HAWAII MORTGAGE PROFESSIONAL MAGAZINE
O DECEMBER 2009
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NATIONAL MORTGAGE PROFESSIONAL MAGAZINE O www.NationalMortgageProfessional.com
Mortgage PROFESSIONAL H A W A I I
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The Hawaii Association of Mortgage Brokers would like to recognize the following members who have been awarded the National Association of Mortgage Brokers Lending Integrity Seal of Approval. These members have passed a federal background check, and completed ethics and continuing education requirements (as of 05/29/09). For more information on NAMB’s Lending Integrity Seal of Approval program, visit www.lendingintegrity.org.
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COMMITTEE CHAIRS Jodie Tanga Scott Coffman Tess Keliikoa Victor Brock Cory Someda Claude Phillips Jeff Wong Cathy Lee Dennis Oshiro Pat Young Steve Higa Cathy Lee Dennis Oshiro Eileen Mactagone Jean Seki Steve Higa Greg Ravelo
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HAWAII MORTGAGE PROFESSIONAL MAGAZINE O DECEMBER 2009
Sunday-Wednesday, February 21-24, 2010 Hyatt Regency Washington, D.C.
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HAWAII MORTGAGE PROFESSIONAL MAGAZINE
Why you should attend The number one reason you should attend this event is the satisfaction of knowing you are doing your part to ensure that mortgage broker issues are heard on Capitol Hill. You are the best spokesperson for our issues. Your participation benefits you, the industry and your clients as a whole, by strengthening the broker’s presence in the halls of Congress.
Key Issues in 2010 Include: Regulatory reform (RESPA, TILA, HVCC and more!) The National Mortgage Licensing Act (SAFE Act) The Consumer Financial Protection Agency (CFPA) And much more! Hotel Accommodations Hyatt Regency Washington on Capitol Hill 400 New Jersey Avenue, NW Washington, D.C. 20001 Phone #: (202) 737-1234 Toll Free #: (888) 421-1442
Here are a few reasons you should attend: Lobby Your Representatives on Capitol Hill “There is no better way to build relationships with your senators and representatives than by attending Lobby Day. Getting face-to-face with the decision-makers who create important policy is invaluable during such historic and unprecedented times in our industry.” —Bill Kidwell Don’t Miss Out on What This Conference Has to Offer “If you can only attend one national meeting this year, make it the NAMB 2010 Legislative & Regulatory Conference. It is a great opportunity to meet with fellow NAMB members and work together to formulate NAMB’s policy agenda.” —Don Fader, CRMS
Be prepared to go to the Hill! Includes Advocacy 101 training: General synopsis and "Question & Answer" on the best ways to communicate NAMB's talking points with your congressman in an effective manner.
It’s all happening now! Visit www.NAMB.org for details!
eSignatures: Be Sure You Know What You Are Getting By Ed F. Wallace Jr., Ph.D.
FHA Insider—Getting the FHA Business: Presentation & Paradigm By Jeff Mifsud
The NAMB Perspective
Trend Spotter: Motivating Move-Up Buyers
By Gibran Nicholas
Jr., MAI, SRA
Ask Brian By Brian Sacks
NMP Mortgage Professional of the Month: Julio de Cardenas, Executive Vice President United Northern Mortgage Bankers Ltd.
Scenes From NAMB/WEST 2009
Value Nation: Challenging the Appraisal By Charlie W. Elliott
Regulatory Compliance Outlook: December 2009—New Good Faith Estimate and HUD-1 Settlement Statement By Jonathan Foxx
Mortgage Foreclosure Predictions for 2010
COM MER CIAL REVE R MOR SE TGA GES
RESI DEN TIAL
TECH NOL OGY
MAR KE SALE TING/ S SETT LE SERV MENT ICES
The Secondary Market Overview: Government Intervention By Dave Hershman
SAFE Smart … Testing, Education and Licensing: Era of the Mortgage Professional By Paul Donohue, CRMS
HVCC Awoken in the City That Never Sleeps By Eric C. Peck
Forward on Reverse: HECM at 20: Leaders and Pioneers in U.S. Reverse Mortgage Series (IV) … The Reverse Quarterback From Wall Street By Atare E. Agbamu, CRMS
A View From the “C” Suite By David Lykken
Your Game Plan to Social Media Success By John Seroka
Residential and Commercial: Working Together
How to Gain New Clients in a Volatile Market By Dr. Kerry L. Johnson, MBA
The Art of Building Strategic Business Alliances in Today’s Challenging Economy By Greg Perrine and Tim Markel
Knotworking: Beyond Networking By Laura Lynn Burke
Cultivating Your Relationships By Nat Hardwick
HAWAII MORTGAGE PROFESSIONAL MAGAZINE
By Christopher G. Brown
By William Pape, MSFS, CMC
ORIG INAT IONS SECO NDA RY SERV ICIN G COM PLIA NCE
December 2009 Volume 1 • Number 8
Mortgage PROFESSIONAL N A T I O N A L
Your source for the latest on originations, settlement, and servicing
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Building relationships The fact is … if you reading this, you’re probably one of the remaining mortgage professionals who has done a great job at building and maintaining relationships. This could be with your account executives, warehouse line rep, referral partners, or just about anyone who can help you with your business. I have always looked at building relationships like building equity. Assuming normal market conditions, that equity will continue to rise as long as you maintain it with care and nurturing. In this issue, you will have the chance to learn a number of ways to build these relationships through various channels, including social networking and the Internet, traditional networking, working with commercial brokers, and putting customer service at the forefront to gain new clients through quality referrals. At NAMB/WEST, Fred Arnold told the group about carving out 10 min. a day to just e-mail something personal to your contacts. It could be a joke, photo, story or anything that is not directly related to your business, but no matter the message, it is your personal message … on that you took the time to construct and send out in order to keep those existing relationships ongoing and foster new relationships.
This month’s Mortgage Professional of the Month … This month, we had the chance to meet with Julio de Cardenes, executive vice president of United Northern Mortgage Bankers Ltd. Julio started in real estate at the age of 18 and soon found a love for the financing side of the business. His training was as hands-on as you can get. With little formal industry education, he started to learn the ins-and-outs of the mortgage business and his mentors had the confidence in him to generate a pipeline of loans by actually doing loans (as opposed to hours upon hours of classroom training). His growth as a mortgage professional was a direct result of becoming an FHA expert and helping to train thousands of mortgage professional on how to structure loans and build relationships with referral partners. Sincerely,
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.
If you haven’t heard, this year’s NAMB/WEST was a huge success. It kicked off with a cocktail party with a great rock and roll band featuring Colorado Association of Mortgage Brokers Past President Douglas Braden. While I would normally NEVER suggest putting an economist at the first session in the morning in Vegas, however, when it’s Texan Dr. Ted C. Jones (director of investor relations, Stewart Information Services Corporation), it’s a good idea. His energy and interaction with the audience is just as powerful as any cup of coffee I have had. The proof is that when Dr. Ted C. Jones asked the crowd, “How many of you feel we are in a housing recovery?” almost the entire crowd gave a resounding, “No!” to which Ted concurred. Ted shared with us that, as part of the overall economic recovery, the next “36 to 48 months, gas will be at $5 per gallon.” And, the “30-year fixed will hit seven percent in 2010.” That was followed by NAMB’s Government Affairs Team of NAMB President Jim Pair, Government Affairs Committee Chair and Past President Harry Dinham, Denise Leonard and Chief Executive Officer Roy DeLoach. “Net worth requirements will turn a lot of mortgage bankers into brokers,” said DeLoach at this session. “HUD didn’t want to be in the business of approving brokers. That job will be pushed to the lenders.” Later on, when talks about the SAFE Act came up, Denise Leonard reported that North Carolina mortgage loan officers (MLOs) will be required to have a score of 720. Denise stressed the importance of the states keeping NAMB aware of any developments like this. Later in the day, we had the chance to hear Ginger Bell (who, by the way, did a great job of coordinating the conference speakers), along with Theresa Ballard, president of BFO Solutions and Ken Perry, president of Broker Knowledge, present a practical overview of the SAFE Act, MDIA, HVCC, Red Flags and other regulatory updates. The day continued with more powerful sessions, including an insider’s look at FHA, provided by Nancy West from HUD, and a closer look at VA loans, provided by Debra Paiva from the U.S. Department of Veterans Affairs. The 2009 NAMB/WEST education sessions wrapped up with two very powerful sessions. One featured three of the industry’s best sales coaches, Ron Vaimberg, Rene Rodriguez and Fred Arnold, sharing the secrets to their success. The other session was one of the most innovative sessions I have seen at a mortgage conference in a long time. NAMB hosted a “speed dating-style” event, where participants had the opportunity to visit with reps from the industry’s top companies in a fast-paced, “get to know you” networking session. Day two of NAMB/WEST’s education started off with a social networking seminar presented by Mark Madsen and Jason Berman. I get into a more detailed account of their session on page 7 of this issue in my communications article in “The NAMB Perspective” column. Following the social networking session, Frank Garay, co-founder of Think Big Work Small, shared his thoughts on how to capitalize on video marketing to build relationships. The last education session featured Jeff Mifsud presenting his real world intimate knowledge on the world of FHA. The day wrapped up with a hugely successful trade show, where the industry’s top wholesalers, affiliated service providers, technology vendors and marketing companies were on hand to help attendees find new ways to make 2010 a great year.
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NAMB/WEST was a HUGE success!
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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.
The National Association of Mortgage Brokers
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NAMB Board of Directors Officers President—Jim Pair, CMC Mortgage Associates Corpus Christi 6262 Weber Road, Suite 208 Corpus Christi, TX 78413 (361) 853-9987 email@example.com President-Elect—William Howe, CMC, CRMS Howe Mortgage Corporation 9414 E. San Salvador Drive, #236 Scottsdale, AZ 85258 (602) 200-8100 firstname.lastname@example.org Vice President—Michael D’Alonzo, CMC Creative Mortgage Group 1126 Horsham Road, Suite D Maple Glen, PA 19002 (215) 657-9600 email@example.com Secretary—Penny Fagan, CRMS P. Fagan Mortgage Inc. 222 East Moulton Street Decatur, AL 35601 (256) 355-5505 firstname.lastname@example.org Treasurer—Don Frommeyer, CRMS Amtrust Mortgage Funding Inc. 200 Medical Drive, Suite D Carmel, IN 46032 (317) 575-4355 email@example.com Immediate Past President—Marc S. Savitt, CRMS The Mortgage Center 115 Aikens Center, Suite 20-B Martinsburg, WV 25401 (304) 267-9040 firstname.lastname@example.org
John Councilman, CMC, CRMS AMC Mortgage Corporation 2613 Fallston Road Fallston, MD 21047 (410) 557-6400 email@example.com
Olga Kucerak Crown Lending 8700 Crown Hill Boulevard, Suite 804 San Antonio, TX 78209 (210) 828-3384 firstname.lastname@example.org Walt Scott Excalibur Financial Inc. 175 Strafford Avenue, Suite 1 Wayne, PA 19087 (215) 669-3273 email@example.com
Senior Vice President Sharon Patrick, MML, CMI (386) 985-1620 firstname.lastname@example.org Vice President/Northwestern Region Jill M. Kinsman (206) 344-7827 email@example.com Vice President/Western Region Tim Courtney (760) 792-5620 firstname.lastname@example.org
Vice President/Southeastern Region Jessica Edmonston (919) 414-3028 email@example.com Secretary Laurie Abisher, GML, CMI (661) 283-1262 firstname.lastname@example.org Treasurer Kay Talley, MML (919) 846-4294 email@example.com Parliamentarian Hulene Bridgman-Works (972) 494-2788 firstname.lastname@example.org
Vice President/Central Region Candace Smith, CMI (512) 329-9040 email@example.com
National Credit Reporting Association Inc. 125 East Lake Street, Suite 200 Bloomingdale, IL 60108 Phone: (630) 539-1525 Fax: (630) 539-1526 Web site: www.ncrainc.org
Board of Directors President—Judy Ryan (800) 929-3400, ext. 201 firstname.lastname@example.org Vice President—Marty Flynn (925) 831-3520, ext. 224 email@example.com Treasurer—Daphne Large (901) 259-5105 firstname.lastname@example.org Ex-Officio—Nancy Fedich (908) 813-8555, ext. 3010 email@example.com
Director—Dave Miller (317) 573-0667 firstname.lastname@example.org Director—Donald J. Unger (303) 670-7993, ext. 222 email@example.com Director—Tom Swider (856) 787-9005, ext. 1201 firstname.lastname@example.org Director—Donovan Williams (714) 638-2855 donw@Informativeresearch.com
NCRA Staff Director—Thomas Conwell (248) 313-1000 email@example.com
Executive Director—Terry Clemans (630) 539-1525 firstname.lastname@example.org
Director—Don Goldammer (661) 398-4700 email@example.com
Office Manager/Membership Services—Jan Gerber (630) 539-1525 firstname.lastname@example.org
Director—Sanford (Sandy) Lubin (805) 481-3155 email@example.com
Legal Counsel—James Sutton (972) 680-2665 firstname.lastname@example.org
Don Starks D.C. Starks Mortgage Associates Inc. 141 South Main Street Bourbonnais, IL 60914 (815) 935-0710 email@example.com
President-Elect Gary Tumbiolo, CMI (919) 452-1529 firstname.lastname@example.org
Vice President/Greater Northeast Region Colleen-Therese McKeever, CMI (646) 584-8332 email@example.com
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Ginny Ferguson, CMC Heritage Valley Mortgage Inc. 5700 Stoneridge Mall Road, Suite 150 Pleasanton, CA 94588 (925) 469-0100 firstname.lastname@example.org
President Liz Roberts-Fajardo, GML (702) 498-8020 email@example.com
Joe Camarena The Mortgage Source 10120 Southwest Nimbus Avenue, Suite C-7 Portland, OR 97223 (503) 443-1060 firstname.lastname@example.org
National Board of Directors
eSignatures: Be Sure You Know What You Are Getting
HAWAII MORTGAGE PROFESSIONAL MAGAZINE
By Ed F. Wallace Jr., Ph.D.
As current regulations continue to account a number of different factors change, one topic that has moved to and not just the input of randomly the forefront among mortgage bankers selected letters and numbers that anyis eSignatures. A normal assumption in one opening an e-mail can enter. A reference to eSignatures is that any sig- secured and certified eSignature goes as nature obtained in a legal and binding far as to perform the transaction differface-to-face meeting is comparable to ently for the borrower and co-borrower, eSignature. However, in the electronic making each signing ceremony indeworld, things are very different. pendent of the other, while allowing As can be seen throughout the indus- the lender to know a specific individual try, the term eSignature is used most often has completed the process. for three distinctly different items, which After the eSignature process is completare an acknowledgement, an acknowl- ed, the documentation is sent to a tampedgement with a name being placed on a er-proof eVault for delivery. Under this page, or a true certified watermarked and type of process, the eSignature is as legal vaulted electronic signature. Although the and binding as any signature notarized first two may currently conform to the ini- face-to-face. Because the documents are tial disclosure regulatory requirements, immediately sent to the eVault, they are they are not a true legal and much more secure than binding signature. An those going through a acknowledgement in most manual process and handcases does not have the delivered to a lender. From security built around it, the eVault, documents can which, in turn, confirms be electronically transmitthat the individual completted to the Mortgage ing the process is actually Electronic Registration the person of record. It simSystems (MERS) for registraply provides a verification tion or delivered to a secthat an electronic docuondary market investor ment is delivered to a speciwhich has the assurance fied e-mail address, or even the eSigned certified docuthat a person has opened ments are genuine. “As the eSignature the email to review it. As the eSignature debate debate moves to a Additionally, acknowlmoves to a complete complete eMortgage edgements may have creeMortgage climate, it is vital climate, it is vital dentials built into the that companies understand that companies delivery mechanism that the difference between an understand the difrequires the recipient to go electronic acknowledgeference between an through a simple process ment and a true eSignature. electronic acknowlto open the documents, Choosing the wrong elecsimilar to buying tickets edgement and a true tronic source may result in online to an event. In legal and monetary probeSignature.” either case, the actions do lems due to lack of adhernot certify that the individual obtaining ence to federal, state and local statues, as the information is, in fact, the person of well as investor requirements surrounding record, only that someone is using the the electronic signature process. computer and opened a file. A true eSignature has a very secured Ed F. Wallace Jr., Ph.D. is the chief integraprocess. This process is transaction-spe- tion officer for Docu Prep Inc., a nationwide cific, borrower-specific, and certifies that provider of closing documents and initial each borrower is in fact the person of disclosure services, including secure elecrecord. This certification ensures compa- tronic delivery tools, loan analysis testing, nies that the information they have and dynamic selection of documents, bar transmitted is being received, reviewed, coding, secured and certified eSignatures and signed by the actual borrower or co- and eMortgages via LOS interfaces, Web borrower and not another member of services and standalone systems. He may be the family or unrelated individual. reached by phone at (801) 574-2919 or eA true eSignature process takes into mail email@example.com.
HUD to exercise restraint in RESPA enforcement The U.S. Department of Housing & Urban Development (HUD) has announced that for the first four months of 2010, the staff of the Mortgagee Review Board (MRB) will exercise restraint in enforcing new regulatory requirements under the Real Estate Settlement Procedures Act (RESPA), due to take full effect on Jan. 1. The MRB has instructed its staff to exercise such restraint in considering an action against Federal Housing Administration (FHA)-approved lenders who have demonstrated that they are making a good faith effort to comply with RESPA’s new requirements. In addition, HUD is asking other federal and relevant state enforcement agencies to exercise the same 120-day restraint in enforcement for non-FHA originators and other settlement service providers who demonstrate the good faith effort to implement RESPA’s new rules. In determining whether a mortgagee has made a good faith effort, MRB staff will consider whether the mortgagee has relied on the new RESPA rule and other written guidance issued by the Department, and the extent to which the mortgagee has made sufficient investment and commitment in technology, training, and quality control designed to comply with the new rule. “We will work with those who are making an honest effort to work with us as we implement these important new consumer protections,” said HUD Secretary Shaun Donovan. “While we will not delay implementation of RESPA’s new requirements, we are sensitive to the concerns of the industry as it integrates these new rules into their day-to-day business practices.” On Jan. 1, 2010, HUD will require that lenders and mortgage brokers provide consumers with a standard Good Faith Estimate (GFE) that clearly discloses key loan terms and closing costs. Closing agents will also be required to provide borrowers a new HUD-1 Settlement Statement that clearly compares consumers’ final and estimated costs. The new RESPA rule became effective on Jan. 16, 2009, but provided
a one-year transition period for the mortgage industry to incorporate these changes. HUD will continue to work with the mortgage industry during this period, including providing a comprehensive set of frequently asked questions (FAQs) on its Web site. For more information, visit www.hud.gov.
President Obama establishes interagency Financial Fraud Enforcement Task Force U.S. Attorney General Eric Holder, Treasury Secretary Tim Geithner, Department of Housing & Urban Development (HUD) Secretar y Shaun Donovan, and Securities and Exchange Commission (SEC) Chairwoman Mary Schapiro have announced that President Barack Obama has established by Executive Order an interagency Financial Fraud Enforcement Task Force to strengthen efforts to combat financial crime. The Department of Justice (DOJ) will lead the task force and the Department of Treasury, HUD and the SEC will serve on the steering committee. The task force’s leadership, along with representatives from a broad range of federal agencies, regulatory authorities and inspectors general, will work with state and local partners to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, address discrimination in the lending and financial markets and recover proceeds for victims. The task force, which replaces the Corporate Fraud Task Force established in 2002, will build upon efforts already underway to combat mortgage, securities and corporate fraud by increasing coordination and fully utilizing the resources and expertise of the government’s law enforcement and regulatory apparatus. “This task force’s mission is not just to hold accountable those who helped bring about the last financial meltdown, but to prevent another meltdown from happening,” said U.S. Attorney General Eric Holder. “We will be relentless in our investigation of corcontinued on page 10
rat lable e
Face the Future with Knowledge attend the 27 Annual Regional Conference of Mortgage Bankers Associations March 14 - 19, 2010 th
Getting the FHA Business: Presentation & Paradigm ence when I say that many LOs get into an office, establish great rapport with the agents, and give a great presentation. They feel great and on top of the world, but then fail to follow up effectively because other things come up. Whether it’s a bunch of refinances, other referrals or any other legitimate distractions, the bottom line is that if you allow other things to distract you from following up, then the seeds you planted at the presentation—along with those important relationships (and future referral business) —will not bear fruit.
“In the last five years alone, there have been more than 1,000 changes to FHA loan programs!” I would like to offer a Five-Step Paradigm you can follow to help you develop FHA business through presentations:
Our 2010 Commercial Property Program features: General Session: A Market Perspective from Seasoned Industry Leaders - Panel I of our General Session will cover Office, Retail, Fannie Mae and Freddie Mac, Panel II will speak to Recreating the Capital Markets: The New Paradigm Our Afternoon Session deals with Workouts on Commercial Loans: How to Handle a Commercial Loan Portfolio in a troubled market: How are the Banks handling Current Market Issues? Tuesdays Session features a panel entitled Unlocking pension fund capital followed by a Lenders Panel Come hear about the concepts on how business can be done in the new credit underwriting cycle. The panel will share with you their vision and underwriting guidelines as to how they are closing deals in this unpredictable marketplace. The lenders will be in the house on Tuesday morning, will you? Enjoy lunch in our Commercial Property Exhibit Hall New for 2010 - Our Opening Residential Networking Cocktail Reception on Tuesday Evening is in the Exhibit Hall. We’ll start this year’s conference off with a BANG at our Grand Opening Reception on the Exhibit Hall Floor!
Residential Program Highlights Our General Session will look at The Future of Mortgage Finance: Making a Profit in the Current and Future Markets. Enjoy lunch in the Exhibit Hall and meet with your colleagues and gain valuable face time with your clients Wednesday afternoon our Regulators Roundtable feature Regulators from NJ, PA, NY and MD as well as NMLS Representatives. Enjoy our Second Cocktail Reception sponsored by:
continued on page 10
Thursday morning the Information Exchange experts will be seated at roundtables, which will be identified by a sign at each table, available for individual or group exchange on their respective topics. Also in the program: Federal Law update; Special Speaker lunch on Thursday and much more! SAFE Education will be provided at the 2010 Regional Conference on Tuesday, Thursday and Friday.
For Registration and Exhibit Information visit www.mbanj.com
2. Start with five real estate offices in areas that will bring you your ideal buyers. I got my FHA start in inner city Detroit in the mid-1990s when the auto companies were doing well and buyers could easily qualify. I had to cultivate 10 leads to close one loan. After time, that ratio changed to 30 leads per one loan closed. I had to find business elsewhere to bring that ratio down. If you’re not sure who your ideal buyer is, you need to make that determination before you start your campaign. Call each office, ask to speak to the manager, and then talk about your
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1. Establish a series of three 15 min. FHA presentations you can offer to real estate offices. Here are some ideas: “The 3 Things All Realtors Must Know About FHA Buyers,” “How to Avoid the Top Three Mistakes Realtors Make When Writing Purchase Agreements,” and “How to Sell Three More Homes in the Next Three Months.” In each presentation, include the guides you feel will benefit your agents.
Commercial Property Highlights
I’ve been asked many times by loan officers just how to develop Federal Housing Administration (FHA) business. My patent response is: “You have to brand yourself as an FHA specialist, get out there and give FHA presentations to your FHA referral sources, and then, follow up.” If you are proficient in the basic FHA guides and want FHA business, you need to make yourself the resource for FHA information. Remember, one of the biggest burdens a real estate broker has is providing useful and effective training to their agents. The FHA guides are so vast and change quite often, even we loan officers have a hard time keeping up. What do you think that means for the overall real estate community? In the last five years alone, there have been more than 1,000 changes to FHA loan programs! Keeping up with FHA is hardly the priority of a Realtor! And yet the more knowledge they have, the more it helps their business. That’s where you, the FHA information source, come in. Real estate agents need some catching up on FHA, and they need you to help them. Unfortunately, many loan officers feel they lack the requisite FHA knowledge to go out there and do FHA presentations. I have to tell you that if you know the basics, then you start presenting the basics. Agents don’t need to become FHA underwriters, they just need the FHA information that can help them add to the value they can give their clients. As you learn more guides, go out and present them to your agents. Over time, you will become an expert and a valuable resource to as many agents as you can effectively manage in your database. The crucial factor in being successful in growing your business through presentations is the paradigm you establish. The paradigm I’m referring to is the pattern of steps you take after you walk out of an office following your FHA presentation. This is where many LOs drop the ball … by failing to implement a post presentation system (PPS). But this is where your referral base and your income stream is at. Now, unfortunately I speak from personal experi-
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For more information on the National Association of Mortgage Brokers, visit www.namb.org.
We Will Weather This Storm
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A Message From NAMB President Jim Pair, CMC
Like many of you in this time of unprecedented financial turmoil for our industry, I have wondered whether or not we as mortgage brokers will survive. And, if we do, what does our future hold? My answer to the first question is a resounding, “Yes!” There are many reasons that the mortgage broker will survive. First and foremost, the mortgage broker fills an important role that the consumer does not receive from any other channel of distribution. The mortgage broker develops a unique relationship with the consumer, while other channels of distribution are more interested in producing a volume of loans each month and will not (or cannot) take the time to listen and work with the consumer to achieve their dream of homeownership. The mortgage broker is willing to spend the time necessary to work closely with the consumer who may have credit issues, or perhaps suggest what steps they can take to accumulate the necessary funds to purchase a home. The mortgage broker is available to the consumer, seven days a week, 24 hours a day … a service other channels of distribution do not provide. Mortgage brokers are innovative and creative entrepreneurs. We are the ones who began pre-qualifying and pre-approving the consumer in an effort to speed up the process of shopping and purchasing a home. This saves the consumer time and allows the consumer to receive preferential treatment from the seller. A real estate agent or builder is now able to spend more quality time with a consumer knowing what price range in which they are qualified to buy. This is an extremely valuable service for the consumer, the real estate agent and the builder that was not being provided by other channels of distribution. The mortgage brokers who have survived the last few years and are members of their state and national association are the true professionals in our industry. These professional brokers subscribe to a code of ethics and best business practices. Many of them have obtained their certification and promote the National Association of Mortgage Brokers Lending Integrity Seal of Approval. All of this sets us apart from other originators and gives the consumer the confidence to work with a mortgage broker. Another question many of you are asking is, “How will we be compensated in the future?” I believe our association will be able to protect the way in which we are compensated. We will still be able to assist the consumer with their upfront costs and be fairly compensated for the services we provide. If, for some reason, we are unsuccessful in protecting the way brokers are currently compensated, there are options open to us. One option would be to become a creditor. As a creditor, brokers would be entitled to indirect compensation just as other creditors. If you choose this option, it would mean added responsibility. You may have to establish a warehouse line or find a wholesale lender who will provide with that line. This is just one option and I feel certain there will be several others. As I mentioned earlier, mortgage brokers are innovative and creative. There is a sailor’s saying that goes like this, “We cannot direct the wind, but we can adjust the sails.” That is who we are and what we do and the main reason the mortgage broker will be here in the future. I want to wish you and your family a very merry happy holiday season and a prosperous New Year. Thank you for the support you give to your state and national association. The year 2010 will be a better year for us all. We will weather this storm. Jim Pair, CMC is with Mortgage Associates Corpus Christi and is president of the National Association of Mortgage Brokers. He may be reached by e-mail at firstname.lastname@example.org.
