April 2021 Issue by HousingWire

April 2021

HOUSINGWIRE MAGAZINE ❱ APRIL 2021

THE ADDED VALUE OF ADUS

TITLE SPECIAL REPORT

ADUs come in many different forms. Here’s the business case for jumping on the ADU bandwagon

The eight companies featured in this section offer solutions to simplify communication and collaboration

P. 28

P. 34

The future of closing

The Future of eClosing Introducing AutoPrep™ by DocMagic®. Leveraging sophisticated AI, OCR, and machine-learning technologies, AutoPrep recognizes signature, initial and notary regions on ANY 3rd party generated documents. In seconds, your e-enabled documents are ready for eSignature, eNotary, and eClosing.

One GIANT LEAP for eClosings!

www.docmagic.com

HOUSINGWIRE Daily A deeper look into the HousingWire newsroom's most captivating stories.

Listen here: housingwire.com/podcast

EDITOR-IN-CHIEF Sarah Wheeler

NEWSROOM MANAGING EDITOR James Kleimann REAL ESTATE EDITOR Matthew Blake SENIOR FINANCIAL REPORTER Kelsey Ramírez MORTGAGE REPORTER Alex Roha ASSIGNMENTS REPORTER Tim Glaze LEAD ANALYST Logan Mohtashami CONTRIBUTORS Patrick Stone, Diane Tomb, Matt Wrye PREMIUM CONTENT/HW+ HW+ MANAGING EDITOR Brena Nath DIGITAL MEDIA MANAGER Alcynna Lloyd JUNIOR DIGITAL PRODUCER Victoria Wickham COLUMNISTS Robyn Friedman CONTENT SOLUTIONS MANAGING EDITOR Maleesa Smith CONTENT EDITOR Jessica Davis ASSISTANT CONTENT EDITOR Jordan White SALES SENIOR VICE PRESIDENT, SALES AND OPERATIONS Jennifer Watson Laws DIRECTOR OF REAL ESTATE Mark Adams CALIFORNIA Christi Humphries CENTRAL Chris Anderson SOUTHEAST Tamara Wren GREAT LAKES Michael Orme BUSINESS DEVELOPMENT Lindsley Harris BUSINESS DEVELOPMENT, REAL ESTATE Amanda Luzsicza DEMAND GEN COORDINATOR Brooke Combs ADVERTISING SALES ASSISTANT Amina Jahic

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HW MEDIA CORPORATE CEO Clayton Collins CHIEF OPERATING OFFICER Diego Sanchez WEB DIRECTOR Brent Driggers PRODUCT MANAGER Matthew Stafford CONTROLLER Andrew Key MARKETING DIRECTOR Caren Karris MARKETING COORDINATOR Katie Galbraith CLIENT SUCCESS DIRECTOR Haley Hess CLIENT SUCCESS SPECIALIST Talia Quigley CLIENT SUCCESS COORDINATOR Kambrie Laurent AUDIENCE DEVELOPMENT MANAGER Alyssa Stringer CREATIVE GRAPHIC DESIGNER Emily Carpenter

HOW TO REACH US LETTERS TO THE EDITOR: feedback@housingwire.com TIPS AND STORIES: editorial@housingwire.com CURRENT MEMBERSHIP / SUBSCRIPTION: hwplusmember@housingwire.com NEW MEMBERSHIP / SUBSCRIPTION: housingwire.com/membership MARKETING & ADVERTISING: jlaws@housingwire.com or (469) 893-1486 ADVERTISING CLIENT SUCCESS: clientsuccess@housingwire.com

APRIL 2021

LETTER FROM THE EDITOR

How permanent is RON? REMOTE ONLINE NOTARIZATION, better known

I am not the only one who didn’t get the RON

as RON, became a national priority in 2020,

treatment. Be sure to read up on the roadblocks

something it’s been working toward for a hand-

happening in California and South Carolina too.

ful of years now. But as COVID-19 forced a new,

Included in the commentaries, Diane Tomb, CEO

socially distant world, 50 states were forced to

of the American Land and Title Association, who

take a hard look at the regulations they have

is closely following and pushing for the adop-

around remote notarizations. This doesn’t mean

tion of eClosings, looks at the title industry as

that they all magically started accepting RON

a whole, outlining how the space is embracing

though (looking at you RIN – remote ink-signed

technology from production through closing.

notarization).

Read up on her insight starting on page 20.

As someone who is based in Colorado and bought her first home during the pandemic, having to go through a drive-thru closing, I can personally attest to the fact that not all states were eager to jump on the RON bandwagon. After writing about RON for so many years now, just wasn’t the case, and looking at our feature on the future of closings (page 22), it seems like

Brena Nath HW+ Managing Editor @BrenaNath

Tweets From The Streets Parting thought from this #HWSpringSummit panel? Don't lose sight of the human touch and the importance of building trust-based relationships when scaling your #digitalmortgage experience! Special thanks to Diego, Fred, and Lisa for fantastic convo! 1 1 by @dalevermillion

APRIL 2021

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. © 2021 by HW Media, LLC • All rights reserved

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I was excited to experience one firsthand. That

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People Movers

Inside Agent

Real Estate Brokerages

Ryan Zanin named CRO at Fannie Mae, along with more c-suite hires.

Top agent Jeff Lowe put Compass on the map in Chicago.

A look at Compass’s colorful past and publicly traded future.

Take 5

Local Intel

Camelia Martin directly supported eNote acceptance at Ginnie Mae.

Bowling Green, Kentucky has many attractions, but homes for sale isn’t one.

Startup Profile

Trade Desk

Glenn Stearns’ second company, Kind Lending, is outpacing his first.

Here’s what trade association are looking at for the rest of 2021.

Launches

Mortgage

Sales Boomerang announced the beta release of Prescriptive Scenarios.

Despite a projected rise in delinquencies, here is why lending standards will ease.

Event Calendar

Real Estate

Here’s how the MBA pivoted its annual conferences this year.

In the real estate world, Rocket Homes could be real estate’s sleeping giant.

IPO Watch

60 Inside United Wholesale Mortgage’s plan to topple Rocket.

Politics & Money

64 How wild lumber prices have crippled homebuilders and hurt homebuyers.

Kudos

72 PeerStreet program aids entrepreneurs from underserved communities.

Parting Shot

74 UWM’s banner year, including originating more than $182 billion in 2020.

Q&A

Q&A 2

Q&A 3

Q&A4

Here’s what to expect for interest rates and loan volumes in 2021.

Realogy’s financial strategy in a year full of rapid change.

How to create more space for women in mortgage.

The history of housing discrimination and inequality.

APRIL 2021

features

april

The added value of ADUs

The future of closing Last year brought an uncoordinated movement to adopt RON. Where do we go from here?

ADUs come in many different forms. Here’s the business case for jumping on the ADU bandwagon.

2021

Title Companies and Solutions Special Reports

RON isn’t the answer to all our questions

The drive to digital in title

By: Patrick Stone

By: Diane Tomb

20 APRIL 2021

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The eight companies featured in this section offer solutions to simplify communication and collaboration between stakeholders.

PEOPLE MOVERS

Gene Thompson

| InterLinc Mortgage Services | CEO

InterLinc Mortgage Services promoted Gene Thompson to CEO after serving as president since 2010. Thompson led the company through its most successful year ever, funding over $2.5 billion in annual production in 2020, with 73% coming from purchase originations. Thompson started his mortgage career as an originator, working his way up to regional manager, eventually starting his own firm, Texas Capital Lending.

Ryan Zanin |

Fannie Mae | Chief Risk Officer

Fannie Mae announced Ryan Zanin has joined the company as its executive vice president and chief risk officer. Zanin has served on Fannie Mae’s board of directors since 2016 but stepped down from this position in January. Zanin brings over 30 years of experience in financial services and more than 20 years specializing in risk management to his new role. Previously, Zanin served as the president and CEO of the restructuring, strategic ventures and insurance group at GE Capital.

Doug Kinney |

Invictus Capital Partners | Head of Investor Relations

Invictus Capital Partners appointed Doug Kinney as senior managing director, head of investor relations. Kinney most recently served as managing partner and co-head of the capital raising and investor relations team at BentallGreenOak, and brings more than 25 years of experience to his new role. Kinney has also held senior leadership positions at The Carlyle Group, Greenhill & Co., Credit Suisse Real Estate Private Fund Group, Heitman/PRA Securities Advisors and Heitman/JMB Realty Corporation.

John Keratsis |

Deephaven | President and CEO

Pretium named John Keratsis president and CEO of its Deephaven mortgage platform. Bringing nearly two decades of experience and expertise to his new role, he is responsible for leading the next phase of Deephaven's strategic growth. Most recently, Keratsis served as senior managing director at Incenter where he was responsible for oversight of several mortgage services and specialty lending business units and over 800 employees.

Desmond Smith |

United Wholesale Mortgage | Chief Growth Officer

United Wholesale Mortgage has hired Desmond Smith, a former Fannie Mae executive, to be its chief growth officer as the wholesale firm attempts to usurp Rocket Mortgage as the nation’s top lender. Smith comes to UWM after a stint at Fannie Mae as the senior vice president and chief customer officer for single family business. He’s also worked at the FHA, Wells Fargo, JPMorgan Chase, Citi, and Capital One Home Loans over the course of a 30-year career in mortgage lending.

Evan Kidwell |

Griffin Funding | Chief Operating Officer

San Diego-based Griffin Funding promoted Evan Kidwell to chief operating officer. Kidwell has been in the mortgage and real estate industry for more than six years and specializes in operations and team management. Kidwell joined Griffin Funding a year and a half ago and works alongside CEO Bill Lyon to assist and equip employees. When he first joined the company in 2019, he served as vice president of strategy, bringing over a decade of business experience to the company.

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Pamela Perry |

Freddie Mac | Vice President of Single-Family Equitable Housing

Freddie Mac appointed Pamela Perry as vice president of single-family equitable housing. Perry will lead a newly formed team responsible for creating solutions to help minority families across the income spectrum achieve homeownership. Perry brings 25 years of legal experience in the financial services industry. Perry joined Freddie Mac in 2011 to oversee the company’s fair lending program. She previously advised on solutions for complex corporate finance transactions with firms such as JPMorgan Chase.

APRIL 2021

TAKE 5

Snapdocs Head of Industry and Regulatory Affairs

Camelia Martin

is leading the charge in industry-wide digital mortgage adoption. As an expert and pioneer in the adoption, implementation and use of digital mortgages, she has more than 15 years of experience in the housing industry, helping countless industry participants understand and integrate eNotes into their policies and procedures. Throughout her career, she has spearheaded initiatives that directly supported eNote acceptance programs for key participants such as Ginnie Mae and the Federal Home Loan Banks. Below, Martin answers five questions that give an inside look at her life:

1. I would tell my younger self... to travel far and often.

2. My biggest learning opportunity was... and continues to be, motherhood.

3. People would be surprised to know I... once studied 16th century poetry and prose.

4. My most useful tech tool is... Microsoft Visio. 5. After I am finished with my career, I hope people remember... the tough days we spent

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together in the trenches just as much as they do the days we celebrated the wins. Those will always be my favorite, as it is when the most lasting and meaningful relationships are formed.

APRIL 2021

STARTUP PROFILE

Kind Lending launched in March 2020, the same month the country started to shut down due to COVID-19. The national wholesale mortgage lender is the second brainchild of mortgage veteran Glenn Stearns, and by the beginning of 2021, it announced that it originated $1 billion in the first six months of production – a feat that took Stearns’ first company, Stearns Lending, 15 years to accomplish. Stearns started Kind Lending after taking what he called a “sabbatical,” which included appearing on Discovery Channel’s “Undercover Billionaire” and ended with his launch of Kind. As a serial entrepreneur, Stearns created Kind Lending as way to get back to his mortgage roots, creating a company that it says is “disrupting the whole mortgage industry by doing business a different way and encouraging others to do the same through kindness and respect.”

Things To Know Attempting to Disrupt: The mortgage process Launch Date: March 2020 Funding: Privately owned and operated Location: Headquartered in Santa Ana, California www.kindlending.com

Funded its first loan in July 2020

250+ employees

In its first six months of production, Kind Lending funded $1 billion

The disruptor score, unique score and launch size were determined through interviews with and editorial research on the company.

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UNIQUE SCORE:

LAUNCH SIZE: FUNDING:

HIGH

LOW

DISRUPTOR SCORE:

UNKNOWN Pre-Seed

Seed APRIL 2021

LAUNCHES

DataTrace Plaid

DataTrace announced that it now provides title professionals access to historical property document images that are currently unavailable through New York’s Automated City Register Information System (ACRIS). Documents pertaining to Bronx, King, New York and Queen counties dating back to the 17th century through 1966 can now be accessed. ACRIS only offers documents dating back to January 1966. Both historical images and indices are available through DataTrace's order entry and retrieval system, SearchTrax, according to Chuck Mauro, vice president of DataTrace's New York regional office. Specific documents pertaining to the property in question can also be accessed through a fixed-fee subscription service.

Plaid launched a new product that aims to make it easier and quicker for clients to establish or change the destination of their paychecks. Plaid Deposit Switch is currently in beta and the company has a waitlist for beta partners. The fintech company said in a blog post that this automation of direct deposit account funding helps banks be more efficient with their account funding flows. The product offers instant and fallback options for consumers when they set up recurring account funding. The instant switch method connects the payroll account through Plaid Link. Meanwhile, the company is also creating a “fallback method” where consumers can ask Plaid to contact their employer on their behalf in regard to updating their direct deposit, with no forms necessary. Plaid already has beta partners, including banking services for freelancers company Lili and financial services company Yotta.

Avanze Tech Labs Avanze Tech Labs announced the launch of STACX post-closing solution – a product that simplifies and fasttracks the entire post-close process, enabling lenders and title companies to improve cycle times and reduce operating costs. STACX utilizes AI technology to automate the classification and extraction of data from loan documents, streamlining the process in minutes; the software eliminates manual work of mortgage processing and labor-intensive quality assurance checks. The technology leverages an open API framework to integrate with existing document management systems and loan origination software.

Sales Boomerang Sales Boomerang announced the beta release of Prescriptive Scenarios, a product line of ‘smart’ loan scenarios designed to identify the ideal loan for each borrower. With Prescriptive Scenarios, Sales Boomerang significantly advances the borrower retention category by triangulating multiple points of borrower intelligence to deliver opportunities that approach 100% relevance. The beta release includes three categories of Prescriptive Scenarios: Rate-and-Term Scenarios, Cash-Out Scenarios, and FHA Mortgage Insurance Removal Scenarios.

DocuSign Rooms for Real Estate streamlines the transaction process by centralizing all transaction documents and details in a single workspace. The DocuSign forms library includes smart-tagged forms from over 100 state and local associations. The DocuSign forms library allows agents to add relevant documents to a transaction room, including offers, listing agreements, disclosures and purchase and sale agreements. The agent can then prepare the forms for the client to sign. Data entered into the room details will auto-populate in the documents, reducing the potential for human error from re-keying information, and accelerating the overall process.

APRIL 2021

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DocuSign Rooms for Real Estate

EVENT CALENDAR

MBA's Spring Conference & Expo 2021

LISTEN NOW "HousingWire Daily"

Date: April 20 - 22, 2021 Cost to attend: $399 - $1099 Presented by the Mortgage Bankers Association

ED DEMARCO ON BIDEN’S APPROACH TO FORBEARANCE BY ALCYNNA LLOYD

LOCATION: VIRTUAL FOR THE VERY FIRST TIME, the Mortgage Bankers Association is combining independent mortgage bankers, servicing, technology, secondary and capital markets all under one (virtual) roof during its 2021 Spring Conference and Expo. A combination of several of its conferences, the event will be held virtually at MBA Live with numerous opportunities for Q&A alongside keynote speakers and industry peers with moderated chats and live polling. The broadcast format will also allow attendees to engage in virtual breakouts and participate in THE HUB — an online venue for the latest products and solutions the industry has to offer. For those not able to attend all the events, MBA will be offering the stream after the convention on demand.

2021 NAHREP National Convention & Housing Policy Summit National Housing Convention: April 13 - 15, 2021 Housing Policy Summit: April 20 - 22, 2021 Cost to attend: Members – Free | Non-members – $50 Presented by the National Association of Hispanic Real Estate Professionals LOCATION: VIRTUAL NAHREP’s annual National Convention is the organization’s premier event of the year where real estate professionals, industry experts and corporate executives can convene for education, networking and entertainment. This year’s event will be joined with NAHREP’s Housing Policy Summit, typically held every year in Washington, D.C., for a housing assembly of education, insight and advocacy. The combined convention and expo will be the site for the release of the annual State of Hispanic Homeownership Report, highlighting the homeownership and economic growth of Latinos in the United States over the past year. There will also be a week of action at Capitol Hill following the event where selected NAHREP members will have the opportunity to participate in virtual meetings.

Since taking office in January, President Joe Biden has stayed busy issuing a slew of executive orders and other plans, including forbearance options for homeowners. On his first day in office, Biden signed an executive order instructing the U.S. Department of Housing and Urban Development to extend the foreclosure moratorium, and HUD Secretary Marcia Fudge has vowed to make housing discrimination and fair housing a priority. Earlier this year, HousingWire Senior Financial Reporter Kelsey Ramírez sat down with Housing Policy Council President and former acting director of the Federal Housing Finance Agency Ed DeMarco to discuss the Biden administration’s plans for homeowners coming out of forbearance and its focus moving forward. In Ramirez’s HousingWire Daily podcast segment, Mortgage Desk, DeMarco says there’s no doubt that Biden has a keen focus on the racial homeownership gap, which will likely affect his administration’s approach to forbearance and housing assistance. “There may be a heightened attention or wanting to make sure that every opportunity has been given to a family that’s in forbearance to be able to stay in their home when they reach the end of the forbearance period – to find a successful strategy to allow them to keep their home,” DeMarco said. “Because as we know, the pandemic has economically affected communities of color harder.” With more than 2.6 million homeowners in forbearance plans at the start of the year and the continuous extension of forbearance polices, this podcast episode provides unique insights from an expert who led the FHFA during some of its most pivotal years. Listen to this informative episode to learn more about how forbearance and moratoriums will impact the housing market in the long run.

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Event TIP

“I always recommend reaching out to see if a link can be sent after the virtual event. As work and home are often the same place, it can be distracting and difficult to follow presentations in real time. A follow-up link allows you to pick the best time for your schedule.”

