The FHFA has announced details of a streamlined loan modification program similar to the one in place at Indymac Federal Bank, aimed at helping seriously delinquent borrowers.
The aptly named “Streamlined Modification Program” is a collaboration of the FHFA (Fannie and Freddie’s new regulator), FHA, Treasury, and Hope Now (along with its 27 servicer partners), but does not provide any direct government assistance.
To be considered for the program, borrowers must own and occupy the subject property as their primary residence, be 90 days or more behind on their mortgage payments, and must not have filed for bankruptcy protection.
They must also prove that they have experienced a “hardship or change in financial circumstances” and did not purposely default on the mortgage to receive assistance.
Eligible mortgages include Freddie Mac, Fannie Mae or portfolio loans with participating investors.
Under the program, borrowers will work with their servicers to establish an affordable monthly mortgage payment, determined as no more than 38 percent of the household’s monthly gross income (debt-to-income ratio).
The affordable payment will be achieved by reducing the mortgage rate on the loan, extending the life of the loan, or deferring payment on part of the principal, but no principal reductions will be permitted.
While no foreclosure moratorium has been put in place, borrowers who remain in contact with their servicers during the modification process may have any planned foreclosure sale suspended.
To encourage participation, servicers who take part will receive $800 for each loan modified through the program.
FHFA director James B. Lockhart noted that Fannie Mae and Freddie Mac own or guarantee nearly 31 million mortgages, representing almost 60 percent of all single-family mortgages in the U.S., but account for just 20 percent of serious delinquencies.
Private-label securities, those sliced and diced on Wall Street, account for 60 percent of serious delinquencies, despite their 20 percent share of the mortgage market.
The program is expected to be launched by December 15th.
FDIC Chairman Sheila Bair, apparently unmoved by the recent Streamlined Modification Plan announced by the FHFA, has launched her own sweeping loan modification program.
In prepared remarks, she noted that the pace of modifications continues to be unsatisfactory, with just four percent of seriously delinquent loans tackled each month.
As a result, she has proposed a streamlined loan modification program similar to the one implemented at Indymac Federal, which aims to rework 2.2 million troubled loans through 2009.
The program, geared towards borrowers 60+ and 90+ days in arrears on owner occupied properties, would rely on standard interest rate reductions, extended amortization, and deferred principal reductions, but the big difference would be government guarantees for loans that re-default.
The government would assume up to 50 percent of losses incurred if a modified loan were to subsequently re-default.
If that’s not enough of an incentive, servicers who agree to take part will be paid $1,000 to cover expenses for each loan modified, a premium to the $800 offered in the FHFA’s SMP.
Bair expects the program to use roughly $24.4 billion of the $700 billion bailout fund, though it’s unclear if the Treasury is yet to be onboard, especially after Paulson recently decided it was best they didn’t use the funds for bad mortgage debt.
The program would also provide support for underwater borrowers, though the government loss share would progressively fall from 50 percent to 20 percent.
If the loan-to-value for the first-lien rises above 150 percent, it would receive no loss sharing benefit from the government.
A standard net present value (NPV) test would be implemented to determine if modifying a given loan made more sense than foreclosing, based on a debt-to-income ratio of 31 percent for the first-lien mortgage payment.
Additionally, a de minimus test would also be carried out to exclude from loss sharing any modifications that did not lower monthly mortgage payments by at least 10 percent.
The loss sharing guarantee would terminate eight years into the loan modification, and would only be applied once the borrower had made six payments on the modified mortgage.
Bair believes the program could prevent 1.5 million foreclosures, factoring in a re-default rate of 33 percent.
In a letter to a group of founders and shareholders, New York-based asset management firm Sculptor Capital Management said their request to inspect the company’s books and records pertaining to its acquisition by Rithm Capital was “improper” and motivated by founder Daniel Och’s “long-standing resentment” of being exited from the company.
Sculptor also said in the letter sent on Tuesday that Och and the other shareholders have requested millions of dollars in cash for legal expenses incurred during the process of being acquired by Rithm Capital. Och and shareholders also requested a prepayment related to a tax agreement tied to the company’s IPO in 2007.
Och, shareholders and Rithm Capital did not reply to requests for comment.
The letter from Sculptor is the latest chapter of a dispute between the asset management firm, Och and other shareholders since Rithm — the real estate investment trust that operates NewRez, Caliberand several other businesses —announced a deal to acquire Sculptor for $639 million in July. If regulators approve, it will bring Sculptor’s $34 billion in assets under management to Rithm.
“While ostensibly requesting information about the sales process described in the Company’s preliminary proxy statement, your Demand for books and records is set against historical context that makes clear that purpose is pretextual, and that the true purpose is the continuation of what the company views as Mr. Och’s well-publicized, years’ long smear campaign against the Company’s management,” the letter states.
