Massachusetts short sale company owners accused of defrauding HUD, Fannie Mae, Freddie Mac

The owners and co-founders of a Massachusetts short sale assistance
company stand accused to defrauding Fannie
Mae
, Freddie Mac, the Department of Housing and Urban Development,
and others on nearly 100 short sale transactions in a scheme to “steal
undisclosed and improper fees.”

According to the Attorney’s Office for the District of Massachusetts, Gabriel Tavarez and Jaime Mulvihill founded and operated Loss Mitigation Services, a company that negotiated with lenders and mortgage guarantors approval of short sales in lieu of foreclosure.

A short sale occurs when the mortgage debt on the home is
greater than the sale price, and the lender or mortgage owner agrees to take a
loss on the transaction.

Court documents show that Loss Mitigation Services supposedly acted on behalf of underwater homeowners to conduct a short sale on their house.

Typically, lenders and mortgage guarantors forbid short sale
negotiators from taking any proceeds from the short sale.

But, the authorities claim that that is exactly what Tavarez
and Mulvihill did.

According to the court documents, from 2014 to 2017, Tavarez
and Mulvihill allegedly falsely claimed to homeowners, real estate agents, and
closing attorneys that lenders had agreed to pay Loss Mitigation Services fees
known as “seller paid closing costs” or “seller concessions” from the proceeds
of the short sales.

But, the court documents state that the lenders made no such
promises.

But as a result of Loss Mitigation Services’ alleged
actions, when the short sales closed, settlement agents paid Loss Mitigation Services
the fees in question, which were typically 3% of the short sale price, above
and beyond any fees to real estate agents, closing attorneys and others
involved in the transaction.

According to court documents, in order to deceive the
lenders or guarantors about the nature of the short sale payouts, Tavarez or
Mulvihill allegedly filed false short sale transaction documents, including
altered settlement statements, fabricated contracts, and mortgage preapproval
letters.

Additionally, Tavarez allegedly created fake letters from
mortgage brokers claiming that the brokers had approved buyers for financing,
in order to convince lenders to approve the additional fees.

In total, the scheme allegedly defrauded lenders and
investors out of nearly $500,000 in proceeds on about 90 short sale transactions.

Tavarez and Mulvihill are both charged with conspiracy to
commit wire fraud, while Tavarez was also charged with aggravated identity
theft.

The charge of conspiracy to commit wire fraud carries a
sentence of up to 20 years in prison, three years of supervised release, and a
fine of $250,000 or twice the gross gain or loss. The charge of aggravated
identity theft carries a mandatory two-year sentence that must run
consecutively to any other sentence imposed, one year of supervised release,
and a fine of $250,000, or twice the gross gain or loss.

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Millennials continue to outpace older generations in homebuying

Continuing a trend that stretches back to one year ago, Millennials are still dominating the homebuying landscape, taking on more mortgages than previous generations.

A report from Realtor.com says that at the end of the third quarter, the Millennial share of mortgage originations increased 3% from last September, coming in at 46%.

(Image courtesy of realtor.com. Click to enlarge.)

Meanwhile, Gen X and Baby Boomer shares continued to fall, to 35% and 17% this year, from 37% and 18% last year, respectively.

As for primary home loan originations, Millennial shares increased also. In September, Millennial share was 44%, up from last year’s 40%.

Gen X shares fell from last year’s 41% to 39%, while Baby Boomer shares fell to 16% from 17% last year.

Millennials were also found to move once every two years, a study from Porch said. Gen Xers moved about every four years and baby boomers stayed in the same place for nearly six years at a time. 

According to the report, Millennials are buying more expensive homes, too.

The median price of a primary home purchased by Millennials went up 6%, to $250,000 compared to last year. Generation X and baby boomers only increased their purchase prices by 5% and 2%, respectively.

(Image courtesy of realtor.com. Click to enlarge.)

