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National Mortgage Professional Magazine
TABLE OF CONTENTS
Volume 4, Number 1
Bay Equity LLC ................................................ www.bayeq.com ..................................................41 Benchmark Mortgage ...................................... www.iambenchmark.info ..............Inside Front Cover Best Rate Referrals, LLC .................................... www.bestratereferrals.com ..................................13 Calyx Software ................................................ www.calyxsoftware.com ......................................43 NMP MEDIA CORP. 1220 WANTAGH AVENUE WANTAGH, NEW YORK 11793
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A Special Look at “Managing & Selling REOs”
CBC National Bank .......................................... www.cbconnex.com ....................................MO3 & 9 Elliott and Company Appraisers, Inc................... www.appraisalanywhere.com ................................42 Equity Loans LLC .............................................. www.equityloans.com ..........................................21 Flagstar Wholesale Lending .............................. www.paperless.flagstar.com ......................Back Cover
Soaking Up REO Inventory Like a Sponge By Daren Blomquist ..............................................................36
Freedom Mortgage .......................................... www.fmbranch.com ......................Inside Back Cover
REOs in 2012: They Key Word is “Trust” By David Lykken & Jon Traver ..................................................38
GSF Funding .................................................... www.gogsf.com ....................................................7
Frost Mortgage Lending Group .......................... www.frostmortgage.com/nmp ..............................24
Hometown Lenders .......................................... www.hometownbranch.com ................................29
An REO Obstacle Course By Ivan Choi ..............................39
Icon Residential Lenders, LLC ............................ www.iconwholesale.com ................................5 & 15
Rehab or Sell “As-Is?” By Cheryl Lang ..............................40
Land Home Financial Services .......................... email@example.com ....................................39
HUD REOs: Six Things Every MLO Needs to Know By Jeff Mifsud ......................................................................42
Loyalty Express ................................................ www.loyaltyexpress.com ......................................15
Managing and Selling REOs in a Flooded Market
Mortgage Brokers Network Corp, Inc. ................ www.mortgagebrokersnetwork.com ......................19
By Frank Danna ....................................................................................43
Features New Year’s Resolutions By Mary Beth Doyle ........................4
Menlo Park Funding ........................................ www.menloparkfunding.com ................................37
NAMB.............................................................. www.namb.org/legconference ..............................35 NAPMW .......................................................... www.napmw.org ..................................................6 PB Financial Group Corp. .................................. pbfinancialgrp.com ..............................................24 Polaris Home Funding Corp. (Branches).............. www.polarishfc.com/TimeForAChange ..................25
Pursuing Excellence By Casey Cunningham ..........................4
Polaris Home Funding Corp. (Wholesale) ............ www.polarishfc.com ............................................31
Controlling Credit Risk By Jonathan Foxx ............................8
REMN (Real Estate Mortgage Network)................ www.remnwholesale.com ....................................11
ValueNation: In Uniformity Lies the Path to Progress By David Rasmussen ............................................................10
Shortsale Speedway.......................................... www.shortsalespeedway.com/freedemo ................30
The NAMB Perspective ..................................................12
Veros Real Estate Solutions .............................. pmc2012.com ......................................................23
For Managers Only: The Management Dilemma By Dave Hershman ................................................................18
Credit Repair Still a Threat to Your Mortgage Business By Terry W. Clemans ..................................28 Leadership and Culture: Are Your Model-Matched With Your Current Mortgage Lender? By Drew Waterhouse ............................................................32 Make Real Estate Agents Your Soldiers! By Raymond Bartreau ............................................................35
Columns Heard on the Street ........................................................6 New to Market ................................................................29 NMP Mortgage Professional Resource Registry ..........44 NMP Calendar of Events ................................................48
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NMP News Flash: January 2012 ....................................19
MISSOURI MORTGAGE PROFESSIONAL MAGAZINE
The Mortgage Battlefield of 2012: A View From the Frontlines By John Walsh ........................20
TMS Funding.................................................... www.tmsfunding.com ..........................................33 NationalMortgageProfessional.com ❖
NMP Mortgage Professional of the Month: Brett McGovern, President of Bay Equity Home Loans ....................................................................16
January 2012 Volume 4 • Number 1
A Message From NMP Media Corp. Executive Vice President Andrew T. Berman A new year … a new attitude and a new direction
STAFF Eric C. Peck Editor-in-Chief (516) 409-5555, ext. 312 firstname.lastname@example.org Andrew T. Berman Executive Vice President (516) 409-5555, ext. 333 email@example.com Joey Arendt Art Director firstname.lastname@example.org Jon Blake Advertising Coordinator (516) 409-5555, ext. 301 email@example.com Kelsey Domino Executive Sales Assistant (516) 409-5555, ext. 316 firstname.lastname@example.org
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National Mortgage Professional Magazine is published monthly by NMP Media Corp. Copyright © 2012 NMP Media Corp.
See you in D.C. this March Back to the subject of resolutions for the new year … did you make a pledge to become more involved with your industry? Do you want to stand alongside your peers as they take on the regulators who have been imposing their will on the industry? If you answered “yes,” a unique opportunity is on the horizon, March 19-20 in Washington, D.C. as you can join your peers in getting a firsthand look at the legislative process on Capitol Hill at the 2012 NAMB Legislative & Regulatory Conference. NAMB is assembling a great list of speakers and guests, as attendees will be armed with the knowledge and talking points needed when meeting on Capitol Hill with your elected officials on Lobby Day. NAMB’s Legislative & Regulatory Conference is highlighted by the annual trip to Capitol Hill where you, as a constituent of your senators and representatives, can provide your elected officials with the knowledge on legislation that may impact your industry. For more information, see NAMB President Donald J. Frommeyer’s message on page 12 or visit NAMB.org/legconference for more details on this event.
New year, new faces Our resolution here at National Mortgage Professional Magazine is to go above and beyond providing you with the tips necessary to take your business to the next level from the industry’s top experts. This year, we welcome a few new columns to the fold, starting with Casey Cunningham o XINNIX on page 4 and her new monthly feature, “Pursuing Excellence.” Casey drives home the message of settling for nothing short of the best in 2012, and how to take the steps necessary to attain your goals. Another new column for all you managers out there is Dave Hershman’s new entry, “For Managers Only” on page 18 where Dave shares his 30plus years of industry experience in helping you find and train the right people to lead your team. You get all this and much more in this month’s issue of National Mortgage Professional Magazine. Was 12:00 a.m. on Jan. 1 just another tick of the clock for you? Or, did it mark the time to take action and stand firm to make the changes necessary, both personal and in business, that will set you toward your intended goal not only in 2012 but beyond? Only you can make the choice to step off the sidelines and step into the ring. If you are reading this publication, you are a survivor so far. Take what you’ve gone through and build upon your experiences while making an investment in yourself. Until next month ...
Andrew T. Berman, Executive Vice President NMP Media Corp.
We kick off January 2012 with a closer look at Brett McGovern of Bay Equity Home Loans on page 16, the subject of our NMP Mortgage Professional of the Month. Brett took a leap of faith in 2007 as the mortgage meltdown began to rear its ugly head. It was at that time that he decided to open Bay Equity and enter the wholesale marketplace and has enjoyed growing success ever since.
Tara Cook Billing Coordinator (516) 409-5555, ext. 324 firstname.lastname@example.org
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So 2012 is finally here. Did you make a list of resolutions prior to midnight on Dec. 31, 2011? Have you taken these resolutions to heart and actually stuck to them. Sure, we all vow to lose weight and eat better, but judging by the dwindling crowds at the gym, I can see that not many have been in the mood to stick to that one. What about your business? Have you made a commitment to improving your bottom line in 2012? This month, we have assembled some of the industry’s top experts four our January 2012 Special Focus on “Managing & Selling REOs.” In today’s marketplace, there’s a good chance you’re either dealing with a large inventory of REOs or trying liquidate your REO portfolio. Perhaps that improvement on your bottom line can start with stepping into the REO marketplace. Daren Blomquist of RealtyTrac kicks things off by sharing his expertise and providing the facts and figures as to why you should no longer neglect this niche in his piece, “Soaking Up REO Inventory Like a Sponge” on page 36. Following Daren, our resident leadership experts David Lykken and Jon Traver of Mortgage Banking Solutions tackle REOs in their piece on page 38. “REOs in 2012: The Key Word is ‘Trust’” examines just who out there can be relied upon for expert advice when entering the real estate-owned marketplace as a trustworthy and knowledgeable individual on the other side of the table can make or break a deal. On page 39, Ivan Choi of Matt Martin Real Estate Management takes a closer look at the hurdles and obstacles in place when trying to close an REO transaction. Cheryl Lang of Integrated Mortgage Solutions opens the debate on whether you should make the investment in fixing up an REO property or sell it in its current state in her aptly titled piece, “Rehab or Sell ‘As-Is?’” on page 40. Our section continues on page 42 as our FHA expert Jeff Mifsud of Mortgage Seminars LLC provides our readers with six points that every loan originator should know before looking into purchasing a HUD REO property. Our special focus wraps up on page 43 with a submission from Frank Danna of Appraisal Logistics, effective ways of opening the dam on your flooded REO pool.
The Association of Mortgage Professionals
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: www.namb.org
P.O. Box 451718 ❖ Garland, TX 75042 Phone #: (800) 827-3034 ❖ Fax #: (469) 524-5121 Web site: www.napmw.org
NAMB Board of Directors
National Board of Directors 2011-2012
OFFICERS President—Donald J. Frommeyer, CRMS Amtrust Mortgage Funding Inc. 200 Medical Drive, Suite D Carmel, IN 46032 (317) 575-4355 ❖ email@example.com Vice President—Donald Fader, CRMS SMC Home Finance P.O. Box 1376 Kinston, NC 28503-1376 (252) 523-5800 ❖ firstname.lastname@example.org Treasurer—John Councilman, CMC, CRMS AMC Mortgage Corporation 2613 Fallston Road Fallston, MD 21047 (410) 557-6400 ❖ email@example.com Secretary—Olga Kucerak, CRMS Crown Lending 222 East Houston, Suite 1600 San Antonio, TX 78205 (210) 828-3384 ❖ firstname.lastname@example.org Past President—Jim Pair, CMC Mortgage Associates Corpus Christi 6262 Weber Road, Suite 208 Corpus Christi, TX 78413 (361) 853-9987 ❖ email@example.com
DIRECTORS Rocke Andrews, CMC, CRMS Lending Arizona LLC 1996 North Kolb Tucson, AZ 85715 (520) 886-7283 ❖ firstname.lastname@example.org
Deb Killian, CRMS GMAC 246 Federal Road, Unit C-24 Brookfield, CT 06804 (203) 778-9999, ext. 103 ❖ email@example.com Linda McCoy Mortgage Team 1 Inc. 6336 Picadilly Square Drive Mobile, AL 36609 (251) 610-0494 ❖ firstname.lastname@example.org
President-Elect Candace Smith, CME (512) 329-9040 email@example.com
Vice President-Eastern Region Christine Pollard (607) 656-5005 firstname.lastname@example.org
Senior Vice President Jill Kinsman (206) 344-7827 email@example.com
Secretary Katheryn M. Farrell (509) 528-0349 firstname.lastname@example.org
Vice President-Northwestern Region Nita Cook, GML, CME, CMI (360) 705-5053 email@example.com
Treasurer Jeanne Evans, CME (918) 431-0155 firstname.lastname@example.org
Vice President-Western Region Lyman King III, CME, CMI (916) 967-4653 email@example.com
Parliamentarian Hulene Bridgman-Works (800) 827-3034 firstname.lastname@example.org
National Credit Reporting Association Inc. 125 East Lake Street, Suite 200 ❖ Bloomingdale, IL 60108 Phone #: (630) 539-1525 ❖ Fax #: (630) 539-1526 Web site: www.ncrainc.org
2012 Board of Directors & Staff Donald J. Unger President (303) 670-7993, ext. 222 email@example.com Daphne Large Vice President & Treasurer (901) 259-5105 firstname.lastname@example.org Tom Conwell Ex-Officio & Legislative Chair (800) 445-4922, ext. 1010 email@example.com Nancy Fedich Director–Conference Chair (908) 813-8555, ext. 3010 firstname.lastname@example.org Judy Ryan Director-New Membership & Elections Chair (800) 929-3400, ext. 201 jryan@Kroll.com
Mike Brown Director–Technology Chair (800) 925-6691, ext. 4350 email@example.com Maureen Devine Director–Education & Compliance Co-Chair (413) 736-4511 firstname.lastname@example.org Renee Erickson Director–Tenant Screening Co Chair (800) 311-1585, ext. 2101 email@example.com Terry Clemans Executive Director (630) 539-1525 firstname.lastname@example.org Jan Gerber Office Manager/Membership Services (630) 539-1525 email@example.com
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Susan Cataldo Director–Education & Compliance Chair (404) 303-8656, ext. 204 firstname.lastname@example.org
William Bower Director–Tenant Screening Chair (800) 288-4757 email@example.com
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Kay A. Cleland, CMC, CRMS KC Mortgage LLC 200 South Wilcox Street #224 Castle Rock, CO 80104 (720) 810-4917 ❖ firstname.lastname@example.org
Vice President-Central Region Lisa Puckett, CME (405) 741-5485 email@example.com
Fred Arnold, CMC American Family Funding 24961 The Old Road, Suite 101 Stevenson Ranch, CA 91381 (661) 284-1150 ❖ firstname.lastname@example.org
President Laurie Abshier, GML, CME, CMI (661) 283-1262 email@example.com
[NOTE: Develop “Pursuing Excellence” header artwork to be picked up monthly] Pursuing Excellence
New Year’s Resolutions by Mary Beth Doyle, Founder
There’s an old proverb that says, “Tomorrow belongs to the people who prepare for it today.” As we begin a new year, it’s important to focus on maximizing business through strategic, proactive marketing. But that’s easier said than done. Reaching out to all your clients, partners & prospects in an effective way takes valuable time & resources. Fortunately, LoyaltyExpress provides comprehensive, cost-effective solutions that motivate your book of business to take action. As a result, you can focus on closing loans. LoyaltyExpress is the #1 choice of top-producing loan officers & executives across the nation. Here’s why:
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MISSOURI MORTGAGE PROFESSIONAL MAGAZINE
t Our proprietary technology enables you to automate high-impact communications that consistently deliver new & repeat business. Intelligent data mining identifies and promotes new opportunities and referrals. t Our wide selection of targeted programs delivers exceptional results. By combining high-quality direct mail, e-mail, and on-demand marketing solutions – your messages will successfully reach & engage your target audience through crossmedia formats and channels. t Our solutions are easy to use. With only a few clicks of the mouse, you’ll be sending targeted marketing campaigns & pieces that convert your book of business into closed loan production. Our industry-leading client services team is always available to answer questions. Time is of the essence. Take a few minutes to explore the benefits of working with LoyaltyExpress. It’s the best investment you can make in your business for 2012 and beyond.
LoyaltyExpress is the leading mortgage marketing company in the nation. For more information: call 877.938.1175 or visit www.loyaltyexpress.com.
By Casey Cunningham
I titled this piece “Pursuing Excellence” because I believe in it so passionately. For you, for me, and for our industry. And I don’t think I am alone in that belief. After all, what is the number one topic for book sellers? Motivation, average to exceptional, 100 ways to excellence, the power within, the power without, the power to change, how to excel, how to succeed, how to whatever … you get it, everyone is looking to achieve their best, and we in the mortgage business are no exception. Let’s face it; we’ve had a few challenges lately. The past 12 months (the past 36 months, actually) have been anything but pleasant. The days of quick approvals, sufficient values and paychecks with lots of lovely zeros have been replaced by Dodd-Frank, appraisals that resemble some hybrid offspring of the Titanic and Hindenburg, and loan conditions on a slam-dunk file that make Tolstoy’s War and Peace look like a sticky note reminding you to buy milk at the grocery store. In short, the success we enjoyed and the excellence we achieved seems a little out of reach these days … or is it? The new world in which we live has resulted in a much-needed cleansing of the industry, sending nefarious senior loan officers to throw in the towel and slither on to their next opportunity. In the meantime, we’ve seen interest rates fall to levels not seen since dinosaurs roamed the Earth. With this in mind, I believe this is a year worth getting excited about and where we can unabashedly pursue excellence to the fullest. That said, it is my opinion, we first need to jettison the idea that “three or four loans a month” is acceptable. Let’s be completely honest, despite contractual obligation to XYZ Mortgage Company Inc. stating three loans in monthly production keeps you employed and allows you to still make a reasonable living, is that really the standard we pursue? Why has the bar been set so low? The “standards” today are lower than they were 30 years ago. Let’s just call it what it is, shall we … excuses. We justify, delay, become lazy, blame the market, blame the economy, become complacent and settle for mediocrity. With the current market conditions, there are countless loan officers still very successful who don’t use the excuses to hamper their success. Does it not speak to the essence of what plagued our industry for the past four years? Why do we, as humans, have a tendency to justify scraping our derrières as we Fosbury Flop (look that one up) over this bar of mediocrity? The setter of standards is not the boss’ boss’ boss who sits at a desk in an office building nine states away. Cliché as it may be, the setter of standards is that lonely soul that stares back at you in the mirror. Not just in the mortgage game, but in life, your relationship with your spouse, your children, your personal finances, your health and the list goes on. The age old questions remains: How many people truly pursue the excellence that puts them on a road to success and goal achievement? The answer is … very few. But you can be counted in this elite group? Ask yourself: What will it take? What will you commit to this year? Are you willing to abandon your comfort zone? What will you read to aid in your pursuit of success? How will you invest in yourself? Are you going to let your success be predicated on anyone else? Are you ready to succeed? When will you start? Find something, ANYTHING to hold you accountable! Professionally, partner with a co-worker, become a student of your profession, conduct site visits, find a top producer with whom you can extract ideas and emulate their success, or best practices. Hire a business coach. Personally, hire a life coach, challenge your spouse, your kids, create a personal mission statement. Set goals that motivate you. Find your purpose and establish a path to get you there. The simple yet unavoidable question is not, what are you doing to pursue excellence, but will you pursue excellence? It’s there if you want it. Answer these two questions to begin your pursuit of excellence: ■ What will you do today? ■ Who will you tell? Casey Cunningham is president of XINNIX, a provider of mortgage sales and leadership development programs. She may be reached by phone at (678) 325-3501 or e-mail firstname.lastname@example.org.
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MISSOURI MORTGAGE PROFESSIONAL MAGAZINE ❖ JANUARY 2012
For additional information regarding Conforming, Jumbo, FHA and VA Lending, Call us at 1-888-247-4207 or visit us online at www.iconwholesale.com
I LPMI Available to 95%
Bay Equity Home Loans Goes Completely Paperless
Why W hy NAP NAPMW? M MW? Three T hree Simple Reasons Reaso ons Education E d duccation Organized Or ganized ffor or the pur purpose pose of providing providing education education tto o pr professionoffe essionals in all phases off the mor mortgage industry, NAPMW offers educa-tgage industr y, NAP N MW off ers educa tion via man enues – seminars and w orkshops k ound the manyy vvenues workshops held ar around on-line,, and National Conference ccountry, ountry, on-line a at at its Na tional EEducation ducation C onference held May. each hM ay. NAPMW NAP MW membership membersship gives gives you you exclusive exclusive access a cess to ac to timely educaeducaaffecting career tion regarding regarding the e regulations regulations aff ecting yyour o car our eer such as a webinar FREE TO TO MEMBERSS monthly monthly w ebinar on industry ind dustry updates updates AND education class offering our 8 hour NMLS continuing continuing educa tion cla ss off ffe ering (NMLS Provider 1400309) P rovider # 140030 09) 6
Leadership p Leadership IIff you you believe believe in helping helping to to elevate elevate the educational edu ucational standards standards of this industry, industry, or assisting asssisting in developing developing the e most competent competent industryy w work industr ork force, force, then you you believe believe in NAPMW. NA APMW.
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NAPMW Butt sinc since women NAP MW is not a women’s women’s organization. organization. Bu ew omen make majority profesup the major ity off professionals professionals in the mortgage/banking morrtgage/banking pr ofession, our purpose business,, personal personal,, purpose is to to help them advance advance in business and leadership development. de evelopment.
Net wo ork king i Networking NAPMW is a ccommunity NAPMW omm munity of near nearly ly 2,000 professionals prof o essionals acr across oss the Country engage mortgage banking industry. C ountry who eng age in the mor tgage / ba anking industr y. Men Men and w omen from from all backg rounds have have joi ned NAP MW because women backgrounds joined NAPMW excel whatt they do do.. Emplo Employers want they want want tto oe xcel e aatt wha yers who w ant eexcelxcellenc e from from their employees emplo e yees engage eng NAP N MW for for up-to-date up-to-date lence with NAPMW education. educa tion. B Both oth pr professionals p ofessionals and emplo emp employers yers e have have found found there there is a plac e ffor or them in n NAP MW W. place NAPMW.
National E National Education ducation Na tional T raining National Training National Networking Na tional N etworking
To T o Join NAPMW NAPMW W visit: www.napmw.org w ww.napmw.o org or ccall: all: 1-800-827-3034 1 800 8 1-800-8 827 3034 827-3034 Have Ha ve Q Questions? uestion ns? Please ffeel eel free free to to e e-mail -m mail us a at: t: email@example.com napm firstname.lastname@example.org . om
Coas Coast oast to to C Coast oas A oast Associations ssociations D iscoun un nted Services Serrvic v es Discounted IIndustry ndustrry Updates U Updatess
Bay Equity Home Loans has announced that it has completed its initiative to implement a completely paperless loan processing system. While Bay Equity’s loan processing system has been predominantly paperless for some time, the company’s electronic document management system now virtually eliminates printing hardcopies of loan documents. By not having to print hundreds of pages of paper—many of them legal-sized—on each and every loan, Bay Equity helps the environment while realizing significant financial savings. It also considerably reduces the time and manhours necessary to take a real estate loan from application to funding. “Loan documentation processing has always been an albatross to the real estate industry,” said Philip Mikolaj, director of information technology for Bay Equity. “Each and every loan required hundreds of pages of paper. By implementing a fully electronic and paperless system, we help the environment and save money that goes right to the bottom line. We can also better manage the entire process and minimize the time it takes to get a loan funded and closed.” The DataTrac EDM document management software was developed by Del Mar DataTrac, a division of Ellie Mae. The software was tailored to Bay Equity’s specific needs by Mikolaj, whose deployment takes full advantage of the system’s capabilities, including: ■ Up-front Submission Indexing: The new system validates that the entire loan document package was received and is ready to be submitted to loan underwriters. ■ Appraisal Integration: Appraisals will automatically appear in electronic document management for UW review, with no human action required to upload appraisals to the system. ■ Remote Virtual Underwriting: Loan underwriting can be done virtually, and from any operations center, allowing overflow management among operations centers. ■ Document Coding: The electronic
document management system will digitally generate comprehensive loan closing packages inclusive of barcodes, which, when returned, will “auto-magically” scan and index every page to its respective and appropriate category. ■ Pre-funding Auditing: Loan funders can audit and run pre-funding bundles and checklists to ensure file is complete and ready for funding. (Post-closing audits can also be performed and reviewed to ensure that all documentation is ready for delivery to investors, who will accept secure electronic transfers directly.
StreetLinks Announces UCDP-Compliant Integration With ACI ACI has announced that StreetLinks Lender Solutions has integrated with ACI’s eServices, an appraisal delivery service to help ensure compliance with client/lender and investor requirements. eServices combines appraisal compliance and quality rules with electronic delivery as a standard feature accessible from the appraiser’s ACI desktop software. ACI’s approach helps ensure that appraisal data complies with both the Uniform Appraisal Dataset (UAD) and MISMO XML requirements before the appraiser completes the appraisal report. “ACI uses integration services from its appraisal software to create customized delivery solutions. The new StreetLinks eService provides a connection for us to seamlessly receive native XML directly from appraisers’ computers with the assurance of our quality and compliance standards,” said Tony Ebeyer, chief strategy officer for StreetLinks. “The ACI system is intuitive and allows for additional flexibility in processing and managing appraisal reports. That’s why thousands of StreetLinks appraisers will rely on it every month.” Prior to delivering the appraisal report to StreetLinks, the new eService performs an in-depth quality control review using ACI’s PAR Logic review rules. The comprehensive library of both industry best practices and jobspecific business rules checks the appraisal report for compliance with StreetLinks’ policies. Once the appraiser has satisfied the requirements, the file
is delivered to StreetLinks for further processing and eventually delivered to either of the government-sponsored enterprises (GSEs), Fannie Mae or Freddie Mac. “As a result of this technology collaboration with StreetLinks, we have developed a comprehensive pre-delivery UAD audit and XML delivery service that makes the process for the appraiser simple and efficient,” said George Opelka, SVP of ACI. “The upgrade provides greater accuracy, which benefits all parties—appraisers, management companies, the GSEs and borrowers.”
Total Mortgage Services Now Licensed in West Virginia
Total Mortgage Services LLC has announced that it received its West Virginia Mortgage Lender License from the West Virginia Division of Banking and is able to originate residential mortgage loans throughout the state of West Virginia. Total Mortgage is licensed as a mortgage lender in West Virginia and holds Mortgage Lender License ML-30789. “We believe we are entering the West Virginia market at a very beneficial time for borrowers, as mortgage rates are close to historical lows and affordable housing opportunities are available throughout the state,” said John Walsh, president of Total Mortgage. “We are excited to help responsible borrowers find the right mortgage solution in today’s challenging environment for their purchase or refinancing needs.” Total Mortgage is now licensed in 25 states and the District of Columbia and has three additional state licenses pending.
and the reception we’ve received in Dallas,” said Bartosh. “REMN’s history of first-class customer service is well0known in the mortgage industry and with this new office, we’ll be able to share this experience face-to-face with current and future Dallas homebuyers.”
