engage engines...jan/feb 2020 • volume 44, issue 4 nationalmortgagenews.com engage engines why...

nationalmortgagenews.comJan/Feb 2020 • Volume 44, Issue 4

Engage enginesWhy 2020 could see mortgage lenders forced to reconsider

their go-slow approach to AI, big data and other technologies

CV1_NMN_01-02_20.indd 1 1/8/20 11:28 AM

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January | February 2020 National Mortgage News 1nationalmortgagenews.com

SAR

A S

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January | February 2020 | VOL. 44 | NO. 4Contents

14Engage enginesWhy 2020 could see mortgage lenders forced to reconsider their customary go-slow approach to innovations in artificial intelligence, big data and other technologies

Origination4Home equity lending slowdownWhile first mortgage volumes at credit unions are rising, HELOC originations are way down.

Secondary6Five questions for Ed DeMarcoEnding the GSE conservatorships, the former Federal Housing Finance Agency head said, needs to be done in conjunction with finance reform and with bipartisan support.

Departments

In Every Issue18PeopleSee who is on the move in the mortgage industry.

20ScreenshotsFrom the municipalities surrounding Silicon Valley to New York’s concrete jungle, here’s a look at the 12 most expensive ZIP codes to buy a home in 2019.

Technology10Five questions for Armando FalconLenders are closer than ever to having a truly paperless mortgage process, the technology consultant and former regulator said.

Compliance & Regulation12No fair-lending cases from the CFPBThe Bureau has not filed an enforcement action or made a referral to the Department of Justice in the past two years.

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National Mortgage News (ISSN #1050-3331) is published 9 times per year; January/February, March, April, May, June, July/August, September, October and November/December by SourceMedia Inc., One State Street Plaza, 27th Floor New York, NY 10004, 212-803-8200. Subscription price: $379 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. © 2020 National Mortgage News and SourceMedia Inc. All rights reserved.

001_NMN010220 1 1/9/2020 4:38:12 PM

2 National Mortgage News January | February 2020

December's origination forecast

$0

$200B

$400B

$600B

$800B

1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20

Note: Estimated volume through 3Q19, otherwise projected volume

Purchase Refinance

Source: Freddie Mac

Freddie Mac cuts 2020 forecast on lower expected refi volumeFreddie Mac reduced its origination forecast for 2020 to under $2 trillion, now projecting $184 billion less in refinance volume compared with its November outlook.

People are reading...

Let’s get housing reform right this time aroundRick Baron: “There’s a simple fix for Fannie and Freddie — covert them into nonprofit corpora-tions so they don’t pay corporate taxes or send profits to Wall Street.”

People are talking about...

Feb. 3-6Independent Mortgage Bankers ConferenceNew Orleans, LAwww.mba.org/conferences-and-education/event-mini-sites/independent-mortgage-bankers-confer-ence

Feb. 23-26MBA’s Servicing Solutions Conference & ExpoOrlando, FLwww.mba.org/store/events/conferences-and-con-ventions/servicing-solutions-conference-and-expo

June 8-10Digital Banking 2020Austin, TXwww.americanbanker.com/conference/digitalbank-ing-2019

Events

What’s going [email protected]

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002_NMN010220 2 1/9/2020 10:46:52 AM

This year marks the 22nd anniversary of the Top Producers program. The rankings are open to loan o� cers and brokers who work at depository, nonbank and brokerage mortgage originatorsin the United States. Participants must complete the survey, which begins with a series of multiple choice questions about recent industry developments and trends, marketing techniques and business practices. The deadline for submissions is 6 p.m. EST, Friday, February 21, 2020.

The 2020 Top Producers will be revealed in April online and in NMN magazine. If you have any questions about the 2020 Top Producers program, please email [email protected].

Submit your entry today.https://www.nationalmortgagenews.com/news/top-producers-2020-survey

Call for Nominations:Top Producers

NMN Call for Nomination house ad.indd 1 1/8/20 12:18 PM003_NMN0120 3 1/9/2020 10:01:34 AM


Origination Origination

HELOCs on the decline at CUs

0%

5%

10%

15%

11.3%10%

12.4%

7.8%

4.9%

1.8%

5.5%

10.6%

9%

First mortgages Home equity lines Second mortgages

Note: All figures based on October data for each yearSource: CUNA Mutual Group

2017 2018 2019

Home equity lending slowdown raises questions for 2020

By Aaron Passman

First mortgage volumes continue to rise at credit unions, but home equity lines of credit have fallen dramatically in recent years

There’s rising uncertainty about how a sizable piece of the credit union industry’s loan portfolio will perform this year.

First mortgage volumes continue to rise at credit unions, but home equity lines of credit have fallen dramatically in recent years, drop-ping from 7.8% growth in October 2017 to 4.9% a year later and just 1.8% in October of 2018, according to the latest Credit Union Trends Re-port from CUNA Mutual Group. Growth rates for second mortgages — which tend to be closed-end loans rather than open ended lines of credit like a HELOC — are also down, though not as significantly. Second mortgage growth was at 9% annually as of October, down from 10.6% one year prior.

The drop in home equity activity may be in line with other recent consumer trends.

Data from the Federal Reserve Bank of New

York shows home equity lines of credit have fallen by almost 50% in the last decade, with those declines partly driven by consumer fears following the Great Recession. A recent report from Redfin also shows more consumers stay-ing in place, sticking around in their homes for an average of 13 years in a push to build equity, though the report notes that’s partly driven by a lack of affordable housing.

“People got burned before because they were loaning money against a property where the value was inflated,” said Eric Bugger, chief lending officer at Wright-Patt Credit Union in Beavercreek, Ohio. “We didn’t necessarily see that here in the Midwest nearly as much as the sand states did, but we did see some of it. When people lost the value they said, ‘Why am I paying all this money on an asset that’s not even worth as much?’” Having lived through that, many

consumers now are hesitant to lend against their existing equity, he added.

Credit unions held just under $560 billion in residential real estate loans as of October, according to CUNA Mutual. Home equity lines and second mortgages accounted for 16.7% of that total. While total mortgage lending at credit unions has increased by 17.8% in the last two years, HELOCs and seconds have dropped by about one percentage point as a portion of total loans, despite an 11% ($9.8 billion) increase in volumes.

Wright-Patt saw a slight drop off in home eq-uity lines last year but that has been made up for by increases in other real estate-secured lending. “Three months ago we saw a pretty significant surge in refinances of first mortgages, so instead of using a second mortgage product, first mort-gage rates were so low that people refinanced their first, and they hadn’t done that for a while because we had such low rates from the previous refi boom,” said Bugger.

Wright-Patt members are deleveraging and not borrowing as much as they used to, he added. Much of that is tied to insecurity about long-term home values.

“We know boomers make up the largest share of homeowners, and the majority of boomers are either really close to or in retirement age, so that might put people off from taking out loans on a home that they might be planning on selling in the next five years or so,” said Francesca Orte-gren, a research analyst at Clever Real Estate.

She added that millennials and Generation X haven’t bought homes at the same rate as previous generations. Although millennial home-ownership is on the rise, many members of that generation may not have enough equity built up to start taking out additional loans.

