Mortgage Banker Magazine August 2020

THE

BANKER

Covering the Entire Mortgage Lending Process and Everything In Between

MAGAZINE August 2020

The New Age of

DIGITAL MORTGAGES Pandemic Pushes eClosings and Remote Online Notarization Forward

Trust in Every Transaction pg. 8

The Next Big Thing in Loan Efficiency pg. 16

Published monthly by Twelve 11 Publishing, LLC 9720 Royal Lamb Drive Las Vegas, NV 89145 Phone: 512.879.4363 Email: INFO@MORTGAGEBANKERMAG.com www.TheMORTGAGEBANKERMagazine.com SUBSCRIPTIONS This publication is for the benefit of mortgage banking professionals involved in all phases of the residential mortgage industry. If you are a mortgage banking industry professional and you do not currently receive The MORTGAGE BANKER Magazine, please go to www.themortgagebankermagazine.com and subscribe for FREE. The MORTGAGE BANKER Magazine is a digital monthly magazine that is sent directly to professionals' computers and hand-held devices. The subscription is FREE to all mortgage banking industry professionals. For additional copies for your colleagues and co-workers, please visit our website at www. themortgagebankermagazine.com and complete the online subscription form.

To opt out of receiving The MORTGAGE BANKER Magazine, please send your request to “UNSUBSCRIBE” with your name, company name, and address to SUBSCRIPTIONS@ twelve11media.com.

ADVERTISEMENTS To inquire about advertising in The MORTGAGE BANKER Magazine, please send an email to Hoierman@ MortgageBankerMag.com or visit our website to request a copy of our Media Kit.

EDITORIALS / ARTICLES To submit an article for consideration in The MORTGAGE BANKER Magazine, please send an email to Editor@ MortgageBankerMag.com. We are interested in original writings relevant to the residential mortgage banking industry. If you have a comment or question about an article or editorial published in The MORTGAGE BANKER Magazine, or if you have a suggestion for a topic you would like to see featured in a future issue, please send an email the editor.

THE MORTGAGE BANKER MAGAZINE POLICY The information and opinions expressed by contributing authors and advertisers within The MORTGAGE BANKER Magazine do not necessarily reflect those of Twelve 11 Publishing, LLC’s, management and /or employees and should not be considered as endorsed or recommended by Twelve 11 Publishing, LLC.

The MORTGAGE BANKER Magazine

2

August 2020

SERVING THE MORTGAGE BANKING COMMUNITY FOR MORE THAN THREE DECADES 202.628.2000

PROVIDING COUNSEL TO THE FINANCIAL SERVICES INDUSTRY FOR MORE THAN THIRTY YEARS SERVING THE REVERSE MORTGAGE INDUSTRY SINCE ITS INCEPTION

202.628.2000 WASHINGTON DC | DALLAS TX | IRVINE CA

202.628.2000

August 2020

FEATURES

12 New Age of Digital Mortgages: Pandemic Pushes eSignatures and Remote Online Notarization Forward

BY BRIAN HONEA

eSignatures and remote online notarization (RON) could very well become the norm as the mortgage industry moves toward digitalization.

Muthu Srinivasan, Chief Technology Officer at Planet Home Lending and a sought-after subject matter expert known for delivering keen insights and efficient solutions to both technology and business challenges, recently shared his thoughts with The MORTGAGE BANKER Magazine on the topic.

16

The Next Big Thing in Loan Efficiency: Reducing Friction Between Borrowers and Investors If only our industry could apply a level of universal standardization to the endto-end mortgage process it would fix one of its biggest issues: friction between borrowers and investors that causes delays and makes it difficult to accurately assess loan portfolio risk and future performance.

JOHN KERATSIS

26

28

Six Ways to Help Borrowers Address Credit Scores

Lessons from COVID-19 Will Remain

Most consumers are good about monitoring their score, but often don’t fully understand how it impacts their financial situations and ability to buy a home.

And with the coronavirus (COVID-19) pandemic in full swing, mortgage lenders and investors are closely monitoring credit scores, which can keep potential borrowers from getting a mortgage that they would have otherwise qualified for pre-COVID-19.

The traditional corporate disaster plan contemplated how to resume operations after an event such as a fire, flood, or tornado. But over the last 15 to 20 years, outbreaks, like SARS, MERS, and Ebola, prompted some executives to develop plans for a pandemic.

It was COVID-19 that forced leaders to dust off those plans and discover what worked and what may need some finetuning.

JOEL BERG

SAMUEL LUNA

The MORTGAGE BANKER Magazine

32

eSigned, Sealed, and Delivered In 2019 there were an estimated 3.2 million cases of identity theft and approximately 1.7 million of those cases involved fraud. All those identities were stored online and in what was purported to be a secure format. The progression of electronics hosted a methodology to commit fraud on a grander scale and, in some cases, the thief cannot be traced. Usher in electronic closings, including notary activities involving one of the most expensive investments a family makes in a lifetime.

FELECIA BOWERS

4

August 2020

Special

SECTIONS LEGAL

LOAN ORIGINATION

8

Trust in Every Transaction: RON, RIN, and Digital Closings During COVID and Beyond

40

The Mortgage Counselor

42

Mortgage Banking Lawyers

MITCH KIDER

ANDREW MACDOUGALL

THE C-SUITE

TECHNOLOGY

20

The Rapidly Changing World of eClosings

44

PROFILE: Laura Escobar

46

PROFILE: Mike Johnson

BRIAN HONEA

REGULATORS AND AGENCIES

24

Best Practices for Maintaining an Environment of Integrity and Ethical Values During COVID-19 OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

PRESIDENT EAGLE HOME MORTGAGE

PRESIDENT, AMCAP HOME LOANS

20 Monthly

DEPARTMENTS 6 From the Editor

COMPLIANCE

36 38

8

From the Desk of the Om-Bobs-man BOB NIEMI

48 MBA Education & Training Calendar

49 White Papers & Webinars 50 Data Download

Regulatory Corner

52 Business Services Directory 53 Sponsors Corner

The MORTGAGE BANKER Magazine

5

August 2020

24

THE

BANKER

MAGAZINE

Our Mission The MORTGAGE BANKER Magazine is dedicated to providing quality informational/educational content that betters the mortgage process at every step. The content is oriented to help professionals progress their understanding of the residential mortgage banking business and develop their skills at improving the efficiency and profitability at all levels.

PUBLISHER Ben Slayton BSlayton@MortgageBankerMag.com MANAGING EDITOR Brian Honea Editor@MortgageBankerMag.com SENIOR EDITOR Jill Emerson JEmerson@MortgageBankerMag.com OPERATIONS DIRECTOR Dawn Slayton DVSlayton@MortgageBankerMag.com ADVERTISING David Hoierman Hoierman@MortgageBankerMag.com PRODUCTION Henry Suchman HSuchman@MortgageBankerMag.com DIGITAL MEDIA Lucas Luna Lucas@MortgageBankerMag.com

FROM THE EDITOR In a continuation of July’s theme of the “new norm” in the mortgage banking industry, our focus for this month’s issue is the increased use of electronic signatures and remote online notarization (RON) in the closing of mortgage loans.

In a world now where everyone is encouraged to avoid physical contact and/or close proximities with one another, mortgage industry professionals have found a way to comply with social distancing mandates and still obtain the endless stream of signatures and notarizations required to complete a mortgage loan transaction. As the industry makes this transition to closing loans completely digitally and remotely, experts such as Muthu Srinivasan (chief technology officer at Planet Home Lending), Andrew MacDougall (chief marketing officer, Notarize), and regular contributors Felecia Bowers and Mitch Kider all weigh in on eSignatures and RON becoming the new norm.

How has your business handled the adjustment to using eSignatures and remote online notaries? Has it gone smoothly, or have there been areas where it’s been a little tougher to adapt? We want to hear about your experiences. We are always listening. You can always drop us a line via the email address below.

.

COLUMNISTS & CONTRIBUTING AUTHORS Joel Berg Felecia Bowers John Keratsis Mitch Kider

Samuel Luna Andrew MacDougall Bob Niemi

The MORTGAGE BANKER Magazine is the official publication of the Mortgage Compliance Professionals Association of America.

Brian Honea Managing Editor Editor@MortgageBankerMag.com The MORTGAGE BANKER Magazine welcomes your feedback.

If you have comments, questions, criticisms, praise, or information to share with us and our readers, please write us at Editor@MortgageBankerMag.com.

August 2020

AUTHORS

Joel Berg

Felecia Bowers

John Keratsis

Samuel Luna

Andrew MacDougall

Joel Berg has been a business-to-business reporter and editor for more than 20 years, both in-house and freelance, covering finance, healthcare, environmental regulation and general business news for local, regional, and national publications.

Felecia Bowers has spent more than 40 years as a bank examiner and chief compliance officer, working specifically with mortgage bankers for over 35 years. Her experience is complemented by the fact that while she was the CCO, she ran the secondary/capital markets department, quality control, and HR, and she is a DE Underwriter. She is a subject matter expert for CSBS and the MBA.

John Keratsis is senior managing director of Lender Services for Incenter, a Blackstone Portfolio company focused on using ideation, technology, and processing expertise to optimize productivity and financial performance for mortgage and specialty lenders.

Samuel Luna is the senior director of Single-Family Affordable Lending at Freddie Mac. He leads the Lender Engagement Team for the Affordable Lending and Access to Credit Division. His team drives affordable loan production with Freddie Mac’s lender customers. Prior to this position at Freddie Mac, he was managing partner at Civic Center Home Loans, a mortgage and real estate firm in Los Angeles where he was responsible for mortgage lending, business strategy, and strategic partnerships.

Andrew MacDougall is the digital marketing manager at Notarize, the first company to enable an entirely online mortgage closing process – where he writes about the intersection of technology, accessibility, and digital trust.

The MORTGAGE BANKER Magazine

7

August 2020

Loan Origination

TRUST IN EVERY TRANSACTION:

RON, RIN, AND DIGITAL CLOSINGS DURING COVID AND BEYOND

By Andrew MacDougall, Notarize

On-demand services have grown increasingly important as we continue to battle the novel coronavirus (COVID-19), especially in the mortgage industry. Contactless closings and remote online notarization (RON) solutions became necessities overnight, and the numbers show the mortgage industry buying into the benefits of a fully digital home-buying experience. From January to June, the number of electronic promissory notes registered to the MERSÂŽ eRegistry has grown 141 percent.

The MORTGAGE BANKER Magazine

8

August 2020

But the pandemic has also introduced us to remote ink notarization (RIN), a new way to close online using audio-video technologies like Zoom, Skype, and GoToMeeting. Governors across the country have issued Executive Orders authorizing RIN in an effort to promote access to notaries and “flatten the curve” in communities. Although well intended, RIN strips away the fundamental guardrails that make online notarizations safer and more secure than traditional paper notarizations.

Here’s what you need to know about using RON and RIN, and how to decide the best course of action for your business and customers.

How can you turn the keys over to the buyer if you can’t trust the integrity of the closing process? validated, there is no audit trail, and neither the notary nor the signer ever interacts with the same document at the same time.

