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STRATMOR Adds A New Principal

Seth Sprague, CMB, has joined STRATMOR Group as a principal. An executive with more than 20 years of mortgage experience, Sprague brings to STRATMOR significant subject matter expertise in mortgage servicing rights (MSRs), servicing, cash flows, liquidity and mortgage profitability strategies.


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“We are delighted to have someone of Seth’s caliber and reputation join our team,” said Lisa Springer, senior partner and CEO of STRATMOR Group. “In today’s challenging times, understanding the value of servicing and how it integrates into an organization’s long-term business strategy is of paramount importance. We believe our clients will greatly benefit from Seth’s servicing know-how and unique industry knowledge. By being able to advise lenders on liquidity and servicing strategies, he adds very important expertise to STRATMOR which will bring tremendous value to our clients.”


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Sprague’s career has focused on the MSR asset management with an emphasis on valuation, cash flows and profitability of servicing at a variety of firms, including Bank of America and KPMG. Most recently, he served as executive vice president of Trading and Analytics at PHOENIX, a provider of mortgage servicing rights analytics, transactions and advisory services to over 250 clients, where he was responsible for client development and a variety of industry outreach efforts. Prior to joining PHOENIX in 2013, Sprague served as senior vice president and servicing asset manager at SunTrust Mortgage, where he managed the mortgage servicing rights (MSR) portfolio valuation process as well as periodic MSR transactions for over 10 years.  


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“Today’s environment requires data driven solutions and optimized performance,” said Sprague. “STRATMOR’s suite of proprietary data and industry subject matter experts provides clients optimal opportunity to prosper and grow. I am thrilled to help leverage these resources into practical solutions for our clients, so they may survive and thrive in the ever-changing mortgage environment.” 


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In 2018, Sprague was appointed as secretary of the Mortgage Bankers Association’s (MBA) Certified Mortgage Banker (CMB) Society. He also serves on several other MBA committees, including the Financial Management Steering Committee, the Council on Residential Mortgage Servicing for the 21st Century, the BASEL Committee and the Servicing Compensation Working Group. Since 2007, Sprague has been an instructor with the MBA School of Mortgage Banking program, where he teaches “Servicing/MSR Day.” He is also as an instructor at the MBA School of Mortgage Servicing. More recently, Sprague has taught a course on the Secondary Market for The National Association of Minority Mortgage Bankers of America.

Sprague is a frequent speaker at various MBA and other industry conferences, often speaking on liquidity and the overall challenges present in the mortgage industry. He holds an MBA from the University of Colorado-Denver and has an undergraduate degree from the University of Richmond with a concentration in Accounting.

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Lenders Could Be At Financial Risk Despite Protection With Home Flood Insurance

As flooding across the U.S. continues to be a serious issue, the effect of loss or damage to homes has dramatically increased. And because most properties are financed, that home serves as collateral to lenders. This in turn means that lenders have a greater financial stake when properties are damaged by flood waters. What makes this situation worse is when the homeowner abandons the home and/or stops making mortgage payments.


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Homes and businesses in high-risk floodareas with mortgages from federallyregulated or insuredlenders are required to have flood insurance. While flood insuranceis not federally requiredfor homes in a moderate- to low-risk floodarea, lenders may still requireflood insurance. Flood insurance is the only way lenders can protect an investment in case of a loss. Lenders need to be aware that properties in their portfolios can move into a covered flood area, which means it would need flood insurance to cover potential loss.  


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Federal Emergency Management Agency (FEMA) applies precise standards and the most accurate hazard information to develop Flood Insurance Rate Maps (FIRM) that show flood zones. However, limitations in the scale or topographic details of the source maps used to prepare a FIRM may result in small elevated areas to be included in a SFHA. Because of this, lenders could face a significant loss if the property is flooded and does not have flood insurance due to Letter of Map Conversion. 


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In order to change the flood hazard designation for properties in these areas, FEMA has set up a process called the Letter of Map Amendment (LOMA) for properties on naturally high ground, Letter of Map Revision (LOMR), a modification to FIRM or flood boundary and floodway map (FBFM) and the Letter of Map Revision Based on Fill (LOMR-F) for properties elevated by placement of fill. These determinations officially amend an effective FIRM. Lenders need to be aware of a property that no longer requires flood insurance as they need to provide a refund to owners if they continue to pay it. 

