Oct/Nov 2018 Issue by HousingWire

HOUSINGWIRE MAGAZINE ❱ OCTOBER/NOVEMBER 2018

DREAM TEAM

How Rick and Patty Arvielo are leading New American Funding to record growth P. 36

2 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

Buy Down Your Borrower’s MI Premium Payment with

RateStar Buydown Arch MI’s innovative RateStar BuydownSM uses easy, efficient RateStarSM technology to help you identify the best combination of upfront and monthly MI to meet each borrower’s needs. Offer borrowers something your competition can’t beat – a tailored buydown solution that can lower their monthly premium. For more information, visit archmi.com/RateStar.

HOUSINGWIRE OCTOBER/NOVEMBER 2018 EDITORIAL

CONTENT SOLUTIONS

EDITOR-IN-CHIEF Jacob Gaffney

MANAGING EDITOR Sarah Wheeler

EDITORS Ben Lane Jessica Guerin

CONTENT WRITER Alyssa Stringer

ONLINE EDITOR Caroline Basile

CREATIVE

REPORTERS Jeremiah Jensen Alcynna Lloyd Kelsey Ramírez

GRAPHIC DESIGN Traci Cortez

FUTURE FORWARD THE NEW FACE of mortgage lending is relatable and aspirational. The purchase of a home, for the very first time, will be less of an investment in community and more about making a connection. When you look across the mortgage lending landscape you can see this idea happening: Nationstar rebrands as Mr. Cooper, loanDepot launches melloHome, Movement Mortgage creates the “Love” initiative. All of these are tactics and techniques to try to connect with potential homeowners. The Ar-

CONTRIBUTORS Casey Cunningham, Travis Kniffen, Joe Markham, Donna Ross

vielos at New American Funding exemplify this exact mortgage lending movement. Longtime HousingWire Editor Sarah Wheeler takes a long look at their story, their success, and their next step. HousingWire, too, has taken part in spreading around the good vibes. We’ve

SALES

CORPORATE

NATIONAL SALES DIRECTOR Jennifer Watson Laws jlaws@HousingWire.com

PRESIDENT AND CEO Clayton Collins

DIRECTOR, MARKETING OPERATIONS AND TECH CALIFORNIA C. Scott Smith Christi Lingard MARKETING MANAGER clingard@HousingWire.com Caren Karris CENTRAL SALES & MARKETING Mark Adams ASSOCIATE madams@HousingWire.com Haley Knighton SOUTHEAST CONTROLLER Tamara Wren Michelle Monroe twren@HousingWire.com MOUNTAIN WEST Bill Brown bbrown@HousingWire.com

recently brought in some stellar talent to join our team. Our new multifamily reporter, Jeremiah Jensen, covers a subject most of us wish we had to deal with: too much growth. Jensen discusses how independent mortgage lenders are redefining themselves in the modern era. Who will be the next New American, Mr. Cooper or Movement? There will be a few sacrifices along the way, to be sure: “There are cogs in motion in the government-sponsored enterprise realm that may get the mortgage market out of its gridlock, but they will take a while to jar the market out of its low volume rut,” Jensen writes. Speaking of new talent, we round out the features with a piece on the goliath that is American Advisors Group. Covering the reverse mortgage space is new to HousingWire, but our Editor Jessica Guerin knows a thing or two about the space and I personally learn something new every time I read her work. Enjoy!

GREAT LAKES Lorena Leggett lleggett@HousingWire.com

Jacob Gaffney Editor-in-Chief @jacobgaffney

Subscriptions are available for $149.00 for one year. A subscription includes the print magazine and online access to the digital magazine. Canada and foreign are only eligible to purchase the “Digital Only” subscription plan at $149 for one year. For subscription orders, call 1-800-869-6882 or email HW@kmpsgroup.com. Postmaster: Send change of address to HW Media, P.O. Box 47627, Plymouth, MN 55447. Subscribers: Please send last magazine label along with change of address requests. The information contained within should not be construed as a recommendation for any course of action regarding legal, financial or accounting matters. All written materials are disseminated with the understanding that the publisher is not engaged in rendering legal advice or other professional services. HW Media does not guarantee the accuracy of information provided, and is not liable for any damages, losses or other detriment that may result from the use of these materials.

Tweets From The Streets “We think of Millennials as always wanting to engage online. Millennials, as well as any other age band, when it comes time to make a decision… want to actually have a personal interaction with someone.” 0

by @Andy_MacDougall

HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018 5

We’re Driving Innovation Home.

Join us on the journey to a true digital mortgage. At Ellie Mae, we’ve always been guided by innovation. And that’s why we’re the only LOS provider with a true digital mortgage solution that covers the entire loan lifecycle, from beginning to end. Encompass® can help you to originate more loans, lower costs, reduce time to close, and ensure the highest levels of compliance, quality and efficiency. Find out how Ellie Mae is driving innovation that gets people into homes faster at elliemae.com/innovation.

OCT./NOV. ’18 42 SQUEEZED How IMBs are dealing with low volumes and overcapacity. By Jeremiah Jensen

46 DOUBLING DOWN AAG’s Reza Jahangiri on the reverse mortgage lender’s massive rebrand. By Jessica Guerin

THE DREAM TEAM How Rick and Patty Arvielo are leading New American Funding into record growth. By Sarah Wheeler

50 COMPANY SPOTLIGHT United Wholesale Mortgage and Sagent Lending Technologies make waves. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018 7

CONTENTS

12 THE LINEUP 12 PEOPLE MOVERS Rayman Kaur Mathoda is named new CEO of Xome.

14 EVENT CALENDAR MBA’s Annual Convention and Expo is set to take place Oct. 14-17 in Washington, D.C.

15 ON THE SHELF Julián Castro details his journey to the upper echelon of American politics in his new memoir.

14 16 Tweets From The Streets Gary Cohn says at Reuters event that nobody went to jail after the financial crisis because no criminal laws were broken. “I would love for someone to answer what laws were broken.”

108 by @morningmoneyben

16 DISPATCH 1 FirstClose leverages data to provide true vendor insight.

18 DISPATCH 2

VIEWPOINTS

Riivos on alleviating the pressure of margin compression.

28 THRIVE UNDER PRESSURE

20 THE A-LIST

Xinnix’s Casey Cunningham on how to thrive in challenging times.

These five companies are eyeing and entering the mortgage and real estate space.

30 A CULTURE OF IT SECURITY

22 HOT OR NOT

Radian’s Donna Ross on boosting your company’s cybersecurity efforts.

32 BUY, DON’T BUILD

HECM counselors say volume is nearly back to normal, while home sellers slash prices.

24 THE HOT SEAT

Roostify’s Travis Kniffen on why digital lending solutions are better with a partner.

Matt Richardson of Manley Deas Kochalski LLC on Ohio’s statute of limitations for mortgage foreclosures.

34 OVERCOMING CREDIT BARRIERS

26 UNIQUE SOLUTIONS

Block66’s Joe Markham how to help borrowers with good or prime credit.

Carl Tyree of Arch MI on how its RateStar Buydown is making a difference for lenders. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018 9

SHINING THE LIGHT ON

NON-QM LENDI NG

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

CONTENTS 90 BACK DEPARTMENTS 54 MULTIFAMILY NIMBYism is depressing multifamily developers.

58 CFPB CFPB director nomination moves to the Senate, but voting stalls.

62 EQUITY INSIGHT Here’s why some financial advisors aren’t allowed to discuss reverse mortgages.

66 GSE REPORT

Rep. Hensarling unveils sweeping bipartisan housing finance reform bill.

72 M&A MOVES From Credit Karma to Compass, six deals that are shaking things up.

76 KUDOS

NOT IN M BACKYAR Y D

Through volunteer work and fundraising, these companies are making a difference.

80 Q&A

SWBC’s Jason O’Brien on omnichannel payment solutions.

84 KNOWLEDGE CENTER FirstClose on how to combat rising origination costs.

88 COMPANIES/ PEOPLE INDEX 89 AD INDEX 90 PARTING SHOT

HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018 11

Rayman Kaur Mathoda Xome

12 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

AMBLARD

RICHARD RYAN

DOHERTY McELROY

intech company Clear Capital appointed Sheila Ryan to the position of chief people officer. Ryan previously served as the vice president of global people and workplace at mobile game developer Glu Mobile. She also led human resources and culture efforts at multiple companies, including CBS Interactive, CNET Networks and Practice Fusion. U.S. Bank promoted Jodi Richard to vice chairman and chief risk officer, where she will join the company's managing committee. In her new role, Richard is expected to continue developing and maintaining strong risk management capabilities for the financial institution. Waterstone Mortgage opened a new branch in Libertyville, Illinois. The company enlisted Joe Amato and Joe Spisak to lead the branch. They will be joined at the branch by loan originators Karen Frye, Nick Larson and Brian Kucharski, and loan partner Kayla Marien. Roostify appointed Eric Amblard as its new chief financial officer. Amblard brings with him more than a decade of board operating experience scaling B2B

ROCCO

HUSAK LOVELL

WMIH Corp. subsidiary Xome named industry veteran Mathoda as its new CEO. She will oversee the company's business segments and the transition of recently acquired Assurant Mortgage Solutions. Previously, she was the co-CEO of Genesis Capital.

SaaS companies. As CFO, Amblard is responsible for managing Roostify’s internal regulator, compliance and contract teams. He previously served as the CFO of EverString Technologies and also held CFO and finance executive positions with NetBoost, Intel, Ensim and KXEN. HighTechLending has hired Marcus Powell as its national retail sales manager. Powell, who worked previously for Liberty Home Equity Solutions and Security One Lending, has years of experience in sales coaching, training and call center origination. Anneta Pope has joined Boston National as senior vice president and reverse mortgage executive. She will help build the company’s reverse mortgage channel and oversee education and training initiatives. Previously, Pope worked at Premier Reverse Closings, Finance of America Reverse and Generation Mortgage. Nationstar Mortgage, now known as Mr. Cooper, brought Kelly Ann Doherty on to its executive team as chief communications officer. Doherty joined Mr. Cooper

in 2016 as the senior vice president of corporate communications. She is expected to continue leading the company’s corporate communications functions including media relations, team member communications, issues management external affairs and social media. Mayer Brown named finance attorney Michael McElroy as a partner resident in its Washington, D.C., office. McElroy will focus his practice on a range of matters related to the mortgage banking and consumer finance industries. McElroy has more than 20 years of leadership experience in the financial services industry and previously served as general counsel and secretary for mortgage lender First Guaranty Mortgage. Marcus & Millichap hired David Shilling ton to ser ve as president of M a rc u s & M i l l ic h ap C apit a l Corporation. Shillington previously served as executive vice president of KeyBank Real Estate Capital, where he managed the Southeast and Mid-Atlantic, the agency lending division and Fannie Mae DUS operations. Jerry Halbrook joined fintech company FundingShield’s senior advisory board. Halbrook has a hefty resume that includes leadership positions at Lender Price, Black Knight, Prudential Home Mortgage, Bank of America, CitiMortgage and Nexstar Financial. Grandbridge Real Estate Capital named Matthew Rocco president. Rocco will oversee the company’s national loan origination program and is responsible for all loan origination. The firm also announced the promotions of John Randall, Joe Lovell, Dan Husak and Jon Boone to senior leadership positions.

Introducing Bringing you the latest in risk-based pricing technology

• Dynamic Pricing Tool gives you the most competitive pricing for your borrowers • Easily Access via MI AXIS, RateFinder, and most LOS and pricing engines • Supports All Product Lines including BPMI, LPMI, single and monthly • American Built with National MI Innovation

U.S. Domiciled Company www.na�onalmi.com/rate-gps/ @Na�onalMI

Innovating with intelligence.

EVENT CALENDAR

MBA ANNUAL CONVENTION AND EXPO OCT. 14-17, 2018 Host: Mortgage Bankers Association Location: Walter E. Washington Convention Center, Washington, D.C. Cost: $1,395-$3,495 On the agenda: The industry’s premier event of the year will take place in Washington, D.C., and feature breakout sessions on topics ranging from the intersection of politics and policy to practical solutions for solving the homeownership gap and more. Starstudded general sessions will feature panelists including U.S. Department of Housing and Urban Development Secretary Ben Carson, former NBA star Magic Johnson and outgoing Fannie Mae CEO Tim Mayopoulos. And if that’s not enough to pique your interest, Kelly Clarkson will be there to bless conference attendees’ ears with an exclusive concert.

WASHINGTON, D.C. There is no shortage of things to do in the nation’s capital, but if you’re looking for a fresh cultural experience, check out ARTECHOUSE. Opened in June of last year, ARTECHOUSE is the intersection of art, science and technology and offers visitors the chance to interact with digital art installations. The space also houses the first-ever augmented reality bar in the U.S. Visit dc.artechouse.com/about to find out more. 14 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

ON THE SHELF An Unlikely Journey: Waking Up from My American Dream JULIAN CASTRO LITTLE, BROWN AND COMPANY

By all accounts, former HUD Secretary Julián Castro should not have achieved such tremendous success. Born in a poverty-stricken neighborhood of Texas, Julian and his twin brother Joaquin were pushed toward the Ivy League and propelled onto the political stage by their bold, activist mother. This candid memoir follows the journey of a family that fought the odds in order to fulfill their dreams of finding their place in the world and making it better.

Billion Dollar Whale: The Man Who Fooled Wall Street, Hollywood, and the World TOM WRIGHT AND BRADLEY HOPE HATCHETTE BOOKS

This real-life tale of a $5 billion fraud details the unbelievable gull of the man behind the 1MDB scheme. Written by two Wall Street Journal reporters, the book tells the story of Jho Low, a baby-faced Wharton grad who concocted one of history’s most appalling financial crimes in 2009. Still a fugitive, Low syphoned billions of dollars from the Malaysian sovereign fund to finance a high-flying lifestyle that included launching a Hollywood production and commissioning one of the world’s most expensive yachts.

Join the POWER of the NETWORK Experience true peer to peer learning and collaboration Drive profitability and performance with exclusive business benchmarking tools Connect and engage at member only conferences and networking events Learn more about all of the benefits to membership at

www.mortgagecollaborative.com

FIRSTCLOSE | SPONSORED CONTENT

Leveraging data to provide true vendor insight and lending process improvement FirstClose goes beyond vendor management to give lenders a holistic view

inancial institutions rely on their vendor partners for critical services and solutions. But understanding how vendors are actually performing — and where another vendor could offer better performance — is beyond the scope of most vendor management systems. Lenders need a truly objective look at their business processes, which is only possible through reporting and analysis. FirstClose leverages its data to close the gap on vendor management, working with clients in a consultative process that provides insight for continuous improvement. “Vendor management itself is a very abstract thing,” said Christina Hardin, analyst at FirstClose. “What’s really important is understanding the results you are getting from your processes. How many days does it take your operation to provide a customer with a product or service? What can you do to improve that?” FirstClose works with a wide variety of vendors for title, flood, tax, and valuation, and has data on those vendors’ performance over time. Not only can FirstClose help clients identify a vendor that is slowing down the process, but with its wide network, it can also provide vendor options to provide efficiencies depending on the type of work or a geographic area. “A vendor may have the highest quality and fastest turn-time in a specific coverage area, but as soon as you lend somewhere else, they fall on their face. Data analytics provides you with the insights to prevent throwing the baby out with the bath water,” said Tim Smith, chief revenue officer at FirstClose. 16 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

Lenders with long-term vendor relationships can utilize FirstClose to generate an organized, all-inclusive look at their performance. Analyzing that data helps drive better-informed decisions, which is especially important as businesses look for more efficiencies. “It may make sense to use multiple vendor options tailored for coverage in an expanding footprint,” Hardin said. “FirstClose makes this easier for clients by providing a variety of options all under one platform.”

FIRSTCLOSE USERS HAVE REPORTED THE FOLLOWING: • Improved automation in the lending department, which provides a higher employee production level and faster training for new employees • Reduced processing turn-times — loans closing faster yields happier borrowers • Consolidated vendors — a single point of contact for customer service • Eliminating the need to pull data from multiple sources since it is all integrated into the FirstClose Report Lenders need insight they can only get from leveraging data. “Data-driven decision making is no longer an option in this competitive space,” said Smith. “Analyzing vendor data is part of continuous process improvement.”

RIIVOS | SPONSORED CONTENT

The margin compression everyone has experienced is our own fault So, how do we get out of it?

t is no surprise that mortgage origination volumes and margins have compressed across the board this year. And if lenders are going to be profitable, or even stay in business, they really need to focus on just one thing. They need to stop pricing loans they are losing money on. Yes, it’s that simple. At least according to Mike McFadden of Riivos, a provider of cloud-based, value chain management applications for the mortgage industry that connects core systems — GL, Payroll and Capital Markets — into a single application so lenders can immediately see the future financial impact of business decisions across the lending operation. And, well, he should know. Previously a senior finance executive who was instrumental in taking a large independent mortgage bank public and later overseeing its sale, McFadden has seen his share of industry ups and downs. And now, as group head of the mortgage technology division at Riivos, he spends a good deal of his time helping mortgage lenders become more profitable. “It’s not rocket science, but most originators are originating loans at margins that are impossible to make money on,” McFadden says. “Pricing loans solely based on what their competitors are doing — they look around at the market and price at the going rate in order to compete. But if you’re pricing loans below your threshold of profitability, below your marginal cost to originate, it won’t matter whether you win business or not, you’re not going to make money — the only thing you might do is put yourself out of business,” he concludes. And with profitability as the end game, having access to relevant data — which according to McFadden includes the fixed/ variable cost structure of the organization — is critical. The key is knowing exactly what the marginal cost to originate a loan is by product, channel, etc., and refusing to price loans below that. He contends that secondary and capital market leaders need access to fixed/variable P&Ls by channel every month, otherwise they are flying blind when trying to make pricing decisions. He likens it to Apple selling iPhones without knowing what input costs are. “[Apple] would never do it,” he says, “but for some reason, mortgage lenders do it every day when buying billions of dollars of loans.” One of the things McFadden works with lenders on is promoting information flow between financial teams. “Company and channel financials provided by the finance team help secondary and capital markets know what’s profitable so they can price loans,” McFadden says. “While real-time volume, margin and product decisions made by secondary and capital market teams 18 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

have a massive impact on finance’s ability to forecast the P&L and balance sheet.” The problem is, the two groups typically don’t communicate effectively enough. And while his company, Riivos, provides technology that puts critical financial information directly into the hands of those who need it to make timely business and financial decisions, McFadden says the bigger fix at most firms requires a cultural shift in which capital markets and finance teams understand the necessity of working closely together toward ensuring profitability of the enterprise. To that end, secondary and capital markets should be communicating and exchanging information with finance at a cadence that’s conducive to real-time decision making — at minimum a couple of times a week and, optimally, daily, McFadden contends. The path forward for the industry — particularly in times of lower volumes, he says — is better information, more relevant information and better analytics around the fixed/variable cost structure of the organization, something that’s difficult given the complexities of multiple new channels of origination and an ever-growing cache of products. Further, at the point where profitability becomes difficult given market dynamics, finance needs to have real-time visibility into variable origination costs, so that timely and impactful financial decisions can be made. And his message is resonating. He speaks frequently to both finance and secondary/capital markets leaders on the need to focus on profitability, not volume, and working together toward that end. “If everyone adopted a policy of not pricing loans below their marginal cost to originate, we wouldn’t be experiencing the margin compression we’re seeing today, and lenders would start making money again,” he concludes. And if Mike McFadden has his way, they will.

