COLORADO MORTGAGE PROFESSIONAL MAGAZINE
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Mortgage PROFESSIONAL C O L O R A D O
Your source for the latest on originations, settlement, and servicing
Colorado Association of Mortgage Brokers State Office The State Affiliate of the National Association of Mortgage Brokers 7010 Broadway, Suite 320 O Denver, CO 80221 Phone: (303) 991-2240 O Fax: (303) 991-2241 E-mail: email@example.com O Web site: www.camb.org
Rod Cameron, CCMB Kay Cleland, CMC, CRMS Tiffany Hughes Ruth Lee Douglas L. Braden, CCMB
CAMB 2009 OFFICERS Phone # President (303) 997-7117 Vice President (720) 670-0124 Treasurer (720) 873-8848 Secretary (303) 942-2004 Immediate Past President (970) 226-2992
E-mail firstname.lastname@example.org email@example.com firstname.lastname@example.org email@example.com firstname.lastname@example.org
Shelley Ervin Kate Gardner Richard Kim
CAMB 2009 DIRECTORS (303) 722-7345 (720) 565-4065 (720) 748-1518
email@example.com firstname.lastname@example.org email@example.com
Kay Cleland, CMC, CRMS Douglas L. Braden, CCMB Ronnie Ray Jenny Gilbreath William F. Kidwell Jr., GMA Dale Davis
CAMB 2009 COMMITTEE CHAIRS Certification/Education (720) 670-0124 Communications/Public Relations (970) 226-2992 Education (303) 733-5950 Events (303) 801-0530 Government Affairs (303) 674-1200 Membership (720) 327-1440
firstname.lastname@example.org email@example.com firstname.lastname@example.org email@example.com firstname.lastname@example.org
CAMB 2009 Board of Directors President Rod Cameron, CCMB of Cameron Financial Services Inc. Rod Cameron’s background includes 20 years as a corporate controller and, most recently, seven years in the mortgage industry. In 2005, he received the Certified Colorado Mortgage Broker (CCMB) designation. Rod’s prior education includes a bachelor of arts in accounting, a master of business administration and a certificate in personal financial planning. “I am very excited at the opportunities and challenges that lie ahead in 2009 for the growth of CAMB,” said Rod. “The association has and will be providing more opportunities for the mortgage professional to advance through education and professionally. Through national certification programs, CAMB will be raising the bar for those mortgage professionals that want the challenge. Educational programs will be offered on a consistent basis, and I plan to be proactive in facilitating education and professional programs of the National Association of Mortgage Brokers.”
Secretary Ruth Lee of Titan Lenders Corporation Ruth Lee is currently with Titan Lenders Corporation. She is a south Louisiana native with a bachelor of arts degree in economics and politics from Mount Holyoke College. Ruth started her career in the Washington, D.C. mortgage market in 1995 as a highly successful originator. In 1997, she became the president of Westlake Mortgage in Austin, Texas. Capitalizing on 10 successful years in the mortgage industry, Ruth joined Guardian in late 2005 to spearhead their national business development. Ruth is heavily involved in CAMB’s efforts on membership retention, fundraising and education.
Immediate Past President Douglas L. Braden, CCMB of Northern Colorado Mortgage Company Douglas L. Braden, CCMB has more than 25 years of experience in the mortgage industry—owning and managing broker offices, originating all types of residential mortgage loans including Fannie Mae direct, Freddie Mac, Federal Housing Administration, U.S. Department of Veterans Affairs, investment property and, now, small commercial loans. Douglas’ involvement with CAMB has taken him across the country to help deal with the turbulent climate facing the industry. CAMB is committed to raising the standards of loan originators, working together with legislators both in the state of Colorado and in Washington, D.C. One of the main concerns today is to ensure that the consumer will truly be served by new legislation and not left without the freedom to choose from a wide variety of options. Current legislation could take that freedom of choice away from consumers and leave them with a limited ability to achieve their goals. For honest advice, seek out a qualified loan professional who subscribes to a strict code of ethics and best practices standard, such as CAMB and NAMB demands from its members. You can find Douglas registered with the state of Colorado at www.dora.state.co.us/real-estate, and as a member of CAMB and NAMB at www.camb.org and www.namb.org, respectively.
Director Shelley Ervin of Clarion Mortgage Capital Shelley Ervin has been a mortgage consultant or two and a half years. She graduated from the Xinnix Academy for mortgage professionals in November 2005 and was honored as the valedictorian of her class. Prior to entering the mortgage industry, Shelley was the director of sales and marketing for the Hotel Boulderado in Boulder, Colo. and the Table Mountain Inn in Golden, Colo. She also enjoyed an extensive career in the retail industry and worked for Federated Department Stores and Macy’s in Southern California as vice president of stores. Shelly graduated with a Bachelor of Fine Arts from Ohio University in Athens, Ohio. She moved to Colorado in 1992 so that she could be near the Rocky Mountains and enjoy her love of the outdoors. In 2006, Shelley served as the Events Committee chair for CAMB. This year, she continues to chair the Events Committee and also chairs the Industry Partners Committee. Shelley is a member of the CAMB Board of Directors. She has been an active volunteer for Race for the Cure and Volunteers for Outdoor Colorado. Shelly teaches downhill skiing in the winter and enjoys racing her mountain bike in the summer.
Richard Kim of Certified Mortgage Corporation Richard Kim is the co-founder and vice president of Certified Mortgage Corporation, which was founded in 2002. He attended the University of San Francisco in 1984, but received his Bachelor of Science in biology/chemistry at Metropolitan State College of Denver in 1999. “I entered the mortgage industry because it was a field that is fascinating and exciting to an individual [and] where a person could interact with people with a variety of backgrounds,” said Richard. His hobbies are golfing, traveling, skiing and going to classical music performances. CO 1 O MAY 2009
Tiffany Hughes of Horizon Financial Services Inc. Tiffany Hughes graduated from Colorado State University in 1991 and entered the mortgage industry in 1996 by working for a large local bank in various capacities. She worked her way up to assistant vice president within two years and soon decided she could better serve clients as a Mortgage Broker. Tiffany founded Horizon Financial Services Inc. in 2000 and has two offices along the Front Range. She has been a member of NAMB and CAMB since 2000 and has recently been certified as a state trainer for CAMB. “I decided to get more involved with CAMB to help raise the profile of mortgage professionals,” she said. “There are exciting things on the horizon for Colorado Mortgage Brokers, and I am proud to be an active participant in change.”
Kate Gardner of Gardner Financial Kate Gardner is the founder of Gardner Financial, a comprehensive savings planning company that utilizes mortgage management as a key tool for wealth building. Kate and her team help clients achieve financial independence through management of key liabilities. They like to point out that the home is both the biggest asset, as well as the biggest liability, for most Americans. Learning how to manage home wealth enables Gardner Financial clients to borrow smart and retire rich. Kate started in the mortgage industry in 2000 in San Jose, Calif. She and her husband, Tom, of 19 years and their three daughters relocated to Boulder, Colo. in 2004. Kate is now a partner in the mortgage firm of J. Allston Mortgage LLC. Through J. Allston Mortgage, Kate offers clients forward and reverse mortgages, Federal Housing Administration products, and education about home wealth. Gardner Financial, launched in April 2007, brings the benefits of smart borrowing decisions across the balance sheet to build assets. The Gardner Financial process delivers clear priorities for saving for the future, and educates clients about home equity management and the need to put equity into a cash position to leverage its return. Kate graduated from the University of Pennsylvania with a Bachelor of Arts in economics in 1982. She is a member of CAMB and CMLA. She is a Missed Fortune Associate, and has earned the Certified Mortgage Planning Specialist and Certified Liabilities Advisor designations. She is mortgage licensed in California and Colorado, and insurance licensed in 22 states.
COLORADO MORTGAGE PROFESSIONAL MAGAZINE
Kay Cleland, CMC, CRMS of NetMore America Inc. Kay Cleland, CMC, CRMS is actively involved in the industry, participating in CAMB and the Colorado Mortgage Lenders Association (CMLA), as well as providing free education on a weekly basis to brokers. Kay began her career in 1982, and joined National City Mortgage in January of 2001. After building an extremely successful and profitable operation in the Midwest for National City, she was relocated to Denver to build the Mountain Region in July 2005. Prior to her employment with National City Mortgage, Kay held several positions with various mortgage companies—including loan officer, marketing, closing, processing, underwriting, account executive and vice president. All in all, she has 25 years of experience in the industry. Among other honors, Kay has served as president and board member for the Greater Indiana Mortgage Bankers Association; and board member, committee chair and director of education for the Indiana Association of Mortgage Brokers. She is a direct endorsed underwriter, holds the NAMB designations of Certified Mortgage Consultant (CMC) and Certified Residential Mortgage Specialist (CRMS), is an approved state trainer and is currently the Education Committee chair for CAMB.
Director Vice President
CAMB’s education providers The Colorado Association of Mortgage Brokers is partnering with the following companies to offer a discount to CAMB members for online and live education. Make sure you tell them you are a CAMB member when you register.
CAMB Affiliate Member Providers
State education requirement exemption Please note, that in order to be exempt from the Mortgage 101 and Trade Practices portion of the coursework and the General Portion of the examination you must meet all five of the following criteria: O Currently maintain a mortgage broker license. O A member of a mortgage broker association approved for exemption by the Division of Real Estate. O Maintain a mortgage broker association designation (CMC, CRMS, CCMB, see below for info) that is current and in good standing. O Provide the letter of certification to the education course provider prior to completing coursework. O Provide the letter of certification to PSI prior to taking the exam.
Designations CAMB has partnered with the National Association of Mortgage Brokers to bring quality education to all regions of the state. Currently, there are four different designations available via NAMB and CAMB.
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General Mortgage Associate (GMA) Certified Mortgage Consultant (CMC) Certified Residential Mortgage Specialist (CRMS) Certified Colorado Mortgage Broker (CCMB): This designation can be supported by taking eight continuing education credits per year. Credits are accepted from the following programs: NAMB, CAMB CE Classes, Training Pro, American Real Estate College, Mortgage Training Institute (MTI), and some other industry association programs (please check with the CAMB office for verification).
Additional training: For those individuals looking to break into the mortgage industry, several colleges offer formal education: O TrainingPro......................................Continuing Education for Mortgage Brokers O American Real Estate College ........Continuing Education for Real Estate Brokers O Mortgage Training Institute ............Continuing Education for Mortgage Brokers
For more information, contact the CAMB office at (303) 991-2240, e-mail email@example.com or visit www.camb.org.
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COLORADO MORTGAGE PROFESSIONAL MAGAZINE
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NMP Mortgage Professional of the Month: Hugh Miller, President and CEO of Reliance First Capital LLC
Ask Tommy: Your QC Expert By Tommy A. Duncan
Trend Spotter: The other 50 percent By Gibran Nicholas
A view from the “C” suite: Survivor By David Lykken and Scott Woll
Lock, stock and barrel By Michael Larssen, CMB
A closer look at Cost Segregation Studies
By Atare E. Agbamu, CRMS
The NAMB perspective
Good-enough technology … is this the best we can do?
By Ron Litt
Value nation: The mortgage crisis and the case of no collateral By Charlie W. Elliott Jr. MAI, SRA
Ask Brian By Brian Sacks
Make sure red flag rules are on your radar screen By Steve Grant
Job hunting in today’s market
Look for ‘the one’ when it comes to branch partnerships
By Joe Ramis
Loan mod forensic loan audit: Part I of III By Bonnie Wilt-Hild
National Mortgage Professional Magazine Book Review: Think Reverse! By Liz Schulz
These are the end of days By Eric Weinstein
COM MER CIAL REVE R MOR SE TGA GES
62+ MAIN STREET
COLORADO MORTGAGE PROFESSIONAL MAGAZINE
By Jeff Mifsud
The FHA insider: The FHA responds to declining markets
RESI DEN TIAL
Forward on reverse: Write-offs could cut HECM costs
TECH NOL OGY
Mortgage warehousing: What now? By James Hinton
By Scott Marchand
MAR KE SALE TING/ S SETT LE SERV MENT ICES TREN DS
ORIG INAT IONS SECO NDA RY SERV ICIN G COM PLIA NCE
O MAY 2009
May 2009 Volume 1 • Number 1
Mortgage PROFESSIONAL N A T I O N A L
Your source for the latest on originations, settlement, and servicing
1220 Wantagh Avenue • Wantagh, NY 11793-2202 Phone: (516) 409-5555 / (888) 409-9770 Fax: (516) 409-4600 Web site: www.nationalmortgageprofessional.com STAFF
Eric C. Peck Editor-in-Chief (516) 409-5555, ext. 312 firstname.lastname@example.org
Andrew T. Berman Executive Vice President (516) 409-5555, ext. 333 email@example.com
Domenica Trafficanda Art Director firstname.lastname@example.org
Karen Krizman Senior National Account Executive (516) 409-5555, ext. 326 email@example.com
Beatrice Marcus Office Manager (516) 409-5555, ext. 301 firstname.lastname@example.org
MAY 2009 O
SUBSCRIPTIONS To receive subscription information, please contact Office Manager Beatrice Marcus at (516) 409-5555, ext. 301, e-mail email@example.com or visit www.nationalmortgageprofessionalmagazine.com. Any subscription changes may be made to the attention of Beatrice Marcus via fax to (516) 409-4600 or e-mail firstname.lastname@example.org. Statements of fact and opinion in National Mortgage Professional Magazine are the responsibility of the authors alone and do not imply an opinion on the part of NMP Media Corp. National Mortgage Professional Magazine reserves the right to edit, reject and/or postpone the publication of any articles, information or data. MO
In this new era of the mortgage profession, we must find the most efficient ways to deliver, process and utilize the significant volume of news and information being constantly disseminated. We believe the broadcast of this news is even more important today in this turbulent and confusing environment. Our industry is under increased regulatory and legislative oversight and constant scrutiny, as mortgage professionals extend their capabilities into a number of interconnected and related businesses.
To say “the times are changing” is an understatement … For the past 16 years, the National Mortgage Press publishing team has delivered relevant, high-quality, local and national content to mortgage professionals nationwide. As a former loan officer, my heart will always be on the origination side of the business. However, times have changed and so has our readership. Today, the lines defining the various disciplines of the mortgage profession are no longer clear, and we are seeing a significant crossover between residential and commercial originations and their associated settlement and servicing. These are profound changes, and mortgage professionals must adapt to these changes to remain competitive and successful.
What you can expect to find in every issue of National Mortgage Professional Magazine? Each month, we will be featuring a Mortgage Professional of the Month. We are selecting this individual based on criteria, including innovation, the ability to overcome insurmountable obstacles, controversial ideas and opinions, and other areas that make the chosen Mortgage Professional of the Month stand out from the pack. This month, we’ve selected former Delta Funding CEO Hugh Miller as our May 2009 Mortgage Professional of the Month. He tells the story of his entrance into the business, how he overcame certain obstacles and his history as primarily a wholesale operation who is also enjoying great success on the retail side. This month’s cover story by James Hinton, “Mortgage Warehousing: What now?,” takes a comprehensive look at the current state of warehousing, and provides suggestions on how to address the issue of disappearing warehouse lines. In the May 2009 issue, we take a closer look at “Who’s Hiring?” in the mortgage industry. This special section will bring you ideas on how and where to look for employment in the industry, and offer tips to assist you on your job hunt. On page 33, in conjunction with FindMortgageJobs.com, we bring you “National Mortgage Professional Magazine’s Top 50 Companies That Are Hiring.” This special one-page listing features the companies, positions and locations of the biggest movers and shakers currently seeking the top professionals in the field to join their ranks. Each month, you can also expect to find other features like Tommy Duncan’s “Ask Tommy: Your QC Expert” column. Tommy breaks down the complexities of quality control and compliance, and brings these ideas down to a level that everyone can grasp. CMPS Institute Founder and Chairman Gibran Nicholas’s “Trend Spotter” column will focus on the latest trends and revenue-generating concepts in the industry, and I think you are also going to enjoy a monthly behind-the-scenes view from David Lykken and Scott Woll in their “A View From the ‘C’ Suite” column. Jeff Mifsud will guide you through the waters of FHA loans from an insider’s perspective in his monthly installments of the “FHA Insider.” If you are involved in reverse mortgages or financial planning, or are considering entering this field, Atare E. Agbamu‘s “Forward on Reverse” is required reading. As we face increased scrutiny over values and the appraisal process, Charlie W. Elliott Jr.’s “Value Nation” will provide a closer look at the world of appraisals and a view of the industry from the appraiser’s perspective. Last, but not least, Brian Sacks will share his marketing techniques and proven sales tips in his “Ask Brian” monthly feature.
But wait … there’s more! In addition to the aforementioned features, each month, we will have the industry’s best minds share their secrets, knowledge and solutions on the industry. We have created a unique visual table of contents called the “NMP Explorer,” designed to help to understand the content of the articles and features through the use of keywords and concepts. The “NMP News Flash” column will bring the latest news briefs and regulatory updates to our pages each month, and our “Heard on the Street” takes a look at the mergers, acquisitions and changes in the lives of those individuals and companies that shape the mortgage profession. Finally, the “New to Market” column will feature the latest programs and products designed to take your business to the next level, and introduce you to some new ideas that’ll enhance and supplement your current business model.
This is NOT a monologue … National Mortgage Professional Magazine is defined by elements of editorial interactivity, as we aim to focus on generating an ongoing dialogue of collaboration with our readers through user-generated content and various forms of social networking. With this in mind, we have developed National Mortgage Professional Magazine together with our continuously updated Web site, NationalMortgageProfessional.com, to offer our readers the freshest news and analysis 24/7, and the opportunity to have an active voice by providing feedback on the issues impacting you, the mortgage professional. The result will keep you better-informed and engaged in the many changes impacting the mortgage profession, no matter what your discipline or area of expertise, as we provide you the tools to be better-prepared in building a more responsive, profitable and compliant business model. Please feel free to share your thoughts, comments, words of praise or complaints directly with me at email@example.com. Cheers,
ARTICLE SUBMISSIONS/ PRESS RELEASES To submit any material, including articles and press releases, please contact Editor-in-Chief Eric C. Peck at (516) 409-5555, ext. 312 or e-mail firstname.lastname@example.org. The deadline for submissions is the first of the month prior to the target issue.
National Mortgage Professional Magazine … a new time, a new empowering resource serving the entire mortgage profession
COLORADO MORTGAGE PROFESSIONAL MAGAZINE
ADVERTISING To receive any information regarding advertising rates, deadlines and requirements, please contact Senior National Account Executive Karen Krizman at (516) 4095555, ext. 326 or e-mail email@example.com.
A message from NMP Media Corp. Executive Vice President Andrew T. Berman
National Mortgage Professional Magazine is published monthly by NMP Media Corp. Copyright © 2009 NMP Media Corp.
Andrew T. Berman, Executive Vice President NMP Media Corp.
Fannie Mae/Freddie Mac HVCC takes effect May 1, 2009 The Fannie Mae/Freddie Mac Home Valuation Code of Conduct (HVCC) became effective on May 1, 2009. All lenders, correspondent lenders and servicers selling loans to Fannie Mae/Freddie Mac will be required to adhere to the Code. The Code of Conduct establishes a number of parameters, including: Required use of the Market Conditions Addendum (Fannie Mae Form 1004MC/Freddie Mac Form 71); appraiser independence safeguards; requirement that the borrower receive a copy of the appraisal; appraiser engagement restrictions; prohibitions against improper influences on appraisers; appraisal audit requirements; and the Independent Valuation Protection Institute. For more information, visit www.fhfa.gov.
New FICO credit score for mortgage lenders debuts
The National Reverse Mortgage Lenders Association (NRMLA) has announced that it soon will be offering a Certified Reverse Mortgage ProfessionalLoan Originator designation. To receive the designation, applicants must meet certain eligibility requirements, such as a minimum of two years of service originating reverse mortgages and 50 loans closed, 12 hours of continuing education and submission to a background check, before they can sit for the exam. Over the past year, a committee of industry professionals and lawyers has been meeting to design the accreditation process and prepare the exam. NRMLA has made a significant financial investment in gathering representatives from across the nation to think through this vital plan. “This is some of the most important money we have ever spent,” says Peter Bell, NRMLA president. “Our organization’s viewpoint is that our first responsibility is to protect the consumer—and this new designation will provide seniors and their children with every assurance that they are dealing with educated, well-prepared professionals.” For more information, visit www.nrmla.org. continued on page 7
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FICO and Equifax have introduced BEACON Mortgage Score, a new FICO industry score designed to help mortgage lenders make the best possible risk decisions when addressing both current homeowners and those aspiring to own. The new score builds upon the predictive power of the BEACON credit risk score which is used in the
Reverse mortgage association adopts loan originator credential
COLORADO MORTGAGE PROFESSIONAL MAGAZINE
The Mortgage Bankers Association (MBA) has increased its forecast of mortgage originations in 2009 by over $800 billion. MBA now expects originations to total $2.78 trillion, which would make 2009 the fourth highest originations year on record, behind only 2002, 2003 and 2005. MBA cites that the boost is due entirely to the expected increase in mortgage refinancing activity motivated by the drop in interest rates following the Federal Reserve’s March announcement on the Treasury bond and mortgage-backed securities purchases programs and the Fannie Mae and Freddie Mac refinance programs. MBA slightly lowered its forecast of mortgage originations tied to home purchases. “While the Fed has not announced that it is targeting specific rates for either 10-year Treasury rates or rates on 30year fixed-rate mortgages, the effect of having the Fed bid in the market for a sustained period is enough to create a refinance incentive for a tremendous number of homeowners,” said Jay Brinkmann, MBA’s chief economist and
For more information, visit www.fico.com or www.equifax.com.
MBA boosts originations forecast by $800 billion-plus
senior vice president of research and economics. “The vast majority of mortgages originated before the latter part of 2008 are probably going to have at least a 50-basis point refinance incentive for at least the next several months, with mortgage rates hitting lows not seen since the early 1950s and late 1940s.” The previous record origination years of 2002, 2003 and 2005 had large amounts of sub-prime loans and jumbo loans. In contrast, the 2009 originations will be almost entirely Fannie Mae and Freddie Mac-eligible loans, or eligible for Federal Housing Administration (FHA) insurance. MBA estimates that refinancings in 2008 totaled $765 billion and were forecast to increase to $1.13 trillion in 2009. With the recent moves by the Federal Reserve and the Fannie/Freddie program, refinancings are expected to reach $1.96 trillion. In contrast, MBA estimates that purchase mortgage originations in 2008 totaled $854 billion, and were forecast to fall slightly to $851 billion in 2009. The new MBA estimate for 2009 is $821 billion, driven by a combination of continued declines in home sales and lower prices on the homes that are sold, leading to smaller mortgages on average than in recent years. MBA projects that total existing home sales for 2009 will drop 2.5 percent from 2008 to 4.8 million units. New home sales will decline about 39 percent in 2009 from 2008 to 293,000 units. Median home prices for new and existing homes will continue to fall, dropping by about five to six percent from 2008 levels. For more information, visit www.mortgagebankers.org.
mortgage industry. By focusing specifically on mortgage risk performance, FICO scientists have developed a version of the BEACON score with significantly greater power for assessing mortgage repayment risk. In early validation testing, the performance of BEACON Mortgage Score was compared to that of the general risk BEACON score when predicting mortgage repayment risk specifically. The new score identified up to 25 percent more of the high-risk mortgages and home equity lines-of-credit that later became seriously delinquent. In light of today’s housing crisis, this new score can aid servicers in earlier identification of borrowers at risk, mitigating the high cost of consumers moving to foreclosure. Early results suggest that the use of BEACON Mortgage Score by the industry can potentially save it $1 billion in foreclosure costs and help keep an estimated 115,000 more struggling homeowners in their homes. To assist clients, BEACON Mortgage Score retains the same 300-850 scoring range, minimum scoring criteria, and inquiry treatment as previous versions of the BEACON score. However, to achieve its increase in predictive strength, FICO’s new scoring model assesses several additional data variables derived from Equifax consumer credit files, selected specifically to predict mortgage repayment risk. As a result, the model includes 15 additional score reason codes that help lenders understand and explain the scores.
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COLORADO MORTGAGE PROFESSIONAL MAGAZINE
Hugh Miller, President and CEO of Reliance First Capital LLC
Each month, National Mortgage Professional Magazine will focus on one of the industry’s top players in our “Mortgage Professional of the Month” feature. Our readers are encouraged to contact us by email at firstname.lastname@example.org for consideration in being featured in a future “Mortgage Professional of the Month” column. This month, we had the chance to chat with Hugh Miller, president and chief executive officer of Melville, N.Y.-based Reliance First Capital LLC. A 20-plus-year veteran of the industry, Hugh Miller is the former chief executive officer of Delta Funding. How did you first get involved in the mortgage industry? My father, Sidney Miller, saw the unfulfilled need for borrowers who could not qualify for conventional loans, and thus started Delta Funding in 1982. I worked part-time for Delta since its inception (I was going to college at the time), and joined the firm full-time in 1985. What has kept you involved in the mortgage business all these years? The mortgage business is a very cyclical and challenging one. New products are constantly being made available for customers and changes are always
occurring with existing product guidelines. The review and study of risk management and understanding of products and programs that make sense both for customers and investors is always taking place. We are also experiencing new technologies to be utilized to help streamline the process. Ultimately, and at the risk of sounding a little corny here, the great American dream is homeownership. The ability to assist borrowers in owning a home is something I think many people in the mortgage business pride themselves on being able to help with, and it’s something that drives them to continue in this business even in adverse times, myself included. Delta Funding had been in business for approximately 26 years, which was a very impressive feat for a nonprime lender. During that time frame, there were many cycles where we saw most of your peers go out of business. What was the primary reason for Delta’s success? I think there were a lot of reasons for Delta’s success. But if I had to identify a primary reason, I would have to say it was our lending philosophy. At Delta, we tried to always originate loans that we felt were in the borrower’s best inter-
ests, as well as loans that made sense in the secondary market. Just as a lender wouldn’t do a loan just because borrowers asked for it if it wasn’t something that made sense, likewise mortgage lenders should not be originating loans solely because investors or Wall Street have an outlet and a market for that loan. It is important to make sure that the product makes sense for both the borrower and the lender/investor. Throughout Delta’s history, we had a strategy of originating only loans that we thought made sense for the borrower. For instance, Delta always originated the majority of its loans as fixed-rate loans, whereas the industry was clearly much more adjustable-rate (ARM)focused. This was true of our company throughout its entire 26-year history, and in fact, we were originating in excess of 90 percent of our loans fixedrate in 2007. While this kind of strategy hurt us from a volume perspective, we felt it was the right thing to do. We did not originate risky product types such as 125 percent loan-tovalue or option ARMs and significantly reduced originations of higher risk loan types by creating underwriting overlays that we thought made sense. We just were not willing to sacrifice quality just to boost originations in the short run when we knew it did not make sense in the long run. We think this long-term approach to the business ultimately led us to having a very low employee turnover rate. We had many people with the company for 10plus years. I began running the company when we had eight people, and we grew it to more than 1,600 by 2007, which is something we are all very proud of. I was really sad to see the hugely successful mortgage powerhouse that your father and you created [Delta Funding] become another casualty of the credit crunch, but we can assume that successful mortgage professionals like yourself look at such misfortunes as learning opportunities.
