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Special Feature: 15 for 15
Providers to Watch in the Year to Come

Posted on 12/1/2014 by April O'Brien in HousingWire
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2014 was one for the books. The industry had to absorb the complications of complying with the Qualified Mortgage and Ability to Repay rules while dealing with much lower origination volume. The refi market officially went on life support, despite dropping interest rates, and the net cost to originate a loan was as high as $6,253 in the first quarter of the year, before falling to $5,074 in the second quarter.

Despite the many challenges, there were companies in the housing finance industry that flourished in 2014. These companies found a way to adapt to stricter compliance standards, navigate through a brutal winter season and still come out on top.

What distinguishes success in this market? And which companies are going to be the ones that squeeze lemonade from a potentially sour housing market in the coming year?

There will be continued regulatory headwinds, from implementing the new TILA-RESPA disclosure timelines to expanded HMDA reporting, and the job market is likely to continue its slow recovery. There’s no magic bullet for a sluggish economy, so companies that want to excel in the midst of a constrained environment will need new processes, new solutions and new vigor.

In this section we are profiling 15 companies who are well positioned to take on the challenges of 2015. The companies occupy different roles within the housing finance space — from lenders to servicers to technology providers — but they all share a vision for an outsized impact in the year ahead.

         

Market view

Normally a period of low interest rates is immediately followed by increased refinances and payoffs. However, due to significantly tighter criteria applied to originations, refinances have remained relatively flat.

These tight regulations on originations will likely result in many institutions attempting to increase revenue through MSR or whole loan sales as well as RMBS securitizations, and the amount of scrutiny being applied to these transfers or securitizations is now presenting its own set of challenges.

The market is seeing new standards take hold in the area of due diligence for loan transfers and securitization. 

Historically, there have been too many issues in the collateral files for seasoned loans and it’s caused problems that investors are no longer willing to tolerate. 

Ratings agencies are now taking a closer look at these files before assigning a rating to a new issue, which is causing investors to exhibit a great deal more care and pay more attention to due diligence standards before purchasing loan pools.

This environment is forcing the industry to perfect the collateral files. This protects everyone involved in the transaction, but it requires firms that are selling a portfolio of seasoned loans or going to the capital markets with a new issue to know much more about what they actually own.

The potential problems that can arise from chain of title and document-related issues have made due diligence much more important.

Obsessed with details

As the industry began to take a collective look at the processes as they existed up to the recession and begin looking for best practices that would prevent similar outcomes in the future, Nationwide Title Clearing was in a unique position of having already done much of this homework.

“At NTC we’ve been obsessed with understanding the issues of regulatory changes and creating new standards for years,” said John Hillman, CEO of Nationwide Title Clearing. “These innovations, and many others like them, spring directly from an obsession with the details and an insistence on making things right.”

NTC has been handling deficiencies in collateral documents for more than 20 years, working on projects that required it to trace the steps from a faulty document or collateral file back to the root cause of the problem.

Over those years, the company developed best practices and standards for due diligence and prevention in addition to remediation and curative actions.

Starting in 2010, NTC introduced mortgage assignment chain audits to help put the messy administrative process into order, formally releasing the program as PerfectChain Assignment Verification Reports. 

AVRs have since become an industry standard and have been adopted as a best practice for several years.

Growing organically

However, NTC recognized that the assignment chain was just one aspect of the collateral file
and that lenders needed due diligence, reporting and remediation services on all aspects when trying to accomplish clean transfers and securitizations.

 

“NTC is unique in that we are one of the only, if not the only, privately owned companies in our segment. 

“We have grown organically from creating lien release documents out of a small office in California to a market leader in post-closing services, due diligence and document production,” Hillman said.

The company has retained the personal-level interaction with its clients that it established as a private company, and continues to focus on its unique specialty.

“For many years our industry had a ‘quantity over quality’ approach. Projects went to the lowest bidder and this often meant shoddy work,” Hillman commented.

“A shift has occurred and, even if the pendulum may have swung too far, the overriding attitude is one that NTC has felt all along — there is no substitute for high-quality expertise.

“NTC is poised to not only continue to grow, but to significantly contribute to setting standards which help our industry, county recorders and ultimately the homeowners,” Hillman said.

This article was originally published online on HousingWire's website. You can access the article here.