States Title raises $123 million to digitize real estate closings

States Title raises 3 million to digitize real estate closings
States Title, which has quickly grown into one of the nation’s largest title insurance and settlement services companies, announced Thursday that it has raised $123 million to continue digitizing real estate closings.

According to the company, its Series C capital raise was led by Greenspring Associates, a comprehensive venture capital investment platform with over $10 billion in assets under management.

Also participating in the round with “significant” investments were new investors Horizons Ventures, Eminence Capital and HSCM Bermuda.

Each of States Title’s previous investors also participated in this latest round of funding, including a “large” investment from Foundation Capital, along with additional investments from SCOR Global P&C Ventures, and notable investors like Assurant, FifthWall Ventures and Lennar Ventures.

Fifth Wall is a venture capital firm backed by real estate titans like CBRE, Lennar, D.R. Horton, PulteGroup, Hines, Equity Residential, Prologis, Macerich, Host Hotels and Lowe’s Home Improvement, while Lennar Ventures is the venture capital arm of homebuilder Lennar.

States Title is on a serious growth trajectory, having acquired both North American Title Company and North American Title Insurance Company in 2019.

According to the company, those two acquisitions helped States Title grow transaction volume by 100x from 2018 to 2019. The company added that its combined business has closed or issued insurance policies for nearly half a million real estate transactions in the past year.

The company focuses on technology in its services, using data science to “create predictive title insurance based on an assigned risk score to indicate how safe a property is from liens or liabilities, helping to achieve faster title processing and more efficient underwriting.”

And the company sees this new funding as a way to continue reshaping the title insurance industry.

“The most pressing need in our industry right now is to remove friction and cost from mortgage closings, and to do so with solutions that can deliver fully remote, instant, digital experiences,” said Max Simkoff, founder and CEO of States Title.

“We are committed to further investment in our patented, industry-leading machine intelligence platform to support the goal of providing an instant closing experience at a lower cost,” Simkoff said.

According to Jim Lim, managing general partner of Greenspring Associates, States Title’s process “streamlines the laborious title and escrow process,” adding that the company invested in States to push its growth forward.

“We are thrilled to support States Title as they advance the vision of an instant mortgage that closes with one tap,” Lim said. “Especially in the current economic climate, the mortgage industry needs to be re-imagined with transformative technological solutions to reduce costs and improve the customer experience. States Title is leading the vanguard of this transformation.”
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OCC’s Otting steps down one day after releasing Community Reinvestment Act reform

OCC’s Otting steps down one day after releasing Community Reinvestment Act reform
Just one day after unveiling sweeping reforms to the Community Reinvestment Act, Comptroller of the Currency Joseph Otting has stepped down from his role as one of the nation’s top banking regulators.

On Wednesday, Otting’s OCC released its final rule on “strengthening and modernizing” the CRA, which requires banks to meet the credit needs of all communities they serve, including low- and moderate-income neighborhoods.

The OCC released the final rule without the agreement of the Federal Deposit Insurance Corp., which stated that it would rather see banks focus on helping their customers during the pandemic instead of focusing on complying with new rules.

Nonetheless, the OCC moved forward with the rule alone, in what proved to be Otting’s final major act as comptroller.

The OCC announced Thursday that Otting is stepping down from the agency on May 29, 2020.

Brian Brooks, who joined the OCC in March as its chief operating officer and first deputy comptroller, will serve as acting comptroller of the currency, as was expected.

Brooks and Otting both previously worked with Department of the Treasury Secretary Steven Mnuchin at OneWest Bank. Mnuchin and his partners at Dune Capital Management formed OneWest after buying the remains of IndyMac Federal Bank from the FDIC in 2009. Mnuchin and his partners later sold OneWest to CIT Group in 2015. 

Otting served as the CEO of OneWest from 2010 until 2015, while Brooks served as OneWest’s vice chairman and chief legal officer.

And now, Brooks is replacing Otting at the OCC.

“It has been my distinct honor to serve the United States and this Administration as the 31st Comptroller of the Currency,” Otting said in a statement. “I am extremely proud of what the women and men of the agency have accomplished to promote economic opportunity, eliminate unnecessary regulatory burden, and operate the agency in a more effective and efficient manner.”

Both Otting and Mnuchin expressed confidence that Brooks will serve the administration well as the new head of the OCC.