- Liz Irish, sales manager at Sun West Mortgage Company and cofounder of Women Producers in Mortgage

APRIL 2021

INSIDE AGENT

Jeff Lowe President of Lowe Group Chicago Jeff@lowegroup.com 1841 N. Sedgewick $4.75 million 6 bed, 7 bath 8,500 sqft

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JEFF LOWE put Compass on the map in Chicago. Lowe emerged as the New York City-based brokerage’s first Chicago broker after Compass CEO Robert Reffkin courted him on numerous occasions in late 2017. At the time, Lowe was Chicago’s No. 1 producer at Berkshire Hathaway Services. Today, he leads a team of agents – the Lowe Group – that racked up $298 million in 2020 sales volume, per Multiple Listings Service data. Lowe’s agent team shepherds home sales throughout Chicago’s North Side from lakefront neighborhoods like Lincoln Park to the rapidly developed environs of Bucktown. The home featured here – an 8,500-square-foot abode in Lincoln Park – shows some of the accoutrements of Windy City luxury. The house, for example, features a limestone fireplace (perfect for any polar vortex!) and walnut-adorned rooms.

APRIL 2021

LOCAL INTEL

By: Matthew Blake

Beverly Hills, California Michael Nourmand of Nourmand & Associates is candid about his work. Real estate, even in the glamour of Beverly Hills, Bel Air, and West Hollywood, can be a low-margin, super-competitive business. But as L.A. has been hit particularly hard by the pandemic, the single-family home luxury market is better than ever. Nourmand professes to have taken at most two days off in the last two months. And the stats suggest brokers are reaping the fruits of trendlines that show COVID did not economically hurt the wealthy. According to research by Miller Samuel and Douglas Elliman, single-family Los Angeles County home sales between $2 to $5 million were up 73% in January 2021 from January 2020 (with 294 such homes sold in 2021). And homes in the rarefied range of above $5 million are up 29% year-over-year to 51. “The market is hot,” Nourmand said. “And I have been working insane hours.”

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Bowling Green, Kentucky

Bowling Green has a General Motors plant specializing in Chevrolet Corvettes. It’s also home to the Southern Kentucky Performing Arts Center, and Western Kentucky University. What Bowling Green does not have is houses for sale. “We have as many homes under contract as we have listed,” said Kenny Cravens, the general manager at Coldwell Banker in Bowling Green, and president of the Southern Kentucky Realtors Association. There were but 429 on-market listings in Southern Kentucky’s entire Multiple Listings Service as of Feb. 11, Cravens said. Southern Kentucky isn’t bursting with people (Warren County, home of Bowling Green, has a population of 234,000), but it has more demand than that. Cravens is witnessing a spiral where people won’t put their home on market because they’re afraid of not being able to find a new place. Another factor: There is space to build, but the skyrocketing price of lumber makes construction expensive.

APRIL 2021

Oakland, California

“Prior to COVID, San Francisco property was trading at $1,300 to $1,400 a foot and Piedmont was trading at $950 a foot,” relayed D.J. Grubb, real estate broker at the Grubb Co. in Oakland. “Since COVID, Piedmont has appreciated 17%, while San Francisco has only appreciated 2%.” The Bay Area is the most expensive single-family home market in the country – with a median sold price of a home well over $1 million in San Francisco, Alameda (home of Oakland) and Marin counties, according to the California Association of Realtors. But the desire for more spacious living amid the pandemic has pushed homebuyers to places like Piedmont, a suburb that envelops Oakland. “People were sitting in the city having babies, and now these people are moving out to the suburbs,” Grubb said. And the people are moving to single-family homes. The normally white-hot Oakland and San Francisco condo market, Grubb observed, is flat.

Chicago, Illinois The condo market—which has animated Windy City residential development the past two decades – is down, said Jeff Lowe of Compass, but single-family home sales are up. “People who were living in larger buildings downtown are moving into single-family,” said Lowe, who leads an agent team based in the Lakeview neighborhood. “My group's sales were up 19% compared to 2019.” Homebuyers are migrating to lakeshore suburbs, Lowe said. But the hottest action lies in the Wicker Park neighborhood on the city’s west side, home to writers like Nelson Algren and musicians like Liz Phair many moons ago. “I had 14 showings in two days,” Lowe recalled. “The buyer pool there is incredible.”

Miami residents don’t have a reputation as hard-bitten, urban dwellers but maybe they should. As denizens of other cities fled high-rises, Miami-Dade County condo sales eclipsed single-family deals in the fall, according to Douglas Elliman Miller Samuel research. Come January, there were 1,279 signed condo contracts in Miami-Dade County compared to 864 new single-family deals. Both numbers, though, represent a marked drop off from one year earlier, which Jonathan Miller of Miller Samuel chalks up to significant inventory issues. “The supply has been choked off,” Miller said. Still, the Miami condo resurgence is an interesting indicator for urban living in the age of coronavirus. “The living concerns because of COVID have significantly dissipated,” Miller said.

APRIL 2021

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Miami, Florida

COMMENTARY

et’s be honest, RON isn’t the miracle answer to all our questions Focusing on a single tool simply won’t bring the innovations this industry desires By Patrick Stone

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The push to further digitize the mortgage process gained added traction amid the COVID-19 pandemic, with lockdowns forcing the mortgage industry to adopt new technologies it has otherwise been slow to embrace. Remote Online Notarizations (RON) form part of that digital transformation, naturally. However, the role RON will play in the end-to-end digital mortgage process is somewhat overblown. While the widespread adoption of this technology is moving forward quickly, the widespread use of RON is probably not going to happen anytime soon. Simply put: far too many potential homeowners still wish to have a higher level of participation in the closing process than RON offers. That’s not to say that having RON available in a time of social distancing hasn’t proved useful, but its impact during the pandemic has been minimal. Right now, if RON is used in even 2% or 3% of all closings, that would be a larger market share than expected. We offer RON as a service and, for 10 months of 2020, WFG used RON on .882% of its closings. Less than 1% of our transactions request RON. There are some notable advances worth mentioning, specifically on the state-by-state level, where the adoption of RON is being approved in legislation and the definitions are being broadened in a hope to expand applicability. Even so, the use of RON will likely remain minimal as we emerge from the pandemic. And this is due to the fact that RON has a very specific function. For example, RON will continue to have applicability

“Far too many potential homeowners still wish to have a higher level of participation in the closing process than RON offers.”

where sophisticated investors can’t get to the closing and it will have applicability for people who are knowledgeable enough and don’t need to actually sit down in person with someone because they’re familiar with the process of getting a mortgage and trust the technology. WHERE RON IS WORKING There are other examples of ways in which RON will find greater market share due to the nature of the process. The biggest user of RON in our company is the Seattle market. Why? When researching our largest market for RON we found that online notarization is preferred due to something very simple: there’s too much traffic in Seattle. You can’t get anywhere during the day in Seattle! If you’re a businessperson and you’re working downtown or you’re working down in Bellevue, you can’t get to a closing office very easily. The applicability there is that you can do more business by doing RON rather than wasting time in traffic trying to do in-person notarizations. That’s where we regularly use mobile notaries and we were using them extensively even prior to the pandemic with business people who have bought or sold multiple homes or completed multiple refinancings. Putting these niche market solutions aside, a broadened market for RON was expected to manifest itself in the quarantine environment of 2020. And that didn’t happen. During this time, and in the socially distanced environment, the majority of our work continued as modified in-person closings. We’ve seen surges in audio-visual tools for online notarization, as well as drive-through notarizations, as these solutions offer adequate alternatives to being in a closing room, one-on-one. When conducting in-person closings, we’ve implemented procedural changes to ensure a safe environment to protect borrowers and other participants. These changes include simple things like disinfecting all surfaces prior to and using a fresh pen for each closing, and requiring everyone present to wear face masks so that we can responsibly conduct business in-person. As the months have passed, the initial panic has ebbed away and people don’t necessarily want everything to be done online.

APRIL 2021

HURDLES THAT REMAIN One of the major hurdles that remain is how the whole legislative process is going to wash out, both on the state and federal level. Although the temporary authorizations of RON use span the U.S., permanent RON legislation has been passed in 29 states, as of this writing, and approximately 20 additional states have issued guidance enabling RON temporarily in response to COVID-19. Unfortunately, state laws vary with respect to the requirements for authorizing notaries to perform RON, authenticating signers, location of signers, content and structure of electronic stamps and seals, and maintenance of notary journal entries for RON transactions. There are trade associations that are working together to get some standard underlying legal status for RON. They are working diligently to get national consensus and regulatory standards to reduce inconsistencies among state laws, however considering the lack of demand for RON at the homebuyer level, it’s unlikely that legislators will prioritize regulatory approval as a service to their constituents. Outside of standardized legislation, there also remain some significant legal questions over the acceptability, as well as how litigation will play out when there is a problem, especially if people are conducting RON signings, but they’re not licensed in that state. The visibility isn’t there as to what the end game will be.

25% thought process inefficiencies were a significant issue. That is defined as communications, signing, closing issues, accuracy, and quality of data. In terms of top priorities for lenders, 33% indicated that a consumer-facing technology is a top priority and 39% said that streamlining business processes was a top priority. To put this into perspective, we conducted a survey back in the early 2000s and found that the borrower’s name and property address or legal description were entered an average of 80 times by the collective transaction participants. While this figure has decreased a bit since then, it is still too high, resulting in wasted time and unnecessary errors. By enabling data to flow through the transaction we can eliminate mistakes and make the process less cumbersome and slow. There have been several studies on eClosings that found that sharing data and using e-closings can get the turnaround time down to 21 days, as opposed to 43 days, while also eliminating a lot of mistakes and a lot of unnecessary calls and emails. The point to this is that solutions are being developed for mortgage lending across the board. Focusing on a single tool simply won’t bring the innovations this industry desires. RON is simply not the miracle answer on its own, but it is part of the solution. Good solutions bring all mortgage transaction participants together within a single, easy-to-use ecosystem, by enhancing communication and transparency, resulting in a better borrower experience. By comparison, RON fulfills a very niche role in the war to overcome the problems that plague our industry.

RON IS NOT THE SOLUTION LENDERS NEED Looking beyond RON, there are other ways in which the industry can gain greater efficiency and further digitize the mortgage process. A survey we conducted of 50-plus lenders revealed that one of the key issues for almost all who participated is the elimination of duplicative touchpoints. Approximately 25% identified their biggest challenge as turnaround times to obtain all the information needed to get a deal closed and another

Patrick Stone is the executive chairman and founder of Williston Financial Group. A 2019 HW Vanguard Award recipient, Stone started WFG in 2010. Prior to that, he served as president and COO of the nation’s largest title insurance company.

APRIL 2021

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And with the above-described safety measures, people know they can have a more intimate closing, in a safe and controlled environment. To be clear, this further compartmentalizes the benefits of RON.

COMMENTARY

he drive to digital in title Title industry embraces technology from production through closing By Diane Tomb

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The title industry has used artificial intelligence and automation in various parts of the process for many years. Title production software companies have made great strides in automation that eliminates re-keying and the transferring of data from one application to another. More and more companies — including underwriters, third-party vendors, and business process outsourcers — have started offering title production automation and using technology to improve the digitization of records. Additionally, companies are using automated reconciliation to complete this task in a timelier manner and address issues more effectively. Finally, title and escrow companies have automated communications such as email, reminders, confirmations, and notifications into title production systems. Aside from title production, the title and settlement services industry has implemented technology and platforms that track the progress of the transaction, provide secure communication, and offer digital, intelligent closing experiences. AUTOMATED TITLE SEARCH ENGINES In the past, a title company wanting to adopt automation needed a custom software build, had to change their workflows around a new process, and provide training for their examiners to use a new interface and procedures. Tools now exist that connect data sources, enabling title reports to be quickly delivered. To help improve the title search process, many companies are using artificial intelligence and machine learning — combined with underwriting guidelines — to search traditional and non-traditional property data sources. This approach augments the traditional search and exam process and can be combined with a traditional title production platform to reduce exam time and increase accuracy. In certain types of transactions, this can expedite loan underwriting and result in faster closings.

DIGITAL TITLE REVIEW PROCESS The title review process is another area where title companies are using technology to reduce the time to close. Using a digitally enhanced title review process, companies can provide title reports that give borrowers clear curative actions and turn times. This workflow streamlines curative efforts. This type of technology can route title documents into categories based on a grading system. Outstanding title issues that need to be cleared are identified so that the title company can explain to the customer how those items will be cured. INTELLIGENT DOCUMENT ROUTING On occasion, lack of communication or miscommunication with lenders can pose challenges, or a lien release may simply get lost in the significant paperwork facing staff. There are now intelligent document routing platforms that improve accuracy for automatically routing mortgage payoffs. AI solutions can extract the necessary information in documents, read the content and route the documents to the correct file without manual interaction. This AI functionality can provide greater accuracy and give companies the ability to effectively handle more transactional volume without additional personnel costs. PROTECTING AGAINST WIRE TRANSFER FRAUD On the fraud front, the Internet Crime Complaint Center received 467,361 complaints in 2019 — an average of nearly 1,300 per day — and recorded more than $3.5 billion in total losses from business email compromise (BEC) schemes. Additionally, COVID-19 has created new global cybersecurity threats, with the number of registered fraudulent emails and text messages spiking by nearly 700% in the early days of the pandemic. These BEC scams often lead to wire transfer fraud. According to the FBI, there were 11,677 victims in 2019 with $221 million in losses due to wire transfer fraud. In March, the FBI is expected to release wire transfer fraud data for 2020. Title and settlement services companies have taken many steps to combat this problem, such as using secure online portals and real-time identity and account verification platforms

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for protecting money. In 2019, the American Land Title Association (ALTA) formed the Coalition to Stop Wire Fraud and has run several digital advertising campaigns to raise awareness with consumers. ALTA also has worked with Congress to push federal agencies to focus more on real estate wire fraud.

DIGITAL CLOSINGS The use of remote online notarization increased 547% in 2020 when compared to 2019, according to a survey ALTA conducted of vendors that offer this technology. This increase can be attributed to heightened demand for RON during the COVID-19 pandemic, coupled with the fact that 29 states have passed permanent laws authorizing the use of RON. Today, RON is being utilized most extensively in Florida, Texas and Virginia. Additionally, use of this technology is trending up significantly in Midwestern states. A decade ago, Virginia became the first state to enact a RON law and Texas approved RON legislation in 2017. Adoption of RON in Florida has been rapid since the state passed legislation in 2019, the survey found. ALTA has advocated for federal legislation that would enable RON in all 50 states with minimum national standards. In collaboration with the Mortgage Bankers Association, ALTA has prepared model legislation that provides the framework for states to adopt an online remote notarization process. Over the summer of 2020, ALTA, the MBA and National Association of Realtors developed a draft model emergency notarization order — which was supported by Fannie Mae and Freddie Mac — to help create uniformity and provide legal certainty for use of RON in states promoting social distancing measures. The title industry has been at the forefront in developing standards for digital closing options that have the appropriate safeguards and authentication process to protect consumers while ensuring the

notarizations provide certainty and effective constructive notice under state law. Due to the COVID-19 health crisis, the need for digital transactions and use of remote notarizations has increased. Having these principles provides a strong foundation for the use of various types of remote notarizations going forward. ALTA’s Title & Settlement Agent Registry identifies title and settlement companies that can perform RON closings. Closing companies that offer RON are designated with a small graphic icon, making them easy to identify in the ALTA Registry. In addition, software has been developed that identifies the different types of digital closings that are legal and available in each state. POST-CLOSING Innovation is also happening after the closing as companies are finding ways to streamline repetitive and manual post-closing processes. Some applications include advanced automation capabilities aimed at consolidating quality-control tracking information relevant to all stages of the post-closing process, from scanning and separating packages to identifying recordables and integrating all shipping phases. Direct integrations with title production systems allow companies to deliver, track and update post-closing files securely in real-time without the hassle of multiple logins. CONTINUED DRIVE TO DIGITAL Companies in the title and settlement space have always had to balance the technology capabilities of many partners involved in the real estate transaction. The title and settlement services industry continues to orchestrate change in the real estate transaction, with the goal to end the siloed approach and deliver a collaborative transaction that best serves the consumer.

Diane Tomb is CEO of the American Land Title Association, the national trade association representing the land title insurance and settlement services industry, which employs more than 120,000 people working in every county in the United States.

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REVIEW OF CLOSING DOCUMENTS In the past, reviewing closing documents has been an extremely manual process. Escrow or closing employees “stare and compare” to verify data and fees. This is another repetitive process that can be automated to help deliver accurate settlement statements. Technology in this area can reduce errors by reducing touch points and automatically reconciling data from the lender’s Closing Disclosure into the title production system.

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The

future of closing Where do we go from here?

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By Matt Wrye

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A “It’s not insurmountable to get permanent RON laws passed over the next few years by states that haven’t done so. But there’s got to be a will to make it all happen.”

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-Bill Anderson

painstaking, uncoordinated movement to fully adopt remote online notarizations nationwide and complete end-to-end digital escrow closings is gaining even more traction as the real estate industry launches into a new decade in 2021. But depending on where you work in housing, it can feel like a bumbling snafu, a noble attempt that’s stuck in slow motion, or maybe even a lifelong crusade where patience and persistence will eventually win the day. Where does the industry go from here? Combined with real estate’s technological adaptation that’s kept transactions healthily moving during the coronavirus pandemic, recent events are signaling that complete electronic closings on a much larger scale could be the next big shift in property transactions. The pandemic is injecting even greater urgency in endorsements of eClosings at the county and state levels from several private sector leaders in residential real estate — and perhaps a few public policymakers who might not be holding out too much longer. “It’s not insurmountable to get permanent RON laws passed over the next few years by states that haven’t done so,” said Bill Anderson, vice president of government affairs for the National Notary Association in Chatsworth, Calif. “But there’s got to be a will to make it all happen.” YOUR SECRETARY OF STATE IS KEY To understand where RON is going, you need to understand where it ’s been. Historically, a notary is not needed to simply oversee a promissory note contract

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signed over from a borrower to a lender. In reality, notaries administer promissory note signatures that support legal property liens for mortgage collateral purposes where the Electronic Security Instrument (deed of trust) is what actually gets recorded in local counties. Officially transacted property collateral by a “third party” notary provides assurance to securitized bond markets and government-backing agencies when lenders sell mortgages to investors. Given this history, going fully RON means weaning off wet-ink closings, hybrid closings, pandemic-era socially distanced “mobile” closings and even remote ink-signed notarizations (RIN) for industry players who are up to the challenge. That is as long as they can envision the efficiencies gained, cost reductions, enhanced security and get local buy-in from county recorder offices. What’s also helped? COVID-19 immediately moved mountains of homebuyer paperwork into the digital sphere within a handful of states that hadn’t transitioned to RON prior to the pandemic. And for longtime RON cheerleaders, acceptance within financial investment markets and government intermediaries already developed over the past 10 years. Freddie Mac, Fannie Mae, Ginnie Mae and others have come a long way to give investors peace of mind. But the hard truth about the future of eClosings is etched in a years-long complex patchwork of permanent-versus-temporary state legislation and “authorization,” governor emergency orders on professional eNotary oversight, county recorder willingness, local real estate transaction law, technology upgrades, properly certified

-Bill Anderson

specialists, liability and fraud concerns and lender workflows. After piecemealing a partially-paper-partially-electronic grid by public and private interests to mark the trail we have today, you shouldn’t expect widespread wholly functioning implementation of eClosings to kick off tomorrow just because of the lingering pandemic. “Historically, you still have to get the blessing of the secretary of state — who’s usually the notary regulator — in any state to pass an official permanent RON law for eNotaries to legally practice,” Anderson said. “If the secretary of state isn’t on board, it’s hard getting legislation out of committee to support any type of permanent remote-notary or electronic-closing escrow services.” And that’s with broad nationwide support already amassed from real estate agents, land title specialists, escrow officers, lenders and trade associations for years on end. LEGALIT Y VS. CAPABILIT Y VS. COOPERATION A state’s structural foundation for allowing RON or RIN is completely separate from its stance toward allowing remote notaries to actually practice those notarizations — the latter being a much-coveted second step in the ongoing storyline. The first step is the legal basis for electronic signatures and notarizations, which have been around for 20 years. With the exception of New York and Illinois (which have electronic signature statutes), all other states and the District of Columbia have deferred to — and ultimately derive their RON and RIN authority from — the Uniform Electronic Transactions Act passed by the Uniform Law Commission in 1999. This act filled in the gaps where state legislatures and secretaries of state did not initially tread. For federal jurisdictions, Congress passed the Electronic Signatures in Global and National Commerce Act (E-SIGN) in 2000. In conjunction, 30 states gradually passed official permanent laws over the years allowing eNotaries to directly administer remote non-ink notarizations or remote ink notarizations — that desirable second step. Some of these states have gone further and developed post-law compliance regulations while others have taken a minimalist post-law approach.

