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November/December 2018 • Volmume 43, Issue 4

the COMPLETE PACKAGE

New fi nancing options and better inventory have bolstered the manufactured housing sector. Is this the answer to lenders’ purchase-market woes?

NMNCV1-NOVDEC2018-43-4

CV1_NMN1118.indd 1 11/1/18 4:18 PM 002_NMN1118 2 11/1/2018 4:57:32 PM Contents November/December 2018 | VOL. 43 | NO. 4

Departments 16 Origination 6 Alarm bells for CRE lenders after Bank The Complete Package OZK’s bad quarter New financing options and better inventory have bolstered the manufactured housing sector. Is this the answer to lenders’ Secondary purchase-market woes? 8 ‘We do not determine our destiny’: A sit-down with outgoing Freddie CEO

Servicing 10 Reducing gap between FHA and conventional market is priority

Technology 12 New UltraFICO score stokes concerns about data privacy

Compliance & Regulation 14 Mortgage credit still in a post-crisis funk? The data begs to differ

In Every Issue

2 Editor’s Desk 20 Voices 23 People 24 Screenshots

nationalmortgagenews.com November/December 2018 National Mortgage News 1

001_NMN1118_001 1 11/1/2018 4:37:28 PM Editor’s Desk Winner of the Polk Award for Financial Reporting Winner of an ASBPE Editorial Excellence Award Winner of a NAJA Editorial Award

One State Street Plaza, 27th Floor New York, NY 10004 (212) 803-8200 Fax: (212) 843-9600

Getting in on the Ground Floor Editor in Chief: Austin Kilgore Capital Markets Editor: Bonnie Sinnock Originations Editor: Bradley Finkelstein Reporters: Kate Berry, Paul Centopani, Hannah Lang, Elina Tarkazikis It’s rough going for To be sure, these efforts are in their infancy Copy Editor: Glenn McCullom mortgage lenders these and headwinds abound. For starters, much of Senior Art Director: Nick Perkins days, and it doesn’t look the manufactured housing inventory currently Group Editorial Director, Banking: Richard Melville Executive Director, Content Operations and like it’s going to get any on the market doesn’t meet the quality speci- Creative Services: Michael Chu easier anytime soon. At fications prescribed by these loan programs. It SVP, Head of Media Sales: Dennis Strong the Mortgage Bankers As- will take time for even high-end manufactured Publisher: Kimberlee Baker (212-803-8475) Sales Manager, Northeast Region: sociation’s recent Annual housing builders to adjust their operations to Brad Bava (212-803-8829) New Business Development: Convention in Washing- meet the new requirements. Vernesa Merdanovic (212-803-8393) ton, D.C., economists projected a 4% year- But if the GSEs and the industry at large are Senior Marketing Manager: Deborah Vanderlinder (212-803-8323) over-year increase in purchase mortgage orig- successful in this endeavor, the end result will be Customer Service: [email protected]; (212) 803-8500 ination dollar volume for 2019. But the increase higher-quality homes, the cost of which will be Reprints: For more information about reprints and licensing will come entirely from rising home prices, not largely offset by more affordable loans for con- content from National Mortgage News, please visit www.SourceMediaReprints.com or contact PARS an uptick in loan count. sumers. Savvy lenders should begin strategizing International Corp. (212) 221-9595. What’s more, the MBA estimates housing now on how to capitalize on this opportunity. Reproduction Policy: No part of this publication may be reproduced or starts will increase by 2.5% from 2018 to 2019, This is our last print issue of the year. But as transmitted in any form without the publisher’s written permission. less than half the 5.3% annual growth from 2017 always, the National Mortgage News website is Transactional Reporting Service: Authorization to photocopy items for internal or to 2018. According to MBA Chief Economist Mi- your destination for the most up-to-date news, personal use, or the internal or personal use of specific clients, is granted by SourceMedia, provided that the chael Fratantoni, labor shortages and land de- analysis and opinion from across the entire in- appropriate fee is paid directly to Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, U.S.A. velopment costs are hindering further growth dustry. Make sure to check out our end-of-year in traditional site-built housing, along with tar- coverage in December, including our 2018 re- iff hikes that have prompted lumber and steel view and 2019 outlook. And after the new year, prices to soar. But relief for lenders is starting to the inaugural Best Mortgage Companies to Chief Executive Officer: Gemma Postlethwaite emerge from an unconventional source. Work For rankings will be revealed online and Chief Financial Officer: Sean Kron As this month’s cover story explains, the con- in the next print edition of the magazine. EVP & Chief Content Officer: David Longobardi SVP, Conferences & Events: John DelMauro vergence of new financing, better inventory and SVP, Human Resources: Ying Wong evolving borrower demands has given new rise to mortgage opportunities in manufactured Send your comments, questions and story ideas to housing. Driven in part by new programs from Editor in Chief Austin Kilgore: the government-sponsored enterprises, as well [email protected] as quality improvements in both the materials and construction of these homes, manufac- tured housing advocates are eager to shed the stigmas long associated with mobile homes. National Mortgage News (ISSN #1050-3331) is published monthly except in December and with an extra issue in October by SourceMedia, Inc., One State Street Plaza, 27th Floor New York, NY 10004, 212-803-8200. Subscription price: $349 per year in the U.S.; $389 for all other countries. Change of Address: Notice should include both old and new address, including ZIP code. POSTMASTER: Please send all address changes to National Mortgage News/One State Street Plaza, 27th Floor New York, NY 10004. For subscriptions, renewals, address changes and delivery service issues contact our Customer Service department at (212) 803-8500 or email: [email protected]. Periodicals postage paid at New York, NY and additional U.S. mailing offices. © 2018National Mortgage News and SourceMedia Inc. All rights reserved.

2 National Mortgage News November/December 2018

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Growth through acquisition Nov. 28-30, 2018 Lennar's purchase of CalAtlantic's financial services operations early this year Small Biz: Banking Conference has offset declines in refinancing and per-loan profits in the company's mortgage unit Nashville, TN Financial services segment, operating earnings bit.ly/2xAvSD2 $60M $50M $40M Nov. 29-30, 2018 $30M Block FS 2018 $20M New York, NY $10M $0 bit.ly/2NQzUMO 3Q17 4Q171Q182Q183Q18 Source: Lennar Jan. 28-31, 2019 MBA Independent Mortgage Bankers Conference Acquisition Gains Offset Shrinking Lenders Fear Worst from Rent Control San Francisco, CA Mortgage Margins at Lennar Measure on California Ballot bit.ly/1OC9Nrq Homebuilder Lennar Corp.’s purchase of CalAt- A. MAULSBY: “I would want to know where the lantic’s financial services operations boosted its actual studies are that suggest that this would have mortgage segment’s earnings in the third quarter an impact,” he said. “They don’t exist; they’re simply as the acquisition offset declines in per-loan theoretical.” It’s call the “Wealth of Nations” and profits and refinancing. was written by Adam Smith in the 18th century.

