ASSOCIATION OF AMERICA. The annual award is given to a person who made biggest impact increasing Asian American and Pacific Islander homeownership. “It is very humbling to be recognized as Person of the Year by AREAA,” Hsieh said. “For me, it has been important to challenge the status quo and look for smarter ways to approach business.”

•The NATIONAL NOTARY ASSOCIATION celebrated its 60th anniversary in 2017. Established in the kitchen of a modest Los Angeles home, the NNA now has more than 200 employees and this year, it has achieved a 20% sales growth rate. The NNA serves 4.46 million notaries public and the businesses that employ them, including many companies in the mortgage and finance industries. The association provides training, insurance, supplies, support and advocacy to ensure notaries and their employers comply with state laws and professional notary practices.

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Here are the challenges facing appraisers next year INDUSTRY SUFFERS FROM A CLEAR LACK OF UNITY

THE APPRAISAL INDUSTRY IS IN A SERIOUS STATE OF FLUX in the present mortgage environment. Property valuation continues to be a critical part of the mortgage loan process, but just what the role of appraisers should be — as opposed to their new masters, the AMCs — and how much consumers should pay for the service is very much in dispute. Frank Danna, co-founder and CEO of Appraisal Logistic Solutions, authored the following guest blog on HousingWire.com as part of our ongoing coverage of this important issue. Comments from the industry follow. It’s been an interesting year, 2017. This is partly due to the unexpected good fortune that lenders enjoyed in 2016. Loan volumes were high last year, higher than many expected. It was good for lenders, but it took a hard toll on the industry and its suppliers. The result has been a number of unexpected challenges for the industry this year and, perhaps, some more to come. While most sectors of the industry managed the increased demand with few hiccups, the appraisal services segment of the industry did not fare as well. The uninterrupted appraisal demand throughout 2016 and into the first quarter of this year led to chronic fatigue that spread throughout the appraiser population. This led to a number of service-level issues, including missed deadlines, longer than customary turn-times, increased revision rates, unresponsiveness and higher appraiser fee demands, to name a few. These appraisal report quality and service level issues created friction between the appraiser population and lenders, real estate agents and homeowners. Some worried that we were beginning

to see a new set of norms for appraisers, work quality and service levels. A closer look at the challenges appraisers faced will be revealing. CHALLENGE 1: APPRAISAL TURN TIMES Whether purchase or refinance, historically speaking, real estate loans are expected to close and fund within 30 to 45 days of loan application. Purchase transactions usually depend upon a pipeline of settlements prior to and after a respective borrower’s loan settlement. Most sales contracts are written based on buyer, seller and real estate agent expectations, which typically demand loan closing within 30 to 45 days of contract acceptance. The increased workflow we saw in 2016 overwhelmed even the most seasoned appraiser professionals, causing them to continually miss deadlines without time to give warning or notification. Lenders and AMCs alike made ceaseless attempts to communicate with and extract order status updates from appraisers with very little success. Mass disregard for communication and falling service levels caused delayed settlements, excessive revisions, extension rate lock fees and increasing frustrations across the industry. As a result, lenders attempted to increase appraisal turn-time and fee expectations among members of the real estate community, as well as buyers and sellers with no success. This attempt at open communication with all parties was the right course of action and it might have worked if all lenders had been working in the same direction. Unfortunately, some competing lenders were promising agents unreasonable turn-times in an attempt to win their business, even HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 97

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HERE ARE SOME OF THE RESPONSES ANDREW RE Independent appraisers often work in their own silos where competitors (their fellow appraiser) can easily undercut their fees — AMCs are in a position to see who is doing this and who is willing to work for the “$250” appraisal. This narrative, (“High volume lenders & AMCs preying on low-fee appraisers) which you accurately point out, should be a red flag to all parties involved and not hidden from public view (ie. the consumer).

ERIC KENNEDY Appraisers have been robbed of their time and resources to the breaking point and all the talk is about “alternative valuations” as a solution? Will lenders still charge the borrower $600 and then provide a $60 AVM?? Probably... It’s such an easy fix really… direct the $MILLIONS being pocketed by AMCs back toward the actual source of the data (Appraisers) and 90% of lenders problems will be solved - at least from an Appraisal standpoint.