THE

A-LIST

MOVING IN

5 companies eyeing and entering the mortgage and real estate space

The mortgage and real estate industries are changing as mergers and acquisitions heat up amid regulatory uncertainty and high costs to originate a mortgage. But that’s not the only thing shaking up the industry. Some big-name companies are now beginning to make their mark, and could change the real estate or mortgage industry as we know it.

Here are five:

The dramatic reshaping of Zillow’s place in the real estate ecosystem is about to take a giant step forward, as the online real estate behemoth announced that it is getting into the mortgage business.

FACEBOOK AMAZON

Last July, the online monolith quietly tested (and then removed) a feature that would connect a potential homebuyer or seller with a real estate agent. And earlier this year, Amazon began exploring a move into mortgage lending and is COMING SOON TO even looking to hire the head of a soon-to-be-announced mortgage division.

4 5

ZILLOW

Facebook announced that it is significantly expanding the real estate listings section on its Marketplace, which is the company’s attempt to take on Craigslist, eBay, and other e-commerce platforms.

MR. COOPER Mr. Cooper (formerly Nationstar) announced its plans to launch a new mobile app that utilizes artificial intelligence to reimagine the homeownership experience with tools to help homeowners optimize their personal balance sheets.

REDFIN Redfin announced that it is “deepening its investment” in its direct buying program, which it calls Redfin Now, and is planning a “long-term” expansion of the program beyond its first few markets.

20 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

Hot SIZZLE? Not FIZZLE? 1 1 WHY THE

WHY THE

HECM COUNSELING



Before you can get a reverse mortgage, you have to submit to financial counseling. And that’s why talking to HECM counselors can be a great way to gauge what’s in the pipeline and identify emerging trends. According to two counselors certified by the U.S. Department of Housing and Urban Development to administer reverse mortgage counseling, volume is nearly back to normal following program changes that took effect last year. One housing director said volume jumped from one jumbo counseling every couple of months to 20 in a two-week period.



HOUSING VOUCHERS



MORTGAGE TECH The process of filing mortgage insurance claims is about to get a lot easier thanks to Fannie Mae. The government-sponsored enterprise announced that it is rolling out a new, streamlined MI claims procedure with help from several of the largest MI providers. Fannie Mae claims that the new process, called MI Factor, will save time and cut costs without additional risk. Fannie Mae said that MI Factor makes it easier for mortgage servicers to file MI claims while also eliminating the need for supplemental filings. Servicers are therefore no longer billed for MI claim curtailments.

FIRST-TIME BUYERS First-time homebuyers may be facing rising unaffordability but they are still outpacing the share of repeat buyers, according to a report from the Urban Institute. This is nothing new, as first-time homebuyers have dominated the mortgage market for a decade. The latest data shows that gap actually continues to grow. Repeat buyers dominated the market before the housing crisis, but after 2007 that all changed. Since about 2014, that gap has widened. The rising share of first-time buyers can be attributed to the lack of repeat buyers in the housing market.

22 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

It’s apparently far too difficult for low-income households to use HUD's housing voucher program to gain access to affordable housing and HUD is planning to do something about it. HUD announced that Secretary Ben Carson is establishing a new “Landlord Task Force” as a way to get more landlords to accept housing vouchers, citing two studies that claim the voucher program is not functioning as it should. HUD said the studies show that “most” landlords don't accept housing vouchers and therefore deny affordable housing to those who need it most.

FACEBOOK Facebook allows landlords and property owners to discriminate against prospective renters and buyers based on race, color, religion, sex, national origin, disability, and other factors, HUD said. After months of investigating Facebook’s ad practices, HUD filed a housing discrimination complaint against the social media giant, alleging that it allows advertisers to purposefully exclude certain people from seeing housing ads based on a number of factors that violate the Fair Housing Act. Facebook denies the allegations, saying “There is no place for discrimination on Facebook.”

SELLING A HOME Home sellers have begun cutting back their listing price, especially at the high end of the housing market, leaving open the possibility that it is now beginning to shift to a buyer’s market. From the beginning of this year, the share of listings with a price cut increased by 1.2 percentage points, the greatest January-to-June increase ever reported and more than double the increase from the same period last year, according to a report from Zillow. And in some markets, the numbers were even higher. For example, in San Diego, 20% of listings had a price cut in June, up from 12% last year.

HOTSEAT

SPONSORED CONTENT

Matt Richardson Director of Litigation

Manley Deas Kochalski LLC

hio was among the states where the foreclosure crisis hit hardest, and it continues to rank in the top 10 states for foreclosures in 2018. We sat down with Matt Richardson, director of litigation at Manley Deas Kochalski LLC, to find out some of the recent developments regarding the Ohio statute of limitations for mortgage foreclosures. Question: How would you summarize recent Ohio court decisions affecting foreclosures? Answer: The Ohio courts are still grappling with the Ohio Supreme Court's Holden decision from 2016. The Court held that a foreclosure plaintiff could recover against a borrower for defaulting on a mortgage after the borrower had been discharged in bankruptcy. The Court reasoned that while the bankruptcy discharge absolves the borrower personally of paying the debt balance, the bankruptcy has no effect on the mortgage. For these reasons, a foreclosure plaintiff can foreclose after the terms of the mortgage are broken. The Court went further to state that a cause of action on the promissory note is separate from one on the mortgage, providing “separate and independent remedies.” As a result, a separate claim to foreclose the mortgage would survive a borrower’s bankruptcy discharge. However, after stressing that these causes of action are separate, the Court created confusion. The Court held that a party seeking to foreclose nevertheless “must prove that it was the person or entity entitled to enforce the note secured by the mortgage.” Here, the Court drew a distinction between “a party that cannot obtain judgment on the note,” if the borrower were discharged in bankruptcy, and “a party that is not entitled to enforce the note” for whatever reason. It remains unclear why the Court drew this distinction

Q&A

24 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

if the two causes of action are truly separate. Finally, the Court suggested that a claim under the mortgage could survive if a claim under the note were barred by the applicable statute of limitations. Again, the Court’s distinction between “a party that cannot obtain judgment on the note” and “a party that is not entitled to enforce the note” is inconsistent with this suggestion. Question: What recent court decision do you think has the biggest potential to change the status quo? A: After Holden, the concept that the statute of limitations could differ for both causes of action has created controversy among the Ohio courts to address the issue. There is now a split of authority about what the statute of limitations is for a claim under the mortgage. The Ohio intermediate court of appeals in Cleveland indicated that the statute of limitations under O.R.C. 2305.06 for claims under the mortgage is longer than for claims under the note under O.R.C. 1303.16. Recently, this conclusion was affirmed by a federal district court in the Northern District of Ohio. By contrast, the Southern District of Ohio has concluded that the statute of limitations for both actions should be the same. Question: What are you hearing from clients about these decisions? A: Clients are understandably cautious about these unsettled issues in Ohio. Clients have sought MDK’s help to understand the issues at stake and for guidance about how to proceed with loans that could pose a statute of limitations issue. Question: Where should servicers be especially careful in light of these decisions? A: With the law uncertain, cases where the acceleration occurred more than six years before the foreclosure complaint will be filed should be flagged to consider whether filing the action is well-advised. Also, in contesting whether the foreclosure action is barred by the six-year statute of limitations, borrowers may file an action against MDK under the federal Fair Debt Collections Practices Act, likely requiring servicers to retain new counsel in the foreclosure action.

GREATER CERTAINTY IN ALL CONDITIONS

We’re boldly positioned for the future. Computershare Loan Services brings together unparalleled experience, products, services and solutions for the mortgage industry. Our uniﬁed strengths help customers achieve a strong and steadfast position in the market, no matter the conditions. See what we can do for your business at ComputershareLoanServices.com.

CMC Funding, Inc: NMLS ID 41998 Specialized Loan Servicing LLC: NMLS ID Main Ofﬁce 2168 Credit Risk Solutions, formerly known as Altavera Mortgage Services operating as Credit Risk Solutions: NMLS ID 1059945

UNIQUE SOLUTIONS

SPONSORED CONTENT

Margins are compressed across the mortgage finance industry, and lenders are looking for solutions that help them win business in this competitive market. We interviewed Carl Tyree, executive vice president and chief sales officer at Arch MI, to find out how Arch MI’s RateStar Buydown is making a difference for its lender clients.

CARL TYREE

Executive Vice President / Chief of Sales Arch MI mi.archcapgroup.com

Q: What prompted Arch MI to create RateStar

Q: What reaction have you gotten from lenders?

Buydown?  Without a doubt, the biggest challenge for our clients is margins. Mortgage originators are operating as efficiently as they can, but with margins and volumes declining, it will be difficult for some lenders to meet their financial targets. Competitive pressure is one reason that mortgage insurance (MI) is now at the forefront of so many transactions — it can truly make a difference for the borrower. Arch MI created this unique new tool that’s similar to a rate buydown and allows you to customize your borrower’s MI premium to an exact dollar amount.



Q: How does RateStar Buydown work?  We took RateStar — our very popular risk-based

pricing solution— and gave it even more flexibility with a new feature that enables lenders to use seller incentives, lender credits and borrower funds to buy down their borrower’s MI premium to an exact dollar amount. As a dynamic pricing solution, RateStar provides competitive MI rates that are tailored to individual buyers based on a variety of loan characteristics. Using RateStar Buydown, lenders can now create the perfect combination of upfront and monthly payments for individual borrowers. Lowering the premium payments means more loans can meet DTI requirements — making the lender more competitive. Overall, RateStar Buydown offers something the competition can’t beat: a loan solution tailored to each borrower’s needs.

What we’ve been hearing the most is that Arch MI couldn’t have picked a better time to introduce RateStar Buydown. Both margins and volume have been declining, so every loan that qualifies is more important than ever. With RateStar Buydown, lenders have a tool that can help them avoid losing those qualifying loans to a competitor.

Q: What drives Arch MI to continue to innovate with MI product offerings?  At Arch MI, we’re deeply committed to innovation that increases origination opportunities for lenders. We’re the industry’s risk-based pricing leader with RateStar, which goes well beyond traditional rate sheets by evaluating a variety of loan characteristics to provide the most tailored, complete and precise MI rate. RateStar’s advanced design delivers an MI quote in seconds anywhere, including using our mobile app. We’re integrated with most LOS and pricing engines, and we back up our commitment to technology with superior support and service that we call Arch MI’s people power. We recently introduced ASK Arch MI, a time-saving service that gives originators answers to their toughest MI underwriting questions in an hour or less – at no additional cost. With these advanced products, lenders can close more loans and get more referrals, and that’s what is going to drive their business and ours over the long term.

How does it help lenders qualify more borrowers under GSE loan requirements?  First, using RateStar Buydown for lower premium payments may allow more loans to meet GSE requirements, including Fannie Mae DTI ratios and Freddie Mac AUS approvals. In addition, premiums can be lowered by ensuring that any seller incentives or lender credits are used up front and no money is left on the table.

26 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

THE AMOUNT AMERICAN SENIORS HAVE IN HOME EQUITY

TRILLION

Tom Selleck Actor and AAG Paid Spokesperson

Let American Advisors Group (AAG) be your partner in success: AAG's Concierge Experience allows your originators and processors to learn while they earn AAG's dedicated Lender Support Team guides the entire loan process from application to submission

Become an AAG Approved Partner

AAG's online marketing portal gives you 24/7 access to custom marketing materials

866-964-1109 aag.com/wholesale

*NRMLA/RiskSpan Reverse Mortgage Market Index Hits All-Time High of 244.73. NRMLA. http://aag.expert/NRMLAindex For industry professionals only -- not intended for distribution to the general public. American Advisors Group, NMLS #9392, headquartered at 3800 W. Chapman Ave., 3rd Floor, Orange, CA 92868. License information on www.nmlsconsumeraccess.org and www.aag.com/disclosure Â

VIEWPOINTS

By Casey Cunningham

How can we thrive during challenging times? Why lenders shouldnâ&#x20AC;&#x2122;t be afraid of new talent

For the first time since 1981, our industry is experiencing a rising interest rate environment. During the refinance era of the past years, we had a few increases, but the market largely saw declining interest rates. Today, we are in a completely different era. Leaders are facing shrinking margins as the cost per loan has gone out of control. They are having to make difficult decisions, looking at exactly how much staff they need in order to operate and what luxury expenses they must cut. 28 HOUSINGWIRE â?ą OCTOBER/NOVEMBER 2018

Additionally, they are leading a salesforce who is adjusting to a new market, one driven by purchase business and more reliant on digital technology than ever before. In short, the headwinds of the industry are strong, and leaders are facing them head on. If anyone knows me very well, they know that I believe challenging times are a huge opportunity. Some people may as-

Casey Cunningham is the CEO and founder of XINNIX. Based in Alpharetta, Georgia, XINNIX provides nationally recognized sales and leadership performance programs.

sume that the current market shift means their business will take a downward turn from which they will never recover. I don’t buy it. The way I see it, challenging times force us to refine our processes and practices. Leaders must be more focused, more intentional about business growth than ever before. When they begin to reevaluate their business and emphasize the things that truly matter, I believe that they can lead companies that thrive, not just survive. START BY ASKING QUESTIONS As leaders turn their attention inward to find what will drive production forward, they should begin by asking themselves some powerful questions about the way they are running their business. These questions should challenge the current status quo and open executives up to looking at new strategies for leading their organization. Here are a few examples: 1. What are my minimum standards? 2. How am I empowering my people to meet these standards? 3. What is my leadership style? 4. W hat kind of culture do I want to drive? 5. How am I going to cultivate this culture? Leaders, closely examining your business is the vital first step toward succeeding in today’s challenging market. Don’t be afraid to ask yourself challenging questions about how you can better serve your organization! DON’T BE AFRAID OF NEW TALENT I understand why an executive today would say, “This is not the time for rookies.” I recently asked a group of industry leaders about how long they expected to wait before meeting their breakeven point for a new loan officer. I was astonished to hear them say one to two years. If this is their expectation, hiring a rookie would surely seem like a risky proposition in today’s challenging market. However, I want to challenge this viewpoint. I believe there is never a bad time to hire a great sales person. I realize new LOs are an investment. They don’t enter the in-

dustry with a pipeline ready and waiting. That being said, leaders do not have to wait a year before their rookies become contributing team members. How do I know? At XINNIX, the students who go through ORIGINATOR, our program specifically designed for professionals entering the industry, are experiencing an average of 4.3 applications within their first 30 days in the market. And we get them to market in four to five weeks. So why are most managers not seeing results like these for their new LOs? They are not following this simple, three step process for hiring successful new talent:

to keep pushing for success. Get them into the marketplace as soon as possible so they become addicted to the lifestyle, income, and transformative opportunities for people’s lives that this career offers. A successful LO is an active LO. Hiring new LOs should have benefits for the entire organization. Every time a XINNIX-trained rookie joins a team, everyone around them experiences an immediate lift. New hires bring new perspective, and besides, no one wants to be beat by the new guy. When you effectively source, train, and assimilate, the fresh talent you bring in will energize your entire team.

1. Sourcing Even if someone is new to the mortgage industry, they should still possess the skills that make them a good salesperson. Leaders need to have a clear screening process in place, designated questions that will drive important conversations, and an assessment that will ensure they have strong, predictable sales skills. Also, remember that “new to the industry” doesn’t have to mean “new to the professional world.” Currently, the average age of our ORIGINATOR students is 32 years old. These are people who are on their second and third career, and they already have experience that will serve them well.

INVEST IN TRAINING ACROSS YOUR SALESFORCE As parents, we want our children to get the best education possible. We do our best to send them to the best schools so they can get into the best colleges so they can one day get a great job and have the most successful life possible. But why does this focus on education stop after college? Learning and development are never done. The minute we enter into the workforce is the minute our true education begins. Leaders, how are you equipping your loan officers to be students of their profession? In a challenging market, it can be easy to overlook training as a non-essential expense. I believe this mindset is deeply flawed. Training is an investment in your associates and the success of your business. The disciplines and strategies mortgage professionals learn through mortgage training will lead to a predictable outcome. Whenever everyone else is falling behind, they have the foundational knowledge and practical skills to thrive. Education needs to be more than something a few people in an organization are serious about. It should be engrained throughout a company’s entire culture. When every associate is constantly working to improve their business, the organization they work for will be at the top of the industry, no matter how challenging market conditions may be.

