Jan. 21: Thoughts on LOs picking up the phone, conference life, the new LLPAs; NAR on rates; Saturday Spotlight: Veros
Regardless of the cause of climate change, of even if one believes in it, it is impacting homeowners, lenders, servicers, and insurance rates. As severe flooding increases, many low-lying coastal cities have some expensive decisions to make. Places like Florida and California grab the headlines, but other areas at the coast or on rivers are equally impacted. For example, when the flood maps show that homes are in danger of flooding, as is the case in Aberdeen and Hoquiam in Washington state, where homes in the hazard area now have a 26 percent chance of flooding over the course of a 30-year mortgage, cities are faced with a tough call, which is how much money is the right amount of money to lower that risk. Meanwhile, lenders are doing what they can to help individual borrowers. Mortgage rates have certainly come down, but mortgage companies continue to offer products that can help, and be open to programs down payment assistance or interest-rate buydowns. And the public is also aware of them. “A seller-paid rate buydown can typically help buyers save more money on monthly mortgage payments than if they negotiated a lower purchase price. It can also be cheaper for the seller to pay for discount points than to reduce the home price. Buyers received a record share of seller concessions – such as mortgage-rate buydowns – during the fourth quarter of 2022…” What else is going on out there?
Saturday Spotlight: Veros Real Estate Solutions
“Property Valuation & Collateral Risk Management Solutions That Instill Confidence in Property and Portfolio Decisions”
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).
Founded in 2001, Veros Real Estate Solutions provides residential valuation solutions to the mortgage industry. Whether it is technology and analytic support for Fannie Mae, Freddie Mac, FHA, and VA, or data/analytics to the rest of the mortgage industry, Veros works hard at understanding our customer’s business model to offer customized solutions to help them manage collateral valuation risk.
Especially with our recent acquisition of Valligent, our uniqueness is providing a full spectrum of collateral valuation products that support every collateral valuation need for residential real estate mortgages. Veros and Valligent share the proven strength to secure multiple large US government contracts, but small enough to provide superior customer engagement that stands well above the industry standard. We invite you to experience the Veros/Valligent difference.
Tell us about what type of volunteer work employees are encouraged to engage in, or charities your company supports, and why.
Veros encourages employees to volunteer within their communities at charities that are important to them. As a company, Veros has supported Direct Relief, FeedingAmerica, World Food Kitchen, Colette’s House, and local animal shelters, to name a few. In addition, Veros has made a commitment to the environment by eliminating “swag” from its presence at industry trade shows and making charitable donations instead.
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?
The company promotes cross training within certain departments, allowing employees to learn different responsibilities and skill sets, which can also include online and onsite departmental training. This is especially important as the company encourages promotion from within. Giving opportunities for employees to work closely with different departments allows them to be promoted or moved into a different department, which opens up a world of possibilities to grow within the company.
Additionally, Veros provides tuition reimbursement for employees who wish to grow their skills and knowledge through certification programs or college education.
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.
Currently, Veros provides a hybrid model for employees. This schedule has them working 3 days in the office and allows employees to schedule which days they would like to work from home.
While many company meetings and events were virtual due to COVID, most of them have returned to being in-person. The company provides free lunches on Monday and free car washes on Friday for employees who are in the office.
Because of the hybrid structure, Veros uses Yammer for company and personal announcements, such as birthdays, employee accomplishments or other fun employee-focused updates so everyone can stay connected, regardless of their location.
Things you are most proud of that don’t have to do with sales.
Veros is most proud of our work with Diversity, Equity and Inclusion (DEI). Veros is leading the industry to bring awareness to the issue of appraisal bias.
Veros recently completed an in-depth study of our AVM across five metro areas to determine if there is any potential racial bias in our AVM. The study found no evidence of bias and we are actively encouraging other providers to study their solutions to ensure accurate valuations for all.
Additionally, we have worked with the Veterans Affairs (VA) to develop a bias word search tool that they run on all of their appraisals. This tool finds key terms that may be indicators of bias and flags the appraisal for further review. We are working on expanding this solution to even more lenders to help streamline reviews.
Additionally, we are working with President Biden’s PAVE task force and the Appraiser Diversity Initiative to foster broader change across the industry and bring more diverse representation to the appraisal industry.
