First American, Stewart Title and Old Republic report for 2Q

First American, Stewart Title and Old Republic report for 2Q
Three of the “Big Four” title insurers — First American Financial, Old Republic and Stewart Title — released their second-quarter earnings this week. Fidelity National will release its second-quarter earnings on Aug. 3.

First American reported $2.3 billion in total revenue for the second quarter, a 41% increase year over year and up from $2 billion in the first quarter of 2021. Net income in the second quarter was $302.3 million, or $2.72 per diluted share, compared with net income of $170.7 million, or $1.52 per diluted share, in the second quarter of 2020, said Dennis Gilmore, First American CEO.

“We also benefited from high productivity bolstered by our ongoing data and title automation initiatives,” Gilmore said in a release. “Our title segment posted a pretax margin of 19.1%, the highest in the company’s history.”

Stewart Title reported $802 million in total revenue for the second quarter. Net income in the second quarter was $94.8 million of net income, at $3.50 per diluted share. That’s up from $54.2 million net income, at $2.01 per diluted share, in the first quarter of 2021, and up from $34.1 million, at $1.44 per diluted share, for the second quarter 2020.

Stewart has been on an acquisition frenzy in the past 18 months, closing deals to acquire 13 companies — including Cloudvirga, NotaryCam, Pro Tek Valuation Intelligence, United States Appraisals, and A.S.K. Services, just in March.

Old Republic reported total revenue of $2.25 billion in the second quarter of 2021, and a net income of $316.4 million — down from $2.36 billion and $502.1 million, respectively, in the first quarter of this year. On a per-share basis, the Chicago-based title company said it had a profit of $1.05. Earnings, adjusted for investment gains, came to 73 cents per share.

“Total and per share year-to-date net income reflect significant increases in the fair value of equity securities by comparison to 2020 when equity markets were disrupted by the onset of the COVID-19 pandemic,” Old Republic stated in a release. “Title Insurance continued to experience robust growth in premium and fee revenues as low interest rates and a favorable real estate market persisted.”
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Borrowers get more options as foreclosure deadline nears

Borrowers get more options as foreclosure deadline nears
With the foreclosure moratorium for federally backed mortgages set to expire next week, the Biden administration is giving borrowers additional options to reduce their mortgage payments.

The Department of Housing and Urban Development (HUD), Department of Agriculture (USDA), and Department of Veterans Affairs (VA) will give homeowners options to reduce their monthly principal and interest by lengthening the term of the mortgage, bringing the agencies “closer in alignment with options for homeowners with mortgages backed by Fannie Mae and Freddie Mac,” a White House press release said.

The ban on foreclosures for federally backed mortgages will expire on July 31, after the Biden administration extended it a final month. The enrollment period for forbearance will conclude at the end of September.

Approximately 1.75 million homes are still in forbearance. For borrowers who can resume paying their mortgage, federal agencies will allow them to move their payments to the end of their mortgage. But the White House said some homeowners will need “deeper assistance” to become current and keep their homes.

“In order to ensure a stable and equitable recovery from the disruptions of the COVID-19 pandemic and prepare for homeowners to exit mortgage forbearance, the Biden-Harris Administration is taking action to keep Americans in their homes and support a return to a more stable housing market,” the White House said.

For borrowers unable to make monthly payments after the foreclosure ban expires, HUD will give servicers the ability to lengthen the mortgage term. Borrowers could see their mortgage terms extended to 360 months at market rate, to reduce their payments by 25%. In addition to a term extension, borrowers could receive an interest-free subordinate mortgage not due until after the first mortgage is paid off, otherwise known as a partial claim.

HUD will offer a partial claim to borrowers who can start making their mortgage payments again.

The USDA will also offer new options to help borrowers attain a 20% reduction in their payments. The tools include an interest rate reduction, term extension and a mortgage recovery advance, to help cover past due mortgage payments and related costs. The options can be used separately or combined.

