Lone Wolf Technologies plans to accelerate growth with investment from Stone Point Capital

Lone Wolf Technologies plans to accelerate growth with investment from Stone Point Capital
Stone Point Capital has purchased Vista Equity Partners’ stake in real estate software company Lone Wolf Technologies. Stone Point will become Lone Wolf’s lead institutional investor, powering the next phase of its growth and expanding its product offering, the company said.

The investment by Stone Point, a financial services-focused private equity firm, will help Lone Wolf streamline its end-to-end experience for agents and brokers and accelerate organic and inorganic product development, the company said.

Lone Wolf’s management team will remain as the company continues on its path of growth. Financial terms of the transaction with Vista Equity Partners weren’t disclosed.

“We’re excited to work with the team at Stone Point to continue our strategic growth,” Jimmy Kelly, CEO of Lone Wolf, said in a statement. “Stone Point’s investment aligns with our vision to create a truly connected, fully digital real estate experience. We are thankful for the partnership and leadership of Vista Equity Partners over the last five years, and we remain committed to serving the real estate industry going forward.”

Lone Wolf provides real estate technologies to over 1.5 million agents, 8,000 brokerages and hundreds of MLS’ and associations in North America.

“We are enthusiastic about the long-term opportunities within the real estate services and technology industry,” Chuck Davis, Stone Point’s CEO, said in a statement. “This industry is undergoing rapid digital transformation, and we are pleased to partner with Jimmy and his colleagues, who together have built a remarkable company and have demonstrated the vision to continue to grow and better serve their clients.”

In 2017, Lone Wolf acquired Instanet Solutions, a provider of transaction management, electronic forms, and eSignature solutions for the real estate industry. The companies said that the deal would create the “largest real estate brokerage software platform in North America.”

Then in 2019, Lone Wolf acquired zipLogix, which also provides transaction management, electronic forms, and eSignature solutions for the real estate industry. The zipLogix platform, which includes the company’s transaction management software (zipForm, zipTMS, and zipVault), will all be available through Lone Wolf’s platform.

Over the last four years, the Department of Justice has been conducting a criminal inquiry into whether Vista’s CEO Robert Smith failed to pay U.S. taxes on roughly $200 million in assets that passed through offshore vehicles, the Wall Street Journal reported this week.

As a result, Smith will pay a $140 million settlement – $85 million in penalties, $30 million in back taxes and $25 million in interest.

To follow the fast-paced changed in the real estate technology world, check out HousingStack, our real estate technology landscape that provides a dynamic visual that reflects the rapid changes in the sector. The HousingStack is exclusively for HW+ members. To join the HW+ community, go here.

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Luxury housing market inspires ‘total frenzy’ in vacation boom towns

Luxury housing market inspires ‘total frenzy’ in vacation boom towns
In the third quarter, luxury home sales jumped 41.5%, the biggest year-over-year shift since 2013, according to Redfin. And while real estate agents repping luxury homes aren’t seeing as many bidding wars as they did this summer, their respective housing markets are still crazy right now.

“What we’re seeing here in Palm Beach is a total frenzy,” Dana Koch, a sales associate with Corcoran Group, the Koch Team in Palm Beach, told HousingWire. “I’ve had many conversations with clients of mine from late April through early July, the market was total pandemonium. And, since early July to now, it’s just getting very busy.”

A recent report from Douglas Elliman and Miller Samuel revealed that the average Palm Beach home price in Q3 was $7 million. Contracts during this time also skyrocketed 62%.

While the Palm Beach housing market has not seen a lot of bidding wars, Koch said that a lot of the inventory has been absorbed and properties are getting multiple offers.

Since it’s a summer destination, Palm Beach’s busy season for home-buying starts on Nov. 1, and runs through May 1. Koch said that since this summer — typically the home-buying off-season — was busy for buyers, he thinks it will only get crazier.

“We normally average roughly like $200 plus million on an annual basis, and during the first three quarters, we’ve sold $350 million worth of real estate,” Koch said. “So it’s been a crazy year. It’s been a very profitable year.”

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Over where the weather is colder, Steven Shane, a Compass real estate agent in Aspen, Colorado, said that buyers are coming from all over Texas, Florida, New York and California.

Shane said that schools in Aspen have increased their enrollment, as families are putting their roots down where they can have more space.

