July New Home Purchase Apps Increased 31.2%

The Mortgage Bankers Association (MBA) Builder Application Survey (BAS) data for July 2019 shows mortgage applications for new home purchases increased 31.2 percent compared from a year ago. Compared to June 2019, applications increased by 11 percent. This change does not include any adjustment for typical seasonal patterns.

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“July’s strong new home sales increase on a monthly and annual basis was driven by the ongoing decline in mortgage rates, combined with steady housing demand and a still-healthy job market,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “The average loan size decreased last month, likely influenced by the increase in the first-time homebuyer share, as these buyers are likely to choose lower-priced, entry-level homes.”

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Added Kan, “MBA estimates that the pace of new home sales in July increased over 16 percent.”

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MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 754,000 units in July 2019, based on data from the BAS. The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors.

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The seasonally adjusted estimate for July is an increase of 16.7 percent from the June pace of 646,000 units. On an unadjusted basis, MBA estimates that there were 63,000 new home sales in July 2019, an increase of 8.6 percent from 58,000 new home sales in June.

By product type, conventional loans composed 69.1 percent of loan applications, FHA loans composed 18.1 percent, RHS/USDA loans composed 1.0 percent and VA loans composed 11.7 percent. The average loan size of new homes decreased from $329,593 in June to $325,457 in July.

Study Identifies Key Differentiators Of High-Performing Lenders

A new study from Mortgage Cadence, an Accenture (NYSE: ACN) company, identifies several key factors that differentiate high-performing lenders from others in today’s mortgage market, which is characterized by an industry-wide housing supply shortage and all-time-high costs to originate a mortgage.

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Mortgage Cadence’s seventh annual Lending Performance Benchmarking Study draws on the analysis of data from mortgage lenders across the country that use the full suite of Mortgage Cadence loan origination technologies.

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The report notes that high-performing lenders share three characteristics. First, they benchmark their performance against the competition, identifying areas for growth and improvement. Second, they optimize their staffing models and cross-train their teams so they can quickly adapt to the ebb and flow of loan volume without hiring additional team members, thereby maximizing profitability. Finally, high performers perfect their processes then map their loan journeys from application to close to eliminate bottlenecks, optimize technology and clarify ownership of touchpoints. 

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A key element of the study is Mortgage Cadence’s benchmarking of the year-over-year performance of its clients. The data compare individual lender performance year-over-year using five critical key performance indicators:

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  • Velocity — the amount of time it takes to close a loan;
  • Borrower Share — the ratio of applications taken to total customer base in the same calendar year;
  • Pull-Through — the ratio of closed loans to applications taken;
  • Cost-to-Close — the total cost of manufacturing a single mortgage; and
  • Productivity — the measure of closed loans per mortgage production employee per month.

The study notes that although Productivity improved to an average of 3.33 loans per employee in 2018, up from 3.29 in 2017, Velocity suffered, increasing by more than eight days in 2018, to 64.53 days. Pull-Through also suffered, dropping to 48.21% in 2018 from 50.08% in 2017. Both metrics contributed to the highest Cost-to-Close measure since the study’s inception: $5,643 (although still significantly less than the Mortgage Bankers Association (MBA) average of $8,975).

According to the study, the decrease in performance is partly the result of a housing supply problem: When the number of interested home buyers exceeds housing inventory, the pre-approval process is lengthened and Velocity increases. Pull-Through also suffers, as a lender can’t expect to close on an application if the borrower can’t find a home to purchase.

“The mortgage market’s volatility over the past 30 years has caused the Cost-to-Close to rise,” said Bryan Ireton, managing director for Mortgage Cadence, Accenture. “Even so, high-performing lenders have been able to consistently realize higher profits by fine-tuning their processes according to benchmarking results.”

OpenClose Adds VP Of Innovation

Allen Pollack, a seasoned industry veteran, has joined OpenClose in the newly created position of vice president of product innovation. Allen will assist OpenClose in continuing to expand the level of innovation invested in its customers and the industry to deliver business-altering products and processes, which align to the ever-changing digital lending landscape. 

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“JP and I are delighted that Allen has joined the OpenClose team,” said Jason Regalbuto, CEO and CTO at OpenClose. “We have competed and collaborated with Allen over the years. He has developed a reputation for innovative business and technology strategies in the fintech space. We are excited about working with him to grow and expand our product offerings and solutions into the future.”

