John Vella of Altisource on URLA, Non-QM Lending and Improving the Borrower Experience
John Vella serves as Chief Revenue Officer of Altisource. Previously, he served as Chief Operating Officer of Equator LLC. He began his financial services career with the Federal Deposit Insurance Corp. and Freddie Mac and later served as Chief Sales Officer for H&R Block’s mortgage company; CEO of Household International’s Automotive Business; President and CEO of Bear Stearns EMC Mortgage Company; and as Executive Vice President for special servicing of GMAC/RESCAP. He holds a Bachelor of Science in English from Springfield College.
MBA NEWSLINK: How would you assess the industry’s preparation for the new Uniform Residential Loan Application, now mandated for February after being postponed in 2019?
JOHN VELLA, ALTISOURCE: The GSEs have actually pushed back the URLA implementation to November due to recent FHFA changes. Integrations will start in March with the option to go live on September 1. It’s still early, but I see the level of preparation as mixed. The focus continues to be on technology integrations, training and change management execution.
NEWSLINK: Do you see non-QM lending continuing its growth this year? How will expiration of the QM patch in 2021 factor into non-QM loan volume in 2020?
VELLA: In 2019, there was an estimated $20 billion in non-QM production, which is still only a small fraction of the market. But I do expect non-QM lending to continue to grow in 2020, especially if interest rates flatten or increase, which they are likely to do at some point. When that happens, we’re going to see more lenders push non-QM volume to increase production. The demand for non-QM loans remains strong, too, as stringent underwriting requirements have kept a lot of credit-worthy consumers from obtaining mortgages. Many of these consumers are self-employed borrowers and first-time home buyers, which makes them prime candidates for non-QM financing.
NEWSLINK: Does AI and machine learning continue its momentum from 2019 to help speed loan originations and reduce costs for servicers and secondary market activity heading into next year?
VELLA: Absolutely. AI and machine learning tools will continue to expand next year because lenders and servicers really have no choice. In order to reduce your cost to originate and service loans, and remain competitive, you must automate and utilize AI and machine learning technologies. From a performance standpoint, by the end of next year, I believe you will see a real difference between organizations that leverage these emerging technologies effectively and those that don’t. The results will be in improved margins, capacity and cycle times.
NEWSLINK: As mortgage lenders pushed to improve the borrower experience in 2019 with data analytics, mobility and electronic closings, can we expect a better borrower experience from application to settlement and servicing in 2020 from the lessons learned in 2019?
VELLA: Yes, especially as the competition to attract and retain borrowers heats up. Collectively, data analytics, mobile technologies and electronic closings are ultimately a table stake issue in 2020 — organizations will not be able to compete effectively without them. One of the biggest issues servicers faced in 2019 was borrower retention. In order to stem runoff losses next year, the need to improve the borrower experience and anticipate their refinancing needs will become mandatory.
NEWSLINK: How do you see data analytics improve from 2019 and have a further impact for investors in secondary market trading for MSR trading and RMBS investors?
VELLA: One of the biggest challenges for investors is pricing. That’s where transactional data and analytics, combined with AI and machine learning, have become effective in enabling lenders to gain much deeper insights into risk. I see all three playing a deeper role in pricing strategies among investors and in secondary market trading overall next year.
NEWSLINK: How will mortgage servicers respond in 2020 to the California wildfires, potential hurricanes and other natural disasters? What did they learn from 2019?
VELLA: The wave of natural disasters we’ve seen over the past two years have given servicers plenty of opportunities to learn from their experiences and make improvements. This has been a huge topic of interest at industry events as well.
I do think the industry overall is better prepared for future events and has worked in a united fashion to share best practices and stay in constant communication with borrowers. Servicers have updated their disaster policies and procedures as well as incorporated new training materials and audit tracking capabilities, allowing the industry to be better prepared to face challenges. We’ll find out how well they did when next disaster strikes, which is only matter of time.
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