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National Mortgage Professional Magazine Presents: State of the Industry Roundtable Discussion


2 0 1 6





What It Takes to be One of the Fastest Growing Companies in the U.S. By Steven Kauffman, CPA, MsEDE ........................................56

National Mortgage Professional Magazine Presents: Top Mortgage Employers 2016

Do You Have What It Takes to be a Branch Manager? By Terry LeBlanc........................................................................................60

Burn Your Boat … or, It Isn’t 2005 Anymore By John Glen Stevens & Russell Dee Warner ..........................................58

Nourishing Employees All Year Round By Kerry Elam ..........................62 The Virtuous Boss By Eric Weinstein ......................................................64 Commit to Being a Leader Instead of a Manager in 2016 By Kevin Gillespie ......................................................................................66 Finding the Right Fit in a Sea of Applicants By Josh McKernan ..........68 You Can Let Your Teeth Rot or Recruit New Loan Officers …

74 Gauging the Pulse of the Industry By Tom LaMalfa

Your Choice By Ralph LoVuolo Sr. ..........................................................70 Training and Mentoring Corner: The Aging of Our Industry By Dave Hershman ....................................................................................71

FEATURES The Commercial Corner By Mike Boggiano ............................................8 The Elite Performer: What is Your Theme for 2016? By Andy W. Harris, CRMS ..........................................................................8 A New Year’s Resolution to Make Your 2016 Unforgettable By Bubba Mills ..........................................................................................10 Does Your New Year’s Resolution Include CFPB Compliance? By Andrew Liput ........................................................................................16 The Mortgage Originators Conference By Linda McCoy, CRMS ........18 NAMB Perspective ..................................................................................20

82 Alternative Credit Scoring Meets the Mortgage World By Phil Hall

84 Legends of Lending: Caliber Home Loans By Phil Hall

V I S I T Company

Web Site


A Page

Agility Resources Group ...................................... www.agilityresourcesgroup.com ......................................60 American Advisors Group.................................... www.aagwholesale.com ................................................63 American Financial Resources Inc. ...................... www.afrwholesale.com/wd-benefits ....................Back Cover Angel Oak Mortgage Solutions ............................ www.angeloakms.com ..................................................17 Assurance Financial............................................ www.lendtheway.com ....................................................39 Brokers Compliance Group.................................. www.brokerscompliancegroup.com ..................................96 Caliber Home Loans.............................................. www.caliberwholesale.com ..............................................11 CAMP .................................................................. www.thecampsite.org ......................................................73 CallFurst.com ...................................................... www.callfurst.com ............................................................65 Carrington Mortgage Services, LLC ...................... www.carringtonwholesale.com ..............................43 & 55 Citadel Servicing Corporation .............................. www.citadelservicing.com ..............................................27 Comergence Compliance Monitoring, LLC ............ www.comergencecompliance.com ..................................57 Document Systems, Inc./DocMagic ...................... www.docmagic.com ........................................................7 Equity Prime LLC................................................ www.equityprime.com ..................................................58 First Guaranty Mortgage Corp. ............................ www.fgmc.com ..............................Inside Front Cover & 56 HomeBridge Wholesale ...................................... www.homebridgewholesale.com ....................................13 Hometown Lenders ............................................ www.hometownbranch.com ..................................51 & 81 LendingHome .................................................... www.lendinghome.com/nmp ............................................1 Lykken On Lending ............................................ www.lykkenonlending.com ............................................66 MBA-NJ/NJAMB .................................................. www.mbanj.com ..........................................................79 MBS Highway .................................................... www.mbshighway.com/MNN ..........................................83







Scenes From NMP’s Holiday Networking Parties ................................24 Updated Dollar Amount HOEPA Fee, Loan Amount Triggers, Qualified Mortgage Points and Fees Thresholds By Melanie A. Feliciano Esq. ....................................................................26 NMP Film Review: The Big Short (That Almost Short-Circuited the World’s Economy) By Richard H. Lovell ..........................................28 Cases and Regulations: 2016 Predictions By Jonathan Foxx ..............38 Ready, Set, Go! ........................................................................................40 Lykken on Leadership: Five Principles for Staying Ahead of the Competition By David Lykken ......................................................44 Non-Prime Mortgages Gain Steam Going Into 2016 By Tom Hutchens ......................................................................................46 The Long & Short: The Business of Short Sales By Pam Marron ........52 Just Ask Eric & Laura By Eric Weinstein & Laura Burke ........................54 Operation VA SITREP “Your VA Situation Report” By Richard M. Bettencourt Jr., CRMS, CMHS..........................................72 MBA’s Mortgage Action Alliance: A Message From MAA Chairman Fowler Williams ......................................................................73 Searching for Growth Opportunities? By Greg Holmes & Jim Ryan ....76 Tales From the Closing Table By Andrew Liput ....................................78 OrigiNation: By Originators, For Originators By Andy W. Harris ..........80 Step Inside Ginnie Mae By Ted W. Tozer ..............................................85 Uncovering Home Equity Cross-Sell Opportunities By Corey Hulbert ......................................................................................86 TRID’s Long-Term Impact on Future Loan Offerings By Wes Miller ..88 What is Slowing the Adoption of Digital Transaction Management in the Mortgage Industry? By Stephen F. Bisbee ..........90

D V E R T I S E R S Company

Web Site


Mortgage News Network (MNN) .......................... www.mortgagenewsnetwork.com ..............................30-31 MortgagePlannerMarketing.com.......................... www.mortgageplannermarketing.com ............................59 NAMB+ ............................................................ www.nambplus.com ......................................................23 NAMB East ........................................................ www.nambeast.com ........................................................3 NAMB PAC ........................................................ www.namb.org ..............................................................25 NAPMW ............................................................ www.napmw.org ..............................................62, 68 & 87 NAWRB ............................................................ www.nawrb.com ............................................................91 New York Community Bancorp, Inc. .................... www.nycbmortgage.com ..................................................9 Paramount Residential Mortgage Group, Inc. ...... www.prmg.net ..........................29, 75 & Inside Back Cover PB Financial Group Corp..................................... www.calhardmoney.com ................................................45 REMN Wholesale ................................................ www.remnwholesale.com ..............................................15 Residential Home Funding Corp. ........................ www.rhfbranch.com ......................................................19 Ridgewood Savings Bank .................................... www.ridgewoodbank.com ..............................................61 Secure Insight.................................................... www.secureinsight.com ..................................................77 Silver Hill Funding ............................................ www.silverhillfunding.com ............................................41 TagQuest .......................................................... www.tagquest.com ........................................................53 Texas Mortgage Roundup.................................... www.txmortgageroundup.com ........................................64 The Bond Exchange............................................ www.thebondexchange.com ..........................................69 The National Real Estate Post.............................. www.thenationalrealestatepost.com ..............................89 United Wholesale Mortgage ................................ www.uwm.com ..............................................................5

JANUARY 2016 Volume 8 • Number 1 FROM THE

Why it’s great to work in the mortgage industry

1220 Wantagh Avenue • Wantagh, NY 11793-2202 Phone: (516) 409-5555 • Fax: (516) 409-4600 Web site: NationalMortgageProfessional.com STAFF Eric C. Peck Editor-in-Chief (516) 409-5555, ext. 312 ericp@nmpmediacorp.com

Joel M. Berman Publisher - CEO (516) 409-5555, ext. 310 joel@nmpmediacorp.com

Joey Arendt Art Director (516) 409-5555, ext. 307 joeya@nmpmediacorp.com

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ADVERTISING To receive any information regarding advertising rates, deadlines and requirements, please contact VP-Sales & Marketing Beverly Bolnick at (516) 409-5555, ext. 316 or e-mail beverlyb@nmpmediacorp.com.

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 ericp@nmpmediacorp.com. 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 orders@nmpmediacorp.com or visit www.nationalmortgageprofessional.com. Any subscription changes may be made to the attention of “Circulation” via fax to (516) 409-4600.

JANUARY 2016 n National Mortgage Professional Magazine n



publisher’s desk

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 Consumer 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.

How many readers of National Mortgage Professional Magazine consider their work to be a daily grind? Surprisingly few. The reason why is because the last few years in our business has given anyone who wanted out plenty of reason to leave. Those who remain are here because they want to be here … they are not survivors, but are “thrivers.” Some of the stories in this issue will touch on the steps leading firms take to create work environments that attract top loan officers, underwriters and processors. Featured this month is our 2016 list of Top Mortgage Employers. We broke down the top mortgage firms and have compiled lists, both regionally and nationally, based upon compensation, speed, marketing support, technology, corporate culture, long-term strategy, day-to-day management, internal communications, training resources, industry participation and innovation. See page 47 for this always-popular feature. Having a great work environment is important because, as our readers will be the first to tell you, success here is a matter of survival of the fittest. After all, we are the publication for America’s top originators. But what about the next generation of great loan officers? Where will they come from? What will it take to recruit new talent into our business? How will we train them to meet loan origination goals in a fully compliant manner that delivers a great customer experience? The answers to these questions will determine how strong our companies will be in the future. Some of those questions will be taken up next month when the NAMB—The Association of Mortgage Professionals meets in San Antonio at the Third NAMB Wholesale Summit with some of the nation’s top wholesale lenders. NAMB is working to promote the growth of wholesale lending, along with compliance and increased profitability to both the lenders and mortgage brokers and mortgage bankers who do business with them. You’ll hear more from NAMB’s leadership this issue in The NAMB Perspective (see page 20). In the pages of this month’s issue, you’ll find intelligent commentary that touches on all of these questions from some of the industry’s leading executives, consultants and trainers. The slower winter months are a great time to spend some time thinking about your recruitment and loan officer retention strategies, and this issue will help. Meanwhile, the nation’s leading mortgage servicing companies will be preparing for the Mortgage Bankers Association’s Servicing Conference in Orlando. While we’re dedicated to supporting front line originators like you because that’s where everything starts, we also know that in today’s lending environment, the loan handoff from originator to servicer impacts the customer experience. This makes it very important that we keep tabs on what’s important to our partners on the servicing side. We’ll send a team from Mortgage News Network down to Orlando for the conference and let you know what we find. Enjoy this issue. By the time you’re finished reading all of the material packed in here, winter will be half over and the next round of homebuyers will be preparing for the spring homebuying season. You’ll find plenty in this issue to prepare you for what is sure to be a hot year in the homebuying market. Sincerely, Joel M. Berman, Publisher-CEO NMP Media Corp. joel@nmpmediacorp.com

National Mortgage Professional Magazine is published monthly by NMP Media Corp. • Copyright © 2016 NMP Media Corp.


