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Your source for the latest on originations, settlement, and servicing


Iowa Association of Mortgage Brokers State Office 4949 Westown Parkway, Suite 165-111 O West Des Moines, IA 50266 Phone: (515) 210-4675 O Fax: (515) 225-6363 Web site: E-mail:

BOARD OF DIRECTORS Phone # (515) 225-3100, ext. 103 (515) 221-0321, ext. 104


Randy Stevens Charles Chedester Vacant Charles Chedester Paul Kramer

President Vice President Secretary Treasurer Past President

(515) 221-0321, ext. 104 (515) 457-8403

Cathy Carlson Kyra Sommerville

Director Director

(888) 868-9186 (515) 271-8960


FEBRUARY 2010 Tuesday, February 9 IAAMB Texas Hold ’Em Tournament Location to be determined MAY 2010 Thursday, May 20 IAAMB’s Day With the Iowa Cubs Principal Park One Line Drive • Des Moines, Iowa 12:05 p.m. JUNE 2010 Thursday, June 17 IAAMB Annual Golf Outing Course to be determined SEPTEMBER 2010 Thursday, September 16 IAAMB 2010 Annual Convention White Oak Vineyards 15065 Northeast White Oak Drive • Cambridge, Iowa For information on all IAAMB events, call (515) 210-4675 or visit

General Mortgage Associates Shonn Mapes, GMA of Mortgage Innovations Nicole McGlothlin, GMA of Four Legacies Mortgage

Greg Franich, CMC, of Symmetry Mortgage Corporation Brian Lampe, CMC, CRMS Joel Rogers, CMC of Loan and Mortgage Network

Certified Residential Mortgage Specialists


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

“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 “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


Think this is something you would like to achieve? Call the IAAMB office at (515) 210-4675 for an application. A minimum of 20 education hours and a minimum of two or five years in the industry, followed by either 50 or 100 points, are required to sit for the CMC and/or CRMS exams. The GMA exam requires no minimum education and less than two years in the industry.



Mark Bittle, CRMS of Mortgage Innovations Charles Chedester, CRMS of Mortgage Innovations Jeff Harclerode Jr., CRMS of Apex Mortgage Inc. Jason Juran, CRMS Brian Lampe, CMC, CRMS Galen McDermed, CRMS of Specialty Lending


Certified Mortgage Consultants

IA 1

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!

Sunday-Wednesday, February 21-24, 2010 Hyatt Regency Washington, D.C.




Be prepared to go to the Hill!

IA 2

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:

Includes Advocacy 101 training: General synopsis and "Question & Answer" on the best ways to communicate NAMB's talking points with your congressmen in an effective manner.

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

It’s all happening now!

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

Visit for details!

Ask Tommy: Your QC Expert By Tommy A. Duncan, CMT


Value Nation: Will Property Values Rebound Anytime Soon? By Charlie W. Elliott Jr., MAI, SRA


Federal Agencies Finally Issue FACTA Rules on Risk-Based Pricing Notices By Terry W. Clemans


SAFE Smart … Testing, Education and Licensing: We Are All Going Back to School By Paul Donohue, CRMS


Trend Spotter: Three Ways to Transform the New Good Faith Estimate Into Your Secret Weapon By Gibran Nicholas


Scenes From NAMB/WEST 2009


The Secondary Market Overview: From Bonds to Production … Fraud and the Secondary Markets By Dave Hershman


Regulatory Compliance Outlook: January 2010—RESPA, TILA and HMDA for the New Year By Jonathan Foxx


The NAMB Perspective


Marketing Your Difference By Greg Frost


The New RESPA Reform Rule: An Overview By Jonathan Foxx


A Walking Contradiction? FHA’s Stevens foreshadows RESPA reform confusion for consumers By Eric C. Peck


Winning the Mortgage Fraud Game By John Frank


FHA Insider: Fraudulent Home Loans Available … Abuse of the FHA program By Jeff Mifsud


How Do You and Your Company Combat Fraud?


By Tommy A. Duncan, CMT

Corporate Theft is on the Rise: Learn How to Prevent It By Andy Schell, CPA, CMB


Turning Good Data Into Good Information Makes Good Loans By Brad Kelso


The Red Flags of Mortgage Fraud By Howell Haunson









Forward on Reverse: HECM at 20: Leaders and Pioneers in U.S. Reverse Mortgage Series (V) … The HECM Sub-Servicing Innovator and NRMLA Founder By Atare E. Agbamu, CRMS






January 2010 Volume 2 • Number 1



Your source for the latest on originations, settlement, and servicing

1220 Wantagh Avenue • Wantagh, NY 11793-2202 Phone: (516) 409-5555 / (888) 409-9770 Fax: (516) 409-4600 Web site: STAFF Eric C. Peck Editor-in-Chief (516) 409-5555, ext. 312 Andrew T. Berman Executive Vice President (516) 409-5555, ext. 333 Domenica Trafficanda Art Director Karen Krizman Senior National Account Executive (516) 409-5555, ext. 326 Jennifer Moeller Billing Coordinator (516) 409-5555, ext. 324

SUBSCRIPTIONS To receive subscription information, please call (516) 409-5555, ext. 301; e-mail or visit Any subscription changes may be made to the attention of “Circulation” via fax to (516) 409-4600. Statements of fact and opinion in National Mortgage Professional Magazine are the responsibility of the authors alone and do not imply an opinion on the part of NMP Media Corp. National Mortgage Professional Magazine reserves the right to edit, reject and/or postpone the publication of any articles, information or data. RT MO



I am honored to have Greg Frost join our list of featured contributors beginning with our January 2010 issue. Greg is the industry’s first billion dollar agent, and a man who I consider to be one of the all-time GREAT mortgage industry speakers. Additionally, I have been told countless times that he is a great person to work for. In Greg’s first installment, he shares the five-pronged marketing approach he uses to continue to dominate the New Mexico mortgage marketplace.

In the world of NAMB First off, I hope you were able to join us at NAMB/WEST for what was a VERY successful conference and great way to plan your 2010 with profit-producing activities. In this issue, Don Frommeyer shares his report on the very successful NAMB/WEST in the January 2010 installment of The NAMB Perspective. Also, be sure to read NAMB President Jim Pair’s outlook on what lies ahead for the industry in 2010. The NAMB Perspective concludes with an article from Pava J. Leyrer providing her tips on success by joining the “BE” list. Coming up in February, from Sunday-Wednesday, Feb. 21-24, NAMB is hosting it’s annual 2010 Legislative & Regulatory Conference. This is your chance to build your relationships with the folks on Capitol Hill who are making the decisions about your industry. NAMB even provides you with Advocacy Training. If you have not already made arrangements, please head over to for more details.

Jan. 1 brought us some major compliance challenges Jonathan Foxx gives an overview on RESPA, TILA and HMDA in this month’s Regulatory Compliance Outlook. Later in the magazine, Jonathan goes into a deep analysis of the new RESPA rules, including a block by block analysis to help you better explain the GFE to your borrowers. Be sure to check out this month’s Trend Spotter column as well by Gibran Nicholas where he shows you how to turn this rather confusing new GFE into a selling weapon.

On the topic of FHA … Called on the carpet this month was FHA’s commissioner, David Stevens, in Eric C. Peck’s “A Walking Contradiction?” on statements made back when we was on the other side of fence as an industry advocate for the Real Estate Services Providers Council Inc. (RESPRO).

Combating fraud Dave Hershman shares his thoughts on fraud’s impact on the secondary market and issues a call to action to fight fraud. Later in the magazine, you will find this month’s focus “Fighting Fraud,” featuring PRMI’s John Frank sharing his simple steps that all originators must follow to nip fraud before it blossoms out of control. Our resident FHA master himself, Jeff Mifsud, shares his experiences in confronting organizations that didn’t address fraud, and also shares an excellent source of financing that allows third-party originations. Included in our “Fighting Fraud” section is an article by Andrew Schell, CPA, CMB, about securing your own organization to keep the perpetrators of identity theft out of your own organization. Brad Kelso shares with us the level of creditability for various income verification methods. Our focus on fraud wraps up with a submission from Howell Haunson on the “Red Flags of Mortgage Fraud” (not to be confused with the ever popular and often-postponed identity theft Red Flags rules).

Also in this issue … The National Credit Reporting Agency’s Terry W. Clemans offers his perspective on FACTA rules and risk-based pricing; Paul Donohue‘s SAFE Smart article covers the topic of testing, education and licensing; from the appraisal and valuation world, Charlie W. Elliot provides a perspective from an appraiser’s point of view on the direction of home values in his “Value Nation” column … not great news, but certainly required reading. For an inspiring story from the reverse mortgage world, check out Atare E. Agbamu’s look at the world of reverse mortgages and a profile on reverse leader and pioneer, Jeffrey S. Taylor, a founder of the National Reverse Mortgage Lenders Association (NRMLA). So enjoy yet another jam-packed issue of National Mortgage Professional Magazine, and don’t forget to log on to our home on the Web, 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 The deadline for submissions is the first of the month prior to the target issue.

Welcome Greg Frost!





ADVERTISING To receive any information regarding advertising rates, deadlines and requirements, please contact Senior National Account Executive Karen Krizman at (516) 4095555, ext. 326 or e-mail

A Message From NMP Media Corp. Executive Vice President Andrew T. Berman




National Mortgage Professional Magazine is published monthly by NMP Media Corp. Copyright © 2010 NMP Media Corp.

Andrew T. Berman, Executive Vice President NMP Media Corp.

The National Association of Mortgage Brokers

National Association of Professional Mortgage Women

7900 Westpark Drive, Suite T-309 O McLean, VA 22102 Phone: (703) 342-5900 O Fax: (703) 342-5905 Web site:

P.O. Box 140218 O Irving, TX 75014-0218 Phone: (800) 827-3034 O Fax: (469) 524-5121 Web site:

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 President-Elect—William Howe, CMC, CRMS Howe Mortgage Corporation 9414 E. San Salvador Drive, #236 Scottsdale, AZ 85258 (602) 200-8100 Vice President—Michael D’Alonzo, CMC Creative Mortgage Group 1126 Horsham Road, Suite D Maple Glen, PA 19002 (215) 657-9600 Secretary—Ginny Ferguson, CMC Heritage Valley Mortgage Inc. 5700 Stoneridge Mall Road, Suite 150 Pleasanton, CA 94588 (925) 469-0100 Treasurer—Don Frommeyer, CRMS Amtrust Mortgage Funding Inc. 200 Medical Drive, Suite D Carmel, IN 46032 (317) 575-4355

Joe Camarena The Mortgage Source 10120 Southwest Nimbus Avenue, Suite C-7 Portland, OR 97223 (503) 443-1060 O John Councilman, CMC, CRMS AMC Mortgage Corporation 2613 Fallston Road O Fallston, MD 21047 (410) 557-6400 O

Don Starks D.C. Starks Mortgage Associates Inc. 141 South Main Street O Bourbonnais, IL 60914 (815) 935-0710 O

Senior Vice President Sharon Patrick, MML, CMI (386) 985-1620 Vice President/Northwestern Region Jill M. Kinsman (206) 344-7827 Vice President/Western Region Tim Courtney (760) 792-5620

Vice President/Southeastern Region Jessica Edmonston (919) 414-3028 Secretary Laurie Abisher, GML, CMI (661) 283-1262 Treasurer Kay Talley, MML (919) 846-4294 Parliamentarian Hulene Bridgman-Works (972) 494-2788

Vice President/Central Region Candace Smith, CMI (512) 329-9040

National Credit Reporting Association Inc. 125 East Lake Street, Suite 200 O Bloomingdale, IL 60108 Phone #: (630) 539-1525 O Fax #: (630) 539-1526 Web site:

2010 Board of Directors Marty Flynn—President (925) 831-3520, ext. 224 Tom Conwell—Vice President (248) 473-7400 Daphne Large—Treasurer (901) 259-5105 William Bower—Director (800) 288-4757

Sanford (Sandy) Lubin—Director (805) 481-3155 Judy Ryan—Director (800) 929-3400, ext. 201 Tom Swider—Director (856) 787-9005, ext. 1201 Donald J. Unger—Director (303) 670-7993, ext. 222

Mike Brown—Director (800) 285-6691

Terry Clemans—Executive Director (630) 539-1525

Susan Cataldo—Director (404) 303-8656, ext. 204

Jan Gerber—Office Manager/Membership Services (630) 539-1525 James Sutton—NCRA Legal Counsel (972) 680-2665


Walt Scott Excalibur Financial Inc. 175 Strafford Avenue, Suite 1 O Wayne, PA 19087 (215) 669-3273 O

President-Elect Gary Tumbiolo, CMI (919) 452-1529

Vice President/Greater Northeast Region Colleen-Therese McKeever, CMI (646) 584-8332


Olga Kucerak Crown Lending 8700 Crown Hill Boulevard, Suite 804 O San Antonio, TX 78209 (210) 828-3384 O

President Liz Roberts-Fajardo, GML (702) 498-8020 O IOWA


National Board of Directors

NCRA Staff

Nancy Fedich—Director (908) 813-8555, ext. 3010


By Tommy A. Duncan, CMT




What are you seeing as it pertains to quality control (QC) personnel experience?


I’ve seen a number of resumes from quality control (QC) professional who state they are underwriters and have performed QC in pass positions. During the interview process, I am amazed of how little they know. When interviewing QC professionals, make sure there is a clear, articulate communication from the QC professional of their definition of QC, underwriting, fraud detection and due diligence. Because the mortgage industry uses many of the QC terms loosely and very little doctrinal terms are established by the industry as it pertains to QC, there may be some misunderstanding in expectations of them when looking for a QC professional. There appears to be a trend of underwriters who started underwriting Fannie Mae or Freddie Mac loans in 2002 and 2003. We have found underwriters who started their underwriting career during this time appear to be the ones who require the most training and supervision. Because of loose underwriting standards, these underwriters appear to be the most gullible and need a host of fraud detection tools to help them find fraud for their success. Those underwriters who started underwriting under the Federal Housing Administration (FHA) with a Direct Endorsement (DE), appear to be the stronger underwriters, and therefore, makes them the better QC professional. Because FHA loan volumes were such a smaller percentage during the subprime boom, the DE underwriters are almost an endangered species. Now that FHA has such a larger percentage of loans, it is difficult to find QC professionals who can jump over to government QC without a lot of training and supervision before they are fully ready to handle the tough FHA files that may wind up in default or indemnified for repurchase. Due to the large demand for FHA and Veterans Affairs (VA) products, the probability of fraud and problematic loans will appear with government loans. This is critical to the mortgagee who may take on the responsibility of sponsorship of loan correspondents because finding the right QC professional to rebut the U.S. Department of Housing & Urban Development (HUD) on repurchases or making a repurchase claim to the loan correspondent. Regardless if the company is dealing with a claim or making a claim, having the appropriate QC staff is important to work these claims. Those QC professional who have limited conventional underwriting and due diligence experience may find it difficult to compete with those underwriters who have government experience. However, those QC personnel who worked fraud may be a better fit because they can spot fraud much quicker than those QC professionals who are accustomed to using checklist. We feel if a QC professional is using the QC checklist they don’t know how to underwrite and find fraud. And many QC professionals who interview with us ask us which QC checklist we use. I reply, “Do you know which chapters of the 4060.1 pertain to the QC plan, and which chapter of the 4155.1 pertains to credit analysis and which chapters of the Seller’s Guide cover quality assurance?” I usually don’t get a response because the QC professional does not know the answer about the basic manuals used for QC. I cannot help but wonder what type QC program did these companies really have? This may speak why the company they worked for no longer exists or they are no longer with the company. Tommy A. Duncan, CMT is executive vice president of Quality Mortgage Services LLC. For answers to your QC and FHA questions, please contact Tommy at (615) 591-2528 or e-mail You may also visit Quality Mortgage Services LLC on the Web at

Sponsored by

By Charlie W. Elliott Jr., MAI, SRA

Will Property Values Rebound Anytime Soon? Depending on where you live and work, Many housing developers have gone you have probably observed a decrease bankrupt, while others have halted in property values over the past year or new product and have dwindled their two. Not only has the economy put the inventory down to levels much lower brakes on sales, the change has been so than what we saw at pre-recession levdrastic that we have experienced an els. Many of the houses were foreover-supply of housing all over the closed upon. Some were subjected to country. Some regions have been hit short sale-type technique, where harder than others, and some parts of banks were involved in loan workouts town have been hit even and the properties were harder than others. sold. The stronger of the If either George W. home builders have Bush, Barack Obama or reduced their number of Congress are guilty of anynew starts, offered existthing relating to the downing inventory at deep turn in property values, discounts and have curthey are probably guilty of tailed their development over-stimulating the econof new projects. All of omy, not under-stimulatthis spells a smaller suping it. For this reason, it ply of new homes on the may very be a sound pracmarket, which is good tice at this point to do medicine for a sick real nothing, as opposed to “The banking indus- estate economy. artificially stimulating it This good medicine, try is far from able to more. Artificial stimulahowever, has wreaked get a clean bill of tion would likely make havoc on the values of health. If we believe matters worse in the long our homes. All of the term. Yes, Big Brother that it has just digest- foreclosures and pricecould come in and take ed an oversized meal cutting has created such a monetary action to further and is getting over the glut in the market that stimulate the real estate indigestion, we must prices have been supeconomy. If so, this would not forget that we still pressed to levels not seen require money, which in years. have credit cards to would only increase the So with all of this swallow and delinnational debt, provide a inventory reduction, when quent commercial temporary fix to the marwill it translate to increasmortgage loans to ket and actually make the es in property values? The consume.” housing recession longer. answer is not anytime The Japanese found this soon. Yes, help is on the out the hard way in the latter part of the way, but do not look for the cavalry movpast century, and they spent a decade ing ahead at a fast pace and making a getting back on track economically. cloud of dust with the bugler leading the All is not as bad as it seems, howev- charge. Expect more of a Sunday afterer. A positive development has noon stroll of the horses, slowly but occurred over the past 12 to 24 surely leading us to the front line. It took months to help the situation, even us a long time to get into this mess and though you and I have not been able it will take time to get us out of it. We to personally feel the results. It is still have hurdles to overcome. The called inventory reduction, and yes, it banking industry is far from able to get a is painful. It has cost us many jobs and has eroded our retirement plans. continued on page 7

Federal Agencies Finally Issue FACTA Rules on Risk-Based Pricing Notices We Are All Going Back to School

By Terry W. Clemans

SAFE education requirements At a minimum each state-licensed MLO shall before issuance of license complete 20 hours of education approved through the NMLS, which must include at least: I I I I

Three hours of federal law and regulations; Three hours of ethics including fraud, fair lending and consumer protections; Two hours of non-traditional mortgage product training; and Twelve hours of elective course work.

Pre-licensing education (PE) formats: 1. Live classroom: Instructor in a live setting in a traditional classroom setup. 2. Live equivalent: A live broadcast of an instructor streamed to a remote group (in an office or conference room) or to an individual one-on-one at a computer. 3. Instructor-led online: An instructor interacts with a class of students over the Internet on material, quizzes and exercises over a defined start and end date. Some states also require state-specific law curriculum for pre-licensing education, either inside the 20 hours or in addition to the 20 hours. For example: North Carolina requires 24 hours of PE, including four hours of North Carolina law. Pennsylvania only requires 20 hours. However, inside the 20 hours, you must take three hours of PA state law. State requirements link:

Be careful In a few states, instructor-led online is disallowed for the state portion of PE. Selfpaced online courses (typical old-school CE format) are never permitted for PE.

A “SAFE Smart” start Most states will require completion of your pre-licensing education in 2010. Then, there are those nerve-wracking tests. Word on the street is that they are no joke. Choose your education provider wisely. Take your studies seriously. Prepare yourself diligently and get started early. The new standards for mortgage professionals have been set high, the tests are challenging and it will take work to be successful. We are all going back to school. 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 to find out more about your obligations for testing, education and licensure, or call (888) 341-7767.


continued on page 10

How long has it been since you had to pass a rigorous test? For me, it had been 14 years since passing the National Association of Mortgage Brokers Certified Residential Mortgage Specialist (CRMS) exam. That obsession to cram, that difficulty sleeping the night before, that vague feeling you’ve forgotten something, that nervous unsettled stomach in the morning, the dreaded start of the timer … here it comes! All non-depository Mortgage Loan Originators (MLOs) will face the challenge of the SAFE MLO National Test component sometime this year. Also, you may have to pass a state test! If your state’s deadline is March or June, dust off your calculator and bring it to class NOW! That’s right, I suggest you make sure the class you take contributes significantly to your passing the SAFE MLO National Test. If you’ve been renewed (and therefore don’t “need” the 20-hour course), I suggest you take a Test-Oriented NMLS CE course or purchase a Test Prep product.


The new requirement is for the lender providing credit to a consumer on less favorable terms than it provides to other consumers based on the use of credit scores and risk-based pricing, to provide the affected consumer a notice of the risk-based adverse action. This risk-based pricing notice includes their credit score, information about their credit report and score, and how to obtain a free credit report to check the accuracy of the information in their credit report. The final rules, a 202page document published in the Federal Register in the closing days of 2009, provides creditors with several methods for determining which consumers must receive risk-based pricing notices, copies of the model forms to use when sending the notice to consumers, and other details about compliance with the new law (a Web link to this document is provided on page 10). There are different form models to cover most lending activities, including specific model disclosure forms for mortgage lending. To assist mortgage lenders, be sure to note the definitions starting on page 115 and the forms specific to mortgage lending starting on pages 153, and then again on 195. Looking at the rules from a consumer’s perspective, besides being a decade-plus behind the actual need for this disclosure, there is a major flaw in the notice as well. All the model forms provide the consumer information about the free credit report they are entitled to under federal law and how to obtain that report. While this is a great help, considering there are so many bait and switch sites out there conning consumers into getting a “free” credit report that turns out to be a hook into some program that is vastly more expensive than just buying a credit report, the real problem is that the credit report the consumer will receive after following the notice instructions is often going to be differ- O IOWA

On Dec. 22, 2009, more than six years since President George W. Bush signed into law the Fair and Accurate Credit Transactions Act of 2003 (FACTA), the Federal Reserve Board (FRB) and the Federal Trade Commission (FTC) announced the final rules that require creditors to provide consumers with a notice when they have been charged more for credit based on their credit score. The final rules implemented in FACTA amends the Fair Credit Reporting Act (FCRA), the primary federal law that governs the use of credit reports. Credit score-driven risk-based pricing has been in practice in almost all sectors of consumer lending for close to two decades. To protect consumers from being overcharged for credit terms based on inaccurate information in their credit files, the FCRA has required lenders to provide consumers a notice of adverse action when the lender has denied the consumer a loan based on their credit report contents. There has been a gap in the consumer disclosures due to the creation of risk-based lending. Often, risk-based lending does not deny the consumer a loan, but approves the consumer at a higher interest rate and this model was not covered under FCRA. Consumers in this category were not provided any notice regarding their rights to check the accuracy of the credit data. In many lending models, more loans have fallen into this category of approved, but at a higher rate than the yes/no based loan underwriting of years gone by. Congress closed that gap in the lender-provided consumer notices in 2003 with the provisions of FACTA that started requiring the use of a risk-based pricing notice; however, it’s been a long and slow bureaucratic process to get the actual rules of the 2003 law written by the FRB and the FTC finally implemented. Lenders will have time to adjust their practices for the new law as well, since it does not go into effect until January 1, 2011.



