Category Archives: Servicing

Supreme Court makes it harder for borrowers to fight foreclosures in non-judicial states

Law firms, mortgage lenders and servicers were just awarded more protection in serving non-judicial foreclosures, according to a recent Supreme Court ruling.

The ruling is a victory for the mortgage industry in its fight to retrieve property from delinquent homeowners. One attorney claims the ruling may eliminate thousands of similar homeowner lawsuits.

In the case of the Obduskey v. McCarthy Holthus decision from earlier today, the homeowner tried to fight his non-judicial foreclosure in Colorado.

Each state differs in foreclosure requirements, but generally fit into two category: foreclosures that get to be decided by the courts or foreclosures that are not — a non-judicial foreclosure. Colorado is a non-judicial foreclosure state.

Homeowner Dennis Obduskey alleged that once he received a foreclosure notice from law firm McCarthy Holthus, he invoked protection under the federal Fair Debt Collection Practices Act.

This act protects consumers and maintains that: “a ‘debt collector’ must ‘cease collection’ until it ‘obtains verification of the debt’ and mails a copy to the debtor,” the Supreme Court ruling states.

However, McCarthy Holthus is not a debt collector by definition, as it only pursues non-judicial foreclosures, the Court ruled.

From the ruling:

Obduskey argues that McCarthy engaged in more than security-interest enforcement by sending notices that any ordinary homeowner would understand as an attempt to collect a debt. Here, however, the notices sent by McCarthy were antecedent steps required under state law to enforce a security interest, and the Act’s (partial) exclusion of “the enforcement of security interests” must also exclude the legal means required to do so.

“This decision essentially gives law firms and lenders more protection in non-judicial foreclosure states,” said David Scheffel, partner at law firm Dorsey Whitney.

“In these jurisdictions, homeowners and borrowers will no longer be able to file lawsuits under the Fair Debt Collection Practices Act (FDCPA) against law firms who are pursuing foreclosures,” he added.

“This essentially eliminates a heavily used practice by plaintiffs’ attorneys,” Scheffel added. “Ultimately, this should have the effect of reducing the cost that lenders/servicers bare in terms of getting to a final foreclosure in these states as the FDCPA lawsuits delay this process significantly. At the end of the day, this decision will eliminate thousands of these lawsuits in non-judicial foreclosure states like Massachusetts, California, Colorado, and Minnesota.”

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HousingWire announces agenda

When we started planning our second annual event, our goal was to design a very practical conference that would give marketers the information and insight they need to succeed in this purchase market so they can Play to Win.

To that end, we invited marketing leaders from 10 lenders to serve on our advisory board, and asked them:  

  • What is the single greatest challenge facing mortgage marketers this year?
  • What’s the most impactful solution you are working with right now, and why? Is there a problem you have that there doesn’t seem to be a solution for?
  • Which social channels are most important for reaching your customers? How has your strategy changed in the last year?
  • What topic do you wish we would have a session on?
  • What’s important for marketers to know when it comes to referral relationships?

We took their answers — some were pages long! — and developed our session topics around their insights, ensuring tangible benefits for our attendees.

So, what is the single greatest challenge facing mortgage marketers right now? The most common answer: How to do more with less. That answer didn’t end up as a session, but rather as marching orders informing how we approach every one of the sessions — how do marketers accomplish social selling, content marketing, branding, etc. when their budget might be smaller or they have less staff than last year?

And that mantra has spurred us to seek speakers from a range of companies — the solutions for a top 25 HMDA lender won’t likely be the same as the solution a stand-alone marketer needs and we want a range of perspectives and potential solutions.

Armed with those insights, we’ve packed a ton of content into the day-and-a-half summit covering topics that include referral marketing, personal branding, content marketing, how to build a marketing tech stack, how to use video, podcasts and voice effectively, and so much more. We’re very excited to host what is shaping up to be a meeting of some of the smartest, most successful mortgage marketers in the business. 

Check out the full agenda and don’t wait to reserve your seat — our early bird pricing expires after March 31. 

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Homeownership investment company Point raises $122 million

Homeownership investment company Point just landed a major cash infusion that will fund its plans to help more Americans access their home equity without incurring debt.

The Silicon Valley company raised $100 million in platform capital from Kingsbridge Wealth Management – bringing its total platform capital to $265 million.

It also secured $22 million in a Series B funding round led by Prudential Financial and DAG Ventures, with participation from existing investors that include Andreessen Horowitz, Ribbit Capital and Bloomberg Beta.

