Last month, Madison, Wisconsin-based mortgage lender Fairway Independent Mortgage Corp. announced the appointment of reverse mortgage industry veteran Dan Ventura to serve as its new vice president of reverse mortgage operations.

The hiring came after a series of announcements in February, including the addition of new reverse mortgage investments and the company rejoining the National Reverse Mortgage Lenders Association (NRMLA).

To get a better idea of what is driving the reverse mortgage lending philosophy with these new realities at the company in mind, RMD sat down with Ventura and Peter Sciandra, the company’s executive vice president of reverse lending secondary marketing, to learn more about the nature of the division as it presses forward in 2024.

Reverse at forward speed

When asked about key goals for the division, Ventura explained that speed is at the front of his mind to further align with one of Fairway’s stated company priorities.

“The main goal that I have is [conducting] reverse mortgages at a forward speed,” Ventura said. “[Among] Fairway’s core values, speed to respond is the highlight of what we do. Taking advantage of the 500-plus branches that we have within the company and engaging them in reverse — be it through education or creating other opportunities — it’s a great platform for us to expand and grow upon our current book of business.”

Ventura also spoke about the company’s decision to rejoin NRMLA, and what it hopes to accomplish by being engaged with the reverse mortgage industry’s preeminent trade association.

“We’re a top four [reverse mortgage] lender in the country, and we just want to be sure that our voice is heard [regarding] the future of the industry,” Ventura said. “We want to just play our part in making sure that we have a say, and we have a seat at the table for what’s going to be decided down the road.”

Tackling growth areas

When asked about the biggest potential growth areas for Fairway’s reverse mortgage business, Ventura described a desire to educate more partners on the potential benefits of Home Equity Conversion Mortgage (HECM) for Purchase (H4P) business and the product’s importance to the company’s future plans.

“Fairway is a top purchase lender in all products, and with our extensive branch network — and more importantly, the large network of [real estate agent] partners that we work with throughout the country — it’s a kind of natural feeder program where we can get in front of more people and educate them on the H4P process,” Ventura explained.

The company is also in the process of recruiting more employees, and it seeks to address the need to educate more current and prospective employees about H4P as a product concept.

“We’re in the market to recruit top talent, and our whole thing is all about education,” he said. “We want to make sure everybody knows what the product is and isn’t, and how it can benefit our seniors. And that’s especially true with the H4P, because there are so many real estate agents out there who have no idea that it even exists or what it is.”

These represent notable growth opportunities, Ventura said. He has also seen firsthand the direct result of more educational engagement with professionals on the H4P product concept.

“I was at a branch in Massachusetts last month, and was engaging them to get more focused on the reverse business,” Ventura said. “I encouraged them to set up an in-person seminar where people can get together and talk about the H4P product.

“In two weeks, we pulled off an event that had 17 people, their attorneys and real estate agents combined. I presented it, and the questions and the engagement and the sheer disbelief about what the product could do for their clients was pretty moving and telling.“

Trend of forward integration

Other high-level reverse mortgage lenders have given service recently to the idea of incorporating more forward mortgage professionals into the reverse business, and different companies often have different attitudes about it. Ventura’s existing forward mortgage experience has been beneficial to Fairway, according to Sciandra.

“Dan has an extensive background on the forward side within Fairway,” Sciandra said. “That idea of forward speed in the reverse business has created a lot more credibility for reverse within our company. We’ve been trying to expand within the forward mortgage ranks for some time now but … reverse is very different from forward, for the most part.”

In addition to core product differences, Sciandra cited the presence of different documents on top of the more consultative nature of selling reverse mortgages to senior clients.

Forward vs. reverse processes

These differences have made other industry participants accustomed to a certain timeline for loan processing, but Ventura’s forward experience helped him to identify efficiencies, according to Sciandra.

“Dan came in and looked at it and said, ‘We can’t take that long. We don’t do that on the forward side; we’re not going to do it on the reverse side,’” he explained. “We’re going to do reverse mortgages like we do on the forward side in terms of speed of responsiveness and of the process itself, and our average close time has improved tremendously.”

In terms of raw numbers, Ventura estimated that from the time a loan is submitted to processing to when it progresses to the “clear to close” stage, an estimated 60% of the company’s files are completed within 30 days. From application through clear to close, the company average stands at roughly 45 days.

“I did look at it and was told repeatedly that you can’t look at a reverse process like a forward process,’” Ventura said. “And I disagreed with it. We quickly proved that we can do things a lot more efficiently and seamlessly.”

Source link

Agents are the lifeblood of real estate brokerages. Recruiting and retaining high-performing agents remains a critical challenge for brokerages, especially in the environment created by the National Association of Realtors’ recent $418 million settlement in a litany of agent commission lawsuits.

While real estate brokerages have no control over interest rates, transaction levels or home sales prices, they realize that proactive recruiting of agents is a key to success in a slow market.

Sales managers often struggle to source enough quality agents to feed the top of their funnel. They might have a hard time crafting a system that produces consistently strong hires, according to Mark Johnson, managing partner at Recruiting Insight. This can also be tied to the fact that managers typically have to juggle many other tasks at the same time, such as coaching or contract signing, which poses a challenge to their organization. 