If LOMA, LOMR, or LOMR-F prove the property is correctly shown outside the SFHA, the mandatory federal flood insurance requirement is no longer applied. Again, lenders can require flood insurance as a condition of the loan, but premiums are lowered for structures outside the SFHA. And if lenders remove the flood insurance requirement altogether, a refund of the premium paid could be issued or the policy canceled.

FEMA does not charge a fee to review a LOMA request, but requesters are responsible for providing the required mapping and survey information specific to their property. For FEMA to remove a structure from the SFHA through the LOMA process, federal regulations require the lowest ground touching the structure, or Lowest Adjacent Grade (LAG) elevation, to be at or above the Base Flood Elevation (BFE).  Lenders can send homeowners who want to file a request for conditional and final map revisions to the FEMA LOMC Clearinghouse.FEMA does recommend flood insurance coverage even if it’s not required by law or a lender. Mortgaged homeowners are eligible to pay much less for the flood insurance if their property is removed from the SFHA through this LOMA, LOMR or LOMR-F. Lenders need to be aware of the flood zone status of the properties in their portfolios and know where to send borrowers who want to challenge those designations. 

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Servicers Expect To See Growth And Increased Delinquencies In Their FHA Portfolios

Altisource has released its 2018 report, “The State of the Servicer Industry.” The report highlights results from the third annual Default Servicing Survey, a survey of over 200 mortgage default servicing professionals.  With the general decline in inventory over the past five years, servicers are expressing interest in working with larger service providers who offer end-to-end capabilities.


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According to the study, when evaluating a vendor to manage their default portfolio, a majority of servicing professionals surveyed consider end-to-end default disposition (93 percent) and REO asset management (93 percent) capabilities important.  Of the servicing professionals surveyed, 86 percent cited that their organization currently services FHA loans. Nearly three-quarters (72 percent) expect their FHA loan portfolio to increase over the next 12 to 24 months and 77 percent expect the increase to be more than 25 percent.


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While FHA loan delinquency rates remain low, servicers need to be prepared to handle these delinquencies. Servicing professionals (73 percent) cited using a third-party vendor as part of their CWCOT program management. When asked what factors are important when choosing a CWCOT vendor, 91 percent of those surveyed said end-to-end capabilities/outside services (i.e. closing, valuation, title curative).  


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“Based on the survey results, recent economic indicators suggest that the housing market is approaching an inflection point,” said Patrick G. McClain, Senior Vice President of Hubzu Auction Services and Equator for Altisource.”While delinquency and foreclosure rates remain low, home price appreciation is slowing and interest rates are rising. With lower origination volumes and an expanding credit box, servicers expect to see growth and increased delinquencies in their FHA portfolios.

“Now is the time for servicers to review their internal capabilities and ensure they are partnered with the best vendors to effectively manage their FHA delinquent loans to avoid unnecessary cost, increased risk and to maximize returns.”

The report can be accessed online at http://go.altisource.com/State-of-Servicing.html

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Servicing Platform Reaches A Significant Milestone

Sagent Lending Technologies has reached its latest achievement, supporting 1 million consumer loans on LoanServ, the loan servicing system powering the servicing operations of many leading financial businesses in the U.S. and Canada.


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LoanServ allows servicers to consolidate their use of outdated, heavily-siloed servicing applications into a single unique platform that provides a single-borrower view and scales to accommodate growth. The platform supports consumer loans and mortgages using a singular, unique design and data structure, unlike other servicing platforms that use wrap-around modules. In addition to making the loan process simpler for users, this helps servicers reduce costs.


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Consumer lending is highly variable in product and support needs and LoanServ automates more than traditional consumer systems. With full support for direct and indirect channels, LoanServ has managed fixed and variable rate products, revolving and installment loans, credit insurance products, and all types of collateral by the millions.


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LoanServ is designed to support changing product types while helping servicers manage state compliance on rates, refunds, late changes, and more. The system also adds automation for collections, reserved balances, secondary marketing, and even hypothecation functions.

