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WE ARE THE FHA SPECIALISTS United Wholesale Mortgage is a 100% FHA Lender United Wholesale Mortgage® is a premier FHA lender with over 20 years of FHA experience. Our network of brokers across the United States are closing more FHA loans every month with the speed, service and knowledge that UWM provides. We take great pride in offering our brokers the best customer service in the industry. Our dedication to excellence has helped us to become one of the fastest growing FHA lenders in the nation. Gain more referrals on your purchases when you wow your Realtors by getting them paid in 5-7 business days. At UWM, we close your FHA refinances before other loan officers have time to solicit your clients. Every decision we make, every call we handle, and every loan we close is designed to make you look good. Just as you wish to make lifelong relationships with your customers, we have the same objectives with our Brokers.

THE UWM STANDARD. SERVICE. SPEED. KNOWLEDGE. • Close your FHA approve eligible loans in

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5-7 business days • 24-48 hour approve eligible underwrites • 24 hour streamline underwrites • 24 hour condition clearing • 24 hour closings • Direct access to your own underwriting team • Paperless submissions • Minimum 620 FICO score required • FREE DU at


Successful LO’s know the long term value of a fast closing. UWM Lends in 39 states: AL, AZ, AR, CO,CT, FL, GA, IA, ID, IL, IN, KS, KY, LA, MA,ME,MD, MI, MN, MO, MS, MT, NE, NH, NM, ND, NV, NC, OH, OK, OR, TN, TX, SC, UT, VA, WA, WI, WY


800.981.8898 ÍÍ Visit to find your UWM Account Executive!



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

Montana Association of Mortgage Brokers P.O. Box 1012 O Helena, MT 59624-1012 Phone: (406) 227-5490 O Fax: (406) 227-7000 Web site: Montana Association of Mortgage Brokers

Montana Association of Mortgage Brokers

Montana Association of Mortgage Brokers

Code of Ethics and Business Standards

OFFICERS Phone # Steven Tucker Dave Christensen



(406) 652-6677

Vice President/President-Elect

(406) 844-2345

Charles Bott


(406) 294-7070

Loren Olsen


(406) 556-9016

Cyndy Rigler

Immediate Past President

(406) 222-3900

DIRECTORS Tavell Peete

(406) 294-7207

Gary Tomljenovich

(406) 259-0877


Honesty and Integrity MAMB members shall conduct business in a manner reflecting honesty, honor and integrity.

Professional Conduct MAMB members shall conduct their business activities in a professional manner.

Honesty in Advertising MAMB members shall endeavor to be accurate in all advertising and solicitations.

Loren Olsen

Benefits Committee

(406) 556-9016


Tavell Peete

Education Committee

(406) 294-7207

Loren Olsen

Finance Committee

(406) 556-9016

MAMB members shall avoid unauthorized disclosure of confidential information.

Cyndy Rigler

Legislative Committee

(406) 222-3900

Tavell Peete

Membership Committee

(406) 294-7207

Steve Tucker

Public Relations Committee

(406) 652-6677

Are You an MAMB Member?

For more information on MAMB membership, call the MAMB state office at (406) 227-5490 or visit

2009 Editorial Calendar For more information on editorial contributions, please call (888) 409-9770 and press "6" for the Editorial Department or e-mail



Special Features

July 2009

Wholesale & Correspondent Update

Who’s Left in Wholesale?

August 2009

Compliance Technology

Compliance Tools Directory

September 2009

The Future of Mortgage Banking

October 2009

It’s All About the Marketing!

Lead Provider Roundup

November 2009

Growth Strategies for 2010

The 40 Under 40: The 40 Most Influential Mortgage Professionals Under 40

December 2009

Building Relationships

*Please note that we also distribute as several other Mortgage Banker and Mortgage Broker events throughout the year

For advertising opportunities in these Focus Issues or Special Features, please call (888) 409-9770 and press "4" for the Advertising Department of e-mail

O JULY 2009

For more information on the benefits of MAMB membership, call the MAMB state office at (406) 227-5490 or visit


Montana Association of Mortgage Brokers

MAMB members shall conduct their business in compliance with all applicable laws and regulations. O

The Montana Association of Mortgage Brokers (MAMB) is an association of licensed mortgage brokers and loan originators from across the state that share an interest in offering the best possible service to their clients and supporters. By offering quality in-person training, opportunities to meet and exchange ideas and a forum for discussion about the changes and ramifications of the licensing law, MAMB is striving to create a level of professionalism in the state of Montana that surpasses that of all others. Membership in MAMB also carries a membership in the National Association of Mortgage Brokers (NAMB) which gives members a voice in Washington, D.C. and up to date information on what is happening nationally. The Board members and membership of MAMB have been working diligently for the past ten years to establish a strong relationship with the Montana Department of Administration’s Division of Banking, brining quality trainers and courses to Montana and building strong industry relationships.

Compliance With Law

MT 1

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MT 2




Plus Postage & Handling

Think Reverse! Table of Contents Part I: The new pillar of retirement security Part II: Marketing reverse mortgages: It’s all about education Part III: Originating reverse mortgages Part IV: Enhancing freedom: The essence of reverse mortgages Part V: A new frontier in mortgage lending

“Atare Agbamu is one of only a handful of people in the reverse mortgage arena who possesses a commanding understanding of the reverse mortgage industry. As an originator, he has hands-on experience educating seniors and their advisors. As author of the “Forward on Reverse” column in The Mortgage Press since 2002, Atare Agbamu communicates nationally with the housing finance community, bringing the unique insights and experience of an ardent reverse mortgage expert into a wider business context. “This book combines Atare’s keen insights and know-how with extensive research to create a first of its kind resource for the reverse mortgage industry. It offers a comprehensive overview of the industry plus detailed information on marketing and originating reverse mortgages. “Present and future reverse mortgage professionals and senior advisors will profit from decades of experience skillfully woven into this book. If you plan to succeed in this industry, this book is the place to start.” —Sarah F. Hulbert, President, Senior Financial Corporation and former four-term Co-Chair of NRMLA’s Board of Directors

“When I first began reviewing the contents of this book, I became quite jealous ... Atare Agbamu has set down an impressive amount of information ... And he delivers it in an easy-to-read, simpleto-understand style that will make this book essential reading for all reverse mortgage professionals.” —from the Foreword by Jim Mahoney, Co-Founder and Former Chairman, Financial Freedom Senior Funding Corporation, and former four-term Co-Chair of NRMLA’s Board of Directors

“The stories [Chapter 15: Profiles in Satisfaction] are the best vehicle to increase understanding and acceptance of reverse mortgages among us laypeople. They are very compelling ...” —Therese Cain, Executive Director, Minneapolis/St. Paul Chapter of Little Brothers—Friends of the Elderly

“This book should be required reading for all new loan consultants originating reverse mortgages and is recommended for experienced ones as well. This book provides excellent insight and information on preparing ahead to provide the service our seniors deserve, to ensure a smooth loan process and shorten the time to closing. Most of the problems caused in the processing and closing of reverse mortgages come from inadequate preparation.” —Deanne Opstad, AVP, Senior Underwriter, Generation Mortgage Company

The NAMB Perspective


FTC Enforcement of Red Flags Rule Begins Aug. 1, 2009


By Terry W. Clemans

Value Nation: How Strong is the FHA Loan? By Charlie W. Elliott Jr., MAI, SRA






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Nationwide Mortgage Licensing System: Who, What, Where, When, Why? By Linda Moore MacCoy


Ask Brian: What Station Are You Tuned Into? By Brian Sacks


NMP Mortgage Professional of the Month: Mat Ishbia, National Sales Manager, United Wholesale Mortgage


Regulatory Compliance Outlook: July 2009 By Jonathan Foxx


Living With HVCC: The Industry Weighs in on the effects of the Home Valuation Code of Conduct By Eric C. Peck


Saving the Yield Spread Premium By Jonathan Foxx


FHA Insider: Need Clarity on FHA’s Allowance of First-Time Homebuyer Tax Credit By Jeff Mifsud


Questions About the Future of Wholesale Are Growing By David Lykken


Shutting Out Mortgage Brokers … be Careful What You Wish for! By Joe Adamaitis


The Future of Mortgage Brokers: Back to square one

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Who’s Left in Wholesale Directory (Commercial & Residential)


Recruiting From the “Compatibility” Approach … the Lost Art By David Walden


Trend Spotter: Real Estate Investors: “Where’s My Bailout?” By Gibran Nicholas






Ask Tommy: Your QC Expert By Tommy A. Duncan

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Forward on Reverse: An Assault on Fairness: Quash Mortgagee Letter 2008-38, Part I By Atare E. Agbamu, CRMS

By Gilbert Frank




O JULY 2009


July 2009 Volume 1 • Number 3



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

1220 Wantagh Avenue • Wantagh, NY 11793-2202 Phone: (516) 409-5555 / (888) 409-9770 Fax: (516) 409-4600 Web site: STAFF Eric C. Peck Editor-in-Chief (516) 409-5555, ext. 312 Andrew T. Berman Executive Vice President (516) 409-5555, ext. 333

While on the topic of mortgage brokers, I have to let you know about the National Association of Mortgage Brokers (NAMB) annual event, NAMB/WEST, set for Sunday-Tuesday, Dec. 6-8 at the MGM Grand Hotel in Las Vegas. Stay tuned to the pages of National Mortgage Professional Magazine or visit as NAMB lines up guest speakers, plans education sessions, posts its list of exhibitors (including the newest wholesalers), and plans tons of networking opportunities at this exciting event that will surely close out 2009 in style!

We are pleased to announce that, in addition to being the official magazine of NAMB and the National Association of Professional Mortgage Women (NAPMW), we are now also the official magazine of the National Credit Reporting Association (NCRA). In this issue, NCRA Executive Director Terry W. Clemans talks about the Federal Trade Commission’s enforcement of the Red Flags Rules. Stay tuned to future issues for monthly updates on the state of the credit reporting industry from Terry and his team.

ARTICLE SUBMISSIONS/ PRESS RELEASES To submit any material, including articles and press releases, please contact Editor-in-Chief Eric C. Peck at (516) 409-5555, ext. 312 or e-mail The deadline for submissions is the first of the month prior to the target issue. SUBSCRIPTIONS To receive subscription information, please contact Office Manager Beatrice Marcus at (516) 409-5555, ext. 301, e-mail or visit Any subscription changes may be made to the attention of Beatrice Marcus via fax to (516) 409-4600 or e-mail Statements of fact and opinion in National Mortgage Professional Magazine are the responsibility of the authors alone and do not imply an opinion on the part of NMP Media Corp. National Mortgage Professional Magazine reserves the right to edit, reject and/or postpone the publication of any articles, information or data. MO






What happens in Vegas, stays with you while you build your business in 2010!

Karen Krizman Senior National Account Executive (516) 409-5555, ext. 326



This month, we have dedicated a great deal of attention to the mortgage broker and the state of the wholesale marketplace. This includes our feature story, “Living With HVCC,” compiled by our own Editor-in-Chief Eric C. Peck, featuring feedback on the Home Valuation Code of Conduct (HVCC) from mortgage brokers, wholesalers and an appraisal management company (AMC). There is a great article by compliance expert Jonathan Foxx on “Saving the Yield Spread Premium.” You will also find articles in the special focus on “The State of the Wholesale Marketplace” from David Lykken addressing the questions on everyone’s mind about the future of the wholesale market, a warning to the industry about what would happen without mortgage brokers by Joe Adamaltis, and a piece by Gilbert Frank where he talks with brokers who are making it work even in today’s challenging environment. To help stay on topic, this month, we choose Mat Ishbia, national sales manager for United Wholesale Mortgage, as our NMP Professional of the Month. Also, be sure to check out the list of residential and commercial wholesalers out there who are ready for mortgage brokers to send them deals!

National Credit Reporting Association gets a voice in National Mortgage Professional Magazine

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

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The “Month of the Mortgage Broker”

Domenica Trafficanda Art Director

Beatrice Marcus Office Manager (516) 409-5555, ext. 301


A message from NMP Media Corp. Executive Vice President Andrew T. Berman




National Mortgage Professional Magazine is published monthly by NMP Media Corp. Copyright © 2009 NMP Media Corp.

A view of the regulatory landscape Due to reader request, we were able to get regulatory compliance expert Jonathan Foxx to author a monthly column titled, “Regulatory Compliance Outlook.” This month, Jonathan covers the Mortgage Disclosure Improvement Act, HVCC, and the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act). For more on the SAFE Act, be sure to read the interview with Berri Leslie from the State of Oregon Department of Finance and Corporate Securities on Nationwide Mortgage Licensing System, conducted by Linda Moore MacCoy. Tommy Duncan also address some regulatory issues in his monthly “Ask Tommy: Your QC Expert” feature.

New business sources If you are looking for ways to reach new sources of business, be sure to check out “Ask Brian” by marketing expert Brian Sacks, where he provides guidance on how to approach certified public accountants (CPAs) for business and working relationships, or this month’s “Trend Spotter” column by Gibran Nicholas where Gibran shares his ideas on how to attract business from real estate investors.

Other “must reads” Since government-insured programs (FHA and VA loans) marketshare of mortgage applications has risen to 35.9 percent in June 2009 (the highest level since November of 1990, according to the Mortgage Bankers Association), it’s no wonder why our readers have been asking for more FHA-related content. This month’s “Value Nation” column by Charlie W. Elliott takes a look at the strength of the FHA program; this month’s installment of “Forward on Reverse” by Atare E. Agbamu addresses the very controversial topic of nonrecourse to seniors and their heirs left open by FHA Mortgagee Letter 2008-38; and this month’s “FHA Insider” column by Jeff Mifsud exposes some methods to help clarify FHA’s allowance of first-time homebuyer tax credits. If you are responsible for hiring for your organization, be sure to read David Walden’s piece on how companies are forgetting about one of the most important areas of recruiting, “compatibility.” I hope you enjoy yet another informative and topical issue of National Mortgage Professional Magazine, and don’t forget to get your daily dose of the latest industry news online at, your online home for breaking mortgage industry news and informative articles from industry experts.

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

The National Association of Mortgage Brokers

National Association of Professional Mortgage Women

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

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

NAMB Board of Directors Officers President—Jim Pair, CMC Mortgage Associates Corpus Christi 6262 Weber Road, Suite 208 O Corpus Christi, TX 78413 (361) 853-9987 O President-Elect—William Howe, CMC, CRMS Howe Mortgage Corporation 9414 E. San Salvador Drive, #236 O Scottsdale, AZ 85258 (602) 200-8100 O Vice President—Michael D’Alonzo, CMC Creative Mortgage Group 1126 Horsham Road, Suite D O Maple Glen, PA 19002 (215) 657-9600 O Secretary—Penny Fagan, CRMS P. Fagan Mortgage Inc. 222 East Moulton Street O Decatur, AL 35601 (256) 355-5505 O Treasurer—Don Frommeyer, CRMS Amtrust Mortgage Funding Inc. 200 Medical Drive, Suite D O Carmel, IN 46032 (317) 575-4355 O Immediate Past President—Marc S. Savitt, CRMS The Mortgage Center 115 Aikens Center, Suite 20-B O Martinsburg, WV25401 (304) 267-9040 O


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

Denise Leonard Massachusetts Mortgage Association 92 High Street, Unit T-41C O Medford, MA 02155 (781) 393-9400 O Walt Scott Excalibur Financial Inc. 175 Strafford Avenue, Suite 1 O Wayne, Pa. 19087 (215) 669-3273 O

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

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

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

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

Board of Directors President—Judy Ryan (800) 929-3400, ext. 201 Vice President—Marty Flynn (925) 831-3520, ext. 224 Treasurer—Daphne Large (901) 259-5105 Ex-Officio—Nancy Fedich (908) 813-8555, ext. 3010

Director—Dave Miller (317) 573-0667 Director—Donald J. Unger (303) 670-7993, ext. 222 Director—Tom Swider (856) 787-9005, ext. 1201 Director—Donovan Williams (714) 638-2855

NCRA Staff Director—Thomas Conwell (248) 313-1000

Executive Director—Terry Clemans (630) 539-1525

Director—Don Goldammer (661) 398-4700

Office Manager/Membership Services—Jan Gerber (630) 539-1525

Director—Sanford (Sandy) Lubin (805) 481-3155

Legal Counsel—James Sutton (972) 680-2665

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

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

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


Ginny Ferguson, CMC Heritage Valley Mortgage Inc. 5700 Stoneridge Mall Road, Suite 150 O Pleasanton, CA 94588 (925) 469-0100 O

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

Joe Camarena The Mortgage Source 10120 Southwest Nimbus Avenue, Suite C-7 O Portland, OR 97223 (503) 443-1060 O

National Board of Directors


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

A Message From NAMB 20092010 President Jim Pair, CMC

ests. So, when you communicate with them, please express your appreciation for their hard work. The environment in which they work is not an easy one so let us do what we can to help them. I thank you again for giving the chance to be your president. I will do my very best to deserve your trust.

I’m just like you As new president of the National Association of Mortgage Brokers (NAMB), I want to thank you, the membership, for this opportunity to serve you. I may be the new president, but in reality, I am just like you, a mortgage broker who is a proud member of this organization, a person who believes our profession is an honorable one that helps the American dream come true for thousands of our neighbors every year. The true strength, heart and soul of NAMB is you, the members. You are on the front line everyday, conducting yourself according to the Code of Ethics and Best Business Practices of our industry. I am very proud of each and every one of you.

We’re all in this together!

Jim Pair, CMC, 2009-2010 President National Association of Mortgage Brokers

NAMB Announces 2009-2010 Board of Directors

Let us all remember the old saying that a chain is only as strong as its weakest link. We are all in this together. Let us remember that reality as we go through this year, a year where we will rebuild our association into a force that helps rebuild our nation.

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Challenges and opportunities


It is no exaggeration to say, in this coming year, our industry and organization will be confronted with some daunting challenges. The bad news is that the economic downturn has severely decreased our membership ranks. The good news is that we have a tremendous opportunity to grow our membership because of legislation passed last year that requires licensing of all originators and the approval of our new Corporate Membership Category. This growth will help re-establish our organization’s and industry’s position and importance to our economy and will help rebuild the association’s financial picture. In the past, we have always relied on Industry Partners as financial partners. This year, we must reach outside of our industry for companies to become sponsors and partners with us to help in rebuilding our financial position.

Becoming better at what we do Like you, I strive every day to become better at my profession. That is why I am particularly pleased about the new education requirements and our new relationship with AllRegs. This relationship gives us the opportunity to offer educational classes to new licensees, thereby allowing us to share in the income with AllRegs through NAMB Enterprises and the opportunity to recruit new members.

Communication is a two-way street As you can imagine, Washington, D.C. is a continuous whirlwind of activity. One of the most important services NAMB provides its members should be in keeping them informed of what is going on in our nation’s capital as it pertains to our industry. We are ramping up our efforts to communicate better and more often with the membership, but we cannot be successful if we do not hear from you. Your input is vital to the future of this organization, so please let us know what is on your mind.

Your role is critical Next month, we will visit with you about your crucial role in helping us protect the interests of our industry and those of the consumer. Rest assured, our efforts in Washington, D.C. on your behalf will continue to be constant and forceful.

NAMB’s 2009-2010 board of directors takes the oath of office at the 2009 MidYear Meeting in San Antonio: (top row, from left to right) Treasurer Donald J. Frommeyer; Immediate Past President Marc Savitt; Past President George Hanzimanolis (at podium); President-Elect William Howe; Vice President Michael D’Alonzo and President Jim Pair with (bottom row, from left to right): Secretary Penny Fagan; and Directors Walt Scott, Ginny Ferguson, Joe Camarena, Don Fader, Denise Leonard and Don Starks The National Association of Mortgage Brokers (NAMB) has announced its board of directors for 2009-2010 at the association’s 2009 Mid-Year Meeting, held June 27 in San Antonio, Texas. Congratulations to the following:

NAMB 2009-2010 Officers O O O O

President (one-year term): Jim Pair, CMC, Corpus Christi, Texas President-Elect (one-year term): William Howe, CMC, CRMS, Scottsdale, Ariz. Vice President (one-year term): Michael D’Alonzo, CMC, Willow Grove, Pa. Secretary (one-year term): Penny Fagan, CRMS, Decatur, Ala. (returning board member) O Treasurer (one-year term): Donald J. Frommeyer, CRMS, Carmel, Ind. O Immediate Past President (one-year term): Marc Savitt, CRMS, Martinsburg, W. Va.

Help our staff help you Today, our staff, ably led by Roy DeLoach, is smaller yet still as dedicated as ever to serving you. They are working hard every day to protect and further your inter-

NAMB 2009-2010 Directors O Joe Camarena, Portland, Ore. (returning board member)

NAMB 2009-2010 Directors (continued) O O O O

Don Fader, CRMS, Kinston, N.C. (returning board member) Ginny Ferguson, CMC, Pleasanton, Calif. (three-year term) Denise Leonard, Wakefield, Mass. (returning board member) Don Starks, Bourbonnais, Ill. (returning board member)

A Message From NAMB Treasurer Donald J. Frommeyer

Scenes From the NAMB 2009 Mid-Year Meeting June 27 at the Watermark Hotel on the Riverwalk in San Antonio, Texas

So, what do you want for the 2009 holiday season? Sure, we are in the midst of the hot and humid days of summer, but in the blink of an eye, the trees will begin to shed their leaves, and you’ll be swapping those shorts for pants and t-shirts for sweaters as the end of another year will be upon us. The National Association of Mortgage Brokers (NAMB) has planned an exciting event to close out 2009, and all eyes will be on Las Vegas as the broker community will come together at the MGM Grand Hotel, Saturday-Tuesday, Dec. 58 for NAMB/WEST. Not sure what you want this year for the holidays? Why not ask for a ticket to NAMB/WEST. With the industry’s top lenders and wholesalers, speakers and educational sessions under one roof, why not ask for the gift that is actually an investment in your future? While the schedule of events is still taking shape, I can provide you with a brief outline to help you make your travel arrangements early:

The passing of the gavel takes place at the NAMB Mid-Year Meeting, as Immediate Past President Marc Savitt congratulates Jim Pair as he assumes the office of NAMB 2009-2010 president

Saturday, December 5 ..........................................NAMB/WEST Opening Reception Sunday, December 6 ......................Speakers, Education and Committee Meetings

NAMB Immediate Past President Marc Savitt congratulates John Councilman on being named NAMB Broker of the Year

Monday, December 7 ........Speakers in the Morning/Exhibit Hall in the Afternoon Tuesday, December 8 ....................NAMB Board Meeting in the Morning/Delegate Council Meeting in the Afternoon

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Donald J. Frommeyer, CRMS, Treasurer National Association of Mortgage Brokers

Gary Akright accepts the NAMB Distinguished Industry Service Award from President Jim Pair


Again, this is just a sampling of what we will have to offer at NAMB/WEST. We are currently lining up top industry speakers and have some surprises in store as we approach December. The industry has clearly evolved over the past year, and I anticipate more changes on the horizon. Why not stay ahead of the curve by joining your industry peers in Vegas for a few days of networking, education and fun at NAMB/WEST. You won’t be disappointed and will surely walk away from the event with a wealth of knowledge and business contacts to close out 2009 on a high note, and begin a new year with a new perspective on the industry. The mortgage lenders and affiliates on hand will be showcasing the products and tools you need in order to improve your bottom line and get a nice jump-start on business in 2010. So again, mark your calendars for Saturday-Tuesday, Dec. 5-8 at the MGM Grand Hotel in Las Vegas for NAMB/WEST. Information will be made available in the coming weeks and months as the schedule is finalized by visiting or calling NAMB headquarters at (703) 342-5900. See you in Vegas! O

NAMB Immediate Past President Marc Savitt is thanked for his term as association president by Past President George Hanzimanolis


Preliminary schedule of events Saturday, December 5..............................................................................NAMB/WEST Opening Reception Sunday, December 6 ..........................................................Speakers, Education and Committee Meetings Monday, December 7................................................Speakers in the Morning/Exhibit Hall in the Afternoon

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Tuesday, December 8 ......NAMB Board Meeting in the Morning/Delegate Council Meeting in the Afternoon


For more information, contact Aubrey Eyer of NAMB at or visit for exhibitor details.