CONVENIENCE WITHOUT COMPROMISING SECURITY

MAINTAIN CONTROL OF YOUR ORIGINAL DOCUMENTS

Remote online notarization is a fully digital experience that mirrors the traditional notarial act. A signer appears before a notary on a video call, and together, they complete, sign, and notarize the document. Each video session is recorded and retained along with an audit trail of the transaction.

Signers only connect with a notary after completing several additional security measures, including personal identity challenge questions and credential analysis of their governmentissued ID. These features help strengthen the notarial act.

In contrast, RIN lacks almost all the benefits of a notarization, whether it be online or in person. The notary serves more like a witness than an agent of trust.

In a RIN transaction, signers connect with a notary through any convenient audio-video platform, such as Skype, Zoom, or Google Hangouts, to sign and notarize paper documents from a separate location. These platforms have been having some trouble of their own that should raise some real alarm for you and your business.

And although notaries are asked to record and retain the notary session, that’s really their only responsibility. The signer’s ID is held up to the webcam, but never closely scrutinized or

The MORTGAGE BANKER Magazine

That last point is a critical one. Signers in a RIN transaction are asked to physically mail their signed documents to have them notarized, which occurs at a later date and outside of their signing session with the notary.

Since the documents are wet-signed and then delivered by mail, there’s no way to prove the documents that the notary receives are the documents they watched the signer complete.

And if the signer tries to save time by faxing or emailing their signed paper documents to the notary, the document that is notarized isn’t actually the original; it’s a copy of the original.

You may wonder how this is any different than “papering out” in states where it’s allowed.

When you paper-out, the original documents are electronically signed and sealed. When the document is copied into paper form, breaking the audit trail and tamper seal, a notary is present and certifies that the copied document once had these features. This chain of custody is entirely absent from RIN transactions, which instead weakens the notarial act for the sake of convenience.

In RON transactions, original documents are stored, signed, notarized, and delivered digitally.

For example, upon completion, eNotes are immediately registered in the MERS® eRegistry

9

August 2020

Loan Origination New technology needs to benefit your business first and foremost. All other benefits come through increased operational excellence.

First, the notary witnesses the document signing via the audio-video call. Days later, the notary receives the original documents by mail and completes the paper ink notarization.

The RIN process is more costly and timeconsuming than even mail-away or hybrid closings because you need to ship the original documents to two destinations: the signers and the notary. The RIN process also allows for the same errors and delays that hinder paper closings today.

and returned to a lender’s eVault for storage.

There’s no concern about the integrity or the originality of documents because RON retains all the important elements of an in-person notarization; it’s just online.

Almost every Executive Order that allows for RIN has the same stipulation: When the pandemic is over and people can safely resume their daily lives, the expectation is that notarizations in these states will return to the inperson model.

This means RIN is a temporary solution that could have a damaging effect on the integrity of the remote notarial act. For hundreds of years, notarizations have held their value regardless of time or location. How can that be the case if they are achieved by temporary means?

We believe that you are better positioned to serve your communities with RON as a permanent solution. More than half of all states have passed laws allowing their notaries to tap into the online notarization marketplace. Most states now allow signers to close online using a remote notary, while hybrid closings can occur in all 50 states.

That being said, investing in RON doesn’t mean you have to exclusively offer digital closings. There’s value in operational flexibility.

There’s value in providing a seamless customer experience. There’s value in becoming familiar with new technology and having it available to you if and when you need it.

That way, when the market changes, or a pandemic pushes your business completely online, you’ll be ready. MBM

INVEST IN THE LONG-TERM SOLUTION

ACHIEVE AND MAINTAIN OPERATIONAL EXCELLENCE New technology needs to benefit your business first and foremost. All other benefits, such as enhanced security, elevated customer experience, and reduced environmental impact, come through increased operational excellence.

Operational excellence is the most immediate benefit of RON because it’s a process that impacts every aspect of your business. It’s a single service that can maximize human capital, streamline mundane tasks, provide a class-leading customer experience, and save you money, all without overhauling your existing workflow.

Saving money is especially important. One survey found 98 percent of companies reported some revenue impact due to poor transaction management, with 57 percent of companies estimating their losses to be between 6 percent and 25 percent of their total revenue.

With the right vendor, RON can be the chameleon within your day-to-day operations.

During RIN closings, recorded documents require two distinct, separate acts by the notary.

The MORTGAGE BANKER Magazine

10

August 2020

Loan Origination

New Age of

DIGITAL MORTGAGES Pandemic Pushes eClosings and Remote Online Notarization Forward

By Brian Honea, Managing Editor

eSignatures and remote online notarization (RON) could very well become the norm as the mortgage industry moves toward digitalization.

Muthu Srinivasan, chief technology officer at Planet Home Lending and a sought-after subject matter expert known for delivering keen insights and efficient solutions to both technology and business challenges, recently shared his thoughts with The MORTGAGE BANKER Magazine on the topic.

The MORTGAGE BANKER Magazine

12

August 2020

The MORTGAGE BANKER Magazine

13

August 2020

Loan Origination MBM: Both eSignatures and RON were used in the mortgage industry before the pandemic, but just how much has their usage increased in the last few months?

their house on the day of closing, but there wasn’t good coordination between the settlement agent and the notary. The notary ended up taking the whole loan package back to the borrowers. Even though they Srinivasan: The interest in electronic signatures had electronically signed most documents, before the pandemic hit was aimed at paper the notary actually had the borrower re-sign reduction, giving borrowers more time to all of those documents. review documents, and the This was a surprise to me. simplicity of spending less There's more training and time on the closing table. coordination that need Those goals were actually Prior to COVID-19, it took to happen between all leading us toward electronic a lot more effort to explain parties involved. We'll get signatures already. When the benefit of eSignatures, there. The remote notary the pandemic hit earlier in process is relatively new but now it’s the other way the year, we started seeing compared to the electronic additional requests and more around. signing process after all. interest in and motivation The industry has been using to use electronic signatures. electronic signatures for We’ve seen quite an applications and disclosures increase in their use. Prior to prior to settlement for quite some time. RON COVID-19, it took a lot more effort to explain kind of blew up in the market. The need for it the benefit of eSignatures, but now it’s the other increased fast and there's still some training way around. People were reaching out to the and communication to do. technology team and saying, “OK, how fast can you get me the electronic signatures?”

MBM: What do you think it will take to “get On the remote notary side, during February there?” How long do you think that will take and March, we saw a lot more requests in your estimation? and concern about electronic notary and Srinivasan: Communication at different levels registration. Recording offices were closing and is key. I'm talking communication between the industry was asking, “Okay. How do we borrowers and loan originators, communication get to a remote notary? Can we get recording between the closer and the settlement agent done? How do we get to an electronic on the lender side, and a close coordination registration?” There was a little bit more between the settlement agent and the notary. interest in RON during that window. There's When we have the remote piece thrown into still interest that I'm seeing and we are still that mix, with a video camera and all, it takes pursuing it. Those questions are now mostly some getting used to. The good news is, people answered. What we are looking to address is are getting a little more comfortable with video adoption. RON is a little bit more challenging conferencing as more of us work and meet from an adoption perspective because of the remotely. A lot more folks are comfortable additional complexity involved. We’ve got the electronically signing documents now. Are folks settlement agent and we've got the notary. going to be ready? There is going to be a subset They need to be trained and certified. of borrowers who will still be a little hesitant to To give a practical example, we had do this. A home purchase is one of the biggest a couple of cases where the borrower purchases in their life. I’m a technology guy. electronically signed the document from The MORTGAGE BANKER Magazine

14

August 2020

I like to have all of that electronic and enjoy pretty fast. That option should increase in two, three, or four months. the efficiency that comes with it. I'm a big fan of it myself. Will the average borrower be MBM: Has the increased use of RON and comfortable doing it via video? I am feeling more eSignatures led to an increase in regulation? confident that we will see a lot more adoption How heavily regulated are these things? of this technology. It's going to take a little bit of Srinivasan: I'm going to answer that in two time and an increase in comfort level before we ways. That ties in with what see adoption in the range of I was saying earlier about 80 or 90 percent, which would be great.

We are at the tipping point on the certification and the training for notary. There are From a regulatory notary certification, and once some additional regulatory perspective, there's a lot of we cross that point, I'm sure requirements that need good news. There are more to be met. The pandemic that option will be preferred, jurisdictions that are allowing moved regulation along RON and accepting it. The especially if public health a little faster. Some of the pandemic pushed this issue professionals continue to call jurisdictions that had been to the forefront. A lot of mulling over whether to allow for social distancing. people are hearing about it electronic signatures or RON, and talking about it. We are fast-tracked their process, at the tipping point on notary or permitted the processes temporarily. certification, and once we cross that point, I'm There's potential for additional rules to come sure that option will be preferred, especially if up. I think once borrowers see the benefit public health professionals continue to call for of electronic closings, they’ll choose it more social distancing. often. And some additional regulatory scrutiny As for the time period, I wish I had a crystal will be good going forward to make sure any ball to tell you how long it's going to take. gaps are noted and addressed, and all parties To give you some numbers provided by our in the transactions are protected. document vendor, for the six months prior to the beginning of this year, there were about MBM: Do you think when nobody's talking about it anymore, that eSignatures and RON 10,000 electronic signings, approximately. will be the new norm in the mortgage industry?

In the month of March alone, that number doubled, literally. The numbers for RON are Srinivasan: I believe it will be the norm. There not as high - yet. It's still a fairly new concept, will be exceptions, like the small group of but hybrid eClosing, as we call it, increased borrowers that I was referring to earlier, and significantly within the first one or two months there will be some unique cases where it in this year. We fast-tracked our plans and so may make sense to follow the previous nondid our vendors. We are working on RON and electronic process that we did. But just as full eNotes as well. We are confident that we working from home is likely going to become can have a fully electronic solution available as the norm going forward, I think electronic an option to our borrowers within a month or closings with eSignatures and RON will two. We are being cautious and we want to do become the norm in the mortgage industry it the right way and make it as beneficial as we going forward. MBM can. We'll start with a pilot for a small group of loans, and then expand it. Once we get Brian Honea is the managing editor of The MORTGAGE BANKER Magazine. through that initial pilot phase, we can move The MORTGAGE BANKER Magazine

15

August 2020

Technology

The Next Big Thing in

LOAN EFFICIENCY: Reducing Friction Between Borrowers and Investors

By John Keratsis, Incenter

The MORTGAGE BANKER Magazine

16

August 2020

I

f you’re gulping a cold brew while trying to keep up with refinancing applications, you undoubtedly appreciate the purchasing app from your favorite coffee franchise.

Specify hot or cold, sweetened or unsweetened, almond or soy, pay, pick up at the curbside, and repeat the next day. The transaction is quick and dependable. Both parties, the franchisee and the customer, get what they expect without any delays, speed bumps, or mistakes along the way. The experience is so standardized that it scales exponentially and consistently across vast retail operations with tens of thousands of locations where hundreds of thousands of customers get their daily caffeine fix.

If only our industry could apply this level of universal standardization to the end-to-end mortgage process it would fix one of its biggest issues: friction between borrowers and investors that causes delays and makes it difficult to accurately assess loan portfolio risk and future performance.

