Seattle-based real estate investment platform Arrived Homes is flush with cash after recently raising $25 million in a venture-capital funding round, and is working to expand its reach in the still-hot single-family rental market.
Arrived Homes is currently on a pace of acquiring about 30 single-family rental properties per month, with an existing portfolio across 19 cities of some 125 properties valued at about $50 million, according to company co-founder and CEO Ryan Frazier.
“Our near-term focus is getting to 100 homes per month over the next six months or so and then continuing to grow from there,” Frazier added. “…Over the next six to nine months or so, you’ll probably find us in 40 markets.
“That’s part of our scaling plan. We’re very selective on what assets we’re buying,” he explained. “I think we make offers on about .1% of the properties we underwrite.”
Arrived Homes, launched in April of 2021, is in a good cash position to fund its planned expansion. It’s targeting the one part of the housing market that appears to still have some legs: single-family investment properties.
The company has been qualified under the U.S. Securities and Exchange Commission’s (SEC’s) Regulation A to open its platform to nonaccredited investors. Frazier said Arrived Home’s platform now has some “100,000 people subscribed and about 10,000 individuals that have started to make investments.”
Arrived Homes to date also has raised a total of $162 million in both venture capital and debt financing, including the $25 million raised this past May in a Series A funding round led by Forerunner Ventures. Returning investors for the latest funding round included Bezos Expeditions (Amazon founder Jeff Bezos investment firm); Good Friends, which is a venture capital fund overseen by the co-founders of Warby Parker; and former Zillow CEO Spencer Rascoff.
Arrived Home’s seed round in June 2021 raised $37 million in equity and debt-financing, and in December last year it lined up a $100 million credit facility. The company, which does not rely on blockchain or cryptocurrency technologies, started the year with about 22 employees and expects that number to jump to 50 by year’s end, Frazier said.
“You look at the data, and 7% of people in this country own investment property today, versus more than 55% owning individual stocks,” Frazier said. “But when you look at the survey data from Gallup polls and Fed studies, actually more people view rental properties as a better long-term investment than investing in the stock market.”
An example of the vitality of the residential rental-property market in 2022 can be found in the deal volume in the private label securitization (PLS) market, which serves as an indicator of investor interest.
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You buy rental properties to invest in and then eventually sell and earn capital gains. It can be one of the smartest investments you make in your lifetime. Before you sell, though, there are certain considerations you must make to ensure you handle the transaction right.
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Year to date through June, a total of 32 prime and nonprime residential mortgage-backed PLS deals were secured by nearly 41,000 rental properties (primarily single-family rentals owned by mom-and-pop landlords) valued at nearly $14 billion, according to PLS deals tracked by Kroll Bond Rating Agency. Over the same period in 2021, there was a total of 10 prime and nonprime PLS deals involving about 12,200 residential rental properties valued at $3.34 billion.
Frazier explained that the rental-property investment process Arrived Homes has worked out with the SEC is “a kind of IPO [initial public offering] for a house.” He said investors are purchasing shares of individual single-family rental properties that are “inside limited liability corporations,” or LLCs. The investors can invest in these LLCs via Arrived Home’s platform for as little as $100 and up to just under 10% of a home’s price.
“Historically in rental properties,” Frazier added, “we’re seeing something like 8% to 12% annualized rate of returns, with a portion of that coming from rental income that we pay out in the form of dividends, and then the other [balance] is property appreciation.
“For our properties on the dividend side, we’ve been ranging between 3% to 7% annualized dividends, depending on the market,” Frazier said. “And then with the property appreciation [reflected in share pricing], we expect the real estate market will average something like 4% or 5% per year, but over the last 18 months it’s been much higher than that.”
Frazier added that the three big barriers to investing in real estate are raising the necessary capital; committing the necessary time, including on the property-management side; and developing the investment expertise. Frazier said Arrived Home’s niche is in providing all three of those to investors.
“The reason I think real estate has been slow to catch up to these other asset classes [such as stock investments] is because it’s very unique in that you need all three of those things at the same time to participate,” Frazier said. “That difference between the 7% of people who own property today versus the 55% to 60% that are investing in stocks — and cryptocurrency is frankly even easier to invest in than real estate — that’s a huge gap. So, there’s maybe 100 million people just in this country that probably could be investing in rental properties if it was just an easier process for them.”
Along with its property-acquisition plans and investor growth, Arrived Homes also is working to develop a secondary market for its securities. Frazier said investors are encouraged to think in terms of a five- to seven-year investment period because “that is what really works best for real estate.” But his company is developing, with SEC review, an initial version of a liquidity platform.
“I think within the next two or three months, we’ll probably have that available, and it’s more of a redemption program, where four times per year we’ll buy back the shares at the current share price and then immediately resell them to new investors at that same share price,” Frazier explained. “And then over the next year, we’re focused more on creating a true secondary market where you can make offers on other people’s shares and their portfolios.”
Arrived Homes has competition in the online real estate investment market to be sure, including companies like Roofstock, Cadre and Fundrise. Still, Frazier is convinced his company has an edge because of both its broad investor reach and its strategic approach to acquiring rental properties — which, he said, continue to produce income even in down housing-market cycles.