There are also options for VA borrowers to reduce their monthly payments after. The VA can purchase up to 30% of borrowers’ unpaid principal balance and arrearages, and provide an interest-free subordinate loan similar to a partial claim. Servicers can also extend the loan term to up to 40 years.

In addition, the Homeowners Assistance Fund provides $10 billion to states, D.C., territories, and tribes for relief to COVID-impacted homeowners after the foreclosure ban expires. In addition to the payment reduction options, homeowners can use those funds to pay mortgage, homeowners’ insurance or utilities. Those with federally backed mortgages and borrowers whose mortgages are not backed by federal agencies will have access to the relief funds.

Ginnie Mae said that its new securities pool for mortgages with a 40-year term will be up and running later this year, giving federal agencies the flexibility to extend mortgage terms, if they choose to do so.
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3 solutions to a gridlocked housing market

3 solutions to a gridlocked housing market
Competition for home buyers is tougher than ever right now, as tightened housing stock supply continues to plague the housing market.

Acra Lending is doing what it can to help free up inventory. The company specializes in non-QM products, a sector that serves many borrowers who might not fit agency loans. By working with borrowers in unusual circumstances, Acra is helping create opportunities for inventory to open up.

3-month bank statement

For example, look at Acra’s 3-month bank statement loan program, said Keith Lind, executive chairman and president of Acra. For those who may have lost their job during the pandemic or who are self-employed, looking at the last three months of bank statements is, “more useful than looking at the last 12 or 24,” Lind said.

The 3-month bank statement program is ideal for borrowers with nontraditional income streams. Borrowers can qualify with their most recent personal or business account bank statements rather than going through an agency underwrite that requires more documentation.

Acra’s 3-month bank statement requirements are stringent, so no borrower is getting a loan they won’t be able to afford.

Using a 3-month bank statement program, borrowers who would not otherwise qualify due to lost or nontraditional income may be able to buy a new home and place their own on the market.

Jumbo products

In addition to low inventory, the massive competition in the market has led to an increase in home prices. According to data from the Mortgage Bankers Association, the average purchase price had risen to $384,000 as of May.

While that’s still below the $548,250 minimum price tag requiring a jumbo loan, the higher average indicates big increases across the board.

“With home prices increasing, a lot more loans fall out of agency guidelines and will fall into the jumbo prime product center,” Lind said.

Acra’s jumbo prime mortgage solution is designed to provide borrowers with the larger loan amounts needed to purchase a high-value property, with loan amounts up to $3 million.

The lender also offers a jumbo non-QM product, which allows borrowers to qualify with full doc or bank statements for loan amounts up to $4 million.

By providing jumbo loans, lenders like Acra are able to make those higher-priced homes available as an option for home buyers.

Fix’n’flip

The third way in which Acra is poised to help expand on housing inventory is through its upcoming fix n’ flip loan vertical.

Fix n’ flip loans are ideal for investors and developers looking to purchase a home and renovate it. Many fix’n’flippers look at older housing stock that isn’t immediately move-in ready, taking on needed updates and rehab to bring the home up to date with the current market’s living standards.

Once the newly updated home is ready, it can then go right back onto the market, much more appealing for standard home buyers than it might have previously been. Through these loans, developers and investors are able to bring new stock to the market that may have been previously overlooked or passed up.

“The fix’n’flip market should absolutely be beneficial to bring on more inventory,” Lind said. “We’re very excited to enter the fix’n’flip space. Our goal is to provide two loans there – we provide the fix’n’flip loan and then the permanent financing for the next person that’s going to get into that home and want to live there for a long time.”

Acra Lending plans to launch its fix’n’flip loan program in the coming weeks. For more information, visit acralending.com.
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Industry to Congress: G-fees aren’t your “piggybank”

Industry to Congress: G-fees aren’t your “piggybank”
Two dozen industry groups have joined forces to oppose any plan to raise Freddie Mac and Fannie Mae guarantee fees (g-fees) to pay for an infrastructure package.

