First American Launches Endpoint, Invests $30 Million

First American Financial Corporation, a provider of title insurance, settlement services and risk solutions for real estate transactions, has launched Endpoint, a mobile-first title and escrow company that provides a reimagined closing experience for buyers, sellers and their real estate agents. Developed as a new stand-alone company, Endpoint combines First American’s title and settlement expertise with the innovative approach of an agile startup to provide a digital real estate closing experience from start to finish. First American has invested $30 million to drive the company’s development and growth. Designed and developed in collaboration with BCG Digital Ventures, the global corporate venture, investment and incubation arm of the Boston Consulting Group, Endpoint delivers its title and escrow service through a suite of web, iOS and Android apps. Significant features of Endpoint include: All parties have real-time visibility into the closing process with progress tracking, push notifications and secure messaging. Documents are completed in the app, with guidance as to what information is needed and how much time each task is likely to take. Earnest money can be transferred digitally, and all parties are notified once the money is received. E-signatures can be completed in the platform, while a mobile notary can be scheduled to facilitate a wet signature at no additional cost. Endpoint is operating in Seattle and expects to expand into California, Arizona and Texas over the next nine months, with further growth planned through 2021.

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Pembrook Acquires Five Properties in Southern California

Pembrook Capital Management LLC has closed a $10.6 million financing package for the acquisition and rehabilitation of five properties totaling 105 units in Los Angeles. The financing was structured as a $6.2 million first mortgage loan for the acquisition of 25 units located at 14949 Roscoe Boulevard and a $4.2 million preferred equity investment for the acquisition of 825-833 East 108th Street (22 units), 6121 Crenshaw Boulevard (17 units), 6736-6800 West Boulevard (24 units) and 14924 Roscoe Boulevard (17 units), all located in Los Angeles.   With the financing in place, sponsor Golden Bee Properties plans to perform $2 million of exterior and interior capital improvements, stabilize the assets and refinance with long-term fixed-rate financing. Pembrook is a real estate investment manager that provides financing throughout the capital structure. The firm has originated or participated in investments totaling over $1.4 billion since it began investing in 2007. Golden Bee Properties is an experienced owner and operator of similar properties in the greater Los Angeles area. They currently own 59 properties located in Los Angeles, Long Beach, Inglewood Van Nuys and Las Vegas.

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Novel Coworking Adds New SmartSuites Floors to Minneapolis TriTech Center

Workspace provider Novel Coworking has added two new floors of SmartSuites at the Minneapolis TriTech Center location, totaling nine new suites and 17,000-square-feet of new space. In 2019, the company debuted its SmartSuites technology-enhanced private suites, which feature a combination of private offices and collaborative open space, dedicated kitchen and conference room facilities. They also offer integrated technologies such as Alexa-enabled sound system and biometric keypad entry. The Minneapolis TriTech location will be adding two of these specific SmartSuites floors.

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“I Felt Alive”

