Tuesday, February 27, 2007

Portellus: new client uses platform for startup

Irvine-based Portellus Inc. has announced that Sydion Financial, a new mortgage bank based in Seattle, will be using three of the company's technology products, the LOS, a rules management system the company calls Enterprise Rules Management (ERM) and an integration services hub called PIXMO. The lender hopes to attract tech-savvy brokers and build out a low-cost origination network.

According to founder and CEO Spencer Richardson, the mortgage company can do this by fully leveraging the Portellus solution from the Point-of-Sale. "All too often, lenders implement promising solutions but then fail to utilize technology to full capacity."

That is true enough. I've heard many technology vendors cry that they spend millions on development of new software tools only to watch lenders plug them in and use them to push paper around their offices. It's the equivalent of buying a high-performance automobile to haul trash down to the local dump.

In the lenders' defense, there are plenty of good reasons that they don't fully leverage the technology they invest in--and a fair number of no so good reasons. MBA says lenders are investing more in technology than ever before (which isn't saying a whole lot because, according to Doug Duncan, MBA's chief economist, lenders spent about 10% of what most industries spend on tech). I confirmed this in conversations with some the nation's largest lenders at a users conference I attended last week.

The big difference between investments made now and those made just a few years ago is that now lenders actually have time to listen to their vendors yak on about all the cool things their technologies can do. Expect to see more companies doing a better job of fully utilizing their tech investments in the days ahead.

Friday, February 16, 2007

Capsilon: decoding the PDF document

In the early days, going paperless meant launching a scanning department and grabbing an image of every document in the process and then storing them electronically. Some lenders got famous doing this and it truly did offer some compelling advantages. One thing it didn't offer was the ability to easily extract data from those images for use in other technology tools.

The first pioneers in this area were the technology firms that support title companies. Back when I was editing Real Estate Technology Insight, I was covering a number of firms that were working to pull the data out of imaged public record documents in order to speed up title searches.

Today, we find that San Diego-based Capsilon is offering a data extraction technology that can pull data points from the pages of a PDF document. This is important because for all the benefits of the Fannie Mae SMART Doc, many lenders and investors will continue to produce electronic loan documents in PDF format.

This new, automated data extraction works independently, or in tandem with Loan Katalyst, the company’s recently released Intelligent Document Management system, which automatically classifies loan file documents as they enter the origination system. Katalyst’s online collaborative portal allows many permitted users to view and take action on loan files simultaneously, with full security.

Capsilon says that this tool will reduce errors and make underwriting, quality control and due diligence audits less labor intensive. The company says that appraisal reports will be one area lenders will be using its technology as a number of appraisal programs produce reports as PDF files.

Tuesday, February 13, 2007

Matrix: forecasting future home prices

Jonathan J. Miller runs a blog that I've been enjoying of late. He posted to his Matrix blog earlier this week about an article by Robert Shiller in the Wall Street Journal. Miller provides a thoughtful analysis of the role of housing fundamentals in home price forecasting and concludes:
"It doesn’t seem like anyone has a handle of the direction of macro real estate markets at the moment, beyond relying on conventional wisdom."
It's almost time for Veros to come out with its quarterly Hot and Cold Top 10 markets. After forecasting home prices for over three years, the company's analytics have proven surprisingly accurate. The Veros analysis goes way beyond conventional wisdom and is worth checking out.

Thursday, February 08, 2007

ABC: Not buying the media’s lede

Word on the street is that the mortgage business is in trouble. Serious trouble. Pack your stuff and move to high ground trouble, if you believe the story that came out today on USA Today.com.

“The mortgage industry plunged deeper into distress this week as two lenders said sagging home prices and higher interest rates are pushing many borrowers into delinquency…Shares of mortgage lenders fell across the board Thursday. Countrywide Financial and IndyMac Bancorp., the two biggest independent U.S. mortgage lenders, each fell more than 2%. Novastar Financial fell more than 11%, hitting a new 52-week low.”
Without getting into a long discussion on cycles and market trends and government agency intervention, let me just say that not every lender out there is buying it. America’s Broker Conduit (ABC), Melville, N.Y., for instance, is adding people at a fairly furious pace. H. Hilary Hamer was named the company’s new Senior Vice President of the Midwest Region earlier this month and last month the company hired Doug Hatch to be Branch Manager for the Las Vegas, Nevada branch. Hamer was previously with Well Fargo Home Mortgage as Senior Vice President, Central Division Manager, Institutional Lending. Hatch was a Vice President at Greenpoint Mortgage.

