NAMBCentral April 2024

NATIONAL ASSOCIATION OF MORTGAGE BROKERS MAGAZINE

APRIL 2024

April 2024

by CHRIS STURDIVANT

President’s Letter

BY VALERIE SAUNDERS

NAMB is looking forward to our 33rd Annual Legislative and Regulatory Conference!

As the only volunteer-driven national organization representing mortgage brokers, we’re excited to host members of the U.S. Congress, FHFA, HUD, Freddie Mac, the National Housing Conference, UnidosUS and many more national thought leaders.

See page 7 for the complete show guide!

NAMB understands the importance of its role as the only volunteer-led organization focusing nationally on improving the industry landscape for mortgage professionals & borrowers. For generations NAMB has worked solely to represent its members’ best interests & we are grateful for the ability to lobby for positive change, hand-in-hand with our members.

Our members & board members will spend a day at the Capitol building speaking with lawmakers, voicing their positions on matters that impact their livelihoods.

Priorities for 2024 include the Homebuyers' Privacy Protection Act (HR 7297 & S.3502), The Love Lives on Act of 2023 (S. 1266), and H.R. 2827, the Captain James C. Edge Gold Star Spouse Equity Act. See page XX for all of NAMB’s 2024 Policy Prioirities.

NAMB remains steadfast on the forefront of change. We work with Congress to improve the climate in which our members & non-members work, a responsibility we take seriously.

We are a volunteer-led, member driven organization which cares deeply about the mortgage industry, is not influenced by outside entities, and has a singular purpose: to keep the industry strong for our members while creating a better environment for everyone involved within the homeownership lifecycle. NC

The National Association of Mortgage Brokers is the voice of the mortgage industry, representing the interests of mortgage professionals and homebuyers since 1973.

Meet the NAMB Board

MICHAEL FARRELL, CRMS, CVLS, CFMP, CREV OAMP PRESIDENT, NAMB VOLUNTEER DIRECTOR & MEMBERSHIP COMMITTEE CHAIR

Nations Lending / TotalChoice Mortgage Senior Divisional Manager mike.farrell@namb.org

Licensed in 1990 Ohio & Florida

Navy vet Mike Farrell was born & raised in Columbus, Ohio. He began his professional career at Bank One (now Chase), moved on to Trans America Financial Services & opened his own brokerage in 1989 – which now operates as a full service division of Nations Lending Corporation, branded as TotalChoice Mortgage. He specializes in VA lending, construction financing & a nity partnerships.

In 2005 Mike was elected president of the Ohio Association of Mortgage Brokers; the org is now rebranded as OAMP with Mike once again in the Chairman role. A longtime NAMB member, Mike sat on its delegate council from 2004-07. In recent years, Mike has been chair of the PAC, LAF & Tech committees; he’s currently Membership chair for 2024-26.

How does NAMB membership help you? NAMB provides vital protections & insight to regulatory & legislative issues and provides a venue to collaborate with like-minded professionals.

What led you to mortgage? I always wanted to be a banker but found focusing on mortgage originations provided a great livelihood & career.

What motivates you in your current position? Helping clients obtain their housing dreams.

Favorite business app: CardTapp, PreApproveMeApp

What was your first paying job? Bank One, 1988

If you could have a career doing anything else, what would it be? Building houses.

What’s your favorite hobby? Hunting, fishing & any time I’m working with my hands.

Favorite vacation spot? Colorado

Where do you see yourself in 10 years? Retired. NC

NAMB’s Membership Committee Chair would like to remind members to 1, DOWNLOAD THE APP and 2, UPDATE YOUR PROFILE

Take the boring out of your marketing and Xcelerate your growth!

Broker Marketing Xcelerator originatorfuel.com/bmx

Policy Priorities

As the leading national trade association for the mortgage industry, NAMB's active lobbying & advocacy e orts focus on national & state issues to protect the interests of its members & borrowers. Read on for this year’s policy priorities; complete text at namb.org/advocacy

Consumer Protection Against Trigger Leads

When a consumer applies for a mortgage, whether purchase or refinance, the credit inquiry generated by a mortgage company is a trigger which notifies credit bureaus that the consumer is interested in applying for financing. This "trigger lead" is then sold by credit bureaus to data brokers including competing mortgage companies without the consumer’s knowledge or approval.

NAMB believes that the act of applying for a mortgage should not be made public & that trigger leads should be banned. In the era of dark web information being sold, and numerous database breaches, the consumer needs to be given more control over their personal information. NAMB believes contacting consumers during the complex mortgage process could be harmful & confusing, or potentially fraudulent.