Three Ways to Transform the New Good Faith Estimate Into Your Secret Weapon The new Real Estate Settlement Procedures Act (RESPA) rule and Good Faith Estimate (GFE) has changed the entire sales process for our $2 trillion per year mortgage industry. What if you could transform industry chaos into your secret weapon to crush the competition and make 2010 your best year ever? Here are three strategies to help you do just that:

Number one: Do not give a GFE too soon in the loan process




Once you have a “loan application” as defined by the U.S. Department of Housing & Urban Development (HUD), you need to give the borrower a GFE within three business days. There are six elements of an application according to HUD:


1. Borrower’s name; 2. Borrower’s monthly income; 3. Borrower’s Social Security Number to obtain a credit report; 4. Property address; 5. Estimate of property value; and 6. Loan amount. The ironic thing is that if you give a borrower a GFE without having all six pieces of information outlined above, you cannot revise the GFE at a later time once you receive the missing piece or pieces of information! HUD says that later receipt of one of these six items does not qualify as a “changed circumstance” that would result in your ability to issue a revised GFE. For example, imagine that Jane Doe Borrower calls you up and says that she is in the market to purchase a home. You take her loan application in order to approve her for financing. However, she does not yet have a property address because she is still shopping for a home. If you give Jane a GFE at this stage in the loan process, you will be bound by the terms of the GFE and you will not be able to change your estimate of closing costs (appraisal fee,

free sooner, and achieve the things in life that are most important to them. This brings us to the next point:

Number two: Do not fill out the voluntary portions of page three of the GFE

Remember, the GFE is all about you and your story as a loan originator—what etc.) once Jane actually finds a home are your fees, how much you are makand signs a purchase agreement. ing on the loan, etc. If you really want Our industry has grown accustomed to win the battle over the hearts and to giving borrowers a GFE even if the minds of clients, you need to fight the property address is still to be deter- battle on a battlefield where you know mined (TBD). Under the old rules, this you can win—by making the conversawasn’t really a problem, because you tion about the client and their story. didn’t have to guarantee the fees listed You need to answer the question, on the initial GFE. “What’s in it for me?” However, under the new from the client’s perspecrules, giving borrowers a tive. The GFE does not GFE without them having allow you to do that, a bona fide property because the GFE is all address could be very about you and your story. detrimental to you. So, while your competiRemember, you are on tors are tripping all over the hook for guaranteethemselves helping clients ing all the fees you estishop them out of business mate on the initial GFE. by focusing on page three Why should you eat the of the GFE, you fight the extra costs if the property battle for the client on a they select requires a battlefield where you “… the first thing more elaborate appraisal know you can win. It you can do to transwith higher fees? empowers you to make form the new GFE With this in mind, the the conversation about into your competitive first thing you can do to the client, about their advantage is simply transform the new GFE story, about their life, don’t give a GFE too into your competitive about what’s in it for soon in the loan advantage is simply don’t them. give a GFE too soon in the process! Only give loan process! Only give Number three: borrowers a GFE borrowers a GFE once you once you have all six Do not guaranhave all six pieces of pieces of information tee the interest information required by rate on line one required by HUD.” HUD. In the meantime, if of the GFE you want to help borrowbeyond today’s ers compare their loan options, as any date if the borrower is true mortgage professional should, uti- unwilling to lock the rate lize software programs like Mortgage There is a lot of confusion in the indusCoach Analyze. try as to how long you need to guaranWith Mortgage Coach, you could tee the interest rate and settlement illustrate the borrower’s cash to close costs listed on the GFE. Here’s the under different scenarios, compare scoop: The settlement costs (Line 2 of loan options and illustrate various cash the GFE) need to be guaranteed for at flow opportunities. Perhaps most least 10 days. However, the interest rate importantly, Mortgage Coach makes (Line 1 of the GFE) does NOT need to be the numbers come alive by making guaranteed at all if the borrower does them relevant to the client’s life. It is not lock in their mortgage rate. HUD ideal for illustrating which mortgage specifically states that it is up to the strategy would best help the client send loan originator to determine how long their kids to college, retire comfortably, they want to keep the rate available. care for elderly parents, become debt For example, the interest rate on the

GFE could expire in five days, three days or within one day; in fact, if your company doesn’t offer rate locks, you could even fill out Line 1 of the GFE by writing in “Not Available” or “NA” in that field. With this in mind, the smartest way to deal with Line 1 of the GFE is simply don’t guarantee the interest rate unless the borrower is willing to make a commitment and lock in their rate. You could best explain this policy to clients and prospects by illustrating market volatility using RateWatch, a service that tracks the prices of mortgage backed securities (MBS). It’s really very simple: O Show clients and prospects a picture of the market using the RateWatch charts O Focus on volatility—illustrate how the market moves every minute of every day and how this impacts mortgage rates O Offer to be the client’s “personal shopper” when it comes to tracking mortgage rates and locking in at the appropriate time The new RESPA rule and GFE represents the biggest change our industry has seen in its sales process in over 30 years. This is an unprecedented opportunity for you to transform industry chaos into your opportunity to outshine the competition. To that end, CMPS certification includes exclusive training and resources to help you transform the new RESPA rule and GFE into your secret weapon to crush the competition and make 2010 your best year ever! Gibran Nicholas is the founder and chairman of the CMPS Institute, which administers the Certified Mortgage Planning Specialist (CMPS) designation. The CMPS Institute has enrolled more than 5,500 members since its founding in 2005. Gibran is also the chairman of Published Daily, a customizable online magazine, newsletter and marketing service that helps professionals transform their clients and prospects into a referral-generating sales force. He may be reached at (888) 608-9800, ext. 101 or e-mail Visit author Gibran Nicholas’s blog at where he shares his insights on economics, real estate and financial issues, including the current mortgage and credit crises.

value nation

HUD announces standards for state compliance with SAFE Act

clean bill of health. If we believe that it has just digested an oversized meal and is getting over the indigestion, we must not forget that we still have credit cards to swallow and delinquent commercial mortgage loans to consume. These are not directly related to the housing market, but they will create a ripple effect. In summary, the worst of the housing debacle is over. Much, however, is left to be done. There are still too many homes on the market for our slow economy to absorb. Home appreciation will take place in a less robust way than we have become accustomed to. Over the next few months, there will be fewer buyers and more-cautious lenders. Meaningful home price appreciation can only come when

unemployment abates, the stock market improves, banks become more aggressive about lending money and the glut of homes on the market has been sold. This should not be rushed and must be handled in an orderly manner. We are looking at two or three years, in my opinion, before home appreciation can return. That can happen only when the economy returns to hitting on all eight cylinders. 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 or visit his company’s Web site,

Ohio AG Cordray sues national rating agencies for misleading ratings

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Ohio Attorney General Richard Cordray has filed a lawsuit against Standard & Poor’s, Moody’s and Fitch, three national agencies that are responsible for providing accurate credit ratings of investments. The lawsuit, filed in United States District Court for the Southern District of Ohio on behalf of five Ohio public employee retirement and pension funds, charges the rating agencies with wreaking havoc on U.S. financial markets by providing unjustified and inflated ratings of mortgage-backed securities (MBS) in exchange for lucrative fees from securities issuers. “The rating agencies were central players in causing the worst economic crisis in Ohio since the Great Depression,” said Cordray. “The rating agencies assured our employee pension funds that many of these mortgagebacked securities had the highest credit ratings and the lowest risk. But they sold their professional objectivity and integrity to the highest bidder. The rating agencies’ total disregard for the life’s work of ordinary Ohioans caused the collapse of our housing and credit markets and is at the heart of what’s wrong with Wall Street today.” The lawsuit alleges the rating agencies gave many of these exotic investments the highest investment-grade credit rating. This rating—referred to as “AAA”—is consistent with the credit ratings given to the safest corporate bonds, and it assured institutional investors, including the Ohio funds, that the investments were extremely safe with a very low risk of default. According to preliminary estimates, the improper ratings cost the Ohio Funds losses in excess of $457 million. “Contrary to the representations of the rating agencies, these mortgage-backed securities were, in fact, high-risk investments that lost tremendous value as the housing market collapsed and mortgage foreclosures accelerated,” said Cordray. O IOWA

The U.S. Department of Housing & Urban Development (HUD) has announced the publication of a proposed rule setting the minimum standards that states must meet to comply with the Secure and Fair Enforcement Mortgage Licensing Act of 2008 (SAFE Act) in licensing loan originators. “By introducing nationwide standards of uniform licensing for loan originators, the SAFE Act is taking an important step in returning integrity and accountability to the residential mortgage loan market,” said FHA Commissioner David Stevens. “Implementation of this Act is a critical addition to our system of regulatory protections that will benefit both consumers and financial institutions.” The SAFE Act was enacted into law on July 30, 2008, as part of the Housing and Economic Recovery Act of 2008 (HERA Act). It is designed to enhance consumer protection and reduce fraud by encouraging states to establish minimum standards for the licensing and registration of statelicensed mortgage loan originators. SAFE also mandates the creation of a Nationwide Mortgage Licensing System and Registry (NMLSR), and encourages all states to provide for a licensing and regulatory regime for all residential mortgage loan originators. While states are charged with enacting licensing standards that meet the requirements of the SAFE Act, overall responsibility for interpretation, implementation, and compliance rests with HUD. If HUD determines that a state’s licensing standards do not meet the minimum requirements of the Act, it is required to implement and administer a licensing system for that state. To comply with the Act, states must put in place a Loan Originator Licensing program that requires originators to take an education course, pass a test, and undergo civil, criminal and financial background checks. States have until July 31, 2010, to have their loan originators licensed under the SAFE Act criteria, unless they already have them licensed under a different system. If already using a different licensing sys-

tem, they have until Dec. 31, 2010, to bring them in line with the Act’s requirements. For more information, visit or

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Rebecca Hinds and Tom Duncan from Quality Mortgage Services LLC were on hand to explain their line of QC product offerings

Denise Leonard takes part in the NAMB Government Affairs Update

Jason Berman of the J. Berman Group delivers his session on properly utilizing social media

NAMB President Jim Pair welcomes attendees to the opening session launching NAMB/WEST 2009

Ken Perry from Broker Knowledge, one of the presenters of the “SAFE Act, MDIA, HVCC and Red Flags Panel” session

J. Kevin Foster, Pam Teer and Monty Ervin from TRW Credit Group




Bill Wogan, Mark Karanovich, Lisa Schreiber and Mark Freedle proudly represent NetMore America during NAMB/WEST in Vegas


Reps from Flagstar Bank show their support for the mortgage broker community during NAMB/WEST 2009

NAMB CEO Roy DeLoach (center) stops by the Fannie Mae booth for a chat with company reps Thomas Collins (left) and Dana Keeney (right)

NAMB Director John Councilman provides an FHA update during the Government Affairs Committee Meeting

Fred Kreger from American Family Funding (far right), with (from left to right) Scott St. John, Melissa Arntzen and Joann Anderson from American Pacific Mortgage

Reps from NetMore America field questions from brokers during the “Speed Dating Mortgage Style” session

NAMB Government Affairs Committee Chair Harry Dinham discusses the latest news from Capitol Hill with attendees during NAMB/WEST

Theresa Ballard of BFO Solutions delivers an update on HVCC

Mike Anderson, Denise Leonard, John Councilman and Harry Dinham take questions during the Government Affairs Committee Meeting

Jim Brown delivers his presentation on Veterans Affairs loans during NAMB/WEST 2009


Dr. Ted C. Jones, director of investor relations with Stewart Information Services, kicks off the day with his economic update

Ron Vaimberg discusses the importance of social media and text messages during his presentation


Art “Ski” Swiatkowski and Mary Jo Cioffi pause for a photo during NAMB/WEST in Las Vegas O IOWA

Reps from Wells Fargo Home Mortgage on the exhibit hall floor of the MGM Grand in Las Vegas


facta rules

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ent than the credit report used to make the loan decision. The methods of compiling the data for a lender credit report vary greatly from the methods used for consumer disclosure reports and discrepancies between the two report methods can have huge impacts on credit scores. This means that hundreds of thousands or even millions of consumers who think they have gone through their credit report as directed on the government-required disclosure and corrected any problems they discovered in the data, will find that when they apply for credit again there may be other problems on the report that were undisclosed to them previously and they may still fall into higher risk-based credit terms. Based on the track record of how long it took this section of FACTA to

actually becoming a reality that is an issue for another day likely many years from now. The FTC/FRB official notice can be found online at, and the full 202-page Federal Register Notice with details about all aspects of the rule can be found at: pricingfrn.pdf. Terry W. Clemans is the executive director of the National Credit Reporting Association Inc. (NCRA). He may be reached at (630) 539-1525 or e-mail Visit the National Credit Reporting Association Inc. (NCRA) on the Web at

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HECM at 20: Leaders and Pioneers in the U.S. Reverse Mortgage Industry Series (V)

The HECM Sub-Servicing Innovator and NRMLA Founder In the beginning, there were 50 lenders awareness of (and combat misconcepchosen by lottery in a pilot program. tions about) reverse mortgages, comThe U.S. Department of Housing & mitment authority to fund more loans Urban Development (HUD) authorized beyond the experimental cap at 2,500 each lender to make just 50 Home HECM loans, inefficient count-by-count Equity Conversion Mortgages (HECMs), a loan limits that complicated marketing, novel home equity loan without decent origination income to fund marketing and operations, exclusion of monthly repayment obligations. HECM presented unique challenges. cooperatives from the HECM programs, and others. One of them was servicing. So, the leader gathHow do you service a ered his handful of mortgage loan where the reverse tribesmen and lender is required to make women and told them payments to the borrower? they needed to take care How do you manage a of themselves, they needmortgage loan where, if ed a presence in D.C. In a the lender fails to make 2004 conversation with payments to the borrower me, he said: on time, the lender must pay a penalty to the bor“I felt that as a group of rower? How do you adminlenders, it was time to get ister a mortgage loan with “In my own case, my together to create a code different investor accountmother got a reverse of ethics and best pracing and reporting rules? Servicing HECMs was formortgage. It allowed tices because my message to them was: ‘If you don’t eign territory. her to continue her But where others saw independence and her do it [self-regulate], somebody else will regulate us. challenges, the leader of financial dignity, and And so, you’ve got to come a large forward mortgage it just changed her together as an industry servicing company saw life. When I saw that I and adopt a set of best opportunity. He assembled a team, studied the felt that this business practices.’” had a future.” servicing requirements of Thus, the National the new mortgage beast, —Jeffrey S. Taylor, Reverse Mortgage Lenders built a servicing platform, CMB Association (NRMLA) was and sold his servicing solution to the 50 pilot HECM lenders. born in 1997 to lead consumer, public, and lawmakers education that was (and He did not stop there. The infant industry built around a is) essential to the industry. The leader product authorized by Congress and hired Dwobell Inc, an association mandesigned in Washington, D.C. lacked a agement company, and its owner, Peter voice in our nation’s capital. The tradi- Bell, to run the new trade group. By the year 2000, through NRMLA, tional lenders at the Mortgage Bankers Association (MBA) were too busy doing the industry’s concerns were receiving what they have always done to fully attention from HUD and Congress. In a appreciate the start-up issues a small piece of housing legislation sponsored but passionate band of reverse lenders by Rep. Rick Lazio of New York, HUD were grappling with. Issues such as consumer and public education to create continued on page 12

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agreed to study three NRMLA issues at that time: Single national HECM loan limit, a reduction in mortgage insurance premiums for seniors who purchase LTC (this is a taboo subject today), and evaluation of cooperatives for inclusion in the HECM program. Much of the improvement in the HECM product and in the industry since 1997 can be traced to NRMLA-led initiatives. In short, NRMLA put reverse mortgages on the map in America. After founding NRMLA and serving as its chairman for two terms (he’s still on the board as founding chairman), the leader retired. Unknown to him, a second chapter of his work in reverse mortgages was about to begin. In November of 1998, Wells Fargo Home Mortgage hired him as a consultant. And on Jan. 1, 2000, Wells Fargo lured him out of retirement to lead its senior products group. Jeffrey S. Taylor, CMB is that leader. His innovation in sub-servicing HECMs and leadership in creating NRMLA were crucial additions to the industry’s architecture. Although he was a pioneer in wholesale and correspondent reverse mortgage lending at Wendover Funding, during his decade-long tenure at Wells Fargo, Taylor focused on a retail origination strategy and made Wells Fargo into the nation’s largest retail reverse mortgage lender, a ranking Wells Fargo continues to maintain. Following his August 2009 retirement from Wells Fargo, a third chapter of Jeff Taylor’s reverse-mortgage life began as chairman of Reverse Mortgage Insight, a California-based advisory and data provider. The following is Jeff Taylor’s reflection on the first 20 years of the industry he helped to build. What attracted you to reverse mortgages, and why did you commit to the business? Back in 1989, I read of a pilot program by HUD that was going to provide home equity loans to seniors without requiring monthly payments, letting them use a portion of the equity in their house. At that time, only 50 lenders were being selected in a lottery administered by HUD. The 50 lenders could make only 50 loans, a total of 2,500 loans. Being in the loan-servicing business, I knew it was going to be difficult for only 50 lenders to design and build a servicing system to actually build this product. Secondly, I felt that this could be a new frontier in mortgage lending because in the past the regular mortgage business that I had been in for the previous 20 years was doing well, and the new market that everyone was focusing on was the first-time homebuyers and new immigrants moving into the United States. But the demographics for seniors both then and today would suggest that this is a new frontier that needs to be

served. We needed to understand the product. At that time, I was the president and chief executive officer of Wendover Funding, which was a large servicing organization, and we designed a servicing system and offered to sub-service those loans for those original pilot lenders which, essentially, got us into the business. And why did you commit to the business? I could see that there were adult children like myself who are always looking for options for mom and dad or grandparents. And the whole idea was that without a reverse mortgage option, many adult children were using their own money, their after-tax dollars to help support them. As always happened in the past, they then waited for the property to be sold to be paid back. In my own case, my mother got a reverse mortgage. It allowed her to continue her independence and her financial dignity, and it just changed her life. When I saw that I felt that this business had a future. And 20 years after, do you still feel that way? Oh yes, I do. It’s been stated that we’ve had more growth in the last four years than we had in the previous 16, and we are yet to reach more than two percent of eligible homeowners in the demographics of 65-plus. So, I think that over the past 20 years, the first 16 years were education. The next four were fueled by falling portfolio values, the financial crisis and a number of other things. Another thing that helped was changing the lending limits, which, not much over a year ago, 80 percent of the counties in the United States had a maximum lending limit of $209,160. The problem was that if a senior had a $300,000 home value, and they were in the lower lending limit, they only could get the amount available based on their age and a maximum value of $209,160. Today, we have $625,500 as the ceiling which has resulted in many more seniors taking advantage of the HECM program because of their ability to get more access to their equity. Moving into next fiscal year, it could be extended. So, we have been able to help a broad range of senior households based on different home values. How has the industry changed since you came in? First and foremost, within the last couple of years, we’ve been in the spotlight, in other words, many are taking notice of the program, lenders advocacy groups and federal and state regulators. I remember attending several continued on page 15

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The lawsuit alleges that the rating agencies made spectacularly misleading evaluations of the MBS due in part to the lucrative fees they received from the same issuers they were supposed to be objectively evaluating. Public statements and testimony indicate that rating agency executives and analysts knew their ratings of the MBS were wrong. Indeed, one rating agency analyst admitted that the market for MBS was “little more than a house of cards” with a much higher risk of devaluation than indicated by the purported investment-grade “AAA” rating. Another rating agency analyst said that “we rate every deal. It could be structured by cows and we would rate it.” Raymond McDaniel, CEO and Chairman of Moody’s, described the ratings frenzy: “What happened in ’04 and ’05 … is that our competition, Fitch and S&P, went nuts. Everything was investment-grade. It really didn’t matter. No one cared because the machine just kept going.” McDaniel added that Moody’s also “[drank] the Kool-Aid.” Cordray said, “Our lawsuit against these rating agencies is another step toward holding Wall Street accountable for its wrongs.” AG Cordray’s fight to hold Wall Street accountable now includes eight major lawsuits, which have recovered more than $2 billion to date. Recent settlements include $284.5 million with secondary defendants in a case involving AIG; $400 million with Marsh & McLennan; $475 million with Merrill Lynch; and the cancelling of $922 million in improperly granted stock options to corporate executives at UnitedHealth. AG Cordray continues to represent the Ohio Funds in several major securities cases, including class action securities lawsuits against AIG, Bank of America, Fannie Mae and Freddie Mac. For more information, visit

FHA proposes new rules to strengthen risk management The Federal Housing Administration (FHA) has proposed new regulations to further reduce risks to its single-family insurance fund as it continues to play a critical role in the U.S. housing market. FHA has proposed to increase the net worth requirements of FHA-approved lenders, strengthen lender approval criteria, and make lenders liable for the practices of their correspondent mortgage brokers. The proposed rule will permit FHA to more effectively focus its resources on lenders that pose the greatest potential threat to its insurance funds and to ensure that lenders possess the resources appropriate for the financial

services they deliver. FHA is soliciting comments on its proposals and the comments received will be considered in the development of a final rule. “With FHA’s crucial role in today’s housing market, it is critically important that we are able to manage risk and to ensure that our reserves are adequate to cover future losses,” said FHA Commissioner David Stevens. “We are taking a number of aggressive steps to ensure that we are able to continue to support the housing market in the short-term and provide access to home ownership to the underserved in the long term, while minimizing the risk to the American taxpayer.” On Sept. 18, 2009, Stevens announced a set of credit policy changes that will enhance FHA’s risk management function, including the hiring of a chief risk officer for the first time in the agency’s 75-year history. In addition, Stevens announced his intent to propose new regulations to further strengthen FHA’s risk management. Since 1993, FHA has required approved mortgagees have a net worth of at least $250,000. To strengthen the financial capacity of FHA counterparties to ensure they can meet their obligations, the proposed rule would require mortgagees maintain a minimum of $1 million in net worth within the first year and at least $2.5 million of net worth within three years of the effective date of the rule. These changes are consistent with industry standards and will ensure that FHA lenders are sufficiently capitalized to meet potential needs, thereby permitting FHA to mitigate losses and decrease risks to its insurance fund. Lenders seeking approval to originate underwrite or service an FHA loan must meet the eligibility criteria for a supervised or non-supervised mortgagee. FHA-approved mortgagees must assume liability for all the loans they originate and/or underwrite. While loan correspondents (mortgage brokers) will continue to be able to originate FHA-insured loans through their relationships with approved mortgagees, they will no longer receive independent approval for origination eligibility. This will require the FHA-approved mortgagee to assume responsibility and liability for the FHAinsured loan underwritten and closed by the approved mortgagee. These changes align FHA with Fannie Mae and Freddie Mac and will potentially increase the number of loan correspondents (mortgage brokers) who are eligible to participate in the origination of FHA-insured loans while providing for more effective oversight of loan correspondents through the FHA approved mortgagees. For more information, visit continued on page 14



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I can't tell you how different this whole experience has been. I'm now going out to celebrate; not that I funded a loan, but that I didn't have to process the file or beg the funder to review my conditions and hope that it funded on time. - Tim Ross Lancaster, CA Regulation and Licensing Department, Financial Institutions Division #621 • Branch License #00621


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NeighborWorks reports: Homeowners seeking counseling are 60 percent more likely to avoid foreclosure

Fraud and the Secondary Markets Today’s issue is fraud. Fraud affects the secondary markets in two very important ways: O The existence of fraud is a valid reason to require a seller to repurchase a mortgage. This is commonly known as a “buyback.” O The higher the prevalence of fraud within mortgages originated, the higher the risk of default of these mortgages, and thus, the lower the value of the commodities created and sold in the secondary markets. In other words, the more fraud in our industry, the higher rates will go.




“Here is the problem, if we don’t all band together to fight this fraud, we will be paying a long term price in terms of tighter guidelines and higher rates in the secondary markets.”