The Mortgage Bankers Association predicts about $1.23 trillion in refinancing originations this year, and loan modifications due to COVID-19 are expected to skyrocket, further stressing processing capacity. An end-to-end solution with universal standards for loan origination and title processing, enabled by across-theboard access to common customer credit and property databases using standardized AI technologies to interpret the data, would eliminate the tollgates in today’s mortgage The MORTGAGE BANKER Magazine

17

August 2020

lifecycle that cause delays and friction points between borrowers and investors.

Such a process would provide straight and smooth pathways for credentialing borrowers, individual mortgage assets, and aggregated portfolios, at scale. It would provide a clear, wide, accurate and realtime window into the granular data needed to gauge the risks and upsides of every investment, in hopes of enjoying predictable and attractive returns. This would inject more confidence into the secondary markets, which routinely hold back 5-20 percent of their trading price, based on reservations about trailing documents and other undiscovered issues that could become problematic when transferring custody.

HOW FAR AWAY ARE WE? NOT AS FAR AS YOU THINK. The central availability of standardized data described above is the Holy Grail for reducing friction between borrowers and investors, but it’s a vision that could take decades given the important regulatory and compliance requirements our industry must follow. Or maybe not.

AI and machine learning platforms at discrete points in the end-to-end process are already overcoming some hurdles, helping to eliminate idiosyncratic variances in data sharing and providing tailwinds at selected points in the cycle, such as the title search.

Known as a huge logjam, this process has long been plagued by

Technology ROADBLOCKS TO TACKLE

inaccuracies and delays, as searches surface the wrong “John Smith” or miss the “John E. Smith” with a background of liens and defaults. New “search and decision engines” that apply AI to borrower and property credentialing are now able to plow through large sets of public and private data in multiple forms, access complete and accurate borrower and property information, and determine within seconds whether files are clear to close.

These “search and decision engines” speed the cycle for both lenders and title examiners.

For the latter group that are accustomed to handling 20-25 searches per day, each taking 15 minutes, reducing the search time per file to a minute or two can instantly boost productivity tenfold. AI generated reports that reveal title issues point the way to exactly what the examiner needs to focus on and why, which significantly reduces curative turn times and flattens the clear-to-close speed bump for clouded titles.

Newer engines are clearing as many as 87 percent of consumers and more than 60 percent of properties on the spot. Lenders are also able to pull up the same information within a short timeframe and tell happy clients that they are clear to close at the point of sale.

The end result is faster loan processing and assets that can be more accurately credentialed for the investors’ benefit, too. The impact of clearing hurdles like these, on steroids, can be significant over time: One major lender reports that every day shaved off its loan cycle represents $3 million in savings.

Now imagine these technologies drawing on even richer sets of data in standard formats throughout the loan cycle, enabling originators and then investors to immediately fine tune their risk analyses and performance projections while accelerating decision-making. When adopted industry-wide, the opportunities for processing as well as asset performance and pricing optimization would be astronomical.

The MORTGAGE BANKER Magazine

What are the significant roadblocks to achieving true, end-to-end mortgage processing standardization?

The many disparate Loan Origination Systems (LOS) that lenders use, which collect and display data and images in highly variable ways, add not just friction, but quicksand.

Just one small but telling example: In order to comply with specific investor protocols, loans have to be re-indexed and re-stacked for risk and performance analysis because different LOS platforms collect and store customer and loan information and imaging into so many disparate databases. The process can be time-intensive and riddled with holes through which potential performance indicators may drop.

Once AI-driven standardization to end-toend mortgage processing is implemented, you can imagine how it would open the door to fundamental changes for streamlining related processes and costs. For example, loans would be so accurately credentialed and bucketed that the need for some types of insurance wrappers would go away altogether. Risk profiles for loan and MSR portfolios would become so detailed and fine-tuned that sellers could include “umbrella wrappers” that, combined with the appropriate type and level of insurance (PMI, title, hazard), basically guarantee portfolio performance. Imagine the impact on pricing!

And no more hold-backs until after transfer, either!

CAFFEINATING THE INDUSTRY The biggest friction point of all may be industry reluctance to make a wholesale change.

But that doesn’t preclude continued iterative progress. In the meantime, during a mortgage process where “the customer feels everything,” unfettered access to standardized data also turns every loan origination into an opportunity to optimize the borrower experience and lay the foundation for a long-term relationship. Of course, it doesn’t hurt to offer them a cup of coffee, too. Just the way they like it. MBM

18

August 2020

Zero Down on Homes For Your Buyers!

learn more at: www.chenoafund.org

Technology

THE RAPIDLY CHANGING WORLD OF eCLOSINGS

By Brian Honea, Managing Editor

Parties involved with closing a mortgage loan have been faced with a number of challenges with the explosion of the usage of eSignatures and remote online notarization (RON) in response to the COVID-19 pandemic. As Director of Enterprise Solutions with DocMagic, Chris Lewis currently works with lending entities of all types to help automate their digital mortgage processes and has experienced some of these challenges first-hand.

Chris recently discussed some of the challenges with The MORTGAGE BANKER Magazine.

The MORTGAGE BANKER Magazine

20

August 2020

MBM: Can you give us a comparison of what percentage of mortgage closings were 100 percent paperless pre-pandemic compared to now?

remote on-boarding model that effectively supported distance-based implementations involving multiple teams and parties, all performed remotely. We quickly perfected implementing, training, and fully onboarding Lewis: What I can tell you is that things are new clients remotely, to the point that, once moving so fast with the uptick in lender implemented, the lender was off to the races rush to perform eClosings that we’ve and performing eClosings never been busier here with ease and efficiency. at DocMagic. Whereas It’s tough enough for over the years, eClosings companies to turn on a were slowly but surely The use of eSigning dime and establish a workmoving toward greater gives both lenders from-home infrastructure marketplace adoption, the due to a rapidly spreading rapid onslaught of Covid-19 and borrowers greater pandemic. From an absolutely sped things up transparency and control operations management virtually overnight. Add perspective, our client unprecedentedly low rates of the overall process. services team did an into the equation that amazing job in successfully sparked a re-fi boom, and transitioning to functioning things have just hit a level of virtually while simultaneously coordinating adoption that is on turbo with eClosing and an influx of new client implementations, also dynamic document generation usage. done virtually.

MBM: During the pandemic, did you have MBM: What are the advantages, besides to make any adjustments to the way you the obvious, to using e-signatures and handled eClosings and remote online remote online notarization to close a notarization? mortgage loan?

Lewis: DocMagic has been doing eClosings Lewis: The use of eSigning gives both for years, long before the term became a lenders and borrowers greater transparency catchy buzzword. Further, before the term and control of the overall process. Borrowers digital mortgage caught on, we were busy can easily access and sign documents within automating eMortgage processes, which was a secure digital environment. It’s fast, easy, the same thing. With respect to where we’re and completely trackable. The detailed at during the pandemic, the main adjustment traceability of eSignings enables lenders we made didn’t have anything to do with to more effectively manage the workflow the technology; we mastered the solution from anywhere, storing signed documents long ago. We just had to start working with securely with an encrypted, tamper-proof lenders, implementing them, and training seal. This helps in two key areas that paperthem remotely, as the country was and still based wet signatures are much tougher largely is under work-from-home (WFH) to track and access, especially as loans orders depending on the state the lenders exchange hands on the secondary market operated in.

We worked diligently to arrive at a and are then serviced.

The MORTGAGE BANKER Magazine

21

August 2020

Technology

First, it helps tremendously with ensuring compliance and that the data on every single document is accurate and consistent, and it’s easy to demonstrate proof of compliance in the event of an audit.

Second, it helps prevent instances of fraud, in particular when the loan file, data, and documents are all stored in a GSE-certified eVault.

Now, when it comes to remote online notarizations, the enhanced speed gained to sign documents requiring notarizations and the convenience that it also accomplishes is immeasurable.

What’s more, use of RON technology fills the final void in establishing a 100 percent paperless closing process. The hybrid model has almost become main stream.

Borrowers are now expecting that option.

Moving forward, lenders should always be focused on offering a fully paperless option for borrowers to take advantage of in the states that permit it.

jobs safely and effectively. However, some states haven’t implemented RON guidelines, or there were stop-gap measures which prevented fully leveraging RON technology, with some other low-tech forms of RON being offered as alternatives such as remote ink-signed notarization (RIN).

Like with RON, RIN permits notaries to utilize videoconferencing technology to legally notarize documents remotely.

However, it requires actually wet-signing paper documents as opposed to utilizing eSign and eNotary technology. So, the RON vs. RIN difference adds a bit more confusion to already constantly changing and complicated state regulations. Some states allow RON, some allow RIN, and others allow both. In that regard, it just requires more attention to what the states are doing. But that’s the technology provider’s job to worry about, not the lender.

MBM: Do you see eSignatures and RON as the new norm for the mortgage industry?

MBM: In the pandemic environment, is compliance tougher or is it the same where eSignatures and RON are concerned?

Lewis: The short answer is, yes. Like WFH orders essentially serving as a giant case study that proved the tele-commute model actually works, the same goes for eSignings, RON, and eClosing technology.

It works and it works very well. It’s just unfortunate that it took a pandemic to move the adoption curve in the right direction. But ultimately, it’s going to serve the mortgage industry well by further automating the paper-based processes of yesteryear that was hampering business-tobusiness as well as business-to-consumer efficiency. MBM

Lewis: This is a great question. We know that a lot of states have different rules behind the acceptance of RON technology.

As an example, some required an attorney to be present and some did not. And some states didn’t offer RON at all but were considering it. So, it has always been something that vendors need to stay on top of.

The pandemic resulted in a huge spike in the need for RON technology due to social distancing requirements and borrower fears of contracting the virus. Consequently, many states started implementing emergency measures to assist notaries in doing their

The MORTGAGE BANKER Magazine

Brian Honea is the managing editor of The MORTGAGE BANKER Magazine.

22

August 2020

Regulators and Agencies

BEST PRACTICES FOR MAINTAINING AN ENVIRONMENT OF INTEGRITY AND ETHICAL VALUES DURING COVID-19 From the Office of Inspector General, U.S. Department of Housing and Urban Development (HUD)

Recently, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which provides the U.S. Department of Housing and Urban Development (HUD) with approximately $12 billion to mitigate the effects of the COVID-19 crisis. Among other things, the CARES Act authorizes the HUD Secretary to waive certain statutes and regulations upon a finding of need. As HUD spends this large sum of money and entities are granted waivers, it is imperative that HUD, its grantees, and its business partners ensure that they maintain a strong ethical environment.

THE FOLLOWING ECOMMENDATIONS ARE INTENDED TO ASSIST YOU IN MAINTAINING AN ETHICAL CLIMATE: Identify and Manage Conflicts of Interest Conflicts of interest arise when individuals receive personal benefit from actions taken in their official capacity, either directly or indirectly through business partners, relatives, or associates. This can happen during the hiring process, the grant process, or the contracting process. Examples include future employment, employment for relatives, grants to friends and business partners, gifts, generous deals for friends, money, etc. Organizations should develop and implement policies to help their employees identify, disclose, and manage actual and apparent conflicts of interest to avoid reputational risks and potential violations of federal criminal and civil laws.

