Dave Biggers — you know him — e-mailed you last week to let you know how much our first a la mode Annual Convention rocked. Even if he didn't say it in just that way. See his message here. You can visit our post-convention page complete with pictures, video of some of the key panel sessions and events, testimonials and much more here.
"First true integration" between appraiser and client desktops
Your residential clients use Loan Origination Systems (LOSs) the way you use WinTOTAL — it's their mission critical application they use to manage almost everything they do day to day. They keep track of borrowers' files and paperwork. They order credit scores and get preliminary underwriting decisions. They order appraisals.
Soon thousands of users of some of the very best LOSs on the market — Encompass®, Genesis 2000® and Contour™, all developed by Ellie Mae — will be using the XSites Network back end to order, keep track of and receive those appraisals. Encompass, Genesis and Contour users will place orders right through their LOS, and the data will flow into your formfilling software on the other end (regardless, as always, of brand). You manage the assignment the way you manage one you've received from a visitor to your XSite. And you deliver the final product the same way, too. You'll just do it more often.
We're accomplishing this by building a custom Ellie Mae plugin for XSite Order Manager, and by building new custom facilities within Ellie Mae's suite of LOS products. We've done plenty of plugins you're familiar with for lenders and management companies. Same concept, but with an important difference. These plugins are more "ground level" — orders come right from the desktop of your broker/loan officer client to yours.
Ellie Mae users will benefit because with a few clicks their order can be routed right into the software of an appraiser in any county in any state. "This partnership marks the first true software integration of two of the most important stakeholders within the mortgage origination process, the originator and the appraiser," said Joseph P. Tyrrell, Senior Vice President of Ellie Mae. "While other attempts to improve the communication and efficiencies between these two critical parties have largely been one-sided, including solutions that others have tried to distribute through our network, our partnership with a la mode will result in true value for both the loan originator and the appraiser."
"While other companies have tried to take an indirect approach to improving communication, a la mode and Ellie Mae have created a direct path, bolting together the desktops of both the loan officer and the appraiser," said Scott Kinnaird, our Chief Strategy Officer.
Read more by clicking here.
Busts don't follow booms: FDIC
Though we keep hearing that recent home price appreciation is "unsustainable" and will lead to a substantial "correction" — that is, that the home price boom may be followed by a home price bust — the Federal Deposit Insurance Corporation (FDIC) did something radical: It took a look at the data. History suggests that a boom alone is insufficient to cause a bust.
The FDIC considered 21 instances in the last quarter century of markets in which home prices fell at least 15 percent in five years. (PDF graph available here.) Few were associated with "booms" first: there were 54 "boom episodes" in markets in the 20 years prior to 1998, and 45 of them did not see a subsequent bust. In 83 percent of post-boom markets, nominal prices continued to inch up and any declines after inflation were very modest. "Home prices in these markets simply stagnated, or stalled out, following their booms rather than going bust," the report found.
Instead, localized economic stress, most profoundly in the "oil patch" areas of Texas, Oklahoma and Louisiana in the 1980s and "the early 1990s recession, massive defense downsizing after the end of the Cold War, a significant commercial real estate collapse, and either a sharp downturn in population growth or outright population loss," which combined to severely depress property values in California and the Northeast in the 1990s, were to blame for the majority of property value "busts." Even busts in Peoria, Ill. and Hawaii can be traced to local economic factors.
All that said, the report tries to identify reasons why history might not be an accurate guide with reference to today, when a record 33 markets are in the midst of home price booms (there were 24 in 1988, the previous record). "[C]hanges in credit markets ... are pushing homeowners — and housing markets — into uncharted territory," the report notes.
Subprime mortgage originations grew 25 percent per year between 1994 and 2003, a nearly ten-fold increase in volume in nine years. Home buyers are also availing themselves of "higher leverage mortgage products" — higher LTV loans, "piggyback" second mortgages — that make them more susceptible to delinquency and foreclosure than at any other time in the housing economy's history. Finally, a run-up in home prices that is unprecedented makes a market itself more susceptible to economic "shocks" that might not otherwise be enough to cause a "bust."
Still, the data and analysis show that a "boom" itself is probably not enough of a reason to forecast a "bust" — good news at the tail end of a widespread, historic home price boom. The FDIC report is available on the Web here.
Fannie, Freddie under fire
2005 has been a tough year already for mortgage funding giants Fannie Mae and Freddie Mac.
In his annual budget message to Congress, President Bush sought a new regulator for the government-sponsored enterprises (GSEs), as well as the Federal Home Loan Bank system. Senate leaders have been mulling GSE regulator reform since last year, but revelations in December that Fannie Mae may have to restate as much as $9 billion in earnings makes the time uniquely right.
Senate Banking Committee Chairman Richard Shelby, R-AL, has championed GSE reform since ascending to the chair, but the GSEs' formidable lobbying pushback put reform on the back burner in 2004. With Fannie's potential restatement, the White House and other Senators, notably Chuck Hagel, R-NE, John Sununu, R-NH and Elizabeth Dole, R-NC, who introduced a meatier bill than Shelby's this year, have begun to pile on.
The bill, S.190, could empower the new regulator to set limits on or ban the use of Fannie and Freddie's automated underwriting systems if they "directly or indirectly" infringe on a primary market activity, according to an analysis by National Mortgage News. The bill provides that the GSEs are not permitted to "directly or indirectly" participate in activities involving the "underwriting of a loan for origination."
Fannie and Freddie's automatic underwriting systems include bolt-ons for everything from ordering appraisals to AVMs.
Meanwhile, the GSEs' current regulator, the Office of Federal Housing Enterprise Oversight (OFHEO), has been leaning on Fannie. Last week, at OFHEO's prompting, Fannie agreed to several new internal, accounting and corporate governance rules including separating its CEO and Chairman of the Board positions, creating an internal Office of Compliance and Ethics and — we are not making this up — implementing "controls surrounding accounting ledger journal entries, including policies that prohibit the falsification of signatures."
To cut costs in advance of a deadline to boost its capital cushion against risk by 30 percent, Fannie has stopped awarding senior managers stock options, issued about $5 billion in preferred stock, slashed its dividend payout and has been shrinking its portfolio of loans.