“Millennials are risk-averse in that way and have a lot more student debt, so they kind of have to take out fewer loans in other areas be-cause they already have a lot of debt,” she said.

But one credit union executive suggested the recent decline in home equity line volumes was less about consumer sentiment and more about recent trends in the market.

“What you did see was a great run-up in equity lending from ’13 or ’14 on to ’17 and ’18 because home values were starting to come back … which causes the average consumer to say ‘My home is worth more, maybe there’s another op-tion for debt?’” said Ray Lindley, chief operating officer at Boulder, Colo.-based Elevations Credit Union and vice chair of the CUNA Lending Coun-cil. “So when you talk about growth rates, you’re

004_NMN010220 4 1/8/2020 4:45:33 PM

nationalmortgagenews.com

Origination Origination

comparing growth rates in ’19 to growth rates in ’16, ’17 and ’18 that were unsustainably high. It couldn’t go on forever at that rate.”

Home equity lending is still growing, he said, just not at the same pace. While second mort-gages and home equity lines are down in Elevations’ call report, many members have instead paid down their home equity lines of credit and refinanced first mortgages. And about 70% of the seconds and HELOCs that the credit union books go straight to the secondary market and never show up on a call report.

While talk of a recession for this year has cooled, one will come eventually. Whenever that happens, an economic downturn is more likely to impact credit union commercial lines rather than housing products, but “if it impacts job creation and employ-ment, that will have a spillover into housing,” Lindley said.

“The scary part about the commercial and business space is that’s newer to credit unions,” he added, noting that CUs may not have the same level of experience with underwriting business lines as traditional banks. That means a credit union that hasn’t been underwriting prudently could find itself in a squeeze if the economy turns. And, he added, if that hap-pens writ large, it could give addi-tional ammunition to the banking lobby’s claim that the credit union member business lending cap doesn’t need to be raised.

Ortegren concurred that any economic crisis in 2020 is unlikely to have the same impact as the Great Recession did. Despite high consumer debt levels overall, she said, “people are taking out [home loans] that make more sense. … People aren’t taking out five times their income [for a mortgage].

“We also have low unemploy-ment across the board, which helps with keeping up with mort-gage payments, and we’ve seen lower delinquency rates in general

on mortgages lately. Mortgages and the hous-ing market might be safer than it was 10 years ago, but we are seeing an incline in credit card

debt, so people are maybe being a little bit more cautious when it comes to mortgages and home lending, but not so much in other areas.” NMN

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To learn more about what we can do for you, call 1-888-SUBSERVEor email [email protected].

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Secondary Secondary

Five questions for former FHFA director Ed DeMarco

By Paul Centopani

Getting Fannie Mae and Freddie Mac out of conservatorship has been an elusive goal. It will remain elusive, says DeMarco, in the absence of broader reform of housing finance, something that will require bipartisan support

How to end conservatorship has been a hot-button topic for the government-sponsored enterprises ever since they went into it following the housing crisis. While the Federal Housing Finance Agency pushes to make it a reality, it remains a complicated issue.

Finding a resolution will require aligning with housing reform and securing bipartisan support, according to Ed DeMarco, a former regulator and conservator for Fannie Mae and Freddie Mac who currently stands as president of the Housing Policy Council. The HPC is a trade organization that advocates for the housing finance system to remain competitive, efficient and accountable. The organization consists of industry leaders across mortgage origination, servicing and insurance.

DeMarco was the acting director of the FHFA during the Obama administration from 2009 to

2014 and a senior fellow in residence at the Milk-en Institute’s Center for Financial Markets.

Below are excerpts from a correspondence with DeMarco about the conservatorship, capital framework and housing reform. The questions and responses have been edited for clarity and length.

When do you see Fannie Mae and Freddie Mac coming out of conservatorship?

FHFA Director Calabria is bringing much needed urgency to that question, but the timing remains unclear. He has identified numerous hurdles that must first be cleared, ranging from finalizing a capital rule, to raising capital for Fannie Mae and Freddie Mac, to preparing FHFA to regulate Fannie Mae and Freddie Mac outside of conservatorship.

By itself, ending the conservatorships is not the

goal. The goal is ending the conservatorships in concert with structural reforms in our housing finance system, particularly in the secondary market.

In other words, the essential component of reform is replacing the Congressional charters of Fannie Mae and Freddie Mac. Simply ending the conservatorships would take us back to the pre-conservatorship status quo. The failure of Fannie and Freddie in 2008 exposed the undeni-able structural flaws with the GSE model.

Only Congress has the authority to address those flaws, by changing the Fannie Mae and Freddie Mac’s charters to improve competitive balance in the secondary market and reduce the systemic risk inherent in the GSE duopoly.

What would it take to get them there?Ending the conservatorships in the context of

true reform requires the Administration and Con-gress to align on a legislative solution. However, FHFA can make great strides in preparing the GSEs and the market for that outcome.

When I was Acting FHFA Director, we em-barked on a series of reforms designed to both serve the conservatorship mandate and help Congress and the Administration achieve true reform. Those efforts are reflected in all leading proposals today, including credit risk transfer and a common securitization platform.

Director Calabria is driving FHFA to continue building the reform pathway. The more FHFA can accomplish administratively, the easier it will be for Congress to focus on the remaining issues that only it can resolve — which include replac-ing the GSE charters, providing for an explicit government guarantee on MBS, and crafting a more effective affordable housing mandate.

Administrative reforms provide the means to assess the impact and performance of reform components and build out the needed infrastruc-ture in advance of legislation. Credit risk transfer is a good example of this approach.

What capital framework would you like to see them under?

The Housing Policy Council believes that the FHFA’s 2018 proposed capital framework is a good structure. It relied upon capital charges based upon granular risk characteristics of indi-vidual mortgages, plus capital set aside to cover other potential losses associated with market risk, operational risk, and model risk. Yet, that proposal needs significant refinement, which is why HPC advocated for a re-proposal back in 2018. So, we are pleased that FHFA intends to

006_NMN010220 6 1/8/2020 4:45:35 PM


Secondary Secondary

do just that. In our view, four key issues with the earlier proposal need to be addressed:

The first is for FHFA to direct the GSEs to release those portions of their historical loan files that are still not public. These files reflect riskier loans and more adverse outcomes than what has been published to-date. With the release of this data, along with the release of the models and assumptions used by FHFA in the proposed capi-tal framework, market participants can validate, or critique, the credit risk assessments embedded in the proposed capital charges.

Second, FHFA needs to fix the framework’s procyclicality by incorporating some reasonable measure of fundamental value that would enable counter-cyclical capital charges.

Third, FHFA should work with other prudential regulators to achieve some reasonable standard of comparability in their capital regulations for mortgage credit risk. Consistent capital stan-dards will enable all lenders to make rational decisions on whether to hold mortgages on their books, to sell and securitize them, or to layoff some or substantially all of the associated credit risk through various other credit risk transfer mechanisms.

Finally, the financial crisis proved the systemic

risk to consumers, taxpayers, and market par-ticipants from concentrating so much credit risk — and the tools for measuring and managing that risk — in the GSEs. This risk concentration has grown during conservatorship. To protect our financial system from another systemic hous-ing finance crisis requires treating the GSEs as systemically important institutions or introducing enough competition to distribute the risk across the market so that the systemic risk is dissipated — preferably the latter.