“I think that there’s a lot of people who rented, put their kids into school, and now, interest rates are so low, if you think about it, it makes a heck of a lot more sense to buy something than to pay rent,” Shane said. “So a lot of the people who came here initially may have rented just to get a place and now are looking to buy a home.”

From hiking to skiing and fishing, Shane said that people want to be able to get out and be able to stretch their legs if they’re working from home, and they can do that in Aspen.

“People learned that they can work from anywhere,” Shane said. “For the most part, people can work remotely, and their children might be attending school remotely. So why not be in Aspen, Greenwich, Connecticut, or the Hamptons?”

Speaking of the Hamptons, as of Q3, home sales in the area have increased 51% year over year, according to another report from Douglas Elliman and Miller Samuel. Gary Depersia, a broker with the Corcoran Group in East Hampton, said that the market is extremely busy right now at all price levels.

“We’ve had quite a few deals above $10 million, above $20 million and above $40 million,” Depersia said. “So, there’s activity all over the place.”

Depersia said that there are definitely bidding wars in his housing market, especially with more people coming out from the city and trying to live in the Hamptons full time.

On the day HousingWire spoke with Depersia, he had six showings. “For a Thursday in October, that is a lot of showings.

“At this time of year we get a lot of showings on the weekend and very few during the week,” Depersia said. “Now we’re getting a lot of showings. It’s not uncommon for us to have three, four or five showings on a weekday of my various listings, or buyers coming out and looking for things with me. So that’s something that’s changed dramatically.”

DJ Grubb said he’s seeing a lot of activity in the higher end of the housing market where he is in the East Bay area in California, including all-cash buyers and buyers taking advantage of the lower mortgage rates.

“I have a lot of people moving within town, and a lot of Millennials coming out of San Francisco, that having just gone through COVID that are now coming over to the East Bay and finding the East Bay a very good buy, whether it be in the million five range or up to $5 million range,” Grubb said.

Grubb, the president of Grubb Company Realtors, said that even though people are moving into his communities, people are moving out, too. The “wealthy, wealthy” are moving to the likes of Aspen, Colorado; Jackson Hole, Wyoming; and the Tahoe area.

In the Lake Tahoe area, Amie Quirarte said that there are lots of Bay Area residents who fled to the vacation town, creating not only an increase in sales but also an increase in rentals.

“It’s been a really interesting summer, to say the least,” the agent at Tahoe Luxury Properties said.

In the past, it wasn’t unusual for houses in Quirarte’s market to sit on the market for 30 days and sometimes 60 days without much movement, causing a decrease in listing prices.

“In that respect, [it has] shifted tremendously,” Quirarte said. “Now we’re seeing nearly every offer is almost all cash, and if they’re not cash then they have at least waived their financing contingencies including their loans and they have the ability to compete with cash offers. And many people, more this summer than any other time in my career, people have waived contingencies altogether, which is very unheard of for our market. Very, very unique.”

Miami Realtor Ines Flax, with One Sotheby’s International, said her housing market is heating up this winter.

“Some houses are getting multiple offers, which [we] haven’t seen that in a while,” Flax said. “Especially in the high-end luxury market.”

Miami is another destination to benefit from the big city exodus caused by the pandemic. Flax said that she thinks her market will be busier this winter than last winter, and said both public and private schools in the Miami area have had triple the amount of students applying.

“We used to have five of the [mega mansion] sales a year in Miami Dade…and now we’ve seen 20,” Flax said. “Just five sold on Star Island within the last six months. The cheapest sale on Star Island was like $19 million, and that was a plot.”
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Why lenders should text their prospects

Why lenders should text their prospects
HousingWire recently spoke with Verse founder and CEO David Tal about the lead conversion gap and how Verse is helping lenders engage and nurture leads.

HousingWire: What’s causing the gap between sales and marketing?