4 National Mortgage News November/December 2018

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or an analyst at Keefe, Bruyette & Woods, wrote in a note to her clients. “That said, at Credit hit this point in the cycle, we don’t believe it A big provision tied to CRE took a bite out of Bank OZK's matters. The market is going to shoot first third-quarter profit and ask questions later, in our view.” Loan-loss provision Bank OZK provided unprecedented details about its CRE lending in an effort to settle $50M nervous investors, noting that the loans were made before the financial crisis and were $40M categorized as substandard last year. The company, as it has on prior confer- $30M ence calls, emphasized that its CRE loans have relatively low loan-to-value ratios. $20M While its annualized net chargeoff ratio $10M still remains low, at 0.49%, it is up signifi- cantly from 0.06% a year earlier. $0 While regulators have been raising con- 3Q17 4Q171Q182Q183Q18 cerns about CRE concentrations for years, Bank OZK has insisted that its expertise Source: The company has earned it some leeway to maintain lev- els that far exceed those that receive add- ed attention from examiners. At Sept. 30, Alarm Bells for CRE Lenders loans in its national real estate specialities group portfolio totaled $8.6 billion. After Bank OZK’s Bad Quarter Gleason, for his part, assured analysts that no other shoes are about to drop. The company is facing criticism after a big chargeoff on two “Properties are regularly and frequently properties, showing that investors have little patience when a appraised, so we feel confident in the qual- risky business model shows signs of distress. ity of the portfolio,” he said during the call. Concerns about Bank OZK’s commercial By John Reosti real estate portfolio first surfaced in 2016 Bank OZK in Little Rock, Ark., did more The lesson for other banks is clear: Ex- when Carson Block, founder of Muddy Wa- than stub its toe when it reported lower pect investor angst if a risky business such ters Research, sparked a brief selloff in the profit tied to two big chargeoffs. as CRE shows any sign of credit cracks company’s shares by questioning the strat- The $22 billion-asset company may have at this stage of the economic cycle. The egy. Bank OZK has since been a periodic lost the confidence of investors for the fore- fact that one of the chargeoffs is tied to a target of short sellers that have been wait- seeable future, even though management Sears-anchored shopping center in South ing for a bad quarter. used an earnings call to passionately defend Carolina could serve as a warning for other It could take some time before investors its heavy reliance on commercial real estate banks that have similar loans outstanding. show renewed confidence in Bank OZK, lending, where the chargeoffs took place. At The other loan is tied to a residential de- particularly at a time when many believe least that was the view of several analysts who velopment in North Carolina. In all, Bank credit issues can only worsen from where cover Bank OZK, which has faced criticism in OZK charged off nearly $46 million in the they stand today. the past for its CRE exposure. Shareholders third quarter to partially write down the “Unfortunately, with the credit blip seen in also responded negatively to the news. loans. The chargeoffs contributed to a 23% 3Q along with a significantly depressed out- “With defenses penetrated, no matter decline in Bank OZK’s third-quarter earn- look on near-term loan growth, we think that how small a breach, confidence in the ings from a year earlier, to $74.2 million. the shares may wallow until the next credit OZK mystique [has] evaporated,” Michael “It is very easy to make the case that these cycle proves out this business model one way Rose, an analyst at Raymond James wrote are one-offs ... and the rest of the portfolio or another,” Stephen Scouten, an analyst at in a note to clients. looks nothing like this,” Catherine Meal- Sandler O’Neill, wrote in a note to clients. NMN

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Millennials Drive Mortgage Origination Rises In 2020 and Beyond: MBA By Brad Finkelstein

While mortgage volume is expected to mortgage rates should rise only modestly $1.631 trillion. The initial projection for 2021 shrink next year, it should increase during from here. We are seeing some decelera- is for $1.74 trillion. The 10-year Treasury the following two years and beyond as mil- tion in the rate of home price growth, but yield should finish this year at 3.2% and lennials start buying homes, the Mortgage believe this is a healthy pause for the mar- rise to 3.4% by the second quarter next Bankers Association forecasts. ket, as it will allow income growth to catch year, where it will remain throughout 2020. Originations should finish this year at up to the recent run-up in home values.” This should bring the 30-year fixed rate to $1.636 trillion and decline in 2019 to $1.63 Home purchase originations are expect- 5.1%, Fratantoni said. trillion, the organization announced at its ed to increase in each of the next few years, But those rising rates are affecting con- annual convention in Washington. going from $1.143 trillion in 2017 up to $1.308 sumers’ housing market outlook. That is a change from September’s out- trillion for 2021. This increase is expected “While the macroeconomic and housing look of $1.606 trillion in total production even as new-home construction remains market backdrops are, and should remain this year and $1.592 trillion for next year. constrained going forward, Fratantoni said. quite favorable, the mortgage industry “The unemployment rate is at its lowest Refinancings made up 35% of the revised continues to be challenged by the drop in level in almost 50 years, resulting in faster $1.76 trillion originated last year. They are origination volume, coupled with signifi- wage growth and more confident home- expected to fall to 28% this year and 24% cant margin compression,” said Fratantoni. buyers,” Chief Economist Mike Fratantoni in each of the next two years, before slight- “Lenders of all types and sizes are seeing said in a press release. ly rising to 25% in 2021. elevated costs, coupled with intensely com- “While the Federal Reserve is expected to There was an increase in the 2020 pro- petitive pricing, to capture more volume. increase short-term rates further, 30-year jection to $1.683 trillion from September’s This in turn is depressing revenues.” NMN Time to Save for a Down Payment at Highest Point Since the Housing Bubble

By Paul Centopani

With home values nearly doubling in- ment, contributes to millennials’ struggles renovations instead of looking for a new come growth in the last 20 years, it’s now to enter homeownership,” Skylar Olsen, home, potential homebuyers could be taking homebuyers 7.2 years to put togeth- Zillow’s director of economic research and deterred from entering the market with er a down payment, according to Zillow. outreach, said in a press release. how long and how much it will take to For the typical consumer making the me- “Saving up for a down payment can save for a down payment. dian income and saving 10% each month, be tough, especially when the cost of “Slower rent growth in recent months it’s the longest amount of time to gather a everyday life outpaces the money you should create some more breathing space 20% down payment since 2008. Fears of put into the bank. It requires good bud- in renters’ budgets, but rents remain high another housing crisis heighten with par- geting and long-term planning. It’s one by historic standards. Even if you don’t allels to a decade ago. It took 5.5 years reason why more and more first-time have plans to buy a home in the next year in 1998, but home values jumped 98.6%, homebuyers are looking to family and or two, it’s not a bad idea to start setting while income grew 52.6% since then. friends for financial help when coming aside savings for a future home purchase. “The simple fact that home values have up with their down payment.” It’s also important to remember that there far outpaced income growth, lengthening With rents decelerating and a high- are many options for mortgages requiring the time needed to save for a down pay- er percentage of consumers opting for less than 20% down,” Olsen said. NMN

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Despite that, if the government, and I mean government very broadly, is spend- ing time on housing finance reform of the future, we have a brand as the best tech- nical advisers around town, because it’s a very complicated business, so a priority would be to help them. Competitiveness is built into our DNA — I just have to keep it going. We’re starting to think a little bit about the down cycle. It’s been a great run up. I don’t think there’s going to be a strong down cycle, but we have to be prepared for it. Whatever we can do to help to land [the proposed rule on enterprise capital] and bring that to finality is important to us. We’re an expert on that, we care about it a lot and we developed the kind of father to