What lessons have you learned from the current credit crisis? Everyone at Delta Funding was obviously very sad to see what happened to our company. While we take a tremendous amount of pride in our 26-year history and our ability to operate through multiple cycles, the complete collapse of the entire non-prime market and the disappearance of the securitization market, ultimately spelled our demise. This current environment is the worst global economic crisis seen in seven decades, according to U.S. Treasury Secretary Timothy Geithner. Being purely a non-prime lender, our business model was reliant on the securitization markets. When those markets for non-prime loans disappeared in late 2007 and we had many hundreds of millions of loans on our warehouse lines with nowhere to sell them, that proved to be our undoing. Since we had securitized for 17 years prior to then, and were able to successfully complete a securitization even in adverse environments such as the fourth quarter of 1998, and the first quarter of 2007 (a time frame where we saw the majority of our peers go out of business), we had hoped that Delta’s superior loan performance based on the products it originated would enable us to continue to access the markets as we had in other adverse times. But, unfortunately, with virtually no market for non-prime, that was not to be the case. We take solace in the fact that we lasted much longer than our peers, and made it through the first half of 2007 with all of our warehouse lines intact and our business thriving. We are now in a market where the vast majority of loans originated have either an implicit or an outright government guarantee. These agencies were created for a reason, including to normalize the markets in adverse times, which is obviously what we are witnessing now. Going forward, we believe a more diversified approach to the business with different product types makes sense for our com-
pany. While the government has made it clear that it does not want to be the sole provider of mortgage financing and would like to see the private sector return. We are certainly interested in participating in those markets again as we did successfully for more than 25 years, but we do think it makes sense to have a diversified approach in terms of available products. This way, we can offer a broadbased set of products to customers and have the company best set up for all different market environments. While I am not sure of the percentage of wholesale business you were doing at Delta, I would venture to guess it was well over 50 percent. What led you to make the decision not to include a wholesale platform with Reliance First Capital? Do you think that could change in the future? While Delta started back in 1982 as purely a wholesale operation, it is important to note that in the last 10 years, we made a conscientious effort to originate retail loans. In fact, retail business was approximately 50 percent of our total business for the last few years at Delta. Hence, we are very well-versed in retail and very comfortable with originating loans from the retail channel. We actually had one of the highest percentages of retail originations that we are aware of in our industry. We were even a top 10 retail lender, so it was natural for us to continue retail originations. The decision not to enter the wholesale arena at this time is both a strategic decision to focus on retail and a market driven decision. As with any business, we will continue to analyze our business strategies and the markets, and will consider wholesale lending, among many other opportunities, as time goes by.
Why are you pleased with your choice of Wexford Capital? What have they done that makes you say that? There are many reasons, as our similar business and corporate philosophies being top of the list. Our warehouse financing arrangement is a great example. Last summer, before we started originating, we were working on obtaining warehouse financing and had received some term sheets. We then received a call from Wexford telling us they did not want us to take a warehouse line from a bank, because they were concerned with the current market conditions and any bank’s commitments to continuing to provide such lines. Needless to say, with what has happened in the markets, it has been very comforting having a warehouse line with your capital partner and not having to deal with the market vagaries. This is just one of the many ways they have provided value added to our company, and demonstrated their commitment to our business. What is your growth strategy for Reliance First Capital? We are definitely looking to grow our company significantly. We are well-capitalized, have numerous outlets for our loans and have more than sufficient warehouse and support in place to allow us to grow. While we are looking to grow organically from our three current offices (New York, Pittsburgh and Charlotte) and a fourth that is opening shortly, we are also looking at other opportunities in the marketplace. We are very open-minded as to the different forms those can take. It could be consideration of some form of a strategic alliance or other business partnership to an outright acquisition. We are looking for people who are the “right fit” for us most importantly.
Visit Hugh Miller’s Reliance First Capital LLC on the Web at www.reliancefirstcapital.com.
Question: Tommy, it appears there are a fewer number of mortgage brokers out there conducting business, It also seems to take longer for my loans to get through underwriting to closing which is hurting my business. What is your recommendation? Fannie Mae recently announced that mortgage brokers are conducting 15 percent of the overall number of mortgage transactions, a number that was 60 percent just a year ago. I will agree that many broker shops no long exist as a result of result of fewer borrowers qualifying for conventional loans. Those brokers who were able to obtain their Federal Housing Administration (FHA) approval in 2008 appear they are going to survive. The trend I am seeing across the country for mortgage broker survival in 2009 is obtaining approval from the FHA for Direct Endorsement (DE) Full Eagle status. This enables the mortgage professional to fund their own loans and sell FHA loans to Ginnie Mae. Warehousing lines or lines of credit have reduced significantly in 2008. However, new and up-and-coming mortgage banking entities are raising capital and private equities to support warehouse lines. Funding your own loans gives you an advantage because you will have your DE from the FHA to underwrite your own loans and close in your own name with a line of credit. What many brokers are discovering is that it’s not as difficult as one may believe. The reason it is wise for mortgage brokers to move into this direction is due to the survival factor. Mortgage brokers who become small lenders and/or mortgage bankers will have more control on loan production, rather than depending on an outside lender’s timeline. You may want to continue to use the large lender for conventional loan products; however, the broker’s lifeline at this point is the FHA. You can have the investor serve as the DE if you cannot maintain a DE underwriter. If you have a Full Eagle, you can chose which Appraisal Management Company (AMC) you want, rather than being forced to use a lender’s approved AMC enabling you to support a community-based or regional AMC. When being considered for FHA Full Eagle status, the mortgage professional will need to demonstrate solid pre-funding quality control (QC) and post-closing QC practices. An FHA QC Plan should incorporate Red Flag Rules/Identity Theft Prevention and fraud detection products that retrieve information from the Internal Revenue Service and the Social Security Administration and exercise post-closing quality assurance (risked-based analysis or the ability for the loan to be repaid). The QC Manager will need to show an active post-closing QC Program by providing QC Manager Reports that capture the company’s response to the QC Reports. These items are required for a line of credit as well. What mortgage professional would not have a robust QC Program when they have more at stake when funding their own loans? Likewise, investors would be more inclined to open a line of credit giving the mortgage professional more flexibility in running their mortgage operations. In order to survive in today’s mortgage industry, a mortgage broker needs to receive FHA approval, work toward obtaining DE for underwriting, fund the shop’s loans, and sell FHA loans to Ginnie Mae. Of course, implementation of a robust QC Program and a display of thoroughness of the program by the use of QC tools like Qchecks, AVMs, outsource post-closing QC and the QC Manager’s Reports, closes the gaps in a QC Program bringing credibility to mortgage operations and stabilization to the industry.
Tommy A. Duncan is executive vice president of Quality Mortgage Services LLC. For answers to your QC and FHA questions, please contact Tommy at (615) 5912528, ext. 124 or e-mail email@example.com. You may also visit Quality Mortgage Services LLC on the Web at www.qualitymortgageservices.com.
O MAY 2009
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If someone is interested, how should they go about contacting you? If they are interested in joining Reliance as an employee, they should contact our Human Resources Manager Cindy Neuendorf at (516) 422-8888 or e-mail firstname.lastname@example.org. For anything strategic-related, they can contact our Executive Vice President Randy Michaels at (516) 422-8850 or email email@example.com.
By Tommy A. Duncan
How did Reliance First Capital come to be? In the weeks and months after we publicly announced that Delta Funding was closing, we were contacted by numerous third parties wanting to invest in a new entity with Delta’s management team. We first focused on an orderly wind-down of Delta, which we believe we accomplished. We were then fortunate to be able to review the capital partners available to us. Ultimately, we decided on Wexford Capital, a [Securities and Exchange Commission] SEC-registered investment advisor with billions of dollars of assets
under management. This has proven to be a great partnership and we are very pleased with our choice.
BY GIBRAN NICHOLAS
MAY 2009 O
COLORADO MORTGAGE PROFESSIONAL MAGAZINE
The other 50 percent
It is estimated that more than 50 percent of American homeowners are either in or near a negative equity situation. My question is: “What systems do you have in place to consistently find and motivate the other 50 percent of homeowners and home buyers that actually qualify for financing?” According to the latest statistics by the Federal Reserve, American homeowners still have more than $8 trillion of home equity remaining—even after the record plunge in home sale prices. Furthermore, American households still have an aggregate net worth (assets minus liabilities) of $56 trillion. In other words, there are still a large number of Americans who can qualify for financing right now. Among this group of individuals who need you and can qualify for your services, you will find business owners, executives, real estate investors, retirees, senior citizens, first-time home buyers and others. Believe me, these people do exist! The only question is where are they? How can you find them and what value do you deliver that attracts them to do business with you?
Where do you find these people? I was recently giving a speech to about 50 CPAs at an event hosted by the CPA association in my state. At least a halfa-dozen people in the audience came up to me afterwards and wanted to refer me business. You see, more than 50 percent of all mortgage originators have completely left the industry. All of these CPAs and financial advisors have been abandoned by our industry and they don’t know whom to work with and where to send their clients. In fact, 61 percent of all financial planners surveyed by the Financial Planning Association indicated that they want to meet and work with qualified mortgage professionals. Not only that, but 81 percent of investors surveyed said that they want their financial advisors to provide them with advice on more than just investments. I’ve got to tell you, if you want to meet the other 50 percent of homeowners who are not underwater, you really need to start networking with CPAs and financial advisors.
In fact, I recently spoke to a group gory was, “Who is the current U.S. of 75 mortgage originators in southern Treasury Secretary.” I was taken by California at an event hosted by the surprise when not a single contestant California Association of Mortgage even attempted to answer this quesBrokers. As I was interacting with the tion. I thought to myself, how could audience, one of the things I asked these people not know Hank Paulson them was whether anyone in the audi- when his name and picture have been ence was involved with their local CPA appearing on almost every channel, association. Not a single person raised newspaper and Web site every day their hand. I then asked if anyone was and night for the past several weeks? The next several questions came involved with their local Financial Planning Association. Again, not a sin- from the “Shakespeare” category. gle person raised their hand. What Ironically enough, all of the contestants were clamoring over exactly is the problem each other to answer here? Why are so many every one of these quespeople in our industry tions. These smart people complaining about lack seemed to have memoof qualified borrowers rized all the works of a when they are all fishing dead poet who lived hunin the wrong ponds? dreds of years ago, and Now, let me ask you. yet not a single person Are you involved with your could name the man who local CPA or financial planwas responsible for the ning associations? Why largest government internot? Yes, I know funding vention in our markets’ sources are pulling their “Are you involved in recent memory. Right funding, Fannie, Freddie with your local CPA then and there, someand the Federal Housing or financial planning thing dawned on me: Administration (FHA) are associations? having an identity crisis, These people are living in lenders keep changing Why not?” a different world than my their guidelines, the unemworld. The things that ployment rate is double what is was two years ago, and everybody seem to be important in my world are thinks that mortgage brokers should just not even on their radar. Not only that, but life goes on and these people are all go out and shoot themselves. But in the meantime, these CPAs living their lives, enjoying Shakespeare and financial planners are just waiting and all the other things that life has to for someone like you to stand up and offer, even in the middle of a financial be a hero for their clients who can crisis and deep recession. qualify for financing. Where are you The moral of the story here is that in and why are you hiding? This is your time and place. You have been chosen order to attract people to do business with us, we need to live in their world by your destiny for this very moment. and speak their language. There are What do you say and how more than 300 million Americans who are continuing to live their lives even in can you attract these clients and their financial light of the current downturn. People will always need a place to live. People advisors? I was flipping channels on my televi- will always get married, have children, sion one evening in late 2008 and care for elderly parents, deal with health came across that classic show, issues, get divorced (unfortunately), etc. Jeopardy! Two of the categories in this In order to do business with these peoparticular show caught my attention. ple, we need to first understand our role The first was “The Financial Crisis,” in their life story, and then communiand the other was “Shakespeare.” One cate our value to them and their finanquestion being posed to the contest- cial advisors. It’s really a two-step ants from “The Financial Crisis” cate- process:
Step #1: Acquire unique knowledge and skills that are valuable to this target audience. You need rock solid answers to questions like these: I What mortgage strategies will best empower me to fund my child’s college education now that student loans are so hard to come by? I What should I do if I own my home free and clear, don’t want to sell it right now in a down market, but still want to move into a new home with little or no mortgage payment? I Is this a good time to buy a home or should I wait for four percent interest rates? I What strategies can I implement immediately to profitably invest in the turbulent real estate markets? I And the list goes on … Step #2: Communicate your unique value in a way that differentiates you and your communications from all the noise bombarding these people. Only by implementing this simple two-step process can you transcend the unfortunate circumstances of today’s market realities, and find and do business with the other 50 percent of homeowners and buyers that need you and can qualify for your services. Gibran Nicholas is the founder and chairman of the CMPS Institute, which administers the Certified Mortgage Planning Specialist (CMPS) designation. The CMPS Institute has enrolled more than 5,500 members since its founding in 2005. Gibran is also the chairman of Published Daily, a customizable online magazine, newsletter and marketing service that helps professionals transform their clients and prospects into a referral-generating sales force. He may be reached at (888) 608-9800, ext. 101 or e-mail firstname.lastname@example.org. Visit author Gibran Nicholas’s blog at http://gibrannicholas.com where he shares his insights on economics, real estate and financial issues, including the current mortgage and credit crises.
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J.D. Power report: Incidences of identity theft higher in younger consumers
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O MAY 2009
Reported incidents of mortgage fraud in the U.S. are at an all-time high and increased by 26 percent from 2007 to 2008 according
According to statistics recently released by the FHFA, short sale resolutions at Fannie Mae and Freddie Mac for troubled borrowers grew by a factor of four over the course of 2008, while loan modifications doubled and completed foreclosures grew by 60 percent through October. The government-sponsored enterprises (GSEs) processed 516 short sales in January 2008; by December 2008 short sales numbered 2,261. Separately, a recent nationwide survey of real estate agents and brokers conducted by Campbell Communications found that 19 percent of home sales during January and February 2009 were short sales, with foreclosed properties accounting for another 37 percent of sales. On
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COLORADO MORTGAGE PROFESSIONAL MAGAZINE
Mortgage Fraud skyrockets according to MARI
Survey finds short sale resolutions at FHFA rapidly rising
The banks have stopped lending, but you can have the ability to make the loans that businesses so desperately need.
Younger consumersâ€” those included in Generation Yâ€”tend to be at higher risk for identity theft, but are less concerned with the threat than are consumers in the Generation X and Baby Boomer demographics, according to the recently released J.D. Power and Associates Identity Theft Report. The inaugural report, conducted by the J.D. Power and Associates Web Intelligence Division, analyzes Internet postings from 70 million blogs and discussion boards that occurred between February 2008 and January 2009. The report is designed to provide executives in the financial services, credit protection, banking and insurance industries with ongoing measures of consumer attitudes regarding perceived risks and other issues pertaining to identity theft, and how these attitudes are influencing consumersâ€™ shopping and buying habits. Online conversations about identity theft indicate that 83 percent of posters in the Baby Boomer generation (those between the ages of 45 and 63) say they have a high level of concern about identity theft, compared with 79 percent of those in Generation X (ages 31 to 44) and only 47 percent of those in Generation Y (ages 19 to 30). Highly concerned online postersâ€”those who proactively protect their identityâ€”comprise 72 percent of posters discussing identity theft, while 24 percent say they are moderately concerned and four percent report a low level of concern. Online commentary indicates that, while people say they are aware of identity theft issues on social networking sites such as Myspace and Facebook, a majority do not take security into consideration when creating their profiles. More often, people report changing their profiles to avoid embarrassmentâ€”for example, to keep a boss from seeing a particular picture. â€œWhile social networking sites can be a hot spot for identity theft, people see these sites as a way to express themselves, and limiting or changing their profiles makes them feel like theyâ€™re censoring their identity,â€? said Carter Truong, senior manager in the J.D. Power and Associates Web Intelligence Division. â€œWhile communicating online, people are unwilling to sacrifice this self-expression as a way to prevent identity theft.â€? For more information, visit www.jdpower.com.
to a report released by the Mortgage Asset Research Institute (MARI), a LexisNexis service. The 11th Periodic Mortgage Fraud Case Report to the MBA examines the current state of residential mortgage fraud and misrepresentation in the U.S. based on data submitted by MARI subscribers. The report found that, for the first time, Rhode Island ranked first in the country for mortgage fraud with more than three times the expected amount of reported mortgage fraud for its origination volume. This is also Rhode Islandâ€™s first appearance on the MARI report Top 10 list, indicating a problematic and overlooked mortgage fraud problem in the state. Florida, ranked first in 2007 and 2006, dropped to second place and is followed by Illinois, Georgia, Maryland, New York, Michigan, California, Missouri and Colorado. The top fraud incident type in 2008â€” representing 61 percent of all reported fraudsâ€”was application fraud, the fifth year in a row it topped the list. Second were frauds related to tax returns and financial statements which jumped 60 percent from 17 percent of reported frauds in 2007, to 28 percent of reported frauds in 2008. Additional documented fraud types included, in order of volume, frauds related to appraisals or valuations, verifications of deposit, verifications of employment, escrow or closing costs, and credit reports. â€œMARI data shows that mortgage fraud is more prevalent today than it was at the height of the boom in mortgage loan originations,â€? said John Courson, president and chief executive officer of the MBA. â€œThis report is essential reading for mortgage bankers who need to understand where mortgage fraud is coming from, what to watch for and how to protect our companies and communities.â€? For more information, visit www.marisolutions.com.
BY DAVID LYKKEN AND SCOTT WOLL
MAY 2009 O
COLORADO MORTGAGE PROFESSIONAL MAGAZINE
“Survivor” … no, not the widely popular television show, though many similarities of people surviving a jungle and learning how to adapt to the current industry environment. But all of us that are still surviving in this industry and plan on seeing it through these tough times and look forward to getting to the more lucrative and positive territory again. We believe that this industry must pull itself up by their boot straps, continue to work hard and plan to change the mystery of this industry in order to gain back the respectability it deserves. The mortgage lending business has been a mainstay of the financial economic landscape for many decades, and consumers, as well as industry veterans, need mortgage lending to regain its position atop the financial services arena so people can purchase homes and be offered refinancing options to obtain the wealth rewards we want to achieve. We have both been employed in the mortgage lending business for over a combined 60 years, and have commented that these past two years have been the most difficult and challenging times we have seen in the business. From the beginning of this decade, we have seen a record volume of originations, as well as record profits and commissions for the industry. Many people made a lot of money during this span, but a lot of mistakes had been made as well. Many people have come and gone from this industry over this past decade. The industry as a whole has taken a large hit to the foundation and the principles that have made it the stronghold of this country. We believe that the wholesale and thereby the broker channel has taken the
largest hit in this downfall of the mort- greedy. Many looked too short-term, but gage industry over the past two years. the financial rewards were large for origiArguably, records show that somewhere nating more and more loans, especially in between 60-65 percent of all originations the Alt-A and sub-prime product world, from 2000-2008 were made by mortgage that lenders, and ultimately Wall Street and brokers. Since the majority of loans were investors, were re-packaging and re-selling originated via the wholesale channel and into a very demand side industry. Now, in order to correct the problem, by mortgage brokers, is this why they are getting the largest portion of the blame? as perceived by Congress and other We all believe that there is plenty of financial service pundits, some believe blame to go around for the fiasco that the answer is more regulation and lendcurrently exists in this industry. Yes, ing conservatism. We could not disagree mortgage brokers may have taken the applications from the majority of the borrowers, but the loan products were dictated by larger lenders, investors, as well as Wall Street, and let us not forget the guidelines and underwriting of the actual loans were done by the lender. Supposedly, there were limitations and guidelines David Lykken Scott Woll in place to limit the risk of broker loans, but now the “As any good business person constantly total blame of the debacle does, they review their options in order seems to be laid at the feet to either survive and/or improve their of mortgage brokers. business into the future.” While it can be said that mistakes were made, and yes, there were some people who abused more with that approach. We all agree the system, even some who committed that the “risk meter” may have been so actual “fraud,” but certainly that was a far to the left or risky, but the answer is small minority. We have both known many not to go so far to the right or ultra congreat brokers, who have a strong following, servative. We hear that there are more great foundation in the community, out- than 2,700 pieces of legislation in front standing principles and are now being of state legislators and U.S. Congress grouped in with many brokers who just regarding mortgage lending focusing on recently started in the business to make as the limitations and/or abolishment of much money as they could and then move mortgage brokers. Now the optimistic on, others who deliberately found the view is that states have been, some to a loopholes to originate difficult and risky fault, heavily involved in the licensing loans, as well as others that became very and regulation of mortgage brokers and bankers. But as we all know, the large lenders, the government-sponsored enterprises (GSEs) of Fannie Mae and Freddie Mac and Wall Street make the rules as to whom they will do business with. As we have seen, many of the larger lenders and the GSEs have eliminated or greatly restricted those who may qualify in their wholesale channels, making it increasingly difficult for brokers to do business. We will all agree that there is still some room to filter this industry, removing those individuals and companies that are affecting the rest of us. But we believe with the assistance of the National Association of Mortgage Brokers (NAMB) and Mortgage Bankers Association (MBA), that we can rebuild this industry back to respectability. But it will take us all working together,
sharing our thoughts and ideas, not looking as we all are vicious competitors, but as a team to bring back this valuable and well-needed financial service industry back to the public to restore confidence in the system, confidence between us, and confidence by the public in the products and services we all offer. In the meantime, we see that many mortgage brokers are looking at their options in order to survive. The many options that are available include, the mergers of brokers that compliment each other across different communities or product offerings; becoming a net branch of a larger lender to take advantage of more competitive pricing, products and technology; or looking to convert to mortgage banking by obtaining a warehouse line of credit and control their business as to lender selection as well as possible agency approvals. As any good business person constantly does, they review their options in order to either survive and/or improve their business into the future. We will review these options in more detail and other current issues in future articles. We appreciate you taking the time to read this article and look forward to communicating and sharing our thoughts and ideas in future writings. Please feel free to contact us with any questions or ideas by email at either firstname.lastname@example.org or email@example.com. David Lykken is president, mortgage strategies and managing partner with Mortgage Banking Solutions. David has more than 34 years of industry experience and has garnered a national reputation. David has become a frequent guest on FOX Business News with Neil Cavuto, Stuart Varney, Liz Claman and Dave Asman with additional guest appearances on the CBS Evening News, Bloomberg TV and radio. He may be reached by phone at (512) 977-9900, ext. 101 or e-mail firstname.lastname@example.org. Scott Woll is director of business development for Mortgage Banking Solutions. With over 25 years in mortgage banking, Scott has experience and knowledge across all facets of the industry. He has been involved heavily in secondary marketing, financial analysis, servicing evaluations and operational management, as well as correspondent and broker lending. Scott has worked diligently with the local MBA, FNMA and FHLMC to assist in the continuing education and growth of the industry. He may be reached by phone at (512) 977-9900, ext. 112 or e-mail email@example.com.
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WELLS FARGO WHOLESALE LENDING
Shared Vision, Shared Success.SM Make Your Way With A Lender Committed To Leading Responsible Change Wells Fargo Wholesale Lending is dedicated to working with mortgage brokers who are committed to five key principles for long-term industry success: Responsibility: Ensure fair and responsible lending and borrower education are top priorities. Quality: Produce high quality loans. Controls: Better manage our collective risk and eliminate fraud. Excellence: Create, promote and adhere to industry-leading standards of excellence. Efficiency: Develop capabilities that drive greater efficiency and ease of use between our companies. Together, we will lead the way, helping to establish a foundation for a stronger, healthier and more responsible industry. Share in this vision. For more information, tools, ideas and market insights visit our Shared Vision, Shared Success.SM web site located on www.brokersfirst.com.
This information is for use by mortgage professionals only and should not be distributed to or used by consumers or other third-parties. Information is accurate as of date of printing and is subject to change without notice. Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A. © 2009 Wells Fargo Bank, N.A. All Rights Reserved. #64153 4/09
O MAY 2009
Battered by the U.S. economic recession, the commercial real estate
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COLORADO MORTGAGE PROFESSIONAL MAGAZINE
PricewaterhouseCoopers survey finds investors prioritizing survival over acquisitions
market is struggling to maintain values across all property types and geographic areas, kicking a growing number of investors into survival mode as they painfully watch the value of their existing portfolios decline, according to investors and real estate professionals surveyed as part of the first quarter 2009 PricewaterhouseCoopers Korpacz Real Estate Investor Survey. Real estate investors do not expect a rebound in any of the commercial real estate sectors until well into 2010, according to the survey. In the meantime, property owners are faced with limited financing options, declining tenant demand, rising overall capitalization rates and deflated
buying opportunities that are to come.” Although sales have been weak, investors surveyed by PricewaterhouseCoopers expect buying opportunities to emerge in the coming months as commercial loan defaults increase and the number of distressed assets on the market increases. Some investors are preparing for potential acquisitions by boosting their liquidity through de-leveraging, joint venture partnerships and select dispositions of current holdings. However, the bid-ask pricing gap remains wide between buyers and sellers, pricing is opaque because of limited sales activity and financing remains scarce. Also making acquisitions difficult is the fact that recession conditions in commercial real estate are not expected to ease until 2010 at the earliest for most major
average in the U.S. residential real estate market, there is one short sale for every two foreclosed property sales. For the GSEs, there is approximately one short sale for every 7.5 foreclosed property sales, but at current growth rates, the number of short sales for the GSEs might exceed the number of foreclosure sales sometime this year. “In many cases, a short sale is a more cost-effective resolution than a foreclosure, with the loss severity for a short sale typically being one-half the severity for a foreclosure,” said Tom Popik, principal author of the Campbell Communications study. “Short sales avoid the legal expense of the foreclosure process, maintenance expenses on foreclosed properties, and interest costs. Additionally, because a short sale can be completed several months earlier than remarketing of a foreclosed property, there is less exposure to rapidly declining prices in real estate markets.” The survey conducted in March 2008 by Campbell Communications found that the average time for a mortgage servicer to provide a “yes” or “no” response to an offer to buy a short sale property was 4.5 weeks. The survey conducted in February 2009 found that the average response time for short sale offers is now nine weeks, double the time of a year ago. In recent months, Fannie Mae and Freddie Mac have attempted to forestall foreclosures as they search for alternatives that do not increase the inventory of vacant properties Loan modifications numbered 4,228 in January 2008 and had grown to 8,688 by December. Completed foreclosure sales at the GSEs were 10,571 in January 2008; by October 2008, completed foreclosures numbered 17,008. In November and December, foreclosure sales dropped precipitously as Fannie Mae and Freddie Mac implemented temporary foreclosure moratoriums. In November 2008, the GSEs completed 14,408 foreclosure sales; in December this number dropped to only 3,430. The surveys also have found that frustrated homeowners often trash their houses when a short sale fails and they are forced into foreclosure. A November 2008 survey conducted by Campbell Communications found onethird of foreclosed properties are so damaged that they cannot qualify for standard mortgage financing; these properties sell for an average discount of 37 percent. In the current survey, a majority of respondents indicated that “cannot get financing for damaged REO (foreclosure) properties” is a major impediment to first-time homebuyers. For more information, visit www.campbellsurveys.com.
confidence. They are looking to protect the value of their existing properties in order to compete and survive in an increasingly challenging environment. To mitigate value loss, landlords are being more proactive about signing tenants to new leases, expansions and renewal, in some cases offering leasing incentives and lower rental rates. In addition, some are attempting to cut property costs and better position assets in a rapidly growing tenants’ market. “Tenants are in the driver’s seat, and landlords are in survival mode, trying to preserve revenue streams in one of the harshest ownership environments ever encountered,” said Tim Conlon, partner and U.S. real estate sector leader for PricewaterhouseCoopers. “It will be survival of the fittest going forward, with owners who are able to remain financially strong being better positioned to capitalize on the
In 1972, I graduated from college and joined my father’s mortgage banking firm. He started in the mortgage business in 1948, and formed his own company in 1950. My dad enjoyed the fatherly trait of passing pearls of wisdom to his sons. This is one of my favorites. “Treat your warehouse lender with the same respect that you treat your wife.” I’ve carried that all these years. I still have the same wife I had 37 years ago. But our warehouse lenders seem to have run off with the tennis pro. Is it something I said, or should I work on my backhand? The availability of warehouse financing is critical to the survival of independent mortgage bankers. Because banks can fund their own mortgage banking operations with deposits, it is not necessarily critical to the viability of bank-owned mortgage companies. Independent mortgage bankers created this industry and provide a valuable source of mortgage loans for the communities they serve. Their presence greatly contributes to the free market dynamics of competition. Their preservation is important to the availability of affordable mortgage loans. The solution to this challenge will require creative compromise and thought. Banks and lenders, the federal regulators and the mortgage banks themselves must work for the solution. Each has its own set of issues and agendas. Let’s take a high level and simplistic look at how we got in this position, and the most significant issues that each party faces. By doing so, we can then look for solutions.
