[caption id="attachment_8871" align="alignright" width="333"] Detwiler: There could be more consolidation among AMCs that haven't begun developing technology.[/caption]

The Mortgage Leader spoke with Michael Detwiler, equity partner and CEO of Class Valuation, about the  decision to invest in appraisal technology, the firm’s recent acquisition of Landmark Network, an appraisal management company--and why he predicts more consolidation will occur among appraisal management companies.

Prior to joining Class last month, Detwiler was the head of Accenture Software including the North American mortgage software and outsourcing business He was the co-founder of Mortgage Cadence, a loan origination software company that Accenture acquired.

Q: The Landmark Network is a provider of valuations, with expertise in reverse mortgages. Why do you find that product of interest?

 Reverse mortgages have always been on my mind. Back in 2000, when I was developing a loan-origination system at Mortgage Cadence, I made sure it could support reverse mortgages. Reverse mortgages are personal to me: My grandmother almost lost her house because at the time--there weren’t reverse mortgages like there are today.

There are many borrowers that could use the product for the good of themselves and their lifestyles; I want to support them and develop technology that will make the experience better for them then it has been up to now. There still is a fear with reverse mortgages among consumers, but the product has moved more into the mainstream than it was in the past.

Q: What technology innovations do you plan to unveil?

Class is investing millions of dollars on developing technology to support appraisers and work with investors, government sponsored enterprises and lenders. For instance, during the refi boom, borrowers might have had to wait for the completion of their appraisals. We can make it easier and faster to gain access to the house through a smart lock box. But I’m not going to give away all of our plans.

Q: Why make a bet on technology for the AMC market now?

Investors are keen on appraisers having a prominent role in the market. Our clients are not interested in taking risks without understanding what the risk is. The feedback received from having boots on the ground, gives them a level of confidence because the valuations are objective and collected by impartial third-parties.

Others chose to side step that approach. There was an initiative in which non-appraisers collected data and generated results. The idea is that they are analogous to an appraiser—but the results are not of the same quality or veracity. Technology plus an appraisal partnership is the direction of the market. Ultimately, the market is more interested in block chain for mortgages than in a model without that technology.

Q: Do you think there will be more consolidation among AMCs, due to technology?

Yes, but the consolidation that will occur won’t be solely because of technology. Lenders will choose to work with the AMCs with the strongest financials, leaving the remaining firms to merge or go out of business. But technology will play a role in acquisitions.

AMCs are being forced to evolve their technology, how they use data, and their use of artificial intelligence. That includes scoring models and quality metrics that enable the lender to see the assignment went to the right panel--based on the performance in states, counties and zip codes.

Organizations will require algorithms that look at historical performance, specialization, quality, proximity and more. As more data comes in, the model gets more accurate. That’s a cost of admission today. Those AMCs that haven’t started to develop the technology—it’s too late for them to begin now, which could lead to acquisitions.

 Q: Is the digital mortgage real or just marketing sizzle?

The digital mortgage is real, but the industry has to make a concerted effort to get there and overcome the inertia in the marketplace. Borrowers would like the digital mortgage, but most, around 70 percent, want real or digital hand holding. Borrowers, for instance, are being asked for documents that they can’t provide readily, and they want to have access to someone with whom they can speak.

Mr. Cooper Group Inc. is acquiring servicing rights on $24 billion in mortgages, a subservicing contract for an additional $24 billion in loans and the Seterus mortgage servicing platform from IBM. Details of the transaction were not disclosed.

“We are excited to welcome more than 300,000 customers and the Seterus team to the Mr. Cooper Group family. We are confident our new team will be energized by our people-first culture, and our new customers will benefit from our user-friendly mobile and online tools designed to help them manage their home finances,” said Jay Bray, chairman and CEO of Mr. Cooper Group Inc. “This transaction is consistent with our outlook for profitability targets and portfolio growth.”

Mr. Cooper expects to fund the acquisition with financing on the mortgage servicing rights and cash. Subject to regulatory approvals, the transaction is targeted to close in the first quarter 2019.

“IBM acquired Seterus in the wake of the 2008 financial crisis to help a client manage a portfolio of distressed loans. We were successful in this mortgage servicing work and the portfolio is now much more stable,” said Jay Bellissimo, general manager for cognitive process transformation at IBM Global Business Services. “The time is now right to divest this business, which is no longer core to IBM’s portfolio, to a mortgage servicing specialist whose domain expertise and scale can further advance this business.”