Point said its new investors, including Prudential, are interested in the company’s solution the lack of affordable housing, and that it plans to work with these investors to create innovative solutions for first-time homebuyers and those living in challenging markets.

“We know that many Americans are overburdened by debt,” said Prudential’s VP of Impact Investments Miljana Vujosevic. “Our investment in Point is one more way we’re committing to helping consumers meet their goals and achieve lasting financial security.”

Point is one of a number of companies offering homeowners debt-free access to their equity by connecting them with investors who want to purchase a portion of their home’s equity.

Point’s offer is typically between 5% and 20% of the home’s appraised value, and homeowners can sell or pay back the investment at any time. If the home depreciates, Point shoulders the loss alongside the homeowner.

The company markets its product as an alternative to home equity loans and cash-out refinances.

Point Co-Founder and CEO Eddie Lim said the company is seeing real interest from consumers looking for an alternative way to get their hands on their equity.

“Point is seeing significant demand for its home equity investment solution,” said Lim. “We are witnessing the emergence of a whole new class of financial solution that is aligned with homeowners, and investors are taking notice.”

Point, which launched in 2015, secured a $150 million platform capital investment from Atalaya Capital Management in 2018, and since expanded its reach to 13 states and Washington, D.C.

The company said the new capital will be used to fund its expansion into more than 30 states by the end of 2020 and aid in its goal to fund more than 1,000 homeowners in the coming year.

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MBA: Economic worries slow growth of mortgage applications

Mortgage applications inched forward slightly for the week ending on March 15, 2019, according to the newest data from the Mortgage Bankers Association‘s weekly Mortgage Applications Survey.

On an unadjusted basis, the Market Composite Index moved forward 1.6% from the previous week.

MBA Vice President of Economic and Industry Forecasting Joel Kan said mortgage rates declined once again, as concerns about the slowing global economy and status of Brexit drove investors’ demand for U.S. Treasuries.

“Rates for most loan types were at their lowest levels in over a year, with the 30-year fixed mortgage rate falling to 4.55% – it’s lowest reading since last February,” Kan continued. “Although lower rates sparked a 3.5% increase in refinance applications, purchase activity was up only slightly last week and from a year ago.”

Furthermore, Kan noted entry-level housing supply remains weak and is likely hindering some would-be first-time buyers from finding a home.

All in all, this – along with faster growth in the higher-price tiers – is why the average loan application size has risen to a new high for three straight weeks, according to Kan.

The Refinance Index slightly grew 4% from the previous week and the unadjusted Purchase Index rose 1% from a week ago and is also 1% higher than the same week in 2018. Lastly, the seasonally adjusted Purchase Index also increased 0.3% from the week before.

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

  • The refinance share of mortgage activity decreased to 39.2% of total applications, moderately increasing from 38.6% the previous week.
  • The adjustable-rate mortgage share of activity fell to 7.1% of total applications.
  • The Federal Housing Administration‘s share of mortgage apps held steady from last week’s 10.4%.
  • The Veterans Affairs‘ share of applications climbed from 10.2% the previous week to 10.6% this week.
  • The Department of Agriculture‘s share of total applications held its ground from last week’s 0.6%.
  • Mortgage interest rates for 30-year fixed-rate mortgages with conforming loan balances fell from 4.64% to 4.55%.
  • The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances slightly decreased from last week’s 4.45% to 4.37%.
  • The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA declined from last week’s 4.61% to 4.59% this week.
  • The average contract interest rate for 15-year fixed-rate mortgages moved backwards from 4.02% to 3.97%.
  • The average contract interest rate for 5/1 ARMs fell to  3.99% from 4.09%.

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These are the best housing markets for first-time buyers

Purchasing the perfect home can be difficult, especially for those navigating the housing market for the first time.

Luckily, a new report by Zillow reveals the country’s top housing markets for first-time buyers, measuring factors like home value, home appreciation, wealth and inventory.

“Becoming a homeowner for the first time is easier in some markets than others – and the difference is not strictly about home prices, although they have a big impact on how long it takes to save a down payment,” Zillow writes. “Strong inventory and lower competition for listings also make a difference – as does the market outlook.”

The video below highlights the top 5 most affordable rental markets, according to Zillow’s research: 

5. Orlando, Florida. In this metro, the median home value is $237,100 and 21.3% of home listings have experienced a price cut.

4. Atlanta, Georgia. In this metro, the median home value is $217,500 and 15.9% of home listings have experienced a price cut.

3. Phoenix, Arizona. In this metro, the median home value is $264,900 and 20.9% of home listings have experienced a price cut.

2. Las Vegas, Nevada. In this metro, the median home value is $277,900 and 23.9% of home listings have experienced a price cut.