The decline of the housing market was precipitated by many factors. Certainly one was the tightening of loose underwriting guidelines, which shut out many who wanted to qualify for loans. This continues today with Fannie Mae the latest to raise minimum scores and lower maximum debt-to-income (DTI) ratios. High default rates, due to declining property values and poor credit quality of borrowers, also contributed to wider

spreads between Treasury rates and mortgage rates. The “spread” is the difference between the rate on the 10-year Treasury and a par mortgage rate. This wider spread was entirely due to the increased risk of default for mortgages as opposed to Treasuries. As I mentioned in a previous article, the government has combated this increase by purchasing mortgages, which has created artificial demand. But the government purchase program must end sometime—most likely in the first quarter of next year. If default rates have not improved by the time the Fed exits the market, the spreads will return in the form of higher rates. I, for one, expected fraud levels to decline as underwriting standards tightened. During the real estate boom, the most prevalent forms of fraud included falsifying 1003s with regard to the income on stated loans (we even called them “liar loans”) and claiming that investment properties were going to be occupied by the purchasers. But with tighter standards and with stated loans going away, shouldn’t the incidence of fraud decline greatly? That is logical. But there are several factors working against this logic right now: O Increased enforcement efforts by the government is causing more fraud to be uncovered than ever. This does not mean that fraud is increasing, but our continued on page 19


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NeighborWorks America, the administrator of the National Foreclosure Mitigation Counseling (NFMC) Program, has announced that NFMC clients who receive foreclosure counseling are 1.6 times more likely to avoid losing their homes to foreclosure than homeowners who do not receive foreclosure counseling, according to recent findings. As a result of NFMC Program funding, families who sought and received foreclosure counseling were provided much needed information, assistance and guidance to address their risk of foreclosure, which helped them find a solution to foreclosure. The report, which analyzed NFMC Program activity during the first year of the program (Jan. 1-Dec. 31, 2008), also found that NFMC Program clients were more likely to receive a loan modification than homeowners who did not receive counseling, and NFMC Program clients who received loan modifications lowered their mortgage payments significantly more than homeowners who received loan modifications without NFMC Program counseling. NFMC Program clients, with the help of their counselors, secured loan mods that lowered their monthly mortgage payments $454 more than the clients who received modifications without foreclosure counseling, which results in an average annual savings of $5,448. “The findings announced today demonstrate the real impact foreclosure counseling can have for families facing foreclosure,” said Ken Wade, chief executive officer of NeighborWorks America. “Thanks to the hard work of non-profit, HUD-approved housing counseling agencies around the country, and the expertise of their certified counselors, families are less likely to lose their homes to foreclosure and receive substantially better mortgage modifications, significantly reducing the likelihood of falling behind again on their mortgage.” While the report analyzes the program data through Dec. 31, 2008, to date, more than 750,000 families have received foreclosure counseling as a result of NFMC Program funding. The NFMC Program was created by Congress to address the nationwide foreclosure crisis by dramatically increasing the availability of housing counseling for families at risk of foreclosure. The $180 million program was authorized through the FY 2008 Consolidated Appropriations Bill, which named NeighborWorks as its administrator. An additional $180 million was appropriated to this effort on

July 30, 2008 through the Housing and Economic Recovery Act of 2008, and the Omnibus Appropriations Act of 2009 appropriated another $50 million to the program on March 11, 2009. For more information, visit

Obama Administration kicks off modification conversion drive The U.S. Department of the Treasury and the U.S. Department of Housing and Urban Development (HUD) have launched a nationwide campaign to help borrowers who are currently in the trial phase of their modified mortgages under the Obama Administration’s Home Affordable Modification Program (HAMP) convert to permanent modifications. More than 650,000 borrowers have been helped thus far. The modification program is part of the Administration’s broader commitment to stabilize housing markets and to provide relief to struggling homeowners, and is a primary focus of financial stability efforts moving forward. Roughly 375,000 of the borrowers who have begun trial modifications since the start of the program are scheduled to convert to permanent modifications by the end of the year. Through the efforts of the campaign, the Treasury and HUD will implement new outreach tools and borrower resources to help convert as many trial modifications as possible to permanent ones. “We are encouraged by the pace at which trial modifications are now being made to provide immediate savings to struggling homeowners,” said the Chief of Treasury’s Homeownership Preservation Office (HPO) Phyllis Caldwell. “We now must refocus our efforts on the conversion phase to ensure that borrowers and servicers know what their responsibilities are in converting trial modifications to permanent ones.” “Encouraging borrowers to move through the process of converting trial modifications to permanent modifications remains a top priority for HUD,” said HUD Assistant Secretary for Housing and Federal Housing Administration (FHA) Commissioner David Stevens. “As a part of our continuing efforts to improve the execution of the HAMP program, HUD is committed to working with servicers, borrowers, housing counselors and others dedicated to homeownership preservation to improve the transition of distressed homeowners into affordable and sustainable mortgages.” The Obama Administration is now working to ensure that eligible borrowers have the information and the assiscontinued on page 23

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Do you have a theory on what is causing the tax and insurance defaults? Well, I think you can look at a couple of drivers. First of all, if you have a senior who is already in trouble and is facing foreclosure, and they take all the proceeds of the loan to pay off back taxes or to pay off the lender, there is a high probability that in year continued on page 20

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What are some lessons you have learned about seniors, the market, and the business? Let’s start with seniors. When dealing with seniors, basically, it’s all about trust. They have to trust you and trust your organization or they are just not going to do business with you, period. And so I think it comes down to trust, understanding that you have trained loan officers, that you have a very compliant organization, and that you follow all the rules to the letter of the law. That, in itself, will continue to garner more and more trust because, at the end of the day, are we still doing reverse mortgages in spite of the articles? We certainly are, and it is because, I believe, the senior, first and foremost, trusts who they are doing business with. That is invaluable. And if you lose that trust, you need to exit the business.

I don’t profess to be an expert on seniors as a market itself, but I know that everything we read comes down to the trust factor. The market is there. The public sector is looking to the private sector for a solution to their epidemic of runaway Medicaid expenses and states’ financial crises. They were looking primarily at reverse mortgages as potential solution to alleviate some of the funding shortfalls to keep people in their homes and out of nursing homes. That holds true today.

assumed that some seniors will not pay their taxes and insurance. There appears to be a systemic problem which is driving an increasing number of seniors to default on paying their taxes and insurance. And that is problematic for the program. O IOWA

meetings I put together with large banks back in the early 1990s. There was a lot of hesitation by the banks because, essentially, they did not want to even consider the fact they were ever going to foreclose on a widow or a senior. And I think after the first 15 or 16 years, the press started writing a lot of positive articles about how reverse mortgages changed the lives of seniors. The industry, including the Mortgage Bankers Association, and our trade association, NRMLA, realized that more lenders, banks and other financial services companies will need to offer this product to the coming age and demographic changes this product is going to change lives for many seniors and help keep them financially independent. In the early days of marketing the HECM program, some lenders or brokers tried to offer other products in conjunction with the reverse mortgage which was not viewed as favorable for many seniors. Regulators and legislators began hearing of possible abuses and began changing laws to stop this kind of activity. I remember saying at the NRMLA meeting in San Diego about two years ago that: “If you think the line is long of people waiting to get into our business, the line will be twice as long of those waiting to regulate us.” That is where we are today. And then, of course, no one could have foretold where home values have gone over the last two years. This product has a tendency to rise to the top. It makes me cringe when I hear people say this is the next sub-prime crisis. First of all, the sub-prime loans never had any insurance. There is a lot more thought and design in this product than there has ever been in the sub-prime, as well as increased emphasis on the many consumer protections outlined for the seniors in the HECM program, counseling etc.

How about the business? What are some lessons you have learned about the business? Well, we all know capital is king. In this business, because the product is still so young even though it is 20-years-old, we are indebted as an industry to Fannie Mae. For the past 20 years until about 18 months ago, Fannie Mae was the primary investor in this product. It pioneered the secondary market and enabled many lenders to get in the business to help more than 500,000 seniors since 1989. What I learned about the business is that what Fannie Mae did in the previous 20 years was assume the rewards, as well as the risks, that go with the product. No one in the business ever


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RESPA, TILA and HMDA for the New Year

RESPA (Regulation X)

Truth-in-Lending (Regulation Z) Initial TILs High Cost Mortgage Loans Higher-Priced Mortgage Loans Timing of Disclosures (Proposal) O Initial Truth-in-Lending. On July 30, 2009, new requirements became effective. These requirements: (1) broaden the coverage of the type of loan that must receive an early disclosure; (2) mandate that basically any mortgage loan subject to RESPA and secured by the consumer’s dwelling must receive an early disclosure; (3) includes new timing requirements for the delivery of disclosures; and (4) restricts the collection of any fees beyond the credit report fee until the consumer has received the initial disclosures. O High-Cost Mortgage Loan. Effective Oct. 1, 2009, new requirements were mandated for determining and verifying repayment ability. There is also a new prohibition on prepayment penalties if the total monthly debt payment, including the mortgage, exceeds 50 percent of the monthly gross income.

continued on page 22

12:15 – 1:45 p.m. Speaker Luncheon 2 – 5:30 p.m. How to Handle a Commercial Loan Portfolio in a Troubled Market 6 – 8 p.m. Networking Cocktail Reception Tuesday 9 – 10:30 a.m. Unlocking Pension Fund Capital 10:45 a.m. – 12 p.m. Lenders Panel 12 – 3 p.m. Commercial Property Exhibit Hall 12 – 2 p.m. Lunch in Exhibit Hall 3 – 5 p.m. How are the banks handling the current market issues? 7 – 9 p.m.

New for 2010! Opening Residential Networking Cocktail Reception in the Mark Etess Arena (Commercial Attendees Invited) Wednesday 9 a.m. – 12 p.m. General Session: The Mortgage Summit: Confront the New Decade with Advice from Respected Mortgage Professionals 12 – 5 p.m. Exhibit Hall Open 12 – 2 p.m. Lunch in the Exhibit Hall 1:45 – 3:15 p.m. Legends of Industry 3:15 – 4:30 p.m. Regulators Roundtable 6 – 8 p.m. Networking Cocktail Reception – Security Atlantic Thursday 9 a.m. – 3:15 p.m. Critical Issues Day 1:00 p.m. – 2:30 p.m. Luncheon with Speakers

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O Higher-Priced Mortgage Loans. Effective Oct. 1, 2009, “higher-priced mortgage loans” became subject to a new set of requirements. A “higher-priced mortgage loan” is specifically defined as a consumer purpose loan secured by the principal dwelling where the Annual Percentage Rate (APR) exceeds the Average Prime Offer Rate (APOR) by certain percentage points. Any consumer closed-end mortgage, including purchase money, is affected.

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Good Faith Estimate (GFE) HUD-1 and HUD-1A Settlement Statement The final regulation requires substantial changes to Real Estate Settlement Procedures Act (RESPA) disclosures, including the Good Faith Estimate (GFE), the HUD–1/1A Settlement Statements, and the Settlement Cost Booklet. The U.S. Department of Housing & Urban Development (HUD) continues to issue comments on compliance requirements by updating their frequently asked questions, known as “New RESPA FAQs.” Implementation is effective on Jan. 1, 2010. Loan originators must understand the regulatory changes and how the changes affect RESPA documents. Classroom, Webinar or online training should be conducted to familiarize loan officers with the revised disclosures; inevitably, customers will have questions when they review their mortgage disclosures. Lenders must be

entirely familiar with and able to implement GFEs that properly conform to all tolerances and data fields.

Monday 9 a.m. – 12 p.m. General Session O IOWA

The year 2010 brings many regulatory compliance changes that will require careful planning, timely implementation and ongoing training to all individuals involved in the loan flow process. Although some effective dates have already occurred, the actual implementation of these requirements has placed greater burden on lenders to be sure of functionality, and especially training. Proper risk management is best combined with appropriate instructional reviews. I would like to take this opportunity to thank those of you who have written me to discuss regulatory compliance issues or to comment on the articles I have written for this publication. In the coming year, I will be exploring other important facets of mortgage loan originations that directly affect the industry’s many compliance needs and will offer further advocacy of consumer protection initiatives. Best wishes for a safe, sound, and prosperous New Year!

Sunday 7 – 9 p.m. Opening Networking Cocktail Reception


For more information on the National Association of Mortgage Brokers, visit

NAMB leads the charge in 2010




A Message From NAMB President Jim Pair, CMC


December has been a very busy month with the legislative and regulatory issues that we had to address. We had to comment on the Federal Reserve Bank’s proposed change, the Federal Housing Administration’s (FHA’s) proposed change to allow mortgage brokers to originate loans when sponsored by an approved FHA mortgagee, the increase in net worth requirements for FHA mortgagees and the change for ordering FHA appraisals. On the legislative front, both the House and the Senate introduced their proposed legislation regarding Consumer Finance Protection Act (CFPA). One of the strengths of the National Association of Mortgage Brokers (NAMB) has been its grassroots response when we issued our “Calls to Action.” We had several in December and I want to thank each one of you who participated. Coming together like this when faced with issues that will affect the consumer and our industry has a tremendous influence on the final outcome of a rule. Thank you all again for your participation. I hope during the holidays you took the opportunity to visit your senators and representatives while they were in district. This is the perfect time to have their undivided attention and explain our industry and the benefits we provide to the consumer. You have the opportunity to talk with them about the various proposed bills and regulations and the possible unintended consequences for the consumer of these proposals. If you participated in the NAMB Calls to Action, visited with your senators and representatives while they were in district, you are ready for the next important event. The 2010 NAMB Legislative & Regulatory Conference is scheduled for SaturdayWednesday, Feb. 21-24 in Washington, D.C. Attending the conference will allow you to hear from the experts on all the latest changes in both the legislative and regulatory arenas. We will have some very important speakers who were instrumental in shaping these issues. We will have the opportunity to visit all our representatives and senators to ask for their continued support. It is impressive to have so many of their constituents from the mortgage industry on Capitol Hill at one time. Attending the Legislative & Regulatory Conference is the most important action you will take to protect your business, our industry and the consumer in 2010. I know our industry is going through some difficult times and we are all watching our expenses. This is one event that you cannot miss. Do not let this event pass you by. You need to be there with the hundreds of other members to ensure our industry will remain a vital channel of distribution for the consumer. Log on to and click on the “Legislative Conference” button to register for this very important event. I hope your holidays were a special occasion to be with family and friends and share in the spirit of the season. See you in Washington this February. 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

Success of NAMB/WEST proves brokers will thrive in 2010 A Message From NAMB Treasurer Donald J. Frommeyer As a wrap up to the 2009 NAMB/WEST event held in Las Vegas, I am writing this article to accomplish two things: One, to express my sincere apprecia-

tion to all the hard workers who made this event in Vegas a great success, and to give a big heartfelt THANKS. I want to say thank you to all who came out to the conference and fully packed the rooms of speakers for each and every session, and to say thanks for your respect that the National Association of Mortgage Brokers would put on a conference that makes it worthy of attendance like in year’s past. Attendance was strong at the event, with nearly 1,000 attendees making the trip to Vegas for NAMB/WEST. I am pleased to report that we had strong attendance from all of NAMB’s state affiliates. My hat goes off to the state representatives who made this happen in their state. These people took this conference on their backs and pushed it to their state members and provided the reasons why these people needed to attend and be on hand in Las Vegas for the full conference. The individual speakers all delivered very strong presentations, and must admit that I gained a wealth of great new knowledge out of every time slot. As a veteran of 35 years in the business, I took home some tips and tricks from the speakers and sessions in Vegas that I plan to use in my everyday business plans. I am still toying with the fact that some type of video can help us. I just don’t know if America is going to want to look at me day in and day out! I want to send a big thank you to Wells Fargo Home Mortgage for sponsoring Sunday’s entire day of education. Dr. Ted C. Jones, director of investor relations for Stewart Information Services, delivered his upbeat 2010 economic forecast to a packed house to kick off Sunday’s mornings events. Members of the NAMB board, including Jim Pair, Harry Dinham, Denise Leonard and Roy DeLoach, provided a very insightful look at the latest in legislative and regulatory changes coming down the pipe. Theresa Ballard of BFO Solutions, Ken Perry of Broker Knowledge and Ginger Bell of Go2Training kept pace with the regulatory updates by focusing in on the SAFE Act, MDIA, HVCC and the Red Flags Rule in their session. After a lunch break, the afternoon continued with Nancy West from HUD with a presentation on the FHA marketplace and Jeff Wilson from the U.S. Department of Veterans Affairs dissected VA loans. Sunday’s sessions concluded with a unique first-of-its-kind speed dating style roundtable event where attendees had 10 min. to spend moving from table to table and meeting one-on-one with the industry’s top wholesalers and affiliated service providers. In addition, Rene Rodriguez from Volentum and Fred Arnold from American Family Funding delivered their presentation on honing your leadership skills in a troubling economic environment. Monday’s sessions focused on networking and social media and we kicked things off with the duo of Blogger Mark Madsen and Mark Green from Top of Mind Networks providing their tips on effectively utilizing social media outlets, such as Twitter and Facebook, to enhance and market your business. In a second Monday morning session, Frank Garay and Brian Stevens from Think Big Work Small discussed how to enhance your business through the use of video. The information we received from Frank and Brian was presented in everyday language that will surely benefit us all. The exhibitor showcase, as I mentioned earlier, featured nearly 50 companies that wanted to meet with mortgage brokers. The role of the exhibitors, who included the industry’s top lenders and affiliated service providers, was to help the mortgage broker attendees find the newest products and services to enhance their business. I personally went to each booth and they were all inquisitive on how I did business and exactly what type of business I did. They presented me with ideas and plans on how to make my business more profitable and better equipped me to handle the changes that are coming down the pike. The other response from them was to talk to me as a decision-maker in my office and how they might be able to help me improve my loan officer quality and the quality of my business. I feel a great deal of the success of the exhibit hall may have been attributed to our Free Pass Program. Through Free Pass Program, managed by National Mortgage Professional Magazine, NAMB industry partners and exhibitors distributed free passes to their clients and their guests that provide access to the expo.

We are now getting ready to start planning the 2010 installment of NAMB/WEST. All attendees should receive a survey on the last event. Please help us in the answering the questions so that we may make the necessary changes that will improve this conference for all. I want to thank all of the NAMB staff who came out to help, and even those who stayed back in Washington, D.C., because without you, we cannot pull all of events of this magnitude. I would also like to thank our knowledge of this fraud is increasing. event planners, Kinsley and Associates … Allison, Stephanie and Devon. You three Thus we see stats of increased fraud did a tremendous job, and as smooth as NAMB/WEST 2009 went, the future should being released by the Federal Bureau be even smoother. of Investigations (FBI). These stats NAMB now turns its attention to Washington, D.C. for its 2010 Legislative & influence those who are looking to Regulatory Conference, set for Saturday-Wednesday, Feb. 21-24. As our industry purchase mortgages as an investment. faces regulatory pressures on almost a daily basis, now is the time to show our O People are more desperate right elected officials the important role that mortgage brokers and the mortgage now. If you are about to lose your industry will play in the recovery of the American economy. Our strength in numhome, you will do just about anybers through our participation in the Legislative & Regulatory Conference and our thing to save it—including lying, march on Capitol Hill will demonstrate to our elected officials that we are here to cheating or stealing to get a loan. help and educate the American consumer, contrary to the picture painted by O There are opportunities to make mainstream media. So make you plans today to join us as we take to the halls of money. Just as people saw opportuCapitol Hill and convey the message of NAMB to the members of Congress. For nities to flip houses during the heymore information, visit and click on the “NAMB 2010 Legislative & day, today, foreclosures are attractRegulatory Conference” link. ing investors who see the opportunity to make a quick buck. And any Donald J. Frommeyer is treasurer and Membership Committee chair of the National time there is that “get rich quick” Association of Mortgage Brokers, and senior vice president of Amtrust Mortgage mentality attached to real estate, it Funding Inc. in Carmel, Ind. He may be reached by phone at (317) 575-4355 or erepresents a bad combination. mail Here is the problem, if we don’t all band together to fight this fraud, we will be paying a long term price in terms of tighter guidelines and higher rates in the secondary markets. For decades through my books, such as The Book of Home Finance, I have been teaching concepts such as the long-term value of owning real estate instead of over-leveraging and getting rich quick. And I have been teaching ethics in lending. Our Certified Mortgage Advisor I have thought about the many seminars and classes we take from course has always had a segment on ethics people who have information and advice for our careers and lives. After thinking about the many directions I could take, I have decided that I want to be a part of the “Be” group. I have listed a few key concepts we are all familiar with and may even already follow. But, I know I need to review them frequently and thought a support group of “BE”lievers could help us all connect. The following is my initial “BE” list”

the secondary market overview

Certification? Certainly! The “BE” group

A Message From NAMB Certifications Committee Chair Pava J. Leyrer, CMC, CRMS

and our CMA’s are all provided with an ethics policy to which they must adhere ( This is one reason that our partner RateLink has started offering the program to their subscribers. As the secondary marketing experts, they understand the connection between doing things right and the longterm benefit to all of us. But this is not enough. We must become proactive. It is time we stopped looking the other way. For every individual who benefits from a fraudulent action, the populace as a whole must pay a price. Think of the industry as all living on a river and make our living off the river. If one person throws their garbage into the river, no big deal. But if a bunch of people do it—our living goes away. It is incumbent upon all of use to make sure that this does not happen. Dave Hershman is a leading author for the mortgage industry with eight books and several hundred articles to his credit. He is also head of OriginationPro Mortgage School and a top industry speaker. Dave’s Certified Mortgage Advisor Program can be found at If you would like to stay ahead of what is happening in the markets, visit for a free trial or e-mail

There will always be something to try and disrupt your attitude, but you do have a choice. Be the first to spread some happiness wherever you go. I must include one more “BE” especially because of my commitment and belief in certification. I have seen a difference in many people that have attained their certification. The level of professionalism and pride increase and I think that “BE CERTIFIED” should also be included on the list. Make this the time to obtain yours.

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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


1. Go to 2. Pick a low fixed rate for your borrower 3. Enjoy an easy closing, and then relax! O IOWA

O BE Dedicated: Hard work and dedication are keys to success. Know the balance between work and pleasure. Making and following through on your plan is extremely rewarding. O BE Thoughtful: Think about what you want and how you want to get it. Make plans and goals and stay focused to attain them. Don’t let thinking become a lost art. O BE Respectful: Respect others and yourself. Showing care and concern for your family, friends, colleagues and customers will always be a benefit to you, as well as those you interact with everyday. O BE Humble: Sincere gratitude and humility are important character traits that are very noticeable in people. O BE Involved: Life is truly short and what you do with it does make an impression and leaves a mark. Making a difference in a professional, community and charitable organization is rewarding for both you and the people you touch. Your time and talents are valuable assets, and do make a difference. O BE Committed: To knowledge and growth. Ask questions if you want to know more or you do not understand. Take the time to really listen to others and you will always learn something. O BE Happy: Yes, I do like the song! Happiness is an attitude about life. It is important everyday and not easy to maintain.

continued from page 14


forward on reverse

continued from page 15

two, they may have difficulty paying taxes and insurance. Looking at the program’s structure, years ago, when proprietary products were introduced, the comparison was the FHA [Federal Housing Administration] product gives you so much more principal limit. The difference was that the costs were financed, and you had to get more principal limit to cover the closing costs. In other words, if it was a $300,000 property value up to the maximum claim amount, and the closing costs were say $14,000, you would have to have at least

$14,000 more on your principal limit because that was your initial balance. From the proprietary side, many of them began saying if I am going to make a loan on a $3 million property, I had better check to see if there had been a prior history of tax delinquency because the property taxes on a $3 million home is huge. So, where is this all going? I have seen suggestions that we eliminate the servicing fee set aside and put taxes and insurance set aside as well. No matter how you get there, you will have to reduce the principal

limit and hold some money back. In the event the senior does not pay their taxes and insurance, there is money there to do it. That is the future. Let me talk about the servicing fee set aside. When I was involved in the primary design of this product, one of the difficulties was comparing the reverse mortgage and the way it is structured with origination costs, servicing costs, compared to the forward side of the business. In a forward mortgage, the servicing fee is built into the interest rate. But we couldn’t because the only product available was an adjustable loan product, and it has a line of credit feature. We never knew what the balance would be, and we didn’t want lenders to have an incen-

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Contact us today to learn more. 1. Borrowers must be at least 62 years or older. Prior Wells Fargo Home Mortgage review and broker approval are required to originate FHA loans. Additional approval requirements apply to originate reverse mortgages. Please contact Wells Fargo Wholesale Lending for details. This information is for use by mortgage professionals only and should not be distributed to or used by consumers or other third parties. Information is accurate as of date of printing and is subject to change without notice. Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A. © 2009 Wells Fargo Bank, N.A. All rights reserved. #68212 12/09-3/10

tive. So, we created a fixed dollar amount that would be added to the borrower’s balance, regardless of the loan balance. That’s how we got $30, $360 a year. Now, that’s all a lender can get for servicing the loan. However, that is a consistent revenue stream, and in the forward mortgage business, your income goes down as the loan balance goes down because it is a function of the interest rate. But I believe now, if you look at the fixed-rate product that is available, most of those loans are eventually going into securities. And I think you can do away with the servicing fee set aside because you already know what the balance is. You can make the servicing fee as part of the interest rate and put in a tax and insurance set aside for emergencies. Those are concepts that have been talked about that I think have legs. What are the prospects and some challenges for the industry? There is a significant group of seniors that still have home equity that will have a need for this product. The current challenges are convincing both federal and state regulators that (a) the product is sound; and (b) that there are significant controls to protect the consumer. The counseling component is huge. Over the years, it hasn’t been funded. A couple of years ago, counseling agencies were asking lenders for money. That was the only way we were going to get any loans closed. Now, that’s all been shut off. And the customer is paying for counseling. It will come to ongoing scrutiny of individual mortgage company, either non-bank or bank-owned, as to playing by the rules and total transparency. The days of what I am going to call “the mortgage cowboy” are gone. They are gone because they never had any capital to start with and, essentially, after they closed the loan, they were selling it to whoever the highest bidder was. And they were using different margins because they could get a different SRP, depending on how they can convince the senior to take product “A” over “B.” That’s exactly where we were. Unfortunately, the forward mortgage business has been around a lot longer than 20 years. Talking about the future, with the continuing cloud of yield spread premiums now under scrutiny at the state level, I think eventually they will be gone. So, that takes one leg of the three legs of the three-legged stool away, brokers relying on the yield spread premium. That comes down to origination income and selling your loans servicingreleased and servicing income. I think it is going to be more of a restricted playing field. At the end of the day, any lender who wants to play by the rules can do so and do so nicely provided they have capital and a line of credit, and they have the trust of the senior consumer. continued on page 22

Marketing Your Difference

Essential knowledge

1. Reciprocity Be the first to give. Trigger the time-honored social principle of reciprocation by giving of your time, your talent and your knowledge with every contact. Never leave a prospecting or protecting meeting without leaving a well-written, personalized article, leaflet or booklet. Use personalized scratch pads as a giveaway. Business cards regularly get trashed. No one throws a scratch pad away. 2. Authority: Showing and knowing Establish yourself as the mortgage authority in your market, again, by providing timely, accurate information that is well-designed and personalized. I use The Loan Toolbox and Mortgage Market Weekly to disseminate information to the local media, as well as my network, and in so doing, brand myself, get published and called upon when the media needs accurate mortgage information. 3. Consistency: The starting point When we determine our course of action, commit to six months and stay on track. Set our calendar and fill the blank spots each day with prospecting and protecting. A regular routine of communication, visits, calls, etc. will become more and more noticed and appreciated once the recipients of our effort realize that we can be counted on. This is an uncertain time. We can become the certainty in the professional lives of our referral partners and prospects by being consistent. 4. Liking: Making friends to influence people I try not to court those who I would not want to invite to my dinner table. So, I do business with my friends and make friends of those I do business with. Like my buddy Tim Braheem always said, “The loan originator with the most friends, wins.” Life is too short to work and rely upon people that you don’t like enough to invite to your home.