EDITORIAL CONTRIBUTORS Featured Editorial Contributors Richard M. Bettencourt Jr., CRMS, CMHS

John Glen Stevens

Melanie A. Feliciano Esq.

Terry LeBlanc

Bubba Mills

Ted W. Tozer

Kevin Gillespie

Andrew Liput

Josh McKernan

Greg Holmes

Richard H. Lovell

Jim Ryan

Corey Hulbert

Ralph LoVuolo Sr.

Russell Dee Warner

Tom Hutchens

David Luna

Eric Weinstein

Steven Kaufman, CPA, MsEDE

Wes Miller

Fowler Williams

Jonathan Foxx

Andy W. Harris, CRMS

Editorial Contributors Stephen F. Bisbee

Dave Hershman

Michael Boggiano

David Lykken

Laura Burke

Pam Marron

Kerry Elam



IS YOUR UNDERWRITER CALLING YOU BACK, BEFORE THEY CALL IT A DAY. GET YOUNITED WITH DIRECT ACCESS TO YOUR OWN TEAM OF UNDERWRITERS. Let’s talk. At UWM, we know exactly what allows us to maintain the fastest and most consistent turn times in the industry: it’s the art of communication. Which is why we give you direct access to the underwriter who works on your loan, why we assign the same team of underwriters to all of your loans, and why they’re committed to returning your calls and emails within three hours every time. It’s like having your own hotline to a team of mortgage superheroes — or their mildmannered alter egos — who blend the art of communication with the science of underwriting. And it’s another reason why more brokers choose UWM than any other lender. Get YOUNITED with UWM today.

YOU + UWM = YOUNITED | 800.981.8898 | UWM.COM This information is provided to mortgage and real estate professionals only and is not intended nor is it authorized for consumer distribution. NMLS #3038.

n National Mortgage Professional Magazine n JANUARY 2016


NAMB The Association of Mortgage Professionals

National Association of Professional Mortgage Women

2701 West 15th Street, Suite 536 l Plano, Texas 75075 Phone: (972) 758-1151 l Fax: (530) 484-2906 Web site: www.namb.org

2015-2016 NAPMW National Board of Directors

NAMB 2015-2016 Board of Directors OFFICERS Rocke Andrews, CMC, CRMS—President Lending Arizona LLC 3531 North Pantano Road l Tucson, AZ 85750 Phone: (520) 886-7283 l E-mail: randrews@lendingarizona.net Fred Kreger, CMC—President-Elect American Family Funding 28368 Constellation Road, Suite 398 l Santa Clarita, CA 91350 Phone: (661) 505-4311 l E-mail: fred.kreger@affloans.com John Stevens, CRMS—Vice President Mountain West Financial 380 North 600 East l Pleasant Grove, UT 84062 Phone: (801) 427-7111 l E-mail: johngstevens@gmail.com Rick Bettencourt, CRMS—Secretary Mortgage Network 300 Rosewood Drive l Danvers, MA 01923 Phone: (978) 777-7500 l E-mail: rbettencourt@mortgagenetwork.com Andy W. Harris, CRMS—Treasurer Vantage Mortgage Group Inc. 15962 SW Boones Ferry Road, Ste 100 l Lake Oswego, OR 97035 Phone: (503) 496-0431, ext. 302 E-mail: aharris@vantagemortgagegroup.com John Councilman, CMC, CRMS—Immediate Past President AMC Mortgage Corporation 10136 Avalon Lake Circle l Fort Myers, FL 33913 Phone: (239) 267-2400 l E-mail: jlc@amcmortgage.com

JANUARY 2016 n National Mortgage Professional Magazine n



Donald J. Frommeyer, CRMS—NAMB CEO American Midwest Bank 200 Medical Drive, Suite C-2A l Carmel, IN 46032 Phone: (317) 575-4355 l E-mail: donald.frommeyer@gmail.com

DIRECTORS Kay A. Cleland, CMC, CRMS l KC Mortgage LLC 2041 North Highway 83, Unit CPO Box 783 l Franktown, CO 80116 Phone: (720) 670-0124 l E-mail: kay@kcmortgagecolorado.com Olga Kucerak, CRMS l Crown Lending 328 West Mistletoe l San Antonio, TX 78212 Phone: (210) 828-3384 l E-mail: olga@crownlending.com David Luna, CRMS l Mortgage Educators and Compliance 947 South 500 E, Suite 105 l American Fork, UT 84003 Phone: (877) 403-1428 l E-mail: david@mortgageeducators.com Linda McCoy, CRMS l Mortgage Team 1 Inc. 6336 Piccadilly Square Drive l Mobile, AL 36609 Phone: (251) 650-0805 l E-mail: linda@mortgageteam1.com Nathan Pierce, CRMS l Advanced Funding Home Mortgage Loans 6589 South 1300 East, Suite 200 l Salt Lake City, UT 84121 Phone: (801) 272-0600 l E-mail: npierce@advfund.com Valerie Saunders l RE Financial Services 13033 West Lindburgh Avenue l Tampa, FL 33626 Phone: (866) 992-0785 l E-mail: valsaun@gmail.com Robert Sweeney, CRMS 600 East Carmel Drive l Carmel, IN 46032 Phone: (317) 625-3287 l E-mail: bob.sweeney46@yahoo.com Michele Velez, CMC l WJ Bradley Mortgage Capital LLC 1300 South El Camino Real, Suite 505 l San Mateo, CA 94402 Phone: (650) 409-2850 l E-mail: michelle.velez@wjbradley.com

1851 South Lakeline Boulevard, Suite 104, Box 303 Phone: (800) 827-3034 • E-mail: napmw@napmw.org Web site: www.napmw.org

National President Kelly Hendricks (314) 398-6840 president@napmw.org

Treasurer Judy Alderson (918) 250-9080, ext. 300 nattreasurer@napmw.org

President-Elect Nikki Bell (678) 442-3966 preselect@napmw.org

Parliamentarian Frances Reinhardt (678) 331-1384 freinhardt@firstservicetitle.net

Vice President Cathy Kantrowitz (845) 463-3011 nvp1@napmw.org

Vice President Laurel Knight (425) 412-6787 nvp2@napmw.org

Secretary Windee Falla (281) 556-9182 natsecretary@napmw.org

National Consumer Reporting Association 701 East Irving Park Road, Suite 306 l Roselle, IL 60172 Phone: (630) 539-1525 l Fax: (630) 539-1526 Web site: www.ncrainc.org

2015-2016 Board of Directors William Bower President (800) 288-4757 WBower@continfo.com

Mike Thomas Director (615) 386-2285, ext. 285 MThomas@CICCredit.com

Julie Wink Vice President/Treasurer (901) 259-5105 Julie@DataFacts.com

Dean Wangsgard Director (801) 487-8781 Dean@nacmint.com

Mike Brown Ex-Officio (908) 813-8555, ext. 3020 MBrown@CISinfo.net

Delia Zuniga Director Delia@AdvantagePlusCredit.com

Mary Campbell Director (701) 239-9977 Mary@AdvantageCreditBureau.com

Terry Clemans Executive Director (630) 539-1525 TClemans@NCRAInc.org

Matthew Carpenter Director MCarpenter@Sarma.com

Jan Gerber Office Manager/Member Services (630) 539-1525 JGerber@ NCRAInc.org

Maureen Devine Director (413) 736-4511 MDevine@StrategicInfo.com

Scott Ledbetter Director (214) 783-3315



n National Mortgage Professional Magazine n JANUARY 2016




co ia rn l er

co the m m er c

Add Small-Balance Commercial Mortgages to Your Game Plan in 2016

Five steps to diversify your business and differentiate yourself from the pack By Michael Boggiano

