CFPB shuts down California credit repair company for lying to consumers

CFPB shuts down California credit repair company for lying to consumers

Gavel justice law legal

Prime Marketing Holdings, a California credit repair company, was already on the radar of the Consumer Financial Protection Bureau, as several of its associated companies were fined earlier this year by the bureau for misleading consumers and charging illegal fees for credit repair services.

Back in June, the CFPB announced that Prime CreditIMC CapitalCommercial Credit Consultants and Park View Law, formerly known as Prime Law Experts, and several executives in charge of the various companies will pay more than $2 million for the alleged illegal actions.

Several of those companies partnered with Prime Marketing Holdings, which operated under several names, including: Park View Credit, National Credit Advisors and Credit Experts.

Now, the CFPB is doling out its punishment against Prime Marketing and banishing the company from the credit repair business.

The CFPB announced Wednesday that it filed a proposed final judgment that would resolve its previous actions against Prime Marketing Holdings. The bureau filed a lawsuit against Prime Marketing, claiming that the company charged illegal advance fees and misled consumers about the cost and effectiveness of its services and the nature of its money-back guarantee.

The final judgment would permanently ban Prime Marketing from doing business in the credit repair industry and require the company to pay a $150,000 civil money penalty.

According to the CFPB, between Oct. 1, 2014 and at least June 30, 2017, the company charged over 50,000 consumers more than $20 million for credit repair services.

But in the bureau’s lawsuit, which was filed back in September 2016, the CFPB accused Prime Marketing of making “misleading and unsubstantiated statements about its ability to improve consumers’ credit scores by removing negative information from their credit reports.”

The company also “misrepresented and failed to disclose the limitations of its money-back guarantee,” the CFPB said.

According to the CFPB’s complaint, Prime Marketing’s customers included people who were seeking to obtain a mortgage, loan, refinancing or other extension of credit.

The CFPB claimed that at times, Prime Marketing represented during calls to consumers that it is a “mortgage affiliate” or otherwise represented that it can help consumers get a mortgage.

The CFPB said that Prime Marketing allegedly made a number of false promises to its customers, including (taken directly from the CFPB):

  • Charging illegal advance fees: Prime Marketing Holdings charged a variety of fees for its services before demonstrating that the promised results had been achieved as required by law. Specifically, the company charged consumers initial fees that it, at times, claimed were required to obtain special credit reports for consumers. The company also charged set-up fees totaling hundreds of dollars and monthly fees that often equaled $89.99 per month.
  • Misleading consumers about the benefits of its credit repair services: Prime Marketing Holdings misrepresented its ability to remove negative entries on consumers’ credit reports. The company also misrepresented to customers that its credit repair services would, or likely would, result in a substantial increase to consumers’ credit scores, generally by an average of 100 points. The company lacked a reasonable basis for making these claims.
  • Misrepresenting the costs of its services: In some cases, Prime Marketing Holdings failed to disclose to consumers during sales calls that they would be charged a monthly fee.
  • Failing to disclose limits on “money-back guarantee”: Prime Marketing Holdings misrepresented that it offered a money-back guarantee if consumers were unhappy with the results of the company’s services. The company also failed to clearly and conspicuously disclose that the guarantee had significant limitations, including that the consumer had to pay for at least six months of services to be eligible for the guarantee.

To take effect, the proposed final judgment needs approval by the U.S. District Court for the Central District of California.

“Today we are taking action to shut down a company that deceived consumers into paying for credit repair services that did not live up to the company’s promises,” CFPB Director Richard Cordray said. “We remain committed to taking action against companies that mislead consumers into paying illegal fees with false promises.”

 

Direct homebuyer Opendoor getting into mortgage business

Direct homebuyer Opendoor getting into mortgage business

Digital house

Late last year, Opendoor, an online marketplace that buys homes directly from homeowners, announced that it raised $210 million to fund the company’s expansion beyond the two markets where it initially launched.

The company first began operating in Phoenix and Dallas-Fort Worth, but back in December, Opendoor said that it planned to expand to 10 new markets this year.

The company now operates in Las Vegas and Atlanta.

And as it turns out, that’s not the only way that Opendoor plans to expand; the company is also getting into the mortgage business.

The company is currently piloting a mortgage program in Phoenix, touting its ability to save homebuyers when they buy one of Opendoor’s properties.

Opendoor, which launched in 2014, operates by buying homes directly from sellers, then turning around and selling the homes on its own marketplace.

A homeowner seeking to sell their home can go to Opendoor, enter details about their home, and get a near-instant price quote for the home.

If the seller accepts, Opendoor then allows the seller to close on the sale when they’re ready, rather than on the timeline of another buyer.

From there, Opendoor makes any necessary repairs or upgrades, then sells the home through its marketplace.

According to the details provided by the company, more than 3,500 Phoenix homeowners have bought and sold homes with Opendoor. While that figure may not be earth-shattering, consider the company’s growth in just the last few years.

During a HousingWire webinar on Wednesday, Daren Blomquist, the senior vice president of communications for ATTOM Data Solutions, spoke about Opendoor and similar “instant offer” companies.