Och, who founded Sculptor in 1994, stepped down as CEO in 2018. In 2016, an Africa-based subsidiary entered into an agreement with the Department of Justice (DOJ) to pay a criminal penalty of more than $213 million in connection with a bribery scheme involving officials in the Democratic Republic of Congo and Libya.
Och, who is still an active shareholder, and other former executives sued the firm in 2022 over CEO Jimmy Levin’s $145.8 million compensation.
Och, who was previously a mentor to Levin, now finds himself on the opposite side of a dispute with Levin in which the Rithm deal is a key issue.
On August 16, a group of shareholders, including Och, Harold Kelly, Richard Lyon, James O’Conner and Zoltan Varga, sent a letter to Sculptor’s special committee of the board of directors saying the deal with Rithm “substantially undervalues the company.”
They noted that on December 17, 2021, when “the Board of Directors approved the exorbitant compensation package” for Levin, the stock was trading at $20.02.
“Just over 18 months later, the Board now has approved a deal that would pay the public shareholders $11.15 per share, just a fraction of what the stock was once worth.”
In the letter, Och and the other shareholders said they were working with Rithm to see whether deal terms could be improved. Absent “material changes,” the group will “vigorously oppose this transaction,” they wrote.
On August 21, Sculptor replied in a proxy statement that it received multiple takeover bids higher than the Rithm offer, some valuing the company at more than $700 million. Sculptor did not accept these bids due to burdensome conditions, lack of secured financing, or, according to the company, because Och and other founding partners rejected its terms.
Och and other shareholders, in subsequent correspondence, demanded that Sculptor release books and records on August 22.
“The suggestion that there were other credible bids that provided greater value and certainty of closing, with or without current management, is distorted — no such bid exists,” Sculptor said in response to the request. “Nor does Rithm’s bid crystallize supposed losses from the adoption of Mr. Levin’s compensation package. Mr. Levin has also agreed to substantial reductions in his compensation to support a Rithm transaction.”
Sculptor said in its letter that Och and the other shareholders asked Rithm to agree to advance tens of millions of dollars as a prepayment at the favorable discount rate of the company’s Tax Receivable Agreement.
Och and shareholders also demanded Rithm pay an additional $5.5 million in cash for the group’s legal expenses supposedly incurred in connection with the company’s sales process.
“The transaction under discussion between the Och Group and Rithm would have included the option for a rollover in order to allow you to avoid recognizing significant taxable gain received in the transaction. Notably missing from those discussions were meaningful concessions by any of you for the benefit of public stockholders,” Sculptor states in its letter.
Inside: Are you wondering how many weeks are in a school year? This guide will help you answer the ultimate question by state. Plus uncover the number of school days or hours.
Ever had that feeling where your kids seem to always be either in school or at home?
This is a common dilemma many parents and guardians scratch their heads over.
Knowing how many weeks there are in the typical school year not only solves this puzzle but also helps with planning vacations, prioritizing extracurricular activities, and ensuring they don’t miss out on crucial academic days.
The number of school days in a public school year varies significantly by state and even within specific school districts, reflecting the unique approaches and needs of each educational jurisdiction.
This variability results in a range of calendar structures, from standard to modified school weeks, which can impact educational planning and execution.
Understanding this variation in the number of school days is paramount for parents in structuring their work weeks in a year, ensuring that all the fun happens and the kids learn the necessary material.
How Many Weeks in a School Year?
On average, a school year generally includes about 36. However, this can slightly vary depending on your location and the type of school.
For instance, in the United States, a typical school year comprises 180 school days, translating to approximately 36 weeks. This is how many weeks in the academic year.
This calculation includes the school-going days only, excluding weekends and holidays.
When you include no school days from holidays, winter, or spring break, the total number of weeks grows to about 40 weeks.
How many school days are in a year?
The number of school days in a year typically spans from 160 to 180 days, based on the education system in the United States.
This accounts for roughly 36 weeks of schooling.
Thus, allowing plenty of time to enjoy one of these summer jobs for teachers.
Required School Days by State
Did you know that across the United States, each state has a unique number of minimum school days in a year? Yeah, it varies!
In addition, the requirements are set by different groups by the state Department of Education or the local school district.
While Colorado mandates the fewest minimum school days in comparison to other U.S. states, at 160 days, the state still maintains a very similar standard for the minimum required hours of instruction per academic year. Despite the reduced number of days, it does not necessarily indicate less teaching time. This may be why teachers in Colorado are the lowest paid.
Some states like Delaware, Missouri, or Texas only require certain instruction hours, instead of days.
This illustrates that even within differing frameworks, states strive to provide a balanced amount of educational exposure to their students.
As you will see this is way under the number of working days in a year.
