Lux joins the mortgage tech company from Cenlar FSB, the nation’s largest subservicer, where he served as executive vice president and chief operating officer for the past six years leading their entire servicing and technology operation. 

He led Cenlar FSB’s digital transformation utilizing automation through chatbots as well as migrating its technology to the cloud. 

“The business of servicing has long since outgrown available technology which increases borrower dissatisfaction, exposure to risk, inefficiencies, and operating costs,” said Lewis Ranieri, founder and chairman of Ranieri Solutions. 

“Rob’s unique background in mortgage includes extensive technology prowess with leading large servicing operations,” Ranieri added.

Lux’s career includes positions at Freddie Mac where he was executive vice president and chief information officer for seven years, and principal at Towers Watson, a global professional services company, where he was responsible for leading teams in the delivery of commercial risk modeling technology for the insurance industry.

Founded in 2018 by Lewis Ranieri – the co-inventor of the mortgage-backed security – Ranieri Solutions is a financial services-focused technology company that invests in, develops and applies innovative technology solutions in the real estate and mortgage industries.

Ranieri’s cloud-based platform features include a digital loan file that provides a central repository for documents, images, audio and video;  end-to-end servicing for performing and default loan processing using a single integrated system and real-time integration through an application programming interface ecosystem.

His term as executive chairman began on January 19. 

Sagent’s appointment of Marshall comes amid the company’s goals to deliver the mortgage servicing industry’s first cloud-native software platform this year.

Marshall will work closely with Sagent’s executive team to achieve that goal as well as oversee the firm’s long-term strategy, according to the firm’s release.

“Mortgage servicing is the last and toughest mile of mortgage industry modernization, and Sagent’s technology, team, and industry expertise make it the best software partner for America’s servicers,” said Marshall. 

He added: “Sagent’s new platform will streamline processes and dramatically lower operating costs for servicers, while significantly improving customer experience.”

Marshall first joined Sagent’s board of directors in 2022 as part of a multi-year agreement with Mr. Cooper Group.

In 2022, Mr. Cooper and Sagent announced a deal under which Sagent will buy certain intellectual property rights related to Mr. Cooper’s proprietary, cloud-based technology platform for mortgage servicing, and Mr. Cooper will receive an equity stake in Sagent. Marshall joined Sagent’s board under the terms of the transaction.

He will continue to lead efforts to raise capital for Mr. Cooper’s first mortgage servicing rights (MSR) fund while shifting his focus to Sagent and the success of its customers.

Prior to joining Mr. Cooper in 2019, Marshall served as executive chairman at Tax Guard Inc. and was co-founder and CFO at Capital Bank Financial Corp. 

His career includes positions at GMAC, Inc., now Ally Financial, Inc. and The Blackstone Group L.P.

Founded in 2018, the King of Prussia, Pennsylvania-headquartered fintech primarily offers three platforms serving both consumer and enterprise customers — including a servicing system of record — a platform for borrowers to manage a loan in default and a servicer-branded customer attention, retention and engagement platform.

In response to the recent recommendation by a magistrate judge against the dismissal of Dancy-Wilkins v. Compu-Link Corporation, the servicer said that the recommendation was made on a more procedural basis rather than the actual merits of Celink’s original motion to dismiss “without prejudice” — meaning it can be refiled at a later date if granted — according to court documents reviewed by RMD.

Celink’s filing

The dispute arises from an adjacent case in which Celink is also a defendant, Shakespeare v. Live Well Financial, which alleges that companies including Celink improperly paid property taxes before they became due without legal justification or notice.

In the initial recommendation, the magistrate judge took Celink to task for failing to mention the applicability of the Shakespeare case to the Dancy-Wilkins proceeding, but Celink holds that the core merits of each case did not require it to do so, according to the filing.

