Jan. 16: Letters on FHFA’s execution restrictions; Big bank’s mortgage earnings; vendors fundraising; Saturday Spotlight: ActiveProspect

Who can forget the famous saying attributed to robber Willie Sutton when asked why he robbed banks: “Because that’s where the money is.” Banks are certainly doing okay. Yesterday we had a volley of earnings news, and recently the Federal Deposit Insurance Corporation (FDIC) reported results from commercial banks and savings institutions that reflect improved profitability, increased liquidity, and strengthened capital levels. The 5,033 FDIC-insured commercial banks and savings institutions that filed Call Reports showed that aggregate net income totaled $51.2 billion in Q3 2020, down $6.2 billion (10.7 percent) from a year ago. Quarterly net income improved despite the pandemic, primarily because of lower provision expense, net interest margin fell to a record low, loan and lease balances declined, driven by reduced commercial and industrial lending activity, and noncurrent loan balances increased modestly. The banking industry remains well positioned to accommodate loan demand and support the economy.

Saturday Company Spotlight: ActiveProspect, helping companies acquire 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). 

ActiveProspect is a leading provider of consent-based marketing solutions for direct-to-consumer mortgage bankers. Founded in 2004 and headquartered in Austin, Texas, we offer a comprehensive SaaS platform geared toward making consent-based marketing the most scalable, efficient, and safest method for customer acquisition. For lenders seeking proof of TCPA consent, we provide the only independent lead certification tool, TrustedForm. Our LeadConduit tool also offers lead optimization and lead distribution solutions.

These solutions help our lenders scale their opt-in consumer acquisition by filtering leads for things like: duplicate leads, known litigators, identify fraudulent leads in live time, phone verification, email verification, and 30+ other Marketplace Integrations that lenders can use to filter their leads, all in one platform integration. Additionally, we provide deep insights into TrustedForm data such as time on page, keystroke speed, words per minute, geo-location, browser, URL, and age of lead, allowing our lenders to maximize their ROI on their lead investment.


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

We’re always looking to support our vibrant community in Austin by donating to or volunteering with different local charities and causes. For example, we recently created an internal month-long fitness challenge for our employees, and the winning team of the challenge was able to choose the local charity of their choice for the company to donate to. The no-kill animal shelter Austin Pets Alive is definitely one of our favorites, and we look forward to supporting many more local causes in 2021!


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? 

Every employee goes through an eight-week internal “Academy” program, wherein they learn about products, technologies, and processes that can help them succeed at ActiveProspect and beyond. When employees request to learn more about certain subjects or earn new certifications, we love helping them do so and encourage enrolling in continuous learning programs.


Tell us how your company maintains its culture in the office, or in a work-from-home environment if applicable. 

ActiveProspect was thrilled to be voted “Best Places To Work Austin” in 2020 and 2021, respectively. Since the global pandemic took over in March 2020, we have been operating completely remotely and continued to create a thriving company culture by hosting virtual happy hours, trivia nights, and other team-building events on a regular basis to keep our team feeling connected and excited about working at ActiveProspect.

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

Despite the unexpected global pandemic locking down the country in March 2020, we were proud to be able to continue growing as a company and become a job creator during times when many workers across the nation were laid off or furloughed. It was humbling to continue growing 50% year over year and have the ability to create desperately needed jobs for talented people during the COVID era.


Fun fact about ActiveProspect:

While we’re headquartered in the beautiful tech hub of Austin, Texas, we also have employees working for us from all over the world, including South America and Asia!


Is there anything else you’d like to share along these lines? 

ActiveProspect is proud to protect direct-to-consumer lenders against TCPA litigation while reducing marketing spend. In this way, ActiveProspect’s platform acts like an insurance policy that also saves money and increases ROI. Chat us to learn more!

(For more information on having your firm, employee growth, and your charitable side featured, contact Chrisman LLC’s Anjelica Nixt.)

Bank news

Over the last several years the big banks have lost/given up market share to independent, non-depository mortgage banks. This hasn’t made politicians or regulators happy, based on a comparison of the amount of capital at both groups, but until the banks decide to reverse course, the IMBs will continue to grab it. Why not?