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Allen has more than 15 years of industry experience developing and leading strategic initiatives and comes to OpenClose from Fiserv where he was responsible for multiple fintech initiatives focused on delivering omni-channel capability and personalized lending experiences, ranging from conversational AI to digital mortgage lending capabilities across online and mobile banking channels.

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Allen was a co-founder of NYLX, serving as chief technology officer where he introduced new technology models that disrupted the mortgage lending space. He later continued as chief technology officer of LoanLogics, a new RegTech company created by NYLX that continued to introduce new technology and disrupt the old way of doing business further creating solutions to support loan quality, due diligence, and multi-channel loan delivery models.  

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“OpenClose has been a long-time innovator in our space, making multiple contributions to help grow the mortgage industry and continually developing products that empower lenders to help borrowers achieve the American dream,” stated Pollack. “The company is well-positioned and strategically aligned to establish itself as one of the industry’s leading disruptors that significantly advances the lending process. I am excited to play a key role in the focus that speaks customer experience and the commitment to innovation supporting lending and the industry’s ongoing transformation.”

OpenClose recently rolled out the its digital mortgage point-of-sale (POS) solution, ConsumerAssist Digital POS, which offers an integrated solution that marries its end-to-end multi-channel LOS, product and pricing engine (PPE), and state-of-the-art POS technology. The single-source solution dramatically reduces the cost to manufacture loans, heightens the borrower experience, and simplifies managing the entire lending process.

Delinquencies Rise In The Second Quarter

The delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 4.53 percent of all loans outstanding at the end of the second quarter of 2019, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The foreclosure inventory rate, the percentage of loans in the foreclosure process, was 0.90 percent last quarter – the lowest since the fourth quarter of 1995.  

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The delinquency rate was up 11 basis points from the first quarter of 2019 and 17 basis points from one year ago. The percentage of loans on which foreclosure actions were started in the second quarter rose by two basis points to 0.25 percent.

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“The unemployment rate remains quite low, but the national mortgage delinquency rate in the second quarter rose from both the first quarter and one year ago. The economy is slowing, and this poses the risk of further increases in delinquency rates,” said Marina Walsh, MBA’s Vice President of Industry Analysis. “Across loan types, the FHA delinquency rate posted the largest variance, increasing 29 basis points from last quarter and 52 basis points from a year ago.”

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Added Walsh, “Heavy rains and flooding, extreme heat, and tornadoes in certain states during the spring, may have also contributed to the increase in the delinquency rate, as some borrowers likely faced disruption or hardship.”

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Key findings of MBA’s Second Quarter of 2019 National Delinquency Survey:

  • Compared to last quarter, the seasonally adjusted mortgage delinquency rate increased for all loans outstanding. By stage, the 30-day delinquency rate increased four basis points to 2.62 percent, the 60-day delinquency rate remained unchanged at 0.81 percent, and the 90-day delinquency bucket increased seven basis points to 1.10 percent. 
  • By loan type, the total delinquency rate for conventional loans increased 15 basis points to 3.61 percent over the previous quarter. The FHA delinquency rate increased 29 basis points to 9.22 percent, while the VA delinquency rate decreased by 13 basis points to 4.24 percent over the previous quarter. 
  • On a year-over-year basis, total mortgage delinquencies increased for all loans outstanding. The delinquency rate increased by 16 basis points for conventional loans, increased 52 basis points for FHA loans, and increased 27 basis points for VA loans from the previous year.
  • The delinquency rate includes loans that are at least one payment past due, but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the second quarter was 0.90 percent, down two basis points from the first quarter of 2019 and 15 basis points lower than one year ago. This is the lowest foreclosure inventory rate since the fourth quarter of 1995.
  • The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was at 1.95 percent – a decrease of 1 basis point from last quarter and a decrease of 35 basis points from last year. The serious delinquency rate was unchanged for conventional loans, down 2 basis points for FHA loans, and down 6 basis points for VA loans from the previous quarter. Compared to a year ago, the serious delinquency rate decreased by 35 basis points for conventional loans, 43 basis points for FHA loans and 22 basis points for VA loans.
  • The five states with the largest increases in their overall delinquency rate were affected by weather-related issues. This may have resulted in an increase in delinquencies over the previous quarter of the following magnitude: West Virginia (86 basis points), Mississippi (81 basis points), Alabama (73 basis points), Indiana (73 basis points), and New Mexico (65 basis points).

