HousingWire spoke to Keith Lind, new chairman and president of Citadel Servicing Corporation, and CSC CEO Kyle Gunderlock about the company’s return to origination, new leadership and plans to continue serving the non-QM market.
HousingWire: In this constantly changing environment, more borrowers will need non-QM loans. How is Citadel Servicing positioned to take advantage of this opportunity?
Keith Lind: We are starting right where we left off and building on the momentum we had heading into 2020. In addition, we used the COVID-imposed shutdown as a unique opportunity to step back and evaluate our strengths and weaknesses.
Citadel had grown so quickly in recent years, and accordingly there were certain aspects of the businesses that stood to benefit from investment so we could restart lending in the best position for our company and our customers. These investments were always part of our plan, but this shutdown allowed us to really accelerate their implementation and impact.
We did all of this knowing that when we resumed originating, we would do so in a much more comprehensive way and be best-in-class in every facet of our business.
Coming out of our four-month pause in lending, we are entering the market with a much stronger balance sheet, better technology on both the origination and servicing side of the business, upgraded guidelines and processes, and a diverse and experienced management team.
We have brought in leaders with deep expertise and a fresh perspective to the non-QM lending space, such as our new Senior Vice President of Sales Doug Perry, who is a true mortgage industry veteran whose most recent role was leading sales at 5 Arch.
We also brought on world-class board members in Tony Meola, the former head of consumer operations and loan servicing at Bank of America, and Konrad Alt, who brings decades of experience in risk management and regulatory affairs with Promontory Financial and Providian Financial. Their experience and strategic insight will be invaluable to me, Kyle and the rest of our management team as we continue growing Citadel Servicing.
Kyle Gunderlock: As Keith said, we are a reinvigorated organization. We are making sure our expertise is supported and amplified by top-tier systems and talent at every level. We specialize in non-QM programs – we think we are the best at it and we are going to keep working hard each and every day to continue that position as a leader.
We are the only vertically integrated company in non-QM mortgages. That means we can deeply analyze our portfolio at every stage in the value chain and better understand the needs of our customers and then build programs based on those needs. We have never followed other out-of-the-box programs but rather created unique ones for our customers.
In a world that has been indelibly reshaped by this tragic pandemic, we are going to bring them programs, capital and service needed to deliver for the end homebuyer and let them buy that new house, move for that new job or take that next step in their life so we can all keep progressing forward.
HW: COVID-19 has disrupted business for many, including those who may have nontraditional income streams. How has income verification for self-employed borrowers or business owners changed as a result?
KG: The COVID-19 pandemic has resulted in a significant number of layoffs and the unemployment rate has not been this high since the Great Depression. Unfortunately, we have seen this amplified among self-employed small-business owners, who are core customers for the non-QM product.
Working with folks who may find themselves in an unusual or unexpected position is something we have more experience with than nearly anyone, and so we are doing what we do best and figuring out ways to work with people with responsible lending programs.
As an example, for consumers in these transactions, we would generally qualify applicants based on reviewing deposits from their personal or business bank statements. We have updated our guidelines to consider the lesser of a 12-month running average or 2-month running average.
Workers have been affected in an unprecedented fashion and looking back for two years as would be present in a 24-month program does not make sense. It is disingenuous to say any portion of the economy is reasonably in the same position as summer 2018.
KL: We are going through something no one has ever experienced in our lifetime, that businesses as well as borrowers have had to adapt to. This doesn’t mean we cannot qualify borrowers; it just means we’ve had to update and amend our guidelines as a result of what is happening. We will always work towards finding the best solution for our customers, company and investors. Self-employed borrowers and business owners will always be important customers for our business.
HW: What are some of the changes we can expect at CSC following the introduction of Keith Lind as chairman and president?
KG: CSC was the first back in this space providing non-QM mortgages post the sub-prime era. Daniel Perl did a tremendous job building the company from the ground up and leading the industry.
With the introduction of Keith as CSC’s new chairman and president, we are now charting the next stage of our growth, which will be underpinned by some changes, as you would have with any evolving company.
The cultural tone across the company is set by an engaged and inclusive management approach, which Keith has embraced and fostered. There will be a deeper focus around improvements in technology on both the origination and servicing side of the business.
In terms of the balance sheet, we are going to expand our efforts by working with a broader group of like-minded, long-term capital partners to supplement our existing relationships. With Keith’s experience, we will be able to further diversify our funding sources by tapping the capital markets while growing our footprint, lending in more states, hiring more AEs and investing in more efficient human capital across the company.
HW: What are some of your near-, mid- and longer-term goals for CSC?
KL: We aim to take an already strong platform in Citadel and truly institutionalize the business with investments in best-in-class products and technology, and by fostering relationships with a range of top-tier capital partners. The Citadel team is excited to restart originations and show the industry the strong value proposition we can bring to our borrowers and brokers. We are extremely focused on providing quality solutions to our customers and growing our footprint and market share through an industry-leading culture and customer service.
KG: Having been with CSC since the start, our goals have always been to provide the industry’s leading non-QM products while helping our customers. Being able to provide industry leading programs to meet the needs of our customers is what we do best, and we are now going to do that in an even more efficient, accessible and systematic way.
We are going to continue to be the leaders in today’s market and plan for tomorrow’s. We need to keep growing, improving and evolving.
HW: Tell us a bit about your backgrounds and what you plan to do at Citadel Servicing together.
KL: Before coming to Citadel, I spent three years at HPS Investment Partners as a managing director, focusing on asset-backed and non-agency mortgage-backed securities. Prior to HPS, I spent fifteen years trading mortgage-backed and asset-backed securities as a managing director at Brevan Howard, Royal Bank of Scotland and Bear Stearns.
Those experiences gave me a great understanding of this industry and how the market works at a granular level, from when a loan is originated all the way up to when it’s securitized. My background and relationships on the markets side perfectly complement Kyle’s experience on the origination side and his 13+ years helping build Citadel into what it is today.
We have a great breadth of knowledge across our industry combined with the benefit of fresh institutional perspective. We plan to take Citadel to the next level and cement our position as the leading non-QM lender. We offer strong programs that satisfy our customers’ needs with competitive rates and fair lending practices. Our customers are, and always will be, our focus as we build Citadel Servicing 2.0.
KG: I have been with Citadel Servicing and its former sister company, First Street Financial, since 2003. I started in the mortgage business on the origination side of the house. But I was always interested in in not only understanding the nuts and bolts of how a mortgage was made, but following the secondary/capital markets to understand why a mortgage was made to certain guidelines and priced a certain way.
Over time, I have touched files in every capacity, from prospecting a lead through servicing a payoff or loss mitigation. Those latter experiences showed me the pitfalls of poorly designed lending programs and more importantly showed the value that responsible, creative and innovative lending programs can bring to all stakeholders. CSC has created value for borrowers, brokers and investors in developing what is now known as non-QM.
Looking through the lens of a post-COVID non-QM lending environment, I think that Keith and I are uniquely positioned to combine our considerable knowledge, relationships and insight to step forward.
We will continue work towards meeting the needs of our customers, but in a responsible way with programs that meet the needs of a large swath of distinctive and atypical non-QM lending programs.