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The mortgage industry is going through a significant change. For mortgage origination professionals, it's a struggle to keep on top of all the changes, and to keep your sales strategies and marketing initiatives at their peak. You need to keep your pipeline filled, and you need the tools and directions to stay profitable, efficient, and effective. We've brought together the best in the business to create a top tier event specifically designed for mortgage origination pros. The Originator Connect Network supports more than 120,000 mortgage pros across the nation. We’re proud to be bringing this show to you. And we're inviting you to be part of this important conference designed to make you a better mortgage originator.
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The Mortgage Godfather: The Evolution of FinTech By Ralph LoVuolo Sr.
A P R I L
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How to See Beyond a Credit Score By Seth Silverstein
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A SPECIAL FOCUS ON “FINTECH GOES LOCAL”
Ten FinTechs That Are Changing the Housing Market By Phil Hall ....38 Layering FinTech to Improve Customer Experience By Scott Dubnoff................................................................................42 Security as a Team Effort: How Mortgage FinTechs Can Protect Customers By Maria Moskver ................................................44 FinTech … Meet My Friend By Christian Olin ....................................46 How Independent Mortgage Companies Are Leveraging FinTech to Win in Local Markets By Allen Shayanfekr ....................................48 In Volatile Financial Markets, Scalability Is Crucial to Lender Success By Vikas Dua ............................................................50 Technology as the Ideal Complement to a High-Touch Ethos By Dustin DeMeritt & David O’Connor................................................52
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HMDA Snags … Are You Getting Caught? By Ann-Marie Lefebvre
New Borrower Expectations Require New Lending Technologies By Roger Hull ....................................................................................54
FEATURES From the Publisher’s Desk: A Message From Publisher & CEO Vincent M. Valvo ......................................................................4 Recruiting, Training and Mentoring Corner: Pandemic: A Case Study in FinTech By Dave Hershman....................................................6 Selling in a Crisis: Be the Calm in a Storm By Shakria Hall ..................8 In This Edition … A Message From Founding Publisher Joel M. Berman ....................................................................................8
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National Mortgage Professional Magazine Presents “Digital Disruptors: FinTech’s Finest 2020”
V I S I T Company
Web Site
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ACC Mortgage .................................................. accmortgage.com ............................................................9 Angel Oak Mortgage Solutions ............................ angeloakms.com ..............................................Back Cover Arc Home Loans ................................................ archomeloans.com ........................................................45 California Mortgage Expo-Irvine .......................... camortgageexpo.com/irvine ............................................1 Carolinas Connect ..............................................carolinasconnectmortgage.com ........................................3 Citadel Servicing Corporation ................................ citadelservicing.com ........................................................13 Concord Church Finance .................................... concordchurchfinance.com ............................................53 Deephaven Mortgage, LLC .................................. deephavenmortgage.com ..............................................19
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The Beckwith Blog: In the Heat of Mortgage 911 By Christine Beckwith th
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Bec
The
DocMagic .......................................................... docmagic.com ................................................................5 First National Bank of America............................ fnba.com/mortgagebrokers ............................................55 Greenbox Loans, Inc. ........................................greenboxloans.com ..................................Inside Front Cover Locke Law US, LLC ............................................ lockelaw.us ..................................................................49 Lykken On Lending ............................................ lykkenonlending.com ....................................................49
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Keep Calm, Carry on in the Midst of a Crisis From Within Your Home By Pam Marron ................................................................12 From the Desk of Beverly Bolnick, CMO-Chief Mommy Officer: Managing the Mental Load of Being a Working Parent ......................18 California Attorney General Releases Second Set of Modifications to Proposed Regulations By Mia Milatz ..............................................22 Your Culture Matters: Systems That Bring Out the Colosseum By Jay Doran ......................................................................................28 Downpayment Assistance Can Help Bridge the Homeownership Gap: A Chat With Richard Ferguson, President of CBC Mortgage Agency ..................................................................32 What Every Broker Should Know About Bank Statement Loans By Ryan Carry ....................................................................................60 Improving Your Referrals Numbers by Over 50 Percent for $1.99 or Less By Matt Muscat ............................................................62
COLUMNS New to Market ..................................................................................14 News Flash: April 2020 ....................................................................16 Heard on the Street ..........................................................................26 NMP Calendar of Events ..................................................................63
D V E R T I S E R S Company
Web Site
Page
MBS Highway .................................................... mbshighway.com/MNN ..................................................15 MCM Capital Solutions ........................................ mcmcapitalsolutions.com ..............................................43
Join your community of mortgage professionals at the
Mid-South Mortgage Expo .................................. midsouthmortgageexpo.com ..........................................27
Carolinas’ largest event for mortgage originators, The
Mortgage News Network (MNN) .......................... mortgagenewsnetwork.com ............................................51
Carolinas Connect Mortgage Expo. Don’t miss out on
Mortgage Star Conference .................................. mortgage-star.net/register ..............................................64
our lineup of engaging events centered around
NAWRB ............................................................ nawrb.com ....................................................................17
networking, skill-building, and having a great time
NewRez, LLC ...................................................... newrez.com ..........................................................23 & 57 Origination Pro.................................................. originationpro.com ........................................................46 Originator Connect ............................................ originatorconnect.com ..............................................34-35
with your peers at our early year edition in Charlotte. To register, go to
PB Financial Group Corp. .................................. calhardmoney.com ........................................................47
Carolinasconnectmortgage.com
RCN Capital ...................................................... rcncapital.com ..............................................................11
Use code NMPOCN for free registration
Paramount Residential Mortgage Group, Inc. ...... prmg.net ................................................Inside Back Cover
Velocity Mortgage Capital .................................. velocitymortgage.com ......................................................7
A MESSAGE FROM THE PUBLISHER & CEO VINCENT M. VALVO APRIL 2020 Volume 12 • Number 4 345 North Main Street, Suite 313 West Hartford, CT 06117 Phone#: (516) 409-5555 • Fax#: (516) 409-4600 NationalMortgageProfessional.com
STAFF Eric C. Peck Editor-in-Chief (516) 409-5555, ext. 312 EricP@MortgageNewsNetwork.com Beverly Bolnick Associate Publisher (516) 368-1149 BBolnick@AmBizMedia.com Joey Arendt Art Director (516) 409-5555, ext. 323 JoeyA@MortgageNewsNetwork.com Phil Hall Reporter (516) 409-5555, ext. 12 PhilH@MortgageNewsNetwork.com Rick Grant Special Reports Editor (570) 497-1026 (direct) (516) 409-5555, ext. 311 RickG@MortgageNewsNetwork.com Andrew Berman Head of Engagement and Outreach (516) 784-4840 Andrew@MortgageNewsNetwork.com Jaclyn Leitermann Client Success Coordinator (516) 409-5555, ext. 316 JaclynL@MortgageNewsNetwork.com Francine Miller Advertising Coordinator (516) 409-5555, ext. 301 FrancineM@MortgageNewsNetwork.com Joel M. Berman Founding Publisher (516) 409-5555, ext. 310 Joel@MortgageNewsNetwork.com
Vincent M. Valvo CEO & Publisher (860) 922-3441 VValvo@AmBizMedia.com Keith Griffin Editorial (860) 719-1991 KGriffin@AmBizMedia.com
The Mortgage Markets Are Infected. Embracing Tech Is the Cure e are living in a world–a mortgage world and the actual world–that is learning just how much technology and new innovation are critical. As a pandemic shackles our economy and threatens lives and livelihoods alike, we are seeing how rapid adoption of technological tools is helping us to reshape how we do business. This isn’t to play down the disaster that is wreaking havoc on the world. COVID-19 is brutally efficient in its ferocity. In order to save lives, our governments are imposing the most draconian measures, such that there is great fear about what kind of dystopian economic future will emerge. In the world of mortgage lending alone, we’ve seen massive threats to servicing, panicked investors laying waste to whole specialty sectors of lending, interest rates bouncing like Flubber, appraisers unable to do interior inspections, workforces scattered across the nation, lenders retrenching, and governments telling consumers they don’t have to pay their mortgages or their rents for months at a time. And that was just a week’s worth of news … But as we’ve moved into weeks of “social distancing” which, let’s be honest, will mean months of gradual easing and then more weeks of scattered confinements when hotspots reemerge, it is the rapid adoption of new technology by workers and companies, and new FinTech providers with a tech-based means of doing business, which are going to be the new standards moving forward. If originators really want ways to engage borrowers, this viral outbreak is a red-alert lesson that tech adoption is going to be mandatory for success. But it cannot all be about simply signing up for video-conferencing and VOIP phone systems. The way forward is going to be lit by companies figuring out whole new ways to reach and serve borrowers, and new platforms to change the way mortgages are originated. Personal hand-holding will still be key, but that guidance may take a different form than literally a physical meeting. As it was a decade ago, the mortgage industry is being re-shaped before our eyes. This time, mortgage loans are not the cause of the economic implosion blooming before us, but they are nonetheless at the epicenter of the financial fallout to come. How homes are bought and sold, how borrowers finance and refinance, it’s all about to change again. For a while at least, much of that change will likely be for the worse. But in time, we will find our way to better days. And those are going to be brought to us by better systems, better technology and by companies that have embraced that FinTech is the future. Sincerely,
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Vincent M. Valvo, Publisher & CEO American Business Media VValvo@AmBizMedia.com
Navindra Persaud Director of Online Content (860) 719-1991 NPersaud@AmBizMedia.com Alison Valvo Interactive Design Director (860) 719-1991 AValvo@AmBizMedia.com Melissa Pianin Marketing & Events Associate (860) 719-1991 MPianin@AmBizMedia.com Stacy Murray Graphic Design Manager (860) 719-1991 SMurray@AmBizMedia.com Donald Frommeyer Chairman, Originator Connect Network (860) 719-1991 DFrommeyer@AmBizMedia.com
Subscriptions To receive subscription information, please call (516) 409-5555, ext. 301; e-mail orders@mortgagenewsnetwork.com or visit www.nationalmortgageprofessional.com. Any subscription changes may be made to the attention of “Circulation” via fax to (516) 409-4600. Statements, articles and opinions in National Mortgage Professional Magazine are the responsibility of the authors alone and do not imply the opinion or endorsement of American Business Media LLC, or the officers or members of any trade association that National Mortgage Professional Magazine is designated as their official publication. Participation in any trade association that designates National Mortgage Professional Magazine as their official publication, events, activities and/or publications is available on a non-discriminatory basis and does not reflect the endorsement of the product and/or services by American Business Media LLC, or any of the trade associations that designate National Mortgage Professional Magazine as their official publication.. National Mortgage Professional Magazine and any trade association that designates National Mortgage Professional Magazine as their official publication do not make any misrepresentations or warranties concerning the regulatory and/or compliance aspects of advertisers, products or services and/or the editorial content contained in American Business Media LLC publications. National Mortgage Professional Magazine and American Business Media LLC reserve the right to edit, reject and/or postpone the publication of any articles, information or data. National Mortgage Professional Magazine is a publication of American Business Media LLC Copyright © 2020 American Business Media LLC
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Recruiting, Training and Mentoring Corner
Pandemic: A Case Study in FinTech BY DAVE HERSHMAN
he threat of the Coronavirus has rapidly changed America. There is no doubt that in our industry, this will be a test of the agents for our technology. As more and more loan officers and operations personnel move to work from home, many factors will come into play.
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Bandwith Sending a complete workforce of hundreds or thousands to work from home—during a refinance boom, no less? What kind of strain does that place on the bandwith of a company? And if so many Americans go home and work, are we overwhelming the Internet completely? Think of a prolonged heatwave that hits all of America and what kind of electricity outages we might face. Of course, the laptop industry will be strained just to keep up with demand. Complications Yes, we can take applications and process a loan online, but what about the complications … l Those who do not have access to the Internet at all. Before we could just meet them in the office and have them sign everything. That may not be possible in some situations during lockdowns. l When local governments close, that could impact everything from titles to getting documents recorded. l Sellers who won’t let
appraisers in their homes or won’t hold open houses. Marketing Now we will have lost the human touch in marketing even more than we have recently. Forget power lunches or lunch and learns. Real estate offices may be holding sales meetings virtually. What can a loan officer do in order to keep in touch? Here are some secondary options: l Calling on a regular basis l E-mailing information l Texting l Social media, including posting and instant messaging l Hold a Webinar or host oneon-one video calls The most effective would be calling–one step below, face-toface. With regard to real estate agents, the first question is, how often should you call? Unless you are transacting business with the agent, calling every day would be way too much, but calling once per month or per quarter would not be enough. It would depend upon how much business you are doing with the agent, how much business they do, the extent of the relationship—as well as other factors. For some, once per week would be right, while for others, it may be every other week. And remember, calling is not your only means of keeping in touch. If you are texting, then calling might be less frequent. Secondly, what should you say? I can start with what not to say: “Do you have any deals for me?” That will get old very, very
quickly. This is the progression: l First, see how they are doing, especially during this crisis. l Ask how their business has been affected by the crisis and what they are doing in order to adjust. l Provide an update on the markets. There have been a lot of headlines and market swings. l If you do have a deal in process, provide an update on the progress. l Ask if there is any way you can help them with their business. That will open the door to find out if they are working with prospects. l Lastly, thank them for their previous support and let them know you are there for them. Speaking of working from home, there are many things an originator can do in order to boost their marketing and put them in position to leverage technology: l How long have you been telling yourself to update
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your database? E-mailing is not effective if you are not reaching your entire sphere. How long have you been telling yourself to update your social media profiles? Posting on social media can be a great way to add value, but not if your sites are unprofessional or incomplete. Those sites can do more harm than good.
Note that I added one option that many originators may not be familiar with. If you have been conducting sales meetings, trainings and/or lunch and learns in real estate offices, why not hold a Webinar in which you can deliver the same information remotely to others that are remote. Public speaking is a powerful tool! There is no doubt that this pandemic will cause a host of issues across America. But think about facing this situation 30 years ago, without technology to do perform functions remotely. The situation will not be perfect, but it at least gives us a fighting chance.
Senior vice president of sales for Weichert Financial Services, Dave Hershman is a top author in this industry, with seven books published, as well as establishing the OriginationPro Marketing System and the OriginationPro Mortgage School–the online choice for mortgage learning and marketing content. His site is OriginationPro.com and Dave can be reached by e-mail at Dave@HershmanGroup.com.
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IN THIS EDITION ...
Selling in a Crisis: Be the Calm in a Storm By Shakria Hall A Message From Founding Publisher Joel M. Berman
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he world is scrambling to piece together the full impact of the COVID-19 health crisis. The lives affected either directly or indirectly by this tragedy is something we will evaluate for years to come. As we pivot and decide how to successfully reprioritize our business strategies, there’s one factor we cannot afford to ignore: The power of human connection. Here are a few practical ways you can connect with, calm and engage with your clients as we navigate through unchartered territory. Be an advisor We are being inundated with information right now. Our e-mail inboxes, newsfeeds and social media timelines are a constant stream of information about emergency rate cuts, mortgage relief, and bond purchases. In many cases, the information is insightful, while others simply leave us with more questions. So, what does this mean for your borrowers? It means they are likely overwhelmed and could use your expertise. In a time where we’re practicing social distancing, a phone call from a familiar voice would be a welcome change. Reaching out to your borrowers will allow them to ask the inevitably tough questions. You may not have all the answers, but this creates space for an honest dialogue. Be a resource of factual yet reassuring information.
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Compassion and empathy goes a long way While offering your expert advice is appreciated, a simple wellness check is invaluable. Reach out to those borrowers who you haven’t done business with, in a few years. Especially anyone who may be at-risk or likely to need a little more assistance. When the dust settles on this crisis, those are the calls they will remember. Leverage technology The internet is flooded with videos of people finding creative ways to connect. Gone are the days where virtual open houses, video meetings and mobile-friendly Web sites are optional. The current environment requires ingenuity. Thankfully, the technology we need is available and waiting to be added to our existing business strategies. Consider virtual happy hours or video e-mails to help foster the connection missed as we all practice social distancing. Show your site some love Now is the perfect time to update your first impression, your website. Is it updated to reflect timely information to help your borrowers and prospects? Does it have a modern design and is it easy to navigate? If the answer is no, to any of those questions, you may have some work to do.
Shakria Hall is brand marketing manager at Calyx, an established provider of compliant mortgage software solutions used by banks, credit unions, mortgage lenders and brokerages nationwide. She may be reached by e-mail at Shakria_Hall@CalyxSoftware.com.
SPONSORED EDITORIAL
o say we are living in unprecedented times is an understatement. Sure, we have all lived through the ebbs and flows of an industry that visits the highest of peaks only to plummet to the lowest of valleys, but these times blindsided the nation and the mortgage industry as a whole. I defy you to find a single economist who looked into their crystal ball and could have predicted that the housing market would be brought to a near halt by a global pandemic. And as COVID-19 continues to wreak havoc on our nation’s health, the tidal wave, not ripple, felt by our nation’s economy is a blow we never saw coming. The forced closure of small business, the mounting employment numbers and the pull back of our industry’s once booming non-QM market are just some of the casualties we now face amid a nationwide epidemic that is growing to epic proportions. And as this month, we take a closer look at the rise of FinTech in the mortgage marketplace, now more than ever has technology become the tie that binds a nation that has adopted its social distancing policy to quell the rapid outbreak of COVID-19. Conference rooms and face-to-face meetings have been replaced by virtual meetings and collaborative software that has allowed certain sectors of our nation to have experienced just a hiccup in day-to-day operations. I think of an article I recently read on the Web site Publishing Executive (PubExec.com). In the article “On Isolated Connectivity, Social Distancing, and the Future of Magazines,” author Samir Husni discusses what he calls “Isolated Connectivity” the concept how today, we feel more connected than ever, yet more isolated than ever before. The choice of “Isolated Connectivity” was, according to Husni, “adopted by millions who enjoyed what they felt to be the privacy of their home along with the virtual connectivity that kept folks screens apart.” Whereas “Isolated Connectivity” was a choice, today, we are faced with “Social Distancing,” and sadly, it is not a choice, but a temporary way of life. Teams are adapting amidst the adoption of new business practices in the era of the remote workplace. Our team keeps in touch via mobile chats and we meet daily via Zoom to update each other on business and day-to-day life. We have also been featuring some of the industry’s top minds daily on our Mortgage Leadership Outlook Series, hosted by Andrew Berman, on Facebook Live on National Mortgage Professional Magazine's Page (FB.com/MortgageProfessional). You can catch previously recorded interviews at NMPLink.com/MLOutlook. Thanks to technology we have been able to keep a “business as usual” mentality as we will continue to bring you the latest news as it happens. So, this month, I am not going to break down the article within, not going to tell you who is writing what … discover that yourself! Take the time to explore our April 2020 issue and realize that as we coincidentally focus this month on FinTech, as that technology is the very backbone of what will get us through this time of disruption. Sincerely,
T
Joel M. Berman, Founding Publisher National Mortgage Professional Magazine Joel@MortgageNewsNetwork.com
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The E BY RALPH LOVUOLO SR.
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The
Mortgage
Godfather
“FinTech” or “Financial Technology,” is a term that has great meaning to me, my history and the history of my family. Having all of my children in the mortgage business along with me has been one of the more interesting and pleasant memories of my life. It all comes to fruition because of my family involvement in the business starting about 1957. As a teenager, I worked with my dad at one of his startup businesses. It was called Century Mortgage Company, based in Camden, N.J. He started that business in order to finance the properties he was selling through his real estate business. It seemed that without knowing it, we were imbued with a genetic predilection to the finance industry that overtook us, whether we wanted it to or not. I personally went from a loan delivery supervisor, then a loan solicitor in the 1960’s and 1970’s, to executive positions at banks and grew into an entrepreneurial mortgage broker enterprise in the 80’s. Eventually, I became a consultant/coach/speaker/aut hor in the 90’s through present day today. My three children span the entire spectrum of the industry with them having positions that run the gamut of all levels of responsibility. It is really not necessary to give the entire history of what has taken over our lives, but what this history does is to give me a unique advantage over almost anyone else in the industry as to the advances we have seen and what my opinions are of the mortgage technology business as it is constructed today. When I started in the business in my mid-20s, I was in charge of keeping track of the inventory of mortgages for the company where I was working, both the loans in process and the closed loans, sold and unsold. We accomplished this
Evolution of FinTech some states still requires a face-to-face presentation in order to complete a mortgage closing. When are we going to catch up and become part of the 21st Century?
I’d love to hear from you as to your frustrations with all of this. Feel free to reach out to me at Ralph@MortgageGodfather.co m and share your thoughts.