Early Stage Funding Rounds Accounted For 75.6% Of Total Investment

Early stage funding rounds (comprising Seed and Series A funding rounds) accounted for 75.6% of total investment volume during the second quarter (Q2) of 2019, according to GlobalData, a leading data and analytics company.

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On the other hand, late stage funding rounds such as Series H, Series I and Series J were almost non-existent in Q2 2019.

The US and China collectively accounted for more than 60% of early state funding and more than 70% of growth/expansion/late stage funding (comprising Series B, Series C, Series D, Series E, Series F, Series G, Series H, Series I and Series J) volume in Q2 2019.

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Other key countries that attracted a significant number of early stage funding during the period include India, the UK, Canada, Singapore, Israel, Australia, Germany, Switzerland, France, Indonesia, Spain and the UAE.  

April 2019 registered 1,006 deals with disclosed funding rounds, out of which early stage funding rounds accounted for 75.6% share. The US topped the list  by attracting 45.7% of early stage funding volume. China held the second position with 18.4% share of early stage funding volume during the month.

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India, the UK, Singapore, Canada, Switzerland, Australia, UAE and Israel were among the other key countries that attracted a significant number of early stage funding during April.

Some of the notable early stage funding rounds announced during the month include US$298.3m Series A funding raised by China-based ENOVATE, US$200m Series A funding in Singapore-based Blockchain Exchange Alliance, and US$100m Series A funding raised by the US-based Talaris Therapeutics.

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In May 2019, venture capital (VC) investments with disclosed funding rounds witnessed a decline of 6.1% compared to the previous month due to a decrease in the number of Series A, Series B, Series C and Series D funding rounds from 547 in April to 468 in May.

In contrast, seed funding rounds witnessed growth in volume and share from 44.7% in April to 48.4% in May. In fact, the month registered the highest number of seed funding rounds in Q2 2019.

While May was also the only month in Q2 2019 to witness Series I and Series J funding rounds, it did not register any Series H funding round.

The US garnered the highest number of early stage funding rounds with 47.8% share, distantly followed by China with 15.6% share. Other top countries that attracted a significant number of early stage funding during the month include the UK, India, Singapore, Canada, Germany, Australia, Israel and Indonesia.

Some of the notable early stage funding rounds announced during May include US$1bn Series A funding in Chinese firm JD Health, US$230m Series A funding raised by the UK-based Checkout.com and US$150m Series A funding raised by the US-based ElevateBio.

In June 2019, VC investments with disclosed funding rounds declined by 18.6% as compared to the previous month due to low seed funding volume. On the other hand, the share of VC funding deals across most of the other funding rounds witnessed growth.

While June was the only month in Q2 2019 to record Series H funding round, it did not record any Series I and Series J funding rounds.

The US accounted for 44.3% of early stage funding volume followed by China with 19.5% share during the month. The UK, India, Canada, Germany, Israel, France, Spain and Australia were among the other key countries that attracted a significant number of early stage funding during June.

Some of the notable early stage funding rounds announced during the month include US$115m Series A funding raised by the US-based Commonwealth Fusion Systems, US$92.2m Series A funding raised by China-based Dailuobo and US$67m raised by the US-based Frontier Medicines.

Mortgage Applications Increase In Latest MBA Weekly Survey

Mortgage applications increased 5.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 2, 2019.

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The Market Composite Index, a measure of mortgage loan application volume, increased 5.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 5 percent compared with the previous week. The Refinance Index increased 12 percent from the previous week and was 116 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index decreased 2 percent compared with the previous week and was 7 percent higher than the same week one year ago.

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“The Federal Reserve cut rates as expected last week, but the bigger influence on the financial markets was the beginning of a trade war with China. The result was a sharp drop in mortgage rates, which will likely draw many refinance borrowers into the market in the coming weeks,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. “The 30-year fixed rate mortgage fell to its lowest level since November 2016, and the drop resulted in an almost 12 percent increase in refinance application volume, bringing the index to a reading over 2,000 – its highest over the same time period. We fully expect that refinance volume will jump even higher this week given the further drop in rates.”

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Added Fratantoni, “Lower mortgage rates did not pull more homebuyers into the market, as purchase volume slipped a bit last week, but still remains around 7 percent ahead of last year’s pace.”

The refinance share of mortgage activity increased to 53.9 percent of total applications from 50.5 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 4.7 percent of total applications.

