May 11: Compliance & QC info; vendor tidbits; note on hedge costs; Saturday Spotlight: New Story Lending

Whatever impacts cities financially can impact residents. Loan officers are very well versed in helping borrowers look at monthly mortgage payment amounts, homeowners’ insurance costs, utilities, and… property tax. In New York, property tax assessments are based on what the property is worth, and that, in turn for commercial space, is based on what an owner can make from it. For commercial real estate companies, the increase of WFH (work from home) has led to less office space needed, leading to lower rents, and that means that their properties are declining in value. Owners can make a compelling case that, for taxation purposes, properties ought to be worth less than they are currently valued. This can have huge implications for city tax revenue. In another city, Atlanta, from 2011 to 2022, owners appealing their tax assessment were successful 62 percent of the time, which led to $654 million in lost tax revenue for the city. If this catches on, it could put a major fiscal dent in municipal finances all over the country. And they’re going to want their money from somewhere.

Saturday Spotlight: New Story Lending

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“Everyone Deserves to Have Home Ownership in Their Story.”

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).

 

New Story Lending was founded in 2022 as a full-service independent mortgage bank to provide the American Dream of homeownership to every consumer willing to work towards it, no matter their circumstances. The name New Story Lending resulted from the challenges both cofounders, Shane Miller and Juan Rodas, experienced in their childhoods, and their belief that anyone, regardless of circumstance, could create their own new story around the dream of homeownership. New Story Lending has grown rapidly. To date, New Story is agency approved, licensed in 17 states, and plans on becoming licensed in most all states in the country.

 

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

 

One of New Story’s core values is Giving Back. Employees are encouraged to volunteer, most specifically in the local communities each reside.

Both CEOs take this value seriously and lead by example. Juan donates much of his time and resources to Shriners Hospital for Children. Born with a hand deformity, Juan believes in the Shriners mission because of how much the organization assisted him as a child and will never forget how Shriners supported him. The reinforcement Juan and his family received from Shriners changed his life. The son of a single mother, Shane’s family’s income was below the poverty line. He has a passion for community advocacy and local churches because of the impact and assistance afforded to his family as a child. Shane supports many local charities but desires those focusing on financial literacy and assistance to single and misplaced parents. Check out their biographies on the website NewStoryLending.com.

 

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.  

 

We believe in a “team” culture—one that values openness, support, transparency, and accessibility. This creates synergy, autonomy, and clarity among our group, which organically advocates for an environment of cohesion and collaboration. Because we recognize the needs of our team and authentically appreciate our employees and their contributions, our focus is thoroughly performance-based—regardless of where one sits, which grants maximum flexibility for remote or in-office work. Through our frequent sales, operations, companywide calls, “water cooler” channel and team-building events, we sustain our culture and maximize clarity and dissemination of information.

 

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

 

We are minority and veteran owned, with a distinct focus on affordable housing and community advocacy, which is a large reason we received our Freddie Mac approval in record timing, along with completion of our HUD test cases in 90 days. This is a testament to the volume of affordable housing we complete. Additionally, we have our own proprietary New Story Heroes $911 lender credit provided to all veterans (active and reserve), first responders, teachers, and medical professionals.

 

Fun fact about your company.

 

New Story takes pride in leaving egos at the door. We are sincerely mission driven and customer focused. Therefore, it is naturally fitting that we are a leadership dyad with two CEOs. It is rare for companies to have two chiefs, but we believe in breaking barriers. Having co-CEOs significantly reduces layers of management, promotes access and collaboration through active leadership, and advocates leadership with two CEOs proficient in all areas of the mortgage process. The co-CEO model is complementary and allows us to achieve, together, much more than we could alone.

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

 

In the weeds with hedge costs and quick origination times

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A Commentary noted, “The cost to hedge is constantly changing. Viewed in a vacuum, the capital markets team can say right now the hedge cost is around $X per loan, while the market is behaving rationally and pull through acts as it has historically. This is also assuming the company is selling loans into market at the right time, are using broker/dealers that aren’t trying to pick off additional spread, and all the while having a stable ‘best efforts to mandatory’ spread. The hedge cost is always changing, and often runs .5 or more. The real value of originating the loan quicker is a reduction in your finance fees from your warehouse bank, and not necessarily on your hedge side.”

