Wednesday, December 1, 2021

Mortgage – HousingWire

Mortgage – HousingWire

Clever raises $8M to expand mortgage platform

Posted: 01 Dec 2021 10:14 AM PST

Online real estate platform Clever has raised $8 million in a Series B funding round to expand its team and accelerate its mortgage efforts, the company said on Wednesday.

The round was led by Cultivation Capital, along with a strategic investment from The Mortgage Collaborative (TMC) Emerging Technology Fund. 

Since its creation in 2017, the company has raised $13.5 million, including the new capital raising and a $3.5 million Series A round announced in the spring of 2019.

Clever’s platform connects consumers with over 12,000 vetted real estate agents. The company negotiates discounted rates, making it easier to compare and interview agents. Listing fees are 1%, far lower than the typical 2.5% to 3% that is the industry standard, the company said.

Much of Clever’s revenue appears to come in the form of referral fees paid by these partner agents, who receive information from Clever about the seller and their property. All agents must have an active real estate license and have at minimum five years of experience. Clever is a licensed brokerage in Missouri. It also works with buy-side agents.

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Ben Mizes, Clever’s co-founder and CEO, said the model has helped consumers save over $80 million in fees. “We’ve proven that customers can choose both low fees and great service,” the executive said in a statement. 

The capital raised will be used to grow the team from 75 to 200 full-time employees. Much of the increase will support the new platform for mortgage lenders. 

According to Luke Babich, Clever’s co-founder and COO, some online lenders have the best rates but lose in the services provided to home buyers. “We enable lenders to build a cohesive real estate team for their borrowers with a top agent, concierge service, and cash back at closing.”

Clever claims it reached $4 billion in total real estate sold through its platform, pacing to sell over 6,000 homes in 2021. The company said it is profitable. 

Owen Lee, a limited partner of TMC’s fund and co-owner of Success Mortgage Partners, said the collective believes that Clever will “shift paradigms” in the mortgage industry. He is supporting the company as an investor and early adopter of its lender platform.

The post Clever raises $8M to expand mortgage platform appeared first on HousingWire.

Ex-MBA prez Ronald McCord to pay $52M mortgage fraud penalty

Posted: 01 Dec 2021 09:12 AM PST

A federal judge ordered Ronald McCord, the founder of Oklahoma City-based lender and servicer First Mortgage Company, who was also once the president of the Mortgage Bankers Association (MBA), to pay $51.8 million in restitution for mortgage fraud.

United States District Judge Robin Cauthron ordered McCord also serve 8.5 years in prison — the maximum the federal government said it would seek — as well as three years of supervised release. McCord’s penalty is dwarfed by the $95 million that Cauthron found he cost local banks, financial institutions and homeowners, during his sentencing in the Western District of Oklahoma on Monday.

In June 2020, a federal grand jury returned indictments charging McCord with having defrauded mortgage lenders Spirit Bank and Citizens State Bank, as well as Fannie Mae and others over the course of three years. McCord pleaded guilty in May to selling more than $14.1 million in Spirit and Citizens loans "out of trust."

Instead of repaying those loans when the mortgages were refinanced or paid off, he released the mortgages at two properties in Leland and Denver, North Carolina.

When Spirit and Citizens discovered the scheme, the two lenders canceled future warehouse loans to First Mortgage Company and required McCord to assign the mortgages to the banks. First Mortgage Company still had $340 million in outstanding balances on Spirit and Citizens' lines of credit at the time of the federal lawsuit's discovery.

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In early 2017, after Spirit and Citizens stopped funding his company's mortgages, McCord sought a new warehouse lender. He set his sights on CapLOC, a North Carolina-based mortgage lender, and tried to sell CapLOC First Mortgage Company's lending arm. According to McCord, he made false statements to CapLOC in an attempt to seal the deal.

“This was a carefully calculated scheme by which the defendant defrauded local banks out of tens of millions of dollars, made false statements to a financial institution, diverted escrow monies intended to pay homeowners' taxes and insurance premiums to cover his company’s operating expenses, and then laundered the proceeds to fund his lavish lifestyle,” acting U.S. attorney Robert Troester said in a prepared statement.

McCord also defrauded Fannie Mae, through First Mortgage Company's mortgage servicing arm.

His company serviced about 12,000 loans totaling $1.8 billion for the government-sponsored enterprise. McCord used escrow accounts, meant to pay homeowners' taxes and insurance premiums, to cover his company's operating expenses. As a result, he bounced checks to more than 60 taxing authorities, causing borrowers to default on their taxes.

