Digital HELOC, Non-QM, Diligence, CRM, Construction Products; Primer on NEXA/Kortas/Grella Case

Think your job has its ups and downs… How’d you like to be a lipstick tester? (You should see the rest of him!) For me it is off to Birmingham tomorrow, where no lipstick testing is on the agenda, but I am sure that one of the topics at the MBA of Alabama Conference will be how best to lend in an era of constrained supply of houses to buy. But that may be changing: Florida is seeing its inventory of homes for sale skyrocket and price growth stagnate, largely due to homebuilders rushing to accommodate a flood of newcomers. Because we’ve done such a great job keeping building costs on land down, while at the same time not polluting our oceans, let’s build a floating city for 20,000. (Sarcasm font required.) Whether it is real estate, beer cans, or the value of companies, values are determined by supply and demand, so here’s something interesting: Berkshire Hathaway’s cash pile has hit a record as Warren Buffett cut its stake in Apple, a company that he described as one of Berkshire’s “four giants” (its insurance business, its stake in Apple, its BNSF railroad, and its energy operations). Follow the money?! (Found here, this week’s podcasts are sponsored by Matic, the digital insurance marketplace built for the mortgage industry. Matic integrates home insurance shopping into the lending and servicing experience, allowing customers to shop carriers and find a policy in minutes. Create a new revenue stream that boosts customer happiness today! Hear an interview with JVM Lending’s Jay Vorhees on running a retail operation in today’s lending environment and how he empowers his employees.)

Lender and Broker Software and Services

Base Price Solution (BPS) by Lender Price was specifically designed for capital markets and secondary marketing teams to automate their base pricing. The product significantly reduces the need for spreadsheets, improves accuracy, and enhances profitability. Providing direct integration for TBA pricing, lenders are able to set up pricing plans for different types of products, and reference buy-up and buy-down tables and MSR servicing grids imported into the system. Additionally, BPS allows manual channel-based subsidies at the coupon and interest rate level and provides complete traceability for audits. With BPS, lenders can quickly reprice within minutes during market swings and recall any committed pricing date to the history screen for reference or audit purposes. By automating the process, lenders can save time, ensure competitive pricing and reduce the risk of manual errors. Request demo, meet at MBA Secondary or email sales@lenderprice.com for more information.

Get the tools and insights you need to build your business, all in one place! Go to MGIC’s Mortgage Connects knowledge hub for podcasts, articles, infographics, social media content and more, all created just for mortgage professionals. And while you’re there, subscribe to be the first to know when new intel drops.

For independent mortgage banks coping with rising costs per loan, outsourcing accounting is an elegant solution to what’s become a very common challenge. Whether you have no accounting expertise in-house or you have a new team with no mortgage experience, you can tap the Richey May Client Accounting and Advisory Services (CAAS) team for the support you need. This team is stacked with mortgage industry experts who can tailor your solution to meet your most pressing needs with no training needed. Need help transitioning to loan level accounting? Need a fully outsourced function? You got it! Need industry training for your controller? We can do that. In this article, Richey May’s expert Kim Dittmer answers all your most frequently asked questions about outsourced accounting as a mortgage bank.

“Tune in to The Construction Lending Podcast by Land Gorilla and gain a strategic edge in the ever-changing world of construction finance. Our in-depth discussions with industry leaders unpack trends, best practices, and risk management strategies you need to know. In our latest episode, we are joined by the Associate Vice President of Government Housing Finance of the Mortgage Bankers Association. Our conversation dives into the pressing issues facing the construction lending industry, from regulatory challenges to the evolving housing market conditions. Subscribe on Spotify, Apple Podcasts, or YouTube for more insightful episodes!”

Refraction (the bending of light waves as they pass through different materials) is the phenomenon behind many optical illusions. For instance, thanks to the refraction of the Earth’s atmosphere, we perceive sunrise well before the sun actually crests the horizon. It’s like seeing into the future! Last week, Dark Matter Technologies’ Horizon user conference gave attendees a similar glimpse into the future with a preview of the company’s mortgage innovation roadmap. There’s a lot for Dark Matter customers to look forward to, from UI enhancements that will make loan origination simpler for borrowers, originators, and admins alike to an expanded selection of services that integrate with the Empower® LOS, including new CRM, eSign/eClose/eNote, fee service, and pricing partners. Already an industry leader in AI deployment, Dark Matter will also introduce new time- and cost-saving generative AI features. Discover how Dark Matter supports a brighter lending future today.