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Meanwhile, eNotaries in another 18 states have been given the green light by an assortment of temporary laws, authorizations and emergency orders over the years to perform their trade electronically. Approximately half of these states’ “temporary” approvals were either developed nearly overnight or fast-tracked from prior discussion when last year’s COVID-19 social distancing policies were put in place. The remaining two states having no permanent or temporary laws that expressly approve of notaries to practice RON, or RIN for that matter, are California and South Carolina, and they are outliers for completely different reasons. During the springtime 2020 crisis point of the pandemic, then-California Secretary of State Alex Padilla (now a U.S. senator) fiercely opposed discussions in the U.S. Congress about passing a federal emergency law temporarily allowing RON in states where eNotaries had never been given approval by their legislature or secretary of state. While Congress ended up not going this route, many states and governors passed their own emergency legislation, authorization, or temporary orders anyway. California did not. “Many were not surprised that California’s secretary of state was opposed to those discussions in Washington, D.C.,” said Gavin Ales, chief compliance officer for DocMagic, an eClosing provider based in Torrance, Calif. “They were surprised over the strength and emphasis in which he pushed back. He wasn’t just against it; he was very averse to the idea.” California decided that only socially distanced “mobile” closings were appropriate. Also, and perhaps unanticipated, RON closings were only allowed if eNotaries providing the service were out-of-state — but even this brief show of support for outof-state notaries was eventually withdrawn. Padilla stated in a letter to Congress that he had concerns over consumer fraud given the online audio-visual nature of an eNotary’s interaction with document signers. “Please don’t force us into something we’re not ready for, is basically what California stated,” said Mark Ladd, past president of the Raleigh, N.C.headquartered Property Records Industry Association and a current member of PRIA’s advisory council. “Mr. Padilla also

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“If the secretary of state isn’t on board, it’s hard getting legislation out of committee to support any type of permanent remote-notary or electronic-closing escrow services.”

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thought it would cost the state $20 million to regulate remote notaries. With California home to Silicon Valley, everyone thought the pendulum would be in favor of remote-notary technology. But the state is apparently convinced it doesn’t know how to properly regulate RON notaries and protect the consumer at the moment.” Over the years, this fear of consumer fraud has also hit a vein in two other large states with big real estate markets and large metropolises: New York and Illinois. State bureaucracy and regulatory culture may play into the picture as well. “No matter what type of business you’re talking about, states like California and New York will always see the need for a robust regulatory scheme, and that involves costs,” Ladd said. “A lot of this comes down to a particular state’s views on regulation in general. That slows things down.” The other state without a permanent or temporary RON law for eNotaries, South Carolina, has a strict yet unofficial practice of making sure attorneys are involved in real estate closings — not professional notaries. The state’s legal association, South Carolina Bar, is still calculating how it would let non-attorneys supervise eClosings so borrowers are protected from fraud and liability when they sign documents. DEVIL IN THE (RON) DETAILS “There will probably always be some usefulness for ink documents,” Ales said. “But still, you would think we’d get to full-RON at some point because that seems to be the trajectory of our eBased society. I’m not sure there’s some huge void to be filled, but RON definitely adds efficiencies. Lenders are always looking at what it costs to produce a loan origination since you’ve got all types of economies of scale at stake. And with the pandemic still here, it’s made complete sense.” A robust number of certified, registered local electronic notaries is another issue as different states have a varying supply of these specialists. Many states’ eNotary workforce pools are not equally proportional to the volume of annual home transactions, let alone the amount of future transactions that have the possibility of being eClosings. On average, approximately 1% of any state’s traditional notaries are also eNotaries. The Louisiana Notary Association came

“Many were not surprised that California’s secretary of state was opposed to those discussions in Washington, D.C.. They were surprised over the strength and emphasis in which he pushed back. He wasn’t just against it; he was very averse to the idea.” -Gavin Ales

out against Gov. John Bel Edwards’ emergency executive RON order when COVID19 hit the state last year. The order was not renewed after it expired but it didn’t matter; the state eventually still passed a permanent RON law. As of late January, the association said in a statement it is continuing to work with the secretary of state’s office and other stakeholders to “promulgate” post-law RON regulations, including how the process will work, what the software will look like and possible next-steps for eNotary training. “Even in normal times before the pandemic, becoming an eNotary was a separate process above and beyond the normal certification and training,” Ales said. “It’s all critical — the notaries, the states, the eVault storage and MERS database (Mortgage Electronic Registration System), and having the blessing of Fannie, Freddie and Ginnie Mae — everything combined. You have to have the whole thing working together for the process to move forward.” County recorder offices across the nation present their own unique circumstances. Those that accept deeds of trust (Electronic Security Instruments) with eSignatures usually convert those files to TIFF (.tiff) images to record on their systems, technically known as the “tag image file format” developed in the 1980s and 1990s. But recorders that don’t accept eInstruments are not refusing because their systems will not allow it. “They can actually accept them,” Ladd said. “They say they can’t — or in reality they don’t want to — from a policy perspective. Even with state legislation, each county has the authority to decide whether they accept eSignatures or eDocuments. States with RON have many counties that will do them, but sometimes a county recorder office in a particular state refuses since their state hasn’t provided official compliance guidance. Also, some county recorders are just afraid it’s a gateway to fraud.” W H AT IS SUCCE SSF U L RON EXECUTION? From a county, to its state, to an entire industry navigating fitful starts over the past 20 years, advocating for RON has come down to keeping one’s composure. “We see a lot of lenders attempting digital closings, and they spend a lot of money and time to just end up doing a few hybrid

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through the company’s platform to use full eClose with some form of RON, which equates to more than 25% of all U.S. mortgages funded annually. It’s a number that will probably grow larger every year — a forecast ICE Mortgage Technology is making since it touches 50% of all mortgages in the nation. Simultaneously, it ’s unlikely all 50 states will have permanent RON laws anytime soon coming out of this pandemic era, especially with the 2020 elections adjusting policies and legislative focus in some states due to changes in leadership. That’s besides the fact that approximately 90% of all Americans live in a county allowing eRecordings and almost 60% in a county allowing -Mark Ladd for full RON. In 2019, several secretaries of state came together to discuss what aligning their postlaw regulatory and compliance standards would look like for permanent eClosings and RON. The biggest impediment is getting many of the remaining states to agree on what those standards are. “These aren’t automobile transactions. They are residential transactions with several hundreds of thousands of dollars in liability,” Tyrrell said. “Everyone is trying to figure out how to implement eNotarization without the litigation exposure. There are advantages for everyone involved in the ecosystem. It’s a matter of counties and states feeling continued pressure to move forward and see that it can be done with the right safeguards.”

"Even with state legislation, each county has the authority to decide whether they accept esignatures or edocuments."

Bio: Matt Wrye writes about real estate, housing, mortgages, the economy, labor markets and the banking industry. 27 ❱ HOUSINGWIRE

closings and maybe a few full eClosings,” said Peter Martinez-Fonts, senior manager of customer success for San Francisco, Calif.-based Snapdocs, during a February eClosing webinar hosted by HousingWire. “They can be a major hassle to do and will lose steam if they never get off the ground within an organization. That’s not really success.” Still, many within the mortgage industry and escrow-title space in recent years have fully backed RON efforts as they patiently persevere and continue doing a mixture of wet-ink, hybrid, or RIN and RON escrow closings. But it hasn’t been painless. “Lenders have completed years of due diligence, but operational concerns and a lack of consistency in the laws nationwide are still a challenge — and no one wants to be the first in line to litigate these complex issues,” Anderson said. “I’ve been working with a lot of the same people over the last few decades. It’d be nice to see full state-to-state permanent adoption of RON take place before we retire.” Joe Tyrrell said “change management” can be hard for lenders to stomach. Until recently, some lenders have been operating in multiple states with only a small proportion of those states allowing for complete eclosing. “Are you going to go through massive disruption just to bifurcate your borrower experience depending on the state?,” said Tyrrell, president of ICE Mortgage Technology, a Pleasanton , C alif.headquartered division of cloud-based loan origination provider Intercontinental Exchange. “Lenders usually never worried about whether a mortgage is eligible for e-close or RON; that was always a consumer opt-in. But today these decisions become a balancing act.” More than 462,000 eNote registrations were completed on the MERS eRegistry in 2020 according to MERS (the Mortgage Electronic Registration System), which is more than quadruple the combined total recorded from 2014 – 2019. Also, these registrations have reached 50,000 – 60,000 per month from September 2020 to January 2021 and aren’t showing any signs of declining. This recent spike paints an anecdotal visual of RON closings going forward. By late 2022, Tyrrell expects more than half of mortgages processed annually

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+ The added value of

ADUs

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By Robyn A. Friedman

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ging parents. College students returning to the fold. Millennials seeking affordable housing in high-priced markets. People with disabilities who can live on their own but need a little family support. All of these populations comprise the target market for accessory dwelling units (ADUs), commonly referred to as granny flats, in-law suites, casitas or guest houses – self-contained living units that usually have their own bedrooms, kitchen and bathroom, but are situated on a lot with a separate home. ADUs come in many different forms. They can be detached, such as a small cottage or guest house on the same parcel as a single-family home. They can be attached, such as an addition on a primary structure. They can be created from the conversion of existing space, such as a garage. Or they can be what California terms a “Junior Accessory Dwelling Unit,” which results from the conversion of space contained entirely within an existing or proposed single-family residence. APRIL 2021

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The Business Case for Jumping on the ADU Bandwagon

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No matter what the form, ADUs are a way to provide affordable housing options in a neighborhood – even a historical neighborhood – without changing the character or causing a substantial increase in housing density. That’s the good news. But there’s a flip side to ADUs. “The bad news is that sometimes, some analysts in the industry portray ADUs as the solution to the lack of housing,” said Robert Dietz, chief economist and senior vice president for economics and housing policy for the National Association of Home Builders (NAHB). “It’s not a long-term solution because an ADU is often not going to be the right kind of housing for a young adult who eventually is going to marry and have kids. It’s not a substitute for entry-level, new-construction single-family housing that was particularly important and in high demand during 2020 as people wanted lower-density neighborhoods and more space for home offices. ADUs don’t add that kind of housing. But as an immediate-term solution to the lack of affordable rental housing, ADUs absolutely have a role to play.” WHAT ARE THE BENEFITS OF ADUS? ADUs offer many benefits and are often seen as a win/win/win for the parties involved – property owners, tenants and builders. The California Department of Housing and Community Development recently summed up the benefits of ADUs as follows: • Affordability: An affordable way to construct a home in pricey housing markets because ADUs don’t require the purchase of land (if added by the owner of an existing home), major new infrastructure or parking. • Income: ADUs can provide a passive income stream for a homeowner. • Cost-effective: ADUs are built with wood-frame construction, which is less expensive than building multifamily on infill lots. • Social: ADUs provide a way for extended families to be close while maintaining privacy. • Space: ADUs often provide as much living space as apartments or condominiums. • Flexibility: They are suitable for many types of residents and allow older adults to age in place. These benefits are driving the market for properties with existing ADUs, homes with sufficient space to add an ADU and for infill lots where builders can erect new structures. “The markets where ADUs are the most attractive are those where it’s hardest to build entry-level housing,” said Dietz. “It’s markets like California, where the regulatory burdens associated with new construction make it difficult to bring building lots into the system.” Seattle, another market with high housing prices, is also popular for ADUs. “We are seeing a surge of accessory dwelling units,” said Robin Sheridan, a real estate broker with Compass Washington. “The audience for whom these units are attractive has exploded since last spring when people began working from home. I’m seeing people building detached home offices, but also many clients who are building smaller homes on-site for their downsizing parents.” THE DATA In July 2020, Freddie Mac released a national study on ADUs. It

reported that the growth of ADUs in the United States has been dramatic, particularly in high-cost areas seeing significant population growth. Freddie’s analysis, the first of its kind on a large scale, is based on 1.4 million single-family properties with ADUs, which were identified after an analysis of 600 million MLS transactions dating back to the late 1990s. “This analysis is both unique and large in scale, giving us insight into the growing movement of accessory dwelling units,” said Sam Khater, Freddie Mac’s chief economist.

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Highlights of the study include: • ADU sales are up: 70,000 properties with ADUs were sold in 2019 (4.2% of total homes sold on the MLS), compared to 8,000 properties with ADUs (1.1%) sold in 2000. • ADU rentals are up: 8,000 ADUs were leased in 2019, up from less than 1,000 in 2000. • ADU listings are up: Between 2009 and 2018, the number of ADUs listed for the first time (including for-sale and for-rent units) grew by an average of 8.6% year-over-year. • Demand for ADUs is up: Demand is highest in the fast-

est-growing regions of the country, including California, Florida, Texas and Georgia. The fastest-growing metros are Portland, Dallas, Seattle, Los Angeles and Miami, each with double-digit growth since 2015. This dramatic growth of ADUs, based on growing demand, creates opportunity for many real estate industry professionals. CARVING OUT A NICHE IN THE ADU MARKET Real estate agent Xio Sandoval realized several years ago the opportunity that ADUs present. As an agent with Century 21 Realty

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One of Mighty Buildings’ 3D-printed ADUs. Photo credit: Mighty Buildings

Masters in Montebello, Calif., she knew that due to California’s high housing-market prices, her clients could benefit by purchasing a home with an ADU. “I’m working with buyers looking for already constructed ADU units because they want the income stream,” she said. Sandoval, who said 70% of her business involves ADUs, has a client who is a builder active in this space. He remodels existing single-family homes and adds a new ADU unit on the property. After she finds a purchaser for the home, Sandoval will help that buyer lease the ADU, usually at a rent of about $1,300, $2,200 or $2,900 for a one-, two- or three-bedroom unit, respectively. She will market the rental ADU, screen potential tenants, arrange for the lease and get the tenant in place, all at no cost to her buyer. Since she started providing this service, the number of closings she’s doing has doubled. Real estate agents should “follow the trends,” Sandoval said. “Don’t be scared to offer rental services – you’re making a difference to these tenants.” BUILDERS ATTRACTED TO ADUS AS WELL Builders and remodelers are also entering the ADU market, attracted to the strong fundamentals. According to NAHB’s first quarter 2019 Remodeling Market Index, one-fifth of remodelers undertook projects that created an ADU within the 12 months prior, with

three-quarters reporting that their projects cost at least $50,000 – and 28% reporting projects costing at least $150,000. But business models vary. Some of the nation’s largest builders are responding to the rise of multigenerational households in the United States, one trend creating a need for ADUs. According to a 2016 Pew Research Center analysis, a record 64 million people, or 20% of the U.S. population, lived with multiple generations under one roof. Miamibased Lennar Corp. offers its single-family Next Gen “home within a home” product in 12 states. The model has a separate, self-contained suite that includes a bedroom, bathroom, living room, kitchenette and even a garage. Other builders have entered the market to build ADUs for both sale and rent. John Hunt, president of Atlanta-based MarketNsight, a housing-industry consultant, said that local zoning rules permit builders to construct a duplex with an ADU on a single-family lot. He said that instead of building a single-family home, which might sell for $500,000, the duplexes would sell in the low $200,000s and the ADU, about 750 square feet, would sell for about $180,000, creating more affordable housing-purchase options for buyers. “That’s mainly on infill lots,” he said. “But there are some plans in Atlanta and other cities for redevelopment, and they’re looking at doing that en masse – putting 215 homes, all in that same configuration of a duplex and one ADU. We’re on the cutting edge of

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An ADU built by Fortas Homes on the same lot as a duplex. Photo credit: Marilyn Nieves, Suspended Image Photography, for Fortas Homes

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this, but the time is right.” Jim Cheeks, the owner of Atlanta-based Fortas Homes, is primarily a builder of affordable single-family homes. But, lately, he’s building ADUs to rent with a long-term-hold strategy. Last year, he completed an ADU project on an infill lot he owned in Atlanta, building two four-bedroom, three and a half bath duplex units, each about 2,100 square feet, plus a 750-square-foot ADU unit with two bedrooms and one and a half baths. Instead of the single-family home the lot was zoned for, which he could have sold for over $800,000, Cheeks now rents the three homes – which leased within days. The rents for the duplexes are market-rate – about $2,800 – while the ADU rents for $1,117, or 60% of the area median income, restricted because Cheeks used financing by a Community Development Financial Institution. “To me, building one large house is not a society good,” he said. “I’m a thoroughly for-profit business, but I am mission-driven. I’m still doing well, but feel like I’m doing good at the same time.” Mighty Buildings, a startup in Oakland, Calif. is even touting its pre-designed ADUs; the company can fully 3D-print a 350-squarefoot home in less than 24 hours. The company claims that it can produce structures with 95% fewer labor hours and twice as fast as conventional construction, with 10-times less waste. While the average traditional stick-build home in California costs $327 per square foot, the company said, a Mighty Buildings home costs up to 40% less and produces virtually zero waste. Company spokeswoman Helen Chong said the company has successfully delivered five ADU units, with 30 units in the production pipeline. Pricing starts at $183,000. ZONING STILL NEEDS TO CATCH UP An increasing number of states and communities are responding to the need for affordable housing by updating existing zoning laws to allow for multiple units in a single-family zone. California legalized ADUs throughout the state in 2017 – “a state law that overrides local zoning to say in almost all circumstances that you can have an ADU,” said Ben Metcalf, managing director of the Terner Center for Housing Innovation at UC Berkeley.