Official government Web site offers help with new rule By Terry W. Clemans O


Mortgage brokers and all other “finan- about the debate of the broadness of cial institutions” as defined by the Red Congress’s Red Flags direction, FTC Flags Rule that are governed by the Chairman Jon Leibowitz stated, Federal Trade Commission (FTC) have “Given the ongoing debate about an additional 90 days to prepare for whether Congress wrote this provicompliance the Red Flag Rule. The term sion too broadly, delaying enforce“financial institutions,” as it applies to ment of the Red Flags Rule will allow this rule, is defined very broadly to industries and associations to share include about everyone in a credit guidance with their members, protransaction and includes all mortgage vide low-risk entities an opportunity originators. to use the template in developing Mortgage brokers, being under the their programs, and give Congress FTC’s oversight for this rule, are among time to consider the issue further.” the business categories Now, mortgage originaoffered the longest comtors have a variety of pliance timeframe. This resources available to delayed enforcement them to make sure they period only applies to the are in compliance before financial institutions that the Aug. 1 enforcement will be under the FTC’s begins. Many credit reportoversight, the financial ing agencies also offer institutions governed by their clients Red Flags the Federal Reserve and compliance programs and other federal agencies products. If your firm has have been required to be not yet created its Red in compliance since Nov. Flags program, the next 60 1, 2008 and are subject to days are crucial to imple“Fines most likely enforcement of the Red mentation. are going to be steep Flags Rule since that date. Since this is the second as the Red Flags In addition to the time the compliance date Rule is intended to extended deadline, the FTC has been postponed, any reduce the potential has provided a Web site of companies found to be for identity theft, new Red Flags Rule resources not in compliance after at Aug. 1 are not likely to be which has been the This Web site offers help in offered much sympathy top consumer comunderstanding the rule, as plaint to the FTC for from the FTC. Fines most well as a template to assist likely are going to be the past five years.” with creating a compliance steep as the Red Flag program for your compaRule is intended to ny. This new Web site is the result of the reduce the potential for identity theft, FTC’s outreach efforts during the past which has been the top consumer comyear in which the staff learned that plaint to the FTC for the past five years. some industries (with the mortgage For a copy of the complete industry being one of those with con- FTC announcement on the postponecerns) within the FTC’s jurisdiction were ment to Aug. 1, log on to uncertain about their companies’ responsibilities under the Red Flag Rule. The FTC staff has developed the Terry W. Clemans is the executive director published materials on the above listed of the National Credit Reporting site to help explain what types of enti- Association Inc. (NCRA). He may be ties are covered and how they might reached at (630) 539-1525 or e-mail tcledevelop their identity theft prevention programs. The Red Flags Rule is one of the Visit the National Credit last parts of the 2003 Fair and Reporting Association Inc. Accurate Credit Transactions Act (NCRA) on the Web at (FACTA) to be implemented. Speaking


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Obama Administration releases financial regulatory reform plan details


U.S. President Barack Obama’s Administration has released a White Paper detailing its Financial Reform Plan to overhaul current regulation of financial firms and markets, and provide new tools for the government to manage potential future financial crises. Several proposals directly affecting the mortgage brokerage industry include creating a single federal regulatory agency, the Consumer Financial Protection Agency (CFPA), adopting new loan product disclosure standards aimed at transparency and simplicity for consumer protection, and requiring compensation of brokers, originators, sponsors, and underwriters to be linked to the longer-term performance of securitized loans. The National Association of Mortgage Brokers (NAMB) has commended the Obama Administration for recognizing and taking action to strengthen the securitization markets through new regulations and supervision calling for increased transparency and disclosures by all originators, underwriters and credit reporting agencies. NAMB applauds provisions calling for all originators to disclose all direct and indirect income. Mortgage brokers have been disclosing all direct and indirect income since 1992 and NAMB believes this disclosure should be used as a model for disclosing hidden lender payments to their employees called “overages“ and service release premiums. “It is time for lenders and banks to finally come clean and disclose these secret payments as mortgage brokers have for 17 years,” said NAMB Past President Marc Savitt, CRMS. “We thank the Obama Administration for recognizing the need to force lenders and banks to disclose to consumers their hidden fees. This will help consumers compare loan products between banks, lenders and mortgage brokers.” However, NAMB sees specific practical flaws with requiring regulations connecting broker compensation with longer term performance of the underlying loans. Mortgage brokers earn their compensation when they find their customer a loan and follow the transaction

to close. Lenders create mortgage products, determine the type of risk they are looking for and pricing of that risk. The White House proposal shifts the risks of their underwriting failures to the mortgage broker without an increase in compensation for that shift. As stated in the White Paper, “The financial crisis was triggered by a breakdown in credit underwriting standards in subprime and other residential mortgage markets.” NAMB has long advocated for consumer protection through transparency and simplification in the mortgage industry. The CFPA would level the playing field for all loan originators and prevent entities from falling through the cracks between jurisdiction and enforcement of numerous regulatory agencies. NAMB welcomes transparency. Although NAMB agrees with the intent of the CFPA to simplify the mortgage process; NAMB would caution such a regulator from potentially causing unintended harm to the consumer. Proposals to standardize mortgage products could have serious consequences for consumers shopping to find the most suitable and cost effective loan. NAMB would welcome the opportunity to participate in the clarification of “plain vanilla” products to ensure consumers have affordable options for obtaining homeownership in the future. For more information, visit or

NAMB selects Home Loan Advocates as its loan modification specialist The National Association of Mortgage Brokers (NAMB) has signed a contract with Home Loan Advocates to act as its endorsed service provider for consumer home loan modification. After researching more than 20 nationally-recognized loan modification firms, Home Loan Advocates was chosen to launch a referral program for loan originators to extend home loan modification service to their clients, based on the company’s “no up-front fee” policy. David Bartels, president of Home Loan Advocates, will teach mortgage originators the best practices used to process loan modifications and negotiate affordable mortgage payments for troubled homeowners. Additionally, Art “Ski” Swiatkowski, a continued on page 18

By Charlie W. Elliott Jr., MAI, SRA

How Strong is the FHA Loan? Over the past few months, we have resort to any such new requirements as heard much about all of the bank loan with Fannie and Freddie and the Home failures, Fannie Mae and Freddie Mac Valuation Code of Conduct (HVCC). FHA going bankrupt, the commercial lending does not require that any organizations market heading south, and Wall Street be put into place to monitor appraisers, taking a bath on toxic loans. Our whole it does this through its own review economy has been wrecked as a result of process. The FHA makes loans up to these bad loans. It was not just a bad 98.15 percent of the appraised value of batch of loans or just a particular type of the collateral used to secure the loan. loan, but practically all cateBorrowers usually put gories of loans. That is except down between three perfor one, the Federal Housing cent and five percent of the Administration (FHA) loan. amount of the loan as a Thus far, no FHA bailouts downpayment. Borrowers have occurred or have been need a credit score of 580 the subject of major discusor higher and may qualify sion. for payments equaling up The FHA or the U.S. to 30 percent of their Department of Housing income. and Urban Development Up until the early (HUD) loan has been 1990s, the FHA had about around for a long time, 15 percent of the home since 1934 in fact. FHA is “Our whole economy purchase market. This the largest insurer of amount dwindled, due to has been wrecked as mortgages in the world. competition from other a result of these bad The authority has insured loans. It was not just sub-prime lenders, to more than 34 million a bad batch of loans about four percent of home loans since its homes sold in 2006. or just a particular inception. Arguably, it Recent changes in the type of loan, but offered one of the first financial markets have drapractically all catesub-prime loans and has gories of loans. That matically reversed this been doing so for three is except for one, the trend. On June 18, HUD quarters of a century. FHA Inspector General Kenneth Federal Housing loans are sold and manDonahue told the House Administration aged as sub-prime loans Financial Services Committee (FHA) loan.” and are under the scrutiny on Oversights and of the HUD purview. In recent years, Investigations that FHA’s share of the many banks and Wall Street types took it home-loan market has skyrocketed to upon themselves to offer their own sub- 63 percent so far this year. prime loans. They charged high fees and In spite of the fact that the FHA has interest rates. Many thought that they never required a government bailout in were making more money by making its 75-year history, the Wall Street their own sub-prime loans, than they Journal recently reported that the would have funding them as FHA loans. mortgage giant might require just that The FHA loan suffered and dropped in in the near future. Its reserve fund fell popularity. This went on for some time to three percent of its 2008 mortgage until the non-FHA sub-prime loans began portfolio balance and its delinquency to hit the proverbial fan. FHA, not having rate increased from 6.2 percent a year made huge volumes of loans during that earlier to 7.5 percent last year. Federal period, has emerged stronger and is now law requires the reserve fund to remain one of the few current alternatives for above two percent. sub-prime borrowers. “Based on the numbers we’re seeing, The FHA approves its own appraisers. It has not found it necessary to continued on page 14

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An Assault on Fairness: Quash Mortgagee Letter 2008-38, Part I The views and opinions expressed in the following article do not necessarily reflect the views and opinions of National Mortgage Professional Magazine, the National Association of Mortgage Brokers, the National Association of Professional Mortgage Women and the National Credit Reporting Association Inc.

A reading of “1” has the lowest impact on rates, while “10” has the highest. Although carefully verified, data are not guaranteed as to accuracy or completeness. BestInfo Inc. cannot be held responsible for any direct or incidental loss or liability incurred by applying any of the information or opinions in this feature. Provided exclusively to National Mortgage Professional Magazine by David Beadle, president of BestInfo Inc., the BestRates cell, pager and e mail rate alert service for mortgage industry subscribers. Send your inquiry to for full details on a free two-week trial subscription. MO






June Existing Home Sales

July 28 July Consumer Confidence

July 30 Weekly Jobless Claims

July 31 Q2 GDP

value … This distinction is very clear in our regulations. So the Mortgagee Letter (ML) does not represent any change in policy position on this matter. Therefore, the ML [200838] that has been charged is appropriate and consistent with historical policy. And, the definition of non-recourse is just as we said it was—so that doesn’t represent a change. So, the only change presented in this new ML is that that the heirs cannot buy the property from the estate to avoid paying off the full loan balance.”

“Yes, well, I would agree that it’s of concern that we’ve closed the one loophole that existed—that is, heirs could buy the properties from the estate to keep the home, but not pay off the full loan balance. Other than that, you’re actually offering up some inaccurate statements about the program’s history. Although many people said, ‘Neither the borrower nor the heirs will ever owe more than the value of the home,’ that’s an inaccurate statement on their part and our guidance has never said as much. Our policy position has always been: Upon sale, the borrower or heirs will not owe more than the

“The HECM is a ‘non-recourse’ loan. This means that the HECM borrower (or his or her estate) will never [emphasis added] owe more than the loan balance or the value of the property, whichever is less [emphasis added]; and no assets other than the home must be used to repay the debt.”

A major insurance benefit or a loophole? Assumption number one: The 20-yearold language and industry-wide understanding in pre-ML-08-38 paragraph 13C of the HECM Handbook contain a loophole. ML-08-38 is a regulatory loophole plug 20 years after the fact. Again, let’s review the language of chapter one, paragraph 3C (1-3C) of the HUD HECM Handbook 4235.1 Rev.-1:

Far from being a loophole, the above language expressly affirms and codifies a major benefit for which every HECM borrower is required to pay mortgage insurcontinued on page 13

Indicator Summary

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By shifting HECM non-recourse policy to deny seniors and their heirs a key benefit of their expensive mortgage insurance premiums, by imposing arms-length rules which turn off seniors’ heirs and cost tax-



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Author’s note: In the dying days of the Bush Administration (Dec. 5, 2008), the Federal Housing Administration (FHA) issued Mortgagee Letter 2008-38 (ML-08-38). ML08-38 is a raw deal for America’s seniors who have taken, who are taking or who plan to

take Home Equity Conversion Mortgage (HECM) reverse mortgages, the dominant program in the U.S. reverse mortgage market. “An Assault on Fairness: Quash Mortgagee Letter 2008-38, Part I” shows why we believe ML-08-38 is a raw deal for seniors and their heirs/estate, and why we are asking the U.S. Department of Housing and Urban Development (HUD) to quash it.

payers money, FHA Mortgagee Letter 200838 is an assault not only on fairness, but also on a core homeowner right: The right to reclaim the family homestead or the family farm from a creditor without a snag. It should be repealed forthwith. Since my March 18, op-ed in Origination News ( y_id=130), feedback from senior policy-level people at HUD points unmistakably to misguided assumptions behind the flawed mortgagee letter. Part one of this article examines the assumptions in the HUD feedback. Part two looks at why the new arms-length rules in ML-08-38, when fully understood and fully disclosed to consumers, will turn away seniors and their relatives from HECM. It concludes by showing that ML-08-38 is costly to taxpayers and unjust to seniors and their relatives. Two days after my Origination News op-ed piece, this e-mail, among others from senior policy-level people at HUD, came in:

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Home sales statistics are caught between a rock and a hard place. If sales begin to rise, there is a strong likelihood that prospective sellers who have delayed placing their homes on the market due to weak demand will rush to post a “for sale” sign on their lawn. The result will be another addition to already bulging inventories, swelled by the number of foreclosed homes. Meanwhile, a continuing cutback on consumer credit could put an additional squeeze on household budgets, resulting in additional foreclosure activity as the unemployment rate rises. And that sets the stage for a double-dip recession. The June new home sales report will be released on July 27. It’s no secret that consumer attitudes about the economy have been one step away from depressed. Even if respondents to surveys claim they are feeling a bit better about the outlook, all it takes is a surge in gasoline prices or a drop in the stock market to trigger another tale of woe. And at the end of the day, it doesn’t matter what people say, but rather, what they do with their money. Right now, most consumers are sticking to the basics. So long as this trend persists, the economy will be unable to expand at anything close to its previous pace. That’s because consumer outlays account for over two-thirds of U.S. gross domestic product. And the government cannot perpetually spend enough money to approximate that $9 trillion per year. The layoff figures showed a glimmer of hope in the third week of June when the number of continuing claims for weekly jobless benefits fell for the first time since early January. But hopes that it would be the start of a trend were dashed a week later, when continuing claims moved back up again. And the “new claims” figure never made it below 600,000, falling to 605,000 on June 6 before rising back up to May levels as the fallout from the automobile industry’s extended summertime plant shutdowns spread to related industries. If consumers decide to keep their older vehicles either because they cannot afford new ones or because they cannot obtain low-rate financing, the manufacturing malaise may continue. The initial reading on second-quarter Gross Domestic Product will be released on this date, and will be viewed in light of the 5.5 percent decline for the first quarter and the 6.3 percent decline in last year’s fourth quarter. There’s great hope on Wall Street that the expected negative Q2 results will put the worst of the longrunning recession behind us, with positive GDP numbers from the third quarter onward. But if geopolitical turmoil flares, the H1N1 influenza pandemic returns with a vengeance or the tightening consumer credit noose escalates, the chances for a deepening recession will rise and it could be a long slog before the economy returns to any semblance of normalcy.

Nationwide Mortgage Licensing System: Who, What, Where, When, Why?

may require hours beyond this ly-insured depositories and subsidiaries threshold. with NMLS. Registered loan officers must complete a criminal background How many states are currently using check and submit employment history NMLS? and experience. They will also coordiTwenty-seven states are currently using nate with NMLS to assign registered NMLS. loan originators a unique identifier.

Under SAFE, who is responsible to approve loan originator education? The SAFE Act requires that the NMLS review and approve all pre-licensure By Linda Moore MacCoy and continuing education courses that Do bank, mortgage bank and credit are to be offered to state-licensed mortBerri Leslie worked for the state of What type of education does SAFE union employees need to be regis- gage loan originators and are intended Washington Department of Financial require? tered? Do their originators need to to satisfy the 20 hours of pre-licensure Institutions during their Nationwide SAFE requires 20 hours of pre-licen- take the tests? education and/or eight hours of annual Mortgage Licensing System (NMLS) transi- sure education and eight hours of Federal agencies are developing procetion and is currently working for the Oregon annual continuing education. States dures to register employees of federalcontinued on page 12 Department of Finance & Corporate Securities helping them implement the Secure and Fair Enforcement (SAFE) Act. Having worked in both Oregon and Washington, Berri has a unique perspective with NMLS and SAFE Act issues. Berri has agreed to answer some of our burning questions regarding the Nationwide Mortgage Licensing System. The following information is provided to help you understand the requirements, when they will be required, and what will be involved.

An interview with Berri Leslie, State of Oregon Department of Finance and Corporate Securities

By what date will most states be using the NMLS? Most states will be on the NMLS by April 2010.

What is the Secure and Fair Enforcement (SAFE) Act? SAFE is the Secure and Fair Enforcement Act passed as part of HR 3221—it was signed by President Bush on July 30, 2008. How does SAFE affect lenders and loan originators? SAFE requires all mortgage loan originators to be either state-licensed or federally-registered. All loan originators must be licensed or registered using the Nationwide Mortgage Licensing System (NMLS), an expanded version of NMLS.

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Who has to register within the NMLS? All mortgage loan originators must be either state-licensed or federallyregistered.

Guaranteed, an established and well-funded Mortgage Banker since 1992, is positioned to continue its prominence in the industry. As a leading FHA Direct Endorsed Lender, we underwrite all files in-house. This allows for faster approvals, common-sense underwriting and timely closings. We are actively seeking relationships with productive mortgage teams and entrepreneurial mortgage professionals.


How does the NMLS relate to the SAFE Act? The NMLS establishes protocols for issuing unique identifiers for all loan originators. NMLS processes criminal background checks, approves prelicensure and continuing education courses, and is responsible to develop a qualified test.

Residential Mortgage Banking Branch Program for Professionals O

When was the NMLS first developed? State regulatory agencies recognized early on that the rapid expansion and evolution of the mortgage industry demanded a more robust regulatory framework that was efficient and effective. In 2003, a nationwide task force of state regulators began developing a uniform licensing registry, similar to what has been done by state agencies in the securities and investment advisor industries. State regulators developed the NMLS in order to: Increase consumer protection, enhance supervision and streamline the licensing process.


nationwide mortgage licensing continuing education. In order to meet its mandate as required by the SAFE Act, the NMLS requires that those individuals/organizations who desire to have their pre-licensure or continuing education courses approved by the NMLS must first register and be granted approval to become an “NMLSApproved” course provider. Upon becoming NMLS-approved, course providers can then submit to have their courses approved by NMLS. What is the Web address for NMLS? NMLS may be found on the Web at AM/Template.cfm?Section=Home3. How often will renewals occur? The licensing period is JanuaryDecember, and renewals occur annually in November and December.

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What is the best way for loan originators to stay informed about all of these changes? Since each state has specific requirements and differing implementation plans, the best way to stay informed is to read all announcements and communications that come from your state licensing agency. Once you are on the NMLS system, the system itself


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early, participate in the many training courses offered and stay informed, won’t have any trouble!

Linda’s comments are shown below will also send you announcements after researching several issues on the and updates. Make sure to be regular- NMLS: ly checking your state’s Web site and the NMLS Resource Center. We, the National Academy of Financial Literacy, recently sponsored a free When you worked on the Webinar that was offered NMLS and Registry transito and sponsored by tion in Washington, what National Association of was the most frustrating Professional Mortgage issue? Women (NAPMW) memLoan originators and combers exclusively. Berri panies waiting until the Leslie was our guest end of our “transition speaker and she providdeadlines” was frustrated an overview of NMLS ing. Washington sent out and Registry, and gave many letters, e-mails and us a demonstration of the even offered to provide NMLS Web site. During on-site training for comthe recent Webinar, one Berri Leslie panies about the NMLS, of the topics of discussion “State regulatory but some folks still waited was requirements and agencies recognized until the last minute! testing for banker origiearly on that the rapid nators, bank originators expansion and What is the chief comand credit union originaevolution of the plaint you hear from tors. The system information mortgage industry loan originators about changes almost daily, as demanded a more all these new changes? planning and rules go into robust regulatory The biggest complaint is effect; however, it was framework that was that the system is diffinoted that these originacult and confusing. I efficient and effective.” tor requirements have not don’t think the system is been announced as of yet. really that difficult, but rather, it’s The following link provides a list of new and most new technologies are states that are integrated and/or tranchallenging at first. Folks who start sitioning into NMLS. Note that each

state listed provides a link to the state Web site: rticipating_States1. The following link provides originator information: Section=The_Industry. The following language is from the NMLS Web site, and can be found in the “Educator Provider” section of the Web site: NMLS has set the following fees for Test Administration and Education Services. These fees will be in effect for 2009 and are subject to change. Test administration 1. SAFE Mortgage Loan Originator Test O National component: $92 100 items (appointment time, three hours) O Each unique state component: $69 45-55 items (appointment time, two hours) Each mortgage loan originator (MLO) is required to pass a test which will consist of at least two components: A National Component and a Unique State Component. Fees are payable by an individual who is registering to take the SAFE Act test components or by the company which may be enrolling its MLOs for the test components. Please feel free to e-mail continued on page 14

Lenders Association (NRMLA), the industry’s preeminent trade group, has a similar understanding of non-recourse as continued from page 10 demonstrated by this consumer safeguard information on its Web site, dating ance premiums. Those premiums cover consisting of payments made to you or on your back to May 2005: both crossover risk (protecting lender behalf plus accrued interest, becomes due and from property value decline at loan termi- payable. Your heirs may repay the loan bal- “Asset Protection. The reverse mortgage is nation) and the recourse risk (protecting ance by selling the home or by paying off the a ‘non-recourse’ loan. This means that borrower from paying more than home’s HECM loan so that they may keep the home. If the amount due can never exceed what market value at loan termination). the loan balance exceeds the value of your the home is worth. Title to the home The above language was itself a 1994 property, your heirs will owe no more than the always remains with the borrower. When explanation of non-recourse in the origi- value of the property. FHA insurance will cover the loan becomes due, the lender is nal HUD HECM Handbook 4235.1 of Aug. any balance due the lender. No additional repaid the sum of funds advanced plus 24, 1989. Here is the original non-recourse financial claims may be made against your the accrued interest, but never more than language (read: historical policy): heirs or estate.” [emphasis added] ( the value of the house. If there is ing value, it belongs to the homeowner or “The lender’s recovery from the borrower striper.pdf) the estate.” will be limited to the value of the home. There will be no deficiency judgment The National Reverse Mortgage Note that since this article was first taken against the borrower or the estate.” [Section 1-12-B, p. 1-6]

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posted on my blog, Atare’s Report, on May 18, NRMLA has revised this wording on its Web site to reflect ML-08-38. However, NRMLA’s revision does not change its historical accuracy in the context of this article, nor has it revised thousands of hard copies in circulation for years ( Mortgages/ConsumerSafeguards/tabid/42 9/Default.aspx). The Fannie Mae and the NRMLA consumer information postings on nonrecourse tell us what Fannie Mae and NRMLA believed was the correct interpretation of paragraph 1-3C (of the HECM Handbook 4235.1 Rev.-1) well before HUD published ML-08-38 on Dec. 5, 2008. continued on page 15

So where is the appropriateness of ML-08-38? Where is the consistency of ML-08-38 with historical policy? And where is the policy foundation for the formulators of ML-08-38? There is none. And sadly, with ML-08-38, lenderinvestor (and successors) benefit/right is unimpaired, but borrower-heirs/estate benefit/right is arbitrarily taken away by administrative fiat without an Act of Congress. This is an imbalance. For the party paying the hefty mortgage insurance premiums, this is a grave injustice.

Is ML-08-38 a change in HECM Non-Recourse Policy? While I leave you, the reader, to judge the inaccuracies in my March 18 op-ed, let’s look at the second premise in the HUD e-mail: Public and industry understanding and interpretation of paragraph 1-3C is wrong:

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“Question: Will my heirs owe anything to the mortgage lender if I die? Answer: Upon your death, the loan balance,


Really! “… that’s an inaccurate statement on their part and our guidance has never said as much.” Incredible! It is hard to understand these assertions, especially coming from high and responsible policy-level people at HUD. Please go back and re-read paragraph 1-3C of the HECM Handbook, as well as the original non-recourse language I referenced above and ask yourself: Is that the language of “many people?” Wasn’t that HUD policy language (guidance) for 20 years until the travesty of ML-08-38? Fannie Mae, HECM’s sole investor from program’s inception in 1989 until 2006 and its dominant buyer today, uses the pre-ML-08-38 language of paragraph 1-3C. Here is a Fannie Mae consumer education Q&A posted in August 2004: O

“Although many people said, ‘Neither the borrower nor the heirs will ever owe more than the value of the home,’ that’s an inaccurate statement on their part and our guidance has never said as much. Our policy position has always been: Upon sale, the borrower or heirs will not owe more than the value … This distinction is very clear in our regulations. So the Mortgagee Letter (ML) does not represent any change in policy position on this matter.”


