This article was written by Mike Senecal and originally appeared on badcredit.org
For all the uncertainties in the economy and the mortgage market, homeownership remains the surest path to building savings and net worth for most people. In other words, the adage that homeowners pay themselves rather than someone else is true.
Financial barriers to homeownership can be a significant deterrent to getting started and eventually seeing a mortgage through to completion. But knowledge is power — and understanding the sometimes arcane details helps first-time homebuyers set themselves up for success.
The most important thing to understand is that change doesn’t come easy in homebuying. Banks and other homebuying stakeholders sometimes do things in a certain way because that’s how they’ve always done them, even though technology and data access present modern alternatives to the status quo that can save buyers significantly.
Sometimes, financial stakeholders stick to the status quo because there’s money in it for them, so they have no incentive to change. While on the homebuyer’s side, saving on closing costs or lowering a property tax bill can make a huge difference.
That’s why a new company, Voxtur, is like a breath of fresh air for homebuying and mortgage consumers. Voxtur makes money on innovation by making homebuying more accessible and less expensive, not by perpetuating old ways of doing things.
Consumers who understand the various roles Voxtur plays in homebuying stand an excellent chance of coming out ahead during their purchase and throughout the time they hold their mortgage.
“You’d be amazed at the tremendous inefficiency still in the mortgage title and closing space,” said Jim Albertelli, Voxtur’s CEO. “Voxtur uses data and analytics to save money for consumers indirectly, through making the plumbing of the mortgage company better, as well as providing it upfront at the closing table.”
Title Insurance Alternative Reduces Closing Costs
Voxtur doesn’t work directly with consumers. Instead, it works across the lending landscape to find alternatives to legacy homebuying processes that can save consumers money.
After graduating from the Emory University School of Law in 1994, Albertelli created a real estate law practice that guided Fannie Mae, Freddie Mac, and Ginnie Mae, government-sponsored enterprises that enhance the flow of credit in the homebuying industry.
Fannie Mae and Freddie Mac purchase and combine mortgages to sell to lenders and investors as mortgage-backed securities. Ginnie Mae guarantees principal and interest payments on those securities. The three entities transact and guarantee about 80% of US home loans.
Title insurance is a particularly entrenched part of the system. A few large title insurance firms control the industry, backed by state regulations that often set rates. Title insurance firms perform deep search services to protect borrowers against defects in a title to a property, such as back taxes, liens, and conflicting wills.
As property values increase, traditional title insurance gets more expensive, even as data improves. The problem is that technology can accomplish the same thing for much less money.
Voxtur has leveraged its complete underwriting dataset based on multiple public data feeds and proprietary data to create Voxtur AOL™. This title insurance alternative, backed by authorization from Fannie Mae and Freddie Mac, can save consumers as much as a mortgage payment or more in closing costs.
Again — knowledge is power. When a mortgage originator sells to Fannie or Freddie, or Ginnie guarantees a VA loan, the AOL title alternative is a viable option.
“You can go to your lender and ask,” Albertelli said. “Consumers can get their rate bought down so they don’t pay as much interest over time, or take those savings of $1,000 or more at closing and spend it on other things.”
More Precise Home Valuations Save Property Taxes
Albertelli built several companies before Voxtur, including a mortgage lender and servicer and a closing and escrow firm.
“That gave me a unique position to see the difficulties of borrowers buying homes,” Albertelli said.
Of course, the problems don’t end after the buyer signs on the dotted line. Another area ripe for Voxtur innovation is property tax. Voxtur provides data and analytics to about two-thirds of US counties to help them create fairer tax assessments.
Gaining savings on property taxes is particularly relevant in the post-pandemic housing market. Mortgage rates are increasing, but home valuations aren’t declining as might be expected due to undersupply.
Voxtur’s Real Property Tax Analytics provides lenders, investors, and homeowners transparency and insight into the accuracy of their most significant home operating expense.
In what’s known as escrow, mortgage lenders commonly arrange with buyers to collect taxes and insurance money every month as part of the house payment. That ensures timely payment of those taxes and stabilizes the loan arrangement, but the lender earns interest on escrow deposits.
The downside is the lender accepts the tax bills it receives from the government without question. Although the amount taken in escrow may be accurate, the assessment may not be.
“Wait a second — the mortgage servicers are making money on your money, but they’re not doing any analysis to make sure it’s correct,” Albertelli said. “They don’t shop for you.”
The gist is that lenders perform escrow services to reduce their risk, not the buyer’s. It behooves consumers to shop responsibly for more affordable insurance and to consult with lenders about the accuracy of tax assessments.
“At Voxtur, we’ve determined that about 10% of the population is overtaxed,” Albertelli said. “Find a data source like Voxtur and ask your title agent for a tax analysis.”
Making Homeownership More Affordable and Accessible
Overtaxed homeowners can usually appeal to the county for a reassessment. Although annual savings may be modest, year-over-year savings can be game-changing, and most jurisdictions protect homeowners against overlarge rate increases.
“The bottom line is when your escrow changes because your insurance or taxes increased, that might not be right,” Albertelli said. “You need to find someone knowledgeable to look at it.”
On the valuation front, Voxtur offers automated valuation methodologies that algorithmically analyze multiple data sources to arrive at more accurate appraisal values. With Fannie Mae moving away from its appraisal requirement, automated appraisals are on the horizon for more consumers.
“It means consumers are going to save money,” Albertelli said. “They’re not going to pay $1,000 or $500 for an appraisal, but maybe only $35 or $50 or $100.”
And when home loans go through a top wholesale lender, Voxtur-enabled direct appraisal technology eliminates the need for an appraisal management company to act as an intermediary, saving time and cost.
Voxtur also provides a comprehensive data suite to title insurance, mortgage, and real estate professionals and investors that help bring efficiencies from every stage of the homebuying process.
Every dollar is significant, Albertell argues. When he started as a prosecutor in Atlanta on an annual salary of $22,000, a few extra dollars made a lot of difference.
“A thousand bucks — that was real dough,” he said. “That was my rent and maybe my groceries.”
What he sees in the real estate world are decision-makers in the mortgage companies, taxing authorities, government-sponsored enterprises, and regulatory bodies who may need to catch up on the significance of a few thousand dollars to first-time homebuyers and homeowners trying to achieve their goals.
“I once heard a mortgage servicer ask who cares about saving $1,000,” Albertelli said. “Well, a lot of people care — that $1,000 is meaningful to real people every day.”