Oct. 7: Anatomy of another mortgage scam; notes and perspective on the strong economy & labor market; Saturday Spotlight: Docutech

As our lending landscape continues to change (this time, rumors of PenFed exiting correspondent), I’ve started investing in stocks: beef, vegetable, chicken. One day I hope to be a bouillianaire. In a free economy, the majority of prices are based on supply and demand. Prices go up when the demand increases, or the supply decreases. The Federal Reserve does not directly set mortgage rates & prices, nor those of poultry. Regarding the latter, chicken prices are up in the U.S. after chicken producers slightly dialed back production to increase profitability, with drumstick prices up 10 percent since February and profit margins at their highest. One reason for that is on the demand side, U.S. consumption of chicken has never been higher: As beef consumption is projected to decline to the lowest level since 2018 and pork consumption drops to the lowest level since 2015, the nation’s stomachs are looking to the birds. For the first time ever, the USDA is projecting that U.S. consumption of chicken is expected to be higher than 100 pounds per person. If you don’t like the chicken prices, switch to pork. For borrowers, the option isn’t so simple.

Saturday Spotlight: Docutech®

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“Accelerate Closings. Accelerate the Dream.”

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).

Docutech History: Docutech, a member of the First American family of companies, provides an end-to-end, integrated, digital mortgage experience, from document generation to eDelivery, eClose and print fulfillment. Docutech sets the standard in providing market-proven technology and unrivaled customer service to the financial industry. Founded in 1991 and acquired by First American in 2020, Docutech has become a technology powerhouse, combining its innovative technology and expertise with the broad solution set and financial strength of First American.

Docutech recently expanded the functionality of its digital mortgage closing platform, Solex®, to include in-person electronic notarization (IPEN), a premier lender dashboard, and an enhanced closing room. (Join us at MBA Annual in booth #716 to learn more about these innovative technologies.)

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

Docutech’s client-centric approach involves supporting the charities that our clients care deeply about. Inspired by efforts across First American, we also support our employees as they give back to the communities where we live and work. Our employees contribute their passion, time and money to dozens of food banks, charity walks, children’s causes, animal rescues and more every year.

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?

Docutech employees are deeply engrained in the mortgage and financial technology industry and play significant roles in numerous industry memberships and associations, including The Mortgage Collaborative, American Credit Union Mortgage Association, MISMO, Mortgage Bankers Association, to name just a few.

There are also numerous learning and development opportunities internally, including First American’s Women in Leadership, SPARK, and our Emerging Leaders programs. The Women in Leadership and SPARK programs are designed to develop talented women who, through their influence, have a significant impact on our company’s operations and overall success. The Emerging Leader is a hallmark leadership development program within First American, focusing on enhancing the skills of leaders from divisions and regions across the company. These programs have contributed to First American’s recognition as one of the 100 Best Companies to Work For by Great Place to Work® and Fortune Magazine for the eighth consecutive year.

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.

One of Docutech’s core values is enjoyment, which we define as loving what you do and who you work with, and we’re consistently finding new ways to bring this core value to life for both our employees in the office and those working remote. For example, on every other Friday, Docutech has a tradition where a member of the leadership team shares a triumph, challenge, learning, or another personal story, with the entire Docutech team. We then open up the conversation in a Teams channel for every employee to contribute their thoughts and stories, with the opportunity to win prizes.

Docutech also has a Watercooler Teams channel (for fun, throughout-the-day banter), and a “camera on” (as much as possible) approach to our virtual meetings. Beyond that, we make it a practice to hire smart, engaging people who help make our days both productive and fun.

Docutech also hosts several culture-enhancing events each year that bring employees together either virtually or in-person. In October, we are holding a Halloween decorating contest where teams decorate a workspace incorporating mystery items that will be sent to them.

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

We’re proud to play a leadership role in the eClosing adoption journey and broader digital transformation taking place across both the real estate and mortgage lending industries. Our industry leadership contributed to First American being named to the Fast Company 2023 Best Workplaces for Innovators list, which honors organizations and businesses that demonstrate an inspiring commitment to encourage and develop innovation at all levels. We’re driven to simplify the complex needs for our customers and enhance the experience of the consumers they serve through innovative technologies and solutions.