The capital challenge For warehouse lenders—usually banks or Wall Street firms—the fundamental issue is CAPITAL. I often hear that lack of liquidity is the source of the problem. Banks with adequate levels of capital do not have liquidity problems. They simply raise liquidity by accept“Mortgage banking was ing more insured deposits, or by borrowing money created to transport from the Federal Reserve or one of the federal home mortgage lending capital loan banks. The banks can then loan that money at a from capital surplus rate higher than the rate they pay for it. But if the areas of the country to bank does not have adequate capital, it cannot raise growing, capital starved more deposits, or borrow money, to invest in new regions of the country. loans. That activity grows the assets of the bank. Independent mortgage Capital adequacy is measured as a percentage of the bankers are vital to the assets that the bank holds. If the bank has inadequate sustenance of our councapital, it cannot grow its assets. try’s mortgage financing.” A couple of years ago, many banks started losing money due to losses on bad loans and exotic derivatives. The capital markets lost confidence in the traditional banking business model. Investors do not want to put money into a losing business that had an uncertain future. The availability of new capital dried up. Federal regulations require that banks hold minimum levels of capital as a percentage of their assets. Many banks have been losing money, and they are not growing capital through earnings. In some banks, the losses have actually caused their capital to fall dramatically. Banks cannot easily raise capital through new stock offerings. They really have only two choices—sell the bank or stop growing the bank. Healthier or larger banks have bought banks that had to sell, or that were closed by the government. Some of the acquiring banks did not have enough excess capital to absorb the banks (and all of their loan losses) they bought, so they made deals with the government to protect them from asset losses. Then things grew worse. The loan and asset losses got even bigger. Private capital wanted no part of it. Banks needed more capital. The government had to start investing capital in these banks.
The capital effect The lack of new capital—through earnings or new stock offerings—makes it very difficult for a bank to embrace a lending strategy that offers significant growth potential. The mantra of most banks is presently capital preservation and not balance
sheet growth. Banks are just trying to survive this period. If a bank enters a lending program that grows its balance sheet size, it will need capital to support that growth. Capital is scarce. Many of the banks in the warehouse business have been bought, closed or merged (IndyMac, Countrywide, Wachovia, Washington Mutual, PNC, Guaranty Bank, Chase etc.). In most cases, the acquiring entity has not preserved the business line in its present form. They closed or significantly shrunk the warehousing unit of the bank they acquired. The loss of these banks has negatively impacted the availability of warehouse financing. On a positive note, Wells Fargo has recently pledged their support to warehouse financing. Bank capital is scarce. In order to safely maintain adequate regulatory capital levels, banks must slow down the growth of their balance sheet, or shrink it. The only way to do that is sell or liquidate assets. During this period, it is incredibly difficult, and costly, to sell assets. Although warehouse lending is profitable, “mortgage” is presently a dirty word and an easy target for discontinued operations. Most importantly, warehouse assets provide an easy way to shrink a bank’s balance sheet— without having to sell anything. The warehouse loans run off quickly—as the mortgages sell—the bank’s assets decrease and capital ratios increase. Some warehouse banks have either exited or shrunk their warehouse lending business. This has decreased the availability of warehouse financing. The nature of mortgage warehousing is best suited to large banks. Mortgage warehousing requires sophisticated systems and personnel. Small banks usually do not have that. Banks also have regulatory limits that they can loan to any one borrower, called “LTOB” or “loans to one borrower” limits. For national banks, it’s 15 percent of capital. For some state banks, it’s 25 percent of capital. For example, a national bank with $50 million in capital would have an LTOB limit of only $7.5 million. Most banks set an even more conservative internal limit that is below the regulatory maximum. Warehouse lines of credit can often exceed $50 million. This makes it very difficult for a small community bank to be a warehouse lender. Through the financial crisis, our small community banks remain healthy. Larger banks, for the most part, were involved in the riskier endeavors and have taken the largest hits. Ironically, they had the expertise and capital to take more risk. If there is excess capital in the banking system, it is primarily found at community banks. But most small community banks do not have, or do not want to concentrate their risk at the maximum LTOB limits that are necessary to support large warehouse lines of credit. Many of them do not have the resources or inclination to create or buy the requisite systems, and hire the expensive personnel, necessary to safely run a warehouse division. Community banks can help with warehouse lending capacity. But they are not the total solution. Collateral management is one of the most important aspects of safe warehouse lending. As banks exit or shrink the warehouse lending business, the prevalence of qualified mortgage warehouse operations platforms is scarce. It takes time and money to recreate these platforms. In these days of profitability and capital concerns, the incentive to embrace overhead and operations risk is less. Those who have these platforms have similar concerns and are not necessarily anxious to “rent them” to other banks by expanding their business and selling participations to other banks. This too has restricted the availability of credit.
Cash deposits at the Federal Reserve ................................................$20 million Traditional warehouse lines of credit ............................................$300 million FHA and VA loans ............................................................................$100 million Conventional loans with an LTV less than 90 percent ......................$30 million Conventional loans with LTV greater than 90 percent ......................$50 million
Warehouse lending: Evolution Use of purchase/repurchase agreements (repos) has been with us since the creation of Ginnie Mae mortgage-backed securities in the late 1960s. Mortgage companies were empowered to issue Ginnie Mae securities backed by the FHA and VA loans that we originate. Mortgage bankers gather bundles of mortgage loans, prepare a schedule of the loans, send it to Ginnie Mae, send the mortgage collateral to an approved custodian/trustee and Ginnie Mae sends back a security guaranteed by them and backed by the loans. The mortgage banker enters into a trade to sell that security to a Wall Street firm on a specific settlement date. The agency security often arrives a week or two before the settlement date. Most warehouse banks allow those securities as eligible collateral under the warehouse line of credit—until the trade settles. Because these securities are backed by the full faith and credit of the United States government, Wall Street developed a process by which mortgage bankers can sell these securities to them before the actual security settlement date (the loan sale date). The mortgage banker has the obligation to repurchase the securities simultaneous with the settlement of the security. The difference between the price at which the Wall Street firm initially buys the security and the price at which the mortgage banker buys back the security is the effective cost of the repo and similar in nature to the interest rate charged on a warehouse line of credit. The repo agreement is almost always with the Wall Street firm to which the security is sold. This process allows the mortgage banker to pay off its warehouse lines of credit with the proceeds of the repo transaction. The effective interest rate on the repo transaction is usually much lower than the rate on a traditional warehouse line. More importantly, the mortgage banker does not have to wait for the securities settlement date to move the loan off its balance sheet and pay down the warehouse line of credit. Most banks do not treat the repos as other debt in the debt to equity calculation. This improves the mortgage banker’s debt-to-equity ratio. Repos still exist and are widely used. As the market matured, Wall Street and the banks expanded the repo mechanism to Fannie Mae and Freddie Mac mortgage-backed securities. They also introduced a snazzy hybrid called the “Gestation Repo.” The Gestation Repo allows mortgage bankers to repo the individual whole loans that have been designated to go into the Ginnie, Fannie or Freddie security before getting the security back from the agency. The loans that are going into the security are specifically identified, and sold into the repo agreement. This lowers the mortgage banker’s cost of credit, gets the loans off the balance sheet sooner and allows them to do even more business. In the early 1990s, some banks began to use this same Whole Loan Repo process in their warehouse lending programs. Several banks still use this today. Rather than establishing a traditional, secured warehouse line of credit to the mortgage banker, the bank actually purchases the individual mortgages, or a 100 percent participation in the mortgages, with an agreement to sell the loan back to the mortgage banker simultaneous with the purchase of the loan by the takeout investor. This allows the warehouse bank to: O Enjoy the lower risk-based asset allocations for the individual mortgages, rather than the 100 percent risk-based asset allocation for a traditional warehouse line of credit.
O MAY 2009
O O O O O
This bank has risk based capital of 9.09 percent ($35 million divided by $385 million). That is above the minimum, but below the required regulatory minimum for a well-capitalized bank, and exposes the bank to increased regulatory scrutiny or criticism. This is a simplistic and extreme example. There are many variables and factors that go into these calculations, and other capital measures that banks must meet. But this example exhibits the importance for banks to manage the risk-based allocations for the loans in which they invest. They can use much less capital, and enjoy greater leverage, by investing in loans that have lower risk-based asset allocation percentages. This example also exhibits that a bank has more incentive to invest in individual mortgage loans, rather than traditional warehouse lines that are secured by individual mortgage loans. When capital is scarce, one cannot blame the bank for maximizing its capital utilization. A bank that owns a mortgage company and funds its mortgage production with deposits can usually count those loans at the lower, loan level risk-based asset percentages. But if they are also a traditional warehouse lender, they have to count those lines of credit, secured by similar mortgage loans, at 100 percent. If they have limited capital, you can guess what they will likely do. They will support their internal mortgage banking operations. That’s just smart business.
COLORADO MORTGAGE PROFESSIONAL MAGAZINE
Bank regulatory capital standards are a very complicated subject. I will try to highlight the basics in very broad and simple terms. If you are a regulator or accountant, please excuse my brevity. Banks should maintain capital of at least six percent of total assets to be classified as well capitalized. There is also a capital standard called risk-based assets. Banks should hold capital of at least eight percent of their risk based assets, and 10 percent to be classified as well-capitalized. Banking regulations have established risk-based asset percentages for the various types of assets/loans in which banks can invest. The riskier assets/loans have a higher percentage, and the less risky a lower percentage. Traditional warehouse lines of credit have a 100 percent risk-based asset allocation. In contrast, Federal Housing Administration (FHA)- and Veterans Affairs (VA)-insured loans have a 20 percent riskbased asset allocation. Conventional loans with a loan-to-value (LTV) exposure at or below 90 percent have a 50 percent risk-based asset allocation and conventional mortgages above 90 percent LTV exposure have a 100 percent allocation. The underlying loans that secure traditional warehouse lines of credit mostly fall into lower risk-based asset allocations—if held directly by the bank. However, a traditional warehouse line of credit is treated like most commercial loans, and treated as a 100 percent risk-based asset. Therefore, banks with limited capital are less inclined to invest in traditional warehouse lines of credit. Banks with scarce capital may reallocate, or target, their assets to more favorably treated risk-based assets. For the last two years, I believe this has been happening and it has impacted the availability of warehouse lines of credit. Let’s take a look at a hypothetical example. A community bank has $500 million in total assets and generally accepted accounting principles (GAAP) capital of $35 million. They have invested their assets as follows:
Risk-based % Amount Risk based $ Cash deposits at the Fed ........................0% ..............$20 million........................$0 Warehouse lines ..................................100% ..........$300 million ......$300 million FHA and VA loans ..................................20% ............$100 million ........$20 million Conventional loan less than 90% ..........50% ............$30 million ........$15 million Conventional loans greater than 90% ..100% ............$50 million ........$50 million Total risk-based assets ..................................................................$385 million
Bank capital: The math
This bank has an LTOB limit of $5.25 million (15 percent of $35 million). This means that the maximum loan commitment to each of its warehouse customers cannot exceed that amount. Their total capital is seven percent of assets ($35 million divided by $500 million), which is safely above the six percent requirement. Their risk-based capital is calculated as follows:
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O Avoid the LTOB limitations. Because the bank is not extending credit to the mortgage banker and is relying solely on the individual loans and the loan sale takeout proceeds for retirement of the loans, the LTOB limits apply to the individual mortgage borrowers and not the mortgage banker. This allows the bank to fund a large mortgage banker that they might not otherwise be able to fund under their LTOB limits. In the last 10 years, Fannie, Freddie and several conduits have developed early purchase programs. These programs look very much like the Whole Loan Repo process. The takeout investor (Fannie, Freddie or the conduit) funds the purchase of the loan, or part of the purchase price, within two or three days of the funding by the mortgage banker. The mortgage banker then has a defined deadline by which it must deliver all of the required documentation, and receive the balance of the money due to them. If they fail to do so, they have to buy the loan back. This allows the mortgage banker to quickly get the loan off the balance sheet, reduce its warehouse line of credit and improve its debt-to-equity ratio.
Warehouse lending: Profitable and safe Without question, the risks of warehouse lending have increased. Nonetheless, for those who run it well, warehouse lending is a safe and profitable business. The lender’s yield on the warehouse line of credit, and the rapid repayment of amounts advanced, makes this lending a very attractive asset for a commercial bank. Those lenders who profit from this lending watch the things that always mattered: O O O O O O O O
The character and track record of their customer and its management The debt-to-equity and profitability of their customer The liquidity of their customer The speed at which their customer turns their loans, including aggressive paydown requirements for aged loans The timeliness, substance and quality of the takeout and the takeout investor to which their customer is selling their loans The advance rate under the line, versus the takeout price Careful oversight and control of the mortgage collateral, including use of the Mortgage Electronic Registration Systems (MERS) Careful control over the funding of the loan and the proceeds of the loan sale
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COLORADO MORTGAGE PROFESSIONAL MAGAZINE
Mortgage bankers: Challenge and adaptation
Mortgage bankers also have challenges. When I started in this business, the prevailing debt-to-equity requirement for warehouse lines of credit was 10 to one. In other words, the mortgage banker needed GAAP capital of $1 million for every $10 million of warehouse line outstanding and, in most cases, for the amount of line committed. Additionally, warehouse lenders looked at working capital (GAAP current assets minus GAAP current liabilities) as an important ratio. We tried to maintain positive working capital equal to at least 75 percent of GAAP capital. We did not capitalize, nor did we often sell, servicing. Most warehouse lines of credit advanced the lesser of 98 percent of par or the loan sale takeout price. In summary, the industry operated with much less leverage than today. As we began to capitalize and sell servicing, things got more complicated. A more competitive and permissive credit environment led to higher advance rates and debt-to-equity ratios. In the last 10 years, I have seen warehouse deals with debt-to-equity ratios as high as 25 to one and advance rates as high as 102 percent of par. As to working capital, “What’s that?” has often graced the tongues of lenders and borrowers. Mortgage bankers are also at the mercy of the institutions to which they sell their loans. For many mortgage bankers, that is a conduit, and the conduits have their own funding challenges—whether it is the funding capacity of the bank that owns them or the capacity of their own warehouse lines. The mortgage business is very volatile. When business volume spikes, the speed at which institutional investors buy loans slows dramatically. This slows down the turnover of the mortgage banker’s warehouse inventory and increases the size requirements of their warehouse credit needs.
Warehouse lending: Solutions Now let’s look at some possible solutions. Some are more dramatic than others. I believe that they can all have a positive impact on the challenge. If you are a mortgage banker: O If you have a warehouse lender, treat them with the same respect you treat your wife (or spouse). O Manage your aged inventory. If you have a problem, call it to the attention of your warehouse lender before they call it to your attention. When you call them, offer a reasonable and achievable plan for resolution of the specific problem. O Prepare and model your business for higher capital requirements—a lower debt –to-equity ratio. O Carefully monitor the liquidity (working capital) of your business, and maintain adequate levels to safely run your business. O Don’t defer problems. Hoping is not a plan.
O Visit your community bank(s) and explain the business to them. Ask them if they will consider providing warehouse financing to you and/or other mortgage bankers. If they will, contact your current warehouse lender and see if they will sell them a participation in your line of credit. If you are a successful warehouse lender: O Thank you for supporting our industry! O Please consider using your operations platform and expertise to expand your lending program by selling participations to other banks that need loans and are willing to consider warehouse financing. Charge a fee for this extra service. If you are a bank that is willing to consider warehouse financing: O Please consider the purchase of warehouse line participations from experienced banks O If you have the resources, consider forming a unit to provide warehouse financing. It can be a very lucrative and safe business channel. If you are a Wall Street firm: O Do you or can you still offer repos? O Do you or can you still offer Gestation Repos? If you are a federal home loan bank or “banker’s bank:” O Please consider creating an operational platform to serve your member banks that would like to invest in mortgage warehousing. This can increase your fee income, and help your member banks invest in a profitable asset. O Consider using your resources to be a clearing house for sale of warehouse line of credit participations to your member banks. O To the extent your charter permits, consider investing in warehouse lines of credit that are secured by loans eligible for sale to Ginnie Mae, Fannie Mae or Freddie Mac. If you are a federal regulator: O Please consider allowing risk-based capital treatment, for qualifying warehouse lines of credit, to be based on the risk-based allocations for the underlying mortgages that secure the line of credit. That will eliminate the disparity between bank-owned and independent mortgage companies. The Mortgage Bankers Association has recently made a similar request. O Bank-owned mortgage companies that are funding their loans “on balance sheet” can already use this capital treatment. O Banks using a Whole Loan Repo process are also already using this capital treatment. By definition, Whole Loan Repo agreements are not supposed to have specific recourse to the mortgage banker. Traditional warehouse lines of credit, backed by agency loans, afford the same collateral protection to the bank, and have the added credit enhancement of specific recourse to the mortgage banker. If you are Fannie Mae, Freddie Mac or Ginnie Mae: O Please consider the purchase of warehouse line participations from experienced banks. As this article goes to press, Ginnie Mae has announced that they are considering some type of warehouse support for Ginnie Mae issuers. O Thank you for your years of support of and collaboration with our industry! Mortgage banking was created to transport mortgage lending capital from capital surplus areas of the country to growing, capital starved regions of the country. Independent mortgage bankers are vital to the sustenance of our country’s mortgage financing. Without adequate and affordable warehouse inventory financing, independent mortgage banks will become scarce. For many years, banks and independent mortgage bankers have enjoyed a symbiotic relationship. We are all aware of the challenges that banks face. The provisions of warehouse financing are good for the banks, mortgage bankers, the availability of mortgage loans and the cost of mortgage loans to the consumer. For many years, this industry has contributed to the American dream of homeownership. Our industry needs some help and some compromise. The cost of that compromise is affordable and, when properly managed, safe. We must all work together for prompt resolution. The tools are available, and the requisite compromises are tolerable. It’s time for a solution! James Hinton is chairman of Hinton Mortgage & Investment Company in Dallas, and is a 37-year veteran of the mortgage and banking industries. His company provides consulting and advisory services to the financial services industry. He may be reached by e-mail at firstname.lastname@example.org or via his company’s Web site, www.cfhinton.com. Visit author James Hinton’s blog at blog.cfhinton.com for tips and tricks on how to de-mystify and conquer the home loan process, and make the best deal for your loan.
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O MAY 2009
Lock, stock and barrel
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MAY 2009 O
COLORADO MORTGAGE PROFESSIONAL MAGAZINE
By Michael L. Larssen, CMB
It seems that our government and busi- marketing that have remained front page ness leaders are constantly making neces- negative news include securitizations, colsary changes to address the systemic blun- lateralized debt obligations (CDOs), derivders that were adopted during the last atives, exotic adjustable-rate mortgages decade. We are witnessing an unprece- (ARMs), etc. Regrettably, one of the more dented bombardment of government basic areas that receive little to no attenintervention, regulation and supervision tion is the lock process. When a borrower applies to a mortto re-engineer the overall finance industry. All of these complex changes are gage company, they have the option to being enacted to ensure we never repeat float their rate until a later period of time the prescription for economic ruin again. or secure the rate that is offered at appliIndustry veterans, politicians and borrow- cation for a set number of days (rate lock). ers continue to struggle and place blame Applicants are able to secure hundreds of thousands of dollars of mortgage money on numerous entities and individuals. The “Blame Game” has become so by simply filling out an application, paypopular, that it is now both a universal ing limited upfront expenses, such as an banking term, as well as the title of a appraisal, credit report and/or application recently published book chronicling our fee. This immediately creates some calamazingly deficient oversight, accounta- lousness about the mortgage application bility and responsibility in mortgage process, because the borrower has very litbanking. We can only pray that all of the tle and/or no commitment to their loan, and/or their mortgage experts being called upon company. You might be to contribute to the plan asking yourself why a borwill enable our newlyrower should have to oblielected government to cregate themselves to a mortate polices that stabilize gage lender and/or their home prices and stimulate loans terms? With commiteconomic growth in the ment comes responsibility, near future. Logically, and with responsibility there is immense political comes accountability. The disagreement about the last decade of mortgage plans being enacted, and company implosions is uncertainty about their paved with examples of effectiveness and timing. “We are witnessing borrowers who did not The magnitude, complexian unprecedented understand the terms of ties and scope of our probtheir loans, as well as many bombardment of lems are epic, and therefore, consumer confidence government interven- unscrupulous mortgage companies that deceived is at a historic low. One tion, regulation and borrowers into loans that thing is certain: Our indussupervision to were not in their best intertry will never be the same, re-engineer the overests. We need to enhance and we must restructure all finance industry.” transparency, accountabiliall aspects of the mortgage ty and responsibility, but application process, credit standards, and secondary marketing how? Are there simple ideas that can practices to regain confidence, and even- achieve incredible results? With all of the recent loan level price tually, more liquidity to the market. So, what does all of the above history adjustments, borrowers have not been have to do with the title of this article, and able to benefit enough from rate reducwhy did I preface this article with a tions. We also need to lower the cost of reminder of the problems we are sick and available credit. I have a simple solution. tired of hearing about? For those of you Create a national proscribed lock not familiar with the phrase, “Lock, Stock process, complimented by a suitable and Barrel,” simply put, it means to put lock fee. The fatal flaw of not having this complete focus into something. If you protocol in our industry has exacerbated have your head down and are really visu- our problems, increased rates and comalizing your target, you can be said to be pounded mortgage company expenses. By adopting a national lock fee policy, a doing something “Lock, Stock and Barrel.” This phrase could not be more apropos of borrower would take more stock reviewing our market today. There are millions of the terms of their mortgage, and this people keeping their head down (for would improve personal accountability. more reasons than I can list), and every- There are some purists who believe that if one is focusing on survival. Unfortunately, a borrower remembered the simple philoswith so much attentiveness and tunnel ophy of “buyer beware,” that many of the vision about the big issues and restructur- bad mortgages would never have been ing the universe, we often overlook the done, and I partially agree. There are many simple obvious problems. With all of the of you who feel borrowers did not have a expert analysis, intervention and regula- barrel of a gun pointed at their heads when tions, we are missing one basic area of the they signed the mortgage, and should have secondary and mortgage application been more responsible. Unfortunately, process that must be perfected. To date, continued on page 16 the more intricate areas of secondary
property types. One exception to this recovery is the U.S. apartment sector, where demand increased with the rise in foreclosures as many homeowners turned to rental properties as a housing option. As demand for multi-family housing catches up with supply, the apartment sector is expected to emerge from the recession phase of the value cycle ahead of the other sectors, according to the survey. As investment risk has increased, the average overall capitalization rate increased on a quarterly basis for all surveyed markets with the exception of the Washington, D.C. and Houston office markets. The Pacific Northwest, San Diego and Denver office markets posted the largest quarterly overall cap rate increases in the office sector. Most of the real estate professionals surveyed as part of the Korpacz Real Estate Investor Survey project overall cap rates to increase over the next six months. For more information, visit www.pwcreval.com.
LPS releases study on impact of foreclosures on home prices Lender Processing Services Inc. (LPS) has released a study that reveals the impact of foreclosure sales, also known as real estate-owned (REO) sales, on home prices. Using a proprietary home price index that can include or exclude REO sales, LPS conducted a study of changes in regional home prices between 2007 and 2008 in the nation’s top housing markets. “While the gap between REO sales prices and the rest of the market was very slim prior to 2007, our study shows that gap is growing at an accelerating pace,” said Nima Nattagh, Ph.D., senior vice president, LPS Applied Analytics. “In general, markets that experienced sharp drops in home prices in 2008 also saw deeper REO discounts.” The largest drop in prices of REO sales were observed in Riverside County, Calif. Home prices fell by 28 percent in Riverside County in 2008 versus 2007; however, including REO sales, prices fell by 34 percent when compared to 2007. The study also found that, including REO sales, home prices declined by 29 percent during 2008 in the Phoenix market where analysts cite significant overbuilding. When REO sales were excluded from the analysis, though, the price decline was less severe at 19 percent year over year. The gap between home prices with and without REO sales was smallest in Seattle, New York and Cambridge, Mass. While the Western states and Michigan and Florida saw double-digit declines in home prices, other regions have fared much better. However, based on study results, further deterioration in the housing market will most likely deepen the REO discount levels in these markets. For more information, visit www.lpsvcs.com.
MBA calls for uniform national regulation of mortgage lending The Mortgage Bankers Association has sent a letter to the Chairmen and Ranking Members of the House Financial Services and Senate Banking Committees calling for legislation that would establish a tough, new federal regulatory framework for mortgage lending to protect borrowers nationwide. In the letter, MBA offered an outline of proposed legislation, titled the Mortgage Improvement and Regulation Act (MIRA), that would establish new uniform national lending standards to replace the current patchwork of state and federal lending laws and that would also establish a new federal regulator to implement and enforce these standards. “In order to restore confidence in the housing and mortgage markets, we need to ensure that many of the excesses that led to the current crisis aren’t repeated,” said John A. Courson, president and chief executive officer of MBA. “For this reason, we are calling on Congress to create a new national regulatory framework to regularize the mortgage market and better protect consumers.” MBA’s plan is centered on the creation of new lending standards and a new regulator, the Federal Mortgage Regulatory Agency (FMRA). MIRA would establish, and FMRA would be responsible for implementing and updating, the new mortgage lending and servicing standards, as well as regulating independent mortgage bankers and mortgage brokers in partnership with state regulators. “MBA has long advocated for uniform national lending standards to protect borrowers coast to coast,” said Courson. “One standard for all borrowers to learn and understand, and one standard for all lenders to follow will offer much better protection to consumers in every state and will help to lower costs. It will also significantly cut down on the confusing and often contradictory patchwork of state laws and regulations.” As part of MIRA, HUD and the Federal Reserve would be required to work together in consultation with the new regulator to develop greatly simplified consumer disclosure forms, including combining Real Estate Settlement Procedures Act (RESPA) and Truth-in-Lending Act (TILA) disclosures to help consumers better navigate the mortgage process. Additionally, MIRA would increase resources for investigating and prosecuting mortgage fraud and establish a national financial literacy and counseling program. As part of that program, MBA suggests there should be pre-purchase counseling required on certain mortgage products, primarily for first-time homebuyers. For more information, visit www.mortgagebankers.org.