What Station Are You Tuned Into?

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Dear Brian: I went to a seminar of yours about a year back in Cleveland. Almost all my business is refinances, and I’m looking to go after the certified public accountants (CPAs) in the area and I’m not to sure how to approach it. Looking for a little bit of advice. —David Brooks, Ohio


Dear David: Thanks for the question. Getting referrals from outside sources is one of the most frustrating things we all go through as loan officers. What most of us do is find a professional like an attorney, financial planner, insurance agent, or as in your case, an accountant, and we rush over to meet with them. Then, we proceed to tell them how wonderful we are and conclude with a strong pitch begging them for business. No surprise that most of us fail. The very first thing you must realize is that everyone, regardless of their business, is tuned into only one station W-I-F-M … otherwise known as: What’s In it For Me? Bet you are tuned into that very same station when a wholesale rep walks into your office. They tell you how great their programs are, how wonderful they are to work with, and then, just like you, they proceed to beg you for business.

So what does work? In all relationships, you must provide value to the other side. They must immediately see ways they can personally benefit from the relationship. And by the way, the fact that you will provide their clients with good service is not the value I am talking about here. That is a given. If you cannot provide good service, you shouldn’t even be in the business! Now, the question is … how can you provide this service? First, start the meeting by trying to find some common ground. The best way I have found to do this is to make the initial contact based on the fact that you both have a mutual client. Every time you take an application, write down the name and phone number of your client’s accountant, attorney and financial planner. If they don’t have one, make sure you are in a position to refer them to your preferred list of providers. I not only give them the

attorney, financial planner or accountant’s business card, but I continue by explaining the importance of the service they provide and why I am personally recommending them. But, I don’t stop there. I then call the person I referred and tell them that I have given their name to my clients and that they should expect a call. This allows me to stay in touch with this referral partner and prove to them that I am a valuable resource they can depend on to grow their business. Let me also give you a few other ways I have found to provide value.

Newsletters Each month, I send out a newsletter to my database of past clients, current prospects, friends, family, and of course, referral partners (including real estate agents and builders). The newsletter allows me to stay in front of these referral partners. I also allow them to write articles for my newsletter (if and only if) they also allow me to write articles for their newsletter. This then allows them to receive my endorsement and be exposed to my clients, and it allows me to provide their clients with information and the referral partner’s endorsement.

related issues, I recently held a teleclass for a bankruptcy attorney where I showed his clients how to get into a home with very little down and attractive rates even if they had a bankruptcy or other credit challenges. There were two big benefits here. First, I was providing information his clients were looking for and needed. Second, I was allowing him to now be seen as not just another bankruptcy attorney who can help them file, but rather, as a trusted legal advisor who can help them get back on track financially. Value for value … this was a true win- win. I got five new clients, and he will get referrals by staying in touch with his clients and providing them with useful information. So David, I hope that helps. Think outside the box and always have the best interest of your referral partners at heart. By truly helping them you will

value nation

help yourself. And forget that everyone is tuned into W-I-F-M. If you have a question you would like Brian to answer in this column, please send an e-mail with “Ask Brian Question” in the subject line to Brian Sacks is CEO of He has been an industry expert for more than 25 years, closing 6,000-plus loans totaling $1 billion. You can read Brian’s 32-page special report entitled “The Death of Mortgage Origination as We Know It” and “The 10 Things You Must Do Now to Survive and Thrive” at This report sells for $97 and has been downloaded by more than 9,200 originators and company owners, but is free for a limited time for readers of National Mortgage Professional Magazine. He may be reached by e-mail at

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I think it’s going in the wrong direction,” HUD Inspector General Kenneth Donohue replied when asked at a congressional hearing if the FHA would need bailout funds. While the FHA loan may require federal assistance to get us through this economic crisis, it currently is the best product going for the sub-prime market. It is currently the product of choice for lenders, requiring a low downpayment loan, where credit history is also of a concern. Thirtyyear amortization is available, and FHA does tons of refinancing. The FHA is also broker-friendly. Mortgage

brokers can still order appraisals directly from FHA-approved appraisers on FHA loans, as has been the case all along. Even if a bailout is required, the need for the FHA product is so vital to our economy that no major change in the availability of new loans is anticipated. Charlie W. Elliott Jr., MAI, SRA, is president of Elliott & Company Appraisers, a national real estate appraisal company. He can be reached at (800) 854-5889, email or visit his company’s Web site,

Web site My Web site has a resource section, and I allow my partners and referral sources to post an ad for their services on my site. I then also want to have a spot on their site. Big idea … make sure your partner’s link opens on your site so it doesn’t take people away from your site. This is referred to as a “window in window” and your Webmaster should be able to set that up easily.

Teleclasses This is a really big way to provide value. One of the ways I stay in touch with my client base is through free monthly teleclasses. I invite my referral partners to come on as guests and tell my clients about some financial topic that is of interest to them (or should be). I then go back to my referral partners and offer to do the same for their clients. I pay for the conference line and all other related costs. As an example … since I am an expert at working with buyers who have had a bankruptcy or other credit-

nationwide mortgage licensing me at if you have questions or comments on the contents of this article. Linda Moore MacCoy is the executive director of the National Academy of Financial Literacy. She has 35 years of experience in mortgage lending, having worked for a bank, a savings and loan, and several mortgage companies. Linda has been originating loans since 1974. Her experience in lending extends to 12 years of selling mortgage automation with Contour Software, Mortgage Company Management, and 25 years training and educating mortgage professionals and real estate agents. She teaches lending law, state and federal; lending automation, and

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personal lending and origination skills. Additionally, she has served as a consultant to mortgage professionals for many years and has been writing for various publications over the years. She may be reached by phone at (503) 639-5500 or e-mail Visit the National Academy of Financial Literacy blog online at National Academy of Financial Literacy, where users can take part in discussions involving the latest software/tools, changes in the industry, and have the ability to ask leading experts the question that involve your everyday workflow.

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“Some borrowers’ heirs may be in for a rude surprise when they learn that HUD is administering a key provision of the HECM program in a way that differs from what loan officers or counselors may have told them.”

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Incomplete non-recourse protection for a full price? Moreover, we must keep in mind that HECM borrowers who are relying on ML-0838 description of the non-recourse limit are paying their full mortgage insurance premiums (MIPs), but are not getting the full nonrecourse protection for their heirs that HUD assumed when calculating the HECM MIP. Below is the key section from the HUD document that describes the HECM model used by HUD to calculate payment amounts and MIP charges during the program’s design. It clearly never anticipated that HECM borrowers or their heirs would be liable for repayments exceeding home values. To the contrary, the MIP was calculated on the assumption that they would NOT be responsible for such repayments. In other words, the HECM MIP was calculated to fit HUD Handbook 4235.1 (and subsequent REV-1) definition. So, HECM borrowers have been paying for this protection but not getting it. Here is the key section from the HECM model document: “The debt is non-recourse, which means that if the borrower is unable to repay the loan when due, the lender looks only to the value of the mortgaged property for repayment and not to any other assets of the borrower or the borrower’s estate.” (Taken from “The FHA Home Equity Conversion Mortgage Insurance Demonstration: A Model to Calculate Borrower Payments and Insurance Risk,” HUD Office of Policy Development and Research, October 1990, Part II-A, page 3. HUD User # HUD-005802*s)

to pay the full loan balance in breach of the contractual obligation it assumed when it structured the program’s MIPs as we have established above. Enter senior advocate colossus, AARP. In a major national report released on Dec. 7, 2007 (“Reverse Mortgages: Niche Product or Mainstream Solution?” pages.111-112), AARP asked HUD to stop the above practice and harmonize its HECM non-recourse practice with its stated policy in paragraph 1-3C of the HECM Handbook. Here is what AARP said in the report (contrast it with assertions in the HUD feedback we are looking at):


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The final assertions in the feedback that ML-08-38 “… is appropriate and consistent with historical policy” and “the definition of non-recourse is just as we said it was—so that doesn’t represent a change” strain credulity again because we have every right to expect the best from our federal civil servants. In other words, if ML-08-38 is not a new rule, why issue it in the first place? Why the conditional recasting of non-recourse? The fact is … ML-08-38 is a clumsy policy response to a specific policy recommendation from AARP. For years, HUD was violating its own non-recourse policy in practice. That is, it was forcing heirs who want to keep the family homestead



Is ML-08-38 consistent with historical HECM non-recourse policy?

SRA designated principle (25 years experience). O

Furthermore, in deciding whether to pay loan balance or market value, the operative phrase in paragraph 1-3C of the HECM Handbook is “… whichever is less.” When there is a crossover event at loan termination, market value is always less. It follows that if the borrower’s heirs/estate wants to reclaim the property, a legitimate need in some HECM loan termination cases, they will (and should) pay market value because it is an option for which the borrower has paid a very steep price.

“As a result, many consumers may have been misinformed about this key defining characteristic of the HECM loan [emphasis added]. HUD should resolve the discrepancy between its stated non-recourse policy and its practice by conforming its practice It quoted paragraph 1-3C verbatim to the definition in the HECM handbook.” and continued … What is clear from the above statement “As actually administered by HUD, however, is that AARP’s understanding of HECM the non-recourse provision only applies to non-recourse policy is in line with Fannie the estate if it sells the home. If the estate Mae’s, with NRMLA’s, with industry particdoes not do so, it must repay the full amount ipants,’ and with the public’s understandof the loan balance, even if it exceeds the ing of the policy. Equally clear is that AARP value of the home. But HUD has never found the inconsistency in HUD’s stated announced that its non-recourse practice dif- HECM non-recourse policy and actual fers from the policy in its HECM program practice sufficiently troubling to recomhandbook or that new regulations or policy mend the harmonization of practice with letters have altered the handbook’s noncontinued on page 17 recourse policy.


Mat Ishbia, National Sales Manager, United Wholesale Mortgage

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American dream of homeownership. That care and concern for the borrowers is something that many large institutions just cannot provide and mortgage brokers do an excellent job of that.


Each month, National Mortgage Professional Magazine will focus on one of the industry’s top players in our “Mortgage Professional of the Month” feature. Our readers are encouraged to contact us by e-mail at for consideration in being featured in a future “Mortgage Professional of the Month” column. This month, we had a chance to chat with Mat Ishbia, national sales manager for United Wholesale Mortgage. In his role as national sales manager, Mat oversees sales staff, customer acquisition and retention, and all company expansion efforts. His efforts have made United Wholesale Mortgage (UWM) one of the top 10 wholesale lenders in the industry. He is no stranger to the secondary market or the operations side of the business. When it comes to evaluating market conditions, monitoring interest rates or reviewing loan files, Mat’s experience is sure to find the best scenario for each broker working with UWM to obtain maximum commission. How did you first get involved in the mortgage industry? After graduating from Michigan State University, I was looking for a company where I could utilize my skills and could grow. I received an opportunity to join a growing local company with room to move up. United Wholesale Mortgage (UWM) was

looking for a niche and an identity, and with the dedication of a great team, we were able create it together. I always wanted to be involved with a company that was shooting for the sky, and at UWM, that was the idea. They wanted to be number one and were open to people coming in with fresh ideas. I started on the ground floor and worked in almost every department, from set up to secondary marketing to sales and everything in between. I worked each day, thinking of what I would do when I eventually got my shot to make the decisions and steer the company. At the end of 2005, I got the opportunity, and at that time, we were a small player in the wholesale world. With the help of all the wonderful people at UWM, we have grown to the national level that we are at today. What keeps you in the mortgage business and drives you to continue to support the mortgage broker? I feel that the mortgage broker community is essential to serving consumers at the highest level, and with our support, brokers can offer excellent customer service to their clients. Losing the mortgage broker, which I don’t think will ever occur, would be the worst thing that could happen to the mortgage business. Brokers are the people who connect with so many consumers, helping them to achieve the

As a mortgage broker, do you feel that it is important to have a deep knowledge of the secondary market side of the business? I believe it is critical for all people in the mortgage industry to truly understand the loan process, from start to finish, and the finish is well beyond the closing. It is shortsided to not recognize that a loan that doesn’t perform or that goes delinquent is not only costly to the borrower and the lender, but the effects are much farther reaching. We at UWM believe it is a privilege to get a Federal Housing Administration (FHA) loan and we treat our ability to offer this product with the utmost respect. We expect our broker network to also recognize this, and know that we are in this industry together and that every loan matters. As a sales manager of a company who works with some of the most successful brokers in the country, is focusing on delivering the lowest rate a successful strategy? I believe that mortgage brokers should focus their time and effort on one important thing and that is reaching out to as many borrowers as possible and handling them to the best of their ability. Spending your time monitoring rates, which none of us have any control of, is, in my opinion, taking time away from originating files, providing great service to your customers, and working for more referrals. So, if I were a mortgage broker, I would focus exclusively on origination and when you see a rate that works for your customer, lock it in and focus on the next loan. Building your business isn’t about rates, it is about being a financial professional and building a solid book of business that you can service for years to come. We all know that many lenders have opted to go strictly retail, leaving the wholesale marketplace with a lack of

lenders. Why has UWM remained committed to the mortgage broker community since 2001? We are an organization committed to being a major player in the wholesale market for years and years to come. We once were a broker here at UWM, and we realized that brokers weren’t provided many of the luxuries that direct lenders and banks were being allowed. We set out to change that problem by providing brokers the level of service, access to underwriters, and open lines of communication to always know what’s going with their loans, so they can keep their customers and Realtors informed at all times. This level of service has helped many brokers in our network grow their business to a level that they didn’t believe was possible. They have done that by impressing Realtors and borrowers to the point of receiving more referrals than ever before. These brokers have figured out that closing more loans and building a strong business is more important than chasing the highest yield spread premium. A broker who works smarter will gain more referrals and ultimately, be in a stronger financial position. Tell us about the unique business culture you and your team created at UWM. At UWM, we have a unique business culture that is based on work ethic and a positive attitude. Every employee at UWM has bought into these core principles and has helped make us a great place to work. At UWM, our daily operations are very simple, from sales to underwriting to closing. The account executive’s responsibilities are to respond to broker questions and make calls to them about our speed and service. Our account executives (AEs) are different than most. Not only do they answer their inbound call, but they make outbound calls to broker shops and see if there are any FHA loans, we can help them close fast. They don’t leave without making sure every loan officer’s e-mail or call is returned. Each day, our underwriting staff gets a handful of loans from their assigned AE and their job is to underwrite them in a timely fashion and provide top notch service to the

brokers who have questions pertaining to their submitted files. The closers get the files, and within 24 hours, they have already sent out the closing docs and communicated directly with the title company to confirm that the closing is set and everything needed has been provided. Our entire team is committed to making brokers feel like mortgage bankers. With the level of customer service and accessibility we provide, our brokers always know what is going on with their loans. Each person at UWM understands that the brokers are the key to our business, and we go above and beyond each day to let them know how much we appreciate these business relationships. What would you say is the mortgage industry’s most underutilized loan program? The industry’s most underutilized program is the FHA streamline. It is a great way to make sure that your borrower always has the best available rate. The streamline is an entitlement that is granted to customers who close on FHA loans. The insurance that the customer pays entitles them to a streamline refinance that will offer the lowest available rate. There is no income qualification, sometimes no appraisal required, and as long as the borrower makes all their mortgage payments on time, then they qualify. Along with the streamline, the government 3/1 adjustable-rate mortgage (ARM) is another product that, if used correctly, can save consumers a lot of money and help them have the lowest payment at all times. The FHA 3/1 ARM is unlike the

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sub-prime ARMs, as with the government ARM, you can always refinance, regardless of property values dropping or loss of income. The rate doesn’t change for three years and after the three years, it can only go down one percent annually and there are no pre-payment penalties. The caps on the FHA 3/1 Treasury ARM are 1/1/5 and a two percent margin, which means that if the borrower’s start rate is 3.75 percent, the maximum their rate can be on the change date three years later is 4.75 percent, which is still well below the fixed rates right now. This product, if used in conjunction with the streamline, is a powerful tool to help many brokers originate more loans and many consumers have a lower payment. As the sales manager for one of the top 10 wholesalers, can you share any insights, philosophies, books or any other strategies that can help the mortgage broker community? I am a big believer of under promising and over delivering. That is what UWM was built on and what I personally believe in. No matter what I am doing, I always shoot to exceed the expectations that I set. I believe that your word is one thing you cannot compromise in this industry, and we are focused at UWM on delivering on our word each day. We advertise our 24to 48-hour turn times and we always come through within that time frame or before. Our submissions closing five to seven business days is something we offer and if the brokers want to participate on their end, we make that happen for them.

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policy when Ken Scholen was the guiding spirit behind HECM is questionable at best and disingenuous at worst. From the foregoing, we conclude that ML-08-38 was based on flawed assumptions. We affirm that ML-08-38 represents a major departure from historical HECM nonrecourse policy. And we assert that ML-0838 is unfair to America’s seniors and their heirs/estate. It should be quashed.



O JULY 2009

Visit author Atare E. Agbamu’s blog at for his thoughts and insights on the reverse mortgage marketplace.


Author and columnist, Atare E. Agbamu, CRMS is director of reverse mortgages at Minneapolis-based AdvisorNet Mortgage LLC. A member of the BusinessWeek Market Advisory Board, Agbamu is author of Think Reverse! and more than 100 articles on reverse mortgages. Through his advisory firm, ThinkReverse LLC, Agbamu advises financial professionals, institutions and regulators across the country. In a 2007 national report on reverse mortgages, the AARP cited Agbamu’s work. He can be reached by phone at (612) 436-3711 or (612) 203-9434, and e-mail at or

policy. And it is abundantly clear that veracity is absent in HUD’s assertion in ML08-38 that some program participants were “mistakenâ€? about the policy. There is another crucial point we should consider about paragraph 1-3C and HUD’s reinterpretation in ML-08-38. The paragraph clearly decrees that â€œâ€Śand no assets other than the home must be used to repay the debt.â€? By forcing heirs/estate, in violation of its own rules, to repay the loan balance, other assets other than the home’s value are being used to repay the loan. HUD cannot have it both ways, for we are a nation of laws and rules. It needs to respect and follow its own rules. It needs to honor and abide by its own contractual obligations if it expects industry participants within its administrative sphere of influence to do the same. It is noteworthy that the authors of the 2007 AARP report include Ken Scholen, Donald L. Redfoot, and S. Kathi Brown, individuals with deep knowledge of HECM and policy issues around reverse mortgages and HECMs in particular. Ken Scholen is the father of the HECM and one of the leading authorities on reverse mortgages in America. For anyone at HUD to suggest that someone such as Ken Scholen is “mistakenâ€? about HECM non-recourse


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certified NAMB trainer and member of the NAMB Task Force on Loan Modification, will introduce the NAMB-endorsed referral program for loan originators, and discuss how and why Home Loan Advocates was chosen. “In today’s market, loan originators are overwhelmed with clients who do not qualify for a refinance, but still need our help,” stated NAMB Past President George Hanzimanolis. “Our goal is to provide a trusted resource to our members—on a state and national level—so they have a vehicle to help home owners across the country who are struggling to make their mortgage payments.” “Fifty percent of all homeowners who attempt to manage their own loan modification fail, simply because they don’t have the experience to submit the package properly,” said Bartels. “Even if a borrower has been turned down, in most cases we are able to resubmit the package and get the mortgage payment reduced.” For more information, visit

CSBS reports to Congress: States on track to meet SAFE deadline


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The Conference of State Bank Supervisors (CSBS) has released the first Annual Report of the Nationwide Mortgage Licensing System

(NMLS) to the U.S. Department of Housing and Urban Development (HUD) and Congress to provide information on the System’s performance in its first year of operation. Selected NMLS highlights from the NMLS Annual Report include: Seven states participated in NMLS at launch and 19 states were participating by year-end; 14 states processed 30,897 license renewals through NMLS in November and December; 756,578 transaction requests by licensees to the 19 participating states were processed by NMLS; more than $24 million in state license fees were collected and disbursed by NMLS; 147,758 inquiries from users were answered by the NMLS call center; 700,000-plus visits were made to the NMLS Resources Web site; and more than 30 live user-training sessions, instructing 1,300-plus professionals, were conducted in 2008. According to the report, state implementation of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act), [Title V of the Housing and Economic Recovery Act of 2008] which requires states to pass legislation to meet the minimum requirements established by the Act by July 31, 2009, has proceeded expeditiously. To date, 32 states have passed legislation to bring them into compliance



with the SAFE Act, and an additional 15 states have introduced legislation to become SAFE Act-compliant. CSBS President and CEO Neil Milner called the SAFE Act “monumental in its foresight and the positive impact it will have upon supervision of the residential mortgage market.” CSBS and NMLS have spearheaded a nationwide effort to achieve uniform implementation of the SAFE Act within a one-year time period. Additionally, federal regulators have begun to build upon the NMLS, as the Federal Housing Finance Agency (FHFA) illustrated by requiring Freddie Mac and Fannie Mae to obtain unique identifiers for mortgage loan originators, loan origination companies, field appraisers and supervisory appraisers for loan applications taken after Jan. 1, 2010. For more information, visit

unique identifier through the registry that will remain with that originator, regardless of changes in employment. When the system is fully operational, consumers will be able to use the unique identifiers to access employment and other background information of registered mortgage LOs. Pursuant to the SAFE Act, the proposal further requires these mortgage loan originators to provide their unique identifiers to consumers in certain circumstances and Agency-regulated institutions to make them available to consumers. Because modification of the registry to accept federal registrations involves complex technical issues, the proposed rule provides for a delay in implementation of the registration requirements until 180 days after the registry becomes operational and available for initial federal registrations. For more information, visit

Federal agencies propose rule to implement SAFE Act LO registration requirements

HUD Secretary Donovan and National Fair Housing Alliance roll out media The federal financial insti- campaign

tution regulatory agencies are together issuing for public comment proposed rules requiring mortgage loan originators who are employees of Agency-regulated institutions to meet the registration requirements of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act). The SAFE Act requires the agencies to jointly develop and maintain a system for registering residential mortgage loan originators who are employees of agency-regulated institutions, including national and state banks, savings associations, credit unions, and farm credit system institutions, and certain of their subsidiaries. These mortgage loan originators (LOs) must be registered with the Nationwide Mortgage Licensing System (NMLS), a database established by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) to support the licensing of mortgage loan originators by the states. As part of this registration process, mortgage loan originators must furnish to the NMLS background information and fingerprints for a background check. The SAFE Act generally prohibits employees of an agency-regulated institution from originating residential mortgage loans without first registering with the registry. The proposal, which is being issued jointly by the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of Thrift Supervision, Farm Credit Administration, and National Credit Union Administration, establishes the registration requirements for mortgage loan originators employed by agency-regulated institutions, as well as requirements for these institutions, including the adoption of policies and procedures to ensure compliance with the SAFE Act and final rule. As required by the law, the proposal also requires these mortgage loan originators to obtain a

U.S. Department of Housing and Urban Development (HUD) Secretary Shaun Donovan and the National Fair Housing Alliance (NFHA) have rolled out their national media campaign to fight foreclosures and discrimination. NFHA and HUD have partnered to create a national media campaign that informs consumers about alternatives to foreclosure, how to avoid predatory loan terms and how to recognize and report rental discrimination. NFHA’s members nationwide, the Leadership Conference on Civil Rights, and other groups will assist with distributing the materials. “Many families, particularly minorities, have been victims of aggressive and misleading marketing of risky loan products and foreclosure rescue scams,” said HUD Secretary Donovan. “As we implement President Obama’s Making Home Affordable plan to deal with the foreclosure crisis we need to ensure that families in trouble with their mortgages are not hurt a second time with scams. Foreclosure scams are destructive, devastating, and deceptive, and I’m thrilled that the National Fair Housing Alliance, in partnership with HUD is launching an ad campaign to address the fair housing challenges in the foreclosure crisis, including predatory lending and foreclosure scams.” The campaign is designed to target: (1) Families in immediate need to refinance; (2) Families in or on the brink of foreclosure; (3) Families facing eviction or already in the rental market: and (4) Families ready to purchase a home. The media campaign will include print ads and posters addressing foreclosure prevention, predatory lending and rental discrimination in English, Spanish and Chinese; television public service announcements (PSAs) in English and Spanish; radio PSAs in English and Spanish; a movie slide; and an airport continued on page 20

requires careful enforcement in order to assure that originators will meet these guidelines. Specifically, compliance with the requirement to receipt the appraisal. “Borrower Receipt of Appraisal” (Section II) of the HVCC states: “The lender shall ensure that the borrower is provided a copy of any appraisal report concerning the borrower’s subject property promptly upon completion at no additional cost to the borrower, and in any event no less than three days prior to the closing of the loan. The borrower may waive this three-day requirement. The lender may require the borrower to reimburse the lender for the cost of the appraisal.”