Arrived Homes is a private company and does not release financial figures. The company’s revenues, compared with its longer-term goals, are minimal at this stage — derived primarily from providing management and related services for its portfolio of some 125 investment properties. Arrived Homes, however, is now in the process of scaling up its operations to acquire more rental properties and to serve more investors — and it’s doing so with the backing of its own investors.
“We went through the process with the SEC [Regulation A qualification and related public filings] so that anyone can invest,” Frazier stressed. “You don’t need a million dollars in net worth, or $200,000 or $300,000 in income.
“I think where we’re unique is that combination of individual single-family homes [rental properties] and access to nonaccredited investors.”
Frazier added that in his mind, Arrived Homes wants to play a role that is similar to what was accomplished by companies like Coinbase, “which made it easy to participate in cryptocurrency,” or Robinhood, “which helped facilitate more retail investors to participate in the stock market.”
“Arrived,” he said, “can do that by helping to facilitate more people to own property.”
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7 Ways Landlords Can Benefit From Real Estate Software
Running a successful rental property business seems like managing a never-ending list of “to-dos.” First, landlords and rental property owners must deal with collecting monthly rent, screening prospective tenants, and trying to keep tenants happy. Then there are unexpected events to take care of like emergency repairs, tenant disputes, or the lengthy process of evicting a tenant for lease violations.
Real estate software can streamline many day-to-day chores of being a landlord. Automating tasks like rent collection, tenant screening, maintenance requests, vacancy listing, and accounting can free up much of your valuable time. The result is you have extra time to dedicate to the core of your business.
For many landlords, switching to digital tools to run a rental business may seem like a huge learning curve. And some may have concerns about security, data processing, or using mobile apps for rent collection or property management.
This article looks at seven ways your rental business could profit from using real estate software solutions.
Why Use Real Estate Software for a Rental Business?
Real estate software simplifies many recurring tasks you must care for as a successful landlord. But beyond this, there are other incredible benefits. Property management software allows you to access your data securely from any device. In a way, it’s like taking your office with you wherever you are.
Another compelling reason to switch to digital real estate solutions is collaboration. For example, suppose your rental business has a small team. In that case, everyone can access the specific information they require. This removes the need to send emails and reminders.
However, software for real estate companies also makes it easier to connect with tenants, listing agencies, and property managers. Just think how much easier it would be to send bulk messages to tenants about upcoming maintenance—or automatically listing a vacant apartment when the lease is soon to expire.
Seven Ways Real Estate Software Can Make Your Rental Business More Profitable
Property management is a multi-faceted job that requires mastering several skills. So, the more you can use software to automate tasks, the more time you have to run a profitable business. Here are seven tasks you can assign to real estate software.
1. Processing online tenant applications
Property management software saves you time because the entire application process is online. All documents in the rental process can be stored digitally and signed electronically. This means no more mailing applications, meeting with tenants in person, or manually processing forms.
One of the benefits of online rental applications is that they remove the risk of human error. For example, information from the rental application automatically populates into the lease agreement. In addition, electronic forms ensure that tenants don’t accidentally leave required fields blank or use scribbled handwriting that is illegible.
2. Tenant screening services
Screening tenants is a crucial landlord task because it’s the only way you can find excellent tenants. However, if you have ever screened a prospective tenant manually, you know how time-consuming the process can be.
The function to screen tenants can be part of the digital rental application. First, the potential tenant approves the required background checks like their rental history, credit report, and criminal history. You then receive the report in no time at all. And based on this, you can accept or deny their online application.
3. Accepting and tracking maintenance requests
Real estate software helps you keep on top of maintenance requests. Keeping rental units in good order and promptly processing service requests is vital for keeping tenants happy.
How can a property management tool keep you organized? First, the tenant contacts you via the app, and you can send the request to the appropriate contractors. Then through the app, you can stay in contact with the contractor and tenant about timelines. The beauty of this system is that everything is in one place.
Landlord software applications also save valuable time because you or the contractor don’t have to assess the issue in person. Instead, the tenant can take a photo or video of the damage and send it through the app.
4. Advertising vacancies
Delays in filling vacancies can eat into your profits. However, if you use a suitable property management app, you can automatically list vacancies on several rental listing sites at once. Because all the information is stored in the software, there is no need to continually compose new listings whenever you look for a new tenant.
5. Online rent collection
Rent collection apps help simplify the rental process because they make it easy for tenants to pay rent online. Landlords who get tenants to switch to online rental payments find that they have fewer late payments.
Here are several reasons why a rental payment service can help you collect rent on time:
Rent collection apps also give landlords payment controls during an eviction process. For example, you can block a partial payment from a tenant facing eviction. This option prevents the bad tenant from derailing the entire process, ultimately costing you time, resources, and money.
6. Integrated accounting software for landlords
Rental property management software helps you manage all aspects of running a rental business, including keeping financial records in check. For example, accounting software for landlords automatically includes rent payments, mortgage payments, contractor bills, and debts. The handy accounting features immediately give you easy access to your financial data.
There is also a space-saving benefit to using real estate software. Cloud-based software means you don’t have to physically store hundreds—sometimes thousands—of files in an office. This protects the files from getting stolen, lost, or damaged.
7. Data analysis
Data analytics is a way that real estate software can make your business more profitable. Analytics gives you insights into the real estate sector that you could never get if you relied on keeping paper files and processing rent checks. This could give you tremendous leverage to beat the competition.