The passage prompted this note from a finance and accounting veteran. “Your section on hedging costs closed with the statement, ‘The real value of originating the loan quicker is a reduction in your finance fees from your warehouse bank, and not necessarily on your hedge side.’

“As a former IMB Treasurer, I’m not sure that I agree with that statement. For most IMBs, the warehouse bank borrowing rate is less than the mortgage note rate on the warehouse line, so they are making a small but positive spread which shows on most IMB financials.

 

“There are three main reasons why you want faster turn times when selling the loan. First, to reduce ongoing hedge costs (from the constant rebalancing with rate changes and the final sale price, even though most hedge desks do macro level hedges). Second, to free up warehouse capacity to fund other loans (important during peak funding months). Third, to avoid warehouse line aging haircuts to their advance rates that may start after 45 days.

“Larger IMBs are typically balancing the above and selling loans faster while waiting to pool enough loans into the mandatory TBA execution where they can get better pricing than selling smaller individual batches of whole loans into GSE cash windows.” Thank you!

Compliance and QC: never any lack of subjects

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Lenders Compliance Group wrote a blog on if a servicer is required to provide periodic statements for loans involving bankruptcy, and the answer may surprise you. The Truth in Lending Act (TILA) requires a servicer to provide a periodic statement “for each billing cycle.” A federal district court in California recently considered and rejected a servicer’s argument that it was not required to provide statements for loans it considered “matured.” On October 16, 2013, the CFPB added to Regulation Z an exemption for a servicer concerning periodic statement requirements while the consumer is a debtor in bankruptcy. The CFPB modified this exemption, effective April 19, 2018. The preamble had acknowledged that the Bankruptcy Code might prevent attempts to collect a debt from a consumer in bankruptcy but stated that the Bureau did not believe the Bankruptcy Code would prevent a servicer from sending a consumer a statement on the status of the mortgage loan.

The CFPB had also specified that the final rule allows servicers to make changes to the periodic statement they believe are necessary when a consumer is in bankruptcy. For example, a servicer could include a message about the bankruptcy and alternatively present the amount due to reflect payment obligations determined by the individual bankruptcy proceeding.

This exemption ceases if the consumer affirms personal liability for the loan or any consumer on the loan requests in writing that the servicer provide a periodic statement (or coupon book) unless a court enters an order in the bankruptcy case requiring the servicer to cease providing a periodic statement (or coupon book).Instead of the normal periodic statement, while any consumer on a mortgage loan is a debtor in bankruptcy or if the consumer has discharged personal liability for the mortgage loan, a servicer must provide a modified periodic statement. The modified periodic statement may omit the normally required information regarding late fees, length of delinquency, risks of delinquency, and delinquent account history, and it need not show the amount due more prominently than other disclosures. A servicer then transitions to providing the normal periodic statement when the loan ceases to be subject to discharge, the debtor exits bankruptcy, or the bankruptcy exemption no longer applies.

MQMR addressed what a lender needs to do in regard to establishing an action plan for corrective action as required by Fannie Mae when a mortgage lender identifies trends through the quality control (QC) review process. Fannie Mae requires monthly QC reporting to senior management to include an action plan for top defect trends. The action plan must indicate intended corrective actions, including expected resolutions and time frames for implementation.

Corrective action and action plans are not optional and failure to maintain action plans serves as the root of MORA exam findings or denial of an application to be approved as an agency seller/servicer. Action plans are tangible documents intended to identify the steps that need to be completed, track due dates and priorities, and record potential roadblocks and resources required. Lenders should define the problem, perform a root cause analysis, design solutions, establish and execute those solutions, and test and evaluate those solutions.

MQMR wrote a FAQ on the importance of evaluating the cybersecurity risk and protocols of vendors. It is critical, as a significant number of the network intrusions and data breaches occurring today originate with a third party, including vendors. Mortgage companies and financial institutions not only need to maintain adequate written third-party vendor management policies and procedures, but they must also perform a sufficient cybersecurity risk assessment of each vendor and ensure they conduct thorough due diligence of vendors deemed to be medium or high risk prior to on-boarding and on an ongoing basis.

