With its acquisition of Cross Media this week, real estate software provider Propertybase joins a host of companies completing mergers and acquisitions with the goal of becoming an all-encompassing one-stop shop for housing-related needs.
Cross Media owns Unify, a customer relationship management platform for the residential mortgage industry aimed at lead generation and client retention, as well as real-time loan origination system integration. The company works with roughly 80 mortgage companies in North America, mining and analyzing potential borrower data through automation to produce higher-intent leads. Its new owner, PropertyBase, offers lead generation, CRM, compliance management and other software tools, which are used by 4,500 real estate entities across the country, the company said.
Unify will operate as an independent business unit under the new ownership, but other terms of the deal were not disclosed.
Recent studies have shown that 2021 should be a big year for industry consolidation and increased use of built-out technology to boost operational efficiencies. With its purchase of Cross Media, Propertybase recognizes the need to cover the entirety of a real estate transaction, CEO Vance Loiselle told National Mortgage News. The acquisition fits the next phase of the company’s vision to enhance its network in the “digital-first world,” he said.
The marriage of lead generations should connect the dots from purchasing a home to financing it.
“Now is the perfect time to transcend the gap between technologies and to further align ancillary services,” Loiselle said. “In addition, as the mortgage industry continues to benefit from refinancing, it will be imperative to proactively support mortgage brokerages with software to handle these requests as well as generate new leads.”
Austin-based mortgage tech platform UpEquity raised $25 million in a Series A funding round led by Next Coast Ventures.
The funding consists of $7.5 million in equity financing and $17.5 million in venture debt, UpEquity said in a statement.
The funding will go toward product development and business development with real estate agents to reduce their time-to-close to 10 days, significantly higher than the industry average.
UpEquity essentially makes free cash offers but charges interest – currently 2.5% – on the loans it provides to homeowners, who can make an offer on a house without having to go through a bank to get a mortgage. Homeowners then make monthly payments directly to UpEquity to pay off the mortgage on the home.
The tech startup says its method is a way to “democratize” the homebuilding process, especially for first-time homebuyers. Sellers are more likely to accept cash offers, which UpEquity claims translates into up to 4% savings for the all-cash buyer.
How this real estate brokerage’s unique model generates more profit for agents
Today, both sellers and buyers expect to handle a majority of the process online. For a well-prepared real estate brokerage, this holds a promising future.
Presented by: 1 Percent Lists
“Our goal is to finally align the mortgage industry with consumer interests,” Herman said in a statement. “This funding is validation that consumers, real estate agents and venture investors understand the power of removing friction from the home-buying process, not only for personal advancement, but to attain the American Dream.”
The company uses uses automated underwriting technology to process the loan.
If a purchaser doesn’t buy the home, then UpEquity owns the house. UpEquity CEO Tim Herman told TechCrunch that only two of the 300 deals the company has done have failed.
The company claims it originated $100 million in mortgages in 2020. According to NMLS data, UpEquity has eight mortgage loan originators working at the company. Dani Hernandez is head of mortgages at the Austin-based startup.
The company is currently originating loans in Texas, Colorado, Florida and California. It plans to expand into new markets this year.
SitusAMC is gobbling up companies. The mortgage tech and service provider announced the acquisition of two companies in January of 2021 alone. Those acquisitions, of mortgage tech firm ReadyPrice and mortgage and title knowledge provider Assimilate Solutions LLC., can be seen in the wider context of a mortgage industry that’s at the beginning of a consolidation cycle, as firms use their record 2020 profits to expand and capture new strategic advantages.
Michael Franco (pictured), CEO of SitusAMC explained why his company is making these moves now. He laid out the sorts of companies SitusAMC is still looking to acquire and why, in his view, these acquisitions across the industry aren’t purely driven by a need to weather the next rate hike.
“The mortgage market is generally a scale business, but I think what you’re seeing here is a move to an ecosystem of capabilities versus point solutions,” Franco said. “That move is just going to continue to accelerate. So, if you take a look at somebody like ICE as a for instance, so they’ve got MERS, they’ve got Simplfile, they’ve got Ellie [Mae] now. You take a look at Black Knight, they went out and they bought Compass [Analytics], and they bought Optimal Blue. You’re seeing bigger and bigger players in this space. That’s where you’re going to start seeing people say, ‘I need to compete with some of the bigger players in the space’ and asking what they need to be successful here longer term.”
For Franco, players in the mortgage technology and service space need to create ecosystems to compete with those big players. For SitusAMC that means acquiring companies that add breadth to its offerings, rather than additional depth to their original services. Competition in this space will be driven by the companies able to bundle 10 different solutions together in one consolidated package.