Some ways that landlords and rental property owners can benefit from analytics include the following:
Conclusion
Real estate management software is invaluable for any successful landlord or real estate investor. The good news is that many rental management software solutions are free for landlords and tenants.
Giving you options to automate laborious tasks saves valuable time and resources. In addition, tenants find the rental experience more enjoyable when they can use an app to make online rent payments, send service requests, and build credit history.
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Pennymac launches two MSR-backed private offerings
Subsidiaries of Pennymac Financial Services Inc. (PFSI), which ranks as one of the top five mortgage lenders nationally, are seeking to raise more than $700 million in the debt markets through the sale of notes secured by mortgage servicing rights.
The transactions include a note offering of $305 million sponsored by PFSI subsidiary PennyMac Mortgage Investment Trust that is “secured by certain participation certificates relating to Fannie Mae mortgage servicing rights [MSRs],” states a recent filing by PFSI with the U.S. Securities and Exchange Commission (SEC).
Another subsidiary of PFSI, PennyMac Loan Services LLC, issued a separate private-label issuance of participation certificates valued in total at $400 million. The notes are backed by Ginnie Mae mortgage-servicing rights, according to a presale report by Kroll Bond Rating Agency (KBRA).
Both note offerings receive a BBB rating from KBRA. The notes issued in both deals pay interest only until maturity, according to KBRA.
The MSR market has been on a bit of a tear since the start of the year, with values rising rapidly and creating opportunities for many lenders to bolster their balance sheets.
PennyMac Mortgage Investment Trust, a real estate investment trust (REIT), recently issued $305 million in Fannie Mae MSR-backed notes to “qualified institutional buyers” via an offering dubbed Series 2022-FT1, PFSI’s SEC filing shows. The five-year notes bear an interest rate of 4.19% above the 30-day average Secured Overnight Financing Rate, or SOFR, according to the SEC document.
The presale report for the separate PennyMac Loan Services-sponsored offering of $400 million in Ginnie Mae MSR-backed participation certificates, called Series 2022-GTI, also involves five-year term notes. The KBRA report does not disclose the interest rate on the notes to be sold — other than indicating the rate, as in the REIT’s offering, will be set at some level above SOFR.
The bond-rating reports for both offerings indicate that the agency MSRs serving as collateral do entail some risk.
“For loans sold to, or guaranteed by, a government-sponsored enterprise or housing finance agency (such as Fannie Mae, Freddie Mac, or Ginnie Mae), the MSR asset is owned by the related servicer [PFSI or its subsidiaries in this case] but can be transferred away from the servicer by the agency due to the occurrence of a pre-determined set of infractions by the servicer,” KBRA bond rating reports on the offerings state. “Depending on the severity of the infraction and other considerations, the agency may attempt to facilitate an orderly transfer of servicing for reasonable consideration of the value of the MSRs.
“However, a troubled servicer may have difficulty realizing market-rate bids for its portfolio given its distressed state and the fact that MSR markets can be illiquid.”
Mitigating that risk, however, according to KBRA, is the fact that both Fannie Mae and Ginnie Mae have pre-existing relationships with PFSI; the size and market share of each “create alignment of incentive”; and the agencies have consented to the securitization of the MSRs.
In the case of Fannie Mae, via an acknowledgement agreement, it has granted PFSI “the right to certain amounts based on sale proceeds, if the MSRs are sold by Fannie Mae, or appraised market value, if the MSRs are retained by Fannie Mae,” the KBRA bond-rating report states. Ginnie Mae’s agreement with PFSI, per KBRA, limits the agency’s ability to “extinguish MSRs” without giving PFSI or its affiliates a chance to first “cure any breach … under the Ginnie Mae contract.”
Monthly valuations of the MSRs for both offerings will be performed by Incenter Mortgage Advisors, KBRA reports. Incenter has managed more than $1.5 billion in MSR sales and purchases, according to KBRA.
Tom Piercy, managing director of Denver-based Incenter Mortgage Advisors, explained in an interview for a prior story that as interest rates rise, the value of MSRs generally increases because the risk of early repayment of mortgages decreases. And fast-rising rates in 2022 have quelled the once-booming refinancing market, which is a major driver of mortgage prepayments.
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New Residential makes another round of layoffs
Lender and servicer New Residential Investment Corp. laid off originations staffers last week, sources told HousingWire. The lender has made several rounds of cuts since February.
Employees in processing, underwriting, and closing jobs were the main targets in the last week’s layoff round, according to multiple interviews with former employees.
The latest layoff affected employees in both junior and senior roles. The company is paying two weeks of severance per year of service, a former employee said.
New Residential, the parent company of NewRez and Caliber Home Loans, declined to comment about the layoffs.
“It came unexpectedly,” said a former employee who requested anonymity. “On Wednesday, we got called into a Teams meeting, and they turned off the comments, so we could not even ask any questions.”
In his division of about 40, about half the employees were let go, he said.
In February, New Residential sent pink slips to 386 employees, about 3% of the mortgage workforce, less than a year after acquiring Caliber Home Loans, a multichannel lender, in a deal valued at $1.675 billion in April 2021.
News of the layoffs comes about six months after Sanjiv Das announced his resignation as CEO of Caliber. “As we continue to create synergies between companies, we are creating a structure to streamline business channels and create long-term growth,” a New Residential spokesperson wrote to HousingWire at that time.