A closer look at Cost Segregation Studies By Scott Marchand
A virtually unknown strategy called Cost Segregation can help you to not only secure loans, but build your business with commercial and multi-unit residential investors. A Cost Segregation Study is a timeproven and powerful technique for increasing cash flow immediately upon acquisition of a commercial or multiunit residential investment property. Traditionally, these studies are completed after the acquisition of a property. However, when commercial mortgage professionals use the analysis during the loan application process, it positions the borrower as more loan-worthy and makes the loan application (banking guidelines) stronger. Best of all, the analysis is free.
What is a Cost Segregation Study and a Cost Segregation Analysis Report?
O For a $1.28 million multifamily investment property: A Cost Segregation Study was performed, netting a tax savings of approximately $85,000 that the owner could not have otherwise obtained without a study. O For a $4.8 million multifamily investment property: A Cost Segregation Study reduced federal and state income tax burden by $231,000 that this owner could not have otherwise obtained. O For a $7.2 million multifamily investment property: A study produced additional depreciation of over $900,000, generating almost $400,000 in tax savings. Scott Marchand is with Albany, N.Y.-based Cost Segregation Partners Inc. He may be reached at (518) 608-4283 or e-mail email@example.com. For information on obtaining a free Cost Segregation Analysis Report, e-mail Scott Marchand at firstname.lastname@example.org.
O MAY 2009
Any commercial or residential multiunit building owner (or those in process of purchasing a building) whose property is valued more than $750,000 or who is constructing a building. Any owners of commercial or residential multiunit buildings who acquired that property post-1986 and have not had a Cost Segregation Study completed yet. Commercial mortgage professionals that use a Cost Segregation Analysis as part of their loan application process show a commitment to their financial
Commercial real estate investors are always looking for ways to improve their projectâ€™s cash flow. Cash flow is often the most critical factor investors analyze in the decision mix to purchase a facility. Cost Segregation Studies accelerate depreciation deductions and defer federal and state income taxes. This helps the prospective property owner increase their cash flow. Once a property is purchased, a study may also materially reduce local property taxes by separating real and personal property. Most importantly, a Cost Segregation Study puts cash into the hands of commercial and residential real estate properties now! What real estate investor wouldnâ€™t want you to show them how to obtain the financing they need and a way to significantly increase cash flow once they acquire a property? These studies are one-time property specific events that are completed in 30 days, saving multiunit owners tens of thousands of dollars. They pay for themselves tenfold. Consider these examples:
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What type of borrowers and properties can benefit?
How does Cost Segregation benefit the borrower beyond positioning to secure a loan?
A Cost Segregation Study identifies and reclassifies personal property (HVAC, plumbing, fixtures, landscape, etc.) from what is real property (bricks and sticks). Typically all of these assets are depreciated over 39 years (commercial) and 27.5 years (residential investment). A study changes the method of depreciation following IRS guidelines to greatly accelerate the depreciation of personal property assets to as little as five years. Oftentimes, up to 60 percent of building costs can be depreciated for these shorter periodsâ€” typically saving property owners hundreds of thousands of dollars. Cost Segregation Studies are performed by a team of engineers, certified public accountants (CPAs) and construction specialists. The cost of a study tends to be 10 percent of the increased cash flow that the study produces. The benefits of a Cost Segregation Study are substantial, immediate and enduring. The Cost Segregation Study is only required once. Its cost is not recurring, but the benefits are recurring during the term of property ownership. A Cost Segregation Analysis Report conservatively identifies and estimates the savings that can be achieved for specific properties.
institution by improving the position and security of a loan for the lender and to the welfare of the borrower by enhancing their cash flow immediately upon acquisition of the property. This is a winwin situation for all parties involved.
lock, stock and barrel
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Mortgagebot acquires Netupdate from Most Home Corporation
Mortgagebot LLC, a provider of online, pointof-sale lending technology to the mortgage industry, has announced that it has acquired, through a wholly-owned subsidiary, the loan origination software platform operated by Netupdate Inc. of Bellevue, Wash. and its client base. Netupdate has been a developer of consumer-direct, point-of-sale mortgage-origination technology since 1999, and was a wholly-owned subsidiary of Vancouver, B.C.-based Most Home Corporation, a provider of online customer-service solutions for the mortgage and real estate industries. “We’re confident that Netupdate clients will benefit from our business model— which is built not only on providing innovative solutions with exceptional functionality, but also delivering outstanding customer care,” said Scott Happ, president and CEO of Mortgagebot. “Because we collaborate so closely with our clients, we call them our ‘Partners;’ and we’re delighted to welcome Netupdate’s clients as new Mortgagebot Partners. Our goal is to make their transition into the world of Mortgagebot as smooth, as trouble-free, and as worry-free as possible.” With the Netupdate acquisition, Mortgagebot strengthens its client base of banks, thrifts and credit unions to more than 900 organizations nationwide. “Most Home is pleased to have Netupdate acquired by Mortgagebot,” said Ken Galpin, CEO of Most Home Corporation. “Mortgagebot truly is the market leader, with a world-class reputation for both product innovation and client satisfaction. Netupdate clients are in very good hands with Mortgagebot.” For more information, visit www.mortgagebot.com.
StreetLinks partners with Calyx Point StreetLinks National Appraisal Services has announces its integration with Calyx Software, makers of the Calyx Point loan origination and processing system. This partnership will allow Point users to order appraisals and receive completed reports within their loan origination system, thus eliminating the use of separate systems and
entry of duplicate information. The integration has been fully tested and is currently operational. “Through this integration, lenders can launch an appraisal order with the push of a button,” explained Tony Ebeyer, StreetLinks COO. “This will reduce processing time and eliminate errors inherent in duplicate entry. With Calyx’s reach and reputation, it is exciting to be in front of everyone using their Point system. This partnership demonstrates our companies’ shared commitment to leveraging time, cost and compliance.” Dennis Boggs, senior vice president of business development for Calyx Software, said, “We are excited about StreetLinks’ integration into Point. Our goal at Calyx is to continue to provide the best service providers available to Point users.” For more information, visit www.streetlinks.com or www.calyxsoftware.com.
Lend America implements 100 percent automated paperless platform Lend America has announced that it has built and implemented an automated paperless platform for all loan originations and processing that enhances overall efficiency, regulatory compliance and risk management, while extending the company’s commitment to environmental stewardship. This strategic initiative was directed by Lend America’s new chief information officer, Adeel Saeed, who is responsible for managing the technology decisions and architecture of the company with a mandate to focus on automation, simplicity and eco-responsibility. “Our paperless platform, which brings the entire mortgage process into a single application, truly positions Lend America as a leading next generation mortgage company,” commented Michael Ashley, chief business strategist of Lend America. “This fully automated platform significantly enhances the mortgage process by intelligently creating, managing, processing, monitoring archiving, and retrieving all content throughout the lifecycle of a mortgage from initial contact through the closing of the loan. The tangible benefits of this platform are numerous and include increased efficiency, regulatory continued on page 20
both assumptions have credibility. Over the past few decades, in an effort to ensure that borrowers had easy access to credit, they were given more and more freedom to shop their loan. While one would assume the ease of shopping could only benefit a borrower, our industry has made the process of shopping a loan so simple, that we diminished accountability and created a world where borrowers can shop mortgage companies indefinitely. This lack of commitment is especially true, if we examine a refinance commitment where the ability to rescind on a mortgage is voluntarily offered at time of application, to minimize the initial review of the paperwork involved. Simply stated, the flexibility offered to a borrower has had an adverse affect of minimizing the significance of a mortgage process, thus diminishing the predictability of loan closings post application. To be absolutely clear, I am not advocating the elimination of the borrower’s ability of comparing competitor’s terms and service. I am advocating that they have a substantial interest in the transaction when they select a company. This policy would also enhance secondary market confidence and performance. It would reduce volatility of a mortgage company’s pull through percentage, for loans sold to the secondary market. Instability of pull-through creates additional hidden costs, directly related to hedging interest rate risk. By implementing a simple national lock fee, hedging volatility of pull-through would be dramatically reduced. Mortgage lenders are graded by their investors utilizing a scorecard. Large banks and/or correspondent investors rank correspondent clients by their ability to deliver high consistent pullthrough. The mortgage lender is charged additional points or penalized for poor pull-through performance, and these costs are passed on to the borrower if their pull through does not meet expectations. At a recent Lenders One (an alliance of more than 125 mortgage lenders) conference, I polled more than 30 executives about my concept, and they unanimously agreed that such a policy would be warmly welcomed. Many in the room had recently put differing lock fee policies into effect, and despite their employees’ passionate objections, they all witnessed very positive results. They also unanimously validated my assessment, that the secondary savings from a reduced pipeline volatility and operational waste that would be realized could range between 0.500 to 0.750 basis points. Simply put, the superior hedging performance achieved from the fee would directly benefit the borrower and the mortgage company. A simple national rate lock policy would reduce the redundant expense that companies encounter working on loans that fall out of their pipeline. With the ease of losing a loan, it is difficult for a
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mortgage company to manage the efficiency and effectiveness of their originators. These unnecessary operational expenses eventually wind up being passed on to a borrower via increased rates.
“While one would assume the ease of shopping could only benefit a borrower, our industry has made the process of shopping a loan so simple, that we diminished accountability and created a world where borrowers can shop mortgage companies indefinitely.” In the mortgage world today, there is a widening gap between the small- to midsized companies. It is usually the larger companies that hedge, and the smaller ones that do not. Recent spreads between best efforts and mandatory delivery have expanded to historic highs. After speaking with several secondary risk management executives, they stated that there is an approximate 0.750 to 150 basis point differential. Operating without a national rate lock policy, the best efforts lender struggles to manage the substantial loss of their applications in a declining rate environment. As rates drop, some smaller mortgage lenders feel helpless to maintain the customer, thus they often renegotiate a rate lock with a borrower, relock the loan with a new investor, and do not deliver the loan to their original targeted investor. The larger lenders are not immune to the negative impact of existing loan lock policy and procedures. They incur the same losses and operational inefficiencies in their retail channels. Large lenders also are affected more severely via their third-party channels, that they have less direct control over when managing risk. These secondary and operational challenges have recently been cited as reasons for larger institutions eliminating their third-party channels. These third-party channels create liquidity and are another important aspect of our business slowly becoming extinct. There is no other financial transaction that I could think of that has such a limited level of commitment. When you buy a stock, you don’t get to change the price of the stock later in the day because the market improved. In order to better manage risk, you have to be able to obtain a secure hold on your deliverables. As I previously stated, there are lenders doing business that charge a lock in fee today, and unfortunately are at a competitive disadvantage by those that do not.. It is a proven fact that a realistic lock fee will differentiate real clients from rate shoppers. If we instituted a national rate lock fee policy, it continued on page 20
Write-offs could cut HECM costs Disclaimer: Nothing in this article should be considered tax advice. It is strictly informational. Consult a reverse mortgage-competent tax advisor. Monica Bubasky is a happy woman. The 70-year-old native of Lake Hekmo, Minn. is beside herself with joy. It comes across in her warm chatty voice and tender brown eyes. Her slight 5’4” frame comes alive when she talks about her modernized kitchen and bathrooms. The $40,000 project, paid for with cash from a reverse mortgage she took in September 2007, made her kitchen and bathrooms age-suitable and new. The kitchen cabinets are now on the same level as her dishwasher. No more climbing
up and risking falling down to get utensils from her cabinets. Her new bathtub is fallproof and ringed with baby-soft air-bubble rubber edges on which she can rest her head while taking a hot bath. If she falls for some strange reason, her head would land on a pillow (thanks to the airbubble edges) that alerts her children and her doctor in neighboring towns. The tub’s auto-cleanser carries a lifetime warranty. Besides auto-flushing and cleaning, her new toilet bowl performs quarterly fecal and urinal analysis and remotely stores the results in her digital medical record. The wall tiles of the bathroom are maintenancefree for life. It is what the contractor’s marketing literature calls “tomorrow’s
bathrooms for older adults who aspire to age-in-place.” As satisfying as the new kitchen and bathrooms are to Bubasky, our tax code may hold some cash surprise: Deduction for the mortgage insurance premium (MIP) she paid to get the Home Equity Conversion Mortgage (HECM) loan as well as the extra 50 basis points MIP charged to her loan balance and remitted monthly to the U.S. Department of Housing and Urban Development (HUD). Considering that Federal Housing Administration (FHA) insurance premiums generally make up more than 50 percent of HECM costs, the potential MIP write-offs could significantly reduce HECM costs for seniors such as Bubasky. These potential tax write-offs came courtesy of some little-known provisions in the Tax Relief and Health Care Act of 2006 (Public Law 109-432, as amended by the Mortgage Forgiveness Debt Relief Act of 2007 [Public Law 110-142]) according to James E. Veale, vice president of government affairs at Security One Lending Inc., one of the nation’s leading authorities on taxes and reverse mortgages. Veale says these guidelines apply to the MIP deduction*: O Insurance contract must be issued after Dec. 31, 2006; O Reverse mortgage has to be related to “acquisition indebtedness” (constructing, acquiring, major improvement or the refinance of those items); O Borrower cannot have income over $100,000 (or in some cases less) without reduction;
O Home has to be a “qualified residence” (a.k.a. principal residence); O No deduction after Dec. 31, 2010; O Pre-paids (i.e. upfront MIP) gets written off over 84 months. Not every borrower can take advantage of the deductions. In addition to meeting the above guidelines, they must have sufficient taxable income for the deduction to make sense, but Veale believes sharing information about the write-off’s availability is important whether or not your HECM borrowers qualify. “Even if they don’t have the income, it is still available, and they should still be made aware that it is available,” says Veale, a CPA with more than 38 years experience in tax matters. Because every HECM borrower’s situation is different and an originator cannot be sure how a customer used their HECM cash, Veale suggests that reverse mortgage originators should not conclude that their customer is eligible without finding out how the cash from the HECM was used. “The key question is ‘how was the loan proceeds used?’” says Veale. That is a question that your clients should be able to answer. If they use their reverse mortgage cash for home *Here is the relevant IRS code: The sections are Internal Revenue Code Sections 163(h)(3)(E), 163(h)(4)(E), and 163(h)(4)(F). continued on page 20
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For more information on the National Association of Mortgage Brokers, visit www.namb.org.
MAY 2009 O
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A message from NAMB President Marc Savitt, CRMS
I’d like to welcome you to the inaugural issue of National Mortgage Professional Magazine. In this issue and future issues, the magazine will focus on all aspects of the mortgage industry. While I personally represent the National Association of Mortgage Brokers, the entire mortgage industry can still speak with a unified voice, and it is the goal of this publication is to have that voice heard. I’d like to thank the publishers of National Mortgage Professional Magazine for providing NAMB with this forum to detail the work we do on behalf of our membership. Our board is rich with industry experience, and in this issue and in future installments, NAMB board members and committee chairs will reveal the secrets to their success and provide tips in their particular areas of expertise. This first installment of “The NAMB Perspective” column will feature articles by our Federal Housing Administration (FHA) Committee Chair John Councilman, CMC, CRMS; Membership Committee Chair Olga Kucerak; and Secretary Don Frommeyer, CRMS. I’m sure you will find John’s expertise in the field of FHA to be quite valuable as he tackles the topic of FHA loans, one of the hottest products currently in the marketplace. Olga’s article stresses the power of NAMB membership and how strength in numbers speaks volumes. Finally, Don’s article discusses the current state of the underwriting field and how the current low rates have created a virtual backlog of work for underwriters everywhere. As the market begins to heat up in certain areas, we as an industry still seem to have a target on our collective backs. We are currently facing several legislative issues in Washington, D.C., and the daily battles on Capitol Hill will continue as we stand up and protect our industry. We have been subjected to unprecedented legislative challenges this past year. A majority of these issues evolved from the unfair image of the broker as portrayed by the mainstream media. We will continue to combat these issues and shall prevail. I thank you for your time and strongly encourage you to take in the knowledge that will be provided by our membership in “The NAMB Perspective” in this issue and in the future. Marc Savitt, CRMS is President of the National Association of Mortgage Brokers and president of The Mortgage Center in Martinsburg, W. Va. He may be reached at email@example.com.
A message from NAMB FHA Committee Chair John Councilman, CMC, CRMS FHA, the low-cost alternative … maybe It seems hard to believe that the FHA has gone from an unused relic to one of the hottest mortgage programs in the market in a mere matter of months. In 2006, many brokers had turned in their FHA approval. Many wholesalers didn’t even offer FHA. All of that was before the financial meltdown. Now, many borrowers who could choose any conventional program are choosing FHA. Everyone who had given up their FHA approval scrambled to be re-approved. Now, brokers are reporting over 50 percent of their production is FHA. If one simply looks at rates and fees, it is easy to send most of your loan production through FHA. A good mortgage originator will dig a little deeper. The current legislative and regulatory climate is already introducing a new concept to many originators, a
Duty of Care. Already included in some state legislation and in HR 1728, Duty of Care means “presenting consumers with appropriate mortgage loans.” That duty requires any originator to take the time to see if they are actually giving the borrower the loan a person who had done due diligence would have given them. Consider a borrower who only expects to live in the house for three years. If the private mortgage insurance (PMI) is available, it is often much less costly than FHA insurance. If the borrower has a 700-plus score and 10 percent down, PMI often is the better choice. Make certain you have checked to see if the loan meets USDA Rural Housing guidelines or if the borrower is a veteran. As home prices stabilize, as they will, presenting the appropriate loan will become even more challenging. One of the most common reasons originators have avoided Fannie Mae and Freddie Mac has been due to a tightening of guidelines and ever-increasing add-ons. Add-on fees have reached unbelievable levels. PMI rates have soared, if you can get PMI for the loan at all. Meanwhile, the FHA has maintained normal MI premiums that seem downright cheap in today’s market. FHA credit, income and reserve requirements are not significantly different than they were in the heyday of the sub-prime market. There are none of the add-ons from FHA that have become commonplace for the government-sponsored enterprises (GSEs). While FHA is not charging add-ons, it has not made FHA loans immune from radical add-on fees from lenders. Supposedly, there is some logic to these fees, but they all seem to stand independently rather than as a component of a grading scale. It is not clear what justifies such massive fees since FHA loans are 100 percent guaranteed. Lenders tell me that it is because their compare ratio in Neighborhood Watch is at risk. Others claim loans that are less than perfect are difficult to market. Still others claim servicing costs are greater. If that is the case, one must wonder one why the fees vary so greatly between lenders. Lenders generally take two different approaches to what is perceived to be greater risk. Some lenders take the approach that fees are inappropriate and they simply don’t take loans with certain features. Some go so far as making across-the-board restrictions for all loans whether conventional or FHA. At least one lender accepts no loans below a 680 score, irrespective of what GSE or FHA guidelines allow. Most of the largest wholesale lenders have set 620 as the minimum acceptable score. A second approach to risk has created a huge cottage industry of smaller wholesale lenders who are willing to accept lower scores, but have considerably higher rates and fees. Although FHA allows maximum financing down to a 500 credit score, it is very difficult to find any lender willing to take an FHA loan with a score below 580. There are so many additions to FHA guidelines and additional fees that the following list is far from inclusive of them all. Scores below 620 can be very costly to the borrower. Not only do some investors charge a point or two more in general than the premium investors, they may charge as much as two points more for the 580 score. This begins to rival or exceed fees charged by Fannie Mae or Freddie Mac. By the time the originator takes even a basic origination fee, the borrower may be paying three to four percent of the loan amount upfront. The credit score fees are only the tip of the iceberg. Consider some of the other add-ons: O A borrower with a very high score may still be unacceptable to many investors because their qualifying ratio is in excess of 45 percent or 50 percent. A fee of one percent is very common for loans with a ratio over 55 percent. If the borrower has no score, tack on another half- point, and if non-traditional credit is used, another half-point. Manual underwriting varies greatly from a quarter of a point to 1.5 points. O Many lenders will not accept a borrower with any mortgage lates. More liberal lenders will simply add on another point. If the property being purchased is an FHA real estate-owned property, expect to add a half-point to a full point. Many investors charge additional fees for certain states and loan amounts. This list is hardly exhaustive. It is entirely possible to have an FHA loan that could exceed Homeownership and Equity Protection Act (HOEPA) fee triggers. That
John Councilman, CMC, CRMS is FHA Committee Chair for the National Association of Mortgage Brokers and president of AMC Mortgage Corporation in Fallston, Md. He may be reached (410) 557-6400 or e-mail firstname.lastname@example.org.
Our success will be a result of our determination, or the lack thereof. It is not a foregone conclusion that we will lose this fight, provided we show up for the battle. Olga Kucerak is Membership Committee Chair for the National Association of Mortgage Brokers and president of San Antonio, Texas-based Crown Lending Inc. She may be reached by phone at (210) 828-3384 or e-mail email@example.com.
A message from NAMB Secretary Don Frommeyer, CRMS The underwriting process: 2009 Hello, it is now 2009 and it is time to come clean with your customer that today’s underwriting is not like it was two years ago. Many of you are aware that every underwriter is making sure that they dot their “I’s” and cross their “T’s,” and make sure that “K” comes before “L” and “Q” is after “P.” Now you have been very honest and upfront with your customer, told them that their rate is this and have told them the amount of cash they will be bringing to close, but what about the real time that it will take to have the underwriting done and the time to get them closed. This item is something that brokers have not been able to forecast, but it is time that you are honest with your borrower. Explain to them that the reason that lenders are running behind. It is truly due to volume and the current amount of workers that they feel comfortable hiring. Most account executives now send you an update as to the amount of days that their underwriting department is behind. I have found that if you are upfront and lay everything on the table and give the customer a timeline based on the information provided by your rep, the customer will not be calling you to close in three days and will realize that it will be 10 business days before you hear from them. I don’t mean that you should totally neglect calling your customer, but you can call them after a few days and give them an update on your lender. Keeping in contact is the one item that will not only put trust between you and your customer, but it will not leave them with any false expectations. Don Frommeyer, CRMS is Secretary of the National Association of Mortgage Brokers and senior vice president of Amtrust Mortgage Funding in Carmel, Ind. He may be reached by phone at (317) 575-4355 or e-mail firstname.lastname@example.org.
NEEDED residential reﬁnance for Greenwich, CT. estate property Speciﬁcs: Current appraised valuation: (all appraisals performed by nationally recognized appraisal companies). current $5.9 million (April 2009), $6.3 million (November 2008) $6.1 million (2007, 2008- three appraisals performed) Property info: 6400 SQ FT home on 4 1/2 acres in estate back-country area. Separate guest house, small barn, pool, pond. World-class neighborhood. CLTV: as low as 38%. Based upon negotiated settlement with FDIC- which is highly anticipated.
The number one reason to join NAMB … We as mortgage professionals must work together to fight and educate people about the benefit of working with a broker. O All regulators and legislators want to know are “numbers.” How many people do you represent? O Small numbers equals weakness, whereas large numbers equal power.
O Nothing gets done without lobbyists and grease (Political Action Committee). Again, the power is in the many, not the few.
Client will accept adj 3/1 ARM, short-term commercial note, private lender note. Title has been held for ten years in a family trust. Client (borrower) will guarantee mortgage, and, in addition, the Trust will guarantee the mortgage. Trust has veriﬁable income (2005, 2006, 2007). To facilitate an expeditious closing, client (borrower/trust) will permit an escrow agent to hold a quit-claim deed for term of loan) Client WILL NOT pay application fees under any circumstances. Appraisals, plot plan, tri-merge credit, 1003, photos available to bona ﬁde lenders. Home can be used for primary residence, OR, used for rental income (which has been its use in 2005-2008).
University Mortgage 151 West Passaic Street • Rochelle Park, NJ 07662 Contact Trust representative at: 202-489-9292 (Washington, DC) or by email at email@example.com
O MAY 2009
O There isn’t one mortgage broker who will have the funds to step up and finance the legal costs associated with the fight. We can do this together, but not individually.
Client has cash reserves of 8-10 months I&P. Taxes and insurance pre-paid for one year. Client seeks stated loan with veriﬁed assets. Assets veriﬁed through notarized bank veriﬁcation of deposits forms or letters.
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A message from NAMB Membership Committee Chair Olga Kucerak
Client Credit score: 800 Borrower has perfect employment, career and un-afﬁliated mortgage history spanning 30+ years.
would be the extreme. While it would be nice to avoid these fees, the stark reality is that millions of borrowers would receive no loan at all if these were not offered. Perhaps as property values stabilize, lower-score or high-ratio borrowers will be able to obtain more attractive financing. The tightening is far from over. Appraisal reviews are becoming commonplace. Even when not required by FHA, some investors will call for a second appraisal. Mandatory appraisals on streamlined refinances are becoming increasingly common. Some investors require full income verification on streamlines, while others simply want to verify employment. The most conservative want a fully documented loan, even for streamlines. It is not uncommon to see lenders stop offering a program before it is necessary to do so. An example is the 95 percent cash-out refinance program. While 95 percent of refinances only needed the FHA case number pulled by April 1, most lenders pulled the plug much earlier. The same cutoff happened with FHA Secure. Despite the profit incentive, some programs offered for insurance by FHA are going wanting. Very few lenders offer FHA’s manufactured housing program. Try to find a lender that will allow your borrower to keep open a Chapter 13 bankruptcy or do an Inter-Vivos Trust. FHA allows them, but there seems to be no market. One must question what will happen when FHA’s legislated moratorium on riskbased pricing expires on Oct. 1. Can we imagine Upfront Mortgage Insurance Premium (UFMIP) possibly doubling combined with the fees lenders will charge? Upfront fees to borrowers could easily exceed five percent and potentially approach 10 percent. That makes sub-prime look cheap. FHA faces its own worries. Downpayment assistance (DPA) defaults continue to grow according to the U.S. Department of Housing and Urban Development (HUD). Perhaps that FHA’s biggest new problem is the “immediate default.” Borrowers were taking cash out of a property and simply walking away. The lender is usually the one stuck, but FHA could also be on the line. Vacant properties are blighting neighborhoods and require significant costs to maintain. If you think lenders vary greatly now, wait until they start reviewing appraisals that include Fannie Mae’s 1004-MC Form regarding declining markets. In the Mortgagee Letter implementing the 1004-MC, HUD states, “Direct endorsement lenders are reminded that if the appraiser they selected provides a poor or fraudulent appraisal that leads FHA to insure a mortgage at an inflated amount, the lender is held responsible, equally with the appraiser, for the integrity, accuracy and thoroughness of an appraisal submitted to FHA for mortgage insurance purposes.” You can be certain that means a lot of direct endorsement underwriters are going to nitpick appraisals to death. If you ordered the appraisal, you may be liable as well. A final word to brokers and correspondents … remember, you are liable for the accuracy of all information that was used to underwrite the loan. You are certifying that the bank statements, pay stubs and other forms of verification are accurate. If the lender pulls a 4506-T and your borrower’s pay stub doesn’t reflect their income, you may be called upon to indemnify the lender. I realize that loans are difficult to do now. But be careful. The federal government can appear as though it has fallen asleep for a long time. If they suddenly awake, very few can afford the legal fees to fight them. Certainly that figures into the increased costs that lenders making more difficult loans anticipate.
lock, stock and barrel would create more parity among competing lenders, stability in the hedging process, self-assurance that the borrower has an incentive to fully understand the terms, and operational efficiencies that can add to lender profitability. Paramount to all of the benefits outlined, an effective national rate lock policy would lower rates for borrowers. The lock-in fee that should be implemented is an amount that does restrict borrowers from applying for a mortgage, and at the same time has a noticeable impact on the decision to commit to a particular lender. As exemplified above, I believe that a fee of 0.500 point would achieve the necessary impact. The policy should allow for the fee to be refunded at closing. This type of change will not come easy. Companies that already instituted this policy fear that they will lose loan officers to competitors and borrowers will walk down the street to a
MAY 2009 O
COLORADO MORTGAGE PROFESSIONAL MAGAZINE
forward on reverse
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company that does not charge them a fee. In this era of change, we must institute this one simple process, and do the right thing for borrowers, mortgage companies and the entire industry. Michael L. Larssen, CMB has 20-plus years in the mortgage banking industry with senior management positions. He has started and/or managed numerous mortgage banking companies. He currently serves on several industry advisory councils, committees and boards. Larssen has held leadership positions with the Tennessee Mortgage Bankers Association and Lenders One Mortgage Cooperative. He previously served as chairman of the National Alliance of Independent Mortgage Bankers and holds the Certified Mortgage Bankers designation. He may be reached by phone at (727) 493-2218 or e-mail firstname.lastname@example.org.