Bloomberg News the system that eventually came out. The comment period ends the middle of next November. The finalization of it should tie ‘We Do Not Determine Our Destiny’: A in … with my retirement. It’s been an exciting five years. The last five Sit-Down with Outgoing Freddie CEO years and the next five years is very exciting in the mortgage business. It’s a very contort- ed and old-fashioned business that’s become Donald Layton, who has run the mortgage giant since 2012, discussed modernized in all these ways. It’s great. If you the busy agenda leading up to his departure and says Freddie can serve go talk to someone who’s in a major mort- as a “technical adviser” in GSE reform talks. gage company, they’ll tell you there’s been By Hannah Lang more change and innovation in the last five years than in the last 25 years. Donald Layton has just under a year be- Layton sat down with National Mortgage fore he retires as CEO of Freddie Mac after News during the Mortgage Bankers Asso- How has Freddie Mac changed as a compa- more than 40 years in the financial services ciation annual conference to talk about ny since you started? industry, but the coming months are shap- what he has learned from his experience Remember, I took this as public service; I ing up to be some of the most formative at and what to expect before he retires. already had my career. I was not trying to the company since Layton joined in 2012. This interview has been condensed and burnish my resume. In June, both Freddie and Fannie Mae are lightly edited for clarity. Simple fact is Freddie Mac, the GSE sys- slated to roll out a uniform mortgage-backed tem, which I experienced back as a banker, security, which experts have highlighted as a What is in store at Freddie between now was not very competitive, not very com- key move in any housing finance reform plan. and your retirement? mercial. It was very policy-driven, ex-gov- And in November, the comment period will DON LAYTON: Obviously, there’s the ernment agency style and I’m not an apol- close on a proposed capital framework for priority of succession. I’d like to point out ogist for the old system. They did some the two government-sponsored enterprises. that we have triple succession, not just good stuff, and they did some things that These policies will be looming as both Freddie me. There’s me, there’s going to be a new eroded confidence. They made themselves and Fannie search for new CEOs, and as the head of the FHFA, and how much that’s political issues because of the unlimited in- public awaits President Trump’s appointment a change, we don’t know. We’re going to vestment portfolios being used. of the next head of the GSEs’ regulator, the find out. The third is, just by coincidence, It became, “Help build something that Federal Housing Finance Agency. our board chair. we can be proud of,” where you took the

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core value that you’re there for as a mis- housing nominally to go up with the nomi- How much of a say do you have in the hiring sion and operate it well. That’s what led to nal incomes, certainly not higher, the way it process for the next CEO? credit risk transfer, the capital system — all has been. We are a policy organization. The answer is I have a modest say. The hir- those things. That’s largely done. There are laws about us. We should be ing is a triple-level hiring: board, FHFA and I have said this before: History books helping affordability; we’re not supposed Treasury as opposed to a normal corporate like to declare eras. My era was the era of: to be a honey pot for politicians to raid and board. I am a member of the board, so I get Make the companies work well in conser- give money away. The FHFA direction is a kind of say. … I help them construct the vatorship. Prior to when I got there, they clear. There should be quality credit … and process. There’s a search committee on the were still dealing with the foreclosure crisis it should be sustainable. … Now then what board, and I’m not on that. It’s all subject to and were not able to focus on solutions at the FHFA wants us to do, which we love, FHFA approval at the end of the day. all. And the foreclosure crisis kind of peak- is be creative about how to create more ed, and it’s still around, but the thought housing, which we can finance a little bit, What advice do you have for your successor? process was moving away. … It was make more in the multifamily space, and work Build up what we have. Remember the quality companies that can do the job well. some of these programs to help afford- people and the management team at the ability. I don’t pretend they’re going to be core, because you can’t do it all. The easi- What role should Freddie play in housing the giant solution to years of house-price est thing about being a CEO is you’re not in finance reform? growth being part of income, but definitely charge of the business, you’re in charge of We do not determine our destiny. We at the margin it can help. people who are in charge of business. should be great technical advisers to ev- It’s high-quality team first — by the way, eryone working on it and we should exe- A Senate hearing scheduled for Oct. 18, that is going to be an issue, because we do cute well, and that’s the role of the com- which was postponed, had been expected have a lot of people who are older at the top. pany. We’re not supposed to be in there to look at so-called mission creep concerns Ages begin with a 6. The next person is going lobbying for one solution or another. The about the GSEs. What were you planning on to have to review management teams, your only thing you’re supposed to be lobbying saying at that hearing? internals and your externals. for is something that works over something In terms of the Senate [Banking] com- that doesn’t work, because you have good mittee’s angled attack, we would have told What’s next for you? technical. It’s not like you have a big con- them as we have said to other venues … our When this is over, I’ll be 69 years old. I’m not flict of interest. The FHFA’s in charge and job is not to spend our time worrying about going to work full time again. I was already you get paid in a way that doesn’t make it what the new system could be. It’s to make retired. This is my third retirement, so now I’m a conflict of interest. the current system as best it can under exist- old. I’ll do what’s called a portfolio of activi- ing laws. That’s our job in conservatorship. ties, where you have a life. I may join a board Part of Freddie Mac’s mission is to make We think we’ve done a great job of that. That or two although my age may be involved in homeownership more affordable. How has means following the congressional initiative there in terms of term limit. Maybe do some Freddie Mac done that so far, and how will given to us in the charter [and] that means nonprofit work, which has been hard for me it continue to do that? adhering to limitations on the charter. with the back-and-forth between New York There’s a big squeeze. House prices bot- This is not a minor, quick, superficial pro- and here, and some investing. tomed out in 2011, and depending on your cess. Everything’s charter-compliant, ev- I am highly likely to try and stay involved index, have grown about 5% since then. erything goes directly to the mission, which as an outsider in housing finance policy. That is higher than nominal incomes, which we summarized in three words: liquidity — I find the gap in knowledge between an means on average in America, housing is we buy from the primary market, stability insider versus the general outside policy more expensive relative to your income, and — we have the system being more stable, community to be quite large, and so at this is usually most visible in renters paying and affordability — we try to keep this least for a few years, I will be in a position larger percentages of their income to rent. process possible. The FHFA does not let us to really help the debate, I think. It’s easier to see than the cost of owning a do stuff just to aggrandize or buy a market. I’m examining everything from writing home, which has lots of components, and It has to have that mission social value to it a book, to doing the blog posts, to join- so the percentage of people’s income that where it does something about affordabil- ing a think tank — those are not mutu- they’re spending on their residences are go- ity. IMAGIN is a classic. It solves stability ally exclusive. In this job, I’m restricted in ing up and up and squeezing everyone else. issues, it solves affordability issues [and] what I can say outside, but once I’m out, That’s not good. Ideally, we’d like the cost of it’s cheaper to the borrower in the long run. then I can help. NMN

nationalmortgagenews.com November/December 2018 National Mortgage News 9

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ernize technology at the FHA, which he has pinpointed as one of his top priori- ties as commissioner. The Federal Housing Administration re- lies on a COBOL (common business-ori- ented language) computer operating system that was invented in 1959, which is mainframe-based. Increasingly, more government agen- cies are moving to a cloud-based system, which offers more security and allows a single operating system to move seam- lessly between computers. The Department of Housing and Ur- ban Development has been lobbying for years to receive funding to update its computer systems, but Congress has failed to provide it.