though they knew they could not deliver on their promises and offer a settlement to meet the sales contract demands. We could write volumes about business ethics between competing lenders and loan officers, but we will reserve that for another day. Notwithstanding the real estate demands, turn-times were extended out to accommodate the slowing appraisal deliveries. Typically, as a result of vacation season, the summer market is known to lead to a reduction in loan volume, which would have given appraisers a welcome respite. But as if to compound the problem, interest rates declined leading into the summer which caused loan volume to remain constant, adding to the pressure on the appraiser community. Consider also that the GSEs had introduced their UCDP/UAD and appraiser were attempting to deal with the dataset findings and warnings without the benefit of sufficient training. It’s not that the appraiser community was unable or unwilling to adapt to the new requirements, but they had been improperly prepared. The GSEs expected the lenders to communicate and train appraisers about the new system, datasets and warnings. This did not happen which forced appraisers to learn on their own. The GSEs have since caught up with the training materials but a little too late. Unfortunately for the industry, the appraiser community also vacations during the summer months, which pushed the due date on current orders out even further than anticipated. Where the appraisers seemed eager to manage their way through the increased 98 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

volume of the 2016 spring market, their tune changed drastically when vacation season arrived. Their message was unified, clear and concise: They were no longer willing to cater to their loyal client base. CHALLENGE 2: APPRAISAL FEES Appraisal fees are an enigma that leaves all parties feeling as if they are staring into a black hole looking for answers. This is not, however, a new challenge. Appraisers have been demanding higher fees for years with no consideration. Part of the reason appraisers haven’t been more successful in achieving higher fee levels is that appraisers are unwilling to unite and work together through an organization or association. We have seen some very weak grass roots efforts to create this unity but with no success. Where many appraisers demand higher fees and are willing to band together to get them, there is still a community of appraisers in the marketplace that are willing to work for reduced fees. High volume lenders and AMCs are preying on these low fee appraisers in an attempt to generate higher profits from their services. It is not uncommon for a high volume lender or AMC to charge a borrower $500 for an appraisal report but pay the appraiser only $250. As long as appraisers are willing to work for these lower fees, the appraiser community as a whole is going to struggle with their cause to increase fees. Ironically, the lending community only hurts itself by promoting the lower quality work of a poorly compensated appraiser. As a result of the continued outcry from the appraiser community regarding low fees, the interagency regulators established a rule that required lenders to pay appraisers a fee that is considered “reasonable and customary.” Typical for the federal government, regulators left a great deal of room for interpretation of the terms “reasonable” and “customary.” Of course, we cannot fault the government for the vague language of its rule as it is not the duty of the government to establish the actual fees that are reasonable and customary in any jurisdiction. The government’s role is but to demand that they are paid accordingly. Many states have since taken the reasonable and customary fee rule to task and established minimum fees to be paid to appraisers for different appraisal report and assignment types. This is, in general, how it’s supposed to work. Unfortunately, in some states, regulators seem to consider survey results an acceptable means of identifying reasonable and customary appraisal fees. Many of the surveys polled appraisers in an attempt to discover how much appraisers are being compensated for different appraisal report types and assignment conditions without the involvement of an AMC. The problem with this approach is that the survey identified current appraisal fees, which from a historically perspective are

Industry Pulse

deflated. For instance, in 2003 an appraiser in the Washington D.C. market charged $350 to $400 for a typical non-complex, non-FHA assignment, which consumed approximately 3 to 4 labor hours. As a result of increasing regulatory and industry demands, today in the same market an appraiser can expect to spend approximately 6 to 7 labor hours for a non-complex, non-FHA assignment for which they are compensated $375 to $450, on average. Labor demands have increased by 100% and fees have increased by only 12%. Forgetting about cost of living increases, trainee appraiser limitations, overhead or other expenses, given the above scenario, appraiser compensation has declined by approximately 77% since 2003. It seems that appraisers are on board with the reasonable and customary fee rule and the respective states’ approach to defining minimum appraisal fees. However, the states grossly missed the mark by setting the minimum fees incredibly low, thereby established a new normal appraisal fee. Now that these new normal fees have been established, appraisers will find it very difficult to increase their fees beyond state mandated minimums. It appears the appraiser community has been sold a 1972 Ford Pinto dressed as a 2017 Lamborghini. CHALLENGE 3: WHAT’S COMING NEXT If the challenges appraisers and the industry they serve were grueling in 2016, they could get even worse in the future. There are a number of risks appraisers are facing. The appraisal-related issues the industry experienced in 2016 convinced lenders, policy makers, regulators and legislators of the need for change. Today, we find these decision makers analyzing the real value of the appraisal process and considering alternative solutions. Industry complaints surrounding the appraisal issues of 2016 were taken seriously on Capitol Hill, causing politicians to demand explanations and solutions to the problem. If one thinks politicians will have no impact on the appraisal industry, think again. Remember back to 2009 when Congress and the president restructured the automobile industry and fired the president of General Motors. Those actions changed the automobile world forever, leading to the collapse of Buick and Pontiac and leaving shareholders in the poorhouse. GSE executives, for their part, have frequently denied allegations that they would approve an alternative to the real estate appraisal. Even so, they rolled out their revised Home Value Explorer and the Appraisal Waiver Programs in 2017. Where the terms have been in existence for some time, the programs have recently been refurbished to permit as many as 25% of refinance transactions to close without an appraisal report as opposed to less than 2% in prior years. Another challenge, though there is some question as to how