Here is the number of student contact days required by each state:
State
State Minimum School Days in Year
Alabama
180 days
Alaska
180 days
Arizona
180 days
Arkansas
178 days
California
180 days
Colorado
160 days
Connecticut
180 days
Delaware
Hours requirement only
District of Columbia
180 days
Florida
180 days
Georgia
180 days
Hawaii
180 days
Idaho
School districts decide on days
Illinois
185 days
Indiana
180 days
Iowa
180 days
Kansas
School districts decide on days
Kentucky
170 days
Louisiana
177 days
Maine
180 days
Maryland
180 days
Massachusetts
180 days
Michigan
180 days
Minnesota
165 days (grades 1 to 11)
Mississippi
180 days
Missouri
Hours requirement only
Montana
School districts decide on days
Nebraska
Hours requirement only
Nevada
180 days
New Hampshire
180 days
New Jersey
180 days
New Mexico
Hours requirement only
New York
180 days
North Carolina
185 days
North Dakota
Hours requirement only
Ohio
School districts decide on days
Oklahoma
180 days
Oregon
Hours requirement only
Pennsylvania
180 days
Rhode Island
180 days
South Carolina
180 days
South Dakota
School districts decide days
Tennessee
180 days
Texas
Hours requirement only
Utah
180 days
Vermont
175 days
Virginia
180 days
Washington
180 days
West Virginia
180 days
Wisconsin
Hours requirement only
Wyoming
175 days
Source: National Center for Education Statistics
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Factors that Influence the Length of the School Year
Knowing how long your school year is can help you plan academically and personally.
But, the question remains will these students be prepared for the number of working hours in a year?
Here are some factors that can influence the duration of a school year:
Legal Requirements:
Every state in the U.S. establishes legal requirements that mandate the minimum amount of instructional days or school hours per year, ensuring that students have a sufficient baseline of educational exposure.
These mandates vary from state to state, with common baselines being around 180 days or varying hours depending on the grade level.
Such requirements can range from 425 hours for Kindergarten in some states to 990 hours for grades 6-12 in others. Exceptions and specific inclusions or exclusions (like recess, lunch, passing periods, etc.) to these instructional times differ among every state, offering districts some flexibility in meeting the standards.
State or City regulations:
State or regional regulations significantly impact the length of the school year depending on climatic, cultural, or other region-specific conditions.
Notably, in areas where the climate includes inclement weather, schools may have longer breaks during winter months to accommodate these conditions.
Also, cultural holidays specific to an area may also necessitate a shift in the school calendar.
School district policies:
School district policies, like budget constraints and teacher contracts, have a crucial role in shaping the length of the school year.
For instance, collective bargaining agreements or contractual obligations could stipulate the length of the academic year, which can differ markedly across various regions.
Similarly, budgetary limitations might lead to reductions or extensions in the number of school weeks, according to the resources available.
Therefore, these policy elements are pivotal in determining the structure and flexibility of the school calendar, directly influencing curriculum planning and the educational opportunities provided to students.
Parental and community expectations:
The effect of parental and community expectations on school calendars can not be underestimated. They undoubtedly play a critical role in shaping the length and structure of the school year.
Parents and the larger community may have certain expectations or preferences that influence when and how long schools are in session. These preferences can significantly shape the academic calendar.
One primary factor is family schedules and routines. Some parents might prefer longer school weeks with shorter breaks scattered throughout the year. This format may align more closely with standard work schedules, minimizing the need for additional childcare arrangements.
On the other hand, some parents might prefer longer breaks, particularly in the summer, to accommodate yearly family vacations. This preference is quite common in many communities where summer holidays are seen as a traditional break for travel and family outings.
School calendars can also be adapted based on parent and community feedback. For example, if a significant number of parents express concerns about children having too much idle time during long breaks, schools might shorten breaks and add more instructional days.
Additional non-instructional days
The overall length of a school year is not entirely determined by the instructional days, but also by these additional non-instructional days.
With more days dedicated to professional development, teachers can enhance their teaching strategies and methodologies, resulting in improved student outcomes. Parent-teacher conferences form another essential component of these additional days, providing a vital platform for communication on students’ progress.
Both these elements contribute to the augmentation of the academic year, extending beyond the set instructional days.
How to Make the Most of the School Year
Making the most of your school year is not just crucial for academic success, but also for your overall well-being.
Here’s how you can do it.
Prioritize time and tasks. Make a list of weekly assignments. Prioritize by deadline and significance, ensuring each task has sufficient time allocated.
Understand your school year structure. This aids in schedule planning, goal setting, and study time allocation.
Create achievable goals. Break them down into manageable tasks and track progress regularly.
Keep track of assignments, due dates, study materials. Use a digital calendar or school planner to stay organized.
Shed light on the opportunity to get ahead. This may be in the form of summer sessions, allowing you to catch up on coursework, and possibly graduate early.
Familiarize yourself with your school’s academic calendar. Make sure to keep note of key dates and deadlines.
Remember, a longer school year equals more opportunities for enrichment activities. So dig into the chances!
FAQ
Yes, there are typically around 36 weeks in a school year, but this can vary.
This calculation is based on the US where most districts require about 180 days of schooling, which roughly translates to 36 weeks. However, this figure may fluctuate between states, districts, and the type of school.