How can housing reform help the deficit in affordable housing?

Housing finance reform legislation presents a generational opportunity for Congress to consid-er the actual home ownership barriers families face today and to develop solutions tailored to those needs.

The Fannie-Freddie system of setting broad percentage goals for secondary market purchas-es and subsidizing the mortgage rate of high-er-credit risk borrowers regardless of income is not working. As a result, we continue to debate both the affordability crisis and the low home ownership rates in certain communities.

Most bipartisan legislative reform proposals

envision a 10-basis point fee on all mortgages in securities backed by the federal government.

This fee would provide a healthy stream of future revenue that can be targeted to families and situations Congress determines warrant sup-port. Such a funding stream could be targeted at borrower needs like down payment assistance, financial education, and building rainy day reserves to help families withstand bumps in the road.

How will the mortgage industry be impacted during the election year and fallout from the election?

The role of housing finance in the macroeco-nomy and in the lives of ordinary citizens is too important to leave reform to one political party. A solution that encourages competition, protects taxpayers, and better addresses affordable hous-ing needs is best accomplished, and perhaps only accomplished, with bipartisan support.

There remains broad bipartisan agreement on the principles underpinning reform.

Whatever the electoral outcomes, we need leaders that can bridge the remaining partisan divides for the good of the economy, taxpayers, and homebuyers. NMN

Fannie and Freddie create new timeline for revamped mortgage loan applicationBy Bonnie Sinnock

Fannie Mae and Freddie Mac will start requir-ing mortgage lenders to use the new uniform residential loan application in the latter half of 2020. Use of the new URLA will be mandatory for loan submissions starting Nov. 1, 2020.

Prior to that date, lenders can use older ver-sions of the application, commonly referred to as the Fannie Mae 1003 form.

Files submitted using legacy automated underwriting system specifications will no longer be accepted after Nov. 1, 2021, when a pipeline transition period ends. The government-spon-sored enterprises plan to have a test environment for the new form up and running by March and subsequently begin implementation with limited production over the summer.

Lender submissions can begin in September.The new mortgage application might have

been implemented a lot sooner if Fannie’s and Freddie’s regulator had not wavered over the course of time on the question of whether to add a language proficiency question or not.

The Federal Housing Finance Agency, under current Director Mark Calabria, determined in August 2019 that the uniform residentiall loan application’s deployment needed to be delayed to make a few changes.

These changes included the removal of a language-related question that had been added under former Director Mel Watt’s leadership.

To avoid delays, Watt had initially decided against adding a language proficiency question back in 2016. At that time, the mortgage industry opposed it on the grounds that it could lead to “heightened expectations” about lenders’ ability to provide services and forms that would address

the needs of all borrowers with limited English proficiency. While the majority of LEP borrowers in the United States speak Spanish, there are many other languages they might speak as well.

Watt then reconsidered his earlier decision, promising to incorporate wording that addressed the concern into a new language question.

Although the Federal Housing Finance Agen-cy’s current director ultimately decided later on to remove the language proficiency question, it has continued to support and expand a transla-tion clearinghouse that was established near the end of Watt’s term at the agency. The clearing-house helps support the two largest groups of LEP residents in the United States, people who speak either Spanish or Chinese

Watt stepped down as director of the Federal Housing Finance Agency in early 2019. NMN

007_NMN010220 7 1/8/2020 4:45:36 PM


Servicing Servicing

States with the most zombie properties

New York

Florida

Illinois

Ohio

New Jersey

0 200 400 600 800 1K 1.2K 1.4K 1.6K 1.8K 2K 2.2K 2.4K 2.6K

Source: Attom Data Solutions

New servicing laws go into effect in New Jersey and New York

By Bonnie Sinnock

Certain loan servicers will need to be licensed in the Garden State, while the New York law will force quicker action on zombie properties

The Department of Banking and Insurance in New Jersey is warning that enforcement of a 2019 residential mortgage servicer licensing law will begin in 2020.

Applications for licenses must be submitted starting Jan. 13 through the Nationwide Multi-state Licensing System. The Department plans to issue licenses on or after April 13.

Licensable companies not covered by exemp-tions in the Mortgage Servicers Licensing Act will be able to continue operating if they submit an application by April 13, pending approval.

Mortgage servicers that are unlicensed after that date “may be subject to enforcement ac-tion,” the department warned in a recent bulletin.

The law is of primary concern to most nonbank servicers of home loans that do not already hold a lending license, but it also imposes some addi-tional requirements on licensed lenders.

Licensed home lenders are exempt from ser-vicing licensing requirements under the new law, but they will need supplemental bonding and insurance coverage applicable to mortgage ser-vicing, according to a separate bulletin issued by the Mortgage Bankers Association of New Jersey and other local trade groups.

Calculations for required fidelity bond and errors and omissions policy amounts are based on the dollar volume of New Jersey residential mortgages serviced. For $100 million or less in loans, a $300,000 policy is required; for $100 mil-lion to $500 million in loans, the policy amounts required are $300,000 plus 0.15% of loans serviced; for $500 million-plus to $100 billion in loans, the policy amounts required are $900,000 plus 0.125% of loans serviced; and for $100 billion-plus in loans, the policy amounts required are $125.27 billion plus 0.10% of loans serviced.

Other states that have imposed new require-ments on nonbank mortgage servicers in recent years include Pennsylvania and Ohio.

Separately, New York Gov. Andrew Cuomo signed legislation aimed at getting mortgage companies to take quicker action on vacant properties.

The legislation, effective immediately, calls for mortgage holders to initiate and complete foreclosure proceedings or discharge the loan on vacant properties within certain timeframes.

“The new law will give localities a legal remedy to compel action on these abandoned proper-ties by mortgage holders,” New York Assembly Member William Magnarelli, D-Syracuse, said in a press release. “This will help get [the properties] out of limbo and return them to the tax rolls and productive use.”

New York has 2,266 zombie properties, the most of any state in the country by far, according to Attom Data Solutions. Contributing to this has been the fact that the Empire State has the seventh longest foreclosure timeline in the U.S. at 1,103 days on average. But the state’s backlog of distressed real estate is shrinking.

There were 25,334 foreclosure filings in New York in 2018, down considerably from 46,696 in 2013, according to a report issued by the Office of the State Comptroller in March.

However, a separate bill regarding reverse mortgage lending to cooperative properties in the state was vetoed by Gov. Cuomo, who felt that the foreclosure risks were too high.

“We are working to determine why the gov-ernor felt that foreclosure risks were too great despite all the consumer protection language,” Steve Irwin, president of the National Reverse Mortgage Lenders Association, said in a state-ment posted on the group’s website shortly before the holidays.

Cuomo, in a letter to the state senate, cited concerns about “unnecessary risks that could lead to foreclosure” and the fact that the federal reverse-mortgage program prohibits such loans.