“As Magistrate Judge Shields held, Shakespeare has no factual or legal relation to this matter,” Celink attorneys said in the filing. Additionally, “Celink did not violate the letter or spirit of the local rules or this Court’s prior orders. […] Celink respectfully requests that the Court sustain its objections to the report and consider the merits of its motion to dismiss.”

Lawyers for the servicer go on to say that the outcome of the Shakespeare case “will have no impact on the Shakespeare matter or vice versa,” the filing reads. “The report relies heavily on the fact that Shakespeare is ‘related’ to this case, taking Celink to task for failing to mention Shakespeare in its opening brief and thereby purportedly violating [local rules].”

Dovetailing with Shakespeare

Celink says that plaintiffs in the Shakespeare case sought to add Sheila Dancy-Wilkins and her 93-year-old mother, Flora Mayweathers — plaintiffs in the direct case — as additional plaintiffs in the Shakespeare case. However, when that was attempted, the judge denied the motion by saying that “such case may not be properly designated as related to the instant action.”

This, Celink says, helps illustrate that Shakespeare has no real impact on the Dancy-Wilkins case and that the magistrate judge should have taken these events into account when making the December recommendation.

“[T]he essential facts of the claims alleged by Shakespeare and [Dancy-Wilkins] are separate and distinct,” said Magistrate Judge Anne Shields in a separate filing, as cited by Celink’s attorneys.

Celink also says that it did not violate local rules by filing its dismissal motion “because it did not have a duty to address a case that involved unrelated factual allegations and legal issues,” the filing reads. “As […] Magistrate Judge Shields found, Shakespeare is not a ‘related case,’ and Celink, therefore, could not have violated [local rules] by failing to raise it to the Court in its opening brief seeking dismissal of the complaint.”

Last month, the AARP Foundation joined the suit on the side of the plaintiffs, saying at the time that it continues to see additional interest fees added to the “wrongfully inflated loan balance every month,” the Foundation said in its announcement.

Recent order

Another complicating factor in this case is the inclusion of RMF as a defendant. The lender’s counsel of record withdrew representation of RMF in early 2023 after its business arrangement ended with the lender following the company’s bankruptcy.

This past October, RMF’s bankruptcy plan administrator notified the court that it “does not intend to appear on behalf of RMF or file any responsive pleadings” in connection with the case.

However, plaintiffs in the Dancy-Wilkins case continue to seek documents and other information — or “discovery” in legal terms — from RMF’s bankruptcy plan administrator, and has not yet been successful. In an order filed on Tuesday, Magistrate Judge Lee Dunst said that any attempts at discovery from RMF must comply with an order issued on Dec. 8 that said plaintiffs “shall not seek any additional discovery prior to a decision by Judge Seybert on the dismissal motion” without consent of the defendant, or prior approval “of the proposed discovery by the Court.”

An earlier November order also said that “[a]ll future relief sought […] also shall address overlap, if any, with the pending Shakespeare litigation,” and that their discovery attempts “fail to comply with those aforementioned court orders.”

Plaintiffs will need to file a new, supplemental submission by Jan. 8 that complies with those prior court orders, he said.

The company has decided to cut 212 jobs in its Lake Zurich site starting on Feb. 16, 2024, per a Worker Adjustment and Retraining Notification Act (WARN) filed with the Illinois Department of Commerce and Economic Opportunity. 

“This action is a partial reduction in the company’s workforce at the site above; the company intends to continue operations at this site; this action is expected to be permanent,” Lisa Herrmann, assistant vice president of human resources at Dovenmuehle, wrote in the document sent on Dec. 14 to the state authority. 

A spokesperson for the company wrote in an emailed response to HousingWire that, as a private company, “Dovenmuehle does not comment on internal matters, including workforce details.” The spokesperson did not provide more details, such as the reasons for the workforce reduction and the jobs affected. 

However, higher mortgage rates this year led mortgage origination volume to decline to $1.6 trillion, compared to $2.2 trillion the previous year, according to the Mortgage Bankers Association (MBA). Volumes are expected to increase 22% in 2024 to $2 trillion. 

