The 2022 landscape for lenders and servicers

Sarah Wheeler: Welcome, everyone. I’m Sarah Wheeler, editor in chief at HTV media with the latest installment of the “HousingWire Daily” podcast, where our editors and reporters discuss the most compelling stories and sources they’re covering. Today, my guest is Brena Nath, managing editor of our HW+ Premium Content program to talk about the latest issue of “HousingWire Magazine,” which was focused on what to expect in 2022 in different Housing articles. Brena, welcome to “HousingWire Daily.”

Brena Nath: It’s always a pleasure to be here.

Sarah Wheeler: So glad we are reunited on the podcast. We love doing podcasts together. So, but first, let’s define your role a little bit or what HW+ is? Because our listeners may not be familiar with that. Can you give us a brief overview of what we mean when we say HW+?

Brena Nath: Yeah, that’s a question I think we get asked a lot that is always growing. HW+ has a lot of parts to it, which we want to be in-depth resources for our members or our active superfan audience. That way, they get kind of the news, and the research, and the data, or even the insight sources that they need in order to be competitive. Time is a little bit of a blur right now. So I’m pretty sure we’re about two years into HW+. Last two years have been a blur for a lot of us I know. But within that time, HW+ really, at its core, what a lot of people expect is the long-form articles that have a lot more sources than it may be just a quick turn on what the news is going on, or maybe a quick, you know, existing-home sales report, but instead taking it a step further and saying, “Okay, what is the industry say about this report?” We also have exclusive data and insights. Our sister company RealTrends, issues regular in-depth research on what people in the industry, some of the stakeholders, see when it comes to salaries, see when it comes to how much it costs to run their operations, how much team members they need, what is their staff look like? And so, it gives people resources and equipment that they need in order to see how their competitors are doing. Then also includes events, on-demand webinars, a Slack channel where if you wanna engage with other people in the industry to see what’s going on, just really think of it as a community that you can engage with other people to see what they’re doing, and learn from each other on what you need to take away from the news.

Sarah Wheeler: Yeah, you know, you said two years ago. We’ve really rebuilt the newsroom in that time. We hired James Kleimann to be our managing editor at the newsroom and have brought on some…really invested in some high power journalists to cover the space at a deeper level than maybe we had done before, to give that kind of quality journalism at, you know, the longer form and the deeper insights. And you can see that in the issue plus coverage that we do. And if you look on our site now, HW+ is a lot of the stories that we’re running, because we are trying to do the news nowhere else which isn’t just, you know, the write up that you can find anywhere, but really in-depth. Part of the HW+ coverage is the magazine, which we publish 10 times a year. So, and you are a magazine editor. So you do a great job on that. And I would love to kind of do a deep dive into our latest issue, which is the December, January issue. It’s one of our double issues. And you really focused on, like, a forward-looking story. So tell us a little bit about how you developed that? What came out of that?

Brena Nath: Yeah. I’m actually gonna take one step back real fast when it comes to HW+, which the magazine is another thing I can’t believe I didn’t even mention it when it comes to HW+ benefits and what comes with your membership. But I do wanna add to it. I think sometimes there’s a little confusion when it comes to like, “Okay, we know what everything comes with HW+, but how do I get it, or even, like, what does that mean?” Like, anyone can read it. And it really is, in simplest form is a subscription-based pay for this extra content. So if you do want to sign up, feel free to go housingwire.com. Click join HW+ in the corner and you can join it annually. And feel free to reach out if you want a discount code in order to join, but it is an exclusive type of content which does then include this magazine in the content. So, wanted to add that in real fast, but the magazine, my favorite part, I know you guys can’t see it. But I’ll show Sarah, the top cover of a little for those who can’t remember, or have never owned one. The heart going back to when we designed this magazine is when we…we’ve done this twice for two years in a row. So going into 2021, we also did a forecast series where we asked everyone in the newsroom to take a beat servicing title origination, and give us a forecast, look at what to expect in 2021.

As we all know, 2021 did bring some curveballs, especially, with the pandemic on top of what already happened in 2020. And so, what I wanted to do when it came to the cover of 2022 was, it almost felt like from my perspective, holding a magic 8-ball and just kind of shaking it slowly, which is why we have it on the cover and saying, “Okay, magic 8-ball.” It’s a toss-up. What do you think the housing market is going to bring next year? And then getting my hands on the magic 8-ball like, “Hey, check back next year.” Like, “Hey, the forecast is a little cloudy, feel free to ask again.” Which at times can seem like what this housing industry is brought us, but unlike a magic 8-ball, we actually wanted to give some clarity. So is it as much and hopefully as the sources ask the district experts, so you can see what are they seeing for each individual market because not every market i’s the same. You know, servicing is doing one thing, origination is doing another thing, titles doing another thing, especially when it comes to technology, having a role in all of these segments, and that’s what we wanted to conquer in this magazine. So it’s beautiful.

