Category Archives: Lending

Finance of America Mortgage settles FHA mortgage fraud lawsuit for $14.5 million

Finance of America Mortgage, a Blackstone portfolio company, has agreed to pay the U.S. government $14.5 million to settle a whistleblower lawsuit involving mortgage fraud.

The payment settles the claim that Gateway Funding Diversified Mortgage Services, one of several companies FAM acquired in 2015, knowingly originated and underwrote deficient mortgage loans insured by the Federal Housing Administration in violation of the False Claims Act.

As a direct endorsement lender participating in the FHA’s loan program, Gateway was required to follow specific underwriting guidelines, maintain a quality control program and report deficient loans to the Department of Housing and Urban Development.

But according to the Department of Justice, Gateway failed to audit all early-payment default loans as required, and when it did perform an audit, it did not act on calls from compliance regarding concerns about the quality of these loans.

The lawsuit alleged that when Gateway team members alerted executives that the lender’s loans had a high default rate, and that specific branches and underwriters were displaying “a pattern of poor performance,” nothing was done to address the problem.

Gateway admitted that it did not adhere to HUD’s self-reporting requirement for deficient loans, and acknowledged it approved loans for FHA insurance that were not eligible. As a result, HUD incurred significant losses when those loans defaulted and insurance payments were made to Gateway.

“Gateway misrepresented that its federally insured loans met HUD’s quality standards, harming borrowers who were left underwater on their homes and taxpayers who backed the mortgages,” said United States Attorney Grant Jaquith. “We are committed to holding mortgage lenders accountable when they abuse government programs for their own gain.”

Article source: https://www.housingwire.com/articles/47692-finance-of-america-mortgage-settles-fha-mortgage-fraud-lawsuit-for-145-million

Mr. Cooper hires restructuring expert as new CFO

Mr. Cooper has hired Christopher Marshall to take over as chief financial officer. He will succeed Amar Patel, who has served as interim CFO since March 2017.

Marshall is the co-founder and former CFO of Capital Bank Financial, where he worked from 2009 until the bank was acquired by Horizon National Capital last year.

Marshall took Capital Bank Financial from a start-up to a thriving bank with $10 billion in assets and a market capitalization of $2.2 billion, guiding it through several community bank acquisitions and a successful IPO.

Chris MarshallPrior to that, Marshall worked as chief restructuring officer and senior advisor to the CEO at GMAC and as CFO at Fifth Third Bancorp.

He was also a member of the management operating committee at Bank of America, where he also served as CFO of the Consumer Products Group and COO of the Global Consumer and Small Business Bank.

“We’re excited to welcome Chris to Mr. Cooper,” said Chairman and CEO Jay Bray. “Chris’ vast financial, operational and strategic experience will be invaluable to the company as we work to deliver more value to shareholders, customers and team members.”

Article source: https://www.housingwire.com/articles/47694-mr-cooper-hires-restructuring-expert-as-new-cfo

Gateway Mortgage hires new chief risk officer

Gateway Mortgage Group has named Steven Patrick its new chief risk officer, tasked with overseeing the Oklahoma-based lender’s enterprise risk management, compliance and quantitative analytics.

Previously, Patrick worked as managing director for Everett Advisory Partners, counseling clients on risk-reducing strategies and solutions to complex funding problems. Prior to that, he worked for Federal Home Loan Bank of Chicago, Bank of America and Merrill Lynch.

“Steve has a tremendous amount of experience in mortgage finance, credit and risk arena,” said Gateway CEO Stephen Curry. “He brings a deep understanding of enterprise-level risk management to this role and understands its importance to a company’s overall health and growth. We are happy to welcome Steve into the Gateway family and we know he will be a valuable addition to the executive leadership team.”

Article source: https://www.housingwire.com/articles/47689-gateway-mortgage-hires-new-chief-risk-officer

Fintech company Plaid raises $250 million, valued at $2.65 billion

There’s a new unicorn in the fintech space, as Plaid announced this week that it raised $250 million in its Series C funding round at a reported valuation of $2.65 billion.

Plaid, a technology platform that connects various applications with users’ bank accounts, has a growing presence in the mortgage space, as the company’s head of mortgage Kate Adamson discussed with HousingWire earlier this year. Also, Fannie Mae recently approved Plaid’s asset verification program to be used within Fannie Mae’s Day 1 Certainty program.

And now, the company plans to grow exponentially thanks to a massive new capital injection.

TechCrunch reported Tuesday that venture capitalist Mary Meeker led the funding round, with participation from Andreessen Horowitz, Index Ventures, Norwest Venture Partners, and Coatue Management, along with existing investors Goldman Sachs, NEA, and Spark Capital.

