Mortgage – HousingWire

As states set up their HAF programs, servicers complain of chaos
Black Knight rolls out tool to minimize fee cure expenses
LendArch hires Karthik Kumar, TCS’s former head of mortgage
As the mortgage market went haywire, rate locks fell by 11%

As states set up their HAF programs, servicers complain of chaos

Posted: 11 Jul 2022 06:30 AM PDT

The federal government’s signature program to help homeowners from falling behind on their mortgage, having utilities shut off, or being forced out of their homes, is finally being rolled out across America through pilot programs.

But servicers say that dealing with the $10 billion fund, dubbed the “Homeownership Assistance Fund,” has been chaotic and cumbersome. Industry trade groups, which played a key role in getting the program off the ground in March 2021, described the process as "an enormous collaborative effort," but also as a "complicated thing to process."

Still, they say rollout of HAF has been a qualified success – for all the logistical headaches, the financial assistance is helping borrowers stay in their homes. HousingWire spoke to servicers to gain insight into how the rollout was going for industry players.

HAF program an 'enormous burden'

The HAF program, run by the Department of Treasury, was designed to give states significant leeway in how they use the federal money. That's precisely what makes it so complex and problematic.

"My favorite tagline when discussing HAF is '50 states, 50 programs,'" said Courtney Thompson, chief product officer at Sagent. "I think the rationale of the Treasury is that states experienced delinquency and the impact from COVID-19 differently, so they wanted to give the states the flexibility."

Thompson said the flexibility baked into HAF has been an "enormous burden on servicers’ ‘ and has weighed on servicers’ loss mitigation profits and assessments. Servicers, by law, are required to communicate clearly with borrowers about available options. But because the programs vary, that can be a challenge.

"The consumer is always instructed to call the servicer and the servicer is responsible, under penalty of unfair, deceptive, or abusive acts or practices (UDAAP) to communicate clearly to the consumer and without confusion," Thompson said. "In this instance, the servicer has its own loss mitigation programs that the consumer can apply for, and in the wake of COVID-19, there are more programs and more opportunities for assistance and then you have HAF that a borrower can potentially apply for."

Servicers and stakeholders working with the HAF program say states differ not only in logistics, such as how many employees are tasked with running the program, but also in each state's requirements for HAF applicants. Some states require little in the way of documentation, while others require borrowers to provide detailed information about their finances. An important caveat: Borrowers must apply for HAF themselves.

Kimberly Hare, president of Fay Servicing, said many state administrators are "confused" about how to run their programs, which has resulted in more work for servicers.

"States were given money and they weren't told how to handle the distribution," Hare said. "A lot of them are running behind and don't have the people necessary to work the programs, and we are having to repeat sending documents because they get lost. It's twice as much work sending data back and forth."

Gisele Roget, who heads Washington, D.C.-based public affairs firm Overbrook Square Group, said another challenge for servicers is being mindful of guidance surrounding the loans that they service.

"I think one of the key nuances is that servicers must also follow guidance published by the Federal Housing Administration, the Federal Housing Finance Agency, the Department of Veterans Affairs and the Department of Agriculture," Roget said. "Servicers that participate in these programs ought to be in compliance with all of the applicable guidance."

Hare said there seems to be an "education gap" among states regarding which borrowers should qualify for funding.

"Instead of focusing on borrowers that were impacted during the pandemic, some of the states have not limited that and are allowing borrowers who were delinquent way prior to the pandemic," Hare said.

Although the fund was created specifically to help homeowners affected by the pandemic, the Treasury allows homeowners experiencing financial hardships after Jan. 21, 2020, to apply for government assistance.

Stakeholders who work with the HAF program said this guidance was crafted under the assumption that the pandemic may have compounded or further exacerbated the financial situation of some already struggling homeowners.

The tail end

Trade groups helping states and servicers maneuver HAF remain optimistic about the program's future.

The National Council of State Housing Agencies, an advocacy organization for state housing agencies, said so far servicer participation "has been very strong," and many states have worked out the kinks to the benefit of homeowners.