Sarah Wheeler: I love it. Now, and I really feel like all of the people who read our articles and listen to these podcasts, you know, the biggest curveball is still the Coronavirus, right? It’s COVID-19. And, you know, back when we were really thinking about this magazine, it was Delta was still there. And then Omicron just came in crazy. And so, but reading through, it’s still very…I feel like we got really timeless sources talking about things that are still very pertinent to 2022. So let’s dive into that. So one of the bits that is covered is origination specifically, like, what does the origination market look like this year? So maybe you can give us some of the information from that story about… We interviewed the Mortgage Bankers Association, Mike Fratantoni, and Marina Walsh. They’re economists there and would love to know some of the things they’re forecasting for 2022.

Brena Nath: Yeah. This next coming up year, now that we’ve done forecast pieces since I’ve been backhousing for three years. One of the common themes that we’ve said each year as we try to figure out the rates is, “Oh, we’re shifting to have purchase-driven market. We’re shifting to have purchase-driven market.” Well, 2022, I think we can all say a lot of the feedback that we’re getting from the industry is we’re heading into a purchase-driven market. And okay, maybe you’ve already heard this. But what does that mean when we say we’re going to have purchase-driven market? Well, that’s what breaks down into a lot of the coverage that we have from there.

So for shifting the purchase-driven market, what should you be focused in? Purchase includes non-QM, purchase includes… We also heard people talking about the rise and maybe it’s, you know, home equity lines people have built so much value in their home. So, we’re shifting to purchase. But that is still a pretty broad market. I can go ahead and kind of read some of these quotes in here that talk about what goes into 2022. So you have quotes like from Tom Wind, who is the EVP of Consumer Lending at U.S. Home Bank. He talks about how lenders are gonna have to manage expenses, improve customer service in a purchase market, and talking about one of the ways that lenders manage expenses, historically, been by laying off processors in LOs. And that’s something and we’re going to dive into a little bit more later. But it’s something that I think a lot of lenders and anyone who really has looked at the refi business, specifically, in 2021, and said, “Okay, we just did a huge ramp-up in hiring. What does this mean as we move forward?”

And going back to the magazine back in September, I wrote another piece that really did a deep dive into the future of the mortgage workforce movement, which really was a foreshadowing into 2022, that all these people had to hire a huge amount of operational staff. We had articles coming out last year that talked about LO Comp a lot, but also talked about, okay, if we’re paying them this much, how do we balance the money here? Or at what point are you paying kind of LO Comp? Not that that’s always been a common word that we’re talking about, that really was though a focus of last year and how high the underwriter pay has got, and how high some of the salary and costs this industry has grown because of such a huge volume. But now we’re going into 2022, we have all this staff, how are we gonna, you know, transition them? How are we gonna move the workforce around? And what does that look like? Maybe it’s not necessarily layoffs, maybe it’s them moving, like, okay. We already know that you know how to do this XYZ thing in the industry, and you’re already training in the system. We’re gonna instead…you’re already a lot more lenders have in-house servicers and servicing within their branches and we’re gonna train them to know how to do servicing in-house or maybe we’re gonna train them to specialize in this type of LO thing, but that was one of the conversations with Agility 360. Raj over there was talking about, well, maybe it’s not just layouts. So that is a common thing we’re seeing in the news right now that another option is transitioning the workforce into other roles.

Sarah Wheeler: I think it’s really interesting because so many of the people that they brought on to handle that refi wave that ended up lasting, like 18 months, maybe we’re not, you know, you could take someone off the street and get them in, you know, as an underwriter for a refi much quicker than you can do some of these now, actual purchase loans, and especially as non-QM wraps up, those are maybe not the same people, but maybe they are. Maybe some of the people you hired, you know, now that they have that basis can be trained further. But I do think it’s interesting that in that article in the magazine, both Marina and Mike talk about the fact that, typically, that’s what’s happened, and Marina, especially, says that, you know, “Years with weak origination volume, the LO turnover rate was 44% in 2014 and 37% in 2018.”