DEBI PALBYKIN JONES Regarding turn times, why not order the appraisal at the beginning of the process insteading of waiting weeks and then trying to get it back a few days before closing? 30 day closings are alive and well for those who order the appraisal at the onset. This is a lender issue, not an appraiser issue. I assume that when you mention quality you mean a reconsideration of value EVERY time an appraisal does not support contract price.

HANK MILLER I suspect a big part of the problem is a lack of demonstrated protection and genuine leadership in the industry. NAR is the forever textbook example of an organization that will “Tiger Mom” for it’s members - NOTHING happened to the agent community in the aftermath of the crash - in fact it’s on fire again. NAR simply defends agents completely - who has the appraiser’s back? The AI? Please. The destruction of the industry continues and there’s not much left. Now it looks like CU will be used against the industry as appraisals are eliminated with some loans. Who cares? Who is vociferously attacking that idea? Crickets.....

serious it is, is the shortage of new appraisers entering the business. Where there may be a shortage of appraisers during peak times, during normal business cycles under normal business conditions, appraiser turn-times return to reasonable tempos and fee increase requests recede in most markets, which leads one to conclude that the shortage may be somewhat overstated. That said, we cannot ignore the fact that the average age of a real estate appraiser is approximately 53 years old. Regulators are in the process of addressing the aging appraiser population and believe they have a remedy close at hand. Despite all of these challenges, most markets are now seeing appraisal turn-times returning to more reasonable timeframes and service levels normalizing. For reasons outlined above, appraisal fees will continue to be an issue while the mortgage lending industry as a whole attempts to establish an appraisal fee equilibrium. We will still experience slower turn-times and higher fees during peak times in the business cycle, which is normal, historically speaking. Appraisers ability to deal with these challenges in 2017 will impact the business environment in 2018 as surely as the events of 2016 have impacted this year. Understanding the business cycle and establishing business cycle expectations at the front end of the transaction across all parties will go a long way toward smoothing out the process for everyone and ultimately ensuring better borrower satisfaction. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 99

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W H I T E PA PE R: Chronos Solu tions | SP ONSOR E D CON T E N T

Mortgage success in a market without precedent TODAY’S MOST CRITICAL MANAGEMENT IMPERATIVES

INTRODUCTION Executives leading mortgage lending enterprises today are doing so in a market that has no historical precedent. We are literally forging ahead into the darkness and the only light we have is the information we share with each other. Making sense of our surroundings together is our first, best option and in that spirit, we present this white paper. We hope to shed some light on today’s most critical management imperatives and share what our firm is doing to help guide our lender clients safely into a more successful future. Our hope is that this information will serve to decrease the business risks you face and increase your chances of achieving long-term success.

SETTING THE STAGE Home finance as it exists in America today is not an old business. It became a significant profit center for financial institutions less than 100 years ago and was only recognized as a key indicator of the economy’s health near the end of the last century. While bank regulation was born out of the Great Depression, it took the Great Recession to elevate the mortgage business to a bureaucratic specialization. With the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, mortgage lenders of all stripes fell under the watchful eyes of a new federal regulator that was tasked with creating hundreds of new industry rules and regulations. The Consumer Financial Protection Bureau (CFPB) has become the most powerful government bureau since the FBI of the 1950s. Since inception, it has levied billions of dollars worth of penalties upon the mortgage industry. But it is not the penalties themselves that are keeping executives awake, it’s the uncertainty that remains even after the rules are written, making it difficult — if not impossible — for financial institutions to meet both the letter and the spirit of the law. The rules have been written and sometimes rewritten, but the ambiguity in the regulations remains.

