Mortgage Banker Magazine July 2020

THE

BANKER

Covering the Entire Mortgage Lending Process and Everything In Between

MAGAZINE July 2020

THE NEW

NORMAL Sustaining Your Business in a Post-Pandemic World page 20

The Need to Overcommunicate pg. 8

Business as Usual ...

With a Mask?

pg. 34

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

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

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July 2020

SERVING THE MORTGAGE BANKING COMMUNITY FOR MORE THAN THREE DECADES 202.628.2000

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

202.628.2000 WASHINGTON DC | DALLAS TX | IRVINE CA

202.628.2000

July 2020

FEATURES

20 A New Normal in a Post-Pandemic World

BY JAY PLUM, JAMES SIAS, MARC DUKES, CAROLYN GORMAN

The dramatic changes over the last four months have rocked nearly every sector of the economy, and the mortgage industry has had its fair share of impact. With interest rates creating record demand, increased reliance on digital solutions, as well as countless other trends triggered by recent events, our steadypaced, highly regulated industry has been challenged to adapt to the current climate.

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The Need to Overcommunicate Dana Dillard, Executive Vice President, Corporate Social Responsibility with Dallasbased mortgage servicer Mr. Cooper, discusses the changes that have taken place in mortgage servicing as a result of the COVID-19 pandemic, how her company is adjusting to those changes, and what the future holds for mortgage servicing.

BRIAN HONEA

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Putting the 'Service' Back in Mortgage Servicing

Navigating Pre-Negotiation and Forebearance Agreements in the New Economy

Economic pressures caused by the pandemic are creating uncertainty for borrowers and servicers alike. The CARES Act, passed in March, requires servicers to provide up to 12 months of forbearance to COVID-19-affected borrowers who have single-family federally-backed mortgage loans and up to three months for borrowers that have multifamily loans.

While litigation remains an option, lenders can also expect pushback from borrowers and a long timeframe to obtain relief. The good news is that many distressed loans can effectively be turned around with a non-litigation strategy, starting with a pre-negotiation agreement and followed with a forbearance agreement.

HERMAN LIPKIS AND JUDI KREITZER

SUSAN GRAHAM

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July 2020

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Fintech Partnerships Facilitate Digital Adoption During and Post-COVID-19 With advances in technology revolutionizing the financial sector at large, the mortgage banking industry’s digital transformation began long before the onset of the coronavirus pandemic. But as COVID-19 forces the industry to rethink a number of its traditional processes, the speed of digital adoption has accelerated.

STEVE HOKE

Special

SECTIONS

30

LEGAL QUALITY CONTROL & RISK MANAGEMENT

16

Safeguarding Confidential Information and Other Work from Home Considerations in the Era of COVID-19 Telecommuting MICHAEL WADE

TECHNOLOGY

30

40

The Mortgage Counselor

42

Where We Have Come From - And Where We Are Going DANIEL CHILTON

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Mortgage Banking Lawyers

THE C-SUITE

The New Reality How Going Virtual Will Forever Change the Mortgage Industry During COVID-19 and Beyond JOE TYRRELL

46

PROFILE: Vishal Garg

48

PROFILE: Susan K. McHan

COMPLIANCE

34

Business As Usual ...

With a Mask?

38

From the Desk of the Om-Bobs-man

39

MITCH KIDER

FELECIA BOWERS

BOB NIEMI

CEO & FOUNDER BETTER.COM

34

PRESIDENT OF RETAIL MORTGAGE FLAGSTAR BANK

Monthly

DEPARTMENTS 50 MBA Education & Training Calendar

51 White Papers & Webinars

Regulatory Corner

52 Data Download 54 Business Services Directory 55 Sponsors Corner

The MORTGAGE BANKER Magazine

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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 Lucas Luna Lucas@MortgageBankerMag.com COLUMNISTS & CONTRIBUTING AUTHORS Felecia Bowers Daniel Chilton Marc Dukes Carolyn Gorman Susan Graham

Steve Hoke Mitch Kider Judith E. Kreitzer Herman Lipkis Bob Niemi

Jay Plum James Sias Joe Tyrrell Michael Wade

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

FROM THE EDITOR We are back from a brief hiatus, and with our July issue we are picking up right where we left off with our last published issue in April: discussing the impact of COVID-19 on our industry and how to adjust to the disruptions the pandemic caused.

Many of the changes brought on by the pandemic will likely turn out to be permanent, hence the terms “new normal” and “next normal.”

Many businesses in our industry are “re-imagining” the way they operate, and we are featuring several of those here in our July issue. Experts from Mr. Cooper and Financial Industry Computer Systems discuss new norms for mortgage servicing. For new norms in lending, we’ll hear from leaders at Huntington Bank and Holland & Knight LLP. And, executives from industry software giant Ellie Mae and a relatively newcomer to the scene, Finastra, report on new norms in the area of technology. Michael Wade from Newbold Advisors writes on safeguarding confidential information and other work-from-home considerations in a post-pandemic world, and more.

It is good to be back. We are here to inform you about ways that will help YOU improve the way you do business. What are some postpandemic new norms for your business? In what ways have your reimagined the way you perform day-to-day operations? We want to know your experiences. We are always listening. You can always drop us a line via the email address below.

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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.

July 2020

AUTHORS

Felecia Bowers

Daniel C. Chilton

Susan Graham

Steve Hoke

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

Daniel C. Chilton is a partner at RAS Legal Group, PLLC. Mr. Chilton is an experienced financial services attorney and has served on numerous financial services panels because of his extensive experience and expertise in the areas of auto default law, mortgage servicing, financial regulatory compliance and debt collections.

Susan Graham is president and chief operating officer of FICS® (Financial Industry Computer Systems, Inc.), a mortgagesoftware company specializing in mortgage origination, residential mortgage servicing and commercial mortgage servicing software for mortgage lenders, banks and credit unions.

Steve Hoke is vice president and general manager, North American Community Markets, Mortgage and Commercial Lending Solutions for Finastra, a company that builds and deploys innovative, next-generation technology on and open Fusion software architecture and cloud ecosystem. Steve leads the product strategy and innovation for Finastra’s Mortgage and Commercial Lending solution sets.

Judith E. Kreitzer Judith E. Kreitzer is a partner in Holland & Knight's Fort Lauderdale office. Ms. Kreitzer's real estate practice has a particular emphasis on commercial real estate lending, commercial real estate lending workouts and commercial real estate development, including acquisitions and sales of development property.

Herman R. Lipkis Herman R. Lipkis is an associate in Holland & Knight's Fort Lauderdale office. Mr. Lipkis focuses his practice on structured real estate finance, acquisitions, dispositions, hospitality transactions, commercial leasing, management and construction matters.

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Joe Tyrrell

Michael Wade

Joe Tyrrell is chief operating officer with Ellie Mae. Mr. Tyrrell oversees technology, product strategy, product management and Ellie Mae’s business and corporate development efforts involving the company’s network of current and potential business partners and merger and acquisition strategies.

Michael Wade is a partner in Newbold Advisors, LLC, Clearwater, Florida.

Michael has more than 30 years of mortgage industry experience serving in senior management positions in loss mitigation, origination underwriting, repurchase management, operational risk management, credit policy, and counter-party risk. The author can be reached at mwade@ newboldadvisors.com.

July 2020

Mortgage Servicing

THE NEED TO

OVERCOMMUNICATE Brian Honea, The Mortgage Banker Magazine

Dana Dillard serves as executive vice president, Corporate Social Responsibility for Mr. Cooper Group. Dana joined Mr. Cooper, previously Nationstar, in 2013 and held various leadership roles, most recently serving as its Executive Vice President, Corporate Social Responsibility. The MORTGAGE BANKER Magazine recently spoke with Dana about what the mortgage servicing world looks like post COVID-19.

The MORTGAGE BANKER Magazine

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July 2020

The MORTGAGE BANKER Magazine: What major changes have taken place in mortgage servicing over the last few months?

The big elephant in the room is the fact that millions of customers that lost their jobs and are trying to figure out how they manage the mortgage payments, and we want to make sure we are there for our customers during such a stressful time for them.

Dana Dillard: There have been a lot of changes in servicing over the last few months, but the ones that really stick out to me are the level of self-service that we have been providing to our customers. They can go on our website and select a forbearance plan if that's what they need. And now we're in phase two, where if a customer has already extended their program from three months to six months, they can also do that online. We've got a great blog out there that walks customers through in detail what options are available to them and what the options mean. We're working on a video of our customer service agents answering questions from customers. We just try to automate it so that customers can absorb it as they're ready to. And I keep watching this because I think it's so interesting—we've got a couple hundred thousand more customers reading our website and looking at the blog and the forbearance pages than have actually submitted a request online. So, you know they're thinking about it.

They're trying to see what's right for their family.

And the automation has allowed them to do that and absorb it as they're ready to and as their situation changes.

Another change is within five days after the pandemic hit, we got 95 percent of our workforce working from home. And in particular, our call center agents are all working out of their homes and that's unprecedented in our industry. It certainly is unprecedented for us. The transition can potentially be an ordeal... You can imagine trying to get the employee a laptop, make sure the wi-fi at their house working, get the house calls routed to them via their cell phones, and getting them set up while you have a huge volume of calls always coming in the door. So that's definitely different. And I think the agents enjoy the convenience of working from home. It's a rapidly changing environment, so trying to get information to them and making sure they're up to

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date on all the changes almost on a daily basis just makes it challenging. We've had to up our game a little bit in the communications department.

Because things are changing almost daily, if a new program comes out, or an update to your program, we just want to make sure they have the latest information for the customers.

Another change we’ve experienced in the last few months is virtual learning. Over the last several weeks, we've had to train not only customer service agents on these new plans, but also we've done a lot of hiring as well. And that is a whole new ballgame when we have brand new hires coming in, getting equipment, going home, and being trained virtually. And then, of course, the big elephant in the room is the fact that millions of customers that lost their jobs and are trying to figure out how they manage the mortgage payments, and we want to make sure we are there for our customers during such a stressful time for them.

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July 2020

Mortgage Servicing TMBM: What have you done to try and adapt to those changes?

of working from home, or working in the office and keeping our employees safe? What I hear from the industry leaders is overriding concern about our teams who have their jobs to do and we don't want to make it any tougher with restrictions within the office. We have to consider what we can do to keep our productivity high for customers and at the same time keep our employees safe.