There were multiple rounds of layoffs in originations at the end of February, March, April and May, affecting both Newrez and Caliber teams, former employees said.
Documents filed with the Securities and Exchange Commission (SEC) show that New Residential had 12,293 employees in December 2021, and 11,324 in March 2022.
The company funded $26.9 billion in mortgages in the first quarter, down from $82.3 million in the previous quarter. But New Residential reported $690 million in net income, a 267% increase from the previous quarter, boosted by the servicing portfolio.
To reduce costs, New Residential announced in June that it had decided to internalize the company’s management. Michael Nierenberg will continue to be the chairman of the board, chief executive officer, and president. The internalization will save approximately $60 million to $65 million.
The company is also changing its name to Rithm Capital, reflecting the diversification of its businesses as more than just a mortgage real estate investment trust. Last year, it closed the acquisition of Caliber Home Loans and Genesis Capital LLC.
New Residential will start trading on the NYSE as “RITM” on or about August 1, 2022.
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Mortgage apps slide 5.4% despite lower rates
Fewer applications show borrowers’ demand for mortgage loans fell this week, despite a decline in rates due to concerns of an economic recession, according to the Mortgage Bankers Association (MBA).
The survey, which includes adjustments to account for the long Fourth of July weekend, shows mortgage applications down 5.4% for the week ending July 1, compared to a week earlier.
“Mortgage rates decreased for the second week in a row, as growing concerns over an economic slowdown and increased recessionary risks kept Treasury yields lower,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a statement. But he added: “Rates are still significantly higher than they were a year ago, which is why applications for home purchases and refinances remain depressed.”
The Refinance Index decreased 7.7% from the previous week and was 76% lower than the same week one year ago, as homeowners still have reduced incentive to apply for the product.
The seasonally adjusted Purchase Index fell 4.3% from the previous week and 7.8% compared to the same week in the previous year because borrowers face an ongoing affordability challenge and a low inventory problem.
The trade group estimates the average contract 30-year fixed-rate mortgage for conforming loans ($647,200 or less) decreased to 5.74%, from 5.84% the previous week, falling 24 basis points during the past two weeks. Jumbo mortgage loans (greater than $647,200) went from 5.42% to 5.28%.
Another index, the Freddie Mac PMMS, showed purchase mortgage rates dropped 11 basis points last week to 5.70%, ending a two-week climb.
Refis were 29.6% of total applications last week, decreasing from 30.3% the previous week, the survey shows.
The adjustable-rate mortgages (ARM) share of applications declined from 10.1% to 9.5%, still demonstrating continued popularity among borrowers. According to the MBA, the average interest rate for a 5/1 ARM fell to 4.62% from 4.64% a week prior.
The FHA share of total applications remained unchanged at 12%. Meanwhile, the V.A. share went from 11.2% to 11.1%. The USDA share of total applications remained at 0.6%.
The survey, conducted weekly since 1990, covers 75% of all U.S. retail residential mortgage applications.
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Arrived Homes is riding the rising rental-property wave
Seattle-based real estate investment platform Arrived Homes is flush with cash after recently raising $25 million in a venture-capital funding round, and is working to expand its reach in the still-hot single-family rental market.
Arrived Homes is currently on a pace of acquiring about 30 single-family rental properties per month, with an existing portfolio across 19 cities of some 125 properties valued at about $50 million, according to company co-founder and CEO Ryan Frazier.
“Our near-term focus is getting to 100 homes per month over the next six months or so and then continuing to grow from there,” Frazier added. “…Over the next six to nine months or so, you’ll probably find us in 40 markets.
“That’s part of our scaling plan. We’re very selective on what assets we’re buying,” he explained. “I think we make offers on about .1% of the properties we underwrite.”
Arrived Homes, launched in April of 2021, is in a good cash position to fund its planned expansion. It’s targeting the one part of the housing market that appears to still have some legs: single-family investment properties.
The company has been qualified under the U.S. Securities and Exchange Commission’s (SEC’s) Regulation A to open its platform to nonaccredited investors. Frazier said Arrived Home’s platform now has some “100,000 people subscribed and about 10,000 individuals that have started to make investments.”
Arrived Homes to date also has raised a total of $162 million in both venture capital and debt financing, including the $25 million raised this past May in a Series A funding round led by Forerunner Ventures. Returning investors for the latest funding round included Bezos Expeditions (Amazon founder Jeff Bezos investment firm); Good Friends, which is a venture capital fund overseen by the co-founders of Warby Parker; and former Zillow CEO Spencer Rascoff.
Arrived Home’s seed round in June 2021 raised $37 million in equity and debt-financing, and in December last year it lined up a $100 million credit facility. The company, which does not rely on blockchain or cryptocurrency technologies, started the year with about 22 employees and expects that number to jump to 50 by year’s end, Frazier said.
“You look at the data, and 7% of people in this country own investment property today, versus more than 55% owning individual stocks,” Frazier said. “But when you look at the survey data from Gallup polls and Fed studies, actually more people view rental properties as a better long-term investment than investing in the stock market.”
An example of the vitality of the residential rental-property market in 2022 can be found in the deal volume in the private label securitization (PLS) market, which serves as an indicator of investor interest.
