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Call 1.800.778.4947 to take control today. | 1.800.778.4947



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

Minnesota Mortgage Association State Office 5200 Willson Road, Suite 300 O Edina, MN 55424 Phone: (952) 345-3240 O Fax: (952) 920-1533 MMA Web site:

Bill Schwietz Robert Carter Robert Carter Clyde Wagner

EXECUTIVE COUNCIL MEMBERS Phone # President (952) 838-8749 President-Elect (763) 390-7200 Treasurer (763) 390-7200 Secretary (952) 545-2808

Carrie Guarrero Steve Hamerski Dan Lindgren John Murphy Wally Zastrow Sue Morrisette Clyde Wagner

Council Member Council Member Council Member Council Member Council Member Affiliate Member Affiliate Member

Bridget Kent Jim Ryder Carrie Guarrero Keenan Raverty Roger Kadlec Tim Swierczek Tim Swierczek Joe Lanser

COMMITTEE CHAIRS Affiliate Committee (651) 765-9510 Activities Committee (763) 746-0409 Breakfast Meeting Committee (952) 808-0042 Legislative Committee (651) 209-2650 Membership Committee (763) 494-0614 Nominating Committee (651) 772-9000 Past President’s Committee (651) 772-9000 Technology (952) 224-9362

Pat Martyn Sue Martyn Rebecca Selby Carla Tourin Joe Martyn Eldon Spencer Jr.

MMA CONSULTANT STAFF Executive Director (952) 345-3240, ext. 1 Assistant Director (952) 345-3240, ext. 2 Public Relations (952) 345-3240, ext. 3 Outreach (952) 345-3240, ext. 4 Technology (952) 345-3240 Attorney (612) 332-1030

(952) 808-0042 (952) 946-9232 (952) 546-1400 (952) 876-4471 (952) 475-5832 (952) 929-8422 (952) 545-2808


The Minnesota Mortgage Association Presents

The 2011 MMA Convention & Exhibitor Showcase Thursday, September 8 Sheraton Bloomington Hotel, Minneapolis South 7800 Normandale Boulevard • Bloomington, Minn. For more information, call the MMA office at (952) 345-3240 or visit MN 1

MMA (search National Mortgage Professional Magazine)

O JULY 2011

For information on all MMA events, call (952) 345-3240 or visit


SEPTEMBER 2011 Thursday, September 8 2011 MMA Convention & Exhibitor Showcase Sheraton Bloomington Hotel, Minneapolis South 7800 Normandale Boulevard Bloomington, Minn. O

AUGUST 2011 Tuesday, August 23 MMA Board Meeting MMA Office 5200 Willson Road Edina, Minn. 8:30 a.m.-Noon

Minnesota Mortgage Association Convention 2011 “We Will Survive!” ONE DAY EVENT

September 8, 2011 Sheraton South, Bloomington Exhibits: 11am-3pm Social hour: 4-6pm

2 opportunities for “Face time” --- Your own table at Social Hour!




___ Convention Bags ___ Social Lounge (Thurs. 4-6pm) ___ Name Badges/lanyards ___ Coffee bar in Expo Hall ___ Convention Programs ___ Registration Table

Company name ________________________ Address ______________________________ ______________________________ Primary contact ________________________ E-mail _______________________________ Phone ______________ Fax _____________

2. BOOTH SELECTION Includes entrance fees, Social Lounge (4-6pm) And lunch for two individuals. ___ Members – $500, or 2 booths for $750 ___ Non-Members – $1000, or 2 booths for $1500 Total Section 2 $ ______


The booth cost includes entrance fees and lunch tickets for only the two individuals named here: 1. ___________________________________ 2. ___________________________________

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Additional company representatives who wish to be present at the convention must complete separate ATTENDEE Registration forms. Exhibitor and Attendee Registration forms received together may be included on the same check or charge.

$500 $500 $500 $500 $250 $125

Multiple Sponsor Options ___ Lunch – September 8 ___ Breakout Session Refreshments

$500 $150

Total Section 4 $ _______


Exhibitor Registration deadline is AUGUST 22. Exhibitor Registration forms submitted after August 22 are subject to availability and will automatically be charged a $300 late registration fee. TOTAL SECTION 2: TOTAL SECTION 4: Optional Donation to MMA Philanthropy

$__________ + $__________ + $__________ +





6. PAYMENT METHODS (select A or B) A. ____ Please charge my credit card B. ____ A check is enclosed Circle one: Visa Mastercard (Make payable to MMA) Name on card ___________________________ Account number _________________________ Expiration date __________________________

7. COMPLETE YOUR REGISTRATION Read the terms and conditions on the reverse, sign and date below, and mail completed registration forms along with your check or credit information, to: MMA, 5200 Willson Road, Suite 300, Edina, MN 55424 QUESTIONS? visit 0r call 952-345-3240 Fax:952-920-1533 I agree to indemnify and hold harmless the Minnesota Mortgage Association (MMA), from any and all liability, loss, damage, or expense from any incident which may arise while attending any portion of the 2011 MMA Annual Convention. If applies, I authorize the above charges to be made to my credit card. I understand all fees paid to MMA are nonrefundable. I authorize any photos taken of me at this event to be published in MMA publications and website. I agree to be bound to the “Terms and Conditions” found on the reverse of this registration. Signature _______________________________________________ Date __________________________________


S:\Convention terms and conditions.wpd

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11. EXHIBIT STAFF REGISTRATION. Registration of up to two representatives per booth purchased will be complimentary provided registrations are received by Association by August 22, 2011. All Advance registered Exhibitors will have a printed Exhibitor Badge available at the Exhibitor Registration Area. 12. SUBLETTING BOOTH SPACE. Exhibitor may not assign, sublet, or apportion all or any part of one's contracted booth space, nor may Exhibitor permit the display, promotion, sales or marketing of nonExhibitor products or services. 13. ARTICLES OF EXHIBIT. The advertisement or display of goods or services other than those manufactured, distributed or sole by the Exhibitor in the regular course of business and identified in this contract is prohibited. 14. SPECIAL VISUAL AND SOUND EFFECTS. Audiovisual and other sound and attention getting devices and effects shall be permitted only in those locations and in such intensity as in the sole opinion of the Association does not interfere with the activities of neighboring Exhibitors. Operation of equipment being demonstrated may not create noise levels objectionable to neighboring Exhibitors. 15. ELECTRICAL. All electrical need to be ordered thru the Sheraton Hotel. Contact Jill Hubbs at 952-893-8498 16. SHIPPING INSTRUCTIONS. Information on shipping methods and rates will be sent to each Exhibitor by the Official Contractor, Hubbell/Tyner. The Exhibitor shall ship, at its own risk and expense, all articles to be exhibited. The Official Contractor will provide storage for incoming freight, delivery to booth, removal, storage and return of empty crates, removal and shipment of outbound freight. The address on all crated shipments shall include the Exhibitor's name and booth number(s). Exhibitor expressly agrees that any exhibit material remaining in exhibit hall after contracted move-out time has terminated, or damaged exhibits left behind, may be removed and disposed of at the expense of the Exhibitor and without liability to the Association or Official Contractor. Exhibitor agrees to pay at end of trade show all fees incurred by Exhibitor from Official Contractor for freight handling as specified in Exhibitor Service Kit. 17. INSURING THE EXHIBITS. Exhibitors are encouraged to insure their exhibits, merchandise and display materials against theft, fire, etc. at their own expense. 18. FAILURE TO OCCUPY SPACE. Any space not occupied at the Sheraton South by 11 a.m. Thursday, September 8, 2011 shall be forfeited by the Exhibitor and space may be resold, reassigned, or used by the Association or exhibit staff without refund, unless a request for delayed occupancy has received prior approval of the Association. 19. LIABILITY FOR DAMAGES OR LOSS OF PROPERTY. Exhibitor agrees to protect, indemnify and hold harmless the Association, the Sheraton South Bloomington, and the Official Contractors from any and all liability, loss, damage or expense by reason of any injury or injuries sustained by any persons or property or loss of property or income which might be derived there from occurring in or about the exposition premises or entrances thereto or exits there from, including that caused by resulting from the negligence of the Association. The Sheraton South Bloomington shall not be responsible or liable for any injury, loss or damage to any property or person brought in by the Exhibitor or otherwise located in the exposition premises. 20. CANCELING EXHIBIT. If for any cause beyond the control of the Association, such as but not limited to the destruction of the exhibit facilities by an Act of God, the public enemy, authority of the law, fire or other force of nature, the Association is unable to comply with the terms of this contract and deliver the space allotted hereunder, this contract shall be considered terminated. Any payments made hereunder by Exhibitor shall be refunded to Exhibitor, less expenses incurred by the Association to the date of termination allocable to Exhibitor after proration thereof among all Exhibitors. 21. MISCELLANEOUS. The Exhibitor expressly agrees to be bound by all the terms, conditions and specifications herein listed and by the Rules and Regulations established by the Association from time to time thereafter modified, and expressly agrees that this contract and such Rules and Regulations contains the entire agreement between the parties hereto and supersedes any prior agreement, written or oral. This contract shall be interpreted under the law of the United States and the State of Minnesota. 22. DISPUTES. All disputes arising between parties under this contract shall be submitted to arbitration. O

1. APPLICATION AND ELIGIBILITY. Application for booth space must be made on the printed form provided by Minnesota Mortgage Association (MMA, hereinafter "the Association"), and contain the information as requested and be executed by an individual who has authority to act for the applicant. The Association reserves the absolute right to decline any application for space, if, in the Association's judgment, the products or services to be shown or demonstrated are not applicable to the mortgage business, are inconsistent with the stated purposes of the MMA and the interests and welfare of its members. The Association further reserves the right to limit the number of producers or suppliers of specialty promotion items or merchandise not directly utilized in effectuating real estate transactions. 2. EXHIBIT BOOTH PRICE. The price is as stated on the contract. 3. PAYMENT DATES. No booths will be guaranteed until the Association has received full payment along with a signed contract. Only those companies receiving approval and confirmation from the Association and having made full payment by August 22, 2011 will be listed in the "Directory of Exhibits." 4. CANCELLATION OF BOOTH SPACE. In the event Exhibitor notifies the Association, in writing, of Exhibitor's Intent to repudiate the contract after acceptance but prior to August 22, 2011, the Association shall be entitled to retain fifty percent (50%) of the full exhibit booth price as liquidated damages. If the Association receives such notice of the Exhibitor's repudiation after August 22, 2011, the Association reserves the right to retain full exhibit booth price as liquidated damages, and to as a penalty, to re-sell or re-assign the booth space. 5. BOOTH SIZE. Booths located in the exhibit hall will be 8' x 10' unless otherwise noted. 6.BOOTH, FURNISHINGS, EQUIPMENT AND SERVICE. Hubbell/Tyner will provide standard pipe and drape booth equipment. The booth equipment will consist of 8' high background drape, 3' high side drape, one (1) identification sign, one (1) - 6' draped table, and two (2) - chairs. All exhibition displays must fit within dimensions above. MMA reserves absolute right to deny exhibitor's exhibits at its sole discretion. 7. ASSIGNMENT OF BOOTH SPACE. All space assignments shall be made by the Association, in its sole discretion as Application/Agreement and payments are received and accepted. In addition, the following booth space assignment rules shall apply: A. Booth assignments shall be made as soon as possible after receipt of a properly contracted contract application and the required payment, and will be confirmed by the Association. B. The Association reserves the right to make and/or change all booth assignments as it deems appropriate. C. The Association reserves the right to take into consideration an Exhibitor's prior participation in the Association's trade exposition when assigning booth space. 8. MOVE-IN/MOVE-OUT AND STAFFING OF EXHIBITS. Move-in is from 9:00 a.m. to 11:00 am on Thursday, September 8, 2011. All exhibits must be installed and ready for Show opening by Thursday, September 8, 2011 at 11:00 a.m. Move-out is from 3:00 p.m. until 6:00 p.m. on Thursday, September 8, 2011. [This information is subject to change.] The Association reserves the right, in its absolute discretion, to impose reasonable limitations on the number of exhibit staff within an exhibit and encourages Exhibitors to obtain approval for the number of staff prior to the Event. Exhibit booths must be staffed during all open show hours and no Exhibitors will be permitted to dismantle prior to the close of the Show on Thursday, September 8, 2011 at 3:00 p.m. Any company violating this regulation may be denied exhibit space in future Association Trade Shows. 9. ADDITIONAL EXHIBITOR SERVICES. All other services are available to Exhibitors as normal changes, through the official convention contractor Hubbell/Tyner (800-947-9750) (hereinafter "Official Contractor"). An Exhibitor's Service Kit will be emailed to all Exhibitors with complete details and deadline order dates for rental displays, additional decorating, furniture signs, floral, electrical, telephone, audiovisual service, draipage information and displayment labor. All arrangements for food or beverage must be made through The Sheraton South Hotel, Jill Hubbs 952-893-8493. 10. HOTEL ROOMS AND SUITES FOR EXHIBITORS. All reservations for sleeping accommodations should be made directly with the Sheraton Hotel South Bloomington,952-835-7800

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MISSION The Minnesota Mortgage Association is a member-governed organization dedicated to integrity and professionalism in the mortgage industry through education, resources and advocacy.



MN 4

O Promote the highest degree of professionalism for those individuals who act as mortgage originators, and to provide ethical and professional standards by which all mortgage originators can be measured; O Provide an opportunity for the exchange of experience and opinions regarding mortgage originators and their profession; O Monitor and disseminate information on legislative and regulatory activity affecting the members and present the position of the Association where applicable; O Hold meetings for the improvement and education of the members, as well as encourage networking referrals among its members; and O Cooperate with other related professionals and industries in a common endeavor to promote the profession of mortgage originator and enhance the public perception thereof.

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CODE OF ETHICS AND STANDARDS OF PRACTICE WHEREAS, the members of the Minnesota Mortgage Association are mindful that the soundness, usefulness, prosperity, and future of mortgage lending depend on the honor, integrity and fidelity of all personnel engaged in this business. THEREFORE, BE IT RESOLVED, that each Member of the Association pledges to observe, obey and maintain the following standards of conduct in dealing with the public and with other Members. O CANON 1 Members shall conduct their business in a professional manner, ensuring that they and their personnel are knowledgeable in the areas of mortgage lending in which they participate and are acting in compliance with sound industry practices. O CANON 2 Members shall act in conformity with applicable laws and regulations and shall cooperate in every appropriate way with all governmental bodies in the interest of establishing and maintaining an efficient and fair framework for mortgage credit. O CANON 3 Members shall act in a manner that recognizes that honor, integrity and fidelity are essential in the mortgage lending business. O CANON 4 Members shall accord oral agreements made to another person the same given to written agreements. O CANON 5 Members shall fulfill their obligations under written or oral agreements with another person, and shall not breach or avoid a commitment made in good faith or another person. O CANON 6 Members shall conduct their business without regard to race,








religion, color, gender, marital status, national origin or age of the persons with whom they deal. CANON 7 Members shall foster healthy competition in the mortgage lending business. CANON 8 Members shall preserve the integrity of all parts of a loan submission and appraisal report and make full disclosure of all pertinent facts including any interest they may have in the loan, project, property or borrowing entity. CANON 9 Members shall consider a correspondent or broker agreement in good faith by all parties to be an integral part of the mortgage lending system, and such agreement shall be terminated prior to its expiration only with good cause. CANON 10 Members shall not quote to a prospective borrower, interest rates or other loan terms which reasonably are not likely to be obtained. CANON 11 Members shall make all reasonable efforts to process loan applications and advise applicants of approval or disapproval promptly and ensure that loans are closed and disbursed in a timely fashion. CANON 12 Members shall maintain all monies which are received as third-party-payments for appraisal reports, credit reports, etc., and for escrow reserve or trust accounts in a prudent and identifiable manner and shall disburse these funds only for the purposes for which they are intended. CANON 13 Members shall not speak falsely or disparagingly of the business practices of a competitor or of a transaction being negotiated by a competitor. CANON 14 Members shall cooperate with the Association’s Ethics Committee in furnishing information relative to any investigation of a possible violation of the Cannons of this Code of Ethics and Standards of Practice. CANON 15 Minnesota Law and Broker Ethic classes will be required of all mortgage loan originators who belong to MMA either individually or by company membership.

WHAT ARE THE BENEFITS OF JOINING MMA? O Membership in a state association focused on enhancing the image of the mortgage broker industry O Extensive educational programs O Networking with professionals who are promoting professional conduct and business ethics O Competitive advantages through enhanced exposure to investors/lenders O Opportunity for issue discussions and information dissemination O Opportunity to join and participate in association committees O Social events and networking activities O Provide input to state regulatory agencies on industry issues O Annual convention O Legislative watchdog, activities both locally and nationally

MINNESOTA MORTGAGE ASSOCIATION MEMBER APPLICATION 1. Select one category of membership below (memberships are January-January): Mortgage originators K 1-5 Employees in MN ........................$495 K 6-15 Employees in MN ......................$800 K 16-30 Employees in MN ....................$1,075 K 31-75 Employees in MN ....................$1,350 K 76-100 Employees in MN ..................$2,025 K 100+ Employees in MN ....................$3,375

Affiliates K All sizes ........................$1,050 Non-profits/government (non-voting membership) K All sizes ........................$675 Individual originator (non-owner; non-voting membership) K Originator or Affiliate Individual ........$225 K Platinum Level Sponsor ....................$5,400 K Gold Level Sponsor ............................$4,700 K Silver Level Sponsor ..........................$3,700

2. Complete contact information and name your voting member below: Company Name: __________________________________________________________________________________________ Company Contact Person: __________________________________________________________________________________

MN 5

Address: ________________________________________________________________________________________________ City/State/Zip: ____________________________________________________________________________________________ Phone #: __________________________________________Fax #: ________________________________________________ E-mail: __________________________________________________________________________________________________ Name of Voting Member: __________________________________________________________________________________

Applicant Signature: ______________________________________________________ Date:____________________________ With this form, you are applying for membership in the Minnesota Mortgage Association (MMA). The MMA estimates that 10 percent of your MMA dues are used for governmental affairs issues and therefore are not deductible.

4. Mail completed forms, with payment, or fax to number below: Minnesota Mortgage Association (MMA) 5200 Willson Road, Suite 300 • Edina, MN 55424

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Phone #: (952) 345-3240 • Fax #: (952) 920-1533 • Web site:


Credit Card: K VISA K MasterCard K American Express Credit card #: ____________________________________________________________________________________________ Expiration date: __________________________________________________________________________________________ Total: $__________ O

3. After reading the Code of Ethics, read and sign the new member pledge below: I hereby apply for membership to MMA, and pledge, if accepted, to abide by the requirements of their Bylaws and Code of Ethics as they are now and as they may be amended. I understand that by providing my mailing and e-mail addresses, telephone and fax numbers that I consent to receive communications by, or on behalf of, the MMA.

Branch Manager Business Analyst Business Development Manager Client Relationship Manager Client Relationship Specialist Commercial Loan Officer Corporate Sales Credit Analyst Inside Sales Legal Assistant Licensing Assistant Loan Administration Manager Loan Originator

Advisor Asset Protection Management Bank President Collateral Asset Manager

Mortgage Loan Processor Mortgage Originator National Account Manager National Sales Rep PC Support Admin Post Closing QC Expert Processor Regional Vice President REO Closer Retail Branch Manager Retirement Planner Reverse Mortgage Specialist Sales Manager Secondary Marketing Analyst Senior Loan Officer Senior Underwriter Senior Vice President Software Engineer Underwriter Vice President Wholesale Account Executive

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MN 6

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This offer expires 12/31/11.

National Mortgage Professional Magazine






July 2011




Volume 3, Number 7





AllRegs ............................................................ ..........................6

A Special Look at Social Media

Associated Mortgage Bankers, Inc. .................... ......................................28 Bay Equity LLC ................................................ ..................................................20

Social Media and the MLO: Competing for Business on New Platforms 30 By Sue Woodard

Benchmark Mortgage ...................................... ......................................5 Calyx Software ................................................ ......................................32

Getting Started on Facebook, LinkedIn and Twitter By Ashley Duvernell & Ericka Smith Closing FHA Loans Through Social Media By Jeff Mifsud What Has Social Media Done for You Lately? By B.J. Bounds


Elliott and Company Appraisers, Inc................... ................................31 .................................... ..............................MN6 Flagstar Wholesale Lending .............................. ....................Back Cover


Freedom Mortgage .......................................... ......................Inside Back Cover Frost Mortgage Lending Group .......................... ..............................20


Guaranteed Home Mortgage.............................. ....................................41 HVCC Appraisal Ordering .................................. ..........................10

Social Media … Business on Purpose or on Accident? By Corrine Jordan


The 25 Most Connected Mortgage Professionals


Icon Residential Lenders, LLC ............................ ..............................12 & 25 Land Home Financial Services .......................... ....................................34 Loyalty Express ................................................ ..............................14 & 24 Menlo Park Funding ........................................ ................................33


Mortgage Brokers Network Corp, Inc. ................ ......................12 Mortgage Dashboard ........................................ ................................37

Compliance Corner: Fair Lending Violations By Jonathan Pinard & Bonnie Nachamie


The Elite Performer: Your Team Defines You By Andy W. Harris, CRMS


Is Becoming a Branch the Right Business Move for You? By Erick Parker, CMC, CRMS

NAPMW .......................................................... ..................................................15 Nationwide Equities Corp. ................................ ..............................................11 PB Financial Group Corp. .................................. ..............................................14


Polaris Home Funding Corp. (Branches).............. ..................21 Polaris Home Funding Corp. (Wholesale) ............ ............................................13


REMN (Real Estate Mortgage Network)................ ....................................29 StreetLinks Lender Solutions ............................ ....................Inside Front Cover

Opening a Dialogue: Elizabeth Warren and the Mortgage Industry By Jonathan Foxx


TMS Funding.................................................... ..........................................17 United Northern Mortgage Bankers Ltd. ............ & 42

The Secondary Market Overview: From Bonds to Production … The Soft Patch By Dave Hershman


NMP Mortgage Professional of the Month: Michael J. D’Alonzo, CMC, President of Creative Mortgage Group


Ability-to-Repay: Regulating or Underwriting? (Part II) By Jonathan Foxx


The NAMB Perspective


Be Smart About Your Business By Mary Beth Doyle


US Mortgage .................................................... ..........................................43 Windvest Corporation ...................................... ........................................36

Columns 12

Heard on the Street


New to Market


NMP Mortgage Professional Resource Registry


NMP Calendar of Events



 JULY 2011

NMP News Flash: July 2011



Value Nation: How Accurate Are Real Estate Appraisals? By Charlie W. Elliott Jr., MAI, SRA, ASA

July 2011 Volume 3 • Number 7



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 Joey Arendt Art Director Jon Blake Advertising Coordinator (516) 409-5555, ext. 301


Tara Cook 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, articles and opinions in National Mortgage Professional Magazine are the responsibility of the authors alone and do not imply the opinion or endorsement of NMP Media Corp., or the officers or members of National Association of Mortgage Brokers and its State Affiliates (NAMB), National Association of Professional Mortgage Women (NAPMW), National Credit Reporting Association (NCRA) and/or other state mortgage trade associations. Participation in NAMB, NAPMW, NCRA, and/or other state mortgage trade associations events, activities and/or publications is available on a non-discriminatory basis and does not reflect the endorsement of the product and/or services by NMP Media Corp., NAMB, NAPMW, NCRA, and other state mortgage trade associations. National Mortgage Professional Magazine, NAMB, NAPMW, NCRA, and/or other state mortgage trade associations do not make any misrepresentations or warranties concerning the regulatory and/or compliance aspects of advertisers, products or services and/or the editorial content contained in NMP Media Corp. publications. National Mortgage Professional Magazine and NMP Media Corp. reserve the right to edit, reject and/or postpone the publication of any articles, information or data. MO



There … I did it. I have taken it upon myself to make this July, and every July hereafter, “Social Media Month.” The topic of social media has become inescapable in today’s society. You have some who use it to catch up with their fifth grade classmates, while others are using it to generate business and close loans. And then, there are some who get in touch with their fifth grade classmates, who now know you are in the business of originating loans, and are then setting that very same person from your past onto the road of homeownership by playing a role in the sale or financing of a home. The power of social media has impacted most everything and has brought instant information right to our desktops and to the glass screens of what was once known as our cell phones. In the palm of your hand, you hold the power of access to thousands of new leads, or to something as basic as a dinner recipe or movie listings. No matter your reasons, we have become a nation that is just a few thumb taps on their screens or finger swipes away from instant gratification. You have the power and tools, but how will you utilize it? This month, we’ve assembled a slate of articles that will help you unlock the power of social media to turn those Followers, Connections, Fans and Friends into prospects and sales. Sue Woodard of Mortgage Success Source gets things started on page 30 by describing a new business landscape when social media exists as an avenue of referrals to loan originators. On page 31, Ashley Duvernell and Ericka Smith from Inlanta Mortgage present a primer on getting your feet wet in the worlds of Facebook, LinkedIn and Twitter. Our FHA expert, Jeff Mifsud of Mortgage Seminars LLC, profiles three mortgage professionals beginning on page 32 who have been using social media to develop their FHA business. B.J. Bounds of Calyx Software, in her article on page 34, discusses integrating social media into your day-to-day operations and how to properly manage the time spent toward your social media and networking efforts. Wrapping up the section on page 35 is Corrine Jordan of Brain Gravy Enterprises who unravels the mystery behind closing deals via social media … is it intentional or accidental? Beginning on page 38, we take a look at the top “25 Most Connected Mortgage Professionals” as voted upon by their peers via a … you guessed it … poll that we took using our own various social media outlets here at National Mortgage Professional Magazine. If you have the chance, I would turn to page 38 and Follow, Friend Request, Connect and become Fans of these mortgage professionals who have embraced social media and are helping others in their community become profitable.

An exclusive interview with CFPB architect Elizabeth Warren This month, we are please to present a very exclusive interview with the person handpicked by President Barack Obama to chart the course of the government’s new Consumer Financial Protection Bureau (CFPB), Professor Elizabeth Warren. Beginning on page 8, Jonathan Foxx, through a series of interviews from questions provided by a number of mortgage industry trade groups, hears the story on the formation and goals of the CFPB from Professor Warren herself. As of July 21, 2011, the CFPB prepares to oversee a number of laws and regulations. Professor Warren, who many speculate will be chosen to lead and oversee this new regulatory arm of the U.S. government, discusses the role the new agency will play in regulating the mortgage and financial services industries and how the CFPB’s open door policy will seek to establish bonds with and input from the many industries it oversees.

Our Mortgage Professional of the Month This month, we feature a profile on Michael J. D’Alonzo on page 18, current president of Creative Mortgage Group in New Glen, Pa. Mr. D’Alonzo also has another role in addition to running the day-to-day operations of Creative Mortgage as he serves as nationwide president of the National Association of Mortgage Brokers (NAMB). Michael shares the history of his 20-plus years in the industry and the direction and future of NAMB as we enter a new mortgage landscape.

