1.22.22: Letters on youth in lending, mortgage fraud, and M&A environment; Freddie deals; Saturday Spotlight: Eltropy

Technology is changing the way homes are built in 2022. Today’s buyers can start the dishwasher from hockey practice or begin a forgotten load of laundry from the office. Being able to control one’s appliances through your phone is greatly improving the lives of some homeowners. Technology can assist, especially when costs become too high or manpower becomes scarce. Did you know that Habitat for Humanity and the University of Montana have partnered to build 3D-printed homes? The partnership follows recent 3D printing efforts by Habitat for Humanity organizations in Virginia and Arizona. “Stick building takes nine to 12 months for Habitat to build one home. The printer can print a home in two days… It saves time and requires less labor, which for Habitat for Humanity is mostly made up of volunteers.” Whale oil becomes too expensive? Let’s drill the earth for oil. In the residential lending process we’ve seen similar things happen. Underwriting becomes too expensive, or there aren’t enough underwriters? Let’s create underwriting programs. If the same thing happens with appraisals, let’s create a waiver system. If 6 percent real estate commissions are too expensive, in steps other ways to buy a house and not pay 6 percent.

Saturday Spotlight): Eltropy, enabling Financial Institutions to communicate more effectively with customers


In 3-5 sentences, describe your company (when was it founded and why, what it does, where, recent growth and plans for near-term future growth).

Eltropy, founded in 2013, is a one-of-a-kind digital communications platform that enables financial institutions to communicate with customers over text, and other digital channels in a secure and compliant way. Using our world-class communications platform, mortgage lenders, credit unions, banks, debt collectors, insurance companies, and fintechs have realized a 20% acceleration in the lending process and a 44x increase in response time with customers throughout the lending lifecycle. In the past year, Eltropy added over 150 new financial institutions to our growing customer base, and plan to double our customer base of over 285 financial institutions by the end of this year.


Tell us about what type of volunteer work employees are encouraged to engage in, or charities your company supports, and why


Eltropy took on a Corporate Social Responsibility effort in building up the Adarsha Education Society in the rural Panchayat village in India. Learning has always been a paramount for our co-founders, so focusing on building a school and supporting the staff seemed like a natural fit for giving back. In addition to the building of the school, Eltropy has promised to match any donation given by its employees. 


What does your company do to help elevate your employees’ growth? Describe any mentoring programs, outside classes or training, in-house training. How does the company help people develop?


Education is paramount to Eltropy. We have prioritized hiring talent from the industries that we serve in order to help our teams build the best products for our clients. In addition, we provide our teams with firsthand experience and training programs from in-house industry experts.


Tell us how your company maintains its culture in a work-from-home environment, or how you plan on bringing employees back into the office, if applicable


A cornerstone of our company is a five-word motto which every employee pledges on their first day: “No Fear, Tell the Truth.” In addition to a weekly standup meeting that features everyone from the company, this pledge has enabled employees to maintain a productive, comfortable work culture built on honesty and trust.


Additionally, Eltropy offers guest house accommodations close to our headquarters in the Santa Clara Valley to encourage our employees to get valuable in-office experiences with our team at large and create social bonds we may not have been able to before.


Things you are most proud of that don’t have to do with sales


The thing we are most proud of as a company is our strength in diversity. We have over 100 employees located in over 40 cities across the globe. This diversity brings different ideas and perspectives that allows us to continue to grow and excel in all aspects. 


Fun fact about Eltropy


We are the only SaaS company (to our knowledge) that has a company theme song!

(For more information on having the charitable, employee improvement-centric side of your firm featured, contact Chrisman LLC’s Anjelica Nixt.)

Youth in our business


I posted a video in Thursday’s commentary, and from Alabama Mike M. let me know his thoughts. “I’m a big fan of your daily commentary. But I am disappointed by the inclusion of the “hiring a millennial” video. It is already an uphill challenge being taken seriously as a professional in this industry if you are under the age of 40 (especially on the operations side) and, in fairness, the millennial cutoff is 1995. So the very youngest of us are 27 while the oldest are now 42… Hardly what I think is being portrayed in the video.

“This kind of content being included in a newsletter that has such a wide and impactful reach truly disheartens me as this industry is already challenged with recruiting and retaining new/young talent due to a lot of leadership having this mindset.” Thank you, Mike.