AllRegs and Total Learning Solutions Join Forces on FHA Training The Federal Housing Administration (FHA) has awarded Total Learning Solutions (TLS) with a contract to provide nationwide technical assistance traincontinued on page 10
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Real Estate Mortgage Network Inc. (REMN) has announced the opening of its first Denver area location. As REMN’s first branch in the state of Colorado, this new location will help the company better service the needs of the region’s year round residents, vacation home buyers and real estate professionals. Located in Englewood, Colo., the new office will be overseen by the recently hired Cathy Stroud, who joins REMN as their first regional vice president for the area. A Denver resident and mortgage industry professional for more than 20 years, Stroud is a graduate of Colorado State University, an active board member of the Colorado Mortgage Lenders Association (CMLA) and volunteers with Susan B. Komen for the Cure. Stroud is joined by Vickie Newman and Kevin Feakes as mortgage loan originators, bringing with a combined
pany introduce their customer-centric, quality focused way of doing business to homebuyers and real estate professionals throughout the region. REMN’s new Dallas office is currently staffed by a team of 17 professionals and will be overseen by Joe Greiner, the office’s area manager, the branch will offer a wide variety of home lending products, including conventional, FHA and VA loans, as well as REMN’s FHA 203(k) Concierge Service, a unique initiative that ensures the home improvement process of 203(k) mortgages runs smoothly for all of the involved parties. Greiner will report to REMN Executive Vice President Tim Bartosh. “I’m very pleased with how quickly REMN has grown throughout the area
REMN Continues Westward Expansion With New Colorado and Texas Branches
50 years of experience to REMN. Scott Newman joins REMN as the Denver office’s area manager and will oversee day-to-day operations. “REMN is well-known in the industry for their terrific customer service and commitment to finding the best possible mortgage solutions for homeowners, a reputation that will follow them here in Denver’s growing and diverse market,” said Stroud. “We’ve recruited some true local all-stars for this office and I look forward to sharing the REMN way of doing business with the greater Denver community.” REMN has also announced the opening of its first Dallas retail location. As REMN’s first branch in the state of Texas, this new office will help the com-
Credit Risk By Jonathan Foxx
e begin 2012 with the certain knowledge that many new regulations and responsibilities have made significant and costly demands on lenders, servicers, mortgage brokers, banks, investors, and mortgage securitizers to revise and strengthen plans to assure their economic survival. Many compliance departments throughout the country have set forth robust compliance calendars in order to monitor, test for, and implement federal and state guidelines.
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The primary source of revenue for the aforementioned companies (collectively, financial institutions) is the negotiating, extending, administering, and packaging of credit. Extension of credit and credit risk are really inseparable features of mortgage loan originations—one does not exist without the other. Credit risk is quite measurable, especially with respect to any activity that poses a risk to earnings and capital. It is no secret that inadequate risk management is a leading cause of the failure of financial institutions. Just as credit risk and extension of credit are inseparable, so also are they inseparable from risk management. Only to the extent that
credit risk and appropriate risk management procedures are identified, analyzed, established, and implemented may financial institutions claim to have safe and sound lending practices. Risk management (often referred to, generically, as Compliance) should not formally come under the rubric of the socalled “Best Practices” section of corporate governance. In my view, risk management is not an elective, a negotiable issue, a good operating practice, a mere technique consistently providing superior results, a Six Sigma template, or a business management strategy. Rather, risk management is, and ought to be, an inherent and essential, evaluative and ministerial function reaching to virtually all intrinsic aspects of a financial institution’s business model. This is why I coined the term “Mortgage Risk Management,”
because it stands on its own, a specialization that provides a firm foundation to the residential mortgage loan flow process—from point of sale to securitization. Put otherwise, it is the one and only “fail-safe” means by which a board of directors may ensure that management effectively implements internal processes designed to identify, measure, monitor, and control credit risk. Close consideration of appropriate risk management practices is vital to a financial institution’s stability, most especially in the outset of a new year and at all other times. But what is risk management? And, how does risk management affect a financial institution’s way of doing business? In this article, I will provide a brief outline of two key areas where credit risk review and risk management conjoin directly to impact a financial institution’s capability to conduct business and manage a thicket of regulations. Drawing on my own experience in working with our clients, I will offer an overview of what risk management entails, whether conducted internally or through external resources. To get a sense of a typical approach involved in evaluating credit risk and the concurrent role played by risk management, I will outline the following areas: Quantity of Risk and Quality of Risk Management. In a penultimate section, entitled Implementing Risk Management, I will offer some guidance about how to use credit risk information effectively to fortify a financial institution.
Quantity of Risk I define quantity of risk as the level of credit risk associated with the credit portfolio of a financial institution. Generally, there are three levels for quantity of risk: Low, moderate or high. In evaluating credit risk, there are nine areas of review that should be undertaken. 1) Risk Level ■ Consider in the analysis the size of the exposure associated with each of continued on page 14
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heard on the street
In Uniformity Lies the Path to Progress By David Rasmussen
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Automating the acceptance of appraisal and other valuation services has been an objective of lenders for a long time. While it has been possible to convert appraisal data into an electronic format for transmission and storage, the lack of consistency among providers has significantly limited the ability to do anything more. When Fannie Mae and Freddie Mac implemented the Uniform Mortgage Data Program (UMDP), along with its three main initiatives, the Uniform Loan Delivery Dataset (ULDD), Uniform Appraisal Dataset (UAD) and Uniform Collateral Data Portal (UCDP), its purpose was to keep data provided to the mortgage industry consistent. Now, we are seeing this positive step in uniformity take on a multitude of new forms and break down barriers to data access. From a broad perspective, valuation management platforms can allow an organization to effectively extend itself in a unified manner, typically connecting lending branches, or perhaps, linking the origination arm to the servicing arm. However, in today’s climate, lenders can leverage these solutions to extend from internal originations efforts into the secondary market government-sponsored enterprise (GSE) investor initiatives to create more cohesion than ever before. A robust valuation management platform, combined with the new uniformity of appraisal data, also greatly improves an organization’s ability to convert data to information that can be used to identify new products, services and opportunities. The industry is already seeing UAD definitions and terms being embraced in the production of non-traditional valuation products, making it possible for an organization to gather input from various sources in a common language to facilitate better analysis and understanding of the underlying collateral throughout the life of the loan. Looking at a more detailed level within the platform itself, there are at least three functional benefits of integrating UCDP and UAD modules and embracing the concept of data uniformity. ■ Benefit #1: Advanced valuation management platforms can provide the ability to convert first-generation appraisals into an electronic data format compliant with GSE initiatives. When that format is not readily available from an appraiser or an appraisal management company (AMC), or a lender chooses not to utilize the portal-level conversion tool, lenders need to have the ability to convert it for submission. Valuation platforms can provide this facility without ever leaving the native application for appraisal order, receipt and review. ■ Benefit #2: Advanced valuation management platforms can provide the ability to automate expectations and resolve issues before submission. Specifically, when an appraisal is returned, a valuation management platform can confirm if the data is UAD continued on page 22
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ing to its business and industry partners. AllRegs Inc. is the exclusive mortgage industry partner of the TLS team. TLS and AllRegs (referred to as Team TLS) will be responsible for providing professional, technical and administrative services to deliver technical-assistance training nationwide via FHA, in conjunction with the Office of Fair Housing and Equal Opportunity (FHEO) and the Office of the Inspector General (OIG), to its business and industry partners. The purpose of this training is to address the housing crisis by ensuring education on, and compliance with, FHA program guidelines. The delivery of this comprehensive training curriculum will support the implementation of policies and program changes to FHA programs as a result of legislation and other issues. “We are excited to be a part of Team TLS and for AllRegs to help deliver this important FHA training initiative to the mortgage lending industry,” said Dan Thoms, EVP of AllRegs.
Avista Solutions Announces Partnership With ComplianceEase
Avista Solutions has announced the completion of a direct integration to ComplianceAnalyzer, an automated compliance auditing solution from risk management solution provider ComplianceEase. Avista Solutions and ComplianceEase have a number of mutual customers and this integration allows those customers to access the ComplianceAnalyzer solution directly from their Avista Agile LOS. ComplianceAnalyzer provides realtime compliance audits at any point in the lending process, safeguarding them from potential loan risks. As part of recent electronic examination (e-Exam) initiatives, state regulators have been using ComplianceAnalyzer and other eExam tools to audit as much as 100 percent of licensees’ loans in regulatory examinations. By leveraging integrated audits using the same auditing software, lenders can prepare in advance for their e-Exams. Equator Reports ComplianceAnalyzer covers a full Nearly 1.2 Million spectrum of government regulations, Short Sales Initiated including the Home Ownership and Equator (EQ), Equity Protection Act (HOEPA), the a provider of Truth-in-Lending Act (TILA), Real Estate default serv- Settlement Procedures Act (RESPA), icing technol- state and local anti-predatory lending ogy, has announced in its fourth laws, state license-based consumer quarter report that approximately lending regulations and secondary mar1.2 million short sales have been ini- ket investor and government-sponsored tiated since the launch of its short enterprise (GSE) compliance guidelines. sale module in November of 2009. “Avista Solutions recognizes the imporThe report also states that Equator’s tance of providing our customers with Loan Segmentation Module has deci- access to industry leading compliance sioned more than 875,000 loans tools,” said Avista Solutions Chief since early 2011 and in excess of Operating Officer & Chief Financial Officer $150 billion in assets have been sold Jerry White. “As the company behind through its platform since 2003. robust tools that state banking and mort“Equator now offers servicers a gage regulators rely on, ComplianceEase is complete, end-to-end default solu- a significant force in the mortgage industion,” said Equator Chief Executive try and we are excited to now offer a Officer Chris Saitta. “Our platform seamless, system-to-system interface to can handle every aspect of default their ComplianceAnalyzer solution.” that our clients need, from loan segAvista customers who choose to mentation to loan modification, sign up for ComplianceAnalyzer may short sales, deeds in lieu, invoicing, utilize the tool to pinpoint a mortgage foreclosure processing and REO.” loan’s compliance risk factors, Equator recently announced plans whether the loan is in the pre-close or to launch a new comprehensive soft- post-close stage, with a single click ware solution for Real Estate and without leaving their Avista Agile Professionals called REvolution Basic LOS. ComplianceAnalyzer returns comin early 2012, an enterprise level prehensive, user-friendly audit reports solution for real estate professionals to lenders within seconds. Each report which will allow them to handle both features the industry standard distressed and traditional properties RiskIndicator, a score that reflects a seamlessly through one system. loan’s compliance risk, as well as “Equator’s loan segmentation quantitative analysis of thresholds module has been a huge success with and detailed qualitative overviews proven results,” said Equator COO with narrative descriptions of regulaJohn Vella. “The enormous volume tory requirements. that has run through the model has “Avista users can enjoy the best of allowed Equator to validate its value both worlds with this seamless integraand we anticipate that the volume in tion, continuing to use their LOS of 2012 will at least double.” choice, while managing compliance
with ComplianceAnalyzer,” said ComplianceEase Senior Vice President Jason Roth. “Major secondary market investors use ComplianceAnalyzer to check every loan prior to purchase and state regulatory examiners are using it to audit as much as 100 percent of licensees’ portfolios. To safeguard their reputations and reduce financial risks, it makes a lot of sense for lenders to do the same.”
radius Selects MortgageFlex’s LoanQuest for Cloud-Based LOS Needs
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DocuTech Corporation has announced the acquisition of the assets of Lender Support Systems Inc.’s (LSSI) Docs3D mortgage document software from parent company, Emphasys Software. The acquisition of LSSI’s Docs3D software and customer base enables DocuTech to continue growing its existing presence among regional banks and credit unions. Current LSSI customers will see no disruption of services and can look forward to benefiting from the expanded compliance services offered
need to take the additional step of uploading the appraisal report themselves to the UCDP as MIS has Mortgage Information the ability to deliver it to both the Services Announces client and the GSEs. In the current Integration With UCDP environment, MIS prides itself on M o r t g a g e providing services that streamline I n f o r m a t i o n the valuation, title and closing Services Inc. processes, allowing their clients to (MIS) has announced that it has inte- focus on growing and maintaining grated with the Uniform Collateral Data their businesses. Portal (UCDP) and is compliant with the MIS has been a national provider Uniform Appraisal Dataset (UAD). of real estate information to the resClients of MIS working with the idential mortgage market since 1990, government-sponsored enterprises offering title insurance, closing and (GSEs) will continue to be able to valuation services to loan originators place their orders through MIS’s pro- and servicing companies. prietary Web-based order placement and tracking platform. They will not continued on page 28
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DocuTech Acquires LSSI Software Assets From Emphasys
and legal staff to track and implement new regulations.
radius financial group inc. has announced that is has selected LoanQuest from MortgageFlex Systems for their loan origination software (LOS) needs. Their decision was based on the desire to have an adaptable, modern platform without the back-end hardware costs. The hosted LoanQuest system selected includes the enterprise-level LOS and a Web consumer portal that allows consumers immediate access to loan status. “Our business needs required a system that is flexible enough to conform to our origination workflow requirements, not the other way around,” said Keith Polaski, principal at radius. “LoanQuest proved that it was versatile and could be adapted as needed without significant programming resources.” MortgageFlex offers several hosting options, including transactional and SaaS. The transactional option allows lenders to “pay-as-used” on a per loan basis and is very beneficial for lending organizations that do not have technical infrastructure and support readily available. Hosted options also give lenders high levels of security with SSAE16-certified facilities and full Disaster Recovery sites. “We understand radius’ business requirements and are confident we will meet and exceed their needs,” said Craig Bechtle, chief operating officer of MortgageFlex. “We’re looking forward to a long and beneficial partnership.”
by DocuTech, including dedicated legal staff tracking all regulatory changes and monthly updates to ensure all systems are up-to-date. “We are thoroughly excited to begin offering our proven compliance and easy-to-use document and disclosure services to LSSI users,” said Ty Jenkins, chief executive officer of DocuTech. “We welcome Docs3D customers to the DocuTech family and look forward to bringing our industry-standard levels of compliance, service and innovative document technology to them.” DocuTech will provide full support to all of LSSI’s customers. This includes customer support call centers, educational materials on regulatory issues
The President’s Corner: January 2011 o here we are, looking at a new year and wondering about all of the good things that we can start over, so we do not make the same mistakes that we made last year. So I found something that we want to change right away at NAMB, the Association of Mortgage Professionals? Membership! It has come to my attention from a few loan originators out there that they paid their state for an NAMB Membership, but they are not able to get onto the Web site, get the discounted rate at an NAMB event as a member, renew their certification, nor get their Lending Integrity Seal of Approval. I need all of you to make sure and verify that your NAMB Membership is active. Go on and make sure that you are listed in the “Find an NAMB Broker” search feature. If you are not, either you membership has expired and you did not renew, or if you paid your dues to your state, contact your state’s treasurer and/or executive director and have them check out the problem. If your membership has expired, now is the time to RENEW! And because the Delegate Council changed the by-laws of the association, you can renew you NAMB dues online by going online to JoinNAMB.com and you can renew you membership. The best thing that you can do is ask your friends if they are members of NAMB. If they ask “Why” reply to them, “Why not?” I have also been speaking with originators nationwide about our Lending Integrity Seal of Approval. Do you currently have yours? This is a great point to make to your customers that you have this Seal. You can go online to NAMB.org and click on the “Membership” icon and underneath the heading, you will find information on the Lending Integrity Seal of Approval where you can apply for the Seal. There is no reason that you should want to advertise yourself without the Lending Integrity Seal. To change direction, we are currently approaching the time that all NAMB members need to start to make plans to
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join us in Washington, D.C. for the 2012 NAMB Legislative & Regulatory Conference, set for Monday-Tuesday, March 19-20 at the Capitol Skyline Hotel in Washington, D.C. Please visit NAMB.org and click on the 2012 Legislative Conference logo to see what is in store for this year’s speakers and panels. This year is going to be really important and all members need to come, attend the Legislative Program on Monday, March 19 and visit your elected officials to let them know what NAMB and its members are doing. There is nothing like being a constituent and walking into their office as a voter. They are there to listen to you and get information from you. Remember, this is for NAMB members only, so you are on the Hill representing your national association, state association and yourself. Come to the Conference, get your information and go talk to your representative on the nation’s capital. If you have never been to Washington, D.C., now is the time to make your mark and get a firsthand look at our nation’s legislative process. We will be hosting classes on key points to discuss with your congressmen and senators, and what you need to do on each and every visit with them. If your state is organizing your Capitol Hill visits, which most state associations do to make sure that the meetings are coordinated, you need to contact your state leadership and let them know that you will be attending. They will welcome you with open arms, and get you set up to walk with them through the halls of Congress. I can remember the first time I went to Washington, D.C. back in 1999. It not only was an honor to be able to walk in as a member of NAMB and my great state of Indiana, but I also got to meet those people that really only existed on the TV. You see them on political talk shows and you wonder what they are like in person, and I had the opportunity to meet most of them personally. During the time that we were in their office, they listened to what we were saying, and I had the chance to engage in conversation with them. It was really exciting. So, get on the bandwagon and get to
the 2012 Legislative & Regulatory Conference where you will get some great information, learn a great deal about government, and you will learn how you can keep in touch with your elected officials and follow up in your home state if we ever need you to contact them during our grassroots events. The NAMB board of directors has gone through a few changes since NAMB/WEST. Walt Scott has resigned from the board due to not being able to spend a lot of free time performing his board duties. Walt lost his father about a year-and-a-half ago and is now the caregiver to his mother, and this accounts for a lot of his time. I will miss Walt and I wish him well. And let’s hope Villanova has a pretty good basketball team this year! We have added two new people to the board. First Rocke Andrews, CMC, CRMS from Arizona, NAMB’s Education Committee Chair, was appointed to the board in November. Rocke has had a lot of experience working on several NAMB and state committees, and will bring a different perspective to the board. Also at NAMB/WEST, we added Kay Cleland, CMC, CRMS from Colorado to our ranks. Kay is a past president of the Colorado Association of Mortgage Professionals (CoAMP) and is CoAMP’s current Membership Committee Chair. As most of you who know Kay, she brings a vitality of life to every meeting, and she will be heading up the new Membership Committee and NAMB’s membership campaign. As I think most of you know, since we got back from NAMB/WEST, Mike Anderson, our vice president and Government Affairs Committee Chairman, has had to resign his position with NAMB due to his mortgage company expansion and the increase in time he needs to spend training his staff for this expansion. Over the past two years, Mike and I have had a relationship where we spoke every day and passed ideas back and forth about NAMB. When I took over as NAMB president in November, we actually started talking more as I was beginning my presidency and sharing ideas with Mike so that when he would take over, he would be pre-
pared to do the things that I am currently doing on a daily basis. I am going to miss Mike here at NAMB, but I do know that our friendship will continue long past our involvement with NAMB. I wish him the best, and I know that he is only a phone call away to brighten my day or to ask his advice. One promise that Mike did make to me is that he may be going away from the day to day trials and tribulations, but he will be attending all of NAMB’s events. Mike, I will see you in D.C. We have promoted John Hudson from Texas as NAMB’s new Government Affairs Committee Chair. John was serving as vice chair of the Government Affairs Committee, and Mike was already getting him ready to take over next June, so he is ready. John is jumping in with both feet and he should be already having his monthly Government Affairs meetings by the time this issue is published. Make sure you stop by and introduce yourself to John when in D.C. In conclusion, I really appreciate the support and kind e-mails that I have received from all of you since I took over this position. I do spend a lot of my own free time working on things that need to be addressed. Your board of directors is also working very hard and none of us are receiving any money for what we do. This is truly an all-volunteer association, and I am proud of each and every one of our board members. I appreciate the e-mails to President@NAMB.org, so keep them coming with your ideas and suggestions. So far, I have been able to answer each message personally. If you want to become actively involved with NAMB, let me know. It will soon be time for nominations for the board and we need people, but I will write more on that in a future message. So renew your membership now, or if not a member, now is the time to join, and remember … Why not? Sincerely,
Donald J. Frommeyer, CRMS, President NAMB, The Association of Mortgage Professionals
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controlling credit risk the areas bulleted below, their risk profiles, credit quality indicators, amounts, volatility, and trends: ◆ Delinquencies ◆ Criticized and classified loans ◆ Non-accrual or non-performing loans ◆ Losses ◆ Other credit quality metrics used by the financial institution (i.e., weighted average: risk grade or default probability) ◆ Underwriting standards ◆ Exceptions to policy 2) Risk Implications ■ There are two areas in particular that are determinative with respect to risk implications: ◆ Significant growth in the size of a credit risk exposure, including whether such growth might be masking deterioration in credit quality indicators; and ◆ Material changes in policies, procedures, or underwriting standards.
3) Risk Assessments ■ Prepare, review, and discuss with management any internally prepared risk assessments of credit risk (i.e., borrower profiles, disclosures, procedures, compliance with regulatory mandates).
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4) Economic Environment ■ Review the local, regional, and national economic trends and outlook, and assess their impact on the credit risk. 5) Business Plans ■ Review business and strategic plans, and evaluate how their implementation may affect the level of risk posed by any credit risk. 6) Earnings and Capital ■ Review and discuss with management the results from applicable testing of product evaluations with respect to potential impact on earnings, investment and raising or maintaining capital. 7) Mitigation Strategies ■ Evaluate the impact of mitigation strategies on the quantity of risk in all areas of the loan flow process. Consider the objectives of programs, and evaluate all departments’ experience with these risk levels, including management’s experience in addressing problems that may arise, or have previously arisen, in such risk levels. 8) Asset Classes ■ Determine and give in-depth attention to asset classes and loan products with more volatility in performance.
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9) Capital ■ Based on the above-listed reviews and findings, assess whether the financial institution has adequate capital to support the risk posed by the quantity of risk.
Quality of Risk Management Having worked with clients on their risk management needs over the years, I have often felt that quality of risk management is where the most work is needed. Financial institutions usually can compile most, if not all, of the quantity of risk information. But then what? I define quality of risk management, broadly, as the exercise of producing evaluative findings with respect to the areas of Policy, Processes, Procedures and Personnel for the purpose of identifying, measuring and appropriately mitigating credit risk. Generally, there are three levels for quality of risk management: Strong, Satisfactory, or Weak. Policy Determine whether the management has adopted effective policies that are consistent with safe and sound practices, given the financial institution’s size, nature, complexity, and risk profile. Evaluate the following areas to determine whether relevant policies provide appropriate guidance for identifying and managing the financial institution’s credit risk. ■ Consider whether the financial institution: ◆ Establishes a tolerance for risk, which would be shown, for instance, as a percentage of capital or expressed in terms of risk, but not simply by the financial institution’s size (i.e., tolerance should be expressed as risk of dollar loss, risk to earnings, or risk to capital). ◆ Develops a company-wide framework for identifying credit risk across business lines, and origination channels, including consideration of distinct groups of loans whose credit performance may be correlated. ◆ Establishes a process for testing the identification of potential credit risk, and to use such testing to evaluate the potential impact of adverse scenarios for credit risk on capital and liquidity, and for reporting those results to senior management and/or the board of directors. ◆ Clarifies the roles and responsibilities associated with identifying and managing credit risk, particularly those that may cross business lines or otherwise not
be under common management. ◆ Defines the process for setting credit risk limits and for approving changes and exceptions thereto. ◆ Determine whether credit risk limits are well defined and reasonable. Consider the way that limits are measured and the use of limits or parameters for different types of exposure within a credit risk class (i.e., property types, product types, geographical considerations, and so forth). ◆ Verify that management periodically reviews and approves the financial institution’s credit risk policies, including relevant limits or strategies on significant credit risk. Processes Determine whether the financial institution has processes in place to provide accurate and timely assessments of credit risk associated with its activities involving the extension of credit. There are two areas that we look for in determining quality of risk management processes: 1. We evaluate how policies, procedures, and plans affecting credit risk are communicated. This analysis involves considering whether management has clearly communicated objectives and credit risk parameters to the board of directors and affected staff. And this review also includes a determination of whether the board has approved the existing credit risk limits. 2. In light of the scope and complexity of a financial institution, we evaluate the adequacy of its processes for analyzing credit risk by considering the following questions: ◆ Does the financial institution assess the level of risk associated with each credit risk? ◆ Does the financial institution’s risk assessment aggregate exposures on a company-wide basis and across lines of business? ◆ Are the results of the risk assessments, including those from testing, appropriately incorporated into the overall capital planning process? ◆ Do the conclusions concerning credit risk appear reasonable in light of information available from other sources? ◆ Is the capital level adequate to support the levels and types of credit risk exposures? ◆ Is a formal analysis of higher credit risk conducted periodically, and does the financial institution have an effective system for monitoring developments in the interim? ◆ Are the financial institution’s analyses adequately documented and the credit risk conclusions communicated in a way that provides decision makers with a reasonable basis for strategic development?
◆ Are the resources devoted to the analysis of credit risk, including the number and expertise of staff members, considered adequate? Procedures In reviewing procedures, we determine whether the financial institution has systems and guidelines in place to provide accurate and timely assessments and feedback of credit risk associated with its credit extension activities. There are four areas that we look at in determining quality of risk management procedures: 1. Determine whether management information systems (MIS) provide timely, accurate, and useful information to evaluate risk levels and trends in credit risk by considering the following questions: ◆ Are all material credit risk exposures captured across all lines of business? ◆ Does the entirety of the data elements collected in the review of procedures appear to be adequate, given the scope and complexity of the portfolio? ◆ To whom are MIS and all reports involved in the loan flow process distributed and how timely are these reports? 2. Analyze how complying with credit risk parameters is monitored and reported to senior management and the board of directors. 3. Assess the level of review for credit risks that are nearing their credit risk limits. For instance, is there sufficient reporting to senior management and is oversight heightened? 4. Evaluate the adequacy of the procedures for monitoring current conditions in higher credit risks, and assess the reliability and accuracy of the types of internal and external resources used. Personnel Staffing is a pivotal area for the quality of risk management, because it reveals the overall ability of the financial institution to meet the demands and responsibilities relating to administering the loan flow process. In effect, the level assigned to this quality of risk management indicates management’s ability to supervise its credit risk in a safe and sound manner. There are four areas that we look at in determining quality of risk management personnel: 1. Given the scope and complexity of the financial institution’s portfolio, assess the appropriateness of the credit risk management structure and the experience of designated personnel, by evaluating: ◆ Whether the expertise, training, and number of staff members assigned to manage credit risk issues are adequate.
