February 2022 Issue

February 2022

HOUSINGWIRE MAGAZINE ❱ FEBRUARY 2022

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WHEN BORROWERS ‘GHOST’ THEIR SERVICERS

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HOUSINGWIRE EDITOR-IN-CHIEF SARAH WHEELER MANAGING EDITOR JAMES KLEIMANN HW+ MANAGING EDITOR BRENA NATH SENIOR REAL ESTATE REPORTER MATTHEW BLAKE SENIOR MORTGAGE REPORTERS BILL CONROY, GEORGIA KROMREI REAL ESTATE REPORTER BROOKLEE HAN MORTGAGE REPORTERS FLÁVIA FURLAN NUNES, MARIA VOLKOVA LEAD ANALYST LOGAN MOHTASHAMI MEMBERSHIP COORDINATOR SARAHI DE LA CUESTA CONTRIBUTORS KENON CHEN, RAVI CORREA

REALTRENDS DIRECTOR OF REAL ESTATE MARK ADAMS EDITORIAL DIRECTOR TRACEY VELT PROGRAM MANAGER LIZ SMITH FINLEDGER ASSISTANT EDITOR ALEX ROHA REPORTER JOE BURNS REVERSE MORTGAGE DAILY EDITOR CHRIS CLOW

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HW MEDIA CORPORATE CEO CLAYTON COLLINS COO DIEGO SANCHEZ DIRECTOR OF FINANCE ANDREW KEY DIRECTOR OF PEOPLE AND CULTURE AMY BEARD DIRECTOR OF GROWTH CAREN KARRIS DIRECTOR OF EVENTS TRACY GARCIA SENIOR GRAPHIC DESIGNER EMILY CARPENTER GRAPHIC DESIGNER BRANDON JOHNSON DIRECTOR OF PRODUCT HOLDEN PAGE UX/UI MANAGER BO FRIZE WEB DIRECTOR BRENT DRIGGERS AD OPS COORDINATOR ELIZABETH LEDOUX MARKETING PROGRAM MANAGER LESLEY COLLINS PRODUCT MANAGER MATTHEW STAFFORD GROWTH COORDINATOR SYDNEY SMITH EVENTS COORDINATOR KATIE GALBRAITH BUSINESS ANALYST WHITNI ROWE SALES SVP SALES AND OPERATIONS JENNIFER WATSON LAWS WESTERN CHRISTI HUMPHRIES, LINDSLEY HARRIS CENTRAL & NORTHEAST MICHAEL ORME, SAMANTHA STEIN, ADINA RITTER SOUTHERN TAMARA WREN, AMINA JAHIC STRATEGIC ACCOUNT DIRECTOR HALEY HESS SALES MARKETING MANAGER TOD MOHNEY PODCASTS AND MULTIMEDIA JUNIOR DIGITAL PRODUCER ELISSA BRANCH CONTENT SOLUTIONS MANAGING EDITOR MALEESA SMITH CONTENT EDITOR JESSICA DAVIS WEBINAR MANAGER ALLISON LAFORGIA

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FEBRUARY 2022

LETTER FROM THE EDITOR

Getting ghosted?

I NEVER THOUGHT I would see the day when the

could be much worse. You can read all about the

housing industry and the dating industry shared

consequences in this month’s feature that starts

a common struggle — getting ghosted. The term

on page 24.

is not so fondly used in the dating world when

And as always, the February issue is the first

someone suddenly and without explanation with-

issue in the new year. As we embark on all things

draws from communication. In similar sentiment,

housing in 2022, we want to thank you, our loyal

the word is used in the mortgage servicing space

readers, for digging into the top trends and sto-

when a borrower decides to cut contact with

ries with us.

their servicer.

While it’s never ideal for servicers to have no back-and-forth communication with borrowers, it’s extremely problematic in the current environment, given the last few years of borrowers who filed for and are now coming out of forbearance.

Millions of borrowers who paused payments are needing to decide next steps. Except unlike your ego and can get back into the dating scene, the outcome of borrowers ghosting servicers

Brena Nath HW+ Managing Editor @BrenaNath

Tweets From The Streets Why can’t the IRS just look at the blockchain and figure out my taxes for me 198

256

4K

by @fintechfrank

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. © 2022 by HW Media, LLC • All rights reserved

FEBRUARY 2022

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february People Movers

2022

12 Guaranteed Rate made some major changes to its leadership team.

Take 5

13 Mortgage servicing long-timer Michael Keaton’s worst job ever.

Proptech Profile

14 Tech-friendly mortgage servicer Valon on its cloud-native platform.

Event Calendar

15 The MBA’s Servicing Solutions Conference is back to meeting in person.

Inside Agent

16 Ashley Cusack was raised in Miami and has spent 30 years as an agent.

Local Intel

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Appraisal

62 Trade Desk

42 There is new leadership at NAHB and NAR as they enter 2022.

Real Estate

46 Here’s an inside look at the effort to outlaw real estate ‘love letters.’

Title

50 The title insurance industry has a talent problem that it’s trying to fix.

Secondary Market

54 Bond-rating agency calls out loan practices that may foster hidden risks.

CFPB Watch

58 CFPB lets mortgage servicers collect on social media, but will they?

The Sunflower State’s capital city isn’t short on buyers these days.

Reggora shares some 2022 projections for the appraisal industry.

Housing Market

66 Hope and homebuyers return to Paradise after the wildfire.

Q&A

70 ICE Mortgage Technology executive discusses fintech in mortgage.

Q&A

71 Dallas broker ranks as the most prolific real estate agent in the country.

Kudos

72 Fairway and the American Warrior Initiative deliver service dogs to veterans.

Parting Shot

74 Natural disasters made headlines in 2021, so what’s HUD doing about it?

FEBRUARY 2022

features

f

When borrowers ‘ghost’ their servicers

A deep dive into the tactics servicers are using to convince borrowers to pick up the phone.

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Loan Servicing Solutions

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A Zillow problem … or an iBuying problem?

The company’s pricing forecast volatility may be an issue inherent to iBuying.

As more homeowners exit forbearance and move into permanent loan workout solutions, servicers need to be nimble in assisting borrowers as they figure out their next steps.

Here’s how Stewart is leveraging acquisitions to become the premier title services company.

The path to modernizing the appraisal process

Headwinds confronting the mortgage industry in 2022

By Kenon Chen

By Ravi Correa

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Company Spotlight: Stewart Title

The competitive edge you need to stay ahead.

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PEOPLE MOVERS

Anne Segrest McCulloch

| FHLBank of San Francisco | EVP, Chief Legal Officer and Corporate Secretary

The board of directors of the Federal Home Loan Bank of San Francisco appointed Anne Segrest McCulloch to the role of executive vice president, chief legal officer and corporate secretary. Bringing more than three decades of experience in the industry, McCulloch is responsible for providing legal counsel to the bank’s management and board of directors.

James Elliott |

OriginPoint | President

OriginPoint, a recently formed mortgage origination joint venture between Guaranteed Rate and Compass, has a new leader, with James Elliott taking on the role of president. Previously serving as chief retail production officer for the West at Guaranteed Rate, Elliott brings more than three decades of experience in the mortgage industry and a track record of driving exponential growth to his new position at OriginPoint. Elliott will work alongside the leadership team at Compass, as they build and grow OriginPoint.

John Palmiotto |

Guaranteed Rate | Chief of Retail Production

Guaranteed Rate also named John Palmiotto to a newly created position, announcing his role as chief of retail production. Working alongside Elliott, Palmiotto previously served as chief retail production officer for the Midwest and East. Palmiotto, who has more than 25 years of experience in the mortgage industry, will focus on driving even more business and identifying new opportunities across the company’s expansive geographic footprint.

Joe Stephenson |

Open Mortgage | President

Open Mortgage named industry veteran Joe Stephenson as its new president. In the newly created position, he will oversee day-to-day mortgage lending operations for the company, with a strong focus on the company’s continued growth. During his 28-year career in financial services, Stephenson has held executive-level positions across multiple originations, operations and process design platforms for financial industry leaders including American Advisors Group, Morgan Stanley, Bank of America and Wells Fargo.

Bill Mitchell |

ReverseVision | Chief Revenue Officer

ReverseVision hired Bill Mitchell as chief revenue officer, where he will oversee the company’s sales, business development and marketing efforts as the company expands its footprint in the mortgage industry. As an experienced technology focused sales and marketing professional, Mitchell has held senior and executive management positions at established software firms, emerging fintech companies and also startups. He also brings a robust background in loan origination systems and digital mortgage technologies.

Gary McKiddy | Mid America Mortgage | Chief Risk Officer Gary McKiddy rejoined Mid America Mortgage in the role of chief risk officer. McKiddy wields nearly 40 years of experience in corporate financial management across multiple verticals, including mortgage banking. In his new role, he is responsible for helping Mid America Mortgage manage risk and improve operations amid the ongoing expansion of its product line. For the last 19 years, McKiddy has served as chief financial officer at NTFN.

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Dean McCall |

Promontory MortgagePath | Chief Information Officer

Promontory MortgagePath promoted Dean McCall from managing director of development operations and data to chief information officer. McCall brings an executive-level engineering and information technology focus to the position, as he helps the company continue to grow and constantly improve upon its technology.

Before joining Promontory MortgagePath, McCall worked in engineering, technology consultation and warehouse architecture with Oracle, Aurora Loan Services and Redwood Trust.

FEBRUARY 2022

TAKE 5

Michael Keaton Chief Servicing Officer at Shellpoint Mortgage Servicing Michael Keaton is a mortgage servicing long-timer. He started his career selling REOs at Wendover Funding in Greensboro N.C. In 2002, after almost 11 years at Wendover, Keaton joined the company that would eventually become Shellpoint Mortgage Servicing, a division of Newrez. Moving up the ranks and now serving as the chief servicing officer at SMS, Keaton has taken on the mortgage servicing industry as he leads one of America’s largest nonbank servicers of residential mortgage loans.

Below, Keaton answers five questions that give an inside look at his life: 1. I feel success in my career ... when we find new and creative ways to reach out to our homeowners and help preserve homeownership.

2. People would be surprised to know ... that my educational background is like someone who hit the random song button in Spotify. I finished my undergraduate degree with a major in theatre, a minor in chemistry, and almost enough classes for a minor in math.

3. The book I can’t stop recommending ... is “Competing in the Age of AI." It will stimulate thinking about how to use data to better serve your homeowners.

4. My worst job ... ever was dressing up as the ICEE Bear at a Kmart in Grafton, Wisconsin. Actors will do almost anything that feels like acting. It was 90 degrees outside, I could barely see through the eyeholes, and with the head on the costume smelled like feet — and not my feet. There was only sweating, no acting.

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5. I would tell my younger self ... to sleep late and not take the job as the ICEE Bear — it was not worth the $50.

FEBRUARY 2022

PROPTECH PROFILE

Tech-friendly mortgage servicer Valon utilizes a cloud-native platform aimed at delivering what it describes as a borrower-oriented experience for servicing loans. Built on Google Cloud, the startup claims its technology has the potential to reduce mortgage servicing costs by up to 50% by vertically integrating the entire process. In 2021 the company secured approval from the Federal Housing Administration and Freddie Mac to service government-backed loans and has repeatedly been cited as an active competitor to servicing-giant Black Knight.

(Left to right) Jon Hsu, co-founder/chief technology officer; Andrew Wang, co-founder/CEO; Eric Chiang, co-founder/chief financial officer.

Things To Know

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Founders: Andrew Wang, Eric Chiang, Jon Hsu Established: 2019 Headquarters: New York Funding to date: $91.7M Main/Lead investors: Andreesen Horowitz, New Residential Investment Corp.

FEBRUARY 2022

How has your tech-centered focus enabled Valon to find success?

"Having a tech-focused platform means that you are much more able to get what you want as an answer at your fingertips. Having that much access to your data immediately relieves the stress for the borrower when it comes to the home. Servicers know it’s an ongoing transaction and a key part mentally of homeowners’ livelihood.

"In a time of what feels like a crisis, that notification that says you missed a transaction doesn’t mean you’re going to lose your home, and the technology can keep you up to date on how to resolve it along the way. However, it's pertinent that the tech you build and the solutions you create work alongside your team members.

"We are able to do all of this because we chose to build our own technology. We can choose what to build and what to do with it and we are really just constrained by our own imagination at this point."

- Valon CEO and Co-founder Andrew Wang

EVENT CALENDAR

LISTEN NOW

WPIM Conference 2022

What’s next for the maligned real estate appraiser?

February 10-11, 2022 Cost to attend: $175 Presented by WPIM

BY ALCYNNA LLOYD

The virtual Women Producers in Mortgage Conference is designed to give attendees a place to expand their confidence and learn how to negotiate and ask for what they want.

Sessions focus on teaching attendees how to navigate the mortgage industry and how to position yourself for growth and success. The line-up of speakers includes Laura Brandao, president at American Financial Resources; Melissa Bird, life coach and author; and Soraya Chemaly, award-winning journalist, media critic and activist.

Servicing Solutions Conference and Expo February 22-25, 2022 Cost to attend: MBA member: $1,349 l Non-member: $2,799 Presented by MBA LOCATION: ORLANDO, FLORIDA All eyes are on the servicing sector as the housing industry enters into 2022. To help navigate the latest changes in servicing, the Mortgage Bankers Association’s annual Servicing Solutions Conference and Expo is back to meeting in person, as industry stakeholders gather to network, share ideas and strategize on the key trends and challenges for the servicing sector, especially as borrowers start to come out of forbearance. Attendee can choose from a variety of breakout session tracks that dive deep into the industry’s top issues and check out the exhibit hall that showcases the hottest tech and other products for servicers.

Event TIP

“Transitioning back to in-person conferences can seem risky while living through a pandemic. However, the MBA San Diego did a great job by verifying vaccination cards for all attendees during the registration process and providing masks and hand sanitizer stations through the conference. Mitigating risks is a part of our daily lives, but as the adage goes, ‘The show must go on.’”

— Raj Sharma, Chief Operating Officer at Agility 360

FEBRUARY 2022

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LOCATION: VIRTUAL

Appraisers have faced significant criticism relating to the role race plays in residential real estate appraisals. These critiques have been shared in several news stories and viral social media testimonies, challenging the public’s perception of how the industry conducts business.

In an episode of Houses in Motion, a series in the HousingWire Daily podcast lineup, St. Petersburg, Florida-based appraiser Francois “Frank” Gregoire dives into specifics about what professional appraisal organizations, the federal government and individual appraisers can do to address concerns. According to Gregoire, to better understand the predicament, appraisers will need more staffing, education and data.

“One of the most important things is going to be increasing opportunities in the appraiser workforce. And that is what the National Association of Realtors has concentrated on with a special work group over 2021,” he said.

“We had a work group in 2020 that was created mainly in response to the newspaper and television stories alleging discrimination and what that work group asked for was data.”

Gregoire claims that while data is essential to reform, focus will also need to shift toward diversifying the appraiser population.

“Over the past year, NAR decided to work on something that could hopefully create some results and actually make a change, and that was diversifying our profession,” Gregoire said. “I'm a second-generation real estate appraiser. The one thing I haven't seen in all of the surveys of appraisers is how many second- and third-generation appraisers there are now. I’m sure you'll find a fairly high percentage, particularly in comparison to other professions.”

Tune in to this episode of HousingWire Daily to learn more about what Gregoire believes needs to change in residential appraisals, and how the industry can transform the narrative of the maligned real estate appraiser.

Scan the code to listen now!

INSIDE AGENT

Ashley Cusack EVM Realty/Berkshire Hathaway HomeServices ashley@ashleycusack.com 9940 SW 60 Ct. Pinecrest, Fla. 33156 $3,950,000 5 bed, 4.5 bath 4,671 sq. ft.

