Dec. 3: The role of AMCs; books for your staff for Christmas; vendor bits; what if the buyers paid RE commissions?
Yes, there are people who are allergic to cat dander and fur. But that won’t stop them from checking out the world’s oldest cat. (I’ll be danged if I don’t move the same way when I get out of bed at 4AM to send out this commentary.) Switching gears, literally, to something that some watch to gauge inflation, used car prices are down 16 percent from their peak in January, and JPMorgan forecasted that prices in used cars could drop 20 percent next year. That’s largely disconnected from the pricing in the new car market, which has risen and would be projected to drop at the absolute most just 5 percent next year. Car costs are important when it comes to the overall U.S. inflation basket, accounting for 11 percent of the core CPI, but because it’s a mixed bag between the used and new market it’s not really clear if there’s a consistent signal being sent to policymakers about the health of that part of the economy.
Kim Perotti, co-President of AXIS Appraisal Management Solutions, sent along a note titled, “Tough Times Don’t Last, But Tough AMCs Do.” “In the current high interest rate environment, we have seen a variety of companies, from lenders to AMCs sharply shrink in size and even close completely. While we should mourn these closures and the suffering of their dislocated employees and vendors, this market consolidation is to be expected and will hopefully result in a stronger and more savvy industry. In times like this, it is essential that companies align and support exceptional vendors.
“In times like this, it is essential that companies align and support exceptional vendors. Exceptional AMCs have weathered economic pressures before. They recognize market impacts and make timely business decisions that not only protect their AMC, but their valued lender-partners and their best appraisers as well. They recognize that their corporate responsibilities go well beyond self. Indeed, no matter the fiscal environment, exceptional AMCs embrace their professional responsibility to support lenders, borrowers, consumers, real estate agents, and appraisers. They facilitate the multiple facets necessary to successfully support the valuation process. Put simply, lenders should expect an exceptional AMC to provide exceptional services and support.
“A few key highlights of how your AMC should aid you are shown here. While we hope to be reaching the ceiling of historic interest rate hikes by the FED, we are likely to have challenging market conditions for some time. Stakeholders in the appraisal, real estate, and lending industries should take note of AMC market consolidation and take advantage by resetting their vendor relationships with proven exceptional AMCs who have the experience, strength, knowledge, and leadership to meet your needs and those of your clients.”
Support home-grown authors!
What a better Christmas present for your staff or co-workers than a book or two written by someone in our industry, or very close to our industry? Is giving a real estate agent a book on becoming a productive and well-respected real estate agent a RESPA violation? For something completely different, looking for a holiday gift for your staff since you’re not spending much on travel and entertainment? Congratulations to anyone who can write a book, and there are several (that I know about) in or close to our biz. And with the reasonable prices, good gifts for your staff. Or for your boss! No, these are not paid ads, and the books are written by folks in our biz, about our biz, or close to it. In no order, we have…
Mortgages aside, given the current employment situation and mortgage folks perhaps taking a look at other industries, let’s start off with a gift idea for a family member or someone you know who is interested in pursuing a career in health or who is in the field and ready for a change. Check out my friend Jeff Oxendine’s new book, You Don’t Have to Be a Doctor: Discover, Achieve and Enjoy Your Authentic Health Career. Jeff, CEO of Health Career Connection and a longtime faculty member at UC Berkeley School of Public Health, shares his proven 9 step framework, practical tools, inspiring stories, and hands-on exercises that he has used to help thousands of students and health professionals choose and succeed in the health career that best suits them. While many students enter college on the premed track, only 17% of premed freshman end up in medical school and only 40% of medical school applicants are accepted. Jeff’s book doesn’t dissuade anyone from being a doctor, it provides practical guidance for people to critically assess their options and develop an action plan for success. (Have your college students interested in health pursue internships through Health Career Connection.)
Eric Mitchell is the EVP for Gold Star Mortgage and oversees nationwide business development strategies for its 500+ employees through innovative purchase market strategies proven to revolutionize the way Loan Officers and Realtors partner, generating their unprecedented success and market reach. Eric has written “The Why of Money”. The Amazon page is live.
Russ Van Buren’s Falling, inspired by the true events of 9-11.
There’s “Surviving Sosebee: A Lesson Plan On Life” by Mary Lee Gilchrest with First State Bank Mortgage in Kansas. (“I self-published so the book can be purchased from me by emailing me your address. My book is $15.00 with shipping and I enclose a return envelope for payment on the honor system that buyers will send money. My book talks about some that I have been through in my life and refers to my job many times, and the small profit I give the profit to ALZ and lung cancer research as those are the illnesses my mother and mother-in-law suffered with.”)