Ralph LoVuolo Sr. has nearly 60 years history in the mortgage business. He was a co-founder/president of the NYAMB and a long-term member of the board of directors of NAMB. The Mortgage Godfather is available to help your salespeople do more business. He does sales rallies, Webinars, personal coaching. Call, text or e-mail (917) 5761230 or e-mail Ralph@MortgageGodfather.com. 11
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other industries in keeping records and performing the many calculations necessary to understand the value of “one” mortgage to an interested buyer/investor. The sales area has been even more behind the rest of the business world, as loan officers, not easily open to change, are still fighting the value of the many CRM systems that exist today. I recently had a conversation with a good friend and highly respected veteran of the industry. We were reviewing, in a cursory way, how the industry had changed from when he started in the last century. I surprised him by telling him my viewpoint of the lack of involvement by all companies that I work with at present, insofar as the involvement of the sales force with their accepted and paid for CRM system. I said it that day and I’m saying it today as I sit here coaching almost two dozen MLO’s, that the company CRM is utilized to about 25 percent of its individual capacity. I find the lack of the use of a CRM is just an awful untold truth for every mortgage company I have ever worked for. I believe that if senior management were to spend the time and effort necessary to train and follow-up with their MLO’s, the amount of business would skyrocket. Overall, the mortgage business as I look back on it from the vantage point of six decades, has been a miserable failure at the advances of FinTech. Today, we are in the middle of a pandemic that has frozen the financial markets to their very core. The advances that have been promulgated on what I’ll call the back end of business today is so far ahead of the mortgage industry, it is an abomination. Mortgages cannot close because government has put a padlock on having people meet to sign papers to transact as simple an activity as borrowing money to finance the purchase of real estate. Laws, rules and regulations prevent documents from being signed electronically in many states. Notarization in
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inventory accounting system by using an IBM card sorting system. That was the way we could know what our secondary marketing was going to produce. That company, Associated East Mortgage, was the first company to issue a Government National Mortgage Association Mortgage Backed Security (GNMA). The value of that document, GNMA #2, was $2 million, and consisted entirely of VA mortgages originated in the Tidewater region of Virginia. I personally went to Washington, D.C. to pick it up and bring it back to our office in New Jersey. It was a source of great pride for the people I worked with. It’s always good to be first. That was an advancement that changed the secondary market as we automated the creation of the document using our IBM Card sorter to print out the forms needed to submit it to GNMA. You can well imagine the way a mortgage-backed security (MBS) is created today by using algorithms that create the documents in seconds, whereas when we did it in the mid-1960’s, it took us a couple of days to do all the required calculations. Secondary marketing requires an in-depth knowledge of hedging and future values that were never a consideration for us. Insofar as the processing of loans, we kept track of the documents on a 3X5 Kardex card. We had one card that represented the entire file. When a document was ordered, and then received, it was recorded on the card. It was an advancement of keeping the information that was previously printed on the face of a file. It was necessary to do keep the record on a card, because if we wanted to know the status of a file, it was not necessary to actually search throughout the office to find the file. The Kardex system was utilized into the 1980’s. That was when it became apparent that the mortgage industry was already far behind
Addressing Post-Housing Crisis Issues
Keep Calm, Carry on in the Midst of a Crisis From Within Your Home In the face of a global pandemic, keep it light to share good things BY PAM MARRON n my column of late, I’ve been sharing the growth of a pilot program that connects mortgage loan originators with housing counselors who can help our challenged clients get “mortgage ready” for the last six months. Progress is being made on this front where services mortgage professionals need for our clients in the coming months and years may grow exponentially. The silver lining is that that awareness of what HUD housing counselors, certified credit counselors and sister agencies can do is being introduced to the mortgage industry right when we may really need it. More to come on this, but right now, some uplift is needed.
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We will get through this For me, it started with a realistic and practical e-mail from the chief executive officer at Innovative Mortgage telling us how to prepare. Offices, including mortgage spaces and wholesalers, figured out how to telecommute overnight. Many of us were incredibly busy trying to close existing deals at historically low interest rates before rate locks expired, while fielding refinance calls from past clients who thought mortgage interest rates had dropped to zero percent when the Fed cut interest rates. But now as business slows down, we are seeing firsthand how the Coronavirus pandemic is affecting our communities and states. We have no choice but to adjust.
Many of us have been faced with decisions to cancel events and trips. Out of a desire to keep “together and communicating,” lightbulb moments are occurring where workable ideas and use of services only discussed in the past are suddenly being implemented. There is no time to decide. It’s “Go Time” and you need to “Just Do it.” Zoom.US, a free, simple telecommunication platform where 49 participants can be seen on a computer screen at one time (though more can join) has become one of many sought-after services. But there is still clumsy trepidation on how to use these types of services for nontechnologically-savvy colleagues. As Communications Chair of the Florida Association of Mortgage Professionals (FAMP) and because we are having a quarterly meeting on Zoom, I opened a new account and chronicled “how to” everything with Zoom, including links to tutorial videos. The silver lining is that I used this same service on Sunday evening to bring nine members of my family together for a weekly chat, and we will continue joining this way every week while we work and live “in place at our homes.” Who knows … this may continue after we are out of the woods. And why not have a Zoom meeting with real estate agents or host a first-time homebuyer class? Below are some lighthearted
offerings for you and family. We need this in a time like this! Loan originator open for business: It’s a family effort!
write a letter that will uplift an elderly stranger? Go to LoveForTheElderly.org for more information. Singing dentist coronavirus video
IMS Loan Originator Anthony Arnold informs all that he is open for business with the help of his son via Facebook. Look for “Anthony Arnold Mortgage Loan Originator” via Facebook.
Want an uplifting tune? Visit the “Singing Dentist” on YouTube and subscribe at YouTube.com/watch?v=X7LCFo9 OjeI.
Write a letter to an elder While you are at home, here’s an idea that is good for kids and adults … The CDC, World Health Organization, as well as the Surgeon General have indicated that there is currently no evidence that COVID-19 is being spread through the mail. So why not
Thank you to those who are in positions where you must work with the public who are in essential services like everyone on the front lines in healthcare, to those who are in food and drug services industries like our grocery stores and pharmacies, and to companies that provide utilities, shipping, gas and support for our infrastructure in order for the masses of us to stay home. Thank you from the bottom of our hearts and stay safe.
Pam Marron (NMLS#: 246438) is senior loan originator with Innovative Mortgage Services Inc. (NMLS#: 250769) in Tampa Bay, Fla. She may be reached by phone at (727) 375-8986, email PMarron@InnovativeMortgage.onmicrosoft.com or visit HousingCrisisStories.com, CloseWithPam.com or 8Problems.com.
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• 1 to 4-un nit Properties
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• Foreclos sure, Short Sale, and Bankruptcy ok
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SimpleNexus Announces Several Product Enhancements
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SimpleNexus has announced the availability of new capabilities for SimpleNexus’ mobile and Web applications: On-the-Go Price Locking via Optimal Blue; URLA Readiness; and in-app review of DU findings. Loan originators can now lock in an interest rate from Optimal Blue at any time, from any device. The ability to quickly lock in a loan interest rate is especially critical to helping loan originators reduce fallout for applicants with tight debt-to-income ratios. SimpleNexus has updated its tech stack to support lenders’ use of the redesigned Form 1003, also known as the Uniform Residential Loan Application (URLA). URLA support is in live production for users of select loan origination systems, and the SimpleNexus team is prepared to support additional LOSs as they adopt URLA. And, loan originators who are licensed to use Fannie Mae’s Desktop Underwriter (DU) can review their DU findings within the SimpleNexus app. “At SimpleNexus, product development begins with listening to the needs of our users,” said SimpleNexus Vice President of Product Shane Westra. “The response to these new capabilities, designed to help lenders work with ease no matter where they are, has been tremendously positive. Our product roadmap for 2020 will
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continue to focus on solutions that drive profitability and deliver a consumer-grade experience to all users.” Fintech LemonBrew Matches Homebuyers and Real Estate Agents
A start-up fintech out of Charlotte, N.C., is planning to launch a platform that pairs homebuyers with local real estate agents. LemonBrew will bring together what it calls “Partner Agents” from major brokerages including Coldwell Banker, Century21, RE/MAX, Keller-Williams and eXp Realty with new buyers. The company’s proprietary algorithm will offer profiles of the top three real estate agents in the buyer’s market, and the buyer also receives a commission rebate at closing from their partner agent to help offset closing costs. The company conducted pilot tests of its platform in North Carolina and Florida last fall and plans a nationwide rollout throughout this year. “Our goal is to provide value to both the consumer as well as the real estate agent,” said Reno Heine, chief executive officer of LemonBrew. “When considering buying a home, the two biggest questions people have are: ‘Where do I even begin?’ and ‘How much does all this cost?’ We’ve built our platform to ease the stress and help answer those questions. Not only do we match you with the best local partner agent, you actually get a rebate back at closing to offset some of the closing costs. It's a win-win.”
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Radian Rolls Out New MI Product
Radian Guaranty Inc., the mortgage insurance subsidiary of Radian Group Inc., has announced the creation of its new Master Policy for all new mortgage insurance applications. The new policy was created with the U.S. Mortgage Insurers (USMI) and its members and with the government-sponsored enterprises (GSEs). According to the Philadelphia-based company, the new product will “provide lenders and servicers with a uniform and straightforward document that is consistent across nearly all mortgage insurers, eliminating the need to evaluate and compare multiple policies.” The new policy also incorporates the Amended and Restated GSE Rescission Relief Principles, which the GSEs finalized in September 2018. This marks the first update to Radian Guaranty’s policy since 2014. “The new Master Policy allows Radian to focus even more on what we do best: helping ensure the American dream of homeownership,” said Radian Chief Executive Officer Rick Thornberry. “The new policy offers servicers and lenders consistency, clarity and our commitment to provide uniform mortgage insurance rescission relief with the continuation of our Confident Coverage promise.”
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Velocity Mortgage Capital Expands Its Marketing Toolkit
Velocity Mortgage Capital has added search engine marketing (SEM) insights and sample creative ads to its Broker Marketing Toolkit. The Toolkit is a comprehensive resource designed to support the needs of independent mortgage brokers looking to reach and engage with investors seeking to purchase residential investment and small commercial property loans. First launched in August 2019, the Toolkit offers promotional marketing materials. The new addition of insights for search engine marketing, including sample and target keywords, equip brokers with all materials needed to expand their businesses. “Velocity recognizes that marketing is essential to attracting new clients, and that most brokers do not have the time or resources to create marketing and advertising materials to secure new business,” said Chris Farrar, chief executive officer of Velocity Mortgage Capital. “We’re pleased to add search engine marketing materials to further round out the curated materials we already offer brokers, to deliver on our mission to help brokers increase grow their businesses.” The curated images and copy in the toolkit help brokers prepare customized promotional e-mails, social media posts, flyers and ads. The kit goes beyond the company’s mortgage
programs to include the expertise, support and materials required to assist brokers with their origination efforts. MISMO Releases Tool to Speed Up the Deployment of New Apps
The U.S. Department of Housing & Urban Development (HUD) is now offering the new Building HOME online training series for
New Volly Venture Provides LOs With Educational Videos
Volly has joined forces with Fast Forward Stories, a provider of branded educational videos for key business verticals. Through
the partnership, loan officers will be able to offer customers access to hundreds of fullyhosted educational videos through Volly’s platform. Videos will be embedded into Web sites, e-mail campaigns, e-newsletters and social media content, as well as personalized at the front (thumbnails) and back ends (calls to action) with a company logo and contact information. With a focus on real estate and mortgage related topics, the videos are designed to educate continued on page 22
Why choose MBS Highway? BARRY HABIB— THE ORIGINATOR OF THE MARKET ADVISORY SERVICE Daily guidance and insights from Mortgage Market expert Barry Habib. He closed over $2 Billion in production as a Loan Originator, called the bottom of the Housing Market and currently provides sales and market training to thousands of Loan Originators across the country. STATE OF THE ART, USER FRIENDLY WEBSITE We've taken great pride in building a website that uses new technology, and enhances the user experience. No matter where you are on our site, you'll always have market data in sight. Never miss a lock alert with our real time market news and alert system.
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HUD Premieres Building HOME Series
either homeownership or rentals. The new series is launching in an eight-module program, with four additional training modules scheduled to be released later this year.
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The Mortgage Industry Standards Maintenance Organization (MISMO) has announced the release of a new tool designed to facilitate the use of MISMO standards. The MISMO Entity Relationship Model, or “ER Model,” supports database engineering and general data management functions, resulting in quicker application development and deployment schedules, while helping to reduce errors that result from proprietary implementations. The MISMO ER Model and the accompanying User Guide are being released for a 60-day public comment period. The comment period remains open from today until April 30, 2020. “MISMO’s ER Model gives mortgage industry users the convenience of quickly creating databases that are based on MISMO standards. A process that otherwise would have taken months can now be created within a few hours,” said Richard Hill, executive vice president for MISMO and vice president, industry technology of the Mortgage Bankers Association (MBA). “Any organization that stores large caches of data in support of its business will benefit from MISMO’s ER Model, and it will save them extensive development time and reduce related costs.” The ER Model is based on Version 3.5 of the overall MISMO Logical Data Model, and is designed to improve how mortgage organizations store and manage data built using MISMO standards.
participants in its HOME Investment Partnerships Program. According to the Department, the new series is an interactive, self-paced online training course that outlines regulatory requirements of the HOME program and practical advice for implementing all HOME activities at the state and local levels. The HOME program provides formula grants to states and localities that can be used in partnership with local nonprofit groups to fund affordable housing activities for
FLASH y APRIL 2020 y NMP NEWSFLASH y APRIL 2020 y NMP NEWSFLASH y APRIL 2020 y NM
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Independent Mortgage Banks See Quarterly Decline in Net Profits
Firms added approximately 10 percent more employees last quarter, and slowing rate locks towards the end of the year led to less secondary marketing. We continue to closely monitor how the fallout from the spread of the Coronavirus will affect the various, important business functions of IMBs.”
Independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported a net gain of $1,182 on each loan they originated in the fourth quarter of 2019, down from a reported gain of $1,924 per loan in the third quarter of 2019, according to the Mortgage Bankers Association’s (MBA) newly released Quarterly Mortgage Bankers Performance Report. MBA’s report found that despite a quarterly decline in net production profits, IMBs had the most profitable fourth quarter since 2012. Additionally, 84 percent of the production and servicing respondents in the survey were profitable–also the highest percentage for a fourth quarter since 2012. “With loan volume at elevated levels, IMBs had a strong close to 2019. Net production profit was a healthy 46 basis points, up from the fourth quarter average of 35 basis points since the survey’s inception in 2008,” said Marina Walsh, MBA’s vice president of industry analysis. “Typically, the second and third quarters perform better than the first and fourth quarters, and last year was no different. A combination of higher per-loan production expenses and lower secondary marketing income affected quarterly profitability.
GSEs Prevent Nearly 4.5 Million Foreclosures Since 2008
The Federal Housing Finance Agency (FHFA) has released its fourth quarter 2019 Foreclosure Prevention and Refinance Report, which shows that Fannie Mae and Freddie Mac (the GSEs) completed 25,930 foreclosure prevention actions in the fourth quarter of 2019, bringing to 4.407 million the number of troubled homeowners who have been helped since the start of conservatorships in September of 2008. Of the near 26,000 foreclosure prevention actions and 4.407 million total in Q4, 3,709,440 helped troubled homeowners stay in their homes, including 2,390,082 permanent loan modifications. Twenty-six percent of modifications in the fourth quarter were modifications with principal forbearance. Modifications with extend-term only accounted for 65 percent of all loan modifications during the quarter.
The Report found that there were 1,272 completed short sales and deeds-in-lieu during Q4, bringing the total to 697,526 since the conservatorships began in September 2008. The GSEs’ serious delinquency rate remained unchanged from the third quarter at 0.65 percent at the end of the fourth quarter. This compares with 3.47 percent for Federal Housing Administration (FHA) loans, 1.92 percent for Veterans Affairs (VA) loans and 1.76 percent for all loans (industry average). The report also showed a jump in refinances from the third quarter of 540,578 to 728,842 in the fourth quarter. Builder Confidence Declines in March
Builder confidence in the market for newly-built single-family homes fell two points to 72 in March, according to the latest NAHB/Wells Fargo Housing Market Index (HMI). Sentiment levels have held in a firm range in the low- to mid-70s for the past six months. “Builder confidence remains solid, although sales expectations for the next six months dropped four points on economic uncertainty stemming from the Coronavirus,” said NAHB Chairman Dean Mon. “Interest rates remain low, and a lack of inventory creates market
opportunities for single-family builders.” Derived from a monthly survey that NAHB has been conducting for 30 years, the HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “Good,” “Fair” or “Poor.” The survey also asks builders to rate traffic of prospective buyers as “High to Very High,” “Average” or “Low to Very Low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor. “It is important to note that half of the builder responses in the March HMI were collected prior to March 4, so the recent stock market declines and the rising economic impact of the Coronavirus will be reflected more in next month’s report,” said NAHB Chief Economist Robert Dietz. “Overall, 21 percent of builders in the survey report some disruption in supply due to virus concerns in other countries such as China. However, the incidence is higher (33 percent) among builders who responded to the survey after March 6, indicating that this is an emerging issue.” The HMI index gauging current sales conditions fell two points to 79, the component measuring sales expectations in the next six months dropped four points to 75 and the gauge charting traffic of prospective buyers also decreased one point to 56. Looking at the three-month moving averages for regional HMI scores, the Midwest fell two points to 66, the South moved
one point lower to 77 and the West posted a one-point decline to 82. The Northeast rose two points to 64.
toward more affordable homes by homebuilders and a historically large PMI market as two results of the boom in the first-time homebuyer market.”
Genworth Reports Strong Activity in the First-Time Homebuyer Market
Commercial Mortgage Debt Rises in Q4
The level of commercial/multifamily
percent) to $1.53 trillion during the fourth quarter, and by $116.7 billion (8.2 percent) for the entire year. “In 2019, the amount of mortgage debt backed by commercial and multifamily properties grew by the largest annual amount since before the Global Financial Crisis,” said Jamie Woodwell, MBA’s vice president of commercial real estate research. “Every major capital source increased their holdings, and some by double continued on page 18
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Genworth Mortgage Insurance, has released the 12th edition of the First-Time Homebuyer Market Report, authored by Chief Economist Tian Liu, covering the fourth quarter of 2019. The report found that first-time homebuyer market activity was strong in Q4, as 517,000 singlefamily homes were purchased–– up six percent from a year ago. First-time homebuyers reached 2.18 million seasonally-adjusted annual rate in the fourth quarter, their fastest pace since 2006. In 2019, 38 percent of all homebuyers and 56 percent of purchase borrowers were firsttime homebuyers. The aging of the Millennial population implies that the increase in first-time homebuyers over the age of 30 will likely lead to an overall increase in the number of first-time homebuyers in the 25-44 age group in the order of 580,000 first-time homebuyers over five years. “The housing market is in the middle of a multi-year boom in the first-time homebuyer market. The market has exceeded two million first-time homebuyers each year for the past three years, which is unprecedented in the past 26 years,” said Liu. “In part, this represents a long overdue rebound from the trough earlier in the decade.” The pool of potential secondtime homebuyers increased for the first-time since 2008 to 8.3 million in 2019 and will grow by more than three million in five years. States with fast job growth reported first-time homebuyer growth rates of 44 percent between 2014 and 2019, compared to the 37 percent growth rate for states with slow job growth. “The first-time homebuyer market offers important insights into the housing market,” said Liu. “With 38 percent of home sales and 56 percent of purchase loans in 2019, it is a market too big to ignore. I see the trend
mortgage debt outstanding at the end of 2019 was $248 billion (7.3 percent) higher than at the end of 2018, according to the Mortgage Bankers Association’s (MBA) latest Commercial/Multifamily Mortgage Debt Outstanding quarterly report. MBA’s report found that total mortgage debt outstanding in the final three months of 2019 rose by 2.1 percent ($75.0 billion) compared to last year’s third quarter, with all four major investor groups increasing their holdings. Multifamily mortgage debt grew by $30.4 billion (2.0
From the Desk of Beverly Bolnick
CMO
Chief Mommy Officer Managing the mental load of being a working parent “I don’t have time for that!” How many times a day do we say or think these words? Is it true? For me, usually it isn’t, as I am simply overwhelmed and need to sit down and take a moment to think about the best way to approach everything I have going on. Society has truly romanticized the notion of being busy, and we often wear our busy-ness as a badge of honor. We equate being “busy” with being “important,” and we want people to think we are constantly busy to “prove” ourselves. This is extremely unhealthy. As a working parent, there is an endless list of tasks, chores, errands and plans that need to be addressed on a daily basis. Often, the mental load is much more overwhelming and daunting than the actual physical load of these items. Here are some strategies I have tried to implement to lessen the mental load a bit: l Create a prioritized, realistic “To-Do list” with attainable goals. “Lose 100 pounds by Tuesday” or “Clean the entire house by 4:00 p.m.” are not attainable goals. Set your to-do tasks with this in mind and increase your productivity by setting smaller benchmarks. l Don’t overbook yourself. My family uses a shared calendar app that allows us to check the family “schedule” before we say yes to a playdate, meeting or book an appointment. We live and die by this app and it is extremely helpful when making appointments for every member of the family. l Make sure you have some kind of down time. My down time is a mixture of manicure appointments, yoga classes and simply sitting on the couch a few nights a week in front of the TV. I actually schedule these things for myself, that way, they are on my calendar. If it physically exists on my calendar, I tend to treat it as if it is just as important as any other appointment. It is imperative to carve out this time for yourself, even if it is just an hour a day. l Learn how to say “No!” I often feel obliged to volunteer for every bake sale and event at my son’s school, but sometimes, these events just don’t fit into my schedule, and that is okay! I can be a better mom to my kids if I am not stressed out, rushing from one activity to another, even if that means I miss an event at school. I think my undistracted presence at home will make a much bigger impact on their lives. The most important lesson I have learned through the insanity of my schedule is to give myself some grace. The pressure to be the best at my career and as a wife and as a mom can be very high, but allowing myself room to be human alleviates at least a bit of this pressure.