The MORTGAGE BANKER Magazine

24

August 2020

Implement Strong Internal Controls Internal controls help an organization operate effectively to achieve its objectives, while complying with relevant policies and laws. Organizations should assess the adequacy of and enhance their internal controls as needed to 1) protect assets; 2) ensure accurate records; 3) promote operational efficiency; 4) achieve the organizational mission and goals; and 5) ensure compliance with policies, rules, regulations, and laws.

Provide Ethics Training Organizations should provide ethics training for all employees, board members, partners, and others who help administer and award federal funds and, as necessary, for contractors, subcontractors, grantees, and subgrantees. Ethics training should be documented.

Maximize Competition in Grants and Contracts The federal and state regulations that govern procurement and grant actions vary for different HUD programs. Each organization has responsibility for ensuring that its employees understand and follow applicable grant and procurement regulations.

Maximizing competition for grants and contracts, as required by federal and state regulations can greatly reduce ethical concerns.

Maintain Document Records Thorough recordkeeping is even more imperative when federal requirements are relaxed or waived.

Documenting all steps of an organization’s actions and decisions promotes an environment of integrity and transparency and will help the organization during future audits and HUD reviews.

Encourage Employees to Report Ethics Concerns During this time of the

The MORTGAGE BANKER Magazine

25

August 2020

COVID-19 pandemic and beyond, organizations should be proactive in reminding employees of key ethics rules and encouraging employees to report ethics violations. Instances of fraud, waste, abuse, or gross mismanagement should be reported to the HUD, Office of Inspector General (OIG), hotline found on the HUD OIG website at https://www.hudoig. gov/hotline. MBM

Regulators and Agencies

Six Ways to Help Borrowers Address Credit Scores

By Samuel Luna, Freddie Mac

W

hen I was applying for my first mortgage – a subprime loan with a high rate and excessive fees – I knew I had some issues with my credit. I was embarrassed by it.

I think that embarrassment and the stigma of poor credit is a real impediment for many folks.

Many first-time homebuyers are afraid to face credit problems directly to fix them, and often just hope the problem areas don’t hurt their chances of getting a mortgage.

Most consumers are good about monitoring their score, but often don’t fully understand how it impacts their financial situations and ability to buy a home. And with the coronavirus (COVID-19) pandemic in full swing, mortgage lenders and investors are closely monitoring credit scores, which can keep potential borrowers from getting a mortgage that they would have otherwise qualified for pre-COVID-19.

Now more than ever, the mortgage industry needs to help educate and guide consumers in strengthening credit for homeownership. This can help first-time homebuyers, particularly in the wake of COVID-19 and resulting financial uncertainty.

It can also help them avoid some misconceptions so they can improve their credit before a mortgage becomes too far out of reach.

Here are several insights on credit scores that lenders can act on to help first-time homebuyers tackle this key element of the mortgage process.

The MORTGAGE BANKER Magazine

1. Lack of knowledge of what’s in the score.

The Consumer Federation of America conducts an annual survey that looks at consumer intelligence about credit scores. The latest survey showed the lowest level of credit knowledge in the past eight years; yet, more respondents considered it excellent or good. Some factors consumers most often fail to consider include the length of credit history, the types of credit they have, and how often they apply for new credit.

Key Takeaway: Help potential borrowers realize that a basic understanding of credit is an important first step in homebuying.

2. Misconceptions about how high credit score needs to be. Following the housing crisis, consumers heard a lot about higher credit score requirements for buying a home. Many still believe it’s hard to qualify for a mortgage, and some lack confidence in how to build their credit score. A 2019 Freddie Mac survey showed that, of renters who plan to purchase a home, 20 percent of low income and 16 percent of middle-income renters said they had low confidence in their knowledge of building credit in preparation for a home purchase.

An even higher percentage—26 percent and 19 percent, respectively—lacked confidence in their knowledge of personal finances and credit.

26

August 2020

5. Unaware that homeownership can improve credit over time. Consumers may be fearful of the short-term dip in credit score following a hard credit inquiry during the mortgage process. Help borrowers reduce their risk by advising them to stay within a 30day window while shopping for a mortgage.

Key Takeaway: Explain how, after a few years of making prompt mortgage payments and building equity, borrowers may see their credit score go up.

6. Credit mistakes after buying a home. It’s natural for new homeowners to want to buy furniture and other items for their new home. But as their monthly costs may increase with homeownership, such additional expenses may negatively impact their credit.

Key Takeaway: Help prospective borrowers set realistic credit score goals and share tips on how to achieve it.

3. Unfamiliar with the importance of pre-qualification. Many first-time borrowers don’t know the difference between pre-approval and pre-qualification, and some mistakenly assume that pre-qualification will hurt their credit score.

According to the same 2019 Freddie Mac survey, only about nine percent of renters who planned to buy in the next two years had been pre-qualified as they prepared to purchase a home.

Key Takeaway: Explain to borrowers that prequalification only requires a soft credit pull, inquires that don’t affect credit scores, and help them understand the advantages of it. A borrower’s greater awareness of their budget demonstrates to sellers their commitment to buying and helps prepare for closing.

4. Not knowing how to resolve credit disputes.

Consumers are doing a better job of occasionally checking for errors on their credit report, but many don’t know what to do when they find them.

Credit agencies have been slow to improve the dispute process, but complex data collection, data breaches and other challenges make it no easy task.

Key Takeaway: Provide guidance to prospective borrowers on how to resolve mistakes—for example, reporting errors to federal agencies—and diligently stay on top of the process.

The MORTGAGE BANKER Magazine

Key Takeaway: Encourage potential borrowers to resist the urge to apply for store cards to get discounts on their purchases and remind them to stay below 30 percent of available credit on all cards.

FINANCIAL EDUCATION RESOURCES CAN HELP FUTURE HOMEBUYERS A solid understanding of credit scores and how to manage them remains one of the biggest homebuying obstacles for first-time buyers, particularly in the affordable housing market. Along with the key takeaways above, lenders and other mortgage professionals can help future borrowers improve their credit education through innovative financial education programs and tools.

When I was buying my first home, resources to help me better prepare for the mortgage process were not readily available. If they were, it would have helped me qualify for a better mortgage with lower rates and fees, saving me thousands of dollars.

However, today, there is a wealth of information and support that can help first-time homebuyers to understand the mortgage process as well as their credit scores. MBM Originally published on sf.freddiemac.com on July 9, 2020 For more information on this and other topics, visit sf.freddiemac.com.

27

August 2020

Mortgage Operations

Lessons from COVID-19 Will Remain

By Joel Berg

T

exans saw signs that COVID-19 was likely to upend everyday life in midMarch.

“The potential disruption became even clearer as nonprofits started kicking into high gear and local officials started to talk about closing schools,” says Leslie Flynne, senior vice president of loan servicing for Houston, TX-based Reverse Mortgage Solutions, Inc. “That’s when company leaders stopped worrying about whether they were overreacting, as they might before a potential hurricane,” Flynne says. They pulled out the company’s pandemic response plan and were

The MORTGAGE BANKER Magazine

pleasantly surprised. “I look and think geniuses must have written it, because it’s spot on,” she says.

The traditional corporate disaster plan contemplated how to resume operations after an event such as a fire, flood, or tornado. But over the last 15 to 20 years, outbreaks, like SARS, MERS, and Ebola, prompted some executives to develop plans for a pandemic.

It was COVID-19 that forced leaders to dust off those plans and discover what worked and what may need some fine-tuning.

Whatever their shortcomings, those plans have helped keep reverse mortgages flowing over the last few months, despite countless

28

August 2020

obstacles posed by efforts to contain the spread of COVID-19. Stay-at-home orders nationwide prevented face-to-face meetings with borrowers, who are by definition older and considered more susceptible to the virus. The orders also complicated home appraisals, title searches, closings, and other aspects of the lending process.

Perhaps most significantly, the orders also forced thousands of professionals at all stages of the reverse-lending process to work from home, with many people setting up alongside working spouses and children going to school via Zoom.

Most disaster plans boast provisions for shifting to remote work. But it is not as simple as plugging in a computer and typing in a Wi-Fi password. In addition to the mundane distractions of home life, employees can succumb to illness or they might be caring for sick loved ones.

At the same time, there may be an increase in business. Over the past few months in the reverse mortgage world, more customers began looking to draw on lines of credit this spring as their investment assets shriveled.

New customers started to see the value of the product as a supplement.

“All those factors can be a challenge for people who are not used to working from home,” says Shane Mathew, vice president of professional services for Virtual Corp., a consulting firm based in Rockaway, NJ that assists companies in disaster recovery and business continuity. “We can technically do it, but companies don’t always plan for the ramifications of doing it,” he says.

To top it off, cyber threats also pose a risk, which can be especially problematic for financial services, such as reverse mortgage lending.

Regulations often assume people can work in an office behind closed doors. “How do you do that at home where a child may have to use the same computer for school?” Mathew asks.

The MORTGAGE BANKER Magazine

Indeed, cybersecurity had been one of the most pressing issues for disaster planners prior to the pandemic. Over the last few years, highprofile ransomware attacks had shut down local governments, and businesses worried they might become targets, too.

“At Reverse Mortgage Solutions, the IT staff worked five days straight to get 400 staff members up and running at home, overcoming numerous challenges related to bandwidth and security,” Flynne says. “They were heroes, because it took about 12 hours of head-down work every day for them,” she says. “We also were fortunate that we had a couple of power users within the business who could also front some of the user calls on connectivity issues.

There are a lot of people in the business who now have an additional skill to add to their resumés.”

“About 40 people continued coming into the office to perform essential tasks, such as funding draw requests and handling the mail,” Flynne says. The company’s pandemic checklist, meanwhile, called for establishing three separate clean rooms. The rooms are cleaned twice a day, deep-cleaned every night, and sanitized every 30 days to hospital standards.

“With all the documents that are physical that come and go, you can never be too careful,” Flynne says. As for the employees still coming into the office, they are all on a single floor but spread out to keep their distance. And no visitors are allowed.

But even though the company was back to normal operations, albeit remotely, within five days, there were still factors that the pandemic plan had not fully considered. One was the uncertainty surrounding an endpoint. After a month in lockdown, most Americans were still working from home with little sense of when, or if, normal life would return. “It requires everybody to be very, very flexible,” Flynne remarks. “And, on the pandemic plan, there

29

August 2020

Mortgage Operations was no aspect that said an infinite amount of patience is required.”

Another overlooked factor is the widespread impact of the pandemic. Not only is Reverse Mortgage Solutions working remotely, so are its vendors and customers. “We’re accustomed to dealing with a disaster,” Flynne says. “We’re just not accustomed to a worldwide disaster where so many of the companies and individuals that we depend upon are as adversely impacted as, if not more than, we are.”

The reach of the pandemic also was a factor for American Advisors Group (AAG), based in Orange, CA. The firm’s plan focused on business continuity in general, not a pandemic in particular. It also contemplated an event striking one or two offices, like a fire or an earthquake, not something that touched company offices around the country, says Rick Lieber, AAG’s chief risk officer.

But the company’s CEO, Reza Jahangiri, grasped early on that COVID-19 posed a significant threat, Lieber says. That recognition allowed company leaders to swing into action while relying on what was already in place.