“My Client the FBI: How a real estate appraiser assisted the FBI before and after the mortgage crisis in cleaning up a broken system.” Written by Donald Gossman, you can read more about it here along with thank you notes from the Feds.
Michael Rosser and Diane Sanders penned “A History of Mortgage Banking in the West,” a “book that should be read by politicians and business leaders everywhere.” Order here and use promo code ROSS17 to knock 20% off the price.
“Buy Your First Home Today” was written by John Mallett is a good book for LOs to give their clients. “Empower your life, build your wealth, own the home of your dreams.”
Anne Elliott composed “Mortgage Risk: A Blueprint for Smarter Origination.” The book is meant for underwriters, sales managers, LOs and appraisers.
“Hacked. Screwed. Gone.” By Jim Deitch is an “A-Z blueprint to protect your business from accidental & malicious information security threats.”
Jason Myers authored “Becoming the Successful Mortgage Broker.” Jason also wrote “The Successful Mortgage Broker.” “Becoming a millionaire in the mortgage industry doesn’t happen by chance. When you lay the proper foundation, you create the opportunity.”
“Demystifying Mandatory” by STRATMOR’s Jennifer Fortier is a good read for anyone starting out in capital markets.
From Texas comes Michael Jones (Georgetown Mortgage) with his tome, “Reset” about a loan officer who is bumping along the bottom and re-ignites his career with some simple process changes and effort.
“The Uncommon Commodity: A Common-Sense Guide for New Managers” was composed by Doug Thorpe. “A collection of many thought-provoking stories, tips, anecdotes, and life hacks to help you grow as a manager.”
Here’s a primer on the capital markets sector from SIFMA…a fundamental overview of U.S. capital markets and financial institutions including an overview of capital markets, role of financial institutions, investment banking, markets & securities, and more.
Real estate commissions… what if buyers have to pony up?
Ed Groshans with Compass Point Research and Trading LLC did a write up on some potential issues for NAR and real estate agents in general.
“In August, we discussed the lawsuit involving the National Association of REALTORS (NAR) and the Department of Justice (DoJ). While this is relevant on a forward-looking basis, what is more imperative is how real estate broker commissions were structured in the past (2015-2020) and the court cases of Moehrl v NAR et al., which is a multi-state class action lawsuit seeking class-action status, and Sitzer/Burnett v. NAR, which is a Missouri only lawsuit.
“In April, the Sitzer/Burnett case was granted class action status. In Moehrl, if the plaintiffs are successful, potential damages could be $54 billion to $377 billion. It could also alter the real estate broker commission structure. Anywhere Real Estate (HOUS – Buy – $12.50 PT), formerly Realogy Holdings, is a defendant in both cases. Both the lawsuits are at district courts. Our expectation is that if NAR loses one or both cases, it would appeal the decision.
“This means that the cases are not likely to be resolved until 2024 or 2025. The Sitzer/Burnett case is scheduled for a hearing in February 2023 and that date could be changed to a later date.
“Risk of broker commission decoupling? In 2019, BPE Law Group (BPE) discussed the Moehrl lawsuit and noted if ‘successful, it will change the commission structure dramatically.’ At present, the selling broker receives the commission for selling a house, which ranges from 4-6% of sales price. If the listing agency sources the buyer, the agency collects the full commission. In many instances, another agency sources the buyer and in these situations the commission is split between the listing agency and the buyer’s agency. The commission tends to be split 50/50between the two agencies.
“According to BPE, the plaintiff seeks a permanent injunction against the NAR and brokers from collecting buyers commissions from the seller. This means that the buyers would likely be responsible for paying a broker, if they choose to use one. In January 2022, NAR reported that the average down payment for first-time homebuyers was 7%. First time homebuyers represent 34% of home sales in 2021 and 31% in 2020. For buyers that are making a down payment of 5%, the buyer broker commission would increase their cash requirements at closing by 20-60% or an additional $3,800-11,400 saved to pay a buyer broker commission of 1-3% for a home priced at $379,100. For buyers making a down payment of 20%,the increased cash requirement remains $3,800-11,400, but only represents an increase of 5-15%relative to the down payment.
“If buyers, notably first-time homebuyers, are required to pay commissions to brokers, it could reduce home sales, at least initially and potentially longer. About one-third of homebuyers are primarily making purchases with 5% down. These buyers may be required to have up to $11,400 more at closing to pay a buyer broker, which could take them years to accumulate.