Heading to MBA Secondary May 18-22? Join Maxwell in New York City for a deep dive into emerging secondary market and due diligence opportunities. Maxwell Diligence is the first diligence firm to review HEA (Home Equity Agreement) and HEI (Home Equity Investment) products, today’s rapidly growing new loan offerings. Plus, Maxwell is your trusted ally in secondary markets. Explore Maxwell Capital’s diverse product range, including jumbo and non-QM options, seamlessly accessible through our tech-driven platform. Both of these innovative solutions will propel your growth in today’s dynamic market. Schedule a meeting in NYC with Maxwell’s VP of Secondary Markets Rob Ross, Chief Risk Officer Brian Simons, Head of Business Development, Diligence Steve Warjanka, or Senior Vice President, Diligence Jim Smith, CMB to learn more.

Wholesale Products

“Kind Lending is thrilled to announce game-changing additions to our product line that will reshape the landscape of non-QM lending. Unleashing Kind Non-QM! This new product line will empower valued broker partners to serve a growing, yet underserved market that will boost their business. Reach out to your Kind Account Executive to help structure your next non-QM transaction using Kind’s Alt-Doc and DSCR product lines that are equipped to meet complex financing with flexible terms to meet your wider range of borrowers who fall outside conventional lending criteria. To learn more about Kind’s Non-QM program suite, connect with your Kind AE today, or visit Kind’s TPO Blog Here. We look forward to serving you!”

REMN Wholesale, recognized as an industry leader in Wholesale Digital HELOCs, has launched EQUITY ACCESS, its new nationwide digital HELOC with loan amounts from $25k to $400k. Fast Closings: Applications can close fast, sometimes in as little as 1 day! As a borrower directed journey, the process will go as fast as they can. Features include Instant Income Verification for the vast majority of W-2 borrowers, automated analysis of bank statements to determine Income for both W-2 and Self-employed borrowers, single AVM up to $400k (appraisal options available), and Broker Portal with robust functionality and real-time detailed status on all pipeline loans. Minimum FICO 640 and max CLTV up to 80 percent (see weekly rate sheet for details). Flexible: Hybrid platform is digitally fast with humans to solve real-life complexities that will result in a higher close rate! And they provide fast payout (utilizing ACH). REMN’s committed to earning their customers’ next loan (Broker/Non-Del). REMN Wholesale is ONLY wholesale, every day… 24/7. To become a REMN partner, email Carl Markman.

NEXA Lawsuits

The recent lawsuits involving NEXA Mortgage, which is possibly the largest mortgage broker in the nation (with approximately 2,500 LOs), its co-founder and CEO Mike Kortas, and its co-founder and ex-president Mat Grella, has ratcheted up with NEXA itself now filing its own Complaint against Grella for the harm he’s alleged to have caused the Company. Whatever the end result of this litigation will be, it is a case study in how the negotiations in any business divorce/separation can easily go astray.

In looking over NEXA’s operating agreement, which is attached to the lawsuit that NEXA filed against Grella, it appears that Kortas has a 50.5 percent membership interest and Grella has 49.5 percent membership interest in the Company. However, while one might be tempted to put the primary focus on this 1 percent difference, operating agreements tend to have protocols when it comes to the election of managers and any changes thereto (i.e., many requiring unanimous consent). As a result, in order to get to the bottom of what this business dispute is really about, a deeper dive is needed. Along those lines, through an examination of the pleadings, it appears that one of the most important inflection points in this dispute may have been around the time that NEXA’s co-founder and former president, Grella, had asked Kortas to buy him out of his ownership interest in the Company.

Apparently, after months of Kortas and Grella’s negotiating the terms of the buyout that Grella had requested, Kortas ultimately terminated Grella’s position as its president. Although one may ask why there is any surprise involved in Grella’s position at the Company being terminated, considering that Kortas was in the process of negotiating the buyout of Grella, the surprise comes from Grella’s later issuance of a statement whereby he alleged that his termination was somehow related to Kortas’ alleged violations of the Company’s operating agreement, namely those terms of the operating agreement that deal with how profits were supposed to have been divided between the two and the need for Grella’s consent to activities not directly related to NEXA’s mortgage brokerage purposes, such as Kortas’ ongoing business deals in the aviation industry.

