Mortgage Banker Magazine September 2020

THE

BANKER

Covering the Entire Mortgage Lending Process and Everything In Between

MAGAZINE

September 2020

Servicing During the Pandemic Forbearance Relief CARES Act

Adapting and Overcoming in COVID pg. 8

Total Workflow Automation pg. 20

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

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September 2020

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September

2020FEATURES 8 Adapting and Overcoming in COVID

BY STEVE STAID

Prior to the COVID-19 crisis, the mortgage industry was in a fairly stable state.

Turned on a dime once the pandemic hit, mortgage servicers were forced to adapt to a totally unprecedented environment.

Recommendations from the government to quarantine, shelter in place, and practice social distancing created new challenges for mortgage lenders as well.

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CARES Act Protections Affecting Residential Mortgage Servicers In response to the global COVID-19 pandemic, on March 27, 2020, President Trump signed into law the CARES Act. The CARES Act addresses sweeping economic stabilization, small business lending, and other direct financial support, tax provisions, healthcare, or other provisions. Below, we summarize the key provisions of the CARES Act affecting residential mortgage servicers.

NANCI WEISSGOLD & ANOUSH GARAKANI

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Pandemic Underscores Need for Stellar Customer Service in Loan Servicing Mortgage transactions don’t end at the closing table, and neither does the lender’s ability to serve the homeowner.

Customer service has become an integral component of loan servicing and directly reflects on the lender, whether servicing is done via a thirdparty vendor or in-house.

Recent challenges presented by the COVID-19 pandemic not only reinforce this but have also placed a spotlight on customer service.

Using Hindsight to Improve Foresight

Internal Audits: The Need for Flexibility

Servicing during a pandemic was not a train that anyone saw barreling down the track towards our industry. And now, the political rhetoric has candidates all stating what they would have done differently. Perhaps no one understands the cliché that hindsight is 20/20. We can all look back on some of the mistakes we have made implementing a rule or dealing with a crisis and find ways we would have done things differently.

In today's COVID-19 business environment, it's more important than ever for organizations to safeguard against potential fraud, waste, and abuse, and one way to do that is with internal audits.

The one-size-fits-all approach may not be as effective as it used to be when it comes to internal audits, however. The audits are flexible and can be customized.

FELECIA BOWERS

MICHAEL STEER The MORTGAGE BANKER Magazine

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September 2020

AN INTERVIEW WITH GARY PENNINGTON

Special

SECTIONS

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TECHNOLOGY

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Future-Proof Servicing Requires Total Workflow Automation JANE MASON

THE C-SUITE

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PRESIDENT 1ST PRIORITY MORTGAGE

CAPTIAL MARKETS

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The Pursuit of Speed to Certainty BILL BANFIELD

COMPLIANCE

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PROFILE: Brooke Anderson Tompkins

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

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PROFILE: Scott Gordon CEO OPEN MORTGAGE

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6 From the Editor

Regulatory Corner

48 MBA Education & Training Calendar

49 White Papers & Webinars 50 Data Download

LEGAL

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The Mortgage Counselor

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Mortgage Banking Lawyers

MITCH KIDER

52 Business Services Directory 53 Sponsors Corner

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September 2020

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@twelve11media.com MANAGING EDITOR Brian Honea Brian@twelve11media.com SENIOR EDITOR Jill Emerson Jill@twelve11media.com OPERATIONS DIRECTOR Dawn Slayton Dawn@twelve11media.com ADVERTISING David Hoierman David@twelve11media.com PRODUCTION Henry Suchman Henry@twelve11media.com

FROM THE EDITOR The COVID-19 pandemic has decimated the mortgage industry, as it has done with many industries.

One faction within the mortgage industry that has taken one of the biggest hits is servicers. While originators are enjoying the refi boom and the flurry of buyers purchasing homes all brought on by record low interest rates, servicers have been forced to get creative with their many borrowers who have not been able to make mortgage payments due to job losses brought on by the pandemic.

What is a servicer to do when their customers can’t pay, making things tough on their operations and possibly putting their business in jeopardy? Hopefully this month’s issue will help. You’ll hear from experts like Steve Staid from Gateway First Bank on adapting and adjusting; the team of Nanci Weissgold and Anoush Garakani of Alston & Bird on CARES Act protections; Michael Steer from MQMR on the need for stellar customer service during the pandemic; and, Jane Mason of Clarifire on the need for total workflow automation.

What has been your experience with mortgage servicing during the pandemic? If you are a servicer, what issues are you facing and what has been your solution? We want to hear about your experiences.

We are always listening. You can always drop us a line via the email address below.

DIGITAL MEDIA Lucas Luna LLuna@twelve11media.com COLUMNISTS & CONTRIBUTING AUTHORS Bill Banfield Felecia Bowers Anoush Garakani Mitch Kider Jane Mason

Bob Niemi Gary Pennington Steve Staid Michael Steer Nanci Weissgold

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

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

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

September

2020AUTHORS Bill Banfield

Felecia Bowers

Anoush Garakani

Jane Mason

Bill Banfield is the executive vice president of Capital Markets for Quicken Loans.

In this role, Bill leads the Capital Markets activities as well as the legal/compliance functions encompassing credit policy for both origination and servicing.

In addition, Bill leads the Strategy and Analytics team that provides data insights and advanced modeling for all key business units within the company.

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

Anoush Garakani is a senior associate on Alston & Bird’s Consumer Financial Services Team. He advises on mortgage banking and consumer finance and concentrates on counseling clients on compliance with federal and state consumer financial protection laws and regulations.

Jane Mason is CEO and founder of Clarifire, a Software-as-a-Service (SaaS) company that specializes in workflow automation across industries. Jane is a recognized leader in technology solutions for the financial services and mortgage industries.

Steve Staid

Michael Steer

Nanci Weissgold

Steve Staid is Chief Servicing Officer with Oklahoma-based Gateway First Bank. As Chief of Servicing with Gateway, Steve oversees all mortgage loan servicing activities, post-closing activities, deposit operations, and commercial loan operations.

Michael Steer is the president of MQMR and Subsequent QC, LLC, MQMR’s sister company dedicated to servicing and sub-servicing surveillance oversight, servicing audits, and servicing consulting.

Mike spends the majority of his time managing the day-to-day operations of MQMR’s due diligence, counterparty review, internal audit, compliance, and operational consulting projects.

Nanci Weissgold is a partner in Alston & Bird's Financial Services & Products Group and a co-leader of the Consumer Financial Services Team. She advises financial institutions and financial service providers on issues relating to mortgage lending and mortgage servicing, valuation, and other consumer lending issues as part of her national regulatory compliance and enforcement practice.

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September 2020

Mortgage Servicing

ADAPTING AND OVERCOMING IN COVID

By Steve Staid, Gateway First Bank

Prior to the COVID-19 crisis, the mortgage industry was in a fairly stable state. Turned on a dime once the pandemic hit, mortgage servicers were forced to adapt to a totally unprecedented environment. Recommendations from the government to quarantine, shelter in place, and practice social distancing created new challenges for mortgage lenders as well.

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September 2020

As the coronavirus crisis continues to transform the mortgage industry and the nation as a whole, companies should prioritize the following:

Although it feels like a rush to beat the clock, it’s important to spend time thoroughly looking for employee prospects as companies continue to hire.

HIRING

When the pandemic started to affect the economy, there was a massive influx of borrowers requiring disaster relief measures such as forbearance and loss mitigation plans. Lenders needed greater financial resources and more employees to meet these increasing needs. As forbearance plans were introduced, mortgage companies faced increased pressure to take care of customers that could only be accomplished by hiring new talent.

Although it feels like a rush to beat the clock, it’s important to spend time thoroughly looking for employee prospects as companies continue to hire. The newly hired employees will likely remain with the company beyond the pandemic, making it important to not only find individuals that check off the list of requirements but also those with values that align with the mission of the lender.

and quickly, taking new policies and processes into account. As mortgage banks adopt new technology, employees need to understand how to leverage it to best meet the needs of their borrowers. Lenders also need to be educated about regulatory relief options so that they can accurately explain them to borrowers who may have questions or concerns.

TRAINING

ACCOMMODATING NEW REGULATIONS

The mortgage industry is seeing record low rates, with the average 30-year fixed mortgage rate recently hitting 2.99 percent. As a result, a growing number of homeowners are refinancing and taking advantage of the opportunity to increase savings amid the economic uncertainty from the pandemic.

This spike gives mortgage lenders an opportunity to expand their business. However, without a well-trained team, they could fall behind. It’s more important than ever for lenders to prioritize employee training and education, especially as new regulatory guidelines are introduced.