"States have been working as hard as they can and as diligently as they can to design programs and get their plans approved by the Treasury, so that they can start helping homeowners," said Greg Zagorski, senior homeownership specialist at the NCSHA.

Representatives of the Housing Policy Council, which has worked to set up the HAF program, said they are encouraged by states from which money is being disseminated to borrowers in need.

The HAF "is at the tail end of loss mitigation and loss mitigation work," a HPC spokesperson said. "The fund will fill in holes at the end."

It wasn't immediately clear how much money has been allocated or distributed from HAF programs. Zagorski said the Treasury will publish a first quarter report this summer, and the second quarter report is expected to be published Aug. 15.

In recent months, housing agencies have upped their rhetoric about the program.

Secretaries from HUD, VA, USDA and Treasury in a joint statement published in May said servicers of federally backed mortgages should offer HAF funding as a loss mitigation option to borrowers who are struggling to make their mortgage payments.

Agency representatives said they encourage homeowners and servicers to continue working together on loss mitigation options to ensure available sources are fully utilized.

The multi-agency press release also asked servicers to hit the pause button on foreclosure proceedings if a borrower applies for assistance through the HAF.

"Pausing any pending proceedings is a vital step toward keeping families in their homes as they receive assistance through the HAF program," the statement read.

The Consumer Financial Protection Bureau also issued a warning in March that it will heavily scrutinize complaints from borrowers who claim they weren't given the option to apply for the HAF.

The watchdog said servicers should provide borrowers with sufficient time to move through the HAF application process before moving forward with foreclosures. Cases in which a homeowner is foreclosed upon while a HAF application is pending will "merit increased scrutiny."

"The servicing community has done a fantastic job keeping up with the velocity of change during this time period," Thompson said. "And ultimately, because the federal investors and insurers have now been very, very clear from a rulemaking perspective that consumers have to be offered HAF prior to foreclosure processes, that makes me think everything is going to be fine."

She added: "This is what I call a 'three little birds moment,' where there’s been all this noise and there’s been all this work to keep up to get to a place, but at the end of day, because there is some consistency now in the expectation that HAF is a thing that needs to be paid attention to every little thing will be alright from a consumer perspective."

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Black Knight rolls out tool to minimize fee cure expenses

Posted: 11 Jul 2022 05:43 AM PDT

Black Knight this week launched a tool that enables lenders to compare loan estimates and closing disclosures from closed loans to minimize expenses in a higher rate environment.

Dubbed the Black Knight “fee cures suite,” the program combines loan information from the lender’s loan origination system with the firm's Ernst fee data, as well as analytics from the company’s “actionable intelligence platform,” to minimize mandatory 0% and 10% fee cures.

The mandatory 0% tolerance fees are paid to the creditor, the mortgage broker, or an affiliate of either party. Any origination fees charged to borrowers fall under this category. And the 10% tolerance fee includes recording costs and charges paid to unaffiliated third-party service providers.

"As lenders struggle to maintain profit margins, fee cures are a preventable expense," said Rich Gagliano, president of origination technologies at Black Knight. "We have seen fee cures average hundreds of dollars per loan and over time, can add up to millions or even hundreds of millions of dollars at the portfolio level."

Black Knight, which has agreed to be bought by rival ICE Mortgage Technology in a deal valued at $13.1 billion, says its AIP is a framework for analyzing data from multiple data sets across the loan life cycle. The Ernst Fee Service is used by lenders to minimize fee cures by providing recording fees, transfer taxes, property tax, title, settlement, inspection data, and lender and appraisal fees.

Through the combination of the AIP and the Ernst Fee data, lenders can identify and drill down to causes by loan attribute including city, state, country, loan type, loan officer, vendor and number and size of cures, according to Black Knight.

Amid plunging origination volume, originators they are facing significant margin compression this year. The Mortgage Bankers Association (MBA) projects about $2.4 trillion in origination volume in 2022, a 40% decline from the previous year’s $4 trillion. The drop is led by refis, which is expected to tally $730 billion, a 68% decline from $2.3 trillion in 2021.

