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Becoming a GSF Pro-Branch grants you access to many of the services that may not be obtainable in your current environment.

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Becoming a GSF Pro-Branch grants you access to many of the services that may not be obtainable in your current environment.

Become part of GSF Mortgage’s Professional Branch Network

GSF Mortgage approved for: FHA VA USDA Freddie Mac Fannie Mae Seller Servicer Jumbo Non-Conforming Reverse Mortgages 203k



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GSF offers total support: Payroll Accounting Compliance Marketing Processing Lead Generation State of the Art Technology Free Education & Licensing Live Securities Pricing On Staff Legal Counsel

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The Secondary Market Overview: From Bonds to Production … How Long Will They Stay Low? By Dave Hershman

Smooth Sailing With New Compliance Tools By Greg Holmes



NMP Mortgage Professional of the Month: Peter Norden, Chief Executive Officer, REMN-Real Estate Mortgage Network Inc.


Mortgage Revolution to Present MRev New York Oct. 15-17


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


“Yield Spread Premium” is Gone! A Proclamation Declares a New Term By Jonathan Foxx


Are You Really SAFE From Predatory Mortgage Originators? By Lawrence Fried


FHA Insider … Big FHA Updates: “NegEQ” Refi, CLTVs, MIPs and Credit Scores By Jeff Mifsud


SAFE Smart … Registration, Level or Not, Here It Comes

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The Trusted Mortgage Professional: It’s Time to Step Up


Looing Into the Future of Mortgage Banking By Rene F. Rodriguez





















A New Era of Mortgage Reform … Part II: Legislation— Reactive or Proactive By Jonathan Foxx

By Greg Schroeder



Value Nation: The Appraisal Review … Its Time Has Come By Charlie W. Elliott Jr., MAI, SRA

By Paul Donohue, CRMS







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A Look Into the Crystal Ball of Mortgage Banking: The Wild Ride Continues, But Major Opportunities Lie Ahead


By Dave Zitting

A View From the C-Suite: Mortgage Banking … Change? You Haven’t Seen Anything Yet! By David Lykken


Forward on Reverse: FIT for Reverse Mortgage Lenders: Part I By Atare E. Agbamu, CRMS






Why and How You Control the Future: Braving the Great Waves of Change By Gibran Nicholas

September 2010 Volume 2 • Number 9

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


YSP, we’ll miss you


As the yield spread premium (YSP) rides into the sunset, we now have to find a better nomenclature to describe the “credit” that third-party originators (TPOs) will receiving for originating loans. On page 18 of this issue, you will find the new term that we feel will takeoff as an official term in the mortgage industry, replacing the old “YSP” as proclaimed by Jonathan Foxx. Later in the magazine, Jonathan continues his dissection of the Dodd-Frank Act in Part II of his series “A New Era of Mortgage Reform.”


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

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


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ADVERTISING To receive any information regarding advertising rates, deadlines and requirements, please contact Senior National Account Executive Karen Krizman at (516) 409-5555, ext. 326 or e-mail 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 call (516) 409-5555, ext. 301; e-mail or visit Any subscription changes may be made to the attention of “Circulation” via fax to (516) 409-4600. Statements, articles and opinions in National Mortgage Professional Magazine are the responsibility of the authors alone and do not imply the opinion or endorsement of NMP Media Corp., or the officers or members of National Association of Mortgage Brokers and its State Affiliates (NAMB), National Association of Professional Mortgage Women (NAPMW), National Credit Reporting Association (NCRA) and/or other state mortgage trade associations. Participation in NAMB, NAPMW, NCRA, and/or other state mortgage trade associations events, activities and/or publications is available on a non-discriminatory basis and does not reflect the endorsement of the product and/or services by NMP Media Corp., NAMB, NAPMW, NCRA, and other state mortgage trade associations. National Mortgage Professional Magazine, NAMB, NAPMW, NCRA, and/or other state mortgage trade associations do not make any misrepresentations or warranties concerning the regulatory and/or compliance aspects of advertisers, products or services and/or the editorial content contained in NMP Media Corp. publications. National Mortgage Professional Magazine and NMP Media Corp. reserve the right to edit, reject and/or postpone the publication of any articles, information or data. MO








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

The future of the mortgage banking marketplace This month, we will focus on the future of mortgage banking. As we face massive changes in the industry, in this focus, we had our experts write about ways to deal with these constant changes. The section starts off with the change-master himself, Rene F. Rodriguez, chief executive officer of Mortgage Dashboard providing an overview of the future of mortgage banking and his perspective from a technology standpoint. Gibran Nicholas then shares his thoughts on why you can control change and how to adapt to the ever-changing marketplace. Then, we get to peek into Dave Zitting’s crystal ball to see the opportunities that await us as the market undergoes its metamorphosis. The section wraps up with David Lykken discussing the current state of the mortgage banking market from the perspective of the C-level executive and speculating on the unknown variables that lie ahead in the marketplace.

Our NMP Mortgage Professional of the Month Last month, we featured wholesaler Joe Amoroso from REMN. As we focus this month on the world of mortgage banking, we didn’t have to go travel very far away from Mr. Amoroso, in fact, we went just down the hall to a man who is considered legendary in the world of mortgage banking, REMN Chief Executive Officer Peter Norden. Peter (who is pretty young by industry standards) came out of retirement when he was faced with unprecedented opportunities presented in the secondary marketplace. Peter is a guy who trades mortgage-backed securities (MBS) on his personal account just for fun. I’m pretty sure you’ll find his insight and stories on the market helpful as you continue to survive in this ever-changing mortgage marketplace. We hope you enjoy this issue and take away from it, knowledge from our informative articles that will assist you in today’s turbulent marketplace. As the leaves begin to fall, action in the industry begins to heat up as I’d like to highlight two marquee events on the horizon. First off, Mortage Revolution will present “MRev New York 2010,” Friday-Sunday, Oct. 15-17 at the Westchester Marriott in Tarrytown, N.Y. For more information on this innovative industry event where the top minds are brought together in a forum to exchange ideas with the common goal of advancing the industry, visit In December, the National Association of Mortgage Brokers will visit Las Vegas and the MGM Grand, Saturday-Monday, Dec. 4-6, for the 2010 installment of NAMB/WEST. This annual event will feature a number of informative breakout sessions, a jam-packed trade show in the exhibit hall, and much more. NAMB continues to fight the fight for the entire mortgage industry, not just the dues-paying members, so come on out to Vegas and see what NAMB has to offer. For more information, visit Until next month ... Sincerely,

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

The National Association of Mortgage Brokers

National Association of Professional Mortgage Women

11325 Random Hills Road, Suite 360 Fairfax, VA 22030 Phone #: (703) 342-5900  Fax #: (703) 342-5905

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

NAMB Board of Directors Officers President—William R. Howe, CMC, CRMS Howe Mortgage Corporation 13322 East Paradise Drive  Scottsdale, AZ 85259 (602) 200-8100 President-Elect—Michael D’Alonzo, CMC Creative Mortgage Group 1126 Horsham Road, Suite D  Maple Glen, PA 19002 (215) 657-9600 Vice President—Donald J. Frommeyer, CRMS Amtrust Mortgage Funding Inc. 200 Medical Drive, Suite D  Carmel, IN 46032 (317) 575-4355 Secretary—Virginia Ferguson, CMC Heritage Valley Mortgage Inc. 5700 Stoneridge Mall Road, Suite 225  Pleasanton, CA 94588 (925) 469-0100 Treasurer—John Councilman, CMC,CRMS AMC Mortgage Corporation 2613 Fallston Road  Fallston, MD 21047 (410) 557-6400 Immediate Past President—Jim Pair, CMC Mortgage Associates Corpus Christi 6262 Weber Road, Suite 208  Corpus Christi, TX 78413 (361) 853-9987


Deb Killian, CRMS Charter Oak Lending Group LLC 3 Corporate Drive, P.O. Box 3196  Danbury, CT 06813-3196 (203) 778-9999, ext. 103 Olga Kucerak, CRMS Crown Lending 222 East Houston, Suite 1600  San Antonio, TX 78205 (210) 828-3384 Walter Scott Excalibur Financial Inc. 175 Strafford Avenue, Suite 1  Wayne, PA 19087 (215) 669-3273

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

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

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

Secretary Murielle Barnes, CME (806) 373-6641

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

Treasurer Hulene Bridgman-Works (972) 494-2788

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

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

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


2010 Board of Directors Marty Flynn President (925) 831-3520, ext. 224

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

Tom Conwell Vice President (248) 473-7400

Judy Ryan Director (800) 929-3400, ext. 201

Daphne Large Treasurer (901) 259-5105

Tom Swider Director (856) 787-9005, ext. 1201

William Bower Director (800) 288-4757

Donald J. Unger Director (303) 670-7993, ext. 222

Mike Brown Director (800) 285-6691

NCRA Staff

Susan Cataldo Director (404) 303-8656, ext. 204 Nancy Fedich Director (908) 813-8555, ext. 3010

Terry Clemans Executive Director (630) 539-1525 Jan Gerber Office Manager/Membership Services (630) 539-1525


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

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


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

President Gary Tumbiolo, CMI (919) 452-1529 

Michael Anderson, CRMS Essential Mortgage 3029 S. Sherwood Forest Boulevard, Suite 200 Baton Rouge, LA 70816 (225) 297-7704

National Board of Directors

influence was causing other positive effects. For example, the fact that houses were going up in value was causing the public to want even more houses. I did read with interest a recent CNN/Money article last month that was titled—“Venture Capitalists Are Back.” Here is an excerpt: “These are the glory days of the residential real estate investor. Low prices, rockbottom interest rates and stable rental markets have created huge buying opportunities. “It’s awesome right now. I don’t think we’ll ever see another time like this,” said Tanya Marchiol of Team Investments, which has operations in about 10 states, but focuses mostly on the Phoenix market. These investors are known to many as vultures because they The first point I will make I seem to swoop in and buy “distressed properbe making every month, and I have been ties”—foreclosures and short sales— for my whole career—never try to pre- cheap.” dict the future. Yes, there is much more Now vultures are not necessarily fliproom for rates to rise than to fall. ping properties. Some are fixing them and However, we need some evidence that the economy is going to gain steam. That renting them. The point is that while the will not happen until the real estate general American public is not rushing to markets start to recover and the real purchase real estate, smart investors are. estate markets will not recover until the This is one indication of a bottom in the economy produces jobs. Well, the econ- markets. However, it does not say when omy cannot produce jobs at the rate we the markets will start moving up. The real need it without a healthy real estate turn does not happen until Americans are market. Talk about a vicious circle. Yes, not only working, but they are working we are in a terrible vicious circle today and not worried about losing their job. Here is the second point: You should and it is the exact opposite of the cycle that produced the real estate explosion be rooting for rates to move up. Why? of a half-a decade ago. Every positive Because rates moving up will be one result of a real estate recovery. More than half of those who want to refinance at these low rates cannot do so because they simply do not qualify. They won’t qualify until lenders start loosening credit guidelines (and I am not talking about going back to the “no money down, stated-income, low credit score” era) and housing prices are going up. So even rising rates could help at least some people refinance. For now, you should be focusing on two things … First, helping get people qualified. There are three main reasons now they don’t qualify:

How Long Will They Stay Low? Now the prognosticators have changed the question. Instead of asking whether rates are rising or falling, they are now asking: “How long will they stay low?” It is quite logical that we should now shift the focus because it seems very unlikely that rates can move significantly down from today’s levels now that they have hit a shade below the 4.5 percent mark as of early August. A couple of points here …  That is what we said when rates went below five percent. Don’t expect them to dip anymore.  Even though you and the experts may not be expecting rates to drop any further, that does not mean your prospects are thinking the same thing.




 They don’t have income (hard to help with that).  Their credit score is too low.  They are underwater. While today, you cannot get more than half of your prospects qualified, you can help many others. Let’s say you see 20 prospects in month and 10 of them do not qualify. Perhaps you convert three into loans. What if you could convert two more? That’s an income increase of 66 percent. Not bad. You do that by making sure their credit score is as high as it can be and not by doing the work yourself— by getting them to a mortgage professional. This helps conversions in two ways:

 Some can now qualify under today’s tight standards.  Because of risk-based premiums, which are not going away even when credit standards loosen, a higher score will enable you to lower your rate

quote for them. This helps against competition and will help make more refinance transactions make sense.

“You should be rooting for rates to move up. Why? Because rates moving up will be one result of a real estate recovery.” The underwater issue is another tough issue, but not as insurmountable as the income issue. The two avenues are modification or short refis with a lender, and if this is not possible, debt reduction that will help them pare down the mortgage in the long run. I understand that neither of these may mean a transaction to you today; however, in the long run, it helps them become clients, and in the short run, it will result in referrals. I am always counseling loan officers to have more of a long-term review if they want to be successful. Don’t just focus on the deals that are possible right now, but build a base for the future, like the venture capitalists are doing with the real estate market. Want to learn about how to help people with both score improvement and debt reduction with one system? Download this recorded Webinar at The second focus for right now … help your prospects see that there is more of a risk for rates to rise right now than fall. Keep in mind that you are not predicting that rates will go up and you are not predicting how long they will stay down. However, I guarantee if rates do spike up, or I should say when rates spike up—your phone will be ringing off the hook from prospects that were waiting for rates to go a little lower or just procrastinating and are now afraid they missed the boat. Actually, little spikes in rate help our business in the short run because it wakes people up. I gave you an avenue to help get people qualified. Now I have to give you an avenue to wake people up. I have developed a letter which is part of our NewsletterPro Marketing System. It focuses upon the “cost of waiting.” You need to show people “the cost of waiting for rates” to go down. There is a cost, even if rates stay the same. If you would like a copy of this letter, email me at Here is my message: Let’s stop focusing on how long rates will stay down. Let’s focus on how to get more people to take advantage of these record-low rates. As the venture capitalists say, “This is the opportunity of a lifetime” Don’t let your clients miss it. Dave Hershman is a leading author for the mortgage industry with eight books and several hundred articles to his credit. He is also head of OriginationPro Mortgage School and a top industry speaker. Dave’s Certified Mortgage Advisor Program can be found at If you would like to stay ahead of what is happening in the markets, visit for a free trial or e-mail

FHA announces plan to assist underwater homeowners with new refi option


FHFA establishes new goals for GSEs

…When you could speak directly with easy-to-reach underwriters who issued fast approvals with common sense underwriting? Well so do we. Go Back in Time. At Terrace Mortgage Company, we believe in providing friendly, fast service with a personal touch, and we’ve done just that for 22 years. We pride ourselves on our easy-to-reach, seasoned underwriters who use common sense and offer unparalleled support by phone or email every step of the way. And we understand you need to close quickly. So we send a link with the closing package directly to the closing company right after you get a clear-to-close.

Terrace Mortgage Company Celebrating 22 years of wholesale lending

 SEPTEMBER 2010 Sandy Garcia, National Sales Director (866) 934-4631, ext 301


continued on page 10



The Federal Housing Finance Agency (FHFA) has sent a final rule to the Federal Register establishing new housing goals for Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs) for 2010-2011. The Housing and Economic Recovery Act of 2008 (HERA) required the FHFA to establish housing goals for the GSEs for targeted segments of the mortgage market. In previous years, the U.S. Department of Housing & Urban Development (HUD) set overall goals that measured the combined performance of single-family and multifamily mortgages. In contrast, the new goals required by HERA target specific segments of those markets. The new goals also reflect essential conservatorship requirements to ensure the GSEs focus on core business activities to support the mortgage market while minimizing losses on their existing mortgages. The final rule establishes three single-family, owner-occupied home purchase mortgage goals for low-income families, very low-income families, and families living in geographical areas with lower-income populations, areas with high concentrations of minority residents, and federally-declared disaster areas. The latter goal also includes a specialized sub-goal to ensure that the enterprises address housing needs in lower-income and minority areas. The final rule also contains a goal for single-family, owner-occupied refinance mortgages for low-income families. The home purchase and refinance goals are expressed as minimum goalqualifying mortgage shares of home purchase or refinance mortgages 

In an effort to help responsible homeowners who owe more on their mortgage than the value of their property, the U.S. Department of Housing & Urban Development (HUD) will begin providing an additional refinancing option for underwater borrowers. Originally announced in March, this enhancement of Federal Housing Administration (FHA) refinance program will offer certain ‘underwater’ non-FHA borrowers who are current on their existing mortgage and whose lien holders agree to write off at least 10 percent of the unpaid principal balance of the first mortgage, the opportunity to qualify for a new FHA-insured mortgage. The FHA Short Refinance option is targeted to help people who owe more on their mortgage than their home is worth—also known as being ‘underwater’—because their local markets saw large declines in home values. As announced earlier this year, this change, as well as other programs that have been put in place, will help the Obama Administration meet its goal of stabilizing housing markets by offering a second chance to up to three to four million struggling homeowners through the end of 2012. Participation in FHA’s short refinance program is voluntary and requires the consent of all lien holders. To be eligible for a new loan, the homeowner must owe more on their mortgage than their home is worth and be current on their existing mortgage. The homeowner must qualify for the new loan under standard FHA underwriting requirements. The property must be the homeowner’s primary residence and the borrower’s existing first lien holder must agree to write off at least 10 percent of their unpaid principal balance. In addition, the existing loan to be refinanced must not be an FHA-insured loan, and the refinanced FHA-insured first mortgage must have a loan-to-value (LTV) ratio of no more than 97.75 percent and a combined loan-to-value ratio no greater than 115 percent.

To facilitate the refinancing of new FHA-insured loans under this program, the U.S. Department of Treasury will provide incentives to existing second lien holders who agree to full or partial extinguishment of the liens. To be eligible, servicers must execute a Servicer Participation Agreement (SPA) with Fannie Mae, in its capacity as financial agent for the United States, on or before Oct. 3, 2010. For more information, visit

Smooth Sailing With New Compliance Tools By Greg Holmes




control process, review their prefundIncreasingly stringent new regulations ing quality controls, and have written and recommendations are simply a procedures in place for how third-party fact of life for today’s mortgage profesoriginators will be approved. sionals. Whether the focus of your business is on meeting the needs of repeat customers or you are actively seeking  The Desktop Underwriter now looks for discrepancies between data eleto introduce yourself to new clients, ments and elements at loan delivwhen it comes to compliance, we’re all ery in more than a dozen additionin the same boat. And right now, that al warning areas. boat is sailing in uncharted waters. This summer, mortgage professionals have been familiarizing themselves Additional challenges with the ins and outs of Fannie Mae’s Mortgage professionals also must take new Loan Quality Initiative (LQI) and into account the more stringent selling requirements that Freddie the impact it is going to Mac announced in its Aug. have on their interactions 16 bulletin which applies with applicants. Fannie to mortgages with settleMae issued these requirement dates on or after Dec. ments and recommenda1, 2010. A key provision of tions in an effort to the updates outlined in improve compliance with Bulletin 2010-19 revises its eligibility and underrequirements for inquiries writing guidelines, havon a borrower’s credit ing determined that comreport amongst others. pliance will help curb the Lenders now will be rise in loan repurchase required to look into the requests to lenders. borrower’s credit report Mortgage professionals “Mortgage profesinquiries made in the prenow are expected to take sionals need not feel vious 120 days, rather a number of additional at sea over recent than the 90 days previousverification and qualificaindustry changes as ly required. If the borrowtion steps as they work long as they have the er was granted additional with their applicants to proper tools at their credit, the lender will be reduce the risk of buydisposal.” required to obtain verifibacks. They are now digcation of the debt, and ging deeper, starting with the prospective borrower’s identifying include the debt in qualifying the borinformation, gathering more detailed rower. This revised requirement will information about the property and apply to all loans, not only manually appraisal, and scrutinizing the appli- underwritten loans. These required extra steps have the cant’s credit profile both at the time of application and again just before clos- potential to slow down applications and weigh down a time-strapped ing. Changes we are seeing include: office’s productivity unless the most  A borrower’s identity now must con- up-to-date resources and a smart plan form to federal documentation require- of action are in use. Fortunately, the credit-information ments. He or she must have either a valid Social Security Number or individ- industry has also been evolving rapidly this year, introducing a variety of tools to ual taxpayer identification number. help mortgage professionals successfully  A property unit number must be pro- navigate today’s compliance environvided if the property on a mortgage ment. These new technologies and application is part of a multi-unit enhanced tools enable mortgage professionals to stay compliant and, at the same development like a condominium. time, keep their profitability on track.  All debts incurred by the borrower up to the mortgage closing date Detailed reports, rapid must be disclosed on the applicant’s response times final application and included in One of the most valuable tools for ensuring the loan qualification. It also is up compliance is a report that allows mortto the mortgage professional to gage professionals to easily compare a have systems and controls in place credit report that was pulled during origination to one pulled at the time of closing. to evaluate those liabilities. These reports can be delivered in just sec Mortgage professionals’ quality control onds and include such important details as process requirements have been a credit score comparison, credit score facrevised, including the timing of quality tor comparison, trade line comparison, control reviews after closings. Offices continued on page 8 now are expected to audit their quality




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new compliance tools public record comparison, inquiries comparison, and information sources comparison. General information also is included, as is a convenient quick-reference summary section. Manual inquiry verifications also are helpful in this regard because they can help determine new account information, as are soft code inquiries, which are available for pre- and post-funding reviews. The tax return verification remains a helpful resource for comparing the income-related lines of a borrower’s tax return with the same lines on file at the Internal Revenue Service (IRS), ensuring

continued from page 6

that the original IRS figures have not been tampered with. These reports also can highlight any discrepancies with Social Security Administration files. Verifications are invaluable in the fight against mortgage loan fraud, a crime with an impact that runs into billions of dollars. A number of other tools are also available to check an applicant’s Social Security Number, address, phone number, employment information, liabilities and the property’s history. These reports also can highlight fraud and other alerts on an applicant’s file.

The speed with which mortgage professionals can obtain these reports is a huge advantage in quickly identifying and resolving possible red flags. The ability to order and receive delivery of appraisals electronically is another valuable time-saver.

Ensuring an accurate credit score Fannie Mae raised its minimum score requirement to 620 in the beginning of July. Even a few points can mean the difference in whether a mortgage applicant is approved or denied, so scoring tools are especially valuable to mortgage professionals in today’s market.  Credit snapshot: The ability to size

Consumers want to work with people Consumers want to work people they can trust and believe. they can trust and believe. starts by setting higher Trust starts byTrust setting higher BROKER standards for the mortgage industry. standards for the mortgage industry. ER








Introducing the Trusted Mortgage Professional Program! 8


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news flash

continued from page 5

acquired by the GSEs. The benchmark goal levels for the low-income and very low-income home purchase goals did not change from the proposed housing goals rule, however, the final rule adjusts the low-income refinance goal downward reflecting recent market conditions. FHFA does not intend for the GSEs to undertake economically adverse or high-risk activities in support of the goals, nor does it intend for the enterprises’ state of conservatorship to be a justification for withdrawing support from these important market segments. As noted in the final rule, FHFA expects to take future regulatory action to address the housing goals treatment of purchases of multifamily loans that aid the conversion of properties that have affordable rents to properties that have less affordable, market rate rents. FHFA also may solicit further comments on how the housing goals can further promote susustainable homeownership and how multifamily subordinate liens can be structured to benefit low-income residents. The final rule is effective 30 days after publication in the Federal Register. For more information, visit

Former New Century execs barred for five years by SEC for misleading disclosures The Securities & Exchange Commission (SEC) has accepted settlement offers from three former officers of New Century Financial Corporation: Brad A. Morrice, the former New Century chief executive officer and co-founder; Patti M. Dodge, the former chief financial officer; and David N. Kenneally, former New Century controller. The SEC’s complaint alleges, among other things, that New Century’s second and third quarter 2006 Forms 10-Q and two late 2006 private stock offerings contained false and misleading statements regarding its sub-prime mortgage business. Each of the defendants agreed to be barred for five years from serving as an officer and director of a public company. The complaint further alleges that Morrice and Dodge knew about certain negative trends in New Century’s loan portfolio from reports they received and that they participated in the disclosure process, but they did not take adequate steps to ensure that the negative trends were properly disclosed. The Commission’s complaint also alleges that in the second and third

quarters of 2006, Kenneally, contrary to Generally Accepted Accounting Principles, implemented changes to New Century’s method for estimating its loan repurchase obligation and failed to ensure that New Century’s backlog of pending loan repurchase requests were properly accounted for, resulting in an understatement of New Century’s repurchase reserve and a material overstatement of New Century’s financial results. The complaint further alleges that Dodge was told of the methodology changes and the backlog of repurchase requests but did not ensure that they were properly accounted for and disclosed. To settle the charges, Morrice consented to the entry of a permanent injunction prohibiting him from violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 (“Securities Act”) and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, and the internal controls, false statements to accountants, and certification provisions of Section 13(b)(5) of the Exchange Act and Rules 13b2-2 and 13a-14 thereunder; and from aiding and abetting violations of the reporting provisions of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-11, and 13a-13 thereunder. He also agreed to disgorge $464,354 with $76,991 in prejudgment interest thereon, and to pay a $250,000 civil penalty. To settle the charges, Dodge con-

sented to the entry of a permanent injunction prohibiting her from violating the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and the books and records, internal controls, false statements to accountants, and certification provisions of Section 13(b)(5) of the Exchange Act and Rules 13b2-1, 13b2-2, and 13a-14 thereunder; and from aiding and abetting violations of the reporting provisions of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-11, and 13a-13 thereunder. She also agreed to disgorge $379,808 with $70,192 in prejudgment interest thereon, and to pay a $100,000 civil penalty. Kenneally has consented to the entry of a permanent injunction prohibiting him from violating the antifraud provisions of Sections 10(b) of the Exchange Act and Rule 10b-5 thereunder, and the books and records, internal controls, and false statements to accountants provisions of Section 13(b)(5) of the Exchange Act and Rules 13b2-1 and 13b2-2 thereunder; and from aiding and abetting violations of the reporting provisions of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-11, and 13a-13 thereunder. He also agreed to disgorge $126,676 with $23,324 in prejudgment interest thereon, and to pay a $32,500 civil penalty. For more information, visit




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FinCEN report finds suspicious activity related to mortgage fraud rises four percent in 2009

Federal Reserve proposes enhanced protections and disclosures for mortgage transactions The Federal Reserve Board (FRB) has proposed enhanced consumer protections and continued on page 12

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HOPE NOW, the private sector alliance of mortgage servicers, investors, mortgage insurers and non-profit counselors estimates the industry has completed 1.13 million permanent loan modifications

Faith Schwartz, senior advisor for HOPE NOW. “Our data this year shows some positive trends, including a high percentage of proprietary mods that include reductions of monthly principal and interest payments. This translates into more affordable loan modifications for homeowners.” For more information, visit


HOPE NOW reports: One million-plus permanent loan mods completed to date in U.S.