SitusAMC’s acquisition strategy, according to Franco, is driven by exactly that – using existing businesses to capture every aspect of a loan cycle, allowing the company to become a single point of contact for mortgage professionals.
Read more: Small business owners – why they can’t get low rates
Franco is aware, though, that margins will shrink across the industry when rates do rise. He explained that SitusAMC is taking a “disciplined approach” to its acquisitions, backed up by confident financial partners. Those partners know that 2020’s numbers might not be easily repeated, and are instead asking how they can find the next big win. He explained that their moves are driven by a longer-term outlook, asking where they see the market in three to five years. He wants to get ahead of macro themes in the industry in these acquisitions, rather than chasing those trends. For SitusAMC that means offering better services to support mortgage pros closing purchase loans.
For other mortgage companies looking to compete in a consolidating space, Franco stressed that now is the time to act. Waiting until rates rise, or another change comes, will put you behind the curve.
“If you’re waiting now, by the time you do something it’s already too late,” Franco said. “I think that the benefit is really in getting ahead of the macro trend, not trying to follow on after the fact because the gains, in our opinion, will aggregate quickly to the winners.”
Kelly Purcell, an advocate for the digital mortgage movement, died on Feb. 6 at the age of 58.
Purcell was a pioneer of electronic signature technology, co-founding SignOnline in 1999, a year before the federal legalization of e-signatures. Since October 2018, Purcell served as NotaryCam’s EVP of marketing and business development.
SignOnline — later renamed eSignSystems — still lives on. It was acquired by Wave Systems in 2001 and again by DocMagic in 2014. The company’s survival is a testament to Purcell’s vision and tenacity, friends and industry veterans said. She committed herself to bettering an industry ripe for innovation and refused to quit, they added.
“Kelly was my go-to whenever I was weary,” Nancy Alley, SignOnline co-founder and vice president of strategic planning at Simplifile, said in an interview. “I remember Jonathan [Kearns] and I were starting to see hope expire a little bit. She just looked at us and it was non-negotiable. She literally became Annette Bening in American Beauty saying, ‘I will sell this house today.”
Purcell made her first foray into lending at GE Mortgage Insurance Group in 1989. Over the years, she heavily involved herself in several industry groups, including the Mortgage Bankers Association, Electronic Signature and Records Association and Progress in Lending Association. She canvassed for new ideas and prioritized thought leadership over bureaucracy. In 2009, eSignSystems won Mortgage Technology Magazine’s Lasting Impact Award.
“To call Kelly Purcell a pioneer is an understatement. eSignatures are a part of our daily lives today but back in the early 2000’s it was such an unknown and considered a risk factor, especially in the mortgage industry,” said Jonathan Kearns, SignOnline co-founder and associate vice president at the Mortgage Bankers Association. “For years we evangelized and moved the needle forward on eMortgages, no one did it better than Kelly. Having an eVault was even more unheard of but from the beginning we knew maintaining the integrity of digital assets would be as important as eSignatures.”
Tim Anderson, SVP and director of digital strategy at MortgageConnect, posted the news of Purcell’s passing on LinkedIn to an outpouring of sympathies from around the mortgage world. Anderson and Purcell met in 1999 and stayed friends ever since.
Purcell’s loyalty and ability to form true connections will be a huge part of her legacy, Alley added.
“She would take anybody in the industry interested in mortgages or E-signatures under her wing, share what she knew, introduce them to the right people and help them find jobs,” Alley said. “She was the best salesperson I’ve ever met. She just had that great connection with people. She was very loyal to her peers in the industry, but loyal to her family above all else.”
Purcell is survived by her daughter, Rachel, her mother, two sisters, three nieces and two nephews.
Managing costs and creating operational efficiencies are foremost on the minds of the mortgage lenders, with the ongoing pandemic creating pressure on their profit margins.
Outsourcing was the leading choice for producing those efficiencies, by 41% of those surveyed for Altisource Portfolio Solution’s latest the State of the Originations Industry report.
That edged out using more technology and digital services to reduce the need for staff, cited by 39% of the respondents to the survey of 200 people conducted between Aug. 17 and Aug. 29, 2020. Those shares were unchanged compared with the previous year’s survey.
“With costs rising and revenues down in many cases due to the pandemic, it makes sense. Rather than spending time and money hiring and training full-time staff, service providers can support and strengthen an originator’s workforce by handling a portion of the lender’s volume,” the report said. “In this way, an originator can avoid the typical hiring/firing cycles that significantly distract an organization from closing more loans.”
