There’s no question that a digital-first way of doing business is becoming the norm and the demand for digital in the mortgage industry is only growing. HousingWire recently spoke with Armando Falcon, CEO of Falcon Capital Advisors, about the continued growth of digital mortgage solutions such as eClosings and what lenders can do to implement eMortgages into their business models.
HousingWire: Is this the year that digital mortgages and eClosings really accelerate? Or was the recent interest more of a COVID-19 workaround?
Armando Falcon: There’s no question that digital mortgages and eClosings certainly got a lot of attention during COVID-19, but they are not a “fix” or a “fad”—they’re the future. The momentum was there pre-COVID and, if anything, it is accelerating as COVID recedes.
Lenders realize the value of giving their customers the same kind of convenient digital experience that they receive in other aspects of their lives (e.g., banking, shopping, transportation). They also realize that if they don’t provide this experience, larger national retail lenders will. This is why I believe these initiatives will continue even in the smaller, more competitive environment that the industry is now facing.
In addition to customer acquisition and retention, the creation of digital assets provides greater capital market efficiencies and reduces costs and errors. Recently there have been a handful of ROI studies that have shown that eClosings and eNotes can save originators approximately $400 per loan and settlement service providers about $100 per loan.
The investment side is ready for the securitization of digital assets. Fannie Mae and Freddie Mac have been buying eNotes for years, and now Ginnie Mae has just reopened its Digital Collateral Program. We have been working closely with Ginnie Mae on this program and are very excited that as of June 20 the program began accepting new applications from eIssuers, eCustodians, and subservicers, opening up the government market to eNotes.
In addition to the momentum and the economics, digital lending just makes sense. Why would our industry keep churning out paper, when the rest of the financial world is rapidly doing as much as possible digitally?
HW: What are the biggest obstacles that lenders face in a true digital transformation?
AF: In my opinion, the obstacles are changing. Three years ago, the mortgage industry wasn’t entirely ready for digitalization. Title and settlement companies were hesitant to embrace eClosings, most states did not permit RON and, even where RON was available, most lenders were not yet comfortable with it. As for investors, the GSEs were pretty much the only ones accepting eNotes. There was not yet a program for securitizing government loans. But this is all changing.
Today, the vast majority of title and settlement companies are ready and willing to support hybrid and, in many cases, full eClosings. There are 39 states that have passed RON laws. The landscape of investors accepting eClosed loans and eMortgages has grown exponentially. And as I mentioned, Ginnie Mae is expanding its Digital Collateral Program.
Companies that are moving forward with digital transformation tend to have strong executive backing of their programs and other advocates in their organization who see the immediate benefits in terms of customer experience, operations, and capital markets efficiency. They are willing to drive change across their operations and work with advisors, like Falcon, to develop a roadmap to integrate digitalization into policies, processes, and training.
A notable challenge for the industry at the moment is the decline in overall market volume and reemphasis on purchase transactions. For the past two years, lenders were so busy booking refinance business that they were reluctant to spare resources for digital transformation initiatives.
Now, lenders that have not yet implemented eClosings will need to seriously consider how the cost savings and operational benefits from digital mortgages offset the economic pressure experienced in a down market. For lenders that have implemented eClosings, they may need to build out new workflows and procedures for their purchase channel to meet the shifting market.
Purchase transactions involve more moving parts, and the lender has less control over certain aspects, such as where settlement occurs. Still, with purchases just as with refinances it’s the lender who drives eSignature of its documents, chief among them being the promissory note.
Digitalizing even just this piece of the closing package creates process efficiencies, reduces costs, and shortens the time spent at closing. With more purchase transactions occurring, we expect there could also be an increase in the use of IPEN (In-Person Electronic Notarization) to notarize the security instrument if the borrower prefers to have an in-person ceremony.
HW: In terms of implementation, how long should an end-to-end transformation project take?
AF: The scope of these projects can vary considerably from one lender to another. Factors that may impact the complexity and time of implementation include: Are they a multi-channel lender? What resources have they committed to their implementation project? Where does the project fit within their list of priorities? How advanced are their counterparties and partners?
Also, what are their goals? Providing a customer experience to rival the mega lenders? Taking time and cost out of closings? Being able to move assets more quickly into the secondary market?
Some clients want to do all of these things and want them done yesterday. Others are content to take a more gradual approach.
The end goal is to be entirely digital, but not every lender needs to be fully digital on day one. There is incremental value in each step in the transformation process. Hybrid closings, for example, are more efficient in most cases than traditional closings and enhance the customer experience. They are often a good interim step prior to full eClosings.