Certification? Certainly! Thankful
A Message From NAMB Certifications Committee Chair Pava J. Leyrer, CMC, CRMS It is December, and our thoughts now turn to holidays as we are often side-tracked by many things this time of year. We are busy changing clocks, changing our wardrobe (well most of us anyway), and especially in our industry, changing our regulations and laws. The media does not have negative stories about us every five minutes, but our regulators have not forgotten how to get media attention using consumer protection as the focus. The Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) is in full swing for most states and many have, or are currently, adapting changes to comply with licensing and the national registry requirements. You are probably wondering why I would title this article “Thankful” with the lead in I just mentioned. I am thankful for the opportunity to still provide the knowledge and expertise my community needs. I am thankful I obtained my National Association of Mortgage Brokers certifications several years ago which helped me be more prepared for the licensing we are now going through. I am thankful that I belong to an association (NAMB) that cares about my business and profession by trying to be proactive with legislation and information. As the month and 2009 ebb to a close, look at what you are thankful for and let those around you know. Take a moment to look into areas, such as certification, that will benefit your professional status and knowledge. Have a great 2009 holiday season! Pava J. Leyrer, CMC, CRMS, is president and owner of Heritage National Mortgage Corporation in Grandville, Mich., and Certifications Committee chair for the National Association of Mortgage Brokers. She may be reached by phone at (616) 534-4993 or e-mail email@example.com.
The Credit Corner Who Moved My Credit?
A Message From NAMB Credit Scoring Committee Member Dave Wheeler The last few years were full of “change” for our industry, but thankfully, credit scoring hasn’t been one of them. “What” you say? “But I read somewhere that scores were completely different now. What is going on?” Since 2006, there have been many announcements about new scoring models that are competing for acceptance in the mortgage space. Quite a few entities need to put their seal of approval on a scoring model before we can use it, including the rating agencies, Wall Street, Fannie Mae, Freddie Mac, the credit bureaus and our lenders. There are also a few pending lawsuits that may need to be settled. Two scores are currently going through that process, VantageScore and FICO 08, and neither have been fully accepted. However, both models have had a significant amount of attention in the media. VantageScore has been silent for the past
few months, but FICO 08 is being implemented by the bureaus now, and is receiving attention. These press releases prompt questions from NAMB members about what has changed already, and what should we expect? First, only Trans Union and Experian have released their versions of FICO 08. It is still unknown if and when Equifax will do the same. Secondly, the governmentsponsored enterprises (GSEs), Wall Street and lenders will have to start using it. That process could take many months or even a few years. So, what stays the same and what changes? FICO 08 has the same “look and feel” as the older models. It still uses the same 300-850 scoring range, and inquiries are still treated the same as we know today. However, it uses newer versions of bureau data, which means that it has more information to draw from when making its score. Using these new fields allows for some new changes that make it a stronger model than ever before. Collections, judgments and tax liens that were originally under $100 are no longer evaluated by the model. We have been told that subsequent collection attempts that add to the balance are still overlooked as long as they are reported correctly. Balances on revolving accounts are weighed more heavily. You will see a greater score change as you hold different balances across your credit cards. Also, a single delinquency will not hold the same negative impact as in previous models. And lastly, authorized users get their own special treatment using proprietary logic. Originally, authorized user accounts were reported to be completely ignored, but the threat of an Equal Credit Opportunity Act (ECOA) lawsuit forced them to be included. The final result is a revised model that considers spousal authorized user accounts, but diminishes the impact from “piggybacking” an authorized user. This is not a complete list of changes, but are the ones that the Credit Scoring Committee of the National Association of Mortgage Brokers is most frequently asked about. Keep this in mind: Credit is an illusion that has purpose. It is only useful in relation to a goal and a time frame. The time frame for FICO 08 may be farther out than many people need if they are going for a house right now, so stick with what you learned before. The NAMB Credit Scoring Class is still one of the premier credit education sources for your lending needs. And rest assured that when FICO 08 becomes fully accepted, NAMB will be providing you with the most up-to-date information.
about. They care about content, traffic and links. They want to be found on page one of Google searches for terms like “Las Vegas first-time homebuyer.” Mark suggests subscribing to real estate agents blogs’ RSS feeds via Google Reader. Using these tools, you can stalk your market’s top real estate agents, as well as get relevant location and industry news consolidated all in one location. I can tell you personally that I use Google Reader based on Mark’s recommendation. It’s very easy to use and a huge time-saver for finding and reading the latest news. Once you find relevant content, share it with other agents, post it onto Twitter, link to it on your blog and comment on it. Mark strongly recommends commenting as a way to build rapport with the blogger and as a way to generate traffic to your site by way of including your Web site’s URL. “Content is King,” was a phrase that was used by offline publishers as they started to roll out Web sites in the mid-1990s. Mark makes a great point on how right now, “Content is King” for mortgage professionals. Using your knowledge base, you have a bank of content that be leveraged to create your own blogs or blog entries for your real estate agent partners. Having relevant content targeting the areas you focus on will help you get top ranking on Google for the keywords you desire. After Mark’s presentation, Jason Berman delivered his presentation on Twitter. First off, Jason is a guy who understands the true value of tools like Twitter and Facebook. Jason was the first person in the mortgage industry, or even in real estate, that I heard use the term “Web 2.0,” long before it received mass adoption. Moreover, he was the first person I knew of that was using social media to build his mortgage pipeline. Jason discussed the do’s and don’ts of Twitter. His main message was to be an “Informer,” not a “MEformer.” He emphasized that optimizing Twitter is possible through sharing valuable information with your followers, and not just telling everyone what you are doing. Both Mark and Jason are great resources when it comes to social media and social networking. Feel free to contact them by e-mail at mark@MyFHABlog.com (Mark Madsen) or firstname.lastname@example.org (Jason Berman). Andrew T. Berman is executive vice president of NMP Media Corp. and a member of the NAMB Communications Committee. You may follow him on Twitter @andrewtberman. He may be reached by phone at (516) 409-5555, ext. 333 or e-mail email@example.com.
Dave Wheeler is a regional account with Credit Plus Inc. is a member of the NAMB Credit Scoring Committee. He may be reached by phone at (610) 462-3763 or e-mail firstname.lastname@example.org.
The Communications Corner
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NAMB/WEST was a great success. Sure, we all learned about the challenges that we are facing when it comes to the new GFE, HUD1 and TIL; potential obstacles created from the SAFE Act and more; however, there was lots of positive talk about new and exciting ways to network and find new business. Among the regulatory and legislative seminars and sessions, NAMB/WEST featured the session, “Social Media: How to Use Facebook, Twitter & Blogging to Build Your Business.” The session started off with Mark Madsen, a Las Vegas-based mortgage originator, who shared his systems with a few hundred attendees on how to “Make the Web work for them, and not work on the Web.” Mark was not talking about becoming a social networking butterfly, but he described strategies in which you could use social media to connect to referral partners, such as real estate agents. Mark defines social media as an online platform that allows us to participate and social networks as sites that use artificial intelligence to help us connect to other like-minded users. Mark started blogging back in 2006, when the local Las Vegas real estate market began to crash. Mark started to closely pay attention to the real estate agents who were still closing lots of deals, despite of the downturn of the Vegas market. By observing what these top agents were doing, he started to figured out ways to help these agents by providing them content, help get traffic to their blogs, and even offer positive commentary and words of encouragement in the form of blog comments (which, by the way, also link to your site bringing you traffic and Search Engine Optimization [SEO] value). Mark shared with us what social media savvy real estate professionals care
NAMB/WEST highlights social networking at annual Vegas event
BY GIBRAN NICHOLAS
Motivating Move-Up Buyers Congress has extended the $8,000 firsttime homebuyer tax credit and expanded it to include a $6,500 tax credit for move-up homebuyers who have lived in their primary homes for at least five out of the last eight years. We have only a few short months (until April 30, 2010) to generate business with this incentive. How can we get the maximum benefit out of this?
Number 1: Understand the homebuyer tax credit
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A “first-time homebuyer” is defined as someone who has not owned a home in the last three years. If you are a “first-time homebuyer,” your tax credit will amount to 10 percent of the purchase price of your new home not to exceed $8,000.
A “long-time resident” is defined as someone who has lived in the same primary home for five out of the past eight years. If you are a “longtime resident,” your tax credit will amount to 10 percent of the purchase price of your new home not to exceed $6,500. The tax credit does not need to be paid back if you continue living in the home as your primary residence for three years without selling it. The home must be purchased for less than $800,000 before May 1, 2010. If you sign a binding contract to purchase a home before May 1, you would need to close the transaction before July 1, 2010. Single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit. You cannot purchase the home from a related party, such as a spouse, direct ancestor or direct lineal descendent (child or grandchild). However, you can still qualify for the credit if you purchase a property from siblings, nephews, nieces and others. If you are married, both spouses must qualify for the credit.
If more than one unmarried individual is buying the property, the credit can be split up among all the individuals who qualify. However, the total credit taken cannot exceed $8,000 (or $6,500 for “long-time residents”). Alternatively, if only one of the unmarried buyers qualifies for the credit based on their income or past homeownership status, the individual who qualifies for the credit can claim the full credit. The credit applies even co-signers on your mortgage loan. The credit applies to one- to four-unit homes, as long as you live in one of the units as your primary residence. You could live in one unit and rent out the others.
the credit easy for people to understand. The best way to do this is to give them a story, example or analogy to which they can relate. Here’s the analogy that I’ve been using to simplify the tax credit and make it easy for people to understand:
A tax credit is kind of like a gift certificate that you can use to pay your taxes—it reduces your income tax bill on a dollar for dollar basis. Imagine paying your bill at IRS Restaurant, and then later getting an IRS Restaurant gift certificate. Normally, you would need to go back to IRS Restaurant and buy more food in order to use your if you have new gift certificate. But what if IRS Restaurant allowed you to just turn in your gift certificate for cash? That’s how the homebuyer tax credit works! All you need to do is file a form with the IRS after you buy your new home and they will send you a refund check for $8,000 (or $6,500), just like the example of IRS Restaurant that allows “People are not moti- you to exchange your gift certificate for cash! vated by dollars and
There are two special rules that apply to members of the uniformed services, the Foreign Service of the cents, but they are United States, or Number 3: motivated by how employees of the intelMake it about dollars and cents ligence community: the client’s life If you have served impact their life. The People are not motivated biggest mistake that for at least 90 days by dollars and cents, but loan originators of the year outside they are motivated by of the United States, how dollars and cents make is to focus on you have until May impact their life. The the numbers instead 1, 2011 to purchase biggest mistake that loan of focusing on the your home and originators make is to client.” receive the tax credfocus on the numbers it. In that case, if instead of focusing on you sign a binding contract to pur- the client. The way to motivate movechase a home before May 1, 2011, up homebuyers is to demonstrate the you would need to close on the impact that buying now would have transaction before July 1, 2011. on their life, as opposed to the If you end up selling the new impact of buying later. If they purhome you are buying in connec- chase now, would they be more tion with government orders for financially equipped to send their official service, the credit does kids to college without breaking their not need to be repaid even if you budget? Would they be more finansell your home within the three cially empowered to comfortably year timeframe. meet their retirement goals? Would they be in a better position to care for Number 2: Simplify the elderly parents? homebuyer tax credit For example, the $6,500 tax credNow that we understand the rules it invested at a seven percent annubehind the credit, it’s time to make al rate of return would grow to near-
ly $13,000 in 10 years. Perhaps this $13,000, combined with the Fed’s $1.25 trillion mortgage rate subsidy (saving them at least one percent in interest or $66,000 over the life their $200,000 mortgage—see last month’s TrendSpotter column), can be used to help send the children to college, get the retirement fund back on track, or pay for an assisted living facility for mom and dad who are aging. Once you paint a picture of the benefits of buying now, talk about the pain of buying later—the kids will have a tougher time with their college funding, the retirement account will remain under-funded, mom and dad’s ailing health will negatively impact the personal and financial goals of you and your children. In other words, get creative with how you talk to clients about the $6,500 tax credit or any other numbers you are going over with them. Remember, numbers don’t motivate people. Life motivates people. Your mission, should you choose to accept it, is to make the numbers come alive by talking to clients about what the numbers mean for their life. Certified Mortgage Planning Specialist (CMPS) certification equips you with scripts, strategies, dialogue structures, resources and presentation tools to make the numbers come alive in every communication you have with clients, prospects and referral partners. 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 referralgenerating sales force. He may be reached at (888) 608-9800, ext. 101 or e-mail email@example.com. 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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FHA presentations. Sound excited when you speak about them! Focus on the benefits the agents will receive. You should be able to schedule at least two presentations. 3. The big day! Your focus should be on establishing rapport with the agents and walking away with a list of the names, phone numbers and email addresses of agents. You can do this by collecting their business cards for a small raffle item, or by passing around an attendance form. Let them know you will use their information to keep in touch and provide important FHA updates. Before ending your presentation, let them know about the next presentation by telling them the title and what they will learn. 4. Make a follow up phone call to each agent that attended, and schedule an appointment to meet with them one on one. The purpose of this meeting is to establish a more personal relationship and learn more about them and what their business goals are. Building trust with them is paramount to them feeling confident in referring their clients to you. 5. Follow through on your word. Provide your new database with FHA
tips and updates to keep them informed. Continue to make appointments with the ones you really feel you can grow with, and make scheduled calls to keep your name on the top of their minds. Follow this paradigm and you will have a fresh new group of Realtors to work with. Sometimes, we become stagnant in our relationships and we need new ones to provide excitement, new ideas and enthusiasm. If you need assistance with your FHA marketing and access tools that can help you develop more FHA business, you can subscribe to my newsletter, The FHA Originator at MortgageSeminars.com. Go FHA! 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.
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porate and financial wrongdoing, and will not hesitate to bring charges, where appropriate, for criminal misconduct on the part of businesses and business executives.” The task force is composed of senior level officials from the following departments, agencies and offices: The Department of Justice; Department of the Treasury; Department of Commerce; Department of Labor; Department of Housing and Urban Development; Department of Education; Department of Homeland Security; Securities and Exchange Commission; Commodity Futures Trading Commission; Federal Trade Commission; Federal Deposit Insurance Corporation; Board of Governors of the Federal Reserve System; Federal Housing Finance Agency; Office of Thrift Supervision; Office of the Comptroller of the Currency; Small Business Administration; Federal Bureau of Investigation; Social Security Administration; Internal Revenue Service, Criminal Investigations; Financial Crimes Enforcement Network; United States Postal Inspection Service; United States Secret Service; United States Immigration and Customs Enforcement; relevant Offices of Inspectors General and related federal entities, including without limitation the Office of the Inspector General for the Department of Housing and Urban Development, the Recovery Accountability and Transparency Board and the Office of the Special Inspector General for the Troubled Asset Relief Program; and such other executive branch departments, agencies, or offices as the President may, from time to time, designate or that the Attorney General may invite. “To give American families the protection and peace-of-mind they need, it’s clear the federal response must be as interconnected and multi-dimensional as the challenges we face,” said HUD Secretary Shaun Donovan. “No one agency is going to be able to stop financial fraud. This Task force will build upon many of the inter-agency collaborations already underway to protect consumers and restore confidence.” In addition, the attorney general will invite representatives of the National Association of Attorneys General, the National District Attorneys Association and other state, local, tribal and territorial representatives to participate in the task force through its Enforcement Committee. For more information, visit http://ustreas.gov.
MBA forecasts origination volume to hit $1.5 trillion in 2010 The Mortgage Bankers Association (MBA) expects economic growth to continue through the rest of 2009 before slowing in the first half of 2010. Unemployment is expected to climb to 10.2 percent by the middle of
2010 before beginning to moderate as economic growth resumes sustained growth in the second half of the year. Mortgage originations should reach $1.5 trillion in 2010. Modest increases in home sales should drive purchase originations, but refinance originations are expected to decline as mortgage rates rise. “The recession is behind us but the effects of the recession will linger for some time in the form of higher unemployment, and lower levels of business investment and home construction,” said Jay Brinkmann, MBA’s chief economist and senior vice president for research and economics. “One of the big questions regarding growth will be the behavior of consumers. The large losses of consumer wealth in the form of reduced home values and stock market losses, as well as the absolute losses of income resulting from unemployment, reduced employment and the fear of unemployment have constrained consumer spending. Timing of the economic recovery is very much tied to the growth in consumer spending. In addition, the effect of the bulk of the federal stimulus package, particularly the construction components, is not expected to be felt until 2010. MBA found that real gross domestic product (GDP) growth was negative in 2009, with the economy contracting by around 0.5 percent resulting from sharp drops in the first half of the year followed by growth in the second half. Growth is expected to be about three percent in 2010. The study found that the unemployment rate will continue to increase from the current level of 9.8 percent, to about 10 percent by the end of 2009 and peak at 10.2 percent in the second quarter of 2010, before declining slowly through 2011. Fixed mortgage rates are expected to average about five percent in the fourth quarter of 2009 and increase to 5.6 percent by the end of 2010, as total existing home sales for 2009 will end up about two percent higher than those for 2008. Existing home sales are projected to increase further in 2010, increasing by approximately 11.2 percent. MBA found that new home sales for 2009 will be down by about 18 percent relative to 2008. Sales seemed to have bottomed in the first quarter of 2009 and have been rebounding modestly since. For all of 2010, new home sales should post an increase of about 21 percent from 2009’s very low levels. The national average home price declines should abate by early 2010, but will vary by state and home value. The demand will be highest for entry-level homes. continued on page 12
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You have all been there; that is if you about the accuracy of an appraisal, I have been in the mortgage business have learned not to jump to conclufor longer than two or three transac- sions one way or another. tions. You are shepherding a loan When presented with an appraisal along the pathway to a closing for a challenge from a client, it is almost client. The client has a job, you have always accompanied with an excess of qualified the client for income, you emotion and precious little in the form have pulled the client’s credit report, of relevant facts. To the borrower, it is they have the proper downpayment getting the proceeds from the loan. To and everything seems hunky-dory. the loan officer, it is closing the deal Then, it happens … you get a call from and paying this month’s rent. These, the underwriting departhowever, are not reasons ment, and you hear that to challenge the appraisdreaded statement. “It al. This must be done didn’t appraise,” which with relevant facts, facts is colloquial for “The not about either of the appraiser is of the opinplayers among the cast of ion that the property is characters, but about the worth less than the estiproperty and the market. mated value that the I once heard a wise loan was based upon.” appraiser talking to a What is a self-respectproperty owner. The ing loan officer to do? owner had made the First, there is always the statement that there was possibility that the home“When presented with something wrong with a owner lied about what certain appraisal. The they paid for the property an appraisal challenge appraiser calmly respondfrom a client, it is or that the tax card is in ed, “Sir, there is somealmost always accom- thing wrong, but it is not error. Then, there is the possibility that the mar- panied with an excess wrong with the appraisal. ket has tanked so much of emotion and preThere is something wrong within the past year or cious little in the form with the property.” two because of the rotten If we are to properly of relevant facts.” economy that the subject evaluate the circumproperty has lost most of stances surrounding an appraisal withits value. But wait … there is one in a transaction, we must get past the other possibility. The appraiser just fact that we want the transaction to may be flat-out wrong. Are they com- close. We must honestly say to ourpetent, do they know the market, selves, “What is the property actually were they in too much of a hurry, or worth?” This must come from the marwas there data supporting a higher ket and not from a preconceived notion market value than that which the that a property is worth “X” amount of appraiser came up with? dollars. I have been an appraiser, review That being said, I am listing three appraiser, appraisal manager and the things that we in our company commonowner of an appraisal management ly find wrong with appraisals, when the company (AMC) for about three appraiser has made a mistake. decades. There is little about real estate appraisals that I have not been subject- 1. The subject is superior to the comed to. We have all seen challenging parable sales used. markets, I have made my share of mis- In today’s market, finding good compatakes, I have seen others make mistakes, and when there is a question continued on page 18
continued from page 10
Purchase originations for 2009 will be $718 billion, about two percent below the 2008 level of $731 billion. Purchase originations should rise about 12 percent in 2010, as existing home sales recover and home prices stabilize. Refinance originations will end 2009 at $1.245 trillion, up about 60 percent from $777 billion in 2008. Refinance activity will likely decrease in 2010 to about $745 billion as mortgage rates increase. “Perhaps the biggest unknown is the level and volatility of interest rates,”
said Brinkmann. “While the lack of inflation, high unemployment and excess capacity in the economy should hold interest rates down, there is a lot of uncertainty regarding rates immediately following the termination of the Federal Reserve’s purchase of mortgage-backed securities. No doubt the Fed will do its best to minimize adverse effects, but the elimination of these purchases will put upward pressure on all long-term rates as well as the spread between mortgage rates and Treasuries. The size of any resulting
rate move will largely determine the size of the refinance market.” For more information, visit www.mortgagebankers.org.
J.D. Power study concludes: Decline in customer satisfaction with primary mortgage lenders The average time required to approve and close a loan has increased in 2009 compared with 2008, fueling a decline in overall customer satisfaction with primary mortgage lenders, according to the J.D. Power and Associates 2009 Primary Mortgage Origination
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Satisfaction Study. The study measures customer satisfaction in four key factors of the mortgage origination experience: Application/approval process, loan officer/mortgage broker, closing and contact. The study is based on responses from more than 3,400 consumers who originated new mortgages within the previous 12 months. The study was fielded between July and August 2009. Overall satisfaction among mortgage customers has declined to 739 on a 1,000-point scale, down 18 index points from 757 in 2008, as a result of tighter underwriting standards and longer turnaround times. The average time required to approve and close a loan has increased to nearly 47 days, compared with approximately 30 days in 2008, primarily due to increased scrutiny of loan applications and higher origination volumes driven by increases in refinancing. This increase in turnaround time has a considerable impact on satisfaction, as satisfaction averages only 723 when the time from application to approval takes six or more days, compared with 798 when the process takes less than six days. Similarly, satisfaction drops from 772 to 736 when the time from approval to closing takes 14 or more days. In addition, lending criteria has tightened, as the study finds that credit scores are higher among mortgage customers and the percentage of loan applicants who have been faced with requests for additional documentation has increased considerably to 45 percent in 2009 from 33 percent in 2008. Branch Banking and Trust (BB&T) ranked the highest among primary mortgage lenders with a score of 783, and performs particularly well in the application/approval process and closing factors. Wachovia (781) and National City Mortgage (769) follow in the rankings. “Customers working with BB&T indicate they have a better idea of the steps involved in all aspects of the mortgage origination process and the time it will take to complete each one,” said David Lo, director of financial services at J.D. Power and Associates. “Customers report that BB&T effectively manages customer expectations around standard process-related elements of the experience, which results in increased satisfaction with the application/approval and closing processes. In turn, this creates a lift in overall customer satisfaction and underscores the importance of communication between lenders and customers.” The study finds that there are nine key practices that lenders should leverage to optimize customers’ satisfaction with the mortgage origination experience. For example, satisfaction averages 793 among customers whose lender provided and met a time frame for the application/approval process, compared with 632 among continued on page 17
Dear Brian: I have been a fan of your articles and the site, www.loanofficerformula.com, for a number of years. While I realize you have been in the business a very long time (nearly 25 years right?), I am amazed at how you can keep your composure during times like these. The last two years have devastated our business, myself included. I have now made my wife go back to work, and I have taken a part-time job. I still originate, but closed down my company and work parttime just to keep my head above water. What do you do to stay positive in these times? Looking forward to your answer, —B. Stanovich, Wisconsin Dear Bob: What a great and timely question. Yes, these past few years have been terrible for most, but not all. Even those who remain are not earning what they had. One of my clients just reported earning $92,000 in revenue from $8.3 million in closings for October … not bad! However, I do realize that he is the exception right now so keep reading.
self image. Most of these books, etc. are teaching you to think positively but that just doesn’t always work now does it? I knew there had to be more than just thinking positively and daily affirmations.
I searched far and wide, and finally found what I believe to be the answer to these questions. It is contained in a classic book called Psycho-Cybernetics by Dr. Maxwell Maltz. It’s a book I give to all of my brand new coaching and consulting clients. Go get this book! Everyone has rough times … myself included. How you get through these rough patches mentally will determine your success! Nothing else! If you want even more tips I have put together a 32-page free report at www.loanofficerformula.com/nmp. Dedicated to having buyers chasing you … 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/nmp. 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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I know, staying positive is easier said than done, but I read and listen to educational audio every single day, including weekends. One of the keys to success I discovered was your self image. It controls everything you do … period! I used to read Think and Grow Rich by Napoleon Hill and all of the other motivational books on success, and yes, they are good, but something always seemed to be missing. Ever see someone do well and reach a certain level and implode? Or, have you ever seen someone who has all of the skill and talent in the world, but just never gets to that top level? Both are because of
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Second … stay positive.
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The good news—the tax incentive is still in place for the beginning of 2010. More good news … there are less of us chasing the same deal than there has been for the past seven to eight years. Yes, it may be tougher to get these deals done, but one big secret that I have always shared is to work backwards. Find out what programs you have to offer, and only then, market to those folks. That is even more important now since most have fewer resources. But, more importantly, when you go after just anyone, you may become very frustrated with all the deals that you cannot do and that is not good!
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Julio de Cardenas, Executive Vice President United Northern Mortgage Bankers Ltd.
