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Left to right: Mary Peterman, Luis Campudoni The Federal Housing Finance Agency appointed two public service leaders, Luis Campudoni and Mary Peterman, to its roster of chief officers, the latest hires in a series of recent personnel moves. Formerly with the U.S. Small Business Administration, Campudoni steps up as FHFA's new chief information officer. In a similar role at the SBA, he held the title of deputy chief information officer, helping lead technology product development, services and operations that aligned with that agency's objectives. Earlier in his federal career, Campudoni served in key roles with the Department of Homeland Security, Federal Emergency Management Agency and Customs and Border Protection.The agency also appointed Mary Peterman as chief financial officer. She comes to FHFA after serving at the Federal Deposit Insurance Corp. as controller and deputy director of the division of finance. A certified public accountant, Peterman formerly worked in the administrative office of the U.S. courts and Department of Homeland Security as well as at local government organizations. Earlier this year, FHFA also named a chief artificial intelligence officer.

The number of rate locks for purchase mortgages increased on a year-over-year basis for the first time since the Federal Reserve started hiking short-term rates in March 2022.Optimal Blue's Market Volume Index for April, which measures rate locks by dollar volume, was 103 for all product types, up 8.7% from March and 10.3% over April 2023.The purchase portion of the index was 90 points, an 11% increase from last month, and 10.8% compared with one year prior, its Originations Market Monitor found.By the number of loans consumers elected to lock during the month (also known as lock count), purchase volume increased by 5% versus April 2023. The difference between the increase in the MVI and in lock counts was likely a result of rising home prices.Much of April's increase in locks reflects home buying and mortgage application activity during March.  March was the fifth consecutive month that annual home price increases were above 5%, at 5.3%, according to CoreLogic."Purchase lock counts are a key market indicator as they control for changes in home prices and more volatile refi activity, so the year-over-year increase in April is a particularly encouraging sign that mortgage production may be turning a corner," said Brennan O'Connell, director of data solutions at Optimal Blue, in a press release. "While we are cautiously optimistic, May figures will provide further confidence in the positive trend, as April 2024 numbers got a boost from the Easter holiday landing in March this year."April was the best month for both the total and purchase MVIs since last June at 105 and 93 respectively.But while the purchase market was on the upswing, likely helped by a boost in the inventory of homes for sale, rising mortgage rates during the month further depressed the refinance business. The 12% share for this loan purpose brought it back to a level reached last summer. Compared with March, the refi share was down 176 basis points, and it was 46 basis points lower than it was for the same month a year ago.Rate and term refis had an MVI of 4, down 13.7% from March, although it was up 13.2% compared with April 2023.Cash-out refis remained more popular as rates rose back above 7%, as that product is more need driven. The MVI of 8 was 0.8% higher than for March and 2.9% higher than for April 2023.Another sign of the influence of home prices was the fact that nonconforming rate locks were the only product to increase its share during April both versus the prior month and the previous year.Nonconforming mortgages made up 13.7% of all rate locks, up 185 basis points from March and 214 basis points from April 2023.During the same period, conforming mortgage locks had the largest share at 56.8%, but that was down 83 basis points from a month ago while up by just 8 basis points over one year prior.For March, the Mortgage Bankers Association reported a 2.6% gain in jumbo product availability, although that slipped to a 0.3% rise one month later.Federal Housing Administration-insured mortgages had an 18.4% share of locks in April, down 58 basis points from March and 114 basis points from April 2023, while Veterans Affairs-guaranteed loan share of 10.6% was 34 basis points lower and 97 basis points lower respectively.The U.S. Department of Agriculture's mortgage program had just a 0.5% share, down by 10 basis points and 11 basis points respectively.Using data from its product and pricing engine, Optimal Blue calculated the 30-year fixed conforming ended April at 7.24%, 51 basis points higher than March and 80 basis point over where it was one year prior.Jumbo mortgages ended April at 7.4%, 32 basis points higher than one month prior and 91 basis points above the year ago level, while FHA loans were at 6.91%, 34 basis points and 53 basis points higher respectively.