So, we do see that, like, that there’s gonna be, you know, I mean, that’s traditionally how it goes. We know this is, you know, a cyclical market, you know, and then you think about in 2020, LO turnover was the lowest in the survey’s history at 21%. And what that means is you have a lot of people there that you didn’t typically have, so you’re maybe overstaffed. It is gonna be interesting. We wrote a story in December 21st in 2021, about the fact that anxiety grips LOs as layoffs with the industry because we had layoffs from Better.com, Interfirst Mortgage, and Freedom Mortgage all announced layoffs in the past couple of weeks of the last weeks of 2021. So, it will be interesting going forward. But I like your optimism on, you know, maybe what does this look like? And just in general, you know, we know that the mortgage origination shops are gonna have to be more efficient, right? You’ve got tight margins, you’ve got stiff competition. Where do you find those efficiencies?

Brena Nath: Yep. Not to bring too much levity to the fact that layoffs are very difficult. We’re seeing that in our coverage, especially with the news, looking specifically at Better.com that came out over the last month. But one thing that for anyone who’s been in this industry long enough is we are a cyclical industry. This isn’t the first time we’ve written about layoffs after a refi boom. I remember joining back almost a decade ago, Sarah and I at HousingWire.

Sarah Wheeler: How is that possible? What?

Brena Nath: It’s been a minute. We’re about to hit an anniversary, a 10-year anniversary in the industry. But in that 10 years, anyone who’s been in this business long enough, and I know there’s plenty of people who go back further than us, we’ve had refi ways, we’ve had this boom. And I remember in the past looking at, you know, from the journalist standpoint, looking at, going online to look at the notices that you have to file in order to lay off a group of people and having to constantly mine that database to see what is going on in the industry, and then having to watch the industry move and shift then. But, one big factor that seems to be present this time in the cycle that maybe we weren’t talking about as much before is the role of technology in everything that you just mentioned, that how technology in all forms and parts and segments of the industry has really transformed efficiency and really transformed the workload and who’s needed. And so, tech adoption has been more prevalent than ever before. So just as I mentioned that, as we shift to this purchase-driven market, the conversation isn’t just on how can we shift these people? But the conversation is also like, “Okay, we can’t rest on our laurels when it comes to technology and going to conferences over the last year.” Going all the way down to like the broker-level shops, the wholesale broker shops, even they were kind of starting to look at, “Okay, we need to adopt this technology. What do we need to do to kind of move forward in this tech world?”

Sarah Wheeler: I think that’s such an important piece. We’re always looking at the technology because that is where, you know, the last 10 years if anything has defined it, it’s that. You mentioned servicing and, you know, let’s talk about that a little bit because we do see that that is one of the areas that, you know, origination shops are going to get into or have decided to keep their servicing so that, you know, as an income stream. So we do have a feature on servicing in this issue, and one of the things we wanna talk about is, like, the challenges of servicing right now, probably bigger than any time since the great financial crisis, just because you have that wave of people coming off forbearance. So talk a little bit about that article.

Brena Nath: This one topic, in particular, servicing exiting forbearance is one that I’ve probably been pretty focused on for a couple of years now even before the pandemic, because the servicing industry has really been making an effort, especially, been under the watchful eyes of the government, the CFPB when it comes to not only the customer experience but also going back to that word technology. What does technology do? And how can technology transform the consumer and the customer journey as they go through the servicing process? And so, leading up to the pandemics, servicers were already working to adopt that technology, working to find ways to reach the borrower, improve the journey, define that customer experience, but then the pandemic hit, and a whole bunch of loans went into forbearance, which those numbers are something we’ve been tracking closely. And now we’re finally getting to a point where all of these loans are coming out of forbearance.

So The HousingWire Annual in October, we had some of the, you know, top experts in the industry if anyone’s listened to Courtney Thompson before, she used to be in our clubhouse, is really passionate a person when it comes to okay, what is the government’s role in this? We also have Karthik, he’s in charge of Global Head of Mortgage Practice at TCS. And then Uday, who’s also the CTO agent. And then also Michael Keaton, who’s a chief servicing officer at Shellpoint Mortgage Servicing. And these four people what I thought was so fascinating, which I think rings through also the coverage of the servicing article in the magazine, is they’re really four coming together, and it was like you’re sitting in the living room with them as they tried to brainstorm what does the future look like? It’s a very present conversation with a lot of people right now. And it’s very top of mind.

