Acra Lending remains committed to supporting borrowers’ needs across the market

Following its rebrand from Citadel Servicing Corp. to Acra Lending, the company has also launched a new jumbo prime program. HousingWire recently spoke with Keith Lind, Acra executive chairman and president, and Acra CEO Kyle Gunderlock, about the new program and how it will help borrowers in 2021 and beyond.

HousingWire: Why did you develop the Jumbo Prime program?

Keith Lind: This specific program has been developed to meet the needs of customers in today’s environment. We wanted to introduce a program that provides borrowers with the larger loan amounts they need to purchase or refinance a high-value property. We have been working non-stop to provide programs through our retail, wholesale and correspondent channels, which have significant demand in the marketplace.

Kyle Gunderlock: The addition of this program demonstrates our commitment in identifying, responding to and anticipating the needs of borrowers across the market. We have always set high standards and our team works diligently on a daily basis to continue to maintain responsible lending practices as the foundation of our business.

HW: How does this help borrowers?

KL: Rates are at an all-time low, but jumbo mortgages are harder to access for borrowers due to ongoing economic downturn caused by COVID-19. The introduction of this program allows for an added avenue for those borrowers who are looking to purchase or refinance high-value properties.

The Jumbo Prime program is designed for qualified borrowers who may have larger loan amounts than allowed under conventional loan terms.

KG: We continuously work to meet the needs of our customers, whether borrowers or brokers, and aim to excel through providing simplicity, consistency and an optimal customer experience.

Our team always asks the difficult questions when determining whether there is a need for a program and whether a customer can benefit from it. This program ticks all those boxes and allows us to offer another valuable program.

HW: How do you foresee this program being utilized in 2021?

KL: As the mortgage lending space experiences continuous changes, we have worked resourcefully to meet market demands. This is going to be a great program for our mortgage brokers and borrowers, not only in 2021 but for years to come. The median home price across the U.S. has steadily increased over the past decade and shows no sign of slowing down. This creates the need for programs like our Jumbo Prime product. The key to a lender being successful is the ability to provide a complete suite of programs that works for everyone; we are doing just that.

KG: If this last year has taught us anything, it is that nothing is guaranteed. What we can do is prepare to meet a variety of challenges in an ever-changing market. This program, and many others, was developed like our 3-Month Bank Statement program: with our customers’ needs at the forefront of our development process.

We are confident that with our experienced management team, we will continue to develop programs like the Jumbo Prime to meet the needs of the mortgage lending space for years to come. Our customers can benefit in knowing that when they partner with Acra Lending, they are doing so with a lender that is focused on bringing a diverse menu of programs and an exceptional customer experience to a marketplace that is often filled with excessive or unnecessary complications.

Source: HousingWire

Non-QM originators are ramping up operations, but finding brokers willing to work the loans remains a challenge

By James Kleimann

Mark Dodson was having a promising start to the year. His corner of the Atlanta mortgage market – high-value home loans that wouldn’t be bought by the GSEs – was booming.

But by March there were whispers that the non-QM space was going to vanish soon. Liquidity had dried up and bond investors were running for the hills.

At that point, Dodson was actively working on a jumbo loan for friends of his from church.

“I told my client, my friends, ‘Look, I know you’re supposed to close in 10 days but we’re closing Friday and you let everybody know it or you may not close,’” Dodson said. “And damn if we didn’t close Friday and they shut it down Monday.”

“I lost $6 million in April,” the broker added.

During the freeze, non-QM lenders – who issue mortgages that can’t be sold to Fannie Mae or Freddie Mac, typically to self-employed borrowers – stopped accepting applications, collectively laid off hundreds of workers; had difficult conversations with their investors, correspondent partners and mortgage brokers alike; and plotted an eventual return to an uncertain market.

Some firms quickly pivoted to conventional products to serve remaining customers. Others took stock of their product offerings and tech stacks and initiated strategies to build stronger companies in the wake of the pandemic. Over the last several months, liquidity has poured back into the non-QM market, prompting roughly a half-dozen lenders to once again underwrite non-QM loans.

“Pre-COVID, loans were trading at 103, 104, maybe even 105 [cents to the dollar], and the margins were there and it was a successful business,” said Keith Lind, the executive chairman and president of Citadel Servicing, one of the biggest non-QM lenders in the country. “The origination credit quality was very good. But when the credit markets seize up and liquidity stops, all of the sudden we went to maybe a low of 85 or 88 cents on the dollar. So when that happens, you don’t originate, you don’t lend at par for something at 88. So you stop.”