HOPE NOW also reports that since January of this year, mortgage delinquencies of 60 days or more past due have dropped 20 percent as of July 2010. Since HOPE NOW initiated survey data reporting (July 2007), more than 3.5 million homeowners have saved their homes via permanent loan modifications. This total reflects the combination of proprietary loan modifications plus those completed under HAMP (as reported by the U.S. Treasury). Combined with other mortgage options, such as repayment plans and forbearance, the mortgage industry has assisted almost 10.4 million homeowners since HOPE NOW was formed in 2007. “The industry continues to make progress in assisting large numbers of borrowers who are at risk of foreclosure,” said 

The Financial Crimes Enforcement Network (FinCEN), has released its 2009 Mortgage Loan Fraud (MLF) study which found the number of mortgage fraud suspicious activity reports (SARs) filed in 2009 grew four percent compared to the number of mortgage fraud SARs filed in 2008. FinCEN also reported that just looking at the fourth quarter of 2009, mortgage fraud SAR filings increased six percent over the same period in 2008. Consistent with recent years, nine percent of all SARs filed in 2009 indicated MLF as an activity characterization. However, looking at just the fourth quarter, this proportion rose to 11 percent. In addition to the increase in SAR MLF filings, the analysis shows an increase in the prevalence of post-origination loan reviews by a variety of mortgage market businesses other than mortgage lenders. Mortgage loan purchasers and providers of mortgage insurance, certificate insurance, or similar credit enhancement have taken an increasing role in detecting potential fraud or misrepresentations. “FinCEN is an active participant in the fight against mortgage fraud working closely with local, state and federal law enforcement, assessing potential vulnerabilities and sharing information that can lead to successful prosecutions,” said FinCEN Director James H. Freis Jr. “These numbers tell us that we must remain vigilant and continue taking action to focus resources and hold accountable perpetrators of mortgage fraud.” The report also lists where MLF SARs are most common by state by county and by metropolitan area. The following table shows the Metropolitan Statistical Areas (MSAs) with the most SAR MLF filings and the number of mortgage loan fraud SARs that were filed in 2009. The volume of SAR filings in any given period does not directly correlate to the number or timing of suspected fraudulent incidents in that period. The numbers reported show when the suspicious activity was reported even if the activity occurred prior to 2009. FinCEN’s data indicates that almost 75 percent of mortgage loan fraud SARs report suspicious activity that occurred more than one year prior to filing the SAR. Foreclosures, repurchases, insurance investigations, and enforcement actions appear in SAR narratives as contributing factors to the ultimate discovery and reporting of suspicious activities. For more information, visit

for at-risk homeowners so far in 2010. For the month of July, the data shows the industry completed more than 120,000 proprietary loan modifications for homeowners, which closely matched the number from the previous month. As reported by U.S. Treasury Department, mortgage servicers also completed 36,695 Home Affordable Modification Program (HAMP) modifications in July. If a homeowner does not qualify for HAMP, mortgage servicers determine eligibility for a proprietary loan modification that may help a homeowner stay in their home. In fact, 86 percent of proprietary modifications completed in July reduced the monthly payment for homeowners in order to make them more sustainable.

news flash

By Charlie W. Elliott Jr., MAI, SRA

The Appraisal Review … Its Time Has Come




Most on the origination side of the lendThere is much pressure from lobbyists ing industry have scarcely heard the term, of the larger financial institutions to con“appraisal review.” Those who have heard tinue to allow the larger banks to conof it probably do not know what and tinue to order appraisals directly from when it has been used as a lending favored appraisers. This is done under resource. It is one of these obscure prod- the auspices of independence of sepaucts and terms that many are cognizant of rate departments within the institution. at a subliminal level, but that we seldom It is done, in many cases, with platforms have a reason for an understanding of. that select appraisers from a blind pool Historically, the term, “appraisal review,” of available vendors. In spite of the lack was one that was known of arm’s-length transand understood as a tool parency, some of these lurking in the background practices will still be perthat was kept mostly under mitted. Given this likeliwraps except for special sithood, regulators will have uations, such as forecloto resort to another way to sures, suspected fraud and verify the authenticity and challenges to an appraisals accuracy of the appraisal. that were not high enough Going forward, much of to meet the expectations of that other way is going to the borrower or lender. be the appraisal review. In Well, I suggest to you the past, it was used very that this is about to change. little in the origination of Unless I am grossly mistakloans. It has been mostly “Unless I am grossly en, you will hear the term mistaken, you will hear used for post-closing analy“appraisal review” more sis. I suggest to you that the the term ‘appraisal often in the months and time has come for the review’ more often in years to come. As I see appraisal review. It is time the months and years for it to come in out of the things, it is one of, if not the to come.” only, weapon of choice in shadows and stand on its the war against bad loans, own as a viable alternative mortgage fraud and bank bailouts. In to the simple appraisal being accepted at recent years, our industry and economy face value without question. has been riddled with problem loans. Yes, there have been informal appraisal Many, if not most of them, have been reviews performed in the past; however, linked to problematic appraisals. this has not proven to be very effective. In the past, we have seen mortgage These reviews have been performed, in lenders, with a financial interest in the many cases, by non-appraisers without closing of a loan, select and employ documentation. They have been little more appraisers to perform appraisals on than a cursory skimming over the appraistheir own loans. We reached the point al to catch glaring errors, with little or no where everyone who has a stake in the record maintained of the process. You may closing of a loan has exerted pressure, look for more formal appraisal reviews, political and otherwise, to impose as prepared by state-certified appraisers. In much control as possible over the some cases, the reviews will be field process, in order to favor the successful reviews, which mean that the reviewer closing of loans. Much of what has gone actually performs a follow-up inspection of on is under the microscope of Congress, the subject property and essentially perand it is unlikely that it will be allowed forms another appraisal of the property. in the future. Having said that, we all continued on page 20 know how politics work.

continued from page 11

disclosures for home mortgage transactions. The proposal includes significant changes to Regulation Z (Truth-inLending) and represents the second phase of the Board’s comprehensive review and update of the mortgage lending rules in the regulation. The proposed changes reflect the results of consumer testing by the Board, which will begin accepting public comment. The latest proposal would: Improve the disclosures consumers receive for reverse mortgages and impose rules for reverse mortgage advertising to ensure advertisements contain accurate and balanced information; prohibit certain unfair practices in the sale of financial products with reverse mortgages; improve the disclosures that explain a consumer’s right to rescind certain mortgage transactions and clarify the responsibilities of the creditor if a consumer exercises the right; and ensure that consumers receive new disclosures when the parties agree to modify the key terms of an existing closed-end mortgage loan. Under the proposal, the timing, content, and format of reverse mortgage disclosures would be changed to make the disclosures more useful to consumers. Currently, consumers typically receive lengthy disclosures when applying that do not explain the particular features unique to reverse mortgages. Under the proposed rules, consumers would receive disclosures on or with the application form, using simple language to highlight the basic features and risks of reverse mortgages. Shortly after filling out the application, consumers would receive transaction-specific disclosures that reflect the actual terms of the reverse mortgage being offered. For more information, visit

Obama Administration announces additional aid to unemployed homeowners The Obama Administration has announced additional support to help homeowners struggling with unemployment through two targeted foreclosure-prevention programs. Through the existing Housing Finance Agency (HFA) Innovation Fund for the Hardest Hit Housing Markets (the Hardest Hit Fund), the U.S. Department of the Treasury will make $2 billion of additional assistance available for HFA programs for homeowners struggling to make their mortgage payments due to unemployment. Additionally, the U.S. Department of Housing & Urban Development (HUD) will soon launch a complementary $1 billion Emergency Homeowners Loan Program to provide assistance—for up to 24 months—to homeowners who are at risk of foreclo-

sure and have experienced a substantial reduction in income due to involuntary unemployment, underemployment or a medical condition. “We remain committed to helping struggling homeowners, and this program will provide additional assistance to states hit hardest by unemployment,” said Assistant Secretary for Financial Stability Herb Allison. “This is part of the Administration’s comprehensive housing policy that has helped to stabilize a fragile housing market and allows responsible homeowners the chance to reduce their monthly mortgage payments to affordable levels.” President Obama first announced the Hardest Hit Fund in February 2010 to allow states hit hard by the economic downturn flexibility in determining how to design and implement programs to meet the local challenges homeowners in their state are facing. Under the additional assistance announced, states eligible to receive support have all experienced an unemployment rate at or above the national average over the past 12 months. Each state will use the funds for targeted unemployment programs that provide temporary assistance to eligible homeowners to help them pay their mortgage while they seek re-employment, additional employment or undertake job training. “HUD’s new Emergency Homeowner Loan Program will build on Treasury’s Hardest Hit initiative by targeting assistance to struggling unemployed homeowners in other hard hit areas to help them avoid preventable foreclosures,” said Bill Apgar, HUD Senior Advisor for Mortgage Finance. “Together, these initiatives represent a combined $3 billion investment that will ultimately impact a broad group of struggling borrowers across the country and in doing so further contribute to the Administration’s efforts to stabilize housing markets and communities across the country.” States that have already benefited from previously announced assistance under the Hardest Hit Fund may use these additional resources to support the unemployment programs previously approved by Treasury or they may opt to implement a new unemployment program. States that do not currently have Hardest Hit Fund unemployment programs must submit proposals to Treasury by Sept. 1, 2010 that, within established guidelines, meet the distinct needs of their state. For more information, visit

PROGRESS in Lending Association formed to promote thought leadership and innovation

The PROGRESS in Lending Association

HUD Fair Housing Report finds disability discrimination tops list of complaints The U.S. Department of Housing & Urban Development (HUD) has released the Obama Administration’s first annual report on the continued on page 16


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To settle Federal Trade Commission (FTC) charges that its 2008 acquisition of three LandAmerica Financial Inc. subsidiaries was anticompetitive, Fidelity National Financial Inc. will sell several title plants and related assets in the Portland, Ore. and Detroit, Mich. metropolitan areas, and in four other Oregon counties. Title plants are databases used by abstractors, title insurers, title insurance agents, and others to determine the ownership of, and interests in, real property in connection with underwriting and issuance of title insurance polices and for other purposes. According to the FTC, Fidelity’s acquisition of the LandAmerica assets was anticompetitive in several local markets for the provision of title insurance information services by title plants.


Fidelity National Financial settles FTC charges in acquisition of LandAmerica

The FTC’s complaint charges the acquisition reduced competition in six geographic areas: The Portland, Oregon, metropolitan area, consisting of Clackamas, Multnomah and Washington counties; Benton County, Ore.; Jackson County, Ore.; Marion County, Ore.; Linn County, Ore.; and the Detroit, Mich. metropolitan area consisting of Oakland, Macomb and Wayne counties. In the Portland, Oregon, area, the complaint alleges the acquisition left Fidelity with a controlling interest in the title plant that is the sole provider of title insurance information services. In the three other Oregon counties, the acquisition reduced the number of independent title plants from four to three. In the Detroit metropolitan area, the FTC contends the acquisition may give Fidelity the power to affect the competitive significance of Data Trace, an independent title services provider, and the only firm in these counties other than Fidelity with a complete and up-to-date title plant. The FTC’s proposed settlement order will replace the competition lost through Fidelity’s acquisition of LandAmerica’s title insurance subsidiaries. First, it requires Fidelity to sell part of its ownership in the joint title plant in Portland, Ore. to Northwest Title. This will ensure Fidelity does not own a majority of the only title plant serving the Portland market. Second, it requires Fidelity to sell a copy of the data from each of the title plants serving Oregon’s Benton, Jackson, Linn and Marion counties to Northwest Title. This will restore the number of independent title plant owners in each county to four—the same number as before the acquisition. Third, the proposed order requires Fidelity to sell a copy of the title data in the three Detroit-area counties that LandAmerica provided to Data Trace before the acquisition to an FTC-approved buyer. This will limit Fidelity’s ability to affect the competitive significance of Data Trace, an ability that Fidelity gained through its acquisition LandAmerica’s assets. Finally, the order requires Fidelity to notify the FTC before acquiring 50 percent or more of any joint title plant in California, Colorado, Nevada, New Mexico, Oregon and Texas—states where Fidelity’s acquisition of LandAmerica’s subsidiaries has increased Fidelity’s ownership interest in title plants. For more information, visit or 

has announced its formation. This new association was started to provides a place for innovation and thought leadership to occur in the industry to move the mortgage industry forward. “Technology is going to play a critical role in how mortgage lenders comply with new regulation, remain competitive, ensure profitability, and serve borrowers looking to get their piece of the American Dream. That’s why this association was formed,” said Tony Garritano, founder and chairman of PROGRESS in Lending. As a speaker, PROGRESS Chairman and Founder Tony Garritano has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years, Garritano has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. PROGRESS’ executive team is a volunteer group made up of mortgage professionals who have a combined 100-plus years of industry experience. “This new association provides a place for thoughts and ideas to flow freely,” said Roger Gudobba, chief executive officer at PROGRESS in Lending Association. “It’s easier to move things forward when you’re in a group. This association is a central place for industry participants to have discussions about how technology can improve the process.” CEO Gudobba has over 20 years of mortgage experience. At present he is also chief strategy officer at technology vendor Compliance Systems. He is a long-time advocate of data standardization and a more data-driven approach to mortgage lending. For more information, visit

Peter Norden, Chief Executive Officer, REMN-Real Estate Mortgage Network




seven years. I did everything fairly young. I ended up specializing in mortgage banking and ended up getting hired away as controller of a company named Globe Mortgage in 1977. I was a kid, and from there, I ended up staying at Globe because the chief executive officer of the company treated me like I was his son. He even introduced me as a son everywhere we went. Within six years, I was running pretty much the entire operation. I ended up staying 11 years which I certainly didn’t How did you get involved expect, more because he constantly left in the mortgage business? the carrot out there that I would be an I got involved in this busi- owner and it never happened. ness 33 years ago believe it or not. When I got out of After this experience, how did you college, I went to work for the account- grow in the world of mortgage ing firm of Touche Ross, which is now financing? Deloitte & Touche, and I ended up by I knew all of the banking relationships pure accident specializing in auditing and all of the trading relationships, and mortgage bankers. I just really grew to I became a trader. I was fascinated by love the business and then one of my the trading side of the business … I clients offered me a job to come in as loved it. I hired a lot of people in the the company’s controller at the ripe old accounting area, and I took over tradage of 22. I graduated college pretty ing at Globe and really did it all myself. early, at the age of 20, and had my first I am a hedger and trader. I’ve traded business when I was 12. I have been mortgages for 20 years. I still do it extremely entrepreneurial my entire occasionally for my personal account. I ended up running most of Globe life. Mortgage for a number of years, What was your business when you except for the multifamily side, as the whole residential side fell under my were 12? Selling stereo equipment … and not supervision. In 1988, I decided that I wanted to “off the truck” either. It was legal and legit. I went to college to get an run a company myself and the banks I accounting degree to give me the back- knew would back me. I did a 100 perground to run my own business—not cent leveraged buyout of a company because I wanted to be an accountant. I based in Atlanta called Old Town was the furthest thing from an account- Mortgage. We merged Old Town with a ant in the world. I just knew at a really builder-owned company in New Jersey First Builders Financial young age there were tons of salespeo- called ple out there, but salespeople generally Corporation, which was owned by the cannot run a business. I only worked for Kaplan Organization and run by Marty Touche Ross for two-and-a half-years Levine. We put the two companies and specialized in mortgage banking. I together and formed First Town. We was fast-tracking at Touche and actual- took Old Town Mortgage and First ly they told me I would be a partner in Builders Financial, and made First In 1999, he started Northern Star which eventually became Opteum Financial Services. Peter served as president and chief executive officer of Opteum until the company was merged with Bimini Mortgage Management. Presently, Peter serves as chief executive officer of Real Estate Mortgage Network (REMN), headquartered in River Edge, N.J.

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 email at for consideration in being featured in a future “Mortgage Professional of the Month” column. This month, we had a chance to chat with Peter Norden, currently chief executive officer of Real Estate Mortgage Network Inc. (REMN). Norden’s business acumen developed at the young age of 12, when, as he describes, he was in the business of selling stereo equipment. A graduate of Fairleigh Dickinson University with a BA in accounting, Peter began his career with the accounting firm of Touche Ross, now Deloitte & Touche, auditing mortgage bankers. He moved on to the mortgage finance side of things when he joined Globe Mortgage in 1977 for an 11-year run with the company. In 1988, Peter bought out Atlanta, Ga.-based Old Town Mortgage, merged it with New Jersey-based First Builders Financial Corporation and called the new entity First Town Mortgage, serving as the company’s chief executive officer and president.

Town Mortgage. Old Builders didn’t sound too good as a company name, so we used the name First Town Mortgage. Basically, the company that I bought did $1 million a month in business and that was it. First Builders did maybe $5 million a month at the time which was all built to build and nothing else. We built it up and nearly doubled our volume every year.

“…I feel that in order to build a quality shop, you have to have quality paper coming through the shop.” We built it up to about a $1.5 billion a year company, and at that point, we sold the company to Chase in 1999. We had a restrictive covenant with Chase where I couldn’t do retail for two years and I held up that agreement. When we sold to Chase they didn’t take any of our administration people, so basically, I started up the wholesale operation called Northern Star in 1999. Northern Star was a wholesale operation that was geared more toward sub-prime to match our ownership because we had an ownership interest in SouthStar Funding, which was a fairly large subprime wholesaler. We didn’t run SouthStar, but we did have the capital behind the company. My retail employees came back en masse to the retail division of Northern Star. We built First Town up and then brought in a large group from California to do wholesale and correspondent lending, and brought in current REMN Director of National Sales Joe Amoroso. Joe came on board as we were looking to buy a company in Connecticut that eventually became Opteum Financial Services. We were doing $1 billion-plus per month at Opteum, until it was sold to Bimini, a REIT (real estate investment

trust) in 2005, but in reality, it was viewed more as a merger. I owned a huge amount of Bimini and was the number two shareholder of the company. I ended up retiring in June of 2007 when I really decided I didn’t want to be in the origination business any more.

“I view any mistakes that I have made as a lesson and just move forward and hopefully learn from it.”

wholesalers were out of business and if there’s one thing that I knew, it was the ins and outs of the mortgage business. I had been through similar business situations in the past, and although I was hesitant to return to business on a larger scale, I think the opportunity now in this business is greater than I’ve ever seen it in my entire career. Nearly 80 percent of the originators who were in the business just five years ago are now gone. There is not a lot of competition and there is very little capital in the mortgage origination companies out there, and from a mortgage servicing perspective, you could potentially build a servicing platform with the tightest underwriting standards we have seen in our entire lives. Servicing, to me, is absolutely worth gold. We effectively took over the Security Atlantic platform, and by putting it all together, we ended up with an entity that has roughly $30 million in capital and you are simply not going to find many independent companies with that kind of capital base.

mark for margins that I’ve ever seen. I have not really had any pressure to reduce those margins because there’s just no company that can offer the support for service levels that REMN does. There are certainly the four big aggregators out there, and they may be priced substantially better than us, on any given day. But if you cannot get a loan closed there in a timely fashion, price doesn’t make too much of a difference. We’ll get the loans closed and that’s how REMN is built. The biggest problem we are encountering now from a cost perspective is that you need to have so many more underwriters underwriting the same number of loans. This is where you increase your overhead. We used to do six loans a day for a full-time underwriter and now we’re at three-and-ahalf per day because everyone’s underwriting standards and guidelines are so much more complex. Do you have any comments on dealing with third-party originations (TPOs) as opposed to the direct channel? From a TPO perspective, the cost to originate the loan is dramatically less than the cost to originate a loan on the retail side … there is no question about it. As far as investor acceptability, it has been difficult. At this point, everybody is very happy with the quality of the paper, and I don’t really see an issue in any way shape or form. With the Ginnie Mae portfolio we have, we do not look at it loan by loan and pick and choose what we’re retain-

“…I think the opportunity now in this business is greater than I’ve ever seen it in my entire career.” In a retail scenario, it’s more difficult to put your foot down with the sales force because a good salesperson in the retail space can go to 10 other shops and do well. They don’t have that and you have a lot more flexibility to be tighter on the wholesale side than on the retail side. When I really think about it and think about the pressure I get when I put through something that I really want to … to tighten the noose on retail is extremely difficult to do without causing ramifications. On the wholesale side, it really isn’t difficult to do—you just do it. In viewing the continued on page 16



What is the current state of REMN’s warehouse lines? We have all the warehousing we need now. If anything, we are now turning banks away because we do not need additional warehouse lines. The only thing we are looking at now and are being approached pretty heavily about is servicing portfolios. About one year ago, we received our Ginnie Mae approval, and during this time period, we’ve actually kept about $850 million so far that we’ve retained.

What are you looking at in terms of cost per loan of originations compared to previous years? Are we almost at an all-time high in the cost per loan area? We are currently probably at the mark of highest cost per loan we’ve ever seen, but you are also at the highest

ing and what we’re not. It has nothing to do with that whatsoever and the weighted average FICO score of our FHA paper is 705. The quality of our paper is exceptional, and I feel that in order to build a quality shop, you have to originate quality paper. We make prudent decisions. We’re not doing loans for FICO scores under 620 and jacking up margins … we have no interest in loans of that nature. It’s all about building a quality shop both on the production side and on the servicing side as well. Building your company is about building a base to get an IPO done. I do think the opportunity is there to build and I find the TPO side interesting because again, there are not a lot of players that provide the level of service that we do. With our previous company, SouthStar, that was really the story. SouthStar was successful not because they were priced competitively in the market, but because they could actually get a loan closed within 24 hours. This is the same mentality on the TPO side at REMN. I believe that, at this point, TPO underwriting and criteria are actually tougher than on the retail side. It’s really interesting, and one of our investors even came and said this to us which surprised me. During an audit, they said that they prefer the TPO business to the retail market. That was the first time I’ve actually heard anybody say that in the last couple of years. The reason is that every retail shop that he goes into, they can’t put things through as they did in the past. It is very difficult to change a retail loan officer’s mentality relative to what you can do and what you cannot do. On the wholesale side, because you’re not dealing with the loan officer directly, you can dictate what you will take and what you won’t take and that mortgage broker can go wherever they want to, but you are dictating what you will and won’t take.


Our intention is that we’d like to retain about 50-60 percent of our overall production. Basically, the aggregators aren’t really paying us what we consider to be fair value for the servicing. Obviously, it’s a major cash issue if you retain all of that servicing and we’ve been fine in managing it. We’re really managing to cash, but we continue to explore situations where people are offering us $50-$150 million in capital to retain a larger percentage of servicing. So we are looking at deals like that to see whether or not they make sense, but I think the opportunity to build an origination platform and servicing platform now is probably the best I have ever seen it. 

Back when you had an interest in both SouthStar and Opteum, how did you operate both companies as they each competed for market share? From Opteum’s perspective, the company was really an all-day shop and not a sub-prime shop. We did very little sub-prime at Opteum. The only sub-prime Opteum did was what Joe [Amoroso] did, which was not a big piece of our overall business. I would say our sub-prime volume might have been three percent of our overall volume on a monthly basis … it wasn’t really what we were doing. Opteum was doing prime business, but we were predominantly an all-day shop, so we never really competed with SouthStar. I was once part of the public company and was allowed to keep my interest in SouthStar, but it was held in a blind trust and I could have nothing to do with it. I got off the board of SouthStar. I had really nothing to do with its ownership or the day-to-day operations of SouthStar. I had a blind trust that owned the stock and that was all I had so that’s how it was segregated from my perspective once it was a public company and everybody was okay with that. At the end of 2007, a friend of mine who had a small hedge fund approached me to do something with him creative on the distressed mortgage side. That sort of piqued my interest and we realized there were a lot of hedge funds out there buying distressed mortgages. As they were buying distressed mortgages, their whole platform was to buy $1 billion worth of mortgages at 0.60 cents on the dollar, and flip it for 0.70 cents on the dollar within a week, make a 10point spread, and then move on to the next deal. All the buyers that were buying all the paper had no one to sell it to, and most of them got stuck with the paper, so we wanted to come up with something different. The theory we came up with was to acquire a small mortgage originator that did not have any legacy that had warehouse lines, agency approvals and multi-state licenses. I knew Doug Rotella, who owned Real Estate Mortgage Network (REMN), for nearly 20 years. I talked to Doug and he needed the capital, and we ended up effectively acquiring REMN.

Discuss the purchase and growth of Real Estate Mortgage Network (REMN) into what it is today? Initially, we put capital in on a preferred stock basis without taking any ownership or voting stock. We did it through a warrant structure, basically so that the states were okay and we didn’t take control. I just gave Doug [Rotella] capital to use and the theory was we would refinance a lot of the paper that we were buying at 0.40 cents on the dollar. Soon thereafter, the agencies changed pretty dramatically as to what you could do and could not do, and it was no longer easy to refinance a lot of that paper. Many of our old employees heard that I had bought this little originator, which I didn’t actually take ownership of until March of 2010. We didn’t exercise our options or get state approval until March of 2010. Many of my former employees wanted to come back again to join us at REMN, and we viewed it as a huge opportunity because most of the

mortgage professional overall quality of loans that I see coming through the system, I have more problems with loans on the retail side than I do from the wholesale side.

