How is Kiavi still in business?

Question

I have been seeing a lot of lopsided refinances from Kiavi lately. Some of them going into foreclosure due to low property appraisals and sales plummeting in the markets their loans are in..

I am curious to know, despite these rough deals, how are they still in business and still lending so aggressively?

Chris Seveney · Answer

we buy distressed debt and Kiavi compared to the others looks like the gold standard. I cannot name names but there are others in a lot worse shape than Kiavi is right now. We just got to $100M+ tapes from two larger lenders in the RTL/DSCR space and they are laying off people left and right as we received several calls from people looking for employment.

One lender capped their lending in california to no more than $1M - which in california and non-rural is basically there way of saying we are not doing business here anymore

Jason Wray · Answer

One thing I think you probably already know that most of these shops or call centers do is put their loan processors or Lo's on a very low comp plan.  It allows them to have a very lean branch bucket and overall origination fee's.  Then they can broker or Correspondent their loans to mini or smaller investors.

Lower loan sizes under $100K, overall less conditonal call outs because their warehouse line is through mulitple sources or not through a bigger funding partner like Mass Mutual or loss payee that micro manages their overlays.

Good news is a lot of the bigger Non/QM investors are expanding their niche programs and options.

Chris Seveney · Answer

What is a lot? They are doing $700M+ a month... Most people only see refinances on properties in trouble and have matured.

Jason Wray · Answer

Erik,

I am not sure and would never talk in a bad way about any business unless I used them but in the last 8 months I have had several customers reach out to fix what they could not accomplish on really basic overlay issues.

I have been seeing a lot of these other AI type LOS type companies drop the ball during the electronic Approve U style 1003/1008 deals that lack typical DU/LP findings.

Back in the day we would target this type of company data to reach out and either help on the 6-12 month refinance or the aged leads.

Clayton Silva · Answer

My thoughts on Kiavi:- I think they came to the market fairly aggressively.  They are a younger company relative to other mortgage lending institutions and have been very active in the fix and flip and DSCR space.  My guess is that a lot of it had to do with growing market share.

- They likely do not balance sheet their loans but rather sell them to hedge funds or insurance companies.  This means they can only offer aggressive terms for so long before the "shareholders/stakeholders" start to have a say in the terms and you will usually see lenders like this start to taper off (tighter UW guidelines, cutting exposure to any single market or flipper, leverage reductions, etc.).  It all comes down to back-end funding appetite for the product.

- My guess is they have enough funding sources and track record to be competitive in the marketplace, but ultimately supply and demand will dictate what they can offer.

- I have started to see a lot of my flipping clients look for funding elsewhere because Kiavi was concerned with investor concentration risk or market risk, so pretty normal growing pains, and a predictable pattern in the space from my perspective.

Erik Estrada · Answer

Makes sense in this market. It’s just an interesting trend to see that many of these troubled properties  have a loan from Kiavi. It could just be a pattern, but I am hearing from other colleagues as well a similar pattern.

Erik Estrada · Answer

I have been refinancing several of their loans these last 12 months, and used to broker deals to them until they started circumventing. This wasn’t a hate post by any means, but just curious to know how in the hell are they still doing some very aggressive loans even though, values have been coming in lower these last 12 months.

How is Kiavi still in business?

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