2. Training A comprehensive training program is vital for rookie success. Each associate represents that brand of an organization. Leaders do not want to send a someone into the marketplace who will be a poor representation. New loan officers still need to know their stuff! Their training should give them the knowledge, skills, and disciplines they need to do great business and be a positive brand ambassador for their company. 3. Assimilation A trained loan officer does not necessarily mean an immediately successful loan officer. Once they have the skills, they need to have the fire that motivates them

HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018 29

VIEWPOINTS

By Donna Ross

Creating a culture of IT security How to boost your company’s cybersecurity efforts

The state of corporate cybersecurity is constantly in flux. With new threats emerging and multiplying quickly, the stakes are high for making sure company systems and data are always secure. According to the 2018 Cost of a Data Breach Report, the average cost of a data breach across industries and countries is $3.86 million, a 6.4% increase from 2017 and a nearly 10% net increase over the past five years. It is no surprise that business leaders are continually looking to lessen the risks. Technology touches all employees within an organization, not just those in the IT department. Security is no different, with a commitment that trickles from the top on down. When talking about a company’s information technology and cybersecurity, the old nugget “You’re only as strong as 30 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

your weakest link,” is 100% true. Despite what some business leaders may believe, protecting an organization’s infrastructure and data doesn’t start or end with investing in a firewall. It starts with embedding cybersecurity into your company culture. At Radian, we view cyberse-

curity as an enterprise risk, not confined to just the IT department but a responsibility shared by all employees. So how do we go about creating this culture? A company-wide culture is created through good security hygiene and training for all staff members to ensure that cybersecurity practices are instilled in each individual from the CEO to the summer intern. Building this culture takes time and perseverance. Through my years of experience I’ve cultivated a few steps to help create an effective culture around IT and cybersecurity. AIM TO DISRUPT Analyze the current culture first to see

Donna Ross is the senior vice president and chief information security officer at Radian Group. She is responsible for Radian’s information security program and business compliance, as well as the enterprise project management and initiative governance programs.

where your IT and cybersecurity efforts rank. Ask questions across the organization about good security practices to help the assessment. If a company’s IT and cybersecurity awareness is low, extra effort will be needed to change it for the better. Being diligent and educating each employee about the importance of good security and the risks without it, is the first place to start. The ultimate goal of this process is to empower employees to become aware and to begin to take small but important steps. Things such as not opening unfamiliar emails and attachments, or not adding unauthorized software or apps to computers can help lower security risks. Without awareness, it is difficult to hold employees accountable for maintaining security both within the work place and in their personal lives. By establishing a clear protocol that aligns with a company’s mission, businesses can focus on continued growth instead of being bogged down by cyber threats. SECURITY SHOULDN’T BE A SECRET Transparency is critical to the success of any IT and cybersecurity program. Keeping security efforts a secret from staff can hinder a business’ success. As stated previously, cybersecurity is not a standalone issue for only the IT department. It must permeate the entire company from the board of directors and senior leadership, all the way down to entry-level positions. All employees need to have a comprehensive understanding of the company’s security strategy and the important role that they play in keeping the company, and themselves, safe online. This includes online security when logging onto a company network both in the workplace and remotely. TEACH GOOD HYGIENE Just like teaching a child the importance of regular hygiene habits, instilling good security habits for employees wards off common threats. Company-wide cyber hygiene includes practices and steps that net-

work-users of computers and other devices take to maintain a system’s health and improve online security. These practices are part of a routine to ensure the safety of both personal and company information that could be stolen or corrupted. A few key practices to include in the company hygiene checklist include: documenting and setting a standard for all hardware, software and mobile applications, analyzing the list of equipment and programs, and creating a common cyber hygiene policy. But in addition to company hygiene, it also needs to take place on a personal level. Keeping the staff safe ultimately makes the company safe. Looking for a meaningful and easy resource to keep employees involved? Radian installed a “doesn’t feel right” button on the bottom of every employees email. After viewing an email, if the employee feels as though this could be a potential cyber threat, they click the button which flags the email for the IT department for further review. According to a report by Cisco, email phishing and spear phishing – sending emails from a known or trusted sender – are well established tactics for stealing users’ credentials and other sensitive information, primarily because they are very effective. In fact, phishing and spear phishing emails were at the root of some of the biggest, headline-grabbing breaches in recent years. Two examples from 2017 include a widespread attack that targeted Gmail users and a hack of Irish energy systems. In addition to looking outward for threats, employees should update their passwords using strong letter and character combinations, and keep all security settings and patches up to date whether that is on a laptop, cell phone or tablet. Just like they do with flossing their teeth, employees need to examine the tough “cracks” in cybersecurity such as immediately deleting any suspicious and unfamiliar emails and attachments. These emails and files can be littered with viruses that have the ability to corrupt the whole IT enterprise. Being able to examine and act on these po-

tential threats will protect the data assets of your company. And of course, like the other common security adage, if you see something, say something. Viruses and threats can start anywhere so educate employees on how to identify threats and establish a protocol for how to report those threats to the IT department. MAKE IT FUN Lastly, the fact is, IT security isn’t the most fun topic to discuss. So make it fun. Create quarterly trainings for all staff members, focusing on highly targeted hacker seasons, such as tax season, company quarterly earnings and the holidays. Consider making a pop quiz contest for all employees to see if they can pass based on the IT facts that were sent to them. Or like Radian, send spoof phishing emails to see who bites. Falling for the fake scam offers a teachable moment that businesses hope will protect employees from a real threat. An IT security workplace culture needs to be intentional. Think of it as an internal campaign. When drafting a campaign, be sure to keep it meaningful, easy, time sensitive, but also make it fun. Keeping these guiding principles in mind will keep employees engaged and empowered and ultimately, it will help stop threats before they begin. Being sensitive to a colleague’s time is vital when teaching security lessons. With a full plate of daily tasks, reading endless reports and documents will most likely get pushed to the side versus becoming a priority. Be sure to keep the messaging simple by sending quick facts about trending IT security issues or current national threats to keep security top of mind. For those leading an IT department, remember that IT security does not need to sit within the walls of an office, but should spread to all staff members within a company. Balancing the needs of a business against the exposure to threats is one of the hardest things for companies to do. If a company follows good hygiene and keeps IT security fun, an IT security culture will be built from the ground up in no time. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018 31

VIEWPOINTS

By Travis Kniffen

Buy, donâ&#x20AC;&#x2122;t build Why digital lending solutions are better with a partner

In the digital age, every sort of business should offer its clients a digital experience, and lenders are absolutely no exception. Clients, including borrowers, expect to be able to interface with their lender online and at their convenience, and the elegance and ease-of-use 32 HOUSINGWIRE â?ą OCTOBER/NOVEMBER 2018

of a digital lending experience may be what decides a borrower on where to take their business. With the market as competitive as it is, lenders must decide whether to work with a partner and buy a digital lending solution or to build one on their own.

Travis Kniffen is the director of business development, partnerships at Roostify.

“

Working with a partner confers significant advantages beyond the oft-cited costs and maintenance. With the right partner, you benefit from perspective, experience, and even their business relationships.”

At first blush, building one’s own solution can sound like the smarter call. After all, you can build exactly what you want, right? The reality is not that simple. In fact, “Build vs. Buy” isn’t really even an accurate way to describe your options – it’s really Build vs. Partner. Adopting a digital lending solution isn’t like buying a widget, where you transact for a static commodity product and then you’re done. You’re paying your solution provider not just for their product, but for their expertise, support, advice, and singular focus. Your digital lending solution provider isn’t just a vendor – it should be a true partner dedicated to helping you succeed in your business objectives. And there are a number of ways that a partner is uniquely able to accomplish that. THE VOICE OF THE CUSTOMER When people talk about the drawbacks of developing solutions internally, they usually bring up things like development costs and ongoing maintenance and areas of expertise. But there’s another disadvantage as well, one that every organization suffers from: the echo chamber. Even with the best of intentions, it’s incredibly difficult to overcome internal idiosyncrasies when building internal solutions. By nature, everyone involved in development shares the perspective of the lender. A partner provides an external voice, and can represent the perspective of the end user, who might otherwise get unintentionally overlooked or underserved. The best partners are willing to challenge your internal status quo to provide a bet-

ter experience for your customers – which ends up also benefitting you, in the form of stickier relationships and happier customers. CONTINUOUS INNOVATION: FOCUS ON TIME TO MARKET NEVER ENDS The market doesn’t stand still, and yesterday’s cutting edge is today’s table stakes. Without constant innovation and development, a digital experience quickly grows dated – which means that a successful experience is never really finished. In practice, this means that lenders that build internally need to run a perpetual software shop to keep their solution current. Even if a lender is large enough that this is financially viable, it still represents a significant distraction from their core competency and purpose. For technology providers, on the other hand, it’s their raison d’etre. Using a partner means that the lender benefits from a singular focus on product, innovation and iteration. Without the distraction of an entirely separate business to manage, the tech partner can be relentless in pursuit of innovation and bring that innovation to market far faster than the lender could. A tech partner also has the advantage of multiple perspectives from multiple clients, which translates into a shared experience benefit for all their clients. Want to try deploying a new workflow? If your partner has already done a similar deployment with another client, you’ll benefit from their experience by getting up and running that much smoother. That’s not even counting the other ben-

efits of partnering with a tech provider leveraging the public cloud – like fast deployment, easy scaling, and disaster recovery the lender doesn’t need to worry about. BEHOLD THE NETWORK EFFECTS The lender doesn’t just benefit from their partner’s architecture and development resources. They benefit from their partner’s biz dev as well. The solution provider has partners of their own, and brings in other players and services that benefit the lender – from CRM and LOS providers to services like appraisal and insurance. This enables the lender to further innovate ways to connect with their customers, and further increase their own workflow efficiency, without having to invest the time and expense of individually researching, pursuing and implementing partnerships with each potential provider. Their digital lending solution provider does the hard work, and the lender is able to reap the benefits of the richer solution. The network effect goes beyond the service provider landscape. Just like social networks, the more people are using a solution, the more it becomes the preferred platform for everyone else. Real estate agents, for example, play a vital role in the home-lending ecosystem, often pointing their clients toward preferred lenders when it comes time for a mortgage. As we have seen on our own platform, when a real estate agent gets used to working with lenders on a particular platform, they want their other lender partners to use it as well. When a lender adopts a solution that already has a user network, they also inherit that network. Building a digital lending solution inhouse may sound like a recipe for exactly what you want. But working with a partner confers significant advantages beyond the oft-cited costs and maintenance. With the right partner, you benefit from perspective, experience, and even their business relationships. Offering a digital experience is now a requirement for successful lenders – and a good partnership is the fastest, most sustainable way to get there. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018 33

VIEWPOINTS

By Joe Markham

3 ways lenders can service borrowers with a good or prime credit score Steps to provide loans that work for both lenders and borrowers

Todayâ&#x20AC;&#x2122;s mortgage brokers and lenders are looking for higher credit scores, leaving worthy borrowers with fair credit scores struggling to find reasonable rates on mortgages. Research from the Joint Center for Housing Studies at Harvard University found that the median credit score for owner-occupied home purchases jumped from 700 in 2005 to 732 in 2016. With brokers becoming more selective about credit scores, plenty of would-be homeowners with fair credit scores find themselves overlooked by banks. 34 HOUSINGWIRE â?ą OCTOBER/NOVEMBER 2018

Joe Markham is the founder and CEO of Block66, a blockchain-powered platform that increases transparency, streamlines capital deployment and overcomes geographical lending restrictions in the mortgage industry.

No one wins when lending standards are imbalanced. Borrowers want to own homes, but no one will lend them the money. Lenders want to make money, but they pass up opportunities to extend credit to people with the means and disposition to pay them back. To correct this issue, lenders must adjust their approach and start providing reasonable loans to qualified buyers. WHY GOOD PEOPLE DON’T GET MORTGAGES Brokers and lenders still feel the heat from the financial crisis of the late 2000s. After the bubble popped, the U.S. government implemented new regulations to limit the likelihood that subprime lightning would strike twice. Unfortunately, those regulations — while a necessary step to curb bad practices — made lenders a little too gun-shy about lending to anyone with lessthan-perfect credit. Right now, buyers are being squeezed by those regulations. Interest rates remain exceptionally low, and people with money to spend are eager to put their savings into homes at great prices. When banks won’t finance their loans, people get frustrated and banks miss out on dependable revenue. Recent government actions have softened the regulatory climate, though. Rollbacks to the Dodd-Frank Act from the Trump administration give bankers more leeway than they enjoyed in the years immediately after the crash. However, if banks are to correct the imbalanced environment, they must use their newfound breathing room to extend more (responsible) loans to people who have good enough credit to deserve them. HOW BROKERS CAN WORK WITH GOODTO-PRIME CREDIT Borrowers with prime credit are lenders’ best friends. They pay on time, default infrequently, and generally keep the mortgage lending process simple. Borrowers with good credit, while not as desirable as their prime brethren, still offer lenders a dependable avenue to earn income on

mortgage loans. LENDERS SHOULD FOLLOW THESE THREE STEPS TO PROVIDE LOANS THAT WORK FOR BOTH SIDES: 1. Diversify the portfolio If brokers want to service borrowers with lower credit scores, they have to give those borrowers a fair shot. Too often, lenders offer six-month plans to which borrowers can’t commit, losing the deals and frustrating the buyers. Rather than hold every applicant to the highest standard, banks should offer a diverse range of loan options to attract qualified buyers of all kinds.

ing every document is trustworthy. This works across borders as well, which can help lenders handle their share of the $135 trillion in cross-border payments made annually. Lenders can even use blockchain to track payments after the mortgage is signed, making it clear which borrowers are keeping up with their payments and which need closer attention. 3. Put education above rejection Mortgage brokers are quick to deny and slow to explain. Rather than leave borrowers frustrated by their predicaments,

“

o one wins when lending standards are N imbalanced.”

Home loans come in a multitude of flavors. Thanks to homebuyer assistance programs, many different types of buyers can qualify for loans they might not expect. Banks should work with these programs to offer their customers a range of options to fit their needs. Down payments and closing costs can frighten first-time homebuyers, but with a little knowledge and assurance, these fledgling borrowers can become big income sources for lenders who serve them. 2. Use blockchain to simplify the process The mortgage industry used to operate in a series of stops and starts. Thanks to blockchain, that clunky process has become a streamlined, efficient machine that provides accurate information to everyone involved. Blockchain offers an immutable audit trail for brokers and lenders to follow when verifying applicant information. This prevents borrowers from modifying information after the fact, creating a trustless process that eases the concerns of banks that service borrowers with lower credit. Blockchain also allows brokers to pull financial information (such as pay stubs) directly from the source, ensur-

lenders should provide tips to help their customers increase their credit scores to qualify for better rates. Improving a credit score is a simple process, if not an easy one. Lenders should encourage prospective borrowers to keep track of their scores through their banks or through free services online. Meanwhile, borrowers should understand that each credit bureau — Equifax, TransUnion, and Experian — calculates scores differently. They should also understand that they can fix their credit scores quickly by removing inaccurate information. If an account appears in error or if an on-time payment shows as missed, the person affected can dispute the issue with each bureau, who will remove the inaccuracy and provide an immediate (and often significant) boost in score. People with great credit scores aren’t the only ones with money to spend. Lenders have an opportunity to serve a much wider, more profitable market, but to do so, they must broaden their horizons. By offering a wider range of options and using blockchain technology to create a trustless process, banks can increase their revenue while providing the loans that good borrowers deserve. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018 35

Photos by Shane Karns

How Rick and Patty Arvielo are leading New American Funding to record growth By Sarah Wheeler

HOUSINGWIRE â?ą ORCTOBER/NOVEMBER 2018 37

The first thing you notice about Rick and Patty Arvielo is how much they like each other. That might seem like a foregone conclusion when you meet a married couple, but when that couple also runs an incredibly successful business together, I imagine it could get complicated. Not so with the Arvielos, whose affection is evident throughout the morning we spend at the New American Funding office in Orange County. They tease each other during the photoshoot and have to be told several times to stop smiling at each other. When we sit them in chairs that are about five feet apart, something seems off in the pictures. “I’m usually not this far away from him,” Patty says. Sure enough, moving the chairs closer brings the shots back into harmony. Such domestic bliss is reflected in the way the two lead New American Funding, where they operate within their respective areas of expertise as a unified team — with phenomenal results. Since starting the company in 2003, Rick and Patty have grown New American Funding into a lending and servicing powerhouse which now funds approximately $980 million a month in home loans and has a servicing portfolio of more than 100,000 loans for $26 billion. The company’s skyrocketing growth has landed the company on the Inc. 5000 list of fastest-growing private companies an astonishing six times. New American Funding now has 165 branches and almost 3,000 employees, and it continues to expand. The company’s success isn’t just measured in growth, however. New American Funding and the Arvielos have racked up awards from Ernst and Young, Best in Biz, Stevie American Business Awards and NerdWallet. HousingWire recognized Rick and Patty in its inaugural Vanguard Awards in 2015, and again in 2017. Patty has been recognized as a HousingWire Woman of Influence for the past two years. What’s the company’s secret sauce? The complementary nature of the strengths of its two leaders. With a strong background in technology, Rick serves as CEO, while Patty, who has extensive sales and mortgage experience, is president. Together, they were able to bring all the mortgage and technology functions in-house, 38 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

driving an efficient, innovative company culture focused on giving loan officers everything they need to succeed. Rick’s deep technical expertise gave the company an early advantage as it developed solutions to provide a complete back-office organization for loan officers. These assets include microsites, social outreach, co-branded marketing collateral, a mobile app suite, coaching help and more, fueling the 23-day average closing time for its loans. Patty’s ability to build and motivate a passionate sales team is another critical factor. She sets the example through her own work, originating and booking millions in home loans each month while still managing the company’s operations and sales. The company continues to evolve alongside the ever-changing market. New American Funding was quick to recognize the shift in consumer behavior that drives borrowers to engage with lenders before they contact real estate agents. The company understood that it needed to capture those borrowers with excellent service at the very start of their loan process, so it leverages a massive volume of data to put accurate information at its loan officers’ fingertips, optimizing its call center to capitalize on those leads while still building relationships with Realtors. New American Funding’s resounding success has inspired a whole class of competitors who want to disrupt the industry in the same way. But while other lenders can try and copy New American Funding’s technology or operations, the synergy between Rick and Patty presents the biggest challenge. In their case, the whole is much greater than the sum of its parts.

A PASSION FOR PEOPLE The elegant sophistication of Patty’s office at New American Funding provides a fitting backdrop for the roles and responsibilities she juggles as president. She works at a smooth marble-top desk with plenty of room to collaborate with Rick or other team members, with white leather chairs and a gorgeous chandelier transforming the office park setting. Photos of Patty and Rick with numerous celebrities and several former presidents share space with framed artwork from her children.

Patty’s 30 years of experience in the mortgage industry started when she was just 16, working at TransUnion in a clerical position. She was promoted to a sales position at 19 and never looked back, forging a career that includes leading the operations unit of an independent broker shop before starting New American Funding. Looking at Patty’s long list of responsibilities today is daunting. She is a tireless advocate of expanding homeownership opportunities for Hispanic borrowers, serving as a member on the Corporate Board of Governors for the National Association of Hispanic Real Estate Professionals and spearheading the Latino Focus Committee within New American Funding. She also created the New American Dream initiative to increase homeownership in African-American communities and serves on the Diversity and Inclusion Committee and the Consumer Affairs Advisory Council for the Mortgage Bankers Association. Her influence extends to Washington, D.C., where she frequently lobbies on behalf of the industry and homeowners. She is a former member of the Fannie Mae Affordable Housing Advisory Council and both Freddie Mac’s Community Lender Advisory Board and Affordable Housing Council. She has recently joined the Latino Donor Collaborative board. In addition, Patty is highly involved in mentorship, providing a roadmap for women — especially minority women — to achieve more than they ever imagined. Yet Patty doesn’t interact like someone who is stressed out. On the morning we meet, she and Rick are hosting their leadership team from around the country, but she has tamed the whirling tornado of obligations into a calm

focus. She is serious, but also warm. She gets the most animated when she talks about the people involved in the loan process — from the loan officers behind the scenes to the borrowers they are helping. Her family, her employees and even those people she hasn’t met yet who could be her customers, these are her motivators. She is on a mission, and when you spend time with Patty, you know it’s a mission she will accomplish.

With a strong background in technology, Rick serves as CEO, while Patty, who has extensive sales and mortgage experience, is president.