“While the goal of this legislation is laudable, and it remains crucial that we find ways to support the needs of senior citizens, this bill does cause some concerns,” he said. “Primarily, most reverse mortgages are issued through the Home Equity Conversion Mortgage program, which is insured by the Federal Housing Administration of the Department of Housing and Urban Develop-ment. HUD requirements for reverse mortgages preclude co-ops because the loan is not secured by real property.” Cuomo was HUD secretary in the Clinton administration. NMN

008_NMN010220 8 1/8/2020 4:45:37 PM


Servicing Servicing

Foreclosure starts fall to lowest level this century: Black KnightBy Brad Finkelstein

November’s foreclosure starts hit their low-est level since Black Knight started tracking this data in 2000, while the foreclosure rate reached a 14-year low.

However, the number of mortgages where

the borrower was 30 days or more late on their payment rose by 4.2% from one month prior to 3.5%, which Black Knight attributed to a normal seasonal pattern. One year ago, the delinquency rate between October and

Sagent Lending to buy ISGN and expand its mortgage servicing technology businessBy Paul Centopani

Sagent Lending Technologies has agreed to buy ISGN Corp. in a deal that would enlarge the company’s loan servicing division.

Sagent — a joint venture formed in 2018 be-tween Fiserv Lending Solutions and private eq-uity firm Warburg Pincus — provides increased efficiency and compliance for both lenders and borrowers. Melbourne, Fla.-based ISGN focuses on software as a service mortgage technology for servicing and construction lending. Con-struction lending is one area that Fiserv is look-ing to support, having talked about bolstering the construction lending market since at least the beginning of 2019.

Financial terms of the deal were not dis-closed.

“We look forward to having the ISGN clients and team members join our broader Sagent community. Together we will remain focused on providing a superior borrower experience and lowering the total cost of servicing,” Bret Leech, CEO of Sagent Lending Technologies, said in a press release. “Clients and borrowers expect re-al-time engagement and access to their data. Like Sagent, ISGN built its offerings to meet these expectations and together we will move forward with an inclusive and comprehensive servicing solution.”

The addition of ISGN to the fold enhanc-es Sagent’s growth in the long term. It also brings in TEMPO, ISGN’s default management software that tracks and manages the default servicing life-cycle for servicers, attorneys and vendors. The main mission of both companies is to improve the overall lending experience.

After drawing interest from the private equity market, Fiserv agreed to sell a major-ity stake of its mortgage and consumer loan origination and servicing business to Warburg Pincus in February 2018. That business would rebrand as Sagent Lending Technologies in September 2018. NMN

Seasonal rise in the delinquency rate

3%

3.2%

3.4%

3.6%

3.8%

4%

Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19

Source: Black Knight

November increased by 1.8% to 3.7%.Foreclosure starts dropped to 33,500 in No-

vember, down 23.7% from October and 26.9% from November 2018. Meanwhile the foreclo-sure rate was just 47 basis points, down 3.3% from the prior month and 9.1% compared with one year earlier.

Prepayments — which reached a six-year high point in October — fell by 19.1% to a rate of 1.46%, as rising mortgage rates cut the incentive to refinance and home sale-related early payoffs declined because of seasonality, Black Knight said.

Still, the prepayment rate was 123% higher than the 10-year low of 0.66% recorded in November 2018.

The number of properties delinquent on their mortgage or in foreclosure grew by 75,000 in November to 2.12 million. This decreased 77,000 compared with November 2018.

The number of properties where the mort-gage payment was at least 30 days late increased 82,000 month-to-month to 1.87 million; the subset of those 90 days or more past due grew by 6,000 to 439,000. But when compared with one year ago, 71,000 fewer loans were 90 days or more late; the number of loans 30 days past due fell by 57,000 from November 2018.

The foreclosure pre-sale inventory ended the month at 248,000, down 7,000 from October and 20,000 from November 2018. NMN

009_NMN010220 9 1/8/2020 5:41:33 PM


Technology Technology

Five questions for former GSE regulator Armando Falcon

By Brad Finkelstein

While widespread adoption of digital mortgage practices remains elusive, lenders are now closer than ever to having a truly paperless loan underwriting and origination process

A fully digital mortgage may lie in the mort-gage industry’s future, but while strides have been made, widespread adoption of this process remains elusive.

That said, mortgage lending is closer than ever to having a truly paperless process, according to Armando Falcon, a former regulator who is currently consulting with Ginnie Mae on its digital mortgage project.

Falcon was the director of the Office of Feder-al Housing Enterprise Oversight in the Bush and Clinton administrations between 1999 and 2005. Before heading up the Federal Housing Finance Agency’s forerunner, he served for eight years as the general counsel of the House Committee on Banking and Financial Services.

Now he runs Falcon Capital Advisors, a con-sulting firm he founded in 2007.

Below are excerpts from a discussion with Fal-

con about the growth of digital mortgages at the Mortgage Bankers Association’s annual conven-tion in Austin, Texas. The questions and respons-es have been edited for clarity and length.

What are some of the trends you are noticing in the mortgage industry?

We’re right in the middle of what we see as a transformation in the mortgage industry, from paper to paperless mortgages, the digital mortgage transformation. I think this is finally the time when it’s going to be widely adopted in the mortgage industry. It will take some time, but all the right events have come together to make it start to happen.

Fannie and Freddie have allowed digital mortgages for about 10 years now but it’s never taken off for a variety of reasons. A couple of those issues have resolved themselves. There’s

no longer real doubt about the enforceability of e-notes, that’s been resolved. Warehouse lenders are now beginning to accept e-notes as collat-eral for their lines. I think the biggest event is the government deciding they’re going to get behind e-notes and fully digital mortgages.

In all my time working in government and now doing consulting work, we see how powerful it can be when government policy aligns with industry desires. So when the two converge to say “we want to accomplish something,” it makes things happen.

There was a lot of talk at the MBA convention about the growing use of artificial intelligence and machine learning to assist with internal processes. How do those impact the digital mortgage transformation?

I think they’re a little related, but I think they’re two separate developments. The AI adoption is meant to automate functions that are repeatable — the manual, almost admin-istrative functions. If you can have AI perform those functions, it becomes more efficient. Dig-ital mortgages are something different. It is the use of technology to create a mortgage asset that is paperless. AI might be able to play some part in the paperless mortgage origination pro-cess, so they can complement each other, but I see them as two separate developments.

When it comes to adopting digital mortgages, many in the industry have been worried about compliance. Are the regulators more open now to digital mortgages?

Yes. You’ve got use of technology on the front end, in the creation of the product, to try to make sure that there is full compliance with all of the regulations.

But there’s another side to compliance that people aren’t focused on, in this kind of econo-my, where there aren’t a lot of borrowers that are defaulting.

During the financial crisis and the subprime meltdown, foreclosures were happening in a big way and people went to into loan files to try and figure out if they were going to foreclose. But there were key documents missing or they couldn’t find the loan file at all. There were sig-natures that were missing on key documents.

All those problems that arose, that came to light as a result of the subprime mortgage crisis, those would be prevented in the digital mort-gage world. The digital mortgage, paperless, closing process will make sure that every field

010_NMN010220 10 1/8/2020 4:45:39 PM


Technology Technology

that needs to be signed, is signed. And there will be digital copies created of a mortgage so that you don’t have to worry about where’s the file. They don’t get lost, they don’t fall off the UPS truck. In all the shuffle of papers, a key slip of paper can fall out, and then you don’t have proof that the borrower signed a certain document.