Typically, there aren’t exactly 40 weeks in a school year. On average, based on the U.S educational system, the school year is about 36 weeks.
However, when including breaks and holidays, the total climbs to around 40-42 weeks.
For instance, in the UK, the school year totals 39 weeks.
In Australia, you’d typically have 38.5 weeks of school in a year, broken down into four terms. Each term lasts roughly 10 weeks, but the exact length can vary slightly depending on the state or territory.
Australian kids are in school for roughly 200 days of the year.
School Days and School Weeks – Are You Happy with What is Happening?
Are you satisfied with the average 36 week school year for your child?
While every state sets its requirements, ensuring that your little scholar gets the right quantity and quality of education.
Based on the research, American students receive fewer amount of instructional time compared to their international counterparts, including countries renowned for educational achievements like South Korea, Japan, and Finland.
This suggests that American students may not be getting substantial educational exposure.
However, the adequacy of education isn’t solely determined by the amount of time spent in school. It’s also dependent on other factors like the curriculum content, the emphasis on particular subjects, and the usage of standardized assessments. It’s important to note that these components can differ significantly among countries, leading to differences in the quality and focus of education.
As a parent, knowing this helps you plan what is best for your children as well as the vacations!
It’s your turn to reflect, engage, and make the most of this information.
Know someone else that needs this, too? Then, please share!!
In the competitive world of real estate recruitment, brokerages fight for the attention and loyalty of talented agents who can drive their success. As the lifeblood of the industry, agents play an important role in attracting clients, closing deals and determining the ultimate profitability of a brokerage. For real estate firms, recruiting a high number of agents as well as recruiting the best-fit agents for your firm is the key to long-term success.
Today, new brokerage models and disruptors are the norm. A firm’s ability to adjust to new competitors and evolve its way of doing business will determine if it comes out ahead in the agent attraction showdown.
At the heart of our comparative analysis, we’ll examine two popular brokerage models: the flat-fee model and the traditional model. Each one boasts its own approach to compensating and supporting agents, promising distinct advantages and challenges. By examining the data, we aim to gain a deeper understanding of each and determine which ultimately comes out ahead.
The flat-fee model: Simplifying compensation, embracing independence
In the flat-fee model, the traditional commission-based structure takes a backseat. Instead, agents are charged a fixed fee or a flat monthly rate, which allows them to retain a more substantial portion of their commissions from transactions. This straightforward approach grants agents the freedom to keep more of their hard-earned income, resulting in potentially higher take-home pay.
Pros:
Perceived enhanced earnings with a reduced fee structure.
Flexibility to structure their services and marketing strategies to fit their needs.
Lower financial risk by keeping costs low, particularly during leaner times.
Cons:
Typically, limited support and resources in the form of training, marketing, etc.
Usually, less brand recognition as compared to well-established traditional firms.
The traditional model: Commission-driven powerhouses
In the traditional model, agents are compensated through the classic commission-based structure. They earn a percentage of the commission from each completed transaction, but a portion of it is shared with the brokerage. This model has been the bedrock of the real estate industry for decades, with established firms carrying well-known brand identities.
Pros:
Extensive support and training with a significant investment in agent development, mentorship, and marketing resources.
Established brand recognition, attracting clients and contributing to an agent’s credibility.
High-value transactions due to their market position and network.
Cons:
Higher cost structure, leading to potentially lower take-home earnings.
Limited flexibility with agents sometimes bound by brokerage policies and practices, typically leaving less room for individual business decisions.
The analysis
To assess the agent attraction expertise of the flat-fee and traditional brokerage models, we looked to the data. We meticulously examined a collection of 20 of the largest real estate firms; 10 flat-fee firms collectively closing $100B in annual sales volume versus ten traditional firms which were also collectively closing $100B in annual volume [2022 RealTrends 500 brokerage data]. We excluded from our analysis any alternative models, disrupters, luxury brands and any other firms that may skew our findings.
Agent count & average sides per agent comparison
Using 2022 data from RealTrends, we first looked at the number of agents associated with each model as well as the total number of sides transacted. The data reveals that flat-fee firms collectively had a 136% higher agent headcount than their counterparts, the traditional models.
As a whole, the flat-fee firms also transacted more sides than traditional firms; approximately 19% more sides closed. We would expect that flat-fee firms would transact a higher number of deals since they have a significantly higher agent count. However, agents within the flat-fee model on average closed four deals per agent while agents within the traditional model closed eight deals per agent.
Average volume per agent & average home price per transaction comparison
Another critical data point to review is found in the average closed volume per agent. A higher closed volume can indicate an agent’s future earning potential as well as longevity in the business. In addition to examining the total volume, it’s also helpful to review the average size of the deals closed by agents within each model, which will provide insight into experience level and expertise.
The data shows that agents within flat-fee firms close less in average volume per agent, approximately 52% less. We can also see that they also closed smaller deals, on average.