â—† Whether reporting lines encourage open communication and limit the chances of conflicts of interest. â—† Whether there is an unusual level of staff turnover and the effect of any staff turnover on credit risk management. 2. Determine whether management has ascertained the adequacy of written policies for managing credit risk and assess managementâ€™s knowledge thereof. 3. Ascertain the adequacy of managementâ€™s practices and capabilities for managing credit risk, including timely responses to a changing environment. 4. Assess the performance of management and the compensation programs for staff members managing credit risks. Consider whether these programs measure and reward behavior that supports the financial institutionâ€™s strategic objectives and risk tolerance limits. (If the financial institution offers incentive compensation programs, ensure that (1) they provide employees with incentives that appropriately balance risk and reward, (2) are compatible with effective controls and risk management, and (3) at all times are supported by strong corporate governance, including active and effective oversight by the financial institutionâ€™s board of directors.)
Implementing Risk Management
3) Corrective Action We encourage a discussion regarding previous, regulatory examination findings and conclusions, including a list of those credit risks that posed a challenge to management or presented unusual and significant credit risk to the financial institution. If needed, we provide a Corrective Action Matrix, which is a form that tracks all recommended changes and monitors compliance with those changes. â– Corrective Action Matrix. We issue the Corrective Action Matrix most often when conditions indicate (1) there has been a deviation from sound, fundamental principles that is likely to result in financial deterioration or increased risk if not addressed, and (2) there is substantive noncompliance with laws or regulations. â– When a Corrective Action Matrix is not used, the following features should still pertain: â—† Describe the defect. â—† Identify contributing factors or the root cause(s) of the defect. â—† Describe likely consequences or effects from inaction. â—† State the record management commitment to corrective action. â—† Include the time frame and the person(s) responsible for corrective action.
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4) Discussion We set aside time to carefully review the actions that management and all relevant staff will take in the future to effectively supervise credit risk. In this setting, we discuss various findings with management, suggesting ways to fur-
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1) Memorandum We provide a summary that elucidates the quantity of risk and quality of risk management, thereby clarifying the direction of credit risk and the adequacy of the financial institutionâ€™s process for managing credit risk. A typical summary includes: â– Quality of the financial institutionâ€™s process for managing credit risk, including the adequacy of policies and procedures. â– Asset quality of credit risk. â– Appropriateness of strategic and business plans in light of their
2) Impact For any issues of concern identified when performing the credit risk procedures, we determine and discuss their impact on the financial institutionâ€™s aggregate credit risk and its direction.
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Now that we have given consideration to certain features of Quantity of Risk and Quality of Risk Management, letâ€™s outline what is required to implement risk management in a practical and effective way. If the methodologies outlined above have been completed, we have reached the point where we may determine, perhaps on a preliminary basis, certain overall conclusions, and communicate our findings regarding quantity of risk and quality of risk management. Keeping in mind that risk management, as previously stated, involves the ability to identify, measure, monitor, and control credit risk, there are several areas of guidance that we usually discuss with or provide to management as part of a due diligence review.
impact on credit risks. â– Responsiveness of strategic and business plans to test results that identify credit risks and materially affect risk exposure due to adverse economic scenarios. â– Accuracy and timeliness of management information systems and the entirety of data captured relative to the scope and complexity of the loan portfolio. â– Quality of staffing, and managementâ€™s capability to manage credit risk. â– Recommendation of corrective actions for deficient policies, procedures, practices, or other concerns, which include: â—† Adequacy of adherence to policies and credit parameters. â—† Adequacy of loan review or audit functions. â—† Other matters of significance.
Brett McGovern, President Bay Equity Home Loans 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 email@example.com to be considered for a future “Mortgage Professional of the Month” feature article. This month, we had a chance to chat with Brett McGovern, founder, president and board member of Bay Equity LLC, and president of Bay Equity Home Loans. Brett has more than 17 years of experience in real estate sales and lending. Prior to founding Bay Equity, he was a senior vice president of Grubb & Ellis Company in San Francisco. He is responsible for key corporate functions, including investor and warehouse line relations, oversight of accounting and secondary functions, marketing and corporate communications.
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How did you first get started in the mortgage business? I started as senior vice president of Grubb & Ellis Company in San Francisco, leasing and selling office buildings in the commercial real estate marketplace. My brothers and a number of my friends were working as sales executives at Washington Mutual (WAMU) and were doing pretty well. In 2004, I decided to join WAMU and originate loans and did well with WAMU. When things began to deteriorate in the marketplace around March of 2007, I called a mentor of mine, Jim Corbett. Jim founded the non-profit Sacramento Entrepreneurship Academy, a program for students of Sacramento State University and UC Davis. It’s a year-long program every Saturday from 8:00 a.m.-1:00 p.m. where you form a team and develop a business plan over the course of the year. In addition, each Saturday successful businesspeople from the area come and talk to you about accounting and law, and a variety of subjects that can help you craft your business plan. I went through the Academy in 1995 when I was a senior at UC Davis. There, I got the framework on what it takes to start a company. Students who go through the program all go through their own gestation period. It doesn’t mean you are going to start a company when you complete it, but you know what to do when you are
ready to take that leap. In 2007, I saw an opportunity with the landscape of the mortgage industry changing, so I decided to start Bay Equity. I called Jim and pitched him the idea of Bay Equity and he agreed to serve as the firm’s chairman. Jim is a long-time entrepreneur and successful real estate investor, who has served as chairman of Bay Equity since its inception. We developed the business plan for Bay Equity, and my brothers, Managing Directors Jon and Casey McGovern, joined shortly thereafter. We raised $1,750,000 in startup capital just for balance sheet purposes, and formed Bay Equity in June of 2007. The credit crisis started the next month, causing us to revise our original business plan and delaying our ability to actually get in business. Warehouse lines were in a defensive mode and not providing liquidity to start up ventures. I ended up calling around 100 community banks to try and get a line of credit that we would use like a warehouse line and finally found one, Bridge Bank in San Jose who agreed to give us a line of credit. We showed them how it could function as a warehouse line with the help of some operations expertise that was involved early in the company’s development. We now had the line of credit from Bridge Bank and got approval from Citi to buy our loans, funding our first loan in May of 2008. Gradually, from May of 2008 onward, we increased our volume and eventually got more investors in the mix—GMAC, Bank of America and Wells Fargo. Wachovia, which later became Wells Fargo, was the first warehouse provider to give us a normal warehouse line for $2.5 million We grew that warehouse line from $10 million to $20 million upward and are currently at $60 million. We have other warehouse lines that filled out our mix as we got a bigger track record. How has Bay Equity continued its growth? In April of 2009, we started focusing on growing retail, with 12 retail branch offices located in California and Washington. We also have 28 wholesale account executives in 10 western states, Our wholesale/retail mix is probably 65/35, and since funding our first loan, we’ve done over $3.5 billion in volume
“Government regulations have added yet another layer of complexity to the difficulty of running a mortgage business in this environment, so our model works very well for mortgage brokers.” and more than 9,500 loans. Our business model is based on a culture of responsible lending, hard work and dedication to providing financing to our customers. In 2010, we made great progress in completing our executive team. Our management team is made up of industry veterans with experience in secondary marketing, finance, operations, compliance, credit and human resources. We are working hard to leave the entrepreneurial phase of our company’s development behind us and to have the ability to scale. As long as we can stay safe and compliant, and make sure that we are doing the right thing by keeping the ship safe and sound, we are going to be set up for success. We’re now selling direct to Fannie Mae, which
is exciting especially in light of the recent volatility in the marketplace. Whether it be large loan aggregators leaving the correspondent space, or changes in the way servicing is valued and accounted for, we feel it’s important to be able to sell direct to the agencies as another option for our daily best execution and loan delivery. Do you think there is a future in private-labeled products? Yes I do, but I don’t think we’re quite there yet. Private capital will need to come in and fill the void left from the lack of any securitization market outside of the agency products. I think originators like Bay Equity will see opportunities to find niches for new
products that make sense for the borrower. Combine this ability to originate with the private capital required to take it to the securitization market, and you’ll see successful new products enter the market. Just when that might happen is still up for speculation. It’s likely that a jumbo product that fills the void left by reduced agency high-balance loan limits, but that still has the underwriting quality of an agency loan will be first to the market. What is it like working so closely with your two brothers, Jon and Casey McGovern? It’s great. We’re a pretty tight-knit family. Over time and over the development of Bay Equity, we have identified our key roles and what we are in charge of. I oversee secondary and finance, and serve as the main contact for third parties like investors or warehouse line providers. I also spearhead raising capital and investor relations. We have done a couple of rounds of preferred equity and did a subordinated debt round a few years ago. It bolsters our balance sheet and provides additional capital to grow the company. My brother Jon oversees human resources, operations and the IT department, while my other brother Casey oversees sales in both the wholesale and retail channels. We try and separate our duties and responsibilities as to maximize our time as much as possible.
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At the Mortgage Bankers Association (MBA) Annual Conference in October, one of the speakers mentioned that in 2008, it was taking 30 days to close a
What would you consider your greatest accomplish“Bay Equity can beat the big banks on price, ment in the industry? We have weathered the lower the cost to originate and deliver greater service. It’s a real value proposition storm so far, from starting Bay Equity as the market for us against the banks that have most was deteriorating in 2007, of the market share.” to overcoming the challoan, and in 2010, it was taking an lenges of getting a mortgage bank startaverage of 52 days to close a loan. ed with no track record. We have been What do you feel has caused that time able to get our company to the point delay and what is the typical closing from a balance sheet perspective time for a Bay Equity loan? through retained earnings where we There has been a lot of consolidation in now are considered a quality counterthe industry, and the big banks have party and are eligible for key industry swallowed up a lot of the market share. programs that will help us get to the The big banks have the dominant mar- next level. We would like to take what ket share nowadays, and I think that is we have accomplished and use that to why you see this difference due to the become one of the next successful midsheer volume of business they are level lenders in the marketplace. We doing. When rates went under the four think we are well on our way. percent mark four months ago, the turn time for a refinance went to 90 days at Do you have any regrets? some big banks. An independent mort- We have definitely made mistakes as gage banker like Bay Equity can better any entrepreneurial company does streamline that process. Currently, we when just starting out and trying to can close a loan in 21 days based upon make it. We probably would have startthe volume that we are doing and the ed building our retail channel right structure of our operations. Bay Equity away, but I think that being mostly can beat the big banks on price, lower wholesale for the first year or so helped the cost to originate and deliver greater us overcome some of the growing pains service. It’s a real value proposition for that you experience as you are trying to us against the banks that have most of the market share. continued on page 18
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Could you define which business models are best for the mortgage broker and which are best for the mortgage banking branch? There is just such a mixed bag out there that I don’t think you can pin it down to saying that a certain model works best. I think it’s more in each individual circumstance and how professionally run the mortgage brokerage operation is. Bay Equity has a diverse group of retail offices that drum up business in all different ways, from a call center model to purchase business-driven realtor relationships, to long time LOs who have their own book of business. We also have a new branch in San Francisco that fits the last category. Manny Kagan’s office is the longest-running mortgage brokerage in San Francisco, having opened its doors in 1984. Manny has loan officers who have been with him for years and who have their own book of business. He does a lot of purchase business with Realtor relationships. Manny has found that the banking platform works well especially where his team works with the same internal support staff, including underwriters, funders, etc. You get a lot of close cooperation and chemistry with one group of people, and you get the attention that you need instead of putting 10 percent of your business with a lender which makes you just a number amongst all the other loans.
How has your profit-perloan changed over the past few years? There is a great deal more compliance that must be performed these days as opposed to 2008. The things we have to do now to get a loan through the pipeline, known in our company as “manufacturing quality,” has changed dramatically. We now comply with newer requirements like Fannie Mae’s Loan Quality Initiative which help tighten the overall quality of the loans as they head to the secondary market, in addition to other compliance controls. The barriers to entry are much greater than they use to be. Our profit margins fluctuate based on market conditions and how things are with the rates, but it has been tougher to operate. Those who can master these compliance issues will do very well moving forward.
What led to Bay Equity branching out into retail in 2009, and what factored into the broker-to-banker programs? The writing was clearly on the wall in 2009, with regulations looming and the wholesale origination channel under increased scrutiny. We felt like it was important for Bay Equity to become more diversified, by not just relying on the wholesale channel, but to also have a strong retail network. The regulatory environment helped push this agenda with changes in both disclosure laws, as well as the way loan officers were to be compensated. Brokers began to take a look in the mirror and assess whether it was more advantageous to be under the mortgage banking umbrella. There are a number of mortgage brokers who see the value of rolling in under a mortgage banking platform like us. Bay Equity handles many of the administrative tasks that have become burdensome to independent mortgage brokers, such as accounting, human resources, compliance, licensing, and other administrative tasks which take
away time from mortgage brokers, and in turn, frees them up to do what they do best … originate loans. Government regulations have added yet another layer of complexity to the difficulty of running a mortgage business in this environment, so our model works very well for mortgage brokers. We want to support our customer, no matter who they are. We think the wholesale market will stick around. There will be a certain percentage of the originator market who will want to be independent and run their own business like brokers in this environment and we are going to support them as much as we can. But if a certain percentage of that broker community is looking at joining a mortgage bank, we want to have a very competitive and appealing platform for them to entertain. We’ve been pretty successful in recruiting, but have also been very selective.
nmp mortgage professional grow something like this. We didn’t bring on retail branches until we were more mature and had our legs underneath us. I also would have tried harder to diversify our investor mix earlier with the addition of the agency outlets.
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Over the next two years, what do you think will be the greatest opportunities in the field of mortgage origination? I think we will see continued consolidation in the industry. It’s getting tougher to operate as a mortgage business, due in large part to the regulatory environment that has been created. And while it has been tough, it has increased the professionalism of the mortgage loan originator. There aren’t many part-time originators left, as now, loan originators have to be licensed through the Nationwide Mortgage Licensing System (NMLS), obtain education credits, etc. What is left is a population of MLOs who are good at what they do and can increase their market share. There are a number of different ways to originate loans. We are focused on the purchase market. We want to be known as a dependable and reliable purchase lender that Realtors and LOs can feel safe sending their purchase loans to. That’s a natural hedge against the rates rising. We’d like to not be at the mercy of a volatile interest rate market or rising rates. Hopefully, at some point, the real estate market bottoms out, becomes healthier and we can see the market recover and sales pick up again, and that’s where we want to position. We want to have a strong network of branches that are purchase-driven and are situated in local strong real estate markets and have a reputation as a reliable choice for purchase loans. Earlier you mentioned Jim Corbett as your mentor. Do you have any other mentors who may have guided your professional career? At Bay Equity, we have a pretty strong team that collaborates and navigates through a variety of issues on a daily basis. Jim Corbett is definitely a mentor of mine in a bigger sense of providing me with the entrepreneurial spirit to seize the opportunity and start Bay Equity. He showed me that if you do things in a sound, ethical and transparent way, success will follow. Charles Hine also was an important mentor for me as I grew up in the business world in commercial real estate. Charles was instrumental in teaching me valuable life lessons, including how to treat people, how to handle yourself with honesty and integrity, the value of a strong work ethic, and how to make good decisions in light of the bigger picture. Do you think there is an opportunity for newcomers who are looking to get into the mortgage business? What advice would you pass on to those new to the industry? In this environment, it is very difficult just to do what it takes to get the right approvals,
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with the biggest barriers being net worth and experience. We have been fortunate enough to do well over the last few years, and have retained our earnings and maintain our balance sheet to be a strong counter party in this environment. But to do it all over again and see that kind of success would be difficult. Today, you see some of the older industry players who have been out of the game now getting back in. I think people see our current marketplace as a good time to return, but these are individuals who have enjoyed past success and are taking another run at it and know what they are getting into.
The Management Dilemma By Dave Hershman
Are there any industry-related issues that keep you up at night? What do you see as the biggest threats to your business as a multi-channel mortgage banker? The uncertainty of the regulatory environment is a big concern, along with the uncertainty of the Consumer Financial Protection Bureau (CFPB). The CFPB is an unknown for a lot of us who are working hard to maintain a compliant business and simply do business the right way. Will new laws be passed that will further impact the way we do business? At what point will all of this ease up? While the laws passed have weeded out a lot of the part-timers in the industry, uncertainty about the state of the regulatory environment remains. The landscape of the industry is also changing. Big banks like GMAC and Bank of America are getting out of correspondent lending and pulling reigning in their mortgage divisions. What will the future be like? Will private capital replace the big loan aggregators? Will rates continue to drop? These are just a few of the issues that we track on an ongoing basis. What do you see in the future for Bay Equity? I think we have a tremendous opportunity for continued growth. The big banks are a little dysfunctional in some measure with the way they are pulling back from the marketplace. Bay Equity’s geographic footprint is limited to California, but we have measures in place to expand both our wholesale and retail channels initially into the northwestern United States. We are adding new branches and have the right team members in place to lead this expansion. We have opened up a Portland, Ore. office as a third operations center. I think with the continued migration of mortgage brokers to mortgage bankers, we will keep adding experienced professionals to our team as we expand throughout the West Coast. As long as we continue to manufacture loans properly and continue to grow our balance sheet, the future of Bay Equity is very bright. The next phase of our business is going to focus on re-engineering Bay Equity … how we do things, continuing to improve our totally paperless operation, making the most of the efficiencies that come with technology and upgrading to better technology platforms.
I still remember two events that happened which shaped my career in the mortgage industry some 30 years ago. Event number one involves my entry into the mortgage business, which was as random as it could be. I had worked in government out of college. Six years in the State of North Carolina Attorney General’s Office, during which I also finished my master’s degree and worked on a Ph.D in public policy. My next two years were spent on Capitol Hill managing an office for a congressman. As the two-year term ended, I was looking feverously for opportunities. I happened to mention this fact to a group of people I played racquetball with on a weekly basis. It turns out that one owned a real estate company and another ran that real estate company’s mortgage entity. One was a mortgage insurance representative. I didn’t even know what mortgage insurance was. The owner of the company said to come down and talk with them. When I met with the president of the mortgage company, he “encouraged” me to become a Realtor. Translation: I am not really that interested in having you as a loan officer. When I went to see the owner of the real estate company, he said, “You will become a loan officer.” I went back down to Tim and said, “Al said I should become a loan officer.” Tim said, “I guess you are going to become a loan officer.” I came in the first day and a staff member said, “You are a loan officer, right?” I guess it was a mistake, but I said, yes. She said, there was someone in the waiting room that needed a loan application taken, the loan officer did not show up. Right there I should have questioned something, but it is the first day and you don’t rock the boat on day one. She gave me a bunch of forms and I took them, and as I walked away, she said, “Keep in mind, it is a VA loan.” I thought to myself, no problem. I am, after all, from the state of Virginia. When I was done, I gave the forms to the staff person who turned out to be an underwriter. She looked them over
and told me that I was going to be a great loan officer. I asked her how she could know that. She replied, “Because you filled in all the blanks on the forms.” I laughed because I thought she was joking. Little did I know … Event number two came about 18 months later. My boss who hired me was gone and another president of the mortgage company was hired. In that 18-month period, I had originated and closed more than 550 loans. I was far and away the “top” producer. The new president had big plans to expand the mortgage company. He asked me if I wanted to manage. “Sure, no problem,” was my reply. Of course, no one told me what a “manager” of loan officers actually did. So I called the Mortgage Bankers Association (MBA) and asked for their books on management. They said they had books on secondary, underwriting, sales and a host of other topics. No books on mortgage management existed. So not only did I learn to manage in this industry on my own, but in my third year in the industry, I also wrote the MBA’s book on management, Managing a Branch Office. Don’t call the MBA for it because it’s out of print. That is how old I am, I have books that I have written that are now out of print. Now, let’s get back to the management dilemma. Training programs for loan officers in this industry are pretty much non-existent. It is true that the government now asks us to get licensed and requires training, at least for those who don’t work for a federally-chartered bank. But this licensing training has nothing to do with a loan officer being successful at their job. Training for managers is even less prevalent. Keep in mind that these are the most important leaders in our industry. They are supposed to lead the rank and file—those who are on the frontlines. They are supposed to train the loan officers, processors and other operations personnel, and they get no help in doing their jobs. When I held national management conferences across the nation, I had hundreds upon hundreds come to me and thank me profusely because they felt alone and lost. continued on page 34
JANUARY 2012 SEC Charges Former GSE Heads for Mortgage Securities Fraud
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The Securities & Exchange Commission (SEC) has charged six former top executives from Fannie Mae and Freddie Mac with securities fraud, alleging they knew and approved of misleading statements claiming the companies had minimal holdings of higher-risk mortgage loans, including sub-prime loans. Fannie Mae and Freddie Mac each entered into a Non-Prosecution Agreement with the SEC in which each company agreed to accept responsibility for its conduct and not dispute, contest, or contradict the contents of an agreed-upon Statement of Facts without admitting nor denying liability. Each also agreed to cooperate with the Commission’s litigation against the former executives. In entering into these Agreements, the SEC considered the unique circumstances presented by the companies’ current status, including the financial support provided to the companies by the U.S. Department of the Treasury, the role of the Federal Housing Finance Agency (FHFA) as conservator of each company, and the costs that may be imposed on U.S. taxpayers. Three former Fannie Mae executives—former Chief Executive Officer Daniel H. Mudd, former Chief Risk Officer Enrico Dallavecchia, and former Executive Vice President of Fannie Mae’s Single Family Mortgage business, Thomas A. Lund—were named in the SEC’s complaint filed in U.S. District Court for the Southern District of New York. The SEC also charged three former Freddie Mac executives—former Chairman of the Board and CEO Richard F. Syron, former Executive Vice President and Chief Business Officer Patricia L. Cook, and former Executive Vice President for the Single Family Guarantee business Donald J. Bisenius—in a separate complaint filed in the same court. “Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was,” said Robert Khuzami, Director of the SEC’s Enforcement Division. “These material misstatements occurred during a time of acute investor interest in financial institutions’ exposure to subprime loans, and misled the market about the amount of risk on the company’s books. All indi-
viduals, regardless of their rank or position, will be held accountable for perpetuating half-truths or misrepresentations about matters materially important to the interest of our country’s investors.” The SEC is seeking financial penalties, disgorgement of ill-gotten gains with interest, permanent injunctive relief and officer and director bars against Mudd, Dallavecchia, Lund, Syron, Cook, and Bisenius. Both lawsuits allege that the former executives caused the federal mortgage firms to materially misstate their holdings of sub-prime mortgage loans in periodic and other filings with the Commission, public statements, investor calls, and media interviews. The suit involving the Fannie Mae executives also includes similar allegations regarding Alt-A mortgage loans. The suit against the former Fannie Mae executives alleges they made misleading statements — or aided and abetted others—between December 2006 and August 2008. The former Freddie Mac executives are alleged to have made misleading statements—or aided and abetted others— between March 2007 and August 2008. The SEC’s complaint against the former Fannie Mae executives alleges that, when Fannie Mae began reporting its exposure to sub-prime loans in 2007, it broadly described the loans as those “made to borrowers with weaker credit histories,” and then reported—with the knowledge, support, and approval of Mudd, Dallavecchia, and Lund—less than one-10th of its loans that met that description. Fannie Mae reported that its 2006 year-end Single Family exposure to subprime loans was just 0.2 percent, or approximately $4.8 billion, of its Single Family loan portfolio. Investors were not told that in calculating the Company’s reported exposure to subprime loans, Fannie Mae did not include loan products specifically targeted by Fannie Mae towards borrowers with weaker credit histories, including more than $43 billion of Expanded Approval, or “EA” loans. Fannie Mae’s executives also knew and approved of the decision to underreport Fannie Mae’s Alt-A loan exposure, the SEC alleged. Fannie Mae disclosed that its March 31, 2007 exposure to Alt-A loans was 11 percent of its portfolio of Single Family loans. In reality, Fannie Mae’s Alt-A exposure at that time was approximately 18 percent of
The Mortgage Battlefield of 2012: A View From the Frontlines estate? Location … I know—nobody wants to hear that again, but the truth of the matter, as it relates to property value stabilization, is that it will occur at different rates depending on geographically-specific criteria. Areas of the U.S. that see the strongest growth and have the smallest foreclosure/unsold inventories will see the quickest progress. Signs of stabilization are already appearing in some areas of the U.S. Zillow Chief Economist Dr. Stan Humphries says, “While we still have a ways to go in terms of home value depreciation, the pace at which home values are falling has declined considerably during the course of this year. This slower pace signals that stabilization is on the horizon.” As the job picture improves, the number of homes falling into foreclosure will decline. More significantly, new households who have not felt comfortable purchasing a home will begin to gain confidence in their long-term prospects and begin to take advantage of the very affordable housing opportunities available. Single-family home prices will likely be flat or see a marginal increase in 2012.
By John Walsh
or the past threeand-a-half years, it is very accurate to say that the mortgage industry has undergone a battle for its very survival. One of the deepest recessions in our nation’s history, the sharpest decline in single-family housing values since the Great Depressions, and the highest unemployment rates since the 1970s have all combined to make the past few years the most difficult ever faced in our industry. The survivors of this difficult time must focus on being part of the solution and building a stronger mortgage industry. Over the next few months, you will likely read numerous prognostications from economists, politicians and Wall Street analysts of what will transpire in the mortgage industry in 2012. What I hope you will find different about my thinking below is that it comes from someone who is on the frontlines working with borrowers, originators, processors, underwriters, account executives and investors every day. The following are five key trends likely to impact the mortgage industry and housing market in 2012:
JANUARY 2012 ❖
MISSOURI MORTGAGE PROFESSIONAL MAGAZINE
1. Mortgage rates will remain attractive through at least the first half of the year 2. Home values will slowly stabilize 3. Innovative products will begin to reappear 4. The industry will grapple with regulatory uncertainty 5. New industry leaders will emerge
Mortgage rates will remain attractive through at least the first half of the year As we enter 2012, two competing forces are impacting mortgage rates—a slowly strengthening U.S. economy, and a growing sovereign debt and banking crisis in Europe. But for the situation in Europe, mortgage rates would have likely already moved higher, perhaps to a rate of
Innovative products will reappear
4.5 percent on the benchmark 30-year fixed-rate loan. However, with bond yields increasing throughout Europe (not just in initial trouble spots like Greece and Italy), U.S. mortgagebacked securities (MBS) remain a safe haven for investors. This “push-me, pull-me” interest rate environment may or may not last. My view is that both competing forces will continue into 2012, but that the situation in Europe could stabilize, thereby clearing the way for rates to rise modestly, along with employment, consumer spending and inflation. If rates rise to near five percent by the end of 2012 as the Mortgage Bankers Association (MBA)
forecasts, we will see a major shift in loan mix in favor of purchase loans. The MBA also says, “A faster economic recovery, led by the housing market, would mean faster home price growth and more sales volume, increasing purchase originations somewhat, but would cut off refinance volume sooner than in our forecast.” Barring a major shock from Europe, I expect a slow recovery based on recent employment, retail sales, industrial production and housing starts data.
