2014 Event Agenda

Agenda: AmeriCatalyst Tightrope


    Sunday, September 7, 2014  
          Opening Reception for AmeriCatalyst: TIGHTROPE    
          IN the Moody Theater
          REGISTRATION DESK | 12:00pm - 9:00pm    
          Located at the W Hotel
    Monday, September 8, 2014  
          9:15 AM - 10:30 AM  | SESSION 1.2 | BLIND SPOT: Income Inequality, the Erosion of the Middle Class and its Impact on  the Housing Market    
          In the broader historical context, wide gaps in wealth between the ultra rich and poor are nothing new, nor is the problem of “income inequality” limited to the United States. However, since the 1980s, income inequality and the loss of wealth among the middle class have increased at an alarming rate, specifically in the U.S. This has direct consequences for our industry: given the amount of income required to qualify for, purchase, and maintain a home, the erosion of the middle class presents a profound turning point. However, for too long it has remained a blind spot within the industry. At this point, even Wall Street is acknowledging the problem: Lloyd Blankfein of Goldman Sachs warned that income inequality is “destabilizing the nation.” PIMCO’s Bill Gross stresses the need for the U.S. to enact policies to bring labor and capital back into balance including a higher minimum wage and higher taxes on the rich, and similar comments have been made by billionaires Warren Buffet and Stanley Druckenmiller. This session looks at what is now called the defining issue of our lifetime and has now become the defining issue of our industry. In the first quarter of this year, home ownership in the U.S. fell to its lowest rate since 1995. There are a number of issues at play in this statistic, but we have to ask ourselves how and to what extent the lack of income and wealth is already affecting our industry, how fast it is happening, and what - if anything - we can do about it. This session focuses on the consequences of income inequality for industry, leaving the political implications to the political process. With so much at stake, this cannot remain a blind spot within the industry, nor can we stay absent from the debate.
      Host:     Toni Moss    
      Host:     Josh Rosner    
      Speaker(s):     Danielle DiMartino Booth, James Galbraith    
          12 NOON - 1:15 PM | LUNCH    
          1:15 PM - 2:15 PM | SESSION 1.4  | WAITING FOR GODOT: GSE Reform (Or What Happens if Nothing Happens)     
          Ever since FHFA Director Jim Lockhart placed Fannie Mae and Freddie Mac into conservatorship in September 2008, Congress has continued to struggle with their reform. While the House and Senate committees have passed different proposals, thus far no consensus has been reached and seems unlikely in the near future. The impasse hinges on three fundamental issues: the role of government in the housing system (with Republicans arguing little to no role), the level of support for affordable housing (a key issue for Democrats), and the impact on community banks (who have a very strong lobby). Meanwhile, U.S. taxpayers have paid more than $187 billion to bring Fannie Mae and Freddie Mac to solvency. In return, the GSEs have paid more than $213 billion in dividends to the US Treasury. While there appears to be profit in that equation, some would argue that when adjusted to risk, there is none. However, common shareholders and investors in the preferred securities of Fannie and Freddie have launched a series of lawsuits against Treasury staking their claim to what they clearly view as profit. And so it goes. We’ve named this session after what was voted “the most significant English language play of the 20th century,” in which two characters wait endlessly (and in vain) for the arrival of someone named Godot. Only at the end of the play does the audience discover that Godot will never appear. In the past six years of conservatorship, why do we not have GSE reform? Perhaps, like Godot, there’s nothing to wait for. Indeed, it may be time to ask, what happens … if nothing happens?
          10:30 AM - 11:00 AM | REFRESHMENT BREAK     
          2:15 PM – 3:30 PM | SESSION 1.5 | OUT OF THE GAME: The Changing Playing Field of Mortgage Origination    
          Increased regulation, which is escalating the costs of origination, is polarizing the industry. Anemic origination volumes and decreasing revenues further exacerbate the challenges of staying in the game. As a result, lenders are either downsizing to avoid CFPB scrutiny, or consolidating to gain the significant economies of scale needed to support the highest cost compliance infrastructure in history. Some are exiting the game entirely after concluding that the combination of compliance costs and risks is simply too high, and a host of new players are moving in to fill the void. This session looks at what it takes to survive in the current lending environment, including a look at origination and production channels, compensation structures, and FHA credit expansion initiatives, with a heavy focus on the promise and potential for non-QM lending.