DD: Our communication game plan it's really been overcommunicate, overcommunicate, overcommunicate because if you're a manager in a call center and you've got 15 agents that work for you, how are you touching base with them and making them feel connected?

As a company we've really been challenged as leaders to say, "Okay, we know we think we communicate, so we've got to up our game even more when it comes to huddles, when it comes to videos, and when it comes to calling our teams at home and visiting with them.”

Just making those connections part of our everyday work, as well as the automation for customers, and the training, and technology, has definitely been new and I think really improved when it comes to building our super community.

TMBM: Do these changes represent the “new norm” for mortgage servicing?

DD: I think we are going to focus our dollars on the automation and customer self-service, That's what customers want and that's what they're going to demand. It's really going to be a competitive advantage for those who figure that out. We're dealing with a lot of customers in social media, and not a huge amount but still it's a steady drum beat, and customers want that, too. I think all those things—technology, how we're interacting with customers—all of that is here to stay for sure.

As far as working from home versus working in the office, I don't think we'll ever go back to the way we were. I can't imagine that we would, and I think our employees have shown us that they can be just as productive and engaged at home, and so how do we balance all of that?

I'm just so thankful for the technology that allows us to connect with our teams, and allows us to be protected from home. Not having that technology was my setback in 2008, I can tell you that. So we're just very fortunate. If you were to tell me that we could get 95 percent of our people working from home in five days, and that we would be just as, if not more productive doing it, I would not have believed it. And yet that's what's happened.

TMBM: Are there any more changes coming in servicing and if so what are they?

DD: When it comes to customers who are in a financial crunch right now, we're really just in chapter one. We have many changes coming down the road when it comes to customers and their experience. And as we did just six months in the forbearance plans, or nine months, or 12 months, what are those changes and options that we have to offer to those customers?

The question is not only knowing how to frame it and how to share it with customers, but also what can we do in an automated way so that we can stay on top of our service game? Because customers expect that. We'll have to continue to think ahead. I was having a conversation this morning with someone who has now been paying six months. What are those plans for the Fannie loans? What is the plan for the Freddie loans? And a lot of that has been lost. That's going to be the next chapter.

And then of course, there is the return to work—not just for us, but for our whole industry.

What does that look like? Is it a combination

The MORTGAGE BANKER Magazine

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

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July 2020

Mortgage Servicing

Putting the ‘SERVICE’ Back in Mortgage

Servicing

By Susan Graham, FICS

The year 2020 is shaping up to be a challenging one for mortgage servicers.

Economic pressures caused by the COVID-19 pandemic are creating uncertainty for borrowers and servicers alike. The Coronavirus Aid, Relief and Economic Security Act (CARES Act), passed in March, requires servicers to provide up to 12 months of forbearance to COVID-19-affected borrowers who have single-family federally-backed mortgage loans and up to three months for borrowers that have multifamily loans.

In this challenging economic climate, communication between mortgage professionals and borrowers is more important than ever.

Borrowers need convenient, immediate access to their up-to-date mortgage information. Digital mortgage technology such as mortgage servicing software and web applications can provide loan information “on-demand,” but human interaction is still an essential part of the “service” equation.

Servicers that embrace a hybrid approach, blending self-service technology with support from welltrained mortgage professionals, will have more loyal, satisfied customers.

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SERVICING TECHNOLOGY ENABLES HIGH QUALITY IN-HOUSE SERVICING Selling loan servicing retained to the Government Sponsored Enterprises (GSEs) allows a lender to originate more loans and gives borrowers the comfort of knowing their servicer is the lender they originally selected, and quite possibly the financial institution where they have other accounts.

The best way to put service back into servicing is to manage servicing In-house, which generates service fee income and provides cross-selling opportunities that enable credit unions, banks, and mortgage companies to provide better, more July 2020

personalized customer service. When servicing is outsourced, the lender has no control over the quality of the customer service provided by the third-party provider. Too often, outsourced servicing companies treat the borrower as just one of many “accounts” instead of providing the personalized service that is required in today’s competitive lending environment. COVID-19 has placed many borrowers in the difficult position of not being able to make their mortgage payments because of a reduction or total loss of income. During times like this, when many borrowers need personalized attention and assistance from their lender, in-house servicing has even greater value.

To make in-house servicing efficient and effective, servicers should use leading-edge mortgage servicing software that integrates with the loan origination system (LOS) and core system. Mortgage servicing software and web

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applications facilitate paperless servicing that improves the overall borrower experience. Today’s environmentally conscious borrowers may view lengthy paper documents as wasteful and even annoying, especially as their preference for and reliance on technology continues to increase.

According to a survey of 1,000 Millennials by the Shelton Group, 70 percent consider a company’s environmental practices when deciding whether to purchase its products.1 Another report, the WeSpire “15 Critical Insights into Gen Z,” found that Gen Z individuals consider the environment their second most important issue.2 Mortgage servicers should offer borrowers several convenient ways to pay. Many borrowers prefer making online payments via online portals and web applications. Mortgage servicing software should also support the processing of phone, in-person, or mailed payments. Web applications

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July 2020

Mortgage Servicing give borrowers online access to their mortgage loan information, allow borrowers to make online payments, and facilitate communication between borrowers and servicers. According to a recent JD Power survey of mortgage servicing customers, mobile customers are more satisfied and more likely to be mortgage company brand promoters than non-mobile users. Unfortunately, only 20 percent of mortgage customers use mobile technology, so it is important to engage borrowers and encourage its use.3 Increasing the use of mobile technology may increase borrowers’ satisfaction and increase engagement. Account alerts are an underutilized way to provide exceptional customer service, engage the customer on a regular basis, and promote customer satisfaction. According to the JD Power survey, receiving account alerts via text messages, secure messages, on the servicer’s website or email was associated with high customer satisfaction. Unfortunately, 50 percent of survey respondents said their servicer either does not have account alerts or they are unaware the service is available.4 For financial institutions or companies that offer another website requiring login credentials to access other accounts, single sign-on technology can be incorporated to make the borrower web application access seamless, as if the borrower’s financial information were on one system.

survey of 7,374 mortgage servicing customers, customer satisfaction drops when borrowers believe their time is being wasted. Among individuals who believe their time is wasted, 66 percent are dissatisfied when they must wait five minutes or more to speak with a customer service representative.6 Customer complaints are a valuable source of information, providing an opportunity to improve the borrower experience. Resolving complaints is crucial for preventing other future grievances. For every person who calls to complain, there may be five other dissatisfied customers who don’t pick up the phone. According to panelists at the Mortgage Bankers Association conference, the biggest complaints involve payment and escrow. Servicers may need to improve their processes, or they may need to educate borrowers to help them better understand and navigate the payment or escrow processes.7 By using mortgage servicing software and web applications to improve the efficiency of mortgage servicing processes, servicers are taking the first step toward improving the customer experience.

As more borrowers inquire about complicated issues or request loan modifications, servicers must also provide exceptional human-touch support.

By responding promptly to borrower inquiries, addressing complaints, and educating borrowers, servicers can create loyal, satisfied customers for life.

SUPPLEMENT TECHNOLOGY WITH THE HUMAN TOUCH

While they may prefer to check their balance or make payments online, many borrowers still want to interact with real, live mortgage professionals, at least occasionally. Surveys show that even millennials, known to prefer technology, still want personal assistance when paperwork and terminology get complicated.5 ]. This need for inperson service will only increase as more borrowers request forbearance due to the COVID-19 pandemic.

To provide an outstanding service experience, mortgage servicers must respond promptly to borrower requests. According to a JD Power

The MORTGAGE BANKER Magazine

END NOTES https://www.prnewswire.com/news-releases/survey-millennials-less-likely-torecycle-but-more-likely-to-buy-from-companies-that-go-green-300522713.html 1

2

http://www.wespire.com/wp-content/uploads/2018/07/WeSpire_GenZ-2.pdf

https://www.jdpower.com/business/press-releases/2018-primary-mortgageservicer-satisfaction-study 3

https://www.jdpower.com/business/press-releases/2018-primary-mortgageservicer-satisfaction-study 4

5

https://thefinancialbrand.com/62142/millennial-digital-mortgage-lending/

https://www.jdpower.com/business/press-releases/jd-power-2017-us-primarymortgage-servicer-satisfaction-study 6

https://www.mba.org/mba-newslinks/2017/february/mba-newslinktuesday-2-21-17/residential/using-customer-feedback-to-improve-servicingexperience 7

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July 2020

Quality Control & Risk Management

Safeguarding Confidential Information and Other Work from Home Considerations in the Era of COVID-19 Telecommuting

By Michael Wade, Newbold Advisors

S

ince the passage of the Gramm-Leach-Bliley Act in 1999 and its ensuing regulations (GLBA), financial institutions have become well-versed in how to identify and safeguard protected personal information (PPI). Over the past two decades, those institutions have developed training, security, and audit programs that garner customer trust and meet regulator satisfaction.

With the onset of COVID-19 and the corresponding government mandates, the number of work-fromhome or teleworking employees has dramatically increased. Roles traditionally performed and managed in-house are now, suddenly, performed from remote residences not designed for such activity. Financial institutions are now confronted with how to manage and oversee security concerns that their risk management programs likely did not envision. This article will examine the gap between those programs and this new reality, and propose solutions to mitigate the new and higher risks to business.

Working remotely is hardly an original concept.

But, the option to work remotely usually has The MORTGAGE BANKER Magazine

typically been viable only for a limited number of trusted industry professionals, such as loan officers and underwriters, or legal and compliance resources. Until recently, a significant percentage of a financial institution’s workforce, particularly those employees who require more managerial oversight, had no other place to work than from the office.

Institutions built their risk management programs around this set of facts, but well-established controls became outdated almost overnight.

To date, regulators have provided little guidance on safeguarding PPI during this pandemic.

Regulators also are likely struggling with work from workforces. On May 8, the Consumer Financial Protection Bureau (CFPB) posted a statement saying “While the Bureau is mindful of challenges faced by institutions, we will not hesitate to take public enforcement action when appropriate against companies or individuals that engage in unfair, deceptive, or abusive acts or practices, discriminate, or otherwise violate Federal consumer financial protection laws, in order to profit from the COVID-19 pandemic.� We can logically assume 16

July 2020

that PPI protection is still a vital legal and business concern, yet the CFPB is not offering any safe harbor to institutions. It is simply up to the financial institutions to quickly adopt new security control measures that meet state and federal regulatory standards. Implementing new controls not only helps ensure GLBA compliance, but also protects against all types of information theft or misuse, thereby protecting an institution’s trade secrets.