FINDING SOLUTIONS Rick’s office is sleek, straightforward and modern. He has an easy smile that extends to a grin when he looks at Patty. He is funny and accommodating during our photo session, which is squeezed in between meetings with the company’s senior leaders. Rick started his first company when he was 16 and he specialized in finding technical solutions for other industries before he founded Broker Solutions Inc. in the early 2000s. His passion to optimize every part of the loan process for more efficiency is contagious, and it’s easy to see why he is the 2017-2018 Chairman of MORPAC, the MBA’s Political Action Committee. He seems like the type of person you would be excited to vote for, but is too genuine to be labeled a politician. His face lights up when he talks about the innovation behind many of the tech solutions he has spearheaded at New American Funding, from its robust CRM platform to its latest mobile app, GoGo LO. As individuals, Rick and Patty are overachievers who would thrive in any environment. Working together, they make a formidable team that is transforming not only their own company but the larger mortgage ecosystem. HOUSINGWIRE ❱ ORCTOBER/NOVEMBER 2018 39

RICK AND PATTY ARVIELO Q: New American Funding had its beginnings as a call center. How did that influence how the company grew or what it does today? Patty: New American Funding’s call center was created to facilitate Rick’s ability to market loans, which is how he started in the business. At the time, I was running operations for New American Funding and the call center, though my background was in distributed retail. I told Rick if we really wanted to grow and not fear refinance cycles, we needed to open branches and hire outside loan officers. This was just six years ago. In the beginning of this journey, many recruits would ask, “Why would I come work at New American Funding? You’re just a call center.” Every single time, my reply would be, “This call center will be your best asset in the near future.” Now we have our call center and outside sales force working as one team, at the speed in which the consumer wants to be served. They work hand-in-hand to enhance the customer experience. Q: Rick, your forte is applying innovative technical solutions to the mortgage process. What do you do personally to stoke your creativity? Is that something that you also encourage/facilitate in your team? Rick: It really is what I am passionate about. I love getting in the trenches with my team and working closely with our LOs in the field to help us determine 40 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

what or how we can do things better. We discuss things in the most minute detail. I truly enjoy the process and so does my team. We all collaborate and they have the authority to articulate their positions, which oftentimes are better than mine. I feel we get the best results that way and our LOs deserve it with the hard work they do. Q: Patty, you’re renowned for creating a top-producing sales force. At what part of the interview or hiring process do you know you have a superstar in the making? Patty: It’s when I know they are aligned with our culture and mission to serve. I think we do a really great job in recognizing talent. It’s similar to how we nurture a sixth sense about knowing who a client is and what they may be looking for in a home before they walk in the door.

Rick and Patty have grown New American Funding into a lending and servicing powerhouse which now funds approximately $980 million a month in home loans and has a servicing portfolio of more than 100,000 loans for $26 billion.

Q: Increasing homeownership among Hispanic consumers is a critical part of New American Funding’s mission, prompting you to establish the Latino Focus Committee in 2013. Where do you still see major roadblocks in the industry in being able to effectively serve this market? Patty: There are many roadblocks in serving this very important demographic: access to capital, education, lack of affordable housing, but the thing I feel we can change quickly is the lack of Latino loan originators. There is a lack of representation in this segment of the mar-

ket, and we have put an emphasis on recruiting young Hispanic talent. We put them in our STEP program so they are offered education and training in many areas of mortgage. We also have many successful Latino loan originators — it’s not hard to find a mentor where you can see yourself. Q: What is something you do every day that helps with the stress of your demanding schedules? Rick: We work out, walk a lot and genuinely enjoy being together. When one needs a shoulder, the other is always there. And, we always have plenty to talk about because we both run this incredible company and have amazing family and friends. Patty: When I feel like I can’t take anything more, I look forward to running home to my best friend, my husband. Q: What is the one object/thing/tech gadget you absolutely can’t do without in your daily life? Rick: Our smartphones. Patty and I have an amazing life filled with travel, philanthropy, family and business. We can enjoy all of these things because we really never disconnect. The automation we have developed through our tools allows us to stay engaged regardless of where we are in the world and we are intimately engaged with our teammates and love the comradery that comes from that. Q: In the 15 years since starting New American Funding, what have you learned about working together as a married couple who are also business partners? Rick: I think the most important thing is that we both know and respect each other’s strengths. And because our strengths are completely different, it balances out very well. We both know when to push our viewpoint and when to let the other lead. I think that is a crucial ingredient to a healthy marriage too. We are definitely better as a family and a business by our combined strength than we would ever be individually. Patty: Our secret sauce is our mutual respect for one other. I admire my husband more than any other person in this world, and I don’t hide letting him know.

Q: Patty, you often get asked on your social media how you “do it all” as a successful businesswoman and mom. What is hardest to balance in this area? Patty: I don’t seek balance. It’s a lot of pressure on a working mother to constantly seek something that really doesn’t exist in my life. I cherish my time as a mother, wife and president of a thriving company. Sometimes I win in all areas, and sometimes I lose, but I have learned to rid myself of guilt and it’s been very liberating. Q: NAF now has approximately 3,000 employees. How do you continue to inspire a passionate workforce as the company gets larger? Rick: I think being as engaged as we are engenders inspiration from our team. They see we are passionate and engaged and, because we nurture it in our culture, it compels others to want to engage with us. We are a family and who doesn’t love a great, big, passionate family? Q: You had Snoop Dogg perform at your last Christmas party. How in the world do you top that? Patty: Snoop Dogg is my favorite hip-hop artist, so in my world, I won’t be able to top it! But I’m sure I will find a way to spoil our team members! HOUSINGWIRE ❱ ORCTOBER/NOVEMBER 2018 41

42 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

SQUEEZED How independent mortgage banks are dealing with low volumes and overcapacity BY JEREMIAH JENSEN

Consumers want flexibility and capability along with boutique treatment. This is the ethos of modern demand in just about any market imaginable. It is no different in the mortgage space. According to J.D. Power’s 2018 Retail Banking Advice Study, 78% of responders in the survey said they wanted to interact with their banks and receive financial advice from them. At the same time, 58% of responders said they wanted to receive the advice they seek through a mobile or webbased banking application. Demand demands more than simple digitization. It demands digitization with a personal touch. At the same time demand is evolving, it is also contracting thanks to an economic bottleneck. Mortgage Bankers Association Chief Economist Mike Fratantoni points to a strong economy pushing interest rates up as one of the primary reasons for this bottlenecking in mortgage originations.

75%

According to recent data from Ellie Mae, purchase applications now make up 75% of all mortgages while refinances hover around historic lows, meaning that, so far, Fratantoni and the MBA’s prediction is dead-on. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018 43

78% “We went from a market which was a $2 trillion market in 2016 [to] we estimate it’s going to be $1.6 trillion in 2018 with more than a 60% decline in refinance volume,” Fratantoni told HousingWire. According to recent data from Ellie Mae, purchase applications now make up 75% of all mortgages while refinances hover around historic lows, meaning that, so far, Fratantoni and the MBA’s prediction is dead-on. Even though a strong economy is drumming up demand for homes, low supply and abysmal affordability conditions have prevented that demand from coming to fruition or filling the gap refis left behind in their fall from grace. “The strength of the job market and demand for housing has meant that purchase volume has increased over that time period, but not enough to offset that decline in [refinance] volume,” Fratantoni said.

The strength of the job market and demand for housing has meant that purchase volume has increased over that time period, but not enough to offset that decline in [refinance] volume.

According to J.D. Power’s 2018 Retail Banking Advice Study, 78% of responders in the survey said they want-

ed to interact with their banks and receive financial advice from them.

On top of the economic factors, the liberal application of regulation has ballooned the cost of origination such that margins are wasting away right along with volume. According to MBA data, the cost of origination has roughly doubled in the last decade, such that it now costs more than $8,000 to originate a loan. “With that, it’s become more difficult for lenders to be profitable because, with the decline in volume, you have a lot of lenders chasing each loan. So, revenues are not increasing, and costs are high,” Fratantoni said. “Our profitability numbers have shown a steady decline and in the first quarter of this year we even saw that independent mortgage bankers were on average showing a loss. Only about 60% of them are profitable even with their servicers cut,” he added. During 2018’s MBA Secondary Market Conference, Mike Weinbach, CEO at Chase Home Lending, called the market “brutally competitive,” and said that a “shakeout” is in order. The sooner, the better, he says. On the same panel at MBA Secondary, Stearns Lending CEO David Schneider agreed saying that, “Capacity needs to come out of the system. There has been a lot of growth in independent banks, but they built their business with margins much higher than we see today.” So, what is an independent mortgage According to MBA data, the cost of origination has roughly

doubled in the last decade, such that it now costs more than $8,000 to originate a loan. 44 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

bank to do? Many have turned to each other or to larger banks and started furiously shaking hands in search of increased capabilities and greater liquidity. A recent example of this was when Pea k stone’s Mor tgage

digitization like [customer] journey mapping, design thinking, technology, etcetera, to do things better, faster and obviously cheaper,” she added. Alvis says a front-to-back evaluation and revamp of an independent

It may be a while before we’re able to come out of that [affordability crisis], but that’s why it is so important for lenders, and IMBs [and] the major banks or whatever to be able to offer different products to help with affordability. – Cassandra Alvis, Digital Risk

Banking Group announced it was working with “a well-capitalized firm looking to acquire mortgage banks with strong origination.” Big names like Amazon and Zillow are also reflecting this trend. These companies are on the prowl for smaller lending operations they can roll into their revenue streams. Another way IMBs are responding to adverse market conditions, sometimes in conjunction with a merger, is a redesign of their model, one that accounts for the absence of the refi market and puts a premium on customer centricity. “We are seeing some of the smaller banks that are consolidating especially if they popped up to fill the void,” Digital Risk Vice President of Business Development Cassandra Alvis told HousingWire. “But what we’re also seeing is that they are embracing the digital space that’s allowing them to look at their model, if you will, in order to determine if they can utilize the

mortgage bank’s processes can position it not only to weather this storm, but also to be able to remain competitive in the long game. “We all were in our fuzzy slippers with the refinance market, but obviously now, that’s gone away. So, we’re kind of riding back to where we were in the early 2000s with regard to it turning into a purchase market, Alvis said. “So, a lot of lenders are having to flip their models along with digitization,” she added. The good news is that, by nature, IMBs are a little nimbler than the traditional banks. This has served them well, and will continue to, as they scramble to reposition themselves above the tide. According to Alvis, these conditions are going to persist. There are cogs in motion in the government-sponsored enterprise realm that may get the mortgage market out of its gridlock, but they will take a while to jar the market out

of its low volume rut. That is why Alvis says it is critical that lenders be flexible and creative. “It may be a while before we’re able to come out of that [affordability crisis], but that’s why it is so important for lenders, and IMBs [and] the major banks or whatever to be able to offer different products to help with affordability,” Alvis said. If a lender is to survive this dry spell, it needs to be able to find customers where others don’t and keep borrowers when others can’t. Until the good times come back, it remains to be seen how far the consolidation in the market will go. Fratantoni says it all depends on the relationship between demand and excess capacity. “How far do we need to go? Looking at the first quarter of this year, the profitability metrics that we track, the net production levels, for IMBs went negative 8 basis points. On average, that’s been about 60 basis points over the last decade or so. I think that could be the indicator of when we’re to the appropriate capacity,” Fratantoni said. “Historically, we’ve had these periods of 18- to 24-month consolidation periods, and I think we’re about halfway through that,” he added. Recently, the industry has been showing some signs of life. MBA data reveals that while the first quarter showed that negative 8 bps in profitability, the second quarter surged back 29 bps such that the market is now at 21 bps in pre-tax production profit. This is a far cry from the 60 bps Fratantoni says the market needs to get back to normal, but it is an encouraging sign that the market is correcting itself at a healthy clip. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018 45

AAG’s Reza Jahangiri on the reverse mortgage lender’s massive rebrand and why he’s betting big on the home equity market By Jessica Guerin

46 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

olding tight to a quarter of market share, American Advisors Group is a goliath in the reverse mortgage space.

Its TV campaigns featuring the late Fred Thompson and Tom Selleck have grabbed the attention of thousands of America’s retirees, pushing its loan volume far past the competition, regularly beating out the second-best by more than double. But HECM volume has tanked in recent months as the industry attempts to regroup after major, unexpected program changes introduced last fall. The new guidelines limited the amount of proceeds and reduced the number of consumers who could benefit from the loan. The result has crippled an industry that was already struggling to find its footing. Despite numerous studies pointing to the loan’s value in strategic retirement income planning and the official shedding of its onerous label as a loan of last resort, reverse mortgages haven’t been able to elevate their reputation. They continue to be mispresented in the press and maligned by the public, despite the fact that a significant number of Americans could use the loan to effectively bolster their finances in retirement. These problems have plagued the product for years, and the most recent program revisions from the Department of Housing and Urban Development aren’t helping matters. The latest data from analytics firm Reverse Market Insight shows that HECM endorsement volume fell 15.5% from May to June, falling to just 2,833 endorsements and achieving a low the industry hasn’t seen in 13 years. To survive in this climate, some lenders in the space are consolidating or launching private reverse mortgages. But not AAG. The industry’s No. 1 lender is taking an entirely different approach. In June, the California-based company announced its official rebrand as a holistic provider of home equity solutions. With a mission to help seniors “retire better,” the lender expanded its offerings to include conventional and FHA refinance loans, plus real estate services specifically designed to help seniors looking to buy or sell home. The move is a bid to embrace the home equity market, based on a growing belief that the house will become an essential part of the equation to solve the retirement income crisis that is slowly tightening its grip on this country.

HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018 47

HousingWire sat down with AAG’s CEO Reza Jahangiri to talk about the lender’s shift in focus, the future of the reverse mortgage space and the important role home equity has to play in shaping the financial future of America’s retirees. Q: Congrats on the rebrand! Tell me about the vision behind this move. The vision was to transform AAG into a product-agnostic, solutions-based company that is focused on helping seniors “retire better” by tapping into their home equity. To do this, we had to move away from only offering the HECM to, instead, offering a full suite of home equity solutions, including HECM, proprietary reverse, traditional mortgages and real estate services. The reason for this was that it was apparent that the HECM business model was not moving the needle on helping millions of seniors consider using home equity more strategically. In short, we were not achieving velocity or increasing market penetration by being 100% HECM-focused. Considering that half of the nation’s seniors experience a decline in their standard of living in retirement, with many relying solely on Social Security for income, this just wasn’t acceptable. We decided it was time to come at it a different way, to open more doors. In our research, we learned that seniors need to feel confident in their decisions and a big part of that process is being given options. We also learned that many customers who decided against a HECM went

on to either downsize or extract equity another way. Based on those insights, we changed our entire business model from being a monoline, product-focused company to a solutions-based business offering a wide range of options. The transition was pretty seamless, because offering options fits extremely well with AAG’s consultative sales approach. Q: Do you think we will see other reverse lenders pivot in this climate, either by consolidating or branching out? Consolidation and branching out are natural attributes of an evolving marketplace. In that regard, I expect we’ll see some changes in the industry. For now, this transformation puts AAG in a category all our own, a category of one. There is no other company focused exclusively on seniors that offers a full suite of solutions in connection with home equity and retirement. Q: AAG has been reverse-only since its inception in 2004. How do you intend to navigate the challenges that are bound to arise when you expand your product suite? We’ve been navigating this transformation over the past three years. We began the ac-

tual build-out in late 2016. In other words, we did not make the decision to expand our product suite overnight. It started with a significant amount of data analysis and research, followed by market testing of the new brand messaging and product lines. The feedback and results from the testing phase were so strong that we felt confident going in this new direction, especially since we were able to address many of the implementation challenges during the testing phase. Q: There’s been a lot of innovation on the proprietary front this year, which I suppose is one good thing to come out of low HECM volume. Do you think we’ll see private reverse mortgages eventually taking up a bigger slice of the pie? We are at the beginning of a very important journey with regard to proprietary products, and we have a ways to go before we can compete head-to-head with government products (if ever), especially for lower home value borrowers where government will probably always have a stronghold. Iteration will be key. The only way to grow the pie is to keep iterating – to offer more and different product attributes that serve different segments of the population. If we can do that, then we should see continued growth in market share for private reverse mortgage products. Q: For more than five years now, AAG has been leading the pack in reverse mortgage lending. What has propelled the company to such success? Care to share the secret sauce? AAG quickly grew to No. 1 after launching our highly recognized national advertising campaigns featuring celebrity spokespeople, like former senator Fred Thompson and Tom Selleck. But where we really differentiate ourselves is in our tendency to break with convention. We invest in the dips and double down, for instance, even when the market

48 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

“We’re in the middle of a mindset shift in society. We’re really in the early days of home equity being utilized in retirement, and we’re starting to see experts and consumers embracing the concept.”

is down. That’s because we believe strongly in the thesis – that seniors are facing a financial crisis and that home equity has to be part of the solution – and because of this we have stayed the course, independent of the market conditions. And that strategy has been working. With every downturn, we have come out the other side with more market share. We have also done well guarding against the volatility in the HECM market by building a larger balance sheet and diversifying our revenue streams, including adding a third-party channel, distributed sales; becoming a master servicer/ Ginnie Mae issuer; and now adding more home equity products to really become a home equity solutions business rather than solely a reverse mortgage company. Beyond that, we built an incredible team and a mission-driven culture based on core values of being caring, driven and ethical. Q: HUD’s latest round of HECM changes have taken a chunk out of volume. I’ve heard HUD has been open to discussions with the industry about the impact. Do you expect it to reassess PLFs and other issues? Does it need to in order for the market to rebound? For the HECM program to continue its mission to serve America’s seniors, it needs a strong financial footing that effectively manages the risks on behalf of America’s taxpayers. In that regard, HUD has made a series of changes over the past five or six years to the origination (front-end) side of the program. A number of these changes have made the program more sustainable and responsible, and safer for consumers, lenders and the government. But the root of the Mutual Mortgage Insurance Fund volatility really lies in the servicing (back-end) management of the program and in some of the modeling assumptions. We have spent a lot of time over the last year researching this, and this administration has the potential to

not only ensure negative subsidy of prospective originations, but also to help stop losses attributable to the legacy books of business. It is a big undertaking and will take a lot of effort on the part of HUD. Once the government addresses the back-end management issues and the program is fiscally sustainable, we will be able to have discourse around bringing some of the features that were better for consumers back to the table. Both the fund stability and potential for things like risk-based pricing being back in the equation will pave the way for sustainable growth in the market. At the end of the day, the HECM is the only loan specifically designed for seniors. It really is the most elegant and most underutilized of the retirement tools. Q: In your mind, what does the reverse mortgage market look like 10 years from now? We’re in the middle of a mindset shift in society. We’re really in the early days of home equity being utilized in retirement, and we’re starting to see experts and consumers embracing the concept. In that regard, we’re on the cutting edge, because in the future we feel that tapping into home equity is going to be much more prevalent in the lives of retirees. This has been talked about for many years, especially by people in our industry, though we are finally hitting an inflection point in the data as well as public awareness/sentiment. In addition, entitlement reform is going to move from rhetoric to a reality over the next 10 years. That is going to place increased pressure on our seniors to come up with private alternatives to funding their retirement. As the home equity concept starts broadening out, reverse mortgages will rise with that tide. The HECM is elegantly designed to meet seniors’ cash flow needs, and the product enhancements made by government will ensure that it continues to play an important role.

