Innovative solutions powering the entire mortgage lifecycle
We're trusted by the most respected organizations in the residential real estate industry to power opportunity in their businesses through innovative, trusted solutions that support the entire mortgage lifecycle. From originations to secondary market activity to loan servicing and asset management, we leverage cutting-edge technology and expert-led services to power more efficient, effective and agile businesses. Let us power your opportunity.
Resources & Insights
Home-buying demand will remain robust in 2021, fueled by low mortgage rates, favorable demographic trends and a gradually improving employment landscape, according to Michael Fratantoni, Chief Economist with the Mortgage Bankers Association (MBA). But the economy is hardly out of the woods.
Last year saw a record-breaking $3.83 trillion in mortgage originations, according to the Mortgage Bankers Association (MBA), as interest rates plunged, and COVID-19 accelerated an ongoing exodus from cities to the suburbs. While 2021 volume is expected to slow somewhat, the purchase market appears to be on pace to surpass refinances, the MBA said. How can lenders gain market share and drive profitability in a white-hot purchase mortgage market?
In a post-pandemic world, business leaders are radically rethinking their approach to hiring and managing talent. The COVID-19 crisis has emphasized the need to respond nimbly to chaotic change, manage fixed costs, accelerate productivity and innovate more quickly. Many firms are looking to reposition, seeking critical skill sets and experience to help them evolve, innovate and stay agile amid rising disruption and volatility.
Q&A with Justin Vedder, President of Securent, An Innovative Loan Defect Insurance Solution to Help Mortgage Participants Reduce Risk, Improve Profits
SitusAMC recently announced the launch of Securent, an innovative risk management and insurance program that protects mortgage market participants from liabilities and losses associated with covered errors, omissions, or fraud introduced in the loan manufacturing process. We spoke with Securent president and industry veteran Justin Vedder about how Securent improves profitability for clients, by mitigating financial and counterparty risks associated with loan defects and fraud across the residential mortgage loan lifecycle. Who is Securent for and what does it do? Securent is designed for mortgage lenders, investors, residential mortgage-backed securities (RMBS) issuers, warehouse lenders, and other market participants. Securent takes a proactive and preventive approach to managing loan risk and pricing it appropriately. We offer Loan Defect Insurance (LDI), Mortgage Application Fraud Insurance, Residential Mortgage-Backed Securities (RMBS) Pool Defect Insurance, and Mortgage Servicing Rights (MSR) Loan Defect Insurance policies. We offer portable insurance that protects against manufacturing defects such as miscalculation of income, data corruption, fraud, misrepresentation, appraisal errors, and guideline and compliance-related violations. What makes this product unique? The innovation is really in the combination of our exclusive insurance model and SitusAMC’s technology. When humans are handling loan files, finding errors occurs by doing quality control on the loan after origination. The horse is already out of the barn, so to speak. Securent combines a proprietary insurance model and leverages SitusAMC’s dynamic technology tools in a powerful, seamless solution that offers end-to-end risk management for loan manufacturing. We drive increased efficiency, better accuracy, and cost effectiveness in our review process. Ultimately, the product increases the value of residential mortgage loans through comprehensive insurance programs, backed by a proprietary risk-rating model and A-rated insurance carriers. How does it work? We created a risk-based identification and pricing model which identifies the appropriate level of due diligence on each loan and the amount of insurance required to protect sellers, purchasers and RMBS issuers from origination risk. It’s called Securent’s Hazard Identification & Estimated Loan Diligence model, or SHIELD. SHIELD evaluates all loans, and scores them based on the likelihood of default, loss, and repurchase demand. The model analyzes those three probabilities, and writes rules against them, which results in identifying the loans that are highest risk -- those that require a deeper dive. What does this look like in practice? Consider a 90 percent loan-to-value (LTV) mortgage in Las Vegas to a borrower who has a 55 percent debt-to-income (DTI) ratio. Las Vegas as a market has a propensity to drop rapidly when the economy declines. So as a higher-risk loan, the model will identify the loan for thorough evaluation to ensure solid value, correct income calculation, etc. Compare that to a 30 percent LTV mortgage in Chicago, with a borrower showing a 12 percent DTI ratio. The model will categorize the loan as requiring less scrutiny due to the low DTI and 70 percent equity. Our model scores the loans and determines the sampling level based on quality and risk. If the quality of the borrowers, collateral package, debt-to-income ratio, or program guidelines start to slip, the model will recalibrate it with a higher risk rating. What are the key benefits? Securent mitigates repurchase risk and potential losses in the mortgage manufacturing process by turning unknown contingent liabilities into quantifiable known liabilities. We increase the overall value and desirability of loans and RMBS issuers and buyers. Because sellers and buyers have higher confidence in the loans, Securent facilitates faster purchases, shorter trade commitments, and reduced funding costs – resulting in shorter transaction timelines. We help lenders who use correspondent networks confidently scale their businesses because the insurance protection supports use of the full credit box, and minimizes the risk of adding a new channel or riskier loan products. Finally, by eliminating repurchase risk, we reduce losses associated with defects, increase the value of the loans, and help clients build more profitable businesses. In addition, our model is open-source, providing the flexibility to choose a preferred third-service provider, if the firm has completed Securent’s service provider review and approval process. How does this insurance program facilitate the transfer of risk and increase value? Let me give you analogy from the consumer credit card space. Company A