Due diligence may include, but is not necessarily limited to: determining if the vendor maintains qualified information security personnel, internally or externally, identifying and evaluating controls implemented to protect confidential data and/or non-public personal information (i.e. password protocols, access management, multifactor authentication, network scanning, etc.), reviewing the vendor’s disaster recovery and incident management plans and related testing of such plans, reviewing security awareness training, including phishing exercises, reviewing external security audits performed (i.e. SOC, SSAE16, penetration tests, etc.), and determining whether the vendor utilizes subcontractors and, if so, whether confidential data and/or non-public personal information is shared with those subcontractors. Failing to perform appropriate cybersecurity reviews of vendors opens a mortgage company and financial institution up to significant risk.

Vendor tidbits

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There’s always something going on with third-party providers. It would be difficult, if not impossible, to be a lender without them.

Real Estate Connection (REC), a realtor management company and brokerage, announced the integration of the HomeAdvantage product and nationwide MLS for lender accounts into its core offering ensuring lenders can keep buyers within their ecosystem, driving leads and deals to their mortgage company. The nationwide MLS integration further enhances REC’s lender partners’ capabilities by providing access to an extensive database of property listings and market data for buyers. Real Estate Connection remains dedicated to delivering cutting-edge solutions and exceptional service to clients and partners nationwide.

The early adoption of FICO’s newest, most innovative, and most predictive scoring model has been widely embraced by the mortgage industry as clients with over $100 billion in annualized mortgage originations and approximately $300 billion in eligible mortgage portfolio servicing have signed up to use the Score. What’s more, Liberty Home Mortgage is the latest lender to adopt FICO® Score 10 T for non-conforming loans. This announcement comes on the heels of several other mortgage lenders embracing FICO ® Score 10 T including Movement Mortgage, CrossCountry Mortgage, Primis Mortgage, and Premier Lending Inc. More details can be found in the press release.

In mortgage tech news, Truv, a consumer-permissioned data platform has integrated with Floify, the mortgage industry’s leading point-of-sale (POS) solution, enabling lenders to verify borrower income and employment as they apply for a loan. Procuring VOI and VOE reports at the point of application allows lenders to pre-approve borrowers faster while reducing production costs and risk. Truv can electronically verify income and employment for 95 percent of the U.S. workforce, and with borrower permission, retrieves two years of W-2s, paystubs, bank statements and 1099s. In March, Floify released Lender Edition to help lenders support a best-in-class borrower experience while streamlining production and controlling costs.

LenderLogix, a leading provider of mortgage point-of-sale and automation software for banks, credit unions, independent mortgage banks, and brokers, announced the latest release of the Homebuyer Intelligence Report, a quarterly summary of insights into borrower behavior during the home buying process based on data collected by the LenderLogix suite of tools. The latest report covers data collected during the pre-approval and borrower application process during the first quarter (Q1) of 2024. Data from the Homebuyer Intelligence Report is available to the industry free of charge.

VantageScore has been awarded two new U.S. Patents for its groundbreaking work using machine learning to broaden the number of people who can be scored while simultaneously increasing the predictive power of credit-scoring models. The newly issued U.S. patent titled “Method and Systems for Enhancing Modeling for Credit Risk Scores” recognizes the company’s innovation in identifying new credit risk-related consumer attributes including those currently excluded by conventional scoring models. An additional patent titled “System, Method and Apparatus for Generating Credit Scores” recognizes VantageScore’s use of alternative data to further expand the number of people who can be scored with VantageScore credit-scoring models.

Xactus announced that several of its verification services are now available via Dark Matter Technologies Empower loan origination software. Lenders utilizing Dark Matter’s LOS can obtain access to Xactus’ Employment VerificationX, Social Security VerificationX and Credit ReportX. Flood ReportX, Tax TranscriptX, and Undisclosed Debt VerificationX are on the Xactus roadmap.

 

At 3 years “Mommy, I love you.”

At 10 years “Mom, whatever.”

At 16 years “Mom, you’re so annoying.”

At 18 years “I’m leaving this house.”

At 25 years “Mom, you were right.”

At 50 years “I don’t want to lose my Mom.”

At 70 years “I would give up everything to have my Mom here with me.”

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 titled, “Relying on the Fed: How Did This Happen?” The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).

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(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 2024 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