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The FHA share of total applications decreased to 11.0 percent from 11.3 percent the week prior. The VA share of total applications increased to 12.8 percent from 12.6 percent the week prior. The USDA share of total applications remained unchanged from 0.6 percent the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.01 percent from 4.08 percent, with points increasing to 0.37 from 0.34 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $484,350) decreased to 3.96 percent from 4.04 percent, with points increasing to 0.26 from 0.22 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.86 percent from 3.94 percent, with points increasing to 0.38 from 0.29 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.37 percent from 3.48 percent, with points increasing to 0.37 from 0.26 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 5/1 ARMs decreased to 3.36 percent from 3.52 percent, with points increasing to 0.36 from 0.31 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

Refinancing On The Rise For Millennials As Interest Rates Decrease

Over the last year, a dramatic drop in interest rates on 30-year notes has led to an active refinance market for millennials. According to the latest Ellie Mae Millennial Tracker, interest rates on all 30-year notes fell from 4.86% in June 2018 to 4.39% in June 2019. This figure marks the lowest average rate for borrowers of this generation since January 2018. Millennials were quick to take advantage of the lower rates and the share of refinances increased from 8% to 14% of all loans closed by members of this generation during the same period. 

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Among all 30-year loans closed by millennials, interest rates on VA loans had the largest year-over-year decrease, dropping more than half a point from 4.54% to 3.97%. Rates on FHA loans fell from 4.93% to 4.49% while rates on Conventional loans saw a near half-point reduction, from 4.84% to 4.35%.

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From June of last year to June 2019, share of refinances among millennials rose in all three major loan categories. Twenty-seven percent of VA loans were refinances this June compared to 18% the year prior. The share of millennials refinancing FHA loans increased from 4% to 6% over the last year and the share of Conventional refinances jumped from 9% to 17%.

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“Savvy millennials looking to lock in lower interest rates on their mortgages have helped drive a surge in refinance activity,” said Joe Tyrrell, chief operating officer at Ellie Mae. “While the Federal Reserve’s rate cut doesn’t necessarily mean that rates on mortgages will continue to drop, we’ll be keeping a close eye on its impact on both the refinance and overall mortgage market as we do anticipate that it will effect consumer behavior, including millennials who look to lower their payments.” 

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While shares of FHA and VA loan refinances are up in June 2019 compared to June 2018, the overall share of FHA loans has decreased, and the share of VA loans has remained flat. FHA loans accounted for 27% of all loans closed by millennials in June 2018, but that figure fell to 24% a year later. Shares of VA loans remain unchanged at 2%.

“There is and has been a massive opportunity for lenders to educate potential homeowners on the loan options available to them,” added Tyrrell. “For example, borrowers with lower FICO scores can take advantage of FHA loans to make homeownership a reality, but the overall awareness that this loan type exists needs to increase.”

With an increased investment in technology, time to close has dropped across the board year-over-year. Average time to close on all loans for millennials has dropped two days while average time to close on refinance and purchase loans has dropped four days and one day, respectively. 

MISMO Hires Jonathan Kearns As VP Of Technology

MISMO, the mortgage industry’s standards organization, has added Jonathan Kearns as Vice President of Technology. Under MISMO’s management by the Mortgage Bankers Association (MBA), Kearns will also serve as MBA Associate Vice President, Product Development.

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The hiring of Kearns comes on the heels of MBA’s $2 million investment in MISMO – announced in March – to enable the organization to expand its resources in support of key initiatives. Kearns will help take the lead on MISMO’s top priorities of focus, including: a uniform dataset for private label mortgage-backed securities; a standardized closing instructions template; harmonized remote online notary (RON) standards; common standards to encourage business-to-consumer communications on smartphones and tablets; and appraisal and rent roll standards for commercial and multifamily lenders.

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“Jonathan is a thought leader in the mortgage technology space, with substantial experience developing technology and product strategy,” said Mike Fratantoni, President of MISMO and MBA’s Chief Economist and Senior Vice President of Research and Industry Technology. “Jonathan is going to energize MISMO’s ability to develop standards and new technology initiatives that will benefit small and large companies and the entire industry.”

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Kearns, who previously served on MISMO’s Residential Standards Governance Committee, comes to the organization most recently from DocMagic, Inc., which acquired eSignSystems, where he had been since 1999. He held various leadership titles through mergers and acquisitions over the past two decades, and was most recently Senior Vice President of Technology.

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“We are excited to have someone with Jonathan’s experience and acumen join MISMO,” said Rick Hill, Executive Vice President of MISMO and MBA Vice President of Technology. “His background with digital technologies and product development will enable MISMO to better serve the entire mortgage industry.”