McCord then laundered the proceeds and diverted them toward paying more than half the purchase price of his son's $900,000 Oklahoma City home, and the construction of his custom vacation home in Colorado.

Separate from his corrupt business ventures, McCord served as the president of the MBA in 1997. The position at the time was a volunteer role, unlike the lobbying group's current office of president, which is a paid staff position.

The investigation which produced the case was a collaboration between the Federal Bureau of Investigation's Oklahoma City office, and the offices of inspector general at both the Federal Housing Finance Agency and the Federal Deposit Insurance Corporation.

The post Ex-MBA prez Ronald McCord to pay $52M mortgage fraud penalty appeared first on HousingWire.

HousingWire Magazine Supplement: December 2021/ January 2022

Posted: 01 Dec 2021 09:00 AM PST

Maleesa Smith
Maleesa Smith,
Managing Editor, Content Solutions

The close of this year and the beginning of 2022 leave me with one question: was 2021 really just 2020 part 2? For the most part, employees continued in a hybrid, if not fully remote, work scenario. We logged on to countless Zoom calls and overused the phrase "new normal." But there were also glimmers of "the Golden days."

From MBA Annual in-person in San Diego to HousingWire's own in-person HW Annual in Frisco, Texas, we had the chance to dust our blazers and business cards. For me personally, it equated to eight blisters – yes, I counted – after a single day in heels. Pain aside, it was wonderful to see familiar faces again and meet folks I had only seen on video calls. Many of you are much taller than I anticipated.

Even with signs of pre-COVID life returning, it's clear that the housing industry as a whole is not returning to its former self. The digital acceleration that occurred across all facets is inextirpable. In the pages beyond, we've compiled the ultimate look at solutions developed across servicing, real estate, title and more. It's been quite a year, and I know I'm not alone when I say I'm excited to see what's ahead in 2022.

To see all HousingWire Magazine issues, click here.

The post HousingWire Magazine Supplement: December 2021/ January 2022 appeared first on HousingWire.

HousingWire Magazine: December 2021/ January 2022

Posted: 30 Nov 2021 09:00 PM PST

Brena Nath
HW+ Managing Editor

As we enter a new year, let's look at some of the events that we can look forward to in 2022. For starters, it's a leap year and the year the Winter Olympics and FIFA World Cup will take place. Toward the end of the year, Americans will also be selecting the 118th Congress. But what about what's next for the housing industry?

Unlike asking a Magic 8 Ball about the future and crossing your fingers that you get the answer you want, this December/January issue was designed to give as much clarity and insight as possible around what to expect in housing in 2022, so you can enter the next year ready to compete. This is the second year that HW Media's newsrooms have come together to give an inside look at what to expect across the entire housing ecosystem.

Starting on page 30, our editorial team broke down some of the biggest trends to watch for in 2022 in the mortgage, real estate, servicing, title and secondary space. This issue also recognizes our 2021 class of HousingWire Tech Trendsetters, as we honor their immense accomplishments over the last 12 months.

These are the leaders who are injecting new technology into the housing market and pushing the envelope with tech disruption. Congrats to this year's honorees!

To see all HousingWire Magazine issues, click here.

To see the HousingWire December/January Magazine Supplement, click here.

The post HousingWire Magazine: December 2021/ January 2022 appeared first on HousingWire.

Mortgage apps decline 7.2% with a lower appetite for refis

Posted: 30 Nov 2021 02:34 PM PST

Mortgage applications declined 7.2% for the week ending Nov. 26, reflecting a lower appetite for refinances, according to the Mortgage Bankers Association (MBA) survey published on Wednesday.

The drop was mainly driven by the refinance index declining by 14.8% from the previous week, on a seasonally adjusted basis. Concurrently, the purchase index grew by 5.1% from the week prior.

However, mortgage applications declined across the board in comparison to a year ago. The overall market composite index dipped 29.6% on a seasonally adjusted basis. Refinance apps fell 40.7% year over year, and purchase apps decreased 9.4% in the same period.

Joel Kan, the MBA's associate vice president of economic and industry forecasting, said mortgage rates rose for the third week in a row, reducing incentives for many borrowers to refinance. "Over the past three weeks, rates are up 15 basis points, and refinance activity has declined over 18%," he said.

Regarding purchase activity, he said the increase in applications was driven by a 6% growth in conventional loans apps, which tend to be larger than government loans. The average loan amount increased to $414,700, the highest since February.  