Self-challenge leads to a lifetime of opportunity. Someone once asked me how I view my success. After thinking about it, I replied that success is a journey of self-exploration and of constantly challenging one’s self. If you improve, good things happen. If you don’t challenge yourself, life is boring. My journey began in 1993 at the Indian Institute of Technology, where I had dual majors—chemical engineering and computer science. My career goal at the time was to become an environmental engineer. Computer science was, I felt, a  nice complement. Big Moves I joined Deloitte in 1997 immediately following graduation and moved to the U.S., settling in Atlanta. The whole world was new to me—new surroundings, a new job and new challenges. I felt alive. At Deloitte I was involved in telecommunications and CRM projects for large clients, including software companies that were embarking on developing CRM software.  After two years, I felt restless. I needed a new vista, so I applied to Wharton to earn my MBA. I chose this path because Wharton had a reputation for being challenging. Again, I felt the urge to rise to the occasion.  I applied to graduate school with the intent of working on Wall Street as an investment banker. Early in the application process, I began to think about my Deloitte experience and a different career path. I had spent considerable time in call centers while working on CRM projects, and I wondered why they were operated exclusively in the U.S. I asked myself, “If you can operate a call center in Spokane, why not in India?” Business Calls That question was the seed of a new business idea. I shifted my focus from working on Wall Street to learning how to build a proper business. In my first year of studies, I collaborated with a former Deloitte associate with whom I shared my  idea for a global outsourcing company. He had worked alongside me on CRM projects and embraced the concept. We spent the next six months working on our business plan. By the end of the first year of school, I had raised capital to fund a startup. My investors’ support was conditional on my leaving school to manage the company. I agreed and dropped out of Wharton in 2000 to form iSeva, a global call center company, with my fellow Deloitte colleague as a co-founder.  People I knew didn’t think this opportunity was real. They cited the volatility in starting a new company and the belief that American businesses would never work with offshore vendors. But companies large and small were poised to take advantage of the Indian labor market. The gold rush was on. I had no doubt I could make good things happen. We focused on mortgage and high-tech, two categories in which we felt confident. Key to our success was focus and specialization. We developed relationships with marquee clients like Citi and Symantec. Over four years, we built a thriving $10 million-class business that employed more than 1,000 people. A “Growing” Challenge In 2004 it became clear to me that to survive in this industry, one had to be a big dog. We were surrounded by giants like Tata and Infosys and, in order to survive, we had to get big fast. The market for a small company just wasn’t there. We had raised some institutional capital, and our investor wanted to roll us up into a collection of complementary companies to build mass.  We sold our interest in the business, and I reapplied to Wharton to complete my MBA. I felt too young to retire, and I wanted a new challenge. I believe that, in life, what you do next is based on what you’ve already done. I took stock of what I knew and began to shape my next move. I knew the U.S. mortgage industry and the U.S.–India corridor. I understood technology and operations. I began to shape my next focus from those perspectives. More Searching . . . and Growth At iSeva, we focused on the origination side of the business, which was pretty crowded at the time. I began to study other parts of the industry and settled in on loan servicing, specifically subservicing. It combined outsourcing with operations, two competencies with which I felt comfortable. I completed my graduate degree in 2005 and began to search for an acquisition candidate. I created what is now called a search fund, where investors agree to contribute capital once you identify and acquire a company. In September 2005, I discovered BSI Financial Services, a company formed in 1986 to service motorcycle leases and auto loans. At the time, BSI was operating as the mortgage division of a bank. I signed the acquisition papers at the end of 2005 and closed early in 2006. We planned to focus on loan servicing for the conventional lending market. The end of 2005 saw home prices beginning to dip and foreclosures rising. By 2007, the Great Recession was looming, and I elected to shift our focus to nonperforming and distressed assets. I took my cues from our clients. They wanted  consistent returns, 100% regulatory compliance and operational transparency. We focused on managing expenses, training and modernizing our servicing platform. During the next 10 years, BSI Financial earned a reputation of being a nimble company that used technology to craft unique solutions for investors in the nonperforming loan (NPL) space. As the company grew,  Inc. magazine recognized us as one of the nation’s fastest-growing companies. Our workforce swelled from 15 full-time employees to 350. Along the way, we discussed and debated our strategic direction: How was the market evolving, and how should we best align our talents and resources in search of the newest opportunity? Around 2014, as our clients were disposing of REO property, I noticed that investors were swooping in to buy those properties to fix-and-flip or hold for single-family rental (SFR). These investors were playing a pivotal role in stabilizing and rehabilitating the real estate

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Home Flipping Activity Drops, Returns Remain Near Seven-Year Low

In the third quarter of 2019, overall home flips dropped 12.9% over the previous quarter and  were down 6.8% from a year ago, according to  ATTOM Data Solutions’ third-quarter 2019 U.S.  Home Flipping Report. Home flipping rates were down in 78% of the local  markets (115 of 147) analyzed in the report. This decline came after an unusually active flipping  market in the spring. The declines stood out as the  largest quarterly and annual drops since the third  quarter of 2014. The homes flipped in the third quarter represented 5.4% of all home sales during the quarter. That level  was down from 6% percent of all home sales in second quarter 2019, but up slightly from 5.2% a year ago. Homes flipped during the reporting period typically generated a gross profit of $64,900, an increase of 1.8% from the second quarter and 3.5% from a year ago. Still, that gross flipping profit translated into a 40.6% return on investment compared to the original acquisition price, which marked a decrease from the 41.1% gross flipping ROI in the second quarter. The latest returns on home flips stood at the second-lowest point since 2011, barely above the 40% ROI from the first quarter of this year. “After a springtime selling binge earlier this year, the home-flipping business settled way down over the summer amid a continuing scenario of languishing profits,” said Todd Teta, chief product officer at ATTOM Data Solutions. “The retreat back to more normal levels of sales comes amid broader market forces that are making it harder and harder for investors to complete the  kinds of deals they were getting as recently as last year. Those forces are keeping profits way down from post-Recession highs and show no signs of easing.” Maksim Stavinsky, co-founder and COO of Roc Capital, noted that borrowers’ declining profits on flips are leading to much greater interest in renting out renovated properties instead of flipping them. “We have been seeing a decline in projected and realized profits for borrowers on projects, despite the fact that borrower financing costs have been meaningfully coming down,” said Stavinsky. “This has led to much greater interest and activity in our rental programs.  We expect these trends to continue.” While home flips purchased with financing continued to drop in the third quarter, those bought with cash climbed, up from 56.3% in the second quarter and 54% a year ago. Eight markets bucked the trend, however, and had third quarter 2019 gross ROI flipping margins of at least 100%. Those markets included Pittsburgh, Pennsylvania (132.6%); Scranton, Pennsylvania (122.5%); Flint,  Michigan (111.2%); Cleveland, Ohio (109.8%) and  Hickory-Lenoir-Morganton, North Carolina (109.7%). Homes flipped in the third quarter of 2019 were sold for a median price of $224,900, with a gross flipping profit of $64,900 above the median purchase price of $160,000. That profit figure was up from a gross flipping profit of $63,750 in the previous quarter and up $62,700 in the third quarter of 2018. But with prices rising on investor-purchased homes, the median 40.6% return on investment was down from the post-Recession peak of 52.1% in the second and third quarters of 2016. The average time to flip nationwide in the third quarter was 177 days.