Mortgage Cadence Adds Data Verification, Fraud Prevention And Compliance Assistance

Mortgage Cadence, an Accenture (NYSE: ACN) company, has added additional DataVerify capabilities to its Enterprise Lending Center (ELC) loan-origination platform, providing additional data verification, fraud prevention and compliance assistance.

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The enhanced functionality streamlines the application authentication process and improves the borrower experience by automating verification of borrower-provided information, including income and social security data.

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The DataVerify integration provides on-platform access to 4506-T IRS transcript ordering and verification. Without this functionality, lenders must navigate to the IRS website, rekey borrower data, and manually complete the 4506-T form, which taxpayers use to request copies of their tax return information. With the new functionality, Mortgage Cadence clients execute the process without leaving the ELC platform — requesting borrower authorization via eSign and then, once consent is given, ordering 4506-T verification directly from the IRS. Customers using this new integration report they are completing this process up to 95% faster.

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The potential benefits to the borrower are equally significant. Instead of borrowers being asked to provide detailed information, and in some cases, additional data to verify this information, such process is now automated on the back end, helping to reduce time to close.

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The newly released 4506-T DataVerify integration provides additional workflow automation to ELC customers who currently use DataVerify’s DRIVE® platform — a single-source application that automates the manual underwriting process and that features audit trail capabilities. When lenders receive 4506-T results, the data is automatically updated in real-time within the DRIVE® report, resulting in an enhanced process that helps to decrease cost to close by automating what had previously been done manually.

Another element of the enhanced DataVerify integration is Social Security Administration (SSA) verification. When the lender receives the SSA document, the integration automatically triggers a system check to confirm if the data is accurate, saving time by eliminating off-platform navigation.  

“At DataVerify, our mission is to deliver flexible solutions tailored to meet the ever-changing needs of our customers,” said Brad Bogel, DataVerify’s president. “Our integration with Mortgage Cadence furthers this mission by providing convenient access to secure verification processes that address industry compliance regulations all within the lender’s origination platform, Enterprise Lending Center.” 

Paul Wetzel, EVP and managing director of product management at Mortgage Cadence, said, “Optimized workflows and increased automation are essential to reducing time and cost to close. This latest integration between our Enterprise Lending Center and DataVerify is yet another example of how we help lenders improve operating performance.”   

Covius Completes Chronos Solutions Acquisition And NRZ Strategic Investment

Covius Holdings, a provider of technology-enabled solutions to the financial services industry, announced today that it has completed its previously announced purchase of various businesses from Chronos Solutions (Chronos), including its credit, flood, income and tax verification services, REO management and disposition, online foreclosure auction and homeowners association (HOA) tracking units. Concurrently, Covius and New Residential Investment Corp. (”New Residential”) completed New Residential’s strategic investment in Covius that was announced on May 1, 2019.

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With its expanded solutions set, Covius also announced that it will now go to market through two new divisions: Covius Origination Solutions and Covius Servicing and Capital Markets Solutions.

Covius Origination Solutions will include:

>>FundingSuitecredit reporting and modeling

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>>TaxDoorand VODAchek borrower verification services

>>Flood and HOA determinations

>>Lien preparation and tracking 

>>Valuations and appraisal workflow

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>>Origination document, title and title curative services

Covius Servicing and Capital Markets Solutions will include: 

>>Document management

>>Loan modification and loss mitigation

>>REO management 

>>RealtyBid auction services 

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>>Asset management 

>>Loss mitigation title and curative services

>>Compliance management

>>Due diligence and business process automation services

Rob Clements, Chairman and Chief Executive Officer of Covius Holdings, said: “The Chronos acquisition significantly expandsthecriticalservicesthatCoviuscandigitallydeliveracrossthemortgageecosystemand deepens our product offerings. Like the reQuire acquisition last year, this acquisition reflects the strategic plan that we have been executing for the past 18 months. Other key elements in that plan include attracting new capital through our agreement with New Residential and the divestiture of our private-label fulfillment business.”

John Surface, President and Chief Operating Officer of Covius Holdings, added: “The combined company is designed to effectively serve our 5,500 clients and meet the changing needs of the origination, servicing, asset management and capital market sectors. We are organizing our management team to align with our new client-oriented, go-to-market positioning and accelerate our enterprise-wide digital investments and partnerships.”