The trade group estimates the average contract 30-year fixed-rate mortgage for conforming loans ($548,250 or less) increased to 3.31%, seven basis points higher than the previous week. For jumbo mortgage loans (greater than $548,250), it went to 3.27% from 3.28%.

Refinances represented 59.4% of total applications, down from 63.1% the previous week. VA loans consisted of 10% of the share, decreasing three basis points. Meanwhile, FHA loans went from 8.6% to 8.9% in the period. The USDA share was at 0.5% of the total.

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Nonbank profit margins improve, but expenses are up

Posted: 30 Nov 2021 01:00 PM PST

Nonbank mortgage lenders regained their footing in the third quarter, upping their net profit by 28% to $2,594 on each loan originated, according to a quarterly report published by the Mortgage Bankers Association on Tuesday. But they would be wise to look at expenses, which climbed to the second-highest rate in recorded history.

The results follow a turbulent second quarter, in which lenders fretted as net income and gain-on-sale margins cratered. The trade association found that from April to June 30, the reported net gain for nonbank lenders was $2,023, down from a reported gain of $3,361 per loan in the first quarter of 2021.

The reason for the rebound in the third quarter had to do with production revenue, which increased by more than 20 basis points from the previous quarter, said Marina Walsh, vice president of industry analysis at the MBA.

Total production revenue in the third quarter came in at 396 basis points, up from 375 bps in the second quarter. However, despite the increase, Walsh noted that compared to a year ago, production revenue lagged in the third quarter by almost 80 bps.

On a per-loan basis, production revenue climbed to $11,734 per loan in the third quarter, up from $10,691 per loan in the previous quarter, the report said.

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Overall, 92% of nonbank lenders that partook in MBA's survey posted overall profitability in the third quarter, up from 84% in the second. In total, 365 companies participated in the survey.

Meanwhile, average production volume fell in the third quarter to $1.17 billion per nonbank lender, a dip from $1.35 billion in the second quarter. That corresponded with a drop in the number of loans originated, from 4,615 on average in the second quarter, to 3,889 in the third quarter, according to the survey’s findings.

The trade group also noted that total loan production expenses and personnel expenses jumped in the third quarter, averaging to $9,140 and $6,185 per loan, respectively.

"Per-loan production expenses continued to rise for the fifth consecutive quarter, reaching the second-highest level ever reported. Rising sales costs that are often determined based on a percentage of loan balances was one primary factor for the increase in expenses," Walsh said. "The average loan balance for first mortgages reached another study-high in the third quarter, passing the $300,000 threshold for the first time to over $308,000."

Productivity for loans originated also dipped, with production employees averaging 3.6 loans per month in the third quarter compared to 3.7 loans in the second quarter.

Another trend highlighted in the report is that the purchase share of total originations has continued to steadily grow, coming in at 59% in the third quarter from 57% in the second, the trade group said.

The MBA estimates that for the mortgage industry as a whole, the purchase share was 46% in the third quarter, up from 44% in the previous quarter.

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Competition for mortgage underwriters has never been fiercer

Posted: 30 Nov 2021 11:07 AM PST

HW-rolodex-LO

Record-setting mortgage originations coupled with a resurgent private-label securitization market have created an expanding demand for loan underwriters at a time when they are in scarce supply. 

That demand-supply imbalance has led to hiring blitzes, lucrative salary offers and bonuses that may help individual firms attract talent, but it also tends to exacerbate the shortage of underwriters available for competing companies. Because, in the end, everyone is seeking to draw from the same limited pool of candidates. 

The causes of the underwriter shortage are varied, but it is most pronounced in the private-label market, industry insiders contend.

"We've grown in excess of 100 employees already in two-and-a-half quarters, that's underwriters," said John Levonick, CEO of Charlotte-based Canopy, a third-party due-diligence (TPR) firm that started doing business in the second quarter of 2021. "And we're actively hiring. Underwriter pay exceeds five digits, and many of them have the opportunity to get … overtime."

Michael Franco, CEO of New York-based SitusAMC, one of the largest TPR firms in the business, said his company has added 2,400 employees organically over the past two years, not counting personnel added through acquisitions. He stressed that is across all facets of the organization, including underwriters for residential mortgage originations and private-label securitizations as well as the firm's commercial operations.

"We had about 2,800 employees as of December 2019 across residential and commercial, and now we're up to 7,300 [including organic hires and employees added via acquisitions]," Franco said. "Are we planning to double the size of the firm every two years? Probably not. But we will continue to hire as needed."