As shown in the chart below, taken from the webinar and courtesy of ATTOM, Opendoor’s growth over the last three years is significant.

Instant offers in Phoenix

The company also claims that it is the top listing agent in the Phoenix area, and said that 10,000 “home shoppers” visit the company’s site each month.

The company now says it’s taking a similar approach to the mortgage business.

“Mortgages are typically a huge pain point in the buying process, but now Opendoor is extending the same speed and service from the buying and selling experience to mortgages, with an added boost of cost savings for the customer,” the company said in statement.

Buyers using Opendoor Mortgage will be eligible for a 1% discount off the purchase of an Opendoor home in the form of a credit towards closing costs.

“We’re fearless about reinventing every step of the transaction to put more dollars in the pockets of our customers,” the company said.

The company said that buyers using Opendoor Mortgage can get prequalified in 30 minutes and close on a home on their timeline, just as they can when selling their home to Opendoor.

The company also claims that a buyer can close on an Opendoor Mortgage in as little as 15 days. According to the company, every buyer gets a dedicated loan expert, which allows them to lock in a mortgage tailored to their financial situation.

The company also launched its own title insurance operation, Opendoor Title, to cover all parts of the real estate transaction.

“We launched Opendoor Mortgage and Opendoor Title so we could handle the process for our customers from start-to-finish and ensure a streamlined transaction,” the company said.

While Opendoor is getting into the mortgage business, the company is not acting as the lender for its mortgage program. Rather, Opendoor will act as a licensed mortgage broker that works with correspondent lenders.

Back in December, the company said that it was handling $60 million in home volume each month and served more 4,000 homeowners since it launched.

Opendoor’s latest round of funding valued the company at $1 billion, making it the latest billion-dollar company to attempt to be a true one-stop-shop for the homebuying process.

Earlier this year, Redfin revealed that it recently began buying homes directly from homeowners with a service called “Redfin Now.” That news came on the heels of Redfin launching Redfin Mortgage, which added a mortgage-lending operation into Redfin’s existing digital-focused real estate brokerage and title businesses.

Now, count Opendoor among the companies that are trying to do it all in the real estate process.

Here are the top 10 metros where Millennials are moving

Here are the top 10 metros where Millennials are moving

boxes

Despite the idea that Millennials move around and don’t want to be tied down, young people today are actually less likely to move than previous generations.

In fact, data from the U.S. Census Bureau shows the mobility rate for young people currently sits at the lowest rate in 50 years. But SmartAsset, a financial data and technology company, analyzed the migration patterns of those 20 to 34-year-olds Millennials who did choose to move.

SmartAsset used data from the 2015 U.S. Census Bureau’s 1-Year American Community Survey to look at migration data on 218 cities, all 50 states and the District of Columbia.

For states, the study showed New York is losing its appeal, as it saw the biggest loss in Millennials, with 29,000 moving out.

On the other end of the spectrum, Texas moved to the top of the list, becoming the No. 1 state for Millennial migration. It received 33,098 new Millennials in 2015. SmartAsset’s study showed that the four states with the largest number of migrated Millennials — Texas, North Carolina, Colorado and Florida — all boast some of the nation’s fastest growing economies.

As far as cities, there are a number of surprises on this list of top 10 cities where Millennials are moving. The net number of migrants is listed for each:

10. St. Paul, Minnesota – 4,144

Moved in: 32,424

Moved out: 28,280

9. Denver, Colorado – 4,221

Moved in: 64,976

Moved out: 60,755

Colorado

8. Fort Collins, Colorado – 4,315

Moved in: 24,847

Moved out: 20,532

7. San Francisco, California – 4,833

Moved in: 62,399

Moved out: 57,566

san francisco houses

6. Spring Valley, Nevada – 5,347

Moved in: 13,546

Moved out: 8,199

5. Fargo, North Dakota – 5,990

Moved in: 19,375

Moved out: 13,385

4. Norfolk, Virginia – 7,198

Moved in: 33,795

Moved out: 26,597

3. Oakland, California – 7,494

Moved in: 26,456

Moved out: 18,962

california

2. Seattle, Washington – 9,886

Moved in: 86,641

Moved out: 76,755

1. Charlotte, North Carolina – 10,707

Moved in: 71,240

Moved out: 60,533

large

Amitree, maker of real estate email software Folio, raises $7 million to fund growth

Amitree, maker of real estate email software Folio, raises $7 million to fund growth

message tech

Folio, a Google Chrome extension that helps real estate agents manage all parts of a real estate deal from within their email, is currently used in approximately 5% of the nation’s real estate deals.

But that percentage could soon grow, as the Amitree, the company that makes Folio, recently raised more than $7 million to fund the company’s growth.

Specifically, the company raised $7.128 million in its Series A round of funding.

According to the company, more than 200,000 real estate transactions have been managed through the Folio software to date, and according to Google Chrome Store stats, more than 30,000 agents have Folio installed.

The company wants to grow both of those numbers and will put its recently raised capital toward that goal.

