Mortgage Banker Magazine February 2020

THE

BANKER

Covering the Entire Mortgage Lending Process and Everything In Between

MAGAZINE February 2020

TECHNOLOGY IN CUSTOMER SERVICE

GAPS

It's Time to Rethink Your Pricing Calculus pg. 18

Were You as Profitable as You Could Have Been? pg. 20

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.

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February 2020

Serving the mortgage banking community for more than three decades

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February 2020

FEATURES 14

Mortgage Technology Gap Still Exists In today’s world, we have so many technology options that can truly create a dramatically better customer experience.

That said, many mortgage applications still contain 10 or more sections of timeconsuming questions that need to be filled out so the lender can evaluate the borrower.

TERESA BLAKE

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20

32

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It's Time to Rethink Your Pricing Calculus

Were You as Profitable as You Could Have Been?

The Land of Lincoln Wants More of Your Benjamins

Are You In Compliance with the CCPA and ADA?

Few banks have tackled the challenge of simplifying and aligning product and pricing with the customer’s needs, throughout their buying journey and beyond. How can they transition to this new approach?

I am not an economist, but I believe companies need to focus on cost savings, not only in years that companies struggle, but in the good ones too. Interest rates are always subject to change, but it can be less of an impact on your company if you budget accordingly.

The Civic Federation, a Chicago-based independent government research organization, recently garnered some local media attention with its claim that homes in Chicago have the lowest effective property tax rates in the region when calculated as a percentage of their market value.

Did you get your CCPA disclosure(s) that rolled out on January 1, 2020, or are you one of those individuals who believe the GLBA disclosure adequately covers the new California rule? I tend to be conservative with my compliance responsibilities and did not feel GLBA was adequate.

GEORGE KING

FELECIA BOWERS

JOE ZEIBERT

ALLISON JOHNSTON

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February 2020

Special

SECTIONS

TECHNOLOGY

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Mortgage Mobile Apps

How to Tackle 2020: A Loan Officer's Plan MATT HOLMES

The New First-Time Homebuyer BRIEN MCMAHON

What Do CRT Prices Tell Us About Iplied G-Fee? ALE X LEVIN

56 58

The Mortgage Counselor: MITCH KIDER

Mortgage Banking Lawyers

THE C-SUITE

QC 2.0 - Next Generation of Quality Control for the Mortgage Industry STEVE SPIES

MORTGAGE OPERATIONS

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LEGAL

QUALITY CONTROL & RISK MANAGEMENT

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46

RALPH ARMENTA

LOAN ORIGINATION

22 24

GSES & REGULATORY AGENCIES

Taking a Critical Look at Operations PETE BUTLER

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PROFILE: Jason Madiedo

62

PROFILE: Kristy Fercho

64

New Decade Means Change for CMLA

CEO ALTERRA HOME LOANS

EXECUTIVE VICE PRESIDENT FLAGSTAR BANK

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Monthly

DEPARTMENTS 47 Product Showcase 66 MBA Education & Training

COMPLIANCE

42

From the Desk of the Om-Bobs-man

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Compliance Alphabet Soups - EFTA

BOB NIEMI

Calendar

67 68 70 72 74

White Papers & Webinars Calendar of Events Data Download Business Services Directory Sponsors Corner

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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 Eric Souza ESouza@MortgageBankerMag.com

FROM THE EDITOR Providing a perfect customer experience, much like implementing quality control procedures to achieve the “perfect loan,” is a never-ending quest. We will never reach a point where we all collectively say, “Alright, there is no longer room for improvement where the customer experience is concerned!”

Lately, it seems, all technology introduced in the mortgage industry is aimed at improving the customer experience. Eliminating paperwork, getting approved or denied for a loan using your phone in a matter of minutes. . . the goal is to make the process easier, and more pleasant, for the customer. You might even say the goal is to tailor the experience to meet the customer’s needs, because they are not all the same. After all, if you remove the “er” from customer, you have “custom.”

In this, the sophomore issue of The MORTGAGE BANKER Magazine, we will take a closer look at improving the customer experience, hearing from experts such as Ralph Armenta of LoanFuel, who likens improving the borrower experience to “chasing a bouncing ball” as he talks about adding features to mobile apps to make things more pleasant for borrower customers, and Teresa Blake from KPMG, who discusses the “gaps” in technology when it comes to the customer experience and what improvements we can expect this year.

If that weren’t enough, this issue contains insight on a wide range other industry-related topics, including the pricing calculus (Joe Zeibert of Normis), the next phase of quality control (Steve Spies of SWS Consulting), planning for success as a loan officer in 2020 (Matt Holmes of Data Facts), examining your operations critically (Pete Butler of Opus), complying with the ADA and CCPA in 2020 (Felecia Bowers of Homeowners Financial Group), and much more.

What do you think can be done to improve the customer experience?

What do you think of our re-branded magazine so far after the first two issues? What topics do you want to see covered? Please let us know; we are listening. You can always drop us a line via the email address below.

COLUMNISTS & CONTRIBUTING AUTHORS Ralph Armenta Teresa Blake Felecia Bowers Pete Butler Matt Holmes Allison Johnston

George King Alex Levin Brien McMahon Bob Niemi Steve Spies Joe Zeibert

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

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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.

February 2020

AUTHORS

Ralph Armenta

Teresa Blake

Pete Butler

Matt Holmes

Ralph Armenta is a seasoned senior mortgage banking and financial technology professional with over 25 years of experience leading sales and revenue businesses.

Ralph is considered a thought leader and has contributed several pieces to industry publications.

Ralph is also an adjunct professor for the State University of New York.

Teresa Blake is a managing director in KPMG’s Financial Services practice in Charlotte. She has more than 25 years’ experience transforming organizations and designing, building, and supporting teams. Her focus is on bringing digital transformation to clients as they evolve from having a digital strategy to doing business in a digital world.

Pete Butler is the executive managing director and oversees Wipro Mortgage Digital Operations/ Platforms which serves the complete mortgage industry lifecycle and Opus Capital Markets Consultants, a specialized risk management and quality control service provider for a wide range of participants in the mortgage and consumer lending industries.

As marketing specialist for the Lending Division at Data Facts, Matt Holmes supports external messaging and brand objectives through continuous content development, product marketing, and competitor analysis.

George King George King has had a 25+ year career at CoreLogic serving in a variety of managerial and contributor roles. He currently serves in a legislative and data analyst capacity for CoreLogic's Tax Services Division, which is within the company’s Business Data Services group.

Alex Levin Alex Levin is director of Financial Engineering at Andrew Davidson & Co., Inc. His recent work focuses on the valuation of instruments exposed to credit risk, home price modeling, and projects related to the MBS crisis.

Brien McMahon As executive vice president and chief franchise officer for Radian Guaranty Inc., Brien McMahon is responsible for leading the company's sales, marketing, and customer experience strategies.

Brien has served in the financial services industry for more than 25 years.

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Allison Johnston With over 28 years of experience in the mortgage industry, Allison Johnston, president of Success Mortgage Partners, understands what it takes to grow a successful company.

Steve Spies

Joe Zeibert

Steve Spies is principal and founder of the risk management consulting firm SWS Risk Advisory.

SWS Risk Advisory LLC enables clients to build a culture of constructive creation, instead of destructive conflict. He can be reached at stevespies@ swsrisk.com.

Joe Zeibert is managing director of global mortgage solutions at Nomis Solutions, where he assists banks around the world to identify mortgage and other consumer lending opportunities that can be enhanced through pricing optimization, price execution, and sales enablement.

February 2020

Technology

MORTGAGE MOBILE APPS:

Chasing the Bouncing Ball for Borrower Experience

By Ralph Armenta, LoanFuel

I

just returned from the New England MBA from what I believe is the kickoff for mortgage conferences of the year preceding the National Independent Mortgage Bankers in early February. The conference was wellattended with more than 2,000 registered and at least another 300 roaming the convention halls.

Hands down two of the most compelling themes for the conference in terms of both speaker content and attendee interest was a growing interest that the historic change in status from mortgage broker to mortgage banker was now in

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fact reversing with a trend from mortgage banker to mortgage broker which is supported by the substantial increase in the TPO channel volume, (perhaps accounting for almost one third of the over-all 2019 origination volume). The second most discussed topic was borrower experience. The goal of this article is to highlight how to improve your borrowers’ experience by embracing and adopting how your company uses and deploys mobile technology.

While other industries have moved relatively fast to integrate mobile technology to enhance

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interface is a hyper link that directs a user through a web-based browser.

Imagine that before the development, release, and refinement of apps we, all relied onnothing more than a web-based user interface to bring content and functionality. Today, we do not access our banking apps, social media, or ESPN by going into Safari or Google to access accounts. Wwe use single sign-on identity with fingerprint and iris recognition.

We demand from our mobile application developers a user interface providing speed, content, security, and a quality user experience that if done properly, lulls all of us into constant interaction. Let’s consider a few examples on mobile user experiences that make a difference.

customer experiences, the mortgage industry has been glacially slow to adopt and advance a mobile technology strategy and marketing effort that helps to build channels, retain LOs, and creates a borrower experience that if properly done can continue to keep that borrower close, long after the loan closes.

Let’s face it, we use our mobile devices to track the status of Uber rides and Domino’s pizza orders and have come to expect this to confirm confidence and experience; why would we find it less compelling to track our home purchase and our mortgage loan status the same way?

The past five years have seen a proliferation with advances in technology that support virtually every workflow and aspect in the mortgage origination ecosystem. Beginning with the loan operating system (LOS), unarguably the central nervous system of a mortgage banking operations, plus significant development for product, pricing, and eligibility systems, advances with point-of-sale (POS), regulatory compliance systems, CRMs and much more. There are technology solutions out there that seek to improve, enhance, expedite, motivate, record, maximize, cultivate, collate, and vibrate in your pocket.

App lineage and the first mobile devices date back to 1973 where the first generation of a cellular based mobile phone was introduced and was the size and weight of a brick. These phones and several device generations later supported the government, corporate titans and the very wealthy before economic equilibrium set in allowing mere mortals like us to gain access.

And poof, almost overnight the onset of a mobile revolution began by providing a cost-efficient consumer-based subscriber offering and was transformed as early as 2008, after the release of the first iPhone.

So, when you think about it, mobile apps are fairly recent and are really about 12 years young.

Simply, most mortgage technologies today woefully miss the mark for mobile applications because their offering is nothing more than a user experience where their solution for mobile

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SMS VS PUSH ALERTS:

SMS or (short messaging service) is a common text application that allows a business or jurisdiction to broadcast broadly or with a specific target. Itis the much older text messaging technology (a staple if you will) that relies on mobile phone carriers, cell towers, and physical phones to get a message from sender to recipient, no WiFi necessary. Just a phone carrier signal and a mobile phone. But watch out with the proliferation of 5G which is discussed later in this article will be the game changer.

SMS is reported to have a 98 percent open rate compared to the paltry 22 percent open rate of corresponding emails. SMS transmissions have the best effect when they are used for matters of urgency, where time is of the essence.

Think about the most immediate Amber Alert where a person is missing and as time ticks away the ability to locate and return the person to safety diminishes.

SMS is less effective if the message is greater than 160 characters. Messaging that requires a longer explanation with long instructions does not resonate with the intended recipient.

SMS is not a strong medium when a sender is trying to convey reference material or information about the future or an activity in the future.

Push notifications are most effective when

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Technology the sender is providing useful and very specific messaging. For example, “your mortgage loan is approved”, “your closing date is set for xx-xx-xxxx” or “your rate lock expires on xx-xx-xxxx”. These short specific push alert notice immediately calls the receiver of the notification to specific action.

A total of 91 percent that receive the notification consider it important and appreciate a call to action.

Push notifications find their way into your mobile device’s notification center and are accessible in the future and are easy to locate.

Push notifications are great for highlighting your app’s features. Spotlight a functionality that your user has not tried or recognized. For example, as a borrower, your appraisal is available in your mortgage folder and you can use it for room dimensions at Home Depot. Or congratulations on your one-year anniversary as a homeowner.

Or borrower retention opportunities with a push notification include rate and payment reductions.

According to Impactband.com:

Figure 1: Usefulness of Information Sources (National Association of Realtor® 2019 Profile Buyers & Sellers Annual Report)

As identified in Figure 1, the National Association of Realtors data shows that 82 percent of those surveyed used their mobile phone to obtain information, and another 16 percent used their mobile device sometimes. The combined use of a mobile device in a transaction was 98 percent.