Chris Guidici, managing director of business development at Illinois-based TPR firm Wipro Opus Risk Solutions, said "there's definitely been a shortage of underwriters," adding that has resulted in a lot of flux and shifting in personnel across firms.

"I've seen a person leave here to go to another firm, and then go to yet another firm, all within six months," Guidici said. "We've had to do three compensation adjustments just to slow down attrition and to attract new talent, the most recent one done within the last three to four months. … This [the underwriter shortage] came on everyone in a quick fashion over the past year to year-and-a-half."

HousingWire interviewed executives at more than half a dozen companies, including TPR firms, loan-trading companies and bond-rating agencies, to take the pulse of the industry on the scramble for underwriting talent. All agreed the causes of the shortage are varied and complex. 

One major dynamic at play is that the same pool of underwriters is in demand for both loan originations, and, on the backend of the process, for doing due-diligence for private-label loan-pool securitizations. And the demand, hiring incentives and pay for underwriters are generally much better right now on the origination side of the equation — with that demand being fueled by a booming origination market. In addition, providing due-diligence services as an underwriter for private-label transactions simply requires more time and a more robust skill set than is required on the mortgage-origination side of the business, TPR firm executives said.

A recent report from the Federal Reserve Bank of New York illustrates the explosion of mortgage originations during the past year. The report reveals that over the four quarters ending the second quarter of 2021, "mortgage originations reached a historic high, with nearly $4.6 trillion in mortgages originated."

"You have a much higher origination market overall than you did in 2019, so there's more underwriters being employed in actual [loan] origination jobs," Franco said. "At the same time, there's a greater need for underwriting talent within the private-label side of the business [because it's expanding, too], and there's just so many underwriters out there, right?"

Levonick added that mortgage originators have lured underwriters with lucrative compensation packages, including "signing bonuses and salaries way beyond what the market could bear on the due-diligence side" for the private-label market.

"The originators just swooped in and said, 'Hey, let's do $5,000, $10,000, $20,000 signing bonuses, and performance bonuses that are guaranteed for end-of-year production," he said. "And there's just no way for due-diligence to really compete with that."

Levonick said contributing to the problem is the fact that many larger TPR firms provide both front-end origination-underwriting services as well as back-end secondary market underwriting services. "And they might push their underwriters to the higher-margin opportunities on front-end [origination side]," he added.

Joseph Mayhew, chief credit officer at Texas-based Evolve Mortgage Services, which also provides TPR services, said the mortgage market is still in a low-rate environment. So, he explained, there's "a lot of business happening" on the origination side, compared with the resurgent but still relatively small private-label market — which represented about 3.5% of the overall residential mortgage-backed securitization market as of August of this year, according to a report from the Urban Institute's Housing Finance Policy Center. The bulk of mortgage securitizations are done through the so-called "agency" market — which is dominated by the government-sponsored enterprises Fannie Mae and Freddie Mac and to a lesser degree Ginnie Mae. Fannie and Freddie’s market share during the pandemic rose to nearly 60% of all new mortgages, up from 42% in 2019, according to the Urban Institute.

On the origination side, mortgages produced for the GSEs also dominate the playing field, so that business is generating a huge demand for underwriters.

"That's where your seasoned underwriters are staying because it’s 90% to 95% of the business," Mayhew added. And it is steady business, as opposed to the more sporadic securitization market featuring loan pools that can feature multiple, varied mortgage products. 

"[The explosive loan-origination business] has diverted underwriters that might normally be on the due-diligence [private-label] side because it's just more profitable for [companies] … because there's more of it to do, and you can do it faster [than providing underwriting services for private-label transactions]," Mayhew added.

Mayhew said it's simply harder and more time-consuming to do underwriting/due diligence for private-label transactions. He said most of the origination market today involves "automated underwritten deals that go through one of the GSEs, and you don’t use the same skill set for that."

"There aren't as many automation tools to help on the TPR [private-label] side, and what I'm seeing is we are having to teach the old ways of craftsmanship and getting loans reviewed in a more manual way," he added. "Ultimately, it's a different style of underwriting. We have enough underwriters overall for the industry, but we don't have enough for the [residential mortgage-backed securities, or RMBS] market segment."

Even as the demand for underwriters continues to surge across both the origination and securitization segments of the business, Roelof Slump, managing director of U.S. RMBS at New York-based Fitch Ratings, said there also has been a concurrent explosion of new third-party due-diligence firms over the past few years — all competing for the same pool of underwriting talent.

"We've certainly seen an increase in the number of TPR firms out there in the market," he said. "There's more TPR firms active today than you had two years ago." (There are at least two dozen TPR firms active in the market, based on lists of approved TPR firms issued by bond-rating agencies.)