Yesterday we saw earnings from a few of the big banks. Analyst Bose George, with KBW, a Stifel company, voiced his opinions on the 4th quarter of 2020. Mortgage banking results came in generally slightly better than his expectations at several large banks (WFC, JPM, C, and PNC). Origination volumes fell -13% Q/Q at WFC and -8% at PNC, but rose +12% Q/Q at JPM, and were flat Q/Q at C. Excluding correspondent though, which companies can enter/exit more fluidly, volumes fell -3% Q/Q on average. Gain-on-sale (GOS) margins were also mixed, likely driven by channel mix shifts, though “George continues to expect industry margins came down slightly Q/Q as primary/secondary spreads narrowed.” Lastly, the MSR marks at the banks improved +9% Q/Q, which was good.

“Mortgage production revenue trends were somewhat mixed (down about -3% Q/Q on average) among the early bank reporters. Overall, George continues to expect industry mortgage banking earnings to be down slightly Q/Q. On the servicing side, the MSR marks were more favorable than George expected, which is a positive read-through for mortgage servicers.

“The difference between WFC and JPM (the two largest bank originators) was driven by correspondent channel production, as WFC pulled back (-25% Q/Q) while JPM jumped back in (+49% Q/Q). Retail channel production at the two banks was down 2-3% Q/Q. The mixed results compare to industry forecasts from the MBA (-7% Q/Q), Fannie (-7% Q/Q), Freddie (+6% Q/Q), and the 45-day lagged MBA applications index (roughly flat Q/Q).”

Agency sales changes roils industry: but with a year’s lead time

The Treasury and FHFA announced amendments to the Preferred Stock Purchase Agreements (PSPA) governing the conservatorships of Fannie Mae and Freddie Mac. The MBA prepared a summary of the announcement. The news from the Treasury and the FHFA (which oversees Freddie and Fannie) was good in some ways, not so good in others. For example, capital markets folks from around the nation quickly latched onto the clause capping annual cash window sales to each GSE at $1.5 billion per year, pointing out that it could be easily misunderstood as helping small lenders. It doesn’t take effect until 2022, a year from now, so there is plenty of time to adjust it. MLOs know that anything that ties the hands of capital markets’ execution impacts the pricing for borrowers.

I received a number of comments.

“They may not understand the direct negative impact to small lenders resulting from the hit to small correspondent buyers.” “This will ‘hollow out’ the mid-sized IMBs and even some larger folks.” A large lender wrote, “I’m not concerned with this, as we are sophisticated enough to make the transition to MBS delivery rather easily. This may impact some of the smaller to mid-sized lenders that are not sophisticated enough or have the desire to handle the MBS delivery. So, the aggregators may see an increase in business due to this. But they will be capped as well.” “Let’s hope that the GSEs will be more accommodating when a customer wants to switch from cash to MBS. Fannie Mae has consistently made it difficult to switch from cash to MBS execution.”

The comments continued. From a smaller lender came, “This is an interesting perspective on GSE appetite for whole loan sales vs. delivering to securitize. I always had the impression Fannie and Freddie wanted to keep any profits from securitization, and were not encouraging lenders to be issuers. That’s fine, since we don’t have the desire, or resources, to securitize this year anyway, and given our expected volume the cap won’t be a problem for us.” And a larger retail lender wrote, “That’s definitely a change in narrative. In the past, every time we asked Fannie about flipping to MBS and away from cash window, we got the runaround answer of, ‘Cash is better, we price it level to MBS, we want everyone on cash window.’”

Chris Bennett with Vice Capital Markets wrote, “There are a number of lenders who are worried about Treasury’s new directive to Fannie and Freddie capping annual cash window sales to each GSE at $1.5 billion per year, some even thinking that means being forced to sell the excess to aggregators. Not at all. FNMA and FHLMC have always been intended to be guarantors of mortgage pools, not just mega investors themselves. In the past, most all lenders that were mid-sized and up issued their own Fannie Mae MBS and Freddie Mac Gold PCs, and smaller lenders came to market through the agencies’ cash windows. After the global financial crisis and conservatorship hit in 2008, Fannie and Freddie generally resisted adding new firms to their lists of issuers, funneling those originations directly to their cash window even as some of those lenders grew to selling multiple billions each year. While this news of a cash window volume cap may seem a bit scary to those who have pooled only with GNMA up to this point, it shouldn’t be. This is about getting back to a larger and more diverse pool of UMBS issuers into the capital markets, and continuing the process of leveling the playing field for all.”