Training in a time of social distancing also comes with its challenges. For a lot of lenders, training was not previously tailored for remote onboarding. Since the pandemic, educating employees must be done virtually

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In anticipation of the high volume of servicing requests, federal regulators have offered regulatory relief to assist mortgage borrowers facing economic hardships due to the pandemic.

The new guidance and requirements were also developed to lessen the burden on lenders.

In early March, guidance from federal agencies and the Coronavirus Aid, Relief and Economic Security (CARES) Act led to the development of two major protections for homeowners with federally funded or GSE-backed mortgages. The first prohibited mortgage lenders and servicers from foreclosing on borrowers until at least August 31, 2020. Under the Pandemic Emergency Unemployment Compensation program, states can extend this up to 13 weeks. The second part of the CARES Act gave borrowers the right to request and obtain forbearance for up to 180 days

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September 2020

Mortgage Servicing More employees are working remotely than ever, making communication within a company more difficult.

communication is critical. As new regulations are passed, lenders must be able to effectively communicate with their borrowers to help them navigate through the necessary processes.

This all begins with transparent communication internally.

More employees are working remotely than ever, making communication within a company more difficult. As a result, mortgage banks should make adjustments to match the greater level of communication necessary to remain engaged with remote workers. Implementing communication tools such as webinars, updated intranet systems, video calls, and more can result in additional costs; however, companies with engaged employees find that a remote workforce can be just as efficient and productive as one in the office.

When new regulations and processes are effectively communicated to employees internally, it simplifies external discussions with borrowers. Since the pandemic, most lenders have taken a customer-oriented approach where the lender explains the borrower’s options and discusses pros and cons. The borrower then makes a decision, sets the terms, and determines how long they will need the relief package.

Because borrowers know their personal situation better than their lenders, this approach has led to greater satisfaction. The key is effective communication.

Though employment is improving and forbearance rates are at their lowest since April, the uncertainty of COVID-19 is discouraging borrowers from ending their forbearance plans, especially with the holidays approaching. As lenders continue to adapt to this bizarre time in history, those that prioritize hiring, training, communicating, and learning about new regulations will come out on top. MBM

if they have experienced financial hardships as a result of the pandemic, which can also be extended an additional 180 days.

Lenders made changes as quickly as possible to accommodate the new forbearance plans. Many revamped their websites to offer an automated way for borrowers to make requests and enhanced their call centers with automated customer service and callback features. Mortgage lenders have recognized the importance of managing these changes in a safe and sound manner, and overall have seen a call to arms where everyone is willing to pitch in and help.

Overall, implementing these new regulations was simple for lenders that were engaged and prepared to be flexible. The bigger challenges came from interactions with governmental agencies as they issued new guidance for originators and servicers in reaction to the pandemic. Over time, servicers became well connected and learned from one another how to handle complications and challenges as they arose. With forbearance plans reaching the end of their term, early indications reflect that the majority of borrowers in forbearance will request extensions.

COMMUNICATION: INTERNALLY AND EXTERNALLY With so much uncertainty surrounding the pandemic and its impact on the industry,

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September 2020

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Mortgage Servicing

CARES Act Protections Affecting Residential Mortgage Servicers

By Nanci Weissgold & Anoush Garakani

I

n response to the global COVID-19 pandemic, on March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act). The CARES Act addresses sweeping economic stabilization, small business lending, and other direct financial support, tax provisions, healthcare, or other provisions. Below, we summarize the key provisions of the CARES Act affecting residential mortgage servicers.

other assistance or relief granted to a consumer” affected by COVID-19 during the covered period.

If a creditor or other furnisher offers an “accommodation” to a consumer affected by the COVID-19 pandemic in connection with a credit obligation or account, and the consumer satisfies the conditions of such accommodation, the furnisher must:

SECTION 4021: CREDIT PROTECTION DURING COVID-19

• If the credit obligation or account was delinquent before the accommodation, maintain the delinquent status during the effective period of the accommodation, or, if the consumer brings the account current during such period, then to report the account as current.

• Report the credit obligation or account as “current,” or

Section 4021 of the CARES Act amends the Fair Credit Reporting Act (15 U.S.C. 1681s-2(a) (1)) to provide a special instruction for reporting consumer credit information to credit reporting agencies during the COVID-19 pandemic.

This provision provides protections only if a creditor approves a consumer for an “accommodation.” An “accommodation” as defined includes an agreement to defer one or more payments, make a partial payment, grant forbearance, modify a loan or contract, “or any The MORTGAGE BANKER Magazine

Of note, this section applies from January 31, 2020 through the later of 120 days after: (i) enactment of this section, or (ii) termination of the national emergency declaration. Moreover, the reporting requirements set forth in Section 4021 do not apply to charged-off accounts.

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September 2020

SECTION 4022: FORECLOSURE MORATORIUM AND CONSUMER RIGHT TO REQUEST FORBEARANCE

of delinquency status, by submitting a request to their servicer and affirming that they are experiencing a financial hardship during the COVID-19 emergency.

Upon receiving a request for forbearance, a servicer must provide forbearance for up to 180 days, with no additional documentation required, other than the borrower’s attestation to a financial hardship caused by the COVID-19 emergency, and with no fees, penalties, or interest (beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full under the terms of the mortgage contract) charged to the borrower in connection therewith. The forbearance period may be extended for up to an additional 180 days, at the request of the borrower, provided that the borrower’s request is made during the covered

Section 4022 of the CARES Act grants forbearance rights and protection against foreclosure to borrowers with a “federally backed mortgage loan,” including certain first or subordinate lien loans designed principally for the occupancy of 1- to 4- families. Thus, borrowers with non-federally backed mortgage loans would not receive foreclosure or forbearance protections under the CARES Act. Forbearance Protections During the covered period, a borrower with a federally backed mortgage loan who is experiencing a financial hardship that is due, directly or indirectly, to the COVID-19 emergency, may request forbearance on their loan, regardless The MORTGAGE BANKER Magazine

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September 2020

Mortgage Servicing

Mae, and Freddie Mac (collectively, the Federal Agencies/GSEs) all issued earlier guidance imposing 60-day foreclosure moratoria. The Federal Agencies/GSEs have since extended their foreclosure moratoria until at least August 31, 2020.

CONCLUSION We note that the mortgage- and creditrelated provisions of the CARES Act provided some immediate clarity and relief but also raised additional questions, much of which was left to the Federal Agencies/GSEs to address in rules or guidance. The Federal Agencies/GSEs initially issued varying guidance regarding CARES Act implementation, which has created confusion and implementation challenges for mortgage servicers. While the Federal Agencies/GSEs have more recently issued additional clarification to resolve some of the existing uncertainty, mortgage servicers should continue to carefully review applicable CARES Act guidance to ensure they understand the scope of requirements applicable to the federally backed mortgage loans they service.

Servicers should also be mindful of the interplay with existing regulatory requirements, such as the CFPB mortgage servicing rules and similar state requirements, as well newly enacted state COVID-19 measures. MBM

period. The initial or extended period may also be shortened at the borrower’s request.

Due to an apparent drafting error, Section 4022 does not expressly define the “covered period.” However, there appears to be an implied covered period associated with this section, namely, March 1, 2020 (the effective date of the national emergency declared by the President) until the earlier of February 28, 2021 or action by either the President or Congress to terminate the emergency declaration, unless the President requests an extension in accordance with the National Emergencies Act. Foreclosure Moratorium Section 4022 also provides for a moratorium on foreclosure activity. Specifically, except with respect to vacant or abandoned properties, a servicer of a federally backed mortgage loan may not initiate any judicial or non-judicial foreclosure process, move for a foreclosure judgment or order of sale, or execute a foreclosure-related eviction or foreclosure sale for at least 60 days from March 18, 2020.

While the CARE Act’s foreclosure moratorium expired in May 2020, FHA, VA, USDA, Fannie

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END NOTES “Federally backed mortgage loan” means any loan which is secured by a first or subordinate lien on residential real property (including individual units of condominiums and cooperatives) designed principally for the occupancy of from 1- to 4- families that is (A) insured by the Federal Housing Administration under title II of the National Housing Act (12 U.S.C. 1707 et seq.); (B) insured under section 255 of the National Housing Act (12 U.S.C. 1715z-20); (C) guaranteed under section 184 or 184A of the Housing and Community Development Act of 1992 (12 U.S.C. 1715z-13, 1715z-13b); (D) guaranteed or insured by the Department of Veterans Affairs; (E) guaranteed or insured by the Department of Agriculture; (F) made by the Department of Agriculture; or (G) purchased or securitized by the Federal Home Loan Mortgage Corporation (i.e., Freddie Mac) or the Federal National Mortgage Association (i.e., Fannie Mae).

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2

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See 50 U.S.C. § 1622.