As a rule of thumb, a relatively large lender can go from paper to hybrid closings in three to five months. A fully digital, enterprise-wide eClosing/eNote transformation probably takes between eight and 12 months. Some of the key activities for a lender to successfully implement an eMortgage program include:
- Standing up a dedicated Project Team augmented with eMortgage expertise
- Conducting an impact analysis across the organization
- Developing a roadmap and plan and
- Ensuring organizational buy-in at all levels through communications and training
In our experience, it is also important to train, train, train, and roll out quickly from the pilot so that your staff embraces digital as the new norm and not a “one-off.”
HW: What are you telling your clients who are on the fence about moving to eClosings and eMortgages?
AF: You cannot afford not to be digital. Your customers expect it, and if you don’t provide it, they will go to other lenders who are more advanced in this area and who aggressively promote a superior digital experience for consumers.
You cannot afford to be an inefficient, slow or high-cost lender. The market is already too competitive. eClosings can cut your origination costs by $400 or more per loan. How can you ignore this?
If your business model is to originate to sell or securitize, why wouldn’t you want to do it faster… get your capital and GOS sooner and pay less on warehouse lines?
Finally, if you are going to be in the mortgage business long term, you’re going to have to be digital sooner or later. Why not make it sooner to keep pace with your competitors?
The post The obstacles to a digital mortgage are changing – Here’s what lenders need to know appeared first on HousingWire.
Source link
:215-447-7209
: deals(at)frankbuysphilly.com
Wholesale Lenders Special Report
Refinance volume was projected to fall after last year’s record-breaking boom, and this year’s rising mortgage rates have further pronounced the downward trend in volume. In light of this, brokers are compelled to find new areas of opportunity, such as expanding their product offerings.
When venturing into the world of non-QM and other specialty lending options, it’s important to partner with experts in the field who can provide reliable training, support and solutions. The four companies featured in this section work to empower brokers through this changing market environment while offering products and solutions for every borrower’s needs.
Champions Funding
Flagstar Bank
Deephaven Mortgage
United Wholesale Mortgage
The post Wholesale Lenders Special Report appeared first on HousingWire.
Source link
What It Takes To Build an Out-of-State Real Estate Portfolio and Earn Enough to Quit Your Job
Sarah Weaver lives with intention, reacts with flexibility, and practices patience. It’s how she managed to acquire 15 units and travel the world as a digital nomad. It’s why agents hire her to coach them. It’s how she started a company to fill a need in her industry. It’s how she earned the financial position to be able to pursue properties in the Smoky Mountains, an area that would have been out of reach for her just a year ago.
But her journey wasn’t always smooth sailing. 2020 was a particularly transformational year, she explains on an episode of the BiggerPockets Real Estate Podcast. She admits to doing things the wrong way before learning to do them right. She wasn’t sure how to navigate her relationships with real estate agents or how to narrow her focus to the right investment strategy. That knowledge was, like Weaver’s success, earned through hard work. Now, she has carved a path that other long-distance investors would feel lucky to follow—and there’s a lot to learn from her story.
Be Intentional
People sometimes ask Weaver how she grew her wealth so quickly. She says it wasn’t easy — but it was most certainly intentional. “I think one thing that I can say with confidence is I live really intentionally,” she says. “Was there a lot of tears and setbacks and frustrations? Absolutely. But I woke up and I was really clear on what my goals were and I didn’t let the little things knock me down.”
In 2015, Weaver wrote in her journal that she wanted to be location-independent. Within eight days, she had a job in the real estate industry that allowed her to work remotely. “And that was this ‘aha’ moment of manifestation. And so, ever since then, I’ve just been really diligent about writing down what I want in life and then not really taking no for an answer.” She knew she wanted to live in Buenos Aires. So three years ago, she bought a one-way ticket to Argentina. When you’re intentional about the life you want, you understand that obstacles are par for the course—and you don’t let them turn you around.
Where to Start
A lot of success in real estate comes from starting with the resources you have. Weaver was living in Denver, Colorado, in 2017. The area was cost-prohibitive for her at the time, so she drove to Kansas City, knowing she could get a better price. “And so I house-hacked in Kansas City in 2017.” She went from single family to duplex to fourplex, house-hacking in different markets each time. It was never an accident that she would become nomadic. She built her investment strategy intentionally for that lifestyle.
Co-host of the BiggerPockets Real Estate Podcast, David Greene, echoes that a lot of success in real estate and business is built in small steps. “It’s that incremental systematic progress where you’re not trying to just knock your opponent out in one punch,” he explains. That kind of patient escalation is something that Weaver has done very well.
The Perks (and Challenges) of Long-Distance Investing
“I think long-distance investing is the absolute way to go even from day one. People ask like, ‘What do you do if something breaks?’ And I say, ‘It’s great. You don’t do anything.’”