JANUARY 2016 n National Mortgage Professional Magazine n



Competition is intense in the current residential mortgage market. As the market evolves, brokers must continue to find new revenue streams, preferably from products your competition isn’t offering. Here’s what you can do now: Diversify and differentiate by offering small balance commercial loans. Small-balance commercial mortgages are a natural progression for brokers who offer an array of residential mortgage products. The small-balance marketplace is made up of millions of small business owners and investors looking to purchase or refinance their commercial properties. You can add new revenue streams and serve more borrowers by meeting the needs of this underserved market. The opportunity is vast in smallbalance commercial, and brokers are wise to position themselves as experts to current clients and referrals who have a need for this product. Begin with a game plan. Get educated about the market and product options, develop a stable of small commercial lenders to serve borrower needs and set goals for integrating commercial into your product lineup. Even something as simple as adding commercial mortgage lending to your e-mail signature and social media profiles can let your network know you’re ready to take on small-balance deals. Start small … literally. Multifamily properties are a perfect transition into commercial because the real estate is similar to the residential properties you work with today. Small-balance programs are more likely to feature streamlined processes. For example, look for a lending program that takes some of the work off your hands and accelerates the timeline. Some lenders even manage the appraiser, title company, environmental evaluations and insurance–freeing you to focus on client communication, document collection and relationship-building. Build upon existing referral networks. Use industry relationships with real estate agents and contractors to find potential mortgage clients. Banks and credit unions are another source for business; they frequently encounter commercial loan opportunities they are unable or unwilling to serve. Be the mortgage professional who gets those referrals by networking with loan officers at local institutions. Enhance your advisor role. Understand the financial goals and specific needs of your clients. This helps you place them in the right loan, which increases their comfort level and confidence in you. Borrowers who have not experienced the commercial loan process may find it intimidating and will appreciate your guidance. Find a niche and serve it well. For example, property cash flow can be a common roadblock for small-commercial borrowers–especially in markets where cap rates are low. Offer a product with a debt-to-income underwriting approach and you can help more borrowers and investors finance properties that otherwise would not pass traditional commercial underwriting guidelines. With reasonable expectations and the right lending program(s), you can capitalize on small commercial deals as a lucrative way to diversify your revenue stream. Prepare for a learning curve and trust that each transaction will become easier as you develop stronger relationships with your stable of lenders. Small-balance commercial loans are a smart product for residential mortgage brokers who need to diversify their income and stand out above the competition. Get in the game today! Michael Boggiano is national sales manager for Silver Hill Funding, a smallbalance commercial mortgage lender offering nationwide financing from $250,000 to $1 million. He may be reached by phone at (888) 988-8843 or e-mail mikeb@SilverHillFunding.com.



elite performer

What is Your Theme for 2016? By Andy W. Harris, CRMS o often, we’re reminded at the beginning of each year that we need to set goals and New Year resolutions, some of which we meet and others that we fail to meet. I certainly think setting goals is important year-round, but what can we do differently than others when planning for the year ahead? What if you had to put 2016 into a story? What would you write and how would it begin and end? Certainly the beginning is easy providing you are already there, but developing an overall theme might just be the difference in an exciting new journey into 2016 versus the old boring New Year resolution. Defined by Wikipedia, “Themes” can be divided into two categories: A work’s thematic concept is what readers “think the work is about” and its thematic statement being “what the work says about the subject.” What does your work say “Our life is a book that about you? What makes you different and stand out from others? What can writes itself and whose you do this year differently than last year to write a new story around your principal themes goals and vision? Creating a theme for sometimes escape us. the year and documenting a story can give you a script and path to follow We are like characters in toward meeting your year-end goals. While some stories may have several a novel who do not themes, your 2016 story should clearly single out one trend that resonates with always understand what you and your vision. The goal is to enhance your existing activities and the author wants of work behaviors. To develop a sense of them.” identity around your theme during internal and external business dealings. —Julien Green This will help others better understand you, who you are, and how and why you run your business the way you do. Making deeper connections and growing your business is about clearly understanding where you are and where you’re going. In 2016, make your story known.


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

A National Leader in Wholesale and Correspondent Solutions

Together, we can

reach new heights.


Email potentialclient@mynycb.com or contact one of our Sales Executives:

Combined with a comprehensive product menu including Conventional, Jumbo, Portfolio and FHA solutions, you’ll quickly realize why NYCB has everything you need to take your business to the next level.

Together, we‌ Serve the borrower – Your customers want economic value, convenience, expediency and reliable counsel throughout the loan process. Your expertise and the NYCB platform enable you to originate and close loans faster, easier and at one of the lowest per loan costs of any loan origination channel in the industry. You are very well equipped to compete on the combined effect of dramatically lower operational costs, service responsiveness, and technological innovation.

Build trusted partnerships – By utilizing our Gemstone technology platform, you gain control over aspects of the mortgage transaction that           experience... for you and your customer. There is no doubt this gives you an edge over your  


This information is for use by current and prospective Clients of New York Community Bank, doing business as NYCB Mortgage Banking, and should not be distributed to or used by consumers or other third parties. Š2016 New York Community Bank. All Rights Reserved.

National Sales Director Sheryl Heffernan Senior Vice President Sheryl.Heffernan@mynycb.com (310) 678-1613

Western Region Sean Gerrity Vice President Sean.Gerrity@mynycb.com (415) 876-8017

Central Region Debbie Schultz Vice President Debra.Schultz@mynycb.com (832) 317-3931

Eastern Region Jim Ford Vice President James.Ford@mynycb.com (770) 590-7348

n National Mortgage Professional Magazine n JANUARY 2016

The NYCB model serves the needs of Correspondent Lenders, Brokers, Community Banks and Credit Unions throughout the nation. Our proprietary web platform elevates your business by offering a        

Going up? Let’s reach new heights together.


NYCB Mortgage Banking’s core focus is developing lending solutions that enable you to win today while preparing you for even greater heights tomorrow. As the mortgage division of New York Community Bank, we’re proud to be building on the Bank’s over 150 years of strength and stability.

JANUARY 2016 n National Mortgage Professional Magazine n



A New Year’s Resolution to Make Your 2016 Unforgettable By Bubba Mills usiness news big hitter Bloomberg reports that eight out of 10 entrepreneurs who start businesses these days fail within the first 18 months. That’s a whopping 80 percent who circle the drain and disappear. Research also tells us why they fail: Lack of careful, methodical, strategic planning. A business plan is a must, period. And now is the perfect time to make a New Year’s resolution that could turn 2016 into an unforgettable year. I want you to resolve to make a business plan for 2016. But before you sigh and say, “I don’t have time for that kind of stuff,” just know the beauty of creating a business plan is that it doesn’t have to be some huge, formal chore. In fact, most good plans I’ve seen for mortgage lending are typically a single, simple page. And to make it easier, I’m going to use this


article to get you started on the right foot. So here it goes. l Step 1: Assess where you are relative to where you want to be. Take a peek in the rearview mirror and ask yourself: How satisfied are you with the number of mortgages you’ve handled in 2015? What went right in 2015? What went wrong this year? What accomplishment made you most fulfilled as a lender? Asking the right questions about 2015 can put you on the right path to achieving what you truly want (and need) to achieve in 2016. l Step 2: Revisit the purpose of your business, its vision, its goals and keys to success. Take a step back and get a look at where your business fits in the big picture. Don’t be afraid to adjust and fine-tune what you want to accomplish by modifying your vision to fit where you want to go in 2016. And then use the answers to the ques-

researching sites you like and then tions in Step 1 to determine your finding the right tech person to do the goals for the coming year. I suggest work. Also, set deadlines for each tochoosing specific numbers for goals do. such as total sales volume, gross commission income or number of mortgages you handled so you can break l Step 5: Do what you said you needed to do in your new plan! Of course all them down into monthly of this is for naught if you don’t folportions and measure your progress. low up and actually complete the plan. Sure, when you look at the plan l Step 3: Establish objectives for each as a whole, it might seem a little main goal from Step 2. Decide on overwhelming—even at one or two the key priorities that have to be pages. First, break down your to-dos done to move you closer to the goals into smaller, more manageable you set. These priorities are bigger steps. Then get accountability. We items, for example, taking a social know why so many people break media marketing course, making their New Year’s resolutions: no your Web site more interactive or accountability. Get your family memdeveloping a better lead-generation bers or co-workers (or better yet, a system. coach!) to keep you on track. l Step 4: Break down your priorities into manageable to-dos. Each priority Bubba Mills is co-owner and executive from Step 3 needs specific to-dos to vice president of Corcoran Consulting & make the priority happen. Take the Coaching Inc. He may be reached by Web site example above: List the to- phone at (800) 957-8353 or visit dos to make that happen, such as CorcoranCoaching.com.

The right products.

The right people. 11


Wholesale Lending

*Rankings Source: Inside Mortgage Finance. Caliber Home Loans, Inc., 3701 Regent Boulevard, Irving, TX 75063 (NMLS #15622). 1-800-401-6587. Copyright Š2015. All Rights Reserved. Equal Housing Lender. For real estate and lending proffe essionals onlyy and not for distribution to consumers. This communication may contain information that is privileged, conďŹ dential, legally privileged, and d/ /or exempt from disclosure under applicable law. Distribution to the general public is prohibited. Caliber Home Loans is an Equal Opportunity Employer.

n National Mortgage Professional Magazine n JANUARY 2016

Visit us online at www.caliberwholesale.com or send an email to NMP@caliberhomeloans.com.


The right backing.

United Wholesale One of First to Offer HomeReady Program

JANUARY 2016 n National Mortgage Professional Magazine n



United Wholesale Mortgage (UWM) has led the market with Fannie Mae’s HomeReady program since its launch on Dec. 12, making it available to its network of independent mortgage brokers. “We are continually looking for new products and services to maximize our broker partners’ business,” said Mat Ishbia, president and CEO of UWM. “HomeReady really gives our brokers the ability to provide the lowest mortgage payment for their borrowers.” HomeReady is a conventional loan program introduced by Fannie Mae that allows downpayments as low as three percent, and with no Fannie Mae price adjustments for LTV over 80 percent with FICO scores above 680. This innovative lending option will help qualified borrowers with lower and moderate incomes obtain a mortgage that is more affordable and sustainable. “The HomeReady mortgage allows us to offer an unbeatable competitive advantage for buyers with a low down payment and decent credit scores,” said Anthony Bird, owner of Riverbank Finance, a partner of UWM. “Combining this program with lender paid mortgage insurance blows away the competition with lower payments and lower costs.” Highlights of HomeReady include: No Fannie Mae adjustments on all loans greater than 80 percent LTV with 680 FICOs and above, including high-balance loans; not limited to first-time homebuyers; available for non-Fannie Mae rate/term refinances up to 95 percent LTV; relaxed AMI income limits based on census tracts; and non-occupant co-borrowers are permitted up to 95 percent LTV.