September 2020

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Managing Massive Volumes of Forbearance, Repayment and Loan Modification Programs first week of August.

Many servicers are experiencing considerable strain on their operations, lacking the necessary technology or staff to handle such unprecedented volume.

Future challenges remain as initial forbearance periods end and millions of extensions follow. Ultimately, when the protections of the CARES Act expire, prompt loss mitigation decisioning will be required.

George FitzGerald, Executive Vice President, Solutions Management, Servicing Technologies, Black Knight

The COVID-19 pandemic has created tremendous hardship and turmoil worldwide. Aside from the devastating impact on human life, the outbreak’s effect on the economy has been profound, with millions of Americans unable to pay their mortgages as a result.

Fortunately, the CARES Act lets homeowners with federally-backed loans request forbearance of their mortgage payments for up to 360 days. Likewise, many private lenders stepped up with similar policies.

Prior to the current crisis, mortgage delinquencies were at record lows and many servicing operations decreased levels of default and loss mitigation staffing as a result.

Now, nearly 6 million homeowners have been in forbearance at one point or another since the crisis began – with 4 million remaining so as of the

Keeping up With Forbearance Volume Black Knight’s scalable and flexible Loss MitigationSM solution delivers end-to end functionality, built-in workflow and quality control capabilities. Tightly integrated with Black Knight’s MSP® servicing system, it lets servicers automate the management of forbearance today and better handle repayment plans and modification programs in the future.

Servicers using MSP can be up and running on Loss Mitigation in a matter of weeks. Its highly intuitive interface is easy for teams to learn and use, so a servicer can ramp up quickly to meet today’s demands.

In addition, Loss Mitigation includes a streamlined process to evaluate borrowers for a forbearance plan, enabling users to create plans immediately. Loss Mitigation also systematically stops late charges, suspends foreclosure actions and automates appropriate credit bureau reporting on affected loans, all of which are required by the CARES Act. Flexible to Support a Variety of Modification Plans When the forbearance period ends, servicers benefit from Loss

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Mitigation’s ability to evaluate borrowers for loss mitigation options regardless of the investor, insurer, loan type, policy or program.

Crucially, it supports all standard loss mitigation plans and regulatory requirements that were enacted prior to the current crisis.

Loss Mitigation also supports the FHFA payment deferral option, as well as the FHA COVID-19 National Emergency Standalone Partial Claim. The solution validates loan data and decisions if the borrower qualifies for one of the programs.

Servicers can run the decisioning in near real time as they are speaking with the borrower or upload a batch file of loans for decisioning. MSP is updated with the balance due when the loan matures or is paid off.

Advanced Automation Leveraging business rules and logic, Loss Mitigation guides users through each step, driving work assignments between the underwriter and quality-control unit to streamline the process. Additionally, validation points throughout the workflow are included so critical information is not overlooked, helping reduce risk.

Be Ready for Today and the Future No one knows exactly when the current crisis will subside or end. The best course for servicers now is to help homeowners weather the storm and prepare for the coming surge of loan modifications and repayment plans. The more servicers automate and track these processes, the more they can keep up with today’s volume, and be ready for any future crisis situations.

September 2020

Quality Control & Risk Management

Pandemic Underscores Need for Stellar Customer Service in Loan Servicing

By Michael Steer, MQMR

Mortgage transactions don’t end at the closing table, and neither does the lender’s ability to serve the homeowner. Customer service has become an integral component of loan servicing and directly reflects on the lender, whether servicing is done via a third-party vendor or in-house. Recent challenges presented by the COVID-19 pandemic not only reinforce this but have also placed a spotlight on customer service.

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September 2020

Servicers and homeowners are facing similar challenges, including financial constraints and concerns, social distancing, remote working environments, and heightened emotional states.

As a heightened emotional state colors every transaction in a different light, it is important for loan servicers to place a premium on customer service efforts. A positive customer service experience is always expected, but with emotions running high, homeowners and regulators are expecting customer service that goes above and beyond.

COVID-RELATED REGULATORY CHANGES AFFECTING LOAN SERVICING With new regulations and changes being implemented at the federal and state levels as well as by the GSEs and investors, loan servicers not only need to be aware of the compliance implications but also how these regulations apply to homeowners. Especially because the homeowners most likely will not be aware of options.

In scenarios in which the homeowner has only a passing knowledge of a regulation, the customer service representative should be able to explain the homeowner’s options clearly and concisely. For example, if a homeowner inquires about COVID-related forbearance, they should walk away from the interaction with an understanding of their forbearance options and how it affects them in the present and the future.

While providing guidance in financial situations is not the responsibility of the customer service department, it is their responsibility to provide the homeowner with as much information as possible.

The CARES Act enacted in March 2020 included consumer finance provisions to directly address helping homeowners who may be struggling to make mortgage payments due to the pandemic. These provisions covered “Federally backed mortgage loans,” but also

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included guidance applicable to servicers helping homeowners with mortgages not covered by the CARES Act. In May, Fannie Mae and Freddie Mac released new retention workout options that were “specifically designed to help homeowners impacted by a hardship related to COVID-19 return their mortgage to a current status.”

During this time, it is important for loan servicers for non-federally backed mortgages to provide the best possible customer service for homeowners seeking information regarding forbearance and foreclosure. While lenders are not explicitly required to offer forbearances to homeowners with non-federally backed mortgages, working with homeowners to help them stay in their homes generally leads to a positive outcome for lenders. After all, homeowners are more likely to become loyal, lifetime customers if their lender shows compassion and a willingness to work together in the homeowner’s time of need.

ADAPTING SERVICING CUSTOMER SERVICE BEST PRACTICES FOR PANDEMIC

Loan servicers are already aware of the best practices for customer service and should have guidelines for loan servicing in a crisis such as a natural disaster, but these practices may need some adaptation in the face of a pandemic.

Some tenets of best practices, including those developed for natural disasters, will be easily converted for a pandemic and some will need to be rethought completely.

1. Engage in proactive, flexible homeowner outreach. Servicers must be flexible enough to communicate with homeowners through a variety of channels (phone, email, written mail, etc.) and, on the back end, configure their systems to track and record homeowner outreach using a multi-channel strategy.

Additionally, every loan servicer should have a

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Quality Control & Risk Management homeowner communication plan in place for natural disasters. Right now, that plan should be scaled up as every homeowner should be thought of as facing a disaster until the homeowner says otherwise. By communicating with the homeowner early, servicers can help homeowners address potential issues, develop a plan, and avoid a personal crisis before the homeowner feels they are in crisis.

4. Check for opportunities to refinance and/or reduce the homeowner’s insurance premium.

Servicers can help retain the servicing asset and improve homeowner satisfaction by looking for opportunities like these to save their homeowners’ money. This is especially true in our current economy, which features highly touted “historically low mortgage rates.” Many homeowners are considering and/or researching refinancing opportunities already, and servicers will increase their chances of retaining the homeowner if the suggestion for and information regarding refinancing comes from the servicer itself.

2. Provide education resources for homeowners.

As stated above, homeowners are most likely not going to be well-versed on the ins and outs of COVID-related regulations.

Loan servicers should provide consumers with easy-to-understand education resources not only regarding their mortgages but also COVID-related regulations, forbearance options and the long-term effects, and current regulations regarding foreclosure moratoriums. Homeowners who are educated on their options will feel more comfortable making decisions regarding their financial future while in a pandemic.

5. Track the recording of lien releases. Most servicers have controls in place to ensure this document is sent to the local recording office at payoff and should be tracking its progress to ensure the lien lease is recorded.

Therefore, this best practice should not require much re-tooling but is once again of more importance today than yesterday.

Several recording jurisdictions halted recording at the beginning of the pandemic and/or are adjusting to new e-recording practices which may have resulted in a document or two falling through the cracks. Servicers must follow the document recording process all the way through, despite delays due to COVID, to ensure that document recording took place.

3. Provide additional customer service training for front-line staff. More than likely, homeowner-facing customer service staff are going to spend the majority of their time receiving customer complaints. Preparing call center or other front-line staff to interact with homeowners that may be in a heightened emotional state ensures that bad feelings are not inadvertently escalated by poor service. In most cases, homeowners seeking customer service from their loan servicer are not only looking for a solution for their issue but also expect their issue to be met with empathy. Many customers’ issues and heightened emotional states can be deescalated if the customer views the customer service representative as understanding and empathic.

The MORTGAGE BANKER Magazine

6. Tighten up loan transfers to reduce errors.

Whether they are sending or receiving a loan, servicers on both sides of the transaction need to conduct their due diligence and put controls in place to ensure this process runs smoothly. These due diligence practices will need to be revisited and possibly re-written to account for remote working and social distancing circumstances.