Home values will slowly stabilize What are the three rules of real
Congress is set to raise Federal Housing Administration (FHA) lending limits back to $729,750 in designated highcost areas across the country. Yet, given the opportunity to raise the limits for Fannie Mac and Freddie Mac loans, they chose to leave the limit at the lower level of $625,500. This may open the market to new jumbo loan products from lenders, and we are already experiencing progress in this area. Additionally, there are signs that some lenders are developing non-agency products which will respond to unmet market demands and provide new investment opportunities for investors seeking higher returns. Any new products developed will be carefully designed and underwritten, but will help open responsible homeownership to more people. continued on page 22
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the mortgage battlefield The industry will grapple with regulatory uncertainty
The coming 2012 elections could be a tumultuous time for the mortgage industry. Not surprisingly, the mortgage and banking industries are likely to be the subject of much critique and demagoguery during the campaign. With Fannie Mae and Freddie Mac potentially seeking billions more in support from taxpayers, and consumer sentiment so negative toward banks and Wall Street, expect regulatory agencies to come down hard on the financial services industry as part of a populist effort to attract votes. Throughout the year, it will seem as though our industry is in a constant struggle to demonstrate our value to the country. We will have to participate in the debate over the role of government in mortgage finance. We will have to engage in the effort to adopt new regulations that are part of the Dodd-Frank legislation. According to Tom Donatacci, executive vice president of Clayton Holdings, “Among the major unanswered questions regarding DoddFrank: What’s a qualified mortgage? How much ‘skin in the game’ will be required of the issuer and seller? How will the conflicts-of-interest provisions impact securitization and various parties’ ability to buy and sell securities? What is the future role of the rating agencies?” New regulations are certainly coming, but their scope and impact are very much up in the air.
New industry leaders will emerge
JANUARY 2012 ❖
MISSOURI MORTGAGE PROFESSIONAL MAGAZINE
With the challenges of the last few
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years forcing hundreds of thousands of 2007-era employees, thousands of small businesses and dozens of large firms out of the mortgage industry, it is somewhat surprising that some brave souls would invest their time and resources to develop, grow and improve the industry in 2012. But that is exactly what I see when I survey they the mortgage landscape. I see: ■ Entrepreneurs and business professionals battling to build a sustainable industry; ■ New and better technology that makes our tasks easier and the loans originated of higher quality; ■ New originators committed to consumer-engagement and education; and ■ Investors eager to bring safe, reliable returns to their clients. The “new” mortgage industry is emerging with leaders who are focused on efficiency, accountability, and sound ethical behavior. That sounds like a great industry to be part of! The year 2012 will not present a return to the industry of the past, but it will represent a real foundation for a successful future. I, for one, cannot wait for 2012 to unfold, so let the battles begin! John Walsh is president of Milford, Conn.-based Total Mortgage Services. John founded Total Mortgage Services in 1997 with a customer-centric approach and a mission of responsible lending. He may be reached by e-mail at JWalsh@TotalMortgage.com or visit TotalMortgage.com.
continued from page 10
compliant. The platform may also run the appraisal through UCDP’s known requirements before it is submitted, providing alerts on any “hard stops” that might prevent the loan from processing for GSE review. Why is this important? Because it allows lenders to identify and handle problems before the GSEs get involved to assist in maintaining a positive seller/servicer relationship. ■ Benefit #3: Advanced valuation management platforms also create significant improvements in vendor management processes by instantly identifying marginal performers and re-directing assignments to the best performing vendors to save time and
money and ultimately increase customer satisfaction. The Dec. 1, 2011 deadline for ULDD compliance is now past, and the final March 19, 2012 deadline for full UCDP compliance is swiftly approaching. It’s not too late for lenders to take a critical look at what they can manually process through the online portal versus the automated efficiency and additional benefits in data uniformity that can be realized with a valuation management solution. David Rasmussen is senior vice president of operations at Veros Real Estate Solutions. For more information, call (714) 415-6300 or visit Veros.com.
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its Single Family loan holdings. The misleading disclosures were made as Fannie Mae’s executives were seeking to increase the company’s market share through increased purchases of subprime and Alt-A loans, and gave false comfort to investors about the extent of Fannie Mae’s exposure to high-risk loans, the SEC alleged. In the complaint against the former Freddie Mac executives, the SEC alleged that they and Freddie Mac led investors to believe that the firm used a broad definition of subprime loans and was disclosing all of its Single-Family subprime loan exposure. Syron and Cook reinforced the misleading perception when they each publicly proclaimed that the Single Family business had “basically no sub-prime exposure.” Unbeknown to investors, as of December 31, 2006, Freddie Mac’s Single Family business was exposed to approximately $141 billion of loans internally referred to as “subprime” or “sub-prime like,” accounting for 10 percent of the portfolio, and grew to approximately $244 billion, or 14 percent of the portfolio, as of June 30, 2008.
FHA Grants Year-Long Extension of Anti-Flipping Regulations Carol Galante, A c t i n g Commissioner of the Federal Housing Administration (FHA), has announced that the FHA will extend its temporary waiver of the anti-flipping regulations in 2012 through Dec. 31, 2012. The extension was granted in an effort to continue stabilizing home values and improve conditions in communities with high foreclosure activity. With certain exceptions, FHA regulations prohibit insuring a mortgage on a home owned by the seller for less than 90 days. In 2010, FHA temporarily waived this regulation through Jan. 31, 2011, and later extended that waiver through the remainder of 2011. The new extension will permit buyers to continue to use FHA-insured financing to purchase U.S. Department of Housing & Urban Development (HUD)owned properties, real estate-owned (REO) properties, or properties resold through private sales. It will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities. “This extension is intended to accelerate the resale of foreclosed properties in neighborhoods struggling to overcome the possible effects of abandonment and blight,” said Galante. “FHA remains a critical source of mortgage financing and stability and we must make every effort that to promote recovery in every responsible way we can.” The extension is effective through
Dec. 31, unless otherwise extended or withdrawn by the FHA. All other terms of the existing Waiver will remain the same. The Waiver contains strict conditions and guidelines to prevent the predatory practice of property flipping, in which properties are quickly resold at inflated prices to unsuspecting borrowers. The Waiver continues to be limited to sales meeting the following conditions: ■ All transactions must be armslength, with no identity of interest between the buyer and seller or other parties participating in the sales transaction. ■ In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the Waiver will only apply if the lender meets specific conditions and documents the justification for the increase in value. ■ The Waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.
MBA Announces the Completion of MISMO Transition The Mortgage Bankers Association (MBA) has announced that it has completed the transition, announced in September, and will resume support for the Mortgage Industry Standards Maintenance Organization Inc. (MISMO). With the successful transition, MISMO will now focus efforts on regulatory implementation and advocating for broader adoption of data standards throughout the industry. “MBA supports greater efficiency and lower costs throughout the industry by advocating for broad adoption of industry consensus standards developed by MISMO. We are actively engaging both regulators and industry in this effort,” said MBA President and CEO David H. Stevens. “MBA will also provide educational opportunities aimed at helping industry and government better understand and implement MISMO standards. Standardization and transparency are critical to the return of investor confidence and liquidity in the mortgage marketplace, and MISMO has a crucial role to play. I would recommend that MBA members become MISMO subscribers in order to help guide this effort.” To assist with these efforts, MBA has hired Cindy Bojokles as its new director of industry standards. In this role, Bojokles is responsible for supporting and advancing the activities of MISMO. Bojokles will work closely with industry executives to increase the standards available to the industry. Bojokles will also help government agencies understand the benefits of adopting the voluntary consensus standards developed by MISMO.
“Cindy has spent over 15 years working on data standards, data quality and business solutions for the mortgage industry. Her detailed knowledge of technology and business processes will prove invaluable to MBA and the mortgage industry as it continues to advance MISMO and industry standards,” said Stevens.
Federal Agencies Join Forces to Prevent HAMP and Loan Mod Fraud
continued on page 24
ther monitor and mitigate credit risk. Often, management offers a pledge to implement corrective action.
Preparation is Prevention Compliance cannot be reverse engineered. I have stated many times that preparation is prevention. Working to evaluate credit risk is critical to the staying power needed by any financial institution involved in the loan flow process. Some mistakes may have a minor effect. But there are costly mistakes that bring with them virtually catastrophic consequences. It is unacceptable and indefensible to attempt to fix mistakes belatedly, when they could have been avoided in the first place. And, for the most part, the tardy and delayed approach just does not work. Allowing exposure to credit risk is such a potentially fatal and fundamental flaw that there really is often no way to undo the damage done by risk management failures. However, by using the above-mentioned tools to determine Quantity of Risk and Quality of Risk Management, a financial institution may still have the proactive opportunity to be stable, strong, and vibrant. Certain information provided in this
article is based on the research and work I have done in developing one of my firm’s risk management tools, called the CORE Compliance Matrix®. This may be part of a due diligence review. It is a unique analysis that offers, among other things, a comprehensive assessment of a financial institution’s compliance with federal and state regulations, thereby providing quantitative ratings of regulatory risk. A CORE® review consists of an indepth evaluation of a financial institution’s CORE® features: Compliance Program (C), Organizational Structure (O), Regulatory Risk (R), and Enforcement Strategies (E). For more information about the CORE Compliance Matrix®, please visit our Web site at www.lenderscompliancegroup.com. Jonathan Foxx, former chief compliance officer for two of the country’s top publicly-traded residential mortgage loan originators, is the president and managing director of Lenders Compliance Group, a mortgage risk management firm devoted to providing regulatory compliance advice and counsel to the mortgage industry. He may be contacted at (516) 442-3456 or by e-mail at email@example.com. 23
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rida L ss: ut of Flo hem e: O r Bo c S e d v u age Fra erco s M o rtg Un d ast Texa E r jo a M 203(k) Rehab Loan Program: Foreclosures Present Challenges, Opportunity NMLS an d St ate Testing fo r Mortgage Pr ofessionals
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New Vista Asset Management, a San Diego-based provider of real estate services
The U.S. Department of Justice (DOJ) has filed its largest residential fair lending settlement in history to resolve allegations that Countrywide
continued from page 15
MISSOURI MORTGAGE PROFESSIONAL MAGAZINE
Rapidly Growing REO Inventory Going to Investors, Not Owner-Occupied Buyers
BofA Reaches $335 Million Settlement With Government Over Countrywide Discrimination and Steering
controlling credit risk
The Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), the Consumer Financial Protection Bureau (CFPB), and the U.S. Department of the Treasury have announced the creation of a joint task force to combat scams targeted at homeowners seeking to apply for the Home Affordable Modification Program (HAMP). SIGTARP, CFPB and the Treasury have partnered to protect taxpayers by investigating and shutting down these scams and by providing education programs to vulnerable homeowners. The joint task force also issued a consumer fraud alert to protect homeowners from HAMP-related mortgage modification scams. The fraud alert will also be provided directly to homeowners eligible for HAMP. “The goal of our consumer fraud alert is to empower homeowners with the knowledge of how to recognize and avoid these scams,” said Christy Romero, Deputy Special Inspector General for SIGTARP. “These scams prey upon the most vulnerable homeowners as they desperately hold out hope of saving their homes. SIGTARP, the CFPB and Treasury want to make sure that homeowners know a scam when they see one and know where to turn for help. SIGTARP will work with the CFPB and Treasury in this joint task force and with other law enforcement partners to shut down these scams and to ensure that the perpetrators pay for their crimes.” SIGTARP, CFPB and the Treasury investigate mortgage modification schemes, among other things, in which companies charge struggling homeowners a fee in exchange for false promises of lowering the homeowner’s mortgage debt or payments through HAMP, a foreclosure prevention program funded by the Troubled Asset Relief Program (TARP) and administered by the Treasury. “Mortgage scams harm not only homeowners but legitimate businesses and the market as a whole,” said Richard Cordray, chief of enforcement for the CFPB. “By joining forces with SIGTARP and Treasury, the CFPB hopes to protect Americans and the integrity of one of the largest consumer financial markets in the U.S.”
for banks and other sellers of foreclosed residential homes, has published the results of a three-year study examining buyer types in 18 U.S. counties hit hardest by America’s mortgage crisis. The study uses data extracted from local recorder, courthouse and tax assessment records to determine whether the purchasers buying foreclosed houses from banks, the U.S. Department of Housing & Urban Development (HUD), the governmentsponsored enterprises (Fannie Mae and Freddie Mac), are owner-occupants or absentee owners using single family homes as rental or vacation properties. New Vista’s data indicates that the percentage of real estate-owned (REO) homes sold to owner occupant buyers has decreased in almost every market analyzed by the company in a study that began tracking real estate sale transactions closed in the first quarter of 2009 and includes consecutive quarterly data through the third quarter of 2011. “Although, quarter-by-quarter, we have observed some market-specific increases, over the entire period, owner occupancy rates for REO sales have broadly weakened,” said Brian Hurley, New Vista’s president and chief operating officer. “With eleven consecutive quarters of data, we can look beyond both seasonality and the temporary impact of demand stimuli such as the homebuyer tax credit, and observe a clear pattern of decline.” In Los Angeles County, Calif., the New Vista data shows 79.36 percent of singlefamily REO houses were purchased by owner occupants in 2009, compared with only 60.32 percent in the third quarter of 2011. Most counties covered by the study saw declines of more than five percentage points during the same period, with a few dropping more modestly. According to the New Vista study, only one county included in the Index (Wayne County, Mich.) had an owner occupancy rate for single-family REO sales below 50 percent in 2009. By the third quarter of 2011, owner occupancy rates for REO sales in an additional four of the studied counties had fallen below 50 percent, including Maricopa County, Ariz.; Osceola County, Fla.; Miami-Dade County, Fla.; and Clark County, Nev. “The decline in owner occupant sales in Maricopa County over the past two years has altered the fabric of our neighborhoods,” said Patricia Garcia Duarte, president of Neighborhood Housing Services of Phoenix and chair of the Arizona Foreclosure Prevention Task Force. “We need to look carefully at this trend and refocus on giving homebuyers a chance to own a piece of the American Dream.”
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Financial Corporation and its subsidiaries engaged in a widespread pattern or practice of discrimination against qualified African-American and Hispanic borrowers in their mortgage lending from 2004 through 2008. The settlement provides $335 million in compensation for victims of Countrywide’s discrimination during a period when Countrywide originated millions of residential mortgage loans as one of the nation’s largest single-family mortgage lenders. In addition, the settlement requires Countrywide to implement policies and practices to prevent discrimination if it returns to the lending business during the next four years. Countrywide operates as a subsidiary of Bank of America, but does not originate new loans. The settlement, which is subject to court approval, was filed in the U.S. District Court for the Central District of California in conjunction with the department’s complaint which alleges that Countrywide discriminated by charging more than 200,000 AfricanAmerican and Hispanic borrowers higher fees and interest rates than nonHispanic white borrowers in both its retail and wholesale lending. The complaint alleges that these borrowers were charged higher fees and interest rates because of their race or national origin, and not because of the borrowers’ creditworthiness or other objective criteria related to borrower risk. The U.S. also alleges that Countrywide discriminated by steering thousands of AfricanAmerican and Hispanic borrowers into sub-prime mortgages when nonHispanic White borrowers with similar credit profiles received prime loans. All the borrowers who were discriminated against were qualified for Countrywide mortgage loans according to Countrywide’s own underwriting criteria. “The Department’s action against Countrywide makes clear that we will not hesitate to hold financial institutions accountable, including one of the nation’s largest, for lending discrimination,” said Attorney General Eric Holder. “These institutions should make judgments based on applicants’ creditworthiness, not on the color of their skin. With today’s settlement, the federal government will ensure that the more than 200,000 African-American and Hispanic borrowers who were discriminated against by Countrywide will be entitled to compensation.” The complaint alleges that AfricanAmerican and Hispanic borrowers paid more than non-Hispanic White borrowers, not based on borrower risk, but because of their race or national origin. Countrywide’s business practice allowed its loan officers and mortgage brokers to vary a loan’s interest rate and other fees from the price it set based on the borrower’s objective credit-related factors. This subjective and
unguided pricing discretion resulted in African-American and Hispanic borrowers paying more. The complaint further alleges that Countrywide was aware the fees and interest rates it was charging discriminated against African-American and Hispanic borrowers, but failed to impose meaningful limits or guidelines to stop it. The complaint also alleges that, as a result of Countrywide’s policies and practices, qualified African-American and Hispanic borrowers were placed in sub-prime loans rather than prime loans even when similarly-qualified non-Hispanic white borrowers were placed in prime loans. The discriminatory placement of borrowers in subprime loans, also known as “steering,” occurred because it was Countrywide’s business practice to allow mortgage brokers and employees to place a loan applicant in a subprime loan even when the applicant qualified for a prime loan. In addition, Countrywide gave mortgage brokers discretion to request exceptions to the underwriting guidelines, and Countrywide’s employees had discretion to grant these exceptions.
California and Nevada AGs Merge Resources Into Mega Mortgage Fraud Task Force Attorneys General Kamala D. Harris of California and Catherine Cortez Masto of Nevada have jointly announced that their states have entered into an alliance, the Mortgage Investigation Alliance, designed to assist homeowners who have been harmed by misconduct and fraud in the mortgage industry. By forging this alliance, California and Nevada will combine investigative resources, including litigation strategies, information, and evidence gathered through their respective ongoing investigations, assisting each state as it pursues independent prosecutions. The alliance will link the offices’ civil and criminal enforcement teams, speeding along the full, fair and adequate investigation of wrongdoing in the two states, which have experienced similar foreclosure and mortgage fraud crises. “The mortgage crisis is a man-made disaster that has taken a heavy toll on the country, but it saved its worst for California and Nevada,” said California AG Harris. “The mortgage crisis is a law enforcement matter, and we will prosecute to hold accountable those who are responsible and also protect the homeowners who are targeted for fraud. I am delighted that California and Nevada are entering into this alliance to leverage the best results for our investigations and look forward to forging simicontinued on page 26
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lar collaboration with other states.” California and Nevada have been the states hit particularly the hardest by the nation’s foreclosure crisis. In October 2011, Nevada and California ranked first and second, respectively, for the percentage of their housing units that entered the foreclosure process, reflecting a parallel surge in foreclosures in the two states. One in every 180 Nevada properties entered the foreclosure process in October, and one in every 243 California homes received a filing that month. In 2010, California led the nation with a total of 546,669 foreclosure filings (four percent of the state’s housing units), while Nevada led the nation with 9.4 percent of its homes receiving a foreclosure filing (totaling 106,160 units). The crisis in these Western states is similar because both states share a foreclosure system in which a bank can foreclose on a borrower’s home without court oversight, also called “nonjudicial foreclosure.” The collective result has created a rich opportunity for predators, leading both states to make mortgage-related law enforcement action a top priority. “I am pleased to join forces with General Harris to fight against fraudulent mortgage and foreclosure practices that continue to devastate lives, homes, and the economy in Nevada and California,” said Nevada Attorney General Catherine Cortez Masto. “This strong partnership will allow our states to make an even more concerted effort to hold fraud perpetrators accountable and ensure law-abiding homeowners receive justice.”
HARP Refis Through GSEs Increase 11 Percent During Q3 Foreclosure prevention activity by both Fannie Mae and Freddie Mac increased in the third quarter of 2011 and totaled nearly two million foreclosure prevention actions since the beginning of conservatorship by the Federal Housing Finance Agency (FHFA) in 2008. During this period, the governmentsponsored enterprises (GSEs) completed one million loan modifications, helping borrowers stay in their homes. According to the FHFA’s third quarter 2011 Foreclosure Prevention & Refinance Report, the increase in completed foreclosure prevention activity in the third quarter was driven primarily by loan modifications and repayment plans. Two-thirds of all borrowers who received loan modifications in Q3 had their monthly payments reduced by over 20 percent. Additionally, the GSEs’ cumulative refinancings through the Home Affordable Refinance Program (HARP) increased 11 percent during the third quarter to nearly 928,600 loans.
Other findings in the 2011 Foreclosure Prevention & Refinance Report include: ■ The GSEs have completed nearly two million foreclosure prevention actions since the start of conservatorship. Nearly 1.7 million of these actions have allowed borrowers to retain homeownership, with more than one million being permanent loan modifications. ■ Loans modified since the start of HAMP are performing substantially better compared with loans modified in earlier periods. ■ Serious delinquency rates continued to decline. However, the percentage of loans that have missed one payment increased during Q3 of 2011. ■ Real estate-owned (REO) inventory declined for the fourth consecutive quarter as property dispositions continued to outpace acquisitions in the third quarter.
Shadow Inventory Remains at 1.6 Million Units Nationwide CoreLogic has reported that the current residential shadow inventory as of October 2011 nationwide remained at 1.6 million units, representing a supply of five months. This total was down from October 2010, when shadow inventory stood at 1.9 million units, or at a sevenmonths’ supply, but approximately the same level as reported this past July. Currently, the flow of new seriously delinquent loans into the shadow inventory has been offset by the roughly equal flow of distressed sales, such as short sales and real estate-owned (REO) sales. CoreLogic estimates the current stock of properties in the shadow inventory, also known as pending supply, by calculating the number of distressed properties not currently listed on multiple listing services (MLSs) that are seriously delinquent (90 days or more), in foreclosure and REO by lenders. Transition rates of “delinquency to foreclosure” and “foreclosure to REO” are used to identify the currently distressed nonlisted properties most likely to become REO properties. Properties that are not yet delinquent but may become delinquent in the future are not included in the estimate of the current shadow inventory. Shadow inventory is typically not included in the official metrics of unsold inventory. “The shadow inventory overhang is a large impediment to the improvement in the housing market because it puts downward pressure on home prices, which hurts home sales and building activity while encouraging strategic defaults,” said Mark Fleming, chief economist for CoreLogic. Florida, California and Illinois
account for more than a third of the shadow inventory. The top six states, which would also include New York, Texas and New Jersey, account for half of the shadow inventory. Nationwide, shadow inventory is approximately four times higher than its low point (380,000 properties) at the peak of the housing bubble in mid-2006. A healthy housing market should have less than one-month’s supply of shadow inventory, which would be an easily absorbed stock of distressed assets with little or no discernible impact on house prices, unless the inventory was geographically concentrated. Despite three million distressed sales since January 2009, a period when home prices were declining at their fastest rate, the shadow inventory in October 2011 is at the same level as January 2009. Because shadow inventory is often concentrated in suburban and exurban submarkets, where distressed sales compete with new construction sales, it is one of the reasons why new home sales continue to be weak. In normal times, new home sales account for 12 percent of all sales, but they are currently running at seven percent of all sales. Based on current estimates of the visible inventory (both distressed and non-distressed), the shadow inventory is approximately half of all visible inventory listings. For every two homes available for sale, there is one home in the “shadows.”
OCC Reports Q3 Foreclosures Rise 21.1 Percent The performance of firstlien mortgages serviced by large national banks and federal savings association was stable, but delinquencies remained elevated during the third quarter of 2011, according to the quarterly Mortgage Metrics Report released by the Office of the Comptroller of the Currency (OCC). The report showed delinquencies remained elevated, but stable, during the third quarter of 2011, but have declined from 2010’s totals. The report covers about 62 percent of all first-lien mortgages in the United States, worth $5.6 trillion in outstanding balances. The number of new foreclosures increased by 21.1 percent during Q3, as servicers lifted voluntary moratoria implemented in late 2010 and exhausted alternatives to foreclosure for the large inventory of seriously delinquent mortgages working through the loss mitigation process. The increase in new foreclosures and the increase in average time required to complete foreclosures sales has resulted in the number of foreclosures in process increasing to 4.1 percent of the overall portfolio, or 1,327,077 loans, at the end of the third quarter of 2011. At the end of Q3 of 2011, 88 percent of the 32.4 million loans in the portfolio were current and performing at the end of Q3, almost unchanged from the
previous quarter. The percentages of mortgages that were 30 to 59 days delinquent and mortgages that were seriously delinquent (loans 60 or more days delinquent or delinquent mortgages to bankrupt borrowers) did not change from the previous quarter. However, both categories of delinquencies have declined from a year earlier. Other findings of the study include: ■ On average, the modifications implemented in the third quarter of 2011 reduced borrowers’ monthly principal and interest payments by 24.4 percent, or $382. Modifications made under the Home Affordable Modification Program (HAMP) reduced payments by 35.1 percent on average or $567. ■ Loan modifications that reduced payments by 10 percent or more performed better than those that reduced payments by less. At the end of the third quarter of 2011, 58.8 percent of modifications made since the beginning of 2008 that reduced payments by 10 percent or more were current and performing, compared with 36.4 percent of modifications made during that time that reduced payments by less than 10 percent. ■ Since the beginning of 2008, servicers have modified 2,258,026 mortgages through the end of the second quarter of 2011. At the end of the third quarter of 2011, 50.8 percent of those modifications remained current or had been paid off. Another 8.8 percent were 30 to 59 days delinquent, and 17.8 percent were seriously delinquent. Eleven percent were in the process of foreclosure and 5.8 percent had completed the foreclosure process.