“The agency and the nation are fortunate that the OCC has a deep bench,” Otting said. “Brian and the Executive Committee are extremely well suited to continue the agency’s important work and succeed in its mission of ensuring banks operate in a safe, sound, and fair manner. Most importantly these leaders can depend on the 3,600 dedicated OCC professionals who thanklessly and tirelessly serve this nation by ensuring our federal banking system remains the world’s envy and capable of meeting the financial needs of Americans everywhere from Main Street to Wall Street, just as the agency has for 157 years.”

Brooks left OneWest in 2014 to become Fannie Mae’s executive vice president, general counsel and corporate secretary. After holding that role for nearly four years, Brooks left Fannie Mae to become the chief legal officer of Coinbase.

And earlier this year, Brooks rejoined Otting at the OCC.

“I am confident that Brian will lead the agency effectively during this challenging time,” Mnuchin said in a statement. “He recognizes the importance of a robust federal banking system to the health and strength of the nation’s economy and has the skills and experience to succeed in this important role.”

Mnuchin also thanked Otting for his two-and-a-half years leading the OCC.

“I want to thank Joseph Otting for his dedicated service as Comptroller of the Currency,” Mnuchin said. “Under his leadership, the agency modernized Community Reinvestment Act rules for the federal banking system, increased access to credit and capital for underserved communities, increased safeguards to the banking system from criminal and terrorist activity, reduced the cost of supervision on America’s banks, and helped the OCC operate more effectively. We are grateful for his commitment to Treasury and our nation.”

According to the Treasury Department, Otting plans to return to the private sector upon his departure from the OCC next week.
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FHFA moves closer to ending conservatorship, issues new rule on allowing Fannie Mae, Freddie Mac to build capital

FHFA moves closer to ending conservatorship, issues new rule on allowing Fannie Mae, Freddie Mac to build capital
Fannie Mae and Freddie Mac moved closer this week to ending their decade-plus-long stay in conservatorship when they announced that they are looking for financial advisors to assist in a stock offering that removes the companies from government control.

But that’s not the only step the government-sponsored enterprises are taking this week towards exiting conservatorship.

The Federal Housing Finance Agency announced Thursday that it is proposing a new rule to allow the GSEs to rebuild their capital bases in advance of leaving conservatorship.

This is actually the second time the FHFA has issued new capital rules for the GSEs in the last two years.

In 2018, the FHFA proposed a rule to implement new capital requirements for Fannie Mae and Freddie Mac.

The move made headlines at the time, but the plan was viewed as merely a thought exercise because under the rule, the capital requirements would have only gone into effect when the companies exited conservatorship.

Under the leadership of then-FHFA Director Mel Watt, the GSEs exiting conservatorship seemed like a pipe dream due to Watt’s view that it was Congress’ duty to act on housing finance reform.

But FHFA Director Mark Calabria has a different view on the matter and is moving full steam towards privatizing the GSEs.

Late last year, the FHFA announced that it was doing away with the 2018 rule and moving forward with a new rule, which was originally expected to be released earlier in 2020.

But that changed in March when the coronavirus was first taking hold in the U.S. At the time, Calabria said that the FHFA would be releasing the new capital rule in late May, which is exactly what the agency did.

According to the FHFA, the 2018 proposal “remains the foundation” of these new plans, but expands on the previous plans.

“The enhancements in the new proposal preserve the mortgage risk-sensitive framework of the 2018 proposal, while increasing the quantity and quality of the Enterprises’ regulatory capital and reducing the pro-cyclicality of the aggregate capital requirements,” the FHFA said in a statement. “Together, the enhancements in the re-proposal ensure each Enterprise’s safety and soundness and its ability to fulfill its statutory mission across the economic cycle, in particular during periods of financial stress.”

As for the rule itself, it appears that the GSEs will end up holding bank-like capital levels, roughly equal to the levels required by the world’s biggest banks, otherwise known as the “Systemically Important Financial Institutions.”

According to Instinet analyst Matthew Howlett, the new proposal would require the GSEs to hold $234 billion in combined capital, based on their asset level as of Sept. 30, 2019.

That’s far beyond the $45 billion in combined capital the GSEs are allowed to retain now and far cry from the $0 in capital they used to be allowed to hold.

“The FHFA’s proposed rule puts the GSEs on track to be the strongest capitalized financial institutions in the world, which we believe should create substantial global investor demand,” Howlett wrote in a note to clients. “We note that the release should come not only as a relief to the market (i.e., worst-case scenario avoided) but also as the strongest indication the FHFA remains committed to privatizing Fannie/Freddie and releasing them from government control.”

According to Howlett, the proposal is a clear indication that the GSEs will be publicly traded companies in the future.