“So much real-estate focused technology is about disrupting the market in some attempt to replace real-estate agents, yet homebuyers and sellers rely on these agents for their experience and expertise more than ever before,” Jonathan Aizen, founder and CEO of Amitree, said. “Our goal is to empower the real estate agent and give them tools that help them do more of what they do best: put people in their dream homes and help them through that huge transition in life.”

The company bills Folio as a “smart transaction assistant” for real estate agent. Here’s how the Folio works, directly from the company:

Folio uses machine learning to process millions of emails and understand what’s going on with every one of an agent’s transactions. Folio helps agents manage their workflow, creating smart folders for each transaction that automatically sort an agent’s emails, files, and contacts. When looking at an email related to a transaction, real estate agents see contextual information right inside their email client that contains the transaction timeline, files, contacts, and status.

The round of funding was led by Vertical Venture Partners, with participation from existing investors, including Accel Partners.

Also participating in the funding was Seven Peaks Ventures, led by Tom Gonser, a partner at Seven Peaks and the founder of DocuSign. Through the investment, Gonser joined the board of Amitree.

“Real estate is going through a shift toward more intelligent tools that help streamline the experience,” Gonser said. “Electronic signatures were the beginning of this wave, and tools like Folio are the next step in enabling the real estate agent to bring more efficiency to their business through machine learning and vertical-specific AI that’s built for them.”

First American: Home prices keep rising, though affordability also improved in June

First American: Home prices keep rising, though affordability also improved in June

House

Home prices increased once again in June, however affordability did not take a hit, in fact, it improved, according to the latest Real House Price Index from First American Financial Corp.

The RHPI measures the price changes of single-family properties throughout the U.S. adjusted for the impact of income and interest rate changes on consumer house-buying power over time and across the United States at national, state and metropolitan area levels. Because the RHPI adjusts for house-buying power, it also serves as a measure of housing affordability. 

Consumer buying power, how much they can buy based on changes in income and the interest rate, increased 1.3% in June, and 3.5% from June 2016.

First American’s index points to signs of increasing affordability in the housing market. The index showed real home prices actually decreased 1.3% monthly in June, but increased 9.3% from last year.

“On a month-over-month basis, affordability improved slightly thanks to the seventh straight month of falling rates for 30-year, fixed-rate mortgages and modest wage gains,” First American Chief Economist Mark Fleming said.

“The increase in consumer purchasing power offset the gains in unadjusted house prices,” Fleming said. “However, on a year-over-year basis, with rates still higher than a year ago, affordability declined 9.3%.”

While real home prices are up more than 9% from last year, this is still down significantly, 34.8%, from the housing boom peak in July 2006 and even down 12.3% from January 2000 price levels.

First American measured unadjusted home prices rose 5.4% annually in June. However, this prediction is slightly lower than other home price measures, such as Black Knight’s report which showed home prices increased 6.2% annually to a new peak.

“The underlying fundamental issue is an overwhelming lack of supply,” Fleming said. “With current homeowners facing a prisoner’s dilemma and unwilling to list their homes for sale, little relief is expected in the supply of existing homes.”

“The supply of newly constructed homes is also sagging, adding to the supply challenges,” he said. “Over the last eight years, housing demand has increased by 5.9 million, but the net new number of housing units has only increased by 3.5 million. This supply shortage will continue to put pressure on affordability and strain first-time home buyers entering the market.”

Overworked and underpaid: Here are the challenges facing appraisers next year

It’s been an interesting year, 2017.

This is partly due to the unexpected good fortune that lenders enjoyed in 2016. Loan volumes were high last year, higher than many expected. It was good for lenders, but it took a hard toll on the industry and its suppliers. The result has been a number of unexpected challenges for the industry this year and, perhaps, some more to come.

While most sectors of the industry managed the increased demand with few hiccups, the appraisal services segment of the industry did not fare as well. The uninterrupted appraisal demand throughout 2016 and into the first quarter of this year led to chronic fatigue that spread throughout the appraiser population.

This led to a number of service level issues, including missed deadlines, longer than customary turn-times, increased revision rates, unresponsiveness and higher appraiser fee demands, to name a few.

These appraisal report quality and service level issues created friction between the appraiser population and lenders, real estate agents and homeowners. Some worried that we were beginning to see a new set of norms for appraisers, work quality and service levels. A closer look at the challenges appraisers faced will be revealing.

Challenge 1: Appraisal turn times

Whether purchase or refinance, historically speaking, real estate loans are expected to close and fund within 30 to 45 days of loan application. Purchase transactions usually depend upon a pipeline of settlements prior to and after a respective borrower’s loan settlement. Most sales contracts are written based on Buyer, Seller and Real Estate Agent expectations, which typically demand loan closing within 30 to 45 days of contract acceptance.

The increased workflow we saw in 2016 overwhelmed even the most seasoned appraiser professionals, causing them to continually miss deadlines without time to give warning or notification. Lenders and AMC’s alike made ceaseless attempts to communicate with and extract order status updates from appraisers with very little success. Mass disregard for communication and falling service levels caused delayed settlements, excessive revisions, extension rate lock fees and increasing frustrations across the industry.