Last, but certainly not least ... In addition to the aforementioned features this month, our regular contributors will also provide their perspectives on an array of topics: Andy W. Harris will break down how to construct the perfect business team on page 4; Charlie W. Elliott discusses the accuracy of appraisals in today’s world on page 10; Dave Hershman looks at the soft recovery of the American economy on page 13; Jonathan Foxx’s second installment in his series on the Ability-to-Repay rule can be found on page 20; Deb Killian in the NAMB Perspective column discusses the power of trade association involvement on page 22; and much more. Enjoy the issue and please do not hesitate to let me know what you think of the publication, either by e-mail at, by interacting with us on Twitter by Following @natlmortgagepro; or by Liking us on Facebook at … I think that covers all of my social media outlets! Until next month …



JULY 2011 

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.

I hereby christen July “Social Media Month”



ADVERTISING To receive any information regarding advertising rates, deadlines and requirements, please contact Senior National Account Executive Karen Krizman at (516) 409-5555, 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 © 2011 NMP Media Corp.

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

Sign-on weekly at

The National Association of Mortgage Brokers

National Association of Professional Mortgage Women

2701 West 15th Street, Suite 536  Plano, TX 75075 Phone #: (703) 342-5900  Fax #: (530) 484-2906 Web site:

P.O. Box 451718  Garland, TX 75042 Phone #: (800) 827-3034  Fax #: (469) 524-5121 Web site:

NAMB Board of Directors Officers President—Michael D’Alonzo, CMC Creative Mortgage Group 1126 Horsham Road, Suite D Maple Glen, PA 19002 (215) 657-9600 President-Elect—Donald J. Frommeyer, CRMS Amtrust Mortgage Funding Inc. 200 Medical Drive, Suite D Carmel, IN 46032 (317) 575-4355 Vice President—Michael Anderson, CRMS Essential Mortgage 3029 S. Sherwood Forest Boulevard, Suite 200 Baton Rouge, LA 70816 (225) 297-7704 Treasurer—John Councilman, CMC, CRMS AMC Mortgage Corporation 2613 Fallston Road Fallston, MD 21047 (410) 557-6400 Past President—Jim Pair, CMC Mortgage Associates Corpus Christi 6262 Weber Road, Suite 208 Corpus Christi, TX 78413 (361) 853-9987

Directors Fred Arnold, CMC American Family Funding 24961 The Old Road, Suite 101 Stevenson Ranch, CA 91381 (661) 284-1150

Deb Killian, CRMS GMAC 246 Federal Road, Unit C-24 Brookfield, CT 06804 (203) 778-9999, ext. 103 Linda McCoy Mortgage Team 1 Inc. 6336 Picadilly Square Drive Mobile, AL 36609 (251) 610-0494

President-Elect Laurie Abshier, GML, CMI (661) 283-1262 E-Mail:

Vice President—Eastern Region Christine Pollard (646) 584-8332

Senior Vice President Candace Smith, CMI, CME (512) 329-9040

Secretary Murielle Barnes, CME (806) 373-6641

Vice President—Northwestern Region Jill M. Kinsman (206) 344-7827

Treasurer Hulene Bridgman-Works (972) 494-2788

Vice President—Western Region Tim Courtney (760) 792-5620

Parliamentarian Dawn Adams, GML, CMI (607) 737-2584

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


2011 Board of Directors & Staff Tom Conwell President (800) 445-4922, ext. 1010 Donald J. Unger Vice President (303) 670-7993, ext. 222 Daphne Large Treasurer (901) 259-5105 Marty Flynn Ex-Officio (925) 831-3520, ext. 224 William Bower Director—Tenant Screening Chair (800) 288-4757 Mike Brown Director—Technology Chair (800) 285-6691

Janet Curtis Director—New Membership & Elections Co-Chair (212) 224-6121 Renee Erickson Director—Tenant Screening Co-Chair (800) 311-1585, ext. 2101 Nancy Fedich Director—Conference Chair (908) 813-8555, ext. 3010 Judy Ryan Director—New Membership & Elections Chair (800) 929-3400, ext. 201 Tom Swider Director—Legislative Co-Chair (856) 787-9005, ext. 1201 Terry Clemans Executive Director (630) 539-1525

Susan Cataldo DirectorEducation & Compliance Chair Jan Gerber (404) 303-8656, ext. 204 Office Manager/Membership Services (630) 539-1525

 JULY 2011

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

Vice President—Central Region Lisa Puckett (405) 741-5485


Donald Fader, CRMS SMC Home Finance P.O. Box 1376 Kinston, NC 28503-1376 (252) 523-5800

President Gary Tumbiolo, CMI (919) 452-1529 

Olga Kucerak, CRMS Crown Lending 222 East Houston, Suite 1600 San Antonio, TX 78205 (210) 828-3384

National Board of Directors

Fair Lending Violations By Jonathan Pinard & Bonnie Nachamie


here can be no more noble a mission than to create a society where all people are afforded equal treatment, regardless of their background. And yet, more than 200 years after our nation’s founding and almost 50 years after the enactment of our nation’s key fair lending laws, we are still working to “get it right.” State and federal regulators have renewed their focus in the fair lending arena and are committed to enforcement of the fair lending laws. Improvements in technology and more detailed reporting requirements, such as Home Mortgage Disclosure Act (HMDA) reporting and Nationwide Mortgage Licensing System (NMLS) Call Reports make fair lending violations easier to detect. There are three types of fair lending violations described in the law (the first two are generally easy to avoid):

N Overt Discrimination: This is where one or more groups of people are excluded from receiving financing. N Disparate Treatment: This is where a particular group is singled out by imposing a different standard of treatment. N Disparate Impact: This happens when there is a policy or procedure that ends up impacting members of a protected class in an adverse way and where there is no legitimate business reason to do so. An example of disparate impact is when customers are charged a higher fee for loans in one county over another and that county has a higher concentration of minority borrowers and there is no legitimate business reason for the higher costs. Disparate Impact Violations are usually unintentional which make them the hardest to avoid.


How do you protect your organization from the expensive process of defending claims of discrimination?

JULY 2011 


N Implement and maintain a Fair Lending Policy: Every organization should have a detailed Fair Lending Policy. The policy premise is simple: Do not discriminate. However, it is a carefully crafted fair lending plan describing the rules and procedures that are to be followed will help guide your employees in maintaining a discrimination free environment. The plan should be comprehensive and remain relevant. Procedures concerning advertising and marketing strategies should be addressed. N Provide fair lending training for your employees: Without adequate training and education, a fair lending program cannot succeed. Fair lending compliance is fed by an educated staff. Employees can only carry out their duties and responsibilities if they understand what those are. N Implement a non-discriminatory pricing policy: “Put your money where your mouth is” by ensuring that all persons have equal access to credit opportunities. Setting standards for loan price and fees helps ensure such equality. N Test to ensure non-discriminatory practices or pricing: Implement a procedure to review loan files and loan data to detect patterns or trends which may indicate disparate results of lending activities. Self-testing and monitoring limits a company’s liability and encourages corrective action, when necessary. This review should include not only closed loans, but applications that are either withdrawn or denied. N Put it in writing! Fair lending policies, like all policies, should be written documents. Avoiding fair lending violations is inexpensive; violating fair lending laws is very expensive. Even the mere allegation of a violation can cost thousands of dollars in legal fees, fines and penalties. By incorporating a meaningful fair lending plan into day-to-day business operations, mortgage brokers and bankers can take a giant step towards preventing allegations of wrongful discrimination. There are several compliance companies including, First National Compliance Solutions, that can provide you with the necessary tools to remain compliant. Take a proactive approach to fair lending compliance and protect your reputation and your profit margins! Jonathan Pinard is president and Bonnie Nachamie is chief executive officer of First National Compliance Solutions Inc. in Merrick, N.Y. Jonathan may be reached by phone at (800) 400-4134 or e-mail Bonnie may be reached by phone at (800) 400-4134 or e-mail

Your Team Defines You


s a professional paid to perform mortgage services for your client, you may or may not realize that you are only as good as the team that surrounds you. You rely on your support team to help complete each section of the loan transaction effectively and efficiently, thus each member has a direct influence on your client’s experience. Team members can be anyone from a loan processor to a real estate agent and everyone in between. In order to gain the most momentum for a positive reputation and future referrals, you must ensure that you are working with the right individuals. It’s also important that everyone understands the client is ultimately their employer and excellent performance is required. Let’s break down teams into two categories: Internal and External.

Internal team Your internal team is simply your place of work and those who surround you. This could be your manager, co-workers, assistants, processors, etc. Your internal team is very important because they have the most direct influence on your daily operations and potential for success. More importantly, they will influence the experience of your client even with any filters you attempt to apply. As mortgage loan originators, we’re in the driver’s seat. If you get a flat tire (such as a delayed closing due to underwriting missing a condition), you must always take the responsibility. Never put the blame on others in front of your client since you’ve made the decision to have them on your team. It’s always the frontline that needs to take responsibility and make corrections or adjustments when needed. In recent years, many LOs have been seeking new companies to partner with during our wild industry changes. Remember to carefully consider your team and environment when making

any changes. It’s best to avoid changing your business identity too often by doing your homework and truly understanding the pros and cons before you

“Coming together is a beginning. Keeping together is progress. Working together is success.” —Henry Ford

make the jump. The biggest mistake is when people do little research on a company or new opportunity and are artificially motivated by money or fearbased recruiting. It’s great to have opportunities and act on them, but make sure you get to know the people and company you’re potentially teaming up with. Always remember, selfbranding is better than company branding if you are a career-minded mortgage professional working by referral.

Key points

 Only surround yourself with people who have a positive attitude.  Only put yourself in an environment that is productive and teamoriented.  Do your research when selecting a company or hiring an employee/assistant.  Always work with those who have strong ethics and integrity, no exceptions. If you personally lack these values, you might consider another career.  Avoid and do not participate in steering for financial gain or potential Real Estate Settlement Procedures Act (RESPA) violations.  Have weekly or monthly team meetings to make sure systems are efficient.  Always have a plan and system in place from application to closing.  If you’re not enjoying your environment continued on page 6



Positive Attitude





 JULY 2011

worth, audited financials or regulatory and clients have known you to be. Build compliance. You will find that you are your origination business. an equal player in a big game, and I don’t want to minimize your potenwhen you score, it helps to win the tial, but as a virtual LO, you can maingame. You are not expendable, but are tain a respectable lifestyle with five to valued by the operation and you can 10 loans per month. Partner with a support your family. small mortgage banker that offers you As an industry, there are many the pricing of a lender and the flexibili“… this is a way for you to wholesale lenders and government ty of a mortgage broker. We have found dominate your market … agencies who believe in the broker this option to be the most effective create your brand and be the model in its purest form. They believe when transitioning from a typical mortthat brokers will one day dominate the gage brokerage to mortgage banker, so trusted advisor that your family, mortgage industry. They know that bro- don’t give up on your dreams. friends and clients have known kers provide volume without the overyou to be.” head. This is the least expensive way for Erick Parker, CMC, CRMS is president of them to gain market share. In addition, Akron, Ohio-based Third Financial. He you to score to win the game. You are this is a way for you to dominate your may be reached by phone at (330) 535expendable and not valued by the oper- market … create your brand and be the 6005, ext. 209 or e-mail eparker@thirdation. Your loan is denied and you have trusted advisor that your family, friends nowhere to turn—no income to support your family. I have spoke to many LOs who are excited about joining a branch operation only to find that they have joined a different branch operation a few continued from page 4 months later because they weren’t making any money. Therefore, as an or not getting along with a colleague, ners are reliable and return calls and LO, you must consider all of your step back and take time to think about e-mails promptly. Look for excellence options and the right option for survival changes you need to make or conver- and those who go above and beyond, moving forward. sations you need to have. As an owner/originator, I understand and not just through the motions. Do the drive to get every deal done. That is  Protect and shield your clients from they put their client’s interests before any internal issues that could possi- their own? Are they driven by the why I have adopted the small mortgage bly impact their experience nega- short-term commission rather than banker/virtual LO model. This type of tively, as long as it’s not withholding long-term wealth? operation will give you the power and information they need to know pricing of a banker, but the flexibility to about their transaction. broker loans that cannot be funded Key points with the warehouse line. You have the  Choose your preferred partners External team best of both worlds. carefully, as your reputation is on The virtual LO model is less expen- Your external team members are simthe line. sive than a traditional branch. Instead ply those who offer other services  Refer only those with the highest of spending valuable resources on a needed to close the transaction, such ethics and integrity, no exceptions. large office space, equipment rental as real estate agents, escrow officers,  Work with those who are confident, and payroll, you invest in a small office, appraisers, insurance agents, etc. Your not arrogant. an assistant and marketing. You build a external contacts and recommenda-  Work with those who are detailed team around you and grow your refer- tions are very important because they and communicate timely. ral base (realtors, CPAs, financial plan- also play a role in your image to the  Understand RESPA and do not vioners, attorneys, etc.) and you build your client. Take the time to understand late it never allow ignorance or operation with Internet lead sites. You others and their work ethic and greed to steer your business and don’t have to be concerned with net habits. Make sure your referral partreputation into failure.  Talk to other colleagues and get feedback on other professionals with good reputations.  Pull 12-month production numbers on real estate agents to have an idea on recent transaction volume and experience in this housing market and lending climate.  Experience matters, so check references and credentials.

Is Becoming a Branch the Right Business Move for You? By Erick Parker, CMC, CRMS


JULY 2011 



s a mortgage broker, you have been operating as a free agent. You are a professional, and work long hours to bring together lenders and borrowers. Your job is to evaluate and analyze each person’s credit situation to determine which lender is the best fit for their needs. You have the flexibility to submit the application to one or more lenders in order to sell it, and work with the chosen lender until the loan closes. You have been an extension of the lender … the low-cost provider and friend to the borrower. It is because of you that most lenders made the top lists of loan originations. Now, the game has changed. Recent regulatory changes have threatened your existence. You have been contemplating joining a branch operation to navigate this regulatory and compliance maze. You want to continue to earn a respectable income to support your family. However, you hesitate because you don’t want to lose your flexibility. So you ask yourself, “What should I do?” You joined a traditional branch operation and found it to be an expensive proposition. You rent office space, hire and train loan originators, and begin marketing. You submit your loan and wait. You assume that closing your loan will be quick because this branch operation has closed billions in loan volume. However, you find that you are a small player in a big game and they don’t need

the elite performer

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Monthly tip Get in the habit of updating your database after every closing or at least once per month. The longer you put off updating your database, the harder it will be to play catch up and ensure your newsletters and your drip marketing is timely and effective.

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Andy W. Harris, CRMS is president and owner of Lake Oswego, Ore.-based Vantage Mortgage Group Inc. and president of the Oregon Association of Mortgage Professionals. He may be reached by phone at (877) 496-0431 or e-mail or visit



Investing in communities

 JULY 2011





United Northern Mortgage Bankers, Ltd. Corporate NMLS ID# 7230 New York State 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

Opening a Dialogue: Elizabeth Warren and the Mortgage Industry By Jonathan Foxx

“Let my successors solve those new problems, as I have solved the one of today.” —Foundation, Isaac Asimov


JULY 2011 



olving a problem begins with admitting that there is a problem. That is tough enough! But then the really hard work must commence: Finding ways and means to resolve the problem. Despite what many people believe, rarely is it wise, safe, or effective to let the ends dictate the means. So-called “outcome based thinking” can be deleterious to judicious and impartial considerations. In other words, making a decision based on the anticipated outcome is a sure way to avoid the responsibility of evaluating the appropriate means toward that outcome. Indeed, it can actually cause a biased view in favor of the outcome, even if the means are reasonably defensible on many grounds! Unfettered discourse, exchanging views, debating visions and perspectives, applying facts–not wishes–to circumstances; and, seeking authoritative, supporting research and objectively derived criteria: These are all valuable tools that contribute to refining the scope of and solution to a problem. In response to the recent financial crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank)1 sought a particular solution to a persistent problem that stalked the financial industry: The absence of sufficient, broad, consumer advocacy within the legislative and regulatory process. At the state level, of course, a central feature of a state banking department’s mission is to act as a consumer advocacy agency. At the federal level, while agencies may act in concert with one another, often they have not adequately synchronized their regulatory guidelines. Thus, although market participants would endeavor to comply with regulations, and notwithstanding the required testing of the regulatory

impact on a subject industry, many regulations—designed to protect the consumer—simply did not really consider the effect on the consumer, irrespective of consumer groups providing testimony to congressional committees, meeting with regulators, and lobbying congressional delegations. Likewise, commercial market participants often found themselves facing recalcitrant agencies that promulgate rulemaking with little or no regard to the consequences, irrespective of strenuous efforts to shape such rulemaking in accordance with existing market action. It seems agencies, regulators, consumers, and commercial market participants talk at, not to, one another. Dodd-Frank put forth a solution to grapple with the gaggle of interlocking, complex, attenuated, and cross-referencing financial regulations built up over decades.2 It legislated into existence a new agency, called the Consumer Financial Protection Bureau (CFPB).3 The stated goal of the CFPB is to: “Promote fairness and transparency for mortgages, credit cards, and other consumer financial products and services. The CFPB will set and enforce clear, consistent rules that allow banks and other consumer financial services providers to compete on a level playing field and that let consumers see clearly the costs and features of products and services.”4 On July 21, 2011,5 the following enumerated laws come under the purview of the CFPB:6  Alternative Mortgage Transaction Parity Act (AMTPA)7  Community Reinvestment Act (CRA)8  Consumer Leasing Act (CLA)9  Electronic Funds Transfer Act (except the Durbin interchange amendment) (EFTA)10  Equal Credit Opportunity Act (ECOA)11  Fair Credit Billing Act (FCBA)12  Fair Credit Reporting Act (except with respect to sections 615(e), 624 and 628) (FCRA)13  Fair Debt Collection Practices Act (FDCPA)14  Federal Deposit Insurance Act, subsections 43(c) through 43(f)(12) (FDIA)15

 Gramm-Leach-Bliley Act, sections 502 through 509 (GLBA)16  Home Mortgage Disclosure Act (HMDA)17  Home Ownership and Equity Protection Act (HOEPA)18  Real Estate Settlement Procedures Act (RESPA)19  SAFE Mortgage Licensing Act (SAFE Act)20  Truth-in-Lending Act (TILA)21  Truth-in-Savings Act (TISA)22  Omnibus Appropriations Act–Section 626 (OAA)23  Interstate Land Sales Full Disclosure Act (ILSFDA)24 Let’s face it: Creating any new governmental agency is a heroic undertaking! To create a new agency that has consumer financial protection as its primary mission requires appointing a director with considerable managerial, legal, political and financial knowledge, all of which ideally would be expressed through a balanced temperament, a focused and incisive mind, a fierce consumer advocacy, and sophisticated communication skills.

Elizabeth Warren Elizabeth Warren, the person President Barack Obama appointed to develop the CFPB, is the very person who devised the idea of a consumer financial protection bureau and then advocated for it in the halls of Congress, in speeches, lectures, and interviews throughout the United States.25 In some ways, Mrs. Warren has become the face of consumer financial protection advocacy at a time when consumer confidence is at a low mark.26 Professor Warren’s credentials indicate that she would be an exacting, methodical, insightful, and highly competent shepherd of the CFPB’s mandates. President Barack Obama expects the CFPB to be a “watchdog for the American consumer, charged with enforcing the toughest financial protections in history.”27 Professor Warren serves as Assistant to the President and Special Advisor to the Secretary of the Treasury on the Consumer Financial Protection Bureau.28 Elizabeth Warren has published numerous scholarly articles, and, after teaching at other law schools, she has been teaching contract law, bankruptcy

law, and commercial law at Harvard Law School, where she is the Leo Gottlieb Professor of Law. Mrs. Warren’s legal expertise and experience have led to her being unofficially considered a nominee to serve as a Supreme Court Justice, for the position previously held by Justice John Paul Stevens (and now held by Justice Elena Kagan). She has served as the Chief Adviser to the National Bankruptcy Review Commission, and was appointed by Chief Justice Rehnquist as the first academic member of the Federal Judicial Education Committee. Importantly, Professor Warren’s understanding of the financial industry is broad based and hands-on. She has served as a member of the Commission on Economic Inclusion established by the Federal Deposit Insurance Corporation (FDIC). She has been the Chairperson of the Congressional Oversight Panel, charged with investigating the Troubled Asset Relief Program (TARP), in which role she has consistently fought for more accountability and transparency in the financial system. Mrs. Warren is a mature woman of 62 years of age, somebody who is not an ivory tower scholar, having grown up in Oklahoma, attended non-Ivy League colleges, and received a JD from Rutgers University.29

Interview and participants We are at the advent of a new era in financial regulation, evidenced, among other things, by the founding of the CFPB. Is this not the best of times to seek dialogue with its administrative team? Recently, I sought to facilitate an interview between leaders of mortgage industry associations and Professor Warren. In my view, it is important to come forward now, in the spirit of finding common ground and collaborative efforts, to create insights and energize policy discussions. In order to work together, we ought to become acquainted with one another’s views, concerns, and positions. Professor Warren has spent much time reaching out to the mortgage industry, just as the mortgage industry has been reaching out to her, and I felt it would be helpful to further reciprocate by having her views published in this nationally distributed, widely-read, mortgage industry magazine.

The format chosen was a set of questions provided by participating industry associations, in writing, to be posed to Professor Warren. I believed it best to leave it to her discretion to choose which questions could be answered at this time. I have not edited Professor Warren’s answers, and provide them in full. Many interview questions, though very important, were also very specific, and it was just not possible for Professor Warren to answer such questions of detailed specificity, prior to the CFPB being empowered to evaluate rulemaking and policy alternatives. Nevertheless, I proffered a wide enough scope of questions that we were able to obtain firm and clear replies. I am pleased to report that nearly all major mortgage industry associations responded to my invitation. I want to thank Professor Warren and her staff for working with me on this project.

Participation The following constitutes the participants and non-participants:

Preamble and interview

The purpose of this interview was to open a dialogue with officials at the

CFPB and state law How much of a role do you think the CFPB can play in helping to bring some convergence and common standards to state mortgage regulation? Are the states receptive? Will the CFPB allow the primary supervision and enforcement of non-bank mortgage lenders to remain with state regulators, with CFPB in a back-up role? Has an agreement been reached between the CFPB and the state regulators on their respective supervision and enforcement roles? When will the industry learn the details so we can know what to expect? Elizabeth Warren: In general, the CFPB’s authorities are focused on federal law implementation, compliance monitoring and enforcement. But as we advance a central principle—the idea that prices and risks should be clear and that pages of fine-print disclosure are not helpful—we will be engaged in an ongoing conversation with state authorities as well. Earlier this year, we signed an agreement with the Conference of State Bank Supervisors to establish a foundation of state and federal coordination and cooperation. State regulators and the CFPB will work to promote consistent examination procedures and effective enforcement of state and federal consumer laws, and to minimize regulatory burden and efficiently deploy supervisory resources. The state attorneys general are also natural partners for us in our enforcement work. In April, we announced agreement on a joint statement of principles with the Presidential Initiative

“The CFPB is working to give conWhat is your vision for the sumers the transparency they deserve to CFPB in terms of inclusion, vismake the choices that work for themà-vis the mortgage industry, selves and their families, while easing and the potential for the indusunnecessary regulatory burdens for try to interact proactively? their lenders.” Elizabeth Warren: Industry —Elizabeth Warren outreach—including to the mortgage industry—has been a high priority for us. I met with community bankers from my lishes an Office of Financial Education home state of Oklahoma my first day on within the new Consumer Financial the job and have continued reaching out Protection Bureau. When it comes to mortto all corners of the industry ever since. gages, most of the CFPB’s educational iniOne of the most frequently discussed top- tiatives will be aimed at consumers, to ics has been the stack of papers that fam- help ensure they are protected from ilies have to wade through when applying predatory actors and have the tools they for a mortgage. With the good advice of need to make sound financial decisions. those in the industry, we’re moving for- The Office of Financial Education will supward on “Know Before You Owe,” a proj- port the development of educational and ect to simplify mortgage paperwork to decision-making tools that complement make it an effective tool for consumers, disclosure and transparency activities and while at the same, time less burdensome help consumers comprehend and assess the information presented to them. for lenders. This education will benefit borrowers and lenders alike by helping create CFPB and mortgage the conditions needed for a fair, transbrokers In your view, is the mortgage broker parent, and competitive market. Clarity channel considered a viable channel for in the marketplace will enable lawconsumers? If so, are you concerned abiding businesses that play by the about five big banks having control over rules to engage in honest competition, the market, thereby restricting competi- and will remove some of the tricks that tion and raising costs? Further, where do less scrupulous lenders have used to you stand on the fine line between letting seek an unfair advantage. market forces work versus regulation? Elizabeth Warren: For too long, regula- In her own words tion has been described as undermining Recently, Professor Warren provided the free market. This is wrong. The choice testimony to Congress about the origins, isn’t between regulation and the market or mission, mandates, and key adminisbetween consumers and lenders. The trative personnel of the CFPB.42 In her choice is between a market in which costs testimony, she discussed “what went are difficult for the average consumer to wrong” in the crisis of 2008 and alludcalculate in advance and surprises are hard ed to the 635-page report, issued by the to find in the fine print, and a market in U.S. Senate Permanent Subcommittee on which prices and risks are clear up front so Investigations, which outlined in considerthat products are transparent and apples- able detail the key causes of the financial to-apples comparisons are possible. Good crisis.43 This report is known as the “Levinregulation is not about impeding market Coburn Report on the Financial Crisis,” and forces; it is about unleashing those forces if you haven’t read it, you should do so. to work better. There are a lot of compa- Sen. Tom Coburn (R-OK) has stated, nies out there—big banks, small commu- “Blame for this mess lies everywhere nity banks, and plenty in between—that from federal regulators who cast a blind want to compete on price, on customer eye, Wall Street bankers who let greed service, on quality, and on other con- run wild, and members of Congress who sumer-friendly ideas. We want to see that failed to provide oversight.”44 One remedy to certain causes of the happen. financial crisis was to create and empower the CFPB. CFPB and educational Drawing from Professor Warren’s aforeopportunities Our association strives to provide educa- mentioned testimony, I would like to tional opportunities to the mortgage quote some of her views, in order to offer lending community. What role do you some insight into how they may be expectfeel education plays in the future of the ed to influence the mission of the CFPB: mortgage industry? Elizabeth Warren: Education and  On markets: “At the consumer bureau, we believe in markets— engagement is a key pillar needed to build a fair and competitive financial marketplace. The Dodd-Frank Act estabcontinued on page 11


 JULY 2011

“Read not to contradict and confute, nor to find talk and discourse, but to weigh and consider.” —Sir Francis Bacon

What role do you foresee the CFPB playing in the methodical formulation of oversight and enforcement initiatives? Elizabeth Warren: We plan to put in place a rigorous program of consumer compliance supervision coupled with strong enforcement. Congress authorized CFPB to enforce Federal consumer financial laws consistently in order to promote fair competition. We expect more than half of the consumer bureau’s resources to be devoted to ensuring that all providers within our jurisdiction—including large banks and non-bank mortgage lenders and payday lenders—follow the federal consumer financial laws. Those companies that want to make prices and risks clear up front are going to like this agency, because we’re going to level the playing field, making it easier for them to compete.