Doing nothing, however, requires a lot of proactive work. “ I have what I call the vendor list. And so I don’t just have one plumber. I have five plumbers because of course the day that something happens, the plumber that you love and trust isn’t available. And so that list is crucial.” She starts working on that list as soon as she’s confident she’ll close. It’s how she self-manages all of her 15 units from thousands of miles away.
Doing nothing also requires that you do your due diligence, she says. “You have to have a team on the ground that you can trust. And so that’s where investor-friendly, investor-savvy real estate agents are absolutely clutch. You need to trust them, but just like online dating, you trust but verify. And so I like to have video tours. I walk the neighborhood on Google Earth. There’s lots of steps in my due diligence process that make long-distance investing possible.”
And though it might go without saying, strong WiFi is crucial. Weaver recommends setting up in a new locale on a weekend day to ensure you can get consistent internet access during the week.
Though distance can be an obstacle, it also has its perks. Living abroad allowed Weaver to keep her expenses low, save more of her salary, and go from three units to 15 in just 68 days. “And when that happened, I woke up and was like, “Wow, I did it,” like I exceeded my lean F-I number or lean financial independent number. Meaning all of my expenses are more than covered by my rental income. I can easily leave my W-2.” It was always the end goal—and now it’s a reality.
Navigating Relationships with Agents
Working with agents can be difficult even when you’re not in a different time zone. Investing from abroad presents an even greater challenge. But ironically, when you invest from a distance, you rely on your agent the most. Weaver says choosing the right agent is part of the puzzle, and having flexibility in your expectations is another. “Ideally, your agent is also an investor, or at least understands investing,” she says. She asks probing questions when interviewing a real estate agent, such as:
Once you have a good agent, you should, of course, try to keep them. This means setting crystal clear criteria so your agent can confidently find what you need. For example, when Weaver was in New Zealand pursuing a deal in Omaha, she provided her agent with incredibly detailed criteria. “He knew to give me purchase price, current rent, market rent, estimated rehab, taxes, and insurance.” And that information made it easier for Weaver to evaluate the deal.
Maintaining your agent’s trust also means putting your money where your mouth is. “One of the quickest ways to be sent to the bottom of an agent’s list is to tell them your crystal clear criteria, the agent sends you that deal, and then you don’t write an offer on it.”
It’s important to be respectful of your agent’s reputation and time. If they’re going to reach out to their contacts for you and find off-market deals that meet your criteria, you need to be certain about what you want and willing to write an offer when you find it, or it will reflect poorly on them. Weaver also has different expectations of how her agents spend their time than she would from a residential agent. “I actually don’t make my agents walk a property unless I’m under contract,” she says, because their time is spent hunting deals.
If you’re looking for an investor-friendly real estate agent, check out Agent Finder in the BiggerPockets Marketplace to find vetted and professional real estate agents who can help you secure the deals you need.
Choosing the Right Investment Strategy
Weaver’s success was only possible because she focused on one strategy at a time. Currently, she’s finding a happy medium in the medium-term rental strategy. “If you have someone who’s willing to book your place for a month, two, maybe three months, they want it fully furnished. You, the landlord, cover utilities, and you might not get as much rent as you would on Airbnb, but there’s less turnover. There’s guaranteed income,” she says.
This strategy also allows investors to evade local ordinances that restrict the number or type of short-term rentals allowed, which have become popular in Western states, particularly Colorado.
Weaver says she’s had success listing her units on Facebook Marketplace and FurnishedFinder.com. But Airbnb can also be a reliable place to find medium-term tenants. Airbnb CEO Brian Chesky says more people are reserving rentals for a longer period because the pandemic has led to more remote work. In the fourth quarter of 2021, 22% of the nights booked were for stays of one month or longer.
Filling a Market Need
Investors often have the unique ability to recognize the unmet needs of other investors, and that’s the idea behind Weaver’s newest venture. “I am now filling a need in the market. I started a company called Arya Design Services, and we help investors either revamp or fully launch their Airbnb. We can buy all of the furniture remotely, have it sent to the unit, and people on the ground can put it together, or you can fly my team in to furnish it themselves.”
It’s just another example of the opportunities that can present themselves when you live with intention, react with flexibility, and practice patience.
Find a Local Agent Today
The BiggerPockets Agent Finder makes it easy to connect with real estate agents who know the local market and can evaluate properties from an investor’s perspective. Here’s how it works:
Source link
FGMC owes Customers Bank $25M, bankruptcy filing shows
First Guaranty Mortgage Corp. (FGMC) and its holding company, Maverick II Holdings LLC, filed for Chapter 11 bankruptcy protection Thursday, June 30, leaving one of the country’s major warehouse lenders as its largest unsecured creditor, according to court filings.
Pennsylvania-based Customers Bank, which has warehouse lending operations located in Hamilton, New Jersey, is listed as the largest unsecured creditor in the FGMC Chapter 11 case — with a claim of $25 million, court pleadings show.