“We’re seeing single-family owners who want the revenue but don’t want the hassle. I think that’s probably, long-term, one of the keys to scaling ADUs – figuring out how to take this from day-to-

New Hampshire passed an ordinance in 2017 that requires local zoning ordinances to allow ADUs nearly everywhere single-family homes are permitted. Minnesota’s Twin Cities have responded as well, with Minneapolis introducing an ordinance in 2014 that allows all types of ADUs, and St. Paul allowing ADUs on single-family lots throughout the city in 2018. The Chicago City Council approved an ordinance in December 2020 that allows the creation of ADUs in five areas around the city starting on May 1, 2021. Some of the units will be required to be affordable, and all are expected to increase the supply of housing while maintaining neighborhood character through “gentle” density that will not be visible through significant exterior changes to the principal residence. Laws are changing in other states as well, and Metcalf said that “a flurry of interesting work” is going on in Maryland, Virginia and the District of Columbia. ADUS NOT WITHOUT CHALLENGES Despite all of their benefits, ADUs present some challenges as well. John Lesak, an architect and principal of Page & Turnbull in Los Angeles, has faced several issues when designing ADUs. The first is to stay within the historic character of a neighborhood. The bigger challenge is parking. “A lot of people don’t want more cars on the street or more traffic,” he said. “People don’t want the cars on the streets because it messes up their beautiful neighborhood, and there’s no place on the parcel to put the cars, so the neighbors start to complain.” But Hunt, of MarketNsight, thinks the parking objections will disappear over time. “People are most afraid of the parking issues,” he said. “But that’s recent – only in the past 30 years have we decided every house has to have a covered garage. But because of Uber and the pandemic and working from home, parking is becoming less of an issue. And as millennials start buying houses and getting on zoning boards, that will change because they seek out walkability.” Financing is another challenge for homeowners who plan to build an ADU. Since the ADUs can’t be separately mortgaged, most homeowners finance them by taking out a home equity line of credit on the principal residence – or paying cash. And, of course, there’s the social challenge. “You have a very intimate relationship with your landlord,” Metcalf said, referring to an ADU resident. “The person who is evicting you is living next door.” That’s why he thinks that there’s future opportunity for someone to manage rental ADUs to provide a buffer between landlord and tenant. “We’re seeing single-family owners who want the revenue but don’t want the hassle,” he said. “I think that’s probably, longterm, one of the keys to scaling ADUs – figuring out how to take this from day-to-day burden, out of the homeowners’ hands, and professionalizing it.”

ers’ hands, and professionalizing it.” - Ben Metcalf

Bio: With more than two decades of experience reporting on the real estate and mortgage, Robyn Friedman brings a wealth of knowledge to her contributions at HousingWire.

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day burden, out of the homeown-

Title Companies and Solutions Special Reports The title process is complex, time-consuming and subject to errors and security concerns, which can potentially delay a borrower’s closing date. To streamline the process, lenders need a way to reduce friction in the loan origination cycle, while still providing accurate results to clients. The eight companies featured in this section offer solutions to simplify communication and collaboration between stakeholders, as well as tools to securely and quickly transfer title

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data.

CoreLogic.................................................................36 D a t aTr a c e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 7 Boston National Title.....................................38 Qualia......................................................................39 Radian...................................................................40 S e r v i c e L i n k . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Sourcepoint. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42 WFG Lender Ser vices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43

APRIL 2021

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APRIL 2021

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CORELOGIC corelogic.com

THE EXECUTIVES:

MICHAEL MARINO, PRINCIPAL OF INDUSTRY SOLUTIONS Michael Marino is responsible for driving the company’s expansion within the title and settlement space.

TASHA HARVILLE, SENIOR PRODUCT MANAGER

oday, title documents are sent between title vendors and lenders via email, third-party email and even fax machines. Once received, lenders employ teams to manually review these title documents and re-type details into their loan origination systems. These manual processes are time-consuming, subject to data-entry errors and potential security concerns – all of which can delay a borrower’s closing date. Recognizing a tremendous opportunity for process improvement, CoreLogic developed the mortgage industry’s first Universal Title Data Structure (UTDS) to source this title data directly from the title agent’s production software in a standard, consistent format. CoreLogic’s UTDS automatically digitizes, organizes and transmits over 350 individual data elements from title commitments, tax certificates, major endorsements and property reports. Rather than being locked in flat pdf documents which have to be manually re-keyed, the UTDS releases the title data so that it can flow instantly and securely from the title provider directly to the lender’s LOS through CoreLogic’s industry leading Collateral Technology platforms. In this way, CoreLogic’s Title and Closing Solution efficiently tracks and securely transmits all title order details instantly, replacing phone calls, faxes, and email with an organized and centralized communication platform. By simplifying and accelerating the collateral underwriting process, CoreLogic’s enhanced Title and Closing Solution also works to reduce potential wire fraud – and ultimately enhances the consumer home-buying experience. “Today, many consumers have to wait 45

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Tasha Harville is responsible for simplifying, automating and bringing CoreLogic’s digital Title and Closing Solution to market.

CoreLogic’s Universal Title Data Structure digitizes the title process, reducing potential fraud

APRIL 2021

– 60 days to close on their dream home,” said Michael Marino, principal of industry solutions at CoreLogic. “By completely automating these manual title processes, we are able to take time, touch and cost out of our clients’ workflows, and help them deliver an improved borrower experience by getting consumers to the closing table faster.” Over the past few years, the GSEs have been promoting the Uniform Mortgage Data Program (UMDP), through which they’ve focused on digitizing and automating manual aspects of the mortgage workflow and creating new data-backed processes. The title space has yet to be impacted by UMDP, but the CoreLogic UTDS will set the industry up for an expedited and smooth transition in that direction. “Our Title and Closing Solution supports automated system-to-system ordering of title products, collaboration on fees for the Closing Disclosure, and a full process closing service which supports scheduling, distribution of documents and post-closing document delivery,” said Tasha Harville, senior product manager at CoreLogic. “We are currently processing over 70,000 loans per month for top depository and non-depository lenders – and our clients have been amazed by the efficiencies this solution delivers.” CoreLogic’s Title and Closing Solution represents a major milestone on the Company’s journey toward Complete Collateral, CoreLogic’s drive to simplify the mortgage origination process by seamlessly orchestrating all of the collateral data and analytics needed to validate a property’s value, title, condition and hazard risks in one automated workflow platform.

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DataTrace’s TitleIQ leverages automation to reduce human error and further streamline processes to-coding, DataTrace solutions transform manual processes and drive title production efficiencies. For example, they can deliver an automated search of the property’s chain of title, transactions, and parties, retrieve the results and organize and pre-populate examination screens with all required title data – eliminating the time-consuming steps in the pre-exam process. By leveraging title production automation, clients can reduce human error and make processes more streamlined by removing human interventions and delays. “If 2020 has taught our industry anything, it’s that we need to be able to rapidly scale to meet demand and be able to do it without adding risk, cost or impacting the customer experience,” said Robert Karraa, president at DataTrace. “Our solutions, like TitleIQ, enable clients to embrace ground-breaking technologies that will fuel their business and market share growth,” Karraa said. Through unified title search and examination production management, the TitleIQ solutions suite improves productivity and expedites report production – enabling title companies to quickly meet fluctuating market conditions and increased demand expectations across all types of transactions and geographies. “DataTrace has always been at the forefront of title innovation,” said Jim Portner, vice president, product and strategy, at DataTrace. “We continue to invest in data, technology, and people to deliver customer-centric solutions that help our customers succeed and drive industry advancements.”

THE EXECUTIVES:

ROBERT KARRAA, PRESIDENT Robert Karraa is a strategic executive with over 30 years of experience in the financial and information services industries, serving in senior leadership positions in operations, sales and general management.

JIM PORTNER, VP, PRODUCT AND STRATEGY Jim Portner provides a deep understanding of the dynamic mortgage and analytics technology marketplace and the opportunities and challenges of delivering solutions for modern title, settlement and real estate companies.

ANNETTE COTTON, VP, DATA MANAGEMENT & OPERATIONS With more than 30 years of industry experience, Annette Cotton oversees the source acquisition, data manufacturing, content quality and delivery of DataTrace’s market-leading suite of enterprise public record data assets.

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ver y real estate transaction — whether it is backed by a mortgage or is an all-cash deal — requires a determination of ownership and a clear transfer of title. That said, many companies still rely on legacy systems and manual processes to procure, search, and examine title. This slows the search and underwriting processes, makes them more prone to errors and delays closings at the expense of the homebuyer. DataTrace delivers advanced real estate data and title search technology and automated examination and production solutions used by leading title and settlement service companies. Its offerings help underwriters and title agents make confident decisions, produce quality work and meet the SLAs needed to accelerate closings. The title and property data behind these platforms are powered by the industry’s largest network of regional title plants and property ownership databases, containing more than 7 billion recorded land record images. TitleIQ, DataTrace‘s automation solution suite, is built on the industry’s comprehensive foundation of data assets, customizable business rules and industry underwriting guidelines. The solution delivers automated title searches, efficient examination, nationwide tax reporting, grading and title production services through a single source that integrates with all leading commercial closing platforms for direct data and image delivery. Using advanced technologies, such as Optical Character Recognition and au-

DATATRACE datatracetitle.com

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BOSTON NATIONAL TITLE bostonnationaltitle.com

THE EXECUTIVES:

NATHAN BOSSERS, PRESIDENT Nathan Bossers is responsible for stewarding the company vision, maintaining operational performance standards, and meeting growth and financial goals.

CHERI KLUFT, PRESIDENT AT BNT TITLE COMPANY OF CALIFORNIA Cheri Kluft leads BNT’s highly successful California office, including responsibility for daily production oversight and client management.

SEAN COOKE, VICE PRESIDENT, MID & MASS MARKET SALES

itle and settlement can be particularly challenging in servicing. The difficulty lies in identifying, accurately assessing and proactively resolving title issues— especially when servicers are dealing with large volumes of assets. Boston National Title (BNT), founded in 2006, offers servicing solutions to help ensure loan portfolios meet investor expectations and are both in compliance with regulatory requirements and within the risk tolerance of the GSEs. The company’s products make it easier for servicers to navigate the title process and eliminate errors.

delays. In addition, BNT cleans up the title on “scratch and dent” loans in MSR portfolios. When servicers discover a loan has incomplete or defective title documentation, the company fixes it right away and issues a replacement title insurance policy to ensure the loan meets investor and GSE requirements. “Our servicer clients prefer us because the typical, attorney-driven process is overpriced, inefficient and outdated while the big underwriters are inflexible and not customer-centric,” Bossers said. “Our clients really appreciate our adaptability combined with our great service.”

“We’ve proven that not only can we deliver great service like a small regional title agent, but we can do it at high-volume scale while exceeding the aggressive performance SLAs of the biggest originators and services in the country...” - Sean Cooke, VP, mid- and mass-market sales

BNT has developed Default Title Lifecycle Management Services, which works as an end-to-end solution to help clients further streamline the process from loan modification to re-performance. “We were among the first national-scale title and settlement agents to create a specialized default title workflow, supported by default processing teams and attorney liaisons, to help expedite the title process and reduce title costs throughout the default title lifecycle,” said BNT President Nathan Bossers. BNT’s servicing solutions workflow is tailored to each client’s process, making it easier to collaborate and reduce costly

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Sean Cooke is a 15-year veteran of the mortgage finance industry with deep experience in solution design and continuous process improvement.

Boston National Title’s Default Title Lifecycle Management Services ensures portfolio compliance

APRIL 2021

Currently, servicers are handling thousands of transactions nationally, while still having to ensure they deliver high-quality results for their clients. A smooth title and settlement process is critical to close transactions quickly and effectively. “We’ve proven that not only can we deliver great service like a small regional title agent, but we can do it at high-volume scale while exceeding the aggressive performance SLAs of the biggest originators and servicers in the country — all while meeting the highest grades of bank and GSE security and compliance requirements,” said Sean Cooke, vice president, mid-and mass-market sales at BNT.

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Qualia automates the title process so lenders can deliver a best-in-class home-buying experience

“Through our secure shared platform, we’re transforming real estate closings from a chaotic, in-person, paper-based process into a remote, digital, Amazon checkout-like experience.” - Nate Baker, CEO

Qualia’s suite of products make home closings more transparent, efficient, and secure. Qualia connects every stakeholder in the process, from signing to post-closing, in order to power greater efficiency, accuracy and security. “Through our secure shared platform, we’re transforming real estate closings from a chaotic, in-person, paper-based process into a remote, digital, Amazon checkout-like experience,” Qualia CEO Nate Baker said. Qualia enables lenders to easily communicate with and collaborate with title companies during a transaction via their Connect product, which brings lenders,

real estate agents, and consumers onto the platform through a secure client portal. Connect offers its users features such as Remote Online Notarization, a closing progress tracker, e-signatures and automated info requests. Qualia has an additional product for lenders called Post, which automates both the digital and physical collection of closing documents from title companies. Qualia also suppor ts title and escrow companies through the following products: • Core, an award-winning workflow, accounting, and reporting product bundle that title and escrow companies use for title production as well as to manage and coordinate closings. • Marketplace, a solution that enables title and escrow professionals to discover, engage, and manage payments and reporting directly with vendors such as title search providers, notaries, release tracking providers and more. • Enterprise, a powerful, cloudba sed collaboration suite for multi-market operations that combines title production software, a client communication portal, and vendor management tools with white-glove, enterprise-grade onboarding, custom services, and account management. Since 2015, Qualia has invested heavily in building a flexible infrastructure for the real estate and mortgage industry. Through its recent acquisition of complementary title software ResWare, to its focus on building user-friendly integrations, Qualia has reset the expectations across the ecosystem for how real estate closings should work.

THE EXECUTIVES:

NATE BAKER, CEO Nate Baker oversees the strategic vision for the company and executes the mission to provide a seamless real estate closing process for all transaction participants.

LUCAS HANSEN, CTO Lucas Hansen heads up the engineering team and oversees the technical development of Qualia’s platform and products.

JOEL GOTTSEGEN, CO-FOUNDER Joel Gottsegen leads product strategy, development and execution, as well as vendor integrations with title companies and mortgage lenders around the country. 39 ❱ HOUSINGWIRE

ualia has created a flexible infrastructure for the real estate and mortgage industry. Real estate transactions require coordination between lenders, title insurers, homebuyers, title and escrow companies – the list goes on. Dealing with dozens of siloed parties creates opportunities for mistakes and complicates the home-buying experience. Qualia, a digital real estate closing platform, brings all of these parties together onto one secure platform to deliver a best-in-class home-buying and selling experience.

QUALIA qualia.com

APRIL 2021

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RADIAN radian.com

THE EXECUTIVES:

JILL CADWELL, SVP, TITLE OPERATIONS Jill Cadwell, a 30-year industry veteran, is responsible for building a digital strategy to accommodate both lenders and customers that continue to make Radian a pioneer in the industry.

GRANT BRITTAIN, SVP, TITLE SALES

itle reports can be confusing, which is why the process is prone to errors. One mistake can slow down the real estate transaction’s closing and frustrate lenders and borrowers. To keep that from happening, lenders need a way to reduce time and friction in the loan origination cycle but still provide their consumers with excellent customer service. Thankfully, technology is increasing efficiency and making it possible for companies to create solutions that help lenders receive timely and accurate title services. Radian Settlement Services created Radian Ready to make the title process less of a hassle for lenders. This solution uses technology as a driver to shorten the loan cycle time, increase transparency

Because of this, lenders can easily review and discuss title reports with their clients, so everyone is on the same page from start to finish. “Consumers expect a smooth transaction with minimal touchpoints prior to closing and Radian Ready simplifies the title process and reduces lender and consumer touchpoints,” said Grant Brittain, senior vice president of Title Sales at Radian. “Regulators and GSEs can rest assured as Radian Ready is a fast, yet compliant solution that ultimately yields a standard ALTA loan policy meeting all investor requirements.” Radian is disrupting traditional title processes and using technology and automation to create a better take on title. With easy-to-understand reports, and clear turn

“We are reimagining title insurance and settlement services to produce a new experience that is strealined, transparent, and cost-effective.” - Grant Brittain, SVP, Title Sales

and reduce friction with the title product. By easing the transition from title production to title curative, Radian Ready doesn’t just make quicker closings a possibility, it also helps lenders outperform with less legwork. In addition to a standard American Land Title Association (ALTA) commitment, Radian Ready provides a clear summary of the title commitment and what steps, if any, need to be cured prior to closing. Radian Ready also uses technological efficiencies to invest in quality personnel to provide a high level of customer service.

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With 17 years of experience in roles across the title industry, Grant Brittain brings the voice of the customer and deep knowledge of the title industry to his role leading the title and settlement sales team at Radian.

Radian Ready eases the transition from title production to title curative to help shorten loan cycle times

APRIL 2021

times, Radian Ready provides lenders with the service and speed they need to create quality relationships with their customers that turn into repeat business. Not to mention, the technology used reduces any chance of risk so both lenders and borrowers can have peace of mind. “We are reimagining title insurance and settlement services to produce a new experience that is streamlined, transparent, and cost-effective,” Brittain said. “Customers choose Radian based on our long-standing reputation and dedication to quality service.”

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ServiceLink’s EXOS Title engine automates the title process so lenders can receive instant title decisions

n today’s low interest rate, high-volume market, lenders need a way to manage their mortgage volume while providing a consistent, high-quality customer experience. ServiceLink’s tech-enabled title solution, EXOS Title, combines cutting-edge technology and superior customer service with a nationwide footprint – ultimately getting lenders and their clients to the closing table faster. ServiceLink’s EXOS Title engine automates the title search, pulling available land records data together to create a complete property profile. It incorporates

Director Susan Falsetti said. “On average, ServiceLink lenders who use EXOS Title’s decisioning functionality close more than eight days faster than those who don’t.” According to a 2018 Fannie Mae National Housing Survey, three-quarters of homebuyers believed it should take a month or less to get a mortgage, from application to close. EXOS Title brings the origination timeline in line with consumer expectations by cutting days from the origination process. Additionally, this solution provides greater visibility into title clearance and

SERVICELINK svclnk.com

THE EXECUTIVE:

SUSAN FALSETTI, MANAGING DIRECTOR OF SERVICELINK’S ORIGINATION TITLE AND CLOSE DIVISION Susan Falsetti leads the team responsible for delivering ServiceLink’s clients a superior, streamlined title experience that helps lenders close faster in this high-demand market.

