Mortgage – HousingWire |
- Rocket offers voluntary buyouts to 8% of workforce
- The crypto-mortgage is the new kid on the block
- FHFA gets blowback on proposed liquidity requirements
- CrossCountry strikes a deal to acquire LendUS
- Jim Linnane tapped to lead retail mortgage lending at Flagstar
- CFPB to use “dormant” Dodd-Frank power to regulate “risky” nonbanks
| Rocket offers voluntary buyouts to 8% of workforce Posted: 26 Apr 2022 05:30 AM PDT  Even the biggest mortgage players aren’t immune to the effects of higher rates and tight housing inventory. Rocket Companies, the parent of Rocket Mortgage and Amrock Title, said late Monday that it would be offering buyouts to 8% of its staff at its mortgage operations and title teams. The company has roughly 26,000 employees, spread across its headquarters in Detroit and in Cleveland. "One of our responsibilities as a company is to provide our team members a fulfilling career, and we have been able to do that for tens of thousands in the last 36 years," Mike Malloy, chief administrative officer at Rocket Central, Rocket’s human resources arm, said in a statement Monday. "Over that time, we have been through several market cycles — similar to those the industry is experiencing today. "As a result of today's market, some team members have told us they are considering a move to another position or a completely different industry. At the same time, our career growth options in certain areas of Rocket Mortgage and Amrock are limited right now, while the housing market normalizes after two years of unprecedented volume." The voluntary buyout package includes several months of pay; full medical, dental and vision coverage until November; payment for banked personal time off; early vesting of stock that employees received at the company's initial public offering in 2020, plus job training/resume building services. Rocket, which is easily the largest mortgage lender in America, reported $6 billion in profits in 2021. That was a 35.4% decline from the unprecedented refi boom in 2020, even though mortgage origination volume actually rose to $351 billion, up nearly 10% from 2020. Like virtually every other mortgage lender, Rocket has seen origination volume and profit margins fall in recent quarters. Mortgage business slowed dramatically in the fourth quarter — Rocket’s net income fell 69.5% year over year to $865 million, which was also a sequential decline of 37%. Rocket did not say if it would institute layoffs should the 2,000 or so workers selected for buyouts not agree to the packages. The news of Rocket’s workforce reduction comes just days after Wells Fargo, the nation’s largest depository mortgage lender, announced that it would be cutting jobs at its home lending division. Sources told HousingWire that hundreds of mortgage processors and underwriters received pink slips. Other job cuts over the last six months have come at Guaranteed Rate, which shuttered Stearns Lending‘s wholesale division; Freedom Mortgage, which shed jobs in South Carolina; Movement Mortgage, which laid off about 170 workers; Interfirst Mortgage, which has cut hundreds at its two locations; and perhaps most notably at Better.com, which has laid off about 5,000 workers since December. Earlier this month, HousingWire published a deep dive exploring how various nonbank mortgage lenders are likely to fare in a purchase-heavy mortgage market. Several analysts and industry executives said Rocket and the other top players are likely to see compressed margins and greatly reduced profitability, but will ride out the storm and likely grab market share due to their largesse and cash positions.
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| The crypto-mortgage is the new kid on the block Posted: 26 Apr 2022 03:00 AM PDT  A rising player in the world of crypto-mortgages and blockchain-enabled financing, LoanSnap, plans to expand its reach in the market by opening its lending platform to licensed mortgage brokers across the country in the near future. Karl Jacob, CEO and co-founder of LoanSnap, said the cyrpto-mortgage system his company has developed can originate more than just loans that LoanSnap mints. In addition to crypto-mortgages, LoanSnap is a full-stack mortgage company that originates traditional mortgages as well. "Our system I think is good enough that it can do not just the loans that we originate, but [loans originated by] other people," Jacob said. "It's an open platform. As long as the loans pass the Fannie Mae and Freddie Mac test, which is one of the requirements, we would certainly look at those loans. So, it's not just our loans supplying into this ecosystem … it could be any originator." Jacob added that LoanSnap, which currently employs about 40 people, has "literally just started" creating a broker network and is planning a formal announcement of the effort soon. "You’re probably one of the first people in the industry that I’m talking to about it," he added. "…It's all been organic so far, [so] it's nascent today, but I expect it to grow quite quickly." LoanSnap is a mortgage company that employs artificial intelligence (AI) technology to originate loans more efficiently and faster. It offers a 15-day loan-closing window and to date has originated "billions of dollars" worth of traditional mortgages dubbed "smart loans" by the company, according to Jacob, who was one of the original strategic advisors to