Meanwhile, the industry is under attack by a new breed of financial services competitor that is working to disintermediate all but the largest institutions from the consumers they serve. Rising from the twin poles of Silicon Valley and London, England, investment in these tech-based firms has skyrocketed since 2008. With little understanding of the compliance environment but massive appeal for the American consumer, these firms are making it difficult for consumers to understand why traditional originators use complianceas an excuse for a less than stellar customer experience. In response, lenders have sought out new technologies to make it easier to remain compliant while focusing on customer service. Called Regtech, these technologies promise to translate complex regulation into API code. Using machine learning, biometrics and distributed ledgers (e.g. blockchain), they strive to replace human QA/QC personnel with thinking machines. Unfortunately, these technologies are often point solutions that must be overlapped to provide a complete solution, the algorithms are proprietary, their developers often lack the balance sheet strength to back up a compliance warranty and they empower fintech competitors as much as traditional lenders. Finally, and perhaps most serious, is the financial services industry’s difficulty in recruiting new workers into the business. As The Economist pointed out in a recent special report: “Today’s recruits to big banks have different priorities from the newcomers of a decade or two ago. These days a presentation to university students might be followed by half an hour of questions about the bank’s corporate social responsibility programme, as well as the more obvious ones about pay and promotion prospects. Those presentations attract significantly fewer people than they did at the height of the banking boom.”

To read the entire white paper, visit the Knowledge Center at knowledge.housingwire.com. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 101

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W H I T E P A P E R : N a t i o n a l G e n e r a l L e n d e r S e r v i c e s | SPONSORED CONTENT

Knowledge Center

Claims handling AN IMPORTANT CRITERIA FOR SELECTING AN INSURANCE PARTNER

WHY EFFECTIVE CLAIMS PRACTICES MATTER Claims handling is often considered only a small piece ofthe selection process when servicers evaluate a provider for insurance tracking and lender-placed insurance (“insurance partner”). In reality, it is a core function of the insurance policy contract and service to the insured. A provider’s ability to satisfy the insurance policy’s obligation and provide outstanding service during the time of loss is one of the top roles an insurance partner must perform. The insurance partner’s results act as a direct reflection on the servicer and their relationship with the homeowner, not only to the homeowner but also to regulators. While lender-placed insurance (LPI) is sometimes misunderstood and maligned, it provides a true benefit for homeowners who fail to maintain or are unable to purchase traditional insurance coverage. In the normal course of business, LPI ensures a servicer is meeting the coverage requirement for their investors and regulators. In the event of damage to the dwelling, lender-placed insurance coverage becomes even more critical. For most people, their home is their most important, and likely most expensive, asset. It provides not only shelter but a place for family to live out their lives together. When damage to the dwelling occurs, the homeowner is dealing not just with the practical aspects of determining what coverage exists and how best to repair their home, but also the emotional unrest, apprehension and uncertainty that results. That is when insurance partners must truly show what they are made of – extending comprehensive service with maximum availability and a sense of urgency in distributing the applicable claims proceeds. One of the ways to ensure this maximum speed and urgency takes place is to choose an insurance partner who owns their in-

surance paper, rather than relying on an outside insurance carrier to provide the product. A premier insurance partner is directly responsible for ensuring the correct amount is paid when there is a loss, the claim is handled efficiently and outstanding service is delivered throughout the process. It’s also important that the insurance partner has the financial solvency and the ability to pay claims at the time of an event. An A.M. Best rating of “A-” or higher for the insurance carrier demonstrates that ability. A high rating is especially critical when considering the carrier’s longevity and ability to respond to catastrophic events.

HALLMARKS OF A STRONG CLAIMS PROCESS Multiple Contact Methods The LPI claims process typically begins when the homeowner suffers a loss and either pulls out their insurance documents or calls their mortgage lender to file a claim. Premier insurance partners will provide multiple self-service methods and 24/7 access for the homeowner to file a claim and check on the status of an existing claim. The most important tool is a toll-free number staffed by caring, experienced team members who stand ready to guide and assist the homeowner through the claims process. This initial contact, or First Notice of Loss, is a period of uncertainty for the homeowner, who is likely dealing with the emotional impact of the damage while trying to understand what coverage is provided. Empathetic team members must stand ready to reassure the homeowner and capture all the pertinent data so that a claim can be opened to review the damage.

To read the entire white paper, visit the Knowledge Center at knowledge.housingwire.com. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 103

SPONSORED CONTENT Javid Jaberi is executive vice president of single family residential operations at Auction.com.