David Tal: The massive gap between sales and marketing is caused by a number of factors and challenges faced by marketing and sales teams, and the difficulty for either of them to solve it. Here are the five biggest reasons:

People want to talk to humans, not chatbots. In fact, 86% of people prefer communicating with a human vs. a chatbot. They crave an authentic human connection.89% of consumers prefer to communicate with a business over text, yet only 6% of businesses are leveraging two-way text conversations to communicate with customers. Customers don’t want to be called, as it’s usually inconvenient and is a reason why 87% of people don’t answer the phone call anymore from numbers they don’t know.Businesses need to contact leads quickly! Speed-to-lead is everything when it comes to engaging fresh prospects, yet sales teams struggle to engage with prospects quickly since they have so many more tasks in front of them at any given time.40% of leads come in after hours and on weekends, when most sales and marketing teams are not there to respond. That’s a massive waste of opportunity, and leads go to waste with every passing minute and day that passes without speaking to someone.Sales and marketing teams fail to nurture prospects long term. Sales reps are busy and usually focused on the new lead that just popped in the funnel. Most make less than two attempts to engage a new prospect before they move on. The fortune is in the follow-up, and it takes 6-8 attempts on average to engage with most prospects.

HW: In a time when lenders are inundated with leads, what should they be most aware of?

DT: Leads today want to communicate on their time and on their terms. We live in a world where people can push a button and get just about anything. Consumers expect immediate engagement and personalized, authentic conversations that help them get the answers they need quickly.

HW: What are the best strategies for lenders when following up a lead?

DT: Speed-to-lead. You have to contact a lead within minutes, or you’ll lose them to the competition. You should automate a first engagement via text so you can always reach out to a new inquiry quickly, around the clock.

Text communication. Getting ahold of leads is tough. You may call them quickly, but that doesn’t mean they’ll answer, because they don’t know who’s calling, and 87% of people aren’t answering phone calls from numbers they don’t know anymore. So use the power of texting to initiate a conversation. You can offer to call them, via text.

We highly recommend using text as an initial way to start a conversation and ask the prospect if they prefer to text or prefer a call. Then, if they prefer a call (which most do not, but some do), when you call them, they’ll know who and why you’re calling, and you’ll have a far more constructive and effective conversation.

HW: How does Verse help lenders with lead conversion and retention?

DT: Verse does it all for you. As new leads flow in, Verse instantly engages all leads via text, 24/7/365 and also offers to call them. Verse also nurtures leads long-term that require multiple follow up attempts, ensuring no leads slip through the cracks.

Once in contact, Verse asks the prospect all the questions you want us to ask, sets appointments for your team and also makes live transfers to your team in real time. From the moment a new lead is created, Verse handles all the engaging, qualifying and nurturing until they are ready to talk to your team, giving your team the leverage to focus on high-intent opportunities instead of chasing them all down with inefficient and incomplete methods.

Verse works with some of the largest lenders in the country, and they are seeing increases of 50-100% full funnel conversion rates. The power of quick engagement, 24/7, relentless nurturing and qualification sets up all teams to succeed far more than they ever imagined.
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FHA unveils Automated Underwriting System as part of modernization initiative

FHA unveils Automated Underwriting System as part of modernization initiative
The Federal Housing Administration announced on Wednesday the launch of its first automated underwriting system that will allow lenders to submit loan application data electronically for single family forward mortgages from their loan origination systems to FHA for mortgage insurance eligibility.

The AUS is built upon FHA’s Catalyst technology platform – a modernization initiative the company says will build trust through “reliable and accurate data, facilitating modern systems for the FHA program participant community.” Previously, the FHA integrated its Electronic Appraisal Delivery module to the Catalyst platform for lenders to submit, track and manage single-family property appraisals.

Some key features include feedback certificates that provide actionable information for lenders that corresponds with FHA policies in the Single-Family Housing Policy Handbook and data synchronization between LOS and FHA Catalyst with the use of Application Programming Interface (API) technology.

The new module also offers integrated submission of credit report data reissuances, which FHA says will eliminate the need for lenders to use a third-party routing system.

“Rather than going through 10 or 15 different systems to go through that transaction, this capability will actually allow them to have one location to access all the information they will need,” said David Chow, the Department of Housing and Urban Development’s chief information officer.

A mortgagee will complete a loan application in the LOS and submit it to the AUS, which will then obtain credit report information for the mortgagee’s credit vendor. After the ULAD and credit report information is obtained, the AUS will score the application using the FHA TOTAL mortgage scorecard. Once scored, the mortgagee will receive a scoring decision and feedback certificate.

“It is modernization of the entire process. Modernization means fewer hassles for lenders and potential homeowners and it translates into more efficiency in the origination process,” said Dana Wade, FHA commissioner. “We are looking to build upon that to have a robust ability to analyze data so that FHA can make better decisions for the taxpayer, for the industry and the stability of the marketplace and ultimately for homebuyers.”