Millennials are also increasing the size of loans they are taking out to buy a home, as this generation had a median loan amount of $231,590 in September. This is 7.3% higher than last year.

This growth in mortgage debt undertaken by Millennials outpaces that of both Baby Boomers, which grew by 2.6%, and Generation X, which grew by 4.4%.

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California and New York cities top the list for largest apartments

Two states that are known for a pricey housing market have this to offer: some of the largest studio and one-bedroom apartments in the nation. Of course, that too, comes at a price. 

According to a recent study by Apartmentguide.com, four of the top five cities with the largest studio apartments are located in California. Not to be outdone by the West Coast, the state of New York is home to the largest average one-bedroom apartments, and two of its cities appear in the top five. 

For studio apartments, Hollywood, California topped the list, with its largest units averaging 723 square feet. However, spacious studio dwellers are paying the price: rent for a studio that size was just over $3,000 at the time of the study.

Next on the list were Irvine, California (674 square feet); Houston, Texas (626 square feet); Long Beach, California (618 square feet); and San Jose, California (608 square feet). 

It’s worth noting that out of the top five cities listed above, the only one with prices below $2,000 was Houston. For a studio sized at 626 square feet, the rent was $1,154 – over $1,000 less than any of the top five. 

Topping the list for single bedroom units, Lancaster, New York’s average square footage per unit came in at 981 for $1,219. The second-largest units come at a much higher price: In Playa Vista, California, a 925 square feet unit will have renters shelling out $4,232. 

Also in the top five were Schenectady, New York (919 square feet); Hollywood, California (907 square feet); and Pikeville, Maryland (896 square feet). 

As for the homes of the largest two-bedroom apartments, California and New York cities did not break into the top three. Two-bedroom apartments in Sheffield Village, Ohio averaged 1,530 square feet for only $1,612. Next on the list was Delran, New Jersey (1,518 square feet) and Brownsburg, Indiana (1,337 square feet). 

New York finally makes a showing in the No. 4 spot on the list, with Melville, New York two-bedroom units averaging 1,329 square feet. This is the first city on the list in which the rent tops $1,700, with the cost of the units soaring to $3,555. 

Pikesville, Maryland also shows up again at No. 5, with an average two-bedroom unit size of 1,323 square feet. 

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Class Valuation’s latest appraisal technology provides stakeholders with data-rich property information

The lack of tech adoption in the valuation space leaves
appraisers with a small pool of outdated options. One of the largest appraisal
management companies in the country, Class Valuation, is looking to buck this
trend by bringing more technology to support the appraisal process overall.

Class Valuation is both investing in technology and equally increasing
adoption. The company offers a full suite of valuation services to different
verticals within the mortgage space. Class Valuation recently introduced Property
Fingerprint, a tool revolutionizing the way appraisers capture property data. Using
machine learning technology and an intuitive mobile inspection application, more
information about a property is captured than ever before.

Class Valuation’s Chief Innovation Officer, Scot Rose,
explains the transparency and consistency Property Fingerprint brings to the
appraisal process.

Rose predicts a much more data-rich environment as leading appraisal
tech innovators find additional ways to leverage property information. Learn
more about Class Valuation and Property Fingerprint here.

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loanDepot expands its leadership team with key hire

loanDepot, a non-bank provider of
direct-to-consumer loans, recently welcomed Steve Kay to the leadership team of
its retail lending
channel, in a move the company anticipates will champion growth.

“loanDepot is
positioned for unprecedented growth in 2020, thanks to the vision and direction
of Anthony Hsieh,” said Brigitte Ataya, loanDepot’s vice
president of retail sales strategy. “I am excited to welcome this seasoned
professional and respected leader in his field to augment our world-class retail
team.”

Kay, who has been appointed as the company’s vice president of strategic alliances, will now be responsible for cultivating key partnerships and programs aimed at enhancing the home buying experience for consumers.

