Painter Kenneth Noland said,  “Context is key – from that comes the understanding of everything.”  Whether that is true in the world of art I could not tell you, but it is most certainly true in the world of economics. What are numbers but meaningless points? It is when those points are considered in the context of what has happened before and what we expect to happen in the future that they become imbued with meaning. With that in mind, I would like to revisit my 2020 thoughts on the U.S. housing market and compare those to where we are today — in the middle of one of the most epic years in our country’s history, due to COVID-19.

No doubt about it, the COVID crisis has taken some juice out of the 2020 housing market. The February housing data, pre-COVID, was juicy indeed. For the first time since the early part of the century, housing was the sector outperforming in the economy rather than a lackluster underperforming sector. If the February trend continued, total existing home sales would have been higher: we probably would have ended the year with sales between 5,7100,000 and 5,8400,000, a noticeable jump from last year’s number of roughly 5.3 million.

Woulda, coulda, shoulda. Even with today’s 6 million existing home sales print, we are down 3.2% compared to 2019 levels.

But, even with the COVID-19 crisis, we have had 17 straight weeks of double-digit year-over-year growth in MBA purchase applications data following a nine-week period of negative year-over-year numbers.

We have seen on average in the last 17 weeks roughly 20% year-over-year growth. But don’t expect the 20% plus year-over-year growth in purchase applications to continue. Some of the positive growth was catch-up demand from those nine weeks of a frozen market due to COVID-19. Even if growth fades toward single digits or even flat, this doesn’t mean a crash is coming in two weeks. If 2020 has taught you anything, it’s that the American housing bubble home price crash bears in the past few years have no idea what they’re talking about because all they care about is trolling for clicks — these are not real economic people. This is why I gave them the new nickname Forbearance Home Price Crash Bros.

The big question for the rest of 2020 is whether or not we will get total home sales of 6.2 million. The context for this number is that from 2008-2019 my belief was that we would have the weakest housing recovery ever, but in the years 2020-2024, our demographics for housing became vastly improved. I have never had a forecast of total home sales (new and existing home sales combined) 6.2 million or higher until this year. Today’s existing home report at 6 million and the solid growth in new home sales means we still have an outside shot to hit my 2020 high range forecast levels even with this pandemic. It is not out of the question that we can get to 6.2 million total home sales by the end of the year.

The new home sales market is doing well as it really benefits from lower mortgage rates. I have said for many years that we wouldn’t see total housing construction start a year at 1.5 million until the years 2020-2024 because we would need to start the year with over 737,000 new home sales in order for developers to see the need for that amount of building. 2020 is looking great on that front for the new home sales market and housing starts, which need more new home sales to warrant more single-family construction.

My biggest concern for housing in 2020-2024 is that real home prices could take off. Good housing demographics, housing tenure at 10 years and low mortgage rates are a perfect recipe for unhealthy home-price growth. The median sales price is now 11.4% higher than a year ago. I’m not saying that home-price growth will somehow morph into a speculation bubble like it did in the 2000s — our credit lending standards will prevent that — but housing could become considerably less affordable even with low mortgage rates if this continues.

Because housing is becoming an outperforming asset, we may see an increase in cash buyers in 2021 as a percent of sales. In today’s existing home sales report they were at 18%. Housing may be an attractive place to park money for yield returns when yields are low elsewhere, and this could also increase demand slightly in 2021. I wouldn’t put too much weight on this story because it’s a smaller portion of total home-sales demand.

The reality for housing has always been the same: Housing is the cost of shelter to your own capacity to own the debt, it’s not an investment. The majority of home buyers in America buy homes to live in, not for an investment. This is the big difference between the housing market now and what we saw in 2002-2005, when we saw a lot of speculation going on. 

Rates, of course, still matter. Mortgage rates are one of the primary drivers of demand. Housing demand slowed when the 10-year yield went above 2.62% in the previous expansion. In this market, expect cooling when the 10-year yield goes above 1.94%. For the next several years the housing market is going to be a battle between good demographics driving demand and affordability keeping demand in check.