Mortgage Revolution to Present MRev New York Oct. 15-17 Grassroots movement to visit Westchester Marriott in Tarrytown, N.Y. this October




Mortgage Revolution, a non-profit, grassroots movement of true mortgage professionals joining forces to influence a positive change in the mortgage industry, has announced that the mortgage industry is undergoing an encouraging renaissance, only 24 months after the sub-prime crisis. To continue this positive momentum, Mortgage Revolution has announced its fourth event, MRev New York, Friday-Sunday, Oct. 15-17, 2010, at the Westchester Marriott in Tarrytown, N.Y. “Mortgage rates have reached historic lows and affordability has reached a record high,” said Brian Larrabee, co-founder of Mortgage Revolution and a 20-year veteran of the industry. “But just as important, high-quality mortgage professionals, who have improved their skills and enhanced their networks, are once again feeling positive about the mortgage industry and are working ever more closely with borrowers to help them make the right mortgage decision. We are very pleased that Mortgage Revolution has been able to play an important part and helped almost 1,000 mortgage professionals become better at what they do and we urge all members of the mortgage industry to attend MRev New York and become part of our positive evolution.” Mortgage Revolution events focus on education and networking. Each day, attendees collaborate for eight to 10 hours of intensive, hands-on classes on a variety of subjects. Then, each evening attendees reconnect to polish the skills they have learned during the daytime sessions. “I still love being a mortgage professional, even though it’s a much more difficult—and at times a more cumbersome job than it was five years ago” stated Florida Home Finance Advisor, Chris Brown. “But when I see a family’s eyes well-up with pride after receiving the keys to their first home, it makes all the industry turbulence worthwhile. At its core, the mortgage business remains a very rewarding profession.” In late 2008, Brown was becoming increasingly frustrated. Lenders were not interested in lending, even to the most highly qualified borrowers. Real estate prices were depreciating. It was the perfect storm. In January 2010, Brown attended the first Mortgage Revolution event held in Atlanta, Ga. “First off, I have never been around a group of people so willing to help lift the spirits of others. Just when many of us needed to be picked up, Mortgage Revolution reminded me of why I got into this business in the first place,” said Brown. “In addition to recharging my batteries, Mortgage Revolution helped improve my skills and has been a key factor in my recent success.” “At Mortgage Revolution, I learned how to incorporate social media and video marketing into my practice” said Philadelphia-based originator Jason Klaskin. “And the results have been phenomenal.” “We have some pretty aggressive goals for MRev New York” said Klaskin. “All attendees will build their own blog. Everyone will shoot their first video. It is not just about learning the skills, but rather putting them into action.” “An event like Mortgage Revolution used to cost several thousand dollars to attend. The fact that Mortgage Revolution is volunteer-based allows us to minimize costs—and opens the experience up to everybody, said Larrabee. “In addition, at the end of the event, we typically raise over $15,000 for local charities. It is very inspiring to be a part of this movement.”

For more information about Mortgage Revolution, visit and

In your career, is there actually one mistake or regret, even if you learned something that you wish you could take back, redo or sweep under the carpet, and not have anyone know about it? That’s an interesting question. I’m not one who regrets anything I ever do. I’ve never regretted anything I’ve done in my entire career. I view any mistakes that I have made as a lesson and just move forward and hopefully learn from it. Unfortunately, I have repeated some mistakes, but overall, my experience has really been pretty good in the business, so I cannot say I have one big regret one way or the other.

news flash

continued from page 15

I have been very fortunate in the mortgage business. I have a lot of people very dedicated to me, but they also know I’m very dedicated to them and I will pretty much do anything for anybody who works for me. I’m very rela-

“I have been extremely entrepreneurial my entire life.” tionship-oriented, so I deal with a lot of these people on a day-to-day basis. I’ve grown to know a lot of people on the wholesale side, and I’ve gotten close to a lot of them in a very short period of time. It’s been a very difficult industry to be in over the past two years, but the relationships that I have with the people involved in it is really what keeps me here and keeps me coming back.

continued from page 13

state of fair housing in America. HUD’s Fiscal Year 2009 annual State of Fair Housing Report highlights the agency’s progress in enforcing the Fair Housing Act, identifies challenges that remain, and demonstrates its commitment to acting now to end housing discrimination. The report, which covers the last full fiscal year of HUD’s complaint investigations and fair housing activities, was released during HUD’s National Fair Housing Policy Conference in New Orleans. The report shows that discrimination based on a person’s disability status continues to account for the largest-single category of complaints. Of the 10,242 complaints filed with HUD and its fair housing partners during fiscal year 2009, 44 percent alleged disability discrimination, while 31 percent alleged discrimination based on race, and 20 percent based on family status. The number and type of complaints received are consistent with the previous two years. “Despite much progress and hard work, Americans continue to face housing discrimination because they’re in a wheelchair, are a different color, or background, or have children,” stated John Trasviña, Assistant Secretary for Fair Housing and Equal Opportunity. “This report is a stark reminder that HUD and our fair housing partners must redouble our commitment to end housing discrimination.” This year’s report highlights HUD’s enforcement efforts, including those that led to changes of policies and equal housing opportunities for racial and ethnic minorities, persons with disabilities, and others. HUD also

handled an array of discrimination cases that resulted in compensation for the victims or pertained to families with children. The report also highlights HUD’s efforts to ensure that the agency’s core housing programs are open to all, regardless of sexual orientation or gender identity. Last month, HUD announced that it will now require all applicants for Fiscal Year 2010 grant funding to certify that they have not been charged with a systemic violation of state or local laws that are equivalent to the Fair Housing Act based on a person’s lesbian, bisexual, gay and transgender status. “HUD and its fair housing partners are on the front lines when it comes to fighting housing discrimination, and our job to prevent it is not complete without addressing 21st Century issues,” said Trasviña. 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.

By Tommy A. Duncan, CMT

Coester Appraisal CEO commissioned by AllRegs to author educational materials

continued on page 25

17 The average FHA loan credit score in 2006 ranged from 665 for an “Excellent” ranked loan, 654 “Good” and 603 for “Fair.” These rankings are a result of post-closing quality control performed on FHA loans. I I I I

Excellent: No errors or a minor error. Good: Minor errors and will sell on the secondary market. Fair: Errors and questions with credit or collateral and may be challenged for a repurchase. Poor: Found fraud in the file.

The average FHA credit score today is “Excellent” 712, “Good” 695, “Fair” 691. As you can see, in less than five years, the difference in the average FHA credit score in 2006 and 2010 is 47 points in the “Excellent” ranking, 41 point in the “Good” ranking and 88 points in a “Fair” ranking. Based on credit scoring, the FHA product is no longer the product of the average mortgage applicant. Borrowers who qualify for FHA loans today have above average credit scores. Because of the overcompensating underwriting criteria, many will not qualify for an FHA loan, such as minorities, young couples and single parents who have a reliable income stream, but have had some hiccups along the way. If the mortgage industry wants to recover, make lending available to the average credit score borrower. Lenders should shoot for a average 688 for an “Excellent,” 674 for a “Good” and a 645 for a “Fair.” This recommendation is still high, but it’s a start in the recovery of the economy. Adjusting the credit score back down will do more for the mortgage and housing industry than any tax credit or stimulus.

Excellent Good Fair Poor

2006 665 654 603 579

2007 663 637 615 567

2008 675 666 638 620

2009 695 687 680 647

2010 712 695 691 706

Tommy A. Duncan, CMT is executive vice president of Quality Mortgage Services LLC. For answers to your QC and FHA questions, please contact Tommy at (615) 591-2528 or e-mail You may also visit Quality Mortgage Services LLC on the Web at

Sponsored by


Mortgage Builder Software, a provider of loan origination software (LOS) technology, has announced its strategic alliance with Cenlar FSB, a sub-servicer of mortgage loans. Mortgage Builder

For the past eight months, I have been reading how the housing market is collapsing with record lows in sales, loan originations, first-time homebuying markets, and new construction. It all appears to point back to the deal the industry made with the devil when it sold its soul for sub-prime lending. Since the collapses of the market, lenders and investors have tightened their lending criteria in order to strengthen their portfolio as a result of failing loans and repurchase demands. I don’t blame them; however, as a result of overcompensating in tougher underwriting criteria in order to have a stronger creditworthy borrower; the lenders have blocked the traditional Federal Housing Administration (FHA) borrower from qualifying for an FHA loan. For years, FHA has been the loan of choice of first-time homebuyers, middle-income, and moderately-low income applicants. With today’s credit score-driven decision-making, the traditional FHA applicant does not qualify for the FHA loan due to the lender underwriting templates.


Cenlar and Mortgage Builder form LOS servicing partnership

What is really plaguing the FHA housing and real estate markets? 

Coester Appraisal Group, a nationwide appraisal management company (AMC), has announced that its Chief Executive Officer Brian Coester has been commissioned by AllRegs, an information provider for the mortgage lending industry, to create instruction manuals, video tutorials and classroom training programs for lenders. These educational materials will serve to educate lenders on how to protect themselves against repurchase requests based on erroneous assessments of the loan file’s appraisal. According to Coester, discrepancies in appraisals account for roughly 15 percent of all repurchase requests. Once a buyback letter is received, the recipient is under obligation to repurchase the loan in question—often hundreds of thousands of dollars, if not more—unless it can prove that it is not responsible for the discrepancy. Coester, who is an expert at successfully rebutting repurchase requests that are erroneously based on appraisal discrepancies, will be addressing the specific steps that the recipient of a buyback letter can take to determine the validity of the claims, and successfully refute them if inaccurate. “Repurchase requests that are based on faulty or erroneous appraisals are often built on misunderstandings,” said Coester. “But because many lenders don’t know how to appropriately respond to the request, they end up repurchasing the loan, even though they’re not at fault. As with any process, there are certain processes and procedures that greatly enhance a lender’s chance of successfully refuting the request. I’m happy to share my expertise and help lenders to protect themselves from unnecessary penalties.” For more information, visit or

has integrated with Cenlar to provide a seamless process for boarding closed mortgage loans from its LOS system directly to the Cenlar servicing platform. The new association began with both companies’ relationship with the Lenders One Mortgage Cooperative, an alliance of independent mortgage bankers that originates more loans than any non-bank mortgage company in the United States. Lenders One members use Cenlar’s capabilities for customized, privatelabel subservicing on a wide variety of mortgages they originate, giving them numerous financial and competitive advantages by retaining the servicing rights to their loans. Mortgage Builder is a preferred LOS software choice for Lenders One members and the two companies found common ground through the alliance, both enjoying high reputations for the quality of their offerings. “Through this integration with Cenlar, Mortgage Builder users can immediately place loans on the industry-leading sub-servicer’s system, taking virtually all of the human error out of the process,” says Keven Smith, Mortgage Builder’s president and CEO. “It makes a key part of the servicingretained strategy much simpler for lenders of all sizes.” Mortgage Builder’s Smith noted that his firm’s relationship with Cenlar is especially timely, given the increasing industry trend toward process integration all across the mortgage process, from origination to servicing and on to investor delivery. “With the advent of the GSEs’ Uniform Mortgage Data Program (UMDP), digital processes will rapidly become the industry standard,” said Smith. “This partnership between Mortgage Builder and Cenlar FSB positions our clients for early UMDP conformance, reduced costs to originate loans, and a better process for consumers. Our integration with Cenlar helps Lenders One’s independent mortgage bankers compete with even the largest banks in the market,” he says, “and provides yet another among scores of good reasons to become part of that alliance.” For more information, visit or

“Yield Spread Premium” is Gone! A Proclamation declares a new term By Jonathan Foxx




Now that the yield spread premium (YSP) has gone the way of nature, and a credit has taken its place, perhaps it’s time to make sure that the public understands that the credit, in whole or in part, provides payment for goods and services that the mortgage broker has actually rendered.1 The new Good Faith Estimate (GFE), which became effective Jan. 1, 2010, reflects the change from YSP to credit. Back in November 2008, when the U S Department of Housing & Urban Development (HUD) evaluated the responses of consumer protection advocates to using a credit, several organizations asserted that “to describe lender-paid broker compensation as a credit to reduce settlement costs is misleading.”2 For example, some maintained that “there is no requirement that the lender payment will actually be used in this manner;”3 while others stated that the proposed language “presumes a trade off through a reduction in upfront costs, and research shows that this does not occur, except in limited circumstances.” In other words, public comments opined that the “characterization of the YSP as a ‘credit’ only exacerbates the issue of the nonexistent trade off.”4 Industry responses to HUD varied, but were generally consistent with respect to opposing the credit. For instance, some took the position that “neither the proposed GFE, nor the proposed HUD-1, can accommodate a lender’s compensation payment to the broker based on the loan amount, or based on a flat dollar amount.”5 This view held that if a lender were “to pay broker compensation that is not tied to the interest rate, there would be no way to disclose the payment without artificially inflating the charges paid by the borrower;”6 while others stated that, among other things, if a broker intends “to rely primarily on the lender for compensation, the dollar-for-dollar offset of the YSP against other service charges will necessitate that the broker increase the disclosed consumer paid fees.”7 In support of its position, HUD reaffirmed the view in its Policy Statement 2001-1, in which it “made clear that earlier disclosure and the entry of YSPs as credits to borrowers would ‘offer greater assurance that lender payments to mortgage brokers serve borrowers’ best interests.’ (See 66 FR 53056.)”8 Furthermore, HUD asserted that the revised GFE was “the result of an iterative testing process, comprised of six rounds of consumer testing of the form during the period 2003 through 2007,”9 and it concluded that consumers were not confused by this new GFE. The YSP is “applied as a credit to the borrower” on the GFE.10 A “credit for the interest rate chosen (sometimes known as ‘yield spread premium’ or YSP)” is stated on the GFE in such a way that it contains the mortgage broker’s compen-

sation for the loan plus any lender fees for origination (except for any charge for the specific interest rate chosen).”11 The mortgage broker’s compensation on the new GFE is contained in the Origination Charge.12 Lenders pay the credit and, of course, they are the ones that charge the discount points. But does the applicant actually know what the credit actually pays? Because the YSP is effectively gone from disclosure and the credit is to be used to partially or fully pay for the mortgage broker’s services, a new term should be used to assure the public of the unique purpose of that credit, with respect to the goods and services actually provided by the mortgage broker. Consequently, I would like to offer a new term to the industry to help assure the public’s positive perception of the critical role played by mortgage brokers. Hence, the following Proclamation! Please be advised that this Proclamation is a work of fiction and is not an official document, doctrine, position or view of any governmental agency, employee of a governmental agency or mortgage industry association. This is my declaration of a way to improve communication between applicants for residential mortgage loans and mortgage brokers with respect to the latter’s compensation, as well as to show the important role the mortgage broker plays in arranging residential mortgage loans for applicants. Although I believe there is substantial regulatory foundation on which to base the use of the new term stated in the Proclamation for educational and promotional purposes, please note that information and suggestions contained herein are not intended to be and are not a source of legal advice. Please be sure to consult a competent residential mortgage compliance professional in advance before using the new term in educational and promotional venues. 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

Footnotes 1—In a series of articles in this publication, I endeavored to show the necessary and positive role played by the Yield Spread Premium in residential mortgage originations. I argued that it was not a “kickback,” as some media and politicians claimed,

when legitimately used in accordance with guidelines set forth by the U S Department of Housing & Urban Development. For further reading, the series can be found as follows:  Foxx, Jonathan, Yield Spread Premiums, Compensation or Kickback?, National Mortgage Professional Magazine, June 2009, Volume 1, Issue 2, pp. 18-20.  Foxx, Jonathan, Saving the Yield Spread Premium, National Mortgage Professional Magazine, July 2009, Volume 1, Issue 3, pp. 26-28.  Foxx, Jonathan, Service Release Premium Versus Yield Spread Premium: Match or Mismatch?, National Mortgage Professional Magazine, August 2009, Volume 1, Issue 4, pp. 34-35. 2—Real Estate Settlement Procedures Act (RESPA): Rule To Simplify and Improve the Process of Obtaining Mortgages and Reduce Consumer Settlement Costs, Final Rule, Federal Register, Volume 73, No. 222, 11/17/08, pp. 68223-68288 (“Consumer Representatives”). 3—Ibid. 4—Ibid. 5—Ibid. 6—Ibid. 7—Ibid. 8—Ibid. p 68225 (“HUD Determination”). 9—Ibid. p 68225. 10—New RESPA Rule FAQs, Section: GFE Block 2, Q&A # 7, 04/02/10. 11—Ibid. Section: GFE Block 1, Q&A # 1. Also, the amount shown in Block 1 “may contain all or some of the credit for the interest rate chosen.” 12—Ibid. Q&A # 9: “Block 1, ‘Our origination charge’ on the GFE contains all charges for origination services performed by or on behalf of a lender and/or a mortgage broker. Origination services includes, but is not limited to, the following: taking of the loan application, loan processing, underwriting of the loan, funding of the loan, acting as an intermediary between a borrower and lender, obtaining verifications and appraisals, and any processing and administrative services required to perform these functions. 13—I want to thank Joel Berman, publisher of National Mortgage Professional Magazine, for mentioning to me the need to have the nugatory Yield Spread Premium replaced with a term that may more precisely reflect its purpose, where it is used in whole or in part to compensate the mortgage broker. However, I am solely responsible for creating the new terminology that I have advocated (and its context). 14—24 CFR Part 3500, RESPA Statement of Policy 2001-1: Clarification of

Statement of Policy 1999-1 Regarding Lender Payments to Mortgage Brokers, and Guidance Concerning Unearned Fees Under Section 8(b). 15—Ibid. 16—24 CFR Part 3500, RESPA Statement of Policy 1999-1: Regarding Lender Payments to Mortgage Brokers; Final Rule. 17—Ibid. 18—Ibid. 19—Ibid. 20—Ibid. 21—HR 4173: Dodd-Frank Wall Street Reform and Consumer Protection Act, 111th Congress (2009-2010), Title XIV, inter alia, § 1403 (Prohibition on Steering Incentives). 22—A consumer may finance origination fees or costs, as long as the fees or costs do not vary based on loan terms or the consumer’s decision to finance such fees, providing this financing takes place at the consumer’s option and solely through principal or rate. Also allowed are “incentive payments” to the MLO based on the number of loans originated within a specified period of time. See Second Summary of Mortgage Related Provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (HR 4173), 07/13/10, Mortgage Bankers Association. 23—See Foxx, Jonathan, Landmark Financial Legislation: New Rules for Mortgage Originators–Part I: Reformation and Regulations, August 2010, Volume 2, Issue 8, pp. 28-42. And, inter alia, Op.cit. 21, § 1403. 24—See 24 CFR Parts 203 and 3500, Real Estate Settlement Procedures Act (RESPA): Rule To Simplify and Improve the Process of Obtaining Mortgages and Reduce Consumer Settlement Costs; Final Rule, Federal Register/Vol. 73, No. 222/Monday, Nov. 17, 2008, pp. 68204-68288. Also: Op. cit. 21. 25—In my article, published in July 2009, I suggested that there was a way the consumer (and, therefore, market forces) could have 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.” That could be done simply by crediting the YSP directly to the borrower. As I wrote: “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. 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.’” See: Foxx, Jonathan, Saving the Yield Spread Premium, National Mortgage Professional Magazine, July 2009, Volume 1, Issue 3, pp. 26-28. 26—Op. cit.21. 27—The new term may be referred to as the “Compensable Services Fee” or by its acronym, “CSF.”

A PROCLAMATION CONCERNING THE NEW TERM “COMPENSABLE SERVICES FEE” TO DESCRIBE COMPENSATION EARNED BY MORTGAGE BROKERS IN RESIDENTIAL MORTGAGE LOAN TRANSACTIONS13 KNOW ALL PERSONS BY THESE PRESENTS: WHEREAS, the mortgage broker provides goods or facilities that are actually furnished or services actually performed for the compensation paid;14 and, WHEREAS, those payments are reasonably related to the value of the goods or facilities actually furnished or services that are actually performed;15 and, WHEREAS, the Department of Housing and Urban Development has identified the following “compensable services” that are normally performed by the mortgage broker in the origination of a loan:16

WHEREAS, the Yield Spread Premium is an indirect fee paid by consumers to mortgage brokers “based upon the interest rate of each loan” entered into by the mortgage broker;18 and, WHEREAS, some or all of the Yield Spread Premium is a payment for compensable services;19 and,

WHEREAS, the law now prohibits a mortgage broker from receiving compensation, such as a Yield Spread Premium, based on the terms of the mortgage loan;22 and, WHEREAS, the law now also effectively prevents the mortgage broker from receiving compensation from other sources if such compensation is being otherwise received, directly or indirectly, from the consumer;23 and, WHEREAS, a credit to the consumer has been legislated into existence to replace that part of the Yield Spread Premium that pertains to compensable services;24 and,


WHEREAS, the particular credit to the consumer which pertains to compensable services is and by rights always ought to be understood as a fee paid for compensable services rendered by the mortgage broker;25 and, WHEREAS, the aforementioned credit is to be used for payment of all or a portion of the Yield Spread Premium or any other premium payable by the lender to the mortgage broker;26 NOW, THEREFORE, BE IT RESOLVED that, henceforth, mortgage brokers shall refer to that part of the credit to the consumer which pertains to compensable services as the COMPENSABLE SERVICES FEE (or CSF);27 and, BE IT FURTHER RESOLVED, that the term COMPENSABLE SERVICES FEE may be used for normal educational and promotional purposes by mortgage brokers who arrange residential mortgage loans for consumers, where such use of the term COMPENSABLE SERVICES FEE is lawfully permitted for normal educational and promotional purposes. IN WITNESS WHEREOF, I have set my hand and caused this PROCLAMATION to become declared throughout all the land, on the day of its publication in the month of September 2010.

Jonathan Foxx In Cuius Rei Testimonium


WHEREAS, the aforementioned “compensable services” are not limited to even those services indicated;17 and,

WHEREAS, the Yield Spread Premium has been effectively legislated out of existence;21 and, 

 Taking information from the borrower and filling out the application  Analyzing the prospective borrower’s income and debt and prequalifying the prospective borrower to determine the maximum mortgage that the prospective borrower can afford  Educating the prospective borrower in the home buying and financing process, advising the borrower about the different types of loan products available, and demonstrating how closing costs and monthly payments could vary under each product  Collecting financial information (tax returns, bank statements) and other related documents that are part of the application process  Initiating/ordering VOEs (verifications of employment) and VODs (verifications of deposit)  Initiating/ordering requests for mortgage and other loan verifications  Initiating/ordering appraisals  Initiating/ordering inspections or engineering reports  Providing disclosures (Truth-in-Lending, Good Faith Estimate, others) to the borrower  Assisting the borrower in understanding and clearing credit problems  Maintaining regular contact with the borrower, realtors, lender, between application and closing to appraise them of the status of the application and gather any additional information as needed  Ordering legal documents  Determining whether the property was located in a flood zone or ordering such service  Participating in the loan closing; and,

WHEREAS, lender payments of the Yield Spread Premium to mortgage brokers may reduce the upfront costs to consumers;20 and,


value nation




continued from page 12

At what time will the reviews take place in the lending process, and how will it affect the loans under consideration? This will vary with different lenders and their policies. All appraisals for mortgage loans will have a pre-closing appraisal review, performed by a qualified appraiser. Some of the reviews will be more formal than others. I consider a formal review to be either a desk review or a field review on a form for that purpose. The appraiser signs these appraisal reviews in the same way as they were by the original appraiser. Once performed, they may support or disagree with the original appraiser’s findings and opinions. In the case of a disagreement, the original appraisal will either be repaired or rejected, depending upon the severity of the problem within the appraisal. In some cases, the review appraiser will conclude that the actual property value is different than the value stated in the original appraisal, and the loan will either be modified or cancelled. Others will also use the tool as a postclosing, quality control instrument to ferret out appraisers not up to the tasks. These appraisers will be removed from the approved list of the lender if found to be turning out substandard work. In cases of pre-closing appraisal reviews, we can expect over time to see that all appraisals are reviewed by quali-

fied state-certified appraisers. Some of these may not be formal review appraisals on every loan, but where appraisals do not pass the smell test, either formal desk reviews or field reviews will be performed prior to closing. This, which is perhaps the most significant point to be made, will be done in an effort for the lender and its staff to distance themselves from pressuring or influencing the appraiser. In summary and conclusion, we can expect to see more appraisal scrutiny on all loans. Certified appraisers in the form of appraisal reviews will perform this oversight. Loans, which may have been made in the past, will not pass muster, in some cases, due to this stricter monitoring. In general, more emphasis will be placed upon insuring that the appraisal is unbiased, legitimate and accurate. For loan officers and other stakeholders, who believe that appraisal reviews reduce the probability that a loan will close, appraisal reviews, in some cases, will improve the probability of a closing. The review is a search for the true value of a property, whether it be higher or lower than that claimed in the initial appraisal. 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, e-mail or visit his company’s Web site,

SEEKING ACTIVE MORTGAGE BANK FOR ACQUISITION I have a client that is actively looking to purchase a Mortgage Bank licensed in at least, New Jersey, New York, and Pennsylvania. The requirements we have include a low FHA “Compare Ratio,” minimum of two existing warehouse lines in good standing, and at least three correspondent lender relationships that are also in good standing, with at least one being an “A” Tier investor. Must have full eagle. The owner/partner will need to be able to stay on until the change of control is completed for quality control purposes. There will be compensation paid during that time frame. There will be a quality control workflow to insure low exposure. Our management team is in place to make it a seamless transition. We would also consider merging our management team with the existing management team if the situation is right. We will use our net-worth to secure the warehouse lines when the change of control is complete. We are very open and willing to hear any situations, business plans, offers, etc. Please email me at with a good time to discuss this, or call me anytime at (631) 835-0000. I look forward to hearing from you. Very truly yours, Tricia A. Odierna, Esq.


Are You Really SAFE From Predatory Mortgage Originators? By Lawrence Fried

Since the passage of the Secure and Fair Mortgage Regulators (AARMR), which will Enforcement for Mortgage Licensing Act establish and maintain a Nationwide of 2008 (SAFE Act), states and governing Mortgage Licensing System and Registry agencies have been scrambling to enact (NMLS). The U.S. Department of Housing new laws and amend existing proce- & Urban Development (HUD) then has dures that facilitate the licensing of the ultimate oversight in determining mortgage loan originators in order to compliance and is responsible for ensurmeet the requirements of this new fed- ing that SAFE Act standards are met. At the surface, there are several proberal law. lems already apparent in defining and The SAFE Act has, in fact, had many benefits. For example, it has put a stop enforcing this Act. While painstakingly to the easy entrance/easy exit loan attempting to define a “loan originator,” originator (now, it’s just easy exit). This various forms of lending institutions and should help ensure that the industry agencies, and what a mortgage loan itself is, the Act goes on to disattracts more qualified cuss what a loan originator and ethical individuals, must now do in order to rather than someone just conduct business. In addilooking for a fast buck tion to current state licenswhen mortgages are in ing requirements, a loan high demand. originator must have a Unfortunately, while background check perenacted with the best formed, which includes intentions to protect the fingerprinting, the pulling consumer and to mitigate of a credit report, and a fraud, and ultimately to criminal history profile. assist in the recovery of Furthermore, approved the housing market, the educational courses and act has also created con“Considering that fusion for mortgage pro- between six and seven tests must be taken and passed. Even a minimum fessionals while engenmillion loans are net worth must be met or dering skepticism that it originated every year, a surety bond posted. will adequately protect this added amount against deceptive lending comes to an extra $15 A measure of practices.