          3:30 PM  – 3:45 PM |  REFRESHMENT BREAK     
          3:45 PM – 4:45 PM  | SESSION 1.6 | DAZED AND CONFUSED: The Current State of Mortgage Servicing and Its Future    
          We’ve titled this session “Dazed and Confused” to reflect the inordinate compliance pressures that have essentially broken the economic model for the servicing sector (hence dazed), as well as the cost-intensive barrage of constant, fundamental policy changes required by GSEs and regulators. The session is a high-level view of the current state of mortgage servicing from an operational perspective, including a breakdown of the current economic model and prospects for profit in the future; the advantages and disadvantages of subservicing and what role sub-servicers will play in the future; the operational impact of servicing churn, and the internal pressure from compliance and legal departments on servicers. After a thoughtful and thorough review of the state of servicing, we transition into a collaborative discussion on what the ultimate servicer could and should look like as a new vision for a sector in the process of painful reinvention.
          4:45 PM – 5:00 PM  | REFRESHMENT BREAK     
          5:00 PM - 6:00 PM | SESSION 1.7 | PICTURE THIS: Taking a “Selfie” of the Mortgage Industry (THE ANNUAL DEBATE)     
          British author Vita Sackville West wrote one of the most sarcastically funny lines of all time: “Everyone is so self-absorbed they have no time to think about me.” And that was almost a century before the selfie! For the most part, selfies are associated with narcissism, vanity, and represent a social media-driven society in which people will stoop to anything to get attention. Regardless of how one views the spectacle (pun intended), by allowing us to be interchangeably behind and in front of the camera, selfies tell us a lot about who we are, and how we would like to be perceived. This session turns the debate inward, using the selfie as a metaphor and asking what a selfie of our industry would look like – how real and authentic it would be and what it says about us vs. how we perceive ourselves. We’ll look at how we currently come across to our audiences, including customers, regulators, and investors, and what we would like the future face of the industry to be. In that context, we also preview some of the best initiatives intended to improve the industry internally, as well as help remediate our public perception. P.S. We reserve the right to copyright the term “melfie”.
           8:30  AM - 9:40 AM |SESSION  1.0 OPENING COMMENTS     
           8:40 AM - 9:15 AM  | SESSION 1.1 | SEAN DOBSON KEYNOTE    
          In this rare keynote address, one of the most prescient investors and successful entrepreneurs in the history of our industry, Amherst Holdings CEO and Chairman of the Board Sean Dobson provides an overview of global macroeconomic factors impacting the U.S. economy and, in turn, the U.S. housing market, with a focus on opportunities for investors and entrepreneurs in the current market environment.
          11:00 AM -12 NOON | SESSION 1.3 | TIGHTROPE: The State of the Housing Market     
          There has rarely been so little clarity and consensus on the state and direction of the mortgage market as there is today. Something quite profound is happening in the market, but exactly what that is remains up in the air. In this session, we present the issues and facts driving current market conditions, with some bold and differing perspectives on their interpretation. In the meantime, a word of advice: don’t look down.
          7:30 AM - 8:30 AM | MORNING COFFEE    
    Tuesday, September 9, 2014  
          1:00 PM - 2:15 PM | CLOSING LUNCH FOR TIGHTROPE     
          7:30 AM - 8:30 AM | MORNING COFFEE    
          8:30 AM – 9:00 AM | SESSION 2.1 | BOOGIE MEN? An Overview of Shadow Banks and Non-Bank Mortgage Companies    
          One of the greatest ironies of post-2008 regulations is that by forcing banks to reduce their risk, regulators have created (and indeed, accelerated) an even greater demand for shadow banking. Although no one can agree on their definition, “shadow banks” exist across a global spectrum of diverse institutions that perform traditional banking functions outside of the regulated depository institutions. In the housing finance industry, we refer to them as “Non-Bank Mortgage Companies,” which include originators and servicers. Not as sexy as “shadow banks,” but certainly more descriptive. These institutions serve a crucial need in filling the void left by the departure of regulated banks, which now find the lending and servicing business uneconomic. In this session, Chris Whalen lays the foundation for subsequent sessions by providing an overview of their function, importance, and increasing growth. As a final note, we were going to name this session, “Who’s Afraid of Bill Erbey” but better judgment prevailed.