Last weekend, a plan to raise revenue through expanded tax enforcement to pay for the bipartisan infrastructure package fell by the wayside. That measure was expected to bring in $700 billion in revenue. With that off the table, Senators are now casting about for an alternative.

The spectre of raising g-fees horrified industry stakeholders. Bill Killmer, the Mortgage Bankers Association’s senior vice president for legislative and political affairs, described g-fee increases as a “zombie pay-for that roams the earth.”

The industry groups wrote that g-fees should only be used as a risk management tool to buffer against potential mortgage credit losses and to support the GSEs’ charter duties.

The coalition — made up of groups that don’t always see eye-to-eye on other issues — spans nearly every corner of the industry.

The MBA, the American Bankers Association and the Housing Policy Council, which represent the mortgage finance sector, signed onto the letter, as did the Consumer Federation of America, which advocates for consumers, the National Housing Conference, an affordable housing advocacy group, the National Multifamily Housing Council, which represents large multifamily landlords and the National Association of Realtors, which represents real estate brokers.

Killmer said members of the coalition got word that the Senate was considering using g-fees as a way to pay for the infrastructure package. Within 24 hours, the two dozen groups sprang into action to pen a letter explaining their opposition.

“It’s a tax on housing consumers for one purpose, risk management of the [Government Sponsored Entities] loan portfolio, to pay for some other purpose,” said Killmer.

Freddie Mac and Fannie Mae charge g-fees to lenders to cover credit losses from borrower defaults, administrative costs and a return on capital. In 2019, g-fees amounted to 58 basis points on average for a 30-year fixed rate loan. Those increases are passed on to borrowers in the form of a higher interest rate.

The use of g-fees to pay for non-housing related items is not an idle threat — it has precedent in recent history.

In 2011, to support a two-month period of payroll tax relief, Congress raised g-fees by 10 basis points for a period of 10 years. That increase expires in September. Members of Congress may be eyeing that deadline and considering re-upping the fees, sources said.

“Since then, whenever Congress or the Administration has considered using g-fees to cover the cost of non-housing-related programs, our organizations have united to emphatically let lawmakers know that homeowners cannot, and must not, be used as the nation’s ‘piggybank,’” the groups wrote.

“The benefits of affordable homeownership accrue to families, communities, and our national economy; we simply cannot allow these benefits to be jeopardized by efforts to raise g-fees unnecessarily,” the letter reads.

Negotiations are still underway in the Senate for bipartisan legislation which would take up traditional infrastructure like bridges, roads, rural broadband and upgrading the power grid. 

Those talks hit a snag earlier this week when Senate Majority Leader Chuck Schumer pushed for a vote on Wednesday to advance the measure. Republicans had opposed the timeline and the vote failed, although Schumer subsequently filed a motion to reconsider.

A bipartisan group of Senators have yet to agree on how to raise revenue for the package. Democrats are also pushing a separate $3.5 trillion infrastructure package, which would advance a social infrastructure agenda.

Update: A previous version of this article incorrectly spelled Bill Killmer’s name.
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The DOJ vs. NAR: What’s the impact to real estate agents?

The DOJ vs. NAR: What’s the impact to real estate agents?

The following Q&A comes from the HW+ exclusive Slack channel, where HousingWire Senior Real Estate Reporter Matthew Blake answered questions about his latest coverage on the impact of the DOJ’s decision and how the industry is gearing up to respond. During the Q&A, Blake discussed the ramifications of previous DOJ investigations into NAR and conversations he has had with top-level agents on how they’re feeling about this news.

The following Q&A has been lightly edited for length and clarity.

HousingWire: To start, the Department of Justice allowing itself to pursue a broader investigation into the NAR is a high-level, brewing conflict. How, if at all, does it practically affect agents?

Mathew Blake: This is not an obscure, legal matter. The DOJ repeatedly said in withdrawing from its consent decree with the Realtor’s trade group that it is looking at commissions. Many scholars and antitrust lawyers, but not many agents, say U.S. real estate commissions are artificially inflated by an illegal horizontal conspiracy between NAR and brokerages. So, if DOJ were to believe that, they would be pursuing ways to lower commissions for consumers.