A brief history

in pure cost for every loan. So, who will underwrite this cost?”

The SAFE Act arose out of the economic crisis that began in 2007. The Housing and Economic Recovery Act of 2008 (HERA) was put together quickly with the intent of mitigating the root causes of the crisis, and to implement sweeping reform over what many felt were longstanding problems in the real estate, lending and banking industries. These problems, critics assert, contributed to the boom and subsequent bust in the housing market, with its falling home prices, rising foreclosure rates and volumes of bad debt. The stated objective of the legislation was to “enhance consumer protection and reduce fraud.” This, in turn, seemed to imply that illegal or unethical practices on the part of mortgage originators were to be blamed for at least part of the industry’s troubles. Enter Title V of HERA, the SAFE Act which, in essence, establishes the requirement to build and maintain a national registry of individuals who are engaged in originating loans on residential properties.1 The legislation holds that each state is responsible for complying with the SAFE Act standards. They are to be assisted in this by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential

protection, but at what cost?

Let’s now look at what the estimated potential cost of implementing the SAFE Act might be. Assuming $50 for fingerprints, $150 in educational classes, $300 in registration fees, and $20 for a credit report, that sums up to $520 for every individual who wants to be a loan originator. With an excess of 100,000 individuals (a conservative estimate, based on figures from the Mortgage Bankers Association) who will be subject to these rules, you can see that the price tag facing the industry for these requirements approaches $100 million. And since the bulk of these fees are recurring costs, the Act represents $100 million annually in additional costs. Considering that between six and seven million loans are originated every year, this added amount comes to an extra $15 in pure cost for every loan. So, who will underwrite this cost? Ostensibly, the loan originator (or his or her company) is on the hook for these fees as a result of the legislation. However, basic economics and past precedents indicate that this increase will be passed along to the consumer, resulting in a higher cost continued on page 24

BIG FHA Updates: “NegEQ” Refi, CLTVs, MIPs and Credit Scores

FHA’s “NegEQ” refinance program

Here are eight things you need to know about this program:

This update from Mortgagee Letter 1024 contains changes to the new maximum CLTV limits for refinance transactions which will be effective for case numbers assigned on or after Sept. 7, 2010. The combined amount of the FHA-insured first mortgage and any subordinate lien may not exceed the applicable FHA LTV and the geographical maximum mortgage amount (does not apply to streamline refinance transactions). Here are the four items from this Mortgagee Letter that you need to know about: 1. Rate and term (or no cash-out) refinances 97.75 percent. 2. Refinances for borrowers in negative equity positions* 115 percent. 3. FHA-to-FHA streamline refinances with or without appraisals 125 percent. 4. Cash-out refinances 85 percent. *This refinance option is only available through Dec. 31, 2012. See Mortgagee Letter 2010-23 for more information.

FHA MIP changes now official With the passing of HR 5981 and the resulting Public Law 111-229, FHA was given authority to change the amount charged to borrowers for both the continued on page 24

I The MLO’s fingerprints for submission to the Federal Bureau of Investigation (FBI) to perform a national criminal background check, and I Information regarding the MLO’s employment history and any relevant civil or criminal history.


Certain limited information on the MLO and identifying information of the institution will then be available to consumers using the Registry by accessing its public Web site. Once registered, the MLO must maintain their registration by renewing annually between Nov. 1 and Dec. 31. The unlevel playing field The most hotly debated issue since the passage of the SAFE Act has been the fairness of requiring full licensure of non-depository MLOs while only requiring registration for MLOs working for depository institutions. Opinions vary and, as with any contentious issue, there are two sides that can basically be summarized: I Non-Depository Licensees will tell you the banks cut a deal with congressional leaders to exempt themselves in order to create a competitive advantage in the marketplace. I Agency-regulated Depository institutions are on record saying they should not be penalized for the inappropriate actions of other lenders that led to the enactment of the SAFE Act. No matter how it’s rationalized, the depository institutions think they are above licensure for MLOs. For the time being, we will live with an unlevel playing field and MLOs working for depository institutions will face the registration process. Possible SAFE leveling At the recent American Association of Residential Mortgage Regulators (AARMR) Conference, the functions of the new Consumer Financial Protection Bureau were outlined for this gathering of state regulators. Peggy Twohig of the U.S. Treasury Department, in charge of standing up to this new ‘Bureau’ said, “… (we) intend to level the playing field between depository and non-depository institutions regarding the SAFE Act.” This was big news and it took the conference by surprise. It remains to be seen if the Bureau will have the intestinal fortitude to stop playing politics and truly level our field of play. Paul Donohue, CRMS is a 23-year industry professional and founder of Abacus Mortgage Training and Education. Paul served on two NMLS working groups, establishing the new national education protocols. Go to to find out more about your obligations for testing, education and licensure, or call (888) 341-7767.


1. The loan to be paid off cannot be an FHA loan and must be current. 2. The max loan-to-value (LTV) ratio is 97.75 percent and the max CLTV is 115 percent. 3. Second lien holders must subordinate to the new first. 4. Loans that receive an “accept/approve” by TOTAL do not require a review of income or credit history.

Unlimited CLTVs eliminated for refinance transactions

Registration process During the 180-day transition period, MLOs must register themselves through the NMLS&R to obtain a unique identifier. All regulated institutions will be required to provide certain limited information to the Registry specific to the entity, which will enable the MLO to complete their registration process. The MLO must also provide additional information that will include:


On Aug. 6, 2010, FHA published Mortgagee Letter 10-23 which details the refinance program available to homeowners who owe more than the value of their homes. Although HUD estimates an economic benefit up to $35 billion, the success will be determined by the current lien holders who must participate by writing down the mortgages at least 10 percent. The program is for loans whose case numbers are issued on Sept. 7, 2010 and closed by Dec. 31, 2012.

5. Loans that receive a “Refer” by TOTAL and/or manually underwritten files, the ratios cannot exceed 31/50 (31 percent includes both first and seconds) and must have acceptable credit history with a minimum credit score of 500. 6. Lenders cannot use premium pricing to pay off debt to qualify borrower or bring mortgage current for the borrower. 7. The performance of loans refinanced under the NegEQ refinance will not be included in the lender’s compare ratio, but will have separate criteria in Neighborhood Watch. 8. The borrower must occupy the subject property.

The final rules to implement the SAFE Act requirements for the registration of mortgage loan originators (MLOs) take effect Oct. 1, 2010. Employees of federally-regulated and other depository institutions who meet the definition of an MLO must be registered by the end of the initial transition period. The National Mortgage Licensing System and Registry (NMLS&R) is projected to begin receiving registrations as early as Jan. 28, 2011. Each agency will be providing advanced notice when the NMLS&R will formally begin accepting federal registrations. Agency-regulated institutions and their MLOs will have a 180-day initial registration period during which time they may continue to originate. MLOs subject to this rule should not attempt to register before the initial transition period begins. 

The end of the summer was a big one for the Federal Housing Administration (FHA) and I have compiled a list of the highlights of each FHA update. The combined loan-to-value (CLTV) ratio, mortgage insurance premium (MIP) and credit score changes continue the disturbing trend of FHA becoming more and more like Fannie Mae and Freddie Mac. I noticed this philosophical shift once Commissioner David H. Stevens took office in July of 2009 and observed that in many press releases and U.S. Department of Housing & Urban Development (HUD) testimony, there was reference to future changes that would strengthen FHA and bring FHA more in line with the other agencies. Although I am all for making FHA stronger, I fear that many of the policy changes over the last year are moving FHA away from its original mission of helping the average creditworthy American achieve homeownership. Here are the points to remember about these changes:

Registration, Level or Not, Here It Comes

By Jonathan Foxx

“This great Nation will endure as it has endured, will revive and will prosper. So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. In every dark hour of our national life a leadership of frankness and vigor has met with that understanding and support of the people themselves which is essential to victory.” —Franklin D. Roosevelt, First Inaugural Address (1933)1




We are now living in a time when fear stalks the land. It’s impossible not to notice its insidious maneuverings in many areas of everyday life. Fear of losing a job. Fear of losing a home. Fear of losing a pension. Fear of losing stock equity value. Fear of devalued or depleted savings. Fear of losing health insurance. Fear of inflation and fear of deflation. Fear of certain religions. Fear of a terrorist attack. Fear of rising education costs and tuition. Fear of continued political gridlock. Fear of disintermediation. Fear of a continuing credit freeze. Fear of reduced Social Security and Medicare benefits. Fear of the impact of climate change. Fear of decaying infrastructure. Fear of socialism, as well as crony capitalism. Fear of more wars. Fear of jobs being sent overseas. Fear of another financial meltdown. Fear of government intervention and fear of government non-intervention. Fear of burdensome federal regulations. And fear of bedrock industries and whole company towns becoming permanently decimated by recessionary pressures. In such a political and economic environment, our politicians seek to calm our fears by providing salvific ways and means, promising various kinds of safety, certainty and stability. The way of the politician is the way of legislating laws and their implementing regulations—through more regulation or, occasionally, less regulation. Politicians rarely get involved in politics to preserve the status quo. They seek public office in order to bring about change. We hope for prescience from our politicians. Voters are rarely interested in keeping things just the way they are; most of the time, voters represent special interests that compete with one another for access to the levers of political power. But groups weakened in the midst of a fearful polity are also weakened at the ballot box and have less clout with lobbyists. Industry associations that may have once been able in a strong economy to support bold lobbying initiatives, expecting politicians to respond to their interests, lose membership in a declining economy, where fear often gains traction; and, because of that reduced membership, the money needed to protect the group through mounting political campaigns and successful lobbying efforts is drastically reduced. Our industry, the mortgage industry, has been weakened. Mortgage originators are not exempt from the impact of huge political forces that either foster or succumb to fear. In the wake of the recent financial collapse, the mortgage industry finds itself today faced with a blizzard of new regulations. There are reformist politicians who advocate for these new regulations, giving forth apologies that rival the reasoning of the most eloquent, ancient rhetoricians; and, there are politicians who condemn these same, new regulations, proclaiming that the prior existing regulations should have been (but were not) enforced, and that interposing new regulations in a deteriorating economy only adds to the industry’s already hefty and costly regulatory burden. Both sides have had their say and their vote; and, this time, the reformists have made the law, consisting of 2,319 pages, covering a vast stretch of financial regulatory requirements. The “Wall Street Reform and Consumer Protection Act,” known as the “Dodd-Frank Act” (Act), is the federal government’s response to the financial collapse, offering financial reform of the financial system in general, and to the mortgage industry in particular.2 It has been legislated into law at a time when fear pervades politics and the economic climate continues to worsen, with high unemployment, an eroding tax base, a swelling budget deficit, trillions of dollars in debt, and increasingly compressed corporate profit margins. The Act hopes to provide that salvific safety, certainty and stability that will calm our fears. But it is legislation that reacts to events past, and it is not nec-

essarily proactive about possible events that may yet transpire. Financial bubbles, after all, exist due to the blindness of market participants, not their foresight. The Act, signed into law by President Barack Obama on July 21, 2010, is a federal statute that principally intends to legislate the presumed ways to avoid future systemic failures in the country’s financial infrastructure. Importantly, it seeks to provide new regulations that will protect consumers in the financial marketplace—and especially the mortgage marketplace—through the creation of a new bureaucracy within the Treasury, to be called the Bureau of Consumer Financial Protection (Bureau).3 At least 16 consumer protection laws will be affected or transferred to the Bureau, including the Alternative Mortgage Transaction Parity Act (AMTPA), Community Reinvestment Act (CRA), Consumer Leasing Act (CLA), Electronic Funds Transfer Act (EFTA), Equal Credit Opportunity Act (ECOA), Fair Credit Billing Act (FCBA), Fair Credit Reporting Act (except with respect to sections 615(e), 624 and 628) (FCRA), Fair Debt Collection Practices Act (FDCPA), Federal Deposit Insurance Act, subsections 43(c) through 43(f)(12) (FDIA) Gramm-Leach-Bliley Act, sections 502 through 509 (GLBA), Home Mortgage Disclosure Act (HMDA), Home Ownership and Equity Protection Act (HOEPA), Real Estate Settlement Procedures Act (RESPA), SAFE Mortgage Licensing Act (SAFE Act), Truth-in-Lending Act (TILA), and Truth-in-Savings Act (TISA).4 In the previous article in this three-part series, I outlined the mortgage loan regulatory provisions of the Act.5 As I wrote in that article, this series on the Dodd-Frank Act is meant to provide an overview. However, the legislation is extremely detailed and extensive. Therefore, for guidance and risk management support, I strongly recommend that you consult a residential mortgage compliance professional or regulatory counsel to develop policies and procedures to implement the Act’s requirements. In this article, I will summarize certain salient aspects of the Mortgage Reform and Predatory Lending Act (Mortgage Reform Act).6 It is a primary component of the Act and requires careful review and analysis in order to implement properly. And, in the third and final article we’ll consider the new Bureau of Consumer Financial Protection and offer some observations on how the many features of the Act may affect the mortgage industry’s prospects.

Mortgage Reform and Predatory Lending Act “Restoration calls, however, not for changes in ethics alone. This Nation asks for action, and action now.” —Franklin D. Roosevelt, First Inaugural Address (1933)7 The following matrix provides a brief overview of the Mortgage Reform and Predatory Lending Act, with respect to the minimum standards for mortgages.8 Mortgage Reform and Predatory Lending Act Title XIV of the Dodd-Frank Act Minimum Standards for Mortgages • Ability to Repay • Safe Harbor and Rebuttable Presumption • Defense to Foreclosure • Prepayment Penalties • Single Payment Credit Insurance • Arbitration Agreements • Negative Amortization Loans • Anti-Deficiency Protections • Partial Payments • Increase to Civil Liability Provisions • Lender Rights for Borrower Deception • Hybrid Adjustable Rate Mortgages • Required Disclosures at Consummation • Required Monthly Statements • Government Accounting Office Report

There has been some concern relating to the effective compliance date of the Mortgage Reform Act’s requirements. The Bureau will be implementing the Mortgage Reform Act and receiving the authorities from the Truth-in-Lending Act and other statutes (see above). The Bureau will be charged with finalizing the provisions of the Mortgage Reform Act within 18 months of the designated date of transfer of authorities of the enumerated laws (see above). The regulatory implementation, once promulgated in final form, will become effective within 12 months. Because the Mortgage Reform Act does not have an effective date, the Act itself becomes the operative date for certain provisions that will not be included in the above-described rulemaking process and timeframe. This means that certain provisions are effective one day after July 21, 2010—the advent date of the law.9 Amongst those affected provisions are the implementation of revisions to a mortgage originator’s compensation, limits to prepayment penalties, HOEPA’s high cost triggers, required disclosures at consummation and single-payment credit insurance.10

Mortgage Reform Act—Certain provisions Ability to repay With the exception of reverse mortgages or temporary or bridge loans with 12 months or less remaining in amortization—including any loan to purchase a new dwelling where the consumer plans to sell a different dwelling within 12 months— certain requirements will be implemented on residential mortgage loans (on an amortized basis). Borrower payment ability is derived through a “reasonable and good faith determination, based on verified and documented information.” Basis for Determination Lenders must consider the following criteria in determining payment ability:  Credit history  Current income11  Expected income the consumer is reasonably assured of receiving  Current obligations  Debt to income ratio or residual income the consumer will have after paying non-mortgage debit and mortgage-related obligations  Employment status  Other financial resource other than the consumer’s equity in the dwelling or real property that secures payment of the loan If the creditor plans on making more than one loan secured by the same residence, then payment ability must be made using the combined payments of all such loans, utilizing a “reasonable and good faith determination.”

 Hybrid Loans Refinanced With Current Lender • Converting a hybrid loan into to a standard loan to be made by the same creditor in any case in which there would be the (a) reduction in monthly payment and (b) the mortgagor has not been delinquent on any payment on the existing hybrid loan:  Repayment Ability based on: a) Mortgagor’s good standing on the existing mortgage. b) If the extension of new credit would prevent a likely default should the original mortgage reset and give such concerns a higher priority as an acceptable underwriting practice. c) Offer rate discounts and other favorable terms to such mortgagor that would be available to new customers with high credit ratings based on such underwriting practice.

Safe harbor and rebuttable presumption Lenders may presume to have a “safe harbor” where such loans have satisfied the ability to repay criteria summarized above. These loans are called “qualified mortgages” and meet specific requirements. The ability to repay presumption is based on using certain, defined parameters. The “safe harbor” provisions may change from time to time for qualified mortgages if the Federal Reserve Board (Board) finds that such revised regulations are “necessary or proper to ensure that responsible, affordable mortgage credit remains available to consumers.”14 Qualified mortgages The following criteria define the “qualified mortgage,” as a residential mortgage loan for which:  The regular periodic payments for the loan may not result in an increase of the principal balance or allow the consumer to defer repayment of principal.15  The terms do not result in a balloon payment, where a “balloon payment” is a scheduled payment that is more than twice as large as the average of earlier scheduled payments.16  The income and financial resources relied upon to qualify the obligors on the loan are verified and documented.  In the case of a fixed rate loan, the underwriting process is based on a payment schedule that fully amortizes the loan over the loan term and takes into account all applicable taxes, insurance, and assessments.  In the case of an adjustable rate loan, the underwriting is based on the maximum rate permitted under the loan during the first five years, and a payment schedule that fully amortizes the loan over the loan term and takes into account all applicable taxes, insurance, and assessments.  Compliance with any guidelines or regulations is required by the Federal Reserve Board relating to ratios (i.e., debt-to-income), other ability to repay standards.  The total points and fees payable in connection with the loan do not exceed three percent of the total loan amount.17 continued on page 25



Non-standard loans Repayment determination for a category called Non-Standard Loans. The following are the grouped into this category along with their respective amortizing and schedule parameters:  Variable Rate Loans that defer repayment of any principal or interest: • Repayment Ability: Based on a fully amortizing repayment schedule.

 Calculating Payment of Principal and Interest—Assumptions • Proceeds are fully disbursed on the date of the consummation of the loan. • The loan is to be repaid in substantially equal monthly amortizing payments for principal and interest over the entire term of the loan with no balloon payment, unless the loan contract requires more rapid repayment (including balloon payment), in which case the calculation must be made in accordance with prescribed regulations.12 • The interest rate over the life of the loan is a fixed rate equal to the fully indexed rate at the time of the loan closing, without considering the introductory rate.13


Exemption There is an exemption for a streamlined refinance made, guaranteed or insured by federal departments or agencies from the income verification requirement, provided: 1. The consumer is not more than 30 days past due on the prior existing loan. 2. The refinancing does not increase the balance of the prior existing loan, other than permissible fees and charges related to the loan product itself. 3. Total points and fees do not exceed three percent of the total new loan amount, other than bona fide third-party fees not retained by the mortgage originator. 4. The interest rate on the refinanced loan is lower than the interest rate of the original loan, unless the borrower is refinancing from an adjustable rate to a fixed-rate loan, under guidelines that the department or agency shall establish for loans they make, guarantee or issue. 5. The mortgage is fully amortizing. 6. Loan terms do not permit a balloon payment. 7. Both the loan being refinanced and the refinancing satisfy all requirements of the department or agency making, guaranteeing, or insuring the refinancing.

 Negative Amortization—Calculation • Repayment Ability: Based on any balance increase that may accrue from any negative amortization provision. 

Verification of income Income verification is based on:  Internal Revenue Service Form W-2  Tax returns  Payroll receipts  Financial institution records, or  Other third-party documents that provide reasonably reliable evidence of the consumer’s income or assets

 Interest-Only Loans • Repayment Ability: Based on the payment amount required to amortize the loan by its final maturity.

are you really safe




continued from page 20

in obtaining financing. Furthermore, the added administrative burden and fees may reduce the number of people approved to originate loans, potentially slowing down the origination process and further raising production costs. By reducing the productivity of any one originator, per loan costs will likely further increase. Given that the lenders are beholden to their stakeholders to maintain margins and profit, these costs are likely to be reflected in the price of obtaining a loan. The most troublesome conundrum arising out of the SAFE Act is that there is an embedded assumption in the resulting legislation that it is possible to weed out most, if not all, unscrupulous loan originators by regulatory fiat. However, in dealing with matters of human nature, and with complex transactions that involve multiple parties and data sources, it’s not that simple. Just because someone is entered in the NMLS, there is no guarantee that they will foreswear all future fraudulent activities. And of course fraud can occur at multiple points in the origination work flow continuum—even at the borrower level. The SAFE Act addresses only one element of a highly elaborate system. Moreover, the SAFE Act does not provide for the continual monitoring of agents in the system. While the system may make it harder for someone to get registered initially, any registrant could later “turn bad” and cause a lot of damage before they are identified and stopped. Periodic agent reviews by the lenders or self-engendered re-certification by the agents themselves would also likely drive up the cost of doing business as yet another layer of red tape is added to an organization’s procedures.

such as in the manipulation of appraisal information/appraised values, etc. in order to get loan approval and, thus, commissions paid. Given this situation, a more holistic approach should be taken to ensure that fraud can be systematically identified across the entire mortgage loan origination process. Why focus solely on the agents when the process of the loan origination itself can be used to help identify, weed out and correct fraudulent information?

Technology offers a better way “Trust, but verify” has long been a watchword of international relations. This recognizes a fundamental truth: It is virtually impossible to identify all of the bad actors in a process upfront, no matter how many safeguards are put in place. Fortunately, for the mortgage industry, there is a better way. New cloud-based lending technologies provide the opportunity to monitor for and detect fraud throughout the lending process. This approach is both far less intrusive and more cost-effective than the NMLS, giving the lender the ability to check loan data throughout the process to ensure it is complete, accurate and unchanged through loan delivery. In this way, it is not dissimilar to the Six Sigma processes that were introduced in product manufacturing a decade or more ago—a system of continuous monitoring designed to drive quality. Until recently, it has been difficult to replicate this kind of technology-driven quality control in mortgage origination. After all, creating a loan is not like building a widget: There is unpredictability to the process that does not exist in manufacturing. That is now starting to change.

A more holistic approach is required

Baby vs. bathwater

Creation of a residential mortgage is a highly complex process involving numerous people and a multitude of tasks. The SAFE Act does not require mortgage underwriters or loan processors to go through a similar qualification or registry procedure. Fraud can be introduced anywhere along the line by these people or others who have access to loan data and files throughout the process. Even closing agents, post-closing activities and audit procedures, introduce the possibility of changes to data and paperwork. The SAFE Act addresses the individual loan originator and really just one step in the origination process—that of the individual (loan originator) counseling the borrower on the appropriate financial product and the income they received as a result of the consultation. However, originators can also be involved in fraud later in the process,

The mortgage industry has always been subject to periods of boom and bust, though the last several years have been extraordinary ones by anyone’s standards. Yet, the market has reacted to self-correct. Underwriting guidelines have adjusted dramatically to counter the years of easy credit. Exotic loan products have been eliminated. Government regulators have stepped in to try and address the problems that developed over the last cycle. While there is an important role for regulation, it is not the only, or necessarily the first, line of defense. By its nature, regulation tends to be expensive, cumbersome and potentially off-target. Often, rules are designed to solve last year’s crisis, not the next impending crisis on the horizon. On the other hand, some technological solutions offer a level of control and flexibility that can adjust to regula-

tions and market conditions, as well as individual agent-level actions. Cloudbased technologies in particular are gaining adoption within the mortgage industry and are evolving rapidly to

“By reducing the productivity of any one originator, per loan costs will likely further increase.”

place. When it comes to detecting the latest iteration of their schemes, technology gives lenders a fighting chance. Lawrence Fried is a mortgage market analyst with Dorado Corporation, a provider of cloud-based consumer lending solutions based in San Mateo, Calif. He may be reached at (650) 227-7300 or by visiting

Footnote enable best business practices and to adjust to changing circumstances. Fraud and fraudsters are nothing, if not infinitely, malleable in their efforts to game whatever system is put in

fha insider

1—For those who are interested in reading through the legal documentation, you can find it here: smlicact.cfm.

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upfront and the annual premiums. These changes as outlined in Mortgagee Letter 10-28, are effective for all case numbers assigned on or after Oct. 4, 2010. Here are the six things you need to know about these changes: 1. The upfront premium is now one percent for all standard FHA programs. 2. The annual premium is now 0.90percent for LTVs greater than 95 percent on 30-year loans. 3. The annual premium is now 0.85 percent for LTVs equal to or less than 95 percent on 30-year loans. 4. The annual premium is now 0.25 percent for LTVs greater than 90 percent on 15-year loans. 5. The annual premium is now 0.00 percent for LTVs equal to or less than 90 percent on 15-year loans. 6. These premiums apply to purchases, regular refinances and streamlines. Please note that this new law also gives FHA the authority to raise the annual premium at will up to 1.5 percent for LTVs at or below 95 percent and 1.55 percent for LTVs more than 95 percent.

FHA implements minimum credit scores Mortgagee Letter 10-29 establishes minimum credit scoring requirements for all standard FHA programs* and is effective for case numbers assigned on or after Oct. 4, 2010. Here are the four things you need to know about these changes: 1. Borrowers with a minimum credit score at or above 580 are eligible for maximum financing.

“Although I am all for making FHA stronger, I fear that many of the policy changes over the last year are moving FHA away from its original mission of helping the average creditworthy American achieve homeownership.”

2. Borrowers with a minimum credit score between 500 and 579 are limited to a 90 percent LTV. 3. Borrowers with a minimum credit score of less than 500 are not eligible for FHA-insured mortgage financing. 4. Borrowers with a non-traditional credit history or insufficient credit are eligible for maximum, but must meet the underwriting guidance in HUD 4155.1 4.C.3. *Please note that these new requirements do not apply to: Title I, Home Equity Conversion Mortgages; HOPE for Homeowners; Section 247; Section 248; Section 223(e), Section 238. Go FHA! Jeff Mifsud founded Southfield, Mich.based Mortgage Seminars LLC in 2004, has been an FHA originator for 13 years, is a contributor to and is a former FHA underwriter. Jeff may be reached at (877) 342-9100 or e-mail Visit author Jeff Mifsud’s Web site at for tips and information on FHA loans and details from some of the nation’s top FHA specialists.