• 70 percent of consumers immediately delete emails that do not render well on a mobile device, • 51 percent of all ad budgets in 2019 were directed toward mobile devices, • In 2019, over 72 percent of all digital marketing was directed through mobile devices,

customers with something less than the best in class for solving the challenges.

Mobile app use is not just the choice of millennials. Cohorts of all ages find the convenience and productivity compelling.

Mortgage banking firms and professionals would do well to enhance borrower experiences with mobile solutions that integrate their LOS and POS systems with mobile apps that hold the interest of their borrowers. Where the “clicks” are meaningful information about the borrower and where this information is developed to create a significant borrower experience that will surely garner strong social survey results. Remember, a borrower has no experience and really does not care what LOS your company uses; and the brief moments a borrower spends accessing a POS system are no more than

• 68 percent of companies have integrated mobile marketing into their campaigns, and • Over 71 percent of marketing professionals believe that a mobile marketing strategy is key to their business.

This is particularly important with the advent of 5G technology taking root globally. The outcome is promising with much faster speeds and with greater bandwidth. Companies are striving to develop crisper content that includes more video streaming and graphics with utility time consuming features that will both enhance our lives and entertain us.

Mortgage technology providers are starting to innovate, but have made it very hard for third-party app developers to access their APIs and inspire innovation through competition, leaving their The MORTGAGE BANKER Magazine

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February 2020

Affordable Housing Programs

Dream No More: Homeownership with Zero Down

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Technology seconds in an origination time frame that spans 60 days. The mobile experience can begin with the first introduction to the “goodbye” letter sent for the transfer of servicing.

According to CleaverTap® a prominent marketing think tank that specializes in real-time mobile experiences provide some very compelling data points in their 2018 annual white paper titled: Data Backed Secrets to Successful 2018 Push Notification Alerts.

CleaverTap has carefully examined over 40 billion clicks. Yes, that is 40 billion with a “B”. Their analysis will help marketing professionals with a mobile strategy to better develop campaigns that result in much stronger ROI results. Firm owners of independent mortgage banks, mortgage sales leadership at banks, mortgage brokers, and mortgage technology firms should consider some of these well-researched and thought-out recommendations.

• Push notifications with key emojis are very effective. Your marketing managers and sales professionals can consider the thousands of basic emojis or you can design your own.

• Timing of your push notifications is everything.

The CleaverTap study found that the time of the day matters. Certain time sensitive messaging cannot fall into a time slot. Your borrower wants to know their loan is approved any time; they want to know their closing date ASAP. • The best time for general push notifications is between the hours of 7:00 a.m. and noon. The worst times are between 3:00 a.m. and 7:00 a.m. Your borrowers do not need to respond immediately or be interrupted for a referral at dinner time. So, consider the time of day for general information and reserve the best notice times for key information.

To sum it all up, we are well beyond the use of mobile technology for making simple phone calls. Since about 2007 when the first iPhones were introduced, technology advancements for both hardware and software have moved at light speed.

Mobile apps have become the technology fibers that weave the access of information. Our mobile devices have become an inextricable part of our daily lives for information, content, social media and transactions and many of us spend well over six hours a day a fixed to it. Most of us keep our mobile devices on our nightstands when we retire for the evening and there are compelling statistics that we pick-up our devices within the first five minutes of waking.

Accessing our phone for financial transactions and credit card and checking balances have become a natural reflex like breathing. Mortgage technology really needs to catch up with the rest of the world and provide open API sources without overbearing access tolls that will encourage and invite best-in-class applications for the mortgage business and borrowers. Mortgage banking firm owners and mortgage sales leadership need to demand a true, efficient, and simple ROI driven mobile solution to bring their businesses into the most important consumer utility used today, their mobile device. MBM

• Over 60 percent of Android users and 45 percent of iOS users opt in for push notifications.

• Business and finance apps see the best and strongest results from consumers, which means that a white labeled mortgage origination app would substantially improve your borrowers’ experience.

• Personalization of the push notification garner the best results. Even a bare bones basic personal message will see engagement increase by 10 percent.

• Character length is very important to effective review, and acknowledgement is essential. For financial services, the perfect character length is about 55 characters. Less is always more.

• Push notification power words entice, invite, and should be time sensitive. “Your loan is in underwriting,” “Your closing date is,” or “Refer a friend or family member and receive a choice dinner value of $100.00.”

• Choose your push notification words carefully.

Words such as apply, cash back, celebrate, discount, exclusive, premium, and reserve are just a few examples.

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February 2020

Technology

MORTGAGE TECHNOLOGY GAPS STILL EXIST: What Improvements Can We Expect for The Customer Experience In 2020?

By Teresa Blake, KPMG

It feels like so long ago that I applied for my first mortgage, an FHA arm loan. I was 24 years old and so proud of being in my first new home. I was shocked at my first adjustable rate hike wondering if I’d made a smart or a stupid decision to not lock in on a rate. I immediately re-applied for a 30year fixed mortgage to get to more predictable payments. Fast forward just a few years. Recently, I have been applying for a mortgage for a potential second home. I applied recently for a 15-year fixed loan and the lender came back with loan pre-approval for a 30-year fixed. When I asked why, they said most borrowers like the low payment but they never asked for my financial objectives. I told the loan officer that a 30-year fixed loan was not what I asked for on the initial online application. I moved on unsatisfied that my needs had not been addressed.

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A few days later I applied with another lender for a 15-year loan and had an experience that left me guessing, and a loan officer who vanished. While applying online, the loan officer called me five or six minutes into my loan application, which I thought was a nice gesture to see me through the process and address any questions I might have. When I told him I was shopping for a vacation home, but had not landed on a property, he said “ok” and that was the last I heard from him. When I found a property, I called him to tell him that a contract was close. He told me that I’d have to re-apply, I just scratched my head wondering if any of the information from my previous interaction was even retained. Unsatisfied with the experience and uncertain about securing a loan that made sense, I stepped back and decided that I might try again in 2020.

The traditional experience done in person with a loan officer to help guide the borrower has been evolved to provide more self service via an online application experience. Initially, when online applications became prominent, the convoluted layout and abundance of questions frustrated and confused borrowers leading them back into a branch or on the phone with a call center.

Today, lenders are using the Point-of-Sale system (POS) to break down the questions in layman’s terms and dynamically adjusting questions based on previous answers. This can greatly shorten the time is takes to complete an application while making it much more intuitive.

In today’s world, knowing borrowers have many choices centered around a shorter and easier experience, lenders are analyzing the best order to ask certain personal questions to understand borrower comfort levels at particular points during the application. When done correctly, it should only take the borrower a few minutes to finish the application, which greatly decreases their chances to abandon or “walk away” from the application. These modifications may seem minor, but first impressions go a long way in customer retention and satisfaction.

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Additional Features and Capabilities POS system features have grown over time to create additional process efficiencies as lenders have started adopting the platform. These features all serve to expedite loan-processing and/or provide visibility to the borrower.

LENDER FEATURES: • Customer Relationship Management (CRM) Integration: Lender integrates CRM to the POS system to automatically input lead information into the POS system.

• Loan Origination System (LOS) Integration: Lender integrates LOS to the POS system to automatically feed information to the LOS for processing, underwriting, and closing tasks.

• Credit Ordering: Originator orders credit directly in the POS system to reduce tasks outside of the POS system.

• Product and Pricing: Originator runs product and pricing (inclusive of fees) directly in the POS system to give borrower accurate loan information upfront.

• Mortgage Insurance (MI): Originator orders MI rate quotes from multiple vendors directly in the POS system.

• Settlement Service Providers: Originator receives applicable settlement fee information included in pricing directly in the POS system.

BORROWER FEATURES: • Document Management: Borrower uploads and views documents in the loan file.

• Appraisal Payment: Borrower makes appraisal payment online.

• Task Checklist: Borrower sees full list of outstanding items required for loan completion.

• Status Check: Borrower checks status of loan for full transparency.

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Technology The C-Suite FRONT-END AUTOMATION

In light of these questions, we suggest lenders begin their consideration of a POS system with these steps:

The key purpose of front-end automation is to verify borrower information and align the borrower to the proper product more expediently. Over the last decade, mortgage offerings have become largely commoditized due to regulatory oversight following the financial crisis, taking focus away from the customer experience to compliance with data capture requirements. This, in many ways, has created the ability to leverage robotic (rules-based) process automation (RPA) to match borrowers to the best-fitting product. It has also led to the digitization of information captured from the borrower to reduce the manual keying of data, which can be error prone.

• Know your workflow from lead to closing; understand your strengths and weaknesses on a detailed level.

• Identify your key performance indicators (KPIs) early to ensure that you can measure success • Spend the time to create a thorough business case before making a selection based on the features and functionality of the POS system you’re considering.

Steps lenders can take: Adopting a POS system clearly provides advantages to lenders. However, selecting and implementing new technologies can present challenges, as well. At the 2019 Digital Mortgage Conference, 150 lenders were asked what their biggest challenge is in delivering a digital mortgage solution. In response, 46 percent singled out execution challenges such as decision-making and talent gaps. [Source: KPMG Survey at the 2019 Digital Mortgage event]

• Put equal focus on people, processes, and technology. An over-emphasis on one to the neglect of others will lead to a misapplication of all three.

Lenders will need to apply some strategic thinking and perform thorough due diligence when selecting a mortgage POS vendor. They should consider engaging a trusted business advisor to assist in the process. But the effortless application and front-end automation provided by a POS system will provide lenders with the ability to structure a loan with verifiably accurate borrower information in minutes, reducing operational cost and an enhanced borrower experience.

I am excited about the new technology developments in intelligent automation and advanced analytics solutions that will further reduce costs while improve the overall borrower experience.

When my daughter asks me why it takes so long to close a loan or why it’s so expensive, I talk about the amazing lenders I continue to have the opportunity to collaborate with each and every day to improve the overall experience. With collaboration, laser focus on execution, and careful consideration of technology, I’m confident the industry will continue to make strides in dramatically diligently improving the home buying customer experience. Please keep up the great work. MBM

As we’ve worked with lenders, we’ve discovered that many of them have similar questions: How do I know which technology platforms to use?

How do I reduce fixed costs?

How do I help combat margin compression?

How do I increase pull-through?

How do I optimize resource management?

Will our current processes truly allow us to take advantage of automation?

How will I be able to make changes in an agile fashion to adapt to changing needs of our customers?

Can I rapidly introduce new products and pricing strategies to capture particular market share?

Can I embed predictive analytics into my process to help me prospect first-time home buyers with greater accuracy?

Can I leverage analytics and data better to more effectively rate risk and price better?

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February 2020

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Loan Origination

It’s Time to Rethink Your Pricing Calculus

By Joe Zeibert, Nomis Solutions THE NEW NORMAL: AFTER YEARS OF WAITING FOR A STEEPER YIELD CURVE, IT’S TIME TO ADAPT

To grab market share from traditional banks, innovative non-bank alternatives such as Rocket Mortgage, Better, and Figure are streamlining and digitizing the mortgage application process. In response, banks have set up “customer journey teams” to reimagine the home buying process and, within it, the financing process. But few have tackled the hardest part of the problem: The challenge of simplifying and aligning product and pricing with the customer’s needs, throughout their buying journey and beyond. How can they transition to this new approach?

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When will the inevitable recession hit? Tomorrow or two years from now? Do any of the previous indicators on which we used to rely mean anything in the new normal? Remember the inverted yield curve and the impending dooms day prophets that came out of the woodwork saying the bull market was over? What followed was all-time market highs and more growth than predicted.

We are now in 2020, and the overall macroeconomic picture is mixed, manufacturing is down, and the market is still up. But one thing is apparent: It seems inevitable that a protracted low-interest environment lies ahead, which means further margin compression for lenders. We’re witnessing flattening and, per the above, occasional yield curve inversions. Consumer confidence is strong, but is fading from recent highs, and this caution is 18

February 2020

fueled by fears of slowing economic growth and the potential for a recession.

There are also some encouraging signs.

While consumer confidence may be down, bank profitability has been buoyed by a strong housing price index (HPI). Total household debt is on a steady upward trend, with the bulk of that accounted for by a significant proportion of mortgage debt. Also, home equity has been growing and, as a proportion of that mortgage debt, is at a very healthy level.