This is why I believe if we ever get total home sales above 6.2 million in years 2020-2024 I will consider this an outperforming metric compared to what we saw from 2008-2019. However, we are nowhere close to the speculation demand we saw during the bubble years of 2002-2005. Context is key!

Also, we are nearing our peak sales capacity on these monthly sales prints for 2020. If you see a lower rate of growth sales print in the future, don’t be a fragile housing crash bear, this mindset hasn’t ended well for those that believe home sales demand is going to crash just because of a lower monthly print. It’s sporadic in the 21st century to have any existing home sales print below 4 million. It’s only happened three times this century and two of those events were one-off items such as the home-buyer tax credit and this year with the low level of sales due to COVID-19, just a tad under 4 million.

The existing home sales demand market isn’t overheating as we are still down compared to 2019 levels. Context is key! 2019 was a very healthy year for housing in that we had negative year-over-year real price gains and sales stayed flat. But more recently, price growth is rising higher as demand has picked up.  We are at levels now that depend too much on lower rates. So I’m rooting for negative real home price growth again but finding it harder to get there with demand so good and rates so low. 

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The Federal Reserve approved a revamp of the anti-redlining rules known as the Community Reinvestment Act, or CRA, in a live-streamed meeting on Monday morning and gave 120 days for community and industry feedback.

The move comes four months after Joseph Otting, head of the Office of the Comptroller of the Currency, stepped down a day after releasing his controversial reforms of CRA. Housing groups sued the OCC in June for “unlawfully eviscerating the vital anti-redlining rules.”

Usually, federal regulators would speak in unison on proposals to revamp rules such as the CRA, but the Fed and the Federal Deposit Insurance Corp. declined to sign onto Otting’s proposal.

“Today the Federal Reserve Board unanimously approved an advance notice of proposed rulemaking that would strengthen, clarify, and tailor the CRA regulation to better meet the law’s core purpose,” Lael Brainard, a member of the Fed’s Board of Governors, said in a speech to the Urban Institute following the release. “Research and surveys indicate that there are ongoing racial disparities in access to credit.”

In 2019, small businesses with Black ownership were only half as likely as those with White ownership to have obtained bank financing in the previous five years, she said.

“And, the gap in homeownership rates between Black and White households remains significant today, even when controlling for differences in income and education,” Brainard said.

Brainard said the new proposal will “modernize the CRA in a way that significantly expands financial inclusion.”

One proposed change is to assign a “nationwide assessment area” for online banks, rather than continue with the current practice of assigning them the area where their headquarters is located.

The National Housing Conference, a fierce critic of the OCC’s reform of CRA, said the Fed’s proposal could lead the way to a united approach to modernizing the CRA.

The Fed’s approach “is likely to improve investment to low- and moderate-income households and communities,” the housing group said in a statement.

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The group of people advising former Vice President Joe Biden on the economy is dominated by people who worked in the Obama administration, according to Beacon Policy Advisors.

Biden has surrounded himself with economic advisers that offer viewpoints ranging from progressive to more middle-of-the-road, Beacon said in a report to clients.

Biden will “continue rolling out more specific economic policies as the election comes closer,” the report said. “In particular, there could be increasing detail if the Biden campaign believes it can flip the script on President Trump and be perceived as better able to handle the economy. Otherwise, Biden will likely continue to be relatively vague to maintain the election as a referendum on Trump.”

Economic advisors cited in the report include:

Jeffrey Zients: In the Obama administration, Zients was director of the National Economic Council, acting director of the Office of Management and Budget, and an economic advisor to Obama. He played a “crucial role” in fixing the early-day website problems with when the Affordable Care Act, commonly known as Obamacare, went live, the Beacon report said. In the Obama White House, he played a key role as the negotiator with Congress on tax and budget agreements. At the time, he proposed lowering the corporate tax rate from the then 35% to something in the high 20s, which is where Biden would look to increase it to after the Republican’s Tax Cuts and Jobs Act of 2017 lowered it to 21%, Beacon said.

