July 15: Compliance topics & repurchase demands; Realtors on market activity; Gen Z & home buying; Saturday Spotlight: Blend

 

Remember the “old days” when every generation didn’t have to have a name? And generations for humans were considered to be 20-30 years? I might not understand Generation Zers, those born between 1997 and 2012 (15 years now defines a generation?), but many are starting careers and buying homes for the first time. Older Gen Zers (up to age 26) account for roughly 15 percent of potential homebuyers across the nation’s 50 largest metros. Salt Lake City (23 percent) has the largest share of mortgage requests from Gen Zers with relatively inexpensive Oklahoma City (22 percent) and Birmingham, AL (21 percent) the next most popular metros. In expensive San Francisco, New York and San Jose, CA, the smallest percentage of mortgages are being requested by Gen Zers. And part of the home buying decision making is based on climate. According to data from the National Energy Assistance Directors Association energy bills are projected to rise in every region of the U.S. this year, impacting hundreds of millions of Americans. According to an analysis of US energy data, the average summer energy bill for U.S. households is projected to hit $578 per month, an increase of 11.7 percent compared to last year. And usually, these bills hit the lower economic rung of our society harder, either because they live in hotter areas (in the city without trees) or the marginal hit of the higher energy bills impacts them more.

Saturday Spotlight: Blend

___________________________________________________

“Modular components and automated workflows for financial services, powered by Blend Builder”

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).

Born out of the ashes of the great recession, in 2012 Nima Ghamsari and his co-founders saw an opportunity to transform the complex and paper-based mortgage process by harnessing the power of technology and data to make financial services simpler and more transparent. Blend is a leading technology company based in San Francisco with a remote-first workforce. We are dedicated to working with financial services providers to streamline workflows and transform banking experiences with our cloud-based platform. Fast forward to 2023, while remaining laser-focused on our mortgage customers, Blend decided to enter our next chapter and focus some of our investments and resources on our Blend Builder platform and Composable Origination.

Blend emphasizes the role of technology in simplifying the lending experience. How does Blend and its technology support the borrower, loan officer and real estate agent relationship in this purchase market?

Blend’s technology simplifies the lending experience for borrowers, loan officers, and realtors in a number of ways. For borrowers, Blend’s platform makes it easy to apply for a mortgage, track the progress of their application, and communicate with their loan officer. Borrowers can also use Blend’s tools to get pre-qualified for a mortgage, get an estimate of their monthly payments, and compare different loan options.

For loan officers: Blend’s platform provides them with the ability to improve productivity, helps them to automate tasks, and enables them to collaborate with borrowers, LOAs, Processors, realtors, and other stakeholders. This can help loan officers to be more efficient and productive, and it can also help them to provide a better customer experience for their borrowers.

For real estate agents: Blend’s platform provides them with tools to help them track the progress of their clients’ loans and to provide their clients with timely updates. These tools include a dedicated mobile application to enable agents and loan officers to better work together. This can help real estate agents keep their clients informed about the status of their loans, and it can also help them to build stronger relationships with their clients.

Blend enables some of the biggest lenders in the nation to process an average of nearly $4 billion in transactions each day. How does Blend integrate with the Loan Origination System and what are some best practices you see loan officers adopting when they leverage this technology in support of their book of business?

Blend has deep and powerful integrations with loan origination systems (LOS) through its modern API infrastructure. This allows lenders to seamlessly integrate Blend’s platform with their existing LOS, which makes it easy for them to adopt Blend’s technology and enables LOs to increase their productivity by working in Blend and staying out of the LOS.

The overarching best practice that Blend’s most productive LOs are tapping into is merging loan advisory and loan manufacturing workflows into one unified workflow. How? Through a simple-to-use set of tools we call LO Toolkit.

At the prospecting stage, LO Toolkit is designed to help drive new business by mirroring the most common ways LOs and borrowers interact. Starting each new opportunity in the Blend app, whether on the go or on the couch, helps kickstart deals for highly productive LOs.

The natural next best practice is to simplify the path to rate lock and ITP. When workflows are rooted in Blend, LOs have access to time-saving lifesavers powered by AI and automation. LO Toolkit brings manual tasks upfront, surfacing the right tasks at the right time and place, while Blend’s intelligent platform automates many background tasks.

Finally, as we push to streamline the path to close, highly productive LOs are using data, not documents. Whether data is sourced automatically from known information or pulled instantly through simple sign-ons to 3rd-party sources, the key is to ensure that data is validated and accurate. And when that data is backed by Blend’s industry-leading verification tools, top LOs can proceed with confidence.