serves borrowers on the lower tiers of the credit curve – people with inconsistent payment histories and defaults. These customers are higher credit risks. As a result, Company A’s stock trades at five times its price-to-earnings (P/E) ratio. Company B, by contrast, only works with high-end borrowers who have good credit histories, so Company B’s stock trades at 20 times its P/E. I view our insurance product as the Company B of the securitization world. Just as credit card companies measure credit risk, we measure mortgage loan risk. It’s almost as if we are offering a ‘mortgage loan FICO,’ if you will, because we actually go in and look at loans, decide which ones present the highest risk, and we can transfer that risk to us, raising the value of the pool. Everybody's good at pricing credit risk. But they don’t know how to structure the price of manufacturing risk or fraud. We'll take that risk, transfer it to us, and we'll take care of it. What’s the macro benefit to the residential mortgage market? Securent will strengthen the whole non-QM infrastructure and allow for lower securitization costs, which leads to better execution and quicker trading. I also think it can change the whole way we do securitizations. When you develop a process where you analyze all the loans through an analytical framework to assess risk and insured those assets accordingly, you’ve improved the ultimate investors’ value in those pools. For example, if you have a market-related credit event, such as COVID-19 or the subprime crisis, when loan performance and home values decline rapidly, investors in those pools are protected from the downside of any manufacturing defects. Every program is insured by Securent Risk Retention Group and back by A-rated London reinsurance carriers to ensure every valid claim is paid. Currently, RMBS pools with insurance, focused on credit-only issues, do not receive much if any value in securitizations. What makes the RMBS LDI different? We look at loans as if we were buying them, just like our clients. The only difference is we are insuring them. If we are going to take the origination risk, we want to be sure every loan is independently reviewed by an independent third-party reviewer. The fact that we look at every loan independently allows us to provide the most comprehensive coverage the market has seen. In addition, the independent review gives our clients the comfort that claims will be paid. This may sound odd but when a review is completed, we are saying that the claim is highly likely to be paid. For more information about Securent, visit www.SecurentRisk.com or contact Justin Vedder at firstname.lastname@example.org.
In this episode of On the Hill, Tim Rood, Head of Industry Relations, talks with Pete Mills, Senior Vice President of Residential Policy & Member Engagement at the Mortgage Bankers Association (MBA). Rood and Mills discuss what mortgage industry participants seeking to influence policy must know to successfully navigate the federal landscape. “Success really starts with finding a good policy solution that addresses your issue, but also legitimately speaks to the concerns of your other audiences,” noted Mills, an experienced financial services industry executive with more than 30 years of expertise in public affairs, government relations, public policy and research, all in the housing and mortgage finance arena. Mills and Rood discuss how the housing finance ecosystem, frequently driven by financial crises, evolved over the decades to include so many different agencies, policymakers, and supervisory and enforcement bodies. They look at why it’s so challenging to target the right audience on Capitol Hill, and why industry participants must look at the macro environment and policymakers’ constituencies to ensure messaging is positioned correctly. SitusAMC recently published the Field Guide to the Federal Government for Housing & Housing Finance, a first-of-its-kind digital experience providing an in-depth perspective on key influencers in Washington, D.C. and their impact on the single-family and multifamily real estate industries. The experience includes a white paper and an interactive map of the ecosystem, with an explanation of important players. “Housing is 16 to 18 percent of GDP, so it's a critical driver for the broader economy,” Mills said. “It's this extraordinarily important part of our social fabric; it's the American dream; it's the primary source of household wealth. Few industries score that high on both economic and social importance and impact. Our issues can sometimes be very complex and narrow … and very few policymakers are going to be able to wrap their heads around the complexities of your business. But if you can tie your issues to the broader macro trends, I think you can get policymakers to pay attention.” For example, the Biden Administration laid out broad policy themes when the president took office: COVID-19 as a national health emergency and economic threat; climate change as an existential threat; and racial equity and inclusion as a moral imperative. “To the extent that you can hook your issue to one or more of those themes, you're able to get attention,” Mills explained. “Understanding the environment you're operating in is really important.” Prior to joining MBA, Mills served as Managing Director and co-founder of the Community Mortgage Banking Project, a public policy organization that represented the interests of companies and coalitions involved in the housing and mortgage finance industries. Mills previously led corporate public affairs for Countrywide Financial, managed trade association policy advocacy for the California Mortgage Bankers Association and the California Association of Realtors, and conducted housing policy research at the Federal Reserve Board. He has a bachelor’s degree in Economics from the University of California at Berkeley, where he graduated with distinction in 1982.
Connect with a Professional
Securent, a SitusAMC Insurance Services Branch, Launches Comprehensive Risk Management and Insurance Programs
NEW YORK – Nov. 16, 2021 – Securent [www.SecurentRisk.com], a newly-formed provider of comprehensive risk management and insurance programs for mortgage and mortgage-backed securities (MBS) stakeholders, today announced the launch of its operations. A subsidiary of SitusAMC, Securent’s loan defect insurance protects primary and secondary mortgage participants against risk associated with defects introduced in the loan manufacturing process, including underwriting defects, compliance violation