When asked what they predict for the mortgage business over the next two-to-three years, 80% of the respondents — up from 79% the previous year — said originators will outsource more to third-party vendors to better deal with market fluctuation, especially as total volume is expected to shrink due to lower refinance activity.
That was the third most-cited prediction, with the No. 1 being that growing costs will drive smaller lenders out of the business or into merging with other lenders. That was cited by 84% of respondents, up four percentage points from the previous year’s survey.
Sandwiched between those two choices was the return of private money into the mortgage securitization market, predicted by 82% of the respondents. That share was unchanged from the previous year, but it was the most cited answer for that period.
Ranked fourth among the predictions cited by the respondents was the likelihood of a market crash in the next 24 months, at 68%, while fifth, at 64%, was a new option for the latest survey, nonbanks will dominate the originations business over the next two-to-three years.
Prior surveys gave respondents the option that big banks will come back in and dominate the mortgage business; in the previous year’s survey, that was the second most cited response at 81%.
Regulatory constraints was the most-cited challenge in today’s mortgage market, by 27% of respondents. This was followed by technology at 24%; staff retention, 21%; margin compression — which is why many lenders are worried about costs — 19%; capacity, 10%; and other, 1%
When asked to rank the initiatives that are most important in differentiating their individual business compared with their competition, technology enhancements edged out customer service, 21% to 20%. Pricing was third at 19%, followed by marketing at 11%, quickest timeline at 10% and artificial intelligence at 9%.
In terms of what makes mortgage products more attractive to consumers, 38% said improved customer experience was key. Lower loan costs was cited by 23%, followed by fully digital closings at 22% and fasting closings at 18%.
“While the road ahead is still unclear, as always, mortgage companies that are ready for whatever comes will have the best chance of thriving in the market,” Brian Simon, president of three Altisource subsidiaries including the Lenders One cooperative, said in a press release.
We reviewed home loan data provided by ICE Mortgage Technology to determine the minimum credit score needed to buy a house in 2021.
As it turns out, most mortgage loans these days are going to borrowers with FICO credit scores of 600 or higher. Having a 650 or higher could significantly increase your chances of loan approval.
If your credit score falls below 600, you might want to consider the FHA loan program as a backup.
(Note: These findings are based on the FICO scoring range in particular, which extends from 300 to 850. FICO scores are widely used by mortgage lenders in the U.S.)
Credit Score Needed to Buy a House in 2021
Each month, ICE Mortgage Technology (formerly known as Ellie Mae) publishes an “Origination Insight Report” that reveals data and trends across the mortgage lending industry. This company creates mortgage processing software platforms that are used by lenders across the U.S.
Their insight reports analyze “application data from a robust sampling of approximately 80 percent of all mortgage applications” processed through their platform.
In other words, these reports give us a snapshot of current trends and standards across the mortgage industry.
They also help us answer common questions, such as: What minimum credit score is needed to buy a house in 2021?
The company’s latest report, which contained application data through the month of December 2020, revealed the following trends for purchase loans used to buy homes:
Nearly all purchase mortgages (99.75%) went to home buyers with credit scores of 600 or higher.
A much smaller slice (0.24%) of the total went to borrowers with scores that fell within the 550 – 599 range.
And there was virtually no lending activity below the 550 threshold.
So right away, we can draw some pretty clear conclusions. Based on these latest trends, it seems that a minimum credit score of 600 is needed to buy a house with a mortgage loan — at least in most cases.
If your score falls within the 550 – 599 range, you might still qualify for a mortgage loan. But you’ll probably have to shop around a lot more than a person with a higher score. You might also have to resort to using an FHA loan, as mentioned below.
Lastly, if your credit score falls below 550, the odds appear to be against you. According to the most recent insight report, only 0.01% of purchase mortgage loans had a credit score within the 500 – 549 range.
Note: None of this is “set in stone.” Different lenders have different standards and requirements, when it comes to screening borrowers. So don’t hesitate to shop around, even if you fall short of these trends.
Differences Between FHA and Conventional Loans
This report also illustrated some key differences between FHA and conventional mortgage loans, with regard to credit score distribution. The FHA program appears to be more flexible and has a higher percentage of borrowers with relatively low scores.
We’ll get to those numbers in a moment. First, a quick review of mortgage lingo:
A conventional mortgage loan is one that is not insured or guaranteed by the government. It receives no government backing of any kind. You might think of it as a “regular” home loan.
An FHA mortgage loan, in contrast, does receive insurance backing from the federal government. This insurance protects the lender against losses that can occur when a borrower fails to repay the debt.