Information contained in the “Regulatory Compliance Outlook” column is not intended to be and is not a source of legal advice. The views expressed are those of the contributing author and do not necessarily reflect the views or policies of National Mortgage Professional Magazine (NMP), any governmental agency, business entity, sponsoring organization or institution. NMP makes no representation concerning and does not guarantee the source, originality, accuracy, completeness or reliability of any statement, information, data, finding, interpretation, advice, opinion or view presented therein.

Mortgage Disclosure Improvement Act (MDIA)

O Disclosure statement: Now requires the following statement: “You are not required to complete this agreement merely because you have received these disclosures or signed a loan application.”

Both Fannie Mae and Freddie Mac adopted the HVCC, whose effective date of implementation was May 1, 2009. One area of implementation

The SAFE Act requires the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) to establish a Nationwide Mortgage Licensing System and Registry (NMLSR) for loan originators. All states must participate in the NMLSR and develop a licensing system for mortgage loan originators that meets certain, minimum standards set forth in the SAFE Act, as determined by the U.S. Department of Housing and Urban Development (HUD), by Aug.1, 2009 (or Aug. 1, 2010 in the case of legislatures that meet biennially). A loan originator must be registered if that originator is an employee of an

Do you have a regulatory compliance issue that you’d like to see addressed in the “Regulatory Compliance Outlook” column? If so, e-mail your issue or concern to Jonathan Foxx at Jonathan Foxx, former chief compliance officer for two of the country’s top publicly-traded residential mortgage loan originators, is the president and managing director of Lenders Compliance Group, a mortgage risk management firm devoted to providing regulatory compliance advice and counsel to the mortgage industry. He may be contacted at (516) 442-3456 or by e-mail at

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O Fee restrictions: Prior to issuing early disclosures, collection is limited to a reasonable fee for the credit report.

Home Valuation Code of Conduct (HVCC)

Secure and Fair Enforcement for Mortgage Licensing Act of Submit your questions … 2008 (SAFE Act)


O Early disclosure: Now extends to “any extension of credit secured by the dwelling of a consumer.” Excluding home equity lines of credit (HELOCs), early disclosure must be implemented for any mortgage loan subject to the Real Estate Settlement Procedures Act (RESPA) that is secured by the consumer’s dwelling (i.e., purchase money, refinances, second mortgages, on primary and second homes).

O Prior to consummation—Seven day waiting period: From delivery or mailing of the TILA Disclosure, prior to consummation. Timing begins when a creditor mails or otherwise delivers the TILA Disclosure. Counting of days as “business days” is defined as all calendar days except Sundays and legal holidays. May be waived for bona fide financial emergencies.

Action steps O Develop a process for implementing two new forms, one to acknowledge receipt of the appraisal and another to waive the three-day rule. O Develop procedures to test the process to be sure that these forms are being timely disclosed. Monitor for corrective actions.

Action steps O Develop procedures to obtain criminal history background checks. O Assist loan originators with understanding the initial examination requirements prior to licensure. O Offer a table to calculate the individual’s net worth requirement. O Institute an ongoing policy to offer individual credit checks. O Arrange training venues for the initial education needed prior to licensure. O Determine and announce state-specific, continuing education requirements. O Provide assistance in ascertaining an individual surety bond. O

The Mortgage Disclosure Improvement Act (MDIA) amends the Truth-inLending Act (TILA) and provides new regulatory structure. However, many provisions go into effect on July 30, 2009, not on Oct. 1, 2009 (as MDIA initially required). The Federal Reserve Board re-set the effective date to July 30, 2009, pursuant to amendments made to the MDIA on May 8, 2009 by the Emergency Economic Stabilization Act. Effective: July 30, 2009, certain requirements must be implemented:

O Re-disclosure—Three day waiting period: If the annual percentage rate (APR) is out of tolerance (not more than 1/8 of one percent above or below the actual APR), redisclosure is required three business days prior to consummation. Counting of days as “business days” is defined as all calendar days except Sundays and legal holidays. May be waived for bona fide financial emergencies.

insured depository institution (or one of its subsidiaries) or originates loans for a state licensed mortgage company (i.e., a lender or mortgage broker). If a state is not in compliance with all the requirements of the SAFE Act licensing mandates, it still must comply with certain standards. Therefore, all affected financial institutions should proactively implement basic standards and procedures on behalf of their loan originators.


news flash

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diorama. In total, 26 products with some variations in English, Spanish and Chinese will be produced for this campaign. For more information, visit or

HOPE NOW reports: Mortgage industry completes record number of workouts HOPE NOW, the private sector alliance of mortgage servicers, nonprofit counselors and investors that

works to prevent foreclosures and keep homeowners in their homes, has announced that its members and the larger mortgage lending industry completed 270,000 homeowner solutions in April. This is the largest number in any month since HOPE NOW began to compile data. In April 2009, HOPE NOW members and the larger mortgage lending industry modified 127,000 mortgages and completed 143,000 repayment plans. This slight drop in the number of modifications and increase in pay-

ment plans from March was partially caused by the industry beginning to implement the Obama administration’s Home Affordable Modification Program (HAMP). Under the conventions of the HAMP, loans are subject to a three-month-trial period before a modification can be completed and, therefore, are often classified as repayment plans or trial modifications. Some of these trial modifications will result in formal reporting of modifications after 90 days. As a result and, as expected, the number of repayment plans increased and the number of modifications decreased from what otherwise might have been recorded. According to Faith Schwartz, HOPE


Shared Vision, Shared Success.SM Make Your Way With A Lender Committed To Leading Responsible Change Wells Fargo Wholesale Lending is dedicated to working with mortgage brokers who are committed to five key principles for long-term industry success: Responsibility: Ensure fair and responsible lending and borrower education are top priorities.

JULY 2009 O



Quality: Produce high quality loans.


Controls: Better manage our collective risk and eliminate fraud. Excellence: Create, promote and adhere to industry-leading standards of excellence. Efficiency: Develop capabilities that drive greater efficiency and ease of use between our companies. Together, we will lead the way, helping to establish a foundation for a stronger, healthier and more responsible industry. Share in this vision. For more information, tools, ideas and market insights visit our Shared Vision, Shared Success.SM web site located on






This information is for use by mortgage professionals only and should not be distributed to or used by consumers or other third-parties. Information is accurate as of date of printing and is subject to change without notice. Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A. © 2009 Wells Fargo Bank, N.A. All Rights Reserved. #64153 4/09

NOW’s executive director, the mortgage lending industry is working hard to make HAMP a successful tool to fight the foreclosure crisis. “Many HOPE NOW members see HAMP as an important opportunity for homeowners in trouble,” said Schwartz. “The number of homeowners helped by the industry each month should continue to increase as this program continues to be implemented.” The HOPE NOW April data shows: The number of 60-plus days delinquencies was the same in April as in March at just under three million; foreclosure starts dropped by more than 16 percent, 290,000 in March to 249,000 in April; and foreclosure sales increased, from 53,000 in March to 65,000 in April. According to Michael Bright, HOPE NOW’s chief statistician, many HAMP trial modifications initially show up as repayment plans. “The increase in repayment plans recorded in April is due, in part, to the first trial modifications completed under the administration’s program,” said Bright. “Assuming borrowers complete the trial period successfully as mandated by the government, these loans will eventually be recorded as having been modified.” For more information, visit

Mortgagebot releases results of its Benchmarks 2009 report Mortgagebot has announced the results of its Benchmarks 2009 report, a biannual comprehensive survey and analysis of online lending trends, practices and procedures that have been implemented at the more than 5,000 mortgage-lending Web sites that Mortgagebot maintains for its more than 900 clients nationwide. “Once again, we’re pleased to provide this unique and insightful research to our clients,” said Mortgagebot president and CEO Scott Happ. “Our Benchmarks 2009 study analyzes the overall online lending practices of all Mortgagebot clients, and the results can help them get a sense of how effectively they’re responding to industry trends—and how well their businesses compare with their peers.” Benchmarks 2009 is the third such study to be done by Mortgagebot, the first one having been published in 2005 and the second one in 2007. The new study is divided into several sections that present detailed data analysis on such topics as: Loan purpose and approval rates; application volumes by origination channel; submitted and abandoned application trends; and online borrower activity and demographic profiles. “Our client family is made up of banks and credit unions of every size and description,” noted Happ. “So our study represents the real-world activity continued on page 28 O


O JULY 2009


“Enhancing the independence and integrity of the appraisal process.”

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—Freddie Mac Home Valuation Code of Conduct Fact Sheet


At this stage of the game, all should know the specifics and background of the Home Valuation Code of Conduct (HVCC). The text of the six-page document has quickly become legendary, the beginning of the end for many independent appraisal operations, and the starting point of positive and negative tirades on the topic that could, and have, lasted hours. As stated on the Freddie Mac Web site, the HVCC is the result of a joint agreement between Freddie Mac, the Federal Housing Finance Agency (FHFA), and the New York State Attorney General [Andrew Cuomo] to enhance the independence and accuracy of the appraisal process, and provide added protections for homebuyers, mortgage investors and the housing market. The National Association of Mortgage Brokers (NAMB) issued a Call to Action in early June where the association urged its membership to bombard the office of New York State Attorney General Andrew Cuomo and the offices of Fannie Mae and Freddie Mac with calls and inquiries, and letters and e-mails on the HVCC issue. NAMB has also set up a special HVCC Resource Center on their Web site for brokers, lenders and consumers to learn more about HVCC and opened a special e-mail account,, where stories on the effects of the HVCC could be shared. You will find a sampling of some of those stories below. In addition to educating its membership on the intricacies of the HVCC, NAMB Immediate Past President Marc Savitt has been fielding mainstream media inquiries and has been lining up media appearances to discuss the matter. On June 18, Savitt testified before the House Financial Services Subcommittee on Oversight and Investigations at a hearing titled, “Strengthening Oversight and Preventing Fraud in FHA and Other HUD Programs.” Savitt, along with representatives from HUD, the Mortgage Bankers Association, and other industry-related fields, shared his membership’s concerns with the HVCC and how it has negatively impacted brokers nationwide since its enactment.

“Our fragile housing market is once again on the verge of collapse,” said Savitt at the hearing. “We are looking for appraisal independence and we don’t have that with HVCC.” National Mortgage Professional Magazine had the opportunity to sample its readers, the ones directly impacted by the HVCC, to provide an overview of how mortgage operations across the nation are dealing with this new regulatory hurdle. Take a look at the perspectives below, and we urge you to share your thoughts and feeling with other readers online at

From the mortgage broker’s perspective … John Anthony ACA Mortgage Company LLC • Mechanicsburg, Pa. The consumer loses … period. Appraisals are more expensive. It takes longer to get the appraisals back, which means the rate lock either needs to be longer (which is more expensive) or they [consumers] have to pay to extend their rate lock or both. Then, if the borrower wishes to change lenders, they may have to pay for another appraisal depending the losing lender’s policies on releasing the appraisal and/or they (the consumer) may experience costly delays in getting the appraisal transferred. These are real world realities. It will seem like standard operating procedure in a year, but we will know, even if the consumer does not, that there was a better way and the consumer is paying thousands more in interest on their mortgage for no real benefit. Good appraisers are talking about getting out of the business. The lender does not pay for extensions, the consumer does (as I mentioned above). There is little motivation to expedite this process.

A simple real example … my customer gave me a check on the 19th of May which we sent that day to the lender (who does not accept credit card payments). Before HVCC, I would have had the appraisal in my hands by a quality, licensed, local appraiser by the 22nd. I am told by the lender that they might hear back on the appraisal (which by the way might be the very same appraiser doing the same work for less money) by June 2. Two weeks versus three days? Real world. Even those who do take credit cards have similar turnaround times. Thousands in interest? For what value? So, that the third-party originators (TPOs) cannot influence the appraisal? The HVCC, as I understand, it was born from an investigation of a lender inappropriately influencing appraised values, not TPOs. The HVCC, as it turned out, does not impact the lenders, and therefore, has no effect on the very organization the investigation found at fault. Real world … operating costs are higher, turnaround times are slower, rates cost more to hold and the consumer does not end up with a better quality product. Fannie and Freddie will still be relying on the appraisal review process for quality control. We can only hope that a repeal is in the wings and that they study how negatively this impacts the consumer with little, if any, upside for the government-sponsored enterprises (GSEs).

Dan Cunyus First Source Capital Mortgage Inc. • Van Alstyne, Texas The recent mandate for a new and improved HVCC, however wellintentioned, seems to be a great example of the Law of Unintended Consequences. From one man’s view, most of the problems today are the direct result of relaxed credit and income underwriting standards for residential real estate transactions. The current situation has less to do with appraisal data, and more to do with how these loan products were actually conceived and born, and placed into the public arena for consumption. So, let’s review … clever Wall Street folks and cheap money policies and the political desires of congressional members all combined to fund a variety of socalled “housing needs” to create an incredible and insatiable appetite for very large amounts of closed loans to securitized and sell as quickly as possible. Investors such as large commercial banks, investments banks, and the likes of AIG are now in shambles as a direct result of the rainbow stew served up by Wall Street. Enter the mortgage originators … now the stage is set, the lights are up and the cameras ready. The money is “on ice,” ready to be offered to the public without closing costs, regardless of job history, credit ratings or what the heck … even a real job! Don’t even mention a downpayment! If you can fog a mirror, you get loan! What a great deal! Whoops … what went wrong … nobody is making a payment! Who can we find to blame for this mess anyway? Well for sure not certain members of Congress, or the Fed, or those on Wall Street, or the poor unsuspecting investors who were duped into purchasing the high-yield investments. We cannot place any blame on the poor unsuspecting borrower, who was obviously strong-armed into signing the loan documents. Folks, it is time for all of us who want the economy to recover, to take a stand on the ill-conceived HVCC mandate. Appraisers, real estate agents, brokers and bankers all already have their own professional codes of conduct! The solution is not to institute a new standard for conduct, which is presently disrupting the flow of mortgage money from those who want to lend, to those who can qualify to actually pay back the loan! Mortgage industry professionals must speak out about this ill-conceived mandate to reinvent the continued on page 24

O JULY 2009

Glenda F. Sweitzer Towne & Country Mortgage • Hamilton, Mont. We are already experiencing higher costs to the customer in the form of desk reviews and second appraisals. This is due to the fact that lenders are taking it upon themselves to dictate values by relying on unreliable sources, such as real estate agents, to determine values in an area. They are also relying on county assessments to dictate values which are nowhere close to actual values. I do believe that a rotation system should be put in place, but we now have new companies cropping up all over the place adding their own fees to the mix, along with trying to dictate fees paid to the appraisers. There is a threat there, in that if appraisers do not agree to these new lower fees, then they will not get the business. This is happening all over the state of Montana.

Lisa Schreiber NetMore America • Walla Walla, Wash. NetMore America is accepting transfers, but we are seeing inconsistency in the language that is being used. If we are to continue with this process, more dialogue around standardization would be helpful to all. We are doing our very best to comply, while providing service to our clients, but it is difficult at best with no benefit to anyone (especially the consumer), except maybe the AMC [appraisal management company]. To give you a better feel for what we are seeing, NetMore has employed three people to manage the HVCC process. In addition to these hires, we still have to utilize underwriters to evaluate the appraisal we receive and deploy QC [quality control] technology which includes an AVM [automated valuation model] on all files. Based on those review mechanisms, we are seeing poor quality in comps used, improper paperwork provided and poor response times when corrections are needed. All of this with no benefit/relief to using an AMC on the investor side (as we are still subject to yet more QC valuations), longer times and higher costs. Amazingly to me, we are also seeing very little push back on values once we have jumped through all these hurdles, which proves to me that the process was not broken, but possibly abused by a small group which led to the lawmakers’ overreaction. It always astonishes me that lawmakers continue to lack the understanding of our business and end up only hurting the consumer to whom they are trying to protect.


Scott Stingley Stonebrook Mortgage • Boise, Idaho Lenders and appraisal management companies (AMCs) will not accept assignments of appraisals ordered through other AMCs as they cannot guarantee the appraisal was HVCC-compliant and do not want to have an unsellable loan in their portfolio. The true issue resides with the consumer who decides to change lenders once the process has been initiated. In these cases, the consumer will be responsible for a minimum of two appraisals resulting in unnecessary expense and wasted time.

From the wholesaler’s perspective … O

Eduardo Adame HomeStart Capital LLC • Bellaire, Texas I am proud member of the National Association of Mortgage Brokers and I am already having several problems by using the lender’s “preferred” appraisers. We have a great reputation in the Houston area, and our company is based on integrity, honesty and unmatched service to all of our clients. We do 100 percent of our business from referrals from previous clients and outstanding real estate agents. We can no longer provide the service and low costs that we are known for because of the following reasons: The last two appraisals I had performed by an appraisal management company (AMC), in my opinion and even both of my buyer’s opinions, were overvalued. Both of my clients had almost 800 credit scores, putting 20 percent down on their purchases. Both of them were really surprised of how much more the properties were appraised for, since they both know the areas where they were buying extremely well. Some lenders have guidelines that clearly state that if the home appraises for 120 percent more than the “Predominant Value” of the area, it automatically triggers an “Appraisal Review,” also performed by the AMC (in this case, it happened to be the same company that performs the actual appraisals). With both of my clients, we had to pay $360 for the appraisal, plus $50 to rush it because they can take more than five days to do the appraisal (which I could have done at no additional charge in one day with my previous appraiser). Since May 1, they have increased their cost to $405 for a 1004 Appraisal. Plus, since both of them were overvalued, we had to order a review for $270 plus a $50 rush fee to get it back in three days. Both of my clients spent more than $700 on appraisals on what we could have done faster and more efficiently for just $275. I called the “Director of Appraisers” to argue the value of both appraisals and I was told that the value was correct … even the sellers of the properties where shocked to learn of these “appraisal values.”

The other problem we see is by the ordering of an appraisal by a lender, and that appraisal being completed in the lender’s name, (the broker/borrower is charged for that appraisal, by the way) we are not able to transfer that same appraisal to another lender in such cases where the original lender may decline the file. This is causing the re-ordering of appraisals on the same property, through another lender, causing double fees to the borrower/broker and increasing time and effort and costs for the appraiser, which is subsequently causing higher appraisal fees.


Living With HVCC continued from page 23

way appraisals are ordered and executed. As it now stands the present situation has created the unintended consequence of making access to credit by the many deserving and credit worthy borrowers much more difficult, not to mention the elimination of tens of thousands of jobs in the real estate industry, including real estate agents, brokers, bankers, appraisers, surveyors, title and property insurance companies, inspection service vendors, and all the many hundreds of thousands of related support industry jobs. So, sound off boys and girls! It is time to get out of your comfort zone, start writing letters, making calls, and sending money to those who have the ability to reverse this mandate, and who see this debacle the same way many of us see it!

From the appraisal management company’s (AMC) perspective …


1. Go to 2. Pick a low fixed rate for your borrower 3. Set closing date then schedule dinner and drinks!

JULY 2009 O


Tommy A. Duncan Quality Mortgage Services LLC • Franklin, Tenn. The consensus from National Mortgage Appraisers is the brokers despise, with a passion, the HVCC, as well as some credit unions and community banks. They feel they lose customer intimacy by bringing in a third party appraisal management company. The loan officers or processors do not like having to provide their client with a credit card authorization form so the appraisal can be paid in advance. As the mortgage professional

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knows their appraiser, they will learn to know their AMC. It is the AMC’s responsibility to strive for the highest customer relationships with the mortgage professional and the AMC who has the ability to master the customer services to the mortgage professional will do well. I see it as business as usual. The mortgage professionals are ordering appraisals just like they were. The difference is there is one centralized order point, rather than having to keep up with multiple appraisers. The mortgage professional will spend less time tracking the appraisal because the AMC is acting as a liaison between the borrower and the appraiser, giving the mortgage professionals more time to make money. Most mortgage professionals want AMCs to use their approved list. This is fine, but the appraisers that are not used to working with AMCs are the most difficult to work with as per pricing, scheduling and turn times. Some mortgage professionals do not want to deviate from their list because they are afraid they may not get the evaluation they want. The relationship between the mortgage professional and the appraiser is already established, and when the appraisal order is made, the appraiser knows what the mortgage professional usually requires. This is a double-edged sword and can cut both ways. I am not an advocate of using an existing appraiser list, but I have accepted appraiser lists in order to bring a level of continuity when starting new relationships. The next problem for AMCs is when the rotation of appraisers is made, the AMC uses an appraiser that is not liked by a lender or a mortgage professional and the lender or mortgage professional wants to blacklist an appraiser for an appraisal that was performed years ago. We ask for the letter of sanctions or disbarment and therefore, we question the legitimacy of the blacklist. We take the position that the lender has not properly documented the disciplinary actions against the appraiser without any opportunity for the appraiser to redeem his/herself. I believe that it is wrong for a lender to hold continuous sanctions against an appraiser, unless the appraiser has conducted some type of appraisal fraud. Here is an example, a nationally-known lender disciplined an appraiser five years ago and issued a letter to the appraiser which the appraiser acknowledges. Since that time, the appraiser has submitted appraisals through brokers/AMCs and the loans were underwritten and funded by the lender who issued a sanctions letter. The same appraiser completed an appraisal for us and the same lender had an underwriter reject the appraisal because the appraiser’s name was on a blacklist. The lender could not produce a sanction letter which the appraiser retained. The appraiser had no disciplinary action by the state or agency. The lender refused us a copy of their blacklist so that we would not order an appraisal from their blacklist. The lender had no future plans to give the appraiser another opportunity. The victim is the borrower. The borrower had to pay for another appraisal and the new appraisal was within a few hundred dollars of the previous appraisal that was performed by the blacklisted appraiser. The lender was coercing the mortgage professional to use an AMC that the nationally-known lender owns. This particular appraiser is repealing the sanctions through the industry because of past accepted appraisals and plans to take this issue to the Evaluation Protection Institute. As I come into contact with various lenders with mortgage banking status, community banks and credit unions, they are under the opinion they can create an internal AMC outside of the mortgage department. This is true for now, but once attorneys start prosecuting lenders for Real Estate Settlement Procedures Act (RESPA) violations for inappropriate business affiliations and associations, and kick-back fees, lenders will start making better use of AMCs. HVCC is not a law, but only a policy. There will be more heated discussions over HVCC as soon as more advocacy for fairness requiring the large lenders and banks to fall in line with the mortgage brokers comes to light. However, I do not see this changing until Fannie Mae and Freddie Mac come out of conservatorship. Regardless if you agree or disagree with HVCC, one has to admit the industry is taking the right step in preventing undue persuasion and influence on the appraisers. I hear it from mortgage professionals and appraisers. Based on being the middle man, HVCC is the future and everyone will need to be flexible and adjust accordingly.

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Let us briefly consider each of these questions. Afterward, a suggestion will be offered that, if implemented, would strongly empower the borrower, fortify the lender and broker relationship, preserve continuity and potency of market forces, and save the YSP.

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Price discrimination: Can the YSP cause price discrimination?