Nevada Attorney General Files Deceptive Practices Suit Against LPS Nevada Attorney General Catherine Cortez Masto has filed a lawsuit against Lender Processing Services Inc. (LPS), DOCX LLC, LPS Default Solutions Inc. and other subsidiaries of LPS (collectively known as “LPS”) for engaging in deceptive practices against Nevada consumers. The lawsuit, filed in the 8th Judicial District of Nevada, follows an extensive investigation into LPS’ default servicing of residential mortgages in Nevada, specifically loans in foreclosure. The lawsuit includes allegations of widespread document execution fraud, deceptive statements made by LPS about efforts to correct document fraud, improper control over foreclosure attorneys and the foreclosure process, misrepresentations about LPS’ fees and services, and evidence of an overall press for speed and volume that prevented the necessary and proper focus on accuracy and integrity in the foreclosure process. “The robo-signing crisis in Nevada has been fueled by two main problems: Chaos and speed,” said Attorney General Masto. “We will protect the integrity of the foreclosure process. This lawsuit is the next, logical
HOPE NOW has released its October 2011 data showing that permanent loan modifications totaled almost 80,000 for the month, bringing the total for the year to approximately 885,000. Included in the data is the continuing trend that the majority of proprietary loan modifications have lower monthly principal and interest payments and fixed interest rates of more than five years. Additionally, October’s data showed declines in 60-plus days delinquent loans and foreclosure sales.
Massachusetts AG Coakley Targets Five Major Banks for Illegal Foreclosure and Servicing Practices Massachusetts Attorney General Martha Coakley has filed a lawsuit in Suffolk Superior Court against five national banks, Bank of America, Wells Fargo, JP Morgan Chase, Citi and GMAC Mortgagein connection with their roles in allegedly pursuing illegal foreclosures on properties in Massachusetts, as well as deceptive loan servicing. The suit also names Mortgage Electronic Registration System Inc. (MERS) and its parent, MERSCORP Inc., as defendants. “The single most important thing we can do to return to a healthy economy is to address this foreclosure crisis,” said AG Coakley. “Our suit alleges that the banks have charted a destructive path by cutting corners and rushing to foreclose on homeowners without following the rule of law. Our action today seeks real accountability for the banks illegal behavior and real relief for homeowners.” In the complaint, AG Coakley alleges these five entities engaged in unfair and deceptive trade practices in violation of Massachusetts’ law by: ■ Pervasive use of fraudulent documentation in the foreclosure process, including so-called “robo-signing;”
■ Foreclosing without holding the actual mortgage (“Ibanez” violations); ■ Corrupting Massachusetts’ land recording system through the use of MERS; and ■ Failing to uphold loan modification promises to Massachusetts homeowners. According to the complaint, the banks used false documentation in the foreclosure process, including robo-signing, whereby bank personnel signed affidavits that were untrue, or not based on the signor’s actual knowledge. An entity wishing to foreclose on a property must demonstrate it has filed an affidavit in compliance with Massachusetts law. The suit also alleges that the five entities participated in unlawful foreclosures when they commenced foreclosures on mortgages where they were not the holders of those mortgages. The Supreme Judicial Court (SJC), in Commonwealth v. Ibanez, recently upheld Massachusetts law and stated that “only the present holder of a mortgage is authorized to foreclose on the mortgaged property.” The complaint alleges that these entities ignored this fundamental legal mandate and proceeded to foreclosure even though they did not hold the mortgage, and thus had no legal authority to conduct the foreclosure. The banks’ failure to obtain a valid assignment of the mortgage prior to foreclosure has adversely impacted titles to hundreds, if not thousands, of properties in the Commonwealth. The complaint alleges that the banks falsely claimed to be the holder of a mortgage in several foreclosure documents even though they failed to obtain a valid assignment of the mortgage. The complaint also alleges that these banks have undermined our public land record system through the use of MERS, a private electronic registry system. According to the complaint, the creation and use of MERS was adopted by these defendants primarily to avoid land registration and recording requirements, including payment of recording and registration fees, and to facilitate sales of mortgage loans. The use of MERS has resulted in a lack of transparency as to the entities that have the legal authority to enforce mortgages, and unfairly conceals from borrowers the true identity of the holder of the debt. Since 1997, more than 63 million home loans have been registered on the MERS System, accounting for more than 60 percent of all newly-originated mortgage loans. The complaint also alleges that through the use of the MERS system, the banks unlawfully failed to register assignments of mortgages and transfers of the beneficial interests in mortgages. continued on page 34
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With the housing market continuing to struggle and fewer consumers
Total Loan Mods for 2011 Nearing the One Million Mark
“Last month, the industry hit a significant milestone with five million completed loan modifications since 2007. With almost a million loan mods completed this year, it is clear that the industry and its partners continue to invest a tremendous amount of resources into assisting homeowners across the country,” said Faith Schwartz, HOPE NOW executive director. “Mortgage servicers, non-profit housing counselors and the government continue to incorporate innovative ways to reach families struggling with their mortgages and each month we see the results of these collaborative efforts.” Since HOPE NOW began reporting data in 2007, the mortgage industry has completed 5.05 million loan modifications for homeowners. This includes approximately 4.17 million proprietary modifications and 883,076 completed under the Home Affordable Modification Program (HAMP). For the month of October, more than 53,000 loan modifications were proprietary and 26,102 were HAMP modifications. According to the survey data, the inventory of 60-day plus delinquencies is 2.65 million for October 2011, down from the 2.81 million reported in September. Completed foreclosure sales for October 2011 decreased from the previous month—64,000 compared to 68,000. Foreclosure starts increased by seven percent for the month—209,000 compared to 196,000.
MISSOURI MORTGAGE PROFESSIONAL MAGAZINE
New Jersey Tops in U.S. With an Average Downpayment of 13.76 Percent
being able to purchase a new home or apartment, LendingTree.com has released data highlighting the average downpayments on residential real estate purchases for all 50 states and Washington, D.C. The study finds that New Jersey leads the country with the highest average downpayment of 13.76 percent. The state with the lowest average downpayment is North Dakota, where buyers put down an average of 11.37 percent when purchasing a home. The locations rounding out the top five for highest downpayments including Washington, D.C. (13.54 percent), New York (13.51 percent), Hawaii (13.37 percent) and California (13.25 percent). The states completing the bottom five are Wyoming (11.42 percent), Oklahoma (11.67 percent), Utah (11.75 percent) and Tennessee (11.75 percent). Overall, the average downpayment for all states is 12.29 percent. “If Federal regulators were to adopt the proposed 20 percent downpayment requirement, a majority of borrowers wouldn’t be able to meet the standard given the findings in this report,” said Doug Lebda, founder and chief executive officer of LendingTree. “The proposed rule is part of a larger set of requirements that would exempt qualified borrowers from risk retention requirements and would have access to the lowest rates available. While this rule has yet to be put into effect, borrowers should be aware of the possibility and plan for future home loan needs. By utilizing LendingTree, borrowers can find the lowest rates available, find the best deal, and decrease monthly payments to make the dream of owning a home a reality.” Additional findings from the LendingTree data include: ■ New Jersey, a state with a loan-tovalue (LTV) ratio lower than the national average, also has a higher average home price than most other states. However, New Jersey falls into the higher end of the spectrum in terms of average debt-to-income (DTI) ratios. ■ Nevada, a state that has had high foreclosure rates and sharp decrease in the numbers of homes purchased, actually ranks as the state with the ninth highest average downpayment at 13.05 percent. ■ The state with the most closings to date in 2011 is Texas, with 39,498 (through October 2011). South Dakota has the fewest closings this year with only 807.
step in holding the key players in the foreclosure fraud crisis accountable.” The lawsuit alleges that LPS: ■ Engaged in a pattern and practice of falsifying, forging and/or fraudulently executing foreclosure related documents, resulting in countless foreclosures that were predicated upon deficient documentation; ■ Required employees to execute and/or notarize up to 4,000 foreclosure related documents every day; ■ Fraudulently notarized documents without ensuring that the notary did so in the presence of the person signing the document; ■ Implemented a widespread scheme to forge signatures on key documents, to ensure that volume and speed quotas were met; ■ Concealed the scope and severity of the document execution fraud by misrepresenting that the problems were limited to clerical errors; ■ Improperly directed and/or controlled the work of foreclosure attorneys by imposing inappropriate and arbitrary deadlines that forced attorneys to churn through foreclosures at a rate that sacrificed accuracy for speed; ■ Improperly obstructed communication between foreclosure attorneys and their clients; and ■ Demanded a kickback/referral fee from foreclosure firms for each case referred to the firm by LPS and allowed this fee to be misrepresented as “attorney’s fees” on invoices passed on to Nevada consumers and/or submitted to Nevada courts. LPS’ misconduct was confirmed through testimony of former employees, interviews of servicers and other industry players, and extensive review of more than one million pages of relevant documents. Former employees and industry players describe LPS as an assembly-line sweatshop, churning out documents and foreclosures as fast as new requests came in and punishing network attorneys who failed to keep up the pace. “LPS has cooperated with the Attorney General’s office for more than 14 months to resolve its inquiry in a manner which would benefit the citizens of Nevada,” read a statement from LPS. “Unfortunately, the company’s efforts to engage in meaningful discussions with the Nevada Attorney General’s office have been frustrated by the Nevada Attorney General’s decision to outsource its investigation to Cohen Milstein Sellers & Toll PLLC, a plaintiff’s law firm located in Washington, D.C., in apparent violation of Nevada law. The complaint highlights misconceptions about LPS and seeks to sensationalize a variety of false allegations in a misleading manner. LPS will vigorously defend against the complaint filed by the Nevada Attorney General.”
heard on the street
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Mortgage Professionals to Watch ■ James E. Iley Jr. has been named senior vice president, national production manager of Supreme Lending.
■ James Cromartie has joined First Guaranty Mortgage Corporation as assistant vice president of business development, national retail production.
JANUARY 2012 ❖
MISSOURI MORTGAGE PROFESSIONAL MAGAZINE
■ Sara W. Stephens, MAI has been elected 2012 president of the Appraisal Institute. Joining Stephens on the Appraisal Institute’s board for 2012 are President-Elect Richard L. Borges II, MAI, SRA; Vice President Ken P. Wilson, MAI, SRA; Immediate Past President Joseph C. Magdziarz, MAI, SRA; and Chief Executive Officer Frederick H. Grubbe, CAE. ■ U.S. Attorney Eric Holder has named Michael J. Bresnick as executive director of the Financial Fraud Enforcement Task Force. ■ Stewart Information Services has announced a new executive team consisting of Glenn Clemente as group president, direct operations; George Houghton as group president, agency operations; Jason Nadeau as group president, mortgage and title services; Mike Skalka as group president, international title operations and chief legal officer; Allen Berryman as chief financial officer; Murshid Khan as chief information officer; and John Arcidiacono as senior vice president of marketing. ■ Rob Pommier has been named vice
president of business development for Genpact Limited’s Quantum mortgage technology platform. Urban Lending Solutions has named T.J. Lewis Jr. as corporate diversity and business development executive. Prudential Mortgage Capital Company has announced that Brian Salyards has joined its multifamily originations team. DataQuick has announced the addition of Frank O’Neill Jr., SRA as the company’s chief appraiser. Shore Financial Services Inc., parent company of United Wholesale Mortgage (UWM), has hired Paul Orlando as the firm’s new chief information officer and has named Bill Van Nort to the position of chief technology officer. Ben Itkin has joined Mortgage Capital Trading Inc. as senior trade desk executive. Paul Leonard has been promoted to the position of senior vice president of government affairs for the Housing Policy Council of the Financial Services Roundtable. WFG National Title Insurance Company has appointed Michael Kelly Esq. as its new vice president, state counsel for its New York agency office.
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: email@example.com Note: Submissions sent via e-mail are preferred. The deadline for submissions is the 1st of the month prior to the target issue.
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Credit Repair Partnerships Still a Threat to Your Mortgage Business And Your State May Take the Action Against You! By Terry W. Clemans
In the spring of 2010, I wrote a column warning mortgage originators that associating with credit repair firms could jeopardize their career. Well, it’s been almost two years since that was written, and I am saddened to feel the need to revisit this issue as the treat is still out there despite increased legal action to stop it. I the past few months, the Attorneys General (AGs) from Colorado, Arkansas and Indiana have all either filed suits or have settled suits against credit repair firms. These state AGs join the Federal Trade Commission (FTC) and AGs in Massachusetts, Illinois, Pennsylvania, California, North Carolina and West Virginia who have taken action against credit repair firms in recent years for a variety of actions claimed to be illegal under various state and federal laws. The most recent case on Nov. 15, 2011 (http://goo.gl/joebT) settled by Colorado AG John Suthers against Veracity Credit Consultants LLC, a Denver-based company, bars the company from charging upfront fees in exchange for credit repair services as well as misleading consumers about their abilities to cleanse consumers’ credit reports. Under the terms of the agreement, Veracity Credit Consultants must pay the state $400,000 in restitution, costs and fees. Veracity, according to the complaint, required that consumers pay an initial setup fee of up to $99 and monthly fees of up to $79. Under both federal (Credit Repair Organization Act–CROA) and Colorado law, a credit repair firm can only charge fees once its services are complete. According to the Web site of Veracity as of Jan. 1, 2012, they are still charging the same fees that got them sued. Many credit repair firms play semantics with the law and claim that they are not “credit repair,” but “credit consultants” or some other name to try to avoid these laws. However, regardless of what a company claims they are, the actions of their business will determine what they are in the eyes of the courts, should they be brought to one based on the complaints of an aggravated consumer. In Arkansas, the AG’s office sued a Texas firm that purports to repair a consumer’s damaged credit history, claiming its services are ineffective and an advance fee it charges is prohibited by Federal law (http://goo.gl/Ackga). Any time a firm wants to charge an upfront fee for a credit consulting or repair service, warning flags should be flying high.
This suit, filed in U.S. District Court in Little Rock against TRW Ventures LLC (who also operates under four company names according to the complaint), seeks to bar the firm from engaging in the practices alleged in the complaint. It also seeks restitution for affected consumers and the imposition of civil penalties and attorneys’ fees. The suit says the company claims to be able to remove all negative information from a customer’s credit report, even that which is accurate and not obsolete. This is another major warning flag for illegal activity under CROA. “Many consumers with bad credit see offers of this kind as their last hope to improve their financial situation … unfortunately; TRW readily takes the money, but offers no real benefit, despite the sales pitch,” said Arkansas AG Dustin McDaniel. And then, hitting closer to the mortgage marketplace, the Indiana AG filed suit against two credit repair and foreclosure consultant companies. Indiana AG Greg Zoeller brought suit against Floridabased Marucci Law Firm and Illinoisbased E.A.C. Financial, claiming they were illegally operating in Indiana when each company entered into contracts with two local individuals, according to the filing (http://goo.gl/jjudb). “Hoosier homeowners facing foreclosure or financial insecurity are often targets for out-of-state organizations looking to make a profit off of their misfortunes,” AG Zoeller said. “This activity not only preys upon some of our most vulnerable citizens, but often places them in further financial distress. The fact that a law firm is involved is all the more disappointing to me.” And don’t forget the treat written about back in 2010, that your ability to access credit information for your mortgage business can be lost due to association with credit repair companies. The national repositories each keep an independent list of companies not to sell credit reports to, based on violations of their policies. One of those policies they strictly enforce is the ban on partnerships with credit repair firms. So the bottom line to all this … be very careful when it comes to credit repair companies soliciting referrals of your consumers. You don’t want to find your name listed in one of these AG’s press releases or your company cut off from access to credit reports vital to your mortgage originations. Terry W. Clemans is executive director of the National Credit Reporting Association Inc. (NCRA). He may be reached at (630) 539-1525 or e-mail firstname.lastname@example.org.
StreetLinks Launches USPAP-Compliant Liquidation Valuation Report for Servicers
continued on page 30
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❖ JANUARY 2012
Real Estate Mortgage Network Inc. (REMN) has announced the introduction of its Wholesale FHA 203(k) Rehabilitation Product to remove the complexity out of the process for independent retail lenders across the country. This new
Our program was designed to be ‘BETTER’. Better people, better tools, & better products. We believe in long-term relationships with our partners and that’s what makes us better.
MISSOURI MORTGAGE PROFESSIONAL MAGAZINE
REMN Launches New Wholesale 203(k) Product
“A Better Home For Your Branch”
StreetLinks Lender Solutions has announced the launch of their new USPAP-compliant product StreetLinks LVR, a liquidation valuation report for mortgage servicers and asset management firms. LVRs will be performed by StreetLinks’ nationwide panel of licensed appraisers using a strict appraisal-like methodology based on property condition, comparables and local market trends to provide a thorough and objective analysis of the liquidation price around a strict 90-day marketing window. This fast, accurate valuation review is designed to deliver the assurance servicers seek in their appraisal values. “Lenders use objective analysis to make a financial decision when funding loans—the same is used during servicing and default. A transaction’s ultimate financial decision requires an accurate and reliable value, which StreetLinks and the appraiser will stand behind,” said Ric Holder, director of StreetLinks’ Mortgage Services Division. “StreetLinks LVR is a versatile servicing tool that can provide relevant data to multiple sectors of the industry, from foreclosure bids to REO sales predictions and initial sales listing price. We’re excited to put a much-needed sense of confidence behind such appraisal values.” Select StreetLinks clients have already purchased LVR reports and have been impressed with the results. “As StreetLinks promised, the LVR left us more informed and more confident in our ability to perform a financial analysis of the collateral related to a seasoned mortgage loan portfolio,” said Joe Huntzinger, vice president of lending at the Indianapolis Neighborhood Housing Partnership.
REMN wholesale product looks to improve the 203(k) experience for everyone involved by leveraging an inhouse REMN team to manage the entire procedure. While there are an overwhelming amount of distressed properties on the market, many lenders do not offer FHA 203(k) products because of the intricacies involved. REMN assigns a dedicated team to handle the 203(k) loan’s postclosing management, home inspection and other matters until the final draw is released. “Today’s market offers massive opportunities for 203(k) products, but they can be so complex that a lot of lenders just won’t offer them,” said Joe Amoroso, director of national wholesale sales for REMN. “REMN wholesale has the experience with 203(k) products and the commitment to customer service to help independent brokers offer these loans in a way that simplifies the process for the home buyer and the loan originator. We recently had more than 1,200 people register for our last FHA 203(k) Webinar, further proof that the industry sees value in 203(k) products, but needs help getting them implemented. REMN has always offered industry leading support and our commitment to simplifying the 203(k) process is one more way we’re helping the independents on the ground compete.” REMN Wholesale’s 203(k) offerings include both Streamlined 203(k) and Full Consultant 203(k) loans for use with one- to four-unit residential properties in more than 30 states. These products allow for maximum loan-to-value (LTV) ratio of 96.5 percent on new home purchases and 97.5 percent on refinances. “Out of 1,200 registered for the recent REMN Webinar on 203(k) loans, only 113 were actively using this product,” said Andrew T. Berman, executive vice president of NMP Media Corp., publishers of National Mortgage Professional Magazine. “The primary reasons cited why registrants were not using the 203(k) product was due to a lack of product knowledge and a shortage of lenders offering 203(k) programs.”
new to market
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QMS to Begin Offering Third-Party MERS Audits
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JANUARY 2012 ❖
MISSOURI MORTGAGE PROFESSIONAL MAGAZINE
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Quality Mortgage Services LLC (QMS) has announced that the company is now offering third-party Mortgage Electronic Registration Systems Inc. (MERS) audits as required by MERS Training Bulletin No. 2011-03, dated July 1, 2011. The bulletin requires Independent Annual Attestation by Dec. 31, 2011, which may be performed by an independent control function within the organization. It must be provided by an independent auditor outside of the company after 2011. The rule impacts all servicers and sub-servicers. MERS tracks servicing rights for loans registered on the MERS System. MERS acts as the mortgagee of record in the public land records and as nominee for the lender and its successors and assigns. “MERS is taking steps to make it easier for the industry to operate in a manner that has worked well in the past,” said Tommy A. Duncan, CMT, president of QMS. “In order to comply with upcoming requirements, independent third-party auditors will be needed to provide audit services to support annual attestations for servicers and sub-servicers. The QMS audit compares the information contained in MERS to the servicing system. In addition to the system comparison, QMS will review the note and security instrument and if applicable, the assignment, release of mortgage, modification or subordination agreement to ensure that the document has been prepared correctly and that the information reported to MERS is accurate. Quality Mortgage Services is proud to offer the industry our services in this area.”
United Wholesale Mortgage Unveils New Jumbo Product United Wholesale Mortgage (UWM) has announced that it has launched a unique jumbo product with loan amounts up to $2.5 million and loan-to-value (LTV) ratios up to 80 percent. This product is exclusive and has extremely competitive low fixed rates in the mid four percent range, along with multiple adjustable-rate mortgage (ARM) options if the borrowers choose. “Investors have been slow to embrace the return of jumbo loans over the past year as a result of the risk factor,” said Mat Ishbia, president of United Wholesale Mortgage. “We are one of the few lenders in the country that have the capability to underwrite, close and fund jumbo loans all under one roof. UWM has the ability to offer this program based on its exceptional
reputation of originating the highest quality loans across the country.” UWM has dubbed the product “The Big and Easy” due to the size of the loan it can fund coupled with the straightforward, trouble-free process that UWM has established. UWM offers brokers a number of different tools to make them more successful. Among them are EASE (Easiest Application System Ever), its broker portal, and Easy Qualifier (EQ), its product and pricing engine. Further, the accessibility to UWM’s customer service staff and quick underwriting turn times attracts top tier brokers who produce high volumes of quality loans. The Big and Easy can be priced and underwritten using EASE and EQ. “Our quality of business is a direct result of our account executives working only with brokers that have proven to originate quality loans and our centralized team of underwriters ensuring that these loans will perform,” said Ishbia. The Big and Easy offers a variety of financing options that include a 30year fixed, 15-year fixed, 10-year ARM and also a five-year ARM. This program accepts FICO scores as low as 720. Eligible property types for The Big and Easy include primary residences, second homes, condominiums, PUDs (planned unit developments) and double units. Officials at UWM say it is the only true jumbo loan in the country that originators can close in two weeks or less and they expect UWMs volume to rise significantly within the next year.
New LPS Offering Further Protects Military Personnel From Foreclosure Lender Processing Services Inc. (LPS) has announced added functionality in its Military Service Personnel (MSP) loan servicing platform that will help servicers better track and manage loans belonging to military service members. LPS developed its Military Service Relief (MSR) functionality within MSP, which adds additional stop-gap measures to help servicers further identify and process protected loans with greater ease and confidence. The Servicemembers Civil Relief Act (SCRA) prohibits mortgage servicers from foreclosing or seizing property from active-duty military personnel unable to meet their mortgage obligations. The protection from foreclosure lasts up to nine months after active duty has ended, and service members also qualify for interest rate limits and other shields under the law. “Due to the current mortgage environment, LPS saw a widespread need to
add additional holds and stop-gap measures to help servicers identify loans belonging to our nation’s military personnel,” said LPS Chief Information Officer Joseph Nackashi. “The expanded functionality can capture and store information about a borrower’s active duty status, while other unique identifiers detect SCRAeligibility to ensure fees are not assessed or collected in error and that payoff interest is calculated using the correct SCRA rate limits.” The MSR functionality delivers 30 more loan-level fields in MSP, the technology used to service approximately half of the nation’s mortgage loans by dollar volume. With these expanded capabilities, servicers can better manage loans for active-duty military personnel. Future MSR enhancements will deliver greater functionality related to default and credit bureau reporting, as well as reconciliation of advances.
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www.PolarisHFC.com 616-667-9000 info@PolarisHFC.com NMLS ID#: 38072 Licensed in: AL, AR, AZ, FL, GA, IL, IN, IA, KS, KY, MI, MN, MO, MD, OH, OK, PA, NC, SC, TN, TX, VA, WV, WI
❖ JANUARY 2012
Zillow Inc. has announced the launch of the Zillow Mortgage Marketplace shopping experience on AOL Real Estate and DailyFinance, providing tools to research, shop for and compare mortgages. AOL Real Estate and DailyFinance visitors now have easy access to important home financial information, such ClosingCorp Announces as mortgage calculators, real-time mortgage rates, and Zillow’s innovative mortEnhancements to gage shopping experience, which allows SmartGFE Calculator ClosingCorp has users to compare personalized loan announced new continued on page 33 enhancements to
MISSOURI MORTGAGE PROFESSIONAL MAGAZINE
Zillow Mortgage Marketplace Debuts on AOL Real Estate and DailyFinance
A Bright Spot in
Automated underwriting and loan pricing technology provider PriceMyLoan has released LendingQB, a 100 percent Web-based mortgage lending platform. “With LendingQB, we believe we are doing more than just providing a ‘cloud computing’ loan origination system,” said Binh Dang, LendingQB’s managing partner. “We believe we are fundamentally changing the way that lenders use technology.” Since 2004, PriceMyLoan has been providing lenders with advanced technology to automate the underwriting and pricing of their loans. Over the past seven years, PriceMyLoan has had the unique opportunity to work closely with their clients and carefully observe their utilization of technology. “Each one of our clients had a valuable LOS story to tell us,” said Gigi Campbell, national sales director for LendingQB. “What became evident is their desire for a ‘one-stop shop’ lending system, and a system that would adapt to the way they work.” To that end, LendingQB was built to include a comprehensive list of features, such as electronic documents with e-signatures; a full complement of tools for loan processing, underwriting, secondary marketing, closing and post-closing; and specialized tools for wholesale and retail environments, such as broker Web site portals and online consumer loan applications. Naturally, PriceMyLoan powers the automated underwriting and loan pricing aspects of the LendingQB platform.
its SmartGFE Calculator. The tool now provides discounted refinance (reissue) rates and conditional fees, and features single sign-on capabilities, improving the convenience of the application by only requiring users to enter one log-in to access the calculator when it is embedded within a secured, third-party Web site. The SmartGFE Calculator only requires answers to questions that are critical to calculating accurate discounted refinance rates for each title company. “When embedded onto secure Web sites, single sign-on makes using the tool incredibly convenient, as users only have to log onto the system once,” said Tim Armbruster, chief technology officer for ClosingCorp. “We are not only committed to seeking customer input regarding our products, but are also truly dedicated to acting on those recommendations and enhancing our offerings. The ability to generate discounted refinance rates and conditional fees based on a specific location are two features that are critical to our clients’ businesses, and we continually strive to ensure that our products deliver the functionality mortgage professionals need today.” By also including conditional fees, the calculator now allows title agencies with several locations to manage the multiple fee structures and deliver accurate rates based on county, region or zone. “We make every effort to create the best user experience possible with all of our products, which is the reason for continuously improving capabilities and adding features such as single sign-on,” said Bob Hart, vice president of sales for ClosingCorp. “By taking the time to identify only those questions that are relevant to delivering accurate discounted refinance rates and conditional fees, we ensure that busy loan officers and title professionals are not burdened with answering any unnecessary questions. Through these extra steps the SmartGFE Calculator gives title companies the most user-friendly, precise way to deliver title and settlement rates, recording fees and transfer taxes to their lender clients.”