In addition, Grella went on to ultimately claim that he was now the majority owner of NEXA because Kortas had allegedly caused NEXA to make certain aircraft-related purchases without Grella’s knowledge or consent. Of course, in examining the allegations surrounding NEXA’s involvement in aviation industry, Grella himself alleges elsewhere in his amended pleadings that the planes had been a part of NEXA’s business interests (e.g., jets are commonly used for travel, marketing, tax offsets, etc.).

For Kortas, who was asked to buyout Grella’s interests, the termination of Grella came in the wake of certain actions that Grella is alleged to have taken that were harmful to the Company, whether those actions may have been motivated a breakdown in the buyout negotiations or otherwise. Enter NEXA itself, which just filed suit in connection with the harmful actions that Grella is alleged to have taken. (See link below.) Per NEXA’s Complaint, Grella is alleged to have violated his “fiduciary duties” by “tortiously interfering” with a pending deal whereby NEXA was in the process of acquiring a $24 million airplane hangar leasehold. In reading between the lines, it appears from the claims being made that NEXA and Kortas, that they believed the termination of Grella’s position at the Company was necessitated by the harmful actions that were being taken by Grella in the wake of his not being happy with the progression of the buyout negotiations.

Following NEXA’s lawsuit against Grella, it now appears that Grella had amended the Complaint that he had previously filed against Kortas and Kortas’ wife (covering the community property angle), by his adding NEXA to the Complaint as well… the very same Company that had just sued Grella and the Company whose membership interests Grella had wanted to sell to Kortas from the outset. With the two cases now being filed, which cases will probably be combined at some point in time, we will have to wait and see how this whole situation shakes out. Still, if one assumes that these cases were ultimately born out of a breakdown in the buyout negotiations, it will indeed be a case study in how the negotiations in any business divorce/separation can easily go astray.

Click here to see this pleading on the public record: https://www.superiorcourt.maricopa.gov/docket/CivilCourtCases/caseInfo.asp?caseNumber=CV2024-010291. Stay tuned!

Capital Markets

Rates: up down and all ‘round? Following a string of stronger than anticipated economic data releases throughout the year, the Fed is expected to remain more and more patient in making any changes to monetary policy. Continued strength in the labor market is a big reason, evidenced by nonfarm payrolls that grew by 175k in April (expectations were for 243k), though there were modest downward revisions to February and March.

But nonfarm payrolls were below analysts’ expectations, and the unemployment rate moved up slightly from 3.8 to 3.9 percent, with rounding making the headline increase look bigger than the details did. Most important for the interest rate outlook, wage growth moderated to the slowest pace since mid-2021. The bond market reacted very positively to the report after what has been a rough couple of weeks. MBS lagged Treasuries in the move up in price, but that was at least good for margins.

While we’re talking about jobs, earlier last week the JOLTS report showed job openings decreased from 8.8 million to 8.4 million during March as demand for workers cooled. There is still more than one job opening available for each unemployed person and feedback in the survey suggested workers are finding it more difficult to find a job. Recent data suggests there is still upwards wage pressure for employers which has been a key factor in determining when the Federal Open Market Committee might consider cutting rates. Higher-for-longer interest rate sentiment weighed on residential spending in March as pullbacks were observed in both the single-family and multi-family sectors. Current market expectations, which are continually wrong, put the probability of the first rate cut at the September FOMC meeting, with November being the second-most likely option.

It’s a slow week for scheduled news. The Quarterly Refunding is expected to pack the most market moving potential when Treasury auctions $125 billion in 3-year and 10-year notes and 30-year bonds over Tuesday to Thursday. Economic data is on the lighter side including consumer credit, wholesale inventories and the first look at May Michigan sentiment on Friday. Following last week’s Fed events, we will have plenty of remarks from Fed speakers and this week’s central bank decisions include the RBA and Sweden’s Riksbank tomorrow and the BoE on Thursday. Regarding MBS, and following today’s agency prepayment release after the close and into the evening, Class A 48-hours is on Thursday with Class B net out Friday.

The week gets off to a quiet start with the Employment Trends Index for April as today’s only data point. After a couple of short-duration Treasury auctions, markets will receive remarks from Richmond Fed President Barkin and New York Fed President Williams. We begin the week with Agency MBS prices better by a few 32nds from Friday’s close and the 10-year yielding 4.47 after closing last week at 4.50 percent (down 17 basis points for the week).