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Copyright © 2009 Emigrant Mortgage Company, Incorporated (Emigrant). All rights reserved. Emigrant is a subsidiary of Emigrant Bank, Member FDIC and is an Equal Opportunity Lender. All product names, company names and logotypes are servicemarks or trademarks of Emigrant in the United States and other countries. The information, products and services contained in this advertisement are believed to be correct but may include inaccuracies, typographical errors and/or omissions. Emigrant does not guarantee the accuracy of the data contained herein. This information is intended for mortgage and/or real estate professional use only and should not be distributed or presented to consumers or any other third parties. This is not an offer or guarantee to extend consumer credit. Program guidelines, terms and/or conditions are subject to change by Emigrant without notice. All loans are subject to submission of a complete application, underwriting review and credit and property approval by Emigrant. Not all products and/or programs are available in all states and/or localities and/or for all loan amounts. Certain products / program are offered through third parties. Other restrictions and limitations may apply. New York Licensed Residential Mortgage Lender: Exempt. Emigrant is registered or licensed with the Banking Departments or Divisions in CT, DE, FL, MA, NH, NJ, NY and PA.


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We are all originating the same five or six loan programs. The days of a competitor finding a new, funky, no qualification program that you don’t have, and stealing your deal, are over. If we all have the same products, how are we going to differentiate ourselves in our market? Simple. We need to know more about Federal Housing Authority (FHA), U.S. Department of Veterans Affairs (VA) and conventional conforming products than anyone else. We need to know how to “tell the story” on a full doc loan with additional documentation and notes to the processer and the underwriter. We commit to always turn in our loan files with a memo to the underwriter. Remember, no one but you has had the time with the client to get the whole story. Relate the story to all concerned and get more loans approved. Thorough knowledge of agency underwriting guidelines and product descriptions is just the start. We also need to be

When You THINK Of...

these principles of ethical influence as taught by Dr. Robert Cialdini: O IOWA

2. Set a fixed time every morning to answer e-mails and then get on with our day Send them out during the day as we need to, but stay away from that e-mail time By Greg Frost alligator as much as possible. Keep our calendar up on our computer screen so During my 37 years in the mortgage well-versed on the additional overlay that we can continually see how few lending industry, I have seen many eco- underwriting criteria that most investors appointments we have and how much nomic swings that have stimulated are now adding to the basic agency regu- time is available for prospecting. both dramatic increases and decreases lations. We need to time block to read in mortgage lending volume. I live in industry information. Start every day 3. Never eat alone Albuquerque, N.M., and our volume of reading and use the information to The best way to work a referral partner purchase money lending opportunities become an authority in our market. This and prospect database is in person. The in 2008 were only 35 percent of what publication is one of the best and should best way to meet in person is at breakfast be on our “must read” list every month. they were at our peak in 2006. and lunch. There are 22 work days in a Fortunately, historic low mortgage month, with 44 opportunities to have interest rates have stimulated refinance Selling and presentation one-on-one personal, productive sales opportunities; however, we are chal- skills calls with our referral partners and lenged with credit and property value We must be sharper here than ever before. prospects. We should schedule half of our issues along with a continually shrinking Why? Because we are going to get in front appointments for protecting and half for of fewer people. If we have prospecting. I dare say that most of us do list of available loan profewer selling opportunities, not make 44 meaningful sales calls in a grams. Therefore, what we must close a much high- month. We will, if we schedule two each should have been a lander percentage of them if we day at the morning and afternoon meal. slide of opportunity has hope to earn as much this been tempered by the year as last, or to enjoy a 4. Get active in the local board of Realtors new realities of the mortraise. Practice selling scripts Join a committee. Scour their roster for gage industry. and dialogues. Make certain familiar names. Make a prospecting list So, many of us have rethat we have an “elevator” from this roster. Then take them to breakread Who Moved My response to the common- fast or lunch. Cheese?, and are reading of place mortgage questions other success stories as we that always ends in an offer 5. Stop in and visit our referral partners desperately try to re-invent of assistance and the setting and prospects ourselves and find a more “This is an uncertain of an appointment to proproductive approach to our Very few of our competitors are. The art of business. An old guy like time. We can become vide it. We need to take off the personal sales call was lost in favor of the certainty in the the headset, stop answering technology somewhere along the way. Call me suggests that you glance professional lives of every insipid e-mail that a referral partner or prospect and schedover your shoulder and comes our way and get out ule an office visit. If we make regular vistake a look back. What was our referral partners among them. Here are five its, we will run into a deal that someone old is once again new. Dust and prospects by things that I think we need else in the office needs help on. Go where off your old flyer from The being consistent.” to focus on in this level of your competitors are not. And there is no Loan Tool Box, illustrating the pyramid: the “Pyramid of a Complete one making office calls these days. Loan Originator,” and focus on the first three levels: Essential Knowledge, Selling 1. Start every day with 30 min. of read- Personal marketing and Presentation Skills, and Personal ing industry publications Branding yourself is more important Marketing. These three skill sets can be We need to be the source of accurate than ever. Mortgage companies have instrumental in helping you kick start your mortgage information to our professional come and gone. We each have an production. Remember, the Lord giveth network and our market. A daily regime opportunity to stand out in our market, and taketh away. These low interest rates of reading and gathering timely industry just by still being here. Let everyone can be gone in a flash, so take advantage of information will contribute to our becom- know you’re still here. Focus your marthe current refi revenue opportunities to ing an authority. keting efforts towards tapping into invest in rebuilding your referral network and mining your relationships.


forward on reverse

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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 decisionmakers 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 congressmen in an effective manner.

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What is your favorite reverse mortgage story? My favorite reverse mortgage story is the one that is most close and personal to me. And that was actually seeing my mother use it. My father died in 1990. We didn’t realize that my father had taken a second mortgage out on the property so that he could buy a car. And when we discovered that my mother (then 70) was not eligible for enough, under the maximum lending limit of those times, to pay off both her first and second mortgage, she had to continue to use her own capital to pay off the second. Five years later, she was eligible for more money because she was five years older. Meanwhile, her home in Denver had gone up in value. She was able to pay off her first mortgage with the reverse mortgage and put about $360 a month back in her pocket. And a year later, she called and said I need a new furnace. And I said, “Mom, good for you. Here is the phone. Call, use your line of credit.” She got the money and put a new furnace in. About four years later, she sold her property in Denver. It had gone up significantly in value. She paid off her reverse mortgage and put money in the bank, and moved to Maryland to be with my sister. That’s the perfect story.

And that’s the way the program was designed to work. That is the way it did work. And that is the way it can work for many. She had the components: Need and some challenges, and she had the ability to tap her line of credit when she had an emergency. Her home went up in value. And when she paid off the mortgage, she had money left over. 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 130 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 or Visit author Atare E. Agbamu’s blog at for his thoughts and insights on the reverse mortgage marketplace.

regulatory compliance outlook New requirements for loans that fall into this category are: 1. Lenders are required to consider the borrower’s repayment ability. 2. Lenders are required to verify that repayment ability. 3. Certain types of prepayment penalties are now prohibited. 4. Establishment of new escrow parameters.

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report the spread between a loan’s annual percentage rate (APR) and the new comparable called the average prime offer rate (APOR): The spread must be reported if it is equal to or greater than 1.5 percentage points for first lien loans or 3.5 percentage points for subordinate lien loans.

Submit your questions … O Timing of Disclosures. The Federal Reserve Board has issued a Regulation Z proposal that affects the content, format, and timing of existing mortgage loan disclosures. The proposed changes would affect closed-end mortgages (such as purchase money loans, refinances and seconds), as well as home equity lines of credit. The proposal, when it is finalized and becomes effective, will have an impact on disclosures given at application and it will contain limits on lender practices. The final regulation will be issued in early 2010.

HMDA (Regulation C) New Reporting Spread O Effective Oct. 1, 2009, a lender will

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 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

news flash

continued from page 14

tance needed to move from the trial to the permanent modification phase. All mortgage modifications begin with a trial phase to allow borrowers to submit the necessary documentation and determine whether the modified monthly payment is sustainable for them. As the first round of modifications reaches the time to convert, the Administration has identified several strategies for addressing the challenges that borrowers confront in receiving permanent modifications. For more information, visit

for each group at the end of the third quarter were as follows: O CMBS: 4.06 percent (30-plus days delinquent or in real-estate owned); O Life company portfolios: 0.23 percent (60-plus days delinquent); O Fannie Mae: 0.62 percent (60 or more days delinquent); O Freddie Mac: 0.11 percent (90 or more days delinquent); and O Banks and thrifts: 3.43 percent (90 or more days delinquent or in non-accrual).

The MBA analysis looks at commercial/multifamily delinquency rates for five of the largest investor-groups: commercial banks and thrifts, commercial mortgage-backed securities (CMBS), life insurance companies, Fannie Mae and Freddie Mac. Together these groups hold more than 80 percent of commercial/multifamily mortgage debt outstanding. The analysis incorporates the same measures used by each individual investor group to track the performance of their loans. Because each investor group tracks delinquencies in its own way, delinquency rates are not comparable from one group to another. For more information, visit

Government releases new data on modification program The Obama Administration has released the latest report for the Making Home Affordable (MHA) loan modification program. As part of an ongoing commitment to transparency, the report includes, for the first time, the number of modifications that have transitioned from the trial phase to permanent phase, as well as a breakout of the 15 metropolitan areas with the highest program activity. With more than continued on page 29

MBA report shows Q3 ’09 commercial and multifamily performance dropping

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Delinquency rates continued to increase in the third quarter for most commercial/multifamily mortgage investor groups, according to the Mortgage Bankers Association’s (MBA) Commercial/Multifamily Delinquency Report. “Commercial and multifamily mortgages continued to feel stress in the face of the weakened economy,” said Jamie Woodwell, MBA’s vice president of commercial real estate research. “The deterioration in commercial and multifamily loan performance is generally in line with what is being seen in other parts of the economy, with loans backed by commercial properties continuing to perform far better than construction and development loans.” Construction and development loans are not included in the numbers presented here, but are included in many regulatory definitions of “commercial real estate” despite the fact that they are often backed by single-family residential development projects rather than by office buildings, apartment buildings, shopping centers or other income-producing properties. Between the second and third quarters, the 30-plus day delinquency rate on loans held in commercial mortgage-backed securities (CMBS) rose 0.17 percentage points to 4.06 percent. The 60-plus day delinquency rate on loans held in life company portfolios rose 0.08 percentage points to 0.23 percent. The 60-plus day delinquency rate on multifamily loans held or insured by Fannie Mae rose 0.11 percentage points to 0.62 percent. The 90-plus day delinquency rate on multifamily loans held or insured by Freddie Mac remained unchanged at 0.11 percent. The 90-plus day delinquency rate on loans held by Federal Deposit Insurance Corporation (FDIC)insured banks and thrifts rose 0.51 percentage points to 3.43 percent. Based on the unpaid principal balance of loans (UPB), delinquency rates





By Jonathan Foxx


In 2008, the U.S. Department of Housing & Urban Development (HUD) issued both technical and substantive amendments to the rule that implements the Real Estate Settlement Procedures Act (RESPA). 1 The technical changes took effect on Jan. 16, 2009 and substantive changes have taken effect on Jan. 1, 2010. Last month, I provided a brief analysis of the new Good Faith Estimate (GFE).2 In this article, I will offer some procedural guidance that incorporates several substantive changes that took effect on Jan. 1, 2010. This analysis is meant as an overview of those changes.3 Notably, the federal regulatory agencies will now begin examining for compliance with the new substantive provisions of the new RESPA Reform Rule on Jan. 1, 2010.4 Among other things, substantial changes have been made to: O O O O

Good Faith Estimate (GFE) HUD-1 Settlement Statement (HUD-1) HUD-1A Settlement Statement (HUD-1A) Settlement Cost Booklet5

I will consider the five following RESPA revisions:6 1. New GFE Form 2. Binding GFE 3. Tolerances on Settlement Costs 4. HUD-1/1A Settlement Statement 5. Settlement Cost Booklet

First page of GFE The first page of the GFE discloses identifying information such as the name and address of the “loan originator” which includes the lender or the mortgage broker originating the loan. The “Purpose” section indicates what the GFE is about and directs the borrower to the Truth-in-Lending (TIL) disclosures and HUD’s Web site for more information. The borrower is informed that only the borrower can shop for the best loan and that the borrower should compare loan offers using the shopping chart on the third page of the GFE. The “Important Dates” section requires the loan originator to state the expiration date for the interest rate for the loan provided in the GFE, as well as the expiration date for the estimate of other settlement charges and the loan terms not dependent upon the interest rate. While the interest rate stated on the GFE is not required to be honored for any specific period of time, the estimate for the other settlement charges and other loan terms must be honored for at least 10 business days from when the GFE is provided. O The form must state how many calendar days within which the borrower must go to settlement once the interest rate is locked (i.e., rate lock period). The form also requires disclosure of how many days prior to settlement the interest rate would have to be locked, if applicable. O The “Summary of Your Loan” section requires disclosure of the loan amount; loan term; initial interest rate; initial monthly payment for principal, interest, and any mortgage insurance; whether the interest rate can rise, and if so, the maximum rate to which it can rise over the life of the loan, and the period of time after which the interest rate can first change; whether the loan balance can rise if the payments are made on time, and if so, the maximum amount to which it can rise over the life of the loan; whether the monthly amount owed for principal, interest, and any mortgage insurance can rise even if payments are made on time, and if so, the maximum amount to which the monthly amount owed can ever rise over the life of the loan; whether the loan has a prepayment penalty, and if so, the maximum amount it could be; and, whether the loan has a balloon payment, and if so, the amount of such payment and in how many years it will be due.

New Good Faith Estimate Form7 As of Jan. 1, 2010, lenders and mortgage brokers8 must provide a standard GFE form to a borrower within three business days9 of receipt of an application for a mortgage loan. The new GFE compares settlement costs and loan terms from various loan originators. Areas covered by the GFE include:

O The “Escrow Account Information” section requires the loan originator to indicate whether the loan does or does not have an escrow account to pay property taxes or other property related charges. In addition, this section also requires the disclosure of the monthly amount owed for principal, interest, and any mortgage insurance.


O The bottom of the first page includes subtotals for the adjusted origination charges and charges for all other settlement charges listed on page two, along with the total estimated settlement charges.

A summary of loan terms and a summary of estimated settlement charges Key dates (i.e., expiration dates of the interest rate and settlement charges) Settlement charges disclosed as subtotals for 11 cost categories A table explaining which charges can change at settlement A trade-off table showing the relationship between the interest rate and the settlement charges O A chart for comparing the costs and terms of loans offered by different originators

Second page of GFE The second page of the GFE requires disclosure of all settlement charges. It provides for the estimate of total settlement costs in eleven categories discussed below. The adjusted origination charges are disclosed in “Block A” and all other

settlement charges are disclosed in “Block B.” The amounts in the blocks are to be added to arrive at the “Total Estimated Settlement Charges,” which is required to be listed at the bottom of the page. 8 Block A: Disclosure of Adjusted Origination Charge Block A addresses disclosure of origination charges, which include all lender and mortgage broker charges. The “Adjusted Origination Charge” results from the subtraction of a “credit” from the “origination charge” or the addition of a “charge” to the origination charge. Block 1: The origination charges, which includes lender processing and underwriting fees and any fees paid to a mortgage broker. Note: This block requires the disclosure of all charges that all loan originators involved in the transaction will receive for originating the loan (excluding any charges for points). A loan originator may not separately charge any additional fees for getting the loan, such as application, processing or underwriting fees. The amount in Block 1 is subject to zero tolerance (i.e., the amount cannot change at settlement). (See “Tolerances” below.) Block 2: A “credit” or “charge” for the interest rate chosen: Note: Differentiation is made between transactions involving a mortgage broker and transactions that do not involve a mortgage broker. I Transaction involving a mortgage broker. Block 2 requires disclosure of a “credit” or charge (points) for the specific interest rate chosen. The credit or charge for the specific interest rate chosen is the net payment to the mortgage broker (i.e., the sum of all payments to the mortgage broker from the lender, including payments based on the loan amount, a flat rate or any other compensation, and in a table funded transaction, the loan amount less the price paid for the loan by the lender). When the net payment to the mortgage broker from the lender is positive, there is a “credit” to the borrower and it is entered as a negative amount. [For example, if the lender pays a yield spread premium (YSP) to a mortgage broker for the loan set forth in the GFE, the payment must be disclosed as a “credit” to the borrower for the particular interest rate listed on the GFE (reflected on the GFE at Block 2, Checkbox 2). The term “yield spread premium” is not featured on the GFE or the HUD-1 Settlement Statement.] Note: Points paid by the borrower for the interest rate chosen must be disclosed as a “charge” (reflected on the GFE at Block 2, Checkbox 3). A loan cannot include both a charge (points) and a credit (yield spread premium). I Transaction not involving a mortgage broker. For a transaction without a mortgage broker, a lender may choose not to separately disclose any credit or charge for the interest rate chosen for the loan in the GFE. If the lender does not include any credit or charge in Block 2, it must check the first checkbox in Block 2 indicating that “The credit or charge for the interest rate you have chosen is included in ‘our origination charge’ above.” Only one of the boxes in Block 2 may be checked: a credit and charge cannot occur together in the same transaction.

Block 3: Service providers selected by the lender (i.e., appraisal, flood certification fees) Block 4: Title service fees and the cost of lender’s title insurance Block 5: Owner’s title insurance Block 6: Other required services for which the consumer may shop Block 7: Government recording charges Block 8: Transfer tax charges Block 9: Initial deposit for escrow account Block 10: Daily interest charges Block 11: Homeowner’s insurance charges

The third page of the GFE includes the following information:

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O Tolerance Chart: Identifies the charges that can change at settlement (see “Tolerances” below). O Trade-Off Table: Requires the loan originator to provide information on the loan described in the GFE and at the loan originator’s option, information about alternative loans (i.e., lower settlement charges but a higher interest rate, lower interest rate but higher settlement charges). O Shopping Chart: Allows the consumer to fill in loan terms and settlement charges from other lenders or brokers to use to compare loans. O Disclosure: Language indicating that some lenders may sell the loan after settlement, but any fees the lender receives in the future cannot change the borrower’s loan or the settlement charges.



Third page of GFE


8 Block B: Disclosure Of Charges For All Other Settlement Services Block B totals the sums for all settlement services (other than the origination charges).



Mortgage broker buys mortgage banker as First Priority acquires Austin Perry

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First Priority Financial Corporation, a privately held retail mortgage origination firm, has announced the intended acquisition of Austin Perry Financial Corporation, a privately held residential wholesale mortgage banker based in Santa Rosa, Calif. Funding more than 10,000 loans annually, First Priority Financial was one of few companies surviving the industry meltdown without posting any losses or going through a single layoff. Similarly, Austin Perry has earned a reputation as a cost and customer service leader in the wholesale mortgage banking arena with a similar approach to the market, quality and cost control, Austin Perry was also among the elite few who remained financially strong while the majority of their mortgage banking peers floundered or barely hung on. “Our success has always been based on doing what’s best for the consumer,” said Tim Kearns, chief executive officer of First Priority Financial. “This means operating on thin margins and delivering greater funding choices and flexibility than the rest of the industry and offering unprecedented work-flow efficiencies for originators. This mindset will never change for us and was also a driving force behind the decision to make this acquisition. The motivation to bank loans in the past was purely profit margin based and not client facing. So we stuck to brokering because it was mathematically best for our clients and loan producers. The changing lending environment makes it prudent to expand and refine banking delivery and continuing to improve upon an already fantastic brokerage channel to best serve our borrowers needs.” When asked about the acquisition, Kearns stated that building a banking division internally is the norm but is too often fraught with growing pains for which the consumer and loan producers would ultimately pay the price. “Choosing Austin Perry was the easy part,” said Kearns. “We have our loan originators rate the lender on every transaction. With over 100,000 transactions funded through virtually every lending source in America, we have the

most thorough lender rankings in existence and Austin Perry has always been one of the top lenders.” Kearns says that the company will take the same low margin, high-efficiency approach to banking that made it the leading broker in the nation. The company will continue to focus on expanding and refining the brokerage channel in tandem with the internal banking division. “We are excited to begin integrating the teams and scaling the funding operation to accommodate the expected increase in volume,” said Steve Weaver, president of Austin Perry. “The cultural fit between the two companies is hard to describe, both entities have such a strong commitment to their people and clients; It’s not something you see much anymore.” For more information, visit

NetMore America enters the East Coast market NetMore America Inc. has announced that it has expanded into the East Coast marketplace by establishing a presence in the state of Maryland. The company received its state of Maryland Mortgage Lender Licenses from the Office of the Commissioner of Financial Regulation and can now originate residential mortgage loans throughout Maryland. “NetMore is building a nationwide lending platform in a responsible and strategic manner by focusing on states with high potential for quality business,” said Mark Freedle, president and chief executive officer of NetMore. “Today, we believe those markets are based on the East Coast in the MidAtlantic region, which includes areas such as Maryland, Virginia and Washington DC, as well as in states such as Florida, Pennsylvania and New Jersey. Our company’s model is based on superior service, risk management and creating efficiency. We will only partner with the highest quality mortgage brokers and retail branch systems in any new market we enter.” NetMore has begun originating mortgages in Maryland through its Wholesale Lending Program that conducts extensive background checks on continued on page 30

new respa reform rule

continued from page 25

Binding GFE10 With limited exceptions, the loan originator will be bound to the settlement charges and loan terms listed on the GFE. For the interest rate, the loan originator will be required to indicate on the GFE the period during which a rate is available. After that period, the interest rate and other rate related charges, the adjusted origination charges, and the per diem interest can change until the interest rate is locked. For settlement charges and all other loan terms, the loan originator will be required to honor the estimated settlement charges and loan terms for at least 10 business days from the date the GFE is provided. The charges and terms in the GFE will be binding, unless a revised GFE is provided to the borrower prior to settlement based on “changed circumstances” as defined in the rule (see below). NOTE: if a lender accepts a GFE issued by a mortgage broker, the lender is subject to the loan terms and settlement charges listed in the GFE, unless a revised GFE is issued prior to settlement. “Changed circumstances” are: G Acts of God, war, disaster or other emergency. G Information particular to the borrower or transaction that was relied on in providing the GFE that changes or is found to be inaccurate after the GFE has been provided. G New information particular to the borrower or transaction that was not relied on in providing the GFE. G Other circumstances particular to the borrower or transaction, including boundary disputes, the need for flood insurance or environmental problems.