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7. Implement secondary sign-off for automated activities, like tax payments.

All servicing systems include automated functionality for recurring tasks like escrow payments, in-escrow analysis, and tax payments. Once again, the secondary sign-off processes should be revisited with remote working in mind. Ensuring that this process is not interrupted or overlooked will help prevent mistakes in managing homeowners’ funds.

8. Adhere to GSE timelines for distressed homeowners. The GSEs have released multiple updates to COVID-19 relief measures, and loan servicers need to remain current on the updates to ensure homeowners have current and correct information. It is also important for servicers to inform homeowners taking advantage of COVID-relief measures of any updates in regulations that may affect them, once again placing an emphasis on proactive homeowner outreach.

KEEPING CUSTOMER SERVICE “CUSTOMER CENTRIC” The phrases “uncertain and unprecedented times” and “new normal” have been used so much this year they both could be trademarked as the official motto of 2020. However, this new normal should not negatively impact, but rather enhance adherence to customer service requirements and best practices in loan servicing. Homeowners feeling the pressure of uncertain and unprecedented times and seeking information regarding loan servicing will rely on the stability provided by these customer service best practices. By keeping the homeowner at the center of loan servicing customer service, servicers can ensure happy homeowners as well as happy regulators. MBM

The MORTGAGE BANKER Magazine

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September 2020

Technology

Future-Proof Servicing Requires Total Workflow Automation

By Jane Mason, Clarifire

F

or those of us who have spent some length of time in mortgage servicing, it’s incredible to think about how much the business has transformed over the past couple of decades. It’s also quite amazing how much technology has evolved, as well.

Good or bad, we have many crises large and small to thank for this state of affairs. But today, servicers are facing a crisis unlike any that has come before. Once again, we are venturing into new territory filled with economic uncertainty and enormous disruption to our businesses and life in general.

Indeed, today’s mortgage servicers are facing unrelenting changes that will undoubtedly last for months or even years to come. And if servicers The MORTGAGE BANKER Magazine

are to thrive in this current environment, let alone survive it, they will once again need to elevate their approach, and most importantly their technology along with it.

IT'S A DIFFERENT WORLD For the past several months, the entire mortgage industry has been struggling to adapt to a new reality driven by the COVID-19 pandemic. As disasters go, the coronavirus has surpassed all the wildfires, hurricanes, tornadoes, and floods we saw during the past several years combined in terms of its impact on mortgage servicers, borrowers, and the economy as a whole.

It’s not just the massive numbers of borrowers who have applied for forbearance as a result of losing their jobs, or as insurance in case they

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September 2020

do, that have put servicers under such daunting pressure. It’s also the difficulties servicers have experienced trying to keep up with the constantly shifting moving targets of federal, state, and investor requirements. And it’s the long term hit to the economy that looms ahead, the potential that millions of homeowners will not be able to resume their loan payments, and that servicers are facing huge liquidity demands.

Many servicers began shifting their focus to streamlining operations immediately following the record surge in mortgage forbearances we experienced back in April. This alone was not easy. We moved organizations to work from home, moved resources, and changed operational communications while at the same time managing the influx of customer needs. Efforts to increase efficiencies were greatly impacted by the transition to working remotely. Now servicers must quickly ramp up and implement new loss mitigation activities to deal with a rapidly evolving and turbulent economy. In other words, the real test has begun.

April now face either a reduction in unemployment benefits or the loss of unemployment benefits altogether. While there has been some rebound in the economy, other companies unable to handle sustained business losses are still laying off workers.

Meanwhile, foreclosure moratoriums are lapsing and new options for borrowers facing COVID-19related delinquencies are increasing. There are six regulatory changes alone between now and October 1st, which include extensions, deferred payments, loan modification options, and other loss mitigation alternatives. Our current outlook for the rest of the year includes more calls for government intervention and relief that will undoubtedly lead to increased intricacies in loss mitigation workouts.

To put it another way, compliance and change are taking center stage.

Obviously, technology can lend servicers a huge hand when it comes to managing investor, agency, and government requirements under this rapidly developing environment. As we’ve seen following the Great Recession and during recent natural disasters, automated workflow technology is a particularly useful tool for monitoring loan portfolios and helping servicers determine the best options for each borrower.

Especially with remote staff, it has never been more important for servicers to access technology

RARE COMPLIANCE CHALLENGES From a compliance standpoint alone, mortgage servicers have an enormous burden on their hands.

While the number of COVID-19 cases continue to rise, millions of borrowers who lost their jobs back in The MORTGAGE BANKER Magazine

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September 2020

Technology completely, create dynamic views, and perform automated eligibility determinations while simultaneously communicating with borrowers to view available options on their own, should they desire.

Fortunately, with more advanced workflow automation solutions, servicers now have the ability to put automation at the center of all of their loss mitigation, default and servicing work, not on the periphery, where efficiencies are only attainable through small increments.

With automation at the core of their operations, servicers can manage a practically unlimited number of borrower requests for assistance and loss mitigation workouts, with compliance baked into each, while planning for the impending default morass.

With such technologies, servicers can not only maximize efficiencies but also reduce risks, enhance the borrower experience, and adjust their operations quickly as the current and postpandemic environment unfolds. Even better, proven and trustful workflow solutions enable all parties, investors, agencies, servicers, banks, borrowers, attorneys, and others, to collaborate within one secure environment; plus, they can be easily integrated into their current technologies and service providers.

Ultimately, the painful lesson mortgage servicers have learned from past crises and today’s crisis cannot just be about how much stress they can take under dire predicaments. It must be how to constantly leverage technology to consistently improve efficiencies, lower costs, enhance compliance, and provide better service.

With a total workflow automation approach, this challenge is so much easier. Streamlining the chaos should be part of their everyday business, since we do not know what the future will bring.

The bottom line is that there will always be more challenges facing servicers, jmore than we can possibly imagine, as our current situation has shown. And, while the wrong tools can paralyze us with fear, the right ones will allow us to embrace the future, regardless of what unexpected demands may come our way. MBM

that is capable of ingesting and synchronizing dynamically changing data throughout a servicer’s operations while minimizing or eliminating manual labor, errors and risk. But when it comes to workflow automations, there are enormous differences between the platform options from which servicers have to choose. Which is why many large servicers are rethinking their traditional solutions and looking for a better, smarter, more versatile way forward, one that provides visibility across their entire organization.

WHY A NEW APPROACH IS NEEDED Today, more and more servicers are coming to an uncomfortable realization: the technologies that they relied on in the past are proving to be increasingly ill-equipped to help them through today’s environment. Many companies that trusted their entire business to what I call “big box” platforms, that is, the handful of servicing platforms used to handle the majority of serviced loans in our industry, simply aren’t flexible or dynamic enough to keep up with the accelerating rate of change in our industry. The other concern is that those who have purchased development platforms have realized they need to be coded in house, increasing the overall complexity of managing changes.

The biggest problem is that most solutions only automate a few types of workflows that are not seamlessly interacting in a cohesive, visible way. These platforms are typically pricey, resource demanding, and slow to change. Servicers that use them gain efficiencies only in silos, preventing them from entirely eliminating the manual work that continues to drive up costs. These platforms also prevent servicers from completely cutting ties with spreadsheets and paper documents, which are practically impossible to manage in a remote environment.

For this reason, more forward-thinking servicers are taking the bold step toward full automation that includes bulk processing of similar workflows, automated document creation and interactive business and underwriting decisioning engines. These are the keys that enable servicers to leverage straight through processing more The MORTGAGE BANKER Magazine

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September 2020

Capital Markets

The Pursuit

of SPEED

to Certainty

By Bill Banfield, Quicken Loans

On the capital markets side, we had extreme volatility in March. Since the beginning of April, things have largely been calming down and they’ve remained exceptionally stable. The good news is, there are record low interest rates, which helps to keep people coming in to refinance their loans, —and things have been remarkably strong on the purchase side.

The MORTGAGE BANKER Magazine

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September 2020

As you go a little deeper, you get into how everyone in the industry is dealing with employment-related topics surrounding COVID-19.

Specifically, how do you properly document a loan?

How do you ensure that someone has the capacity to repay while also making sure all clients who are having difficulty paying their mortgages get enrolled in forbearance plans?

Over the last couple of years, we have been working on something we call “Rocket Solutions.”

We were thinking, “Someday, what if the economy changes?” We didn’t want to live through what servicers lived through in the credit crisis in 2008.

So we started building a technology platform that allows us to easily engage with our serviced clients to help them in the event of a hardship. In this situation, the CARES Act was passed, and within 48 hours, our clients could reach out to us through RocketMortgage.com to learn about their options and, if it’s the best option for them, enter into forbearance online.