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improvement like Monica Bubasky, then they may be able to make the deduction with the guidance of their tax advisor. Why should you bring this potential MIP tax deductibility information to your clients’ attention? There are at least two reasons. One, as I advised in my recent book, Think Reverse!, reverse mortgage originators should conduct themselves as consultants, not product salespeople because a reverse mortgage is a solution to your clients’ life-planning needs, not a product to be sold. By bringing the provisions of this little-known tax law to the attention of your clients, their children, or their accountants, you will be showing your clients and their circle of influence that you care about their financial well-being. Acts like these will differentiate you from the product-peddlers in our midst. Secondly, it is another way to add value to your post-closing relationship with your clients. A little postcard from you to your Mrs. Bubaskys may read: Dear Mrs. Bubasky: I hope you are doing well. It is tax season again, and I thought you should know that you may be eligible to deduct a portion of the mortgage insurance premium (MIP) you paid the federal government to insure your reverse mortgage loan. The Tax Relief and Healthcare Act of 2006, Public Law 109-432 (as amended by The Mortgage Forgiveness Debt Relief Act of 2007, Public Law
110-142), says you may be eligible to deduct a portion of your MIP. Take this card to your accountant and ask them to get you the deduction you may be entitled to. The law runs out in 2010. So, act now to put some money in your pocket. Sincerely yours, Atare E. Agbamu Needless to say, you will impress not only your Mrs. Bubaskys, but also their accountants and their children. Think reverse. Move forward! Author and columnist, Atare E. Agbamu, CRMS is director of reverse mortgages at Minneapolis-based AdvisorNet Mortgage LLC. A member of the BusinessWeek Market Advisory Board, Agbamu is author of Think Reverse! and more than 100 articles on reverse mortgages. Through his advisory firm, ThinkReverse LLC, Agbamu advises financial professionals, institutions and regulators across the country. In a 2007 national report on reverse mortgages, the AARP cited Agbamu’s work. He can be reached by phone at (612) 436-3711 or (612) 203-9434, and e-mail at email@example.com or firstname.lastname@example.org. Visit author Atare E. Agbamu’s blog at http://thinkreverse.com for his thoughts and insights on the reverse mortgage marketplace.
heard on the street compliance, risk management, security, centralized document retention and reduced paper files. All will help us better serve our clients, increase the company’s overall profitability and have a significant impact on the environment.” Lend America launched its automated paperless platform in early February 2009, and to date, all of the company’s loan originations, from entry into the organization to closing, are conducted as a paperless transaction. Utilizing key technologies, this fully integrated collaborative solution allows borrowers to e-sign disclosure documents via a secure portal and/or submits the documents required for their loan. In addition, the platform allows borrowers to communicate realtime with Lend America’s 300-plus trained mortgage specialists and is combined with an automated fulfillment process tracked at every step for those without online access. Using a multi-layered SSL encryption technology, consumer data is always secure and monitored 24/7. In conjunction with the launch of its automated paperless platform, Lend America developed a two-week mandatory training program for its entire 590plus employee base so they could clearly understand both the full functionality of the platform and the business benefits to the organization and environment. For more information, visit www.lendamerica.com.
Fiserv launches new brand identity Fiserv Inc. has unveiled an enhanced market approach and new brand identity, affirming the company’s commitment to its clients and to leading the transformation of financial services technology. These moves represent a further acceleration in Fiserv’s singular approach to the market and to anticipating client demands within a rapidly changing environment. “Our enhanced market approach and vibrant new identity are reflective of the significant change occurring within the financial services industry,” said Jeffery Yabuki, Fiserv president and chief executive officer. “We have the expertise, resources and scale to lead this transformation. Fiserv provides processing technology solutions for more financial institutions than anyone in the world. That scale, combined with our market-leading products and services, uniquely positions us to lead the development of next-generation solutions that will transform the way financial services are delivered.” The company’s organizational structure has been aligned to streamline Fiserv’s market approach, accelerate product innovation and make it easier for clients to access the full breadth of Fiserv solutions. All of the company’s businesses have been unified under the new brand and report through two primary operating divisions led by Steve
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Olsen, former CheckFree chief operating officer and now Fiserv group president, and Tom Warsop, Fiserv group president. This structure will enable further integration of client relationship management and product development efforts. For more information, visit www.newfiserv.com.
DartAppraisal.com extends partnership with Ellie Mae for HVCC compliance DartAppraisal.com, a provider of nationwide residential real estate valuations, is expanding its ongoing partnership with Ellie Mae, a provider of loan processing software for mortgage bankers, brokers and other third party originators. Ellie Mae has announced its HVCCCompliant Appraisal Services, a new program designed to help banker, lender and broker clients fully comply with the Home Valuation Code of Conduct (HVCC) that went into effect on May 1. “The new program initiated by Ellie Mae, combined with the pending HVCC regulations, will serve to elevate the level of independence and transparency between appraisers and mortgage brokers or lenders,” said Darton Case, president of DartAppraisal.com. “This independence will help to reduce opportunities for bias throughout the industry. Furthermore, it will serve to enforce the strict standards which DartAppraisal.com already has in place and extend those same standards on this platform.” For more information, visit www.dartappraisal.com.
Lenders One and Rapid Reporting team up for income verification Lenders One Mortgage Cooperative has entered into an agreement with Rapid Reporting, a provider of pre-funding income and identity verification products for the mortgage industry. The partnership will provide cooperative members with more aggressive pricing and quicker turn times on Form 4506-T requests with Rapid Reporting’s IncomeChek product. IRS Form 4506-T, Request for Transcript of Tax Return, is a quality control check used to evaluate the borrower’s creditworthiness by verifying the income stated on the loan application. “Today’s lending environment is about improving efficiencies while reducing costs, all to ultimately increase a company’s return on investment,” said Luke Pille, Lenders One director of national programs. “Our members are making more Form 4506-T orders as investors are requiring such documentation. Rapid Reporting, which focuses on the mortcontinued on page 22
COLORADO MORTGAGE PROFESSIONAL MAGAZINE
O MAY 2009
Good-enough technology … is this the best we can do?
MAY 2009 O
COLORADO MORTGAGE PROFESSIONAL MAGAZINE
By Ron Litt
In the heydays that were only just a few the mortgage industry: Homebuyers soon years back it seems, the systems in every will be securing mortgages and closing on lender’s office were straining at their break- sales almost as easily and conveniently as ing points to cope with the volume. During they purchase an airline ticket online. this time, there was much fanfare and Borrowers will go through the entire hype about the so-called “e-mortgage.” It process, from application to registering with was to be the unifying process that would the county courthouse, without the mounds streamline our process, eliminate paper of messy paperwork currently required.” shuffling, lower costs and cure the common cold. Committees were meeting, comIt had been more than five years since missions were debating about standards, the first e-mortgage and we were still shufand technology was being developed to fling tons of paper around with each loan. facilitate e-signatures and imaging. Things Fast forward to March of 2009. If you looked so hopeful, yet the e-mortgage did originated a loan lately, you know that is not evolve beyond a prototype. still takes an average of two to four weeks to There was no time then to implement collect all paperwork and get a clear to any major improvements; no time to close. Oh yes, we are making use of elecadopt the new technologies that promised tronic documents. The appraisal comes as a the untold rewards of efficiency and cost PDF, but the appraised value, the appraisreduction. Instead, we settled for familiar er’s name and license information are mantechnology … some band-aids, ually transferred to another form or system. workarounds and minor The credit reports, title comchanges in our manual mitment, are all still largely process. We used lots of old, just paper documents that familiar tools, like spreadare in electronic form. There sheets, to calculate best exeis no ability to actually move cution, to manage hedges the information from sysand locks. What I call, “good tem to system electronically. enough” technology. We’ve had automated We put off things and underwriting in place for patched up existing systems. decades, but no one trusts We prayed for a time when the findings since the volume would back off a litmortgage meltdown. “A tle so we would have time to minimum credit score of “We’ve had automated consider major improve620 for this loan program underwriting in place ments to our processes. is required regardless of for decades, but no one Well, that time has come … AUS findings”, is a phrase trusts the findings or has it? Volume is down routinely posted on Web since the mortgage and the pressure is off, but sites and lender guidemeltdown.” where is the capital to make lines. Lenders routinely the very improvements we lusted after just impose additional conditions on loans a short time ago? Today, the theme is capi- which require manual handling. tal conservation. Budgets are slashed, profWe live in a strange mortgage universe its down and layoffs are de rigueur as we today—a stagflation of sorts. In stagflation, are in survival mode. there is high inflation driven by high So what are we doing about technolo- demand, and economic stagnation caused gy, these days? It seems that it’s good by slow or no growth at the same time. We enough. Systems are no longer stressed have something like that today, don’t we? past their limits. There’s no pressure to The demand for mortgage loans is being improve technology and no money to do fueled by low interest rates and high home it. Interest in new innovations and the e- inventories. At the same time, it is mortgage is down as is attendee and restrained by the stagnation, nay the tightexhibitor participation at mortgage tech- ening of credit requirements, falling warenology events and trade shows in general. house capacity and general reluctance on Are we stuck in neutral … not moving the part of lenders to lend. It’s Alice in forward or backward? At a time when we Wonderland’s mad tea party all over again! could be preparing for the future, we are It’s not much better downstream. Title faced with the prospect that there might company technology still does not interface not be one, at least as we know it, hence with other systems on a broad basis nor do few want to invest in new technology. warehouse lenders or end investors. How Every year since 2000 when the first e- many of the approximately 3,100 counties mortgage was consummated, we asymptot- in the U.S. can actually electronically record ically approach the e-mortgage finish line, a note and deed of trust? We are still paying half the distance at a time, but are we ever for overnight delivery fees. really going to get there? Six years after that The use of paper documents with original momentous event, the following quotes signatures is still commonplace. While e-mail appeared in a July 24, 2006 CNNmoney.com has improved the velocity of business comarticle, entitled “E-mortgages on the way.” munications, it is not a secure medium for the “There’s a quiet revolution going on in
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heard on the street gage industry, understands the evolving need of lenders and offers the tools they need to operate in a more cost effective, efficient manner.” IncomeChek is Rapid Reporting’s Web-accessible income verification tool that is directly interfaced with the IRS to confirm and verify borrower income against tax return, W-2 and 1099 data. It produces personal (1040) or business (1120 or 1065) tax transcripts in as little as 24 hours, and it will save Lenders One members time and money as prescreening mechanisms eliminate invalid IRS forms and fraud detection tools work to reduce the risk of repurchase demands. IncomeChek provides results in a data format, enabling members to automate their underwriting processes in addition to decreasing loan processing times with the removal of human errors, which will increase operational speed and efficiency. “We feel as though we are an extension of the Lenders One network, not just a third-party vendor,” said Jay Meadows, Rapid Reporting president and CEO. “Lenders One has members in all 50 states, and each of these lenders demonstrates the utmost integrity in wanting to eliminate fraud and improve their reporting processes. With Rapid Reporting, they can feel confident in their efforts to prevent fraudulent information from being used.” For more information, visit www.lendersone.com or www.rapidreporting.com.
Kroll Factual Data and MIAC Analytics unite to offer analytical data Kroll Factual Data, a provider of business information solutions to financial organizations, and MIAC Analytic, a provider of post-origination and secondary mortgage pricing, hedging, accounting and risk management solutions, have announced an alliance to provide whole loan collateral risk assessment to mortgage investors and risk managers. “Our alliance with Kroll Factual Data provides real-time risk metrics to help our clients measure the fundamental risks caused by the current financial crisis,” said Paul Van Valkenburg, principal at MIAC. “Together, we are providing our customers with current loan value and borrower credit information to manage portfolio risk accurately and in a timely manner. Through this partnership, we can deliver information within hours that once took days or weeks.” Kroll assesses consumer data to help clients more accurately evaluate loan characteristics, transfer risk and increase safety and soundness. MIAC Analytics’ integrated software products assist with deriving loan loss reserve calculations, pricing and valuation of mortgage-based assets and OTTI (other than temporary impairment) for secu-
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rities. The integration of Kroll Factual Data’s updated risk metrics, lender data and collateral behavior assumptions derived with MIAC’s analytic tools provides for faster, more comprehensive loan evaluation and pricing. For more information, visit www.krollfactualdata.com or www.miacanalytics.com.
PennyMac selects LPS’ MSP to service its first mortgages and HELOCs Lender Processing Services Inc. (LPS), a provider of integrated technology and services to the mortgage industry, has announced that Private National Mortgage Acceptance Company, LLC (PennyMac), a manager of residential mortgage assets, has signed a multiyear contract to service its first mortgages and home equity lines of credit utilizing LPS’ Mortgage Servicing Package (MSP). Approximately 50 percent of all U.S. mortgages are serviced on MSP. MSP supports all areas of PennyMac’s servicing, including loan setup and maintenance, cashiering, escrow administration, investor accounting, default management and regulatory reporting. In addition to MSP, PennyMac is leveraging LPS’ complete suite of mortgage solutions, including valuation products, title decisioning solutions, flood services, workflow management platform (LPS Desktop), risk management solutions, document services and default services. “Our strategy is to keep borrowers in their homes through programs that address both their ability and willingness to pay their mortgages. Simultaneously, we are creating value for investors,” said Stanford L. Kurland, PennyMac’s chairman and chief executive officer. “MSP is the leading and most com right system for PennyMac as we look to jump-start and significantly grow our business.” For more information, visit www.PennyMacUSA.com or www.lpsvcs.com.
Beacon Reverse to become American Home Bank Reverse Beacon Reverse, a provider of reverse mortgage lending services to community banks, credit unions, non-profit lenders and consumers, has announced that it will become known as American Home Bank Reverse. Beacon Reverse became a division of American Home Bank in 2006, and originates and/or provides fulfillment for all of the Bank’s reverse mortgage production. It also originates reverse mortgages through a network of thirdparty lenders that value having the support of an experienced partner when it comes to these specialized programs. continued on page 27
The FHA responds to declining markets In November of 2008, Fannie Mae and Freddie Mac published their requirement for appraisers to use the new “Market Conditions Addendum” for all appraisals done after April 1, 2009. Through Mortgagee Letter 2009-09, the Federal Housing Authority (FHA) has responded in kind by establishing their appraisal requirements for properties located in declining markets, including the use of the Market Conditions Addendum. The purpose of this addendum is “to provide the lender and borrower a clear and accurate understanding of the market trends and conditions prevalent in the subject neighborhood.” (Fannie Mae form 1004MC) What I’d like to provide you is a better
understanding of what is required of appraisers in today’s market, and the importance of delivering an accurate assessment of the subject property and the neighborhood trends. Historically, loan officers have not seriously taken the great importance of the appraisal and the value it has to their clients. Unfortunately, in my experience, I find that most loan officers really don’t understand appraisals and what’s involved in determining the value of a property. In turn, they generally have not treated the appraisal as a truly important piece of information for the borrower. I’ve observed that loan officers regularly put tremendous pressure on appraisers to
“bring in the value.” This is not only highly unethical, but it displays a total disregard for the client’s needs. When a client requests a cash-out refinance, a good practice is to ask them the following question: “How long do you expect to stay in the home?” The answer will help determine just how much cash they should really take out. You should assume the role of a financial advisor, and you should give them a broader understanding of the potential ramifications of any resulting transaction. The truth is, most clients aren’t thinking long-term, so you have to help them. In all cash-out situations, you have to compare the short-term gain to any long-term losses and establish a priority. It may well be that the short-term benefit (debt consolidation) is more important than the long-term loss (less profit when property is sold). For example: Let’s say you have a client that wants to do an 85 percent cash-out refinance to consolidate some debt. When you ask them, “How long do you expect to stay in the house?,” they answer, “Three years.” Given this information, you have to project what the house may sell for at that point and what they will net from that sale. If the house is currently appraised at $250,000 (based on a solid appraisal with no stretch on value), the loan amount at an 85 percent loan-tovalue (LTV) will be $212,500. Using conservative figures, here’s what you project:
Commission at six percent ........$14,100 Seller concession at five percent $11,750 Transfer tax at one percent..........$2,350 Escrow costs ................................$1,500 Cash needed to close ..................$4,950 In this scenario, you estimate that your client may need to bring approximately $5,000 to close on the sale of their home. Your client doesn’t like that idea, so you decide to do an 80 percent LTV for a loan amount of $200,000. At this loan amount, your client will receive approximately $6,200 at closing. Your client likes this much better and opts for the 80 percent LTV. The scenario I’ve just described to you is that of a mortgage professional giving sound advice to their client. Imagine how good that client will feel about giving referrals to this loan officer. Now let’s look at the financial outcome for the same $250,000 (real value) where the same client goes to a “loan pusher” who is only concerned with their commission, who doesn’t think longterm either for the client or themselves, and makes it his or her business to exert pressure on appraisers to “bring in the value.” We will assume the “loan pusher” had the appraiser “bring in the value” at $275,000, and they did an 85 percent cash-out refinance for a loan amount of $233,750. Of course, the client is happy to consolidate their debt, but they are blissfully unaware of what the future outcome will likely be when they try to
Future sales price ..................$235,000 Mortgage payoff ......................$210,250
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O MAY 2009
Value Financial launches Virtual RMS Web portal
MAY 2009 O
COLORADO MORTGAGE PROFESSIONAL MAGAZINE
Value Financial Mortgage Services has announced the launch of Virtual RMS, a special Web portal for reverse mortgage specialists. The new portal will allow a reverse mortgage specialist to access calculators, marketing and training materials, online news feeds, radio spot production, access to Value Financial’s online weekly Webinars, and timely information from the U.S. Department of Housing and Urban Development (HUD). Virtual RMS was designed and built by Andrew Milks, AVP of marketing and training for Value Financial. The company has long been proud of the extensive materials it made available to train its staff. Through Virtual RMS, a loan originator can do everything from ordering
business cards, to designing and printing personalized direct mail, to producing a custom 60-sec. radio commercial at one location. The public may view the site at http://vfrms.com/#content. However, access is limited to Value Financial reverse mortgage specialists. For more information, visit www.valuefinancial.net.
AllRegs enhances State Compliance Package with three new features AllRegs has announced that new features have been added to its State Compliance Package accessed through AllRegs Online. State Compliance Package subscribers currently benefit from online, searchable access to plain language interpretations, links to supporting laws and regulations, English and Spanish language disclosures and
more for all 50 states. Now enhanced with three new features, subscribers have access to loan file checklists, disclosure matrices and permissible fee matrices for each of the 50 states. “We are excited to offer new checklists and matrices on state compliance, required documents and permissible fees through our State Compliance product,” said Dan Thoms, AllRegs senior vice president. “These documents can be printed and inserted into the front of every loan file, or used as a reference for state compliance. Mortgage professionals will be able to ensure that their loan files are complete and compliant by using these new checklists and matrices, streamlining processes and promoting accuracy.” Each product is an instant-print worksheet that is continually updated by AllRegs. For more information, visit www.allregs.com.
Calyx releases Point and Point Central Version 7.0 Calyx Software has announced the release of Point and Point Central Versions 7.0. Point Version 7.0 provides a number of new capabilities to improve workflow and increase loan productivity, including central document image storage capabilities for eloan purposes, as well as enhancements to banking screens, title and escrow interfaces and the addition of a new Federal Housing Administration (FHA) statutory worksheet. Due to the increased use of e-loans and e-docs, Calyx has integrated a document image storage feature for organizing and storing all of the documents in each Point file. Point automatically encrypts, compresses and associates each document with the loan file, regardless of whether the document is single or one of a group, from within Point or one of its interfaces, or from outside of Point. Externally-generated documents can be scanned and imported, or dragged and dropped, into the Point file, while maintaining an audit trail for each document that shows who created it, what it contains, and the date and time it was created. With its enhanced security, Doc Storage formats e-mail documents into PDF files using 128-bit encryption and individually set passwords for each document in the storage file. Another significant change Point 7.0 offers is enhancements to the banker screens. Users can use Point as a single system of record, from origination through product pricing, registration and rate lock, underwriting, and eventually to closing and sale on the secondary market. The banker screens in 7.0 support user’s daily workflow more effectively and there is increased clarity in documentation tracking and reporting. Additionally, title and escrow interfaces have been directly embedded into Point 7.0. Working within Point, users can now order all needed forms from a document provider. Calyx Point 7.0 also includes a worksheet enabling
brokers and lenders to perform statutory required calculations and document them in the loan origination file, in order to comply with FHA requirements. The new worksheet saves repetitive data entry, as information flows from screen to screen, while ensuring that the loan is in compliance throughout the Point file. PointCentral provides all the benefits and functionality of the Point program, but also allows remote users to access all loan documentation via a secured Internet connection and gives customers the ability to apply fieldlevel rules and conditions for quality and compliance purposes. “Our goal is to ensure that Point and PointCentral consistently remain the products of choice in the mortgage industry,” said Dennis Boggs, senior vice president of Calyx Software. “The newest versions also ensure users are in compliance, allowing them to focus on effectively and efficiently close loans.” For more information, visit www.calyxsoftware.com.
Ellie Mae announces HVCC compliance program Ellie Mae has announced its HVCCCompliant Appraisal Services, a new program designed to help banker, lender and broker clients to fully comply with the Home Valuation Code of Conduct (HVCC) that went into effect on May 1, 2009. Ellie Mae’s HVCC-Compliant Appraisal Services will leverage technology enhancements, partnerships with appraisal management companies (AMCs), and direct connection via the ePASS Network to facilitate the HVCCcompliant ordering and delivery of appraisals for Ellie Mae’s banker, broker and lender clients. With the HVCCrelated enhancements to the Encompass Mortgage Management Solution, companies gain the ability to control which staff members can electronically order appraisals, create rules based on property location and loan type, and create and manage their own appraisal panels. Users will also be able to connect directly with top appraisal management companies that are integrated to the ePASS Network. Ellie Mae is working with correspondent and wholesale lenders to incorporate solutions that enhance appraisal portability and simplify lender re-certifications. “The Home Valuation Code of Conduct’s guidelines will require mortgage professionals to change the way they do business with appraisers,” says Ellie Mae Senior Vice President Richard Roof. “After May 1, originators who fail to comply with the HVCC may be faced with penalties, the inability to sell loans, or in the case of brokers, will be unable to submit their loan applications to the wholesale lender of their choice.” continued on page 26
fha responds to declining markets sell their home in three years. Here’s how the numbers may look for this client: Future sales price ..................$235,000 Mortgage payoff ....................$230,250 Commission at six percent ......$14,100 Seller concession at five percent $11,750 Transfer tax at one percent ........$2,350 Escrow costs ..............................$1,500 Cash needed to close ................$24,950 In this outcome, the client has to bring in nearly $25,000 to closing! How happy do you think they’d be, and how ready to send all their family, friends and co-workers to their “loan pusher?” Sadly, it’s thanks in large part to these “loan pusher” scenarios that has contributed to the current crisis in our industry and all the appraisal reform. And, based on the great feedback I get, I’m encouraged to know that the readers of my column are true mortgage professionals, trusted advisors for their clients who are more concerned with integrity and their client’s best interests than with a quick profit at the client’s expense. And now, here are the 10 things your appraiser must do or provide for all FHA appraisals of properties located in declining markets done after April 1, 2009, from Mortgagee Letter 2009-09:
1. Forward this update to your appraisers. 2. Forward this update to all of your real estate agent partners. As you already may be aware, I provide legislative updates for LoanToolbox. After sending this update and suggestion
“I sent that out to my database yesterday and when I checked my e-mails, I had two real estate agents asking me to call their customers for a loan, and a refinance request from another old customer of mine. One agent in particular thanked me for the information, but everyone else just seemed to be responding to the contact. I am really pleased with how Platinum Plus lets me manage my database with automation.”
Jeff Mifsud founded Southfield, Mich.based Mortgage Seminars LLC in 2004, has been an FHA originator for 12 years, is a contributor to LoanToolbox.com and is a former FHA underwriter. Jeff may be reached at (877) 342-9100 or e-mail email@example.com. Visit author Jeff Mifsud’s Web site at http://mseminars.com for tips and information on FHA loans and details from some of the nation’s top FHA specialists.
d Mortgage Brokers: Open letter to Mortgage Bankers an GE year old FULL SERVICE MORTGA Reliance First Capital LLC. Is a one el, Charlotte, NC, Pittsburgh and Philad NY le, lvil Me in ces offi h wit ER NK BA ial r management team of Delta Financ me for the by ed nd fou s wa and , PA phia, rtteam has over 100 years combined mo ent em nag ma ior sen r Ou . ion rat Corpo king of a very strong private equity firm bac the e hav We e. enc eri exp g kin gage ban is looking to grow its originations ce ian Rel . ets ass in s lar dol ion bill 5 with over ic opportunities from an outright teg stra g sin cus dis in d ste ere int is franchise and with mortgage bankers/brokers ip nsh tio rela nch bra net ed difi mo a acquisition, to A and agency loan products. that have a strong knowledge of all FH hly or mortgage broker with a team of hig If you are a licensed mortgage banker rself g to get ahead, and want to align you motivated individuals who are lookin with a company that can provide: ❖ A wide range of loan products; ker without having to worry about ban age rtg mo e tru a as act to y ilit ❖ Ab warehouse facilities; lar private equity fund; ❖ Financial backing of a 5 billion dol years combined mortgage banking ❖ A management team with over 100 experience; edge; ❖ Technology that is on the cutting joining the “Reliance First ❖ Then you should seriously consider Capital family”. e, please To explore opportunities in confidenc Yours truly,
Randy Michaels firstname.lastname@example.org
call me directly at (516) 422-8850.
COLORADO MORTGAGE PROFESSIONAL MAGAZINE O MAY 2009
This update includes an often stated warning that … “Direct Endorsement Lenders are reminded that if the appraiser they selected provides a poor or fraudulent appraisal that leads FHA to insure a mortgage at an inflated amount, the lender is held responsible equally with the appraiser for the integrity, accuracy and thoroughness of an appraisal submitted to FHA.” If the above appraisal guidelines look foreign to you, that’s okay, because this update is intended for appraisers and
underwriters. What you can (and should) do is to provide you with this information so you can take the following actions and help make yourself an FHA resource in your market.
Become an FHA resource in your market place and gain an advantage over your competition. Go FHA!
1. At least two comparable sales within 90 days of the appraisal date. 2. A minimum of two active listings or pending sales in addition to the three closed comparables. 3. Bracketed listings using both dwelling size and sales price when possible. 4. Adjust active listings to reflect the List to Sales Price Ratio. 5. Adjust pending sales to reflect contract sales price when possible. 6. Include original list price and any revised list prices. 7. Reconciliation of adjusted values of active or pending sales with adjusted values of closed comparable sales. 8. Absorption Rate Analysis. 9. Verify sales data through the parties to the transaction. 10.Known or reported sales concessions on active and pending sales.