And so, with them, it was like, “Okay, what does the end of forbearance look like? What does this mean for people?” And something that Courtney said at that time that really stuck out to me is, a lot of people may be outside of the industry, or even in the industry during this pandemic, always kind of some time, maybe in the words of Logan, the four brands crash bros, really say, “Okay, there’s gonna be this giant forbearance crisis whenever it comes out.” But one thing that Courtney pointed out, it’s not really the crisis in the forbearance but where we’re gonna see a trouble spot or trouble issue is just how the loss mitigation process or even taking people through, we have nonjudicial and judicial states right now when it comes to foreclosures, and how are those processes gonna look right now when they haven’t been in the office? Or they haven’t been next to each other in the room pushing papers? Are they all gonna come back to a room and move this across? And so, looking very pointedly at what does the foreclosure process look like? And are they ready to handle this? And really just shifting that mindset of, “Okay, are we ready to accept forbearance?” All these servicers are doing an immense amount of work, but also looking in that circle and saying, “Where does technology still need to look or look deeper? Or where are some of the trouble spots in there? And that’s something that Courtney Thompson has really been focused on and talks about.

Sarah Wheeler: And I really appreciate that. You know, to Logan’s point, that he also says it’s not like, you know, we’re gonna have a housing crash, but if you’re in servicing, it is a wave of people at the same time coming off of those, you know, foreclosure moratoriums, the forbearance programs, they’re all coming off at the same time. So now we’re… I feel like we have to give servicers credit, right? I mean, you and I joined when servicers were still really in the spotlight and really in the crosshairs of the, you know, regulatory bodies, because of what had happened in the financial crisis this time around.

Number one, housing did not cause anything, any part of this forbearance crisis, and number two, they really worked through. So we went from over 4 million people on forbearance, probably the highest point, to now we’re under a million. I think it’s around 800,000, as of right now. And you just think that’s a tremendous amount of work already, in that short amount of time. But now we have all of those people to move through. And, you know, part of that…some of the great things about that is as housing prices have escalated, if people needed to sell, they could sell, as opposed to going into foreclosure. But, at the same time, those same people you don’t want them to have to sell and then they’re in an environment where it’s really hard to buy. I mean, sellers or buyers, hopefully, right? And so you just think about all the work that’s gone into that loss mitigation, you know, with all the borrowers and many of those people are not where they were when the pandemic started. So, and getting in communication with them and all of the work that goes into that. It’s really been amazing to see. You know, one of the things that this article in the magazine points out is just that, yes, they’ve done a great job, they’re still in the crosshairs of regulators, and this year, wow, what a huge story that’s been? It’s not just your regular players. It’s not just the CFPB. The OCC wants to talk to servicers. You know, everybody is looking at how these borrowers are being handled, and it’s a tremendous amount of pressure.

Brena Nath: I do also want to highlight a small teaser, if you will, that magazine feature that’s going out in February. February issue always focuses on servicing, specifically, this year that topic definitely is top of mind and it’s also in conjunction with the servicing conference for people who are attending there. But the main feature right now, just to give a small highlight of what it’s about, it’s by our reporter Flavia Nunes. And she kind of talks about in general without giving, like I said, too many spoilers, about this idea of being ghosted. So it goes in-depth interviewing servicers it’s another effort, in this idea of, like, “Okay, you have all of this information, you have their email addresses, you have their phone numbers, you know where they live, and you’re still having a hard time reaching out to them, and getting in touch with them on their loan, or on their mortgage that’s in forbearance and deep-diving into what does that mean exactly if the borrower is ghosting you?”

And at the same time, we also published an article back in December, that was kind of digging into how the CFPB lets mortgage servicers collect on social media, but will they? And kind of digging into like, “Okay, both of these things, tackle this idea of like reaching somehow the bar or how can we communicate to them? How can we get to them in this new world?” And for those of you who don’t really know the word ghosted, it’s really is what it sounds like. It’s trying every single thing that you can, and all of a sudden, they’re just like dropping off the grid. It’s commonly used in dating, as well, where you’re talking, talking, talking, and all of a sudden they’re gone. And they’re just ghosting you. And so, what does that mean for servicers?