American Brokers Conduit (ABC) is the wholesale division of American Home Mortgage Investment Corporation, a publicly held Real Estate Investment Trust (NYSE: AHM). ABC operates nationwide and has built a business model based on a broker-centric strategy. At the end of Q3 2006 ABC was ranked as the 6th largest residential wholesale lender in the US with a market share of 3.88% according to National Mortgage News. The company works with 6,500 brokers through 33 wholesale branches in 21 states.

The company basically came out of nowhere to become a dominant player, which will not surprise you if you know CEO Don Henig. When he took over the management of the wholesale business in Q2 2002, American Brokers Conduit wasn’t even ranked in the top 100. Today, ABC produced just over half of the $15.5 billion in loan volume its parent company reported in 4Q06.

But can this business continue to grow when so many are scaling back operations, closing branches or going out of business?

I spoke to Lisa Schreiber, Executive Vice President for ABC about how she thinks that will happen.

“A lot of our competitors are still very focused on the transaction,” she said. “That’s important, but I think there are a lot of opportunities many are missing around partnering more closely with the broker.”

When I pointed out that many wholesale lenders are focused on the transaction because that’s where their brokers are focused, she agreed, but added that the lender has a responsibility that goes beyond that.

I have visited with Schreiber before and understand her company’s emphasis on broker training and how a lot of online real estate is devoted to it, but was impressed when she told me about the new initiative ABC launched to train its trainers.

“We’ve hired technology training specialists in each of our five regions,” she said. “They go out and help the Broker Relationship Managers (a special position inside ABC dedicated to supporting both the wholesale Account Executive and the broker) understand the technology we provide to brokers. Everyone inside is certified so they can, in turn, better train the brokers.”

Lots of lenders talk about providing training. Most mean brainwashing the brokers into thinking they are the only wholesale lender worth working with. When a lender takes its own medicine, on the other hand, is an indication that there might be a reason to make such a claim.

Only time will tell whether this strategy will take ABC through to the other side of the cycle. I’m not betting against them, and I’m not taking down this post. So we’ll look back and see in 2009.

Wednesday, February 07, 2007

Portellus: Growing its tech sales team

Portellus Inc., Irvine, Calif., has hired Craig Anderson and Holt Crowder as business development mangers for its national outside sales team. Crowder was senior sales executive for Mortgage Cadence, Greenwood Village, Colo., and Anderson was vice president of East Coast sales for Beanstalk Networks/OpenClose Mortgage Technology Group, West Palm Beach, Fla.

In their roles at Portellus, both Anderson and Crowder will be responsible for nurturing new business opportunities for Portellus’ Enterprise Rules Management (ERM), Web-based Loan Origination System (LOS), and point-of-sale portal solutions.

Normally, marketing staff additions don’t interest me much, but I have written a lot about both Mortgage Cadence and Beanstalk/OpenClose. Both are strong firms with solid technology offerings. Portellus, by comparison, is a relative newcomer to the space. I have not seen a recent demo of its software.

Sometimes, salespeople move around because they just like to move around. Portellus has been aggressive in its promotional efforts over the past year and was smart to put Joe Bowerbank in charge of that. They may have just decided to throw some money at this problem and hired some experienced execs.

Or there might be something going on over there.

Monday, February 05, 2007

Dynatek: 86% growth in Plug-In partners

This is the era of plug and play. SOA, industry data and messaging standards, the open source movement facilitated by a practically free global network and a general reluctance to get locked into multi-million dollar proprietary platforms has all conspired to create an environment where technology players just naturally gravitate toward partnership. But that, in and of itself, is not enough to justify an 86% growth in Dynatek Plug-In partners?