So all these defects in loan files that came to light after the financial crisis — digital mort-gages fix that. Digital mortgages protect the integrity of the loan file.

Given your past role as the regulator for the government-sponsored enterprises, what do you see happening with housing finance reform? Is there any chance of it happening in 2020?

There’s nothing special about 2020 that there’s going to be some epiphany in Congress. What’s

more likely to happen is, in a year or two or more, Congress fills what regulatory action alone cannot fill.

It was important that Treasury got the report out. I think that box had to be checked and now that that’s happened and the administration’s position been made clear, Director Calabria now is positioned to execute on using his powers to reform Fannie and Freddie.

I know Mark, I like him, I’m a fan of his, I think he’s going to do a good job running the agen-cy. I trust him to be very careful about properly reforming Fannie and Freddie rather than just recap and release. Because recap and release without reform is just recap, release, repeat. He understands that very well and I think he will recognize the need for very serious reforms at Fannie and Freddie in connection with taking them out of conservatorship.

So Congress needs to act, rather than the regulator taking this on itself?

Exactly, but I think we do need regulator to be a catalyst for Congress to act. You need the regulator to do as much as it possibly can to identify to Congress what it needs to do to fill the gaps. And Congress then is more capable of passing a more limited law to fill those gaps.

It will be very hard for any competitor to pull some market share from Fannie and Freddie. Given the difficulties in that, it would be difficult for investors to pour money into a competitor at the very unlikely prospect of pulling market share from Fannie and Freddie.

That’s why I think most of the reforms that are well thought out include market caps for Fannie and Freddie. When (Senate Banking Committee) Chairman (Mike) Crapo put out a proposal two years ago, he had market caps in his bill. NMN

Two fintechs broaden their mortgage ambitionsBy Sean Allocca & Will Hernandez

Wealthfront, a pioneer in robo advice that just a few months ago began offering savings accounts, says it’s taking its next step — connecting cus-tomers with mortgages.

Meanwhile, Varo Money CEO Colin Walsh says that if his digital-only firm’s application for a bank charter is approved, it will expand into robo advice and brokering mortgages.

The recent announcements are part of the fin-tech world’s ongoing mashup of wealth manage-ment and basic banking on digital-only platforms. Their target audience? The customers of tradition-al banks.

“The recent launch of savings accounts and planned expansion into checking accounts and mortgages are just a few steps on a path to become a viable alternative to banks,” said David Goldstone, head of research at Backend Bench-marking.

Wealthfront describes traditional lenders as vul-nerable to digital-first, artificial-intelligence-pow-ered providers.

“By our estimate, there are over 50 million retail banking clients up for grabs at the top U.S. banks alone,” according to a company blog post in late November by Dan Carroll, founder and chief strat-egy officer of Wealthfront. “These branch-nevers will leave their banks for a better solution over the next decade.”

Customers will be able to apply for mortgages made by a bank partner of Wealthfront through Wealthfront’s mobile app, Carroll wrote. The company, which already analyzes thousands of mortgages and home pricing data to help clients stay on track while saving for a down payment, will help clients figure out if they qualify for the loans, according to Carroll. Loans of $800,000 at 3.5% interest were given as an example.

Banks should take note. “Wealthfront has ambitions to expand well beyond investing to compete with traditional banks for customers’ full personal finance relationships,” Goldstone said.

Wealthfront, of Redwood City, Calif., did not provide more details, such as which bank would be providing the mortgages.

Plans to broker mortgage lending would put them in competition with challenger banks, too.

Varo Money said it intends to offer a variety of loans provided it secures a bank charter.

“At Varo, we plan to have a full range of con-sumer banking products in our road map once we become a bank, including [certificates of deposit], robo-advising, credit cards, home equity loans and mortgage brokering,” Walsh said in an interview..

“In order to survive, these robo startups need to diversify,” said Jen Butler, a research director at Corporate Insight. “In the past several months,

deposit products have been the focus of this expansion. Startups must now compete directly with established institutions, like Bank of Ameri-ca Merrill Lynch, Charles Schwab and JPMorgan Chase — organizations that have the luxury of an existing customer base to tap into and the scale to provide competitive pricing.”

Tim Mayopoulos, president of the digital lender Blend, said it is understandable why upstarts like Wealthfront would want to get into mortgages.

“It’s a huge market with good margins when conditions are favorable, which they are at the moment,” said Mayopoulos, a former CEO of Fannie Mae. “However, it is also a space that is very complex from an operational and regulatory perspective.”

In addition to experience in dealing with regu-lators, established lenders have large customer bases and ample resources to spend on market-ing, according to Mayopoulos.

“That said, Wealthfront and other new digital financial companies have attracted millions of users for their products over the past decade,” he said. “If they have managed to build the trust necessary to convince their customers to use them for a transaction as complex as a mortgage, the industry should prepare for yet another compet-itor. Wealthfront will certainly not be the last to venture into this space.” NMN

011_NMN010220 11 1/8/2020 4:45:40 PM


Compliance & Regulation Compliance & Regulation

And then there were none

0

2

4

6

8

10

12

14

16

2012 2013 2014 2015 2016 2017 2018

Source: Department of Justice

CFPB fair-lending referrals to DOJ

Where have all the CFPB fair-lending cases gone?

By Kate Berry

The Consumer Financial Protection Bureau has not filed an enforcement action or sent a Department of Justice referral on a fair-lending violation in the past two years

Despite assurances by the Consumer Finan-cial Protection Bureau that it is serious about cracking down on fair-lending violations, the lack of any CFPB enforcement actions regard-ing redlining and other discriminatory practices in two years worries consumer and civil rights advocates.

Neither CFPB Director Kathy Kraninger nor her predecessor, former acting Director Mick Mulvaney, has filed any fair-lending enforcement orders or referred possible Equal Credit Opportu-nity Act violations to the Department of Justice, in sharp contrast to the Obama administration.

Industry lawyers say the CFPB is still focused on fair-lending exams, and Kraninger told lawmakers in October that the agency was conducting investigations. Yet the lack of public enforcement activity over such a long stretch concerns agency critics who say discrimination

in the financial services sector still exists and is a barrier to minorities’ financial well-being.

“The absence of fair-lending cases isn’t because we’ve successfully ended discrimina-tion,” said Vanita Gupta, president and CEO of the Leadership Conference on Civil and Hu-man Rights and the former head of the Justice Department’s civil rights division. “It is, however, reflective of our new reality: Enforcement in this area has largely halted. The CFPB and the Department of Justice have an obligation to look out for discriminatory activity — which remains illegal — and to fight on behalf of those being harmed.”

Under the Trump administration, the bureau has signaled a desire to pull back from enforce-ment actions generally and fair-lending investi-gations specifically. In an April speech, Kraninger said the agency was refocusing on supervision

instead of enforcement. And last year, Mulvaney had stripped the agency’s Office of Fair Lending of enforcement powers.