Protecting Homeowners from Catastrophic Losses Caused by Floods

The National Flood Insurance Program (NFIP) insures approximately 4.9 million policyholders in nearly 22,600 participating communities. Largely solvent for most of its history, the NFIP today is about $20.5 billion in debt, the result of such large-scale disasters as Hurricane Katrina in 2005, Hurricane Sandy in 2012 & Hurricane Harvey in 2017. Congress last reauthorized the NFIP on a long-term basis in 2012. Since then, the program has been temporarily extended nearly 20 times, reflecting an inability to fashion bipartisan approaches to reforming the program.

NAMB supports a full reauthorization of the NFIP including provisions that allow for the most a ordable rates & e ective coverage. There are a number of reform proposals pending in Congress that we are supportive of. In the absence of a consensus on these measures, we call on Congress to adopt a bill that creates a 5-year pilot program of a means-tested voucher program where the federal government would provide direct assistance to be used to pay flood insurance premiums for those that meet certain income requirements.

Legislative Changes Needed to Expand Small Creditor Definition Under QM Rule

Small business mortgage broker businesses are treated, under the Qualified Mortgage Rule, in the same manner as multi-billion dollar depository & non-depository banking and mortgage compa-

nies who lend their own money & service their own originations. By treating the small business mortgage broker as a large business, they are not a orded the opportunity to broker loan transactions to the low- and moderate-income borrower due to the Qualified Mortgage 3 percent points & fee cap.

A definitional error that occurred while formulating the Qualified Mortgage definitions of the Wall Street Reform and Consumer Protection Act of 2009 (H.R. 4173) remains unaddressed. This error has caused unintended consequences for low- & moderate-income consumers by removing competition.

Importantly, the 3% QM Rule definitional error creates a disparate impact on low- & moderate-income borrowers, placing them in higher rate loans than they could otherwise qualify. Specifically, this provision negatively impacts loans in the $100,000 to $200,000 range because brokered mortgages must count excessive numbers of mortgage loan related items within the 3% cap.

NAMB supports removing from the 3% cap on mortgage broker company payments that are already included in the rate set by the lender/creditor. Commission payments to the loan originator will continue to be counted in the 3% cap.

Enhanced Benefits for Gold Star Spouses

Following the loss of their service members, Gold Star spouses often face di culties ranging from the change to single incomes to access to housing benefits. The Departments of Defense & Veteran A airs provide various benefits to assist with those hardships. However, many of those benefits are forfeited once a surviving spouse remarries before age 57, or in some cases, age 55.

NAMB supports legislation that would restore non-monetary survivor benefits to the remarried spouses of fallen U.S. service members. This legislation applies to surviving spouses who are eligible for the Gold Star Lapel Button without regard for whether they have remarried.

Protecting the Rights of Veterans Utilizing VA Home Loans

No VA-approved lender may discriminate against a buyer. This includes situations where the VA loan applicant is temporarily disabled, pregnant or falls into another category that a ects the borrower’s income temporarily but does not a ect the overall employment status or viability of the borrower as a good credit risk. Correspondingly, no seller can refuse to o er a property on a discriminatory basis – the seller is required to comply with Fair Housing Act laws.

Unfortunately, NAMB has discovered that sellers are increasingly being encouraged not to sell to veterans who are utilizing VA mortgage loans because of the enhanced standards these loans contain. NAMB supports a federal investigation into these discriminatory practices. Despite the laws in place to protect veterans, they are losing out on their dreams of homeownership or forced into more expensive loans. NC

Hire a VA Compliantly

BY JOEL HENRY

My fellow NAMB members: I’ve noticed mortgage brokers increasingly turning to virtual assistants (VAs) to streamline operations & boost productivity. The post-COVID purchase market has put pressure on margins while more work is needed on the front end to get to a funded loan.

As the demand for virtual assistants continues to rise, mortgage brokers should understand compliance regulations when it comes to licensed loan activities. Let’s explore your key compliance considerations when looking to harness the power of remote support – while staying within the bounds of the law.

There is uncertainty & misunderstanding around the definition of “licensed activities” and who can perform them. When I speak with state regulators & ask them to define “licensed activities,” they often admit there is not as much clarity around some

There is uncertainty & misunderstanding around the definition of “licensed activities” and who can perform them.

activities as there should be. They concede there are individuals & mortgage companies not operating compliantly as a result.

When we pulled down every state's loan application for a mortgage broker/company license on the NMLS, we noticed many of them used similar language on what defines a licensed activity. This included terms like processing, taking loan apps & placing/selling mortgage loans for gain. In all cases, there is no mention of a critical role in the broker channel: the Loan O cer Assistant (LOA). In the broker world, LOAs work on files prior to processing but they do not originate, accept applications (the LO does this) or negotiate terms (the LO also usually does this). Naturally many brokers I speak with are under the impression that the duties of an LOA do not fall under licensed activities.