And, while net interest margin has certainly been compressing, over the past couple of quarters banks have been able to grow their loan portfolios and their net interest income. The credit market is strong, total outstanding loans are up, yet we are in a new normal of lower yields and frequently inverting yield curves.

What is the best strategy to remain profitable in this cycle? We need to focus on a customer-first approach if we want to sustain loan growth without driving margins to zero in this tight environment.

Take for example the home equity market. Right now, this potentially lucrative lending product is caught in the middle between two competing loan products. It is being attacked on the high end by cash-out mortgage refinances, which are as slow as HELOCs to originate but are often much cheaper and are also tax-deductible. Meanwhile, on the low end, HELOC volume is being nibbled by personal loans that are faster and cheaper to originate and are priced at much higher interest rates. Of course, this picture will change quickly if mortgage rates rise.

My point is that banks have got themselves into a mindset of designing products that align with specific customer situations but have fairly rigid rules for application. But the reality is that customers have needs that require flexible solutions, not rigid products. Let’s play “what if” for a moment.

rethink and link the pricing assumptions on these two products, we can overcome the potential for losing money on a low-value HELOC. • What if you structured a cash out $50k mortgage refinance along with a $10K cash-out refinance of a mature auto loan? The customer gets the $60K they need and a lower rate on both the auto and the mortgage.

In other words, how can we ‘solution-sell’ by offering attractively priced products that address customer needs and are coherent with your bank’s profitability goals?

REFORMULATE FOR DEMAND-SIDE PRICING Bank product and pricing decisions are typically reactive and address short-term problems, such as capacity. They are also driven by competitive pressures and quarterly financial objectives. These short-term-focused pressures and objectives will only intensify over time, and so the only framework for sustained growth and profitability is to be customer-centric, not product-centric.

This new way of thinking is enabled through the application of decision-making tools that position you to deliver a better customer experience at a lower fulfillment cost. This mindset creates a winwin situation in which you can command a price premium through a superior customer experience, or, alternately pass this cost savings on to the customer.

Becoming customer-centric and an unyielding advocate for the customer is good for business and profit in the long term. Happy customers, even at lower rates, lead to referrals. And referrals are the least expensive form of new business. New business leads to more revenue, which in turn positions you to reinvest in the technology that powers these customer-centric decisions.

If adopted as a proactive long-term strategy, a customer-centric pricing approach, enabled by being smarter through improved customer insights so that you can offer the customer the right price, leads to a better customer experience and reinforces the cycle of happy customers and profitability. MBM

• What if you could reduce a customer’s LTV to lock in a better rate for 30 years by giving them an attractively priced personal loan?

• What if, instead of offering a $45K HELOC, you instead offer a personal loan for $20K to money now, with a $25K HELOC for later use? If we The MORTGAGE BANKER Magazine

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February 2020

Loan Origination

Were You as

PROFITABLE as You COULD HAVE BEEN?

By Allison Johnston, Success Mortgage Partners

Looking back at 2019, it was a great year. I imagine most companies broke records and had an amazing year. The refinance bump did help with increased originations, but for us, Success Mortgage Partners, we only saw about a 15 percent increase in overall volume due to refinances. This was quite a movement for our company considering we are primarily a purchase business. The question is‌ Will the rates stay where they are now?

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February 2020

I am not an economist, but I believe companies need to focus on cost savings, not only in years that companies struggle, but in the good ones too. Interest rates are always subject to change, but it can be less of an impact on your company if you budget accordingly.

Healthy companies constantly look at their overall financials and look at ways not only to make money but to save money. Although times are great now, it will not always be the case.

Presidential elections, potential wars, and any type of uncertainty can drive down customer confidence for making financial decisions. When companies are growing and hitting record numbers, it is easy to take their eye off the ball because of the hype. It is an amazing feeling to say you hit a record, but ask yourself: “Were you as profitable as you could have been?”

If you have not reviewed your vendor contracts or asked for better terms, then you should. Do you have the best vendors for your business? From personal experience, we reviewed all our contracts, lease agreements, reduced excess spending on overtime, tightened up on metrics, focused on efficiencies and building BOTs in our LOS system, and hired only when needed, not to fix a problem. In doing this, we have saved over $7 million dollars in 2 years.

You should ask yourself are you managing to the task or the personality of your team members? I often find that managers have a hard time deciding whether to part ways with a team member that is underperforming. Trust me it is never an easy task; however, I have heard people say keeping someone that is a subpar team member is better than not having the productivity at all. Just say that out loud once or twice. Does it make sense? People should not let themselves get in a position to “keep” under performers. Keeping people on your bench helps you in a situation like this. If you are desperate to hire someone, do you always hire the right

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person? Or, when you have a little more time to vet candidates, do you make better decisions?

Personally, I make better decisions when I have time to vet potential candidates rather than when I am pressed to hire someone…anyone…. I try to justify it in my head too by saying well, “I think they will do okay.” Okay is never enough and should not be acceptable to you. Striving for exceptionalism should not be an occasional task but performed daily.

People might ask how does someone go about saving $7 million? The answer is a simple one…Dedication, perseverance, and 100 percent company buy in. We saved $7 million as a collective effort with everyone’s contribution; accepting all ideas and looking through ways to be more efficient. Yep, you guess it; we did not keep under par performers. Our owners spearheaded the idea and then the teams ran with it. We give a trophy to pass every month for the department with the most cost savings or the best efficiency. We made it fun. People are competitive by nature and want to succeed when given a target. People want to feel part of something and that they contributed.

Disciplined cost savings can help companies invest in new age technology and further advancements. If you are someone that shops for a better deal personally, then why wouldn’t you do the same for your company? It is a change of mindset and once it is changed, amazing things will happen. The biggest assets that companies possess these days are their managers, team leads, and team members. One hundred percent hands down your people. So, give them the ability to be empowered, make decisions, and positively contribute to the company’s overall success. Invest in your people and they will invest in you and your company.

It is a new year, new goals, and new opportunities to be great. So why wouldn’t you?

MBM

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Loan Origination

HOW TO TACKLE 2020: A LOAN OFFICER’S PLAN

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By Matt Holmes, Data Facts 2. SET SMALLER, ACHIEVABLE GOALS.

e all know New Years’ resolutions are hard to keep. Thirty-five percent of us will stick to our resolutions past the end of January, and only 23 percent of us will keep them until the end of the year. If you’re skeptical about making resolutions for your lending team in 2020 (or if you’ve given up altogether), we’ve got good news: You can do it.

We’ve put together an eBook with some helpful strategies that’ll get you there, including how you can set better goals, increase your productivity, and maximize closings.

Here are some of the most common behaviors we’ve seen among successful loan officers, and why we think you should adopt them in 2020.

Break your goals down into small, manageable steps. Eating an elephant might sound daunting.

But, if you can break that elephant down into smaller, simpler parts, it doesn’t seem all that difficult. We have the propensity to set our goals too far out, so it’s important to bring our goals back down to earth.

Think about how our early ancestors managed to survive. For cavemen, survival was a day-to-day struggle.

The same goes for your mortgage lending team. If you set your sights too far out, you might procrastinate or get sidetracked on the way to your goal.

3. REWARD YOURSELF.

Are you rewarding yourself periodically for hitting your goals? It’s a simple idea, but good old-fashioned Pavlovian conditioning can go a long way. If you aren’t rewarding yourself for creating patterns of good behavior, you aren’t doing much to solidify those habits.

For every milestone you hit, take note of how you’ll celebrate. Each positive reward can provide you with the boost you need to reach the next one. Of course, you don’t need to incentivize yourself with fancy dinners or expensive toys, but a simple reward structure can keep you motivated on the way to your goals.

1. THINK SPECIFIC.

If you want to enjoy success in the new year, you’ll need to make sure you’re setting goals that are specific. Get down to what you want; a vague goal isn’t going to cut it. Think about a loan officer who wants to “expand their network” in 2020. Doesn’t sound very specific, does it? Instead, consider providing some specifics about what you want to achieve. For example, “Make 3 new connections per week starting this month.” This is more specific, and it also aims to quantify your goal.

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February 2020

4. MONITOR YOUR PROGRESS, AND SCHEDULE TIME TO LEARN.

Examples to consider: • Social media • Office politics • Water cooler chit-chat Note: If a task can’t be done, scheduled, or delegated, then there’s a good chance it should be deleted from your work schedule.

Sometimes we all fall short of achieving our goals.

Maybe your target was to produce 150 leads per quarter, and you only hit 100. Given this situation, you understand that you need to figure out a way to generate 50 more leads per quarter, because if you continue on the same path, chances are you’ll fall short again.

This is where learning comes in. Dedicate some time to research what you can do better. In this case, maybe you’ll need to set aside an hour to study lead generation techniques. Not only will you need time to brainstorm, but you’ll also need to schedule time to implement these strategies and monitor your results.

6. AUTOMATE PROCESSES.

For loan originators, time is money. Lucky for us, we live in an age where technology can help us work faster.

Think about the actions that you complete during the average workday. Are some of these actions repetitive?

Would you consider them low-level cognitive tasks? If so, there’s a good chance they can be automated using mortgage software. For example, collecting borrower documentation can be time-consuming. However, GSEs and data providers now offer ways to complete income and asset validation without having to manually track down bank statements.

5. DON’T BE AFRAID TO SAY NO.

What’s one thing you can say “no” to that’s a waste of time? Most of us have things that creep into our schedules that might dominate our workday. Getting rid of non-productive behaviors might free up some time to work on productive tasks to which you can say “yes.”

A good way to sort out these daily activities is to split your day up into tasks based on the level of urgency. This is where the Daily Priority Matrix, otherwise known as the Eisenhower Matrix, comes in.

If the task can’t be done now or later, and it can’t be delegated, then it must be deleted. Let’s break down these categories...

7. EMOTIONAL HEALTH IS KEY.

If you’re feeling inundated with daily tasks, try incorporating small breaks into your schedule. Take a quick break to read something that you’re interested in and isn’t work-related. Research shows that the human brain is 50-60 percent less productive at the end of the workday than the beginning, and taking short breaks can help you stay more productive, later into the day.

If possible, try to stop surrounding yourself with people who bring you down. Take cranky clients or referral sources, for instance. If someone continues to bring bad vibes to your day, what’s the point in keeping them around? Ridding your work environment of negative influences can help you and your team think positively and can even impact your bottom line.

This mindset shouldn’t stop when you leave the office either. We know that happiness is directly tied to our relationships, especially those outside the workplace. Remember, you are the sum of the 4-5 people with which you spend the most time. The more you associate with quality people who inspire you, the happier you’ll be in the workplace.

Dreaming is easy, but coming up with a cohesive plan is hard. If you’re going to succeed, you’ll need to stick to that plan. And don’t be afraid to write it all down. Having your strategies listed on paper will help you hold yourself accountable. If you can roll out your plan while focusing on each of these areas, you’re well on your way to knocking it out of the park in 2020. MBM

The Daily Priority (Eisenhower) Matrix

Do it: Items with clear deadlines that require immediate action.

Examples include: • Meeting with mortgage applicants • Approving loans • Calculating payment schedules Schedule it: Items that don’t have a specific deadline, but help you get closer to your goals.

Examples, such as: • Strategic planning • Networking • Professional development Note: These tasks are easy to procrastinate.

Delegate it: Tasks that need to be done, but may not require your specific set of skills.

Examples include: • Advertising your services • Building a website • Sending certain emails Delete it: Distractions that detract from your performance at work. May not be harmful in moderation.

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Editor's Note: This article was originally published by Data Facts as an ebook.

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Loan Origination

THE NEW FIRST-TIME HOMEBUYER: What We Need to Know and How We Can Help Them on their Journey to Homeownership

By Brien McMahon, Radian Guaranty

C

onsiderable time and thought have been spent on the position millennials hold in the housing market and for good reason.

According to a 2019 report from the National Association of Realtors, millennials now make up one-third of the home buying market and will remain a central force in the housing market for decades to come. But as we turn the calendar to the launch of a new decade, it’s also time to start looking at the next wave of first-time home buyers: Gen Z. Born between 1995 and 2010, Gen Z will be the largest U.S. demographic group by 2026, constituting approximately 82 million consumers.

While millennials came of age during the Great Recession and the lean years that followed, Gen Z has emerged during a time of record highs in the stock market, extremely low unemployment, and rock-bottom interest rates.