The drop in CFPB fair-lending cases can be at-tributed to a number of other factors. Mulvaney had instituted a temporary halt to all enforce-ment actions after coming aboard. Discrimina-tion and redlining cases also take more time.

“It could suggest the industry is doing a better job of monitoring their fair-lending compliance, or cases are taking more time to develop,” said Tim Burniston, senior adviser and regulatory strategist at Wolters Kluwer.

“The regulators are continuing to do fair-lend-ing exams and fair lending is still a high priority but why the number of pattern and practice cases has declined, I can’t wrap my arms around it, except they take time to develop.”

He added that a drop in fair-lending cases and referrals is not limited to the CFPB.

“There is not only a substantial drop-off in referral activity from the CFPB to DOJ, but also a substantial drop-off by every other bank regu-lator that has [ECOA] responsibilities as well, he said.

The agency was more active in fair-lending en-forcement under the Obama administration. The CFPB made 40 lending discrimination referrals to the Justice Department since 2011, peaking at 15 in 2014 but dropping to just two in 2017.

Lawyers who defend institutions targeted by the CFPB say the bureau is still focused on fair-lending exams through its nonpublic super-visory work. The bureau has conducted exams of a number of nonbank mortgage lenders in the past two years, lawyers say, but the exams ended without any findings of redlining or discrimina-tion.

“We have seen a good bit of activity on the supervision side with fair lending, but nothing that is going to become public, and a lot of it started a long time ago,” said Christopher Willis, a partner at Ballard Spahr.

Others said the bureau has not prioritized fair-lending enforcement actions because Re-publicans have long opposed the agency’s use of “disparate impact” theory, which holds that lenders can be found liable for racial discrimina-tion even if it was unintentional.

When Congress passed a resolution last year to repeal the CFPB’s guidance on discrimination in auto lending, Mulvaney, now the White House chief of staff, told consumer advocates that the CFPB could no longer pursue disparate impact claims, according to some who attended a meet-ing with him.

012_NMN010220 12 1/8/2020 4:45:40 PM


Compliance & Regulation Compliance & Regulation

Although the Supreme Court in 2015 upheld the disparate impact theory under the Fair Housing Act, the high court’s 5-4 decision was interpreted to limit the ability of consumers and federal agencies to file claims. The high court said plaintiffs have to prove a defendant’s poli-cies caused the alleged disparity.

Consumers also would have to follow a five-step framework to prove discrimination under an August proposal by the Department of Hous-ing and Urban Development. They would have to show that a policy or practice is “arbitrary, artificial and unnecessary” to move forward with a claim.

Some are concerned that the CFPB will go further by reexamining how it enforces the ECOA, the 1974 law that protects consumers from discrimination based on race, sex, age and other variables.

“We know that communities of color are disproportionately harmed, and the govern-ment must live up to its responsibility to enforce the law,” Gupta said. “The retreat from lending enforcement coupled with the administration’s attack on disparate impact, which provides tools for challenging more common, less overt discrim-ination based on implicit bias, leaves communi-ties more vulnerable than ever.”

Consumer advocates also point to a proposal on Home Mortgage Disclosure Act data that Kraninger issued in May that would potentially exempt 85% of banks and credit unions from HMDA reporting. HMDA data is used to examine and identify fair-lending violations.

In October, the CFPB gave a second, two-year exemption from HMDA requirements to institu-tions that offer fewer than 500 open-end lines

of credit. Kraninger also plans to reopen the Obama-era HMDA rule written in 2015 to make those exemptions permanent.

“They’ve made it easier to hide patterns of discrimination by raising the threshold for report-ing, which makes it harder for civil rights lawyers or state attorneys general to draw conclusions when the data is not available,” said Linda Jun, senior policy counsel at Americans for Financial Reform, a nonprofit coalition. “So in addition to not going after any bad guys in two years, they are making it a lot harder to find those patterns of discrimination.”

With the backdrop of so many changes to fair lending, House Democrats grilled Kraninger in October about the bureau’s efforts to ferret out discrimination in home loans.

“This is the first time in its history that there has been a six-month period where there has been no discrimination in lending occurring in this country,” said Rep. Joyce Beatty, D-Ohio. “Do you really expect me to believe that?”

Kraninger reiterated her commitment to fair lending.

“I can assure you that we do have fair-lending examinations, fair-lending investigations that are open and ongoing,” she told Beatty. Enforcement cases “definitely are not a measure of when dis-crimination is happening in the marketplace, but it is our best effort looking at referrals from other agencies, looking at our complaints, looking at what’s happening in the marketplace where we’re bringing investigations and career bureau attorneys are taking those investigations where they can based on the facts and circumstanc-es and carrying them through to conclusion or closing them.”

In response to a question from Rep. Alma Adams, D-N.C., Kraninger said that the CFPB historically has conducted 13 fair-lending exams at any given time, and during her leadership it has had 10 exams.

“I can assure you that I am committed to it,” Kraninger said. “Part of this is also the hiring process of getting more examiners on board. We have 300 examiners who have taken fair-lending training, and are able to be engaged in fair-lend-ing exams. I do commit to again a similar level, not an exact level, but a continued commitment to fair lending, I pledged and believe I’m meet-ing.”

Still, the focus of fair lending has changed dra-matically under Kraninger and Mulvaney. One of Mulvaney’s first moves in 2018 was to dismantle the CFPB’s Office of Fair Lending.

He removed its enforcement powers and placed the office under a separate division fo-cused on advocacy and education. The bureau’s Office of Supervision, Enforcement and Fair Lending does not have a separate fair-lending unit.

“They appear to be in a mode where they are more restrained about [fair lending] right now,” Willis said.

Still, others suggested that if Kraninger does file a lawsuit on fair lending, it will happen closer to the 2020 presidential election.

“The CFPB may have lawsuits to file against consumer abuse but they may be waiting until it’s closer to the elections before filing or to roll something out, but it will probably be something very minimal,” said Jeanetta Williams, president of the NAACP Salt Lake Branch and Tri-State Conference of Idaho, Nevada and Utah. NMN

FHA revises defect taxonomy to boost lendingBy Bonnie Sinnock

The Federal Housing Administration has imple-mented defect taxonomy revisions for 2020 that it considers one of several milestone achieve-ments in its efforts to “provide greater clarity and consistency for lenders.”

The move is among several FHA officials laid out plans for at the Mortgage Bankers Asso-ciation’s annual convention last fall with the intention of addressing the decline in depository involvement in the government mortgage insur-ance program. The bank share of the FHA mar-

ket was less than 14% in the fiscal year ended Sept. 30, 2019, according to HUD’s latest annual report. In FY 2011, depositories accounted for nearly 41% of endorsements in the FHA market.

Banks retreated from the sector after large penalties related to allegations of improper FHA lending were levied in the wake of the financial crisis. The latest revisions to the taxonomy used to classify and define loan errors are aimed at giving lenders more certainty about the bounds they need to operate in to avoid liability.

There historically have been high levels of lia-bility associated with False Claims Act violations, which HUD and the Department of Justice used to pursue lenders that allegedly produced prob-lematic FHA loans. Courts can award three times the amount of actual or compensatory damages for these violations under the False Claims Act.