LoanLogics and MemberClose Partner to Offer Portfolio Review Service for Credit Unions MemberClose and LoanLogics have partnered to create an automated portfolio review service designed to meet the needs of credit unions. The offering will enable

users of MemberClose to acquire new loan management and assessment functionality that promises to further enhance the value of the MemberClose Home Equity and Mortgage Settlement software platform. A credit union can upload loans to LoanLogics’ LoanHD Loan Performance Management platform via a secure interface located on the MemberClose’s Web site. The LoanHD system will perform a sophisticated analysis of the loans, which is then delivered in easy to understand language through the MemberClose platform. MemberClose users will benefit from the ability to run portfolio reviews and assess the amount of potential risk inherent in the credit union’s home equity lending portfolio. In addition, this partnership will also provide discounts for credit unions that wish to further tap additional capabilities provided by LoanLogics through its LoanHD platform. “I’m excited to be able to deliver this valuable tool through our partnership with LoanLogics,” said Bob Delaney, chief operating officer of MemberClose. “This new service will enable a credit union to easily determine any change in the risk profile of its borrower as it relates to credit, property value or lien position. LoanLogics is the premier provider of loan analytic tools to lenders and the perfect company for us to partner with for this service.” “The aim of this partnership is to ensure that credit unions have the technology they need to serve their members and comply with regulations. In addition, it means that credit unions of any size have access to the same technology as the largest mortgage lenders and that levels the playing field,” said Brian K. Fitzpatrick, president and CEO of LoanLogics. “Increasingly, credit unions are recognizing that they need to proactively monitor their mortgage loan portfolios. LoanHD provides a cost effective, efficient technology that helps our clients stay compliant while reducing costs.” In addition to life-of-loan perform-

ance management, analytics, monitoring and data refresh capabilities, LoanLogics also offers product eligibility and pricing, as well as a loan-quality management solution that automates and reduces the costs and risks associated with mortgage loan qualityassurance and quality-control audits.

BofI expects to deploy the platform across other business units, including commercial and industrial lending, warehouse lending, and potentially other business units in 2016.

Ellie Mae Launches New Version of Encompass

BofI Federal Bank Launches Commercial Lending Portal

BofI Fed-eral Bank, the nationwide bank subsidiary of BofI Holding Inc., has announced that it has implemented a new document management and delivery system for its Multifamily and Small Balance Commercial Lending businesses. SPEED2 is a document management portal that allows multifamily and small balance commercial borrowers and bank staff to easily and securely access, upload and store loan documents through desktops or through the cloud. Customers using the system can monitor the progress of their loan and send secure messages to loan officers while BofI staff can communicate directly with borrowers and brokers to provide accurate and timely feedback. Additionally, the system significantly improves the operational efficiency of the document delivery and storage processes by automating various indexing, editing, reporting and compliance functions. “We are extremely excited to launch this new technology platform for our commercial lending customers,” said Brian Swanson, BofI Federal Bank executive vice president and chief lending officer. “Allowing our customers to electronically access the status of their loan files and deliver documents through our secure portal will provide greater transparency into our process and streamline our operational efforts. It provides another layer of differentiation in our already high level of customer service.”

Ellie Mae has announced the 15.2 release of Ellie Mae’s Encompass all-inone mortgage management solution. Encompass version 15.2 offers compliance updates, overnight rate protection for secondary marketing, and integrated AllRegs Investor guidelines for easy access to vital information. The 15.2 release of Encompass includes: l Compliance Updates: Starting with the first quarter 2016 filings, lenders required to file quarterly Mortgage Call Reports through the Nationwide Multistate Licensing System & Registry (NMLS) are required to report loan applications and pre-approval requests based on a revised definition of “application” in addition to reporting changes in application amounts. Ellie Mae’s updated Mortgage Call Report offers fields to track loan information including the date of “application” in addition to both initial and final loan amounts. Additional enhancements include updates to TILA (Regulation Z) Annual Threshold Adjustments for HOEPA and ATR/QM, the ability to set defaults for Home Counseling Provider searches, and additional fields to support HOEPA compliance reviews on HELOCs. l Overnight Rate Protection for Secondary Marketers: Allows the submission of Lock Requests when the Lock Desk is closed, and gives lenders the ability to manage their exposure to market risk for each channel while providing their customers additional flexibility to lock in rates.

continued on page 18



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The Federal Housing Finance Agency (FHFA) has released a final rule amending its regulation on Federal Home Loan Bank (FHLBank) membership by financial institutions. The updated rule follows more than 1,300 comment letters received by the regulator after it issued a proposed rule in 2014. The final rule does not include provisions from the 2014 proposed rule requiring financial institutions to retain FHLBank membership by maintaining ongoing minimum levels of investment in specified residential mortgage assets. “The statutory requirements for members to continue their commitment to housing finance can be addressed by monitoring the levels of residential mortgage assets they hold and we, therefore, decided not to include the ongoing investment requirements in the final rule,” said FHFA Director Melvin L. Watt. But the new rule features a provision that redefines “insurance company” that excludes captive insurance companies. The FHFA argued that captive insurers primarily focus on underwriting insurance for its parent company or for other affiliates, instead of the general public. Rather than immediately ban captive insurers from membership, the new rule allows FHLBank captive insurer members that joined before the new rule takes effect to terminate their membership within the next five years. In making this announcement, Watt added that Congress has the authority to amend the Federal Home Loan Bank Act to allow captive insurers the right to become FHLBank members again. “The MBA is disappointed, to say the least, in the final rule on FHLBank membership,” said David H. Stevens, CMB, president and CEO of the Mortgage Bankers Association (MBA). “When Congress established the FHLBank membership framework, it didn’t limit membership to only certain insurance companies. Today, without

direction from Congress, FHFA decided to narrow membership and exclude important members of the system.” Rob Nichols, president and CEO of the American Bankers Association (ABA), countered the sentiments of Stevens and the MBA. “We’re pleased that FHFA listened to the more than 1,300 comment letters from ABA, state associations and banks opposing this provision. There was no demonstrable need for the proposed changes, which contradicted congressional intent and would have harmed the FHLBs, their member banks and the communities they serve,” said Nichols in a statement. “In today’s marketplace, we need a FHLB system that serves the wide variety of lending institutions active in today’s housing finance market, including captive insurance companies, REITs, independent mortgage bankers, and other entities, all of which provide major sources of liquidity and are core components in the 21st century FHLBank system,” said Stevens. “We will continue to work with Congress on this issue to address the shortcomings of today’s rule.”

Guardian Mortgage Launches Community Outreach Program

Guardian Mortgage Company has announced the launch of its “Community Involvement” program, an outreach effort designed to get its teams involved in the local communities they serve. According to Guardian’s CEO and President Russ Anderson, the new program will “facilitate and implement ideas that

give Guardian colleagues a chance to ‘pay it forward’ in their local communities.” The program, which is completely voluntary with all Guardian Mortgage locations participating. Currently, Guardian has offices in Plano, Richardson, Arlington and El Paso, Texas; Grand Blanc, Mich.; Scottsdale, Ariz.; and Santa Fe and Albuquerque, N.M. For their inaugural projects, all locations will do something to fight hunger in their communities. Some of the charities they’ll be working with include the North Texas Food Bank, Feed My Starving Children, The Food Depot and El Pasoans Fighting Hunger. Following these initial efforts, each office will choose a new project on a quarterly basis. “Guardian is more than its colleagues, but part of a much larger community,” Anderson said. “We recognize the importance of the unique towns and cities that surround our individual offices, and we want to be an avenue by which each of us participates in the betterment of the overall environment.” Leading the Community Involvement program is Anisa Johnson, vice president of marketing and communications for Guardian. She was chosen by the company’s senior leadership to spearhead the program for the first year. Her term will end Sept. 30, 2016, when a new leader is selected to take the reins. “Our Community Involvement program is going to be a game-changer,” Johnson said. “We’ve always provided great services to our customers, but now, we can expand that service to others within the community as well. I hope our work will truly make an impact on our communities and those who need it.”

Goldman Sachs in $5.1B MBS Settlement Goldman Sachs Group Inc. has announced that it will pay $5.1 billion in fines and penalties as part of a settlement involving its underwriting and

sale of problematic mortgage-backed securities (MBS) between 2005 and 2007. The settlement will resolve the ongoing investigation of the New Yorkbased firm by Residential MortgageBacked Securities Working Group of the U.S. Financial Fraud Enforcement Task Force and will also resolve claims brought by the U.S. Department of Justice, the National Credit Union Administration, the Federal Home Loan Banks of Chicago and Seattle, and the New York and Illinois Attorneys General. Under the terms of the agreement in principle, Goldman Sachs will pay a $2.385 billion civil monetary penalty, make $875 million in cash payments and provide $1.8 billion in consumer relief initiatives including principal forgiveness for underwater homeowners and distressed borrowers and creation and preservation of affordable housing. Goldman Sachs, which made no admission of wrongdoing in its settlement announcement, stated that this agreement will result in reduced earnings of approximately $1.5 billion on an after-tax basis for the fourth quarter of 2015. “We are pleased to have reached an agreement in principle to resolve these matters,” said Lloyd C. Blankfein, chairman and CEO of The Goldman Sachs Group Inc.

Trade Groups Balk at FHFA Borrower Survey A coalition of financial services trade associations sent a joint letter to the Federal Housing Finance Agency (FHFA) expressing concern over its proposed survey to borrowers that will collect data for the upcoming National Mortgage Database project. The survey, which mortgage borrowers will be able to fill out on a voluntary basis, is designed to have up to 85 questions regarding their home loan experience. This new survey will replace the current FHFA National Survey of Mortgage Borrowers.