In September, Pyramid Systems, a technology solutions provider for federal agencies, announced it was awarded a Salesforce Refactoring and Implementation Support Services (SRISS) contract to modernize the FHA loan system. According to the release, the two-year contract is worth $42 million.

The FHA said its new AUS will be available in FHA Catalyst for single family forward mortgage programs on or after Oct. 30, 2020 and will not be a required replacement of other automated underwriting systems that accommodate FHA-insured mortgages.
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Hours before its IPO fizzled, Guild Mortgage agreed to pay $25M to settle federal lawsuit

Hours before its IPO fizzled, Guild Mortgage agreed to pay M to settle federal lawsuit
Just before its stock debuted at a disappointing $15 a share, Guild Mortgage settled a federal lawsuit that claimed the lender knowingly breached legal requirements when it originated and underwrote FHA loans. Guild agreed to settle the federal lawsuit, brought by the Department of Justice, for just under $25 million, the government said Thursday. It did not admit to any wrongdoing.

The lawsuit, brought initially in 2016, alleged that Guild knowingly originated and underwrote mortgages that didn’t meet the program requirements of the FHA. Those loans, originated between 2007 and 2011, defaulted and led to claims to the FHA for mortgage insurance. Guild failed “to comply with material program rules that require lenders to maintain quality control programs to prevent and correct underwriting deficiencies, and failed to self-report materially deficient loans that it identified,” the government said.

“As this settlement demonstrates, we are committed to holding mortgage lenders accountable when they choose to abuse the integrity of vital government programs that are designed to assist homeownership,” U.S. Attorney Robert Brewer for the Southern District of California said in a statement. “We also commend the whistleblower for coming forward, exposing these wrongs, and working with the government investigative team.”

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The whistleblower, former head of quality control at Guild, Kevin Dougherty, will receive $4.98 million of the $24.9 million settlement.

In a statement, Guild said it “entered into this settlement agreement to avoid the delay, uncertainty, and expense associated with continued litigation.”

“Guild remains confident in the compliance processes it has in place for FHA- related mortgage lending and other mortgage lending activities and maintains its position that the claims asserted were without merit,” said Mary Ann McGarry, Guild’s CEO.

The settlement occurred just before Guild and its private equity owners McCarthy Capital Partners made a debut on the public markets.

Through Guild Holdings, the lender’s management and the private equity investors planned to issue 8.5 million shares of Class A stock, priced between $17 and $19. It would have raised approximately $153 million. Instead, Guild sold just 6.5 million shares at $15 apiece, raising $98 million. The money raised will not be going to Guild Mortgage; management and McCarthy are the beneficiaries of the IPO.

In an interview on Thursday, McGarry, the longtime CEO said that company management and McCarthy were in it for the long haul, even if the IPO didn’t meet expectations.

“We don’t look at just today, it’s a snapshot in time,” she said in an interview. “We’re focused on the future, and I can only control what I do best, and that’s being CEO and running the company and producing consistent, profitable growth as I have the last 12 years.”

Through the six months ending June 30, Guild, which does nearly all of its business through the retail channel, posted a profit of $110.8 million, up from a $47 million loss in the first six months of 2019. It originated $14.6 billion in loans during the first half of the year. Company president Terry Schmidt said the recapture rate this year was 67%.

Per the prospectus, 55% of mortgages originated in the first half of the year were refinancings. Guild retained servicing on 85% of its loans. Gain-on-sale margin was a very healthy 504 bps, up from 383 bps year-over-year.

For the third quarter, origination volume is expected to come in at $10 billion, which should yield a net income between $178 million and $187 million.

Guild has retail locations across 31 states and, according to McGarry, the company is interested in expanding into new territories, potentially through additional acquisitions.

This story was updated to include comment on the settlement from Guild.
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The housing bubble boys blew it in 2020

The housing bubble boys blew it in 2020
The NAR existing home sales report released today blew out all estimates with 6,540,000 in existing home sales. This epic headline punctured any 2020 bubbles the housing bubble boys had left in their arsenal. But before we get too excited, keep in mind we are still down 0.2% year to date compared to 2019 levels. Still, this seems like a booming housing market, right?

I have often claimed that 2008-2019 would have the weakest housing recovery ever in history. And it did. I also said that the new home sales recovery would be fairly anemic, housing starts would never start a year at 1.5 million and purchase applications would never hit 300 until the years 2020-2024.