• Daily updated mortgage industry news • Industry blogs • Write your own blog

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Fairway Independent Mortgage enters the  The term of the loan does not exceed 30 years, except as such term may be wholesale market continued from page 23

extended by the guaranteeing or insuring federal departments or agencies (i.e., high-cost areas), and  In the case of a reverse mortgage (except where an exemption applies, as indicated above), a reverse mortgage which meets the standards for a qualified mortgage. Points and fees Other than bona-fide third-party charges not retained by the mortgage originator, creditor, or an affiliate of the creditor or mortgage originator, total points and fees are those points and fees payable in connection with the loan.  Calculation: Points and fees exclude either of the amounts described in the following scenarios, but not both: • Scenario # 1: Up to and including two bona-fide discount points payable by the consumer in connection with the mortgage, but only if the interest rate from which the mortgage’s interest rate will be discounted does not exceed by more than one percentage point the average prime offer rate.18 • Scenario # 2: Unless two bona-fide discount points have been excluded under Scenario # 1, up to and including one bona-fide discount point payable by the consumer in connection with the mortgage, but only if the interest rate from which the mortgage’s interest rate will be discounted does not exceed by more than two percentage points the average prime offer rate.  Bona Fide Discount Points: Loan discount points which are knowingly paid by the consumer for the purpose of reducing, and which in fact result in a bona fide reduction of, the interest rate or time-price differential applicable to the mortgage.  Interest Rate Reduction: Scenario # 1 and Scenario # 2 (see above) do not apply to discount points used to purchase an interest rate reduction, unless the amount of the interest rate reduction purchased is reasonably consistent with established industry norms and practices for secondary mortgage market transactions.  Smaller Loans: For lenders that extend smaller loans to meet the requirements of the presumption, the Board will consider the potential impact of such rules on rural areas and other areas where home values are lower.

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Mortgage Builder and NYLX form pricing partnership Mortgage Builder Software, a provider of loan origination software (LOS) technology, has completed its integration with product eligibility and pricing (PPE) technology provider, NYLX, of Mt. Arlington, N.J. The partnership results in a new level of sophistication for price decisioning, allowing mortgage lenders to achieve the best possible pricing for loan products, benefiting consumers by obtaining the most

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The Mortgage Reform Act amends the Truth-in-Lending Act (TILA)19 by adding a new section entitled “Defense of Foreclosure.” Pursuant to this section of TILA, a consumer now may assert a defense of recoupment20 claim for violations when a creditor, assignee, or other holder of a residential mortgage loan or anyone acting on behalf of such creditor, assignee, or holder, initiates a judicial or non-judicial foreclosure of the residential mortgage loan, or any other action to collect the debt in connection with such loan. Areas that provide additional protection to consumers include “steering” violations and the failure to properly determine the borrower’s ability to repay. Also, a set off is now provided without regard for the time limit on a private action for damages.21 The amount of recoupment or set off is equal to the amount which the consumer would be entitled for damages for a valid claim brought in an original action against the creditor, plus the costs to the consumer of the action, including a reasonable attorney’s fee.22

Essent Guaranty Inc., a mortgage insurer founded to provide private capital to America’s housing finance system, has announced that its parent company, Essent Group Ltd., has secured an additional $100 million in capital commitments from new and current investors. The additional commitments raise Essent’s total equity commitments to $600 million. Essent Guaranty also announced substantial progress during the last quarter, including establishing active lender relationships, issuing mortgage insurance (MI) certificates, initiating Essent Online as its businessto-business Web portal, and achieving approval to issue mortgage insurance nationwide. “During 2009 and early 2010, the company focused on building our operating platform and obtaining the necessary regulatory and licensing approvals to open our doors for business at Essent Guaranty,” said Mark Casale, president and chief executive officer of Essent. “Since our announcement on February 18th that Fannie Mae and Freddie Mac approved Essent as a qualified mortgage insurer, we have turned our full attention to serving lender clients and homeowners. We have had an enormously productive



Defense to foreclosure

Essent Guaranty raises $100 million in additional capital and issues first MI policies 

 Balloon Loans: The term “qualified mortgage” includes a balloon loan: • Meeting all of the criteria for a qualified mortgage (see above); • For which the lender makes a determination that the consumer is able to make all scheduled payments, except the balloon payment, out of income or assets other than the collateral; • For which the underwriting is based on a payment schedule that fully amortizes the loan over a period of not more than 30 years and takes into account all applicable taxes, insurance, and assessments; and • That is extended by a lender which:  Operates predominantly in rural or underserved areas;  Together with all affiliates, has total annual residential mortgage loan originations that do not exceed a limit set by the Board;  Retains the balloon loans in portfolio; and  Meets any asset size threshold and any other criteria as the Board may establish, consistent with the purposes of this subtitle.

Fairway Independent Mortgage Corporation has announced that it is entering the wholesale market with select banks, credit unions and brokers. The company will build a national wholesale platform by leveraging its expertise in Federal Housing Administration (FHA), agency and USDA lending and the seasoned management and staff it has assembled. As a retail lender, Fairway Independent Mortgage currently provides mortgages directly to borrowers. By creating a wholesale channel, the company will be able to fund loans for customers of other banks, credit unions and mortgage brokers. It will fund third-party origination (TPO) business through several business lines including fulfillment, broker and correspondent. The move comes after a record year in loan originations for Fairway Independent Mortgage, which surpassed $3.4 billion in loan volume in 2009. While this will be Fairway’s first foray into the wholesale market, its senior management has a collective 150 years of experience in the wholesale mortgage industry. Fairway’s wholesale team is a blend of mortgage professionals that made up the successful third-party origination sales and operations teams of Union Federal Bank and MidAmerica Bank. “As the mortgage industry continues to rebound, we see a fantastic opportunity for us in the wholesale market, particularly with our strong focus on FHA lending, high-touch customer service and top-notch talent,” said Steve Jacobson, chief executive officer of Fairway Independent Mortgage. “Although our goals are modest, we believe we can bring the same successful culture, speed and quality of service to the wholesale space as FHA experts who are able to serve banks, credit unions and other loan originators. Entering the wholesale market is the right thing for us to do right now.” For more information, visit

favorable terms for their home financing transactions. Through NYLX and its LoanDecisions platform, Mortgage Builder users have seamless access to real-time pricing information available anywhere in the industry without ever leaving the Mortgage Builder platform. “This direct access allows our users the ability to give immediate alternatives to borrowers with complete confidence and accuracy,” says Keven Smith, chief executive officer and president of Mortgage Builder. “In addition to the speed of determining available programs and their prices, the lender is saved the time and effort often wasted on loans that have no chance of closing.” “NYLX integrations have helped our customers achieve a more cohesive technology environment,” says Howard Conyack, chief executive officer of NYLX. “As Buy Side and Sell-Side pricing is managed to optimize profit, our integrations ensure that we are returning accurate data to the database of record via our LoanDecisions application. Integrated tools and eligibility reasoning help to qualify borrowers earlier in the origination process, supporting close conversion.” For more information, visit or

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Prepayment penalties A lender may not charge a prepayment penalty for a residential mortgage loan, if it meets any one of the following criteria:

mortgage loan product that does not have a prepayment penalty as a term of the loan.

Single payment credit insurance  Has an adjustable rate; or  Has an annual percentage rate (APR) that exceeds the average prime offer rate (APOR) for a comparable transaction, as of the date the interest rate is set: • First lien loans (1) with principal amounts at or below limits set by Freddie Mac, the APR is more than 1.5 points above the APOR for comparable transactions, as published by the Board; (2) with principal amounts above limits set by Freddie Mac, the APR is more than 2.5 points above the APOR. • Second lien loans the APR is more than 3.5 points above the APOR. Restrictions  During the first year period beginning on the date the loan is consummated, the prepayment penalty may not exceed an amount equal to three percent of the outstanding balance on the loan.  In the second year from the date the loan is consummated, the prepayment penalty may not exceed an amount equal to two percent of the outstanding balance on the loan.  In the third year from the date the loan is consummated, the prepayment penalty may not exceed an amount equal to one percent of the outstanding balance on the loan.  After the end of the three-year period beginning on the date the loan is consummated, no prepayment penalty may be imposed on a qualified mortgage.


Required to provide alternative financing  A lender may not offer a consumer a residential mortgage loan product that has a prepayment penalty without offering the consumer a residential

Prohibition and exceptions Prohibition: Lenders may not finance,23 directly or indirectly, any credit life, credit disability, credit unemployment, or credit property insurance, or any other accident, loss-of-income, life or health insurance, or any payments directly or indirectly for any debt cancellation or suspension agreement or contract. Exceptions:

(1) Insurance premiums or debt cancellation or suspension fees calculated and paid in full on a monthly basis that are not considered financed by the creditor; and, (2) Credit unemployment insurance for which the unemployment insurance premiums are reasonable, the lender receives no direct or indirect compensation in connection with the unemployment insurance premiums, and the unemployment insurance premiums are paid pursuant to another insurance contract (i.e., third-party) and not paid to an affiliate of the creditor.

Arbitration agreements Prohibition: Lenders are not permitted to have arbitration provisions or any other non-judicial procedure in mortgage contracts as the method for resolving any controversy or settling any claims arising out of the mortgage transaction.24 At any time after a dispute or claim has arisen under the transaction arises, however, the consumer and the creditor or any assignee may agree to arbitration or any other non-judicial procedure as the method for resolving any controversy. Statutory Cause of Action—No Wavier: Lenders are not permitted to have provisions in mortgage contracts that may apply to or be interpreted so as to bar a consumer from bringing an action in an appropriate district court (i.e., federal court) of the United States, or any other court of competent jurisdiction, for damages or other relief in connection with any alleged violation of the Mortgage Reform Act or any other federal law.

Negative amortization loans



Lenders may not offer negative amortization loans on residential mortgages and HELOCs, excluding reverse mortgages, unless prior to the consummation the lender provides the consumer with a statement that:

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 The pending transaction will or may, as the case may be, result in negative amortization;  Describes negative amortization in the manner required by the Board;  Negative amortization increases the outstanding principal balance of the account; and  Negative amortization reduces the consumer’s equity in the dwelling or real property. Counseling If the transaction is not a “qualified mortgage” (see Safe Harbor and Rebuttable Presumption section for definition) and the consumer is a first-time borrower, the consumer must provide the lender with “sufficient documentation” to demonstrate that homeownership counseling was completed by the consumer.25

Anti-deficiency protections An “anti-deficiency law” is a state law which provides that, in the event of foreclosure the consumer is not liable, in accordance with the terms and limitations of that state’s law, for any deficiency between the sale price obtained through foreclosure and the outstanding balance of the mortgage. The Mortgage Reform Act provides protection to the consumer with respect to actions taken by the lender that are subject to anti-deficiency laws. In this regards, the creditor or mortgage originator must provide a written notice to the consumer describing the protection provided by the anti-deficiency law and the “significance for the consumer of the loss of such protection” before the loan is consummated. Therefore, prior to consummating a refinance, notification to the consumer that refinancing would cause loss of protection must be provided.

Partial payments TILA has been further amended26 to require a creditor or an entity “becoming a creditor” to notify the consumer about the creditor’s policy regarding the acceptance of partial payments, and, if partial payments are accepted, how such payments (1) will be applied to the mortgage, and (2) if such payments will be placed in escrow.

Increase to civil liability provisions

Required monthly statements

Private rights of action brought under TILA have been extended with respect to statutory damages, as follows:

There has been an amendment to TILA regarding monthly billing statements.29 The Board reserves the right to issue additional disclosure regulations. For each billing cycle, a statement must be provided to the borrower that provides the following:

 Transaction: not less than $200 or more than $2,000  Class Action: the lesser of $1 million or one percent of the creditor’s net worth. Claims may be brought in any United States district court (i.e., federal court), or in any other court of competent jurisdiction, before the end of the three-year period beginning on the date of the occurrence of the violation.27

Lender rights for borrower deception There is now an exemption from liability and rescission where borrower fraud or deception has taken place in the transaction: No creditor or assignee will be liable to an obligor, if such obligor or co-obligor has been convicted of obtaining the mortgage through actual fraud. Of course, the lender may have additional remedies available by law or contract.

 Amount of the principal obligation under the mortgage.  Current interest rate in effect for the loan.  Date on which the interest rate may next reset or adjust.  Amount of any prepayment fee to be charged, if any.  Description of any late payment fees.  Telephone number and electronic mail address that may be used by the obligor to obtain information regarding the mortgage.  Contact Information: counseling agencies or programs, and state housing finance authority. Exception: A fixed-rate residential mortgage loan where the creditor, assignee or servicer issues a coupon book to the obligor that contains substantially the same information as indicated above.

Hybrid adjustable-rate mortgages A hybrid adjustable-rate mortgage (H-ARM) has a fixed interest rate for an introductory period that adjusts or resets to a variable interest rate after such period. The Board reserves the right to issue additional disclosure regulations for adjustable rate mortgages other than H-ARMs. New consumer notification requirements must be provided that state the reset terms and alternatives, as follows:

 Alternatives: A list of alternatives consumers may pursue before the date of adjustment or reset, and descriptions of the actions available to consumers, including: • Refinancing • Renegotiation of loan terms • Payment forbearances • Pre-foreclosure sales

Required disclosures at consummation Prior to consummation, new disclosures are required.  Variable (Adjustable) Rate—Disclosure: • The amount of the initial monthly payment of principal and interest, and the amount of such initial monthly payment including the escrows.28 Also, the amount of the fully indexed monthly payment of principal and interest, and the amount of such fully indexed monthly payment including the escrows.  Settlement Charges: The aggregate amount of settlement charges, the amount of charges included in the loan, the amount of such charges the borrower must pay at closing, the approximate amount of the wholesale rate of funds in connection with the loan, and the aggregate amount of other fees or required payments in connection with the loan.

 Total Interest: The total amount of interest that the consumer will pay over the life of the loan as a percentage of the principal of the loan.

Meeting the challenge “Finally, in our progress toward a resumption of work we require two safeguards against a return of the evils of the old order; there must be a strict supervision of all banking and credits and investments; there must be an end to speculation with other people’s money, and there must be provision for an adequate but sound currency.” —Franklin D. Roosevelt, First Inaugural Address (1933)30 We have now come to the end of the second part in this three-part series about mortgage reform. Due to this financial reform legislation, over the next few years (and beyond) the way we will originate mortgages will markedly change, our assumptions will be challenged, and the financial considerations we bring to our work will be transformed. Many new guidelines yet to be promulgated await future interpretation and implementation. Litigation will inevitably ensue, individual and class action, come what may. A new Bureau of Consumer Financial Protection will soon become the center of our focus; its leadership, structure, and rulemaking will determine our mortgage origination processes and market actions.31 In the next and final article, I will summarize the features of this Bureau and discuss how the fulfilling of its legislated purpose will change and inform the mortgage industry. The country’s economic stability is inherently linked to the health of the mortgage industry. In due course, we will know if this mortgage reform contributes to its long term well-being. Jonathan Foxx, former chief compliance officer for two of the country’s top publiclytraded residential mortgage loan originators, is the president and managing director of Lenders Compliance Group, a mortgage risk management firm devoted to providing regulatory compliance advice and counsel to the mortgage industry. He may be contacted at (516) 442-3456 or by e-mail at

Footnotes 1—Franklin D. Roosevelt, Inaugural Address, March 4, 1933, as published in Samuel Rosenman, ed., The Public Papers of Franklin D. Roosevelt, Volume Two: The Year of Crisis, 1933 (New York: Random House, 1938), 11–16. 2—HR 4173: Dodd-Frank Wall Street Reform and Consumer Protection Act, 111th Congress (2009-2010): “A bill to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end “too big to continued on page 28


 Fees Paid: The aggregate amount of fees paid to the mortgage originator in connection with the loan, the amount of such fees paid directly by the consumer, and any additional amount received by the originator from the creditor.



 Contact Information: Counseling agencies or programs, and state housing finance authority.

Before the end of the one-year period beginning on the date of the enactment, the Comptroller General of the United States will conduct a study to determine the effects of the Mortgage Reform Act on the availability and affordability of credit for consumers. The report will produce findings for the mortgage market for mortgages that are not within the safe harbor (discussed above); on the ability of prospective homebuyers to obtain financing; on the ability of homeowners facing resets or adjustments to refinance; on minorities’ ability to access affordable credit compared with other prospective borrowers; and, on home sales and construction. The report will also contain findings and conclusions regarding the extending of the rescission right, if any, on adjustable rate loans and its impact on litigation; state foreclosure laws and, if any, an investor’s ability to transfer a property after foreclosure; expanding the existing provisions of the Home Ownership and Equity Protection Act of 1994 (HOEPA); prohibiting prepayment penalties on high-cost mortgages; and, establishing counseling services under the Department of Housing and Urban Development and offered through the Office of Housing Counseling. 

 Reset: During the one-month period that ends six months before the date on which the interest rate in effect during the introductory period of the H-ARM adjusts or resets to a variable interest rate or, in the case of such an adjustment or resetting that occurs within the first six months after consummation, at the consummation the creditor or servicer of the H-ARM must provide a written notice, separate and distinct from all other correspondence to the consumer, with this information: • Index: The index or formula used in making adjustments to or resetting the interest rate and a source of information about the index or formula. • Calculation: An explanation of how the new interest rate and payment would be determined, including an explanation of how the index was adjusted, such as by the addition of a margin. • Good Faith Estimate (GFE): A GFE based on accepted industry standards, provided by the creditor or servicer, which states the amount of the monthly payment to be applied after the date of the adjustment or reset, and the assumptions on which this estimate is based.

Report to the GAO

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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, simple-to-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

fail”, to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes.” Sponsored by Representative Barney Frank (D-MA) and Senator Christopher Dodd (D-CT). 3—Foxx, Jonathan, “The Birth of an Agency,” National Mortgage Professional Magazine, September 2009, Volume 1, Issue 5, pp. 4-27. This article provides a chart that outlines the Bureau’s structure and authorities. 4—Foxx, Jonathan, “he CFPA Controversy: Asking the Tough Questions,” National Mortgage Professional Magazine, October 2009, Volume 1, Issue 6, pp.22-25. 5—Foxx, Jonathan, “Landmark Financial Legislation: New Rules for Mortgage Originators—Part I: Reformation and Regulations,” National Mortgage Professional Magazine, August 2010, Volume 2, Issue 8, pp. 28-42. 6—My analysis will not address the Act’s new regime for national bank federal preemption in the area of state consumer financial laws, or, for that matter, the new framework for determining the states’ enforcement powers against financial services companies. 7—Op. cit 1. 8—Op. cit. 2, the matrix and subsequent outline of the Mortgage Reform Act— Certain Provisions are based on Title XIV, Subtitle B (Minimum Standards for Mortgages), Subsections 1411-1422. 9—Op. cit. 2, Section 4: Effective Date, states: “Except as specifically provided in this Act or the amendments made by this Act, this Act and such amendments shall take effect one day after the date of enactment of this Act.” 10—Op. cit. 5. 11—Seasonal income may be used, including income from a small business, considering the seasonality and irregularity of such income in the underwriting and the scheduling of payments. 12—Accordingly, with respect to any loan which has an annual percentage rate (APR) that does not exceed the average prime offer rate (APOR) for a comparable transaction, as of the date the interest rate is set, by 1.5 or more percentage points for a first loan; and by 3.5 or more percentage points for a subordinate loan; or, using the contract’s repayment schedule, with respect to a loan which has an APR, as of the date the interest rate is set, at least 1.5 percentage points above the APOR for a first lien residential mortgage loan; and 3.5 percentage points above the APOR for a subordinate loan. 13—The term “fully-indexed rate” means the index rate prevailing on a residential mortgage loan at the time the loan is made plus the margin that will apply after the expiration of any introductory interest rates. 14—Op. cit. 2, Title XIV, Subtitle B (Minimum Standards for Mortgages), Subsections 1412 (3)(B)(i). 15—Except as provided by the Mortgage Reform Act’s requirements for balloon mortgages. 16—Except as provided by the Mortgage Reform Act’s requirements for balloon mortgages. 17—Other than bona fide third party charges not retained by the mortgage originator, creditor, or an affiliate of the creditor or mortgage originator, total points and fees payable in connection with the refinancing may not exceed three percent of the total new loan amount. 18—The term “average prime offer rate” (APOR) means the average prime offer rate for a comparable transaction as of the date on which the interest rate for the transaction is set, as published by the Federal Reserve Board. 19—Section 130 of the Truth in Lending Act (15 U.S.C. 1640). 20—The term “recoupment” generally refers to an affirmative defense that may be asserted by a defendant whose claim is based upon the same transaction that is the subject of the plaintiff’s suit. 21—The term “set off” has been judicially defined as “a claim arising out of a completely independent and unrelated transaction,” which is asserted to offset liability for another claim [Atlantic City Hasp. v. Finkle, 110 N.J., 1970]. 22—The statute of limitations for private right of action for such violations of TILA does not apply to such recoupment defenses. 23—The prohibition applies to any residential mortgage loan or with any extension of credit under an open end consumer credit plan secured by the principal dwelling of the consumer (i.e., HELOC). 24—The prohibition applies to any residential mortgage loan or with any extension of credit under an open end consumer credit plan secured by the principal dwelling of the consumer (i.e., HELOC). 25—Homeownership counseling is acceptable from organizations or counselors certified by the Secretary of U.S. Department of Housing & Urban Development (HUD) as competent to provide such counseling. 26—Section 129C of the Truth-in-Lending Act. 27—The statute of limitations extension is provided for any violation of 15 U.S.C. § 1639 or the newly created Section 129B and 129C of TILA. 28—All applicable taxes, insurance, and assessments. 29—Section 128 of the Truth in Lending Act (15 U.S.C. 1638). 30—Op. cit 1. 31—For more information about the Bureau of Consumer Financial Protection, please see my articles, referenced above: The Birth of an Agency; The CFPA Controversy: Asking the Tough Questions; and, Landmark Financial Legislation: New Rules for Mortgage Originators—Part I: Reformation and Regulations (Op. cit 3, 4, 5).

heard on the street


continued from page 25

Corporation, America Preferred Lending, GM West Funding and Thayer Financial Corporation of California; Choice One Mortgage Corporation, Homelynx Home Loans and Liberty Mortgage Lending Inc. in Florida; and Hi-Tech Mortgage Inc. in Arizona. “Independent mortgage bankers are inking new services commitments cautiously these days and focusing on granular, loan level quality as their operations benchmark,” said TLC President Mary Kladde. “Mortgage lenders are motivated by compliance pressures and fiscal prudence to outsource detail-intensive back office operations and fulfillment services, including post-closing loan review.” Titan Lenders Corporation’s patented, proprietary Web-based software Cerberyx (CBX) supports a full suite of fulfillment services, including: Funding, compliance, closing, post-closing, purchase review for correspondents and warehouse lenders, trailing documents, MERs management, Federal Housing Administration (FHA) insuring, and document management (imaging). For more information, visit

Mortgage Professionals to Watch  Mortgage Concepts has promoted Leonard J. Ramirez to chief operating officer and has added Scott A. Milner as vice president.

Leonard J. Ramirez

Titan Lenders signs nine mortgage bankers in second quarter

It’s Time to Step Up

Thoughts on the new age of broker accountability By Greg Schroeder I started writing this column to assist brokers in regaining their status as Trusted Mortgage Professionals because as a former wholesale lender, I passionately believe in the wholesale channel and want to see it succeed once more. However, the grumblings I’ve been hearing lately regarding licensing, insurance and the like have left me somewhat troubled. It’s time for me to stop being polite and start getting real. Mortgage brokers facilitate the largest financial transaction most consumers will ever undertake, but there’s so much more to the home purchase than just numbers. Owning a home is part of the American dream. Homes are where we raise our families and make memories that last a lifetime. There is a sense of security and comfort attached to one’s home—it’s our refuge from the storm. With so much at stake for the consumer, is it really so ludicrous to demand that the agents facilitating this transaction be licensed, bonded and insured? Think about it … you have to have a license to trade stocks or issue insurance. Want your hair colored or a drink at your local watering hole after a hard day? The professionals applying that nice shade of copper or pouring that scotch must be licensed as well. Having a license signals to the consumer that he or she can place some measure of trust in that licensed professional because there are consequences for noncompliance with the terms and conditions of that license. In addition, a license also provides certain protections to the licensed professional, usually in the form of some recourse through the issuing entity for addressing allegations of misconduct. Recent changes to net worth requirements have placed the bulk of responsibility for loan buybacks on the shoulders of wholesale lenders, and those lenders are going to want some means of recompense from their third-party originator (TPO) partners if a loan officer does something to damage the integrity of a loan or pool of loans. Gone are the days when, in such a case, brokers could simply declare bankruptcy and open up shop as a new origination firm. The industry is watching, and it is demanding accountability from everyone. Brokers had it really easy in the mortgage bubble heyday. Times were good. Profits were plentiful and housing prices had nowhere to go but up. It didn’t matter that having unlicensed loan officers originating loans created increased potential for fraud, negligence and predatory lending. Even originating loans without documentation—a practice most would now agree is just plain foolish— was accepted without batting an eye. Investors were willing to take on these enormous risks because they thought the money that would be made would far exceed the cost of accepting this risk. We all know how that story turned out so why is there so much resistance to creating accountability? It’s time to be professional. It’s time to take pride in what we do. A true Trusted Mortgage Professional views consumer protection as priority number one, and because he or she has nothing to hide, the true Trusted Mortgage Professional has no problem possessing insurance to cover acts of dishonesty and/or fraud on the part of loan officers and is happy to be licensed, tested and registered. It’s not just that it makes good business sense—it’s also the right thing to do. Greg Schroeder is president of Comergence Compliance Monitoring. To learn more about how the Comergence Compliance Trusted Mortgage Professional program can help, call (714) 495-4720.