The ancient Roman god, Janus, was two- other things, that “settlement charges faced—his back-to-back visages looking often are based on factors unrelated to at the past and into the future—a sym- the cost of providing the services,” and bolic representation of ineluctable tran- advocated regulating settlement costs. sitions through the passage of time, a This position was an underlying feareminder of essential change from one ture of the debate, beginning in 1972, condition to another, whether for better which led up to the formation of or worse. Like it or not, the yield spread RESPA.4 Congress decided that RESPA premium (YSP) will be should not implement going through its own price controls, such as transition soon, and, setting maximum allowdepending on the poliable costs, believing tics—and not necessarily instead that proper disthe facts—the essential closure and prohibiting change will be enduring certain practices were and irreversible. sufficient to avoid abuse. If the YSP is believed to HUD has maintained that be a legitimate financing RESPA is not intended to tool and proves to be a usebe a rate-making statute. ful means in the service of And it has indicated in borrowers, it may yet survarious policy issuances “If the YSP is believed vive; if not, its demise is on that the YSP is not per se to be a legitimate the way. At this time, it is in legal or illegal. Yet in the financing tool and danger of becoming near future the YSP—a proves to be a useful extinct! The House recently component of total commeans in the service passed the Mortgage pensation, and a means of borrowers, it may Reform and Anti-Predatory whereby a borrower, if yet survive; if not, its Lending Act,1 which will properly empowered, amend the Truth-in- demise is on the way. could actually determine At this time, it is in Lending Act (TILA), and it its use—will be heading danger of becoming has gone to the Senate.2 Its to the dustbin of history. extinct!” provisions directly affect This controversy can the fate of the YSP. If it be considered by briefly passes on to the White House in its current exploring certain evaluative criteria. form and President Obama signs it, this Broadly, the following areas constitute legislation will become law. the core of the debate: A key provision is the virtual removal of yield spread premiums!3 O Can the YSP cause price discrimination? Prior to the enactment of the Real O Can borrowers be charged more Estate Settlement Procedures Act because of the YSP? (RESPA) in 1974, the U.S. Department O Can the YSP provide a dollar for dolof Housing and Urban Development lar financing offset? (HUD) and the Veterans Administration O Does the YSP cover the cost of (VA) issued a report asserting, amongst goods and services?

There is some evidence that less sophisticated borrowers and borrowers with certain racial profiles have paid higher loan costs. According to HUD’s Office of Policy Development and Research, “price discrimination has been known to occur,” whereby “loan fees are highly correlated to race and education characteristics, with African-American and Latino borrowers paying an average of $415 and $365 more, respectively, than other borrowers.”5 HUD’s recent, final version of Regulation X revisions,6 designed to create a more level playing field, were in part a response to a regulatory impact analysis—required by the Regulatory Flexibility Act—that stated “there is strong evidence of information asymmetry between mortgage originators and settlement service providers and consumers, allowing loan originators to capture much of the consumer surplus in this market through price discrimination.”7 Total loan costs are elevated in loans containing YSPs, discount points and seller contributions to closing costs. The YSP may not necessarily offer the borrower a savings, though it can be used to increase the cost. “Research shows that borrowers saved only $20 in upfront cash for each $100 paid in YSP. Mortgage-brokered loans benefited the least, saving only $7 per $100 in YSP.”8 Higher fees, lower savings, meaning increased costs to borrowers, can lead directly to price discrimination.

Higher costs: Can borrowers be charged more because of the YSP? Mortgage brokers can obviously increase their compensation by selecting the lender that offers a higher YSP for a loan, though another lender may offer a loan with similar features, but at a lower YSP. It doesn’t matter that the compensation is paid indirectly (i.e., YSP paid by lender), the consumer is ultimately paying for it. If such increased compensation is not used as a financing offset, the mortgage broker could be incentivized to choose the higher YSP, without having to provide any additional financing, products, or services to the borrower. This is a prima facie violation of RESPA,9 because a borrower’s upfront cash requirements are not lowered, yet the mortgage broker’s compensation is increased in excess of what is reasonably related to the total value of the origination services provided by the broker.10

Offset financing: Can the YSP provide a dollar for dollar financing offset? HUD has consistently taken the position that the YSP can play a significant role in offsetting financing costs.11 In its Statement of Policy 2001-1, HUD stated that “a yield spread premium can be a useful means to pay some or all of a borrower’s settlement costs. In these cases, lender payments reduce the up-front cash requirements to borrowers. In some cases, borrowers are able to obtain loans without paying any upfront cash for the services required in connection with the origination of the loan. Instead, the fees for these services are financed through a higher interest rate on the loan. The yield spread premium thus can be a legitimate tool to assist the borrower”12 (emphasis added). Indeed, HUD believes this use of the YSP “fosters homeownership.”13 Analogous to the case of the YSP having the potential to cause a higher cost loan, if the YSP is only used to increase the borrower’s interest rate as well as the broker’s overall compensation, but does nothing to lower up-front cash requirements for the borrower, this use of the YSP would not be a bona fide source of financing and certainly violates RESPA.14

Goods and services: Does the YSP cover the cost of goods and services? This is an area that has been litigated extensively and, even to this day, the outcome is uncertain. The legal landscape has stretched far and wide, in various jurisdictions, from initially maintaining that the YSP is a referral prohibited by RESPA’s Section 8,15 to the YSP being a form of compensation and not a violation of RESPA;16 from the YSP being a permissible payment for goods (i.e., loans with YSPs),17 to a reversal of that position, holding that the YSP was potentially a prohibited referral fee under Sections 8(a) and 8(c) of RESPA.18 In that latter ruling, a case decided by the Court of Appeals for the Eleventh Circuit, in Culpepper v. Inland Mortgage Corporation (Culpepper), the Court offered a two-pronged test to determine if the YSP was compliant with RESPA: 1. Are goods or services provided in exchange for the yield spread premium?; and 2. Was the YSP a payment in exchange for those goods or services. First, the court decided that the YSP was not a payment for the good itself (i.e., the “good” being the loans with YSPs, table-funded), because the lender, not the broker, actually owned the loan already. Second, the court decided that the YSP was not a payment for the good itself, asserting that direct payments to the broker is the allowable compensation, and, in any event, given that the YSP is calculated on the basis of the loan’s interest rate, where there is no ostensible difference between a loan with a YSP and a loan without a YSP, the YSP had to be a prohibited referral fee.

HUD then weighed in, offering its Statement of Policy 1999-1, and in so doing offered its own Two-Part Test. Essentially, HUD’s position was (and still is) that a mortgage broker’s total compensation is RESPA-compliant (1) if “goods or facilities were actually performed for the compensation paid,” and (2) if the “payments are reasonably related to the value of the goods or facilities that were actually furnished or services that were actually performed.”19 HUD provided a list of compensable services which, although it is not (and was not meant to be) exhaustive, clearly identifies numerous services that mortgage brokers render in return for direct and/or indirect compensation from the borrower. Importantly, HUD identified certain goods provided by a mortgage broker, but it made clear that the loan (i.e., a loan with YSP, table-funded) was not itself a “good.” Explicitly, HUD stated that, “while a broker may be compensated for goods or facilities actually furnished or services actually performed, the loan itself, which is arranged by the mortgage broker, cannot be regarded as a ‘good’ that the broker may sell to the lender and that the lender may pay for based upon the loan’s yield’s relation to market value, reasonable or otherwise.”20 Even though HUD had answered key questions, many courts still vacillate in their interpretations. Indeed, litigation continued, bringing about an additional response from

HUD. Its 2001-1 Statement of Policy 21 was issued, in part, to clarify HUD’s position on YSPs, due to a decision of the Court of Appeals for the Eleventh Circuit, in Culpepper v. Irwin Mortgage Corporation, which upheld certification of a class in a case alleging that YSPs violated Section 8 of RESPA.22 The Court had found that the lender, pursuant to a prior understanding with mortgage brokers, had paid YSPs to the brokers based solely on the brokers’ delivery of above par interest rate loans. Furthermore, the court described HUD’s 1999-1 Statement of Policy as “ambiguous.” At the time, other courts were rendering conflicting decisions. HUD’s response asserted the legality of YSPs, when services are actually rendered for compensation reasonably related to the value of the services and it makes clear the operational effectiveness and purpose of YSPs in increasing homeownership, as well as identifying those areas where the YSP may be abused. But how to determine that the compensation payments are reasonably related to the value of the services actually furnished and performed?

Suggestion Implicit in each of the criteria given above is the view that the YSP can be abused, though it may serve a legitimate purpose. Many commercial transactions are subject to abuse, if left unregulated. To eliminate the YSP, when it is a useful means and legitimate tool to originating residential

mortgage loans, would not only deprive the borrower of its application, but also cause a pervasively destructive impact on the mortgage brokerage industry. This is clearly a case that cries out for better regulation. HUD had recommended regulatory measures in 1997, when it published a proposed rule to give a qualified “safe harbor” for payments to mortgage brokers under RESPA’s Section 8.23 HUD proposed that there would be no violation of RESPA—and a presumption would be made that broker fees, both direct and indirect, were legal— if a mortgage broker should enter “into a contract with consumers explaining the broker’s functions (whether or not it represented the consumer) and the total compensation the broker would receive in the transaction, before the consumer applied for a loan.”24 Recent RESPA reform has been an attempt to remediate through increased disclosure. The new Good Faith Estimate (GFE), consisting of three pages, provides a rather thorough outline of the settlement charges. The GFE requires that the YSP to be disclosed more comprehensively, requiring a “credit” field to be used to disclose a yield spread premium and a “charge” field to be used for discount points.25 However, does this go far enough in determining the extent to which the YSP is applied to the loan and, importantly, establish the “reasonableness” of this particular compensation for

goods or services actually rendered? After all, HUD’s remedy would simply be to require an enhanced disclosure of the YSP to the borrower. Indeed, the Mortgage Reform and Anti-Predatory Lending Act, mentioned above, will surely add a whole new set of mandatory disclosures to the already huge number of disclosures required by existing law. But the resolution will not be found in more and more disclosures or by allowing the government to interpose itself between the consumer and private enterprise through more disclosure forms and promulgating arbitrary standards. An important piece is still missing, one that gives the consumer (and, therefore, market forces) the ability to set a fair market standard for compensation payments that are “reasonably related to the value of the services actually furnished and performed.”26 In the long run, if appropriately implemented, it would also remedy many of the issues involving price discrimination, higher costs, and offset financing, because it would give the borrower control over the use of the YSP. The missing piece is simply to credit the YSP directly to the borrower. The borrower would then have the choice to use the YSP in accordance with the borrower’s own interests. Once the borrower specifically authorizes how the YSP is to be used, a standard of “reasonableness” would be established.

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O JULY 2009

*Subject to state specific laws, regulations and Emigrant’s Geographic Restrictions. **Applicant(s) must have a FICO of 651 or greater for transactions with loan amounts above $3 Million. Copyright © 2009 Emigrant Mortgage Company, Incorporated (Emigrant). All rights reserved. Emigrant is a subsidiary of Emigrant Bank, Member FDIC and is an Equal Opportunity Lender. All product names, company names and logotypes are servicemarks or trademarks of Emigrant in the United States and other countries. The information, products and services contained in this advertisement are believed to be correct but may include inaccuracies, typographical errors and/or omissions. Emigrant does not guarantee the accuracy of the data contained herein. This information is intended for mortgage and/or real estate professional use only and should not be distributed or presented to consumers or any other third parties. This is not an offer or guarantee to extend consumer credit. Program guidelines, terms and/or conditions are subject to change by Emigrant without notice. All loans are subject to submission of a complete application, underwriting review and credit and property approval by Emigrant. Not all products and/or programs are available in all states and/or localities and/or for all loan amounts. Certain products / program are offered through third parties. Other restrictions and limitations may apply. New York Licensed Residential Mortgage Lender: Exempt. Emigrant is registered or licensed with the Banking Departments or Divisions in CT, DE, FL, MA, NH, NJ, NY, PA and RI.



Contact a BrokerDirect® BrokerDirect Account Manager in Your Area TODAY! O

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news flash

of a broad spectrum of lenders from coast to coast. Half of our clients have less than $500 million in assets, but half of them have more. We’re also pleased to be able to serve about 40 of America’s top 100 banking institutions, and nearly half of the country’s top 100 credit unions.” According to Happ, Benchmarks 2009 presents useful insights into the realm of consumer-direct, Web-based mortgage lending—insights that can help banks and credit unions sharpen the focus and direction of their lending businesses. For more information, visit

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HUD offers $58 million for housing counseling


yield spread premium

continued from page 20

The U.S. Department of Housing and Urban Development (HUD) has announced that more than $58 million is available for a broad range of housing counseling programs to help families find and preserve housing. The funding is an increase of $11 million, or 23 percent, over last year. These grants will be awarded competitively to hundreds of HUD-approved counseling agencies and state Housing Finance Agencies that offer a variety of services, including how to purchase or rent a home, how to avoid foreclosure, how to improve credit scores, and how to qualify for a reverse mortgage. “Now, more than ever, it is crucial that American families make informed decisions about their housing choices,” said HUD Secretary Shaun Donovan. “These counseling agencies are also vital to the success of the President’s Making Home Affordable Plan which is helping families avoid foreclosure and remain in their homes.” HUD-approved counseling agencies provide homeownership counseling, as well as financial literacy education to renters and homeless individuals and

families. This year, HUD’s Housing Counseling Grant program will provide approximately $47 million for comprehensive counseling; $8 million for Reverse Mortgage Counseling, $2 million for supplemental funding for Loan Document Review Counseling, and $1 million in supplemental funding for Fair Lending and Mortgage Fraud Analysis and Counseling. National and regional agencies distribute much of HUD’s housing counseling grant funding to community-based grassroots organizations that provide advice and guidance to low- and moderate-income families seeking to improve their housing conditions. In addition, these larger organizations help improve the quality of housing counseling services and enhance coordination among their counseling providers. HUD will award grants to approximately 400 applicants. Applications may be downloaded from HUD’s Web site, including instructions on submitting proposals via FedEx, United Parcel Service, and the U.S. Postal Service. Applications must be postmarked on or before Friday, July 17 and received by the designated reviewing office within five days. For more information, visit

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

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

Market forces will respond accordingly, as borrowers agree to the utilization of the YSP. Placing the control of the YSP into the hands of the borrower and letting its use be determined by the borrower will protect the borrower and provide a true “safe harbor.” Like the Roman god, Janus, we now occupy the middle ground between the past and the future, between how the YSP has been used in the past and how (or even if) it will be used in the future. As events unfold, however, saving the YSP by empowering the borrower to authorize its use may not go far enough! For the Service Release Premium (SRP), the undisclosed income paid to a lender when it sells an above par loan into the secondary market, is in some ways an analogue to the YSP. RESPA does not require a lender to disclose the SRP to the borrower, though it does require a mortgage broker to disclose the YSP. Should the YSP be revised or eliminated without concomitantly changing the application of the SRP? Legislation aimed at changing the YSP, but not the SRP, seems to favor the lender over the mortgage broker. Both the lender and broker serve the consumer! Borrowers will benefit from the proper use of the YSP and the SRP. In future articles, we will explore the role played by the SRP in originating residential mortgage loans, and, importantly, how revising the application of the SRP will benefit consumers, maintain a stable market, and preserve the vitality of all loan originators. Jonathan Foxx, former chief compliance officer for two of the country’s top publicly-traded residential mortgage loan originators, is the president and managing director of Lenders Compliance Group, a mortgage risk management firm devoted to providing regulatory compliance advice and counsel to the mortgage industry. He may be contacted at (516) 442-3456 or by e-mail at For more information on author Jonathan Foxx, visit Lenders Compliance Group on the Web at


• Daily updated mortgage industry news • Industry blogs • Write your own blog • Find loan programs • Discover local and national events • Get access to video

1- HR 1728. 2- Passed by the House on May 7, 2009 and received by the Senate on May 12,2009. 3- Amending TILA Sec 129B, inter alia, by inserting a new subsection after subsection (b): Sec 103(4)(A) “No provision of this subsection shall be construed as permitting yield spread premiums or other similar incentive compensation.” 4- Hearing before the Subcommittee on Housing of the House Committee on Banking and Currency (1972),

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Real Estate Settlement Costs: FHA Mortgage Foreclosures, Housing Abandonment, and Site Selection Policies. 5- Research Works, Volume 5, Number 8, September 2008, pp 1-2. 6- Released: Nov. 12, 2008. 7- FR-5180, Filed: 05/08/09. 8- Research Works, Op. cit., p.1. 9- 24 CFR 3500, Real Estate Settlement Procedures Act. 10- HUD offered a “Two-Part Test,” in its Statement of Policy 1999-1, to determine if a loan origination is RESPA compliant: (1) whether services were actually furnished and actually performed for the compensation paid, and (2) whether the compensation payments are reasonably related to the value of the services actually furnished and performed. See: 24 CFR Part 3500 (RESPA), Statement of Policy 1999-1, US Department of HUD, 02/22/99. 11- 54 FR 38646 (September 20, 1989), final rule in Deregulation of Mortgagor Income Requirements; HUD’s recognition in 1992 that the YSP must be disclosed, codified in “Fact Situations” 5 and 13 in Appendix B to 24 CFR Part 3500; see also, Op. cit. Statement of Policy 1999-1. 12- 24 CFR Part 3500 (RESPA) Statement of Policy 2001-1, Section I.A. 13- Ibid. 14- 24 CFR 3500.14 (g)(1)(iv), permits “a payment to any person of a bona fide salary or compensation or other payment for goods or facilities actually furnished or for services actually performed.” 15- Mentecki v. Saxon Mortgage, Inc., 1997 WL 45088 (E.D. Va. 1997). 16- Barbosa v. Target Mortgage Corporation, 968 F.Supp. 1548 (S.D. Fla. 1997). 17- Culpepper v. Inland Mortgage Corporation, 953 F.Supp. 367 (N.D. Ala. 1997). 18- Culpepper v. Inland Mortgage Corporation, 132 F.3d 692 (11th Cir. 1998). 19- HUD Policy Statement, 64 FR 10080, 10084, Op. cit., Note 10. 20- Op. cit., Note 10, Statement of Policy 1999-1, Section II.C. 21- Op. cit., Note 12, Statement of Policy 2001-1. 22- Culpepper v. Irwin Mortgage Corporation, 253 F.3d 1324 (11th Cir. 2001). 23- Codified at 62 FR 53912. 24- Op. cit., Note 10, Statement of Policy 1999-1, Section F. This qualified “safe harbor” would only be available to those payments that did not exceed a test to preclude “unreasonable fees.” The test was to be established in the rule-making. 25- 24 CFR Parts 203 and 3500, FR: Vol. 73, No. 222, pp. 68204-68288 (11/17/08). 26- Op.cit., Note 10, Statement of Policy 1999-1, “Two-Part Test.”

Need Clarity on FHA’s Allowance of the First-Time Homebuyer Tax Credit?

1. The IRS tax credit refund can be made only to the taxpayer and not a third party. Meaning the tax payer will get the refund and just repay the second line according to the terms of the lien. 2. The entity offering the tax credit advance with second liens can be a federal, state or local government office or an FHAapproved non-profit (HUD 4155.1 5.C).

6. Payments on second liens must be included in ratios unless deferred for at least 36 months. You will need to find out the terms of the loan. If you find that the payment is deferred for at least 36 months, you don’t have to include the payments in the ratios. 7. Balloon payments on second liens may not become due before 10 years.

Method 2: The purchase of the tax credit FHA-approved mortgagees and FHA approved non-profits may purchase the tax credit. The tax credit purchaser may not charge more than 2.5 percent of the tax credit as a fee. The mortgagee or nonprofit is allowed to charge a fee for the service they are providing, and that fee cannot be more than 2.5 percent of the

Visit author Jeff Mifsud’s Web site at for tips and information on FHA loans and details from some of the nation’s top FHA specialists.




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O JULY 2009

3. The buyer cannot get cash back through the tax credit advance. That is, if the TC is $8,000, but the buyer only needs $5,000 to close, the agency cannot give them back the $3,000 difference.

5. The second lien may be “soft” or require payments. Many government agencies already offer soft seconds that are either forgiven after a certain period of time or payable when the home sells. Some agencies do require payments. With the American Recovery and Reinvestment Act (ARRA) funds, many county and city agencies have been allotted money for these types of programs, which really benefit the borrowers. I learned about a program in the state of Michigan that offers up to 50 percent toward a FTHB purchase. Learning about and understanding how these programs work can help you stand out with your marketing, so contact your government offices and research these programs!

Jeff Mifsud founded Southfield, Mich.based Mortgage Seminars LLC in 2004, has been an FHA originator for 12 years, is a contributor to and is a former FHA underwriter. Jeff may be reached at (877) 342-9100 or e-mail


Method 1: The advance of the tax credit with a second lien

4. The second lien may not exceed the downpayment, closing costs and prepaid expenses. Please note that with the second lien method, they can use these funds for the 3.5 percent downpayment and the advance can exceed the tax credit amount. According to FHA Guides, the agency giving the second lien is able to offer the full amount of acquisition costs (4155.1 5.C.3.c). For example, if the buyer’s downpayment plus closing costs plus prepaids equals $10,000, and the tax credit is for only $8,000, the second lien cannot exceed $10,000.

which is when the program ends, so take action now. I suggest going to city administrators and informing them about this program. Cities throughout the country have been allotted millions through the ARRA funds to help them create homeownership. This could be a way you can help them make those funds go farther, which is music to any city administrator’s ears. Position yourself as an FHA expert and offer to do a community seminar about this program. Go FHA! O

If you are, you are definitely not alone. This Federal Housing Administration (FHA) update is from Mortgagee Letter 2009-15, which establishes the guidelines for the use of first-time homebuyer tax credit as settlement funds. Since this update was released, I have been getting e-mails from loan officers (LOs) across the country asking for clarity on how the program works. The fact is that these updates can be confusing if you are not proficient with FHA guides, as each of these updates presumes you have a good working knowledge of the guides and each update builds on that previous working knowledge. I hope to clarify how the First-Time Homebuyer Tax Credit (FTHBTC) works with FHA, and to give you the information you need to be an informed mortgage professional. The easiest way to understand these new guides is to look at them as two separate programs and two separate ways FHA allows use of the FTHBTC for settlement funds. The first is when the amount of the tax credit is advanced to the buyer in the form of a second lien, and the second is when the tax credit is purchased from the buyer in the form of an unsecured loan. To restate: One way is an advance with a lien and the other is a purchase of the tax credit as a loan. Now I will explain in more detail each of these two programs.

tax credit amount. For example, if the tax credit is $8,000, the fee the buyer is charged cannot exceed $200. This is not a hard and fast rule, and the letter states that it’s only “FHA’s view” that the fees not exceed 2.5 percent of the tax credit amount. The IRS may deduct from the tax credit: Unpaid student loans, tax liens and garnishments. Therefore, lenders and agencies are cautioned to do their due diligence in researching whether the borrower has any other credit obligations which would offset the tax credit amount. The proceeds of the sale of the tax credit can be used for closing costs, prepaids and additional downpayment above the 3.5 percent. Please note that with the Tax Credit Purchase method, the buyer cannot use these funds for the 3.5 percent downpayment. If you’re an FHA lender that has adequate resources and are able to quickly implement new programs, taking advantage of this change could help boost your purchase volume. This program could form the foundation of your homebuyer marketing for the rest of the year. You only have until Dec. 1,


reconstructed to better accomplish what it set out to achieve. Beyond the regulatory conundrum we face as an industry, there are internal forces further eroding the number of wholesale participants. We have witnessed an increasingly uneven “playing field” between the have a significantly negative and onerous “haves” and the “have not’s.” By that, I affect on our industry. There is a determi- mean those mortgage banking companies nation behind each of these bills to bring that have sufficient net worth and liquidity under control what is perceived as a to be able to sell loans on a “mandatory greedy out-of-control mortgage industry. basis” have a significant pricing advantage For those who feel that regulation is the over those more thinly capitalized smaller end-all-be-all “cure” for what has “ailed” companies that are forced to sell loans on our supposedly “sick” industry, they are the “best efforts” basis. Those selling on a brewing up a concoction of “medicine” “mandatory basis” are realizing anywhere that will do more to kill than to heal what from a full point to a point and three-quarters bottom line gain over is wrong with our industry. those selling on just a “best Well-intentioned regulaeffort” basis. When a group tors who do not underof companies, in this case stand our industry, nor the the better-capitalized comcomplexities or the probpanies, are able to realize lems we faced in this last the pre-tax difference of a business cycle, are the full point or more over their most ill-equipped body of more thinly capitalized individuals to be crafting a counterparts, the better “fix” to a system that capitalized companies are admittedly has flaws. The going to be able to offer betreal problem here is that ter pricing, while at the we, as an industry, have same time, maintain lacked the will or desire to “The real problem greater profitability. And self-regulate, and now, here is that we, as an when this happens in the whether we like it or not, industry, have lacked almost-always-competitive are going to face an the will or desire to “dog-eat-dog” wholesale onslaught of regulation self-regulate, and now, market, only the strongest like we have never seen whether we like it or (better capitalized) compabefore. And interestingly not, are going to face nies will survive, thus causenough, it will have the an onslaught of reguing a further thinning of the greatest negative impact lation like we have wholesale ranks. on the wholesale originanever seen before.” Several years ago, very tion channel. Is there a few knew what a warebetter example of a misguided, albeit well-intended, regulation house line of credit was. It was only those than the Home Valuation Code of who owned their own independent mortConduct (HVCC)? I cannot think of one sin- gage banking company or those who gle piece of regulation that has done wanted to become a mortgage banker more to kill a greater number of real knew and understood the importance of a estate transactions than the HVCC. And it warehouse line. In fact, in this last business comes at a time when our economy des- cycle there was such a seemingly endless perately needs every real estate transac- abundance of credit and warehouse line tion possible to fund in order to help providers that we, as an industry, took for rekindle an otherwise stalled real estate granted this critical segment of our induseconomy and world economy. Unless we try. Few understood that warehouse-lines speak out with a loud voice, more of the of credit were the very “heart pump” of same is on its way … and once again, the the independent mortgage banking indusgreatest impact will be on the wholesale try … that is until we as an industry expechannel. But, your voice can make a dif- rienced a life-threatening cardiac arrest. ference as we have witnessed by HR 3044, This brings me to the last couple of major which if passed, will put an 18-month forces working against the wholesale chanmoratorium on the HVCC until it can be nel: an ever shrinking number of ware-

Questions About the Future of Wholesale Are Growing By David Lykken

Many executives today who occupy the “C” Suite are pondering questions related to the future of the wholesale production channel. They are asking themselves and their fellow C-level executives questions like:

JULY 2009 O



O What on earth has happened to wholesale? O What forces are working against wholesale? O Who’s left? O Is wholesale going to survive? O What is the future of wholesale? O As a wholesale C-level executive, how best should I position my company’s business strategy to not just survive but prosper on these changes?