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As we approach the next generations of firsttime homebuyers, both millennials and Gen Z, it is vitally important to understand, more granularly, who these potential homebuyers are. The demographic makeup of the U.S. is shifting, and those changes are well represented in the evolving pool of consumers looking to take the plunge on their first home purchase.

A TRUE MELTING POT

Harvard University’s Joint Center for Housing Studies estimates that nearly 77 percent of our nation’s household growth over the next decade will come from minority-headed households. As a comparison, as recently as 2012, fewer than 30 percent of U.S. households were headed by minorities. The Asian American/Pacific Islander community is the fastest growing segment of the U.S. population, according to the 2018-2019 State of Asia America report produced by the Asian Real 24

February 2020

Estate Association of America, in conjunction with RE/MAX and Freddie Mac. Connecting directly with these communities is the best way for lenders and agents to serve potential borrowers, and strategic partnerships is an effective way of doing that. However, it’s important that these efforts feel genuine. Having a team that mirrors your target audience in age, race, and language skills, can help a company be better positioned for success. This may require retraining professionals from other industries, mentoring young talent, or creating and/or partnering with professional groups.

Industry participants can benefit from partnering with top diverse real estate trade associations, including the National Association of Hispanic Real Estate Professionals (NAHREP), Asian Real Estate Association of America (AREAA), and the National Association of Real Estate Brokers (NAREB). Each of these organizations has a mission to expand homeownership for their respective minority constituents through education and advocacy.

Even though younger adults are known for being internet savvy, there continues to be an opportunity to better educate borrowers about down payment assistance or grant programs that states, municipalities, and nonprofits offer firsttime homebuyers. Properly educating borrowers about financial assistance options can help with affordability and distill the 20 percent down myth.

TECHNOLOGY IS AT THE CENTER

Taking a closer look at Gen Z, according to a Business Insider survey, this group of young people have a reputation of being a highly practical, optimistic generation. Indeed, a recent survey conducted by Homes.com reported that 87 percent of Gen Z members report they want to own their own homes before age 35.

And unlike any generation before them, Gen Z, like Millennials, has grown up in a world where technology has been incorporated into every aspect of their lives. The new generation of homebuyers has experienced the confluence of technology, automation, and increased personalized contact, and demands the same from the housing industry.

First-time borrowers want to learn about, view, and purchase a home all on one, conveniently accessed screen. Those are characteristics lenders and agents should keep in mind when working with and marketing to these first-time buyers.

This increased level of connectivity also means housing professionals have an opportunity to leverage technology to reach their target audiences.

Among all populations, referrals from friends and family drive business in the real estate market. In the age of “going viral,” that statement rings truer now more than ever before. Housing professionals, from realtors to marketers to sales teams, should thoughtfully and strategically embrace technology, keeping in mind the influence that it holds.

The growth of minority populations and projected increases in their homeownership provide significant opportunities for mortgage lenders. Young, diverse households are seeking solutions across the entire mortgage value chain, including tailored products and services. For lenders, it boils down to being a valuable financial partner, with a focus on serving the specific needs of these populations. MBM

DOWN PAYMENTS STILL A CHALLENGE

Even when considering the positive conditions of the current market compared to years’ past, the dream of owning a home is still frustratingly out of reach for too many people.

Determining whether to rent or buy, city versus suburbs, starter home or dream home, these are just some of the basic challenges facing first-time homebuyers. However, even once those decisions have been made, saving enough money for a large down payment continues to be the greatest hurdle to homeownership. This is especially challenging for first-time homebuyers and can be particularly true for minority borrowers who are often unaware of their options.

Many consumers appear to be misinformed about down payment requirements and may believe that a 20 percent down payment is mandatory.

Helping borrowers understand their options can help more homebuyers realize their dream is within reach. For example, many young individuals may not realize that private mortgage insurance is a financial tool that can allow qualified homebuyers to purchase a home sooner, with less money down.

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February 2020

Quality Control & Risk Management

QC 2.0

Next Generation of Quality Control for the Mortgage Industry

By Steve Spies, SWS Risk Advisory

A two-part series starting with strategic guidance on adapting QC to the digital marketplace. In part two I take out my crystal ball and forecast the next decade’s convergence of big data, customer experience, and quality control ... or not.

T

he last mortgage war is over. The mortgage loan quality battles raged from 2008 until the tide turned around 2015. The war was won by the industry’s embrace of quality standards rivaling industries known for their precision manufacturing processes. Rolex would give a tip of the cap to the mortgage industry’s >99.5 percent significant defect accuracy rate. But that long needed permanent investment in quality control was designed for a high document, labor intensive and low-tech world. Digitization, risk proliferation, and the competitive onslaught requires a new mind set for using quality control dollars to survive in the era of Big Data. In short, time to pivot

from defense to offense, and this month I lay out a plan to do that.

In next month’s issue, I will take a stab at forecasting the industry’s progress over the next decade in automating the credit decision process in alignment with loan quality requirements. Spoiler Alert: Even though great gains will be made in the routine aspects of the industry, like closing docs, with underwriting and QC, every mortgage is like a thumbprint.

Each loan is so borrower unique that big challenges in credit data standardization prevents tech from providing anything close to a 100 percent solution in the next ten years. Count me a doubter that “within two years the

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February 2020

majority of mortgages won’t need a human touch.”

PART ONE

Mortgage QC 2.0—The Best Defense is a Good Offense Quality Control as an offensive weapon has three main attributes: 1. Proactive – 80 percent realtime, pre-closing, 20 percent post-close 2. Profit centered – strategic, targeted QC driving continuous bottom line improvement across the enterprise reducing costly manufacturing defects.

3. Data driven, human applied – Artificial Intelligence (AI) and

Tech rightfully power QC 2.0, but needs extreme discipline to ensure accurate data quality and interpretation.

Proactive: It’s important to distinguish quality assurance from quality control. Quality assurance is making sure customer expectations are met before the transaction is completed.

Quality control is a post-closing validation that the manufacturing process worked as intended and as required by law and investors. Most lenders only intentionally invest in backend quality control as an audit compliance necessity. During the crisis, QC became synonymous with repurchase avoidance, and

then a defense against stricter legal and regulatory compliance standards. Those foundational, post-manufacturing duties must continue, but the GSEs have committed to long-term repurchase risk minimization.

This incentivizes resource reallocation to managing quality while creating your product or service. Embedding a quality assurance feedback loop in the product delivery process prevents mistakes from impacting your customers. Have you analyzed the cost of reworking a loan? The price of a lost customer? Getting it right the first time flows right to the bottom line and keeps coveted customer surveys and social media ratings high. It’s not

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unreasonable to shift 80 percent of your overall loan quality dollars into pre-delivery because QC technology has developed robust pre-funding QC modules, reporting, and feedback loops, possibly with an overall reduced QC budget.

More importantly, as repurchase defects are so rare, quality assurance can focus on manufacturing errors that really cost you money. Over processing, wastes, and delays are eating your lunch now. Mortgage lenders are well aware that the percentage of “just got lucky” defects is much higher than the approximately .5 percent industry repurchase error rate. These impactful defects generally don’t require

Quality Control & Risk Management repurchase when the overall loan credit profile is strong. However, the same mistake on loans with marginal credit parameters might require financial remediation if not outright repurchase. Lenders should have a sense of urgency about this; it’s time to optimize manufacturing quality before the inevitable recession and the typical erosion in loan quality that comes with it. Only proactive QC improves or preserves profits, the second pillar of next generation QC. Profit Centered: I recently outlined the case that strategic lenders will view QC as a profit engine. To recap, the cost to originate a loan is pushing $10,000, which cannot last. The industry is constantly bemoaning over documentation and sending loans back through underwriting five or six times due to faulty or errant documentation.

And we can’t help ourselves from throwing more and more money at originators. The cost of implementing all the technological bells and whistles may add hundreds of dollars per loan with questionable payback. And that assumes implementation of these tech tools is seamless and accurate.

And finally, of course, lenders are absorbing a backbreaking amount of increased compliance and regulatory costs.

Forward-thinking lenders realize investing in quality control as a real-time feedback mechanism drives continuous improvement to revenue and cost. Shifting your mindset from QC as a no news is good news role, to a powerful proactive source of improvement may

separate winners and losers. It’s likely no other function in your organization dissects every step and every document on a sample of your loans every month. QC’s timely results drives costs savings now, rather than some imagined future state.

In case you missed it, here are the five immediate ways I suggested your QC work can lower costs and improve revenue:

Forward-thinking lenders realize investing in quality control as a realtime feedback mechanism drives continuous improvement to revenue and cost.

1. Underwriting overlays – needed or overly cautious?

2. Required documents – eliminate CYA docs 3. Rework – loan defects slowing down the process?

4. Technology – promised savings being realized?

5. Liquidity– repurchase/loss reserves excessive?

Here are couple more interesting possibilities: • People – coaching up those with most defects is an easy win • Loan type – self-employed taking twice as long?

Just a couple hours

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brainstorming your QC results will drive a long list of high impact opportunities. Rather than mechanically sampling and reporting on repurchase and compliance, the more advanced reporting tools from QC vendors and inhouse systems can be plumbed for endless insight into company operations. Engage your QC team or vendor to generate improvement ideas, gather market intel, stop overkill, and prevent mistakes.

Data Driven – Human Applied There is no looking back on the digitization of business processes, and QC is no exception. In fact, because its main purpose is data analysis, either in a document or a raw data point itself, QC lends itself to automation better than other parts of the business. AI and machine learning excel at spotting when two or multiple pieces of information don’t make sense in relation to each other. Lenders’ investment in these tools requires at least two guardrails. First, implement with a purpose, either driving front-end improvement to a manufacturing weakness, or spotting troubling quality issues or fraud patterns post-close. Don’t act without a plausible ROI. Second, ROI calculations must factor in that AI and Robotics often generate high false positive rates. Chasing down too many inaccurate red flags destroys the benefit and numbs the staff from acting on real risk indicators.

The Big Data era is driving a generational shift in mortgage origination, from customer acquisition to fulfillment, underwriting and closing. Of

QUALITY CONTROL GUIDE KEY PERSONNEL & CONTACT INFORMATION Dru Jacobs, President 1-800-888-0456 Sales@adfitech.com www.adfitech.com BUSINESS SERVICES & PRODUCTS

CORPORATE PROFILE Since 1983, Adfitech, Inc. has been the go-to source for premier post-closing and pre-funding quality control services for more than five hundred mortgage lenders, banks, and credit unions throughout the United States.

Located in the heartland of America, Adfitech, Inc. is known for concierge-level service in delivering trustworthy results, expert regulatory oversight, and improving overall loan quality for the clients we serve. Adfitech, Inc.’s online reporting and rebuttal platform is the easiest, most transparent online rebuttal process the industry has to offer. Our simple per-file pricing eliminates the need for long-term and minimum contracts, enabling Adfitech, Inc. to operate as your company’s full-service quality control partner. For more information or to schedule a demo, please visit us at www.adfitech.com.

Performing oversight from application to payoff, Adfitech, Inc. offers review service products to meet every need. Post closing Quality Control that meets the requirements of Fannie Mae, Freddie Mac, FHA and VA, as well as, Non-QM/ATR products.

Pre-Funding Quality Control to review the accuracy and quality of the loan application and approval before funding. Mortgage Fulfillment to handle the delivery of a complete closed loan file to an investor or collateral package to custodian with imaging and/or file storage options. Servicing Quality Control Reviews consisting of several distinct QC programs based on the areas of servicing in which you wish to identify and control operational risk. Mortgage Due Diligence that is rating agency reviewed and offers Pre-Securitization, Private Transfer, and NPL / RPL reviews.

KEY BENEFITS & VALUE

Experience Counts! With 35 years of service, Adfitech, Inc. is committed to providing timely response to all inquires as well as proactive solutions in order to meet client specific demands. Our innovative approach to client satisfaction allows us to remain agile in an ever-changing industry as we continually work to exceed expectations of our partners. With no long-term or minimum contracts and competitive and simple per-file pricing, Adfitech, Inc. gives your company a full-service quality control department as well as a variableprice solution based on your company’s production volume.

KEY PERSONNEL & CONTACT INFORMATION Claudia Duncan, President 615.591.2528 ext 124 info@qcmortgage.com www.qcmortgage.com BUSINESS SERVICES & PRODUCTS

CORPORATE PROFILE Quality Mortgage Services, LLC (QMS) is a well-established leader of mortgage quality control audit solutions and proprietary mortgage auditing software, MARS (Mortgage Analyst Review Software). With over 20 years of experience and specialized knowledge in the mortgage banking industry, QMS is a boutique risk management and mortgage quality control solutions company that provides full service mortgage loan analysis results for banks, credit unions, lenders, brokers and housing authorities.