Fun fact about Veros.
The Veros team knows how to have fun together – through Zoom, Teams and in person. The company townhall and holiday events are legendary for their balance of celebrating business accomplishments, employee recognition and all-around fun!
(For more information on having your firm’s extracurricular activities, employee growth, and your charitable side featured, contact Chrisman LLC’s Anjelica Nixt.)
(I ran this a few months back but continue to see morale issues in our biz.)
Hunter Marckwardt, EVP with CrossCountry Mortgage, LLC, writes, “This market is a challenging one. Have we heard that before? New news? Tired of hearing about it? There are aspects of this market that are not fun but there is also massive opportunity for growth. For many of us, 2020-2021 were crazy. My personal production tripled. I was just that good. To triple my business in a 2-year period of time is nothing short of massive kudos to me for being that good at my job. Had nothing to do with market, conditions…just me being amazing.
“So clearly I’m joking. The market in 2022 felt like a hangover. The refinance boom was the equivalent of eating our young. We’re all left looking at each other with a ‘what now’ look in our faces. It’s almost funny…. almost.
“I’ve been having bigger conversations with some of my great business partners. We’re strategizing on data/content/messaging. Taking facts about numbers, comparisons to year over year, quarter over quarter, rate comparisons vs. new loan amounts, impact of values dropping and what that looks like in a payment. Understanding the needs of our clients, the questions that need to be asked to identify their ‘why’ for buying now.
“I was having a conversation last week with one of my favorite partners about numbers she’d like to see, and in what format, then she jokingly said, ‘Hunter, help me, help you, help me.’ As soon as she said it, I thought, ‘GENIUS! Help me, help you, help me?” What does this mean? It means for me to think bigger, to ask better questions to provide more intel, to help her provide content to her clients, to help her be better. She was asking me to keep asking questions that drill down into details that help her uncover numbers and info to help her clients make decisions based on more data than more emotions.
“Our team is now having more fun working to be better. Dialing in our P & L, dialing in our new CRM, simplifying our messaging for our clients, easy to use calculators for our clients (2/1 buy down costs etc…). There will be two camps in six months from now, those that got better and those that wish they had. I fully recognize what got me the last two years of business is not going to get me the next two years of business (I know ‘got’ isn’t a real word but I like it, MOM).
“’Right now’ requires being better. This market requires all of us to be better. My favorite quote of the year is from Dave Savage, saying, ‘Hunter, lenders have never been this out of shape,’ and I agree. Question is, what are we all doing to get back in shape? Me having bigger conversations w/ business partners who are pros and plan to be here two years out and beyond, holding me accountable to execute on being better, is helping me get back in shape. I don’t take it as a criticism, I take it as a wakeup call ‘help me, help you, help me’ is my business partner saying, ‘Be better for me.’” Thank you, Hunter.
Thoughts on life at a conference
Next week hundreds of us head to the MBA’s IMB in San Diego. A while back, the founder and CEO of Lodestar Jim Paolino, wrote me, and it bears repeating, saying, “I think it is very necessary for the industry to believe, as I do, that these conferences need to be more inclusive.
“As a millennial who founded LodeStar in 2013 when I was 26 years old, industry conferences have been both an uphill battle and one of the most reliable ways for me to build my business. Early on, an older mortgage guy bemoaned to me, ‘I remember when we used to have strippers at these things.’ However, I have made countless friends and connections with folks I would not have if I did not attend, ultimately benefiting LodeStar.
“At this point, I have adopted a ‘nothing good happens after 9PM’ approach to conferences and bow out after I have gone to my meetings. As a vendor, there are only a few conferences I feel are worthwhile to be an exhibitor.
“I find myself nervous to send younger female employees alone to conferences due to the personal experiences they have come back with regarding inappropriate behavior. Headlines like conference fist fights between mortgage professionals below that definitely do not reflect well on the industry.”
“I constantly wonder what the role of conferences will be moving forward now that the pandemic has wound down (in the United States). I recognize this is all not an easy problem to solve but I do feel it is vital to the long-term health of this industry, one that I have grown up in and care deeply about. A more welcoming conference environment for all types of people is better for everyone: companies, vendors and especially the conference organizers. I do hope there is more thought put into how to create value in conferences for all.”