NBKC Invests in MortTech Organization

Nbkc Bank has invested in ProPair, which employs artificial intelligence to optimize the distribution and prioritization of mortgage leads to individual loan officers, rather than a distribution based on seniority or other factors.

As the first customer of ProPair, Nbkc piloted the software in the bank’s home loan division. “We have tremendous confidence and respect for ProPair’s founders and experienced first-hand how its smart pairing improves customer experience and loan officers’ success,” said Eric Garretson, CFO & fintech strategy leader at Nbkc.

“Having NBKC as our first customer enabled us to develop and test our product before launching at scale” said Devon Johnson, co-founder and chief data officer of ProPair.

First Command Financial Services, Inc. will extend direct deposit pay to Coast Guard clients and other financial support to ensure they avoid potential financial hardships during the government shutdown.

“The latest news reports on the government shutdown indicate that about 42,000 Coast Guard members won’t see their next paycheck until mid-January, and First Command is committed to doing all we can to ensure that our Coast Guard clients are not financially harmed by government actions or inactions that are beyond their control,” said Scott Spiker, chairman and CEO of First Command. “As we face another government shutdown, we again commit to help our clients and ensure their family finances are squared away.”

First Command will be offering assistance to all clients who the shutdown affects—but the situation is particularly hard on members of the Coast Guard—who earn modest salaries and spend weeks away on deployment.

“The Coast Guard is a military service of the United States at all times,” Bowen said. “However, since the Coast Guard is not a part of the Department of Defense, and it resides as a military service in the Department of Homeland Security, members of the Coast Guard will not be paid during the government shutdown,” said Charles “Skip” Bowen III, a member of the First Command Military Advisory Board. “This is not right. Just like the rest of the military, Coast Guard personnel deploy for long periods of time including overseas with thousands away from home at sea on Coast Guard cutters right now.

First Command is ready to address the possible financial difficulties that might arise during the government shutdown, including the following:

* Zero-interest payroll advances. The program is designed to ensure that payroll advances will be transparent to clients, who will see the usual direct deposit amount credited to their account.

* Loan assistance. The bank is prepared to work with clients on any loan payments.

* Penalty-free early certificate of deposit withdrawals. The bank will waive any early withdrawal penalties for clients who need to redeem a First Command Bank certificate of deposit prior to its maturity.

* Secured Lines of Credit. The bank will help clients use their non-tax qualified mutual fund as collateral for a low interest rate line of credit.

* Special handling of credit card accounts. The bank’s Visa cardholders will be offered priority processing for increases to credit limits and deferments of monthly payments. The bank will also waive cash advance fees during the shutdown.

“You only need to glance at the military pay tables to see that these Coast guardsmen do not make a great deal of money and many live paycheck to paycheck. Bottom line, Coast Guard families cannot go for long without pay,” said Bowen, who served as a 10th Master chief petty officer of the Coast Guard. “Many banks and financial services firms connected with the military such as First Command are trying to help. In addition, most of the military service organizations are taking a strong stand politically on behalf of Coast Guard members. I hope and pray that a resolution is found quickly. Our Coast Guard families deserve it.”

The Federal Emergency Management Agency will issue and renew flood insurance policies, reversing an earlier ruling from the agency. The decision was controversial because 40,000 home sales are lost every month that flood insurance is not available to borrowers, according to the National Association of Realtors.

"FEMA and the Administration deserve credit for hearing our concerns and acting swiftly to address them," says NAR President John Smaby. "This new decision means thousands of home sale transactions in communities across the country can go forward without interruption, as Congress intended when it renewed the flood insurance program earlier this week.”

Congress on Dec. 21 passed legislation that extends the National Flood Insurance Program until May 31, 2019. In an unexpected policy decision, FEMA on Dec. 26 said it couldn't allow insurers to issue and renew federal policies while the partial government shutdown was ongoing.

The ruling was unexpected because in past government shutdowns, FEMA continued to operate the program as authorized. NAR, along with other organizations, including the Property Casualty Insurers Association of America and the Independent Insurance Agents & Brokers of America, urged policy makers to reevaluate the decision. Congress expressed concern as well.

"We thank the administration and Congress for stepping up so quickly to ensure the smooth continuation of flood insurance at a time when market disruption would be extremely hard-felt," says Shannon McGahn, NAR senior vice president of government affairs.