Facebook when it was in its startup phase. "We saved our customers more than $80 million last year," he said. "We're not huge, but we're not small either." In addition to originating traditional mortgage loans employing artificial intelligence (AI) technology to create efficiencies and to speed up the origination process, LoanSnap has launched an innovative crypto-mortgage program that relies on AI technology, cryptocurrency and linking a real-world mortgage lien to a digital NFT — a nonfungible token. Essentially, through the so-called Bacon Protocol — a set of smart contracts and programming that exists on the Ethereum blockchain platform — investors can purchase stable coins, which are a form of "stable" cryptocurrency pegged to the value of the U.S. dollar. Those stable coin investments are then pooled to fund digital, AI-enabled mortgages, and the mortgage liens are then indelibly linked to an NFT, which in turn serves as a form of collateral for the stable coins funding the transaction. "So, the process is basically [that] the money [from the mortgage payment] flows back to the people who participate in originating and servicing that loan," Jacob said. "But the lion’s share of that money goes back to the stable coin holders — the people who lent the money to that borrower through the coin. As far as a borrower is concerned, they just have a home loan, and they make a payment just like they normally would from their bank account, or they also can make it from their crypto [currency] wallet." Jacob is not alone in seeing the potential upside for crypto-mortgages and AI-enabled traditional loans. To date, LoanSnap has attracted about $53 million in venture capital investment. The crypto-mortgages originated by LoanSnap so far are more akin to home-equity loans as opposed to home-purchase or rate-and-term refinance loans. The liens linked to NFTs represent a portion of a home's value as a result. To date, LoanSnap has originated about $7.3 million in crypto-loans across 27 homes that have a total value of $43 million. The annual percentage yield for holders of LoanSnap's stable coin used to fund the mortgages, called bHome, as of this week was 3.434%. On the high end, one bHome-funded crypto-mortgage involves an $820,000 mortgage and lien on a California home valued at $20 million. Another transaction, on the low end, involves a $30,000 NFT-backed mortgage loan and lien for a home in Vancouver, Washington, valued at $432,000, according to the Bacon Coin website. "It's significant," Jacob said. "It's getting to be a big project." Jacob added that he was an advisor to Facebook "when it was six guys in a house in Palo Alto [California]," so he has some receipts in making winning bets on emerging markets. "A lot of people when we started the stable coin stuff thought, you know, we're [crazy], it's small, but that's exactly what they told us at Facebook," Jacob recalled. "I'll never forget the moments when we were pitching it [Facebook] as an investment, and the most common feedback we got was, 'You guys are screwed because MySpace has 100 million users, and you will never catch them.'" Facebook is now approaching 3 billion users worldwide. By one estimate, the global cryptocurrency market, although volatile, is valued today at around $1.8 trillion and is projected to exceed $32 trillion in value by 2027. "When we’re talking about the crypto stuff, we don’t need [warehouse lenders] because warehouse lines are really a creation of the industry to solve a problem, which is that funders can't fund fast enough. And we don’t have that problem with blockchain because it funds [loans] in minutes," Jacob said. "I do think on the correspondent side and beyond, there’s definitely an opportunity, even for existing mortgage companies that are really good at the sales and marketing side, but maybe not so good at the back-end processing and all that. That's what we built our system to do [for crypto and traditional mortgages]." LoanSnap is not alone in seeing future opportunity in the crypto-mortgage market. LauraMac is a software as a service, or SaaS, firm that provides due-diligence automation tools for the secondary market. Its technology is used by third-party due diligence firms that assess mortgage pools in securitization transactions in the private label market. Bob Fulton, CEO of LauraMac, said he is seeing increased interest in including comprehensive loan information in secured blockchain-enabled mortgage transactions. "That would really be a value-add because the lien alone doesn’t tell you much, other than who owns the property," he said. "In any one of those transactions, especially as it relates to mortgage, there is going to be the need for validation of data that gets put into that blockchain, and we do believe that there's a role for LauraMac to help facilitate the validation of that information," Fulton added. "It would still be done through one of our [client] third-party review firms [using our platform], but we do see that as an opportunity for us to participate in that market." LoanSnap and LauraMac are far from alone in seeking to tap into the emerging blockchain and cryptocurrency lending markets. Other active players include Propy, Figure and Milo — as well as three companies backed by specialty housing-finance company Redwood Trust's venture investment arm, RWT Horizons. They are Vesta Equity, Oasis Pro Markets and Liquid Mortgage.