Everyone bowed out. Citadel’s competitors Angel Oak Mortgage Solutions, New Rez Mortgage, Caliber Home Loans, Athas Capital Group, Carrington Mortgage Services and First Guaranty Mortgage Company all halted issuing non-QM loans, which comprise roughly 5% of the overall mortgage market.

Though most of the sizable non-QM lenders have rehired staff, resumed lending or are on the cusp of doing so, they must still contend with a thorny problem: a good chunk of mortgage brokers are so awash in comparatively easy mortgages that they won’t bother with non-QM products, which are more complex and time-consuming than conforming mortgages.

“When Angel Oak Mortgage Solutions launched seven years ago, we had to educate [brokers] on the non-QM space,” said John Jeanmonod, a vice president at the Atlanta-based non-QM lender. “Now we’re educating them on why there was a pause. Most of them know why, but all of them really just want to know, ‘How are you going to try and close my customer today?’”

He added: “What we’re really trying to tell them now, almost more than ever, is that the self-employed borrower hasn’t gone away. And whether you do it or someone else does it, that loan is going to get done.”

This ain’t your daddy’s subprime

About a decade ago, mortgages that were ineligible to be bought by Fannie and Freddie were tagged with the odious label “subprime.” Such mortgages, infamous for atrocious credit standards and a lack of skin in the game on the part of borrowers, ushered in a collapse of the housing market, which triggered the Great Recession of 2008.

Loans that don’t meet the GSEs’ standard today are known as non-QM, but few observers believe there are parallels to what happened 12 years ago. Lenders today have more rigorous standards on non-QM products, and forbearance rates roughly are in line with agency loans. As is true with loans sold to Fannie and Freddie, non-QM lenders must ensure the borrower can pay back the loan and is credit-worthy. But unlike Fannie and Freddie, most non-QM loans rely on the borrower’s credit score and the loan-to-value ratio on the loan, rather than the debt-to-income ratio.

The products appeal mostly to independent contractors and self-employed borrowers, with non-QM lenders often marketing their wares to real estate agents who have entrepreneurs for clients.

“Self-employed borrowers take advantage of the tax laws,” said Dodson, who runs Mortgage Capital Advisors. “For eight years they were not able to get a mortgage loan – they could have an 800 credit score, $2 million in the bank. But they were still hampered because lenders wouldn’t give them a loan. That’s when we get ‘em. I’m also finding that self-employed people know a lot of self-employed people. It’s about getting word out to them. Realtors need to be your ally.”

There’s a common misconception that because the products aren’t guaranteed by the federal government, they’re marred by sloppy underwriting or exorbitant risk, mortgage executives and brokers said.

“It was just a liquidity issue,” said Angel Oak’s Jeanmonod of the tremors in the spring. “Everyone gets the non-QM sorely confused with what happened during the mortgage meltdown…our underwriters are the best in the business. ”

Angel Oak relaunched in May with a pared back set of products and tightened down payment requirements. Since May, they’ve had 19 enhancements to their programs due to renewed liquidity. “We still don’t have all the programs back yet,” Jeanmonod said. “We have the bank statement program, jumbo loans. It wasn’t that borrowers weren’t performing, it was that the investors didn’t have a broad appetite.”

Citadel has also returned with a streamlined list of products. It now does three-month bank statements as opposed to one month, and requires higher levels in reserves.

Since the market has returned, borrowers with sizable reserves and strong credit histories are typically finding interest rates in the 5% and 6% range, said Yonce.

The path of least resistance

Though the non-QM lenders are frustrated by a reluctance on the part of some brokers to push their products, they understand the dynamic at play: it’s the path of least resistance, and the non-QM reputation perhaps doesn’t live up to its underwriting quality.

Most mortgage brokers would rather collect 100 bps a pop on simple refinancing deals that take a few weeks than a non-QM product that takes at least twice as long to close, non-QM executives said.

“It’s not the borrowers, it’s the fact that the brokers aren’t focusing on non-QM,” said Lind. “They’re going to the low-hanging fruit, the agency product because they’re probably making more money. But I think we’ve done a very good job – we’re extremely efficient, return times are fantastic and if you give us a non-QM loan we’re going to close it.”