As a
mortgage industry veteran, Kay has extensive experience in the alliance space, holding
similar roles at several companies, including Summit Funding, Bank of
America
, and Countrywide Home Loans.

Kay said he’s looking forward to assisting his new team in growing business.

“loanDepot’s
investment in this specialized area will translate into tremendous value for
our branch managers and loan consultants,” Kay
said. “I look forward to capitalizing on the growth opportunities in all of our
markets and assisting the entire loanDepot team
in growing their business at the national, regional and local levels.”

Need help getting hired or
looking to hire? HousingWire wants to help. Our new service, HousingJobs,
lists the latest gigs in the housing industry for loan officers, underwriters,
processors, loan servicers, and tech and marketing pros.

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Zillow experiences growing pains as it moves from listing houses to buying them

In the last few years, Zillow has reshaped its entire business, moving from a real estate listings website to a company that supports the entire homebuying and selling experience.

And while the company is seeing positive results in terms of growth and revenue generation, Zillow is also experiencing some serious financial growing pains as it expands.

According to the company’s third quarter results, Zillow’s consolidated quarterly revenue more than doubled year over year, growing 117% year over year to $745.2 million.

The company stated that growth was driven by expansion in its Homes segment (which includes the company’s iBuying business, Zillow Offers) and solid performance in the Premier Agent business.

“Our third quarter results were strong, demonstrating that Zillow Group’s business model expansion to mechanize real estate transactions is gaining traction as consumer demand reveals people want a better, simpler way to buy, sell, rent and finance homes,” said Zillow co-founder and CEO Rich Barton.

But, while things may be looking up for Zillow Offers, the program’s costs are exceeding the money coming in, leaving the company operating at a big loss.

In the third quarter, Zillow posted a net loss of $64.6 million, an increase of more than 13,000% from the same time period last year, when the company lost only $492,000.

For the year, Zillow has now lost more than $204 million, compared to a loss of just over $22 million in the first nine months of 2018.

And basically all of that loss is coming from the company’s homebuying expansion.

According to Zillow, its Homes segment has lost approximately $204.2 million, slightly more than the company’s overall loss of $204.15 million.

As Zillow is finding so far, buying, refurbishing and selling houses is a sometimes expensive proposition. In fact, according to Zillow, the company is losing money every time it buys and sells a house.

According to a letter to shareholders, Zillow’s average cost per house in the third quarter was $317,723. Its average sales price was $113 less, $317,610.

Put simply, Zillow is losing $113 every time it buys and sells a house.

In Q3, Zillow purchased 2,291 homes and sold 1,211 of them.

The company ended the quarter owning 2,822 houses.

Zillow says the rise in awareness and demand for Zillow Offers is growing rapidly, with over 80,000 homeowners requesting offers from Zillow in Q3 alone.

In Q3, Zillow Offers launched in eight new markets, including Portland; Nashville; Miami; San Diego; San Antonio, Texas; Austin, Texas and Fort Collins and Colorado Springs, Colorado.

By mid-2020, Zillow says it plans to be in 26 markets. By the end of 2019, the iBuyer says it will launch in Los Angeles.

Meanwhile, the company’s Premier Agent business, where the company sells ads and other features to real estate agents is helping to blunt some of the financial damage from the company’s expansion.

“Our core Premier Agent business is strong, with record revenue that exceeded our outlook,” Barton said. “The profitability of our Premier Agent business is foundational to Zillow’s success and is the reason we are able to expand Zillow Offers with such confidence and speed. This quarter’s results illuminate how Zillow Group is in the most favorable position to lead Real Estate 2.0.”

Traffic to Zillow Group-related mobile apps and websites reached an all-time high in Q3, with an average monthly unique users up 5% year over year to 195.6 million. Zillow says that visits exceeded 2.1 billion, up 11% year over year.

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Congress considers fix to QM Patch

Congress will consider legislation on Wednesday to fix the so-called QM Patch that permits some loans to borrowers with high debt levels to be considered Qualified Mortgages.

