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[ad_1] An op-ed I wrote that appeared recently in HousingWire on the nature of nonbank mortgage company risks and Ginnie Mae’s proposal to impose risk-based capital and liquidity requirements on their issuers highlighted nonbank lighter safety and soundness regulation as a concern for generally higher risk profiles of these firms relative to depositories.  In light of this important industry and policy topic, I thought it instructive to provide further insight into the arguments raised from that previous piece. In a comprehensive study of mortgage market liquidity, Liquidity Crises in the Mortgage Market, several well-known academics provided compelling evidence for “liquidity vulnerabilities associated with nonbanks.” In their study, these researchers examined the 2008 financial crisis and its impact on nonbank liquidity. They found that: “of the 19 nonbanks and depositories that funded their originations using both warehouse lines and SIVs in the precrisis period, only two, Nationstar Mortgage and Suntrust, survived until 2017.” They further state: “The collapse of the short-term funding structure of nonbanks and some depositories, such as Countrywide Financial, led to rapid losses in liquidity and lending activity.  Many of these firms experienced bankruptcies and closures similar to that of New Century.”  Suffice it to say that not much has changed in terms of the liquidity risk potential of nonbank mortgage companies since that time. Denials that these institutions do not pose relatively greater risk to the mortgage industry at some point in the future than depositories, reminds me — having started my career off during the S&L crisis with the thrift industry’s regulator and ending it during the 2008 financial crisis at Citigroup heading up risk for their North America consumer division — that memories tend to fade regarding the details of past crises.  Another major risk of nonbank originators and servicers is operational risk in terms of loan manufacturing quality. In a study I conducted for the MBA’s Research Institute for Housing America I analyzed the impact of loan manufacturing quality on credit loss and its implications for the industry. It is critical to understand how operational risks can be closely tied to other risks such as credit.  In my earlier op-ed, I referred to a statistical analysis finding that the risk of nonbanks was significantly higher than that of depositories, controlling for other risk factors. I applied a multivariate statistical analysis consistent with the one I used to develop the industry’s first FHA automated underwriting scorecard (known now as TOTAL), and the industry’s first VA scorecard during my tenure at Freddie Mac.  Far from being a back-of-the-napkin estimate of nonbank risk, it analytically controls for a host of factors such as borrower credit score, LTV, DTI and a dozen other factors to understand the credit risk profile of borrowers. The origination period of the analysis was 2000-2015 to allow for loan seasoning and two models were estimated: one with a definition of default as a loan becoming 90 days past due or worse, and the second a loan becoming 180 days past due or worse.  I segmented the time periods into four underwriting regimes based on a machine learning technique clustering loan performance based on origination year and quarter. These were 2000-2003, 2004-2008Q2, 2008Q3-2011, and 2012-2015. I created separate indicator variables for whether the loan was originated by a depository or nonbank and included them in the models along with the other variables of interest.   The overall models had a high level of discriminatory power on an out-of-sample basis (KS of 66 and 69 for the 90DPD+ and 180DPD+ models, respectively). A table of results from those models is found below showing the odds ratios (risk multipliers) from those indicator variables.  NonBank Risk Multipliers Compared to Depositories The baseline or reference level (odds ratio =1) for each odds ratio is the default risk of mortgages originated by depositories between 2000-2003. Any odds ratio above 1 in the table indicates higher risk of nonbanks relative to the baseline. All estimated coefficients underlying the odds ratios were statistically significant at the 995 level with the exception of the 180DPD+ model results for the nonbank 2000-2003 period which were no different than the baseline. Note that for the 180DPD+ model the 2012-2015 period was collapsed with the 2008Q3-2011 period based on the machine learning results. The results indicate that other than the 2000-2003 period, loans originated or serviced by nonbank institutions were riskier than depositories originating or servicing loans from 2000-2003. Specifically, the 1.9 risk multiplier I cited in the earlier piece was from a simpler version of this model. The results are consistent with this analysis where for 2012-2015, loans originated by nonbanks were 2.2 times more likely to become 90DPD+ than depositories from a more normal underwriting period (2000-2003). Similar results (2.57 odds ratio) hold for nonbank servicers over the 2012-2015 period, which analytically corroborates a GAO’s study of nonbank mortgage servicers and their recommendation for greater regulatory oversight. Specifically, they stated: “Banks and nonbank servicers are subject to different safety and soundness regulation and different capital rules. As a result, mortgage market participants and others have questioned the extent to which nonbank servicers may pose additional risk to consumers and the market and whether the existing oversight framework can ensure the safety and soundness of nonbank servicers.” The primary takeaways are this: nonbanks by virtue of their business model and regulatory oversight pose greater liquidity and operational/credit risks than depository institutions all things considered.  Clifford Rossi is Professor-of-the Practice and Executive-in-Residence at the Robert H. Smith School of Business at the University of Maryland.  He has 23 years of industry experience having held several C-level executive risk management roles at some of the largest financial institutions. This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners. To contact the author of this story:Clifford Rossi at crossi@umd.edu To contact the editor responsible for this story:Sarah Wheeler at swheeler@housingwire.com The post Risks of nonbank mortgage sellers and servicers revisited appeared first on HousingWire. [ad_2] Source link