CFPB and mortgage industry


Organizations and officials (declined)  American Bankers Association (ABA)40 Peter Garuccio, vice president, public relations  Mortgage Bankers Association (MBA)41 John Mechem senior director, public affairs, communications and marketing

Role of the CFPB

Working Group of the National Association of Attorneys General, the first step in forging a new partnership between federal and state officials to protect consumers of financial products and services. 

Organizations and officials (accepted)  Association of Residential Mortgage Compliance Professionals (ARMCP)30 Jonathan Foxx, president  Community Mortgage Bankers Project (CMBP)31 Glen Corso, managing director  Impact Mortgage Management Advocacy & Advisory Group (IMMAAG)32 Bill Kidwell, president  National Association of Independent Housing Professionals (NAIHP)33 Marc Savitt, president  National Association of Mortgage Brokers (NAMB)34 Don Frommeyer, president-elect and vice president  National Association of Professional Mortgage Women (NAPMW)35 Laurie Abshier, national president  National Association of Realtors (NAR)36 Lucien Salvant, managing director  National Credit Reporting Association (NCRA)37 Terry Clemens, executive director  National Reverse Mortgage Lenders Association (NRMLA)38 Daryl Hicks, vice president, communications  Real Estate Services Providers Council (RESPRO)39 Sue Johnson, executive director

CFPB. Given the fact that the CFPB would not receive its enumerated authorities until July 21, 2011, I felt it best to give Professor Warren the opportunity to choose the questions that could be answered now, at the advent of the CFPB’s coming into its powers. Professor Warren’s choice of the questions and her answers to them demonstrate a willingness to work with the mortgage industry in exploring new ways and means to fortify the relationship between consumers, industry, and regulators.

By Charlie W. Elliott Jr., MAI, SRA, ASA

How Accurate Are Real Estate Appraisals?


JULY 2011 



rom what we hear and see about the appraisal profession, it would appear that a real estate appraisal should be a very accurate measurement of the worth of a property and that the property only has one precise value. Further, appraisers are highly trained, and it is up to the appraiser to determine what this amount is. In cases where appraised values are called into question, many suspect incompetence on the part of the appraiser or some form of bias to include fraud. As members of the real estate industry and as citizens, we have been conditioned that appraisers are highly trained and that, upon certification, they have the unquestionable skills and competence to perform precise estimates of value, which very narrowly represent the value of a property. Well, I am here to tell you that not all is black and white in the real estate appraisal world. There is ample gray to cause pause when we use opinions of value developed by licensed appraisers. This is not to say that all we have been led to believe about the impeccable reputations of individual appraisers or the integrity of the profession as a whole should be viewed with a jaundiced eye. The truth is that an appraisal, which is

defined as an “opinion of value,” is just that, an opinion. Having been in a position over the last 30 years not only to perform appraisals, but also to review thousands of them, I confess that, under the best of circumstances, there are shortcomings in the process. Having said that, without question, we in the United States have the best body of knowledge, appraisal theory, training and regulatory system in world, and overall, our evaluation capabilities are the envy of all on the planet. Given the previously stated, I direct your attention to a few facts and conditions that may cause a more sober look at the reality of the appraisal profession. This article will not deal with intentional bias, fraud, and/or corruption, but only deal with the challenges faced by appraisers and their limitations as professionals, given the environment in which they work. There is a plethora of topics and issues that could be examined relative to the limitations confronting appraisers; however, for the purposes of this article, we will stick to a few of the more apparent and basic ones.

Competency In order to become a licensed appraiser



today, one must generally spend a min- soned professionals. This is especialimum of three years in education and ly true with challenging assignments. training. For those aspiring to obtain There must be some acceptance of additional skills, it could take four or more this fact, when ordering and using years to obtain a state general certifica- appraisals. What is an acceptable tion. To obtain a creditable general desig- variance? I say it depends upon the nation, many appraisers market. In some marspend five to 10 years kets where conditions developing their talents. are good, appraisals This does not take into should be within two or account the many years of three percent of other on-the-job experience, in appraised values. In othsome cases, reaching 40 to ers where market condi50 years, which experitions are challenging and enced appraisers have. hard to predict, a 10 perMy experience and cent variance may be observations have taught welcomed. This must be me that real estate weighed on a case-byappraisal is a field where case basis. wisdom prevails, and that “The truth is that an short-term training proScope, research appraisal, which is grams and educational and analysis defined as an ‘opinion courses provide a good Yes, all appraisals, no of value,’ is just that, foundation, but fall short matter how thorough, an opinion.” of preparing the appraisshould provide an accuer for the most challengrate opinion of value. ing assignments. While it is not my goal This having been said, if we order an to criticize the inexperienced apprais- appraisal with a curbside inspection ers—those having the minimal train- on the least comprehensive appraisal ing to qualify for licensing—simply do form, and ask for only approach-tonot have the background to tackle value, we will likely get what we pay complex issues. Those with less experi- for. The appraiser, who is assigned a ence, often find themselves less project and given proper inspection equipped to address difficult assign- access, time, budget and direction, ments and sometimes provide value may be held to a higher standard opinions that are less accurate than than one where the appraiser is those of seasoned appraisers. asked to do a drive-by inspection and submit their report within 24 hours. Market Simply stated, the appraiser who is The past three years have been the permitted to devote ample time and most challenging for appraisers of any effort to an appraisal will do a more that I have experienced in my 30-plus thorough and accurate job if everyyears of appraising. This is due to a less- thing else is the same. than-fluid market, where sales data is either unavailable or compromised by No, appraising is not an exact scishort sales or foreclosure actions. ence. There are many variables to conDeveloping a creditable value opinion sider when evaluating an appraisal and in a market, a market where, except the value conclusion it provides. There one foreclosure, there have been no are factors, both within and outside of sales of properties within a year and our control, that impact the accuracy of where there are 20 listings at various the appraisals that we order on a propprices, is a challenge for any appraiser. erty. Accuracy may be associated with I would venture to say that, under an appraiser’s competency, as well as such circumstances, we would get market conditions and the scope of the varying opinions from the most com- work assigned to the appraiser. One of petent and experienced appraisers. In the most controllable variables is that such a case, if two appraisers appraise of the selection of the most skilled a property and end up with substan- appraiser available for a given project. tially different values, it would per- Further, the appraiser should be given haps be hard to prove either of the the proper resources, including time, appraisers wrong. budget and property access, to complete the assignment in a professional Tolerance manner. Adverse market conditions Even when appraisers are the most are harder to overcome in rendering competent and when all other condi- the most accurate appraisal, except for tions are excellent, how much differ- the fact that the best appraiser is likeence should we expect to find in-value ly to do the best job. The expectation estimates between two appraisers? In of a perfect appraisal should be temmy experience, having previously pered with an understanding of the ordered two or more appraisals on the competency of the person doing the same property from different apprais- job and current market conditions. ers, it is not unusual to get varying opinions. Some of this can be written off to Charlie W. Elliott Jr., MAI, SRA, is president the lack of competence on the part of of Elliott & Company Appraisers, a nationone of them. However, competence is al real estate appraisal company. He can not the only issue here. Some issues are be reached at (800) 854-5889, e-mail charviewed differently by different apprais- or visit his company’s ers, even when both appraisers are sea- Web site,

opening a dialogue

“In general, the CFPB’s authorities are focused on federal law implementation, compliance monitoring and enforcement.” —Elizabeth Warren

continued from page 9

markets that make prices and risks clear and that give consumers the basic information they need to determine who is offering the best deals. Our primary goal is to make markets for consumer financial products and services work in a fair, efficient, and transparent manner. That means ensuring that consumers have access to information to help them understand the terms of the deal. Fair and transparent markets encourage personal responsibility and smart decision-making. When consumers are presented with a clearer choice between two financial products and they can easily know the costs, benefits, and risks of those products, they will be better able to make decisions that work for themselves and for their families.”

further disadvantage that could push many out of business.”  On regulatory costs: “The CFPB is committed to working with smaller institutions to reduce regulatory costs. We have already begun that work, and we are pleased to report to Congress that the spirit of openness and cooperation expressed by community banks and credit unions has been extraordinary. The mortgage disclosure integration project is one area in which we are seeking to

reduce regulatory burdens, and we expect that it will serve as an excellent test case as we design our ongoing processes for how the consumer bureau and smaller institutions can work together to increase the ability of these institutions to spend less time on regulations and more time serving America’s families.”

about the nature of the CFPB’s power. Critics have claimed that the CFPB is ‘the most powerful regulatory agency that’s ever been put together,’ that it is ‘the most powerful agency ever created,’ and that it ‘doesn’t have to explain what it does to anybody.’ These claims disregard the limits on the consumer bureau’s authorities and the very meaningful

 On limitations of the CFPB: “There have been many overblown claims

continued on page 14

 On consumer responsibility: “Consumers expect to be held responsible for the financial decisions they make. If they don’t keep up with their debt payments, they expect to face the consequences. Personal responsibility is critical. But consumers want to know the costs upfront and don’t want to be blindsided by hidden fees, interest rate changes, or payment shocks. Informed decision-making allows consumers to drive the financial marketplace so that providers offer products that meet consumer needs and preferences.”  On disclosures: “At the CFPB, we believe that a simple and straightforward presentation of key credit terms is the best way to level the playing field between borrowers and lenders and to foster honest competition. Our goal is shorter, clearer forms for the most common credit products, the kind that consumers can read in a few minutes with high levels of understanding. The CFPB is working to give consumers the transparency they deserve to make the choices that work for themselves and their families, while easing unnecessary regulatory burdens for their lenders.”  On leveling the playing field: “A significant part of our mission will also be to help level the playing field for smaller lenders, such as community banks and credit unions. We recognize that the regulatory pressures on banks have increased substantially over time. While regulatory costs may be manageable on a per-account basis for the largest financial institutions, for smaller businesses, all the complicated rules, extensive paperwork, and expensive compliance reviews can be daunting. If we continue on our current regulatory trajectory, traditional banks and credit unions will be put at a


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Independent mortgage banks and subsidiaries made an average profit of $346 on each loan they originated in the first quarter of 2011, down from $1,082 per loan in the fourth quarter of 2010, according to the Mortgage Bankers Association’s (MBA) First Quarter 2011 Mortgage Bankers Performance Report. Among the other key findings of MBA’s Quarterly Mortgage Bankers Performance Report are:  Total production operating expenses—commissions, compensation, occupancy and equipment, and other production expenses and corporate allocations—rose to $5,837 per loan in the first quarter of 2011, compared to $4,930 in the fourth quarter of 2010.  Average production volume was $164 million per company in the first quarter of 2011, down from $286 million per company in the fourth quarter of 2010.  The refinance share of total originations by dollar amount for this sample of independent mortgage bankers and subsidiaries was 50 percent in the first quarter of 2011, compared to 63 percent in the fourth quarter of 2010.  Average loan balances dropped to $196,456 in the first quarter of 2011, from $208,319 in the fourth quarter of 2010.  Measured in basis points, net secondary marketing income rose to 201 basis points in the first quarter 2011, compared to 188 basis points in the fourth quarter of 2010. But with the decreasing average loan balances, net secondary marketing income dropped to $3,827 per loan in the first quarter of 2011, from $3,870 per loan in the fourth quarter of 2010.  Personnel expense drove the majority of the change in net production income, rising to $3,640 per loan in the first quarter of 2011, compared to $3,124 per loan in the fourth quarter of 2010.  The “net cost to originate” increased to $3,540 in the first quarter of 2011, from $2,827 per loan in the fourth

quarter of 2010. The “net cost to originate” includes all production operating expenses and commissions minus all fee income but excludes secondary marketing gains, capitalized servicing, servicing released premiums and warehouse interest spread.  Sixty-three percent of the firms in the study posted pre-tax net financial profits in the first quarter of 2011, compared to 84 percent in the fourth quarter of 2010.  Full-year 2010 production profits were $1,054 per loan originated. In comparison, average production profits in 2009 were $1,135 per loan originated and $305 per loan originated in 2008, based on MBA’s Annual Summary Report. “Mortgage origination volume in the first quarter of 2011 dropped significantly from the refinance-heavy fourth quarter of 2010. As in the past, mortgage companies had difficulty managing staff levels to reflect the drop in loan volume. This caused higher perloan production costs. Even though overall revenues went up, they did not go up fast enough to offset the higher costs,” said Marina Walsh, associate vice president of industry analysis for the MBA. “In the first quarter of 2011, changes in compensation plans and investor expectations are additional factors that likely drove up loan production expenses per loan to the highest levels ever reported for this study.”

CSBS and AARMR Reach $3 Million Compliance Settlement With Mortgage Access Corporation The Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) have announced a 10state settlement, in which Mortgage Access Corporation d/b/a Weichert Financial Services (MAC) headquartered continued on page 16

The Soft Patch There is no doubt that the recovery has hit a “soft patch” this spring. We have presented many of the reasons for this slowdown even before the slowdown occurred as they were inevitable. What are these main reasons?

“The slow economic recovery has been significantly influenced by a lack of consumer confidence. Consumers have to be confident in their future in order to purchase homes.”

Factor number one … The first factor is the winding down of government stimulus, including the end of the homebuyer tax credit. The public sector is shrinking, especially at the state and local levels, which was bolstered by federal stimulus dollars in the past few years. According to a report released by outplacement consulting firm Challenger, Gray & Christmas, approximately 40 percent of all planned layoffs last month were in the government sector even though only eight percent of Americans are employed by the government. The news is not likely to get much better, according to a recent CNN/Money article:

Factor number two …

Factor number three … Finally, the most unforeseen factor has been the spate of natural disasters which have befallen the United States and the world. Each has delivered a blow to localized areas, the effects of which have been felt around the world. continued on page 15

 JULY 2011

I know that it has been “politically correct” to rail against the deficits we have racked up during this severe recession. However, as Congress circles like a vulture over the budget with the debt limit negotiations coming to a head by late July or early August, we must remember that it was the stimu-


The second factor is the rise of oil prices. There is no doubt about the fact that higher gas prices are constricting spending elsewhere. Last month, we reported that the average American household is now using close to five percent more of their monthly budget on gas compared to just two years prior. More importantly, rising gas prices also hurt the confidence of a consumer. The slow economic recovery has been significantly influenced by a lack of consumer confidence. Consumers have to be confident in their future in order to purchase homes.


“Don’t look to state and local governments to prop up the job market. To the contrary, this cash-strapped sector is set to go on a record-breaking layoff binge when the new fiscal year starts on July 1. State and local governments are forecast to shed up to 110,000 jobs in the third quarter, the first time the bloodletting has risen into the triple digits, according to IHS Global Insight. “We’re on a downward path,” said Greg Daco, principal U.S. economist at IHS. “It’s not looking good.” State and local government employment has been a drag on the economy all year, averaging a loss of 23,000 jobs a month over the past three months. All told, the sector has lost 510,000 positions since its peak in August 2008. The bad news is that local governments are in even worse shape. Not only are they losing state aid, but they are finally feeling the fallout from the mortgage meltdown.”

lus efforts that helped avoid a complete meltdown when the financial crisis hit. And by far, the largest contributor to the deficit has been the lower tax revenues caused by the recession. Thus far, state and local governments have been able to survive, but only with federal money. That is now gone. The government will be a drag on the recovery, no matter how we play the cards from here. Even the wars we are fighting will be winding down, hopefully. The bottom line … the recovery will take longer without this stimulus, even if it will be better for the economy in the long run in the form of lower long-term deficits. And the deficits will not really shrink until tax revenue rises through the recovery. Sound like a Catch-22? It is!

opening a dialogue

continued from page 11


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â&#x20AC;&#x153;Education and engagement is a key pillar needed to build a fair and competitive financial marketplace.â&#x20AC;? â&#x20AC;&#x201D;Elizabeth Warren

Industry outreachâ&#x20AC;&#x201D; including to the mortgage industryâ&#x20AC;&#x201D;has been a high priority for us.â&#x20AC;? â&#x20AC;&#x201D;Elizabeth Warren

oversight that Congress imposed over its functioningâ&#x20AC;&#x201D;oversight that is consistent with that which exists over other independent agencies.â&#x20AC;?

work seeking ways to place restrictions on the ability of the CFPB to carry out the purpose determined for it by DoddFrank. It is time now for the mortgage industry to willingly participate in such a worthy mission, especially as the CFPB begins its arduous task to provide and improve consumer financial protection.

 On proposals to change the CFPB: â&#x20AC;&#x153;Proposals to change the consumer bureau have been put forward in the name of accountability. But accountability is ultimately about being responsible for getting a job done on behalf of American families. Those families know that they are held accountable every day. They have to pay their credit card bills and student loans. They see money disappear from their checking accounts when they make a mistake. And, as millions of families have witnessed first-hand in the past few years, when they default on mortgages they cannot afford, they lose their homes. American families expect to pay what they owe, but they also want to make sure that the rules are fair and followed. They want an agency that will be accountable for getting that basic job done, and, so long as it has the tools, the CFPB will be that agency.â&#x20AC;?

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If the need for financial reform has taught us anything at all, it is that a financial system can collapse when market participants are not properly informed of risks, when information about financial risk is not appropriately vetted into the market, where regulatory compliance created to assure an orderly market is not enforced or does not even exist, and if financial products and services are not monitored for defects that may cause systemic failure.45 Consumer advocacy is central to the strength of the mortgage industry. In due course, we will know if the CFPBâ&#x20AC;&#x2122;s mission and Professor Warrenâ&#x20AC;&#x2122;s vision for it will be reified. Even before the CFPB receives its enumerated authorities on July 21, 2011, there have been many powerful, ideological, political, forces at

Jonathan Foxx, former chief compliance officer for two of the countryâ&#x20AC;&#x2122;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

Footnotes 1â&#x20AC;&#x201D;HR 4173: Dodd-Frank Wall Street Reform and Consumer Protection Act, 111th Congress (20092010): â&#x20AC;&#x153;A bill to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end â&#x20AC;&#x153;too big to failâ&#x20AC;?, to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes.â&#x20AC;? Sponsored by Rep. Barney Frank (DMA) and Sen. Christopher Dodd (D-CT). 2â&#x20AC;&#x201D;Foxx, Jonathan, â&#x20AC;&#x153;Landmark Financial Legislation: New Rules for Mortgage Originatorsâ&#x20AC;&#x201C;Part I: Reformation and Regulations,â&#x20AC;? National Mortgage Professional Magazine, August 2010, Volume 2, Issue 8, pages 28-42; Foxx, Jonathan, â&#x20AC;&#x153;A New Era of Mortgage Reformâ&#x20AC;&#x201C;Part II: Legislation â&#x20AC;Ś Reactive or Proactive,â&#x20AC;? National Mortgage Professional Magazine, September 2010, Volume 2, Issue 9, pages 22-28; Foxx, Jonathan, â&#x20AC;&#x153;A New Era of Mortgage Reform-Part III: Consumer Financial Protection â&#x20AC;Ś Bureau and Bureaucracy,â&#x20AC;? National Mortgage Professional Magazine, October 2010, Volume 2, Issue 10, pages 22-40. 3â&#x20AC;&#x201D;I have written extensively about the Bureau. See: Foxx, Jonathan, â&#x20AC;&#x153;The Birth of an Agency,â&#x20AC;? in National Mortgage Professional Magazine, September 2009, Volume 1, Issue 5, pages 24-27. This article provides a chart that outlines the Bureauâ&#x20AC;&#x2122;s structure and authorities. Also see: Foxx, Jonathan, â&#x20AC;&#x153;The CFPA Controversy: Asking the Tough Questions,â&#x20AC;? in National Mortgage Professional Magazine, October 2009, Volume 1, Issue 6, pages 22-25. 4â&#x20AC;&#x201D;U.S. Treasury Web site/Initiatives/Bureau of Consumer Financial Protection (CFPB).

5—Designated Transfer Date is July 21, 2011. See Designated Transfer Date, Bureau of Consumer Financial Protection, Federal Register, Vol. 75, No. 181 (09/20/10). 6—In addition to the “enumerated laws” many other laws are amended to provide for the Bureau’s interaction, such as the Expedited Funds Availability Act, Federal Financial Institutions Examination Council Act of 1978, Right of Financial Privacy Act, Telemarketing and Consumer Fraud and Abuse Prevention Act. 7—12 U.S.C. §§ 3801 et seq. 8—12 U.S.C. §§ 2901 et seq. Not included as an “Enumerated Consumer Law” in H. 3126, but enforcement authority over this Act is transferred to the CFPA. HR 3126 § 184(b)(2). 9—15 U.S.C. §§ 1667 et seq. Not specifically referenced in HR 3126’s definition of “Enumerated Consumer Law,” but enforcement authority over this Act is transferred to the CFPA. H.R. 3126 § 184(b)(2). 10—15 U.S.C. §§ 1693 et seq. 11—15 U.S.C. §§ 1691 et seq. 12—15 U.S.C. §§ 1666-1666j. Not specifically referenced in HR 3126’s definition of “Enumerated Consumer Law;” but enforcement authority over this Act is transferred to the CFPA. H.R. 3126 § 184(b)(2). 13—15 U.S.C. §§ 1681 et seq.; and, 15 U.S.C. §§ 1681m(e), 1681s-3, 1681w. 14—15 U.S.C. §§ 1692 et seq. 15—12 U.S.C. § 1831t(c)-(f). 16—15 U.S.C. §§ 6802-6809. 17—12 U.S.C. §§ 2801 et seq. 18—15 U.S.C. § 1639. 19—12 U.S.C. §§ 2601-2610. 20—12 U.S.C. §§ 5101-5116. 21—15 U.S.C. §§ 1601 et seq. 22—12 U.S.C. §§ 4301 et seq. 23—Public Law 111-8, 2009. 24—15 U.S.C. § 1701. 25—Warren’s advocacy for a consumer financial protection agency began publicly on March 10, 2009, when she joined Sens. Dick Durbin (D-IL), Chuck Schumer (D-NY) and Reps. Bill Delahunt (DMA) and Brad Miller (D-NC) to announce a bill to create what was then being called the Financial Product Safety Commission. In time, its other appellation was Consumer Financial Protection Agency. The Dodd-Frank Act created the Bureau of Consumer Financial Protection. 26—The Conference Board announced on June 28, 2010 the Consumer Confidence Index, which

had declined in May 2011, decreased again in June. The Index now stands at 58.5 (1985=100), down from 61.7 in May. The Present Situation Index decreased to 37.6 from 39.3. The Expectations Index declined to 72.4 from 76.7 in May. This is a seven month low. Source: The Conference Board, June 28, 2011. 27—President Barack Obama’s speech in the Rose Garden, Sept. 17, 2010. 28—As of early July 2011, the Obama Administration appears to be considering the appointment of Professor Warren to the position of Director of the CFPB. 29—In addition, Professor Warren’s broad abilities are reflected in the fact that she has been elected to the American Academy of Arts and Sciences. She has conducted empirical studies for the National Science Foundation and the Ford Foundation. A fierce advocate for preserving middle class financial opportunities through proper consumer financial protection, Mrs. Warren is a former vice president of the American Law Institute and she is also a former Sunday School teacher. 30—ARMCP: 31—CMPB: 32—IMMAAG: 33—NAIHP: 34—NAMB: 35—NAPMW: 36—NAR: 37—NCRA: 38—NRMLA: 39—RESPRO: 40—ABA: 41—MBA: 42—Testimony of Elizabeth Warren, Special Advisor to the Secretary of the Treasury for the Consumer Financial Protection Bureau, Subcommittee on TARP, Financial Services, and Bailouts of Public and Private Programs Committee on Oversight and Government Reform United States House of Representatives, Tuesday, May 24, 2011. 43—U.S. Senate Permanent Subcommittee on Investigations, Senate Investigations Subcommittee, Levin-Coburn Report On the Financial Crisis, April 13, 2011. 44—Idem. 45—Foxx, Jonathan, “A New Era of Mortgage Reform-Part III: Consumer Financial Protection … Bureau and Bureaucracy,” National Mortgage Professional Magazine, October 2010, Volume 2, Issue 10, pages 22-40.

