Category Archives: Real Estate

The mortgage business

“Motto Mortgage will open mortgage franchises throughout the U.S. increasing competition in the industry, resulting in more choice and a better experience for consumers,” the company said Tuesday. “Its loan originators will work with real estate offices so that agents can help homebuyers obtain the mortgage loans that best fit their individual needs.”

According to RE/MAX, the Motto Mortgage brokerages will be located within RE/MAX offices.

“Pairing a Motto Mortgage franchise with a real estate brokerage means homebuyers can work with a real estate agent to find a home and with a Motto Mortgage loan originator to secure financing in offices at one location,” the company said.

RE/MAX claims that placing Motto Mortgage franchises within RE/MAX offices, it creates a true “one-stop shop” for homebuyers.

“RE/MAX disrupted the real estate industry when it was created more than four decades ago. We did it by empowering real estate agents and ultimately giving consumers a better home-buying and selling experience,” RE/MAX CEO, Chairman and Co-Founder Dave Liniger said.

“The RE/MAX model remains unique and continues to thrive because we have the best agents in the business who deliver exceptional service,” Liniger continued. “Today we are extending our core competency of franchising into the mortgage origination market by introducing Motto Mortgage.”

Lingier said that RE/MAX “obsesses” about ways to improve the real estate experience for consumers, and sees this as a way to help mortgage brokers and consumers alike.

“We know that independent mortgage brokers’ share of the mortgage origination market dropped significantly following the economic downturn, falling from a 15-year average of 22%– with a high of 35% in 2006 – to 10% in 2015,” Liniger said. “Mortgage brokers bring choice and service to the consumer and Motto Mortgage will work to expand the market share of mortgage brokers and bring better mortgage choice and service to consumers as a result.”

Motto Mortgage President Ward Morrison, who has been with RE/MAX for 11 years and most recently served as vice president, region operations and business opportunities, said the company will look to bring mortgage brokers and “skilled” loan originators back to the market.

“Our priorities will be educating, training and supporting our franchisees so that they can provide exemplary customer service to their clients,” Morrison said.

“Because choice and service matter, Motto Mortgage will offer a variety of mortgage options while promoting honesty and complete disclosure, making it extremely consumer friendly,” Morrison said. “It’s the one-stop shop homebuyers want and the experience they will soon come to expect.”

RE/MAX’s move into the mortgage brokerage space comes at interesting time, as theNational Association of Mortgage Brokers, the association of mortgage professionals, and United Wholesale Mortgage recently announced a new initiative that aims to grow the mortgage broker channel.

Mat Ishbia, president and CEO of UWM, told HousingWire earlier this year that mortgage brokers took a major hit after the financial crisis, leaving their individual businesses behind and moving to the security of working for a bigger company.

And Motto Mortgage could prove to provide that security for mortgage brokers.

Requirements for condos

download-61The FHA announced that it is indeed changing some of its rules around condo financing, lowering its owner-occupancy requirements on certain condo developments.

Under the FHA’s current rules, approved condominium developments must have a minimum of 50% of the units occupied by owners.

The new rules, which go into effect immediately, would lower this requirement to 35% for existing condo developments provided the project meets “certain conditions,” the FHA said.

“While having too few owner-occupants can detract from the viability of a project, requiring too many can harm its marketability,” the FHA said in a statement. “It is FHA’s position that owner-occupants serve to stabilize the financial viability of the projects and are less likely to default on their obligations to homeowner associations than non-owner occupants.”

According to the FHA, for some condominium projects, the existing owner-occupancy requirement is “necessary” to maintain the stability of FHA’s Mutual Mortgage Insurance Fund.

But the FHA said that it in certain instances, it now believes that it would be possible to protect the MMIF while allowing a lower percentage of owner-occupants.

“(The Department of Housing and Urban Development’s) experience shows that higher reserves, a low percentage of association dues in arrears, and evidence of long-term financial stability allow for a lower owner-occupancy percentage without undue risk to the MMIF,” the FHA said.