Executive Conversation: Javid Jaberi on what’s needed for a healthy real estate marketplace Auction.com delivers transparency and market intelligence Q: What are buyers and sellers looking for in a real estate marketplace today? A: Buyers and sellers alike are looking for greater transparency and more information relating to the property and market intelligence. Buyers recognize the value of our marketplace for its unparalleled volume and penetration of distressed real estate, but they also value the access we provide specific to a property’s condition, the neighborhood it’s located in, and, if it’s inhabited, the tenants. This greater level of intelligence into the property builds trust and confidence within buyers, enabling them to make more informed decisions about what to bid on and how to best leverage the asset should they win. For sellers, increased transparency means valuable insight into buyer interest on a particular property. A seller’s ultimate goal is to dispose of the asset quickly and efficiently, resulting in the best outcome on investment. Our marketplace generates more qualified buyers to compete in a marketplace that aligns with both seller and buyer objectives. Q: How do you determine whether a real estate marketplace is healthy or not? A: As market conditions change, marketplaces should provide an accurate read on pricing and the efficiency of selling. In a healthy marketplace like Auction.com, buyers continue to find the opportunities they seek, sellers receive market prices and qualified bids early and often, and 104 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

“We’ve spent the last 10 years learning what the market needs and how to deliver it.” the process of transferring ownership through the marketplace remains effective and risk-free. We see it every day as buyers and sellers interact successfully through our marketplace. Q: What then are the keys to creating and operating a healthy real estate marketplace? A: First, it is created through the expertise of our staff and the rich relationship with our partners in the 3,100 counties we serve nationwide. These relationships help us accurately — and quickly — process assets through from onboarding an asset onto our platform to the successful closing of sale while ensuring all seller and legal requirements are met. This level of detail requires an in-house team that has developed proven strategic processes and perfected the engagement with buyers and sellers beyond just selling the asset. The marketplace must also have the capacity to increase demand through a scalable platform, one that provides a wide-array of offerings to meet the wants of potential buyers. Economies of scale are also important as a healthy marketplace is one that supports a large population of both buyers and sellers. At Auction.com, we work to ensure we

earn the trust of our buyers and sellers by providing educational resources to buyers (both new and returning), and sharing the latest industry insights with our sellers in order to help them create the best disposition strategy for their portfolio. Q: What has Auction.com done differently that has led to the creation of such a marketplace? A: First, we’ve spent the last 10 years learning what the market needs and how to deliver it. We have more experience in this business than anyone and it shows in the platform we’ve built and the number of users we have attracted. Beyond that, it requires a culture that fosters continuous improvement. Things change so rapidly in our industry and neither buyers nor sellers have the time or resources to keep up-to-date on all of the constant changes. So they rely on us for that and we have to be up to that challenge. That takes great people and we believe we have the best working for us. You can train anyone to learn a new skill, but the level of commitment and dedication that our team have simply can’t be taught, and it is taking our company and our clients “Beyond the Bid” to something much more powerful in the industry.

SPONSORED CONTENT

Mat Ishbia is president and CEO of United Wholesale Mortgage.

Executive Conversation: Mat Ishbia on how his company supports mortgage broker success UWM’s marketing technology gives brokers robust options to compete Q: United Wholesale Mortgage is the No. 1 wholesale lender in the country. What kind of growth do you see in the mortgage broker channel across the industry? A: I see big growth in the mortgage broker channel over the next three years. It’s the best place for loan officers to work, and it’s the best place for borrowers to get a loan. Brokers used to make up close to 50% of the market and, while I don’t see the number getting back to that level, right now it’s in the 12-15% range and we see brokers reaching more than 20% of the market. More loan officers are leaving banks and retail lenders to work for mortgage brokers. More real estate agents are seeing the better client service that brokers deliver. More borrowers are reaping the benefits of using brokers. Q: Do you think consumers are becoming more aware of mortgage brokers and what benefits they offer? A: Absolutely. I think consumers and real estate agents are all realizing that mortgage brokers have huge benefits. Real estate agents are able to close deals on time because they’re working with brokers that can choose a specific lender based on their desired turn times. Agents can hit their contract dates more consistently by working with brokers than retail lenders. Consumers are seeing the value of brokers because options matter, and shopping mortgages matters. They’re seeing

that mortgage brokers are actually in their local communities and can offer them multiple choices. More and more borrowers are realizing that having options is key, and mortgage brokers provide the most options.