Beverly Bolnick, associate publisher at American Business Media, started her post-grad life working in the music industry and in radio broadcasting. After a quick stint as a high school English teacher, she joined nmp as a marketing assistant in February 2012, and in just three years, worked her way up to become VP of sales and marketing. Outside the office, she is a proud wife and mother of a toddler, a preschooler and a parakeet. She may be reached at BBolnick@AmBizMedia.com.
NMP NEWS FLASH continued from page 17
digits. Continuing the recent trend, the growth in multifamily mortgage debt outpaced that of other property types. Looking ahead, a key question will be how the Coronavirus and related economic shocks will affect the market’s momentum in 2020. At this point it is still too early to tell.” The four major investor groups are: Bank and thrift; commercial mortgage backed securities (CMBS); collateralized debt obligation (CDO) and other asset backed securities (ABS) issues; federal agency and government sponsored enterprise (GSE) portfolios and mortgage backed securities (MBS); and life insurance companies. Commercial banks continue to hold the largest share (39 percent) of commercial/multifamily mortgages at $1.4 trillion. Agency and GSE portfolios and MBS are the second largest holders of commercial/multifamily mortgages, at $744 billion (20 percent of the total). Life insurance companies hold $561 billion (15 percent), and CMBS, CDO and other ABS issues hold $504 billion (14 percent). Social Distancing Spurs the Introduction of Remote Online Notarization Legislation
Due to the proliferation of the American workforce becoming more remote throughout the Coronavirus pandemic, U.S. Sens. Kevin Cramer (R-ND) and Mark Warner (D-VA) have introduced the “Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020 (S. 3533),” bipartisan legislation that permits the immediate nationwide use of remote online notarization (RON) with minimum standards and provide certainty for the interstate recognition of RON. This technology allows the consumer and notary to be in different locations using two-way audio-visual communication to securely execute electronic documents. “With the need for social distancing to help prevent the spread of the virus, we want to provide options to consumers to
close their transaction remotely nationwide,” said Diane Tomb, ALTA’s chief executive officer. “We applaud the leadership of Sens. Kevin Cramer and Mark Warner for introducing The Secure Notarization Act, which offers a safe alternative to help get transactions completed during this health crisis. The strong standards in this bill are important to prevent fraud and offer consumers a more secure alternative rather than FaceTime or Skype when buying property or refinancing a mortgage.” The SECURE Notarization Act would authorize all notaries to perform RONs, requires tamperevident technology in electronic notarizations and provides fraud prevention through use of multifactor authentication. “Americans shouldn’t have to risk their health or safety to execute important financial or legal documents, especially when they could do so from the safety of their own home,” Sen. Cramer said. “The Secure Notarization Act brings the notary process into the 21st Century, allowing people to securely complete documents while still following recommended health and social practices amid the coronavirus pandemic.” While RON won’t be available for every transaction, it does provide another closing option in some circumstances. This could be extremely valuable for people looking to refinance. “Virginia has safely and securely allowed the use of remote notarizations for years,” Sen. Warner said. “At a time when most people should be staying at home, there’s no reason anyone should have to leave just to get notary services.” Your turn National Mortgage Professional Magazine invites you to submit any information on regulatory changes, legislative updates, human interest stories or any other newsworthy items pertaining to the mortgage industry to the attention of: NMP News Flash column Phone #: (516) 409-5555 E-mail: Newsroom@MortgageNewsNetwork.com
Note: Submissions sent via e-mail are preferred. The deadline for submissions is the 1st of the month prior to the target issue.
SHINING THE LIGHT ON
NON-QM
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Deephaven Mortgage is shining the light on Non-QM lending by providing products specifically designed to address the needs of millions of borrowers who are unable to obtain a traditional mortgage. In return, this allows originators to expand their business by reaching out to a broader group of borrowers. Help shine the light on Non-QM for your potential borrowers. Contact us by visiting www.deephavenmortgage.com and selecting either Correspondent or Wholesale. We look forward to you getting in touch with us today! Deephaven Mortgage® LLC. All rights reserved. This material is intended solely for the use of licensed mortgage professionals. Distribution to consumers is strictly prohibited. Program and rates are subject to change without notice. Not available in all states. Terms subject to qualification. For more information on Deephaven’s state licensing, visit the NMLS Consumer Access webpage at http:// nmlsconsumeraccess.org/. NMLS #958425
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Millions of potential borrowers are locked out of today’s conventional mortgage market.
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How to See Beyond a Credit Score
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More data for better decisions New tools such as artificial intelligence (AI) and machine learning (ML) are helping a growing number of lenders go beyond the status quo modeling techniques. A machine learning model can incorporate hundreds or thousands of added credit variables and find signal throughout the infinite combination of all these data points with each other, allowing them to price more accurately for risk. The granularity of insight that trended and alternative data provides in a machine learning model can also be particularly
helpful during an economic downswing. If a borrower with a 700 credit score has slipped from 800 during a period of economic growth, that borrower is much more likely to default during tougher times. Without trended data, a bank would not be able to account for this kind of historical knowledge. Alternative data points, such as whether that borrower recently lost their job, can help produce a more nuanced analysis of borrower risk. Automated decisioning Lenders using AI models are also able to increase automation to more quickly evaluate and price borrowers, shortening the evaluation process from between 15-60 21 minutes to just seconds. Automating the approval process allows lenders to provide a better customer experience by avoiding lengthy delays in clear-cut cases and freeing up human underwriters to spend more time helping the applicants that fall in the middle. This ability to manually review borrowers with extenuating circumstances and determine a better outcome will result in a more rewarding experience for customers. ML models allow for consistent finetuning, helping lenders deliver more personalized customer service and evolve over time. Above all, transparency is key when incorporating significant amounts of data. Lenders must be able to ensure models are fair and accurate. This requires having the ability to understand the relationship between all different variables, as well as understand each data point’s impact on the overall outcome. Machine learning allows lenders to extract the most value from additional data points, helping better serve borrowers.
Seth Silverstein is Zest AI’s executive vice president for credit analytics. Seth uses his extensive industry knowledge to help clients better understand and use Zest AI’s tools in the most effective ways. Prior to Zest, Seth was executive vice president and corporate head of financial analytics and modeling at Ally Financial.
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Not all 700s are alike Even when a consumer has a credit score, that alone doesn’t paint the full picture of creditworthiness. Consider two people that both have the same 700 credit score … do they have the exact same credit risk? One could be on their way up from 650, while the other is on their way down from 800. A great way to know the direction of a consumer’s default risk is by looking at trended
data, which captures financial behavior (payments and borrowing) over a consecutive period of months or years. Lenders who use traditional scores alone won’t have that perspective, but those who incorporate trended data in their models know to find out that not all 700s are alike. Alternative data can also help thicken up a credit file up by including factors such as a consumers' cash flow, rent payment history, length at current employer or residence, and liens and judgments. These varied and creditadjacent variables help paint a much more accurate picture of how likely someone is to repay a loan. Most lenders already have access to a lot of credit-adjacent alternative data, but rarely use it because it’s of little use in a standard logistic regression model in which many of the factors in this expanded set of variables can correlate with each other. That is, they don’t provide any added signal; two factors can cancel each other out. This is why the lending industry became so reliant on the traditional three-digit credit score.
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early 60 million Americans are considered credit invisible, meaning that they have not built a substantial credit history. For decades, lenders have relied heavily on the traditional credit score as the most important indicator of a borrower's credit risk. People who don’t have a credit history are often left out of the mainstream U.S. financial system. Even though they pay their phone bill, electricity bill and rent, they're excluded from affordable credit options because they haven't been summed up in a three-digit credit score. It’s time to end our over-reliance on the traditional score, which is holding back some 20 percent of U.S. residents from gaining real economic opportunity, and many others for whom a three-digit score fails to capture their true level of creditworthiness. Fortunately, new tools such as machine learning and credit analysis that uses trended data and data not found on traditional credit reports (known as “alternative data”) can fill in these huge gaps in the analysis of the underbanked. As a result, lenders can find new borrowers and widen their portfolio, specifically within sub-prime, Millennials, and Generation Z populations. Smart lenders will begin building trending and alternative data into their models, which yield a much better look at consumers’ abilities to repay loans.
By Seth Silverstein
California Attorney General Releases Second Set of Modifications to Proposed Regulations By Mia Milatz
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n March 11, 2020, the California Attorney General’s office announced the release of a second set of modifications to the proposed regulations for the California Consumer Privacy Act (CCPA). The release includes the text of the new modifications in both a redline version and
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clean version. The Attorney General has allowed for a written comment period regarding the new proposed changes by mail or e-mail until March 27, 2020. Final regulations are expected to be issued following the new comment period, and in no event later than the July 1, 2020 enforcement deadline. The second set of modifications make several notable changes and provide some further clarification to the proposed modifications including: l Removal of Section 999.302: Guidance Regarding the Interpretation of CCPA Definitions. The Section was previously added in the February modifications, and provided guidance on what should be considered personal information. l Removal of Opt-out Button or Logo. Section 999.306(f) has been removed from the latest version of the modified regulations after being added in the last release in February. It provided a sample of an opt-out button or logo that could be provided in addition to providing a notice of right to optout. l Clarification for Notice at Point of Collection. Section 999.305(d), added in the second set of modifications, provides that a “business that does not collect personal information directly from a consumer does not need to provide a notice of collection to the consumer if it does not sell the consumer’s personal information.” Additionally, a data broker registered with the Attorney General does not need to provide a notice at point of collection to a consumer if it has included in its registration submission a link to its online privacy policy that includes instructions on how a consumer can submit a request to opt-out. l Update to Employee Notices. Employee notices for collection of employment-related information is no longer required to provide a link to the business’s privacy policy. l Update to Request to Know. In response to a request to know, a business cannot disclose personal information specific to a consumer such as Social Security Number, driver’s license number or unique biometric data. However, the latest modification adds that a business “shall inform customers with sufficient particularity that it has collected the type of information.” l Update to Content of Privacy Policy. The second set of proposed modifications adds back some of the content requirements for privacy policies that were removed by the initial modifications. Specifically, privacy policies must identify both the categories of sources from which the personal information is collected and the business or commercial purpose for which it is being collected or sold. Mia Milatz is a regulatory compliance attorney with Torrance, Calif.-based DocMagic Inc. She may be reached by phone at (800) 649-1362, ext. 6347 or e-mail Mia@DocMagic.com.
SPONSORED EDITORIAL
NEW TO MARKET continued from page 15
borrowers on the homebuying and home financing processes. “Our industry is in the midst of a profound shift in how we communicate with customers,” said Volly Chief Executive Officer Jerry Halbrook. “Video is proving to be an incredibly effective way to convey essential information. This exciting partnership with Fast Forward Stories will allow loan officers to boost engagement, leading to increased sales. Meanwhile, customers will become more knowledgeable about important next steps in the mortgage process.” SingleSource Unveils Deed in Lieu Title Product
SingleSource, a Canonsburg, Pa.-based provider of title and settlement, valuation, real estate-owned (REO) asset management, property preservation, and document management services, has added a Deed in Lieu title offering to its product line-up. According to the company, the new product provides statedriven searches at 20, 40 and 60 years. SingleSource added that it has added team members who specialize in servicing Deed in Lieu transactions to support the product. “One of the biggest challenges servicers face is title transparency and quicker decisioning ability,” says Ed Austin, chief operating officer at SingleSource. “Rather than rely exclusively on a current owner search, we go the extra mile to provide servicers with a full product search to help them make informed decisions about properties from the outset of their involvement with transactions.” Civic Financial Launches New Military Discount Program
committed to supporting the nation’s injured veterans through Wounded Warrior Project (WWP) and the non-profit’s free programs and services. “My brother, Jonathan, served heroically in the Army and gave the ultimate sacrifice for our country—so the efforts to support our military men and women are extremely dear to my heart,” said William J. Tessar, president of Civic Financial Services. “We are always looking for ways to honor and appreciate these heroes—past, present and future—who make our liberties possible.” Civic’s new Military Discount Program, by way of a lender credit at closing, is geared for those who are interested in building their real estate investment portfolios. Gary Corless, Warrior Support at WWP, said: “The support we receive from Civic Financial Services gives Wounded Warrior Project the critical resources we need to serve warriors. We’re committed to helping injured veterans achieve their highest ambition, and with Civic Financial Services’ help, they can get there.” Civic Financial Services’ contributions to the Wounded Warrior Project directly supports the programs and services that give warriors access to mental health services, physical health and wellness education, and many other programs such as career counseling. Warriors never pay a penny for these programs– because they paid their dues on the battlefield. Your turn National Mortgage Professional Magazine invites you to submit any information promoting new “niche” loan programs, new products or any other announcement related to the introduction of a new program, to the attention of: New to Market column Phone #: (516) 409-5555 E-mail:
Civic Financial Services has announced the launch of its Military Discount Program, designed to support active duty, veteran and retired military personnel. Civic Financial is
Newsroom@MortgageNewsNetwork.com
Note: Submissions sent via email are preferred. The deadline for submissions is the 1st of the month prior to the target issue.
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Working with the industry y leader that has over 30 years of experience with Joint Ventures
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way to enter the real estate lending market
. Professional marketing
support for lead d generation i and brand re ecognition
. Progreessive technology
to enh hance the consume er experiience
. Recruuit and retain top
mortgage professionalss within your local marke et
Contact: Randy Van a den Houten Senior Vic i e President Joint Ven enture & Retail Lending Randy.Van a denHouten@sheltermortgage.com . 414 1 .469.3182 Š2020 NewRez, LLC. All Rights Reserved. 1100 Virginia Dr., Suite 125, Fort Washington, PA 19034. Corp NMLS#: N 3013 (www w.nm . lsconsumeraccess.org). This communication is provided for use by real estate or mortgage profes e sionals only and is not intended for distribution to consumers or other third parties. This does not constitute an advertisement as defined by Section 1026.2(a)(2) of Regulation Z. Licensed by the AZ Department of Financial Institutions (license no. 919777). Licensed by the Department of Business Oversight under the California Residen e tial Mortgage Lending Act. Loans maade or arranged pursuant to a California Financial Lenders Law license. GA - Georgia Residential Mortgage Licensee #22847. KS - Kansas Liccensed Mortgage Company (license no. MC.0025382). C MA-New Penn Financial, LLC is licensed in Massachusetts as a Mortgage Lender. Massachusetts Mortgage Lender License - License Number: ML-3013. NJ- Licensed by the N.J. Department of Banking and Insurance. NY- Licensed Mortgage Banker - NYS Department of Financial Services. RI - Rhode Island licensed lender. Additional licenses ava v ilable at www.n . ewrez.com.
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HMDA Snags ‌ Are You Getting Caught? Improving data integrity for fair lending and CRA analytics By Ann-Marie Lefebvre
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underlying data, it is possible that these observations and conclusions about the data might also be used by key stakeholders including regulators, state attorney generals, consumers, community action groups, and the general public. Some will use this data in trying to assess how well financial institutions are meeting the needs of their communities under the provisions of the Community Reinvestment Act (CRA), as well as to detect any suggestions of unfair treatment on a prohibited basis under fair lending rules and regulations. Therefore, it is more important than ever that FIs heed the signs of potential treacherous waters ahead, understand what story their data are telling, and ensure their data integrity standards are sufficient to stay afloat in the event that storms rise up on the horizon.
Cast nets to catch big fish With the release of the public aggregate data, many FIs are anxious about conducting fair lending and CRA analytics on their 2018 data, but it is critical to first confirm that the data being used are accurate. It’s a good time to cast nets to catch any errors that are surfacing in the data, and then develop a risk-based approach to fine-tune the size of the net and drill down to find other errors that may be hiding in the weeds. HMDA challenges are reflected in Wolters Kluwer’s annual Regulatory & Risk Management Indicator survey, where concern levels about managing HMDA obligations jumped significantly among reporters–from 21 percent in 2018 to 35 percent in 2019– particularly relating to their ability to analyze newly collected HMDA data. And concerns about reporting those expanded data to regulators increased significantly– from 15 percent in 2018 to 40 percent in 2019. Following are some “Big Fish” areas to review to ensure that your FI understands these basic concepts as you re-visit your policies, procedures, and training; confirm specific guidance for source documentation for every field, for every line of business; and start your data integrity scrubs: l The definition for “Dwelling” l The potential relationships between codes (e.g. If Preapproval equals code 1 [Preapproval Requested], then Loan Purpose must equal code [Home Purchase]) l The distinction between blank fields, “NA” and codes (e.g. “8888”) l The appropriate codes for CoApplicant whenever an action is one that does not require a credit decision, such as withdrawn, closed incomplete or purchased l When to report Total Loan Costs or Total Points and Fees l Calculations, such as when to start calculating for Loan Term continued on page 58
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Build strong vessels for rugged seas The basis for sturdy shipbuilding in the context of data integrity is a robust HMDA Compliance Management System (CMS). A solid CMS starts with having a strong culture of compliance around HMDA policies, procedures and training across all channels, including retail, consumer and commercial; and extending to associated third parties where applicable. It is critical to ensure that all data that needs to be collected is being collected, and updated where appropriate, in a timely manner. The 2018 expanded HMDA data include many fields of data that were not previously mandated for HMDA reporting. FIs should pay special attention to ensure all new fields are being collected across all appropriate lines of business, including new underwriting and pricing data critical for fair lending analytics. For example, new underwriting fields include information on income, the name and version of the credit scoring model, the automated underwriting system (“AUS”) name, combined loan-to-value (CLTV) and denial reason. New pricing fields include information on interest rate, total loan cost or points and fees, origination charges, discount points, lender credits and rate spread. Preventive and detective controls should be implemented and aligned to key risks in support of accurate data collection and
reporting and documented as part of a detailed HMDA Risk Assessment. Key stakeholders, executive management and the board of directors should receive regular and informative reports identifying any gaps or system issues that may be affecting the flow and integrity of data.
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n Aug. 30, 2019, the Federal Financial Institutions Examination Council (FFIEC) announced the availability of aggregate data on mortgage lending transactions at 5,683 U.S. financial institutions (FIs) covered by the Home Mortgage Disclosure Act (HMDA), including banks, savings associations, credit unions and mortgage companies. The data covers 2018 lending activity submitted, or re-submitted, on or before Aug. 7, 2019. It includes 48 data points, providing information about the applicants, the property securing the loan or proposed to secure the loan in the case of non-originated applications, the transaction, and identifiers. Many of the data points are available for the first time as part of the new, expanded HMDA data set, and some points are presented based on ranges or rounding certain fields, such as age, debt-to-income (DTI) and loan amount. The release of the data was accompanied by several caveats. For example, per CFPB guidance, caution should be used when comparing HMDA data across multiple years due to changes in HMDA definitions, values, and thresholds. Also, caution is required for certain geographic areas due to the changes in Metropolitan Statistical Areas (MSAs) and census tract boundaries, and updates to the population and housing characteristics of census tracts, especially those that follow the decennial census and five-year updates based on the American Community Surveys (ACS) data. Additional caveats cited by the Consumer Financial Protection Bureau (CFPB) remind users of the information that HMDA data alone cannot be used to determine whether a lender is complying with fair lending laws. The data does not include some legitimate credit risk considerations for loan approval and loan pricing decisions, and when regulators conduct fair lending examinations, they analyze additional information before reaching a determination about an institution’s compliance with fair lending laws. The release of the data was also accompanied by initial observations about the Aug. 7, 2019 HMDA data set. In addition to varying degrees of analysis of the
heard street on the
Our Heard on the Street column is a chronicle of events, changes and passages in the lives of the people and companies shaping the mortgage industry.