Johnson said that “word of mouth” is the best way to organically recruit new agents. If a brokerage enjoys a good reputation, its agents will speak highly of it and draw new agents to the brokerage. If agents don’t bring in new recruits directly, a third-party source such as an existing client or a business partner might inspire an agent to join a brokerage. Curated events can also be a great way to recruit agents as it allows a brokerage to showcase its culture, Johnson added.

Tech enters the picture

Alongside these possibilities, the integration of an artificial intelligence (AI) tool can also be a solution. When AI started to gain momentum in the real estate industry, most investment capital was poured into consumer-facing products such as Zillow’s Zestimate or predictive marketing solutions. 

Launched in 2006, the Zillow Zestimate leverages public documents to provide estimates of value for every house in a given neighborhood. These types of consumer-facing products generated a lot of interest from investors. Simultaneously, predictive marketing also gained a lot of traction. Agents started using predictive modeling to determine which person in a neighborhood, or which person in a list of contacts, was most likely to list their property in the near future. 

The focus on aiding brokers in team recruiting and management through AI remained limited until more recently. In 2016, Robert Keefe pioneered this niche with Relitix, paving the way for a new wave of innovative companies in the sector. AI can help streamline the recruitment process in real estate by leveraging data from diverse sources to identify candidates with the desired skill sets and cultural fit. 

“The scarcest resource in real estate is brokerage manager time,” Keefe told HousingWire. “I felt that emerging data tools and technology paired with MLS and other agent-level data would allow us to help leverage that scarce time resource and make an hour of manager time 10 times as productive through data superpowers.”

Companies like Relitix, Lone Wolf Technologies, Courted, Brokerkit and MoxiWorks offer AI tools to streamline the recruitment process of agents. These companies leverage different techniques such as predictive analytics and machine learning — including the subsets of active learning and deep learning — to forecast the future performance of an agent. 

Deep learning is a more advanced form of machine learning. It uses multiple, sequential layers of machine learning to produce highly refined and nuanced answers, and it forms the basis of the AI large language models such as ChatGPT that have become prevalent in the past year.

When labeled training data is not available (i.e., there is data but no “answers“), data engineers can use active learning to have the AI create a smaller dataset with more important data points for review and labeling by human reviewers. This smaller dataset can stand in for the large, fully labeled datasets without the need to label as many examples.

The goal of these analytics tools is to improve expert decision-making by converting raw data into insights, inferences or predictive models that can aid operational processes. Analytics are best viewed as a repetitive process in which predictive models are continually refined and improved. 

“Data certainly abounds in real estate. In fact, it’s the existence of data in this industry that facilitates advanced analytics approaches,” said Sean Soderstrom, co-founder and CEO of Courted, a New York-City based firm founded in 2021. 

“The problem, however, is that the vast majority of brokerages use historical data to make recruiting decisions,” he added. “Courted has shown that there is significant volatility in agent production year over year.

“Without AI, it is nearly impossible to discern between an agent whose best selling years are behind or in front of them at scale. You can possibly do this if you have a connection to that agent and you know their business deeply, but it’s impossible to comb through all this information for all agents who might be a good fit for your brokerage, given one and a half million agents in the country.” 

Alleviating pain points

Companies have identified three main problems with how brokers have been recruited in the past.

First, there tends to be significant volatility in an individual’s production from year to year. Second, each agent has a varying likelihood to change brokerages at a specific point in time. Lastly, recruiters can struggle to create the right message that will attract a specific agent.

To tackle these issues, tech-based recruiting companies leverage data from multiple listing services (MLSs), which undergo meticulous data engineering to generate comprehensive agent profiles. These profiles are then subjected to comparative analysis against a relevant cohort of agents. Key performance metrics such as sales volumes, the average time that listings spend on the market, and sale-to-list-price ratios are evaluated.

Additionally, machine learning and predictive analysis models forecast an agent’s production volume for the ensuing year and assess the likelihood of turnover for a specific brokerage. 

For example, the so-called “switch risk rating” from Relitix is used to assess the relative likelihood that an agent will switch brokerages in the next three months. Recruiters use it to help prioritize recruiting lists and managers use it in conjunction with agent retention efforts. 

Meanwhile, the company’s “rookie potential rating” measures the success potential of agents with less than 36 months of MLS experience. It allows recruiters to uncover high-potential agents with limited experience amid the noise of large numbers of new agents. 

Lastly, the “listing effectiveness grades” evaluate agents on how effective they are in closing their listings. Every agent in the MLS is assigned a grade (A to F) each month, with 20% of the total agent pool receiving one of the five grades. Agents with “A” grades represent the top 20% of the pool and can be counted on to close the most difficult listings with a high level of reliability. 

Conversely, agents with “F” grades have failed to close relatively easy listings and have an outsized number of canceled, expired or withdrawn listings relative to their peers. Relitix’s machine learning algorithm is retrained each month to reflect current market conditions, and to ensure that the grading is adjusted for listing difficulty and local supply-and-demand conditions. 

“This is going to be an especially important metric in the next few years,” said Keefe, the founder of Relitix. “We have been producing this grade on the agent pool since 2019.”