“On average, ServiceLink lenders who use EXOS Title’s decisioning functionality close more than eight days faster than those who don’t.” - Susan Falsetti, Managing Director

expected clear-to-close date and pricing, to help loan officers set clear and realistic expectations with borrowers from the start. EXOS Title offers strict adherence to local, state and federal regulatory guidelines. Plus, ServiceLink’s Operational Audit and Compliance team closely monitors new and pending regulations and participates in industry seminars and events to ensure they have the most up-to-date information. EXOS Title helps lenders reduce the amount of providers needed to manage their pipeline – ultimately resulting in increased efficiency.

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Fidelity National Financial data, title plant data, public records data and data from other sources and 100% of orders return a complexity decision in five seconds. EXOS Title untangles the complexities around title decisions and gives each file an Expedite, Accelerate or Standard status based on readiness of being clear to close, so ServiceLink and its clients can triage files accordingly. “This prioritization is essential in high-volume markets like we’re seeing today. When lenders receive instant complexity title decisions, they can create a runway for simpler orders to close, and focus their resources on more complicated ones,” ServiceLink Managing

APRIL 2021

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SOURCEPOINT sourcepointmortgage.com

THE EXECUTIVES:

ROSHAN SETHI, HEAD OF GLOBAL SERVICING OPERATIONS Roshan Sethi oversees the company’s global strategic outsourcing and servicing and title operations.

MELANIE CORNELIUS, VICE PRESIDENT, STRATEGIC ACCOUNTS Melanie Cornelius is responsible for expanding relationships with industry-leading organizations, including large banks and the GSEs.

KENNETH MARKS, ASSOCIATE DIRECTOR, TITLE SERVICES

enders are currently dealing with incredibly high call volumes, which makes it difficult to ensure their clients are receiving the best customer service at the highest quality. Lenders need support during this hectic time to manage their portfolio and avoid any mistakes, especially when it comes to title insurance and settlement fees. To reduce the likelihood of these issues, Sourcepoint, a business process management (BPM) company and national title agency, provides lenders a range of title and settlement solutions to increase business efficiency. The company offers both automation and global sourcing solutions combined to create an offering that is highly cost-effective. “We engineer solutions for our clients. One of the things we do exceedingly well is business process orchestration – we are able to orchestrate their business processes better digitally or with global sourcing solutions,” said Kenneth Marks, associate director of Title Services. “We deliver savings, capacity and great quality to our clients.” Sourcepoint has a strong focus on compliance, which allows the company to provide a high level of assurance to their clients. In addition, they strive to ensure quality, whether dealing with inline quality control or having centralized quality that supports their own work. Quality control is a key benefit for their consumers, regulators and the GSEs. There are a number of ways Sourcepoint streamlines the mortgage process to avoid title insurance and settlement fees. One solution that specifically facilitates real estate transactions is the company’s newly launched proprietary Intelligent (Digital)

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Kenneth Marks leads the company’s Insured Title and Closing business, operating across three global centers.

Sourcepoint’s title and settlement solutions increase business efficiency amid high call volumes

APRIL 2021

Resource Management (IRM) tool. IRM uses an AI algorithm to optimize the utilization to complete inflow within a stipulated time. The tool reviews and validates the completion of notary services for orders received in a client system. Sourcepoint’s solutions help solve problems for their clients, which is how the company has become a trusted advisor to lenders. “At the end of the day the solutions provided by Sourcepoint and its competitors are similar, but it all comes down to the people who are driving and executing our solutions,” said Melanie Cornelius, vice president of Strategic Accounts. “We have developed a mature approach to engagement – we take the time to listen, understand and create the best solution that fits our clients’ needs.” There’s no one-size-fits-all solution for every team. Instead, Sourcepoint helps lenders rethink how their businesses are organized and identify opportunities to further introduce automation into their businesses on the title agency side. “This is just another reason our clients chose to work with Sourcepoint – an industry leader that is transforming the end–to–end mortgage life cycle,” said Roshan Sethi, head of Global Servicing Operations. “Our clients like and appreciate that they have a partner who is evolving, thinking ahead and driving solutions back to them. With our industry ever-changing, we need to be a nimble and agile partner. Sourcepoint is powered by people, process and technology and we are making huge positive impacts on our clients’ operations.”

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he real estate settlement process er’s experience by providing them with a can be negatively impacted by convenient, secure and intuitive self-sermany factors. From lost documents vice ecosystem for enhanced transparento chasing down critical data, it’s import- cy. In addition, WFG’s standardized inteant lenders remain organized so borrow- gration protocols simplify and expedite ers don’t have to endure long turnaround system-to-system integrations, further times and closing delays. Rigorous pro- eliminating the need to rekey data. Today’s consumers have high expeccesses and efficient technology have never been more important than they are at this tations when it comes to customer sercurrent time of high refinance activity, vice. They expect to remain in the loop when lenders are managing record-break- and have ongoing transparency, and the same is true for the mortgage origination ing volumes. WFG Lender Services has created a process. Consumers want constant insolution that takes time and cost out of sight into where they are in the transaction. WFG’s MyHome t he rea l e st ate Exchange facilitates process, helping “The time we invest in this desire by providmor tgage lend ing transparency and ers become more understanding our clients’ proactively providing successful, while operations pays dividends status updates every passing along the in increased productivity, step of the way. benefits of greatreduced costs and time “Our lender clients er efficiency and enjoy working with economy to their savings.” WFG because we supcustomers. This - Dan Bailey, SVP port them with solusolution is MyHome tions that facilitate Exchange. Built on WFG’s award-winning MyHome their business needs, provide them with collaboration platform, MyHome Exchange transparency into the process and support brings borrowers on board early in the our technology and service offerings with refinance transaction and actively engag- NPS-rated ‘world-class’ service levels,” es them every step of the way. MyHome said Dan Bailey, senior vice president of Exchange minimizes application-to-close WFG Lender Services and WFG Enterprise turn-times and accelerates the settlement Solutions. “Lenders partner with WFG Enterprise process by eliminating duplicate touchpoints, enabling proactive communica- Solutions because we provide them with tion, and facilitating data and document consistent and predictable service levcollection, storage and sharing. MyHome els, obsess about improving the process Exchange also makes it easier for bor- and work closely and collaboratively with rowers to submit their required informa- them to develop and implement solutions tion and documents, so the process runs that help us all become more efficient and close more transactions,” said Bailey. “The smoothly from the beginning. MyHome Exchange users also benefit time we invest in understanding their operfrom increased efficiency. Not only does ations and unique needs pays dividends in this make the origination process easier increased productivity, reduced costs and for lenders, it also improves the consum- time savings.”

APRIL 2021

WFG LENDER SERVICES wfgls.com

THE EXECUTIVES:

DAN BAILEY, SVP, WFG LENDER SERVICES & WFG ENTERPRISE SOLUTIONS Dan Bailey is responsible for operations at WFG’s Lender Services division and also leads the national sales team for the company’s Enterprise Solutions group.

STEVE OZONIAN, CEO, WILLISTON FINANCIAL GROUP Steve Ozonian has held executive-level positions at Chicago Title & Trust, Coldwell Banker, Prudential Real Estate and built the world’s most successful real estate research portal as CEO of Realtor.com.

PATRICK F. STONE, EXECUTIVE CHAIRMAN AND FOUNDER, WILLISTON FINANCIAL GROUP A 2019 HW Vanguard Award recipient, Patrick F. Stone founded WFG in 2010. Prior to that, he served as president and COO of the nation’s largest title insurance company for nine years, chairman and co-CEO of a software company and CEO of a real estate information company.

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WFG Lender Services’ MyHome Exchange accelerates settlement by eliminating duplicate touchpoints

TRADE DESK

Trade associations from across the housing industry are on the front lines of issues that lenders, real estate agents and everyone in between face every day. In these letters, they give their members an inside look at what they are working on, and the most important issues facing each industry today.

AIME......................................45 ALTA......................................45 MBA ......................................46 NAHB ....................................46

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NAR........................................47

APRIL 2021

CEO Association of Independent Mortgage Experts

AIME members, Independent mortgage brokers are continuing to highlight the dynamic and flexible nature of the mortgage industry as a whole. Harnessing technology, developing lender partnerships, and leveraging industry insights will allow the wholesale community to offer an elite client experience. A sustained period of historically low mortgage rates and high demand has created unprecedented volume while also amplifying a supply shortage in the housing market. Capitalizing on the upcoming purchase season will require independent mortgage brokers to bring all of their skills to the table. Purchase season also offers a chance for new and existing mortgage professionals to grow their skills and exemplify to consumers why brokers are strongly positioned to help the widest range of consumers throughout the home buying process. Brokers have time and again proven that they are prepared to adapt to any industry

ALTA members, In January, a new administration took over the White House and the 117th Congress began. With new legislators come new opportunities as well as the challenge of clearly and simply explaining the value of the title insurance industry, especially when the changeover transpired in the middle of the COVID-19 pandemic. The country locked down in March 2020, but as of this writing almost a year later, in-person meetings are still not part of the playbook. While Congress members and staffers make themselves available for virtual appointments, the lack of face-to-face interaction doesn’t seem ideal; however, the American Land Title Association’s Advocacy team has found the virtual advocacy world can present an even better forum to tell our story. Throughout 2020, ALTA was successful in utilizing short, compelling videos about our industry — and its leadership during the pandemic as part of ALTA’s “Our Title is Protection” campaign — to prepare legislators and staffers before we entered a virtual conversation about policy priorities. We found this tremendously

changes and ever-evolving consumer needs. This purchase season will allow the broker community to put on full display how our expert knowledge and experience in areas of education, operational efficiency, and local community needs are consumers’ best bet in obtaining the optimal loan product for their unique scenario. AIME is looking forward to reconnecting with our membership in anticipation of hosting our 4th annual Fuse National Conference this September which will serve as an opportunity for the wholesale channel to unite together and highlight the immense progress that has led to continued growth in broker market share. The event will include the same caliber of speakers, networking opportunities, and industry access that Fuse has become known for. This commitment is a testament to AIME’s belief there is nothing stopping the independent broker community from moving forward for years to come.

helpful in preparing for an open dialogue without having to pass around the dreaded, dense white papers or one-pagers. When all parties in a meeting are familiar with the basics of who you are and what you do, you can have a more informed, fruitful exchange that provides an impactful outcome. Policy discussions flow more easily, and everyone can walk away feeling productive. As ALTA members prepare for the second vir tual A LTA Advocacy Summit in May, we will reinforce to them that policy is about people, communities and values—reminding them to make their message relevant to current challenges they face on the ground at home. To highlight innovations and solutions rather than problems. And most importantly, to embrace the virtual format — right now, it can be an interesting forum for engagement.

Diane Tomb

CEO American Land Title Association

American Land Title Association APRIL 2021

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Katie Sweeney

Association of Independent Mortgage Experts

TRADE DESK

Robert Broeksmit

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President & CEO Mortgage Bankers Association

Mortgage Bankers Association

TRADE DESK

MBA members, The abrupt onset of the COVID-19 pandemic last spring sent shockwaves reverberating through the U.S. economy. Millions of Americans lost their jobs, the financial markets swung wildly, and in a matter of weeks lenders provided more than 5 million homeowners a forbearance plan to help them weather the economic impact of the crisis. Through all the challenges, the mortgage industry – including more than 800 independent mortgage banks – not only weathered the storm, but provided critical support for consumers and the economy at a crucial time. IMBs were well positioned to assist struggling homeowners, even while handling the surge in mortgage applications driven by record-low interest rates. They helped to drive the $2.3 trillion in total refinance originations in 2020 – the most since 2003 – and provided a form of economic stimulus for millions of homeowners looking to reduce their monthly payments. Furthermore, many

NAHB members, Housing is always an important factor in our country’s economic growth and has been a bright spot during the difficult times of the pandemic. But a skilled labor shortage could curtail the industry’s ability to build enough homes to keep up with growing demand. That’s where the Home Builders Institute comes in. The National Association of Home Builders is proud to partner with HBI to address the industry’s labor shortage — a shortage that results in higher construction costs, increased home prices and lower economic growth for our nation — and to change the public perception of careers in the skilled trades. As NAHB’s workforce development arm, HBI is a leader in construction career training, providing its students with the skills and experience they need for good-paying and meaningful careers in residential construction. HBI, under the leadership of NAHB past chairman Ed Brady, offers pre-apprenticeship training, job placement services, mentoring, certification programs, and online learning across the country to underserved populations, including veterans, transitioning military, high school students and justice-involved individuals. Each year, HBI trains thousands of individuals in local communities across the nation in masonry, carpentry,

households realized quickly that they needed (or wanted) more indoor and outdoor space to live and work. IMBs, large and small, helped make their housing needs and dreams come true, contributing to the almost $1.5 trillion in total purchase mortgages last year. IMBs, with no advance warning, also played a substantial role in helping distressed homeowners receive the relief they needed in the form of forbearance. Thankfully, with a growing number of borrowers back on track, servicers are now providing sustainable repayment plans to ensure they remain in their homes, while also continuing to assist those still struggling. MBA anticipates that 2021 will be a record year for purchase originations, and with IMBs representing over half of the mortgage market, they will continue to play a pivotal role in the ongoing economic recovery. Regulatory and legislative policy responses in support of the recovery must recognize the vital role of IMBs.

electrical wiring, building construction technology, HVAC, plumbing, solar installation and other building-related fields. At a recent NAHB leadership meeting, I was proud to present one of those individuals, Justin Harrod – a 2018 graduate of the HBI carpentry program at the U.S. Army’s Fort Carson in Colorado Springs, Colorado – with the association’s highest honor for an HBI graduate, the Chairman’s Award. Funded by the Home Depot Foundation, the Fort Carson program is one of 10 located near the nation’s largest military bases that provide transitioning military members and their spouses with 12 weeks of free construction industry training in HBI programs. Working with HBI and other partners across the industry to focus on training the next generation of skilled workers is key to tackling the housing affordability crisis and maint a i n i ng a robu s t housing market.

National Association of Home Builders APRIL 2021

Chuck Fowke

Chairman National Association of Home Builders

Charlie Oppler President National Association of Realtors

National Association of Realtors

TRADE DESK

NAR members, As we take on the immense but very necessary challenge of eliminating bias and discrimination from America’s housing industry, NAR is focused on identifying strategic, practical approaches that will help us secure diverse and inclusive communities. NAR has worked tirelessly over recent years to position our members as industry leaders toward this worthwhile cause. That’s why I am asking this association’s leadership to stand up for racial equity by accepting the Fair Housing Challenge. This challenge calls on participants to take three steps, the first of which is completing NAR’s new Fairhaven fair housing simulation. This consists of an immersive simulation that uses the power of storytelling to illustrate discrimination. The scenarios used within the simulation are inspired by real life fair housing cases and by discussions with NAR members. Next, we have our implicit bias training. This training seeks to address the way our minds automatically – without

awareness – associate negative stereotypes with particular groups or people. The exercise provides practical tools and methods to overcome these hidden biases, which we all have. It allows Realtors to recognize, and more importantly, work to eliminate their own prejudices. The last step in the Fair Housing Challenge involves the “At Home with Diversity” certification course, which I am asking all NAR leaders to earn. We live in a diverse and multicultural nation, and Realtors must be comfortable engaging with clients of all backgrounds. This day-long course will help NAR members navigate the ever-evolving real estate market and the changing world around us. Realtors have been instrumental in securing and upholding various key fair housing protections since passage of the Fair Housing Act in 1968. However, we still have so much more to accomplish. And as America’s largest trade association, we will continue to work to end discrimination in housing, one interaction at a time.

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APRIL 2021

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MORTGAGE

APRIL 2021

MORTGAGE

Why mortgage lending standards will ease in 2021 LOOSENING EXPECTED DESPITE A PROJECTED RISE IN DELINQUENCIES BY KELSEY RAMÍREZ

"...there may still be a lack of access to credit for low-income households even if underwriting standards do ease somewhat this year.” - Curt Long

APRIL 2021

households have fared so much better than lowincome ones over the past year means that there may still be a lack of access to credit for low-income households even if underwriting standards do ease somewhat this year,” Long said.

The speculation about easing credit standards comes on the heels of the Federal Reserve’s latest Senior Loan Officer Opinion Survey on Bank Lending Practices, which concludes that banks began easing lending standards at the end of 2020. The survey also states that banks expect to continue easing standards as risks lessen. “Major net shares of banks that reported expecting to ease standards cited an expected improvement in credit quality of the loan portfolio and an expected

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conomists and housing experts say mor tgage lending standards will likely loosen in 2021, despite the increased risk of delinquencies ahead. Such a scenario illustrates the growing disparities in the U.S. housing market. As one struggling group of homeowners braces for the end of forbearance and navigates COVID-19-related economic shocks, another segment is better positioned than ever to scoop up properties that become available. If this happens, it would prove a dramatic contrast to that of the financial crisis, in which lenders tightened credit standards from 2007 through 2010, said Curt Long, National Association of FederallyInsured Credit Unions chief economist and vice president of research. “Nevertheless, the fact that high-income

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MORTGAGE

increase in risk tolerance as important reasons for the expected easing in lending standards,” the Fed’s survey said. As the economy reopens and the COVID-19 vaccine beats back the threat of the virus, economists expect this loosening of credit will only increase consumer demand for loans, including mortgages. Over the pandemic, a record number of U.S. households reduced their debt loads, giving them a better shot at a new mortgage. “ With household balance sheets generally in good shape, loan demand is likely to pick up again as the economy reopens, and the good news is that most banks expect to continue relaxing consumer credit standards over the course of this year,” Capital Economics Senior U.S. Economist Andrew Hunter said. “That provides another reason to expect consumption growth to rebound strongly as the virus is brought under control.” Credit standards tightened throughout the year last year. JPMorgan Chase tightened mortgage terms on jumbo loans for co-operatives and condominiums in Manhattan amid shrinking buyer demand. And last spring, the bank tightened its standards by increasing overlays for borrowers applying for a new mortgage, saying they would need a credit score of at least 700, and will be required to make a down payment equal to 20% of the home’s value. O ther banks and lenders also tightened their standards last spring including Union Home Mortgage, United Wholesale Mortgage, Caliber Home Loans, Arc Home, Parkside Lending, U.S. Bank and First Community Mortgage. What ’s more, lending in the nonQualified Mortgage space, which was supposed to take off in 2020, dried up completely as lenders halted their nonQM offerings amid the pandemic’s onset. M o s t l e n d e r s , h oweve r, h ave returned to the non-QM market and are

forecasting an uptick in growth in 2021. Even the big banks have reduced the amount cash they’d kept on the books to insulate against COVID-related defaults, suggesting they might loosen standards in the coming year. If economists are correct and mortgage rates begin their steady rise in 2021, the easing of credit standards could help keep demand for mortgages high. Economists across the housing industry believe the era of extreme low rates could be coming to a close, but the transition might be slow.

