Rate drop fallout: 3K borrowers a day seek loans – and new lenders
Client retention. In low rate environments, it’s the Achilles heel of mortgage lending. When rates drop, as they have recently, thousands of borrowers each day rush to get a new mortgage. And now, the hype about the Federal Reserve rate cut is exposing unprepared lenders to the so-called mortgage-portfolio runoff risk, or past client runoff to a new lender.
“We have seen a 200% increase in application activity in our lender’s portfolios in the past two weeks, and over 3,000 past clients re-entering the market every day,” said Louis Zitting, chief executive officer of MonitorBase, a mortgage technology provider based in Salt Lake City.
Whether the Fed’s interest rate cut translates to lower mortgage rates in your institution or not, the extensive media coverage “is definitely inspiring borrowers to look into their mortgage options… leaving lenders vulnerable to portfolio runoff,” he said.
Mortgage portfolio runoffs happen when clients, typically high credit score, low loan-to-value borrowers, go to another lender to purchase a new property or refinance their mortgage. If the homeowner decides to refinance six months to one year after loan origination, once the new lender pays off the original mortgage loan, the loan’s servicer charges an Early Payoff (EPO) fee to the loan originator or the broker. Refinancing by another lender also decreases the overall valuation of the mortgage portfolio and may increase its default risk.
Technology can help lenders avoid being blindsided. MonitorBase offers a past client runoff prevention solution for lender-servicers, correspondent lenders and brokers. The tool relies on “prescreened credit information and other behavioral data” to determine when credit-qualified past clients are back in the market to purchase or refinance a home, the company said.
Its early warning system is designed to help mortgage lenders to keep an eye on both new originations and retention. The platform delivers notifications as soon as the lender’s client starts shopping for a home purchase or refinance.
“High credit borrowers are refinancing from an FHA loan to a conventional loan to lower their rate and drop their mortgage insurance,” Zitting said. “These are the very borrowers that lenders need to retain to keep up the overall credit quality in their portfolios.”
Sagent hires new CEO & president
Sagent Lending Technologies, a mortgage servicing fintech based in King of Prussia, Pa. has appointed 20-year industry veteran, Dan Sogorka as chief executive officer and president, replacing Bret Leech who will become executive chairman and board member.
Before Sagent, Sogorka served as CEO of digital mortgage point of sale provider Cloudvirga, president of EXOS Technologies, EVP of Servicelink, a $1 billion revenue subsidiary of Fidelity National Financial, and division president at mortgage servicing and data provider Black Knight.
Established in 2018 “to disrupt loan servicing and homeownership,” Sagent is a joint venture backed by financial technology services giant Fiserv Inc. and growth investing private equity firm, Warburg Pincus.
Sogorka’s appointment to CEO and president, the company said, aims to accelerate Sagent’s growth following prior expansions through its servicing platform LoanServ, customer analytics tool Account Connect, and default servicing platform ISGN Technologies. Sagent provides servicing throughout the homeownership lifecycle including purchasing, refinancing, servicing and retention, home equity, default, loan modification, bankruptcy, and foreclosure, connecting lenders to their borrowers.
Loan servicing “is about anticipating and exceeding consumer expectations as it is about anticipating and managing lender risk,” Sogorka said. He will ensure those principles support Sagent’s future acquisitions of core technologies that help modernize and scale the complex loan servicing process.
Moms 4 Housing movement expands to LA
In L.A., reaction to the coronavirus pandemic differs. Some Angelenos clear Costco’s shelves. Others seek shelter for their families.
The LA Times reports that a group of moms and their families have taken over a vacant two-bedroom bungalow in El Sereno, a neighborhood on the eastside of Los Angeles. They “plan to remain indefinitely and potentially take over more homes.”
The mothers say “the region’s extreme lack of affordable housing and the threat of the novel coronavirus pushed them to act” on Saturday, March 14.
“With the coronavirus, they want us to be quarantined in our homes, but some of us don’t have homes,” said bungalow resident Martha Escudero, who has spent the last 18 months living on couches with friends and family members in neighborhoods across East Los Angeles.
The move follows on the steps of the Moms 4 Housing movement initiated by a collective of mothers in California, a story NEXT followed and reported in January. The movement remains largely underreported by the mainstream media.
Like the Moms 4 Housing group in Oakland, the protesters in L.A. are receiving assistance from the Alliance of Californians for Community Empowerment, an organizing group that has advocated for state measures to expand rent control and other tenant protections, according to the LA Times.
The L.A. moms say the bungalow is state property. Reportedly, years of contested litigation related to a now-aborted plan to extend the 710 Freeway in the area and legislation that stalled the 6.2-mile project before construction could begin, suggest staying there indefinitely could be a hard goal to achieve. By comparison, the Oakland moms managed to successfully pressure Wedgewood Inc. of Redondo Beach to sell a vacant home that the company was planning to renovate and flip.
Amilda is a journalist and branding consultant interested in how entrepreneurs turn brilliant ideas into products and services that advance business acumen and improve people’s lives in unprecedented ways. She has covered mortgage finance for over 15 years.