“Solutions need to be built for today’s marketplace to help servicers compete, deliver best-in-class borrower experiences, and reduce overall costs. One million consumer loans actively being serviced on LoanServ signals to the market that the solution is trusted by a variety of servicers and can handle the increased scale and flexibility that modern lending demands,” says Bret Leech, CEO, Sagent Lending Technologies. “This is quite the milestone for us.”

 

FirstBank Puerto Rico Streamlines Operations, Automates The REO Process

RES.NET, a technology platform allowing mortgage bankers, investors, vendors, consumers and other parties to communicate around a real estate transaction, has successfully developed and deployed a Buyer’s Marketplace for FirstBank Puerto Rico. The new marketplace showcases the bank’s diverse portfolio of available assets and engages a much broader audience of potential buyers and investors than traditional tools available in the market. It was created in Spanish to accommodate the widest range of buyers.

Shortly after FirstBank Puerto Rico selected RES.NET as the operating platform to assist with the disposition of its OREO (other real estate owned) properties, the devastation from Hurricane Maria presented a new set of unforeseeable challenges for the bank and the island as a whole. The bank and RES.NET issued a call to action, expediting the development and deployment timeline, quickly launching the marketplace in its native language to contribute to the rebuilding efforts of the community.


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“Following Hurricane Maria, it became urgently important to streamline the bank’s OREO process and workflow, while simultaneously enhancing the visibility of the bank’s available assets to a broader audience of potential buyers and investors,” said Bianca Torres Román, VP, FirstBank Puerto Rico. “Within just one month of launching the new Buyer’s Marketplace, the unique number of visitors seeking information on our available properties more than tripled. Today, we are now reaching prospective buyers not just in Puerto Rico and the immediate region, but across the United States as well.”

The custom buyer’s site features a diverse range of assets available including land, commercial, residential, multi-family, retail, apartment units and apartment complexes. The site translation into Spanish enables prospective buyers and investors to easily navigate and independently search properties by territory, municipality, ZIP code and price range. Features include multiple photos of properties including photos of the interior, highlighted features providing information on specific desirable amenities from pools, to views or topography, and the ability for buyers or investors to contact the bank directly and/or make an offer. Prospects can view the available properties, or by navigating through FirstBank’s site.


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“Prior to partnering with RES.NET on the development of the Buyer’s Marketplace, we were limited in terms of the information and features we could highlight, as well as our ability to showcase a property,” Torres continued. “The traditional methods of marketing property in Puerto Rico are primarily through social media outlets, agent to agent exchanges and select online resources. Those methods have limited functionality, restricting the ability to upload photos, and in some cases, simply highlight a property’s specific location.”

In addition to the Buyer’s Marketplace, the bank has implemented RES.NET’s REO, Agent, Vendor, and Property Preservation portals to automatically track and manage its whole portfolio. Bank employees can now manage the entire process from the time a foreclosure has been conducted through the sale and closing to a new buyer. What was previously managed through a manual process has been improved through the automation of workflows, work cues, offer management tools and agent interaction, and notification features.


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Torres added, “With RES.NET, the complete portfolio can be viewed via the dashboard, providing real-time data and a more holistic view of our assets. Having access to this data is invaluable and helps ensure we are positioned for success in the future. Launching the Buyer’s Marketplace in combination with deploying our operating platforms is a pivotal moment for the bank’s OREO success.”

“I am very pleased with the work we’ve accomplished together with the team at FirstBank Puerto Rico,” said Keith Guenther, CEO and founder of RES.NET, a wholly owned subsidiary of USRES. “It is the combined dedication of both our teams that allowed this large-scale development and implementation to occur in less than six months. We worked closely with the bank’s staff to scope and develop this customized marketplace to assist the bank in connecting with potential buyers within Puerto Rico, as well as outside of the territory. This visibility of its available assets to a broader audience is an important step in the rebuilding efforts. Any effort that reduces the probability these properties remain vacant ensures the future stability of the region.”
 

