Head In The Clouds

*Head In The Clouds*
**By James Comtois**

JamesC***When I first started covering the mortgage technology industry, one of the most frequently used buzzwords was “paperless.” Firms were very eager to reduce the paper trail of the mortgage lending and servicing processes. These days, the industry is pretty gosh-darned paperless. Heck, not just the industry, but the world (a number of newspapers I used to write for now no longer have a print edition and are completely paperless products).

****With the industry having more or less succeeded in being a paperless one, the trend has gone much, much further. But the more the industry has gone paperless, a new problem has developed—that of storage within a firm’s computer network. Although there’s no longer the need for those large, metal filing cabinets in the office, the need for more virtual cabinets has arisen, now that hard copies are becoming things of the past.

****Now, the industry relies heavily on wireless technology and cloud computing, also known as “the cloud.” With the cloud, not only do we have to no longer worry about using paper, but also cluttering up storage space on a computer’s memory is now becoming a thing of the past.

****One firm that’s all about maximizing the use of such modern technologies as smart phones, tablets and the cloud is FotoNotes. Originally launched in 2009 as Fotobabble, FotoNotes helps firms make the most out of wireless communications technology. (Considering this is inevitably where all industries are going, it looks to be a pretty smart business model.)

****Recently, the organization has launched a cloud platform for property preservation and other real estate services.

****Launched at the National Association of Mortgage Field Services Annual Conference in Chicago earlier this month, the FotoNotes’ Mobile Property Preservation Solution boasts such services as enabling users to create, assign and manage work orders; access work orders in the field; capture photos and other data from the job site; and automatically stream work orders, photos and data to and from such back-office systems as Property Pres Wizard.

****In the online demo for the product (which can be found here http://www.fotonotes.com/sneak-preview-fotonotes-mobile-property-preservation-solution/ ), FotoNotes founder and CEO Kamal Shah explains that the FotoNotes’ Mobile Property Preservation Solution will ultimately enable udders to streamline operations, reduce manual work, improve vendor scorecards and (this perhaps could be the best part) get paid faster.

****The demo also shows that signatures can be captured, reports can be generated (in PDF format) directly onto one’s mobile phone and then emailed.

****All of this, of course, can be done without eating up any memory on one’s PC, tablet or smart phone.

Getting Over The Hurdle

*Getting Over The Hurdle*
**By James Comtois**

JamesC***For most homeowners, making regular monthly payments is easy—provided the payments are low enough. The hard part is making that initial downpayment. For prospective middle-class homebuyers, particularly those of the first-time variety, the idea of putting down tens of thousands of dollars up-front can be a rather daunting—if not insurmountable—hurdle.

****This is why one San Francisco-based firm and one community bank in the Pacific Northwest has come up with an interesting funding system to help first-time homebuyers get over that downpayment hurdle. If they’re successful, they may pave the way for a completely new method of homebuying, one that would essentially do away with downpayments—or at the very least, dramatically reduce them.

****FirstRex announced a service to provide homebuyers with downpayment funding in combination with the portfolio loans of HomeStreet Bank.

****Founded in 2004, FirstREX has an intriguing business model. It’s neither a lender nor a bank, but it provides homebuyers and homeowners with financing alternatives to home equity loans and mortgages based on equity instead of debt.

****Under the REX HomeBuyer program, FirstREX will fund up to half of the borrower’s downpayment required on a HomeStreet purchase loan. The downpayment funding from FirstREX is an equity investment—not a grant, subsidy or loan—so there is no interest and the homeowner makes no monthly payments to FirstREX. Apparently the company instead earns a return on its investment when the home is eventually sold, up to 30 years in the future.

****Clearly the firm is betting on the overall profitability of the housing market, since the way the system works is that if the home for which the REX HomeBuyer program has provided downpayment funding goes up in value, then FirstREX earns a profit. If the home has decreased in value, However, FirstREX typically suffers a loss. So like I said, the firm is betting large on the housing market remaining strong from here on out. So okay, that’s admittedly a pretty low-risk bet.

****In turn, HomeStreet Bank will be able to close many home loans that they wouldn’t otherwise be able to.

****“Our focus is on helping people buy homes,” Rich Bennion, executive vice president and residential lending director for HomeStreet Bank said in a statement. “Downpayment funding from FirstREX expands the options of qualified homebuyers to buy a home that will meet their needs.”

****“Many home buyers can easily afford the monthly housing payments on the home they want to buy, but don’t have enough cash saved for the required down payment,” added James Riccitelli, co-CEO of FirstREX. “Others have the cash but are uncomfortable making a large down payment.”

****According to Riccitelli, REX HomeBuyer solves both of these problems. Buyers can buy the home they want today, with less debt and less risk, and also be able to retain some of their cash after closing for other purposes.

****The REX Homebuyer program was originally announced in May, but is being rolled out and available to HomeStreet Bank customers this quarter.

****So could this wind up being a standard method for getting over the hurdle of making a downpayment? A lot of it depends on how successful FirstRex’s business model winds up being. Who knows? If this catches on, this could be the beginning of the end for downpayments. So okay, probably not, but it’s still fun to imagine.