Docutech‘s strong culture is rooted in a set of core values: Velocity, Ownership, Innovation, Customer Success, and Enjoyment (VOICE). Our unique culture continues to propel Docutech to consistently provide the best-in-class products and services our customers expect from us.

Fun fact about your company.

Emily Shapiro, president, is as driven in her personal life as she is in her professional life. In her free time, Emily races off-road, both cars and trucks. She’s sponsored by Impact by MCS and has won multiple championships, earned Rookie of the Year honors, and is a two-time winner of the Driver of the Year award in her series.

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

We’re excited to see our industry friends at the upcoming MBA Annual for a chance to reconnect in person. You can find us in booth #716 in THE HUB or set a meeting to chat with our experts in our First American Hospitality Suite.

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

 

Who’s in your wallet? Another scam

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Matt Levine with Bloomberg wrote out a tale of fraud recently, worth a skim for anyone who handles money for anyone else. “The Securities and Exchange Commission [Monday] charged Matthew Motil, host of the podcast, ‘The Cash Flow King,’ for fraudulently raising approximately $11 million from more than 50 investors in a Ponzi scheme involving notes that were purportedly backed by residential properties.

“According to the SEC’s complaint, Ohio’s Motil defrauded investors with promises of low-risk, high-return promissory notes purportedly collateralized by first mortgages on homes located throughout Ohio. Motil allegedly promoted the investments on his website, inviting potential investors to ‘be a real estate investing badass!,’ and on his podcast, where he assured investors that the investments he offered were safe and backed by a ‘first lien position’ on the underlying real estate assets.

“Motil told investors that he would pay the investors returns on their investments from profits from renovating, reselling, refinancing, and renting the properties. As the complaint alleges, however, Motil did not in fact secure first lien positions for the investors as promised and regularly sold multiple promissory notes he claimed were secured by the same property to multiple investors.

“In one instance, Motil allegedly sold more than $1 million of promissory notes to 20 investors, each note supposedly collateralized by the same property he had acquired for $47,000. Rather than renovate the properties, Motil allegedly used investor money to make Ponzi payments to previous investors and for his own extravagant personal expenses, including to rent a lakeside mansion, purchase courtside season tickets to NBA games, and make $400,000 in credit card payments for his wife, Amy Motil, who is named as a relief defendant.

“The SEC complaint breaks down Motil’s alleged numbers. Motil intentionally misappropriated the funds transferred by investors to the Chase Accounts by making Ponzi payments, moving money to businesses unrelated to real estate, and paying personal expenses. Overall, during the Relevant Period, Motil raised over $11 million from unsuspecting investors. He used over $3.7 million (or 33 percent) on Ponzi payments; over $900,000 (9 percent) on transfers to other businesses unrelated to real estate, $400,000 on transfers to his wife, and $1.6 million on personal expenses.

“Motil does seem to have invested in real estate, and he was aware of how mortgages work, even if his investors were not, so his alleged pretend mortgages had an unnecessary number of the trappings of real ones: Motil also sent investors a document he created titled “Mortgage.” The mostly boilerplate language in the Mortgages generally contained covenants prohibiting Motil from creating or accruing any debt, lien or charge that would have priority over the Note received by the investor.

Levine goes on. “Motil specifically told numerous investors that after he received their money, he would record the mortgage and they would receive a signed copy of the recorded mortgage mailed directly from the appropriate county clerk. Motil often told investors that the county clerks were backlogged and that it took several weeks or months to send their recorded mortgages. But Motil was just buying time. He knew that county clerks could not possibly mail a copy of the recorded mortgages because, among other things, Motil rarely recorded the mortgages. In fact, Motil admitted under oath during his Section 341(a) bankruptcy hearing, that he only recorded mortgages ‘a couple times, if . . . asked.’

“Motil’s failure to record the mortgages not only contradicted his written and oral assurances to investors, but it also enabled Motil to sell multiple Notes ‘collateralized’ by the same property to different investors. If prospective investors searched county title records, they would be unable to discover that the property purportedly collateralizing their investment was already encumbered by a mortgage.

