Do you lend, or have clients that lend, in Texas, Louisiana, or Mississippi? Prior to Laura not being quite the “stormzilla” that the experts had predicted, ClosingCorp estimated that more than 28,000 pending mortgage transactions currently in progress in those states are in jeopardy, as a result of Hurricane Laura. The loans, which are being originated by more than 180 different lenders, have a combined value of more than $6.8 billion. (Always listen to local authorities: “Don’t risk it for brisket!”) More disaster news and investor updates below.
Saturday Company Spotlight
This week we highlight CBC Mortgage Agency, a company most known for providing down payment assistance.
Describe your company (when was it founded and why, what it does and where, recent growth and plans for near-term future growth). CBC Mortgage Agency (CBCMA) was founded in 2013 by the Cedar Band Corporation (CBC), which is wholly owned by the Cedar Band of Paiutes, a Native American tribe in Utah. CBCMA provides down payment assistance (DPA) through its Chenoa Fund to creditworthy individuals who lack the funds for a down payment. We are committed to increasing access to affordable, responsible, and sustainable homeownership opportunities for low-moderate income borrowers. To date we have provided DPA for 22,000 households resulting in over $500 million in increased wealth since closing.
Tell us about what type of volunteer work employees are encouraged to engage in and why. Employees of CBCMA are imbued with a sense of mission. Every employee understands how their daily responsibilities enable new families without legacy wealth to realize the dream of homeownership. In addition, we sponsor and work to support the UHOUSI Initiative, an organization dedicated to helping low-income minorities become homeowners. The UHOUSI Initiative works closely with the faith-based community to conduct free workshops at local churches to provide education and guidance to those who are interested in homeownership. Due to the COVID-19 pandemic, these workshops are now being held in a virtual format, where attendance has increased substantially. We encourage our employees to participate in the UHOUSI Initiative and other non-profit organizations that help people of color build wealth through responsible homeownership.
What does your company do to help elevate your employees’ growth? How does the company help people develop? We reimburse our employees for tuition and continuing education costs to assist them in the advancement of their professions. Additionally, as a part of our mission to encourage responsible and sustainable homeownership, we provide a DPA grant to any employee that has been employed for at least six months.
Tell us how CBCMA maintains its culture in the office, or in a work-from-home environment if applicable. Our culture was firmly in place prior to the pandemic, so the work-from-home transition was easy. Our senior management leads by example, incorporating our mission of helping low-income Americans become homeowners into each internal and external communication. We communicate by phone and video to maintain a sense of community.
What things you are most proud of that don’t have to do with sales? We’re proud of the fact that most of our customers would not have been able to become homeowners without our programs. Over one-third of all our borrowers are the first in their families to own. Over 55 percent of our borrowers are minorities without legacy wealth to help with a down payment. We are most proud of the tens of thousands of people who have become responsible homeowners through our programs.
Fun fact about CBCMA? Our parent corporation, CBC, also runs Twisted Cedar, an award winning, tribally owned winery. Our winery is sustainably farmed and green certified. And it benefits the Cedar Band community by providing employment opportunities.
(For more information on having your firm and its charitable side featured, contact Chrisman LLC’s Anjelica Nixt.)
Who are Our Clients?
Or, more accurately, who were they last year? And who was doing the loans? The Consumer Finance Protection Bureau issued a new Home Mortgage Disclosure Act (HMDA) analysis of the 2019 HMDA Data. (Here is the first article.) For the industry, the top 25 “open-end” lenders accounted for about 573,000 open-end originations, or 53.6 percent of all open-end originations reported under HMDA.
Conventional jumbo loans have the highest mean and median credit scores among closed-end mortgages, with a mean score of 765 and a median of 773. Among Black and Hispanic White homebuyers seeking conventional conforming loans, the median combined loan-to-value and debt-to-income ratios are higher than their Asian and non-Hispanic White counterparts. And to no LO’s surprise, FHA borrowers have the lowest mean and median scores among closed-end mortgages, with a mean score of 668 and a median of 663.
My guess is that the CFPB is keenly interested in your shop if you’re an outlier in any of the metrics. But that is just a guess.