QMS is a proven industry partner, with a dedicated commitment to our clients. The QMS vow is to shine in customer service, responsiveness, support and flexibility.

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QMS delivers reports and analytical tools that assist clients in assessing loan quality and maintaining organizational compliance.

Our audit reviews are in line with agency requirements and QC services include: Post-Closing, Pre-Funding, Federal Regulatory, Pre-Purchase/Due Diligence, Early Payment Default, Denials, Servicing, Repurchase Defense, HMDA, Anti-money Laundering and MERS® audits. Additionally, QMS offers a secure reverification platform, QCVerify, and our MARS QC software can be leased to manage QC efforts inhouse.

KEY BENEFITS & VALUE Audits, QC plans and verification solutions that meet today’s organizational compliance needs…. We guarantee 4-6-week report delivery. At QMS we are progressive in nature, committed to service, and always evolve to better assist our clients in meeting industry requirements and their unique needs. All solutions are competitively priced and supported by our MARS software, providing transparency to every phase of the quality control process.

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course, this shift creates new frontiers for quality control.

Any investment in data driven solutions comes with a big piece of yellow caution tape around it. Even though we have the technology and skill to spot defects with data, the data quality curve is just emerging.

Most mortgage file credit elements lack standardization and controls around data creation, transmission, and protection. Borrowing a baseball analogy, income and employment data integrity is barely out of the first inning. Add in that humans are handling this data at some point introduces everything from normal error, to biased interpretation, to outright manipulation. By comparison, because of widely agreed upon format and data definitions, appraisal data standardization and digitization approaches the late innings. Regardless of where a piece of technology claims to be in the game, QC must lead in testing data quality and holding vendors accountable for data accuracy claims. Confirmation bias can be rampant amid the glamour of new technology.

To keep pace with mortgage digitization, QC must develop data quality testing expertise.

But don’t be fooled by tech providers claiming to verify direct from the “source of truth.”

This term mistakenly entered industry lexicon believing that going to the “source;” for example, an employer makes it the “truth” for purposes of credit decisioning. I prefer the terms “primary sources” and “alternative sources.” An employer is a primary source

for employment information, but its “truth” depends on the employer’s approach to an array of consistency, definitional, and reporting needs. For starters: Did the income vendor interpret and map the employer paystub fields correctly? Did they manually manipulate the data in any way?

Did your loan origination system import the data correctly? Your

Regardless of where a piece of technology claims to be in the game, QC must lead in testing data quality and holding vendors accountable for data accuracy claims.

QC team must independently validate and analyze data quality at all points during its digital journey.

A single source for data also complicates independent validation. QC should lead development of secondary sources to confirm accuracy and reasonableness that don’t rely on the primary source. For instance, can LinkedIn give us independent insight on employment status? Even in today’s mostly manual world, we seldom rely on one source of corroboration. As an example, we now get up to four pieces of primary data on employment and income: a paystub, W-2, verbal verification of employment, and sometimes tax returns. Further,

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relying on a single source opens that source up to targeted manipulation and falsification.

Fooling ourselves that QC’s no longer necessary will be the biggest mistake of all. Quite the opposite. By assuming an unvalidated primary source is always accurate, we potentially back into another version of nodoc loans.

Hoping to optimize speed and cost, AI advocates imagine a world where a sufficiently predictive credit decision can be made from modeling publicly available information. Proponents say it’s a straightforward algorithm by mining social media, credit scores, and everything else the internet knows about us. Then, it’s a simple matter of pricing for the modeled default risk. No need for documentation or other controls.

Just consider the accuracy of your own internet footprint to know that data quality concerns grow exponentially with such an approach. And pricing for risk was one of the mistakes at the heart of the last crisis. By design, a pricing for risk approach assumes some borrowers lose their homes and is contrary to the goal of sustainable home ownership. My view is no matter the sophistication of the decision engine, we can never comprise the fundamentals of independently establishing borrower willingness and ability to repay a debt.

With these limits on how far “data and done” can carry us, in next month’s issue I share my vision for the next decade’s wins and challenges in pursuit of the digital mortgage. MBM

Mortgage Operations

THE LAND OF LINCOLN WANTS MORE OF YOUR BENJAMINS High Property Taxes Have Many Hog-Tied in “Hogtown”

By George King, CoreLogic

T

he Civic Federation, a Chicago-based independent government research organization, recently released its report analyzing property tax rates in Northeastern Illinois. The report garnered some local media attention with its claim that homes in Chicago have the lowest effective property tax rates in the region (1.74 percent) when calculated as a percentage of their market value.

The October 21, 2019 report estimates the tax year 2017, payable in 2018, effective tax rates for Chicago and 28 other selected municipalities in northeastern Illinois were lower in areas with a richer tax base. However, despite 7 of the 12 Cook County municipalities experiencing an effective property tax rate decrease on residential property in tax year 2017 compared to the previous year, the fact remains that in the ten-year period between tax years 2008 and 2017, the effective tax rates increased in all the selected municipalities in Cook and the collar counties, as outlined in the report’s major findings.

The report went on to explain that the change in effective tax rates over time is due to changing actual composite tax rates, changing median levels of assessment, or both. Add to that changes in the equalization factor in Cook County. As an example,

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the report cites that Chicago’s actual composite property tax rate increased from 4.816 percent in 2008 to 7.266 percent in 2017. Over the same time period, the median level of assessment decreased from 9.13 percent to 8.06 percent for residential properties in Chicago and rose from 16.41 percent to 20.90 percent for commercial properties, according to 2017 assessment level ratios calculated and published by the Illinois Department of Revenue.

On the whole. in fact, Illinois has the dubious distinction of being the least tax-friendly state in the country overall, according to a Kiplinger report, especially for homeowners, citing among other disproportionately high state and local taxes an average property tax of $2,408 per $100,000 in home value. This ranks Illinois as the second highest state in the nation for property taxes. Other sources, including WalletHub and Patch (quoting the Tax Foundation), confirm that ranking, citing the effective property tax rate for Illinois as the second highest in the country, nestled between New Hampshire at number 3 and the state with the highest property taxes, New Jersey.

As a direct consequence, Illinois has been experiencing a net migration loss, meaning that more people are leaving the state than are moving

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there. In 2017, its rate of in-migration was thirdto-last nationally, even when factoring in people who moved to Illinois from other countries. The Chicago Tribune recently disclosed that in 2017, an estimated 266,000 people reported they had moved to Illinois in the last year; 9 percent fewer than the 292,000 estimated arrivals in 2013. The number of people who arrived from other states rather than from abroad declined even more steeply, from more than 223,000 to roughly 195,000 according to census data.

In fact, Illinois has long had a negative net migration rate, while other nearby states have had increasingly positive net migration in recent years.

And the gap is widening with the population in Chicago, the state’s largest and most important economic engine, continuing to slip. A recent Chicago Tribune investigation cites new jobs or job transfers as a major reason, but does not discount

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the significance of a tax exodus; those residents packing it up and heading to neighboring states with more affordable housing and lower property taxes. While there are ultimately many reasons that might motivate a move from the Windy City, the lower tax burden seems to be a major factor according to a recent Tribune article exploring why Chicagoans are leaving.

Even at this writing, with a planned real estate transfer tax rate hike in jeopardy, and the fate of an alternate plan uncertain, a property tax hike may be looming for 2020 in order to fill a $50 million budget gap. Chicago may remain the third largest U.S. city for now. However, in the end, while statistics can often be twisted to paint a pretty picture, the reality of high taxes will ultimately take its toll. MBM

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February 2020

Mortgage Operations

Taking a Critical Look at Operations: How Partnering With a Consultant Might Save Your Business

By Pete Butler, Opus Capital Markets Consultants

S

By working with a consulting group, individual lenders earn an industry-wide perspective based on consultants’ understanding of marketplace best practices. In addition to this, lenders frequently learn ways to make better use of their staff, deploy their technology more successfully, and reduce their compliance risks, all while lowering operational costs.

ince 2008, the mortgage industry has changed drastically, and continues to evolve with a current uptick of volume. As new buyers enter the market and residential prices continue to increase, so has the cost per loan, which has risen steadily year over year. As lenders look to handle higher volume and streamline processes, they should also think strategically about the best ways to reduce their overhead and create lean operations to manage seasonal peaks and valleys.

Partnering with consultants to identify potential process improvements is one ideal method to create better operations and reduce the cost per loan. Often, when looking inward, many lenders miss out on best practices and do not realize their own blind spots in processes and procedures.

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WORKING WITH A CONSULTANT

Many businesses are hesitant to embrace any significant change; however, in this competitive environment, lenders should be comfortable with the idea that their operations need to evolve over time. When working with consultants, lenders need to dedicate a certain amount of time to the consultants’ discovery processes, which can include extensive onsite evaluations and a review of the 34

February 2020

current technology.

By looking at an individual loan’s lifecycle, consultants will evaluate points of potential inefficiency or processes that need to change, first in origination operations, then in servicing.

During this consulting process, these experts can also help lenders identify regulatory compliance best practices for end-to-end operations, including how to create change management procedures for the inevitable regulatory changes in the industry.

Similarly, consultants can identify areas of potential risk, whether related to regulatory issues or data management, and offer solutions to reduce those risks.

solutions that can work in harmony with existing lender technology, if desired, to help streamline processes and reduce manual labor, further freeing valuable staff. By focusing employees on more strategic tasks, such as quality control instead of data entry, these employees often show a dramatic increase in job satisfaction.

SHIFTING TEAM STRUCTURES

Many times, consultants recommend implementing team structures as a source of improvement. In particular, they recommend that the originations department have structured teams instead of having underwriters, processors, and closers working in isolation. Similarly, having loan officers assigned to groups can be most efficient.

These teams work best if all members are located in the same physical office, with the exception of underwriters, who can operate successfully from remote locations, yet still be teamed.

TAKING ADVANTAGE OF A FRESH PERSPECTIVE

While consulting with experts can disrupt operations, it is difficult to overstate the value of bringing in outsiders for a fresh point of view. These unbiased consultants have no personal agenda or political objectives other than identifying best practices to save the lender time and resources.

Many times, the changes consultants recommend may disrupt processes that important individuals in the company recommended years ago, and lower level employees have been too afraid to question.

These personal ties to operational procedures, or even technology contracts, are one of the obstacles to a company’s success, and an unbiased outsider can easily recommend change without fallout.

THE POTENTIAL FOR OFFSHORING

Consultants may recommend building a hybrid onshore/offshore approach to underwriting, especially if lenders are concerned about the rising cost per loan. In most cases, the quality of work from these underwriters is as high as onshore workers, but at a reduced cost. For those concerned about quality control, taking the entire process primarily offshore may not be the best solution due to various challenges, not the least of which are licensing requirements by some states. By using this hybrid approach, some lenders have reported reducing their cost per loan to below half of the national average, and depending on the product type, it could be below $2,000 per loan.

TAKING A STRATEGIC LOOK AT STAFF

Occasionally, the presence of consultants can make employees uneasy, since consulting and reorganization or downsizing departments are often unfairly correlated. However, during this period of low unemployment, talented employees are hard to find, and employers are often eager to reallocate any talented employees whose roles might be disrupted by change. This reallocation can often be one of the biggest benefits of process improvement, through which lenders can identify which departments are understaffed and shift resources to address those needs as other departments create better operational efficiencies.

As consultants review operations, they often make recommendations on leading edge technology The MORTGAGE BANKER Magazine

IMPLEMENTING NEW TECHNOLOGY

As with staffing structures, consultants often look closely at the technology a lender uses for origination and servicing. During this process of identifying areas of improvement, they may recommend origination technology and/or configuration changes that eliminates significant portions of manual tasks, particularly solutions that rely on Artificial Intelligence or “AI.” For servicing, many consultants find this department often relies on the most antiquated processes and 35

February 2020

Mortgage Operations technology, since much of the innovation in the industry focuses on originations. Consultants often recommend the use of technology for smarter data and document transfers from originations to servicing. By deploying technology strategically, as consultants are looking to transform operations in these departments to focus on single touch processes, instead of multiple manual processes for overworked employees.

