Mortgage – HousingWire |
- Q&A: The nitty gritty on Milo’s crypto mortgage
- Groups blast FHA draft defect taxonomy in joint letter
- Opinion: The changing landscape of the IMB
| Q&A: The nitty gritty on Milo’s crypto mortgage Posted: 28 Jan 2022 12:53 PM PST  Milo, a Miami-based digital lender, announced last week that it is rolling out a crypto mortgage product to clients with digital currency. Josip Rupena, the CEO of Milo, hopes that his mortgage product will allow borrowers who may not be able to qualify for a conventional mortgage to have a shot at a 30-year mortgage, backed by a bitcoin pledge. Currently, the cryptocurrency universe is worth over $1.7 trillion though it has nosedived in the last week, down from about $3 trillion. HousingWire sat down with Rupena this week to learn about how a crypto mortgage transaction works, why a borrower would opt for a crypto mortgage, volatility, and what the future of crypto holds for the mortgage industry. Editor’s note: This interview has been edited for length and clarity. It was also conducted when crypto's market cap was about $3 trillion. Maria Volkova: Is the crypto a deposit of sorts? Can you explain to me a little bit how this transaction works? Josip Rupena: It’s not a deposit. It's going to go to a third-party custodian that we work with, and then that amount is going to be held there. It’s a pledge. So, what that means is that in the event that the consumer can’t make their mortgage payments, we have a claim on the actual crypto. MV: Is Bitcoin kept as collateral through the life of the loan? JR: Yes, we require them to keep Bitcoin collateral through the life of the loan. Once a client pays off the loan, the Bitcoin will go back to their digital wallet and the lien on the property will be removed. The exact unit amount of bitcoin (i.e. 10 bitcoin) would go back to them, and may be worth more or less in dollar terms than when they originally took out the loan. MV: Who is your target audience for this product? JR: What we’re seeing is that a crypto consumer tends to skew younger, so I would say that it’ll range from 20's to 40's. And I would say probably the average is going to be someone in the 30-year-old range. MV: In Milo's press release, there was mention of a waitlist for the crypto mortgage. How many customers are waiting in line to get a crypto mortgage? JR: Since we launched that waiting list a little over a week ago, I believe we have over 5,800 people on that list. And we expect demand to continue to grow as new people hear about what we’re doing and more importantly, they start to see that there’s an opportunity for them to now diversify and buy real estate. We’ve been really overwhelmed by the amount of interest in people reaching out to us. MV: If a borrower has $1 million in crypto why would they opt for a crypto mortgage instead of liquidating their Bitcoin and buying a house with cash? JR: I think the primary reason is the opportunity cost. So, when someone has amassed a significant portion of wealth that's comprised of crypto it becomes a very big opportunity cost to sell it, if you believe that it’s going to continue to rise over the coming years. And the other aspect is, if you do sell, there’s a likelihood that that’s going to trigger a taxable event. And then the third reason is that today, for someone that has crypto, it is challenging for them to qualify for a conventional loan. If they have to liquidate their crypto wealth, it becomes more challenging for them to be able to qualify, and a lot of people that have crypto, well, they may not have all the qualifications, to be able to qualify for a conventional loan. You may be able to have enough for a down payment, but you still need to qualify for a mortgage. So that’s what we’re really trying to solve for is if you’re trying to do this transaction, then can we put it all together and be a turnkey solution. MV: Your mortgage product is built around the idea that Bitcoin has value, and it will continue to grow, but what happens if Bitcoin is devalued? JR: It’s a great question. And it’s one that we think a lot about the structure and sort of risk parameters. For a consumer that pledges Bitcoin, there will be a margin call and if the value of Bitcoin drops below a certain percentage, that will trigger an event where we may have to liquidate to stay within our risk parameters of what we're comfortable with. But for most consumers that have Bitcoin, this is usually not the only amount of Bitcoin that they have, so it's likely that they would have the desire to pledge more, because again, they don’t really want to sell the Bitcoin because of volatility around it. I think that if you would have asked me five years ago, with the asset class being $200 to $300 billion in aggregate, like the digital asset class, then you would say, yes, there’s a likelihood that it could go down significantly. But I think if you fast forward today, the asset class is close to $3 trillion, and the reality is that it’s here to stay. I think that the expectation is that