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Stronger Together


Editor’s note: this piece originally appeared in the October edition of MReport.

The Five Star Conference & Expo has become an annual tradition for more than a decade bringing lenders and servicers, government representatives, service providers, attorneys, and other mortgage professionals to Dallas for several days of discussion, education, networking, and collaboration.

But this year, as we are all too aware, has been a very different year. With many industry teams still working remote and the impact of COVID-19 still stretching across all sectors of the economy, this year’s Five Star, by necessity, became an online-only virtual event.

When the call went out, the industry responded in force.

Over the course of two days, on September 14-15, mortgage professionals once again gathered for the Five Star Conference. Within a virtual environment designed to evoke the real experience of an in-person event, attendees viewed in-sightful panels featuring a top-tier lineup of subject matter experts, networked with colleagues in chat rooms, and even added some digital “swag” to their collection while exploring the Exhibit Hall.

More importantly, however, they discussed the unique challenges the industry has faced in 2020—and the critical lessons and best practices that can help drive progress forward even in the face of remarkable adversity.

“Built to Overcome Challenges”

Rather than the educational Labs of years past, this year’s Five Star Conference panels were divided into tracks themed by topic. The conference commenced with sessions focused on the State of Homeownership in the U.S. and Industry Preparedness for events such as natural disasters or the pandemic.

Ed Delgado, Chairman Emeritus of Five Star Global, opened the event by acknowledging the economic tumult and public health concerns of the ongoing pandemic, referring to the “uncharted territory” that the industry has entered while praising the indefatigable spirit of mortgage professionals to push ahead during the crisis.

“As a collective body, we are an industry that is the heart and soul of America,” Delgado said. “We make home possible, and we stand at the ready to protect and defend that dream each and every day, for this industry was built to overcome challenges.”

Monday’s opening ceremonies also included a presentation entitled “Operation Homefront: Serving America’s Military Families.” Continuing an annual tradition carried over from the live version of the Five Star Conference, the Operation Homefront segment was a celebration of our nation’s military service members. During the ceremony, Operation Homefront’s Brigadier Gen. John I. Pray III was joined by representatives from Auction.com and the Veterans Financial Services Advisory Council in a virtual presentation honoring our nation’s heroes.

Addressing challenges was the dominant theme in the conference's first day, with several speakers comparing the year’s difficulties with the obstacles that arose in the last great economic crisis in 2008. During the “State of Housing” panel, Kurt Johnson, Chief Credit Officer at Mr. Cooper, recalled the problems created by Housing Bubble-era underwriting standards and praised the Dodd-Frank Act for helping to stabilize the housing market.

During that same panel, Steve Bailey, Senior Managing Director and Chief Mortgage Operations Officer at PennyMac Financial Services, observed that the industry had benefited from “lots and lots of lessons learned” since 2008. Of course, there is no shortage of new challenges, however, including how well borrowers understand the ins and outs of the forbearance plans within which many have sought shelter from the economic fallout of COVID-19. One key misunderstanding Bailey cited was homeowners’ “history of people thinking that [forbearance] was about forgiveness, which everybody knows that is not.”

Speaking during the “Homeowners of Tomorrow” session, Suzy Lindblom, COO at Planet Home Lending, identified the millennial demographic as a challenge, calling on mortgage professionals to “help them understand homeownership and how to get into homeownership.” She also cautioned the conference audience that millennials have different communication traits and expectations than previous generations.

“They were born with iPads in their hands, so they do a lot of upfront research,” Lindblom said. “They’ve already gone on Realtor.com and Zillow.com. They want the convenience of being able to do the research. They don’t want an authority to come in and help them—they want a partner and the ability to do everything online.”

During that same session, Laura Escobar, President of Eagle Home Mortgage, envisioned removing the complexity that often burdens loan origination by using technology to create “world’s simplest path to homeownership” for all stakeholders.

“We’ve been focusing on removing the friction from the homebuying process for years now,” she continued. “Automation bots, digital mortgages, eClosings, data versus documentation. The homebuyers of tomorrow grew up with mobile banking, mobile check deposits, mobile everything. They expect the same level of digitization and automation from their mortgage providers.”

Of course, the pandemic is still with us, and yesterday’s normalcy has not elbowed the new normal aside. During the “Managing the Strain on Servicing Systems” panel, Michael Keaton, Chief Servicing Officer at Shellpoint Mortgage Servicing, praised the servicing side of the industry for being able to quickly migrate from the traditional call center operation to today’s remote-work constellations.