Jared Bernstein: Bernstein previously served as chief economist and economic adviser to Biden, as well as being the executive director of the White House Task Force on the Middle Class and a member of President Barack Obama’s economic team from 2009 to 2011. After leaving the White House, he became a senior fellow at the Center on Budget and Policy Priorities, a think tank that analyzes the impact of federal and state government budget policies.

In a Vox article last year, Bernstein outlined four assumptions he said have limited economic policy: A mistaken estimation of the natural rate of unemployment; the view that globalization benefits everyone; the theory that deep budget deficits will limit investment; and that a higher minimum wage will only hurt workers.

“Given Bernstein’s close history with Biden, he is someone who we anticipate will have a major influence on the administration’s economic policies,” the Beacon report said. “Since he is also a PhD economist, Bernstein could also make the move from the White House to the Federal Reserve Board of Governors and would be a relatively uncontroversial choice for that role, compared to other economic advisors.”

Heather Boushey: If Hillary Clinton had won the 2016 presidential election, Boushey would have served as the chief economist of her transition team. Now, she is one of Biden’s key advisors on the economy, according to the Beacon report. Boushey is CEO of the Washington Center for Equitable Growth, a spinoff from the Center for American Progress that focuses on policies promoting broad-based economic growth – in other words, an economy that benefits everyone, not just the wealthy. Boushey testified to Congress in July in front of the Joint Economic Committee on the Coronavirus Recession advocating for COVID-19 response policies including an extension of the $600 a week beefed-up unemployment benefits, federal aid to state and local governments struggling with the costs of responding to the pandemic, rental assistance, direct payments to low- and middle-income families, small business aid, funding for safe elections, and hazard pay for essential workers that would increase their salaries during the health crisis.

“Boushey is best known for her push to reduce inequality, and her research highlighting how inequality limits economic growth across the economy,” the Beacon report said.

Ben Harris: Harris was Biden’s chief economist and chief economic advisor from 2014 through the January 2017 end of the Obama administration. Harris’ main interests are tax and budgetary issues as well as Social Security. If the Biden administration pursues any reforms or expansions of the Social Security program, including a transfer to ensure the trust fund does not run out, Harris will likely be the administration’s lead, the Beacon report said. Harris “has been an advocate for increased stimulus from Congress, seeing the last stimulus as good though some of it going to companies that were not in need of the money they received,” the report said.

Felicia Wong: Wong is the president of the Roosevelt Institute, a progressive economic think tank that seeks to carry forward the values of President Franklin D. Roosevelt, who steered the U.S. out of the Great Depression, and his wife, Eleanor. Earlier this year, Wong criticized the Heroes Act, the COVID-19 relief bill passed by the House of Representatives at the end of May, for not going far enough.

“Wong will certainly be one of the more progressive voices advising Biden, but her ideas will be taken seriously and some may be adopted in a modified form as a compromise towards the progressive wing of the party,” the Beacon report said.

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First-time homebuyer activity decreased mostly in part due to the economic effects of the pandemic, but it still remains the most active segment in the purchase space of the housing market.

During the second quarter, 539,000 single-family homes were purchased by first-time homebuyers, down 4.6% compared to last year, according to Genworth Mortgage Insurance. This represented 40% of single-family homes purchased during Q2, Genworth said.

Compared to the first quarter of this year, it is an 18% drop.

“The COVID-19 pandemic pushed the U.S. economy into the sharpest recession on record in March,” Tian Liu, Genworth’s chief economist said. “The housing market also began correcting in April, resulting in an 18% decrease in the number of first-time homebuyers in the second quarter compared to the first quarter. A quick rebound in May moderated the market decline.”

Although buyer purchasing power has increased, many may not be able to find a home that’s affordable due to high home prices as a result of low inventory.

In 35 states and Puerto Rico, there were fewer first-time homebuyers in the second quarter of 2020 than the second quarter of the prior year. In 15 states and Washington, D.C., there were actually more first-time homebuyers reported.

The report also noted that first-time homebuyers relied on smaller down payments for their mortgages.