As a result, lenders attempted to increase appraisal turn-time and fee expectations among members of the real estate community, as well as buyers and sellers with no success. This attempt at open communication with all parties was the right course of action and it might have worked if all lenders had been working in the same direction.

Unfortunately, some competing lenders were promising agents unreasonable turn-times in an attempt to win their business, even though they knew they could not deliver on their promises and offer a settlement to meet the sales contract demands. We could write volumes about business ethics between competing lenders and loan officers, but we will reserve that for another day. Notwithstanding the real estate demands, turn-times were extended out to accommodate the slowing appraisal deliveries.

Typically, as a result of vacation season, the summer market is known to lead to a reduction in loan volume, which would have given appraisers a welcome respite. But as if to compound the problem, interest rates declined leading into the summer which caused loan volume to remain constant, adding to the pressure on the appraiser community.

Consider also that the GSE’s had introduced their UCDP/UAD and appraiser were attempting to deal with the dataset findings and warnings without the benefit of sufficient training. It’s not that the appraiser community was unable or unwilling to adapt to the new requirements, but they had been improperly prepared. The GSE’s expected the lenders to communicate and train appraisers about the new system, datasets and warnings. This did not happen which forced appraisers to learn on their own. The GSE’s have since caught up with the training materials but a little too late.

Unfortunately for the industry, the appraiser community also vacations during the summer months, which pushed the due date on current orders out even further than anticipated. Where the appraisers seemed eager to manage their way through the increased volume of the 2016 spring market, their tune changed drastically when vacation season arrived.

Their message was unified, clear and concise: They were no longer willing to cater to their loyal client base.

Challenge 2: Appraisal fees

Appraisal fees are an enigma that leaves all parties feeling as if they are staring into a black hole looking for answers. This is not, however, a new challenge. Appraisers have been demanding higher fees for years with no consideration.

Part of the reason appraisers haven’t been more successful in achieving higher fee levels is that appraisers are unwilling to unite and work together through an organization or association. We have seen some very weak grass roots efforts to create this unity but with no success. Where many appraisers demand higher fees and are willing to band together to get them, there is still a community of appraisers in the marketplace that are willing to work for reduced fees.

High volume lenders and AMC’s are preying on these low fee appraisers in an attempt to generate higher profits from their services. It is not uncommon for a high volume lender or AMC to charge a borrower $500 for an appraisal report but pay the appraiser only $250. As long as appraisers are willing to work for these lower fees, the appraiser community as a whole is going to struggle with their cause to increase fees. Ironically, the lending community only hurts itself by promoting the lower quality work of a poorly compensated appraiser.

As a result of the continued outcry from the appraiser community regarding low fees, the interagency regulators established a rule that required lenders to pay appraisers a fee that is considered “reasonable and customary.” Typical for the federal government, regulators left a great deal of room for interpretation of the terms “reasonable” and “customary.”

Of course, we cannot fault the government for the vague language of its rule as it is not the duty of the government to establish the actual fees that are reasonable and customary in any jurisdiction. The government’s role is but to demand that they are paid accordingly. Many states have since taken the reasonable and customary fee rule to task and established minimum fees to be paid to appraisers for different appraisal report and assignment types. This is, in general, how it’s supposed to work.

Unfortunately, in some states, regulators seem to consider survey results an acceptable means of identifying reasonable and customary appraisal fees. Many of the surveys polled appraisers in an attempt to discover how much appraisers are being compensated for different appraisal report types and assignment conditions without the involvement of an AMC.

The problem with this approach is that the survey identified current appraisal fees, which from a historically perspective are deflated. For instance, in 2003 an appraiser in the Washington D.C. market charged $350 – $400 for a typical non-complex, non-FHA assignment, which consumed approximately 3 to 4 labor hours. As a result of increasing regulatory and industry demands, today in the same market an appraiser can expect to spend approximately 6 to 7 labor hours for a non-complex, non-FHA assignment for which they are compensated $375 to $450, on average.

Labor demands have increased by 100% and fees have increased by only 12%. Forgetting about cost of living increases, trainee appraiser limitations, overhead or other expenses, given the above scenario, appraiser compensation has declined by approximately 77% since 2003.

It seems that appraisers are on board with the reasonable and customary fee rule and the respective states’ approach to defining minimum appraisal fees. However, the states grossly missed the mark by setting the minimum fees incredibly low, thereby established a new normal appraisal fee. Now that these new normal fees have been established, appraisers will find it very difficult to increase their fees beyond state mandated minimums. It appears the appraiser community has been sold a 1972 Ford Pinto dressed as a 2017 Lamborghini.

Challenge 3: What’s coming next

If the challenges appraisers and the industry they serve were grueling in 2016, they could get even worse in the future. There are a number of risks appraisers are facing.

The appraisal-related issues the industry experienced in 2016 convinced lenders, policy makers, regulators and legislators of the need for change. Today, we find these decision makers analyzing the real value of the appraisal process and considering alternative solutions.