Attracting new-to-the-business agents
Based on the statistical analysis, it becomes apparent that flat-fee firms often focus on a large agent count with high transaction volume. A notable trend emerges where agents drawn to flat-fee models are frequently those who are relatively new to the industry or are brand new licensees. Additionally, individuals attracted to the part-time flexibility that a real estate career offers are inclined towards flat-fee firms.
Consequently, a greater number of agents are required within flat-fee firms to achieve equivalent volume targets. Remarkably, this demand for increased agent numbers has not posed a deterrent for flat-fee firms, as evidenced by their substantial growth in recent years.
Historical shifts
While the initial data analysis reinforces existing assumptions, a more interesting and unexpected dimension emerges when historical shifts in volume and sides across both brokerage models are examined. Following the post-COVID real estate boom, both flat-fee and traditional firms experienced a surge in sides transacted as well as increasing property values, contributing to an upswing in overall sales volume.
However, the scenario shifted in 2022 with the market downturn. Traditional brokerages experienced a sharper decline in sides, attributed in part to agents leaving due to high costs, whereas flat-fee firms exhibited greater resilience. The notion that flat-fee models attract individuals who do not rely primarily on real estate as their main business is worth noting. Most intriguing is the fact that although sides decreased more significantly, the impact on overall sales volume was less severe for traditional firms compared to flat-fee firms.
A plausible theory suggests that agents within traditional firms specialize in higher value properties than flat-fee firms, leading to increased value growth. Their higher production per agent, coupled with greater experience and support, equips them to navigate market fluctuations more adeptly.
Takeaways:
Stability in challenging times:
Flat-fee models were less affected by side reductions in bad years, possibly due to part-time agents with diverse income sources.
Traditional brokerage strategy:
Traditional models maintained stable sales volume despite fewer sides, likely due to experienced agents handling higher-value deals.
Diverse model strengths:
Flat fee emphasized transactional efficiency, accommodating a larger number of transactions.
Traditional models prioritized experienced agents and larger deals, ensuring steady revenue despite lower transaction count.
Market adaptation:
Both models should consider adapting strategies to market conditions and leveraging their unique strengths.
As we conclude our analysis, it’s evident that the many seasons of change in real estate demand a strategic negotiation between innovation and tradition. Agents, the driving force of the industry, now have the luxury of choice. To win in agent attraction, flat-fee models can further bolster their appeal by offering targeted support and mentorship, enhancing their brand recognition, and cultivating a sense of community among their diverse agent base.
Conversely, traditional models can leverage their established brand identities to attract experienced agents while embracing flexibility in their offerings to cater to the changing preferences of a new generation of real estate professionals. By embracing the strengths of both models and charting a course that resonates with modern agents, brokerages can ensure they remain at the forefront of the industry’s evolution.
Diana Zaya is the founder and president of Maverick RE Consulting.
In the competitive world of real estate recruitment, brokerages fight for the attention and loyalty of talented agents who can drive their success. As the lifeblood of the industry, agents play an important role in attracting clients, closing deals and determining the ultimate profitability of a brokerage. For real estate firms, recruiting a high number of agents as well as recruiting the best-fit agents for your firm is the key to long-term success.
Today, new brokerage models and disruptors are the norm. A firm’s ability to adjust to new competitors and evolve its way of doing business will determine if it comes out ahead in the agent attraction showdown.
At the heart of our comparative analysis, we’ll examine two popular brokerage models: the flat-fee model and the traditional model. Each one boasts its own approach to compensating and supporting agents, promising distinct advantages and challenges. By examining the data, we aim to gain a deeper understanding of each and determine which ultimately comes out ahead.
The flat-fee model: Simplifying compensation, embracing independence
In the flat-fee model, the traditional commission-based structure takes a backseat. Instead, agents are charged a fixed fee or a flat monthly rate, which allows them to retain a more substantial portion of their commissions from transactions. This straightforward approach grants agents the freedom to keep more of their hard-earned income, resulting in potentially higher take-home pay.
Pros:
Perceived enhanced earnings with a reduced fee structure.
Flexibility to structure their services and marketing strategies to fit their needs.
Lower financial risk by keeping costs low, particularly during leaner times.
Cons:
Typically, limited support and resources in the form of training, marketing, etc.
Usually, less brand recognition as compared to well-established traditional firms.
The traditional model: Commission-driven powerhouses
In the traditional model, agents are compensated through the classic commission-based structure. They earn a percentage of the commission from each completed transaction, but a portion of it is shared with the brokerage. This model has been the bedrock of the real estate industry for decades, with established firms carrying well-known brand identities.
Pros:
Extensive support and training with a significant investment in agent development, mentorship, and marketing resources.
Established brand recognition, attracting clients and contributing to an agent’s credibility.
High-value transactions due to their market position and network.
Cons:
Higher cost structure, leading to potentially lower take-home earnings.