Dovenmuehle, founded in 1844, provides a private-label mortgage sub-servicing solution, per its website. It is a sub-servicer for commercial banks, credit unions, independent mortgage lenders, MSR investors and state housing finance agencies nationwide.

Its services include portfolio, government, and Fannie Mae and Freddie Mac loans. 

In September, it appointed Robert Howerton as chief information officer to oversee the company’s IT infrastructure. Before joining Dovenmuehle Mortgage, Howerton was IBM’s leader platform security engineer.

The proposed policy

FHA in May submitted — and in November, updated — a draft Mortgagee Letter (ML) to the Single Family Drafting Table, an online portal for stakeholders to review proposed policies. The proposed ML would establish a new loss mitigation option for mortgage borrowers called the “payment supplement.”

It would establish “a new home retention option to help struggling homeowners meet their mortgage obligations,” according to the May 2023 announcement from FHA. “The new option, called the Payment Supplement Partial Claim, would allow mortgage servicers to use the FHA Partial Claim both to bring a borrower’s mortgage current and to provide temporary reductions to their monthly mortgage payments for up to five years.”

Industry response

Members of the MBA and NMSA submitted a letter to FHA Commissioner Julia Gordon on the matter this week, largely supporting it but making a series of key recommendations designed to address industry concerns.

“The resources required to implement and maintain the Payment Supplement, including a servicer’s ongoing obligation to borrowers and [the U.S. Department of Housing and Urban Development (HUD)] throughout the Payment Supplement Period, require additional amendments to the Draft ML,” the letter explained.

“We are very encouraged by FHA’s thoughtful process to date and request certain changes to allow for the successful implementation of Payment Supplement by reducing [its proposal’s] operational, compliance, liquidity, and reputational risks,” the letter added.

The payment supplement policy “[combines] a standalone Partial Claim to bring the mortgage current with a new monthly principal reduction (MoPR), which will temporarily provide a monthly payment towards the principal portion of a borrower’s monthly mortgage payment, without requiring the mortgage to be modified,” the letter said.

The payment supplement would also “provide a temporary payment reduction for three years, after which the Borrower will be responsible for resuming payment of the full monthly [principal and interest] amount.”

Recommendations

The MBA and NMSA letter makes four key recommendations: to increase the proposed incentive payment from $1,000 to $3,500; to provide the model note and payment supplement agreement while “remov[ing] enforceability;” to end the payment supplement if a borrower re-defaults during the supplement period; and to provide 9-12 months for successful implementation of the policy.

“Sustainable loss mitigation policy is necessary to preserve affordable homeownership,” the letter said. “FHA guidance must continue to reduce the program’s complexity as the draft ML touches on all aspects of a servicer’s operations and loan lifecycle.”

Servicer engagement with borrowers is “heavily impacted through multiple required communication touchpoints,” and the supplement as currently proposed “remains administratively burdensome and costly to temporarily implement and maintain as a solution under the COVID-19 Recovery Loss Mitigation waterfall,” the letter explained.

Addressing the identified gaps will improve the borrower experience, the letter said, as well as “reduce the risk of inadvertent noncompliance for servicers and establish a permanent program.”

The company, which helped organize over $2 trillion in mortgage-servicing rights (MSRs), changed its brand name to Incenter Capital Advisors. It will emphasize corporate strategy and capital markets activities in different asset classes, institutions and balance sheet types.

Amid the changes, founder Tom Piercy will take the chief growth officer role. JB Long, who joined parent company Incenter Lender Services in July as chief revenue officer, will be the company’s president. 

Before Incenter, Long spent 26 years at EverBank/TIAA Bank, where he was one of the earliest executives at the financial institution. He was also an executive vice president of capital markets at Ocwen Financial Corporation.

“Our clients are turning to the capital markets to proactively seek out broader customer offerings, pricing dislocations, higher-yielding assets, and portfolio growth,” Long said in a statement. “These markets also offer protections against today’s headwinds, including interest rate risk, capital and liquidity requirements, and stringent regulations.” 