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"THE NEW YORKERS DOWN HERE WOULD CALL IT VICTORIAN" said Ashley Cusack, of the home she has listed here along the Florida coastline, 18 miles south of downtown Miami, “but really it’s Key West style.”

“There’s wraparound porches, porches all the way across the front, and the primary suite has a balcony,” Cusack said. “In Miami, the outdoor space is important.”

Cusack was born and raised in Miami and has spent 30 years as a real estate agent. She’s observed Miami’s high-velocity changes in real estate and architecture. The Pinecrest home, for example, was built in 1999, though it is an area among 1950s abodes.

Cusack has stuck with real estate in part due to the flexibility it provides. “I have two children who are now in college,” she said. “It has afforded me the opportunity to be at sporting events for my kids and also volunteer, like coaching lacrosse.

“Also, residential real estate is all about your relationships,” she added. “I enjoy the fact that it is business and personal, so being focused on relationships is one of your greatest assets.”

FEBRUARY 2022

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

Listen here: housingwire.com/podcast

LOCAL INTEL

By Brooklee Han

Annapolis, Maryland

Annapolis lies right on the Chesapeake Bay and is within commuting distance to both Baltimore and Washington, D.C. Local Coldwell Banker agent Alison Wisnom says that this location, as well as the area’s relatively low cost of living compared to neighboring metros, is driving more and more homebuyers to consider the area. “Our city is attractive to a wide range of people,” Wisnom said. “We have seen during COVID-19 a lot of people leaving the DC area because they have more flexibility with work. We also see a lot of people retiring to this area both nationally and internationally.” Being close to the naval base also attracts a lot of military personnel to the city. The heightened demand has put a strain on Annapolis’ already tight housing inventory, causing properties that would have previously held narrow appeal to go faster than expected. “I had one home recently that needed major cosmetic renovations and it ended up getting multiple offers, so it is still super competitive here,” she said.

Manchester, New Hampshire

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“We are in a market like I’ve never seen in 30 years and I’ve seen a lot of different markets,” Laurie Norton a local Better Homes and Gardens Real Estate The Masiello Group agent said. Throughout the fall of 2021 Manchester, the largest city in New Hampshire, held steady in the Top 10 of Realtor.com’s monthly hottest housing markets ranking, even hitting the top spot in September.

Rising demand from local buyers, as well as out-of-state buyers looking to take advantage of the Granite State’s tax laws and proximity to Boston, has driven prices up and put even more strain on the area’s already tight inventory. “Before COVID-19, in Manchester, we would have an average of about 150 houses on the market at all times,” Norton said.

“This past summer, we only had 25 houses.”

FEBRUARY 2022

New Braunfels, Texas

Although the housing market in Provo has cooled a bit since its peak last spring and summer, local Keller Williams agent Becca Summers doesn’t think it is an indication of a true market shift.

“I believe it’s just normal seasonality,” Summers said. “It’s colder, it gets dark earlier, people just don’t want to be out looking at houses.” According to Summers the days of getting up to 30 offers on a home are over, but she is still seeing homes get two to three offers regularly. “Making sure that the house is staged properly and marketed well is really important,” she said.

Despite the cool off, on average, homes are sitting for only 10 days on the market. “I definitely think we will see things pick back up in the spring like they normally do.”

Topeka, Kansas

The Sunflower State’s capital city isn’t short on buyers these days.

Since the summer of 2020, demand for homes has soared. “You get a small town feel here,” Kylie Edington, a local agent with Prestige Realty said. “It’s such a centralized location because we are still close to Kansas City and Lawrence and Emporia. You can get to the bigger areas within an hour. But we have all the shopping and restaurants you need here and we’ve had a lot of downtown revitalization.” Also attracting buyers to the area is the city’s Choose Topeka program, which provides monetary incentives for homebuyers who relocate to the area. “They are basically paying people to move here,” Edington said.

FEBRUARY 2022

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Provo, Utah

Winter is usually a slow time for Keller Williams’ Lakefront Group agent Hunter Croan, who specializes in lakefront properties in Texas’ hill country between San Antonio and Austin. “It is still pretty hot,” Croan said. “It is not going 100 miles per hour like it was before, but we’re still at a good 85 miles per hour.” While some of Croan’s buyers are using new remote work flexibility to relocate to a more desirable location, a lot of his buyers are in the market for vacation homes. “The majority of our business has been second-home sales, but we have also been seeing quite a few Californian buyers,” Croan explained. With easy access to two of the Lone Star State’s major cities, hiking trials, lakes and the Guadalupe and Comal rivers, it is easy to see why buyers are flocking to the area.

COMMENTARY

T

he path to modernizing the appraisal process A solutions-driven approach for the appraisal industry

By Kenon Chen

Through all the transformative and disruptive changes that have occurred over the past two years, there is one common thread that has emerged. Regardless of the size or complexity of a system or process, it is time to look at whether the impact it has on people is equitable. All people. And the appraisal process is no exception. After a summer filled with

After a summer filled with overwhelming demand and too little appraisal capacity, which increased loan costs and time to close, there is finally light appearing at the end of the tunnel.

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overwhelming demand and too little appraisal capacity, which increased loan costs and time to close, there is finally light appearing at the end of the tunnel.

Recently, the Federal Housing Finance Agency (FHFA) announced that desktop appraisals — which allow valuations to be remotely performed by utilizing public records

like tax appraisals, listings and other digitized property information — first implemented as a temporary measure at the start of the pandemic, will become permanent beginning in early 2022.

Additionally, as directed by the Biden administration, the U.S. Department of Housing and Urban Development last summer created the Property Appraisal Valuation Equity (PAVE) initiative and task force designed to fight valuation bias through consumer education and practitioner training, ensure that industry practices and government oversight promote valuation equity, prioritize high-quality data, and promote enforcement of anti-bias policies and legislation, including the Fair Housing Act.

ADVANCING APPRAISAL TECHNOLOGY These and other steps are sorely needed to bring the appraisal process in line with advances to digitize mortgages, utilizing technology to combat inconsistencies that continue to beleaguer the profession, and reduce closing slowdowns often caused by appraisal capacity issues. The movement to embrace appraisal

Continued digitization of the appraisal process takes us a step closer to understanding the key drivers of these gaps and to ensure there is consistency of approach in every neighborhood, every time.

FEBRUARY 2022

•

•

Enforcement and compliance. We need more science and less art. Data and compliance standards need to improve to more effectively identify valuation bias. The Appraisal Subcommittee must have greater direct oversight over individual states in order to ensure fair and consistent enforcement of appraisal behavior. And the Standards and Qualifications Boards also need greater diversity too, to eliminate blindspots and guarantee fairness for minorities in the profession.

Advancing diversity and increasing opportunities in the appraiser workforce. The appraisal profession should resemble the communities in which they serve. Not only for the sake of building trust, but also to connect with a larger set of potential new appraisers.

The greatest barrier to that today is the current supervisory model. Our industry must support and adopt solutions like the Practical Applications of Real Estate Appraisal (PAREA) and allow students to engage in simulated/virtual training programs in every state. Our industry must support appraisal diversity initiatives, recruit more minorities into the vocation, and increase incentives and opportunities for valuation professionals.

The modern appraisal movement is accelerating.

•

•

Reconsideration of Value (ROV) process. Borrowers should always have the opportunity for appraisals to be reconsidered in an unbiased fashion. We all need to support an ROV process that provides recourse to customers who have legitimate concerns about the reliability and credibility of a valuation, including claims of bias or discrimination and lack of confidence in appraiser dependence. All lenders and their agents, not just appraisal management companies, should be obligated to follow this process.

Policy, guidance and regulations. It is encouraging that the FHFA has decided to permanently allow desktop appraisals, and that is a good start. The agency would be well served to also adopt hybrid appraisals and inspectiononly waiver policies as additional options to today’s GSE appraisal waivers. In addition, the industry must embrace modern appraisal practices that decrease subjective variance, increase independence from appraiser bias, and implement extra checks and balances via proven computer-driven models.

The modern appraisal movement is accelerating. And while there is no single product or change that will roll back the years of unequal policy and practice that have led us to this point in time, each action we take to increase consistency, grow and promote diversity and embrace solutions that remove inequities take us a step closer to that possibility.

Kenon Chen serves as executive vice president, corporate strategy at Clear Capital. In his role, Chen sits at the intersection of executive, product, marketing and sales teams.

FEBRUARY 2022

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modernization techniques also holds the promise of removing the potential for racial bias, better supporting efforts to remove valuation gaps that persist in minority neighborhoods.

Consider that, per recent research by Freddie Mac, 12.5% of the properties in Black neighborhoods receive appraisal values lower than the contract price versus 7.4% for those in white neighborhoods, resulting in a gap of 5.2%. The appraisal gap for properties in Latino neighborhoods can be even worse, going as high as 9.4%.

Continued digitization of the appraisal process takes us a step closer to understanding the key drivers of these gaps and to ensure there is consistency of approach in every neighborhood, every time.

There is a path to progress that is emerging in the near term. Now is the time for the industry to work quickly and better coordinate efforts, particularly in the following areas:

COMMENTARY

H

eadwinds confronting the mortgage industry in 2022 Mortgage executives must focus on risk, strategy and efficiency

By Ravi Correa

As we approach 2022, some concerning headwinds confront the mortgage origination industry. For companies to survive and thrive, mortgage executives must focus on three primary factors: risk, strategy and efficiency.

In terms of managing financial risk, considerations include interest rate, market and reputation. Risk is becoming more pronounced as the Federal Reserve announced its plan to start tapering mortgage-backed security purchases by $5 billion, which will inevitably cause market volatility. In addition, the Mortgage Bankers Association forecasted that refinancing volume will decrease by nearly $1 trillion in 2022.

Such a massive drop would create high-level risk for the financials of many originators. There are many mortgage firms that have prospered in 2020 and 2021 due to ultra-low rates.

sheet, envision potential scenarios and think strategically about how you can navigate 2022.

OPERATIONAL RISK Operational risk should also be a consideration. Ensure that a strong control framework is in place to reduce leakage due to inefficiencies, as well as lapses in controls due to risk incidences.

Promoting well-developed internal controls to understand the root causes of any operational issues and developing a feedback loop will ensure that loan quality is maintained, and loanorigination operations are efficient and effective.

It’s incumbent upon mortgage executives to be keenly attuned to their business metrics. As volume compression results in greater competition and tighter margins, originators will need to run their businesses more efficiently to protect balance sheets and avoid capital erosion. Companies with broader product

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MANAGING BALANCE SHEET RISK To effectively confront these challenges, managing balance-sheet risk will be key. This includes focusing on capital/equity to ensure the foundation is strong, covenants are met and operational flexibility is maintained.

Additionally, it will require development of financial forecasts using realistic assumptions and producing profit-and-loss forecasts to understand and effectively manage profitability levers.

Balance-sheet risk also entails developing cash flow forecasts to ensure velocity is maintained and sufficient to propel the business forward. Against the current macroeconomic backdrop, now is the time to revisit the balance

Against the current macroeconomic backdrop, now is the time to revisit the balance sheet, envision potential scenarios and think strategically about how you can navigate 2022.

FEBRUARY 2022

The key to navigating headwinds is having a strong set of metrics and analysis to guide decisionmaking.

STRATEGY FOR NAVIGATING HEADWINDS The key to navigating headwinds is having a strong set of metrics and analysis to guide decision-making. This requires considering changes to product sets and potentially adding revenue generators, such as non-QM loans.

Leverage data and financial analytics to drive business transformation and broaden strategy.

Additionally, conduct financial evaluations of strategic decisions to ensure they increase enterprise value.

The heightened volatility and volume decline we can expect in 2022 are likely to present opportunities for consolidation. As many originators face significant operational difficulties, they may become more open to being acquired. Accordingly, companies able to better weather the storm might find attractive acquisition or collaboration opportunities that enable them to gain greater market share.

Unique acceleration opportunities will be available for businesses offering non-QM loans that are unaffected by the volume decline in agency origination. Mortgage operators with direct access to agencies and the expertise to create mortgage-backed securities will likely increase margins as they attract business from smaller originators.

ESTABLISH KEY PERFORMANCE INDICATORS As it is vital to closely follow performance metrics for early detection of risks and other negative issues, establish key performance indicators to monitor critical elements like labor utilization, cost to produce and production per FTE. Mortgage executives need to understand how efficiently their businesses employ labor and find technological solutions to reduce operational bottlenecks. It often takes three months before a new hire becomes efficient,

OPPORTUNITY AWAITS Following a golden era of great profitability for the mortgage origination industry, a critical confluence of issues portends that this year will likely be more challenging. I believe enterprises with capital and long-term vision should stand ready to act on the opportunities created, driving internal decisions with an even greater focus on growth and further strengthening their businesses and growing the firm’s offerings.

2022 will be the year of nimble and efficient organizations, as companies with laborious mortgage origination processes find it significantly more difficult to maneuver. Businesses emphasizing efficiency and effectiveness can overcome the industry obstacles on the horizon and take advantage as others are impeded by them.

Ravi Correa is chief financial officer at Angel Oak Lending.

Correa is responsible for all financial aspects for Angel Oak-related mortgage lending entities.

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offerings, such as non-qualified mortgage (nonQM) loans, are better positioned to handle this adverse environment, while those with limited products will face greater operational constraints.

and full-time workers can be difficult to remove from the payroll once they have been onboarded.

This may be an opportune time to use temporary or offshore resources to lower break-even volume and keep costs less correlated with revenue. Ensuring optimal productivity from your workforce could also entail investing in technology that drives additional layers of efficiency, or implementing process improvements. How does your company change or improve processes as you identify inefficient aspects? How long does it take to go from identifying a problem to implementing a solution?

Overhead efficiency, which can include leasing costs, is another key consideration when facing mortgage origination headwinds.

Perhaps it would be a more prudent play to use coworking spaces before signing a long-term lease, as you assess whether a new branch or sales office is likely to be profitable. If the workforce is remote or hybrid, is there an opportunity to reconsider the use of office space? Make sure any overhead structure you add is both efficient and sustainable. On average, a $100,000 reduction in overhead results in lowering break-even volume by 3% to 4%.

Other areas to evaluate for efficiency include revenue margins, hedge effectiveness, operational and cash flow velocity. I also recommend developing integrity validation for system-generated data to ensure accuracy and reliability.

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WHEN BORROWERS ‘GHOST’ THEIR SERVICERS

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A deep dive into the tactics servicers are using to convince borrowers to pick up the phone 23

Larry Goldstone is tired of being ghosted.

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By Flávia Furlan Nunes

He is used to it by now, but the problem has only gotten worse since the beginning of the COVID-19 pandemic. Goldstone has tried contact via phone calls and emails consistently. If necessary, he even knocks on doors — without success. He has talked openly about it but is still trying to understand the reasons and potential solutions.

Goldstone’s case is not related to the world of bad Tinder dates, where the colloquial term “ghosting” is popularly used when someone cuts off contact without warning or explanation. Goldstone is an executive at a mortgage servicer company trying to reach out to homeowners.

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“We know who the borrowers are.

We service their loans. We have their email addresses. We have their phone numbers. We know where they live.

But we’re having a hard time reaching out to them,” he said during a panel at the annual Residential Mortgage Servicing Rights Forum held in New York City in October.

Servicers, lenders and investors dealt with a tsunami of 7.7 million forbearance programs throughout the COVID-19 pandemic, reaching 1.5% of the U.S. population. Most homeowners who stopped their mortgage payments have successfully arranged a graceful exit from forbearance. In general, "We know who the borservicing executives rowers are. We service are relieved not to their loans. We have their have to re-live another email addresses. We have foreclosure crisis. their phone numbers. We But there will be know where they live. But some fallout. And for we're having a hard time the hardest cases, the reaching out to them." biggest problem for - Larry Goldstone servicers right now is simply establishing communication with them.