A 2021 report by industry publication Inside Mortgage Finance ranked Customers Bank as the 10th largest warehouse lender nationally in terms of financing commitments as of Q3 2021 — at $5.4 billion.
Scott Goodwin, senior vice president of warehouse lending at Customers Bank, said the debt exposure in the FMGC case “is guaranteed by a PIMCO entity, and we expect to be paid in full.”
Behemoth investment management firm PIMCO in 2015 purchased a stake in FMGC, according to a report by Inside Mortgage Finance at the time.
HousingWire reported late last week that First Guaranty had laid off nearly 80% of its staff and stopped accepting new mortgages. The lender then filed for Chapter 11 bankruptcy on Thursday, June 30.
“While we have made considerable efforts to address our ongoing financial challenges related to the state of the mortgage market, we ultimately must do what is best for our borrowers and consumers,” said Aaron Samples, chief executive officer of FGMC. “After careful review and consideration, the company determined that pursuing the protections of chapter 11 is the right and responsible path at this time.
“As part of this process, the Company retained a portion of its workforce to manage the day-to-day business.”
The lender also has filed various motions to preserve company “value for the benefit of the company’s stakeholders,” FGMC’s announcement of the bankruptcy states.
The goal for a company in a Chapter 11 bankruptcy protection case is to emerge from bankruptcy after restructuring its operations and debt through a court-approved reorganization plan — with secured creditors having superior status over unsecured creditors.
Among the motions now pending in the FGMC bankruptcy case is a request seeking court approval for debtor-in-possession (DIP) financing, which would be provided by Barclays Bank PLC, court pleadings show. DIP is a special kind of financing available to companies in Chapter 11 cases and normally has priority over existing creditors’ claims or equity holdings.
Other creditors in the FGMC bankruptcy with unsecured claims exceeding $500,000 include the following:
The nature of each of the company’s claims is listed as a margin call in the court pleadings — except for Sourcepoint’s claim, which is listed as a trade debt. FMGC is listed as the only equity security holder in Maverick II Holdings, court pleadings show.
The bankruptcy filing so far does not include a list of secured creditors, only a creditors matrix — which does not include financial figures. PIMCO is not listed in the matrix, at least under that operating name.
FGMC’s Chapter 11 bankruptcy case is filed with the U.S. Bankruptcy Court for the District of Delaware.
The post FGMC owes Customers Bank $25M, bankruptcy filing shows appeared first on HousingWire.
Source link
After implosion, FGMC files for bankruptcy
Less than a week after laying off hundreds of workers and refusing new mortgage applications, First Guaranty Mortgage Corp. (FGMC) and its affiliate Maverick II Holdings filed for Chapter 11 bankruptcy protection late Wednesday.
“While we have made considerable efforts to address our ongoing financial challenges related to the state of the mortgage market, we ultimately must do what is best for our borrowers and consumers,” Aaron Samples, chief executive officer of FGMC, said in a statement.
FGMC, controlled by global investment management firm PIMCO, said it had “significant operating losses and cash flow challenges due to unforeseen historical adverse market conditions for the mortgage lending industry, including unanticipated market volatility.”
HousingWire reported on Friday that FGMC laid off around 80% of its workforce in a virtual meeting. Later that day, the company sent a WARN Notice to the Texas Workforce Commission, explaining it had terminated 428 of its 565 employees. A deal for funding with fintech firm PLACE fell through, sources told HousingWire.
In the wake of the mass layoff on Friday, correspondent lending partners have complained about a total lack of communication with the company. They are particularly worried about loans already approved but not purchased by FGMC.
According to those sources, FGMC adopted an aggressive pricing strategy to purchase loans from correspondent partners, often paying 20 basis points higher than other investors on 30-year fixed-rate mortgages. When the markets became particularly volatile in mid-June, losses became too great and PIMCO made the decision to shut the company down, company sources said.
The company said the bankruptcy action has no impact on closed mortgages, which are already serviced by third parties. FGMC said it has taken steps to accommodate the maximum number of borrowers who have started but not yet completed the loan process.
FGMC claims that loans in the pipeline will be closed and funded, under existing terms and conditions, due to a debtor-in-possession financing and potential partners. The debtor-in-possession financing, however, needs the Delaware bankruptcy court’s approval.
Several former correspondent partners told HousingWire they’ve struggled to sell their pipeline of loan elsewhere on such tight timelines.
FGMC said it is in the process of developing an employee incentive and retention program, which requires Court approval. As part of the Chapter 11 process, the company retained a portion of its workforce to manage the business.