There are multiple benefits. It’s the way consumers expect to transact. It helps with outreach so people aren’t on the phone for 40 minutes waiting for somebody to answer, and it allows us to reach out to our clients to help them.

I think it’s interesting that we didn’t build this because there was a pandemic, but it ended up being a tool that allowed us to connect with clients almost immediately.

With the traditional model, you call your servicer. But if everybody calls at once, it’s inevitable that you’re going to have people sit on hold because it’s tough to scale up a team that fast. On the other hand, when you do it digitally, it allows an almost unlimited number of people to research their options and only talk to someone if needed. You can imagine the small amount of people that need to pick up the phone when the vast majority of people can be helped digitally and be self-served 24/7. We found it to be very effective. So much so that we are continuing to evolve it as we look at new loss mitigation options that become available.

There are a few things I think stand out about the changes that have taken place: The MORTGAGE BANKER Magazine

1) Years ago, we set up call centers for our mortgage bankers and we would do inbound calls for people who wanted to buy or refinance homes. At the time, people said, “Nobody is going to want to transact over the phone.” Over time, we have proven that to be a fallacy and that the new evolution of people are transacting online. The mortgage industry has always been slow to adopt any kind of technology, largely because it’s so fragmented. But I think you’re seeing it not just in the mortgage industry but in auto sales and other industries. COVID-19 forced the industry to realize you can be in business and do it digitally – and consumers actually like to transact that way. I think you’re going to see more and more lenders adopting digital platforms. And not just a glorified application, but, at some point, to really make it work, you have to build the pipes so that you can pull the data in that actually changes the process. That’s what we’ve been focused on for a number of years, so I think we’re really well-positioned.

2) Secondly, there is remote online notarization.

You don’t need to have people driving around all over town trying to meet people to notarize documents. We’ve been working with each state and we’re committed to this. We think this is the better way to go. You can educate the consumer, you can have people who speak multiple languages, and you can help a consumer do this transaction and fully understand it.

3) Then we have digitization even in the appraisal process. We may not see every single appraisal become some type of digital valuation, but you certainly can see pockets where it makes sense because comparables are so similar that it’s a logical way to provide valuations.

Each one of these things doesn’t solve the entire market, but increasingly it solves chunks of the market, making the consumer experience better and making the transaction faster and smoother. I really do see these things as the new norm.

I sometimes caution myself against using the phrase “silver linings,” but our industry has been fairly privileged in the fact that we’ve been busy, 25

September 2020

Capital Markets we’ve been able to make a living, you can do it remotely, and there’s this catalyst to be able to help consumers, and do it digitally.

What we have to get our minds around, though, is it’s not about just taking an application online where somebody types up something and you do the same old thing. You need to obtain, use, and source data in a different way that drives out all the dead zones in the process.

If you do it the right way, you’re going to provide speed to certainty. When the realtors, the buyers, and anyone transacting has more clarity, they will be more confident in the process, and they will be able to transact faster. Not with more risk, but because they are more certain about what to expect and where to expect it; it will lead to a much better process.

If you went to any lender and they asked you for two months of bank statements, how are you going to get those statements to them?

Are you going to fax them, email them, or send them by snail mail? That means your data is flying

around out there. Generally, it’s secure, but it’s certainly not as safe as if you use a portal that allows just the data to be transferred from your banking institution to the lender using a secure method that you authorize. No faxes, no emails, no lost anything.

It’s all digital and secure.

If you look at mortgage fraud, it’s typically going to be around employment, income, and assets. The more you can get that digitally from the source, it actually creates a more secure loan with less ability for fraud to happen. In the case of the asset statements, if a client authorizes the mortgage lender to obtain it direct from the source, then you don’t have any intermediaries in between that can potentially fabricate documents.

Now, that’s the exception because fraud is a small fraction of what happens out there, but the big win is really the experience that you can do it the one time and you don’t have to be moving paper around, emailing things, or people losing documents. It actually brings speed to certainty.

MBM

OCTOBER 2020 TECHNOLOGY ISSUE Technological Demands to Operate in the COVID-19 Environment

The MORTGAGE BANKER Magazine

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September 2020

Zero Down on Homes For Your Buyers!

learn more at: www.chenoafund.org

Compliance

Using Hindsight to Improve Foresight

BY FELECIA BOWERS, HOMEOWNERS FINANCIAL GROUP

S

ervicing during a pandemic was not a train that anyone saw barreling down the track towards our industry. And now, the political rhetoric has candidates all stating what they would have done differently. Perhaps no one understands the cliché that hindsight is 20/20.

We can all look back on some of the mistakes we have made implementing a rule or dealing with a crisis and find ways we would have done things differently. We use that hindsight to improve how we do things in the future. This pandemic is no different. Servicing and compliance personnel learned a lot during the industry melt-down in the mid-2000’s and are using that valuable information and the regulations born from that time period to handle the plethora of delinquencies, forbearance and modification requests they are receiving today.

Compliance professionals should take the time to complete a risk assessment of their internal or third-party servicing activities to ensure all are following the 2016 finalized rules. Did you know that under the finalized 2016 servicing rules, delinquency begins on the date a periodic payment, sufficient to cover principal, interest, and escrow (if applicable) becomes due and unpaid until such time as no periodic payment is due and unpaid? Can that definition be any more confusing?

Did you know that that delinquency begins at the unpaid due date regardless of whether the servicer provides a grace period or assesses a late fee? The rule did not usurp RESPA’s requirement of early intervention, continuity of contact, and the 120day foreclosure filing prohibition. It also did not impact TILA’s required periodic payment statement disclosures on delinquency status.

These rules did answer that age-old question The MORTGAGE BANKER Magazine

of whether a loan servicer can accept a partial payment from the consumer. Hint: YES! The rule does not prohibit a servicer from accepting a payment that does not completely cover the full payment and planned escrows (if applicable). But there are some caveats, such as if the servicer deems the partial payment as a timely remittance, then they cannot report the borrower as delinquent for that period. Read up on those caveats!

It is extremely important for anyone servicing loans to ensure they are compliant with federal laws, agency requirements, and state laws.

Compounding the already arduous task of remembering all these rules are the interim guides issued under the CARES Act and emergency orders issued by the states, agencies, and GSE’s. One slip could cost your organization the ability to collect future payments or foreclose.

If you have not done so already, now is the time to review the CFPB servicing rules as well as internal policies and procedures for your company and any entity servicing for your company. These are the guiding rules and principles for every aspect of the servicing function and should be tested under today’s environment. And, if you are pulling policies and procedures, make sure you receive copies of any interim emails issued that may provide guidance for a specific state, the CARES Act, Agency, and GSE guidance, etc. Policies and procedures with interim guidance are obviously meant to be used together.

The agencies are anxious to prevent another financial crisis with Fannie Mae and issued F-202, LL-2020-05, and LL-2020-07, LL 2020-09 by introducing incentive fees for completed workout plans where Fannie bears the risk of loss.

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September 2020

HR personnel should evaluate how the customer service team is performing and holding up. I cannot emphasize enough the importance this front-line team performs for your company.

They are the first voice a distraught consumer hears when they call seeking help and the one the consumer will remember the most. Have you listened to customer service calls in-house or by your vendor? You should. Have calls been abandoned, purposely dropped, do customer The MORTGAGE BANKER Magazine

service representatives get “short” with the client, or quote misinformation that could lead to a legal claim or complaint? Check those emails too. You might be surprised. There is a meme on social media about the correct use of grammar. Let’s Eat, Grandma vs. Let’s Eat Grandma. The simple placement of a comma makes a HUGE difference.

One means you are hungry and the other has Grandma suffering a terrible demise.

Do customer service staff deal with qualified 29

September 2020

Compliance

written requests (QWRs)? If so, do they know what qualifies as a QWR and what does not? Do they even know what the abbreviation means?

And what about QWR’s? I experienced a case where a consumer sent in a QWR, written on their payment coupon, stating they refused to make future payment until we answered questions about their loan being sold in the secondary market or securitized. Thankfully, my servicing department was well trained on what qualifies as a QWR and what does not. A formal response citing RESPA guides and how he can make future requests for information was sent only to have the consumer repeating his case again the next month on the payment coupon.

But he never missed a payment although he threatened to stop paying because we would not answer his teeny, tiny questions on that coupon.