1. Tampa, Florida. In this metro, the median home value is $213,600 and 24.8% of home listings have experienced a price cut.

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Two New Jersey men arraigned in $1.6 million reverse mortgage scam

Two New Jersey men were arraigned in federal court Monday for a reverse mortgage scheme that used inflated property appraisals to obtain $1.6 million in proceeds that were then taken from unsuspecting homeowners.

Rafael Peralta of Clifton, New Jersey, and Philip Puccio Jr. of Mahwah, New Jersey, were indicted by a federal grand jury on one count of conspiracy to commit fraud and six counts of bank fraud.

According to the Department of Justice, Puccio is a mortgage broker who also had a stake in a home remodeling company alongside Peralta. The two allegedly solicited older homeowners for home repairs and renovations, encouraging them to apply for a reverse mortgage to finance the work.

They then conspired with an appraiser to submit inflated property valuations in order to secure larger proceeds on the reverse mortgages, and also submitted false loan documents that actively concealed the fact that the loan proceeds were being dispersed to entities they owned, the indictment stated.

The indictment lists six New Jersey properties for which the two men submitted inflated appraisals to obtain a collective $1.6 million in loans.

“The diverted loan proceeds were deposited into bank accounts controlled by Peralta and Puccio and used for their personal benefit and to further the conspiracy,” the DOJ stated.

The two face up to 30 years in prison, a $1 million fine, or twice the gross monetary gain by the defendants or twice the gross monetary loss to others, whichever is greater.

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Facebook making massive changes to ad platform after being accused of enabling housing discrimination

Facebook is making significant changes to its advertising platform after the social media monolith was accused of enabling discrimination in housing, employment, and lending.

The changes come after years of scrutiny into Facebook’s ad practices, which appeared to allow advertisers to purposefully exclude certain people from seeing housing, employment, or lending ads.

Last year, the Department of Housing and Urban Development filed a complaint against Facebook, claiming that the social media giant’s advertising platform enabled property owners to discriminate against prospective renters and buyers based on their race, color, religion, sex, familial status, national origin, disability, or other factors.

HUD’s investigation began in response to a ProPublica article in October 2016, which said Facebook gave advertisers the ability to exclude certain ethnic groups from seeing the ads.

Fair housing groups later filed a lawsuit against Facebook in March 2018, saying its ads still discriminate against protected groups under the Fair Housing Act, including women, veterans with disabilities and single mothers.

After HUD filed its complaint against Facebook, the site announced that it was removing more than 5,000 ad target options to “help prevent misuse.” The site claimed that the removed options include “limiting the ability for advertisers to exclude audiences that relate to attributes such as ethnicity or religion.”

But Facebook announced Tuesday that it is undertaking a massive overhaul of its advertising platform that goes well beyond any of the previously announced changes.

According to Facebook, it will no longer allow anyone or any company to target housing, employment, or credit ads by age, gender or zip code.

Additionally, advertisers offering housing, employment and credit opportunities will have a “much smaller set of targeting categories to use in their campaigns overall,” Facebook said.

The site also said that any detailed targeting option “describing or appearing to relate to protected classes” will also be unavailable for advertisers.

Beyond that, the site said that it is building a tool that will allow users to search for and view all current housing ads in the U.S., regardless of where the ads are targeted.

“One of our top priorities is protecting people from discrimination on Facebook,” Facebook Chief Operating Officer Sheryl Sandberg said in the announcement.

“We’re proud that our services help businesses reach people all over the world who are interested in their products and services. Small businesses now have access to marketing tools that previously only big companies could afford. This levels the playing field so that they can reach audiences they care about,” Sandberg continued.

“Our job is to make sure these benefits continue while also making sure that our ads tools aren’t misused. There is a long history of discrimination in the areas of housing, employment and credit, and this harmful behavior should not happen through Facebook ads,” Sandberg added.

“Housing, employment and credit ads are crucial to helping people buy new homes, start great careers, and gain access to credit,” Sandberg said. “They should never be used to exclude or harm people. Getting this right is deeply important to me and all of us at Facebook because inclusivity is a core value for our company.”

The announcement is the result of a settlement with the fair housing groups that sued the site, which include the National Fair Housing Alliance and the American Civil Liberties Union.

In a post on its site, the ACLU goes into more detail about how Facebook’s newly announced ad changes will be implemented, including the creation of a new and separate advertising portal for housing, employment, and credit ads.