Several former workers on Wednesday also filed lawsuits related to the layoffs. Jennifer Jackson said the company violated the WARN Act and seeks damages amounting to 60 days’ pay and employee retirement income security benefits. In a separate lawsuit, John Slater and Lee Ann Casanova made similar claims.
James Kleimann contributed reporting.
The post After implosion, FGMC files for bankruptcy appeared first on HousingWire.
Source link
Purchase mortgage rates drop, ending 2-week climb
Purchase mortgage rates this week dropped 11 basis points to 5.70%, according to the latest Freddie Mac PMMS Index, ending a two-week climb following the Federal Reserve’s rate hike earlier this month.
A year ago at this time, 30-year fixed rate purchase rates were at 2.98%. The PMMS, a government-sponsored enterprise index, accounts solely for purchase mortgages reported by lenders during the past three days.
“The rapid rise in mortgage rates has finally paused, largely due to the countervailing forces of high inflation and the increasing possibility of an economic recession,” said Sam Khater, chief economist at Freddie Mac.
Another index showed the 30-year conforming rates also slid from last week.
Black Knight’s Optimal Blue OBMMI pricing engine, which includes some refinancing data — but excludes cash-out refis to avoid skewing averages – measured the 30-year conforming rate at 5.89% Wednesday, down slightly from last week’s 5.9%. The 30-year fixed-rate jumbo was at 5.42% Wednesday, up from 5.33% from the previous week, according to the Black Knight index.
Khater expects the dip in mortgage rates will also slow down home price growth.
“This pause in rate activity should help the housing market rebalance from the bottleneck growth of a seller’s market to a more normal pace of home appreciation,” Khater said.
Mortgage application volume rose 0.7% last week led by refinancing applications and a slight uptick in conventional loans, according to the Mortgage Bankers Association. After increasing 65 basis points during the past three weeks, the 30-year fixed rate declined 14 basis points last week, the MBA said.
Refi application rose 1.9% from the previous week and purchase application marginally increased 0.1% from a week earlier.
Mortgage rates tend to move in concert with the 10-year U.S. Treasury yield, which reached 3.10% Wednesday, down from 3.16% a week before. The federal funds rate doesn’t directly dictate mortgage rates, but it does steer market activity to create higher rates and reduce demand.
Following the Federal Reserve’s interest rate hike of half a percentage point June 15, mortgage rates have been showing an upward trend for the past two weeks.
According to Freddie Mac, the 15-year fixed-rate purchase mortgage averaged 4.83% with an average of 0.9 point, down from last week’s 4.92%. The 15-year fixed-rate mortgage averaged 2.26% a year ago.
The 5-year ARM averaged 4.50% up from 4.41% the previous week. The product averaged 2.54% a year ago.
Economists expect the tightening monetary policy will reduce originations in 2022 and 2023. The MBA expects loan origination volume to drop about 40% to about $2.4 trillion this year, from last year’s $4 trillion. Meanwhile, the MBA expects 6.53 million existing and new home sales in 2022, compared to 6.9 million in 2021.
The post Purchase mortgage rates drop, ending 2-week climb appeared first on HousingWire.
Source link
Stake, a fintech that offers cash rewards to renters, raises $12M
Stake, a financial tech company that provides cash back and banking services to renters, raised $12 million in Series A funding to build out its platform and suite of solutions for renters and property owners.
The financing round was led by real estate technology investment firm RET Ventures and also included participation from Enterprise Community Partners, Hometeam Ventures, and Second Century Ventures, the investment arm of the National Association of Realtors, Stake said Monday.
“Unlike homeowners, renters rarely reap financial benefits from paying their homes and families who rent tell us they could use a little extra cash each month,” said Rowland Hobbs, co-founder and CEO at Stake. Hobbs added that the platform allows renters to build a “rainy day fund” by making their largest expense also their largest source of savings.
Founded in 2018, Stake provides an average of 4% cash back to renters when they pay monthly rent using Stake and offers a no-fee banking service, according to the firm’s website.
The company makes profit by charging a transaction fee for every cash back to rental owners and operators. In return, every $1 spent with Stake returns on average $2.11 to owners and operators by replacing marketing and unmanaged expenses, Hobbs said.
The firm’s website shows a total of $140 million leases are offered on Stake. Renters that use Stake for their monthly payments are 50% less delinquent than those who don’t use the platform and result in 30% more rental renewals, according to the company.
The post Stake, a fintech that offers cash rewards to renters, raises $12M appeared first on HousingWire.
Source link
Knox Financial to expand loan products with $50 million in funding
Boston fintech firm Knox Financial plans to expand its lending business and loan products with $50 million in funding it received from a real estate advisory firm.
New York-headquartered Saluda Grade provided the capital, which Knox will use to expand its lending business into Georgia, Knox representatives said Wednesday. The fintech also will offer additional loan products, including home equity lines of credit (HELOCs), new purchase loans and cash-out refinancings.