TechCrunch also reported on Plaid’s reported valuation, which places the company squarely in unicorn status, a term for privately held startups that are valued at more than $1 billion.

In a blog about the capital raise, the company’s founders, Zach Perret and William Hockey, said that they plan to use the money to expand.

“Today, we’re excited to announce that we’ve raised a $250M Series C to reinvest in the fintech ecosystem. With it, we’re planning to grow the team and expand our operations,” Perret and Hockey write in the blog. “We’re focused on shipping and scaling products that will both serve the growth and scale of these customers, and become the foundation for fintech for decades to come.”

As Perret and Hockey note, much of the financial services industry is becoming much more digital, and Plaid plans to be at the forefront of that ongoing transistion, including in the mortgage business.

“The coming years will continue to bring major changes to the financial ecosystem. As digitization simplifies financial products, banking services are becoming increasingly self-contained and embeddable,” Perret and Hockey write.

“Instead of visiting a bank branch to get a loan, consumers can now apply for a mortgage via their phone as they search for a home. Indeed, many companies—for example, those in the sharing economy—consider embedded banking products to be a key differentiator for their hosts, drivers, sellers, and suppliers. Every company is becoming a fintech company,” they continue. “Plaid’s role is to empower these innovators with a platform—and a data network—that delivers access to the financial system.”

As part of the funding round, Meeker will be joining the company’s board. According to the TechCrunch report, the money Meeker used to invest in Plaid came from Kleiner Perkins, the venture capital firm that Meeker is reportedly set to leave soon.

“We feel fortunate to power thousands of companies that have completely reshaped the way Americans live their financial lives. Their innovation has made financial services markedly more accessible and empowering than ever before,” Perret and Hockey conclude. “Yet, we’ve only just begun the fintech journey. We’re looking forward to this next chapter as we work to make money easier for everyone.”

Article source: https://www.housingwire.com/articles/47690-fintech-company-plaid-raises-250-million-valued-at-265-billion

MBA: Mortgage applications increase 1.6%

Mortgage applications increased 1.6% for the week ending Dec. 7, 2018, according to new data from the Mortgage Bankers Association’s weekly Mortgage Applications Survey.

Mortgage rates fell across the board last week, driven by a similar slide in Treasuries. Trade fears dominated investors’ concerns for another week, and this was amplified by data released by the U.S. Commerce Department showing a widening trade deficit,” MBA’s Associate Vice President of Economic and Industry Forecasting Joel Kan said. “The 30-year fixed mortgage rate decreased 12 basis points over the week back below 5%, representing the largest single week drop since 2017.”

On an unadjusted basis, the Mortgage Composite index increased 1.6% from the previous week.

“As a result of these recent rate declines, we saw another weekly increase in refinance applications, along with a rise in the average refinance loan size,” Kan said. “Larger loans tend to react more readily for a given change in mortgage rates. Meanwhile, purchase application activity also increased over the week and was up more than 3% compared to a year ago.”

The Refinance Index rose 2% from the previous week, and the unadjusted Purchase Index fell 2% from last week and was 4% higher the same week in 2017. The seasonally adjusted Purchase Index pushed forward 3% from the previous week.

The refinance share of mortgage activity grew to 41.5% of total applications, up from 40.4% the week before. Notably, this is the highest reading since March of this year.

The adjustable-rate mortgage share of activity increased to 7.6% of total applications.

The Federal Housing Administration share of mortgage apps increased from last week’s 10.2% to 10.8%, and the Veterans Affairs’ share of applications also grew, rising from 10% the previous week to 10.2% this week.

The Department of Agriculture share of total applications move forward, increasing from 0.6% last week to 0.7% this week.

The MBA reported that mortgage interest rates for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) decreased to 4.96% from 5.08% the previous week. This is the lowest reading since September 2018.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $453,100) decreased from last week’s 4.89% to 4.80% this week.  This happens to be the lowest reading since September 2018, as well.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA fell from 5.05% last week to 4.97% this week. Once again, this is the lowest reading since September of this year.

The average contract interest rate for 15-year fixed-rate mortgages fell, decreasing from 4.5% last week to 4.41% this week. This percentage is also the lowest reading since September.

Lastly, the average contract interest rate for 5/1 ARMs retreated to 4.24%, down from 4.33% last week.

Article source: https://www.housingwire.com/articles/47675-mba-mortgage-applications-increase-16

It’s official: Trump nominates Mark Calabria to lead FHFA

Late Tuesday night, President Donald Trump announced his choice to lead the Federal Housing Finance Agency – Mark Calabria.

Trump announced his intent to nominate Calabria, who currently serves as chief economist for Vice President Mike Pence. Previously, Calabria served as a senior aide on the Senate Banking Committee where he was one of the lead drafters of the Housing and Economic Recovery Act of 2008, which created the FHFA.