Government-provided insurance is what distinguishes FHA and conventional loans. It also affects the minimum credit score needed to buy a home. Generally speaking, FHA loans are easier to obtain due to the government backing. Conventional loans, on the other hand, usually have higher standards.
Which leads us to the next question: What credit score is needed to buy a house in 2021, when using an FHA loan?
What Score Is Needed for an FHA-Insured Home Loan?
Based on the origination insight report mentioned above, it seems that a credit score of 550 or higher is needed to qualify for an FHA loan these days.
That’s different from the official minimum score required by the Federal Housing Administration. The official FHA guidelines (found within HUD Handbook 4000.1) state that a borrower needs a credit score of at least 500 to qualify for the program. A score of 580 or higher is needed to take advantage of the relatively low 3.5% down payment option.
But the Ellie Mae / ICE report showed that very few FHA home loans are going to borrowers with scores below 550. That’s because mortgage lenders can determine their own qualification criteria, even when participating in a government-backed program. And lenders tend to set the bar higher.
Regarding FHA loans, the latest insight report showed that 98.64% of FHA purchase loans went to borrowers with FICO credit scores of 600 or higher. Another 1.24% of mortgage applicants fell within the 550 – 599 range. And only 0.11% had scores below 550.
Here’s the key distinction between FHA and conventional:
With conventional / non-government mortgage loans, there’s hardly any lending activity within the 550 – 599 credit score range (0.03%).
With FHA-insured home loans, there was a higher level of activity among borrowers within that same range (1.24%).
The bottom line here is that mortgage lenders clearly want to see higher scores among FHA borrowers, compared to the official program cutoff of 500. Having a credit score in the low-500 range might check a box with the Federal Housing Administration. But that doesn’t mean you’ll pass muster with mortgage lenders.
Related: Average down payment size in 2021
A Small Part of a Bigger Picture
Credit scores are an important part of the mortgage qualification process. Having a good score can help you qualify for a home loan with a competitive interest rate.
That’s a big deal, from a borrower’s perspective.
But there’s a bigger picture here as well. Yes, there is a certain credit score needed to buy a home in 2021, and we’ve covered that above (as much as possible). Just bear in mind there are other qualification “checkpoints” you’ll have to clear.
For example, borrowers must also have a manageable level of debt in the lender’s view. The debt-to-income ratio, as it’s known, is a key part of the mortgage application and underwriting process. Also, borrowers must be able to document their income and earnings — and it must be sufficient to cover the monthly payments and other debts.
While credit scores do matter within the mortgage world, they are part of a broader review process that also includes debts, income and assets.
Disclaimer: This report provides an analysis of current lending trends based on third-party data. It is not meant to be the “final word” in lending standards and requirements. Nothing in this article should discourage you from applying for a home loan or speaking with a lender. That’s the only way to find out where you stand, in terms of your qualifications.
The volume of homes sold or refinanced in 2020 was incredible, with total origination volume expected to top $4 trillion for the year once all the numbers are in. Wanting to take advantage of record low mortgage rates to gain more space in a pandemic, consumers didn’t follow traditional seasonal buying patterns, fueling a non-stop race to find and buy a house.
That dynamic is driving home sales this year too, which is why we’re hosting our virtual Spring Summit focused on The Year-Round Purchase Market.
The lingering pandemic, uncertainty about rates and a demographic tsunami of buyers means those in real estate and mortgage have to be as smart and agile as ever. We’re bringing together experts who can speak to the topics that are critical to your success at this year’s Spring Summit, including:
What mortgage tech is solving now
Servicing challenges in a pandemic period
Operational strategies in the current market
The brave new world of valuations
Mortgage disruption outlook
A new regulatory regime
Our keynote session is a one-on-one interview with UWM President and CEO Mat Ishbia. In January, UWM completed the largest SPAC deal in history to become a publicly traded company valued at $16 billion, raising $925 million in cash in the process, with an opportunity to elevate mortgage brokers nationwide.
In this session, HousingWire CEO Clayton Collins will interview Ishbia about the way the company responded to the COVID crisis, the decision to go public and the future of the mortgage broker model.
We’ve also got sessions on increasing minority homeownership, the economic outlook, lessons from local markets and more.
As with all our events, we’re bringing together some of the brightest and most successful people in mortgage, real estate, compliance, security, technology and regulation to speak at our Spring Summit. These experts will provide insights and a holistic view of what’s happening right now in real estate and mortgage, as well as what’s coming next.
The 2021 Spring Summit is designed for our HW+ premium members, who get access to all HousingWire virtual events, long-form digital content published weekly, an exclusive Slack community and more. Sign up for HW+ membership here, or get event-only access for your company or team here.