Leadership and Culture: Are You Model-Matched With Your Current Mortgage Lender?
By Drew Waterhouse
The mortgage industry is on the verge of a new chapter, characterized by lower overall production volumes relative to years past, greater compliance burdens and lower product-based differentiation among participants. However, lost in this seemingly depressing news are the seeds of real opportunity for firms and individual originators well-suited to the new environment. A much smaller pool of players has created a need to achieve greater production with fewer originators. No, that is not a contradiction—due to the shrinking of the mortgage industry, the loans closed per originator figures are actually headed higher. This reality has put origi-
Leadership and culture are the first of the core business factors any mortgage originator should evaluate when determining the company with which they have the best model-match.
nators with a documentable track record of strong production in great demand. Could this be the time for you to consider a move to a mortgage lender in which you are better model-matched? Model-matching is the process of improving the mutual results from relationships between lenders and originators. It is a comprehensive process of assessment of both parties across a wide range of factors, including leadership, culture, business type, operations and technology. This process involves due diligence and consideration of both objective and subjective factors of a relationship in order to produce a holistic picture of positive-matched and negative-matched areas within the relationship. Leadership and culture are among the most important, yet difficult, business relationship components to evaluate. However, let’s take a look at how they can be evaluated.
Leadership For high-achieving organizations and professionals, it is vital that engagement between managers and producers be conducted in a clear, concise and consistent way. The study of leadership clearly demonstrates that talent (producers and other creative employees) appreciate clarity of vision, a voice in, and an impact on the business processes and freedom to reasonably adapt to their unique circumstances or style (empowerment). Where this environment exists, organizational and individual goals are achieved, culture is seen and morale is high. Questions to be considered include: Vision ■ Can you restate, without prompting
or referring to notes, the vision and key strategies of your current employer? ■ Do you believe that the vision expressed by your current employer is a prudent one given your understanding of the mortgage industry and market currently? Voice ■ Does your current employer actively seek input from you and others throughout the organization before, during and after implementation of a new project, process or product? ■ Do you feel that you can voluntarily share your opinion on matters of concern to you without fear of ridicule or retaliation? Empowerment ■ Can you point to specific initiatives or changes in policies or processes at your current employer that are directly attributable to employee suggestions or recommendations? ■ Has the firm been reasonably accommodating to you with regard to minor variations from company policies or protocols as it relates to the unique features of your business? Leadership can be a subjective quality to evaluate in corporate America. Yet, there are fundamental questions related to a company’s stated vision, proactivity in seeking input from employees and responsiveness to individual employee needs that can help to assess whether your current company’s leadership is a positive or negative model-match for your business.
Culture The culture of a business is most assuredly influenced by the leadership factor we have just examined. But culture goes well beyond the direct influence of managers from above—it considers the values displayed within the organization. Values comprise a wide range of factors including: 1. Compensation, benefits and recognition; 2. Development and growth; 3. Job characteristics; 4. Organizational character and reputation and; 5. Relationships. A true, positive model-match can only occur when you, the originator, are aligned with your organization across the full range of these values. Questions that can help to illuminate this alignment or lack thereof include: Compensation, benefits and recognition ■ In light of the recent compensationrelated regulatory changes in the mortgage industry is your employer’s compensation program competitive, clear and compliant? ■ In your market, how does your compensation package compare to your peers? ■ Is your employer’s benefit package competitive and sufficient for supporting your career, family and retirement goals? ■ Are employees at your current comcontinued on page 34
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quotes and lender reviews, and connect directly with lenders. Home and mortgage shoppers can find the Zillow Mortgage Marketplace shopping experience on AOL by visiting: the AOL Real Estate home page; the AOL Real Estate listing pages; or the AOL Real Estate home finance center. “We planned to launch this integration next year, but as mortgage rates remain at historic lows consumers are clamoring for quick and useful mortgage information. In less than two months, Zillow and AOL’s development teams worked closely together to launch Zillow Mortgage Marketplace on AOL Real Estate and DailyFinance,” said Spencer Rascoff, Zillow chief executive officer. “Expanding Zillow Mortgage Marketplace to AOL is an important milestone, and will expose our unique mortgage offering to many more millions of mortgage shoppers.” In October, AOL and Zillow announced the partnership to add the Zillow Mortgage Marketplace shopping experience on AOL Real Estate and DailyFinance in 2012. “Our goal is to provide a suite of best in class financial tools and resources to support our users as they make personal finance and real estate decisions through their life stages,” said Jay Kirsch, senior vice president and general manager of the AOL Marketplace. “We are thrilled to have Zillow join our team of outstanding partners. Collectively, we are bringing the best of the Web to our AOL users in one comprehensive online destination.”
servicers, the benefit of using this module is that Aklero can validate thousands of loans overnight, while in the same amount of time, servicers that cling to expensive manual processes complete far fewer loans files.
Leads360 Releases New Refi Product for HARP Phase II Leads360 has announced the release of the Leads360 HARP 2.0 Toolkit in
response to the anticipated increase in refinance activity from HARP Phase II. With interest rates at an all-time low in the four percent range, and an estimated one million eligible homeowners under the government expanded Home Affordable Refinance Program (HARP), lenders are in a great position to proactively treat existing customers as new leads, showing they have their best interest at hand. In this environment, effective lead management is critical to capture, nurture and track these important sales opportunities. “HARP 2.0 offers a great opportunity for LSI Mortgage Plus to continue to build trust as a go-to lender for our customers,” said Brigitte Marshall, director of marketing at LSI Mortgage Plus.
“Leads360 is critical to our HARP 2.0 campaign, allowing us to set up specific campaign workflows, including nurturing efforts, customized distribution and more, to effectively market to existing customers.” Leads360 HARP 2.0 Toolkit empower lenders with three main tools: Data mining of their Leads360 database to identify qualified borrowers; pre-sale nurture efforts with direct mail tracking and email nurturing campaigns and sales process workflow to aggressively track opportunities through to the close of the mortgage. “HARP 2.0 will generate a welcome spike for the mortgage industry, and it’s continued on page 34
Aklero Unveils New MERS Data and Doc Validation Module NationalMortgageProfessional.com ❖
MISSOURI MORTGAGE PROFESSIONAL MAGAZINE ❖ JANUARY 2012
Aklero Risk Analytics Inc. has announced the release of DQx for MERS Data and Document Validation Module. The module is part of Q-Close, Aklero’s Loan Quality Management Platform, and provides an automated method to validate the accuracy of data resident in the MERS Electronic Registry. “We developed this offering in response to the requirements outlined in the MERS Quality Assurance Procedures issued in September requiring servicers to validate the accuracy of the data held on the MERS’ system against source documents,” said Richard J. Downing, executive vice president of sales for Aklero. As a result, lenders are required to attest that they have performed a three-way document to data validation, including comparing the data on the MERS system against the bank’s data and against the “true data,” or original documents, a process that ensures a high degree of accuracy. That approach enables Aklero to review the documents and identify discrepancies. For
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one that lenders cannot afford to miss out on,” said Nick Hedges, president and CEO at Leads360. “The past few years have been a challenge for the mortgage industry with foreclosures at an all-time high, lower loan origination volumes and a heavily regulated default space. HARP revisions, combined with lower interest rates, have the potential to drive a much needed boost for the mortgage industry and the economy.”
ACI Releases New UCDP-Compliant Appraisal Reader Tool
ACI has announced the release of a new Appraisal Reader powered by Appraisal.com. The new technology helps lenders and reviewers view and validate appraisal reports prepared by any appraisal software vendor that supports the new MISMO XML format. Appraisal.com is an ACI brand that serves the appraiser and lender communities. The Appraisal Reader is compact and provides mortgage professionals with a critical tool to conduct a review while keeping all the components of the appraisal report intact. The review is performed using ACI’s PAR Logic rules, a comprehensive library that checks the appraisal report for compliance. Custom client-specific rules can also be applied on demand using PAR Logic to highlight errors and omissions. The Uniform Appraisal Dataset (UAD)
JANUARY 2012 ❖
MISSOURI MORTGAGE PROFESSIONAL MAGAZINE
for managers only
information embedded in the PDF appraisal report is also available in a concise, organized manner using the QuickView Summary Report within the Appraisal Reader. The QuickView Summary Report presents the UAD information in a form and helps streamline the review and validation process prior to submission to the Uniform Collateral Data Portal (UCDP). “With the advent of the UCDP, ensuring regulatory compliance before submitting appraisal reports to the portal is increasingly important for lenders and appraisers,” said Dave Roberts, president of ACI. “We’ve developed a sophisticated, yet free, solution that enables lenders, credit unions, and community banks to easily view and validate MISMO XML appraisal reports using Appraisal.com technology.”
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: email@example.com Note: Submissions sent via e-mail are preferred. The deadline for submissions is the 1st of the month prior to the target issue.
leadership and culture pany recognized for achievements in ways that go beyond basic sales incentive contests? Development and growth ■ Are you given the opportunity and encouragement/support by your current employer to seek training that goes beyond continuing education? ■ Do you have access to internal training relative to business planning, professional development, products, technology and marketing? ■ Are there key leaders and managers that take a vested interest in coaching and accountablilty with you? Job characteristics ■ Are you given sufficient autonomy and independence by your current employer? ■ Does your company provide you with leadership opportunities? ■ Would you consider your current position to be conducive for proper work/life balance? Organizational character and reputation ■ Are you proud to work for your current employer? ■ Does the reputation of your employer create value for you in your market with your business partners and cllients? ■ Does your current employer engage in community service or industry leadership initiatives? Relationships ■ Do the relationships you have with
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fellow employees at your current organization ... ◆ Do you have relationships with fellow employees and team members or is it transactional? ◆ Is it an environment where you are able to share and benefit from having relationships that can tangibly enhance your productivity and long term objectives? ◆ Do you enjoy being in the office and work environment or is it something you would rather avoid? The culture of an organization can also be hard to quantify, but it is necessary to do so if a true assessment of your current situation can be accomplished and then compared to other opportunities in the marketplace. Leadership and culture are the first of the core business factors any mortgage originator should evaluate when determining the company with which they have the best model-match. Honestly answering the questions poised above can prepare you to “build where you stand” or to figuratively “Go West, young man (or woman)” in search of better opportunities. Drew Waterhouse is managing director of Hammerhouse LLC, a national recruiting and strategic growth firm for the financial services industry with mortgage sales and leadership placement at its core. Drew may be reached by e-mail at Drew.Waterhouse@TeamHammerhouse.co m or visit TeamHammerhouse.com.
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Think about it. How do you become a manager or owner in this industry? Usually like me. 1. You become a loan officer without any training. Usually because you know someone in this industry because most companies don’t want to train rookies. If I had knocked on the door of 10 mortgage companies 30 years ago, none of them would have hired me. 2. You become a top producer. Perhaps you are more competitive, a harder worker or just fall into the right situation. I think for me it was the right situation being “inside” a real estate office. 3. You are then promoted to manager. Or, you start your own company because you get little guidance or support from your present manager. There you are—a good producer. You are probably missing a few fundamentals of production. Now you must teach others to do what you do. And here is the problem—you are still producing. Now you
must produce, recruit, hire, train, coach, administer, fight fires and more. If I count all of these, it would be at least five fulltime jobs. Think you can do any of them well? Most producing managers make 70 percent of their income from personal production. Therefore, where are you going to spend most of your time? For those not good in math, that leaves 30 percent or less on the other four jobs. And you wonder why I felt that management training was important? And that is why I have teamed with National Mortgage Professional Magazine to deliver a column on leadership for mortgage managers. That is also why I ask that I not set the agenda each month. It has to be what is important to you. E-mail me at Dave@HershmanGroup.com and let me know what you are would like to see in this column. Dave Hershman is a top author in the mortgage industry with seven books published, as well as hundreds of articles. Dave has delivered hundreds of keynote speeches, seminars and schools for the industry as well. He may be reached by e-mail at Dave@HershmanGroup.com or visit OriginationPro.com.
nmp news flash
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Finally, the complaint alleges the banks deceived and misrepresented to borrowers the process, requirements, and availability of loan modifications. The banks publically claimed to be engaged in widespread loan modifications aimed at preserving home ownership and avoiding unnecessary foreclosures. Through the National Homeownership Retention Program, which commenced on Nov. 6, 2008, these banks represented that they would work with borrowers to help them avoid unnecessary foreclosures by reducing monthly mortgage payments to affordable and sustainable levels. The complaint alleges these banks misled borrowers about their eligibility for this program and the amount of relief available, failed to achieve a significant level of modifications, and often strung along borrowers for months in trial modifications that were ultimately rejected. The AG’s lawsuit seeks civil penalties, restitution for harm to borrowers and compensation for registration fees that
were avoided. The lawsuit also seeks to hold the banks accountable through permanent injunctive relief to provide a solution for prior unlawful foreclosures and to require that the banks, going forward, register assignments and other documents in accordance with Massachusetts law.
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: firstname.lastname@example.org Note: Submissions sent via e-mail are preferred. The deadline for submissions is the 1st of the month prior to the target issue.
Make Real Estate Agents Your Soldiers!
BY RAYMOND BARTREAU
The number one reason you should attend this event is the satisfaction of knowing you are doing your part to ensure that mortgage broker issues are heard on Capitol Hill. You are the best spokesperson for our issues. Your participation benefits you, the industry and your clients as a whole, by strengthening the broker’s presence in the halls of Congress. Highlights Will Include: I Mortgage industry trade association panel discussion featuring representatives from NAMB, the Mortgage Bankers Association (MBA), the National Association of Realtors (NAR) and the National Association of Home Builders (NAHB) I A closer look at the powers of the Consumer Financial Protection Bureau (CFPB) and what they will be looking for in their audits I Loan originator (LO) compensation and the impact of HR 2509, the Preserving Consumers’ Mortgage Origination Choices Act of 2011, sponsored by Rep. Gary Miller (R-CA)
Hotel Accommodations Capitol Skyline Hotel 10 "I" Street, Southwest • Washington, D.C. 20024 Phone #: (202) 488-7500
www.capitolskyline.com Special "NAMB" rates will be available for a limited time only. Book early! You must be registered for the conference in order to book your room.
Visit www.NAMB.org/legconference for details!
❖ JANUARY 2012
Includes Advocacy 101 training: General synopsis and "Question & Answer" on the best ways to communicate NAMB's talking points with your congressional leaders in an effective manner.
MISSOURI MORTGAGE PROFESSIONAL MAGAZINE
Raymond Bartreau is Chief Executive Officer of Best Rate Referrals. He may be reached by phone at (800) 811-1402 or e-mail RBartreau@BestRateReferrals.com.
Capitol Skyline Hotel Be prepared to go to the Hill!
The age-long question of, “the best way to gain and keep relationships with real estate agents” is becoming more obvious … you must give them business to get their business. Of course it isn’t as simple as it sounds. It takes strategic planning, research and the right relationships to help you achieve this goal. First, you must determine who you want to work with. A few suggestions would be looking for the real estate agents with the most listings. Or, who is the most aggressive buyer agents in your market. My advice would be to target two or three new real estate partners to work with and send business to. Once you have your target list of new partners, you now must gain a source of business for them. There are many ways you can do this and lower you overall cost per acquisition. One of the easiest ways with an almost immediate return on your investment is providing homebuyer leads to highproducing buyers’ agents/brokers. Real estate agents are in desperate need of leads, and when they have a strategic partner providing them leads, they are guaranteed to send you all their loan business. Make the real estate agents your soldiers, your army on the frontline. As we know, getting a hold of any lead is the first major battle. By sharing homebuyer leads with a real estate agent, you are doubling your chances of contacting the individual to pre-qualify them for a loan. This is another battle within itself as you always have to make sure that your real estate partners are calling the leads multiple times a week until they get a hold of them. I have spent the last six months putting together a business model to target real estate agents using our traditional marketing methods as our core value to the real estate industry. If you can consistently feed a real estate partner leads day in and day out for less than half of your current budget, you will have real estate agents eating out of the palm of your hand. Activity breeds higher sales, easier recruiting, more agents working in office and paying desk fees to receive leads, and MOST important to you … a happy real estate partner or two. Where do you get exclusive buyer and seller leads and how can you deliver them to your partners on a real-time basis? Our staff of mortgage and real estate marketing professionals can help with the entire process, in fact, we are giving 10 leads away free on any purchase loan marketing consultation. I can personally set you up with a specialist in your state, simply e-mail me at RBartreau@BestRateReferrals.com.
Monday-Tuesday, March 19-20, 2012
Soaking Up REO Inventory Like a Sponge By Daren Blomquist he perception continues to persist that bank-owned properties are saturating the housing market nationwide, making it difficult for banks to unload these properties and giving buyers the upper hand in submitting lowball offers. I overheard a conversation at lunch recently confirming this. A group of businessmen were talking about a real estate-owned (REO) property just listed for sale in Ladera Ranch, Calif., a large development in Orange County sold at the peak of the boom and now littered with foreclosures. One gentleman said he was surprised at the asking price per square foot of just $183, which he considered a bargain. But one of his lunch buddies chimed in and recommended that he should still come in with an offer well below the asking price—and move on to another property if that offer was rejected. But trends in REO inventory (http://goo.gl/yg76B) suggest this climate may be changing—at least in some local markets. In the Orange County market, for example, REO inventory decreased 12 percent from the beginning of 2011 to the end of November, according to RealtyTrac data. We estimate that REO inventory in Orange County now represents a 12.5-month supply—certainly on the high side but not the towering tsunami that some reports of shadow inventory conjure up.
JANUARY 2012 ❖
MISSOURI MORTGAGE PROFESSIONAL MAGAZINE
Dwindling REO inventory Nationwide, REO inventory shrunk 35 percent from January to November and now represents an estimated 12-month supply based on the sales pace of REOs. In some states the estimated supply of REO inventory is down to less than 10 months—states like Idaho, Arizona and Virginia (seven-month supply) and Missouri, Colorado and Nevada (eight-month supply). This dwindling supply of REO inventory in many areas is the result of delays in the foreclosure process slowing down the pace at which lenders foreclose. The average time
it takes to foreclose nationwide (http://goo.gl/xlI19) has increased by 19 percent over the past year, from 281 days in the third quarter of 2010 to 336 days in the third quarter of 2011, according to RealtyTrac data. The average time it takes to foreclose nationally is up more than twofold from the third quarter of 2007, when it was 140 days. These delays were caused by a firestorm of controversy surrounding the propriety and legality of the foreclosure process itself, in some cases calling into question whether an REO property can be sold to a third party or obtain clear title. One recent example of this was a Sept. 29 bankruptcy court ruling in Arkansas that found some lenders are not properly authorized to do business in the state and therefore are in violation of the state’s non-judicial foreclosure statutes. As a result of the ruling, now under appeal, some title companies in the state no longer issue title insurance for foreclosed properties. But despite some extreme examples like the Arkansas case, lenders appear to be ramping up foreclosure activity in select areas and for select portions of their distressed portfolios that will presumably stand up to increased scrutiny. Evidence of this ramp up is a recent surge in the earlier foreclosure filings that start the foreclosure process. These default filings spiked 33 percent back in August (http://goo.gl/a32yV) and have remained elevated since then, RealtyTrac data show. Scheduled foreclosure auctions, the second stage of the foreclosure process in most states, reached a nine-month high in November (http://goo.gl/t15uX), indicating this wave of delayed foreclosures is gradually making its way through the foreclosure process. Many of these delayed foreclosures will eventually become REOs, meaning an increase in REO inventory. But that won’t necessarily be a terrible thing for many markets that are primed to quickly absorb addi-
tional REO inventory— particularly if that inventory is in reasonably good condition. In contrast, some other local markets are in still saddled with a large inventory of REOs. In these REO saturated markets, lenders and servicers should think twice before adding more bank-owned properties to the backlog. Instead they may need to more seriously consider foreclosure alternatives such as loan modification, short sale or even donating property to local land banks.
27,307 properties as of the end of November, the blazing pace of REO sales in the city is helping to keep its estimated monthly supply of REO inventory at 6.28 months—enough to be third place on our list of REO absorbent markets. Other top REO absorbent markets were Modesto, Calif.; Sacramento, Calif.; Richmond, Va.; Lakeland, Fla.; Stockton, Calif.; Denver and Akron, Ohio.
“Nationwide, REO inventory shrunk 35 percent from January to November and now represents an estimated 12-month Top REO saturated supply based on the sales pace of REOs.” markets
Top REO absorbent markets All of these markets had REO inventory representing less than eight months as of the end of November and at least 400 REO sales in the second quarter of 2011, according to the RealtyTrac U.S. Foreclosure Sales Report (http://goo.gl/CdgGP). The Virginia Beach-NorfolkNewport News metro area topped the list, with 1,250 REO properties representing a 3.07-month supply. Boise was second on the list, with 812 REO properties representing a 3.66-month supply. Even though the Phoenix metro area posted a massive REO inventory of
All of these markets had an active REO inventory of more than 4,000 properties as of the end of November, representing at least a 15-month supply. The BostonCambridge-Quincy metro area led the pack with 5,678 active REOs representing a whopping 133-month supply because of an anemic REO sales pace. Some landmark rulings by the Massachusetts Supreme Judicial Court in 2011 have largely frozen up sales of foreclosed property in the state. Most recently, the court ruled in October that the purchaser of a property in a flawed foreclosure sale is not the true owner of that property. This October ruling, in the case of
But in the suburbs surrounding the city of Detroit, well-priced REO inventory in good condition is hard to come by, according to Piekarz and other local real estate agents. “There is a vast majority of buyers who cannot find homes for sale for a good price in good condition,” said Oakland County real estate broker Ian Whitelaw, who added he thinks there is a “backlog of buyers” for these types of properties. Lenders and servicers could effectively approach markets like Detroit with a two-pronged strategy. Highly distressed inventory in the foreclosure pipeline could be donated to a local land bank, if one exists, since little demand exists for this inventory. On the other hand, REO properties in decent condition and in desir-
ties, but that a large shadow inventory of REO remains unlisted. “I’m seeing a ton of trustee’s sales going on, also a lot of REOs out there that are not on the market yet,” said Clayton. Other top REO saturated markets were Milwaukee; Cincinnati; Orlando; Detroit; Philadelphia; Cape Coral-Fort Myers, Fla. and Minneapolis-St. Paul.
Options in REO saturated markets
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MISSOURI MORTGAGE PROFESSIONAL MAGAZINE
A closer look at the REO saturated market of Detroit may provide some insight on how lenders and servicers might most effectively manage and sell REO inventory in similar markets. With 33,309 unsold bank-owned homes in the six-county region— down 36 percent from the peak of 52,341 unsold REOs in December 2008—Detroit has an estimated 16month supply of REO inventory, according to RealtyTrac data. Much of that inventory is highly distressed and unattractive to most buyers, according to Anne Piekarz, broker/owner at MI Realty Group in Sterling Heights, Mich., and a member of the RealtyTrac Agent Network. “We list for Fannie Mae, and we have some properties in Detroit,” she said. “Horrible, horrible, horrible. … You can’t go down there by yourself. You have to go in the morning and you have to go with a partner.”
Daren Blomquist is director of marketing communications for Realty Trac Inc. With RealtyTrac since 2001, Daren currently manages the company’s public relations, marketing and advertising efforts. His duties include the creation of the company’s monthly and quarterly foreclosure reports, which are cited by thousands of media outlets nationwide, including all the major news networks and leading publications such as The Wall Street Journal, The New York Times and USA TODAY. He may be reached by e-mail at Daren.Blomquist@RealtyTrac.com.
Bevilacqua vs. Rodriguez, built on the court’s January decision in the case of US Bank vs. Ibanez, which said that a bank cannot foreclose on a property when the bank does not sufficiently prove that it owns the mortgage. Second place on the REO saturated list was the Birmingham, Ala., metro area, with total REO inventory of 5,417 representing a nearly 100-month supply. The most populous county in the metro area, Jefferson County, filed the largest municipal bankruptcy in U.S. history in November. With an REO inventory of 4,698 representing a 24-month supply, the Salt Lake City metro area is number three on our list of REO saturated markets. Kandy Clayton, broker/owner at Clayton & Associates Real Estate in Sandy, Utah, and member of the RealtyTrac Agent Network, noticed an increase in the number of HUD REO properties in the region starting as early as November 2010. “Listing brokers for HUD started receiving properties in November (2010). With that came a huge influx of properties on the market.” said Clayton, a HUD listing broker who noted that many of those properties were in poor condition and in need of significant repairs. “I never thought I’d sell a $50,000 house again but I did this year.” Clayton said that investors have been willing to snatch up many of those highly distressed HUD proper-
able neighborhoods could be pushed more quickly to market as these are likely to be snatched up quickly if priced correctly.