Next-level insights

Joshua Paul, vice president of operations at ONE Sotheby’s International Realty, uses AI recruiting tools from Courted. They allow him to prepare effectively before meeting with a job candidate, and they help make the conversations more personalized and more intentional, he said. 

At a glance, Paul can access an agent’s yearly transaction details and their results across various key performance metrics. He can also consult predictive analytics to forecast the potential performance of an agent.

“I can understand the agent’s entire business in less than 20 minutes, so that when I’m having an in-person conversation with the agent, it feels like I’ve done a substantial amount of research,” Paul said. 

In these cases, AI helps pinpoint some of the high and low points of an agent’s production. Although there is no “crystal ball” when it comes to real estate agents, AI can help benchmark a  selection, according to Nick Weitekamp, executive vice president at West USA Realty, a brokerage that uses Relitix tools.

“Relitix gives us a little more insight into what the potential for an agent could be, based on the metrics that have already been pumped into Relitix,” Weitekamp said. “That’s a nice kind of conversation piece. 

“When we are talking to different agents, it gives us a little more of an insight into that crystal ball. It’s not perfect. But it just helps guide the conversation about what these agents could become if they got a little more support, a little more training, a little more focus in the business.”

Ultimately, when it comes to recruiting, the value proposition of a company is key. Many brokerages offer financial incentives, such as upfront cash and stock bonuses or better splits, to lure more agents into joining. But culture, technology, support and other factors can be strong arguments to onboard more agents. 

Most large, publicly traded real estate brokerages invest heavily in their recruiting functions. Some even choose to invest in their technology to recruit agents. 

According to Soderstrom, AI-assisted recruiting can contribute to leveling the playing field for players across the real estate industry. It allows bigger companies to get a better return on investment for their recruiting efforts while providing smaller companies with powerful tools that enable them to compete with larger, more well-capitalized competitors. 

Source link

Everyone knows it’s been a very dry 18 months for home sales. As mortgage rates rose starting in 2022, payment affordability got dramatically worse and homebuyer demand dried up. At the same time, seller volume dried up.

But now sellers are coming back into the market. New listing volume last week was 18% more than a year ago. Total available inventory is gradually climbing about 1% per week — last year it was still declining in April. As we roll into the second quarter, we should have accelerating inventory growth each week. 

All of these signals point to rising home sales in 2024. Last year was very, very low, so “rising” isn’t very difficult. There are still a lot of people who assume that mortgage rates need to fall before we see a rebound in home sales, but the data shows that we only need stability in the mortgage markets.

Pending sales

Last week saw 69,000 new contracts for single-family home purchases across the country. There were another 15,000 condo sales started. That’s up 3% for the week and it’s a healthy 13% more sales than a year ago. That brings us to 367,000 single-family homes in the contract pending stage. That’s 7% more home sales than a year ago.

When mortgage rates rose in January February and into early March, that sales growth slowed. But as we’re now seeing a month or so of mortgage rate stability, we see the sales starting to pick up again.

I was discussing with HousingWire’s Lead Analyst Logan Mohtashami about comparing the Altos pending sales data to other indicators of home sales, specifically the Mortgage Bankers Association’s purchase mortgage applications index. This index that tracks mortgages is still not really showing growth over last year. But our pending sales data is very obviously showing growth.

Why the difference?

One reason may be that we have had a shift to more cash purchases. NAR reported 33% all cash buyers, which is the most since 2014 when buyers were still cleaning up distressed properties. So home sales may be a bit decoupled from the MBA mortgage data for a while.

New listings

New listings dipped a little from the previous week but there were still 22% more sellers hitting the market last week than the same week last year. That’s 18% growth over last year when we include the immediate sales that were newly listed and are already in contract. The immediate sales don’t add to active inventory, they’re already pending.

That’s 60,000 new listings and another 17,000 immediate sales. Not only are the new listings growing, but also there were 8% more immediate sales than a year ago. These are all encouraging signs for sales volume in the housing market. More sellers means more sales in 2024. This is underway and the trend seems very clear to me. I suppose this trend could reverse if we have another mortgage rate shock with rates jumping back closer to 8%.

Total inventory

New listings are up 18% year over year. New contracts are also up, but only 13%, so total inventory of unsold homes is growing. I’ve shown how last year was very obviously a supply-constrained market. This year the dynamic is different. The longer mortgage rates stay higher, the more inventory will build. 

There are now 517,000 single family homes on the market. That’s 26% more homes for sale now than a year ago. Inventory has now expanded for 20 weeks in a row. The takeaway here is that this expansion of inventory is from mortgage rates staying high. If rates fall notably, homebuyer competition will heat up and this inventory growth trend will finally reverse. 

We should have close to 700,000 homes on the market in August or September. That’ll feel like a lot! It won’t be a lot actually, but it’ll be the most homes available since 2019. The longer we stay at higher mortgage rates, the more inventory can build back to the old normal levels. 

Pendings price

The median price of all the homes that got offers last week is $393,775 — that’s 5% higher than a year ago. 

This is the price of the new pendings. This is a different price measure than I usually share in Altos weekly reports. There are many ways to measure “home prices.” Do we want to look at the price of the houses that closed escrow last month? The asking price that homebuyers will see if they want to buy? Or in this case, the price of those that get offers — indicating where the buyer demand is?