Over the course of three months, HousingWire interviewed about a dozen servicers, housing counselors, academics and lawyers to drill down on how big the ghosting problem is, why it happens, and what the consequences could be for both borrower and servicer.

AN ARMY OF DOOR-KNOCKERS Goldstone, who is president of Capital Markets & Lending at BSI Financial Services, estimates that between 20% to 25% of borrowers in BSI’s servicing portfolio have been non-communicative, he told HousingWire.

Consequently, they built an additional foreclosure and loss mitigation capability, added staff and rethought processes to contact borrowers. The company serves a $50 billion loan portfolio.

Investment firms that purchase mortgage loans in default also face the same challenge. Bill Bymel, managing director at Spurs Capital,

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an investment manager specializing in distressed mortgages, said that about 15% of the overall portfolio during the pandemic contained non-communicative borrowers, up 50% compared to the same pool of borrowers pre-COVID. One reason homeowners have not responded to the company was the foreclosure moratorium that went into effect in March 2020. “Without any enforcement action on the foreclosure side, it has opened up a new level of borrowers’ belief that they can just kick the can down the road and ignore the problem,” Bymel said.

According to Bymel, the situation began to change as a key Dec. 31 deadline neared, the date by which the Consumer Financial Protection Bureau (CFPB) rules stipulate that servicers redouble their efforts to work with borrowers to prevent avoidable foreclosures. Borrowers started to reach out knowing that foreclosure processes would soon resume, said Bymel.

Another Bymel business, First Lien Capital, a mortgage and real estate investment platform, is increasing the number of workers who knock on doors and negotiate with homeowners due to the lack of communication via phone or email.

“We would normally have about 150 people nationwide, and we are probably going to have about 200 people knocking on doors looking for solutions,” Bymel said.

The reasons for the lack of communication between borrowers and servicers are numerous. Ellie Pepper, deputy director at the National Housing Resource Center (NHRC), an advocate for the nonprofit housing counseling industry, said the past still looms large for many borrowers. Some are especially haunted by the Great Recession between 2008 and 2011.

“Borrowers had different interactions with their servicers, and some ended up not really trusting their servicers,” she said. “Servicers are under different rules and are trying to be more open to interacting with borrowers in a better way. But the bottom line is that homeowners are scarred.”

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servicers can begin foreclosure operations throughout the country.

The situation is more delicate for servicers focused on loans with Ginnie Mae guarantees. In this case, the share of borrowers in loss mitigation plans, delinquent or foreclosure increased to 16% in September (or 411,000 homeowners), according to Black Knight data shared with HousingWire.

For example, with Federal Housing Administration (FHA) loans, 1.5 million homeowners became delinquent and entered forbearance between March 2020 and November 2021, the end of the fiscal year. In November, 387,488 homeowners were still in forbearance, and 79% of them were seriously delinquent. The FHA has a total portfolio of 660,000 seriously delinquent loans.

According to mortgage analytics firm Recursion Companies, Freedom Mortgage had the highest number of COVID-related forbearance plans for Ginnie Mae loans, with 41,204 in total in October. The company said the share of borrowers ghosting them is a minority, but declined to provide a figure.

“When customers are behind on their mortgage, they are concerned, and they don’t know exactly what to do,” said David Sheeler, executive vice president of correspondent lending and servicing finance at Freedom Mortgage. “We certainly have had some challenges. But I think, for the most part, being very proactive in sharing the message around what’s available to customers [after forbearance] has helped.”

Servicers are looking for different ways to connect with borrowers.

Pepper, from the NHRC, mentioned that they are working with the U.S. Department of Housing and Urban Development approved housing counseling agencies to do more effective outreach to some of the harder-toreach borrowers.

Dillard, from Housing F inance Strategies, recommended that servicers work with nonprofit organizations, community leaders and other trusted partners in areas where the problem is more evident.

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Besides fear and lack of trust, Pepper said it may sometimes be difficult for homeowners to understand mortgage terms, particularly if English is not their native language, so they “ Without any avoid contacting their servicers. enforcement To Dana Dillard, principal advisor at action on the Housing Finance Strategies and a 25foreclosure side, year mortgage industry veteran, the it has opened up ghosting problem happens, among a new level of other reasons, because homeowners borrowers’ bedeny the reality or feel overwhelmed lief that they with their debts — especially if they can just kick the lost a relative or friend due to COVIDcan down the 19 or are unemployed for a while. road and ignore Jackie Boies, senior director in the problem.” partner relations at credit counseling - Bill Mymel consultancy firm Money Management International, said that people fear talking with their mortgage servicers because they have never had to speak to them before in many cases. “When the pandemic hit, and they put their loan into forbearance, it was quite easy. Most servicers allow you to go online and just sign up for a plan. And now to exit it, if you are not somebody who is just returning and paying it all in full, it is a little scary.”

The latest Black Knight data show that there were still about 1 million active forbearance plans in October.

Among over 6 million borrowers who exited the plans, 76% performed or paid off their debt. Another 7% were in loss mitigation plans, 3% were delinquent and less than 1% were in foreclosure — the three categories accounted for 854,000 homeowners in aggregate.

“That’s what you’re “Servicers are under seeing: a huge drop different rules and are in forbearances as trying to be more open people a re being to interacting with forced off, but some borrowers in a better borrowers are not reway. But the bottom sponding to their serline is that homeownvicers,” said Matthew ers are scarred.”

Tully, vice president - Ellie Pepper of agency affairs and compliance at servicing SaaS Sagent.

Tully said that homeowners are “putting their heads in the sand,” not realizing that the foreclosure moratorium went away, and

“We certainly have had some challenges. But I think, for the most part, being very proactive in sharing the message around what’s available to customers [after forbearance] has helped.”

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- David Sheeler

“We’re going to have a small pocket of customers who still need our help [after forbearance plans expire],” she said. “I do think it’s a small share of them, but it’s challenging, and it is time-consuming for servicers.”

CONSEQUENCES Ghosting doesn’t br ing many practical consequences in the dating world. Ghostees and ghosters can move on with their lives after interrupting romantic texts and sweet dates. In complete silence, they deal with their own internalized emotional conflicts.

It is not that simple when the relationship is between mortgage servicers and borrowers.

Failures in communicating and finding a solution for a mortgage loan in default can lead, in the worst-case scenario, to foreclosure.

That is exactly what millions of forbearance plans and a federal moratorium were designed to avoid during the pandemic.

But in 2022 these safeguards are not in place anymore, forcing companies and homeowners to face the problem.

A caveat: A backlog of foreclosures from the last two years will make the process longer and more expensive.

During the pandemic, the CARES Act banned foreclosures for 16 months — from March 2020 through July 2021 — to protect homeowners experiencing financial hardship. Also, servicers were not allowed to execute a foreclosure-related eviction until September 2021.

The rules were only applied for federally backed mortgages, about 75% of all mortgages. But to simplify their operations, servicers voluntarily offered the safeguard for all borrowers, not only those who had loans guaranteed by government agencies, such as Fannie Mae and Freddie Mac. These agencies also took additional steps to limit mortgage defaults and foreclosures, expanding repayment options through December 2021.

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WHO’S AFRAID OF THE CFPB? After the federal foreclosure moratorium expired in July, the Consumer Financial Protection Bureau (CFPB) launched rules limiting foreclosures through Dec. 31. Servicers had to give borrowers a meaningful opportunity to pursue affordable loss mitigation options quickly and without exhaustive paperwork.

One of the options was a deferral: resuming regular payments but moving missed bills to the end of the mortgage. Another possibility consisted of changing rates, principal balance or length of the mortgage via a loan modification. In addition, homeowners could sell their homes if they had sufficient equity.

But according to the CFPB, foreclosures could start for borrowers who were more than 120 days behind on their mortgage before March 1, 2020, more than 120 days behind and had not responded for 90 days (the ghosting cases), or evaluated for all mitigation options without success.

Servicers, afraid of CFPB enforcement actions, were resistant to start new foreclosures until the rules expired, according to industry executives and lawyers.

The moratorium kept new monthly foreclosures cases artificially low at 7,132, on average, between March 2020 and July 2021, down from 28,877 before the pandemic, according to a report from ATTOM Data Solutions.

But new cases increased when the federal moratorium ended, from 6,572 in July to 10,471 in November, the latest data available.

Still, monthly foreclosures were half the pre-pandemic levels.

“We anticipate seeing an uptick in foreclosure activity in the first quarter, partly because the CFPB rules will have expired, partly because there is always an uptick after the holidays,” Rick Sharga, executive vice president at RealtyTrac, said to HousingWire.

He follows, “We expect to see another uptick, probably late summer, as servicers will have gone through all of the loss mitigation options with borrowers who have been delinquent and not been able to get back on track. But

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and Texas are administrative foreclosure states, which means the process will take less time because it does not need to go through a judicial process.

In this group, states with the shortest average foreclosure timelines in the third quarter of 2021 were Montana (94 days) and Wyoming (102 days), according to ATTOM. Judicial states such as Florida, New Jersey and Connecticut require a court decision, which means that the process can take years. The ATTOM data shows that the judicial states with the most extended average foreclosure timelines were Kansas (1,901 days) and New York (1,659 days).

Due to the COVID-19 pandemic, foreclosure processes have become longer. Properties foreclosed across the country were in the process an average of 924 days in the third quarter of 2021, up from 830 in the same period of 2020.

“We already know that government staff were low, to begin with. A lot of people left work and didn’t come back during COVID. Now we’re going to need more staff to deal with the backlog of foreclosures coming down the pipe,” Bymel, at Spurs Capital, said.

Bymel expects a timeline extension between 12 and 18 months in states with judicial foreclosures.

Because the timeline is longer, Bymel said the cost of a foreclosure process will increase for servicers and investors. “I usually figure a cost between 4% to 5% of the loan balance per year to property taxes, insurance, legal, servicer, inspections, in the judicial states, and between 2% and 3% in administrative states.”

Sharga, from RealtyTrac, said that he expects that states will bring retired judges back to handle foreclosures, as happened during the Great Recession.

“But, coming out of a pandemic, the general feeling is to do everything you can to protect the homeowner from losing a house because a lot of these people probably wouldn’t be losing a house except for the pandemic. So, I don’t expect to see a lot of activity in courts or in the legal system to accelerate the foreclosure process.”

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we don’t expect to see normal levels of foreclosure activity until late in the year.”

Sharga’s worst-case scenario predicts foreclosures at 1.5% of total loans in the next 12 to 18 months, which would change if another recession happened. To compare, according to the Mortgage Bankers Association (MBA) data, new foreclosure cases were at 0.8% of total loans before the pandemic, after achieving almost 5% during the Great Recession.

Federal laws aren’t the only ones servicers have to contend with. States also launched new rules to prevent foreclosures during the pandemic.

The National Consumer Law Center (NCLC) identified executive declarations and court orders in 34 states as of April 2021.

Some states have imposed a moratorium after the federal safeguard ended in July. In Oregon, the deadline was Dec. 31, 2021. New York banned residential and c o m me r c i a l foreclosures until Jan. 15, 2022.

According “But, coming out of t o Geoff a pandemic, the genWalsh, sta ff eral feeling is to do a t t o r ney at everything you can the National to protect the homeConsumer owner from losing a L aw C enter house because a lot of (NCLC), some these people probably states hadn’t wouldn’t be losing a reacted to the house except for the pandemic and pandemic.” created more -Rick Sharga restr ictions to foreclo sures, such as Oregon a nd New York, because they hadn’t seen new cases — as servicers were afraid of the CFPB rules.

“Each state has the authority to implement laws for servicers to review borrowers’ situations before foreclosure, and I expect states to strengthen their laws,” Walsh said.

Foreclosure rules change according to where the borrower lives.

For example, Alabama, California

A Zillow problem … or an iBuying problem?

The company’s pricing forecast volatility may be an issue inherent to iBuying

By Matthew Blake

F

ed valuation models or AVMs — are deployed to extend credit, appraise a home, and — in the case of iBuyers — even guide when to purchase a home for cash that might be profitable to resell.

When Zillow waved the white flag on its iBuying operation in November, CEO Rich Barton couched the company’s price forecasting model as something of a Frankenstein’s monster, an audacious curiosity that proved too dangerous. “Our observed error rate has been far more volatile than we ever expected possible,” Barton said.

To some housing executives who routinely use AVMs, Barton’s explanation rang false. “This is not a problem with valuation models,” said Matt Woods, CEO of real estate consulting service Sold.com. “This is a Zillow problem.”

But to Kennedy, who for the last 16 years has run AVMetrics in Simi Valley, California, an evaluator of AVMs for

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or nea rly, a dec ade L ee Ken nedy helped opera te nuclear submarines for the U.S. Navy and when the Cold War ended, he sought a different path to apply his education in nuclear engineering. Kennedy landed a job at American Savings Bank, later acquired

by Washington Mutual, and he helmed the company ’s f ledging Alternative Valuation Business Unit.

By the late 1990s, Kennedy said, data storage and computing power was growing cheaper. Washington Mutual felt increasingly comfortable using data points about a single-family home — when the property was built, its location, available purchase price history — as fuel powering a valuation model to extend someone a home equity line of credit.

Fast forward to today, and alternative valuation models — redubbed automat-

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client companies, what happened at Zillow is not surprising.

What’s different about Zillow? “Most of my clients are large lending institutions and shy away from publicly admitting a mistake,” Kennedy said.

With Zillow out, there are two publicly traded companies, Opendoor and Offerpad, whose predominant business model is iBuying.

Both are scaling up rapidly. Opendoor posted a 91% revenue increase to $2.3 billion in its third quarter earnings report. Offerpad revenue grew 30% to $540 million in the same quarter.

But neither has found a profitable path even amid a booming housing market.

Opendoor lost $56.8 million in the quarter. Offerpad posted a $15.3 million loss, though it was profitable in the second quarter.

Kennedy is skeptical that a pricing model can ever work for Opendoor, Offerpad or future iBuyers. Such a model, the engineer pointed out, must assess current value while baking in near-term - Matt Woods price fluctuations.

“Inf lection points in the market are hard to predict,” Kennedy said.

output, instead of a human appraisal, to issue a loan.

When the housing bubble burst, pricing model use was rolled back. “But since about 2012,” Rossi said, “there has been a little bit more relaxation in how the AVMs get applied.”

This permissiveness coincided with the growth of AVM vendors such as CoreLogic and HouseCanary. It also dovetailed with the advent of iBuyers Opendoor (founded in 2014), Offerpad (2016), plus power buyers, companies like Orchard and Ribbon that facilitate a consumer switching homes by making a cash offer on properties.

That Zillow could both fail at iBuying and blame their pricing model strikes these proptech executives as a Zillow problem and not a rebuke of pricing models.

“AVMs are built to help rational decision-making, but Zillow was manually overriding its algorithms,” said Court Cunningham, CEO of Orchard, a New York-based company that claimed a $1 billion valuation last month.

Faulting the hu ma ns for defying the machines was echoed by other close Zillow observers, plus a Business Insider article that reported on the “over exuberance of human managers at the company.”

(Zillow declined to comment on the question of whether it overrode the algorithm. The company mostly responded to questions by referring back to its public statements. A spokesperson also noted that the still extant “Zestimate” is a “starting point” for market value, too challenging to forecast home prices three-to-six months out.)

Orchard’s AVM also uses machine learning, a form of artificial intelligence focused on pattern recognition.

Machine learning increases the number of property comparisons — the “comps” that form the backbone of a human appraisal — from three or four to dozens.

“This is not a problem with valuation models.

This is a Zillow problem.”

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HOW A HOME PRICING MODEL WORKS Clifford Rossi, now a finance professor at the University of Maryland, recalls working at risk management in Fannie Mae and Freddie Mac when, after connecting to Netscape on a dial-up modem, employees could access a proprietary data storage system of county property records.