“Not only are we remote, but some of our remote associates are people we have never met in person,” he remarked, noting this was a change from the traditional servicing set-up “where there really is a teamwork element to it, where folks rely on each other and lean over the cubicle wall when they need a little bit of help. There’s also the camaraderie that comes from working in close-knit teams, particularly when you’re a company like Shellpoint where a very small percentage of our folks pre-COVID were working from home—maybe 10%, probably close to 5%.”

During the “Navigating Through the Storm” session, Stanley Middleman, CEO of Freedom Mortgage, recalled how his company transitioned from “a Thursday when we were working in our office and business was as usual [to a] Tuesday the following week [when] we woke up and 98% of our population is working from home.” He said that he believed the nimbleness displayed by mortgage companies when taking on this abrupt shift to be the year’s most important story.

“The big takeaway was that not only could we survive and succeed and do our jobs, but we could actually thrive,” he said. “Out of all this, we’ve become boundless in our opportunity. We’ve been breaking record after record every month in originations, and all the while we were supporting over 100,000 requests for forbearance, generating huge volumes of originations and hiring 1,000 and 1,200 people a month through each of the last three or four months. The lessons learned here are multifaceted.”

Terry Smith, CEO of Rushmore Loan Management Services, went even further in praising the industry's ability to meet and overcome pandemic-era challenges.

“We were able to turn the switch off from being in the office on one day and five days later we were up and running,” he said of the industry’s remote workforce. “I think we’ve done a great job. All of our employees are really the frontline heroes of the industry.”

The educational lineup also included the Fifth Annual Dakota Asset Services (DAS) Network Summit, the second installment of which picked up on Tuesday. The DAS Network Summit brings together invited members of the DAS network to gain knowledge and critical business insights from industry leaders. DAS executives led discussions on topics such as the state of the industry, best practices for residential agents and brokers, and network responsibilities. A Changing Legal Landscape Legal issues, including compliance, defaults, and the government and service sector perspectives were the topics of discussion during the 2020 Legal League 100 Fall Summit.

The Summit provided top industry insights on various legal issues, including the latest details on foreclosures and forbearances, how the government is handling moratoriums, and other issues and how servicers are managing their pipelines in this unprecedented economy.

The Summit kicked off with experts from the Legal League 100’s Advisory Council discussing how it represents the member-ship in its discussions, priorities, and actions. Roy Diaz, Managing Shareholder, Diaz Anselmo Lindberg, P.A. & Chairperson, LL100; and Stephen Hladik, Partner, Hladik, Onorato & Federman, LLP discussed these items, as well as the impact fore-closure moratoriums have had on law firms. They also talked about fee parity within the industry.

Following the Advisory Council’s discussion, industry eco-nomic experts provided insights on how unemployment is expected to impact foreclosure levels and how forbearance rates may be felt in the world of bankruptcy filings, as well as other factors affecting the default market.

“The economy is in a pretty bad place,” said Tendayi Kapfidze, Chief Economist of LendingTree, during the “Economic Overview Impacting Default” session. “During the financial crisis, the economy shrunk 4.8%. We had a decline in the second quarter [of 2020] of up to 30%. That’s not going to persist, but even if we get all but 9% of that back, that’s going to be an economy that’s about 10% smaller than it was at the beginning of the year. The qu

estion is how long will it last, and what changes are going to occur in the economy as a result of it.” “We are in a once-in-a-lifetime event,” added Lawrence Yun, Chief Economist and SVP of Research, NAR. “We may actually be in a new economy, with a large percentage of people able to work from home in the future years. Without a doubt, we plunged into a recession, with more than 50 million people applying for unemployment insurance at some point. That’s more than one-third of the labor force.”

However, there is job creation occurring in some sectors, while there are job losses in others, Yun added. And the housing sector is enjoying a bounce, even as unemployment remains high.

“We expect very strong activity in autumn and winter of this year,” Yun said.

A session on compliance and government outlook examined how the government is handling moratoriums, timelines, and updates to compliance rules, as well as what the future will look like once moratoriums expire. Decisions about moratoriums, foreclosures, and forbearances will sharply impact servicers’ businesses in the year to come.