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to the membership, one of their Platinum Plus members followed my suggestion, and sent the FHA Appraisal update to their real estate agent and client databases. Shortly thereafter, I received this correspondence:
new to market
By Charlie W. Elliott Jr., MAI, SRA
MAY 2009 O
COLORADO MORTGAGE PROFESSIONAL MAGAZINE
The mortgage crisis and the case of no collateral
Our current economic crisis, in the minds 2. Property values whipsawed wildly of many, was caused primarily, if not in the months leading up to the ecoexclusively, by the issuance of hundreds nomic crisis. of billions of dollars of bad real estate There were reports of values increasing loans. In addressing the issue of defaults as much as 40 percent per year in areas, on loans, most would have assumed that such as Las Vegas, California and the losses on the loans by the banks Florida. The economy could not support would have been largely mitigated by this kind of appreciation, and the propselling the property for which the loan erty values headed south. Borrowers was collateralized. After paying $500,000 for homes all, people borrowing suddenly found themselves money, whether on a paying for $400,000 mortresidential or commergages, when their property cial property, must make was only worth $300,000. downpayments, which To put it simply, they serve to account for part bailed, leaving the bank of the purchase price of holding the bag. Let’s say property, while loan-tohere that the typical damvalue (LTV) ratios offer age is 20 percent of the protection on refinances. value of the property. Even if the borrower loses his job or business, 3. Some unscrupulous falls on hard economic lenders and appraisers “While there is a times or just proves to be added insult to injury by plethora of blame a bad credit risk, most of fraudulently participatto go around, the us probably thought that ing in schemes to inflate purpose of this the bank would have a appraisal values in order article is to large measure of protecto make loans “work.” address the issue tion. Here, we had a perThis usually occurred of collateral.” fect storm of things that where borrowers were least went wrong. While there is capable of paying back the a plethora of blame to go around, the pur- loan. Otherwise, it would not have been pose of this article is to address the issue of necessary to tip the scales in the begincollateral. As the owner of an appraisal ning. In this subtle fraud the lender company and as one having many years of pressured the appraiser for values high real estate experience, I offer you a hypo- enough to make the deal. The appraiser thetical case demonstrating that banks had did not realize a big cash kick back; he no collateral on some mortgage loans. That only received the normal appraisal fee is right, zero collateral. and stood first in line to do the next appraisal for the lender. The loan officer 1. Many people getting loans did not made his normal commission on the make material downpayments. transaction, paid his bills for the month We have seen those television commer- and protected his position to make more cials offering 125 percent loan-to-value similar loans the following month. Its (LTV) loans in the months leading up to effect inures primarily to the short-term the wheels falling off of all of the benefit of the borrower, and to a lesser banks. Yes, 125 percent LTV. Who in extent, to the lender and the appraiser. their right mind would expect to have a Here we could be dealing with damages sound loan under such circumstances? at, or near, 25 percent. Let’s say that this causes damages of 20 continued on page 29 percent on an average.
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Several of the industry’s most widely accepted and leading appraisal management companies have partnered with Ellie Mae to participate in the HVCCCompliant Appraisal Services program, including First American eAppraiseIT, ServiceLink, Finiti, StreetLinks, and AppraiserLoft. Three appraisal management companies that are also participating are also already integrated into the Encompass network: CBCInnovis, DartAppraisal.com and Nations Valuation Services. Ellie Mae plans to continue adding appraisal management companies on a case-by-case basis. For more information, visit www.elliemae.com.
Interthinx launches Web-based video news program Interthinx has launched a new, Web-based video news series called FraudBytes to provide the financial services industry with current information on important industry changes. Similar to a cable news program segment, the series will focus on fraud risk mitigation and regulatory compliance for mortgage lenders. “We have become a society that is accustomed to getting news from television,” said Kevin Coop, president of Interthinx. “The Internet has made it possible to extend news delivery to the desktop, and our research indicates that lenders are very comfortable getting critical information through this medium. We have always been a primary source for fraud and compliance information. This multimedia news program will make it easier for us to deliver it to our customers.” The first FraudBytes newscast appeared on the Interthinx Web site during the first week of March and included information on FHA compliance, emerging fraud schemes, the new Home Valuation Code of Conduct (HVCC), and Interthinx product updates. “We have learned, through programs like our FHA Webisodes, ‘Fraud Angels,’ and ‘FSI: Fraud Scheme Investigation’ training films, that multimedia is a very effective medium for communicating with our customers—and the industry at large,” said Kristi Kennelly, director of marketing for Interthinx and host of the new program. “The valuable information we provide through FraudBytes will be easy for lenders to digest, retain, and act on. By delivering it in the form of a short, on-demand video news program, lenders will benefit quickly from the updates. In today’s world, executives must find ways to stay informed with minimal time investment so they can concentrate on the critical tasks that require their attention.” For more information, visit www.interthinx.com.
Kroll seeks to curb borrower fraud with FactualID Kroll Factual Data has announced that it will offer its consumer identity verification product in conjunction with trimerge credit reports. FactualID, a comprehensive borrower assessment, helps lenders prevent fraud and reduce risk by uncovering possible identity misrepresentation. “A recent report issued by FinCEN [the Financial Crimes Enforcement Network] indicated that more than half of mortgage fraud filings were filed by only 10 institutions, around eight percent of the SARs [suspicious activity reports] filed referenced a repurchase demand, suggesting the filing institution did not learn of the possible fraud until a buyback was requested.” said Jeff Gentry, vice president of emerging services at Kroll Factual Data. “Uncovering fraudulent activity at the point of origination is essential. By combining FactualID with our credit reports, we aim to help financial institutions fund accurate, high quality loans, and ultimately reduce losses due to fraud.” To perform a FactualID assessment, clients provide Kroll Factual Data with the borrower’s name, Social Security number and property address. From this data, clients receive a report that assesses the risk of identity and occupancy misrepresentation and also searches the Office of Foreign Asset Control (OFAC) List of Specially Designated Nationals (SDN), the OFAC Non-SDN Palestinian Legislative Council List (NS-PLC) and other exclusionary lists. Results are translated into a numerical risk score to provide easy risk assessment parameters that can be customized for each client. For more information on, visit www.krollfactualdata.com.
Byte announces Electronic Document Management for BytePro Byte Software has announced the addition of Electronic Document Management to its BytePro software. Electronic Document Management will be available in both BytePro Enterprise and BytePro Standard as part of a major software release coming this spring and will be included in the core software without additional fees for current Byte Software customers. BytePro will store the electronic documents on the customer’s network, not on a remote server accessible only via the Internet. This configuration results in greater control over the documents, faster document access, higher system availability, low overhead and increased productivity. Loan documents can be continued on page 28
heard on the street According to Russell Rothstein, managing director of American Home Bank Reverse, the name change reflects American Home Bank’s increasing prominence, and commitment to reverse mortgage lending. “Changing our name to reflect our affiliation is a logical move, and emphasizes our community bank orientation,” commented Rothstein. James Deitch, American Home Bank’s CEO, said the division’s focus on supporting community banks, credit unions and non-profit lenders places them at the forefront of what is an emerging trend in reverse mortgage lending. For more information, visit www.ahbreverse.com.
Mortgage Professionals to Watch I Gregory Lutin has been named executive vice president and national sales manager for Flagstar Bank.
I David Oshan has been named chief financial officer of Ameritrust.
I Lance Drummond has been named executive vice president of Fiserv Inc. I The Federal Deposit Insurance Corporation (FDIC) has announced the appointment of Paul M. Nash as deputy to the chairman of external affairs, a new senior position with the FDIC. I American Realty Capital has announced the appointment of Steve Rokoszewski as vice president, national sales desk for Realty Capital Securities LLC, the broker/dealer affiliate of American Realty Capital Trust. I Chad Coluccio has joined Mission Capital Advisors LLC as managing director in the firm’s New York office. I Mortgage Spirit has named Keith Kemph vice president of sales and marketing, and has also announced the appointment of Michael Byrd as vice president of information technology. I Dallas-based Mortgage Search & Acquisition has named Chris Meyer managing director of the company’s new Phoenix office. I Keith Kitterman has joined NexBank as director of the company’s new wholesale lending division, overseeing the division’s lending operations in the north Texas area.
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:
Heard on the Street/Mortgage Professionals to Watch column
I Ron Litt and Linda Litt have joined the corporate staff of Southwest Funding LP. I Encomia has added Al Tappe to
Note: Submissions sent via e-mail are preferred. The deadline for submissions is the 1st of the month prior to the target issue.
Further, he stated, “The potential of e-mortgages has yet to be realized except as a technical curiosity. Now, it holds the promise that it might be the thing that can rescue our industry.” I certainly hope he is right. According to Smith, e-mortgages are not paper, they are simply organized collections of data. So when one item is changed, that change is instantly reflected in all associated documents in the collection. This structure can make compliance simpler and thirdparty fraud, hopefully, immune to human tampering. Borrowers and investors alike can “see” the loan throughout the process as it progresses and into a secure electronic vault. Closings are inherently more transparent and secure. It is this inherent assurance to stakeholders that may bring securities investors back to the fold, resulting in liquidity throughout the industry once more. It has been almost nine years since the first e-mortgage closed. In 1961, without the aid of cell phones, personal computers and the Internet, we started the space program and landed a man on the moon. That took less than eight years. I’m still waiting for the e-mortgage to show up. I hope I don’t miss the e-mail! Ron Litt is operations director at Dallasbased mortgage banker, Southwest Funding LP. He may be reached by phone at (214) 221-5215, ext. 168 or e-mail email@example.com.
O MAY 2009
Phone #: (516) 409-5555 E-mail: firstname.lastname@example.org
transmission of documents with consumer information. The ubiquitous fax machine, a technology that was invented in 1843, is still an essential element of the mortgage process, cranking out thousands of reams of paper as it moves information around the country. Last year, the Property Records Industry Association (PRIA) and MISMO (Mortgage Industry Standards Maintenance Organization) announced the first draft erecording document standards; a draft, mind you. In the joint press release which appeared in the May 2008 issue of Mortgage Banking Magazine it stated, “This is the first joint publication of the two organizations since forming an alliance in November 2005,” according to Harry Gardner, then MBA’s vice president of industry technology and head of MISMO. One wonders what they were doing for the last three years. Recently, Mr. Gardner moved on to other pursuits and the Mortgage Bankers Association announced that MERS (the Mortgage Electronic Registration Systems), the highly successful electronic registry service will take over MISMO. Some, including Kevin Smith, president and CEO of Mortgage Builder Software, view this development with optimism. In his February 12 “Industry Outlook” column on Mortgage Technology, he said, “Hopefully, having MISMO be part of MERS will hasten the process of adoption for e-mortgages.”
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COLORADO MORTGAGE PROFESSIONAL MAGAZINE
I Lender Live Network Inc. has hired Joe Camerieri as vice president of sales.
lead the company’s banking industry business development division.
continued from page 22
new to market
We all do foolish things. Many knowing well in advance that our actions are foolish, but we are not willing to change our behavior. Okay, I’ll start … I smoke—both foolish and dangerous! So far, I am getting better, but have yet to fully quit … foolish! I am writing this article today, just two days after surgery when I was specifically told not to drive. But I drove myself to the office and committed to writing this article. If parts of it are incoherent, then blame the Percocet and Codeine. Didn’t take them this morning knowing I wanted to get this article out.
Now let’s talk about you!
MAY 2009 O
COLORADO MORTGAGE PROFESSIONAL MAGAZINE
Let’s get out a pad and paper and talk about what you might be doing that’s foolish: Meaning you know better, but continue the bad habits anyway. It’s almost like some evil force deep within you is preventing you from doing the right thing. Before I continue and we make that list, I must tell you about a book called Psycho-Cybernetics, A New Way to Get More Living Out of Life by Maxwell Maltz. This book has really helped me and hundreds of my members overcome some of these foolish habits. Now let’s get to that list okay?
1. Do you work “in” your business instead of “on” it? 2. Do you market your services? 3. Do you have a system for maintaining your pipeline—getting it processed and closed? 4. Do you follow up on your past clients with a newsletter? 5. Do you block times in your planner to market? 6. Do you know your numbers? 7. Do you track your marketing pieces? 8. Do you use the “head of lettuce” tools that everyone else is using? 9. Do you use emotional direct response marketing? 10. Do you use automated tools like Arch Telecom and Mortgage Web Success to generate new business? 11. Are you getting your share of real estate agent business? 12. Are you doing $10 an hour work? 13. Is your support staff helping you or hurting you? 14. Do you even have a support staff? 15. Are you a generalist or a specialist? 16. Is your income predictable regardless of the economy or rates? 17. Do you have a niche? 18. Are you the obvious “go to” person in your area? Now this is going to sound harsh so wait a second before you read this! I’ll bet after reading this, you have found a number of areas in which you need help. Knowing that, the question becomes “Why are you being foolish?” and not doing anything about it. You see, I know you can make an excuse for each one of the issues above. But guess what … whether they are legitimate or not, they are still excuses and if you want positive things to happen, you must make changes not excuses (please re-read those last few words) even if they are uncomfortable! Okay, that’s enough now! I know you get the idea. We launched the www.loanofficerformula.com community on our site. I am really thrilled to tell you that all of the answers to the questions above are answered in great detail. This is a community of like-minded originators and company owners and dedicated to helping everyone succeed … period! If you have a question you would like Brian to answer in this column, please send an e-mail with “Ask Brian Question” in the subject line to email@example.com. Brian Sacks is CEO of www.loanofficerformula.com. He has been an industry expert for more than 25 years, closing 6,000-plus loans totaling $1 billion. You can read Brian’s 32-page special report entitled “The Death of Mortgage Origination as We Know It” and “The 10 Things You Must Do Now to Survive and Thrive” at www.loanofficerformula.com/mp. This report sells for $97 and has been downloaded by more than 9,200 originators and company owners, but is free for a limited time for readers of National Mortgage Professional Magazine. He may be reached by e-mail at firstname.lastname@example.org.
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attached to the BytePro loan file from a variety of sources, including e-mail, fax, scanners or by simply dragging and dropping from a folder on the hard disk. Source documents can be in any common format, including PDF, TIFF, JPEG, HTML and DOC; the documents are ultimately stored in a PDF format. Once documents are stored within BytePro they can be viewed, printed or securely emailed to the borrower or investor. “The addition of Electronic Document Management to our core software represents another step in the continuing evolution of our products,” states Joe Herb, general manager of Byte Software. “We are particularly pleased to be able to include the feature in our core software at no additional cost, which will result in higher adoption rates and yield significant savings for Byte Software customers.” For more information, visit www.bytesoftware.com.
Optimal Blue launches new engine with newly designed production sites Optimal Blue has announced the launch of a new engine and production sites to provide greater speed and flexibility to its customers. The engine is hosted in a state-of-the-art, green, SAS-70 co-location facility. The implementation includes state-of-the-art storage area networks (SANs) for greater reliability and flexibility. Optimal Blue’s executives wanted the release of its new engine to offer increased system flexibility, speed and scalability. The co-location facility enables Optimal Blue to grow its capacity as volume dictates, as well as increase throughput, by incrementally adding more blade servers. Search times have been reduced to two- to three-seconds. Capabilities of the interface have been increased to handle pricing traces for historical pricing and enable users to customize the way the search results are presented. What used to be a unified single screen search result has been augmented with views across multiple tabs depending on how a specific user wants to see the information, which is something no other provider in this space has the capability to do. Using the new look, production sites have become more visually intuitive, have much greater navigation capabilities and improve efficiencies of information retrieval. With this functionality, users require fewer clicks to search for and lock loans, and they get their results faster. “As our customers face the current and future market challenges, it’s our job to help stretch our innovation capabilities further to streamline the workflow process, improve production and ultimately increase profitability,” said Larry Huff, co-CEO of Optimal Blue. “For Optimal Blue, this was an important financial and technical investment, but it’s a true differentiator that allows our
platform to operate at a more advanced level than our competitor’s. We see that as a significant competitive advantage for our customers.” As part of the engine overhaul, Optimal Blue upgraded from stand-alone servers to a Dell PowerEdge modular blade enclosure with blade servers connected to a very fast Dell EqualLogic PS Series iSCSI SAN. This results in a 50 percent improvement in application response time, as well as significant savings from the reduction in space used for hardware. Additionally, Optimal Blue will save a significant amount each month in power, furthering its efforts to become more environmentally friendly. For more information, visit www.optimalblue.com.
Property Fraud Prevention releases anti-fraud software Property Fraud Prevention LLC, has unveiled its new PFP Reports, an online software system that allows lenders and title companies to track realtime activity by running reports that can reveal property fraud schemes at any time in the loan process. “Mortgage fraud cases have been on the rise in recent years and our current economic situation is causing an even greater increase in fraud cases,” said Gloria Lorentson, president and CEO of Property Fraud Prevention. “Our PFP Reports software system is a powerful tool that provides up-to-the-minute information and can reveal potential fraud schemes before a loan is funded.” Subscribers to PFP Reports can easily and securely run real-time reports using software that allows title companies and mortgage lenders to communicate without invading each other’s databases. The PFP data is stored indefinitely in a secure database and becomes more powerful with each transaction. “The software helps identify inconsistencies in data and alerts subscribers that they may want to investigate further,” explained Warren Burgess, project manager and architect who designed the system. “Our reports are intended to provide data security, data integrity, and real-time responses to subscriber submissions.” For more information, visit www.propertyfraudprevention.com.
Commerce Velocity releases update to Home Affordable Modification Program Commerce V e l o c i t y announced that its Asset Management Solutions have been updated to include all of the newly continued on page 38
Make sure red flag rules are on your radar screen By Steve Grant
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4. Another evaluation issue I will list is that of the borrower trashing the property upon departure. First, he performs zero maintenance on the property for the last few months there, anticipating that the property will be lost. No yard maintenance, no painting, no cleaning, no nothing. Finally, during the last few weeks and days, he goes on a redneck rampage, breaking everything in the home that can be broken, knocking holes in the walls, staining the carpet beyond reclamation and finally stealing everything he can possibly take from the property, nailed down or not. Let’s estimate that these damages reduce the property value by 35 percent. 5. Finally and to add insult to injury, it is expensive for a lender to foreclose on a property. Selling cost alone typically are six percent of the sales price. If the property lies idle for 18 months the loss of interest income could cost the lender nine percent. The cost of property taxes could take another one percent. Then add maintenance, insurance, utilities, court costs, legal fees, and, well, you get the picture. Final estimated damage estimated here is 20 percent. In summary, do the math. In this hypothetical case there is nothing left for collat-
eral; zilch, zero. I submit to you that while most collateral related losses may not total or exceed 100 percent of a property’s value, most foreclosed homes in today’s market suffer to some degree, from some if not all of the above diminution of collateral issues, giving real meaning to the term, sub-prime mortgage. When we look at the situation as a whole, one must wonder who in their right mind would make a loan under the circumstances described above. Some of them may seem far-fetched, but all of it has gone on everyday in the mortgage business. I have personally witnessed all of these examples. This is not an indictment against lenders and appraisers. Most are honest and ethical, but some are not. Perhaps lenders and regulators will pay more attention to collateral and collateral valuation issues going forward. In my next column, I will offer suggestions as to how the powers that be should handle real estate loans to better ensure that our ship does not run aground yet again. Charlie W. Elliott Jr., MAI, SRA, is president of Elliott & Company Appraisers, a national real estate appraisal company. He can be reached at (800) 854-5889, e-mail email@example.com or visit his company’s Web site, www.appraisalsanywhere.com.
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O MAY 2009
To Get Started Today, Contact Us At:
COLORADO MORTGAGE PROFESSIONAL MAGAZINE
There’s so much to keep tabs on … What to look for increasing regulation, rapidly fluctuat- So how can you prevent identity ing market conditions, changing lender theft as instances occur? There are relationships and more. Properly man- several key pieces of information to aging it all can make you feel like an air look for, including: traffic controller. Here is one more thing that you should O Alerts, notifications or warnings be aware of: The “Red Flags” rules, which from consumer reporting agencies go into effect May 1. By this date, it’s importhat suspicious activity may have tant to have detailed policies and procetaken place. This can include anydures in place to effectively detect, prevent thing from excessive inquiries for and mitigate identity theft. These rules, information to an unusually high which have been in the pipeline for more number of financial transactions, than a year, call for an alert, proactive attiboth of which might indicate fraud. tude toward protecting customers, including mortO Suspicious documents gage customers. Although or personal identifying there aren’t any criminal information. This would penalties for not following include documents that these rules, violators could appear to be forged or be subject to civil monetary contain information penalties. So consider ideninconsistent with other tity theft a big “blip” on pieces of identification. your personal radar. Understanding the O Unusual or suspicious rules, and committing to activity on an account— following them, is just noticeably different from the first step. There’s the typical activity. “The latest practical matter of being technology can help able to catch everything O Information that comes you stay on top of it and prevent incidents. directly from customers, vicall without breaking tims of identity theft or law The latest technology can help you stay on top of it a sweat.” enforcement authorities. all without breaking a sweat. Ongoing awareness is key. Some fraud can be caught in person, but How the “Red Flags” technology is a great partner. There are rules came to be plenty of services that provide pieces of Each year, despite the best efforts of information that can serve as notice financial institutions and law enforce- about potential identity theft. The chalment, identity thieves devise new ways lenge is gathering all the information in to steal personal information. In 2007 a meaningful and easy-to-use way. alone, more than 250,000 identity theft For example, each of the three major complaints were received by the Federal credit bureaus—Equifax, Experian and Trade Commission (FTC), according to TransUnion—offer fraud prevention media reports. services as part of their credit report Because of this ongoing concern, and services. They flag phone numbers and the need for intensive action, a number addresses considered high risk, and of agencies including the FTC, bank reg- when application information is subulatory agencies and the National Credit mitted that doesn’t match what is Union Administration created the Red already on file from the customer. Flags rules, as part of the Fair and The systems also reports if there have Accurate Credit Transactions Act (FACTA) been excessive credit inquiries on a of 2003, technically Sections 114 and given Social Security number, and tracks 315. Identification and detection of pat- the use of Social Security numbers for terns, practices or specific activities that deceased individuals or numbers not yet could be related to identity theft are issued. Luckily, there are providers that required, along with guidelines on spe- consolidate information from the three cific, continual responses. agencies into one report. Who needs to be aware of this? Here’s another resource: Alerts by the Professionals at any financial institution Office of Foreign Assets Control (OFAC) that hold a “transaction account” allow a professional to automatically belonging to a customer. This can check borrower records against the U.S. include local banks, savings and loans Treasury’s master list of Specially and credit unions. Importantly for mort- Designated Nationals and Blocked gage brokers, it also includes creditors, Persons, which contains thousands of and the so-called “covered accounts” individual names. These individuals may include mortgages. Also in the mix are be more likely to commit fraud. finance companies, utilities and continued on page 36 telecommunications companies.
MAY 2009 O
COLORADO MORTGAGE PROFESSIONAL MAGAZINE
Job hunting in today’s market
You only have one chance to make a good first impression. In today’s highlycompetitive job market, you cannot afford to make mistakes. In this feature, top executives from Residential Finance Corporation share tips on how you can make the most of that first impression to stand out and get noticed. Today, many thousands of mortgage professionals are unemployed and seeking work. If you are among them, you face challenging odds, whether you choose to remain in the mortgage business or seek a position in another industry. But there are concrete steps you can take in order to increase your odds of getting noticed and making a noteworthy first impression. Like any company hiring in today’s market, Residential Finance Corporation receives hundreds of resumes for its available positions. In this article, Residential Finance Corporation President and Chief Executive Officer Michael Isaacs, Vice President of Sales Obiora Egbuna, and Executive Recruiter Russell Jipson discuss what they believe makes candidates stand out as they offer concrete suggestions on how to make your application convey the very best first impression to help move your resume to the top of the pile.
case anything gets separated. Make sure that you have a professionally appropriate e-mail address, i.e., firstname.lastname@example.org rather than email@example.com. Cover letters should always be customized to the company and the position for which you are responding. In the letter, address your interest in the position for which you are applying and include specific reasons why you believe you are the best candidate for the job. Be sure to carefully research the company and explain why you are interested in the position and how you believe that your skills and capabilities
story. Create a “laundry list” of all your accomplishments and their overall impact in terms of benefits to others and your company. Then customize a best-fit resume by cherry-picking the types of accomplishments that are most pertinent to the specific position for which you apply. Describe your accomplishments in terms of dollars, percentages and return-on-investment for the greatest impact. Isaacs: What gets attention fast is your record of achievement—words like increased volume, grew business, top producer, expanded lines of business, get us to stand up and take notice. Be sure and include details, such as dollar volume or percentage of growth. Cite any awards or recognition you received that would be appropriate to the posi-
Go the extra distance Michael Isaacs
“But there are concrete steps you can take in order to increase your odds of getting noticed and making a noteworthy first impression.”
Look sharp Like the Academy Awards, there is always an air of expectation when the envelope— or the electronic file—is opened. The first glance can leave a lasting overall impression, so make sure that your presentation speaks well of you. Michael Isaacs: The first impression we get of a candidate begins with the overall look of your cover letter, resume and any accompanying documents. Give your application good visual appeal that will help make a professional impression by being well organized, laid out in a visually appealing manner with a balance of copy and bullets that highlight your achievements and qualifications. Russell Jipson: Include your contact information—not only on your cover letter, but on all pages of your resume and any accompanying documents as well, in
Egbuna: Your actions will always speak louder than words, and one picture speaks a thousand words. When you provide a clear picture of your achievements—and the net impact on the business, you demonstrate the value you can bring to a potential employer. Don’t discount your related experience outside the industry, but explain why this experience would bring value to the position for which you are applying. For instance, the fact that you sold life insurance may not initially interest a mortgage company reviewing your resume. However, if you mention that you were consistently the top sales performer in your division, and that you believe your experience and success in selling life insurance could enhance your success as a loan officer, the employer might be very interested in your qualifications. What’s more, if you could provide statistics showing how you increased the volume of your sales or those of your department by a set percentage each quarter, you would demonstrate that you are a motivated individual with valuable closing skills.
will add value to the position and to the company. As for the resume, there are many formats from which to choose. But the one that would serve an applicant best is one that features achievements and accomplishments specific to the position being applied for whenever possible. Be sure and customize your accomplishments and capabilities to be very specific to the job for which you are applying. Obiora Egbuna: Always be honest— never exaggerate your skills, achievements or education—but do relate how your skills, achievements and education make you a great fit for the position.
Use facts to tell an enticing story Stick to the facts and let them tell your
tion you seek, such as “consistently placed in Top 10 Producers for the past 14 months” or, “received citation for processing efficiency.” Jipson: Provide concrete, “action-to-benefit” examples of your achievements relative to the position for which you are applying. Never brag or exaggerate when discussing your accomplishments, but do communicate with sincere enthusiasm, and use facts and figures to make your story compelling. Instead of saying, “Negotiated to trim 30-percent off with vendors,” use statements such as “Negotiated with vendors to gain a 30 percent cost reduction, resulting in overall monthly savings of $55,000, which was reinvested into revenue-generating activities that yielded an additional $4.4 million revenue, for an overall 325-percent returnon-investment.”