“The overall proposal is clear; there is no substitute for equity capital,” Howlett wrote. “The plan is a nod by the FHFA that the GSEs need to be in a position to attract and retain substantial equity capital going forward.”

In Howlett’s view, however, the GSEs’ full exit from conservatorship likely won’t happen for several years due to how much money they’ll need to raise. According to Howlett, Instinet’s analysts now expect the GSEs to fully exit conservatorship at some point in 2024.

As for the mortgage business itself, Howlett states that these new rules could make GSE mortgages more expensive.

According to Howlett, the new plan makes it more likely that the FHFA will order the GSEs to increase the fees they charge lenders to guarantee loans (otherwise known as G-fees) by approximately 10 basis points to “improve required returns for shareholders.”

The increased G-fees would likely be passed along to the borrowers, meaning an increased interest rate or more fees on a loan.

Nevertheless, all parties involved from the government side of things are pleased with the rule.

“This national health crisis has affirmed the importance of the Enterprises’ mission to serve the American housing market during good times and bad,” Calabria said.

“When credit dries up, low- and moderate-income households are hurt most. We must chart a course for the Enterprises toward a sound capital footing so they can help all Americans in times of stress. More capital means a stronger foundation on which to weather crises. The time to act is now.”

The FHFA’s proposal is supported by Department of the Treasury Secretary Steve Mnuchin, who said that the rule is an “important” step in ending the GSE conservatorship.

“I commend Director Mark Calabria and the FHFA for their work on this issue,” Mnuchin said in a statement. “Establishing regulatory capital requirements for both GSEs represents an important step toward bringing the conservatorships to an end. Appropriate capitalization of the GSEs will be critical to protecting taxpayers, fostering market discipline, promoting stability in the housing finance system, and ensuring durable consumer access to mortgage credit.”

Both Fannie and Freddie also expressed their support for the rule.

“The reproposal of this critical rule marks another important milestone in our path out of conservatorship,” Freddie Mac CEO David Brickman said. “I thank Director Calabria for his leadership in moving this rule forward. As Freddie Mac takes unprecedented steps to assist homeowners and renters adversely affected by COVID-19, we remain focused on preparing for our responsible exit from conservatorship.”

Fannie Mae CEO Hugh Frater agreed.

“FHFA’s proposed regulatory capital rule marks the start of an important new chapter for Fannie Mae,” Frater said. “These next steps toward our recapitalization and release from conservatorship are more than 10 years in the making, and we thank Director Calabria for his leadership during this process.”

To read much more about the rule from the FHFA itself, click here and here.
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Patty Arvielo to speak at June’s virtual summit

Patty Arvielo to speak at June’s virtual summit
With more than 30 years of mortgage industry experience, Patty Arvielo helms New American Funding‘s daily operations of more than 200 branches, 3,300 employees and a servicing portfolio of more than 131,000 loans for $32 billion.

That operation has exponentially grown from the one Arvielo and her husband, Rick, founded 17 years ago. The duo has built New American Funding into a mortgage lending and servicing powerhouse that has landed the company on the Inc. 5000 list of fastest-growing private companies six times.

At our virtual summit on June 11-12, Arvielo will discuss a topic she’s particularly passionate about: Hispanic homeownership. A first-generation Latina whose mother left Mexico at 18, she will cover marketing to Latino borrowers.

Arvielo’s support of Hispanic consumers during the home-buying process is long-standing. She launched New American Funding’s Latino Focus committee in 2013 to address the challenges Hispanic homebuyers face.

Arvielo advocates externally, as well. She has served extensively for industry groups, including the Mortgage Bankers Association‘s Diversity and Inclusion committee, the National Association of Hispanic Real Estate Professionals and the Housing Counseling Federal Advisory Committee. She frequently visits Washington, D.C. to rally on behalf of homeowners.

Because of her track record and extensive contributions, she was named one of HousingWire’s Women of Influence in 2017 and 2018 and a HousingWire Vanguard, which recognizes industry leaders with a significant impact on the housing economy and various sectors, in 2015 and 2017.

On Tuesday, Arvielo was awarded two Stevie American Business Awards, including Gold for Woman of the Year.

Don’t miss the opportunity to hear Arvielo’s insights at the virtual summit by registering here. Her husband, Rick, will also speak in two sessions, one with HousingWire CEO Clayton Collins on Marketing Meets Tech and another panel session with Realtor Bobbi Howe and Guaranteed Rate CMO Steve Moffat on the lender-Realtor partnership.