LERETA Selects Eric Christensen As Chief Strategy Officer

LERETA, LLC, a national provider of real estate tax and flood services for mortgage servicers, has tapped Eric Christensen as the chief strategy officer for the company. Christensen is responsible for product development, corporate strategy, marketing and M&A transactions.


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Christensen, who most recently was the founder and managing director of Credit Data Solutions, has spent his career developing knowledge around financial software, predictive modeling and analytics, credit risk technology and decisioning software. His expertise extends in fraud management, competitive strategy, business planning, sales and marketing as well as risk management and regulatory relations.


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“Eric’s deep and varied experience in the financial industry makes him perfect to help usher LERETA into a new era where technology and people help provide the best level of service to our customers,” said John Walsh, CEO of LERETA. “We welcome his knowledge and passion for bringing positive change to the industry.”


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Before Credit Data Solutions, Christensen had different executive positions at several financial services companies, including Interthinx/Strategic Analytics, FICO, Fannie Mae, E*Trade and LoanPerformance/CoreLogic. In addition to his success, Christensen has a Certified Mortgage Bankers (CMB ®) designation through the MBA.

Pretium Partners Acquires Selene Holdings

Pretium Partners, LLC (“Pretium”), an investment management firm focused on real estate, mortgage finance and corporate credit with over $10 billion in assets under management, today announced that it has entered into a definitive agreement to acquire Selene Holdings LLC (“Selene”) from funds managed by Oaktree Capital Management, L.P. (“Oaktree”) and Ranieri Partners LLC (“Ranieri”).

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Founded in 2007, Selene is the parent company of Selene Finance LP (“Selene Finance”), a Houston-based residential mortgage servicing company. With more than 500 full time employees, Selene Finance is a special servicer of nonperforming, re-performing, REO and performing loans and is able to service in all 50 states. Selene Holdings also includes SelecTitle, a title services company, and New Diligence Advisors, a national third-party diligence and advisory services firm.

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Donald Mullen, Founder and Chief Executive Officer of Pretium said, “Selene is a best-in-class servicer that adds significant capabilities and expertise to Pretium’s residential credit ecosystem. We look forward to further investing in Selene’s technology and platform and working closely with management to best serve Pretium’s investors and Selene’s clients.”

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Brian Laibow, Managing Director of Oaktree said, “Pretium is a leader in residential credit. They have an institutional culture and demonstrated history of growing customer-focused businesses. As we have built Selene with our clients, it was very important for Oaktree to partner with someone who shares that vision. We’re pleased to have found that in Pretium.”

Joe Pensabene, President and CEO at Selene added, “Selene has always been focused on providing flexible and creative servicing solutions to our clients. We’re excited to join with a partner who shares that approach and commitment to the industry, and look forward to continuing to expand our solutions for the residential credit markets.”

Terms of the transaction were not disclosed. The transaction, which is subject to customary closing conditions and regulatory approvals, is expected to close mid-year 2019.

Houlihan Lokey served as exclusive financial advisor to Selene. Buckley Sandler LLP served as legal counsel to Selene. Sidley Austin LLP served as legal counsel to Pretium.

Lenders Should Be Aware Of This …

As a homeowner, how would you like to pay less in property taxes, or even not have to pay those taxes at all? Many homeowners and lenders are familiar with the term exemption. It’s a discount or benefit given for meeting certain requirements. Common examples are a homestead or primary residence exemption, usually a credit applied to taxes if the property being assessed is where the borrower lives. Other common exemptions are disability or disabled veteran, given to people with disabilities or who have served in the military and are now disabled. Exemptions are also usually given to people who are 65 years of age or older, or if the property is used for a special purpose, such as agriculture. Exemptions like these help people who may have trouble paying their taxes keep their properties. Exemptions also lessen the amount that a mortgage company will have to pay if it’s an escrowed account.