Crafting a compensation package that allows mortgage companies to recruit or retain the employees they desire has to strike a balance between offering a competitive amount and ensuring it is sustainable for the finances of the business. In boom times, companies tend to make offers that in the long-term are not healthy for their own interests.In 2021 for example, Lori Brewer, who at the time was the head of a firm that provided incentive compensation technology, noted that once a certain level of pay has been reached, it is difficult to roll it back.In the future, companies can try to align the compensation policy with the shift in profitability, but that can be a difficult concept to get employees to accept, Brewer said.But incentive pay may be the way to go and not just for loan officers, said Laura Lasher, the managing director of consulting firm Worthy Performance Group, and the former president of the mortgage division at Arbor Bank, Omaha, Nebraska."I've seen it work for not just the loan officers and [their] teams, but also the assistants and the closers and underwriters," Lasher said. Incentives can help not just with loan volume but with loan manufacturing quality because no one wants to have to buy a loan back.It's especially important to get compensation properly calibrated given that staffers have been less eager to switch employers of late. Fewer loan officers changed jobs in 2023, 73,292, compared with 85,337 during the prior year, according to data from Mobility Market Intelligence. Individuals at the higher end of the production spectrum tended to stay with their employer longer, the MMI statistics showed. For loan officers whose annual volume ranged between $20 million and $50 million, median tenure was three years and eight months. Producers in the $50 million and $100 million range had a median tenure of four years and one month, while those top originators that do over $100 million annually had a median tenure of four years and four months.Of course, companies have to make money in order to pay those loan officers and teams. They can incentivize employees to develop ideas that help them cut time during the origination process."The bottom line, we all know, is volume helps everything," said Lasher. "So, how can we create the best experience, raving fans, all the time that brings that volume back, that repeat business?"Everyone working in the mortgage industry knows that, given the lower-volume, high interest environment, changes in structure need to be made. But it's how that message is relayed to the staff that ensures buy-in."People still feel the instability; is that company going to be there? Is this agreement going to be honored?" Lasher said.Case studies: Certainty Home LendingCertainty Home Lending, which is part of the Guaranteed Rate family, had to address these sorts of questions when it recently added a number of top producing loan officers from George Mason Mortgage, whose parent company, United Bank, was consolidating its residential real estate finance operations.Franco Terango joined Certainty approximately one year ago as its CEO, with 36 years in the financial services industry, 25 of those in mortgage, including at Bank of America."What Certainty already embodied was just a cultural differentiator in regards to being big enough to matter and small enough to care," Terango said. "It's kind of the moniker but it fits so well with where I'm at in my career." It was a situation that also helped attract those loan officers.Several things can attract top performers, and while compensation is part of it, the company must also have a strong value proposition and good technology. Lower on the list of priorities - but still very relevant for attracting talent, is a robust marketing system, a solid product mix and capital markets support. Certainty, for one, also benefits from its association with Guaranteed Rate."A mortgage professional that's been in the business for a long time understands having…those components and then having a competitive compensation plan, that is ideally the company that you're going to go work for," Terango said.If a company doesn't have these elements, it can offer a higher level of compensation, but what happens when the money runs out? The loan officer leaves for another originator."I would not want to work for a company that was just paying a big bonus," he said. "They'd have to have those other elements."Certainty is constantly looking at what it offers potential workers, and it does keep an eye on recent performance."It's a quid pro quo that we want to deliver on all the things that we're promising but at the same time, you're going to deliver a level of performance associated with that compensation," Terango explained.Certainty looks primarily at the last 12 months of production but also takes into account the shorter three-to-six-month time frame, which is a sign that in today's tight environment that the LO has been producing. The company wants to reward that."Most originators I talked to are realistic about where [industry] volume has been for the last 18 months and where their volume has been for the last 18 months," said Terango. "The expectations are different than it was two or three years ago."Given industry conditions, the view was it would be easy to recruit, Terango commented. But some loan officers are thoughtful about what they want and they are not simply jumping companies just to chase a paycheck. On the flipside, he knows other people in the business that have chased the money only to discover that the landing spot they choose does not fit the needs of their client base, and they end up leaving within a year because they can't do business.Consumers Credit UnionOver at Kalamazoo, Michigan-based Consumers Credit Union, a good compensation plan is a big piece of the recruiting process, said Josh Summerfield, its vice president of mortgage."In every conversation I have with potential loan officers that we're