Isaacs: We recently received a package from a candidate who included quotes from co-workers, employers, business partners and others, and included contact information for each. These testimonials helped illustrate the individual’s character and capabilities, making them a real stand out. Jipson: If you have sufficient experience and accomplishments, consider creating a resume package with your customized cover letter and an achievement-laden resume. Egbuna: Consider including a short list of your favorite books, and/or the organizations you belong to (as appropriate) in the package. Explain why these books and/or organizations are important to you, demonstrating your motivation, career focus and interest in personal development.
Communicate your enthusiasm: Show your interest Isaacs: People who communicate with sincere enthusiasm and show their
interest in a position tend to stand out during the interview process. Jipson: Enthusiasm makes an impression after your interview, as well. Follow up promptly with a personalized card via mail and e-mail. Egbuna: Make your follow up note extra effective by taking this opportunity to reiterate why you are interested in the position—why you believe you would be a great fit and the value that you could bring to the organization. This can be especially helpful if you are applying as a loan officer or for another sales or customer service-related position.
The follow up Isaacs: Following up shows how interested you are in the position—and it also demonstrates how you may follow up on the job with customers or coworkers. Jipson: Enthusiasm makes an impression after your interview, as well. Use a personalized card—and send an email. Be careful about calling, however. Follow up promptly with a personalized card via mail and e-mail.
Selling yourself: Tips to ace your interview Making a strong positive impression with your resume can get you an interview. But you really have to shine during the interview process and “sell” yourself to “close the sale.”
A positive attitude communicates a wealth of information about you and attracts positive attention toward you. Work to maintain a positive attitude throughout your job hunt. Isaacs: Today’s job hunt can be an arduous and frustrating task with so many talented professionals now seeking work. But nobody wants an Eeyore on their team. Present yourself as upbeat and motivated throughout the application and interview process. Jipson: Never lose sight of your capabilities and your goals. Review your “laundry list” of accomplishments and allow yourself to recognize the value of your achievements, and use that as a buoy between interviews. Egbuna: Network and help others in their job hunts, as well.
Branching out In today’s market, the competition for open positions is intense. Many are considering employment in other fields. The advice in this article can apply to job hunters universally. Isaacs: Attitude and skill sets are transferable across industries. If you consider looking to another field, take inventory and create a “laundry list” that defines the skill sets and accomplishments you have to offer, then cherry-pick key elements to custom fit each position for which you are applying. Jipson: If you apply for a position outside of the mortgage industry, cut the industry slang and abbreviations to more clearly explain your skill sets and accomplishments. Egbuna: Remember, customize your resume to the position you are applying for and make it a stand out by including concrete examples of your skills, accomplishments and successes. The tips in this article can help you stand out in a crowded field of job hunters and put you in contention for the position you seek.
By Joe Ramis
licensed to do business in just one state or in several states. Being open to other In today’s challenging economy, it’s states allows you to expand your busimore important than ever for mortgage ness, or at the very least, not turn away professionals to make the right decision potential customers. If the company is when deciding on a potential branch affiliated with a federally-chartered partner. The choice will have a long- bank, that removes some licensing lasting impact on your business and obstacles and can provide the ability to reputation. There are wide variations serve customers across the U.S. The past among branches and the people who positives of working for companies run them, of course. affiliated with a federally-chartered I have found that the bank have been diminbest approach is to look at ished with upcoming this like a dating relationimplementation of the ship. There are some attracSAFE Loan Licensing Act, tive things about the comas well as heightened pany that caught your eye scrutiny from regulators. in the first place, and that’s The more lenders you enough to begin a dialogue. have access to, the better. But the real test comes in Those who are on their those first few encounters. own know that lenders are A real comfort level must be harder to find, and the established early on, and pricing isn’t always ideal. backed up with proof that Being part of a network “Part of the benefit this company will meet helps. If the company has of joining a compamost or all of your needs. a banking division, you ny is the profession- also have more choices. Only then can things be taken to the next level. al support you You can close loans with This idea of dating your company directly, or should receive.” implies that it’s a two-way can broker them to wholestreet—and nothing else sale lenders, although the latter option is will do. Here are some things to look for decreasing over time. when sizing up a potential branch partner. You may also secure access to loans through the Federal Housing Size of company Administration (FHA), Veterans Affairs Every company is a different size, for (VA), and USDA Rural Development, as better or for worse. I’ve worked for both well as reverse mortgages and even big and small firms. In a small company commercial and construction loans. Be (say, less than 25 employees total), the sure to ask about all the possibilities atmosphere is typically more tight-knit, during the interview process. and there’s more hands-on involvement If you’re not familiar with working with from those in charge. That can be good, all these loan types, that’s okay. Good from a mentoring perspective, or bad, if companies can provide training, and in they’re meddlesome and don’t allow the end, you’ll be able to show your cusyou to simply do your job. tomers you can be a one-stop solution. On the flip side, a larger or nationwide company will have access to more Look for support resources and business opportunities for Part of the benefit of joining a company mortgage professionals. But company is the professional support you should leadership will be more remote, and they receive. Solo practitioners have to do may not know about (or care about) your much more than originate loans. They local market. There may also be issues need to manage their finances, informawith trying to serve too many branches. tion technology needs, accounting, proOne good thing about a larger com- cessing, marketing and legal compliance. pany is that there are more people for These headaches can take a lot of time sharing ideas on how to succeed. You’ll away from focusing on mortgages. likely learn things you hadn’t thought The best companies provide excelof before. Find the company that strives lent support in these and other areas. Of to give you the independence you want, particular importance these days is while helping you conform to a safe compliance. With new laws and changes and stable work environment with just to laws coming down more frequently, the right amount of support. being out of the loop can cost you in terms of money and reputation. Don’t
More options You should ask if the company is
continued on page 32
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Jipson: You should be prepared for a phone screening prior to being invited to interview. Make sure that you can communicate a succinct message about your strengths and capabilities. Make it short enough to pique our interest in 30-sec. If you believe you’re a perfect fit for the position, tell us how and why
Look for ‘the one’ when it comes to branch partnerships
COLORADO MORTGAGE PROFESSIONAL MAGAZINE
Isaacs: Emphasize your strengths and capabilities and demonstrate an upbeat, can-do attitude. Ask thoughtful questions that demonstrate your interest in the position and the organization. And ask for the job—communicate your interest clearly that you would like to be a member of the team and why you believe you would be a great fit for the position.
Egbuna: Borrow a technique used by many sales, customer service and call centers—practice in advance. Record yourself and use a mirror to hear, see and fine-tune yourself to measure what you will say and how you say it. Create scenarios and practice fielding questions. Be sure to ask about next steps before you leave.
Egbuna: Make your follow up note extra effective by taking the opportunity to reiterate why you are interested in the position—why you believe you would be a great fit and the value that you could bring to the organization. This can be especially helpful if you are applying as a loan officer or for another sales or customer service related position.
you think so from the start.
continued from page 31
chance it. This is one benefit of larger companies, since they have staff members whose sole job is to think about background checks, staff licensing, file reviews, loan audits and the wording of marketing materials. Another key area to look at is technology. How committed is the company to the latest and greatest? You’ll want to price loans efficiently and accurately, lock in loans online, and have access to a loan pipeline on your timetable. The most competitive companies make technology a priority. You’ll want to know what, if anything, all these services will cost you personally, as well.
A stable place to work
A reading of “1” has the lowest impact on rates, while “10” has the highest. Although carefully verified, data are not guaranteed as to accuracy or completeness. BestInfo Inc. cannot be held responsible for any direct or incidental loss or liability incurred by applying any of the information or opinions in this feature. Provided exclusively to The National Mortgage Professional Magazine by David Beadle, president of BestInfo Inc., the BestRates cell, pager and e mail rate alert service for mortgage industry subscribers. Send your inquiry to firstname.lastname@example.org for full details on a free two-week trial subscription. MO
MAY 2009 O
COLORADO MORTGAGE PROFESSIONAL MAGAZINE
Everyone knows the mortgage business isn’t exactly stable right now. Companies are coming and going
more quickly, while those with the best business reputations are standing their ground. You’ll want a realistic assessment of the company, and this requires pointed questions for your interviewer, as well as due diligence in and around the company. Your interviewer will probably say the company is doing great! That’s to be expected. The more candid he or she is, the more you can trust the information. While you shouldn’t expect access to sensitive financial information, you should be able to visit a few of their offices and talk with the people who work there. This way you can see what the working atmosphere is like. If they don’t encourage it, that’s a huge red flag. Even more revealing details can come from business partners, such as title companies or other lenders. Ask your interviewer who these are, but be prepared to make some calls to find out
May 21 Weekly Jobless Claims Rate Impact May 26 May Consumer Confidence Rate Impact May 27 April Existing Home Sales Rate Impact May 28 April New Home Sales Rate Impact
on your own. You can do research to see if they’ve ever been suspended or fined by agencies such as the U.S. Department of Housing and Urban Development (HUD), or if they are listed as problematic by the Better Business Bureau.
Expectations on both sides A tell-tale sign is what they expect from you, personally, during the process. Do they call you immediately after you inquire, and make lots of promises with little substance? Do they only want to talk about your production numbers, and not how you got there? Is there a job offer without an in-person meeting? These could be signs of serious trouble. The best companies take a more methodical approach, looking at your background, experience (including management roles) as well as your production numbers. The interview process should be
a genuine give and take, with each side putting its best foot forward, while being realistic about the potential opportunity. In the end, look at it this way: You’re not just joining a company, but rather making a career decision. It’s like going from dating to marriage. Initial attraction and interest only go so far. You and your prospective employer need to be completely comfortable with the arrangement, or it won’t work. Remember, you become married to a company’s reputation when you join up. As in life, there are no guarantees, but if you strive to see the whole picture, you’ll “tie the knot” with more certainty and much less stress. Joe Ramis is branch recruitment director for Inlanta Mortgage, a mortgage banker since 1993. He can be reached by phone at (262) 513-9853 or e-mail email@example.com.
7 6 5 4
As the month of April came to an end, the number of first-time claims for weekly state unemployment benefits was falling but the number of continuing claims was rising. This was an indication the pace of job cuts was decelerating but hiring had not resumed in any significant way. The sudden advent of a potential influenza pandemic threw another obstacle in the way of a global economic recovery since planes heading to certain destinations were flying almost empty and even the vice president of the United States was saying that people should avoid confined spaces such as airliners and subway trains. If you count up all the industries which are connected to the use of confined spaces (such as elevators in office buildings), you may come up with a number which encompasses the majority of business activities. There was a significant improvement in April attitudes as measured by the Conference Board. The overall index jumped more than 12 points to a level of 39.2 when compared to March and future expectations shot up to a level of 49.5 from what had been 30.2. This survey was administered before the influenza news became the lead story on all three broadcast network newscasts on April 24. Within days, many folks were heading for their nearest pharmacy to pick up face masks and to the supermarket to stock up on supplies as if a blizzard or hurricane were on the way. While this may provide a temporary boost to retail sales, it could be a harbinger of the “nesting” tendency which took place in the immediate aftermath of the 9/11 attacks. The scenario of people sitting at home is not conducive to economic prosperity except for online retailers and pay-per-view movie purveyors. It’s been difficult to get a handle on existing home sales for two reasons. First, the annualized rate has been bouncing up and down like a yo-yo since November of last year. For instance, the sequence has been 4.5 million (November), 4.7 million (December), 4.5 million (January), 4.7 million (February) and 4.6 million (March). Of the most recently released total, roughly half were foreclosure sales. And foreclosures themselves were curtailed in many states by nervous politicians during the winter months. The result is that foreclosures are on the rise again as the embargo has now been lifted in most locales. Since hiring has not returned, the prospects are for continued stagnation in the real estate market. If any improvement does emerge, it could bring out another wave of sellers, thereby keeping inventory levels near historic highs. While mortgage rates have been near half-century lows for months, the effort by the government to provide stimulus to the real estate market via artificially reduced yields has been a failure. The reason is that we’ve seen it before, back in June 2003. Rates are not substantially lower now than they were six years ago. Despite the New York Federal Reserve’s $1.5 trillion annualized pace of mortgage-backed securities acquisitions, prospective home buyers are more worried about their next paycheck than owning a residence. Therefore, the only way to get everyone’s attention may be to take three dramatic steps when it comes to borrowers with a solid record of on-time rent or mortgage payments by reducing the 30-year fixed-rate to an annual percentage rate of three percent, raising the refinance loan-to-value ceiling to 150 (from the current 105) and allowing simple drive-by appraisals for refis.
National Mortgage Professional Magazine’s 50 companies that are hiring A&N Mortgage Services Allied Home Mortgage Capital Corporation American Bank Bank of America BranchCare Consultants LLC Citi
Loan Officer, Processing Manager Illinois Loan Officers, Branch Managers Various locations throughout the country Loan Officers Colorado, Florida, Illinois, Indiana, Minnesota and North Carolina Mortgage Loan Officer, Mortgage Underwriter Nationwide Bank Affiliate Branch Manager Nationwide Loan Processor, Telesales Mortgage Consultant, Credit Specialist 2—Loan Closer, Government Underwriter, Credit Underwriter and Loss Mitigation Specialist Ann Arbor, Mich. and Frederick, Md. FHA Underwriters, Mortgage Document Review Specialists Providence, R.I. Servicing Director Santa Ana, Calif. FHA Direct Endorsement (DE) Underwriters Long Island, N.Y. Branch Managers With Existing Branches North Carolina and South Carolina Auditor Model Validation & Valuation, Auditor Team Lead Washington, District of Columbia Credit Analysts, Closers, Funders, Processors, Underwriters Illinois, Michigan, North Carolina and Ohio Loan Originators Illinois, Missouri and Texas Branch Managers, Loan Officers, Escrow Officer, FHA Processers, DE Underwriters and More Arizona, California and Nevada Branch Managers, Loan Originators 16 States Throughout the Country Risk Modeling Director Associate, Learning Consultant McLean, Va. Loan Officer Dublin, Ohio Mortgage Sales Nationwide Mortgage Broker, Loan Officer New Jersey Mortgage Loan Originator Farmington Hills, Mich. Loan Officer San Diego, Calif. Originators, Reverse Originators, Underwriters, Processors and Closers Various Locations Throughout the Country Loan Modification Reps Nationwide Senior Sales Director, Senior Loan Officer Colorado Loan Officers, Branch Managers Various Locations Throughout the Country Housing and Foreclosure Counselor/Advocate Providence, R.I. Mortgage Broker, Loan Originator, Branch Manager Nationwide Marketing Manager Lewisville, Texas Branch Managers Nationwide Mortgage Processor Bridgeport, Conn. Retail Loan Officers Fort Lee, N.J. Loan Officers Atlanta, Ga. Loss Mitigation Underwriter Purchase, N.Y. Mortgage Analysts, Loan Officers Various Locations Throughout the Country Direct Endorsement (DE) Government Underwriters, Loan Processors, Underwriters, Closers, Administrative Support Las Colinas/Irving, Texas and Philadelphia Mortgage Consultant Little River, S.C. Mortgage Closers St. Louis, Mo. Account Executives, Loan Originators San Diego Compliance Analyst Highlands Ranch, Colo. Loan Officers, Branch Managers Various Locations Throughout the Country Credit Policy Manager North Carolina Mortgage Loan Officer/Originator Waldorf, Md.
Citizens Bank CMH Concorde Staffing Group Dover Mortgage Company Fannie Mae Fifth Third Bank First Bank First Mortgage Corporation First Priority Financial Freddie Mac Freedom Banc Mortgage Services HSBC Just Mortgage Inc. Level One Bank Luxury Loans M&T Bank Modification Zoom Mortgage Solutions of Colorado mortgageNOW Inc. National Housing Non-Profit Nations Funding Source Nationstar Mortgage Pan American Mortgage Bank People’s United Bank PrimeLending ProLending Quorum Federal Credit Union Reliance First Capital RemX Office Staff
Loan Mod Sales Reps Orange County, Calif. Senior Loan Officers Various Locations Throughout the Country Underwriters, Closers, Mortgage Loan Processors, Mortgage Loan Officers Various Locations Throughout the Country Mortgage Loan Closing Manager San Antonio, Texas Reverse Mortgage Originators Various Locations Throughout the Country Loan Processors, Loan Originators Austin, Texas Branch Managers Nationwide Loan Officers Nationwide
For more information on employment opportunities throughout the country, log on to FindMortgageJobs.com.
O MAY 2009
Residential Lending Services Inc. Rose International SaveMTG.com Specialized Loan Servicing Superior Mortgage The Poston Group Union Bank and Trust United Homestead LLC and Home Protection Law Group United Northern Mortgage Bankers U.S. Bank Home Mortgage USAA Value Financial Mortgage Services Inc. W.J. Bradley Company WestStar Mortgage XINNIX Inc.
COLORADO MORTGAGE PROFESSIONAL MAGAZINE
Who’s Hiring Report for Mortgage Professionals Branch Opportunities
Allied Home Mortgage Capital Corporation 6110 Pinemont Houston, TX 77092 Phone: 888-736-1520 www.branchasap.com CEO: Jim Hodge Key Contact: Jonathan Fowler Shawn Fewell Paul Buske Phone: 888-736-1520
Opportunity: Allied Home Mortgage Capital Corporation is the #1 Branch Company in U.S, #1 Branch, Company in FHA originations. We offer our branches the ability to originate, Conventional, FHA, VA, Reverse Mortgages, Rural Development as a Mortgage Banker (No YSP Disclosure required) plus the ability to Bank or Broker FHA Loans. You pay no warehouse fees on Banked Loans. Loan revenues are posted to your account on Banked Loans w/in 24 hrs. We help you generate business with programs like Corporate Sponsored Marketing Programs, FSBO Marketing Program, Internet Lead & Marketing Programs, Branch Websites in English and Spanish. All branches have access to free training. There is strength in numbers, however with dedicated inside Branch Coordinators, you will never feel like a number when you join Allied.
mortgageNOW Inc. 141 W. Front Street Red Bank, N.J. 07701
CEO: James L. Marchese Key Contact: Thomas Sirico National Business Director firstname.lastname@example.org Phone: 866-421-8400
Opportunity: Excellent opportunity with one of the fastest growing companies in the country. Maximum income potential for all positions includes health and 401K programs. Sales leads provided with cutting edge technological support. Top FHA Direct Lender in all listed states. We are currently hiring Sales Managers, Loan Officers, Telemarketers, Underwriters and Processors. Locations: CA,FL,GA,HI,IL,IN,MD,MI,MN,MO,NJ,OH,PA,SC,TN,TX,WA
Locations: Allied Home Mortgage Capital Corp. is Licensed in all 50 States and USVI.
Loan Ofﬁcer Programs
Platinum Credit Services, Inc. 100 Broadhollow Road, Suite 100, Farmingdale NY 11735 www.platinumcreditservices.com CEO / Key Contact: Lorenzo Pugliano President /CEO email@example.com Phone: 631-299-2084
Opportunity: Affected by the mortgage melt down? Make big money from the contacts you made. If you’re a victim of the mortgage melt down but still have a lot of contacts in the industry why not use those relationships to tremendously increase or supplement your income today. Platinum Credit Services is looking for people that are serious about making money by introducing us to your contacts in the mortgage industry. We will give you residually commission based on there gross sales every month. This is a wonderful opportunity for you to profit from the years of hard work building these relationships .Please email or call me for more information. Platinum Credit Services, Inc. is one of the largest full level credit reporting agencies in the nation. We prosper during these hard times because of our proprietary Fico score improving systems. It’s our mission to help loan officers close more loans.
Reliance First Capital, LLC 100 Baylis Rd. Ste 150 Melville, NY 11747
President/CEO: Hugh Miller Contact: Human Resources Department Email: firstname.lastname@example.org Phone:516-422-8888 Fax: 866-724-6169
Opportunity: Reliance First Capital, a dynamic and leading mortgage banker, is seeking motivated Mortgage Analysts with a proven track record, to join our organization. If you have a background in sales, have a desire to earn a significant income in the mortgage business, and are looking for a long term career, this may be the opportunity for you. We provide you with material amount of leads on a daily basis, extensive product line available for sale, tremendous back office support and quick turnaround times, excellent technology that will help you close more loans, aggressive compensation plan, extensive training program, excellent benefit package including Medical, Dental, Vision & LTD, 401(k) Locations: Nationwide
MAY 2009 O
COLORADO MORTGAGE PROFESSIONAL MAGAZINE
HTDI Financial 4365 E Pecos Rd #135 Gilbert, AZ 85295
Key Contact: HTDI Financial CSO Program, Inc. email@example.com Phone: 877-877-4834 opt 5
Loan Ofﬁcers and Branch Managers Superior Mortgage Corp. 854 S. White Horse Pike Hammonton, NJ, Zip 08037
Opportunity: The credit industry is one of the most powerful and profitable industries. With our Credit Services Organization (CSO) Program, you can quickly become a credit repair expert and run your own credit repair business. As a CSO, you can earn an average of $500 - $700 per client in a 6 month timeframe while helping clients with their futures. You handle ALL aspects of your business; we handle the burden of the actual processing and repairs in getting their credit in the best shape possible.
CEO: Stephen Cors Key Contact: George Allen Executive Vice President firstname.lastname@example.org Phone: 609-294-4455
Founders: Skyler Wittman, John Washenko Key Contact: Sue Copening Branch Manager, Independent Agent Sue@TeamSue.com Phone: 407-443-0348
Reverse Loan Ofﬁcer Programs Value Financial Mortgage Services, Inc. 660 NW 116th Street Miami, FL 33168
Opportunity: Join UFirst™, an award winning company offering a revolutionary system that helps consumers and homeowners rapidly pay off debt and build equity. “Entrepreneur Of The Year”™ award winners, in 2008, from the Utah Region of ERNST & YOUNG. UFirst™ has opportunities for Mortgage & Financial professionals to represent this program as a “value added” service OR as a full time career, potentially providing an income which matches, or exceeds, that of your mortgage business. Full training & support provided. Ask about our “Agent Fee 4 Leads” program. Locations: Nationwide
Opportunity: Privately held Mortgage Banker who was founded over 20 years ago on the principals of always doing the right thing for our Loan Officers, Branch Managers, employees, and our customers. We are experiencing record growth and production while other companies are downsizing and struggling to survive. Our warehouse lines are strong and secure allowing Superior to close loans on time every time. We have the products tools and experience to help you excel in this very competitive market place. Our comp plans and incentives are second to none with a full benefits package. We are very entrepreneurial in our business model and will entertain your proposal to open a branch or join us as a Loan Officer. We are FHA and VA approved as well as Fannie Mae and Freddie Mac Seller Servicers. Locations: Various locations.
Business Opportunities UNITED FIRST FINANCIAL (Nationwide) Home Office: Salt Lake City, Utah
CEO: Nelson A. Locke Key Contact: Charles Kluck President email@example.com Phone: 800-760-5363 X 122
Opportunity: Value Financial is an aggressive reverse mortgage lender in Miami, FL. We are expanding into new states and we are in need of talented Reverse Mortgage Originators. We offer a lead generation system, high commission rates, industry leading reverse mortgage technology, and the ability to originate both FHA Forward and Reverse Mortgages. We are an HUD Direct Endorsement Lender and a Fannie Mae Seller/Servicer. Call us today to join the Value Financial Team! We Pay Signing Bonuses for Experienced Reverse Mortgage Originators! Locations: Various locations through the country. Call 800-760-5363 X 122 or email firstname.lastname@example.org
Various Positions Citi Various Locations Nationwide
CEO: Vikram Pandit
Opportunity: CitiMortgage prides itself in making the dream of homeownership come true for a wide range of customers and partners across the country every day. As a member of Citi, we are focused on providing the highest quality mortgage products as part of an expansive portfolio of financial services that includes banking, insurance, asset management, credit cards, and much more. CitiMortgage offers products to help first-time homebuyers, as well as those interested in building a new home, refinancing, or tapping into the equity of an existing home. Hiring for: Telesales Mortgage Consultants, Loan Processors, Loan Closers, Credit Underwriters, Government Underwriters, Operations Managers, Sales Managers
Key Contact: www.careers.citigroup.com www.citi.com
Locations: Ann Arbor, MI; Las Vegas, NV; Dallas, TX; St. Louis, MO
Various Positions Franklin First Financial 329 Hempstead Turnpike West Hempstead, New York 11552 www.franklinďŹ rstďŹ nancial.com/careers Fred Assini President Key Contact: Denine Sadlowski Recruiting Manager OfďŹ ce: 516-479-5777 x5776 Fax: 516-479-5753 denine@FranklinFirstFinancial.com
Opportunity: Come work for a Leading Mortgage Bank that knows what it takes to be a winner. The latest Technology and Smartest Marketing helps you earn more than ever before. National TV and Call Center Campaigns give you a world of leads. Competitive Compensation: Salary and hourly positions available. Bonus Plan: Plans available for sales, salaried, and hourly positions. Great Culture: Have fun working for Franklin First Financial. Experience over 15 years of mortgage management to grow your career.
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Locations: New York, New Jersey, Florida, Long Island, New York (other locations available)
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2009 Editorial Calendar For more information on editorial contributions, please call (888) 409-9770 and press "6" for the Editorial Department or e-mail email@example.com.
Direct Response Marketing
Best Direct Mail Pieces
Wholesale & Correspondent Update
Whoâ€™s Left in Wholesale?
Compliance Tools Directory
The Future of Mortgage Banking
Itâ€™s All About the Marketing!
Lead Provider Roundup
Growth Strategies for 2010
The 40 Under 40: The 40 Most Influential Mortgage Professionals Under 40
Platinum Credit Services, Inc. will train and educate your staďŹ€ of mortgage professionals on how to use and maximize our score enhancing software. PCS will guide them through our re-score process and get the scores increased at the bureau level in as little as 2 â€“ 5 business days with or without documents. Call us today!
COLORADO MORTGAGE PROFESSIONAL MAGAZINE
*Please note that we also distribute as several other Mortgage Banker and Mortgage Broker events throughout the year
O MAY 2009
For advertising opportunities in these Focus Issues or Special Features, please call (888) 409-9770 and press "4" for the Advertising Department of e-mail firstname.lastname@example.org.