“The risk of pushing out home purchases could be mitigated if the Federal Housing Finance Agency (FHFA) and Federal Housing Administration (FHA) allow buyers to include the buyer broker commission as part of the financing. It is unclear if these agencies will permit this even though fundamentally that is how the market currently functions. If the financing of buyer broker commissions is not permitted, then it is likely that buyers will attempt to negotiate a lower sales price, putting pressure on home prices. The change could also result in fewer bidding wars for properties as the cost to buyers would increase as the sales price increases. The amount a buyer could pay for a house would be capped by their savings, which would have to fund the down payment and broker commission.” Well done, Ed!
Vendor and third-party updates
There are some very interesting products out there. Let’s keep playing catch with a random look at who’s been doing what in recent times.
The first to provide certain telecommunications (telco), pay TV and utilities attributes to the mortgage industry, Equifax’s expanded data insights will help streamline the mortgage underwriting process and support loans within the secondary mortgage market. Alongside traditional credit reports, Equifax utilities can help create greater home ownership opportunities. Additionally, use of expanded data insights can provide visibility to millions of credit invisible consumers, those without traditional credit files, and enhance the financial profiles of thin, young, and un-scorable consumers. While traditional credit reports remain a strong indicator of credit history and past financial reliability, more data drives better decisions. This new offering is another way Equifax is leveraging differentiated data assets to help more consumers to gain access to mainstream financial services and opportunities.
Pennymac Financial Services, Inc. (Pennymac) announced the launch of POWER+, a game changing broker technology platform with an intuitive interface that empowers brokers to provide clients with expedited service throughout the entire mortgage journey enabling brokers to disclose, lock and manage their loans seamlessly and concisely. Exciting differentiators of POWER+ include a new Loan Estimate preview which looks like an actual loan estimate, providing brokers with more control and an added layer of confidence in accuracy. Close with people and technology: Pennymac is tech forward and human focused. Their vision is to create a seamless, data-driven workflow that allows brokers to self-serve 24/7 while providing access to caring, engaged experts to support brokers when they need them. A settlement agent fee collaboration tool to balance the final CD in a traceable system for real-time and accurate communication between brokers, Pennymac and the settlement agent.
LoanPASS, a rapidly growing fintech focused on next-generation decisioning automation, and LendingPad, an end-to-end web-based loan origination system (LOS) provider, jointly announced a partnership to integrate their core platforms for use by direct lenders. From within LendingPad’s LOS, users will be able to seamlessly access LoanPASS’ decisioning platform to return product and pricing results for any type of loan program, with unparalleled speed and accuracy. “Each of our digital lending platforms reside in the cloud and are delivered using a low-cost SaaS delivery model, creating a maintenance free and low-cost interface,” said Wes Yuan, CEO of LendingPad. Both companies will be demonstrating their respective platforms at the upcoming MBA Annual Convention & Expo located in Nashville, Tenn. from Oct. 23 -26.
Sales Boomerang and Mortgage Coach announced a significant new integration with Insellerate that streamlines the sales process by enabling loan officers (LOs) to generate and customize Total Cost Analysis (TCA) loan presentations prefilled with contact data directly from the Insellerate customer relationship management (CRM) and lead management dashboard giving lenders a big advantage in lead conversion. As the market continues to slow, this will be a critical differentiator for lenders’ continued success. Practically everyone has a CRM these days, but it’s the specific combination of a CRM’s tools and tools that equip LOs with the capabilities they need to efficiently contact leads and provide meaningful mortgage advice that earns their trust and loan commitment faster that makes all the difference.
Staircase, the company building an integrated, digital infrastructure to accelerate tech-enabled mortgages, launched MSR Transfer, a new technology that automates and streamlines mortgage servicing rights (MSR) transfers and orchestrates transactions between the buyer and seller of MSRs. Eliminating the manual loan file review process, it leverages Staircase’s Loanboarding product which uses machine learning tools to automate the ingestion of loan files and transform raw loan data into structured documents. Additionally, MSR Transfer gives users the ability to save all loan data on a blockchain, including the findings and resolutions, allowing for a better price when rights are sold and provides a full audit trail.
Tavant, a Silicon Valley-based provider of industry-leading digital lending solutions, launched two new products to Touchless Lending™️, which now includes experiences not just for underwriters and processors but also for home buyers, loan officers, brokers, realtors, and more. Diversifying its AI-powered Lending-as-a-Service platform to include both Credit Analysis and Collateral Analysis, two separate product offerings, Tavant further solidifies its status as the industry’s preferred mortgage automation partner. This expansion marks a significant milestone for Tavant as the organization makes steps towards unifying all of its Fintech products under one overarching product brand, Touchless Lending.
What happens when you combine an impersonator with some amazing special affects? This short entertaining video. (Please excuse the language in the title.)
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