Baby Boomers won’t downsize homes anytime soon Instead, they’re working longer and the kids are living with them Baby Boomers are staying put and their kids are sticking with them. A recent study by Trulia examined the housing situations of homeowners 65 and older and compared it with a decade ago. It uncovered a 3.4% jump in the number of seniors working in 2016 compared with 2005, and a 1.7% increase in the number living with younger generations. It also showed that seniors appear to be holding off on downsizing just the same as they were 10 years prior. Only 5.5% of seniors moved, according to Trulia, and of those who did, the split was pretty even between single-family and multifamily residences. But Trulia analyst Alexandra Lee points out that while the percentage of downsizers hasn’t changed, the number of those moving actually has. “Because the Boomer generation is so much larger than previous generations, that 5.5% moving rate translates into very different raw numbers across the years,” Lee wrote. “There were about 7 million more senior households in 2016 than 2005, meaning 386,000 more senior households moved in 2016.” The age at which seniors decide to downsize has also shifted. The survey revealed that in 2005, seniors were moving into multifamily residences by age 75. By 2016, this had moved to 80. The study sought to examine whether Baby Boomers holding onto their homes was driving up home prices. In looking at the nation’s top 100 metros, it determined that Boomers were not eroding affordability. “Like the general population, seniors in expensive and unaffordable metros rent at much higher rates,” Lee wrote. “The higher the income required to purchase the median home, the lower the proportion of senior households that could downsize.” Lee pointed out that a lack of affordable options for downsizing is likely part of the problem. “The acute shortage in starter home inventory can make it difficult for retirees to move to smaller homes. Not only are seniors not responsible for making inventory-scarce metros unaffordable, they’re feeling the inventory pinch themselves.”

HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018 49

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

UNITED WHOLESALE MORTGAGE

| SPONSORED CONTENT

Winning by putting mortgage brokers first One in every five loans closed by a mortgage broker goes through UWM

nited Wholesale Mortgage prides itself on one accomplishment more than anything else. More than its industry-leading turn times, and more than the fact that it is the fastest-growing mortgage lender, overall, in the country, UWM is proudest to say it has played a hands-on role in growing the mortgage broker channel. According to Bureau of Labor statistics, the number of loan officers, processors and other mortgage professionals employed in the wholesale channel has grown from 55,000 in 2011 to 94,000 at the end of 2017. But why is that the achievement that UWM highlights and circles on its resume? Because, according to UWM President and CEO Mat Ishbia, that’s where it all starts. “Everything we do as a business is for mortgage brokers, and everything we’ve been able to do as a company is because of mortgage brokers,” Ishbia said. “All of our technology, client service, marketing support, operational processes, it’s all designed to help brokers grow their business. When mortgage brokers grow their business from doing eight loans a month to 12, or from 15 loans a month to 20, we grow our business at UWM along with them.” It’s a simple concept: When a company depends completely on increasing its clients’ business in order to grow its own business, all of its objectives should put its clients’ needs first. Mortgage brokers have indeed taken kindly to UWM’s committed efforts to growing, and the results show in the numbers. Through the first six months of 2018, UWM had taken a commanding 20.4% of 50 HOUSINGWIRE ❱ MONTH 2018

gage brokers first and provide them with extra resources aimed at growing their business.

These resources include:

market share in the wholesale channel en route to closing $19.4 billion in loan volume. The closest competitor, Caliber Home Loans, closed $6.2 billion in loans for a 6.6% market share in the same timeframe. Astonishingly, UWM’s market share means that one in every five loans that a mortgage broker closes in the United States goes through UWM. But Ishbia is quick to spin it the other way for motivational purposes, pointing out that it means that, “For every 100 loans, brokers are sending 80 of them somewhere else, which means we can do our jobs even better.” The thought of UWM realizing that it “can do its job even better” is a noble and humble mindset from UWM’s leader – and a scary thought for the rest of the industry. The company is already closing loans in an average of 14 business days. It already has some of the best pricing on Elite loans and some of the cheapest mortgage insurance rates in the country. UWM is at the front of the line when it comes to technology it gives mortgage brokers access to, like the nation’s first-ever true 100% virtual e-closing process, which allows mortgage brokers to give a consumer a full virtual mortgage experience from application through closing. In addition to those business-focused items, UWM has also gone above and beyond its industry competitors to put mort-

• Broker Brilliant Ideas: Mortgage brokers can submit their feedback and ideas for implementing or improving tools and services directly to UWM, many of which get executed. • Marketing Toolbox: A library of resources to facilitate communications and marketing efforts with borrowers and real estate professionals, including customized flyers, social media posts, email and press release templates, radio scripts, videos, and more. • FindAMortgageBroker.com: A website that educates borrowers, real estate professionals and loan officers on why the wholesale channel is the best choice across the board – and helps consumers and real estate agents easily locate a mortgage broker in their local area. That focus on putting mortgage brokers’ best interests at the front and center of its business objectives is what has earned UWM its reputation as one of the “good guys” in the wholesale industry, based on the lender scorecards that have been developed by the broker advocacy movement BRAWL (Brokers Rallying Against Wholetail Lending). BRAWL has cast a spotlight on every wholesale lender in America by evaluating them on a number of metrics and rating

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

UNITED WHOLESALE MORTGAGE

“

verything we do as a business is for mortgage brokers, and E everything we’ve been able to do as a company is because of mortgage brokers.”

them in three categories – essentially good guys (true partners), middle-of-the-road, and bad guys (wholetail lenders). UWM’s designation as one of the good guys has given additional credibility to its pro-broker business practices, but it has also hurt the company. “BRAWL making the lender scorecard available throughout the industry was the equivalent of the NFL making each team

share their respective playbooks with one another; everyone got to see our plays,” Ishbia said. “In a perfect world, none of our wholesale competitors would know why brokers love us so much, so they couldn’t copy us.” While UWM won’t shun the positive press it receives from third parties, the company doesn’t need the outside hype to validate its business practices because

| SPONSORED CONTENT

it believes very strongly in its own mission of wholesale broker growth. “We know who we are as a company and what we believe, and it’s all about mortgage brokers being the best place for consumers to get a home loan, the best place for Realtors to partner with, and the best place for loan officers to work,” Ishbia said. “Regardless of what other wholesale lenders do, we’re fully committed to growing the broker channel and doing what’s best for mortgage brokers.” UWM continues to bet its future on mortgage brokers, and if current trends continue, chances are looking pretty good that UWM will continue to be the big winner in the mortgage industry because of it. HOUSINGWIRE ❱ MONTH 2018 51

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

SAGENT LENDING TECHNOLOGIES | SPONSORED CONTENT

Grow wisely

A new name with the same dedication to clients and solutions

iser v Lending Solutions is now Sagent Lending Technologies, a new name constructed from two words:

• Sage, referring to the wisdom that Sagent has acquired through partnering with its valued clients over the years. • A gent, denoting that they continually aspire to be a catalyst for change within the lending industry.

While Sagent has changed its name, this does not reflect a change in its dedication to clients. Sagent is committed to helping its clients realize the promises they’ve made to their customers while staying faithful to their unique brand identity. Sagent’s continued promise to its lending clients is to deliver the best possible lending experience to their end-user customers. Newly independent and inspired by a vision of where lending technology is going, Sagent brings an entrepreneurial energy to its clients that’s grounded in industry-leading credibility. Stressing that it’s only successful when its clients are successful, Sagent believes in a true partnership model with a healthy back and forth between its expert team of developers and the lenders the company has promised to serve.

52 HOUSINGWIRE ❱ MONTH 2018

MAKING MORTGAGE SERVICING MORE EFFICIENT - LOANSERV LoanServ, Sagent’s mortgage servicing platform, allows lenders to perform essential back-office functions more efficiently. Loan boarding, collections, default management, and more are all built-in functions of the solution that allow servicers to spend more time on what matters and less time on tedious task work.

LoanServ offers several key benefits, including: bReal-time loan processing bIntegrated default management bInvestor support bSingle-view borrower information file bClient-defined workflow automation bSubservicing capabilities bBuilt-in collections and loss mitigation tools Regional banks, large credit unions, start-up loan servicing operations, specialty servicers and sub-servicers have all deployed LoanServ in order to reduce disparate software, eliminate redundant processes and capitalize on new lending opportunities. Because LoanServ captures and stores account data in one place, servicers have a more holistic view of the borrower. This creates a more efficient servicing operation, controls the cost to service and reduces lending risk. For instance, the system’s Investor Accounting features give servicers greater control over their investor relationships since both can access real-time data about portfolio position and immediately see the impact of every borrower transaction. And LoanLink, a key LoanServ option, allows clients to quickly roll out self-service websites that pull account information directly from the LoanServ system in real time and enable consumers to access their accounts with 24x7 convenience. These features illustrate the importance of Sagent’s dedication to listening to its clients, which leads directly to the design and development of its solutions. As CEO Bret Leech explains, “Sagent Lending Technologies’ focus is to make lending better for everyone by forming true partnerships with lending clients. Through these partnerships, Sagent helps lenders fulfill business promises while conforming to their unique brand identity.” Sagent Lending Technologies builds upon decades of innovation and experience to usher in a new and improved mortgage servicing experience for its clients.

Trusted by more than 200 real estate portals and products from newspapers to national banks.

NOT IN M Y BACKYAR D

54 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

Multifamily Bulletin

NIMBYism is depressing multifamily developers “NOT IN MY BACKYARD” IS KEEPING SOME DEVELOPERS FROM BUILDING BY JEREMIAH JENSEN AND BEN LANE

MULTIFAMILY developers’ confidence in the health of the market fell over the last few months, thanks to a combination of factors, including the threat of rising construction costs due to tariffs and NIMBYism standing in the way of new multifamily developments getting off the ground. NIMBYism (or NIMBY) stands for “Not In My Backyard.” The phrase represents a sentiment among residents of certain areas (usually homeowners) who resist different types of developments, out of fear that it will depress their property values or bring in a different kind of “element” into their neighborhood. NIMBYists, as they’re called, want to keep things just the way they are in their neighborhoods and push back against new developments. And that attitude, combined with local building regulations, is keeping some multifamily developers from being able to build new housing stock in areas that sorely need it. “Multifamily builders and developers are seeing strong demand, but there are headwinds that have impacted further development,” Steve Lawson, chairman of National Association of Homebuilders Multifamily Council. “Some developers have had difficulty getting projects off the ground due to regulatory burdens and neighborhood opposition in certain parts of the country,” Lawson added.

MOODY’S BUYING COMMERCIAL REAL ESTATE DATA PROVIDER REIS FOR $278 MILLION Moody’s Corp. is set to grow its commercial real estate data business, as the company announced recently that it is acquiring Reis, a commercial real estate data provider, for approximately $278 million in cash. Reis currently provides analysis and forecasts for 275 metropolitan markets and 7,700 submarkets in areas like multifamily, affordable housing, office, retail, student housing, senior housing, and more. In the deal, Moody’s will acquire all outstanding shares of Reis. Both companies’ boards of directors have approved the deal. Mark Almeida, president of Moody’s Analytics, said that the deal will help increase its real estate data offerings and help the company provide more compelling analysis. “Commercial real estate is analytically very complex, and Reis has committed decades of effort and expertise building a unique data asset with critical and hard to replicate information on this large and important asset class,” Almeida said. “Their data on CRE supply and Moody’s Analytics’ insights on the demand for commercial properties will provide market participants with a powerful 360-degree view of the economics of CRE lending and investment,” Almeida added. “Working together, HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018 55

Multifamily Bulletin both Reis and Moody’s Analytics will become even more relevant and valuable to CRE finance professionals.”

FACEBOOK SET TO ADD MILLIONS OF NEW LISTINGS AS PUSH INTO REAL ESTATE CONTINUES Facebook is expanding its presence in the rental market. Last November, Facebook partnered with platforms Zumper and Apartment List to add rental listings to Facebook Marketplace. Now, a little under a year later, Facebook is at it again, this time with Rental Beast, a software-as-a-service rental listing platform that provides millions of rental listings. “This partnership comes at a crucial time in real estate when more and more agents are starting to focus on helping renters given that sales inventory is at record lows in most key markets, and homeownership levels have been on a downtrend,” a spokesperson for Rental Beast told HousingWire. Facebook was unwilling to comment on its larger strategy, but it did confirm that this new agreement changes nothing about its relationships with Zumper and Apartment List. “Home rentals is a popular activity on Facebook. With this home rental experience on Marketplace, we hope to make it even easier for people to find their next home,” a Facebook spokesperson said. Rental Beast’s platform holds over 6 million rental listings across the nation, which the company says represents over 70% of the rental inventory in the U.S.

IS THE U.S. RENTAL MARKET TILTED AGAINST LOW-INCOME RENTERS? Is the U.S. rental market helping to increase inequality? More and more, Americans are turning to renting out of necessity, as the first rung of the property ladder is pulled farther and farther from the ground. But now, thanks to the gargantuan demand for rental units, even finding a rental dwelling is becoming less and less affordable for low-income earners. According to a recent roundtable discussion at the Wharton School at the University of Pennsylvania, the current market conditions are promoting inequality. Here’s why: The basic problem is one of classic supply and demand. Demand for rental units in general is incredibly high right now, and because supply has been behind demand until recently, rents have gone up nationally. Now the trend that is emerging is a little concerning. If you zoom in on the rent growth you will see that what is happening at the moment is a contraction in rents at the top of the spectrum (Class-A) and a boost in rents at the bottom of the spectrum. AUSSIE INVASION? TWO AUSTRALIAN FINANCIAL GIANTS PLAN Zillow Chief Economist Aaron Terrazas, one of the members TO BUILD $2 BILLION U.S. MULTIFAMILY PORTFOLIO of the Wharton roundtable, explained that this is a result of U.S. multifamily has had the favor of U.S. investors for quite some over-investment in upscale rentals and an exodus of well-to-do time, but it seems tales of its boons have stretched to the land Millennials to homeownership. down under. “Those higher-income young adults who typically rent those Australian companies Lendlease and First State Super have apartments have been out buying homes. The labor market is very teamed up to invest serious capital in U.S. multifamily assets. tight. Interest rates are still very low. Those are the people who The firms have each committed $500 million in equity to start have been propelling the purchase market, leaving vacancies in a new investment platform with the intent of creating a $2 billion the rental market. That’s not happening for lower-income renters,” multifamily portfolio with assets in the “gateway cities” of New he said in the roundtable. York, Chicago, Boston, San Francisco and Los Angeles. Another of the roundtable members, Metropolitan Policy “We have a strong track record of success working alongside Program fellow at the Brookings Institute Jenny Schuetz, said First State Super and share a common objective to increase our the lopsided boom in apartment construction has created an im- exposure to the U.S. multifamily sector,” Lendlease Americas balance in the rental market that will be tough to remedy. CEO Denis Hickey said. “We’ve certainly seen a boom in building in the last several Lendlease is an international property giant with operations in years, but that comes after the absolute trough during the Great Australia, Asia, Europe and the Americas. First State Super, one Recession. And we’ve been under-building multifamily housing of Australia’s largest superannuation funds, has been eyeing the for about 25 years now,” she said. U.S. multifamily market for a while and is excited to cash in on “We’ve seen supply finally start to catch up at the high end. We the strong performance of the asset class. would expect that’s eventually going to translate into at least “We are excited to expand our strong and longstanding relationmore stable rents in the middle of the distribution, possibly lower, ship with Lendlease into a market and sector that we believe has but it’s going to take a while for that to happen,” she added. very attractive long-term fundamentals,” First State Super Head According to the panel, there are no easy solutions. Cities em- of Income and Real Assets Damien Webb said. ploying restrictive zoning policies and high construction prices Lendlease will become the new platform’s development conmake it difficult to build new, affordable housing. struction and investment manager, and the portfolio will be 56 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

Multifamily Bulletin

seeded with two existing Lendlease properties that are being completed in Chicago and Boston, valued at $400 million. NEW YORK CITY PUBLIC HOUSING STAFF IN HOT WATER AFTER HOSTING ORGIES Allegations of extreme sexual misconduct have been brought against the staff of a public housing development in the Bronx. The New York City Housing Authority reassigned all 40 members of the Throggs Neck Houses, a public housing development in the Bronx, and suspended two for hosting orgies on the job. According to the New York Times, trouble had been brewing at the development for a long time. Trash pickup and maintenance had long since gone by the wayside and the allegations of sexual misconduct and inappropriate work behavior were just the icing on the cake. “We’ve had longstanding concerns about management and performance issues at Throggs Neck. Those concerns, coupled with

troubling allegations of misconduct, are why the staff was reassigned. We can’t comment further on an ongoing investigation,” NYCHA Spokeswoman Robin Levine told NYT. According to one resident, besides neglecting their duties, the staff would openly talk about their sexual encounters with one another, on the clock, around the complex. Other sources told NYCHA that supervisors and some of the caretakers held regular orgies inside a groundskeeper shop at the development, sometimes putting in for overtime while they spent hours drinking and engaging in sexual activity. President of the resident association at Throggs Neck Monique Johnson said there were many staff members who had nothing to do with the lewd happenings and that there was a culture of fear and retaliation among the whole staff. “There are a lot of staff members that had absolutely nothing to do with this, but because of the inappropriate behavior they have been uprooted and moved as well,” Johnson said.

WE ARE MORE THAN TITLE Appraisal Valuations | Mortgage Servicing Solutions | Loss Mitigation Services | Capital Markets Services Collateral Integrity Services | Commercial Due Diligence Services | 1031 Exchanges | e-Recording Services National Signing Services | Digital Closing Solutions | Electronic and Wet Ink Signature Capture … and of course, Residential & Commercial Title/Settlement SEE YOU AT THE MBA ANNUAL CONVENTION IN D.C. BOOTH #232 | OLDREPUBLICTITLE.COM/MORETHANTITLE 10/2018 | © Old Republic Title | Old Republic Title’s underwriters are Old Republic National Title Insurance Company and American Guaranty Title Insurance Company.

HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018 57

CFPB Watch

58 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

CFPB Watch

CFPB director nomination moves to Senate VOTE REMAINS TO BE SCHEDULED BY CAROLINE BASILE, KELSEY RAMIREZ

THE SENATE COMMITTEE on Housing, Banking and Urban Affairs narrowly passed a vote nominating Kathy Kraninger as the next director of the Consumer Financial Protection Bureau. The vote narrowly passed on August 23 with 13 senators voting for Kraninger’s nomination and 12 senators voting against it. Kraninger’s vote will now move to a full Senate vote, where she will face her final hurdle before replacing CFPB Acting Director Mick Mulvaney and becoming director of the CFPB for the next five years. It is unclear when the vote to confirm Kraninger will happen and as of press time, a vote was not listed on the Senate schedule. But her nomination is not guaranteed – in fact, Senate Democrats continue to strongly oppose her as the next director of the CFPB. Part of their disapproval of the nomination stems from Kraninger’s potential role in constructing the controversial border policy that separated undocumented immigrant children from their parents. However, Senate Committee Chairman Mike Crapo, R-Idaho, explained he would not expect this administration nor any administration to release documents related to a deliberative process. For this reason, he scheduled to move ahead with the vote, despite requests from Democrats to wait until the candidate sub-

mitted answers to questions and documents concerning her role in the policy’s development. “The Consumer Financial Protection Bureau was the most polarizing part of Dodd-Frank, and it is not surprising that the nominations of Cordray and now Kraninger are contentious,” Crapo said in his opening statement. The committee was initially set to vote for the nomination of Kathy Kraninger as the next director of the CFPB, along with nominations for other positions, on Aug. 2. However, the night before, the Banking Committee announced the postponement of its vote. This is because Senate Majority Leader Mitch McConnell announced his plan to end senate business for a short recess, saying the Senate would return on Aug. 13. Kraninger’s nomination was later rescheduled for August 23, 2018. There are some who say Kraninger has no chance of passing the Senate nomination process, and that her nomination is simply a ploy to keep Mulvaney at the helm. If her nomination is denied in the Senate, President Donald Trump will have another 210 days to nominate a new replacement to lead the bureau. But while Democrats continue to fight against the nomination, members of the housing industry stepped up to voice their support for Kraninger. The Mortgage Bankers Association sent the HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018 59

CFPB Watch committee a letter, urging it to approve her nomination as quickly as possible. “The bureau needs well-qualified leadership, and we are confident that should she be confirmed by the Senate, Ms. Kraninger will utilize her significant experience in government management to improve the Bureau’s operations and oversight,” said Bill Killmer, MBA senior vice president of legislative and political affairs. “We also are hopeful that she will leverage the information gathered from the bureau’s ongoing RFI process to protect consumers from unscrupulous practices while also ensuring that borrowers have access to safe, sustainable loan products.” Other nominations were also rescheduled for Thursday and passed through the Banking Committee, however these were much less controversial. In fact, in the opening statements before the vote, Kraninger was the only nominee mentioned in a controversial manner. The other nominees confirmed by the Senate Banking Committee included: Kimberly Reed to be president of the Export-Import Bank, Elad Roisman to be a member of the Securities and Exchange Commission, Michael Bright to be president of Ginnie Mae, Rae Oliver to be inspector general of the U.S. Department of Housing and Urban Development and Dino Falaschetti to be director of the office of financial research for the U.S. Department of the Treasury. CFPB STUDENT LOAN OMBUDSMAN RESIGNS, REBUKES MULVANEY’S ANTI-CONSUMER EFFORTS Seth Frotman, assistant director and student loan ombudsman at the CFPB, resigned from his position, rebuking Acting Director Mulvaney on his way out the door, according to reporting from National Public Radio. Frotman’s resignation, according to the letter, is effective as of Sept. 1. In a scathing letter addressed to Mulvaney, Frotman accused the agency of turning its back on young people and their financial futures and serving the best wishes of companies over consumers. “Unfortunately, under your leadership, the Bureau has abandoned the very consumers it is tasked by Congress with protecting. Instead, you have used the Bureau to serve the wishes of the most powerful financial companies in America,” Frotman wrote. Here’s an excerpt from Frotman’s resignation letter: “Each year, tens of millions of student loan borrowers struggle to stay afloat. For many, the CFPB has served as a lifeline, cutting through red tape, demanding systematic reforms when borrowers are harmed, and serving as the primary financial regulator tasked with holding student loan companies accountable when they break the law. The hard work and commitment of the immensely talented 60 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

Bureau staff has had a tremendous impact on students and their families. Together, we returned more than $750 million to harmed student loan borrowers in communities across the country and halted predatory practices that targeted millions of people in pursuit of the American Dream. The challenges of student debt affect borrowers young and old, urban and rural, in professions ranging from to clergymen. Tackling these challenges should know no ideology or political persuasion. I had hoped to continue this critical work in partnership with you and your staff by using our authority under law to stand up for student loan borrowers trapped in a broken system. Unfortunately, under your leadership, the Bureau has abandoned the very consumers it is tasked by Congress with protecting. Instead, you have used the Bureau to serve the wishes of the most powerful financial companies in America.” In May, Mulvaney announced that he was dramatically reorganizing the structure of bureau and folding Frotman’s division, the Office of Students and Young Consumers, into the Office of Financial Education. Previously, Mulvaney moved to rescind regulation by enforcement and restructure the bureau altogether. The decision was met with fervent protest from Ranking Member of the House Committee on Financial Services Maxine Waters, D-Calif., who said the restructuring sends a clear message that political appointees are infiltrating the agency with an ideology that will put consumers last. “The closing of the Office of Students and Young Consumers is deeply concerning and will most certainly set back the progress the Consumer Bureau had made to protect our nation’s students and consumers,” Waters said at the time. “Under the leadership of Richard Cordray, the Consumer Bureau was vigilant in protecting the over 44 million student borrowers who collectively carry over $1.48 trillion in student loan debt in this country.” CFPB ADDS NEW MEMBERS TO CONSUMER ADVISORY COMMITTEES The CFPB announced it named new members to its consumer advisory committees, filling a gap that was created back in June of this year, when Mulvaney gutted three of the boards. The new board members were appointed at the beginning of September. According to the CFPB’s announcement, the newly appointed members include experts in consumer protection, fair lending, civil rights, fintech, financial services, community development and consumer financial products and services, as well as representatives of community banks and credit unions. According to the agency, the new members will serve a one-year term. “These experts are highly talented individuals in consumer finance markets, and we look forward to working closely with them throughout their service,” Mulvaney said in a statement.

The new members are as follows: Consumer Advisory Board Members: Liz Coyle, executive director, Georgia Watch Sameh Elamawy, CEO, Scratch Services Manning Field, COO, Acorns Jason Gross , CEO, Petal Clinton Gwin, president and CEO, Pathway Lending Ronald Johnson, president, Clark Atlanta University rent Neiser, senior director of strategic B programs and alliances, National Endowment for Financial Education

Community Bank Advisory Council Members:

Credit Union Advisory Council Members:

John Erik Beguin, founder, CEO and president, Austin Capital Bank

Arlene Babwa, vice president of risk management, Coastal Federal Credit Union

Bryan Bruns, president and CEO, Lake Central Bank Maureen Busch, vice president, compliance and CRA officer, The Bank of Tampa Michael Head, president, CEO and director, First Federal Savings Bank Aubery Hulings, vice president, Operations Manager, The Farmers National Bank of Emlenton

Luz Urrutia, CEO, Opportunity Fund

Heidi Sexton, EVP/COO, Sound Community Bank

Sophie Raseman, director of product, Brightside

Jeanni Stahl, SVP/chief risk and compliance officer, MetaBank

Sean Cahill, president and CEO, Southwest 66 Credit Union Teresa Campbell, president and CEO, San Diego County Credit Union Christopher Court, vice president, accounting & operations, Service 1st Federal Credit Union James Hunsanger, chief risk officer, Michigan State University Federal Credit Union Bryan Price, president and CEO, Indiana University Credit Union Eric Schmidt, president and CEO, WestStar Credit Union

HOUSINGWIRE â?ą OCTOBER/NOVEMBER 2018 61

Equity Insight

62 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

Equity Insight

Here’s why some financial advisors aren’t allowed to discuss reverse mortgages THEY CAN BOLSTER A RETIREMENT PLAN, BUT SOME ADVISORS CAN’T TALK ABOUT THEM BY JESSICA GUERIN

REVERSE MORTGAGES are not the loan they used to be. Once used largely as a loan of last resort by seniors unable to make ends meet, they have undergone substantial policy changes over the years that have repositioned them as a worthy financial planning tool. As a result, they have been embraced by numerous financial experts. Research published in The Journal of Financial Planning and articles in mainstream media outlets by well-respected authorities in retirement planning have detailed the ways this loan can be used strategically to bolster one’s retirement income plan. But, despite all this, many financial advisors can’t talk about them. The problem is an institutional blackout placed on advisors from their broker-dealer firms. And apparently, this is a widespread problem. Shelley Giordano is the chair of the Funding Longevity Task Force, which aims to spread awareness about reverse mortgages

among the financial planning community. She said she hears weekly from loan officers and financial advisors at firms around the country that their discussions about reverse mortgages have been shut down by their compliance. Some are even threatened with disciplinary action should they proceed. “It is the job of compliance departments to be risk averse, and they are concerned about headline risk should one of their associated persons use a client’s home equity inappropriately,” Giordano explained. “There is no incentive to take on this risk since there is no direct revenue for recommending a reverse mortgage.” Confusion about reverse mortgages might also play into the problem. “To the extent that compliance folks have considered reverse mortgages at all, they are subject to the same old misconceptions as everybody else,” she said. Giordano said that part of the problem is that financial planning HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018 63

Equity Insight has not traditionally included the utilization of housing wealth. year three other runners followed suit. “At the core designations, licenses and registrations do not inThe effects of Bannister’s record-breaking run have served as an clude housing wealth in their curriculum or testing so financial example of the power of positive thinking, the lesson being that planners come into a practice without any information on reverse simply thinking something is possible is a major part of actually mortgages,” she said. making it happen. The American College of Financial Services is seeking to change It’s a lesson that Fairway Independent Mortgage is applying this, establishing an RICP designation several years ago that ex- to its HECM origination strategy in an effort to move the needle. plores reverse mortgage use. More than 11,000 students are now No. 9 on Reverse Market Insight’s July Top HECM Lenders list, enrolled in the course. Fairway closed 600 loans in the first half of 2018. It has about 500 With The American College and the Task Force joining forces loan officers who are able to originate a reverse mortgage and just to take up the cause, there’s a chance that we could see a change 25 who focus exclusively on reverses. Most of its HECM volume in the tide. comes from LOs who close one HECM every three to four months. Curtis Cloke, the founder and CEO of THRIVE and a well-known But in today’s climate, closing a reverse mortgage every now speaker in the retirement income world, said he is seeing the be- and then – or even hitting the industry average for full-time HECM ginnings of a shift in acceptance among broker-dealers. LOs of one every other month – isn’t going to cut it. “We’re seeing some movement underfoot of just a handful of To address this, Fairway plans to throw its weight behind its top broker-dealers who have heard the messages in a multitude of HECM producers, working closely with five to 10 of its top producways,” Cloke said. ers in a push to help them close four to five loans every month. “Some are finally saying this is a fiduciary discussion that we “We’re going to concentrate on a handful of those who are doing have to have… it’s all happened just this year,” he added. really well. We know that if we can break that barrier with our Cloke said he is working with one of the largest broker-deal- top people, pretty soon a whole lot of people will be breaking it,” ers right now on establishing guidelines that would allow their said Harlan Accola, Fairway’s national reverse mortgage director. advisors to discuss reverses with their clients. As of press time, “People will realize it can be done and then they will follow suit.” HousingWire was unable to receive confirmation from this firm Prior to the institution of Financial Assessment in 2014, it was that it was re-evaluating its stance. not uncommon for a loan officer to close five to 10 HECMs a month, Cloke said the broker-dealer came to understand that it was not according to Accola. But outside of a call center, that kind of volabout compensation, but about offering comprehensive advice. ume is unheard of after program changes that took effect Oct. 2. “They finally understood that we’re not talking about brokers Accola said the lender will put its full force behind its top selfselling or being compensated for the sale of reverse mortgages. sourced LOs to help them break industry standards. Rather, this is about understanding how it works as a financial “Through coaching, advertising, marketing, relationships – plan, being able to frame how a reverse mortgage may affect a whatever we have to do as a company to provide the support to client and then referring them to the appropriate locations for get them there,” he said. “We really believe that that will be the discovery and fact-finding beyond their advice that does not in- tipping point. Everything will be different when we start having volve them.” producers who are doing that many loans a month.” “One of the things that fiduciaries have to be able to provide is Accola said he realizes it’s easier said than done, but believes evidence of the value of their advice for charging the fees they positive thinking is the most important part of the equation. charge, and this just adds another element and dimension of their “I don’t think there’s a secret sauce; I think it comes down to ability to say, ‘Hey, we’re not leaving stones unturned,’” Cloke making more phone calls and finding more referral partners,” said. he said. “But when everybody puts their heads together and be“For the years this topic has been silenced. For many of lieves something is going to happen, that’s when you will see Americans, 50% or more of their wealth is in their house, and real change.” the advice being given to clients in retirement completely ignored Accola said for too long the industry has gotten away with low this.” volume. “There are a whole bunch of companies that are recruiting peoFAIRWAY INDEPENDENT MORTGAGE THROWS WEIGHT BEHIND ple who do one loan a month, and that’s all that’s expected. It’s TOP HECM PRODUCERS like we embrace and reward mediocrity. So many people were In 1954, Roger Bannister ran the first four-minute mile on record, making big money doing very little until October came along. It achieving something previously considered impossible. Just 46 used to be easy for people to be very mediocre and make good days later, Australia’s John Landy beat his time, and within one money, but those days are gone and I’m glad they are gone.” 64 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

Equity Insight

“

We’re going to concentrate on a handful of those who are doing really well. We know that if we can break that barrier with our top people, pretty soon a whole lot of people will be breaking it.”

Times are different now, Accola added. “Reality check: You’re not going to be making the same as a doctor by doing nine loans per year,” he said. “We need to help more seniors, that’s all there is to it. It’s not just going to be good for Fairway, it’s going to be good for the whole industry. REVERSEVISION SOFTWARE TO ACCOMMODATE PROPRIETARY REVERSE MORTGAGES Reverse mortgage software provider ReverseVision announced this week that its loan origination system can be customized to accommodate proprietary reverse mortgage loans. The three-time HW Tech100 winner will work with lenders to produce an LOS complete with features specific to their proprietary loan product. Lenders need only to complete a product questionnaire, according to the company, which will then be used to configure custom features within ReverseVision’s RV Exchange system. The entire process will take just eight to 10 weeks. “We’ve designed our system for flexibility so that we can configure almost any proprietary product without a major software release,” said Jeff Birdsell, ReverseVision’s vice president of professional services. The move is a response to a wave of proprietary reverse mortgages that have hit the market in the last several months. ReverseVision said these recent innovations are reinvigorating the reverse space by targeting gaps in the market that the HECM is unable to address. “Pioneering proprietary products have the potential to elevate reverse mortgages beyond the complexities, caps and limitations of HUD’s HECM program,” said Birdsell. “They’ll also create some stability in the industry where sudden government changes to the HECM program have sent reverse lenders into emergency response mode. These new products could also drive loan production by competing more directly with traditional loans and serving a broader range of customer needs.” HECM COUNSELORS SEE VOLUME PICK UP Before you can get a reverse mortgage, you have to submit to financial counseling. And that’s why talking to HECM counselors can be a great way to gauge what’s in the pipeline and identify emerging trends. According to two counselors certified by the U.S. Department of Housing and Urban Development to administer reverse mortgage

counseling, volume is nearly back to normal following program changes that took effect last year. For one agency, that has a lot to do with the new proprietary products that have come to market. “This month alone, we’ve already done 20 jumbo counselings, and it’s only the 15th. That’s a lot,” said Jennifer Cosentini, housing director at Cambridge Credit Counseling in Massachusetts. “Six months ago, we would only see one every couple of months, it was so rare that the counselors weren’t even sure how to do it.” Cosentini said borrowers have been responding well to these non-agency offerings. “In the beginning, we thought maybe borrowers weren’t going to like these jumbo loans because the interest rates were higher, but now interest rates are lower and the closing costs are less than a HECM,” she said. “We’re getting a pretty good response from all the borrowers.” Cosentini said that their volume is back to where it was prior to the changes. “Some of it has to do with jumbo interest, and some of it is that lenders have come up with different strategies to sell the HECM,” she said. “It took a little while, but they’ve finally gotten to where they needed to be.” Christena Durost, a counselor with Housing Options Provided for the Elderly, said that while their volume is not quite back to normal, HOPE is seeing an increase in referrals every month. Durost said HOPE is not yet providing counseling for the new proprietary products but is interested in doing so. The most notable thing she’s seeing with the HECM right now is a significant variation in margins. “There used to be a pretty tight range, normally within a quarter to half a point. Before, lenders would stay in the same range on margins and then compete on fees and lender credits,” she said. “But now, there is a much wider range. I saw a 1.3% margin this week, and then I had client who was offered a 3.875% margin – that was really shocking.” Cosentini also said she is seeing major margin variation. “They are all over the place,” she said, adding that she’s noticed a trend toward a more sophisticated borrower as well. “We do not see a lot of last-minute, desperate borrowers anymore. I’d say maybe 30% are last resort,” she said. “Most of them are really doing this for good reasons and are planning ahead for the future.” Durost said she sees a mixed bag. “I’m still getting desperate, low-income borrowers, but the loan just isn’t working as well for them as it used to,” she said. “The most common reason for people to do this is still to pay off an existing mortgage,” Durost added. “Sometimes that’s because they can’t afford to pay the existing mortgage, and sometimes it’s because they are planning for retirement.” HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018 65

GSE Report

66 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

GSE Report

Hensarling’s Hail Mary TOP REPUBLICAN UNVEILS SWEEPING BIPARTISAN HOUSING FINANCE REFORM BILL BY CAROLINE BASILE, BEN LANE IT’S NOW OFFICIALLY been 10 years since and Homeowners Act (or PATH Act). Given the PATH Act’s “slim” chance the government took Fannie Mae and The PATH Act was originally introduced of passing, Hensarling also plans to inFreddie Mac into conservatorship. And in 2013 and worked its way through the troduce a separate bill that would repeal in that decade, an uneasy status quo has House of Representatives, as two compet- Fannie and Freddie’s charters and drastideveloped with Fannie and Freddie dom- ing bills (the Corker-Warner and Johnson- cally elevate the role of Ginnie Mae in the inating the housing finance system, de- Crapo bills) moved through the Senate. housing finance system. spite their limited capital bases and unNone of those bills ever became law, but What makes this bill interesting is that resolved position as wards of the federal Hensarling said Thursday that he plans to Hensarling plans to introduce it in partnergovernment. reintroduce the PATH Act, despite know- ship with several Democrats. But if House Financial Ser v ices ing it has little chance of passing. “So as an alternative, I’ve decided to Committee Chairman Jeb Hensarling, “For almost 20 years, I along with a partner with Mr. Delaney on the other side R-Texas, has anything to say about it in his handful of reformers like Congressman Ed of the aisle to propose a bipartisan comprofinal days in office, all of that uncertainty Royce have labored in vein to replace the mise housing reform plan that preserves will soon be resolved. GSEs’ government-sanctioned monopoly the government guarantee in the secondHensarling, long an advocate for re- with a new system based on competitive ary mortgage market,” Hensarling said. forming the country’s housing finance private capital, innovation, consumer “In the time I have remaining in Congress, system, announced recently that he plans choice, and market discipline,” Hensarling this is the plan I will pursue.” to introduce two major housing finance said in the House hearing on the 10-year The Delaney that Hensarling is referring reform bills, both of which would upend anniversary of Fannie and Freddie being to is Rep. John Delaney, D-Md., who has Fannie and Freddie’s place in the market taken into conservatorship. also worked for several years on reforming and work to bring private capital back into “We passed the PATH Act in the 113th the housing finance system. Back in 2014, the market. Congress to do just that,” Hensarling said. Delaney introduced legislation that would The efforts are not Hensarling’s first at “I am reintroducing the PATH Act this week, have broken up Fannie Mae and Freddie reshaping housing finance. In fact, one of and for no other reason it is the right thing Mac. the bills Hensarling plans to put forward is to do and it will let me sleep better at night. Neither Delaney nor Hensarling is planone he previously introduced several years Regrettably, its chances for passage re- ning to run for Congress again, meaning ago, the Protecting American Taxpayers main slim.” they plan to use their remaining time to HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018 67