“A homeowner’s best investment is the home they live in — far better than the returns we’ve seen from the stock market in 2022, and a great hedge against record-high inflation,” said David Friedman, co-founder and CEO of Knox Financial.
Established in 2018, Knox aims to help manage residential rentals with its algorithm-based platform. Its rental pricing and projection model also calculates the rate of return an investment property is expected to produce over time. When a property is enrolled in the platform, Knox automates and oversees the property’s finances and taxes, insurance, leasing, banking and bill pay, according to the company’s website.
The funding comes shortly after Knox launched its first mortgage product, dubbed the Knox equity access program (KEAP), in April. KEAP loans give homeowners access to capital, based on the equity in the home, to turn it into an investment property with Knox. Homeowners can then use their KEAP loan to fund a downpayment on their next home and to pay for repairs on their investment property.
In return, Knox charges an origination fee and third-party costs to the borrower. Knox also keeps 10% of the rental income generated from properties listed on its platform.
Knox’s expansion comes amid a shrinking mortgage origination market. As mortgage rates began increasing this year, lenders, mortgage tech firms and real estate brokerages started laying off employees, often citing rapidly declining market conditions.
With rising mortgage rates, company representatives said Knox has seen growing interest in second lien products such as home equity loans or HELOCs from borrowers who have tappable equity but don’t want to refinance.
“As mortgage rates have risen, more inventory will become available at more competitive pricing,” said Matt Marra, chief growth officer at Knox.
Knox Financial raised $10 million in Series A funding in April 2021, led by G20 Ventures, following a $3 million seed round in January 2020. The largest markets for Knox are metropolitan areas of Boston, Atlanta, Houston, Dallas and Austin, Texas. According to Marra, Knox oversees a portfolio of $150 million in combined value.
The post Knox Financial to expand loan products with $50 million in funding appeared first on HousingWire.
Source link
As FGMC shuts down, lender partners question fate of loans in pipeline
Tech-fueled mortgage lender UpEquity just wants answers.
Roughly a year ago, the Austin-based fintech began to sell its loans to First Guaranty Mortgage Corporation (FGMC), a lender and investor that specializes in non-qualified mortgage loans and is controlled by behemoth investment management firm Pacific Investment Management Company (PIMCO).
UpEquity sent between 30 and 40 loans per month to FGMC, worth about $60 million in total volume, executives said. Depending on the month, FGMC bought between one-fourth and one-third of the loans UpEquity sold to investors through the correspondent channel.
One week ago, problems emerged: FGMC’s loan approval, which usually took one business day after due diligence was completed, was taking four days. Questioned by UpEquity, FGMC answered that nothing was wrong; they would approve and buy the loans.
Then, without apparent notice to its correspondent partners, FGMC on Friday cut most of its workforce, and former high-level employees said the company has essentially shuttered.
It’s caused frustration for FGMC’s lending partners.
“We have about 14 loans, $5 million worth of loans, in the process of being purchased by them,” said Louis Wilson, co-founder and chief operating officer at UpEquity. “On Friday, we stopped getting responses via email. Then, we read about the layoffs. On Monday, no one responded to my email.”
He added: “We’re sitting here wondering what will happen to those loans. We’ll probably sell to another investor. For us, it’s nowhere near life-threatening, but it’s a painful day.”
A West Coast-based lending executive told HousingWire that FGMC said it can’t or won’t honor locks in its correspondent pipeline, even loans that were cleared for funding and underwritten by FGMC.
“I have done this 30 years and not seen it done this poorly,” he said.
A spokesperson for FGMC, which stopped taking mortgage applications late last week ahead of the mass layoff, declined to answer HousingWire’s questions. However, the spokesperson said that the company is continuing to fund loans, engaging proactively with its customers and “working closely with financial stakeholders to navigate this challenging moment.”
Mispricing at FGMC?
Two mortgage executives whose companies sold loans to FGMC said the firm often paid 20 basis points higher than other investors on 30-year fixed-rate mortgages.
However, mortgage rates rose sharply in the last few weeks, largely due to news of higher-than-expected inflation and the anxiety leading up to the Federal Reserve‘s 75 basis point hike.
FGMC approved loans to purchase at a rate of 5.3%, locked 20 days ago, according to Wilson, but now rates are around 6%. And investors are asking for higher premiums to invest in these assets amid a flight to quality caused by the expectation of higher U.S. Treasury rates.
Days before the layoffs, FGMC was negotiating to purchase loans with more lenders, and all seemed business as usual, multiple sources told HousingWire.
“We signed up with them as a correspondent; we signed the paperwork on Monday, June 20. Then, on Friday, the 24th, they went out of business,” said Rich Weidel, the CEO of multichannel lender Princeton Mortgage. “This happens when companies get desperate, and they try to win loans by mispricing.”