NAR on mortgage rates and affordability
Nadia Evangelou, NAR senior economist and director of real estate research, had some thoughts this week on the bond market. “Mortgage rates continued their downward trek this week. According to Freddie Mac, the rate on a 30-year fixed mortgage dropped to 6.15 from 6.33 percent the previous week. With inflation declining and the Fed switching to a smaller rate hike, mortgage rates may drop even further in the upcoming weeks.
“The fall in mortgage rates creates opportunities for many buyers. A lower mortgage rate brings down the monthly payment. Since rates’ recent peak in the middle of November, buyers can save about $300 every month with rates near 6 percent. At the same time, data shows that sellers are more willing to negotiate as homes stay on the market longer. Sellers had to reduce their initial asking price by 12 percent on average for sold properties listed for more than 30 days. Price cuts reached 15 percent when properties stayed on the market for more than 4 months.
“In the meantime, there are fewer offers per listing. The typical seller receives a couple of offers for their home compared to 4 offers the previous year when buyers were rushing to benefit from the 3 percent historic low rates. However, buyers are still dealing with weak affordability and low inventory. Buyers earning $100,000 can currently afford to buy a home with a price of up to $380,000. But only 40 percent of the listings are in their price range. A year ago, these same buyers could afford to buy a home that was $130,000 more expensive.”
Industry view of loan level price adjustment changes
Mark Milam, President and Founder of Highland Mortgage, writes, “I’m writing to express my strong objection to the newly announced LLPAs for Fannie Mae, effective for loans delivered May 1, 2023. As the Agency surely knows, the housing market is experiencing unprecedented challenges to affordability. But just in case, please go here to see affordability is at a low we haven’t seen for decades, if ever.
“Home price appreciation and interest rate increases have reduced the dream of home ownership for millions of Americans. The changes in the latest announcement are punitive for potential homebuyers who have saved for down payment and maintained good credit. The potential homeowners who might benefit from the restructuring of LLPAs are low-credit score and low-down payment borrowers. Why is the agency punishing potential homeowners who have put themselves in a good position to buy?
“Making matters worse is the clear illiquidity and the absence of yield in the secondary market. This exacerbates the effects of these changes. A borrower with a 740-credit score putting down 15% will incur a minimum increase to rate of 0.25% from your decision. The result will be additional interest of $23,000 over the term of a $400,000 loan. Is this what the administration desires?
“It is flatly irresponsible to impose this level of financial burden on the American people, who are already suffering through 40-year high inflation. It is additionally unconscionable to place yet another obstacle in the path of a housing recovery. Please reverse this decision immediately.”
And Adam Quinones observes, “Headlines promoted affordability and celebrated cheaper borrowing costs for underserved borrowers, yet the agencies have been quietly raising base G-fees behind the scenes to counter those improvements. Smoke and mirrors because optics matter. The edges of the grid are not where the GSEs do most of their business though. +60% of issuance since 2014 is 700+ FICO with LTVs under 80%.
“The real story is obvious concern around a potential home price correction. The biggest moves on the grid were in the most prominent FICO bands where MI is viewed by agency models as mispriced. Upfront g-fees were essentially shifted to the left on the grid, sometimes twice, meaning the model implied insurance costs of an 75-80% LTV loan today is more likely to reflect the risk on an 80-85% LTV tomorrow.
“In some regions , 75-80% might now be the 85-90% column. Either way, the agencies definitely don’t want a refinancing event. Collateral Underwriter’s AI may not handle that well (negative feedback loop). It’s tempting to call these changes a net positive for non-agency issuance but falling home prices impact every mortgage regardless of guarantor.”
Everyone asked a 100-year-old man and his 98-year-old wife for their health secrets.
The old man said “I’ll tell you my secret. I’ve been married for 75 years. I promised my wife when we got married that when we quarrel, the loser has to walk for 5 miles. So I’ve been walking 5 miles every day for past 75 years!”
Everyone applauded, and asked again, “But how come your wife is very healthy as well?”
The old man answered, “That is another secret. For 75 years every single day she has been following me to make sure I really walk the full 5 miles!”
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