“In this particular case, I think we had the basic infrastructure and resourcefulness to be able to handle it, even though the plan did not specifically contemplate a pandemic,” says Lieber, who also praised the leadership of Michael Josephs, AAG’s chief information officer, and Martin Lenoir, its chief operating officer and chief marketing officer.

Before states began issuing stay-at-home orders, AAG had started testing the ability of its staff to work remotely, even in areas like customer service, which traditionally functions in a highly centralized environment.

AAG started the transition the week of March 9. Within ten days, the company had 85 percent of its nearly 1,300 employees working remotely and 100 percent within 15 days, Lieber explains.

And operations had virtually no downtime or loss of service. “I would say we’re all very pleasantly

The MORTGAGE BANKER Magazine

surprised at the ability to be at least as effective as we work from home,” he says.

Part of the process involved managers physically distributing computer equipment to employees, while maintaining social distance, Lieber says. AAG’s solid vendor relationships ensured it had the equipment it needed.

For the future, though, the company will consider ensuring employees already have tools, such as thin clients, they can use to work from home, Lieber comments. Thin clients are lightweight computers, about the size of routers, that expedite remote connections to a server. The server then does the work of running software that a traditional PC would do.

Another factor in AAG’s successful transition was communication, Lieber adds. Rebecca Pacillas, the company’s senior vice president of human resources, helped employees understand what was happening and why.

In addition, AAG developed safety guidelines for vendors, such as appraisers and settlement agents. It distributed the guidelines to customers so they would know what to expect, and it included a phone number to call with any complaints.

Some AAG employees remain in the office to handle essential physical documents, Lieber says.

But they are widely dispersed and outfitted with masks, gloves, and wipes. “We’ve taken social distancing to the max,” he says. “Nobody’s even close to six feet proximate to each other.”

When elected officials were debating on how and when to relax social distancing guidelines and let businesses reopen their physical locations, John Button, CEO of San Diego-based technology provider ReverseVision, was contemplating the longer-term impact of the sudden shift to remote work. “I find it hard to imagine that people won’t learn from the experience and say to themselves, ‘Why don’t we do way more virtual business?’” he says.

30

August 2020

He also expected the COVID-19 crisis to accelerate efforts to make reverse mortgage lending more digital, especially at closing, where so-called wet signatures are still required.

Still, it wasn’t easy even for a tech company to go virtual. ReverseVision’s plan initially called for its roughly 30 employees to work from home during the pandemic, since they already had that ability, Button says. But the plan was tweaked to have two employees continue coming into the office each day on a rotating schedule.

The goal was to ensure nothing was overlooked, according to Button. The company followed the process for a few days but ultimately decided all work could be done remotely, with a few exceptions. One is the audiovisual system for conducting large training webinars. “That’s a little hard to replicate at home, so folks go in to use that,” Button says.

The MORTGAGE BANKER Magazine

He said technology likely will help fill the gaps in remote working, though he acknowledges not all the gaps can be filled. Relationships change when employees disperse to home offices, even when they’re adept at using communication apps like Zoom and Slack. Spontaneous conversations that lead to new ideas are less common.

“There ultimately is no true substitute for face-to-face human interaction, particularly in idea-based businesses like software,” says Button.

“And I certainly would expect as a business that when our 30 people can be together again, we’ll have ourselves a nice little party.” MBM

(Editor’s note: This article originally appeared in the July/August 2020 issue of Reverse Mortgage Magazine)

31

August 2020

Compliance

eSIGNED, SEALED, AND DELIVERED

BY FELECIA BOWERS, HOMEOWNERS FINANCIAL GROUP

A

s a seasoned compliance professional, I am usually skeptical of new ideas, and I have to say that the electronic adventures in closing are one of those areas. Do not accuse me of being afraid of change. I am of the era where a remote control was Dad telling us to get up and change the TV channel. My compliance training occurred when we had IBM Selectric III typewriters, pagers, large paper 3-ring manuals with our compliance laws, and a handheld calculator was used to create and test APRs. The movie, 2001 A Space Odyssey, came out in 1968 and it seemed outrageous that we would ever have a computer that could take over tasks for us.

We do not have Hal to do our bidding, but we do have Alexa. I mention this not to remind myself of my “seasoning” but to point out that modern technology has its benefits and its burdens. The benefits are obvious. According to the Federal Trade Commission, the burden is that in 2019 there were an estimated 3.2 million cases of identity theft and approximately 1.7 million of those cases involved fraud. All those identities were stored online and in what was purported to be a secure format. The progression of electronics hosted a methodology to commit fraud on a grander scale and, in some cases, the thief cannot be traced.

Usher in electronic closings, including notary activities involving one of the most expensive investments a family makes in a lifetime.

Notary fraud existed before remote online notarization or RON, though. I recall a fraud case I investigated where a man (I stop short of referring to him as a gentleman), attempted to mortgage the family home by forging his wife’s signature on a refinance, established a fake email for his wife to sign the closing documents in a purportedly remote The MORTGAGE BANKER Magazine

location, bought a notary stamp online to fake notarize the signature, and almost got away with his nefarious activities. I have to save the outcome to make sure you read the rest of this article. As for electronic closings, we have now flipped our thought process from “why would we do this?” to “how can we do this?”. It can be less expensive and more efficient, but it needs to be introduced into the workflow with care, meticulous planning, and extensive oversight.

The process of eClosings is convenient, and, given our current virus environment, safe. The convenience is obviously in the fact that consumers can preview their documents ahead of the scheduled signing date, and they can preliminarily sign some of the closing documents that don’t require notarization. There are two categories of eClosings: hybrid and full. In a hybrid eClosing, only some of the closing documents are signed digitally. Other pieces still require in-person “wet” signatures. However, in a full digital closing, all documents are signed electronically.

There are key terms of which to be familiar: • eNotarization is the act of electronically affixing a notary signature and acknowledgement to a document. This practice is authorized in most states. This can still be done face-to-face.

• eMortgage is a mortgage where the critical loan documentation is created, executed, transferred, and stored electronically, as opposed to physically on paper.

• eNote is a document that must be tampersealed and has a special type of digital signature that guarantees data integrity. A timestamp attaches to the signature for an added layer of security.

32

August 2020

• IPIN or IPN is In Person Notarization where a person can sign notarized documents electronically in person vs. remote notarization.

RIN is a remote ink-signed notarization and is a hybrid-type of transaction where everyone “wet” signs the documents and the notary still ink stamps the package. The process of viewing the borrowers’ signatures required for the notary is performed via a video conference call. The notary will then identify the signer(s) and the signed documents are then sent to the notary to place their stamp and signature to be returned to the settlement agent or lender. There are no electronic signatures.

Embracing this technology has additional benefits that your C-Suite is already aware via the money trail. The mortgage industry has a workload that is anything but normal or uniform.

Applications spike on Mondays and Tuesdays after the weekend. People tend to buy homes in the late spring or summer so their kids can start school in the new district. Lower rates mean more refinances.

Higher rates obviously cut down on refinances and

RON is a remote online notarization; a fully digital experience for the consumer. The process occurs via an online secure audio-visual connection where the documents are digitally signed, and the notary performs a remote notarization using a digital notarial certificate. After the signing, the package is sealed electronically. A RON program does require authentication usually via a three-part process, a video component, and the borrower will need to provide identification to the notary usually before the signing date and time.

Signatures garnered this way hold the same weight as traditional notarized documents. A growing number of states are allowing their notaries to conduct business in this manner.

The MORTGAGE BANKER Magazine

33

August 2020

Compliance electromagnetic waves could interfere with the signals the telescope receives. Thus, gadgets and Wi-Fi are banned around this area.

purchases. The November and December holidays tend to be periods of increased staffing reductions because production slumps. Thus, staffing levels throughout the year could fluctuate significantly.

Implementing a partial or full automation of the mortgage process could streamline the following:

• Do the states you do business in authorize the use of RON or RIN on a temporary, emergency basis or permanently?

• Staffing levels;

• Confirm that your investors will accept all forms of electronic closings, a bifurcated process, or no electronic closings at all. If not fully embraced, understand the exclusions and make sure you coordinate loan sales to investors with limitations with capital markets personnel, lest you have an unsaleable loan.

• Office overhead requirements through the remote work force with capabilities of exchanging data with all service providers and co-workers electronically; • Reducing printer and copier equipment and supplies and work space; and

• Work with a reputable digital document platform. An emergency such as the current pandemic is not the time to vet a new provider whose program is untested. You can work with that untested company later as a back-up or secondary service. Check with your investors on this one too. At least one large purchaser of single family residence transactions restricts the electronic process to a short list of vendors they have vetted. If you use anyone else, they may not purchase the loan.

• Increased fee income.

As mentioned previously, the current pandemic has forced us to embrace a digitally remote workforce, remote signings, and hybrid eClosings, and emergency state orders have embraced RON procedures. But not all states have embraced RON or RIN with federal legislation underway to mandate these two procedures as viable options to the loan process. Before you fully embrace this technology, there are a few rules, regulations, oversight protocols you should ensure you have in place:

• Make sure your delivery channels are secure and embrace multiple layer authentication processes.

• Do not forget that we have identity requirements under the USA PATRIOT Act and Customer Identification Program rules. Know your customer! Do not compromise in this area as it will help curb abuses as the technology is embraced.

• Video conferencing should be secure also.

Meeting passwords are highly recommended and consider sending those passwords via an alternative method such as text message or a personal phone call rather than sending it as part of the meeting invitation.

• Econsent is still required! We cannot do business with a consumer electronically unless they have consented to doing business via this method.

• Review document retention requirements. Some state requirements may not cover electronic storage and you may need to garner specific approval to conduct eClosings.

• Have a back-up plan in place for consumers who may not be electronically sophisticated or who live in remote areas where internet access is limited.

Yes, there are some areas of the U.S. that are so densely populated that the telecom companies will not invest in building the infrastructure to serve them. Or, think about Green Bank, VA dubbed the National Radio Quiet zone. Green Bank is home to the largest steerable radio telescope in the world. Any device that creates The MORTGAGE BANKER Magazine

• Speaking of documentation retention… who is going to be responsible for maintaining the video of the closing and notary activities? Your company, the settlement agent, the notary?

What does state law require? Maybe all parties need to retain copies of the video?

• If you maintain copies of the videos of the 34

August 2020

signing process, can IT storage systems handle the additional requirements? Can you retrieve a specific video for a specific loan if a problem occurs? Can you deliver that video to the investor if requested? If you rely on the settlement agent or notary to retain copies, will you be able to retrieve a copy for an investigation and what are the service provider's record retention requirements?

authentication process should entail (questions), how the process should work, and the angle of the camera to visually observe the consumer signing and the signature, etc.

• The standard practice document could contain an FAQ also. This piece will obviously expand as you gather more questions.

• Make sure the realtors are committed with the process too. Knowledge is a powerful took and having them as an ally would be beneficial.

• How will you investigate fraud at the closing table or through the notary?

• While you are investigating the state requirements, restrictions, or allowances, be sure to review state fees. What states will or will not allow you to pass on fees for electronic closings?

Yes, there will be expenses associated with the maintenance of a secure program, moving the electronic data to various sources, and additional storage on servers, etc. Many states may be of the mistaken impression that an electronic closing is cheaper, and easier withno paper couriers. How it is not associated with the cost of a company’s normal business overhead?