Bloomberg News “Some of our key systems are over a quarter of a century old,” Montgomery said. “They’re very expensive to main- tain, and some are based on programs Reducing Gap Between FHA and and languages built for obsolescence years ago.” Conventional Market Is Priority If the Federal Housing Administration cannot utilize shared technology between The Federal Housing Administration is looking to streamline other agencies like the Department of its single-family loan servicing requirements to align them with Agriculture or the Department of Veter- industry standards and upgrade outdated technology. ans Affairs, the agency will move to us- ing “modern, off-the-shelf software that is By Hannah Lang commonly used in the conventional mar- ket,” Montgomery said. This software would cost $80 million The Federal Housing Administration lies upon to carry out such functions, and over a four-year period, he said. is seeking to narrow disparities between are committed to identifying reforms that According to Montgomery, the agency is mortgages insured by the government would help relieve some of the cost bur- looking to adopt three key features based and conventional loans, said FHA Com- dens,” he said, referring to the Department on industry best practices to improve its missioner Brian Montgomery. of Housing and Urban Development. technology: an automated underwriting For example, the FHA is planning to The Federal Housing Administration is system, paperless processing capabilities streamline its single-family loan servicing also taking steps to reduce technological and an automated collateral valuation requirements in order to align them with disparities, which has become a main pri- system to manage appraisal quality and industry standards. These efforts are part ority under Montgomery. Unlike the con- valuation risk. of the Trump administration’s objective ventional market, the FHA still relies on “We already have a track record of suc- to ease regulatory burdens, Montgom- paper case files and an outdated legacy cess with building these modernized sys- ery said during a speech at the Mortgage information system. The FHA’s foreclo- tems, including the electronic appraisal Bankers Association’s annual conference sure fee schedules also deviate from other delivery system and the loan review sys- in Washington last month. types of mortgages. tem, which have allowed many lenders to “We remain cognizant of the challeng- During his remarks, Montgomery re- do business with FHA that’s easier,” Mont- es for servicers, which HUD generally re- peatedly emphasized the need to mod- gomery said. NMN

10 National Mortgage News November/December 2018

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“The privacy and information security is- sues could easily outweigh those benefits.” Bair isn’t alone. Gary Reeder, vice presi- dent of innovation and policy at the CFSI, is concerned about risk on a systemic level around companies like credit bureaus that the entire financial services industry de- pends on so heavily. “We’re getting to where we have larger sets of data housed in institutions that the entire financial services industry rests on, and they don’t have the same regulation and security protocols a regulated bank would have,” he said. Though credit bureaus are overseen by the Consumer Financial Protection Bu- reau, the regulator focuses on consum- er protection. It doesn’t impose capital

Bloomberg News requirements to prepare for a possible data breach or failure. “As you concentrate data and more people use that data to make decisions, New UltraFICO Score Stokes there’s a liquidity and capital question that comes to the fore because people can Concerns About Data Privacy say they have liability, but without capital that’s meaningless,” Reeder said. “I can say A new credit score that includes consumers’ cash flow alongside you’re liable, but if your pockets are empty, their credit score is winning praise for its potential to help expand there’s nobody to pay for that liability. The access to credit, but some worry it gives the credit bureaus even banks know that at the end of the day they more data that could be compromised. are the only ones that have deep pockets, they’re required by law to have them.” By Penny Crosman But Mike Pecan, head of data strategy at Experian, argues that the firms involved A new credit score that includes a con- diate potential problem — namely with take security and data privacy seriously. sumer’s cash flow alongside their credit credit bureaus getting unfettered access He notes that the model is opt-in — con- score — dubbed UltraFICO — is winning to bank account data. sumers have to give permission for Expe- praise for its potential to help expand ac- “If the credit bureaus want to start rou- rian to collect their bank account data. As cess to credit but also stoking concerns tinely accessing our bank accounts, they a result, the credit bureau is unlikely to be- about its data privacy implications. should be subject to bank-like regulation,” come an alluring honey pot of consumer FICO announced in late October that it said Sheila Bair, a former chairman of the bank account information. is testing a new credit score with Experian Federal Deposit Insurance Corp. “I’ve been Steve Smith, CEO of Finicity, said that and data aggregator Finicity that draws a critic of big U.S. banks in certain areas, his company has gone through extensive on several months’ worth of data from but I do believe their information security information security reviews to obtain da- consumers’ bank accounts. The idea, ac- systems are substantially superior to the ta-sharing agreements with banks. It has cording to FICO, is to create a “second credit bureaus and that is due, in large also obtained third-party information se- chance” score that could allow consum- part, to their regulated status.” curity certifications for financial data, in- ers who’ve been denied credit due to the Bair sees a potential upside in that it cluding PCI and SOC2. The company also traditional model another shot at obtain- could help expand credit access, but won- uses the tokenized authentication methods ing it. But some observers saw an imme- ders if it’s worth the risk. in the FDX’s Durable Data API standard.

12 National Mortgage News November/December 2018

012_NMN1118 12 11/1/2018 4:37:47 PM Technology Technology

Reeder says he’s not opposed to the file, we can show positive financial man- “There are 53 million unscorable con- new score, but says there needs to be agement experience and that correlates sumers today — they cannot be scored better safeguards. nicely with positive credit risk.” by FICO 8 or 9,” said Pecan with Experian. “With the right controls and the right The goal for UltraFICO is to promote fi- “With inclusion of this consumer-permis- clarity for consumers about what they’re nancial inclusion, letting people who ha- sioned data, we believe we could reach up giving up, it could help people who are ven’t built up much in their credit report to 90% of those people.” starting out their credit lives, particularly yet and people who have had temporary Pecan also said that older people who as they come to the U.S.,” he said. “There financial setbacks due to loss of a job or ill have paid off their mortgage, car loans are large numbers of people who come health, qualify for credit. and other debt and want to get a retire- who have good credit histories, but they Online lenders have been considering ment RV often struggle to get credit. can’t transport their score; their bank ac- bank account data in their underwriting “They manage their finances, but they count data would probably be sufficient to decisions for years and have found it to be haven’t used credit in a long time and can’t tell you their creditworthiness.” predictive of creditworthiness. get a loan,” Pecan said. “This opens oppor- According to FICO, a handful of banks tunities for them.” How the new score works and credit unions are piloting the new But younger people, who haven’t had When a consumer applies for credit at score and many fintech lenders, banks time to build up a strong credit file, may a lender that supports the new score, they and credit unions have expressed in- benefit most from the new score. will be given the chance to opt in to the use terest in it. The pilot should go live in “This appears to be a shift to address how of UltraFICO. The consumer will also be al- the first quarter of 2019 and the score younger people use money,” said credit ex- lowed to decide which of their accounts should be generally available to lenders pert John Ulzheimer, who formerly worked should be considered in the score. in summer 2019. at FICO and Equifax. Millennials and Gen Finicity, which has data-sharing agree- Zers are less likely to use credit cards and ments with several large banks but works Who will benefit? loans than their parents were but do have with all 15,000 financial institutions, will According to FICO, consumers who ha- bank accounts. Ulzheimer also argued that then be given the go-ahead to draw sev- ven’t had a negative balance in a check- only a narrow slice of consumers will bene- eral months’ worth of data from those ing account for the past three months and fit from the new score. accounts in whatever manner it normally have maintained a balance of $400 or “This won’t turn someone with a tradi- would — through an API, screen scraping, more should see their credit score increase tional FICO score of 500 into an A+ cred- or some other method. with UltraFICO. it prime,” he said. “This will push someone Finicity will provide that cash flow data “The greatest increase we see is for is for who is along the margins risk-wise over the to credit bureau Experian, which will mix those consumers that are probably having finish line.” Such a person might be subject it in with its usual credit report data and the hardest time trying to establish credit,” to high rates, he noted. pour it into the UltraFICO score model. Shellenberger said. “Those would be con- Banks will be able to slip the new score into sumers with young or thin credit files and Will banks consider it? their underwriting engines the same way consumers who may have experienced One advantage banks may have from they use other FICO scores like FICO 8 or 9. previous financial distress.” UltraFICO is a step toward better compet- According to FICO, some lenders plan to In FICO’s tests, 80% of consumers who ing with online lenders. use UltraFICO as a “second chance” score. have thin and young credit files but can “This seems to be a way to help slow-mov- “As opposed to a consumer being de- maintain an average balance of $400 or ing, dinosauric lenders be more nimble clined for the credit or terms they’re seek- more in their bank accounts see at least a and compete with these cutting-edge on- ing, a lender has an opportunity to reach 20% increase in their score. line lenders that didn’t grow up married to out to the consumer and say hey, if you’re “That can be significant for consumers FICO and therefore don’t have this depen- willing to share additional information with that are trying to obtain credit at reason- dence on FICO when they build their risk me, I may be able to give you the credit able terms,” Shellenberger said. management platform,” Ulzheimer said. you’re looking for,” said David Shellenberg- Among consumers that have had finan- UltraFICO lets banks modernize their er, senior director of scoring and predictive cial distress, evidenced by a charged-off underwriting decisions without having to analytics at FICO. “By leveraging checking, account or a collection account on file, one make major changes to their loan systems. savings and money market accounts, in- in ten see an increase of 20 points or more Smith said that the world is changing formation not found in a traditional credit in the new score, the FICO tests found. and banks need to change with it. NMN