In other words, it could affect the very economic model we know for agents — which is that they are independent contractors who make a living on commissions that can be 3% each of a total home purchase price

HousingWire: Interesting insight. To build on that, would you consider NAR to be a monopoly?

Mathew Blake: I’m not a lawyer so I don’t know, but the lay understanding of monopoly is dominance of one field, and NAR is certainly the dominant trade group for agents. But more than just representing labor, they also represent management (brokerages) and claim to work in the best interests of consumers. So, they have an outsized role in the American real estate market, and, I would say, a unique one among trade groups. The question, though, for antitrust purposes is whether they are a monopoly causing harm to consumers and that’s where you get into full-throated arguments

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Crypto firm names Kraninger top lobbyist

Crypto firm names Kraninger top lobbyist
As regulatory oversight of cryptocurrency looms, Solidus Labs has appointed former Consumer Financial Protection Bureau director Kathy Kraninger to grease the wheels.

Solidus Labs, which creates cryptocurrency market surveillance tools, appointed Kraninger, who led the CFPB from 2018 to 2021, to lead the company’s regulatory efforts as its vice president of regulatory affairs.

Asaf Meir, Solidus Labs’ CEO, praised Kathy’s “strong commitment to consumer protection” and expertise in regulatory issues. He added that cryptocurrency is bringing immense changes to how financial markets work and how they are regulated.

“Crypto and decentralized finance – DeFi – are not only changing the way we understand financial markets and risk, they’re also transforming financial regulation,” said Meir. “Kathy’s the right person to lead our strategy in response to demand from regulators, enforcement agencies and legislators for crypto-native risk monitoring solutions.”

While she led the CFPB, Kraninger gained a reputation for being much more business-friendly than her predecessor, Richard Cordray. Enforcement actions plummeted under her watch, as did civil penalties. The agency recovered $1.9 billion on behalf of consumers from 2018 to 2020, compared with $5.6 billion in 2015 alone.

Kraninger said that decentralized finance and cryptocurrency are “truly changing the way we engage in the financial marketplace.” She said that Solidus hopes to be on the leading edge of those changes.

“Solidus brings essential crypto-native risk monitoring and fraud prevention capabilities that meet the needs of responsible industry players and regulators, and can help facilitate the next generation of markets.”

Kraninger’s appointment to the New York-based cryptocurrency startup comes as regulators across the world warn they intend to reign in cryptocurrency and stablecoins.

Last month, the Bank of England raised concerns about stablecoins, a form of currency used to facilitate transactions with cryptocurrency.

In a whitepaper, the central bank wrote, “The viability of their business models must not depend on looser regulation for the same level of risk – a form of ‘regulatory arbitrage’. And they must not rely on making promises that they cannot guarantee to keep over time.”

Treasury Secretary Janet Yellen in a February interview with CNBC called cryptocurrency “highly speculative” and voiced concerns about the risks to investors.

“I think it’s important to make sure that it is not used as a vehicle for elicit transactions and that there’s investor protection,” said Yellen.

Earlier this week, Yellen convened a meeting to discuss the “need to act quickly to ensure there is an appropriate U.S. regulatory framework in place.”

The group said it expected to release recommendations “in the coming months.”

Editor’s note: Due to an editing error, a prior version of this story said Kraninger was acting director. She was confirmed as director in late 2018 in a party-line vote.
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Existing home sales show strength of demographics

Existing home sales show strength of demographics

The National Association of Realtors reported existing home sales for the month of June were under their estimates slightly. The seasonally adjusted annual rate of 5.86 million achieved in June was a bit better than my expectations, ending four months of declines.

If existing home sales were getting noticeably weaker, we would expect the sales trend to be around 5.3 million, which would be back to 2019 levels. But that is not what is happening. Every single existing home sales print this year indicated an annual rate of sales higher than the total existing-home sales in 2020.