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Coas Coast oast to to C Coast oas A oast Associations ssociations D iscoun un nted S errvic v es Discounted Services IIndustry ndustrry Updates U Updatess

 JULY 2011

ed moving down a few months ago and they are not likely to rise until the soft patch is over. That means two things for your production. First, more refinances. Second, the lower rates will be gone in a flash when the recovery gains steam again. That could be two weeks from when I wrote this article (mid-June) or it could be six months. From a loan officer’s perspective, you better act quickly and instill a sense of urgency in your refinance and purchase prospects. Remember how quickly rates rose last year? Is it likely to So this is why we have a soft patch. happen that fast again? This is why the credit crisis is not over and banks have not loosened their stan- Dave Hershman is a leading author for dards, and the housing slump does not the mortgage industry, with eight books end until the credit crisis is over. I sin- and several hundred articles to his credcerely believe that we have enough it. He is also a top industry speaker. If latent demand to absorb the foreclo- you would like to stay ahead of what is sures coming to market in short order, happening in the markets, visit but if only consumer and lender confi- for a dence returns. Without that confidence, free trial. Dave’s NewsletterPro we will be struggling to absorb the sup- Marketing System can be found at ply for a few more years. and Sound pretty negative? Well, there is he may be contacted by e-mail at some good news in all of this. Rates start-

Three T hree Simple Reaso Reasons ons


From the tsunami in Japan, to the flooding in the middle of the United States, we have experienced a series of shocks. For example, manufacturing is being affected by part shortages emanating from Japan. Of all the factors, this one is the wild card. Another disaster could strike tomorrow. What these events remind us is that this is a global crisis. Debt issues in Europe threaten our economy as well. The world needs to heal, not just the U.S.

continued from page 13

Why W hy NAP NAPMW? M MW? 

the secondary market overview


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JULY 2011 



continued from page 12

in Morris Plains, N.J., agreed to remit a $3 million penalty. “The effectiveness of the multi-state effort as a platform to regulate large companies across the country, while enhancing consumer protection, is a testament to the states’ ability to modify the regulatory approach to better assess for compliance with applicable state and federal law,” said John Ducrest, Louisiana Commissioner of Financial Institutions and Chairman of the Conference of State Bank Supervisors (CSBS). The consent order between state mortgage regulators and MAC was executed following an examination conducted under the protocols of the Multi-State Mortgage Committee (MMC). The examination found numerous compliance and internal control deficiencies, including the origination or completion of mortgage loan applications by loan originators (LOs) that were not licensed in the appropriate jurisdictions. The multi-state examination revealed that MAC failed to institute the proper oversight and controls to ensure compliance with applicable licensing and regulations in the various states it operates within. MAC permitted individuals unlicensed in particular states to participate in various aspects of the mortgage loan originator process, in violation of the states’ mortgage originator licensing requirements. The major terms of the consent order require Mortgage Access Corporation d/b/a Weichert Financial Services to:  Reassess their internal routines regarding the oversight of LO activity and to implement appropriate technology that will prevent an application from being processed by an unlicensed individual.  Implement a system that will allow for the full investigation of complaints submitted by consumers, state or federal agencies, or other individuals alleging that MAC has employees acting in the capacity of an unlicensed LO.  Identify an independent auditing firm to, at MAC’s expense, conduct a review of all mortgage loan applications taken from Sept. 1, 2010-March 31, 2011 for compliance with state mortgage licensing laws.  Refund certain fees to borrowers in the state of New York. The foregoing must be memorialized in an Internal Control Plan that must be approved by the regulators, and MAC must remit a penalty of $3 million to the 10 states that are party to the order. “The multi-state mortgage examination program was initiated to enhance consumer protection, foster a culture of compliance within the industry, and hold individuals and entities accountable for actions which are not in compliance with applicable rules and regulations,” said Darin Domingue, Deputy Chief Examiner of the Louisiana Office

of Financial Institutions and president of AARMR. “The licensing laws enacted by states, including testing and educational requirements, have been put into place to help ensure that the largest financial transaction most consumers will make is facilitated through qualified and licensed individuals.” The 10 state agencies included in the multi-state action are the Connecticut Department of Banking; the Kentucky Department of Financial Institutions; the Louisiana Office of Financial Institutions; the Massachusetts Division of Banks; the New Jersey Department of Banking and Insurance; the New York State Banking Department; the North Carolina Office of the Commissioner of Banks; the Pennsylvania Department of Banking; the Vermont Department of Banking, Insurance, Securities and Health Care Administration; and the Virginia Bureau of Financial Institutions.

Studies Find Housing Counseling as an Effective Tool in Foreclosure Prevention

The Homeownership Preservation Foundation (HPF), an independent national non-profit dedicated to helping distressed homeowners navigate financial challenges and avoid mortgage foreclosure since 2004, has reported that independent data presented at a recent regulatory briefing verified the effectiveness of mortgage counseling for financially challenged homeowners who receive it. The four research studies separately conducted by the Joint Center for Housing Studies of Harvard University, The Urban Institute, Federal Reserve Board (FRB), and the National Council on Aging (NCOA) were presented at a briefing session held June 21 by the Coalition of HUD Housing Counseling Intermediaries. Colleen Hernandez, president and chief executive officer of The Homeownership Preservation Foundation, which offers mortgage counseling via the Homeowner’s HOPE Hotline at 888-995-HOPE, moderated the panel during which the four organizations reported their findings. Among the data presented that makes a compelling case for continued support of mortgage counseling opportunities:  Housing counseling consistently increases the likelihood that the homeowner will be granted a loan modification (200 percent higher probability).  Counseled borrowers received more favorable terms on their loan modifications compared to uncounseled borrowers (on average, $110 lower monthly payment and five basis points lower interest rate).

 Counseling raises the probability of a homeowner receiving a loan modification that “cures” (restores the loan to good standing) a serious delinquency or foreclosure (over a 12 month period, 55 percent of loans cured among people who received counseling versus 38 percent of loans cured among those who did not receive counseling).  Homeowners who received counseling prior to being granted a loan modification curing a serious delinquency or foreclosure were more likely to remain current on their loan after the modification compared to those who did not receive counseling (64 percent versus 51 percent of loans were still current eight months post-modification for counseled and uncounseled homeowners, respectively).  Increasing affordability problems suggest greater need for counseling as the number of renters and current homeowners paying more than 50 percent of their income on housing continues to grow. “As nearly three-quarters of those who call our national Homeowner’s HOPE Hotline and receive foreclosure prevention assistance from our counselors report back that they are still in their homes a year later, the findings presented by these four wellrespected organizations corroborate what everyone at HPF knows firsthand that mortgage counseling works,” said Hernandez.

NFCC Poll Finds 20 Percent Downpayment Still Unattainable for Many The National Foundation for Credit Counseling (NFCC) has released results of an online poll that has concluded that close to half of the respondents would never be able to save enough money for a downpayment on a home despite the low state of the current U.S. housing market. On the other end of the spectrum and identical to 2010, the 2011 category with the lowest response rate, 12 percent, represented those who indicated they would have no trouble coming up with a 20 percent downpayment. “The 2011 results could be even worse than they appear at first glance,” said Gail Cunningham, spokesperson for the NFCC. “Since prices for homes are at historic lows, the necessary downpayment represents a lower dollar amount than would typically be necessary. Nonetheless, consumers still do not feel capable of meeting the requirements.” The numbers suggest that consumers are reconciled to satisfying their housing needs through renting, even though in some markets it can be more affordable to buy a home than rent. While demand for rentals increased, so did the cost of renting. Although renting has many advantages, it may not stimulate the economy as much as an uptick in the housing market world, as renters do not typically spend as much on home improvements, lawn equipment, appliances, or other areas which would lead to job growth.

Consumers’ inability to buy a home exacerbates the already distressed housing market and slows recovery. Neighborhoods with multiple homes for sale or in foreclosure create blight on the entire area, resulting in a decreased tax base for the community, and further distress experienced by the displaced families that have been forced to abandon their dream. The longer the neighborhoods go unoccupied, the more prone to crime and vandalism they become, diminishing the property values even further. “Now is the time for consumers to examine their long-term goals as they relate to housing, and take the steps necessary to meet them,” said Cunningham. “Renting may be the right answer for some people, but just because homeownership isn’t on the horizon at the moment doesn’t mean it never can be.”

TransUnion Study Finds Opportunity in MortgageOnly Default Market A study conducted by credit analyst TransUnion has shown that consumers who only defaulted on their mortgage during the economic recession were far better risks than those consumers who went delinquent on multiple credit accounts, such as credit cards and auto loans. This was evident across all credit scoring ranges. The results showed that consumers with mortgage-only defaults performed better on new loans than those with multiple delinquencies. The study did not find any strong evidence supporting the widely accepted “excess liquidity theory,” which suggests consumers who stopped paying their mortgage loans during the recent recession had an increased cash flow in the short-term, and therefore could repay other debts. In fact, consumers in the foreclosure process performed similarly, if not better, on certain accounts when they opened them further in the foreclosure process. “There appears to be a pocket of opportunity among mortgage-only defaulters that is not the result of excess liquidity, but rather the unique circumstances of the recent recession,” said Steve Chaouki, group vice president in the financial services business unit for TransUnion. “This new market segment that the recession created is an important one for lenders to understand. They have the potential, today, to be stronger and more reliable customers.” Additional evidence suggesting the “excess liquidity theory” was not in effect during the recession was witnessed when comparing consumers who were 120 days past due on their mortgages, but opened new auto loans at various times after their delinquency. The percentage of consumers delinquent on those auto loans decreased as more time passed. “This recession was unique in that certain consumers who defaulted on mortgages would otherwise be good credit risks. It appears their actions were driven more by difficult economic circumstances than by any inherent inability to manage debt,” said Ezra Becker, vice president of research and

Minorities Comprise Nearly Half of All Loan Mod Scam Victims

Miami ranked highest among cities for reported scams, followed by Los Angeles, Las Vegas, Houston, and Chicago. Interestingly, while California’s reported fraudulent activity was significantly higher than other states, only one city from the Golden State ranked in the top five, indicating that purported scam activity isn’t concentrated in any one area. The Federal Trade Commission (FTC) issued a rule in early 2011 prohibiting the payment of any upfront fees to negotiate mortgage reduction payments on behalf of a homeowner. Nevertheless, an untold number of companies and individuals continue to openly and flagrantly violate the rule, asking on average for an upfront fee of $2,589.58 to modify a mortgage. In virtually all instances, either no mortgage

reduction was achieved or no work was actually performed.

Your turn 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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Nearly half the victims of mortgage loan modification scams are of AfricanAmerican, Hispanic, or Asian descent, according to statistics released by the Homeownership Preservation Foundation (HPF), an independent national non-profit dedicated to helping distressed homeowners navigate financial challenges and avoid mortgage foreclosure since 2004. Nearly one-in-four of the possibly fraudulent scams reported were in California. Since February 2010, the Homeownership Preservation Foundation (HPF) has operated a specialty unit of their Homeowner’s HOPE Hotline (888-995HOPE), a resource for financially distressed homeowners. The unit focuses on those who believe they have been victimized by a scam or have been approached by someone offering related services they suspect are fraudulent. Virtually half of the

calls fielded since the hotline was launched were from homeowners who voluntarily identified themselves as African-American, Hispanic, or Asian. “Repeated studies have shown that minorities were disproportionately targeted for predatory lending during the housing boom, and we have compelling evidence indicating that minorities are bearing the brunt of an unusually high percentage of mortgage scams,” said Colleen Hernandez, chief executive officer of the HPF. The state of California leads all states in possible fraudulent activity, accounting for 22 percent of the calls. Florida was the second highest with seven percent, followed by Texas with five percent, New York with five percent, and Georgia with four percent. 

consulting in TransUnion’s financial services business unit. “Also, these results are wellaligned with our past research into the reversal of the payment hierarchy dynamic. Bottom line—consumers prioritize their payments based on product preference when they find themselves constrained financially. In that sense, loan defaults have always been strategic.” A noteworthy exception was seen in credit cards where a slight increase in delinquencies occurred when consumers delayed the opening of the new tradeline. The delinquency changes were minimal between accounts opened seven to 11 months later (18.5 percent) and 12 or more months later (18.7 percent). “This study is critical in that it sheds more light on consumer behavior in a challenging economy,” said Becker. “The analysis of consumer preferences between products and how they manage and prioritize them is important information lenders need to leverage to effectively manage their customer relationships. This study affords lenders greater insight into consumer performance, hopefully leading to a more mutually profitable, long-term relationship between lender and borrower.” The study reviewed data from a random sample of five million consumers with an open mortgage trade in January 2008. From this sample, TransUnion looked at a subset that had at least one non-mortgage trade open as of December 2007, went 120-plus days delinquent on the mortgage trade between January 2008 and June 2009 and opened at least one additional trade after the mortgage went delinquent. This left the final sample size of approximately 129,000 new accounts for analysis. The sample was studied through a performance window of 12-17 months. TransUnion evaluated the product mix of these consumers post-foreclosure, calculated each consumer’s VantageScore in the month prior to the new tradeline opening and evaluated the delinquency rates of those new trades with 12-17 months of performance through August 2010.

Michael J. D’Alonzo, CMC, President E

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ach month, National Mortgage Professional Magazine will focus on one of the industry’s top players in our “Mortgage Professional of the Month” feature. Our readers are encouraged to contact us by e-mail at to be considered for a future “Mortgage Professional of the Month” feature article. This month, we had a chance to chat with Michael J. D’Alonzo, CMC, president of Creative Mortgage Group in Maple Glen, Pa. In addition to serving as president of Creative Mortgage Group, Michael is a longtime and active member of the National Association of Mortgage Brokers (NAMB), currently serving as president of the nationwide trade association. He took over as president of NAMB in December of 2010, when immediate past president William Howe was forced to step down due to health concerns. D’Alonzo was recently elected to a full term as president for the 2011-2012 calendar year in June at the NAMB Mid-Year Meeting. A 20-plus year veteran of the mortgage industry, D’Alonzo has dealt with both the commercial and residential side over his career. Creative Mortgage Group has been recognized with multiple awards for outstanding excellence and achievement by several top tier wholesale lenders in the country. D’Alonzo served two terms as president of the Pennsylvania Association of Mortgage Brokers (PAMB), the Pennsylvania state affiliate of NAMB, and has held a variety of positions on the NAMB board of directors, and is an active member on a number of NAMB committees. How did you first get started in the mortgage industry? I graduated from Drexel University in Philadelphia in 1983, and from there, went to work for ARAMARK, a food service business. I worked in the accounting and finance departments there for around four years, and then got started in the mortgage industry in 1987. Is there anything that you learned while working for ARAMARK that you applied to the mortgage business today? I dealt with a lot of financing information in my early years at ARAMARK. I

learned how to read tax returns, how to look at budgets, how to crunch numbers … so that was a nice transition to the number-intensive mortgage industry. The whole corporate environment and absorbing the corporate culture of working at ARAMARK’s headquarters in Philadelphia was a good learning experience in working for a big company in corporate America.

agents, so I just developed and cultivated those types of relationships, many of those which I still carry to this day.

Is there anything that you do different in regards to your business development today that you weren’t doing when you first started? It’s really a lot of the same going on as far as the way I conduct business now as opposed to 20-plus years ago when I first started. It’s all “There’s always going to be about developing a place for the mortgage relationships, keepHow did you first broker in the future, the ing your word, being get involved in the independent person or proactive and commortgage business company that is going to ing through with the and what exactly operate as a true broker.” results you initially got you into the promised. Those are the traits that have industry? In the building I worked at with ARAMARK carried me throughout my career. I have in Philadelphia, there was a friend of mine always been honest and produced what I who owned a mortgage company that I said I was going to produce. If there’s an knew from when I worked at a racquetball issue, I can crunch the issue. I never overfacility and his family were members of promise, and I don’t oversell and people the club. We always hit it off pretty well. I appreciate that. ran into him a few times in the elevator, and he felt I should get involved in the What value do you think you have mortgage industry. I was interested in being a mortgage broker over your breaking into sales with ARAMARK, but mortgage banker counterparts? they didn’t have any sales positions avail- As a broker, I have always enjoyed the able. I got in touch with my old friend in advantage of the versatility and being the mortgage business and began working able to use different lenders that may with him in the same building that housed have different products. As a mortgage ARAMARK. I worked for him for about two broker, I am always making myself years, and then moved on to working with available, whether its 10:00 p.m. or on PaineWebber Mortgage Finance. In 1991, I a Sunday morning at 8:00 a.m. … its started my own company with a business those types of things that give a mortassociate, and in 1995, parted ways with gage broker an advantage over a morthim and formed Creative Mortgage gage banker. Group in Maple Glen, Pa. What do you see for the future of the When you started your own business mortgage broker? I see a lot of the comwhere were you getting business from? panies taking the mortgage broker out Most of my business was referral-based. A of the operation and merging them into lot of it was through accountants, attor- mortgage bankers. A lot of them are neys, financial planners and real estate doing it so they can have the power of a

banker, but still have access to being able to broker products? How do you envision the future model of the mortgage broker business? There’s always going to be a place for the mortgage broker in the future, the independent person or company that is going to operate as a true broker. There have been a lot of brokers who have aligned themselves with banks and still operate as brokers with the strength of a bank behind them. We’re already seeing that and that’s okay because they still haven’t really changed who they are as brokers. How do you handle operating your own business at Creative Mortgage Group and balance that with your responsibilities as nationwide president of the National Association of Mortgage Brokers (NAMB)? I really compartmentalize a lot of stuff and make specific time for handing the affairs of NAMB. I must also provide time to not only handle business, but also make time for my family. It’s a juggling act, but it’s something that works for me. Personally, if I don’t have a full plate, I don’t feel good about myself. I always have to have a lot of things going on. It’s very important to have the support of your family. If I didn’t have an understanding family, it would be hard to juggle all the many things that I do, so I’m fortunate in that respect to have a family that understands my responsibilities. Are there any tools that you find are essential to time management, whether it be in the day-to-day operations of Creative Mortgage Group or in your role as NAMB president? I’m an old school kind of guy, so I make a lot of lists on yellow pads. I have a folder with a yellow tag for NAMB, a folder with yellow tag for business and a folder for my personal life. Each folder is in a briefcase and I write a list up every night and they go into each folder. Whatever doesn’t get done that day, goes onto the list for the following day. These folders are my life. I don’t do a lot of technical stuff, but I need to have those lists. Physical lists allow you to be accountable every day for everything that you

do. A lot of people use technical stuff and forget about other things. It goes into their Outlook Calendar and it’s out of their minds, whereas you are forcing yourself to take accountability of what you did or didn’t do that day. A lot of people make fun of me, but it’s what works for me. I always have my lists, and I always have those folders with me constantly, whether I’m on vacation or in my office, I always have my three yellow pads and folders with me. What keeps you up at night? What do you worry about the most … your business, the affairs of NAMB and the nation’s mortgage population, or your family? I feel what keeps me up is NAMB being a truly viable association for its membership. I think we have turned the corner. It was a tough six months to start the year, and it seems like we’ve been constantly in crisis management mode during that time span as well. We’ve come an incredibility long way since William Howe stepped down as NAMB president for health reasons in late 2010. We made a lot of big decisions of late, and I truly believe that NAMB, as an association, has turned the corner. The regulations passed by the government have been suffocating a lot of small operations, and even some big companies as well. But I’m am optimist, and I think on the industry side, we’ve seen the worst and there’s going to be a turnaround, but it’s just going to take a little time.

The Consumer Financial Protection Bureau (CFPB) has released their proposed Version A and Version B of the revised Good Faith Estimate (GFE) disclosure. Have you made a decision as to which one you like? I really haven’t made a decision as of yet on that. I haven’t had a good chance to go through them both and see which one is going to be the more beneficial version of the two. Under Elizabeth Warren’s direction as current head of the CFPB, do you think the mortgage banker and mortgage broker industries will see any improvement? Mrs. Warren seems very consumer-focused and sensitive to the complexity of the mortgage transaction. Her aims with the CFPB seem to create a competitive marketplace which is hopefully healthy in driving down the cost to the consumer. What are your thoughts on Mrs. Warren and the future of the CFPB as they establish the office? A lot of the ideas we hear coming out of the office of the CFPB seem okay. I think that we’ll be able to work with the CFPB and develop relationships to make the mortgage industry one that is very manageable for the CFPB. It’s hard to say right now, but again, being an optimist, I think NAMB can work with just about anybody.

Has there been anyone in particular you have looked up to as a mentor in the industry? Yes, it would be my longtime friend, George Hanzimanolis. Any time I have questions or second guess myself, I call George. He’s always been the voice of reason for me, and he’s probably one of the best presidents that NAMB has ever had. He always keeps me grounded with his advice. Do you have any regrets so far in your career? Is there something you wish you acted a little earlier on or could have handled differently? I don’t really dwell on things that I didn’t do right. I cannot think of anything off the top of my head, but my feeling has always been that if you made a decision, you must now accept that decision and walk with it.

They say we’re most influenced by the places we go, the people we meet and the books we have read. Have any of these factors played an impact in your growth as a mortgage professional? The person who had the biggest impact on my life would be my father. He was a very honorable person of high character and high moral fiber. I always looked up to him. He always said the right things and made everything okay. He passed away 13 years ago, but I think about him every day. He was a very good man. I like the book Papa, My Father by Leo Buscaglia. He writes a lot of books about family and is of Italian descent like me. He discusses what its like growing up in an Italian family and makes me think a lot about growing up with my family, how my parents shaped my future and made sacrifices in their lives to make my life better. Behind every good person are parents who put everything on the line so that their kids could have a better life. I relate a lot to Buscaglia’s books. As far as places are concerned … my place of solace is the shore. We have a place in Ocean City, Md., and when I get to the bridge and head out to our getaway, I feel like the world is lifted off my shoulders. I can clear my thoughts and have a little peace. I unplug when I go there, but am never fully unplugged, as I always have my laptop, my three yellow pads and folders, but I do unplug to a certain extent. What advice can you give to someone who is struggling in the business and trying to find new ways to exist? What would you say to the struggling mortgage company that is having a difficult time finding their place in the mortgage business? I think that right now, more than ever, you really have to work hard. There is no secret, no magic bullet or no secret formula. You just need to work hard, push yourself and clear your head of all the negative thoughts to make it in this current marketplace. For those of us who have been in the industry for a long time, we get caught up in the “Woe is me” mentality. Sure, things are not what they were six years ago. We need to look at a person who may just beginning in the business … they don’t know any better. We need to think like that person with a clear head and eliminate the negative thoughts. We need to get down to work and build relationships. I think we’re already seeing smaller regional wholesalers popping up. I think you’ll continue to see that. Although there is a decrease in the mortgage broker population out there, I think it’s still going to be a viable option for the homebuying public. Think about all of the loans being written now and over the course of the last two years at least … they are all good loans. Brokers are delivering good, solid quality loans to the wholesalers, and as the statistics unfold and those loans become good loans, I think that’s going to be a good commodity for the wholesaler. Once they know that high-quality loans are being delivered, the market share will increase.


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Do you think that as NAMB president, you are in the midst of one of the most tumultuous times in the industry? With a drop in the economy, a drop-off in membership numbers, and legislation that has sent people running from the mortgage business, do you think you have the most challenges ever faced by an NAMB president? I think that each NAMB president is faced with a number of challenges and every one who has come before me has faced them in a different way. These are very different types of challenges we face today, and with these challenges come great opportunities. I think that’s where NAMB stands as a viable association for the mortgage community. And it will be through these challenges that NAMB will become a powerful force in the industry.

What has been the proudest moment to date in your career as a mortgage professional? I would say that it would have to be the honor of serving as president of NAMB. I’ve been actively involved in NAMB since 1996, and have seen the good, the bad and the ugly this industry has to offer. I’m very honored and proud to serve as president of this great association, to direct the future of NAMB and help shape its future. I am also proud of my two terms as president of the Pennsylvania Association of Mortgage Brokers from 2000-2002. We played a role in drafting stiffer licensing legislation for the industry in the state of Pennsylvania, and were also were one of the first states in the nation to require industry education for loan originators. My involvement with PAMB served as a stepping stone to my NAMB involvement and participation in affairs on the federal level.

Whether good or bad … you made the decision and must look to the future.


How have you dealt with the Federal Reserve Board’s loan originator compensation rules at Creative Mortgage Group? We do a majority of our business from a lender-paid point of view, so we are adjusting to the LO compensation rules. I always say small mortgage companies can adjust better than anyone else in the industry. In our industry, we have had so many things thrown at us and we’ve always figured out a way to make it work and survive. It will be no different when

What are the chances we’ll see some changes in the LO compensation rules? The main thing as far as LO compensation is concerned is that we need to have the mortgage broker treated on a level playing field with the rest of the industry. At least if we get that accomplished, then we’ve done something. Right now, mortgage brokers have a dilemma on how they pay their LOs on borrower-paid compensation scale and that’s what we need to correct at the every least. If we correct that, then I feel we’re at least on a level playing field and can continue to work with the Federal Reserve Board on changes to the rule.

What are five things you can think of why someone should become an NAMB member right now? I feel that everyone making their living as a mortgage professional should support the industry, and everyone should become a member of their trade association. Legislative issues and what NAMB fights for on Capitol Hill should be their primary motivation to become a member. Secondly, as previously stated, if you are making your living in this industry, you should support the industry. The third reason to join NAMB is to gain access to information that will help you conduct business in this current marketplace. The fourth reason I would say NAMB membership is vital is access to industry education. Through industry education, you can further your professional stature, such as through our certification programs. Lastly, I feel that member benefits are a great reason to join. Access to trade shows and some of the best and brightest minds through networking opportunities is yet another way to enhance your business. NAMB has been in crisis management mode in the past six months, and I think that over the next year, we can start shifting our focus toward education, member benefits, and improved communications with our membership. These are the things that will drive up our membership numbers and it’s a work in progress. 

The Mortgage Bankers Association (MBA) is forecasting that we’re going to see nearly a 40 percent increase in purchase business from 2011 through 2012. Do you feel that number is accurate and what can mortgage professionals do to prepare themselves for that surge? I agree with the MBA’s forecast. In my business, we’ve already seen 90 percent of our transactions as purchase transactions, and for the last couple of years, it’s been a 50/50 split with refi purchases. Of course, you’d rather have a truly purchase-driven business, but refis are the icing on the cake. I think we’re going to see a lot of purchases over the next year, and as far as first-time homebuyers are concerned, that market is growing, and sooner or later, the floodgates are going to open. To be ready for that influx of business, just keep yourself aligned with real estate agents, and develop and cultivate your relationships. The days of building leads and lists are gone. These days, you have to build relationships. If you want to survive at the end of the day, it’s going to have to be a referral-driven business.

dealing with the new LO compensation rules. LO compensation was a big pill to swallow, but in the end, we are going to work within the guidelines and do what it takes to be successful.