Sarah Wheeler: Well, and what does that mean? What are the efforts that the regulators are gonna look at and say, “This was a great faith effort? This was a good-faith effort. This is, you know, we tried all this.” And one of the things was, when the pandemic first hit, you know, the regulator said, “Hey, we understand how difficult it is when you guys are remote, and all these people moved. And so, we’re gonna give you grace on sort of, like, you know, we’re gonna take a light hand and really understand that these were incredible circumstances.” Well, as things have shifted out of that, and now as we have an entirely different regulatory focus really with the new administration, you wonder how much of that is gonna translate now? And you know how it should translate because we have been doing this for a couple of years now, but still that whole part of the borrowers have always had the upper hand in the sense of like, if they don’t want to talk to you, there’s only so much you can do. But now, you know, even more so, I feel like there’s more pressure about that. So it’ll be really interesting to see what are the good faith efforts they’re gonna look at? And what are the things that they’re gonna say frankly, they feel like servicers should have done better? We don’t really know that right now.

Brena Nath: And the conversation is always being updated. I know I just mentioned, Flavia Nunes, who’s one of our reporters. I would also recommend following Georgia Kromrei. She’s our Senior Mortgage Reporter. She is constantly in talks with the government and with regulators. And, you know, the CFPB, Rohit Chopra is now in charge over there. And to Sarah’s point, like, okay, we have this new administration, we have a lot of regulators who, you know, Ginnie Mae’s president was just sworn in this week. A lot of changes have been happening when it comes to government regulation. So staying on top of Georgia commerce coverage would really be something they’re gonna help you know the latest on it.

Sarah Wheeler: So looking forward, love to tease something that we’re gonna do in February, which is really interesting, which is we’re going to gather economists for like an economic summit in a virtual event. So maybe you can tell us about that.

Brena Nath: I’m super excited about this event that we have coming up. It’s almost a month away. It’s gonna be on February 8th, at 1:00 Central, so 2:00 Eastern Time is exclusively available to our HW+ members. So going back to the beginning of this podcast, if you wanna sign up, feel free to register, like I said, feel free to reach out if you want a discount code to the event. But we’re bringing together first, Sarah Wheeler, who is on this podcast. She’s gonna be our moderator for the event. Then we’re also gonna have our Lead Analyst, Logan Mohtashami. He’ll be there as well to unpack his forecast. And then we’re bringing Selma Hepp, who’s the deputy chief economist at CoreLogic. Marina Walsh, she’s the VP of Industry Analysis, Research, and Economics at the MBA, who we also referenced during this conversation. And then Jeff Tucker, who is senior economist at Zillow. And for anyone who was paying attention to this economists series that we did last year, Jeff Tucker was featured in that as well along with a couple of other of these economists. And he hosted a Q&A in our Slack channel, which got tons of engagement.

So all four of these people are people that you really want to, not only are they gonna talk about home prices, maybe, or mortgage rates, but for example, Marina can go into like, “Okay, what does this mean for you and your business? What does this mean for an originator and a lender?” And so, they’re not all four gonna be talking about the same thing. They’re gonna give their own unique angle and perspective that they bring into the entire housing ecosystem. So I’d highly recommend. We’re gonna frame it as a roundtable discussion. There are plenty of questions going around right now when it comes to 2022. And this is your place and your chance to bring your questions and ask them during that roundtable discussion. Okay, what do you expect when it comes to this? What do you see happening here? And so, just as a recap, February 8th is…we’re calling the HW+ Virtual 2022 Forecast Event. And also, like I said, it’s a month away. We’re gonna have about a month’s worth of data already on what’s happening in 2022. So Logan and other economists are able to speak to, “Okay, what have we seen so far?” So just because you’ve read all the forecasts leading up to this event, there’s gonna be even more to unpack because as we all know that the ecosystem is constantly changing.

Sarah Wheeler: I really love that especially, because Omicron just threw a wrench in everything. I feel like a month from now where it’s actually gonna be more timely than if we did it right now. So we picked that time in February very strategically, and we hope that it is perfect for our listeners who really need to know what should I expect in these different areas for my business? So Brena, thank you so much for talking about what’s in the December, January magazine, and then the forward look to February, and some of the things we’re doing there. You said a couple of times, “Hey, reach out if you’re interested in HW+.” How do people reach out?

Brena Nath: Yeah. Feel free to shoot me an email. My email is bnath, so [email protected]. Always open to feedback, thoughts, along with any help that you may or giving any help that you may need when it comes to HW+. So, open inbox over here.

Sarah Wheeler: You know what? Thank you so much for being on today. I know you’re not feeling well. You’re a champ getting on here and doing this with me. Really appreciate it. And I will talk to you later. And all of our listeners, I will see you tomorrow for the next episode of “HousingWire Daily.”