Mixing the old with the new yields a winning formula in volatile times
The following article is written in association with Acra Lending.
Labeling 2023 a challenging year for the mortgage industry is to deal in understatement with the rate on a 30-year fixed spiking to its highest level in more than 20 years at around 8%. Yet with its tried-and-true focus in non-QM wholesale and correspondent lending programs, Acra Lending has been all but immune to the market downturn.
“Unfortunately, we’re still seeing a lot of people going out of business in 2023 in a continuance of 2022,” Kyle Gunderlock (pictured left), president and chief risk officer, said. “But the fear of markets falling, values dropping astronomically, have never come to fruition. So that could be a positive trend.”
While home affordability continues to be a roadblock for borrowers, Acra Lending has managed to gain market share amid a rockier market landscape, managing director, head of credit, Craig Timmins added.
“For us as a company, there’s been some very positive things in 2023,” he said “We’ve seen our market share increase. In 2022, we saw loan volumes fall from 2021 rather precipitously – understandable with higher rates,” Timmins added. “But we’ve seen a big step forward this year in volume. In fact, our best month so far this year was like 10% off our 2021 high. We’re not quite where we were, but we’re also not that far off from where we were in 2021. We continue to see positive signs moving forward as we continue to try and grow the business.”
With portfolio size as an accurate barometer, growth is also being seen on the servicing side. “From a servicing perspective, the increase in rates has allowed us to maintain a large portfolio that’s paying off very slowly,” Eric Friedman (pictured center), managing director, servicing, said. “Regardless of what the originations volume looks like, the servicing portfolio continues to grow. It has not slowed down, and we have the same servicing issues we would have in a normal servicing environment.”
Still business to be done
Maintaining that sense of normalcy amid the chaos of the current market has also helped Acra Lending navigate through choppier waters. Unlike industry rivals pushing riskier products to borrowers, Gunderlock said, the lender has maintained a steadier momentum.
“There’s still going to be a need for people to pull cash out,” Gunderlock said. “And certainly, there’s going to be a need for people to move when they need a new residence. So there is still business to be done.”
While competitors increasingly stretch the boundaries of loan-to-value (LTV) and debt-to-income (DTI) ratios, Arca Lending prefers to rely on its proven product mix that’s allowed it to thrive for 20 years. “What you don’t want to do is dive to the bottom,” Gunderlock said. “That’s what we’re seeing a lot of our competitors go – stretch LTVs or these high DTIs – and those are the things that can get very dangerous.”
The Acra Lending approach
So what is Acra Lending’s preferred approach? “We’re just going to stick to offering a great product breadth for non-QM, do prudent underwriting, maintain valuations and trying to maintain a normalcy to allow the markets to maintain our liquidity which has allowed us to grow our market share,” Gunderlock said. “Not trying to reach for that one extra loan has proven to be a positive for us.”
Gunderlock praised Gregory Meola (pictured right), managing director, head of business development and strategy, for his efforts in keeping the lender up on the latest technology along with Craig Timmins, managing director, for implementation of best practices standards. He said both undertakings are meant for the benefit of Acra Lending’s customers via its brokers.
“Greg [Meola] has done a great job of adding technologies, and Craig [Timmins] has been working on some best practices for our underwriting departments,” he elaborated. “Those have allowed us to create a better consumer experience for our brokers, which is the predominant portion of our business.”
How Acra Lending embraces technology
In that technology realm, the private mortgage lender is among the first to fully embrace Artificial Intelligence into the mix. Toward that end, Acra Lending last month revealed its partnership with digital products and solutions company Tavant. The collaboration will enable Acra Lending to utilize Tavant’s AI-powered platform, dubbed Touchless Lending Collateral Analysis, in its digital mortgage operations.
“As we go through the year, we want to define ourselves as not only an adopter but an innovator at the same time,” Meola said at the time. “We have been working very hard to get a lot of great enhancements to our technologies and our process efficiencies, and the work we are doing with Tavant is an integral part of this transformation.”
As if that leap of faith into technology were not enough, Meola said more is yet to come: “2023 was a staging year for a huge rollout in the tech-forward organization within Acra, and that’s going to be the way we operate with our brokers in a new portal that will not only allow them to easily submit loans to us but be an integral part of the transaction as well,” he said. “We’ve created some efficiencies on the back end with technology and AI so that we can sort through documents and come to underwriting decisions much quicker by bubbling up the issues and clearing the non-issues at a more rapid pace.”
It’s not just about having all the bells and whistles, but with a mind toward economies of scale across the organization. He cited technology-aided benefits in the credit lines cog Timmins runs and on the servicing side of the business overseen by Freidman as an example of the clockwork precision at play.
“We deal with a lot of warehouse lines on the back end, and a lot of math and documentation has to go into that,” Meola added. “We are implementing automation to streamline the entire loan process, ensuring a more efficient journey from inception to loan disposition with us. So, by looking at the whole thing – and obviously after we’re selling the loan and servicing it – it’s getting Eric’s team a lot more transparency into the servicing book and being able to have more optionality with that from people processing technology.”
It would appear the future is now at Acra, with that cutting-edge scenario to be on full display by next year: “That’s what 2024 is going to be for us – a revolution into being an innovator in the private lending technology space,” Meola said.
AI still was largely the stuff of science fiction when Acra Lending first began helping borrowers achieve homeownership 40-plus years ago – a concept reserved for pulp fiction or comic books of a bygone age. Yet by embracing the now all-too-real technology while guarding its historically proven product mix, the lender has created its own plotline for 21st century success.