As we look towards the future of the mortgage industry, what key technological advancements or trends do you anticipate? Tells about internal advancements, and how you promote diversity.

Blend has a long history of diversity, inclusion, and belonging. Blend was founded on accessibility, and we’re intentionally investing in equity. In tech, the mortgage industry is constantly evolving, and there are a number of technological advancements and trends that we anticipate in the future.

The continued adoption of cloud- and platform-based technology: Cloud-based technology is becoming increasingly popular in the mortgage industry because it is scalable, flexible, and cost-effective. Platform technology unifies historically disparate processes into a unified system, breaking down data silos and isolated workflows.

The use of artificial intelligence (AI) and machine learning: AI and machine learning are being used to automate tasks, improve decision-making, and provide personalized customer experiences. The AI boom is here in many other industries, and mortgage will be no different.

The flexibility to measure market changes technologically: Most lenders need to make recurrent personnel decisions in reaction to changes in rates. When technology is flexible enough to meet the demands of any market, lenders can focus on retaining staff and upskilling them to successfully sell, process, and close in any conditions.

Blend is focusing investment its R&D efforts in these and a select few other areas to meet these trends head on with the ultimate goal of improving the mortgage experience — for everyone.

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

Real estate market snap shots

___________________________________________________

One can make the argument that resort areas all tend to go up and down together. Out west, bordering California and Nevada at 6,200 feet, is Lake Tahoe, home to some very cool towns and ski resorts. Tal Fletcher with Tahoe Mountain Realty sent out his July 2023 Tahoe-Truckee Real Estate Market Update.

“Real estate activity in the Tahoe Truckee region followed a deep V-shaped trajectory through the first half of 2023. However, historical data has consistently demonstrated that the latter half of a year brings about twice as many sales as the initial six months. Preliminary indicators of summer performance lend support to the notion that the latter half of 2023 may exceed this trend.

“After the soaring volume that defined 2020 through the first half of 2022, the final months of last year showed a market that had run out of both inventory and energy. Q1, 2023 followed this path as transaction volume hit all-time lows, ultimately bottoming out in April once winter rendered the sparse available inventory virtually ‘unshowable’ amid historic snowfall.

“The merciful end of ski season kicked off the annual surge of spring listings compounded by a segment of homeowners anxious to not endure another such winter. Even the slightest loosening of supply stimulated increased activity such that Q2 ended with nearly 50% more transactions than the preceding quarter. June was the first month in 2023 to record over 100 residential transactions and $150,000,000 in sales volume.

“Despite wild fluctuations in the number of transactions, prices held steady through early 2023. Average and median prices each fell just 6% from historic highs in 2022 maintaining levels well above the benchmarks set in 2020 and 2021 as sellers proved patient and almost entirely without distress. Average days on market crept up to 55, higher than the 38 from 2022 but still dramatically below historic timelines. The average sale deviated just 3% from the asking price; absolutely normal for any time period outside of 2020-2022. Listings offered below $1,000,000 in Truckee have continued to reliably generate multiple offers driving closing at 101% of asking price.

“The counterpoint to surging demand for residential property is vacant land for which demand has cooled dramatically. Construction costs remain on an inflationary curve while finished home values have leveled off; an equation that leaves all but the largest projects with negative equity upon completion. Sellers of vacant land appear equally patient to home sellers, thus prices have similarly held steady despite transaction volume being just 38% of the same period last year.

“Heading into summer, the number of listings has more than doubled from the low point of spring though 400 listings is exceptionally low by historical standards. At the pace of sales experienced in H1, 2023, this represents almost exactly 6 months’ supply, a perfectly balanced market. However, history has shown that the second half of any given year will deliver double the quantity of sales as the first six months. Early returns on summer activity validate the second half of 2023 may outperform this trend significantly.”

In Marin County, north of San Francisco, veteran real estate agent Jenn Pfeiffer with Corcoran Icon Properties observed, “Good news about the economy has pushed interest rates to their highest point so far this year, exacerbating the standoff between potential sellers who are reluctant to give up their low rates, and buyers who are reluctant to buy at 7%. Both median price sold and average price per square foot dipped a bit in June, but both are right about where they were in March 2022, just before the extreme peak of last Spring. 59% of homes sold were above the asking price, and 49% received multiple offers.

After ticking up each month since February, inventory dropped in June as the number of new listings plunged 39% from May. Months’ supply of homes–how long it would take to sell the current listings at the current rate they’re selling–was the lowest in many years at just one month. Interesting times indeed, as that normally would indicate an extreme seller’s market.