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LendArch hires Karthik Kumar, TCS’s former head of mortgage

Posted: 11 Jul 2022 03:00 AM PDT

Mortgage consulting firm LendArch has hired Karthik Kumar, the former global mortgage practice head at Tata Consultancy Services (TCS).

He will serve as LendArch’s executive vice president and chief operating officer.

Kumar was a manager at Standard Chartered Bank from 2002 to 2004. He then spent 18 years at TCS, where he focused on solution architecture, operational delivery and entity transformation for most of the top-40 mortgage lenders and the largest vendors.

“We intend to change how lending is going to be done fundamentally – behavior, market dynamics, products,” Kumar said. “We’re not talking about huge Capex changes; we’re talking about minor changes that will have a significant impact.”

LendArch was founded in 2021 by Tammy Richards, whose CV includes high-level stints Bank of America, Caliber Home Loans. She most recently served as chief operating officer for loanDepot. Richards left the company in March 2021 and, after six months, filed a lawsuit alleging that the lender closed thousands of loans without proper documentation, among other misdeeds.

LendArch has over 30 clients, including lenders and broker firms. The company, with 25 employees, is focused on the origination side of the business. Clients include several top 10 lenders in the country.

LendArch has a consulting arm to develop a plan for clients, for example, to reduce costs and improve their underwriting. According to Kumar, it works like a “C-suite in a box,” but with an independent perspective.

The company also has a technology development team creating a suite of small technology products intended to have a significant impact when put all together – Kumar likened these technologies to building blocks on a Lego toy.

“We are trying to create an API economy,” Kumar said, referring to exposing a firm’s digital services and assets through application programming interfaces (APIs).

Kumar sees potential for LendArch’s technology to complement and communicate with products from top vendors in the country, such as ICE Mortgage Technology and Black Knight, but not compete with them.

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As the mortgage market went haywire, rate locks fell by 11%

Posted: 10 Jul 2022 09:01 PM PDT

Just how bad was the mortgage market in June, when rates climbed north of 6%? Rate locks fell across all loan types last month, and were down 11% overall from May, according to Black Knight.

The company’s monthly mortgage originations report also revealed that 82% of locks in June were purchases, the lowest share of refis since the company began tracking data in 2018.

June's data represents how interest rate-dependent the originations market has become, said Scott Happ, president of Optimal Blue, a division of Black Knight.

"With 30-year rates hovering below 6% – still historically low – we've seen the rate/term refi market dwindle to next to nothing, with increasing downward pressure on cash-out activity," said Happ. "Eventually, equilibrium will return but as of June, the market seems to be having trouble adjusting to a rate environment anywhere above the historically low levels reached during the pandemic."

Cash-out refinance volume fell 13% from May, while rate-term refis fell 9% and purchase loans fell 11%. Purchase rate lock volume is down nearly 16% from June 2021. But a closer look reveals even more troubling news on the purchase front.

“However, when we look at purchase lock counts to exclude the impact of soaring home values on volume, we see the number of purchase mortgages is off some 21% from last year's levels," Happ said.

Mortgage rates, as measured by Black Knight's Optimal Blue OBMMI pricing engine, jumped past 6% in mid-June before pulling back to finish the month at 5.79%, a jump of 44 basis points from May.

Government loan products gained market share as the Federal Housing Administration (FHA) and Veterans Affairs (VA) lock activity continued to increase at the expense of agency volumes, a trend likely reflected in another decline in the average loan amount from $351,000 to $359,000.

Average credit scores rose to 723 in June while cash-out refinance scores fell to 693, the lowest since Optimal Blue began tracking the data in 2013.

Black Knight's monthly market monitor reports provide origination metrics for the U.S. and the top 20 metropolitan statistical areas (MSA) by share of total origination volume.

The New York-Newark-New Jersey MSA had the highest rate lock volume at 4.5% in June. The Washington-Arlington-Alexandria area had the second-highest lock volume rate (3.8%) trailed by the Los Angeles-Long Beach-Anaheim (3.5%) area.

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Loans And Mortgage

Monday, July 11, 2022