[ad_1] The post Nikola Stock Falls as Founder Trevor Milton Indicted appeared first on Millennial Money. Shares of Nikola Corporation (NASDAQ: NKLA) opened 8% lower on Thursday morning following news that the company’s founder Trevor Milton has been indicted by federal prosecutors in the Southern District of New York (SDNY) as well as by the SEC. Milton is accused of fraud and making false statements, misleading investors regarding the viability of Nikola’s technology. Milton had already stepped down and departed the company late last year amid the controversy, after activist short seller Hindenburg Research had released a research report that detailed how Nikola’s product demonstrations were faked. A truck rolling down a hill Specifically, Milton is accused of targeting retail investors (individuals using apps like Robinhood, in particular) on social media and other media appearances, promoting Nikola and claiming that the hydrogen fuel cell truck, dubbed the Nikola One, was commercially viable. Hindenburg said that Nikola’s truck demo merely showed the vehicle rolling downhill and that the truck was not actually driving at all.  The company’s response did not inspire much confidence either. “Nikola never stated its truck was driving under its own propulsion in the video,” the company wrote at the time. Nikola’s claims had even convinced auto giant General Motors (NYSE: GM) to invest in the company, but the legacy automaker backtracked on the partnership following the revelations.  “From approximately November 2019 through September 2020, Milton’s statements in tweets and media appearances, individually and taken together, painted a picture of Nikola that diverged widely from its then-current reality,” according to the SEC complaint. The SEC’s legal filing includes a handful of allegations against Milton, including: Falsely claiming that the Nikola One could be “driven under its own power.” Falsely claiming that Nikola could produce hydrogen and “obtained electricity at costs that made hydrogen production profitable.” Falsely claiming that Nikola had already secured billions of dollars worth of orders. Falsely claiming that Nikola trucks would have a total cost of ownership that was 20% to 30% lower than comparable diesel vehicles. Nikola went public by merging with a special purpose acquisition company (SPAC) in a deal that secured a 25% stake in the company for Milton. Securities regulators argue that Milton’s motive was to inflate Nikola’s stock price, allowing him to pocket tens of millions of dollars. At Nikola’s peak, Milton’s shares were worth over $1 billion. “Milton’s focus remained on the stock price and his attempts to influence the retail investors who he viewed as driving it,” the SEC writes. “To that end, Milton tracked the daily number of new Robinhood users who held Nikola stock.” While Milton left Nikola many months ago, the ongoing skepticism around the company’s technology is still quite relevant to investors. Here is Nikola’s official statement in response to the indictments: “Trevor Milton resigned from Nikola on September 20, 2020 and has not been involved in the company’s operations or communications since that time. Today’s government actions are against Mr. Milton individually, and not against the company. The company has cooperated with the government throughout the course of its inquiry. We remain committed to our previously announced milestones and timelines and are focused on delivering Nikola Tre battery-electric trucks later this year from the company’s manufacturing facilities.” Pick Like A Pro Where to invest $500 right now Lots of new investors take chances on long shots instead of buying shares of great companies. I prefer businesses like Amazon, Netflix, and Apple — they’re all on my best stocks for beginners list. There’s a company that “called” these businesses long before they hit it big. They first recommended Netflix in 2004 at $1.85 per share, Amazon in 2002 at $15.31 per share, and Apple back in the iPod Shuffle era at $4.97 per share. Take a look where they are now. That company: The Motley Fool. For people ready to make investing part of their strategy for financial freedom, take a look at The Motley Fool’s flagship investing service, Stock Advisor. They just announced their top 10 “best buys now” across the entire stock market. Whether you’re starting with $100, $500, or more, you should check out the full details. Click here to learn more The post Nikola Stock Falls as Founder Trevor Milton Indicted appeared first on Millennial Money. [ad_2] Source link

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[ad_1] Texas-based Realtor Jordan Schilleci with her clients at Chicago Title for closing. While selling homes as a real estate agent in Spring, Texas, which is located in the Houston metro area, Jordan Schilleci felt something was missing — a place for people to gather and spend time together, like a recreation or community center. Such a place could be popular, especially following the lockdowns seen throughout the state as a result of the COVID-19 pandemic, Rather than wait for someone else to take charge of the project, she put her head down and decided to take on the task of building such a center herself. Schilleci said she’s currently in the process of buying more than 10 acres off a street in Spring — a city of around 60,000 people north of Houston — which she will put a “community space” on, complete with an outdoor food court, a barn for gathering in, outdoor space for children to play in, and an area for horses. She’s also toying with the idea of purchasing five acres of lakeside property and building a family park on it. “There isn’t anywhere big or cool for people to gather in Spring, and I want to provide that,” she said. “My goal in life isn’t to make a ton of money — it really is to give back.” It’s her connection to Spring, along with the example she wants to set for her family, that’s driving her. Schilleci’s family has been in the Spring area for more than 50 years, she said, giving her an almost protective feeling of the region. It is also important, she said, that her children grow up knowing that their mother made a difference in the community. This content is exclusively for HW+ members. Start an HW+ Membership now for less than $1 a day. Your HW+ Membership includes: Unlimited access to HW+ articles and analysis Exclusive access to the HW+ Slack community and virtual events HousingWire Magazine delivered to your home or office Become a member today Already a member? log in The post Kudos: Houston-area Realtor plans to build community center, family park appeared first on HousingWire. [ad_2] Source link