Robert Tranchell continued on page 37



Mortgage fulfillment outsource services provider Titan Lenders Corporation (TLC) has signed nine mortgage banker clients in the second quarter of 2010. TLC, a U.S.-based domestic mortgage fulfillment outsource operation, offers a parallel and variable costalternative solution to lenders that maintain back office and warehouse line management operations. TLC’s new clients include: Ace Lending LLC of Wisconsin; America One Mortgage

 Robert Tranchell has been named reverse mortgage manager of Mount Vernon Mortgage’s reverse mortgage division.



Scott A. Milner


period, highlighted by the issuance of our first mortgage insurance policies and successfully raising an additional $100 million in capital.” In May 2009, Essent said it had raised an initial $500 million in capital commitments from a group of experienced financial services investors including Pine Brook Road Partners, Goldman Sachs, JP Morgan Chase, PartnerRe, RenaissanceRe Ventures Ltd., and others. “Our additional capital raise, as well as the recent capital raises by other mortgage insurance companies, affirms the view we have shared with public policy makers that private capital is available to take prudent mortgage credit risk,” said Essent’s Vice Chairman Adolfo Marzol. “We hope Essent will continue to play an important role in enhancing confidence that a sound mortgage finance system can attract capital into the private mortgage insurance industry to take and manage mortgage credit risk.” The company also announced that its lender customers now have access to Essent’s ordering and servicing portal, Essent Online at Essent launched the portal in May, which enables lenders to submit loans for MI, update loan parameters, and upload documents. Mortgage loan servicers can activate a certificate, transfer servicing and run reports using the portal. “We are pleased that our lenders will be able to order mortgage insurance from Essent using a secure and easy Web-based process through Essent Online,” said Casale. “Our team has been working hard to engage our lender partners and establish an operating platform that supports the needs of our customers and makes doing business with Essent an easy and efficient experience.” Essent also has received state licensing approval in all 50 states and the District of Columbia and is able to write mortgage insurance nationwide, facilitated by Essent’s participation in the National Association of Insurance Commissioners’ National Treatment licensing pilot program. For more information, visit

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Looking Into the Future of Mortgage Banking By Rene F. Rodriguez




We hear all the time that the only two over the past few years. It has happened things in life we can count on are to other industries before us and it will “death and taxes.” Well, there is a third happen again in the future. One comthat is often forgotten and that is: mon factor of disruptive change, regardChange. Any time I am asked to reflect less of the affected industry, is a dust on the future of anything, my first storm of data that makes it virtually thought is, “Oh, how convenient it impossible to make sense of the change would be to have a crystal ball.” Since while it’s happening. A quick glance at none of us have one, we are forced to the headlines over the past few years rely on other methods to analyze and will illustrate this. Until very recently (and some would prepare for what we think might come. Unfortunately, for too many in our argue that we’re not even there yet), it industry, a question about the future of wasn’t clear how damaging the downturn would be, how many the mortgage banking banks would be forced industry has no meaning out of business, how to them. Many have many jobs would be lost already moved on, forced or how long would it take out of the business by a to recover. When one downturn so severe that expert would go on only those interested in record with an opinion, staving off public panic three others would step refer to it as anything up to refute it. Who are other than a depression. we to believe? But, for those of us still Everyone, including here who are still comthe federal government, mitted to earning a living “Heeding the advice seems bent on determinand providing a service to mortgage borrowers, of Albert Einstein, it is ing who is to blame and there can be a no more clear that we certainly what caused the meltdown. Personally, I don’t important question. cannot keep doing care about any of that What will the future things the way we because I believe it will hold for our industry? have done them in take years to work What skill set will be the past if we hope through all of that only to required to succeed here to succeed.” find answers that surprise and how can those intent no one. I choose to leave on achieving that success navigate the legislative minefield that that to the historians to figure out. I’m has resulted from the financial crash? more interested in the impact of the These are questions that I have person- crash and what it will take to move forally spent a lot of time thinking about. ward through this time of disruptive I’m not one of the chief executive offi- change into the future. cers who have “survived” this downturn. No, I chose to enter the fray after A clear path to the future the downturn had already begun and I Heeding the advice of Albert Einstein, it did it with the sure knowledge that this is clear that we certainly cannot keep industry does have a future and I could doing things the way we have done them in the past if we hope to succeed. lead a firm to success in that future. It is critical that we learn from the past, but the pathway to the future will not Making sense of violent be discovered if we keep looking into change Our industry is not the first to experience the rearview mirror. We’ll miss the wide the kind of change we’ve lived through open road ahead of us that is full of

opportunities. We’ve seen it happen already to so many firms in our space. Seeing a clear path to the future requires us to look at things in a different way. As we conduct our planning sessions, we look at the industry through the lens of the three major forces that are affecting our industry right now: Compliance (or quality), marketing and technology. Focusing our view through these lenses helps us better understand not only where we are today, but also where we need to be in order to stay competitive and add value.

The compliance (or quality) lens Most companies in any industry can succeed based on the power of their marketing departments. They have something to sell, and if they can sell it, they can stay in business. If not, they’re out of the game. That’s how it normally works. However, for firms operating in the U.S. financial services sector, it doesn’t work that way. Banks don’t need to spend all of their resources on sales in order to remain in business because they have something that most people want—Money. In banking today, success isn’t guaranteed to firms that can sell enough to stay in business. Rather, it all depends upon the way they do business. Toyota is a great example. After World War II, Japan was devastated and was forced to completely change the way it did business if they had ever hoped to compete in the global manufacturing market. W. Edward Deming, the father of the “Quality Sciences,” brought these game-changing methodologies to Japan after his unsuccessful attempts at convincing American manufacturing companies that they needed to adopt a quality approach. Toyota’s decision to adopt led them to become the powerhouse that they are today. That is not to say that Toyota is perfect given their recent issues, but the lesson here is in how they responded to that adversity, and more importantly, they had a business culture that could quickly adapt once again. We’ve seen the commercials and ads showing that they are spending “$1 million per hour” on improving their business.

Some have described the last few years as somewhat of a complete devastation to how we do business. As a case in point, take the recently announced lawsuit against one of the nation’s top five banks. The plaintiff alleges that because the bank didn’t take every possible action that might result in the borrower keeping his home, the institution violated Home Affordable Modification Program (HAMP) guidelines and is subject to forfeiture. It’s not clear yet whether this case will actually go to court, but the ramifications are potentially serious. This is but one example of a financial institution caught between those it serves and the brick wall of legislation and regulation that threatens to choke the life out of them. I would venture to guess that it will get worse before it gets better. To succeed in the future, companies need to see compliance as a “quality” problem. They must look beyond just compliance and re-assess the overall quality of their processes. What is it about their processes that would allow for poor quality? How can they leverage technology to improve and manage their processes to ensure quality and compliant work? Let me give you one more example. As a result of the new changes in compensation, many companies have increased the costs to the consumer to make up for the shrinking margins. This might work for the short term, but the competitive landscape will begin to squeeze that as well. I just heard someone recently talking about how they lost a client to someone who was willing to do a loan for $250. It is unavoidable that that kind of pressure will force companies to look inward to find inefficiencies that they can fix to maximize their profitability, which is just another way to say what I said above: They will be forced to assess the way they do business. Any successful firm in the future needs to have quality and compliance built into its DNA or they will simply cease to exist.

The marketing lens While everyone may want money, banks don’t exist to serve everyone. Knowing what markets an institution should be serving, at what price and

Braving the Great Waves of Change



Finally, and most importantly in my mind, is the technology lens, the ability to see the transaction not as simply a pile of paper, but as an orderly progression of processes that speeds the loan in a compliant and quality fashion from lead to post-close. There is no way that mortgage professionals of the future can act on what they learn by looking through the compliance and marketing lenses without good technology. It’s more vital today than ever before. Lenders of the future must be fast, agile, lean and affordable, all of which determines how effectively they can implement the proper technology. But it will not be technology, as we have known it so far. Lenders of the future will need much more flexible systems that can easily and quickly be deployed to sell new programs to new classes of

Why and How You Control the Future


The technology lens

borrowers. This will require a true partnership between the lender and the technology provider. The technology that lends itself to this kind of relationship and offers this kind of power does not come in a box. Technology that can adapt to the everchanging needs of the mortgage marketplace of the future can only be proBy Gibran Nicholas vided through Web-based solutions. It will be a template-based solution that is easy to customize, very fast to deploy Who controls the future of mortgage few years once the massive financial banking? Regulators? Secondary market reform law is implemented. The govinvestors? Fannie Mae, Freddie Mac and ernment-sponsored enterprises (GSEs) “It is critical that we learn from the the Federal Housing Administration are fighting for their lives, and their past, but the pathway to the future (FHA)? fate will be determined within the next will not be discovered if we keep No my friends. You control the year. The FHA has risen up like a strong looking into the rearview mirror.” future. Your future in mortgage bank- giant, only to fall dangerously ill and ing is what you make it to be. Allow me fight for its own survival by constantly churning out guideline changes. The to explain. and seamlessly connected to analytics You’ve survived the Great Mortgage only way to survive this Second Great for compliance and audit trails and Meltdown of 2007-2009. You’ve kept Wave of Change is to draw on the dashboards for effective management. updated on all the industry and regulatory strength and skill that you acquired during the First Wave. The software will live “in the cloud,” changes. You’ve built flexiYou can do it, because whether it is a public cloud or a private ble, yet functional, systems you’ve been here before cloud, which gives the bank full control around the new underwritand you know the landover the data. It will be updated in real ing realities. You’ve probascape. time on a near-continuous basis. It will bly taken counsel and inspiI started by asking you a not require large IT teams to main- ration from at least one simple question: “Who tain—at least for the originator—and therapist, pastor, rabbi, controls the future of mortwill allow business users to get under priest or spiritual guide to gage banking?” The future the hood and make changes without cope with the constant of the mortgage banking is fear of losing critical information. It onslaught of changes in change. Therefore, the real will be an extension of the originator your business and life. question to ask here is, and will enable compliance and mar- You’ve made it through that “Who controls change?” keting without requiring high levels of great wildness of life called “If I asked you to The answer is that resources to run. It will probably also “change,” and you are better change happens, but you be available at a variable cost that and wiser for it. If I asked articulate the one control the pace at which changes with the originator’s business. you to articulate the one quality about youryou adapt to the change. Finally, it will enable full customer rela- quality about yourself that self that has helped Therefore, you control the tionship management (CRM) before, has helped you survive the you survive the last future. If you don’t adapt during and after the transaction with last few years in the mortfew years in the well to change, the data that threads through. No more gage industry, what would mortgage industry, Hurricane of Change that importing and exporting of data, which you say? what would you is the future of the mortis a quality nightmare. My guess is that you say?” gage industry will burn would probably say, “The you out. It will chase you The future will be one in which spe- ability to recognize, cialization is taken to the extreme. respond, and adapt to change.” After out of the industry even as it chased out Successful mortgage banks will be made all, the ranks of “former loan origina- many of your former colleagues. If you up of Jedi Warriors who specialize in tors” are lined up with many of your adapt slowly to change, you will be compliance, marketing and technology, colleagues who could not adapt to the pushed to the sidelines of mediocrity and as it will take all three, plus strong lead- enormous Hurricane of Change that frustration. The Hurricane of Change will ership to succeed. But before these pro- keeps flooding our beloved industry. So slowly chip away at your income, and fessionals can be deployed, the future you, like a lone warrior in an epic drain the joy out of your professional must be visualized. We can only do that drama, have heroically survived the career in mortgage banking. However, if you adapt well to effectively by seeing the landscape First Great Wave of Change in the mortthrough these three lenses. gage industry. Take a moment to change, the future will be way better If we do that, we will be in a very appreciate where you’ve been and than the past. The “good old days” of mortgage banking look like a dry desert good position to succeed in the future what you’ve accomplished. mortgage business. Okay, so what about right now and of poverty compared with the blossoming garden of wealth that awaits you in the future? Rene F. Rodriguez is chief executive officer of The Second Great Wave of Change is the future. You can transform the Austin, Texas-based MortgageDashboard. here at our doorstep. The regulators Hurricane of Change into your best He is a renowned behavioral, leadership have returned with a vengeance, alter- competitive advantage while your comand organizational change expert, world- ing compensation structures, and re- petitors are preoccupied with survival. class sales trainer and dynamic keynote writing all the rules once again. Some Sounds interesting; but how can this speaker. He can be reached by e-mail at of these changes will take hold within work in real life? or visit the next several months, and other continued on page 32 changes will take hold over the next 

how, is the purview of the marketing department and it’s going to be increasingly important in the future. As financial services firms continue to focus on niches, competitive pressures will increase and the firms with the best handle on marketing and promotion will emerge as the strongest in their geographical markets. In the future, a successful firm will be perceived by the rest of the market as a leader in its niche. Goodwill and trust is a hard-won commodity that can no longer be obtained easily with traditional media. Banks must find a way to rise above the sludge left over from the crash and brush off the image of the Wall Street fat cat in favor of a more personable and trustworthy service provider. This will be very challenging for large national lenders to accomplish, as they just cannot move and adopt as fast. With that being said, I see, ultimately, a return of the mortgage broker. But, and I mean a big “but,” not the mortgage broker of the past. I’m referring to the local professional businessperson who understands the business, truly cares about their clients and is willing to take the time to explain the process to a borrower at a kitchen table, will eventually be a hot commodity again. But to capitalize on this opportunity when it returns, brokers must take the time now to hone their craft by becoming experts in lending guidelines; improve their skills by learning how to communicate and present complex financial concepts and be able to clearly outline what it means to the borrower; and harness the right technologies that enable them to increase productivity and prevent non-compliance in realtime versus waiting until the end of the process to check for it.




Consider an example from the world of mobile phones and technology. Specifically, consider how Apple and the iPhone survived and thrived during the Hurricane of Change in the mobile phone industry. The interesting thing is not that Apple created the iPhone. The interesting thing is that Apple keeps improving the iPhone. Apple doesn’t stop improving just because they survived and thrived during one or two Great Waves of Change that have flooded the mobile phone industry. It’s not enough to be successful once. It’s not enough to simply ride one or two Great Waves of Change. In order to maintain consistent levels of success in any industry, you must constantly improve and stay on the cutting edge, while anticipating and riding the waves of change. We can learn from this and apply it to how we respond to the Hurricane of Change that constantly floods the mortgage industry. It’s not enough that you survived (and maybe even thrived) during the Great Mortgage Meltdown. The key is to relentlessly focus on improving yourself now and into the future. Improve your Realtor relationships. Improve the way you convert rate shoppers. Improve the way you generate referrals from CPAs and financial advisors. Improve the speed and ease with which you simplify compliance and understand the Hurricane of Change. Your mission, should you choose to accept it, is to constantly improve yourself and ride the dangerous waves of the Hurricane of Change at the same time … all without getting burned out! But how? Consider an example from the world of personal fitness. You work out, you eat, you rest, and then you repeat the process over and over again. The workout cannot always be the same; it must focus on different muscle groups and levels of resistance. The food cannot be filled with processed sugar and fat; it must be nutritious and have varying balances of protein and carbohydrates. The rest cannot be overlooked or short changed; it must be consistent in order to re-energize your body and help you maintain high levels of endurance and strength. This type of cycle is exactly what you need to consistently maintain high levels of success in the mortgage industry. You need to regularly participate in training opportunities that boost your levels of knowledge and equip you with new skills. These are like the workout sessions that constantly challenge you to higher levels of performance. You need to regularly fill your mind and heart with quali-

ty content and strategic insights. These are like the nutritious foods and recovery drinks you take after a good workout. You need to rest and recharge and have a fulfilling personal life in addition to your career in the mortgage industry. This will help you avoid burnout and keep your career situation aligned with your priorities in life. Apple doesn’t stop innovating and improving when it comes out with a killer product like the iPod, the iPhone or the iPad. Apple keeps researching, creating and improving their products in order to remain on the cutting edge. People with nice physiques don’t stop working out or challenging their bodies once they reach a certain level of physical health. They keep challenging themselves to higher levels in order to maintain their health and improve their bodies.

“‘Who controls the future of mortgage banking?’ The future of the mortgage banking is change.” Truly successful mortgage originators do not stop learning and challenging themselves once they survive the Great Mortgage Meltdown. They recommit themselves to excellence every day and remain on the cutting edge. They discipline their minds and take advanced training courses in order to build more business muscle and outperform the competition. They consistently feed themselves quality content and strategic insights that help them improve themselves and better understand the Hurricane of Change all at the same time. Remember, you control your future. Gibran Nicholas is the founder and chairman of the CMPS Institute (—NMLS Provider ID# 1400384). The CMPS Institute administers the Certified Mortgage Planning Specialist (CMPS) designation and has enrolled more than 5,500 members since 2005. Through CMPS, Gibran empowers mortgage professionals with confidence, unique knowledge, and dynamic marketing resources to simplify compliance, increase their competitive advantage, and generate more business. Visit Gibran’s blog and Web site at 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.

A Look Into the Crystal Ball of Mortgage Banking The wild ride continues, but major opportunities lie ahead By Dave Zitting

It has been an amazing opportunity to this flawed strategy is the overreliance live and work in mortgage banking over by many, in recent years, on statistical the last 20 years. But perhaps none of algorithms as a pure replacement for those years have been more exciting case-by-case, experiential-based judgthan the past two. Some may choose a ment. Flawed strategies like these have different adjective to describe it (many left us to adapt to a new and increasnot fit for print), and that anyone with ingly regulated marketplace, spawned this notion is a glutton for punishment. in response to a perceived need to preI disagree! Living in a time when major vent the consequences of these stratehistorical events are playing out around gies to our industry, and their ripple us on a daily basis is nothing less than effect upon the overall economy. In thrilling. Without question, there have this new marketplace we’re left with been some tough days, weeks, months two choices: and quarters, but if you  Make opportunities to are still in the game today, create a better busiyou’re tougher, wiser and ness out of the chala bit more humble than lenges of our new marjust a few short years ago. ketplace; or With all this change and  Be consumed by those uncertainty, I’m regularly challenges. asked by peers, employees, partners, and cusThe opportunity availtomers, “what will the able to any company that future hold for mortgage desires it lies in the banking?” I think that picacknowledgement of a ture is becoming clearer “The smart leaders new marketplace, and its with each passing week. willingness to lead the The future of private and companies that charge in transforming mortgage banking has invest in renovations their business accordingsome interesting times and technology to ly. Those organizations ahead. Unfortunately, the drive productivity and that do it will own future “wild ride” we’ve been on quality in response to market share. In reading over the last several years is the margin pressures the tea leaves, the overfar from being over. The from a heightened regwhelming consensus is future will include some ulatory environment that there will be potenunknowns, some inevitable issues, some exciting oppor- will succeed in creating tially fewer overall mortgages written, more regutunities, and certainly, a competitive advanlation, fewer secondary some unwanted changes tage that drives both channel options, and a lot that every mortgage banker revenues and profits.” of people throwing in the will simply need to accept. proverbial towel. The end game for those who remain will be “That which is escaped now, is pain to “who gets what’s left?” The smart leadcome.” ers and companies that invest in reno—Proverbs vations and technology to drive producPerhaps this quote from the book of tivity and quality in response to the Proverbs has greater meaning for you margin pressures from a heightened having experienced the last several regulatory environment will succeed in years in mortgage banking. I think it is creating a competitive advantage that fair to say that, for mortgage bankers, drives both revenues and profits. No forecast of the future is complete the last two years has brought more change than the two decades prior to without considering the size and scope it. Most of this change (many would of the overall market for the foreseecall it “pain”) has been forced upon us able future. Currently, the market is in response to businesses within our running at about $1.2 trillion. This is industry who temporarily “escaped” considerably smaller than what has the consequences of failed products and flawed strategies. One example of continued on page 33

been the market size over the last half decade. If you’ve only been in mortgage banking the last five years, the current decline feels even more pronounced. In reality, a $1.2 or $1.5 trillion market is respectable and reflective of a normal market expected for the foreseeable future. The industry may experience occasional refinance tailwinds (like that experienced currently—and could enjoy going into 2011), but these have been artificially created by macro economic policy, and not contributable to market-size sustainability. There are many who might argue that we are at the bottom of cycle that has to go up. After all, what goes down must go back up, right? Unfortunately, this is not always how it plays out. When a trend goes down, it can stay down, or go down further! I believe we are seeing the market at its best altitude for the time being, with a number of incidences that can occur that could potentially result in a loss of altitude. Consider a few questions that may help you gauge for yourself whether our market will be growing, shrinking or maintaining. Let’s consider the profile of the homebuyer of the future.

Otherwise, you may be the next victim of a changing marketplace! I congratulate you for being a member of what is rapidly becoming an exclusive club! Dave Zitting is chief executive officer of Salt Lake City, Utah-based Primary Residential Mortgage Inc. He may be reached by phone at (801) 596-8707, ext. 1001 or e-mail


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If you feel any of the above questions come with an answer that potentially increases the size of the mortgage market, I implore you to do the research and get the facts. The evidence suggests that our industry is still contracting and will continue down that path for some time. The prudent question then for any mortgage banker considering the future is, “What is the best way to thrive in a flattening, or possibly contracting market?” My answer is, just find a way to stay in the game. The

victim of our changing landscape. And, on an unrelated note, it’s probably not going to be a great thing for the American consumer. But that is a question for a different article. If this description of the future seems overwhelming and scary, there is no time like the present to acknowledge the realities and change your mindset from fear to determination. 

 Will it be the homeowner that is currently at a four percent interest rate that would need to accept seven percent-plus on the new upgraded home?  Will it be the first-time homebuyer that just got out of college who watched their parents or family friends painstakingly lose their home to foreclosure in years past?  Will mom and dad dish out advice that homebuying is as easy and natural as waking up in the morning?  Will downpayments be low and/or simple to come by?  Will credit return to a relaxed model any time in the next decade-plus?  Will affordability continue to miraculously improve?  Is our population expanding at such a pace that it will naturally create demand?

good news is that the very challenges inherent to mortgage banking’s future represent opportunities for great success for the right kind of company. That company is one which has the ability to work within shrinking money supply channels by securitizing its own paper, building scale through volume growth, capturing efficiencies and developing excellent banking relationships within all secondary market channels. These organizations will have a massive leg up on the competition, and will ultimately enjoy strong gains in marketshare. Productivity and automation built into the lending manufacturing process is imperative not only for the sake of saving margin, but also for complying with the new doctrine deployed by the Federal Reserve and Consumer Financial Protection Agency (CFPA) enforcement officials. And, I don’t need to tell you that these entities have big teeth and certainly mean business! The new rules regarding loan officer compensation are the latest example of the changing regulatory environment, and its impact on the economic engine of every mortgage banker. This is an enormous change that affects every aspect of our business. I find it interesting to hear some of my colleagues still commiserating over the new rulings. That should already be worked out in your minds. If you understand the true meaning of this legislation, your companies should work just fine creating and deploying the new systems and structures required to support it. Don’t waste another minute on complaining about realities that are here to stay. Start investing now in the growth and expansion of your business. Renovate every aspect of your company to ensure that it fits in the new world, the Era of Dodd-Frank. If you are waiting around to see how things will “shake out,” then wake up! These changes are here to stay. If you think you can “fly under the radar” by not adopting, or only partially adopting, the realities of the new mortgage marketplace, I implore you to rethink that strategy. There is no question in my mind that the future of mortgage banking is filled with excitement and opportunity for those that know how to execute and build a platform designed for the future. I would venture to forecast with almost certainty that our market will shrink, there will be fewer players in the game, and market share will be ultimately shared by fewer overall companies. This will not be great news for the unprepared that will be the next

A View From the C-Suite Mortgage Banking … Change? You Haven’t Seen Anything Yet! By David Lykken




In getting ready to write this article, I went back and re-read the article I wrote a year ago about the future of mortgage banking entitled, “What Lies Ahead for Mortgage Lending?” Back when I was writing that article, I remembered asking myself, “Do I really dare write about what I see coming at this industry?” I saw some really ugly things coming down the pike, and predicted as much. Unfortunately, those predictions, all of which came to pass, are but a prelude to what is yet to come. Change is coming … some good and some not so good, but interestingly enough, both the good and the not so good changes are going shake this industry to its core. That is why I’m titling this month’s article “Change? You Haven’t Seen Anything Yet!” But first, an explanation as to what a “C-Suite” is. I have been writing for National Mortgage Professional Magazine

now for over a year and was recently made aware that a large number of faithful readers of this series of article have been wondering “What the heck does Dave mean by the C-Suite?” My apologies for any confusion or questions… and I maybe will ask that this explanation be included in future articles. Every company has a “Chief” … the boss, the owner, the president and chief executive officer (CEO). The bigger the company, the more “Chiefs” there are. Mortgage companies typically have a chief financial officer (CFO), and frequently, a chief operating officer (COO), and in the case of banks involved in lending, a chief credit officer (CCO). This group of senior managers is commonly referred to as “CLevel” executives. And because these “CLevel” executives typically have their offices in the same location, i.e. office suite, that