The later question is the primary focus of this article, but we first need to understand the problems currently facing the wholesale channel. It doesn’t matter which side of the wholesale channel you are on … the originating broker or the mortgage banker funding the loans … these questions are in the forefront of everyone’s mind of anyone remotely associated with wholesale. This is especially the case if you are one of the many who have been (or were) regularly checking the now infamous Web site, the Implode-O-Meter ( For the last two plus years, this site has chronicled the demise, one-by-one, of the multiple hundreds of wholesalers who have either exited the wholesale channel or completely gone out of business. Never in the history of the industry have we witnessed such a mass exodus (or implosion) of participants from such vibrant sectors of our industry.

Forces working against wholesale And it isn’t like the forces working against the wholesale business channel have abated at all. There are credible reports of literally thousands of bills working their way through the legislatures of almost every state in the union that have will

house lenders for the whole industry, and even greater shortage of warehouse lenders willing to fund loans for independent wholesale mortgage bankers. If warehouse lenders are willing to do so, they are frequently requiring much higher capitalization to offset the perceived risk. This is compounded by a decreasing number of investors willing to buy third-party-originated (TPO) product … another name for wholesale lending. The days of thinly-capitalized independent mortgage bankers doing TPO business are pretty much over … at least for this next business cycle. So, on the surface, it looks bleak for the wholesale originations. Gone are many large and small wholesalers that serviced tens of thousands of mortgage brokers across the country. Gone are thousands upon thousands of independent mortgage brokerage companies. Gone are thousands of folks from our industry.

So, what is going on in the heads of the C-level executives? As a result of all these changes, we are seeing two ‘camps’ forming … Group #1: Those that only see gloom and doom. But, there’s another group … Group #2: Those that see an amazing abundant number of opportunities as a result of all the calamity and carnage that has taken place in the market place. In spite of all the obstacles, challenges, shortages of credit, etc, those in the second group also see a huge “void of capacity” in our industry and know that someone, somehow, someway are going to figure it out and have unprecedented opportunity in this next market cycle. As a regular guest on TV being interviewed about these issues related to our industry, and as the result of having my own radio program and being a business consultant, I am being continually asked all the questions I am discussing in this article. Having taken my fair share of sales training classes, I always try to answer every question with a question. I ask everyone these three very basic (rhetorical) questions: O Do you believe that the American dream of homeownership is alive and well today? O Do you believe that it will take a

housing recovery to lead this nation out of this recession? O Do you believe that Americans are coming to a place where they are no longer going to need mortgage loans to finance their American dream? Granted, “The Dream” of homeownership may have had some recent nightmares, but “The Dream” is still very much alive! Without question, housing is critical to our economy and particularly will assist in a recovery from this recession. And there’s little doubt that Americans are in more need of mortgage financing than ever before. So if you are one of those that gravitate to Group #2 that is good. But, before you start charging off to exploit the many opportunities that are undoubtedly out there, I would merely offer you this word of advice … If you go about your business in this new business cycle according to what worked in the last business cycle, you too will fail. However, if you are wise and get the right counsel, you will have one of the most amazing opportunities this market has ever presented any group of professionals. I have said this before and will say it again: I predict more wealth will be created more quickly in this next business cycle than at anytime in history. Without trying to sound like some late night TV infomercial pushing some get-rich-quick scheme, I can assure you that there are more opportunities today than ever before.

Alternatives to both Again, it is my opinion that there will always be a place for some number of wholesalers and mortgage brokers. However, if market conditions are requiring you to look at other alternatives, might I suggest the following: O For originators, find a legitimate HUD-compliant net branch operation and become part of it. O For wholesalers, consider starting an emerging broker-to-banker program whereby you convert your current wholesale business relationships to make correspondents. There’s a way of doing this to create a substantial capital base.

O Consider raising the necessary capital to become a well-capitalized mortgage banking company … it is possible. O Do not accept the lie that there’s no capital willing to invest in your business. Forbes has estimated that there are billions of dollars in cash looking for a good investment. Find someone who can help you develop a wellthought out business plan, including a solid financial forecast, and then you can pursue your dreams of financing the American dream. David Lykken is president, mortgage strategies and managing partner with Mortgage Banking Solutions. David has more than 34 years of industry experience and has garnered a national reputation. David has become a frequent guest on FOX Business News with Neil Cavuto, Stuart Varney, Liz Claman and Dave Asman with additional guest appearances on the CBS Evening News, Bloomberg TV and radio. He may be reached by phone at (512) 977-9900, ext. 101 or e-mail

Wholesalers that will survive

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Those wholesalers that will survive moving forward are going to have to be adaptable. Here’s what I mean. They are going to have to adapt to numerous new regulations coming forth. They cannot be ignored or you will be put out of business. Another way a successful wholesaler is going to survive is to become adaptable in ways in which they sell loans into the secondary markets. For example, they must adapt to selling loans on a “mandatory” basis. Without question, it is going to be very difficult for anyone to successfully operate a wholesale business if they are selling loans into the secondary markets on the “best efforts” basis … at least as long as there exists the significant spreads between “mandatory” and “best efforts” pricing. Those selling on a “mandatory” basis will have such a significant pricing advantage over those don’t to the point that it will be nearly impossible to compete. The only exception will be if a wholesaler is able to achieve some unique product or market niche and provide over-the-top service. Another key factor necessary for the independent mortgage banker to survive as a wholesaler is the ability to sell directly to Fannie Mae, Freddie Mac and Ginnie Mae. With the new higher capital requirements, wholesalers are going to have to raise additional capital to compete. Warehouse lines of credit will remain an issue for the foreseeable future, and that the key to funding more volume will be the rate at which a mortgage banker can turn their warehouse line. However,


There’s little question that many brokers and loan originators have left the industry or have been forced to take jobs with banks, bigger companies or net branches, but they are still out there and they haven’t lost their desire to operate independently. Even those who left the industry want to come back. Why? Because there’s something infectious about this business! There’s something so rewarding about helping someone as a loan originator to achieve the American dream and make a decent living along the way. This is a relationship-driven business. Yes, pricing and programs are important, but at the end of the day, it’s all about relationships. Have you ever wondered why in the last business cycle, 68 percent of all originations were captured by the mortgage brokerage community? It’s because mortgage brokers did an excellent job of establishing relationships with consumers and providing them options that other big companies could not provide. So, the answer to the question, “Will the broker survive?” … the answer is “yes,” in a way. But the “how?” and “in what form?” is the bigger question. Therein resides one of the bigger opportunities. Successfully connecting (or reconnecting) with these displaced groups of

we are seeing growing signs that warehousing will be more available in the future. With credit facilities currently being considered by Fannie Mae, Freddie Mac and Ginnie Mae, there is hope that the current warehousing shortage will be addressed. I’m encouraged by recent reports that the U.S. Treasury and the Obama Administration are aware of the problem and they are taking action. O

Brokers who will survive

originators will be the key. It’s probably a foregone conclusion that in this next business cycle, there are going to be far fewer mortgage brokers in business functioning as originators. It is near as I can determine, regrettably, only about 15 percent of the original population of mortgage brokers will survive. But that’s not to say that there is no future for the independent originators and that again is where the opportunity is. There isn’t sufficient amount of space in this article to further expound upon this point … maybe in future articles. Write me and let me know. The brokers who do survive will have to learn to live in an increasingly more regulated environment with real penalties and will have to learn to operate earning lower fees. As the old saying goes, “What we lose in fee income, we’ll make it up in volume.” We have a client in midtown Manhattan who makes a very good living operating on one percent origination fees and minimum yield spread premiums (YSPs). This individual has always operated as a low cost originator and has discovered ways to make a very good income by doing a higher volume of loans.


Shutting Out Mortgage Brokers … The Future for Mortgage Brokers Back to square one? be Careful What You Wish for! will be plenty. Competition will be limited to only a few large players comprisWhile I am a mortgage banker and have ing of mostly banks. While this may not been on both sides of the fence the past be all bad, one will need to consider 29-plus years, it pains me to think what which bank to do business with. After may happen if mortgage brokers are all, some of the banks or companies still standing are the same participants shut out of the lending business. In recent weeks, there has been a num- who helped create the problem loans ber of articles and bulletins through indus- we hear and read about on a daily try publications, as well as the larger basis. In addition, the question remains media circles, hinting that the era of unanswered as to which banks will be owned by the govern“mortgage brokers” may be ment, and if they are, coming to an end. Without how will that enhance a doubt, there will be peotheir services and costs if ple who will use this small at all? amount of information to Consumers will also say, “Hooray … can’t wait lose that personal touch as … don’t let the door hit brokers thrive on return you in the … etc., etc.” I business and referrals. would suggest to these peoBrokers usually can offer a ple that they withhold their better deal because of glee until they understand lower overhead, and as a the true impact that the borrower, you won’t be a loss of brokers would have “At what price will number, but a true client. on the industry and borhomebuyers pay to While banks can and rowers in general. simply purchase a should provide the same I’m not here to explain home or refinance service, it is nearly imposmy version of what went sible due to the sheer volwrong and who did what, once the brokers and ume they receive. Further, but I would ask people to the competition they they simply cannot comconsider that while there provide are gone? In my opinion, it will pete with the entreprewere obviously those who be plenty.” neurial spirit that most did not belong in the brokers possess. mortgage industry, there In closing, yes, I am a mortgage were many more who outnumbered banker and proud to be one; however, I them who did belong. Many of these people are familiar believe in Democracy, free speech and faces in our communities who never had the spirit of the entrepreneur that sepaa problem with asking borrowers for a rates us from all other countries. Right paystub or bank statement to prove they about now, I’m hoping that we do not could repay a loan. They understood risk lose sight of this by using this crisis as an and they understood their responsibili- excuse to end an era of business that is ties. These were friends and families who, absolutely necessary. Good brokers projust like you and I, had a job to do and vide a useful and necessary service to but for a few did it professionally and many Americans, and even as a banker, I with integrity. These were the people would not want to see that be taken away many of you sought out to find a better from anyone, especially due to certain deal. Lower rates or lower fees in some political and financial aspirations. I would ask that before those who cases, or they were able to be more creative to help those who needed to go out- have the authority make this decision side the box. These are not the people final, to please consider the need for who caused today’s doom and gloom competition and the individualized and/or who took advantage. These peo- services that brokers bring to the table. ple simply followed the guidelines issued I caution against a hasty decision and to them by the lenders and hedge funds would hope that this hint of ending who figured there was no need for that loans taken by mortgage brokers is reconsidered by all. paystub or bank statement. The question going forward is, “At what price will homebuyers pay to sim- Joe Adamaitis is a senior loan consultant ply purchase a home or refinance once with Wells Fargo. He may be reached by the brokers and the competition they phone at (603) 817-6543 or e-mail provide are gone?” In my opinion, it

JULY 2009 O



By Joe Adamaitis


By Gilbert Frank

When I was asked to do an article on the future of mortgage brokers, I thought that with 25 years in the business, I could do it off the top of my head. But just in case, maybe I should make a few calls. So, I started calling my broker clients and the responses I received ranged from the sky is falling to it has never been better. I thought this is not unusual, some people always see the glass half full others half empty. I decided to dig a little deeper and contacted my fiends throughout all aspects of the mortgage business to get their thoughts. Here is what they had to say. First thing out of everyone’s mouth was the Home Valuation Code of Conduct (HVCC) and what a colossal mess it is. Appraisal costs have risen and values are a big problem. The quality of appraisals has worsened, mostly because the most experienced appraisers don’t want to work for an appraisal management company (AMC) because of the low pay. Many of the AMCs are national companies and their appraisers don’t have local experience, so the appraisals tend to be very conservative. Because the appraisals, in most cases, are not assignable, it makes it harder to shop loans and creates the need to order a new appraisal if the loan turned down. With all that said, when push comes to shove, many brokers tell me it’s not that big a deal In fact, it has some positive effects. Not being able to shop the loan around once it is submitted increases the pull-through rate for the wholesale lender, which is a good thing because we need them to stay in business! Most of these problems are logistical and should work themselves out over the next few months and is no more difficult than in the past when lenders had their own list of approved appraisers we had to use. On a side note, the president of the National Association of Realtors (NAR) was in New York recently to meet with New York State Attorney General Andrew Cuomo and his staff who worked directly on the HVCC, to share the concerns of his membership, and ask for their assistance in resolving problems related to the HVCC. He also traveled to Washington, D.C. to meet with the Director of the Federal Housing Finance Agency, James B. Lockhart, to discuss ways they can work with Fannie Mae, Freddie Mac and lenders to ensure that appraisals are

accurate. We need to support NAR and all trade associations in their legislative efforts on this issue. So, if appraisals are not the real issue what is? The overwhelming response was competition from big banks and pending legislation. Let’s tackle big banks first (we won’t name them but come on … we know who they are). The big banks offer better rates through retail than the wholesale market, and therefore, brokers have a more difficult time competing. Their underwriting is easier on retail and they won’t offer competitive jumbo programs to brokers. Okay, so really what is new? Banks have always offered special terms to their good customers, especially ones with large deposits. Go back 25 years and there was no secondary market for jumbo loans. Right now, VA/FHA and conforming loans are the broker’s most competitive programs, so we need to focus on them. Big banks will come back into the market when there is new competition for jumbo loans. My best guess is sometime next year.

“So, now we are back to square one in the industry. The mortgage brokers had, for a long time, built up an overwhelming advantage with the wholesaler lenders and now it has turned around 180 degrees in favor of the wholesaler.” Now, let’s get to the meat and potatoes, upcoming legislation for our industry. This is of course the massive “point the finger campaign” that hopes to pin all the ills of the mortgage industry on thirdparty originations … mortgage brokers. Of course, this is not true, but big banks and Wall Street have more powerful and influential lobby groups than we do and that is how they spin it. The Federal Reserve policy that goes into effect the end of July deals with what fees the broker can collect prior to the borrower receiving a Regulation Z disclosure from the lender. This will impact the mortgage broker more than the mortgage banker who is the lender and can provide the Regulation Z. This policy is, of course, full of interpretation, and I am not the legal expert to advise the industry, so I would say everyone needs to read up on this and get a more thorough understanding of the situation. Still, this is not a deal killer, just another hurdle to jump.

Tommy … what will the Consumer Financial Protection Agency (CFPA) do to the mortgage professional? The Obama Administration recently released its 88-page summary of the Financial Regulatory Reform proposal, and it appears brokers or mortgagees will be required to up their professionalism in the mortgage industry as a mortgage banker. Some of the key points that affect brokers are: I CFPA require originators or securitizers to retain an interest in the credit risk of loans transferred in securities to private investors. I Authorizes new requirements for originator compensation that would disburse commissions over time based on loan performance. I The establishment of appropriate duties of care applying to financial intermediaries serving consumers, including a new “duty of best execution” for mortgage brokers. This means that the broker/mortgagee may be required to have five percent interest in the performance of a loan after funding. If the loan goes into default, regardless of the cause, the broker may have fiduciary responsibility as a result. The broker/mortgagee is now in the mortgage insurance business and now held accountable. Your yield spread premium will no longer be paid with other commissions. You will receive residual income over the life of the loan. And, this new agency will enforce accountability by ensuring banks, non-banks and independent mortgage brokers play by the same rules. It will be interesting to see who establishes the rules and which rules will be selected. Which rules will no longer apply? Regardless, what the outcome of CFPA will have on the mortgage professional, one thing is clear. There will be more changes to compliance. Quality Mortgage Services (QMS) can provide full-service mortgage compliance. If the mortgage professionals are required to start performing in the mortgage banking world by securitizing or insuring loans, the mortgage professional will need to have risk analysis compliance performed on the loans. Now, the minimum is 10 percent. However, if the mortgage professional is required to securitize or insure a loan, a larger sampling will be required. I often see where QMS performs 10 percent sampling of post-closing quality control (QC) and the mortgagee gets hit by the U.S. Department of Housing and Urban Development (HUD) on defaulted loans. In most cases, the loans that were hit by HUD were not quality controlled. The mortgagee, as a result, is forced to perform more than 10 percent QC because of the defaults. If the mortgagee had performed a larger selection for QC, the probability is the loans could have been assessed for risk and addressed properly. When HUD challenges the loans of a mortgagee, the mortgage professional is in reaction mode rather than in pro-active mode. Now that the Obama Administration is reforming the mortgage industry one can expect that the “broker/originator” will have skin in the game if one wants to play. The mindset will no longer be “one more loan,” it will be “one more quality loan.” The loan will have a legacy and it will follow the broker/originator for the loan’s full term. This is why the mortgage professional will have QC or more QC so that the mortgage professional will not have to pay for it later on.

Tommy A. Duncan is executive vice president of Quality Mortgage Services LLC. For answers to your QC and FHA questions, please contact Tommy at (615) 5912528, ext. 124 or e-mail You may also visit Quality Mortgage Services LLC on the Web at

Sponsored by

O JULY 2009

Gilbert Frank has spent the last 25 years in wholesale and retail lending. He may be reached by e-mail at

By Tommy A. Duncan


regional banks will pick up the slack. I have recently been contacted by lenders looking to get back into the market, and I have also heard about Wall Street looking to get back into mortgage backed securities, and why not. Housing prices don’t look to go much lower, and sanity has returned to underwriting and program guidelines. There is money to be made in mortgages, and I never underestimate the greed factor in business. If there are profits, they will come and they will need mortgage brokers to maximize them. The battle for the mortgage broker can be compared to stepping into the ring with Mike Tyson. Mike won most of his fights before they even started. His opponents were so intimidated that Tyson often knocked them out in the first round. As a boxing historian, I will tell you that the longer the fight went on, the more successful the opponents were. We have taken some vicious blows, but we have not been knocked out! At the same time, we are not out to the woods by any stretch of the imagination, but as Dennis Reese, a long-time veteran of the mortgage industry said to me this week, “It is in a period of huge chaos and change that the opportunity to form great companies is born. This should be looked on as an opportunity, not a doomsday event.” I like that. Moreover, it may be a good time for some small mortgage brokers to consolidate. I keep hearing that wholesale lenders are cutting off brokers for lack of volume, and that would be one reason to join forces. Volume is always a great negotiating tool. Todd Shillington of Amerifund Lending Group is a large mortgage broker who has been very successful for many years. I asked him for his plan to survive the current environment this is what he said: “In order to survive, you need very good processing. The lenders won’t accept poorly-processed loans and it just creates more time delays. The education of loan officers is critical. We have weekly Webinars to keep our people up to date. We offer a very competitive commission split model with our loan officers who mostly work out of their homes. This helps keep our costs down so we can use our resources more effectively. Again, the strong will survive, but there is more consolidation to come. We need to be lean and aggressive to survive.” Sounds like good advice to me. O

HR 1728 has passed the House and is on its way to the Senate. This bill has many complicated factors, but two aspects of importance are: Stated-income loans and regulation on what fees we can charge. We are not doing many stated-income loans currently, so this is not a big issue, but the fees issue is a different matter. As of the time of this writing, the bill has not passed, so I urge you to contact your legislators and the National Association of Mortgage Brokers to fight this purposed bill. Tracy Kelly of Kelly Mortgage summed it up this way: “We are throwing the baby out with the bath water. To blame all the industry’s woes on the broker is just not right. In every industry, there are competent people and incompetent people. I know that I have taken more continuing educations classes by virtue of being approved in many states than the average loan officer at any large bank. It seems that I am always taking a class to keep my licenses active. To insinuate that all brokers are not educated or ethical is just an incorrect statement. I have fought too hard to get to where I am today, and I will not leave without a fight. I am in this for the long haul!” We need more people like Tracy! So, now we are back to square one in the industry. The mortgage brokers had, for a long time, built up an overwhelming advantage with the wholesaler lenders and now it has turned around 180 degrees in favor of the wholesaler. Brokers are no longer able to submit files to multiple lenders and then play the market for the lower rates and bigger rebates. Lenders are no longer under pressure to approve marginal loans that are poorly processed just to save a perceived broker relationship. Now, the broker must submit quality loans that are well-processed and delivered in a timely fashion. The good news is that wholesale lenders are enjoying better margins than in any time in recent history. Wholesalers making a profit is good news because it will encourage more lenders to come back into the wholesale market. The big banks are making money on their new loan originations, yet they won’t be able to handle the industry volume through their retail outlets. The mortgage broker is an intricate part of the mortgage industry. If the big banks don’t expand wholesale lending, then


Who’s Left in Wholesale COMMERCIAL Company/Web Site/Phone

Products Offered

Assurity Financial Services, LLC (866) 844-7390

Conf Fixed, Terms: 40,30,25,20,15,10; Conf ARM, Terms: 3/1,5/1,7/1; Gov Fixed, Terms: 30,25,20,15; Gov ARM, Terms: 1/1,3/1,5/

AK, AZ, CA (only DRE CRML types), CO, CT, FL, GA, ID, IL, IN, KY, MD, MI, MN, MO, NC, NV, NM, OH, OK, OR, SC, TN, TX, UT, VA, WY

A mid-sized lender that is well positioned for success as a responsible steward of the lending community it serves.

Capital Development (866) 456-2402

Multi-Use, Special-Use, Hospitality, Multi-Family Loans, Conventional, SBA 504, SBA 7a, USDA B&I, Hard Money


Capital Development specializes in Conventional and SBA financing with competitive wholesale commercial mortgage rates.

North and Central America

Wholesale lending, established 2003. Institutional and private funds. Low rates, fast close. User friendly for agents not experienced in commercial. Plenty of money. Creative & flexible underwriting.

Commercial Finance USA Purchase, refinance, rehab and construction of any type of commercial, mixed use, recreational, or religious property. Land 925 837-7752


acquisition and development. Discounted mortgage notes and REOs.

Emigrant Funding Corporation Full Doc & Low Doc Programs $100K up to $5MM, No Doc Program $100K 1-800-EMIGRANT ext: “FUNDING” up to $1MM, Properties: Multifamily,

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Mixed Use, Retail/Office


About the Company

New York, New Jersey, EFC is a portfolio lender providing Commercial Financing. No Connecticut, minimum FICO requirement. Brokers protected/Premiums paid. Massachusetts, New Hampshire, Rhode Island, Pennsylvania and Florida.

First California Bank 818-638-5886

FCB offers loan products up to $4M with competitive rates/terms, low appraisal costs, and common-sense underwriting.

Southern California

FCB has been serving Southern California for over 30 years as a well-capitalized and stable commercial bank and lender.

Freedom Capital, LLC 480-346-7448

Commercial 1st Lien Mortgages for Commercially Zoned and Commercially Used Properties Only. YSP and Protected Fees for Brokers.