“Modernization means fewer hassles for lenders and potential homeowners and it translates into more efficiency in the origination process." -Dana Wade

APRIL 2021

Increased adoption of digital technology should contribute to looser credit standards in 2021. Over the past year, the use of eNotes registered on the Mortgage Electronic Registration Systems increased a full 261% year over year in December 2020. This occurred as a larger pool of lenders and even government agencies begin accepting eClosings. In December, Rocket Mortgage became the first lender to use eNotes in closing a Ginnie Maebacked loan as part of a pilot program. Observers say the market is set to see widespread eClosings of Ginnie Mae loans by the end of this year. With Ginnie Mae on board with eClosings, this could encourage more lenders to participate in Federal Housing Administration loans, which have typically been more labor-intensive and costly to originate than conventional loans. Under former President Donald Trump’s administration, the FHA began a multi-year effort to modernize its systems. In October, the FHA announced the launch of its first automated underwriting system, which will allow lenders to submit loan application data electronically for single family forward mortgages from their loan origination systems to FHA for mortgage insurance eligibility. “It is modernization of the entire process,” FHA Commissioner Dana Wade said at the time. “Modernization means fewer hassles for lenders and potential homeowners and it translates into more efficiency in the origination process. We are looking to build upon that to have a robust ability to analyze data so that FHA can make better decisions for the taxpayer, for the industry and the stability of the marketplace and ultimately for homebuyers.” Ginnie Mae saw similar modernization efforts.

MORTGAGE

program in particular more attractive to lenders, making it more efficient and effective to participate in the program. And those things combined will actually make the program less costly and more attractive and available to homebuyers.”

“We believe as lenders who participate in government mortgage programs increase their use of digital mortgages and economies of scale emerge, the cost to originate and service a mortgage will decline,” a Ginnie Mae spokesperson told HousingWire. Ed DeMarco, Housing Policy Council president and former Federal Housing Finance Agency director, says he hopes this momentum to modernize the process will continue under the new administration. “We’re actually starting to see the fruits of that modernization ef fort in the marketplace,” DeMarco told HousingWire. “But there’s still a lot of work to do. “I think the benefit of doing that is the new administration is clearly going to be focused on affordable housing,” DeMarco continued. “Getting FHA and Ginnie Mae modernized and improving some of the operational parameters of their programs will make the FHA

“We’re actually starting to see the fruits of that modernization effort in the marketplace. But there’s still a lot of work to do.” -Ed DeMarco

APRIL 2021

This reduction in cost for FHA or Ginnie Mae loans will be critical for lenders looking to pare back their origination costs, which have continued to rise over the past few years as hiring increased. Driven by historic volume, mortgage origination profits rose to a record-high in the third quarter of last year, according to the latest IMB Production Profits report from the Mortgage Bankers Association. Production profits rose to 200 basis points in the third quarter. It was the first time that had happened since the MBA’s report debuted in 2008. “Production expenses usually drop with increased volume, as fixed costs are spread over more loans,” said Marina Walsh, MBA vice president of industry analysis. “But in the third quarter, costs rose despite the volume increase. One major reason for this increase was escalating personnel costs, including signing bonuses, incentives, overtime and commissions that were pushed higher with the need and competition for workforce talent.” Total loan production expenses – commissions, compensation, occupancy, equipment and other production expenses and corporate allocations – increased to $7,452 per loan in the third quarter, up from $7,138 per loan in the second quarter. Since the third quarter of 2008, loan production expenses have averaged $6,566 per loan.

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REAL ESTATE

APRIL 2021

REAL ESTATE

Rocket Homes could be real estate’s sleeping giant LENDER SEEKS TO STEER CUSTOMERS TO ROCKET-APPROVED AGENTS

uring breaks in nearly ever y televised basketball game, it ’s there: Tr a c y M o r g a n imploring pensive homebuyers “pretty sure” is not enough, and that they can only be certain about their giant life choice with Rocket Mortgage. “Find the right mortgage with a local broker and Rocket technology,” intoned the narrator on the commercials, which premiered during the Super Bowl. The ads are mostly set not in a loan office, but a home showing. That raises a question of perhaps little interest to National Basketball Association fans but a great deal of interest to National Association of Realtors members – where is the real estate agent in this picture?

“Rocket’s real estate game play is going to have firepower.”

-Mike Kortas

APRIL 2021

Rocket rocketed to being the highest volume mortgage lender in the country by late 2017. They surpassed Wells Fargo through persistent marketing (ginning up interest in the Rocket app), robust customer service and benefited from industry-wide retreat from the depository banks. Rocket has since ridden the wave of famously low interest-rates, which juiced the mortgage refinancing market. The company created by Dan Gilbert went public last year, and it reported a cushy $6.6 billion in profits through the first nine months of 2020. But a company like Rocket – both ambitious and these days heavily reliant on the refi revenue stream – is looking for ways to get more purchase business, and one of them is real estate. The company’s real estate arm, Rocket Homes, has historically been a tiny part of the company’s revenue. But Rocket is looking to throw its considerable weight around in real estate – positioning itself as a one-stop shop for homebuyers.

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BY MATTHEW BLAKE

REAL ESTATE

“They’re aggressive,” said Mike Kortas, the president and CEO of Nexa Mortgage, a mortgage brokerage. “Rocket’s real estate game play is going to have firepower.”

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“15,000 real estate agents across the country, who, while affiliated with a separate brokerage, are Rocket partner agents."

Over the past two months, a new posting from Rocket Homes hit LinkedIn – “A real estate advisor.” The adviser, states the job ad, must be able to work nights and weekends as they “build and maintain a pipeline of over 750 clients and build a business relationship with our nationwide network of real estate agents.” The applicant should be ready to glue themselves to the potential homebuyer. “They stay with them whether it’s three days, three months, or three years,” said Doug Seabolt, CEO of Rocket Homes. Rocket is a licensed brokerage and retains Rocket-affiliated real estate agents: So, is the real estate adviser another Rocket real estate agent? Seabolt says it’s not, despite the adviser performing preliminary, agent-like tasks such as pointing consumers to different homes in the market. Instead, Seabolt said, the adviser boosts Rocket in the small but growing world of real estate partnerships. The company’s public filings indicate it has 15,000 real estate agents across the country, who, while affiliated with a separate brokerage, are Rocket partner agents. (For those wondering, then, what in-house Rocket real estate agents do, Seabolt stated they “provide real estate services across the U.S. primarily for Rocket team members.”) For an agent, enrolling in a real estate partnership is like signing up to be a driver on a rideshare app. They apply, are vetted, have a brief

APRIL 2021

orientation session, and field leads as a buy-side agent at certain times. The agent is not necessarily exclusive to Rocket, and could be doing the same gig with Redfin, or another company. If the agent closes a sale, Rocket gets a referral fee. In Kortas’ stomping grounds of central Arizona, some real estate agents, he said, have begun to gobble up business as Rocket-preferred agents. But, up until now, money in real estate referrals is a drop in the bucket. Rocket reported a total of $13.28 million in referral fees in their third-quarter earnings. Rocket has its work cut out in getting customers to think of them as a real estate source, along with a mortgage lender. Rocket Homes’ home listings website is aesthetically similar to Redfin, and someone entering their contac t information there is quickly emailed and called by a Rocket representative.

“Rocket has really been a data and technology company for a long time now. Ultimately, they have so much data that they could use it for other ways to make money.” - Matt Gouge

REAL ESTATE

on, or how much the company may invest in real estate. But he did echo Rocket’s slogan. “The home is an essential component of happiness and financial well-being,” he said. “We are providing the tools and information services that help a consumer arrive at certainty.”

But Rocket Homes averaged 485,000 unique visitors a month in quarter three (which is up from 372,000 a year before), small traffic numbers in the soaring business of home-viewing. Redfin claims 49 million unique monthly visitors. Zillow reports 236 million.

If the numbers are small, why does Rocket Homes matter? Industry insiders gave two reasons – one is that Rocket has not just a lot of capital, but a lot of people’s information. The other is that Rocket is throwing its hat in an exclusive ring to be a one-stop shop for homebuyers. Consumers know Rocket best for an app that lets them quickly learn if they are pre-approved for a loan – a process that, of course, involves providing one’s financial history. “Rocket has really been a data and technology company for a long time now,” said Matt Gouge, a mortgage broker in Sacramento. “Ultimately, they have so much data that they could use it for other ways to make money.” Traditionally, Gouge said, real estate and mortgage stay in their lanes, save for brokerages keeping a token mortgage corner office. But Rocket is adapting to the ways of its publicly traded, datarich brethren. That’s not to say other mor tgage lenders, as most such companies, like Rocket’s Wolverine State arch-rival United Wholesale Mortgage, have no real estate profile. Rather, Zillow and Redfin — real estate outfits who each have mortgage departments — are the real competition. During its annual earnings call, Zillow CEO Rich Barton said he “envisioned a future experience that begins on our mobile app” where a customer can see a

- Steve Murray

home, get a prequalified home loan, and close on a home. It may be a smart play, said Steve Murray, president of RealTrends, for Rocket to not just defend its mortgage turf from Zillow, but also go after real estate. “About 66-70% of all consumers still choose their real estate agent because they know one or some trusted source referred them,” Murray said (HW Media, the parent company of HousingWire, acquired Real Trends in late 2020). “That leaves the rest up for grabs.” Murray notes that Rocket enters a crowded market, but also a fluid one where a firm could grab 100,000 closed transactions in a year, and still have less than 1% market share. Seabolt did not specify how many real estate advisers the company would take

APRIL 2021

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“About 66-70% of all consumers still choose their real estate agent because they know one or some trusted source referred them.”

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REAL ESTATE BROKERAGES

APRIL 2021

REAL ESTATE BROKERAGES

A look at Compass’s colorful past and publicly traded future WILL AGENTS STICK AROUND FOR THE ROAD AHEAD?

eal estate brokers are a chatty bunch, but a few can be draining socially. Discuss the weather, how your pets are handling the pandemic, even the housing market, but these brokers will steer the conversation to one subject, and one subject alone – the residential real estate brokerage Compass. Compass – the broker will lament – puffs itself up as a “tech” company, but it’s really just another brokerage. And, so, while Compass’s $1.6 billion pot of venture capital money may seem impressive it’s vaguely irresponsible. As for Robert Reffkin, Compass’s chief executive officer and co-founder...Well, don’t let them get into the youthful-looking Reffkin’s Twitter affirmations – “The bad news is time flies. The good news is you’re

“In five years, I think we’ll be in the top 50 markets in the world, and No. 1 in all the U.S. cities” - Robert Reffkin

APRIL 2021

the pilot.” – and especially not his aspirations about Compass. Reffkin is famously ambitious. In 2018, he told an interviewer, “In five years, I think we’ll be in the top 50 markets in the world, and No. 1 in all the U.S. cities – and top three in the international ones.” Today, as Compass readies to be a publicly traded company this year – the brokerage did an Initial Public Offering filing with the Securities and Exchange Commission last month but did not disclose financials, and it is not known when their stock may trade – the brokers and real estate agents are getting antsy. “The brokerage community would like them to go public sooner rather than later, because we are getting sick of the Compass blather,” said D.J. Grubb, the Oakland broker behind Grubb & Co. who, nonetheless, blathered (helpfully!) about Compass for an hour. Once public, Compass will become less an object of fascination, jealousy, scorn and puzzlement from the brokerage community. It will leap into the rat race

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BY MATTHEW BLAKE

REAL ESTATE BROKERAGES

of quarterly reports along with a handful of competitors, most notably Realogy, which owns Coldwell Banker, Sotheby’s International Realty, the Corcoran Group and Better Homes and Gardens. Like an over-budget blockbuster movie, Compass may never make money. (C ompas s decline d to answer questions or make executives available for an interview.) “ The real estate industr y, and brokerages in particular are ripe for disruption,” said Gilles Duranton, a real estate professor at the University of Pennsylvania. “That said, I’m not really sure of Compass’s appeal.” “We assume they are not profitable,” said Jack Micenko, a research analyst at Susquehanna International Group, who added he’s not sure how Compass will ever become profitable. And yet, it bears watching if the brokerage can be another “Titanic” – the movie, not the ship.

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The year was 2012, and Ori Allon could do no wrong. T h e 3 2- y e a r- o l d , I s r a e l i - b o r n , Australian-educated sof tware programmer had sold startups to Twitter and Google, the latter company creating an algorithm that is part of the Google search engine. “Emails arrive daily from venture capitalists with the same basic message,” read a Verge profile of Allon from that halcyon time. “‘Whatever you’re doing next, please take our money.’” Allon snatched $7 million from investors for his next project, Urban Compass, an impressive sum considering investors, including Goldman Sachs and Founders Fund, had no clue what Allon would start. “I’m interested in the Uber model,” was

the most Allon told Verge about Urban Compass. “Can I disrupt a very analog industry?” Allon and Reffkin picked real estate as that very analog industry. The former chief of staff to the president of Goldman Sachs, Reffkin set up Urban Compass as a New York City firm. The pair hired agents to lease commercial building space. When that did not take, Compass gazed at its Manhattan environs and pivoted to luxur y-focused residential real estate. What if they spent VC money on recruiting real estate agents who sell so many penthouses and mansions that they are millionaires themselves? Urban Compass in 2014 plucked from Douglas Elliman a charismatic, South African-born luxury agent in Leonard Steinberg, who had amassed over 2 billion dollars in real estate transactions. Wealthy homebuyers, Compass correctly understood, weren’t calling Steinberg because he worked for Douglas Elliman, but because he was Leonard Steinberg. “Compass was in trouble before they brought in Steinberg,” recalled Jonathan Miller, a real estate appraiser at Miller Samuel, who publishes reports on the New York real estate market. “That was a sea change. Steinberg was able to recruit, and they have attracted top producers.” Steinberg became the company’s “Chief Evangelist,” Urban Compass became just Compass, and the brokerage pilfered elite agents in Washington D.C., Chicago, Los Angeles and San Francisco. In 2018, Compass got a stranglehold on the Bay Area market, buying Pacific Union, a San Francisco firm with 54 offices and 1,700 agents that, according to RealTrends, was the fifth-biggest brokerage in the country. Prior to the Pacific Union buy, Compass raised $400 million from SoftBank, the Tokyo-based mega-VC that also threw bags of cash at Uber and WeWork. Compass raised more Sof tBank

APRIL 2021

cash and snared investments from not just VCs but the Qatar Investment Authority and Canada Pension Plan Investment Board. By 2019, they were the third biggest brokerage nationally, per RealTrends, with just Realogy ($176 billion) and Berkshire Hathaway ($136 billion) netting more than Compass’s $92 billion sales volume. Reffkin appeared on CNBC that year and compared Compass, then valued at $6.4 billion, to Amazon. Compass was also sued in 2019 by Realogy for “poaching” agents, years after they were sued by New York-based Douglas Elliman on similar grounds. The lawsuit is ongoing, and Coldwell Banker President and CEO Ryan Gorman told HousingWire he’s happy Compass plans to go public, because “it would bring more transparency to the real estate industry.” When the pandemic hit last March, Reffkin announced a 15% staff layoff. But Compass persisted in its growth, for example, adding almost 250 agents in New York state alone during the 2020 second quarter (an 11% jump in Empire State agent headcount) at a time when rival brokerages were cutting back. The brokerage has enjoyed the strongest real estate market since 2006, according to National Association of Realtors home sale data. Compass said in November that they hired Goldman Sachs and Morgan Stanley to guide them through the IPO process. Compass’s recognizable name, and the surge in real estate – not just home sale volume but outfits like Rocket Companies and OpenDoor going public – could lure retail investors. “Maybe there will be some folks who said Compass grew faster than everybody else, and so they can flip the switch and become profitable,” Micenko said.

REAL ESTATE BROKERAGES

Jeff Lowe hardly thought of exiting Berkshire Hathaway Homeservices, where he led Chicago’s most lucrative sales team. But there he was, eating Japanese food with Reffkin at Momotaro in the West Loop, a celebratory meal after Reffkin had flown to Chicago three separate times to court Lowe. Later that night, Reffkin and Lowe met up with Lowe’s 14-person team at Coda Di Volpe in the Southport neighborhood: the group was now part of Compass. “Robert Reffkin is a very persuasive guy,” Lowe said, recalling his recruitment by Compass three years ago. “A lot of firms are downplaying the importance of the broker, but Robert really sees the broker as a key component of the future.” Lowe declined to disclose the commission split he got from Compass, noting that he left for reasons including the brokerage’s overall largesse. (“Our marketing department here is four times larger than other brokerages,” Lowe said.) But in tandem with marketing, tech platforms (more on that in a sec), and other resources, Compass grew in no small part by upending the split. Commission income is the beating heart of any real estate brokerage. Realogy reported $4.2 billion in company revenue for the first nine months of 2020, with 77% of that coming from commissions. A typical model has an agent selling a $1 million home, getting about a 3% commission, or $30,000. The agent splits the commission with the brokerage, keeping 60-70% of that $30,000 and passing on the other 30-40%. But Compass in “many cases overpaid agents,” Micenko said. The analyst believes Compass’s average split to be 90% agent, 10% brokerage. Compass propelled commissions upward industry-wide, but only partly.

APRIL 2021

With no discernible breakthrough in customer-relations management software or sale processing platforms, Compass’s tech strategy can devolve into executives repeating the word “technology.” “They spent a tremendous amount of money on a home-grown CRM system,” Micenko said, only to then buy Contactually, a company that built a CRM platform. In one respect, Compass is playing catch up to Realogy’s tech. Realogy’s non-commission revenue mostly stems from a platform that shepherds customers through the title and escrow process of buying a house. Compass, which has a tech hub in Seattle and another in Hyderabad, India, calls itself a tech company perhaps because investors value those firms more. “Almost all VC-backed entrants position themselves as tech companies that happen to be in real estate,” Gorman of Coldwell Banker, said. “Compass is a disruptor by capital, but not by ideas,” said Miller of Miller Samuel. As Compass has heard during its eightyear history. The good news for Reffkin is that he is the pilot. The bad news is he needs to once again find new passengers.