Glenn Stearns Launches Mortgage Banking Firm, Kind Lending
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Glenn Stearns, star of Discovery Channel’s “Undercover Billionaire,” has announced the launch of his next venture, Santa Ana, Calif.-based Kind Lending LLC. Stearns will serve as founder and chief executive officer of Kind Lending, as the firm will be dedicated to putting people before profit, while maintaining transparency and integrity in lending standards, looking to introduce a contemporary approach to mortgage banking. Yvonne Ketchum will serve as president of Kind Lending, who will be joined by Chief Technology Officer Mark Russell, Senior Vice President of Business Initiatives Mellissa Rugh; and Senior Vice President of Marketing Christy Mindell. "Glenn is the type of person I would’ve worked for again in a heartbeat. He is truly kind, inspirational, gutsy and driven,” said Ketchum. "When he called, I jumped at the chance to launch this new venture with him. We are thrilled to introduce Kind Lending to the world. That's Kind as in nice, caring and helpful. It will be a game-changer, and we can’t wait to show everyone how different, fresh and real mortgage lending can be.” After 10 months of working as a mortgage loan originator, Stearns emerged in 1989 at the age of 25 as the founder and CEO of Stearns Lending LLC, becoming one of the largest lenders in the country before it was sold to private equity firm
Blackstone. In 2002, Stearns was honored by Ernst & Young’s prestigious Entrepreneur of the Year Award, and in 2011, he was awarded with the Horatio Alger of Distinguished Americans Award and was elected as its youngest serving board member. New Residential Transfers Agency Subservicing From PHH
New Residential Investment Corporation has reached an agreement with Ocwen Financial Corporation to transfer the subservicing of agency loans currently subserviced by PHH Mortgage Corporation, a subsidiary of Ocwen, to its NewRez LLC subsidiary. The transaction will involve PHH transferring the subservicing of approximately $41.8 billion unpaid principal balance (UPB) of agency MSRs, representing approximately 310,000 loans. Transfers are expected to occur during the second and third quarters of this year. After the transfers are completed, New Residential will maintain its subservicing relationship with Ocwen related to the portfolio of non-agency loans currently subserviced by PHH. “Both New Residential and Ocwen have evolved tremendously since we first announced our agency subservicing agreement with PHH. We believe this transfer is in the best long-term interests of our company as we execute on our business strategy,” said Michael Nierenberg, president, CEO and chairman of New Residential.
Veterans United Home Loans Continues Growth, Expands Operations to St. Louis
Veterans United Home Loans announced that it has hired more than 1,000 new employees in 2019. Last year along, Veterans United originated nearly 67,000 loans worth $16.4 billion, an uptick of 44 percent in number of loans and 56 percent in volume, year-overyear. “Our employees are dedicated to providing the best possible customer service experience to Veterans and service members during their homebuying journeys,” said Dr. Amanda Andrade, chief people officer at Veterans United Home Loans. “We are excited that we were able to help as many Veterans as we did achieve the American dream of homeownership.” Veterans United also expanded its footprint in St. Louis, with a new office where it will bring more than 150 mortgage origination and IT jobs to the region. Andrade said the proximity of the new office to its existing offices in Columbia, Mo. will allow it to tap into St. Louis’s talent pool, while maintaining close connections to the company’s roots in central Missouri. “We plan to hire between 100-120 in production and 4050 for our production team in St. Louis,” Andrade said. Veterans United’s 3,100 employees focus on helping veterans and their families secure homeownership. The
company’s success is tied directly to living out its employee-created values: “Be Passionate and Have Fun, Deliver Results with Integrity and Enhance Lives Every Day.” In 2019, Veterans United Foundation, the philanthropic arm of Veterans United, donated nearly $1 million to support mental health and posttraumatic stress disorder initiatives across the nation through the Warrior Campaign. The campaign grew out of employees’ expressed desire to rally behind those who face the often-silent battle of mental illness and to show support for organizations that are helping raise awareness. In total, the foundation donated to 29 charities throughout the country. The foundation is supported by the company and its employees. Supreme Lending Partners With Cloudvirga to Enhance the Digital Experience
Cloudvirga has announced that Supreme Lending will provide Cloudvirga’s technology to its loan officers and consumers to power the digital mortgage process. Cloudvirga’s software, the Cloudvirga Digital Mortgage Platform, increases transparency, reduces the time it takes to process and close a loan with a streamlined mortgage experience, and radically cuts overall loan manufacturing costs. Supreme Lending originators can leverage the Cloudvirga Digital Mortgage Platform to improve the digital mortgage application lifecycle
by automating lending workflow– from initial application to data collection and validation to automating workflow and more. “It is Supreme’s opinion, with all the antiquated procedures in the mortgage process, that by digitizing the user experience, we can have a much more streamlined process,” said Scott Everett, president of Supreme Lending. “Our partnership with Cloudvirga will allow us to be focused and ready when the busy buying season is upon us. As a lender that is consistently above 85 percent purchase volume, a tool like Cloudvirga’s Digital Mortgage Platform will enrich the consumer, loan originator, and Realtor experience tremendously.” Daniel Sogorka, chief executive officer at Cloudvirga, said: “Our partnership guarantees that Supreme Lending’s loan officers can offer their borrowers the industry’s best digital mortgage experience, streamlining the application process, cutting costs, and improving the originator’s experience while shortening the time to close. Supreme Lending is a visionary and innovative lender, and we are beyond excited to partner with them.”
significantly reducing costs. The Origence platform was officially launched in October. "The ability to achieve Day 1 Certainty is a crucial advantage for lenders who must meet new consumer expectations for a faster, simpler mortgage experience," said Roger Hull, president and chief product officer for Origence. "Our Day 1 certification ensures our clients will be able to deliver faster responses to borrowers, while eliminating an enormous amount of manual effort behind the scenes. At the same time, they get a state-of-the-art platform
that maximizes automation, so they can close loans faster and at a lower cost." Motto Mortgage Reports $1.1B in 2019 Loan Volume
Denver-headquartered Motto Franchising LLC has announced that its Motto Mortgage network of offices closed more than $1.1 billion in loan volume last year. The company, which is a member of the RE/MAX Holdings Inc., has more than 100 offices in
over 30 states, employing 238 loan originators. Motto added that it helped more than 5,000 households achieve homeownership in 2019. “Closing more than $1 billion in loan volume is a major milestone for any mortgage company,” said Ward Morrison, president, Motto Franchising. “The fact that the Motto Mortgage network of offices were able to accomplish this in only three years showcases the momentous success of the Motto Mortgage brand. More continued on page 56
27 Origence Approved for Fannie Mae's Day 1 Certainty Program
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Origence has announced that the Origence mortgage lending platform has received certification from Fannie Mae's Day 1 Certainty program. By automating the verification of a borrower's identity, employment, income and assets, the Origence platform enables lenders to achieve Day 1 Certainty from Fannie Mae, while accelerating the borrower's experience and closing loans faster. Fannie Mae's Day 1 Certainty initiative is designed to provide lenders with enhanced loan origination controls, improved processes and certainty around the borrower's assets, income and employment information, in addition to relief from representations and warranties on validated loan components. The Origence platform is an end-to-end system that combines point-of-sale (POS) and loan origination system (LOS) tools that accelerate a lender's loan production and reduce process cycle time, while
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Cultu Matt
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Systems That Bring Out the Colosseum
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importance that you are privy to how your mind works. Like the spectators who watched men kill men for sport, in your brain therein lies mechanisms which enable you to let go of your individuality and become part of the crowd. There is always an opportunity for you to be taken the fool without your awareness. Systems for organizations do this to their members without conspiracy, without conscious intent and without debate. It is just a part of who we are, human. Rise up today a little clearer on why it is you decide what it is you choose. Reflect today on the courses for your actions both seen and unseen. Instead of brashly following the crowd, take heed for even but a moment and think twice. Ask yourself, “Is this what I want?” and “How does this really work, at 29 bottom, what is the cause to what I am a part of right now?” For example: Sports, events, teams, companies, groups, etc. Whatever it is you are involved with, regardless of how much you have felt compelled to partake in, reflect on questions that question what you have decided. The Romans in 600AD did, and finally, their culture changed, eroded and redeveloped itself over the beliefs that led to countless bloodshed all so the masses could rejoice or disassociate. What is it you could be running from? Who is it you could be running from? Lastly, I will leave you with this thought: Accept nothing in absolute, question everything, separate your ego from your premise, build on logic and never shut out another’s disparagement with your case. Follow these protocols moving forward and maybe, just maybe, you will fall away from the herd. Remember, systems of organizations bring out the Colosseum in us all. Follow this creed and we will change the world together because your culture matters!
Jay Doran is chief executive officer at Culture Matters LLC, where he helps business owners define their company’s values and increase their confidence to lead both personally and professionally. Jay is also the author of Thirty Days of Thought: Culture Matters.
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yourself, “For what?” The answers are many, but to be blunt, mostly for distraction. To clear it up simply, we need to understand disassociation or the need to cope through one’s own pain by attaching their ego to a place that others have done the same. The more people argue for their limitations aimed at a singular cause, the less likely their delusion will be called out as what it really is. The Emperor’s New Clothes are the finest of linens (read the story of The Emperor’s New Clothes for greater context and because it will make you more aware and therefore a more able parent, friend, spouse and businessperson, etc.). The Colosseum was a medium for disassociation, and it was born out of blood and would bring on the blood for hundreds of years. After reading through this, you may be thinking, “Okay, cool … but what does this have to do with me?” The answer is, everything. Organized systems bring out the “Colosseum” in all of us. Any time a cause is constructed, whether a movement, hobby, association, sport, company or wherever there is an opportunity for “The Colosseum Effect” to strike hold, this is where your logical brain shuts off and your emotions take the lead. In the moment, it feels good to win. It feels good for your team to be victorious, tribe against tribe, but we are not Romans. We are Americans and beyond that, we are humans who in 2020, must recognize our shared humanity. Divided we fall, united we stand and no, people are not dying in the arena and also, that is not the point. The point is that our culture that has died, and it will be our children who are left to redeem it–unless we change and change quickly. After all, do we want them to burden our load? For it is now the utmost of
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ystems that bring out the Colosseum in us are all around. They are part of our culture embedded in our neuropsychology, passed down from father to son and hidden in plain sight as if everything is just okay as it is. This is not the case … everything is not okay! With societal evolution, there must be conscious development so long as what is conscious and acceptable must no longer be accepted. Let’s take the Roman Colosseum, for example, which was first put to construction in 79AD. The Colosseum was intended to bring the people of Rome together. Conspiracy aside, we can infer in the context of this essay to put the people to sleep to matters of importance, but while they were awake … it was the Roman Emperor Vespasian who started the construction. He was an Emperor who knew blood. He gained respect from a military conquest on Britain as a general and won through what became known as “The Year of the Four Emperors.” When Emperor Nero, who was a real nasty tyrant, died, Emperor Othno succeeded him and was usurped by Emperor Vitellius, who then was usurped by Vespasian and this is when a short war between two generals of Rome ensued, Vitellius versus Vespasian. While Vespasian ascertained supplies of grain in Egypt, one of his generals ended the feud defeating Vetellius’ army and ending his reign by way of death. It was at this crescendo that Vespasian, the founder of the Colosseum, had visions of his divinity and decided to overthrow all the laws of treason that Nero had put in place. The new Emperor began his dynasty and had started to attain the love of the people. With Othno’s supporters behind him along with all of Rome, the Colosseum would be erected. It started in 79AD and ran until the 600’s, with more than 500 years of bloodshed. At this point, you may be asking
2020
National Mortgage Professional Magazine Presents …
DIGITAL DISRUPTORS: FINTECH’S FINEST 2020 s today's businesses strive to keep pace with an ever-changing market, the use of technology is crucial to keeping those pipelines full and an endless stream of deals to continue to flow. The advent of Financial Technology (FinTech) helps to automate, improve and streamline these financial activities and deals. Lenders need FinTech companies as partners that are in-sync with their borrowers’ overall customer experience. This issue, we present the companies that are leading the way in the FinTech arena and will continue to assist lenders in closing their deals and streamlining their processes moving forward.
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Calyx 3500 Maple Avenue, Suite 500 Dallas, Texas (800) 362-2599 CalyxSoftware.com
SigniaDocuments 6136 Frisco Square Boulevard, Suite 350 Frisco, Texas (888) 892-1843 SigniaDocuments.com Mike.Romano@SigniaDocuments.com
Calyx is an established provider of compliant mortgage software solutions used by banks, credit unions, mortgage lenders, and brokerages nationwide. The company’s easy-to-use technology, including its online borrower interview, loan origination systems, and secure electronic signature software, is designed to streamline, integrate and optimize all phases of the loan process for customers of various sizes, workflows, channels and complexities. Combined with its extensive network of integrated partners, Calyx products deliver a true digital mortgage solution that maximizes profitability and enhances the customer experience. For more information, call (800) 362-2599 or visit CalyxSoftware.com.
SigniaDocuments, part of Evolve Mortgage Services, is the only document engine built entirely of Category 1 SMART Docs. All of its documents, not just the note, are SMART and can be “read” electronically before and after signing because the source data, documents and audit trail all travel as one. SigniaDocuments enables immutable information through SMART Docs providing certainty to assets. This results in the reduction of QC, compliance, and upfront audit costs. Further, documents are all natively built on XML and are uniquely created for each loan package based on the loan information as opposed to being pulled from a static library of PDFs that often results in the use of incorrect disclosures. With documents created on XML, there is no risk of formatting errors or signature lines being improperly tagged or missed. SigniaDocuments’ documents are auto-tagged for eSignature, but can also be used for paper and hybrid signing experiences.
Pavaso Inc. 2901 N. Dallas Parkway, Suite 400 Plano, Texas (866) 288-7051 Pavaso.com Sales@Pavaso.com
Tavant 3965 Freedom Circle, Suite 750 Santa Clara, Calif. (408) 519-5400 Tavant.com Ashish.Kumar@Tavant.com
Pavaso empowers lenders, title companies and real estate attorneys to complete real estate closings in all 50 states. Through one secure collaborative platform, Pavaso connects all permissible parties to exchange information and documents, communicate and collaborate in real time to streamline the entire closing process. Delivering process improvements throughout application, pre-closing, closing and post-closing, Pavaso offers a true “full service” eClosing platform, that can perform a completely paperless eClosing in as little as 15 minutes. The platform is designed to enhance workflows and existing relationships, not replace them. Pavaso does not rely on outside third parties to complete an eNotary. Training and support are provided to your state-commissioned eNotaries or your existing relationships with signing agency can be used to eNotarize documents on Pavaso. As a leader in digital mortgage transformation, Pavaso is focused on delivering a best in class closing experience for everyone involved, especially your customer.
Headquartered in Santa Clara, Calif., Tavant is a digital products and solutions company that provides impactful results to its customers across North America, Europe and Asia-Pacific. Founded in 2000, the company employs more than 2,500 and is a recognized top employer. Tavant is creating an AI-powered intelligent lending enterprise by reimagining customer experiences, driving operational efficiencies and improving collaboration. Find Tavant on LinkedIn (LinkedIn.com/company/tavant/) and Twitter (@Tavant).
“Downpayment assistance programs can have a huge positive effect on the ability of African-American households to transition from renters to homeowners because they help eliminate the gap created by the lack of intergenerational wealth.” —Richard Ferguson, President of CBC Mortgage Agency
Downpayment Assistance Can Help Bridge the Homeownership Gap A chat with Richard Ferguson, president of CBC Mortgage Agency
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differences, the gap would be reduced by 22 percent.
What is the biggest factor in the disparity? Richard Ferguson: Income was identified as the biggest factor in the gap. Though the median income in the U.S. for White households exceeds $61,000, the median income for AfricanAmerican households was less than $39,000. If the disparity in income were eliminated, the homeownership gap would be slashed by 31 percent.
Are there any other factors impacting the homeownership disparity that aren’t mentioned in the report? Richard Ferguson: Definitely. One of the biggest factors is intergenerational family wealth. White families are far more likely to have the resources to help family members with a downpayment for a home purchase. But that level of wealth is lacking among AfricanAmerican families. The lack of family wealth also plays a role in credit scores, since African-American families are less able to provide financial assistance to family members who are in distress.
Was income the only factor in the disparity? Richard Ferguson: No. The report also highlighted how African-American households are less likely to marry. If the marriage rate were the same between African-American and White consumers, then the homeownership gap would be cut by 27 percent. Another factor is credit scores. More than half of White households have a FICO score higher than 700. But among African-American households, just 21 percent have credit scores of more than 700. In addition, more than a third of African-American households don’t have enough credit to generate a credit score, while that share is just 19 percent among White households. Without the credit score
How does downpayment assistance, such as the programs offered by CBC Mortgage Agency, impact homeownership disparity? Richard Ferguson: That’s a great question. Downpayment assistance programs can have a huge positive effect on the ability of African-American households to transition from renters to homeowners because they help eliminate the gap created by the lack of intergenerational wealth. Not only does it provide African-American families with the ability to make a downpayment, but giving these families an ownership stake in their community makes the community itself better. That is because there is a newfound pride of ownership by these families, incenting them to take better care of their homes and
play a bigger role in the welfare of the community. Our own research has found that more than 90 percent of downpayment assistance recipients would not have been able to purchase a home without such assistance. The U.S. Department of Housing & Urban Development (HUD) has stated that downpayment assistance has a negative impact on FHA performance. Is that an indication that downpayment assistance will lead to more foreclosures? Richard Ferguson: No. It’s true that the FHA has suffered losses from downpayment assistance in the past, but that was before the financial crisis, when home sellers indirectly provided the assistance and raised the price of the property to cover it. Seller-funded assistance is no longer around, and today’s downpayment assistance programs don’t have the same effect on FHA loan performance. This is supported by a report prepared for the Federal Reserve Bank of St. Louis by the Harvard University Joint Center for Housing Studies that indicated downpayment assistance has no significant impact on loan performance. HUD must consider this evidence—that downpayment assistance does not have a harmful impact on FHA risk—and avoid tampering with these valuable programs that are successfully helping bridge the racial gap in U.S. homeownership and helping to make FHA a better option for all consumers.
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The Urban Institute recently released a report entitled “Breaking Down the BlackWhite Homeownership Gap.”
What is your key takeaway from the report? Richard Ferguson: The report brings into focus a huge racial disparity in homeownership, with nearly 72 percent of White adults owning property, while less than 42 percent of African-American adults own their homes.
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ichard Ferguson is president of CBC Mortgage Agency, a nationallychartered housing finance agency and a leading source of downpayment assistance that helps lowincome consumers, often in minority neighborhoods, achieve the dream of homeownership. Ferguson graduated from Brigham Young University with a degree in economics. He began his career as a loan officer in 1993, becoming a top producer. In 2000, he helped to build one of the nation’s largest downpayment assistance providers, which he left in 2004. He later co-founded a business finance platform in 2006, which was later acquired, to provide credit and financing opportunities to small businesses. Ferguson has also been an investor in several companies involving technology, manufacturing, retail and renewable energy. In 2013, Ferguson was recruited to lead CBC Mortgage Agency in providing responsible homeownership solutions to deserving homeowners. National Mortgage Professional Magazine recently had the opportunity to sit down and chat with Richard to discuss the role of CBC Mortgage Agency and downpayment assistance in today’s mortgage marketplace.
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In the Heat of
Mortgage 911 By Christine Beckwith
sit in the dark the morning I write this article, the news is on in the background, with the ticker running amok for a world under siege by an invisible enemy. The world we were living in just a month ago when I wrote this column is barely recognizable. A new world has given way to what will be the most memorable disruption and greatest threat to modern global society to have ever happened in the memories of mankind. And here we are, at the helm of the greatest economy in the world, holding all the cards. It’s time to play a hand and realize just how crucial it is that we get it right. As a coach and president of a coaching company for mortgage and real estate professionals, I can assure you, I am enduring the storm and am swimming. I am accumulating the best economic advice available … middle of the road, vetted and sound advice, from executive leaders, Wall Street execs, industry experts and the news. I can see the whites of the eyes of those professionals and leaders who have complete panic ensuing. And I am here to confidently reassure that we will be okay … more than okay in short order. I can say this because of my understanding of what is truly at the core of this disruption and what the effects will be and are because of my understanding and education. So what exactly is the 9-1-1 for mortgage and real estate professionals?