Industry complaints surrounding the appraisal issues of 2016 were taken seriously on Capitol Hill, causing politicians to demand explanations and solutions to the problem. If one thinks politicians will have no impact on the appraisal industry, think again. Remember back to 2009 when Congress and the POTUS restructured the automobile industry and fired the President of General Motors. Those actions changed the automobile world forever, leading to the collapse of Buick and Pontiac and leaving shareholders in the poorhouse.

GSE executives, for their part, have frequently denied allegations that they would approve an alternative to the real estate appraisal. Even so, they rolled out their revised Home Value Explorer and the Appraisal Waiver Programs in 2017. Where the terms have been in existence for some time, the programs have recently been refurbished to permit as many as 25% of refinance transactions to close without an appraisal report as opposed to less than 2% in prior years.

Another challenge, though there is some question as to how serious it is, is the shortage of new appraisers entering the business. Where there may be a shortage of appraisers during peak times, during normal business cycles under normal business conditions, appraiser turn-times return to reasonable tempos and fee increase requests recede in most markets, which leads one to conclude that the shortage may be somewhat overstated. That said, we cannot ignore the fact that the average age of a real estate appraiser is approximately 53 years old. Regulators are in the process of addressing the aging appraiser population and believe they have a remedy close at hand.

Despite all of these challenges, most markets are now seeing appraisal turn-times returning to more reasonable timeframes and service levels normalizing. For reasons outlined above, appraisal fees will continue to be an issue while the mortgage lending industry as a whole attempts to establish an appraisal fee equilibrium. We will still experience slower turn-times and higher fees during peak times in the business cycle, which is normal, historically speaking.

Appraisers ability to deal with these challenges in 2017 will impact the business environment in 2018 as surely as the events of 2016 have impacted this year. Understanding the business cycle and establishing business cycle expectations at the front end of the transaction across all parties will go a long way toward smoothing out the process for everyone and ultimately ensuring better borrower satisfaction.

Monday Morning Cup of Coffee: Zillow claims Zestimates now more accurate than ever

Monday Morning Cup of Coffee takes a look at news coming across HousingWire’s weekend desk, with more coverage to come on larger issues.

First and foremost, our thoughts are with all those affected by Hurricane Harvey. The hurricane made landfall on Friday evening, stalling over parts of Southeast Texas, just hours away from HousingWire’s headquarters outside of Dallas.

A report issued Friday by CoreLogic suggested that wind and storm surge from Harvey could cause insured property losses of between $1 billion and $2 billion for both residential and commercial properties.

The report, based on the storm’s projected path as of 10:00 a.m. Central on Friday, does not include projected insured losses related to additional flooding, business interruption or contents, because the rainfall is expect to last for several days.

But the damage likely far worse than CoreLogic’s report suggested, as the early projection of the storm showed that Houston would avoid much of the heaviest rain.

But that’s not the case.

The storm settled over Houston over the weekend, creating flooding of “historic proportions” in the nation’s fourth largest city. The images emerging on Sunday from Houston are horrifying and tragic.

In some areas, waters rose to nearly 20 feet.

From the National Weather Service, issued on Sunday morning:

If you want to help the victims of the storm, the Houston Chronicle has details on how to donate to the Red Cross and other information.

As our Kelsey Ramírez reported on Friday, both Fannie Mae and Freddie Mac issued bulletins late in the week, reminding mortgage servicers and homeowners of the government-sponsored enterprises’ disaster relief policies.

“Relief, including forbearance on mortgage payments for up to one year, may be available if their mortgage is owned or guaranteed by Freddie Mac,” Yvette Gilmore, vice president of single-family servicer performance management at Freddie Mac, said.

Fannie Mae has similar disaster relief policies. Click here for more on the housing industry’s response to Harvey.

On Saturday, the Board of Governors of the Federal Reserve System, the Conference of State Bank Supervisors, the Federal Deposit Insurance Corporation, and the Office of Comptroller of the Currency issued a statement providing financial institutions with some guidelines about how to handle the aftermath of Harvey.

The agencies said that they “recognize the serious impact of Hurricane Harvey on the customers and operations of many financial institutions and will provide regulatory assistance to affected institutions subject to their supervision.”

Click here for the full bulletin from the agencies.

In other news, the real estate industry has long had its issues with the “Zestimate,” the property value estimation tool that appears on every listing on Zillow.

While Zillow describes the Zestimate as a “great starting point” for determining the value of a home, homebuyers and sellers often believe that the Zestimate listed on a home is the true market value of the home.

And that causes issues when the true market value differs from the Zestimate’s projection.

Just last week, a judge in Illinois dismissed a lawsuit brought by a number of homeowners who claimed that the Zestimate undervalued their homes and cost them money when they tried to sell their house.

MarketWatch’s Andrea Riquier gives us more details:

The suit claimed that home buyers read the estimate as an appraisal regardless of whether it was an official appraisal and expected to negotiate accordingly. Zillow, for its part, had stressed that the Illinois statute made clear that calculations formulated in the way that Zestimates are can’t be used as official appraisals.