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Realogy, who Micenko analyzes, now has an average split of 75/25. And the more celebrated the agent, the better the split. A top Compass seller in the upper middle class L.A. neighborhood of Silver Lake is known to make a 95/5 split, a Compass agent on L.A.’s rich West Side receives even more than that. “They’ve bought market share at a very steep cost,” said Michael Nourmand, a broker in Beverly Hills. Compass hammers out these splits in a low-margin industry. Realogy and Re/Max, another publicly traded residential real estate brokerage, turned third quarter profits. But the companies ebb and flow between the red and black – largely dependent on the cycles of the housing market. Realogy absorbed a $378 million net income loss for the first nine months of 2020. Realogy slammed Compass’s splits in its most recent quarterly report as the fantastical machinations of a company burning through VC cash. “Certain owned-brokerage companies have investors that have historically allowed the increase in market share over profitability,” the New Jerseyheadquar tered brokerage snif fed, excoriating “competitive models that do not prioritize traditional business objectives.” Compass has more to worry about than just Realogy. Its two-to-threeyear contracts negotiated with agents are beginning to expire, prompting competitors to wonder if Compass can hold on to its envious stable of talent. “It will be interesting to see if agents stay when the financial incentives of their contract expire,” Nourmand said. “At some point, pay to play will end and they will have to prove that they can retain and recruit agents with market rate agreements.”

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IPO WATCH

APRIL 2021

IPO WATCH

Inside United Wholesale Mortgage’s plan to topple Rocket PLANS TO CAPTURE 50% OF THE WHOLESALE MARKET

eeks before United Wholesale Mortgage went public in a SPAC deal that valued the lender at $16.1 billion, its president and CEO Mat Ishbia said observers shouldn’t expect a different United Wholesale Mortgage or a different Mat. He proved it in his first earnings call. On the earnings call, Ishbia, in his characteristic fast-talking bravado, bragged about the wholesaler’s position as the biggest purchase lender in the market, cautioned that they’ve prioritized the long game over short-term profits, teased new technology offerings to come in 2021, outlined scenarios in which UWM dominates when

“2021 is going to be a great year. We’re really focused on mortgage brokers and helping make the process faster, easier, cheaper, and that’s helped us become the No. 2 overall mortgage lender." -Mat Ishbia

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interest rates rise, laughed about how other lenders take 54 days to close a loan when he does it in 18, and repeatedly told investors that his company’s strategy was far superior to that of its arch-rival, Rocket Mortgage. The numbers for the fourth quarter were indeed impressive – $54.7 billion in originations, $1.33 billion in income, margins at a very healthy 305 basis points. In fact, UWM originated more than $182 billion in mortgages in 2020, generating about $3.37 billion in profits. Incredible numbers. Ishbia told analysts that the company doesn’t see originations or margins normalizing in 2021, giving the firm another year of big profits and further investment in technology. And yet, despite those eye-popping numbers and proclamations to reinvest in the company, UWM’s stock fell about 10%. HousingWire took a closer look at how United Wholesale Mortgage plans to grow market share, who it intends to steal it from, the larger question of mortgage cyclicality, and why Ishbia thinks Rocket

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BY JAMES KLEIMANN

IPO WATCH

Mortgage’s strategy is ultimately flawed.

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“2021 is going to be a great year,” Ishbia said on the call. “We’re really focused on mortgage brokers and helping make the process faster, easier, cheaper, and that’s helped us become the No. 2 overall mortgage lender. Hopefully soon, we’ll be the No. 1 mortgage lender, with strategies we’ll discuss during the call today.” In the first quarter, the wholesale lender is projecting closed loan volume between $52 billion and $57 billion, and a total gain margin of between 200 and 235 basis points, which would be a significant increase over the 95 bps from the first quarter of 2020, but lower than that of the fourth quarter. One of the reasons the lender expects strong profits for the first quarter and beyond is the additional firepower coming on the purchase front. “When COVID hit, we pulled out of a lot of products, specifically FHA and jumbo, and basically said we’re not going to focus on these products – those delinquencies are higher, there’s uncertainty in the market,” Ishbia said. “And I’m OK doing less business because I’m going to make sure we steer the ship safely for the long term.” “One of the consequences is we did less purchase business in those two buckets, which made our purchases look not as exciting as it had been. But we turned back on the FHA, our Conquest program in December. And we also will plan on turning on a jumbo product in March,” Ishbia said. In all, United Wholesale Mortgage generated $42.9 billion in purchase loans during 2020, a decline from 2019. Reintroducing those products will generate about $16 billion in originations

by the third quarter of 2021, the president and CEO of UWM said. “We expect to have big, big purchase numbers going forward,” Ishbia said before taking a shot at rivals, notably refi-heavy Rocket Mortgage. “We are a purchase lender – we had 71% purchase in 2018. We’ve done this before, our biggest competitor and many of our top competitors have not done it before.” A return to FHA and jumbo loans doesn’t mean UWM necessarily has a newfound penchant for risk. The average FICO score for a UWM borrower in 2020 was 757, and UWM’s delinquency rate was below 2%, far lower than the industry’s rate of 4.7%, according to Ishbia. Forbearance rates on UWM loans were also below 2%, he said. “We have chosen less volume for quality. We are trying to win long term. We’ve been in business for 35 years, we’ll be here for another 35 years.”

Perhaps no other mortgage lender in America has as much riding on the growth of the broker channel as UWM. It is foundational to Ishbia’s ambitious plan to topple Rocket Mortgage, which leads the race by several lengths and can make money across multiple segments. It’s simple math: without thousands of new mortgage brokers and doubledigit growth in the channel, UWM can’t possibly catch its rival, which originated about $323 billion(!) in mortgages last year, according to Inside Mortgage Finance. As of the third quarter of 2020, the broker channel represented about 17.2% of the overall residential mortgage market, according to Inside Mortgage Finance. Ishbia says that channel can

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basically double in size by 2025, with UWM snagging 50% marketshare within the wholesale channel. Where those brokers will come from looms large. Ishbia believes they’ll come from the biggest IMBs, small community banks, credit unions, large depository institutions, and even outside the mortgage industry. “We think a big part of the broker channel growth is educating consumers, but also retail loan officers leaving the Guaranteed Rates, the Rocket Mortgages, the loanDepots, the Caliber retails, and joining mortgage brokers,” he said. “We see that trend happen every single day. But it will be a bigger push in the future... it just doesn’t happen when rates are so low and [retail LOs] are getting so many leads, [and their] pipeline is full.” UWM’s method to growing market share within the wholesale channel is two-pronged: it will invest billions in technology, leveling the playing field with retail; and the value proposition for brokers is high. “I think it will actually come from some of the top players that you might see in the wholesale top 10,” he said. “There is a wide gap in technology and delivery of speed of close, where we are winning right now. And a lot of other people have to significantly lower their margins just to get even close to the amount of volume that they want to compete with us. So as we continue to widen the gap, and the pricing becomes more aligned, we believe that our growth will be substantial. And I’m expecting that growth to be in 2021 and 2022.” Ishbia added that once a mortgage broker uses UWM, they stay because UWM doesn’t compete with them through other channels, has best-inclass technology and closes loans quickly. “Therefore, they look good to the Realtor, they look good to the consumer, and they’ll get more referrals and keep sending loans to UWM,” he said.

IPO WATCH

The last year has been extraordinarily kind to the independent mortgage banks. Without the same regulatory challenges as their bank counterparts, IMBs were able to move (relatively) quickly when the pandemic began to capitalize on neverbefore-seen interest rates. Including the correspondent channel, they originated over $4 trillion in mortgages in 2020, nearly 75% more than they had in the prior year. Several of the nonbanks, including UWM, have reported profits in the billions for the calendar year. Not that the investors have been impressed. Following a quarter in which it originated a then-record $72.3 billion in first-lien mortgages, Rocket Companies pulled the trigger and went public in early August. The company had planned to sell 150 million shares at a range of $20 to $22. But following a roadshow with investors, Rocket downsized the IPO. It ended up selling 100 million shares at $18 apiece, raising $1.8 billion for a $36 billion valuation. The downsizing would become a theme. Guild Mortgage, backed by a private equity firm, followed in the fall. It downsized its IPO and then traded below its $17-$19 target price, ending its first day of trading at below $15 a share. Wholesale lender Homepoint, owned by affiliates of Stone Point Capital, debuted last month at a disappointing $13 a share in a downsized offering, well below the $19-$21 its backers had hoped to raise in the IPO. UWM made its highly-anticipated public debut earlier this year. Ishbia and top executives even traveled to the New York Stock Exchange to ring the bell and

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In the earnings call, Ishbia didn’t shy away from critiquing his larger Michigan mortgage counterpart. Rocket is a master of direct-toconsumer retail, which tends to be refiheavy, Ishbia said. That model isn’t as effective when interest rates increase, he said. Ishbia further questioned the viability of Rocket ’s continuing strategy in wholesale – now a decade old – given that it competes with brokers in other channels and is predicated on leveraging the brand’s name recognition. “Obviously Rocket has a great retail presence,” Ishbia said. “But brokers don’t want to have to compete with their partner.” Ishbia later said that the Rocket Pro TPO business, which includes the broker model as well as a corporate partnership, actually comprises about 30% or more of that business line. He won’t be following a similar template. UWM is only interested in the broker, he said. Ishbia put these feelings into action later in the year when he announed on a facebook live video in March that UWM would no longer partner with brokers who also work with Rocket Mortgage and Fairway Independent Mortgage Corp. “I can’t stop you, but I’m not going to help you, help the people that are hurting the broker channel, and that’s what’s going on right now," he said. " We don’t need to fund Fairway Independent or Rocket Mortgage to try to put brokers out of business. We don’t need to do that. If you want to do that as your own deal, no hard feelings, but you can’t work with UWM anymore," he added. Whether any of this means investors buy stock is unclear. But Ishbia, who now has a net worth somewhere in the $12 billion range, claims he’s not worried.

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open trading. Shares of United Wholesale Mortgage Corp. (UWMC) closed at $11.35 on the first day of trading, up from the $10 of the initial company merger. Following the fourth quarter earnings, shares fell 10%. J a c k M i c e n ko , an an al y s t a t Susquehanna International Group, said the company’s gain-on-sale margin guide for the first quarter was likely the culprit. “The company guided to a GOS margin in a range of 200-235 bps, down from 306 bps reported in 4Q20. Across the industry, GOS margins are elevated, but many assume (including us) that they are not sustainable,” Micenko said in a note. “Given that UWMC’s guidance is 1/3 of the way through the first quarter, this suggests that the rationalization of GOS in the industry is finally upon us. We like the UMWC model – it’s more geared toward purchase volumes, and the broker channel should grow even if total originations decline. But the volatility in GOS is a key reason investors have historically valued mortgage originators in the 5-8x P/E range through cycle,” the note continued. Ishbia insists he’s built a business for the long haul. He also offered a scenario in which UWM gains market share and maintains profitability while others struggle. “We imagine, what does 2024 look like in a $1.5 trillion year, when the mortgage market is cut in half,” he said. “Well, here’s what happens – the broker channel grows to 33%. Not only do the brokers grow, but also purchase business [expands to] some 33% or $500 billion. Our share will be 50%.” According to Ishbia’s math, UWM would be doing about $250 billion a year in originations. “We are less cyclical than our biggest competitor, who’s almost 93% refinance,” he said.

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POLITICS & MONEY

APRIL 2021

POLITICS & MONEY

How wild lumber prices have crippled homebuilders UNTIL MORE LUMBER MILLS REOPEN, EXPECT PRICES TO REMAIN HIGH

t was spring of 2020, and Keta Kosman saw a perfect storm about to collide with the lumber industry. As the COVID-19 epidemic set in, then-president Donald Trump and Canadian Prime Minister Justin Trudeau assured business leaders that, despite border closings, trade would not be impacted. The rail cars that carried lumber from the mills of Canada into the lumber yards and big box stores of America would continue to run unabated. It proved overly optimistic. For safety reasons, lumber mills across the two countries closed down almost immediately. Supply lines choked just as demand spiked to levels never seen before. And the virus was raging. “Suddenly, the supply chain was seriously impacted by the social-distancing restrictions put in place for health and safety reasons, especially

“Suddenly, the supply chain was seriously impacted by the social-distancing restrictions put in place for health and safety reasons, especially in Canada.” - Keta Kosman

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in Canada,” said Kosman, the publisher of trade Madison’s Lumber Reporter in Vancouver. “Fast forward to 2021, and scheduling delivery times in America are still extremely challenging, which is causing a lot of consternation. Since customers are only ordering the wood they need for actual building projects, the added shipment delays are a real problem.” Home construction in the United States is heavily reliant on trade with Canada, which has historically supplied more than 80% of the lumber imports to the United States. Supply chain woes and heightened demand forced lumber buyers, builders and mills to spend hours on the phone to try to confirm orders, often to no avail. With paltry supply, customers had no choice but to pay through the nose for materials. This triggered suppliers of other building materials – gypsum, aluminum, copper – to raise their prices, too. “Industry players were caught by surprise during the usual building and selling season of summer,”

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BY TIM GLAZE

POLITICS & MONEY

Kosman said. “Despite not liking the asking prices, they had to pay because their projects needed to be completed.” This is the story of how a pandemic in 2020 tested the operational limits of building suppliers, the patience of homebuilders and contractors, and the wallets of their clients. HousingWire also looks ahead to 2021, which is already showing signs of a rebound.

“As people started nesting in response to the pandemic, they started undertaking all sorts of home renovation projects. At the same time, sawmills started shutting down and have only partially reopened because of social distancing concerns.”

In some ways it’s ironic. Suppliers had actually anticipated a drop in demand when the virus started to spread last spring, with many cutting plywood production – some, in Idaho for instance, by as much as 40%. But stay-at-home orders evolved into work-from-home orders, and before too long, much of the American workforce was at home all day, every day. Home projects spiked as people pined for a more comfortable living area, and some began erecting second living spaces for privacy while they worked. Demand for lumber began rising. Then, mortgage rates plummeted to historic-lows, and casual home shoppers became homeowners. Prices on vacant, new, and unbuilt homes were already trending upwards due to the low supply of lumber, but this didn’t stop demand. “As people started nesting in response to the pandemic, they started undertaking all sorts of home renovation projects,” said Robert Dietz, National Association of Home Builders‘ chief economist. “At the same time, sawmills started shutting down and have only partially reopened because of social distancing concerns.” Suddenly, lumber suppliers who earlier requested less inventory were beset upon for supply – with little chance of filling the surging order demands in a timely manner.

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-Robert Dietz

The NAHB reported that, from April 2020 to August 2020, the price of lumber increased by 110% and hit an all-time high of $950 per thousand boards in September. With these prices, a new

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home build could suddenly cost an additional $15,000 compared to prepandemic numbers. It ’s an effect of the virus – and subsequent low supply – that struck the very lifeline of homebuilding: What do builders and construction companies do when they can’t afford lumber and other materials necessary to put up a new home? Projects creep to a halt, and crews become smaller as companies try to pinch pennies without sacrificing building integrity. And all the while, prices continue to climb, according to David Logan, director of tax, trade and policy analysis for the NAHB. “ We’re still in record-shat tering territory when it comes to prices,” Logan said. “Not just lumber, but oriented strand boards, too, which is a common substitute for plywood. So, you have these two structural parts of a home that are up, percentage terms, triple digits. It depends on the size of the house, of course, but by no means is it insignificant. And as prices go up, that percentage gets bigger.” Seeing the demand for lumber, c ompanie s manuf ac turing other important homebuilding materials – aluminum, steel, drywall, and copper, among others – raised their prices, Logan said, up to 25% higher than prepandemic levels in some instances. All of this at a time when buyers are flooding the housing market to take advantage of the record-low mortgage rates, which itself pushed up prices. And with demand as high as it is, Kosman said it is not uncommon for some extra costs on a new build to be paid by the homebuyer or homeowner. “Homebuilders had signed contracts and needed to deliver by the end date – usually about three months from the time they began – and could not pass those increased costs on to customers,” she said. “So, for new building and renovating that started at the end of the

POLITICS & MONEY

summer of 2020, those higher lumber costs were added into building project costs. In short, when lumber supply is so low while construction activity is so high, it is the end-user — the homeowner or homebuyer — who pays those increased costs.” Skilled laborers began hiking their prices to take advantage of the home demand, as well; plumbers installing pipes in a new build, electricians laying wire, and general contractors could increase their rates while remaining in high demand. As of February 2021, hiring a plumber for a house call could average

is the light at the end of the tunnel? Signs of life were spotted in the fourth quarter of 2020, when prices dropped to around $560 per thousand boards in November. This followed a yearly trend in the supply cycle of lumber – as the colder months settle in, demand for new construction slows, allowing supply to catch up in time for spring. That price is still high for the winter, experts said, which doesn’t bode well for the first quarter of 2021. “Producers of framing lumber are telling us they can’t increase production much to meet these higher prices,” said Stinson

It’s just as important, Fowke said, that domestic lumber mills ramp up production once they re-open. “In the wake of the COVID-19 pandemic, housing has been one of the few economic bright spots,” Fowke said. “But housing’s potential to lead the economy forward remains limited as long as lumber remains expensive and scarce.” As is the case for so many suffering businesses, the continued distribution of COVID-19 vaccines and the promised economic stimulus triggered by President Joe Biden’s $1.9 trillion American Rescue Plan will be key in reversing the pricing

“In short, when lumber supply is so low while construction activity is so high, it is the end-user — the homeowner or homebuyer — who pays those increased costs. - Keta Kosman

As the calendar flips to 2021, builders are asking the million-dollar question: Where

Dean, CEO and owner of Deacon Lumber Company. “Log shortages and capacity restraints related to COVID precautions have handcuffed producers at a time they should be investing in as much production as they can. “Lack of for-sale supply is at generational lows, which can suppress demand. The weirdest part is, it hasn’t yet.” It is vital that the U.S increases domestic softwood lumber production and obtain a new lumber agreement with Canada, Dietz said. Even with these moves, don’t expect a switch to flip and prices to return to pre-pandemic levels, he said. “Other supply chain disruptions are also increasing construction times and raising costs,” Dietz said. “Combined with higher regulatory burden risk, housing affordability headwinds will increase in 2021.”