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Median Home Prices Unaffordable for Average Wage Earner

Home ownership consumes 32.5% of wages in fourth quarter 2019 The fourth quarter 2019 U.S. Home Affordability Report, released in mid-December by data provider ATTOM Data Solutions, shows that median home prices in the fourth quarter of 2019 were unaffordable for average wage earners in 344 of 486, or 71% of the U.S. counties analyzed in the report. The figure represents a slight improvement from previous reports. It was down from 73% in third quarter and 75% from a year earlier. The report analyzes median home prices from publicly recorded sales deed data collected by ATTOM Data Solutions and average wage data from the U.S. Bureau of Labor Statistics in 486 U.S. counties with a combined population of 235.2 million. The report determined affordability for average wage earners by calculating the amount of income needed to make monthly house payments on a median-priced home, assuming a 3% down payment and a 28% maximum “front-end” debt-to-income ratio. “Payment” included mortgage, property taxes and insurance. Average 30-year fixed interest rates from the Freddie Mac Primary Mortgage Market Survey were used to calculate the monthly house payments. The required income was compared to annualized average weekly wage data from the Bureau of Labor Statistics. “Home prices rose across the country by 9% year-over-year in the fourth quarter of 2019, and the typical home remained a financial stretch for average wage earners. However, homes were actually a bit more affordable because of declining mortgage rates combined with rising pay to overcome the continued price run-up,” said Todd Teta, chief product officer with ATTOM Data Solutions. “As long as people are earning more money and shelling out less to pay off home loans, the market should remain strong with prices continuing to rise, at least in the near term. Those are big ifs, but for now this report offers some decent findings for both home seekers and home sellers.” The largest populated counties where a median-priced home in the fourth quarter of 2019 was not affordable for average wage earners included Los Angeles County, California; Maricopa County (Phoenix), Arizona; San Diego County, California; Orange County, California (outside Los Angeles); and Miami-Dade County, Florida. The 142 counties (29% of the 486 counties analyzed) where a median-priced home in the fourth quarter of 2019 was affordable for average wage earners included Cook County (Chicago) Illinois; Harris County (Houston), Texas; Wayne County (Detroit), Michigan; Philadelphia County, Pennsylvania; and Cuyahoga County (Cleveland), Ohio. Home Price Appreciation  Outpacing Wage Growth Home price appreciation outpaced average weekly wage growth in 369 of the 486 counties analyzed in  the report (76%). The largest counties where this occurred were Los Angeles County, California;  Cook County, Illinois; Harris County (Houston),  Texas; Maricopa County, Arizona; and San Diego County, California. On the other hand, average annualized wage growth outpaced home price appreciation in 117 of the 486 counties (24%), including Orange County, California; Miami-Dade County, Florida; Kings County (Brooklyn), New York; Queens County, New York; and Santa Clara County (San Jose), California. Wages Needed to Buy a Home Among the 486 counties analyzed during the  reporting period, 311 (64%) required potential homebuyers to allocate at least 30% of their annualized weekly wages to the purchase. Counties requiring  the greatest percent included: Marin County, California (outside San Francisco; 111.2% of annualized weekly wages needed to buy a home) Kings County, New York (103.6%) Santa Cruz County, California (outside San Jose; 103%) Monterey County, California (outside San Francisco; 88%) Maui County, Hawaii (84.9%) A total of 175 counties in the report (36%) required less than 30% of potential homeowners’ annualized weekly wages to buy a home. Counties requiring the smallest percent included: Baltimore City/County, Maryland (11.2% of annualized weekly wages needed to buy a home) Bibb County (Macon), Georgia (12.4%) Rock Island County (Davenport), Illinois (14.4%) Wayne County (Detroit), Michigan (15.2%) Richmond County (Augusta), Georgia (15.2%)

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