To be eligible for the lower owner-occupancy rules, the condo development must be more than 12 months old. Additionally, the requirements for the lower owner-occupancy rules are:

  • Applications must be submitted for processing and review under the HUD Review and Approval Process (HRAP) option
  • Financial documents must provide for funding of replacement reserves for capital expenditures and deferred maintenance in an account representing at least 20% of the condo development’s budget
  • No more than 10% of the total units can be in arrears (more than 60 days past due) on their condominium association fee payments
  • Three years of acceptable financial documents must be provided

According to the FHA, for condo projects that are proposed, under construction, which includes existing projects that are less than 12 months old, or “gut rehab” conversions, the FHA will maintain its current owner-occupancy percentage of 30%.

NAR President Tom Salomone welcomed the changes, but said that NAR hopes the FHA will go even further with these new rules.

“NAR has been fighting for changes to FHA’s condominium rules for years, and the mortgagee letter announced will bring some much needed relief to the market,” Salomone said.

“Condominiums will have a much easier time getting certified by FHA, and Realtors will have more options for clients looking to purchase a condo with an FHA mortgage,” Salomone continued. “This is a big win for NAR, and while we believe all condominiums should have the rules applied to them equally, we also believe FHA has heard the concerns of Realtors and is moving in the right direction.”

Replacement program

“One Mod is a universal framework designed to provide the customer meaningful payment relief early in delinquency,” JPMorgan Chase Product Executive Erik Schmitt told HousingWire. “This is achieved through the creation of a simplified customer experience and a product designed to provide meaningful payment relief, which is the key driver of re-performance.”

“Additionally, the product is durable, in that it is designed to provide customers with assistance across a broad range of economic environments,” Schmitt said.

One Mod will be an improvement from HAMP as experts analyze what worked and what didn’t.

“We’re taking the lessons that we learned from HAMP and finding ways to only require the specific documentation used to drive payment reduction,” Alex McGillis of Quicken Loans told HousingWire. “The data from HAMP shows that payment reduction is the biggest driver in reducing re-defaults.”

There will be several changes to the new program as the industry shifts towards what Yvette Gilmore, Freddie Mac vice president of servicing performance management, calls a non-crisis program.

One of the major shifts includes an increase in the program’s availability.

“The focus of One Mod is to maximize the number of homes saved, which is achieved through increasing program accessibility and providing more sustainable solutions to prevent default,” Schmitt said.

Also, the proposed program will differ when it comes to the regulation that controls it. At the session, the MBA asked Laurie Maggiano, the Consumer Financial Protection Bureau program manager, what the industry can expect when it comes to new regulation for loan modification.

“We just published a 900-page rule, what else do you want?” Maggiano joked. Then, on a more serious note, she added, “Because the rule doesn’t say what a modification should look like, and I don’t expect to go there, I don’t expect any more regulation.”

McGillis summed up the goals for the new program:

“Everyone should have the ability or chance to save their home no matter what they’re going through,” he said at the session.

Lennar to move forward

When WCI Communities, a “lifestyle community developer and luxury homebuilder” headquartered in Florida, announced last month that it agreed to a “definitive merger agreement” with fellow homebuilder Lennar for $643 million, the company said that its board was going to take a 35-day “go shop” period to seek a better deal.

Now, the 35-day “go shop” period is over and the merger with Lennar is moving forward, but it’s not a done deal yet.

WCI announced Thursday that its board actively solicited alternative acquisition proposals throughout the go-shop period, but did not receive “any superior proposals” to top the Lennar deal during those 35 days.

In the deal, Lennar agreed to acquire all of the outstanding shares of WCI common stock in a cash and stock transaction, which values WCI at $23.50 per share.

That price is based on a 37% premium above where WCI closed on Sept. 21, 2016.

The deal values WCI at approximately $643 million in equity, or an enterprise value of $809 million, the company said.

In the end, WCI’s board didn’t find a better deal. WCI’s board of directors unanimously approved the merger agreement with Lennar, and now the deal moves forward, with a caveat.