As promising as the crypto-mortgage market might be, it is attracting the attention of regulators like the U.S. Securities and Exchange Commission (SEC), which is examining NFTs and crypto exchanges to determine if some nonfungible tokens should be treated as regulated securities. LoanSnap and companies offering similar NFT investments are not out of the woods yet in terms of potential SEC scrutiny, then, but Jacob seems confident that his company's product can withstand the scrutiny. One long-standing test in U.S. law for determining if an instrument is a security focuses on whether it can be deemed a passive-income investment vehicle — in which investor return is dependent on the efforts of others to increase value. An NFT secured by a mortgage loan seems to be a different kind of product than a speculative security because its value is based on a loan covenant secured by a hard asset — not the hope that some artist's NFT will increase in value after he or she pens a hit song in the future. "They [the bHome stable-coin buyers] all understand how a mortgage loan works, and they all know that homeowners are going to pay that loan back no matter what. That’s the first check that they write," Jacob said. "So, investing in something backed by that is a no-brainer, compared to magic internet money and a bunch of this other stuff [speculative cryptocurrency].” Still, the emerging crypto market remains very nuanced and in flux on many fronts, and the shot callers on questions of regulation will be U.S. regulators ultimately, not LoanSnap or other companies now looking to build out this brave new market. The post The crypto-mortgage is the new kid on the block appeared first on HousingWire. |
| FHFA gets blowback on proposed liquidity requirements Posted: 25 Apr 2022 05:30 PM PDT During the market disruption in March 2020, the value of mortgage servicing rights became temporarily disconnected from mortgage rates. Large mortgage sellers and servicers faced severe margin calls, and it took several weeks for them to get the go-ahead from the Federal Housing Finance Agency to draw on their liquidity buffers. It's a scenario that large nonbanks are hoping not to repeat. "The point of [FHFA] asking them to have that liquidity is to make them more resilient in a stressful environment. The point of building up liquidity is to be able to use it," said Ed DeMarco, president of the Housing Policy Council, which reps large nonbank mortgage lenders and servicers. Industry stakeholders took to a virtual forum Monday afternoon to share their thoughts on proposed tweaks to criteria for Fannie Mae and Freddie Mac sellers and servicers, as well as a 2021 proposal by Ginnie Mae for its issuers. Participants took it as a good sign that Ginnie Mae and the Federal Housing Finance Agency jointly hosted the event. The Conference of State Bank Supervisors — which regulates nonbanks at the state level — also participated in the session. The FHFA proposed the raft of changes for GSE sellers and servicers in February. As conservator of the government-sponsored enterprises, FHFA does not regulate mortgage lenders. Its proposed criteria for Fannie Mae and Freddie Mac's counterparties, however, would determine how they manage risk. Ginnie Mae issued its own proposed guidelines for its issuers in July 2021, but has not implemented them. The FHFA proposed an additional liquidity buffer for large non-banks, which it said they could use "in times of financial or economic stress." The Housing Policy Council asked FHFA to clarify exactly when those buffers could be used, and how they would be re-capitalized after the stressful event ends. "Large nonbank seller/servicers need to understand the procedures for accessing the liquidity buffer before a crisis, not during one," the Housing Policy Council wrote. Emissaries from several industry trade groups also criticized a 200 basis point incremental liquidity charge that FHFA proposed on all to-be-announced hedging positions. The FHFA said the new requirement was a response to margin calls it observed in March 2020. Scott Olson, executive director of the Community Home Lending Association, said the liquidity requirement was "out of the blue," and would penalize smaller sellers and servicers. In a letter to the FHFA, CHLA said the requirement would harm consumers by increasing concentration and making the market less competitive. "Many solvent smaller IMBs, facing big liquidity increases, will elect to simply sell their loans to aggregators instead of to the Enterprises," CHLA wrote, which could result in "fewer consumer choices, less competition, and less personalized service." Other commenters argued the liquidity increases could also drive originators to manage risk less effectively. Urban Institute researchers Karan Kaul and Laurie Goodman, and former Ginnie Mae president Ted Tozer, in a joint letter, said the new proposed liquidity requirements appeared to be "punitive." They argued the extra liquidity charge would discourage hedging, and could push originators to use less effective hedging strategies. "This is the opposite of what the FHFA wants," Kaul, Goodman and Tozer wrote. While the FHFA proposed heightened liquidity requirements for nonbanks, committed lines of credit would not count toward fulfilling them. Committed lines of credit — which can include warehouse, servicer