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area became know as the “C-Suite,” the Americans realize that now is the time to group of offices where the CEO, CFO, COO clean house. It’s time that we have a new and other C-Level executives work. crop of Congressmen and women who will My apologies again to the readers of do their best to undo as much of the damthis article over the past year who have age that has been done before it is truly wondered what I meant by the “C-Suite.” too late. If you are not involved in politics, I now understand why it may have been you need to become involved now for the difficult to understand the perspective sake of our industry and our country. from which I have been After recently speaking writing these articles for at a conference (I would be the past year if you haven’t happy to speak at your understood what I meant next conference), someby that “C-Suite.” Hopefully, one, who reads my “A View you now understand that From the C-Suite” montheach month when I write ly, asked me, “Dave, I’ve this article, I endeavor to been reading your articles provide a perspective that and have been intrigued should be or hopefully it is and encouraged by your coming from the C-Suite in prediction that ‘more the form of decisions made money will be made in the by the C-Level executives next five years in mortgage “If you are not running the company. lending than the previous involved in politics, So, back to the subject 25 years,’ and I am wonof this month’s article dering if in light of all the you need to become which is having to do with involved now for the changes taking place in the extraordinary changes our industry, whether you sake of our industry coming on our industry … still believe this to be posand our country.” changes that are beyond sible?” Let me assure you anything most of us ever as I did that person … yes, thought possible. Things have been set I absolutely and emphatically declare in motion, mostly by the federal gov- that more money will be made in morternment, that will undoubtedly result gage banking in the next five years than in yet more dramatic changes in the in the previous 25 years! way we go about our business. You may be thinking, “How is this possible?” Here’s a tip … most people that hear  We have not yet begun to under- that statement do not bother to ask the stand the full impact of “financial logical “follow up“ questions. Maybe that is regulations,” thanks to the Dodd- because some simply do not believe it is Frank legislation that was signed possible, and therefore, find themselves into law a short time ago. living a self-fulfilling prophecy operating at  We have not yet begun to compre- levels far below what they are capable of hend the full impact of the higher cap- enjoying. Their disbelief or unbelief disital requirements for every independ- qualifies them for a shot at “the prize.” ent mortgage banker across the counOn the other side of the spectrum, try. there are those who hear or read the  We have not yet begun to realize the same proclamation and walk away quietfull impact of the unbelievable growth ly knowing that it is not only possible but of the federal government and the that they are some of the few already control it has over our industry. enjoying “the prize.” In spite of all the  We have not yet begun to realize the negativity, obstacles and challenges facconsequences of this Congress’ out- ing our industry, they are living the of-control spending. dream. But one thing I have noticed, they are not talking about it … and oftenSadly, the regulations being put in times, you won’t know by the way they place to protect consumers are actually live that they are as successful as they are. hurting them and the economy. The Then there is everyone in between the more stimulus that we have thrust “doubters” and the “doers” who still have a upon us, the longer it will take for us to shot at “the prize,” but for a lack of disciget to an economic bottom so that we pline, lack of vision or a host of other reacan start the recovery that we so des- sons, they fail to achieve their full potential. perately want and need. By the way, you may wonder what Yes, changes are coming, all the result qualifies me to make such a bold stateof regulations already passed by ment as I do with this prediction. It’s not Congressmen and Congresswomen that the fact that I’ve been in the mortgage have little or no understanding of the con- business for 37 years, nor is it because I sequences to our industry or to the con- have owned or been an owner/operating sumers they’re trying to protect. I don’t partner in a number of mortgage or care what side of the political aisle you mortgage-related companies across the may favor, but the vast majority of country, but rather, it’s the fact that for

the past 10 years, I have had the privilege of serving as a consultant to hundreds upon hundreds of companies across this great country. I have watched some companies that most didn’t think had a snowball’s chance in hell of making it succeeded beyond anything anyone could imagine. Conversely, I have watched companies that many thought were surely destined for greatness, crash and burn seemingly unexplainably. One of my favorite business authors is James Collins. He has written several good books, the most notable being, Good to Great. But my favorite book written by James Collins and co-authored by Jerry Porras is Built to Last. If you have this book, read it again. If you don’t, I recommend you buy it and download it onto your favorite e-reader as well. Here’s why … they studied and researched a large number of companies in search of the “best of the best companies.” The criteria used to select the companies they studied was amazing. When I read the list, I began to wonder if any company could meet their stringent requirements to qualify. Interestingly, too many companies qualified and the criteria was made even more stringent to narrow down the list of com-

panies they included in the more in-depth study. It is fascinating to read. For the companies that made it past the final cut, were some interesting common denominators. What I saw were these primary five “CHIEF” guiding principles: Character, Honesty, Integrity, Ethics and Faith (CHIEF). Please excuse me for playing on this acronym, but I am going to emphatically say that unless you have these “CHIEF” principles guiding you as the “chief” executive of your company, your probability of extraordinary success is limited, if not impossible. These guiding principles are like having a good bright lantern while hiking a precarious path in the night. For those of us in this industry, we are walking a very precarious path with an increasing number of twists and turns (changes) ahead. One misstep could put you out of business as quickly as falling off a cliff would. The change that is coming to our industry is largely the result of the fact that many lost sight of these five guiding principles. But here is the “redemptive” good news. The greatest distinction we have as humans amongst all of God’s creation is that we have free will. We can make a quality decision to change, and if

the will to change is based on the right principles, we can change our lives, our companies, our future and our destiny. On Aug. 28, Glenn Beck had a “Restoring Honor” rally in Washington, D.C., where hundreds of thousands of Americans from every walk of life, race and religion showed up en mass. In my opinion, the reason many came was more than just to support “the cause,“ but to make a statement about their own commitment to return to honor which involves each of these CHIEF principles … Character, Honesty, Integrity, Ethics, and the most important, Faith. For those who choose to change and embrace these CHIEF principles, I believe their chances for success increases exponentially. Conversely, for those who do not, the chance of failure increases dramatically. I’m not looking forward to the coming government controls and intrusions into our industry. Many believe that this coming November, we will see an uprising of “We the people …” I pray that “We the people …” will elect a new crop of freshmen Congressmen and Congresswomen will have the will and guts to roll back much, if not all, of what the current Congress has put in place.

But no matter which way all that goes, I know that if you will operate by these five CHIEF principles, you can be one of those that will be “Built to Last” and achieve success regardless of how challenging environment becomes. As always, I welcome your feedback. David Lykken is president, mortgage strategies and managing partner with Mortgage Banking Solutions. David has more than 35 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 To listen to author David Lykken’s online radio show, log on to and type in “Lykken on Lending” in the “Search” box on the right-hand side of the page.


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FIT for Reverse Mortgage Lenders: Part I FIT is all about questions




It is a new day in HECM counseling (and lending) in America. Beginning this month, the U.S. Department of Housing & Urban Development (HUD) is mandating extra questions that HECM counselors must ask reverse mortgage prospects in prelending counseling. These questions and processes are packaged as the Financial Interview Tool or “FIT.” Along with FIT, HUD is also requiring HECM counselors to do a benefits audit for seniors, using an online resource called BenefitsCheckUp (BCU). Across the country, there are public and private benefit programs for seniors with limited means. For those who qualify, these programs could supplement reverse mortgage cash or render it unnecessary, preserving it for times of real need. The National Council on Aging (NCOA), a HUD counseling intermediary since 2007, created these tools—results of years of exclusively serving seniors. Lending, including reverse mortgage lending, is over-weighted in left-brain skills and processes and severely underweighted in right-brain insights and perspective. The FIT questions are designed to correct this structural intel-

• • • • • • • •

lectual imbalance and bring about a more holistic or whole-person approach to HECM counseling (and lending). FIT questions cover areas such as funds usage, absence or presence of other safety nets, for example, insurance policy or pension benefits for a surviving spouse, and transitional issues like widowhood, divorce and separation, among others. The FIT/BCU approach has been used through the NCOA national network since 2007, and NCOA’s data and experience show that it has been a success with seniors. Like any good organization attuned to good ideas and best practices, HUD got wind of FIT and BCU, studied them, and adopted them for its own ends: Protect seniors and manage its insurance business risks at the Federal Housing Administration (FHA). A review of some initial industry participants’ comments suggests there are some misconceptions about FIT (and BCU). With focus on FIT questions and risk-factors, the series explain these new realities in reverse mortgage lending in the age of the Dodd-Frank Act.

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Headlines and breaking news from

continued on page 42

Headlines and blogs from around the web.

heard on the street

continued from page 29

 Mortgage Banking Solutions has named F. Anthony “Tony” Musgrave as a senior consultant.


 Tony Musgrave

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.

The 40 Most Influential Mortgage Professionals Under 40

We are seeking nominations from our readers for the National Mortgage Professional Magazine’s “40 Under 40” feature, slated to appear in our November 2010 edition.

To be considered for the 40 Under 40 feature, visit to submit your nominations.


Who qualifies: Anyone who is under the age of 40 and has had a major impact on the industry. This could be through innovation, association participation, sales force automation, community activism, management techniques, technology or any other significant method that has influenced our industry. We would need a short, three-line bio on you, along with a color photo and company contact info to complete the profile.


National Mortgage Professional Magazine Presents ... The 40 Under 40 

 Freddie Mac has named Jerry Weiss to the newly created position of chief administrative officer.  Timothy Geithner, secretary of the U.S. Department of the Treasury, has named John G. Walsh acting comptroller of the currency.  Jeremy Daugherty has joined Prospect Mortgage as the new district manager for the company’s southern Nevada region.  Prommis Solutions has named John Marecki vice president of East Coast foreclosure operations.  Chase has hired four new loan officers, including Tom Boudreau, Peter Gerardi, Frank Martins and Maureen Petrellese.  RoundPoint Financial Group has named Dave Worrall executive vice president and national servicing manager.  Kathy Marquardt has been named associate vice president of commercial servicing and council coordinator for the Mortgage Bankers Association (MBA).  Former National Football League (NFL) player Arturo Freeman has joined MyCapitalAccess.  Sandy Simmons has been named operations manager of BluFi Direct Mortgage.  Radian has promoted both Angela Capone and Candice Racine to the position of area sales manager.  AMS Servicing LLC has appointed Kevin J. Cooke to the position of

senior vice president, sale and business development. Larry Sneathern has joined Beech Street Capital as senior vice president of loan origination. Steve Kenny has been promoted to the position of commercial real estate banking region executive for Bank of America Merrill Lynch. Richard D. Powers has been named president and chief operations officer of DJSP Enterprises Inc. Grandbridge Real Estate Capital LLC has announced a number of promotions, including, Richard Thomas to senior vice president; Garner “Tip” Strickland to vice president; Frank Sciara, Chad Collins and Rad Davenport as assistant vice presidents; Tommy Ware to real estate analyst II; Brett Olsen and David Schwarz IV to real estate analyst III; David Cortez to real estate analyst IV; and Sean Clancy to real estate appraiser IV. Allied Home Mortgage Capital Corporation has appointed Jeanne L. Stell as consultant and compliance manager.

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Credit Plus announces Credit Radar report

score at risk of dropping; and key indicators that may require the lenders attention. For more information, visit

Interthinx expands risk services to collateral valuation

Inlanta updates site for customer convenience Inlanta Mortgage has completed a redesign of its Web site,, to offer loan applicants and other site visitors a quicker and more convenient way to learn about the company’s full range of programs and services. Inlanta’s new site includes many valuable consumer resources and tools. Applicants can get answers to many frequently asked mortgage questions and even set up a customized tracker to alert them when rates reach a target level. Visitors also have an opportunity to initiate a free, no obligation consultation with an Inlanta mortgage professional about any of Inlanta’s loan programs for home purchase, home renovation and refinance. “The new Web site accomplishes our

goal of offering visitors a one-stop source for mortgage answers and solutions,” said Jean Badciong, chief operating officer at Inlanta Mortgage. “It offers an easy and secure way to complete a quick loan request, submit a loan application or view the status of a loan from the convenience of any computer or mobile device. Whether they are interested in a conventional loan, FHA mortgage, refinancing, or even a reverse mortgage, visitors can use the Web site to get the information they need to proceed with confidence.” Visitors also can learn about the company’s 17-year history, read about recent news and events, and explore employment opportunities and partnership programs with Inlanta. Testimonials from Inlanta customers address the company’s professionalism, the refinancing process, and how Inlanta has made the dream of home

Credit Plus Inc. has announced that it is offering Credit Radar from CreditXpert Inc., an automatically generated cover page for mortgage credit reports that gives lenders an instant snapshot of an applicant’s credit worthiness. “Credit Radar combines revolutionary credit intelligence and industry best practices into a simple, elegant cover page that is delivered automatically with every credit report,” said Greg Holmes, national director of sales and marketing for Credit Plus. “Lenders can instantly size-up their loan applicants and spot any critical issues, all without digging through the actual credit report. And because it’s a cover page, it’s automatically delivered with no additional logins or clicks.” Each Credit Radar page includes an easy to scan summary of three components: A forecast of the applicant’s midscore in 30 days, enabling the lender to immediately be aware of potential problems at closing; a mid-score risk component that alerts the lender if nominal increases in the applicant’s revolving balance would put the mid-

Interthinx has announced the launch of Interthinx Review Appraisal Services for the residential mortgage market. Interthinx has combined its experienced appraisal team with the technical prowess of the platform developed by ACI, a leading provider of technology solutions for the valuation industry, to provide in-depth desk and field review services to its national client network. Interthinx is a provider of comprehensive risk mitigation solutions in the areas of mortgage fraud, collateral valuation, regulatory compliance, audit services, and loss forecasting. “We saw the need for improving the industry’s approach within the valuation space,” said Mark Chapin, chief valuation officer at Interthinx. “Doing business the same old way simply won’t work anymore. That’s why we’ve begun to apply our proficiency in fraud analytics to modify the way appraisals are analyzed. By providing additional data sources and better tools for examining property valuations, Interthinx






11:00 a.m.

9:00 a.m. - 12:00 p.m.

Concurrent Programs Meet FHA Lenders & Companies offering Net Branch Opportunities at Roundtables (In order to purchase a table you MUST be an exhibitor for the exhibit hall)

10:30 a.m. - 12:00 p.m.

Panel: Opportunities in obtaining Warehouse Lines

12:15 p.m. - 1:30 p.m.

Luncheon with Speaker: Mortgage Fraud Scams - How to Avoid Them!

Golf Outing Check In — Harbor Pines, Egg Harbor City, NJ

12:00 Noon

Lunch at Golf Course — Harbor Pines

9:00 a.m. - 6:30 p.m.

Continuing Education: 8-Hr SAFE Course (includes 1-Hr PA)

7:00 p.m. - 9:00 p.m.

Opening Networking Cocktail Reception in the Exhibit Hall


1:30 p.m. - 5:30 p.m.

4 Hr NJ State Laws Pre-license Education

8:30 a.m. - 9:00 a.m.

Continental Breakfast

1:30 p.m. - 3:00 p.m.

Panel: How to Increase Client Credit Scores

9:00 a.m. - 12:30 p.m.

General Session

3:00 p.m.

Conference Ends

12:30 p.m. - 5:30 p.m.

Exhibit Hall Open

12:30 p.m. - 2:00 p.m.

Lunch in Exhibit Hall

2:30 p.m. - 4:00 p.m.

Panel: Branch Opportunities for Mortgage Brokers

4:00 p.m. - 5:30 p.m.

Special FHA Session a) How should Brokers prepare to work with Lenders under the new FHA ruling. b) How to originate and process FHA Loans.

6:00 p.m. - 8:00 p.m.

Networking Cocktail Reception

Visit for more information on Exhibit and Individual Attendee Registration presented by the The New Jersey Association of Mortgage Brokers and The Pennsylvania Association of Mortgage Brokers

offers lenders the opportunity to reduce collateral risk significantly via an innovative, Web-based system.” Interthinx Review Appraisal Services includes desk and field appraisal reviews (current and retrospective) and reconciliation services. All services use a certified licensed level real estate appraiser, selected only after a stringent background check has met Interthinx standards. The opinion is supported by data from public and Interthinx proprietary sources and the knowledge and experience of the review appraiser. The offering helps lenders mitigate the risk of investor buybacks due to collateral valuation issues. “The analytics and tools we are developing in tandem with ACI are shaping the future of valuation,” said Kevin Coop, president of Interthinx. “Expanding our current valuation services division to provide in-depth desk and field appraisal review services that leverage our proprietary data, analytics, and systems is a natural and necessary step for Interthinx and our customers. We look forward to providing trustworthy, high-quality, and streamlined services for lenders and investors nationwide.” For more information, visit

Ellie Mae announces Success-Based Pricing option for Encompass 360 Ellie Mae has announced a pricing structure available

to customers of Encompass360 Mortgage Management Solution Banker Edition. In addition to its hosted and licensed models, Encompass360 Banker Edition is available as a “Success-Based Pricing” model. With this model, customers do not have to purchase the technology. Instead, they pay a fee—which may be passed to the borrower, to the extent permissible by law, as part of the lender’s origination, document preparation and processing fees—for each closed loan. “Encompass360’s Success-Based Pricing gives us the same access to all the bells and whistles—like loan officer websites to communicate with borrowers, closing tools and automated loan origination compliance checks—all without a longterm investment,” said Encompass360 customer Joe Cuttone, owner and chief executive officer of American Fidelity Mortgage Services. “We’re a mediumsized company with a system that rivals any solution in the industry—and that includes the technologies used by the big players. It really makes economic sense for us.” All Success-Based Pricing customers have the exact same fully integrated access to Encompass360’s comprehensive set of features that licensed-pricing customers have, including private-labeled borrowerfacing Web sites, electronic disclosures and eSigning, electronic document management technologies, Encompass Closer document preparation services, and Encompass Compliance Service automated compliance technologies.

Customers opting for Success-Based Pricing may order an unlimited number of disclosures and closing documents may be drawn as many times as is needed, all for no extra charge. There are no or minimal upfront fees for new Banker Edition customers to get started using Encompass360 Success-Based Pricing. Nominal monthly fees are required if closed loan minimums for such month are not met and the per-closed loan fee may be based, in part, upon the number of originators per customer company. “Some of our customers asked for the type of flexibility and business control that comes with this type of pricing, so we are providing it to them,” said Jonathan Corr, chief strategy officer for Ellie Mae. “Ellie Mae has always had a strong commitment to helping customers do more and better business. This is a win-win pricing model where our customers’ success becomes our success. We’re giving our customers one more way to do business in a way that makes most sense for them, while they’re still getting a footprint of capabilities that span the full spectrum of the mortgage loan origination cycle.” For more information, visit

Del Mar DataTrac partners with CCMC on regulatory compliance solution Del Mar DataTrac Inc. (DMD), a provider of end-to-end mortgage lending automation solutions, and CCMC

Inc., a technology interface provider, have released DMDBridge, a connectivity tool that automatically moves loan data from a lender’s third-party origination system to the DataTrac mortgage banking system of record. The first DMDBridge was created for companies with loan officers working in Encompass 360 that rely on DataTrac as their centralized mortgage lending platform. DMDBridge captures all of the data in the industry standard DU 3.2 file set plus the addition of loan information needed to ensure compliance with Real Estate Settlement Procedures Act (RESPA) and other emerging regulatory requirements. DMDBridge pulls fee information required by RESPA for borrower disclosures and escrow information for the Truth-in-Lending (TIL) disclosure from Encompass and automatically populates fields in DataTrac. Without DMDBridge, processors are required to manually enter loan file information from the LOS into DataTrac, introducing inefficiency and the adjunct risks of re-keying data. “DMD is all about making mortgage bankers more efficient, which includes adapting to new regulations and the increased need for loan data detail that flows from point-of-sale through to secondary marketing to meet end-to-end compliance requirements,” said Rob Katz, president of DMD. “We went to CCMC to help develop a tool our users continued on page 40

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continued from page 39

need because it is the best interface provider in our industry.” The DMDBridge has been architected to allow for additional third-party systems to seamlessly integrate to DataTrac, and CCMC is already working extensions to various serving systems. “CCMC is proud of its partnership with DMD and has created the DMDBridge interface to serve DataTrac users’ ongoing needs with full support services and software updates,” said CCMC Vice President Dana Giesler. “We are pleased that DMD users are experiencing an immediate return on investment and relief from compliance headaches.” For more information, visit or

IVS releases automated inspection form for distressed properties Infinity Valuation Services (IVS), a full-service valuation company for distressed properties, has announced that it now provides a fullyautomated property inspection form to support its services. IVS works with thousands of real estate agents across the country to provide interior and exterior broker price opinions (BPOs), appraisals and

property inspections. As an integrated component of IVS’s BPO system, the new form now enables the company to tailor the inspection report information to better meet the needs of clients. “As an expert in the distressed property industry, we have created an automated form that is designed to address the specific questions and concerns of organizations regarding their distressed assets,” said Chris West, president and chief executive officer of IVS. “The form enables IVS to add components to the inspection to address specific concerns our clients have about their respective portfolios or pool of assets. Once the property has been inspected, agents can easily enter the information and upload the corresponding photos for immediate delivery to our clients.” The automated inspection form provides the answers to a series of questions about the property including: Details about the current condition (interior and/or exterior); the need for repairs or maintenance; the occupancy status; listing detail and nearest comparables; and code violations (potential or confirmed). The form can be used to check on listing agents to ensure they are maintaining properties for maximum buyer attention

at a fraction of the cost of sending staff on inspections. In addition, a bank or financial institution can use the form to check on the quality of the agents used to manage their real estate-owned (REO) properties. A loan servicer can use the form to check on the condition of a property immediately prior to a foreclosure sale or after a natural disaster and traders can use the form to ensure bulk sale properties are in saleable condition right before finalizing a bid. “Our mission is to provide indispensable services that enable our clients to make critical valuation decisions,” said West. “We accomplish this by taking the time to ensure that we understand the goals of our clients and communicate that information to our agents. The introduction of an automated property inspection form is our latest effort to advance that mission.” For more information, visit

eTEC to market InHouse Connexions as private label appraisal process management technology InHouse Inc., a provider of appraisal solutions for banks, lenders and other mortgage originators, announces that eTEC, a leading appraisal management company (AMC), has added a private-labeled version of InHouse’s Connexions technology to its product and service offerings. Connexions will be available through

eTEC as “eTEC Powered by Connexions.” It is the first appraisal technology to combine analytics, data mining and workflow on one platform as well as the only appraisal management technology that allows users to manage any combination and number of appraisal vendors—AMCs, appraisal companies and individual appraisers—all from one central platform. Offering eTEC Powered by Connexions not only expands eTEC’s business opportunities as an AMC, but also provides its lender customers with a time-tested tool for managing the entire appraisal workflow in addition to ensuring geographic competence and optimal appraiser selection according to the property. The system gives lenders the freedom to run their appraisal process in the way that works best for them, while staying compliant with the Home Valuation Code of Conduct (HVCC), FHA Appraiser Independence, and other guidelines. Lenders also have the ability to add AMCs and appraisers into the system in seconds, so they never have to be locked into any specific vendor. “We now sell the technology as part of an appraisal package to lenders,” said Susan King, executive vice president and national sales director for eTEC. “We know that a lot of lenders prefer to do business with more than one AMC, and we saw that Connexions accomplished that objective with economic and compliance sense. Users are assured of the highest quality, most




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StreetLinks expands its guarantee to include appraiser competency

Ellie Mae announces the addition of PHH Mortgage to Encompass 360 program

Fannie Mae’s announcement SEL-2010-09, June 30, 2010 specifies lender responsibility and liability regarding appraiser selection criteria, regardless if the selection is performed by a third-party appraisal management company (AMC). StreetLinks National Appraisal Services (StreetLinks) has always provided, on every appraisal at no additional cost, an exclusive “Warranty of Appraisal Quality,” which provides indemnification to lenders in the event of a verified appraisal related repurchase demand. StreetLinks’ revised “Warranty of Appraisal Quality & Appraiser Competency” provides comprehensive indemnification to lenders inclusive of Fannie Mae’s appraiser selection criteria mandates. “Now that Fannie has clarified that the liability for appraiser selection and competency rests solely on the lender’s shoulders, all lenders should give careful consideration to AMC models that prioritize transactional profit over geographic proximity and report quality,” explained Tony Ebeyer, StreetLinks chief operating officer. “Appraiser proximity, geo-competency and historical quality have always been the keystones to StreetLinks’ proprietary assignment methodology, IQ-Select—regardless of the impact on our margin.” StreetLinks has long been the industry leader in appraiser proximity, geocompetency and appraisal quality as evidenced by its approach to appraisers. StreetLinks has never mandated fees to its appraiser partners—appraisers set their own market fees. In addition, all assignments are processed through IQ-Select, which ranks appraisers on proximity, historical quality, historical service metrics and capacity. “Everything in the new Fannie Mae regulations has always been at the core of our business model which provides the highest quality appraisal reports in the industry. Lenders can be assured that our appraiser selection and assignment methodology, backed by our warranty, is compliant with Fannie’s requirements,” said Steve Haslam, StreetLinks chief executive officer. “Fannie has officially placed the burden on the lender for compliance with best-practice appraisal assignment. As such, lenders should carefully scrutinize the appraiser selection and assignment methodology used by their AMC or inhouse appraisal management solution.” StreetLinks provides appraisals nationwide that are fully compliant with Federal Housing Administration (FHA), the Home Valuation Code of Conduct (HVCC), Fannie Mae, Freddie Mac and all other current regulations. An innovator in the appraisal manage-

PHH Mortgage Corporation, a subsidiary of PHH Corporation, and Ellie Mae, the enterprise mortgage origination technology provider, have jointly announced that PHH Mortgage has been added as a lender to Ellie Mae’s Encompass360 Select program, which is exclusively accessed by preferred customers of Encompass360.



The Encompass360 Select program enables a unique and proactive two-way flow of communication between preferred Encompass customers and PHH Mortgage. After these customers submit loan information into Encompass360, that information is matched instantaneously against pre-determined PHH Mortgage loan criteria and the pricing for the loan is automatically presented on the customer’s Encompass360 screen. Customers that are pre-approved by PHH Mortgage can also upload loan applications into the PHH Mortgage Speedy Online Application and Response (S.O.A.R.) loan origination system, lock loans and check loan status in real-time. The program provides approved customers with seamless synchronization between all loan submissions to PHH


Mortgage and the loan conditions and data that are comprehensively stored in the customer’s Encompass360 system. “Our business partnership and integration with Ellie Mae’s Encompass360 loan origination system is one of the first its kind. It will help clients improve their service delivery to their customers, as well as allow them to help simplify the process of selling their loans in the secondary market,” said Mike Dirrane, executive vice president of sales for PHH Mortgage. “This relationship is only being offered to a group of preferred Encompass360 customers that have demonstrated their ability to write the quality of business that aligns with PHH Mortgage’s standards.” continued on page 42



are talking product. Naturally, REMN has FHA, VA and Conventional solutions to fit the needs valuable product is our people. The REMN Sales and Operations teams give you – and your loans – the time and attention you deserve. Even better, at REMN, same-day approvals are guaranteed.* You can rely on us to get the little, yet vital, things taken care of on time. It’s time to get to know our people.

* Same-day decisions guaranteed if file is received by 11 a.m. EST. Real Estate Mortgage Network, Inc. is located at 499 Thornall Street, Second Floor, Edison, NJ 08837. NMLS #6521. This information is for use by mortgage professionals only and should not be distributed to or used by consumers or third parties. Information is accurate as of date of printing and is subject to change without notice.