[ad_1] The post How to Get Out of a Lease appeared first on Millennial Money. Signing a lease on a rental property can be a lot of pressure—especially if you’re new to a particular city and don’t know the people you’ll be living with.  Regardless, this is a standard lease agreement for renters who are going to be new tenants.  Getting an apartment requires putting your name on a contract, surrendering a down payment, and forming an obligation to make good on monthly payments until the lease expires. Depending on the terms of your lease, this might be three months, six months, a year, or even multiple years.  Unfortunately, rental agreements don’t always go the way we plan. That being the case, it’s important to know what to do if you need to leave the lease agreement early.  Keep reading to learn when and how you should get out of a lease. or, skip straight to the section on how to get out of a lease. When to Break a Lease on a Rental Property  Here are some common reasons to break a lease on a rental property.  Getting a new job in another city  You may live in Massachusetts, get a job in California, and need to relocate immediately. When this happens, you may not have time to ride out a lease or even go through the hassle of finding someone else to take over. Talk to your landlord and explain the situation. Getting a new job elsewhere is a legitimate reason to break a lease, and a reasonable individual should be able to work with you to resolve the situation amicably. Nightmare roommates  There are countless horror stories of people who sign leases with strangers they meet on Craigslist who turn out to be monsters.  The first rule when living with strangers is to research them… thoroughly. Do a background check if possible or ask for references for security purposes. You should also trust your gut. If you get the sense you may clash with an individual or if you feel unsafe around them, walk away before signing the lease. Sometimes, it takes a few weeks or months for someone to show their true colors. When this happens, don’t hesitate—get out! One option could be to approach the landlord and explain the situation. The landlord may be able to arrange a meeting with your roommate to resolve the conflict.  You may also suggest a roommate clause in your contract. Run the contract by an attorney and ask to add a stipulation allowing you to exit early if your roommate doesn’t meet certain conditions like cleanliness, safety, or behavior.  The place isn’t habitable  There are some things that can go awry after signing a lease that can make a place unlivable.  The heat might break, and the landlord may ask the tenant to fix it. Or, a pipe or toilet might burst, flooding the house or creating a toxic situation. Pests like rats or rodents can also become a problem. If something happens to make a place unlivable, ask the landlord to intervene and document your conversation. If the landlord refuses to intervene, you can contact your local board of health to get involved to inspect the place for safety code violations.  When that happens, the board of health will come and inspect the property. It’s possible they may condemn the property if it’s uninhabitable.  Loss of income  If you lose your job, you may not be able to make rent anymore.  Your first step should be to talk to your landlord and inform them of the situation. The sooner you talk to them, the better.  After all, you don’t want to lose your job and wait until rent is due before reaching out. That’s problematic, to say the least. The landlord may have a plan in place to help tenants like you. You might be able to defer rent or pay partial rent until you find new work or unemployment kicks in. Another option is to use your security deposit to cover yourself, buying time to get back on your feet.  If you get to a point where you can’t find new work and can’t afford rent, then you may have to break the lease. Inquire about subleasing to avoid facing any penalties.  Domestic violence  If you are a victim of domestic violence, get out first and ask questions later.  Consult an attorney and try to reach an understanding with the landlord. You might also reach out to the National Domestic Violence Hotline for assistance. Under no circumstances should someone stay in an abusive situation out of fear of breaking a lease. Period, end of argument.   How to Get Out of a Lease If you’re a tenant looking to move out before the end of your lease because someone in the neighborhood harasses you, there are health and safety issues, or you’re activated for military service (among other legal reasons), here’s what you have to keep in mind to get out of a lease. Read the terms and conditions Be prepared to pay Try to find a subletter Talk with the landlord Get legal advice if necessary Do a walkthrough before leaving Settle 1. Read the terms and conditions The first thing to do when breaking a lease is to scour the original paperwork you signed. The lease should outline exactly what you’re responsible for paying… and what you can expect to get back from your initial deposit. Look for an early termination clause. It’s also a good idea to check state laws and local landlord-tenant laws so you’re informed of your rights before approaching your landlord. 2. Be prepared to pay  The bad news is that—unless you can find a replacement tenant—you’ll most likely have to compensate the landlord if you try to get out of a lease early.  The landlord could demand some sort of financial compensation for breaking the lease. Depending on how nice your landlord is, you could either end up having to

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