Companies are responding as best they can, and we are seeing a set of best practices coming into focus. Loosely divided into three groups are Information Technology, Policies, Procedures and Training, and Liability Insurance; and, some of the more prevalent steps included in each are:

authorized users only. Configure access carefully, use firewalls, include additional authentication requirements such as two-factor authentication, and/or robust password standards.

• Obtain and use only employer-owned hardware.

Financial institutions may have to invest in new hardware, such as laptops and cell phones.

• Ensure all hardware includes current security software. Institutions also may have to invest in more technical resources to deploy anti-virus patches, etc.

• Limit the type of remote connections used by employees, and prohibit working from public sites, like coffee shops.

INFORMATION TECHNOLOGY

• Invest in data loss prevention software.

• Ensure the institution’s networks, Virtual Private Networks (VPNs) and other IT resources are in place to support the entire workforce. VPNs afford greater security protocols than the average personal wireless network.

• Make sure information is encrypted before transmitted.

POLICIES, PROCEDURES, AND TRAINING • Review and revise all policies and procedures relevant to roles that access PPI to account for the new remote working environment. For

• Ensure access to an entity’s systems is limited to The MORTGAGE BANKER Magazine

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Quality Control & Risk Management o Sets forth expectations regarding coming to office on occasion and maintaining high level of performance.

example, desktop work procedures should include prohibitions on printing PPI remotely.

• Train managers on the new procedures, including ways to effectively manage remote teams.

o Requires the employee to take reasonable steps to protect the company’s confidential and proprietary information.

• Consult with legal counsel experienced with GLBA to determine and mitigate new data privacy legal considerations.

LIABILITY INSURANCE • Consult with insurance brokers and review liability coverages to counter higher information security risks. The application process alone can serve as a mini-risk assessment.

• Consult with legal counsel with employment law expertise to review monitoring policies to avoid or limit discrimination claims.

• Train teleworkers on new security awareness issues; for instance, deploy their own “clean desk” or privacy measures. Those include common sense ideas: lock doors to the residence when not in use, lock screens when away from the desk, and never print.

• Discuss cyber exposure and adequately insure against cyber liability policies.

• Review employment practices liability insurance coverages to address the scenario of an employer having to furlough or terminate employees who cannot adequately meet the employer’s work- from-home standards.

• Ban flash drives and similar external hard-drive devices.

• Avoid use of speaker phones and beware of “smart speakers” such as Alexa, or home surveillance tools like Ring.

• Consider wage and hour insurance. For companies with a business surge, employers must be sure to compensate lawfully, including overtime wages. With all employees working remotely, increased disputes may arise over hours actually worked.

• Remind employees that applicable confidentiality policies are still in place.

Educate employees about improving their online and work-from-home habits.

• Consider implementing or enhancing a teleworker policy and corresponding agreement with employees. Work with legal counsel and ensure the agreement:

• Examine worker’s compensation insurance, as the employer no longer has direct control over the work environment. Employers may face novel legal challenges due to employee accidents/injuries in a home office.

o Sets expectations of possible home office audits, perhaps via Zoom, Facetime, or written questions.

Unquestionably, the current pandemic has significantly changed the work environment from office to home, but the PPI risks remain.

These risks are further complicated now that employers allow ALL employees, including those hired with the intent of being supervised daily, to work remotely. As we stand today, it is difficult to say when things will return to “normal.” The suggestions put forth above require a significant amount of effort, but in light of the risk, the measures have merit. MBM

o States that the employer may discontinue the arrangement at any time with or without advance notice in the employer’s sole discretion. o Considers who will be providing the equipment, preferably the employer. If it is the employer, then specify that the property is the employer’s and is to be used only for business purposes.

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July 2020

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.

The MORTGAGE BANKER Magazine

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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Loan Origination

A New Normal

in a PostPandemic World

Will the sudden changes over the last four months drive fundamental change in the mortgage industry?

Experts from Huntington Bank tackle that question from three key areas: sales, credit, and operations

By Jay Plum, James Sias, Marc Dukes, Carolyn Gorman

The dramatic changes over the last four months have rocked nearly every sector of the economy, and the mortgage industry has had its fair share of impact. With interest rates creating record demand, increased reliance on digital solutions, as well as countless other trends triggered by recent events, our steadypaced, highly regulated industry has been challenged to adapt to the current climate.

I asked my department leaders in sales, credit, and operations to identify how the pandemic is affecting mortgage lending; and, more importantly, how these impacts are sparking fundamental change. James Sias, national sales manager; Marc Dukes, national credit and data analytics manager; and, Carolyn Gorman, national operations manager, each tackle the question from a multilateral perspective and share their unique approach to our business.

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SALES – James Sias How automation actually allows for a more personal touch

and are generally more knowledgeable about their options than they were before this pandemic. At the same time, they are also less willing to engage in outdated procedures like sifting through piles of paperwork and trading documents back and forth.

The industry has responded with better frontend processes, risk-assessment tools, and more automation. Services that allow faster processing and fewer borrower-contributed documents have become the new standard. Some of these services include asset aggregation, income assessment, and advanced score modeling.

However, these services are still behind the level of automation many customers demand.

Artificial intelligence and machine learning are filling in some of the gaps, but many tools were created years ago without any real improvement in the quality, availability, or details in data.

In short, customers have become more intelligent about their creditworthiness, while underlying technologies have struggled to keep up the pace. The industry must continue to make great strides in digital risk assessment and credit processing if we want to meet customer demands in the digital world.

Pandemic or no pandemic, mortgage loan officers remain at the heart of sales and serve as trusted advisors during some of the largest financial transactions of a borrower’s lifetime. Even as the industry moves toward automation and digital solutions in the wake of COVID-19, the role of a mortgage loan officer is not going away. Instead, it is getting redefined.

By automating certain tasks, like collecting paperwork or transferring documents, we are enabling mortgage loan officers to prioritize valueadded services. This opens the door for them to have deeper conversations with customers, spend more time developing referral partners, and focus on cultivating stronger relationships with centers of influence.

Navigating through a period of such volatility is why engaging with these partners is more important now than ever. Automation provides mortgage loan officers greater opportunities to stay in touch with customers by answering questions, keeping them current on industry dynamics, and simply just being available as a resource.

Some experts predict that a mortgage is a commodity to be fully automated. However, many borrowers prefer personalized service and value knowing they have a trusted expert they can call.

This is especially true for first-time homebuyers, purchase transactions, or other unique transactions.

Embracing automated services is something we are leveraging to help us accomplish this and build customer loyalty for years to come.

OPERATIONS – Carolyn Gorman Yes, you can put the customer first Though the operations department is traditionally known for everyday tasks like fulfilling product orders, the opportunity we have to impact the customers’ overall experience could not be overstated, especially now.

The goal has become to modify processes and technologies as customers express new and different demands. By putting the customer at the center of operations, we are extending the service experience through things such as loan closing, which means fulfilling not just on a loan product but fulfilling a customer’s unique financial goals as well.

The rapid pace of industry change means it is important to stay flexible, even as we make choices about what to accelerate and how to sequence these changes. Including customer-

CREDIT – Marc Dukes Savvier markets demand better technology The move toward automation has also left its mark on the credit segment. Though the goals of the credit process have not changed, such as achieving the most accurate discrimination of good versus bad loans, while maximizing the customer experience, the market has. Customers are savvier, have access to better information, The MORTGAGE BANKER Magazine

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Loan Origination facing colleagues in the development process is crucial to ensuring the customer’s needs are what is guiding these choices.

To put words into action, we recently used this approach to accelerate implementation of contactless and limited exposure tools for digital signing services. These tools became essential due to the pandemic, but their convenience will remain the standard for technologies moving forward. It is our goal to continue providing customized and proactive service, while offering options to fit our customers’ varying needs.

Marc Dukes has been in banking for more than 20 years, managing groups ranging from marketing analytics and credit risk to his current responsibilities as director of credit and analytics for Huntington’s consumer finance business, where he manages more than 180 underwriters, credit risk colleagues and support staff.

Carolyn Gorman leads Huntington’s mortgage processing, closing, funding and

THE BOTTOM LINE

operational support functions.

With 18 years of experience in

Buying a home is stressful, even without the circumstances of a nationwide pandemic.

In our fast-paced, ever-changing, digital world, customers are turning to us with more complex borrowing questions and requiring an increasingly customized experience. Figuring out how to offer them a service experience that’s second to none is sparking a movement throughout the industry that starts with each segment of an organization.

So, what will this look like? More than simply being speedy and convenient, the entire process must focus on the customer’s comfort and preferences. The commitment to excellent customer service remains the same; it’s how we get there that’s changing. And the best firms will continue to be what they have always been: organizations focused on delivering products in the best way possible. However, the process will be faster and adaptable based on each customer’s individual needs, which will require a delicate balance between relying on digital solutions and knowing when human connection simply cannot be replaced.

The MORTGAGE BANKER Magazine

the industry, she has held several leadership positions supporting loan originations at Huntington and other banks.

Jay Plum is a 30-year veteran and leader of the lending industry, Jay Plum oversees mortgage and consumer lending at Huntington.

Under his leadership, the bank has become the top mortgage lender in Ohio and the fourth largest in its sevenstate region across the Midwest.

James Sias has spent more than two decades working in financial services. At Huntington, he oversees all sales efforts for a range of business lines, including retail, consumer direct, third party lending, corporate relocation and home equity channels.

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Zero Down on Homes For Your Buyers!

learn more at: www.chenoafund.org

Loan Origination

NAVIGATING PRE-NEGOTIATION and FORBEARANCE AGREEMENTS in the NEW ECONOMY: CONSIDERATIONS for LENDERS

By Herman Lipkis & Judith E. Kreitzer, Holland & Knight LLP

T

he longest period of economic growth in American history has finally come to an end.

The National Bureau of Economic Research has confirmed that the U.S. economy is now in recession territory. Borrowers and their lenders are feeling the effects of the Covid-19 pandemic, with growing numbers of borrowers missing loan payments, requesting payment deferrals, and/or demanding modifications

to existing loans.