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 email@example.com for consideration in being featured in a future “Mortgage Professional of the Month” column. This month, we had a chance to chat with Julio de Cardenas, executive vice president of Levittown, N.Y.-based United Northern Mortgage Bankers Ltd. A 20-plus year veteran of the mortgage and real estate industry, Julio attained his real estate license at the age of 18, and sold his first home shortly after while attending St. John’s University. Success in real estate led Julio to leave the world of academia behind to pursue a career in home sales and home financing. Julio’s career has taken him from residential and commercial real estate, to mortgage banking, a four-year stint as a national sales trainer and consultant, now back into mortgage banking. Currently, Julio serves as the executive vice president of United Northern Mortgage Bankers Ltd. Led by company president and co-founder Don Giorgio, United Northern currently averages $35$40 million per month in closings, and as Julio stated in our conversation, the company is projecting growth of
approximately $50-$75 million per month in 2010. In order to accommodate the company’s financial growth, United Northern is set to move into a larger corporate headquarters, just blocks away from its current Levittownbased operations. They are licensed in eight states and currently have six other locations, with more in the works. How did you get started in the mortgage industry? After graduating LaSalle Military Academy, I was primed to begin a life of hard work to achieve my goals. I attended St. John’s University, as I acquired my real estate license and sold real estate. After the sale of my first home at 18-years-old, I quickly shifted to more commercial and investment properties, mainly commercial leases, investment, specs and storefront properties. I loved real estate, but my drive sought out more. Around 1988-1989, I opened up my own real estate brokerage, High Rise Associates. Unfortunately, around that time is when the commercial market began to crumble. In 1990, I went to work for Home Mortgagee Corporation, as a loan officer. On my first day, training in the mortgage industry was pretty basic. I sat with the owner and another Home
Mortgagee employee for about 30 min. each. I was showed how to fill out a 1003 and order a credit report. It was after that I was taken to a room with a box of pads and pens inscribed with the Home Mortgagee logo and was told those were the marketing materials I was to pass out on the road. The bookkeeper smiled as she handed me a check for $150 for expenses my first week, while someone else had given me a beeper. My training was complete. I was assigned my territory in New York, and pointed in the direction of the Bronx! Thinking back, the smile on the bookkeeper’s face was more of an unspoken statement. “You’ll never make it, Hot Shot!” There was never a detailed explanation of what to do, but that did not deter me. I took my background in real estate, along with my ambition to succeed, headed to the Bronx and eventually made a fortune! After a year-and-a-half with Home Mortgagee, I moved on to Mutual of North America in the beginning of 1992. My family at the time applied pressure for me to return to college. I weighed my options and realized that the amount of money I was making in real estate was more favorable compared to what I was doing in macro economics at St. John’s. Everyone in my family has at least a degree, some multiple, including my grandparents. I took the gamble, slung my calculator over my shoulder and off I was again. Within a few months, I was the company’s top salesman, and 18 months later, I made enough to buy into the business, so I became a partner with the company’s owner. The bulk of my business was FHA loans. When I started with Home Mortgagee, their idea was to become a master in FHA … to go out there and speak about FHA, give FHA seminars, and teach the real estate brokers and attorneys about FHA loans. That is what I did, and at that time, many people thought FHA was a thing of the past, as they were doing mostly
conventional and stated loans, but I stuck with FHA and it paid off in a big way. Mutual became extremely successful and I prided myself in being the “Government Loan Guru.” In 1997, I sold my shares in Mutual of North America back to its founder and opened a mortgage bank called First Estate Funding. After five years as president of First Estate Funding and achieving a certain level of success in our industry, in 2002, I sold off my portion to my partner and walked away. At the end of that year towards the beginning of 2003, I went to work for Ron Vaimberg International (RVI) as a trainer and coach. My time with RVI was during the heart of the sub-prime boom, and I was doing consulting and training around the country. I had a riot travelling from one lender to another, motivating their staff and getting paid for it. For those four years, the only thing I considered work was the tedious chore of making airline and hotel reservations. Those years were quite rewarding and educational for me. I worked with Ron until May of 2007. As our industry disappeared before our eyes, I looked for new opportunities. I first met Don Giorgio, president and co-founder of United Northern Mortgage Bankers, when my ex partner in Mutual of North America sold the company to him after I had left. I was immediately taken by his intelligence, integrity, experience and wisdom. I was living in Michigan at the time, and even had a lucrative offer from a company in California, but I spoke to Don and genuinely liked him. I started with United Northern in June of 2007. How do you motivate your employees and instill in them the tools required to take the overall success of United Northern to the next level? In this profession, you have to like what you do. It’s not work to me. I still live in Michigan and come to New York during the week for work. For me, the real work is getting up at 3:30 a.m. on a Monday, traveling to the airport to get to
has been an almost mass elimination of mom and pop stores. Everything is big and very rarely can you find something on a smaller scale. We need to grow, and our target is to hit $750 million in 2010 and to be over the $1 billion mark in 2011. If we don’t get there, we could get swallowed up because the cost of maintaining our infrastructure is increasing. With compliance and licensing issues these days and the costs involved, the little guy cannot survive. We employ someone making a full-time salary just to follow up on licensing issues for us as a company, licensing on all of our loan officers, educational requirements and compliance in marketing. He works 4050 hours a week on making sure we maintain compliance. Every state has specific rules and requirements. When you have loan officers licensed in several states, and we, as a company, are licensed in eight going on 10 states, it’s a lot to keep track of! Do you think the new GFE and HUD-1 will address some of the borrower confusion that exists at the closing table? I actually think it could cause more confusion at the closing table. If I tried to explain loan programs to anyone off the street, they won’t understand them. Just as if that person were to explain their profession to me, I wouldn’t understand them. I think it will become more cumbersome. It’s a three-page Good Faith Estimate (GFE), and you now have to compare things that other people quoted in your price. Does the consumer really understand these concepts? Look at the auto industry … whether they charge you a 14 percent interest rate or two percent, you still base your decision whether or not you purchase the car on what you can afford. At the same time, I like the other changes in the industry concerning education and licensing requirements. I believe these initiatives are weeding out a lot of the people who have tarnished the industry. You want people you can trust doing mortgages. We have taken so much abuse in our industry, but once upon a time, if you sent in a check for $500, you received a broker’s license. If the industry is now policing itself and is creating education requirements, that brings it to a higher level and raises the bar for the industry as a whole.
continued on page 18
Are you in favor of increased lender liabilities and net worth requirements currently proposed by the U.S. Department of Housing & Urban Development? Yes, I am in favor of those initiatives because this will also weed out the bad in this industry. United Northern is still a small mortgage banker, but a key phrase I heard at the recent MBA Annual Conference was “skin in the game.” You want to make sure that the lenders doing your loans have “skin in the game” and are reputable. You want them to stand by what they did. Loan officers, before they were
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What are some of the keys that have led to the success of United Northern Mortgage Bankers? We have grown the company through the support of our staff. We believe that our number one priority is our staff, and we are committed to creating an environment where everyone succeeds. You want to go to a place that will take care of you. We are a 30-year-old company that is not going anywhere anytime soon … we’re not a fly-by-night
operation. United Northern is as for everyone. We have a terrific seastronger than it has ever been. soned staff with a lot of experience. If We are constantly recruiting and you take Don, myself, our underwriters training. At United Northern, you get and all of our processing staff, we have honesty and integrity. You may not about 300 years of combined industry always like the answer I may give, but experience. I remember one of my you get it. There is no ego here. underwriters saying that being called Our business approach is pretty sim- “seasoned” was the nicest way she had ple … we sit back, take a look at the big ever been called “old.” United Northern picture and don’t react on a dime. We knows where the market is at all times, don’t hire and fire on a whim or even a we react and we don’t play games with small boom in business. people’s locks. We are a retail operation At United Northern, we give people and our job is to give people good servthe customer service needed and provide ice. Let’s not make it too complicated a strong core. Buying a home is the single … it’s not rocket science. Our personalmost important purchase a person will ized service, energy and experience, make in your life. As you climb the ladder topped with pricing that competes with of success those mortgages become larg- the big boys, often has me wonder how er and the hand holding more intense. they can compete with us! At the end of All of these e-lenders have failed the day, everyone feels good about because no matter what transpires in the what they have done. loan process, how do you trust all of that information to a computer? People want Are you active in industry trade human feedback. A loan officer’s job is to associations? hold their customers’ hand through the Yes, I make sure I attend all types of indusmortgage process. There are also times try conferences. I believe in educating when we question if we can myself with what’s going on actually close on a deal. in our industry. I am also There is no substitute for trying to become more the one-on-one human eleactive with the Mortgage ment. We have, at times, Bankers Association (MBA). had the applicant come and The small- to mid-sized sit with myself, Don and the mortgage banker’s needs underwriter on the file. I ask are not always met. them to explain why we Through recent years, we should make this loan? Why have watched the disapdoes our loan officer feel pearance of mom and pop this is a good loan? hardware stores, pharmaUnfortunately, nor the cies, grocery stores, etc. underwriter, Don or myself “Mortgage banking, at Now is the time to get were present when a loan the present moment, involved so that we avoid officer sat at their kitchen becoming the next casualis both challenging table. Face-to-face, you can ty of big business. We are and exciting. I enjoy the voice that needs to be read in someone’s eyes if the building of a busi- heard. they are being sincere. ness, and this time, The independent mortgage banker, like United it’s for keeps … I have What are United Northern’s Northern, can cater to the growth goals over the next found my home.” individual … a large bank few years? cannot possibly do that. We receive United Northern is celebrating 30 years referrals from larger banks because due in this industry … 30 years of helping to their guidelines, they need “the people purchase and remain in their square” to fit into that “square.” They homes. We want to be here another 30 need everything to fit perfectly. If any years. As much as the doom and gloom terms of the deal are even slightly ill- of the American economy surrounds aligned, the loan won’t go through. us, there are a lot of companies out These large institutions cannot do the there that do plenty of good for people. one-on-one situations. Here at United What we do is very well thought-out. Northern, we can. My goal isn’t to grow overnight; this success was 30 years in the making. Even in Can an independent mortgage banker a year from now, I just want to increase like United Northern compete with the by $10-$20 million per month in probig banks of the world on pricing? duction, then we increase it a bit more Yes, we can. First off, our overhead isn’t … it’s not about growing haphazardly. the same. We pride ourselves on being Our projections are based on five-year lean and mean. Don and I currently increments, and we know where we share an office in order to accommo- want to be five years from now. date our growth. Offices that once Truthfully, the worst thing that could housed one or two salespeople are now happen would be if we did $2 billion occupied by four. It wasn’t until we worth of business next year. It sounds were absolutely bursting at the seams crazy, but that would not be a controlled that we decided to acquire our new cor- growth … we may have compromised porate space. These smart business the quality and integrity of the files, we practices are to ensure another 30 years may have bypassed areas of quality conin business. In the new facility, we have trol, may have missed a few steps, etc. taken on the first floor, third floor and That’s not what we are looking for and the lower level for storage. we won’t do that. Money comes from the same source In every industry we have seen, there
the office in time. The real work is done by my wife who deals with six children! The phone goes off and I’m here in New York and she’s in Michigan dealing with various issues with my kids. I will repeat the old saying, “Behind every great man, is a great woman.” By not having any home stress, I get to really enjoy my passion … banking. Mortgage banking, at the present moment, is both challenging and exciting. I enjoy the building of a business, and this time, it’s for keeps … I have found my home. I know that family comes first, but to me this is an extended family. Many people count on me and I work hard to not let them down. I constantly preach to my children that there are consequences for your actions. One false move by me can impact the families of all 120-plus of United Northern employees and beyond. As we continue to grow, that number grows. We’ll never know how many people’s lives are impacted by what we do. Think about how many spheres were affected by the Bernie Madoff scandal … charities, nonprofits, etc. … it’s all a trickle-down effect. There are serious consequences for your actions in this world. We, as a society, haven’t really held people accountable; we just give them a slap on their wrist for their ill-advised actions. Just recently, Lend America closed its doors. Where is the accountability for the 600 employees who lost their jobs because of the misdeeds of a few … from the maintenance guys who worked for them, to the vendors, lenders, etc.? The chain reaction is colossal. There may be a few who were involved in wrongdoing, but there are 600 people affected who have families, who have car payments and bills to pay. For the selfish acts of a few, the majority has to suffer. Everything I do affects hundreds of people. There is a major ripple effect that would take place if something stupid happened within our company. I try to instill in my loan officers and my own kids that there are consequences to your actions. I always tell loan officers when they start out to think about their job before entering the mortgage industry. I tell them to take that same work ethic they had in their previous job and now apply it to being a loan officer. The amount of money you can make in this industry is amazing. The problem is when they become complacent. In this country, if you want something bad enough, you can work hard and achieve it. My words are not empty hype, I live them and my staff sees it.
Fellow Texans NAMB President Jim Pair and NAMB Director Olga Kucerak share a laugh in Las Vegas
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Dr. Ted C. Jones, director of investor relations for Stewart Information Services, delivers his economic update at NAMB/WEST in Vegas
NAMB Immediate Past President Marc Savitt, Cheryl Savitt, and NAMB Treasurer and Convention Committee Chair Don Frommeyer during the NAMB/WEST Opening Reception Ken Perry of Broker Knowledge and Ginger Bell of Go2Training, co-moderators of the “SAFE Act, MDIA, HVCC, Red Flags and Other Regulatory Updates” panel discussion
Fred Arnold, president of American Family Funding, delivers his presentation, “Double Your Profits Without Doubling Your Workload”
Nancy West, marketing and outreach specialist for the U.S. Department of Housing & Urban Development (HUD), discusses the latest FHA changes during her presentation
Rene Rodriguez, chief executive officer of Volentum, shares the secrets to his success in a down market
NAMB Chief Executive Officer Roy DeLoach discusses the importance of education during NAMB/WEST
Joe Camarena, chairman of the NAMB Education Committee, welcomes attendees to NAMB/WEST 2009 in Las Vegas
Jeff Mifsud of Mortgage Seminars LLC leads the session, “National Broker Challenge: Thrive in 2010 With the New FHA”
New Good Faith Estimate and HUD-1 Settlement Statement The U.S. Department of Housing & Urban Development (HUD) published a final regulation on Nov. 17, 2008. This final regulation made substantial changes to Regulation X, the implementing regulation of the Real Estate Settlement Procedures Act (RESPA). Among other things, HUD has made substantial changes to the: Good Faith Estimate (GFE) HUD-1 Settlement Statement (HUD-1) HUD-1A Settlement Statement (HUD1A), and Settlement Cost Booklet1. This month’s column will highlight certain features of the new Good Faith Estimate and the HUD-1 and HUD-1A Settlement Statements.2 Implementation Date: January 1, 20103
The new GFE is three pages in length and contains more information than the previous GFE. Main sections of the new GFE include:
Important dates This section contains dates that are important to the borrower and lender.
This section also includes specific “yes or no” questions with regard to whether the interest rate, loan balance, and payment amounts can increase during the life of the loan. There are specific “yes or no” questions with regard to whether the loan has a prepayment penalty or a balloon payment. Note: If the answer to any of these questions is “yes,” then the new GFE requires additional information about that feature. There are many calculations in this area that have not been a part of previcontinued on page 20
The Mortgage Bankers Association (MBA) has adopted a model sale and servicing agreement it anticipates will become the standard form for industry participants to use voluntarily for whole loan purchases and sales made with an eye toward potential securitization. The agreement was adopted by MBA’s Residential Board of Governors (RESBOG) as an MBA supported best practice. The model agreement is part of an MBA initiative to help increase liquidity and efficiency in the non-conforming residential mortgage market. The agreement provides standard formatting and text for standard practices, reducing the time, effort and cost of legal and due diligence reviews. The agreement also includes standard formats for transaction-specific terms. “At the current time, there is virtually no private label MBS market to speak of,” said John A. Courson, MBA’s president and chief executive officer. “When the market begins to return, we expect it will start with whole loan transactions. This model agreement will provide consistency and transparency to help investors get a better understanding of
Ocwen completes nearly 45 percent of industry’s permanent modifications Almost half of the trial mortgage modifications converted to permanent modifications for distressed homeowners under the U.S. Treasury Department’s Home Affordable Modification Program (HAMP) are attributable to Ocwen Loan Servicing LLC, the principal subsidiary of Ocwen Financial Corporation. There are 27 large banks and loan servicers participating in HAMP, but Ocwen alone completed 44.6 percent of all of the permanent modifications done by the industry. According to a report released by the Congressional Oversight Panel monitoring the government’s Troubled Asset Relief Program (TARP), only 1.26 percent of trial modifications under HAMP were able to convert to permanent status as of Sept. 1, 2009. Ocwen, however, converted 13.9 percent of its customers’ trial modifications during that timeframe, and its conversion rate is now at more than 20 percent and climbing. Servicers collect HAMP incentive fees only for modifications that convert to permanent status. To convert, the servicer must obtain and verify all documentation required of the homeowner under HAMP guidelines and receive three monthly payments on the modified loan during the trial period. The converted modifications can also generate second- and third-year bonus fees for servicers, assuming the loans continue to perform. “Our technology and analytics-based approach to prudent modifications is paying off, as shown by the proportion continued on page 21
Purpose (See “Shopping for Your Loan”) Shopping for your loan The “Purpose” and “Shopping for Your Loan” sections, containing standardized language from HUD. These sections explain to the borrower the purpose of the GFE and how to use it to shop for the loan that is best for that borrower.
Summary of your loan This section includes information about the initial loan amount, loan term, initial interest rate, and periodic (i.e., monthly) payment amount.
MBA releases model whole loan sale and servicing agreement
the whole loans they are purchasing.” A working group of MBA’s Secondary and Capital Markets Committee developed the model agreement by consolidating elements of existing whole loan servicing agreements. MBA released a draft in July for public comment in order to solicit feedback from all interested stakeholders. The current model agreement incorporates that input and is designed to increase transparency and efficiency in the private label mortgage backed security market. MBA anticipates further refinements to the agreement this year and a process of regular periodic review going forward. “The model agreement was drafted by members, for members and with significant input from a wide variety of stakeholders,” said Courson. “Plus, we’ve developed protocols so that the agreement reflects standard practices and legal requirements both now and in the future.” For more information, visit www.mortgagebankers.org.
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General headings (originator and borrower information)—Page 1 On the top of page one you will see the General Headings information. The lefthand side gathers information about the originator, including name, address, phone number and e-mail address. The right-hand side gathers information about the borrowers, including name and address. This section also includes the date that the GFE is prepared.
those whose lender did not. In addition, satisfaction declines from 781 to 643 when customers were asked to provide the same information more than once. “The good news for lenders is that optimizing the mortgage experience is as easy as adopting these key practices,” said Lo. “The bad news is that few customers say they have an optimal experience— only 22 percent of customers report experiencing all nine service practices. Among these customers, satisfaction averages 862 points. In contrast, satisfaction averages only 566 points among customers who report that their lenders missed four or more of the key practices.” The study also finds that satisfaction is a critical component in optimizing advocacy, loyalty and cross-sell opportunities. Among customers with high satisfaction levels (scores of 800 or higher), 58 percent say they “definitely will” recommend their lender, compared with only 8 percent of customers with low satisfaction levels (scores below 800). More than 60 percent of customers with high satisfaction levels say they “definitely will” consider their lender when they refinance, while only 13 percent of less-satisfied customers say the same. Highly satisfied customers are also more likely to use additional products and services from their lender, such as a checking or savings account, credit card or home equity line of credit. For more information, visit www.jdpower.com.
The new GFE
Line #1: The originator provides the date (and time, if necessary) through which the disclosed interest rate information is available. Note: This is not intended to be an interest rate lock. Line #2: The originator provides the date through which all settlement service charges disclosed on the GFE are available. HUD requires this date to be at least 10 business days from the date of the GFE, in order to give the borrower time to shop around for the best mortgage. Line #3: The originator provides information about the rate lock. After the rate has been locked, the borrower will have a stated number of days to go to settlement in order to receive the locked interest rate. Line #4: The originator lists the number of days before settlement that the interest rate must be locked.
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rable sales is tough. Do not be afraid to ask your Realtor or borrower if they are aware of any other higher-priced properties that may have recently sold near the subject, and may have not been considered as comparable sales. 2. Watch for unfavorable adjustments in the square-footage section of the appraisal. This is especially troublesome when the subject property is smaller than most or all of the comparable sales. Frequently, the dollar-per-square-foot adjustment is much smaller than the depreciated value of the improvements. Ask the appraiser for paired sales to demonstrate the difference in value-persquare-foot. 3. Inquire about unique characteristics, processed by the subject, but not properly credited to the subject property in the appraisal. Items frequently overlooked or undervalued are additional land, detached buildings, such as mother-in-law apartments, exceptional views and water frontage.
While every property and appraisal is unique unto itself, those variables listed above are among those that I have found most often to be responsible for undervalued properties. Sometimes, we will find that a property just is not worth more than the appraisal and, under such circumstances, it may be time to swallow our pride and move on. Yet at other times, there may be good cause to question the appraiser. I think that you will find that, in most cases, appraisers will be receptive to suggested areas of improvement in appraisals. Appraisers lose when they are unwilling to consider the relevant facts presented about an appraisal. Their credibility is also the line, and few are willing to risk losing business because they make mistakes that they are unwilling to address. 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, email firstname.lastname@example.org or visit his company’s Web site, www.appraisalsanywhere.com.
By Christopher G. Brown
Expect 2010 to be another tough year for those having trouble keeping up with their mortgage payments. As an attorney who spends my days fighting against mortgage lenders that’s what I’m expecting in the coming year. That said, I do expect some good news for cash-strapped homeowners next year, because I see strong indicators that tell me that the courts will take a good hard look at the legality of some mortgage foreclosure proceedings. On the other hand, I don’t foresee much of a decline in the number of mortgage foreclosures in 2010. Looking into my crystal ball, here’s what 2010 looks like to me:
The pace of foreclosures will not slow in 2010
More foreclosures will be fought successfully because of the industry’s faulty system
I expect problems in the loan registration system to slow or even halt some foreclosure proceedings. More courts will take a dim view of Mortgage Electronic Registration Systems Inc. (MERS) which is the system that’s supposed to keep track of mortgage filings. I first challenged this system in court in 2008 and was able to halt a client’s foreclosure completely because of its flaws. Then, last year, the Supreme Court of Kansas and other courts observed that the MERS system could create insurmountable problems for a party seeking to foreclose. I predict that more court decisions like these will follow in 2010, as the spotlight becomes more and more focused on the problems with MERS. The system was originally created to keep track “I do expect some good of any changes in the ownnews for cash-strapped ership of a mortgage. homeowners next year, Today, it has some significant problems when it because I see strong comes to proving what indicators that tell me institution actually has the that the courts will ability to launch a foreclotake a good hard look sure proceeding. Watch for at the legality of some more and more courts to mortgage foreclosure take notice of that in 2010.
There will be no significant decline in the number of mortgage foreclosures within the next 12 months. The first wave of foreclosures was for those who took out subprime loans. These posed the highest risk of default, so it was natural that these loans would start the foreclosure wave. proceedings.” Unfortunately, I expect that wave to intensify as More foreclosures more and more loans from the next riski- will be defeated because est loan category, Alt-A, fall into default. the wrong party tried to When you add that to a struggling econo- take the house my, high unemployment rate and a terri- Only the owner of a loan has the right ble real estate market, you have a recipe to foreclose on a mortgage in most for an increase in foreclosures for at least the next 12 months. continued on page 20
HAWAII MORTGAGE PROFESSIONAL MAGAZINE DECEMBER 2009
Mortgage Foreclosure Predictions for 2010
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mortgage professional licensed, would just travel from lender to lender. Now, with the Nationwide Mortgage Licensing System & Registry, that license follows you. You now have to meet particular licensing and education requirements. This is a career … treat it as a career. This isn’t a part-time job at a fly-by-night operation, so take it seriously. There has to be a way to take it to a certain level, and I am in favor of increased lender liabilities and stricter educational requirements. What would you say to the mortgage professional to remain positive in
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today’s marketplace? When you break it down in its most simplistic form, we hold people’s hands and help them attain the American dream. We give them that place, a home that is their shelter, where they raise their children, and where one day, when those children go to school, it may become the source of equity for college education. Upon retirement, with a reverse mortgage, it could afford them a second home or allow them to live better in their retirement years. You are doing something noble, so treat it as such.
Government Intervention There is no doubt that the housing industry would have led us into a depression had the government not intervened with strong action during the past 12 months. Many are complaining that the government spent too much money and we will be paying for generations to come. However, not many in the mortgage industry are complaining about the programs that specifically help the housing and mortgage markets. Just as I am sure that not many in the auto industry complained about the Cash for Clunkers Program. With the year coming to a close, we are again focusing upon governmental action. With a pipeline of millions of foreclosures on the horizon, there is little doubt that the housing markets could stand on their own without continued government support. To that end, the previous month held much good news in this regard:
Celebrated bank analyst Meredith Whitney put out an industry note that zeroes in on the Fed’s MBS purchase program. She calls the “Great Exit” the biggest market and bank risk over the next four months. Let’s hope it emerges into the public view over the next four months, because it could be, if the Fed exits as planned at the end of first quarter 2010, the biggest kick in the stomach housing and financial markets have gotten since surviving the near total shut down of credit last fall. We checked with our resident secondary expert, Eric Holloman, founder
On July 30, 2008, as a central part of the Housing and Economic Recovery Act (HERA), President George W. Bush signed into law the Secure and Fair Enforcement (SAFE) for Mortgage Licensing Act. Through its creation of the Nationwide Mortgage Licensing System and Registry (NMLS), this landmark legislation sets forth education, testing and other professional integrity standards. The SAFE Act sharply defined and established a new official designation for the originating profession: The Mortgage Loan Originator (MLO). Under the SAFE Act, every MLO in the country (yes, including those employed by depository institutions) must register with the NMLS, obtain a unique identifier (UI) or an individual ID, and submit to fingerprinting for a criminal background check. Additionally, all MLOs not employed by a depository institution must obtain and renew a license from their state. State licensure will require the MLO to satisfy significant education mandates, pass rigorous state test components, submit to credit examination and meet other standards necessary to command the confidence of the community. Last, but not least, the rumor is true: Every non-depository MLO must pass a rigorous 100-question national test. Everyone must pass the test. There are no grandfather provisions.
SAFE purpose Congress established the NMLS for the registration and licensing of MLOs for the following reasons: Database: To provide a comprehensive licensing and supervisory database with uniform application and reporting; Licensing: To streamline the licensing process, improve information flow and reduce the regulatory burden on multi-state entities; Public exposure: To provide for tracking of MLOs across state lines and give consumers access to the employment status and disciplinary actions against MLOs; and Accountability: To enhance consumer protections by requiring MLOs to act in the best interest of the consumer and enforce responsible lending behavior. In an interview with Chris Kukla, consumer advocate attorney for the Center for Responsible Lending (CRL), I asked what his organization was fighting for. He replied: “We want to stop lending abuses, protect consumers at the origination table through greater transparency and force the industry to lend continued on page 25
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The legislation also would extend the $8,000 homebuyer tax credit to contracts signed by April 30 and closed by June 30. The credit was set to expire after Nov. 30. The legislation also created a $6,500 credit for those who buy a home after owning one for the last five years. That measure would apply to contracts signed by April 30 and closed by June 30. The bill would raise the adjusted gross income cap to $125,000 for single filers and $225,000 for joint filers.