In the 2020 revision, among the classifications the FHA worked to clarify were the bounds of different severity tiers it has for errors, along with potential remedies. NMN

013_NMN010220 13 1/8/2020 4:45:41 PM


Mortgage companies have been slow to adapt as secondary-market buyers, vendors and other types of lenders embrace advances in artificial intelligence, big data and methodology used in underwriting.

For the most part, they’ve gotten away with it. The evolution of the sec-ondary market has been a long, drawn-out process and alternative lenders have had plenty of other categories of credit to chase.

But 2020 could provide a significant reality check for the go-slow move-ment. Lower-than-expected rates have bolstered activity in the segment and nontraditional lenders have taken notice. In addition, the dominant government-related mortgage investors are starting to modernize their underwriting in ways that will likely put competitive pressure on the entire ecosystem.

As a result, established players across the industry could find themselves at a competitive disadvantage to newcomers when it comes to capitalizing on new business prospects, managing risk and operating efficiently.

Those mortgage lenders seeking to stay apace will need to understand and act on some fundamental forces driving change if they are to preserve their own relevance in the coming years.

Faster decisioningOperational costs are still relatively high in mortgage lending and con-

sumers increasingly expect a relatively quick decision when they apply for a loan, making quicker turnaround among the most immediate and urgent matters of attention.

Matt Komos, a vice president in TransUnion’s research and consulting division, is among those who see consumer expectations as first among the questions lenders need to address.

“This is my perspective, not necessarily the TransUnion stance, but I think continuing to figure out how to answer the consumer’s needs is the answer,” he said. “The consumer has gotten used to a world where I can order food on my phone and get it in 20 minutes, I can have a car come to me instead of hailing a taxi, and I can order through Amazon today and have it tomor-row.”

Mortgage decisions aren’t instantaneous at this point — and perhaps they shouldn’t be, given that many borrowers still need some consultation. But processes supporting those decisions are moving faster thanks to new forms of workflow automation and improved electronic access to bank data and other information.

Workflow management tools that streamline processes by collecting consumer-authorized data used in underwriting, and routing of loans in re-sponse to it, are the first step to take in upgrading underwriting. It’s an area where insurgents may currently have the edge.

Engage enginesMortgage lenders’ uptake of innovations in artificial intelligence, big data and other technologies has been relatively slow. It’s an

approach that may not be tenable in 2020

By Bonnie Sinnock

014_NMN010220 14 1/8/2020 4:46:47 PM


015_NMN010220 15 1/8/2020 4:46:51 PM


“Some of the new fintechs are looking at data aggregation upfront before getting into fulfillment or underwriting. Being able to do that at the front end allows you to streamline operations,” said Michael Grad, a senior partner at Stratmor Group. “If you know the complexity of the loan at the start of the process, you can send that loan to the right part of the factory that processes less-complex loans more effi-ciently.”

“The most efficient way we can receive that data and analyze it, that’s what we’re looking into,” said Tom Hutchens, executive vice presi-dent of production at lender Angel Oak Mort-gage Solutions.

Broader collection and use of dataAnother compelling reason to update un-

derwriting technology and data is that it has helped lenders approve a broader range of borrowers.

“I think this is a big topic among lenders of all shapes and sizes right now, and it’s really about expanding the credit profile served to capture additional market segments,” said Joey McDuf-fee, vice president at mortgage technology firm Blue Sage.

Existing mortgage underwriting models can consume at most 15-20 variables. The latest AI-driven versions expand that number and in doing so more readily incorporate larger alter-native data sets. In some cases, that expands the potential approval pool.

“AI is better math that can be used to find

people around the margins that lenders ought to be saying yes to if they took a more compre-hensive view,” said Kareem Saleh, an executive vice president at fintech Zest.ai. “What we find is that lenders can increase their approval rate by 10% pretty quickly by just parsing the edges more finely.”

The idea that more borrowers could be under-written if broader sets of data could be consid-ered in models isn’t new, but it’s gaining consid-erable momentum across consumer finance.

“Fintechs have successfully done it in the unsecured personal loan space and now we’re starting to hear about home equity lines of

credit,” Komos said. “They’re also starting to dabble with auto refinance. So I think there’s an opportunity for mortgage lenders to learn from what they’re doing. It could definitely be a way to bring more consumers into the mix.”

To get a sense of how the use of advanced data and technology can make a difference in a lending sector, consider this: Fintechs in the personal loan market are now responsible for 40% of originations today, up considerably from 6% in 2010, according to Komos.

While the mortgage market is far larger, more beholden to government-related entities and more complex than the personal-loan sector, key stakeholders there also are starting to recognize that alternative data is a reality they must contend with.

“As the consumer continues to show an in-terest in those things, we’ll see different asset classes move toward them to help meet the needs of the consumer,” Komos said. “There’s a lot of regulation and homes are a big purchase for consumers, so mortgage lenders are going to be a little more hesitant, but they’re also be-holden to Fannie Mae and Freddie Mac. It could be a matter of getting the GSEs on board.”

At this point, both Fannie and Freddie have tested and are weighing the use of more ad-vanced underwriting data and technologies.

In addition, traditional credit reporting and scoring vendors that serve the mortgage indus-try have been steadily working to incorporate more alternative data and advanced technolo-gy into their product lines.

The fintech effect: exhibit A

0%

10%

20%

30%

40%

50%

2010 2019

Note: Fintech share of the unsecured personal loan market based on balancesSource: TransUnion

More loans, fewer problems

Average Percentage

Increase in approval rates 10-15%

Decrease in charge-off rates -30%

Note: After implementation of a customized, advanced risk modelSource: Zest.ai

016_NMN010220 16 1/8/2020 4:46:51 PM


“We’ve been working for a number of years to figure out how to get a consumer’s bill payment history beyond traditional credit relationships with things like utilities your mobile phone and your cable bill. That’s the type of data while it’s used by a lot of different consumers hasn’t been factored into a credit score before,” said Michele Bodda, general manager for Experian Mortgage.

In addition, traditional credit-score provider FICO also is working on adding new sets of data to its risk model.

“We’re looking at alternative data or data outside what the three main credit bureaus typically provide to gain additional insight into positive consumer repayment behaviors that exist, but just haven’t shown up in the traditional data,” said Joanne Gaskin, a vice president at FICO. “We don’t really see a problem with that, as long as the decision and the score to be used are based on true risk assessment.”

More advanced risk modelsAs the financial crisis demonstrated, opening

up the credit box ultimately doesn’t help lenders if the incremental loan originations wind up defaulting at substantially higher rates.

So it’s imperative that new underwriting technology and data are designed to improve risk assessment. Evidence that they do has been promising to date.

“Artificial intelligence certainly has the ability to find additional predictive lift from looking at existing data as well as finding new correla-tions,” said Craig Focardi, a senior analyst at Celent.

The latest artificial intelligence-driven alter-native-data models may not have been around long enough to conclusively demonstrate how

predictive they are when it comes to long-term performance, but regulators are starting to take them seriously.

“The use of alternative data in a manner consistent with applicable consumer protec-tion laws may improve the speed and accuracy of credit decisions,” five federal regulatory agencies said in a joint statement issued in December.