recruiting, they want to know what the comp plan looks like," Summerfield said. "Having a competitive compensation plan, not just with incentives, but also with the benefits packages is super, super important for us."Consumers has a 401(k) program that the company matches dollar for dollar up to 10%, which is generous compared to what else is offered in the market, he said. But it is also important to have the products and a strong manufacturing process so that the loans close, especially in an industry where most salespeople are paid on commission. Even back office incentives can be based on production targets."Because if you can't get them to the closing table, it doesn't matter what the comp plan looks like, you're not going to get paid anything," Summerfield said. "So, it's really a three-fold thing for us trying to balance it all out."That helped Consumers, especially during the heavy recruitment cycle in the industry."It's just sticking true to our value propositions and the execution side of things," Summerfield said. "When [we're] recruiting, it's the products that we have available, being a balance sheet lender. I'm leaning into that."It is those balance sheet products – like a zero-down, no mortgage insurance product, an aggressive construction lending product and a higher loan-to-value investment property loan – that let Consumers stand out in its market."Everybody's fighting for every bit of market share that they can get right now and I don't think that's going to change," Summerfield said. "People are going to take their stabs to try to buy some business with bringing in sales staff."Highland MortgageCompanies use certain business metrics in order to craft their compensation programs.The pandemic fundamentally changed the economy, which in turn has made it more difficult to hire salespeople, said Mark Milam, president of Atlanta's Highland Mortgage."If you're going back any further than January 2023, you're really not getting accurate data for what is possible based upon the environment we're in now," Milam said. A typical producer that in the past might have done $24 million a year is now doing between $10 million to $11 million a year at best, and sometimes worse than that, depending upon where they get their business."The days of giving upfront money to recruit salespeople over are just largely gone," Milam said.Instead of a sign-on bonus or a draw against commission (either recoverable or non-recoverable), Highland is giving incentives based on a combination of metrics, including production and quality.The salability of the file goes right to the profitability of the company."It's important to have multiple metrics in there, how well they support the culture of the company and participation, especially if you're a referral base shop as we are," Milam said. "The days of paying someone on historical production, I think, are a little outdated, because those production numbers are going to be wildly different moving forward."However, many potential employees are still operating in the mindset that the industry had in the pandemic or prior days. But they cannot rely on a 2010s through 2022 model."When it comes to sales, you got to be a little bit more judicious. We had to learn that the hard way," Milam admitted. He pointed out that while some people the company hired are historically good producers, they did not have a personal business set up to deal with the combination of high rates and rising home prices that stunted the housing market.The other issue is that competition for strong staffers remains. Highland recently brought on an underwriter at what he thought was a competitive salary. But a competitor made an offer so strong that the underwriter took the position, and Milam doesn't blame them for doing so."I go back to incentivized pay as being something I'm a big fan of. A right-sized base salary, but with per-file incentives that allow someone to make the kind of money they would like to make, so long as the company is making the kind of money it needs to make," Milam said.Arrive HomeWhile Arrive Home is not a lender — it works with them on providing down payment assistance and alternative credit solutions — it competes with mortgage companies for staff.Arrive Home just hired a senior loan processor and it is back in the market for more. The first time it posted the position it got 35 applications. Now it got 60 in just the first two days after putting the job notice out, said Tai Christensen, its president.Part of what job seekers are looking for is the ability to work from home, either full-time or on a hybrid basis. Arrive Home allows for that, which helps it find people who don't want to give up that lifestyle as their current employer forces them back into the office."We also really prioritize trying to achieve that elusive, evasive work-life balance," Christensen said. "We allow you to work early in the morning and later in the evening to accommodate your schedule, as long as you're making your time commitments and also meeting deadlines."Arrive Home uses a salary arrangement whereas traditionally most lenders have a commission or bonus structure.While an individual can make more with the latter, especially in the boom times, right now many people are seeking the certainty having a set salary brings, Christensen said. "Are you working under a commission structure and your pipeline is not as heavy or the volume isn't there, you're going reach out and look for opportunities where you have guaranteed pay."Arrive Home does pay bonuses and it also allows for the opportunity to have overtime.But it also offers "vacation reimbursement," she said. "Each of our employees gets $2,000 per year that you are able to submit receipts for any vacation expenses you may have during the paid time off that you are using."Until now, Arrive Home has also paid 100% of medical and dental insurance costs for employees, but rising prices may force it to change that policy.