That storage of those records begat one of the first home pricing algorithms, initially used in the late 1990s as guideposts for bundling mortgages. By 2004, Rossi said, Fannie Mae and Freddie Mac greatly expanded the application of AVMs via the “property inspection waiver” by which mortgage lenders could “streamline operations” by using an AVM appraisal

“Our observed error rate has been far more volatile than we ever expected possible.”

- Rich Barton

FEBRUARY 2022

OPENDOOR’S HOME PRICING MODEL In a November 2020 Secur ities and Exchange Commission filing before the company went public, Opendoor laid out some of the features of its AVM. The company collects data from Multiple Listings Services; MLS data incorporates facts like square footage plus more open-ended characteristics such as “hardwood floors throughout.”

Opendoor also inputs “proprietary data assets.”

This includes non-public data about the homes’ underwriting history as well as “seller input,” which is the online questionnaire potential home sellers fill out. The company’s filing also mentions, “Geospatial data assets, such as power line proximity and road noise level.”

These are bullet points, or one-off sentences in Opendoor’s pitch to prospective investors. They do not explain why a seller would be motivated to be completely forthright in a questionnaire, or how variables are weighted, or how Opendoor’s AVM is different from others, including Offerpad’s, which months later released a similar presentation.

The public filings examined also say little about price forecasting, the element of Zillow’s iBuying model that company CEO Barton specifically said is too volatile.

Opendoor has declined to comment on questions about its AVM, noting it doesn’t disclose specifics of its pricing algorithm because they are proprietary.

Still, Opendoor supporters view the company as the iBuyer that knows what it’s doing. The day after Zillow announced its wind down, Opendoor co-founder Keith Rabois, who is no longer part of company leadership, tweeted: “If you read our SPAC filings, we explained how our algorithms actually work vs Zillow’s which are horrible.”

“Ibuyers are in the business of buying low and selling high over a short period of time. They are not out there trying to predict the economy.

They do not want to get stuck holding a bunch of houses.”

- Greg Buchak

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Home pricing AVMs have also evolved to input what might seem like intangible factors, said Matthew O’Hara, head of portfolio management and research at Unison Investment Management.

Unison contributes to the investment of a person’s home, and in exchange gets access to the person’s equity. In order to determine what homes to invest in, Unison accesses AVMs with features like noise indexes, proximity to transportation, and school and crime data.

But AVMs are less equipped to forecast future home prices.

“The AVM is a product based on today’s value,” said Winfield Xu, a senior data scientist manager at Unison.

“A home value forecast is an economic model that usually only goes down to the zip code level.”

“A home pricing forecast looks at underlying house pricing fundamentals, data from Moody’s, local employment trends,” Rossi said. “It’s more like betting on a stock since it’s hard to capture turns in the economy.”

That makes it incumbent on iBuyers to resell before the economy turns.

“Ibuyers are in the business of buying low and selling high over a short period of time,” said Greg Buchak of Stanford University, who has studied the industry. “They are not out there trying to predict the economy. They do not want to get stuck holding a bunch of houses.”

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Power buyers like Ribbon and Orchard, however, are buying a home for cash that their client has already agreed to move into. Ibuyers, meanwhile, typically buy a home without the future homeowner in mind.

“It is ver y different f rom a r isk sta ndpoint,” Cunningham of Orchard said.

FLAWS IN PRICING MODELS Though Matthew O’Hara at Unison uses AVMs, the company’s decision on what homes to invest in are driven by an independent contractor, third-party appraiser.

“It is partly a trust issue,” O’Hara said. “The homeowners that we are entering into a contract with understand better the methodology.”

In addition to demystifying the home valuing process, the human appraiser fact-checks what the automated pricing model inputted.

“In public records, a home might say it has five bedrooms when really it has three,” Xu of Unison said.

“AVMs are 100% trusting of public data and sometimes that public data is wrong.”

AVMs can also fall short in evaluating a home’s condition or the surrounding neighborhood. “There could be shag carpeting that has been around since the 1970s,” Rossi, the Maryland professor, said. “There could be a run-down, abandoned home on the block.”

These issues can generally be addressed after in-person inspection, which Opendoor, Offerpad and power buyers conduct. But they throw into question the accuracy of computer-generated comps: HouseCanary CEO Jeremy Sicklick has claimed the company uses up to 500 comparable homes in a valuation. But which of those comps has secretly ugly carpet? “There are still Achilles heels to price modeling,” Rossi said.

Shaival Shah, CEO of Ribbon, said his company is aware of such shortcomings. “Every home is a unique snowflake with a really interesting complexity,” Shah said.

Ribbon uses a three-pronged approach — a real estate agent visiting the property it may buy, a “desktop” appraisal from a Ribbon employee, and a home value that’s the average from numerous AVM vendors — in order to find a valuation.

THE IBUYER DILEMMA Observers like Shah contend iBuyers increasingly seek corporate investors to buy their homes in bulk.

Zillow is taking this approach with its remaining inventory. New York-based Pretium Partners will buy 2,000 homes from Zillow and rent them out, the Wall Street Journal reported in November But most available evidence points to iBuyers selling homes the same way your neighbor does.

“IBuyers use traditional selling channels, relying on Multiple Listings Services to dispose of their inventory,” asserted a December 2020 study by Buchak of Stanford, Gregor Matvos of Northwestern University, and Tomar Piskorski of Columbia University, one of the few academic studies on iBuying.

“Ibuyers are no better at selling houses than other households,” added the study (which is titled, “Why is intermediating houses so difficult? Evidence from IBuyers”). “Formally, their current matching technology is almost identical to other sellers. This is intuitive since they have to sell their houses through a listing process.”

For Zillow, that included pricing the inventory. An examination of Zillow homes languishing on the Phoenix area MLS indicates that the company was not adjusting to moderate, short-term trends like people buying fewer homes in the back-to-school period. By comparison, Opendoor and Offerpad modestly recalibrated purchase, and subsequently, resale price.

“Zillow’s model was not bad, but it lacked predictability,” said Kennedy of AVMetrics. “That’s where their chief economist comes in.”

But what if there is something more than the change

“Every home is a unique snowflake with a really interesting complexity.”

- Shaival Shah

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“The iBuyer will always have a smaller buy box. When they buy a home, they are immediately on the clock.”

of season to forecast, such as a rapid surge or diminishment in COVID-19 cases, an interest rates spike, or millennials deciding home ownership is overrated?

IBuyers, the study from Buchak, Matvos and Piskorski found, suffer a dilemma.

Their raison d’etre is making a traditionally illiquid asset — the house — liquid. But empirically, the homes that they can quickly buy and resell for a profit are typically “cookie-cutter homes” in suburban, Sunbelt enclaves. Homes without character, or, less pejoratively, homes without quirks that can mess up an AVM just enough to cause an iBuyer to pause. (Or, in the case of Zillow, mistakenly move full steam ahead.)

In other words, homes that are easy to buy and resell to begin with.

“Intermediation is only profitable in the most liquid and easy to value houses,” the study reads. “Therefore, iBuyers technology allows them to supply liquidity, but only in pockets where it is least valuable.”

Opendoor and Offerpad are working to address these issues.

Carrie Wheeler, chief financial officer of Opendoor, noted on the company’s most recent earnings call that they have expanded into over 40 markets, increasing its “buy box” — that is the range of homes the company feels comfortable purchasing. Opendoor has expanded its buy box without suffering the exacerbation in net losses that befell Zillow.

Offerpad, meanwhile, has added value to its inventory through in-house renovators who refurbish homes, aiming to make the house they market a more valuable asset than the one they bought.

Going forward, both fast-growing companies must make difficult decisions of what markets they, and their AVM, feel comfortable expanding into.

“The iBuyer will always have a smaller buy box,” said Shah of Ribbon. “When they buy a home, they are immediately on the clock.”

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- Shaival Shah

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BLACK KNIGHT BlackKnightInc.com

THE EXECUTIVES:

ANTHONY JABBOUR, CEO Anthony Jabbour leads the company’s overall vision and direction, and is passionate about delivering innovative solutions across the loan life cycle that help lenders and servicers retain existing customers, gain new customers and operate more efficiently.

JOSEPH NACKASHI, PRESIDENT

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or more than 50 years, the Black Knight MSP loan servicing system has been helping power servicing operations from loan boarding, payment processing and escrow administration to investor reporting, compliance management, default processing and more.

MSP is a single, comprehensive platform used by servicers of all sizes to support a wide range of loan products, including first mortgages and home equity loans and lines of credit on a single system.

“MSP is used to service approximately 36 million loans,” Black Knight President Joe Nackashi said. “Thanks to the system’s scalability, it’s suited for portfolios of all sizes. In fact, 42% of MSP clients service fewer than 50,000 loans.”

As rising interest rates impact origination volumes, competition for purchase refinance consumers grows increasingly fierce. As a result, servicers must be critically focused on their customer retention strategies.

The MSP system is integrated with several tools that can help servicers boost retention, including Black Knight’s Customer Service solution. Using this single application, representatives have access to customer information that is required to address borrower questions quickly, leading to faster call resolutions.

Furthermore, MSP integrates with Black Knight’s Servicing Digital solution to provide customers quick, convenient access to their loan and property-related information from the convenience of any device.

Offered as a mobile app and web solution, Servicing Digital delivers the self-service capabilities today’s consumers want, helping servicers amplify customer experience and retention efforts. By giving customers the power to perform tasks and access loan, home and property information on

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Joseph Nackashi is responsible for helping Black Knight deliver integrated and innovative solutions that help transform the industry and is committed to superior client support and helping clients achieve greater levels of success.

Black Knight’s MSP loan servicing system aims to help servicers operate more efficiently while reducing costs

FEBRUARY 2022

their own, Servicing Digital helps reduce workload and stress on busy servicing operations.

MSP also supports retention with its integration with Capture, Black Knight’s lead analytics solution that proactively monitors portfolios for loans that could benefit from refinance based on a customer’s specific equity position and/or current first-lien rate.

Using the lender’s current pricing and most up-to-date market and margin structure, Capture helps generate accurate, borrower-specific pricing scenarios.

Black Knight is committed to routine updates to the MSP system to help clients address their regulatory requirements.

These continuous enhancements help servicers stay up-to-date with ever-changing federal regulations, supporting compliance and reducing risk.

MSP offers integrated default functionality that assists with loss mitigation, as well as foreclosure, bankruptcy, claims and invoicing processes. This functionality is particularly critical today, as servicers are helping their borrowers get back into an active payment status following the COVID-19 pandemic.

Servicers using MSP can maximize the team they have while reducing costs and operating at higher levels of efficiency. The system leverages capabilities including advanced decisioning, workflow, and integration tools to help users simplify and streamline processes and lower costs.

“Black Knight’s MSP loan servicing system together with all of the integrated capabilities delivers a comprehensive solution that our clients trust,” said Nackashi.

“Black Knight is committed to advancing mortgage servicing with scalable, innovative solutions, backed by decades of financial stability and industry expertise.”

- SPECIAL REPORT -

Sponsored Content

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s part of its vision to reimagine servicing through innovative solutions, Freddie Mac has created Resolve, an integrated default management platform that delivers rules-based workout decisions in real-time, as well as supplemental data and insights to mortgage servicers.

In creating Resolve, Freddie Mac partnered with clients to reimagine traditional loss mitigation and developed a new technology experience that expedites mortgage assistance for homeowners.

Clients working with Freddie Mac requested a flexible workflow and transparency for workout requests.

As a result, Resolve offers two ways to connect: a user interface and B2B integration via APIs. Clients have the option to use one path or both, depending on what works best for their business model.

“The Reimagine Servicing initiative is an example of our commitment to designing solutions around client insights,” said Cecelia Raine, vice president of Servicing Strategy and Integration. “Resolve is a direct reflection of this commitment. Our goal is to be the investor of choice through innovative solutions and our partnership approach.”

Resolve makes decisions, calculates values and provides loan terms that are derived from guiding policies that servicers adhere to. These rules adapt to new or updated requirements and regulations. This relieves servicers of in-house development and allows them to focus their time on working with the homeowner or handling more complicated cases.

Resolve’s APIs return workout decisions in three to five seconds. With decisions and data at their fingertips, servicers’ interactions with homeowners are more impactful than ever. Servicers can provide clarity and more certainty on decisions, improving the Freddie Mac loan experience for their staff and homeowners.

“Servicers who are using Resolve APIs today are seeing up to 15 minutes saved per case, and when added up for all workouts, that’s amazing efficiency,” said Kate Mossop, vice president, Servicing Product and Offerings.

Resolve can also trigger a servicer’s workflow, such as solicitation offers and steps to close. Additionally, because Resolve can connect directly to a servicer’s loss mitigation platform (proprietary or third-party), case management can be completed on a single platform.

Because Resolve integrates with various Freddie Mac data sources, the platform requires a significantly reduced dataset, eliminating the need for manual data entry. Resolve only requires a servicer to provide five loan data points to create a loss mitigation case.

Resolve also addresses servicers’ need for transparency. With each decision request, Resolve APIs return dynamic and descriptive messaging to inform servicers of exactly why a loan was eligible, ineligible or failed validation.

Servicers can view the status of submissions in an intuitive and clear interface along with any additional actions they need to take.

Resolve is adaptable, designed for single or bulk loan submissions for both user interface and B2B connectivity. This flexibility helps servicers absorb and scale for increased default volumes due to economic cycles. And when servicers needed a streamlined way to submit forbearance extension requests, Freddie Mac implemented a simple submission method in the platform.

“With the COVID-19 volume coming through, this has really been instrumental for us,” said API adopter Glenn Meadows, SVP of Mortgage Servicing at Fifth Third.

Glenn adds, “For me it comes down to one word, efficiency … we can make decisions with a higher degree of accuracy.”

FEBRUARY 2022

FREDDIE MAC sf.freddiemac.com/resolve

THE EXECUTIVES:

CECELIA RAINE, VICE PRESIDENT, SERVICING STRATEGY AND INTEGRATION Cecelia Raine leads the strategy to modernize several technology platforms and to transform the client experience under the Reimagine Servicing initiative.

KATE MOSSOP, VICE PRESIDENT, SERVICING PRODUCT AND OFFERINGS Kate Mossop is responsible for delivering strategic servicing products in Freddie Mac’s Single-Family division and for guiding the organization’s servicing product vision and roadmap.

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Freddie Mac’s Resolve default management platform reimagines traditional loss mitigation

C O M PA N Y S P O T L I G H T : S T E W A R T T I T L E | S P O N S O R E D C O N T E N T

The growth of Stewart toward an end-to-end real estate experience How Stewart is leveraging acquisitions to become the premier title services company

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tewart is one of the largest global title insurance companies and under writers in the industr y. It’s been around for more than 128 years and is built on values that include accountability, collaboration, trust and a fundamental commitment to providing better experiences.

But the company is not satisfied just looking back at its long history. Instead, its leaders are looking ahead and focused on how the company can grow.

“Our vision is to be the premier title services company,” said Beth Fowler, EVP of Lender Services at Stewart. “To do that, to be the best company in the industry for lenders and enterprise customers, what we deliver has to go beyond title. And it does.”

INVESTING IN PEOPLE AND TECHNOLOGY Stewart has been in the news several times over the past two years, as the company has expanded talent and made numerous acquisitions to aid in its growth. Among the acquisitions are title and settlement offices to expand its share and gain scale in key markets, as well as technology providers to improve the customer

experience and expand its data and analytics capabilities.

In the past three quarters alone, the company has added more than 3,500 employees through acquisitions and direct hires.