"Some might have better technology, which may mean the work is more efficient, and they can handle more loans [per underwriter], and it remains to be seen how that plays out," Slump added. "But at least … there's certainly a robust, deeper market of TPR firms currently available to issuers."

Still, according to Tom Piercy, managing director of Colorado-based Incenter Mortgage Advisors, those multiple TPR firms are still competing for talent from the same limited pool of underwriters. "That same underwriter on the front end [doing originations] also is in demand on the back-end [for securitizations]," he said.

John Toohig, managing director of whole loan trading at Raymond James, added: "So all of these companies are fighting for the same talent, and it's really fascinating to watch the musical chairs. You'll call one person at one firm, and then you'll call him again six weeks later and discover he's moved over to [another firm]." 

Finally, another major contributor to the shortage of underwriters in the industry is the strengthened regulatory and industry-standards environment of today, which has been beefed up considerably since the global financial crisis and related housing-industry crash some 15 years ago.

"One of the things due-diligence firms face is that the rating agencies have a level of expectation around experience, and three years is the relevant amount of experience [for an underwriter]," said Bill Shuey, director of securitization operations at Wipro Opus. "Some of the things that happened pre-Dodd Frank during the financial crisis have made everyone very cognizant of making sure that you have a competent underwriting staff, which is a good thing. But it does contribute to a shortage [of underwriters]."

Fitch's Slump said all of these forces and more acting on the demand for and supply of underwriters will likely "continue to contribute to a slowing-down effect as [private-label] deals come through [for review and rating]."

"Ultimately, the TPR firm needs to be an independent third-party entity," Slump added. So, he said, an issuer "can't just bolt on a review and say they've done the diligence."

"The industry is trying to come up with alternatives, and better ways of thinking about it [the underwriter challenge]," he said. "But at least from a number-of-firms standpoint, there’s certainly a robust, deeper market of TPR firms currently available to issuers. We’ve continued to watch that growth."

This is part II in HousingWire's three-part series on the repercussions of an industry-wide underwriter shortage. Check out the first story in the series here, and look for part III to be published later this week. 

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FHFA: Government to back mortgages up to $970,800 in 2022

Posted: 30 Nov 2021 09:12 AM PST

The Federal Housing Finance Agency (FHFA) today announced the baseline conforming loan limit for 2022 will be $647,200, an increase of 18%.

The federal government will now back mortgage loans of nearly $1 million, with the new ceiling loan limit for one-unit properties in most high-cost areas now $970,800 — or 150% of $647,200.

Special statutory provisions establish different loan limit calculations for Alaska, Hawaii, Guam, and the U.S. Virgin Islands. In these areas, the baseline loan limit will be $970,800 for one-unit properties.

In 2021, the FHFA set the baseline conforming loan limit at $548,250, a 7.5% increase from the prior year. Over the past six years, the baseline loan limit has risen $230,200.

Median home values exploded across dozens of housing markets across the country in 2021. In the third quarter, the FHFA announced that its house price index saw the largest increase since the metric was introduced in 2008. House prices increased 18.5% across the nation, while some markets saw even larger increases.

All large metropolitan areas tracked by the FHFA saw house-price increases. In Boise, Idaho, house prices jumped 35.8%, and the U.S. Census Bureau’s mountain division saw increases of 25% year-over-year.

In late September, several nonbank mortgage lenders announced that they would preemptively increase conforming loans limits to around $620,000 for most U.S. counties, a sign that the FHFA would be hiking loan limits significantly to keep up with the rise in prices.

A 2008 law determines the conforming loan limits for Fannie Mae and Freddie Mac.

The Housing and Economic Recovery Act established a formula for increases, and set the baseline loan limit at $417,000. It mandated that the baseline could only rise after home prices returned to pre-recession levels. That condition was finally met in 2016, when the FHFA increased conforming limits for the first time in a decade.

For high-cost areas, where 115% of the local median home value exceeds the baseline conforming loan limit, the maximum loan limit is higher than the baseline loan limit. HERA establishes the maximum loan limit in those areas as 150% of the baseline loan limit.

Some parts of the housing finance industry have questioned how the conforming loan limits are set.

The Housing Policy Council, which represents large mortgage lenders and servicers, wants the FHFA to use its authority as both regulator and conservator of Fannie Mae and Freddie Mac to freeze or drop the loan limits, notwithstanding the formula set by statute.

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Mortgage – HousingWire

Mortgage – HousingWi...