Recommendations in a new Financial Stability Oversight Council report could give nonbank mortgage servicers more of a liquidity backstop but may also lead to them being more closely regulated.The report discussed at an FSOC meeting on Friday calls for Congress to provide the Federal Housing Finance Agency and Ginnie Mae with additional authorities aimed at improving their ability to manage nondepository counterparties.It also included calls for the expansion of the Pass-Through Assistance Program that Ginnie Mae used as an emergency facility during the pandemic, congressional involvement and an industry funded liquidity resource.A fund financed by the industry could help sustain a troubled nonbank long enough to transfer servicing to a capable party in an emergency while avoiding taxpayer-supported bailouts, supporters like Treasury Secretary Janet Yellen said in a statement Friday.However, officials from some regulatory bodies, while backing other recommendations, advised caution around more ambitious efforts in the report like the industry-funded facility."The FSOC's recommendation to establish a nonbank-financed liquidity fund, administered by a newly authorized federal regulator, is premature at best," said Brandon Milhorn, president and CEO of the Conference of State Bank Supervisors, in a press statement.Milhorn showed concern about the potential for "unintended consequences" that could "negatively impact the nonbank mortgage market," calling for a go-slow and well-researched approach."Instead, federal agencies, Ginnie Mae and Congress should focus their immediate attention efforts on targeted structural changes included in the FSOC report," he said. "I encourage Congress to remove any legal impediments to information sharing between Ginnie Mae and state regulators."Superintendent Adrienne Harris of the New York Department of Financial Services, a non-voting member of FSOC, weighed in on a recommendation that "state regulators require the largest nonbank servicers adopt recovery and resolution plans."Harris said in a statement that the plans could be constructive for nonbank mortgage servicers if they are not "a one-time exercise left to sit on a shelf collecting dust until a crisis strikes." The plans "must be practical, actionable, tested and kept up to date," she said.One early industry reaction to the report from the Community Home Lenders of America suggested that a permanent and expanded version of the last-resort PTAP program, as Ginnie itself has recommended in the past, would be welcomed."We are pleased that FSOC has embraced CHLA's longstanding call to expand PTAP which would create a liquidity backstop," CHLA Executive Director Scott Olson said in a press statement.FSOC "identifies sensible opportunities for structural reform to the Ginnie Mae program while highlighting Ginnie Mae's ongoing effort to expand liquidity options and relieve liquidity pressure on issuers," said Bob Broeksmit, president and CEO at the Mortgage Bankers Association.However, the mortgage industry has historically been wary of other FSOC intervention amid efforts to characterize the increased nonbank presence within it as a potential systemic risk."We share FSOC's goals of a safe, stable, and sustainable financial services marketplace, but some of the report's recommendations are unnecessary," Broeksmit said."While we support national standards for capital and liquidity requirements, layering duplicative supervision requirements or supervisory entities onto a heavily regulated market will add significant cost and complexity. Managing such changes, should Congress require them, could lead to reduced appetite for mortgage servicing," he added.That, combined with a pending bank capital proposal could drive depositories further out of the mortgage market and have an adverse impact on the market, Broeksmit added.Agencies that more specifically manage nonbank counterparties like Ginnie and FHFA called the current report balanced in acknowledging servicers' risks while also stressing their benefits.Many nonbanks do tend to be monoline entities focused on single-family housing finance and may be vulnerable to swings in the volatile valuations of mortgage servicing rights. They advance some payments on behalf of delinquent borrowers and support a mortgage-backed securities market that helps fund a wide swath of affordable housing in the United States."The FSOC report calls attention to the strengths of nonbank mortgage servicers, including their commitment to the mortgage market and to supporting sustainable homeownership for historically underserved populations, along with several structural vulnerabilities," FHFA Director Sandra Thompson said in a statement."I am particularly encouraged that the FSOC recommends Congress consider providing FHFA with additional authority to establish appropriate safety and soundness standards for nonbank mortgage servicing and to directly examine for compliance with these standards," Thompson added, referring to a longstanding agency proposal that the report backs.Some of the entities FHFA regulates have been wary of an expansion of its authority.Rohit Chopra, director of the Consumer Financial Protection Bureau, also showed interest in more closely regulating nonbank servicers in his remarks at the meeting on Friday, citing previously mentioned areas of scrutiny the CFPB has been targeting like "junk" fees and credit reporting.He additionally noted interest in further reforms around distressed mortgage servicing and foreclosure prevention that would move regulation away from a "check the box" exercise. (A court challenge to the CFPB's funding structure is pending.)