By the way, for someone of any age thinking about becoming an MLO, Monster.com spells out some basics.

Don’t do the crime if you can’t do the time


Maryland’s Dan P. corrected me on the Baltimore AG’s indictment of lying on a mortgage application, which she now claims to be racially motivated. “Marilyn Mosby is accused of purchasing the Florida property as a 2nd home, not as a primary residence. The problem is that, before she even closed on the purchase, she had apparently signed an agreement with a rental agency to rent the property out. This is probably a bigger issue that the pension loan and the nondisclosure of the federal lien.” Thank you, Dan.

And from Maryland Ken S., whose father served as the State’s Attorney for Montgomery County, MD from 1970-1996, writes, “The lender and borrower are both responsible for claiming a Florida property as owner occupied (OO) for the State’s Attorney of Baltimore City. (Prosecutors in the Counties and Baltimore City are State’s Attorneys, not District Attorneys or Attorney Generals. Maryland does have an Attorney General representing the entire State.)

“Mosby is best known for charging the police officers with the death of Freddie Gray, after he died in a police vehicle in transit for processing after he was arrested. In 2010, I suggested to MERS that an Owner Occupancy Registry be created, similar to a driver’s license, to avoid the claim of an Owner-Occupied property or releasing a current property/departure residence as the primary residence. MERS could drive fee income for managing the Registry and remove these outrageous claims, such as a primary residence for a Florida property for an elected official in Baltimore City.

“Recall that Sheila Bair refinanced a 2-unit property as a second home although was an investment property and guidelines indicated 2-unit properties are not eligible as a 2nd home.

if a Bank Director has done either deed, the Board Member would be removed ASAP.” Thank you, Ken!

M&A in a tough environment


Despite the thinking that the only thing that never changes in mortgage banking is the owner’s unwavering belief that their company is undervalued, we should expect to see a fair number of mergers and acquisitions in 2002, both from lenders and vendors.

Industry vet James Johnson sent over, “You have been listening to me for years rant about our forty-year bull market in bonds that began in August 1981. I read recently that the Bloomberg U.S. Aggregate Bond Index was down only four of those forty years, and never two years in a row. Amazing, but it was down 1.54% in 2021 and already down 1.62% in 2022. So, is the bull market in bonds now officially over?

“I would say that it is over for some period of time, until we get a handle on inflation, and maybe go through a few years of a rising rate cycle. But something else crazy will probably happen with interest rates one of these days and the Federal Reserve will find a good reason to take rates super low again. In the meantime, rates are quickly moving higher, and creating an inflection point for IMBs. The obvious question for your readers is how all of this will impact their business?

“Rates are hard to predict, but there are most likely some tough times ahead for IMBs, maybe along the lines of what we saw in 2018. The next stop on the 10-year Treasury is a 2% yield, and it is looking like it will get there by the end of January. Likewise, 30-year fixed rates are following and headed for something around 4%. The recipe is pretty simple when rates move higher: volume and rate & term refis drop, margins compress, profits suffer, and operating leverage begins working against companies. In the M&A world, acquirers are still paying premiums, but they are smaller than a year ago, and are probably headed even lower. This has many company owners upset, as they figure that the window has closed on them, but I don’t think it should be viewed like that.

“In 2020 and most of 2021 company owners felt that nobody was going to pay them enough to walk away from their fat profits, and for the most part that proved to be correct. By harvesting the once in a lifetime profits in 2020 and 2021, owners probably maximized their total take. That is earned profits, premium dollars, and back end earn-out money. Now that company valuations have declined, some owners are feeling like they made a big mistake not taking advantage of the recent market opportunities. But a bigger premium would probably not have compensated for their lost income. So, no reason for remorse, as most owners pocketed the easy money.

“So, what to do now in 2022? First, the reality is that there is way too much capacity right now, and we won’t see another good market until refis return. I’m suggesting to owners, if they are prepared to fight the next war, then they should hold on and hope for the best. But there is another group of owners with a very different mindset. They are thinking more in terms of lifestyle and the memories of 2018 are still fresh in their minds. These guys made a ton of money over the past 30 months, and may not be willing to put that at risk and kill themselves for smaller paydays going forward. Some probably like the idea of eliminating most of their risk, and monetizing some of what they have built. If any of your readers would like to discuss this further, they can call me at 707-738-2666 or email me.” Thank you, James.

