Yesterday we saw something we haven’t seen for a while: a bank shut down. Philadelphia-based Republic First Bank (doing business as Republic Bank) was closed by Pennsylvania authorities which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect depositors, the FDIC entered into an agreement with Fulton Bank, National Association of Lancaster, Pennsylvania to assume substantially all of the deposits and purchase substantially all of the assets of Republic Bank. The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) related to the failure of Republic Bank will be $667 million. Mortgages probably didn’t help: Independent mortgage banks and mortgage subsidiaries of chartered banks lost an average of $1,056 on each loan they originated in 2023, down from an average loss of $301 per loan previously. This represents a series high in the 15-year history of the Mortgage Bankers Association’s (MBA) Annual Mortgage Bankers Performance Report. Of course, every lender and vendor think they’re going to do better next month, next quarter, next… otherwise, mergers and acquisitions would be “en fuego.” But they aren’t. So perhaps they will do better!
Saturday Spotlight: OptiFunder
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“Revolutionizing Warehouse Management for Mortgage Lenders”
Describe your company (when was it founded and why, what it does, recent growth and plans for near-term future growth).
OptiFunder, the pioneer of the Warehouse Management System (WMS), was founded in 2018 to bring optimization and automation to warehouse lending. An award-winning mortgage software company, OptiFunder has announced a revolutionary new software for warehouse lenders, called Greyhound by OptiFunder, featuring the same scalability, security, and automation from its flagship solution.
Over the last five years, OptiFunder has developed the most comprehensive warehouse management system for mortgage originators. With 40 percent of top IMBs on OptiFunder’s roster, 1 in every 7 loans funded across IMBs go through the OptiFunder system. Built by a team of mortgage professionals, the OptiFunder software not only reduces risk, but the user-friendly system condenses hours of manual work into automated tasks. From funding through loan sale, OptiFunder has automated the entire process for many originators. OptiFunder’s innovative solutions and remarkable growth earned it a top 100 spot on Inc5000’s Fasting Growing Private Companies in 2023. From 2020 – 2024, HousingWire has named OptiFunder a Tech100 Mortgage Winner, and in 2023 and 2024 OptiFunder was recognized as a Progress in Lending Innovations Winner.
Describe any new products or solutions and how they will bring positive change to the industry.
“We wanted to create a platform for warehouse lenders that would run independent of OptiFunder but leverage the same technology and incredible team,” said CEO Michael McFadden. “While Greyhound represents a new brand, the underlying software, configurability, and proven rules engine have already routed and funded nearly a million loans with over 70 warehouse lenders.”
Greyhound provides new options for warehouse lenders looking for alternatives to legacy solutions. With its security-first design, highly configurable workflow, seamless integrations, and unparalleled efficiency, Greyhound is an ideal fit for warehouse lenders looking to grow market share in today’s challenging environment. With effortless client onboarding, robust reporting, and simple loan ingestion from originators, warehouse lenders of all sizes can easily scale their business with minimal cost and complexity.
Tell us about your team (what types of volunteer work are employees encouraged to engage in, how does your company help elevate growth, how does your company maintain culture in a work-from-home environment?)
OptiFunder appreciates its highly experienced team of professionals with over 125 years of mortgage banking experience, offering generous flexibility for work/life balance and volunteer work. Being part of OptiFunder means being first to market with breakthrough solutions.
Things you are most proud of that don’t have to do with sales.
OptiFunder is most proud of its customers’ experiences and positive feedback with not only the software, but with the whole team. “We’re a technology company,” said McFadden, “but it’s the direct feedback I get around our people at OptiFunder that means the most to me.”
Is there anything else you’d like to share along these lines?
OptiFunder released a monthly newsletter reporting on warehouse lending trends, available the second Tuesday of every month. Sign up here for next release on April 9th.
(For more information on having your firm’s extracurricular activities, employee growth, and your charitable side featured, contact Chrisman LLC’s Anjelica Nixt.)
Compliance and QC are boring, but someone has to do it
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MQMR released a blog about what Fannie Mae requires when establishing a target defect rate in relation to a mortgage lender’s quality control (QC) program. In order to evaluate and measure loan quality standards effectively, Fannie Mae requires mortgage lenders to establish a target defect rate related to its post-closing random QC sample, reflecting the lender’s quality standards and goals. Fannie Mae advises that different target defect rates may be established for different severity levels. However, at a minimum, a target defect rate must be established for the lender’s highest level of severity. A lender must document the rationale for establishing its target defect rate(s). Realistic targets should be: set as low as possible, designed to be reduced over time, based on financial analysis of costs associated with defective loans, evaluated at least annually against updated performance, default and capital needs, and used to quantify the risk exposure of defects and drive change.