Happiness And Safety

*Happiness And Safety*
**By James Comtois**

JamesC***Considering two big points of concern within the mortgage lending industry are customer satisfaction (which actually isn’t exclusive to just the mortgage sector) and risk mitigation, it’s somewhat surprising that a program like MortgageSAT hasn’t been introduced sooner. Then again, customer service is something firms often claim to care about, but a different story is revealed whenever you’re on their customer care line indefinitely, so maybe it’s not so surprising.

****Regardless, back in April, a Peachtree City, Ga.-based mortgage lending consulting firm teamed up with an Ann Arbor, Mich.-based customer feedback providing company to launch a customer survey and analytics application that captures consumer feedback and allows lenders to measure and respond to borrower satisfaction.

****Now up and running, through MortgageSAT, The STRATMOR Group has put its mortgage consulting chocolate in the CFI Group’s customer feedback peanut butter by allowing lenders to compare their customer satisfaction performance both internally (i.e., across their production and back office operations) and externally in comparison to other lenders. This data enables lenders to determine in advance the impact that changes will have on consumer satisfaction ratings, allowing them to spend resources where it will have the most meaningful impact.

****“Customer satisfaction is a dangerous blind spot for the lender because it has become a focal point for our new regulator,” said STRATMOR Group senior partner Matt Lind. “The result has been a trend in the industry toward more responsiveness and transparency regarding the consumer’s experience in the mortgage process. Lenders have largely been guessing because they didn’t have the data or the analytics to know how satisfied their customers were and what they should do about it. We’ve changed that.”

****In addition, MortgageSAT offers a way for lenders to know how borrowers feel about the mortgage transaction, giving the institution an opportunity to track experience across a range of transactions and react immediately to issues.

****“Yes, sure, fine,” you may be thinking. “But what does any of this have to do with the risk mitigation you mentioned earlier?”

****Well, according to STRATMOR managing director Garth Graham, in addition to giving lenders immediate reactions from its customers, MortgageSAT can also help a great deal with risk mitigation, “because if you measure satisfaction consistently and quickly react to issues, then consumers are far less likely to seek help from regulators regarding these issues. But it also helps drive more business, because MortgageSAT helps you predict how increases in satisfaction help you increase your bottom line.”

****Graham added: “This is critical for the mortgage industry because as the refinance business falls away, making sure customers are satisfied is how lenders will gain market share through greater referrals and customer cross sell opportunities.”

Dressed For Distress

*Dressed For Distress*
**By James Comtois**

JamesC***It is definitely a good time to be servicing distressed residential mortgages these days. (It’s actually also a good time to be servicing and investing in distressed properties of all types these days, but that’s another story for another day.)

****Just ask Fay Servicing. Thanks to its specialty of managing distressed and at-risk resi mortgages, the Chicago-based special servicer is in quite a good place. Oh, it’s also doing well thanks to its staffing model, to be sure. But it sure hasn’t hurt that its business model focuses on a business that currently is booming.

****In the wake of dramatic growth in 2012 and in the first quarter of 2013, Fay Servicing, whose customers include banking institutions and alternative real estate investors, announced a hiring initiative in May that was implemented to entice college-educated mortgage professionals with origination experience to join the firm’s team in Chicago.

****The five-year-old servicing firm has opened its second office, a 10,000-square-foot space in Oakbrook Terrace, Ill. It’s also initiated plans to double the number of its employees from 100 to 200 by year’s end.

****So how has the hiring initiative been going since it was initially announced?

****Ed Fay, founder and CEO of Fay Servicing, told me that, as of June, the firm’s expansion plans were right on schedule. Since the release was sent last month, the firm has added 20 people to its staff so far, and he expects to have at least 20 more people by next quarter.

****“The execution has been very good so far,” Fay said, noting that the firm, which deals exclusively with whole loans, could grow even faster, but that would prevent it from properly training its new staff.

****Fay also pointed out that his firm’s staffing model is somewhat different from other servicing companies in that it focuses on attracting mortgage professionals with loan origination expertise, typically from large lenders located within the Chicago area. In other words, the firm is interested in hiring people who used to be on the sales side of the business.

****“They can empathize with customers,” he added. “Customers aren’t looking for handouts; they’re looking for a hand.” Well said.

****And why has the firm been doing so well? It’s not just its hiring model that’s enabled the company to see considerable growth over the past several months. It’s also helped that the distressed space is growing in popularity among banks, REITs, private investors and insurance companies.

****As we all know, the spectrum of distressed products are constantly expanding—whereas only a few years ago ‘distress’ used to simply mean loans that were nonperforming, it can now run the gamut of nonperforming, nonprime and even performing, but with something odd about the loan (in fact, a good portion of the loans that come to Fay’s attention are performing, but are considered distressed simply because there’s something concerning about them). And this plays right to Fay Servicing’s niche.

****So with the demand for servicing distressed loans still on the rise, it appears as though that Fay Servicing is continuing—and will continue—to see favorable growth. In fact, by the end of the first quarter of 2014, Fay plans on growing the staff to 210 professionals.

****“When it comes to distress management, you need to have the best people for the job,” Fay added.

****ABOUT THIS NEW COLUMN: James Comtois has been a financial journalist for more than 14 years and has covered the real estate and mortgage industries for more than eight of those years. He has written for such publications as Crain’s New York Business, MarketWatch, Private Equity Real Estate News and National Mortgage News. He lives in Brooklyn, NY. In this new monthly column for PROGRESS in Lending he’ll share his take on the industry with you.