One broker said abandoning agency loans in favor of non-QM product in the current environment simply didn’t make business sense right now.

“I wouldn’t chase that business because I have 46 loans in process that are fairly simple to do,” said Matt Gougé, a broker at Answer Home Loans in Folsom, California. “And non-QM loans in my experience are harder.”

Yonce, who runs Dallas-based Greater Texas Mortgage, said the non-QM space still has to work on its perception in the marketplace.

“Newer loan officers are scared of the business because they think it has to do with predatory lending,” said Yonce. “And it doesn’t. It’s the total opposite from that. They don’t understand it, so they can’t sell it to the customer.”

Jeanmonod and Lind both noted that brokers will be more conscious of the non-QM market when rates fall and the refi business slows.

“There are people out there who are just focusing on refis, and when those go away that LO is in jeopardy of losing income,” said Jeanmonod. “Like anything, you have that seasoned loan officer who has a stream of referral sources whether it’s a Realtor, CPA, bankruptcy attorney, etc. they hopefully cherish that referral source and work on all loans equally.”

The ups and downs of the non-QM market over the past calendar year has led to a flurry of referral activity. Loan originators at retail banks pushed non-QM deals to specialist brokers like Dodson and Yonce, they said.

Dodson said he had a client who recently made a $1.8 million purchase after he was turned down by a retail bank. The client had adequate reserves, a great credit score and two years of bank statements to determine income. Angel Oak funded the loan.

“He was thrilled he had an option of buying this house when he didn’t have one two days earlier,” said Dodson. “In this case, the banker referred him to us.”

Business is “not quite there yet“

Though the lenders and brokers are back cranking loans and investors are comfortable with non-QM products, they’re still not quite firing on all cylinders like they had been in January.

In January, non-QM loans were arguably the hottest product on the mortgage market and were on a high not seen since 2007. They were performing better than FHA and conventional loans, said Yonce. Then COVID hit.

“So at that point, it was really strong – I was averaging probably at least three bank statement loans a month,” said Yonce. “And then when COVID hit, they went away overnight.”

But lenders and brokers are both optimistic that business will return to normal levels in 2021.

“We started originating in August, we funded our first loan in September. I think we’ll be back to our pre-COVID levels hopefully by early spring,” said Citadel’s Lind. “Pre-COVID, 65% of our business was cash-out, now 70% of our business is purchase. I think rates up in the agency market is going to be very humbling…and there will be a lot of tailwinds for the non-QM work.”

“We’re not there yet,” added Dodson. “We were killing it with the non-QM. The higher loan-to-value loans aren’t back yet but we got 90% bank statement deals back and that’s a big, big product.”

Jeanmonod, who’s based in Dallas, said Angel Oak is about 50% back to normal levels (they originated about $3.3 billion in mortgages in 2019). “We’re probably about halfway back and increasing every month,” he said. “Our month-over-month growth has been outstanding. It’s going to hockey stick back.”

James Kleimann is the mortgage editor at HousingWire. Email him at jkleimann@housingwire.com

Source: HousingWire

By Hitz Mistry

Leading lenders meet customers’ historical needs while adapting to current ones

The mortgage industry never stops – consumers always desire the opportunity to own a home. Accordingly, brokers and borrowers continue to pursue purchase transactions independent of the world’s turmoil. Activity may ebb and flow and needs may change with the times, but brokers need to be ready to serve their clients in all environments. One differentiator for leading lenders, such as Citadel Servicing, is to not only meet customers’ historical needs but adapt to current needs, as well as anticipate future market opportunities to ensure they are consistently enabling their broker partners to exceed customer expectations and fulfill demand.

There is no getting around that the world has changed, causing a profound impact on the ever-changing landscape of mortgage lending. As a result, not all of the organizations in the mortgage space will continue to thrive and serve their customers – Charles Darwin said it best in “On the Origin of Species” – “It is not the most intellectual of the species that survives; it is not the strongest that survives; but the species that survives is the one that is able to best adapt and adjust to the changing environment in which it finds itself.”

So, what does this mean for brokers and borrowers? With the short pause in non-QM lending, many organizations decided to switch their focus to other lending areas, choosing to concentrate on traditional mortgages or other markets. While this may have been a savvy tactic on the part of those lenders, it puts brokers who need a non-QM solution in a difficult position.