The complete guide to selling rental property in 2022
You buy rental properties to invest in and then eventually sell and earn capital gains. It can be one of the smartest investments you make in your lifetime. Before you sell, though, there are certain considerations you must make to ensure you handle the transaction right.
Presented by: Roofstock
Year to date through June, a total of 32 prime and nonprime residential mortgage-backed PLS deals were secured by nearly 41,000 rental properties (primarily single-family rentals owned by mom-and-pop landlords) valued at nearly $14 billion, according to PLS deals tracked by Kroll Bond Rating Agency. Over the same period in 2021, there was a total of 10 prime and nonprime PLS deals involving about 12,200 residential rental properties valued at $3.34 billion.
Frazier explained that the rental-property investment process Arrived Homes has worked out with the SEC is “a kind of IPO [initial public offering] for a house.” He said investors are purchasing shares of individual single-family rental properties that are “inside limited liability corporations,” or LLCs. The investors can invest in these LLCs via Arrived Home’s platform for as little as $100 and up to just under 10% of a home’s price.
“Historically in rental properties,” Frazier added, “we’re seeing something like 8% to 12% annualized rate of returns, with a portion of that coming from rental income that we pay out in the form of dividends, and then the other [balance] is property appreciation.
“For our properties on the dividend side, we’ve been ranging between 3% to 7% annualized dividends, depending on the market,” Frazier said. “And then with the property appreciation [reflected in share pricing], we expect the real estate market will average something like 4% or 5% per year, but over the last 18 months it’s been much higher than that.”
Frazier added that the three big barriers to investing in real estate are raising the necessary capital; committing the necessary time, including on the property-management side; and developing the investment expertise. Frazier said Arrived Home’s niche is in providing all three of those to investors.
“The reason I think real estate has been slow to catch up to these other asset classes [such as stock investments] is because it’s very unique in that you need all three of those things at the same time to participate,” Frazier said. “That difference between the 7% of people who own property today versus the 55% to 60% that are investing in stocks — and cryptocurrency is frankly even easier to invest in than real estate — that’s a huge gap. So, there’s maybe 100 million people just in this country that probably could be investing in rental properties if it was just an easier process for them.”
Along with its property-acquisition plans and investor growth, Arrived Homes also is working to develop a secondary market for its securities. Frazier said investors are encouraged to think in terms of a five- to seven-year investment period because “that is what really works best for real estate.” But his company is developing, with SEC review, an initial version of a liquidity platform.
“I think within the next two or three months, we’ll probably have that available, and it’s more of a redemption program, where four times per year we’ll buy back the shares at the current share price and then immediately resell them to new investors at that same share price,” Frazier explained. “And then over the next year, we’re focused more on creating a true secondary market where you can make offers on other people’s shares and their portfolios.”
Arrived Homes has competition in the online real estate investment market to be sure, including companies like Roofstock, Cadre and Fundrise. Still, Frazier is convinced his company has an edge because of both its broad investor reach and its strategic approach to acquiring rental properties — which, he said, continue to produce income even in down housing-market cycles.
Arrived Homes is a private company and does not release financial figures. The company’s revenues, compared with its longer-term goals, are minimal at this stage — derived primarily from providing management and related services for its portfolio of some 125 investment properties. Arrived Homes, however, is now in the process of scaling up its operations to acquire more rental properties and to serve more investors — and it’s doing so with the backing of its own investors.
“We went through the process with the SEC [Regulation A qualification and related public filings] so that anyone can invest,” Frazier stressed. “You don’t need a million dollars in net worth, or $200,000 or $300,000 in income.
“I think where we’re unique is that combination of individual single-family homes [rental properties] and access to nonaccredited investors.”
Frazier added that in his mind, Arrived Homes wants to play a role that is similar to what was accomplished by companies like Coinbase, “which made it easy to participate in cryptocurrency,” or Robinhood, “which helped facilitate more retail investors to participate in the stock market.”
“Arrived,” he said, “can do that by helping to facilitate more people to own property.”
The post Arrived Homes is riding the rising rental-property wave appeared first on HousingWire.
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Home price growth expected to dip as demand normalizes
Home price appreciation, which skyrocketed during the pandemic, is showing signs of slowing, according to a monthly report published by CoreLogic Tuesday.
In May, home prices increased by 20.2% year-over-year, the report said. But come next May, the data vendor predicts home price appreciation will dip to 5%.
The recent hikes in mortgage interest rates by the Federal Reserve has contributed to the expected cool down of home prices, according to the report.
As of June 23, mortgage interest rates were at 5.81%, per Freddie Mac’s PMMS mortgage survey. At the beginning of January, interest rates hovered at 3.22%. CoreLogic’s report said rising rates and affordability challenges will lessen buyer demand and will continue to affect home price growth.
The silver lining behind the market cool down is a recalibration, which should restore balance between buyers and sellers, said Selma Hepp, deputy chief economist at CoreLogic, in a statement.
“While annual home price growth still exceeds 20%, we expect to see a rapid deceleration in the rate of growth over the coming year,” Hepp said. “Nevertheless, the normalization of overheated buying conditions should bring about more of a balance between buyers and sellers and a healthier overall housing market.”
Home prices in Tampa, Florida grew by 33.4% —the highest year-over-year home price increase recorded in a metro area in May, according to the report. Phoenix trailed behind, with home prices growing 28.7% year-over-year. Both cities also registered the largest gains in March and April, according to CoreLogic.