Bruno Pasceri, the president of parent company Incenter Lender Services, said Incenter Capital Advisors provides clients a “new competitive advantage.”  

The company’s solutions include transactions such as structured hedging and M&As; analytics and reporting on dashboards and key performance indicators; advisory solutions on product and service development; and specialty solutions such as lending as a service. 

In May, HousingWire reported that Incenter launched a new digital MSR exchange, known as eMSR Exchange, which connects buyers and sellers of co-issue flow offerings online and provides pricing 24/7.   

But compare mortgage delinquencies over the same period: 2.8% in September 2022, 2.8% in September 2023, according to CoreLogic data.

CoreLogic’s Loan Performance Insights data, shared with HousingWire, represents foreclosure and delinquency activity reported for first liens against a property. It encompasses approximately 75% of the nation’s foreclosure data.

CoreLogic principal economist Molly Boesel attributes much of the stability in the low delinquency rate to low unemployment over the period.

“The overall U.S. delinquency rate was unchanged from one year ago in September and remains near an all-time low,” Boesel said. “While there was a decrease in the share of mortgages six months or more past due, there was a compensating increase in early-stage delinquencies. If the labor market weakens in the coming months, expect further increases in mortgage delinquencies.”

There are exceptions, however, to the stable and low delinquency rates seen at the national level. CoreLogic’s LPI report highlights one common factor: natural disasters.

Kahului-Wailuku-Lahaina, which suffered significant damage from wildfires in August, had the largest year-to-year increase in delinquency rates in the country – more than 140 other U.S. metros that netted year-to-year increases in September. The metro’s delinquency rate rose 3.5 percentage points to 5.7%.

The report also notes that delinquency rates remain higher in Punta Gorda and Cape Coral-Fort Myers, metros in Florida that were hit by Hurricane Ian in September 2022.

That is noteworthy, considering that a recent Redfin analysis concluded Americans are increasingly moving to counties prone to flooding, wildfires and excessive heat, areas sometimes abandoned by insurers.

The majority of cities in the U.S. saw their delinquency rates hold or fall on a year-to-year basis in September.

Serious delinquency rates – defined as delinquencies of 90 days or more – were even rosier for most U.S. cities. The rate fell for 367 metro areas, stayed the same for 14 and rose in only three: Punta Gorda, Cape Coral-Fort Myers and Elkhart-Goshen, Indiana.

The state-level view is similar. Rates of delinquencies of 30 days or more rose year-to-year in only 15 states, and the largest increase – South Dakota – was only half a percentage point.

In a 2019 lawsuit, Black Knight accused Pennymac of copying its mortgage servicing platform, MSP, to create its Servicing Systems Environment (SSE) platform. 

On Nov. 28, an arbitrator awarded Black Knight $155.2 million in damages related to a breach of contract claim (plus interest and attorney’s fees), representing six years of avoided license fees.

Meanwhile, according to the arbitrator’s conclusion, Pennymac will keep all its intellectual property and software, including SSE, “free and clear of any restrictions on use.” Pennymac said SSE has allowed it to reduce its servicing costs per loan by over 30% since its implementation.

The arbitrator issued an interim award, which means the companies can still move to correct, modify or vacate it before a state court confirms it. 

Black Knight filed a complaint against PennyMac in November 2019 for breaching contracts and misappropriating trade secrets. According to the plaintiff, Pennymac stole its mortgage-processing system and created one of its own. 

The lawsuit, filed in the Fourth Judicial Circuit Court in and for Duval County, Florida, sought $340 million in damages and injunctive relief under the Florida Uniform Trade Secrets Act and declaratory judgment of ownership of all intellectual property and software developed by or on behalf of Pennymac. 

In March 2020, the companies entered arbitration. 