Normally we talk about the asking price of all the homes on the market. If you want to buy a house and you walk into the market today, the median price of single-family homes in the U.S. is $439,900. That’s up a fraction from last week and only half a percent higher than it was last year at this time. 

But if we look at the price of the homes going into contract, we can see where the buyers are and the price they’re paying before the sale is closed in the next month or two. The median price of the new contracts pending this week is $393,775. That’s 5% higher than a year ago.

Price reductions

The one area I’ve been sensitive to are price reductions: the percent of homes on the market which have had to lower their asking price. There are now 31.9% of the homes on the market with a price cut from their original list price. That’s up 50 basis points from the previous week and is 1.4% higher than a year ago.

Because we had so few sellers at this time last year, you can see how this data point is a good indicator of supply and demand balance: buyers were grabbing any good property that was available. In most markets now, buyers feel like they have less urgency and sellers react to that fact.

Source link

Former NEXA Mortgage president Mat Grella has accused his partner at the firm, Mike Kortas, of making aircraft-related purchases with company money without his consent, resulting in his “abrupt” termination from the company. Kortas denies his partner’s allegations.

“I had grown frustrated with our partnership, coupled with Mike’s fixation on aircraft-related purchases. I had some concerns about where our focus was because it had shifted away from mortgages and more on aviation. I brought my concerns to Mike and it became evident that my concerns were not being handled productively,” Grella said in an interview. 

As a result, Grella started conversations related to a buyout in November, he told HousingWire. However, during the company’s valuation process, when financial professionals reviewed its books, discoveries of aviation purchases led him to confront Kortas, resulting in his termination as president of NEXA, Grella added. 

“Early this year, I discovered that Kortas had been making aircraft-related purchases with company money and without my knowledge or consent,” Grella said in a statement. “When Kortas entered into a letter of intent for NEXA’s purchase of a $24 million airplane-hangar leasehold, I objected in the interest of protecting the company. The situation escalated, resulting in my termination.”

In response, Kortas wrote to HousingWire that the only portion of Grella’s most recent statement that “appears to be accurate is his handling of NEXA’s day-to-day operations, which mainly included financial aspects.”

Kortas added that Grella was notified of his “impending termination’ a number of days prior and was “directly related to his tortious and intentional interference with NEXA’s business and, which was done in breach of his fiduciary duties.”

“In November 2023, Mr. Grella requested and agreed with NEXA to a buyout of his membership interest in NEXA and its subsidiary companies, which include the ongoing aviation business that Mr. Grella was also approved of which NEXA currently leases an aircraft hangar ,” Kortas said. “As such, Mr. Grella’s claims that NEXA has done things without his knowledge and consent are especially troubling and not credible.”

Grella filed a complaint against Kortas and his wife, Edna Montijo, in Maricopa County (Arizona) on March 19.

In total, Grella claims he discovered over $1.5 million worth of “secret, unauthorized” aircraft purchases and jet hangar lease payments – “and all of which Kortas purchased for himself or his wholly owned entities.” 

The document claims breach of the operating agreement, breach of fiduciary duties, unjust enrichment, and conversion, among others allegations. It says Kortas’s “misconduct also supports his removal from the company as a member.”

Grella is asking for attorney fees and punitive damages. He also claims that Kortas converted NEXA funds and made unauthorized credit card purchases, which “have reduced Kortas’ membership percentage interest to below Grella’s membership percentage interest, such that Grella is now the majority owner of Nexa.”  

The lawsuit states that Kortas had 50.5% of the company and Grella had a 49.5% share. 

NEXA’s businesses

America’s largest mortgage brokerage, NEXA originated $6.29 billion in mortgage loans in 2023, according to Kortas. As of Monday, the company had 2,391 sponsored mortgage loan officers, per the Nationwide Multistate Licensing System (NMLS). 

Grella told HousingWire that the mortgage business is profitable despite a challenging market. But that’s not the case for the aviation business. NEXA’s affiliated companies include AXEN Mortgage, a non-delegated correspondent shop, as well as a charter flight business – the latter of which was the source of disagreement between the partners.  

The venture started in February 2022 when Kortas “persuaded” Grella to purchase two jets for NEXA’s corporate use and business purposes, per the lawsuit. The jets would be used to fly executives around the country as needed. However, there were also tax benefits to depreciating those assets, which would justify the investment. Another jet acquisition was made one month later. 

Then, according to the lawsuit, in late 2022, Kortas “convinced” Grella to acquire an FAA-licensed charter company called Fly Dreams, LLC. The justification was that it would help charter the third jet and “dry-lease it, which would help defray NEXA’s aircraft expenses.” 

“After NEXA closed on the purchase of Fly Dreams in early 2023, due to regulatory hurdles that Kortas had failed to flag or explain, NEXA was unable to charter the new jet with Fly Dreams,” the lawsuit states. 

After that, specifically in 2023, Grella said Kortas tried to convince him to purchase an airplane flight school due to a pilot shortage (which he ended up doing independently), invest in an aircraft hangar, and purchase another jet. 

Grella refused and claimed he faced retaliation, with Kortas treating him as an employee rather than a partner, depriving him of the use of the jets, and ceasing the payment of wage for both of them despite NEXA having millions in retained earnings.