Do not forget your HR perspective even if you are not in HR. Your customer service representatives are struggling to balance several things. They have their own pandemic related personal issues plus they are the recipient of the customer’s anger, sadness, depression, and the emotions that the consumer is struggling with based on the fact that, for the first time in their homebuying path, he or she needs to ask for help. That is a lot to work with compounded by the CSR’s need to ensure what they are doing is compliant, how to diffuse an angry customer without losing their “cool,” working longer hours from home while trying to take care of their own families, and ensuring they maintain their own employment. I am not a front-line person who has to deal with customers on a daily basis but I do receive that angry call referral or a direct call from a customer. The first thing I remind myself is to put myself in their position regardless of what that position is because their position is based

The MORTGAGE BANKER Magazine

on their perception. Right or wrong, it is their perception.

New to the servicing realm is the introduction of mathematical computations that are capable of analyzing a borrower’s payment activity, finding hiccups that may identify a possible problem, and allowing personnel to reach out to that customer proactively vs. reactively to see if they need financial assistance. Is your company running these models on your HELOC portfolio and using this to discontinue future advances from the HELOC? If so, have you factored in the impact on issuing an adverse action? How do you tell someone that a computer calculation states they will be defaulting soon?

I can talk about rules, regulations, policies, procedures, and protocols for days and weeks.

I think the number one thing for compliance professionals to do is to remind their teams about is compassion. The consumers calling for help are stressed, anxious, confused, depressed, and who knows what else is going on in their life. When I am teaching new employees the requirements of the privacy laws, I remind them that they should keep the consumer’s information as private as they would want their own information to be maintained. The same applies to servicing now and into the future.

Treat the customer with the same compassion and interest as you would want to be treated.

My idea is to give everyone one of those T-Rex costumes with a self-contained air pump and face shield and let’s have a little fun.

Shaking hands is impossible. You cannot hug anyone because your arms won’t reach. No kissy greetings because of the face covering.

Touching your face is done inside the unit.

Maintaining social distancing comes naturally lest you step on someone else’s tail. Who’s with me? MBM

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September 2020

Compliance

Internal Audits: The Need for Flexibility An Interview with Gary Pennington, Alchemi Advisory Group

By Brian Honea

In today's COVID-19 business environment, it's more important than ever for organizations to safeguard against potential fraud, waste, and abuse, and one way to do that is with internal audits.

The one-size-fits-all approach may not be as effective as it used to be when it comes to internal audits, however. The audits are flexible and can be customized. According to a recent study by the Institute of Internal Auditors: • Almost one-third of respondents did not include cybersecurity or information technology in their audit plans. • More than half did not include governance/culture or third-party relationships.

As companies prepare 2021 budgets and look closely at key risk areas, customizing the internal audit function is a critical path to success. Gary Pennington, founder and president of Dallas-based Alchemi Advisory Group and an industry expert with over 35 years of experience specializing in internal auditing, corporate governance, risk and compliance, and financial management, recently discussed with MORTGAGE BANKER Magazine how critical internal audits are for companies to prosper in the post-pandemic world.

The MORTGAGE BANKER Magazine

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September 2020

MBM: What is it that sets an internal audit apart?

Gary Pennington: An internal audit is where you act on behalf of the company, but you still have a veil of independence. You’re acting on behalf of management but act as a trusted impartial advisor. You’re really looking into things and asking questions and probing where they would want to go if they had time to do it, so you’re really an extension of management. And it’s a little more flexible: the mortgage industry has some guidelines and regulations they have to stay within, and they do have to cover some of those in audits as part of their annual plan, but they do have flexibility on how big they want that plan to be, how extensive they want it to be, and what their budget is for it. They have some leeway as far as how much they want to spend and where they want to use those dollars, where they want to point their audit department to get the most results.

MBM: A lot of companies are not aware that internal audits can be flexible or customized. Why do you think that is?

Pennington: I think a lot of people are looking at what they do in terms of regulations and what they have in front of them and say, “That’s what our compliance needs are and what we can use internal audit help on.” An internal audit can really be a bigger, broader spectrum than most people think. You could look at things from an efficiency standpoint, from an operational standpoint, from a regulatory standpoint, or any combination of the above. People don’t really think of an internal audit as, “Wow, we could do more with it than we usually do,” because they have a narrow focus and perspective.

MBM: A study from the Institute of Internal Auditors found that one-third of respondents did not include cybersecurity or information technology in their audit plans. What are the advantages of including cybersecurity and IT in internal audits?

Pennington: Internal audits, have historically, been looking at controls from a financial control standpoint. For example, “Do we have the right controls over our loan approval process? Typically The MORTGAGE BANKER Magazine

looking at it from a manual control perspective (i.e. did someone do what they were supposed to do as part of their normal workflow and did they follow the process?). Cyber controls look at it from a different perspective and look at it from are the systems secure, processing information correctly, and protecting data from outside parties?

Let’s look at it from the perspective of the threats that may be impacting that. You have two or three prime concerns. One of them is security and infrastructure and the handling of data. A lot of the data is private, so you don’t want to get it in the wrong hands. And also making sure that the system is working as possible, so if you have something that grabs a table and calculates a result; for example, A plus B should equal C, but if A plus B equals D, then you’ve got a problem with your system not calculating correctly. So, there’s a whole myriad of things that people could be doing from a cyber world that people don’t usually think of that as a role internal audit can handle and act on management’s behalf. And they don’t always have the bandwidth to look into them because resources are a constraint.

MBM: How critical is customizing the internal audit when it comes to forging a path to success?

Pennington: Being that it’s an internal audit, it has some flexibility as far as what and where management wants it to look and what its scope and objectives are. Management sets the schedule for the year and says, “This is what we want you to look at.” Some of those audits may address traditional regulatory issues, such as SOX compliance, others could be more nontraditional such as departmental performance, identification of efficiencies, safeguarding of assets, or even forensic investigation.

You may say, “I want to make sure the loan application department is working efficiently. Let’s go into that.” Or maybe, “What’s our bad debt write-off and how is that being handled?” You can customize an audit to look at something that is of interest to senior management and say, “This is something we’re concerned about. Let’s cover it.”

There may be many things that could be on the 33

September 2020

Compliance schedule of an internal audit department during the year, and when it comes to resources, you only have so much. So, prioritization is critical.

if they do a good job and keep it updated and active, it can be out in front of them, like a radar showing potential hazards to avoid. Risk assessment should be constantly looking for threats and measuring how the company would hold up against those threats. Most companies stumble over it because it’s not comfortable and it’s not one of those processes people enjoy very much. Having a proactive risk assessment process and getting the right assistance is always helpful.

Data analytics is having the ability to mine data and look at data from different angles and different perspectives. Tools and techniques now available to audit departments can help. You traditionally may just look at data in one direction coming out of the reports, but slicing it and dicing it and looking at it from different angles and comparing different databases to each other can really provide a lot of insight and potentially identify unseen problems.

MBM: What are some traditional ways internal audits can benefit a company?

Pennington: An internal audit allows you to look into areas and verify that things are being done properly.

When you’re in the C Suite you can’t get into the nuts and bolts and verify that employees are getting things done the way you think they are. They may be telling you everything is great and everything is fine, but you need somebody to actually come in and verify that it’s being done. Internal audit can act as independent eyes and ears of senior management.

MBM: How do internal audits provide value in nontraditional areas and serve as a conduit to improve processes through risk identification and data analytics?

MBM

Pennington: Risk assessment is an area a lot of companies traditionally struggle with but are finding

The MORTGAGE BANKER Magazine

Brian Honea is the managing editor of MORTGAGE BANKER Magazine.

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September 2020

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

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

NMLS Ombudsman Meeting Update

T

he unprecedented times continue with innovative solutions being instituted to keep supervision moving forward. The NMLS Ombudsman meeting details were announced and hopefully you will take the time to join the meeting on the afternoon of September 9th from 3:30 p.m. to 5:30 p.m. Eastern Standard Time. The meeting will be a combination of recorded and live interaction, but in a different format.

The interaction will be available for live attendees via the WebEx meeting, and questions and answers for the presenters will utilize the WebEx Q&A function. The announcement also shared that there will be no open forum discussion. This has been the source of many long and involved discussions in past live meetings as both industry and state have the opportunity to discuss many sides of an issue. The loss of this section of the meeting is unfortunate, but understandable due to the limitations of the pandemic.

Jim Payne, director of examinations/assistant deputy commissioner Kansas Office of the State Bank Commissioner, will open the meeting and share details and updates as standard

for Ombudsman meeting formats. There are three industry submissions for discussion, although all would align around similar issues and concerns.

Danielle Arlowe of the American Financial Services Association submitted a letter on the work from home authorizations and need for continued extensions. Her letter and discussion will be a good opportunity for the industry to learn more how state regulators plan to manage rolling extensions to preserve the safety of consumers and employees.

The second submission came from me as a former ombudsman and representative for many clients also concerned about the impact of the pandemic and work from home mandates.