there will be volatility within the asset class, but I don’t think it disappears, by any means. MV: Are there plans to securitize the product? And who is funding this initiative? JR: Yes, at some point, we’re going to look at that. And we have several relationships with institutional capital partners for what we are doing. On the side of you know, who’s taking the risk? We've been fortunate to have great investors, equity investors into our company and that’s allowed us to go out and be a direct lender. And we have good institutional relationships as well, with partners that help us have more capital. But that’s all possible because we have great investors that are allowing us to really be innovative, and being a venture backed company. MV: What do you see being the future of crypto and mortgages? JR: There have been different companies trying to approach it from different perspectives. Our mindset around this is to help consumers that have digital wealth, be able to buy real estate and today that there’s a big friction point around that, so we’re trying to solve it from that side of the equation. I think that there’s a lot of people that are trying to solve through blockchain with title and records, and you know, the closings. So, there’s a lot of people looking at it from a pure infrastructure perspective, we’re looking at it from a consumer solution perspective. The post Q&A: The nitty gritty on Milo's crypto mortgage appeared first on HousingWire. |
| Groups blast FHA draft defect taxonomy in joint letter Posted: 28 Jan 2022 10:47 AM PST Consumer advocates, fair housing groups, banks and mortgage lenders don't always play on the same team, but today they joined forces to critique the Federal Housing Administration's proposed servicing defect taxonomy. In a joint letter to Lopa Kolluri, FHA’s principal deputy assistant secretary, the American Bankers Association, Americans for Financial Reform Education Fund, Center for Responsible Lending, Consumer Action, Housing Policy Council, National Consumer Law Center, National Fair Housing Alliance, National Housing Conference and the National Housing Law Project said HUD’s proposed defect taxonomy did not provide enough specifics on loan-level defects and remedies to be successful. The groups said HUD should not finalize the taxonomy before doing further engagement with stakeholders. The groups said that a successful taxonomy should prioritize violations, assess severity based on the level of harm the conduct poses to borrowers and FHA, assign a range of appropriate remedies for each specific violation and clarify how HUD will determine a remedies and address systemic defects. The current draft taxonomy does not meet those criteria, the groups wrote. The taxonomy also fails to mention borrower harm in its draft taxonomy, instead only focusing on harm to the property and the FHA. While the taxonomy is meant to provide clarity on the rules of the road for servicers, the groups said it seems designed for loan origination reviews. The groups argued the taxonomy should account for differences between servicing and originations. "Servicers, for example, are engaged in long-term relationships with many thousands o borrowers at one time," the letter reads. "A severity assessment must differentiate between those defects that have an ongoing impact on multiple borrowers and those that reflect isolated errors with no material impact on borrowers." Compliance as a Competitive Edge in a Purchase Market For lenders to be effective in today's purchase market, they need tools that increase their speed and efficiency, while also ensuring they remain in compliance.This white paper provides insights into why lenders should consider integrating compliance automation. Presented by: Total ExpertA HUD spokesperson did not immediately respond to a request for comment. On Oct. 28, FHA released its draft defect taxonomy for loan servicing, the agency's method of identifying loan-level defects and remedying them. Industry stakeholders at the time took issue with vague potential remedies, and said the taxonomy could drive away large depositories, who have in recent years fled the FHA market in the wake of False Claims Act enforcement actions. According to the taxonomy, if FHA were "unable to determine servicing compliance due to missing or incomplete records, individual account information or related data," the penalty could be as painless as furnishing mitigating documentation, or as harsh as life-of-loan indemnification. Steve Sharpe, a staff attorney at the National Consumer Law Center who focuses on mortgage servicing for FHA, the United States Department of Agriculture and Department of Veterans' Affairs-backed loans, said that ambiguous penalties could result in overly severe punishments for trivial mistakes. It could also lead to too-soft remedies for defects that cause systemic harm. "If you have every possible remedy — from [the consumers'] side it could be, "Well, you won't have a harsh remedy for the really important defects," Sharpe said. "What we're saying jointly is that this is complicated, and we should talk among all stakeholders, to define the really high-priority defects, and what would be an appropriate standard to address the defects." The post Groups blast FHA draft defect taxonomy in joint letter appeared first on HousingWire. |
