Digital Risk In The News

Mortgage crisis holds opportunity
Firms see a market for tight underwriting and the laid-off underwriters to do it.

October 5, 2007
Jerry W. Jackson
Sentinel Staff Writer

The Orlando area economy - strong by state and national standards -- is flashing mixed signals, warning of a slowdown ahead but bolstered by companies building for the future.

Another office-market survey out this week shows weakness, particularly in downtown Orlando. The survey by Grubb & Ellis/Commercial notes that "Downtown activity is anemic, with only 3,000 square feet absorbed in the third quarter of the year."

Absorption is the net increase in space leased, so the report means that office space roughly equivalent to a single-family home was all that was filled, downtown, during the third quarter.

"Downsizing by CNL and SunTrust have hurt this sub-market," according to the report by David Chapin, vice president of the office group, and Jeff Sweeney, president. Some rents are still going up, in response to higher costs, but other office owners are cutting deals to attract tenants, a sign of the mixed signals and unclear direction the report said.

A quarterly survey report by Cushman & Wakefield of Florida Inc. earlier this week, said office leasing in Metro Orlando was down 40.6 percent from the same period a year ago.

At the same time, companies are moving to take advantage of some of the cyclical weakness and changes. Digital Risk LLC, a 2-year-old startup in Orlando, has moved into space in the new Plaza tower downtown and is expecting to hire 200 mortgage underwriters by the end of this year.

The slowdown in sales and mortgage lending and shuttering of subprime lenders has created a pool of "talented, experienced people," said Jeff Taylor, managing director. "I wouldn't call it a slowdown. It's really been an implosion."

Company co-founder and Chief Executive Officer Peter Kassabov said Digital Risk is preparing for a new era of tougher underwriting scrutiny, in the wake of the subprime meltdown and global bond-market shakeup. So the company is investing heavily in training, he said, for forensic underwriting -- the toughest, detective-mode reviewer of loans -- as well as regulatory-compliance employees.

"Wall Street's demands for our due-diligence services is extremely high, and our only constraint is hiring and training experienced staff," Kassabov said.

Florida's economy has been weakened by the real estate slowdown, but "will accelerate slowly in 2008," said Sean Snaith, a University of Central Florida economist, in a forecast update this week.

The rest of 2007 and 2008 will be tough for home sellers, just as 2004 and 2005 were "tough for buyers," in a "market karma" sort of way, Snaith said.

Karma might be described as the Eastern concept of the Western saying that "what goes around comes around."