advance and mortgage servicing rights lines of credit — are governed by covenants between the financial institution and the borrower. Unlike uncommitted lines of credit, they cannot be rescinded without breaking the agreement. If FHFA does not allow those committed lines of credit to count in some portion for the overall liquidity requirements, "Either there's going to be a lot more warehousing of cash and cash equivalents, or lines are going to get drawn on rather than waiting," said DeMarco. In its comment letter, the trade group also highlighted that committed lines of credit performed well during the disruptions of early 2020. Bob Broeksmit, president of the Mortgage Bankers Association, said it would be "problematic to eliminate recognition of committed lines of credit." "They are durable in ways that uncommitted lines are not, and can only be withdrawn under certain conditions," Broeksmit said. A frequent criticism of the previous FHFA administration was its tendency to implement changes the mortgage industry viewed as abrupt. The caps on investment properties the agency implemented together with the U.S. Treasury in 2021 caught many in the mortgage industry off guard. FHFA Acting Director Sandra Thompson has generally had a more deliberative stance. But, in a departure from that approach, the agency currently expects GSE sellers and servicers to implement its proposed changes to eligibility requirements within eight months. That timeline did not win FHFA any points among industry stakeholders. The Housing Policy Council, along with the Mortgage Bankers Association and the Urban Institute, also asked FHFA to delay implementation of any changes by at least a year. Currently, the FHFA envisions implementing the changes by December 2022. The post FHFA gets blowback on proposed liquidity requirements appeared first on HousingWire. |
| CrossCountry strikes a deal to acquire LendUS Posted: 25 Apr 2022 03:22 PM PDT  Ohio-based CrossCountry Mortgage has entered into an agreement to acquire California-based retail lender LendUS, multiple sources familiar with the deal told HousingWire. Founded in 2003 by mortgage broker Ron Leonhardt, CrossCountry originated $52 billion in mortgages in 2021, up 22% year-over-year, checking in as the 17th biggest lender in the country, according to Inside Mortgage Finance. LendUS doesn't have quite the same heft. Founded after the combination of American Eagle Mortgage, Mortgage Financial, Regency Mortgage and RPM Mortgage, the company's originations reached $7 billion in 2021, down 1% year-over-year. It has about 350 loan officers and roughly 100 retail branches. LendUS and CrossCountry did not respond to multiple requests for comment. Multiple sources told HousingWire that LendUS employees were informed of the deal in a conference call and had until about Friday to sign employment agreements with CrossCountry. As part of the acquisition, LendUS CEO Rob Hirst will remain in a managerial role, with LendUS functioning as CrossCountry's largest division. "It was time for him to cash in his chips while he still has something of value," said one source with knowledge of negotiations. The CrossCountry-LendUS deal appears to be the first in what analysts and industry veterans believe will be a wave of mergers and acquisitions in 2022. Across the industry, originations are down 50% year-over-year due to the decline in refinancings, but staffing capacity remains high after the glut of business in 2020 and 2021. Competition will be intense over the next 12 to 24 months, driving gain-on-sale margins down even further, Moody's analysts wrote in March. "Some of the smaller guys will have to be either laying off employees, or it's gonna be tougher to survive and they will get taken out," Kevin Heal, an analyst at Argus Research, told HousingWire. That's an opportunity for bigger lenders to grow not only organically, but also via merger and acquisitions. CrossCountry has been acquisitive over the last couple of years. Usually, the target company operates under CrossCountry's umbrella after the acquisition. In 2020, the company acquired First Choice Loan Services, a New Jersey-based mortgage company with offices in 15 states. Financial terms of the deal were not disclosed. First Choice brought to CrossCountry retailer Costco's mortgage program, which connects the big box retail giant's members with a select list of lenders and offers a discount on the lending fees. In 2019, CrossCountry acquired bemortgage, founded in 2017 as a division of Bridgeview Bank Group, and PERL Mortgage, a lender founded in 1994 that had 60 branches spread across 18 states, according to the Nationwide Multistate Licensing System & Registry. CrossCountry, which has seen considerable growth since 2013, operates in 50 states. It has been a Freddie Mac, Fannie Mae and Ginnie Mae approved seller and servicer since 2012. It provides purchases, refinances, and home equity products. The post CrossCountry strikes a deal to acquire LendUS appeared first on HousingWire. |