nationalmortgagenews.com November/December 2018 National Mortgage News 13

013_NMN1118 13 11/1/2018 4:37:48 PM Compliance & Regulation

affordability gap has gotten worse, that may be due to skyrocketing home prices Lending thaw more than anything else. A Mortgage Bankers Association gauge of the credit supply Data points to mortgage credit avail- suggests that standards have loosened since 2012 ability having taken a huge leap since 2012, in part because of access to low- Mortgage Credit Availability Index down-payment loans. 200 “If you look from 2012 to today, credit has 180 160 gotten looser, particularly with respect to 140 greater availability of low-down payment 120 loans,” said Mike Fratantoni, chief econ- 100 omist and a senior vice president at the 80 Mortgage Bankers Association. 60 Still, experts agree that following years 40 of ballooning teaser rates and stated-in- 20 come loans leading up to the 2008 melt- 0 down, mortgage credit will likely never be 6/30/10 6/30/11 6/30/12 6/30/13 6/30/14 6/30/15 6/30/16 6/30/17 6/30/18 as loose as it was back then — and that is Source: Mortgage Bankers Association a good thing. “Nobody wants to get back into the mess that everybody was in during the Mortgage Credit Still in a Post-Crisis meltdown,” said Bunce, a former vice pres- ident of underwriting at Countrywide Fi- Funk? The Data Begs to Differ nancial, which was sold to Bank of Ameri- ca in 2008. “We don’t want stated-income Despite recriminations about how the crisis and ensuing regulations loans back or those kind of exotic loan have tightened loan access, an actual assessment of mortgage credit programs. The credit box is pretty much availability finds the situation is more complicated. where it should be.” Just by origination volume alone, mort- By Kate Berry gage lending has made a dramatic recov- ery since the crisis. In all of the recent 10-year commemo- “There are loans for almost every bor- In 2005, during the real estate boom, rations of the financial crisis, a common rower in the marketplace if they want one,” home purchase loans reached $1.5 trillion, theme has emerged among analysts said Christy Bunce, the chief operating of- according to data by the Mortgage Bank- and commentators: Mortgage credit is ficer at New American Funding, a lender ers Association. The market began to cra- just too tight. based in Tustin, Calif. ter in 2008, bottoming out in 2011 at $505 Lenders point to the effects of regulation Although credit definitely tightened in billion, but then began a dramatic recov- that they say is overburdening lenders and the immediate aftermath of the crisis, sev- ery in 2013. By last year, the volume of pur- leading to some borrowers losing out on eral data points show it has loosened con- chase loans hit $1.1 trillion, the same level homeownership. Others say the memory siderably in the years since, and lenders on reached in 2007. of mortgage lenders done in by easy-credit the ground portray a mortgage credit mar- “It’s the loosest credit since 2007, but no- policies during the boom is still vivid, lead- ket with a diverse array of products for bor- where near 2005 or 2006, which was un- ing to today’s lenders remaining cautious. rowers of varying financial backgrounds. healthy,” said Lionel Urban, a vice president But an actual assessment of mortgage New regulations, such as underwriting and product manager for bank solutions at credit availability is more complicated. The requirements established by the Con- Fiserv, a technology provider. “There’s tons conventional wisdom that the crisis and sumer Financial Protection Bureau, have of liquidity in the conforming space and ensuing regulations have kept mortgage probably made it harder to lend to bor- that’s where everybody is competing, and credit out of reach for the vast majority of rowers with poor credit, but not impos- they are competing hard now because vol- borrowers is not backed up by the data. sible. And analysts say that while the ume and margins are compressing.”

14 National Mortgage News November/December 2018

014_NMN1118 14 11/1/2018 4:37:49 PM Compliance & Regulation Compliance & Regulation