These are just a few of the experts we have lined up for the two-day summit, which also includes Casey Hurbis, Brian Covey, Barbara Yolles, Alec Hanson, Cindy McGovern, Kevin Peranio and Bill Ludwig.
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Spruce raises $29 million in Series B funding

Spruce raises million in Series B funding
Real estate tech company Spruce has raised $29 million in Series B funding led by Scale Venture Partners, with participation from Zigg Capital and Bessemer Venture Partners.

The Series B funding will support the team’s expansion, accelerate the development of its proprietary technology and deepen integrations with client partners, Spruce said.

The Spruce platform helps mortgage lenders, real estate investors and PropTech companies manage the title and closing process online while providing a digital-first closing experience to homeowners.

“In these uncertain times, innovative mortgage lenders and real estate companies that support digital transactions are providing essential services to consumers, ensuring that critical moves are still possible and refinancing loans to help cover necessary expenses,” Spruce Co-Founder and CEO Patrick Burns said in a statement.

“Spruce is proud to be supporting our clients on the forefront of this paradigm shift, and excited to provide the best tools to compete in an ever-changing environment.”

The company launched in 2016 and has operations hubs in New York, Texas and California. Spruce has enabled more than $1.25 billion worth of transaction volume while growing revenue by more than 400% annually, the company said.

“We believe that Spruce is playing a critical role in enabling innovation in real estate transactions,” said Alex Niehenke, a partner at Scale Venture Partners. “While we’re still in the early innings, change is happening fast. It’s only a matter of time before the manual processes in real estate transactions are transformed by digitization, connectivity, automation, and streamlined customer experiences.”

This funding round follows a near $16 million raise in 2018 to expand its national footprint and platform, which included Bessemer Venture Partners, Omidyar Network, and Collaborative Fund.
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#GoodDeeds: Acts of Kindness from Pennsylvania and New York

#GoodDeeds: Acts of Kindness from Pennsylvania and New York
Filling a Need
Wendy Kelly, a settlement coordinator for Trident Land Transfer in Blue Bell, Pa., helped with an effort by the Daughters of the American Revolution (DAR) to provide facemasks during the COVID-19 crisis.
A member of the Towamencin Chapter of DAR, Kelly and other volunteers sewed more than 1,400 masks for essential services workers during the crisis. Recipients included local police, medical personnel, and senior and assisted living communities.
In the photo, Kelly delivers face masks to Officer Fred Lynch of Upper Gwynedd Township Police Department. (Photo Credit: Daughters of the American Revolution)
Nothing But Love
Employees of Westcor Land Title Insurance Co. in New York and the New England area are supporting their local communities. Staff shopped for and delivered more than $2,000 worth of groceries to local food banks across New York and Massachusetts. “They genuinely love where they live and wanted to do whatever they could to support their local communities throughout this challenging time. We're so proud of them,” said Haley Pereyo, Westcor’s social media and communications manager.

Mortgage delinquencies nearly double in April on COVID-19 shock

Mortgage delinquencies nearly double in April on COVID-19 shock
Mortgage delinquencies almost doubled in April as out-of-work Americans struggled to pay their bills during the COVID-19 pandemic.

The U.S. delinquency rate rose to 6.45% from 3.39% in March, the largest monthly increase ever recorded, Black Knight said in a report on Thursday. It was almost triple the previous record gain in 2008, near the beginning of the financial crisis.

About 3.6 million homeowners were past due on their mortgages at the end of April, the most since January 2015, Black Knight said. The number jumped 1.6 million in a tally that counts forbearances as delinquent if the borrower didn’t make an April payment.

About 8.8% of U.S. mortgages are in forbearance, Black Knight said in a report last week. The pace of new forbearances requests has slowed to about 27,000 a day, down 85% from April, the mortgage-data firm said.

The U.S. unemployment rate spiked to a record high of 14.7% in April, more than tripling from March, after states shuttered businesses in an effort to stem the spread of COVID-19. It surpassed the highest rate of the financial crisis, which peaked at 10% in October 2009, according to data from the Bureau of Labor Statistics.

Nevada was the state with the biggest increase in mortgage delinquencies during April, climbing 5.2%. New Jersey was next, with a 5.1% gain, followed by New York, up 4.9%.

Measured by metropolitan areas, Miami had the largest gain, up 7.2%, followed by Las Vegas, with a 6.2% increase, and New York, with a gain of 5.4%.

Both foreclosure starts and foreclosure sales hit record lows in April as moratoriums halted foreclosure activity across the country, Black Knight said.
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