Regarding the $24 million airplane-hangar leasehold, the lawsuit that “Grella informed the seller of the truth of Kortas’ inability to bind Nexa.” Then, through his legal counsel, Kortas “asserted that the aviation business is a legitimate business of Nexa and “Grella had consented to some aviation related purchases.” Therefore, according to Kortas, he was authorized to make the purchase on Nexa’s behalf without Grella’s consent, per the lawsuit.

The split

According to Grella, his “abrupt” termination occurred on March 20, after months of frustration related to what he calls a “serious breach of NEXA’s operating agreement, which requires profits to be distributed equally and for both partners to consent to activities not directly related to NEXA’s mortgage brokerage purposes.”

The lawsuit states that Kortas controls the company, bank accounts, and profit distributions. However, the operating agreement says that if the company engages in any other activity that is unrelated to the purpose of mortgage brokerage, it “requires unanimous member consent.”

“But after Kortas developed an aviation hobby, he began spending millions of dollars of company money for his own aircraft, without Grella’s consent, and, in many cases, without his knowledge,” the document states. 

Grella, who started the business with Kortas in 2017 after leaving Equity Prime Mortgage, was responsible for handling the operations, including managing relationships with partners and lenders, overseeing production and supporting loan officers and the management team. 

Kortas announced during a weekly Town Hall on Tuesday that Grella had been terminated. This means he will not be involved in the company’s daily operations or strategic decisions for the growth of the business. However, he remains a partner until the conclusion of a buyout negotiation. 

According to Kortas, the buyout depends on NEXA’s appraisal. Despite his sadness at hearing what he called Grella’s “harmful rhetoric,” Grella appears to be motivated more by his unhappiness with the terms of his agreed-upon buyout than by concerns he claims to have about the related airplane business, Kortas added.

“Of course, Mr. Grella’s ongoing interference with NEXA’s business relationships and expectancies, which appears to be a blatant effort to pressure NEXA into relenting on those contractual rights that Mr. Grella is actually upset about, are doing nothing but causing the type of harm… harm that is irreparable in nature … that Mr. Grella professes to be taking issue with.”

“NEXA will not be bullied or blackmailed into foregoing its legal rights by a former employee who had himself already agreed to no longer be an owner of NEXA.”

Source link

A federal judge in Texas has granted a preliminary injunction to banking trade groups that seek to halt the implementation of new rules for modernizing the Community Reinvestment Act (CRA), according to court documents reviewed by HousingWire.

Judge Matthew Kacsmaryk sided with organizations including the American Bankers Association (ABA), the U.S. Chamber of Commerce and five additional trade associations at the state and national levels to issue a preliminary injunction that halts the implementation of the rules while deciding the merits of the broader case.

The injunction is extended for each day the matter remains pending, according to the judge’s order.

The revisions to the CRA aim to address issues such as the rise of mobile and online banking, as well as further efforts to combat redlining.

The plaintiffs filed the suit in February. They sought to review the new rules under the Administrative Procedures Act (APA) and ultimately vacate them, arguing that they “work a wholesale and unlawful change to a statutory and regulatory regime that, for nearly five decades, has successfully encouraged lending in low- and moderate-income neighborhoods throughout the United States,” according to the initial legal complaint.

Originally announced late last year, the new rules seek to modernize the CRA — originally passed by Congress in 1977 and signed into law by President Jimmy Carter that October — by taking advancements including online and mobile banking into account, as well as by addressing systemic inequalities in access to credit.

Agencies in alignment on the new rules include the Office of the Comptroller of the Currency, the Federal Reserve Board and the Federal Deposit Insurance Corp. (FDIC). Each of the agencies are named as defendants in the case.

“The final rule will better achieve the purposes of the law by encouraging banks to expand access to credit, investment, and banking services in low- and moderate-income communities; adapting to changes in the banking industry, such as mobile and online banking; providing greater clarity and consistency in the application of the CRA regulations; and tailoring to bank size and type,” Fed Chairman Jerome Powell said at the time the rules were announced.

At the time, housing organizations largely supported the revisions, including the Mortgage Bankers Association (MBA), the National Community Reinvestment Coalition (NCRC) and the National Housing Conference (NHC).

In a joint statement issued by the plaintiffs and posted by the ABA, they lauded the judge’s decision.

“While we strongly support the goals of CRA, the Final Rules exceeded the banking agencies’ regulatory authority and created disincentives for banks to lend in low- and moderate-income communities that need access to credit the most,” the statement read. “We look forward to litigating this matter to a final judgment.”

Source link

Kentucky is on the brink of ending exclusive real estate listing contracts. The state’s General Assembly passed a bill to protect homebuyers from predatory contracts known as non-title recorded agreements for personal services (NTRAPS) or right-to-list agreements.

The practice of right-to-list agreements preys upon homeowners by offering small lump sums of cash  in exchange for decades-long contracts for the exclusive rights to sell the property.

For a homeowner in need of extra cash, somewhere between $300 to $5,000, a company will give them the cash they need without a loan. But there is a catch: They have to sign an agreement allowing the firm the right to list their home if they choose to sell in the future — obligating them for up to 40 years.