Florida and Tennessee posted the highest home price gains, 33.2% and 27.4%, respectively. Arizona ranked third with home prices growing by 27.3% compared to last May, the report shows.
Homes in Washington D.C. ranked last for appreciation, at 4.3%, the data vendor said. The rate of price growth in the city should rise slightly by May 2023, CoreLogic forecasts.
The data vendor predicts a 50% chance home price growth will significantly dip by next May in Boise City, Idaho, and in three Washington state areas: Tacoma-Lakewood metro, the Olympia-Turnwater metro and Bellingham.
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Redwood Trust finalizes acquisition of lender Riverbend
Specialty finance company Redwood Trust Inc. has completed its acquisition of bridge lender Riverbend Funding LLC, which has a funded portfolio of more than $1.5 billion single-family and multifamily loans nationwide.
The acquisition of Portland, Oregon-based Riverbend and its subsidiaries, announced originally in late April, is expected to fit in well with Redwood’s existing business-purpose lending platform, CoreVest. Redwood executives say Riverbend will be integrated into CoreVest.
CoreVest provides financing to real estate investors across the country and as of late June boasted more than $15 billion in loans closed and some 125,000 units financed, according to the lender.
In particular, Riverbend will expand CoreVest’s reach by adding single-asset bridge origination and distribution channels to CoreVest’s existing product offerings.
“As we described when we announced the acquisition of Riverbend, we also continue to believe, especially amidst this higher rate environment, that our investment portfolio and operating revenues will further benefit from Riverbend’s bridge product and fee-based revenues,” said Christopher Abate, CEO of Redwood.
Sean Robbins, co-founder of Riverbend, said “joining forces with CoreVest will help us provide greater financing options for our partners, drive overall productivity and enhance our efficiency.”
“Over the last 12 months, Riverbend [founded in 2017] has originated over $1.0 billion of loans across 33 states, with additional key markets targeted for future expansion,” states the April announcement detailing the acquisition deal then still in motion. “Riverbend’s executive leadership team plans to remain with the business following the completion of the transaction.”
Riverbend offers financing to veteran real estate investors who acquire residential and multifamily transitional properties with plans to renovate and sell them. It also serves professional developers of multifamily properties. The company employs more than 50 people.
“Riverbend complements Redwood’s existing business-purpose mortgage banking platform, CoreVest, … enhancing CoreVest’s suite of products, geographic and production footprint, and client base,” the original announcement of the acquisition states.
The financial terms of the deal were not disclosed. JMP Securities served as exclusive financial advisor to Mill Valley, California-based Redwood for the transaction.
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Ex-employees sue FGMC for discrimination, retaliation
Three former employees are suing First Guaranty Mortgage Corporation (FGMC) and financial backer Pacific Investment Management Company (PIMCO), alleging they were discriminated against on the basis of their gender and then retaliated against for complaining.
Lynley VanSingel, Melanie Meyer, and Jessie Palmer filed the lawsuit against FGMC and PIMCO in the Eastern District of Texas U.S. District Court on Thursday, June 23, a day before PIMCO-backed FGMC eliminated nearly 80% of its employees and began to shut down. FGMC filed for Chapter 11 bankruptcy protection in Delaware on Thursday, June 30.
The lawsuit accused the plaintiffs’ supervisors, including CEO Aaron Samples, senior vice presidents Jordan Simons and Brandon Jewkes of “negative treatment, including hostile micro-aggressions based upon gender, discriminatory and bullying conduct and treatment which was not experienced by male employees.”
VanSingel, Meyer, and Palmer also claim FGMC and PIMCO removed responsibilities from them and changed their pay and reporting structure because of gender. VanSingel and Palmer were terminated and Meyer was demoted with a significant pay reduction, according to the lawsuit.
The lawsuit claims PIMCO “knowingly allowed FGMC to be undercapitalized and/or improperly transferred assets out of FGMC causing FGMC to be undercapitalized.”
VanSingel, former senior vice president at learning & organizational development at FGMC, is suing FGMC and PIMCO for not paying her 60 days of severance following her termination in February 2022.
VanSingel alleges that she experienced discriminatory conduct from senior vice president of retail sales Simons in January 2022. During a meeting, Simons claimed that a trainer assigned to his team was unprofessional, according to VanSingel. When VanSingel asked for specific complaints Simon couldn’t bring up other points besides playing rap music in class on breaks, VanSingel said in the lawsuit.
Throughout the meeting Simons kept correcting her and told her the way she was speaking was undermining her credibility, VanSingel claimed. He was employing “gender-based micro-aggressions in the conversation,” according to the lawsuit.
VanSingel brought the interaction to her direct supervisor, Dwayne Smith, chief administrative officer, but her concerns were not addressed because she was terminated shortly after her complaints, she said in the lawsuit.
VanSingel was told by Smith that she was being fired for expressing frustrations and the comments she made in her self-evaluation portion of her annual review, in which she claims to have made an honest assessment about the past year, court papers say. VanSingel later learned that the termination decision was made by the CEO immediately after her complaints regarding Simons and before her self-evaluation comments, according to the lawsuit.
Meyer, who was hired as a mortgage originator in October 2020 with about 20 years of experience, claimed that Simons raised his voice after she questioned some data on a report that Simons was sharing at a meeting in January 2022. According to Meyers, other sales managers sent her messages apologizing for Simon’s behavior. Simons later sent Meyer a text apologizing for his outburst but didn’t apologize in front of the group, she said.