          9:00 AM– 10:15 AM | SESSION 2.2 | EVEN THE SHADOW DOESN’T KNOW: Regulation and Oversight of the Non-Bank Mortgage Companies    
          In pursuit of unmet demand and greater economies of scale, non-bank mortgage companies have grown to such an extent that they are now responsible for almost 50% of all 1-4 family mortgage loans, and non-bank servicers held 17% of the $10 trillion MSR market at the end of 2013, up from 9% a year earlier. The rapid growth, flexibility, and dominance of these institutions have heightened concern among regulators at the federal and state level regarding the appropriate levels of their regulation and long-term economic viability. Specific to those concerns are liquidity, capacity, and counterparty risk, the latter of which some fear could potentially delay the return of private-label securities even further. Despite their concerns, to date there has been no coordinated approach among regulators to address these vital issues. In the absence of prudential regulation, oversight of the non-bank mortgage companies has fallen upon an already pressured FHA, VA, Ginnie Mae, and the GSEs (the latter of which, incidentally, are themselves the largest nonbank institutions). This session takes a detailed look at the complex issues posed by the growth of the non-bank mortgage companies in light of the strong need for them. We will hear from some of the agencies which, due to the absence of a definitive regulator, now play quasi-regulatory roles. We will also hear from the non-regulated mortgage companies themselves on how they are preparing for the inevitable regulation to come. From someone. Somewhere. At some point. Until then, even the shadow doesn’t know.
          10:15 AM – 11:15 AM | SESSION 2.3 | AS THE WORLD CHURNS: The Drama and Dilemmas of Mortgage Servicing Rights  and Their Transfer     
          When it comes to Mortgage Servicing Rights (MSRs), one bank’s liability has become a non-bank’s opportunity. It wasn’t always like this. Where MSRs were once a valuable asset for the largest banks, regulatory compliance costs, unprofitable mortgage origination, the liabilities of third-party origination, regulatory uncertainty, litigation, negative headlines, Basel III, and Obamacare* have rendered servicing a liability. Today, the $10tn MSR market is being driven by the sale of distressed servicing portfolios from the large banks to non-bank mortgage companies and/or/including mortgage REITs, private-equity firms, and hedge funds, with prime servicing surely to follow. Between the fourth quarters of 2012 and 2013, the market share of the nonbank servicers grew by almost 130 percent, and today, five of the top ten servicing firms are non-banks. And now enters the drama: Earlier this year, New York State’s Department of Financial Services superintendent, Benjamin Lawsky, indefinitely halted Wells Fargo’s $39bn transfer of MSRs to Ocwen, the largest non-bank servicer, due to concerns about Ocwen’s capacity to effectively service the loans. Lawsky’s intervention challenges the very nature of special servicing by questioning at what volume does a special servicer lose its “high touch” approach? This session explores the dynamics, drama and dilemmas of MSRs and their transfer, discussing who’s selling, who’s buying, volume projections, pricing, how the volatility of regulatory uncertainty and legal risks are impacting the sector, and where it is headed next. * We’re not exactly sure how Obamacare is related but given the pervasive rhetoric on its detriments it seemed to fit nicely in the list!
          11:15 AM - 11:45 AM | REFRESHMENT BREAK     
          11:45 AM - 1:00 PM |  SESSION 2.4 | KNOWNS AND UNKNOWNS: The Strengths and Weaknesses of Housing Finance Data and Demographics     
          This session shows the data behind the dialogue over the past day and a half through its exploration of the strengths and weaknesses of housing finance data and demographics. Looking at housing supply and demand drivers and constraints, we’ll discuss economic trends, house prices, loan performance, new construction starts, the shadow inventory, interest rate lockout, and income trends and their impact. We’ll also discuss demographics and future housing demand, highlighting the critical differences along the spectrum of demographic composition from Millennials to Boomers and examine what a “minority majority” will do to influence household formation statistics, the propensity to rent versus own, and how these factors influence a myriad of public policy options. We’ll transition from the strengths of what we do know about the industry to a collaborative debate between panelists and the audience that inventories the weakness of what we don’t know - including what data is missing, how it negatively impacts the industry, and how it may be possible to provide a more accurate and predictive view of industry dynamics in the immediate future.