Does this mean that the challenge is over? Unfortunately, no. Not only are we dealing with a huge pipeline of foreclosures, the Fed is still on schedule to exit the purchases of mortgagebacked securities (MBS) at the end of the first quarter of next year. Those who understand the markets know that the Fed’s control of short-term rates does not extend to long-term home loan rates. Many are predicting a poor reaction to the Fed’s strategy. Here is what HousingWire had to say on this issue:
The SAFE Act
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Translation: Short-term rates are not going up anytime soon. Low rates are critical to the housing recovery and, of course, the housing recovery is critical to the recovery of our overall economy. And that was not the end of the good news as Congress passed not only an extension, but an expansion of the tax credit. The move to expand the credit to move-up buyers is critical because this market has languished as the first-time homebuyer markets have flourished since the beginning of this year. From CNN/Money:
“Until the default rates move down to acceptable and tolerable levels, the markets cannot stand on their own and government aid is critical. If the government leaves before the markets are healthy, then we are talking about a huge risk.”
The mortgage industry is at the epicenter of the national financial crisis. This has caused damage to our reputation. It is our responsibility to restore lost confidence and credibility. We should not waste energy thinking the irresponsible lending practices of the past will return. Those days are gone forever. A bold and better way is pushing up through the rubble like a phoenix rising from the ashes. Welcome to a New Era of the Mortgage Professional. Regulatory activism and marketplace realities have spurred a top-to-bottom reformation of our industry. The old “safety and soundness” lending principles, once the domain of the depository institutions, are being pushed down into the non-bank mortgage channel. Skeptical consumers, emboldened by the financial crises, are taking control of their financial well-being, demanding more for less with no tolerance for incompetence or infidelity. And now we have a specific federal law driving this reformation: The SAFE Act.
The Fed released their statement after meeting for two days which indicated that conditions are “likely to warrant exceptionally low levels of the federal funds rate for an extended period.”
Congress also passed an extension of the Economic Stimulus Act’s loan limits for high-cost areas. This means the “$729K” limits will stand for another year. This action also is critical because while the government has propped up the conforming and government markets with heavy loan purchases, the jumbo markets continue to suffer. In order for the housing market to recover, we need all segments of the market to be firing on all cylinders.
Era of the Mortgage Professional
predictions for 2010 jurisdictions. There is, however, a distinction in the law between owning the loan and having a right to enforce the note and that distinction can make the difference between whether a foreclosure action is proper or not. In the past, courts allowed parties to file foreclosure actions based on the assertion that those parties had the right to enforce the note. I’ve fought these actions by arguing to the court that the foreclosing party needs to prove ownership, which is more than just a right to enforce the note. I anticipate that more courts in 2010 will recognize the distinction between the right to enforce the note and the right to foreclose the mortgage and more foreclosure actions will be dismissed as a result.
Mortgage modifications and other foreclosure alternatives will become scarce I believe that it will be harder to avoid foreclosure in 2010. If a borrower is seeking a mortgage modification, they will probably be talking to one
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department in the bank. If they are seeking a short sale, they will likely be speaking with a different department. Foreclosures are handled by yet another department in the bank. The problem is that the different departments don’t talk to each other and what one department is doing does not affect the other. This means that, for example, borrowers could be working on a modification with the loss mitigation department, only to find that the foreclosure department has had them served with a foreclosure summons. A pending modification application does not prevent the borrowers from losing their house in foreclosure. In general, I’m looking towards 2010 as a year in which foreclosures will continue at the current pace, but that borrowers will have more success in keeping the foreclosure wolves at bay. Christopher G. Brown is foreclosure defense practice chair for the Westport, Conn. law firm, Begos Horgan & Brown LLP. He may be reached by phone at (203) 226-9990 or e-mail firstname.lastname@example.org.
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the secondary market overview
of RateLink. Eric indicated that he shares these fears. “The Fed must eventually exit from this market and how this plan plays out could very well significantly affect rates and thus our production next year.” If you would like a recording of a Webinar in which Eric gives a secondary update, e-mail us at email@example.com. We are walking a tightrope right now. The reason the mortgage markets cannot exist on their own is the fact that mortgages are not seen as a safe investment. Until the default rates move down to acceptable and tolerable levels, the markets cannot stand on their own and government aid is critical. If the government leaves before the markets are healthy, then we are talking about a huge risk. The tax credit will not help if rates move up significantly, while lenders are still underwriting to find gold in every file. What does this mean for you? Rates are low now. The tax credit is expanded.
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Foreclosures will keep a lid on price increases. We suggest you market these conditions heavily to your sphere. This may be the last chance for many in America to obtain bargain real estate prices with super low rates and a government kickback. There are not many times in our history when the conditions will be so ideal for millions to purchase. You may want to consider marketing right through the holiday season … and hope that the Fed makes the right decision so that the momentum continues through the New Year!
regulatory compliance outlook ous RESPA requirements before (i.e., new monthly payment at first interest rate change date or maximum monthly payment for a variable rate loan). Review carefully. Escrow account information The Escrow Section discloses if the originator requires an escrow account to be set up to pay such items as hazard insurance, real estate taxes, and so forth. Note: The monthly payment amount disclosed here includes only principal, interest, and any mortgage insurance, but does not include taxes and insurance (escrows). Summary of your settlement charges This section contains a summary of (A) the adjusted original charge, (B) charges for all other settlement services, and (A + B) the total estimated settlement charges. Detailed information about the charges appears on Page 2. The amounts are summarized on Page 1 for the borrower’s convenience. Understanding your estimated settlement charges—Page 2 Your Adjusted Origination Charge This subsection consists of blocks. Block #1: The loan originator discloses all the charges that the loan originator will receive, except for any charges for the specific interest rate chosen (i.e., the discount points).4 Block #2: Discloses the credit or charge (points) for the specific interest rate chosen.5 Transactions not involving a broker. There are two choices:
(1) Lender discloses the points or yield spread premium as part of the origination charge in Block #1. If the lender chooses this approach, then in Block #2, the lender should check the box that says, “The credit or charge for the interest rate of_____% is included in ‘Our origination Dave Hershman is a leading author for charge.’ (See item one above)” the mortgage industry with eight books and several hundred articles to his cred- (2) Lender discloses the points or yield it. He is also head of OriginationPro spread premium as a separate line item Mortgage School and a top industry in Block #2. If the lender chooses this speaker. If you would like to stay ahead approach, then in Block #2, the lender of what is happening in the markets, should follow the instructions for transvisit ratelink.originationpro.com for a actions involving brokers. free trial or e-mail firstname.lastname@example.org. Transactions involving a broker. For transactions involving brokers, brokers do not have the option of using the first check box in Block #2 (to indicate that the credit or charge for the interest rate is included in the origination charge). Brokers must check either the second or the third check box under Block #2. (1) If there is a yield spread premium being paid, check the box that says, “You receive a credit of $_____for this interest rate
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of_____%. This credit reduces your settlement charges.” Note: The amount of the credit is listed as a negative number. (2) If points are paid to the lender, check the box that says, “You pay a charge of $_____for this interest rate of_____%. This charge (points) increases your total settlement charges.” Note: The amount of the charge is listed as a positive number. Note: At the bottom of this subsection is a line designated as Line A–“Your Adjusted Origination Charge.” The amount disclosed here is the sum of the “Our origination charge” and the credit or charge for the specific interest rate chosen. Your Charges for All Other Settlement Charges This subsection consists of various blocks: Block #3: The fees disclosed are those fees for which the loan originator chooses the service provider. The individual services and the charges for those services are disclosed and totaled in the right hand column. Block #4: Is for title services and lender’s title insurance. The lender’s title insurance premium is included in this total. Block #5: Includes the owner’s title insurance fees, regardless of who pays for it. Block #6: Is for the required services for which the borrower can choose the service provider. The borrower can choose a service provider from a list that the loan originator may provide, or the borrower can shop for a provider on his/her own.6 Block #7: Discloses the total of the government recording charge. Block #8: Discloses the total of the transfer taxes. Block #9: Discloses the initial deposit for the escrow account (if applicable). Block #10: Discloses the amount of daily interest charges from the date of settlement until the first day of the next month of the first day of the normal mortgage payment cycle. Note: Also discloses the per diem charges, the number of days for interest charges, and the estimated date of settlement. Block #11: Discloses the types and continued on page 23
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With minimal resources available to them, few mortgage servicers have invested sufficiently in data management and predictive analytics to adequately identify borrowers most at risk. But this appears to be changing, according to new research conducted by TowerGroup and distributed by FICO. The study is published in the FICO Mortgage Credit Risk Managerâ€™s Best Practices Handbook. It assesses the current state of mortgage credit risk management best practices among leading institutions, analyzing
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HAWAII MORTGAGE PROFESSIONAL MAGAZINE
FICO publishes study: Best practices in credit risk management to increase profitability
the strategic application of technology in financial services based on a survey of senior mortgage credit risk managers who collectively account for 58 percent of first mortgage outstanding debt. Findings show that many more loan servicers are moving toward a stronger implementation of analytical tools, with half saying they are currently implementing a solution, and another 20 percent evaluating solutions with the intent to implement them in the next six to 12 months. Executive management is taking note: 72 percent of survey respondents said their management has tightened its focus on credit risk management; the same number said they have had organizational restructuring to increase focus on distressed assets. In a risk-averse environment, lenders have responded with more conservative loan underwriting practices, yet these practices are too often applied to all loan applicants, putting lenders in jeopardy of losing their best clients. The report suggests that use of customer segmentation analytics will be critical in order to keep clients and maintain profitability. Yet while most institutions have begun to increase spending on analytic and reporting tools, only 24 percent have significantly increased their IT spending budgets. Additionally, with the high demand for loan modifications, servicers are under increasing pressure to execute unprofitable transactions in order to keep people in their homes, all the while trying to manage their own portfolios to be lucrative enough to stay in business. In these cases, adapting and adding technology for loan modification programs can be critical. Many are already implementing these technologies, with two-thirds using net present value software to automate required borrower eligibility guidelines for government loan-modification programs. Yet only 36 percent are using decisioning technology to compare alternative loan forbearance programs and decide on the optimal program option. â€œWeâ€™ve gained invaluable experience working with mortgage lenders and servicers through our FICO Mortgage Recovery Initiative (FICO MRI),â€? said Joanne Gaskin, FICO director of mortgage scoring solutions. â€œWe commissioned this study to more fully understand the loan remediation challenges our clients face, and to gather best practices for our clients to help them improve portfolio profitability and reduce the loan modification re-default rate. By sharing what weâ€™ve learned, FICO can work even more effectively with our clients, bringing the power of
of permanent HAMP modifications completed for Ocwen customers,â€? said Ocwen President Ronald M. Faris. â€œWe believe itâ€™s better for our business, and better for struggling homeowners, for us to do the difficult, detailed re-underwriting work up front. Weâ€™re committed to modifications that stick; those are the ones that help homeowners for the long run, mitigate the mortgage crisis and, importantly, generate incremental revenue for our shareholders.â€? Ocwen was one of the first servicers to begin executing modifications under HAMP and has pledged to work with the Obama Administration to implement and improve its foreclosure prevention efforts. â€œSustainable modifications are the key to a lasting solution to the daunting foreclosure crisis which threatens so many families,â€? said Ocwen Chairman and Chief Executive Officer William C. Erbey. â€œWe applaud and support the Administrationâ€™s efforts to assist homeowners with unaffordable mortgages.â€? Ocwen recently convened more than 30 representatives of grassroots and national housing advocacy organizations for a roundtable discussion to share new ideas and insights related to preventing foreclosures and helping homeowners. The Ocwen and community groupsâ€™ representatives agreed upon a number of imperatives, including: Working closely with Treasury to arrive at more flexible guidelines so more distressed homeowners qualify for mortgage modifications under HAMP; developing a national HAMP awareness and information campaign to increase homeowner outreach; focusing more intensely on homeowners who are unemployed or under-employed and thus need state or federal assistance to qualify for mortgage modifications; a greater collaboration between servicers and grassroots groups in providing realtime solutions for homeowners, including being more proactive about helping borrowers early on, before they face the prospect of foreclosure. For more information, visit www.ocwen.com.
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analytics and automation to help homeowners receive the most appropriate loan treatment and help preserve homeownership.” For more information, visit www.fico.com.
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Commercial real estate industry investors and professionals remain decidedly negative, colored by distress over prospects for an extended period of anemic demand and costly de-leveraging, according to respondents of the Emerging Trends in Real Estate 2010 report, released by PricewaterhouseCoopers LLP and the Urban Land Institute (ULI). Survey respondents predict that commercial real estate vacancies will continue to increase and rents will decrease across all property sectors before the market hits bottom in 2010 and projects value declines of 40 percent to 50 percent off 2007 market peaks. Survey participants also believe that 2010 and 2011 will present generational opportunities for investors to buy at or near cyclical lows. “Our report participants find that a sense of nervous euphoria is growing among liquid investors who can make all-cash purchases,” said ULI Senior Resident Fellow for Real Estate Finance Stephen Blank. “Those that are patient, daring and selective could score generational bargains on premium properties from both distressed sellers and banks that are clearing out unwanted bad loan and real estate owned portfolios. However, once the property market recovery begins and gains traction, likely before 2012, any rebound could be restrained by a lackluster economy and rising interest rates.” The survey data also indicates that investors believe that capital will slowly begin to flow back into commercial real estate markets by the end of 2010, led by all cash investors seeking quality assets. The debt markets will start to rebound too, but remain “far from normalized” in the wake of unprecedented de-leveraging. Any lending will be conservative, expensive, and extended only to the most-favored banking relationships. REITs, private equity funds, and even refashioned mortgage REITs will start to provide loans to battered borrowers but at a steep price. “For 2010, our report finds that
investors will need to time the cycle and only cash-buyers will benefit from the emerging opportunities,” said Tim Conlon, partner and U.S. real estate sector leader, PricewaterhouseCoopers. “Investors will need to be patient and transaction trigger points will be improving job numbers, visibility into asset pricing and stepped up tenant deals. Equity investors will need to focus on quality assets and expect to hold for at least a five to seven year period during the recovery, allowing fundamentals to slowly improve.” Survey participants believe that the markets performing well before the crash should perform better coming out of it and the laggard markets will continue to suffer. The report finds that investors will continue to favor global gateway markets on the East and West Coasts. Cities and urbanizing infill suburbs with 24-hour attributes, brainpower centers that offer universities and high-paying industries, as well as ‘barrier to entry’ markets where geographic constraints limit development and help control overbuilding will be top market performers. According to the survey, Washington, D.C. ranks number one as the “recession-proof” city. Value declines have been less than other markets as employment is buffered by the federal government. Long-term confidence holds for New York and Boston, despite financial industry downsizing. West Coast gateways, such as San Francisco, Seattle and Los Angeles, have all suffered ratings declines, but remain among the survey’s top 10 major markets. Texas markets continue to show strength after years languishing in the survey basement. For more information, visit www.uli.org or www.pwc.com.
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regulatory compliance outlook amounts of homeowners insurance that will be required to be paid by settlement and totaled in the right hand column. Note: At the end of this subsection is a line designated as B – “Your Charges for All Other Settlement Charges.” The amount disclosed here is the total of all the charges under “Your Charges for All Other Settlement Charges.” Lines A and B are totaled together to disclose the “Total Estimated Settlement Charges.”
(2) Interest rate dependent fees, if the loan has not yet been locked. continued from page 20
borrower or the transaction, that was relied on in providing the GFE and that changed or was found to be inaccurate after the GFE was provided. New information particular to the borrower or the transaction, which was not relied on in providing GFE.
Exceptions: (1) GFE expires (i.e., exceeds the 10 business days disclosed on page 1 and the borrower requests another initial GFE); and
Using the tradeoff table The table in this section is meant to help the borrower compare the transaction disclosed on the GFE with similar transactions: The same loan with lower settlement charges but a higher interest rate. The same loan with a lower interest rate but higher settlement charges.
Using the shopping chart The shopping chart section is meant to give the borrower the ability to compare the information from this GFE with the information from the GFEs of other loan originators. The “This loan” column is completed by the loan originator. Columns labeled “Loan 2,” “Loan 3” and “Loan 4” would be completed by the borrower by hand as the borrower shops around with other loan originators. If your loan is sold in the future This section informs the borrower that the lender may sell the loan after settlement.
Note: Loan originators have the option of completing this section.
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Understanding which charges can change at settlement—Page 3 This section gives information to the borrower to help the borrower understand what to expect for final charges on the HUD-1 Settlement Statement. There are no completion fields in the Understanding section; therefore, it is important to place each fee in the appropriate category. Charges fall into one of three categories: 1. Charges that cannot increase at settlement. 2. The total of these charges can increase up to 10 percent at settlement. 3. These charges can change at settlement. Note: These charges can be understood as three types of tolerances (respectively):7 1. Zero Tolerance 2. 10 Percent Tolerance 3. No Tolerance
An act of god, war, disaster, or other emergency. Information particular to the
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A “changed circumstance” includes the following:
Residential Mortgage Banking Branch Program for Professionals
The loan originator is bound by the initial GFE and the tolerances described in the Understanding about which charges can change at settlement. There are a limited number of circumstances under which a revised GFE may be given. The revised RESPA rules refer to this situation as a “changed circumstance.” If a changed circumstance allows for re-disclosure of the GFE, then the charges from the re-disclosed GFE will be used when comparing the GFE charges with the HUD-1 charges. This comparison is found on page 3 of the new HUD-1.8 Note: the rule also provides a remedy for tolerance violation (and HUD itself has acknowledged that fee tolerance may be difficult to meet at times): Violations of fee tolerance can cured by reimbursing borrowers the amount by which the tolerance was exceeded. (Reimbursement must be made at settlement or within 30 days of settlement.)
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National Mortgage Professional Magazine recently had an opportunity to follow up with National Association of Mortgage Brokers Immediate Past President Marc Savitt of The Mortgage Center in Martinsburg, W. Va. to discuss his trip to New York City and the offices of New York State Attorney General Andrew Cuomo. The purpose of the trip was to present the Office of Attorney General Cuomo with 120,000-plus signatures from consumers and the mortgage industry agreeing that
120,000-plus signatures from both industry professionals and consumers. Savitt’s day in Manhattan started at the studios of Fox News for a live interview with the anchors of Fox Business News to discuss the harmful effects of the HVCC. Savitt described the people at Fox News as very helpful in wanting to get the message out on the negative impact of HVCC. “The Attorney General’s Office is looking at a lot of opposition to this right now,” said Savitt. “They really don’t have a lot of friends out there, so it would be in their best interest to create some type of modification or revision to this Code so that everybody can live with it. The consumer will still be protected, but at the same time, it will not harm the consumer or small business.” After the Fox interview, Savitt and the contingent of mortgage professionals venNAMB Immediate Past President Marc Savitt and tured off to Broadway to delivthe group of mortgage professionals outside the er 35 boxes of letters and petioffices of New York State Attorney General Andrew tions to Cuomo’s office. The Cuomo in Manhattan delivery was covered by another major media outlet, CNBC. the Home Valuation Code of Conduct Savitt, along with Garay and Stevens, (HVCC) is harmful to the housing market went up to the offices of the New York and detrimental to the home buying State Attorney General and had a meetprocess. Included among the signatures, ing with two of Cuomo’s senior attorwhich were hand-delivered in 35 boxes neys. The meeting was the fourth by by a group of mortgage professionals Savitt with Cuomo’s office since May. who made the trip from as far as Virginia, “This, by far, was the most productive were letters and HVCC “horror stories” meeting,” said Savitt. “The first two meetfrom consumers, appraisers, real estate ings, of course, we tried to get them not to agents and mortgage brokers. implement the HVCC. I met with them last “We have one state Attorney General who appears to be promulgating a rule or regulation across the entire country,” said Savitt. Along for the ride with Savitt were Frank Garay and Brian Stevens, co-creators of Think Big Work Small. Both Frank and Brian have used their Web site, ThinkBigWorkSmall.com to discuss the HVCC and present the industry’s view on how the HVCC should be halted Frank Garay (third from left) of Think immediately through the duo’s daily Big Work Small is joined by some volvideo updates. Frank and Brian served as unteers who wanted their voice heard in a driving force behind soliciting the New York City on the ills of the HVCC
May after the Code was in effect for about three weeks. They weren’t interested in hearing anything and didn’t think there were going to be any problems with it.” In addition to the petitions, Savitt also presented a study conducted by Interthinx, which cited mortgage fraud in property valuation having increased 25 percent from the second quarter of 2009 to the third Members of the group gather and prep for the quarter of ‘09, an overall increase of meeting with reps from Cuomo’s office 46 percent from the previous year. The third quarter of 2009 represented the first full quarter that the HVCC has determine if harm would be caused to been in effect. small businesses, consumers and others. “The Attorney General’s Office now The problem they are having right now is to acknowledges that there are problems keep their Code in place, perhaps with with HVCC,” said Savitt. “They want to some modifications and revisions so that have dialogue with us to correct these everybody can live with this … the conproblems. We told them that the only sumer will be protected and small businessway to get rid of this list of problems is es won’t be harmed.” to have the brokers back in charge of NAMB continues to update the mortthe ordering process.” gage broker community through its The two sides agreed to meet again HVCC Resource Center section on their between Thanksgiving and the end of the Web site, www.namb.org. year, and both sides will come to the table with options to get the HVCC issues resolved. “To get a meeting like this, you usually send three or four e-mail requests that go ignored,” explained Savitt. “The Attorney General’s Office is deathly afraid of negative press, so the final e-mail I sent stated that we were going to the press with this issue and that they would be contacted for an interview. Within three minutes of sending that final e-mail, on a Saturday afternoon no less, I received correspondence from a Boxes containing petitions with senior attorney with the Attorney General’s 120,000-plus signatures are unloaded Office granting the meeting.” for delivery to Attorney General In February of 2009, NAMB, with the Cuomo’s office support of Baker & Hostetler LLP, filed a lawsuit with the United States District “One thing this issue has done is highCourt for the District of Columbia light the need for everybody to work against then Federal Housing Finance together as a team,” noted Savitt. “That is Agency (FHFA) Director James B. the only way we will accomplish not only Lockhart over the HVCC included in the fixing HVCC, but maybe future issues that appraisal agreements between the may come down the road. We are living in FHFA, Fannie Mae and Freddie Mac a world today where people can’t go at it (GSEs), and Attorney General Cuomo. alone … everybody has to work together “They never followed the Administrative for the common good of not only the Procedure Act, which was the basis of our industry, but the consumer. Hopefully, this lawsuit against them,” said Savitt. “They is the beginning of that process and we never followed the proper procedures to won’t be dealing with this much longer.”
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responsibly.” This is not a revelation. This is good business. We should take it to heart.
Informative Research and ValuFinders form partnership
My SAFE-smart position We must rethink our marketing impres-
Paul Donohue, CRMS is a 23-year industry professional and founder of Abacus Mortgage Training and Education. Paul served on two NMLS working groups, establishing the new national education protocols. Go to AbacusMortgageTraining.com to find out more about your obligations for testing, education and licensure, or call (888) 341-7767.
Credit Plus pushes green initiative
Pro Teck moves to new HQ and unveils new logo
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The number one reason you should attend this event is the satisfaction of knowing you are doing your part to ensure that mortgage broker issues are heard on Capitol Hill. You are the best spokesperson for our issues. Your participation benefits you, the industry and your clients as a whole, by strengthening the broker’s presence in the halls of Congress. And if that doesn’t convince you, here is just one reason given a by past attendee ...
Debate the Hottest Issues Affecting Your Business Today “I have been attending this conference for the past 10 years and each year revitalizes my knowledge of how the political process contributes to the mortgage industry. It is essential for NAMB members to discuss issues and make positive change for mortgage brokers and their customers.” —John Marcell
Key Issues in 2010 Include:
Regulatory reform (RESPA, TILA, HVCC and more!) The National Mortgage Licensing Act (SAFE Act) The Consumer Financial Protection Agency (CFPA) And much more!
It’s all happening now! Visit www.NAMB.org for details!
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Pro Teck Valuation Services, a real estate valuation provider, has announced a new corporate
Why you should attend
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Credit Plus Inc. has announced that supporting documents to complete supplements can now be directly uploaded through its credit system. This new procedure is an important step towards the company’s overall goal to adopt more green initiatives that have a positive impact on the environment. “Credit Plus is determined to help protect the environment,” said Greg Holmes, national director of sales and marketing at Credit Plus. “We are focusing on making the mortgage transaction as paperless as possible and plan on rolling out additional green efforts in the near future.” Previously, when a loan officer was working on a file and the potential borrower stated that there was an inaccuracy on his/her credit report, the supporting document would have been faxed or e-mailed to Credit Plus. Now, there is a hyperlink from the trade line that allows the document to be immediately attached to it in Credit Plus’ system. Additionally, and since June of 2008, all of Credit Plus’ customers receive a onepage invoice with a link to a secure Web site to review account details. This has substantially reduced the amount of paper being utilized. The company estimates that it has reduced its paper usage by 30 reams a month, which is the equivalent of saving nearly two trees every month. For more information, visit www.creditplus.com.
Informative Research, a provider of mortgage credit information nationwide, and ValuFinders, a provider of valuation services to national lenders and government agencies, have announced a strategic partnership which provides seamless integration of their systems enabling lenders to maximize the best of both companies’ core strengths. As a result of this partnership, lenders and brokers now benefit from a comprehensive online appraisal ordering and delivery service. Specifically, clients of Informative Research will benefit from seamless integration into ValuFinders Appraisal Concierge, an online appraisal ordering and delivery service that allows lenders to use a blind-draw system to randomly select certified and Federal Housing Administration (FHA)-approved real estate appraisers. Used in conjunction with Informative Research’s comprehensive suite of mortgage credit information services, Appraisal Concierge enables lenders to easily stay in compliance with federal guidelines including the Home Valuation Code of Conduct (HVCC). “In today’s constantly changing mortgage marketplace, accurate and timely valuation is critical,” said Brad Kelso, vice president of marketing at Informative Research. “Our business model is built on quality and superior customer satisfaction. Our customers are demanding alternatives to appraisal management companies due to their high fee structure and inexperienced appraisers. We responded to meet our clients’ needs and we discovered the perfect partner in ValuFinders.” With ValuFinders Appraisal Concierge, Informative Research customers can meet HVCC requirements, source appraisers from a national network of certified appraisers, attach documents to order requests, coordinate and confirm the delivery date and fee, and track orders from inspection to delivery. The Appraisal Concierge service includes appraiser independence, monitored communications and automatic delivery of the appraisal to the lender, streamlining the process while ensuring compliance. “We are extremely pleased to be partnering with Informative Research, a company who shares our passion and commitment to exceeding client expecta-
tions,” said Joe Williams, president of ValuFinders. “Since 1999, we have strived to deliver the industry’s most comprehensive and reliable suite of valuation and collateral risk solutions, backed by the most trusted network of certified FHA-approved appraisers. We go to great lengths to pay our appraisers full fees to ensure our high standards for quality are met each and every time.” For more information, visit www.informativeresearch.com or www.valufinders.com.