Ability-to-Repay: Regulating or Underwriting? (Part II)

By Jonathan Foxx “I leave it to be settled, by whomsoever it may concern, whether the tendency of this work be altogether to recommend parental tyranny, or reward filial disobedience.” —Northanger Abbey, Jane Austen


JULY 2011 



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n my previous article in June, I discussed the proposed rule issued by the Federal Reserve Board on May 11, 2011 regarding requirements for the Ability-to-Repay (Rule).1 The Rule affects closed-end residential loans. The Federal Reserve Board (FRB) issued this proposed rule (Rule) to implement ability-to-repay requirements for closed-end residential loans. The Rule implements Section 1411, Section 1412, and part of Section 1414 of the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act of 2010 (Dodd-Frank).2 Comments on the Rule are to be received by no later than July 22, 2011. This month, the FRB will retire from its involvement in this matter, because it is handing over its rulemaking authority in the subject statute to the Consumer Financial Protection Bureau (CFPB) on July 21, 2011.3 Thus, the promulgation of the final Rule will be under the aegis of the CFPB. In Part I of this article series, I explored some of the salient features of this Rule, noting particularly that, as a revision to Regulation Z (the implementing regulation of the Truth in Lending Act), it requires creditors to determine a consumer’s ability to repay a mortgage before making the loan and would also establish minimum mortgage underwriting standards. The Rule applies to any consumer credit transaction secured by a dwelling,4 except an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan or ‘‘bridge’’ loan with a term of 12 months or less. It appears that the Rule applies to purchase money and refinances, but not modifications of existing mortgages. There is a prohibition on prepayment penalties unless the mortgage is a prime, fixed-rate, qualified mortgage, and unless the amount of the prepayment penalty is limited. I have discussed also that complying with the requirements of the Rule is essential, because borrowers in a foreclosure proceeding will likely claim that the creditor failed to comply with the Rule, as a defense by way of recoupment or set off, without regard to the normal statute of limitations under the Truth in Lending Act (TILA).5 A violation of the Rule subjects the creditor to the TILA civil monetary penalties, plus the same enhanced civil remedies that apply to violations of TILA’s high-cost loan rules,6 and TILA also would authorize state attorneys general to bring actions for violations of the Rule for a period of up to three years.7 A loan that is a covered transaction must qualify, among other things, as a “qualified mortgage” (QM) if the creditor wishes to include a prepayment penalty in the loan. The Rule provides a presumption of compliance with the ability-to-repay requirements if the mortgage loan is a “qualified mortgage,” which does not contain certain risky features and limits points and fees on the loan.8 Furthermore, one feature of a higher-risk mortgage loan (i.e., subject to enhanced appraisal requirements under Dodd-Frank § 1471) is the loan may not be a QM.9 (Under Dodd-Frank § 941, a “qualified residential mortgage” (QRM) may not be broader in scope than a QM as defined in the Rule.)10

Regulation and Licensing Department, Financial Institutions Division #621 • Branch License #00621 continued on page 24



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

Want More Control? Do Something … Anything! By Deb Killian, CRMS, NAMB Board Member

JULY 2011 



It’s July 4 at 5:45 a.m. I woke up thinking about the year being half over. Where will the second half take us? We have already dealt with many challenges and more appear to be on the horizon. I cannot figure out whom or what is really driving this environment. Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) are still with us. Congress cannot figure out what to do with them or what to do about anything else. The market is in fits and starts … in the morning, there are “signs of improvement” and later that same day, some potential disastrous news shifts the mood. Rates are down … oh, no, they are “deteriorating.” Buyers will not buy in one of the lowest interest rate environments in history, worried by the experts that home prices haven’t hit bottom, regulations have a stranglehold on the entire business and Congress seems to think the noose isn’t tight enough. Volume is down, but lenders are recording record profits! What a MESS! The National Association of Mortgage Brokers (NAMB) and its state affiliates struggle with the same challenges. Critics expect states and NAMB to “do something about it.” As statewide president of the Connecticut Association of Mortgage Professionals, (yes, we also kept our CTAMB logo, but changed our name), I have been called by individuals who are NOT members in a challenging tone, asking me “What are YOU GUYS doing about the LO compensation rule?” or the flavor of the day, “qualified residential mortgages (QRMs)?” I am not a rude person, yet one such caller forced me to get in his face. So the first question I asked him, “Are you a member?” To which he not surprisingly replied, “No.” To which I asked “Why not?” To which he replied, “Cause YOU GUYS don’t do anything!” I replied, “THEN WHY ARE YOU CALLING ME? Do you have ANY IDEA how many hours I spend volunteering to save your butt?” I won’t bore you with where it went from there, suffice to say he was irrational, frightened and clearly didn’t want to know or understand what his role is. His time was far more important than the countless hours donated by willing volunteers to protect his business! If you are not part of the solution, there is a pretty good chance you are part of the problem! What is the crux of this issue? I ask you; (yes, I really do want your feedback) how does an entire industry pull together? We all have the same goals in mind. Aren’t we all working toward providing a marketplace that services consumers in a professional, competent manner; one that is undeniably unmatched by our larger competitors? So here’s the crux of it, the mindset of the people in the industry. The word “professional” has been a void in this industry for a long time. Let’s face it … most loan originators consider their job to be a sales job. The word “professional” simply implies something totally different. We need a huge shift in the way we think! In my fantasy world, every professional would not only be a member of their association, but they would strive for perfection; certifications, association participation and maybe even some, elective education (do you mean take a course nobody is making me take?). Ask yourself this question: “If we all have the same products and all have to follow the same rules (well most of us do) how are you any different from the originator down the street? One day last year, I received a call from a borrower who was clearly shopping. He told me he had spoken to several brokers. I ended up taking his application and midway through, asked him, “Did you give your application to the other brokers also?”

“No,” he replied. “So why are you giving it to me,” I asked. “Because I read your bio and it blew me away,” he said. That stopped me in my tracks. My bio? Where did he see it? What did it say? Had I updated it and how can I get everyone else in the world to read it? What happened after that is irrelevant. The point is, that was the most important piece of information any consumer can ever give you—why they chose you! Assuming you have a bio, what does it tell your customers about you? Until a complete mind shift occurs, until “salespeople” start thinking of themselves as part of something bigger than their current transaction, until we back up our supposed professional image with professional commitment, we will live in a place where everyone needs help to survive, very few volunteer and Congress thinks we are scoundrels. For some reason, we expect our world to unrealistically remain untouched, yet live in perpetual fear and uncertainty that it won’t. I firmly believe there is a better place to reside. How do you go about shifting your mindset? Make a commitment to yourself … a commitment to your customers … a commitment to learning … and a commitment to participating, volunteering, budgeting for improvement and challenging yourself to be your better self! This is not a competition amongst peers. This is a competition between you and yourself. This is a competition that implores you to do the unexpected and see your future as a better place than the insane, insecure place that we are in now. It’s easy to say “get involved in your life.” Doing it is where the challenge lies. Here are some ideas that could possibly be attainable, and ones that just might get you out of your chair and out of your office … Ready? 1. If you are not a member of your state association, join today. Visit for more information. 2. If you do not have an NAMB state affiliate in your own state, then join another state! 3. Go through state and NAMB Web sites to see what is happening and what has happened. Now I know not all of the sites are up to date, so if that’s your pet peeve or excuse for not joining, then get on an “Update the Web Site Committee” and become part of the process. 4. Start an Excel Spreadsheet on your desktop and keep track of every single course you take and Webinar you attend (however short or seemingly inconsequential). Do you want a template? Just e-mail me at and I’ll be happy to send you one. 5. In the same desktop folder, keep copies of registration forms, flyers and certificates of completion from anything you attend. You will need to prove attendance in order to become certified. 6. Get certified! Use the above courses to help you qualify Most trainers at the gym I work out at all have at least two or three certifications! Even trainers have certifications! Visit the NAMB Web site at and click on the “Certification” tab for more information. 7. Read, or at least, flip through trade magazines periodically … amazing ideas are right in front of us. 8. Set a budget for some amount like $2,000 annually to invest in your own career by attending trade shows and conferences, classes or to just support your association by attending functions. 9. Start a blog. 10. Write articles.

11. Develop courses and then teach them! E-mail me at if you need assistance with this one. 12. Get out into your community and speak about something that furthers your career and brings value to your audience. 13. Read industry books. In the last year, I have read, Chain of Blame by Paul Muolo; Too Big to Fail by Andrew Ross Sorkin; Liars Poker and The Big Short by Michael Lewis; No One Would Listen by Harry Markopolis; All the Devils Are Here by Joe Nocera & Bethany McLean; The Week That Changed Wall Street by Maria Bartiromo, The House of Dimon by Patricia Crisafulli; and I’m ready to start Reckless Endangerment by Gretchen Morgenson. Industry books beef up your broader knowledge, giving you insight into what happened and how we should be conducting business today and in the future. Be a student of your own profession. People tell me they don’t read this stuff because it’s depressing. I say, all the more reason to understand what happened and how it affects our future. Another way I see the industry coming together is through a new program that we started in NAMB’s Connecticut state affiliate, CTAMB, called the Ambassador Program. The purpose of the program is to get wholesalers and other industry professionals committed and involved. They too have a vested interest in the survival of the mortgage broker. We are just rolling this out in Connecticut and I hope it will become a program nationwide. Stay tuned. So, how has my life been made better as a direct result of my association involvement? For starters, I have closed transactions that were leads directly from the NAMB Web site. Members that I have met from all over the country have referred me business, and I have referred business back to them. I have taken,

written and delivered courses in my own home state of Connecticut and at conferences, which helped me earn my Certified Residential Mortgage Specialist (CRMS) certification, which earned me business I would not have received otherwise. I am often called to write articles by different publications. One publisher contacted me solely due to my association to NAMB to author a 20-hour SAFE course textbook “National Residential Mortgage,” which I co-authored with my husband, Don DeRespinis, currently the chief information officer for NAMB. The textbook is currently in its final stages of production. I have traveled to conferences in cities I probably never would have seen. I have made some incredible friends who have helped me and given me the honor of helping them. Sometimes even, I just had fun! I have been offered opportunities that never would have been presented because I never would have met these people without my association involvement. I feel good every day that, in some small way, just maybe, I made a positive impact on other originators struggling with the same challenges I have. It’s all worth every minute! I share this with you because I learned that I was so focused on the day-to-day, that I never thought about later! What better way to open your mind, shift your mindset, get in the groove, gain a positive perspective, improve your skills and really earn the business of your clients, than to participate! And don’t forget, to have some fun as well! This is just a springboard … it’s up to you to step up to it.

“If you are not part of the solution, there is a pretty good chance you are part of the problem!”

Deb Killian, CRMS is a National Association of Mortgage Brokers (NAMB) board member and statewide president of the Connecticut Association of Mortgage Brokers (CTAMB). Deb is also Connecticut wholesale account executive for GMAC. She may be reached by e-mail at

Scenes From the 2011 National Association of Mortgage Brokers Mid-Year Meeting


June 4-5 at the Crowne Plaza Valley Forge Hotel in King of Prussia, Pa.


Shawn Schofield and Ronald Weiss from the Nevada Association of Mortgage Professionals chat with Denise Leonard during the 2011 NAMB Mid-Year Meeting

 JULY 2011

NAMB Delegate Chuck Anderson from the Idaho Association of Mortgage Professionals during the NAMB Delegate Council Meeting

NAMB Delegate Brooks Bosley, president of the Maryland Association of Mortgage Professionals, during the NAMB Delegate Council Meeting

NAMB Lobbyist Roy DeLoach updates members of the Delegate Council Meeting on the latest news from Washington, D.C. 

NAMB President Mike D’Alonzo welcomes Illinois Association of Mortgage Professionals President Dennis Papiernik to the 2011 Mid-Year Meeting

ability-to-repay (part II) Be Smart About Your Business by Mary Beth Doyle, Founder


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JULY 2011 


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In this Part II of the article series, I will examine more closely the eight factors that constitute the ability-to-repay, as well as consider many other features of the Rule, including the limits on prepayment penalties, the lengthening of the time creditors must retain records evidencing compliance with the ability-to-repay and prepayment penalty provisions, the prohibition to evading the Rule by structuring a closed-end extension of credit as an open-end plan, the delineation of new terms, procedures, and their resulting implications for creditors and others who arrange, negotiate, or obtain an extension of mortgage credit for a consumer in return for compensation or other monetary gain.

Prepayment penalties Recall that part of the QM requirements is a test for Points and Fees, the purpose of which is to determine what does or does not constitute a QM. The Rule would limit the total points and fees to a specific percentage of the total loan amount in order to create a threshold to identify a QM. Points and fees do not include compensation paid to licensed persons who perform real estate broker services (so long as they are not compensated by a creditor, loan originator, or an agent of either); a servicer or its employees or agents, including those who negotiate loan offers or modifications for delinquent or defaulted loans or those in danger of delinquency or default; and, certain employees of manufactured home retailers. In the QM points and fees test, bona-fide third-party charges (other than includable mortgage insurance premiums) may be excluded if, and only if, they are not paid to the creditor, a loan originator, or an affiliate of either of them.11 And, up to two bona fide discount points can be excluded if the interest rate before discount does not exceed by more than one percent the APOR12 for a comparable transaction as of the date the interest rate is set for the discounted interest rate. But, if these discount points have not been excluded, then up to one bona-fide discount point can be excluded if the interest rate before discount does not exceed by more than two percent of the APOR for a comparable transaction as of the date the interest rate is set for the discounted interest rate.13 With that in mind, a “prepayment penalty” means any charge imposed for paying all or any part of a covered transaction’s principal before the date it is due. But the term is applied broadly to include: 1. Traditional prepayment charges, 2. Any interest that is charged on a loan balance after the date that any part of it is prepaid (i.e., for certain government loans that prepay on other than a payment due date, charging interest on the full balance of the loan through the end of the month), and 3. A closing cost or other fee that is waived unless the borrower prepays the loan. It should be emphasized that number two above affects government loans.14 A “prepayment penalty” does not include fees for preparing and providing documents when a loan is prepaid in full, whether or not the loan is actually prepaid, such as loan payoff statements, and documents involving reconveyance or release of the lender’s security interest. Importantly, the prepayment is factored into the “total loan amount” calculation so that the included amount will result in a higher percentage than at present. In other words, the QM points and fees test will, for the most part, disenfranchise the use of prepayment penalties. To understand how the “total loan amount” is calculated, including the prepayment penalties, it is necessary to recognize that this term uses the revised highcost mortgage rules, as follows:  Deduct the following items from the Amount Financed (as that term is defined in Regulation Z) to compute the total loan amount: a. All items under Section 226.4(c)(7) of Regulation Z (other than tax escrows) that are payable at or before loan closing, unless the charge is reasonable, the creditor receives no direct or indirect compensation in connection with the charge, and the charge is not paid to an affiliate of the creditor; b. Premiums payable at or before loan closing for credit insurance or debt cancellation/suspension coverage, whether mandatory or optional; and, c. The total prepayment penalty incurred if the loan is being refinanced by the current holder or servicer of the existing mortgage or an affiliate of either of them (as long as “a,” “b,” and “c” are included in the points and fees as well as financed by the lender). The FRB solicited comments on an alternative, perhaps more facile, calculation of the “total loan amount.”15

Limitations and features 1. First, a covered transaction may not include a prepayment penalty unless all of the following conditions are met: A. The prepayment penalty must be otherwise permitted by applicable law. continued on page 28

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Capital One to Acquire ING to Create the Fifth Largest Bank

JULY 2011 



Capital One Financial Corporation has announced a definitive agreement under which it will acquire ING Direct from ING Groep by the end of 2011 in a stock and cash transaction valued at approximately $9 billion. Currently the eighth largest bank in the United States, based on deposits, Capital One’s acquisition of ING Direct combines ING Direct’s valuable national direct deposit franchise with Capital One’s advantaged access to assets and local scale branch banking. When the deal closes, Capital One will become the fifth largest bank in the United States. The combination strengthens Capital One’s customer franchise and brand and provides significant financial and strategic upside with low execution risk. Under the agreement, Capital One will purchase ING Direct from ING Groep for $6.2 billion in cash and approximately 55.9 million Capital One shares, valued at $2.8 billion, based on a Capital One share price of $50.07, the 10-day average of Capital One closing prices for the period ending June 15, 2011. Capital One expects to finance the cash portion of the consideration, in part, through a public equity raise of approximately $2 billion and debt offerings of approximately $3.7 billion prior to the close of the transaction. ING is currently one of only a few lenders nationwide offering jumbo loans. As part of the deal, Capital One will also acquire ING Mortgage. “The acquisition of ING Direct is a game-changing transaction that delivers attractive deal economics immediately and compelling long-term strategic value,” said Richard D. Fairbank, chairman and CEO of Capital One. “The combination of Capital One and ING Direct creates a unique and valuable banking franchise that includes advantaged access to assets, great local scale branch banking in attractive markets, and with ING Direct, the leading direct bank customer franchise with national reach. Adding ING Direct enhances and sustains key sources of shareholder value over the long-term, including growth, returns and capital generation.”

Capital One will work closely with ING Direct’s leadership team to establish a management structure designed to ensure that the combined company achieves the highest quality integration and has the best leadership in place to build on ING Direct’s great customer franchise. ING will maintain a 10 percent stake in Capital One and the right to one director on the company’s board.

Ellie Mae Realignment to Focus on Encompass360 Clientele Ellie Mae has realigned its sales and client relations divisions to focus on maximizing return on investment for key Encompass360 clients. Two senior executives—Devin Daly and Joseph Tyrrell—have been appointed to spearhead a strategic initiative that emphasizes enhanced communication and collaboration among the 40 in-house and field sales and client service team members that assist key clients and high volume accounts with business operational assessment, system configuration, implementation, training and long-term usage of their Encompass360 software. By creating this new initiative, Ellie Mae is formalizing the means by which its in-house and field sales and client service team members gain a deeper understanding of key clients’ current and future business needs, as well as the way they leverage and communicate that information across multifunctional teams within the company. This initiative includes efforts such as client operations and workflow process reviews and analyses, which provide team members with the information they need to present or create the tailored solutions that help maximize the clients’ benefits from using Encompass360. Daly, who was hired as the company’s vice president of client services, oversees a field staff of sales engineers and managers that work with lenders to implement Encompass360. He is also responsible for client education and training, and is charged with creating and implementing processes for addressing each client’s specific needs throughout the implementation process. Daly has more than 15 years of management and technology experi-

ence. Prior to joining Ellie Mae, he was the founder of Source Holdings, a CRM software-as-a-service provider to the mortgage industry, and was also chief technology officer for His background includes additional work with Altara Inc., a reseller and consultant of Microsoft business solutions, where he ran the professional services operation. Tyrrell has been hired as the company’s new vice president of strategic client relationships. He is charged with creating and implementing processes for the way that the Ellie Mae account management staff assists key clients in optimizing their Encompass360 systems after implementation. His team of strategic account managers is responsible for consulting with key clients to help them drive greater efficiencies, as well as to identify and close any potential compliance gaps within the client’s internal processes. Tyrrell returned to Ellie Mae after spending five years as a business process and strategic relationship consultant for several companies in the mortgage and insurance industries. His previous position with Ellie Mae was senior vice president of strategic partnerships.

Kinecta and NuVision Announce Plans to Merge K i n e c t a Federal Credit Union and NuVision Federal Credit Union have announced that they have filed an application with the National Credit Union Administration (NCUA) to merge the two credit unions. The boards of each credit union approved moving to the next phase of the merger process after extensive due diligence confirmed the added benefits a combined organization will bring to their collective members, sponsor companies and communities. The merger will immediately expand each credit union’s branch/ATM network with 51 branches and 112 ATMs, primarily throughout Los Angeles and Orange Counties, as well as bring members a wider choice of products and services. Longer term, the economies of scale of a larger organization provide added resources to expand branches, products, member service initiatives and electronic delivery channels. “We’re excited to take the next step toward bringing two successful organizations together to deliver better service and convenience to our members, sponsor companies, employees and communities,” said Darryl Johnson, chair of the board of Kinecta. “Not only will this merger bring members more branches and products, it will build an even stronger foundation for long-term success.” Roger Ballard, currently joint chief executive officer of Kinecta and NuVision, will become chief executive officer of the new combined organization, which will retain the Kinecta

Federal Credit Union name and charter. Pending regulatory approval, the merger will be put to NuVision member vote. “Submitting our formal merger application moves us closer to creating a stronger, more competitive credit union that will bring our members greater value than either of us can as independent organizations,” said Robert Geraci, chairman of the board of NuVision. “The due diligence process reinforced our belief in the benefits of this merger, with even more synergies than expected between our goals and organizations.”

Mortgage Cadence Forms New Finale Doc Prep Division Mortgage Cadence LLC has announced that it will spin off its compliance, content and document preparation division, Mortgage Cadence Finale, into a separate entity, Finale Document Services. Finale allows lenders to create initial disclosures, interim packages, closing packages, loan modification packages, short sale documents and any other financial document and deliver them securely to the borrower or settlement agent in seconds. The tool was integrated into the company’s ELS offering (Orchestrator), but has since found a larger market as a standalone. “We’ve been in the compliance, content, document creation and management business since 1999 and have invested tens of millions of dollars into this product line and the seasoned team that supports it,” said Michael Detwiler, chief executive officer of Mortgage Cadence. “I pushed my team to develop an industry-leading document preparation and delivery solution powered by our proprietary rules engine because we could no longer stand idly while the industry continued to be underserved. We have streamlined implementations and eliminated document-related problems and compliance issues while increasing client satisfaction across the board. An amazing statistic to note is that since inception, we haven’t lost a single Finale customer to a competitor. That statement alone speaks volumes.” Finale contains an array of features, including the ability to: Generate forms dynamically for each individual and unique transaction; eliminate the rekeying of data; automate the document generation/distribution processes; and maintain strict compliance. The system can generate fully compliant forms for Fannie Mae, Freddie Mac, FHA and VA programs, as well as federal and state disclosures and supports all other investors as well. The platform supports doc prep for truly any financial transaction including first mortgages, second mortgages, HELOC’s, loan modifications, short sale, and forward and reverse mortgages.

“Finale delivers the document set that is required in complete compliance, regardless of the type of product or the jurisdiction,” Detwiler said. “We have a team of attorneys and compliance professionals ensuring our clients will be protected. The days of having an originator click boxes to determine what docs get included are over. The risk is simply too high. Lenders taking a loose approach to documents will fall out of compliance and be asked to buy loans back. Buyback requests for document-related issues are not as common now, but make no mistake, they will be. Lenders need to get prepared with the right solution.”

REALM Network and LPS Form Mobile App Partnership

Home Depot Partners With First Guaranty Mortgage on New REO Marketing Initiative

 PennyMac has announced the appointment of Paul Szymanski as managing director of the company’s warehouse lending division, and has named Doug Jones as its new chief correspondent lending officer.  Fairway Independent Mortgage Corporation has announced the addition of JC Mier as head of the company’s new Plano, Texas-based branch.

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.


 JULY 2011

First Guaranty Mortgage Corporation (FGMC) has announced a partnership with Home Depot and APD Solutions (APDS) to present its Rebuild the Dream initiative. Rebuild the Dream will seek to

Mortgage Professionals to Watch

 TMS Funding, the wholesale residential channel of Total Mortgage Services LLC, has announced the addition of five new wholesale account executives: Scott Beckwith in Georgia; Craig Castronovo in the New York Metro market; Tracey Ibsen in the New Jersey region; Robert Lukowski Jr. in the Illinois region and Matthew Neeley in the Connecticut region.  Shore Financial Services Inc. has named David Hall as president of its retail mortgage division.  Pro Teck Valuation Services has named Basil G. Pallone as its new chief financial officer.  Ellie Mae Inc. has hired Parvesh Sahi as its new vice president of compliance solutions.  Lender Processing Services Inc. (LPS) has named Joe Jacqout, former Deputy Attorney General of Florida and Chief of Staff for Florida Attorney General Bill McCollum, as LPS’ new senior vice president of government affairs.  G. Carolyn Mitchell has joined Aklero Risk Analytics Inc. as senior vice president.  Radian Guaranty Inc. has announced the addition of Marshall G. Gayden as senior vice president of account management.  Russell L. Burdsall has been named senior vice president of BankAtlantic Mortgage Services.  Morgan Harris has been appointed executive vice president of default services for WFG National Title Insurance Company.  Scott Slifer has been named president of sales and marketing for ISGN Solutions Inc. and ISGN has also named Raghavan Tiru as its new chief information officer.  Caliber Funding has named Brian Simon as its new chief executive officer.  Equifax has named Jeff Flory and Jeff Schwartzel as enterprise business directors.  Jim Beatty has joined Urban Lending Solutions Appraisals LLS (ULSA) as its new senior vice president of valuation services. ULSA has also hired Dennis Postlewait and Darlene Burnham as senior vice presidents of business development.


PLATINUMdata Solutions and Ellie Mae Inc. have announced the integration of PLATINUMdata’s REALview collateral valuation review technology with Ellie Mae’s Encompass360 Mortgage Management Solution. This integration provides direct, seamless connectivity between Encompass360 and REALview, enabling Encompass360 users to access REALview directly from their Encompass360 systems. REALview is an automated, transparent appraisal review tool that processes and analyzes appraisals. In addition to cross-checking and analyzing each appraisal against thousands of USPAP (Uniform Standards of Professional Appraisal Practice) guidelines and appraisal data factors, REALview verifies the appraiser’s license status while also integrating public record and other local market data to help validate the appraisal information. “The Interagency Guidelines have presented many new regulations and originators are rightfully concerned about compliance,” said Arturo Garcia, chief operations officer for PLATINUMdata Solutions. “By integrating into Encompass360, we’re extending REALview’s reach and providing even more originators with a cost-effective, automated solution for complying with the new Interagency Guidelines.” Encompass360 users can now not only order REALview reports with just a few mouse clicks, but also receive the completed reports almost instantaneously. The way it works is, the Encompass360 user uploads an appraisal PDF file into the newly created interface. There, the relevant data is extracted from the PDF appraisal report, evaluated and reviewed, all within minutes and in a fully automated fashion. When the analysis is complete, an easy-toread report is generated and automatically filed in the user’s corresponding Encompass360 eFolder. “Appraisal quality is a major factor in producing high quality loans,” said Jonathan Corr, chief strategy officer for Ellie Mae. “Our clients have come to rely on us to provide the solutions that enable total loan quality—and that includes valuations. We’re pleased to add REALview to the comprehensive range of quality-enhancing tools we offer our clients.”

accelerate the resale of real estateowned (REO) properties and help rebuild the housing stock nationwide by reducing the time cycle on the sale of such properties, as well as improving the sale prices. The initiative will provide incentive to homebuyers and Realtors alike to use rehabilitation loans to increase the value and appeal of REO properties which would often otherwise be marketed in a state of disrepair. FGMC is a national, full-service mortgage lending firm offering mortgage solutions to clients of varying income and credit types. The Rebuild the Dream program will confront the misperception that renovation loans, several of which are offered through the U.S. Department of Housing & Urban Development (HUD) and Fannie Mae, can be time-consuming, complex and administratively burdensome to close. By facilitating and encouraging the use of such loan products, FGMC will seek to expedite REO sales at more stable pricing. “This initiative will work to smooth the transaction for Realtors who otherwise would have avoided the rehabilitation loan,” said FGMC Senior Vice President Andrew Peters. “We believe that many have avoided such products because of a misperception that the 203k loan is timeconsuming and difficult to close. Our team will work with asset managers and Realtors to cut through the proverbial ‘red tape.’ Now, a Realtor will be able to market a bank-owned property to prospective buyers, suggesting they customize the house as though it were brand-new.” The Rebuild the Dream Team will collaborate with real estate agents, REO asset managers and real estate agents to coordinate the marketing of REO properties, and will manage the administrative requirements associated with a rehabilitation loan through closing, cutting the time and guesswork often associated with the process. Additionally, FGMC will be partnering with Atlanta-based APDS, a national neighborhood revitalization firm providing services and strategies that impact community development. APDS uses community development consulting services and a comprehensive network of real estate services to design and implement neighborhood-based programs. In partnership with Home Depot Inc., APDS will provide high-level customer service and coordination on the delivery of the renovation services to be facilitated by the rehabilitation loans, including contracting on the rehabilitation work. 