Dynatek offers the MORvision loan origination system. I spoke to founder Jack Luhtanen for a recent Mortgage Banking article. It’s hard to argue with the fact that his company was utilizing a Services Oriented Architecture long before it was cool. Plug-In partners are all the service providers that lenders work with who have taken the time to integrate their software with MORvision.

The Livonia, Mich.-based company made the announcement earlier this month, reporting that its Plug-Ins and Partners increased from 110 to 125. Plug-In transactions also grew by 241,724, bringing the company’s two-year adjusted growth to 86%.

Dynatek added 15 new Plug-Ins in 2006. This represents 13.64% growth in the number of partners, brings the company’s grand total up to 125 Plug-Ins in 17 categories, and triples the number of choices available to MORvision customers since 2004.

Thursday, February 01, 2007

Bloomberg: A story about us

There's an interesting story about the mortgage business on Bloomberg.com today. By interesting, I guess I mean weird. That's what sometimes happens when we try to write stories about our industry for a more mainstream audience.

The bottom line seems to be that subprime ARMs are resetting and some folks are getting payment shock, as predicted. Many folks who may only have qualified for a loan due to lax underwriting standards are now at risk of losing their homes. Delinquency and foreclosure rates are already rising and the industry is attempting to tighten up its guidelines before legislators step in and rain on everyone's parade. A fairly typical story you might have already read a few times in our own industry's trade press.

But Bloomberg speaks to the masses, which must be why the story starts out not with the fact that foreclosures on subprime ARMs rose to 2.19% in the third quarter of last year (talk about a lagging indicator), nor the fact that investors are demanding 1.6 percentage points more than benchmark rates to buy BBB-rated bonds backed by subprime mortgages, both of which were mentioned in the article, but rather the story starts with Prince Jones, Jr.

Mr. Jones is a barber who took out a subprime ARM loan for a $170,000 house in St. Paul a year ago, we're told. We're not given any FICO information (that might confuse a non-industry business person, I guess), but we are told that he has debt and doesn't make much money. I guess we're supposed to assume that he shouldn't have been approved.

Now, Mr. Jones knows he's in a risky situation. The article makes a point of explaining that he planned to use his good payment history to refinance into a new loan before the ARM adjusted. It's risky, but this is America and we often take risks if we believe it will better our situation in the long run. In millions of cases, this same risk has paid off and people who had been renters are now part of the largest pool of homeowners (read American Dream achievers) in history.

Not so for our poor hero. Sure enough, Mr. Jones gets hit by a drunk driver and can't make his payments and gets into trouble. He's still trying to catch up when the ARM adjusts and now he's really in trouble. So, you can clearly see from this story that the mortgage business is in for trouble. There are a lot of bars and liquor stores out there.

I have another story for you. A guy I know--we'll call him Peter--was never all that good at making his payments on time. Nothing serious, mind you, just not what we would call A-paper in our business. He got a subprime ARM and then sold off a big chunk of his business to a foreign investor who just happened to own a lot of media companies in Europe. Overnight his products were all the rage on the other side of the big pond and he couldn't spend his money fast enough.

Like Mr. Jones, Pete planned to go shopping for a new loan before his ARM adjusted and his payments went through the roof, but he never got the chance. As soon as his banker (and insurance agent and financial planner and accountant) figured out he was in the money, he was flooded with low-interest-rate mortgage offers. So, what should this story tell you about the mortgage industry in the United States? Exactly as much as Mr. Jones' story does.

Don't get me wrong. The industry is facing a fairly tough time and more companies will tank as we make our way through it. There were plenty of companies that probably should have tightened up their underwriting standards earlier, but for every 2.1% that went into foreclosure there were 97.9% that paid a whole lot of fees, points and interest for those loans. You don't even have to be an executive in our business to know that means profit.

If you want to tell me that the industry better make an adjustment or face more painful, harmful federal, state and local legislation, then tell me that. Don't try to amuse me with a pointless story about one data point out of millions that doesn't really even illustrate your point. The story could have come in 500 words shorter and more valuable with some good editing.