The 2008 economic recession gave lenders many lessons that can be applied to 2020.

Prudent lenders understand the delay and expense involved with foreclosure litigation.

While litigation remains an option, lenders can also expect pushback from borrowers and a long timeframe to obtain relief, as many courts remain closed and others are operating with reduced staff amid a growing

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backlog of cases. The good news is that many distressed loans can effectively be turned around with a non-litigation strategy, starting with a pre-negotiation agreement and followed with a forbearance agreement.

Forbearance agreements can be a win-win solution: providing borrowers with critical time to stabilize their operations, while simultaneously protecting lenders’ remedies, all while avoiding the uncertainty

PRE-NEGOTIATION AGREEMENTS

and expense of litigation.

Lenders that agree to enter forbearance agreements do not waive their rights or forgive defaults under the loan. On the contrary, standard forbearance terms require a borrower to acknowledge their defaults, waive any defenses, and recognize the lender’s rights and remedies.

Forbearance is a temporary period during which a lender agrees to refrain from enforcing

its remedies under the loan documents, but the borrower’s original default is not waived or forgiven. While borrowers benefit from additional time to cure defaults and improve their finances, lenders can use the forbearance period to improve their position by requiring increased reporting requirements, additional cash management controls, and more accurate financial stress tests.

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Before entering into any discussions about a loan modification or forbearance, lenders may consider requiring a pre-negotiation agreement.

A pre-negotiation agreement (PNA) requires both lender and borrower to acknowledge that the parties have agreed to engage in negotiations about a possible accommodation, without obligating either party to a particular solution or affecting the lender’s ability to enforce its rights under the loan documents. The purpose of the PNA is to set the ground rules for how the negotiation between the parties will take place. PNAs help foster open communication between the parties and can prevent unscrupulous borrowers from using the discussions as a basis for opposing enforcement actions, claiming that the lender committed to a loan modification, or asserting any lender liability claims in connection with a loan.

In its most basic form, a PNA may describe the status of the relationship between lender and borrower and include the borrower’s acknowledgment of all defaults, the amount currently owed, and serve as a reaffirmation of the terms and covenants of the loan documents. Any of the loan guarantors should also be a party to the PNA. The PNA should explicitly state that any proposals discussed between

Loan Origination the parties are non-binding until reduced to a written agreement executed by the parties. The following are additional terms and conditions commonly included in PNAs: • that borrower shall not rely on any discussions with lender and will not forgo refinancing opportunities; • that all communications and documents exchanged are inadmissible as evidence in any judicial proceeding and shall remain confidential even after termination of the PNA; • that lender’s failure to exercise its rights with respect to a default shall not affect any of its rights or remedies under the loan documents or law; and, • that lender may accept or reject payments without waiving any of its rights and/or remedies.

The parties may also consider including language permitting any party to terminate discussions and the PNA at any time, without liability, subject to certain clauses which may survive termination, such as confidentiality provisions.

A well-drafted PNA is an important first step on the road to a potential

loan modification and/or forbearance agreement. The next and more important step is the forbearance agreement.

FORBEARANCE AGREEMENTS

Once a PNA has been executed in connection with a defaulted loan, the next step a lender could consider taking is entering into a forbearance agreement. Considering a borrower’s forbearance request is somewhat similar to processing an original loan request. Lenders should consider whether the borrower actually qualifies for a modification.

Updated due diligence on the borrower and guarantor parties should be performed including examining current financial statements, confirming guarantors’ contact information, and reviewing a hardship statement and turnaround plan for the loan.

It is important to obtain the most up-to-date information on all borrower and guarantor parties as well as the loan collateral before entering into a forbearance agreement.

Similar to the PNA, a forbearance agreement may include a recitation of the parties’ relationship, an acknowledgment by the borrower and any guarantors of all existing defaults, and affirmation that the agreement does not represent a waiver

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of the lender’s rights and/ or remedies under the loan.

The agreement should specify the balance due, including all unpaid principal, interest, late fees, reserve amounts, and other charges. Lenders may also want to include the following provisions: (i) a confirmation that lender provided borrower with a default notice pursuant to the terms of the loan documents; (ii) (ii) acknowledgment that the agreement is binding upon the borrower, guarantor(s) and each’s successors and/or assigns; (iii) (iii) a waiver by borrower of its right to the automatic stay following a bankruptcy filing; (iv) (iv) consent to jurisdiction in the event of future litigation; and (v) (v) a release and indemnification by borrower and guarantor of any liability for any causes of action the parties may have against the lender.

The forbearance agreement should clearly set forth the term of the forbearance period, whether the borrower is expected to make any payments during that time and any events that would trigger a termination of the forbearance period,

in which case the borrower should agree to an immediate default scenario.

It is not unreasonable for a lender to require payment in exchange for its agreement to delay enforcing its remedies under the loan documents.

Any fees in connection with the forbearance should be specifically described, including the method and timing of the payments. The forbearance agreement also provides an opportunity to implement enhanced compliance standards including

new reporting requirements and cash management controls. Additional controls to consider include escrowing for taxes and insurance and the use of a lockbox for rental payments. Depending on the term and structure of a loan, the forbearance agreement can become long and complex, so it is important for lenders to encourage borrowers to engage their own legal counsel to review and advise them.

While the causes for the current recession may be different than the last one, the

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

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July 2020

fundamentals of a successful loan workout remain the same. Pragmatic lenders can utilize pre-negotiation and forbearance agreements to help their borrowers during a difficult time, while preserving their rights at no or limited costs to the lender. Working together within the framework of these agreements can help both lenders and their borrowers avoid costly litigation, turn a distressed loan into a performing loan, and help foster a stronger borrower-lender relationship. MBM

Technology

Fintech Partnerships Facilitate Digital Adoption During and Post-COVID-19

By Steve Hoke, Finastra

W

ith advances in technology revolutionizing the financial sector at large, the mortgage banking industry’s digital transformation began long before the onset of the coronavirus pandemic. But as COVID-19 forces the industry to rethink a number of its traditional processes, the speed of digital adoption has accelerated. In particular, technology is critical to enhancing efficiency while lenders are managing increased volume due to low interest rates. As banks and lenders look to embrace digital tools, partnerships with fintech firms can help drive crucial innovation in the mortgage lending business, both during the pandemic and looking ahead to the post-COVID-19 future.

branches and require employees to work from home, increased loan volume can put a significant strain on operations. As a result, institutions are ramping up their investment in digital tools to increase efficiency, while also maintaining social distance.

ACCELERATING ADOPTION OF DIGITAL TOOLS Prior to COVID-19, the mortgage industry was already beginning to adopt online mortgage applications, e-closings, electronic verification of income and assets, and other digital tools. In addition to the universal benefits of embracing digital technology, including cost savings and efficiency, digital tools offer specific and valuable advantages to the mortgage banking industry.

Online mortgage applications allow borrowers to check the status of their mortgage applications and enhance communication visibility throughout the application process. From the lender’s perspective, the ability to digitally collect and process application documents can substantially boost efficiency and reduce the time to close.

For example, Equifax’s Work Number database service allows lenders to quickly and securely verify an applicant’s proof of employment and income, while FormFree provides automated verification of assets. Before the pandemic, Fannie Mae and Freddie Mac instituted policies to waive representation and warranty for lenders who electronically verified income details using these services. Although these policies were temporarily suspended due to economic uncertainty caused by COVID-19, they are strong indicators that digital tools are becoming the norm.

As social distancing and other COVID-

LOWER INTEREST RATES LEAD TO AN UPTICK IN LOAN VOLUMES The coronavirus pandemic and the shutdowns it prompted in communities throughout the U.S. have created widespread economic uncertainty and hardship. In an attempt to ease these burdens and encourage economic activity, the Federal Reserve cut its benchmark interest rate by a full percentage point to a range of 0 - 0.25 percent.

These rate cuts have led to a significant increase in the volume of mortgage activity. Existing homeowners view the historic low rates as an opportunity to refinance, and new homebuyers are eager to secure a mortgage while rates are low.

Finastra clients in the mortgage banking space closed more loans in April 2020 than any other month since we began tracking these metrics.

Robust loan activity is a positive development for the industry; however, at a time when COVID-19 has forced banks and credit unions to close physical The MORTGAGE BANKER Magazine

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related developments necessitate a shift to digital processes and solutions, lenders’ and borrowers’ expectations will shift as well. In other words, once the industry has embraced technology that improves efficiency for all parties, few will be tempted to go back to the “old way” of processing loan applications. Rather, the industry will need to be strategic about managing borrower experiences in the context of a digital journey. For many banks and lenders, partnering with fintech firms offers valuable support.

like Etsy or Airbnb connect individuals offering and consuming a product or service, open platforms can also connect banks and lenders with fintech companies that offer solutions to the challenges the mortgage industry faces during COVID-19and beyond. Once integrated into an open platform, banks can “plug into” a variety of new capabilities and tools without having to replace their own core systems.

In addition to providing access to digital tools that drive efficiency, technology platforms can also help banks and lenders identify opportunities to improve their processes through data. Using artificial intelligence and automation to analyze data offers greater visibility into cycle times, allowing mortgage bankers to pinpoint bottlenecks and improve process efficiency. Data analysis can also provide useful metrics around application activity, volume, location, demographics, and more.

The coronavirus pandemic presents unprecedented challenges to the economy and to the way the mortgage lending industry conducts its business. However, when it comes to digital transformation, the pandemic has only accelerated a shift that was already underway. Lenders that take advantage of opportunities to partner with fintechs will position themselves to not only weather the COVID-19 crisis, but also set themselves up for success as we enter the “new normal” of a postpandemic world. MBM

PARTNERING WITH FINTECHS TO UNLOCK THE VALUE OF DIGITAL When it comes to embracing technology, collaboration between fintechs and the mortgage banking industry can help drive not only innovation, but also efficiency. For mortgage lenders currently managing a high volume of applications and closings, priorities are less oriented around immediate growth and more focused on making processes more efficient. For instance, automated communication tools can help reduce the number of inquiries to call centers, which are already operating with reduced resources due to the pandemic.

Open platforms and open application programming interfaces (APIs) can facilitate collaboration between mortgage lenders and the fintechs looking to serve their digital needs.