The first quarter was better for title insurers than the same period last year, as all of the five publicly traded companies posted higher net earnings.However, Doma, which announced an agreement to be acquired by Title Resource Group as the second quarter began, reported a GAAP net loss, although it was lower than for the first quarter of 2023.Old Republic, whose title insurance underwriting unit is a part of a larger firm that also has a general insurance line, did end up with lower pretax operating income.Meanwhile, the title industry came under attack in the first quarter from the White House and the Federal Housing Finance Agency, which is pushing a pilot program that would waive the requirements for a lender policy on certain refinancings.The Consumer Financial Protection Bureau is reportedly considering making lenders pay for their portion of the title policy.Fidelity National Financial CEO Mike Nolan, on his company's earnings call, fired back. "While we strongly support the broader effort to make homeownership more affordable, we believe the recent comments from the FHFA and the CFPB relative to title insurance are misguided and display a misunderstanding of the vital role in value that title insurance provides consumers and the broader economy and the critical role it plays in helping to make the American dream of homeownership a reality."The CEOs at First American, Ken DeGiorgio, made similar statements during its earnings call.But Carolyn Monroe, president and CEO of Old Republic National Title Holding Co., took a more measured approach on parent company Old Republic International's call."We would characterize these developments as early stage and still subject to much debate and lobbying," Monroe said. "But considering the recent press, we wanted to note that we are tracking these developments and at this time, do not anticipate any significant implications for our business."Later in the call, Craig Smiddy, president and CEO of Old Republic International added that the company was working with the American Land Title Association on these developments."It may change who pays for something…whether it's the borrower or the lender," Smiddy said. "But we don't see it materially impacting the business because at the end of the day, in order for a lender to sell a mortgage in the secondary market, they're going to need title insurance."At the same time, the head of the nation's largest mortgage lender, United Wholesale Mortgage chief executive Mat Ishbia reiterated his prior comments about the product during the company's earnings call on May 9."The title insurance business itself is one of those parts of the industry that are ripe for disruption," Ishbia said in response to a question. "Charging consumers a lot of money for a product that doesn't require a lot of cost and so, reality is that's going to get disrupted at some point."UWM partners with title companies and the product isn't going to go away, Ishbia continued."They're going to be part of the industry and they do great things, but there is going to be some disruption going to some movement, because there's a better way to do things for consumers," Ishbia said. "A lot of people look at it and we're one of those people that look at it."Here are the first quarter results for the publicly traded title insurers:

The number of homeowners seriously underwater on their mortgages is growing as their equity cushion wavers, according to new research from Attom Data Solutions.While a study published earlier this week revealed that, by one measure, the amount of outstanding home equity hit a record $17 trillion, the share of homes considered equity rich, with loan-to-value ratios of 50% or lower, hit a two-year low to begin the year. The 45.8% share in the first quarter has dipped for three consecutive quarters, and is smaller than the 47.2% mark at the same time last year. Homes seriously underwater, or with loan-to-value ratios of 125% or greater, meanwhile rose quarterly from 2.6% to 2.7% in the first quarter. Median single-family home and condominium values slipping 4% over the winter was a factor in the setbacks, Attom said."The windfalls are starting to erode bit by bit amid mounting signs that the market is no longer so super-heated," said Rob Barber, Attom CEO, in a press release.The company, which utilizes data from more than 155 million properties, said it's too early to make broad statements about the market's direction given the traditionally slower fall and winter seasons. Tight inventory, and mortgage rates still above 7% as of Friday, according to Lender Price, are keeping homeowners put and home prices elevated. The nation's property owners hold almost $17 trillion in equity, and $11 trillion in "tappable" equity, according to an Intercontinental Exchange finding earlier this week. The share of underwater mortgages rose in 37 states, and in 1 of every 37 homes nationwide in the first quarter, according to Attom. Kentucky suffered a rough first quarter with the largest quarterly drop in equity-rich properties, from 35.4% to 28.7%, and the greatest gain in underwater homes from 6.3% to 8.3%. The Bluegrass State is also