Over the past 18 months, the company has invested $1 billion on more

“... we’re being really thoughtful in deploying capital to look for solutions, capabilities, and products and services that really maximize and enhance the customer experience...” than twenty companies that span the full breadth of its business. Industry leaders it has added to its portfolio to expand service capabilities include A.S.K. Services, Cloudvirga, Pro Teck Valuation Intelligence, Signature Closers, United States

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Appraisals, Informative Research, PropStream and NotaryCam. “We’ve been very intentional as we’ve looked at potential acquisition targets and products and services that would benefit our customers,” Fowler said. “Our acquisition strategy demonstrates Stewart’s commitment to delivering a better experience, whatever it takes. That dollar investment, tied with the intentional nature of what we’ve brought into the Stewart fold — at the end of the day, we’re excited about what that brings to our customers.”

I M P R OV I N G S E R V I C E S A N D CAPABILITIES Stewart’s investments reflect the important role lender services plays in its overall plan to become the premier title services company. Stewart has shown a true commitment to providing centralized title services to its lender and other enterprise customers. Over the past two years, the lender division has focused on two things: growing in size and scale and adding new capabilities to serve customers needing multi-state and national solutions.

According to Fowler, “As a premier partner, we’re being really thoughtful in deploying capital to look for

C O M PA N Y S P O T L I G H T : S T E W A R T T I T L E | S P O N S O R E D C O N T E N T

P R OV I D I N G A N E N D -T O - E N D EXPERIENCE Stewart’s lender services cover the full digital mortgage and real estate experience. That’s by design, Fowler said.

“We start by leveraging our core title capabilities and expanding to other products and services in the transaction life cycle,” she said.

“We’ve added capabilities that start at the front end with the consumer, and then take it all the way through the closing and funding experience and beyond.”

The result is an impressive chain.

PropStream offers data for lead generation; Informative Research provides customer acquisition, prequalification, portfolio retention and credit and verification solutions; Cloudvirga’s POS system powers lenders, originators, consumers and brokers and automates back-office tasks; United States Appraisals and Pro Teck expand Stewart’s depth in the appraisal and valuation space from originations to capital markets to servicing; Signature Closers and

“... we have that capability, and more importantly the depth of expertise to deliver.”

NotaryCam provide enhanced signing options; and the partnership with CertifID protects funding.

Commenting on Cloudvirga, one of Stewart’s more recent acquisitions, Fowler said, “We were very attracted to the technology and mortgage expertise that it brings to the table.

Certainly, that’s core to what lenders need. We also appreciate the opportunities to expand its impact.”

Fowler also noted Stewart was particularly excited to pair NotaryCam, a leader in online notarization and original provider of eClosing solutions, with Signature Closers, a signing and technology platform that’s part of the Stewart family of companies. Stewart acquired NotaryCam in late 2020, after years of partnership in the digital and eClosing space.

“Bringing those two pieces together enables Stewart to deliver on any closing experience that our customers want,” she said. “Leveraging the NotaryCam platform, which truly is one of the best in class, [if] they want that true remote online notarization experience, we have that capability, and more importantly, the depth of expertise to deliver.”

Stewart’s partnership with CertifID is part of the experience as well.

CertifID is Stewart’s partner for secure funds transfer protection, as the company wants to ensure it protects its customers, itself and its shareholders among rising threats of wire and title fraud.

“All of these products and services are superior from a standalone perspective,” Fowler said. “Our vision is to take it a step further, to pull those services together in a more streamlined and digitized experience that can then yield efficiencies for our customers — cost savings, better decision-making and ease of use. Now that we’ve brought these capabilities together, the next iteration is to transform it into a more streamlined and digitized end-toend experience.”

THE FUTURE OF STEWART “Stewart also has two main goals when it comes to how it plans to move

FEBRUARY 2022

“Momentum is something that you see and hear when you talk about Stewart.”

forward,” Fowler said. “One of which is to continue to build and expand upon its automated capabilities.”

Part of that is a focus on Stewart Accelerate, the company’s automated title and underwriting decision engine, which benefits lenders by providing them with an upfront workflow decision to help them identify which loans can close more quickly.

Stewart is looking to continue to enhance the technology and decisioning capabilities over the next year.

Its second goal goes back to the company’s desire to streamline and create a platform of solutions for its customers across the real estate spectrum — lenders, investors, servicers and other enterprise buyers and sellers.

“We want to continue to leverage Stewart’s assets and capabilities, finding ways to connect the components for the benefit of our customers with more integrated solutions and intelligent decisioning that culminates in a premier customer experience,” Fowler said.

Over the last few years, Stewart has demonstrated its commitment to growth, evolution and movement toward its goals of streamlining the mortgage or buying and selling process for its customers. It shows no signs of stopping anytime soon.

“Momentum is something that you see and hear when you talk about Stewart,” Fowler said. “We’re investing in that momentum and that’s going to y ield some more great things to come. We’re definitely excited about what we’ve accomplished and where we’re going.”

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solutions, capabilities and products and services that really maximize and enhance the customer experience, whether that be for lenders, servicers, investors, power buyers or others. A big part of that, in terms of what we see, is ensuring we have a robust suite of digital data and analytics services.”

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......................................43 MBA ......................................43 NAHB ....................................44

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NAR.......................................44

FEBRUARY 2022

TRADE DESK

Marc Summers

President Association of Independent Mortgage Experts

AIME members, February is a time to recognize our industry leaders in the mortgage business by acknowledging the wholesale movers and shakers who set the pace for why brokers are better. Brokers face a lot of challenges, such as production forecasting, hiring, managing a team of employees and building relationships with lenders. It’s critical for all originators to develop effective relationships with referral partners, implement an optimal tech stack for efficiency, market your team to borrowers in your community and master a variety of mortgage lending products.

This month, the top originators and leaders in the broker channel are at the forefront of recognition — both in the narratives we’re telling through our members and by honoring them in our inaugural event and awards ceremony, Hall of AIME. Our hope is to shine a light on the originators, operators and owners who are pushing the broker channel forward. Too often the

achievements of hardworking brokers are not visible to everyone in the housing industry and as a leader of AIME, it’s my intention to do my part to bring their voices, stories and successes to light.

I hope all of you will help us celebrate those who have paved the way to the channel’s current success. Our Spark small business grant program has fueled another round of support for new broker owners to ensure the future growth of the wholesale mortgage industry leaders. And, our member-driven committees are continuing to protect the broker community by enhancing our voice in government affairs, education and outreach, and minority consumer homeownership.

Further, a new health care rollout will help many owners at local broker shops retain the talent they have.

AIME is committed to being an advocate for the wholesale mortgage channel throughout the year and into the future.

Association of Independent Mortgage Experts its momentum. MISMO’s funding mechanism, the Innovation Investment Fee, 75 cents on every new loan registered on the MERS system, enables it to fund the critical initiatives that are providing value to lenders by solving a wide array of key business challenges.

MERSCORP, as a service to the industry, is again graciously acting as the billing agent for the fee and is sending invoices this month.

I encourage your continued support, along with the more than 1,500 lenders of all sizes and business models, who are investing in the industry’s standards development efforts by paying the fee. Working together through MISMO, all industry participants will finally be able to speak the same language and, as a result of your investment, be able to collaborate, innovate and prosper, ensuring a robust mortgage market.

Mortgage Bankers Association

Robert Broeksmit

President and Chief Executive Officer Mortgage Bankers Association

FEBRUARY 2022

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MBA members, As our industry embraces its digital future, MISMO, our standards organization, is built for this moment.

MISMO is creating essential standards to solve key business challenges by facilitating the industry’s digital transformation. The organization is compiling a central source of information on e-eligibility; enhancing data exchange for participants in the private label securities (PLS) market; reducing friction associated with servicing transfers; providing eMortgage technology certifications; helping the industry navigate environmental, social, and corporate governance (ESG) disclosures; and more.

MISMO provides lenders with a unique seat at the table to collaborate with the GSEs, government agencies, regulators and others to develop standards that are used throughout the mortgage ecosystem.

MISMO’s work is leveraged in virtually every mortgage today and reduces manual, paper-based processes, leading to lower costs, improved margins, reduced errors and enhanced customer experiences.

MISMO needs the industry’s full support to sustain

Jerry Konter

Chairman National Association of Home Builders

National Association of Home Builders

TRADE DESK

NAHB members, Fresh on the heels of the 2022 International Builders’ Show in Orlando, I’m excited to begin my tenure as chairman of the National A ssociation of Home Builders.

Seeing so many members of our industry back in person was inspiring.

It reaffirms the commitment each of us has made to enriching our nation through what we do — building homes for American families.

It is an honor to work on behalf of such an electrifying group of forwardlooking, productive individuals. Each of us takes immense joy and pride from that moment when we hand over the keys to a family’s new home.

The can-do spirit of our members energizes the volunteer leadership and the staff who advocate on behalf of our industry. An industry that has shown great resilience throughout the COVID-19 pandemic and played a critical role in the nation’s recovery.

This strength has come despite

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NAR members, An imperative priority for the NAR is closing the racial homeownership gap. While increased homeownership would benefit people of color who have historically been subjected to discriminatory laws, policies and predatory loans, closing the gap would also boost the real estate industry, strengthen local communities and fuel American economic growth.

NAR research shows that Black Americans are half as likely as white Americans to rely on the sale of an existing home for a down payment, while they are three times more likely to tap into a 401(k) or a pension fund for a down payment. Statistics show that Black Americans, on average, own homes that are valued less than comparable homes owned by whites.

NAR is working diligently to close the gap. We are tackling these issues with several approaches. First, we’re advocating for the preservation of existing homeownership. As the severity of the pandemic fluctuates, we believe the government should continue its support for rental assistance and for mortgage forbearance — when appropriate — and work with lenders and servicers to find ways to extend the time for repayment.

These policies have already proven helpful to renters

lingering supply disruptions that pushed prices of lumber and other building products to record highs.

NAHB staff and member volunteers continue to work to find lasting solutions to those supply disruptions, including urging the Biden administration to negotiate a long-term agreement with Canada on softwood lumber imports.

As a builder myself, I am keenly aware of the many issues facing our industry, including the cost and availability of labor, the scarcity of building lots and the high costs of excessively burdensome regulations.

These challenges are preventing too many Americans from obtaining housing at a price they can afford.

We’ll find no simple solutions to the challenges we face. It takes an ongoing commitment to educate members of Congress and officials in the regulatory agencies about policies that work, and those that do not. We remain resolute.

and borrowers of color as they have disproportionately lost jobs due to the COVID-19 pandemic.

NAR is also calling for investments to combat the housing-supply crisis. For far too long, there has been underinvestment in new homes and critical infrastructure. The supply shortage drives up prices and pushes homeownership out of reach for buyers of all backgrounds. Among other actions, we would like to see tax breaks that incentivize new construction and the conversion of unused commercial properties to residential.

In addition, we are well past due for an update to scoring models.

Many legacy credit-scoring systems don’t recognize fulfillment of common financial responsibilities, such as rent or utility bills. This renders a number of creditworthy consumers “credit invisible,” effectively leaving them out of the housing market.

This must change. We have made improvements, but further work is needed. NAR plans to be at the forefront of these reforms.

Leslie Rouda Smith President National Association of Realtors

National Association of Realtors FEBRUARY 2022

Discover the most innovative technology solutions in mortgage and real estate.

Join the HousingWire team for one of our upcoming Virtual Tech Demo Days.

View the full schedule here: housingwire.com/engage

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REAL ESTATE

FEBRUARY 2022

REAL ESTATE

Inside the effort to outlaw real estate ‘love letters’ IT’S A BATTLE BETWEEN FAIR HOUSING CONCERNS AND FREEDOM OF SPEECH

BY BROOKLEE HAN

When the Dolensky family made the decision to sell their home of 20 years in the Atlanta suburb of Kennesaw, a home they had raised four children in, there was a sense of melancholy surrounding the experience. But changes brought on by the progression of life and work made it clear that it was time to move on.

To their delight, they received two “more or less equally strong offers” on their home. In the end, they decided to sell their beloved home to a newly married couple who expressed in a letter accompanying their offer a desire to raise their family in a home

- Mark Meek

FEBRUARY 2022

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As local housing markets across the country have hit alarming highs over the past 18 months, buyers desperate to get into a house have tried anything and everything to win the deal. From waiving contingencies such as home inspections, to offering to pay for the seller’s moving expenses, and even pledging to name their first-born child after the sellers — buyers and their agents have been doing their best to get creative.

One tactic that has been popular for years, writing

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"While this may seem harmless, these letters can actually pose fair housing risks because they often contain personal information and reveal characteristics of the buyer."

and a school district that clearly had been good to the Dolensky’s now-adult children.

“It certainly wasn’t my parents’ main deciding factor,” the second oldest son, Tim, said. “But I know they were happy to know that it was going to people who were clearly as in love with it as they were when they moved in, in 1999.”

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REAL ESTATE

letters of introduction or “love letters” to the home seller to accompany the offer, however, has recently come into the spotlight and not in a good way.

Last year, lawmakers in Oregon passed a bill (HB 2550) that banned sellers’ agents from passing “non-customary documents” onto their clients, which has largely been interpreted as a ban on love letters. The bill was sponsored by Democratic state representative Mark Meek, who is a real estate broker himself.

Meek and others argued that the law was necessary “to help a seller avoid selecting a buyer based on the buyer’s race, color, religion, sex, sexual orientation, national origin, marital status or familial status as prohibited by the Fair Housing Act (42 U.S.C. 3601 et seq.).”

Although this is the first law in the country to attempt to put a stop to the so-called love letters, the practice has been under fire for a few years now. In an October 2020 Fair Housing Corner blog post, the National Association of Realtors warned agents that, “While this may seem harmless, these letters can actually pose fair housing risks because they often contain personal information and reveal characteristics of the buyer, such as race, religion, or familial status, which could then be used, knowingly or through unconscious bias, as an unlawful basis for a seller’s decision to accept or reject an offer.”

In response to the passage of the law in November of 2021, the Pacific Legal Foundation, a libertarian public interest law firm, filed a preliminary injunction against the new law on behalf of Bend, Oregon-based Total Real Estate Group.

Total Real Estate Group asked a federal judge to block the law before it went into effect on January 1, 2022, but was not successful.

The injunction claims that the ban violates the First Amendment rights of brokers, agents and their clients and that based on previous precedents set

“What I think is the key, is that what you’ve got is a regulation that is both over inclusive and under inclusive."

- Allan Ryan

by commercial speech cases, such as Virginia State Bd of Pharmacy v. Virginian Citizens Consumer Council, Inc., and Central Hudson Gas and Electric Corp. v. Public Service Commission, the “law forbid, or at the very least substantially burdens, this valuable exchange of truthful and non-misleading information.”

Pacific Legal Foundation is no stranger to First Amendment cases. The organization has successfully argued many free speech cases for their clients, including in Minnesota Voters Alliance v. Mansky, in which the Supreme Court voted 7-2 in favor of PLF’s client MVA, finding the state’s restriction on

FEBRUARY 2022

clothing worn in polling places to be unconstitutional. While the organization has also had success arguing property rights cases, this will be their first case that combines free speech and real estate.

Although he disagrees with PLF and TREG’s reasoning, Allan Ryan, a Harvard University professor who teaches “The Constitution and the Media,” believes that the First Amendment claims against the law are strong.

“I don’t think the issue of whether or not it’s commercial speech will be the key here,” Ryan said. “What I think is the key, is that what you’ve got is a regulation that is both over inclusive and under inclusive.

It is over inclusive because it bans all love letters that are transmitted to the seller by the seller’s agent even though the letter may have absolutely nothing in them that could lead to discrimination. It could say something like ‘This is an old house and I love historic homes.’ Nothing about that has anything to do with protected classes.

It is under inclusive because all it does is focus on letters that are transmitted by the seller’s agent. There is no prohibition on a buyer writing a letter and dropping it through the mail slot of the home.”