Recorded in property records since 2018, right-to-list agreements can be misleading in many instances, and they can create “impediments and increase the cost and complexity of transferring or financing real estate in the future,” according to a  news release from the American Land Title Association (ALTA), which supports the legislation.

Firms such as MV Realty (which has filed for Chapter 11 bankruptcy in more than 30 states), SellWhenever and HomeOptions generate home listing business through cash payments to homeowners and right-to-list agreements.

Sponsored by State Rep. Michael Meredith (R), the new bill will make right-to-list agreements unenforceable by law. It will also restrict and prohibit the recording of these agreements in property records, provide for their removal from existing records and allow for the recovery of damages. Penalties will be applied if NTRAPS are recorded in future property records. 

ALTA,  the national trade association of the title insurance industry, and the AARP lauded the Kentucky General Assembly on Monday for passage of House Bill 88.

“The property rights of American homebuyers must be protected,” Elizabeth Blosser, ALTA vice president of government affairs, said in a statement. “A home often is a consumer’s largest investment, and the best way to support the certainty of land ownership is through public policy. We have to ensure that there are no unreasonable restraints on a homebuyer’s future ability to sell or refinance their property due to unwarranted transactional costs.”

Other states such as Utah, Colorado, Georgia, Tennessee, Idaho, California, Florida, Washington, Virginia and North Dakota have passed similar bills in recent years. 

“The passage of HB 88 is a continuation of AARP’s advocacy efforts, undertaken in collaboration with ALTA in other states, to put an end to this harmful practice,” Samar Jha, AARP government affairs director, said in a statement. “We expect and hope to work on similar legislative solutions in other states to help protect homeowners against such predatory housing practices.”

Kentucky Gov. Andy Beshear is expected to sign HB 88 into law in the coming weeks.

Source link

Mortgage rate buydowns and a limited supply of existing homes have buoyed housing demand for many months despite elevated interest rates. As home prices rose steadily, homeowners also accumulated significant equity.  

The typical homeowner who purchased a median-priced home in January 2020, assuming a 10% down payment and the prevailing 30-year fixed mortgage rate at that time, has received a $208,000 boost in net worth, according to a report from John Burns Research & Consulting.

Meanwhile, homeowners who bought in January 2000, January 2006 and January 2013 have received boosts of $414,000, $338,000, and $343,000, respectively.

Overall, U.S. homeowners held $31.8 trillion in home equity at the end of 2023, up from $15 trillion in 2006, the previous peak of the housing cycle. 

At a more granular level, the study shows that home equity increases benefits to buyers across all segments. 

Certain homeowners are allocating their home equity toward the purchase of a larger, nicer home. The built-up equity helps them assume a larger down payment and reduce the cost of monthly payments. Meanwhile, first-time homebuyers may benefit from generational wealth transfers, giving them a leg up to access homeownership

Lastly, accumulated home equity allows homeowners to spend on repairs and remodeling projects. Ultimately, home equity enhances the financial confidence of homeowners, the report concluded, driving up consumer spending and investment in the broader economy.

Source link

“What if homeowners could tap into home equity without taking on debt?”

When Hometap launched in 2017, the Boston-based fintech offered an unorthodox answer to this question for homeowners looking for an alternative to a loan. Through a home equity investment, homeowners can receive cash upfront in exchange for a share of the home’s future value. In return, Hometap gets an agreed-upon percentage of the sale price or appraised value within a 10-year period. 

Instead of taking on additional debt such as a home line of credit (HELOC) or home equity loan to tap into equity, these deals — often referred to as home equity agreements (HEAs) or home equity investments (HEIs) — are debt-free, equity-based financing that provide relief for clients with a variety of financial needs, said Dan Burnett, head of investor product at Hometap. 

“We do see this as a new asset class in the real estate ecosystem and we see it as complementary to traditional debt options that exist today,” Burnett said.

Hometap is among a handful of companies — including Unison, Unlock, Point and Aspire — that offer home equity investments. In exchange for providing homeowners a lump sum of cash, they receive a share of the home’s future value or future appreciation.  

Fintechs involved in homeownership investments have been around for nearly two decades, but it wasn’t until recently that a handful of them have been backed by big investors seeking to take the HEI product mainstream.

“Affordability has always been a challenge,” said Ashkán Zandieh, managing partner and industry chair at the Center for Real Estate Technology and Innovation. “In addition to that, conventional underwriting does not serve the new-age economy such as gig workers, so you are seeing this demand for alternative financing. 

“And with rising home prices and the growing burden of traditional mortgage debt, homeowners are looking to tap into their home equity without taking on additional debt.”

The home equity investment is a new concept for many homeowners and is still small compared to the size of the traditional mortgage market. The annual investment volume in the U.S. is estimated to be in the $2 billion to $3 billion range, a figure estimated by home equity investment companies. 

The market, however, is expected to grow as HEI companies seek to partner with mortgage lenders and real estate brokerages. Rated securitizations of home equity agreements and home equity investments is also adding optimism about further expansion as they signal that institutional investors are warming up to the asset class, sources told HousingWire.