home to two of the top-five zip codes with the greatest share of seriously underwater homes, in Columbia and Princeton.Other states with steeper rises in underwater homes were West Virginia (5.4% overall); Oklahoma (6.1%); Arkansas (5.7%) and Delaware (2.7%). The Midwest is also home to the zip codes with the highest share of seriously underwater mortgages. Gillete, Wyoming includes two zip codes with rates exceeding 79%, while Mount Vernon in southern Illinois had a share of 55%.While the Northeast was generally more equity-rich, some Midwest and Southern states posted green shoots. South Dakota recorded the biggest quarterly upgrade in equity rich properties, from 49.8% to 51.5%, while Missouri posted the largest decline in underwater homes from 5.6% to 4.5%.The most equity-rich destinations were sunny, coastal locales led by San Jose (69.3%), California, followed by MIami (64.5%), Los Angeles (64.3%) and San Diego (64.2%).

Two influential government-sponsored enterprises are temporarily cutting some slack to single-family mortgage companies regarding one aspect of insurance mandates after hearing some concern about it from providers of the coverage.Fannie Mae, Freddie Mac and their regulator are providing short-term leniency on immediate compliance with requirements to obtain and document a traditional home's replacement cost value yearly. Insurance policies must still be settled on a replacement cost basis."We are engaging in further dialogue with our industry partners to understand recent concerns raised related to obtaining the replacement cost value. Pending those efforts we will refrain from citing lenders and servicers for noncompliance with these requirements," a Fannie spokesperson said, confirming the new guidance in an email.Fannie called the replacement cost requirement a "necessary" and "well-established" practice it has engaged in "to confirm that the property insurance coverage amount is sufficient."A Freddie spokesperson issued a similar statement while stressing that its recent industry letter to this end "reinforces" its requirement "for policies to be settled on a replacement cost basis" "We are temporarily not going to require servicers to take action when we note noncompliance with obtaining replacement cost value during certain procedural reviews," the Freddie spokesperson said.While Fannie and Freddie say they have long required replacement cost due to concerns about depreciation (which actual cash value doesn't account for), their recent reaffirmations of the requirement alarmed an insurance industry that said the market has increasingly moved to ACV.In particular, a recent Fannie single-family selling guide clarification specifying claims settled for actual cash value "are not acceptable" sparked concern. Insurers also noted Freddie Mac recently clarified some single-family guidelines that stressed the replacement cost standard.It's an issue for insurers because they have been trying to offer more options around the basis on which claims are settled to address concerns about rising insurance costs and risks. Both have risen due to higher interest rates, climate change, floods and other hazards."An absolute restriction limiting the contracts that satisfy eligibility for GSE-backed mortgages to replacement cost is too narrow," the National Association of Mutual Insurance Companies and the Independent Insurance Agents and Brokers of America said in the letter written last month. The Insurance Journal reported on the letter earlier.Jimi Grande, senior vice president of federal and political affairs for NAMIC, welcomed the decision by Fannie, Freddie and their regulator to take some time out to consider how the issue  could be resolved without leaving any policyholders un- or underinsured."Insurance is getting more expensive, so a lot of times a way to make a policy affordable is to charge someone less. Many do choose the ACV policies," Grande said in an interview.The Mortgage Bankers Association joined Grande's group in welcoming the enterprises' move to put the RCV compliance citations on hold so stakeholders could determine whether or not it is still an appropriate standard."MBA applauds the GSEs for engaging with industry stakeholders to address mounting concerns about hazard insurance costs and availability," the group said.Insurers said they were initially surprised to see replacement cost stressed as the only option given the prevalence of ACV use and Fannie and Freddie's large market share, leading them to initially believe the standard or enforcement around it was new."The truth of the marketplace today is many borrowers have ACV policies. It's very common," Grande said.One of the biggest drivers of concern about replacement cost may be roofs, for which policies in the insurance industry have been trending toward use of ACV or cost-sharing coverage as they are big-ticket items with particularly high costs, Grande said.(Fannie and Freddie's multifamily insurance guidelines in the case of the apartment roofs do allow a carve-out for ACV but that part of their business has different considerations than the one that oversees insurance for traditional homes.