Fannie Mae requires lenders to document the rationale used to establish the target defect rate(s). Fannie Mae also requires lenders to measure performance against their target defect rate(s) at least quarterly and report results to management. The gross defect rate is the true measure of a lender’s manufacturing quality for its overall book of business. Lenders must evaluate the target defect rate(s) at least annually and reset, if necessary, with the goal of reducing defects over time.
Lenders Compliance Group wrote about guidance in putting together a list of HMDA procedures and internal controls needed to comply with filing HMDA data. The Home Mortgage Disclosure Act (HMDA) requires certain financial institutions to collect, report, and disclose information about their mortgage lending activity. HMDA was enacted by Congress in 1975 and implemented by Regulation C. Over the years, there have been numerous amendments, updates, and linkages to other Acts. HMDA is a disclosure law that relies upon public scrutiny for its effectiveness.
Contrary to what some people think, HMDA does not prohibit any specific activity of lenders, nor does it establish a quota system for mortgage loans to be made in any geographic area. The federal supervisory agencies use HMDA data to support a variety of activities. For instance, some federal supervisory agencies use HMDA data as part of their fair lending examination process, and other agencies use HMDA data in conducting Community Reinvestment Act (CRA) performance evaluations.
HMDA disclosures provide the public with information on the home mortgage lending activities of particular reporting entities and activity in their communities. These disclosures are used by local, state, and federal officials to evaluate housing trends and issues and by community organizations to monitor financial institutions’ lending patterns. Because HMDA data serve numerous important purposes, validating the accuracy of HMDA data is a key element of the federal supervisory agencies’ examination activities. For LCG’s complete list of recommendations, read on.
Mortgage Quality Management and Research released a blog on why an approved mortgage lender needs to report a loss in the Company’s net worth to Fannie Mae and/or HUD. Fannie Mae and HUD require approved licensees to report the failure to maintain minimum financial requirements, such as net worth, minimum capital, and minimum liquidity, as detailed in Fannie Mae Selling Guide A4-1-01.
Typically, a material decline in lender adjusted net worth, a decline in profitability, or a default under various obligations, that allows Fannie Mae to declare a breach of the Lender Contract, is material if Lender Adjusted Net Worth declines by more than 25 percent over a quarterly reporting period or by more than 40 percent over two consecutive quarterly reporting periods. A decline in profitability is four or more consecutive quarterly losses accompanied by a decline in Lender Adjusted Net Worth of 30 percent or more during the same period.
Fannie Mae advised sellers/servicers to be especially mindful of the requirements measured by percentage decline, as they commonly are breached in adverse market environments. HUD’s Handbook 4000.1(A)(7)(g) and (h) specifies that, if at any time, a Mortgagee’s adjusted net worth or liquidity falls below the required minimum, the Mortgagee must submit a Notice of Material Event to FHA within 30 business days of the deficiency. The Mortgagee must submit a Corrective Action Plan that outlines the steps taken to mitigate the deficiency and includes relevant information, such as contributions and efforts made to obtain additional capital. HUD also requires reporting of operating losses of 20 percent or greater of a licensee’s net worth. To report the loss, a licensee must file a Notice of Material Event within 30 business days of the end of each fiscal quarter in which a Mortgagee experiences the loss.
Lenders Compliance Group released a compliance FAQ on money mules in regard to ID theft and AML compliance. Money mules can be, but are not always, aware they are involved in laundering money obtained illegally. The purpose of this illegal activity is to obscure the source of funds. They are a key element in the money laundering and identity theft process. Unwitting individuals are unaware they are involved in criminal activity and engage in it thinking it’s legal. They are often deceived into doing the activity for someone they believe to be an employer, acquaintance, perhaps a romance scammer, or somebody in a position of some trust. Witting individuals who should be aware they are involved in suspicious activity but engage in it anyway.
While they aren’t fully aware of the extent to which they are involved in criminal activity, they typically ignore clear indicators that what they do is illegal or suspicious. Complicit individuals know they are involved in criminal activity yet still engage in it willfully. This type of money mule ranges from inexperienced individuals unaware of their involvement to experienced and adept fraudsters who run entire money mule rings.
Vendor tidbits
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STRATMOR Group’s Customer Experience Strategy program, MortgageCX, is now integrated with Encompass and available through ICE Marketplace! MortgageCX personalizes CX feedback and coaching tips for every LO, processor, and manager, leveraging STRATMOR’s industry expertise, peer benchmarking data, and the lender’s own customer feedback. Participating lenders are transforming their customer experience and igniting their revenue growth. Contact STRATMOR for more on the MortgageCX program and join those lenders already benefiting from this integration.