Limited flexibility with agents sometimes bound by brokerage policies and practices, typically leaving less room for individual business decisions.
The analysis
To assess the agent attraction expertise of the flat-fee and traditional brokerage models, we looked to the data. We meticulously examined a collection of 20 of the largest real estate firms; 10 flat-fee firms collectively closing $100B in annual sales volume versus ten traditional firms which were also collectively closing $100B in annual volume [2022 RealTrends 500 brokerage data]. We excluded from our analysis any alternative models, disrupters, luxury brands and any other firms that may skew our findings.
Agent count & average sides per agent comparison
Using 2022 data from RealTrends, we first looked at the number of agents associated with each model as well as the total number of sides transacted. The data reveals that flat-fee firms collectively had a 136% higher agent headcount than their counterparts, the traditional models.
As a whole, the flat-fee firms also transacted more sides than traditional firms; approximately 19% more sides closed. We would expect that flat-fee firms would transact a higher number of deals since they have a significantly higher agent count. However, agents within the flat-fee model on average closed four deals per agent while agents within the traditional model closed eight deals per agent.
Average volume per agent & average home price per transaction comparison
Another critical data point to review is found in the average closed volume per agent. A higher closed volume can indicate an agent’s future earning potential as well as longevity in the business. In addition to examining the total volume, it’s also helpful to review the average size of the deals closed by agents within each model, which will provide insight into experience level and expertise.
The data shows that agents within flat-fee firms close less in average volume per agent, approximately 52% less. We can also see that they also closed smaller deals, on average.
Attracting new-to-the-business agents
Based on the statistical analysis, it becomes apparent that flat-fee firms often focus on a large agent count with high transaction volume. A notable trend emerges where agents drawn to flat-fee models are frequently those who are relatively new to the industry or are brand new licensees. Additionally, individuals attracted to the part-time flexibility that a real estate career offers are inclined towards flat-fee firms.
Consequently, a greater number of agents are required within flat-fee firms to achieve equivalent volume targets. Remarkably, this demand for increased agent numbers has not posed a deterrent for flat-fee firms, as evidenced by their substantial growth in recent years.
Historical shifts
While the initial data analysis reinforces existing assumptions, a more interesting and unexpected dimension emerges when historical shifts in volume and sides across both brokerage models are examined. Following the post-COVID real estate boom, both flat-fee and traditional firms experienced a surge in sides transacted as well as increasing property values, contributing to an upswing in overall sales volume.
However, the scenario shifted in 2022 with the market downturn. Traditional brokerages experienced a sharper decline in sides, attributed in part to agents leaving due to high costs, whereas flat-fee firms exhibited greater resilience. The notion that flat-fee models attract individuals who do not rely primarily on real estate as their main business is worth noting. Most intriguing is the fact that although sides decreased more significantly, the impact on overall sales volume was less severe for traditional firms compared to flat-fee firms.
A plausible theory suggests that agents within traditional firms specialize in higher value properties than flat-fee firms, leading to increased value growth. Their higher production per agent, coupled with greater experience and support, equips them to navigate market fluctuations more adeptly.
Takeaways:
Stability in challenging times:
Flat-fee models were less affected by side reductions in bad years, possibly due to part-time agents with diverse income sources.
Traditional brokerage strategy:
Traditional models maintained stable sales volume despite fewer sides, likely due to experienced agents handling higher-value deals.
Diverse model strengths:
Flat fee emphasized transactional efficiency, accommodating a larger number of transactions.
Traditional models prioritized experienced agents and larger deals, ensuring steady revenue despite lower transaction count.
Market adaptation:
Both models should consider adapting strategies to market conditions and leveraging their unique strengths.
As we conclude our analysis, it’s evident that the many seasons of change in real estate demand a strategic negotiation between innovation and tradition. Agents, the driving force of the industry, now have the luxury of choice. To win in agent attraction, flat-fee models can further bolster their appeal by offering targeted support and mentorship, enhancing their brand recognition, and cultivating a sense of community among their diverse agent base.
Conversely, traditional models can leverage their established brand identities to attract experienced agents while embracing flexibility in their offerings to cater to the changing preferences of a new generation of real estate professionals. By embracing the strengths of both models and charting a course that resonates with modern agents, brokerages can ensure they remain at the forefront of the industry’s evolution.
Diana Zaya is the founder and president of Maverick RE Consulting.
Recently, however, equity has built up in millions of homeowners’ properties thanks to three years of rising home values. This has lead to an incread many owners are also using equity to pay off their mortgages early.
An analysis by Black Knight Financial Services[1] found that chronically low interest rates motivate millions of homeowners to take advantage of rate declines by refinancing again soon after their last refinances.
Falling rates create “serial refinancers”
The number of owners who refinanced again after refinancing under two years ago jumped by 800 percent from Q1 2014 to Q1 2015. These “serial refinancings” dropped by nearly 65 percent when rates rose toward the end of last year, yet they still accounted for two-thirds of rate/term refinances in Q4 2015.