Similarly, to the ways consumer-facing platforms The MORTGAGE BANKER Magazine

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Technology

THE NEW REALITY:

How Going Virtual Will Forever Change the Mortgage Industry During COVID-19 and Beyond

By Joe Tyrrell, Ellie Mae

A

ny mortgage lender, technology company, or service provider that takes supporting their clients seriously, has periodically run its executive teams through what is called a “table-top” exercise, where some hypothetical natural disaster or data breach occurs and the company’s leadership team must “break the glass” and invoke either their business resumption and/or disaster recovery processes. The purpose of the table-top exercise is to gauge how prepared the company is if The MORTGAGE BANKER Magazine

such a real event were to occur. At the onset of COVID-19, it was difficult to determinehow the housing market would be impacted by the global pandemic, but perhaps the most unlikely outcome, that nobody saw coming, was that lenders didn’t just survive shifting their workforces to operating remotely; but, in fact, many of them have thrived during this transition. Obviously with mandatory social distancing measures created across the country, the options for mortgage professionals to spend their time have been 30

July 2020

limited to shopping for essentials online and plowing through the unprecedented volumes lenders were facing. The result was increased capacity, new levels of collaboration (virtually), and lenders having to answer employees questioning why they can’t continue to work from home even once offices are re-opened. While some roles, such as underwriters, have worked remotely for a while now, many lenders still rely upon centralized operation centers where departments are co-located together, or physical workflows are optimized through intricately designed seating charts. However, going virtual has challenged those traditional approaches and perhaps even exposed them as being unnecessary for success.

So now companies throughout the mortgage supply chain are having to answer a question for which none of their hypothetical exercises prepared them: once you break the glass, can you ever really put it back together?

communication is improved, creating relationships that can last beyond just one loan transaction incorporating technology into a lender’s process that will last well beyond the COVID-19 era.

Not only is engaging digitally with borrowers beneficial in the short-term to keep pace with the demand, but it will also be a business asset postCOVID. Borrowers have long been interested in digital options. Data from Ellie Mae’s Borrower Insight Survey found that 50 percent of borrowers chose their lender based on whether they offered an online application or portal. Investments in digital solutions will appeal to tech-savvy new generations of borrowers and will free up lenders’ valuable time and energy so they can provide the interconnected and personalized communication that today’s borrowers crave when making one of the biggest financial decisions of their lives.

However, no matter how good your point of sale system is for engaging consumers, if you don’t have a systemic way to ensure every consumer is followed up with, every consumer is communicated to, and every possible expression of interest has the opportunity to become an application, then you are never going to realize the value of your investment and the consumer will never get the experience that they want.

IT’S NOT JUST YOUR EMPLOYEES Now that lenders have proven their ability to operate virtually, it’s not just their employees who have grown accustomed to this new reality, but also the clients that they serve. Under normal circumstances, many borrowers often complete their applications over several sessions online, starting and stopping at their convenience. But at this time, with such an overwhelming volume of applications and limited resources, applications can easily fall through the cracks or be abandoned all together by a borrower if lenders do not actively follow up and engage them. While that may be the reality for the lender, it is absolutely not the expectation of the consumer. Digital solutions offer critical tools to keep track of each application, from seeing the loan’s current status, to alerting the lender when there is a requirement to disclose (even on incomplete applications), to signaling lenders when it’s time to follow up with a potential borrower in order to convert their interest into an application. For some digital solutions, this process can be fully automated, freeing up lenders’ bandwidth to personalize their follow ups with borrowers and more efficiently drive new business. As a result, borrower and lender The MORTGAGE BANKER Magazine

FAST TRACKING THE TRUE DIGITAL MORTGAGE Prior to the COVID-19 pandemic, many facets of the mortgage process were already on track to become fully digitized, but these efforts have been jumpstarted out of necessity. From submitting documentation and applications online, to pulling deposit records and verifying employment, income, and assets, every aspect of the mortgage process is now on the fast track to becoming fully digitized, which will not only help lenders manage high levels of interest but will also ultimately streamline business operations to improve profitability. With value to both the lender and the consumer, there are historically manual processes that are ready for digitization.

Checkers Get Checkmated—Digital solutions are helping lenders remain compliant with changing government and industry requirements, but many lenders still rely upon people checking 31

July 2020

Technology documents and then other people checking their results, just to be sure. While GSEs have provided flexibility surrounding how lenders verify income, as a result of COVID-19 and the resulting establishment of forbearance policies and procedures, they have also tightened requirements on the timing by which income and employment verifications must be completed. Using digital tools to verify employment, income, and assets not only helps conserve time and reduce in-person interactions, but also ensures lenders are compliant. Many loan origination systems allow for these services to be ordered automatically, based upon lender defined milestones, with business rules driving actions in order to keep lenders focused on the consumer, not on having people checking data.

paper documents, thumbprint pads and driver’s licenses. Some progress had been made to digitize the process prior to the pandemic, but since the onset of COVID-19, the industry was forced to adopt and drive the additional innovation to truly accelerate the next paradigm change in the closing process. With remote online notarization, borrowers are able to connect with a commissioned notary over video call and remotely notarize any needed documents. While not all states allow remote online notarization, many are out of necessity for the duration of the COVID-19 pandemic, while additional legislation around the action is being fast-tracked.

There is no doubt that the past few months have been a challenging time for borrowers and lenders alike. But every advancement needs a catalyst and the focus on borrower experience, with safety and not just speed being a requirement, has forced the industry to confront historical practices and push through the change management challenge that innovation presents. While the speed at which the industry has adjusted to the challenges before them and adapted in order to provide attentive and socially distant service to their borrowers has been nothing short of heroic, we have to ensure that over time, we don’t regress back to how things were done, and instead keep taking the necessary steps to truly realize a digital mortgage.

Lenders can reap the rewards in a postCOVID world, while providing a better borrower experience, throughout the entire transaction, not just the first 15 minutes while the application is being completed.

If we have learned anything from enduring a global pandemic while at the same time facing unprecedented loan volume, with an unpredictable and quickly changing secondary market, it’s that we have to be prepared to adapt to change. MBM

Crowd Processing—Home appraisals have also become further digitized during the pandemic. Home appraisals are necessary in order to refinance most loans; however, most homeowners and home appraisers may not be comfortable being in close proximity to a stranger to complete the process. Fannie Mae, Freddie Mac, and other government agencies have announced digital alternatives to the appraisal process to accommodate social distancing measures. For instance, Fannie Mae has issued a guidance allowing appraisers to develop appraisal reports for Fannie Maeowned loans based on photos provided by the homeowners and listing services rather than conducting an in-person walk through.

Technology providers, such as Clear Capital, have launched mobile services that help homeowners gather photos of their home’s interior and exterior for their appraiser. While remote appraisals have temporarily become the norm under social distancing measures, it is unlikely that this will become a permanent change.

Paper Extinction—Notarization has long been a cumbersome analog process, relying on

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NOWRON AVAILABLE State

Executive Order State Surveys Available

Both RON and Executive Order State Surveys Available

Remote Online Notarization State Surveys Surveys Available

MBA Compliance Essentials℠ is offering two types of guides to help you stay compliant: Remote Online Notarization (RON) State Surveys, offered for the 23 states with permanent RON rules, and Executive Order State Surveys, available for the 32 states with executive order RON rules. Inside each survey: • State’s laws organized into nine key topics and requirements • Guide for using the RON State Surveys and key points every lender needs to know • Matrix of RON Requirements by State with 40 rows of state-specific information for more than 20 states (available only with purchase of full package)

To purchase one or more fully-editable digital surveys, contact Erica Garner at egarner@mba.org. Bulk pricing available.

21763

mba.org/ce

Compliance

BUSINESS AS USUAL . . .

WITH A MASK?

BY FELECIA BOWERS, HOMEOWNERS FINANCIAL GROUP

H

ow does one define what the new “normal” is in the world of compliance?

The compliance officer’s world is already one big predicament most of the time.

It changes frequently based on the federal, state, agency, or GSE setting a new rule, priorities are plenty and often overlapping for scheduled tasks, and then you have the day-to-day hiccups that arise and throw off even the most well-planned calendar.

On top of the compliance changes still moving forward, today’s normal includes a pandemic, social unrest, and contentious elections. Also, here in Arizona we are approaching monsoon season while others have hurricane season bearing down. To top it off, we have the growth of the fraud industry taking advantage of vulnerable individuals frightened by the events we are experiencing. How many of these circumstances impact the compliance world? All of them! HIPPA privacy, TRID, data security, RESPA, HMDA, FCRA, ECOA, fair lending and discriminatory issues, all things servicing, yada, yada, yada. Let’s look at some of these areas.

HIPPA privacy: Financial services were deemed essential services federally and in almost every state.

The more states your company does business in the more state, county, and city rules you must review to establish when and how your workforce can return to work. We ended up with a benchmark 99.6 as the top of the human temperature gauge due to the balancing act between federal, state, county, and city guidelines. Add to that mandatory PPEs and health screenings that are robust enough to separate COVID-19 symptoms from those associated with other underlying health issues. For example, a person with shortness of breath may have asthma and nothing related to COVID-19. And, you have different protocols for higher risk employees than for those that feel they are invincible. So, how does compliance fit in? Health screening responses should The MORTGAGE BANKER Magazine

be viewable by HR personnel only. How are you going to alert employees that work in proximity of a co-worker that tested positive for COVID-19 without giving away the name of the infected person? Time to brush up on HIPPA. CARES Act specific: If your compliance hat spills over to HR, don’t forget the guidance in the CARES Act requires a minimum of up to two weeks paid time off if the employee is diagnosed with COVID-19 or they need to take care of an impacted family member. This is ON TOP of the standard PTO or sick leave allowance.

Some well-deserved recognition should come from all managers to the back-office post-closing heroes who were, in most cases, still required to go to the office to scan closing packages, make sure notes are shipped, and clear investor stips, etc. And do not forget servicing or interim servicing personnel who had to open the daily mail and process payments. I continued to go to the office on some days and specifically walked through these departments to thank them for their dedication and contributions to keep everything running.