  Agenda: Renting The Future

    Tuesday, September 9, 2014  
          IN THE MOODY THEATER    
          1:00 PM - 2:15 PM  | LUNCH    
          7:00 AM - 6:00 PM | REGISTRATION DESK      
          Located at the W Hotel    
          4:30 PM - 5:00 PM |  REFRESHMENT BREAK     
          IN THE MOODY THEATER    
          11:45 AM - 1:00 PM |  SESSION 2.4 [1] KNOWNS AND UNKNOWNS: The Strengths and Weaknesses of Housing Finance Data and Demographics     
          This session shows the data behind the dialogue over the past day and a half through its exploration of the strengths and weaknesses of housing finance data and demographics. Looking at housing supply and demand drivers and constraints, we’ll discuss economic trends, house prices, loan performance, new construction starts, the shadow inventory, interest rate lockout, and income trends and their impact. We’ll also discuss demographics and future housing demand, highlighting the critical differences along the spectrum of demographic composition from Millennials to Boomers and examine what a “minority majority” will do to influence household formation statistics, the propensity to rent versus own, and how these factors influence a myriad of public policy options. We’ll transition from the strengths of what we do know about the industry to a collaborative debate between panelists and the audience that inventories the weakness of what we don’t know - including what data is missing, how it negatively impacts the industry, and how it may be possible to provide a more accurate and predictive view of industry dynamics in the immediate future.    
          2:15  PM – 3:15 PM | SESSION 2.5 [2]  BUILT TO LAST: Establishing the Foundation for a Statistically Supportable View of Single-Family Rental     
          Currently, the Single-Family Rental sector lacks a strong foundation for a statistically supportable view of the housing and rental markets that enables the ability to manipulate variables and scenarios to support actionable strategies, to accurately project critical issues such as how net asset value is calculated, the ability to lever rents and to determine how to capture and stratify rent growth, for example. Most importantly, the purpose of the session is to establish a view of the empirical validity of the sector. Similar to the preceding session “Knowns and Unknowns,” this session provides an update of current market conditions and detailed data driving the sector via an inventory of all current available data in Single-Family Rental, and transitions into a discussion about what more empirical data is needed and how far we have to go. Finally, the session kicks off a new initiative of the AmeriCatalyst Idea Lab’s Single Family Rental Strategies (SFRS) think tank, establishing a data research council to establish metrics and benchmarks for Single-Family Rental moving forward.    
          3:15 PM - 4:30 PM | SESSION 2.6 [3]  RUMOR HAS IT: The State of Single-Family Rental and What Happens Next    
          While single-family home rental is not a new concept, the institutionalization of Single-Family Rental as a professional industry sector and asset class certainly is. These developments have not occurred without controversy, which is why it is important to keep in mind the tumultuous period and context in which the sector has evolved. What we now know as “Single-Family Rental” began as a partial solution to the foreclosure crisis that brought much-needed private capital to acquire the unprecedented shadow inventory of REO properties. As such, negative public reactions to institutional – or “Wall Street” investors post-crisis are to a certain extent, inevitable. More importantly, the sector has developed in the unbridled culture of mass and social media, in which anyone can become a publisher and reach a wide audience within seconds. As we have already seen, this can be brutal as operators tread the learning curve. Furthermore, developments in the sector are evolving at a pace faster than media and analysts can process and capture. We’ve titled this session, “Rumor Has It” in reference to all of these factors because if you read the news and blogs, rumor has it that as those in it for the trade exit the ride, the wheels are falling off of the sector. And yet those whose business models are built to last have only just begun. This session separates the facts from fiction, highlighting how business models are changing in line with rising house prices, increased operational efficiencies, public access through securitization and REITs, and the ongoing funding revolution as cheaper capital reaches smaller players. We discuss the latest developments, dynamics, and thought processes of the pioneers leading some of the most important firms in the sector, with a preview of what happens next.    