Learn more at


Our product is our people.

of your customers. But, at REMN, our most 

These days, not many mortgage companies

forward on reverse

continued from page 36

We look at FIT risk factors and frame questions to help loan officers talk with seniors about soft risks that may affect their ability to stay at home and benefit from the reverse mortgage. Although FIT is a HECM counseling tool, the issues it addresses can help lenders appreciate and manage reputation, litigation, and financial risks uniquely associated with HECM lending. Here are the seriesâ&#x20AC;&#x2122; goals:  Address FIT misconceptions among lenders and promote better understanding;  Sensitize lenders to some of the soft risks in HECM lending;  Promote a holistic or whole-person approach to HECM lending;  Advance the idea that protecting FHAâ&#x20AC;&#x2122;s HECM Insurance Fund from losses is the business of every industry participant. The industryâ&#x20AC;&#x2122;s health depends on the insurance fundâ&#x20AC;&#x2122;s soundness. FIT is all about asking questions, talking about risks seniors may not consider because of the pressures of immediate needs, and helping them make better borrowing decisions. Sound borrowing decisions help lenders, investors and HUD avoid losses.

â&#x20AC;&#x153;Although FIT is a HECM counseling tool, the issues it addresses can help lenders appreciate and manage reputation, litigation, and financial risks uniquely associated with HECM lending.â&#x20AC;? Atare E. Agbamu is author of Think Reverse! and more than 140 articles on reverse mortgages. Since 2002, he writes the nationally-distributed column, â&#x20AC;&#x153;Forward on Reverse.â&#x20AC;? A former director of reverse mortgages at Minneapolisbased AdvisorNet Mortgage LLC, Agbamu has years of hands-on experience marketing and originating reverse mortgages. Through his advisory, ThinkReverse LLC, Agbamu advises financial professionals, institutions and regulators across the country. In a 2007 national report on reverse mortgages, AARP cited Agbamuâ&#x20AC;&#x2122;s work. He can be reached by phone at (612) 203-9434 and e-mail at Visit author Atare E. Agbamuâ&#x20AC;&#x2122;s blog at for his thoughts and insights on the reverse mortgage marketplace.






new to market

continued from page 41

Encompass360 Select customers also benefit from PHH Mortgageâ&#x20AC;&#x2122;s loan decisions in as little as three business days. These select originators have the flexibility of functioning as a broker or banker, depending on the transaction, and operating as either a delegated or non-delegated correspondent. Additional benefits include access to PHH Mortgage underwriters, training, channel decisionmakers, exclusive customer service team members, and a dedicated help desk. PHH Mortgage offerings within the Encompass360 Select program are presented to program customers who are preapproved to do business with PHH Mortgage. Encompass360 Select customers that are not pre-approved with PHH Mortgage may apply through its streamlined application process and will receive a decision in as few as five business days. â&#x20AC;&#x153;We are very pleased to be adding PHH Mortgage as a lender in the Encompass360 Select program,â&#x20AC;? said Jonathan Corr, chief strategy officer for Ellie Mae. â&#x20AC;&#x153;PHH Mortgage stands for the kind of service quality and dedication that our Encompass360 customers expect from their best lenders. By proactively offering PHH Mortgageâ&#x20AC;&#x2122;s market-forward pricing and products within Encompass360, Ellie Mae is taking another important step toward expanded efficiency and productivity for our customers, providing more choices and moving toward a more holistic approach that elevates total loan quality.â&#x20AC;? For more information, visit or

ALTA announces update to RESPA-compliant uniform instructions The American Land Title Association (ALTA) has announced that it has updated its uniform set of instructions to help facilitate the handling of new settlement documents that became mandatory Jan. 1, 2010 due to changes to the Real Estate Settlement Procedures Act (RESPA). The Uniform Supplemental HUD-1/1A Instructions are now available in an editable PDF file format and facilitates the transfer of information from lenders to settlement agents in order to create an accurate, compliant HUD-1/1A. â&#x20AC;&#x153;By including this information in a standardized format that can be keyed in directly from a computer, ALTAâ&#x20AC;&#x2122;s Uniform Supplemental HUD-1/1A Instructions greatly reduce the burden on lenders and settlement agents related to preparation and approval of final HUD-1/1A documents,â&#x20AC;? said Mark Winter, president of ALTA. â&#x20AC;&#x153;Lenders and settlement agents who seek a more efficient and compliant closing and funding process will adopt this form.â&#x20AC;? On Jan. 1, 2010, the U.S. Department of Housing & Urban Development (HUD) began requiring lenders and mortgage brokers provide consumers with a stan-

dard Good Faith Estimate (GFE) that discloses key loan terms and closing costs. Closing agents are required to provide borrowers a new HUD-1 Settlement Statement that compares consumersâ&#x20AC;&#x2122; final and estimated costs. Adopting a standardized format for transmitting the information from the loan originator to the settlement agent that is necessary for the completion of the HUD-1 will benefit all of the participants in the settlement process by improving the efficiencies and accuracy of the finished product. â&#x20AC;&#x153;Uniformity benefits the loan originator, settlement agent and consumer by reducing the incidence of errors, thereby eliminating problems at and after the settlement as well as speeding up the settlement process,â&#x20AC;? Winter said. â&#x20AC;&#x153;This supplemental document in its updated form adds efficiency and transparency to the new mortgage documents and should prove advantageous to lenders looking for a standard way to send Good Faith Estimate information to settlement agents.â&#x20AC;? For more information, visit

ProLender Solutions launches FHA Connection interface ProLender Solutions Inc., a lending software provider for mortgage lenders, has announced the release of its FHA Connection interface, which allows users to easily send information from the ProLender software directly into FHA Connection, eliminating the need for users to log into FHA Connection and manually complete the screens. â&#x20AC;&#x153;The FHA Connection interface streamlines the process for FHA loansâ&#x20AC;? said Steve Hendrix, training and support manager at ProLender Solutions. â&#x20AC;&#x153;Our clients are excited they can leverage the information already in ProLender and not have to go to a separate website anymore. It just makes their job so much easier and eliminates a lot of duplicate data entry.â&#x20AC;? The ProLender team, working together in partnership with their clients, created the new FHA Connection screen within the ProLender application to include the ability to validate the subject property address, obtain a CAIVRS authorization, request a case number assignment and submit the appraisal logging. With just a few clicks of the mouse, the user can send the required information over to FHA Connection and receive a response back which improves efficiency and reduces potential mistakes. ProLender develops paperless lending software specifically designed for mortgage lenders looking to streamline their operation. Because the ProLender system integrates with many loan origination systems, credit systems, doc systems, MERS, warehouse banks and

much more, all users are able to work from one corporate lending platform, thus streamlining the process and eliminating the potential for costly mistakes. â&#x20AC;&#x153;We take great pride in working with our clients to always provide the greatest efficiency in technology and this new FHA interface is another example of thatâ&#x20AC;? said Kevin Roczey, president of ProLender Solutions. For more information, visit

LoanSifterâ&#x20AC;&#x2122;s product and pricing engine now available to eMagic users

eMagic has announced that LoanSifterâ&#x20AC;&#x2122;s real-time product and pricing engine is now available to eMagic users through a seamless integration, allowing lenders and originators to identify, price and process loans with greater accuracy and speed than ever before. The integration empowers eMagic users to further grow profits and stay compliant with a growing number of industry regulations and evolving investor guidelines. "Our relationship with LoanSifter provides eMagic customers a competitive advantage and better profitability. It also streamlines the mortgage loan process,â&#x20AC;? said Chad Northington, managing director of eMagic. â&#x20AC;&#x153;eMagic customers now have up-to-the-minute access to price loan scenarios in LoanSifter with lead or loan information gathered in eMagic. This includes

underwriting guidelines, pricing incentives and rejection details. eMagic customers can upgrade to load any investor rate sheet, as well as their own. The results can also be automatically sent back to eMagic.â&#x20AC;? is an e-commerce subsidiary of Mortgage Guaranty Insurance Corporation (MGIC). LoanSifterâ&#x20AC;&#x2122;s products provide instant, up-to-the-minute pricing, product and guidelines on over 150 correspondent and wholesale investors, including MGICâ&#x20AC;&#x2122;s own mortgage insurance pricing and eligibility guidelines. Through an upgrade to LoanSifterâ&#x20AC;&#x2122;s solutions, eMagic customers can have access to auto-quoting sites, automated email alerts and drip marketing, open house flyers, scenario tracking and alerts. â&#x20AC;&#x153;In todayâ&#x20AC;&#x2122;s environment, mortgage lenders need seamless tools that give them a competitive edge,â&#x20AC;? said Bruce Backer, president of LoanSifter. â&#x20AC;&#x153;What we bring to eMagic customers is just thatâ&#x20AC;&#x201D;an opportunity to remain nimble with an automated workflow that offers improved, accurate data quality, better control and compliance, and improved profitability.â&#x20AC;? For more information, visit or

Embrace Home Loans launches Streamline 203(K) home improvement loans Embrace Home Loans, a direct lender for Fannie Mae and Freddie Mac, approved by the Federal Housing Administration (FHA) and

U.S. Department of Veterans Affairs (VA), and an issuer for Ginnie Mae, announced that it has begun offering Streamline 203(k) loans. The company said the loans cover a variety of home improvements and repairs and allow borrowers to take out a single mortgage covering the purchase and rehabilitation of a dwelling. Much like other FHA loans offered by the company, the FHA insures the 203(k) loan in a partnership with Embrace Home Loans. Streamline 203(k) loans can accommodate repair costs up to $35,000. To be eligible for the program, a property can only contain between one and four dwelling units and must have been constructed for at least one year. Not all home improvements are covered under the 203(k) program. "Embrace Home Loans has already helped hundreds of thousands of families with their mortgage financing needs," said Kurt Noyce, president of Embrace Home Loans. "We look forward to helping many more families revitalize communities by offering Streamline 203(k) loans. The program streamlines the complicated process of buying a home requiring rehabilitation, allowing homebuyers to combine the cost of purchase and improvement in a single loan, making it a great choice for many prospective and current homeowners." Streamline 203(k) loans cover the repair or replacement of roofs, gutters, HVAC systems, plumbing, electrical systems and flooring. They can also be used to cover minor, non-structural remodeling projects, painting, weatherization, disability access improvements and appliance replacement. They cannot be used

for major remodeling projects, new construction, structural repair, environmental mitigations, landscaping, luxury improvements or certain, more complicated home improvement projects. "The 203(k) loan program was created by the Federal Housing Administration in order to rehabilitate older neighborhoods and to expand home ownership opportunities," said Noyce. "By adding Streamline 203(k) loans to our product offerings, we are able to continue this noble project and assist in the revitalization of communities across the United States. And because Embrace Home Loans is an experienced FHA insured loan lender, we are well equipped to manage the 203(k) loan program smoothly and effectively. We are very proud to serve communities and families by providing this important loan product." For more information, visit

Your turn National Mortgage Professional Magazine invites you to submit any information promoting new â&#x20AC;&#x153;nicheâ&#x20AC;? 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.

Markets may be volatile, but thereâ&#x20AC;&#x2122;s one thing you can always count on, the total commitment of our Mortgage Team. Loyalty, continuity of service and our dedication to protecting the integrity of our relationships are just a few of the things that set us apart. Ridgewood understands the needs of its communities and develops speciďŹ c product beneďŹ ts to meet those needs.





Call Bijan Farassat at 917-731-4870 or email

Call Lisa Constant at 516-640-8375 or email

Member FDIC

A Member of the New York Association of Mortgage Brokers


*LTVs apply.



weâ&#x20AC;&#x2122;re committed to brokers!


Appraisal Management Company

Coester Appraisal Group 7650 Standish Place, Suite 107 • Rockville, MD 20855 (888) 485-1999 Ext. 2 We are a premier National Appraisal Company since 1970. We have a complete product line for your entire organization. We guarantee HVCC and FHA regulatory compliance. Let our experience work for you. The way valuations should be.

Branch Manager

iServe Residential Lending 415-298-2500 iServe offers a complete product mix - aggressively priced, with hassle-free service & turntimes. Branching & Loan Officer opportunities available nationwide. For a change, focus on production, quick closes & a good night's sleep!

Compliance Consultants

LENDERS COMPLIANCE GROUP 167 West Hudson Street - Suite 200 Long Beach | NY | 11561 | (516) 442-3456 The first full-service, mortgage risk management firm in the country, specializing exclusively in mortgage compliance. Pioneers in outsourcing solutions for mortgage compliance.

United Northern Mortgage Bankers......888-600-8808

Branch Manager

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

Brokers United ........................................877-710-0948 Consulting & Branch opportunities. Exclusive opportunities with a top Federally Chartered Bank, Mortgage Banker and/or Mortgage Banker/Broker Platform. Email Jeff Flees at




Church Financing

Freedom Mortgage Corporation 800.220.9498


Freedom Mortgage Corporation, The BEST Branch Solution, Period.

• Church Purchase & Construction • $100,000 to $2,500,00 • Church Refinance & Cash Out • Churches all 50 states • 75% of Appraised Value • 20 Yr. Fixed Rate

Our Compliance Team Will: Leverage your existing employees. Improve your productivity. Collaborate on projects. Make the most of your current technology. Bring innovation to your company. Be a strong cultural fit. Free you to focus on your core competencies. Give you access to world-class expertise. Lower your total operational costs.

Contact Management/CRM WorkCenter CRM ....................................877.498.6888 A CRM & contact management solution designed for mortgage professionals. Automated campaigns & LOS synchronization make WorkCenter an intuitive timesaver for staying in touch with clients.

Continuing Education Closing Gifts GSF Mortgage 15430 W Capitol Dr. Brookfield, WI 53005 1-877-494-4448 Be in business for yourself, but not by yourself. Join GSF Mortgage's Professional Branch Network. Enjoy freedom and stability and reap the rewards. Signing bonus for Branch Managers, retain 100% of your commissions. Absolutely NO files fees, NO splits

Cruise4Two-Loan Incentives 1-866-541-8077 Increase your Loans,Get the Edge & Generate More Referrals! Offer your clients a 5 Day 4 Night Cruise certificate for Two to Mexico, the Bahamas or the Western Caribbean (up to a $1798.00 value) only when they close a loan with you. Only $159.00 per certificate!!

Guaranteed Home Mortgage Company, Inc. 108 Corporate Park Drive, Ste 301 White Plains, NY 10604 888-329-GHMC • Find out what Guaranteed can do for you. Branch Program for Professionals. It's what we do.

Does Advertising in the Resource Registry Work? It just did!

Inlanta Mortgage W229 N1433 Westwood Drive, Suite 103 Waukesha, WI 53186 • 262-513-9853 Established in 1993 and headquartered in Waukesha, Wisconsin, Inlanta Mortgage is a multi-state mortgage banking company committed to delivering superior service to our branch clients. For more information, call 262-513-9853 or visit

Call 888-409-9770 ext. 4 to Register your company.

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Doc Management

Hard Money/Private Lending

Leads DocVelocity (877) 362-8356 DocVelocity is an end-to-end paperless solution designed to simplify the loan origination experience. Imagine having all your documents in the loan process as electronic files, all online, from preapproval to closing. DocVelocity provides: Fast and easy loan delivery to any lender … Automatic doc sorting, naming and filing … Real-time online document sharing for anyone you choose … Friendly and intuitive user interface … No start-up fees, and free training and support. DocVelocity addresses important compliance issues while giving your office the competitive advantage of being paperless. It streamlines all aspects of the mortgage process and most important, it does so in one easy-to-use and inexpensive package. Its newest version, DocVelocity 2.5, adds over 50 new features and enhancements to make the best paperless office even better. DocVelocity is the flagship product of Paperless Office Solutions, Inc., a wholly owned subsidiary of Flagstar Bancorp. Visit to find out more.



ACC Mortgage, Inc. 932 Hungerford Drive #6 • Rockville, MD 20850 240-314-0399 • 240-314-0336 fax • 877-390-4750 is the largest online directory for mortgage professionals and a favorite of consumers shopping for mortgage loans.

We are doing traditional subprime lending, fix & flip lending and hard money lending.

Our network attract over one million visitors per month. Our paid lead program as well as our free lender directory will help you connect with targeted new consumer traffic from with high-intent consumers searching online for the right mortgage lender.

Income Verification Services

Advanced Data (800) 537 - 0458 Advanced Data is a leading national provider of data services, streamlining income and employment verification with proprietary software. Clients can submit 4506-T directly through Encompass360. Also ask about our AVM and flood services!

Loan Incentives

Cruise4Two-Loan Incentives 1-866-541-8077 Increase your Loans,Get the Edge & Generate More Referrals! Offer your clients a 5 Day 4 Night Cruise certificate for Two to Mexico, the Bahamas or the Western Caribbean (up to a $1798.00 value) only when they close a loan with you. Only $159.00 per certificate!!


Jumbo Loan Management Systems

North Lake College 5001 North MacArthur Blvd, Room T-231-C Irving, TX 75038 (972) 273-3467 • Sign up with the Premier Jumbo Lender 877.464.0555, option 2 Move your Jumbos to a better neighborhood. ING Mortgage is your home for Portfolio loans up to $3,000,000. We offer aggressive pricing and simple guidelines in all 50 states. Big Loans. Low Rates. Great Value.

XetusOne is a powerful, easy-to-use loan management system that streamlines loan processing. Our affordable SaaS applications are lenders #1 choice for origination, subordination & modification.

Loan Origination Systems

Errors and Omissions Insurance CB Malaga Insurance Services LLC ......877-245-5887


Calyx Software 800-362-2599 Calyx Software, the #1 provider of mortgage solutions is dedicated to offering reliable and affordable software that streamlines, integrates and optimizes the loan process. Find out how PointCentral can streamline your business and create compliant processes today.

Events Internet’s Leading Consumer Mortgage Marketplace Attracting over 7 million unique consumers every month • 561-630-1257 NYC Real Estate Expo LLC Anthony Kazazis - Director •

646.210.2545 • 914.763.8008 “The Expo for Real Estate Professionals" For ongoing Networking Events throughout the year please visit

Reach affluent and creditworthy consumers who are in-market and ready to transact. Bankrate is a consumer direct Web site, NOT a lead aggregator. Qualified leads for every sized budget, and pay only for performance. No set up fees! No contracts! No risk!

Try us risk-free! Call 561-630-1257 or visit for more details.

End-to-end LOS system for multi-channel lending. PreQual thru Interim Servicing. Includes all back-office functionality; Underwriting,Secondary Marketing,Post Closing and much more SaaS, ASP and Client Server delivery options.


• Reach self directed, highly qualified consumers that are actively searching for mortgage loans • Geo-targeting – reach the right consumers in the right markets • Our proprietary Advertiser Portal gives you complete control over your campaigns, budgets, and performance reports. • YOU determine your daily/weekly/monthly budget • Pay only for consumers who click on your listing • NO cancellation fees

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Insurance broker providing errors & omissions (E&O) insurance to mortgage brokers and bankers. All loan types. Available in 22 states. 

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Intracoastal Abstract Co. Inc.................516-358-0505 Privately owned & operated full service title insurance agency in NY, NJ and FL, with affiliates throughout the US & Canada. Escrow Agent in Florida.

Comergence Compliance Monitoring, LLC 630 The City Drive South, Suite 205 • Orange, CA 92868 Office: 714-740-9000


Comergence Compliance Monitoring is the mortgage industry’s only Complete broker desk management software and outsource solution for TPO management and monitoring. We can supplement lenders inhouse management and monitoring resources departments.

Retail Branch

(800) LOANS-15


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

Flagstar Wholesale Lending (866) 945-9872 Flagstar Wholesale Lending, a division of Flagstar Bank, is one of the nation’s largest wholesale and correspondent mortgage lenders, providing the technology, products, service and support that independent mortgage brokers, correspondents, and bankers need in today’s mortgage arena. In the ever-changing environment of mortgage banking, Flagstar takes pride in accommodating the specific needs of each customer. At Flagstar, we understand that you need every available advantage to stay ahead of the competition. This is why we provide multiple technology options to meet your needs to register, lock, underwrite, close, fund and deliver your loans. Our wholesale website ( and the loan processing tool Loantrac provides our customers with the functionality that make it easier and faster to close loans, saving you time and money! Visit to learn more.

Terrace Mortgage 4010 W. Boyscout Blvd., Suite 550 Tampa, FL 33607 866-934-4631 • We offer competitive pricing and fast turn-times for FHA, VA, Conventional, and USDA programs without having a retail presence in the industry. We are a wholesale lender with 22 years of experience and believe in exceptional service.

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If your ad was here, you would be seen by 191,181 Mortgage Professionals looking for resources to help them in their business. The Resource Registry is a directory of lenders (wholesaler or retail that are recruiting), affiliated services and resources that is seen by more than 191,181 active Professionals. Call 888-409-9770 ext 4. to register your company.

Call 888-409-9770 ext 4. to register your company.




For more information contact THOMAS R. SIRICO, Vic President of Business Development at (917) 923-1472 or email at We look forward to sharing our services with you!

Sales Coach/Training

Abacus Mortgage Training and Education PO Box 780 Summerfield, NC 27358 888-341-7767 • At Abacus we make your education count! Nationally approved mortgage education provider - #1400011 NMLS Approved Prelicensing and Continuing education courses National and State Exam Prep Materials - start studying now!

Secondary Marketing “Consulting” Broker to Banker ..........(951) 746-3075 We complete your applications for approval Save the time and hassle contact:

Lykken on Lending is a weekly 60-minute show hosted by mortgage veteran of 37 yrs, David Lykken, along with special guest Alice Alvey & Joe Farr as well as featured special guests. Each week we provide our listeners with up-to-the-minute information of what is happening in mortgage and housing industry.

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Exhibitors and Sponsors


2010 NAMB/WEST Conference December 4-6, 2010 at the MGM Grand Las Vegas!


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







Abacus Mortgage Training and Education .......... ....................................21 & 35 ACC Mortgage .................................................. ....................................26 American Toner & Ink .......................................... ....NC1 & 6 BankFinancial.................................................. ......................................34 Calyx Software ................................................ ........................................4 CB Malaga Insurance Services LLC ...................... ..........................................13 Coester Appraisal Group.................................... ..................................36 Comergence Compliance Monitoring, LLC .......... ............8 & 29 .................................... ..............................NC5 Flagstar Wholesale Lending .............................. ....................Back Cover Freedom Mortgage .......................................... ......................Inside Back Cover Gateway Mortgage Group, LLC .......................... ........................................26 GSF Mortgage Corporation ................................ ......Inside Front Cover & NC4 GSF Funding .................................................... ................................................39 Guaranteed Home Mortgage.............................. ....................................11 Inlanta Mortgage.............................................. ....................................13 iServe Residential Lending, LLC ........................ ..................................40 MBA-NJ/NJAMB ................................................ ..................................................38 ..................................28 Mortgage Concepts .......................................... ..................................7 NAMB/WEST .................................................... ....................NC2, NC6, 10 & 47 NAPMW .......................................................... ..................................................37 PB Financial Group Corp. .................................. ..............................................48 Quality Mortgage Services ................................ ..................................17 & 33 REMN (Real Estate Mortgage Network)................ ....................................41 Ridgewood Savings Bank .................................. ....................................43 “Seeking Active Mortgage Bank......................................................................................................20 Terrace Mortgage Company .............................. ....................................5 United Northern Mortgage Bankers Ltd. ............ .............................. 9 & 33 Xetus Mortgage Corporation.............................. ..................................................42

SEPTEMBER 2010 Sunday-Tuesday, September 26-28 Mortgage Bankers Association Regulatory Compliance Conference 2010 JW Marriott Hotel 1331 Pennsylvania Avenue Washington, D.C. For more information, call (800) 793-6222 or visit OCTOBER 2010 Sunday-Tuesday, October 10-12 National Association of Hispanic Real Estate Professionals/Asian Real Estate Association of America 2010 Real Estate Marketing Conference The Bellagio Resort 3600 South Las Vegas Boulevard Las Vegas, Nev. For more information, call (858) 6229046 or visit Monday-Tuesday, October 11-12 Virginia Association of Mortgage Brokers 22nd Annual Convention Colonial Williamsburg-Williamsburg Lodge 310 South England Street Williamsburg, Va. For more information, call (804) 2857557 or visit Friday, October 22 Evolution: The Oregon Association of Mortgage Professionals Mortgage Industry Convention & Trade Show 1849 SW Salmon Street Portland, Ore. For more information, call (503) 6708586 or visit Sunday-Wednesday, October 24-27 Mortgage Bankers Association 97th Annual Convention & Expo Atlanta Georgia Congress Center 285 Andrew Young International Boulevard NW • Atlanta For more information, call (800) 7936222 or visit NOVEMBER 2010 Thursday, November 4 Utah Association of Mortgage Brokers 2010 Annual Expo Noah’s 322 West 11000 South South Jordan, Utah For more information, call (801) 7876611 or visit Monday-Wednesday, November 8-10 Mortgage Bankers of Pennsylvania Conference Wyndham-Conference Center 95 Presidential Circle Gettysburg, Pa. For more information, call (973) 3797447 or visit

Tuesday, November 9 Tennessee Association of Mortgage Professionals 2010 Mortgage Industry Showcase The Best Western Cedar Bluff Inn 420 North Peters Road • Knoxville, Tenn. For more information, call (615) 3020001 or visit Tuesday, November 16 Missouri Association of Mortgage Professionals 17th Annual Convention St. Charles Convention Center 1 Convention Center Plaza St. Charles, Mo. For more information, call (314) 9099747 or visit Wednesday-Friday, November 17-19 Mortgage Bankers Association Accounting, Tax & Finance Management Conference 2010 The Roosevelt New Orleans 123 Barrone Street • New Orleans, La. For more information, call (800) 7936222 or visit DECEMBER 2010 Saturday-Monday, December 4-6 NAMB/WEST 2010 MGM Grand Las Vegas 3799 Las Vegas Boulevard South Las Vegas For more information, call (703) 3425900 or visit FEBRUARY 2011 Sunday-Wednesday, February 6-9 Mortgage Bankers Association’s Commercial Real Estate Finance/Multifamily Housing Convention & Expo 2011 Manchester Grand Hyatt San Diego One Market Place • San Diego, Calif. For more information, call (800) 7936222 or visit Tuesday-Friday, February 22-25 Mortgage Bankers Association National Mortgage Servicing Conference & Expo Gaylord Texan Hotel & Convention Center 1501 Gaylord Trail Grapevine, Texas For more information, call (800) 7936222 or visit APRIL 2011 Sunday-Wednesday, April 3-6 2011 National Association of Mortgage Brokers 2011 Legislative & Regulatory Conference Hyatt Regency Washington on Capitol Hill 400 New Jersey Avenue NW Washington, D.C. For more information, call (703) 3425900 or visit