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choosing appraisal business partners Buyer beware: Sense before dollars Everyone makes money on the process somehow. Make sure you know upfront how your prospective partner gets paid. It sounds like a simple concept, but this is a significant factor in judging the overall value of the solution. Here are examples of situations to avoid:




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typically isn’t necessary, especially in today’s competitive environment. If they have to develop your solution, and want an implementation fee upfront, you should question their experience. Testing and launching custom implementations is a long-term project fraught with unforeseeable delays and expenses, and it’s rarely a good experience for the lender. Don’t foot the bill for someone to develop a new solution, unknowingly playing the guinea pig. If it’s new, it most likely hasn’t been tested, and there are plenty of solutions out there that have been, so you don’t need to risk additional upfront expense.

 Avoid AMCs that take a large cut of the appraiser’s fee. There’s usually a reason the appraiser is working for a lesser fee and if the AMC’s profit margin is dependent on how low they can get the appraiser to go, and how high they can get you to go, there’s a definite problem. I used to ask “You know what you’re paying for the Finding a long-term partner is any appraisal, but do you know what realm is a tough decision, but in this the appraiser is actually being regulatory environment it’s absolutely paid?” Trust me—it matters. essential. As a lender, you need to focus  Beware of bait-and-switch scenarios. on origination and service, and rely on Sometimes full service AMCs offer a valuation workflow experts to help you “self-managed” solution based on with specific workflow operations. With less expensive, tech-based services. the right partner you can weather any Sometimes choosing between an regulatory storm and continue moving AMC and a self-managed technology forward. Always remember to keep the platform seems like an either/or long term goals of your organization in choice, and a vendor offering both mind; otherwise you may be making solutions can be perceived as a safer this same decision again sometime option. However, once a client is soon. Hopefully these guidelines help hooked, the vendor has a financial you make the best choice for your incentive to guide them to a more organization. costly solution regardless of their actual needs. If you choose to go Chris Sullivan oversees the national sales with the vendor’s technology plat- team for Mercury Network, and supervisform and have a customer support es Mercury’s largest, key strategic question, you might be escalated to accounts. He has been with a la mode higher priced AMC services. Make inc. for 11 years, building invaluable sure you’re not getting baited on a expertise in vendor management operaless expensive solution, only to find tions and appraisal compliance concerns out later you’re being sold on the with the largest lenders and appraisal more expensive AMC services you management companies in the nation. Chris has been instrumental in the thought you wouldn’t need. growth of Mercury Network, powering  Also watch out for implementa- more than 20,000 compliant appraisal tion fees and upfront costs. deliveries a day. He may be reached by Whether it’s a software platform phone at (800) 434-7260, ext. 708 or eor an AMC, paying upfront fees mail

pursuing excellence

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identifies goals that you hope to achieve. A plan opens its’ author to measurement, feedback, judgment and most importantly, a far greater opportunity to succeed. I am offering, to any and all willing to listen, my highest and most valuable advice. Adopting this business discipline will yield enormous benefits in both your professional and personal life. Demonstrate the courage to create a business plan and submit your plan to those you trust. Risk falling short of your goals. Expose yourself to critique,

accountability and the support of others. Your business plan will act like an invisible hand, offering you non-stop direction, guidance and inspiration. And it will cost you nothing but the time invested in writing your plan. This is the closest thing I’ve discovered to “pixie dust” in my almost 30 year career. Casey Cunningham is president of XINNIX, a provider of mortgage sales and leadership development programs. She may be reached by phone at (678) 3253501 or e-mail

Creating Compliant ABAs and MSAs By Joseph Cilento

To remain viable beyond the refinance boom, lenders must reduce their reliance on refi loans. Every mortgage lender would like to establish connections with direct referral sources such as real estate agents. Fortunately, there are identified acceptable, lawful means for agents and brokers to work together through compliant ABAs and MSAs.

ABAs and RESPA Section 8 An ABA, an affiliated business arrangement, consists of a profit-sharing arrangement between two settlement service providers (SSPs): Businesses or individuals who help to close a residential real estate transaction and/or conduct a residential mortgage loan. Settlement service providers include lenders, real estate agents, attorneys, closing agents, title agents, home builders and developers, credit and appraisal companies, home and flood insurance companies, surveyors, home inspectors and home warranty firms. When setting up an ABA, you must be aware of Section 8 of the Real Estate Settlement Procedures Act (RESPA), a rule preventing the acceptance of any fee as “part of a real estate settlement service involving a federally related mortgage loan …” However, the rule does provide one exception to “permit payment for goods actually furnished or services performed.” But you must understand that a referral is not a compensable service. You are not allowed to compensate a business partner for sending you a referral. For an ABA to qualify under RESPA Section 8, you must pay a reasonably equivalent value for services rendered.

Compliant ABAs An ABA differs from an MSA because it has a specific expressed statutory basis. It’s right in RESPA, and RESPA states you can refer business if you properly use this method. Some of these requirements include:  You must disclose the existence of the ABA, and in the written disclosure, you must provide an estimate of the charges. RESPA contains a promulgated form you can use.  You cannot require a consumer to use your ABA.  The only value you may legally receive is a return on an ownership interest in the form of a dividend or a distribution of some sort. Payment cannot be related to volume. The U.S. Department of Housing & Urban Development (HUD) also addresses the proper nature of the participants in an ABA to ensure it is compliant. Its list includes capitalization, staffing, independent management, separate offices, core settlement services, outsourcing of services, relationship with the outsourced service provider, value and payment for outsourced services, active competition in the marketplace, and exclusivity with interest owners.

Compliant MSAs Unlike an ABA, a MSA (marketing service agreement) is not addressed on a specific statutory basis. However, HUD pointed out a few red flags to avoid. The areas of concern include direct consumer solicitation, a transactional fee paid on a per-loan basis, direct receipt and transmission of consumer information, and exclusivity between the parties. MSAs employ two basic types of fee arrangements: A fixed-fee and a transactional, or per-loan, fee. The fixed fee involves fewer compliance risks. You need to be very careful with–even avoid–the transactional fee situation. When using marketing services agreements, you should ensure the agreement clearly spells out what the parties are going to do; it is structured on a fixed-fee basis related to the value provided; and the relationship is disclosed to the consumer.

Conclusion Government regulations specifically limit how ABA/MSA business may be conducted. In addition, individual states often enact local rules stricter than federal ones. Individual companies should provide well documented written policies and procedures about establishing and conducting business with referral partners, including periodic evaluation. But with adequate care to ensure compliance, ABAs and MSAs can play a very positive role in your business. Joseph Cilento is director of business affiliations for Guaranteed Home Mortgage Company. Founded in 1992, Guaranteed is a licensed mortgage banking firm comprised of more than 300 mortgage professionals lending in 28 states. He may be reached by phone at (914) 696-3400.