However, the discussion in my submission goes beyond the current pandemic to review the future of branch licensing. While the discussion has been briefed at Ombudsman meetings and several times in this column, the brick and mortar supervisory plan from the last financial crisis is outdated. The opportunity is to evolve new approaches for regulators to supervise licensees.

Digital supervision has grown through business practices and regulators have evolved

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September 2020

toward digital supervision with the development of the State Examination System and more.

The third letter is from Charlie Fields of PennyMac who was a mortgage regulator for many years. His letter seeks very similar thoughts but also asks for a regulatory ‘safe harbor’ for employees working remotely due to the pandemic. He also hopes for the opportunity to continue the discussion of branch licensing requirements noting technological advancements and online mortgage applications by consumers.

Clearly, the unprecedented year has impacted the Ombudsman meeting as well.

Discussions will continue to focus on how to preserve the protections to both consumer and company during the pandemic and beyond. The discussions should be robust, and speakers will be recorded but also responding during the meeting.

If you are unable to attend, the Ombudsman meeting will be recorded and posted on the NMLS Resource Center for later review. All details in advance or recording after the live event will be available at: https:// nationwidelicensingsystem.org/ contact/Pages/Ombudsman.aspx MBM

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Compliance

REGULATORY CORNER CFPB: MORTGAGE COMPANIES CONSENT ORDERS The CFPB issued consent orders against Sovereign Lending Group, Inc. and Prime Choice Funding, Inc. Sovereign is a California corporation that is licensed as a mortgage broker or lender in about 44 states and the District of Columbia. Prime Choice is a California corporation that is licensed as a mortgage broker or lender in about 35 states and the District of Columbia. Both companies offer and provide mortgage loans guaranteed by the United States Department of Veterans Affairs (VA).

The CFPB found that the companies mailed consumers advertisements for VAguaranteed mortgages that contained false, misleading, and inaccurate statements or lacked required disclosures, in violation of the Consumer Financial Protection Act’s prohibition against deceptive acts and practices, the Mortgage Acts and Practices – Advertising Rule, and Regulation Z. The consent order against Sovereign requires Sovereign to pay a civil penalty of $460,000. The consent order against Prime Choice requires Prime Choice to pay a civil penalty of $645,000. The consent orders also impose injunctive relief to prevent future violations, including requiring the companies to bolster their compliance functions by designating an advertising compliance official who must review their mortgage advertisements for compliance with mortgage advertising laws prior to their use; prohibiting misrepresentations similar to those identified by the CFPB; and requiring the companies to comply with certain enhanced disclosure requirements to prevent them from making future misrepresentations.

FHFA: 2021 TARGETS FOR FANNIE MAE AND FREDDIE MAC The FHFA proposed its 2021 housing goals for Fannie Mae and Freddie Mac. Due to the economic uncertainty related to the COVID-19 national pandemic, FHFA is proposing benchmarks for calendar year 2021 only, and those levels will remain the same as they were for 2018-2020. Once finalized, the proposed benchmark levels would extend those benchmarks that are currently set to expire on December 31, 2020. The proposed rule will be open for comments for 60 days following publication in the Federal Register.

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CFPB: 'SEASONED QM' CATEGORY PROPOSED The CFPB announced in August a proposed rule to create a new category of seasoned qualified mortgages (Seasoned QMs) in order to encourage innovation and help ensure access to responsible, affordable financing in the mortgage credit market. Seasoned QMs would have to be first-lien, fixed-rate covered transactions that have met certain performance requirements over a 36-month seasoning period. Covered transactions would also have to be held in the creditor’s portfolio during the seasoning period, comply with general restrictions on product features and points and fees, and meet certain underwriting requirements. For a loan to be eligible to become a Seasoned QM, the proposal would also require that the creditor consider and verify the consumer’s debt-to-income ratio (DTI) or residual income at origination.

Seasoned QM status would only be available for covered transactions that have no more than two 30-day delinquencies and no delinquencies of 60 or more days at the end of the seasoning period. However, should there be a disaster or pandemic-related national emergency and as long as certain conditions are met, the proposal would not disqualify a loan from becoming a Seasoned QM for the failure to make full contractual payments if the consumer receives a temporary payment accommodation.

Important to note is that this is the third CFPB-proposed rulemaking regarding qualified mortgages since June. The first proposal would amend the general QM definition in Regulation Z to replace the DTI limit with a price-based approach. CFPB Director Kraninger has emphasized the importance of receiving public comment from stakeholders in response to that proposal, especially on possible standards to help the CFPB identify verification safe harbors for inclusion in final rules. The second proposal would amend Regulation Z to extend a temporary QM definition known as the GSE Patch to expire upon the effective date of the final rule proposed in the first NPRM. Comments on this proposal will be accepted for 30 days following Federal Register publication. MBM

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September 2020

Legal

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

Two Tales of Servicing

T

his month’s issue of Mortgage Banker Magazine focuses on loan servicing and the COVID-19 pandemic. From a compliance perspective, I think that our industry has performed well overall in rising to meet the servicing challenges of the pandemic. This is largely the result of the lessons learned by industry and regulators from the last financial crisis. But the coronavirus has also revealed an over-reliance on servicers in connection with aspects of the loan securitization process that are not core servicing activities.

First, the positive. Mortgage servicers learned the lessons of the last financial crisis and have implemented strong loss mitigation processes, including sufficient staffing, that were already in place when forbearance requests and other loss mitigation needs started to increase. If you look at the guidance published in March by government agencies, including the CFPB, HUD, and the VA, as well as the GSEs, you will see that it focused on using existing tools to address borrower difficulties. The automatic nature of the CARES Act forbearance requirement (for loans

to which that requirement applied) also streamlined the process of responding. The regulatory framework for loss mitigation that was implemented after Dodd Frank helped simplify what had previously been a patchwork of servicer policies subject to varying investor requirements. Moreover, the foreclosure moratoria put in place in many jurisdictions bought time for both servicers and borrowers.

There were hiccups, of course, including some servicer websites that either did not provide sufficient information or gave conflicting information concerning the details of forbearance, but compared with the regulator and consumer complaints concerning loss mitigation in 2008-2009, these were minor issues which were in most cases easily remedied.

The more troubling fallout of the pandemic for mortgage servicing was not the fault of the companies in our industry. Rather, it reflected the government and the GSEs being slow to respond to the unintended consequences of the increase in loss mitigation. As the expected cost of servicing went up, the value of mortgage servicing rights went down, impacting

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September 2020

lenders’ ability to originate and sell loans profitably. Additionally, the extent to which servicers may be required to advance missed payments (such as for loans in Ginnie Mae pools) posed problems given the scale of the forbearance requests that were expected.

Ultimately, falling interest rates helped with the economics of mortgage origination, and investors made policy changes that blunted some of the most significant impacts.

Going forward, however, I think that these unexpected challenges highlight policies that could use more attention from lawmakers and regulators. In particular, expecting servicers to advance money, rather than simply accept and apply periodic payments, may not be necessary for the securitization markets to function.

Finally, servicers should not let down their guard when it comes to regulatory compliance, and in particular loss mitigation.

After any financial crisis, litigation and enforcement follow. By fully applying the compliance lessons of the last crisis, servicers can be ready to defend their actions during this crisis, when the time comes. 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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September 2020

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

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

Roger Fendelman Principal

Marty Green Attorney

roger@garrishorn.com 636-399-0169

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

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

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

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

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September 2020

The C-Suite

Brooke Anderson Tompkins President 1st Priority Mortgage

What do you find most rewarding about your job?

My first response is helping families cross the threshold to home, and we capitalize HOME. Years ago, we developed what we referred to as guideposts. One of those guideposts was that every file is a family. Family in this context is a borrower’s family, the real estate agent’s family or going deeper to our internal side of sales and operations family. It's about working together. We’ve determined that this mindset has fostered a cultural skillset to create raving fans. Ultimately whatever combination of families we’re speaking to, our collective families build communities and we’re really proud to be a part of that. It helps me do what I do every day when I keep it in that context. It's never been more important than now.

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

We’ve navigated a deluge of change over the past many years. With the added layers of the pandemic uncertainties, we’re all having to continue to adjust, whether it be as individuals, organizations, or as a collective industry, to rise to a whole new level. It’s requiring us to think differently and move differently to excel despite many reasons to fail. I’ve been fortunate to be included over the last many months in some amazing conversations with leaders committed to navigating what lies ahead. It's what we have done the past many years, depending on which piece you want reference. Is it operations, technology, or regulatory? Change is constant. With the added elements of a pandemic, we can choose to come together, assess the realities and embrace the roller coaster. We went from catastrophe in certain respects this spring to historybreaking volumes 90 days later. It’s been a wild ride.

What time do you get up?

6 a.m.