HOW TO MAKE THE MOST OF YOUR CONSULTING RELATIONSHIP

The most successful consulting relationships have transparency on both sides, which is vital from the inception. The client in this relationship should be prepared for numerous questions from the consultants, and must answer as honestly as possible. Some clients make the mistake of underestimating the depth of these relationships and do not commit fully on the front end. To make this transformation a success, they must dedicate time and personnel to these efforts.

Occasionally, clients fail to provide consultants with an advisor figure, who can serve as a point person for questions. When this happens, the engagement tends to drag out further and can be much more costly for the lender, while also yielding reduced results. Furthermore, clients that do provide adequate resources tend to have less down time implementing changes and have a more seamless transition to improved processes. Ideally, lenders should engage with consultants as early as possible, allowing for UAT, stress testing, and adjustments leading to steady state in order to have new operational processes in place before higher volumes of activity come in the Spring.

Consulting relationships often yield results over time, instead of immediately. Evaluating the success of an engagement should happen gradually over phases, especially as any technology or staffing changes will involve training and retraining. While lenders look for new ways to compete, embracing change, even in a short period of time, can yield huge results, particularly in reducing the cost per loan and the amount of time employees spend on manual tasks; thus, creating new and improved metric goals. MBM The MORTGAGE BANKER Magazine

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February 2020

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The MORTGAGE BANKER Magazine

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Compliance

ARE YOU IN COMPLIANCE WITH THE CCPA AND ADA?

BY FELECIA BOWERS, HOMEOWNERS FINANCIAL GROUP

I

feel the need to confess that and did not feel GLBA was adequate. The CCPA my mind never stops thinking defines private information as data that identifies, when it comes to compliancerelates to, describes, is capable of being associated related issues. I’m one of with, can identify, or reasonably identify directly or indirectly a consumer and/or their specific those individuals who critiques household. The law allows a person to activate billboards, reads the fine print their “right to be forgotten” which basically means on TV ads, and reviews internet that they can request the removal of their private pop-ups hoping to find a mistake information from your system. in the advertising. I am one of the PLUS, you have to notify everyone few individuals who watch the early in the loan manufacturing process morning realtor and loan officer Did you get your CCPA that you shared that personal shows. You know these shows. disclosure(s) that rolled information (PI) with that they too Two people discussing new listings, new loan programs, interest out on January 1, 2020, have to remove the consumer’s information. That is a lot of ground rates, and, in the process, they or are you one of those to cover. Still think you don’t need are violating the TILA by quoting individuals who believe to develop a CCPA disclosure? rates and fees with no APR, never thought to mention equal housing, • We do not do business in the GLBA disclosure and failing to mention the NMLS CA so the law does not pertain to adequately covers the us. Right? Possibly wrong. Your number or license. My husband of new California rule? website is viewable by consumers in 35 years has been known to get in CA. on the action by finding a faux pas before I do. He has learned the • Does the company ever pitfalls through osmosis. It is through osmosis that collect divorce documents to establish the he was excited to learn of the California Consumer continuance or receipt of child support? Those Privacy Act, CCPA for short. Why should he care? divorce documents usually contain PI on minor Someone in California filed fake tax returns in our children; for example, full name, date of birth, name last year and he wants to activate the “right to and possibly their social security number. You’ve be forgotten” premise under the CCPA. got the minor’s information and now you must protect it.

THE CCPA

• Do you collect college transcripts or proof of specialty education for earning potential analysis? Covered.

Did you get your CCPA disclosure(s) that rolled out on January 1, 2020, or are you one of those individuals who believe the GLBA disclosure adequately covers the new California rule? I tend to be conservative with my compliance responsibilities

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• Do you have a program that allows a consumer to build an alternative credit profile through rent

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February 2020

or utility payment histories? Covered.

of vendors with whom the information was shared.

• Does your website plant a cookie on the browser of individuals who access the website? Covered.

It is easy to see where a separate disclosure may be needed just for the CCPA, which is exactly what we had created for compliance with CCPA. And don’t forget that the CCPA disclosure must be given to the consumer BEFORE any private information is collected. BEFORE! Be sure to create a link on your consumer facing online application requiring the consumer to access the CCPA disclosure and/ or confirming they accessed it before providing the site with private information. How will you handle the disclosure requirements relative to the plethora of prequalifications taken face-to-face? Training. You will need to train staff on the requirements of CCPA and provide them with the tools to ensure compliance.

• Do you have a loan officer participating in a lead generation program where the vendor monitors the shopping history of the consumer on their property site? Is that browsing history provided to the loan officer in anticipation of the loan officer reaching out to the consumer to help them; for instance, “You’ve been looking at homes in Eastmark. Can I help with your search or financing?” Browsing history information is covered.

• You need to build out the infrastructure to handle requests to “be forgotten” including notification

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February 2020

Compliance ADA COMPLIANCE

non-compliant website is but one win-win for this disclaimer. It might help protect you if the vendor’s website attacks the user’s computer with a virus.

While you are reviewing and revising your website for CCPA compliance, look at your ADA compliance for the site. ADA compliance is prominent these days because of the amount of business conducted on the web. ADA was introduced in 1990 and according to the web, the first website was not launched until a year later in Britain. The law obviously did not know that the internet would be so invasive into our everyday lives. Heck, I still remember that a pager was the only way to reach my loan officers and don’t let me reminisce on how much room the cell phone unit took up in the trunk of the car.

Unfortunately, ADA has not kept pace with the way we use the internet and social media today. Failure to modify the law leaves compliance in the hands of the courts. Attorney’s representing ADA clients get to establish the guides through court rulings while disclosing the complexities faced by handicapped individuals working with and on computers. Here are some items you may want to review to make sure you are ADA-compliant:

• Do things slide by or rotate on the site too fast? I find this one very annoying because I was not able to read the full text so I have to sit there through another round of a flashing screen.

• Does the site have an alternative way for someone to contact your company? It should.

• Check links to ensure they work. I find that this is one area that is neglected.

• Fixing the site can be fairly easy using some of the commonsense issues cited above. There are also vendors and programs designed to help with compliance. Consider inviting your local Association for the Blind to work with your organization to improve your outreach through social media and in general.

Remember, your website is open for viewing by consumers in all states. I’ve also found that a website inadvertently may have a discriminatory component due to the photos of happy consumers used on the site, lack of diversity. Make sure it also has your ECOA, FHA, SAFE and State requirements. Be sure to document your efforts to fix the site, periodic reviews and monitoring. And, once again, we circle back to training. Make sure Marketing personnel are appropriately trained on ADA compliance issues, as well as federal laws, to ensure they put best practices in place during the development phase. MBM

• Do you have contrasting colors that allow a visually impaired individual to distinguish the print from the background? Marketing personnel like to use aesthetically pleasing pallets to draw in the customer but sometimes that sky blue background with white lettering just won’t work.

• Is the fine print too fine? One should not be required to constantly change the Zoom on their computer to read the data contained on the site.

• Do you require the user to download items such as your CCPA Privacy Policy or Terms of Use? Those pretty colors all over the site could prevent the user from even seeing where the forms are available.

The opinions expressed herein are not intended to be construed as legal advice. Please consult with your Compliance Officer or Attorney for guidance.

• If the site has a video component that is pertinent to delivering information about the company or the compliance disclaimers, is it closed captioned?

Or can it be read via a reader for the blind?

Felecia Bowers serves as the compliance manager for HFG. Her compliance career spans 35+ years starting with the Federal Savings & Loan Insurance Corporation (FSLIC) and the Resolution Trust Corporation (RTC) in the 1980s. She can be reached at fbowers@ homeownersfg.com.

• Links to outside sources expose your company to unnecessary risk if there is no disclaimer that you are not responsible for content once the viewer leaves your site. Mitigating the risk of the vendors The MORTGAGE BANKER Magazine

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February 2020

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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.

Heart Still In It?

F

ebruary is full of hearts with Valentine’s Day and the NMLS Annual Conference taking place in the ‘heart’ of San Francisco.

February is always an integral checkpoint month in annual development and review of annual resolutions. The shortest month provides a quick review on heart, vision, and commitment to development. NMLS attendees will be evaluating resolutions for development and growth this month as well.

In 2018, the Conference of State Bank Supervisors launched Vision 2020. This aggressive strategy would bring increased harmonization to multistate licensing and supervision while fostering innovation with a commitment to protecting consumers. Now 2020, the conference will be a vision checkup.

A critical component is the adoption of best practices and uniformity in state examinations, including a new technology platform. That platform launched in 2019 as the State Examination System, or SES. The end-to-end tool helps to standardize, optimize, and safeguard examinations. Initial industry reports on the system are positive, but all state regulators

need their heart into the adoption of common exam practices and not just the SES. Consistent implementation among regulators of SES and the identified best practices will improve communication, advance supervision, and reduce time and cost of the exam process.

Compliance and examination are key to regulatory supervision and the core for Vision 2020.

Another key component of Vision 2020 is the modernization of the NMLS. But evolution of the NMLS as a risk-based and efficient tool has slowed with several relaunched efforts. The promised responsiveness from increased business tools with expedited processing has also been delayed. News of the next step of NMLS development is greatly awaited.

The “heart” of the NMLS conference is literally the NMLS. So, updates on NMLS system development, functionality, and supplemental features will be as useful as the harmonization of these between the states.

The core of the vision was to allow regulators improved access and reliability on the analyses performed by other state regulators. This goal would also provide efficiencies to help companies maintain footprint

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February 2020

and support development and innovation.

The ‘Vision” of course expands as system work continues. In November, regulators spoke of an increased culture of compliance based on real-time features built into today’s loan origination systems and processes. Origination system requirements and loanlevel compliance technology ensure compliance with state and federal laws to ensure consumer protections. Automated quality control and direct data validation significantly improve data integrity and speeds approval at rocket speeds. Company oversight and awareness of daily compliance advances each month.

But technology can only take our vision so far. A true paradigm shift away from paper-based examinations in brick and mortar branches across every state also needs an innovative plan. A vision beyond the SES and the evolved NMLS is required.

Today’s consumers don’t shop branch to branch, but scan app to app or website to website.

The future is virtual branches for origination and digital company oversight. Vision is the ability to view the way something should be, and that is the heart of our challenge. MBM

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Compliance

Compliance Alphabet Soups Each month we will serve up cans of Alphabet Soup applicable to the mortgage industry. Each flavor of Alphabet Soup will include the soup’s acronym and its actual name, and a hyperlink to the regulation, law, or rule from the agency that administers it. It’s all right here; relax and enjoy reading your favorite bowl of Mortgage Compliance Alphabet Soup.

Electronic Funds Transfer Act The Electronic Funds Transfer Act (EFTA) was enacted in 1978 in response to a significant growth of ATMs and electronic banking. Regulation E implements the EFTA and is a consumer protection law that establishes a framework of consumers’ rights, responsibilities, and liabilities when using the electronic fund and remittance transfer systems. Financial institutions also must adhere to certain rules and responsibilities. The Federal Reserve Board had original rulemaking authority; and, in 2011, pursuant to the Dodd-Frank Act, this authority was transferred to the CFPB. Like several regulations, Regulation E is divided into subparts: • Subpart A provides rules with electronic funds transfers, of EFTs, gift cards, prepaid cards, and gift certificates: o Initial and ongoing disclosures o Error resolution procedures and timeframes o Unauthorized EFTs o Overdraft services o With respect to gift cards, additional rules involve limitations on fees and expiration dates • Subpart B focuses on rules with remittance transfers: o Prepayment and receipt disclosures o Error resolution procedures o Cancellation and refund rights for consumers While the EFTA and Regulation E have been around awhile, several recent amendments are worthy to mention: • Rules with remittance transfers have been amended several times since 2012.

• A final rule in 2013 amended subpart A to no longer require a fee notice be posted on or at an ATM. • In 2016, additional protections were added for consumers who use prepaid accounts.

• In 2019, the CFPB issued a notice of proposed rulemaking regarding remittance transfers where financial institutions are allowed to disclose estimates instead of exact amounts to consumers and where the safe harbor may be increased for a person making remittance transfers in the normal course of business.

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Perhaps most important to lenders are the following: • Section 1005.10(e)(1) states that “No financial institution or other person may condition an extension of credit to a consumer on the consumer's repayment by preauthorized electronic fund transfers, except for credit extended under an overdraft credit plan or extended to maintain a specified minimum balance in the consumer's account.” With that said, lenders may offer a loan with a reduced annual percentage rate or other cost-related incentive to a consumer who agrees to a preauthorized transfer payment method, but must also offer such a loan without preauthorized transfer payments. The commentary to the regulation provides additional insights on this matter.