The Real Estate and Living Media (REALM) Network, the online advertising service of the LPS Real Estate Group have announced a strategic media relationship with Smarter Agent, a provider of mobile real estate applications. This partnership enables the REALM Network to expand its offerings beyond its many thousands of Web sites into the mobile device market. “We all understand the importance of mobile devices to the future of real estate,” said Shiraz Vartanian, general manager of the REALM Network. “Smarter Agent has more than 10,000 apps that are branded to major real estate franchisors, MLSs, brokers and agents. By combining those with the thousands of online sites in the REALM, advertisers are able to expand their reach exponentially. Together, Smarter Agent and the REALM are giving advertisers and their agencies a single, simplified way of reaching real estate-buying target audiences in a way they’ve never been able to before.” Smarter Agent develops branded mobile applications for real estate organizations that allow their customers to view all MLS listings anytime, anywhere from any mobile device. Through the new arrangement with Smarter Agent, the REALM advertisers can now reach real estate consumers on these mobile devices, as well as online, with a single purchase. “This new relationship with LPS and the REALM is a perfect strategic fit for us,” said Brad Blumberg, chief executive officer of Smarter Agent. “Smarter Agent’s location-aware mobile real estate apps have been downloaded more than two million times—that’s a very large, target audience of active movers for the REALM’s advertisers. Given the larger appeal to advertisers and their expected increase in advertising, our clients and the REALM publishers will benefit from the opportunity to earn more revenue.”

PLATINUMdata and Ellie Mae Partner on Appraisal Transparency

ability-to-repay (part II)

continued from page 24

requirements of the Rule. In any event, any such loan, constructively being a covered transaction, would need to comply with the closed-end credit rules, which include the ability-to-repay.

Alternative loan—Lenders B. The APR of the loan cannot increase after consummation.16 C. The loan must be a QM or a Balloon Payment Qualified Mortgage (BPQM). D. The loan must not be a higher-priced mortgage loan under Section 226.45 of Regulation Z.17 2. Secondly, the duration of the prepayment penalty period may not be more than three years after the consummation of the loan. 3. Third, the amount of the prepayment penalty (i) may not exceed three percent of the outstanding, prepaid loan balance if incurred during the first year after consummation of the loan, (ii) may not exceed two percent of the outstanding loan balance prepaid if incurred during the second year after consummation of the loan, and (iii) may not exceed one percent of the outstanding, prepaid loan balance if incurred during the third year after consummation of the loan. In the QM points and fees test, a loan that includes the aforementioned, maximum prepayment penalties must include three percent of the entire outstanding loan balance as part of the points and fees. Consequently, the creditor and loan originator would have to forego virtually all other points and fees in order to meet the QM test.18 Closed-end reverse mortgages, bridge loans with initial terms of 12 months or less, and loans with initial terms of 12 months or less to finance the initial construction of a dwelling are subject to the restrictions on prepayment penalties. Because a closed-end reverse mortgage involves the addition of interest and fees to the principal balance, a reverse mortgage does not qualify as a QM and, therefore, by definition cannot include prepayment penalties.

Conditions—Alternative loans


Consistent with providing information about alternative financing options to a consumer, if the lender offers a covered transaction that contains a prepayment penalty, it must also offer a covered transaction that does not contain a prepayment penalty (an “alternative loan”). Obviously, if the lender determines that the borrower cannot qualify for any alternative loan, then it should not offer a loan with a prepayment penalty. There is no violation of this Rule relating to alternative loans if the covered transaction is closed without a prepayment penalty or no covered transaction is closed at all. A creditor may not structure what is constructively a covered transaction as an open-end loan in order to evade the

The alternative loan must meet all of the following conditions: 1. The APR of the alternative loan must not increase after consummation. 2. The alternative loan must be the same type of loan as the loan with the prepayment penalty. 3. The alternative loan must have the same term as the loan with the prepayment penalty. 4. The alternative loan must provide for regular periodic payments that do not result in an increase in the principal balance (i.e., does not allow the borrower to defer the repayment of principal and does not result in a balloon payment, unless the loan is a BPQM). 5. The alternative loan must have total points and fees that do not exceed the permitted percentage of the total loan amount for a QM (see above) based on information known to the creditor at the time the alternative loan is offered. 6. The lender must have a good faith belief that the borrower qualifies for the alternative loan, based on information known to the lender at the time the alternative loan is offered.19

Alternative loan—Brokers If a mortgage broker offers a prepayment penalty, the lender must also present the mortgage broker with an alternative loan that meets the above-mentioned conditions. Operationally, this can be done by the lender providing a rate sheet to the mortgage broker, which includes the terms of the alternative loan. I would advise the lender to execute an agreement with the mortgage broker, requiring the mortgage broker to present an alternative loan to the borrower.20 The alternative loan can come from the creditor or from another creditor (if the loan offered by the other creditor has a lower interest rate or lower total dollar amount of origination fees and discount points). Procedurally, this disclosure is methodologically similar to, but does not replace, the anti-steering protocol derived from the final rule of the Truth-in-Lending Act’s (TILA) loan originator compensation requirements set forth in the revised Regulation Z.21 The same requirements apply for table-funded transactions. The creditor must offer an alternative loan that meets the conditions described hereinabove, that is, offered by the assignee or by another creditor (if the loan offered by the other

JULY 2011 


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creditor has a lower interest rate or lower total dollar amount of origination fees and discount points).

Record retention The Rule mandates retaining records for three years after consummation of the loan. If the creditor must verify and document information used to underwrite a loan, the creditor must retain evidence sufficient to demonstrate compliance with that requirement. Retention of hard copies is not required, as long as the lender can reproduce the documents. Two years after the date that disclosures are required, excluding the record retention provisions relating to advertising rules, remain in place for other provisions of Regulation Z.

originators would have to ensure that borrowers can make payments if interest rates rise.22 Essentially, the gambit being proffered by Dodd-Frank is based on the theory that mortgage securities backed by QRM loans should be exempt from the risk-retention rules, on the theory that investors understand the underwriting quality and risks of these loans sufficiently that additional “skin in the game” is not necessary. QRM, therefore, is directly related to new risk retention requirements. In a forthcoming article, I will treat extensively the QRM and risk retention. For the sake of understanding the ability-to-repay, suffice it to recognize that Dodd-Frank requires mortgage originators and securitizers to keep at least

five percent of the credit risk, involving certain types of mortgages, whenever they are involved in creating or selling appertaining, residential mortgage-backed securities. The ability-to-repay links up with the way risk retention is defined because QRMs are deemed to carry a lower risk of default. However, there is no clear elaboration of possible adverse outcomes to implementing such a scheme. As Mark Zandi and Cristian Deritis, of Moody’s Analytics, state: “Getting the QRM definition right is vital. Too narrow a definition—limited to loans with very high down payments and high credit scores, for example—could significantly raise the cost of mortgage credit and reduce its availability for a large number of potential borrowers. Too

wide a QRM definition could blunt the risk retention rule’s ability to raise market confidence in securitization.” In my next article, I will discuss in detail the qualified residential mortgage and risk retention. But certainly with regards to the ability-to-repay and the QM, imposing a duty upon lenders to assure a borrower’s ability to repay as a regulatory requirement, effectively codifying underwriting guidelines—although not without precedent as a legal construct—has become a signal part of Dodd-Frank, thereby enshrining a particularly inherent underwriting feature to a regulatory framework. The extent to which there is a drift toward continued on page 41

Finale “A story has no beginning or end: arbitrarily one chooses that moment of experience from which to look back or from which to look ahead.” —The End of the Affair, Graham Greene


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 JULY 2011


The ability-to-repay requirements are set forth in the Federal Register, consisting of 117 pages, in the usual three column format. In long format, as produced by the Federal Reserve itself, the requirements consume 474 pages. This is a very complicated set of guidelines. Some of the criticism directed at this Rule involves, among other things, the linkage between the qualified mortgage (QM) and the qualified residential mortgage (QRM), and the ostensible imposition of underwriting guidelines in a regulatory framework. The broader issue is the extent to which the Rule actually raises the pricing to the consumer. The qualified residential mortgage (QRM) exemption for risk retention purposes (as required by Section 941of Dodd-Frank) and the qualified mortgage (QM) definition (under the “Ability-to-Repay” provisions of Section 1412 of Title XIV of DoddFrank) do require further synchronizing. Recently, the Wall Street Journal described three ways that the standards for the QRM could be improved, such as: (1) By requiring a minimum 20 percent downpayment and an alternate outlining a 10 percent downpayment and mortgage insurance, with loan-to-value ratios could be higher for refinances; or (2) Prescribing steps requiring originators to verify borrowers’ incomes; or (3) Providing calculation such that the maximum amount of a borrower’s income can go towards mortgage payments (i.e., DTI); or (4) Recommending mortgage debt equal to 28 percent of income and total debt equal to 36 percent of income, with the alternative being ratios of 33 percent and 41 percent under certain circumstances; or finally, (5) Clarifying which types of loans will be ineligible, such as disallowing interest-only mortgages, but allowing certain adjustable-rate loans that could qualify, although the

Pulling your hair out with other lenders?

Social Media and the MLO: Competing for Business on New Platforms By Sue Woodard

JULY 2011 



The way people receive and communi- view Facebook as their community more cate needs and information has taken a than they do people sitting right in front dramatic shift in the past few years. The of them?” number of people on Facebook is more than double the population of the United Quite simply, each MLO needs to put States. LinkedIn has grown 100 percent to him or herself in front of the opportu100 million professionals in the past year. nities. There needs to be a presence in There are 1.3 million “tweets” sent out the very media where prospective cusfrom Twitter each hour. tomers are spending the majority of This not only affects social connections, their media time, and the MLO or comsocial media influences the way people pany needs to be comfortable with and communicate everyday needs, from shop- have the technology that facilitates this ping to childcare, and even more dramat- interaction or the borrower will not ic decisions including when and how to know the lender is out there. purchase a home. Web sites, including This aspect of origination cannot be, and REAL- overlooked. A recent independent study, have capitalized on the online performed by FirstUSA Data and comhousing information knowledge acquisi- missioned by Mortgage Success Source tion need, but the chalfound that originators lenge remains for many that spent at least 33 mortgage loan originators percent of their time on (MLOs), from top-performing customer acquisition industry veterans to green had higher loan voloriginators just stepping into umes than their peers. the business, on how to comSpecifically, the study pete for business in the new found that more than 50 social media world. percent of originators who Social media platforms spent at least 33 percent of have gone from a trend their time on customer among high school and acquisition were top-third college students to a way performers. Only 10 perof life for all demographcent of them were bottom“Relevant content is ics. Almost 25 percent of third performers. the currency that Facebook users are 25-34 builds business relayears old and 30 percent tionships, but MLOs New-age lead are 35-54 years old. Those generation cannot continually age groups are prime can- keep fresh, pertinent Local real estate offices didates for becoming firstare just not the same content flow on a time homebuyers, current anymore. While visiting daily basis along homeowners looking to an office with donuts with their other refinance and those looking knowledge and client and rate sheets was to purchase another home always considered a bit acquisition duties.” because of life events, such “old school,” at least the as a new job, divorce or the MLO might have had the arrival of children. But these potential cus- chance to say hello to a few hungry tomers are not visiting banks or credit agents. But things have changed and unions in person. They have direct deposit, real estate agents are no longer in their online bill pay and get pre-qualifications offices waiting for the phone to ring. for auto loans online. Instead, they network online, and look for To capitalize on the communication market and financial knowledge to develshift, each MLO must devise his or her op an edge. MLOs must make changes as own strategy for embracing and using well, having real-time market data, analythe technology tools that are avail- sis and advice on their mobile device and able—to anyone—and compete for the must be able connect with agents and same viewers by adding his or her own other referral partners. tactics. The question becomes: In this new media age, the epitome of visibility is Google. If an LO in Denver “How does a single MLO or one company enters “Mortgage in Denver” and does stand out to the 500 million people who not come up as one of the top three or

four responses, that LO is at an extreme disadvantage. Ideally, the MLO’s blog, Facebook page, personal Web site and ghost-written article will pop up, creating a presence and a new prospect. Ad words can be bought on Google, creating an instant presence if those words are typed into the browser, but a much less expensive way to have input in search engine optimization is to frequently contribute to sites and crosspromote with referral partners.

Establishing the connection One of the most difficult things for any business to do is try to find customers and predict when they are going to need products or services. On average, 15 percent of an MLO or organization’s clients are going to need to buy a new home or refinance their current home each year. It is the same ratio for the rest of the population. The problem is there is just no connection between the MLO and the prospect. Where those prospects are located is getting much easier to figure out. If an MLO wants to know who and where the potential clients are, it is not nearly as difficult as it might seem and will get increasingly easier. The average Facebook user is connected to 80 community pages, groups and events. The key is finding the prospects before there is a need. People’s needs for mortgages and almost any banking product are driven by major life events. Whether it is the birth of a child, loss of a spouse, a wedding, a move, a child’s graduation, a job transfer or pending retirement, many are predictable events. When a known potential consumer decides the time is right to commit to a purchase, the MLO who reached out through social media has already created a connection between the prospect and him or herself. The MLO used social media to build brand awareness—the key is to engage the consumer by providing a bounty of useful and relevant information. Within the context of the banking and financial services world, and all business to client businesses, branding through social media creates trust and builds a foundation. Unlike traditional bus stop ads, creatively placed business cards or a billboard, social media creates a dialogue instead of the traditional one-way conversation that used to occur with advertising. A name and phone number do little to create brand loyalty or trust. Prospects can reach out with questions and concerns, see interaction with current clients and receive information and advice through social media platforms. Data analytics reveal customer

interest in viewing content and even gives clues to their financial needs through page-by-page reporting.

Obstacles and solutions Social media is an adaption that MLOs and their companies must make to remain viable. Once the transition to social media has occurred, the opportunities for increased business present themselves through those new channels, but along with the new business potential, issues can also arise from attempting to remain relevant in these new ventures. Compliance, syndication and content creation all pose problems for MLOs entering the world of social media. Any communication an MLO has about finance from his or her personal social media account, the bank or parent institution is responsible for. The wellintentioned MLO who tries to reach new heights can end up penalizing themselves or their employers because the message was non-compliant. Syndicated messages, particularly direct marketing, are extremely viable solutions. Institutions can approve messaging sent to social media and e-mail and still get a personal touch by attaching an individual MLO’s picture, name and contact information. Another challenge of meeting social media needs is finding interesting, timely content to give to consumers. The individual MLO must have real-time information to replace daily rate sheets and be able to easily explain the market along with giving reliable insight and advice. Newsletters, ezines and market-related e-mails are all popular ways to communicate market information, but where does the information come from? Relevant content is the currency that builds business relationships, but MLOs cannot continually keep fresh, pertinent content flow on a daily basis along with their other knowledge and client acquisition duties. The investment should be made to procure an organized, established network of industry subject matter experts, talented writers and easy deliverability. This allows MLOs to stay current, build key relationships and not fall behind. Having this information automated along with other syndicated social messaging is a great way to keep abreast with the social media trend and gain business without losing productivity in other areas. It’s clear that social media is not just a trend as it increasingly influences the way people communicate and do business. The only way an MLO and lending institutions can remain competitive is by making a push into social media through a well thought-out plan that supports the MLO’s sales and prospecting efforts. Such endeavors include search engine optimization (SEO); utiliz-

ing multiple multimedia platforms including blogging, Facebook, Twitter and LinkedIn; providing relevant messaging to establish a relationship and making sure they can be found. The dangers that come along with this new horizon are the risks of unregulated messaging, lack of syndication and branding and the need for content. Many MLOs and organizations are turning to professionals to handle messaging, content and real-time market knowledge and seeing a large increase in loan volume as a result. Are you one of them? Sue Woodard is president of Mortgage Success Source, and has held many different roles during her nearly 20 years in the mortgage industry. A highly sought-

after international speaker, trainer, writer and consultant for the mortgage and real estate industries, Sue and her top-producing team maintain a profitable and thriving origination practice in Minneapolis. Sue had her own successful financial radio show, has been featured on NBC and CBS Live News Radio, and has also been a guest on CNBC’s SquawkBox and Jim Cramer’s Mad Money. She is a member of her local mortgage association and board of Realtors, the Women’s Council of Realtors and is on the National Advisory Board for Ellie Mae. She has a teenage daughter and firmly believes that sleep is overrated. She may be reached by phone at (800) 963-1900, ext. 1555 or e-mail

Getting Started on Facebook, LinkedIn and Twitter By Ashley Duvernell & Ericka Smith




 JULY 2011

In the conservative, and sometimes old- rent and potential customers. fashioned, world of the mortgage industry So it’s safe to assume that social net… you may wonder: Is there a place for working sites are here for the duration. social media? While there The big question is are arguments for both whether not you or your sides, we side with those organization should get who agree social media is involved. For those interjust another way we can ested in social networking reach out and seem more sites (SNS) for primarily relevant to current and personal use, decisions future customers. about what to share and In our everyday life, who to “Friend” through many of us are accusFacebook and other social tomed to meeting media sites are rather simsomeone who ends up ple. In business, engaging asking, “Are you on with current and prospecFacebook?” Well, with tive customers via SNS is a “Many professionals 600 million users, most use social networks to different ballgame. of us are. In fact, there Organizations interested establish credibility are more Facebook in engaging customers via and visibility in their users than people in the SNS must make sure their industries for the United States. social media activities are purpose of building The average age of aligned with their core relationships.” social network users has marketing objectives and —Ericka Smith increased from 33 years integrated with existing of age to 38 years of age, and currently communication channels. Messages half of all adult social network users are conveyed through SNS channels and over 35 years of age. While those num- traditional channels such as e-mail, telbers might not be surprising, these next evision or radio should support each facts might be: Facebook users are other. Organizations should also be premore trusting that others, have more pared to handle negative communicaclose relationships and are more politi- tion via posts, comments or other cally engaged than those who don’t. means. Overall, the goal is to encourage Social network usage inspires trust … customers to get involved in a dialog interesting findings with interesting with you, earn their trust, allow them to implications about the way our organi- share their opinions and encourage zations should be engaging with cur- them to provide feedback.

For the interests of busishould generally be connesses, the “Create a Page” tent with the free basic option for Facebook would service. be for you. You can elect to You begin using identify your organization LinkedIn by connecting as a local business or place, with other LinkedIn a company or a brand, as users. You can search by well as what industry catea person’s name, the gory your business falls into. organization they work A business account does not for, school, a past comhave friends like personal pany they worked at, Facebook accounts, instead, their job function and a business account on “Social network usage many more options to Facebook has Fans. Fans find people you may inspires trust … click the “Like” button on know. LinkedIn can serve interesting findings your business page to show as a great way to connect with interesting their support, but do not implications about the with industry professionneed to be Fans to read your way our organizations als such as real estate page content. However, a agents or other mortgage should be engaging person must be a Fan to professionals. with current and post comments or like posts potential customers.” The more partneron your business page. This ships you have with real —Ashley Duvernell presents a good opportunity estate agents, the bigger for you to interact or have meaningful con- your referral business grows. By conversations with your current or future cus- necting with mortgage professionals, tomers. A Fan Page also allows you to post you can discuss current industry hot helpful links or promotions to your fans, topics and bounce ideas off each other. which can turn out to be a great resource Another way to connect with people is for information related to your business. to join professional groups that are Another popular SNS that is seeing related to your industry. Once you increased growth is LinkedIn. It is the become part of a group, you can post world’s largest professional network questions or discussion board topics, used to link job seekers with employers, answer questions or engage in other to share professional expertise, and for people’s conversations to build your general networking. To begin on connections. LinkedIn, users create a profile indentiThe final big player in SNS is Twitter, fying current job status or industry of which boasts more than 200 million interest and a variety of other informa- users. Twitter is essentially a micro blog tion typically found on a standard that users use to “tweet” messages 140 resume. Examples of information a user characters or less. Shortened URLs are can customize on their profile include often used within the content of a tweet work experience, education, skills, as to direct followers to a page with more well as academic awards and achieve- detailed information impossible to conments. While you can purchase upgrad- vey in a little tweet. Tweets are blasted ed accounts that allow for things like advanced searches, most new users continued on page 32

bility in their industries for the purpose of building relationships. Others use social networks to provide articles and other useful content in effort to drive traffic to their Web site. While others utilize social networks in conjunction with other search optimization practices, assuming that social networks are fast becoming an important factor in the way Google, Bing and Yahoo determine a Web site’s authority, page rank, and ultimately, its position in the coveted organic search engine results. No matter how or why we decide to engage in social networking, our customers are already out there forming connections and building relationships. Since social networking sites are generally free and very simple to set up, why not explore for yourself and see what kind of business they bring in. It’s recommended that you don’t spend more than an hour each day in the beginning stages of your social media plans, until you really start to build a following. If you’re stuck, always remember you can visit other mortgage professionals’ social media pages and see how they are interacting with others to get ideas for yourself. If anything, it’s another way to establish yourself as a professional and reach out to groups you may have not connected with before. Ashley Duvernell is marketing coordinator, public relations and social media for Inlanta Mortgage. She may be reached by phone at (262) 797-7111, ext. 6103 or e-mail Ericka Smith is marketing coordinator, SEO and Internet marketing for Inlanta Mortgage. She may be reached by phone at (262) 797-7111, ext. 6102or e-mail

JULY 2011 



out to the group of Twitter users who have elected to follow you (Followers) and you receive tweets from the Twitter users you have elected to keep tabs on (Following). Retweets (RT) allow users to share links, tweets and other gems tweeted by others. Signing up for a Twitter account is similar to the log-in process for Facebook or LinkedIn. Once you’ve created an account, Twitter provides a list of topics that you can select from or a search bar to enter in topics or people you may be specifically interested in. Follow them to receive tweets from that group or person and click the following button to “Unfollow.” Ideally, loan originators can use Twitter as a way to provide important or useful information to their followers, who may be current or future customers, other industry professionals or businesses you work with on a normal basis. Since Twitter is more for quick posts or updates, feel free to throw in some fun or interesting posts along with the informational ones. Your followers don’t want information solely regarding you and your business; give them a reason to want to follow you - either because you are the first to post the next viral video or you have a great taste in music. Again, by combining the fun stuff with important information that pertains to you and your business, your followers will be more involved. Ideally, a strategic social media marketing plan would incorporate Facebook, LinkedIn, and Twitter. The real value derived from integrating social network use with traditional channels of communication will vary from organization to organization. Many professionals use social networks to establish credibility and visi-

Closing FHA Loans Through Social Media By Jeff Mifsud

To many mortgage loan originators (MLOs), social media is a mysterious landscape in the world of lead generation that seems impossible to penetrate. At the same time, you know that social media does impact the way people shop for homes and seek out MLOs. In this article, I will share with you a perspective on social media and Federal Housing Administration (FHA) loans, along with interviews with MLOs who are successfully using social media to close FHA loans. But first, a few words about an “oldie but goodie” technique: Some 15-plus years ago, the most effective marketing tool an originator had was a phone. An MLO was forced to set appointments and develop relationships with referral sources in order to do business. With this model, in theory, the more referral sources an MLO connected with, the more referrals would be generated. This model worked then, and as long as there are telephones, it will always work. Why? Because it is through the relationships that are built in face-to-face meetings that trust is built, and it is because of that trust that the real estate agent will suggest that her buyer call you. Assuming the buyer trusts their agent, they will, in turn, trust you. Over time, on the condition that you maintain your relationships (this is key), your database will grow and a certain percentage of closings each year will come from your database. I know an MLO in the Montgomery, Ala. area who has used this method to build her business. In 2010, her office of three MLOs closed nearly 800 loans, and 100 percent of her business comes from referrals! Developing this type of database takes years, but it creates a very solid return year after year because of solid relationships that have developed over time.

Now … enter social media

e-mail: visit:

There are two ways I have observed that MLOs use social media. One is as a tool to develop a credible image and as a place to send potential clients to learn more about the LO and to gain confidence in their expertise and credentials. The second is to use it not only as a way to create credibility, but as a primary means of generating leads through a well-designed social business strategy. I am going to focus now on the latter; if you are considering investing your time using social media to generate FHA business, you will need to pay close attention! First, you have to know that the use of

social media can be a huge waste of time if you don’t understand how it works and have a detailed plan of execution. From what I’ve seen, most MLOs waste their time with social media and they would be more successful if they spent their time having face-to-face meetings with FHA referral sources. Because just as having face-to-face meetings is a way of developing relationships, so it is with social media; that is, the way you communicate to the consumers through social media is a means of building trust in the absence of a personal referral. Social media works well with targeting FHA borrowers because they are often first-time homebuyers and are looking for information to educate themselves on the homebuying process, so if you are providing the blog to give them the information they are seeking, then you stand to win them as clients. I recently spoke to Tim Storm of Alpine Mortgage, Paul Dunn of Sunstreet Mortgage, and Brad Yzermans of First Priority Financial, three MLOs who have expertise in developing FHA business through social media and have learned from social media guru, Mark Madsen, the creator of ( I asked them a series of seven questions related to the topic and here are the answers to those questions.

How much time do you spend on social media sites? Paul Dunn (PD): By social media, I am assuming you mean anything from Digg, to ActiveRain to YouTube and Facebook. I view the social media as a tool for driving traffic, and segmenting the different social media sites by their best use. However, for me, all social media has only one purpose: To drive traffic to my conversion sites. I use a fully automated system for the social bookmarking sites such as Digg, so I really only spend a few minutes a week on those. I’ll spend enough time to write a post on ActiveRain or other blog sites once or twice a month, depending on the product campaign; during a campaign I will spend a couple hours to several working within YouTube. Although Facebook can be an extremely valuable tool for a social media campaign, it is not really a necessary ingredient. But I do believe that if Facebook was your primary online presence, you could

dominate with a well thought-out localized series of Fan Pages and Groups. I bet you could even get others to post your content and the maintenance would be minimal. Tim Storm (TS): I actually don’t spend much time on Facebook or Twitter, but I do spend time blogging. I am active on My outside blog with is I probably spend less time on Facebook now than before. Except now I use it as a way to stay connected to other mortgage bloggers. We bounce ideas off each other. I’m in a couple of private groups for Wordpress and mortgage blogging. I still check out Activerain every day. I write posts for my outside blog, but also read some of the technical posts. I’m always trying to learn. Brad Yzermans (BY): Approximately 3090 min. a day. I plan to add more blogs this year. I time block an hour a day for writing a post. I have blocked out time for each blog in order to make sure nothing sits too long. Some blogs I write a post every other week, and some get a new post every week. The multi-user blogs are powerful because of their “Google Juice,” so I make sure to contribute solid content on those blogs that link back to my other blogs and Web sites. Some niche blogs I’ve left alone; I’d rather focus on FHA and VA than the Homepath program. I have recently started, which is beginning to generate leads as well. BY: I write approximately two to six articles per month. I feed in other articles to compliment my blog. Writing blog posts probably takes me longer than others … maybe one hour total for a complete article.