Well, here we are in 2020 entering into the best housing demographic patch ever recorded in U.S. history. We have “built-in” replacement buyers at a time mortgage rates are low and are likely to remain so during the next five-year period. One might say this is a perfect storm for housing to outperform other economic sectors for years to come.Then COVID-19 happened and the chaos theory and the butterfly effect took hold of the U.S. economy back in March.

However, there are some things not even COVID-19 can take away. So, let’s take a look at the housing data in 2020 so far. 

New home sales are on fire and this data line will moderate for sure. However, new home sales have outperformed my 2020 forecast as this sector benefits with lower mortgage rates than even the existing home sales market place.

The best part about housing in 2020 for me is the monthly supply data for new home sales has moved lower. This is where monthly supply for new homes should be when new home sales demand is strong. This is good for housing starts.

Housing starts are also up, but we haven’t started the year at 1.5 million housing starts yet. Although we have some weakness in the multifamily sector, housing starts have made an epic comeback. But we have to remember that in February it showed near 40% year-over-year growth, before COVID-19 hit. This housing story was here before COVID-19 hit us.

Mortgage Bankers Association purchase application data has shown us 22 straight weeks of positive year-over-year growth, averaging over 20% during the timeframe. We have finally breached the 300 level in this index in 2020 like demographic clockwork. The last four weeks of year-over-year growth were 26%, 24% ,21% and 22%. Remember, this data looks out 30-90 days.

When I think about housing 2020, it’s not the V-shaped recovery that I will remember first or the most. I will remember the February existing home sales data which got me almost spitting out my coffee. That February report was one of the most impressive I have seen in my lifetime. That was the green light that housing was going to outperform even my estimate for 2020.

In years 2020-2024, even with COVID, housing has the ability to outperform just based on the raw power of demographics. COVID-19 gave us nine weeks of negative year-over-year data followed by an undeniable housing market comeback. This happened because demographics and mortgage rates are what drive this part of the economy.

It helped too, that Freddie and Fannie weren’t publicly traded companies without government backing, so credit stress was stable as we never really had a tight lending housing market in 2020, at worst 4.5% to 6.2% of all loans were tight this year. 

Today, we are back to almost flat even with the 20.9% year-over-year growth from the recent report. Yes, we went through some pretty spectacular gymnastics in housing to end up basically flat for the year.

In my opinion, if we had not been affected by the COVID crisis, existing home sales would have ended 2020 with between 5,710,000 – 5,840,000 in sales. This would have been a big jump from 2019 levels and compared to the previous years. We may not be able to make up all the lost ground due to COVID-19 this year, but that demand may be pushed forward to the next year.  

For now, just know that the housing bubble boys and the mega housing bears blew it this year! Why? Because they didn’t focus on the two factors that drive the housing market: demographics and mortgage rates. Rates can go higher but demographics are very sticky and not so easy to manipulate. As you can see, this isn’t an overheating demand market compared to last year, we aren’t even positive for 2020, not yet at least. 

So, don’t get too bearish if you see a housing data rate of growth slow down in the upcoming months. This has been a common failure by housing bears for many years. Remember, think of sticky demographic demand — the replacement buyers in years 2020-2024 — and if rates stay low, housing will be stable.
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Stewart Title acquires valuation services company Pro Teck

Stewart Title acquires valuation services company Pro Teck
Stewart Appraisal Management, a subsidiary of Stewart Information Services Corp., announced on Thursday it acquired valuation services company Pro Teck Valuation Intelligence.

Stewart is looking to strengthen and expand its scale in the appraisal and valuation solutions space. With more than 40 years of residential real estate experience, Pro Teck provides property valuation services and recently released its technology Valuation Intelligence, a cloud-based fulfillment platform that provides residential real estate values and market information, as well as an SaaS solution to enable lenders to directly manage the appraisal process in house.

“As we continue to invest in Stewart’s future, this acquisition adds innovative technology, data and analytics to our growing valuation businesses, critical for driving future business,” Stewart CEO Fred Eppinger said. “Pro Teck’s added scale and capabilities take us one step closer to becoming the premier title services company, allowing us to increase our services for our customers.”