From the ACLU:

In the first-of-its kind settlement announced today, Facebook has agreed to create a separate place on its platform for advertisers to create ads for jobs, housing, and credit. Within the separate space, Facebook will eliminate age- and gender-based targeting, as well as options for targeting that are associated with protected characteristics or groups. Targeting based on zip code or a geographic area that is less than a 15-mile radius will not be allowed. And Facebook will stop considering users’ age, gender, zip code, or membership in Facebook “groups” when creating “Lookalike” Audiences for advertisers. Facebook will also require advertisers for employment, housing, and credit to certify compliance with anti-discrimination laws, and it will institute a system of automated and human review to ensure that such ads are properly identified and channeled into the separate flow. Additionally, due to a three-year monitoring period in the agreement, we’ll be watching Facebook’s progress closely to ensure that it implements these changes fully.

Today’s changes mark an important step in our broader effort to prevent discrimination and promote fairness and inclusion on Facebook,” Sandberg said. “But our work is far from over. We’re committed to doing more, and we look forward to engaging in serious consultation and work with key civil rights groups, experts and policymakers to help us find the right path forward.”

In its statement, the NFHA said that it will work with Facebook to develop an in-house fair housing training program for Facebook leadership and staff. Additionally, the fair housing groups will monitor Facebook’s advertising platform on a continuing basis to ensure that future advertisers do not engage in discrimination.

“This settlement positively impacts all of Facebook’s 210 million users in the U.S. since everyone is protected by our nation’s fair housing laws,” said Lisa Rice, president and CEO of NFHA. “As the largest digitally-based advertising platform and a leader in tech, Facebook has an obligation to ensure that the data it collects on millions of people is not used against those same users in a harmful manner.”

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JLL buying HFF in $2 billion deal that will create multifamily real estate giant

In a deal that will combine two of the biggest names in multifamily and commercial real estate, Jones Lang LaSalle announced Tuesday that it is buying HFF for approximately $2 billion.

Under the terms of the agreement, JLL will acquire all the outstanding shares of HFF in a cash and stock transaction that carries an equity value of approximately $2 billion.

Both JLL and HFF are consistently among the top lenders in the multifamily real estate space, with both companies placing in Freddie Mac’s top 10 lenders of 2018.

JLL touted HFF’s capital markets experience as a significant draw to the deal. JLL claims that the deal will allow the company to “rapidly scale” its presence in the U.S. capital markets, and accelerate the growth of its debt advisory business in Europe and Asia, along with driving increased operating efficiency.

“Increasing the scale of our capital markets business is one of the key priorities in our Beyond strategic vision to drive long-term sustainable and profitable growth. The combination with HFF provides a unique opportunity to accelerate growth and establish JLL as a leading capital markets intermediary, with outstanding capabilities,” said Christian Ulbrich, global CEO of JLL.

“We have long admired HFF for its expertise and leading reputation in the industry, as well as its client-first culture of teamwork, ethics and excellence, which aligns with our own,” Ulbrich added. “I believe that combining our organizations will deliver a range of compelling benefits for our clients, employees and shareholders.”

Upon closing of the deal, JLL shareholders are expected to own approximately 87% of the combined company, while HFF shareholders are expected to own approximately 13%.

The companies also expect the deal to provide “significant run-rate synergies,” estimated to be approximately $60 million over two to three years.

As part of the deal, HFF CEO Mark Gibson will become JLL’s CEO, Capital Markets, Americas and Co-Chair of its Global Capital Markets Board.

“This is a terrific transaction for our shareholders, providing them with an immediate cash payment and the opportunity to participate in the long-term value of the combined company,” Gibson said.

“In addition, we believe the combination with JLL will create a superior platform for our shareholders, clients and employees than either company would have independent of the other and will significantly accelerate our firm’s strategic plan,” Gibson added. “JLL’s team-oriented culture with the additional standards of high character and integrity are an excellent match with the HFF culture, which has been HFF’s fundamental differentiator since its inception.”

The companies expect the deal to close in the third quarter of 2019.

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Fewer Americans are filing for foreclosures

There was a moderate drop in foreclosures in February, according to ATTOM Data Solutions‘ latest Foreclosure Market Report.

According to the Foreclosure Market Report, there was a 3% decline from the previous month and an 11% year-over-year decrease from 2018.

Notably, only 54,783 U.S. properties were listed as foreclosure filings, default notices, scheduled auctions or bank repossessions. This marks the eighth consecutive annual decrease in foreclosure activity.

The Foreclosure Report analyzes the total number of properties with at least one foreclosure filing entered into the ATTOM Data Warehouse during the month and quarter. 

The report is based on data collected from more than 2,200 counties nationwide, accounting for more than 90% of the U.S. population.