GSE Report push for this housing finance reform effort. does not necessarily represent my pre- sors” to the GSEs to apply with the FHFA Hensarling announced last year that ferred policy or optimal policy, but I be- to serve as “private credit enhancers” or he would not be pursuing re-election (al- lieve it represents an achievable policy and Ginnie Mae-approved issuers. though there have been rumors that he a good faith effort at bipartisan comproAs part of that wind-down, the governmight slide into a role in the Trump admin- mise,” Hensarling said. “A decade without ment would take over the GSEs’ Common istration), while Delaney announced last GSE reform has once again put homeown- Securitization Platform, the coming joint year that he is not running for Congress be- ers, taxpayers, and the economy at risk. delivery system for the Single GSE Security cause he is running for president in 2020. The time to act is now.” that’s scheduled for use in 2019. Despite those divergent career paths, The bill contains numerous sweeping The bill would establish a new “non-govDelaney and Hensarling are joining to- reforms to the housing finance system, ernment, not-for-profit Mortgage Security gether to pursue housing finance reform. including separating Ginnie Mae from Market Exchange” that would develop Also joining them in introducing the bill the Department of Housing and Urban “best practices” standards for the private is Rep. Jim Himes, D-Conn. Development and making it the primary securitizing, pooling, and servicing of The plan, called the “Bipartisan Housing government backer of all mortgages. mortgages, as well as operating a “publicFinance Reform Act,” would bring massive The bill would see Ginnie Mae create a ly accessible securitization outlet to match changes to the mortgage market. program called “Ginnie Mae Plus,” which loan originators with investors.” This is how Hensarling described it: would “provide borrowers access to conAccording to a summar y of the Our discussion draft, which we will unveil ventional home loans by guaranteeing bill, the bill “transforms the Common later today, will repeal the GSEs’ charters, payment to investors of securities backed Securitization Platform from a proprietary permanently ending their monopoly, and by eligible conventional mortgages and secondary market access point jointly transition to a system that allows qualified protected with private capital.” owned by Fannie Mae and Freddie Mac mortgages backed by an approved private That private capital would be in the form and built only for their benefit, to an open credit enhancer with regulated, diversified of “private credit enhancement,” which market utility operated by the Exchange.” capital resources to access the explicit, full Ginnie Mae issuers would be required But that’s just the tip of the iceberg of the government securitization guarantee pro- to purchase in order to have their loans Bipartisan Housing Finance Reform Act’s vided by Ginnie Mae. I believe the plan will included in eligible mortgage-backed changes. preserve much of what is demanded in the securities. “Ten years after the financial crisis, our current system: liquidity, the TBA market, Additionally, the bill would eliminate housing finance system remains broken. and the 30-year pre-payable fixed mort- the 3% down mortgage programs of There’s still too much entity risk, not gage. And it will do so while dispersing risk Fannie and Freddie, requiring borrowers enough affordability, and we haven’t and leveling the playing field for all entrants to put down at least 5% to get a govern- taken comprehensive action to make the into mortgage finance. ment-backed mortgage. system safer for taxpayers long-term,” Hensarling describes the plan as a Perhaps most notable of all in the bill is Delaney said in a statement. “grand bargain” that is not his preferred the fact that it calls for the repeal of the “It’s imperative we deliver a solution outcome but said that it might be the plan GSEs’ government charters. and this discussion draft is a bipartisan to save the housing market from a future The bill would require the Federal blueprint for how we can substantially collapse. Housing Finance Agency to permanently increase our investment in affordable “While by no means perfect, we offer repeal the GSEs’ charters within five years housing, make the housing finance systhis proposal as a grand bargain on how of the bill becoming law. The FHFA would tem more stable, protect the thirty-year to move past an increasingly dangerous also be required to “eliminate any statuto- fixed-rate mortgage, and preserve the status quo: codify an explicit government ry advantages and privileges conveyed by successful GSE multifamily business,” MBS guarantee into law, coupled with those charters on Fannie Mae and Freddie Delaney continued. “The American Dream an accountable and effective affordabil- Mac as corporate entities.” really depends upon access to affordable ity program in exchange for placing the Additionally, “no later than the termina- housing and a workable and secure houstaxpayer in a catastrophic loss position tion of the charters,” the FHFA would be ing finance system. I thank Chairman only diffusing the credit risk beyond two directed to take the GSEs into receiver- Hensarling for working with Congressman GSEs, and creating market competition,” ship to begin winding down their legacy Himes and me on this draft and I look forHensarling said. business. ward to hearing from stakeholders and “The grand bargain I have described The bill would then allow the “succes- constituents so we can continue to move 68 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

forward on a solution.” The bill was welcomed cautiously by both the National Association of Realtors and the National Association of FederallyInsured Credit Unions. “We support the overarching goal of Chairman Hensarling and Rep. Delaney’s GSE reform draft to create an equal playing field in the single-family mortgage market,” NAFCU President and CEO Dan Berger said in a statement. “As Congress gears up for housing finance reform and considers this legislation and other approaches, it is important that vibrant competition remains throughout the system and that credit unions maintain unfettered access to the secondary mortgage market and fair pricing based on loan quality, not quantity.” Himes called the legislation a “vital piece of reform” and said that it will help all involved in the housing finance system. “I’m proud to join Chairman Hensarling and Representative Delaney in promoting this vital piece of reform. This bipartisan discussion draft ensures that new homeowners will have access to the affordable, predictable financing options they need, makes access to affordable housing a priority, and shields taxpayers and our economy from future housing-related downturns,” Himes said. NAR President Elizabeth Mendenhall

“

It’s imperative we deliver a solution and this discussion draft is a bipartisan blueprint for how we can substantially increase our investment in affordable housing,” – Rep. John Delaney, D-Md.

shared similar sentiments. “After years of discussions w ith Chairman Hensarling and his staff, the Realtors are pleased to see the Chairman now support a federal role in the conventional housing finance system. An explicit government guarantee will protect consumers by stabilizing prices and helping to ensure the market is supported during times of economic distress – critical elements that should be the bedrock of any reformed housing finance system,” Mendenhall said. “Ultimately, the Chairman’s proposal moves this discussion forward, marking a notable, important shift to a Ginnie Mae model that operates on a smaller, more nuanced scale,” Mendenhall added. FREDDIE MAC CEO DONALD LAYTON TO STEP DOWN Well, it’s official. Freddie Mac CEO Donald

Layton is stepping down from his role in the second half of 2019, confirming speculation about the move that circulated prior to the news. According to Freddie Mac, Layton notified the GSE’s board of directors about his retirement plans. The board then created a CEO succession plan to find Layton’s replacement. Freddie Mac said that the succession plan is expected to be completed by Layton’s retirement. The plan includes considering candidates from both inside and outside the company. The internal candidate Freddie is eyeing? The GSE has already identified that person: David Brickman, who serves as executive vice president and head of Freddie Mac Multifamily. Freddie Mac’s board also announced it has formed a search committee, as well as an executive search firm, for its external candidate search. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018 69

GSE Report Additionally, the board announced Brickman will be appointed to serve as president of Freddie Mac, effective immediately. Deborah Jenkins, who currently serves as the senior vice president of multifamily underwriting and credit, will be promoted to executive vice president and take over Freddie Mac’s multifamily operations on January 1, 2019. “Don has played an indispensable role in transforming Freddie Mac and moving the housing finance system in a better direction, particularly with his leadership in developing the GSE credit risk transfer market,” Christopher Lynch, chairman of Freddie Mac’s board of directors. “The Board is extraordinarily grateful for his service to the company, and we anticipate that he will continue to play an invaluable role at Freddie Mac during his remaining tenure.” In regards to Brickman stepping into the role of president, Lynch said the board is “confident” that Brickman’s experience will help further the company. “David is an excellent choice to serve as president,” Lynch added. “He is a natural leader who has built the multifamily business into the industry’s innovative market leader.” FANNIE MAE, FREDDIE MAC ENDING EXPANSION INTO SINGLE-FAMILY RENTALS Over the last year or so, Fannie Mae and Freddie Mac both expanded their presence in the single-family rental market, with both of the GSEs beginning to fund single-family rental investments for larger players in the market. But that expansion is about to end. The FHFA announced that Fannie and Freddie will both be shutting down their single-family rental pilot programs and ending their participation in the SFR market, outside of their previously existing small investor programs – Fannie Mae’s Multiple Financed Properties and Freddie Mac’s Investment Property Mortgages. 70 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

According to the FHFA, the GSEs’ ex- their single-family rental pilot programs,” pansion into single-family rentals was the FHFA said in its announcement. conducted on a “test and learn” basis, deThe FHFA said that it recognizes the signed to determine if the GSEs were need- “potential need for long-term financing for ed to support the growing single-family mid-size investors that own affordable sinrental market. gle-family rental assets,” but states that it But the FHFA said that it has since believes its “premature” to allow the GSEs learned that the market can function with- to enter that part of the market because the out the GSEs. potential impact on rent growth, long-term “What we learned as a result of the pi- affordability, for-sale assets, and homelots is that the larger single-family rental ownership is currently “insufficiently investor market continues to perform suc- understood” and requires “significantly cessfully without the liquidity provided by more extensive research and analysis.” the Enterprises,” FHFA Director Mel Watt The FHFA notes that its decision does not said in a statement. prevent the GSEs from proposing changIn its announcement, the FHFA notes es to their existing programs that would that much of the single-family rental mar- meet the needs of the SFR market, or from ket is still controlled by “small” investors, developing proposals that are designed to who own between one and 50 properties, utilize single-family rentals as a pathway despite the recent growth of massive oper- to homeownership. ators in the space. The GSEs’ pullback from the single-famThe expansion was met with pushback ily rental market was cheered by the from other market participants but had Community Home Lenders Association. since expanded. “T he Com mu n it y Home Lenders Back when Freddie Mac completed its Association is pleased that FHFA has confirst SFR financing, it touted the program’s cluded that GSE financing of large-scale ability to maintain housing affordability single-family rental portfolios should be for lower income households. ended,” Scott Olson, CHLA’s executive di“We’ve said from the beginning that the rector, said in a statement. “Fannie Mae goal of our single-family rental pilot is and Freddie Mac can now go back to focusto increase the availability of affordable ing on smaller investor loans for affordable rental housing in communities across the single-family rental properties.” country, and this transaction does exNAR also welcomed the FHFA’s decision. actly that,” David Leopold, Freddie Mac “With inventor y shortages facing Multifamily vice president of targeted af- housing markets across the country, the fordable sales and investments, said earli- National Association of Realtors has long er this year. “All of the homes in this trans- advocated for the FHFA to end its expanaction will remain affordable for working sion into the single-family rental market families, with over 90% affordable for low- and return its focus to promoting a liquid and very-low income families.” and efficient housing market, as Congress That was eight months ago and the land- intended,” Mendenhall said. scape has apparently changed since then. “By financing the purchase of thousands “While the Enterprises’ single-fam- of single-family homes for institutional ily investment home rental programs investors to use as rentals, Fannie Mae have played an important role for small and Freddie Mac compounded on inveninvestors, the market for larger inves- tory shortages and affordability concerns, tors has performed successfully without which are holding back prospective homeEnterprise participation. As a result, FHFA buyers across the country,” Mendenhall is directing the Enterprises to conclude added.

MBA Promoting Opportunities for Women to Extend their Reach

It’s Our Birthday! Two years ago, mPower was born. Today, it’s a robust network of 4,000+ who believe in the power and inﬂuence of women. Join us in our mission to ensure a strong future for women in our industry.

19244

mba.org/mPower

M&A Moves

72 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

M&A Moves

Market is ripe for M&A SIX DEALS SHAKING THINGS UP BY CAROLINE BASILE, JACOB GAFFNEY, JEREMIAH JENSEN, BEN LANE AND KELSEY RAMIREZ THE GLOBAL MARKET for mergers and acquisitions is booming and a quick view of the deal pages on Reuters Americas reveals more buyers than sellers. What’s more, several reports indicate the growing possibility of a looming economic downturn, beginning in the next 12 to 18 months. In the aftermath of such an event, the Federal Open Markets Committee will have little choice but to implement economic stimulus measures — most notably, a reduction in interest rates. So, as the industry positions itself for this potential originations boom, once the economy regains steam and mortgage rates are low, it’s a natural environment for speculators to speculate. The environment is becoming so ripe, several financial publications are now publishing op-eds, offering advice on how to navigate the tricky turns of M&A. Forbes published one such article in late August, titled, “What You Need to Know About Mergers & Acquisitions: 12 Key Considerations When Selling Your Company.” It’s an extensive look and how complicated these affairs can become and helps explains what buyers are looking for in their search. For a player like Amazon, there are a few considerations necessary to identify their possible mortgage lending targets. In the Forbes piece, author Richard Harroch of AllBusiness asks: “Are you growing faster than the competitors?”

Also, Harroch advises to look at your company’s projected financial growth. Is your company a meaningful IPO candidate? Is the management experienced and experts in their fields? Harroch should know what buyers are looking for, as he is also a managing director and global head of M&A at VantagePoint Capital Partners. “Most mergers and acquisitions can take a long period of time from inception through consummation; a period of four to six months is not uncommon,” writes Harroch. “The time frame will depend on the urgency of the buyer to perform due diligence and complete the transaction, and whether the selling company is able to run a competitive process to sell the company, generating interest from multiple bidders.” Considering the moves made already this year, outlined below, and Harroch comments next to the above economic timeframe, 2019 is going to be a year of big buys in the mortgage and housing industry. CREDIT KARMA ENTERS THE MORTGAGE BUSINESS BY BUYING APPROVED Credit Karma, the personal finance company that provides its members with products and services to manage their finances and connects those members to financial services providers, is officially getting into the mortgage business by acquiring Approved, a digital mortgage platform. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018 73

M&A Moves Credit Karma will not be lending though. But the company is expanding into the mortgage business thanks to Approved. According to a blog from Approved Founder and CEO Andy Taylor, Approved will help Credit Karma build a “digital mortgage experience” for its 80 million members. Credit Karma offers its members products that can be used to monitor and improve their credit, prepare and file their income taxes, monitor their identities, and track and manage vehicle information and financing solutions. Earlier this year, Credit Karma said that it has originated more than $40 billion in credit products through its platform including credit cards, personal loans, mortgages, automotive financing, and student loan refinancing. Credit Karma made that claim when it announced that Silver Lake, a private equity firm that led a $500 million round of funding online lender SoFi last year, was planning on investing $500 million in the company. That deal valued Credit Karma at $4 billion. Credit Karma and Approved did not share the financial details of the deal publicly, but Taylor said that being acquired by Credit Karma will allow Approved to significantly grow its business. “Working with Credit Karma gives us the resources and immediate scale to accelerate our mission-driven work, reaching significantly more homebuyers than we could have imagined when we started,” Taylor said in his blog post. Approved, which was founded just a few years ago, expanded its business earlier this year when it announced a deal with LendingQB, a provider of SaaS loan origination technology solutions, to launch a wholesale lending platform. According to Taylor, Approved has handled nearly $5 billion in mortgage originations so far and has no plans of slowing down. And now, the company is set to grow even more thanks to the Credit Karma acquisition. In his blog post, Taylor said that the Approved team is working on something new, but isn’t ready to share it yet: “We can’t wait to reveal what we’re working on next,” he wrote. XOME ACQUIRES ASSURANT MORTGAGE SOLUTIONS Xome, a subsidiary of WMIH Corp., the parent company of the Nationstar Mortgage Holdings family, announced it is acquiring Assurant Mortgage Solutions from Assurant, a risk management solutions provider. The move expands Xome’s footprint and grows its third-party client portfolio in its valuation, title and field services business. Xome announced Assurant Mortgage’s clients will now gain access to Xome’s real estate platform. “We are excited the Xome team is growing with the acquisition of Assurant Mortgage Solutions,” WMIH Corp. Chairman and CEO Jay Bray said. “We’re confident that the products and expertise 74 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

Assurant Mortgage Solutions brings will give our combined clients exceptional service, enhanced solutions and comprehensive end-to-end capabilities.” “This acquisition accelerates Xome’s goals for third-party growth and brings more value to our company, valued clients and shareholders,” Bray said. The acquisition closed on Aug. 1 for $35 million in cash with additional consideration dependent on achieving certain future performance targets. Xome explained that with this acquisition, the majority of its revenue will be derived from third-party business. The company said that while the acquisition is expected to increase its earnings, the 2018 earnings target is expected to remain unchanged as it integrates the new platform. The acquisition is expected to increase company earnings in 2019. According to Assurant, the deal includes all of its mortgage solutions business including title, valuations, mortgage technology and field services, adding that “nearly all” of its mortgage solutions’ employees will join Xome. “Successful execution of our profitable growth strategy requires us to align resources with our best opportunities,” said Michael Campbell, president of Assurant Global Home. “In recent years, the Mortgage Solutions business has gone through a transformation in processes and technology,” Campbell continued. “The acquisition by Xome is a natural fit for the Mortgage Solutions product portfolio and will give the business the scale it needs to reap the benefits of those investments.” CELEBRITY FINANCIAL FINALIZES MORTGAGE COMPANY ACQUISITION Celebrity Financial has finalized its acquisition of independent mortgage lender Midwest Equity Mortgage. The deal, which closed for an undisclosed amount, gives Celebrity, based in the U.S. Virgin Islands, a 100% stake in the lender. When the purchase was announced in June, Celebrity said it was going on an acquisition tear, starting with its purchase of Midwest Equity Mortgage, with additional plans to purchase companies in several industries, including banking, fintech, insurance and capital markets, over the next 12 to 24 months With ownership changes come leadership changes. David Robnett, chairman and CEO of Celebrity, will now serve as Midwest Equity Mortgage’s CEO. Dave Hansen, partner and co-founder at the lender, will serve as its chief revenue officer. “From the time we announced this acquisition, we’ve received significant interest and positive responses from our business partners and regulators,” Robnett said. “There’s also no doubt the industry, in general, is taking notice that there is something special going on over here that others want to be a part of. We’ll be announcing several additional growth initiatives soon.”