Calabria served as deputy assistant secretary for regulatory affairs at the U.S. Department of Housing and Urban Development during former President George W. Bush’s administration. Calabria also held positions at Harvard’s Joint Center for Housing Studies, the National Association of Home Builders and the National Association of Realtors.

So, Calabria has the housing experience and has long been outspoken about housing issues. In one example, the same week that he was named to Pence’s staff, Calabria posted a blog, found here, where he addresses the Mortgage Bankers Association’s plans for the future of Fannie Mae and Freddie Mac.

Rumors began to surface that Calabria would be the agency’s next leader earlier this week.

The current head of the FHFA, Mel Watt, is set to depart in January. Watt also recently faced some serious allegations involving his alleged conduct while in his role.

And what might the FHFA look like under its new leadership? For one thing, as Pence’s economist, Calabria famously called for the end of the conservatorship of Fannie Mae and Freddie Mac. Click here to read more about what Calabria as director of the FHFA would mean for the future of the GSEs.

Of course, Calabria’s nomination must still be approved by the Senate, but with his extensive background in housing, and a Republican majority in the Senate, that isn’t expected to be a problem.

“Mark Calabria possesses a unique combination of policy, regulatory and housing expertise, and his nomination to lead the FHFA is well deserved,” said Dan Berger, National Association of Federally Insured Credit Unions president and CEO.

“If confirmed by the Senate, NAFCU looks forward to working closely with Mr. Calabria to ensure a healthy, sustainable and viable secondary mortgage market,” Berger said. “In our numerous meetings with Mr. Calabria, it is clear he has a firm understanding of credit union issues and of the important role the GSEs play in their mission.”

Article source: https://www.housingwire.com/articles/47679-its-official-trump-nominates-mark-calabria-to-lead-fhfa

Millennials will purchase at least 10 million new homes in the next 10 years

According to U.S. Census Bureau and First American calculations, over the next 10 years, Millennials are expected to purchase at least 10 million new homes. By 2060, it is estimated that the generation will have produced more than 20 million first-time homebuyers.

In a recent note, Odeta Kushi, a senior economist for First American, a real estate service provider, said Millennial demand for homeownership was one of the biggest trends influencing the housing market in 2018. This is unlikely to reverse going into next year, the year after that, and many years to come.

While this generation is often “mistakenly portrayed” as showing a preference for renting, Kushi notes this is not correct; Millennials still appreciate buying a home but have different motivations and delays in doing so:

“Because they grew up in the wake of the housing bust, Millennials are less likely to consider homeownership as a means of building wealth and, therefore, choose homeownership based more on whether homeownership fits their lifestyle or not. Our research shows that, because lifestyle choices are the most important factors influencing the decision to become a homeowner, it is reasonable to expect the homeownership rate for Millennials to increase as more get married and form families.”

While the homeownership rate for young adults is currently quite low, with just over one-third of adults under 35 owning a home, the potential for home sales is high. Kushi notes that more than half of all the purchase mortgages guaranteed by Fannie Mae and Freddie Mac in 2018 went to first-time homebuyers.

Article source: https://www.housingwire.com/articles/47667-millennials-will-purchase-at-least-10-million-new-homes-in-the-next-10-years

Democrats choose Rep. Maxine Waters to lead House Financial Services Committee

The Democratic Steering and Policy Committee nominated Rep. Maxine Waters, D-Calif., late Monday to lead the Financial Services Committee.

Waters currently serves as the House Financial Services Committee’s Ranking Member, so it comes as no surprise that now, after the Democrats took control of the House in the midterm elections, she would be nominated as committee chair.

In fact, since the elections, experts have speculated what changes would come to the finance industry with Waters as chair. Mortgage Bankers Association Chief Lobbyist Bill Killmer told HousingWire there will be an emphasis on issues ranging from consumer protection, affordable housing and more.

And Waters herself even began making promises for what she would do if selected to lead the Financial Services Committee including spotlighting affordable housing and “bringing accountability to the Trump administration.”

Waters will be the first woman and African American to chair the Financial Services Committee. Of course, her nomination must still be approved by the Democratic Caucus.

“I am honored to have been nominated by the Democratic Steering and Policy Committee to serve as Chairwoman of the House Financial Services Committee in the 116th Congress,” Waters said.

She explained that she will focus on protecting consumers and investors from abusive financial practices, ensuring strong safeguards to prevent another financial crisis, expanding affordable housing, encouraging responsible innovation in financial technology, promoting diversity and inclusion and getting Americans and small businesses fair access to the financial system.