What is the first thing you do in the morning?

Level-set mentally for the day ahead. I run through my calendar and affirm the most important things that I’m going to get done that day.

What is your mantra?

“We never give up. We always find a way.”

What is on your desk?

Stacks of work! It’s not all paper, but I do still use paper, admittedly.

There is a pandemic plan, an LOS conversion, and we are in the midst of a corporate relocation.

Fortunately, I also have many reports of history-setting numbers!

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September 2020

I’ve been fortunate to be included over the last many months in some amazing conversations with leaders committed to navigating what lies ahead.

What is your best habit?

Reflection.

What is the last thing you do at night?

Two things. Hug my family and review the day. I walk through what did I do right, what did I do wrong, and what can I do differently tomorrow?

What time do you go to bed?

Usually 11 p.m.

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September 2020

The C-Suite If you are not constantly evolving to keep up, you better be planning for your goingaway party.

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September 2020

SCOTT GORDON CEO Open Mortgage

What time do you get up?

7 a.m.

What do you find most rewarding about your job?

What is the first thing you do in the morning?

I love startups, and every day in the mortgage industry is like being at a startup. It's a new opportunity to innovate a new process, to improve operations, or learn a new product to address a new market. The industry has lagged behind others at using technology but now there are changes happening in every part of our pipelines. Every month we have to take a hard look at where we are and evaluate what new technology has the most upside and should be addressed first. Of course, the downside is that this industry demands efficiency. If you are not constantly evolving to keep up, you better be planning for your going-away party.

Eat! An egg, toast, and cereal.

What is your mantra?

“If not me, who”? If I can’t help people, or leave the earth better, who else will?

What is on your desk?

A standup desk with a keyboard, a mouse, and a chocolate bar.

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

We must be ready to turn on a dime. In March, COVID-19 shocked the industry and products disappeared and pricing blew up. Now, pricing has settled down and some products are back, but it forced big changes. I believe a big risk is thinking the worst is over. We don't know how rates or products or defaults will play out as financial support runs out or is removed by the administration. The other stressor for me is hiring. Volume is booming; do we hire people at all costs who will be over-priced when the boom is over?

Personally, I'd rather leave some volume on the table than set people up to be fired.

What is your best habit?

I work out with a trainer twice a week, even during quarantine, just now it’s by video!

Looking past 2020, I put up the seed money for a sales collaboration platform that digitally walks buyers through the process of buying a home. It’s the Realtor’s platform, but Open Mortgage will be the first lender on the platform, which will give us the tightest integration with borrowers and their realtors. It’s a great thing to have when refinancing is down.

What is the last thing you do at night?

I read something that has nothing to do with mortgage or business.

What time do you go to bed?

11 p.m. typically.

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September 2020

Education

Education & Training Calendar Date

Course Name

Dates

Link

Sept/Oct 2020

Sep 3

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

September 3

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

Sep 8

School of Mortgage Banking II

September 8 – October 1

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

School of Mortgage Banking I

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

Introduction To Mortgage Banking

September 8 - 22 https://www.mba.org/store/events/education/meeting/igol/

Sep 10

Budgeting and Financial Planning for Non-Believers

September 10

https://www.mba.org/store/events/education/meeting/ webinar/budgeting-and-financial-planning-for-non-believersx261528?check_for_mini_site=Y

Sep 14

School of Mortgage Banking III

September 14 – October 2

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

Sep 18

LIBOR Transition: Servicing Issues

September 18

https://www.mba.org/store/events/education/meeting/webinar/ libor-transition-servicing-issues?check_for_mini_site=Y

Sep 24

Lending 2021: Will You Change the Way You Work to Compete?

September 24

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

Oct 5

School of Mortgage Servicing

October 5 - 16

https://www.mba.org/store/events/education/meeting/igol/ school-of-mortgage-servicing-october-2020?check_for_mini_ site=Y

School of Mortgage Banking I

October 5 - 29

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

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

introduction-to-mortgage-banking-september-2020?check_for_ mini_site=Y

Conferences/Conventions

Instructor Guided Online Course (IGOL)

MBA Research Events

Classroom Course

Webinar

MISMO Events

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September 2020

Other

WHITE PAPERS & WEBINARS

REGULATORY COMPLIANCE • RISK MANAGEMENT • OPERATIONAL EXCELLENCE

READ, WATCH & LEARN ...

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

YOUR WHITE PAPER HERE

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September 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

5.76%

18.07%

479,574

3.008

758

63

17%

83%

2

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

5.13%

20.36%

424,039

2.900

756

75

29%

71%

3

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

4.29%

14.18%

395,149

2.958

750

71

34%

66%

4

Chicago-Naperville-Elgin, IL-IN-WI

3.88%

16.05%

277,488

2.980

751

76

38%

62%

5

Boston-Cambridge-Newton, MA-NH

3.03%

10.65%

402,135

2.938

758

67

25%

75%

6

Seattle-Tacoma-Bellevue, WA

3.00%

15.14%

416,177

2.989

754

69

25%

75%

7

San Francisco-Oakland-Hayward, CA

2.91%

34.19%

553,263

2.976

767

59

15%

85%

8

Phoenix-Mesa-Scottsdale, AZ

2.53%

3.12%

285,896

3.050

743

75

33%

67%

9

Denver-Aurora-Lakewood, CO

2.51%

4.19%

357,800

2.973

757

71

28%

72%

10

Dallas-Fort Worth-Arlington, TX

2.45%

9.60%

297,759

3.021

741

78

44%

56%

11

San Diego-Carlsbad, CA

2.12%

14.81%

459,666

2.930

758

68

19%

81%

12

Riverside-San Bernardino-Ontario, CA

2.03%

9.19%

332,497

2.996

736

75

30%

70%

13

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

1.80%

13.31%

287,826

2.987

747

78

43%

57%

14

Atlanta-Sandy Springs-Roswell, GA

1.69%

5.50%

277,402

3.028

734

80

47%

53%

15

Houston-The Woodlands-Sugar Land, TX

1.64%

0.42%

272,629

2.999

737

80

50%

50%

16

Minneapolis-St. Paul-Bloomington, MN-WI

1.60%

19.41%

288,165

2.942

757

75

35%

65%

17

Sacramento--Roseville--Arden-Arcade, CA

1.36%

17.47%

358,234

3.011

751

71

27%

73%

18

Portland-Vancouver-Hillsboro, OR-WA

1.35%

6.47%

342,176

2.993

755

71

31%

69%

19

Miami-Fort Lauderdale-West Palm Beach, FL

1.34%

1.68%

319,481

3.079

734

77

49%

51%

20

Baltimore-Columbia-Towson, MD

1.32%

7.88%

330,471

2.957

749

79

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.

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September 2020

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

Jul-20

Month-overmonth change

Year-over-year change

6.91%

-8.91%

99.96%

Total U.S. foreclosure pre-sale inventory rate:​

0.36%

-1.80%

-28.04%

9,900

67.80%

-74.74%

Monthly Prepayment Rate (SMM):

2.73%

2.80%

91.10%

Foreclosure Sales as % of 90+:

0.06%

18.03%

-96.79%

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

3,692,000

-342,000

1,885,000

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

2,250,000

376,000

1,806,000

190,000

-2,000

-68,000

3,881,000

-345,000

1,816,000

Total U.S. foreclosure starts:

Number of properties in foreclosure pre-sale inventory:​ Number of properties that are 30 or more days past due or in foreclosure:​

12 Month Trend

Total Number of Past Due Mortgages Improves in July While Serious Delinquencies Climb •

Mortgage delinquencies continued to improve in July, falling 9% from June, with more than 340,000 fewer past due mortgages than in the month prior

•

Foreclosure activity continues to remain muted due to widespread moratoriums; though starts rose for the month, overall activity remains near record lows

•

Early-stage delinquencies – loans with a single missed payment – have fallen below pre-pandemic levels, suggesting that the initial inflow of new COVID-19-related delinquencies has subsided

•

Prepayment activity edged slightly higher in July, hitting its highest monthly mark since early 2004, as low rates continue to drive both refinance and purchase activity

•

However, serious delinquencies – those 90 or more days past due – rose by 376,000 and are now up more than 1.8 million from their pre-pandemic levels

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.

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September 2020

B2B

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

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

Amanda Bowers VP of Marketing abowers@pfic.com

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

Michael Whipple Vice President michael.whipple@ chenoafund.org

208.250.9132

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

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

kristi.helmlinger@radian.com

215.231.1230

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

Mitchel H. Kider Managing Partner

kider@thewbkfirm.com

202.557.3511

The MORTGAGE BANKER Magazine

52

September 2020

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

The MORTGAGE BANKER Magazine

53

September 2020

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