December 2016 - Getting Serious About Diversity

TheMReport — News and strategies for the evolving mortgage marketplace.

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42 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G A NA LY T I C S S E C O N DA R Y M A R K E T DEPARTMENT ORIGINATION LOCAL EDITION THE LATEST ORIGINATION LOCAL EDITION Soaring Mortgage Revenue Gives U.S. Bancorp a Push STRONG REFINANCE ACTIVITY DRIVES THE BANK'S EARNINGS UP 40 PERCENT OVER 2015. MINNESOTA // A substantial spike in mortgage revenue helped to create a profitable third quarter for U.S. Bancorp, according to the bank's Q 3 earnings report released recently. U.S. Bancorp, headquartered in Minneapolis, reported a net income of $1.502 billion for Q 3, or $0.84 per common share, an increase of approximately 1 percent from the bank's Q 3 2015 totals of $1.489 bil - lion and $0.81 per common share. The bank's Q 3 total of mortgage revenue was $314 million, which was an increase of 32 percent from Q2's total of $238 million and an increase of 40 percent from Q 3 2015 ($224 million). The increases were driven by strong refinancing activities due to lower longer-term interest rates during Q 3, according to the bank. Year-to-date through the first three quarters, U.S. Bancorp's mortgage revenue is $739 million, which is 6.3 percent higher than the first three quarters of 2015 ($695 million). The spike in mortgage bank - ing revenue drove U.S. Bancorp's noninterest income for Q 3 up to $2.445 billion, from $2.326 billion in the same quarter a year ago. "U.S. Bancorp reported solid, industry-leading financial results in the third quarter," U.S. Bancorp Chairman and CEO Richard K. Davis said. "The banking industry continues to face steady headwinds, including persistently low interest rates, a flat yield curve, and a slow economic recovery that caused some commercial customers to pause investments in their busi - nesses during the quarter. Despite the operating environment, we an- nounced record earnings per share and solid revenue growth, particu- larly within our fee-based business- es. Fee-based revenues grew year over year across most categories including payments, mortgage banking, and wealth management while capital markets continued to have solid performance in the third quarter. We remain confident in our ability to generate consistent, predictable, and repeatable industry- leading financial results because of our diversified business model and the execution of our strategy." U.S. Bancorp's average total loans increased by 8.6 percent over-the-year up to $19.1 billion in Q 3, driven by an increase in resi - dential mortgage loans (from $51.8 million up to $56.3 million). Secrets to Success in the Lease-To-Own Space THIS EMERGING MARKETPLACE IS FILLING THE HOMEOWNERSHIP GAP. Contributed Content by Jon Buerkert SOUTH CAROLINA // One seemingly insoluble problem in the housing market over the past several years is the inability of many middle-and lower-income Americans to buy homes. In many areas around the country, the price of renting has soared to the point where it makes much more finan - cial sense to own than to rent, but a large number of people who want to make that leap have been kept out of the market, either due to insufficient income, poor credit, or both. In fact, the homeowner - ship rate recently dropped below 63 percent, a nearly 48-year low, even as interest rates hover around historical lows. This state of affairs is especially frustrating for those people who lost their homes to foreclosure after the real estate market crash. Many of them have been able to rebuild their finances since then and are ready to get back into home own - ership, yet the doors to residential real estate remain closed to them. And it's a big potential market. A record 11.4 million renter house- holds spent at least half of their income on rent in 2014. It could be a lot cheaper for them to own their homes, never mind get the opportunity to start building home equity wealth, if they could only get the chance. Leasing homes with an option to buy provides renters a second chance at homeownership. It gives them the time necessary to rebuild their credit and financial strength, and eventually regain future own - ership of a home. Many lenders know all this, but most are leery of entering a market they see as extremely high-risk. And it certainly is—if the lease-to- own process is done improperly. There are enormous differences between the lease-to-own market and the conventional mortgage market. One of those very impor - tant differences is customer service. Indeed, in order to succeed in the lease-to-own market, lenders and servicers must have an extreme focus on building a one-on-one relationship with their custom - ers. Once someone finds a home they're interested in and submits an application, they should deal with one person—and one person only— whose job it is to make sure the house is going to be a good fit for them and that they can handle the associated responsibilities. After the lease agreement is signed, the individual is assigned an advocate in the customer service department, who is responsible for working with them to make sure their payments are submitted each month. In the event the customer runs into a problem and they can't make their payment, they know who they can call. As we witnessed during the mortgage meltdown, homeowners who had trouble making their pay- ments often refused to talk to their mortgage servicer, either out of embarrassment or fear, even when the servicer came to offer a helping hand or to simply find out what the matter was. How many people could have saved their homes from foreclosure if they had at least listened to what the servicer had to propose? Unfortunately, many didn't consider negotiation as a plausible solution. We have found that eviction is never a good option for anyone, so our goal is to help our customers stay in their homes. We will bend over backwards to avoid eviction. It's critical in this market that servicers build a supportive, communicative relationship with customers the minute they start the leasing process. That builds a bond of trust between the servicer and the customer so that if prob - lems do arise, they can be resolved quickly to the satisfaction of both parties, most often with the clients remaining in the home and, eventually, purchasing it. That's a successful resolution that benefits our entire industry and country. Millions of people have a real de- sire to become homeowners, despite whatever problems they may have had in the past. Thanks to innova- tive homeownership solutions and open minds, we as an industry can still provide that opportunity to them, whether it's through lenders or lease-to-own specialists. Jon Buerkert is the chief business development officer at Columbia, South Carolina-based Vision Property Management (VPM). In addition to managing lease-to-own properties, VPM actively purchases problem properties from banks and servicers on a national basis. In this contributed piece, Buerkert discusses the single-family rental market. "The banking industry continues to face steady headwinds." —Richard K. Davis, Chairman, U.S. Bancorp

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