| Jim Linnane tapped to lead retail mortgage lending at Flagstar Posted: 25 Apr 2022 01:52 PM PDT Jim Linnane, the former head of retail at Stearns Lending, has joined Flagstar Bank as the president of the company's distributed retail mortgage division. Linnane, who worked at Wells Fargo for 15 years and also ran national sales at Guaranteed Rate, will head Flagstar’s efforts in strategy, sales, growth, recruitment and operations for the division. “He’s a results-oriented team-builder with a demonstrated ability to grow people and organizations,” said Lee Smith, president of Mortgage for Flagstar. “We’re excited to have him on board and look for positive developments with Jim at the helm of Flagstar’s distributed retail operation.” The depository bank originated about $50 billion in mortgage loans in 2021, though origination volume and margins have declined considerably in recent quarters, according to its earnings statements. In the fourth quarter of 2021, Flagstar originated about closed $10.7 billion in mortgage loans, down from $12.5 billion a quarter prior. Its net margin on locked loans fell to 1.02% from 1.50% in the third quarter. In April 2021, New York Community Bank, one of New York City's largest multifamily lenders, announced that it planned to acquire Michigan-based retail bank in an all-stock merger valued at $2.6 billion. The deal was supposed to close by the end of 2021, however, it has not yet received regulatory approval. The keys to lending in a post-refi boom world As record refinance volumes disappear, lenders need to get intimately familiar with their database of customers. Being a resource for all real estate financing needs for your customers will become more important in the next few years than ever before. Presented by: CIVIC FinancialNYCB had essentially exited the residential mortgage banking business in 2017 after selling its origination and servicing platforms. The new company would have over $87 billion in assets and operate nearly 400 retail branches across nine states, the lenders said in April 2021. The combined company would have 87 loan production offices across a 28-state footprint. Flagstar's brand will be maintained in the Midwest. Flagstar's mortgage division would also maintain the Flagstar brand. The post Jim Linnane tapped to lead retail mortgage lending at Flagstar appeared first on HousingWire. |
| CFPB to use “dormant” Dodd-Frank power to regulate “risky” nonbanks Posted: 25 Apr 2022 01:37 PM PDT The Consumer Financial Protection Bureau (CFPB) plans to revive "dormant" Dodd-Frank Act powers that would allow the watchdog to conduct supervisory exams on nonbanks or any “fintech” it believes is risky. "Given the rapid growth of consumer offerings by nonbanks, the CFPB is now utilizing a dormant authority to hold nonbanks to the same standards that banks are held to," said CFPB Director Rohit Chopra in a statement. "This authority gives us critical agility to move as quickly as the market, allowing us to conduct examinations of financial companies posing risks to consumers and stop harm before it spreads." The CFPB said Monday that it is seeking public comments on a procedural rule to make this process “more transparent.” Before the Dodd-Frank Act of 2010, only banks and credit unions were subject to federal supervision. But that all changed with the 2008 financial crisis, in which nonbank lenders made billions in bad mortgage loans, and, as a consequence, would eventually be placed under the supervision of the CFPB (in addition to depositories with $10 billion or more in assets and their servicers). The watchdog, now with more teeth, argued that Congress over a decade ago gave it the authority to supervise “larger participants” in consumer reporting, debt collection, student loans servicing, international remittances and auto loan servicing. The “dormant” rule gives the CFPB supervision over nonbanks whose “activities the CFPB has reasonable cause to determine pose risks to consumers. This authority is not specific to any particular consumer financial product or service. While the CFPB did implement the provision through a procedural rule in 2013, the agency has now begun to invoke this authority. This will allow the CFPB to be agile and supervise entities that may be fast-growing or are in markets outside the existing nonbank supervision program.” How to navigate the top five cyber threats facing financial institutions Let's explore several cyber threats that are likely to plague the financial industry in 2022, and ways financial services leaders can combat each risk. Presented by: William Mills AgencyThe agency cited potential risky conduct as potentially unfair, deceptive, or abusive acts or practices, or other acts or practices that potentially violate federal consumer financial law. Complaints to the CFPB or information from judicial opinions and administrative decisions could also trigger a review of a nonbank or fintech. “The CFPB may also learn of such risks through whistleblower complaints, state partners, federal partners, or news reports,” the agency said. In part because of a friendlier regulatory climate than what depository counterparts work in, nonbanks have become the dominant force in mortgage lending. About 70% of first-lien originations made in 2021 came from nonbank originators. The CFPB under Chopra has already warned mortgage servicers that not honoring forbearance would quickly land them in hot water. It’s also said it would be taking a close look at “modern day redlining.” The post CFPB to use “dormant” Dodd-Frank power to regulate “risky” nonbanks appeared first on HousingWire. |
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