ALL 50 United States

Bank-Based Financing up to 90% LTV (Own.Occ.Purchase) and up to 60% LTV (ALL Refi’s and N.O.O. Purchase) for Most Commercial Properties. NO Multi-Family, NO Gas Stations, NO Churches.

Mercury Capital 212-661-8700

Short Term Bridge Loans, Hard Money, 1st Mortgages


Mercury Capital specializes in fast and creative solutions for immediate financing needs.

Sterling Commercial Capital

1-2 year bridge loans and 3-10 year permanent loans on a wide variety of property types. We also target hard-tofinance transactions.


Sterling Commercial Capital is a private commercial real estate mortgage lender, providing competitive short & long term loans


RESIDENTIAL Products Offered

ACC Mortgage

ACC Mortgage Lending Philosophy: Benefit, Capacity, Value 70% MAX LTV, Rates from 9.99% No credit score minimum NO DOC COMMERCIAL

East Coast

Since 1999 we have been closing the loans that others can’t. We are the final decision maker.

Bank of Ann Arbor 248-336-9140

Bank of Ann Arbor offers conforming and FHA Products. We also offer DU Refi Plus as well Rural Housing Loans.

Most States except CA, FL, NV, AZ, CN

Bank of Ann Arbor keeps expanding with competitive rates and great customer service. Check us out!

Bismark Mortgage Company 800-350-7199 x103

We offer two types of short-term residential construction loans: Owner-Occupied and Non-Owner Occupied. We also have a Construction Completion Program.


Bismark Mortgage Company is a private portfolio lender providing financing for the construction of residential single-family homes.

CGB Agri Financial Services 877-548-2622

Rural home; part time farm; bare land. Conforming credit for rural. Loans - 1 yr ARM to 30 yr fixed monthly pymt 85% LTV


CGB is a national company that originates and services rural home and full time farm loans.

Construction Capital Source 801-747-7150

Residential Construction Loans Commercial Construction Loans

Utah and Idaho

CCS is a wholesale lending company that doesn’t market to borrowers and builders. We exist to provide the mortgage broker with the tools to close more construction loans.

Emigrant Mortgage Company

No-Income/No-Asset - Subject to state laws, Jumbo Loans up to $10MM, Foreign National Financing Agency (FNMA/FHLMC) Products

New York, New Jersey, Connecticut, Massachusetts, New Hampshire, Rhode Island, Delaware, Pennsylvania and Florida

EMC is a portfolio lender specializing in niche financing for Primary Residences, Investment Properties and Co-ops.

Fifth Third Mortgage We offer a wide variety of mortgage solutions - from fixed rate to ARMs,


Fifth Third Mortgage remains committed to providing you with the mortgage products you need to serve your customers and grow your business. We offer a variety of mortgage solutions, timely service and a history of responsible lending that keeps us financially sound and focused on a brighter future...ours and yours.

conventional to FHA.


About the Company

Fixed and ARM rates for land and home loans, together or separate. AG land loans for production property. Rural Commercial property loans.

Texas, New Mexico and Oklahoma

Innovative Rural financing since 1993. Real estate finance services for all types of rural property, specializing in Texas, New Mexico and Oklahoma.

Flagstar Wholesale Lending 866-945-9872

FHA, VA, Conventional, Warehouse LOC, Jumbo, eClosings


One of America’s largest wholesale and correspondent mortgage lenders, Flagstar is a leader in paperless technology.

Generation Mortgage Company 1-866-733-6085

FHA-Insured reverse mortgages: adjustable and fixed HECM (Home Equity Conversion Mortgage) loans for senior homeowners.

All US states except AK, IN, KY, NY, SD, WA.

Generation Mortgage Company‚TM, is a top-ten, nationwide reverse mortgage lender and servicer with experienced team.

ING Mortgage 866-464-9461

ING Mortgage is best known for our Jumbo Portfolio 5 and 7/1 ARMS. We lend up to $3,000,000 in all fifty states on single family primary oneunit properties.

All states

ING Mortgage is the operating name of ING Bank, fsb in the Wholesale Lending channel. ING Mortgage is backed by ING, a global financial institution.

TruClose Financial Services

O JULY 2009

"Who's Left in Wholesale" Directory is Sponsored by


First Source Capital Mortgage, Inc 888-484-1256 O

Company/Web Site/Phone


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Company/Web Site/Phone

Products Offered


About the Company

Luther Burbank Savings 310-220-2040

Portfolio lender offering Jumbo and Super Jumbo home loans in the State of California.


Luther Burbank Savings specializes in portfolio lending and provides excellent service to its approved brokers and their customers.

Platinum Mortgage, Inc. 877-50-EZ-Rep

Conventional, FHA/VA

Georgia, Tennessee, Alabama, Kentucky, Louisiana, Mississippi, Florida

Platinum Mortgage is a southeastern wholesale residential lender with benchmark rates and unparalleled service. Closing loans has never been EZ’er.

Primary Capital Mortgage 1-877-690-1270

Conventional, FHA, VA and USDA loan products offered.


Primary Capital is a leading residential mortgage company offering conventional, FHA, VA and USDA loan products.

Provident Bank Mortgage Faster Funded Home Loans North CA - (800) 738-0806 or South CA (800) 733-3657

Agency conforming and high balance fixed rate and ARM programs. Jumbo fixed rate and ARM programs, and full FHA/VA product line.


Provident Bank Mortgage, a division of Provident Savings Bank, FSB chartered in 1956, has wholesale sales/operation offices in North and South California.

Security Atlantic 866-933-6342

FHA Wholesale Lender Only

36 States

One of the top ten National Wholesale FHA lenders in the country. Great customer service. 24 hr turn time on new files and preapprovals.

United Mortgage Corp. 516-570-4116

Conforming Fha, Conforming Conventional, Jumbo Fha, Jumbo Conventional, Fixed And Non Fixed Products For Both Fha And Conventional


United Mortgage - Nat’l licensed Mtg. Banker with excellent service & turn around time conveniently located in Hauppauge, NY.

United Wholesale Mortgage 1-800-981-8898

FHA Approve Eligibles and Streamlines Only! Minimum FICO 620

Nationwide except AK, CA, DE, HI, NJ, NY, PA, RI, SD, WV

Closing FHA Loans in 5-7 business day! Always 24-48 hours on FHA Approve Eligible loans and Streamlines!

Wells Fargo Wholesale Lending

Conforming conventional, FHA/VA, Reverse, Home Equity.


As a leading lender, we are committed to working with brokers to establish long-term success for the broker industry.

Recruiting From the “Compatibility” Approach … the Lost Art By David Walden

Platinum Credit Services partners with Red Flag Advisory Corporation

Byte Software, a provider of loan originacontinued on page 40

The surprise

Let me backtrack for a moment. I am After contacting numerous recruit- not a fan of hypocrisy and I’m not ment/placement organizations, I was preaching a version of it here. Fifteen rarely interviewed in person or by tele- years ago, I formed an outsource prophone by recruiters interested in eval- duction management company speuating my personal and professional cializing in opening new branches in selected markets for talents, strengths and mortgage bankers wantweaknesses such as how ing to expand more rapwell I interview; what my idly than their producwants or needs in an tion management team employer might be; what could effectively make my professional ambihappen on their own. tions are or what priThese were turn-key mary, and even underlybranches assembled with ing, career goals exists. all the necessary parts Instead, most often, I was and were often co-mansimply directed to comaged by me as a provision plete an online applicaof the contract until they tion and/or resume; sub“We’ve all seen could be fully absorbed mit same and hope for a successful producers and indoctrinated into response that may or leave Employer A the new employer may not come for weeks and simply cross the client’s culture. This busior months later. As an ness model required the experienced recruiter street to Employer B, while offering the formation of a recruitmyself let me assure ing/placement division to same basic menu of everyone that is not promeet the staffing needs, programs and fessional recruiting/placement. That is better competitive prices ...” while remaining within cost goals for the branch described as Internet meat marketing. It’s a “quantity versus acquisition. We joined the recruiter’s quality,” “for the masses and not the trade association, got their trade news, classes” approach to filling positions tips, professional standards recomwith the bureaucratic human resources mendations, etc along with those of departments of large institutional cor- our own Mortgage Bankers Association. porate giants which seem to be the We filled the positions within the new only employers doing much hiring late- branch with employee candidates ly. When initiating follow-up on my based on compatibility and often marown, I have been made aware of seri- keted the remaining book of candious deficiencies in the presentation dates to other employers within the and marketing skills of most recruiters given market. In doing so, we interunder the guise of excuses such as, viewed the potential employers, as “your resume is intimidating,” “you are well as the employees. We found that it over-qualified,” “you won’t be chal- was often more difficult to find good lenged for long before I have to replace employers than to find good employyou” and a myriad of other speculative ees within a given market. We were possibilities. Yet, if they had invested always honest with our employee canonly five minutes of their time and didates relative to their probable suceffort they would have realized that cess with a potential employer in the they were definitely not probabilities event they chose to accept employor certainties. I’m too far down the ment. Often, we advised them to stay road in my career to be a slave to my put until a more compatible opportuego and to believe that I am a special nity developed. Becoming involved in case, and I have confirmed that belief the potential success or failure of within the context of the employment continued on page 39 search experience. Far too many mort-

O JULY 2009

Interthinx has formed a strategic relationship with Document Express, a firm that provides state-ofthe-art mortgage loan document preparation, as well as compliant lend-

The background for the opinion


Interthinx forms alliance with Document Express

NYLX offers product and pricing technology in Byte Software

gage industry professionals are experiencing the same lack of adequate and efficient, hands-on representation from the professional recruiting / placement industry. Remember those who handle you with such indifference today when you need them. Times will change and they will again need you in the not too distant future. I am actually restarting my business to take advantage of the opportunities created by this very glaring void. O

In response to the Fair and Accurate Credit Transactions Act of 2003 (FACT Act), Platinum Credit Services Inc. (PCS) has formed a partnership with Red Flag Advisory Corporation to provide a complete and comprehensive program which will keep companies in compliance with the Red Flags Rule. The Red Flags Rule, in effect since Jan. 1, 2008, requires many business and organizations to implement a written Identity Theft Program designed to detect the warning signs or “red flags” of identity theft in their day-to-day operations, take steps to prevent crime, and mitigate the damage it inflicts. The Red Flags Rule is enforced by the Federal Trade Commission (FTC), the federal bank regulatory agencies, and the National Credit Union Administration. The program which companies must create for the Red Flags Rule must include four basic components, which together create a framework to address the threat of identity theft. The program must include: A platform to detect red flags; identify said red flags; have a policy and procedures manual for combating the red flags; and have updated training on the established program. Currently PCS has established a product, Precise ID, which scans a credit report for “red flags.” On the report, there is a scoring model which will let the company know the risk of potential fraud. The Red Flag Advisory Corporation sets up complementary assessment audits, compliance manuals, and ongoing training for identity theft. Together, the two companies offer the marketplace a full complete identity theft program that is tailored to a specific company’s needs. Aug. 1 is the final date before enforcement takes place. Beyond that date, failure to comply will likely lead to fines starting at $2,500 per incident. For more information, visit

ing documents, initial disclosures, closing documents, high-cost analysis and flood certificates for lenders throughout the nation. Through the new alliance, the Interthinx PredProtect Compliance Suite has been integrated into the DX Closing Document system. The integration provides lenders with the option to verify loans against high-cost thresholds by using a comprehensive report that includes full testing at the federal, state, local, and government-sponsored enterprise (GSE) levels, along with additional checks for the Truth-in-Lending Act (TILA) and state consumer loan laws. Through the Elite Series of loan closing products and services, Document Express customers can now benefit from comprehensive compliance reviews that feature clear, simple worksheets with Interthinx-exclusive Points & Fees Drilldowns to make it easier to comply with the law. “With the torrent of new laws and increased enforcement by both regulators and investors, many lenders will not be able to keep up without outside support,” said Kevin Coop, president of Interthinx. “PredProtect is the industry standard tool for helping ensure compliance with new lending requirements as they are enacted. The integration of PredProtect with the DX Closing Document system enables lenders to fund loans with increased confidence that they are in compliance with all applicable laws, rules, and regulations.” “Document Express and our customers have been interested in providing this type of integration in connection with our Elite Series of closing services and products,” said Paul Fosco, president and CEO of Document Express. “There is no longer a need to be concerned with inaccurate data, re-keying errors, or learning the nuances of additional verification systems. Clients enter loan data once into their LOS system, order, and get our quality products and services in seconds. Nothing could be easier.” For more information, visit or

Until recently, I was an owner partner of a mortgage banking operation. Due to prevailing and deteriorating market conditions, the unpleasant decision to close became necessary. After a brief sabbatical for reflection and grasp of the lessons learned, including the fact that self employment has its benefits and its drawbacks and wanting a break from the latter, I decided to enter the job market as an employee candidate for the first time since the early nineties. The experience has been surprising to say the least.



Real Estate Investors: “Where’s My Bailout?” How would you like to generate some business with qualified real estate investors using three simple strategies that have been lost in all the “bailout” noise and confusion?!

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Strategy #1: Utilize a reverse mortgage to purchase a two- to four-unit property


Until the end of 2009, an investor who is age 62 or older can purchase a two-, three- or four-property worth up to $625,500 with a 30 percent to 35 percent downpayment, live in one of the units, generate income by renting out the other units, and never have to make a mortgage payment for the rest of their entire life. This opens up a lot of options for seniors and investors who are wondering how to supplement their retirement income now that their house values and retirement accounts have plummeted. The reverse mortgage for home purchase transactions became available on Jan. 1, 2009, and the higher nationwide loan limit of $625,500 (regardless of county) became available several months ago as part of the 2009 economic stimulus plan. Investors who are trying to sell their duplexes, triplexes or four-unit properties can utilize this strategy in their marketing as a way of stimulating potential buyers. The temporary higher loan limit really opens up a lot of new options that were not otherwise available for senior investors. The purchase price of the property can even be greater than $625,500, but the investor would need to come to closing with more cash to make up the difference. Remember, the $625,500 limit expires at the end of this year, and reverts back to $417,000 in 2010, so your investor clients will need to take action now.

Strategy #2: First-time homebuyer tax credit … for investors! The $8,000 first-time homebuyer tax credit can also be utilized on one- to four-family properties. The greatest thing is that not all buyers need to be first-time homebuyers. This means that an individual who qualifies for the credit can get their parents to co-sign on the loan and/or contribute to the downpayment, and this would not disqualify the individual from taking the

credit. A group of friends, relatives or out the house and wants to live there, and investors could get together and buy a gives the tenant the right to buy the home duplex, triplex or four-unit property, at a pre-determined price at some point and the credit can be claimed by any in the future. A sale-leaseback strategy is one or more of the investors as long as where a homeowner sells their current the individual(s) claiming the credit live property to an investor and then pays the in one of the units as their primary investor rent, with the option to buy back home for at least three years. They the home at a pre-determined price at could claim the credit even though they some point in the future. While most real estate investors are are generating income by renting out scrambling to find tenants for their one or more of the other units. The maximum Federal Housing vacant properties, savvy investors could Administration (FHA) loan-limit on four-unit utilize either a rent-to-own or a saleproperties ranges from $521,250 in low-cost leaseback strategy to find tenants before they commit their investhousing markets, up to ment dollars to a specific $1,403,400 in the highest property. This is a fantastic cost markets of the country. opportunity for investors An investor who is trying to to work with the large popsell their one- to four-family ulation of people who unit property can also utiwon’t qualify for the govlize this strategy to stimuernment foreclosure prelate potential buyers. This vention plans. Did you strategy just became a know that, in many cases, whole lot easier now that servicers are actually the FHA allows the credit to required by law to forebe utilized as part of the close on distressed borrowbuyer’s downpayment by “While most real ers who have ample equity either borrowing against it estate investors are in their homes because the or selling it to their lender or scrambling to find net present value of the another third party. Even if tenants for their servicer’s recovery through the buyer doesn’t use the vacant properties, a foreclosure sale is higher credit for their downpaysavvy investors could than the net present value ment, they can file a form utilize either a rentof their recovery through a with the IRS to get a refund to-own or a saleloan modification plan? check this year and they leaseback strategy to Properly structured saledon’t have to wait until they find tenants before leasebacks (as long as they file their 2009 tax returns in they commit their are not prohibited by the April of 2010. Remember, investment dollars to laws of your state) could be this opportunity ends a specific property.” utilized in these cases to when the credit expires on help the home owner Nov. 31. avoid the foreclosure and recover some Strategy #3: Rent-to-own of the remaining equity in their home. The sale-lease back could also be a and sale-leaseback fabulous strategy to help fill the void opportunities There are a large number of distressed left by the disappearance of statedhomeowners who will not qualify for the income loans. Say you have a selfmortgage modification plans announced employed individual who has 50 perby the government. These homeowners cent-60 percent equity in their home, still need a place to live, and many will but cannot qualify for traditional cashnot be able to qualify for conventional or out mortgage financing. A properly government mortgage financing for at structured sale-leaseback could allow the client to access the equity in their least another three to five years. A rent-to-own strategy is where an home and avert a disastrous situation investor or real estate agent takes a poten- due to lack of liquidity. There are a few potential landmines tial homebuyer house shopping even to avoid when structuring these types of though the buyer can’t qualify for traditional financing. The investor buys the transactions. It is illegal in some states house, rents it to the tenant who picked to do a sale-leaseback transaction for

someone currently going through foreclosure. Also, if the tenant defaults on their rent or walks away from the deal, the investor could be left holding the bag. On the other hand, if the investor defaults on the mortgage and goes into foreclosure, the tenant may be evicted by the new owner. The Helping Families Save Their Homes Act (S 896, signed into law in May 2009) provides two minimum guidelines that protect tenants in these and other situations: O Tenants are now allowed to occupy the property until the end of their lease term (even after the landlord goes through foreclosure) as long as the new buyer does not intend to occupy the new home as their own primary residence. O If the new buyer intends to occupy the home as their own primary residence, the tenant must be given a 90-day notice before being forced to leave. In all these cases, it is crucial to be properly trained in the nuances of how to structure transactions in ways that minimize risk to the clients. Becoming a Certified Mortgage Planning Specialist (CMPS) equips you with the unique knowledge, skills and resources to help investors, homeowners and homebuyers successfully implement these strategies and navigate the ever turbulent mortgage and housing markets. Gibran Nicholas is the founder and chairman of the CMPS Institute, which administers the Certified Mortgage Planning Specialist (CMPS) designation. The CMPS Institute has enrolled more than 5,500 members since its founding in 2005. Gibran is also the chairman of Published Daily, a customizable online magazine, newsletter and marketing service that helps professionals transform their clients and prospects into a referral-generating sales force. He may be reached at (888) 608-9800, ext. 101 or e-mail Visit author Gibran Nicholas’s blog at where he shares his insights on economics, real estate and financial issues, including the current mortgage and credit crises.

“compatibility” approach someone’s career and livelihood is a tremendous responsibility and must be treated as such!

Practicing the trade From the beginning of each contract through to final conveyance, if I didn’t already have a good working knowledge of the employer client’s culture, I invested significant time and research into gaining an explicit understanding of the business philosophies and personality of the corporate production management for whom I would assemble a branch in order to match those components better with those same two components of the employee candidates to be recruited. I wanted the placements to stick. After all, recruiters must frequently guarantee free replacement of employees and typically those that depart within the initial three to six months of employment. The blame for the departure typically rests on the employee within the context of the replacement guarantee. In that context, its simply good business practice, and certainly more costeffective, to do the job right in the first place than do it repetitiously for free. We’ve all seen successful producers leave Employer A and simply cross the street to Employer B, while

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offering the same basic menu of programs and competitive prices to the same Realtors and homebuilders customers only to bomb because they aren’t “compatible” with the business philosophies and personalities of their new management and the resulting “culture” of their new employer.

Moving forward My specialty has always been production, whether retail, wholesale or correspondent. I have personally managed successful production departments for all three types and recruited for all three types, as well as affiliate branch networks. My experience and intuition tells me that traditional retail production will be the first type of production platform to experience growth when the market turns around. Therefore, I will offer the following recommendations and insights to those specializing in retail production when considering new employment opportunities that will come.

Be self-aware Know who you are! Compatibility is the primary key to a successful and productive employment relationship. It is paramount that employee candidates are self-aware that their own

needs and goals are constantly evolving and that the profile of the employer culture with which they are most compatible at any given time changes with them. Every day, the loan officer in a traditional production culture, primarily serving real estate agents and homebuilders, he/she faces the prospect of being blamed for events often beyond their control and being fired by one or both of their employers as a result! To possess the personal self-esteem and professional constitution to endure these challenges daily without succumbing to burnout within three to five year cycles is almost superhuman! You deserve to be represented as such.

No need to go it alone Top performing producers not experiencing burnout should consider choosing a recruiter to be their agent, and then be patient and allow them to conduct a thoughtful search for a compatible employer. An existing, wellperforming team wanting to remain as a working unit for a company being closed or acquired or a good producer with leadership qualities who may not be a “top performer” individually, but can assemble and lead a team of good performers whose aggregate production equates to a “top performing group” can do this too. The recruiter represents the producer or group exclusively on a “no cure, no pay” basis, but the potential employer pays

By other Hard Money Lenders? ACC Mortgage can help. We are the bank. We are the decision maker. ACC Mortgage can help you and your company close more loans.

Submit your scenarios at or call 877-353-2233.

A top performing producer with a proven track record of quality volume origination numbers will be in demand in any market condition, including the present one. Let’s face it … no employer is going to attempt to recruit one by saying, “We’re an awful place to work, so come to work for me and I’ll wreck your success.” They are going to present and describe their organizations in the best possible light. Those representations are unfortunately often misrepresentations. It doesn’t really matter in the end if those misrepresentations are intentional or just prejudicially naive. Think about it. The only difference between murder and manslaughter is the existence of “intent,” but the victim doesn’t care. They’re dead either way.

An objective solution To minimize the risk of selecting a new employer in error because they simply told the producer what they wanted to hear, choose a recruiter that has served in management positions with mortgage banks. There are continued on page 40


We will even process your loan.

Facing the facts O


their tab plus reimbursements for marketing/advertising cost advanced by the producer or group for the search for the employer. Sports and entertainment stars have agents and mortgage stars can too!