As I anticipated, Americans are buying more homes with mortgages in the years 2020-2021 than any single year from 2008-2019. The years 2022-2023 will be the sweet spot years because ages 30 to 31 will make up the biggest age group in history.

Almost four months ago, I wrote that based on the year-over-year growth in purchase applications, the housing market should have a few existing home sales prints under 5,840,000. I wrote:

“The rule of thumb I am using for 2021 is that existing home sales if they’re doing good, should be trending between 5,840,000-6,200,000. This, to me, would be considered a good year for housing. This also means that we should have some prints above 6,200,000 like we have had already and below 5,840,000, which hasn’t happened yet. We ended 2020 with 5,640,000 existing home sales, which was only roughly 130,000 more than 2017 levels.”

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2021 Market Leaders: Compass, flat-fee brokers make noise

2021 Market Leaders: Compass, flat-fee brokers make noise
RealTrends Market Leaders report ranks the top residential real estate firms in over 160 different metropolitan areas based on 2021 RealTrends 500 brokerage rankings.

When it comes to movers and shakers in the Market Leaders report, it can be boiled down to Compass and flat-fee brokerages. Both are making noise, rising quickly up the rankings to the top of select markets around the nation.

Compass’s growth trajectory

Compass’s growth story is not unfamiliar. However, just how far they’ve come deserves recognition. They are leading three markets in California: San Diego, Los Angeles/Orange County and San Francisco. With 15,528 transaction sides and sales volume of $23,634,228,407 in Los Angeles and Orange County, they are dominating the market. In San Diego, they have 9,567 transaction sides. “In Greater San Francisco, it’s lapping the competition with a 13,000+ transaction side lead, but even more importantly, its volume is now more than double its nearest competitor,” says Scott Wright, a consultant for RealTrends and partner with RTC Consulting, which specializes in real estate brokerage M&A, business valuations and consulting.

Compass is making headway in other markets as well, with significant growth in Denver, where it’s in the top 5 in both sides and volume and in Southeast Florida, where it’s No. 3 in transaction sides and No. 4 in volume. The company has moved into the top 5 in Chicago, into the top 3 in both sides and volume in Philadelphia behind HomeServices, and No. 3 in sides and No. 2 in volume in Boston. Robert Reffkin’s company is in the top 10 in at least 14 markets around the country.

Flat-fee brokerages climbing quickly

Flat-fee brokerages are gaining momentum around the country. “Because of their low margins, this business model relies on economies of scale to make money,” says Wright. And, they’re growing quickly. Last year, United Real Estate wasn’t listed on the RealTrends Market Leaders report because its company-owned brokerage was just in Dallas. But, since it acquired Benchmark Realty in Nashville and Virtual Properties in Atlanta, it has entered into the top 10 in Atlanta, No. 1 in Nashville and is in the top 10 in Southeast Florida.

Homesmart’s owned company is still No. 1 in Denver by sides, and “it remains No. 1 in Arizona, with significant franchise growth around the country,” says Wright. “Phoenix is a haven for iBuyers but also for flat-fee companies.”

Equity Real Estate is No. 1 in Salt Lake City. Other flat-fee companies showing up in the report are Cummings & Co. Realtors in Baltimore, Samson Properties in Washington, D.C., Latter & Blum in Houston (Latter & Blum is only a flat-fee brokerage in Houston, not Louisiana), JP & Associates in Austin and Dallas/Fort Worth, Palmer House Properties and Atlanta Communities Real Estate Brokerage in Atlanta and Silvercreek Realty Group in Boise, Idaho.

Interesting Marketing Leaders trends to note

With Latter & Blum Companies’ acquisition of Gardner Realtors, they are now more than double their nearest competitor in New Orleans by both sides (6,511) and volume ($2,184,208,980). However, if you combine transaction sides (5,036) for Nos. 2 and 3, Keller Williams Realty Services and Keller Williams Realty Metairie, that lead shrinks.