According to Weidel, Princeton signed the papers but did not sell loans to FGMC.
Funding falls through
FGMC sent a WARN Notice to the Texas Workforce Commission on Friday, explaining the company has decided to terminate the employment of 428 of its 565 employees on June 24, 76% of the total workforce.
“FGMC has experienced significant operating losses and cash flow challenges due to unforeseen historical adverse market conditions for the mortgage lending industry, including unanticipated market volatility,” Cassie Vacante, senior vice-president of Human Resources, wrote in the document.
Vacante added that “in addition, FGMC’s recent efforts to obtain funding that could have prevented this layoff have proven unsuccessful.”
Former employees told HousingWire on Friday that they were laid off without severance pay. A spokesperson wrote that FGMC has paid salaries, accrued paid time off, and commissions that have come due. However, the spokesperson said, the company is in the process of making severance payments to those who are eligible.
The post As FGMC shuts down, lender partners question fate of loans in pipeline appeared first on HousingWire.
Source link
The obstacles to a digital mortgage are changing – Here’s what lenders need to know
There’s no question that a digital-first way of doing business is becoming the norm and the demand for digital in the mortgage industry is only growing. HousingWire recently spoke with Armando Falcon, CEO of Falcon Capital Advisors, about the continued growth of digital mortgage solutions such as eClosings and what lenders can do to implement eMortgages into their business models.
HousingWire: Is this the year that digital mortgages and eClosings really accelerate? Or was the recent interest more of a COVID-19 workaround?
Armando Falcon: There’s no question that digital mortgages and eClosings certainly got a lot of attention during COVID-19, but they are not a “fix” or a “fad”—they’re the future. The momentum was there pre-COVID and, if anything, it is accelerating as COVID recedes.
Lenders realize the value of giving their customers the same kind of convenient digital experience that they receive in other aspects of their lives (e.g., banking, shopping, transportation). They also realize that if they don’t provide this experience, larger national retail lenders will. This is why I believe these initiatives will continue even in the smaller, more competitive environment that the industry is now facing.
In addition to customer acquisition and retention, the creation of digital assets provides greater capital market efficiencies and reduces costs and errors. Recently there have been a handful of ROI studies that have shown that eClosings and eNotes can save originators approximately $400 per loan and settlement service providers about $100 per loan.
The investment side is ready for the securitization of digital assets. Fannie Mae and Freddie Mac have been buying eNotes for years, and now Ginnie Mae has just reopened its Digital Collateral Program. We have been working closely with Ginnie Mae on this program and are very excited that as of June 20 the program began accepting new applications from eIssuers, eCustodians, and subservicers, opening up the government market to eNotes.
In addition to the momentum and the economics, digital lending just makes sense. Why would our industry keep churning out paper, when the rest of the financial world is rapidly doing as much as possible digitally?
HW: What are the biggest obstacles that lenders face in a true digital transformation?
AF: In my opinion, the obstacles are changing. Three years ago, the mortgage industry wasn’t entirely ready for digitalization. Title and settlement companies were hesitant to embrace eClosings, most states did not permit RON and, even where RON was available, most lenders were not yet comfortable with it. As for investors, the GSEs were pretty much the only ones accepting eNotes. There was not yet a program for securitizing government loans. But this is all changing.
Today, the vast majority of title and settlement companies are ready and willing to support hybrid and, in many cases, full eClosings. There are 39 states that have passed RON laws. The landscape of investors accepting eClosed loans and eMortgages has grown exponentially. And as I mentioned, Ginnie Mae is expanding its Digital Collateral Program.
Companies that are moving forward with digital transformation tend to have strong executive backing of their programs and other advocates in their organization who see the immediate benefits in terms of customer experience, operations, and capital markets efficiency. They are willing to drive change across their operations and work with advisors, like Falcon, to develop a roadmap to integrate digitalization into policies, processes, and training.
A notable challenge for the industry at the moment is the decline in overall market volume and reemphasis on purchase transactions. For the past two years, lenders were so busy booking refinance business that they were reluctant to spare resources for digital transformation initiatives.
Now, lenders that have not yet implemented eClosings will need to seriously consider how the cost savings and operational benefits from digital mortgages offset the economic pressure experienced in a down market. For lenders that have implemented eClosings, they may need to build out new workflows and procedures for their purchase channel to meet the shifting market.
Purchase transactions involve more moving parts, and the lender has less control over certain aspects, such as where settlement occurs. Still, with purchases just as with refinances it’s the lender who drives eSignature of its documents, chief among them being the promissory note.