The trade groups questioned whether the new survey is “overly extensive” in its questioning and if it would duplicate similar surveying by the Consumer Financial Protection Bureau. The groups also expressed concern over potential data breaches of the collected data. “Clearly, the information contained in the Database is broad and highly sensitive,” the letter said. “While any breach would be a serious problem, the problem of re-identification is even more serious. Data in the Database can be pieced together with data from other private and public databases to identify individual borrowers and associate an even greater amount of confidential information with them. There would be great harm to consumers if the information were to be released carelessly or unwittingly, or if it were to be accessed by individuals aiming to do harm.” The trade groups signing the letter included the American Bankers Association; the American Financial Services Association; the American Land Title Association; the Consumer Bankers Association; the Consumer Mortgage Coalition; Credit Union National Association; the Housing Policy Council of the Financial Services Roundtable; the Independent Community Bankers of America; the Mortgage Bankers Association; and the National Association of Federal Credit Unions.

Midsized Metro Areas Home to Greatest Rent Burdens

CUNA Faults CFPB on HMDA Data Collection The Credit Union Nat i o n a l Association (CUNA) has criticized the magnitude of the Consumer Financial Protection Bureau’s (CFPB) efforts to collect Home Mortgage Disclosure Act (HMDA) data. In a comment letter filed with the Office of Management and Budget, CUNA stated that the CFPB is exceeding

the Dodd-Frank Act requirements on HMDA data collection, which requires 17 data fields. The CFPB, according to the trade group, is pursuing “a staggering 48 data fields.” far more than the 17 required by law. “While Congress did authorize the CFPB to collect ‘such other information as the bureau may require,’ it is unlikely this grant is an unbridled delegation to the CFPB to more than double the amount of express data points that Congress had indicated for the bureau to collect,” the CUNA letter complained. CUNA also faulted the CFPB for not what HMDA data it plans to make public, which is also among the Dodd-Frank requirements. “In the HMDA rulemaking, the CFPB

fell well short of this mandate and only adopted a ‘balancing test’ to balance the importance of releasing the data to accomplish HMDA’s public disclosure purposes against the potential harm to an applicant or borrower’s privacy interest that may result from the release of the data without modification,” the letter continued. “Input solely on a nebulous balancing test is in fact a blatant disregard of the statutory requirement to provide regulations, in consultation with other banking regulatory agencies, to determine which data points will be public.” CUNA also requested an extension of the HMDA data collection compliance continued on page 16



n National Mortgage Professional Magazine n JANUARY 2016

U.S. metro areas with populations of less than 2.5 million experienced the most dramatic increases in unaffordable rent expenses over the past decade, according to new data report from Make Room, a renters’ advocacy campaign sponsored by the non-profit Enterprise Community Partners. The new data defined “unaffordable rent” as the expenses carried by renters who shell out more than half of their household income (before taxes) toward rent and utilities. Measuring data covering 2005 to 2014, Make Room found the Jacksonville, Fla. metro area experienced the greatest unaffordable rent increases, with a 7.2 percent hike. Two state capitals— Richmond, Va., and Hartford, Conn.— followed with increases of 6.2 and 5.1 percentage points respectively. On a state basis, Hawaii carried the greatest cost burdens as the share of renters facing severe difficulty paying rent grew by 6.9 percent from 2005 to 2014. Maine and Alaska also saw large numbers of renters with unaffordable housing costs, with increases of 6.5 percent and six percent respectively during this period of time. “The shortage of affordable rental homes is a worsening, nationwide problem that must be addressed,” said Angela Boyd, managing director of Make Room. “Focus tends to center

around affordability issues in high-density, high-cost coastal cities, but the data shows that mid-size cities across the country have felt the squeeze most during the past decade.”

Does Your New Year’s Resolution Include CFPB Compliance? By Andrew Liput

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What better way to celebrate the dawn of 2016 than to recap some of the key regulatory changes and compliance stories from last year and to address those that are rumored to be in the works for this year? Fears of Consumer Financial Protection Bureau (CFPB) audits (and let’s face it, publicity regarding large fines and penalties) created a cottage industry of compliance consultants. Mock CFPB audits at a cost of $10,000$50,000 became commonplace as lenders sought a heads-up on internal policy and procedure adjustments to ensure a potential audit might be less painful. Vendor management came of age as lenders and vendors both realized that the CFPB was serious when it enacted Bulletin 20I2-3, requiring risk evaluation, monitoring and reporting of third party service providers as a measure of consumer protection. Whether lenders are (gasp!) trying to manage this risk themselves or outsourcing the evaluation and monitoring to others, it is safe to say that doing business with a bank is now considered a privilege and not a right. RESPA kick-back penalty threats caused many folks to divest themselves of affiliated title, appraisal and settlement service business, and others swiftly exited real estate joint marketing arrangements. Managing consumer non-public private information under data privacy rules added additional burdens, and fears, for lenders nationwide. Controlling who has access to such information both internally and externally has proven to be a major task. Many lenders have adopted confidential email delivery rules and have stepped up evaluation of their technology platforms and data process flow procedures. In addition, several hacking scams rocked the industry when lenders and settlement agents were unwittingly duped into wiring funds to criminals after e-mail addresses were hacked, duplicated and misused. Perhaps no new regulatory scheme in recent memory created as much anxiety, anger, confusion, comedy memes and general anticipation as TRID: the TILA, RESPA Integrated Disclosure Rule. Designed to reduce paperwork, increase transparency, and slow down the closing process a bit to provide consumers with more time to study and understand loan costs, the implementation was delayed from August to October and has so far failed to trigger the Apocalypse. As the year unfolds the CFPB has given a hint at where it is focused, beyond supervision and audits. Discriminatory lending practices appear to be of paramount concern. Combined with changes to HMDA reporting requirements, lenders can expect the nature and practice of whom they lend to and whom they decline will be under heightened scrutiny. The CFPB seems laser focused on rooting-out any practices that by design or consequence limit lending efforts and homebuying opportunities in under-served communities. Expect new rules, aggressive audit questions, and fines and penalties where disparate treatment and disparate impact in discriminatory lending practices are uncovered. Happy New Year! Andrew Liput is CEO of Secure Insight, a risk analytics firm offering vendor management services addressing settlement agent risk. He can be reached by e-mail at ALiput@SecureSettlements.com.


nmp news flash continued from page 15

deadline to be moved to Jan. 1, 2018, with reporting to begin one year after. It also sought an exemption for institutions issuing 500 covered closed-end loans and 1,000 covered open-end loans, as well as a clearly defined safe harbor period for institutions making a good-faith effort to meet compliance guidelines.

Feds to Target All-Cash Luxury Real Estate Purchases

sions—is three percent below the 2014 level and 62 percent below the 2.8 million peak reached in 2010. Last year, one in every 122 property in the U.S., or 0.82 percent of all housing units, had at least one foreclosure filing. This is the second consecutive year that the annual national foreclosure rate was below one percent. “In 2015 we saw a return to normal, healthy foreclosure activity in many markets even as banks continued to clean up some of the last vestiges of distress left over from the last housing crisis,” said Daren Blomquist, vice president at RealtyTrac. “The increase in bank repossessions that we saw for the year was evidence of this cleanup phase, which largely involves completing foreclosure on highly distressed, low value properties.” Twenty-four states and the District of Columbia posted a year-over-year increase in foreclosure activity, most notably Massachusetts (up 55 percent), Missouri (up 50 percent), Oklahoma (up 36 percent), New York (up 24 percent) and Texas (up 16 percent). Foreclosure starts increased in 16 states, most alarmingly in Oklahoma (up 92 percent) and Massachusetts (up 67 percent), while bank repossessions increased year-overyear in 41 states and the District of Columbia, most notably in New Jersey (up 226 percent), New York (up 194 percent) and Texas (up 115 percent). New Jersey’s ailing seaside resort Atlantic City was the top metro area for foreclosure rates, where 3.43 percent of housing units had a foreclosure filing. New Jersey’s capital Trenton had the second highest metro level for foreclosure rates, at 2.14 percent, followed by the Florida markets of Tampa Bay-St. Petersburg-Clearwater, Florida (2.03 percent), Jacksonville (2.02 percent) and Miami (1.98 percent).

The federal government has announced a new initiative to identify certain individuals that may be using dubious limited liability company structures to cover their allcash purchases of luxury residential real estate in New York City and Florida’s Miami-Dade County. The Financial Crimes Enforcement Network (FinCEN) issued Geographic Targeting Orders (GTO) that will temporarily require certain U.S. title insurance companies to identify and report the true “beneficial owner” behind any legal entities making luxury real estate purchases in these two high-priced markets. The GTO initiative is based on concerns that some of these transactions involve shell companies that only exist as a cover for money laundering schemes. FinCEN did not publicly state how many transactions could be potentially targeted in this operation. The GTOs will go into effect on March 1 and expire on Aug. 27. “We are seeking to understand the risk that corrupt foreign officials, or transnational criminals, may be using premium U.S. real estate to secretly invest millions in dirty money,” said FinCEN Director Jennifer Shasky Calvery. “Over the years, our rules have evolved Energy Patch States to make the standard mortgage market Risk Housing Woes more transparent and less hospitable to Falling energy fraud and money laundering. But cash prices may purchases present a more complex gap have a negative that we seek to address. These GTOs will impact on the produce valuable data that will assist housing marlaw enforcement and inform our broadkets in so-called er efforts to combat money laundering “energy patch” states, according to the in the real estate sector.” Arch Mortgage Insurance Company (Arch MI) Winter 2016 Housing and Foreclosure Filings Hit Mortgage Market Review. States with economies that are heavNine-Year Low Nearly 1.1 mil- ily dependent on domestic oil, coal and lion foreclosure natural gas production–North Dakota, filings were re- Wyoming, Alaska, West Virginia and ported in 2015, New Mexico–were seen as especially the lowest an- problematic due to a seesaw effect of nual total since weakening employment levels and 2006, according to RealtyTrac’s Year- increasing home prices. On a metro End 2015 U.S. Foreclosure Market level, Texas is home to the five markets Report. with the greatest risk of home price The 1,083,572 total on foreclosure declines over the next two years, with filings—which include default notices, scheduled auctions and bank repossescontinued on page 26

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n National Mortgage Professional Magazine n JANUARY 2016



· Mortgage lates last 12 months OK


The Mortgage Originators Conference Wednesday-Friday, March 9-11, 2016 Westin Hilton Head Resort on Hilton Head Island, S.C.