Building out this infrastructure is quite an undertaking for all companies as well as the thirdparty components, such as federal and state laws, changes in notary laws, security, and increased protocols to prevent fraud. The list is growing and probably never ending.

Now, the rest of my fraud story. The closing documents were sent via email to the wife’s fraudulent email account. He signed her name, completed the witness piece on the deed, and used his fake notary for her signature. He almost got away with it except… It was a cash-out refinance to pay off credit cards. His wife did not know about the credit card debt. The settlement agent was not ambitious enough to send the checks to the credit card companies so they mailed a package of checks along with the final Closing disclosure to the home.

The wife gets the mail every day. SURPRISE! She contacted our office immediately and discovered the loan, with her as a co-borrower, the fraudulent signing, etc. The home was owned free and clear gifted to them by her parents when they were married. Oh, I forgot to mention he was not on title but completed a fraudulent grant deed granting him interest in the home. She returned the checks to our office and we reversed the transaction. And hubby? The police were heavily invested in this one. The fraudulent witness signature was that of his wife’s best friend who was married to the town’s chief of police. DOH! They all filed criminal charges against him and she divorced him. He lost his job in the process and his family. MBM

• Will there be new service providers to incorporate in your third-party vendor management program?

• Does your QC process require any adjustments to accommodate this process?

Make sure your customer is prepared, in advance, for the electronic closing process.

Communication is key when rolling out an electronic process. And, also take into account these points: • Econsent!!! I can’t emphasize this one enough.

Too many people take this process for granted and think that everyone is doing it… of course the borrower wants to do business electronically.

• Consider creating a standard practice document that outlines what your company’s requirements are for the electronic closing, the RON or RIN process, and the authentication process, etc.

• The standard practice document may even go as far as to provide definitive instructions to the settlement agent and/or notary on what the The MORTGAGE BANKER Magazine

35

August 2020

Compliance From the Desk of the ‘Om-Bobs-man’

"Om-Bobs-Man" is the nickname Bob Niemi earned while serving as the NMLS Ombudsman in 2014 and 2015. Bob is a former Ohio state regulator and now an expert consultant on NMLS and state regulatory matters. Bob can be reached at BNiemi@Bradley.com.

NMLS News and Notes…

U

nprecedented times recently took a turn that no one saw coming.

The AARMR Board announced that it was necessary to cancel the AARMR Conference previously scheduled for August 4-6. The AARMR Board previously moved to a virtual format based the concern for the health and safety of its members. AARMR shocked with the news that it would also need to identify a new association management company, but details of that exact situation were not available.

Certainly, a serious issue to cause this much disruption at a precarious time.

The removal of a key mortgage regulatory conference is a significant setback. The mortgage industry is facing key challenges with pandemicappropriate work from home models, digital branching, remote supervision, and regulatory priorities. A delay to a possible 2021 NMLS Conference to be held may depend on a vaccine.

The conference is also one of the two critical in-person meetings for the NMLS Ombudsman to be with all stakeholders.

New Ombudsman Jim Payne of the Mortgage Lending Division of Kansas has

been named the new NMLS Ombudsman. In a statement Payne said, “I am energized about assuming the role of NMLS ombudsman at this time as we lay the foundation for a modernized NMLS, in which data standardization across state agencies will drive a new licensing model, improving licensing supervision and assisting industry with their concerns about NMLS.” His statement reinforces the need for engagement between regulators and the mortgage industry.

Payne’s experience will serve him well as the fifth Ombudsman.

Payne served as co-chair for the NMLS Modernization Steering Committee and district representative on the NMLS Policy Committee. The Ombudsman is also on the NMLS Policy Committee which oversees the system and makes policy decisions regarding any impact on meeting state licensing regulations.

The August planning for the Ombudsman meeting is underway, but details are not yet available for the agenda, format, or timing. Watch the NMLS Resource Center for information on how you can participate virtually.

Payne’s statement shows the

The MORTGAGE BANKER Magazine

36

August 2020

attention to new licensing models utilizing data standardization, which demonstrates the NMLS is moving forward with networked supervision for regulatory licensing and supervision. But did one state just take a step back?

The South Dakota Division of Banking added mortgage branch registrations as of July 1st. This registration would be required for any location other than the corporate location that originates, sells, or services South Dakota mortgages. In addition, the branch manager of any branch location must be a licensed South Dakota mortgage loan originator.

The Division has provided guidance that companies currently licensed in the state must register applicable branch locations by December 31, 2021.

In other news, Idaho H0401 went into effect on July 1st which amended the definition of mortgage lender to now include mortgage companies that engage in mortgage servicing by adding, “or servicing a residential mortgage loan on behalf of any person.” Although the statute layers additional burdens to mortgage servicers, there was good news in that the ‘qualified individual’ mortgage licensing requirement was also removed.

MBM

MBA COMPLIANCE ESSENTIALS℠

Training Tools for Compliance Staff at all Levels From quick-to-market updates on industry developments to comprehensive skill-based training at all experience levels, MBA Compliance Essentials, is your One Resource for results-oriented mortgage compliance education in our industry.

20623

•

Get hands on guidance with our library of 20+ Resource Guides.

•

Ensure your entire staff is compliant with 25+ self-study courses specifically on regulatory compliance topics.

•

Get trained on the most pressing topics with more than 100 complimentary webinars each year.

•

Set yourself apart with the Certified Mortgage Compliance Professional (CMCP) Designation.

mba.org/ce

Get a $2,000 voucher to use towards your MBA Compliance Essentials education with MBA’s Path to Diversity Scholarship.

See if you meet eligibility requirements at mba.org/pathtodiversity.

Compliance

REGULATORY CORNER FEDERAL COMPLIANCE REDLINING LAWSUIT FILED… Recently, the CFPB filed a lawsuit against Townstone Financial, Inc., a nonbank retail-mortgage creditor based in Chicago, for violations of the ECOA, Regulation B; and the Consumer Financial Protection Act. ECOA and Regulation B prohibit mortgage lenders from discriminating against applicants in credit transactions on the basis of race, color, national origin, or other prohibited bases. ECOA and Regulation B also prohibit mortgage lenders from making statements, or engaging in acts or practices, that would discourage, on a prohibited basis, applicants or prospective applicants from applying for credit. The Bureau’s complaint alleges that Townstone violated ECOA and Regulation B by engaging in discriminatory mortgage-lending practices and that these violations also constituted violations of the CFPA. The complaint says that Townstone engaged in the following: • Acts or practices, including making statements during its weekly radio shows and podcasts through which it marketed its services, that illegally discouraged prospective African-American applicants from applying to Townstone for mortgage loans; • Illegal redlining by engaging in acts or practices that discouraged prospective applicants living in African-American neighborhoods in the Chicago MSA from applying to Townstone for mortgage loans, including by making discouraging statements during its weekly radio shows and podcasts through which it marketed its services; and • Illegal redlining by engaging in acts or practices that discouraged prospective applicants living in other areas from applying to Townstone for mortgage loans for properties located in AfricanAmerican neighborhoods in the Chicago MSA, including by making discouraging statements during its weekly radio shows and podcasts through which it marketed its services.

NMLS POLICY GUIDEBOOK… Check out the updated version of the NMLS Policy Guidebook. Also, a summary of changes have been posted to the NMLS Resource Center.

FHA STREAMLINED SINGLE-FAMILY SERVICING POLICIES PROPOSED… The FHA recently released proposed revisions to its single family servicing policies that are designed to remove unnecessary barriers for homeowners seeking mortgage payment relief, achieve operational consistency with industry standard best practices, and reduce burdens incurred by the industry when servicing an FHA-insured mortgage portfolio. Comments due on September 12, 2020 and should be submitted via the process prescribed on the "Drafting Table" webpage.

The revisions focus on: The MORTGAGE BANKER Magazine

38

August 2020

• Revising the standard servicing loss mitigation home retention waterfall to ensure borrowers are evaluated for the solution that is most likely to best help them avoid foreclosure; • Eliminating unnecessary and time-consuming borrower documentation requirements for Trial Payment Plans, bringing FHA requirements into alignment with industry best practices and allowing servicers to grant assistance more quickly; and • Modifying other servicing and operational policies, including the allowable fee structures, that provide more consistency between FHA policies and those used by the private market and the Government Sponsored Enterprises.

EGRRCPA-REQUIRED HPML ESCROW EXEMPTION PROPOSED… The CFPB issued a notice of proposed rulemaking to amend Regulation Z by providing a new exemption available to certain insured depository institutions and insured credit unions from the requirement to establish escrow accounts for certain HPMLs, to implement an amendment to Regulation Z made by section 108 of the EGRRCPA. Comments on the proposal will be accepted for 60 days following Federal Register publication. The proposed amendment generally would exempt from the Regulation Z HPML escrow requirement any loan made by an insured depository institution or insured credit union and secured by a first lien on the principal dwelling of a consumer if: • The institution has assets of $10 billion or less; • The institution and its affiliates originated 1,000 or fewer loans secured by a first lien on a principal dwelling during the preceding calendar year; • The institution meets the requirement in § 1026.35(b)(2)(iii)(A) relating to making a covered transaction secured by a first lien on a property located in a "rural" or "underserved" area; and • The institution and its affiliates do not maintain an escrow account other than those established for HPMLs at a time when the creditor may have been required by the regulation to do so or those established after consummation as an accommodation to distresses consumers.

FINAL RULE ISSUED… The CFPB recently issued a final rule revising certain dollar amounts in Regulation Z, based on the annual percentage change reflected in the Consumer Price Index (CPI) in effect on June 1, 2020. The final rule will be effective January 1, 2021. Here’s a recap of the adjustments: • For HOEPA loans, the adjusted total loan amount threshold for high-cost mortgages in 2021 will be $22,052.

• The adjusted points-and-fees dollar trigger for high-cost mortgages in 2021 will be $1,103.

• For qualified mortgages, the maximum thresholds for total points and fees in 2021 will be o 3 percent of the total loan amount for a loan greater than or equal to $110,260; o $3,308 for a loan amount greater than or equal to $66,156 but less than $110,260; o 5 percent of the total loan amount for a loan greater than or equal to $22,052 but less than $66,156; o $1,103 for a loan amount greater than or equal to $13,783 but less than $22,052; and o 8 percent of the total loan amount for a loan amount less than $13,783.

The MORTGAGE BANKER Magazine

39

August 2020

Legal

The Mortgage Counselor Mitchel H. Kider is the Chairman and Managing Partner of Weiner Brodsky Kider PC, a national law firm specializing in the representation of financial institutions, residential homebuilders, and real estate settlement service providers.

Crises Accelerate Change

T

his month’s issue of The MORTGAGE BANKER Magazine focuses on electronic signatures and remote notarization. Neither is a new concept, but the adoption and utilization of both have been accelerated by the COVID-19 crisis. That same trend is affecting multiple aspects of our industry, as well as many other industries in our country.

There is nothing magical about a signature; it is rather simply a combination of a manner of authentication with a ritual for agreeing to a transaction. Before signing documents with a pen (or quill) became common, seals of various types, such as cylinder seals, were used to authenticate and approve documents. In some cultures, the corner or fringe of a garment applied to clay or some other substance could play the same role. With electronic signatures, we have seen the limitations of ink and paper overcome through the use of technology. Notarization is similar in these respects. Notaries public verify identities and act as impartial witnesses to the signing of important documents to prevent fraud and forgeries.