Digitalizing even just this piece of the closing package creates process efficiencies, reduces costs, and shortens the time spent at closing. With more purchase transactions occurring, we expect there could also be an increase in the use of IPEN (In-Person Electronic Notarization) to notarize the security instrument if the borrower prefers to have an in-person ceremony.
HW: In terms of implementation, how long should an end-to-end transformation project take?
AF: The scope of these projects can vary considerably from one lender to another. Factors that may impact the complexity and time of implementation include: Are they a multi-channel lender? What resources have they committed to their implementation project? Where does the project fit within their list of priorities? How advanced are their counterparties and partners?
Also, what are their goals? Providing a customer experience to rival the mega lenders? Taking time and cost out of closings? Being able to move assets more quickly into the secondary market?
Some clients want to do all of these things and want them done yesterday. Others are content to take a more gradual approach.
The end goal is to be entirely digital, but not every lender needs to be fully digital on day one. There is incremental value in each step in the transformation process. Hybrid closings, for example, are more efficient in most cases than traditional closings and enhance the customer experience. They are often a good interim step prior to full eClosings.
As a rule of thumb, a relatively large lender can go from paper to hybrid closings in three to five months. A fully digital, enterprise-wide eClosing/eNote transformation probably takes between eight and 12 months. Some of the key activities for a lender to successfully implement an eMortgage program include:
In our experience, it is also important to train, train, train, and roll out quickly from the pilot so that your staff embraces digital as the new norm and not a “one-off.”
HW: What are you telling your clients who are on the fence about moving to eClosings and eMortgages?
AF: You cannot afford not to be digital. Your customers expect it, and if you don’t provide it, they will go to other lenders who are more advanced in this area and who aggressively promote a superior digital experience for consumers.
You cannot afford to be an inefficient, slow or high-cost lender. The market is already too competitive. eClosings can cut your origination costs by $400 or more per loan. How can you ignore this?
If your business model is to originate to sell or securitize, why wouldn’t you want to do it faster… get your capital and GOS sooner and pay less on warehouse lines?
Finally, if you are going to be in the mortgage business long term, you’re going to have to be digital sooner or later. Why not make it sooner to keep pace with your competitors?
The post The obstacles to a digital mortgage are changing – Here’s what lenders need to know appeared first on HousingWire.
Source link
Two more MSR deals valued in total at $2.5B hit the market
The Prestwick Mortgage Group, an Alexandria, Virginia-based advisory and brokerage firm, has unveiled an offering for a $1.6 billion package of Fannie Mae, Freddie Mac and Ginnie Mae mortgage-servicing rights (MSRs).
The bulk of the 7,189 loans in the MSR offering put out to bid this week were originated in Florida and the Midwest, according to the offering documents — which list Prestwick as the exclusive broker and indicate bids are due July 12. The seller is identified only as an “independent mortgage banker.”
By volume, the loans included $583 million from Fannie Mae; $322 million in Freddie Mac loans and $737 million in loans backed by Ginnie Mae, according to the offering documents.
Prestwick’s offering comes on the heels of a separate bulk offering announced recently by Denver-based 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, with an anticipated sales execution date of July 31. The seller was not identified.
The bulk of the nearly 4,000 loans in that MSR package by volume ($686.1 million in Fannie Mae loans and $229.7 million in Freddie Mac loans) were originated in the Northeast and California.
Denver-based Incenter has been staying extremely busy with MSR offerings, even if many of its deals are off the public radar. Tom Piercy managing director of Incenter, said the firm “is currently working on multiple deals totaling in excess of $60 billion that are not out for public auction.”
The weighted average interest rate for the $1.6 billion MSR offering being marketed by Prestwick is 3.175%. For Incenter’s $915.8 billion deal, the average interest rate is 3.148%.
For the Prestwick offering, the average net servicing fee (a slice of the overall interest rate) is 0.2927%; for the Incenter deal, it’s 0.2505.
As interest rates rise — with the Federal Reserve on June 15, adding a 75 basis-point accelerant to the mix — loan-prepayment speeds drop for lower-rate loans due to diminished refinancing activity. That, in turn, amplifies the value of MSRs because they pay out over a longer period.
Those dynamics sparked some major MSR bulk offerings over the first quarter of the year, as HousingWire reported previously. That trend continued in the second quarter as well.
In addition to the latest MSR deals announced by Prestwick and Incenter in late June, three MSR sales offerings were announced earlier in the month by Prestwick and a separate advisory firm, New York-based Mortgage Industry Advisory Group (MIAC) that together are valued at more than $1.4 billion.
The Prestwick Mortgage Group served as the exclusive broker for a $618 million offering of Fannie Mae and Freddie MAC MSRs with bids due June 2.
In addition, 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.
The post Two more MSR deals valued in total at $2.5B hit the market appeared first on HousingWire.
Source link