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The financial effect of these exemptions can be substantial. Some states will give a large credit for the exemptions. For instance, if the property is a combined Homestead and Disabled or Homestead and over 65 status, it surpasses the taxes that are assessed to the property and the borrower does not have to pay property taxes. Sometimes, like in Texas, people with certain exemptions can qualify to have their taxes deferred, so the taxes will not have to be paid taxes until they move, pass away, or try to sell the property. People in Texas also can enroll in a special installment plan. In other situations, the exemption provides a credit that lowers the total taxes that must be paid. The requirements, benefits and application process for the exemptions can vary from state to state, and often local agencies check yearly to see if the exemption still applies. An example would be checking a property with an agricultural exemption to determine the last time there was actually farming on the property). It’s always best to check with the website of each state to understand the nuances of each exemption.

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If the county discovers that a property did not qualify for the exemptions granted, a reassessment can occur. When this happens, the taxes that would have been owed if the exemption was not applied become due. As a result, the property will suddenly have delinquent taxes that lenders were not aware of and the consequences of these delinquencies can range from having extra penalties and interest added, to possible property loss depending on how the county manages delinquencies.

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It’s always beneficial for lenders to be vigilant and pay attention to what is happening with the properties on which they have issued loans. If a borrower violates a requirement for an exemption, such as not farming on land with an agricultural exemption or filing a Homestead exemption even though it’s being used as rental property or for commercial use, the lender will ultimately end up paying more or even losing the property. One way for lenders/servicers to stay on top of this information is to stay in touch with the county tax offices and assessors and pay attention to any correspondence received from them. This can be a time consuming task. If lenders do not have time to constantly monitor this information, working with a business partner that has employees trained to be experts in tax laws would be prudent. Lenders should look at keeping up with exemptions as protecting their investment and saving themselves from unwanted penalties.

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Expanding Affordable Homeownership With Housing Counselor Support

It is not new news that market constraints affect minority homeownership. Rising interest rates, tightened eligibility requirements, higher prices and origination costs are converging to lower mortgage origination projections for 2018. These and other factors will have an inordinate effect on minorities and low-to-moderate income borrowers particularly in underserved markets and rural areas.

According to a recent analysis by Zillow, black and Hispanic renters are finding it more difficult to save for the required down payment for a home purchase. Essentially, Zillow determined that high rental rates are taking such a large bite out of income that it is materially affecting the ability for these groups to save money for a down payment on a home.

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Recent Home Mortgage Disclosure Act (HMDA) data show that the percentage of black applicants declined for a mortgage was at a higher-than-average rate.

Despite the lowest industry declination rate in 20 years – 9.8 percent in 2017 compared to 18.1 percent in 2007 – black applicants were turned-down to the tune of 20 percent in 2017.

Programs Abound

Despite these dismal results and pessimistic expectations, there is an abundance of affordable mortgage lending programs at the local, state and federal levels. Community Reinvestment Act (CRA) requirements provide additional stimulus for banks to participate in such programs. All of these programs require pre-purchase housing counseling and education by HUD-certified housing counselors to ensure that the applicant has a successful homeownership experience and is prepared for unanticipated life events that may disrupt the ability to pay.

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There is also an emerging trend to deploy proactive post-purchase counseling protocols for at least a year after affordable loans originate to help new homeowners when turbulence occurs.

Rather than reacting to a problem, this counseling strategy includes constant communication with the homeowner at regular intervals and continuous education about the responsibilities of homeownership. This type of assistance helps new homeowners avoid financial traps and navigate tax and insurance issues, home repair problems or homeowner association dues issues that may surprise new buyers.

Most importantly, it can help homeowners create a budget and maintain financial discipline especially, in the first year of the mortgage when all stakeholders are at the most risk.

These dynamics present a unique opportunity for lenders to embrace housing counseling and integrate the discipline into new efforts to work on a local and national basis to create best-execution models for expanding sustainable homeownership, especially in a purchase market where first-time homebuyers can play a significant role.

Fannie Mae’s HomeReady program and Freddie Mac’s Home Possible program are designed to reach low- to moderate-income (LMI) borrowers in underserved areas and feature more lenient eligibility criteria.

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For instance, under the Fannie Mae HomeReady guidelines while there is a 3 percent down payment requirement, the allowable sources are flexible including authorized down payment programs at the state and local level which will translate into zero-down from the borrower.