Even before the current health crisis, many states had adopted remote online notarization (RON), which allows notaries to do their jobs online using audio-video technology instead of requiring all individuals to be physically present in the same room.

A small silver lining of this otherwise terrible crisis in our country is that the need for remote processes is tipping the scale, as it were, in favor of allowing the types of innovations that should be happening anyway. Beginning with virtual home tours and cumulating in eClosings, the home buying and mortgage lending processes have been changing dramatically over the past several months.

While some of these changes may be viewed as temporary, most are probably here to stay.

In the long run, the changes whose approval and adoption are being driven by COVID-19 should decrease transaction costs and improve customer service.

Once consumers get used to innovations that save them time and effort, they will demand that same convenience in the future.

Which inevitably brings us to compliance. Whenever innovators

The MORTGAGE BANKER Magazine

40

August 2020

try to improve the mortgage process, the first impediment is regulatory compliance.

Sometimes, there are legitimate concerns about consumer protection, recordkeeping, or privacy. Other times the concern lies with the structuring of arrangements and the relationships among the parties providing the vastly improved services and whether these arrangements unwittingly run afoul of federal and/or state laws.

But often, the problem is getting someone to approve, or create an exception for, doing something in a way that is different from the way it has “always� been done.

For our industry, historically low interest rates make it easier to invest in these innovations. But as we do that amid significant volume that is otherwise keeping the industry occupied, it is important not to lose track of the compliance analysis that is still a prerequisite to change. Because, after an economic crisis, the enforcement and litigation begin.

And if you keep compliance top of mind as you innovate, you will be better situated to weather the next storm as well. MBM

Legal

Mortgage Banking Lawyers These attorneys are universally recognized by their peers as setting the highest standard for the legal profession, excelling in all fields – knowledge, analytical ability, judgment, communication, and ethics.

Thomas F. Vetters II Managing Partner

Mitchel H. Kider Managing Partner

Thomas E. Black, Jr. Managing Partner

tvetters@ravdocs.com 512-617-6374

kider@thewbkfirm.com 202-557-3511

tblack@bmandg.com 972-353-4174

Thomas Vetters is the managing partner of Robertson Anschutz Vetters, LLC (“RAV”) where he has spent his entire legal career developing a comprehensive expertise in the mortgage lending and compliance industry and helped develop the firm’s 50-state document software Docs on Demand®. Thomas is Board Certified in Residential Real Estate Law by the Texas Board of Legal Specialization.

In his 35 years as a practicing attorney, Mitch has represented banks, mortgage companies, residential homebuilders, real estate settlement service providers, credit card issuers, and other financial service companies in a broad range of matters. Mitch represents clients in investigations and enforcement actions before the Consumer Financial Protection Bureau, Department of Housing and Urban Development, Department of Veterans Affairs, Department of Justice, Federal Trade Commission, Ginnie Mae, Fannie Mae, Freddie Mac, and various state and local regulatory authorities and Attorneys General offices. In addition, Mitch acts as outside general counsel to smaller companies and special regulatory and litigation counsel to Fortune 500 companies.

Thomas E. Black, Jr. is managing partner of Black, Mann & Graham, LLP. Founded in 1997, the firm has offices in Dallas, Flower Mound, and Houston, Texas. Tom practices in the area of residential real estate law representing many of the nation’s largest banks and mortgage companies. He has been admitted to the practice of law in New York, Texas, Iowa and Washington. In 1976, Tom received a B.A. degree from the University of Notre Dame. He received his J.D. degree from the University at Buffalo in 1979 and an M.B.A. degree from The University of Notre Dame in 2008. After holding senior positions with a number of national mortgage companies, he returned to the practice of law in Texas in 1995. A frequent mortgage industry lecturer, he taught more than 25 years in the Mortgage Bankers Association’s School of Mortgage Banking. He is active in community service and held a variety of board positions, and serves as a Trustee of the University of Buffalo Foundation and of Saint Mary’s College, Notre Dame, Indiana.

Thomas currently serves on the Board of Directors for the Texas Mortgage Bankers Association and previously chaired their Regulatory Compliance Committee, Education Committee and served on their Executive Committee.

Thomas has prepared and presented papers on Texas Home Equity, Privacy, Safeguards, Loan Originator Compensation, ATR/QM and the TILA/ RESPA Integrated Disclosures. He is admitted to practice in the State of Texas and the U.S. Western District of Texas. RAV’s offices include Houston, Austin, Plano, and The Woodlands.

The MORTGAGE BANKER Magazine

42

August 2020

Mortgage Banking Lawyers These attorneys are universally recognized by their peers as setting the highest standard for the legal profession, excelling in all fields – knowledge, analytical ability, judgment, communication, and ethics.

James W. Brody, Esq. Mortgage Banking Practice Group Chair jbrody@johnstonthomas.com 415-246-3995

Roger Fendelman Principal

Marty Green Attorney

roger@garrishorn.com 636-399-0169

marty.green@mortgagelaw.com 214-691-4488 ext 203

James Brody actively manages all the complex mortgage banking litigation, mitigation, and compliance matters for Johnston Thomas. Mr. Brody’s experience centers on those legal issues that arise during loan originations, loan purchase sales, loan securitizations, foreclosures, bankruptcy, and repurchase & indemnification claims. He received his B.A. in International Relations from Drake University and received his J.D., with a certified concentration in Advocacy, from the University of the Pacific, McGeorge School of Law. He was a recipient of the American Jurisprudence BancroftWhitney Award. He is licensed to practice law in California and has been admitted to practice in front of the United States District Courts for the Central, Eastern, Northern, and Southern Districts of California. In addition, Mr. Brody has served as lead litigation counsel for numerous mortgage banking and commercial related disputes venued in both state and federal courts, in a direct capacity or on a pro hac vice basis, in AZ, CA, FL, MD, MI, MN, MO, OR, NJ, NY, PA, TN, and TX.

Roger Fendelman is a managing member of Garris Horn PLLC and CEO of Firstline Compliance. A mortgage compliance technology pioneer with more than 25 years of legal experience, Roger advises both mortgage originators and technology providers on compliance, technology, and automation challenges, with a focus on TILA, RESPA, QM, HOEPA, TRID, HMDA, ECOA and state consumer protection laws. For more than a decade, Roger served as the executive compliance leader of mortgage fraud and compliance technology innovator Interthinx and was the creative force behind PredProtect, one of the first cloud-based mortgage compliance automation solutions. Under Roger’s stewardship, the system became an industry standard for compliance, processing one million loans annually and earning a 2014 HousingWire AllStar award. He previously served in various capacities including compliance manager, processor and underwriter, providing him with an enhanced level of understanding for his clients’ day-today compliance needs.

Marty Green leads the Dallas office of Polunsky Beitel Green, one of the country's top residential mortgage law firms. Mr. Green is an accomplished attorney with more than 20 years of experience in the legal, banking and financial services industries. He is the former Executive Vice President and General Counsel for Dallas’ CTX Mortgage Co. and previously worked with the Baker Botts law firm in Dallas as Special Counsel. In his role as leader of the firm’s Dallas office, Mr. Green advises clients on the latest rules and regulations covering residential lending, in addition to building on Polunsky Beitel Green’s long tradition of delivering loan closing documents with speed and accuracy. Mr. Green is admitted to practice before all Texas state and federal district courts in addition to the U.S. Court of Appeals for the Fifth Circuit. An honors graduate of the University of Texas School of Law, he earned his undergraduate degree at Southern Utah University. Texas Monthly has selected him as a Super Lawyer multiple years.

The MORTGAGE BANKER Magazine

43

August 2020

The C-Suite

LAURA ESCOBAR President Eagle Home Mortgage

What is your mantra?

My mantra is to express gratitude even when it hurts. Express gratitude always to everyone and for everything. There is always a lesson!

What do you find most rewarding about your job?

The most rewarding part of my job is the development of people, personally and professionally. I love being part of people’s dream accomplishments and helping them get there. If you are hard-working, dedicated, and, most importantly, have heart, I will be your biggest champion.

What is on your desk?

On my desk you will find a plaque that says, “I’m not bossy, I am the boss”, Love Bombs Kindness Cards, Purell (lots of it), figurines I’ve received as gifts throughout the years, and my sole plant—a cactus.

What do you think is the biggest challenge for the mortgage banking industry currently as a result of the COVID-19 pandemic?

One of the biggest challenges for the mortgage banking industry during COVID-19 has been maintaining associate engagement and company culture while working remotely and employee retention. I think engagement and culture are key to attracting and retaining top talent. That said, mortgage professionals are getting offers left and right and may think that the grass is greener on the other side, without thinking about the cyclicality of our business. It’s important to me as a leader to regularly create moments of connectivity with associates as well as communicate on our performance to emphasize the stability that comes with being the affiliate lender to the largest homebuilder in the U.S.

What is your best habit?

My best habit is definitely time management. With daily meetings back-to-back and hundreds of emails per day, I’ve learned to be disciplined and ultra-efficient with my time. I empower others to own tasks and I delegate, I schedule 15-minute meetings, I write brief emails, and I use conversations over emails to solution.

What is the last thing you do at night?

What time do you get up?

I wake up at 6:30 a.m.

What is the first thing you do in the morning?

The first thing I do in the morning after my coffee fix is exercise. I used to do early morning exercise classes and spinning. In today’s environment, I’ve adjusted to working out from home with a trainer and Peloton.

The MORTGAGE BANKER Magazine

44

August 2020

The last thing I do at night is pray.

I’m a quiet prayer. My husband typically says, “Can I talk now? Have you finished praying?”

What time do you go to bed?

I typically go to bed around midnight or 1 a.m.

I think engagement and culture are key to attracting and retaining top talent.

The MORTGAGE BANKER Magazine

45

August 2020

The C-Suite The mortgage industry is one of the most volatile and cyclical in the country and building a team that responds quickly and efficiently to whatever comes their way is very rewarding.

The MORTGAGE BANKER Magazine

46

August 2020

MIKE JOHNSON President, AmCap Home Loans

What do you think is the biggest challenge for the mortgage banking industry currently as a result of the COVID-19 pandemic?

Obviously, the health and welfare of our employees and establishing a safe work environment were paramount in the beginning. Once we solved the safety issues, we quickly found ourselves dealing with an unprecedented increase in loan volume; more specifically, purchase loan volume. This is where the challenge lies. One of the things I learned in business school was that when running a business, the two worst things that can happen are nobody shows up and everybody shows up. Right now, everybody is showing up, which has put a large strain on our manufacturing process. Fortunately, over the past few years we’ve been creating systems to allow more and more of our people to work remotely and these streamlined systems have allowed us to adapt.

What do you find most rewarding about your job?

I like building things… not necessarily just making things bigger, but making them better. The mortgage industry is one of the most volatile and cyclical in the country and building a team that responds quickly and efficiently to whatever comes their way is very rewarding. The team I have on the floor, this year 2020, is the best team I’ve ever seen in my career.

What time do you get up?