As an organization that is committed to non-QM lending, Citadel Servicing did not try to deviate or divert its focus to other areas. Instead, the company adapted. Instead, Citadel Servicing chose to use the temporary pause to invest in its processes and technology, which would improve the customer experience. Whether a broker or borrower, each is a customer and a client. The high-touch service, thoughtful and innovative programs Citadel Servicing provides do not differ.

Providing a solution to an area that can sometimes be seen as complicated to underwrite – but in a way that is beneficial to all parties – is something the company has done in the past and continues to do in the current environment, in which non-QM solutions are more necessary than ever.

Working with clients who may find themselves in an unusual or unexpected position is something Citadel Servicing has more experience with than anyone in the space, and the company prides itself on continuing to work with customers and drive product innovation to address the changing landscape head-on.

Building a solid foundation with any partnership is important. A broker should be able to trust that when they have a loan to submit the lender will have not only the right programs but also the right people in place to make the process as simple and efficient as possible.

Citadel Servicing invests in both its technological infrastructure and its employees, pushing and motivating them to become the best in the industry. Having a dedicated in-house learning and development team to support career growth is essential to the company’s success, as are the new systems and technologies it invested in during the recent pause in lending activity.

No one knows what tomorrow will bring, but what Citadel Servicing will continue to do is make it stays at the forefront of the non-QM sector to provide brokers and borrowers the best service and programs in the industry.

Source: HousingWire

HousingWire spoke to Keith Lind, new chairman and president of Citadel Servicing Corporation, and CSC CEO Kyle Gunderlock about the company’s return to origination, new leadership and plans to continue serving the non-QM market.

HousingWire: In this constantly changing environment, more borrowers will need non-QM loans. How is Citadel Servicing positioned to take advantage of this opportunity?

Keith Lind: We are starting right where we left off and building on the momentum we had heading into 2020. In addition, we used the COVID-imposed shutdown as a unique opportunity to step back and evaluate our strengths and weaknesses.

Citadel had grown so quickly in recent years, and accordingly there were certain aspects of the businesses that stood to benefit from investment so we could restart lending in the best position for our company and our customers. These investments were always part of our plan, but this shutdown allowed us to really accelerate their implementation and impact.

We did all of this knowing that when we resumed originating, we would do so in a much more comprehensive way and be best-in-class in every facet of our business.

Coming out of our four-month pause in lending, we are entering the market with a much stronger balance sheet, better technology on both the origination and servicing side of the business, upgraded guidelines and processes, and a diverse and experienced management team.

We have brought in leaders with deep expertise and a fresh perspective to the non-QM lending space, such as our new Senior Vice President of Sales Doug Perry, who is a true mortgage industry veteran whose most recent role was leading sales at 5 Arch.

We also brought on world-class board members in Tony Meola, the former head of consumer operations and loan servicing at Bank of America, and Konrad Alt, who brings decades of experience in risk management and regulatory affairs with Promontory Financial and Providian Financial. Their experience and strategic insight will be invaluable to me, Kyle and the rest of our management team as we continue growing Citadel Servicing.

Kyle Gunderlock: As Keith said, we are a reinvigorated organization. We are making sure our expertise is supported and amplified by top-tier systems and talent at every level. We specialize in non-QM programs – we think we are the best at it and we are going to keep working hard each and every day to continue that position as a leader.

We are the only vertically integrated company in non-QM mortgages. That means we can deeply analyze our portfolio at every stage in the value chain and better understand the needs of our customers and then build programs based on those needs. We have never followed other out-of-the-box programs but rather created unique ones for our customers.

In a world that has been indelibly reshaped by this tragic pandemic, we are going to bring them programs, capital and service needed to deliver for the end homebuyer and let them buy that new house, move for that new job or take that next step in their life so we can all keep progressing forward.

HW: COVID-19 has disrupted business for many, including those who may have nontraditional income streams. How has income verification for self-employed borrowers or business owners changed as a result?

KG: The COVID-19 pandemic has resulted in a significant number of layoffs and the unemployment rate has not been this high since the Great Depression. Unfortunately, we have seen this amplified among self-employed small-business owners, who are core customers for the non-QM product.

Working with folks who may find themselves in an unusual or unexpected position is something we have more experience with than nearly anyone, and so we are doing what we do best and figuring out ways to work with people with responsible lending programs.