By Linda McCoy, CRMS

JANUARY 2016 n National Mortgage Professional Magazine n



NAMB—The Association of Mortgage Professionals is hosting a conference at one of the most beautiful locations in the United States on Hilton Head Island, S.C. This is “The Connector Conference for Mortgage Pros,” created for building relationships between mortgage professionals, lenders and support businesses in the industry. The Conference starts Wednesday, March 9 and ends Friday, March 11. Every morning, we will have a keynote speaker. Our opening keynote on Wednesday is Chip Cummings, an international speaker, author, trainer and consultant. He has had more than 28 years of experience in the mortgage lending industry and $1 billion-plus in sales volume. His topic will be “Breaking the Boundaries of Success.” Chip will be giving you seven simple rules that can change your life. Our Thursday morning keynote speaker will be Lisa Myers, former congressional correspondent for NBC News. Lisa and her team received some of the most prestigious awards in journalism, and she has many exciting stories to tell and you will not want to miss any of them. Friday morning, we will feature Sam Wyche, former NFL head coach of the Cincinnati Bengals, and a former NBC and CBS Sports analyst. Sam was considered one of the most innovative coaches in the NFL, as well as a master of motivational techniques. Sam’s inspiration was the key to one of the biggest turnarounds in NFL history, when the Cincinnati Bengals went from 4-11 in 1987, to the Super Bowl the following year. He will be discussing “How Winners Do It.” The Exhibit Hall will open at 8:00 a.m. on Wednesday and Thursday. It will be filled with the best wholesale lenders and support businesses in the mortgage industry. You will want to visit each booth and find out what they can do to help you in your personal business. There will also be concurrent classes, panels, speakers, education and a broker roundtable during the mornings. We decided to give you every afternoon off to have fun doing whatever you might want to do around the Island (remember … all work and no play, makes Jack a dull boy!). Then, come back for networking in the evening with a Cocktail Reception in the Exhibit Hall, and discuss what fun you had that day. The exhibitors will be offering education, discounts and prizes. You will have an opportunity to visit with them, and put your cards in to win while enjoying the evening. Wednesday afternoon, we will have the NAMB Legislative Action Fund (LAF) Golf Tournament at the Port Royal Golf Course, adjacent to the Westin Hilton Head. If you are a golfer, do not miss this chance to say you played golf at Hilton Head, or better yet, to say you won the NAMB LAF Golf Tournament at Hilton Head. Please register today. We have a beautiful hotel, the perfect location, a fantastic line up of exhibitors, speakers, classes and fun planned. All we need is for you to come and take your business to the next level in 2016. Linda McCoy, CRMS is chairman of NAMB EAST. Linda is a Certified Residential Mortgage Specialist (CRMS) and the owner of Mortgage Team 1 Inc. in Mobile, Ala.


new to market continued from page 12

l Integrated AllRegs Investor Guidelines: Announced in November, AllRegs’ Market Clarity content is now accessible via investor guideline links within the Encompass Product and Pricing Service and Encompass TPO WebCenter. This includes product summaries with key eligibility requirements, the industry leading AllRegs guideline library, and investor bulletins. AllRegs’ Market Clarity is a business information tool for the mortgage banking industry that helps lenders and investors manage risk, identify market opportunities and maintain a competitive edge. l Image Manager for Encompass Docs Solution: Provides lenders with the flexibility to easily brand the Loan Estimate and Closing Disclosures with a company name and logo. “Ellie Mae’s new release of Encompass is designed to help our customers expand and manage new channels more effectively, while ensuring compliance with evolving regulations,” said Jonathan Corr, president and CEO of Ellie Mae. “These enhancements to Encompass, combined with our recently announced AllRegs investor guideline integration, increase productivity and efficiency for lenders of all sizes.”

Mid America Mortgage Launches New Marketing Tools to Partners

Mid America Mortgage has announced the firm has developed Mid America Concierge, an online marketing support portal for its strategic business partners, including real estate agents and brokers. The portal provides Mid America’s partners with access to marketing and promotional materials, in addition to services for lead generation, social media marketing, customer relationship management (CRM) and more. “Mid America’s partners are a critical component to our success,” said Jeff Bode, Mid America Mortgage owner and CEO. “Whether its using Mid America’s affiliated LOS Mortgage Machine or the best-of-breed services available through Mid America Concierge, we want to ensure our partners have the absolute best technology and services available to execute at the highest level possible.” To make the available services more affordable, Mid America offers incentives for partners to promote their work with Mid America through credits and discounts for services on the site. “Providing value, whether it’s to borrowers or our partners, is one of the cor-

nerstones of Mid America’s philosophy, and we want to make it both easy and beneficial for our partners to access the services available through Mid America Concierge,” Bode said. “Something as simple as taking a photo at closing can translate into big savings on services, which helps our partners grow their business while supporting Mid America. It’s truly a win-win for everyone.”

Zillow Launches “Price This Home” Custom Home Value Estimate Tool

Zillow has announced the launch of Price This Home, a tool that enables home sellers to create a custom, private value estimate for their home based on comparable home sales and listings, personal knowledge of their home and surrounding neighborhoods, and local market conditions. Price This Home will help sellers understand what their home is worth in the current market by allowing them to quickly and easily compare their own home with homes currently on the market, as well as those that have recently sold. “Deciding to sell a home can be stressful, and many homeowners spend a lot of time researching home values and market conditions before contacting their agent,” said Jeremy Wacksman, Zillow’s chief marketing officer. “Price This Home is an excellent tool in those early days. It shows sellers how their home stacks up against other homes on the market, and allows them to provide extra information to create a more customized value estimate.” Price This Home uses the home’s Zestimate home valuation, the estimated market value, as a base, and allows the homeowner to select information that will give them a more customized value estimate.

Your turn National Mortgage Professional Magazine invites you to submit any information promoting new “niche” loan programs, new products or any other announcement related to the introduction of a new program, to the attention of: New to Market column Phone #: (516) 409-5555 E-mail: newsroom@nmpmediacorp.com Note: Submissions sent via e-mail are preferred. The deadline for submissions is the 1st of the month prior to the target issue.



n National Mortgage Professional Magazine n JANUARY 2016

NAMB PERSPECTIVE The President’s Message: January 2016 Catch the wave! That is the wave that NAMB—The Association of Mortgage Professionals and the mortgage industry is on right now. NAMB membership is increasing and our wholesale partners are returning in force to work with us to further grow the thirdparty origination (TPO) channel. In October, we had the most successful national conference in more than 10 years in Las Vegas with NAMB National. It was sold out, well-attended as we even had to add seats for several of the sessions, and we launched the new NAMB East convention for those unable to attend. NAMB East is coming in March to Hilton Head, S.C. and hotel rooms are selling fast. Please make your reservations now to avoid missing out.

The 2016 Legislative & Regulatory Conference is coming to Washington, D.C. a month later in April and once again promises to be the largest in the modern era (once again the last 10 years, though the term “modern era” fits as well). February will also see the first NAMB Wholesale Summit of 2016 and we are adding many new partners to the event. The Wholesale Summit allows our wholesale partners to discuss how all of us can better our industry and work together to solve issues that affect us all. Fannie Mae is returning to our conferences and we hope to the Wholesale Summit as well. In December, NAMB had a meeting with the Consumer Financial Protection Bureau (CFPB) to establish a working relationship. We were welcomed as were our comments and observations on the new

The CEO Perspective

JANUARY 2016 n National Mortgage Professional Magazine n



A Message From NAMB CEO Donald J. Frommeyer, CRMS Now that 2016 has begun, what are you doing to make your life as an originator better for you? Are you looking at trying some type of new program to increase business? Are you looking at buying leads? Are you trying to increase your business by talking to Realtors? Are you looking at your state or national association to try to help you? Yes, I asked are you looking at your state or national association to try to help you. Your state association and NAMB serve a wealth of information and contacts at your disposal to increase your business. Why? It has to do with expanding your sphere of contacts. As the chief executive officer of NAMB—The Association of Mortgage Professionals, I am always reaching out to all of my colleagues to make my life as an originator work better for me. I attend conferences at both the state and national level, educate myself and collect information that I can use to increase my business. I speak with attendees and speakers to try to gain some type of insight to make my life easier and improve my business. I want to learn to do things easier and more efficiently so that I have more time to do what really motivates me and that is close loans and make people happy. So, to be honest, I really try to get as much out of every event that I attend to make myself better. I go out of my way to

listen to speakers tell their stories. I go out of my way to attend breakout sessions that let you share what you do right to increase business. I feel that I am a very accomplished originator, but I can always learn something new. And to be upfront, it pays dividends in my paycheck. I realized over 15 years ago that being involved in just attending these events made me a better originator. I am always looking to increase my business in some way to make myself better and I get that from going to state and national conferences. If you are not a member of your local state association, you need to join today. You can get so much out of your membership and I promise you it will pay you dividends. If you are not a member of NAMB, you need to join today. At the cost of membership, you can make it back by the thousands if you make NAMB work for you. At just $10 per month, it is the best investment you can make in yourself. NAMB will bring you monthly members-only Webinars, you can get discounts through NAMB+ for things that you do in your office as well. You can attend NAMB East, NAMB National and the Legislative & Regulatory Conference and gather so much information that it will educate you about becoming a better originator in today’s competitive marketplace. NAMB East is coming up very soon. Let me just touch upon what you can do to improve yourself. On Tuesday, March 8, you can attend