Overall, 449,000 first-time homebuyers used some form of low down payment mortgage products to finance their home purchase in the second quarter, roughly 83% of all first-time homebuyers. That’s a record, according to Genworth.

Between April and June, Genworth researchers found that the number of rate locks by first-time homebuyers increased by 55% and no states reported negative growth.

Rate locks of over 100% between April and June happened in New York, Pennsylvania, New Jersey and Michigan.

Liu said that despite the challenge the pandemic handed first-time homebuyers, credit availability was maintained in the housing finance system, as the private mortgage insurance industry played a huge role.

“The main reasons that the housing finance system has largely maintained credit availability to date include a focus on prudent underwriting, having adequate capital in the financial system, a significant presence for the agency market that will take credit risk during periods of market stress, and continued investment in technology to make the industry capacity more elastic,” Liu said.

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Mortgage applications decreased 2.5% last week after seeing some positivity the week prior, according to a report from the Mortgage Bankers Association.

The refinance index decreased 4% compared to the week prior but remains 30% higher than the same week last year.

According to Joel Kan, MBA’s associate vice president of economic and industry forecasting, demand for refinances may be slowing due to remaining borrowers waiting for another sizable drop in rates.

Purchase applications decreased slightly by 1% from the week prior on a seasonally adjusted basis, while the unadjusted purchase index decreased 12% compared to the week prior. However, the purchase index was 6% higher than the same week last year.

“Applications to buy a home also decreased last week, but the underlying trend remains strong,” Kan said. “Purchase activity has outpaced year-ago levels for 17 consecutive weeks, with a stronger growth in loans with higher balances pushing MBA’s average loan size to a new survey high of $370,200.”

The adjustable-rate mortgage (ARM) share of activity increased to 2.3% of total applications.

Here is a more detailed breakdown of this week’s mortgage application data:

  • The FHA’s share of mortgage apps decreased to 9.7% from 10.2% the week prior.
  • The VA share of applications increased to 12.3% from 11.2% the week prior.
  • The USDA share of total applications decreased to 0.5% from 0.6% the week prior.
  • The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) remained unchanged at 3.07%.
  • The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400) increased to 3.41% from 3.40% the week prior.
  • The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA remained unchanged at 3.16%.
  • The average contract interest rate for 15-year fixed-rate mortgages decreased to 2.61% from 2.62% the week prior.
  • The average contract interest rate for 5/1 ARMs increased to 3.20% from 2.99% the week prior.

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This article was written for FinLedger, HW Media’s new fintech focused news brand designed specifically for financial services professionals in banking, payments, insurance and proptech. Register for the FinLedger Daily Newsletter.

The virtual notary services industry has become increasingly popular amid the COVID-19 pandemic as businesses have adopted remote signatures to adhere to social distancing protocols while closing on mortgages and other loans.

Dealmaking in the virtual notary services space rose despite the pandemic. In July, DocuSign acquired  Austin-based startup Liveoak Technologies for $38 million in an all-stock transaction. Digital notary platform Notarize also closed on a $35 million Series C round of funding in March, raising a total of $82 million with investments from real-estate focused venture capital firm Camber Creek, Boston-based Polaris Partners, and other existing strategic investors.

Companies like Liveoak, which has financial institutions as customers, utilize web-based videoconferencing, identity verification and other tools to complete an auditable transaction remotely. These remote online notarizations (RONs) avoid the traditional in-person contact. Notaries are being hired by these companies, but their work is conducted solely online. 

Consumer loans such as mortgages and other financial documents require notarization. Remote online notarization allows the notary act to be performed remotely and contactlessly instead of in-person. Digital adoption has been hampered by state laws since a federal law that outlines practices for remote online notarizations does not exist. The laws related to virtual notary services are passed by individual state legislatures. 

Virginia became the first state to authorize remote notarization via live audio-video technology in 2011 with the passage of House Bill 2318/Senate Bill 827. There are 27 states that have enacted a form of a RON law, including Alaska, Arizona, Colorado, Florida, Idaho, Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Montana, Nebraska, Nevada, North Dakota, Ohio, Oklahoma, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington and Wisconsin, according to a report written by law firm DLA Piper.  