In late January during a call with Simons, Meyer suggested that her team get more leads to experiment if her group could convert more loans than other less experienced teams. Simons allegedly told Meyer in an unprofessional way not to question how things were set up. When Meyer brought the encounter up to her supervisor Jewkes, Meyer was told to to bring things up to Simons and “couldn’t fear his reaction,” she claimed.
Despite receiving an award for her group’s performance in January 2022, Meyer was informed by the human resources team, Simons and Jewkes that she was being terminated or could accept a demotion to an hourly call center loan officer. She resigned in April 2022 after taking the hourly call center loan officer position.
Although the company accepted Meyer’s resignation, they never responded to her complaints, according to the lawsuit. In her resignation letter, she said her demotion was a “constructive discharge, resulting from gender discrimination and retaliation.”
Palmer, who was hired as sales manager in March 2021, alleged that Simons hired a loan originator whom she chose not to hire. She claims the candidate was discriminatory and disrepectful during the interview. Sidney Elliot, the candidate, referred to Palmer as “honey” and “sweetheart” during the interview, the lawsuit claims. Jewkes, despite being aware of the candidate’s conduct, chose to hire him, the lawsuit alleges.
Elliot was later transferred to Palmer’s team and referred to her as “sweetheart” again during the first weekly one-on-one, Palmer said. After Elliot complained to Simons that he couldn’t report to Palmer because “he didn’t feel that he could work with a woman,” Simons and Jewkes “conceded to Elliot’s discriminatory demand” and didn’t provide Palmer a comparable replacement, the lawsuit said.
Simons later admitted to Palmer that he knew he should have fired Elliot, Palmer claimed. Following that incident, Jewkes began criticizing the quality of Palmer’s originator’s files, which Palmer claimed was on par with the top originators at the company.
In January 2022, Palmer was notified that she was terminated, allegedly for low sales volume, days after she reported several discrepancies in her final production numbers to an employee on the payroll team. She was about $80,000 from hitting the target of $10 million sales but reports suggested that she was nowhere near that figure, Palmer claimed.
The plaintiffs are seeking judgment on three separate counts. They are seeking back pay, front pay, pension benefits, stock options, bonuses, health benefits, and any other relief needed to compensate them.
FGMC declined to comment on ongoing litigation. None of the named defendants responded to requests for comment. Attorneys for VanSingel, Meyer, and Palmer also did not respond to requests for comments.
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MSR market closes June on $5.2B high note, but has it peaked?
The mortgage-servicing rights (MSR) market continued to defy gravity and remained upward bound as June came to a close.
On the last day of the month, the New York-based Mortgage Industry Advisory Corp. (or MIAC Analytics) released bid documents for an MSR offering it is brokering that exceeds $5 billion in value.
“MIAC Analytics, as exclusive representative for the seller, is pleased to offer for your review and consideration a $5.22 billion Fannie Mae, Freddie Mac and Ginnie Mae mortgage-servicing portfolio,” the offering documents state. “The portfolio is being offered by a mortgage company that originates loans with a concentration in California.”
In fact, by value, the bulk of the loans in the MSR package were originated in California — representing $2.9 billion, or about two-thirds of the total value of the MSR bulk offering. The percentage of Fannie- and Freddie-backed loans in the package is split evenly by value — at 39.3% and 39.5%, respectively. Ginnie-backed loans comprise 21.2% of the package by value.
The offering includes a total of 17,088 mortgages with an average interest rate of 3.127% — well below current 30-year fixed rates now approaching 6%. The servicing-fee cut — a slice of the total interest rate — averages 0.268%.
In addition to the current offering, MIAC came out with two large MSR offerings earlier this month involving a $4.8 billion loan pool and a separate $816.7 million package, both composed of Fannie Mae and Freddie Mac loans.
But how long can this MSR boom continue?
Tom Piercy, managing director of Denver-based Incenter Mortgage Advisors, said as interest rates rise, the value of MSRs generally increases because the risk of early repayment of mortgages decreases. And fast-rising rates in 2022 have killed the refi boom, which is a major driver of mortgage prepayments.
Piercy added, however, that at some point rates reach a level where each additional incremental increase doesn’t appreciably decrease prepayment speeds.
“The question around diminishing returns is valid,” he said. “However, one must be aware of the nuances and economic variables that impact MSR valuations.”
Yes, we would see pricing begin to hit its ceiling when looking at just prepayment curves, Piercy explained.
“For instance, most 2020 & 2021 conventional [mortgage] vintages have seen lifetime [prepayment] speeds drop to as low as 6% or 7%, and more typically 8%,” he said. “The standard life of a mortgage asset without refinance pressure is typically 8% over the history of data — simply due to relocation, divorce, death, etc.”
A conditional prepayment rate, or CPR, is typically expressed as an annual percentage based on the likely prepayment rate for a pool of mortgages.
“Given this history, one would believe we are hitting our ceiling with MSR values, but that’s not the whole story,” Piercy said.
Piercy explained that another factor impacting the value of MSRs that could further fuel the run-up in value is the relationship between loan escrow balances and short-term rates.