Turning point

A turning point for the home equity investment market came with the closing of the first rated securitization of notes backed by HEAs in September 2023. The notes were originated by Unlock Technologies, issued by private investment firm Saluda Grade and rated by DBRS Morningstar.

DBRS Morningstar’s rating of the $224 million securitization opened up new types of bond buyers that have inherently lower costs of capital, Saluda Grade CEO Ryan Craft said.

“More securitizations, more availability of securitized investors’ capital, and eventually the ratings that have now come to the market are likely to drive down the cost of financing. And that has already started to happen,” Craft said.

The importance of being rated is to create more “depth” for the market, said Eoin Matthews, co-founder of Point

Point and Redwood Trust completed their first securitization of Point’s home equity investment assets, issuing about $139 million of rated asset-backed securities in October 2023.

“There’s a lot more capital in the picture — in particular, insurance capital — which needs the rating for them to buy the bond,” Matthews said. “So, the rating just opens up this massive world. To put a sense of scale on that, insurance capital is about $8 trillion, and about half of that goes into the bond world.”

Since Unlock and Saluda Grade completed the first securitization to include home equity agreements in August 2021, at least eight additional HEI-type securitizations totaling $1.89 billion have been completed. 

Craft expects these shared equity offerings to come to the market with “far more regularity,” with at least five anticipated by the end of this year.

“We are seeing, as a result of multiple issuers in the space, multiple transactions, better understanding of the products and securitized structures, and now the availability of ratings,” Craft said. “We are already seeing the compression of pricing in the securitized debt market, which will have follow-through effects eventually to the pricing of the product and the competitiveness of the market, which will likely drive down prices.”

Potential partnerships

Home equity investments are likely to become essential to the home finance product marketplace. Mortgage lenders and real estate agents will need to incorporate HEI offerings into their businesses, said John Arens, head of the business unit at Aspire, an HEI platform owned by Redwood Trust.

“We believe HEI has the potential to be a transformative innovation in home finance, not just as an equity access product but also as a down payment contribution product,” Arens said.

In these cases, the idea is to enable consumers to tap into the equity of their current property to bring down the cost of a down payment for a new purchase. Buyers can reduce their monthly mortgage payment and potentially avoid private mortgage insurance — a requirement if buyers take out a conventional loan with a down payment of less than 20% of the purchase price.

“I think that’s probably where the greatest product market fit you will have within the real estate community long term — leveraging equity to help a consumer buy a home in the future,” said Michael Micheletti, chief marketing officer at Unlock.

Partnerships with real estate agents or mortgage originators to educate homeowners and buyers on HEI products will be key, the companies interviewed by HousingWire said. A lack of knowledge by consumers is one of the biggest tasks these fintechs face. 

“While today’s home equity-released product inside of the equity finance world begins to migrate to offer a purchase product, a key acquisition point for homeowners will certainly be the real estate agent ecosystem. And we believe originators of HEAs, like Unlock, will certainly be targeting that,” Craft said. 

Redwood, for instance, has been buying HEIs from third-party originators since 2019 and has been providing liquidity to portions of the nonagency mortgage market. Through that effort, Redwood has established a broad network of about 190 correspondent originator partners today.

“Over the last few quarters, we’ve begun collaborating with sellers to roll out our HEI product to their clients,” according to a year-end 2023 Redwood Trust shareholder letter.

“To further address the opportunity we see in home equity, we also launched a traditional second lien mortgage product to our network in January. The combination of second lien loans and HEI has resulted in a unique, coordinated solution set for our origination partners.”

Looming challenges

The small size of the home equity investment market means potential for growth but also equates to fewer regulations compared to the mortgage industry, which requires strict disclosures and protections for consumers. 

“From a consumer protection standpoint, it’s a bit of a Wild West,” said Jenny Song, principal at Navitas Capital, a real estate and construction technology-focused venture capital firm.

Song noted that fintech companies have been able to create returns for their investors through certain deal structures that are punitive to customers. And because there are different types of structures, it’s hard for consumers to make an accurate assessment.

“A lot of them have downside protection, where your house might be worth $1 million, but they’re underwriting it to $800,000,” Song said. “If your property doesn’t even appreciate, you somehow have to come up with whatever that gap is.”

From the fintech’s point of view, they are going up against larger players — including the banks in the industry with bigger balance sheets.

“The established players are usually the banks that hold your savings, checking account. All of these alternative financing solution companies have to compete with that … so the cost of customer acquisition is expensive and channel partnerships are already in place,” Zandieh said. 

While the big players are already partnered with real estate agents and brokerages to access potential customers — capturing them early on in the early home search process — home equity investment companies generally don’t get involved until a homeowner looks to tap into their equity, Zandieh said.

It also remains to be seen how a lower interest rate environment will impact HEI providers as it will make borrowing costs less expensive for homeowners and prospective buyers.

“As rates go down, we are a more compelling alternative investment vehicle for a broader swath of investors as well, which hopefully creates additional demand on the capital side and provides more competitive pricing to our homeowners,” Burnett said.

Despite the uncertainties of regulations and macroeconomic factors, continued consumer demand for home equity investments as well as rated securitizations of home equity agreements add to the optimism for potential market growth.

“Home equity investment is growing as consumer debt is at an all-time high and consumers will be looking to leverage their home equity much more,” Micheletti added.