Remote online notarizations are digital experiences that mirror the traditional notarial act, said Pat Kinsel, CEO of Notarize, a Boston-based notary public platform. A signer such as a customer closing on a loan appears before a notary on a video call and they complete, sign and notarize the document, he said. Each video session is recorded and retained along with an audit trail of the transaction.

“Signers only connect with a notary after completing several additional security measures, including personal identity challenge questions and credential analysis of their government-issued identification,” Kinsel said. 

Electronic closings supported by remote online notarization (RON) offer advantages to notaries, borrowers and lenders. The notary’s traditional “stare and compare” of the ID is further supported by credential analysis and knowledge-based authentication (KBA), reducing the risk of fraud or errors, said Camelia Martin, managing director, digital mortgage advisory with Falcon Capital Advisors, a Washington, D.C. business advisory firm in real estate, mortgage finance, digital mortgage, banking and capital markets.

“Borrowers can complete the closing from the comfort and safety of their own homes,” she said. “If the transaction is ever challenged, the lender has the ability to access an audit trail and an audio-video recording of the online notarization session.” 

Since March, Notarize said its business rose exponentially – by over 500% – since the COVID-19 pandemic forced businesses and consumers to rely on remote, digital notarizations to complete critical transactions, including commercial agreements, retirement withdrawals, healthcare proxies, home closings and refinancings. 

“The pandemic has fast-tracked market acceptance and business operations for Notarize and RON as a category,” Kinsel said. 

Demand for Notarize’s platform rose the most for real estate transactions with over $7 billion ordered in June 2020 alone, as consumers sought to complete closings, refinance and take advantage of historically low interest rates. 

“At the current rate, Notarize is on pace to close $100 billion in volume on the platform,” he told FinLedger. 

Notarize opened its platform to independent notaries and title agents in 13 states since March and also hired thousands of notaries in Florida, Texas, Virginia and Nevada. The notaries worked from home and received payment the same day through Stripe Connect, a platform that accepts money and pays out to third parties. 

A growing number of industries are turning towards utilizing virtual notary services to go fully digital. Notarize said it is now working with the top 10 U.S. insurance companies, including home and auto providers. The company also accelerated the rollout of its Ellie Mae Encompass partnership and integration “so mortgage lenders may offer online closings with minimal setup.” The company expanded the market for mortgage lenders since Fannie Mae and Freddie Mac permanently eliminated the waiver requirements for lenders to perform RON mortgage closings.

Notarize also signed dozens of partnerships in various industries, including J. D. Power & Associates in auto to conduct fully-digital car sales. Trust & Will uses the company’s software to execute wills entirely online while homebuilder Lennar uses it for mortgage closings (a strategic investor in Notarize, participating in its $20M Series B round in 2018.) 

The software of companies such as Notarize is secure from cybersecurity criminals and other forms of tampering. 

Notarize said its application development team built bank-grade, highly secure software systems. The data is transmitted and stored using industry-best data security practices. 

“All user communications are encrypted and all data such as documents are protected using industry-specified encryption protocols such as AES-256,” Kinsel said. “All application accesses are also tracked using an audit trail. Notarize’s security policies and systems are audited and tested on a regular basis.”

The notary uses a special x.509 digital certificate. Once the notary’s digital certificate is applied to a document, it creates what’s called a digital “hash,” which is essentially a hidden record of all the bits and bytes comprising the document. If any component of the document is later changed, no matter how small, the document will show that it has been changed (or “tampered with”) after the digital signature was applied.

This enables all users to confirm that they are looking at the original document as originally signed and notarized, according to the company.

Notarize also stores a digital record of every notarization in a password-enabled “verification portal” where the customer and any legally authorized recipient can access a digital copy of the original notarized document along with key transactional information about the notarization itself. It also stores the video of the notarization session, showing both the notary and the signer as the document is notarized, in an effort to deter fraud and provide a secure record of the entire transaction.