“Appropriate oversight of the Trump Administration and the regulatory agencies under the Committee’s jurisdiction will also be an important responsibility for the committee,” Waters said. “Of particular importance is ensuring that the Consumer Financial Protection Bureau is not dismantled by Trump’s appointees. This critical agency must be allowed to resume its work of protecting consumers from unfair, deceptive or abusive practices without interference from the Trump Administration.”

“As Chairwoman, I will continue to have an open-door policy, in order to hear the perspectives of all stakeholders, including representatives of the financial services industry as well as advocates for consumers and investors,” she said. “I will continue to work with both Democratic colleagues and my colleagues across the aisle to find commonsense solutions to benefit hardworking Americans and protect vulnerable families.”

Article source: https://www.housingwire.com/articles/47669-democrats-choose-rep-maxine-waters-to-lead-house-financial-services-committee

Sabal announces new president and COO

Sabal Capital Partners, a financial services firm specializing in commercial real estate, lending and investing, announced Monday that it appointed Jason Pendergist as president and chief operating officer of term lending.

The company explained that Pendergist is a seasoned C-suite leader with proven leadership in the commercial real estate finance and banking arenas. In his new position, Pendergist will oversee Sabal’s growth, focusing on introducing new finance offerings and amplifying the firm’s transaction volume.

“Jason will be instrumental in fueling Sabal’s rapid growth, developing and onboarding new lending programs and realizing market opportunities,” Sabal Capital Partners CEO founder Pat Jackson said. “At the same time, he will help us maximize the synergies that allow us to exponentially expand the Sabal platform.”

“His long and successful history of enabling firms to successfully achieve and manage accelerated growth is well documented and we know he will help us optimize every area of our business,” Jackson said. 

Prior to his new position, Pendergist served as executive vice president and head of real estate and commercial banking with Banc of California, president of consumer and commercial banking at Luther Burbank and held the title of senior vice president at JPMorgan Chase.

Notably, Pendergist also helped found the American Bankers Association’s Commercial Real Estate Committee in 2015, most recently serving as the committee’s chairman. 

 Pendergist plans to utilize his vast experience to help Sabal achieve its goals.

“One of the greatest draws of Sabal is the company’s entrepreneurial spirit and desire to evolve a customer-centric business through operational efficiencies,” said Pendergist. “The company is an established national platform and a scalable enterprise with a commitment to service. We have the opportunity to change the industry for the better and I am excited to be a part of that.” 

Article source: https://www.housingwire.com/articles/47664-sabal-announces-new-president-and-coo

SEC joins DOJ in giving up case against mortgage bond trader Jesse Litvak

Over the summer, the Department of Justice gave up its five-year pursuit of former Jefferies managing director and mortgage-backed securities trader Jesse Litvak, ending the DOJ’s effort to jail the trader for allegedly lying to customers about mortgage bond trades.

Litvak was originally charged in 2013 with 16 counts of defrauding customers on residential mortgage-backed securities trades by allegedly misrepresenting both the selling price and buying price of bonds.

In March 2014, Litvak was found guilty of lying to clients about mortgage-backed securities and received a two-year prison sentence, but Litvak fought the conviction successfully.

This summer, after seeing Litvak’s conviction overturned in the Court of Appeals for the second time, the DOJ abandoned its prosecution of Litvak.

And now, the Securities and Exchange Commission has done the same thing.

The SEC announced last week that it asked a judge to dismiss its claims against Litvak, a request that a judge granted last week.

According to the SEC, the criminal charges Litvak faced were based on the “same facts” that supported the SEC’s case. So with the DOJ giving up its case against Litvak, the SEC is choosing to end its pursuit of Litvak as well.

Litvak was one of the only people sent to jail for their conduct in and around the housing crisis.

As stated before, in 2014, Litvak was found guilty on 10 counts of securities fraud, one count of defrauding TARP, and four counts of making false statements within the jurisdiction of the United States government.

As a broker-dealer, Litvak dealt with both the bond sellers and bond buyers. In some cases, Jefferies would purchase the bond for a certain price, then sell it for more, thereby making a profit.

The government claimed that Litvak was dishonest with both sides of the deals, playing both to produce more profits than Jefferies deserved.

Litvak successfully fought that original sentence, with the Court of Appeals for the Second Circuit throwing out his conviction because he wasn’t allowed to bring expert witnesses to testify on his behalf.

But the government didn’t give up in its pursuit of Litvak, bringing 10 new charges against him and eventually securing a guilty verdict on just one count of fraud.

Litvak was sentenced to two years in jail for that one count, but appealed that decision, and was able to convince the Court of Appeals to overturn that conviction as well.

That second defeat led to the DOJ abandoning its case against Litvak, and the SEC has now followed suit.

Article source: https://www.housingwire.com/articles/47665-sec-joins-doj-in-giving-up-case-against-mortgage-bond-trader-jesse-litvak

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