Loan mod forensic loan audit: Part I of III
MAY 2009 O
COLORADO MORTGAGE PROFESSIONAL MAGAZINE
By Bonnie Wilt-Hild
What is a forensic loan review? Although an consumer should the court find in the borafterthought where mortgage lending is rower’s favor. concerned, this piece of the mortgage funcSeveral pieces of the mortgage process tion should be strongly considered not only are audited during a forensic loan audit from a compliance standpoint, but also to determine if there have been violafrom the standpoint of future lender liabil- tions where the overall mortgage process ity. It’s not a term that we have heard often is concerned. Cases are examined to in the past, but with the rise of loan modi- determine compliance where the Real fication cases, the term will become quite Estate Settlement Procedures Act (RESPA) relevant in the years to come. and Regulation Z are concerned, As we wade our way out reviewed to determine if of the mortgage mess that predatory lending practices was created over the past were used and examined seven or so years, governto determine if misreprement officials as well as sentation or constructive lenders, have become well fraud occurred at any time aware of the unscrupulous throughout the mortgage lending practices that process. Evidence of violaplagued us over the past tion where any of these several years. These pracitems are concerned could tices have resulted not only result in serious legal conin the collapse of the mortsequences for the loan sergage market, but the subvicer and as stated above, “Forensic loan review legal leverage for the borsequent increase in the is a useful tool for number of foreclosures. rower where loan modifiall lenders, servicers As lenders try to minication is concerned. as well as the loan mize overall losses that Approximately 80 permodification might be sustained as a cent of the forensic loan companies.” result of the excessive forereview can be completed closure rate, loan modificaby simply reviewing the tions have become, in some instances, a borrower’s mortgage documents, reviewmethod to cut future losses as well as help a ing the results of any technology tools, borrower retain ownership of their property. underwriting practices and the borrowers Loan modification companies, as well closing documents. Quite frankly, someas attorneys, have taken on the arduous thing as simple as under-disclosure of the duties of helping those individuals who borrower’s annual percentage rate by as received mortgages that were not in their little as 0.125 percent could result in seribest interest either do to excessive interest ous consequences, including reopening rates or other features, modify their current the borrowers’ rescission period which mortgages into more sustainable mortgage could place a stay on foreclosure proceedproducts, and due to declining markets ing until the case is heard in a court of nationwide, many lenders are beginning to law. also see this as a viable solution to forecloForensic loan review is a useful tool for sure. However, there are still lenders out all lenders, servicers as well as the loan there that purchased and securitized these modification companies. As mortgage promortgages that refuse modification fessionals, I think we all need to be aware attempts at any level. of the standards and practices under which As a result, many of the attorneys and they will be conducted in the future. The loan modifications companies have imple- trend is gaining momentum from both an mented the use of the forensic loan audit offensive and defensive standpoint. in order to gain legal leverage against these loan servicers. The bottom line is this, if a As the author of The 2009 FHA/VA Survival forensic loan audit determines that the Kit, a 1,000-page how-to guide, Bonnie Wiltborrower’s rights were violated under state Hild is a Loan Modification University or federal law, the attorney may pursue instructor (www.loanmoduniversity.org), legal action against the loan servicer which and maintains a full-time position as senior could not only stay a pending foreclosure DE underwriter for a major banking institubut result in actual, as well as statutory, tion. She may be reached at contact@fhamonetary damages being awarded the training.org.
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on your radar screen There’s assistance from the Internal Revenue Service (IRS) that can be helpful as well. For example, TRV (tax return verification) reports provide a streamlined method of verifying a borrower’s tax information by electronically comparing the income-related lines of the borrower’s tax return with the same lines on file at the IRS. This data can be obtained on any individual or business that has authorized the release of this information in connection with an application for credit. Any variations uncovered can be highlighted in an easily read report. TRVs offer further protection against fraud by verifying that the applicant’s information matches Social Security Administration files.
What you’ll need to do Just like an air traffic controller needs to make the right decisions without panicking, so will you as a mortgage professional. It’s all about having a plan in place focused on prevention and reaction to incidents. A big step is putting your program in writing, and in as much detail as possible.
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Not only must you say how you will work to prevent identity theft and mitigate it if it happens, you must be able to explain how you will update and execute on this plan for the future. You’ll need to think through how employees will be trained, and how this will be verified and continually improved upon. Importantly, there needs to be buyin from senior leaders within your company, since they are ultimately charged with overseeing the program. Like a successful air traffic controller, a mortgage professional needs to rely on the right technology and expertise to keep everything moving smoothly. Taking a few important steps where identity theft protection and compliance with the Red Flags rules are concerned will keep your business under firm control. Steve Grant is president of Credit Plus Inc., a credit information services provider since 1928. He can be reached by phone at (800) 258-3488 or e-mail email@example.com.
Think Reverse! by Atare E. Agbamu, CRMS By Liz Scholz
Think Reverse! The Complete Guide to Marketing and Originating Reverse Mortgages for Mortgage Professionals and Financial Advisors reflects an impressive level of breadth and depth in reverse mortgage knowledge. Clearly a lot of thought with integrity was clearly put into this work. I found the work impressively researched, well documented and a nicely interwoven range of topics throughout the way. Author Atare E. Agbamu’s expertise as a reverse mortgage loan originator, with real live cases, and his experience as a key industry participant and leader, comes through on each page loud and clear. I appreciate the range of insight offered from the softer side of communicating with clients to the more technical perspectives and information on the products. This book takes complex products and rules and boils them down to very accurate, yet understandable, terms. And now, more than ever, is the importance of ethics in dealing with seniors. Atare provides sound, practical and professional insights into dealing with this very special customer in marketing, meetings and outreach with the right level of integrity and care for the client. Tips on communications, analysis on new market segmentation, and trends to expect were just a few of the many facets of the book that I found interesting. I would highly recommend that anyone interested in getting into the business, or new to the business, and yes, even seasoned veterans, can learn from this book! Kudos to Atare for a fine piece of work that will serve the mortgage industry in very positive ways. Liz Scholz is chief operating officer and executive vice president of the National Reverse Mortgage Lenders Association. She may be reached by phone at (202) 939-1776 or e-mail firstname.lastname@example.org.
BY ERIC WEINSTEIN
and watch out for Andrew Cuomo’s flaming new appraisal guidelines from the sky. There will be nothing left but prayer and repentance for the faithful, as the demonic regulators reap carnage throughout the land proudly displaying the “666” tattooed on their forehead. There will be nothing left for us but foreclosures and short sales, but hey, it’s a living. Don’t bother complaining, as our tiny planet hurdles through space where no one can hear you screaming. We are but a tiny grain of sand, on a desert planet among billions of solar systems in billions of galaxies. Our fate is held in the hands of powers we cannot even imagine. Comic forces control our destiny. The best we can say is, “We had a good run while it lasted,” turn out the lights and wait for the next evolutionary species to take over. Personally, I am rooting for a Planet of Apes. It will be a tough call, whether the politicians or the apes can throw the most feces. As for me, I will just sit in my hole, surrounded by rice, continuing to scribble out 1003s for buyers “just looking” and refinancing neighbors who have no hope of qualifying. You may ask, “What is the square root of Y squared?” Why? Because I don’t know how to do anything else … do you? Eric Weinstein may be reached at (703) 505-8692 or e-mail email@example.com.
COLORADO MORTGAGE PROFESSIONAL MAGAZINE O MAY 2009
As a self-acknowledged expert in the ice caps melting. Having your home mortgage industry, it is my firm belief “underwater” will have new meaning that the world will come to an end on once the seas consume the land. This will be helped further as the Dec. 21, 2012. I came to this realization after studying such market indicators as International Monetary Fund (IMF), the Dow Jones Industrial Average, the under the United Nation’s benevolent Mayan Calendar, the Prophecies of military leadership, moves us to a Nostradamus, the Bible code and the “one world currency” and the antinumber of vowels in the word Christ reveals himself. Imagine how “Obama.” Notice how when you take the phones will ring when rates hit one percent on a 30-year out the vowels, all you fixed-rate the day after are left with is “BM.” 100,000 headless horseEvery sixth grader knows men scourge the earth. those are the initials for Of course, good luck how the economy is locking in, your account doing right now. executive will be on So, as a loan officer, vacation that week and what does this mean for the fax lines will be you and your family in jammed. this most uncertain End It has been scientifiof Days? cally proved, on the In times of panic, it anointed day, the earth, is well known that peo“Prices have sun and center of the ple tend to invest in declined to the point galaxy will align as it safe mediums such as where borrowers does once every 15,000 gold and U.S. normally frozen out years. The last time this Treasuries. While, I of the market due to happened, the Dow Jones have my investments in low wages can now was at zero, caves were a rice, guns and a well afford to buy.” surplus on the market, constructed hole in the the prime rate was at ground, I can certainly respect the investing strategy of my negative three and Merrill Lynch execpeers. Real estate, however, should utives refused their bonuses. It is well not be overlooked. Prices have known that on that cycle, the earth’s declined to the point where borrow- poles shift, north becomes south, and ers normally frozen out of the mar- Chinese kids digging a deep hole reach ket due to low wages can now afford America, rather than the other way to buy. We are on the cusp of anoth- around. Count on shifting poles causer buying boom. It will not be long ing changes in magnetic fields and before my secluded wilderness throwing off annual percentage rate fortress is overrun by first-time calculations, since no one knows how homebuyers, nail salons and Verizon to do them by hand anymore. Even FIOS installers. Hence, the guns … worse than predicted, the earth’s rotation may even reverse itself. Then day part of my equation. Mortgage rates will also continue to would be night, night, day and drop, due to the slow economic growth, American Idol would be on at 4:00 the lack of inflation and a surplus of a.m. Borrowers, however, will continwaterfront properties on the world ue to call you while you are sleeping market due to global warming and the and ask, “What’s the rate, now?”
Yet, the market is a strong organism and is able to rebound. Civilization will survive, in one form or another and a mini-boom is bound to begin any quarter now. One just needs the staying power to weather the ensuing gamma ray radiation from the black hole in the center of the universe and the spontaneous combustion of all living matter on the planet. Remember, the market works in cycles, much like a tornado in the Wizard of Oz. You may lose your home, but look at the nice shoes you pick up. Naysayers discount the increased number of buyers that will be caused when zombies and vampires gain equal rights, the ability to purchase property and are allowed to adopt. Of course, plan on yet another disclosure in the loan package, this one requiring a droplet of blood next to the bar code. But still, it is a small price to pay for more first-time homebuyers in a slow economy. What is going on now is called “The Rapture,” when good jobs disappear and go to Heaven, and us remaining sinners are left to suffer the seven years of Obama Tribulations. If you read the blogs, you already can see famine, war, earthquakes and locust infestations devastating the world. Alas, until our Father’s army defeats Satan’s demon hordes, there will be nothing left for us to do but agonize through this, hunker down
MAY 2009 O
COLORADO MORTGAGE PROFESSIONAL MAGAZINE
new to market
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released guidelines and logic outlined in the Treasury Department ’s new Home Affordable Modification Program. The Asset Management product line includes AssetX, which decisions loans at a pool or portfolio level, and Optimizer which provides detailed analysis and processing solutions at the individual case file level. The company reports that its clients are able to access the updated rules from both modules. “Our customers are able to accurately decision their loan modification case files today against the new program guidelines released just yesterday,” said Commerce Velocity Product Director Fred Popke. “Our ability to make changes like this is one of the many factors attracting many firms challenged in the industry today. With thousands of loans that need to be modified, they need a system that can get their guidelines updated in a very consistent and timely fashion.” Commerce Velocity’s decisioning platform has been designed to enable large lending institutions and servicers to efficiently process thousands of loans at a time. The software automatically cycles through all of the possible qualifying permutations of interest rate reductions, term extensions and mortgage payment to income ratios and will even recommend appropriate principal balance reductions to qualify the borrowers while adhering to the investors’ or servicers’ decisioning guidelines. The software will also instantly calculate how each loan workout compares to other options such as a real estate-
owned/foreclosure property or a short sale. For more information, visit www.cvelocity.com.
OpenClose launches the AssistSeries OpenClose has announced the introduction of its new, integrated endto-end suite of mortgage software products called the AssistSeries. Developed to help mortgage companies and individuals create new business opportunities, the AssistSeries streamlines workflows and helps lenders automate more tasks with less software and capital. Its design enables mortgage brokers, mortgage lenders, credit unions or community banks to configure the system to meet the needs of large enterprises or individual loan originators. With its acquisition of LION MTS, OpenClose has integrated the LION mortgage software into its own Webbased solutions to create a new suite of mortgage products. The integrated products are built upon a single technology platform to enable mortgage professionals to work with a single set of loan data from initial consumer contact through post-closing and secondary marketing. This reduces the time spent preparing loans while also increasing security and profitability. “In order to be successful in the new marketplace, companies are going to have to change the way they do business,” said J.P. Kelly, OpenClose’s president of operations. “The AssistSeries enables lenders to increase efficiencies in the lending process by including consumers and
brokers in the same system used by lenders and consolidating all loan data. Preparation time is reduced, while security and profitability are maximized.” For more information, visit www.openclose.com.
HOPE NOW announces site enhancements to assist at-risk borrowers HOPE NOW has announced a redesigned and enhanced Web site (www.hopenow.com) that provides an important new way for homeowners with mortgage concerns to connect directly with their mortgage servicer and receive help faster. The site features a new online Assistance Intake Form, which a homeowner may use to submit an application for assistance to his or her servicer. The homeowner then will receive an acknowledgement of the application in no more than five to seven business days and will have confirmation that the process has begun. The Assistance Intake Form and enhanced Web site was developed by HOPE NOW in preparation for the Obama administration’s Homeowner Affordability and Stability Plan. The new enhancements will allow HOPE NOW to handle the expected large increase in the number of homeowners requesting assistance. “HOPE NOW’s enhanced Web site will make it even easier for homeowners at risk of foreclosure to start the workout process and will allow servicers to assess each homeowner’s needs much more quickly,” said Faith Schwartz, HOPE NOW’s executive director. “We want to do everything possible to make sure that every avoidable foreclosure is actually prevented.” For more information, visit www.hopenow.com.
iEmergent announces new enhancement to its mortgage forecasts iEmergent has announced the addition of enhanced local market performance planning tools to its 20092013 mortgage opportunity forecast tables. iEmergent’s enhanced performance planning tools help banks, mortgage lenders and sales managers maximize loan acquisition efficiencies, increase sales productivity, spend marketing dollars wisely and optimize the allocation of their consumer contact resources through educated decisions based on the types, size and expected growth rates of mortgage volumes in local markets. The planning tools are embedded in iEmergent’s detailed loan volume forecasts and unique market behavior metrics. The user-adjustable tools enable lenders to differentiate the purchase and refinance opportunities in each market and automatically calibrate resource coverage levels based on their lending model, current and future growth objectives, and competitive market position. By providing the user the flexibility to alter inputs and assumptions, the interactive tools help business leaders at all levels see how changes in the economic environment might impact their overall volume, market share and sales efficiency goals in different markets. “Our enhanced mortgage market forecasts simplify many of the critical decisions used when developing strategies to seize market share by grounding crucial decisions in fact-based, loan volume projections and calculations, rather than relying on the old conventional wisdoms that may no longer fit today’s environment. Since the tools permit users to define multiple scenarios, they are able to optimize their total resource levels, efficiency and profitability in a wide range of market conditions. By planning in advance for market uncertainty, an organization reduces internal anxieties and outperforms competitors who are passively waiting for market conditions to change.” For more information, visit www.iemergent.com.
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: firstname.lastname@example.org Note: Submissions sent via e-mail are preferred. The deadline for submissions is the 1st of the month prior to the target issue.
COLORADO MORTGAGE PROFESSIONAL MAGAZINE
O MAY 2009
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 email@example.com. MAY 2009 Thursday, May 21 Florida Association of Mortgage Brokers Suncoast Chapter Tabletop Trade Show The Osprey Inn 1660 South Tamiami Trail • Osprey, Fla. For more information, call (941) 993-5084 or visit www.famb.org. Sunday-Wednesday, May 31-June 3 Mortgage Bankers Association President’s Conference Note: This is an MBA member-only event La Costa Resort & Spa 2100 Costa del Mar Road Carlsbad, Calif. For more information, call (800) 793-6222 or visit www.mortgagebankers.org.
MAY 2009 O
COLORADO MORTGAGE PROFESSIONAL MAGAZINE
JUNE 2009 Wednesday, June 10 Arizona Association of Mortgage Brokers 2009 Mortgage MarketPlace Education & Expo “Expand Your Mind & Expand Your Business” Phoenix Convention Center 100 North Third Street • Phoenix For more information, call (480) 423-7334 or visit www.mortgagemarketplacehome.com.
Wednesday-Friday, June 17-19 National Reverse Mortgage Lenders Association Washington D.C. Policy Conference The Liaison Capitol Hill Hotel 415 New Jersey Avenue • NWWashington, D.C. For more information, call (202) 939-1760 or visit www.nrmla.org. Saturday, June 27 2009 National Association of Mortgage Brokers Mid-Year Meeting Crowne Plaza Riverwalk 111 Pecan Street East • San Antonio, Texas For more information, call (703) 342-5900 or visit www.namb.org. JULY 2009 Wednesday, July 8 11th Annual “Let’s Make a Deal” Tri-State Wholesale Lending Fair Sponsored by the Mortgage Bankers Association of New Jersey/New Jersey Association of Mortgage Brokers, New York Association of Mortgage Brokers and Pennsylvania Association of Mortgage Brokers Trump Taj Mahal 1000 Boardwalk at Virginia Avenue Atlantic City For more information, call (973) 379-7447 or visit www.njamb.org.
Wednesday-Saturday, July 15-18 Florida Association of Mortgage Brokers 2009 Annual Convention & Trade Show “World of Wonders” Orlando World Center Marriott Resort & Spa 8701 World Center Drive Orlando, Fla. For more information, call (800) 289-9983 or visit www.famb.org.
OCTOBER 2009 Friday-Saturday, October 2-3 Kentucky Association of Mortgage Professionals 2009 Annual Convention Belterra Casino & Golf Resort 777 Belterra Drive Belterra, Ind. For more information, call (270) 929-2836 or visit www.kyamp.net.
Wednesday-Saturday, July 29-August 1 California Association of Mortgage Brokers 2009 Annual Convention & Grand Exposition San Diego Marriott Hotel & Marina 333 West Harbor Drive San Diego Convention Center 111 West Harbor Drive San Diego For more information, call (916) 448-8236 or visit www.cambweb.org.
Monday-Tuesday, October 5-6 Washington Association of Mortgage Professionals 2009 Real Estate Lenders Conference Meydenbauer Center 11100 NE 6th Street Bellevue, Wash. For more information, call (866) 425-7250 or visit www.wamb.org.
AUGUST 2009 Tuesday-Friday, August 11-14 American Association of Residential Mortgage Regulators 20th Annual Regulatory Conference The Hyatt Regency Savannah 2 West Bay Street Savannah, Ga. For more information, call (202) 521-3999 or visit www.aarmr.org. SEPTEMBER 2009 Wednesday-Friday, September 9-11 Mortgage Bankers Association of Pennsylvania Annual Conference The Eisenhower Hotel 2634 Emmitsburg Road • Gettysburg, Pa. For more information, call (888) 739-9991 or visit www.mba-pa.org. Wednesday-Friday, September 9-11 Mortgage Bankers Association Document Management & Custody Conference The Westin GasLamp Quarter San Diego 910 Broadway Circle • San Diego For more information, call (800) 793-6222 or visit www.mortgagebankers.org. Thursday, September 10 Minnesota Mortgage Association 2009 Convention & Exhibitor Showcase The Hyatt Regency Minneapolis 1300 Nicollet Mall • Minneapolis For more information, call (952) 345-3240 or visit www.themma.org.
Allied Home Mortgage Capital Corp. ............www.branchasap.com..................................................34 All Regs......................................................www.allregs.com ........................................................17 Citi ............................................................www.careers.citigroup.com ....................................8 & 35 Elliott and Company Appraisers Inc. ............www.appraisalsanywhere.com ......................................37 First Fidelity Capital Markets Inc. ................www.ffidelity.com ......................................................24 First Integrity Title Agency LLC ....................www.fitallc.com ......................................................CO 2 Flagstar Bank ............................................www.wholesale.flagstar.com ............................Back Cover Franklin First Financial ..............................www.franklinfirstfinancial.com..............................29 & 35 Global Financial Services ............................www.globalbrokersystems.com ......................................7 HTDI Financial ..............................................www.startacreditrepaircompany.com ..34 & Inside Back Cover Hudson Valley Processing ............................www.hudsonvalleyprocessing.com ................................23 Mercury Capital ..........................................www.mercurycapital.com ............................................38 Mortgage Now Inc. ....................................www.mtgnow.com ..............................................21 & 34 Multiple Listing Service of Long Island Inc. ..www.mlsli.com ............................................................3 NAPMW......................................................www.napmw.org ........................................................39 National Association of Mortgage Processors..www.loanmoduniversity.com ........................................43 Platinum Credit Services Inc. ......................www.platinumcreditservices.com ..........................34 & 35 Presidents First Mortgage Bankers................www.presidentsfirst.com ..............Inside Front Cover & 34 Quality Mortgage Services............................www.qcmortgage.com ..........................................5 & 37 Reliance First Capital LLC. ..........................www.reliancefirstcapital.com ................................25 & 34 Superior Mortgage Corp...............................www.supmort.com ......................................................34 United First Financial..................................www.unitedfirstfinancial.com ..............................15 & 34 University Mortgage ....................................................................................................................19 Value Financial Mortgage Services Inc. ........www.valuefinancial.net........................................27 & 34 Wells Fargo Home Mortgage ........................www.wellsfargo.com ....................................................9
Monday-Wednesday, September 14-16 Mortgage Bankers Association Regulatory Compliance Conference The JW Marriott Hotel 1331 Pennsylvania Avenue Washington, D.C. For more information, call (800) 793-6222 or visit www.mortgagebankers.org. Wednesday-Thursday, September 16-17 2009 Missouri Association of Mortgage Brokers Trade Show & Convention St. Charles Convention Center and Embassy Suites Hotel 2 Convention Center Plaza • St. Charles, Mo. For more information, call (314) 909-9747 or visit www.mamb.net. Thursday-Friday, September 17-18 Mortgage Bankers Association Human Capital Management Symposium MBA Headquarters 1331 L Street NW • Washington, D.C. For more information, call (800) 793-6222 or visit www.mortgagebankers.org.
Sunday-Wednesday, October 11-14 MBA 96th Annual Convention & Expo San Diego Convention Center 111 West Harbor Drive San Diego For more information, call (800) 793-6222 or visit www.mortgagebankers.org. Wednesday-Friday, October 21-23 Pennsylvania Association of Mortgage Brokers and New Jersey Association of Mortgage Brokers Regional Conference Trump Taj Mahal 1000 Boardwalk at Virginia Avenue Atlantic City For more information, call (973) 379-7447 or visit www.njamb.org. Friday, October 30 Oregon Association of Mortgage Professionals 2009 Annual Convention “The Best of the Best” Location to be determined For more information, call (503) 670-8586 or visit www.oamponline.com. NOVEMBER 2009 Monday-Thursday, November 2-5 VAMB 21st Annual Convention Williamsburg Lodge 310 South England Street Colonial Williamsburg, Va. For more information, call (804) 285-7557 or visit www.vamb.org. Friday-Wednesday, November 13-18 NAMB/WEST MGM Grand Hotel & Casino 3799 Las Vegas Boulevard South Las Vegas For more information, call (703) 342-5900 or visit www.namb.org. FEBRUARY 2010 Monday-Thursday, February 1-4 Mortgage Bankers Association CREF/Multifamily Housing Convention & Expo Mandalay Bay Resort & Casino 3950 Las Vegas Boulevard South Las Vegas For more information, call (800) 793-6222 or visit www.mortgagebankers.org. Tuesday-Friday, February 23-26 Mortgage Bankers Association National Mortgage Servicing Conference & Expo Manchester Grand Hyatt 1 Market Place San Diego For more information, call (800) 793-6222 or visit www.mortgagebankers.org.
Why some Mortgage Professionals fail in Credit Repair while others Make Serious Money Mortgage Professionals make money in credit repair while getting borrowers Mortgage Ready!
You don’t need to be a credit expert to they couldn’t close before due to bad credit! It means more loans and more revenue for my start your own Credit Repair business Fortunately, with HTDI Financial’s Credit Services Organization (CSO) program, you will be able to handle ALL aspects of your business except having to do the actual repairs; we do that for you! We will train you on how to handle these customers and you will have the support you need every step of the way. We will make you look like a Fortune 500 company even if you work from home! YOU control how much money you make. In fact, through our CRM, we give you the tools and resources to harvest leads, manage prospects and monitor their progress.
You don’t have to spend tens of thousands of dollars for start-up costs for your own Credit Repair Company Once you are set up in our system, you will get access to software and tools that HTDI has spent over $1 million on research and development. You don’t need to spend an arm and a leg to start building your own credit repair business. Here is a quote from a mortgage company located in upstate New York who spent months of research before choosing HTDI:
“Until last year, I owned a large mortgage company in upstate NY with over 125 employees. We got hit hard during the mortgage industry crash and had to close our doors. I was stuck in a position with thousands of leads and customers that couldn’t get qualified for anything. I decided to start looking for a way to capitalize on my left over resources and help people in the process. I called many other credit repair companies and was very unimpressed. One west coast based company was charging $15,000 and had nothing but negatives written about them on the Internet. Then I found HTDI. They helped me to get started at the beginning of this year and it has been great. I have not only made great money helping people to repair their credit, but I have refinanced 8 of them and helped 6 buy houses that would have never qualified with the new guidelines. The software is very user friendly and all of my clients, affiliates and Brokers have increased business because of it.”
Get those impossible to close deals CLOSED! As the number of loan programs are shrinking, the bar on credit scores keep rising. This program will allow your borrowers to become “Mortgage Ready” as soon as 45 days. As one of our CSO stated:
“I have many loan officers that are now able to send their clients through the credit repair, raise their scores, and then close the client’s loan that
loan officers. Even better than that, it is very rewarding to be able to help a client regain their credit and be able to get the loan they need.”
Get started in a business that is booming and shows no signs of slowing The credit industry, as a whole, is one of the most powerful and profitable industries in existence. With loans, insurance and even employment taken into consideration individuals’ credit picture, the credit industry is getting bigger every day. Inside the credit industry, Credit Services is helping by assisting consumers with getting back on track by removing unverifiable and inaccurate negative items from their credit reports. As a CSO, you can benefit in being in a profitable industry and helping clients with their futures.
“I’ve been in the mortgage business over 22 years. A year ago, as the mortgage crisis worsened, I began trying to find a way to help clients who needed a better credit profile in order to get a mortgage. Fortunately for both me and my clients, I stumbled on HTDI. After a year of experience, I can honestly say the success rate is 100% and client satisfaction is through the roof. All of my clients have seen significant improvements, and some have experienced breathtaking jumps in their credit scores, even on the first round! From Day One you can be sure your “back office” (HTDI) has you covered. They will execute their part of the job seamlessly, with precision, on time, and with total consistency. All you have to do is SELL the service! Just sign people up, collect the money, and send HTDI the paperwork they need to get started. If you simply focus on selling the service, you will make lots of money, the work will get done, and you will never have to worry about unhappy customers. Although I got into it as a part timer, I now realize this is an excellent full time business opportunity. (Frankly, these days it’s probably a better business than the mortgage business!) You could easily make six figures in the first year with a minimal investment of money. How many opportunities like this exist these days? What you must invest is your time – SELL, SELL, SELL & SELL some more! Ultimately, what you are selling is the professionalism of HTDI, which is why this really
Industry Leading Results 46.95%
20.44% 17.32% 14.21%
Round 1 Round 2 Round 3 Round 4
rocks as a business opportunity.” We average one of the highest fix/deletion rates in the industry for the first 45 days of service. Shown below, in real-time, is the average percentage of fix/deletes per round.
If you are going to get involved in Credit Repair, be VERY CAREFUL First you have “Fair Credit Reporting Act” (FCRA). The FCRA holds credit bureaus and creditors to their reporting methods and has guidelines they must comply with. There are numerous techniques that are used along with similar laws to maximize results for each client. You must know these laws inside out. You can’t forget “Credit Repair Organizations Act.” (CROA). Just like the FCRA, the CROA hold credit repair companies to specific guidelines as well. If you choose HTDI Financial for your backend processing, we will ensure you maintain compliance. Lastly, you have applicable State Laws. Depending on the state you wish to conduct business in, you may have a state Credit Services Organizations act to comply with. As an active member in good standing of the National Association of Credit Services Organizations, you can be sure that we take our job very seriously, making sure you stay compliant and your clients.
FREE demo available
There is only one step you need to take; visit www.startacreditrepaircompany.com or call us at 877-877-4834 option 5.
MAY 2009 O
NATIONAL MORTGAGE PROFESSIONAL MAGAZINE O www.NationalMortgageProfessional.com