REOs in 2012: The Key Word is “Trust” By David Lykken & Jon Traver ebster’s Dictionary defines the word “Trust” as: Reliance on the integrity, strength, ability, surety of a person or thing; confidence. When dealing in the wonderful world of real estate-owned (REO) properties, I don’t think there is a more important word than trust. Let me explain what I mean … As we begin 2012, many of the so called “experts” we see on television and in the print media are talking as though the industry has turned the corner with regards to REOs and foreclosures. Those of us who live and work in the mortgage and real estate industries know better. I’m not sure that anyone really knows the true scope of the problem, but we all know we have several more years of work to do. Having said that, let’s get to work! Our hope with this article is to give everyone who works in the REO space a fresh and hopeful start to what is sure to be another challenging year. There are so many different angles to take when faced with this unique challenge. Let’s look at our first option, hiring real estate agents to list and help sell our REOs. This has been one of the most common ways that REOs have been moved. Success is dependent upon a number of things; however, there are a few common mistakes when using this method. The first mistake made is in how an agent is chosen to list a REO. Jon Traver, who is co-authoring this article, has a unique perspective on the REO business, as both a long-time member of the Mortgage Bankers Association (MBA) and a successful mortgage banker and loan originator, and as a member of the National Association of Realtors (NAR) and successful Realtor. It has always been amazing to us the caliber, or lack thereof, of Realtors who are chosen to handle this business. Don’t get us wrong, there are many great and knowledge Realtors working and succeeding in this space, but the vast majority of the time, the interview process is lacking and usually driven by the Realtors’ willingness to work for as cheap as possible. If the saying “You get what you pay for” doesn’t mean anything to you, it should. The best and most successful Realtors
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are busy and have no need to work for next to nothing. If you choose a Realtor to handle your REO business by who is willing to discount their fees, you will find many takers. However, a closer look at that group will show you that many of the agents are simply not that good or they are only interested in getting a listing. Selling REOs is tough enough, but trying to do so with a Realtor who doesn’t have the ability or desire to help you determine the best price for your property is not very smart. You must first find the real estate agents who are committed to doing the best job for you. Build a plan with that agent and TRUST them when they give you advice. If you are simply sending listings to the lowest bidder, do you really have the confidence in them and will you trust them to do the job you want and need? Will they work as hard for you if they are only making a small percentage of their usual commission? While we have worked with agents who have provided volume discounts for high volume and have done a great job, but if your primary decision revolves around getting a discount, you there’s a good chance you will be disappointed. Now let’s move on and assume that you have chosen “the right” Realtor, you must trust them. If you are working on a long-term relationship, you should be able to trust their advice. If you don’t, you have to go back and examine whether or not you made the right choice. Whether the issue is that of determining the right listing price, or whether to accept or counter an offer, listening to the professional is important. We have seen so many poor decisions made because a decision to counter an offer was made by someone who either never worked in real estate or was very inexperienced. A good agent will earn their commission many times over and save you money with their professional advice. If you are not sure how to find these types of agents, here’s some real simple advice … ask around and ask for references. There are plenty of them out there who are ready, willing and able to help. Mistake number two … we forget that a seller is a seller, whether it be a person or a bank. There is so much
advice that real estate erty. Due to this fact, the agents give to normal sellvast majority of buyers ers, and yet banks almost are instructed to not even never take the same consider one. Even if a advice from their agents. client is willing to wait, There is a reason these do you think the agent topics are consistent wants to wait for their throughout the industry, commission? Of course they WORK! not! We simply must When Mr. Traver make the process faster worked as a listing agent, and simpler for the he gave the same advice buyer. This brings more on every listing appointbuyers into the market, “If you choose a ment. Almost always, the which increases the Realtor to handle client would take his prices we can expect. your REO business advice and his success Trust is the issue here as by who is willing to would come when he sold well, since most delays discount their fees, the home. It is amazing to seem to occur while waityou will find us that banks almost ing for a higher-level many takers.” never take the same employee to approve a —David Lykken advice when given. contract. If we trusted It’s important to minimize the out our plan and our team, this wouldn’t be of pocket expenses for any seller, bank necessary as often. or otherwise. However, With so many chalsometimes there is work lenges to overcome when that needs to be done, selling REOs, many are and will provide a good looking into turning their return on investment properties into rentals. (ROI) when the house Even Fannie Mae is movsells. Whether we are ing in this direction, and talking about something before long, we might as simple as painting the have a whole new group front door or something of landlords. Choosing as major as replacing carthe right property manpet, sometimes money agement company to “With so many needs to be spent. If you challenges to overcome help you through this have followed our first channel is going to be a when selling REOs, tip, hire the best agent many are looking into very important process. you can to help with your turning their properties In many markets, properlistings, and trust them ties are so far underwainto rentals. Even when they recommend Fannie Mae is moving ter, that renting seems to that work needs to be be the only option. If you in this direction, and done. There are ways to before long, we might do decide to become a keep costs down and even landlord, be very, very carehave a whole new ways to delay the expense ful. Once you have picked group of landlords.” until you sell the properyour property management —Jon Traver ty. But don’t be afraid to company, TRUST them. spend a little money to make that prop- They are the experts and the ones with the erty a little more desirable. We can experience, so listen to them. assure you that an “as-is” home in poor When Jon used to meet with clients condition must be discounted much during a listing appointment, here is more than the cost of a little work. what he told them, “I cannot promise Another big mistake made in the you what your home will sell for, but I REO marketplace, and probably the one can promise you that we will get the that costs banks the most money, is the best price possible.” His clients trusted length of time it takes to close a pur- his expertise and his ability to help chase. This is a lesson in Business 101. them get the best price. Would you Most businesses work to make it as easy trust your partner if they made the as possible to do business with them. statement to you? Why do we make it so hard? Buyers’ In summary, we leave you with this agents are well aware of how long it advice to help you work through your usually takes to purchase an REO prop- REOs in 2012 … surround yourself and
your company with knowledgeable professionals and TRUST them! Whatever your position, the path to success is always the same … surrounding yourself with smartest people, and then listen and TRUST them and their advice. If you follow this simple advice, your 2012 will be better than your 2011. David Lykken is president of mortgage strategies and managing partner with Mortgage Banking Solutions. He has more than 35 years of industry experience and has garnered a national reputation, and has become a frequent guest on FOX Business News with Neil Cavuto, Stuart Varney, Liz Claman and Dave Asman with additional guest appearances on the CBS Evening News, Bloomberg TV and radio. He may be reached by phone at (512) 977-9900, ext.
10, or e-mail email@example.com or firstname.lastname@example.org. Jon Traver is production consultant—branching, recruiting and LO training for Mortgage Banking Solutions. Jon has spent 12 years forging referral relationships with builders and realtors for his own mortgage company. He has extensive experience working with branch companies to grow their businesses through branch and LO acquisition, as well as building long-term business development plans. Jon trains executives, branch managers, and loan officers how to redefine who they are and what they do. He then helps them build a game plan for taking that new knowledge to the streets, including the execution. He may be reached by phone at (512) 977-9900, ext. 112, (972) 467-3990 or e-mail email@example.com.
An REO Obstacle Course By Ivan Choi
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Servicers now need to maneuver and step through higher loan-to-value (LTV) and debt-to-income (DTI) ratios, forbearance and extensions while all the time, ensuring proper maintenance and condition of the property. All of these obstacles stand in the way before servicers can climb a wall of distressed properties and work toward getting to the finish line. Normally, servicers would follow through investor guidelines and have the wind at their backs knowing that they are doing their best for the investor or residential mortgage-backed security (RMBS) trust. An unemployed borrower would go through the normal procedures, working with a servicer at trying to make their monthly mortgage payments. If the borrower could not make their monthly payments in 12 months, the house would eventually need to go into REO. The wall at the end of the course would be manageable. Then, in a normal REO disposition, the bank would auction the property to the highest bidder, ensuring that the property brings the highest value for the investor. It was not necessarily a sprint to the finish line, but a manageable course without any major hurdles or obstacles that stood in the way, apart from prevailing market conditions. Today, however, under HAMP, ser-
n obstacle course, unlike a simple sprint to the finish line, is filled with walls to climb, tires to step through and hurdles to jump over. It’s not a simple race, but a skillful art in maneuvering quickly to the finish line. The same can be said for servicers working through loan modifications and real estate-owned (REO) dispositions. In a normal environment, servicers would have a smooth REO disposition. In the current situation, unless they map out a proper course for it— taking care of all the obstacles that stand in the way—they can face a number of unexpected hurdles. A wall of properties in distress is the first obstacle in this race, and one that sustains itself through regulatory hurdles set up by the federal government to try and keep borrowers in their homes. Some of those hurdles include the Home Affordable Modification Program (HAMP) and the second phase of the Home Affordable Refinance Program. I think of them as hurdles because they are obstacles that do not necessarily align servicers with their responsibilities to the investors or residential mortgage-backed securities (RMBS) trusts. Indeed, these obstacles sometimes stand in the way of a servicer doing what is best for the investor or the trust.
does this help the loan vicers need to reduce trust or the investor if the mortgage payments to value of the homes levels affordable for bordecline while a borrower rowers—for a minimum keeps making payments? of three months and up to A recent CoreLogic six months for some— study found that national while these eligible home prices continue to homeowners can look for be pressured by a stream a new job. of distressed properties Through forbearance, that threaten to push ratios of monthly housing prices even lower. The payments-to-income are allowed to move up to 31 “If we continue to see report said the nation’s shadow housing inventopercent while a borrower home values decline ry stood at 1.6 million is unemployed. The typithrough 2013, as cal percentage of housing Zillow reported, and units, or a five-month supply in October, as the payment-to-income would no incentives to be at 28 percent. Servicers foreclose on homes, we National Association of Realtors (NAR) revised its must now offer temporary may see valuations assistance to unemployed decline even further to existing home sales downward by 14 percent from borrowers who meet specifthe point that they 2007 to 2010. ic criteria. will never regain Enter the second The criteria also factors anything close to their phase of the Home into loans insured under original value.” Affordable Refinance the Federal Housing Administration (FHA). All servicers are Program, or HARP 2.0. Homeowners required to consider an alternative modi- making current payments can also refification approach that emphasizes a prin- nance with an unlimited LTV ratio. cipal write-down for HAMP-eligible bor- Despite being underwater on the home, rowers. The alternative principal reduc- the borrower can stay in their home if tion allows some underwater homeown- they have only missed one payment withers to reduce the principal balance of in the past six months. The U.S. Department of the Treasury their mortgage in steps over three years if said forbearance will not cost taxpayers they remain current on payments. However, these rules do not comply anything. However, the Treasury seeks to with capital-stack investors in an RMBS penalize future homeowners with an trust. Servicers are supposed to initially increase in guarantee fees for Fannie Mae treat the write-down amount as for- and Freddie Mac because of their losses. These programs are costing investors bearance and will forgive the forbearance amount in three equal steps over and capital-stack investors in RMBS trusts three years, as long as the homeowner continued on page 40 remains current on payments. How
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time and declining valuations. Servicers face a double-edged sword and are crushed by both sides of the equation. They face lawsuits by not following HAMP or HARP Phase II, but they may also face lawsuits from RMBS trust investors. Even runners on an obstacle course have room to maneuver among the tires, hurdles they must jump over and walls they have to climb. Servicers, however, are being asked to jump major hurdles and climb huge walls in order to fulfill their priorities. While nobody wants to see homeowners evicted from their properties, the HAMP program will cause further delays on homes likely to go into foreclosure, thus decreasing their value. As a result, this obstacle course increases a final wall of properties that may be losing value rather than gaining it. RealtyTrac recently reported a 14 percent decline in foreclosures during the past year, but there still remains a significant number of foreclosures across the country. The same report said that with nearly 224,400 U.S. properties in foreclosure during November, a three percent decrease from the previous month, one in every 579 U.S. housing units had a foreclosure filing during the month. A slow, methodical walk to the foreclosure finish line only means more foreclosures and, with so many REO properties already, their condition becomes more difficult to maintain. Neighborhoods and communities can become blighted as foreclosure filings continue to increase. The result is that home values decline and, when they go to auction, the investor or RMBS trust is the one left holding the bag. A recent survey conducted by Zillow Inc., reported U.S. home prices will continue to decline through late 2012 or early 2013, as negative equity and weak job growth hinder a real estate recovery. More than 100 economists, property experts and investment and market strategists said prices could rise nearly three percent each year after 2013 and through 2016, but how will this be possible without job growth and purchase activity? Investors will most likely purchase foreclosed properties, fix them up and rent homes rather than occupy them until valuations start to increase. What will that do to the communities and the home values and what will that do to new multifamily construction? Meanwhile, if borrowers do not remain current on their payments in the HAMP
program, servicers need to double relocation assistance payments for borrowers successfully completing a foreclosure alternative, up to $3,000. Under HARP Phase II, homes can remain well underwater if borrowers can refinance. How many times will they be able to refinance before not making their monthly payments? Despite increased incentives to servicers and lenders under the HAMP program, including increased incentives for extinguishment of subordinate liens to encourage more short sales and other alternatives to foreclosure, servicers must still bear these costs, including the addition of a single point of contact under the program. Some servicers decided to drop out of this obstacle course race and let someone else run it for them. For this reason, there has been a considerable increase in subservicers handling these loans. A recent survey found that the nation’s sub-servicers were processing $386 billion of loans as of Sept. 30, a 20 percent increase from the same period a year earlier. The key to keeping valuations high is to find true value in the marketplace through purchase activity, and to ensure that homes are properly maintained and managed to keep values from declining before they are ready to sell. If we continue to see home values decline through 2013, as Zillow reported, and no incentives to foreclose on homes, we may see valuations decline even further to the point that they will never regain anything close to their original value. Lower values remain a large hurdle to overcome in this obstacle course. The result will simply cause investors, including RMBS investors, to stay away from the marketplace longer and we will continue to see mortgage originations through FHA, Fannie Mae and Freddie Mac. If this happens, not only will investors and trusts end up holding the bag, but taxpayers as well. And that will be yet another hurdle—perhaps a huge wall—we will all have to attempt to climb over even after this obstacle course race has ended. Ivan Choi is senior vice president for Matt Martin Real Estate Management (MMREM) based in Arlington, Va. He is the current president of the board of directors of REOMAC, was a senior executive in Bank of America’s mortgage organization and an expert consultant in business development and default management services prior to joining MMREM in 2011. He may be reached by e-mail at I.Choi@SperlongaData.com.
Rehab or Sell “As-Is?” By Cheryl Lang selling them quickly can oday’s mortgage make substantial profits. lenders and serOutsource professionals, vicers have much in such as asset management common with medieval companies that specialize alchemists ... but instead in all aspects of REO manof turning common metagement, are especially als into gold, they strive adept at knowing when to transform non-perand where to rehab propforming properties into erties for their clients. They profitable assets. realize that ROI is individProperly managing and ual to each property and selling distressed properties market, and that there are is a difficult task, and one “As communities times when a more extenthat will undoubtedly concontinue to struggle sive rehab will yield a tinue to challenge the with growing greater return. industry throughout 2012. inventories of vacant It’s a delicate balancIt will take 45 months to properties, the trend ing act, as more extensive clear the $384 billion in disfor legislators to rehabs can take longer to tressed homes on the marhold property complete and have the ket in the U.S., according to owners accountable potential to increase the a report released by will grow.” holding period. So, what Standard & Poor’s in sorts of things should be considered November 2011. A chief question for those holding when deciding whether to rehabilitate distressed properties: Should these a property, or to sell it as-is? And, when properties be rehabilitated before does it NOT make sense to rehabilitate being placed on the market for sale, or a property? The following are some of the main should they be sold “as-is?“ It takes a savvy asset manager with a good net- factors to be considered: work of real estate and construction professionals to know when it is worth Location rehabbing a real estate-owned (REO) The old real estate adage, “Location, property for the greatest return-on- location, location” holds especially true in the distressed property management investment (ROI). Often, properties are needlessly sold in business. Where is the property locat“as-is” condition when they would fetch a ed? If it’s in a desirable area, typically it considerably higher price with some reha- makes sense to do some rehab before bilitation work. The average pricing for putting it on the market to sell. Some of the factors to consider when distressed property was substantially lower than for non-distressed property, determining whether a location is desirable according to Campbell/Inside Mortgage are: Is the homeownership rate greater than Finance HousingPulse Tracking Survey 50 percent? What is the percentage of released in late December. Non-distressed households with children? What is the eduproperties sold for an average of $258,900 cation level of the residents? What is the in November, the survey showed. The average annual income of the residents? average short sale sold for $209,000, while Answers to those questions can help estabthe average move-in ready REO sold for lish whether to rehabilitate houses in a par$189,700. As would be expected, the aver- ticular neighborhood or area. There are certain areas of the counage sale price for a damaged REO property was well below at $98,600, according to try where it just doesn’t make sense to rehabilitate a home. Parts of Detroit, the HousingPulse survey. Clearly, repairs and renovations to Los Angeles and some Cleveland neighmake a home “move-in ready” can borhoods are so rundown and crimemake a big difference in the selling price. ridden that theft and vandalism often Companies that specialize in buying dis- ruin any attempts made at repair. Short tressed assets, rehabilitating them and of putting an armed guard or a trained
guard dog on a property 24 hours a day, it’s difficult to protect properties in these neighborhoods, so lenders or servicers would be wasting their money on repair and rehabilitation costs.
Cheryl Lang is president and chief executive officer of Integrated Mortgage Solutions, a Houston-based provider of collateral protection resources for the mortgage servicing sector. She may be reached by phone at (281) 994-4538 or email Cheryl.Lang@IMSToday.com. 41
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Is the target market comprised of owneroccupants or investors? If the goal is to reduce turn times and get the asset off the books, the target market would be a cash buyer, which is almost always an investor.
In addition to the obvious benefit of repairing or rehabilitating a property—an increased selling price—there are a few other advantages. From a societal perspective, fixing up vacant or rundown properties helps preserve neighborhoods. Rehabilitated homes are generally sold to owner-occupants, which helps bolster the integrity of a community. Lawmakers are taking note. As legislators at all levels of government work to combat crime, blight and other threats to the health and safety of their citizens, they are starting to look to the owners of distressed and vacant properties for answers. Chief among their questions: What is being done to preserve communities? Lawmakers see vacant properties with maintenance and safety issues as a haven for drug houses and prostitution, and the longer a property remains vacant, the more apt it is to invite crime and vandalism. Repairing and selling the properties can help breathe new life into potentially dangerous areas. As communities continue to struggle with growing inventories of vacant properties, the trend for legislators to hold property owners accountable will grow. Consider the State of California’s probe into the handling of foreclosed properties by the government-sponsored enterprises (GSEs). In late December, California Attorney General Kamala Harris filed a lawsuit against Fannie Mae and Freddie Mac over mort-
distressed asset management has changed dramatically in the past few years. Savvy property owners and asset managers realize that simply crunching numbers on a spreadsheet is not enough anymore. A new and more creative approach to dealing with non-performing assets is called for—one that meets the needs of the owner or investor of the property, while still helping to foster stable and safe neighborhoods. Doing so is important to the health and recovery of the housing market, and the economy overall.
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Rehabbing helps restore neighborhoods
gage and foreclosure problems in the state. AG Harris is investigating Freddie Mac’s and Fannie Mae’s involvement in 12,000 foreclosed properties in California where they serve as landlords. The lawsuit also asks the GSEs to reveal whether they have information on the decreased value of those homes due to drug dealing or prostitution, as well as explosives and weapons found on those vacant properties. New laws are also taking effect at the local level. Banks that own vacant or dilapidated properties in Las Vegas could face fines or jail time under a foreclosure ordinance approved by the city of Las Vegas in December. The ordinance requires banks to list empty, foreclosed properties on a registry and contains misdemeanor penalties for allowing a property to fall into disrepair. There’s no doubt that the world of
When a natural disaster, such as a hurricane or tornado occurs, there are often insurance funds available for repairs. It makes perfect sense to use the insurance proceeds to repair the properties and improve the neighborhood. In some cases where a settlement has been announced, there are pools of funds available for repairs. For example, in late December, there was a settlement announced that allows for the repair thousands of homes with Knauf Plasterboard Tianjin drywall that was manufactured in China. A fund will be created with up to $1 billion to cover the defective drywall repairs at Knauf’s expense. Most of the homes are in Florida and Louisiana, with some located in Mississippi and Alabama. In those states, large quantities of defective Chinese-made drywall were imported during the housing boom and after a string of Gulf Coast hurricanes. After the housing bubble burst, lenders and servicers found themselves holding many distressed properties in those Southeast states with the defective drywall, which typically requires a costly repair or replacement. Asset managers had little choice but to sell these toxic non-performing assets in “as-is” condition as the cost of remediation protocols was too prohibitive. Last year, a much less invasive and more cost-effective solution for drywall remediation was brought to the market. By spraying a specially-formulated foam-type biochemical into damaged areas, a newer “in-situ remediation” technique is providing a long-term remedy for the odor and the damaging effects of the airborne emissions from defective drywall. The development of the in-situ drywall remediation technique is a great example of how a resourceful solution can make rehabilitation of damaged properties feasible. Distressed properties that were previously deemed too expensive to repair are now being upgraded to “move-in” condition efficiently, with costs kept to a minimum.
If the repairs are extensive and may require an extended hold time, which translates into money, the target market may, again, be the investor. On the other hand, preserving properties is good for neighborhoods, so if the goal is to keep the community intact, then owner-occupants would be the target market. Often, the underwriting and investor guidelines will dictate whether repairs need to be made. For example, the Federal Housing Administration (FHA) requires that the property be in acceptable condition and pass an FHA inspection in order to qualify for FHA financing. So, when targeting first-time homebuyers or buyers who may be eligible for an FHA mortgage, rehabilitating the property is generally called for. The property will need to meet the minimum standards set by the FHA in order to qualify for FHA funding.
HUD REOs: Six Things Every MLO Needs to Know By Jeff Mifsud his article is written for, in my opinion, some 99 percent of the mortgage loan originators who do not specialize in providing financing for U.S. Department of Housing & Urban Development (HUD) real estate-owned (REO) purchases, but over the course of time, are likely to come across a few buyers who may want to purchase HUD homes. The purpose of this article is to provide insight into the more important aspects of processing these loans. This will assist you in having greater success when working with buyers of HUD homes.
A significant percentage of these homes are in disrepair HUD homes are generally sold as-is, with little to no repairs done on behalf of the buyer. Given this reality, HUD tends to price their homes in order to attract cash buyers who don’t need your services. On occasion, you may have FHA buyers who want to by a HUD home, but the condition of the property may not meet the FHA Minimum Property Requirements. In such an instance, having the ability to do 203(k) financing is crucial since the 203(b) doesn’t always work. Having access to the (k)s, however, is quite different than having the knowledge to process and close them. Suffice it to say that if you have to flip a (b) to a (k), don’t go at it alone. Get help from an expert in
Implore your clients to get a home inspection This is, of course, good advice for all homebuyers, but critical in these situations–yes, even when the Federal Housing Administration (FHA) appraisal performed by HUD doesn’t state any deficiencies. HUD does REO appraisals on their HUD listings and forwards these appraisals on to the buyer’s lender when requested. Lenders can underwrite from this REO appraisal and are responsible for making sure the property meets FHA’s Minimum Property Requirements (MPR) and may need to request a copy of the buyer’s home inspection to learn more about the property. The last thing you want is for a buyer to purchase a home, move in, and then discover an expensive repair that needs to be made.
The highest and best bid wins I use the term bid because all offers on HUD homes are done online through HUD’s Web site, HUDHomeStore.com. Knowing this, you can help your buyers’ real estate agent structure the transaction to win the bid. HUD likes to sell
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structuring the (k)s, because the last thing you want is a horrible experience that will guarantee that your clients will never refer business to you!
homes to primary occupant buyer submits a bid pants, so if you have a on more than one prophomebuyer who is trying erty, the bid that proto buy a HUD home as duces the greatest net their primary residence, return to HUD will be you have an advantage. accepted while all other HUD wants to earn as bids from that buyer will much as possible on the be eliminated from consale, so one strategy, if sideration. However, if the buyers can afford it, the prospective ownerwould be not to ask for occupant buyer has subHUD to pay for any of the mitted the only accept“One of the greatest buyer closing costs. able bid on another aspects of our recent property, then that bid Additionally, if the clients housing crash is the can afford it, have the must be accepted and availability of buyer pay a portion of the all other bids from that affordable housing. real estate agent’s combuyer on any other For homebuyers mission directly in order properties will be not be in today’s market, to decrease the amount considered. the crash has been HUD has to pay the buyer a blessing.” agent (HUD will pay three Earnest money percent to the buyer deposits are not agent and three percent of the buyer automatically refunded closing costs). Should the buyer’s home inspection be For example: On a $100,000 offer, unsatisfactory or the loan be denied, instead of asking for the full $3,000 (three HUD does not have to refund the percent) toward mortgage closing costs deposit as would be the case on a reguand $3,000 (three percent) for the buyer lar FHA purchase. HUD determines agent commission, ask for $0 toward their refunds on a case by case basis, so closing costs and only $2,000 in buyer you must make this clear to your client agent commission (have the buyer pay at the time of pre-approval and do not their agent $1,000 directly so they receive rely on the real estate agent disclosing the full commission for their services). this information. This is a winning strategy and few real estate agents will use this structure, but HUD homes are usually priced very will instead, submit the bid with the full low and you will have an opportunity to three percent commission and three per- help first-time homebuyers purchase a cent toward closing costs. home that will give them a very affordable payment. One of the greatest aspects of our recent housing crash is the availYou have to order ability of affordable housing. For homea new case number Each HUD home will have a current buyers in today’s market, the crash has case number attached to it. Since it was been a blessing. I have found that the FHA financing that was defaulted on to most satisfying experiences in my career produce the foreclosure. However, you are those assisting a family achieve the will have to order a new case number goal of homeownership, especially when for your buyer because it will be new they thought it was out of their reach. FHA financing. When entering the case There’s nothing more gratifying than witinformation in FHA Connection, the nessing the joy on their faces, sometimes lender should select “Real Estate- accompanied by tears of joy, when that dream becomes a reality. Owned” for the Processing Type. Go FHA!