2. Ten percent tolerance category: For this category of fees, while each individual fee may increase or decrease, the sum of the charges at settlement may not be greater than ten percent above the sum of the amounts included on the GFE. These fees include: = Loan originator required settlement services, where the loan originator selects the third-party settlement service provider. = Loan originator required services, title services, required title insurance and owner’s title insurance when the borrower selects a third-party provider identified by the loan originator. = Government recording charges. 3. No tolerance category: This category of fees is not subject to any tolerance restriction. The amounts charged for the following settlement services included on the GFE can change at settlement and the amount of the change is not limited. These fees include: = Loan originator required services where the borrower selects his or her own third-party provider. = Title services, lender’s title insurance and owner’s title insurance when the borrower selects his or her own provider. = Initial escrow deposit. = Daily interest charges. = Homeowner’s insurance.

HUD-1/1A Settlement Statement12 The revised HUD-1/1A Settlement Statement form provides a reference between the HUD-1/1A and the relevant line from the GFE.13 (Inadvertent or technical errors on the HUD-1/1A will not be deemed to be a violation of RESPA, if a revised HUD1/1A is provided to the borrower within 30 days of settlement.) Key enhancements There are no substantive changes to the first page of the HUD-1/1A form. However, there are changes to the second page of the form to facilitate comparison between continued on page 31

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A loan originator has the burden of demonstrating non-reliance on the collected information, but may do so through various means (for example, through a documented record in the underwriting file or an established policy of relying on a more limited set of information in providing GFEs). Note: if a loan originator issues a revised GFE based on information previously collected in issuing the original GFE and “changed circumstances,” it must document the reasons for issuing the revised GFE, such as its non-reliance on such information or the inaccuracy of such information.

• In-House Mortgage Loan Officers (MLOs)

• Virtual Mortgage Loan Officers (VMLOs)

• Team Leaders/Sales Managers

Tolerances on settlement costs11 Established “tolerances” or limits are placed on the amount actual settlement charges can vary at closing from the amounts stated on the GFE. Three tolerance categories of settlement charges are disclosed. At settlement, if the charges exceed the charges listed on the GFE by more than the permitted tolerances, the loan originator must cure the tolerance violation, at settlement or within 30 calendar days after settlement, by reimbursing to the borrower the amount by which the tolerance was exceeded.

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8 Tolerance categories 1. Zero tolerance category: This category of fees is subject to a zero tolerance standard. The fees estimated on the GFE may not be exceeded at closing. These fees include: = The loan originator’s own origination charge, including processing and underwriting fees.

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1. It demonstrates that there was a change in the particular information; or 2. The information was inaccurate; or 3. It did not rely on that particular information in issuing the GFE. O IOWA

Changed circumstances do not include: borrower’s name, borrower’s monthly income, property address, estimate property value, mortgage loan amount, and any information contained in any credit report obtained by the loan originator prior to providing the GFE (unless the information changes or is found to be inaccurate after the GFE has been provided). Also, market price fluctuations by themselves do not constitute changed circumstances. Changed circumstances affecting settlement costs are those circumstances that result in increased costs for settlement services such that the charges at settlement would exceed the tolerances or limits on those charges established by the regulations. Changed circumstances affecting the loan are those circumstances that affect the borrower’s eligibility for the loan. For example, if underwriting and verification indicate that the borrower is ineligible for the loan provided in the GFE, the loan originator would no longer be bound by the original GFE. In such cases, if a new GFE is to be provided, the loan originator must do so within three business days of receiving information sufficient to establish changed circumstances. The loan originator must document the reason that a new GFE was provided and must retain documentation of any reasons for providing a new GFE for no less than three years after settlement. None of the information collected by the loan originator prior to issuing the GFE may later become the basis for a “changed circumstance” upon which it may offer a revised GFE, unless:

= The credit or charge for the interest rate chosen (i.e., yield spread premium or discount points) while the interest rate is locked. = The adjusted origination charge while the interest rate is locked. = State/local property transfer taxes.


FHA’s Stevens foreshadows RESPA reform confusion for consumers




By Eric C. Peck


Webster’s New Universal Unabridged Dictionary, defines the word “simplify” as “to make less complex or complicated; make plainer or easier.” We as a society know that in today’s times, when government interjects itself in the affairs of the people in order to make things “simple,” that simplicity doesn’t always come to fruition, and in fact, often results in unintended negative consequences. It’s no mystery that when on March 14, 2008, the U.S. Department of Housing & Urban Development (HUD) decided to simplify the homebuying process for the American consumer through revisions to the Real Estate Settlement Procedures Act (RESPA), that a virtual train wreck of confusion was on the horizon. One of the aims of HUD’s RESPA reform was to standardize the Good Faith Estimate (GFE) to improve disclosure of loan terms and settlement costs for the consumer. The end result of HUD’s vision of RESPA simplification is a more complicated and confusing process for the homebuyer, the lending industry and the government. As of Jan. 1, 2010, HUD requires that lenders and mortgage brokers provide consumers with a standard 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 initially became effective on Jan. 16, 2009, but HUD provided a one-year transition period for the mortgage industry to incorporate these changes. The confusion on the government side is evident when you rewind nearly 18 months ago. It was on Sept. 16, 2008, before the U.S. House of Representatives Subcommittee on Oversight and Investigations of the Committee on Financial Services, when David H. Stevens, then president of affiliated businesses for Long & Foster Companies and current Assistant Secretary for Housing/FHA Commissioner, testified on behalf of the Real Estate Services Providers Council Inc. (RESPRO) at a hearing on HUD’s proposed RESPA rule. RESPRO is a national non-profit trade association of residential real estate brokerage, mortgage, home building, title and other settlement service companies who work to promote an environment

enabling providers to offer diversified services for home buyers through affiliations, joint ventures and other strategic alliances. “RESPA reform has been a nightmare for the mortgage industry since it was proposed back in 2002,” said Marc Savitt, CRMS, president of Martinsburg, W. Va.-based The Mortgage Center. “If the industry cannot understand the revised GFE due to confusion, how is the consumer going to understand it?” On behalf of RESPRO, Stevens weighed in on supporting HUD’s goal of providing simplified mortgage disclosures that make it easier for consumers to shop when they purchase or refinance a home. However, in the testimony, Stevens and RESPRO believed that the RESPA reform proposed by HUD in March of 2008 would have the opposite effect. “HUD fully understands how bad this rule is, as evidenced by David Stevens’ September 2008 testimony before the House Subcommittee on Oversight and Investigations of the Committee on Financial Services,” said Savitt, then president of the National Association of Mortgage Brokers (NAMB) who sat beside Stevens on Sept. 16, 2008 and represented the mortgage broker trade association at the House Subcommittee on Oversight and Investigations of the Committee on Financial Services during the RESPA reform hearing. “I also testified at that same hearing and remember the passion in his voice, with respect to his concern of consumer confusion and damage to the overall housing market.” Quoting the testimony of Stevens from the hearing: “The proposed Good Faith Estimate (GFE) is lengthy, complex, and cannot be easily compared by a borrower with the HUD-1 Settlement Statement at closing to determine whether the actual costs exceed the estimate provided at the time of the loan application.” “The proposed GFE contains terminology that conflicts with other disclosures consumers receive under the Truth-in-Lending Act (TILA) and the Equal Credit Opportunity Act (ECOA), which will add to the borrower’s confusion during the loan application process. “HUD’s proposed new GFE and mortgage application process would overlap and

conflict with the broader federal mortgage regulatory framework under TILA and ECOA, which would further add to the borrower’s confusion.” Lengthy and complex? Quite the polar opposite of Webster’s definition of “simplify,” the initial intent of the RESPA rule. Conflicting terminology in the GFE? Why burden the borrower with more troubles as they embark on what is likely the single largest purchase they will make in their life. Overlapping regulatory framework? Wasn’t this supposed to be made, again, “simple?” “In studies conducted by the Federal Trade Commission [FTC] in 2004 and 2007, it was determined that the new GFE was confusing to consumers,” said Savitt. “If HUD allows this rule to go in to effect on Jan. 1, the housing market will be seriously injured.” Stevens as new FHA Commissioner is no stranger to the mortgage lending arena, as he has seen both sides of the fence. Before accepting the role of FHA Commissioner, he served as president and chief operating officer of The Long & Foster Companies. With Long & Foster, one of Stevens’ responsibilities was president of affiliated businesses, overseeing the individual business units for mortgage, title, insurance and settlement services for the company. Prior to that, Stevens had a brief stint of a little over a year as executive vice president, national wholesale manager for Wells Fargo from 2005-2006. Prior to his short tenure with Wells, he served as senior vice president for the single family division at Freddie Mac for approximately seven years. Stevens got his start in the financing world back in 1983, with World Savings for 15 years, working his way up to the role of group senior vice president. Doing the math, that’s a grand total of 26 years in the finance industry prior to his accepting President Obama’s nomination as FHA Commissioner back in March of 2009. Less than half the way through Stevens’ prepared testimony, he makes the statement: “These are just a few reasons why we believe HUD’s 2008 proposed RESPA reform rule—which was almost 100 printed Federal Register pages—was fundamentally flawed. Given the short

timetable for public comments (March 14-June 13, 2008), the thousands of comments received, and the extremely short time after the deadline for comments that HUD took to analyze them, draft a final rule, and send it to OMB [Office of Management and Budget] ( June 13August 14, 2008), we think that it is extremely unlikely that HUD has modified the proposed rule in a manner that would resolve these and numerous other potential problems.”

“HUD fully understands how bad this rule is, as evidenced by David Stevens’ September 2008 testimony before the House Subcommittee on Oversight and Investigations of the Committee on Financial Services.” —Marc Savitt, CRMS, President, The Mortgage Center “Fundamentally flawed” was the Stevens/RESPRO description of the rule. Now that may have been back in September of 2008, but with a rule set for enactment on Jan. 1 and nothing having been done to rectify these “fundamental flaws,” it looks as though a “fundamentally flawed” rule will be governing the industry responsible for the single greatest investment in one’s life as of Jan. 1. He concluded this section by stating, “we think that it is extremely unlikely that HUD has modified the proposed rule in a manner that would resolve these and numerous other potential problems.” Now that he is in charge of enforcing this revised RESPA rule, Mr. David Stevens, in his position as FHA Commissioner, has the power to change things. As of this writing, there has been no movement on modifying any portion of this rule that would resolve any of its potential problems. “As recently as last month, Vicki Bott, HUD Deputy Assistant Secretary of Single Family Housing, called the revised RESPA rule ‘confusing,’ while speaking on a Webinar,” said Savitt. “The last thing our economy needs right now is another housing crisis.”

news flash

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728,000 modifications underway across the country, the program is on track to meet its goals over the next several years. Borrowers in modifications are saving an average of over $550 per month, however, the report shows that servicers have only converted 31,382 modifications to the permanent phase. According to servicer reports, most borrowers in modifications are meeting their responsibilities to make their payments. Servicers need to do their part to help borrowers complete the process and get to the finish line. Top Administration officials recently met with servicers in Washington, D.C. to urge a faster pace in converting borrowers to permanent modifications. “As this report illustrates, struggling homeowners across the country continue to receive immediate relief in the form of reduced monthly payments and a second chance to stay in their homes,” said Chief of Treasury’s Homeownership Preservation Office (HPO) Phyllis Caldwell. “Our focus now is on working with servicers, borrowers and organizations to get as many of those eligible homeowners as possible into permanent modifications.” “Our challenge now is to keep the pressure on,” said HUD Senior Advisor for Mortgage Finance William Apgar. “HUD approved counselors are working with borrowers to ensure they are doing their part to transition into sustainable permanent modifications and we will ensure that servicers convert as many of those modifications by the end of the year as scheduled as they are scheduled to.” For more information, visit

National Mortgage Professional Magazine invites you to submit any information on regulatory changes, legislative updates, human interest stories or any other newsworthy items pertaining to the mortgage industry to the attention of:

NMP News Flash column Phone #: (516) 409-5555 E-mail: Note: Submissions sent via e-mail are preferred. The deadline for submissions is the 1st of the month prior to the target issue.

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The November Mortgage Monitor report, released by Lender Processing Services Inc. (LPS), has revealed a nationwide loan deterioration ratio higher than 3:1, indicating that for every one loan improved, three more loans are deteriorating. Published by LPS, a leading provider of mortgage performance data and analytics, the November 2009 Mortgage Monitor report is an in-depth summary of mortgage industry performance indicators based on data collected as of Oct. 31, 2009. Of home loans that were current as of December 2008, more than two million, or 4.02 percent, were delinquent or in foreclosure by the end of October 2009. High rates of deterioration were particularly evident in the Northeast and Northwest. Thirty-one states now have non-current loan rates (delinquency plus foreclosure rates) ranging

Your turn O IOWA

LPS report shows loan deterioration ratio above the 3:1 mark

from 10 percent in Missouri to as high as 22.7 percent in Florida. Foreclosure sales jumped in October, with the rate at 5.6 percent of foreclosures in inventory. The number of foreclosures on the market continues to stall as foreclosure timelines extend. Nearly 30 percent of properties that have been in foreclosure for 12 months have not yet been put on the market for sale twice the level of the prior year. Foreclosure inventories continued to

climb to record levels. October’s foreclosure rate stood at 3.14 percent, a month-over-month increase of 0.7 percent and a year-over-year increase of 85.1 percent. Total delinquencies, already at record highs, edged up 0.85 percent in October over September’s figures and were 32 percent higher than the same period last year. Loans rolling to a more delinquent status remain elevated, but totals are below the Nov. 2008 peak. Roll rates into foreclosure remain low as a result of loss mitigation efforts and elevated delinquent loan volumes. For more information, visit


heard on the street

continued from page 26

all mortgage brokers prior to approval and will follow by building its Professional Branch System, which is dedicated to supporting only the very best retail mortgage professionals in their respective markets. Currently able to do business in 26 states and operating 18 professional retail branches, NetMore’s production volume surpassed the $1 billion milestone for its fiscal year that ended Sept. 30, 2009, a 300 percent increase compared to the same period in 2008. For fiscal year 2010, the company is projecting production volume to increase to the $1.3 billion to $1.5 billion range. For more information, visit

Cole Taylor Bank establishes residential unit

Cole Taylor Bank, a subsidiary of Taylor Capital Group Inc., has announced that

it has established a new residential mortgage origination line of business. The new business will be headed up by Willie Newman, former executive vice president of ABN AMRO Mortgage Group, and a recognized industry expert with more than 24 years of mortgage banking experience. Newman will report to Randy Conte, Taylor Capital’s chief financial officer and chief operating officer, who was chief operating officer of ABN AMRO Mortgage for several years. The unit will have offices in several states, with production to come from established relationships with mortgage brokers, remote retail origination sites and production from Cole Taylor’s retail banking locations. The loans will not be held in the bank’s portfolio but rather sold after origination. “We expect that the addition of this new line of business will be an important new source of fee income for our organization and will provide additional earnings diversification,” said Bruce W. Taylor,




marketing your difference


5. Consensus: People proof, people power. Announce every success. Attend every closing and survey the borrower, listing agent and selling agent. Share every positive borrower survey with both agents. Don’t forget the listing agents, as they will likely be the selling agent on their next deal and you want to wow them and woo them to earn that referral. Share every positive listing and selling agent positive survey with their respective sales managers and broker/owners. This strategy alone gained me “in house” lender status at four real estate companies. After years of sending those positive surveys out, they reached out to me and offered the opportunity. I’ve covered a lot here, so please consider giving this another read and making a list of those ideas that you like and

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will consider implementing. Failing to plan is planning to fail. There’s no substitute for good, old fashioned, belly-tobelly selling. People have been looking for shortcuts for years. Some work for a time and then the cheese gets moved and it’s back to basics. Greg Frost is president of Frost Mortgage Lending Group, a PRMI Company. Greg has a proven track record as the first billion dollar producer. Greg’s Albuquerque team regularly originates more than 800 loans each year. Last year, his team originated financing for 5.5 percent of all resales as reported through the Albuquerque Board of Realtors, which translates to one out of 19 homebuyers in Albuquerque, N.M. alone. He may be reached by e-mail at

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chairman of Taylor Capital. “We believe that this is a significant opportunity for us, and we are fortunate to be able to attract an industry leader like Willie Newman for this new line of business.” Randy Conte said, “I’m delighted to welcome Willie and his team to our organization. His leadership and industry contacts should enable us to grow this business—which we understand very well—into a strong source of fee income for the bank. We expect to begin originating high-quality, first mortgage loans in the first quarter of 2010.” For more information, visit

ISGN acquires Loan Fulfillment Services from Fiserv ISGN Solutions Inc. has announced that it has completed its acquisition of the Loan Fulfillment Services (LFS) business from Fiserv Inc. This acquisition will add broker price opinions, closing and settlement services, valuation services, flood and title certification, home retention and loan modification solutions, and vendor management solutions to ISGN’s portfolio of products and services for residential mortgage lenders. “This is great news for our customers,” said Niraj Patel, group president of ISGN. “With the combined strength of the two entities and a comprehensive suite of end-to-end products and services, customers can now focus on loan profitability and creating business impact, while working with a trusted partner.” ISGN has grown rapidly, emerging as one of the industry’s most diverse providers of integrated mortgage services and technology solutions. Four years ago, the company laid out a vision of becoming a global solutions provider for the mortgage industry, applying its unique technology, process expertise and global workforce to be a transformational partner for lenders. The new combined entity will operate under the ISGN name and employ more than 1,700 associates across 15 domestic locations and three international facilities. ISGN, which had more than 600 clients including large global banks, regional lenders, community banks and credit unions, has added more than 400 Fiserv lender and broker customers as its own. Most of the management team members from the Fiserv business will be joining ISGN. Lee Howlett, who was the president of the fulfillment services business, will head the servicing practice. “We are excited about the opportunity to be a part of a reputed industry leader,” said Howlett. “Our services complement each other and our customers will benefit from this amalgamation of products and services.” “The key challenge our customers face today is enhancing loan profitability,” said Patel. “Vendors tend to be fragmented and don’t provide efficiencies, economies of scale or depth in the mortgage domain. ISGN has created a one-stop partner for all loan life cycle requirements.”

For more information, visit or

HUD taps Marshall & Swift for REO costing data

Marshall & Swift, a provider of building cost data and estimating technology and a MacDonald, Dettwiler and Associates (MDA) company, announced that the U.S. Department of Housing & Urban Development’s (HUD) Office of Single Family Asset Management (SFAM) will use Marshall & Swift’s cost estimator data and solutions to provide repair, replacement, maintenance or improvement costs on Federal Housing Administration (FHA) housing units, as a pilot initiative. Marshall & Swift’s cost estimator responds to the industry need to estimate repairs on the growing number of residential properties now in or entering the real estate foreclosure market. The subscription services establishes repair costs to increase the time for understanding repair needs in the overall real estate transaction. HUD’s decision to use Marshall & Swift’s data will help it simplify and ultimately eliminate the manual cost allowable updates routinely performed to develop and confirm costs for the industry across the United States and its territories on a consistent and totally verifiable basis. “Marshall & Swift is proud to continue to provide support to the FHA and HUD’s Office of Single Family Asset Management,” said Salil Donde, chief executive officer of Marshall & Swift. “The selection of Marshall & Swift’s industry leading total component database, offers defendable repair cost estimations in the fifty states and territories, and will streamline validating costs for residential property repair and preservation. Marshall & Swift’s objective thirdparty information will provide a conduit for the agency and industry to work more closely with each other and reduce unneeded time, costs and expenses associated with the protection and preservation of assets.” For more information, visit or

NexBank to expands its mortgage operations NexBank, a North Texasbased banking and financial services company, has unveiled its plans to expand its retail and wholesale mortgage divisions to further enhance its developing service operation among a growing network of homeowners, real estate agents and mortgage professionals. With double-digit expansion of both mortgage divisions during 2009, NexBank plans to add 30-plus mortgage production professionals between the two mortgage divisions in 2010. continued on page 41

new respa reform rule

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the HUD-1/1A and the GFE, as indicated above. Each designated line on the second page of the revised HUD-1/1A includes a reference to the relevant line from the GFE. O No Cost Loans: Where “no cost” refers only to the loan originator’s fees (see Section L, subsection 800 of the HUD-1 form), the amounts shown for the “origination charge” and the “credit or charge for the interest rate chosen” should offset, so that the “adjusted origination charge” is zero. Where “no cost” encompasses loan originator and third-party fees, all third-party fees must be itemized and listed in the borrower’s column on the HUD-1/1A. These itemized charges must be offset with a negative adjusted origination charge (Line 803) and recorded in the columns. O Comparisons: The revised HUD-1 includes a new third page (second page of the HUD-1A) that allows borrowers to compare the loan terms and settlement charges listed on the GFE with the terms and charges listed on the closing statement. The first half of the third page includes a comparison chart that sets forth the settlement charges from the GFE and the settlement charges from the HUD-1 to allow the borrower to easily determine whether the settlement charges exceed the charges stated on the GFE.14 O As indicated above, inadvertent or technical errors on the settlement statement are not deemed to be a violation of Section 3500.4 of RESPA if a revised HUD-1/1A is provided to the borrower within 30 calendar days after settlement. 15 O The second half of the third page sets forth the loan terms for the loan received at settlement in a format that reflects the summary of loan terms on the first page of the GFE, but with additional loan related information that would be available at closing. A note at the bottom of the page indicates that the borrower should contact the lender if the borrower has questions about the settlement charges or loan terms listed on the form. O Section 3500.8(b) of RESPA (“Charges to be Stated”) and the instructions for completing the HUD-1/1A Settlement Statement provide that the loan originator shall transmit sufficient information to the settlement agent to allow the settlement agent to complete the “Loan Terms” section. The loan originator must provide the information in a format that permits the settlement agent to enter the information in the appropriate spaces on the HUD-1/1A, without having to refer to the loan documents.

4—Lenders are responsible for the disclosures provided by mortgage brokers and, therefore, should implement procedures to assure that mortgage brokers with whom they do business comply with the new RESPA requirements. 5—HUD issued the revised Settlement Cost Booklet on Dec. 15, 2009. Entitled Shopping for Your Home Loan, the new booklet must be used with the new GFE and HUD-1. 6—Portions of this overview incorporate guidance from OTS: Consumer Affair Laws and Regulations, Section 1320.1 (12/2009) 7—The GFE must be completed in accordance with the instructions set forth in Appendix C of 24 CFR Part 3500. 8—The RESPA Reform Rule changed the definition of “mortgage broker” to mean a person or entity (not an employee of a lender) that renders origination services and serves as an intermediary between a lender and a borrower in a transaction involving a federally related mortgage loan, including such person or entity that closes the loan in its own name and table funds the transaction. The definition will also apply to a loan correspondent approved under 24 CFR 202.8 for Federal Housing Administration (FHA) programs. The definition would also include an “exclusive agent” who is not an employee of the lender. 9—Weekdays, except Sundays and specified, legal holidays. 10—See: 24 CFR 3500.7(f). 11—See: 24 CFR 3500.7(e) and (i). 12—See: 24 CFR 3500.8. 13—No settlement statement is required for home equity plans subject to the Truth-in-Lending Act and Regulation Z. 14—If any charges at settlement exceed the charges listed on the GFE by more than the permitted tolerances, the loan originator may cure the tolerance violation by reimbursing to the borrower the amount by which the tolerance was exceeded. A borrower will be deemed to have received timely reimbursement if the financial institution delivers or places the payment in the mail within 30 calendar days after settlement. 15—See: 24 CFR 3500.4: Reliance upon Rule, Regulation or Interpretation by HUD. 16—Op. Cit. 5.