WCI is now subject to customary “no shop” provisions that limit the company’s ability to solicit alternative acquisition proposals from third parties or to provide confidential information to third parties, which basically means that WCI cannot actively pursue a better offer, but if one comes along, its board can consider it.

The “no shop” provision is subject to customary “fiduciary out” provisions, which again basically means that if WCI gets a better offer, it can take it.

According to WCI, it will file proxy materials with the Securities and Exchange Commission related to a special meeting of WCI’s common stockholders to vote on the merger agreement.

The company said that anticipates that the special meeting will be held in December 2016 or January 2017. The company said that if the merger agreement is approved, the merger would be expected to close shortly thereafter.

If the merger is completed, the transaction would include a portfolio of owned or controlled land totaling approximately 14,200 home sites, located in most of coastal Florida’s “highest growth and largest markets,” WCI said.

According to data provided by WCI, the company completed 1,118 homes with an average sales price of $444,000 during the 12 months ended June 30, 2016.

WCI is more than just a homebuilding business. The company also operates a real estate brokerage, title and lifestyles amenities businesses, all of which would be included in the Lennar deal.

“Our agreement with Lennar testifies to the legacy and quality of our brand, the attractiveness of our homes and communities, and the talent of our team members,” Keith Bass, president and CEO of WCI, said in September when the deal was announced.

“WCI Communities homebuyers and homeowners can expect a smooth transition and the continuation of the top-tier service they have come to expect from WCI,” Bass continued. “The Lennar offer represents immediate and attractive value for our stockholders.”

Oversee project management

Melia Homes, a home builder in Southern California, named Tim McSunas as its new executive vice president.

McSunas brings nearly 30 years of experience to the company. He held senior management roles in companies such as John Laing Homes, Pardee Homes, Taylor Woodrow Homes, The Shopoff Group and William Lyon Homes.

In these positions, McSunas developed skills in sourcing and controlling new land opportunities, negotiating purchases and sales agreements, conducting land feasibility, leading underwriting and developing new joint venture partnerships.

In his new role, McSunas will oversee operations, project management, product development, sales and marketing. He will also be involved in land acquisition opportunities.

“I’m excited to join Melia Homes’ executive team and look forward to getting involved in the progressive strategies that have shaped its visionary approach,” McSunas said.

According to data provided by WCI, the company completed 1,118 homes with an average sales price of $444,000 during the 12 months ended June 30, 2016.

WCI is more than just a homebuilding business. The company also operates a real estate brokerage, title and lifestyles amenities businesses, all of which would be included in the Lennar deal.

“Our agreement with Lennar testifies to the legacy and quality of our brand, the attractiveness of our homes and communities, and the talent of our team members,” Keith Bass, president and CEO of WCI, said in September when the deal was announced.

“WCI Communities homebuyers and homeowners can expect a smooth transition and the continuation of the top-tier service they have come to expect from WCI,” Bass continued. “The Lennar offer represents immediate and attractive value for our stockholders.”

Hover near 50 year low

National vacancy rates for rental housing decreased to 6.8%, down 0.5 percentage points from last year and the same as the second quarter this year. The homeowner vacancy rate remained unchanged from last quarter and last year at 1.8% in the third quarter.

“Given other evidence from the release, my views swing more with the optimists than the pessimists,” Trulia Chief Economist Ralph McLaughlin said. “Household formation surpassed 1.1 million, climbing from 944,000 last quarter. About 560,000 – or nearly half – of these households were owners, up from a loss of 22,000 last quarter.”

“I think this is good news in light of the fact that millennials now make up the largest pool of potential new households,” McLaughlin said. “Though many are still living with their parents, they eventually will move out.”

“First, they will rent, and as they settle down, and then they will buy,” he said. “While we can’t know for sure they will own at rates of older generations, our survey work at Trulia shows 80% of Millennials want to own a home – the highest share of any cohort and the highest in the seven years we’ve run the survey.”

A chart from First American shows Millennials have a higher percentage of people with a college degree than any other generation. Historically speaking, homeownership rates are much higher among those with college degrees.