The judge, in dismissing the suit, agreed. “Zestimates are not false, misleading, or likely to confuse,” the ruling read. “The word ‘Zestimate — an obvious portmanteau of ‘Zillow’ and “estimate’ — itself indicates that Zestimates are merely an estimate of the market value of a property.”

Zillow has consistently tinkered with the algorithm that powers the Zestimate over the years, improving its accuracy, measured by how close the Zestimate is to the eventual sale price of a home, from 14% in 2006 to 5% as of a few months ago.

But a 5% error rate is still a 5% error rate, which leads to problems like lawsuits in Illinois.

Zillow wants so badly to make its Zestimate even more accurate that earlier this year, it launched a contest to improve the algorithm that powers the Zestimate, offering $1 million to anyone who could markedly improve the Zestimate’s accuracy.

But Zillow isn’t sitting on its hands and waiting for someone else to improve the Zestimate. Its analysts are also still working to make the Zestimate more accurate.

In fact, as part of an announcement about the Zestimate contest, Zillow said Friday that it just released a “major” update to the Zestimate that brings the error rate down from 5% to 4.3% nationwide.

Zillow said that it accomplished this latest improvement by moving its data into the cloud.

“To establish these new gains in home valuation accuracy, Zillow transitioned all its data to the cloud and can now compute the Zestimate in near-real time,” Zillow said. “Now, Zillow can process three times as much data as before, which allows its data scientists to experiment and iterate faster than ever, creating more accurate valuations.”

As for the contest itself, Zillow said that it is very encouraged by the response.

According to Zillow, more than 15,500 people have downloaded the competition dataset since the contest launched in late May. Additionally, more than 2,500 competitors from 76 countries have submitted an average of 350 entries a day to the contest.

“The Zestimate is trying to answer an incredibly complex and important question, and with the strong contest submissions we’re already seeing, we are on pace to reach our goal of becoming one of the world’s most impactful machine learning competitions,” Stan Humphries, Zillow Group chief analytics officer, said. “In the meantime, we think homeowners will be pleased with the new enhancements we’ve made to ensure they have a trusted starting point when monitoring the value of what is often the largest purchase of their lifetime.”

The contest runs through Jan. 15, 2019.

And in other online real estate news, it’s been fascinating to watch investors’ response to Redfin, which went public one month ago.

The online real estate brokerage, which also recently expanded into mortgage lending and buying homes directly from homeowners, priced its initial public offering at $15 per share. Investors loved the stock in early trading, pushing Redfin above $20 per share in its first day of trading.

Since then, Redfin’s stock has continued to climb, closing Friday’s trading at $24.89 per share, an increase of nearly 66% from where the stock opened back in July.

And while the company’s executives were, shall we say, rather pleasedwith the results on that first day, the fun part for the rest of us starts very soon, because Redfin is about to have to start revealing its quarterly financial results.

In fact, Redfin announced Friday that it will report its second quarter financial results on Sept. 7, 2017 after the stock market closes. That means investors and the rest of the housing industry will soon get a good look at what Redfin’s got going on under the hood.

Should be interesting.

And with that, have a great week everyone!

Housing industry gears up to face Hurricane Harvey

Housing industry gears up to face Hurricane Harvey

Flood street sign

The housing industry is gearing up for Hurricane Harvey, which made landfall on the coast of Texas late Friday night.

The hurricane is expected to increase to a category three storm by the time it hits the coast, according to an article by Nicole Chavez, Eric Levenson and Joe Sterling for CNN.

This life-threatening storm could leave parts of south Texas uninhabitable for months, according the National Weather Service in Houston. The CNN article explained this type of language hasn’t been used since Hurricane Katrina.

Freddie Mac sent out a reminder of its disaster relief policies Friday, urging families affected by the storm to contact their mortgage servicer.

“We strongly encourage the many American families whose homes or businesses are being impacted by Hurricane Harvey to call their mortgage servicer if the Federal Emergency Management Agency’s declaration is announced,” said Yvette Gilmore, vice president of single-family servicer performance management at Freddie Mac. “Relief, including forbearance on mortgage payments for up to one year, may be available if their mortgage is owned or guaranteed by Freddie Mac.”

Here are some of the disaster relief policies Freddie Mac offers:

  • Suspending foreclosures by providing forbearance for up to 12 months
  • Waiving assessments of penalties or late fees against borrowers with disaster-damaged homes.
  • Not reporting forbearance or delinquencies caused by the disaster to the nation’s credit bureaus

Fannie Mae also sent out a reminder for servicers and homeowners, encouraging them to stay safe and take advantage of Fannie’s disaster relief policies.

“At this time, it is important for those in the path of the storm to focus on their safety as they deal with the damage caused by Hurricane Harvey,” said Carlos Perez, Fannie Mae senior vice president and chief credit officer.  “The primary focus of Fannie Mae and our servicers continues to be with the homeowners who have been impacted by this disaster and to ensure assistance is offered to borrowers and communities in need.”