This admittedly cautious regulatory en-dorsement was nonetheless a noteworthy breakthrough. Concern that newer risk models used for underwriting might raise compliance questions has been a big concern, in part be-cause it was unclear supervisory agencies would be open to the new approach. The interagency statement suggested regulators are getting there. Mortgage lenders need to, too.

Get ready to grow — or miss outThe housing finance industry needs to start lay-

ing the groundwork for new AI-driven underwriting models that can digest larger amounts of alterna-tive data because government-related agencies and large investors are starting to embrace these strategies. In addition, emerging homebuyers increasingly demand a quick, digital turnaround on credit decisions and have nontraditional credit and income histories. Meeting this demand has expanded lending in other parts of the consumer finance market and it could help mortgage lend-ers grow their business volumes too.

That growth is going to be accessible to those in a position to pursue it, and the amount of business available to those who fall behind will only get smaller as new technologies and access to new types of data advance. NMN

Time-saving technologies

• Fintechs process purchases 9.2 days faster than traditional lenders

• Fintechs process refinances 16.6 days faster than traditional lenders

• Days added to traditional lenders' timeline when volume doubles: 13.5

• Days added to fintechs' timeline when volume doubles: 7.5

Note: The bottom two bullet points are based on a doubling of application volumeSource: Federal Reserve Bank of New York

Lenders expand mortgage criteriaBy Bonnie Sinnock

Mortgage lenders are increasingly introducing new loan programs outside of typical underwrit-ing parameters.

Carrington Mortgage Services launched a new nonagency product called Prime Advantage. The alternative-income documentation loan is aimed at serving consumers who “just missed” qualify-ing for conventional or jumbo loans.

Verus Mortgage Capital recently introduced a correspondent-channel loan that has under-writing criteria outside the parameters of the Qualified Mortgage safe harbor. The new loan product, Prime Ascent Plus, allows for 12- and 24-month alternative-income documentation for self-employed borrowers, loan-to-value ratios up to 90%, FICO credit scores as low as 660, debt-

to-income ratios up to 50% and loan amounts ranging from $150,000 to $2.5 million.

Other examples seen in recent months include Plaza Home Loans’ introduction of a proprietary reverse mortgage up to $4 million, and Finance of America Reverse’s expansion of the eligibility age for products to borrowers as young as 60 in certain states. NMN

017_NMN010220 17 1/8/2020 4:46:52 PM


CaliforniaCovina

LERETA LLC has named Steve Orgillchief technology officer.

Orgill, who has more than 25 years of experience in the financial services industry, was most recently COO of First American Settlement Manage-ment Solutions.

He also served as vice president of strategic architecture at Stew-art Information Services, CTO at DataQuick Information Systems and CTO at HydrantID.

MassachusettsDanvers

Mortgage Network Inc. said that Ryan Hayes has joined the company as senior vice president of residential

lending. Hayes has 20 years of mort-gage banking experience and has held roles in mortgage origination and secondary market operations.

Most recently, he served as senior vice president of residential lending at Salem Five Bank.

New Jersey

Cherry HillTD Bank has added loan officers

Stephanie Arcelay, J. Mansisidor and Jim Webster to its residential lending team to deliver specialized mort-gage products to medical and dental professionals.

Arcelay joins TD from SunTrust Mortgage in Nashville, Tenn., where she most recently acted as vice president of mortgage lending and doctor loan specialist. Her prior ex-

perience includes roles at BB&T and Bank of America.

Mansisidor brings more than 17 years of mortgage lending experience and most recently served as a senior loan officer at Fulton Mortgage Co. in Wil-liamsburg, Va. He also served as a se-nior loan officer at Citizens Bank, Bank of America and SunTrust Mortgage.

Webster, who has more than 18 years of industry experience, also joins TD Bank from Fulton Mortgage Co., where he served as a mortgage loan officer in Rockville, Md.

Tennessee

MurfreesboroGuaranty Home Mortgage Corp.

has promoted Chip Adkins to chief production officer. Adkins brings more than 25 years of financial relat-

ed experience to his role overseeing production for GHMC.

He joins Guaranty Home Mort-gage Corp. from Franklin American Mortgage Co.

Texas

DallasSandler Law Group LLC said that

Regina Uhl has joined the firm as partner.

Uhl is licensed as an attorney in Texas, Kentucky and Illinois and is certified by the Texas Board of Legal Specialization for her expertise in the area of residential real estate law.

Her practice areas include residen-tial real estate law and regulatory compliance, and her past experience includes serving as general counsel to Affinity Mortgage. NMN

People

Steve OrgillCovina, CA

Ryan HayesDanvers, MA

Stephanie ArcelayCherry Hill, NJ

Chip AdkinsMurfreesboro, TN

Regina UhlDallas, TX

018_NMN010220 18 1/8/2020 4:46:55 PM

SAVETHEDATEDigital MortgageSeptember 14-15, 2020 | Mandalay Bay, Las Vegas

More information to come: Alex Boiselle | [email protected]

212-803-8500

NMN _DIGMO20_STD.indd 1 1/9/20 1:24 PM019_NMN0120 19 1/9/2020 1:53:59 PM


ScreenshotsScreenshots

12 most expensive ZIP codes for home buying in 2019

No. 211962 Sagaponack, N.Y.2019 median sale price: $4,300,0002018 rank: 22018 median sale price: $5,500,000

No. 490210 Beverly Hills, Calif.2019 median sale price: $4,080,0002018 rank: 112018 median sale price: $3,212,500

No. 810013 New York, N.Y.2019 median sale price: $3,515,0002018 rank: 42018 median sale price: $3,810,000

No. 1298039 Medina, Wash.2019 median sale price: $3,200,0002018 rank: 152018 median sale price: $3,050,000

No. 194027 Atherton, Calif.2019 median sale price: $7,050,0002018 rank: 12018 median sale price: $6,700,000

No. 390402 Santa Monica, Calif.2019 median sale price: $4,154,0002018 rank: 52018 median sale price: $3,762,000

No. 794301 Palo Alto, Calif.2019 median sale price: $3,522,0002018 rank: 62018 median sale price: $3,755,000

No. 1194028 Portola Valley, Calif.2019 median sale price: $3,300,0002018 rank: 82018 median sale price: $3,300,000

No. 602199 Boston, Mass.2019 median sale price: $3,669,0002018 rank: 32018 median sale price: $4,722,500

No. 1094957 Ross, Calif.2019 median sale price: $3,350,0002018 rank: 232018 median sale price: $2,550,000

No. 510007 New York, N.Y.2019 median sale price: $3,900,0002018 rank: 132018 median sale price: $3,075,000

No. 994022 Los Altos, Calif.2019 median sale price: $3,450,0002018 rank: 72018 median sale price: $3,500,000

From the municipalities surrounding Silicon Valley to New York’s concrete jungle, here’s a look at the 12 most expensive ZIP codes to buy a home in 2019, according to PropertyShark.

For the analysis, PropertyShark looked at residential sales closed between Jan. 1 and Nov. 5, 2019, inclusive of condos, co-ops, and single- and two-family homes. To make the list, ZIP codes needed to host at least three transactions in that time period.

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