Freddie Mac and Intercontinental Exchange, Inc., a leading global provider of technology and data, announced their collaboration which will leverage both companies’ automation technologies and solutions to help lenders quickly and efficiently underwrite mortgage loans starting at the point of sale. “Our collaboration with ICE builds upon Freddie Mac’s commitment to improve loan quality from origination through delivery so we can help reduce defects, lower costs and bring greater efficiency to the mortgage origination process,” said Kevin Kauffman, Freddie Mac Single-Family Senior Vice President of Seller Engagement. Recent analysis shows that loans originated by lenders leveraging certain Freddie Mac automated offerings are up to four times less likely to produce defects than loans without these technology offerings.
The Mortgage Collaborative, the nation’s largest independent mortgage cooperative, announced the addition of Blue Sage Solutions, an industry leader in innovative cloud-based technology providers, to bring interim servicing to the mortgage industry. The partnership makes the Blue Sage Digital Servicing Platform (DSP), a cloud-based system that provides all necessary functions to perform interim servicing, available to TMC members at preferred rates. Utilizing the same trusted technology and architecture as all Blue Sage offerings, the platform offers a modern, user-friendly interface that is accessible via any browser, enabling an optimized borrower and lender experience. All lenders, regardless of their current loan origination software (LOS), can use the Digital Servicing Platform to effortlessly automate the onboarding of loans, process individual and batch payments, collect payments and seamlessly offboard loans via servicing transfers.
Truv, a provider of automated employment and income verification technology for mortgage lenders, banks, and credit unions, announced it is now a conditionally authorized report supplier for mortgage lenders using Fannie Mae’s Desktop Underwriter® (DU®) validation service. After final approval, which is expected later this year, Truv’s consumer-permissioned platform will be able to obtain and transmit income and employment data through the DU validation service. As an authorized report supplier for Fannie Mae’s DU validation service, the Truv platform will enable lenders to reduce risk of fraud and buybacks by leveraging real-time data directly from the source, lower costs by reverifying a borrower’s income and employment data at no additional expense, accelerate growth by increasing pull-through rates and closing loans faster, and improve productivity by reducing time spent collecting data to underwrite loans.
Clear Capital, the national real estate valuation technology company, announced an expanded partnership with Cherre, the leading real estate data management platform. Through Cherre’s API, customers now have access to ClearAVM™, Clear Capital’s automated valuation model (AVM), where they can map and set rules to automate, standardize and validate data from multiple third parties. Similar to how lenders use ClearAVM to scan the nation for lending opportunities, Cherre customers can now leverage the tools’ national coverage to identify investment opportunities, and SFR investors can use the data to inform leasing and asset sale decisions alongside ensuring due diligence.
Secure Insight’s new settlement disbursement fraud tool, TruePay has seen an impressive growth trajectory in just 2 months since its launch. The automated wire verification and mortgage payoff tool now has over 100 users and has been endorsed by CATIC and Aspen Insurance. Early feedback has been very complimentary with users touting ease of use, accuracy, low cost with no contract or user fees, and detailed reporting. For more information email truepay@secureinsight.com or visit truepay.secureinsight.com
National Mortgage Insurance Corporation (National MI), a subsidiary of NMI Holdings, Inc. (NASDAQ: NMIH), announced an enhanced integration with PMI Rate Pro, a provider of mortgage insurance (MI) pricing technology. Leveraging PMI Rate Pro’s new single API solution, the integration will help lenders and borrowers save time and money when ordering mortgage insurance from National MI. Its recently enhanced single API solution platform offers quoting, risk-allocation and ordering functionalities for lenders and mortgage software providers. Integrating easily with popular LOS, pricing engines and POS technologies. Read the Press Release for complete details.
ACES Quality Management® (ACES) released its quarterly ACES Mortgage QC Industry Trends Report covering the third quarter (Q3) of 2023. The latest report analyzes post-closing quality control data. Notable findings from the Q3 2023 report include the following: the overall critical defect rate decreased by 2.91 percent to 1.67 percent, representing four consecutive quarters of decline. Despite its improvement over the last quarter, Income/Employment continues to lead all defect categories, followed by Loan Documentation and Borrower and Mortgage Eligibility. Findings for the Q3 2023 ACES Mortgage QC Industry Trends Report are based on post-closing quality control data derived from the ACES Quality Management and Control® benchmarking system and incorporate data from prior quarters and/or calendar years, where applicable. All reviews and defect data evaluated for the report were based on loan audits selected by lenders for full file reviews.
The mortgage world has its own language, as evidenced in this clever home-made video! (Thank you to Mike Metz at Arizona’s VIP. for this one!)
Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is titled, “Relying on the Fed: How Did This Happen?” The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).
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(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. This newsletter is for sophisticated mortgage professionals only. There are no paid endorsements by me. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2024 Chrisman LLC. All rights reserved. Occasional paid job & product listings do appear. This report or any portion hereof may not be reprinted, sold, or redistributed without the written consent of Rob Chrisman.)
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