TRID regulations. This will be an ongoing relationship. Julie Vore of the CFPB’s Mortgage Markets Originations Department will be hosting a Q&A on TRID concerns for NAMB members in January. We are working on having the CFPB speak at upcoming events. I was at an event recently where one of the speakers was David H. Stevens, president and CEO of the Mortgage Bankers Association (MBA). He gave numbers about the coming increase in mortgage originations and the rising demand of from new household formations. Rent is on the rise, thus making homebuying more attractive. The growing numbers of younger and diverse minority buyers is an exciting opportunity for us in the coming five years. He said younger buyers are moving out of their parents homes as evidenced by his own son’s recent departure. He stated that though our regulations have been increasing, MBA as well as NAMB have been working to better remedy this situation. The MBA’s positions on legisla-

tion align well with NAMB’s in that most of the new regulations are hurting the consumer’s ability to get a loan. He wants a level playing field, with licensing for all originators. He says Fannie Mae and Freddie Mac pricing should be the same for all, with no sweetheart deals for the depositories on the topic of government fees on agency loans. All in all, now is a great time to be a mortgage originator and a great time to be a member of NAMB. So if you are not one yet, please go to your state association Web site or NAMB.org and join as a Professional Member. NAMB needs you in our growing numbers to show regulators that we represent our industry. So catch the NAMB wave now and get ready for a big ride. Sincerely,

the NAMB Board Meeting to see how everything is put together and meet the entire board of directors. This Board Meeting is open to every member. That is how I got started. I went to one of NAMB’s Legislative Conferences, attended some meetings then the NAMB Board Meeting. It showed me what kind of people are fighting for you in every aspect of your daily life. On Wednesday, March 9, the first thing on the agenda is the day’s Keynote Speaker, Chip Cummings. He is going to talk about “Breaking the Boundaries of Success,” and the seven simple rules that can change your life! Chip is an outstanding educator and this is an excellent start to increasing your business. After Chip’s presentation, the morning breaks down into two concurrent sessions of 50 minutes each, followed by two more concurrent sessions of 50 minutes each. All of the day’s events take place while the exhibit hall is open. At noon, the first day comes to a close and then there is the NAMB Legislative Action Fund Golf Outing. Played on the grounds of the hotel, this outing is returning after an eight-year hiatus. Make sure that when you are registering for the conference, you register for this golf outing. Playing golf in Hilton Head is something I have been looking forward to for a long time. The cost is $175 per person or $650 per foursome. What a way to spend the afternoon! Then, at 6:30 p.m., join the Evening Cocktail Hour to see how people did at the golf outing and enjoy the friendship of attendees and exhibitors until 7:30 p.m. As Thursday, March 10 begins, there will be a Delegate Council Leadership Meeting from 8:00 a.m.-8:50 a.m.

Delegates will be asked to participate with Fred Kreger, NAMB’s president-elect, to see what their responsibilities are going to be for the coming year. Then at 9:00 a.m., the keynote speaker for the day is Lisa Myers on “The Politics of Today.” An award-winning congressional correspondent for NBC News, I think Lisa will open your eyes to what could be in store for the upcoming presidential race of 2016. After this, you again have two sets of concurrent sessions that will again make you a better originator, and you have several options to choose from, depending on what you need to expand your business with. The afternoon is free for you to enjoy networking, playing more golf, take a tour, or just sit by the pool or the ocean and enjoy the great scenery. On Friday, March 11, we start off at 8:00 a.m. with an Originator Roundtable Discussion on what works for you in the industry. This is what I was talking about getting information from others—the sharing of information from successful originators to make your business better in 2016. This is a must-attend event just to hear the different ideas that you can literally take back and start putting into play right now. Then, at 9:45 a.m., we have our final keynote speaker, Sam Wyche, a former NFL head coach of the Cincinnati Bengals, and an NBC and CBS sports analyst. His topic of discussion will be “How Winners Do It” and this is another mustattend session. This will be the time you want to come to be inspired and motivated as the conference comes to a close. The final session of NAMB East 2016 will be a Broker Panel Discussion, hosted by NAMB Treasurer Andy W. Harris. Come witness the passion and tenacity of Andy and his panel as they talk about origina-

Rocke Andrews, CMC, CRMS, President NAMB—The Association of Mortgage Professionals randrews@lendingarizona.net JOINNAMB.com

NAMB PERSPECTIVE tion and your future in the year 2016. So, there you have it. I have given you just a short idea of this coming NAMB East conference and what it can do to help you succeed in this coming year. The best part of it all, you can get your registration free by contacting the account rep of one of the exhibitors at the conference. They are giving out free pass codes to waive your $495

admission fee. You need to ask all of your account reps for this code. If you don’t know who is an exhibitor, go to NAMBEAST.com and click on “Exhibitor List” and you will see your list. Find a company you do business with and call your rep for the code. If you wait until you get there, it will cost you $695 to attend. And one final note, these codes expire

Are you getting your fair share? By David Luna, CRMS

By Linda McCoy, CRMS As I am writing this message, I am watching the NCAA College Football National Championship game between Alabama and Clemson. This is a very exciting game. I feel such excitement watching these guys play! These young men are all real winners on both teams.

Our time is counting down for our mortgage originator conference at NAMB East in Hilton Head, S.C. We have almost filled out our room block, so you need to make your reservations today. This is a very exciting event that so many loan originators, brokers, lenders and support businesses of the mortgage industry will be on hand in Hilton Head, S.C. on from Wednesday-Friday, March 9-11. We have a fantastic conference

planned for our members and attendees. Our location at the Westin Hilton Head Resort on Hilton Head Island, S.C. is absolutely beautiful. The hotel is one of the best on the island, with a breathtaking waterfront view. NAMB has listened to the members and tried to give them nearly everything they asked for in a conference. This is going to be one of the best networking events that NAMB has ever held in the east. We cannot tell you what a wonderful experience you will miss if you stay at home, but if you attend, you’ll make memories that will surely last a lifetime. We have great speakers, sessions and classes lined up, and the exhibitors

Donald J. Frommeyer, CRMS is chief executive officer for NAMB—The Association of Mortgage Professional. He may be reached by e-mail at namb.ceo@namb.org.

National Association of Realtors (NAR) Chief Economist Dr. Lawrence Yun with NAMB Director and Communications Committee Chair David Luna, CRMS earning an average of $76,900 annually, have a credit score of 640 and are buying a typical-sized home. It is a great time to be in the mortgage industry, as more Millennials are coming in every month. If you are hiring, make sure you are attracting your fair share of this market. Many Millennials do not even know that the mortgage industry is a career option, so attracting good people is a fine opportunity for growth. Do you have what they need? Do you know what Millennials are looking for in a company? Are you the solution they are looking for and don’t even know it. Get the word out, hold job fairs, be concerned about what is important to your employee prospects. Have fun … it is going to be a great ride in 2016. David Luna, CRMS of Mortgage Educators and Compliance in American Fork, Utah serves as director and Communications Committee chair for NAMB—The Association of Mortgage Professionals. He may be reached by phone at (877) 403-1428 or e-mail David@MortgageEducators.com.

are the best of the best. Visit NAMB.org/NAMB/National.asp and see what this conference has in store for you. If you want to be a winner as a mortgage originator, you need to attend NAMB East, a conference for top mortgage originators. Alabama just won! They are the winners and you can be too. Roll Tide! We hope to see you all at NAMB East. Linda McCoy, CRMS is broker/owner of Mortgage Team 1 Inc. in Mobile, Ala., a member of the NAMB Board of Directors and serves as NAMB East Committee Chair. She may be reached by phone at (251) 6500805 or e-mail linda@mortgageteam1.com.


n National Mortgage Professional Magazine n JANUARY 2016

The Clock is Ticking … NAMB East Just Weeks Away

Association of Realtors (NAR) Chief Economist Dr. Lawrence Yun in a recent NAR press release. “The pent-up demand for buying in recent years finally broke out in a meaningful way in 2015, fueled by sustained job growth in many parts of the country and rising home values giving more homeowners the incentive to sell.” Yun also expects a three percent increase in home sales to approximately 5.45 million in 2016. Predictions are that millions of these boomerang borrowers over the next five years will be in the market to own their home. What about the Millennial borrowers? Did you know that Millennials are the largest segment of the labor force at 53.5 million, making them 25 percent of the U.S. population? You probably want them to be a part of your team. Sixty one percent of them have attended college, and one concern by MLOs would be the amount of student loan debt this segment of the market has accrued. Studies show that student loan debt is at an approximate average of $30,000, which could be a problem considering qualified mortgage (QM) loans and their related DTI. Nearly half of all Millennials rent, but they don’t want to. The majority of Millennials don’t know what they need to do to own a home. There is a huge opportunity to train them to work in the industry, and then once trained, they can help their friends get into a home because living with mom and dad is not what they really want to be doing. Numbers from 2015 show that 32 percent of all home purchases were by these young people. If we looked at their median age of 29-years-old, they are

frank … we need YOU. So come help us and be part of a great organization that believes in you and what you do … no questions asked!