How many loans do you close from the social media-generated leads? PD: Enough … social media is the source for all of my closings. I have met the Realtors I work with now through my online campaigns. When you control the lead, it is much easier to choose or fire your Realtors. TS: Through blogging, I get around nine to 10 leads per month, counting the Realtors who find me through blogging and then send leads. Many turn into pre-approvals and then it’s a matter of finding a home and getting an offer accepted. That has been the difficult part. I just keep preapproving as many as possible. It’s a numbers game. It seems like I need 10 active pre-approvals for every deal that actually goes into escrow. I try to maintain about 50 pre-approvals. I still get Realtors who find me on the Web and then refer deals to me. That is actually my primary source of new Realtors since I rarely go out in the field or

hit the weekend open houses. I have Realtors referring me deals who I’ve never met. Typically, I try to meet a good referring Realtor at least once a year. That probably sounds terrible, but if I’m out in the field, then I’m not on the computer, which is how I get leads. BY: In 2010, I closed 13 loans directly attributed to blogging. What system or process do you use to follow up with the leads captured through social media? PD: Usually they come in two forms. The first, the potential customer will fill out the online application and then wait for me to call them or second, the potential customer will call me then fill out the online application. I find I have more success when they call before filling out the application because it is easy to put off that call when you are swamped, right? After they fill out the application they are sent a link to my credit agency where they can pull continued on page 34


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 JULY 2011

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How long have you been working social media angle? What sites do you use the most? PD: I don’t think of social media quite the PD: I use my own network of sites. I use same way others think about it or use it. To You Tube the most for me, it is simply a tool to social media. drive traffic to a conversion engine. If it requires makTS: Besides my own blogs, I ing friends, then it is too write on a few multi-user much effort and the return blogs; is most likely too low and unless it can be automatI still learn from Mark ed. I like to think of it as Madsen, the master. creating a footprint that will drive traffic for the BY: I now contribute to long term. I first started three blog sites. Most of my using social media back time is focused on blogging. in 2006 or 2007 … not “…you have to know sure. How many articles/blogs that the use of social do you write in a month media can be a huge TS: I’ve been actively waste of time if you and how much time does blogging since November don’t understand it take? of 2008, which is about how it works and PD: When it’s time to kick when Mark Madsen’s off a new campaign, I will have a detailed plan MyFHAMortgageBlog startof execution.” write an article. A 400-word ed. I have learned quite a article takes about 10-15 bit from Mark. min. At this point, I’m only writing a maintenance article every couple of weeks. But BY: Since June of 2009. when I need to make a quick campaign, I may write one a day and set to auto-pub- How many leads do you generate lish to release them over a week. You can monthly from social media? write them over some spare time during PD: A lot. I don’t call on Realtors. All of my the weekend and schedule them to be business comes from online activity. My published at a later date. When I build a business attire is shorts and flip-flops. I have new site, I will spend three to five hours not met a borrower face-to-face in years. creating the content. TS: From blogging, I generate approxiTS: I have seven of my own blogs which mately 30-40 leads per month. Some are I also write on. Some are tied to a spe- just gathering info, but many are very good cific program, like OrangeCountyHome- leads. and, while oth- BY: I generate about 10 lead inquiries per ers are tied to a specific city, like month … not all are eligible to qualify

now, but I add them to my database and stay in touch until they are eligible.

and pay for their credit report. When the credit report is pulled, I get an instant alert, then can pull it down and call them. Then, once they are in the system, I have an online application status and document tracking program I use that sends an automated status update every night. A good social media system is the perfect answer for The Lazy Originator, and coming soon,! TS: After 20 years of using ACT!, I have switched to Mortgage Planner CRM. Itâ&#x20AC;&#x2122;s an awesome Web-based CRM. It is easier to track e-mails, set up templates and track leads than what I had used before. I can quickly track how many leads I am getting from each source. It even works great as an iPhone app that allows me to easily access my entire database wherever I am from my phone.

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BY: I have a high trust conversation, answer their questions and offer solutions that involve me doing their loan. If they were just calling for info, then I let them go on their way. Some call back after experiencing the wrath of some other hack LO trying to meet their quota. I get the name, e-mail and phone number from everyone who calls me. Most call rather than request info online or fill out lead capture forms. A lead from a blog caller is usually someone who has read your content, watched your videos, and decided you are the one they want to work with â&#x20AC;Ś people are lurking online, sometimes for months. They want to know who is the most knowledgeable and transparent LO around â&#x20AC;Ś someone they can depend on and someone who is real. When they read your blog, they get to know your personality. And people do business with others they know,

like and trust, right? Video accomplishes this issue even better, but only if you can pull it off in front of a camera. I publish content on three different blogs, all designed to drive traffic back to my main blog site. It can take a few months for your blog content to start developing calls at first. I anticipate this to double in 2011. Blogging cost me about $400 last year. Blogging done wrong can make you look bad. I spent a lot of time reading and learning how to do it. Mark Madsen has been a big help.

media guru friend of mine is encouraging me to provide a service of writing blog content for MLOs to make it easy for them. Before committing to this, I am curious how many of you would want this service and what you would pay for four articles a month for your blog. Send me an e-mail at with your thoughts. In the meantime, develop a plan to develop a blog that will target the buyers you want to attract. The more clari-

Tim Storm added these tips about blogging in general: â&#x20AC;&#x153;The key to blogging is to write good content. I see too many people who just write a sales letter for a blog article. I try to write out exactly what they searched Google for. Iâ&#x20AC;&#x2122;m not trying to tease them to get a phone call. I lay it all out. I think a first-time homebuyer will appreciate that. If Iâ&#x20AC;&#x2122;m searching in Google for something and I end up on a sales letter, I go back to Google and continue to search what Iâ&#x20AC;&#x2122;m looking for. When an FHA or VA buyer does call me, they are already sold on me, my knowledge, and ability to get their loan closed. Rarely do I get a â&#x20AC;&#x153;rate shopper call.â&#x20AC;? Folks, social media is direct marketing at its best and without the huge dollar investment. It only makes sense to put your marketing efforts where the buyers look firstâ&#x20AC;&#x201D;online. The formula is very simple:

What Has Social Media Done for You Lately?

Quality Targeted Content + Consistency Leads The key is the discipline it actually takes to implement and maintaining the blog. Because of my knowledge of FHA and my writing skills, a social

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ty you have, the more effective your result will likely be. Go FHA! Jeff Mifsud is founder of Michigan-based Mortgage Seminars LLC, a former FHA underwriter with 15-plus years of experience originating FHA loans, an FHA expert for and creator of The FHA Originator, a monthly FHA newsletter. Jeff may be reached by phone at (248) 403-8181 or visit

By B.J. Bounds

your personal profile. Of course, you cannot take 1003 applications through Facebook, but you at least have a platform to promote your services to its 600 million-plus active users. Another booming social media platform is Twitter, the 140 character microblogging phenomenon. With 200 million current Twitter accounts and 460,000 new accounts each day, Twitter is undoubtedly growing fast. Twitter really is a great tool for business. In just 140 characters, you can share industry news, talk about your services and build relationships with potential clients who found your tweets. If you have a Web site or blog, you can link your tweets directly to them for complete details and to perhaps capture visitor information with a registration request for additional information. â&#x20AC;&#x153;Social media is a You can have mini convercommitment.â&#x20AC;? Where we spend sations with interested parties, share important news, our time Facebook is a wonderful marketing tool and create an online persona that will for consumer marketing. Itâ&#x20AC;&#x2122;s fun and you attract future clients or industry partners. can do so much with it. Many of you are To keep in touch with your industry already communicating with friends and partners or professional groups, donâ&#x20AC;&#x2122;t family on Facebook. You might even have neglect LinkedIn for outstanding networkconnected with current or former clients ing functionality for referral partners and through your personal page. But, have fellow mortgage professionals. LinkedIn is you considered creating a Business Page the business networking tool that serves using your personal profile? With a the needs of professionals in any industry Business Page, you have greater opportu- or job function. Even the most basic â&#x20AC;&#x153;freeâ&#x20AC;? nities for promoting your business to version of LinkedIn has valuable business potential clients. You can secure a user building potential. You can post status name for your business so that you can updates similar to Facebook to keep conprint the URL on your business cards, fly- nections involved with your business and ers or brochures. Itâ&#x20AC;&#x2122;s a free Web site for can interact with networking groups that you that you can easily manage through best suit your business and your interests.

If you look at any of the articles and research done on the benefits of social media, youâ&#x20AC;&#x2122;d be hard-pressed to find any downsides to using social media to promote and build your business. But as with anything that looks as good as free social and business networking, there is a potential snag: Timeâ&#x20AC;&#x201D;more specifically, time management. Managing the time you spend networking online versus other businessbuilding activities or even just the day-today activities of running your business can make a world of difference in how effective your marketing efforts prove to be. There are several notable networking platforms and using them in conjunction with your other activities increases your online presence and visibilityâ&#x20AC;&#x201D;as long as youâ&#x20AC;&#x2122;re not spending too much or too little time with them.

LinkedIn provides for an online “resume” where you can list your credentials, experience, specialties, languages spoken, etc. And like Facebook and Twitter, you get amazing search engine result placements.

How to spend your time wisely

 Analytics: Social media activities— keeping your material fresh and current, posting multiple times a day, having meaningful dialogue with your followers/connections—is great, but without analytics, how do you know what’s working and what’s not? Use the free tools within your platforms to monitor the posts and links that resonate best with your clients and peers. You will save time and potential followers by only posting the best content for your networks. 1) Facebook has “Facebook Insights” that helps you see how your fans are interacting on your page. It allows you to see who your active users are and where your traffic is coming from. 2) To check your Tweet stats, you can use a free tool such as Tweetstats that will display your tweets and monitor how you’re doing in terms of follower interactions. 3) If you use for a URL shortener, you can visit their site to see how many followers are clicking your links. Analysis tools for Twitter are plentiful and you can quickly find one that provides the information you need. It bears mentioning that if you do choose to use Hootsuite, you have access to their analytics tools as well.

The goal of social media is to enhance your business by increasing your online

B.J. Bounds is senior marketing communications specialist for Calyx Software. In addition to media relations and copywriting, BJ is a contributing author to the Calyx Software blog, CalyxCorner. She has more than 10 years of experience in sales and corporate marketing with a focus on technology that spans several industries. She may be reached by phone at (800) 362-2599 or visit


Social Media … Business on Purpose or on Accident? By Corrine Jordan So, you are thinking of jumping on the social media bandwagon or have already started; how is that going? Are you seeing the successes that you hoped for? Are you producing enough sales to fund the efforts you are putting in? If not, you may want to consider a few things.

Brand communication versus marketing A great place to start thinking about social media is whether you have a solid brand or not, and most importantly, what your brand is communicating. With this thought process in mind, let’s first address what a brand is. Many people will say a logo or your corporate image. I would say this answer is close, but no cigar. A brand is your company promise (or meta-communication) to the customer on their experience in working with your company. It is also a representation of what you will find within the walls of the company—or it should. Many times when I am working with

a client toward their marketing goals, I will visit what message their brand is portraying out in the world and interview individuals within a company to see if this message is in alignment before devising a marketing strategy. I will also research what the world is saying about a particular company in my discovery period. Many times, I will find a haphazard message because the brand communication piece was omitted at the creation phase. What most people do not understand in establishing a brand is that it is more than a nice logo and some colors that are pleasing to the eye. Instead, a brand should be created with the customer in mind first, how your company fits within the target audience second and how you feel about it third. Think about the type of person you wish to include in your portfolio of clients. Who are they? What types of products do they buy? What types of activities do they enjoy? Where do they eat? Now think of the other companies continued on page 36

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Time is money

commitment seriously. If you abandon your support network, you could suffer a loss of credibility—and potential business. For social media to prove successful as a business-building strategy, you must designate and maintain a good balance of time. Develop a strategy for social media content as you would with your overall business and use the tools at your disposal to help you manage your time. Effective time management of your networking activities will give you a decided advantage over your less-contemporary competitors.


 All-in-one suites: Technology companies know that you’re busy. Just like your loan origination system (LOS) provider, they work hard to ensure that their technology, while developmentally complicated, serves to ease your daily work life. Companies like Hootsuite and Tweetdeck, along with many others, have honed the art of the “post-once-post-all” social media extravaganza. Hootsuite is an online system that allows you to post immediately or schedule your Tweets. With Hootsuite, you can monitor multiple platforms and post to all with very little effort or time. There are separate tabs for each social media platform you monitor. Tweetdeck is a downloadable application that displays your various platforms on one screen, as opposed to tab views. Like Hootsuite, Tweetdeck also allows you to schedule your updates. If you need to shorten your link addresses, Tweedeck gives you a choice of several URL shorteners. If you are looking for a suite to manage your

 On-the-go tools: This would be a good time to start using your phone for something other than a phone. It’s almost impossible to find a basic phone anymore … they’re all smartphones that offer so many features and functions to help you organize your day. If you have a data plan, you can use your phone to access your social media, check your e-mails, and post based on incoming news or anything other information that your networks will appreciate. Set up e-mail alerts for industry news so that you are always up-to-date and can post relevant material for your clients. Your phone is a wonderful communication tool that allows you to stay in contact with your clients, making them happy and more apt to provide you referral opportunities.

presence and enabling virtual relationships with clients and referral partners. It’s your opportunity to demonstrate your expertise, knowledge of the industry and personality. After all, people want to do business with a person, not a company. You are the face of your company that social media displays for the Internet world, and it’s online where many buyers start their search for information so it’s the right place to be today to grow your business. But, if you get locked up in social media jail, you’re not running your business. Social media can certainly be fun and it can do a lot for you and your business. It is definitely entertaining to keep up with old high school friends, see how your peers are dealing with regulatory concerns, or read about the antics of the children in your friends and family network. But if you’re using it for business, you have to manage your time wisely and not neglect the daily activities that are the bread and butter of your business. On the other hand, take your social media 

No matter how many of the social media platforms you choose to use, it is important that you manage your time wisely so that you are not so consumed by them that you burn out and drop out completely. That would certainly be a disservice to your fans, followers, and connections and could be detrimental to your reputation. Social media is a commitment. While it’s not as quick to maintain as other mediums, blogging is a good example of the importance of sticking with it. So many companies start blogging, but give up after one or two posts when it becomes difficult to find the time to develop fresh content on a regular or semi-regular basis. Then, they have a blog link on their main Web site that leads to nowhere. Search engines will forever continue to drive traffic to your earlier posts, but visitors might think you’ve gone out of business when they see you’ve been inactive for so long. The same pitfall lingers in the background for social media that require greater regularity and frequency. What makes the pitfall easier to combat in the platforms such as Facebook, Twitter and LinkedIn is that there are tools specifically designed to help you save time and energy when posting to multiple mediums.

social media, there are several others to choose from depending on your particular needs. Don’t feel like you are obligated to just one. They’re free so you can try several to determine which one works best for you.

that are winning at providing products and services to these people. Ask yourself, what do their brands have in common? This is the sweet spot of success! If it helps you, think about all of those things about yourself. The next time you are out running errands, think about whom else is in the places you frequent, and if there is a common thread between you. The answer is always yes! Once you have established what your brand communication is or made adjustments accordingly, you can take what you learned and apply it towards your marketing strategy. This strategy should support your brand communication and speak to your audience in symphony. This is especially true on the social networks where you can’t easily undo damage that has been done.

Marketing: The three types of communication with your audience

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mortgage or real estate professional, this type of social media behavior will not be becoming of your brand unless, you are posting pictorial success stories of customers you helped or houses sold. These days we all want to know who we are working with and a certain amount of personalization is in order, but pay special attention in making sure that it matches the communication of your brand and that of your marketing strategy.

Becoming part of the circus—tightrope walker or lion tamer? Lion tamer of course! The difference between the two is whether you incorporated the above strategies and whether you have set aside time in your day toward your social media goals. One of the first questions I always ask when called upon to consult a client in creating a new campaign or in creating a Web site with social media capabilities is “how much time do you have to devote to this campaign/Web site?” The answer I hear more often than not is “I don’t have any” or “hmmm, probably around 10 min. per week.” In my mind, I always hear, “I don’t have the time to make money”. If you are considering social media as your communication method with the world, you must devote time to it every day! Remember this: A busy page with campaigns geared toward your brand is money in the bank.

Value! This word is where it all comes down. What value can you provide that sets you apart? Also, what value do your clients place on you? Lastly, by using social media, what value will you offer to your potential customers in “Liking” your Facebook page or in interacting with your social media enabled Web site? If the answer is not easily obtained, please spend some time with your brand and don’t be afraid to ask those tough questions with your clients. This is a good reason to stay in touch and allow your clients and “friends” to tell you what they value in you.



In many ways, the old days of marketing were much simpler. You could come up with a profound message, a great title, some compelling imagery and that could be enough. Not these days. Why is that? Simple, the old ways of magazine ads, television spots, flyers and all oneway communication marketing are completely over. Your ads and campaigns can no longer speak to your audience and not have your audience speak back to you on your Web site, a blog or to their 500

friends on social media. If because they won the you have not represented worst logo of the year yourself well or provided award, the last and best quality goods or services, type of communication you and everyone else occurred—three-way will know about it. communication! Because of this, adoptThe logo was so terrible ing two-way communicathat the design-minded tion with your audience community was buzzing and writing your marketamongst themselves about ing strategy to reflect the company and that horthese results is imperative rible logo. If you don’t to any good campaign. believe me, Google “GAP “Remember this: Also, keep your strategy logo redesign” and see A busy page with open to changes and visit what you find. Long and campaigns geared what works and what short, what seems bad was toward your brand doesn’t often. probably a cleverly drafted is money in A great and not so marketing ploy to get more the bank.” great example is a camattention because their paign that the GAP hosted logo was no longer in the recently in obtaining feedback from the minds of the community. world on how they should redesign their logo. The greatest part about this cam- My doctor went paign is that it allowed everyone to provide to the nightclub examples back to the corporation on what So many times I have heard stories of inditheir company means to them. The unfor- viduals—representing themselves or that tunate part is that the chosen logo won the of a business—post profoundly personal worst logo design award of the year. Was information on social networks. The trend all lost because of this? No, sometimes bad is to be transparent in business, but does press can turn into good press. that mean that you want your clients passThis was actually a brilliant strategy on ing judgment on your brand performance several levels. They heard from their cus- by coupling your personal and professiontomers what value they place on their al persona? products, they allowed their customers (or My vote is absolutely not unless it suppotential customers) to have ownership of ports “who” your business is. If you are a the brand, and they learned invaluable photographer and you are posting a pictolessons about their target audience rial journal of places you have been, that they can incorporate later. Lastly, would be relevant. However, if you are a

Corinne Jordan is a technical and marketing consultant with more than 14 years of demonstrated success delivering solutionbased strategies and training to companies ranging from start-up technology companies to the Fortune 500. Corinne also is cofounder of Brain Gravy Enterprises whose current portfolio boasts more than 12 cutting-edge technologies. She may be reached by phone at (206) 601-2309 or e-mail



 JULY 2011

Todd Ballenger

Twitter: @toddballenger Facebook: A relied-upon source with 20-plus years of mortgage industry experience, Todd e-mails his company’s database of around 16,000 followers twice weekly, writes for 3,000-plus readers of his blog, has more than 2,000 Facebook Friends, and 2,000 LinkedIn relationships. Chris Brown

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Derek Egeberg

Twitter: @approvalcoach Facebook: LinkedIn: Derek is a member of the 1,000-plus Friends on Facebook Club, has 11 Recommendations on LinkedIn, a few hundred followers on Twitter and is a regular contributor to MortgageDaily.TV. Frank Garay & Brian Stevens

Twitter: @tbwsd Twitter: @chris_brown Frank and Brian of Think Big Work Small are Facebook: Co-host of REBarCamp Orlando, Chris is closing in on 2,500 Facebook easily the most watched mortgage professionals with their daily Friends (yes, Friends, not Fans ... he really connects with them all), industry videos and humorous commentary that is shared by a 3,445 Twitter Followers and 1,170 Fans on his Facebook Page, “Free countless number of fans. Help 4 FL Real Estate Agents.” Dan Green Rob Chrisman Rob himself would probably disagree with Twitter: @mortgagereports this nomination. He’s just a guy who enjoys Facebook: sharing his unique, in-depth daily analysis mixed with humor that is guaranteed to give a chuckle a If you talk about mortgage blogging and don’t mention Dan Green, you have not had a complete conversation about mortgage blogging. day on his very popular blog, One of the first mortgage bloggers (if not, the first), Dan has volumes of incredible industry knowledge and is a great social engager. Ricardo Cobos Shaun Guerrero Twitter: @ricardocobos Some might look at Ricardo’s 400 Followers as low, but Twitter: @shaunguerrero these are local folks in his market. Plus, Ricardo has a Facebook: score of 51. Moreover, he received more nominations that were all unique genuine testimonials as to why he is one of the “25 Most Shaun is another member of the 1,000-plus Friends on Facebook Club. He uses a mix of various social networks to promote his online Connected Mortgage Professionals.” TV show and local events (more than 1,000 attendees each year). Mike Cox Annie Gulosh Twitter: @Ratesinmotion Facebook: Facebook: Annie Gulosh has more than 22,000 Fans on her Mike provides entertaining mortgage industry and interest rate updates in well-produced videos that are great for real estate agents “365ThingsPortland Facebook Page,” where she posts one new thing and borrowers to know about the best deals out there. His Twitter per day to do in Portland. Think any one of those 22,000 folks ever buy a home? You bet! account currently has 1,230 Followers. Michael Deery

J. Scott Harris

Facebook: Facebook: LinkedIn: Michael runs the Facebook Page “Free Resources for Real Estate Agents,” Scott is a major connector “in real life” and online. He has been hostwhich has 2,124 Fans and provides real estate agents with lots of great ing the longest-running mortgage industry networking parties, and has more than 3,000 Connections on LinkedIn and Facebook. educational and marketing materials to help them close more deals.

Scott Hudspeth

Facebook: Scott has a Fan Page with approximately 1,300 Michigan Realtors as fans, and averages eight loans per month from his Fan Page. Dustin Hughes

Twitter: @FollowDustin360 Facebook: When you think of mortgage professionals on YouTube, you often think of someone with a Webcam in their office ... not Dustin! Dustin creates well-produced and entertaining videos, and one of his several YouTube accounts has more than 270,000 views! Gary Lacey

Twitter: @netbranch Facebook: Gary is a mortgage industry recruiter that connects mortgage branches and mortgage bankers through a mix of relationships, SEO, his company blog and social networks. David Lykken

Mark Madsen

Michael Maida

LinkedIn: Mike has 700 connections on his LinkedIn account (these are people he REALLY knows personally). He has integrated video blogs with his CRM to help ensure quantifiable ROI on his organization’s social media efforts.

Facebook: Jennifer manages the Facebook and Twitter accounts for a la mode. On Facebook, she interacts with 3,742 Fans on matters related to valuation, appraisals, and provides insights on a la mode’s fun, yet professional, corporate culture. Rhonda Porter Twitter: @mortgageporter Rhonda is a favorite among the mortgage community on Twitter. Besides industry news, trends and opinions, Rhonda shares amazing recipes that she with her 4,000-plus Followers. Chik Quintans

Twitter: @chikquintans Facebook: Chik shares timely industry news, insight and opinions with mortgage and real estate pros. He’s become an information source for the national media. According to Klout, he’s a “Thought Leader.” John Glen Stevens

Facebook: With more than 1,400 Connections on LinkedIn and 1,843 Friends on Facebook, John Glen Stevens is constantly seeking new ways to connect with his goal of “educating the public about mortgages and taking it to a whole new level.” Carl White

Facebook: Call them animals, call them unorthodox ... whatever you do, don’t call them late for your mastermind group. They share powerful tips on their Facebook Fan Page with 13,000-plus fans (many of which are in the 20-plus loans per month club). Sue Woodard

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Facebook: Sue shares her insights and real world success stories with 20,000-plus mortgage professionals, including how to make social media, traditional media and face-to-face interactions work to build your Twitter: @jmchood pipeline. She currently has 4,996 Facebook Friends that she connects Justin totally gets social media and loves to share his knowledge with on a personal level. Justin McHood



Twitter: @mark_madsen If this was a list of the “One Most Connected Mortgage Professional,” Mark Madsen would be that person. Those who are involved in social media are constantly mentioning this guy. He’s the master at making the search engines fall in love with your social media content.

Jennifer Miller 

LinkedIn: A legendary mortgage consultant, radio show host, and National Mortgage Professional Magazine featured columnist, David started a LinkedIn Group about LO compensation, and within weeks, the group quickly grew to 3,000 active members.

and success with others. He has 2,216 Followers on Twitter, and says he’s an expert at search engine marketing, real estate and Arizona.

LenderCity Launches Net Financial Protection Bureau (CFPB), an Branch Alternative With independent bureau within the Federal Unique Franchise Program Reserve System created by the Dodd-

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LenderCity has announced that it has completed its Uniform Franchise Disclosure Document (UFDD) and plans to sell franchises nationwide. The company, which has been in business since 1997, was founded by President and Chief Executive Officer Gregg Harris. “I see a growing trend for smaller independent mortgage brokerage offices,” said Harris. “Recent regulatory changes in the industry that restrict a loan officer’s income are making it more conducive for them to go into business for themselves. However, the franchise model allows them to benefit from being part of a larger organization while maintain complete control over their business.” Although franchising has been offered previously, there is virtually no company currently offering franchising in the United States mortgage market, making LenderCity a true pioneer. LenderCity is bucking the trend, with the only current offering being a “net branch” model. This means that a loan officer or mortgage broker who wants to become a net branch really just becomes an employee of the company. LenderCity will allow a maximum of 20 franchises in 2011, and look to double that number to another 40 in 2012. For a mortgage broker, this also means surrendering their license and giving up their corporate identity. Under the franchise model, the franchisee is independently owned and operated. They maintain autonomy and control their business, but have the backing of a national brand, marketing, and lead generation. LenderCity also provides back-end administrative support so franchisees can focus on doing what they do best, originating loans.

Jonathan Foxx Announces the Launch of the CFPB Forum The CFPB Forum has b e e n launched by Jonathan Foxx, president of Lenders Compliance Group, as a “discussion forum” for news and views regarding the new Consumer

Frank Act. The CFPB Forum is not associated or affiliated with the Consumer Financial Protection Bureau. “My firm, Lenders Compliance Group, is making this commitment to administer, monitor, maintain, and continually update the CFPB Forum,” said Foxx. “If you are interested in the CFPB, this forum is for you.” The CFPB Forum, located at, has interactive discussion facilities and is shared through LinkedIn, Facebook and Twitter. Informative articles and news will be separately published. “I welcome proposals for news and articles to be posted on the CFPB Forum. Please contact me via e-mail at to make arrangements.” There are many ways to use the CFPB Forum, including: Joining the Discussion Forum; posting articles (special feature); posting news (special feature); suggesting site enhancements; Share It; subscribing; and following by e-mail. “This is a unique discussion venue,” said Foxx, “providing a Web space for participants to better their understanding and become more informed about the CFPB.”