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and distribution trends of lumber and other building materials. Controlling the virus seems to be the first step, as more vaccinated workers means more lumber mills can safely re-open across the country, leading to an uptick in inventory. Until then, with the vaccine rollout progressing slowly, builders can expect the same low inventory and the same high prices for the time being. “Customers could always choose to simply delay projects in the expectation that prices will go down eventually,” Kosman said. “For 2021, now at the beginning of February, it is clear that lumber prices will not go down.” 67 ❱ HOUSINGWIRE

around $300, sources told HousingWire. It can all be traced back to lumber prices, which went as high as 140% above 2019 costs, according to Chuck Fowke, NAHB chairman. “This unprecedented price volatility has added thousands of dollars to the cost of a new home,” Fowke said. “Soaring lumber prices and supply shortages are not only harming home builders and home buyers, but also threatening the housing sector and the economic recovery.”

with Jeremy Collett Guaranteed Rate Executive Director, Capital Markets

Here’s what to expect for interest rates and loan volumes in 2021 Guaranteed Rate finance leader says “don’t fade the Fed” Over the past year, mergers and acquisitions, huge financing rounds and public offerings have dominated headlines across the real estate and housing finance sector. This level of action is keeping finance executives like Jeremy Collett, executive director, capital markets at Guaranteed Rate busier than ever. HousingWire reached out to Collett to hear more about the current market and what to expect for interest rates and loan volumes in 2021. HousingWire: As you think about your career, what moments and experiences really prepared you for this current market? Jeremy Collett: The obvious answer here is the financial crisis, but I like to look at managing capital markets in terms of modes; you can’t get locked in to one particular strategy. All mortgage companies that have ever failed, have one thing in common: they ran out of cash. In my opinion, the biggest responsibility of a nonbank lender’s trading and finance executive team is to ensure the business has adequate cash to manage and fund the pipeline while also being able to cope with any unforeseen circumstances like a sudden change in Fed monetary policy or some other risk. From that perspective, the post-housing crisis QE era really helped me in 2020. Specifically, in 2012 we quickly pivoted away from a loan sale strategy built purely on best execution, to one built on fast execution. Additionally, we spent the last 10 years at Guaranteed Rate building our digital mortgage platform and it was a huge part of our success in 2020. We’re really fortunate to work with the best sales, tech, and ops professionals in the industry.

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HW:What dynamics are fueling investor interest in the housing space? Why or why not is now the right time for mortgage and real estate companies to raise capital or pursue other strategic transactions? JC: This is such an interesting topic right now. Not only are lenders coming off the best year ever in terms of fundamentals, with record margins, revenue, volume, etc., lenders are also finding themselves with excess cash for the first time I can remember. There are effectively two

options with what to do with that, dividend it out to shareholders or deploy it in growth and become more dominant in the industry. In terms of raising capital, it makes a lot of sense given the enormous earnings in the industry right now; originators are entertaining valuations of four to eight times earnings, numbers we only dreamed of over the past 10 years. This is obviously very attractive for an industry historically plagued by volatile earnings. The prospects of quantum growth are also extremely exciting since nonbank lenders have basically dominated the development of tech and the digitization of mortgage. By winning over customer loyalty through digital mortgage, nonbank lenders are starting to play a massive role in the distribution of other financial products like credit card and wealth management. This is all happening at a time when home prices are soaring, interest rates are at all-time lows, and millennials are moving out of cities and buying homes in the burbs. HW: If 2020 is defined by COVID-19, low interest rates and insane volume, how do you predict 2021 will be defined? JC: While the industry probably won’t have to scramble to solve for obtaining appraisals, dealing with forbearance, or coming up with massive amounts of cash to handle margin calls on hedges, 2021 will likely look a lot like 2020. The Fed has effectively signaled to the markets that they will hold the target rate near zero for the foreseeable future, certainly through 2021 and beyond. The asset purchase program, which includes at least $40B of agency MBS, will also continue as the Fed uses all of its tools to stabilize the economy as it recovers from COVID. Fundamentally, rates should remain low this year with perhaps some upward pressure from increased Treasury issuance as the new administration takes the reins. If there’s one piece of insight to live by over the past 10 years, it’s “don’t fade the Fed.”

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with Charlotte Simonelli Realogy Holdings Corp. Executive Vice President, Chief Financial Officer

Realogy’s financial strategy in a year full of rapid change Simplifying the business, strengthening the balance sheet and more Charlotte Simonelli took over the role of executive vice president, chief financial officer of Realogy Holdings Corp. in March 2019. As CFO, Simonelli is responsible for all financial functions across the company’s multiple businesses and brands, including financial reporting, planning and analysis, accounting and more in addition to acting as the company’s treasurer.

HousingWire: 2020 was truly a remarkable year for mortgage and real estate companies. What role did you and your team play in helping Realogy navigate 2020 and emerge successfully? Charlotte Simonelli: Realogy’s financial strategy was a critical component in our ability to own the recovery. Prior to the pandemic, we’d been laser-focused on strengthening our financial profile and investing in our strategic priorities, including technology innovation and lead generation, among others. Those efforts proved to be advantageous through the crisis, allowing us to execute from a position of strength and arm our affiliated agents and brokers with the tools and technology they needed to help keep America moving. Our team played both offense and defense: we continued to invest in strategic initiatives, made proactive moves to take care of our people as best we could, identified smart temporary cost savings, and stayed laser-focused on strengthening our balance sheet. As volume accelerated, we did not lose sight of our financial goals and were able to take advantage of both our momentum and a strong market to further strengthen our balance sheet. We continue to thoughtfully manage Realogy’s financial profile today, including preserving our ample liquidity and accelerating our debt reduction efforts while still investing in the business. Recently, we were able to successfully upsize a new unsecured debt offering to $600 million at a very attractive interest rate. From where I sit, as investors continue to show excitement about our direction and the long-term potential in the market, the future looks bright.

HW: What characteristics and organizational alignment really separate the most effective finance teams from the ineffective? CS: Across our various business units and brands, Realogy’s finance organization is home to both real estate veterans and industry outsiders, which allows us to use our expertise to make solid business decisions while also fostering innovation. We are focused on driving our strategy and capitalizing on our strengths. I joined Realogy just under two years ago from large, multi-brand companies in the consumer product space. Much of my previous experience was in identifying efficiencies while also finding ways to leverage the collective power of multibrand businesses. People might think consumer products would never translate to the real estate services business, but I find those experiences inform my work every day as we move to simplify our business and harness Realogy’s size and scale to create value for the affiliated agents, franchise owners and customers we serve. HW: How does your team work across the company – from the c-suite to front lines – to be as effective and impactful as possible? CS: Everything we do is with the success of our affiliated agents and brokers in mind, which in turn drives value creations. Realogy’s teams across every brand and business unit, including our title business and mortgage joint venture, work in close partnership with business leaders to create value for our agents so they can close deals. When we work united by this singular goal, being effective and impactful becomes easy. Our focus from a financial perspective continues to be on simplifying our business, strengthening our balance sheet and doing it all efficiently in order to be as agile as possible to support our agents and brokers where they need us most.

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As a leader at one of the largest real estate franchises, HousingWire reached out to Simonelli to learn how Realogy is continuing to manage its successful financial profile in a year full of rapid change and accelerating volume.

with Marcia Davies Chief Operating Officer at the Mortgage Bankers Association

How to create more space for women in mortgage Here are some things women can do to champion each other Marcia Davies not only serves as the chief operating officer at the Mortgage Bankers Association, but she also founded and leads the association’s networking platform for women in the real estate finance industry, mPower.

As a mentor and advocate for women in the industry, HousingWire interviewed Davies on its female financial empowerment podcast, Girlfunds, to learn more about leadership and what women can do to better support other women. HousingWire: What is one statistic around women in the workforce that has always stood out to you? Marcia Davies: Recently, a Harvard Business Review report caught my eye. Companies with the most ethnically diverse leadership teams are 33% more likely to outperform their peers on profitability, and specifically speaking to women, those with executive-level gender diversity worldwide had a 21% higher likelihood of outperforming their industry competitors. The data stands the test of time and highlights how diversity, and specifically gender diversity and leadership, is good business. So simply stated, the more diverse your leadership team is overall, the more profitable and successful your company will be.

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HW: What was it like starting out in our industry as a woman and what changes are you seeing in this? MD: I started in the industry 30 years ago, and you’re right, there weren’t many women in the industry. As I grew in my career, there became more and more frequent times when I was the only woman in the room. I didn’t have a network of other women that I could go to and bounce ideas off of, or to talk about challenges I was having. What would have been helpful is having a group like mPower, or more women around where we could talk about what we were facing, and problem solve together and make sure that our male counterparts were aware of some of the things that we were facing in the workplace. And I think about “imposter syndrome.” It’s that little voice in your head that makes you question, “Can I do

this? Should I really be here? I was ‘lucky’ to get here?” It would have been helpful as I was navigating my career to know that was a real thing. I just thought it was my own self-doubt. HW: How can we create more opportunities within our industry and even outside to help create more space for other women to succeed and lead? MD: I love being asked questions that are actionable. I think we need to mentor, sponsor and lift women up. It sounds simple, but as you know, when everybody’s busy at work, sometimes you forget that you need to make the time to sponsor and lift other women up. And if you’re fortunate enough to be in a leadership role, I do believe it’s your responsibility to send that elevator back down and lift other women up so that they can have opportunities. They can really have the advantage of someone investing in them to make sure that they are successful so they can thrive. The other thing is, we have to be able to sponsor and support women. You may have a colleague who, whether young or a seasoned professional, doesn’t often speak up for the great work that they’re doing. So, when you’re in a meeting, and it’s appropriate to mention that Sally did this amazing work where people can be made aware of it, we should leverage it. You need to be the person who can sponsor that woman when they’re not in the room and also help advocate for them. As women, we are not usually strong advocates for ourselves. We assume our good work is just going to be recognized. Well, ladies, we have to learn to toot our own horn. And I’m not saying do it to the point where we’re going to blow it, but we do need to make sure our good work is recognized. I always say to tell people what you’ve accomplished and I guarantee you, it’s more than they even realized.

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with Michael Neal Senior Research Associate in the Housing Finance Policy Center at the Urban Institute

The history of housing discrimination What does inequality within housing mean for today’s borrowers? When it comes to housing inequality, there is a lot of history to unpack. In Honest Conversations, a new podcast miniseries that focuses on minority homeownership, HousingWire Digital Media Manager Alcynna Lloyd interviews different housing experts to examine the state of minority homeownership in America.

HousingWire: How did new economic structures in suburban spaces of the post-war period influence housing inequality and affluence? Michael Neal: Number one, in aggregate, I think things were moving upward for sure. That being said, the devil is in the details. And what we really observed was that a certain category of people were able to take advantage of these opportunities and use them for their good, and others were actively and consciously excluded from them. Additional housing in the suburbs certainly allowed particularly white Americans to access the credit and to access the opportunities to move into those neighborhoods. And over a period of time, to experience the benefits or the financial benefits, at least, in the form of price appreciation and broader equity. But I think that there was a certain group of people, particularly people of color, who by and large did serve their country, who were actively and consciously excluded from these opportunities and were not allowed into these new-fangled suburban communities. And by and large, they were, therefore, not able to benefit due to housing discrimination, at least to the same degree. HW: In the 1950s, when many middle- and lower-class white Americans were moving to the suburbs with the help of the government, data shows many African Americans and other minorities were systematically shut out. What were some of the laws or rules that prevented them from accessing equal housing?

MN: Redlining is one that really comes to mind, and the covenants and rules that were put into those covenants that kept people of color from achieving homeownership in those particular communities. Laws, such as redlining, kept people from getting a mortgage, and therefore, they weren’t being able to access homeownership. We’ve really described two steps. We described rules that kept you from achieving homeownership, but then, we described, given that you weren’t able to achieve homeownership, you were not able to access it in the places that could give you the maximum amount of benefit. Over time, that’s going to build on itself and lead to, I believe, a portion of the gaps that we see today with respect to homeownership, and with respect to wealth more generally. HW: What is your biggest area of concern for minority homeownership? And what can the industry do today to address this gap? MN: For me, I think that the biggest concern that I have is that African Americans and Hispanics, in particular, are not experiencing the benefits of homeownership to the degree that their white counterparts are. That is, even if we were somehow to close the gap in homeownership, the gap, with respect to the financial benefits of homeownership, remains wide for a number of reasons. Part of which I think are rooted in a history of systemic racism and housing discrimination. Part of which are the economics that currently prevail. So, I encourage both myself in my own research and analysis, but also for the industry more generally, that it’s not enough to get African Americans and Hispanics into homeownership. We must also take the extra steps and implement the necessary policies to ensure that these new homeowners actually benefit to the same degree as the other Americans are able to.

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In this interview, Michael Neal, a senior research associate in the Housing Finance Policy Center at the Urban Institute, discusses the history and data behind minority homeownership and explains how inequality within housing came to be and what it means for today’s borrowers.

KUDOS

PeerStreet program aids real estate entrepreneurs from underserved communities Company aims to stop “negative flywheel”

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By Tim Glaze

kud

Following the murder of George Floyd in 2020, PeerStreet CEO Brew Johnson knew his real estate investing platform needed to get involved with forwarding social change.

That led to the launch of PeerStreet’s “Evolving Neighborhood Uplift Fund,” a charitable initiative used for a more purposeful and sustainable way to invest in real estate entrepreneurs from underserved communities. The E.N.U.F. advisory board reviews and selects ten entrepreneurs who best meet eligibility requirements, including demonstrating a passion for real estate investing and community improvement, while identifying as a member of a minority group and of an underseserved community. According to PeerStreet, the mission of the new initiative is “to equip aspiring real estate entrepreneurs with the tools and capital they need to invest in real estate projects and, in doing so, invest in their communities.” Once candidates are accepted to the E.N.U.F. project, they will receive mentorship from PeerStreet’s network of real estate experts, matching with people like Jason Lewis, who is the CEO and founder of Cheta Ozougwu, Investor at Tidal Loans AryMing Capital. In addition, when they identify qualifying projects, the capital needed will be funded out of a charitable giving vehicle, hosted by the Tides Foundation. Cheta Ozougwu, an investor at Tidal Loans and one of the mentors in the program, said, “With the disparity in resources and knowledge available to Black investors, it is truly a blessing that PeerStreet co-founder and CEO Brew Johnson is so passionate about this

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cause. Tidal Loans shares that passion.” “Tidal Loans’ main goal in its involvement with E.N.U.F is to be a part of a program that inspires and enables our next generation of Black real estate investors,” said Ozougwu. Ozougwu is just one of a handful of mentors and advisors with different areas of expertise who are partnering with the initiative to help others create wealth. BUILDING WEALTH THROUGH REAL ESTATE “We are passionate about democratizing the ability to create wealth through real estate,” Johnson said. “The social unrest that unfolded following the murder of George Floyd really underscored the unequal playing field, the disparity in wealth and the lack of investment in black communities – which are huge factors in the racial inequities we see today.” The economic statistics are shocking, as Johnson pointed out: white communities receive four times the investment that black communities do, he said, and the average white household has 10 times the wealth of the average Black household. And, the Federal Reserve reported in August that the average homeowner in 2016 had a household wealth of $231,400, compared to the average renter having a household wealth of just $5,200. Fast forward to a February study by the United States Census Bureau that shows similar data around inequality. The homeownership rate for white Americans in the fourth quarter of 2020 was 74.5% – a nine-year high, and surpassing the fourth quarter of 2019’s rate of 73.7%. Homeownership rates for Black Americans dipped to 44.1%, the lowest rate since the first quarter of 2020. Even considering American cities with larger Black populations, the homeownership gaps are alarming. Washington, D.C. and Los Angeles, for instance, show a gap

of 25% between white and Black homeownership. Or, to boil everything down: the homeownership gap between white and Black Americans is larger today than it was 50 years ago. And that’s with mortgage rates falling to historic lows amid the COVID-19 pandemic. With rates expected to return to semi-normal and home prices still high, homeownership could continue to be a problem for Black Americans. CREATING THE IDEA FOR E.N.U.F. As Johnson watched the raw emotions of the Floyd case spill over on the news, he felt helpless. In response, he gathered his team in June and brainstormed ideas that would help make a difference. The idea for E.N.U.F., he said, was born. “After we thought about the wealth gap problem in the context of our business and our goals of cre-

Jason Lewis, CEO and Founder of AryMing Capital

ating a level playing field, unlocking a reinforcing American Rescue Plan cycle of wealth creation, – currently earmarked at and community invest$1.7 trillion for the economent, it became apparent up in. Because Black famimy – includes $100 billion that we didn’t need to wait lies on average have fewer for affordable housing around for someone else assets it’s harder for them and a $15,000 first-time to make a change,” he homebuyers tax credit that to access capital to start said. creating wealth. can be used When individuals invest “When invesas a down in loans on PeerStreet, tors buy loans payment. the capital is distributed from PeerStreet, In the meanthrough a network of small they earn interest time, Johnson business lenders to real on their investsaid PeerStreet estate entrepreneurs ment which is is doing what around the country. Those great, but the it can with the entrepreneurs then use ecosystem that resources it that money to buy propinvestment suphas – without erties, fix them up, then ports is even waiting for the rent them out or sell them Ashley Flucas, General more important government. to homebuyers. To date, Partner of Flucas – their invested “We love to PeerStreet has allocated Ventures capital gets allocatsee government approximately $4 billion ed to small of capital businesses to real and real estate “I know first-hand that real estate is a estate entreentrepowerful economic driver to accomplish preneurs,” preneurs Johnson around this goal and helping others to be able said. the to grow wealth through real estate is “I know country. very exciting." - Ashley Flucas first-hand “In that real a way, estate is a we’ve crepowerful economic driver support and think housing ated a wealth-generating to accomplish this goal for everyone is important,” machine,” Johnson said. and helping others to he said. “But I don’t think “At the same time, there be able to grow wealth anyone should wait for the is a massive wealth gap in through real estate is very government or someone America and the numbers else to fix things or make a exciting,” added Ashley are just shocking.” change. We believe that we Flucas, general partner President Joe Biden of Flucas Ventures and a have the power, collechas been a proponent of tively, to make an impact affordable housing since founding advisor to the and create a better future. he launched his presidenE.N.U.F. project. That’s what drives our tial campaign, and his mission at PeerStreet, and the E.N.U.F. program is a natural extension of that mission.” The goal with E.N.U.F., Johnson said, is to reverse the negative flywheel minority families are caught

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dos

KUDOS

parting shot

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❱ UWM’S RECORD-BREAKING YEAR United Wholesale Mortgage showed it is a force to be reckoned with once again, announcing it generated more than $1.3 billion in net income during the fourth quarter of 2020. And for the entire year, UWM originated more than $182 billion in mortgages, blowing away the $107.8 billion in mortgages it delivered in 2019 as the market boomed. To start out the year, the company also had its public debut on the New York Stock Exchange pictured above with Alex Elezaj, chief strategy officer, Melinda Wilner, chief operating officer, Mat Ishbia, president and CEO, Jeff Ishbia, founder and board member and John Tuttle, NYSE vice chairman and chief commercial officer (left to right).

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April 2021 Issue

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