O JULY 2009


heard on the street

JULY 2009 O



tion software for banks, credit unions and mortgage brokers, has announced a partnership with NYLX to provide product eligibility and best execution loan pricing technology to its customer base. Through Byte Software’s partner program, ByteLink, NYLX has created a seamless interface to access product and pricing information for mortgage loans while in BytePro. With the NYLX integration, Byte Software customers have instant access to a provider of realtime lender rates and guidelines. The NYLX integration leverages its LoanDecisions solution platform, where BytePro users benefit from multiinvestor/multi-product pricing displays and accurate investor data, enabling quick reaction to live market conditions. Management benefits from control and optimization of locks based on price and revenue targets, helping to achieve profit goals and competitive advantage delivered through a seamless user interface. “The new integration between NYLX and Byte Software provides banks, credit unions and mortgage companies with enhanced functionality that enables loan officers to make faster and more effective decisions at the point of sale,” said John Alexander, president of NYLX. “A seamless user experience delivers best execution eligibility and pricing, helping loan officers prioritize their pipeline and more aggressively target high value prospects. This joint solution leverages the NYLX universal integration platform and offers significant value and bottom line impact for NYLX and Byte Software mutual customers.” For more information, visit or


“compatibility” approach

continued from page 37

Lenders One continues to membership growth After the addition of 42 new members to its roster in 2008, Lenders One Mortgage Cooperative, a national alliance of mortgage bankers, has announced that it is continuing the trend of steady growth by adding seven new members in the first quarter of 2009 and another six members in the month of April. “Independent mortgage bankers must rely heavily on the help of their peers to transform today’s mortgage challenges into opportunities for growth,” said Scott Stern, CEO of Lenders One. “That is why so many of them have turned to Lenders One. We provide our members access to quality products and services, while giving them opportunities to network with a variety of industry professionals.” Springfield, Mo.-based Oakstar Bank joined Lenders One in January. The locally-owned community bank focuses on providing up-to-date technology. Julie Barker, executive vice president, said, “Lenders One’s business model gives us the power of combined purchasing and working with some of the best investors and vendors. Oakstar will become a stronger bank because of our membership in Lenders One Mortgage

Cooperative, and we will have the knowledge and industry associations to help us achieve market leadership.” Other new members from the first quarter include: Ideal Home Loans in Englewood, Colo.; Covenant Mortgage in Westford, Mass.; Advisors Mortgage Group in Manasquan, N.J.; Platte Valley Bank in Platte City, Mo.; Pinnacle Mortgage Group in Lakewood, Colo.; and Trident Mortgage Company in Devon, Pa. “Each year the cooperative’s membership has experienced steady growth, and that is especially notable because of the very unpredictable state of the mortgage industry,” said Stern. “Our strong presence in the current mortgage industry is further evidence of the value that mortgage bankers see in membership with Lenders One.” For more information, visit

LoanMarket.NET partners with First American Title Insurance LoanMarket.NET, an online marketplace for buying and selling real estatesecured note investments, has partnered with First American Title Insurance Company, the largest subsidiary of The First American Corporation family of companies, to offer buyers and sellers an integrated third-party solution for title insurance and closing settlement. “We’re very excited to offer our buyers and sellers an integrated title and escrow solution from First American, one of the most trusted names in the title insurance industry,” said Jeff Freud, founder and president of LoanMarket.NET. “Their proven technology, expertise and nationwide reach will ensure LoanMarket.NET customers a seamless title and settlement process.” The First American partnership provides LoanMarket.NET and its users with a single source for accurate, efficient and cost-effective title and settlement services nationwide. “First American is honored to be chosen as the settlement service provider for LoanMarket.NET’s innovative business platform,” said Vincent Foley, vice president of First American Title Insurance Company. “We believe that our centralized national solution is a perfect fit for buyers and sellers operating in an online marketplace environment.” LoanMarket.NET is designed to offer both existing note investors and those interested in investing in this asset class for the first time unprecedented access to the market. Since its launch, LoanMarket.NET has empowered both buyers and sellers of notes by creating a neutral, open marketplace that brings price discovery, transparency and efficontinued on page 42

fewer of those than recruiters who simply claim to specialize in mortgage banking placement, but they do exist in growing numbers in most major markets. They have attended production management seminars, sat in management meetings, understand what does and does not make good business sense from both the corporate and the producer sides of the policy equations when mediating and resolving conflicts of purpose. And most importantly, they know what questions to ask employer clients and whether the answers received are indicative of production-friendly cultures. As an employer, I always enjoyed working with knowledgeable recruiters who understood the needs of my business and what works and what doesn’t. I had to interview far fewer candidates to find the right one and a good fit. They earned my respect and their fee. As an employee candidate, I wouldn’t want anything less. The employer is often going to be more candid and even drop their guard to reveal true colors with a recruiter working for a placement fee and perceived as an extension of the employer. Likewise, an employee candidate is going to be more open and revealing to a recruiter because they are not the employer. The insights available from these positions of observation and context are invaluable to a good, professionally-executed placement if used properly by the recruiter who can listen through an answer to the real meaning of the answer. Top producers are almost always top producers because of their entrepreneurial personalities. To continue their success, they would be welladvised to focus employment search efforts on entrepreneurial production cultures. That’s compatibility. They thrive best as big fish in smaller ponds than small fish in the biggest ponds. As a recruiter, when seeking to fill positions within traditional and entrepreneurial production platforms serving real estate sales professionals, I found the large, institutional employers to be more valuable as ‘farms’ than as employer clients because my business model was focused on quality versus quantity.

Cultural differences The larger mortgage banks embrace the call center type production platform in part because of the monogamous and structured rules-based culture. Their employees function strictly within their policies and answer only to them. By comparison, the repeat business-oriented, entrepreneurial type of loan officer working within the more traditional production platform culture actually recognizes that they have two different employers … the institutional lender who writes

continued from page 39

their paycheck and their new business referral customers who “employ” their services and give them their very purpose to exist. That loan officer often must serve as mediator when those two employers occasionally find themselves at cross-purposes over turnaround times, subjective underwriting conditions or decisions, meeting contract closing dates, pricing issues, lock expirations and a myriad of other traps that must be cleared in the origination process. The institutional employer demands to be put first by expecting the employee to be a “company man.” However, the referral customer expects to be put first because they believe the loan officer’s reps and warranties, included by statement or implication, that they would do everything within their power to expedite a competent and professional effort to smooth out all of the bumps in the road on the way to a pleasant and painless experience for their buyers on whom they depend for future referrals to friends, relatives and co-workers for new business!

Living the life If the issue at conflict between the two employers is perceived to be “internal” to the institutional employer, the other believes that removing or solving the obstacle is completely within the will of the loan officer’s lender and that refusal to do so suggest that either the loan officer isn’t making an effort to resolve the problem or his company lacks sufficient respect for the loan officer to accommodate his/her efforts to achieve customer satisfaction. An institutional employer can make a decision within a matter of seconds … the effects of which can take six months or more to overcome before new business opportunities can be resumed from the business referral customer employer. Often such, decisions are objective and unavoidable. Often … they are not. Regardless … when such decisions are made and lines are drawn in the sand as a result, the employer on the losing end usually considers the loan officer to be responsible. Most large/mega banks and mortgage banks cannot deal with this sort of culture. They created policies to serve their business and have evolved into rules-based bureaucracies who now can only serve their policies.

There’s a place and purpose for everyone Their “don’t bother me with the facts, here’s our policy” creed wreaks havoc within the entrepreneurial-oriented, traditional production culture which is why few mortgage production stars continued on page 42

must integrate components that help our customers easily detect and prevent fraudulent activity and risk,” said Jorge Sauri, president of MortgageDashboard. “To offer the most efficient solution, we selected Interthinx to give our customers streamlined fraud detection via a single click within MortgageDashboard.” For more information, visit or

Loan Score rolls out integration with Encompass

MortgageDashboard selects Interthinx for fraud solution integration Interthinx, a provider of proven risk mitigation, fraud detection and regulatory compliance tools for the residential mortgage industry, has successfully integrated its fraud prevention system with MortgageDashboard’s loan origination system, MortgageDashboard. The integration enables MortgageDashboard to offer customers a seamless interface with automatic and proven screening for potential fraudulent activity. BenchMark Mortgage was recently introduced to MortgageDashboard’s expanded loan origination system. MortgageDashboard integrated Interthinx’s FraudGUARD product, a fraud detection tool that measures and scores fraud risk against public, private and proprietary data sources. “Mortgage fraud continues to impact

the industry in insidious and highly destructive ways, and Interthinx is committed to aligning with companies like MortgageDashboard that share the common goal of fighting fraud at origination,” said Kevin Coop, president of Interthinx. “Interthinx offers proven solutions that help prevent and detect fraud, supported with proactive education and training to help mortgage professionals identify fraudulent activity before it does damage to a company.” MortgageDashboard enables the processing of paperless mortgages for lenders, credit unions and banks. It provides loan product optimization, loan application processing, all state-specific forms and disclosures, automated underwriting and closing documents. In addition to conventional loans, the platform supports subprime automated underwriting as a Web service. “To provide a robust loan origination system, vendors have realized that we

Loan Score Decisioning Systems, an enterprise-class pricing and automated underwriting solutions provider, has announced that it has embedded its product and pricing engine (PPE), PowerPricer, within Ellie Mae’s Encompass Banker Edition. The new integration offers customers the ability to quickly price, run eligibility and select loan programs both at the point-of-sale (POS) and also in the back office from within their Encompass Mortgage Management Solution. “We want to make it as easy as possible for our clients to do business,” said David P. Colwell, executive vice president at Loan-Score. “Integrating our PPE with Encompass allows users to continue working in the LOS while Loan-Score’s rules engine operates behind the scenes. This level of transparency is paramount to establishing ease of use and rapid user adoption. Because both of our platforms are utilized on a software-as-a-service (SaaS)


State Compliance

basis, it really helps alleviate the IT burden of having to support technology infrastructures and changing data.” Loan-Score’s PowerPricer is the product and pricing component of its comprehensive decisioning suite, which can be used for all lending channels and products. Pricing and guidelines can be customized to blend programs at the POS and then re-decision deals for best execution at the secondary desk. In addition to centralizing pricing for all lending channels, PowerPricer also returns instant product eligibility and best-fit pricing, provides loan-level drill downs in the pipeline, submits lock requests, ensures that pricing and investor guidelines are up-to-date, and offers additional production-facing tools. For more information, visit

Mortgage Warehouse Network offers solution for banks to enter the warehouse lending industry Mortgage Warehouse Network, a service provider offering mid-sized banks a simplified and cost-effective way to participate in warehouse lending, has launched a “turn-key” solution that includes the back office operations, systems and experienced personnel that banks need to establish and maintain highly profitable warehouse lines quickly, safely and economically. continued on page 43

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“compatibility” approach NMLS

practice their trade from mega-bankowned or -operated platforms. This isn’t meant to be an indictment. They really have no choice due to their size and the regulatory scrutiny they face constantly. Some offer an almost miniuniversity style menu of excellent training programs for a wide variety of subjects for those producers who want to develop expertise in different processes, functions and/or government and conventional loan programs. And they represent very good employment opportunities for many good seasoned mortgage professionals. When burnout for a producer happens and it will at least once during a typical loan officer’s career, the call center production platforms particularly at the servicing mega-banks are a good alternative base from which to use one’s skills, program and process knowledge and lender experience while avoiding the stress and tension

heard on the street



Mortgage Professionals to Watch

JULY 2009 O

related to the marketing side of this business to real estate sales professionals and other referral sources. Again, be self-aware of the culture in which you will be most compatible at various stages of your career and choose your employment opportunities where you can contribute the most. David Walden is a 39-year veteran of the mortgage banking industry, specializing in the mortgage production management of retail, wholesale, correspondent and affiliate branch origination strategies, and currently owns Production Solutions, outsourced production management and staffing. In addition, David also owns Risk & Recovery Solutions, conducting mortgage fraud detection, investigation, prosecution and asset recovery. He may be reached by e-mail at or

continued from page 40

ciency to the traditionally opaque secondary market for real estate-secured investments. For more information, visit or


continued from page 40

O JPMorgan Chase has named Thanh Roetelle head of warehouse lending for its bank division. O The Mortgage Bankers Association has announced the nomination of Michael W. Young as the association’s vice chairman-elect. O MRG Document Technologies has added Michael O’Leary as senior mortgage consultant and Craig Kaley senior technology specialist. O Cheryl Hemingway has joined QuestSoft as senior account manager. O Madison Commercial Real Estate Services has announced the hiring of Patrick Anarumo, Terence P. Guerriere Esq., Joseph J. Napolitano Esq., Danielle Sprouls Esq. and Louis H. Weinberg Esq. O Radian Guaranty has announced the addition of 13 new local account managers: Tim Allen in Mississippi and Alabama; Cassaundra Brenden in Minnesota, North Dakota and South Dakota; Carey Buckey in Connecticut and western/central Massachusetts); Phyllis Cox in Hawaii; Brooke Keitel in Oregon and southern Washington; Pamela Ormsby-Ripley in Houston, Texas; Laureen Potter in western and central Pennsylvania; Stephan Poulson

in southern California; Ray Rodriquez in New York, northern New Jersey and Vermont); Bryan Setlik in Iowa and Nebraska; Shari Spiess in Washington; Kellie Steger in Virginia; and Michelle Weiss in Alaska. O USA Funding has announced the hiring of Ryan Gajevic and Alicia McClendon as trusted mortgage advisors, Jaymee Catrine as processor, and Joshua Kowalke as assistant processor. O Greystar Real Estate Partners has announced that Tracy Bowers was joining the company as senior director of real estate. O Ronald Ahlensdorf Jr. has joined Pro-Teck Services as senior director, business development.

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

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

new to market

continued from page 41

LoanSifter, Inc., Web-based, pointof-sale product pricing and eligibility (PPE) tool, has announced an integration with Ellie Mae’s Encompass Banker Mortgage Management System, a loan origination and management system for mortgage bankers and brokers. This seamless integration will allow loan officers to leverage instant pricing decisions across their entire investor database from within Encompass, returning “buy” and “sell” side pricing that appropriately incorporate SRPs, margins and other incentives in addition to the accurate, branch-specific, risk-based pricing. Prospects originating from the Encompass system will be transferred into LoanSifter, along with their pricing scenarios, allowing for the immediate, simple creation of real-time monitoring, ongoing e-mail pricing campaigns, and other marketing materials that are accurately targeted to the borrower’s unique scenarios. This is in addition to the seamless workflow of submitting a pricing request from Encompass to LoanSifter, whose automated underwriting solution (AUS) allows the loan officer to determine the best-execution pricing strategy quickly before pushing those results back into the secondary desk within Encompass. From there, the secondary department can immediately re-price the loan for confirmation, and utilize integrations from within Encompass to the selected lender. “LoanSifter offers Ellie Mae’s

Mortgagebot has unveiled Version 2.0 of Mortgage Marvel, its online mortgage shopping service. The new Mortgage Marvel includes a credit-score feature that enables all mortgage shoppers— regardless of their credit score—to get instant, accurate, personalized and anonymous mortgage quotes via the Internet. “A key factor that makes Mortgage Marvel so different from other mortgage shopping services is that every quote is created in real time, directly from the ‘live’ product databases of participating lenders,” said Scott Happ, president and CEO of Mortgagebot LLC. “All quotes are built using live loan product data; so consumers can have the confidence that they will never get ‘bait-and-switch’ quotes or ‘teaser’ rates with Mortgage Marvel.”

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

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

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O JULY 2009

Convergys Corporation, a relationship management company, has announced the availability of Convergys Loan Modification Solutions. The solutions enable mortgage service providers to quickly and effectively respond to heavy customer demand for refinancing by leveraging Convergys’ live agent assistance and self-service automation technology, proactive outbound communications via voice, e-mail or text, and analytics to encourage loan retention and new lending, while lowering service costs. The solutions are available as a full suite or as individual services. “Mortgage companies and financial serv-

LoanSifter forms strategic partnership with Ellie Mae

Mortgagebot unveils V 2.0 of Mortgage Marvel


Convergys launches loan modification solution

ices institutions are faced with managing this incredible volume of requests,” said Andrea Ayers, president, customer management, for Convergys. “They require tools that are specifically designed to help them manage the call volume while still driving a superior customer experience. Convergys Loan Modification solutions give mortgage providers a single source for the tools they need to meet their primary objective— increasing retention by proactively managing the experience to optimize customer value over the life of the account.” The Convergys Loan Modification solutions include skilled contact center agent services, on-demand intelligent self-service automation from Convergys On-Demand Speech, outbound notifications for proactive communications to customers, and analytics to aid with intelligent routing and measurement of customer satisfaction. This buildingblock approach allows mortgage providers to quickly increase their capabilities to accommodate large volume of customer calls about company- and government-initiated programs, such as the Homeowner Affordability and Stability Program (HASP). For more information, visit enables borrowers to get instant and accurate mortgage rate and fee quotes from a nationwide network of banks and credit unions. All borrowers need to do is enter four pieces of data: Loan amount, property value, property zip code and credit score. No personal information is ever required. Mortgage Marvel displays a selection of free, accurate, up-to-date mortgage rate and fee quotes from multiple lenders in an easy-to-understand table. “In today’s Internet-enabled society, mortgage shopping shouldn’t be a hassle,” said Happ. “And while we’re pleased with the growing acceptance of Mortgage Marvel among both mortgage lenders and consumers, we know that a consumer’s credit score can directly influence the cost of borrowing.” O

“In these times of low interest rates and surplus capital, banks are looking for ways to bring higher returns on equity while still staying in safe investments,” says Dennis Ferstler, Mortgage Warehouse Network’s chief executive officer. “Mortgage Warehouse Network answers that need and provides exceptional return-on-equity based on a safe business platform. Many banks are discovering that warehouse lending is not only one of the most lucrative, profitable and safe investment areas for banks, it’s also now fast and easy to establish.” Mortgage Warehouse Network’s solution allows banks to establish a warehouse line, without the investment, time and development effort involved in creating an entirely new bank division from the ground up. With Mortgage Warehouse Network, banks have the ability to fund their first loans within 60 days of signing up. Mortgage Warehouse Network provides the systems, policies, procedures and human capital required to initiate and maintain a warehouse line, in addition to providing the financial modeling and managing the ongoing credit analysis. “We are essentially boarding single family mortgage loans at a discount for an average of 15 days,” says Jeff White, chief operating officer of Mortgage Warehouse Network. “A lot of banks are interested in entering the warehouse lending space, but simply don’t want to go through the time, hassle and financial commitment of creating an entirely new division. Now, they don’t have to.” Mortgage Warehouse Network utilizes one of the most powerful technology platforms in the industry providing seamless and transparent operations, funding logs, fraud detection, redundant underwriting and real-time reporting. This comprehensive database contains everything the bank needs and can be easily integrated into their general ledger and bank software, eliminating errors that often occur with manual processes. For more information, visit

Encompass customers an affordable, easy-to-use and accurate automated underwriting and pricing engine,” said Bruce Backer, president of LoanSifter. “In this constantly changing market, keeping up with fluctuations is an important task for mortgage originators, and LoanSifter’s Web-based solution delivers better service and more options for originators to present to their borrowers.” For more information, visit or


JULY 2009 Wednesday-Saturday, July 29-August 1 California Association of Mortgage Brokers 2009 Annual Convention & Grand Exposition San Diego Marriott Hotel & Marina 333 West Harbor Drive San Diego Convention Center 111 West Harbor Drive San Diego For more information, call (916) 4488236 or visit



ACC Mortgage .................................................... ........................................39 All Real Estate Solutions LLC ................................ ............................................17 All Regs.............................................................. ..............................................41 Continental Home Loans Inc.........................................................................................................21 Elliott and Company Appraisers Inc. .................... ............................18 Emigrant Mortgage Company .............................. ..............................27 First Source Capital Mortgage Inc. ........................ ..................................24 Flagstar Bank .................................................... ..................Back Cover Franklin First Financial........................................ ............................29 Frost Mortgage Banking Group ......................................................................................................9 Guaranteed Home Mortgage ................................ ..................................11 HTDI Financial.................................................... ....................13 Hudson Valley Processing .................................... ......................12 Informative Research .......................................... ............................19 Mortgage Now Inc............................................... ............................................25 NAMB/West ........................................................ ..................................................6 NAPMW.............................................................. ..............................................42 New York Appraisal Management Services Inc. ...... ..............................................15 Platinum Credit Services Inc. .............................. ..........................7 Presidents First Mortgage Bankers........................ ..............Inside Back Cover Quality Mortgage Services.................................... ................................18 & 33 ThinkReverse! .................................................... ............................MT 2 TruClose Financial Services LLC ............................ ....................................34 & 36 United First Financial .......................................... ..............................17 United Mortgage Corp. ........................................ ..................................43 United Wholesale Mortgage ................................ ......................Inside Front Cover Value Financial Mortgage Services Inc. ................ ......................................31 Wells Fargo Home Mortgage ................................ ........................................20

Friday, October 30 Oregon Association of Mortgage Professionals 2009 Annual Convention “The Best of the Best” Location to be determined For more information, call (503) 6708586 or visit

Monday-Wednesday, September 14-16 Mortgage Bankers Association Regulatory Compliance Conference The JW Marriott Hotel 1331 Pennsylvania Avenue Washington, D.C. For more information, call (800) 793-6222 or visit Wednesday-Thursday, September 16-17 2009 Missouri Association of Mortgage Brokers Trade Show & Convention St. Charles Convention Center and Embassy Suites Hotel 2 Convention Center Plaza St. Charles, Mo. For more information, call (314) 9099747 or visit Thursday-Friday, September 17-18 Mortgage Bankers Association Human Capital Management Symposium MBA Headquarters 1331 L Street NW • Washington, D.C. For more information, call (800) 7936222 or visit Monday-Tuesday, September 21-22 20th Annual Illinois Association of Mortgage Professionals Fall Conference The Sheraton Hotel 3400 Euclid Avenue Arlington Heights, Ill. For more information, call (630) 9167720 or visit OCTOBER 2009 Friday-Saturday, October 2-3 Kentucky Association of Mortgage Professionals 2009 Annual Convention Belterra Casino & Golf Resort 777 Belterra Drive Belterra, Ind. For more information, call (270) 9292836 or visit Monday-Tuesday, October 5-6 Washington Association of Mortgage Professionals 2009 Real Estate Lenders Conference & Expo Meydenbauer Center 11100 NE 6th Street Bellevue, Wash. For more information, call (866) 4257250 or visit Sunday-Wednesday, October 11-14 Mortgage Bankers Association 96th Annual Convention & Expo San Diego Convention Center 111 West Harbor Drive San Diego For more information, call (800) 793-6222 or visit

NOVEMBER 2009 Monday-Thursday, November 2-5 Virginia Association of Mortgage Brokers 21st Annual Convention Williamsburg Lodge 310 South England Street Colonial Williamsburg, Va. For more information, call (804) 2857557 or visit DECEMBER 2009 Sunday-Tuesday, December 6-8 NAMB/WEST MGM Grand Hotel & Casino 3799 Las Vegas Boulevard South Las Vegas For more information, call (703) 3425900 or visit FEBRUARY 2010 Monday-Thursday, February 1-4 Mortgage Bankers Association CREF/Multifamily Housing Convention & Expo Mandalay Bay Resort & Casino 3950 Las Vegas Boulevard South Las Vegas For more information, call (800) 793-6222 or visit Tuesday-Friday, February 23-26 Mortgage Bankers Association National Mortgage Servicing Conference & Expo Manchester Grand Hyatt 1 Market Place San Diego For more information, call (800) 793-6222 or visit APRIL 2010 Sunday-Wednesday, April 25-28 Mortgage Bankers Association National Technology in Mortgage Banking Conference & Expo Hyatt Regency Chicago 151 East Wackler Drive Chicago For more information, call (800) 7936222 or visit AUGUST 2010 Wednesday-Friday, August 18-20 California Association of Mortgage Brokers 2010 Annual Convention & Grand Exposition Hyatt Regency Long Beach 200 South Pine Avenue Long Beach Convention Center 300 East Ocean Boulevard Long Beach, Calif. For more information, call (916) 4488236 or visit MO






Wednesday-Friday, September 9-11 Mortgage Bankers Association Reverse Mortgage Lending Conference The Westin GasLamp Quarter San Diego 910 Broadway Circle San Diego For more information, call (800) 793-6222 or visit

Thursday-Friday, September 10-11 2009 Nebraska Association of Mortgage Brokers/Nebraska Mortgage Association Fall Conference Embassy Suites Omaha-La Vista Hotel & Conference Center 12520 Westport Parkway La Vista, Neb. For more information, call (402) 505-7180 or visit


JULY 2009 O



AUGUST 2009 Tuesday-Friday, August 11-14 American Association of Residential Mortgage Regulators 20th Annual Regulatory Conference The Hyatt Regency Savannah 2 West Bay Street • Savannah, Ga. For more information, call (202) 5213999 or visit

SEPTEMBER 2009 Wednesday-Friday, September 9-11 Mortgage Bankers Association of Pennsylvania Annual Conference The Eisenhower Hotel & Conference Center 2634 Emmitsburg Road Gettysburg, Pa. For more information, call (888) 739-9991 or visit

Wednesday-Friday, October 21-23 Pennsylvania Association of Mortgage Brokers and New Jersey Association of Mortgage Brokers Regional Conference Trump Taj Mahal Casino Resort 1000 Boardwalk at Virginia Avenue Atlantic City For more information, call (973) 3797447 or visit


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

Thursday, September 10 Minnesota Mortgage Association 2009 Convention & Exhibitor Showcase The Hyatt Regency Minneapolis 1300 Nicollet Mall Minneapolis For more information, call (952) 345-3240 or visit




 Call Now: 1-877-773-7178 

 Presidents f irst

Presidents First is a multi-state, full-service home mortgage Banker dedicated to offering quality mortgage solutions with an unwavering commitment to service. Having years of experience in the mortgage industry, we understand what’s important. Presidents First is dedicated to providing our customers with intelligent, innovative mortgage products at aggressive rates and unparalleled service levels. Utilizing hands-on common sense underwriting, expeditious closing strategies and personalized account servicing, Presidents First is focused on helping our customers to grow their business. Offering affordable lending solutions for borrowers that deserve quality loan programs and stability - it’s clear to see why Presidents First is America’s Leading Wholesale Lender.™

America’s Leading Wholesale Lender ™ Let Us Help Grow Your Business!  Conforming Fixed  FHA 203B  FHA 203k  FHA Streamline


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