The good news is that we will no longer be competing against shortsighted opportunists with no commitment to professionalism; a higher-level playing field of competition has been set. However, you must brace yourself: These new standards demand excellence and will challenge even the most experienced originators. In the New Year, we’ll all have to earn our place in this profession. All who fall short will be shown the exit.
sions to reposition ourselves as mortgage professionals and consumer advocates. We are operating in a skeptical marketplace looking for someone to trust. When we become the borrower’s advocate, we will earn that trust, watch our business flourish and restore professional excellence to this business we love so much.
regulatory compliance outlook The new HUD-1 and HUD-1A Settlement Statements The new HUD-1 (and HUD-1A) compares the fees disclosed on the GFE and the HUD1 Settlement Statement. However, the HUD–1 Settlement Statement now consists of three pages (the HUD–1A consists of two pages). It should be noted that HUD made similar revisions to both the HUD-1 and the HUD-1A. Therefore, references herein to HUD-1 apply as well to the HUD-1A. Main sections of the new HUD-1: Page 1: No substantive changes. Page 2: Certain substantive changes. Lines now refer to Block numbers from the GFE. This is meant to help the borrower understand how the charges from the GFE are now populated on the HUD-1. Page 3: New page, with numerous substantive changes.
Top Section The top of the page has a comparison of the GFE and HUD-1 charges. Comparisons are divided into three areas:
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Charges That Cannot Change Charges That in Total Cannot Increase More Than 10 Percent Charges That Can Change
This part of the new HUD-1 is correlated to the “Understanding” section discussed above (Page 3 of the GFE), indicating which charges can change at settlement. As noted above, the new Understanding section gives detailed information regarding which of the three areas is appropriate for a particular charge. Note: In the subsection “Charges That in Total Cannot Increase More Than 10%,” the GFE charges and the HUD-1 charges are totaled (for those charges that fall into this category). If the HUD-1 totals higher, the dollar amount of the difference must be disclosed, along with the concomitant percentage change. The change may not exceed 10 percent, without violating the 10 percent change limitation in this category.
Bottom Section The bottom half of Page 3 provides a summary of the loan terms, similar to the “Summary” on the GFE (see above). The section includes information about the initial loan amount, loan term, initial interest rate, and periodic payment amount. There are also certain “Yes” or “No” questions regarding whether or not the interest rate, loan balance and payment amounts may increase during the life of the loan, and if the loan includes a prepayment penalty or a balloon payment. Any affirmatively answered item requires additional information, and spaces are provided for completing required information relating to that feature. The final block contains the “Total monthly amount owed including escrow
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account payments.” Unlike the GFE, this area of the HUD-1 gives the initial monthly payment, which includes principal, interest, mortgage insurance (if any), taxes and insurance (escrows). Note: The area on the GFE correlating to this are of the HUD-1 gives the dollar amount for the initial monthly payment, including only principal, interest, and mortgage insurance (if any).
Submit your questions … Do you have a regulatory compliance issue that you’d like to see addressed in the Regulatory Compliance Outlook Column? If so, e-mail your issue or concern to Jonathan Foxx at firstname.lastname@example.org. Jonathan Foxx, former chief compliance officer for two of the country’s top publicly-traded residential mortgage loan originators, is the president and managing director of Lenders Compliance Group, a mortgage risk management firm devoted to providing regulatory compliance advice and counsel to the mortgage industry. He may be contacted at (516) 442-3456 or by e-mail at email@example.com.
Footnotes 1-HUD is publishing revisions to the Settlement Cost Booklet. This new booklet must be used along with the new GFE and HUD-1. 2-For more detailed information, please review the following Appendices from the RESPA regulation: Appendix A—Instructions for completing the HUD-1 and HUD-1A; Appendix C— Instructions for completing the Good Faith Estimate (GFE). 3-Lenders can choose to implement the GFE and HUD-1 earlier than Jan. 1, 2010. 4-All of these various charges (i.e., origination fee, application fee, underwriting fee, etc.) and their impact on APR and Section 32 are all lumped together into the “origination charge” for purposes of disclosure on the GFE and the HUD-1. 5-Completed in different ways, depending upon whether a broker is involved in the transaction. 6-If the loan originator does provide a list of service providers, the loan originator is held accountable for the accuracy of the disclosed charges. 7-The revised RESPA rule allows for the use of an “average charge,” based on the average charge for a class of transactions. For instance, averages from a specific time period between, say, 30 days and six months, given a common geographic area, and the same loan type. The “average charge” must be used for all transactions within that class. The “average charge” rule went into effect Jan. 16, 2009. 8-The only fees that may change are fees that were affected by the changed circumstance.
HECM at 20: Leaders and Pioneers in the U.S. Reverse Mortgage Industry Series (IV)
The Reverse Quarterback From Wall Street Home Equity Conversion Mortgages Loans’ reverse mortgage division, is the (HECMs) and private reverse mortgages gave investment-banker-turned-industry birth to a new asset class, but the sharp executive who brought the U.S. reverse financial minds on Wall Street missed this mortgage industry to Wall Street and seminal event for almost a decade. Then in vice-versa, a reverse quarterback of sort. Following his stint at Lehman, Corn 1998, Lehman Brothers tapped a young investment banker to start its reverse mort- joined Financial Freedom as executive vice president with responsibility for gage business, the first on Wall Street. To understand the new industry and wholesale/correspondent, capital markets and secondary marketing. to plant Lehman’s flag in it, Twelve months later, he the banker ventured into left Financial Freedom to reverse country. First, he care for an ailing parent. identified the industry’s Corn resurfaced as part of key players and assessed the transition management their needs: They needed team at BNY Mortgage. capital to grow. Second, he When EverBank took over initiated Lehman’s acquisiBNY Mortgage and created tion of some jumbo propriEverBank Reverse Mortgage, etary reverse loans from Corn became a co-president Transamerica HomeFirst of the company. In 2008, (THF), a reverse mortgage Metlife Bank bought pioneer which was exiting the business. The THF “Some investors under- EverBank Reverse Mortgage, and Corn was named vice loans became the collaterstand it, but many al for the first reverse mort- potential investors have president and head of its gage securitization in the yet to purchase a reverse reverse mortgage business. A 1987 accounting U.S. engineered by Lehman mortgage-backed secugraduate of Muhlenberg Brothers in 1999. rity, so there is much College, Craig and his wife, Third, calling on other education ahead. ” Laura, have four children. talents at Lehman and —Craig Corn, Vice The following are his using cash from the THF-LB President, Head of reflections on the industry assets (jumbo reverse he has helped to shape. Reverse Mortgages, loans) sale, the banker helped Financial Freedom Metlife Bank At Lehman Brothers in Senior Funding Corporation (FFSFC … then a unit of Union Labor Life 1999, you were part of the team that pioInsurance Company [ULLICO]) to buy the neered the securitization of reverse origination and servicing assets of THF, a mortgages in the U.S. secondary market. transaction which propelled Financial What attracted you to reverse mortgages Freedom into the front ranks of reverse as an asset class, and why did you commortgage lenders and servicers in the U.S. mit to them? Then, the banker envisioned and ini- I had been involved in reverse mortgagetiated Lehman’s investment in FFSFC, type products before joining Lehman Unity Mortgage, and other reverse mort- Brothers in 1998. In the United Kingdom, gage lenders, giving Lehman a strategic I helped develop the market for shared position in the emerging industry, as appreciation mortgages, a type of equitywell as access to loans for jumbo reverse release mortgage product, similar to mortgage-backed securities. Craig Corn, head of MetLife Home continued on page 29
heard on the street
continued from page 25
logo and the move of its corporate headquarters. The new logo is part of a larger rebranding project. With record growth over the past few years, including being recognized in the Inc. 5000 as the 12th fastest-growing privately-held real estate firm in the United States, Pro Teck saw the need to ensure its culture and purpose were clearly articulated to a growing family of employees, vendors and clients. The rebranding effort will sharpen Pro Teck’s mission and message. “Pro Teck’s shift to a new look symbolizes the accuracy, service and expertise we deliver to our customers. Our focus is to provide the most accurate real estate valuations, custom configured to meet the business needs of originators, servicers, investors and underwriters,” said Tom O’Grady, chief executive officer of Pro Teck. “We believe the new logo captures the spirit of how Pro Teck effectively delivers its services.” Pro Teck will also be moving its corporate headquarters to a new building that will more than double its current space. “Success has made this move necessary,” said O’Grady. “Fortunately, we were able to find a new home less than a half mile from our current location, making the transition seamless to our customers and employees. The new site provides an excellent working environment for our staff, and will allow us to meet the future needs of our clients.” For more information, visit www.protk.com.
NAR announces tech acquisition of LPS Real Estate Group
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Equifax Inc. has announced that it has acquired Rapid Reporting Verification Company, a privately-held national provider of IRS tax transcript information and Social Security Number authentication services. The addition of Rapid Reporting will enhance Equifax’s ability to provide lenders with improved
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Equifax acquires Rapid Reporting
The National Association of Realtors (NAR) has acquired technology to create a database of all properties in the U.S. The technology acquisition includes licensed data and secured data aggregation services from LPS Real Estate Group, a wholly-owned subsidiary of Lender Processing Services Inc. NAR will use the assets to develop the Realtors Property Resource (RPR), a parcel-centric information database covering all of the more than 147 million property parcels in the country as a resource for NAR members. NAR is planning to launch RPR in the second quarter 2010. “Realtors are the first, best source for real estate information, and the RPR is another emphatic feature to that resource,” said NAR President Charles McMillan, a broker with Coldwell Banker Residential Real Estate in Dallas-Fort Worth. “RPR will give Realtors nationwide data on all properties at their fingertips so they can respond quickly to consumers interested in residential and commercial real estate. This is exciting news and a terrific NAR member benefit. NAR is committed to keep Realtors central to the transaction and to the buying and selling experience with their clients and customers.” The management team of RPR includes Chief Executive Officer Dale Ross, cofounder of the Metropolitan Regional
Information System; President Marty Frame, former general manager of Cyberhomes; Senior Vice President of Industry Relations Mona Steen, former senior vice president with Cyberhomes; and Jeff Young, NAR director of the Realtors Property Resource and 2008 president of the Michigan Association of Realtors. RPR will provide nationwide access to public record information, such as tax and assessment data, liens, zoning, permits, environmental information and information on neighborhoods, school district and community demographics, along with advanced search features for property searchers, as well as market-tomarket comparisons and referral opportunities not currently available. “These acquisitions will allow Realtor interests to control the program and the content,” said NAR Chief Executive Officer Dale Stinton. “Realtors need to respond quickly to today’s tech-savvy consumers, and the RPR provides a means for multiple listing services (MLS), commercial information exchanges (CIEs) and real estate brokerage business models to support the Realtor community, rather than requiring Realtors to purchase data aggregated by third parties. RPR is not a national MLS, and will carry no offers of cooperation and compensation. It is a private, NAR members-only benefit. The assets acquired by NAR will be directed through a wholly owned subsidiary corporation, Realtors Property Resource LLC.” RPR will develop business strategies to make it affordable and feasible for NAR members, and will complement, not compete with, MLSs and CIEs. While many MLS and CIE systems provide a range of services, no two are alike. Brokers are looking for tools that support their agents across multiple markets with similar service levels and access to robust and valuable data. RPR is designed to support local MLS and CIE models to create a common experience for agents and brokerages. “We’re honored to have been selected by the National Association of Realtors to provide technology, data and other services for the RPR,” said Jay Gaskill, president of LPS Real Estate Group. “Being involved with such a transformational industry initiative serves as an endorsement for our company and the premier products and services we provide to MLSs and associations, brokers, franchisors and sales associates.” For more information, visit www.realtor.org or www.lpsvcs.com.
BY DAVID LYKKEN A few months ago, I wrote metaphorically about the C-level executive who was looking out over the landscape of the industry from a high-rise corporate boardroom window pondering the storm clouds that were coming at the industry, and therefore, at their company. It is true that as C-level executives, we spend most of our time looking externally at the risks that could threaten our business. However, often overlooked are the hidden internal risks that can sink our “boats” … and there is nothing like the F-word that can do just that. For the mortgage lender, there is no greater internal risk to a company’s survivability than fraud. Using that very word as an acronym, allows me to highlight five areas every C-level executive should consider when examining internal risks. They are as follows:
It is analogous to flying an airplane with a faulty compass. Not knowing where “true north” is, could lead to disaster. You don’t necessarily need to know how a compass works to navigate an airplane. But you absolutely have to know how to read a compass. That may seem like an over simplification, but it works. Here’s where I am going with this … and I am going to expand upon this in the “Accounting” section below. Too many C-level executives have no clue if their financials are accurate. They are flying blind. When in this condition, they are unable to detect if there are things going on “below the surface” such as someone embezzling money from the company. You would be surprised to know how much of that is going on in companies across America.
Mortgage companies that originate loans must have a demonstrated There’s an old saying that has been cir“zero tolerance” policy against fraud, culated around the mortgage industry and the definition of fraud needs to for years that goes something like this be clearly spelled out. … “A mortgage lender Investors need to stop never really ‘sells’ a loan making ridiculous repurto an investor … he chase demands and merely ‘rents’ it to an inventing “fraud” where investor until something no fraud existed. The goes wrong with the loan investors who intentionand then the investor ally do “forensic undermakes them take the writing” to “discover loan back” fraud” are about as Starting in 2007, more morally bankrupt as the companies have been driven originator that purposeout of business by investor fully does something in repurchase demands than “Trusting in inaccuthe origination process almost any other single rate or even frauduthat is fraudulent. thing. It used to be that only lent financials has mortgage bankers had to been the undoing of Accounting deal with repurchase many companies.” In this article, we are pridemands. However, today, marily focusing on fraud mortgage brokers are facing repurchase demands also, it seemed … and now specifically, accounting like this threat seemed to abate some fraud that involves embezzlement. This until just recently. In recent weeks, we is the worst nightmare of every busihave seen another round of repurchase ness owner. As a consulting firm, we are frequentdemands, but this time, with more increased intensity than ever before. That ly asked by C-level executives, usually old saying seems to be more true today the business owner, to come into their company because he or she has begun than ever before. The easiest and best way for a C-level to suspect embezzlement has or is takexecutive to mitigate repurchase risk is ing place. And when we confirm that to read all legal agreements before that there is or has been an embezzlesigning. If there is language in those ment going on, more than 90 percent of agreements that represents undue risk, the time it is being done by someone you have one of two choices: Not sign- that the C-level executive trusted implicing it or changing it. Unfortunately, itly. There are not too many things many C-level executives wait until they worse than a trust violated. It can take are presented with a repurchase years to recover financially and emodemand to read the agreement. Believe tionally and many never do. Accounting systems such as it or not, you can mitigate this risk by inserting and/or deleting language in QuickBooks are too easily manipulated. the agreement. I know, to many of you Frequently, accounting “irregularities”
Repurchases Financials Repurchases Accounting Underwriting Due diligence
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As a consulting firm with clients coast-to-coast, it is in these five areas where we see internal risk that has proven life-threatening to many mortgage companies.
Financials Trusting in inaccurate or even fraudulent financials has been the undoing of many companies. In today’s world of computerization, it isn’t surprising that virtually every mortgage company uses some type of accounting software system to generate financial statements. Of all the software systems in the market, the one we see the most is Intuit’s QuickBooks. It is not because it is the best system … far from it. That said, it can and does work for thousands of mortgage companies today. No matter which system the company chooses, it comes down to the old acronym “GIGO” (Garbage In, Garbage Out). C-level executives need accurate financials to make critical business decisions. “Manage by the numbers” is the only way to effectively manage any business. Yet, most C-level executives are typically not known for their strong accounting skills. They are more entrepreneurial by nature with strong intuitive skills. But when you have someone with strong intuitive skills trying to apply them to the financial management of their company, the results can often be disastrous. This is the classic “flying by the seat of your pants” gone bad.
reading this, that seems like a fantasy. Most of the investors that are demanding loans to be repurchased are claiming fraud as the basis for the repurchase demand. One of the most effective ways to manage repurchase risk is to closely manage your production operation. I don’t care how good someone might be at negotiating contracts, no investor in their right mind would agree to buy loans if the mortgage company would not indemnify that investor against fraud. We all know that the problem with many repurchase demands is that the investor is claiming “fraud” when no fraud was committed. The solution to this problem may seem over simplistic and “Pollyannaish” but it really isn’t. And the solution is twofold.
start off as innocent mistakes, but then when someone discovers a way to “creatively” resolve the mistake, they also discover how easy it is to manipulate the system. Therefore, someone with a “motive” (i.e., short on cash to pay their bills) can start “manipulating” the books to misrepresent the facts so they can “borrow” some money from the company “on a short-term basis” to “make ends meet” until “some other money (miraculously) can be found.” This is regrettably becoming increasingly more common given our country’s economy and the financial stresses being experienced by many. To understand how accounting fraud can be avoided, we first need to come to grips with the core of the problem … at least most of the time. As I said earlier in the “Financials” section, most Clevel executives are not known for the in strong accounting skills. To them, diving deep into transactional details is on the same level as having a root canal … they hate details. They love the saying, “Don’t tell me about the labor pains … just show me the baby!” Even some of the biggest control freaks quickly delegate accounting details to a trusted “bean counter” type. However, the further away they get from the numbers, the more susceptible they are to accounting fraud that then leads to embezzlement. If you rely upon a Certified Public Accountant (CPA) firm to do your annual audit, think again. In every situation we are brought in where there was embezzlement, the CPA firm that did the annual audit failed to discover the financial fraud. All too often, the CPA firm that does the audit can become too comfortable with those people in accounting doing the fraud. It is a good idea to change CPA auditors every so often. You, as the C-level executive, should select the auditing firm. It is a conflict to have accounting staff select the CPA firm that does the audit. In almost every situation where we were called in to a company where embezzlement has taken place, we discovered these common denominators. The embezzlement was done by a highly trusted employee. It was someone they had known personally for a long time. It had been going on for a fairly long time. They trusted this person as if they were family. continued on page 30
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reverse mortgages. So I was already familiar with the reverse mortgage product when I returned to the U.S. What attracted me to the reverse mortgage was its newness. It was different from anything I had seen before, and it had potential for growth along with America’s older population. Moreover, once we understood the favorable traits of reverse mortgages (for example, that prepayment was linked not to interest rates, but to mortality), we felt they would be attractive to investors once we overcome their inherent lack of periodic cash flow. How was the experience of creating the first reverse mortgage securitization for your investors, for Lehman Brothers, and for you? The experience of creating the first reverse mortgage securitization was very exciting. The team at Lehman Brothers knew that we were breaking new ground, and although the process of working with lawyers, accountants, rating agencies, investors, etc. was long and involved many late nights, there was a tremendous amount of pride in being involved in such a ground-breaking transaction. In addition, this securitization led to Lehman Brothers’ investments in the business by buying several reverse mortgage companies, including Financial Freedom.
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Lenders One Mortgage Cooperative, a national alliance of independent mortgage bankers, has announced that MetLife Bank NA, a subsidiary of MetLife Inc., as its newest preferred investor. The relationship will position MetLife Home Loans’ Reverse Mortgage Division to purchase cooperative members’ closed reverse mortgages and fixed-rate home equity conversion mortgage (HECM) products. “The reverse mortgage product is very important to seniors looking for ways to fund a comfortable retirement, as well as to our members, for whom the reverse mortgage business represents significant opportunities for growth,” said Scott Stern, chief executive officer of Lenders One. “Reverse mortgage lending is still a relatively untapped business channel for many lenders. We believe that MetLife’s experience in this sector of the industry will support our members’ efforts to grow their business in this market and allow an additional way for them to provide needed products in the communities they serve. We are so pleased to welcome MetLife as a preferred investor, especially because they are the top issuer of Ginnie Mae HECM mortgages in the country.” “With maybe 10 investors in the country buying reverse products, there are lim-
Servicing Source announces its acquisition of Level 1 Loans The Servicing Source, a division of the Sextant Group Inc. and provider of mortgage asset pricing services and models, has announced the purchase of Level 1 Loans from IntraPrise Solutions. Concurrent with this acquisition, the Servicing Source will be renamed Level 1 Loans. IntraPrise Solutions will continue to provide technical support for this new brand of asset valuation models. The mission of Level 1 Loans is to bring mortgage asset pricing as close to a true level 1 valuation under FAS 157 as possible. This means striving for quoted prices, of identical assets, in active markets, at the measurement date. Level 1 Loans will combine its proprietary cashflow model with its newly-acquired loan level slotting and pricing engine. “This system avoids the subjectivity inherent in the cashflow modeling relied on by most valuation systems,” said Dr. Thomas J. Healy, CMB, president of Level 1 Loans Inc. “It identifies what the active loan market will pay for an identical asset as of the measurement date. Pricing validity has been demonstrated for both new and seasoned loans.” Todd Fisher, president of IntraPrise Solutions, said “This system is made possible by the marriage of Level 1 Loans’ understanding of mortgage asset pricing and IntraPrise solutions technology that allows for the capture of investor prices, the slotting of loan product against those prices, and the execution and delivery of valuation runs.” For more information, visit www.L1Loans.com or www.intraprisesolutions.com.
UnitedTech acquires the assets of LandAmerica OneStop UnitedTech Lender Services (UTLS) has purchased the assets of LandAmerica O n e S t o p, w h i c h continued on page 31
What are some lessons you have learned about reverse mortgagebacked securities (RMBS) and investors’ attitude toward them? The greatest lesson I have learned is that when dealing with investors, it is useful to discuss the importance of reverse mortgages in the lives thousands of older Americans. Put differently, the human element should be a critical part of the investment discussion, but not necessarily the investment decision. Obviously, investors control billions of dollars and they are looking for asset classes and investment structures that provide them with the appropriate risk/reward characteristics. However, these investors also have parents and grandparents, and they appreciate the role the reverse mortgages can play in helping people live more comfortable and dignified lives in retirement. In addition, they want to understand issues like fraud, cross-selling and counseling. Over the years, it has become clear to me that when dealing with investors, the discussion about the non-investment side of the reverse mortgage business can be just as important as the discussion of the investment in the product itself.
MetLife Reverse named a Lenders One preferred investor
ited resources and knowledge available to lenders,” explained Michael Mooney, wholesale and correspondent sales director for MetLife Home Loans, a unit of MetLife Bank NA. “Partnering with Lenders One provides us a great opportunity not only to help those lenders already offering reverse mortgages, but also to help more small- to mid-sized lenders venture into this special market and support them with an appropriate level of understanding to be successful—and, above all, to help more seniors to remain comfortably in their homes.” For more information, visit www.lendersone.com or www.metlife.com.
HAWAII MORTGAGE PROFESSIONAL MAGAZINE
How informed were investors about reverse mortgages as an asset class when you began? How educated are they today? Investors knew very little about reverse mortgages when we started speaking with them about this new asset class. As a result, we not only had to educate investors about the investment structure and the nuances of the product, but we also had to explain to them the origination process, how the loans were serviced, what happens when a maturity event [borrower moves, sells, or dies] occurs. It was an education of the entire business. Today, investors are more educated about the product. We have
How has the secondary market for reverse mortgages evolved since your pioneering work? Where is it headed? For the first six to seven years after the first securitization, only a handful of reverse mortgage securitizations were issued, and only with non-HECM proprietary product. Two significant changes have happened since then: The securitization of HECM in 2006 and the development of Ginnie Mae’s HMBS program for HECM securitization, beginning in 2007. These events have changed the reverse mortgage securitization market by making HECMs the underlying collateral. From investors and rating agencies standpoint, the significance of the 2006 HECM securitization and the 2007 Ginnie Mae HMBS stems from the elimination of crossover risk (thanks to Federal Housing Administration [FHA] insurance) and the certainty of pre-payment when loan balance approaches 98 percent of FHA’s maximum claim amount (MCA). Because HECM products dominate reverse mortgage origination, their increased use as collateral for Ginnie Mae’s securitizations gives investors the confidence to consider reverse mortgage-backed securities as a viable asset class, knowing that securitizations will be regular.
products, quality and services to help them better control fraud. Equifax will pay $72.5 million in cash for the company. “More than ever, today’s lenders need better tools to determine creditworthiness before qualifying a loan,” said Trey Loughran, Equifax’s senior vice president, corporate development. “Rapid Reporting’s capabilities will allow us to offer lenders new and improved products, as well as more advanced fraud management services.” Based in Fort Worth, Texas, Rapid Reporting offers products, including IncomeChek, which provides IRS verification of income tax information, and DirectChek, which provides Social Security Administration verification of social security numbers and also meets USA Patriot Act compliance requirements. Operating through a secure Web-based portal, these products offer financial institutions an efficient and cost-effective means to confirm borrower identity and income. “This transaction is a logical next step for our company,” said Jay Meadows, president and chief executive officer of Rapid Reporting. “The combination of Rapid Reporting’s assets with Equifax’s mortgage-related and employment verification services will enable us to effectively mitigate fraud and offer more advanced products for mortgage lenders.” For more information, visit www.equifax.com or www.rapidreporting.com.
Without a model, what were some structural challenges you faced? And how did you overcome them? The great challenge in any securitization of a new asset class, especially one as fundamentally different as reverse mortgages, is that there is no blueprint on how to do it. As a result, the team had to develop its own model, which was vetted by senior management, rating agencies, lawyers, accountants and investors. The most significant challenge was developing the rating agency criteria for this asset class. Literally, we had to work with the rating agencies for several months in developing criteria for ratings, from Triple AAA right through to Triple BBB. Since there was no historical experience to draw upon, the criteria were developed while we were figuring out the structure, modeling the transaction, and convincing investors of the product’s merits.
had many securitizations since 1999, both of HECM and non-HECM reverse mortgages, worth billions of dollars. Some investors understand it, but many potential investors have yet to purchase a reverse mortgage-backed security, so there is much education ahead.
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a view from the “c” suite During the duration of the embezzlement, all normal “checks and balance” type controls had been removed or had never been in place. While there may be an opportunity for recovery by making a claim on your Errors & Omissions (E&O) insurance, oftentimes, the loss is so significant that it is a almost impossible to recover all the money stolen. The solution for most companies is to bring in an outside consulting firm that has depth in accounting and knows where and how to look at areas of the company that can create exposure. If interested go to our Web site, www.MortgageBankingSolutions.com, and check out our CFO2Go services.
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There are any number of directions I could go with this one, but here is one that you may not have considered. We all have been told that private mortgage insurance (MI) companies are there to pay claims in the event a loan goes into default. The problem today is that so many loans have defaulted that mortgage insurance companies have begun to renege on paying insurance claims, most likely for survival. I know this is hard to believe, but it is happening with increasing frequency. The scenario is that a when a home is foreclosed upon and resold, it is not uncommon for there to be a loss. When there is an MI policy in place, a claim is filed. With increasing regularity, MI companies are claiming that loans were inaccurately underwritten and/or loan fraud was involved. The end result is that the claim is denied. This results in a repurchase demand back to the company that originated the loan. As a consulting firm, we are often called to get involved. Here are the lessons we are learning. Contract underwriting via an MI company may not provide you the risk protection you thought. We are at a place that you need to select your vendors such as an MI company based upon something more than how good the MI rep is. Document your loan underwriting decisions thoroughly, especially those marginal transactions. Having a good paper trail could make all the difference when filing an insurance claim or defending a repurchase demand.