Is your client's credit hammered? Hannah Fliegel The Credit Restoration Expert 415-999-9348

Settlement Cost Booklet16

Wishing you a Happy & Healthy 2010!


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 For more information on author Jonathan Foxx, visit Lenders Compliance Group on the Web at


Best Wishes for 2010!


1—73 Fed. Reg. 68204 (Nov. 17, 2008). 2—Regulatory Compliance Outlook, National Mortgage Professional Magazine, December 2009, Volume 1, Issue 8. 3—For detailed information, 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). O IOWA

A loan originator is required to provide the borrower with a copy of the Settlement Cost Booklet, entitled Shopping for Your Home Loan, at the time a written application is submitted, or no later than three business days after the application is received. If the application is denied before the end of the three-business-day period, the loan originator is not required to provide the booklet. If the borrower uses a mortgage broker, the broker rather than the lender, must provide the booklet. The booklet does not need to be provided for refinancing transactions, closed-end subordinate lien mortgage loans, and reverse mortgage transactions, or for any other federally related mortgage loan not intended for the purchase of a one-to-four family residential property.


Winning the Mortgage Fraud Game




By John Frank


Mortgage fraud continues to increase, The FBI clearly states that fraud is, despite the numerous news articles and “The intentional misstatement, misrepmedia attention that bring to light the resentation or omission by the applicant many schemes designed to take advantage or other interested parties, relied on by of mortgage processes. National banking, a lender to provide funding for, to purfinancial and mortgage trade associations chase, or to insure a mortgage loan.” invariably include, in their annual events, Government insuring programs and specific topics for fraud detection and miti- recent laws are now being designed to gation strategies. Individual state legisla- strictly follow the historical definition of tures are taking action in an attempt to sta- fraud, and not allow anything into the bilize internal economic facloan decision that has not tors; including property valbeen verified and validatues. Incidences of reported ed through independent fraud have increases so consources. On the heels of sistently that trending charts the demise of popular can be confused for those mortgage programs that measuring the popularity of were designed to “Trust” leading video games. With the word of the borrower, increasing pressure on it appears that the legislamortgage income streams tive pendulum has swung due to newly enacted legisin the opposite direction. lation, it is fair to ask if it Although in some cirwould have been less turbucles, the past programs of lent to have chosen a career “… the past programs NINA (no income, no asset) of NINA (no income, in politics. and SISA (stated-income, no asset) and SISA In July 2009, the Federal stated-asset), are rememBureau of Investigations (stated-income, statbered with fondness, most(FBI) released its mortgage ed-asset), are remem- ly for the ease of processfraud statistics for 2008. The ing and the profits they bered with fondness, report identified an increase generated, it can well be mostly for the ease of of reported fraud of 36 perargued that they representprocessing and the cent over 2007’s totals. profits they generated, ed the brink of disaster for Figures for 2009 were also the mortgage industry, it can well be argued reported as showing “signifespecially when allowed that they represented icant” increases. The FBI for the salaried borrower. the brink of disaster Web site categorizes mortWhat cannot be quesfor the mortgage gage fraud as either, “Fraud tioned is the demise of industry, especially for Property” or “Fraud for many origination compawhen allowed for the Profit.” “Fraud for Property” nies that relied heavily on salaried borrower.” entails the borrower misthese programs and upon stating income and/or debts ever increasing property in order to qualify to purchase a property. values and funding volumes. Many comThe borrower usually enters the transaction pany income strategies fell victim to the with the full intent of making payments, lure of easy profits and were crushed by although their plan may be short-term in unscrupulous borrowers who chose to lie areas where property values are rapidly or scheme their way through the mortincreasing. “Fraud for Profit” usually gage process. involves, “multiple loans and elaborate Mortgage companies can successfully schemes,” in order to gain large proceeds navigate these potentially dangerous from the purchase transaction. These waters by recognizing the changes in the schemes often leave the loan origination industry and responding with a strong company facing indemnification since any fraud policy that focuses quality control government insurance program (FNMA, (QC) resources heavily upon prevention. FHLMC, FHA, VA) would be withdrawn once Preventative audit and systemic controls fraud is identified. provide the ability to mitigate risk, while

managing large loan populations and large numbers of satellite branches, yet remaining flexible enough to meet each borrower’s individual financial needs. Although individual companies must set policies that best suit their corporate objectives, the prudent executive will be sure their policy includes these basics.

enables systemic review of values for the appraised property and the appraisal comparables with a comparison to current local market values. Identified exceptions can then be reviewed manually to ensure validity of the appraisal value.

Be aware of your environment

The Mortgage Asset Research Institute (MARI) produces a quarterly report on fraud and notes that the most common categories include misrepresentation of the application, income, employment, assets or debts, and/or occupancy. FHA processing requires independent validation of each of these critical loan elements. However, the need to provide immediacy for the customer in loan processing has pressured some lenders to take shortcuts that can lead to an unhappy ending where fraud is concerned. Many fraud schemes involve critical timing on the part of the borrower. For example, in an investigation of employment prior to funding, it is critical to perform a new validation rather than just initial the preliminary verification of employment (VOE), or mark it as, “same.” More than one potential fraudulent borrower has been stopped with a late stage VOE that was unanticipated.

With advancing technology, it is becoming increasingly difficult to combat those who intentionally work to defraud the mortgage lender. This enables the mortgage lender increased preventative controls without excessive additional costs. Mortgage industry leaders know that following the required Federal Housing Administration (FHA) Quality Control Plan offers only minimal protection against fraud for mortgage origination. Historically, it has been the standard to review 10 percent of closed loans to ensure compliance with the FHA postclose audit requirement and hope that fraud was never detected. This needlein-a-haystack approach often produced the desired result of finding nothing. Shifts in the market have required more vigilance on the part of the lender and a more comprehensive fraud net. The adage, “fight fire with fire,” seems to apply here as lenders have an arsenal of electronic measures available at the touch of a button, and the payment of a fee. Names such as Compliance Ease, Loan Safe, and Fraud Guard once thought of as luxuries are now becoming staples in mortgage processing. Technological advances enable the lender to review information from multiple databases that can provide critical data right up to the closing date. Although this may mean an increase in processing costs, it is a far more expensive lesson to learn after the loan has closed, that there are property valuation or borrower income related issues.

Obtain accurate collateral values “Fraud for Profit” schemes are attractive due to the lucrative payoff. Inaccurate property valuations are often at the root of such attempts where the property values have been exaggerated, frequently through manipulation of the appraisal. This leaves the lender or the insuring entity holding the bill when the scheme unravels. Again, use of industry software that accesses database information

Verify once, verify twice and then verify again

Follow the common red flags In November 2009, during the Fannie Mae Mortgage Fraud update, Senior Industry Relations Manager Amy Heinz stated that the published “Common Red Flags” could assist in fraud prevention. The red flag categories posted by Fannie Mae include key areas to monitor for the Mortgage Application, Sales Contract, Title, Employment and Income Documentation, and Asset Documentation. Including key red flag data points, such as unsigned or undated applications, same telephone number for applicant and employer may seem like obvious additions. However, postmortem examination of files gone wrong, often prove that elaborate schemes are the minority. It is more frequent that the simple requirements become stumbling blocks for even the giants of the mortgage industry. These common Red Flags form the foundation to a secure fraud policy.

Zero tolerance for fraud Part of the validation process may determine that internal documentation may be

a contributing factor to discrepancies detected in a file. Maintaining a zero fraud tolerance, both internally and externally, ensures that the company can continue to focus resources and fight fraud as an external foe. Any violation, no matter how insignificant, must be excised like a cancer. The origination company graveyard is filled with those who thought that doing business meant turning a blind eye at times. All too infrequently, requests are received to review tax returns where the borrower has not disclosed certain incomes, but requests that the loan officer include the figures when calculating the debt ratio. There are no grey areas! There are no allowances for either the customer with this mindset, or a loan officer that would even consider allowing this manipulation. These scenarios should be avoided as the ticking time bombs in your loan portfolio which they truly represent. No matter how large the borrower’s income, no matter how high their FICO score, if they receive the IRS audit phone call, its game over. Finally, I am frequently asked, “What is the reimbursement recovery potential for

money lost due to fraud?” Although each situation is unique in some way, with fraud schemes the money disappears quickly and most often is not recoverable. In a USFN article in 2007 by Bruce Bergman, he concludes that suing for fraud is a less profitable route than merely foreclosing on the property. Although it may not offer the satisfaction of seeing punishment enforced, it does have the benefit of returning funds to the company coffers. This is, after all, the primary goal when a fraud investigation turns into a loss mitigation scenario. A successful fraud prevention policy will ensure that the company dollars never fall into the category of potential recovery. John Frank is the vice president of quality control for Primary Residential Mortgage Inc. He graduated from the University of Utah in 1988, and has been in the banking industry for almost 25 years. His background includes management positions with Norwest Bank, The Associates and Citi Group. He may be reached by phone at (800) 255-2792, ext.1017 or e-mail

FHA Insider: Fraudulent Home Loans Available Abuse of the FHA program By Jeff Mifsud

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Learn more about our services by calling, Lorenzo Pugliano, President and CEO at 631-299-2084.


These were the words of Attorney General Eric Holder, quoted in a Nov. 17 press release announcing that President Barack Obama has established, by Executive Order, an interagency Financial Fraud Enforcement Task Force whose job is to combat financial crime. “FHA [Federal Housing Administration] will not tolerate lenders who violate our rules and prey on those who depend on a reverse mortgage to continue to live independently,” said FHA Commissioner David Stevens in a press release on Oct. 30 when HUD announced taking action against a reverse mortgage lender in Hawaii. Commissioner Stevens continued, “FHAapproved lenders must understand that we mean business when it comes to protecting the FHA insurance fund from those who cut corners and take advantage of unsuspecting senior citizens.” In another press release, announcing action taken against a large national FHA

lender on Oct. 20, Commissioner Stevens stated, “If we determine that our partners are not playing by the rules, they’ll cease being our partners. It’s not just about protecting the financial health of the FHA insurance fund—this is about protecting each and every family that looks to the FHA for safe and secure mortgage financing.” In this same press release, HUD announced the proposed sanctions and penalties against individual underwriters and alleged that “these underwriters falsely certified to the Department that the loans were originated in compliance with FHA requirements and were eligible for FHA mortgage insurance.” I think the above material pretty well speaks for itself … FHA is serious about ridding our industry of the crooks who take advantage of their clients, their employees and the agencies and companies they do business with. Over the course of my career spanning the past 15 years, I have witnessed firsthand how FHA lenders come and go in the marketplace. I have lost several referral sources because of the thieves who walk among us. Here’s one example: Several years ago, I worked very hard to get into a particular real estate office. I finally got in for a presenta- O IOWA

“We will be relentless in our investigation of corporate and financial wrongdoing, and will not hesitate to bring charges, where appropriate, for criminal misconduct on the part of businesses and business executives.”

tion, impressed them with my knowledge of I think we need to really study what FHA and my ability to package the tougher works to keep default levels down, and deals. I soon became their main loan origi- strive to implement a plan that achieves nator and was doing a great job for them, this. In my opinion, a good place to start is but the fact is there remained many deals I to study a company in middle-America could not do because they simply didn’t called Farm Credit Services of Midmeet FHA criteria. Before long, the referrals America (FCS), one of the country’s largest from this office ground to a halt and I want- farm lending institutions based out of ed to find out why. I spoke to one of the Louisville, Ky. When Greg Frost was unable agents who said that they to speak at their annual had switched to another LO convention because of who “could get more deals scheduling conflicts, he done.” Something smelled suggested that FCS contact fishy, and I researched a bit me. My first thought after further, only to find that receiving their invitation they were falsifying docuto speak was, “What in the ments in order to get the world am I going to say to loans insured. To assure the a farm lending organizaborrowers didn’t go into first tion?” This was in April of payment default they would 2008 at the height of the make the payments for the mortgage industry crash borrowers. Not able to comand they wanted somepete with thieves, I stopped one who would explain “FHA is about giving marketing to that office. The what had happened in creditworthy good—or bad news, the non-farm mortgage Americans a chance depending on how you look industry, and how it hapat homeownership, at it—is that this lender’s pened, because while the default ratio grew so much and it’s FHA’s respon- mortgage industry atthat FHA started auditing sibility to put the sys- large may have been their loans and eventually tems in place to make crashing, their business put them out of business. was booming! that happen.” Another company I I’d like to share with couldn’t compete with you the qualities I found would sell the loans to the aggregate in FCS that shielded them from the crash lenders, but would hold the servicing and continues to keep their default rates rights to their loans. They would do FHA low. In 2008, their default rate was only loans that didn’t meet FHA guides and, 1.2 percent, but there was concern that on numerous occasions, when a loan the price of corn would have a negative payoff came in, they would keep the impact on their default rates. Sure money themselves and invest it for their enough, the price of corn went down this own benefit, but keep making the pay- year by about 30 percent, and their ments to the investor with the interest default rate did increase … to 1.9 percent they would earn from their profits. As (yes, you read right)! When grain goes long as the loan payments were made, down, this equals a potentially significant the investors never knew the loan had drop in income for the farmers. When the been paid off. Pretty clever … so clever, result is a mere 0.7 percent increase in in fact, that the owner of this company, default rate, this can only reflect stellar along with the employee who collaborat- lending practices. And despite the current ed with him in this scheme, are now in continued on page 34 jail for the next six years.


downturn in the market, FCS has still experienced six percent growth from last year. This is a testament to the fact that their corporate culture is in and of itself the best loss mitigation tool. After interviewing a number of people in the organization from the top executives, to operations staff and sales people, these are the 10 qualities that I believe represent the corporate culture at FCS: O O O O O O O O O O

Strong relationships with clients Prudent underwriting Servicing the loans originated Staff training Loan officer accountability Compensation structure Selective TPO relationships Clients’ future dependence on loans Connection to the land The quality of the people they hire

You can see how much we can learn from my friends at FCS. And when you look at the history of FHA and the economic circumstances under which it

started, you will find the same core qualities. I am pleased with the direction Commissioner David Stevens seems to be taking the FHA, I only hope that he and his staff not to forget the roots of FHA, thus turning it into just another “GSE.” FHA is about giving creditworthy Americans a chance at homeownership, and it’s FHA’s responsibility to put the systems in place to make that happen. 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 and is a former FHA underwriter. Jeff may be reached at (877) 342-9100 or e-mail Visit author Jeff Mifsud’s Web site at for tips and information on FHA loans and details from some of the nation’s top FHA specialists.

How Do You and Your Company Combat Fraud?




By Tommy A. Duncan, CMT


Being that my company, Quality Mortgage Services LLC, is a compliance company, we help many mortgage companies combat fraud. The first thing that a company must have in place is a commitment to combating fraud or what we call the “Attitude” which emanates from the company’s leadership and trickles down. When a company has the commitment to of zero tolerance for scrupulous deals, all the team members will be on board to combat fraud. Many mortgage companies only take their Quality Control (QC) Plan as the tool to receive Federal Housing Administration (FHA), Fannie Mae or Freddie Mac approval. The QC Plan is more than a check the block for correspondent or mortgagee approval … it is the company’s written policy on quality production. Other mortgage companies have combined their Home Valuation Code of Conduct (HVCC) QC Plan and Red Flag Rules as appendices with their QC Plan. This a great process of using the Red Flag Rules as a pre-funding QC Plan to detect fraud prior to closing and using the HVCC QC Plan as a collateral QC Plan. Training is another way our clients are combating fraud. We audit a number of fraudulent mortgage files and we ask, “How did this get through?” We base this on training. Having a trained set of eyes that knows how to recognize fraud helps

strengthen the quality of loans. Several months ago, we conducted training for a group of new QC auditors. After the initial test case, we gave the new auditors a set of live files to audit. We had not prescreened the files prior to the assignment, and we discovered a number of digitallyaltered documents of bank statements produced either by the loan officer or the borrower. The electronically-altered documents raised several red flags. The fax date stamp did not align with the Internet printed document. The fonts on the bank statement were not an exact fit. The kicker was when the withdrawals and deposits did not calculate with the available balance on the bank statement. The fraudster did not reconcile the statement. Why didn’t the processor or underwriter detect this? Fraud for housing is one of the most common types of fraud and rarely prosecuted. However, the mortgage company had internal problems and the company has deviant and/or untrained personnel who are gullible. There are a number of fraud detection course out there and many of them provide a certification at the conclusion of the course. Also, Campus MBA offers a number of course for underwriters and compliance personnel. Having qualified staff trained in fraud detection is the best way to com-

bat fraud and having fraud detection tools as a resource is good as well, but too many mortgage professionals rely on them to a great degree than the people who have the ability to reach beyond data models into asymmetrical analysis.

tax transcript service because Social Security, addresses, income and past employment, along with many other things, can be validated. It is my opinion that the tax transcript is the best technology solution for fraud detection prior to funding.

What systems do you have in place to What sort of job has the industry done spot the red flags of fraud? to police itself and combat fraud? Seasoned and experienced staffs that know I think the industry is doing a good job but it the mortgage process and software called could do better. One of the things it has done Mortgage Analysis Review Software (MARS), well is the requirement of licensing of loan which guides the end user through the originators. I was happy to see the recent loan as they analyze the loan. MARS is Federal Deposit Insurance Corporation mostly data entry, but (FDIC) requirement for loan through the data entry, the officers who work for banks end user applies their fraud to be held to the same standetection experiences and dards as non-banks. Fannie analyzes the loan. This Mae’s recent announcement method has proven sucabout having another 4506-T cessful when applying signed at closing to verify or asymmetrical analysis that re-verify tax transcripts is yet is not data model driven. another positive step in eradAsymmetrical analysis is the icating fraud at the closing ability to analyze nontable. Training of the Federal measurable red flags, like Bureau of Investigations (FBI) association and link analystaff in mortgage fraud “Things that the sis, that is not measured investigation and advancing through data, or discern- industry could do betthe technology of the U.S. ter is to police itself ment of actions for discernDepartment of Housing & include the prevention Urban Development (HUD) ment of actions not taken. of executives of fraud- so that it can be equal to the What technologies are large lenders as per training ulent mortgage comavailable to combat fraud? panies from ever open- and technology, are another I have clients from supering another operation two good things being done vised wholesale lenders to in the combating of fraud. … the virtual non-supervised loan corre- “phoenix” going down Enforcing existing appraisal spondents and I have seen policies through the Home in flames and then about every type of fraud Valuation Code of Conduct coming back to life.” detection tool out there, (HVCC) has improved the from document compliquality of loans by 16 perance vendors, credit bureau services, auto- cent according to Fannie Mae. Something as mated valuation model (AVM) products, simple as changing underwriting requirecompliance software checklists and data ments has deterred fraud as well. services. For some reason, regardless of The Mortgage Bankers Association the technologies available, mortgage (MBA) is extremely proactive in working fraud keeps increasing. As more technolo- with industry professionals and vendors gy keeps surfacing the more fraud preven- in communicating actions on Capitol Hill tion data systems and tools become avail- and going back to the professional and able. As far as I know, the industry has not getting feedback on what works and what been able to track the success of mortgage needs improvement. In 2009, MBA had fraud detection, but it can track mortgage several conferences, such as the Fraud, fraud cases. Therefore, with all the tech- Quality Assurance and Residential nologies available for detecting fraud, the Underwriting, Legal and Regulatory, and industry is unable to measure the success of course, their national conference of the technology tool available. where committees met to discuss compliWhen a loan goes into default, we need ance and fraud and what the industry can to know the reason or reasons why. There is do to improve in the department of polino technology available to do this. It is a cies, procedures, technology and lobbying manual audit and it is a human being, not to police the industry. The MBA has lissoftware or a great database, that discovers tened to the voice of the mortgage profesthe fraud. The problem is that, in many sionals who work directly with mortgage fraud cases, technology was used to screen compliance and mortgage fraud and has the loan for fraud, because the mortgage coordinated their unified efforts. professionals who used the tools were not skilled enough to detect the fraud, except Do you feel more legislation is neceswhen the loan arrives at the QC profession- sary to fight fraud? al for audit for fraud. I know that many I do not think the industry needs any technological tools are available to detect more legislation. The industry can place fraud, however, one of the best tools is the policies on itself in order to improve its

image to the consumer. For example, most people think HVCC is a law. It is not. It is a compliance policy adopted by Fannie Mae, Freddie Mac and other agencies, but approved by the Federal Housing Finance Agency (FHFA) which has oversight of the agencies. Things that the industry could do better is to police itself include: O The prevention of executives of fraudulent mortgage companies from ever opening another operation … the virtual “phoenix” going down in flames and then coming back to life. O Stopping the creation of the Consumer Finance Protection Agency (CFPA) and use the legal authorities that are in the mortgage industry that already exist. O State examiners need to have the equivalent knowledge as QC auditors and underwriters. I would love to report the number of mortgage files that were touched by state examiners and mortgage fraud was prevalent in the file and never noticed by the state examiner. O Force mortgage lenders who use their own appraisal panel and rotation to report to their investors or agencies Sections IV & VI of the HVCC, along with their QC reports. If you think these mortgage lenders and banks who use their own rotation are really giving the appraiser their independence and there is not any persuasive influence going

on, then I need to introduce you to “Mortgage Compliance 101” or perhaps you need to actually read the HVCC. It is a matter of time before some the small- or medium-sized lenders, community banks and credit unions get busted on HVCC violations. O Put a policy in place for depository banks to cooperate with lenders and compliance companies when performing re-verification of assets or deposits for the good of the industry. O Create a way for compliance professionals to consolidate data in order to create watch lists of those professionals, such as real estate agents, appraisers, title companies/attorneys, underwriters, loan officers and processors who are associated with high-risk loans in order to enhance fraud investigations through link analysis and trends. Tommy A. Duncan, CMT is executive vice president of Quality Mortgage Services LLC. He may be reached by phone at (615) 591-2528, ext. 124 or e-mail Visit co-author Tommy A. Duncan, CMT’s Quality Mortgage Services LLC Web site at for more information on quality control programs and compliance solutions.

By Andy Schell, CPA, CMB

For brokers and bankers

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What do business owners need to know about financial management? All too frequently, we see companies exposing themselves to the increased risk of corporate fraud due to a lack of structured control and transparency in their accounting systems. On a daily basis, we talk to mortgage banking executives across the county … many of whom are also the owner of the business. One interesting common comment

“By using PCS’s VOE service, I was able to move the cost onto the HUD1 and virtually get the VOE’s done at no cost to my company” “PCS’s high level of customer service ensures that my loans close on TIME!”

Learn more about our services by calling, Lorenzo Pugliano, President and CEO at 631-299-2084.


Most of the recommendations contained in this article are applicable to all mortgage lenders. Some of the content is specific to mortgage bankers. If you are a broker thinking about becoming a mortgage bank or looking at join-

ing a mortgage bank then you need to understand all the issues addressed here. If you are an originator in a mortgage bank and you want to help your company stay in business, help your management understand the importance of proper accounting. For owners of mortgage banks, you may be surprised at what your accounting department is doing or not doing.