Matt Levine finishes with, “He recruited some suckers and then went around volunteering to them ‘you’ll get a mortgage in the mail from a county clerk,’ and then they didn’t? Why? Did the suckers expect anything from the county clerk? Before he brought it up? I feel like you could do this scam pretty successfully without telling anyone anything about county clerks?”

Job market: strong like bull

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Rising bond yields could mean the end of the Federal Reserve’s interest-rate increases, as the market “does the Fed’s work” for it. The 30-year Treasury yield has exceeded 5 percent for the first time in 16 years amid expectations that interest rates will remain higher for longer, creating concerns for governments that borrowed at low rates throughout the pandemic and find themselves with substantial debt. Yesterday’s nonfarm payrolls number was another reminder of the current strength of the U.S. economy.

MBA SVP and Chief Economist Mike Fratantoni’s reaction to this morning’s U.S. Bureau of Labor Statistics report on employment conditions in September. “The job market remained quite strong in September. Not only did the pace of job growth pick up, but the unemployment rate remained steady at a quite low 3.8 percent. Moreover, job growth numbers for the prior two months were also revised much higher.

“Most of the job growth continues to be concentrated in leisure and hospitality, a sector that is still recovering from the losses incurred during the pandemic.

 

“Wage growth is cooling somewhat, at 4.2 percent over the past 12 months, but is still likely too fast to be consistent with the Fed’s 2 percent inflation target.

 

“This report certainly surprised the market, which had been expecting a slowdown and longer-term rates jumped in response. Mortgage rates will follow which will likely mean that lending activity, which was already at a multi-decade low, is not going to pick up anytime soon.”

And the National Association of Realtors (NAR) Chief Economist Lawrence Yun observed, “The job market continues to crank out jobs in high figures: 336,000 in September and over 4 million more compared to pre-COVID-19 March 2020.

“It does not mean all is well. The jobs data, however, is considered a lagging indicator as the firms will only make a job cuts decision after having cut costs in other areas. Commercial real estate, in particular, is flashing warning signs. Net leasing on retail and warehouse spaces is slowing. The office sector is continuing to bleed with rising vacancy rates. Community banks, many with exposures to commercial real estate, are watching their balance sheets carefully.

“The fast-rising interest rates are breaking several sectors of the economy. The remaining sectors will also likely crack if the rate hikes continue. Given that the inflation rate is already cooling, the Fed needs to stop raising rates and strongly consider cutting interest rates next year. That would be the soft landing without the net job cuts to the economy.”

The perspective on rates and the economy: it’s not pretty

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Filip De Mott reports, “The bond-market sell-off that’s sending yields soaring is starting to eclipse some of the most extreme market meltdowns of past eras. Bloomberg reported losses on Treasury bond with maturities of 10 years or more had notched 46 percent since March 2020, while the 30-year bond had plunged 53 percent.

“Those losses are nearly in line with stock-market losses seen during the worst crashes of recent history, when equities slumped 49 percent after the dot-com bubble burst and 57 percent in the aftermath of 2008. Compared with previous bond-market meltdowns, long-term Treasurys are seeing one of the most extreme undoings in history. The losses are over twice as big as those seen in 1981 when 10-year yields neared 16 percent. That crash came as the former Federal Reserve chair Paul Volcker grappled with historic inflation and pushed the federal funds rate to just under 20 percent.

“While interest rates remain well below that level today, the central bank’s aggressive turn toward monetary tightening in the post-pandemic era has caused a similar bond-market rout. And traders have continued selling amid concerns of rebounding inflation, while a deluge of Treasury issuance this year has also pressured bond prices.”

Business Insider’s Filip De Mott wrapped up with, “Long-duration yields have climbed to their highest since 2007 as a result, with the 30-year note passing the 5 percent barrier for the first time in decades. Investors expect a similar path for the 10-year, which is hovering at just more than 4.7 percent. Well-known investors, including Bill Ackman, Ray Dalio, and Bill Gross see the 10-year hitting 5 percent in the near term.”

I wanted to get a jump on Christmas shopping, so I went to the toy store and asked the assistant where the Schwarzenegger dolls are.

She replied, “Aisle B, back.”

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, “Mind the Down Payment.” 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 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