This acquisition comes just months after Stewart acquired United States Appraisals. Headquartered in Overland Park, Kansas, United States Appraisals provides residential management solutions on a nationwide level.

This is the second acquisition for Stewart following last September’s decision by the Federal Trade Commission to halt the company’s merger with Fidelity National Financial. The two companies terminated the deal, which would have seen Fidelity buy Stewart for $1.2 billion.

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But that change of plans has not kept the company from growing and even expanding into several new markets this year.

“We are very excited to become part of the Stewart family,” Pro Teck CEO Tom O’Grady said. “Stewart’s commitment to building their appraisal and valuation capabilities into a dominant market leader was attractive to us. With the strength of Stewart, and the synergies with Stewart’s existing appraisal and valuation operations, we will be able to bring much greater value and competitive advantage to our clients.”
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Docutech purchase drives First American information revenue up 38%

Docutech purchase drives First American information revenue up 38%
Earlier this year, First American made its latest move toward a fully digital mortgage with its purchase of mortgage tech firm Docutech. Now, that purchase is driving up the company’s revenues.

The company rebranded to First American Docutech in September after the purchase for $350 million in February this year.

In the third quarter of 2020, First American’s information and other revenues were $282.7 million, up 38% compared with the same quarter last year. The company said this increase was primarily due to the growth in mortgage originations that led to higher demand for the company’s title information products, the acquisition of Docutech and revenues from services provided to support a temporary pandemic-related government program in Canada.

Docutech, a document, eSign, eClosing and compliance technology provider, is one of the top tech companies in the housing industry. The company’s digital document technology is used by Black Knight, Ellie Mae, Fiserv, CoreLogic, Blend, Tavant, Floify, Maxwell, Roostify and more than 175 lenders.

“The acquisition of Docutech reflects our steadfast commitment to invest in and grow our core business,” First American CEO Dennis Gilmore said earlier this year. “Moreover, it demonstrates our dedication to improving the home-buying experience for consumers and driving the digital transformation of the real estate settlement process.”

Overall, the company’s total revenue was $1.9 billion in the third quarter, up 15% from the previous year. Closed title orders were up 30%, driven by an 85% increase in refinance orders. However, this shift to refinances also caused the average revenue per order to decrease 13% annually.

Net income in the third quarter increased to $182.3 million, or $1.62 per diluted share, down slightly from $187.2 million, or $1.65 per diluted share in the third quarter of 2019.

“Our third-quarter financial results were strong, achieving a record pretax title margin of 19%,” Gilmore said. “Our purchase and refinance businesses are performing well, benefiting from strong order trends and our continued focus on cost efficiency. Given low mortgage rates and robust demand for housing, we expect refinance and purchase activity to remain at elevated levels for the remainder of the year.”
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Existing home sales surge 9.4% in September

Existing home sales surge 9.4% in September
Sales of existing homes took off in September, jumping 9.4% from August to a seasonally adjusted annual rate of 6.54 million, the National Association of Realtors said in a report on Thursday. Compared to a year ago, sales are up 20.9%.

“Home sales traditionally taper off toward the end of the year, but in September they surged beyond what we normally see during this season,” said Lawrence Yun, NAR’s chief economist. “I would attribute this jump to record-low interest rates and an abundance of buyers in the marketplace, including buyers of vacation homes given the greater flexibility to work from home.”

That surge in potential buyers, however, may be met with what Yun says is historically low inventory. At the end of September, housing inventory totaled 1.47 million units, down 1.3% from August and down 19.2% from one year ago when inventory sat at 1.82 million.

Unsold inventory measured as a “months supply” number that gauges how long it would take to sell all the homes if nothing else came on the market, was 2.7 months, NAR said. That’s down from three months in August and four months a year ago.

An improving job market, low rates, and families looking for more space played key roles in the recent activity spike, according to Mortgage Bankers Association senior vice president and chief economist, Mike Fratantoni.

“The primary constraint to even more sales is the plummeting inventory of homes on the market, which is leading to bidding wars and spikes in home prices across the country. Fortunately, we are seeing a pick up in the pace of construction, which should bring more inventory onto the market for next year’s buyers,” Fratantoni said.

The median existing-home price last month was $311,800, up 14.8% from this time last year, and prices rose in every region. According to the report, 71% of homes sold in September were on the market for less than a month at an average of 21 days – an all-time low.

However, risk still remains in the market, said Ruben Gonzalez, chief economist at Keller Williams.