ATTOM’s analysis indicated that during the month of February, banks repossessed 11,392 U.S. properties. This total is down 7% from January and 12% percent from a year ago.

Furthermore, 29,735 U.S. properties started the foreclosure process in February, rising just 1% from the previous month but still 9% below 2018’s level.

Overall, New Jersey topped the list of housing markets with a foreclosure filling rate of one in every 1,006 housing units, followed by Delaware with one in every 1,008 housing units; Maryland with one in every 1,193 housing units; Florida with one in every 1,365 housing units and Illinois with one in every 1,465 housing units.

However, foreclosure rates countered nation trend, increasing year-over-year in 13 states including Florida, up 68%; Oregon, up 46%; Louisiana, up 34%; Illinois, up 9%; Texas, up 9%; and Colorado, up 3%.

NOTE: For this report, ATTOM Data Solutions analyzed sales deed data.

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Small-dollar mortgages are not as risky as most lenders think

The purchase of a single-family home worth $70,000 or less is rarely financed by a mortgage, and while there are a number of reasons why, one major factor is their perceived risk.

A recent analysis by the Urban Institute examined the risk associated with small-dollar mortgages, determining that the perceived risk was “not correct or fair.”

But because many lenders shy away from offering financing on lower-valued properties, researchers said many creditworthy Americans are shut out of homeownership in low-cost or distressed communities.

According to the report, just 25% of homes purchased for $70,000 or less were financed with a mortgage in 2015. By comparison, 80% of homes valued between $70,000 and $150,000 were purchased with a mortgage.

Urban Institute’s report points to several reasons for this lack of small-dollar financing: fixed servicing and originating costs that make financing lower-value properties less attractive; all-cash investors who dominate low-cost housing markets; and the difficulty in securing a mortgage on manufactured homes of condos, which may comprise a solid portion of low-value properties.

Another key factor? Lenders’ perceived risk of small-dollar mortgages.

To determine if this risk was founded, the think tank examined the risk profiles of small-dollar loans to assess how they stacked up against larger loans. This is what researchers found:

Small-dollar loans have similar credit profiles
Small-dollar and mid-sized mortgages ($70,000 to $150,000) have comparable credit profiles across government, GSE, private-label securities and portfolio channels.

Loan-to-value ratios are also comparable between small and mid-size mortgages. Debt-to-income ratios for small-dollar mortgage borrowers are about 3 to 4 percentage points lower across all channels, which researchers attribute to lower monthly payments from lower loan balances.

Small-dollar mortgage loans perform like loans with higher balances
Minor differences in performance are explained by differences in credit score, DTIs and LTVs, Urban Institute stated.

For GSE and portfolio channels, small-dollar mortgages performed similarly and, in some cases, better than larger loans during the pre-crisis housing boom years, even though they had lower credit scores.

For the government channel, small-dollar loans had higher default rates in the pre-crisis years, but this has narrowed as the credit score gap narrowed.

The private-label securities channel had higher default rates overall, but during the 2005 to 2007 bubble years, small-dollar loans had similar or even lower default risk despite weaker credit profiles.

Loss-severity on small-dollar mortgages is higher
The loss severity for small-dollar mortgages originated from 1999 to 2017 was 61.6%, compared with 44.6% for loans on properties valued at $70,000 to $150,000.

Why? For one, fixed origination and servicing costs. Also, when a loan defaults, the loss severity is calculated as a percentage of the loan balance. Plus, losses on these loans are more likely to be written off to avoid the cost of loss mitigation.

But here, the institute points to something interesting:

Even though the greater loss severity on small loans is a symptom of the cycle of weak demand for small-dollar mortgages, it is also a cause, as the lack of such mortgages can depress home price appreciation and make it more difficult to recoup losses on the property. A more robust market for small-dollar mortgages could remedy this issue, as would implementing cost-efficient measures for originating and servicing small-dollar loans.

The researchers conclude that the practice of adding risk-price premiums to small-dollar mortgages is unfair, and that assumptions that they are inherently riskier are incorrect.

“There are hundreds of low-cost and distressed communities where affordable housing is available but not accessible to families who want to buy homes because the system for financing purchases is not robust enough,” the report stated.

Urban said a better understanding of how small loans perform can help lenders fill in this “missing piece of the mortgage market” and serve more borrowers.

“Otherwise, naturally occurring, affordable single-family housing will continue to be the province of investors and speculators who can buy homes with cash and will not be an option for the millions of credit-worthy potential first-time homebuyers and working families who could become homeowners if mortgage financing were available,” the researchers concluded.

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