Fannie Mae’s disaster relief guidelines allow servicers to suspend or reduce a homeowner’s mortgage payment for up to 90 days if the servicer believes a natural disaster brought down the value or habitability of the property or if the natural disaster temporarily impacted the homeowner’s ability to make payments on their mortgage.

Servicers do not need to contact homeowners in order to suspend payments for 90 days, but after contacting the homeowner, they can offer forbearance for up to six months, which can be extended an additional six months as needed for homeowners that were current or less than 90-days delinquent at the time of the storm.

But the GSEs aren’t the only ones stepping up in the wake of the storm. Short-term rental site Airbnb announced it launched its Disaster Rental Program to help Texans evacuate from Hurricane Harvey.

This program offers evacuees housing in major emergency events, and encourages its hosts to offer their homes up for free.

“We encourage hosts in safe, inland areas to aid in this effort by listing their available rooms or homes on the platform to help the growing number of evacuees,” said Kellie Bentz, Airbnb head of global disaster response and relief. “Our thoughts continue to be with everyone in the path of the storm, and we thank the dedicated government and emergency response personnel who are keeping our communities safe.”

 

Consumer Bankers Association to Cordray: It’s time to put up or shut up about Ohio

Consumer Bankers Association to Cordray: It’s time to put up or shut up about Ohio

CFPB

Despite seemingly overwhelming rumors about Consumer Financial Protection Bureau Director Richard Cordray’s supposed intention to step down and run for governor of Ohio, thus far, Cordray has done nothing one way or the other to stamp out the rumors about his future.

All the while, the noise surrounding Cordray’s future keeps getting louder and louder.

And according to the Consumer Bankers Association, the cloud of uncertainty hovering around Cordray is now negatively affecting the CFPB’s ability to function and the financial services industry’s ability to plan for the future.

“It is well past time Director Richard Cordray clarify his intentions to run for public office as the speculation has become a distraction and now casts a shadow over the impartiality of the CFPB,” CBA President and CEO Richard Hunt said Friday in a note to the group’s members. “We need to have stability at the CFPB.”

According to Hunt, the mounting speculation about Cordray’s future is another sign that the CFPB should not be run by a single director, but rather by a bipartisan commission.

“The current limbo – will he or won’t he? – is just the latest reason why a Senate-confirmed, bipartisan commission must be established at the CFPB,” Hunt said. “A diverse group of experts directing and formulating agency policy – not a single director – would ensure consumers receive a balanced, deliberative and thoughtful approach to regulation.”

This isn’t the first time that the CBA has called for a bipartisan commission to run the CFPB.

Back in the June, the CBA joined more than 20 of the housing industry’s largest trade groups to call on Congress to enact legislation that would change the leadership structure of the CFPB from a single director to a bipartisan commission.

There is currently legislation making its way through Congress that would change how the CFPB is structured, but would not replace the bureau’s single director with a commission.

Recently, the House of Representatives voted to pass the Republican-crafted Financial CHOICE Act, which would abolish the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The version of the Financial CHOICE Act that passed the House would change the structure of the CFPB to make the director fireable at will by the president, rather than for cause only, as it stands now.

The original version of the Financial CHOICE Act would have seen the single director replaced by a commission, but that stipulation didn’t make it into the updated Financial CHOICE Act.

As Hunt notes, Corday is rumored to officially declare his intentions next month.

“Currently, Director Cordray is scheduled to speak at the Ohio Land Bank Conference in Cleveland, Ohio on September 12th, 2017,” Hunt writes. “Also, he is rumored to appear at an Ohio AFL-CIO Labor Day picnic. Could these appearances have implications for a potential run for office?”

The Ohio Democratic Party recently announced that its first debate for the party’s nomination for governor would be held on September 7, leading to more speculation that Corday will step down over Labor Day weekend.

“The markets and consumers demand stability, and announcing his intentions is just the right thing to do,” Hunt concludes.

But for now, the industry is left waiting to see what Cordray is going to do next.

Damning report finds state agencies wasted millions meant for struggling homeowners

Damning report finds state agencies wasted millions meant for struggling homeowners

Money tightening

A damning new report from a federal watchdog shows that 19 state housing finance agencies wasted millions of dollars that should have gone to struggling homeowners as part of the government’s Hardest Hit Fund program.

The report, published Friday by the Office of the Special Inspector General for the Troubled Asset Relief Program, showed that SIGTARP’s investigation found that the all 19 of the state housing finance agencies that participated in the Hardest Hit Fund collectively wasted $3 million on items like barbecues, steak and seafood dinners, gift cards, flowers, gym memberships, employee bonuses, litigation, celebrations, and cars, instead of using the money to help struggling borrowers.

The Hardest Hit Fund was created in 2010 and is designed to help state’s housing finance agencies assist struggling homeowners and help stabilize neighborhoods in many of the nation’s hardest hit communities, as part of TARP.

The program initially set aside $7.6 billion for those communities, but last year, the Department of the Treasury announced that it was committing an additional $2 billion to the Hardest Hit Fund.

The money in the Hardest Hit Fund program went to state housing agencies in Alabama, Arizona, California, Washington, D.C., Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Mississippi, North Carolina, New Jersey, Nevada, Ohio, Oregon, Rhode Island, South Carolina, and Tennessee.