We are entering a period when things typically slow down for July and August before picking up again in September. Though some buyers seem to be adjusting to the higher rates, it may take a drop to really ignite a big surge of activity in the fall. As always, real estate is hyper-local. What’s happening in your neighborhood or block may buck trends and averages.”

Compliance: ignore at your own risk

___________________________________________________

When lenders are cutting overhead, they tend to focus on non-money-making departments, unfortunately. Wo to any lender that focuses cuts on compliance and QC.

Lenders Compliance Group recently wrote a Compliance Hot Topic on Fannie Mae requirements for Fidelity Bond and Errors & Omissions Insurance. Fannie Mae’s Mortgage Origination Risk Assessment, known by its acronym “MORA,” is an audit team that conducts reviews, usually on-site, which is tasked with assessing the operational capabilities, governance, and compliance with Fannie Mae’s Selling Guide (“Guide”) requirements. A Fannie Seller/Servicer must always be prepared for a MORA audit, which means that the Seller/Servicer must continually monitor and document its compliance with Fannie guidelines. One should be able to provide at least nine types of documentation to MORA. Any defects in these categories may lead to an adverse finding on a MORA audit.

MQMR recently released another Compliance Hot Topic on recent guidance on reducing Loan Originator Compensation due to unforeseen increases in settlement costs or clerical errors. The Loan Originator Rule permits a loan originator to reduce its compensation in narrowly defined circumstances to lower costs to consumers if there are unforeseen increases in settlement costs. The Consumer Financial Protection Bureau’s (CFPB) Fall 2022 Supervisory Highlights explained that examiners found that lenders issued Loan Estimates to consumers based on fee information provided by their mortgage loan originators (MLOs). The lenders later discovered that the fee information entered was incorrect due to clerical errors by the MLOs. In each case, the lenders provided a lender credit to the customer to correct the tolerance issue. However, the lender then also deducted the lender credit amount from the MLO’s commission based on the exception set forth above which permits decreasing a loan originator’s compensation due to unforeseen increases in settlement costs.

Examiners found that the MLOs knew the correct fee amounts at the time of the initial disclosures as the settlement services had already been performed. The CFPB made clear that clerical errors are not “unforeseen.” Rather, these errors violate TRID as the lenders provided the disclosures without using the “best information reasonably available.” The cures which result from these errors may not be allocated to the loan originator. Lenders should also be mindful of state labor and employment laws, which may prohibit such a claw back as well.

Lenders Compliance Group recently wrote about common defenses to repurchase demands. The response to a repurchase demand is usually a function of the amount in dispute, the status of the relationship of the loan originator with the purchaser or investor making the demand, and the stated grounds for repurchase. Most defenses arise directly from the terms of the contract governing the purchase and sale of the loan(s) at issue. Even if the contract appears to govern the basis of the repurchase demand, a defense may exist when the contract contains conflicting or ambiguous provisions.

Some of the most common defenses to repurchase demands generally are that the loan is a performing loan, that there are service errors or other circumstances attributable to the loan’s default, a lack of evidence of any misrepresentation, a lack of proper notice, or a violation of good faith and fair dealing standards by the party making the repurchase demand.

Talent hunt

___________________________________________________

Jim McGrath, Managing Partner at The EMAC Group, LLC, observed, “Lenders are in a fierce battle to recruit or retain the best loan officers, pushing up their market value. With competitive pricing, product, and speedy turnarounds, the most attractive opportunities are determined by how much money is being offered. It’s clear that whoever offers the highest transition has the upper hand.

“Mortgage lenders face a critical challenge today, not just how to win the ‘war,’, but how to win the individual battles for talent, one originator, one branch, one region at a time. The current landscape of loan officers is becoming increasingly competitive, as employers scramble to find qualified professionals to fill the gaps caused by an aging workforce and a lack of corporate investment into recruiting new talent into the industry.

“This has driven up the cost of attracting and retaining the best talent, with employers offering more generous transition packages to entice them away from the competition. I am seeing lenders focused on not letting their business fall behind in this race, and taking the necessary steps to secure the best MLO talent before it’s too late.” (Jim has developed his “Candidate-Centric Courtship” program through his live coaching support to further refine your direct recruiting campaign. His newly updated and enhanced mortgage recruitment eLearning and 1:1 coaching platform provide the resources you need to succeed.)

I think the reason we are born with two hands is so we can pet two dogs at once.

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. STRATMOR’s current blog is titled, “Interest Rates are Like the Weather? Or Like Signs of the Zodiac?” The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).

qoɹ

(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 2023 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