Other data suggests that mortgage Data shows that a range of factors, from “from an overall credit perspective, credit credit access may never get back to where down payments to loan-to-value ratios to is not tight,” he added. it was at the height of the boom, but has debt-to-income ratios, have all loosened “The income guidelines are restrictive. still made a sharp rebound since the af- dramatically since the crisis. So credit is available but getting people termath of 2008. In 2017, the median down payment for a to fit that box is difficult because the un- The MBA tracks access to mortgage purchase loan was 6.5%, up from an aver- derwriting rules restrict income and as- products with an index measuring the over- age of 4.5% percent in 2007, according to sets,” Dallas said. all supply of credit based on a wide range Attom Data Solutions. Under the Qualified Mortgage rule, of products that investors are willing to The FHA’s guidelines remained un- lenders must document a borrower’s in- buy. The “mortgage credit availability in- changed during and after the crisis, with come, assets, savings and debt using dex” suffered a sharp downturn from 868.7 borrowers able to obtain a home loan with eight criteria known as Appendix Q, which in June 2006 to 92.6 in June 2011. But the only 3.5% down. the industry wants changed. index came back to 181 in June of this year, Both Fannie Mae and Freddie Mac cur- Don White, the chief credit officer at reflecting a loosening of down payment rently offer low-down-payment programs PennyMac, said documentation of self-em- and credit score requirements since 2012. that require as little as 3% down. ployed income in the QM rule “is particular- “Yes, we’ve seen some loosening but ly onerous, especially for small businesses.” we’re nowhere close to where we were in The FHA’s guidelines remained But the impact of the QM rule on mort- 2006,” said Fratantoni of the MBA. unchanged during and after gage credit availability is also limited. Others note that while industry practices the crisis, with borrowers able Technically, the QM stamp of approval re- and regulatory decrees have forced lend- to obtain a home loan with quires that a borrower must have a debt- ers to significantly bolster documentation, only 3.5% down. to-income ratio of 43% or less. Lenders corresponding improvements in technolo- have complained loudly that that cutoff gy have allowed companies to make those In a handful of states with high home has disproportionately impacted low- to changes and still make credit available. prices — including California, Colorado, moderate-income borrowers. However, the “Relative to the last housing boom, it’s Hawaii, Oregon, Massachusetts, New Jer- CFPB rules carve out a seven-year exemp- hard to get a loan, but it’s probably much sey and New York — some lenders required tion for loans backed by Fannie and Fred- easier relative to long-term norms since a median down payment of 10% in 2017. die, which expires in 2021. you have to provide the same documen- Meanwhile, in the first half of 2018, 11% Fannie and Freddie “have their QM tation but now there are ways you can of purchase loans had LTV ratios of 95% or ‘patch,’ and they don’t have to abide cur- do it more quickly with technology,” said higher, a tenfold increase from 2014, when rently by Appendix Q requirements in order Daren Blomquist, a senior vice president a mere 1.2% of purchase mortgage loans to be QM,” said White. at Attom Data Solutions. were originated with LTVs of 95% or more. And many agree that the CFPB rules are Evidence of the gradual loosening of To be sure, the regulatory environment still in flux, and the bureau could make credit over the past few years can be has made aspects of mortgage origina- changes to QM that will provide more found in the slight uptick in foreclosure tion more challenging, and the industry flexibility to lenders. Acting CFPB Direc- start numbers to 1.26% in vintage 2014 continues to push for changes to the CF- tor Mick Mulvaney — a Trump adminis- Federal Housing Administration loans, PB’s “Qualified Mortgage” rule and oth- tration appointee focused on easing rules Blomquist said, compared with the long- er regulations. developed in the Obama administration term average of 0.7%. Bill Dallas, whose former company Own- — has shown a willingness to revise QM. “It’s a sign that a modicum of risk has re- it Mortgage Solutions became the first But even former CFPB officials under Mul- turned to lending,” he said. high-profile mortgage lender to close vaney’s predecessor, Richard Cordray, are For less creditworthy borrowers and during the crisis in 2007, said regulations open to some changes. those with hard-to-document credit pro- such as the CFPB requirements are keep- “Appendix Q could be tweaked to allow files, there is no subprime or Alt-A market ing some self-employed borrowers, small a borrower to qualify if their assets sup- anymore. But there are more than 200 business owners and borrowers with assets port the monthly mortgage payment,” down payment assistance programs that but no income, from getting a loan. said Patricia McCoy, a law professor at allow low- and moderate-income bor- “We turn down potential borrowers all Boston College Law School and a former rowers to get into a home provided they the time,” said Dallas, now the president assistant director for mortgage markets have decent credit. of Finance of America Mortgage. Yet at the CFPB. NMN

nationalmortgagenews.com November/December 2018 National Mortgage News 15

015_NMN1118 15 11/1/2018 4:37:50 PM The Complete Package

New financing options and better inventory have bolstered the manufactured housing sector. Is this the answer to lenders’ purchase-market woes?

By Bonnie Sinnock

Lending on manufactured housing is more complicated and risky For example, it might be tough for a traditional mortgage lender than originating mortgages for traditional single-family homes. But to assess risks that are unique to the factory-built housing process, a dearth of entry-level housing, along with new Fannie Mae and like those involved in financing the installation of the home after it Freddie Mac initiatives, are prompting mainstream mortgage lend- is manufactured. But there is less concern about factors like bad ers to venture into the sector as it is being revitalized by new com- weather that hold back production timelines for site-built homes petition and higher-quality inventory. and their financing. Manufactured homes account for almost 10% of housing starts Along with Fannie and Freddie, the Federal Housing Adminis- nationally and can represent an even larger share of existing inven- tration is developing its own plans to increase financing offered tory in some regions, like the Pacific Northwest. Their numbers can through its manufactured housing programs. But even without grow rapidly because producing and installing manufactured homes greater involvement from the FHA and government-sponsored en- is less labor-intensive and faster-paced than site-built new homes. terprises, the market for factory-built homes is growing in size and That’s attractive to the mortgage lenders, retail loan officers and quality, making it a more viable entry-level housing alternative for mortgage brokers seeking new sources of purchase originations lenders to serve. to make up for the significant decline in refinance lending volume “It is part of the future, and there are several reasons why it is over the past year. good for affordable lending, and for first-time homebuyers,” said And while many issues that constrain growth in the stick-built David Battany, the executive vice president of capital markets at market are absent from manufactured housing, the sector comes San Diego-based Guild Mortgage. “But the mortgage industry is with its own unique set of challenges. still catching up to it.”

16 National Mortgage News November/December 2018

016_NMN1118 16 11/1/2018 4:38:19 PM nationalmortgagenews.com November/December 2018 National Mortgage News 17

017_NMN1118 17 11/1/2018 4:38:24 PM Higher-quality, factory-built homes are Fannie’s new program, MH Advantage, While manufactured housing loans cur- catching on with consumers because they prices manufactured housing loans at the rently represent a mere 1% to 2% of the fill a need for housing that costs more than same rate as traditional residential mort- company’s overall volume, it is growing. a manufactured home without land, but gages as long as the homes have features “It is not going to replace all the volume less than a site-built home. like energy efficiencies, attached garages mortgage lenders have lost, but for com- “It fills the gap that is between $89,500 and a pitched roof. panies that want to hire and retain loan of- and $220,000, which site-built homebuild- “If the manufacturer produces a home ficers, it’s another arrow their LOs can add ers aren’t filling,” said Lesli Gooch, execu- that includes those amenities, then they to their quiver,” Loving said. tive vice president of government affairs are going to offer financing at a rate on at the Manufactured Housing Institute, a par with site-built homes,” Gooch said. Barriers to entry trade group for the sector. “That’s huge for us.” Housing inventory shortages, the con- While some manufactured housing com- Traditional mortgage companies are vergence between factory- and site-built panies prefer to keep their costs and prices starting to see these higher-quality, fac- homes, affordability pressures, and new low, others are increasingly competing in this tory-built homes as a market that could forms of GSE financing are coming togeth- niche. The most notable is Clayton Homes, a benefit them as well. er to give lenders unprecedented access to builder owned by billionaire Warren Buffett’s “It’s a way to get inventory in the market,” the manufactured housing market. Berkshire Hathaway conglomerate. said Mike Fontaine, chief financial officer But lenders do face headwinds. Most of The trend is significant for mortgage and chief operating officer at Plaza Home the country’s manufactured housing inven- lenders because it bridges differences be- Mortgage, a company that is considering tory is ineligible for traditional mortgages. tween manufactured and traditional hous- buying MH Advantage loans. The homes are treated as personal, rath- ing in ways that could make the product This form of housing is marginally dis- er than real, property, because they’re not more accessible to them. placing some other alternatives considered built permanently affixed to land. In those “If you look at pictures of these homes, by entry-level homebuyers and downsizing cases, consumers obtain chattel loans, a they look comparable to site-built hous- retirees, but increasing affordable housing type of secured debt similar to an auto loan. ing,” said Gooch. stock overall, according to Battany. The home is titled in public records, which That should make these houses eligible “It will allow companies to build more the lender holds until the debt is paid. for financing at the same interest rate as houses, more quickly,” he said. The GSEs have pledged to experiment traditional single-family homes, she said. There were more than 92,000 manufac- with chattel lending in high-needs areas “Just because it was built in the factory, tured homes shipped in 2017, up from almost as part of their “Duty to Serve” legislative that doesn’t necessarily mean it should 50,000 when the market bottomed out in mandate. But in the meantime, their manu- be that different than the financing for a 2009. For traditional mortgage lenders start- factured housing activity remains concen- house that’s built on site,” said Gooch. ing to become more active in the sector, this trated in real property. Historically, the GSEs have charged a pre- is the source of an incremental gain in volume Chattel lenders, on the other hand, do en- mium that deducts from the price they pay rather than a notable one, but every little bit gage in some competition with real-proper- for manufactured housing loans based on helps in a market with fewer lending opportu- ty lenders and may have in-house connec- the view that the collateral is riskier than a nities, and more competition for loan officers. tions with manufactured housing builders. single-family home. But that’s changing. “With interest rates going up, and volumes The advantage mortgage lenders have Fannie is testing a manufactured housing going down, more and more people are look- is that borrowers can get a much more fa- loan that omits that premium if the home ing for programs and products that will fill vorable rate if they are willing to work with has verified features that make it more com- the gap,” said Jim Loving, director of national a lender that will help them convert their parable to site-built homes. Freddie also is sales for Planet Home Lending’s correspon- home into real property. readying new pilots in response to this trend. dent channel. Planet Home has increased Chattel loans tend to have 10- or 20-year “One thing we are looking at is how we its involvement in the manufactured housing terms and rates ranging from around 6% to can support that type of home,” said Den- sector due to growing demand from third-par- a little over 10%, depending on underwriting nis Smith, an affordable lending manag- ty originators, and is considering offering MH considerations like credit score, down pay- er at Freddie Mac. Advantage loans, according to Loving. ment and home size, according to Gooch.