6:00 a.m. – Reluctantly

What is the first thing you do in the morning?

What is the last thing you do at night?

Work out. I try to get it over with before I wake up.

Read – it’s the only way I can fall asleep.

What is your mantra?

The best time to plant a tree is 50 years ago.

What is on your desk?

Resumes and financial statements.

What is your best habit?

Organization

The MORTGAGE BANKER Magazine

47

August 2020

What time do you go to bed?

10 p.m.

Education

Education & Training Calendar Date

Dates

Link

School of Mortgage Banking I

August 3 - 27

https://www.mba.org/store/events/education/meeting/ classroom/school-of-mortgage-banking-i-august-2020online?check_for_mini_site=Y

School of Loan Origination

August 3 - 27

https://www.mba.org/store/events/education/meeting/igol/ school-of-loan-origination-august-2020?check_for_mini_site=Y

Improving Profitability with Mandatory Loan Sales

August 5

https://www.mba.org/store/events/education/meeting/webinar/ improving-profitability-with-mandatory-loan-sales?check_for_mini_site=Y

Understand Alternative Documentation and Win More Business in 2020

August 11

https://www.mba.org/store/events/education/meeting/webinar/ understand-alternative-documentation-and-win-more-businessin-2020?check_for_mini_site=Y

Invisible Scale: Turbo Charge Your Growth with Miller’s Law

August 11

https://www.mba.org/store/events/education/meeting/webinar/ invisible-scale-turbo-charge-your-growth-with-millers-law?check_ for_mini_site=Y

mPower presents: Permission Granted to S.T.A.Y. #StartThinkingAboutYOU®️

August 13

https://www.mba.org/store/events/education/meeting/webinar/ mpower-presents-permission-granted-to-stay-startthinkingabout you%C2%AE%EF%B8%8F?check_for_mini_site=Y

MBA and ALTA's Digital Closing and eMortgage Virtual Boot Camp: Live Content Only

August 18 - 20

https://www.mba.org/store/events/education/meeting/bootcamp/mba-and-altas-digital-closing-and-emortgage-virtual-bootcamp-live-content-only?check_for_mini_site=Y

Ensuring Data Quality and Compliance Through the Loan Process

August 20

https://www.mba.org/store/events/education/meeting/webinar/ ensuring-data-quality-and-compliance-through-the-loanprocess?check_for_mini_site=Y

Aug 25

Bank-Owned Mortgage Divisions: What Bankers Need to Know

August 25

https://www.mba.org/store/events/education/meeting/webinar/ bank-owned-mortgage-divisions-what-bankers-need-toknow?check_for_mini_site=Y

Sept 3

mPower presents: Mitigating Bias in your Leadership… and in your Life

September 3

https://www.mba.org/store/events/education/meeting/ webinar/mpower-presents-mitigating-bias-in-yourleadership%E2%80%A6-and-in-your-life?check_for_mini_site=Y

Sept 8

School of Mortgage Banking I

September 8 - 29 https://www.mba.org/store/events/education/meeting/

School of Mortgage Banking II

September 8 – October 1

https://www.mba.org/store/events/education/meeting/ classroom/school-of-mortgage-banking-ii-september-2020online?check_for_mini_site=Y

Introduction To Mortgage Banking

September 9

https://www.mba.org/store/events/education/meeting/ webinar/lending-2021-will-you-change-the-way-you-work-tocompete?check_for_mini_site=Y

Aug 3

Aug 5 Aug 11

Aug 13

Aug 18 Aug 20

Sept 9

Course Name

Aug/Sept 2020

classroom/school-of-mortgage-banking-i-september-2020online?check_for_mini_site=Y

Conferences/Conventions

Instructor Guided Online Course (IGOL)

MBA Research Events

Classroom Course

Webinar

MISMO Events

The MORTGAGE BANKER Magazine

48

August 2020

Other

WHITE PAPERS & WEBINARS

REGULATORY COMPLIANCE • RISK MANAGEMENT • OPERATIONAL EXCELLENCE

READ, WATCH & LEARN ...

ADVANCE YOUR KNOWLEDGE AND CAREER Click below for information and details on white papers, webinars and knowledge-based content

YOUR WHITE PAPER HERE

The MORTGAGE BANKER Magazine

49

August 2020

Data Download

Top Origination Markets by Loan Volume Consolidated Metropolitan Statistical Area (CMSA/ Metropolitan Statistical Area (MSA)

% of Lock Volume

MOM Growth

Avg Loan Amount (S)

Avg Rate

Avg FICO

Avg LTV

Purchase

Refi

1

Los Angeles-Long Beach-Anaheim, CA

5.93%

48.86%

490,689

3.878

727

71

30%

70%

2

Washington-Arlington-Alexandria, DC-VA-MD-WV

4.81%

61.90%

416,697

3.671

732

83

42%

58%

3

New York-Newark-Jersey City, NY-NJ-PA

4.11%

42.17%

402,615

3.820

727

77

44%

56%

4

Phoenix-Mesa-Scottsdale, AZ

3.74%

70.32%

281,012

3.817

725

81

42%

58%

5

Chicago-Naperville-Elgin, IL-IN-WI

3.27%

45.89%

283,028

3.916

729

81

45%

55%

6

Dallas-Fort Worth-Arlington, TX

3.00%

70.24%

408,841

3.702

717

82

32%

68%

7

Seattle-Tacoma-Bellevue, WA

3.00%

58.68%

424,578

3.789

733

77

32%

68%

8

Denver-Aurora-Lakewood, CO

2.96%

57.27%

358,889

3.772

730

77

30%

70%

9

Boston-Cambridge-Newton, MA-NH

2.91%

41.83%

288,291

3.866

737

75

54%

46%

10

Riverside-San Bernardino-Ontario, CA

2.38%

65.85%

591,239

3.777

713

80

20%

80%

11

Houston-The Woodlands-Sugar Land, TX

2.19%

41.13%

332,751

3.822

712

85

36%

64%

12

San Francisco-Oakland-Hayward, CA

2.11%

59.68%

499,843

3.692

745

66

29%

71%

13

San Diego-Carlsbad, CA

1.95%

49.67%

266,443

3.838

739

75

52%

48%

14

Atlanta-Sandy Springs-Roswell, GA

1.88%

29.25%

261,598

3.915

713

84

62%

38%

15

Miami-Fort Lauderdale-West Palm Beach, FL

1.76%

59.01%

286,674

3.741

714

80

41%

59%

16

Minneapolis-St. Paul-Bloomington, MN-WI

1.66%

33.04%

323,362

3.971

738

80

53%

47%

17

Philadelphia-Camden-Wilmington,PA-NJ-DE-MD

1.62%

46.80%

276,745

3.813

723

82

50%

50%

18

Portland-Vancouver-Hillsboro, OR-WA

1.51%

45.92%

338,532

3.772

736

76

35%

65%

19

Austin-Round Rock, TX

1.43%

58.10%

352,324

3.771

737

80

31%

69%

20

Baltimore-Columbia-Towson, MD

1.37%

51.33%

323,376

3.777

724

85

45%

55%

SOURCE: Optimal Blue, Plano, TX. Data is based on loans locked within Optimal Blue’s Digital Mortgage Marketplace platform.

Optimal Blue operates the leading Mortgage Marketplace Platform, connecting a network of originators and investors and facilitating a broad set of secondary market interactions.

More than $750 billion of transactions are processed each year across the Optimal Blue platform. For more information, please visit www.optimalblue.com.

Through actionable data and analytics, Optimal Blue enable mortgage lenders and professionals to visualize and track performance, compare profit margins, and assess the effectiveness of secondary marketing strategies.

The MORTGAGE BANKER Magazine

50

August 2020

•

After rising from 3.2% in January to 7.8% in May, the national delinquency rate improved for the first time in five months, falling to 7.6% in June as the overall number of pastdue mortgages declined by 98,000

•

With federal foreclosure moratoriums still in place, active foreclosure inventory continues to dwindle; June’s 192,000 active foreclosures were the fewest on record, dating back to 2000

•

Serious delinquencies—those 90 or more days past due – rose by more than 1.2 million as the initial wave of borrowers financially impacted by COVID-19 missed their third mortgage payment

•

Prepayment activity hit its highest level in 16 years in June, fueled by record-low 30-year interest rates and surging refinance incentive

•

Totals are extrapolated based on Black Knight’s loan-level database of mortgage assets. All whole numbers are rounded to the nearest thousand, except foreclosure starts, which are rounded to the nearest hundred.

At 1.87 million, the number of seriously delinquent mortgages is now at its highest level since early 2011

About Black Knight As a leading fintech, Black Knight is committed to being a premier business partner that clients rely on to achieve their strategic goals, realize greater success and better serve their customers by delivering best-in-class software, services and insights with a relentless commitment to excellence, innovation, integrity and leadership. For more information on Black Knight, please visit www.blackknightinc.com.

Black Knight is a leading provider of integrated software, data and analytics solutions that facilitate and automate many of the business processes across the homeownership lifecycle.

The MORTGAGE BANKER Magazine

51

August 2020

B2B

BUSINESS SERVICES DIRECTORY Proctor Financial provides comprehensive insurance products and service solutions for financial institutions.

While weaving compliance throughout all our applications and technologies, Proctor operates as an extension of our clients, where partnership meets innovation.

Amanda Bowers VP of Marketing abowers@pfic.com

Chenoa Fund is an affordable housing program provided through CBC Mortgage Agency (”CBCMA”), a uniquely created and organized government institution. CBCMA is a public-purpose driven governmental entity specializing in providing 100% financing for loans guaranteed by the FHA, with a focus on under-served borrowers. Our mission is to provide funding for affordable housing opportunities in communities nationwide. CBCMA partners with quality mortgage lenders on a correspondent basis to provide down payment assistance for qualified home buyers in the form of second mortgages and gifts. All assistance is provided in compliance with FHA guidelines.

Michael Whipple Vice President michael.whipple@ chenoafund.org

208.250.9132

Radian ensures the American dream through industry-leading mortgage insurance and a comprehensive suite of mortgage, risk, real estate, and title services. With the combined expertise of the entire Radian family—including Radian MI, Clayton, Green River Capital, Five Bridges Advisors, Independent Settlement Services, Red Bell Real Estate, LLC and Radian Title Services—we are a single trusted partner, delivering unparalleled value and efficiency across the mortgage and real estate spectrum. Visit www.radian.com to see how Radian is shaping the future of mortgage and real estate services.

Kristi Helmlinger Vice President Enterprise Sales, Mortgage and Real Estate Services

kristi.helmlinger@radian.com

215.231.1230

Weiner Brodsky Kider PC is a Washington, D.C.-based firm with a national practice focused on compliance, regulatory, transactional and litigation matters related to financial services concerns. We represent a broad client base, from start-up businesses to Fortune 500 companies, throughout the United States.

Mitchel H. Kider Managing Partner

kider@thewbkfirm.com

202.557.3511

The MORTGAGE BANKER Magazine

52

August 2020

SPONSORS CORNER Many thanks to these sponsors for supporting our mission of bringing you a magazine dedicated to informing and educating mortgage banking professionals.

The MORTGAGE BANKER Magazine

53

August 2020

PROMOTE AND ADVERTISE with