“We are seeing a lot of activity from our borrowers,” said Patrick Cox, SVP Operations for PHH Mortgage Corporation, during a session entitled “The Servicer Perspective.” He continued: “While we had a tremendous increase in the requests for forbearance in March and April, we have since seen a decrease in activity in new borrowers reaching out to us. We do anticipate a lot of those borrowers who are currently on forbear-ance extending.

“One surprising thing we found is that a lot of the borrowers who asked for forbearance in the March/April time frame actually continued to pay,” Cox added. “We expect that behavior to continue.”

He also noted that bankruptcies have fallen to about half of what they were in March.

With the changes in borrower’s finances, and the foreclosure/forbearance/moratorium rules, PennyMac Loan Services is reevaluating its financial review methodology, said Jennifer Gordon, VP Vendor Management. “We’re also taking a look at our attorney network, which I think is a very solid network. We’re taking a look to make sure we have appropriate backups in place in every space.”

Sharing Servicer & Government Outlooks

The second day of the Conference began with an emphasis on the mortgage servicing landscape’s current state and what the coming months could offer.

Ann Thorn, EVP and Chief of Operations and Servicing at Caliber Home Loans—as well as this year’s Five Star Lifetime Achievement Award recipient—observed that the stress of the pandemic created a new sense of union as lenders and servicers “banded together a lot more than we have in the past.” And while the current crisis has only been in motion for a matter of months, Thorn admitted “for servicers that have been on the front lines, it felt like a long time—and the first few months were very difficult when trying to explain to our customers what is going to happen.”

Wes Isley, Senior Managing Director at Carrington Holding Co., noted that servicers managed to maintain high levels of quality customer service while undergoing their own operational difficulties.

“During this crisis and its peak call volumes, we moved from centralized call centers—which we never would have thought of—to working from home,” he said. “And we did that in a week and a half—the industry as a whole. You didn’t hear stories about major problems.”

Robert Caruso, CEO at ServiceMac LLC, gave kudos to the vendor community for supporting servicers during this unprecedented period.

“They were looking at things and trying to monitor it,” he noted. “The technology enhancements that had to be done to help meet the COVID-19 components were done quickly and efficiently by the vendors. I was thrilled that we got it done so quickly and were ready for it.”

Servicers spent much of early pandemic weeks trying to absorb shifting rules and mandates, according to Scott Arnold, SVP at Wells Fargo, who added that “keeping up with it was a challenge.”

This was a situation that ran against the basic tenets of mortgage servicing, as noted by John Dunnery, VP at Bayview Loan Servicing.

“For most servicers, change is not a good thing,” Dunnery said. “We want changes locked down. We don’t want changes to go on and on as we’re trying to implement and be compliant with the rules and regulations that are coming out.”

Still, Dunnery praised the manner in which “servicers have been able to be nimble and have been able to address most of the regulations and rules that come out.” At this point in time, Dunnery noted that most servicers are focusing on maintaining contact with borrowers.

“We’re building into our servicing systems an array of ways for us to track those customers,” he continued. “First off, are they impacted by the COVID-19 pan-demic? If they are, are we making sure that we have that noted in the servicing system? Are they experiencing financial hardship? Do they need that forbearance and for how long?”

The conference’s second day also included input from officials at the U.S. Department of Veterans Affairs, Ginnie Mae, Freddie Mac, and the Consumer Financial Protection Bureau regarding the policies, programs, and procedures within their respective offices.

The Hon. Brian D. Montgomery, Deputy Secretary of the Department of Housing and Urban Development (HUD), made a special appearance to detail the work of the Federal Housing Administration (FHA) during the ongoing pandemic.

“In the current pandemic, FHA was able to build up their reserves to arguably the highest amount ever in the last actuarial review, close to $109 billion of what we call MMI capital. And even in our most recent report to Congress, we’re still showing that the reserves made strong. I know folks were talking to us about lowering premiums and all that. And it’s easy to be a Monday morning quarterback, but it’s good that we didn’t.”

Montgomery added that both FHA and Ginnie Mae possess the capital “it will take to weather the storm,” noting the agency is also working to focus on nonpandemic crises including responses to recent hurricanes, as well as the regular day-to-day operations that were never put on hold during this period.

“In a lot of different ways, FHA and HUD needs to be there for Americans, certainly during the good times but even in those times that are more challenging,” he said.0

A FORCE on the Front Lines

The state of the real estate industry, the nuances of the servicing businesses, and government issues were all discussed at the Five Star FORCE Summit on the second day of the conference.