18 National Mortgage News November/December 2018

018_NMN1118 18 11/1/2018 4:38:24 PM When the land as well as the home is MH Advantage specifications, particularly manufactured housing often found in more purchased, the rate may be lower, even if among firms that sell lower-priced homes. rural areas with fewer homes, it is tougher the land remains personal property. In this “We’re a little bit concerned that it may to find comparable properties to base val- case, rates tend to be in the 5.75% to 8% drive up some costs that would be passed uations on, said Loving. range, depending on the term and under- on to the consumer, but anything that be- Being aware of differences in what foreclo- writing considerations involved. gins to get the agencies comfortable with sure properties sell for in the market is also In cases where manufactured loans are the manufactured home, we’re definitely important to understand, said Waite. The fact secured by real property, and a program behind that,” said Bill Packer, chief operat- that MH Advantage, unlike MH Select, per- like MH Advantage is in play, qualifying ing officer at American Financial Resourc- manently validates the structural standards borrowers and properties may be able to es, a mortgage lender that specializes in that homes are built to with a sticker should obtain 30-year rates slightly below 5%. manufactured housing and derives more help uphold their values, he said. But chattel lenders can give consumers than one-third of its business from it. In addition to understanding the nuanc- access to a home with a lower price point Still, MH Advantage is starting to catch es involved in valuations, lenders will have and underwrite a loan more quickly. They on with builders. Land Home has a de- to initially find a way to learn how to help also may be quicker to offer a loan to a velopment affiliate that is building mod- fund the installation of homes that qualify borrower with a lower credit score, albeit el homes with MH Advantage in mind. It for Fannie’s new financing. at rates that could go as high as 12%. plans to market them as a way to quickly If there already were existing MH Advan- While there is some competition between replace traditional single-family structures tage units, installation loans would be less the two markets due to the convergence damaged by wildfires. crucial, noted Battany. Guild is using con- between the traditional site-built and fac- Commodore Homes of Pennsylvania and struction lending technology to help it sur- tory-built homes, both largely continue to Colony Factory Crafted Homes are also en- mount that obstacle. Another option is to coexist, according to Battany. dorsing MH Advantage, as is Clayton Homes. partner with other experienced lenders in “People can still always buy the low- “We are encouraged by the development the sector, he said. er-quality manufactured home if price is of MH Advantage. As our industry evolves, Manufactured housing historically has had the most important driver of their decision,” it is important that homebuyers are of- higher depreciation and loan delinquency he said. “Also, a high-quality manufactured fered more diverse opportunities to access rates than traditional mortgages. This may home qualifies for better-priced financing affordable housing,” Clayton spokesman not be the case when it comes to newer through a GSE program will actually result Ryan Wilson said in an email. homes built to higher standards, but lenders in a homebuyer getting a lower interest The learning curve for mortgage lenders like Planet that are considering expanding rate than on a traditional manufactured that want to offer manufactured housing into manufactured housing are still being cau- home. So the lower monthly cost of the in- loans is not as steep as it was. Lending pro- tious about drawing up underwriting overlays. terest savings will offset some of the higher grams today are “friendlier for a lender that’s Established players hope newer entrants cost to purchase the home.” not in the market” than past efforts like MH properly size up the manufactured housing Another issue is that lenders are still wait- Select, a program similar to MH Advantage risks correctly, because not doing so has ing for units that qualify for MH Advantage that had the bad fortune to launch around hurt the sector in the past. to be produced. the time market turned in 2007, said Waite. “I don’t mind other lenders coming in, I “I do see an emerging, potential market, But manufactured home lending still has just hope they don’t blow it,” said Waite. but I don’t know how long it is going to take,” nuances that could trip up mortgage lend- If traditional mortgage lenders find ways said Brad Waite, president of Land Home ers less experienced with it, he said. to appropriately underwrite and make more Financial Services, a mortgage lender that “The quality of the manufactured home has manufactured home loans to support it, the has an established sideline in manufactured improved immensely over time,” said Loving. increased production of higher-quality man- housing that’s grown from 5% to as much as But the product is still a little more complex ufactured homes could have a net benefit for 10% of its business in the past year or so. than a traditional home loan for a mortgage home-finance companies, said Battany. What’s more, there’s no guarantee that lender, “especially on the appraisal,” he said. “It could replace some existing forms of manufactured housing builders will all With new types of higher-quality manu- manufactured housing, but it also will expand start producing inventory that meets the factured homes going into production and the housing market for lenders,” he said. NMN