A buyer can submit offers on multiple HUD homes at one time
Real estate brokers may submit multiple bids on an individual property, as long as each bid is from a different purchaser. If a buyer submits multiple bids on the same property, only the bid producing the highest net return to HUD will be considered. If an owner-occu-
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 LoanToolbox.com and creator of The FHA Originator, a monthly FHA newsletter. Jeff may be reached by phone at (248) 403-8181 or visit www.MortgageSeminars.com.
Managing and Selling REOs in a Flooded Market Accurate Property Valuation Equals Successful Portfolio Management and Movement By Frank Danna anks are in liquidation mode. Most are experiencing losses, and with the Office of Thrift Supervision (OTS) now under the supervision of the Office of the Comptroller of the Currency (OCC), banks cannot show the same losses that they could prior to this merger. There is a lot of inventory that must be managed, maintained and ultimately moved off the bank’s books. Banks are under pressure from both the regulatory agencies, and also face pressures from the market. Some are struggling to make this movement happen, while others are quickly selling properties that are severely undervalued. The marketplace is flooded with real estate-owned (REO) properties that are ill-maintained and not in the condition to compete with comparable resale properties.
Best practices approach: In-house or outsource?
Invest now to save later: BPO doesn’t mean “best price option”
MISSOURI MORTGAGE PROFESSIONAL MAGAZINE e-mail: firstname.lastname@example.org visit: www.calyxsoftware.com
❖ JANUARY 2012
Most properties are valued by a broker price opinion (BPO), which is set by the selling agent. Since few banks are able to gauge the true value of the home, the BPO is the most commonly used and driving force behind the value of the home. Unfortunately, BPOs don’t work. Some agents are in the practice of providing very aggressive BPOs to banks. A low BPO enables the bank to price the property at the low end of the market, theoretically allowing the bank to move the property faster and the agent to turn a profit faster. One of the main issues with this is that agents only make $20-70 per BPO, which might have a negative effect on the overall quality of work and may not provide true value to the bank. As an alternative to a BPO, banks can obtain an appraisal to set the price. There are several benefits from choos-
There are steps, however, that a bank can take in order to more effectively manage this process and their REO portfolio, contributing to the overall health of the bank, despite a flooded market. A bank has two options when it comes to managing an REO property: Outsource the job to an REO management service, or control the process internally. REO management services may or may not have the background and expertise to seize, secure, maintain and sell the property on behalf of the bank, but banks are not in the business of managing properties and are challenged when it comes to filling this role. If a bank chooses to outsource, there are several factors to consider in evaluating REO management services. Before the mortgage meltdown, there was not a high demand for these types of services. Accordingly, most have not been around for more than a few years. Is the company equipped to deal with seizure of the property, i.e. is the property owner squatting in the home, or has the property owner contributed to significant destruction? Secondly, can the company secure and maintain the property? Mold is the number one contributing factor in rehab expenses and can cost upwards of 20 to 30 percent of the home’s
value to remediate. If the property is not secured properly, mold will be the biggest problem and will dramatically decrease the salability of the home. Once the home has been secured and properly maintained, a price must be set. When it is time to sell the property, there are a lot of market indicators that could determine what that property is worth based on the original appraisal report. An accurate price determines if a property moves quickly, or if the bank will need to manage it for months, if not years. Undervaluing an REO property will result in market flooding and will push the resale market down along with it. The resale market is forced to drive down prices in order to compete with the flooded and undervalued REO market. If a property is listed for more than six months, there is a very good chance that the value of the home is no longer close to accurate. The market is a moving target, typically in a downward trend. Six months of non-movement equals a considerable amount of expense for the bank in maintenance and upkeep.
ing this route, but all start process from a micro with more initial cost standpoint as opposed to a from the bank upfront. macro standpoint. From An appraisal will cost the taking back the property, to bank between $300-$400, valuing it, to putting it back as compared to $70-140 for on the market, a bank can a BPO. This cost becomes analyze this progression to negligible when there is more effectively control potential to add thousands, and even cut its losses. if not millions of dollars in Being more involved in the some cases, in potential valuation and more sucvalue. When a bank levercessfully managing the “A low BPO enables method will put the bank ages a highly-qualified the bank to price the in a much better position appraiser, the appraiser property at the low becomes personally knowlwhen the property goes on end of the market, edgeable of the REO portfothe market. lio in order to better under- theoretically allowing Regulatory pressures stand the bank’s position, the bank to move the and market conditions are property faster and goals and strategy: A sixforcing banks to move REO the agent to turn a month timeline to liquidate properties at values that profit faster.” is significantly different may not accurately reflect than a nine-month timehome values in the area. line. Understanding this nuance could be Several factors contribute to the success of the equivalent of success for the bank. selling these properties, but can be more On average, an appraiser will value the efficiently and profitably managed in bank’s portfolio higher than a BPO. Banks order to promote the highest value and sell a property for what the understood highest quality sale. Every day that a bank value is. If a bank has a more accurate ini- maintains a property that isn’t valued cortial value, even if it is higher, it can more rectly, it is leaving money on the table and than likely sell the property just as quick- walking away from found value. An acculy. Understanding what other active REO rate price does not mean depending on a properties in the market are selling for, at subjective BPO, but requires a more any income level and state of condition, hands-on approach in which a bank will will put the bank in a better position to be better equipped to handle a flooded garner higher value for the REO. While REO marketplace. there is more upfront cost, an experienced appraiser will value the property for what Frank Danna is chief executive officer for it is truly worth, enabling the bank to Appraisal Logistics, a provider of complimove it quickly and ultimately recover ance risk management for appraisal more value in the end. independence. He may be reached by Depending on the size of the REO port- phone at (866) 991-2574, ext. 222 or efolio, a bank can better manage the mail fddanna@GoToALS.com.
Accounting and Audit
Flagship Mortgage Corporation ........1-800-492-5239 Multi-State mortgage bank has management opportunities available for experienced, successful & ethical professionals. Click/Email: email@example.com
Mark Wilson Certified Public Accountants 9455 Ridgehaven Ct, Suite 101 • San Diego, CA 92123 619-649-0712 www.markwilsoncpa.com A full service CPA firm specializing in the needs of the mortgage industry. Providing monthly bookkeeping services,FHA and financial statement audits , corporate tax preparation and contract CFO services. Contact us today to learn more.
iServe Residential Lending www.iservelending.com firstname.lastname@example.org 415-298-2500 Freedom Mortgage Corporation www.fmbranch.com email@example.com 800.220.9498
iServe offers a complete product mix - aggressively priced, with hassle-free service & turntimes. Branching & Loan Officer opportunities available nationwide. For a change, focus on production, quick closes & a good night's sleep!
Freedom Mortgage Corporation, The BEST Branch Solution, Period.
Appraisal Management Company
HVCC Appraisal Ordering National Appraisal Management Center www.HVCCAppraisalOrdering.com Please call 866-396-6260
We help you Meet & Exceed UMDP enforced by the GSE’s We Improve your evaluation of collateral with “REALviewTM” Appraisals submitted in a MISMO/XML or PDF format. We’ve raised the bar for Appraisal Management Services!
Guaranteed Home Mortgage Company, Inc. 108 Corporate Park Drive, Ste 301 White Plains, NY 10604 888-329-GHMC • www.joinguaranteed.com Find out what Guaranteed can do for you. Branch Program for Professionals. It's what we do.
Mortgage Brokers Network Corp, Inc. 1-888-589-7048 The Mortgage Industry’s Matchmaker http://mortgagebrokersnetwork • Mortgage Branch Employment Opportunities • We work with some of the top mortgage branch companies in the industry! • With hundreds of branch employment opportunities out there, making a choice on who to sign up with is not an easy task! We are here to help! • Hiring Licensed Mortgage Originators for branch management and loan origination. • Bank and Broker status to choose from, multi-State lending and more...
Appraisal Management Company
Visit our site or call us today to speak to one of our representatives.
Hometown Lenders (888) 606-8066 firstname.lastname@example.org www.hometownbranch.com
JANUARY 2012 ❖
NATIONAL MORTGAGE PROFESSIONAL MAGAZINE
CENTERED ON YOUR NEEDS - FOCUSED ON YOUR SUCCESS
United Northern Mortgage Bankers......888-600-8808 Limited room available for established Team Leaders and Licensed Mortgage Originators. Become part of an established 30-year Mortgage Banker with a proven track record and success.
NO File Fee or Monthly Fees
StreetLinks Lender Solutions (800) 778-4920 www.streetlinks.com email@example.com StreetLinks Lender Solutions provides an innovative and comprehensive suite of valuation services and lending technology solutions used by lenders and appraisers nationwide to improve everyday business operations.
• Get a BPS payback from our volume incentive that your loan officers can’t see • You have the ability to control your loan officers pricing • Create, Customize and Optimize your branch’s compensation plan • Recruiting Support – Our network of recruiters place producers in your branch! • Full Eagle Lender and we’re currently looking for high-quality Producers in TX, GA, AL, TN, FL, MS, and SC
Branch Recruitment RealEstateBestJobs.com ....................201-489-0256 Currently working with various bankers & federally chartered banks. Seeking established, new branches & Loan Officers Nationally. We are a top recruiting firm handling all types of mtg positions.
StreetLinks industry-leading products include LenderPlus™ full-service appraisal management, LenderX™ lender-executed appraisal management software, BPOs, SCORe™ appraisal validation reviews and more. Our commitment to quality and service, embodied by our partnership approach to clients and appraisers, continues to set us apart as the nation’s premier lending solutions partner. For more information, visit www.streetlinks.com.
Inlanta Mortgage W229 N1433 Westwood Drive, Suite 103 Waukesha, WI 53186 www.inlanta.com • 262-513-9853
Established in 1993 and headquartered in Waukesha, Wisconsin, Inlanta Mortgage is a multi-state mortgage banking company committed to delivering superior service to our branch clients. For more information, call 262-513-9853 or visit www.inlanta.com.
Does Advertising in the Resource Registry Work? It just did!
Call 888-409-9770 ext. 4 to Register your company.
CONCORD CHURCH FINANCE NATIONWIDE FINANCING FOR CHURCHES Pre-qualify Online @ www.Concordchurchfinance.com 800-926-0399 • Fax: 858-756-8108 • Church Purchase & Construction • $100,000 to $2,500,00 • Church Refinance & Cash Out • Churches all 50 states • 75% of Appraised Value • 20 Yr. Fixed Rate
LoyaltyExpress 877.938.1175 firstname.lastname@example.org www.loyaltyexpress.com LoyaltyExpress, the leading mortgage marketing company in the nation, delivers high-impact marketing that substantially increases production levels. Direct mail, e-mail, and intelligent alerts are combined to deliver unprecedented results. Learn more today.
DocVelocity www.docvelocity.com (877) 362-8356 email@example.com DocVelocity is an end-to-end paperless solution designed to simplify the loan origination experience. Imagine having all your documents in the loan process as electronic files, all online, from pre-approval to closing. DocVelocity provides: Fast and easy loan delivery to any lender … Automatic doc sorting, naming and filing … Real-time online document sharing for anyone you choose … Friendly and intuitive user interface … No start-up fees, and free training and support. DocVelocity addresses important compliance issues while giving your office the competitive advantage of being paperless. It streamlines all aspects of the mortgage process and most important, it does so in one easy-touse and inexpensive package. DocVelocity is the flagship product of Paperless Office Solutions, Inc., a wholly owned subsidiary of Flagstar Bancorp. Visit www.docvelocity.com to find out more.
Abacus Mortgage Training and Education PO Box 780 Summerfield, NC 27358 888-341-7767 • www.GetYourEd.com NMLS approved 20 hour Prelicensing Education NMLS approved Continuing Education Live Classroom Instruction, Web Delivery and Private Events The SAFE-Smart ExamCram, Powerfully Innovative Test Prep
MSS Learning Center (800) 963-1900 www.MortgageSuccessSource.com Email: info@MortgageSuccessSource.com Time is running out...are you ready?
firstname.lastname@example.org • www.nycrealestateexpo.com
646.210.2545 • 914.763.8008 “The Expo for Real Estate Professionals" For ongoing Networking Events throughout the year please visit www.nycnetworkgroup.com.
FHA Audit and Licensing
Bonnie Nachamie & Jonathan Pinard have assembled a team of experts to assist Mortgage Brokers, Mortgage Bankers, Federal and State Chartered Banks & Credit Unions with their mortgage compliance needs.
Mortgage Banking Systems - ProClose 1360 Beverly Rd. Ste 200, McLean, VA 22101 800-783-2283 · email@example.com www.ProClose.com ProClose provides compliant closing documents and software for Residential Mortgage Lending. Created with closers in mind, we help make a lender’s staff more efficient and supported.
45 LenderCity Home Loans 888.880.2489 www.LenderCity.com
• The Ultimate Test Prep Kit and Test Prep Boot Camps – Cover everything to pass the S.A.F.E. Act Test — on your first try.
• Continuing Education - Exciting, NMLS approved courses that meet your Continuing Education needs and build your business.
NYC Real Estate Expo LLC Anthony Kazazis - Director
First National Compliance Solutions Inc. 1-800-400-4134 www.firstnationalcompliance.com
Pass the S.A.F.E. Act Test, meet your 20 hours of Pre-licensure, and complete the 8 hours of Continuing Education you need
• 20-hour Pre-licensure - Packed with everything to successfully complete your pre-licensure requirements.
Robertson | Anschutz 800-343-7160 firstname.lastname@example.org www.radocs.com/info.html
• Growing with a recognized brand • Local and National marketing and advertising • Online search engine marketing • More aggressive lender pricing based on volume incentives • A proven system that generates more revenue than average broker shops • Ability to retain your license, existing corporation, and autonomy
• Lead generation
Document Preparation (SaaS)
• Processing and closing services also available
Best Rate Referrals ............................................800-811-1402
Hard Money/Private Lending Docs on Demand 800-343-7160 email@example.com www.docsondemand.info Your Complete Mortgage Marketing Solution. Call Us Today! (800) 922-9860 www.envisiondirect.net/catalog/mortgage.htm
Mortgage Loan Closing Document Preparation & Compliance Software Loan Documents and Compliance – Web-based/SaaS – Easy to Use Intuitive – Secure and Reliable – Integrates with Leading LOS Free Setup and Support – Extensive Compliance Audits
• Specializing in Official Snap Packs for Greater Open Rates • Envelope Mailers, Business Reply, Postcards and Much More • Targeted Mortgage Lists with Many Selects • Complete Design, Printing and Mailing Services
Errors and Omissions Insurance CB Malaga Insurance Services LLC ......877-245-5887 Insurance broker providing errors & omissions (E&O) insurance to mortgage brokers and bankers. All loan types. Available in 22 states. www.CBspecialty.com
We are doing traditional subprime lending, fix & flip lending and hard money lending.
Windvest Corporation ............................877-285-0777 Specializing in rehab loans for property investors in So. CA. Up to 60% ARV, 12.99% fixed rate, 3.5-5 points, 1 yr. term. Fast & professional service since '94! Visit windvestcorp.com!
❖ JANUARY 2012
Call 888-409-9770 ext 4, to register your company.
ACC Mortgage, Inc. 932 Hungerford Drive #6 • Rockville, MD 20850 240-314-0399 • 240-314-0336 fax WeApproveLoans.com
NATIONAL MORTGAGE PROFESSIONAL MAGAZINE
Mortgage marketing company with decades of combined experience providing quality leads, mailers, lists and dialer products. www.bestratereferrals.com & www.mortgageleads.org
Mortgage Loan Closing Document Preparation & Compliance Services Fulfillment Services Including Pre-Funding Review & Post-Closing Interfaces with Leading Loan Origination Software Systems Foreclosure – Loss Mitigation Services
LenderCity Home Loans is now offering individual franchises. This is perfect for the L.O. who has always wanted to open their own brokerage but didn't know how. Benefits include:
Income Verification Services
Advanced Data (800) 537 - 0458 www.advanceddata.com firstname.lastname@example.org Advanced Data is a leading national provider of data services, streamlining income and employment verification with proprietary software. Clients can submit 4506-T directly through Encompass360. Also ask about our AVM and flood services!
www.LendingForms.com Same Day Shipping (orders placed prior to 3pm et) 24/7 Secure e-Commerce Site Save 33-50%
Best Rate Referrals The Leading Direct Marketing Company for Mortgage Professionals 800-811-1402 • www.bestratereferrals.com Reach affluent and creditworthy consumers who are in-market and ready to transact. Bankrate is a consumer direct Web site, NOT a lead aggregator. Qualified leads for every sized budget, and pay only for performance. No set up fees! No contracts! No risk! Founded in 2005, Best Rate Referrals has grown into one of the fastest growing marketing firms in the nation. By combining new technology with traditional direct marketing methods that produce profitable results.
Income Verification Services Platinum Credit Services, Inc.................631-299-2084 Tax return vertification (4506 tax transcript done in less than 24 hours in most cases). Call Lorenzo Pugliano, President and CEO at 631-299-2084.
JANUARY 2012 ❖
NATIONAL MORTGAGE PROFESSIONAL MAGAZINE
AAA Refi Leads.....AAA Refi Leads.....AAA Refi Leads Learn how I went from failure to success by mailing cheap refi letters from home, closed 71 loans & made $248,954.62 last yr. I’ll show you exactly how I did it. Go to: www.Refi-Leads.NET
Internet’s Leading Consumer Mortgage Marketplace Attracting over 8 million unique consumers every month www.Bankrate.com • 561-630-1257 Reach affluent and creditworthy consumers who are in-market and ready to transact. Bankrate is a consumer direct Web site, NOT a lead aggregator. Qualified leads for every sized budget, and pay only for performance. No set up fees! No contracts! No risk!
• • • •
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Best Rate Referrals is the direct marketing leader in the mortgage and banking industry. • • • •
Mortgage Direct Mail & List Services Mortgage Live Transfers Mortgage Internet Leads Mobile Marketing
Comergence Compliance Monitoring, LLC 630 The City Drive South, Suite 205 • Orange, CA 92868 Office: 714-740-9000 www.ComergenceCompliance.com 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.
Loanbright 27902 Meadow Drive, Suite 375 Evergreen,CO 80439 866-391-2709 • www.Loanbright.com Loanbright helps mortgage companies capture and close more business through its marketing and software tools. An INC. 500 awardee, Loanbright has helped thousands of companies since 1999 by providing them with well over 3 million qualified sales leads.
www.mortgageloan.com • 877-390-4750 MortgageLoan.com is the largest online directory for mortgage professionals and a favorite of consumers shopping for mortgage loans. Our network attract over one million visitors per month. Our paid lead program as well as our free lender directory will help you connect with targeted new consumer traffic from with high-intent consumers searching online for the right mortgage lender.
Polaris Home Funding Corp. 616-667-9000 email@example.com www.polarishfc.com/timeforachange #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).
• Reach self directed, highly qualified consumers that are actively searching for mortgage loans • Geo-targeting – reach the right consumers in the right markets • Our proprietary Advertiser Portal gives you complete control over your campaigns, budgets, and performance reports. • YOU determine your daily/weekly/monthly budget • Pay only for consumers who click on your listing • NO cancellation fees Try us risk-free! Call 561-630-1257 or visit www.bankrate.com/cpcprogram/ for more details.
The Lykken on Lending RADIO PROGRAM
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Loan Origination Systems
(800) LOANS-15 www.usmortgage.com 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.
Calyx Software 800-362-2599 firstname.lastname@example.org www.calyxsoftware.com Calyx Software, the #1 provider of mortgage solutions is dedicated to offering reliable and affordable software that streamlines, integrates and optimizes the loan process. Find out how PointCentral can streamline your business and create compliant processes today.
YOUR SUCCESS IS OUR SUCCESS! For more information contact THOMAS R. SIRICO, Vice President of Business Development at (917) 923-1472 or email at email@example.com. We look forward to sharing our services with you!
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.
Icon Residential Lenders (888) 247-4207 www.iconwholesale.com
Flagstar Wholesale Lending www.wholesale.flagstar.com (866) 945-9872 WLSC@flagstar.com 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 (wholesale.flagstar.com) 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 wholesale.flagstar.com to learn more.
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
Terrace Mortgage 4010 W. Boyscout Blvd., Suite 550 Tampa, FL 33607 866-934-4631 • www.terracemortgage.com 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.
Wholesale/Residential 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.
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
Now Wholesale Lending in:
• Arizona • California • Colorado
• Nevada • New Mexico • Oregon
• Texas • Utah • Washington
Veros Real Estate Solutions 2333 North Broadway, Suite 350 • Santa Ana, CA 92706 (866) 458-3767 www.veros.com • @verosres (Twitter) Veros Real Estate Solutions is a premier technology leader in the mortgage industry and proven leader in enterprise risk management and collateral valuation services. Veros combines the power of predictive technology and data analytics for advanced automated solutions.
CBC National Bank is one of the nation’s fastest growing wholesale lenders offering Conventional, FHA, VA, and USDA. The most important aspect of being a leader in today’s market is the ability to build and maintain a meaningful relationship with each customer. We understand that these meaningful relationships coupled with competitive pricing and efficient technology are the pillars of today’s lending environment. We are now hiring Account Executives in AL, TN, KY, VA, & MD.
Big Enough to MATTER…Small Enough to CARE
Wholesale Reverse Mortgages
NATIONWIDE Equities Nationwide Equities Corporation 201-529-1401 www.nwecorp.com 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
to register your company.
Bookmark this! Access these listings online at
❖ JANUARY 2012
Contact Stu Ehrlich in our HR department at firstname.lastname@example.org for further details.
Call 888-409-9770 ext. 4
NATIONAL MORTGAGE PROFESSIONAL MAGAZINE
CBC National Bank 3010 Royal Boulevard South, Ste. 230 Alpharetta, GA 30022 888-486-4304
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.
88 Kearny Street, 3rd Floor San Francisco, CA 94108 Phone: (415) 632-5150 • Fax: (925) 226-1938 www.bayeq.com
If your ad was here, you would be seen by 191,181 Mortgage Professionals looking for resources to help them in their business.
Sunday-Wednesday, April 22-25 2012 National Technology in Mortgage Banking Conference & Expo Arizona Biltmore 2400 East Missouri Avenue Phoenix For more information, call (800) 793-6222 or visit MortgageBankers.org. To submit your entry for inclusion in the National Mortgage Professional Calendar of Events, please e-mail the details of your event, along with contact information, to email@example.com.
JANUARY 2012 Monday-Friday, January 23-27 MISMO January 2012 Trimester Meeting One Ocean Resort Hotel & Spa 1 Ocean Boulevard Atlantic Beach, Fla. For more information, call (800) 793-6222 or visit MortgageBankers.org.
JANUARY 2012 ❖
MISSOURI MORTGAGE PROFESSIONAL MAGAZINE
FEBRUARY 2012 Sunday-Wednesday, February 5-8 2012 CREF/Multifamily Housing Convention & Expo Atlanta Marriott Marquis 265 Peachtree Center Avenue Atlanta For more information, call (800) 793-6222 or visit MortgageBankers.org. Tuesday-Friday, February 21-24 The Mortgage Bankers Association’s 2012 National Mortgage Servicing Conference & Expo Orlando World Center Marriott 8701 World Center Drive Orlando, Fla. For more information, call (800) 793-6222 or visit MortgageBankers.org. 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 MBANJ.com.
Wednesday, March 14 Florida Association of Mortgage Professionals Broward Chapter 2012 Annual Trade Show Broward County Convention Center 1950 Eisenhower Boulevard Ft. Lauderdale, Fla. For more information, call (850) 942-6411 or visit FAMB.org. Monday-Tuesday, March 19-20 2012 NAMB Legislative & Regulatory Conference Capitol Skyline Hotel 10 “I” Street Southwest Washington, D.C. For information, call (972) 758-1151, or visit NAMB.org/legconference. Thursday, March 29 Maryland Association of Mortgage Professionals 2011 March Mortgage Madness Convention Martin’s Crosswinds 7400 Greenway Center Drive Greenbelt, Md. For information, call (410) 752-6262, or visit MDMtgPros.org. APRIL 2012 Wednesday-Thursday, April 18-19 2012 National Policy Conference Hyatt Regency on Capitol Hill 400 New Jersey Avenue Northwest Washington, D.C. For more information, call (800) 793-6222 or visit MortgageBankers.org.
Sunday-Wednesday, April 22-25 2012 National Fraud Issues Conference Arizona Biltmore 2400 East Missouri Avenue Phoenix For more information, call (800) 793-6222 or visit MortgageBankers.org. MAY 2012 Sunday-Wednesday, May 6-9 2012 National Secondary Market Conference & Expo New York Marriott Marquis 1535 Broadway New York, N.Y. For more information, call (800) 793-6222 or visit MortgageBankers.org. Friday-Wednesday, May 18-23 2012 Mortgage Bankers Association of Georgia Education Forum & Expo Sandestin Hilton Golf Resort & Spa 4000 South Sandestin Boulevard Destin, Fla. For more information, call (478) 743-8612 or visit MBAG.org.
Sunday-Wednesday, May 20-23 2012 Commercial/Multifamily Servicing & Technology Conference Hilton Anatole 2201 North Stemmons Freeway Dallas For more information, call (800) 793-6222 or visit MortgageBankers.org. Sunday-Wednesday, May 20-23 2012 Legal Issues/Regulatory Compliance Conference La Quinta Resort & Club 49-499 Eisenhower Drive La Quinta, Calif. For more information, call (800) 793-6222 or visit MortgageBankers.org. JUNE 2012 Sunday-Wednesday, June 3-6 Mortgage Bankers Association’s 2012 Chairman’s Conference The Breakers 1 South County Road Palm Beach, Fla. For more information, call (800) 793-6222 or visit MortgageBankers.org. OCTOBER 2012 Sunday-Wednesday, October 21-24 Mortgage Bankers Association 99th Annual Convention & Expo The Hyatt Regency 151 East Wacker Drive Chicago For more information, call (800) 793-6222 or visit MortgageBankers.org.
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www.Fmbranch.com 800.220.9498 Info@Fmbranch.com 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.
Some restrictions may apply. All borrowers are subject to credit approval. Programs subject to change. The information provided herein is for dissemination to and for the use of real estate and financial business entities only and is not an advertisement for the extension of credit to consumers. ÂŠ 2011 Flagstar Bank