To get to the bottom of this, our team sent an email to every state regulator & provided the following simple definition of an LOA to confirm it comprised licensed activities: “The LOA reviews documentation such as a credit report, bank statement & paystubs to evaluate a borrower's credit worthiness prior to processing.” In most cases, the states responded by clarifying that their definition of the term “processing” actually includes the LOA activities in our email. They determined that essentially any activities that take place after a borrower fills out an application are considered licensed.

CONTINUED ON PAGE 16

Surety Bonds 101

BY CHRIS STURDIVANT

Mortgage brokers & lenders are often required to obtain a surety bond as part of their state licensure process. These surety bonds act as a financial safety net, letting the public (regulators & consumers) know that a mortgage broker or lender is financially responsible & capable of fulfilling their obligations.

It’s important to note that surety bonds are a protection for the public and a liability for mortgage brokers & lenders. If a claim is made against their bond, the bonding company will seek reimbursement from the broker or lender. This is why insurance companies require indemnity agreements & mortgage brokers know they’re personally liable for their bond obligations.

The good news is that technology has helped make obtaining mortgage broker bonds quicker & more a ordable. The NMLS now allows most surety bonds to be filed by insurance brokers electronically (Electronic Surety Bonds or ESB). Some new insurance markets even o er bonds to brokers & lenders with no underwriting requirements necessary (no credit checks, no financials, up to $1 million in aggregate liability) & at much lower rates.

NNA Surety has mortgage bonds available for $6 per $1,000 in liability with no underwriting required (rates subject to change without notice).

What to know when obtaining your surety bond(s):

1. What type of license do you have? Many regulators have di erent bond forms that di erentiate between Mortgage Broker, Mortgage Lender, Mortgage Originator, Corporation vs. Partnership, Lender vs. Correspondent, etc. Choose the surety bond that matches your exact license type.

2. How much liability coverage do you need? Some states base liability requirements on the mortgage company’s origination volume from the previous year. Other states have flat liability requirements for all licensees. Determine the liability amount required by your regulator to prevent delays when filing your license. Bond liability amounts can often be found on the state licensing page of the NMLS Resource Center:

3. Grant your insurance agency permission to issue bonds on your behalf in the NMLS system. You’ll need your insurance agency’s NPN number to use the lookup tool in the NMLS.

4. Check your state’s requirements. Identify if your state requires a paper bond that you will mail to the regulator.

Once you’ve determined the type of bond & liability amount needed, you’re ready to purchase your bond. Bonds can be easily purchased online & obtained within minutes. NMLS filings can take a few hours after purchase. NC

Chris Sturdivant, Vice President of Business Development for NNA Surety Bonds & The National Notary Association, is a licensed insurance agent in all 50 states. He works closely with the licensing & compliance departments of the largest banks & non-bank mortgage companies in the U.S. csturdivant@nnasuretybonds.com, 818-739-4086.

COMPLIANCE, CONTINUED FROM PAGE 12

Next, it was important for us to understand the definition of “operating under a license.” Essentially, who gets to perform licensed activities? Here things are pretty standard. In most states, a person can perform licensed activities if they are either (1) individually licensed thus operating under their own license or (2) a W2 (direct employee) of a licensed mortgage company operating under the company's license. As an employer, if you are paying individuals to perform licensed loan activities and they are not individually licensed, simply make sure they are paid as a W2.

We’ve now arrived at the crux of the issue: Virtual assistants cannot be individually licensed, nor can they be a W2 employee because they do not have SSNs & are not U.S. citizens.

One option is to incorporate your company in the foreign country where you want to source your virtual assistant. We did this in the Philippines, where our company, BrokerVA, is incorporated. Our application took one full year from start to finish.

We first applied to the government of the Philippines & then we applied to all of the individual agencies like their tax agency, social security agency, health agencies & so on. We maintain an operational unit that provides monthly reporting to these agencies. They also handle our quarterly audits. Generally, there is a capital requirement to maintain a $200k balance in an approved Filipino bank account while operating in the country.

Lastly, there are requirements to maintain oversight, security, data policies, background checking and, in some cases, the establishment of an NMLS branch. While this is a lot of work, it does satisfy the requirement in most states; your overseas sta will now operate as a direct employee under your company license.

The second option is an easier one – you can get a compliant virtual assistant from BrokerVA! BrokerVA is the first & only compliant virtual assistant sta ng service for mortgage brokers. Licensed in over 20 states, BrokerVA empowers brokers to compete with banks & direct lenders who lower their operational support costs by sta ng experienced & highly trained mortgage professionals overseas. NC

Joel Henry heads up BrokerVA’s Growth department. Visit brokerva.com to learn more!