Howard Hanna Real Estate bought Rand Realty last year, and that puts them in the top 5 in New York City by transaction sides. They still dominate Charlotte, North Carolina with the Allen Tate brand. And, they continue to control the market in Cleveland, with a 20,000+ transaction side lead over Keller Williams Legacy Group Realty, LLC.

John L. Scott has taken back the No. 1 spot by transaction sides in Greater Seattle, after ranking No. 2 last year.

Keller Williams still controls Texas. Across all markets nationwide they were No. 1 in 43 markets by transaction sides.

Corcoran Global Living is one to watch. After being known only in New York City, they started franchising and are now in the top 10 in the uber-competitive San Francisco market by both sides and volume.

By transaction sides, Realogy/RGB Companies topped the market at No. 1 in 30 metro areas, Berkshire Hathaway HomeServices in 18 and RE/MAX in 18 markets.

Markets where independents are on top

There were 51 independents — which includes at least 28 that are members of the Leading Real Estate Companies of the World — who are No. 1 in their markets by transaction sides. One to note in Virginia Beach is Rose & Womble Realty. It maintains the No. 1 spot by sides and volume, fending off franchises in the area.

In the Milwaukee/Lake Geneva area, Shorewest Realtors has closed transaction sides that are more than double the No. 2, First Weber Group/HomeServices. Shorewest is also No. 1 by volume.

In Grand Rapids, Michigan, Five Star Real Estate continues to edge out the franchise competition. Same with Real Estate ONE in Detroit, which is the only independent in that area ranked.

View the 2021 RealTrends Market Leaders report.
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Freddie Mac names Mauricio chief compliance officer

Freddie Mac names Mauricio chief compliance officer
Freddie Mac announced today that Jerry Mauricio, who has served as the entity’s chief compliance officer since January 2021, will transition to the permanent role.

He will be a member of the company’s senior operating committee and report directly to Freddie Mac’s CEO, Michael DeVito. Mauricio will oversee the regulated entity’s compliance risk management program for its regulatory and conservatorship obligations.

“[Mauricio’s] proven compliance and management expertise in both global and domestic financial services companies makes him an outstanding choice to be Freddie Mac’s chief compliance officer,” said Michael DeVito, CEO of Freddie Mac. “I look forward to working closely with [Mauricio] as we ensure Freddie Mac’s safety, soundness and risk management are second to none.”

Mauricio has been at the firm in a number of roles since 2019. He was previously the CCO and senior vice president at Capital One Investing and Capital One Advisors. Before that, he was a compliance officer at financial institutions including BNP Paribas, Barclays and now-defunct Lehman Brothers.

Mauricio’s transition to a permanent role comes at a critical time for the government sponsored entities.

In recent months, there have been numerous high-level departures from Fannie Mae and, to a lesser degree, Freddie Mac. Ex-employees say restrictive compensation levels under conservatorship have led some to seek better-paying gigs in the private sector.

A spokesperson for Freddie Mac did not immediately respond to an inquiry about how many roles have yet to be filled. A survey of LinkedIn listings shows 130 open positions at Freddie, 32 of which were posted in the last 24 hours.

Freeing the regulated entities from conservatorship was a key priority of the Federal Housing Finance Agency’s former director, Trump-appointee Mark Calabria.

But hope for ending the arrangement — a lucrative one for the federal government — diminished when President Donald Trump failed to secure reelection. Days after last year’s presidential election, Freddie Mac’s previous CEO, David Brickman, announced he would step down. Brickman went on to head up a commercial mortgage venture, NewPoint Real Estate Capital. It took Freddie Mac six months to name a new CEO, Wells Fargo alum DeVito.

But any remaining hope that the federal government would release the GSEs was quashed last month, when a Supreme Court decision gave the President the power to fire the FHFA director at-will. Within hours, Biden removed Calabria and appointed Sandra Thompson, a longtime regulator.
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