Both programs require proof of pre-purchase homeownership preparation. The Fannie Mae requirement may be satisfied if the borrow completes an online education course provided by Framework. However, a particular down payment assistance DPA program used for the HomeReady program may require more personalized counseling.

Fannie Mae also strongly encourages housing counseling by including it in the HomeReady guidelines: “housing counseling for prospective homebuyers effectively expands the pool of eligible homebuyers.”

Best Execution

While the competition for borrowers heats up, lenders must always look for the most cost-effective model to increase homeownership rates. However, the housing counseling component, if not managed correctly, will impose additional costs and time delays to an already costly proposition for originators.

To help make affordable lending actually “affordable,” Hope LoanPort (www.hlp.org) offers a turnkey technology platform to originators that fully integrates HUD-certified housing counselors who provide pre-purchase and post purchase counseling.

This delivery model makes it easy for originators to work with housing counselors for any borrower nationwide to meet housing counseling eligibility requirements both before and after a loan is originated. HLP reports that by implementing a post purchase counseling process for DPA loans, early payment default rates are reduced by 30 percent. An early payment default is equally as devastating for the servicer, lender, investor and insurer as it is for the homeowner.

Social Responsibility

The mortgage banking industry has always been a strong proponent of expanding the pool of eligible borrowers especially for minorities and LMI consumers in underserved markets. The addition of personalized and consistent housing counseling and education has proved to be a major tool in supporting that admirable objective.

The current mortgage finance market is fertile ground for the industry to step up its efforts to collaborate with housing counselors and leverage their abilities to meet this common goal.

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Why Lenders Should Be Aware of Exemptions

As a homeowner, how would you like to pay less in property taxes, or even not have to pay those taxes at all? Many homeowners and lenders are familiar with the term exemption. It’s a discount or benefit given for meeting certain requirements. Common examples are a homestead or primary residence exemption, usually a credit applied to taxes if the property being assessed is where the borrower lives. Other common exemptions are disability or disabled veteran, given to people with disabilities or who have served in the military and are now disabled. Exemptions are also usually given to people who are 65 years of age or older, or if the property is used for a special purpose, such as agriculture. Exemptions like these help people who may have trouble paying their taxes keep their properties. Exemptions also lessen the amount that a mortgage company will have to pay if it’s an escrowed account.

Featured Sponsors:

 

 
The financial effect of these exemptions can be substantial. Some states will give a large credit for the exemptions. For instance, if the property is a combined Homestead and Disabled or Homestead and over 65 status, it surpasses the taxes that are assessed to the property and the borrower does not have to pay property taxes. Sometimes, like in Texas, people with certain exemptions can qualify to have their taxes deferred, so the taxes will not have to be paid taxes until they move, pass away, or try to sell the property. People in Texas also can enroll in a special installment plan. In other situations, the exemption provides a credit that lowers the total taxes that must be paid. The requirements, benefits and application process for the exemptions can vary from state to state, and often local agencies check yearly to see if the exemption still applies. An example would be checking a property with an agricultural exemption to determine the last time there was actually farming on the property). It’s always best to check with the website of each state to understand the nuances of each exemption.

Featured Sponsors:

 
If the county discovers that a property did not qualify for the exemptions granted, a reassessment can occur. When this happens, the taxes that would have been owed if the exemption was not applied become due. As a result, the property will suddenly have delinquent taxes that lenders were not aware of and the consequences of these delinquencies can range from having extra penalties and interest added, to possible property loss depending on how the county manages delinquencies.

Featured Sponsors:

 
It’s always beneficial for lenders to be vigilant and pay attention to what is happening with the properties on which they have issued loans. If a borrower violates a requirement for an exemption, such as not farming on land with an agricultural exemption or filing a Homestead exemption even though it’s being used as rental property or for commercial use, the lender will ultimately end up paying more or even losing the property. One way for lenders/servicers to stay on top of this information is to stay in touch with the county tax offices and assessors and pay attention to any correspondence received from them. This can be a time consuming task. If lenders do not have time to constantly monitor this information, working with a business partner that has employees trained to be experts in tax laws would be prudent. Lenders should look at keeping up with exemptions as protecting their investment and saving themselves from unwanted penalties.

About The Author