“Our company will grow if brokers grow because we only do wholesale lending.” Q: How can mortgage brokers compete with retail lenders when it comes to technology, especially as consumer expectations continue to rise? A: Mortgage brokers can compete with retail lenders because, besides the multiple products, they have access to technology, innovation and ideas of 20 wholesale lenders, not just one retail lender. What’s happening more now than five years ago, on the technology side, is wholesale lenders are building technology to help brokers thrive. Brokers actually have better technology than a lot of retail lenders because they have access to [UWM’s] marketing technology and Blink, and several other wholesale lenders, so they can use the best technology that everyone has to offer. Brokers didn’t have that kind of support five years ago. Q: What does UWM do differently to support mortgage brokers? A: A big part of why UWM is different

is that we’re partners with mortgage brokers. Our company will grow if brokers grow because we only do wholesale lending. We believe completely in the wholesale channel. We’re not competing with brokers at all, and we want brokers to succeed. Our business is to help brokers thrive, and if we do that and we keep doing a great job, we’ll grow our business as well. So we’re completely different because our focus is to really support brokers. Everything we think about is: How do we help this broker go from 10 loans a month to 12? How do we help that broker go from 20 loans a month to 25? We want them to get better. Q: Beyond those day-to-day client service efforts, UWM stands out because of the programs it’s involved with, like KickStart. Why is that so important to you? A: KickStart is important to us because we know that mortgage brokers are the best place for a borrower to get a loan and the best place for loan officers to work. The program is also big for entrepreneurship. We really believe in the value of people starting their own companies and we want to help support that. UWM is an entrepreneurial company, and if we can help loan officers achieve their dreams of running their own business, that’s important. Helping entrepreneurs that are going into the mortgage broker world is a win-win for us, and we really believe in it. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 105

SPONSORED CONTENT Scott Slifer is global head of mortgage at Sutherland and CEO and chairman of Sutherland Mortgage Services.

Executive Conversation: Scott Slifer on the digital innovations impacting mortgage companies Sutherland Mortgage Services delivers robotic process automation Q: How are digital innovations transforming the mortgage industry? A: The industry will be able to improve their operational efficiency, gain intelligence and insights, and improve the overall customer experience. Digital innovations coupled with process transformation have the power to drive the most change for the mortgage industry. Process transformation enables mortgage companies the ability to rethink, reimagine, and rebuild the way work gets done. When legacy processes are redesigned to accommodate digital solutions such as robotic process automation (RPA), analytics, and other innovative applications, the impact of digital has the potential to become increasingly more powerful. While many companies are leveraging digital innovation, now is the time to determine where to gain the most value and place technology bets in those practices. Q: What digital innovations are occurring in the industry and how are they positively impacting mortgage companies? A: Robotic process automation enables mortgage companies to automate verifications or checklist-driven, manual tasks. At Sutherland, we have transformed processes and implemented RPA that, in many cases, has resulted in over 25% reduction in manual work. Data analytics can be leveraged to conduct predictive and prescriptive models to identify trends among your servicing 106 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

portfolio, cross-sell additional products and services, understand and improve decline/cancel or withdraw rates, and even improve customer retention rates. Sutherland benefits from having acquired Nuevora, a recognized leader in providing analytics-as-a-service capabilities. Nuevora enables mortgage companies to use data analytics to optimize ROI, and empower business leaders with short time-to-decision visualizations. A third innovation is an app developed by Sutherland which lets borrowers upload required documents at any time, giving lenders the power to reduce loan cycle time from 45 days to 32 days. Q: How can mortgage companies leverage digital innovations to drive growth and improve their overall operation? A: There are three key areas that will be most positively impacted through new innovations: operational efficiency, intelligence and insights and an improved customer experience. First, new innovations are critical to improve operational efficiencies so your teams and technology can close loans as quickly as possible. Digital innovations also help drive new intelligence and insights. Now is the time for lenders to build a strategy around loan servicing that leverages intelligence from data analytics to identify customers before they “shop” for better interest rates and individuals likely to have a life event occur that would impact their loan.

Finally, an important step in improving the customer experience is through customer journey mapping, which identifies both positive and negative trigger points in the experience. Q: What benefits do companies in the mortgage space gain from partnering with Sutherland? A: Unlike most other service providers, Sutherland is a team of mortgage bankers, serving mortgage bankers. Our team is comprised of individuals who have served in executive leadership roles with the leading mortgage banks in the industry. In addition to our domain expertise, Sutherland partners with leading mortgage companies to transform their processes and bring innovations to their organization. Above and beyond loan origination, underwriting, and component servicing, Sutherland delivers a suite of digital solutions such as RPA, data analytics and artificial intelligence, and mobile apps, to improve the scale and efficiency of our clients’ operations. And with our acquisition of Nuevora, we provide our clients an added level of actionable intelligence to empower executives to learn more about their business and make influential business decisions. Sutherland regularly conducts customer journey mapping and design thinking sessions at our innovation labs in San Francisco and London to drive significant process transformation for some of the world’s leading mortgage lenders.