M&A Moves

NEWS CORP’S MOVE ACQUIRING TEXAS REAL ESTATE STARTUP OPCITY FOR $210 MILLION Move, which is owned by media giant News Corp and operates Realtor.com for the National Association of Realtors, is about to PRO TECK VALUATION SERVICES ACQUIRES DIRECT VALUAgrow its real estate empire by acquiring a Texas-based real estate TION SOLUTIONS technology startup that claims its technology can match qualified The trend of consolidation among appraisal management com- homebuyers and sellers with real estate agents in real-time. panies seems to be continuing as Pro Teck Valuation Services News Corp announced at the end of August that Move is acquiring announced that it bought cloud-based valuation fulfillment Opcity, which was founded in 2015, for $210 million. platform and appraisal management company Direct Valuation Move claims that the acquisition will bolster Realtor.com’s lead Solutions. generation capabilities, allowing real estate agents to choose be“The synergies are exciting, with Pro Teck providing additional tween “traditional lead products that offer professionals the opproducts and services to DVS clients, and Pro Teck now being able portunity to work leads themselves” or a “concierge-based model to offer a cloud-based solution to lenders who manage their own that provides highly vetted, transaction-ready leads” that will be appraiser panel,” Pro Teck CEO Tom O’Grady said delivered using Opcity’s technology. Capitalizing on those synergies, the new Pro Teck will leverage The acquisition solidifies a meteoric rise for Opcity, which iniDVS tech to enable lenders to manage the entire appraisal process tially launched in a few markets in 2016. Just over a year ago, in-house with automated assignment, tracking, quality control the company raised $27 million in its Series A round of funding and payment processing. Pro Teck also said that it expects the to “rapidly scale its workforce and establish an award-winning acquisition will allow the company to increase its offering to both culture to expand its footprint to real estate brokers nationwide.” its own clients and those it inherits from DVS as well. That was May 2017. Now, the company is selling itself to Move for nearly eight times that amount. BURGEONING REAL ESTATE GIANT COMPASS BUYING PACIFIC The company now has a client base that includes more than UNION 5,000 brokerages and more than 40,000 agents. Its customers Growing real estate tech company Compass is assuming Pacific include a number of franchised brands, such as Better Homes Union, the fifth largest brokerage in the nation and the biggest & Gardens, Keller Williams, ReMax, Berkshire Hathaway Home independent brokerage in California. Services and other independent brokerage companies. Compass is serious about growth and has been on an absolute Executives from both News Corp and Move touted Opcity’s techtear since raising a whopping $775 million in funding over the nological expertise as a driving factor in the acquisition. last few years. “Consumers and agents use Realtor.com for one primary purThanks to SoftBank, Compass is the unquestioned belle of the pose – to buy or sell a home,” Move CEO Ryan O’Hara said. “This real estate tech investment ball, poised for explosive growth after acquisition will help us bring buyers, sellers and agents together having received a $450 million investment from the Japanese tech with as much simplicity, efficiency and choice as possible.” company’s investment arm, which was billed at the time as the “The addition of Opcity to our portfolio will align with our stratlargest investment a real estate tech company has ever received. egy to enhance the experience of consumers, while providing our And now, the company is putting some of that money toward se- industry partners with more opportunities to connect with clients riously growing its California business by acquiring Pacific Union. and grow their businesses,” he added. “In recent years, real estate professionals and brokerage firms The real estate segment has been a fast-growing piece of News have been reacting to the world others are attempting to create,” Corp’s business ever since it acquired Move in late 2014. Compass Founder and CEO Robert Reffkin said in a statement. “I According to News Corp, in the fiscal year that ended June 30, believe the combination of Compass and Pacific Union will be a 2018, Move’s real estate revenues rose by 20%. The company said definitive step in building a company that can ensure the future that Move has nearly doubled its revenues since being acquired of real estate is driven by the vision and aspirations of real estate by News Corp. professionals.” Robert Thomson, CEO of News Corp, said that the company The company has committed to planting its flag in the top 20 has no plans to slow down the growth of its real estate segment. cities in the U.S. and expanding into over 65 new offices by the “Through product innovation and powerful media platforms, end of this year. The acquisition of Pacific Union is a big play for News Corp is increasing its presence and capabilities in the burCompass’ growth efforts in the West and evidence that its intent geoning digital real estate services market,” Thomson said. to grow is both real and potent. Announced separately from the acquisition finalization, Midwest Equity Mortgage announced that California-based JVM Lending is now part of its company as of Aug. 7.

HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018 75

Kudos GIVING BACK • Over the course of six days, more than 90 BB&T associates volunteered with MILITARY MISSIONS IN ACTION to serve veterans and current members of the military as part of the Lighthouse Project – an annual effort at BB&T that encourages associates to serve their communities from April through June. “I don’t think our country does enough for veterans,” BB&T Associate Cindy Overley said. “When I had the opportunity to do this, it was where I wanted to go,” she added. ALLY FINANCIAL donated school supplies to more than 800 Detroit children recently. Ally volunteers gave out backpacks full of supplies, uniforms, and hygiene products at THE CHILDREN’S CENTER’s Back to School Bazaar which helps prepare Detroit students to kick off the school year right with everything they need to succeed in the classroom. “At Ally, fostering economic mobility is the main focus of our corporate citizenship program, so supporting educational initiatives in our communities is an important part of our approach,” Ally Business Administration Executive and Head of Corporate Citizenship Alison Summerville said. “We hope that helping local students prepare for school will generate excitement for the new year and help pave the road for academic success in the future,” she added. MOVEMENT MORTGAGE’s tuition-free charter school, Movement School, is opening its second campus in Charlotte following the success of its inaugural year in the original Movement School. “Our first year exceeded expectations in almost every way,” Movement Foundation Executive Director of Education Tim Hurley said. “I can’t speak highly enough of how the teachers, staff and Movement School families worked together to love, value and educate the students, encouraging them to new heights.” The Movement Schools are open to all 76 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

Photo by Markus Chow

students in North Carolina. About 75% of the students are from economically underserved areas. “Nothing unlocks potential like education,” Movement School Founder and Chairman Casey Crawford said. “We believe opening a second campus will help the unique gifts, talents and abilities of even more children across Charlotte become fully realized,” he added. In early August, the annual ELLIE MAE Classic took place at TPC Stonebrae in California, just outside the Bay Area. Pops of color punctuated the country club grounds as polo-clad players lined up for Ellie Mae’s Community Pro-Am, sponsored by HousingWire, where teams of three industry amateurs partnered with a pro to hit the links for a good cause. The event, now in its fourth year, raises money for the MORTGAGE BANKERS ASSOCIATION’S OPENS DOORS FOUN-

DATION, which provides financial relief to families with critically ill children. It also benefits the WARRIORS COMMUNITY FOUNDATION, the charitable arm of the GOLDEN STATE WARRIORS. Stephen Curry, the team’s star guard, graced the competition alongside other big names like Andre Iguodala, Dallas Braden and Jose Canseco in the event’s Celebrity Shootout. At the Pro-Am kickoff, HousingWire CEO Clayton Collins delivered a $40,000 check to support Opens Doors from HousingWire and the rest of the Pro-Am sponsors, which included Ellie Mae, TERAVERDE FINANCIAL, PRIMELENDING and PULTE MORTGAGE. “At HousingWire, we’re not only focused on keeping housing industry professionals informed with breaking news and insightful journalism, we also seek to build a community of engaged housing professionals,” said Collins.

CAPITAL MARKETS:

SAY ‘ YES’ TO NTC!

NTC SUCCESSFULLY RESPONDS TO CAPITAL MARKET DEMANDS! NTC’S SOLUTION CAN INCLUDE: SIDE LETTER MANAGEMENT - Exception Clearing and Tracking - Managing Buyer Expectations - Centralized Single Source of Data PORTFOLIO CLEANUP - Build True Exception Reports - Identify and Separate Critical/ Non-Critical Exceptions - Remediate Exceptions DUE DILIGENCE FOR PURCHASE - Property Reports - Mortgage Position Validation - Collateral Review

800.346.9152 x310

Kudos GIVING BACK “The Community Pro-Am brings together some of the most impactful executives in the industry with the shared mission of giving back through support of the MBA Opens Doors Foundation,” he added. For some of the players, Opens Doors’ mission is personal. Teraverde Financial CEO Jim Deitch, an Opens Doors board member, said his own daughter’s cancer battle motivated him to get involved. “Thankfully, we were able to step in and help her, but what about the people who have to make a choice between caring for a sick child or working to make a mortgage payment?” Deitch said. “Opens Doors provides the opportunity for seven hospitals to refer people who need help. They have the opportunity to have their mortgage or rent payment made while they’re tending to their very sick child, so they don’t have to make a choice between taking care of their child and keeping their home,” Deitch added. Deitch said the donation from sponsors of the Ellie Mae Community Pro-Am will help 15 to 17 families afford a month’s worth of rent or mortgage payments.

MILESTONES • OPENDOOR, an online marketplace that buys homes directly from

LAUNCHES • KELLER WILLIAMS is teaming up with Austinbased artificial intelligence firm KUNGFU.AI to create a new data pool and explore future tech gamechangers for real estate agents. The first project KW and KUNGFU will work on together is a program that can

read and help generate business insights from PDF-based real estate contracts, which contain a mixture of text and handwriting. REDFIN MORTGAGE announced that its mortgage lending arm is setting up shop in North Carolina as it continues its national foray into the national

78 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

mortgage lending landscape. North Carolina is the eighth state Redfin has launched its since it started offering the mortgages last year. This is the second Southeastern market Redfin has expanded into recently. In June, Redfin Mortgage started doing business in Georgia.

homeowners, is about to go nationwide. Now operating in 10 markets, including Atlanta, Charlotte, DallasFort Worth, Las Vegas, Nashville, Orlando, Phoenix, Raleigh-Durham, Tampa, and San Antonio, the company plans to expand into California, the Pacific Northwest, and several other areas over the next few months. According to information provided by the company, Opendoor’s next market expansions will be in Sacramento, California; Riverside, California; Denver, Colorado; Portland, Oregon; Austin, Texas; and Jacksonville, Florida. The company said that by expanding into those markets, it will be able to reach approximately 15% of the total population of the U.S. THE NATIONAL ASSOCIATION OF GAY AND LESBIAN REAL ESTATE PROFESSIONALS and SOTHEBY’S INTERNATIONAL REALTY AND REAL TRENDS unveiled the inaugural Top LGBT+ Agent List, the real estate industry’s first recognition of top producing LGBT and allied agents and teams. According to Kevin Thompson, CMO of Sotheby’s International Realty, and sponsor of the list, creating the list creates an opportunity to showcase real estate’s top professional who combine outstanding service and unmatched market knowledge with an impeccable work ethic and an insatiable desire to succeed.

Use Discount Code HW15 For 15% Savings!

SPONSORED CONTENT

Jason O’Brien SVP of Payments, SWBC

Executive Conversation: Jason O’Brien on omnichannel payment solutions SWBC offers payment solutions to meet the consumer demand for selfservice options Q. At SWBC, what trend are you seeing in payment options? A. We’ve been major players in the payments industry for well over two decades, and more than ever, we are seeing consumer experience and the demand for self-service solutions causing significant growth in online and mobile payments. Particularly, in the last year, we’ve seen self-service channels are growing at about three times the rate of “agent-led” calls. There are a few contributing factors that are driving financial institutions to invest more in their self-serve payment offerings: Demand: Consumers expect this degree of self-service capability and they’re more vocal about their frustrations when an institution doesn’t make self-service payments available. Technology: Advances in self-service channels are making it easier to meet operational and risk requirements of financial institutions. Affordability: Card-brand costs, specifically the recent cap Interchange Rates made by Visa, are making cards far more affordable for larger debt payments. Q. How has SWBC utilized the omnichannel payment trend for the financial industry? A. As a third-party payment processor, we work hard and invest heavily in technology to ensure our clients have a solution that is effective for all the channels that their customers would use to make a pay80 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

ment to their account. Account holders expect frictionless transactions within and between the accounts at their financial institutions. We enable institutions to offer such services without having to worry about sizable capital expenditures or managing the necessary systems to power such transactions. Q. What is the difference between online payment options and omnichannel payments? A. Online payment options are a subset of omnichannel payments and may have distinct requirements compared to the other payment channels. Omnichannel is a comprehensive and intentional strategy to support payments across the board as the critical customer service touch-points at a financial institution, including online. Omnichannel ensures that there is a plan to support customers for in-person, phone, mobile, desktop, and more; the plan will ensure that business requirements (i.e. risk controls and operational capabilities) are built into each channel. This allows omnichannel support, even if 100% functional parity cannot be attained because of external factors. One factor that should be consistent across all channels is the acceptance of card-sourced funds. Consumers are far more likely to have their debit card with them than they are to have ACH account and routing numbers. We’re seeing the

costs of card payments in our niche space dropping significantly and becoming more affordable—which is a great benefit to both institutions and their borrowers. Q. What does it look like to integrate this payment strategy? A. There are two approaches a financial institution can take: The Infection Approach: The leader of a division or department decides they need a single channel solution for their organization but recognizes the need for an enterprise omnichannel solution. This leader could deploy a point-solution specifically for their division. As such, the division leader would work with our implementation staff to deploy the division’s solution, but would be empowered with the understanding that our solution can easily be expanded to additional channels as the financial institution’s cross-functioning teams have capacity to integrate additional channels. The division leader’s success with her own payment channel is often a very powerful influence to other divisions and helps grow support for an omnichannel solution from other division leaders. This approach may have a longer duration overall, but it allows for more granular resource planning, allowing divisions to tackle projects already in-flight. Top Down Leadership Directive: C-level decision makers give the directive to implement an omnichannel solution. In this case, our implementation team would

“...we work hard and invest heavily in technology to ensure our clients have a solution that is effective for all the channels that their customers would use to make a payment to their account.” organize a project for an enterprise-wide deployment and would lead the institution through the sequence of events and deliverables that will result in an efficient deployment across the organization. This approach will result in a shorter duration as the deployment manpower will be made available all at once for a focused initiative. Q. What are ways financial institutions can drive consumers to utilize omnichannel payments? A. Communication is certainly key.

Customers need to be informed early and often that options are available to them, how they can use them, and ultimately, how they will benefit from using them— i.e. save time, avoid late fees with prompt payments, etc. Websites, newsletters, social media, in-app messaging, IVR messaging, and team-member scripting are all important components of distributing this information. A couple of other key considerations institutions should keep in mind when developing or expanding their omni-

channel payments capabilities include features and fees. Features: While an omnichannel strategy may require having different features available through each channel, it is important for institutions to offer as many features as possible. Leverage Fees to Drive Strategies: By evaluating the need for payments solutions, financial institutions may find opportunities to offer fee-free solutions within one or more channels of their strategy. If a strategic channel is struggling to grow users, then discounting fees or waiving fees for the channel may help. Conversely, increasing fees for some of the more expensive channels (i.e. live calls) can also help sway utilization.

HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018 81

SPONSORED CONTENT

Daniel Perl Chairman, CEO of Citadel Servicing Corporation

Executive Conversation: Daniel Perl on re-opening the non-prime lending market Citadel Servicing Corporation directly services all non-prime loan products in house for seamless integration Q. What is driving the recent surge of interest in non-prime lending? A. Quite simply a need from loan originators to earn commissions and mortgage companies to improve their profits. They have spent the past five to seven years picking off the low-hanging “refi fruit.” The market for agency or jumbo refinances has gone the way of the buffalo with rising rates and it might be several years if that trend continues for any meaningful volume in the refinance sector to re-emerge. Non-Prime offers a viable alternative to penetrate a market that has been insufficiently mined for the past 10 years. Additionally, it is a loan product that has not become a commodity, so there is room to gain market recognition in addition to the profit motive.

expand rational lending products to an underserved market.

Q. When did you foresee this market coming back? A. When I realized the importance of the 2010 Dodd-Frank Act. In reading the 800 or so pages that pertained to the mortgage lending sector, it became quite apparent that a reignition of the finance company mortgage model could be triggered as the Act provided a ready road map for compliance. I am proud to say that we were the first back in the space with a compliant lending program. As the company who rebadged “subprime” into “non-prime” in order to create a less pejorative moniker, Citadel Servicing Corporation (CSC) has been at the forefront of the movement to

Q. How do your non-prime products differ from the typical non-prime loans of the past? A. It is night and day; and as a non-participant in the sketchy schemes of the era 1990 to 2007, this marketplace is a return to the finance company style lending I grew up on in the 1980s. The key issues are always about loan performance and ultimately loan repayment, not to mention avoiding the layering of onerous risk to a mortgage resulting in delinquency. In the not-so-distant past, finance companies like Beneficial, Household, Associates, and Dial among others played a specific role in providing access to fi-

82 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

Q. How did you prepare CSC for this moment? A. As a long-term servicer of loans, CSC made an easy segue from an acquirer of NPL and RPL assets from 2007 to 2011 to one originating the new edition nonprime loans circa 2011. The hardest part was convincing brokers, bankers, and borrowers that this was not a mirage. Most of the companies and borrowers that we approached were concerned that CSC was just a new breed of “hard money” lender. Explaining to both groups that we offered full 30-year term Dodd-Frank compliant mortgages was arduous to say the least. There were simply no other originators in the space until late 2013.

nancing for all manner of American citizens who were locked out of owning real estate for a number of reasons. I am, however, under no illusions that some of the positive factors of the past seven years might be co-opted by competition pushing the boundaries of common sense. It surfaced in the 80s, 90s, and most direly in the 2000s. It is not a wildly pessimistic guess to think it could happen again. Q. How are your non-prime loans performing? A. In a word, fantastic! And since we are one of the very few to directly service all of our non-prime loan products in-house, we are in the enviable position to have the data immediately available to back up this statement. For the past seven years, delinquency has been under 3.5% from 30 days through REO. And speaking of REO, we are fortunate to have had only four since 2011. Delinquency from a roll rate perspective has effectively been stationary in the various buckets, which is remarkable given that our servicing portfolio will be cresting $2 billion shortly and we have originated almost $3 billion in the same period. I have never seen anything to rival these metrics in over 35 years of originating and servicing mortgages. The two leading drivers of this are sound lending programs and full vertical seamless integration.

LENDINGLIFE The newsletter designed with Loan Originators in mind.

Get the latest lending news delivered twice weekly to your inbox with HousingWire’s LendingLife Newsletter. Stay up to date and be the expert in the office and online.

GET ON THE LIST: housingwire.com/newsletters

HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018 83

Knowledge

Center

84 HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018

W H I T E PA PE R: Fir st Close | SP ONSOR E D CON T E N T

Knowledge Center

Putting the profit back into mortgage lending HOW TO COMBAT THE RISING COST OF ORIGINATION BY FINDING EFFICIENCIES IN VALUATION AND TITLE

MORTGAGE LENDERS are facing a host of challenges in the current market. Rising interest rates and a shortage of housing inventory have reduced the number of loans being written, at the same time total loan production expenses have increased. Lenders are definitely feeling the pain. In Fannie Mae’s Q2 2018 Lender Sentiment Survey, few lenders said they are expecting growth as they look ahead to the rest of the year. “Lenders remain bearish this quarter as they continue to face headwinds from rising mortgage rates, tight supply, and strong home price appreciation, which have drastically reduced refinance activity and restrained home purchase affordability,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “These factors have combined to squeeze mortgage origination volumes and have increased competitive pressures.” The increase in both interest rates and home values have shifted the market away from purchase and refinance loans and created an ideal environment for home equity loan products. In the first quarter of 2018, the number of purchase loans decreased 16 percent from the fourth quarter and refinance loans decreased 2 percent, but HELOC originations increased by 18 percent. Clearly, lenders who want to compete effectively in this market are going to have to be faster and more efficient than ever before.

Over the last several years, the mortgage industry has seen a number of new products and services aimed at automating every part of the loan process, from mobile loan application technology to real-time product and pricing engines for the secondary market. But despite progress in other areas, many lenders aren’t taking advantage of the efficiencies to be gained in two key parts of the process, especially in a home equity market: appraisal and title. NEW APPRAISAL AND TITLE OPTIONS After the financial crisis, the appraisal process was changed to ensure appraisal independence and increase the accuracy of property valuations. The new rules tightened up what valuation level was needed for different loan products and introduced appraisal management companies into the mix. But as the housing market started to recover, the appraisal process became a bottleneck, lengthening time to close and stalling loan production for many lenders.

To read the entire white paper, visit the Knowledge Center at knowledge.housingwire.com. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018 85