Due diligence The most effective way to prevent fraud throughout your organization is through due diligence. What I am talking about is something broader than just the routine monthly quality control process. Due diligence can mean different things to different people, but basically it is a process of investigation that
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looks deeply into every aspect of an organizations operations. This can and should be done on an ongoing basis with your own internal staff, as well as bringing in a thirdparty consulting firm every six to 12 months. When our consulting firm does due diligence reviews, and we do a lot of them all over the country on companies of all shapes and sizes, it quickly becomes evident that this may be the first time anyone had done a thorough examination of all aspects of their operations. It opens the eyes of the C-level executives to the importance of doing this on a regular basis. Without fail, things are revealed that are surprising and somewhat embarrassing to the Clevel executive. There are two basic benefits that come from doing regular ongoing due diligence reviews. The first and most obvious is catching things that are being missed in the normal day-today operations. The second and less obvious is this … just having an ongoing thorough due diligence review process can stop an employee from doing things that can cost the company precious capital … both time and money. The thorough due diligence review exposes weaknesses where fraud and embezzlement take place. As wise old Benjamin Franklin said, “An ounce of prevention is worth a pound of cure.” If you don’t get anything else from this article, I hope you give serious consideration to implementing an ongoing due diligence program within your company. When selecting an outside firm to perform due diligence, make sure they have hands-on operating experience of actually running a company like yours. Otherwise, how will they know where things can go wrong? We have a team of dedicated mortgage professionals that have owned and operated their own mortgage companies and are dedicated to helping C-level executives like you to do a thorough examination/investigation of your internal operations. Thank you for reading this article, and I welcome the opportunity to talk with you about your company’s needs. 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.
ADAPT releases decisioning engine for streamlined loan mods
Freddie Mac announces pilot program to provide standby purchase A u t o m a t e d agreements to Decisioning Asset warehouse lenders
Performing Technologies (ADAPT) Enterprise LLC, provider of an on-demand software solution for loss mitigation specialists, has announced the release of ADAPT, a Web-based NPV Decisioning Engine designed to empower mortgage brokers, attorneys, community-based organizations and others to support servicers by preparing loan modification packages that conform to the government ’s Home Affordable Modification Program (HAMP) guidelines automatically. The tool enables loss mitigation professionals to instantly determine the eligibility of a loan modification, based on HAMP guidelines. The system applies the base NPV calculations and defines the reduced rate, modified term, step-rate along with principal forbearance (if suggested), in real-time. It then produces the package for the servicer’s review. “Servicers are overwhelmed with the volume of loan modifications they are receiving right now and can not deal with them because they are so busy dealing with borrowers who are closer to being foreclosed upon,” said Tom Sato, president of ADAPT. “This tool will allow loss mitigation specialists to do the heavy lifting for mortgage loan servicers, providing them with deals that will meet HAMP guidelines, complete with the paperwork to move the deal through to closing. This is the solution the industry has been looking for.” ADAPT provides a secure pre-qualification application exchange, which is triggered by the end-user, enabling the homeowner to enter data in a secure Web environment. The tool informs all parties that the homeowner is required to enroll into a U.S. Department of Housing & Urban Development (HUD)approved housing counseling program automatically if it detects that the backend debt-to-income exceeds 55 percent. The system will automatically import the borrower’s data into the Freddie Mac Loss Mitigation Transmittal Summary Form as soon as it automatically confirms borrower eligibility. For more information, visit www.adaptnow.com.
Freddie Mac has announced a pilot to help lenders obtain warehouse lines of credit with participating warehouse lenders. The initiative is designed to help single family and multifamily lenders (Freddie Mac seller/servicers) find adequate warehouse lines of credit to fund loans for sale to Freddie Mac. Freddie Mac currently is working with warehouse lender Natty Mac, a Guggenheim Partners company, in the pilot program. “The warehouse lending industry has nearly exited the market making it increasingly difficult for lenders to fund loans,” said Charles E. Haldeman Jr., chief executive officer for Freddie Mac. “We’re proud to help bring much-needed additional liquidity to the residential and apartment financing community.” Freddie Mac will provide participating warehouse lenders with standby commitments to purchase qualifying loans in the event a seller/servicer cannot meet its contract obligations or fails. Pre-funding reviews are required and normal Freddie Mac purchase and origination processes and procedures apply. Consistent with its charter and without objection from its regulator, the Federal Housing Finance Agency (FHFA), Freddie Mac is providing this standby purchase commitment arrangement with Natty Mac as part of the pilot program. Freddie Mac seller/servicers interested and who qualify for this program will need to enter into a separate agreement directly with the participating warehouse lender. The credit line from the warehouse lender that is supported by the standby commitment will fund only the loans the participating seller/servicer intends to sell to Freddie Mac. For more information, visit www.freddiemac.com.
Interthinx adds MDIA test to compliance tool Interthinx announced that its PredProtect Compliance Suite now performs Mortgage Disclosure Improvement Act (MDIA) calculations that automatically determine when continued on page 32
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includes the Default Services Division (formerly known as LandAmerica Default Services Company) and BackInTheBlack, the industry’s most comprehensive endto-end default servicing technology platform. These former LandAmerica business units are now known as UTLS Default Services and UTLS BackInTheBlack. “With proven client focused methodologies in place, we will quickly build on the foundation of providing innovative and superior business solutions to our clients,” said Tim Walsh, president of UTLS. “Our default management clients are increasingly challenged with delinquencies and foreclosures, as well as the increased focus on regulatory compliance and loss mitigation. Blending the service capabilities with the BackInTheBlack technology enables UTLS to offer the mortgage industry the best and most integrated default and technology servicing solutions in the marketplace.” For more information, visit www.unitedtechls.com.
ing property auction services with LPS’ other leading default solutions, we can offer our clients an unparalleled toolset for managing and disposing of REO assets that delivers the best overall results. This acquisition solidifies LPS’ position as the leading provider of asset management solutions.” LPS Auction Solutions takes a creative and comprehensive approach to auction property marketing, including the development of compelling property sales materials, as well as extensive outreach involving radio, television and print advertising, direct mail and email campaigns, public relations initiatives and social media engagement. “With access to a powerful array of promotional channels and our unique understanding of local market conditions, we can quickly adjust our marketing strategy for each individual auction,” said Neel. “This helps ensure that we’re attracting the maximum number of potential buyers and investors to each auction event.” For more information, visit www.lpsvcs.com.
LPS acquires auction solutions provider for residential REO properties
Lenders One partners with Cenlar FSB
NetMore America has hired John Cassell as senior vice president of retail production.
Mortgage Professionals to Watch Flagstar Bancorp has announced the election of president and chief executive officer Joseph P. Campanelli to the position of chairman, replacing Thomas J. Hammond who retired in October. The company has also announced the appointments of Salvatore Rinaldi to the position of vice president and chief of staff, and Marshall Soura to the position of executive vice president and director of corporate services.
Credit Plus Inc. has promoted Greg Holmes to the position of national director of sales and marketing.
At its 96th Annual Convention & Expo in San Diego, the Mortgage Bankers Association (MBA) has elected Robert E. Story Jr., CMB of Seattle Financial Group as association chairman; Michael D. Berman, CMB of CWFinancial Services as association chairman-elect; and Michael W. Young of Cenlar FSB as association vice chairman.
Michael Berman Greg Holmes
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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.
What is your favorite reverse mortgage story? I have heard and have been involved in many feel-good stories about how reverse mortgages have made a differ-
ence in people’s lives. But I have to say that during 1998-1999, when my colleagues and I at Lehman Brothers were working on the first securitization and getting to understand the product, the market and its growth potential, is was one of my favorite times in the reverse mortgage business. We knew we were not simply working on a transaction, but rather, building a business and that securitization is vital to the growth of the industry.
HAWAII MORTGAGE PROFESSIONAL MAGAZINE
What prospects and challenges do you see for RMBS after the Great Recession of 2008-2009? The prospects are very encouraging. Ginnie Mae’s HMBS program has made a significant difference in changing investors’ attitude toward the reverse mortgages. Given the massive flight to quality we have seen over the past few years, any product with government guarantee is going to be seen as attractive to many investors. As a result, investors are much more open to discussing the product with us. When you factor in the zero risk [really?] weighting of a Ginnie Mae HMBS with the favorable pre-payment characteristics of HECMs and HMBS structure, it is not surprising that interest in reverse mortgages as a new asset class has grown significantly in the past twelve months.
Lender Processing Services Inc. (LPS), a provider of integrated technology and services to the mortgage and real estate industries, has announced its acquisition of Rising Tide Auctions, known for its property auction expertise and innovative property auction strategy. The acquisition will expand the asset management offerings of LPS and allow the company to provide comprehensive property auction solutions to help servicers minimize real estate-owned (REO) timelines and reduce costs. Furthermore, real estate buyers and investors will be provided with the ability to purchase individual or multiple bank-owned properties directly from the nation’s leading REO disposition service provider. Mortgage servicers have long relied on a wide range of default-related solutions from LPS, including national field services, full-service asset management, title and closing services, as well as bankruptcy and foreclosure management. With the addition of property auction services through LPS, servicers now have more REO management options from a single provider. Additionally, servicers working with LPS Auction Solutions will benefit from the company’s ability to manage all aspects of the auction process from beginning to end, including data collection, property due diligence, open house showings and the auction event. To help ensure timely REO dispositions, the company also utilizes a comprehensive broker outreach program to encourage broker participation in the auction events. “Rising Tide Auctions brings significant assets to LPS, including an impressive team of executives with more than 30 years of successful property auction marketing experience,” said Chad Neel, president of LPS Asset Management and Field Services. “By integrat-
Lenders One Mortgage Cooperative, a national alliance of independent mortgage bankers, has announced its newest partnership with subservicing giant Cenlar FSB, which will provide cooperative members with the ability to maintain the servicing rights on their loans. Cenlar has serviced residential loan portfolios for more than 40 years in all 50 states, allowing the company to reach all Lenders One members. “Loan servicing is quickly emerging as a trend—as well as necessary business component—for independent mortgage bankers, and we want our members to be on its forefront,” said Scott Stern, Lenders One chief executive officer. “Partnering with Cenlar benefits our members with timely, scalable term and interim mortgage servicing. These benefits are then translated to borrowers in the form of a more diverse, quality loan offering.” Cenlar is working with Lenders One to provide its membership with customized subservicing for a wide variety of mortgage products, all private-labeled under each lender’s name and logo. Offering cooperative members the opportunity to maintain the servicing rights to their loans helps them reap the benefits of that servicing revenue without fixed operational costs. It also enables them to avoid the added expenses and time to build this capacity internally. “Based on the volatility and ongoing evolution of the industry, lenders need the flexibility to adapt to changing market conditions,” said Lori J. Pinto, CMB, senior vice president of business development for Cenlar FSB. “This relationship provides Lenders One’s members a means to effectively grow their business models and expand new offerings to their respective communities. Lenders One is committed to the industry’s mortgage bankers and focused on providing the business partner-
ships that will bring the most value to its members. For this reason, we are looking forward to not only expanding our relationship with them, but also assisting these lenders explore new markets.” For more information, visit www.lendersone.com or www.cenlar.com.
HAWAII MORTGAGE PROFESSIONAL MAGAZINE
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new disclosures are required and whether the timing of the disclosures meets statutory requirements. PredProtect compares the annual percentage rate (APR) at application to the most recently disclosed APR, applying a tolerance of one-eighth of one percent. The system then provides an “earliest closing date” calculation to ensure that the timing for initial or re-disclosure follows the new requirements. Users are automatically notified when a loan is out of compliance. This new feature, although optional, is being provided at no additional cost to Interthinx clients. “MDIA compliance presents one of the biggest challenges of 2009 for many lenders, especially those with dated origination platforms that lack the elasticity to adapt quickly,” said Roger Fendelman, vice president of compliance for Interthinx. “PredProtect offers lenders an easy way to comply with MDIA. It provides instant protection from additional scrutiny with written proof of compliance placed right in the loan file.” MDIA is a federal law that is part of the Housing and Economic Recovery Act of 2008 (HERA). MDIA requires that lenders wait seven days after the initial disclosure is provided before closing a home loan and an additional period any time the APR changes by more than one-eighth of one percent and re-disclosure is required. The law then requires an additional cooling-off period before the loan can be closed. This sequence is frequently referred to as the 3-7-3 Rule. “The time is right for lenders to deploy new, practical technology and ready themselves for more regulation to come,” said Mike Zwerner, senior vice president of business development for Interthinx. “It seems like there’s never a good time to implement change, but now it’s a matter of keep-
When You THINK Of...
ing up with tough new regulation and survival. Another way to look at the current environment is to recognize the industry is in a state of rebuilding consumer trust and brand confidence. Hidden costs or errors add up to lost opportunity. The new MDIA test in PredProtect provides lenders with a simple approach to compliance, helps avoid costly errors, and mitigates reputational risk with inexpensive, fast automation.” For more information, visit www.interthinx.com.
Experian launches consumer income assessment tool Experian has announced its suite of leading “ability to pay” products—Income Insight and Income View—designed to determine a consumer’s ability to pay. Income Insight was designed to support recent legislation by providing an estimate of a borrower’s individual income utilizing verified income data and proprietary credit bureau attributes. Income View is a Web-based tax verification service that provides clients with reliable IRS 4506-T processing and prompt access to applicants’ verified income via the Internal Revenue Service (IRS). “With a number of new or proposed lending regulations, there is an increasing emphasis being placed on more diligent and more informed lending,” said Steven Wagner, president of Experian Consumer Information Services. “Our new ‘ability to pay’ products are an important part of this continuously changing picture. The capability to accurately estimate or verify a borrower’s income provides a key
insight into that consumer’s ability to repay a loan.” Some of the features of Income Insight include: Support of a lenders’ ability to comply with recent legislation; assistance to lenders with responsible provision of credit through considering a borrowers’ ability to pay; compliance with the Fair Credit Reporting Act (FCRA) and the Equal Credit Opportunity Act (ECOA); the targeting of customers while considering the complete financial picture; an improvement on risk management efforts by including modeled debt-to-income ratios; accuracy in segments defaulted borrowers to maximize collection processes; and streamlined results online or in batch. Some of the key benefits of Income View include: Income tax return summaries and detailed transcripts for individuals and businesses, including IRS 1040, W-2, 1099 and 1065, the secure delivery of IRS transcripts within 24 to 48 hours; identification of potential fraud through discrepancies in stated-income, Social Security Number, filing status, name or address; and no rush fees. For more information, visit www.experianplc.com.
Byte integrates LoanSifter into BytePro Byte Software, a provider of loan origination software for banks, credit unions, mortgage bankers and mortgage brokers, has partnered with LoanSifter Inc. to offer a product and pricing engine. LoanSifter’s best-ofbreed solutions include an intuitive point-of-sale loan eligibility and pricing engine, lock desk and rate sheet generator satisfying the most demanding loan officer. “LoanSifter’s streamlined, easy-toread format means originators don’t have to waste time searching through unnecessary numbers and suggestions to get the information they need,” said
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Bruce Backer, president of LoanSifter. “Secondary managers and originators tell us that they are looking for ways to manage risk and efficiently secure more transactions. They understand that integration translates to increased control and immediate answers—two factors that can make the difference in growing your business in a challenging market.” LoanSifter provides pricing, automated underwriting systems and lock desk features. Secondary departments utilize the thorough, real-time streamlining and maintenance of the entire mortgage pricing process (margins, adjustments, incentives, service release premiums [SRPs] and underwriting guidelines), no matter if servicing is retained or if correspondent and wholesale investors are used. The partnership between Byte Software and LoanSifter reduces data input and errors by giving customers the ability to submit existing loan data from within BytePro, instantly accessing pricing and product information. For more information, visit www.bytesoftware.com or www.loansifter.com.
Avista announces Web portal launch and FHA integration Avista Solutions, developer of Avista Agile loan origination software (LOS), has unveiled its completely redesigned consumer Web site capability that puts much greater functionality into the hands of borrowers. The extensive makeover improves the borrower experience and helps lenders meet the growing desire of consumers to obtain more information and functionality independently when visiting lender Web sites. The new Web portals are private labeled by Avista and branded to be consistent with the lender’s own Web site. Visitors can submit applications online, obtain automated approvals, receive online disclosures, and if “just looking,” can receive notification when the rates they want are available. Payment calculators, loan type scenarios and other tools are available, with customer-input information feeding directly into the lender’s Avista Agile loan originator software (LOS). Borrowers stay abreast of their loan’s progress with automated email updates and online status, saving expensive and time-consuming phone calls back and forth with the lender’s staff. Avista has also announced that its automated underwriting system (AUS) has been interfaced with the Federal Housing Administration’s (FHA) “Technology Open to Approved Lenders” (TOTAL) Scorecard. This interface allows lenders who are underwriting FHA loans to submit borrower information to the TOTAL Scorecard, which combines the capabilities of Avista’s AUS to determine whether a loan is elicontinued on page 34
heard on the street
Your turn continued from page 31
Pro Teck Valuation Services has announced the hiring of Jeff Marchetti as senior sales director and Al Dalupan as sales director, business development.
gage advisors: Janice Cole-Thornton, Keith Fansher, Doris Hansen, Thomas Harty, James Janik, Chue Lee, Elisabeth Schaller and Joseph Scheurell. The company has also announced that Zachary den Daas has joined as executive assistant, and that John Guirau and Michelle Lewin have been added as call center representatives. Assurity Financial Services LLC has announced that Vanessa Giacoman, CMB has been named the company’s new chief operating officer and managing member.
National Mortgage Professional Magazine invites its readers to submit any information, events, passages, promotions, personal or professional occurrences that seem appropriate and/or other pertinent data to the attention of:
Heard on the Street/Mortgage Professionals to Watch column Phone #: (516) 409-5555 E-mail: email@example.com Note: Submissions sent via e-mail are preferred. The deadline for submissions is the 1st of the month prior to the target issue.
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 loan start your own Credit Repair business
Antonio Catalano has joined Resource Title’s Independence, Ohio office to help in developing the company’s retail division.
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
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
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 rocks as a business opportunity.”
20.44% 17.32% 14.21%
Round 1 Round 2 Round 3 Round 4 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 www.startacreditrepaircompany.com
There is only one step you need to take; visit www.startacreditrepaircompany.com or call us at 877-877-4834 option 5.
HAWAII MORTGAGE PROFESSIONAL MAGAZINE
New Oak Capital has appointed Jay Lown as managing director of the company’s financial institutions group. PHH Corporation has named Jerome J. Selitto as president and chief executive officer, and has also been appointed to company’s board of directors. Teresa Switzer has joined property preservation and inspection services provider Mortgage Contracting Services (MCS) as vice president of business development and client relations. BankUnited has named Raymond S. Barbone as executive vice president of mortgage services. William Mueller has been appointed chief executive officer of iServe Real Estate Operations, a wholly-owned subsidiary of National Asset Direct Inc. DebtX has promoted Bill Looney, former executive vice president of the company, to the role of president of U.S. sales. USA Funding Corporation has welcomed the following as trusted mort-
“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 started in a business that is booming and shows no signs of slowing
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:
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.”
Industry Leading Results
new to market
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if you originate you must pass it. No grandfathering. No exemption. No escape. [if originating for a depository institution the exam is not mandated. Yet.]
to pass it, you’ll probably have to study!
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continued from page 32
gible to be insured by the FHA. The direct system to system interface between the Avista’s AUS and FHA allows approvals to happen in minutes, speeding up and simplifying the entire procedure for lenders and reducing origination costs in the process. “FHA is understandably busy at the moment, as it undergoes a renaissance in the use of its products and programs,” said Mark Phlieger, Avista chief executive officer. “By interfacing our automated underwriting capability with the TOTAL Scorecard, originators can get answers very quickly, without data reentry and other inefficiencies that can lead to mistakes and delays.” For more information, visit www.avistasolutions.com.
DartAppraisal.com offers new FHA appraisal compliance solution DartAppraisal.com, an independent provider of residential real estate valuations, has announced an updated version of its popular DartExpress system to ensure compliance with all Federal Housing Administration (FHA) Mortgagee Letters related to valuations. The technology updates come in advance of the FHA policy changes which will take effect Jan. 1, 2010, allowing mortgage brokers, lenders and appraisers an early advantage in compliance. DartAppraisal.com originally developed DartExpress technology in May 2009 to streamline the appraisal process for mortgage brokers while maintaining Home Valuation Code of Conduct (HVCC) compliance. The enhanced system now maintains compliance with all new FHA appraisal policies for FHA-insured loans as well. DartExpress provides a quick and easy online system to initiate an appraisal order, pay for and track the progress of the order, and finally deliver a copy to the mortgage broker and lender in full compliance with HVCC and all new and existing FHA Mortgagee Letters. “We have enhanced our DartExpress technology to now offer the fastest path to FHA policy compliance for mortgage brokers, lenders and appraisers,” said Marko Berishaj, vice president of DartAppraisal.com and a certified mortgage banker. “The Webbased system is a complete solution that ensures our appraisals adhere to all FHA Mortgagee Letters related to valuations. DartExpress continues to be extremely popular within the industry for HVCC-compliant services, and we are confident it will deliver high quality results for users seeking FHA compliance.” DartExpress users register on the DartAppraisal.com secure Web site and receive their own account password. The mortgage broker then
picks from a list of FHA-approved lenders who have “authorized” DartAppraisal.com to process the appraisal order. Next the user pays online with a credit card, providing immediate credit verification and processing of the order without many of the common delays associated with consumer appraisal coordination. Brokers can track up to seven steps in the appraisal pipeline via the DartAppraisal.com Web site to determine the status of each order in the account. The viewable tracking process includes receipt, acceptance, scheduling, appointment set, inspection, quality control and possible addendums. Notations of any complications which may have arisen within the process are also visible. For more information, visit www. DartAppraisal.com.
Loan-Score launches site to underwrite FHA loans Loan-Score Decisioning Systems has announced it has officially launched www.LoanSCORECARD.com for mortgage bankers, community banks, credit unions, lenders and originators to connect to the Federal Housing Administration’s (FHA) TOTAL Scorecard loan approval platform. The new site seamlessly interfaces with Scorecard to offer users an easy, efficient and cost effective automated FHA underwriting experience. Earlier this year Loan-Score interfaced its automated underwriting system (AUS) with FHA TOTAL Scorecard, which was initially added as functionality to Loan-Score’s existing decisioning suite. The launch of LoanSCORECARD.com, however, now allows the entire mortgage industry to utilize the portal as a standalone application to decision and underwrite FHA loans, complete with conditions and an FHA certification that the home ownership centers (HOCs) will accept and review to insure. The site allows lenders, loan officers and brokers the ability to create an account, upload a 1003, pull/re-pull credit, instantly return underwriting decisions on FHA loans and manage their FHA pipeline. The primary value in LoanSCORECARD.com is that users pay only a fraction of the typical cost to automatically return eligibility. “LoanSCORECARD.com serves the gamut of mortgage bankers, community banks, credit unions, lenders and originators to conveniently and cost effectively decision FHA deals using our portal’s interface with Scorecard,” said Joe Bowerbank, senior vice president of marketing at Loan-Score. “What we’re providing is an attractive industry-wide alterna-
tive to using other FHA decisioning options.” For more information, visit www.LoanSCORECARD.com.
Docu Prep designs new app for new GFE changes
MERS and Interthinx collaborate on fraud prevention MERSCORP Inc. (MERS) and Interthinx have announced the launch of a national fraud prevention database that will allow lenders to seek, identify and share suspected fraudulent activity in loan continued on page 43
We look for loans that improve a clients situation, in fact we recently increased our funding capacity. • No Credit Score Minimum -NO DOC and STATED Welcome In Certain Situations! • Residential & Commercial • Loan Amounts $100,000 to $2,000,000 • Debt Consolidation, Foreclosure and Bankruptcy Buy-Out • First and Second Trust Mortgages
Never A Pre-Payment Penalty Our 3 Point Lending Philosophy: 1. Loan must show tangible net benefit to borrower 2. Borrower must demonstrate some capacity to repay 3. Is the appraisal accurate? We are going to verify, not low ball your appraisal. It's Just That Simple...
Visit our website or Call 877.353.2233 or For Faster Service Please Fax Your Scenarios To 240.241.5160
Kroll Factual Data, a provider of business information solutions to financial organizations has announced the release of an Independent Verification Solution which helps lenders comply with the proposed Federal Housing Administration (FHA) credit policy changes announced on Sept.r 18, 2009. “It is vital for lenders to prepare for the new FHA requirements to avoid
WE ARE NOT CREDIT SCORE DRIVEN,
HAWAII MORTGAGE PROFESSIONAL MAGAZINE
Kroll introduces verification solution to assist with FHA compliance
We are the lender, and ﬁnal decision maker, not a broker.
In preparation for the federallymandated Good Faith Estimate (GFE) changes and requirements, Docu Prep Inc. has created a feature which will provide customers with an easy transition to comply with any GFE changes that are on the horizon. With the U.S. Department of Housing & Urban Development’s (HUD’s) new GFE requirements (which will go into effect Jan. 1, 2010), lenders are scrambling to update their systems to ensure compliance to the upcoming changes. “Our customers can continue to use their LOS [loan originator software] systems without any technical upgrade,” said Docu Prep Senior Architect Josh Arceo. “Users will be able to use the old forms or new forms simultaneously.” Docu Prep’s new feature will allow users to easily disclose their fees and comply with the GFE’s regulatory requirements while maintaining a parallel structure to their current LOS systems. Adhering to compliance with these new regulations will be a simple task for Docu Prep’s customers, while minimal changes will be made to their current processes. “Compliance with the new GFE/HUD requirements is greatly enhanced with the simple, client-driven approach,” said Ann Savage, general counsel for Docu Prep. “Early testing and parallel systems will help our clients ensure they understand the product and legal changes and how they work in practice before the Jan. 1st deadline.” Not only will Docu Prep’s new application minimize changes to customers’ current processes, but it will also enhance their understanding of the new requirements to be put into place. “The new feature will provide a clearer understanding of how fees interact with the new GFE and HUD-1 Settlement Statement, and will ensure a more precise comparison of fees between initial disclosure and closing documents,” said Docu Prep Senior Analyst Britt Christiansen. For more information, visit www.docuprep.com.
repurchase claims and sanctions,” said James Donnan, president of Kroll Factual Data. “For the highest level of safety and soundness, verifications should be performed by an expert third party that is financially independent from the transaction.” Under the proposed guidelines, mortgage brokers will no longer receive independent FHA approval for origination eligibility, but will instead be required to originate through an FHA-approved lender. Since FHAapproved lenders will carry the liability for broker-originated loans, they need to bolster their verification process to support the additional volume that will come from the correspondent channel. Adding to this new strain on scarce underwriting and quality control resources is a new rule for FHA streamlined refinances which requires lender certification of the borrower’s capacity to pay at the time of application. “This raises the bar at a time when FHA market share is soaring,” said Teresa Grove, senior vice president of marketing for Kroll Factual Data. “The Independent Verification Solution helps lenders keep up with demand for FHA loans by delivering timely, independent verifications so underwriters and quality control personnel can focus their efforts on making good loans instead of on gathering information.” Kroll Factual Data’s economies of scale and proprietary processes allow them to deliver capacity-to-pay verifications at a lower overall cost than doing the verifications with in-house resources or by assembling a complex set of disparate verification products. Since the verifications are performed externally to the lender’s operation and billed according to actual use, lenders also ensure that expense stays in sync with volume fluctuations for higher profits and better capital efficiency. The detailed billing and reporting that is included with the service increases traceability and transparency for Real Estate Settlement Procedures Act (RESPA) compliance. To give lenders an extra measure of protection against the risk of errors, Kroll Factual Data’s verifications are backed by representations and warrantees of accuracy. Lenders can customize the solution to include additional types of verifications and risk assessment analytics as required for their specific risk management program. For more information, visit www.krollfactualdata.com.