RESPA: Do you have any desk rentals? The plan to reintroduce your company workforce may not sync with the plan for the brokers whose office you rent space. Make sure your staff is aware of what the broker will require and balances it with your company needs. Do you have marketing agreements with realtors? Have you properly re-evaluated the temporary loss of some of those services in the cost analysis? For instance, open houses went digital and face-to-face meetings were suspended. Were your loan officers able to participate in digital meetings? What other services were impacted by the office closure? Does your cost basis need to be re-evaluated and reduced?

Data privacy: We raced to build out a remote 34

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infrastructure for our workforce only to find that many of them do not want to return to the office because they have to wear a mask or because there is no coffee machine access. Their reasons have nothing to do with the virus; it is the office amenities. This means your internal data privacy program and oversight is still a #1 priority for compliance professionals and IT personnel. Word on the street is that state examiners have beefed up this component of their exams which have not stopped amid the virus.

Vendor management: Now is not the time to take liberties and relax the protocols of your thirdparty vendor management program. What are your vendors doing about their remote workforce and data security?

on to MISMO to enhance future products and services. UETA and E-Sign compliance refresher courses should be on your agenda if we continue down the digital closing path. And while we are working on all things digital closings, a future agenda item for MISMO and other agencies is establishing common closing data sets from continuity in the industry’s closing instructions to the settlement agents. This idea was tossed around over 20 years ago and never took off. I am optimistic it will gain momentum now.

Fair lending, consumer complaints, and ECOA: Discrimination complaints jumped in April and early May when investors pulled out of many programs where guidelines were flexible enough to accommodate consumers with lower credit scores, self-employed individuals, or down-payment challenged borrowers. Overlays to verify, re-verify, and re-re-verify employment just before Certificate of Eligibility proved to be a challenge, especially when someone was furloughed but needed that

Uniform Electronic Transaction Act (UETA) and E-Sign: MERS is rolling out a new 0.75 administration fee as a result of remote online notarization (RON), digital closings, and electronic notes. The fee is not retained by MERS but is passed The MORTGAGE BANKER Magazine

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Compliance handling the sudden influx of delinquencies reported through Neighborhood Housing? ML 2020-13 finally identified the specific coding to be used for COVID-19 forbearance plans making them easy to identify. Are you going to treat them as a normal early payment default even though HUD stated if the loan was not delinquent pre-COVID-19, it is not considered delinquent?

cash-out refinance. If you had no other source for these loans sitting in the pipeline, they were probably declined because the program was no longer available. The latest report from the CFPB was that over 4,500 complaints in the past few months had the word COVID-19 in them and many were complaints because the program was discontinued; thus, consumers could not get loans.

HMDA: Although the quarterly HMDA report has been temporarily suspended, I recommend gettingthis one done and keep it on track.

BSA: FinCEN sent a reminder to ensure BSA obligations are complied with during the pandemic.

And, if you have any issue that pops up that could be COVID-19 related, COVID-19 FIN-2020-A002 must be in field 2 of any SAR. Field 34 (fraud field) OTHER must be elected with a detailed description of the issue and relationship to COVID-19.

TILA and RESPA: Servicing was once again overwhelmed with forbearance requests, and little ability to validate the forbearance was a financial necessity. Thank the CARES Act for that one. And, the agencies did not consider these temporary plans as “delinquent” loans. The impact on this area has yet to be seen since the balloon payment associated with most of these plans has not hit. And, do not forget the servicing rules around live contact, early intervention, single source contact, the dual tracking prohibition, billing errors, and exhausting options before initiating foreclosure. Are you setting yourself up for a discrimination complaint if you do not grant forbearance or a forbearance plan for the forbearance plan because the consumer cannot repay the deferred payments in month seven?

The CARES Act extended forbearance to federally backed mortgages. People with private label, jumbo, or private bond loans were not embraced under the CARES Act. The drafted Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES Act) captures the missing market applying forbearance standards to all residential mortgages.

Watch this one.

States: Do not forget to review state laws. A biggie is the California Consumer Protection Act (CCPA).

Guidance for CCPA was introduced during this crisis. The CCPA grants California consumers robust data privacy rights and control over their personal information including the right to know, the right to delete, and the right to opt-out of the sale of personal information that businesses collect, and includes additional protections for minors. The regulations establish procedures for compliance and exercise of rights, as well as clarifying important transparency and accountability mechanisms for businesses subject to the law. The Attorney General can enforce the CCPA beginning July 1, 2020.

Red Flags and Fraud: And as if we don’t have enough things to think about, the FTC has announced an uptick in scams for miracle cures for COVID-19, home test kits, foreclosure avoidance and equity stripping, free test kits, fake stimulus checks, threats of suspending SSI benefits, fake go-fund-me, and fake charities. The CFPB has also launched a website with information on mortgage and housing assistance information on. If you have not reviewed it, do so. It is quite informative and was a joint effort of the CFPB, HUD, VA, and the FHFA’s.

So, circling back to the definition of the new normal for compliance professionals? I think it will be business as usual with a mask to hide the pursing of our lips, look of angst, or clenching of teeth. MBM

FCRA: FCRA issues are discussed in part 2 of the government plan. The HEROES Act could prohibit consumer reporting agencies and furnishers of data (servicers) from reporting any adverse information occurring during a national emergency as declared by the President. Think about this for a while. How would one know if a bankruptcy was the result of COVID-19 or poor spending habits? There will need to be some rules and collars around this one.

Crossing my fingers, the voice of reason will listen to our industry and implement some oversight.

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CORONAVIRUS

RULE OF THREE SOCIAL DISTANCE

WASH HANDS

CLEAN SURFACES

PURSUE PROFESSIONAL PRODUCTIVITY. READ CURRENT ISSUES OF THE MAGAZINE. VISIT OUR WEBSITE FOR INFORMATIVE CONTENT. THE

BANKER MAGAZINE

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.

Turbulent Times

W

e are experiencing unprecedented and turbulent times. State work from home mandates slowed the spread of COVID-19 and reduced the risk of exposure to employees and borrowers. These mandates required awareness to daily compliance and data security for mortgage companies while serving more borrowers. Many times, home buyers shopped for homes online, financed their homes online, and closed their homes online through remote online notarization.

This is not meant to minimize the impact the pandemic on families impacted by the virus or the economic slowdown implemented to flatten the curve.

We are all saddened by this and pray for our nation to recover and learn to grow together to find housing opportunity for us all. The mortgage business is essential to sustaining this opportunity.

Mortgage lenders provide borrower assistance, finance home purchases, refinances, and revitalization to neighborhoods.

While these actions are valued and needed, let’s review one aspect of lessons learned from the work from home mandates.

The core of state agency allowances for temporary work from home was to allow essential mortgage services, while reducing

the risk of exposure to the virus.

States that normally mandate all origination work be performed from a licensed location temporarily allowed for mortgage work from home. The notices also contained compliance mandates and specific duties for mortgage loan originators, servicing employees, and other employees of the licensed company.

Common state provisions included the following: 1) A company must have both approved policy and process to manage a remote workforce.

2) Access to company systems and loan origination system must be done in a secure manner using a virtual private network.

3) A company must ensure that all security updates are current.

4) No physical records are allowed at home.

5) Borrowers must not come to originator’s home.

Certainly, the responses to slow the spread of the virus created exceptional times for compliance, but emergency provisions provided the groundwork for digital origination compliance. The risk to confidential information is higher under remote oversight but it can be managed. How we fulfilled these duties should impact our

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future while searching for a ‘new’ normal.

Digital origination models have been resisted by many state regulators with commutable distance and licensed location origination requirements.

Common supervision mandates for production models of the last century. Yet, today’s mortgage platforms and smart phone apps are designed to originate beyond these ‘temporary’ standards.

Mortgage systems provide increased access to credit for more borrowers while monitoring compliance in real time.

Advancements in loan origination systems, third party verifications, and automated quality control make this the common model for today’s mortgage company. Perhaps this ‘temporary’ allowance was an opportunity to demonstrate compliance capabilities and access to credit for digital mortgage platforms.

Work locations will not be the same when financing moves to a ‘new’ normal. Will state regulators review digital branches and supervision as a reality or with chronophobia? Will the experience substantiate the business model as effective? We may be in this together, just not the same. Perhaps our ‘new’ normal recognizes increased use of digital mortgage solutions. MBM

REGULATORY CORNER FEDERAL COMPLIANCE CFPB: PROPOSED RULE The CFPB recently published a Notice of Proposed Rulemaking regarding the anticipated discontinuance of LIBOR, or London Interbank Offered Rate. Comments due

by August 4, 2020. The CFPB has also published FAQs regarding the transition.

CHARM BOOKLET REVISED The CFPB also announced recently the availability of an updated CHARM booklet. The update is partially a result of the fact that the LIBOR will be discontinued sometime after 2021. This change will likely impact ARMs, reverse mortgages, and HELOCs that use LIBOR as the index.

Continue to use what you may have in stock, but think about moving to this most recent version. Or, when using the electronic version, check with your software vendor to make sure that the most recent version is dated with 6/20 on the last page.

TRID RESOURCES The CFPB recently published four new TRID FAQs on disclosing seller-paid loan costs on a separate closing disclosure for the borrower, lender credits, the total of payments, and using the optional signature line on the Closing Disclosure. Also, check out the Factsheet on TRID Title Insurance Disclosures that was also recently published.

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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.

Preparing for the Day After

A

s I write this in mid-June from my home office, which is as busy as our law firm was a few short months ago, I imagine that many of you will still be in your respective home offices when the July issue of The Mortgage Banker Magazine is published.

By that point, we will be entering the fifth month of our new reality.

The temporary new reality of extreme physical isolation where our country figuratively came together by staying home to flatten the curve has been at least somewhat successful, giving the doctors, nurses, and others on the front lines, our 21st century American heroes, the ability to prevent what happened in Italy and Spain from happening in most parts of the United States. But we are all starting to recognize a more permanent new reality of a world forever changed by this new threat. Some of those changes are predictable, and others have not yet become clear. The current lockdown has been eased in some places, and we have started to see the first signs of what may be a cycle of tightening and loosening of different restrictions in different

places based on local conditions.

We can already see how things will be different from how they were before and also different from the way they are now.

We understand that social distancing, increased hand washing, no longer shaking hands as a greeting, restrictions on large crowds, staying home at the slightest sign of illness, and perhaps increased temperature checks in public places will be the new norm. Shortages of toilet paper will probably not persist, but there will be other, bigger changes in the long run, which are harder to predict with any certainty.