In other words, Ryan feels that in order to withstand scrutiny, the law needs to be more narrowly tailored to fit the exact types of speech and means of communication that are in violation of the Fair Housing Act. “If there were a law that said something like ‘No prospective buyer can urge that a sale be made to them based on a protected class status’, then I think you have two things there: there is a compelling interest on the part of the state based on fair housing legislation in place and you also have a narrowly tailored law,” Ryan said.

However, with the law as it currently stands, Ryan sees too many loopholes for sellers to garner information on the protected class status of the prospective

REAL ESTATE

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Peter Wardhana, who is an agent in the San Francisco Bay area but is following this case closely as he believes that it may have implications on real estate legislation in his state, also acknowledges that the law leaves numerous loopholes open.

“A new challenge is that many home sellers have a Ring or other security camera at their home that enables them to visually see everyone who comes by,” Wardhana said. “So, eliminating the love letters alone will not necessarily keep a seller from observing who the prospective buyers are.”

Agents, such as Cannon Beach, Oregon-based RE/MAX agent Alaina Giguiere, do not see any issue with the law and believe that it will be effective in preventing issues of discrimination based on protected class status.

“I don’t love love letters,” Giguiere said.

“I find them to be distracting. They are not part of the real estate transactional documents and I think that they are very subjective and can be a bit manipulative.

I feel that it is my job, when I represent sellers, to help them get the highest value in the shortest amount of time with the least amount of stress and, quite frankly, those letters can put undue stress on a seller. They might want to help out the person pleading with them in their love letter, but they also want the most money for their house and sometimes those two things don’t line up. I hope the law goes forward and I’d be grateful to never have

to deal with love letters again.”

Giguiere feels that by banning love letters, the state of Oregon is leveling the playing field for homebuyers.

“What happens if you get four offers and you get love letters from three and

is one of the powerful pieces about having legislation like this, as it might help us solve issues that exist, but we currently don’t know how to uncover,” Allan Lazo, the executive director of the Fair Housing Council of Oregon, said.

“It is the right to free speech against the right to equal treatment. I don’t know how you weigh those two things or where the lines would be drawn.”

- Allan Lazo

the fourth just sends in their offer?” she posits. “Is the offer without a love letter automatically disadvantaged? At the end of the day we need to focus on the terms and conditions of the actual offer and you need to sort of take the emotion out of it.”

While it is true that when stripped of all the excess, a home purchase is just another financial transaction, the emotional aspect of buying a home can’t be overlooked.

“It is not easy to take the emotion out of selling or buying a home,” Wardhana said. “Many sellers are emotionally tied to their homes because it is a place full of cherished memories. For many buyers, a new home is something that they have dreamed of as a place for a better life for them and their loved ones. These emotions can have an impact on how some people make their decisions.”

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Still, the fair housing concerns the law brings up are incredibly relevant.

“I think the issues raised by this law are hard to uncover and I think that

FEBRUARY 2022

“Extreme inequities and disparities in homeownership along the lines of race still exist.”

In addition to the protected classes brought up in the Fair Housing Act, Oregon has its own set of law prohibiting discrimination based on marital status and source of income.

“It is great in Oregon that we have additional protections, but it is hard to know if they are effective in every single transaction when we know there is an issue, but we can’t necessarily uncover it,” Lazo said. “So in cases like this we need those additional protections and legislation. In general, the fair housing laws are good, but anytime you can more closely pinpoint a place where an issue might exist, I think is an appropriate place for us to bring additional legislation in.”

At the end of the day, however, it will be up to the courts to decide if the law’s block on free speech is more or less important than its implications for fair housing.

“It is the right to free speech against the right to equal treatment,” Lazo said.

“I don’t know how you weigh those two things or where the lines would be drawn.”

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buyers, either through communications transmitted directly to the seller from the buyer or the seller searching the buyer’s name online, for the law to really have an impact on individuals who truly wish to act discriminatorily.

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TITLE

FEBRUARY 2022

TITLE

The title insurance industry has a talent problem WHAT'S AT THE CENTER OF ATTRACTING THE NEXT GENERATION?

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hannon Foglia Brandy was pretty certain she wanted a career in public relations, but af ter a summer internship before her senior year at Bryant University, she began considering a career in the field of title insurance.

“I was looking to come home and do an internship over the summer, and nothing was really sparking my interest,” the New Hampshire native explained. “My mom, who is an LO, wrote to a friend who had just started her own title company about a year prior and found out that they were looking for interns for the summer. So, I kind of begrudgingly took the interview. I had absolutely no idea what title or title insurance was, but I liked them and the environment and what they were building, so I ended up taking the internship.”

Foglia Brandy has officially been with Cohen Closing and Title for five years now and is currently

"I had absolutely no idea what title or title insurance was ...”

- Shannon Foglia Brandy

FEBRUARY 2022

working as a closing agent and the director of business development.

“I lead a team of closing agents and marketers and work with them to help grow the business and expand into different areas,” Foglia Brandy said. “I get to explore all sorts of new software and technologies that make our jobs easier and more effective.”

While Foglia Brandy acknowledges her work in the title industry is not exactly what she had in mind for her career when she was in university, she does see some parallels between her former dream job in PR and what she does at Cohen.

“I definitely work every day at maintaining a good reputation for the company and the industry as a whole, and I do a lot of written communication,” Foglia Brandy explained. “I really do love what I do.”

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BY BROOKLEE HAN

TITLE

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But as a woman in her mid-20s, Foglia Brandy is something of an anomaly in the title insurance industry. As of 2014 the average age of title insurance agents and brokers was around 60 years old, and the situation has not really improved.

Finding ways to attract and hire the next generation of mortgage and title industry professionals has been plaguing firms for years.

“This is the top issue,” Diane Tomb, CEO of the American Land Title Association, said. “This is what keeps people up at night and the COVID-19 pandemic has only made things more complicated.

We first launched our Talent Committee about 15 years ago and it is still working on the issue. Almost 21% of our workforce is within 10 years of retirement.”

While ALTA works to attract new talent to the industry in general, the thousands of firms that exist in the space have developed their own strategies to bring new talent to their specific company.

Stewart, one of the “Big Four” title insurers, is focusing most of its efforts on attracting developing new talent through internship programs, similar to how Foglia Brandy got her start in the industry.

“Most of the undergraduates and young people we see in the program aren’t going to school for title insurance,” Ryan Swed, Stewart’s head of U.S. national commercial services, said. “They are in marketing or geography or accounting, but through the internship program they get exposed to a large publicly traded company that has some really interesting work for them to do. I think that they’re getting exposed to our industry in a way that they’re saying, ‘Hey, this could be interesting for me,’ but it’s a place that they would not normally look. So, I think it’s a great place to not only attract new talent, but that leads them to also talking

to friends and, as in many businesses, referrals are a great way to generate new talent.”

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Pat Stone, the founder of WFG National Title Insurance and a long-time industry leader, echoed Swed’s sentiments.

“What really happens is that people stumble into title insurance by accident more than on purpose because it is not a career choice listed by any counselor out there at a university,” Stone said.

“Now, having said that, it has an amazing attraction to people once they’re exposed to it because it is a great forum for learning about real estate, technology and insurance. Once people get into it, a lot of people stick around because they’re curious and they have a desire to learn. I got into this business by accident. I got a degree in history and was looking for a job and started as a title examiner trainee.

I’ve been in the industry now for 46 years.”

Since starting the internship program, Stewart has had some success in converting some former interns into fulltime employees.

“We were recently looking for a role replacement and ended up calling up someone from the internship program to see if they were interested in coming back for a full-time job,” Swed said. “It has been a great way to expand our potential talent pool.”

Two newcomers to the industry, Doma (formerly known as States Title) and Blueprint, are taking a slightly different approach to talent development. They are putting their efforts into employee training and onboarding programs.

“We have developed a robust training strategy that includes title learning paths for roles across the company,” Blueprint CEO Steve Berneman said. “That ’s

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helped transaction coordinators move into account management, IT specialists move into product management, and business development reps transition to ops. Our goal is to unlock the potential in our team so that each member can grow with us. We also have management training, a streamlined onboarding process and professional development stipend benefits to enhance external learning.”

Similarly, Doma hopes that its onboarding programs will make new hires feel welcome and prepare them for any challenges they may face in an industry that is often unfamiliar.

“We have started looking at what we’re calling our junior associate level profile, where candidates don’t necessarily have title and escrow experience, but they do have other kind of skills and criteria that we are looking for and then we are developing an onboarding and training

“The one area that I would say that is probably having less and less appeal and will probably continue having less appeal is the actual function of title examining and being a title examiner or searcher."

- Pat Stone

TITLE

A

As a whole, the title industry is at an important inflection point, as technology solutions are starting to be introduced into an over 100-year-old industry.

“As recent as 2019, only 14% of title professionals were offering any type of digital closing,” Tomb said. “Now it is at 46% and as ALTA gets closer to the finish line with things we have been advocating for, like widespread RON approval and usage, we expect that number to rise.

This influx of technology has of course created a plethora of new job opportunities in the sector.

“There is a huge opportunity for folks who are technologically savvy to step into our industry,” Tomb said.

For Stone at WFG, the industry’s embrace of technology has made hiring easier for certain roles.

“Because of the tremendous emphasis on technology, we aren’t having any problem at all attracting people,” Stone said. “This is currently a great venue for technological development as so much is changing. The one area that I would say that is probably having less and less appeal and will probably continue having less appeal is the actual function of title examining and being a title examiner or searcher.”

"Of course we would love people with experience, but if we find someone who is inexperienced but who is willing to learn and is the right culture fit, we are willing to train them.”

- Shannon Foglia Brandy

Although technology has somewhat diminished the need for title searchers and examiners, through automation the need for these more “traditional” roles is not going away.

“The need for a title examiner in the traditional sense of the word is declining and will continue to decline, but it won’t go away and it is a problem attracting people for these roles,” Stone said. “At WFG the average age of our examiners is considerably higher than it used to be and will continue to go up. You occasionally find somebody that is interested in doing it, but it doesn’t have a lot of attraction for people.”

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When it comes to attracting talent for traditional title roles, firms are hoping that their company culture and benefits help them bring in new workers. “ We have analyzed our benefits packages and our ability to accommodate remote work,” Swed said. “Not just at Stewart, but industry-wide, I think opening up the possibilities of remote work has widened our talent pool.”

At Blueprint, Berneman feels that the firm’s mission does a lot of the heavy lifting for them.

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“Hiring in any industry is extremely competitive right now,” Berneman said. “For traditional title roles, the idea of modern workflows, being more effective and joining the front lines of transformation is very appealing. For our technology and product hires, many can relate to their own struggles with trying to purchase a house, and the idea of building a better process goes a long way.”

Back in New Hampshire, Foglia Brandy said that her firm does a lot with its social media channels in an attempt to attract younger talent.

“We have a really active Facebook page and our social media team is really working to grow our TikTok,” Foglia Brandy explained. “Of course we would love people with experience, but if we find someone who is inexperienced but who is willing to learn and is the right culture fit, we are willing to train them.”

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program that would support them,” Kevin Pursel, Doma’s VP head of recruitment said. “It allows us to not only increase our talent pool but also the diversity of our talent pool as you don’t have to require X number of years of title and escrow experience. We certainly want that deep expertise in the title and escrow experience, but if you can couple those candidates with recent college grads or those more junior in their career, that’s a great mixture to have.”

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SECONDARY MARKET

FEBRUARY 2022

SECONDARY MARKET

Private-label loan-vetting comes up short BOND-RATING AGENCY LOOKS AT LOAN-SAMPLING PRACTICES

BY BILL CONROY

"... it’s important to understand that the due-diligence reviews performed on loan pools assembled for securitizations often make use of a process called loan sampling."

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pool of loans that often numbers in the thousands.

The results of the sample reviewed, or vetted for risk, can then be extrapolated to the entire loan pool that has been aggregated to back a private-label residential mortgage-backed securities (RMBS) offering.

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KBRA reports that sampling, although in use to some degree for years, exploded in 2021. It is now employed in some form by most issuers of nonagency prime transactions. Then, the bond-rating agency describes another concerning trend.

“The notable increase in due-diligence sampling in 2021 has also come with an unfortunate caveat,” KBRA reports. “Some loans that are initially targeted for sampling are removed from the pool prior to the completion of review for reasons that are or may be

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T

he process of vetting loan pools assembled for private-label securitization deals is, to a degree, like sausage-making.

Few take the time to understand the process, but everyone eating the sausage wants to trust that the ingredients won’t cause them heartburn.

A report by the Kroll Bond Rating Agency, however, raises a yellow flag about current loanreview practices in the private-label market that requires examination of the sausage-making. As part of that, it’s important to understand that the due-diligence reviews performed on loan pools assembled for securitizations often make use of a process called loan sampling.

The concept is simple: A random sample of loans is selected for due-diligence review from a larger

SECONDARY MARKET

related to loan quality.”

The dropped loans create a potential problem that is known in the world of statistics as a sampling bias. And that bias can lead to an overly optimistic assessment of the quality of the entire loan pool — or, put another way, it can cloak some of the risk.

“These dropped loans are often not accounted for in final disclosures to investors in the same manner as reviewed loans,” KBRA reports.

Loans are dropped from the loanpool samples for a variety of reasons, the bond-rating firm reports, including low ratings or because they require time for additional investigation to cure defects. “Issuers face time and resource constraints” when bringing deals to market, the KBRA report states, which can lead to loans being pulled from samples before due-diligence reviews are completed.

“We do get requests from issuers to pull a group of loans without a specific reason for why they’re being pulled, and a lot of them are the pending loans,” said Mark Hughes, president of capital markets at Texas-based Evolve Mortgage Services, which provides due-diligence services.

“There are some loans that are pulled that potentially could have wound up in the C and D [ratings] bucket. So, they [KBRA] are correct, and there is some hidden risk.

“Frankly, when [issuers] are comfortable that most of those [pulled loans] are curable [with more time], they don’t want to take the hit today when they can put them in the deal next month."

- Mark Hughes

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T

That “hidden risk” exists because loans in a random sample, both those with good and poor ratings, are presumed to exist in the same proportion across the larger loan pool they have been drawn from for the due-diligence review. Pulling them out of the sample prior to the vetting being completed, then, can distort, or skew, the sample-review results.

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Hughes added, however, that in his experience, the bulk of the loans pulled because they had unresolved defects at the time of a securitization’s closing are later resolved and end up with A or B ratings. “And they show up in the next deal,” he said.

“Frankly, when [issuers] are comfortable that most of those [pulled loans] are curable [with more time], they don’t want to take the hit today when they can put them in the deal next month,” Hughes explained.

Still, KBRA reports that “loan drops from sampled populations and associated reporting conventions ... can leave investors missing useful information.”

“The trend is most prevalent in prime agency-eligible investor transactions but is becoming more significant in traditional prime deals,” KBRA reports.

“Notably, the uptrend was only observed during the last few months, with 28 of the 39 transactions with [loan] removals ... occurring in deals with closing dates during or after August 2021.”

KBRA attributes the recent dramatic rise in loan sampling — and associated loan drops — to several factors. Those include investor acceptance of the sampling practice in prime deals as well as the cap placed earlier this year on the government-sponsored enterprises’ (GSE’s) acquisition of mortgages secured by second homes and investment properties.

Many of the investment-property mortgages — which might have been purchased and securitized by Fannie Mae or Freddie Mac prior to the cap — found their way into loan pools backing privatelabel deals. The cap was suspended this past September by the Federal Housing Finance Agency, which oversees the GSEs, but the resulting increased deal flow is still winding its way through the private-label market.

“As a TPR [third-party review firm], we are definitely aligned with making

SECONDARY MARKET

but unseen, weaknesses in the original population,” the KBRA report states.