“As long as unemployment remains elevated, there is a possibility that we see layoffs spill into the higher-paying sectors that are currently propping up the housing market”, said Gonzalez. “That broader recovery will likely hinge on medical progress toward ending the pandemic, as well as a strong fiscal stimulus that helps families maintain their incomes while the economy remains at reduced capacity.”
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What MBA’s forecast means for mortgage originators

What MBA’s forecast means for mortgage originators
The MBA’s economic research team of Dr. Michael Fratantoni and his staff made national news at the MBA’s annual virtual convention, releasing a projection for 2020 of $3.18 trillion, the second-largest origination year in U.S. history next to 2003. 

It’s worth looking inside the numbers though as we head toward year-end and think about 2021 strategies. Here are three key takeaways:

1. 2021 is expected to show refinance volume being cut nearly in half by just over $800bb, almost 50% of 2020. That trend is expected to continue in forward years in the MBA forecast. Why? Even a leveling of rates will result in refi coupon burnout as we complete the process of refinancing virtually everyone eligible.

Frankly, what will be left in the refi market will likely be harder credit quality transactions that a hungry mortgage origination industry will turn to as volumes drop. If rates rise modestly, as MBA suggests, we will be left with rates still near historic lows, a boon for homebuyers but still a contraction in refinances.

2. Despite this contraction, 2021 is forecasted to be a larger overall year than 2019 by approximately $195bb. So, while some right-sizing will occur, it will be to better levels than 2019.

3. The purchase/refi story here is important. Purchases in 2021 should be roughly $350bb larger than 2019, and $120bb bigger than 2020. Those that have a better purchase-to-refinance mix will be better prepared here.

So, what does this mean for originators?

Here are some expectations and recommendations:

First, the refi/purchase mix should be carefully evaluated down to the loan officer level. A top originator this year may become a challenge as the market shifts if they are heavily weighted in refinance. Run a spreadsheet by LO, branch and region. The analysis may expose training needs for respective production teams.

Doing this now will help lending teams establish a game plan to increase the skills of any refinance-focused LOs, as well as their managers. The skill needs of a proactive, outward-relationship building LO is much different than those of a rate-quoting refi originator. 

Second, the second half of 2021 will be where the brunt of the slowdown occurs. This is because of two things. First, there is still plenty of “in the money” refis to be had, which should carry into the first quarter. Second, any slowdown of Fed MBS purchasing likely won’t start until a vaccine is in hand and the COVID trend line, and economic pathway, show distinct improvement.

This should mean that rates will stay at these lows for a few months, perhaps even dipping slightly lower through the winter. The good news is that this gives lead time for originators to train and prepare by doing the analytics of their sales teams and establishing a training strategy.

Third, the volume we have been seeing has also widened spreads as lenders used pricing to slow volume. As the market shrinks and capacity remains, it is almost a certainty that spreads/margins will contract due to competition, thus reducing loan-level profitability. The double whammy of a contraction, even small, is that it not only shrinks volume, it disproportionally shrinks profits as fixed costs remain high and pricing margins compress.

Conclusions? First, the mortgage market is always volatile, but the winners are the ones who “go where the puck is going”, to use the famous Gretzky line. In management, understanding “situational leadership” will help assess commitment versus competence challenges. Those leaders that plan in advance for this shift will be best prepared.

Second, there is no need to overreact. The good news is that this data provides clarity and preparation is key. In fact, if none of this happens, the best outcome will be the skills development of your teams, assuming you responded to this forecast in your own way.

And finally, there are great tools available that can augment a sales team’s abilities. There will still be refinance loans to be had and having skills to help borrowers capture equity in their homes in order to build wealth or reduce debt is a real value that can help many homeowners. But training and trainers must have content. The LOs will need tangible, implementable, skills versus hype and enthusiasm. Knowing the difference here will be the key.

Having been an LO and a manager in a very sales-focused and training-oriented company for the first part of my career was critical to helping me be ahead of the game in planning and preparation. Likewise, having good data from organizations like the MBA and others can provide you the information needed for success. The only question then is how mortgage leaders will implement an execution plan to be ahead of the change that’s coming.

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

To contact the author of this story:Dave Stevens at dave@davidhstevens.com

To contact the editor responsible for this story:Sarah Wheeler at swheeler@housingwire.com
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