          5:00 PM - 6:00 PM   |  SESSION 2.7 [4] GOING PUBLIC: Securitization and the Funding Revolution in Single-Family Rental    
          The funding revolution has begun. Prior to Blackstone’s groundbreaking rental payment securitization in October of 2013, capital leverage was mostly limited to secured credit facilities. The advent of rent-backed securities has brought the lowest cost of capital to institutional owners and operators, launching what one could characterize as an “arms race”. To date, there have been a total of six transactions totaling approximately $3.4 billion, with two more new issuers in the market and an anticipated total of 10 transactions in 2014. Add in the potential for multi-borrower securitizations, and the market is anticipated to grow as much as $20 billion annually. Blackstone’s initial transaction has since been followed by American Homes 4 Rent in April of this year, as well as Colony American Homes in April and May, with Silver Bay and American Residential Properties announcing new issues. Now, the real work begins. Given the fact that there are billions of dollars in outstanding interim finance lines that need to be taken out through securitization, have we found the model that is going to clear the market of the supply? Are these past and upcoming structures investor-friendly enough to expand the investor base and how much can the investor base be widened? What structure works best? As we tread the path toward institutionalizing the sector, are we on the right path? And finally, are we there yet? This session addresses those questions and more, providing a behind-the-scenes look at transaction pitfalls and performance and current market response, prospects for new issuers, 
improvements in investor reporting, the internationalization of the investor base, and previews the next big thing in the growth of the SFR securitization market, multi-borrower securitizations.    
    Wednesday, September 10, 2014  
          2:15 PM – 3:30 PM | SESSION 3.5  | SCHOOL’S OUT: Lessons Learned and Best Operational Practices in Single-Family  Rental 3 Years On     
          3:30 PM  – 4:30 PM | SESSION 3.6  WHERE HAVE ALL THE COWBOYS GONE: Changing Acquisition Strategies to Adapt  To Changing Market Fundamentals    
          The “four horsemen” driving recent changes in acquisition strategies are the presence of larger players in the market, rising home prices, new mid-tier financing, and ROI expectations of public investors. As such, acquisition strategies for Single-Family players have become increasingly sophisticated and dynamic. In adjusting to rising house prices in particular, the largest players are selling select assets in their portfolio or have stopped buying (for now). Other firms are merging to gain greater efficiencies, moving to new geographic locations, or are acquiring and renovating smaller portfolios to sell to the larger players. With the new wave of funding leverage, mid-tier investors are changing their strategies to focus on “secondary markets” with higher risk, and higher reward. This session discusses how acquisition strategies are being calibrated to shifting market conditions. We’ll evaluate the costs and efficiencies of current acquisition channels including single-site MLS, Trustee auctions, stabilized portfolios, whole portfolio acquisitions, and non-performing loans. We also debate which acquisition strategy is best executed based on the size of investors involved. And finally, we’ll discuss what is likely to happen if house prices head back downward.    
          7:45 AM - 8:30 AM | MORNING COFFEE AND REFRESHMENTS     
          8:30 AM - 9:30 AM | SESSION 3.1 | LEVELING THE PLAYING FIELD: How Small to Mid-Tier Investors are Changing the Game     
          Single-Family homes represent approximately 14 million homes, or more than 10% of the overall housing market. Given the enormous size of the market, reliance upon the large institutional investors as a gauge for market performance distorts the reality of what is happening in the heart of the market – the smaller to mid-tier investors and operators. In a report earlier this year, Keefe, Bruyette & Woods estimated that 14% of the market is owned by investors with more than 10 properties, 35% are owned by investors who own 2 – 10 properties, and 51% are assumed to be owned by a single investor. The advent of new lending facilities geared toward small to mid-tier investors is poised to level the playing field by providing greater financial leverage and incenting their growth, but to what extent will it change the game? This session looks the issue from two perspectives. We begin with a look at how lenders are streamlining financing operations to facilitate more fluid transactions between borrowers and sellers, as well as build the infrastructure to prove the viability of a securitization market for multiple borrowers.  Our second perspective comes from the mid-tier investors and operators themselves. With access to lower costs of capital, how will it change their business models, and what will they do with the funding?    