“What were HELOCs doing 10 years ago? Were they doing a lot of volume? No, you could barely get one,” Micheletti said. “I think it really comes down to, ‘What is the use case?’ It comes down to consumer demand and you have to have a good product market fit.”

Source link

After a series of high-profile challenges faced by senior living facilities in the wake of the COVID-19 pandemic, U.S. senior housing facilities appear poised for a rebound, according to reporting from The Wall Street Journal.

Occupancy rates at private-pay senior care facilities are nearing pre-pandemic levels, according to new data from the National Investment Center for Seniors Housing & Care (NIC).

“In the fourth quarter of 2023 the average rate was at 85.1% in the 31 largest U.S. markets,” according to the data reported by the Journal. “While that is still 2 percentage points below the first quarter of 2020, it is way up from its pandemic low point, 77.8% in the first half of 2021.

“Rent increases, meanwhile, have been outpacing inflation, with independent living costing an average initial rate of $4,126 a month in December and the more intensive assisted-living units costing $6,422,“ NIC reported.

Some of this reflects “pent-up demand,” according to NIC representatives. Seniors who had previously looked into moving to these facilities but put it off — perhaps due to anxiety about COVID-19’s spread inside such facilities early in the pandemic — saw their needs mount in the intervening time and are now moving forward, according Lisa McCracken, NIC head of research.

“[The needs of seniors] have been amplified because of that delay,” she told the Journal.

Aging in place, however, is still emerging as a dominant preference. In addition to other independent metrics that point to a desire of seniors to age in place, the Journal cites 2022 data from the University of Michigan’s Institute for Healthcare Policy and Innovation, which found that the vast majority of adults ages 50 to 80 (88%) felt it is important to remain in their homes for as long as possible, with 62% saying it’s “very important” and 26% saying it’s “somewhat important.”

Aging in place has become easier and is often a far less costly alternative to senior living facilities.

“Many of these seniors are able to defer move-in decisions partly because improvements in healthcare and new technology have made aging-in-place easier, less expensive and less isolating,” the Journal stated.

“They are able to opt to live at home thanks partly to workplace changes during the pandemic that give loved ones more flexibility to provide senior relatives care and company,” according to Green Street analyst John Pawlowski, who spoke to the Journal.

Half of older Americans are unable to afford private-pay senior living facilities, and many are still wary about the post-pandemic challenges to manage infection rates inside such places. But the demographic trends, in addition to favoring the reverse mortgage business, may also swing more older adults into these types of facilities.

Aging in place could also come with unanticipated challenges, according to NIC. Higher divorce rates among baby boomers and a childless rate of nearly 20% could make the prospect more challenging. This is in addition to a lack of necessary renovations in seniors’ existing homes, which are designed to make aging in place easier to accomplish for longer periods of time.

“While most older adults feel it is important to stay in their home as long as possible, many are not prepared to age-in-place,” professor Preeti Malani, who worked on the 2022 University of Michigan study, told the Journal.

Source link

A new class-action lawsuit was filed by a former agent against real estate brokerage Keller Williams (KW), contesting alterations made to the company’s profit-sharing program. 

There are now a total of five class-action lawsuits against KW challenging the company’s profit-sharing program adjustments. Earlier in March, four agents formerly affiliated with Keller Williams — Jerri L. Moulder, David L. Bueker, Robert E. Hill and Kevin Ortiz — took legal action against the real estate brokerage by filing four separate class-action lawsuits.

On March 29, Edward Fordyce, who worked on and off with Keller Williams from 2019 to 2022, filed a complaint aiming for class-action status in the U.S. District Court for the Eastern District of Pennsylvania in Philadelphia. Allegations against KW include breach of contract, declaratory judgment and unjust enrichment. Fordyce’s complaint challenges adjustments made to Keller Williams’ profit-sharing program.

In February 2020, KW introduced a more restrictive policy to its profit-sharing program. It stated that associates who joined the brokerage on or after April 1, 2020, and subsequently jumped to a competitor would lose their revenues from the company’s lifelong revenue program. But that policy did not impact agents who joined before April 1, 2020. 

The change introduced in 2020 also extended the wait period to become a vested member. But in August 2023, during KW’s Mega Agent Camp event in Austin, the company’s International Associate Leadership Council (IALC) voted to revise the profit-sharing distribution policy. Under the updated policy, vested agents who joined before April 1, 2020, and actively compete with KW brokerages would see their profit share reduced from 100% to 5%.

An incentive to go back to Keller Williams remained. Former agents who return to the company within six months of the effective reduction date will have their profit share restored to 100%, KW President Marc King wrote in an email in August 2023. Also, former KW agents who have retired or left the industry altogether will retain their full profit-share distribution. The new policy is supposed to be implemented on or before July 1, 2024.

The plaintiffs argue that according to the Keller Williams policies and guidelines manual, the brokerage did not have the right to terminate the profit-share program. They also claim it  didn’t have the right to amend any aspect of the program’s method of calculating a market center’s profit-sharing contribution or a recruiting sponsor’s profit-sharing distribution, except as specifically directed by the IALC. Lastly, any amendment made to the profit-sharing program was only allowed to be be prospective and not retroactive. 

Source link