When anyone starts talking about accounting, most people cover their ears and run away. Many would prefer to have a root canal than to learn about financial controls. I’m a CPA, but also a musician and would personally prefer to write about drum sets than accounting. It is an undeniably dull topic, but proper accounting for any business is immensely important. So why learn accounting? Aside from the ability to know if your business is making money, learning accounting can protect your company from the growing threat of corporate theft. O IOWA

Corporate Theft is on the Rise: Learn How to Prevent It

we hear people say is their accounting have a heart issue, we are going to get system is running “just fine.” When a treatment from a heart specialist, a carmortgage executive says accounting is diologist, because not all doctors know “just fine,” it typically means they are the details about a heart. The same goes able to get the information they think for CPAs. All CPAs know basic accounting, they need from their accounting sys- but not all CPAs understand the comtems, including their cash balance and plexity of mortgage banking. Just like the total volume closed within a month. we’d see a cardiologist for our body, Those two figures are important to we’d see a mortgage expert CPA to tell us know, but only represent a fraction of if the heartbeat of our business is okay. the essential information and do not represent fraud prevention. Violation of trust We also note that most often the In our personal lives, we regularly trust founder of a mortgage business or the the people around us. We trust the mortgage executive who is other drivers on the highhappy with their accountway to stay in their lane ing system is not a CPA. This and we trust airplane is an important distinction pilots to land safely at the because knowing if an correct airport. Even accounting system is suffimore, we trust those with cient for a business is not a whom we share a personskill-set that is developed al relationship to be honjust by starting a business. est and trustworthy. Can In fact, assessing an you image the unthinkaccounting system is a very able distress created by complex process that discovering that your requires extensive experichild has been harmed by “What if an accountence and training in GAAP, a trusted caregiver or that (CPAs use these guidelines ant stole millions from your best friend has been to record information), U.S. sleeping with your your company by Department of Housing & diverting money from spouse? We all hear about Urban Development (HUD) loan purchases so they the unthinkable, and requirements (this includes hope we never face it, but not only took lots of GAAP, net worth levels and sometimes, bad things money, but they left borrower escrow), warehappen to good people. you with millions of house lender requirements, In our business world, dollars in unpaid liaand Fannie Mae and we trust those around us bility? All it takes is Freddie Mac expectations. without a second thought. five loans to create So, when someone says We are confident that the losses in the millions.” accounting department accounting is fine, they are saying they feel good will make the payroll about it and think they are in good deposit on time every time. We trust that shape, but just like a doctor can listen to the receptionist will let us know if we a heartbeat and know if the heart is have a guest. But what happens when the okay … a CPA can tell if an accounting fabric of our world is destroyed by a dissystem is running okay. The patient may honest employee? feel fine, but could have congested We initially think of employee disarteries and be on the path to a heart attack. The reality is, if we feel like we continued on page 36





honesty as someone taking your lunch out of the refrigerator, or even taking money out of your desk drawer. But what happens when our closest and most trusted employee, the person who makes sure there is money in the bank, takes advantage of us? We all have accounting people who support our businesses, either as an employee or as a bookkeeper or auditor. These people perform essential functions like transferring money and making payroll; functions that we expect to be done correctly and timely without fail. We grow so comfortable with our accounting staff that we are confident they will continue to do what they have always done … move money and make payroll on time every time. We all know there are substantial amounts of money rolling through a mortgage bank. The unthinkable of unthinkable events is when our trusted accountant who manages or money begins to move company money to their own account. At this point, most of you are thinking this is unbelievable. But it has happened. We’ve met with companies where the “always dependable” bookkeeper moved so much money out of the company that the company may not survive … thus the ultimate violation. What if an accountant stole millions from your company by diverting money from loan purchases so they not only took lots of money, but they left you with millions of dollars in unpaid liability? All it takes is five loans to create losses in the millions. CPAs call corporate theft “DEFALCATION” defined as: “To misuse or embezzle funds by a person trusted with its charge.” Defalcation is similar to “DEFICATE” creating an interesting metaphor. I cannot divulge any details, except to assure you that this is a true and recent story. The most disheartening issue of all is that it could have been prevented with just a few common controls mortgage CPAs expect to see in any company’s accounting system. As a side note, before there was an issue with this business, the owner was confident their accounting was fine; when, in fact, it was dangerously compromised. They didn’t know it was compromised because they lacked the knowledge and training necessary to monitor the system and trusted blindly without verification that things were, in fact, “just fine.” All violations of trust are repulsive and end with the gut-wrenching feeling of pervasive violation. The closer the person is to you, if it’s a spouse or a longtime bookkeeper, the deeper the pain and the longer the violation is stained in your memory. No one ever thinks it will happen to them. There is a psychological event that we all fall

victim to and this is denial. We engage this defense mechanism and bury our heads in the sand or state that: “This can’t happen to me nor has it happened to anyone I’ve ever known. This is just something that happens to other people.” And yet, the risk is real, but most business owners tell us their accounting is fine when the reality is they could be at risk and not know it. There is an interesting quote from the Bible that states “Pride Comes Before a Fall.” Basically, if you are so confident in your actions and believe that you are right without exception or counsel, it is likely that you are next to fail. Just ask anyone who has failed. Another saying that speaks to the issue of control is “absolute power corrupts absolutely.” Said another way, someone with unlimited control will use that control to their personal advantage. There are many examples in history of this, from the Caesars through Hitler and on to Saddam Hussein. The lesson learned is without controls or oversight, dictators and those who control money in a business could use their powers to their own benefit.

lations. Many non-certified accountants are excellent bookkeepers and are essential to the accurate record keeping of a company. Just make sure a mortgage CPA helped to set-up the accounting system and reviews the accounting reports on a monthly basis. It is absolutely important to remember that an accounting department is populated by humans, and humans are capable of errors in action or judgment. It is also important for you to pay attention and ask questions about the numbers. If you don’t understand the answer, get someone else to help until the answer makes sense. Never accept the answer, “That’s just how it is,” or “That’s want the auditor said.” Dig deeper and understand the answer. Your first loss is your smallest loss when detecting corporate fraud. Defalcation usually begins in smaller amounts, and then increases in size if the scheme is undetected. Finding corporate theft early will reduce the loss and digging into accounting is the only way to find it.

Check the checkers: Trust but verify

Protecting your company from corporate theft begins with having a good accounting system, along with proper accounting procedures for the posting of loan funding and purchase transactions. No one wants to talk or think about the details of accounting, but this can be the difference between success and failure. Even the Small Business Administration (SBA) has statistics about this. The federal agency that helps small business says that 95 percent of all small businesses fail in the first three to five years because of poor planning and poor financial management. Think about this, out of 1,000 people who started a new business, people who took all of their savings to start the business, people who were all 100 percent confident in their future success, 950 out of 1,000 of them have failed and lost everything. They lost everything because they didn’t have proper financial planning, which includes an accounting system with proper controls over money. So, why didn’t they have good accounting systems? Maybe they didn’t know how to build one. Maybe they didn’t have access to a CPA. The unfortunate reality is almost all of them didn’t know what they needed to know. I heard a college professor comment, “It is better to ask a question and seem a fool than not ask a question and fail.” I think the same holds true when business owners think about their accounting.

So what are the reasonable precautions that are designed to keep honest people honest? The answer to this question is easy. Effective accounting systems require detailed and comprehensive data entry, accurate reporting, thorough breakdowns of where monies are at all times, and finally, absolute transparency. Transparency is not achieved without proper data capture, otherwise reporting can be inaccurate. As I stated previously, no one thinks it will happen to them. Everyone trusts their accountant because generally accounting people are trustworthy. The entire CPA profession is based on providing trust and confidence in the work they perform. CPAs are the only profession in which the Securities & Exchange Commission (SEC) designated as qualified to express an opinion about the presentation of the financial statements of a company. To earn and preserve this trust, CPAs are specifically required to take regular ethics exams and undergo thorough training on how to implement procedures to prevent corporate theft. A very important distinction needs to be made between a noncertified accountant/bookkeeper and a Certified Public Accountant. Although CPAs often do similar work as a non-cert accountant, and a non-cert-accountant may have a degree in accounting, they do not have the same level of continuing education and testing as a CPA. A noncert-accountant is not licensed and is not under regulatory oversight like a CPA. This distinction is important when identifying the path to protect from vio-

Accounting systems prevent failure

From lemonade stand to used car accounting When a lemonade stand buys sugar and lemons they create an asset of the business called raw materials inventory.

When the owner of a car lot buys a car at an auction they can get 100 percent financing from a bank so there is no immediate cash spent. The car lot will record the borrowing from a bank as a liability and the car as an asset held for sale. The fundamental principal here is the moment you borrow money, you have a liability and the moment you close a loan you have an asset. Another important accounting event for a car lot is collecting money from a buyer for the purchase of a new DVD player to be purchased and installed by a specialty auto parts store. The money is a liability of the car lot until they give the money to the auto parts store. When a company receives money from a customer to be held for someone else the money is a fiduciary liability. When we look at mortgage banking, we are surprised to see that many mortgage banks do not follow these basic accounting principals. When they close a loan (buy a car), they do not record the asset. When they borrow money from a warehouse lender (borrow from a bank), they do not record a liability. When they take money from a customer for taxes and insurance, they do not record the money as a liability for escrow impounds. By not implementing these basic accounting principals, the owners of mortgage banks are limiting the accuracy of their financial statement and creating a higher potential for corporate fraud.

Mortgage banking accounting is complicated … get help! The complexity of a mortgage banking operation with warehouse lines and multiple investors can get confusing with many detailed accounting issues. Mortgage banks that hedge or retain servicing create a significantly more sophisticated accounting process. One the basic accounting processes to note is that when a loan is made, it creates an asset of the company and also creates a liability of the company to the warehouse bank. Any funds collected from the borrower at closing for impounds are a liability to the mortgage bank and are subject to the requirements for the segregation of fiduciary funds. When the loan is sold, the asset is removed from the balance sheet, along with the payoff of the warehouse liability and the profit for the specific loan is calculated. When you close a loan it is the same as if you purchased a loan, and as we just discussed when you buy an asset you should immediately record doing so in your books. These are irrefutable and fundamental accounting principals that combine with proper controls to protect a mortgage bank from corporate fraud. Many mortgage banks do not focus on corporate fraud prevention and choose not to implement these funda-

mental accounting principals. When we ask why the owners do not implement comprehensive accounting protection, we usually hear one of three reasons: 1. The most common answer … the warehouse lender doesn’t make me do it. We work for many of the significant warehouse lenders, and I can state from firsthand experience that if this ever was the case, it is no longer the perspective. With the regulatory scrutiny the warehouse lending community is receiving, they are very aware of the importance of having properly prepared monthly financial statements from their mortgage bank borrowers. I predict that the warehouse lenders will soon require all mortgage bank borrowers to not only submit monthly financials, but to prove they have a dual entry accounting system with proper loan level posting. 2. The second answer we hear is: Our CPA told us this was okay. Recall the reference to the heart doctor above? Not every CPA understands mortgage banking. Please make sure your CPA is a mortgage expert. Unless a CPA is regularly and significantly associated with this business, it is possible they may not understand the intricacies of how a dual entry loan level posting procedure provides protection from corporate fraud in mortgage banking. As a small bonus, the more detailed and clean your accounting system is, the less expensive your annual audit will be.

and Great Plains are more sophisticated and more expensive accounting systems that can support an automated interface from a mortgage operations system. If you use Excel for your accounting, then you do not have an accounting system. We suggest that you switch to a system that deploys dual entry accounting; otherwise you are exposing yourself to a higher probability of corporate theft among other catastrophic oversights. Metric management is an essential element of an accounting system. Metrics of mortgage banking include: profit per loan, cost per loan, profit per branch, margin per product, profit per originator and on and on. If you are not getting this information, then your accounting system is not giving you sufficient information to run your business. Every business entity needs a system of checks and balances regardless of its size. We have worked with both large and small companies across the country. We find that virtually every company has an opportunity to improve their accounting processes in ways the owner had not seen. It is important to understand that no one is immune, regardless of experience or size. We’ve seen the ramifications of an inadequate accounting system have catastrophic consequences to a business. The proper recording of each loan transaction, strong internal controls, and a thorough review of your monthly financial results is the best defense against corporate theft.

Mortgage banking controls

1. Two people must approve large transfers of money unless to a pre-approved title company or other pre-approved vendor. 2. When writing checks, if one person prepares the check, then another person signs the check and another person reconciles the bank statement. If you only have one person in accounting, then it is best to hire another company to perform the bank reconciliation. The bottom line is there should be at least two people involved in your accounting department to have minimal checks and balances.

6. Have a monthly financial review with all owners and your chief financial officer. Ideally, your CFO is a CPA with 10plus years of experience in mortgage banking. If you do not have a qualified CFO, it is possible to hire a contract CFO.

Concepts to minimize exposure to corporate theft Corporate fraud is also called white collar crime because it doesn’t take a gun to rob you if you give someone absolute control over money. As noted above, the saying “absolute power corrupts absolutely” means that someone with unchecked control is more likely to abuse the system to their benefit. Controls are designed to keep honest people honest and make it more difficult for purposed corporate theft to occur. In most cases, the incidents of corporate fraud occurred because of a breakdown in, or a failure to, implement a proper accounting system. The risk of corporate fraud can be minimized by implementing proper controls which include: 1. Strictly control who can approve wires and checks.

4. Have a qualified CFO review your books monthly. Your auditor is usually not able to be your CFO because “independence” rules prevent them from participating in the management of your company. 5. Calculate financial metrics each month to make sure the numbers make sense. Ask lots of questions. 6. Have a budget and compare your actual result to your budget. If there are any unexplained deviations in the numbers, don’t stop asking questions until the answers make sense. This may seem like a lot to implement, but remember the corporate fraud loss that I mentioned above was in the millions. With such a significant potential consequence, it seems reasonable to implement all of these steps together to minimize the risk of corporate fraud and create transparency in your accounting system. There is a lot to digest in this article. The most significant to take away should be: 1. Check the checkers: Make sure someone is watching accounting. 2. Accounting systems matter: Have a strong set of controls over your accounting procedures all supported by a dual entry accounting system with loan level accounting. 3. Every company needs a qualified CPA/CFO to keep the numbers on track. continued on page 38

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3. For online banking, if one person enters the payment online, then someone else should approve the payment and another person reconcile the bank statement. If you only have one person in accounting then it is best to hire another company to perform the bank reconciliation. Again, you should have at least two people

5. Record loan level financial detail for each loan in your accounting system to track all cash-related events created by or anticipated by the lock registration, closing statement and purchase confirmation. This will include tracking mortgage insurance premium (MIP) payments, impound funds and investor proceeds. Without loan level data capture, it is not possible to properly track branch profitability.

3. Make sure your accountant/bookkeeper records loan level entries including the creation of an asset when the loan is closed.


As an important side note, some companies use Excel as their accounting system. Excel is an amazing spreadsheet tool, but it is not an accounting system. The dual entry nature of an accounting system creates embedded controls and reconciliation points to keep the numbers on track. QuickBooks is a simple accounting system that uses dual entry accounting. The dual entry process is somewhat hidden by the nature of the posting process. Accounting for Mortgage Bankers

In an accounting system with proper controls, there are a number of procedures or rules to protect the business. Recall I’m a musician and generally don’t like rules, but in this case, it will protect your business from theft and failure. Here are just a few basic procedures to implement:

4. Never have the same person prepare the check, sign the check, and reconcile the bank statement. There are no circumstances that justify having one person with uncontrolled assess to the company’s money. There must be oversight.

2. Implement a robust accounting process with a dual entry system and loan level recording. Do not use Excel as your accounting system; it does not have dual controls. O IOWA

3. The third answer we hear is: I own a $5 million a month mortgage bank and I do all the accounting myself; no one but me can get to the money. If this is the case, please be sure to have proper loan level posting in a dual entry accounting system to reduce the potential for errors. This way, when your company grows and you need to have someone else in accounting, you’ll already have a wellstructured accounting system. All that aside, we usually see the owner of a company helping the sales team increase volume, looking for new branches, working on getting better pricing and planning the vision for the company. It will be challenging to get all of this done while wearing a green accounting eyeshade.

involved in your accounting department to have minimal checks and balances.


If you don’t have a mortgage expert CFO, it is wise to engage these services. 4. At the very least, have a regular independent assessment of your accounting system. This review is not an audit, but an assessment of your corporate theft protection strategy.

It all connects for a reason Think of an accounting system like the components of a new 100-in. plasma television. At the luxury TV store, they told you to get a back-up power supply and a power conditioner because your new $5,000 TV needs stable and consistent power to operate correctly. Failure to install either of these components could hurt your TV if there is a power surge or power failure. If you go home and plug the TV into the wall it will turn-on and it will look like everything is okay. When there is

an electrical surge and your TV gets fried, you’ll remember the importance of having proper power controls. Accounting controls are like the power components for the television. Everything can look okay, but when lightning hits bad things happen. Corporate theft is a reality in business, the risk of which can be minimized with proper controls over the financial affairs of a mortgage lender. Andrew Schell, CPA, CMB, is managing partner and president-CFO2Go for Mortgage Banking Solutions based in Austin, Texas. Over the past 30 years, he has been recognized as a results oriented leader who is often published discussing risk management, accounting, and capital markets issues. He can be reached by phone at (512) 977-9900 or e-mail

Turning Good Data Into Good Information Makes Good Loans Credibility, accuracy and depth are key




By Brad Kelso


Never has it been more important for of your underwriting by providing solid underwriters and brokers to assess and information to meet the end needs of understand the reliability of the loan investors. data they rely upon. Such a large porWebster’s defines it plainly this way: tion of underwriting is essentially about turning Data: Individual facts, staprovided data into decitistics, or items sionable loan informaInformation: Knowledge tion. “Bad” or more likely gained through study, “fuzzy” data going into communication, research; underwriting increases instruction the risk of generating poor loan information Understanding that good and funding riskier loans. information requires good But how can brokers data is key to ensuring the help their own cause— quality of the mortgage streamlining their deals lending decision. “But how can brothrough to underwritUnderwriters essentially ing? The answer is that gather and compile all the kers help their own brokers must begin cause—streamlining data (individual facts, stapackaging their loans tistics or items) provided their deals through with full knowledge of to underwriting? The and available to them. the best practices for the Then, with analysis, they answer is that brounderwriter at the other transform this data into kers must begin end. Failure to underusable information (knowlstand the downstream packaging their loans edge gained) to provide a with full knowledge use of packaged data complete and accurate only slows down underfile about the borrower’s of the best practices writing, which ultimatelikelihood of repaying a for the underwriter ly slows closings. mortgage. at the other end.” It’s easy to confuse The truly differentiat“data” with “informaed quality of a loan’s forecast risk tion.” So here’s a review, and perhaps then is found in the quality of the more importantly, two detailed exam- information that supports it, starting ples as you seek to improve the quality with the original data, and how it is

analyzed. The process of using the data as information can define the difference between a quality loan and one that carries a greater risk of default. Data quality, or its integrity, can be qualified by evaluating three key elements: 1. Credibility of its source: From whom was the data gathered, what are their credentials, in what form or manner was the data received? 2. Accuracy: Can the data be confirmed or verified? By what manner was it gathered? What quality control was employed at the roots of its collection? 3. Depth: What’s included or behind the data … score models, logic, as reported, is this an interpreted fact or purely subjective? By way of example, let’s consider these data attributes for two common underwriting issues: Previous income documentation and identity verification.

Previous income documentation: Comparing 4506-T to manual tax returns It is now common to order IRS income tax transcripts (using 4506-T forms) for two years prior as an alternative to retrieving hard copies from the borrower. Here’s how those two products stack up from a data integrity perspective, comparing each across credibility, accuracy and depth. 4506 credibility: Excellent The IRS is an absolute source (albeit secondary) for accessing tax return transcripts. The data is delivered directly and cannot be easily forged or amended in the process. It comes in an unalterable file over a secure connection. Manual tax return credibility: Fair to low It’s too easy for a copied tax return to be fraudulently altered if not by the borrower, but by someone with a vested interest in the loan. In addition, a copy is always less credible than an original. The exception to this is if a CPA has prepared the return and then can be used as a verifiable source. 4506 accuracy: Excellent The IRS has actually built data and logic checks that essentially act as quality control of an individual’s tax return. Adjustments in math or in the actual data itself create better data accuracy beyond the original return itself. While the IRS’s accuracy is still limited to the quality of consumer’s original return, by adding its own

integrity checks (W-2 and 1099 income sources minimally), the IRS provides exceptional accuracy for an underwriter. Manual tax return accuracy: Low A manual return’s data accuracy is essentially ‘as stated’ with few secondary checks possible except from the copied W-2s or 1099s. Fairly obviously, returns prepared by the applicant carry with them far greater risk of error or outright fraud. 4506 depth: Excellent Beyond having logic that checks the math and compares it with W-2 and 1099 data, the IRS also offers access to any adjustments to the return by visibility to a log file that shows dates and filing amendments. This adds additional value to an underwriter as they are assured of getting not just the best known copy of the return, but also the lineage of what was amended, when and why. Often, this lineage itself is information that should be scrutinized. Manual return depth: Excellent. Ironically, a full copy set of tax returns offers good secondary data as the schedules, signatures and secondary identifying data can be gleaned from the actual returns. None of these are easily accessed through IRS transcripts. By this comparison example, it’s fairly easy to see how 4506 income verifications have become the de-facto tool for underwriters in a very short time. But let’s review a slightly trickier comparison requiring much deeper understanding of the source data.

Identity verifications: Comparing Social Security Number traces to direct Social Security Administration verifications With the advent of Fair and Accurate Credit Transaction Act (FACTA) Red Flags regulation, identity confirmation and identity theft mitigation in underwriting has risen to a much higher standard. For that reason, underwriters are turning to identity trace reports or to verifications directly to the Social Security Administration (SSA) for escalation products. But what exactly are the tradeoffs in these products’ credibility, accuracy and depth? As a review, Social Security Number (SSN) identity trace reports are commonly offered by the bureaus and other aggregators. These reports list all reported SSN usage information and combine these with reported names, addresses number and fre-

quency of use. They had been most commonly used for skip tracing efforts in collection. The alternative escalation product for identity verification is a consentbased social verification directly to the SSA. This begins with a required consent form, signed by the applicant (form SSA-89) that allows the lender, through an approved vendor, to submit data directly to the SSA in order to verify the name with the SSN and date of birth. As you will see, these products carry very different data integrity levels used to answer the same question: Is my applicant legitimately who he or she claims to be? Below is the comparison of the data integrity attributes of credibility, accuracy and depth. Trace credibility: Fair Why? One would think the bureaus are an excellent and very credible source of high integrity data, and typically, this is the case. However, looking deeper, the root source for most trace data is simply an aggregation of what is reported to them by subscribing creditors. In general, these creditors do operate and

report credibly but by experience, the quality of input, spelling and SSN input is poorly controlled and this impacts its overall quality. SSA direct credibility: Exceptional As with the IRS is with income, not only is the SSA a credible source, but in this case, it is the definitive primary source for identifying a SSN with a name, issued date and address. The data is passed only in a secure environment, and better still, because the applicant consents to allow this verification, fraudsters are often stopped at the gate when they realize that the SSA will be used to verify their identity. Trace accuracy: Fair As suggested, there is wide disparity in the level of data quality control by the credit subscribers who contribute to the bureaus. A trace report is actually a data dump of all the reported combinations of names, addresses and SSNs (misspellings and all) used to report credit. So yes, it is data, but considering it high-quality data may cause misleading underwriting and wasted efforts try-

ing to reach consensus with conflicting information. SSA direct accuracy: Exceptional No database match is ever without possibility of error, but largely, the results from such a request—“Match” or “No Match” are very reputable. It’s hard to argue with a primary source that is so tightly controlled as the SSA. Trace depth: Good/excellent Here, the bureaus and aggregators provide good, and sometimes excellent, context and depth by showing timestamped traces of the reported addresses. This presents the data in a more usable framework. For example, the underwriter can orally quiz the applicant about their address lineage using the trace data as a way to validate its accuracy. SSA direct depth: Low Ironically on this point, the SSA falls short because its service only ‘confirms’ or ‘denies’ the validity of what the requestor has asked. If one part of the request does not match the records, the entire validation is

returned as a “No Match.” So, the cost of having a definitive source is there is no additional data returned. In general, this is why using or combining both tools, Trace and SSA Direct is actually a best practice. Through just these two comparisons, you can see that understanding data integrity—credibility, accuracy and depth—can be key to obtaining information that will ensure the quality of the mortgage lending decision. Brad Kelso is the vice president, director of marketing and product development at Informative Research, with a cumulative 22 years in financial services. Prior to joining Informative Research, Brad led Countrywide’s credit fraud initiatives and system development efforts with credits as a national expert and speaker on “Authorized User Score Fraud.” He is the primary architect of two products related to identity fraud for the mortgage industry. Brad can be reached by phone at (800) 473-4633, ext. 150 or e-mail

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The Red Flags of Mortgage Fraud Be on guard for these signs of potential fraud




By Howell Haunson


Mortgage fraud is a serious problem … are more likely to stop paying the note on still. Of course, credit standards are much an investment property than they are to higher today than a few years ago, and it stop paying the mortgage on the home is difficult for a borrower to obtain a mort- they occupy. By lying about one’s true gage by fibbing about their intention, the borrower income or otherwise doccauses the mortgage comtoring their loan applicapany to take on more risk tion. But where there is a than it intended to take. will to defraud, fraudsters The lender gave a loan on will find a way. terms it would not have Ironically, federal legisoffered had it known corlation enacted to stem the rect information. decline in the housing marAs we deal with real ket has become a tool in world situations where the mortgage fraud racket. people argue, often conThe $8,000 refundable tax vincingly, that bending the credit to first-time homerules won’t hurt anyone buyers is a case in point. “Fraud is fraud, even and that their intentions if the borrower According to the Nov. 24, are pure, it’s good to keep intends to repay the 2009 edition of the Wall in mind that the definition loan in full, and no Street Journal, “At least of fraud is really black and fraud is intended.” 19,000 filers who claimed white: Providing any incor$139 million in tax refunds rect information or delibunder this credit did not actually buy a erately withholding any information to home, according to Treasury officials. In obtain a loan constitutes fraud, no matter addition, 74,000 filers claiming a total of how pure one’s intentions are. $500 million in refunds seem to already have owned a home.” Red flags of mortgage Not only is fraud prevalent, it is incred- fraud ibly expensive to mortgage companies. O Attorney-in-fact involved: When On average, a fraudulent mortgage costs someone is acting on behalf of the the lender 37 percent of the amount owner, there is the potential for loaned. A $100,000 fraudulent mortgage fraud. Make sure you are clear about results in a typical loss of $37,000, for the true motivations of the attorneyexample. Approximately 25 percent of all in-fact and that they coincide with foreclosures are due to fraud. those of the owner. If you have a For this reason, anyone involved in the doubt, contact the owner. mortgage industry needs to be alert to the red flags of possible mortgage fraud, and I’ll O Title held by virtue of an unrecordoutline many of these red flags in this artied deed: In some states, it can take up cle. But first, let’s have a clear idea of what to six months for a recorded deed to mortgage fraud is. Stripping away all of the show up on a title search. In this case, legalities, mortgage fraud boils down to the seller might bring an unrecorded this … “Mortgage fraud is intentionally getdeed to the closing to speed things up. ting a financial institution to make, buy or However, this is a red flag, as the sellinsure a loan when it would not have done er might not actually be the owner, so, or not done so on the same terms, if it but a tenant who filled in a blank had known correct information.” deed. When in doubt, call the previous Fraud is fraud, even if the borrower owner listed on the deed to assure intends to repay the loan in full, and no they actually sold the property. fraud is intended. For example, let’s say that, in order to get better terms on a O Loan secured by property recently loan, a borrower tells the lender that they paid off: Usually, when someone intend to live in a property that they are sells a house, they pay off any buying strictly as an investment … and, remaining debt with the proceeds they pay off the loan. Is this really fraud? from the sale. It’s odd for someone Who is hurt? Yes, this scenario is still to pay off a loan a few months or fraud, and the borrower is still liable and weeks before the sale. Maybe they may be criminally prosecuted because didn’t actually pay off the loan at they obtained a loan under false pretensall, and the quit claim/release deed es. Loans are priced higher for investment is forged. To make sure all is aboveproperties for a reason—because lenders board, call the lending company, know that if times get tough, borrowers and make sure the loan is paid off.