The House Financial Services Committee is debating H.R. 2445 that gives originators the option of either relying on Appendix Q in the Qualified Mortgage rule to determine a borrower’s debt-to-income ratio or on standards set by the Federal Housing Finance Agency.

“We see this legislation as a de facto extension of the QM Patch,” Cowen Washington Research Group said in a note to clients on Monday. “As such, this bill would be positive for housing by ensuring the supply of mortgage credit is not constrained.”

While enactment by both the House and the Senate is unlikely, “it offers cover for an expected regulatory solution,” Cowen said, meaning a policy decision by the FHFA, the watchdog of Fannie Mae and Freddie Mac.

The QM Patch, which expires in January 2021, permits loans with debt-to-income ratios above 43% to get QM protections such as the “safe harbor” provision that makes it harder for lenders to be sued.

“While the ability to repay concept is widely embraced, the specifics of how the Qualified Mortgage rule works have always been contentious,” the Cowen note said. “This is especially true of the requirement that Qualified Mortgages have debt-to-income ratios of 43% or less as that puts significant pressure on banks to properly calculate income.”

The Qualified Mortgage rule issued in the wake of the financial crisis has pages of limits, known as Appendix Q, on when income can count and when it must be excluded, Cowen said. It also details which debts count and which are excluded.

“Given the complexity of these rules, there is an incentive for banks to be conservative when determining income but expansive when looking at debts,” the note said. “Such an approach should result in fewer borrowers able to qualify for mortgages.”

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Reverse mortgage lender Retirement Funding Solutions rebranding as Mutual of Omaha Mortgage

One of the top reverse mortgage companies in the nation is
about to carry a new name.

Retirement Funding Solutions, which ranks among the top 10 reverse mortgage lenders in the U.S., is rebranding and will now be known as Mutual of Omaha Mortgage.

Retirement Funding Solutions is a subsidiary of Synergy
One Lending
, a mortgage
lender that offers a variety of home financing products and services, including
mortgages and reverse mortgages, through a network of loan officers, mortgage
brokers, and direct sales channels. 

Synergy One was acquired last year by insurance giant Mutual of Omaha, and eventually began operating at Mutual of Omaha Mortgage.

And now, Retirement
Funding Solutions will carry the same name.

The name change comes as Mutual of Omaha is in the process of selling off its banking arm, Mutual of Omaha Bank, to CIT Bank, the banking subsidiary of CIT Group.

Synergy One and Retirement Funding Solutions operated under the
Mutual of Omaha Bank umbrella, but Mutual of Omaha is not selling the mortgage
business.

Rather, the company is transitioning Mutual of Omaha
Mortgage from the bank to Mutual of
Omaha Insurance Co.
, the parent company.

And now, the companies will all carry the Mutual of Omaha
brand.

“As we become more closely aligned and integrated with
Mutual of Omaha, we are excited to adopt the Mutual of Omaha brand, which is
known and respected by consumers for its integrity and customer focus,” Retirement
Funding Solutions President Alex Pistone said.

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Black Knight: Early-stage delinquencies heighten among purchase loans

This year’s persistent decline in mortgage rates has pushed housing affordability to a 3-year high, resulting in significant purchase activity growth, particularly among the nation’s first-time homebuyers.

But
while purchasing demand may be improving, data from Black Knight indicates
that origination performance is weakening as the company determined that early-stage
delinquencies have been steadily increasing
over the past 24 months.

According
to the company’s Mortgage Monitor report, nearly
1% of all originations made in the first quarter of the year fell into delinquency
just six months after close.

“We’ve seen early-stage delinquencies
rise over the last several years, with the increase being driven primarily by
purchase loans,” said Ben Graboske, Black Knight’s president. “About 1% of
loans originated in Q1 2019 were delinquent six months after origination. While
that’s less than one-third of the 2000-2005 average of 2.95%, it represents a
more than 60% increase over the last two years and is the highest it’s been
since late 2010.”