And from MCT’s Phil Rasori came, “While I realize that this letter is written in the final throes of a conflict-ridden administration, I’m concerned that the damage of this recommendation might be overlooked because it has been placed under the false title of, ‘Provide Small Lender Protections.’ This rule would have a substantial negative affect the secondary execution of small to midsize independent mortgage lenders, for two reasons. First, given that Fannie has directed the vast majority of small and midsize lender to only commit cash window, the limit of $1.5 billion per four quarters is far too small. For reference, over 25% of MCT’s agency sellers would have been completely frozen out of Fannie midway through 2020. Second, and more importantly, over 80% of correspondent aggregators use some form of cash window commitments for their back-end execution. As such, restricting commitment amounts will either severely limit or completely remove these executions which are desperately needed by small lenders.”

Vendor morsels

There’s a new kid on the block: Lionel Urban, a 30-year mortgage technology leader has recently opened Urban Technology Change Consulting. “Urban TCC helps financial institutions create technology and mortgage lending roadmaps, and assists with vendor selection and implementation, allowing them to maximize their automation budget. This coverts Lender’s technology expense into an investment that ensures ROI.” The firm will support banks, credit unions, and IMBs with mortgage technology planning, RFPs, contract negotiations, and internal resource assessments. “As the former founder and CEO of PCLender, Lionel has over 100,000 hours in lender operations, secondary marketing, compliance, risk, and workflow automation planning and supervision, allowing him to help lenders identify, validate, and implement their technology plans and ensure budgets and staffing skills are properly aligned to vendor agreements and successful implementations.”

Blend has expanded its partnership with Freddie Mac with the integration of the company’s automated underwriting system (AUS), Loan Product Advisor® (LPASM). Together, Blend and Freddie Mac are collaborating on technology solutions to drive faster assessment of data and reduce the amount of paperwork. In addition, Blend recently announced its Digital Lending Platform supports the redesigned Uniform Residential Loan Application (URLA). The GSEs have begun accepting the redesigned URLA to their AUSs.

LendWize has completed the acquisition of ARIVE, LLC and successfully transitioned to a fully integrated solution, consolidated under the LendWize technology stack. LendWize fully transformed ARIVE Next platform, featuring numerous innovations, more streamlined technology, electronic lender integrations, and an improved mortgage broker experience across the board.

UniversalCIS, a market leader in technology and solutions to the mortgage industry, is pleased to announce the acquisition of mortgage technology provider SharperLending. The SharperLending transaction, which follows the merger of Universal Credit, CIS Credit Solutions, and Avantus, provides further enhancements to the technology platform for UniversalCIS. SharperLending provides a product extension into software solutions for the residential and commercial appraisal markets through Appraisal Firewall and related products, optimized settlement, and bundled services solutions, as well as direct income verification and mortgage credit reporting technology. SharperLending will operate as an independent business unit as a wholly owned subsidiary of UniversalCIS.

Reggora, an appraisal software company that is modernizing residential real estate valuation, announced the successful completion of its $30 million Series B funding round led by returning investor Spark Capital, a venture capital firm responsible for early-stage funding of numerous successful startups including Twitter, Wayfair, Plaid, and Slack. The round also featured contributions from returning investors Boston Seed and 1984. New investors included Shine Capital and Greenpoint Partners, among others. This financing brings the total capital raised by the company to more than $45 million; the current round will be used to support technology and engineering investments that will further scale the company.

Brace has raised $15.7 million in Series B funding to “accelerate our mission of providing a new generation of mortgage servicing software. This latest round, led by Canvas Ventures, brings our total funding to over $30 million, and will be used to continue Brace’s investment in delivering an end-to-end mortgaging servicing platform. Brace is proud to have built a compliant, user-friendly digital solution that meets the needs of all of our constituents: borrowers, servicers, and investors.

SimpleNexus has received a follow-on investment of $108 million in Series B funding led by global venture-capital and private-equity firm Insight Partners as demand for the tech company’s digital mortgage platform soars. With the support of Insight Partners, its vision to hone the entire home buying journey from the borrower’s first contact with a Realtor to the closing table and beyond; SimpleNexus plans to transform the homeownership journey into a seamlessly connected experience.

Getting older? Remember, life is not a dress rehearsal.

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, “Work Longer and Harder, or Work Smarter”.


(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 2021 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