Private Money Marches On
Many readers of this commentary focus on certain aspects of lending. I received this note from Bill Tessar, President of CIVIC Financial Services, on how originators can win with private money real estate investment products. “Rob, while refinances currently provide nice short-term gains, there are only so many times the Joneses can refi. To really grow their business, brokers and mortgage originators should be looking toward private-money programs. With all the institutional capital flowing into this channel, there are too many advantages with private money to ignore. Private money lending supports non-owner-occupied properties. This makes it ideal for building a real estate investor client base, since investors typically finance four properties a year (compared to conforming borrowers who only purchase one home every four years). They are usually short-term loans, too, which many investors eventually refinance to a conforming product—creating an additional sales opportunity.
“Need more proof? Because income, credit scores and DTIs are less important than LTV, private money loans are easier to approve and close fast— most in 5-10 days. And since investment properties are non-owner occupied, the mortgages aren’t subject to consumer regulations like TRID. Ultimately, private money loans provide brokers and originators an additional income stream that will survive escalation in interest rates.” (Loan officers and Brokers can read about CIVIC’s loan programs at www.civicfs.com/mortgage-brokers, while correspondent information is at www.civicfs.com/correspondent.)
FEMA drives disaster updates
World: “There’s no way we can shut everything down in order to lower emissions, slow climate change, and protect the environment.”
Mother Nature: “Here’s a virus. Practice.”
There are other crises besides COVID, like floods, fires, locusts, boils, frogs dropping from the sky… sorry, I got carried away. FEMA’s is the last word in disasters, and its declarations drive the policies and procedures for lenders. Of course, no lender wants to extend credit on a house that is no longer there, or extensively damaged. And few borrowers will continue to make payments on a structure that they can no longer live in. A disaster was declared yesterday in Louisiana from Laura. While we wait for a true evaluation of Hurricane Laura’s impact, the Agencies and investors are making preemptive moves or are addressing recent events. Let’s see who’s doing what.
This week, Black Knight’s McDash Flash Forbearance Tracker calculated that, as of August 25, 3.9M homeowners remain in active forbearance, representing 7.4 percent of all active mortgages. This is unchanged from last week (or the week prior to that). Of these, 72 percent have had their terms extended.
Freddie Mac issued a reminder to mortgage servicers of its disaster relief policies for homeowners as Hurricane Laura makes landfall and amid the wildfires threatening parts of California. Freddie Mac’s disaster relief options are available to homeowners whose homes or places of employment are located in presidentially declared Major Disaster Areas where federal individual-assistance programs are made available to affected individuals and households.
Fannie Mae issued a reminder for those impacted by Hurricane Laura and the California Wildfires of available mortgage assistance and disaster relief options. Fannie Mae’s guidelines for single-family mortgages impacted by a natural disaster allow homeowners to request mortgage assistance by contacting their mortgage servicer following a disaster. Mortgage servicers are authorized to suspend or reduce a homeowner’s mortgage payments for up to 90 days, without establishing contact, if the servicer believes the homeowner was affected.
Also, Homeowners affected by disaster are often eligible to reduce or suspend their mortgage payments for up to 12 months. Utilization of the temporary payment break prevents homeowners from incurring late fees, foreclosure and other legal proceedings are suspended. There are a number of options available to potentially help homeowners catch up on missed payments. In addition, homeowners currently on a COVID-19-related forbearance plan who are subsequently impacted by the storm or fires should contact their mortgage servicer to discuss options.
Fannie Mae offers help navigating the broader financial effects of a disaster to homeowners with a Fannie Mae-owned mortgage and renters living in Fannie Mae-financed properties through its Disaster Response Network*, including: A needs assessment and personalized recovery plan, Help requesting financial relief from FEMA, insurance, and other sources, Web resources and ongoing guidance from experienced disaster relief advisors. Homeowners and renters can call 877-833-1746 to access Fannie Mae’s Disaster Response Network™* or other available resources.
Linn county, Iowa been declared by FEMA as Major Disaster Area for the Incident Period Date of August 10, 2020. For loans submitted with an appraisal dated on or before the incident period end date or for those submitted without an appraisal, Sun West will require an interior and exterior inspection prior-to-funding or purchase of any loans with subject properties that are determined to be at risk. The inspection must verify that the property is sound, habitable and in the same condition as when it was appraised.
This loanDepot Announcement discusses Flood Certificate Automation, mello Broker Portal Transition and a new feature, FHA Case Number Requests in mello.