Quality Mortgage Services Launches ADDP to Stamp Out Appraisal Fraud Quality Mortgage Services LLC (QMS) has announced the release of its Appraisal Defect Detection and Prevention (ADDP) product, a solution can be deployed by a lender or by QMS on an outsourced basis that seeks to eliminate appraisal report errors and defects. QMS will provide free mortgage repurchase defense or mortgage put back rebuttals regarding loan collateral if any such request is made by an investor on a loan where ADDP was used. “We’ve been in the quality control business since 1992 and we know that many appraisal related issues are not the result of increased valuation fraud, but rather defects in the appraisal report,” said Tommy A. Duncan, presi-

dent of Quality Mortgage Services. “We developed the ADDP technology and related methodology to empower our own loan auditors, but in today’s environment, every underwriter should have access to this tool.” Duncan maintains that most underwriters are not trained to find every possible appraisal defect and that leaves lenders open to increased risk. As appraisal-related rules and regulations continue to impact the industry, ADDP is expected to be used by more underwriters, especially since it is available at a low per-loan cost. In addition to underwriters working in mortgage companies, ADDP is also expected to be adopted by appraisers interested in ensuring the quality of their product without relying on expensive AMC quality control (QC) personnel; community banks and credit unions that don’t have trained QC staff in house but don’t want to pay high outsourcing fees; and appraisal management companies (AMCs) interested in performing QC on the valuation reports they provide to their lender clients. “There are a lot of community banks and banks that are doing their own underwriting and I feel many of them are becoming complacent,” said Duncan. “ADDP would provide them with a stronger underwriting decision. We have some community bank clients that are small and basically, ADDP enables the underwriter to reduce their risk.”

PMI Launches MODEL Servicer Program to Recognize Top Mortgage Servicers The PMI Group Inc.’s principal operating subsidiary, PMI Mortgage Insurance Company, has announced the launch of its MODEL Servicer Program designed to recognize and reward high-performance mortgage servicers. “Since the beginning of the housing crisis, PMI has seen that the use of certain mortgage servicing best practices plays a central role in maximizing the level of home retention and achieving positive results for borrowers, communities and mortgage investors,” said Chris Hovey, PMI SVP of servicing operations and loss management. “PMI believes servicers that have demonstrated effective use of these best practices deserve recognition for the positive impact they have in preserving homeownership in communities nationwide.” In order to be eligible for the program, servicers must exhibit superior foreclosure prevention results on PMI’s “Servicer Scorecard.” In addition, they will be asked to affirm that their operations substantially adhere to industry best practices as outlined in PMI’s Best Practice Principles, which were developed in collaboration with mortgage servicing industry leaders. “Our new MODEL Servicer Program is designed to recognize best-in-class servicers for the work they’re doing to prevent foreclosures,” said Hovey. “These servicers will receive multiple benefits to reward their excellent performance in sustaining homeownership.”

Lead Generation Meets Mortgage Calculator on the iPhone Zillow has announced the launch of its Zillow Mortgage Marketplace iPhone App, bringing the loan shopping experience of the Zillow Mortgage Marketplace to the mobile marketplace. The Zillow Mortgage Marketplace App for iPhone combines personalized loan quotes with advanced calculators and tools to help borrowers understand how much home they can afford, what their monthly payments would be, and whether refinancing their current home makes financial sense. The Zillow Mortgage Marketplace App allows for instant, personalized loan quotes from lenders, as well as gauging home affordability and monthly payments on the spot. “The user interface (UI) is well thoughtout. Some folks in the comments are mentioning they don’t get it, but I’ve played with a lot of iPhone mortgage calculators and this UI is good,” said Jason Berman of Mortgage Tech Summit. “Here’s the problem as I see it, dozens of free slider mortgage calculators already available in the iTunes Store. The rate chart is well done but do folks really need to get instant rates? Don’t they already know what they qualify for by the time they look at a house? Or do real estate agents like driving around with clueless potential borrowers?” The Zillow Mortgage Marketplace App allows borrowers to easily fill out a loan request by providing information about the home they want to buy or refinance, and their own financial situation. Borrowers do not enter any personally identifiable information, but just enough data for lenders to return custom quotes. Users receive an average of 25 loan quotes per request, and can compare rates and lenders side by side, including scanning more than 8,900 consumer-submitted lender reviews. With one touch of a finger, the borrower can then immediately connect with lenders of their choice and begin the process of securing a home loan, right from their iPhone. “It’s a cool app, however, based on some local searches I did in Louisiana, they are way off on property taxes and insurance,” said Mike Anderson, CRMS of Essential Mortgage and vice president of the National Association of Mortgage Brokers (NAMB). “This is typical of online and out of state lender and leads quotes to be very misleading. Also, I noticed they lacked local lenders.” The Zillow Mortgage Marketplace iPhone App design streamlines the user experience for mobile and uses its Webbased counterpart Zillow Mortgage Marketplace to provide a transparent lending marketplace where borrowers can connect with reputable lenders to find personalized loan options and get a variety of competitive mortgage rates. “If I was an originator paying Zillow for leads, I’d be slightly annoyed at the iAds continued on page 42

ability-to-repay (part II)

continued from page 29

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

1—Federal Register, Vol. 76, No. 91, Wednesday, May 11, 2011, Proposed Rules, 12 CFR Part 226, Regulation Z-Truth-in-Lending Act. [Regulation Z; Docket No. R–1417]. 2—HR 4173: Dodd-Frank Wall Street Reform and Consumer Protection Act, 111th Congress (2009-2010): “A bill to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end “too big to fail”, to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes.” Sponsored by Rep. Barney Frank (D-MA) and Sen. Christopher Dodd (D-CT). 3—July 21, 2011 is the date, pursuant to Dodd-Frank, that the Consumer Financial Protection Bureau (CFPB) receives rulemaking and examination authority over the “enumerated laws,” the so-called “Designated Transfer Date.” See Designated Transfer Date, Bureau of Consumer Financial Protection, Federal Register, Vol. 75, No. 181 (09/20/10). The Designated Transfer Date must

be between Jan. 17, 2011 and July 21, 2011, unless the Treasury Secretary determines that the orderly implementation of Title X is not feasible within 12 months; but, in no case may the Designated Transfer Date be later than Jan. 21, 2012. 4—Includes a closed-end home improvement loan on a vacation residence. 5—Op. cit. 2 § 1413. 6—Under the Home Ownership and Equity Protection Act (HOEPA), a consumer has a right to rescind a transaction for up to three years after consummation when the mortgage contains a provision prohibited by a rule adopted under the authority of TILA § 129(l)(2). Any consumer who has the right to rescind a transaction may rescind the transaction as against any assignee. See: TILA §131(c). The right of rescission does not extend, however, to home purchase loans, construction loans, or certain refinancing with the same creditor. See: TILA § 125(e). 7—Op. cit. 2, §§ 1416, 1422. continued on page 42



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“subjectivity” regarding what does or does not constitute valid criteria for the abilityto-repay seems to be cast as a regulatory, rather than an underwriting methodology. How is this approach different from the so-called “plain vanilla” notion which privileged certain forms of standard mortgages (offering safe harbor) over others? Indeed, by defining qualified mortgages to exclude negativeamortizing mortgages, or with certain high balloon payments, Dodd-Frank is effectively privileging the other mortgage structures by according them a rebuttable presumption of demonstrated ability to repay. This seems odd. It is not a complete safe harbor from statutory scrutiny, but an exemption from one of its more significant and transformative requirements. But what is the privilege worth, when the broad definition of the QM provides express criteria for compliance with the regulatory guidelines (i.e., relating to DTI, mutandis mutandi a proxy for the ability to repay)? Put it this way … if a mortgage meets the required ability-to-repay, per the federal regulatory guidelines, there is a rebuttable presumption of compliance that the ability-to-repay has been met. In philosophical logic, this is usually referred to as “circular reasoning.” It seems likely that regulators will bring forth ever on-going issuances of new rules, and attendant calculations—de facto underwriting guidelines—that will continue to set the then current standard. Another way to view this is the gradual nationalizing of underwriting guidelines. Furthermore, it seems to me that the imposition of an ability-to-repay requirement as a regulatory mandate is an admission that market forces cannot discipline lenders or incentivize lenders to act in their own self-interest. This is an obvious shift in liabilities, because this mandate shifts the burden of compliance to the lenders in order to assure that their contractually bound borrowers can pay back their loans. Parties to any contract can become adversaries! In other words, the relationship between the creditor and the borrower is innately affected and extensively undermined by this Rule, inasmuch as it imposes a new kind of theory for a regulatory framework and, in my estimation, infantilizes lenders by making them comply with a regulator’s ad hoc way of rationing the extension of credit. If the rationing of credit is meted out through this regulatory construct, it can be legitimately asserted as well that lenders are not arms-length, contractual counterparties; that is, lenders now will have a duty to assess a prospective borrower’s ability to repay, irrespective of collateral value and securitization. This change in the dynamics between and the inherent, due diligence tension among the parties to a residential mortgage transaction raises serious issues about the systemic consequences soon to be engendered.



8—Dodd-Frank stipulates that FHA loans are QRMs, because of their explicit government backing. And as long as the GSEs operate under government control, the QRMS are supposed to apply to GSE loan products as well. 9—Mortgages covered by the HOEPA amendments have been referred to as “HOEPA loans,” “Section 32 loans” or “high-cost mortgages.” The Dodd-Frank Act now refers to these loans as “high-cost mortgages.” 10—The Qualified Residential Mortgage (QRM) exemption for risk retention purposes (as required by Section 941of the DFA) and the Qualified Mortgage (QM) definition (under the “ability to repay” provisions of Section 1412 of Title XIV of Dodd-Frank) require synchronizing. 11—The FRB has requested comment as to whether loan-level price adjustments to offset added risks, which are imposed by secondary market purchasers and passed through to borrowers in the form of points, should be excluded from the points and fees under this provision. 12—Required by Dodd-Frank, effective April 1, 2011, if a jumbo loan’s APR exceeds the average prime offer rate (APOR) by 2.5 or more percentage points on the date the interest rate is set, then TILA requires the establishment of an escrow account for the payment of property taxes and any creditor-required premium for mortgage-related insurance, prior to consummation. For jumbo loans with an APR which does not exceed the APOR by 2.5 percentage points or more, this escrow requirement will no longer apply. 13—To be a bona fide discount point, the calculation must both (1) be consistent with established industry practice, and (2) account for the amount of compensation that the creditor can reasonably expect to receive from secondary market investors for the loan. 14—Government loans require the charging of interest through month-end when the loan is prepaid on other than a payment due date. Because the additional interest is treated as a prepayment penalty, the loan could be treated as unlawful under the Rule if the lender

charges a prepayment penalty more than three years after consummation. Moreover, if such a loan is characterized as a loan that includes a prepayment penalty, the lender must offer an alternative loan (See “alternative loan.”). 15—The FRB alternative is a calculation that is equal to the principal loan amount, less charges that are points and fees under Section 226.32(b)(1) of Regulation Z, and that are financed by the creditor. Note, however, that the alternative calculation would generally result in a larger total loan mount, thus requiring even more points and fees. 16—The APR of a fixed-rate mortgage or a step-rate mortgage without a variable rate feature does not increase after consummation. 17—That is, the “transaction coverage rate” must not exceed the APOR for a comparable transaction as of the date the interest rate is set by more than 1.5 percent for a first lien loan that does not exceed the Freddie Mac conforming loan limit, by more than 2.5 percent for a first lien loan that does exceed the Freddie Mac conforming loan limit, or by more than 3.5 percent for a subordinate lien loan. 18—The FRB’s prepayment penalty calculation is less generous to the mortgage holder than given in DoddFrank, as the former applies the applicable percentage against the outstanding loan balance prepaid, but the latter applies the applicable percentage against the entire outstanding loan balance. 19—The creditor may rely on information provided by the borrower, even if it is subsequently determined to be inaccurate. 20—This agreement can be an additional addendum to the existing compensation agreement between the parties to the transaction or a separate agreement relating thereto. 21—75 Federal Register 58509, Sept. 24, 2010. 22—Timiraos, Nick, Five Questions on the Qualified Residential Mortgage, Wall Street Journal, WSJ Blog, 03/24/11.

JULY 2011 



continued from page 41

United Northern Mortgage Bankers, Ltd. Corporate NMLS ID# 7230 New York State 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

new to market

continued from page 40

running on the bottom of the app ... ING Direct for me,” said Berman. “This creates a confusing situation for the user as advertising that has nothing to do with the users data is displayed right underneath a rate quote that is ‘somewhat’ qualified. It’s just odd. I think Zillow should pick a single revenue stream for the app and stop trying to keep one foot in each sandbox.” Zillow operates across iPhones, iPads, Androids and BlackBerrys, and empowers consumers with access to real-time mortgage information on-the-go with the Zillow Mortgage Marketplace iPhone App. In May 2011, Zillow was used on a mobile device more than 8.8 million times, with 1.8 million homes viewed on mobile devices every day, or 21 homes per second. “I predict that the app will be popular because it carries the Zillow name,” said Allan Daniels of Dr. Daniels and Son in Bloomfield Hills, Mich. and member of the Michigan Insurance and Finance Advisory Committee (IFAC). “‘Zillow’ has achieved the remarkable accomplishment of being transformed from a noun to a verb. While not as common as ‘I Googled you’ or ‘We can Skype tomorrow,’ it is fairly common to hear someone say, ‘I Zillowed the property, and it’s worth ...’“

Interthinx Bolsters Its FraudGUARD Product to Boost Loan Quality

In response to its own findings that employment and income mortgage fraud risk rose significantly in 2010, Interthinx has integrated new critical data points to help lenders identify high-risk borrowers. The inclusion of associated business search and bankruptcy data within Interthinx’s FraudGUARD ensures a more concise overall borrower risk review, can improve loan quality, and provides users a more comprehensive fraud prevention report. “The Employment/Income index in our 2010 Annual Mortgage Fraud Risk Report rose by nearly 30 percent, which could indicate that ‘fraud for property’ is on the increase,” said Mike Zwerner, senior vice president of Interthinx. “Our product team has kept a close eye on this insidious trend, and we’ve focused key development in the area of identifying employment fraud and misrepresentation. We’re excited about the added data and analysis within FraudGUARD and the further protection and intelligence this proven tool brings to the residential mortgage lending industry.” The bankruptcy and associated business search features are optional and highly customizable. FraudGUARD users can choose to order the new options on all loans or just certain loans. “This essential product development provides our customers yet another layer of crucial information before funding a loan,” said Kevin Coop, president of Interthinx. “Within seconds, our customers will now have answers to questions such

as, Is the borrower associated with another business that is not the current employer? Is the borrower’s employer an inactive corporation? Does the borrower have a bankruptcy record within the last four years? Is there a bankruptcy after the application date? With this type of insight, lenders are better prepared to make informed underwriting decisions during this time of emphasis on loan quality over loan quantity.”

QuestSoft Updates NMLS Call Report Module for HMDA Compliance Lenders who hold a state license though the National Mortgage Licensing System (NMLS) are required to file a quarterly Mortgage Call Report (MCR). QuestSoft, a provider of Home Mortgage Disclosure Act (HMDA) and mortgage compliance software, has released Call Report RELIEF, a module of their proven HMDA RELIEF software that assists in the compilation, validation and reporting of the MCR. The MCR is required from any lender that holds a state license or registration through NMLS. The report, which includes both mortgage loan activity and financial information about the company, must be submitted quarterly. The deadlines each year are Feb. 14, May 15, Aug. 14 and Nov. 14. NMLS has issued a statement that they will not post a deficiency notice for late filers unless the initial report is submitted on or after June 16. “Lenders who do not file their MCR will be posted on the NMLS’ public Web site, and multiple violations could result in fines,” said Leonard Ryan, president of QuestSoft. “Call Report RELIEF ensures that lenders will be able to avoid the penalties of non-compliance without requiring a significant investment of additional time or staff resources.” HMDA RELIEF, which provides lenders a simple system to collect, analyze, report and submit annual HMDA data to the Federal Financial Institutions Examination Council (FFIEC), will now include new fields relating to credit score, prepayment penalties, NMLS License numbers and new amortization and loan channel information. “Lenders need the assurance that their compliance software is always up-to-date with the newest regulatory revisions,” Ryan said. “Call Report RELIEF and HMDA RELIEF keep our customers on the cutting edge of compliance, ensuring that they meet all the expected standards well in advance of their deadlines.” In response to the announced revisions to HMDA submissions required by the Dodd-Frank Act, Ryan attended several of the HMDA hearings conducted by the Federal Reserve and met with the Conference of State Bank Supervisors (CSBS) regarding these reports, licensing issues and the new multi-state exam process. As a result, HMDA RELIEF provides continued on page 48



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Comergence Compliance Monitoring, LLC 630 The City Drive South, Suite 205 • Orange, CA 92868 Office: 714-740-9000 Comergence Compliance Monitoring is the mortgage industry’s only Complete broker desk management software and outsource solution for TPO management and monitoring. We can supplement lenders inhouse management and monitoring resources departments.

Retail Branch

Icon Residential Lenders (888) 247-4207 Icon Residential, a wholly owned subsidiary of Grand Bank N.A., is one of the nation’s leading Conforming, Jumbo, FHA and VA wholesale lenders. Our strength, success and longevity is derived from delivering customers service that exceeds our valued business partners expectations. With deep industry knowledge, financial stability and innovative technology we provide the solutions for our business partners to fund loans while avoiding risk. • • • • •

Direct Access to Underwriters Competitive Pricing Innovative Technology Paperless Solution Bank Funding


TMSfunding Wholesale Lending 326 W Main Street • Milford, Ct. 06460 888.371.2989 • WWW.TMSFUNDING.COM Your Partner in Success! • • • •

Paperless! Quick and Easy! Top Tier Account Executives Committed to Wholesale Operations that Earn Your Business

Wholesale Reverse Mortgages

NATIONWIDE Equities Nationwide Equities Corporation 201-529-1401

Polaris Home Funding Corp. 616-667-9000 #1 USDA RD lender in multiple states with strong FHA/VA/CONV product lines as well. Don't be held hostage by a captive branch arrangement. Bank it or broker it. Have a business name/identity you don't want to give up? We allow DBAs (subject to state rules).


For Licensed Mortgage Brokers in NY, NJ, CT, PA and FL No HUD Approval Required – Live Help Desk Will Provide Training at Our Office or Yours 48 Hour Underwriting - Get Paid Within 48 Hours of Funding

AMX/Land Home Financial ..................800-349-4172 AMX/Land Home Financial Services Wholesale Lending Division - Great Rates, Great Programs, Great Service. Offering financing options that work in today's market.

(800) LOANS-15 Are you a broker/owner or current branch manager looking to expand your business into Mortgage Banking with FHA capabilities? Then our PARTNER BRANCH ADVANTAGE© program is perfect for you. We are offering you all the benefits of partnering with an established lender while still enjoying your independence. US Mortgage Corporation is a nationwide FHA Direct Lender with a 16 year long reputation of excellence.

88 Kearny Street, 3rd Floor San Francisco, CA 94108 Phone: (415) 632-5150 • Fax: (925) 226-1938 Now • Arizona • California • Colorado


Wholesale Lending in: • Nevada • Texas • New Mexico • Utah • Oregon • Washington


We look forward to sharing our services with you!

Secondary Marketing Consulting

We complete your applications for approval Save the time and hassle contact:

Flagstar Wholesale Lending, a division of Flagstar Bank, is one of the nation’s largest wholesale and correspondent mortgage lenders, providing the technology, products, service and support that independent mortgage brokers, correspondents, and bankers need in today’s mortgage arena. In the ever-changing environment of mortgage banking, Flagstar takes pride in accommodating the specific needs of each customer. At Flagstar, we understand that you need every available advantage to stay ahead of the competition. This is why we provide multiple technology options to meet your needs to register, lock, underwrite, close, fund and deliver your loans. Our wholesale website ( and the loan processing tool Loantrac provides our customers with the functionality that make it easier and faster to close loans, saving you time and money! Visit to learn more.

The Resource Registry is a directory of lenders (wholesaler or retail that are recruiting), affiliated services and resources that is seen by more than 191,181 active Professionals.

Call 888-409-9770 ext 4.


to register your company. BankFinancial ..........................................800-894-6900 We have money to lend for apartments, $250M to $2MM, up to 75% LTV. We offer competitive rates, fees & terms. We’re committed to helping you and your clients close the deal. Call us.

Access these listings online at

We offer competitive pricing and fast turn-times for FHA, VA, Conventional, and USDA programs without having a retail presence in the industry. We are a wholesale lender with 22 years of experience and believe in exceptional service.

 JULY 2011

Bookmark this!

Terrace Mortgage 4010 W. Boyscout Blvd., Suite 550 Tampa, FL 33607 866-934-4631 •


Broker to Banker ..........(951) 746-3075

Flagstar Wholesale Lending (866) 945-9872

If your ad was here, you would be seen by 191,181 Mortgage Professionals looking for resources to help them in their business. 

For more information contact THOMAS R. SIRICO, Vice President of Business Development at (917) 923-1472 or email at



Wednesday-Friday, August 3-5

Thursday, September 8

Hawaii Association of Mortgage Brokers 2011 Annual Conference “Are You Smarter Than a …?” Sheraton Waikiki Hotel 2255 Kalakaua Avenue Honolulu, Hawaii For more information, e-mail or visit

2011 Minnesota Mortgage Association Convention & Exhibitor Showcase “We Will Survive!” Sheraton Bloomington Hotel, Minneapolis South 7800 Normandale Boulevard Bloomington, Minn. For more information, call (952) 345-3240 or visit

Thursday-Friday, August 4-5

Sunday-Tuesday, September 11-13

California Association of Mortgage Professionals Annual Convention “Summer CAMP: Scouting Out Success” San Jose Marriott 301 South Market Street • San Jose, Calif. For more information, call (916) 448-8239 or visit

Mortgage Bankers Association’s Mortgage Operations Conference 2011 Hilton New Orleans Riverside 2 Poydras Street • New Orleans, La. For more information, call (800) 793-6222 or visit


new to market

continued from page 42

Sperlonga Data and Analytics, a subsidiary of MMREM, has announced a new service designed to help mortgage servicers reduce their risk on loan modifications by alerting lenders that a borrower is falling behind on their homeowners association (HOA) fees. Unpaid HOA fees, a sign of potential mortgage defaults, have historically been very difficult for lenders and servicers to track. With this new service, lenders can now identify potential defaults or troubled modifications months before the borrower actually misses a mortgage payment. The service, “Loss Mitigation Association Surveillance” (LMAS), makes it possible for servicers to stay up to date on problems regarding borrower payment of HOA fees. LMAS provides an authorization form for servicers to execute with the borrower during the loan modification process that allows Sperlonga to communicate directly with the HOA. Sperlonga then monitors monthly payments and notifies the servicer if the borrower misses a payment, providing a warning to trigger servicer attention that a

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

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

National Reverse Mortgage Lenders Association 2011 Annual Meeting & Expo Renaissance Boston Waterfront Hotel 606 Congress Street Boston For more information, call (202) 939-1784 or visit

Thursday, September 15


Iowa Association of Mortgage Brokers 2011 Annual Convention & Education Des Moines Botanical Center 909 Robert D. Ray Drive Des Moines, Iowa For more information, call (515) 210-4675 or visit

Tuesday-Thursday, November 1-3

Sunday-Tuesday, September 25-27 Mortgage Bankers Association’s Regulatory Compliance Conference 2011 Renaissance Washington DC Downtown 1127 Connecticut Avenue Northwest Washington, D.C. For more information, call (800) 793-6222 or visit OCTOBER 2011

Monday-Wednesday, October 3-5 Mortgage Bankers Association of Pennsylvania (MBA of PA) 2011 Keystone Conference Wyndham Gettysburg Hotel 95 Presidential Circle Gettysburg, Pa. For more information, call (888) 739-9991 or visit

Tuesday, October 4 Illinois Association of Mortgage Professionals 2011 Fall Conference Waterford Banquet Center 933 South Riverside Drive Elmhurst, Ill. For more information, call (630) 916-7720 or visit

Sunday-Wednesday, October 9-12 Mortgage Bankers Association’s 98th Annual Convention & Expo The Hyatt Regency 151 East Wacker Drive Chicago, Ill. For more information, call (800) 793-6222 or visit

Friday, October 14 Kentucky Association of Mortgage Professionals 2011 Annual Convention & Trade Show Location to be determined Lexington, Ky. For more information, call (270) 929-2836 or visit

Third Annual Northeast Conference of Mortgage Brokers Presented by the New Jersey Association of Mortgage Brokers and the Pennsylvania Association of Mortgage Brokers Trump Taj Mahal Casino Resort 1000 Boardwalk at Virginia Avenue Atlantic City, N.J. For more information, call (732) 596-1619 or visit

Wednesday, November 2 2011 Missouri Association of Mortgage Professionals Convention & Trade Show St. Charles Convention Center 1 Convention Center Plaza St. Charles, Mo. For more information, call (314) 909-9747 or visit DECEMBER 2011

Sunday-Tuesday, December 3-5 2011 NAMB/WEST Loan Originator Conference MGM Grand 3799 South Las Vegas Boulevard Las Vegas For more information, call (303) 798-3664, ext. 15 or visit MARCH 2012

Sunday-Thursday, March 11-15 29th 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 (732) 596-1619 or visit




JULY 2011 

New Sperlonga Data Product Warns Mortgage Servicers of Possible Default

potential default is looming. The LMAS service complements a related product, Sperlonga’s HOA Delinquency Check, which ensures that a borrower is not severely delinquent on HOA dues prior to a loan modification or short sale, forewarning servicers and lenders of potential difficulties with those transactions. “In the majority of the cases, borrowers will stop paying their HOA fees before they stop making their mortgage payment,” said Matt Martin, Sperlonga Data and Analytics’ chairman and chief executive officer of MMREM. “Knowledge that a borrower is late or delinquent on HOA fees will allow servicers to get in front of a loan that’s about to default.”

Mortgage Bankers Association’s Quality Assurance and Residential Underwriting Conference 2011 Hilton New Orleans Riverside 2 Poydras Street New Orleans, La. For more information, call (800) 793-6222 or visit



its users with an 18-month head start on the revised regulations.

Monday-Wednesday, October 24-26


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

Tuesday-Thursday, September 13-15




Nationwid e FHA Lend er Looking fo r: TO P P R O D U CER


Call for De tails!

T h e B E ST B r a n c h S o l u t i o n , P e r i o d . 800.220.9498 This information is provided to assist business professionals and is not an advertisement extended to the consumer, as defined by Section 226.2 of Regulation Z. Freedom Mortgage corporate office is located at: 907 Pleasant Valley Ave. Suite 3, Mount Laurel, NJ 08054. Lender NMLS ID: 2767. Licensed by the NJ Department of Banking and Insurance, License #9100861. All Rights Reserved.