More than convenience

Conducting transactions remotely and contactlessly is more than a convenience, said Brian Madocks, CEO of eOriginal, a Baltimore, Maryland-based digital loan processor. Vendors must conduct both data and asset protection. Data protection ensures confidentiality and privacy of data while asset protection ensures the “integrity of an asset, that it is tamper-proof,” he said.

The transactions, such as a mortgage closing, need to be performed where it produces a valid, tamper-proof digital record. This transaction needs to be recorded to provide evidence that it occurred and all elements of the transaction need to be securely stored as proof that the transaction was properly executed, Madocks said. 

The use of virtual notary services has accelerated since the onset of the pandemic, he said. 

“Borrowers and loan officers want and need remote capability to maintain social distancing and continue to transact business,” Madocks said. 

While digital adoption accelerated prior to the pandemic, in the aftermath of March, adoption by SBA lenders grew to fulfill the demand for Paycheck Protection Program loans.  

The rise grew in other businesses such as the mortgage, auto and consumer loan industries.

“The requirements for remote and contactless solutions are no longer about convenience,” he said. “It’s about changing the way we will conduct business in the Covid and post-Covid new normal.”

Lenders and investors are still looking to strike the right balance between compliance and scalability with RON, Martin said. 

“The market still has a lot of work to do to reach the holy grail of a full, paperless remote eClosing,” she said. “We need much more than RON to get there.”

Lenders need the capability to generate an electronic promissory note (eNote) and an eVault to store and manage copies of eNotes. 

“Today lenders are shopping for services and implementing processes that the industry does not have a lot of experience with,” Martin said. “A large part of the work we do at Falcon is helping lenders evaluate and implement the right digital mortgage technology providers. At the same time, we also help lenders establish the compliance infrastructure needed to ensure that they have adequate oversight and controls over their eClosing processes.”

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The second quarter was a tough one on iBuyers, as only 0.1% of the homes sold across 418 metros — only 880 homes total — were purchased by top iBuyers Redfin, Zillow, Opendoor and Offerpad, according to a report by Redfin.

That’s a drop of 88% compared to Q2 last year. It also represents the smallest number of properties purchased by iBuyers since Q1 2017, Redfin said, with iBuyers spending $195 million in Q2, compared to $1.6 billion Q2 2019. Redfin’s report is based on analysis of MLS and public records data.

During shut-down orders, Zillow canceled contracts on homes and Opendoor pulled offers and layed off 35% of its staff. Redfin furloughed 41% of its agents.

Phoenix had the most significant slump in the iBuyer market share in Q2. iBuyers there acquired 0.8% of homes that sold, down 3.3 percentage points from Q2 2019.

Behind Phoenix is Raleigh, North Carolina, and Las Vegas, which fell 2.9 and 2.7 percentage points, respectively.

Of the homes purchased in Q2, iBuyers bought them at a median-price of $241,100, down from $250,000 last year.

In all but one market, iBuyers purchased the homes for less than the metro-area median price. That outlier is Riverside, California, where the median purchase price was $400,000, about $6,000 higher than the metro area sale price, Redfin said.

Homes on the market in Q2 were bought by iBuyers after being listed for a median of 13 days, down significantly from 40 days last year. The average non-iBuyer home spent 37 days on the market, which Redfin said is unchanged from last year.

“One trend that has ramped up since the pandemic began is the iBuyer bidding war,” Jason Aleem, vice president of RedfinNow said in the report. “Homeowners are seeking out offers from multiple iBuyers so they can feel confident they are getting the best possible price in this blazing hot market without a bunch of foot traffic coming through. As a result, iBuyers are making more competitive offers.”

Some solutions iBuyers implemented to bring back customers during Q2 include virtual home tours, 3D home tours and virtual signing practices.

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Citigroup CEO Michael Corbat announced that he is retiring in February, and that the firm’s retail banking chief Jane Fraser will succeed him.

Jane Fraser

Fraser’s ascendance will make her the first female CEO of a major U.S. bank.