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Where have we been? In order to understand where we are going, we must understand where we have been. Having been through several national economic crisis in a three-decade career, I know we are not where we were during the 2008 “Mortgage Implosion.” No, we are not in a rising customer default market, which has delivered long-term sustained damage and disruption to the mortgage and real estate world. We are not losing value in our homes (yet). Millennials have only
heard about and not experienced firsthand our last massive crisis. What is happening now is very different. We can accept that we are seeing similar symptoms, but have a completely different illness. In 2008, we had a life-threatening illness to our industry, and today, we are in a slow slide car accident … one that will, of course, require repair and cause damages, but not one that will take us completely out of a thriving future that “We all awaits in a postCorona world.
continue their transactions understanding they will be okay. Obviously, taking tactics to disinfect the homes they are entering and the one they are leaving. But don’t stop the flow of these transactions if you can avoid it. Stalling can jeopardize the transaction greatly, with so many variables impacting that deal staying solid to the finish line. l Buyers who are stalling like deer in need to the headlights: We understand understand that we are that Handling homebuyers witnessing an emergency, the may stall not the fall of our economy. bumps their efforts and to take The effects look the same and the bruises refuge in damage will hurt, but by large Yes, we their will recover current percentages, all will be returned from this far homes and quicker and the idea of to normal and beyond it’s the best moving is not when we pass this.” advice of the palatable, let most knowledgeable alone shopping for a economic experts in our new home. While field that we will bounce back the movement to buy a home is moment this passes. We may, suspended, there is no reason however, suffer some harmful not to call a mortgage damage … professional and work on a prequalification and get in a l Delinquencies and job loss: position to take action as soon Homeowners who fail to make as this passes. We encourage their mortgage payments right everyone to encourage the now due to job loss or income same and to work with potential issues during this crisis will buyers with the same suffer mortgage delinquencies confidence. This will help speed that are harmful to their credit along our recovery at a faster qualifications. However, many pace. predict that we will see credit l No open houses: Of course, reform or emergency there are no open houses being amendments that will allow for held, and as such, the selling the forgiveness of any means for real estate agents is delinquency brought on from halted. This is where virtual this plight. If that holds true, open houses will be at an allhomeowners will get relief to time high and thank God for the shift funds to life saving funds years of 360-degree virtual that are so desperately needed video shoots that allow buyers right now. to truly get a great perspective l Sellers who abandon selling of their potential home in a their homes: We understand high-definition, panoramic and that leaving your home during all-encompassing videos and quarantine is likely not to be photos. These will serve to startling. For those who have a keep homes moving for home to move to, they should potential buyers. Real estate
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agents should hold “Virtual Open Houses” and move their manual open houses to this format ASAP! Interest rate volatility: We understand that mortgage interest rates have taken us on a thrill ride, complete with loops, turns and bends. Coming off the many months of incredible all-time lows, mortgage rates have reacted in recent weeks to the piling up and capacity reaching levels leaving lenders hiking their rates to slow down volume. Conversely, the Fed dropping rates to zero percent and explaining to a desperate world that the “mortgage rates are NOT zero” has taken an entire industry to its knees with tons of time spent explaining to consumers why not. Some mortgage sector fatalities: It’s yet to be understood where we will need to amputate parts of the industry in order to survive. As this article is being written, nonQM lenders are suffering and finding any foothold they may have for an economic break that has left investors and warehouses weary of a high risk market.
So what now? My greatest advice to all of you is to remain calm … to not fall victim to fear mongering news or to those who are economically inept. This market and what we are seeing is all from this Coronavirus pandemic event. As a result, we are not staring down a market that can’t recover quickly. We will see fast recovery and the resumption of our thriving prior levels, with some small percentage of casualty. As I write this, I am watching the unemployment numbers rise and that is going to bring the water line to new heights and will scare us in the process. But just as fast as things went into turmoil, will we all be right back in business. continued on page 59
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A Special Focus on
FinTech Goes Local
Ten FinTechs That Are Changing the Housing Market ne of the most dramatic developments within the industry has been the rise of the FinTechs and the impact they’ve created for homebuyers and sellers, not to mention mortgage brokers, mortgage lenders and other professionals in housing-focused fields. Ten FinTechs have been particularly innovative and aggressive in making their presence known across the industry. For those who have not been paying close attention to the FinTech world, it might be a very good idea to keep an eye on these companies. And for those have been tracking the progress of FinTechs, it would make good business sense to formulate strategies surrounding the challenge these digital companies will have in the coming months.
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Headquartered in New York City, Better.com was created in 2016 after its founder, Vishal Garg, lost a home to an all-cash buyer because the mortgage process he was using was too lethargic. He used the money he had saved for the downpayment to start Better.com, which digitizes the entire mortgage process, while eliminating commissions, fees and branch appointments. The company now operates in 30 states and the District of Columbia, and began offering FHA loans via its Web site (Better.com) last March. In November, it announced plans to hire 80 veterans through Shift.org, a hiring pipeline from the military to high-growth startups, with the goal of hiring an additional 5,000 veterans and military spouses by the year 2025.
By Phil Hall
San Francisco-based Divvy Homes offers a digital update on the rent-to-own model by purchasing the homes selected by its clients and then becoming their landlord. Clients pay a two percent upfront fee and a portion of their monthly rent can be converted into a downpayment if the client decides to go from tenant to homeowners. Now available in eight markets–Atlanta, Cleveland, Dallas, Memphis, Phoenix, San Antonio, St. Louis and Tampa–the company purchased more than 900 homes last year and said it is receiving 10,000 applications a month.
Startup FinTech Home Diversification Corporation, based in Manchester, N.H., offers the Home Diversification Agreement (HDA), a mortgage enhancement product that can be purchased during or after the mortgage origination process. According to the company, the HDA is recorded as a junior lien on the property, with the goal of ensuring the value of the property itself versus the mortgage. The company added that the HDA enables homeowners to exchange their local-market home price index for a broader continued on page 40
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ten fintechs that are changing the housing market
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nationwide index, resulting in a reduced threat of home price value risk or even foreclosure.
Seattle-based real estate FinTech Modus specializes in digital closing services. Its flagship product is the Digital Earnest Money Deposit, which is designed to replace the need for wire transfers via a secure, proprietary platform that enables users to directly access their account and securely submit funds to escrow. The company stated this platform will eliminate wire fraud, adding that there has been a 1,100 percent increase in the number of compromised e-mail victims involving real estate transactions and reported monetary loss between 2015 and 2018.
The Boston-headquartered Notarize enables an entirely online mortgage closing process. It has amassed an A-list of partners including Ellie Mae, Stewart Title and Guaranteed Rate, and it has branched out into the event business with the successful debut of its Rewired conference in November.
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San Francisco-based Opendoor pays all-cash offers between $150,000 and $500,000 on houses that were built after 1960. Sellers in nearly two-dozen markets can determine their own closing timeline between 14 and 60 days. If any repairs or renovations are needed to bring a home up to market-standard conditions, Opendoor will request a credit and make them on the seller's behalf. Last August, the company launched a mortgage division called Opendoor Home Loans. In September 2018, Opendoor acquired Open Listings, a Los Angeles-based platform for homebuyers seeking property. The company is promoting itself as “the first end-to-end marketplace for buying, selling, and trading-in homes—equipping people with the ability to move in just a few clicks.”
A New York City-based FinTech that launched in 2017 under the name Perch, Orchard works to help sellers seeking a new home, while trying to get buyers for their existing residence. Under the Orchard concept, the company makes an offer on a client’s home that is valid for six months and then helps them secure a new home, with the closing on both homes occurring on the same day. The company recently expanded into the Atlanta and Denver markets–it is also in Texas’ Austin, Dallas-Fort Worth and San Antonio markets– after receiving $36 million Series B funding.
New York City-headquartered FinTech Ribbon provides homebuyers with an all-cash, guaranteed-to-close "Ribbon Offer" to present to sellers. Buyers are pre-approved for a purchase and home valuations are completed within 24 hours. If a homebuyer can't close with a mortgage on time, Ribbon will buy and reserve the home on behalf of the homebuyer and lease it to them for up to six months. The company said that buyers saved an average of $10,000 in cash discounts and received a 100 percent on-time closing. Now operating eight markets across four states–Charlotte and Raleigh, N.C.; Nashville; Atlanta; Charleston and Greenville, S.C.; and Memphis and Knoxville, Tenn.–Ribbon plans to expand into 20 markets across 10 states by the end of 2020.
New York City-based Simplist launched in September 2019, and focuses on borrowers who are either self-employed or not part of the traditional workforce. Simplist uses proprietary technology to quickly verify most applicants’ financial information, and qualified borrowers can be matched with competitive rates from a list of 25 national lenders and regional and local banks. Simplist, which also offers access to refinancing options for existing homeowners, currently operates in the Colorado, Connecticut, Florida, New Jersey and Pennsylvania markets and plans to expand its footprint this year.
The online platform for San Francisco-headquartered fintech Unison brings a co-investment element to the homebuying and selling process. Unison invests in the property by downpayment assistance (10 percent of the purchase price) in exchange for a shared portion of the property’s future change in value. Thus, when the property is sold, Unison is repaid for its original investment plus 33 percent of the home’s appreciation value. The company is now operating in 30 states and the District of Columbia, and has branched out as a data source tracking housing market trends.
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Layering FinTech to Improve Customer Experience
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By Scott Dubnoff
inancial service providers need to offer customer-centric services capable of combining speed and flexibility in order to compete in today’s market. With more than a dozen different entities involved in the transaction of financing a home, the financial technology, or FinTech, required for such a complex financial transaction like a closing on a mortgage is multifaceted and requires seamless integration of different vendors, and an array of different technologies, to help customers achieve their goals. This is a far cry from more simple transactions like securing a ride with a transportation service like Uber, for example. With ride-sharing services, there is a driver with a car, a customer with a desire to go somewhere, and a nicely polished app to connect the two parties together. Simple. Compare that to a mortgage transaction, where on top of the lender and the customer, you also need to connect in a mortgage broker, a credit reporting agency, an appraiser, an insurer, a real estate agent, a title company, and many, many more. The technology system required for this type of financial transaction is in a completely different galaxy, forget ballpark. Building this complex system requires a layered approach. On top of a solid base of well-architected cloud infrastructure you layer the vast array of required service vendors, creating an integrated network of services and capabilities. Finally, the top layer is your polished front-end which seamlessly abstracts the user from the complex web beneath it, creating a cohesive and differentiated branded experience. Financial companies looking to develop their own enterprise FinTech solutions should approach each layer of the system separately and follow these baseline objectives to ensure they all stack together succinctly:
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Build natively on and leverage the power of the public cloud; Select and integrate with vendors that are built on
The customer is going to associate the experience they have using your technology as a reflection of your brand. For that reason, it is critically advantageous to have as much control over the top layer as possible.
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modern tech-stacks; and Acutely focus on the front-end user interface (UI), to provide a seamless and unique user experience.
Power of the cloud Your underlying system infrastructure sets the framework for every piece of technology you build … it’s like the foundation of a house. With little exception, the benefits of building natively on and leveraging the power of the public cloud are overwhelming. Those of us charged with managing a financial company’s technology want to focus on software capabilities and features, not hardware. Microsoft Azure and Amazon AWS, two of the leading cloud providers, offer infrastructure services that abstract away many of the traditional IT system hardware responsibilities. Since management of the servers, tools, backup, and scaling are the responsibility of the cloud provider, your internal IT staff will no longer have to worry about managing them, and are then empowered to focus on vendor integration and UI development. Using a modern, cloud-based system design, with microservices
and event-driven architecture, allows for rapid scaling, is fundamentally resilient, and allows developers to focus on business logic rather than infrastructure. It’s also extremely economical. You pay by the second of compute time; so, if you get busy, the system scales automatically based on need, and you simply get charged accordingly. This Platform as a Service (PaaS) architecture lets companies who are not massive IT companies, like midsized lenders such as AFR, focus their limited IT budgets on software developers and capabilities. No more acquiring servers to add bandwidth, and no more rooms dedicated to racks. And, with public cloud architecture, you don’t go down if the building loses power. Most importantly, performance components can be adjusted in just a few clicks, from anywhere, and by people who don’t have decades of experience building servers. Vendor selection Considering FinTech integration will be required with a number of different entities to achieve a successful mortgage transaction, selecting vendors that are built on modern tech-stacks is also
imperative. There are a ton of service types required to secure a mortgage: Pricing, appraisal, mortgage insurance, fraud, verification of assets, verification of employment, just to name a few. While the lengthy list makes it challenging to provide a seamless transaction, it also opens the door for differentiation and innovation. You want services that don’t just integrate with your loan origination system (LOS), but that can also be tapped by your own custom software. An interconnected system is far better than the sum of its parts. The magic happens when you create connectors between the vendors in unique and useful ways. Think of it like the smart devices in our homes: Any one of those Internet of things (IoT) devices by themselves is useful, sure, but their real power is apparent when they are working together. In the same way modern consumers invent new ways to string together their light switches with their blinds, garage doors, and thermostats, leading lenders can now connect their appraisal system to their disclosure system, to their e-mail notification system, and so on. Fundamentally, it is important to remember that any system you build is only as performant and stable as its underlying services. So, it is imperative to not only consider your own base architecture layer, but those of your vendors. If your proprietary online mortgage app can support 500 apps an hour, but your pricing engine or LOS can only handle 50, then you’re only doing 50. Similarly, if your pricing engine falls over every time rates drop, then you will be the lender missing out on a crazy rush of business when rates hit historic lows. Borrowers simply do not want to deal with multiple logins to multiple portals, one for each entity involved in their mortgage transaction. To provide a single portal, vendors need to have modern Fintech enabling integration. At minimum, they need to support Single Sign On (SSO), so that you can transition users from your portal to theirs without needing to reauthenticate them. An even better approach is having your vendor expose all of their capabilities via an application programming interface (API). This enables you to leverage all of their functionality, but wrap it entirely within your own portal, creating the most unified experience. Today’s FinTech developers are choosing their technology service providers more carefully. They should look for the most robust software platform with interconnected
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capabilities, and not necessarily the provider who has been around the longest. In fact, some of the behemoth companies that have been around a long time are using antiquated technology and are going to have to rebuild to compete. Focus on the front end At the end of the day, IT managers build two things–the back-end system, comprised primarily of middleware connecting all the vendors together, and the front-end interfaces (UI) with which your customers interact. Think of your back-end system as a platform, it is a single entity that all of your different front-end interfaces connect to. The platform provides all of the data and functions to each of your company’s UI’s. Creating your interfaces separately from your back-end platform makes your FinTech device agnostic. Rather, it makes it very easy to extend your platform capabilities to new devices. For example, with minimal effort you could spin up an Apple Watch complication to show interest rates directly on a user’s watch face, and
all you’d need to do is connect it to the same back-end pricing service to which your pricing portal is already connected. This same principle can be applied to web apps (web portals), native phone and tablet apps, Alexa-enabled devices, and whatever the next consumer big device might be. Treating these layers separately makes it easier for companies to upgrade their technology. User interfaces can be refreshed independently of the back-end, and vice versa. For example, on the platform side, vendors can be swapped out in such a way that the UI’s wouldn’t even need to be modified; a single change to the vendor service would propagate to every app that uses those services. On the UI side, a refreshed web portal could be developed and stood up alongside its older counterpart, with both sites connecting to the same back-end, allowing for a user-driven migration experience. When developing applications for FinTech, the UI/UX design should be easy to understand and easy to use. Copy and color choices count! The
text within the product should be understandable for everyone, no matter their financial and educational background. Also, a very clear and minimalistic design featuring a basic color panel that looks neutral and soothing will welcome users, rather than drive them away by a design that is too busy, complicated or colorful. Adaptability is also important: All the information users expect to get should comfortably fit into any screen to ensure a great user experience for any display size or context. The customer is going to associate the experience they have using your technology as a reflection of your brand. For that reason, it is critically advantageous to have as much control over the top layer as possible. To do so
requires the compatibility of each layer beneath it in the stack. The solid base of well-architected cloud infrastructure, layered with an integrated network of services and capabilities must adequately support the top layer–your polished front-end user interface. Layers in a much larger system Remember that to your end user, the system you build is just another service. Make sure your own system can be accessed programmatically by them. We’re all just nodes in a much larger network; so the more accessible your software is, the more it’ll be used. Or, the more you leverage your layered FinTech to improve the customer experience, the more customers you will ultimately have to serve.
Scott Dubnoff is chief technology officer at American Financial Resources Inc. (AFR). Since 2013, Scott’s expertise in information systems has helped AFR develop industry-leading technology and improve the company’s growth and profitability. AFR utilizes the latest technology and delivers educational resources to mortgage brokers, loan originators and their customers. He may be reached by e-mail at Scott.Dubnoff@AFRCorp.com. 43
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Security as a Team Effort: How Mortgage FinTechs Can Protect Customers he mortgage industry is in a unique period of transition, with one foot in the traditional world of finance and another in the ever-changing world of tech. Meanwhile, regulations in both worlds are increasing, meaning today’s mortgage lenders must be hypervigilant to ensure they’re compliant on all fronts. That task is daunting, but industry players (including legacy lenders, digital lenders, mortgage tech companies and tech companies that serve mortgage clients) can live up to the challenge by treating customer security as a team effort. Here are three internal practices that can make this work.
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1. Include diverse voices in the C-suite Any mortgage company with an online presence must also comply with state and federal privacy and security regulations. Any tech startup that serves mortgage customers must comply with mortgage industry regulations. To ensure that both happen consistently, companies playing in the mortgage space must have representatives in the C-suite responsible for overseeing best practices on three fronts: Mortgage, tech and compliance. Having such leaders ensures that major decisions don’t unintentionally undermine a company’s security or compliance on any front and that security and compliance are proactively included in every part of a company’s offering. At a legacy mortgage lender, this might look like a tech executive advising on security best practices for creating and maintaining the company’s mobile app. At a tech startup hoping to serve mortgage clients, this might look like a chief compliance officer or chief security officer overseeing data mapping and management as the California Consumer Privacy Act (CCPA) takes effect. This may sound simplistic, but
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By Maria Moskver
Just as important as having a C-suite with diverse backgrounds is building a culture of security at every level of an organization.
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it’s not always intuitive when companies see themselves as clearly on one side or the other of the mortgage-to-tech spectrum. Mortgage industry veterans tend to know mortgage regulations inside and out; tech executives are well-versed in the demands of data privacy. The danger of not including leaders with varied backgrounds is that mortgage industry participants risk knowledge gaps they’re unaware of–in other words, not knowing what they don’t know. As we’ve seen with data breaches in the last few years, that can be a costly way to operate. Equifax, for example, knew about a data vulnerability in its system for at least two months before that vulnerability led to one of the biggest data breaches of 2017. The 100-plus-year-old financial firm may have thought it was okay to ignore the vulnerability; if it had heeded input from a more tech-savvy leader, it might have known better. On the other side of the spectrum, we have Ascension, a data analytics firm that serves
financial and mortgage companies. Because it failed to password protect one of its servers, millions of customer documents were exposed– including many containing mortgage information. While that’s arguably also a tech-first error, the company might have been more vigilant about its security if it were better versed in the stringent laws governing how customer mortgage data must be handled. Diverse perspectives in the Csuite can help set the tone for an organization’s security and data protection, but to be most effective, companies must also follow universally recognized best security practices. This brings me to the second internal practice. 2. Voluntarily seek security certification Mortgage regulations are not optional; companies that don’t comply risk fines and penalties that could inhibit their ability to operate. On the tech side of things though, laws haven’t kept up with the pace of innovation: Most security best practices are still voluntary.
The CCPA is changing that, but we’re still a long way from mortgage and mortgage tech companies facing data regulations as stringent as those that regulate their lending and financial practices. That matters because consumers care about data security. In fact, while 96 percent of people care about data privacy, only 25 percent trust companies to handle their personal information. And that’s not as it should be: 92 percent believe that businesses should be proactive about data protection. The opportunity is clear … mortgage lenders that can demonstrate they’re taking proactive steps to protect customer data will win customer trust. Mortgage tech and other FinTech providers selling to lenders that can demonstrate how they’ll help lenders improve customer data security will have an easier sell. As far as which security certifications to prioritize, I recommend that mortgage tech companies focus on SOC-2 and ISO/IEC 27001. Lenders looking to partner with mortgage tech providers should look for organizations that have these certifications. Here’s what they do: l
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SOC-2, which is overseen by the American Institute of Certified Public Accountants (AICPA), ensures that systems within SaaS and tech companies adhere to certain standards of security, availability, processing integrity, confidentiality, and customer data privacy. ISO/IEC 27001, which is overseen by the International Organization for Standardization, verifies that a company adequately protects customer data as part of its larger information security management system.
Both require ongoing maintenance from certificate holders, meaning that organizations with current
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certifications can be seen as adhering to best practices for maintaining the security of customer data. One part of maintaining certification is proving that employees consistently handle data in secure ways. This brings me to the final practice mortgage and mortgage tech firms can implement to ensure customer data security. 3. Create a culture of security Just as important as having a Csuite with diverse backgrounds is building a culture of security at every level of an organization. Every day, every single person at an organization makes choices that affect the security of the company and therefore the security of all its customers’ data. Will you download that email attachment? Will you hold the building door for the person behind you? Will you reuse your work e-mail password on a social media account? There’s no way to guarantee every decision every employee
makes is secure, but by creating a culture of security, you create an environment where employees approach their work with a security-first mindset. This starts with providing adequate training, both for general best practices (like locking your computer screen whenever you step away from your desk) and for job-specific best practices (like checking any code written against a known vulnerability database). To obtain SOC-2 and ISO/IEC 27001 certification, organizations have to provide such training to every employee. While it’s important that employees at every level receive clear instructions for how to do their jobs securely, it’s also important that leaders at every level enforce security policies consistently. When secure behaviors happen both from the bottom up and from the top down, an organization has a true culture of security. At this point, security is the default mode of operation, meaning that culture is much
more likely to endure and yield positive outcomes. Security and customer protection are a competitive advantage We’re currently in an era of increasing regulation in the mortgage tech space. For customers, that’s a good thing. In addition to the greater financial security mortgage industry regulations offer, data security regulations will improve the security of consumers’ personal data and therefore offer greater peace of mind. Mortgage and mortgage tech companies that prove adept at complying with regulations and therefore protecting customer information and creating secure,
carefree experiences will beat out competitors in the coming years. Customers will only expect greater data security and privacy in the future; as they do, they will flock to mortgage lenders with a clean data privacy track record and a compliance-first operating style. These lenders, then, will be pushed to choose tech providers with robust security credentials. The beauty is that this shift is not a trend; rather, it’s a longterm move toward practices that lead to better outcomes for everyone involved, meaning everyone who steps up to meet increasing security and privacy demands will win.