Likewise, KBRA’s report concludes that “understanding where the ‘armor’ is missing will be increasingly important as sampling expands and credit quality changes, even within the prime sector.”

sure that investors have the information that they need in order to make smart decisions,” said Michael Franco, CEO of SitusAMC, a major due-diligence firm based in New York. Evolve’s Hughes also agreed with that perspective.

“But we also think that it is incumbent on investors to determine what is the information that they need in order to make smart decisions,” Franco added.

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T

“As a TPR [third-party review firm], we are definitely aligned with making sure that investors have the information that they need in order to make smart decisions."

- Michael Franco

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The realities of the free market, however, don’t always dovetail with the demand for full transparency in all situations, Franco explained.

“Issuers are not incentivized to provide any additional information beyond what is absolutely required to get their securitization done,” he said. “Everything that you disclose that you don’t need to is now something that somebody can sue you on.

“So, if you don’t have to disclose it, why would you?”

The KBRA report provides an analogy that helps to better explain the risks of a lack of transparency in the case of loan sampling and related loan drops — absent the complicated statistical analysis.

The bond-rating firm’s report describes a study done during World War II of aircraft returning from battle. A researcher was tasked with examining the planes to see where the bullet holes were so that armor could be enhanced in those areas.

The researcher, however, also decided to consider the planes that were shot down and did not return to base because, in his reasoning, the “armor plating should go where the bullet holes were missing and not where they appeared.”

“In other words, aircraft that did not return pointed to the areas of most critical,

John Toohig, managing director of whole-loan trading at Raymond James in Memphis, said loan sampling and related practices are accepted in the market right now “because of the rabid demand for loans and bonds and the outsized and strong performance of ... the collateral.”

“Investors need earning assets and mortgages have been a winner throughout the pandemic,” he added.

Toohig reminds, however, that the nation’s housing crash some 15 years ago was the result of a “slow bleed” from a thousand cuts.

“It didn’t happen overnight. It was all in the spirit of efficiency,” he said. “Fulldoc went to alt-doc, which morphed to no-doc.

“Then a shock hit the system, the water drained out of the pond, and we got to see who was swimming naked — ugly and all.”

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CFPB WATCH

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CFPB WATCH

CFPB lets mortgage servicers collect on social media, but will they?

RULE INCLUDES STRINGENT STANDARDS

BY GEORGIA KROMREI

"The debt collection industry is on notice: they must treat consumers with respect, and we are going to enforce the law when we see violations.”

- CFPB

treat consumers with respect, and we are going to enforce the law when we see violations.”

But whether or not the CFPB’s new rule applies to mortgage servicers is somewhat of a gray area, although an agency spokesperson said the rule does not specifically exempt the industry.

Its application to mortgage servicers hinges on how the Fair Debt Collection Practices Act defines a “debt collector.” Mortgage servicers are sometimes considered a debt collector under that statute, such as when they service loans on someone else’s behalf, as mortgage subservicers do. Mortgage servicers are also typically considered debt collectors if they acquire the mortgage while it is in default.

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The CFPB’s new debt rule comes with some major caveats, including limits on how often a debt collector

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he new Consumer F i n a n c i a l Protection Bureau debt collec tion rule allows mortgage servicers to communicate with borrowers on social media, but the compliance risk may outweigh the potential reward.

The CFPB’s rule went into effect at the end of last year. The watchdog agency said it would be looking very carefully at how debt collectors use the new means of contacting consumers, including through social media.

“We’re not going to tolerate excessive emails, texts or DMs, and we expect debt collectors to verify consumers’ identities as well as the underlying debts,” a spokesperson for the CFPB said. “The debt collection industry is on notice: They must

CFPB WATCH

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“... servicers are struggling to digitally communicate with consumers at all, let alone on Facebook.”

- Courtney Thompson

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can contact a borrower. Servicers must verify consumers’ identities as well as the underlying debts, which poses a challenge on social media.

The communications must also be private, meaning mortgage servicers won’t be able to send a public Venmo request for a mortgage payment, or post on the public wall of a borrower’s LinkedIn profile page.

Given that social media platforms’ privacy policies vary, and few have endto-end encrypted messages, keeping debt-collection conversations private could also be daunting. Meta, the company formerly known as Facebook, has said end-to-end encryption for its Messenger and Instagram might be available in 2022, at the earliest.

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Experts are divided on whether mortgage servicers will take advantage of the new capabilities, especially given the CFPB’s increased scrutiny of mortgage servicing, the ambiguities in the new rule and the limitations of documenting compliance on social media.

Matthew Tully, vice president of agency affairs and compliance at Sagent, which develops mortgage servicing software, said he sees the new rule as a step toward bringing the FDCPA, which dates to 1978, into the 21st century.

“This is the first step of a journey,” said Tully. “The Bureau has opened the door.”

The CFPB may have opened the door for mortgage servicers to negotiate a borrower’s defaulted mortgage via Instagram, but only just barely.

CFPB WATCH

“Is it worth the risk of trying to collect on a debt, only to end up revealing info that shouldn’t have been revealed?”

- Matthew Tully

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Still, others obser ved that if communicating via social media proves an effective way of reaching consumers, then mortgage servicers will take advantage.

John Toohig, managing director of whole loan trading at financial services

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Whether mortgage servicers are ready to start direct messaging consumers, they are already incorporating aspects of the new debt collection rule into their recordkeeping systems.

Tully, of Sagent, said the company’s platform for loan servicers, LoanServ, already allows servicers to track contacts based on the CFPB’s new seven-day rule, which limits debt collectors to one call during a seven-day period.

He said that servicers will, in time, use social media to contact borrowers. But there is a long way to go before reliable identity verification systems will allow servicers to contact borrowers with confidence. Until then, they will likely opt for traditional methods of phone, text and email.

“You have to be really sure it’s the right person on Instagram, because otherwise you can get in a lot of trouble,” Tully said.

“Is it worth the risk of trying to collect on a debt, only to end up revealing info that shouldn’t have been revealed?”

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C

Courtney Thompson, the founder of mor tgage servicing advisory firm Consigliera, said that language like “excessive” or “reasonable” to administer the law with flexibility. But subjective language spells uncertainty for mortgage servicers, who are already keenly aware of the new administration’s heightened regulatory leanings.

Thompson said she doubted servicers would do asset-level communication of any kind on social media, because “servicers are struggling to digitally communicate with consumers at all,” she said, “let alone on Facebook.”

That’s primarily because servicers need a unified audit trail for all communications with consumers, she said. The need to document everything has kept many servicers using traditional modes of communication: paper and telephone.

firm Raymond James, said he could see mortgage servicers using social media to reach borrowers. That is, until regulators carry out enforcement actions against servicers who do so, with fines big enough to hurt.

“It comes down to whether [the rule] has teeth or not,” Toohig said.

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APPRAISAL

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APPRAISAL

Appraisals stand on shifting sands 2022 PROJECTIONS FOR THE RESIDENTIAL APPRAISAL INDUSTRY

BY BRIAN ZITIN AND KEN DICKS

We have reviewed and analyzed recent stakeholder and government data, and we are pleased to deliver the following analysis and predictions for 2022.

"The tides of the mortgage industry are changing as we head into 2022 ..."

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I

It is fairly well-known that the appraisal industry has a supply and demand issue. Freddie Mac recently released trend analysis of appraisal activity for appraisals submitted to the Uniform Collateral Data Portal. This data clearly illustrates the issue: • Appraisal volume exceeded the high-water mark of 700,000 monthly submissions to the appraisal data warehouse on multiple occasions in 2021. Prior to 2020 it was a rare occurrence for volume to exceed 600,000 per month.

• The number of appraisers completing appraisals for transactions eligible for sale to the GSEs has remained relatively flat.

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he tides of the mortgage industry are changing as we head into 2022, and just like the sand under the waves, we can expect the appraisal landscape to shift along with it. Appraisers, like many other service providers, must adapt to market changes to accommodate their clients’ needs. Whether it is providing appraisal services, underwriting services or title services, a mortgage application cannot proceed without their input.

APPRAISAL

In addition to the supply and demand issue in 2021, we also saw continued challenges around appraiser throughput, appraisal turn times and appraisal fees.

2021 also introduced change at the policy level, as appraisal waivers began to slow down and the FHFA’s announcement to allow desktop appraisals.

We’ll dig deeper into each of those topics below, but first we’ll explore one of the biggest driving forces on appraisal: market volume.

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Mortgage rate predictions for 2022 by industry stakeholders show rates for 30year fixed mortgages to range from 3% to 4%. As of this writing, in 2021, 31 of 45 weeks had mortgage rates below 3%.

The last time the 30-year mortgage rate was at or above 3.5% was in March of 2020. Prior to that, we have to go back to October 2016 to see rates at 3.5% or below.

Meanwhile, the Mortgage Bankers Association (MBA) is forecasting purchase mortgage originations to increase 9% in 2022 and refinance originations to decrease by 62% .

Appraisal demand from generators (i.e., HELOC and private clients) is expected to remain stable to slightly declining.

How does this impact appraisal volume? Mathematically, the MBA predictions result in a loss in demand between 30% to 35% for appraisals associated with mortgage originations.

As application volume is anticipated to shift from predominantly refinance activity to purchase activity, we anticipate the demand for appraisals in the mortgage sector to decline 15% to 20% with other demand generators pointing toward stability or slightly declining.

In a recent Fitch Ratings analysis on

nonbank mortgage origination outlook, analysts stated that "rising rates fueled by the tapering of Fed asset purchases and home price appreciation from the growing disparity between housing supply and burgeoning demand are also expected to contribute to lower volumes and margins into 2022."

I

It is worth addressing the overall appraiser supply here as well. Analysis of appraiser credentials in the U.S. shows continued decline. According to 2021 data from the Appraisal Institute, the current number of state-issued appraiser credentials is 93,309, which is more than 3,000 fewer credentials cited in a 2019 Appraisal Institute study, which put the number of credentials at 96,856 in 2016.

Attrition and supply continue to be a market concern.

Efforts to date to bolster the ranks of credentialed appraisers has resulted in reducing the rate of decline, but decline continues nonetheless. Perhaps diversity, equity and inclusion efforts by industry stakeholders and the Appraisal Foundation’s PAREA efforts may bear fruit in the future; however, significant impacts to increase the ranks of qualified appraisers are not anticipated in 2022.

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According to our analysis of data released by both Freddie Mac and Fannie Mae, the count of active appraisers based on mortgage activity has been mostly flat since 2018, with minor fluctuations.

The rise in sales and refinancing activity

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in 2021 resulted in increased appraiser productivity, ranging between 50% to 100% per appraiser.

How does this convert on a per appraiser basis? With 40,000 appraisers having their appraisal work submitted to the GSE appraisal por tal, the median throughput level pre-2020 was approximately 10 appraisals per month, or 2.5 per week. From 2020 through 2021, that throughput level increased to 15 to 20 appraisals per month, or 3.75 to 5 appraisals per week.

And while appraisers have shown they have adjusted processes to produce at a higher level of output on a weekly basis, no significant process changes are anticipated to contribute to be a drag on productivity.

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Unfortunately, a centralized source measuring market-level appraisal turn times does not exist. Data is often limited to anecdotal experience by individual lenders, users of appraisal services and reporting by a handful of appraisal management companies. In general terms, prior to 2021, it was common for appraisals to have an average turn time between 9 and 12 days. Based on analysis of three national AMC quoted turn times on their websites, in 2021, the turn time range expanded to 8 to 21 days.

Those states having the fewest number of appraisers often show the longest cycles. These numbers are in line with what we see lenders experiencing using the Reggora platform.

While pipeline volume plays a large part in the equation, the geography and the supply of appraisers in particular markets are contributing factors and the range of turn times can vary significantly across

APPRAISAL

D

Due to the supply and demand crunch, appraisal fee escalations and upward pressure on fees has received much attention in 2021. As we expect market volume to drop by at least 20% to 30% moving into 2022, it is anticipated that some relief of fee pressure will occur; however, complex submarkets, complex properties and appraisals in locations deemed difficult, where the appraiser is required to expend more time on an assignment, will continue to see fee pressure. The introduction of desktop

and potentially of alternative products, should also assist in helping fees to come down from their 2021 levels, but they will most likely stay elevated compared to historic norms.

B

Both Fannie Mae and Freddie Mac have underwriting programs that allow lenders to waive the requirements for an appraisal in certain circumstances. No or low cash-out refinance applications receive the largest share of waivers. From June 2020 through May 2021 the percentage of appraisal waivers increased, and activity averaged approximately 385,000 per month. However, when looking at waiver activity measured from January 2021 through June 2021, the data show a decline of approximately 11.5%. We expect that number to continue to decline as refinance activity slows down.

In addition to appraisal waivers, desktop appraisals have also been a topic of conversation among the GSEs. In October, the FHFA announced that desktop appraisals, similar to what was allowable during the COVID-19 appraisal flexibilities, will be allowed as we move into 2022. We also expect desktop appraisals to replace some of the loans that were previously qualifying for appraisal waivers. Finally, we also see a possibility for the introduction of an even broader set of alternative appraisal products that incorporate new technology and processes to further address issues with turn times, racial bias and supply constraints.

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T

The topic of racial bias in real estate, and in appraisal, has been a hot one. 2021 brought forward the Property Appraisal and Valuation Equity (PAVE) Interagency Task Force to address inequity in home appraisals. PAVE is required to bring forward a final action report in 2022.

And while it is unknown what the final recommendations will be, PAVE’s focus is multi-pronged, and recommendations are anticipated revolving around government oversight, industry practice, consumer and practitioner education and making available high-quality data to combat racial inequality.

T

There’s a lot of change happening across the industry, and the foundation for appraisal is more like sand than stone. As we head into 2022, we can expect some balancing and displacement to occur.

While demand for appraisal services is anticipated to drop due to less refinance activity, we will also see increased demand stemming from fewer appraisal waivers and more desktop appraisal products. And while turn times and fee pressures are anticipated to retreat back to pre-2020 levels, there remain supply pressures, particularly in geographically challenged markets. There will also be a focus on responding to the anticipated PAVE task force recommendations, whether they be on a regulatory front or through establishing new industry practice.

One thing is for certain: As change happens in 2022, appraisers will need to rely on their skillset to measure, analyze and navigate that change.

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localities within the marketplace.

The National Association of Realtors projects 2022 home sales activity to be slightly lower than 2021. As a result, we should expect to see overall appraisal turn times improve. To keep this in perspective, a 20% decline in demand when production is 3.75 appraisals per week results in a decline of one appraisal per week per appraiser. For locations where the supply of appraisers is abundant and the appraisal process itself can be completed in a standardized amount of time, we anticipate a return to pre-2021 levels with turn times of 8 to 10 days. In locations where there are limitations on the supply of appraisers, or the amount of time it takes to complete an appraisal is extended due to lengthy drive times and data-challenged locations, only modest gains are anticipated and extended turn times will continue to be the norm.

Of course, fluctuations will occur due to seasonality, as the appraiser supply is anticipated to remain fixed and demand is variable. If there is heightened risk of either supply side or demand side variations, then the above predictions would need to be revised.

HOUSING MARKETS

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Housing Markets FEBRUARY 2022

HOUSING MARKETS

Hope and homebuyers return to Paradise HOW HAS THE LOCAL MARKET BEEN SINCE THE WILDFIRE?

BY BROOKLEE HAN

T "Paradise bore the brunt of the Camp Fire’s destruction."

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The loss of housing and businesses resulted, expectedly, in a mass exodus from the town. Prior to the Camp Fire the population of Paradise was nearly 27,000. By the end of 2019, just 4,608 people called the town home, However, by early 2021, the population was already rebounding, with roughly 6,000 people living in Paradise.

In fact, Paradise’s housing market, though constrained by unresolved wildfire litigation and issues like proper home insurance, even has the high-demand, low inventory problems of most other U.S. cities.