Corbat, who’s led the bank for eight years, was expected to serve two more years at Citi, according to the Wall Street Journal. Instead, Fraser, a 16-year veteran of the bank, will move from her position as bank president and head of consumer banking to claim the throne.

“We believe Jane is the right person to build on Mike’s record and take Citi to the next level,” Citi’s Chairman John Dugan said in a statement Thursday.

Fraser, 53 and a native of Scotland, has worked at virtually all of Citi’s key divisions during her tenure. She led the bank’s strategy division during the financial crisis, headed the Latin American divisions following a scandal, and most recently was the point person for Citi on the coronavirus pandemic in North America.

She’s also a known quantity in the mortgage space. In 2013, Fraser was tapped to head CitiMortgage in St. Louis. At the time, CitiMortgage – as was true with other banks – was heavily reliant on refinancings. Such loans accounted for 78% of applications across the country, but fell dramatically in the ensuing years.

“The day I started at CitiMortgage was the day the market started responding to the Fed, and inevitably was the end of the refi boom,” Fraser, who became CEO in May 2013, said in an interview with the Post-Dispatch.

With the drop-off in refinancing business, CitiMortgage spent much of Fraser’s tenure pivoting to purchase lending and cutting jobs and closing offices to reduce losses. More than 1,000 underwriter, sales, fulfillment and default jobs were cut in September 2013 alone.

The bank retreated from other corners of the mortgage space. Early in 2017, Citi announced it was leaving the mortgage servicing business.

Citi quietly returns

But in the last two years, Citi has begun to make noise again. In 2018, Citi formed a partnership with Digital Risk and Black Knight to form a single digital mortgage origination platform. A year later, it made an investment in Better Mortgage, believed to be $5 million.

In August 2019 Citi issued a $362.6 million mortgage backed security comprised of loans originated by Impac Mortgage Holdings.

And although it wasn’t among the 25 biggest residential mortgage lenders in the country in 2019, Citi increased its origination volume each quarter and ended the year with $16.9 billion in originations.

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On Nov. 17, stockholders of CoreLogic will get to cast their vote on whether to replace the current board of directors with nominees proposed by Cannae Holdings and Senator Investment Group at a special meeting.

In a letter to stockholders, CoreLogic urged them not to sign a proxy card sent by Senator or Cannae and reminded them that only their last vote on the matter would count. Stockholders who had already signed a proxy card for Cannae or Senator can reverse that vote by sending in a new proxy card, the letter said.

The battle for CoreLogic started on June 26 when Cannae and Senator, who jointly own 15% of the company’s stock, submitted an offer to acquire the company for $65 a share, for a total of $7 billion. CoreLogic rejected the proposal on July 7, saying the bid undervalued the company and raised regulatory concerns, labeling it an “opportunistic proposal.”

In a series of defensive measures, CoreLogic raised its 2021 and 2022 financial guidance, while increasing share reauthorization to $1 billion. Adopting a “poison pill” strategy, Corelogic approved a shareholder-rights plan that prevents investors from acquiring 10% or more of the company’s common stock, or 20% in the case of certain passive investors.

On July 29, Cannae and Senator issued an open letter to fellow shareholders announcing that they had initiated a process to call a special meeting of shareholders to elect nine “independent and highly accomplished directors” to the CoreLogic board of directors. The companies said their goal was to replace the majority of the board with “nominees who will act in best interests of shareholders” who have no affiliation or association with Senator, Cannae, or any of their affiliates.

It’s unclear which way stockholders will vote. CoreLogic’s stock took off on the news of the takeover bid, jumping 25% to $66.33 on June 26, and was at $66.37 as of close of market on Friday, Sept. 4. 

The chairman of Cannae Holdings is Bill Foley, the chairman of Fidelity National Financial, which is also majority owner of ServiceLink. In addition, Foley is executive chairman of Black Knight Financial Services — a direct competitor of CoreLogic.