Maria Moskver is the chief legal and compliance officer at Cloudvirga. A results-driven executive with more than 20 years of experience in the consumer financial services industry as a practicing attorney and chief compliance officer for technology-based companies, Moskver has extensive knowledge of federal and state-specific regulatory issues and a strong track record of establishing cultures of compliance. 45
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FinTech … Meet My Friend he popular topic of financial technology, better known as “FinTech,” is saturating the blogosphere. A simple search for “FinTech” on Google gives you millions of results. Some authors seem riddled with anxiety, prophesizing doom, while others suggest investing millions into this new market. In truth, FinTech has been around in one form or another since the development of technology itself. For the mortgage industry, FinTech is not new, but particular innovations are. Online mortgage applications, automated underwriting and customer resource managers (CRM) are only a few of the innovations that are improving the customer experience. Mortgage companies are notorious for having a low adoption rate, but now they have no choice. It’s not a matter of why, but when. The good news is the change won’t be as dramatic as some of you may fear.
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Where can the customer experience improve? Unreasonable underwriting periods, uncertainty about approval and unknown market
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By Christian Olin
“There is plenty of discussion about how FinTech is disrupting the market, but as stated before, it’s supplementary. In all truth, people will need a personalized approach to origination, because the process itself will always be confusing
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conditions can cause stress for the buyer. It’s hard out here for a prospective borrower. Despite all of our attempts to make it seem simple, in advertising and in person, mortgage origination is not magic. In some cases, the origination process takes weeks
of labor. Borrowers will sometimes give up halfway through, and insight from Ellie Mae suggests around half will actually quit during the beginning of the online application. This leaves plenty of room for lenders to improve.
What the borrower wants According to a mortgage survey conducted by JD Power, consumers have a few basic needs … Number one, lenders need to communicate with consumers throughout the origination process. It’s important that loan officer’s and lenders make themselves available for consumers and update them at each milestone. At our firm, On Q Financial, we send out automated e-mail updates, and go a step further by conferring with clients over the phone. This personal touch is a characteristic of smaller agencies that borrowers find larger organizations lack, according to a recent study published by Ellie Mae. Number two, borrowers want faster closings. It’s a hot market, and borrowers want to know their loan is secure. The mortgage process is extremely time-consuming, so any way that we as originators can accelerate the process without sacrificing quality will benefit consumers. Number three, borrowers want to be treated like individuals. Whether they prefer to work online or in person, you should be giving them the choice. Technology should only be an addition to the already existing experience. FinTech won’t be able to improve the borrower experience by itself. It’s about letting the borrower have their choice and working within the needs of the individual. We shouldn’t treat every borrower as if they were the same. Where does technology play a role? Technology will be able to help with every single aspect of origination from application to the closing table. Better CRMs will allow large and small lenders to take a more personalized approach with their clients. Automation will make faster closings possible. Every aspect of origination is going to change, and it’s for the better, but it is by no means the end of the story. FinTech and the customer experience There is plenty of discussion about how FinTech is disrupting the market, but as stated before, it’s supplementary. In all truth, people will need a personalized approach to origination, because
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will not only speed up the process, but also save lenders money. A savings that they will be able to pass along to the borrower. Hybrid e-Closings and eClosings are also on the horizon. This is perhaps the newest development of FinTech in the mortgage space. Being able to sign closing documents before the closing date gives customers the opportunity to make their closing easier. Even being able to offer closings online, might be a possibility in the near future. Right now, not all investors accept this type of closing method. Some examples of organizations that do accept this type of closing methods are Fannie Mae and Freddie Mac.
a process that doesn’t drive them to pull their hair out of their head. In conclusion FinTech is a topic that has been at the top of every originators mind lately, but we need to take a step back and take a customer centric approach. Integrating technology into the mortgage process will be critical if we want to appeal to customers in the future. The customer experience overall is going to change for the better. All we must do is adapt and look at how we can encourage innovation and growth.
Christian Olin started his career right out of college as a rookie on Wall Street with Morgan Stanley. With more than 20 years of experience, he has become a specialist at sales management, strategic business development, building best of breed teams, and cross-functional selling. In particular, his experiences in emerging finance technologies have been useful in his current role as vice president of the direct lending team at On Q Financial. (480)-320-3095 or e-mail Christian.Olin@OnQFinancial.com. 47
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Effect on the lender Developing this kind of automation in house or outsourcing to another company is not always cheap, but it will save money. Not only that, it’s clear that offering a superior product is how to get a borrower’s attention. If you offer the fastest and cheapest products, they aren’t likely to hold up over time. A main concern people have with FinTech is that they think it will leave many underwriters and operational employees out of work. FinTech is meant to streamline operations and improve efficiencies across the board. The ebb and flow of this industry leaves many operational individuals out in the cold, but improving efficiencies would actually mean more job security for many employees. Margins will shrink with FinTech. Over time, this means that the cost to originate will go down. This is wonderful news for the borrower who has been paying attention to the rising cost to originate. Margins are a major concern for many lenders right now. FinTech is going to be the driving force behind changes in the industry for decades to come. For some, this is great news and for others it’s a matter of concern. The reality is that many of those individuals resistant to Fintech don’t understand its capabilities or they only want to do what is easy for them. What matters is finding ways to improve the customer experience. FinTech is allowing us to
target segments of the population that lenders wouldn’t have previously had access to. Technology allows us to keep better track of customers and gather more data about them. In Ellie Mae’s recent survey of the borrower experience, they say that lenders who experienced an increase in loan volume were more likely to offer a mobile app, and those who didn’t unfortunately saw a decrease in loan volume. It’s simple, we work in a market where we need to follow the customer and the customer is being very clear about what they want. They want a great rate and
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the process itself will always be confusing. What are the specific technological innovations and how are they changing the industry? An innovation that is impacting the bulk of the process by automating underwriting is Artificial Intelligence (AI). AI, in reality, is much different from AI in our imaginations. AI in our imaginations is dominating the world by hacking into all of our computers and deleting our Facebook profiles. AI in reality is scraping our data and feeding us individualized ads and will not be able to make decisions on complicated loan profiles. Technology with CRMs is allowing for multi-channel touch point methods. This means that you’ll be reaching out via e-mail, phone and text. This is good for the borrower, because there are many steps they should be informed of. Many borrowers are particular about how they like to communicate, so reaching out through multiple channels will allow you to provide custom and prompt communication. Ninety-three percent of lenders offer online applications, according to a recent study done by Ellie Mae. The same exact study explains that borrowers are making their choices about which lender to use based on whether they offered an online application. It’s predicted that in the future this will become an even more important point to borrowers. The technology behind these applications is great for the borrower experience, but be wary, because if it takes too long, or is overly complicated, it is likely that the borrower will abandon the application and move to a different lender. Chatbots are an innovation that will be able to impact a lender’s bottom line when it comes to servicing. Chatbots will give the customer the opportunity to have their questions immediately answered. In addition, automation will be integrating into every aspect of the origination process. Automation allows waivers to be applied to certain loans. These significantly speed up the process and can even allow some borrowers to forgo appraisals. Automation will shorten the period between closing and selling the loan. This
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How Independent Mortgage Companies Are Leveraging FinTech to Win in Local Markets ince the 2008-2009 financial crisis, private lending has taken over virtually every sector of the real estate investing sector. In fact, the broadest segment of the private lending sector is mortgage lending. According to Magnify Money, there was a balance of $10.3 trillion in U.S. mortgage debt as of December 2018. More than half of that was provided by non-bank lenders. That includes independent mortgage companies. Private lending is certainly nothing new, but it has emerged as one of the fastest-growing segments of the lending marketplace. This is due, in large part, to the passing of the 2012 JOBS Act.
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Why is independent mortgage lending growing? There are many factors influencing the rise of independent mortgage lending. For starters, following the financial crisis, banks pulled out of mortgage lending, which left a huge gap to fill in the marketplace. Since then, Millennials have emerged as the largest homebuying segment and are expected to create 30 million new households in the U.S. between 2015 and 2035. The Mortgage Bankers Association (MBA) predicts 10 million new minority households by 2024. Homebuying is surging. As homebuying has seen a resurgence, traditional lenders have tightened their credit standards. Meanwhile, alternative lending models are increasing and filling the gap left by banks and traditional mortgage lenders. In Canada, eight percent of mortgages were private, as of November 2018. Private lending increased by 37.8 percent between 2017 and 2018. The rise of real estate crowdfunding and the advent of new technologies has decreased the cost of starting new
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By Allen Shayanfekr
FinTech makes their lending operations more efficient, increases market share if leveraged efficiently, and makes traditional lending products more attractive to younger generations.
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enterprises even as investors have learned they can increase their returns by taking advantage of new marketplace lending models. From direct lending to fix-and-flip funding, platforms that specialize in opportunities for real estate investors are adding billions of dollars to the transactional marketplace. Fractional investing makes it possible for average mom-andpop investors to earn record returns by funding a diverse range of real estate projects from ground-up multifamily construction deals to single-family rentals. On top of all of this, in 2017, Congress passed the Tax Cuts and Jobs Act, which created opportunity zones for real estate developers and offers tax cuts for redeveloping and renovating entire sections of dilapidated neighborhoods all across the U.S. This isn’t just an opportunity for builders and flippers. It’s also an opportunity for independent mortgage companies.
FinTech: The new opportunity for independent mortgage lenders Finally, after a decade of giving up the market to private lenders, banks are beginning to see the market opportunity and are starting to adopt the same technology as online lenders to recapture some of the mortgage lending markets. This is going to have an impact on every segment of the private lending market, and make it more competitive. Not only are banks and traditional lenders re-entering the market, but new technologies such as artificial intelligence, machine learning and credit risk assessment tools are making existing online lenders more efficient and competitive. Traditional lenders, if they’re not adopting the same technology and building their own tools, are partnering with alternative lending frontrunners on new products and business models. The independent mortgage lenders that survive the next decade will
be those who can leverage FinTech to keep up. Another challenge is the increase in regulation. Too much and it will hamper innovation. Too little and scams and unethical schemes will steal market share and scare the market into a frenzy. While these challenges are real, independent mortgage lenders are on the rise to capture some of the market growth that appears likely to continue for the foreseeable future. Right behind Millennial homebuyers dominating the market are the digitally native Generation Z, and Baby Boomers, who have reached retirement age and have begun downsizing. The mortgage market is ripe for explosion. ATTOM Data Solutions reports that, in 2017, 207,288 single-family homes and condos were flipped, and 34.8 percent of those were financed. The dollar volume for financed flips hit $16.1 million, a 10-year high. Private lending is largely responsible. Millennials are comfortable using technology for financial transactions and are more likely to use online or mobile banking tools than older generations. They are the highest demographic of users for mobile financial apps. The oldest members of Generation Z are currently hitting homebuying age and are more digitally literate than Millennials because they’ve been using digital technologies since preschool. FinTech makes their lending operations more efficient, increases market share if leveraged efficiently, and makes traditional lending products more attractive to younger generations. Three ways independent mortgage lenders use fintech to penetrate local markets Real estate is intrinsically local. Technology can increase the reach of mortgage lenders, but it can also facilitate specialization and more efficient market identification and penetration. Often smaller than big bank and traditional competitors, independent
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mortgage lenders can marry technology with service to gain a competitive edge in local markets. A look at the top 10 real estate crowdfunding Web sites for accredited investors confirms this. Among the players include California-based PeerStreet; commercially-focused CrowdStreet; FundThatFlip, specializing in house-flipping; 1031 Crowdfunding, with its focus on exchanges; ArborCrowd, the proprietary platform for the Arbor family of real estate companies; RealCrowd; and up-and-coming contenders Carlton Crowdfund, 2019 LendIt Fintech Top Real Estate Platform award-winning Sharestates, single-family rental platform Roofstock and its sister platform Roofstock One, which offers fractional investing opportunities in single-family rentals, and hard money lender Zeus Crowdfunding. The diversity in the space is one of private mortgage lending’s core benefits to investors. In general, there are three ways independent mortgage lenders use FinTech to deliver quality investments to local real estate investors across North America. These include: l
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Third-party SaaS solutions Third-party solutions give independent mortgage lenders the ability to deliver mortgage
Developing a fintech stack This is the most expensive and risky option, but for mortgage lenders that can pull it off, the rewards are also greater. Why the future of mortgage lending is brighter than ever With the emergence of new technologies comes new opportunities. Fintech is a golden opportunity for independent mortgage lenders who are ready to tap into the ever-expanding economy of private lending. From mobile banking to blockchain and cryptocurrency business models, independent mortgage lenders are using emerging technologies to penetrate local markets all across North America. Despite the growing threat of regulation and increased competition, the future of mortgage lending has never been brighter. Making use of FinTech to penetrate local mortgage markets requires innovation, capital expenditure, and creativity in designing products that appeal to the various consumer and investor markets. This is an exciting time to be a mortgage lender.
Allen Shayanfekr is the co-founder and chief executive officer of Sharestates. He is an entrepreneur with crossfunctional expertise in real estate, law, technology, and finance. Allen's Juris Doctorate (JD) with a background in securities, regulation and compliance played a pivotal role in launching Sharestates as a pioneer in the real estate crowdfunding industry. Allen now leads platform innovation for Sharestates, optimizing the user experience for borrowers and investors while also spearheading the development of new loan products and capital markets relationships. He may be reached by e-mail at Marketing@Sharestates.com.
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Each option has its pros and cons, but the bottom line is that companies using any of these options are able to leverage technology in some sense to deliver financial services, particularly lending products, more efficiently.
Partnerships Partnering with a large traditional lender allows smaller alternative private lenders the ability to tap into the mortgage market by leveraging the reputation and capital of a major player with a solid track record. The right partnership means the independent mortgage company startup needs little or no upfront investment. The downside is the lender must share revenues with its partner.
MORTGAGE BROKER AND LENDER COMPLIANCE
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Adoption of third-party software-as-a-service (SaaS) solutions Partnerships with traditional lenders Developing their own technology stacks
services from loan origination and underwriting to risk assessment and customer service more efficiently. Solutions come in a variety of implementation options from subscription-based to outright purchase.
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In Volatile Financial Markets, Scalability Is Crucial to Lender Success By Vikas Dua
s I’m writing this article, the major global financial markets have experienced two weeks of down and up (mostly down) rollercoastering due to COVID-19 concerns. The S&P500 Index has experienced its six largest point moves all in the first two weeks of March 2020, and the VIX—the very definition of volatility—is at historic levels, surpassing those seen during the crash of 2008. Leaders in the commercial and consumer lending markets are bouncing back and forth between trying to predict the next day's movements to (and much more importantly) determining how to react to this movement: Is it a time to be aggressive or to hedge? While no one can accurately predict the rise and fall of the markets, one area of preparation that often goes overlooked is how flexible and adaptable an organization is to fluctuating business volume and challenging environmental conditions. In the midst of an unprecedented crisis such as the spread of COVID-19, most corporate decisions are reactionary. Planning for the unplanned is an oxymoron, but there are two basic truisms that can be applied to most marketaltering events:
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The ability to pivot is always helpful to either weather a bad situation, or leverage an opportunity; and The same event that can cause a downturn for one market segment can offer an opportunity for another sector.
Consider the initial financial impact of the COVID-19 pandemic. Amid a crisis of travel advisories and cancelled business travel, it's understandable that major airlines have been hit with cancelled reservations and significant reductions in passenger-driven revenue. Yet, private charter jet services like
WheelsUp and PrivateFly have seen commensurately higher demand from personal and corporate travelers that want an extra level of prevention and are not particularly price-sensitive. Similarly, in the business lending space, delayed purchasing decisions, and idled manufacturing facilities, have a give and take effect for small business lending. Those organizations that process merchant cash advances, for example, may see their transaction volume decrease, while some of our FinTech lenders are reporting higher application volume, coupled with lower approval rates. Perhaps no funding sector has seen a greater impact than residential mortgages. With the Federal Reserve responding to market concerns by lowering prime lending rates, residential mortgage rates are close to alltime lows. According to the Mortgage Bankers Association Weekly Mortgage Applications Survey for the week ending March 6, 2020, volume was 192 percent higher annually. Mortgage refinancing applications spiked 79 percent from the previous week, marking the highest weekly jump since November 2008 and a 479 percent increase from the same week a year ago. This sounds like a great time to be in the mortgage origination business, yet most lenders are not in a position to handle the influx of business. In a recent article on CNBC, Matt Weaver, vice president of regional lender Cross Country Mortgage, stated: “It’s absolute pandemonium. The industry is inundated with requests. Let’s put it this way, we are like Home Depot during a hurricane.” The story goes on to explain how Cross Country has increased business hours and is trying to find more staff to handle the volume. We suspect many lenders are in the same predicament. However, if mortgage history teaches us anything, the origination environment may be diametrically
different in six to nine months. No matter how fast originators onramp employees and upgrade systems, it is difficult to pivot quickly if there isn’t built-in nimbleness to business workflows. This challenge is not limited to regional lenders. Wells Fargo is undergoing the same on-the-fly reorganization … “We continue to hire underwriters processors and closers into our fulfillment group and we’re also executing on opportunities to shift team members from other nonfulfillment groups into our fulfillment operation,” said Thomas Goyda, a spokesman for Wells Fargo. Both the Cross Country and Wells Fargo approaches to the mortgage climate are reactionary. While the regional lenders have the challenge of ramping up new employees, Wells Fargo’s human resource reallocation plan could lead to mistakes and sub-optimal audit practices. At Ocrolus, we’ve seen firsthand how progressive FinTech lenders are able to create a nimble environment for loan origination and servicing. Flexibility was built out of necessity. FinTech lending is an industry that is just over a decade old and has grown as an alternative lending resource for individuals and businesses that didn’t fit into traditional credit scoring models used by depository lenders. FinTech lenders couldn’t grow based on the same models used by brick
and mortar lenders … they needed to eliminate process lags and underwriting inefficiencies without compromising due diligence in order to operate and thrive as disruptors to the financial markets. As FinTechs have matured and their respective market share has grown, their practices are being adopted by leaders and innovators throughout the broader industry. A key factor to flexibility has been the elimination of data entry bottlenecks. Successful FinTechs don’t have underwriters keying in borrower information or performing “stare and compare” analysis of income, asset and identification documents. Instead, they are using document digitization services and data aggregators to provide underwriters with actionable data. Replacing manual data entry and review with API-called data connectivity enables FinTech lenders to accommodate fluctuating loan volume on call, rather than scrambling to add, subtract or redeploy human resources. Again, it is impossible to determine with certainty the direction of business markets and their commensurate effect, either positive or negative, on a mortgage lender. However, it can be predicted that markets will change, loan volume will fluctuate and the need for resource flexibility will be paramount to weather downturns, as well as to capture opportunities.
Vikas Dua is chief operating officer of Ocrolus, a FinTech infrastructure company that transforms documents into actionable data with over 99 percent accuracy, powered by artificial intelligence (AI) and a unique, human-in-theloop data validation process.
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Technology as the Ideal Complement to a High-Touch Ethos ondering if it’s time to integrate FinTech into your core processes? The answer is “Yes!” FinTech, as explained by Investopedia, is “utilized to help companies, business owners and consumers better manage their financial operations, processes and lives by utilizing specialized software and algorithms …” In the mortgage world, FinTech allows providers to be more productive, more customer-service oriented and more effective. But you don’t have to be a huge national company with unlimited resources to make it happen. At Boston-based radius financial group, our motto is that we “Make Mortgages Better,” and FinTech has become a key component of our ability to do so. Here are some of the lessons we’ve learned and best practices that any mortgage company can borrow.
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Start with first things first FinTech bells and whistles are great, but as they say in the computer industry: “Garbage In, Garbage Out.” In other words, merely layering a tool on top of inefficient processes is bound to lead to frustration and wasted dollars. That’s why our first step in implementing FinTech was decidedly low-tech: Deconstructing and recreating our workflow process. The goal was to map our entire workflow and identify inefficiencies or inconsistencies in order to establish a set of best practices that would be adopted companywide. The workflow analysis examined the mortgage transaction through every department, phase and step. We broke down silos in order to get every department to merge their ideas and come up with one common workflow that was universally agreed upon and then documented to ensure we were all on the same playing field.