Effective August 20, 2020 Flagstar Bank is suspending funding for California properties located in counties with active wildfires. Once closing and funding has resumed, Flagstar will provide the re-inspection requirements, as applicable.
As Laura peters out in the Southeast, Valuation Partners sent out a note to the industry saying, “We stand ready to support you if circumstances require it. Our appraisers and field inspectors are ready to provide disaster or property condition assessment report requests. Valuation Partners will also be donating a portion of the revenue to the American Red Cross.
Lenders do what they can to eliminate the friction in the loan process, which some consider everything between taking the application and signing the closing papers. Put another way, reengineering the mortgage approval process to eliminate inefficiencies is a noble goal. Nate Johnson, SVP and Mortgage Business Head at SLK Global Solutions, writes, “Rob, a major part of inefficiency in mortgage operations involves the enormous amount of wasted time and effort collecting borrower documents prior to the underwriting decision. This creates longer cycle times between the time applications are received and processing begins, as well as delays in notifying customers about additional document requirements, excessive file touches by underwriters and processors prior to the final decision, and inaccurate quality checks. The end result is production expenses far higher than they need to be.
“The only way out of this quagmire is for lenders to place the document collection in the hands of technology. This ensures that loan processors—who are less costly than underwriters—submit loan files only when they are truly ready for a conditional approval, and it also makes quality control and quality assurance processes more efficient and less costly. These benefits can only be attained through experienced providers that can integrate technology and utilize intelligent process analytics to drive production efficiency—and have the track record to prove it. (Contact SLK at [email protected] with questions.)
Black Knight announced the “bolt-on” acquisition of DocVerify, a provider of electronic signature and electronic notarization solutions to various industries, including real estate and mortgage. Those “in the know” figure a purchase price of $25-$50 million. purchase price and $5-10 mil. of annual revenues, or 0.4-0.8% of BKI’s estimated 2020 revenues.
KBW believes that, “DocVerify bolsters BKI’s product suite in what is likely a strong growth area in online document verification, particularly in the wake of the global pandemic, and accelerates BKI’s ability to provide a fully digital home/mortgage closing process. In addition, the deal could provide attractive revenue synergy opportunities from cross selling BKI’s expansive customer base of originators within its Empower, Optimal Blue, and MSP products to the DocVerify platform.”
Wisconsin-based mortgage lender Inlanta Mortgage launched the OptifiNow CRM and automated marketing platform to improve their branch development and recruiting efforts. “Recruiting is a big part of our growth strategy,” said Chris Knowlton, CIO of Inlanta Mortgage. “Over the past five years, Inlanta has grown tremendously beyond our family-owned roots. We’re committed to advancing the growth of our national footprint, but in order to sustain that growth we need a way to identify and engage with candidates effectively. That is why we selected OptifiNow.”
Recall that ACES Risk Management (ARMCO) announced the release of ACESXPRESS for Early Payment Defaults (EPDs) to bolster lenders’ existing audit programs in light of the recent increases in required monthly EPD audit volume. ARMCO refined the functionality of ACESXPRESS to deliver needed EPD audit support with a streamlined implementation timeframe. ACESXPRESS for EPDs includes minimal setup requirements and the ability to configure within a week, full product support from ARMCO, pre-configured audits, including ACES IQ for conducting EPD reviews, and a library of standard report templates.
Three contractors are bidding to fix a broken fence at the White House. (No whining: applies to any Administration.) One is from Chicago, another is from Tennessee, and the third is from Minnesota. All three go with a White House official to examine the fence.
The Minnesota contractor takes out a tape measure and does some measuring, then works some figures with a pencil. “Well,” he says, “I figure the job will run about $900. $400 for materials, $400 for my crew, and $100 profit for me.”
The Tennessee contractor also does some measuring and figuring, then says, “I can do this job for $700. $300 for materials, $300 for my crew, and $100 profit for me.”
The Chicago contractor doesn’t measure or figure, but leans over to the White House official and whispers, “$2,700.”
The official, incredulous, says, “You didn’t even measure like the other guys! How did you come up with such a high figure?”
The Chicago contractor whispers back, “$1000 for me, $1000 for you, and we hire the guy from Tennessee to fix the fence.”
“Done!” replies the government official.
And that, my friends, is how stimulus plans work.
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, “No One is Standing Over Anyone’s Shoulder”, focused on managing remote employees.
(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. This newsletter is designed 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 2020 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.)