As an example, for consumers in these transactions, we would generally qualify applicants based on reviewing deposits from their personal or business bank statements. We have updated our guidelines to consider the lesser of a 12-month running average or 2-month running average.

Workers have been affected in an unprecedented fashion and looking back for two years as would be present in a 24-month program does not make sense. It is disingenuous to say any portion of the economy is reasonably in the same position as summer 2018.

KL: We are going through something no one has ever experienced in our lifetime, that businesses as well as borrowers have had to adapt to. This doesn’t mean we cannot qualify borrowers; it just means we’ve had to update and amend our guidelines as a result of what is happening. We will always work towards finding the best solution for our customers, company and investors. Self-employed borrowers and business owners will always be important customers for our business.

HW: What are some of the changes we can expect at CSC following the introduction of Keith Lind as chairman and president?

KG: CSC was the first back in this space providing non-QM mortgages post the sub-prime era. Daniel Perl did a tremendous job building the company from the ground up and leading the industry.

With the introduction of Keith as CSC’s new chairman and president, we are now charting the next stage of our growth, which will be underpinned by some changes, as you would have with any evolving company.

The cultural tone across the company is set by an engaged and inclusive management approach, which Keith has embraced and fostered. There will be a deeper focus around improvements in technology on both the origination and servicing side of the business.

In terms of the balance sheet, we are going to expand our efforts by working with a broader group of like-minded, long-term capital partners to supplement our existing relationships. With Keith’s experience, we will be able to further diversify our funding sources by tapping the capital markets while growing our footprint, lending in more states, hiring more AEs and investing in more efficient human capital across the company.

HW: What are some of your near-, mid- and longer-term goals for CSC?

KL: We aim to take an already strong platform in Citadel and truly institutionalize the business with investments in best-in-class products and technology, and by fostering relationships with a range of top-tier capital partners. The Citadel team is excited to restart originations and show the industry the strong value proposition we can bring to our borrowers and brokers. We are extremely focused on providing quality solutions to our customers and growing our footprint and market share through an industry-leading culture and customer service.

KG: Having been with CSC since the start, our goals have always been to provide the industry’s leading non-QM products while helping our customers. Being able to provide industry leading programs to meet the needs of our customers is what we do best, and we are now going to do that in an even more efficient, accessible and systematic way.

We are going to continue to be the leaders in today’s market and plan for tomorrow’s. We need to keep growing, improving and evolving.

HW: Tell us a bit about your backgrounds and what you plan to do at Citadel Servicing together.

KL: Before coming to Citadel, I spent three years at HPS Investment Partners as a managing director, focusing on asset-backed and non-agency mortgage-backed securities. Prior to HPS, I spent fifteen years trading mortgage-backed and asset-backed securities as a managing director at Brevan Howard, Royal Bank of Scotland and Bear Stearns.

Those experiences gave me a great understanding of this industry and how the market works at a granular level, from when a loan is originated all the way up to when it’s securitized. My background and relationships on the markets side perfectly complement Kyle’s experience on the origination side and his 13+ years helping build Citadel into what it is today.

We have a great breadth of knowledge across our industry combined with the benefit of fresh institutional perspective. We plan to take Citadel to the next level and cement our position as the leading non-QM lender. We offer strong programs that satisfy our customers’ needs with competitive rates and fair lending practices. Our customers are, and always will be, our focus as we build Citadel Servicing 2.0.

KG: I have been with Citadel Servicing and its former sister company, First Street Financial, since 2003. I started in the mortgage business on the origination side of the house. But I was always interested in not only understanding the nuts and bolts of how a mortgage was made, but following the secondary/capital markets to understand why a mortgage was made to certain guidelines and priced a certain way.

Over time, I have touched files in every capacity, from prospecting a lead through servicing a payoff or loss mitigation. Those latter experiences showed me the pitfalls of poorly designed lending programs and more importantly showed the value that responsible, creative and innovative lending programs can bring to all stakeholders. CSC has created value for borrowers, brokers and investors in developing what is now known as non-QM.

Looking through the lens of a post-COVID non-QM lending environment, I think that Keith and I are uniquely positioned to combine our considerable knowledge, relationships and insight to step forward.

We will continue work towards meeting the needs of our customers, but in a responsible way with programs that meet the needs of a large swath of distinctive and atypical non-QM lending programs.

Source: HousingWire