INDEX COMPANIES

Factom........................................................................74, 78

Merrill Lynch.....................................................................76

United Shore Financial Services...........................20

Fannie Mae..........................................28, 37, 39, 77, 94

Montegra Capital Resources..................................65

United Way......................................................................95

Accenture..........................................................................20

Federal Emergency Management Agency.....51

Morgan Stanley.............................................................79

United Wholesale Mortgage.........20, 30, 32, 105

Accenture Federal Services.....................................20

Federal Housing Administration..................20, 55

Mortgage Action Alliance.........................................37

U.S. Department of Housing and Urban

Federal Reserve.............................................................39

Mortgage Bankers Association.......22, 37, 43, 48

Development.................................................................. 47

Alight...................................................................................20 Allianz..................................................................................22 Altisource..........................................................................20 American Banker...........................................................61 American Red Cross............................................94-95 Appraisal Logistic Solutions...................................97 Asian Real Estate Association of America.....24, 95 Assurant Foundation.................................................95 Auction.com..........................................................20, 104

Federal Trade Commission............................. 92-93 FHFA....................................................................................39 FICO..............................................................................32, 80 Fidelity National Information Services.............20 Financial Conduct Authority..................................39 Financial Crimes Enforcement Network.60, 62 First American................................. 20, 43, 74, 79-80 First American Financial Corporation...............79 First American Mortgage Solutions.....43, 74, 79 FIS..........................................................................................76

B Bank of America.............................................................61 Bank of England............................................................38 BB&T Corporation........................................................94

Flagstar Bank.................................................................95

N NAMB..................................................................................30 National Association of Realtors..................70, 72 National General Lender Services.....................103 National Notary Association..................................95 Nationstar Mortgage Holdings..............................81 New American Funding.............................................37

Forney Transportation Museum..........................22

Operation HOPE............................................................94 Owners.com....................................................................20

Booz Allen Hamilton...................................................76

General Motors............................................................. 99 General Services Administration........................ 48

C Caliber Home Loans....................................................95

Google.................................................................................43

Chronos Solutions..................................28, 74, 77, 101

Hubzu..................................................................................20

Citigroup............................................................................76 Clayton Holdings..........................................................39 Colonial Savings............................................................94 CoreLogic...................................................20, 79-80, 94 Cornerstone Home Lending..................................40 Corsair Associates........................................................78

I Informative Research................................. 20, 74, 80 Internal Revenue Service................................... 91-92

Credit Suisse....................................................................76

PHH Mortgage Corporation................................... 86

PEOPLE A Amter, Bob........................................................................65

Arvielo, Patty....................................................................37

RealEC Technologies..................................................78

B Bank, PNC........................................................................ 64

Baugher, Jon................................................................... 64 Beane, Roger....................................................................81

92-93

Biehle, Blair.......................................................................20

ServiceLink...............................................................20, 82

Burch, Cary........................................................................20

JPMorgan Chase.....................................................61, 94

ServiceLink Auction.....................................................20 Social Security Administration...................... 91-92

Department of Justice....................................... 92-93

DEVAL................................................................................ 84

LenderLive........................................................20, 86-87 Lender Processing Services...............................76, 81

Securities and Exchange Commission..............65,

DataTree............................................................................79 DataVerify.........................................................................20

Z Zillow............................................................................. 71, 73

Polaris................................................................................. 72

CFPB.............................................................. 37, 87, 90, 101

Wells Fargo..................................................61, 79, 91, 94

Xinnix............................................................................40-41

Black Knight..................................20, 51, 74, 76, 78, 81

Washington Post......................................................... 64

BBVA Compass..............................................................95 Bloomberg......................................................... 17, 64, 93

Notarize..............................................................................95

Flagstar Foundation...................................................95 Freddie Mac.............................................. 20, 37, 39, 94

Veros....................................................................................26

Stewart Information Services...............................20 Stewart Lender Services..........................................78 Stewart Title...................................................................78 Sutherland Mortgage Services...........................106

Carson, Ben..............................11, 13, 22, 47-48, 51, 55 Clements, Rob............................................................... 86 Cole, James..................................................................... 60 Correa, Beth.....................................................................95

Lender Support Systems.........................................20 LendingTree.....................................................................20

Lennar.................................................................................95

Endeavor America Loan Services........................20

LightStream Home Improvement......................26

Ten-X...................................................................................20

Equifax...................................................................11, 89-93

LoanCare...................................................................82-83

The Money Source.......................................................20

Dalio, Ray...........................................................................23

EstaR mortgage............................................................30

loanDepot.........................................................................95

Thomson Reuters.........................................................20

Dalporto, Gabe...............................................................20

EverBank Financial..................................................... 86

LoanLogics.......................................................................20