"Gen Z consumers ... have no problem chatting with an AI, especially if the AI is intelligent," said Affirm CEO Max Levchin, when discussing the buy now/pay later firm's latest quarterly results. Buy now/pay later fintech Affirm produced higher sales volume and narrowed its losses during the first quarter of the year, and CEO Max Levchin said recent tests the company conducted with generative AI suggest that young adults would rather resolve customer-service questions with an intelligent chatbot than with a human agent.The company's goal is to use gen AI to "prework" a lot of routine customer inquiries so that human agents who are experts can readily answer more complex questions. "Gen Z consumers really love chatting versus calling and they have no problem chatting with an AI, especially if the AI is intelligent," Levchin told analysts during a conference call this week to discuss earnings for the quarter ended March 31, 2024.He cautioned that it's very early to predict the long-term effects of gen AI, but he's optimistic about ways to deploy the technology across the organization."No one has lost their job to be replaced by a robot at Affirm … but in terms of our ability to scale our customer service and base as we employ AI more and more, that's certainly going to be a cost saving over the next one to three years," Levchin said.Affirm's biggest challenge this year is refining features of its much-ballyhooed Affirm Card, which Levchin is positioning as a hybrid financial tool to be used for everyday debit purchases, short-term zero-interest loans and longer-term loans with different interest rates."It takes a long time to invent a new type of card," Levchin said, noting that Affirm made headway during the recent quarter in helping Affirm Card users understand the best use cases for paying with the Visa card's debit mode versus financing a preplanned purchase with interest at the point of sale or deciding to split a purchase into four equal payments over six weeks, with no interest."During the last quarter we launched a lot of tweaks and fixes, making the card more comprehensible and easier to use and understand," Levchin said.For example, using the pay-later mode in a restaurant poses some challenges when customers have to factor in a tip, Levchin said. About 10% of Affirm Card users' spending on the card is now in the debit mode, up from 6% during the quarter that ended Dec. 31, 2023. Increasingly, customers are using Affirm for more diverse purchases, including for everyday items, Levchin said.During the recent quarter, general merchandise accounted for 32% of Affirm purchases, with fashion/beauty and travel/ticketing each accounting for about 16% of purchases and sporting goods coming in at 4%. By contrast, Peloton bikes accounted for about 30% of Affirm's sales in 2021.Affirm's total transactions during the quarter rose 50%, to 21.5 million from 14.4 million a year earlier. More than three-quarters, or 77%, of Affirm's transactions occurred at the point of sale, with 23% initiated online, through the mobile app or with the Affirm Card. Seventy-two percent of Affirm's loans were interest-bearing during the quarter.The company's gross merchandise volume rose 36% during the company's third fiscal quarter, to $6.3 billion from $4.6 billion during the same period a year earlier, while total revenue soared 51%, to $576 million compared with $381 million during the year-earlier period.Delinquencies on monthly installment loans stayed flat and Affirm's net loss shrank to $134 million compared with a loss of $206 million during the same period a year earlier.Despite generally positive trends, Affirm's stock sank to $31 a share from $35 a share pre-earnings, and it ended the week at $32 a share, as investors were underwhelmed by Affirm's slower-than-expected momentum. "We view Affirm as substantially overvalued, particularly given that the company's pace of growth will likely be too slow to capture the fastest income-growth segments of Gen Z," said equity analysts at Morgan Stanley in a Thursday note to investors. "We increasingly believe that Affirm's long-term customer base will be made up primarily of lower-income consumers more evenly distributed across age demographics, which likely implies economic life cycle income and spending potential growth will be limited," they wrote. 