Agency deals: driving rates in the primary markets


Freddie got 2022 off on a good start. Freddie Mac will soon begin marketing a class of Multifamily WI Certificates from a substantial portion of the benchmark A-2 guaranteed bond class of Structured Pass-Through K-140 Certificates. The company began selling its Class A-M K Certificates through the WI K-Deal structure in September 2021, allowing Freddie Mac to transfer market risk as it pools collateral for K-Deals and providing investors early exposure to certain bond classes. Freddie plans to use the concept on the A-2 bonds for K-140, with the goal of eventually moving the entire principal-bearing guaranteed portion of a deal to the forward-funded structure. The WI Certificates are public securities backed by the Freddie Mac guarantee and tradeable shortly after pricing, initially receiving a fixed coupon amount, and, upon delivery of the K Certificates to the WI trust, WI Certificates will bear the same coupon as the coupon of the corresponding class of the newly issued K Certificates. Investors provide the initial cash collateral for the WI Certificates. Freddie Mac has published an investor presentation and FAQ providing additional details on the WI K-Deal program.

Freddie Mac announced the pricing of the SB90 offering, a multifamily mortgage-backed securitization backed by small balance loans underwritten by Freddie Mac and issued by a third-party trust. The company expects to issue approximately $403 million in SB Certificates (SB90 Certificates), which are expected to settle on or about September 24, 2021. The Optigo Small Balance Loan origination initiative helps to better serve less populated markets and provide additional liquidity to smaller apartment properties. Freddie Mac Small Balance Loans generally range from $1 million to $7.5 million and are generally backed by properties with five or more units. This is the ninth SB Certificate transaction in 2021. View the offering circular.

A while back Freddie Mac priced a new offering of Multifamily WI K-Deal Certificates (WI Certificates), which are initially backed by cash assets that will be used to purchase the A-M class of a to-be-issued reference K-Deal. Once the reference K-Deal class is issued and purchased by the WI trust, the WI Certificates will be indirectly backed by a pool of fixed-rate multifamily mortgages with predominantly 10-year terms. The company expects to issue approximately $170 million in WI Certificates (Series WI-K132), which were expected to settle on or about September 28. The one offered class, Class A-M, had a weighted average life of 10.24 years, a spread of S+27 bps, a 1.63 percent coupon and yield, and a $99.9922 price.

(Parental guidance recommended.)

A successful rancher died and left everything to his devoted wife.

She was a very good-looking woman and determined to keep the ranch, but knew very little about ranching, so she decided to place an ad in the newspaper for a ranch hand.

Two cowboys applied for the job. One was gay and the other a drunk.

She thought long and hard about it, and when no one else applied she decided to hire the gay guy, figuring it would be safer to have him around the house than the drunk.

He proved to be a hard worker who put in long hours every day and knew a lot about ranching.

For weeks, the two of them worked, and the ranch was doing very well

Then one day, the rancher’s widow said to the hired hand, “You have done a really good job, and the ranch looks great. You should go into town and ‘kick up your heels.’”

The hired hand readily agreed and went into town one Saturday night.

One o’clock came, however, and he didn’t return.

Two o’clock and no hired hand.

Finally he returned around two-thirty, and upon entering the room, he found the rancher’s widow sitting by the fireplace with a glass of wine, waiting for him.

She quietly called him over to her.

“Unbutton my blouse and take it off,” she said.

Trembling, he did as she directed. “Now take off my boots.”

He did as she asked, ever so slowly. “Now take off my socks.”

He removed each gently and placed them neatly by her boots.

“Now take off my skirt.”

He slowly unbuttoned it, constantly watching her eyes in the fire light.

“Now take off my bra.” Again, with trembling hands, he did as he was told and dropped it to the floor.

Then she looked at him and said, “If you ever wear my clothes into town again, you’re fired.”

Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “Opening the Door to Consumer Direct” about the pros and cons of the CD channel. The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).


(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. This newsletter is for sophisticated mortgage professionals only. There are no paid endorsements by me. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2022 Chrisman LLC. All rights reserved. Occasional paid job & product listings do appear. This report or any portion hereof may not be reprinted, sold, or redistributed without the written consent of Rob Chrisman.)

Rob Chrisman