TransUnion...................................................................... 89

Danna, Frank...................................................................97

Experian............................................................................ 89

LRES...............................................................................74, 81

Treasury Department................................................39

DuBose, Jimmy...............................................................94

Ellie Mae......................................................................34-35

108 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017

AD INDEX

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A Arch MI.......................................................................................................................................3

El-Erian, Mohamed................................................................22

Manning, Peyton.....................................................................22

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

Mastioni, Marcello..................................................................20

Miller, Hank................................................................................ 99

Felt, Matthew............................................................................ 71 Field, Nick................................................................................... 64

Chronos Solutions..............................................................................................................18 Clayton....................................................................................................................................21 Compliance Ease.............................................................................................................. 44

Freck, Chris..................................................................................30

Nackashi, Joe.............................................................................76 Nadeau, Jason..........................................................................78

G Garcia-Gratacos, Deborah................................................ 84

E Ellie Mae..................................................................................................................................6

Gardner, Cory..................................................................... 61, 64

Palbykin Jones, Debi............................................................ 99

F Fannie Mae............................................................................................................................. 5 FICS..........................................................................................................................................93 First American Mortgage Solutions...........................................................................29 Freddie Mac........................................................................................................................ 8,9

Gebre, Biniam............................................................................20

Patenaude, Pam.....................................................................55

Gilford, Sam..............................................................................90

Paul, Rand...................................................................................61

Glider, George........................................................................... 48

Ploder, Rodolfo........................................................................92

Goodman, Stacey...................................................................20

Pyle, Laurie.................................................................................78

Gateway Mortgage Group................................................................................................7 Global DMS........................................................................................................................... 111

Re, Andrew................................................................................ 98

Richardson, Lori......................................................................40

IMN............................................................................................................................................16

Guillebeau, Chris......................................................................23 Gurman, Sadie......................................................................... 64

H Hatch, Orrin.................................................................................91 Healey, Maura............................................................................91 Heck, Denny................................................................................61 Hensarling, Jeb..........................................................................91 Hisey, David................................................................................20 Huff, Jared...................................................................................20

I Ishbia, Mat................................................................................105

J Jaberi, Javid..............................................................................104 Johnson, Mark............................................................................81

K Kaplan, Jennifer...................................................................... 64 Kaplan, Peter............................................................................92

S Sanzone, Tom...........................................................................76 Schneiderman, Eric...............................................................90 Sessions, Jeff............................................................................ 64 Slifer, Scott...............................................................................106 Slonaker, Matt..........................................................................28 Smith, Richard......................................................................... 89 Steinmetzer, Michelle................................................... 28, 77 Surface, John............................................................................ 86

T Tapia, Eva....................................................................................20 Terrazas, Aaron..................................................................71, 73 Titus, Dina....................................................................................61 Trump, Donald........................................................................ 64

L LRES........................................................................................................................................ 27 M M&M Mortgage Services.................................................................................................45 MCS..........................................................................................................................................92 MGIC.........................................................................................................................................25 N National MI............................................................................................................................12 Nationwide Title Company............................................................................................. 4 New American Funding................................................................................................. 112 NEXT Conference...............................................................................................................67 NFR........................................................................................................................................ 107 O

Valladares, Sherry..................................................................20

Old Republic..........................................................................................................................14

Kirby, Peter.................................................................................78

Warren, Elizabeth....................................................................61 Waters, Maxine.........................................................................91 Worrall, Dave.............................................................................82 Wyden, Ron.................................................................................91

Leahy, Patrick........................................................................... 64 Lee, Barbara...............................................................................61

J. Ronald Terwilliger Foundation for Housing America’s Families.............. 85

Kelly, Patrick.............................................................................80 Kennedy, Eric............................................................................ 98

R Radian.................................................................................................................................... 10 S Safeguard............................................................................................................................ 107 Stewart Title Guaranty Company............................................................................. 66

Long, Brock..................................................................................51

Yolles, Barbara.........................................................................20

Loughran, Joseph...................................................................92

Yun, Lawrence..........................................................................70

United Wholesale Mortgage.................................................................................56, 57 USFN........................................................................................................................................31

Lewis, Nicole............................................................................. 64

HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017 109

PARTING SHOT

❱ DEVASTATION Hurricane Harvey made landfall in late August along the Texas coast, dumping unprecedented amounts of rain on Houston and surrounding cities. With more than 80% of homeowners in the area without flood insurance, recovery will be slow. Here, a neighborhood in the Houston suburb of Riverstone starts the clean-up process. Photo by Shutterstock.com 110 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2017