• In the event a customer contacts you regarding an error applicable under Regulation E, know your institution’s error resolution procedures. Timing is EVERYTHING! The most common violations under Regulation E involve this process. https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1005/1/

The MORTGAGE BANKER Magazine

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February 2020

GSEs & Regulatory Agencies

What Do CRT Prices Tell Us About Implied G-Fee?

By Alex Levin, Andrew Davidson & Co., Inc. (AD&Co)

I

n seeking best execution, mortgage bankers should first know the current implied g-fee being charged by the GSEs. This would be indicative of a market (rather than the GSEmandated) cost of credit risk embedded in conforming loans. While it would be relatively simple to quantify the g-fee as the cost of GSE credit-risk sharing if the GSEs sold off all of their risk, this is not done in practice (L. Goodman [2014], E. Belbase [2013], K. Palmer [2017]). In fact, the riskiest part is usually retained. We have developed a method of “risk-neutralization” for an agency credit model. This process deforms a credit model developed for the real world to reflect the market price of credit risk gauged from CRT prices. The approach does not require the entire risk to be sold and can rely only on the prices of existing CRTs.

RISK-NEUTRALIZATION METHODOLOGY

We create a grid of 20 deterministic scenarios ranging from very optimistic to base case to extreme stresses. The scenarios differ both in

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economic factors and model stresses, thereby exposing potential modeling errors within AD&Co’s LoanDynamics Model (LDM) to our risk analysis. Using this model, we can calculate the reference pool’s defaults and losses as well as the tranches’ cash flows, write-downs and present values for each scenario. By assigning theoretical probability to each scenario using the Vasicek distribution adapted by AD&Co (aka the “threegroup Vasicek”), we turn the scenario analysis into a credit-and-option-adjusted valuation method.

We can compute credit OAS (crOAS) using market prices of CRTs or vice versa; see A. Davidson, A. Levin and H. Qin [2016] for details.

Furthermore, using the available market prices of CRT bonds, we can alter the distribution to minimize the difference among crOAS levels measured across the subordination of bonds.

This change in probability distribution, called risk-neutralization, is achieved via a shift in base case selection (scenario #7 for the real-world or

February 2020

COMPUTATION AND COMPOSITION OF IMPLIED G-FEES

“physical” model) and correlation parameter Rho of the Vasicek distribution that is akin credit volatility.

In addition to the scenario re-weighting, the risk-neutral scenario set excludes stresses from the factors already priced by other markets: interest rates (benchmarked to swap/swaptions) and prepayment-model scales (benchmarked to TBA parity to GSE debentures). Therefore, our 20-scenario grid used for risk-neutral agency credit model includes only stresses to home-price appreciation rates (HPA) and default-rate outputs from LDM. AD&Co’s historical risk-neutralization process shows that:

After we benchmarked risk-neutral distribution to the CRT prices, we compute implied g-fee (for latest reference pools) as the sum of (A) annualized loss rate and (B) cost of remaining crOAS for all tranches, sold or retained. Furthermore, we consider it informative to split term (A) into (A1) expected annualized physical loss rate and (A2) price of risk. It is quite common that A2 much exceeds A1 meaning that the largest part of g-fee is a capital charge for covering a much-larger unexpected loss than a realworld expected loss reserve (see Table 2 for a pair of representative 2019 STACRs).

• Upon the CRT market inception, both credit risk and liquidity risk had high prices, as expected in a new market.

Table 2. Components of Implied G-Fee as of 3/29/2019, in basis points Reference pool Physical Price of Total Risk-

Loss (A1) Risk (A2) Neutral Loss

• Both risks fell steadily during the subsequent years (2016-2017).

STACR 2019-DNA1 3.9 STACR 2019-HQA1 4.1

• Over the last couple of years, credit risk inflated, held stable, and then deflated again while liquidity remained steady. We attribute some of the 201819 trend to the observed decelerating home-price appreciation.

Table 1. Comparison of Physical and Risk-Neutral Base Cases as of 12/31/2019 Scenario 1-yr

2-yr

HPA Default-Model

HPA HPA Trough Scale Physical 7 4.7% 8.8% N/A 100% Risk-Neutral 12 -3.1% -4.9% -8.1% 150%

As seen from Table 1, we expect national home prices to continue rising in the real-world economy, but the guarantees are priced to a moderate recession. In addition, we simulate that recession with the model under-predicting default rates and a fatter distributional tail (higher Rho).

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22.6 24.2

Total G-Fee (A)+(B)

4.2 3.4

26.8 27.6

As seen from Table 2, the high-LTV reference pool (HQA1) is about as risky as the normal-LTV one (DNA1) and implies a similar cost of protection. In the analysis, we used all available loan-level data (sourced from Intex) including the size of mortgage insurance (MI) for loans with OLTV greater than 80. Whether we should credit the GSEs (for the proper design of CRTs), the MI industry (for the proper selection of MI coverage) or ourselves (for the good modeling), but, risk-wise, most high-LTV deals look comparable to normal-LTV deals (with all other aspects controlled for, e.g. vintage) – once MI is taken in consideration.

However, we assume that the MI provision never fails, an assumption some practitioners may challenge. To complete this analysis, we would like to make a couple of comments about our approach.

First, we consider only the credit risk components and ignore administrative fees that are typically included into the GSE g-fees.

Second, our methodology recovers the implied g-fee for credit risk of the entire reference pool, whether the risk is sold or retained. This claim may sound paradoxical or even suspicious at first glance

• The latest Physical/Risk Neutral shift in base case is five scenarios down (from #7 to #12, see Table 1 for comparison), with a relatively moderate increase in correlation Rho (20% versus 32.5%).

18.7 20.1

Cost of crOAS (B) (A)=(A1)+(A2)

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February 2020

GSEs & Regulatory Agencies Figure 1. Implied G-fee (bps) for Contemporary CRTs Issuance

Figure 2. OAS History of US Corporate Market

REFERENCES

considering we only worked with cash-bond CRTs. To clarify, we use those CRTs only to gauge market price of credit risk. Implied g-fee is not equal to the total cost of all CRTs – unlike in the cost-based method advocated by the GSEs themselves. Our approach is similar to valuation of an exotic option from vanilla option benchmarks.

Figure 1 depicts only the credit component of g-fee (net of administrative fee). As seen, the recent levels are on a decline falling below 25 bps, with a fairly efficient pricing of low/high LTV and STACR/ CAS differences.

Historical dynamics of our results are optically similar to the dynamics of global credit risk, including the one observed in the corporate bond market (Figure 2). MBM

The MORTGAGE BANKER Magazine

E. Belbase, STACR & CAS: Implications for Housing Finance Reform, AD&Co’s Pipeline, October 2013.

A. Davidson, A. Levin and H. Qin, Risk Neutralization of Agency Credit Model, Relative Value and Implied G-fee, AD&Co’s Quantitative Perspectives, October 2016.

L. Goodman, Risk-Sharing Deals Support Reduction in Freddie and Fannie Guarantee Fees, Urban Institute, December 3, 2014.

K. Palmer, What Credit Risk Transfer Tells Us About Guarantee Fees, Journal of Structured Finance, Fall 2017.

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February 2020

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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.

Focusing on Statutory Language

T

he Supreme Court recently held that the discovery rule, a rule which delays the running of a statute of limitations until a plaintiff is on notice of facts concerning his or her claim, does not apply to the Fair Debt Collection Practices Act (FDCPA).

This is a positive development for the industry, both in the specific context of the FDCPA, and more generally as the Court continues to interpret most statutory provisions according to their plain meaning.

As discussed in my December 2019 column in Mortgage Compliance Magazine (before this case was decided), statutes of limitations, which limit the time period to bring a lawsuit, are subject to various exceptions.

The time period ordinarily starts to run when a party first has a legal claim; in legal parlance, when the claim first accrues.

One of these exceptions is the discovery rule. In those limited contexts where the discovery rule applies, the statute of limitations does not begin to run until a

party knows or should know facts sufficient to create a cause of action. The discovery rule is generally applied where a statute expressly provides that the time to bring a claim is counted from when the plaintiff discovers the facts of the violation. Additionally, common law fraud claims have traditionally been subject to the discovery rule. Various state laws also differ in how and when the discovery rule may be applied in those jurisdictions.

The issue in the Supreme Court’s recent decision in Rotkiske v. Klemm was whether the discovery rule applied to the FDCPA’s statute of limitations.

Under the FDCPA, debtors can sue debt collectors who engage in certain abusive practices, including prohibited communications with debtors.

The FDCPA provides that the action must be brought “within one year from the date on which the violation occurs.” The question whether that limitations period was subject to the discovery rule generated a split among the federal appeals courts.

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February 2020

Most circuit courts of appeals applied the literal language of the statute, holding that the statute of limitations begins to run on the date of the violation and not discovery of the violation. The Fourth and Ninth Circuits, as well as some district courts, disagreed and applied the discovery rule. In Rotkiske, the Supreme Court resolved the circuit split by interpreting the statutory language as it is written. Thus, FDCPA claims must be brought within one year from the date on which the violation occurs, not when the debtor discovers the claim exists. Note that the Court did not consider equitable tolling, which I discussed in December, because Rotkiske had not properly preserved that argument in the courts below.

While the specific decision here, which limits the time to bring FDCPA claims, is positive for those in our industry who may face such claims, I think the more important aspect of this decision is the way in which it underscores and continues the Supreme Court’s trend of applying the

plain meaning of statutory terms and rejecting results-oriented arguments in many cases, including in connection with statutes of limitations.

Examples abound of the Court’s language-based approach to statutory interpretation, but you may recall in particular that in Freeman v. Quicken Loans, the Supreme Court rejected an expansive reading promoted by HUD and lower courts of RESPA, and held that the plain meaning of the words “portion, split, or percentage” in Section 8(b) of RESPA requires a plaintiff to show at least two persons divided an unearned fee to state a claim.

And in Gabelli v. SEC, the Court declined to apply the discovery rule to an SEC enforcement action seeking civil penalties under the Investment Advisors Act of 1940 for several reasons, including the absence of “discovery” in the statute, even though the claims

While we may not always benefit from decisions based on the plain language of the legal text at issue, it is important for industry to have the predictability that a textual approach usually brings arguably sounded in fraud.

More recently, the Court in 2019 followed the plain language of a limitations provision in the False Claims Act, in Cochise Consultancy v. United States ex rel. Hunt, rejecting a results-based argument about the meaning of the provision in question.

There are two things you should take away from this

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decision and the trend that it represents. First, while we may not always benefit from decisions based on the plain language of the legal text at issue, I think it is important for industry to have the predictability that a textual approach usually brings. Second, unfortunately, it often takes a considerable amount of time for the “correct” textual interpretation to prevail, which may be after the conclusion of your particular case. Here, the FDCPA statute of limitations issue, which appears clear from the statutory text, had been contested and the subject of differing authority for many years. Even with this particular legal issue resolved, that type of uncertainty will not go away until the Supreme Court’s textual approach filters down more to the lower courts. 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.

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February 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.

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February 2020

The C-Suite

The most rewarding part of the job is being able to help people build wealth through homeownership.

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February 2020

JASON MADIEDO CEO of Alterra Home Loans What do you find most rewarding about your job?

Helping people build wealth through homeownership. The wealth gap between underserved consumers and general consumers is over $100,000. The average net worth of a household in America is between $120,000 and $140,000. The average net worth of underserved or minority consumers in America is between $6,000 and $12,000. The number one driver of wealth is real estate, and most minorities in this country have a homeownership rate of below 50 percent. Because more than 50 percent do not own homes or real estate, we believe that is the big driver of the wealth gap in America. So for me, the most rewarding part of the job is being able to help people build wealth through homeownership.

What do you think is the biggest challenge the mortgage industry is facing currently?

The biggest challenge for the mortgage industry is the mortgage manufacturing process and the high cost of manufacturing affordable lending mortgages. I think the manufacturing process and delivery process for a standard mortgage with a standard borrower is pretty low-cost. It’s relatively easy to manufacture because it’s consistent and it’s the same structure all the way. When you’re doing loans in the affordable mortgage space and you’re using multiple affordable lending products, the manufacturing of those loans is very different because the products are different and the borrowers’ profiles are more complex in the areas of income calculation and asset verification.