We know from experience in our lifetimes that change can happen quickly and that we, as Americans, adapt. The attacks of September 11, 2001, were very different from what we are experiencing now, but the way that they changed our culture, our perspective, and our lives overnight is analogous. An initial period of uncertainty and fear gave way to longer-term changes, even when air travel (for example) resumed. Not all of the changes happened right away, but we as a nation quickly got

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used to more security restrictions, and to things no longer being the way they were. That experience is instructive here as well.

Now, as then, in addition to striving to keep our families, our employees, and our country safe, we are focused on keeping our businesses and our industry working through the legal, logistical, and secondary-market challenges that the current crisis has brought. In many ways, the laws and regulations governing our industry—which we are used to thinking of as impediments to creativity and innovation— have proven flexible when necessary. For example, state regulators rushed to provide guidance on loan originators working from home, even where that had not previously been permitted. In other instances, government agencies have responded with less flexibility.

We also saw at least one state government reacting to what it perceived as industry service providers abusing their status as “necessary” or “essential,” by significantly restricting those service providers’ activities.

The other precedent that we should learn from is the last

financial crisis. We face this crisis with a regulatory framework and servicer competencies in loss mitigation already in place.

We also have the hard-earned knowledge that buying time for borrowers in distress helps the industry and the country as a whole, but that legislation and regulation are necessary to give servicers the ability to provide that flexibility.

From a regulatory perspective, I expect regulators to pay more attention to lenders’ financial stability. Some of that will take the form of state regulators (in addition to New York) paying more attention to business continuity and disaster preparedness for nondepository lenders. It may also take the form of regulators being

more sensitive to the business realities that lenders face. But regulators will be laser-focused on consumer protection, and any failure to accommodate borrowers in these difficult times (especially those on the front lines of fighting the coronavirus or of delivering essential goods and services) poses a significant “headline risk.”

Despite the tremendous challenges facing our country (and the world), I remain optimistic about the future.

Innovation comes from solving problems, and our current environment is full of problems to solve. Looking forward, I see a lot of changes to our business and our lives. Some of these changes, like the shift to automation, were

already underway, but they will undoubtedly accelerate.

Consumers, lenders, servicers, service providers, and regulators alike will have increased experience and comfort with remote and paperless processes.

Like with distance learning, telemedicine, and remote court appearances, there will be strong incentives to expand these innovations for the benefits of increased convenience and efficiency, rather than trying to return to “normal.” Of course regulators have a say in whether those innovations will be permitted, but they, too, may find their hands forced by events that are larger than all of us. For now, stay safe and strong. MBM

Legal

Where We Have Come From — And Where We Are Going ..

By Daniel Chilton, RAS Legal Group

T

he world did not see it coming in Q1 2020.

WHO knew? The infamous pandemic known as the Coronavirus rocked global financial markets as information and understanding of the dangers posed by the virus came to fruition around February 21. Markets began a free fall in late-February, bounced back in late-March as a result of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and have seen a steady increase since then on a hope and a prayer. The mortgage industry, so critical to financial markets, received its blessings and curses. From the Fed's reactive monetary policy, to the passing of the CARES Act, to the cascade of consumerfocused regulatory policies, this article walks us through where we have come from and provides some speculative insights on where we are likely going.

MORTGAGE RATES AND THE FLOW OF MONEY

In March, the Federal Reserve moved to keep liquidity in the mortgage industry by rates cuts and mortgage purchases.

In an effort to guard against a contagion impact towards market liquidity, two rate cuts were quickly implemented as well as the Fed's pledge to

purchase billions of mortgagebacked securities to support smooth market functioning. On April 28, the Federal Reserve announced it would maintain its quantitative easing strategy by maintaining its fed funds rate to near zero levels until confidence in the economy and maximum employment and price stability is back on track.

Despite these preventative actions, and most would applaud the effective results, lenders have still seen a decrease in mortgage applications, driven by a drop in demand for new homes on the market and by less traffic from prospective buyers as compliance with stay-at-home orders are in effect.

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THE CARES ACT AND THE DISTRESSED HOMEOWNER Title IV of the CARES Act was designed to address protections for distressed homeowners with federally-backed mortgages.

First, lenders or servicers are not allowed to conduct any foreclose activity, whether judicial or nonjudicial, on a consumer for 60 days after March 18. Second, for those distressed homeowners experiencing financial hardship due to the coronavirus pandemic, a forbearance or extension request can be made up to 180 days after March 18. Additionally, landlords are prohibited from starting eviction or charging penalties and fees related to their tenants not paying rent if the mortgage is federally backed.

On May 12, 2020, the Consumer Financial Protection Bureau (CFPB), Federal Housing Finance Agency (FHFA), and the Department of Housing and Urban Development (HUD) released a joint-article providing mortgage and housing assistance through a website tool to consumers. “This invisible enemy has a lot of Americans concerned about how they are going to stay safe and make ends meet,” said HUD Secretary Ben Carson.

“No one should lose their home because of Coronavirus, and this new website is full of resources to help property owners and renters navigate these unprecedented times.

HUD is continuing to monitor the needs of our FHA borrowers and HUD-assisted families, and we are prepared to take additional actions as needed.”

In addition to the federal guidelines, states also took up their sovereign act to opine as to the ability to foreclose or evict a tenant during the national state of emergency.

Examples include Alabama Governor's Sixth Supplemental State of Emergency; Connecticut statement from Chief Court Admin on March 19, 2020; Florida Governor's Executive Order No. 20-94; and, Massachusetts HB 4647.

California, in particular, has pending Assembly Bill 2501 that would extend a 180-day stay of foreclosure beginning with the end of the COVID-19 emergency period, requiring servicers to automatically approve consumers who are 60 days in arrears for forbearance,

as well as a list of do's and don'ts from servicers. The law makes misrepresentations and non-disclosures of a servicer’s forbearance and end-offorbearance loss mitigation options a violation of the state’s unfair and deceptive practices act; there is no similar requirement on consumers.

IMPACT TO THE DEFAULT AND COLLECTIONS INDUSTRY

On a personal note, I have maintained diligent review of combing through pending laws, regulations, or orders impacting the mortgage, automobile, and credit card default industry.

Prior to being an attorney, I was a financial analyst for a national bank; I looked for trends in laws that projected the psychological perception of the legal and regulatory community for the default industry. The best example can be expressed from the 2009 collapse of the financial markets. Unpredictable defaults occurred in every type of asset: mortgage, credit card, automobile, and student loans.

Demand for how to handle defaulted assets through loss mitigation, foreclosures, or otherwise also spiked. The Home Affordable Modification Program (HAMP) and numerous state laws directed new ways of what could or could not be accomplished during a mortgage default process; there was a focused concern over how consumers were treated during this process.

As a result, and over the next 10 years, and leading up to the pandemic, the default industry

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maintained a consumer-focused approach. A truly great story of making something good out of something unexpected.

When we turn to recent events, the legal and regulatory communities' actions make for a clear message to the default industry: do not exercise the default or collection clause within the lending agreement during the pandemic. If there is a consumer setback during the period of the pandemic, then there is strict liability on the pandemic itself.

No proof of impact is being requested; the pandemic has been so omnipresent that any condition is attributable. However, another message from the legal and regulatory communities has also been apparent; the stoppage of foreclosure activity is not a sustainable model to maintain market liquidity. Just as action was taken by the Federal Reserve in March and April to open one side of the financial pipe, so too must the default end of the pipe be free and clear to function. If you plug either side of a pipe, the free flow of liquidity will cease, causing market rate adjustments and cost of capital increases caused by default risk, deflation of home values, new home demand due to higher rates, and a potential contagion of moral hazard. By maintaining transparent dates to lifting the moratoriums in place today, consumers know where they stand. Moreover, the tens of thousands of jobs in the default mortgage industry will know how to keep those jobs working for all.

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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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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The C-Suite Buying a home is the cornerstone of the American Dream, and knowing we’re helping people achieve that is exhilarating and truly motivating on the tough days.

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VISHAL GARG CEO and Founder, Better.com

What do you think is the biggest challenge for the mortgage banking industry with regard to the COVID-19 pandemic?

What do you find most rewarding about your job?

I think it’s beyond the mortgage industry and more the overall housing industry, which has remained stubbornly archaic and analog. The entire home financing transaction from start to finish is extremely brick and mortar, from the process of open houses to getting a mortgage to in-person notaries and closings.

COVID-19 has forced the entire industry to adapt; and, as a result, we’ve seen agents doing Zoom showings of open houses, iPhone-verified appraisals, and e-closings.

In a post-COVID world, I think we’re going to see the normalization of buying a house fully online. We never thought we’d buy groceries online, but look at Instacart’s success.

The most rewarding aspect of my job is knowing we’re providing thousands of homebuyers with a better mortgage at the lowest rate, without a commission, saving them an average of $3,500 in fees. That allows them to get a better house in a better school district or use those savings to take their kids on vacation.

Buying a home is the cornerstone of the American Dream, and knowing we’re helping people achieve that is exhilarating and truly motivating on the tough days.

Second to that, it’s how passionate and exciting the 2,500+ employees at Better.com are about our mission.

I believe it’s my job to consistently communicate why the work we’re doing is so powerful and why we should be passionate about helping our customers.

What time do you get up?

6 a.m.

What is your best habit?

I am always interested in another point of view.

What is the first thing you do in the morning?

Grab an espresso from my coffee machine.

What is the last thing you do at night?

What is your mantra?

Working harder to action the future first. Most people agree on what the future is; few people agree on how to get there. By being first to actualize the future, more people surrender to your way of doing things.

What is on your desk?

My week’s reading.

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I brush my teeth and go to my kids’ rooms and kiss them goodnight again.

What time do you go to bed?

11 p.m. on the weekdays. 10 p.m. on the weekends.

The C-Suite

Susan K. McHan

President of Retail Mortgage Flagstar Bank

What do you find most rewarding about your job?

The most rewarding part of my job is working with my team to find innovative ways to help people make what is perhaps the most important financial and emotional decision of their lives: buying and financing a home. I say “emotional” because a recent study from the National Association of Realtors found that homeowners are generally healthier and happier than nonhomeowners. Then there’s all the emotion that’s wrapped up in owning a home. After all, it is the place where life gets lived. No wonder everyone calls it the American Dream.