A former loan originator has pleaded guilty to scamming Chicago-area homeowners in a reverse mortgage scheme that prosecutors say caused $6 million in losses. Mark Steven Diamond, 67, faces up to 30 years in prison after pleading guilty Tuesday to a wire fraud charge for his role in scamming elderly homeowners. The onetime LO, who was barred from originating loans 20 years ago, worked with brokers to scam over a dozen residents out of reverse mortgage proceeds to pay for shoddy or nonexistent home repairs. According to the plea agreement in an Illinois federal court, Diamond admitted to defrauding 17 victims from ages 62 to 97 out of $839,000 in reverse mortgage funds. Feds claim the scheme included at least 80 victims. Diamond, who remains in custody, faces up to 30 years in prison, and prosecutors have recommended a sentence of up to 24 years. He'll be sentenced in September, while four other co-schemers who've also pleaded guilty await sentencing. Attorneys for Diamond didn't return requests for comment Thursday.The defendant was a licensed loan originator in Illinois and president of brokerage OSI Financial Services, along with home repair contractor firm United Residential Services, in Chicago. The same Illinois federal court previously barred him and OSI from originating loans in 2003. Beginning in 2006, Diamond employed Cynthia Wallace, of Sauk Village, Illinois to solicit homeowners in the West Side of Chicago, a predominantly African-American neighborhood with older homes that largely weren't refinanced. Over the next nine years, the pair convinced homeowners, many with a lack of financial understanding, to undertake home repairs, which they presented as costing near the total of each homeowner's anticipated equity. The duo, in accordance with separate mortgage brokers, took out reverse mortgage loans in homeowners' names, falsifying documents and representation to both customers and financial institutions to push the transactions forward.The broker co-defendants worked for American Fidelity Financial Services and Illinois-based Harbor Financial Group, according to the plea agreement. An Illinois regulator revoked Harbor's residential mortgage license in 2010 over its arrangement with Diamond. The nation's senior population holds a record amount of equity in their homes, but today are reluctant to use it for additional funds, according to Fannie Mae research.

Fannie Mae is making a key underwriting tool used for certain types of mortgages free of charge on its website.The government-sponsored enterprise's income calculator, which serves lenders who originate loans for self-employed clients without traditional salary flow, is now available on Fannie Mae's site via a new web interface. Introduced last year through authorized third-party providers, the tool aims to help originators lower their loan defect rate while streamlining business functions. "With the launch of our new web interface, originators now can select the solution that best aligns with their processes and meets their needs, while saving time and improving certainty in the quality of the loan," said Mark Fisher, president of single-family credit risk solutions, in a press release. Customers of Fannie Mae's technology vendor partners will continue to have access to the income calculator through their providers' platforms as well, Fisher said."Whether through our new web-based user interface or through an integrated technology service provider, Fannie Mae's income calculator simplifies the process of underwriting the qualifying income of self-employed borrowers, which traditionally has been a challenging and time-consuming operation for lenders."The self-employed population represents approximately 10% of the U.S. workforce, according to U.S. government estimates, as well as a growing number of Fannie Mae loan deliveries. But the steps involved in originating mortgages to such borrowers often involve detailed scrutiny of bank statements and other sources, increasing the possibility of loan defects. In April, Aces Quality Management found the loan-defect rate improving to its lowest in over three years, according to the most recent data available. But issues with income and employment came in as the most common type of error, found in more than 23% of loans.The income calculator tool offered by Fannie Mae uses tax return data to determine monthly wages while also utilizing its current selling guide requirements, prior to submission of the loan. The service returns a monthly qualifying income amount along with warnings to help originators avoid common mistakes.The latest announcement follows recent changes to Fannie Mae underwriting policy, including approval of single-source validation of a borrowers' assets, income and employment, which is intended to ease processes for lenders. The GSE also made moves this year to address concerns about the costly impact on lender business when they are required to repurchase defective loans. Notifications of potential flaws could allow lenders to remedy a defect situation before Fannie Mae moves on to more expensive options, industry leaders said.