The vote on Nov. 17 concerns the removal of these board directors:

  • David Chatham, president and CEO of Chatham Holdings Corp.
  • Douglas Curling, principal and managing director of New Kent Capital
  • John Dorman, private investor, formerly CEO of Digital Insight
  • Paul Folino, chairman of the board, and former executive chairman at Emulex Corp.
  • Thomas O’Brien, former CEO and president at Insurance Auto Auctions
  • Pam Patenaude, former deputy secretary of HUD and co-founder of the J. Ronald Terwilliger Foundation for Housing America’s Families
  • Vikrant Raina, managing partner at BV Investment Partners
  • Michael Shepherd, chairman of Bank of the West
  • David Walker, former director of the program of the accountancy at the University of South Florida.

In their place, Cannae and Senator propose appointing:

  • W. Steve Albrecht, the Gunnel Endowed Professor in the Marriott School of Management at Brigham Young University and former chairman of Cypress Semiconductor
  • Martina Lewis Bradford, founder, president, and CEO of Palladian Hill Strategies, a government relations firm
  • Gail Landis, founding partner of Evercore Asset Management, where she served as managing principal from 2005 until 2011. She has been on the board of Morningstar since 2013
  • Wendy Lane, who has served as chairman and founder of Lane Holdings, an investment firm, since 1992
  • Ryan McKendrick, the former president and CEO of AMCOL International
  • Katherine “KT” Rabin, who served as CEO at Glass, Lewis & Co., a provider of global governance services, from 2007 to 2019
  • Sreekanth Ravi, co-founder and executive chairman of the board of RSquared, a cloud-based artificial intelligence (AI) platform in the workforce intelligence market
  • Lisa Wardell, chairman and CEO of Adtalem Global Education, a workforce solutions provider
  • Henry W. “Jay” Winship, president and founder of Pacific Point Capital, a real estate investment firm 
At this point CoreLogic plans to hold the special meeting in person, but said it has contingency plans in place for a virtual meeting if necessary.  

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Bond giant Pacific Investment Management Co., or PIMCO, one of the biggest buyers of Fannie Mae and Freddie Mac mortgage-backed securities, warned on Monday that ending the federal conservatorship of the GSEs without Congressional input would constrict housing-finance credit and boost mortgage rates.

In a letter to Mark Calabria, director of the Federal Housing Finance Agency, PIMCO executives including Managing Director Dan Hyman, head of agency mortgage trading, said freeing the companies by executive fiat would be interpreted by investors as an end to the government’s guarantee of the MBS.

That would boost mortgage rates and force some investors to sell the bonds, the PIMCO executives said.

“While the focus to release the GSEs from conservatorship is understandable, we believe that any release particularly prior to Congressional action would have unfavorable – and likely dramatic – consequences,” the PIMCO letter said. “We strongly believe that market participants will not view the release of the GSEs as a return to the implied guarantee model that prevailed before the financial crisis, but rather, they would view them as wholly-owned private companies with no accompanying government guarantee.”

That means investors would require higher returns to compensate for greater risks, the PIMCO executives said.

“Mortgage rates will increase, homeownership will likely suffer and the national mortgage rate will no longer exist,” the executives wrote.

The “national mortgage rate” refers to the ability of lenders to offer the same rate to homebuyers with similar credit profiles and down payments in different parts of the country.

“It is almost impossible to overstate the importance of the national mortgage rate, not only for the primary and secondary mortgage markets, but most importantly, for borrowers and prospective homeowners,” the letter said. “The national mortgage rate is a central underpinning of America’s housing finance system.”

PIMCO’s warnings came in response to the FHFA’s request for comments on its proposed capital rule that Fannie Mae and Freddie Mac be required to hold about $240 billion in capital combined, based on their September 2019 assets.

Raising the capital buffer is aimed at ensuring taxpayers don’t have to cover losses for the two companies, which have been in government control since they were seized in 2008 in the midst of the financial crisis.

A year ago, the Trump administration released a blueprint for freeing the GSEs from conservatorship without requiring Congressional approval. Calabria has worked to get all the pieces in place, but if former Vice President Joe Biden usurps President Donald Trump in the Nov. 3 election those plans could be knocked off track.

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