| Opinion: The changing landscape of the IMB Posted: 28 Jan 2022 08:35 AM PST There are some interesting trends that have come out of the boom years of 2020 and 2021. The realignment of the mortgage industry should make us all rethink how we look at lenders by category. Rather than looking at bank-owned mortgage companies and independent mortgage companies, perhaps we should think of new categories. For example, there are nonbank mortgage banking companies that are not truly independent. These could be categorized as nonbank but publicly owned or owned by Wall Street private equity or hedge fund investors. Clearly, they are not independent mortgage bankers (IMBs). In fact, the Mortgage Bankers Association made clear a distinction that may be fading among nonbank lenders in their IMB White Paper published in 2019 where they stated, "IMBs are closely held private companies…..whose owners have skin in the game." Clearly, like all mortgage banking executive teams, there is a fiduciary feeling of responsibility that rests on these leadership teams. In many cases, the original founders still run these companies even after going public or selling a large equity position. But as we have seen even in recent moves, the CEO is a hired executive in many of these public nonbank lenders and Wall Street-owned firms. CEOs can come and go, but the firm keeps going. But unlike the IMB of old, the past few years have truly changed the landscape. We watch the stock prices of public nonbank mortgage companies in the same manner in which we watch public bank stocks. The era of the truly Independent Mortgage Banker has changed. Just take a look, for example, at the recent list published by Inside Mortgage Finance (listed with permission, subscription required to see full list) of the top lenders in 2021: 1. Rocket Mortgage (Quicken), MI What's interesting is that, while there are many nonbank lenders on the list, very few are truly IMBs – independent mortgage bankers owned and operated by their founder without shareholders or beholden to Wall Street investors. And while several on the list have, to their credit, turned their founders into billionaires and their CEOs have rung the closing bell on Wall Street, there will be likely differences between a public and truly privately owned IMB going forward. While hard to tell how this plays out over time, the lines are blurring. On the above list, for example, Fairway is still a true IMB by the definition described here. Does that mean that the CEO of this company can withstand the margin compression and market shifts with more patience than some others simply because he does not have to respond to market (street) expectations? Regardless of what happens going forward, we have definitely seen a paradigm shift in the market that has created this new form of nonbank mortgage company that perhaps cannot claim to be an IMB anymore but perhaps can behave more like a bank-owned mortgage company due to access to a broader range of capital sources. On the other hand, the truly independent mortgage bankers won't be on CNBC explaining quarterly earnings drops in a declining market — a benefit to independence. We will watch the next few years as this market shifts, the business gets harder as profits and margins shrink, and the implications to banks, nonbanks, and IMBs becomes clearer. But for institutions like the Mortgage Bankers Association and its members, the need to represent IMBs, nonbank mortgage bankers, and bank lenders needs a closer look when selecting board positions and leadership roles. It's no longer as easy to look simply at bank and nonbank when evaluating equality in leadership. The policy needs of various lender categories, now at least three, may have differences going forward. And true IMBs in particular need to make sure that their voice is heard, not just at the MBA, but broadly in state associations and with policy makers in Washington D.C. The implications to debates on capital, affordable lending policy, and other policy considerations within the GNMA programs and with the GSEs are just the tip of the iceberg as we look forward. David Stevens has held various positions in real estate finance, including serving as senior vice president of single family at Freddie Mac, executive vice president at Wells Fargo Home Mortgage, assistant secretary of Housing and FHA Commissioner, and CEO of the Mortgage Bankers Association. This column does not necessarily reflect the opinion of HousingWire's editorial department and its owners. To contact the author of this story: To contact the editor responsible for this story: The post Opinion: The changing landscape of the IMB appeared first on HousingWire. |
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