Your Game Plan to Social Media Success
HAWAII MORTGAGE PROFESSIONAL MAGAZINE
By John Seroka
Think about the last time you attended tion they play. As a broker, your pura major sporting event, such as a profes- pose for participating in social media sional basketball game. One connec- should be to build a solid following of tion—an interest in how the team’s loan originators, other business referplayers will perform that day—brought rals and loan prospects. you and thousands of people together. The idea of a shared connection helps Avoid sales pitching explain why social media is now a Just as fans entering a basketball arena dynamic marketing force for businesses. have expectations about what will tranThe Internet is your arena to connect spire there, social media users have expecwith a crowd that’s intertations too. They turn to ested in what you bring to blogs, Facebook or other the home financing social Web sites for interestgame. But how do you get ing and informative online the crowd’s attention and conversation. Sales pitches make them your fans? will drive people away from First, you need to be a you. Instead, let people starter … you have to get know what your key interoff the bench and get into ests are, what your function the action. Social Web sites is within your company, and are buzzing with activity. share key industry informaBest of all, no tryouts are tion to help their careers. required, so you can easily Remember that people do “Too many people join the game and become business with people they new to social neta major participant. like, which ties into the relaworking get overzealA main point to undertionship-building purpose stand is that online social ous at first and then of a social media strategy. networking is about reladrop off completely tionship-building. Take the Know the tools because they don’t time to build your online see immediate results available relationships and underEach social Web site has a from all the postings stand that rewards will different playbook to folthey have done.” come your way in due time low. For example, Twitter … and it snowballs. After revolves around Tweets, all, Kobe Bryant didn’t become a house- which are messages of 140 characters or hold name after his first few games. less. Facebook is designed to be personOnline networking is an inexpensive al and communicate the personality of way to reach people, but you may need you and your business. LinkedIn is a site to pace yourself in the beginning. Too that enables you to describe your profesmany people new to social networking sional background and display recomget overzealous at first and then drop mendations from customers and associoff completely because they don’t see ates. A blog is a Web-based journal that immediate results from all the postings typically focuses on one subject. they have done. There are other websites for social Like a coach developing a game networking, but we’ll take a closer look plan, you too will need to plan a strate- at the most popular examples so you’ll gy that successfully uses social media. be ready to score points in any of them.
Identify your purpose, know your audience No pro makes it onto the court without knowing his purpose based on the posi-
Blogs Selecting a blog host such as WordPress.com, Blogger, Typepad or Vox is the easiest way to begin. A hosted
blog is very inexpensive and takes less than 10 min. to establish. If you want the look and feel to be completely customized, however, you may feel limited by a hosted blog. The other option is a server side or stand alone platform. As a mortgage professional, your blog will target business referrers (loan officers, past customers and other professionals), so anything you write needs to keep this audience in mind. There are more than 40 documented ways to drive traffic to a blog. One popular method is to submit your blog to several blog directories like Blogarama or Bloggapedia. This is just one of the many effective tools available to get your blog noticed in the social media arena. Include your contact information and picture to personalize your blog. Below each post, install a bookmarking widget. If you have Facebook or LinkedIn pages, include a link in your profile and send Tweets driving people to your blog. Be sure to put your blog URL on all your marketing pieces, including your business card. Another tip is to research keywords and be sure to use them in the title and first sentence of your posts. For example, don’t try to rank in Google for the term “mortgage news,” but instead try to rank for something specific like “mortgage news in Venice, Calif.” Use Wordtracker to find keywords with less than 100 competitors if you can. Also ensure that people can subscribe to an RSS feed, leave comments and leave trackbacks.
Twitter Strategic page development is an important key to the success of your Twitter page and can help set you apart from the competition. When you design your Twitter page, it’s best to customize the page background so it complements your brand. Be sure to include a photo and select something professional that communicates your personality. A Twitter page with your picture will do a better job attracting followers. Just look at the top 100 Twitterers and you’ll see that they include pictures of people, not logos or objects. After you have your Twitter page set up, Tweet several messages of strategic value and substance before you invite your colleagues and business prospects to follow you. This way your followers will understand the value. As a mortgage professional, you may
wish to communicate information about rates, new guidelines, mortgage industry trends or other topics that would be of value to your audience. When communicating this information, use a hashtag (#) in front of keywords in your Tweets. This will make it easier for people to find you. There are several ways you can encourage people to follow you. One way is to click on “Find People” at the top of your Twitter page where you’ll find several options for drawing them in. You can also install a Twitter widget on your Facebook page so that every time you send a Tweet, your Facebook wall is updated. You won’t have to go to both sites to send the same message, which saves time. Remember to include your Twitter URL in your e-mail signatures and add the Twitter link icon on your Web site landing page. In addition, there is a new feature at LinkedIn that allows integration with your Twitter account.
Facebook Establishing a strategy for your Facebook page before creating your profile is necessary in order to best optimize your presence on this Web site. One idea is to use your company logo or your picture as the primary photo … it depends on your overall social media strategy. You can also post photo albums with pictures of yourself and your employees to more personally connect with your audience. Including pictures of you or employees engaged in group activities or corporate events is perfectly acceptable. Attracting people to follow you on Facebook is fairly simple, but you must remember why people become followers to begin with—it’s because they like you, your company and you are a source of information to them. While establishing your fan base, be personable and informative. People on Facebook will be interested in knowing a bit about what you do during your personal time; however, overdoing this at the cost of informative communications will cost you. To find people to follow you, you can click on “Friends” and then click on “Invite Friends” or “Find Friends.” After clicking “Invite Friends,” you simply input e-mail addresses of those you wish to invite or import addresses from your address book, write a message and send it out. “Find Friends” helps you find people in your e-mail contacts who already have Facebook accounts.
Keep a consistent presence and post relevant content Players who have a reputation for slam dunks and three-point shots quickly become fan favorites. If you consistently post interesting and reliable updates that affect your audience directly and immediately, then the more loyal your fan base will become. In the mortgage industry, things are constantly changing and these changes have a definite impact on consumers, loan officers and other business referrers. There is a constant flood of economic and industry news—keep track of what’s happening and frequently update your messages. Social networking is all about two-way communication. So how do you respond to negative feedback? Quickly and directly! This always requires tact. You have to remember that putting something out there is like taking the final shot at the buzzer— you cannot take it back. If you have a problem client who posts something derogatory
about you or your business, resolve it quickly, first privately and then online. Do not continue an argument online.
Connect with your crowd By understanding how to use social media effectively, your online game plan will help your company grow. There are books available that can provide more strategy details, and marketing firms can give you a jump start to help achieve quicker results. With the widespread use of social networking sites, now’s the time to get off the bench. John Seroka is vice president of Seroka & Associates, a full-service branding, advertising, marketing and public relations firm that serves a nationwide client base. He may be reached by phone at (866) 3790400, e-mail firstname.lastname@example.org, or connect with him at linkedin.com/johnseroka or at twitter.com/johnseroka.
Residential and Commercial: Working Together By William Pape, MSFS, CMC
1. Simply that one partner feels that he does not need the other partner; 2. One feels he is doing the majority of the work and only receiving a small percentage of the income; 3. One want to be “the boss;” and 4. One does not like the way the business is going, etc.
continued on page 38
1. What work will be completed by each party?
The bottom line is that both the residential and the commercial broker should assume that the relationship will not be long-lived and decide in their early negotiations how any future concerns may be handled. Certainly there are a number of things that one must consider prior to entering into a referral or co-brokerage relationship with another broker. In real estate, the slogan of greatest importance seems to be “location, location, location.” In financing, the greatest concern should be “ethics, ethics, ethics.” The ramifications of not taking the relationship between brokers seriously can be devastating to both parties. Have you thought about your licensing and your ability to continue to work in our industry? If you are a residential broker, whether you refer a client to a commercial broker or you enter into a co-brokerage relationship, you are probably receiving some compensation. Don’t you think that that means you have some fiduciary relationship to the client? If the client feels as though he has not been treated fairly, he undoubtedly will go back to the referring broker to vent his anger and maybe even request financial compensation. So, what to do? You should check references, qualifications, confirm licensing and general reputation before making a referral to anyone you do not personally know well. You should review the contract that your client is expected to sign. Are you a party to the contract? Does the client know exactly what role you are playing in the transaction? As a commercial broker working in concert with a residential broker to provide financing for one of the residential broker’s clients, you must consider your reputation within the lending community. Do your due diligence. Speak directly with the client and ascertain what, if any, information has been provided to the client by the residential broker. Does the potential client understand what is expected of him? Does he know what the residential broker’s role is in the financing endeavor? Does the client have any questions regarding the fee agreement? Are his expected financing results realistic? Networking is possible within a multitude of areas. We have stressed the relationship between the residential and commercial mortgage broker, but other networking relationships are also avail-
HAWAII MORTGAGE PROFESSIONAL MAGAZINE
Partnerships just don’t last very long. So, the answer may be to look at a co-brokerage or a referral relationship as being different than a true partnership. You can do that, if you have clearly defined the obligations of both parties. In a “referral” relationship, the referring entity is simply expecting a small pre-agreed fee to introduce the potential commercial client to the commercial broker. In a co-brokerage relationship, both parties are working together to obtain the financing for the client. Complexities can occur … is the referral fee to be paid for each separate transaction in the future? Who has the contract with the borrower? How much will the fee be? What happens if, in the future, the client contacts the commercial broker directly? The same questions come up in a co-brokerage arrangement with the addition of:
2. Will all future business be split the same way between the parties? 3. Who has the relationship with the lender and what happens to that contact, if the two brokers separate? 4. Are you sharing forms, documents, etc.?
There are all types of direct relation- have been called upon to co-broker the ships: Personal-business-client-lender- commercial transaction. Co-brokerage etc., in the lending world. But, there of a specific transaction is the evolution are also relationships built within a of the relationship between the resilarger framework of our dential and the commerindustry and beyond the cial loan broker. scope of your daily conSo, how do you build nections. Let’s consider this relationship between the relationship between the residential and comthe residential and commercial broker, when mercial mortgage broker. there is limited interacThis relationship may tion between the parties take us out of our norms and their interests are and into a temporary, or really not the same, even an evolving, associexcept for the fact that ation that may lead to a both seek financing for long-term alliance. their respective client? “In real estate, the Relationships that Generally, it is often the slogan of greatest work must allow for both commercial broker who parties to contribute so seeks out the residential importance seems to that the sum of the be ‘location, location, broker, who may, in the results of the work of future, have a commerlocation.’ In financboth parties is greater ing, the greatest con- cial transaction come than the sum of the work across their desk that cern should be ‘ethics, of the two individuals they cannot handle for ethics, ethics.’” considered separately. the client. Typically, a Generally, the beginning social relationship begins of this relationship occurs when the even prior to a possible working relaresidential mortgage broker needs help tionship. Of course, at times, the resiin obtaining financing for a commercial dential broker has an inquiry from a property, with which he or she is not client regarding a commercial transacfamiliar. The commercial broker must tion and initiates the relationship with a have already cultivated a measure of qualified commercial broker or at least confidence within the residential bro- attempts to find someone to help them kerage community or they would not complete the commercial transaction.
If I were the commercial broker, in order to develop these contacts, I would first consider joining the local, state and/or national organization that best represents both brokerages. This affiliation adds credibility to your endeavors to work as a co-broker. Second, I would try to educate your local residential brokers so that they may determine if they are really considering a “do-able” transaction. Third, I would offer assistance to anyone interested in learning more about evaluating commercial transactions. Whereas, if I were the residential broker, first, I would determine what areas of interest the various commercial mortgage brokers have, i.e. multi-family, small or large commercial, SBA, specialty or other types of properties. Second, I would determine the success rate of the potential co-broker. Third, I would determine what specific expectancies the commercial broker had in regard to my involvement in the transaction. Fourth, an equitable fee split arrangement must be agreed upon and a document signed. In both cases, references should be exchanged and considered and everything should be in writing. Very few “partnerships” are successful in the long-term. Consider those business partnerships of which you are aware and calculate how many have lasted say 10 years. Why? There may be a number of reasons:
able to both the residential and commercial broker. Not only do you have the possibilities within professional lending associations, but also within real estate and other organizations such as the national and local realtors’ associations, Certified Commercial Investment Members (CCIMs), Members of the Appraisal Institute (MAIs), financial advisors, insurance professionals, etc., but also with lenders, title companies and others either directly or indirectly related to the financing industry. One of the reasons that I have had some success in developing relationships within other professional groups is that I have continued to pursue professional designations within not only the lending industry, but also the financial services industry. It is much easier to “sell” yourself to other professionals, if you have the back-up of academic degrees or professional designations. We can all continue to educate ourselves—so take continuing educa-
tion whenever it is available. Good relationships are time-consuming and require effort on your part. It takes a long time to develop a sense of confidence within your fellow brokers, but only one mistake to ruin that relationship. Most things that are worthwhile are worth working hard to get. So get out there and develop great relationships with your residential or commercial counterpart and be more successful than you already are. William Pape, MSFS, CMC is with Commercial Mortgage Brokers, a company with offices in Arizona and Missouri. He has been a commercial mortgage broker for more than 20 years and handles only commercial transactions in excess of $1 million on a national basis. He served on the National Association of Mortgage Brokers (NAMB) board of directors for five years and directed six national commercial conferences for NAMB. He may be reached by phone at (480) 836-8681 or e-mail email@example.com.
Cultivating Your Relationships
HAWAII MORTGAGE PROFESSIONAL MAGAZINE
By Nat Hardwick
Many of the most rewarding personal going out to a marketing event, aggressivefriendship relationships in my life have ly shaking hands and collecting clients’ grown out of business relationships that business cards and then believing that the were nurtured over time. Early on in my hard work is over. They don’t periodically career, I learned that the check in with their new or recipe for successful, meanpotential clients, assume ingful, long-term business that no news is good news, relationships contains many and wait until the client of the same key ingredients picks up the phone first. that we subconsciously use Instead, please understand in developing and mainthat it is once a new client taining our personal friendrelationship has been ships—those key ingrediestablished that the real ents include being open and work should begin. Check honest with strong lines in with your clients regularof communication; being ly, solicit honest feedback accessible; properly followand then take action based “One of the worst ing through; dependability on the recommendations mistakes that I see and a willingness to do they make. Listen to your whatever it takes to help the professionals make in clients and show them that this business is going what they tell you is imporother side out. out to a marketing Put simply, one should tant. Think of your clients nurture their business relaas outside consultants or event, aggressively tionships with the same trusted friends who can regshaking hands and level of care and concern ularly advise you on ways collecting clients’ that they nurture their peryou can improve. business cards and sonal friendships. The reality One technique that I’ve then believing that is that when one adopts this found to be highly successthe hard work is mindset, one quickly learns ful to facilitate regular and over.” that, just like meaningful ongoing communication is friendships, highly successoffering my clients aroundful business relationships also take a lot of the-clock accessibility. I give new clients time, effort, hard work and commitment. my personal cell phone number and Regular contact and open, direct com- assure them it is fine to call any time, day munication are critically important to or night, to reach me. It is a small gesture developing meaningful business relation- in which I demonstrate to them that they ships. One of the worst mistakes that I see are important and offer the reassurance professionals make in this business is that a decision-maker is always accessible
to them in any situation. Whatever method you choose, make sure clients know they can get a hold of you when they have a concern and ensure that they feel like it is appropriate to contact you directly. I have also discovered over the years that regularly checking in and communicating with existing clients is an excellent way to increase your existing client base. One successful way to generate new business relationships is through the kind recommendations and the referral of existing clients. If you have provided a client with a positive experience, ask them if they would recommend your services to a friend of theirs. Better yet, ask them to facilitate an introduction to other key producers within their office. I cannot stress how important this technique was to helping my firm, Morris|Hardwick|Schneider, grow. In fact, if I sit down with our current client list, I feel that it is a “family tree” of sorts, where each loyal client has led to a fruitful relationship that led to another and so on. Just as your circle of personal friends grows naturally as you meet friends of friends socially, so should your network of business network expand over time. Just as important as regularly touching your clients and showing them that you care about their business concerns, as well as them as people, is a requirement that you respond and react appropriately to the information you receive. Solicit earnest feedback from your clients and then use that feedback as a springboard in implementing governing policies and procedures within your organization. Frame your service around your clients’ needs. In today’s marketplace, practically every business pays lip service to the same ideal that the client is priority number one and customer service is tops. These often-repeated claims appear in everything, from commercials and marketing materials, to printed receipts and coupons. Due to this overexposure, what should be highly meaningful business statements have become merely empty words in the eyes of many consumers. Rather than preaching about your superior service, demonstrate your commitment to exceptional service by showing your client that they are your number one priority. Showing, in addition to telling, will earn you credibility and loyalty from clients who often hear empty promises of the same from your competitors. One way I have undertaken to demonstrate my commitment to putting our clients first is by embracing exceptional service as a company-wide commitment. We have put this promise into practice by using client feedback and suggestions to devise a specific set of service standards, our BASICS. These BASICS govern our daily operating procedures; the very heart of their purpose
is to maintain and build positive and fruitful client relationships. The BASICS are not an amorphous “vision statement,” rather, they are specific requirements and timelines. We publish these BASICS to our clients, and ask that they hold us accountable for them. Putting your neck on the line in this way is not easy, and it certainly involves reputation risk, but by publicly setting the bar high and continually striving to improve to exceed our own standards, we have built lasting client relationships that have enabled our success. As an owner or manager, you absolutely must make sure that you have a team working with you that also shares the belief that meaningful business relationships are essential to continued success. Enlist their support in managing and maintaining the business relationships that you initiate. As a business grows, it becomes impossible for one person to be the “do all and end all” of managing every client relationship. I am constantly reminded how important my team is in maintaining every client relationship within our firm. Certainly those whom you surround yourself with as employees within your organization can make or break the client relationships that you have worked so hard to put into place. Ensure that everyone down the line who interacts with the client shares the same respect for the relationship that you espouse. Our BASICS: Treat everyone with courtesy and respect. Demonstrate professionalism and a positive attitude. Return all phone calls and e-mails within two hours. Meet all promised deadlines. Always go the extra mile to close the loan. Communicate with clients and borrowers and address potential problems prior to closing. Send the HUD-1 Settlement Statement to all parties within four hours of receipt of closing instructions. Complete the title commitment and send to the client within 48 hours of receipt of title order. Follow the Good Faith Estimate (GFE). Start all closings on time. Nat Hardwick is a managing partner with the firm of Morris|Hardwick|Schneider. Nat serves as chairman of the board of directors and chief executive officer of LandCastle Title. He also serves on the Board of Directors of the LandCastle Title Foundation. He may be reached by phone at (678) 298-2100 or e-mail firstname.lastname@example.org.
How to Gain New Clients in a Volatile Market By Dr. Kerry L. Johnson, MBA
HAWAII MORTGAGE PROFESSIONAL MAGAZINE
The Dow decreases by 38 percent and II. Let your clients know then increases by 42 percent, all in one that their own biases will year. There is a high likelihood that the cause them to make bad market will correct itself. Mortgage mortgage choices. rates have increased and then In one University of Michigan study, if an decreased. It has been easy to qualify investor missed the 40 best-performing for a loan and now it’s hard. Even if the days in the market from 1963 to 1993, the Fed is able to stabilize the credit mar- average return would have dropped from kets, people are fright12 percent to seven perened of change. Your cent. While you aren’t an hope is to maintain your investment broker, the client base, but you can same concept is true do much more. You can when looking for the right grow your business even mortgage. In the Journal during these treacherous of Economic Behavior and times. Organization, Richard Are you diligent in Thaler wrote that more making calls to your top people make mistakes by tier clients? In past “turbunot making decisions lence,” you have learned than by making the wrong the lesson that making ones. frequent client calls is a “In a Forester There is also a high great way to hand-hold tendenc y for your research study, broyour clients. In a Forester kers who talk to their clients to avoid making research study, brokers clients at least once a changes to their mortwho talk to their clients at gage plans despite good month during least once a month during reasons for doing it. In volatiles times, lose volatiles times, lose fewer one Boston University fewer clients to the clients to the competition study, subjects were and gain many more competition and gain offered a choice of varireferrals. But what should many more referrals. ous investment products you say on those calls? But what should you and expected returns. Here is a four-step process After making choices, say on those calls?” to not only avoid losing the participants were clients and their assets but informed some of the also build your practice. choices were already in their portfolio. Forty-seven percent changed their I. Bring your client back mind and decided to stay with the to their original goals products currently in their portfolio. One of my coaching clients audio This is one of the reasons clients are records with permission the opening often willing to ride an inappropriate meeting laying out the needs and mortgage into ruin. This status quo desires of the client in preparation to bias of only accepting 30-year-fixed create a mortgage plan. When making loans or the lowest monthly payment the monthly follow-up calls, he then may be the wrong decision but yet the uses the exact words the client stated one the client is used to owning. in that meeting. “When we first met two years ago, you mentioned that III. Be armed with at least your most important goals are having three solid stories of your an income of $8,000 a month and clients who weathered make it last until you pass away, pay volatile periods in the your home off in 15 years and provide past and came out ahead for your children’s college expenses. using your advice You also want to travel during retire- The reason your clients panic during ment at least four times a year at an recessionary periods is due to emotion, expense of $5,000 per trip. Are these not logic. Don’t try to console them only goals still important to you?” with logic, they won’t stay convinced. Bringing your clients back to their They cannot remember the logic and are original goals will assure them you are again consumed by emotion. That is why still in control and still on track to meet you should always use solid behavioral their goals. economics arguments followed with sto-
ries the clients can remember. If you can After steps one through three, here are do that, you won’t have to say the same the words you can use to gain referrals: things over and over to the same clients. “I really enjoy working with you. I am IV. At the end of the always trying to build my business with my best clients. Who do you know who conversation, ask for could benefit from the kind of relationreferrals I am sure the last thing you think of in ship we’ve had so far?” a volatile period is ask for referrals. It’s like asking a car crash victim to buy Using this script will secure two life insurance while still in the ambu- referrals and one new client within six lance. Yet while most brokers don’t months from every referral request. even call their clients during downContrary to common sense, your turns. You will be able to pick up more clients depend more on your ability to market share (clients) who are terrified communicate than your ability to pick the about losing their home or making right mortgage for them. There is no rule payments in the future. You may also that you have to lose clients during be able to attract more clients already volatile periods. In fact, most of my coachdisgruntled with the lack of client con- ing clients who keep in contact with their tact from most brokers. I played tennis own clients are having a record year. They recently in my regular Sunday match are gaining clients and because prospects in Newport Beach, Calif. The topic of are scared and need someone to advise conversation was how much money them on the right real estate financing we all lost the prior week. The conver- decisions. Seventy percent of these HNW sation also migrated to our respective prospects don’t have a mortgage broker home mortgages. I flippantly asked if they can trust and the remaining 20 perany mortgage broker had contacted cent have absentee brokers. This is the them over the last 12 months. All best time since 2003 to protect your client shook their heads no. base and gain more referrals. According to one study, 57 percent of your clients would never use you again if Dr. Kerry L. Johnson, MBA is a best-sellanother mortgage broker approached ing author and speaks at mortgage them. This means that many high net industry conventions around the world. worth (HNW) clients would meet with you His personal coaching company, Peak if you had the courage to ask. In another Performance Coaching, promises to study at the University of Connecticut, increase your business by 80 percent in researchers discovered that 89 percent of eight weeks. He may be reached by clients cared more about the relationship phone at (714) 368-3650 or visit with their broker than about interest rate. www.KerryJohnson.com/coaching.
The Art of Building Strategic Business Alliances in Today’s Challenging Economy
Perhaps the most challenging step, includes your potential clients, and the one that some people dread, is rather than your peers. the face-to-face meeting with a potential contact. At times, it can be challeng- Honesty is the best policy. Being ing to initiate, let alone maintain a relahonest and truthful at all times will tionship, but below we have outlined show your credibility and prove that some successful tactics that have been you are the real deal and that you beneficial for our business networking are always looking out for their best efforts: interest.
HAWAII MORTGAGE PROFESSIONAL MAGAZINE
By Greg Perrine and Tim Markel
Relationships can be defined as the way in relationships. It starts with doing your which two or more concepts, objects or homework in advance, so that you have people are connected. The art of building pertinent knowledge about the individlong-lasting relationships is essential to ual, their employer and their business growing your business and flourishing in in general. Being able to identify comyour respective industry. Successful people mon interests, work-related and nonhave the ability to develop relationships work-related, also provides a solid founthat are effective, beneficial and endure dation for establishing an effective relationship based on personover time. Given the current al camaraderie. And finaleconomic climate, estably, you must put yourself lishing and maintaining in the right situations to relationships has never meet your top tier conbeen more imperative. tacts and capitalize on Even with the best the encounter through products and business diligent follow-up. practices, you still need Doing a little research strong relationships to sucbefore you approach a ceed in the real estate potential client or busiindustry. Building strategic ness contact sounds obvialliances and partnerships ous, but a surprising numis an important aspect of keeping your business rel- “The art of developing ber of people don’t take evant and enabling you to and maintaining rela- the time to do it right. The grow as an individual and tionships comes more company Web site, if there an organization. The art of easily to some people is one, is the place to start. developing and maintain- than others. However, Here you’ll find information on what the company ing relationships comes with a strategic plan, does, who its clients are more easily to some peoa little practice and and, if you’re lucky, a bio ple than others. However, determined follow-up, of the person you plan to with a strategic plan, a little practice and deter- anyone can become an meet. Of course, there’s effective networker.” always a Google search mined follow-up, anyone —Greg Perrine, and other online tools can become an effective Project Manager, The that can lead you to news networker. Moote Group articles, organizations and The first step is to idenother tidbits about your tify your target: Who are the individuals and businesses that can contact. Check Web-based networking enhance your bottom line or play a and social sites such as LinkedIn, Plaxo or vital role in the growth of your busi- Facebook for more details with an eye ness? In addition to prospective clients, for other ways to engage with and estabthink about contacts who might be lish a concrete connection. And don’t forgood referral sources or can connect get to tap the knowledge of other peoyou with those hard-to-reach people ple, including your own team. Our firm has a bi-monthly meeting that may have work for you. Establish a priority list and map out a plan as to to talk about new contacts, relevant how you can connect with each of those events and changes in the industry. It’s also a great way to get feedback on your resources. Your goal should be to establish a networking strategy or find out if any of mutually beneficial relationship. The your co-workers can help you with a concept of reciprocity in business has connection. We keep details notes on been around for ages, but too often we our networking in spreadsheet format forget that sometimes it’s better to give and note contact information for each than to receive—especially in the person or business. Our combined conbeginning. The next time you meet tact list—accessible to the entire team someone who can help your business, and constantly updated—forms the database through which we send e-mail ask first what you can do for them. There are many different ways to announcements on our services and effectively build mutually beneficial recent accomplishments.