What do you think is the biggest challenge for the market banking industry with regard to the COVID-19 pandemic?

There is no shortage of challenges in today’s environment. Every day we hear in the media how an important economic indicator has hit a level not seen since the Great Depression. On the one hand, we’re providing payment relief to customers struggling to stay in their homes, and on the other hand, we’re helping to put people in new homes and booking record refinances. It’s a mixed message of skyrocketing unemployment, plummeting interest rates, and a strong appetite for refinances. All of this against a backdrop of Congress and the Federal Housing Finance Agency creating new programs that won’t stand still. I think making responsible decisions about lending and servicing in this environment is the biggest challenge relating to the pandemic. As lenders, we need to protect the balance sheet of the companies where we work while tending to what we at Flagstar call the “human interest rate.” This involves more than simply finding solutions for our customers; it involves finding the right solutions for them, even in times of financial distress. It’s a delicate balance, especially when you consider there are credit risk folks in the industry today who still carry the scars of 2008.

But in the end, we’ll work through it, just like we did in 2008 and 2012. And there’s even a silver lining: it’s turned up the heat on us as an industry to go all-electronic. Meanwhile, we’ve shown a lot of ingenuity in adapting. Who would have thought a year ago that drive-by appraisals, garage closings, and carwindow notarizations would be the new normal?

At Opes Advisors, which is a division of Flagstar Bank, we built our business on providing trusted advice. We want people to trust us to act in their best interest, to be accountable to them.

They are making a big decision, and there’s a lot of money at stake. It’s rare to have a job that comes with such high emotional content. My teammates and I consider it a privilege to help people become homeowners and to do so in the most stress-free way possible.

What is your mantra?

From a mentor early in my career, I learned five philosophies that I live by and lead from in all endeavors.

• Take individual responsibility • Act with integrity • Acknowledge and appreciate my team’s contributions • Build mutually beneficial relationships

What time to you get up?

As a national lender, Flagstar operates in all time zones. I’m in California, so 5:00 to 5:30 a.m. is my wakeup for morning check-in calls with our leadership team.

What is the first thing you do in the morning?

It’s the time for me to center my day and reflect on what I want to accomplish.

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• Never stop learning

What is on your desk?

Photos of my family, two of my favorite books, my computer (two screens), HP12C, PowerPoint decks, pads with checklists for different meetings around projects, and people and things I need to accomplish.

What is your best habit?

• Reviewing calendars and meetings on Sunday afternoon for the next week. Then on Friday afternoons, I review meetings from the past week and send myself a Sunday calendar invite for what I need to do over the weekend.

• Have a complete list for each meeting of the purpose and what we need to accomplish.

What is the last thing you do at night?

Kiss my family goodnight. I’m the first one to bed. Then before going to sleep, I think about all the reasons to be grateful for the day.

What time do you go to bed?

Weekdays by 10 p.m. I have to be prepared for my morning meetings on Eastern time.

My teammates and I consider it a privilege to help people become homeowners and to do so in the most stress-free way possible.

The MORTGAGE BANKER Magazine

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July 2020

Education

Education & Training Calendar Date

Course Name

Dates

Link

July 2020

July 7

School of Mortgage Banking I

July 7 - 30

https://www.mba.org/store/events/school-of-mortgagebanking-i/school-of-mortgage-banking-i-july-2020-online?check_ for_mini_site=Y

July 8

VA Underwriting During COVID-19 and Beyond

July 8

https://www.mba.org/store/events/webinar/va-underwritingduring-covid-19-and-beyond?check_for_mini_site=Y

Underwriting Self Employed Borrowers during COVID-19

July 8

https://www.mba.org/store/events/webinar/protecting-yourprofitability-through-quality-control?check_for_mini_site=Y

Protecting Your Profitability Through Quality Control

July 9

https://www.mba.org/store/events/webinar/libor-101-transitionbasics-for-the-single-family-market?check_for_mini_site=Y

Servicing GSE Payment Deferrals

July 9

https://www.mba.org/store/events/webinar/servicing-gsepayment-deferrals?check_for_mini_site=Y

MAA Quarterly Webinar

July 9

https://www.mba.org/store/events/webinar/maa-quarterlywebinar-july-2020?check_for_mini_site=Y

Introduction To Mortgage Banking

July 13 - 27

https://www.mba.org/store/events/instructor-guided-onlinecourse/introduction-to-mortgage-banking-july-2020?check_for_ mini_site=Y

School of Mortgage Servicing

July 13 - 23

https://www.mba.org/store/events/instructor-guided-online-course/ school-of-mortgage-servicing-july-2020?check_for_mini_site=Y

July 15

Legacy Pricing Won’t Save You in Lending’s New Normal

July 15

https://www.mba.org/store/events/webinar/legacy-pricing-wontsave-you-in-lendings-new-normal?check_for_mini_site=Y

July 20

School of Mortgage Banking II

July 20 – August 14

https://www.mba.org/store/events/somb2/school-of-mortgagebanking-ii-july-2020-online?check_for_mini_site=Y

July 22

Mortgage Servicing and Sub-Servicing Part I

July 22

https://www.mba.org/store/events/webinar/mortgage-servicingand-sub-servicing-part-i-overview?check_for_mini_site=Y

July 29

Mortgage Servicing and Sub-Servicing Part II

July 29

https://www.mba.org/store/events/webinar/mortgage-servicingand-sub-servicing-part-ii-details?check_for_mini_site=Y

July 9

July 13

Conferences/Conventions

Instructor Guided Online Course (IGOL)

MBA Research Events

Classroom Course

Webinar

MISMO Events

The MORTGAGE BANKER Magazine

50

July 2020

Other

WHITE PAPERS & WEBINARS

REGULATORY COMPLIANCE • RISK MANAGEMENT • OPERATIONAL EXCELLENCE

READ, WATCH & LEARN ...

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

YOUR WHITE PAPER HERE

The MORTGAGE BANKER Magazine

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July 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

5.13%

13.45%

452,970

3.267

753

64

18%

82%

2

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

4.53%

11.71%

409,918

3.149

754

77

33%

67%

3

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

3.71%

22.74%

391,274

3.219

748

71

28%

72%

4

Chicago-Naperville-Elgin, IL-IN-WI

3.61%

6.64%

267,189

3.248

751

76

35%

65%

5

Boston-Cambridge-Newton, MA-NH

2.88%

16.98%

391,512

3.178

756

68

25%

75%

6

Seattle-Tacoma-Bellevue, WA

2.74%

9.09%

403,803

3.243

751

71

28%

72%

7

Phoenix-Mesa-Scottsdale, AZ

2.73%

6.98%

277,653

3.328

742

76

34%

66%

8

Dallas-Fort Worth-Arlington, TX

2.72%

7.66%

286,583

3.283

738

79

45%

55%

9

Denver-Aurora-Lakewood, CO

2.71%

16.01%

349,153

3.258

755

71

28%

72%

10

San Francisco-Oakland-Hayward, CA

2.17%

32.46%

514,846

3.250

764

59

17%

83%

11

Riverside-San Bernardino-Ontario, CA

2.12%

9.40%

324,109

3.254

733

75

27%

73%

12

Houston-The Woodlands-Sugar Land, TX

1.96%

13.87%

268,162

3.281

735

81

50%

50%

13

San Diego-Carlsbad, CA

1.87%

14.77%

446,642

3.178

753

70

22%

78%

14

Atlanta-Sandy Springs-Roswell, GA

1.84%

3.52%

266,626

3.288

731

81

47%

53%

15

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

1.63%

15.60%

285,271

3.233

748

78

37%

63%

16

Minneapolis-St. Paul-Bloomington, MN-WI

1.56%

-5.85%

284,897

3.184

756

77

37%

63%

17

Miami-Fort Lauderdale-West Palm Beach, FL

1.41%

13.38%

311,903

3.325

731

77

42%

58%

18

Austin-Round Rock, TX

1.36%

13.45%

315,861

3.190

751

76

47%

53%

19

Portland-Vancouver-Hillsboro, OR-WA

1.34%

-5.12%

335,881

3.246

753

73

31%

69%

20

Baltimore-Columbia-Towson, MD

1.31%

7.06%

327,126

3.213

746

80

37%

63%

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. Nearly $2 Trillion of transactions are processed each year across the Optimal Blue platform. For more information, please visit www.optimalblue.com or email datasolutions@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

52

July 2020

May-20

Month-overmonth change

Year-over-year change

7.76%

20.43%

130.78%

0.38%

-5.80%

-22.70%

5,100

-31.08%

-86.92%

Monthly Prepayment Rate (SMM):

2.29%

-1.78%

86.39%

Foreclosure Sales as % of 90+:

0.09%

-19.57%

-95.09%

Number of properties that are 30 or more days past due, but not in foreclosure:​

4,123,000

723,000

2,363,000

Number of properties that are 90 or more days past due, but not in foreclosure:​

631,000

169,000

170,000

Number of properties in foreclosure pre-sale inventory:​

200,000

-11,000

-55,000

4,324,000

712,000

2,309,000

Total U.S. loan delinquency rate (loans 30 or more days past due, but not in foreclosure):​ Total U.S. foreclosure pre-sale inventory rate:​ Total U.S. foreclosure starts:

Number of properties that are 30 or more days past due or in foreclosure:​

•

•Another 723,000 homeowners became past due on their mortgages in May, pushing the national delinquency rate to its highest level in 8.5 years

•

There are now 4.3 million homeowners past due on their mortgages or in active foreclosure – including those in forbearance who have missed scheduled payments as part of their plans – up from 2 million at the end of March

•

Serious delinquencies are on the rise as well, increasing by more than 50% over the past two months

•

However, Black Knight’s McDash Flash Payment Tracker shows a higher share of payments have been made thus far in June than at the same time in May, suggesting the rise in delinquencies may be leveling off

12 Month Trend

•

Both foreclosure starts and sales (completions), halted by COVID-19 moratoriums, remain at record lows

•

The share of homeowners in active foreclosure has fallen to its lowest level on record since Black Knight began reporting the figure in January 2000

•

COVID-19-related impacts on April purchase and refinance locks resulted in mortgage prepayments edging downward, but with 30year rates near record lows, the potential for increased prepay activity remains

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

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

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

The MORTGAGE BANKER Magazine

53

July 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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July 2020

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