Although interest rates have been on a roller coaster over the last year, rate and term refinances from borrowers who’ve held their mortgage for less than six years have remained steady. Term reductions remain popular among borrowers taking advantage of low rates. Not surprisingly, they are more popular among aged loans, as borrowers do not want to restart the clock on their mortgage, the report said. Black Knight found that some 37 percent of rate/term refinances in Q4 2015 included a term reduction.
“These two trends are linked, as term reductions are more popular among loans of a greater age, as those borrowers are understandably more hesitant to restart the clock on their mortgages,” the study found.
The data showed that serial refinance extracted $68 billion in equity via cash-out refinance transactions in 2015—the most since 2009 and a 53 percent increase over 2014. Cash-out refinance borrowers continue to represent a relatively low risk profile for lenders; the average post-cash-out LTV is 67 percent, with an average credit score of just under 750.
What this means for you—shorter terms may not pay for refinancing
However, serial refinancers may end up losers in the long run. If they reduce the term of their loan too much, they may end up end up not saving enough on lower interest rates over the course of the loan to pay for the cost of refinacing.
Greg McBride, senior financial analyst for Bankrate.com, says a general rule of thumb is that it is worth it to refinance if the homeowner can make back their investment within three years or less. “If your time horizon is not long enough, you are not going to be able to recoup the cost of refinancing,” he says.
As term reduction refinances grow in popularity, the active mortgage sector shifts as well. Five percent of all active mortgages had 20-year original terms (highest share in over ten years); 16 percent are 15-year original term; and 2.5 percent are 10- year original term (down slightly from last year), according to Black Knight.
Loan modifications just got a whole lot trickier, that is, if some investors in mortgage-backed securities get their way.
One hedge fund, Greenwich Financial Services Distressed Mortgage Fund 3, LLC, has launched a suit against Countrywide Financial, alleging its sweeping loan modification program is illegal and will reduce the value of related securities for bondholders.
William Frey, who heads the hedge fund, has argued that the program launched by Bank of America to satisfy numerous complaints about predatory lending at Countrywide Financial over the years will cost investors billions.
The program seeks to modify up to 400,000 Countrywide loans, equating to roughly $8.4 billion in mortgage rate and principal reductions, but because many of the loans are actually owned by investors, Frey wants Bank of America to compensate them for any resulting losses.
While loan modifications are generally looked at as a positive, by giving borrowers a break, bondholders who have interests in a number of Countrywide mortgage securities will see reduced or delayed payments, thus devaluing the securities themselves.
The lawsuit is demanding Countrywide repurchase every loan on which it seeks to reduce payments so the bondholders aren’t hurt by the resulting action of the modifications.
However, Paul Koches, general counsel for Ocwen, the largest subprime mortgage servicer, noted that modifications are conducted in the best interest of investors, and more importantly, contractually bound to benefit all parties, including homeowners.
Koches added that as a loan servicer, he’s obligated to take action in the best interest of the aggregate investment, even if it harms a particular class of investors.
Meanwhile, Frey believes such modifications will result in higher mortgage rates for borrowers in the future, as the terms of loans can seemingly be changed more easily, putting more risk in the hands of bondholders.
Frey says such action could permanently cripple the secondary market for mortgages, and has suggested that a better solution would be for the government to buy up all of the troubled mortgages instead.
Better — which went public after merging with special purpose acquisition company (SPAC) Aurora Acquisition Corp. on Thursday — funded a loan volume of $1.7 billion across 4,768 loans in the first six months of 2023. In Q2, Better’s origination volume was $900 million across 2,421 loans, compared to production of $800 million across 2,347 loans funded in Q1.
Of the $1.7 billion in production volume in the first half of 2023, refis accounted for $131 million and purchase loans consisted of $1.6 billion. Better’s funded loan volume of $1.7 billion in the first half of 2023 declined from $9.7 billion during the same period in 2022.
The lender’s gain-on-sale margin increased to 2.34% for the six months ended June 30, 2023, from 0.99% for the six months ended June 30, 2022. The jump in gain-on-sale margin resulted from “market volatility which positively impacted our mortgage platform revenue,” its 8-K filing states.
Better’s total market share of 0.2% during the six months of 2023 declined from 0.7% in the same period in 2022.
“The mortgage market remains competitive among lenders, given the interest rate environment and we continue to focus on originating the most profitable business available to us. As a result, we have pulled back on our most unprofitable channels, resulting in further declines to market share,” according to its filing.
In Q2, Better decided to wind down its in-house real estate agent business to focus on partnering with third-party real estate agents. The pivot was aimed at providing customers with real estate agent services, a business model that better aligns costs with transaction volumes, particularly in market environments with decreased mortgage volumes.
The company’s latest filing shows the firm had less than five agents as of June 8, 2023, declining from 470 agents as of December 31, 2021, and about 80 agents as of December 31, 2022.