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By Dustin DeMeritt & David O’Connor
…we also know that efficiency is just one component of a successful mortgage operation. You have to balance it by keeping internal and external customers at the heart of the process. —Dustin DeMeritt, Director of Marketing, radius financial group inc.
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Once we established a standardized workflow, we incentivized adoption through upstream and downstream service level agreements (SLAs), with a joint level of standards and KPIs that are measured throughout the process. If you’re considering implementing automation, our experience shows that taking the time to tighten up your processes will pay off, not only in a more effective adoption of automation, but in team motivation and customer service. Robotics process automation gets the job done Wouldn’t it be great to automate those tedious, yet critical, factors that go into a successful mortgage experience? Once we had created that welldocumented workflow, we then analyzed it for pieces we could automate. As an example, we know we need to order a flood certification on every property. So now, as soon as the processing status is enabled in the loan file, our
“robot” builds a list of property addresses and orders them all at once every hour. Not only does it save our team from having to do it manually, but we’ve realized how much our customers appreciate having this information up front. After all, if you’re planning to buy a home and expect the payment to be $2,400, it’s an unpleasant surprise to find out you’re in a flood plain, and your payment will jump to $3,000. You may no longer qualify for the mortgage or the amount might be outside of your budget. However, it can be human nature to forget to order a flood certificate, which can lead to an upset customer if this reality is discovered later in the process. But as we like to say, “The robot never forgets.” That’s just one example of the 150 processes we have automated. Another important byproduct of artificial intelligence (AI) use is that it has allowed us to redeploy staff to more customer-centric tasks, which gives them a more engaging job. And finally, robotic process
automation has made a significant difference by making our business scalable. Even as the economy seems to flip daily, we, like many others, have our biggest pipeline ever. At radius, we don’t need to hire and train a bevy of employees because automation allows us to scale our model with the employees we have since it handles these mundane yet key tasks. That is where FinTech wins the battle in allowing your company to be prepared to handle a spike in volume, without having to worry you are overstaffed as demand fluctuates. Artificial intelligence creates efficiencies As we moved through our workflow process, we identified a bottleneck that I imagine any mortgage company can identify with—the fact that one of our biggest time-wasters was the physical action of organizing loan documents. In fact, we were astounded to realize that our loan analysts spent nearly 30 to 40 percent of their day working in documents, handling mundane tasks, such as making sure each document faced the right way to separating tax statements and pay stubs. Through AI, we have been able to remove that process from their plate, and as a paperless company, we make sure that every piece is digitized and organized in a way that allows them to move directly to analysis. Now, the loan analyst will get a message that the “Jones File” is in the document storage part of our loan operating system, and they’ll open a neat file that is ready for analysis. Not only does that allow us to complete more files, but it removes a laborious process and allows them to engage at a higher level with thought work. Getting small wins as you move toward the bigger picture Of course, not every firm can implement a robust FinTech
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If you’re considering implementing automation, our experience shows that taking the time to tighten up your processes will pay off, not only in a more effective adoption of automation, but in team motivation and customer service.
make that margin back is reducing the cost of production— and that’s where the rubber meets the road for automation and FinTech. However, we also know that efficiency is just one component of a successful mortgage operation. You have to balance it by keeping internal and external customers at the heart of the process. We have always sung the praises of using technology to make mortgages better, but never at the expense of the “high touch” service our customers expect and appreciate. In fact, that’s where we started this process, with the goal of creating a better customer
experience and improved team commitment and motivation. But it wasn’t long before we realized that FinTech could be an important tool to help create efficiencies. That’s why I would encourage any mortgage company investigating the benefits of FinTech to remember what really matters—customer service, improved productivity and employee experience—and identify ways that automation can help them realize their goals. And it will look different for every firm, depending on your culture, your budget and your needs. Take charge of your tech, rather than allowing it to be in charge of you.
—David O’Connor, Chief Technology Officer, radius financial group inc.
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How can FinTech initiatives set your mortgage company apart? Ready to embark on a FinTech project and wondering if it’s worth it? I can assure you it is, from both a customer and employee experience perspective. But I also realize that’s not enough—after all, mortgage providers are used to dealing in hard numbers. And that’s where FinTech can back you up. The most important byproduct of a FinTech initiative is that it reduces the cost of production in a way that you can measure. For example, you might know that last June it cost you $4,000 to manufacture a loan, but in the following year, it only costs you $1,000. That’s an incredible savings, and it’s not just a ballpark because it’s substantiated with real figures. FinTech allows us to measure how much time a loan assistant spends on a file, divided by their salary, we can find the hourly rate of each employee. In today’s environment—where the mortgage world is constantly being attacked by margin compression and increased regulatory pressure—collectively we’re making less money on the product, and it’s more expensive to produce. The only way to
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process in its entirety. That’s why it’s important to identify places you can make incremental changes, in order to help create buy-in and momentum. One of our most successful processes that’s relatively easy to implement as one of the fastest, easiest wins, is improving our customer experience with better communication, which we believe is a significant part of a successful FinTech stack and a crucial factor in a positive online application experience. Customers have done their part to fill out the application and submit their W-2s, and they want to know how it’s working through the system. Through automated communication, they don’t have to wonder where it is, nor do we have to rely on a loan officer keeping them apprised. Using our digital system, they log into the portal where a track bar shows them how many steps have been completed and what’s next; which is also supplemented with e-mail communications that alert them when each milestone is completed. It standardizes the process and allows them to feel engaged. We’ve seen our positive feedback skyrocket once we implemented this effective communication step. In fact, when we look at our Net Promoter Score (NPS) every Monday, we can see the impact—ours hovers around 87,
Dustin DeMeritt is director of marketing for radius financial group inc., and can be reached by phone at (781) 742-6500 or e-mail DDeMeritt@radiusgrp.com. David O’Connor is chief technology officer for radius financial group, and can be reached by phone at (781) 7426500, ext. 513 or e-mail DOConnor@radiusgrp.com.
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New Borrower Expectations Require New Lending Technologies By Roger Hull
t seems hard to imagine, but there was a time not too long ago when most homebuyers didn’t shop for homes online. The simple explanation for why things changed is “the Internet.” The reality is that consumers have always prized convenience, and it was easier to find homes for sale online than to drive through neighborhoods, step into a real estate office, or wait for the Sunday paper. The demand for greater convenience is also why we have ride sharing services like Uber and Lyft and online streaming sites like Hulu and Netflix. The mortgage industry, too, has seen innovations in consumer convenience, among them, online applications and digital signatures. We even have new FinTech software that gives borrowers the ability to take on much of the mortgage process themselves. And yet, despite these advances, it still takes roughly as long to buy a house today as it did 20 years ago. And lenders today continue to struggle with attracting borrowers, improving conversion ratios and providing a superior mortgage experience to homebuyers. The problem is that the underlying technologies most lenders use haven’t changed all that much in recent years. In fact, they were never that useful for providing great customer service—or for lowering costs or increasing sales. But these antiquated technologies are not the only option for lenders.
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Why yesterday’s technologies are failing us Almost every mortgage professional today uses software that was originally intended to streamline the mortgage process and improve profitability. Yet most of these software solutions have been around for a decade or more, and consumer behaviors have changed dramatically since then. Consider the fact that, 10 years ago, relatively few consumers used their phones for their banking needs. According to a recent survey by Business Insider Intelligence, however, 89 percent of respondents now use mobile banking regularly, including 97 percent of Millennials. While consumer behaviors are obviously evolving, the bulk of software solutions lenders are using today are not. They were built when
consumers were far less comfortable using the Internet for financial transactions than they are today. As such, these software solutions are illequipped to provide the mortgage experience that today’s borrowers want–which includes the ability to sign documents, verify their income and assets, and perform other tasks required in the loan process. Make no mistake, borrowers have always wanted a more convenient mortgage process. If they cannot find an acceptable level of service from you, they will find someone who can provide it—and they have plenty of options. In fact, given the acceleration in new origination technologies, finding another loan officer or lender capable of delivering an experience that today’s borrower prefers is not only possible, it is becoming necessary. With certain technologies, for example, it is possible for borrowers to research loan products on their own and get product and pricing options within several minutes, all without having to reveal a single piece of personal information. This capability alone can greatly improve a lender’s ability to attract and gain trust from borrowers who may be shy about sharing their private data before they know what to expect when getting a loan. Another way lenders can improve borrower engagement is by adopting mortgage platforms that are available through multiple digital channels, including mobile devices. Increasingly, these tools are being used by borrowers to shop for mortgages, submit applications and track their loan process wherever they are. And, they get responses within minutes. But most lenders still don’t have platforms with multiple digital channels. With new technologies that enable the secure, quick transfer of the proper documents and automatically verify the borrower’s credit, income and asset information, it’s also now possible for borrowers to complete the mortgage application process online in less than 15 minutes. Again, however, the most popular loan origination platforms on the market today are unable to achieve such levels of performance. Ultimately, overcoming these challenges and exceeding borrower
expectations will require a switch to next-gen digital, end-to-end mortgage platform—one that combines marketing automation and the ability to let borrowers shop, apply for and complete their financing entirely online. At the same time, a self-service mortgage is not for every consumer— which is why such platforms must be equipped with a fully-integrated sales portal that allows mortgage professionals to collaborate, create a financing package unique to each borrower, and track the status of the transaction from cradle to closing. In order to compete successfully for business in 2020 and the years ahead, however, mortgage professionals and lenders will need even more.
completely missing out on their significant benefits. Another sizeable chunk of a lender’s loan costs rests in complying with an increasing number of regulations and investor requirements. Most lenders currently spend large sums on human loan auditors to review files manually, which takes a huge toll on productivity and efficiency. With newer technologies, lenders can automate a much greater percentage of their compliance processes, reduce cycle times and improve productivity. Beyond improving the borrower experience and lowering costs, there lies the ultimate goal of every loan officer and lender—growing business. This goal could soon become more challenging, with several leading Overcoming expense a industry organizations, including the nd sales obstacles MBA, projecting more modest loan Despite the plethora of mortgage volume in years ahead. Regrettably, solutions developed over the past most traditional origination systems are decade, it still costs more to designed to help lenders only manufacture the average mortgage manufacture loans, not sell them. loan than it has in the past. According Newer systems, on the other hand, to the Mortgage Bankers Association’s have been built with marketing most recent Quarterly Mortgage automation and point-of-sale Bankers Performance Report, the technologies already combined in the average total loan production expense same system. This enables lenders to was $7,217, significantly higher than share and leverage the same data for the average expense of $6,481 over both marketing and loan origination the past 12 years. purposes, and the results of this A significant portion of any lender’s combination have been amazing. costs is tied up in manual processes By having technologies that and the time it takes to collect and combine sales and production tools in verify borrower documents during the a single, unified system, I have seen application process. By automating several institutions increase their these processes, lenders can mortgage sales volumes by as much successfully eliminate huge amounts of as 30 percent. These all-in-one, endmanual effort behind the scenes, which to-end platforms are also helping enables them to reduce cycle times lenders reduce friction throughout all of and lower costs. And few new their processes, which increases pullplatforms being built today allow them through rates. to do so. To be sure, the speed of New lending technologies, technological change will continue to including the Origence mortgage accelerate, which will continue to push lending platform, are also being built consumers to demand more from with artificial intelligence (AI) and everybody they do business with. That, machine learning tools, which have in turn, means more pressure on been successfully deployed in many lenders and loan officers to meet and other segments of consumer lending, exceed borrower expectations. So, including auto financing. But again, when it comes to the technology they the majority of the traditional choose, why shouldn’t lenders mortgage systems lenders use today demand more, too? After all, the only were developed before these tools thing at stake is the future of mortgage became available, so they are lending. Roger Hull is president and chief product officer of Origence, developer of the Origence origination platform, an end-to-end solution that powers mortgage, consumer and home equity lending for financial institutions.
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importantly, the closed loan volume represents the families across the nation that loan originators in the Motto Mortgage network served in 2019. I am proud of our franchisees and look forward to continued momentum in the years ahead.” Notarize and Stewart Title in New Partnership
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Notarize, the Boston-based company that enables an entirely online mortgage closing process, has entered into a partnership with Stewart Title that will give its direct offices and independent agents the ability to offer fully online and hybrid closings powered by Notarize. Stewart and Notarize conducted their first online closing in 2017, and the companies stated they have completed thousands of closings in the following years. Stewart has approved online closings in more than half of the states, and the companies forecast expanded opportunities as more states pass legislation to enable online closings. “Since completing the first online closing in the country with Notarize back in 2017, we’ve spent the last few years understanding how we can bring a transformational digital process to consumers that enhances the customer experience for how they want to close on their home,” said Scott Gillen, senior vice president for industry relations and marketplace strategy at Stewart Title. “Notarize has been our top partner in the space, not only from an advocacy and enablement perspective, but because we share the same vision on putting convenience and experience first. We can’t wait for 2020.” Notarize Founder and CEO Pat Kinsel said: “Scott and the team at Stewart were the first title underwriter to see the promise of online closings. They created a vision for the future and worked tirelessly to provide consumers a better closing experience. We're proud to deepen our relationship with Stewart to take online closings to full scale in 2020."
The Mortgage Collaborative Adds MGIC to its Preferred Partner Network
The Mortgage Collaborative (TMC) has signed an agreement with Mortgage Guaranty Insurance Company (MGIC) to be the newest addition to join its Preferred Partner Network. “We’re privileged to have MGIC become part of the Collaborative’s Partner Network to kick off 2020,” said TMC Chief Executive Officer Jim Park. “Their industry reputation and company values align with our guiding principles of offering best-in-class products and solutions to our lender member network.” TMC enters 2020 on the heels of record-breaking growth in 2019, adding 53 new Lender Members, 15 Preferred Partner companies and record attendance at both 2019 winter and summer conference events. “We are honored to join TMC’s network of top tier lenders and strategic partners,” said MGIC Executive Vice President of Sales and Business Development Jay Hughes. “TMC’s platform affords us an ideal opportunity to work directly with their growing lending community to help deploy solutions, services and experience that make homeownership attainable and continue to advance the mortgage industry.” Promontory MortgagePath Consolidates Into One Entity
Promontory MortgagePath LLC has consolidated its family of companies into one entity with a singular focus on driving down the cost and time required to originate mortgages. The move blends three distinct teams with complementary skills and strengths, uniting Promontory Fulfillment Services LLC (PFS) and PromonTech LLC under their former parent-company banner— Promontory MortgagePath. Since their founding in 2015, the three companies have worked collaboratively to provide technology-driven mortgage
fulfillment solutions—with PromonTech developing proprietary point-of-sale mortgage technology, PFS providing comprehensive third-party mortgage fulfillment services, and Promontory MortgagePath concentrating on leadership and strategy. Now, all functions will be unified as Promontory MortgagePath. “Integrating our powerhouse teams represents a strategic realignment of our mission to provide lenders with best-in-class, tech-enabled mortgage fulfillment services that improve borrower experience, ensure regulatory compliance and lower the cost of origination,” said Gene Ludwig, Promontory MortgagePath’s chairman, founder and chief executive officer. “Our goal in joining these three entities together under a single brand is to ensure Promontory MortgagePath can innovate even faster and flawlessly execute in a rapidly evolving business landscape, to the benefit of our clients and their customers.” Equifax Partners With Rent Reporting Platforms
Equifax Inc. has teamed with three rent-reporting platforms–Esusu, MoCaFi and Zingo–in a new effort to expand the financial profiles of consumers. According to the Atlanta-based companies, the three platforms allow consumers to include rental payment data as part of their respective credit reports. As part of this partnership, the three companies will also present their users with a free weekly or monthly VantageScore credit score to track their score changes. "Our partnership with these market leading rent-reporting agencies reaffirms our commitment to become a more consumer friendly data and credit reporting agency," said Tom Madison, senior vice president and general manager at Equifax Global Consumer Solutions. "This will help provide a more comprehensive view of consumers' payment histories and help people in the pivotal moments in their financial lives, such as applying for their first mortgage or buying a car." Radian Invests in Covered Insurance Solutions
Radian Group Inc. has announced it has made a strategic investment
in Covered Insurance Solutions Inc., a digital insurance agency that enables consumers to compare and purchase homeowners’ insurance, including during the mortgage application process. The terms of the investment were not disclosed. Covered Insurance Solutions is headquartered in Denver and is a licensed insurance agency in 48 states. “The digitalization of our industry is well underway, and we believe that the most successful companies in the future will be the ones that most effectively leverage technology,” said Radian CEO Rick Thornberry. “That’s why we have made our own digital transformation such a priority, and that’s why we are investing in Covered, a promising fintech startup that is working to disrupt how homeowners’ insurance is bought and sold.” Ross Diedrich, chief executive officer of Covered Insurance Solutions, said: “We are very excited to partner with Radian as we embark on this new phase of our development. Radian’s comprehensive industry intelligence and deep relationships will be tremendous assets as we expand our reach into the mortgage ecosystem with comprehensive insurance offerings.” Guaranteed Rate to Support VA Borrowers Via USO Partnership
Guaranteed Rate has announced a partnership with the United Service Organizations (USO) to ensure veterans and members of the military transitioning out of active duty service receive oneon-one guidance and support from VA loan specialists during every stage of the homebuying process. “Partnering with the USO is another way for Guaranteed Rate to make the American dream of homeownership a reality for as many veterans as possible,” said Guaranteed Rate Founder and CEO Victor Ciardelli. “It’s an honor to serve those who have served our country with our commitment to delivering the best value proposition tailored to their specific needs.” Guaranteed Rate offers buyers a streamlined digital process, as well as tools like FlashClose to save time at closing and provide options for remote online notarization and mobile closings.
Neptune Flood Expands to Louisiana Neptune Flood, an online flood insurance company, is now operating in Louisiana. The St. Petersburg, Fla.-based company waited until Mardi Gras to announce its presence in Louisiana, which is the 39th state where it is selling its flood insurance policies. Neptune Flood added that its policies meets the requirements to be accepted by all banks and has optional enhancements to the standard National Flood Insurance Program (NFIP) policy, including coverage for temporary living expenses, unattached structures and pool repair and refill. "Louisiana is key to Neptune's
growth and Neptune is focused on the safety and security of Louisianans," said Trevor Burgess, president and chief executive officer of Neptune Flood. "We're proud to be able to offer select Louisiana homeowners the protection they require that far surpasses what is offered by the traditional NFIP." Mortgage professionals to watch ... l Mortgage Connect LP has appointed industry veteran Stephen Cazzaniga senior vice president of procurement and vendor management.
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“Homeownership is an important goal for many veterans and transitioning service members,” said USO Chief Development and Marketing Officer Lisa Turner Anastasi. “Guaranteed Rate provides them with guidance, support and education to help make that goal achievable, while enabling sound financial decisions in preparation for the future.”
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CIS Credit Solutions has named Paul Ryan, the former Speaker of the House of Representatives, to its newly formed advisory board. The Trump Administration has nominated Dana Wade to become the next Assistant Secretary for Housing and Commissioner of the Federal
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Housing Administration (FHA). NewDay USA has promoted Michael "Mo" Oursler to become its new chief operating officer (COO). Radian Group Inc. has appointed Derek Brummer as president of Radian’s Mortgage business. He will also continue to oversee the company’s Mortgage Insurance and Mortgage Risk Services businesses. Guaranty Home Mortgage Corporation has added Amber Heiss as an account executive. Heiss brings more than 10 years of experience in mortgage lending. Freddie Mac has announced the addition of financial services executive Mark Grier to its board of directors. ClosingCorp has announced that Dan Mugge has rejoined the company as chief technology officer. Guaranteed Rate has hired Joseph Grassi as its new chief risk officer. Open Mortgage has bolstered its footprint in the three-state Arkansas, Oklahoma and Missouri region with the appointment of Sherry Sherrell as regional branch
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manager and the opening of a new branch in Fayetteville, Ark. Reno Heine, chief executive officer of LemonBrew Technologies, has been named to the Forbes Real Estate Council, an invitationonly community for executives in the real estate industry. The Mortgage Bankers Association (MBA) has announced that Michael P. Flood has been named senior vice president of commercial/multifamily policy and member engagement.
Your turn National Mortgage Professional Magazine invites its readers to submit any information, events, passages, promotions, personal or professional occurrences that seem appropriate and/or other pertinent data to the attention of: Heard on the Street/Mortgage Professionals to Watch column Phone #: (516) 409-5555 E-mail: Newsroom@MortgageNewsNetwork.com
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©2020 NewRez LLC. All Rightss Reserved. 1100 Virginia Dr., Suite 125, Fort Washington, n PA 19034. Corp NMLS#: 3013 (www.nm . lsconsumeracccess.org). This communication is provided for use by real estate or mortgage profes e sionals only and is not intende d d for distribution to consumers or other third parties. This does not constitute an advertisement as defined by Section 1026.2(a)(2) of Regulation Z. Licensed by the AZ Department of Financial Institutions (license no. 919777). Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act. Loans madee or arranged pursuant to a California Financial Lenders Law license. GA - Georgia Residential Mortgage Licensee #22847. KS - Kansas Licensed Mortgage Company (licen nse no. MC.0025382). MA-New Pen nn Financial, LLC is licensed in Massachusetts as a Mortga g ge Lender. Massachusettts Mortgage Lender License - License Number: ML-3013. NJ- Licensed by the N.J. Department of Banking and Insurance. NY- Licensed Mortgaage Banker - NYS Department of Financial Services. RI - Rhode Island licensed lender. Add ditional licenses ava v ilable at www.n . ewrez.com.