O Proposed sale within a year of obtaining title: On average, people own an owner-occupied home for at least seven years. If someone is selling their house within a year of buying it, something may be fishy. Perhaps, the current owner is in default to their lender. Call the lender to make sure. Perhaps, the current owner has gotten an appraiser friend to appraise the house for more than fair market value, defrauding both the buyer and new lender. In this case, an appraisal review through another appraiser may be in order. O Contract provides for a large allowance: Let’s say the contract provides a $10,000 lighting allowance to the buyer. Well, what if the buyer spends $1,000 of this allowance on lights and uses the remaining $9,000 as a downpayment on the house? In this case, the allowance is actually a way for the seller to funnel downpayment funds to the buyer—in violation of the loan contract. To avoid this problem, ask for receipts and make sure the closing statement itemizes each allowance and to whom it was paid. O Excessive commissions: In today’s market, when most real estate agents are willing to cut their commissions to get a listing or make a sale, a larger than normal commission is suspect. Maybe it’s a bribe from one of the parties to keep the real estate agent quiet about some fraud that is being perpetuated. Question the real estate agent about why the commission is so high. There may be a perfectly good reason. After all, it is not illegal to pay someone whatever you wish. But if you get a vague answer, slow down and investigate more thoroughly. O Sales price exceeds fair market value: This is similar to excessive commissions. Why, especially in today’s market, would anyone deliberately pay more than market value for real estate? Maybe the buyer is paying more to make sure the seller goes along with fraudulent activity. Time to slow down and ask questions. O Party request to pay debts not secured by the property or required by the lender: For instance, say the loan includes payments to an exterminating company. This could be perfectly legitimate. Or it could be a way to launder money though a shell company or maybe it’s a kickback to the buyer. To make sure, call the company receiving the payment and check with the secretary of state’s office to make sure it is a valid, registered company. Above all, obtain

lender approval before paying debts it has not required. O File contains more than one contract with significant differences in price: This is pretty clear evidence that fraud is underway. It has happened twice in the history of our real estate closing firm and we sent the records to law enforcement authorities both times. O Buyer’s check indicates another to be remitter: In these cases, the buyer shows up with a certified check drawn on someone else’s account (for example, his mother’s account), and no accompanying gift letter is presented. Chances are it is probably a loan from mom which would affect the terms of the mortgage. Get a gift letter or change the terms of the loan to reflect this debt. O Several closing deals referred from parties with whom you have had no past dealings: If it sounds too good to be true, it probably is, particularly if you don’t know the person referring the business. Slow down, check references, do your homework or you might find yourself knee deep in a major scam. O No government-issued ID: A good rule of thumb for a closing attorney is, “If you can’t fly on an airplane, you can’t close on real estate.” With no ID, a borrower may not be who they say they are. They may walk out of the closing room with $100,000, and the closing agent may never be able to track them down. As a closing agent, always get a government-issued ID with a photo. If the person closing says their ID card is stuck in their wallet, tell them you’ll wait. In my own practice, I once had a purchaser go out to his car to get his ID and never return. If I had not asked for an ID, he would have left with the lender’s money and never returned. O Anything that does not pass the “smell test:” If you see or sense anything unusual, slow things down, ask questions and make sure you are comfortable with the answers. If something does not smell right to you, trust your instincts. It’s better to be safe than sorry. Howell Haunson has been practicing real estate law for more than 25 years and is partner in charge of education at Morris|Hardwick|Schneider. He has served as member of the board of directors of the Georgia Real Estate Closing Attorneys Association and is actively involved in presenting lectures and seminars relating to real estate issues throughout the country. He may be reached by phone at (770) 955-1763 or email

heard on the street

Here comes continued from page 30

Mortgage Professionals to Watch

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O Chris Flanagan has been hired as head of U.S. mortgage and structured finance research for BofA Merrill Lynch Global Research. O Mortgage Contracting Services (MCS) has promoted John Maxwell to the position of executive vice president of operations. O Ed Bratton has been appointed president and chief executive officer of ViewPoint Bankers Mortgage. O Docu Prep Inc. has added Brittany Beavin and Kami Schmidt to its staff. O Prommis Solutions has named Susan Staley as vice president of loss mitigation. O USA Funding Corporation has announced the hiring of Barbara Becker-Oakes, Michael Fabian, Amy Kaufman, Jason Helling, and Shari Middlestead as trusted mortgage advisors; Nancy Yang as human resources assistant; and Jeffrey Middlestead as branch director.

Your turn National Mortgage Professional Magazine invites its readers to submit any information, events, passages, promotions, personal or professional occurrences that seem appropriate and/or other pertinent data to the attention of:

Heard on the Street/Mortgage Professionals to Watch column Phone #: (516) 409-5555 E-mail: Note: Submissions sent via e-mail are preferred. The deadline for submissions is the 1st of the month prior to the target issue.

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O The Mortgage Bankers Association (MBA) has announced the promotion of Shelley Reback and Michael Sorohan to the position of associate vice president, John T. Mechem to the position of vice president of

public affairs; and Teressa Jeffries, Masuda Ranjber and Alicia Roundy to the director position. O Inlanta Mortgage has named Cassy Humberger as branch manager. O IOWA

“At NexBank, we’re so proud of the work of the respective mortgage staffs, especially considering the current state of both the lending and general mortgage markets. However, with an increase of this many production officers, we’ll at least double the current size of our production staff,” said Davis Deadman, chairman and chief executive officer of NexBank. “The level of our growth reveals the true expertise currently available in these respective divisions. The staff and their leadership have done a remarkable job, and we’re proud of their performances.” In December 2008, NexBank launched its wholesale lending division, which gave local mortgage bankers and brokers a new means of traditional mortgage funding when many other organizations were leaving the wholesale category. “NexBank’s mortgage divisions are in a unique position in an industry that has realized some losses, layoffs and mergers,” said John Ory, chief operations officer at NexBank. “However, we have been able to carefully manage and grow key areas of our markets, resisting highgrowth speculative opportunities while maintaining high quality services and standards. We had significant goals for our new wholesale mortgage operation and succeeded.” In July 2009, NexBank Residential Mortgage was created through a partnership between NexBank and The Funding Source, a former mortgage operation in Dallas. The creation of the new residential mortgage division provided a positioning for NexBank as a multi-faceted mortgage lender in North Texas, an important advancement in the company’s desire to service customers and clients with all their financial needs. “NexBank saw the opportunity to grab market share as the mortgage markets and funding sources contracted,” said Deadman. “We’re satisfying an absence of funding that every homeowner needs and we couldn’t be more excited about the opportunities we see ahead of us.” For more information, visit


per loan basis, is only available in the PointCentral upgrade. “We do everything we can to make sure our customers remain in compliance while responding to their requests for enhancements,” said Douglas Chang, president of Calyx Software. “Offering our customers a broader mortgage solution that fulfills all of their needs allows them greater flexibility with room to grow.” For more information, visit

Calyx releases Version 7.2 of Point and PointCentral in compliance with RESPA revisions




Calyx Software has announced the release of Point and PointCentral 7.2. Point combines the latest technology with the functionality that mortgage professionals require for loan marketing, prequalification, origination, and processing. PointCentral unites Point with business rules, remote access and consolidated data storage. Version 7.2 offers compliance updates and increased functionality and flexibility for traditional originating and loan processing as well as mortgage banking processes. Point 7.2 complies with RESPA regulations that require loan originators to include a provider list with the new standardized Good Faith Estimate (GFE) statement that became effective Jan. 1,


Countdown to Buy launches online marketplace 2010. Additionally, in order to comply with the latest Fannie Mae mandate, Point 7.2 includes the new Transmittal Summary Form 1008 that is required for all loans taken on or after Jan. 1, 2010 and the new Application Form 1003 that is required for all loans taken on or after July 1, 2010. With improved document storage, automatic co-borrower synchronization, and closing document interface enhancements, mortgage loan processing is even faster and more efficient. Version 7.2 also offers enhanced banking screens to provide greater functionality and effectiveness. Customers will see remarkable improvements in the screens for Fees & Impounds, Warehouse/Funding, Shipping, Trailing Documents and Product & Pricing Interfaces. The Audit Trail feature, which allows the tracking of all field level and document management changes on a

Sponsored by Quality Mortgage Services and National Mortgage Professional Magazine Join us on Thursday, March 4, 2010 at 1 PM (EST) for a FREE interactive Webinar featuring National Mortgage Professional Magazine editorial contributor and fraud and quality assurance expert, Tommy Duncan, CMT from Quality Mortgage Services. This is the official release of the 2010 “Fraud and Flawed Loan Report,” outlining areas of risk, opportunities for improvement, and debunking common fraud myths in residential mortgages. In this live presentation Mr. Duncan will:       

Present overall risk rankings for all residential originations in 2009 Share the top 10 problem areas found in loans Compare and contrast findings from 2009 and 2008 Identify areas in need of improvement and problem categories Compare FHA and Conventional loans Show you how to lower production risks by targeting appropriate loan types Reveal stats on whether “Supervised Lenders” or “Non-Supervised Lenders” originate loans with less flaws.

You can register for the FREE Thursday, March 4, 2010 Webinar at 1 PM (EST) by visiting Copies of the report will be sent to all those in attendance.




Your source for the latest on originations, settlement, and servicing


Quality Mortgage Services, LLC Nationwide Quality Assurance & Compliance Solutions

Countdown to Buy, an online re a l e s t a t e marketplace, has announced the launch of its automated real estate matching platform. The Countdown to Buy platform is equally capable of supporting foreclosures, short sales and traditional property transactions. In conjunction with the launch, the company has entered into an agreement with a leading nationwide servicer of residential mortgages for its initial pilot program and began offering a sampling of properties located in Connecticut, New Jersey and New York in December, with the potential for additional locations to be added. The company is currently in negotiations with other leading banks and servicers for additional programs throughout the United States. Founded in 2008, Countdown to Buy uses a patent pending technology that automatically matches buyers and sellers in a real estate transaction through a time-limited process that reduces the property’s list price one percent per day. Confidentially submitted offers are systematically compared to the daily price and when an offer matches or exceeds that price, the offer is automatically accepted and the contract process is initiated. Through the company’s Web site,, property listings can be researched, showings can be arranged, and offers can be submitted. “We set out to create an environment of trust between buyers, sellers, and third parties,” said Jim Hodson, chief executive officer and founder of Countdown to Buy. “Now more than ever home buyers need 100 percent transparency and unbiased information throughout the entire home purchase process. Countdown to Buy’s online real estate platform eliminates negotiation and mitigates uncertainty surrounding the foreclosure market, essentially unlocking foreclosure purchase opportunities for homebuyers.” For more information, visit

Del Mar DataTrac and Wolters Kluwer team for compliance solution Del Mar DataTrac (DMD), a provider of affordable mortgage lending automation solutions, has

announced that Wolters Kluwer Financial Services home loan application disclosures and closing documents are now available from within DMD’s DataTrac loan origination solution. DMD’s DataTrac customers now have seamless, electronic access to Wolters Kluwer Financial Services’ VMP Mortgage Solutions compliance disclosures and closing document packages through the company’s Document Preparation Platform. With the integration to Wolters Kluwer Financial Services’ Document Preparation Platform, users of DMD’s DataTrac solution have the ability to generate standard and customized initial disclosures and closing documents. Because Wolters Kluwer Financial Services’ platform generates the necessary compliance documentation on behalf of DMD’s lenders, they can reduce the regulatory requirement burden associated with determining which documents are required for a specific transaction and jurisdiction. “Partnering with Wolters Kluwer Financial Services allows DMD to give the hundreds of mortgage lenders, banks and credit unions that use DataTrac the benefit of accessing these accurate and up-to-date compliance documents without disrupting their lending work flow,” said Rob Katz, president of DMD. “We’re excited about the opportunity to provide a greater number of financial institutions with access to our disclosures and closing packages through our new alliance with DMD,” said Jason Marx, vice president and general manager, Mortgage. “DMD’s DataTrac users can rest assured the compliance content within our documents is built upon nearly 40 years of regulatory expertise and experience in the mortgage industry.” For more information, visit or

Ocwen launches foreclosure prevention product Ocwen Financial Corporation, a servicer of sub-prime mortgages, has adopted new technology that enables homeowners in financial distress to connect directly, via the Ocwen Web site,, with nearby community services and government agencies. Ocwen customers who log on to can enter their zip code and then choose from service categories, including job training, food assistance and utility payment assistance in all 50 states. They receive a list of local, well-qualified non-profits and government agencies that may be able to help them with personal and financial issues. The same referrals, from the same database, will also be available to customers via Ocwen’s telephone representatives. The service is a result of Ocwen’s new, multi-year agreement with MortgageKeeper Referral Services Inc., an organization that helps link individuals in financial distress to valuable, reputable community services through its product, MKDirect. “Our goal is to help homeowners, including those experiencing financial

troubles, stay in their homes,” said Ocwen President Ron Faris. “One of the multiple ways we do that is to lead customers to resources that can help them manage or solve personal and financial problems that may be at the root of missed or late mortgage payments. Homeowners, communities and our company benefit when mortgages are affordable and sustainable.” “Ocwen has always been progressive in their work with struggling homeowners,” said Rochelle Nawrocki Gorey, president of MortgageKeeper Referral Services. “They understand that missing mortgage payments is a symptom of larger, more pressing problems. MKDirect increases the likelihood that homeowners will find high quality help to alleviate personal and financial problems——problems that keep them from making their mortgage payments.” For more information, visit or

Cogent Road enhances its AVAIL applicant recovery management system

PriceMyLoan integrates with Ellie Mae’s Encompass360 PriceMyLoan has announced an integration with Ellie Mae’s Encompass360 Mortgage Management Solution. The integration allows users of Encompass360 to access automated underwriting and loan pricing decisions provided by the PriceMyLoan engine from within the Encompass360 system. “PriceMyLoan and Ellie Mae are leading technology providers in the mortgage industry,” said Gigi Campbell, national sales director for PriceMyLoan. “Our integration creates tremendous value for mortgage bankers by providing a seamless process for originating, qualifying and pricing loans within a single platform.” Once a loan file has been created in Encompass360, the file’s data can be transmitted directly to PriceMyLoan’s engine. Using investor guidelines, pricing matrices and rate sheets, PriceMyLoan returns accurate loan eligibility and pricing results back to the Encompass360 user within seconds. Product and pricing data is automatically transferred back onto the Encompass360 loan file when selected by the user. “Encompass360 customers can now leverage the automated underwriting and pricing strengths of PriceMyLoan without disrupting the workflow of Encompass360,” said Richard Roof, senior vice president for Ellie Mae. “Our customers have come to rely on us to provide comprehensive access to the solution providers that enhance their business processes. As a market leader, Ellie Mae is committed to fostering productive partner relationships, and providing our customers with seamless, integrated access to high quality solutions like PriceMyLoan.” For more information, visit or

National Mortgage Professional Magazine invites you to submit any information promoting new “niche” loan programs, new products or any other announcement related to the introduction of a new program, to the attention of:

New to Market column

Note: Submissions sent via e-mail are preferred. The deadline for submissions is the 1st of the month prior to the target issue.


Phone #: (516) 409-5555 E-mail:


Your turn O IOWA

Cogent Road, a provider of Internet-based applications for the mortgage industry, announced the latest enhancements to AVAIL, an automated applicant recovery management system enabling mortgage originators to provide ongoing mortgage-qualifying services to prospective borrowers. AVAIL, an extension of Cogent Road’s Funding Suite, a credit management solution that manages costs and enhances customer retention during the loan origination process, offers loan originators the ability to efficiently maintain contact with their initially credit-declined applicants while they adopt the new behaviors needed to achieve qualifying status. AVAIL’s added functionality offers a new dashboard that reveals the current qualifying and recovery status of all applicants in real time. Originators can use the new tool to quickly discern how well applicants are progressing, as well as which applicants have met or are close to reaching their target credit scores. For initially credit-declined applicants, the steps required to eventually achieve qualifying status can take up to 12 months. AVAIL was designed to help originators stay in contact with these applicants, eventually enabling them to improve their own scores and bring them back into the pipeline when they reach defined qualifying benchmarks. Using AVAIL, originators can coach applicants to change their spending behavior, such as paying down high balances and using credit cards responsibly, in order to become more credit-conscious consumers. AVAIL also organizes and manages client information to automatically notify originators when educated potential borrowers eventually achieve predefined credit score targets. “The AVAIL program arms originators with an ability to not only educate prospective borrowers on how to adopt healthy credit behavior practices, but to keep more leads in-house without

having to turn away what could eventually become viable business,” said William DiPaolo, chief executive officer of Cogent Road. ”Originators using AVAIL can efficiently generate a new source of qualified leads. As applicants adopt better credit behaviors, AVAIL lets them know when these applicant’s have reached the level required to reapply for their mortgage.” For more information, visit or


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


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

FEBRUARY 2010 Monday-Thursday, February 1-4 Mortgage Bankers Association CREF/Multifamily Housing Convention & Expo Mandalay Bay Resort & Casino 3950 Las Vegas Boulevard South Las Vegas For more information, call (800) 793-6222 or visit

APRIL 2010 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

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) 296-2840 or visit

MAY 2010 Monday-Thursday, May 3-6 Tennessee Association of Mortgage Professionals 2010 Convention & Trade Show, “Tried, Tested & True” The Hotel Preston 733 Briley Parkway Nashville For more information, call (615) 302-0001 or visit

Be prepared to go to the Hill!



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 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) 379-7447 or visit

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) 448-8236 or visit 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 MO






Abacus Mortgage Training and Education .......... ......................................5 & 41 ACC Mortgage .................................................. ....................................26 AllRegs ............................................................ ..................................................7 Calyx Software ................................................ ........................................25 Debt Aid Processing, Inc. .................................. ................................11 Elliott and Company Appraisers, Inc................... ..............................................44 Emigrant Mortgage Company ............................ ................................21 Entitle Direct Group.......................................... ..................Inside Front Cover First Source Capital Mortgage, Inc. .................... ..........................................19 Flagstar Bank .................................................. ......................Back Cover Franklin First Financial .................................... ..............................7 Frost Mortgage Banking Group ......................................................................................................13 Guaranteed Home Mortgage.............................. ....................................................23 HTDI Financial ................................................ ........................................29 MBA-NJ/NJAMB ................................................ ..................................................17 ................................IA1 Mortgage Concepts .......................................... ........................25 Mortgage Dashboard, LLC.................................. ..............................31 Mortgage Now, Inc. .......................................... ........................................16 NAMB.............................................................. ..........IA2, 22, 30 & 44 NAPMW .......................................................... ..................................................43 Platinum Credit Services, Inc............................. ........33, 35, 37 & 39 Presidents First Mortgage Bankers .................... ......................................15 Quality Mortgage Services ................................ ..............................4, 14 & 42 The Bond Exchange .......................................... ..................................10 The Credit Restoration Expert............................ ..................................31 Trump Network................................................ ......................................31 U.S. Bank Consumer Finance..........................................................................................................31 United Northern Mortgage Bankers Ltd. ............ ...... 27 & Inside Back Cover Wall Street List ................................................ ........................................10 Wells Fargo Home Mortgage.............................. ............................................20

Sunday-Wednesday, February 21-24 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) 342-5900 or visit





It’s all happening now! Visit for details!


Includes Advocacy 101 training: General synopsis and "Question & Answer" on the best ways to communicate NAMB's talking points with your congressmen in an effective manner.




At United Northern, we give you the freedom to originate and succeed with our winning team. About working with United Northern Mortgage Bankers • Ongoing training and consultation with top industry executives • An in-house team to monitor SAFE Act compliance • Access to in-house marketing services

• In-house underwriting

• Pricing support desk to ensure maximum profitability on each • Most loans underwritten in 24 to 48 hours loan, while maintaining a competitive advantage over the street • Multiple valuation tools to research value • Proven leading-edge technology (built on Encompass 360 • In-house valuation desk to help ensure accurate technology) values and responsive turnaround time • Virtual office support • Multiple established warehouse lines • Licensing and regulatory compliance services

Limited room available for established Team Leaders and Licensed Mortgage Originators. Become part of an established 30-year Mortgage Banker with a proven track record and success.

Learn about the great opportunities available by making an appointment with United Northern Mortgage Bankers Executive Vice President Julio de Cardenas by calling 888-600-8808, ext. 1 or by e-mailing

United Northern Mortgage Bankers, Ltd. Corporate NMLS ID# 7230 New York State Banking Dept. - Licensed Mortgage Banker – License #100724 New Jersey Dept. of Banking and Insurance – Mortgage Lender – License #L0046623 Pennsylvania Dept. of Banking – Mortgage Lender – License #20887 Connecticut Dept. of Banking - Mortgage Lender - License #20372 Massachusetts Div. of Banks and Loan Agencies - Mortgage Lender & Mortgage Broker – License #MC5070 North Carolina Commissioner of Banks – Mortgage Lender – License #L140365 South Carolina State Board of Financial Institutions – Supervised Lender – License #S7,461 Florida Dept. of Financial Institutions - Mortgage Lender - License #ML0700679 Senior Security Home Advantage is a lending area of United Northern Mortgage Bankers, Ltd. Direct FHA Endorsed Lender