Black Knight says the increases in
early-stage purchase loan delinquencies are more pronounced among
first-time homebuyers, as they make up more than 70% of recent GNMA purchase
loans.

The impact of their performance is now putting upward pressure on overall early-stage delinquency rates, according to the company.

“Early-stage GSE delinquencies currently stand at 0.6%, up two-tenths of a percentage point over the past 24 months, but still 40% below the market average and 60% below their own 2000-2005 average of 1.3%,” Graboske said. “Though there has been some softening in GSE purchase loan performance, it hasn’t been to the extent seen among entry-level buyers.”

“All in all, first-time homebuyer originations combined between the GSEs and GNMA increased by nearly 50% between 2014 and 2018,” Graboske continued. “However, whereas first-time homebuyers represent just over 40% of GSE purchase loans, they make up 70% of the GNMA purchase market.”

Graboske
said this concentration has led to the sharpest increase in early-stage delinquencies seen within the last few years.

“That concentration is contributing to a more significant increase in early-stage delinquencies among GNMA loans, which saw 3.3% of loans delinquent six months after origination,” Graboske said.  “That’s up 1.2 percentage points from two years ago, and though still roughly half the 2000-2005 pre-crisis average, it represents the sharpest increase we’ve seen in the market in recent years.”

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Fed’s climate conference cites housing impact

The Federal Reserve held its first-ever conference addressing climate change on Friday. One of the topics was the threat posed to the housing market by changes in weather patterns.

“Higher sea levels, heavier rainfalls, dryer conditions, and the associated fallout can cause catastrophic losses to property and casualty insurers,” said Mary Daly, president of the Federal Reserve Bank of San Francisco as she opened the event.

“Climate change is an economic issue we can’t afford to ignore,” she said.

The cost of home insurance – required by mortgage lenders – has skyrocketed as insurers increase rates to cover massive payouts as severe weather incidents have increased over the last decade.

Home insurance rates increased nationally by 51% from 2007 to 2016, the lastest full-year data available, according to QuoteWizard, a LendingTree subsidiary. That’s more than triple the 15% inflation that occurred during the period, as measured by the Department of Commerce.

Lael Brainard, a member of the Fed’s Board of Governors, also spoke at the climate conference, addressing the impact of severe weather events on families who suffer property damage when their finances are already stretched thin to afford the higher cost of housing.

“With low levels of liquid savings to meet emergency expenditures, these households tend to be less resilient to the temporary loss of income, property damage, and health outcomes they face from disasters,” Brainard said.

The cost of record-breaking storms, floods and wildfires that made headline news in 2019 has yet to be tallied, but most economists agree it may have topped the more than $100 billion of damage seen in 2018 – only half of it covered by insurance.

This year marks the fifth consecutive year in which 10 or more billion-dollar weather and climate disaster events have impacted the United States.

Changes in weather patterns have caused some areas of the U.S. to see a spike in rainfall and others to see decreases, according to the National Aeronautics and Space Administration.

“Because human-induced warming is superimposed on a naturally varying climate, the temperature rise has not been, and will not be, uniform or smooth across the country or over time,” NASA said.

For example, severe storms in the Midwest in early 2019 dumped rainfall that was four times above the area’s average, causing what the New York Times called the “Great Flood of 2019,” affecting 14 million people.

A drop in rainfall in California, coupled with higher temperatures, have contributed to the state’s deadly wildfires that consumed almost 2 million acres in 2018, killed more than 100 people and destroyed more than 22,000 buildings.

In 2019, the tally wasn’t as high, but Americans were introduced to “public safety power shutoffs,” or PSPS, that became national news.

That’s when utilities cut power to large sections of the nation’s most populous state rather than risk seeing a spark from a powerline cause a deadly blaze. One PSPS last month plunged more than 2 million people into darkness.

“Welcome to California, which is living back in the Stone Age,” said one Twitter user.

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