According to SIGTARP’s report, the Hardest Hit Fund program established significant guidelines around what the state agencies could do with the money they received from the Treasury.

Specifically, all expenses charged to TARP by the state agencies must be “necessary” to facilitate loan modifications. The SIGTARP report provides more detail on how the payment structure works.

“Treasury’s contracts with the state agencies administering HHF also included a schedule of permitted expenses, which listed specific categories of necessary expenses and dollar limits,” SIGTARP said in its report.

But SIGTARP’s investigation found that each of state agencies “lumped unnecessary expenses into permitted expenses categories, elevating the risk of fraud, waste, abuse, and overpayment throughout the program,” in some form or fashion.

Included among those unnecessary expenses were meals and other expenses directly involving Treasury officials.

All in all, the SIGTARP report found that the 19 housing finance agencies charged $3 million in unnecessary charges to TARP.

As SIGTARP notes in its report, some of the expenses are minor, including TARP gift cards for employees, TARP barbecues, TARP flowers, TARP gym memberships, and TARP balloons, but others were significant.

For example, Rhode Island charged to TARP “hundreds of thousands for the construction of a customer center even though it is also used for non-HHF purposes—years after billing TARP for the build-out of an office in 2010,” the report stated.

The SIGTARP report lays out some of the other “wasteful” spending by the housing finance agencies, including:

North Carolina Housing Finance Agency. $107,578 for barbecues with Treasury employees, parties, celebrations, Visa gift cards, flowers, restaurant outings including steak and seafood dinners, gifts, gym memberships, regular employee meals, and employee cash bonuses, customized Lands’ End shirts, and a CVS gift card to recognize new HHF funding in 2016.

Rhode Island Housing. $1,031,210 for a new customer center with a new kitchen and new furniture in 2016, marketing, systems and rent that were fully charged to HHF but also used for other purposes, backdated “rent” for three years when the HHF program was closed, and a monthly employee payment to defray transportation costs.

Nevada Housing Division. $43,497 in bonuses, of which nearly all went to the chief executive officer who was later terminated, and employee picnics.

Florida Housing Finance Corporation. $106,774 in bonuses approved by the now terminated executive director. Gift certificates to employees and a barbecue.

District of Columbia’s Housing Finance Agency. $258,333 to prepay for five years of avoidable online storage access and data two years after the HHF program was closed to homeowner applications.

Illinois Housing Development Authority. $98,305 in employee cash retention awards. HHF funds were also spent for lunch at a pizza restaurant to “to celebrate getting new HHF funds and an employee’s upcoming wedding.”

Alabama Housing Finance Authority. A TARP barbecue with Treasury employees Visa gift cards, and fruit baskets.

Kentucky Housing Corporation. Picnic with food trucks, an employee gelato outing, catered lunches with Treasury employees.

Ohio Housing Finance Agency. More than $13,000 in events with housing counselors, including admissions to three zoos and catering.

South Carolina State Housing Finance and Development Authority. An executive’s use of a car for more than four years

But the SIGTARP report doesn’t only hold the state agencies responsible for the wasteful spending.

SIGTARP also chides the Treasury for not doing enough to prevent the issue from happening.

“Treasury did not hold state agencies accountable to the requirement in Treasury’s contract that expenses must be necessary for the specific services in HHF,” SIGTARP wrote in its report. “Treasury regularly reviewed state agency expenses, but only on a small sample basis with minimum dollar thresholds.”

In a statement, SIGTARP’s Christy Goldsmith Romero did not mince words either.

“Congress did not authorize TARP dollars for barbecues, steak and seafood dinners, gift cards, flowers, gym memberships, employee bonuses, litigation, celebrations, cars, and other unnecessary expenses of state housing agencies, but those are some of the charges SIGTARP’s forensic analysis uncovered,” Goldsmith Romero said.

“SIGTARP previously reported on scores of people who earn under $30,000 a year, but were turned down for the Hardest Hit Fund. Now we find that some state housing agencies are more willing to keep TARP dollars for themselves than distribute it to low-earning homeowners, a violation of TARP contracts and inconsistent with TARP law,” Goldsmith Romero continued.

“With more than $1 billion to be spent on HHF administrative expenses, the mindset must change at state agencies and Treasury. Otherwise taxpayers will continue to pay more for these services than is necessary,” Goldsmith Romero added. “TARP is not a source to fund state agency’s general operations, boost state employees’ morale, or throw catered barbecues when Treasury employees visit. TARP is not a windfall.”

SIGTARP concludes its report by calling for the Treasury to recover the $3 million in wrongful spending from the housing agencies.

“This report should deter future unnecessary spending when state agencies can see that other state agencies modify loans in HHF without charging TARP for these same expenses,” SIGTARP said. “However, the responsibility to stop TARP spending on unnecessary expenses rests with Treasury.”

In a response from Treasury that was included in the report, the department said that it agrees that the Treasury should recover the amounts expended in violation of program requirements.