nationalmortgagenews.com November/December 2018 National Mortgage News 19

019_NMN1118 19 11/1/2018 4:38:25 PM Voices

Within the fintech space, there is a broad range of companies with ideas to support various lender business models and auto- mation needs. Some of these products are designed to deliver a collaborative borrower experience, with an emphasis on support- ing the lender’s online and mobile channels. Others function primarily as integrators of data and services across the mortgage sup- ply chain, providing a one-stop shop while removing the need for lenders to manage multiple external integrations. Collectively, they all electronically cap- ture, organize and present data drawn from trusted sources — and then link such data to underwriting and other consumers of the data to drive automated workflow and lender decisioning. The result is a faster, pa- perless, more efficient process that delivers a vastly improved borrower experience. With digital, real-time views of collateral Fintech Innovation Is Becoming a and capacity now enabled, there is growing awareness among lenders that they can ben- Must-Have for Mortgage Lenders efit by gaining more visibility into the inves- tor’s assessment of risk at the point of sale. Exploration and adoption of new technologies is essential By accessing the results of both govern- for achieving strategic goals and satisfying the needs and ment-sponsored enterprises’ automated expectations of mortgage borrowers. underwriting systems early in the process, lenders can get a clearer picture of all the By Andy Higginbotham options available to them and to the borrow- er. And they can also maximize loan fungi- Innovation, disruption, change — these This disruption is challenging some bility and secondary market execution, and words are not generally associated with long-standing industry norms, and lenders drive down their cycle times and costs. the mortgage industry. But in a digital age on the forefront of this trend stand to ben- This idea of running both GSEs’ automat- where consumers’ expectations are shift- efit from lower origination costs, shorter cy- ed underwriting systems is an inevitable ing, that needs to change. The industry cle times and a better borrower experience. workflow innovation. Until recently, it wasn’t must provide a faster, less pa- Supply chain friction and possible to do this efficiently. But now there per-intensive process and give costly loan quality and compli- is an expanding list of lenders and mort- consumers more control. ance efforts have contributed gage technology partners building the As edge technologies be- to a dramatic increase in loan first generation of automated systems to come increasingly main- origination costs. But mort- support this concept. Fintech-driven inno- stream, several well-funded gages are manufactured from vation is ushering the mortgage industry technology startups are enter- the flow of data and funds, into a new era. For lenders, exploration and ing the market to enable the making them a prime target adoption of new technologies is imperative elusive digital mortgage expe- Andy Higginbotham for digital automation. See- for achieving strategic goals and satisfying rience. The names are now fa- ing an opportunity, privately the needs and expectations of borrowers. miliar — LoanBeam, Cloudvirga, funded fintech companies have Blend, Roostify, Finicity, FormFree, Tavant, emerged to accelerate the evolution of the Andy Higginbotham is SVP of strategic delivery Yodlee, PointServ — to highlight just a few. data-driven, digital mortgage experience. in Freddie Mac’s single-family business.

20 National Mortgage News November/December 2018

020_NMN1118 20 11/1/2018 4:38:27 PM We’re Driving Innovation Home.

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021_NMN1118 21 11/1/2018 4:57:34 PM MARKETPLACE MARKETPLACE INSURANCE SUBSERVICING

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022_NMN1118 22 11/1/2018 5:10:44 PM People

Jennifer Cherney Scott Bristol New York, NY Troy, MI Dan Davis Des Moines, IA

Eric Christensen Covina, CA

Brett Price Atlanta, GA

CALIFORNIA director in its capital advisors division For the credit unions, he supervised tributed retail for Flagstar, to create in the firm’s Atlanta office. IT staff, contributed to strategic plan- a growth strategy for retail, develop COVINA In this role, he will specialize in loan ning, negotiated vendor contracts, and execute a technology roadmap LERETA LLC has tapped Eric Chris- origination, negotiation, and structur- and managed technology budgets for Flagstar’s national retail operation, tensen as its chief strategy officer. He ing of debt and equity investments for and procurement. and optimize its platform to support is responsible for product develop- all asset types. In 2014, Davis became a product its loan officers. ment, corporate strategy, marketing Most recently, Price served as an manager and consultant for CUTEK and M&A transactions. adjunct instructor of real estate de- Inc., which provides custom program- Christensen, who most recently was velopment finance at Columbia Uni- ming services to credit unions. NEW YORK the founder and managing director of versity in New York. Credit Data Solutions, has spent his He previously served as asset NEW YORK career developing knowledge around manager for a REIT operated by MICHIGAN Greystone has hired Jennifer Cher- financial software, predictive model- Clipper Equity, a New York Stock Ex- ney as a managing director as part ing and analytics, credit risk technol- change-traded residential landlord TROY of the firm’s ongoing effort to ex- ogy and decisioning software. and development firm. Flagstar Bank has hired Scott Bris- pand the firm’s lending operations Before Credit Data Solutions, Chris- tol as senior vice president and na- across the Northwest. tensen held executive positions at tional production manager of its re- Based in Seattle, Cherney is focused several financial services companies, IOWA tail mortgage business. on national multifamily real estate including Interthinx/Strategic Analyt- He brings to Flagstar more than lending across a range of sectors. ics, FICO, Fannie Mae and LoanPer- DES MOINES 20 years of industry experience, ex- Before joining Greystone, she most formance/CoreLogic. Fintech startup LenderClose has clusively in the retail mortgage sec- recently was executive director, com- named Dan Davis as its new director tor, most notably from New Ameri- mercial term lending and multifamily of technology. can Funding, where he was national finance for JPMorgan Chase in Seattle. GEORGIA For over 17 years, Davis worked in sales manager, and from PrimeLend- Cherney has also served as the the IT departments of three Midwest ing, where he was president and na- vice president of strategic finance ATLANTA credit unions, culminating in a vice tional sales manager. at Extell Development Co. and as a Franklin Street, a commercial real president position with Financial Plus In his new role, Bristol will partner managing director at Meridian Capi- estate firm, has named Brett Price as Credit Union in West Des Moines. with Susan McHan, president of dis- tal Group. NMN

nationalmortgagenews.com November/December 2018 National Mortgage News 23

023_NMN1118 23 11/1/2018 4:38:35 PM Screenshots 12 Housing Markets Where Prices Are Cooling Off

No. 5 No. 9 Portland, Ore. St. Louis, Mo. Median home price: $391,400 (4.9%) Median home price: $163,100 (5.4%) Median rent: $1,833 (-2.7%) Median rent: $1,139 (-1.2%) Change in for-sale inventory: 18% Change in for-sale inventory: -4.3%

The national median rent decreased 0.2% in September, the first year-over-year decline since July 2012, according to Zillow. In the home purchase market, prices increased 7.6% nationwide year-over-year, a slower pace than in previous months. Here’s a look at the 12 cities with the slowest home price growth in September 2018. The data, from Zillow, is based on data for home value, rents and housing inventory, with comparisons based No. 6 No. 10 on year-ago figures. New York, N.Y. San Diego, Calif. While no markets experienced a decrease in home purchase prices, Median home price: $431,000 (5.2%) Median home price: $589,200 (5.9%) Median rent: $2,370 (-1.9%) Median rent: $2,541 (0%) median rents were flat or down in all but two markets. Meanwhile, the Change in for-sale inventory: 5.2% Change in for-sale inventory: 47.1% inventory of for-sale homes dropped in only three markets.

No. 1 No. 3 No. 7 No. 11 Washington, D.C. Philadelphia, Pa. Chicago, Ill. San Antonio, Texas Median home price: $401,000 (3.7%) Median home price: $229,300 (4.7%) Median home price: $222,200 (5.3%) Median home price: $187,800 (6.1%) Median rent: $2,133 (-0.9%) Median rent: $1,566 (-1.7%) Median rent: $1,635 (-1.9%) Median rent: $1,330 (-1.1%) Change in for-sale inventory: 0.8% Change in for-sale inventory: -8.7% Change in for-sale inventory: 2.7% Change in for-saleinventory: 11%

No. 2 No. 4 No. 8 No. 12 Baltimore, Md. Sacramento, Calif. L.A.-Long Beach-Anaheim, Calif. Boston, Mass. Median home price: $265,600 (4.5%) Median home price: $400,600 (4.8%) Median home price: $647,100 (5.4%) Median home price: $458,000 (6.2%) Median rent: $1,740 (-0.2%) Median rent: $1,842 (1.8%) Median rent: $2,750 (0.8%) Median rent: $2,367 (-1.6%) Change in for-sale inventory: -0.2% Change in for-saleinventory: 17.2% Change in for-sale inventory: 29.9% Change in for-sale inventory: 16.7%

24 National Mortgage News November/December 2018

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