          9:30 AM - 10:40 AM |  SESSION 3.2 | HARNESSING GLOBALIZATION: Crowdfunding and Market Disruption     
          Banking is necessary, but banks are not - as evidenced by our earlier AmeriCatalyst sessions on non-bank mortgage companies. A company with a strong brand, technology, and access to capital can in fact perform traditional (albeit non-depository) banking activities. Provided, of course, regulators don’t kill it. Case in point: crowdfunding. Two years ago, crowdfunding was barely in the investor lexicon. When the JOBS Act of 2012 legalized crowdfunded investing (CFI) and became effective on January 1, 2013, the race was on. Today, virtually all crowdfunding analysts agree that real estate crowdfunding will be the largest – and most successful crowdfunding model of all, and is poised to revolutionize real estate capital formation. In the same way, having an information facility to publish a unilateral offer of compensation on property is necessary, but as it currently exists, what we know as MLS, is not. The context of this session is ultimately about globalization, and what happens when innovative firms harness its fundamental forces into a particular business model. In this case, technology, distribution, the Internet, and the power of the masses. The session analyzes the obstacles and potential of two different but powerful models that could fundamentally alter the real estate sector by changing the way in which we buy, sell, and fund real estate transactions. As an interesting side note, we were going to name this session “Capital Darwinism”, citing the famous quote by Charles Darwin, “It is not the strongest of the species” that survives, nor the most intelligent. It is the one that is most adaptable to change. In fact, Darwin never said it. What he said was those who survive are the ones who most accurately perceive their environment and successfully adapt to it. In the same way that the growth of Single-Family Rental is a reality check for the future of housing finance and homeownership, crowdfunding and the expansion of the auction model serves as a reality check to the real estate industry.    
          10:40 AM - 11:00 AM |  REFRESHMENT BREAK     
          IN THE MOODY THEATER    
          11:00 AM  – 12:00 PM | SESSION 3.3 | SIBLING RIVALRIES? A Debate Between Single-Family and Multi-Family Operators     
          Almost everyone involved in Single-Family Rental believe that the institutionalization of the sector is likely to follow a similar growth trajectory as the Multi-Family sector did 20 years ago. As such, Single-Family market players view themselves as the younger siblings of Multi-Family. While Multi-Family operators view Single-Family players as the new kids on the block, they question their birthright to the same family. As one institutional investor put it, “Single-Family Rental is a logical extension for multi-family players. Their lack of participation in the sector is a blatant indictment of their view of the sector.” While Single-Family Rental is unlikely to become the suburban version of the apartment industry, like Multi-Family, it is well on its way to becoming a new institutional asset class. This session features a good-natured debate between leading Single-Family and Multi-Family operators on their similarities and differences, and what those in the early stages of Single-Family Rental can learn from the experience of the Multi-Family sector.    
          12:00 PM - 1:15 PM  | LUNCH     
          1:15 PM –  2:15 PM | SESSION 3.4 | THE EYE OF THE BEHOLDER: Comparing and Contrasting the Analysts’ Approach to  Single-Family Rental Entities and Issuances    
          To a certain extent, everyone in Single-Family Rental is treading the learning curve and therefore “winging it”. Both equity research and rating agency analysis are a collaborative endeavor, relying on strong internal debate to differentiate between distractions and key drivers of value creation and essential ratings criteria. When it comes to Single-Family Rental REITs and recent Single-Family Rental securitizations, there are no cycle-hardened valuation standards, and no historically agreed upon barometer of what’s most critical.  Single-Family Rental does not fit well into the traditional REIT box. As such, one could argue that current analysis understates both the outsized growth potential and the operational risks of Single-Family Rental relative to most all other sectors of the market, particularly traditional REITs. One can equally argue that comparing the nascent Single-Family Rental sector to time-tested REITs is the Holy Grail for Single-Family Rental operators and investors. Where there is value in different approaches, there is also confusion. With a front row seat to the birth of an entirely new industry, our panel of fixed income and equity analysts is collectively documenting the genesis of the Single-Family Rental era. So what matters now, and what will matter in the future? A critical topic for operators and investors alike, this session provides a Wall Street perspective of the sector through the lens of equity analysts and rating agencies in order to understand where they agree, where they don’t, and how analyst opinions have changed over the past year. After all, like beauty, value and risks always lie in the eye of the beholder. But seriously, does a BPO really have to be the proxy for calculating NAV?