More than three years later, the arbitrator awarded, in part, Black Knight‘s breach of contract claim and denied the claims of trade secrets misappropriation and injunctive and declaratory relief.

“The arbitrator concluded (wrongfully in our view) that Pennymac’s access to MSP allowed it to increase the speed of developing SSE and awarded Black Knight lost profits in the form of licensing fees it would have otherwise received from Pennymac over a longer development period,” Pennymac said in an 8-K filing with the Securities and Exchange Commission (SEC). 

ICE, the new owner of Black Knight, said in a statement that it “will continue to seek the robust protections afforded to trade secrets and confidential information under federal and state law, including in products developed using its confidential information.”

According to Pennymac, the accrual related to the interim award will be recorded in the fourth-quarter earnings, with an impact of $2.85 per share. The company states it had $1.2 billion cash on its balance sheet as of Sept. 30 to fulfill the interim payment.

Analysts who cover Pennymac at Jefferies wrote in a report that they “would expect a modestly negative reaction to the charge, which equates to roughly 4% of book value.”

Delinquent home loans on one- to four-unit properties rose to 3.62% of all outstanding mortgages in Q3, up from 3.37% the previous quarter and 3.45% a year ago, according to MBA’s National Delinquency Survey.

“The increase was driven entirely by a rise in earliest-stage delinquencies – those 30-days and 60-days past due. Later-stage delinquencies – those 90 days or more past due – declined to the lowest level since the first quarter of 2020,” Marina Walsh, MBA’s vice president of industry analysis, said in a news release.

The 90-day delinquency rate fell to 0.98% in the third quarter, down from 1.07% in Q2, the survey found. Meanwhile, the delinquency rates for loans 60 days past due (0.62%) and 30 days past due (2.03%) increased quarter over quarter in Q3 from 0.55% and 1.75%, respectively. 

Over the third quarter, the total delinquency rate for conventional loans reached 2.5%, up from 2.29% in Q2. Meanwhile, FHA delinquency rate saw a larger jump to 9.5%, up from 8.95% the previous quarter. The VA delinquency rate reached 3.76%, up from 3.70% in Q2.

South Dakota, New Mexico, Hawaii, Mississippi, and Louisiana posted the largest quarterly increases in their overall mortgage delinquency rates. 

Additionally, the percentage of loans in the foreclosure process rose by  0.14%, up from 0.13% in Q2. However, that’s notably lower than the historical quarterly average of 0.40%.

As delinquency and foreclosure rates remain reasonably low, Walsh said that homeowners might have used loss-mitigation options to prevent foreclosure. Another explanation is that equity-rich homeowners might be selling their homes  before foreclosure becomes a necessity. 

Mortgage delinquencies track labor data closely

The October jobs report revealed that the unemployment rate rose to 3.9% — the highest level since January 2022. The MBA forecasts slower hiring and rising unemployment by the end of 2024, with unemployment expected to hit 5%.

“The increase in unemployment will likely mean further increases in mortgage delinquencies, particularly for FHA borrowers,” Walsh said.

The original plan — to buy up troubled mortgage assets — was quickly abandoned in favor of actions like capital infusions for banks and the bailout of our auto companies. For our nation’s homeowners beleaguered by toxic mortgages and underwater loans, Treasury created a plethora of programs — with acronyms like HAMP, HARP, FHA Short Refi and the Hardest Hit Fund. 

Some worked well, others not so much. Quickly building a loss-mitigation system in the midst of a crisis was a challenge. We had not experienced such a level of defaults and foreclosures since the Great Depression. Moreover, instead of the longstanding prevalence of banks holding loans in portfolio, we needed to develop de novo standardized loss-mitigation programs for new-fangled structures called mortgage-backed securities.

The good news is that this period of experimentation with mechanisms to keep defaulted borrowers out of foreclosure has evolved and been refined over the last 15 years into effective, standardized loss-mitigation programs that both keep borrowers in their home and reduce losses on the underlying home. And key federal agency mortgage loan programs like FHA, VA, and Fannie Mae and Freddie Mac have fully embraced them. Government is often criticized — but here we used lessons learned to build a better mousetrap.