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O Walk M Me portal feature for quick accesss to transactions and pipeline
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for a Line of Credit (from action date) v. Loan (from first payment) The appropriate codes for Counteroffers and Action Taken All rules for collecting Demographic Information, especially in a commercial context The appropriate codes for CoApplicant whenever an action is one that does not require a credit decision, such as withdrawn, closed incomplete or purchased
Avoid running aground Following is one area that is getting FIs stuck in the mud as they conduct HMDA data integrity reviews—how to report on Multifamily Affordable Housing Units. Identifying Multifamily loans is not as easy as it once was. Prior to 2018, the property type field identified the property securing the loan as either a one-to-four family dwelling, a manufactured dwelling, or a multifamily dwelling. Beginning with 2018, property type was eliminated and now there are multiple fields to complete, including Construction Method (Site Built, Manufactured Home), Manufactured Home Secured Property Type, Manufactured Home Land Property Interest, Total Units and Multifamily Affordable Units. The following focuses on some common pitfalls in these last two fields. Total Units represents the number of units securing the loan. It could include multiple singlefamily dwellings, and it could include multiple, but not all, condos or co-ops in a building. Importantly, you cannot rely on Total Units to determine the number of Multifamily Affordable Housing Units. To find the number of Multifamily Affordable Units, it’s best to approach this as a three-step analysis: l Step one, proceed only if this is a “dwelling” containing five or more individual units. l Step two, confirm that the loan is secured by the entire property. If not, the property is not considered Multifamily, and
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therefore enter “NA.” Step three, determine how many units are “affordable.” Enter “0” for a covered loan or application related to a multifamily dwelling that does not contain any such “affordable” income-restricted individual dwelling units. Please note the difference between when “NA” is used, and when “0” is used. A blank field will generate a validity edit. Also note that Multifamily property includes Manufactured Home Community.
The following are examples of different combinations of the Total Units and Multifamily Affordable Units fields: l A borrower purchases seven individual condominium units out of a 164-unit complex. Seven “Total Units” would be reported, if each is securing the loan. Because the individual units do not represent a multifamily dwelling, the “Multifamily Affordable” field would be populated with “NA.” l A borrower purchases an entire seven-unit complex with no affordable housing. While there are five or more units and the entire building is purchased, none of the dwellings in the seven-unit complex are affordable housing, therefore, Multifamily Affordable units would be populated with “zero.” l A borrower purchases an entire 12-unit complex with three affordable housing units. Twelve Total Units and three multifamily affordable units would be reported. Smooth sailing These are just a few tips to help FIs with shoring up any data integrity leaks. Avoid any last-minute rescue efforts by conducting regular data integrity reviews and performing periodic checks against the current edit list provided by the CFPB. Having reliable data will help you set a course for smooth sailing as you use the data for CRA and fair lending analytics.
Ann-Marie Lefebvre is a consulting manager with the Wolters Kluwer U.S. Advisory Services team, with industry experience and strong understanding of HMDA and Community Reinvestment Act requirements to create customized training programs for banking customers. She can be reached by e-mail at AnnMarie.Lefebvre@WoltersKluwer.com. © 2020 American Business Media LLC | 345 North Main Street, Suite 313 | West Hartford, CT 06117 | 516-409-5555
THE BECKWITH BLOG
Photo credit: Getty Images/Sean Pavone
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We all need to understand that we are witnessing an emergency, not the fall of our economy. The effects look the same and the damage will hurt, but by large percentages, all will be returned to normal and beyond when we pass this. The economy can recover faster than the pandemic! It is predicted that when we see the slightest light at the end of the tunnel, we will see all calm return and the economy will begin to repair itself before we are even at the end of the pandemic’s finish line. So we aren’t not looking for the end of the tunnel, we are looking to bridge the curve. While we are all trying to flatten the curve and are taking life-saving measures and sacrifices, we also need to do our part to keep things in order. The more we do this and attend to our referral partners, business partners and consumers, the better off our return will be!
Christine Beckwith is a 30-year mortgage industry veteran who has broken many glass ceilings and has blazed a trail for many female professionals to come. Christine is currently president and chief operating officer of 20/20 Vision for Success Coaching and Consulting, a decorated, sought after and award-winning leader. Christine may be reached by e-mail at Christine@VisionYourSuccess.net.
NAMMBA CONNECT 2020 The Westin Buckhead Atlanta 3391 Peachtree Road NE • Atlanta NAMMBA’s CONNECT 2020 provides you with an opportunity to network with mortgage and real estate professionals from across the real estate finance industry and will feature some of the top speakers in the mortgage and real estate industry. Featuring: l Three days packed with professional development, training and networking l More than 50 sales and training sessions l More than 60 Corporate Exhibitors in the Pavilion l Network with more than 800 attendees sales, operations and real estate agents Keynote Speakers and Featured Speakers currently booked for NAMMBA CONNECT 2020 include: l Jonathan Lawless, Fannie Mae’s Vice President for Product Development and Affordable Housing l Samuel Luna, Senior Director of Single-Family Affordable Lending for Freddie Mac l Roberto Monaco, Founder of InfluenceOlogy l Mitchel Kider, Chairman and Managing Partner of Weiner Brodsky Kider PC l Rob Chrisman, Capital Markets Consultant for Chrisman Inc. For more information, visit
NAMMBACONNECT.org/Connect2020
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The greatest gift we can give in a time of hope is the gift of authentic advice. Right now, as an industry, I am seeing great leadership and mentoring by those who are here to help everyone. Some are familiar voices and many are those who are emerging as new leaders. Be a part of this problem-solving army of leaders and entrepreneurs. Be a positive part of the solution and understand we WILL recover from this quickly. Keep hope and more than anything, stay safe. I send all of the well wishes, prayers and promises I can to be a part of that solution and help us keep the needle moving in the right direction as best I can. I also see incredible kindness, a convergence of industry leaders, true helpfulness and generosity, as always the American people show heart in our most dire times. It is that hope and heart we hang onto and lead with. We have been here before, but for different reasons. We will weather this storm once again and prevail. The younger generation of mortgage professionals are now being given their own industry war story, sadly, and yes, it’s a whopper. “An Economy Interrupted” at its height will be an incredible story to tell one day. Let’s just make sure we write a happy ending! Godspeed …
Save the Date … Wednesday-Saturday, September 16-19
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So how do I help in the recovery efforts now? 1. Stay calm: Be the voice of calm. Be informative, share vital news, talk your customers off the cliff, and keep transactions moving along, even if you have to hold them and keep them alive to a long-awaited finish line. 2. Educate yourself on the mortgage economy: Don’t fall into the trap of alarmist and uneducated economic news. We will recover from this “economic emergency” quickly and with vibrant returns. 3. Put on your oxygen mask before helping others: We need to ensure that we stay healthy. We need to follow the emergent advice. As a nation of traveling salespeople, for active professionals, this “quarantining” is hard. Look for the silver lining of time spent with family and a more peaceful existence while we hold down the emergency in front of us, and embrace the new world you are in. 4. Create a new normal: In order to be at peace with your new world, you need to create a true work space in your home. You
need to wake and get into routines for you and your children just like you would on a regular day. You get up, shower, exercise, go to work (in the other room) and you develop routines for your kids as well! 5. Increase your communication: It’s vital right now that you be the voice that is in constant contact with your clients and referral partners. As leaders, you must be proactive, calming and informative. 6. Keep things moving: Now, more than every “movement” of the transaction, we need to create an environment of normalcy in the collection of applications and provide hope to mortgage applicants. Create a line that we can move when this lifts. Do not stop being the trusted advisor.
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What Every Broker Should Know About Bank Statement Loans By Ryan Carry
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When you stop and think about it, bank statement lending is a product for the times we’re living in. It creates financing for people who are willing to take a chance on themselves. Most of these individuals are financially responsible but in many cases, have been sidelined because they don’t fit into the box.
1. Incorrect bank statement analysis: Income deposits used for qualification must be “business-related” income generated by the business (for services rendered). Deposits that are the result of “line of credit advances,” “refunds” or “general” account transfers can mean that the borrower is simply moving money in order to qualify for the loan. As a result, these deposits are generally not considered in the income calculation. For example, if a $100,000 line of credit advance is counted as income, that would generate
an additional $8,333/month in income. When this “income” is removed, that could cause the DTI to go from a qualifying 43 percent to disqualifying 60 percent. 2. Incorrect employment data on 1003: The business entity (employment) on the 1003 does not match the bank statement entity (business name). At the very least, this will lead to additional underwriting conditions. But often this defect is a sign that there are other red flags/disqualifiers that will prevent the loan from closing. 3. Invalid CPA: When a CPA/Tax Preparer Letter validates selfemployment and expense factors, due diligence is performed on the CPA/Tax Preparer to confirm the person signing the letter has the authority to do so. Frequently, the preparer cannot be found or their license is suspended or inactive. These are just a few of the red flags that a loan originator should be looking for with bank statement loans. Good wholesale partners will help you find and address these and others early on in the origination process, before they become deal breakers. With the right information and the right partner, bank statement loans no longer have to be a daunting prospect– they can be a growing revenue stream and a relationship builder for any shop.
Ryan Carry is the vice president of national sales for Impac Mortgage Corp. In this role, Carry is responsible for the growth and performance of the company’s Wholesale Division. He manages a team of more than 40 account executives, the client success team and the TPO marketing team, serving more than 1,000 originator clients nationwide.
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So why the confusion? For one thing, non-QM is still a relatively new concept for many loan originators. In the aftermath of the mortgage crisis, the bulk of their business was FHA, or GSE, W-2 DU/LP loans. There was a simple formula to originate these loans: Take a couple of years of W-2s, throw them in the DU or LP spin cycle and you’ve got your decision. To be successful at bank statement lending requires the active engagement of the loan officer and a strong partnership with the wholesaler. The wholesalers with the best origination track records in this category spend a lot of time and training to explain the nuances of income calculation to their partners, so there are fewer surprises and disappointments. These wholesalers should also offer technology and real-time support to identify possible errors and/or issues early enough in the process to save the loans. Why do we go to these lengths? First of all because we want the loan; and secondly, because we know every deal is either a relationship builder … or killer. The last thing anyone wants is a situation where your referral partner’s best client is in the middle of escrow and someone missed the deposit on page 73 of the bank statement and the deal gets declined. The diverse income streams of today’s self-employed borrower are the main reason why bank
statement loans are so challenging. It’s not unusual for many prospects to have multiple sources of income: Think of a freelance designer, who works for Uber part-time and who also has rental income from Airbnb. This is definitely not the selfemployed borrower circa 2000. In many cases, these borrowers work and live out of the same personal checking account that we’re pulling income from. So, what you have is multiple income streams and personal expenses, like Trader Joe’s and Nordstrom’s, mixed in with business expenses. This is often where things get muddy. It takes skill and experience to work through these issues and calculate qualifying income. But there are also some common defects that can derail or at least delay bank statement loan approvals:
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or the past few years, bank statement loans have been the product of choice for most non-QM originators. But despite all the attention that they have received, these loans have one of, if not, the lowest pull through rates of any non-QM product. I’d argue that there are two reasons for this. The first is, there continues to be a fair amount of confusion over how to derive the income calculation. The second is, our industry has been slow to understand who today’s self-employed customer really is and how diverse and complex their incomes may be. Ten or 15 years ago, the typical bank statement loan prospect was a doctor, a lawyer, a high-commissioned salesperson or business owner: Someone with a name on a building or at least on an office door. But that’s not the case anymore. Over the past decade, technology and the changing nature of work and opportunities have created millions more self-employed customers. According to FreshBook, a cloud-based HR platform, by the end of this year there will be 42 million selfemployed Americans. They’re contractors, freelancers, Uber drivers, and yes, even mortgage brokers. There is also a strong connection between the Internet and entrepreneurship. Today, you don’t have to go to Wharton to start a business and be an entrepreneur, nor do you need a record contract to be an overnight sensation. If you’ve got talent you can put your music up on SoundCloud and Spotify, attract a million followers and make a million, all on your own.
Improving Your Referrals Numbers by Over 50 Percent for $1.99 or Less By Matt Muscat eople go through life with low expectations. We are raised this way, people tell you to "not get your hopes up" from a young age because they don't want us to get hurt. Adults are all 'professional and tough' on the outside, but real people on the inside, and people like working with real people! People remember emotional times. People remember stressful times. One of the most stressful times for many people can be flying. Southwest Airlines took full advantage of the fact that people remember traveling, and decided to amplify their customer experience to make it memorable. One of the best ways to make something memorable? Insert some happiness and fun. Want an example? Check out this rapping flight attendant (YouTube.com/watch?v=pvdCFY Lf_JI) who spiced up the normally boring safety announcements. Nobody goes into the mortgage process with high expectations. Sure, people might be excited to buy a home but very few people are excited at the prospect of filling out hundreds of forms and
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surrendering documents they didn't even know they had. The closing table, in general, can be a stressful transaction ordeal for many people, but it is the biggest opportunity that agents, lenders and other settlement providers have. Now … you real estate professionals. Why not take your initial meetings with clients, and especially the closing and find a way to make them undeniably awesome? The title of this article was how to increase referrals by over 50 percent for $1.99 or less, and you can do just that by making the process of working with you spectacular. The concept isn't new: When you create raving fans they refer you more. The best part? People you are working with know more people who are about to start looking to buy a home. This concept is called a "Reticular Activator.” It is the part of your brain that is always on alert, it notices things similar to what it is going through. Bam! Your clients are buying a house, and all of a sudden they know a ton of people also buying a house. So the million dollar question is how you can make the closing/application/initial meeting
more fun, memorable wine. I have seen and awesome? agents bring mini “Nobody goes into Here are some bottles of bubble ideas, but just in case the mortgage process what do you they happen with high expectations. think? to find "the one" with Sure, people might be excited Music buyers. to buy a home but very few Price ... Free Care people are excited at the Play the packages prospect of filling out hundreds Price ... song "Happy" Cheap of forms and surrendering really, really, Remember documents they didn't even when you loud (for the right client). started college know they had.” Other songs that and mom sent you a evoke happiness work surprise care package? too—if they won out in a Why not come up with a fun competitive situation try playing buyer or seller package? Check “All I Do Is Win.” out your local gag store and stock up on things that are funny Change up a boring norm gag items that you think your Price ... Free clients will get a kick out of it. If Take a normally serious situation they love whiskey or wine, put a and add your own twist. Has bottle in. Are your clients sellers anyone ever seen a creative way to who are going to be constantly go through documents at closing? displaced? Give them five How can you make this fun. different small gift cards for local Channel your inner Southwest restaurants or bars that they can Flight Attendant :) use when you kick them out to do showings. Go the extra mile by Pop bottles adding notes explaining why each Price ... Cheap item is in the package. Where it is appropriate, bring a bottle of champagne/sparkling Just smile Price ... Free No matter what your budget, you can afford to smile. Smiles are infectious, if nothing else smile, and be seen smiling as much as possible. Even if you are stressed, don't let it show. Keep calm and show everyone that you thrive under pressure. For an added bonus, use a tool like BombBomb to send out short videos where you enthusiastically explain to your clients what's going on.
Matt Muscat is a career marketer in the real estate industry. Author of the Amazon number one TAG: The Tangible Action Guide For Real Estate Marketing, Matt is the director of marketing for Treadstone Funding. He may be reached by phone at (616) 3262192 or e-mail MattM@TreadstoneMortgage.com.
NATIONAL MORTGAGE PROFESSIONAL MAGAZINE’S
calendar of events MAY 2020 Monday-Wednesday, May 11-13 Maryland Mortgage Bankers and Brokers Association 2020 Mid-Atlantic Regional Conference MGM National Harbor 101 MGM National Avenue Oxon Hill, Md. For more information, visit MARCMBA.org. Sunday-Wednesday, May 31-June 3 Mortgage Bankers Association 2020 Chairman's Conference The Resort at Pelican Hill 22701 South Pelican Road Newport Coast, Calif. For more information, visit MBA.org.
JULY 2020 Monday-Wednesday, July 6-8 2020 Ultimate Mortgage Expo Hotel Monteleone 214 Royal Street New Orleans For more information, visit UltimateMortgageExpo.com.
Thursday, July 30 NRMLA 2020 Western Regional Meeting Hotel Irvine 17900 Jamboree Road Irvine, Calif. For more information, visit NRMLAOnline.org. AUGUST 2020 Wednesday-Saturday, August 5-8 2020 FAMP State Convention & Trade Show Hilton Orlando Bonnet Creek 14100 Bonnet Creek Resort Lane Orlando, Fla. For more information, visit OurFAMP.org. Tuesday, August 11 2020 Carolinas Connect Mortgage Expo Embassy Suites Hilton Charlotte 4800 South Tryon Street Charlotte, N.C. For more information, visit CarolinasConnectMortgage.com. Friday, Sunday, August 21-23 Originator Connect 2020 Planet Hollywood Las Vegas 3667 Las Vegas Boulevard South Las Vegas For more information, visit OriginatorConnect.com.
Sunday-Thursday, October 4-8 37th Annual Regional Conference of MBAs Hard Rock Casino Hotel 1000 Boardwalk Atlantic City, N.J. For more information, visit MBANJ.com.
Thursday, September 10 2020 Texas Mortgage Roundup Dallas DoubleTree by Hilton Dallas 4099 Valley View Lane Dallas, Texas For more information, visit TXMortgageRoundup.com.
Tuesday, October 13 2020 California Mortgage ExpoSan Francisco Radisson Oakland Airport Hotel 8400 Edes Avenue Oakland, Calif. For more information, visit CAMortgageExpo.com/SanFrancisco.
Wednesday-Saturday, September 16-19 NAMMBA CONNECT 2020 The Westin Buckhead Atlanta 3391 Peachtree Road NE • Atlanta For more information, visit NAMMBACONNECT.org.
Wednesday, October 21 2020 Suncoast Mortgage Expo Embassy Suites Tampa—USF 3705 Spectrum Boulevard Tampa, Fla. For more information, visit SuncoastMortgageExpo.com.
Thursday, September 17 2020 California Mortgage Expo-Glendale Hilton Los Angeles North/Glendale 100 West Glenoaks Boulevard Glendale, Calif. For more information, visit CAMortgageExpo.com/Glendale-2.
NOVEMBER 2020 Thursday, November 5 2020 Utah Mortgage Expo & Show Park City Marriott 1895 Sidewinder Drive Park City, Utah For more information, visit UtahMortgageShow.com.
Thursday, September 24 2020 Chicago Mortgage Originators Expo Holiday Inn Chicago SW 6201 Jollet Road Countryside, Ill. For more information, visit ChicagoOriginators.com.
Wednesday, November 11 2020 New York Mortgage Expo Crowne Plaza 63 Executive Boulevard Suffern, N.Y. For more information, visit NYMortgageExpo.com.
OCTOBER 2020 Thursday, October 1 2020 Colorado Mortgage Summit Embassy Suites by Hilton Denver Tech Center North 7525 East Hampden Avenue Denver, Colo. For more information, visit COMortgageSummit.com.
Thursday, November 19 2020 Texas Mortgage RoundupHouston Sheraton North Houston at George Bush Intercontinental 15700 John F Kennedy Boulevard Houston, Texas For more information, visit TXMortgageRoundup.com.
To submit your entry for inclusion in the National Mortgage Professional Calendar of Events, please e-mail the details of your event, along with contact information, to newsroom@mortgagenewsnetwork.com.
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Thursday, June 25 MBA's 2020 Document Custody Workshop Ritz-Carlton, Tysons Corner Tysons Galleria 1700 Tysons Boulevard McLean, Va. For more information, visit MBA.org.
Thursday, July 23 2020 Arizona Mortgage Expo Wild Horse Pass Casino & Resort 5040 Wild Horse Pass Boulevard Chandler, Ariz. For more information, visit AZMortgageExpo.com.
SEPTEMBER 2020 Wednesday, September 2 2020 Great Northwest Mortgage Expo—Washington Edition Hilton Bellevue 300 112th Avenue SE Bellevue, Wash. For more information, visit GreatNorthwestExpo.com.
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JUNE 2020 Tuesday, June 23 2020 Great Northwest Mortgage Expo—Portland Edition Holiday Inn Portland South Hotel & Convention Center 25425 SW 95th Avenue Wilsonville, Ore. For more information, visit GreatNorthwestExpo.com.
Wednesday, July 15 2020 Mid-South Mortgage Expo Sheraton Memphis Downtown 250 North Main Street Memphis, Tenn. For more information, visit MidSouthMortgageExpo.com.
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