“From what I gather, it seems to be about half are people who already or previously lived here pre-Camp Fire and the other half are from out of the area,” local Fathom Realty agent Douglas Speicher said. “We currently have about 33 stick

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n November 2018, the deadliest fire in the history of California nearly destroyed Paradise, a 144-year-old town that sits in the Sierra Foothills above the northeastern Sacramento Valley.

When the smoke had cleared, the Camp Fire lef t tens of thousands of people displaced, 86 persons dead and 18,804 buildings destroyed.

Paradise bore the brunt of the Camp Fire’s destruction.

“Every home, every little business, there were a few that made it along the main streets, but other than that, at least 95% to 98% of the residential housing in the area was gone,” local eXp Realty agent Mike Stearns said.

HOUSING MARKETS

and manufactured homes active on the market and 103 active lots. We have had over 200 lots active on the market at one time since 2019, so we are a little low on inventory.”

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O

One key factor in the Paradise market, Speicher said, is the pending results of a class action lawsuit filed against utility giant PG&E. After the fire, the price of PG&E’s shares tumbled and in early 2019 the company, which provides gas and electricity to the vast majority of Northern California homes, filed for Chapter 11 restructuring bankruptcy.

In 2020, as part of its plan to exit bankruptcy, PG&E agreed to fund a $13.5 billion trust to compensate the nearly 70,000 individuals who lost homes, businesses and family members in fires linked to its equipment.

As of July, 3,300 people, or less than 5% of the individuals impacted by the fire, had received such compensation. The money in the fund is tied to the company’s stock value. If PG&E’s share price goes down, as it did in June when the company disclosed its equipment may have started this summer’s Dixie Fire, victims may not receive compensation money.

On the advice of their lawyers, Speicher said, many homeowners are waiting for the lawsuit to settle before they sell.

While homeowners are still dealing with the last major fire, they seem not terribly concerned with the next one, or at least not concerned enough to pass up affordable California housing.

In November, the median sales price in Paradise was $437,500, an 8.8% yearover-year jump thanks to increasing demand and lower inventory, according to Redfin.

Those prices are higher than the national median home price of $357,000 as of November, per the National Association of Realtors.

Prices, though, remain 44% below the statewide median home price of $782,480 in November 2020, according to a California Association of Realtors report.

“I think that [the threat of fire] is the biggest hurdle in getting people to go back or getting new people to the area,” Shane Collins, a RE/MAX agent in the neighboring city of Chico said. “The people who do end up buying here, it is slightly more affordable and that kind of pushes them into deciding to buy here.”

"I think that [the threat of fire] is the biggest hurdle in getting people to go back or getting new people to the area."

- Shane Collins

FEBRUARY 2022

B

But prospective homebuyers are still facing a competitive market.

“Properties are sitting a week or two before they get offers at the moment.

They are generally generating a few offers, but typically not more than five,” Speicher said. “On the easy to build on vacant lots, which generally are priced based on size and ease of building, we seem to be getting anywhere from three to 10 offers.”

Local agents are slowly seeing new construction listings pop up.

“The problem is that it costs more to build a house than you can sell it for,” Stearns said. “People are rebuilding homes for about $350 per square foot, but you can sell them for barely $300 per square foot. Plus, they are trying to limit the number of manufactured homes, But, really, those are the only things that can get built because there are no contractors, everyone is already busy. So, it’s coming along, but it’s a slow process.”

According to Speicher, buyers , regardless of whether or not they are new to town, prefer the new construction homes or lots.

“Generally, the newer builds have way better ratings for fire safety and all around energy efficiency,” Speicher said.

Prospective homebuilders are subject to specific building codes and standards that result from Paradise being located in a Wildlife Urban Interface area. These include using non-combustible materials for roofing, exterior walls and siding, as well as having vent openings capable of resisting the intrusion of flames or embers. “ We are s e e ing s ome uniqu e construction homes return, but the conventional stick-built is the common theme that we are seeing comeback,” Speicher explained. “We are also seeing a handful of insulated concrete from homes come on the market and they

HOUSING MARKETS

have a very high fire risk durability.”

In addition to checking the regulatory compliance of a new build, Speicher recommends that his clients consider how many routes there are available to get away from the home, and what the neighboring parcels are doing for preventative maintenance.

“You can do everything under your power to protect your property, but if the neighbors aren’t then it’s not going to be good,” Speicher said. “So is there a lot of vegetation that hasn’t been cleared or are there still dead, burned trees? Those

neighbor very well might not,” Speicher said. “I recently sold a home where the neighbor had just bought a few months prior and their insurance premium was about $1,400 a year, but the parcel next door that I sold, with the exact same house plan by the exact same builder, had to get insurance through the FAIR plan that was $3,700 a year.”

Local agents have hope that the town, and its real estate market, will continue to come back in the new year.

“We’re seeing a lot of people want to return to Paradise, whether they had

"We’re seeing a lot of people want to return to Paradise, whether they had decided to relocate out of area or just down to Chico, a lot of people are selling the homes they purchased in Chico to move back to Paradise now."

- Douglas Speicher

are really big things because defensible space makes a huge difference in being able to fight future wildfires.”

P

decided to relocate out of area or just down to Chico, a lot of people are selling the homes they purchased in Chico to move back to Paradise now,” Speicher said. “In the last six months there seems to be almost a new wave of hope.”

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Prospective homebuyers must also consider the cost and availability of fire insurance.

“Fire insurance is currently not widely available through traditional carriers, so people are having to use the government program, the California FAIR Plan, which can be anywhere from $3,500 to $5,000 a year,” Collins said.

Speicher also noted that while low-cost fire insurance may be available through a traditional carrier on one property, that doesn’t mean it will be available at a neighboring parcel.

“What one home can qualify for, their

FEBRUARY 2022

with Jonas Moe ICE Mortgage Technology Senior Vice President, Marketing

Can fintech continue to support record volume?

ICE Mortgage Technology exec on providing seamless automation With all signs pointing to a continued hot streak in 2022, lenders will be turning to technology solutions to help process and close loans quickly and efficiently in an ultra-competitive market.

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In 2021, the company was honored as a Tech100 Mortgage winner for its impact and innovation in housing. ICE Mortgage Technology offers a single platform that leverages the largest connected network in the industry to automate everything from consumer engagement through loan registration and every step in between.

HousingWire reached out to Jonas Moe, ICE Mortgage Technology senior vice president of marketing, to learn how tech and automation can support lenders in the current market and what’s to come in tech innovation for 2022.

HousingWire: How is a strong focus on mortgage tech especially important during this current sales boom?

Jonas Moe: The last two years brought together an incredible combination of factors. First, you had the COVID-19 pandemic, then our industry had record loan volume, and now the U.S. housing market is experiencing a frenzied demand that’s exacerbating a longstanding housing shortage. As all these factors come together, it tested whether technology was prepared to handle the volume.

For lenders, they had to quickly evaluate their technology partners, their systems and their tools. From ICE Mortgage Technology’s perspective, we didn’t skip a beat.

Our technology helped process and close record volumes and was the backbone for lenders adapting to the pandemic and needs of their customers. Bringing together Ellie Mae, Simplifile and MERS to form ICE Mortgage Technology was a huge advantage for our customers, as it leveraged the strengths of all three companies to extend our digital mortgage and eClose solutions. As consumer expectations change, staying focused on adopting the right mortgage technologies can determine success or failure. We believe in investing in digitization, and we know how to connect our customers to where they need to automate. We are poised to deliver that technology through our continued investments and innovations in the mortgage space through Simplifile and MERS.

HW: We hear a lot about margin compression in the industry right now. How can tech play a role in improving margins for lenders?

JM: While margin compression affects banks and lenders the same, smaller community banks are at higher risk when their profit margins shrink. That’s where automation and tech can help level the playing field by alleviating some of the manual process that’s still in place for the smaller players.

Antiquated tools and processes can increase time to close, potentially increase manual errors, and thereby decreasing efficiency and their profit. ICE Mortgage Technology delivers additional value to customers and the industry and in a differentiated way. We are focused on automating the entire mortgage process from consumer engagement through loan registration and every step and task in between.

And we are doing this by offering a single platform that leverages the largest connected network in the industry.

As part of ICE, a global data and technology company, we’re able to leverage additional resources backed by ICE’s data services and the New York Stock Exchange.

Together, we have the ability to create what we believe is a completely differentiated solution, and truly change the mortgage industry.

HW: What can you tell us about projects that ICE Mortgage Technology is working on for 2022?

JM: We recently launched several innovations this fall.

Following our Encompass eClose launch in the spring of 2021, it’s a perfect example of how the industry is viewing technology moving forward. Several lenders during the pandemic had to piece together different electronic closing solutions to keep up with the large scale of volume happening. Our eClose solution provides one consistent and seamless borrower experience, from connecting with a lender all the way to eSigning, saving time and money for our lenders along the way. It doesn’t stop there.

FEBRUARY 2022

with Ben Caballero HomesUSA Founder and CEO

Top of the list: An interview with Ben Caballero Dallas broker ranks as the most prolific real estate agent in the country Each year RealTrends releases its list of the highest performing real estate agents in the country, and, like clockwork, Ben Caballero of Dallas-based HomesUSA tops the list.

HousingWire: What does HomesUSA do?

Ben Caballero: Our service supports builders, sales, their marketing and then management as it relates to marketing their homes to Realtors. We are not a business-to-consumer company. We are business-to-business. What builders don’t need is a Realtor to list their homes in a traditional way. But what they do need is for the Realtors that have buyers to have the complete and accurate information about their homes. So that those agents will bring their buyer to the builder. We have a specialized service to ensure that the builder’s homes are presented to the Realtors through MLS in the most efficient and accurate way. And then we provide a platform that allows the builders to see that we are accountable and transparent so that if they have any questions about anything, they can log in to our system and see it.

HW: So, talk more about the value that you provide. For example, one of the building companies you work with is Toll Brothers, a pretty sophisticated, publicly traded company. Why can’t Toll Brothers just put the homes on the MLS themselves?

BC: They could, and a lot of homebuilders do. Meritage Homes, Taylor Morrison are some of the larger public builders that do. But when you’re doing hundreds of buildings a year, you have to put them in right as they’re completed, and you have to be sensitive to the completion date. And when a home is completed, you have to get the photography done. There’s a management process we do where we touch each listing approximately 23 times, from changing the status and stage in construction process to changing the photographs. And then builders are pretty likely to change prices throughout the life of listings, and they’ll list it and if the market is softer, they will lower the price.

So, with our listings, the Realtors know they have a level of confidence that the information is accurate.

The full-length interview was first featured on HousingWire’s website. To read the entire interview, go to housingwire.com.

FEBRUARY 2022

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Each year RealTrends releases its list of the highest performing real estate agents in the country, and, like clockwork, Ben Caballero of Dallas-based HomesUSA tops the list. In 2020, Cabellero reported 6,409 transaction sides — or 18 home sales a day — for a deal volume of $2.2 billion. So, who in the world is Ben Caballero? And are these numbers for real? Caballero grew up in Florida, served in the Air Force and has spent the last several decades in Dallas, staying in Big D because a few people were friendly enough to help when Caballero’s car broke down.

He is CEO of HomesUSA, which helps homebuilders place homes on Texas’s sundry Multiple Listings Services.

Previously, Caballero was a homebuilder and operated an apartment rental service. Before then he spent decades in homebuilding and apartment rental services.

As for the number … they are kind of real. Caballero is like any real estate listing agent, on the hunt for clients. But instead of individual homesellers, his clients are homebuilding companies including Toll Brothers, Trophy Signature Homes and Historymaker Homes.

Caballero does not have to guide these corporate clients through the legal and administrative work — and emotional heft — of selling a home. His job is to ensure homes are being seen. The staggering home sale numbers perhaps distract from the fact that Caballero arguably does have a major insight: homebuilders are traditionally too estranged from real estate. And the result is that the real estate agents of homebuyers can overlook newly built homes because those homes have not been properly entered into the MLS, and promoted the way existing homes are.

HomesUSA has changed this, at least for much of Texas, and Caballero believes he has shifted homebuilder behavior nationally (HomesUSA also aspires to its own national expansion). HousingWire spoke with Caballero over video from the CEO’s Dallas office on HomesUSA’s revenue, business model and Caballero’s own journey. Here are the highlights of that discussion.

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Fairway delivers service dogs to veterans

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Making “Paws for a Cause” a priority over the holidays

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By Sarahi De La Cuesta

Fairway Independent Mortgage Corporation, Fairway Wholesale Lending and the American Warrior Initiative (AWI) wrapped up last year by granting 16 service dogs to 16 veterans in a timespan of less than one hour. The presentations were part of the American Warrior Initiative’s mission to bridge the military-civilian divide by bringing awareness to civilians all over this country of the challenges facing service members and helping service members to know that there are people who do care.

Fairway founded AWI in 2015 and underwrites all expenses of the nonprofit, with Fairway employees donating millions of dollars to the nonprofit over the years.

“When I began to originate loans for activeduty military clients in Leesville, La., I heard stories of what these soldiers and their families were going through, and it broke my heart.

Some of the challenges include repeated deployments, post-traumatic stress, financial strain, higher rate of divorce, and tragically a higher rate of suicide,” Louise Thaxton, a branch manager at Fairway and a military specialist for the American Warriors Initiative, said.

“As I began to speak nationally to mortgage professionals about the needs in the military community, there was a beautiful response, and people began asking how they could help.

The CEO of Fairway generously allowed us to create a nonprofit where 100% of the donations would go directly to veterans and active duty service members,” she said.

In total, AWI funding granted 100 service dogs in 2021, a few seen in these photos, doubling the 50 g iven in 2020.

It has not, however, been a smooth ride to get to this p o i n t , w i t h t he COVID-19 pandemic bringing hardship to the cause.

FEBRUARY 2022

“Because of the pandemic, service dog companies either completely shut down or drastically reduced the training of dogs,” Thaxton said. “This dramatically impacted our initiative in 2020 as we were only able to grant 50 dogs when the goal was actually 100. And a tragic fact is that suicide rates increased for veterans in 2020.

“We are determined, moving forward that we will place as many dogs in the hands, hearts and lives of as many veterans as we can — because we believe service dogs save lives,” she said.

Along with donating service dogs, Fairway also honors service members through staffrelated activities, such as wearing red on Fridays to “Remember Everyone Deployed” and hosting events across the country like 5Ks and auctions.

Looking ahead, Thaxton said her long-term goal is to create a veteran reality TV show that brings awareness to the challenges that veterans and active-duty military members face as well as how Americans can help.

dos

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KUDOS

FEBRUARY 2022

parting shot

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After news of tornados, wildfires, hurricanes and other natural disasters made headlines throughout 2021, the year ended with a wildfire destroying nearly 1,000 homes around the Denver and Boulder, Colo. area, as pictured here. The news closed the year out with a story that has become all too common — that another natural disaster has wreaked havoc and left many impacted in its aftermath. At the end of last year, the U.S. Department of Housing and Urban Development announced the allocation of more than $2 billion in disaster funding for communities in 10 states covering 15 major disasters. While the news came before the Colorado fire at the end of the year, it includes wildfires in California, hurricanes in Louisiana, earthquakes in Puerto Rico and more. “These disaster recovery and mitigation funds are essential to advancing the Biden-Harris Administration’s climate and equity priorities by building long-term and inclusive resilience to the impacts of climate change, particularly for underserved and marginalized communities,” said HUD Secretary Marcia Fudge at the time of the announcement. “With these allocations, we are addressing climate justice in hard-hit communities that can now begin the process of building back better from disasters and improving long-term, equitable resilience to future impacts of climate change.”

FEBRUARY 2022

REUTERS / ALYSON MCCLARAN - stock.adobe.com

❱ NATURAL DISASTERS IN 2021

OUR AUDIENCE = YOUR AUDIENCE solutions.housingwire.com

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