The linchpin of these efforts is the partial claim. The concept is simple. A homeowner loses their job and falls behind on their payments, then gets back on track when they secure a new job. 

Commonly, the homeowner lacks the funds to cover payments missed while jobless. The default action for such borrowers is foreclosure. But not only does the borrower lose their home, a foreclosure also significantly inflates loan loss levels. And this on a loan where the borrower is once again capable of making the monthly payments.

Under a partial claim, the underlying mortgage loan program advances the funds for the missed payments, and structures the advance as a second lien, with repayment tacked on to the end of the existing loan term. This tool is ideal for a situation like COVID-19, where a short-term crisis boosted defaults arising from a temporary loss of a job or income (and Congress offered these borrowers forbearance). 

A second critical component of successful loss-mitigation efforts is the job of servicers, which execute the programs directly with borrowers. I was working on the House Financial Services Committee in 2008, handling phone calls from irate borrowers who could not get banks to even return their phone calls, much less help them with their loan. Moreover, banks actually had financial incentives not to use loss mitigation tools, since they could accelerate or increase losses on second lien home equity loans they held.

In the 15 years since then, nonbank independent mortgage banks (IMBs) — which is what our Community Home Lenders of America (CHLA) members are — have taken over a significant portion of the mortgage business from the banks. The record conclusively shows that IMB servicers are now doing a much better job than the banks did in 2008 to work with defaulted borrowers and implement loss mitigation to keep borrowers in their home. So, not only have loss-mitigation options like partial claims improved, but their execution is much better.

How did this work during COVID?  The answer was just fine, thank you. Take Federal Housing Administration (FHA) single-family loans. FHA’s 2022 Annual Report noted that FHA helped more than 1 million homeowners in 2022 who were behind on their mortgage payments obtain an FHA COVID-19 Forbearance and/or an FHA COVID-19 Recovery option to stay in their homes. The percentage of serious FHA delinquencies fell from 11% at the height of COVID to less than 5% at the end of the last fiscal year.

And FHA, under Commissioner Julia Gordon, continues to refine the partial claim tool to improve it. Last year, FHA launched a new partial claims payoff portal to streamline information about partial claims payments and also announced a 40-year loss mitigation option.  In May of this year, FHA announced a new partial claim option that could obviate the need for servicers to buy loans out of pools, a move CHLA applauded, since it would avoid costly re-pooling in a rising mortgage rate market.

Fannie Mae and Freddie Mac have also developed strong loss-mitigation tools. In March of this year, FHFA announced new enhanced payment deferral policy for borrowers facing financial hardship. FHFA Director Thompson noted that Fannie and Freddie have “completed more than one million COVID-19 payment deferrals during the pandemic, helping borrowers nationwide to stay in their homes.”

The Department of Veterans Affairs (VA) should also be commended for its proactive response to COVID-19 in its guaranteed mortgage loan program. Additional flexibilities adopted by VA included more options in its home retention waterfall, allowing borrower deferments, and creating a VA Partial Claim Program and a refund modification option.

VA is also developing a Servicing Purchase Program (VASP), where the VA would purchase the loan from the servicer, modify it to a very low rate, and service the loan directly for the remaining life of the loan.

The 2008 Housing Crisis was a nightmare. But there was one silver lining. Like a Phoenix rising from the ashes, not only did our economy and housing markets recover, but our homeowner retention programs born in this period have become an unparalleled success. And that is a story that must be told.

Scott Olson is the Executive Director of the Community Home Lenders of America (CHLA)and was the Housing Policy Director for the House Financial Services Committee at the time of the 2008 Housing Crisis.

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

To contact the author of this story:
Scott Olson at scottolson@communitylender.org

To contact the editor responsible for this story:
Sarah Wheeler at sarah@hwmedia.com