The Summit began with the State of Real Estate keynote, with First American Corporation Chief Economist Mark Fleming discussing the current state of the residential real estate market, price trends, forbearances, and the impact of current events on the REO market.

Following the economic update, summit attendees learned some of the essential basics of the business, including education, training, and certifications that enable one to excel. Partnerships with REO companies were also discussed.

“It’s important for agents to foster relationships with different people,” said Jacquelyn Pardue, Head of Procurement, LoanCare. “The more positive you can be with those people, the more likely they are to respond to you; the more likely they are to refer you somewhere else that could better answer your questions if they’re not the right person.”

The business operates on 30-day cycles, Pardue added, so it’s important to build relationships when actual business activity is slow.

Industry experts followed that session with an in-depth overview and timeline for managing REO properties to provide a better understanding of how one’s role as an agent comes into play.

Knowledge of government policies is essential for the success of the business, so the final event of the day included in-depth discussions of how to negotiate the regulatory maze, particularly in the wake of the pandemic.

“The communication from our government partners is so much better now than it was in the 2007-2008 period,” said John Dunnery, adding that not everything affecting real estate is related to the pandemic—such as the hurricane that recently swept through the Gulf of Mexico.

“We are dealing with other things as well,” Dunnery said. “One is the FHFA announcement around the refinance surcharge in order to increase revenue for the GSEs for refinances. That was a surprise to the industry. I don’t think anybody expected to see that for several reasons: Property values are now high; people have several ways to exit the property; we don’t have adverse market conditions other than that there are too few homes for buyers who may want to get into homeownership.”

To deal with the crunch of forbearances, some had recommend-ed looking at auto-enrollment, but some may borrowers may not need forbearance, said Jim Scott, SVP of Default, LoanCare, LLC, a company that has helped 155,000 with forbearance during the cur-rent COVID-19-related financial crisis. “It’s important that you have conversations with borrowers to learn what actually has occurred, what are those impacts, and how we can assist them. At LoanCare we’ve opened up our website and our virtual response unit to allow borrowers to self-service.”

The GSEs had to rise to the challenge presented by the economic fallout of the pandemic, said Jake Williamson, VP, Single-Family Collateral Risk Management, Fannie Mae. “As of a couple of weeks ago, we produced over 40 lender letters for selling, collateral, and servicing policy changes to respond to the crisis. All of that has been done in about five months. In normal times, that’s about two years’ worth of work. Not only has that been diligent work by Fannie Mae, but also many industry participants, servicers, appraisers have made Herculean efforts.”

Williamson added that the market remains strong for REO properties.

A Wealth of Insights

In the weeks ahead, we’ll be sharing longer samples of some of the many conversations that unfolded at Five Star Virtual Conference. Stay tuned to DSNews.com, theMReport.com, and thefivestar.com/news—as well as the pages of DS News and MReport magazines—for longer interviews with many of the Conference speakers.

NOTE: You can still experience the Five Star Virtual Conference’s content digitally. Visit fivestarconference.com to watch videos on demand.

About Author: David Wharton

David Wharton, Managing Editor at the Five Star Institute, is a graduate of the University of Texas at Arlington, where he received his B.A. in English and minored in Journalism. Wharton has over 15 years of experience in journalism and previously worked at Thomson Reuters, a multinational mass media and information firm, as Associate Content Editor, focusing on producing media content related to tax and accounting principles and government rules and regulations for accounting professionals. Wharton has an extensive and diversified portfolio of freelance material, with published contributions in both online and print media publications. Wharton and his family currently reside in Arlington, Texas. He can be reached at David.Wharton@theMReport.com.

About Author: Phil Hall

Phil Hall is a former United Nations-based reporter for Fairchild Broadcast News, the author of nine books, the host of the award-winning SoundCloud podcast "The Online Movie Show," co-host of the award-winning WAPJ-FM talk show "Nutmeg Chatter" and a writer with credits in The New York Times, New York Daily News, Hartford Courant, Wired, The Hill's Congress Blog and Profit Confidential. His real estate finance writing has been published in the ABA Banking Journal, Secondary Marketing Executive, Servicing Management, MortgageOrb, Progress in Lending, National Mortgage Professional, Mortgage Professional America, Canadian Mortgage Professional, Mortgage Professional News, Mortgage Broker News and HousingWire.

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