What is your best habit?

I never leave my desk unorganized and I never go to sleep with anything that isn’t organized in my house . . . organization.

What time do you get up?

Usually around 6 o’clock.

What is the first thing you do in the morning?

I look at my phone and review any communication overnight from any of my team members.

What is your mantra?

What is right is more important than who is right.

What is on your desk?

My computer, my notepad, a sticky note that is always on there that says “pause” because sometimes you just need to pause before you open your mouth, and family pictures.

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February 2020

What is the last thing you do at night?

Sit with my wife and watch a game show.

What time do you go to bed?

Between 10 and 11.

The C-Suite

KRISTY FERCHO

Flagstar Bank Executive Vice President, President of Mortgage What do you find most rewarding about your job?

The most rewarding thing about my job is putting people in homes. We have the unbelievable privilege, really of helping people achieve the American dream and putting people in homes. One of the things I did when I first got here (in 2017) was make a budget to meet our origination goals. Last year our goal was $35 billion in originations, and I translated that into how many people we would put in homes. We measure our performance by how many people we are putting in homes, because I want to put a face to that. Last year, based on our origination volume, we put 114,924 people in homes.

That’s helping families, that’s helping communities, and that’s the most rewarding thing about our job. Work hard and do good at the same time.

What do you think is the biggest challenge for the mortgage banking industry currently?

I think the biggest challenge is the inventory shortage. It’s been part of the story since the housing crisis. The supply of houses in some markets has been more affected than others, but with the baby boomers aging in place, the builders are really focusing on that higher tier market, and first-time homebuyers are really being left in the lurch. People aren’t doing the move-up into the more expensive homes.

We have an increasing housing shortage, especially for first-time homebuyers, and I think it’s only going to get worse unless we as an industry really look to find solutions. You saw that pressure in 2018 and I think it was even stronger in 2019, especially in certain markets, and I think it’s going to continue to be part of the story and the challenge for the mortgage industry in 2020.

What time do you get up?

6 a.m., unless I have an early meeting, and then I get up at 5:30.

What is the first thing you do in the morning?

What is your mantra?

“Each day is God’s gift to you. Make it a great day.” I believe we control our destiny by our attitude, and so mine is seeing each day as a gift and seeing the good in it.

I do quiet time. I pray, I read the Bible, and I’m a journaler, I just sit in quiet reflection for about 30 minutes.

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"We have the unbelievable privilege, really of helping people achieve the American dream and putting people in homes" What is on your desk?

My computer, a bunch of pictures of my family, a bunch of file folders with stuff I need to do.

I haven’t gone paperless yet. I’m old school.

What is your best habit?

I identify three things each day that I’m grateful for, so the habit is the practice of gratitude.

What is the last thing you do at night?

I pray.

What time do you go to bed?

Usually around midnight or 1 a.m.

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February 2020

The C-Suite

New Decade Means Change for CMLA "My primary focus for the CMLA right now is to make sure that midsize and small community-based lenders have a voice when it comes to the CFPB, TRID, and the GSEs"

The Community Mortgage Lenders of America (CMLA), an industry advocacy group solely focused on the concerns of midsize and small community-based lenders, has begun 2020 with a new chairman and new issues atop its agenda.

Michael Jones, CFO of Thrive Mortgage, was elected chair of the CMLA at the beginning of the year to replace Kim Curtis, president and CEO of Tidewater Home Funding, LLC, who completed her term at the end of 2019 and will remain on the board. Jones has been a member of the CMLA Board of Directors since 2017 and was serving as the organization’s treasurer at the time of his election as chair.

“I look forward to working closely with Michael on our efforts in D.C.,” said Ed Wallace, executive director of CMLA. “His insight has always proven to be on point, and I know he will do a tremendous job for our members as well as the industry.”

Jones will be focusing his agenda on topics which are key to the viability and continuation of midsize and small lenders throughout the country.

“My primary focus for the CMLA right now is to make sure that midsize and small community-based

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lenders have a voice when it comes to the CFPB, TRID, and the GSEs,” Jones said. “These are the make or break topics for our members and future members. Independent mortgage bankers have and will continue to be essential to the overall market, and I want to make sure the unique needs of IMBs are not only heard but fully understood by policy makers and regulators.”

As Jones begins his term as chair of the CMLA, two primary objectives which will be on the organization’s agenda are the Loan Officer Compensation Rule and the QM Patch.

The Loan Officer Compensation Rule will: • Allow loan originators to voluntarily lower their compensation in response to demonstrable competition in order to pass along the savings to the consumer, • Allow lenders to reduce a loan originator’s compensation when the originator makes an error, and • Allow lower compensation in order to offer loans made under state and local housing finance agency (HFA) programs.

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The QM Patch, which allows borrowers an exemption to the ability to pay/qualified mortgage rule on GSE-backed loans, is a solution that does not diminish market conditions and allows for midsize and small lenders equal ability to provide the necessary loan programs to all borrowers.

The CMLA applauded the Consumer Financial Protection Bureau’s announcement on January 17 to extend the QM Patch beyond its scheduled expiration of January 2021.

“We are very happy the CFPB has listened to our position and is planning to extend the QM Patch,” Jones said. “Our extensive and comprehensive efforts provided the insight the CFPB needed to understand and realize the importance of maintaining the QM Patch in light of the changes that are occurring with the Bureau and the GSEs. The CMLA made sure that independent mortgage bankers and community banks of all sizes had an opportunity to contribute to this decision.”

Michael Jones CFO, Thrive Mortgage

MBM

Write? Right!

Pen an article and we will help you publish your expertise.

March 2020 is waiting for you!

Contact: Editor@Twelve11Media.com

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February 2020

Education

Education & Training Calendar Date

Dates

Link

Cyber Liability For The Mortgage Finance Industry

February 4

https://www.mba.org/store/events/webinar/cyberliability-for-the-mortgage-finance-industry

Pros and Cons of Appraisal Waivers

February 4

https://www.mba.org/store/events/webinar/ce-pros-andcons-of-appraisal-waivers

Feb 13

Effective Internal Audit Function: Beyond the Basics

February 13

https://www.mba.org/store/events/webinar/effectiveinternal-audit-function-beyond-the-basics-x261631

Feb 19

Real Estate Wire Transfer Fraud: Prevention Prior to Closing

February 19

https://www.mba.org/store/events/webinar/real-estatewire-transfer-fraud-prevention-prior-to-closing

Feb 23

Foundational Concepts in Residential Mortgage Servicing

February 23

https://www.mba.org/store/events/classroom-course/ foundational-concepts-in-residential-mortgageservicing-x260811

Feb 25

Ten Top Sales Tips for Originators in 2020

February 25

https://www.mba.org/store/events/webinar/ten-top-salestips-for-originators-in-2020

Feb 26

REIT Universe 2020: Property & Markets Outlooks

February 26

https://www.mba.org/store/events/webinar/reit-universe2020-property-and-markets-outlooks

Mar 2

Cap Rates: What Are They & What Are They Telling Us?

March 2

https://www.mba.org/store/events/webinar/cap-rateswhat-are-they-and-what-are-they-telling-us

Mar 5

Closing with Confidence Series - Part I

March 5

https://www.mba.org/store/events/webinar/closing-withconfidence-series-part-i

Mar 9

School of Mortgage Servicing

March 9 - 19

https://www.mba.org/store/events/instructor-guidedonline-course/school-of-mortgage-servicing-march-2020

Mar 12

Closing with Confidence Series - Part II

March 12

https://www.mba.org/store/events/webinar/closing-withconfidence-series-part-ii

Mar 16

School of Loan Origination

March 16 – April 9

https://www.mba.org/store/events/instructor-guidedonline-course/school-of-loan-origination-march-2020

Feb 4

Course Name

February 2020

Conferences/Conventions

Instructor Guided Online Course (IGOL)

MBA Research Events

Classroom Course

Webinar

MISMO Events

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February 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

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February 2020

Education

2020

Calendar of Events

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STATES

Calendar of Events FEBRUARY NEBRASKA February 6, 2020 Sales Excellence Workshop

MARCH

APRIL

ILLINOIS March 04, 2020 Mortgage Lending Industry Conference

COLORADO April 9th, 2020 Mortgage Lenders Expo

NEW YORK March 11, 2020 6th Annual Strategic Real Estate & Lending Summit

KANSAS & MISSOURI April 22-24,2020 MBA Great River Conference

https://mbba-nh.org/event/2019-tri-statemortgage-Conference/

https://mbany.org/events/event_list.asp

TEXAS February 18-19, 2020 Secondary Market Conference & Warehouse Conclave

CALIFORNIA March 23, 2020 Legislative Day

MARYLAND April 17, 2020 Installation Luncheon, Annual Meeting & Awards Ceremony 2020

https://nebraskamortgageassociation.com/ meetinginfo.php?id=32&ts=1576086549

VERMONT, NEW HAMPSHIRE, & MAINE February 6-7, 2020 Tri-State Mortgage Conference

https://imba.org/meetinginfo. php?id=9&ts=1576687922

https://www.cmba.com/legislative-day/

https://www.texasmba.org/secondary/

KENTUCKY February 20, 2020 Education Conference http://www.mbaky.org/

https://cmla.com/civicrm/event/ info?id=311&reset=1

https://www.greatrivermba.com/

https://mmbba.org/meetinginfo.php

IOWA March 24, 2020 IMA Spring Conference

NEW JERSEY April 19 - 23, 2020 2020 Regional Conference of MBAs

CONNECTICUT March 24-25 2020 Loan Officers University

TENNESSEE April 22-24, 2020 2020 Great River MBA Conference

https://whova.com/web/imasp_202003/

http://www.cmba.org/?_ wga=2.188795171.986432858.

1576958208-1661659382.1572117843

http://mbanj.com/events

https://www.tnmba.org/events/eventscalendar/#!event/2020/4/22/2020-greatriver-mba-conference

WISCONSIN April 22-23, 2020 2020 Real Estate & Finance Conference http://www.wimba.org/Events

The MORTGAGE BANKER Magazine

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February 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

5.98%

-11.07%

497,385

4.024

727

71

38%

62%

2

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

4.45%

-12.69%

401,810

3.796

732

83

50%

50%

3

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

4.34%

-13.93%

394,566

3.964

727

77

52%

48%

4

Phoenix-Mesa-Scottsdale, AZ

3.36%

-7.22%

277,660

4.042

725

81

49%

51%

5

Chicago-Naperville-Elgin, IL-IN-WI

3.29%

-16.23%

260,154

3.962

729

81

48%

52%

6

Dallas-Fort Worth-Arlington, TX

3.08%

-10.40%

273,901

4.007

717

82

58%

42%

7

Seattle-Tacoma-Bellevue, WA

2.83%

-22.17%

416,693

3.897

733

77

39%

61%

8

Denver-Aurora-Lakewood, CO

2.82%

-17.79%

345,759

3.885

730

77

35%

65%

9

Boston-Cambridge-Newton, MA-NH

2.65%

-24.86%

411,207

3.853

737

75

44%

56%

10

Riverside-San Bernardino-Ontario, CA

2.33%

-11.23%

327,696

3.943

713

80

42%

58%

11

Houston-The Woodlands-Sugar Land, TX

2.18%

-9.65%

254,909

4.058

712

85

71%

29%

12

San Francisco-Oakland-Hayward, CA

2.15%

-18.60%

579,095

3.942

745

66

29%

71%

13

San Diego-Carlsbad, CA

1.98%

-10.76%

486,588

3.841

739

75

34%

66%

14

Atlanta-Sandy Springs-Roswell, GA

1.95%

-15.47%

253,144

3.938

713

84

56%

44%

15

Miami-Fort Lauderdale-West Palm Beach, FL

1.87%

-13.69%

305,007

4.135

714

80

58%

42%

16

Minneapolis-St. Paul-Bloomington, MN-WI

1.66%

-22.23%

272,873

3.865

738

80

48%

52%

17

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

1.65%

-17.17%

261,639

3.945

723

82

56%

44%

18

Portland-Vancouver-Hillsboro, OR-WA

1.55%

-17.93%

333,523

3.907

736

76

40%

60%

19

Austin-Round Rock, TX

1.42%

-15.54%

314,174

3.895

737

80

62%

38%

20

Baltimore-Columbia-Towson, MD

1.36%

-10.90%

309,963

3.908

724

85

53%

47%

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

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February 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

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February 2020

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February 2020

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