Always be prepared! It is amazing how Provide a service that is unmatched many times you will meet someone of by others in your industry. At the end related interest when you least expect of the day, providing a great service it. Being open to all options is crucial is what will make your clients continbecause sometimes you meet people ue to do work with you. in the most ordinary of places. How many times have you been at a restauThe above-mentioned tools have rant, on a plane or at your kid’s soccer given us an advantage in building our game and started talking with the per- network. There are times when we do son next to you—only not want to attend events to find out that at one or meetings, but at the point you both worked end of the day, if you are for the same company diligent with your efforts or on the same project. the rewards you reap will Being able to leverage be immense. past experiences or Relationships are great encounters on the fly and essential to your busiwill prove to be ness, but it is the ones that extremely beneficial for can be sustained over time establishing or rekinthat will prove to be profdling a relationship. itable. You can go through the trouble of preparing Face time is very yourself and putting your“Remember, respect important to main- and trust are the glue self in the best position, taining a relationship. but all will be for naught if that holds together With all the text mesyou can’t sustain those functioning teams, saging and e-mails partnerships and man- relationships over time. these days, the imporBeing proactive and anticiaging relationships.” tance of putting a face pating your clients’ needs —Tim Markel, CFD to a name has taken a will give you a leg up over back seat. Stopping by Administration/Reim- your competition. You bursement Division a client’s office to say need to show your potenManager, The Moote tial client you have the hello or asking them Group to lunch will imply skills and knowledge to that your client is anticipate their every need always on your mind. Remember, in and that you will put them in the best order to maintain a relationship over position to benefit. Relationships are time, they must be nurtured and something that constantly needs to be taken care of with the required com- nurtured and taken care of. ponents noted above. It is not easy to establish a firm relationship let alone sustain one for the One way to engage quickly with peo- forthcoming years. Relationships can ple is to establish a common interest be compared to a redwood tree. A redor friendship prior to discussing wood has a solid foundation based on business. Being able to relate on a enriched roots and can grow to be the personal level first will make future tallest tree in the forest, but without interactions about business much the necessary ingredients, it will not more effortless. Don’t try too hard to achieve its greatest potential. force the issue. Allow the conversa- Consistency and timeliness in a relation to dictate the topics of interest. tionship provide an individual and/or client a mechanism to depend on you. Get involved with industry commit- It is going to take time to establish a tees and community activities. worthwhile relationship and being conMaking time for groups play a vital sistent and unrelenting with your role in how well-rounded an individ- efforts, will significantly increase the ual you are. Look beyond the obvi- effectiveness of your hard work. It has ous professional organizations that been said that you have only ten touchrelate to your own industry. You may es (phone calls, personal interactions or want to be a member of a group that e-mails) with a prospective client
before the opportunity is lost. That being the case, it is vital to treat each interaction with the importance it deserves because it could be your last. In today’s challenging market, you have to build successful relationships and interact with people in a positive way to attain your organizational goals. Building relationships is such a vital aspect of your business, so vital, there are divisions within your company where their sole task is to bring in business. Remember, respect and trust are the glue that holds together functioning teams, partnerships and managing relationships. Through
hard work and persistence, you can really make a difference in establishing an effective relationship that is mutually beneficial to both sides. Greg Perrine is a project manager and Tim Markel is a CFD administration/reimbursement division manager at The Moote Group, a full-service construction management firm serving California, Nevada and Arizona. Greg may be reached by phone at (714) 751-5557, ext. 246 or e-mail email@example.com. Tim may be reached by phone at (714) 751-5557, ext. 217 or email firstname.lastname@example.org.
Knotworking: Beyond Networking By Laura Lynn Burke
Now is the time to take action, start knotworking, forming alliances, building relationships, bonding and partnering today! Many individuals refer to networking as an activity that is done for the benefit of obtaining business, but knotworkers understand that networking is an activity that can be used for purposes other than business gains. Knotworkers know that true knotworking can lead to life-long relationships that often become great friendships. I am stressing the importance of knotworking, not for a specific need, but for the gain of new and lasting relationships. A comparison would be a transactional salesperson or a relational salesperson? Which one are you?
Are you a transactional person or a relational person? A transactional person is in the mindset of what’s in it for the moment. “I need to close this transaction, and if I never hear or see from you again, so be it.” The relational person is quite the opposite. The main focus is to make this experience a positive one for you, as well as build a bond, friendship, or unity of some form, regardless how weak or strong. It’s the initial tie that the relational person is looking for. Therefore, in my eyes they are a knotworker. While there are far too many achievers pushing to succeed at whatever the cost may be, individuals and team members become dispensable, when necessary. This has become an acceptable business practice. It is an inexcusable to use an act in this manner to propel yourself forward. We must look at business differently. Knotworking, combined with “networkology” is the key to the future, and more importantly, basic principles that continued on page 42
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It’s a team or group effort of promoting one another and mutually benefiting, void of the “What’s in it for me?” attitude. That attitude doesn’t exist in knotworking. In knotworking, all (team members or groups) are working towards long-term goals, binding win-win relationships— relationships that both nurture and feed one another. I remember hearing a You’re losing story about a town trying to money! build a very large monuEveryday that you are not ment of stone many, many talking to somebody, you years ago. The men in the miss an opportunity to town would hoist large knotwork. By using the art stones up with a rope and of “knotworking” which is a pull. Eventually, the statue word I coined, you will became too tall for any one become more effective at person to pull the single networking, know when rope up and lift the stone. the best time to ask for a They stumbled upon referral is, and once you have the referral, you will “LinkedIn, Facebook, the idea of braiding the know how to take it to the Plaxo and Twitter are single ropes they had next level. key marketing compo- together, and tying them, this added strength to the The difference between nents, as well as a rope, and they used a networking and knotworkfabulous way to stay team of men to pull the ing is the same difference between a transactional in touch with possible ropes with the very large referral sources. By stones to the top. This sale and a relational sale. Networking, like the trans- build the relationship story exemplifies two key points, the tying and actional sale, is for today first, referrals will braiding of the ropes coupled with the attitude come later.” made the rope stronger, of “What’s in it for me?” Networking is the exchange of superficial like a group of people with similar pleasantries between parties and then thoughts bonding together to make a comes, “What’s in it for me?” The other difference, the second is that by workparty counters, “What I need is referrals.” ing together as a team they were able to Knotworking, on the other hand, is lift much heavier stones than trying to creating teams, forming partnerships do so individually. This old story reflects and building relationships through my theory on knotworking implicitly. trust, loyalty and mutual respect. It’s a bond, a unity, a tie or knot that strong- The difference between ly holds those involved together like networking and finely woven fabric. It’s the difference knotworking between being a thread or a piece of By understanding the difference between networking and knotworking, you will finely woven fabric. Networking is the sharing of referrals. Knotworking is the sharing of abilities, resources and knowledge. It is through knotworking that you will understand the power and benefits of investing in relationships. Networking was a must in the past, in today’s marketplace “Knotworking” will be your survival.
become more productive and profitable, by eliminating cold calls, phone-a-thons and unproductive, busy work that wastes your time, replacing it with knotworking. I once heard Dr. Kerry Johnson, author of Mastering the Game: The Human Edge in Sales and Marketing said, “The definition of a ‘top producer’ is someone who has the ability to make cold calls, but never actually has to. Nine out of 10 cold calls will end in rejection, while seven out of 10 referralbased calls will gain new business.” We’re facing serious challenges with business as we know it. Our industry is faced with extreme changes, including slow downs and shut downs. In the mortgage business, we routinely see new rules and regulations, less lenders and tightened guidelines, while technology continues to expand our marketing capabilities. Our business is referral driven, so you must learn to combine traditional methods of networking with current technology in order to take control of your business. In order to win in today’s marketplace, you cannot afford to make a wrong move. Knotworking provides solutions and the tools to prepare you for higher levels of networking that will be expected. Knotworking will put you on the cutting-edge by learning where to mine for referrals, how to build strong alliances with bonds that tie and give you knowledge to create your own hubs or referral trees that will keep you flourishing. Knotworking isn’t something you can turn on and or off. It’s an ongoing process that you continuously improve and perfect. Some people are natural born networkers or have acquired the skill somewhere during their childhood; others must learn the skill and techniques. Our most important skills can be learned. Once you’ve started to knotwork, you will never want to stop. It will be a dynamic tool you can use to build your business.
individuals are people and are to be treated with kindness and respect. One never knows who could be a diamond in the rough. Through knotworking, you can start building those ties and bonds today.
Free Fall Networking
HAWAII MORTGAGE PROFESSIONAL MAGAZINE
I went to a convention in Atlanta for one of my business ventures. I walked away with three potential deals for another business in which I was involved in. I also made two new friends and one acquaintance who shared a great story with me. I encountered these other business transactions for two reasons.
First, the woman I was traveling with, a friend Betty had a great deal of respect for me within the industry and felt comfortable referring me to her friends, because she trusted me. She opened the door for conversations and it was up to me to build the relationship and ask for the business. A referral. Second is what I call “Free Fall Networking.” No, you’re not networking without a net, but you really aren’t there for business nor did you plan or position yourself to be there. It’s an event that leads you to unexpected knotworking opportunities. You bond almost instantaneously with someone, and before you know it, you’re doing business together. This is considered “Free Fall Networking.” Planned networking is when we plan to meet a certain person or to do something, such as attend a function, mixer, seminar or party. Neither
planned nor Free Fall Networking is better than the other. They are just different. Know the difference; learn to understand the dynamics of both to be an expert in networking. Futurists are telling us that relationships will be the most important factor in doing business. The author of Endless Referrals, Bob Burg tells us that “People will do business with those people they know and trust!”
Investing in relationships Quite a few years back, I had an unusual situation occur. I was working as a loan officer for a bank. I had to make a judgment call very quickly. I believe I did the right thing. The situation involved a great referral source, a builder, Larry, who had been my client for years. We had a comfortable, lengthy business relationship. He knew he could count on me to get the job done. We made a deal a few years back never to ask the other person to jump through burning hoops unless absolutely necessary. When asked, then you knew it was serious and immediate action would be taken on both sides. We discussed situations rationally, without unreasonable expectations of one another. We had built a relationship on trust, loyalty and mutual respect. He called me one morning and was interested in refinancing his own home loan. He asked me, “What could I do to help?” He called during the worst possible week! This was during the 1993 refinance craze when banks, from time to time, would raise their rates just high enough to slow down the volume giving them a chance to catch up and breathe. The bank I represented had done just that, raised its rates just slightly over
current market rates. I knew that we were higher than others at this time and there wasn’t anything I could do. So it was my dilemma! I knew my rates were not the best, competitive maybe, but not the best! This was my great business associate and referral source. If I quoted Larry my rates and he made a few phone calls, he could think I was taking advantage of our relationship, especially after all the business he had referred to me. He would have probably laughed and said, “What are your real rates?” I made a quick decision. I knew which lender had the best rates in town. It was also the lender who was kicking my butt! I also knew on a normal daily basis they weren’t the lowest and they didn’t have the niche products that I had. He didn’t need a niche product. All he wanted was the best rate. He was looking to me to give him the best rate. So I did! I took a risk. I said to him, “I can tell you where to go today. They have the best rate not only in town, but also in three counties. I cannot come close to their rate. Please, this is between you and me. I’m telling you this for your personal business. Next week, my rates will be down again, but not today. I want you to be happy as my business partner, so I am sending you to my competition.” I was playing Miracle on 34th Street, Macy’s referring Gimbels … Gimbels referring Macys. I referred him to another lender.
offering. I know it’s slightly higher than most, but we have a relationship so you have to work with me. You have to do your deal at the higher rate because it’s me. No other reason, I cannot beat the rate. I have the same service, but you have to take this rate because of our relationship.” How long do you think that our relationship would have lasted? I would have lost not only the relationship, but his respect as well. I opted to lose the transaction but keep the relationship. The very next week, he referred me to one of his construction clients, as always, no reservation or hesitation on his part. When you find yourself in a similar situation, think twice before you make a sales pitch to someone with whom you have a relationship. Always put the relationship before the transaction and commission!
What lies ahead
There will be changes in the future that will affect the way business is conducted. Technology will appear as a stronger force in sales, marketing and customer service. It is convenient, relatively easy to set-up and cost effective. LinkedIn, Facebook, Plaxo and Twitter are key marketing components, as well as a fabulous way to stay in touch with possible referral sources. By build the relationship first, referrals will come later. The world is evolving and we are history in the making. We may not see it happening, but we are creating history. Keep the relationship, We all need to take inventory regarding how we expect to grow our business in lose the transaction I lost the transaction, but kept the rela- this “new marketplace.” tionship! In fact, I even solidified our relationship. I lost the transaction, but I Laura Lynn Burke has been selected from didn’t lose my friend as a colleague in a nationwide search to be featured in the process. I strengthened his trust in Stepping Stones to Success, a highly sucour relationship and in me. I looked like cessful book series. The book features a “hero” instead of a “loser!” If I had best-selling authors Deepak Chopra (The tried to sell him on a bogus interest Power of Purpose), Jack Canfield rate, I would have risked our entire rela- (Chicken Soup for the Soul), Dr. Denis tionship, one of mutual trust and Waitley (featured in The Secret) and respect. I also kept control of where I Laura Lynn Burke (Networkolog) who are sent him. I knew they couldn’t fill my joined by other well-known authors each shoes for the future needs of his cus- offering time-tested strategies for success tomers. What if he’d been dissatisfied in frank and intimate interviews. Laura with my assistance and went in search is also the CEO and founder of of another lender on his own. Who then Footprints International d/b/a The might he have stumbled upon, a poten- Mortgage Institute, a training and contial new source for his customers. I did- sulting company designed with you in n’t want that to happen. mind. For more information, call (708) He was happy and respected my can- 692-6199 or e-mail firstname.lastname@example.org. dor because in his time of need, I came through. It didn’t matter that I didn’t Visit author Laura Lynn have the best interest rate. What matBurke’s Web site at tered was that I was the person who www.lauralynnburke.com found the lender who did give him the where she arms you with the best interest rate. information to “Prepare today for What if I had said to him, “I expect tomorrow’s changes, and you will stay you to take the rate and program I am one step ahead of the competition.”
new to market
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LPS launches automated property valuation model
eLynx launches e-closing network
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Plus Postage & Handling
Think Reverse! Table of Contents Part I: The new pillar of retirement security Part II: Marketing reverse mortgages: It’s all about education Part III: Originating reverse mortgages Part IV: Enhancing freedom: The essence of reverse mortgages Part V: A new frontier in mortgage lending
“Atare Agbamu is one of only a handful of people in the reverse mortgage arena who possesses a commanding understanding of the reverse mortgage industry. As an originator, he has hands-on experience educating seniors and their advisors. As author of the “Forward on Reverse” column in The Mortgage Press since 2002, Atare Agbamu communicates nationally with the housing finance community, bringing the unique insights and experience of an ardent reverse mortgage expert into a wider business context. “This book combines Atare’s keen insights and know-how with extensive research to create a first of its kind resource for the reverse mortgage industry. It offers a comprehensive overview of the industry plus detailed information on marketing and originating reverse mortgages. “Present and future reverse mortgage professionals and senior advisors will profit from decades of experience skillfully woven into this book. If you plan to succeed in this industry, this book is the place to start.” —Sarah F. Hulbert, President, Senior Financial Corporation and former four-term Co-Chair of NRMLA’s Board of Directors “When I first began reviewing the contents of this book, I became quite jealous ... Atare Agbamu has set down an impressive amount of information ... And he delivers it in an easy-to-read, simple-to-understand style that will make this book essential reading for all reverse mortgage professionals.” —from the Foreword by Jim Mahoney, Co-Founder and Former Chairman, Financial Freedom Senior Funding Corporation, and former four-term Co-Chair of NRMLA’s Board of Directors “The stories [Chapter 15: Profiles in Satisfaction] are the best vehicle to increase understanding and acceptance of reverse mortgages among us laypeople. They are very compelling ...” —Therese Cain, Executive Director, Minneapolis/St. Paul Chapter of Little Brothers—Friends of the Elderly “This book should be required reading for all new loan consultants originating reverse mortgages and is recommended for experienced ones as well. This book provides excellent insight and information on preparing ahead to provide the service our seniors deserve, to ensure a smooth loan process and shorten the time to closing. Most of the problems caused in the processing and closing of reverse mortgages come from inadequate preparation.” —Deanne Opstad, AVP, Senior Underwriter, Generation Mortgage Company
eLynx, a portfolio company of American Capital, has announced an innovative electronic closing network (eCN) service that lenders are integrating into their existing closing process to increase loan quality and provide more control in order to meet the government’s demands for more accurate closings. The move will help lenders ensure borrowers and settlement agents have a better experience at the closing table. Lenders and their customers will benefit from eCN’s settlement agent management component, which provides vital information about the agents who handle the closings, their processes and disbursement. These details will help lenders accelerate the delivery of the closing package and funds, avoid fraud, service issues and other problems that can be costly to all parties to a closing and negatively affect the customer experience. eLynx reports that over 65,000 of the 300,000 plus settlement agents the company works with have already registered on the eCN system. Built on eLynx’s expedite platform, eCN connects disparate industry parties and their supporting systems in ways that never existed before. The result is a single view into regulatory compliance, a streamlined process, reduced risk of errors and fraud, and improved customer service. “More than 98 percent of the industry’s closing agents already use eLynx’s expedite services, and now, through
HAWAII MORTGAGE PROFESSIONAL MAGAZINE
Lender Processing Services Inc. (LPS), a provider of integrated technology and services to the mortgage and real estate industries, has announced the availability of its new automated property valuation model, LPS AVM, to assist the mortgage industry in establishing and verifying property values for underwriting, quality control and due diligence. LPS has combined its public records data, analytics and modeling resources with its valuation experience to deliver a thorough automated valuation report via LPS AVM. The report, which delivers increased hit rates and improved accuracy, will include a value estimate; up to 10 comparable sales listings with a location map; a statistical confidence interval band; a history of subject property transactions and finance activity; and regional price trends. “LPS AVM is powered by our robust
public records database and multiple valuation modeling methodologies, and is complemented by ongoing quality control and reliable customer service. However, we offer mortgage bankers far more than an AVM,” said Nima Nattagh, Ph.D., senior vice president of LPS Applied Analytics. “In addition to our suite of AVMs and a cascade interface, LPS is also a leading provider of desktop and field valuations. The extensive collateral valuation expertise offered by our modelers and developers enables LPS to partner with lenders, servicers and capital market professionals to determine the right products at the right points in the collateral valuation process.” LPS Applied Analytics collects and compiles real estate public records data directly from the county assessor and recorder offices in jurisdictions that cover 89 percent of U.S. residential market activity. The database describes property characteristics, ownership change, sales and financing data. For more information, visit www.lpsvcs.com.
applications from the point of origination. MERS FraudALERT, powered by Interthinx, will help identify and prevent fraud through the sharing and reporting of key data among the more than 62 million loans currently registered on the MERS System. Lenders using MERS FraudALERT will submit loan application data and incident reports with suspected or confirmed fraudulent activity to a centralized database. The system will then notify other lenders who have loans that may have connections to the data, alerting them to possible fraudulent transactions in their pipelines. “While the industry currently has access to excellent loan-level fraud detection technology, lenders still face unacceptable risk,” said R.K. Arnold, MERS president and chief executive officer. “Fraudsters circumvent those tools by perpetrating multiple instances of fraud concurrently because no one is speaking to each other. Only by creating a collaborative industry wide fraud prevention database can this activity be stopped. MERS FraudALERT will become the national mortgage fraud detection and prevention utility. By participating, lenders can show that they take fraud prevention seriously.” MERS FraudALERT combines MERS’s infrastructure and industry-wide integration with the proven fraud detection capabilities of Interthinx. Lenders who register their loans on the MERS System will have immediate access to the first industry wide database of fraud-related information through the new product, making any fraud screening technology more effective. For more information, visit www.mersinc.org or www.interthinx.com.
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eCN, eLynx can offer detailed information on these vital partners,” said Sharon Matthews, eLynx president and chief executive officer. “This additional data gives our lenders insight into who is interacting with its customers, helps them mitigate fraud more effectively, and ultimately gives them more control over the entire customer experience.” For more information, visit www.elynx.com.
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: email@example.com
Note: Submissions sent via e-mail are preferred. The deadline for submissions Your turn National Mortgage Professional Magazine is the 1st of the month prior to the tarinvites you to submit any information get issue.
• Daily updated mortgage • Find loan programs • Discover local and industry news national events • Industry blogs • Write your own blog • Get access to video
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 firstname.lastname@example.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) 7936222 or visit www.mortgagebankers.org. Tuesday-Thursday, February 9-11 Nationwide Mortgage Licensing System 2010 User Conference & Training Rancho Bernando Inn 17550 Bernando Oaks Drive • San Diego For more information, call (202) 2962840 or visit www.nationwidelicensingsystem.org.
Abacus Mortgage Training and Education .......... www.acethesafe.com ............................................34 ACC Mortgage .................................................. www.weapproveloans.com ....................................35 AMB Links/DBA Alliance AMC ..........................................................................................................4 Byte Mortgage Software/CBC Companies ............ www.byte-cbc.com ..............................................18 Calyx Software ................................................ www.calyxsoftware.com ........................................22 Closing.com .................................................... www.closing.com ................................................18 Direct Group, LLC ............................................ www.dgmortgagemarketing.com ..........................18 Elliott and Company Appraisers, Inc................... www.elliottco.com ..............................................39 Emigrant Mortgage Company ............................ www.emigrantmortgage.com ................................32 Entitle Direct Group.......................................... www.entitledirect.com ..................Inside Front Cover Etrafficers........................................................ www.etrafficers.com ............................................42 FindMortgageJobs.com .................................... www.findmortgagejobs.com ................................HI3 First Source Capital Mortgage, Inc. .................... www.fscmortgage.com ..........................................11 Franklin First Financial .................................... www.franklinfirstfinancial.com ............................22 Frost Mortgage Banking Group ........................................................................................................9 Guaranteed Home Mortgage.............................. www.ghm.com ....................................................23 HTDI Financial ................................................ www.htdifinancial.com ........................................33 MBA-NJ/NJAMB ................................................ www.mbanj.com ....................................................5 Mortgage Concepts .......................................... www.mortgageconceptsonline.com ........................10 Mortgage Now, Inc. .......................................... www.mortgagenow.com ..........................Back Cover Mortgage Trainers of North America .................. www.mtgtna.com ................................................39 MortgageProShop.com...................................... www.mortgageproshop.com ..................................43 NAMB Legislative Conference ............................ www.namb.org ..................................................HI4 NAPMW .......................................................... www.napmw.org ..................................................27 Platinum Credit Services, Inc............................. www.platinumcreditservices.com ..........................21 Presidents First Mortgage Bankers .................... www.presidentsfirst.com ......................................13 Solid Solution Escrow ....................................................................................................................41 Stearns Lending, Inc. ........................................ www.stearns.com ................................................18 United Northern Mortgage Bankers Ltd. ............ www.unitednorthern.jobs ...... 11 & Inside Back Cover United Wholesale Mortgage .............................. www.uwmco.com ................................................41 US Home Loan Advocates .................................. www.ushla.com ..................................................20 Wall Street List ................................................ www.wallstreetlist.com ..........................................7 Wells Fargo Home Mortgage.............................. www.brokerfirst.com ............................................12
Saturday-Thursday, February 20-25 National Association of Mortgage Brokers 2010 Legislative & Regulatory Conference Hyatt Regency Washington on Capitol Hill 400 New Jersey Avenue NW Washington, D.C. For more information, call (703) 3425900 or visit www.namb.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. MARCH 2010 Sunday-Wednesday, March 14-17 27th Annual Regional Conference of Mortgage Bankers Associations Trump Taj Mahal Casino Resort 1000 Boardwalk at Virginia Avenue Atlantic City, N.J. For more information, call (973) 3797447 or visit www.njamb.org.
Sunday-Wednesday, April 25-28 Mortgage Bankers Association National Fraud Issues Conference 2010 Hyatt Regency Chicago 151 East Wackler Drive • Chicago For more information, call (800) 793-6222 or visit www.mortgagebankers.org. AUGUST 2010 Wednesday-Friday, August 18-20 California Association of Mortgage Brokers 2010 Annual Convention & Grand Exposition Hyatt Regency Long Beach 200 South Pine Avenue Long Beach Convention Center 300 East Ocean Boulevard Long Beach, Calif. For more information, call (916) 4488236 or visit www.cambweb.org. OCTOBER 2010 Sunday-Wednesday, October 24-27 Mortgage Bankers Association 97th Annual Convention & Expo Atlanta Georgia Congress Center 285 Andrew Young International Boulevard NW • Atlanta For more information, call (800) 793-6222 or visit www.mortgagebankers.org. MO
Sunday-Wednesday, April 25-28 Mortgage Bankers Association National Technology in Mortgage Banking Conference & Expo Hyatt Regency Chicago 151 East Wackler Drive • Chicago For more information, call (800) 793-6222 or visit www.mortgagebankers.org.
HAWAII MORTGAGE PROFESSIONAL MAGAZINE
Wednesday, February 17 Florida Association of Mortgage Brokers Broward Chapter 2010 Annual Chapter Trade Show The Broward Convention Center 1950 Eisenhower Boulevard Ft. Lauderdale, Fla. For more information, call (954) 7611422 or e-mail email@example.com.
APRIL 2010 Tuesday-Wednesday, April 13-14 Mortgage Bankers Association’s National Policy Conference Hyatt Regency Washington on Capitol Hill 400 New Jersey Avenue NW Washington, D.C. For more information, call (800) 793-6222 or visit www.mortgagebankers.org.
new to market
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