Total operating expenses dropped to $183.9 million for the six months ended June 30, 2023, driven by lower funded volume as well as reductions in headcount-related costs and other operating expenses resulting from restructuring initiatives. Compared to the same period in 2022, operating expenses declined by 80% from $903.7 million.
Better scaled down about 91% of its workforce over an 18-month period to 950 team members as of June 8, from 10,400 employees in Q4 2021.
“As we have reduced headcount drastically in previous years and have continued headcount reductions in the first and second quarters of 2023, and expect to continue through 2023, we expect employee-related costs to decrease as a smaller administrative function is needed to support an organization with a much lower headcount,” the disclosure states.
Filings show Better completed the acquisition of Birmingham Bank – a regulated U.K bank – in April 2023. The company acquired 100% of the equity of Birmingham for a total consideration of $19.3 million – consisting of $15.9 million in cash and $3.4 million in deferred consideration.
The acquisition allows Better to grow and expand existing operations in the U.K. by enabling it to offer online deposits to consumers and hold U.K. residential mortgages, the company said.
Back in April, Better announced plans to create 40 jobs in Birmingham over the next three years following the buyout in fields such as business development, savings management, marketing, operations, finance, risk management and IT.
Its 8-K filing revealed that Fannie Mae notified Better about failing to meet the agency’s financial requirements due to the company’s decline in profitability and material decline in net worth.
“Subsequent to June 30, 2023, as a result of failing to meet FNMA’s financial requirements, the Company has entered into a Pledge and Security Agreement with FNMA on July 24, 2023, to post additional cash collateral starting with $5.0 million, which will be held through December 31, 2023,” the filing stated.
The company had cash and cash equivalents of $109.9 million as of June 30, 2023, down from $318 million on December 31, 2022.
Better’s stock opened for trading at $1.20 on August 28. They were down about 93% from $17.45 when blank check company Aurora closed for trading on the stock exchange on August 23.
Friday, April 7, marked a day for celebration. After four years of Congress hiking Veterans Administration (VA) so-called “Bluewater Navy” mortgage loan fees as an offset to pay for other critical veterans’ benefits, Congress has finally let those excessive VA mortgage loan fees expire.
This good news for homebuyers comes on top of FHA action in late February to cut the annual premium on FHA loans by 30 basis points, from 0.85% to 0.55%, saving most families around $800 starting last March 20. And it follows actions over the last year by FHFA to cut Fannie Mae and Freddie Mac LLPA fees for certain first-time homebuyers.
What does the VA loan fee reduction mean for veterans and active-duty families using their no-down-payment mortgage, an “earned benefit” thanks to their uniformed service to the nation? It means that first-time buyers using VA loans will see guarantee fees fall 15 basis points, from 2.30% to 2.15%, and other buyers will see a 30-basis point improvement, from 3.60% to 3.30%. For these families, savings will range from $600 to $1,200 saved starting this week.
The expiration of the higher VA mortgage fees was not a sure thing and should not be taken for granted going forward. Last November, the Community Home Lenders of America (CHLA) wrote a Letter to top members of Congress asking Congress to let these fees expire.
Why was CHLA concerned? Because just one year earlier in November 2021, Congress, in their perpetual hunt for “offsets” to pay for other federal spending, hiked fees on Fannie Mae and Freddie Mac loans by $21 billion over 10 years to help pay for part of the cost of the totally unrelated $1 billion infrastructure bill. And technical budget offset concerns played a big role in delaying FHA’s action in cutting FHA premiums.
Meanwhile, Congress and the president are gearing up for a fight over spending cuts in connection with an increase in the debt limit. Any revenue source that has been used in the past could be a target. But at least for now, veteran homebuyers and homeowners are the clear winners.
Charging fees higher than needed for insurance purposes has prevented some qualified families on the margin from being able to escape rents that have been rising faster than incomes. Given that the VA (and FHA) loan programs serve a higher proportion-of first-time buyers and lower-FICO score buyers than conventional loans, reducing these costs helps redress wealth inequities over time.
To be clear: these loan fee reductions are not some giveaway to families that ought not buy a home — the reductions redress the issue of artificially high fees keeping qualifying families from buying a home. CHLA supports actuarially-based insurance fees to ensure programs remain solvent and proper insurance pricing that balances both risk and opportunity. Mortgage loan fees should not be higher than needed to safely run government-backed lending.
So, a thank you to FHA for making FHA mortgage loans more affordable, a thank you to FHFA for making GSE mortgage loans more affordable, and a thank you to Republicans and Democrats in Congress for making VA mortgage loans more affordable.
The year is yet young, but this mortgage news for young families has so far been positive. CHLA stands ready to work with Washington stakeholders to keep the good news coming.
Rob Zimmer is Director of External Affairs for the Community Home Lenders of America (CHLA).
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
To contact the author of this story: Rob Zimmer at [email protected]
To contact the editor responsible for this story: Sarah Wheeler at [email protected]