Where Rocket, Freedom and Redwood execs see opportunity

• Key Insight: See how Rocket Mortgage, Freedom, and Redwood Trust are targeting more market share expansion. 
• Expert Quote: “If liquidity gets really tight, a lot of the AI stories that are bad ones will fall apart.” — Stan Middleman, CEO, Freedom Mortgage 

Overview bullets generated by AI with editorial review.   

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Rocket Mortgage, Freedom and Redwood Trust are eyeing further opportunities to keep picking up market share in the current environment, industry leaders said at an industry conference this week.

“The best companies lean into the downturn and find opportunities to grow,” said Stan Middleman, CEO of Freedom Mortgage during a Housing Finance Strategies  conference broadcast online.

From left, Stan Middleman and Jay Bray

Middleman said he has been preparing his team to focus on meeting customer needs and opportunistically engaging in acquisitions of companies or assets.

Jay Bray, president and CEO at Rocket Mortgage, said his publicly traded company also views the market as one conducive opportunistic M&A but is “taking a very disciplined approach around the balance sheet” due to liquidity concerns.

A focus on managing liquidity risk

“Liquidity is something we should all be thinking about,” Bray said, noting that Rocket’s other priorities are to focus on efficiency, consolidation and servicing that helps balance the mortgage business when rates rise, as they have at times this year.

Middleman also said he sees potential liquidity risks given recent private residential mortgage-backed securities market disruption and the relatively higher delinquency rates government loans in the market have, which require servicers to advance funds.

“When you think about liquidity, it’s not just servicing advances. It’s warehouse lines. It’s the price of warehouse lines. It’s repo lines. It’s the cost of financing MBS,” he added.

Areas with liquidity risk include the securitized market, but that’s opened up inroads into the space for those that can manage it, said Chris Abate, CEO at Redwood, a mid-sized real estate investment trust known for being a leading innovator in nonagency RMBS.

“Liquidity is challenging right now. Capital is challenging. Ironically, though, there are great opportunities to pick up market share,” Abate said. “We’ve done 35 securitizations this year. It’s more than we’ve ever done, and I think those opportunities will continue.”

AI has potential, with some caveats

Abate said that in addition to seeing potential to pick up market share he has been focused on selective, cost effective adoption of artificial intelligence technology, which he can do more to automate data analysis in the non-qualified mortgage market.

“We don’t necessarily have a big AI-dedicated wing of the company, but we have rolled out the tools to everyone. The adoption has been pretty spectacular but you do have to manage your token usage,” he said.

Bray said his company also has been investing in AI with the aim of creating efficiencies and improving customer interactions.

“I think that is going to result in us being able to continue to compete in a very fierce way in the marketplace and continue to be able to grow share,” he said.

Middleman said he agreed AI had potential to help large companies growing share, but advised the broader market not to overestimate AI’s potential for offering efficiencies.

He also said rising liquidity risk could lead to a shakeout in the AI sector.

“If liquidity gets really tight, a lot of the AI stories that are bad ones will fall apart. The good ones will survive, but the bad ones won’t and I think it may look a little bit like the dot-com crisis that we experienced in the late ’90s,” Middleman said.

Source: www.nationalmortgagenews.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.