There is a short-term (monthly) float of around 13 days between the average on-time payment of principal and interest to the day of remittance to the investor. Long-term escrows, he added, are considered the taxes and insurance payments “that are received monthly but not paid to the counties or insurer for six to 12 months, depending on how often taxes are paid in the county or when the homeowners policy is due.”
“Escrow balances play a big part of the valuation when rates are higher,” Piercy added.
MIAC explains the role of an escrow balance plays in loan income on its website with the following example:
“What follows is a simplified monthly income statement for a $200,000 loan the month after it is sold. The servicing fee is 25 basis points, the ancillary income is $20.00 per year, the monthly value of the escrow float is estimated to be $1.33 (average escrow balance of $1,600 at 1% interest), and the servicing costs are $125 per loan.”
When the spread between short-term and longer-term rates narrows, as it has been since the start of the year, that helps to bolster the value of escrow balances and the related MSRs, Piercy said. As of March 1, the spread between the 2-year and 10-year Treasury was 41 basis points, according to Federal Reserve data. On June 20, it stood at 4 basis points.
“This increase in short-term rates will impact the value of the escrow balances associated with the MSR asset, hence, generate even greater value in the short-term,” Piercy said. “As rates rise, however, one will typically see the required yield on investment increase, but that is lagging parameter, which means we will see the value of MSRs increase in the short-term should these short-term rates continue to rise.”
Based on recent MSR offerings in June that are in addition to MIAC’s recent offerings, it appears there is still plenty of fuel left in the MSR-value tank.
Earlier this week, HousingWire reported that the Prestwick Mortgage Group, an Alexandria, Virginia-based advisory and brokerage firm, had put out for bid an offering for a $1.6 billion package of Fannie Mae, Freddie Mac and Ginnie Mae mortgage-servicing rights. Bids are due July 12.
Prestwick’s offering comes on the heels of a separate bulk offering announced recently by Incenter Mortgage Advisors that involves a $915.8 billion package of Fannie Mae and Freddie Mac MSRs. Bids on that package were due on June 23.
Piercy said Incenter also is working on multiple deals totaling more than $60 billion “that are not out for public auction.”
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Deephaven Mortgage offers hands-on training to help brokers gain expertise with non-QM product offerings
With more hopeful homeowners searching for non-traditional lending solutions, brokers are looking to partner with wholesale lenders that can offer unique options. For those borrowers historically underserved in the traditional mortgage industry, Deephaven Mortgage has proven that its expertise in the non-QM space can benefit both brokers and borrowers.
With more than a thousand independent mortgage brokers counting on their knowledge and experience, the account executives at Deephaven Mortgage have a reputation for helping their brokers thrive each step of the way.
“We work with brokers on their submissions from the get-go by recommending the right product, catching errors or missing information upfront and stewarding the application through to underwriting,” said Tom Davis, Chief Sales Officer at Deephaven Mortgage. “Our brokers know we stand by our terms and commitments. And because our underwriting is in-house, we respond faster and can be more flexible with borrowers’ individual situations.”
As the demand for non-QM continues to grow, brokers want to know that they are fully equipped to handle an influx of non-QM borrowers. While adding non-QM options to their product offering could be big for business, many brokers may not have the practical experience required to negotiate these loan types effectively. That’s where Deephaven comes in.
“Brokers who are new to non-QM are eager to offer these loans to grow their value and their business. On the other hand, they’re often worried it may be difficult to learn how to broker non-QM,” said Shelly Griffin, Senior Vice President of Client Development. “Deephaven offers great, hands-on training that quickly gets brokers comfortable with the process and submitting loans. We also provide them with white label marketing materials explaining non-QM and different product options that they can simply pass on to borrowers or real estate agents.”
Deephaven also offers a bank statement loan program feature that provides an excellent solution to evaluate the financial position for borrowers who are self-employed or small business owners. Moreover, Deephaven’s 15-day DSCR (Debt Service Coverage Ratio) loan program give brokers a competitive advantage in a booming property investment market.
By pioneering more non-traditional lending solutions, Deephaven is keeping pace with a housing market and workforce that is constantly evolving. The team at Deephaven continues to adapt its products and approach to align with the needs of today to help future borrowers meet their homebuying goals and to help brokers meet their business goals,.
“Entrepreneurs, self-employed workers, business owners, property investors – more and more people are choosing to do it their way. As the demand for non-QM continues to grow, it will become more mainstream to the point where it will be unusual for a wholesale broker not to include non-QM in their product offering,” said Steve Lemon, Senior Vice President and National Head of Wholesale Sales. “Our role is to lead the adoption of non-QM by the wholesale broker community through product innovation, great training and fantastic support for both brokers and borrowers.”
Tom Davis, Chief Sales Officer
Tom Davis manages Deephaven’s Wholesale and Correspondent sales channels and brings 20+ years of experience helping lending partners with their Non-Agency/non-QM and Agency needs.
Shelly Griffin, Senior Vice President, Client Development
Shelly Griffin’s profound knowledge of loan processing and underwriting translates into confident, long-term client relationships. She has helped innumerable mortgage professionals successfully roll out non-QM products for their organizations.
Steve Lemon, Senior Vice President, National Head of Wholesale Sales
Steve Lemon is expanding Deephaven’s broker network as the demand for Deephaven’s non-QM products increases. Steve brings more than 25 years of success in sales and support in the non-QM space.
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