As I have traveled across the country, I can sum up my view of the growth of the mortgage industry as impressive. In all areas of the country, not only is the mortgage industry back, but it is coming back in a big way. As an education provider, we see many new people coming into the industry. We are seeing new people, Millennials as well as others, jumping into the mortgage industry. The employment situation, as we see it, is robust and growing. The other trends that we are seeing is the licensed mortgage loan originators (MLOs) expanding their licensing base to include additional states. Companies are branching out into other states and smaller companies are expanding. Just look at what is happening at the NAMB conferences and expos. Vendors are coming back and coming back strong. Advertising dollars are being spent and the feeling of the dark, bleak days of 2007-2008 are thawing as quickly as the winter’s snow. Yes, it’s a great time to be in the mortgage business as the future outlook and employment possibilities are looking very promising. I don’t want to discount the rise in interest rates as maybe tempering my optimistic take on the industry—if people are getting better jobs, if better loan programs are coming out and

underwriting guidelines are becoming more realistic. Now that TRID is in our rearview mirror and the adjustment periods are well underway, my opinion is that hiring in the mortgage industry will continue for some time. There are millions or future homebuyers sitting on the sidelines waiting to buy a home. When you look at the waiting timelines before someone can get into a home after a bankruptcy, foreclosure or short sale, hundreds of thousands of these borrowers are going to need an MLO which again bodes well for the employment future of those coming into the industry. Just to give you a quick update for 2016, the wait times to get either an FHA, VA or conventional loan are shortened. It may still be seven years after a foreclosure unless the foreclosure was included in the bankruptcy, if so, it is now only four years. And four is now the longest time frame a potential borrower has to wait before getting into a home loan. Each lender will have their own overlays pertaining to time frames, LTV, DTI and credit scores. Check with your account executives to find out what your lender is doing. These represent thousands and thousands of returning homebuyers, not to mention the Millennial homebuyers who were teenagers when the mortgage mess started. “Following the housing market’s best year since the recession, existing-home sales are expected to increase in 2016 at a moderate pace,” said National

at the end of January. After that, it will cost you to register. And don’t forget to make you hotel reservations right away. The rooms are going to go fast and you won’t want to be left out. And to be honest, I cannot wait to go to this event! Go to JOINNAMB.com now and become a member today. And let me be


getting toknow John G. Stevens, CRMS Vice President of NAMB B Y

JANUARY 2016 n National Mortgage Professional Magazine n



On Dec. 7, 2015, John G. Stevens began a new chapter in his career as vice president of business development for Mountain West Financial Inc., headquartered in Redlands, Calif. “I am very excited about this opportunity to grow with them,” said Stevens, who will be based in his native Utah. Prior to joining Mountain West Financial, Stevens was Utah area manager for Bank of England Mortgage, formerly ENG Lending. Within the mortgage profession, many people are aware of Stevens’ leadership roles within NAMB—The Association of Mortgage Professionals. At last fall’s NAMB National meeting, Stevens was honored by his peers with the NAMB Mortgage Professional of the Year Award. “John G. Stevens is a tireless advocate on behalf of mortgage professionals,” said Rocke Andrews, president of NAMB, when presenting Stevens with the award. “His leadership within his own business and his infectiously positive attitude on behalf of his peers across the country has earned him this well-deserved honor as the Mortgage Professional of the Year. NAMB+ is


a major success because John made sure that it was a success. We are very fortunate to have such an energetic and hardworking leader on the NAMB Board taking the initiative on such critical tasks.” National Mortgage Professional Magazine recently had the opportunity to chat with Stevens about his career, his new position with Mountain West and his involvement in NAMB. How did you get into the mortgage profession? Was this your original career choice? It wasn’t. I was going to be a lawyer. I attended Utah Valley State College, majoring in international business with a minor in German. But my kayaking buddy Kade Shumway and I talked one day about the mortgage company he was working for and how we could do a better job than they were doing. So I quit college and never looked back. We founded Stevens & Shumway in 2000. I chose this career and I’ve loved every second of it. How did you first become involved with NAMB? I was part of the Utah Association


of Mortgage Brokers (UAMB), now the Utah Association of Mortgage Professionals (UAMP) and received The Utah Mortgage Press (the forerunner of National Mortgage Professional Magazine) where I read about NAMB and I thought, “Hey, this is a good thing, I need to become more involved.” I fell in love with it. I realized that, thanks to NAMB, we are able to band together and fight for homeowner rights. In 2011, I became a member of NAMB’s board of directors. How active have you been in NAMB and locally on the state level with NAMB’s Utah affiliate? I am now the NAMB vice president. I was president of NAMB+, chairman of NAMB’s Political Action Committee (PAC) and chairman of the Legislative Action Fund (LAF). I’ve also served on NAMB’s Nominating Committee, Membership Committee, Finance Committee, Bylaws Committee, and Policy & Procedures Committee. I am also the past chairman of the NAMB National Convention. With UAMP, I served as president in 2010 and I am on the board of governors and

board of directors. I also served as UAMP’s Events Committee chairman. Why do you believe it is important for mortgage professionals to become involved in NAMB? As with any business, there is power when we work together as one. Anyone can hold a candle on a hill, but if you band together and build a lighthouse, people will see your light from miles and miles away. With NAMB, we are able to be unified in one voice and have a single voice on Capitol Hill and at the state level. By doing this we can make sure Americans can achieve their dream of homeownership. What do you see in 2016 for the mortgage profession? We will see slightly higher rates, which should bring stability to the economy. People will realize the days of lower rate are done with. We should also find that the turbulence with TRID calming down as companies adjust to the changes and are able to get closing back on track

NAMB PERSPECTIVE What can the industry do to attract more young people into mortgage careers? I recently changed jobs, and my new company is offering classes to help Millennials come into the profession. This is the industry that they would want to be part of– there is no other industry that gives them the ability to earn a great income and still have time to enjoy with their families. The mortgage industry provides a quality of life that you cannot find in other industries. I can understand that Millennials are frustrated–today, there are lower incomes and more applicants for jobs. But they also need to remember that people will always need a home and will need the financing to get that home. I know that NAMB has created NAMB University. I am not involved in that, but I am very excited about what they are doing.

Looking back on your career, what do you see as you greatest accomplishments? My greatest accomplishment was having built a career where I can spend the necessary time my family. That is my focus of what I do in my life. One of my mentors, Boyd K. Patrick, who recently passed away, told me that I should never give up what I want most for what I want now. That really stuck with me to this day.

You mentioned your family earlier. Outside of work, how do you spend your leisure hours with your family? My wife is really my best friend. We go fishing and do outdoor activities–we take our dog for walks and we talk. On Friday nights, we get pizza and buy a

movie for the kids, then sit down after and talk about what we watched. Mondays are family nights where we get together to sing songs and read from the Scripture–it is important to keep our family unit strong. Phil Hall is managing editor of National Mortgage Professional Magazine. He may be reached by email at philh@nmpmediacorp.com.

NAMB+ is an independent, wholly-owned, for-profit marketing subsidiary of NAMB, The Association of Mortgage Professionals. Dear Mortgage Professional, Happy New Year! Let’s make 2016 a great one! NAMB+ is looking forward to a big year, and each of our exceptional Endorsed Providers wants to earn your business and help make 2016 your best year yet. We are rolling-out several new Endorsed Provider relationships this month and throughout the first quarter of the year. We are also working to improve our website, revamp our communications strategy, and we plan to be even more active on social media in 2016. NAMB+ is here as a resource for you, and we want to stay connected with you in as many meaningful ways possible. One way I hope you will choose to connect with us is in-person at the inaugural NAMB East conference in Hilton Head, S.C., March 8-11. NAMB+ will be there, along with a number of our Endorsed Providers.

Registration is open and hotel rooms are filling-up fast. I sincerely hope you will try to attend, as our Board of Directors and I would love to talk with you about NAMB+ and personally introduce you to some of our tremendous Endorsed Providers who can certainly help you and your business succeed in 2016. Sincerely,

Nathan Pierce, CRMS, CMP, President NAMB+, Inc. npierce@advfund.com See below for a complete listing of the current NAMB+ Endorsed Providers and visit NAMBPlus.com for more information.

23 Go to BestMLOs.com to start learning from the best. NAMB members enter NAMB Member Coupon Code: NAMB15

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As an NAMB member, Birchwood Credit Services will waive the sign up fees! It’s a “NO RISK” way to experience the Birchwood difference firsthand!

NAMB members receive a discount off Brokers Compliance Group compliance support programs.

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NAMB members get a $300 discount on coaching. NAMB members receive exclusive discounts training events, including live seminars and internet-based web shops

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NAMBPLUS Login Instructions Simplii VOIP business phone solutions include all the features and functionality of a high end business phone system without the high costs. We offer all NAMB members a 10% discount off their phone services. For more information please e-mail stevew@simplii.net

Username = Member Number Password = First initial of your first name capitalized and your last name with the first letter of the last name capitalized (example = JStevens) *If you are not a NAMB member please visit NAMB.org and join today to gain access to NAMBPLUS.com and the many benefits NAMB members receive!

n National Mortgage Professional Magazine n JANUARY 2016

What are some of the challenges that you face in today’s market? There are always challenges and always competition wherever you go. In Utah, a lot of our state consists of rural housing, so we have to make sure what the best program is for those particular borrowers.

during the presidential election year.


What is the housing market like in Utah? Utah is kind of its own special state. We were in a good place when the bubble burst–we were not at the point with escalated home values, so we didn’t have the massive explosion and implosion that other states experienced. In the last couple of years, a lot of homes were back selling at the levels where they were selling in 2006 and 2007. Now, for the first time, homebuying is hot, hot, hot.

What are some of your goals for 2016? I am very excited to be with Mountain West Financial and help them grow throughout the United States. My goal is to help homeowners get into homes. With NAMB, I am excited over the “Every Member, Every Year” initiative in which the members give a small portion to our PAC to help us increase our sphere of influence

JANUARY 2016 n National Mortgage Professional Magazine n NationalMortgageProfessional.com


Dear Mortgage Professional, Happy New Year! Thank you to all of the mortgage professionals who so generously contributed to NAMBPAC in 2015! Last year we more than doubled the number of individual contributors to NAMBPAC and we put ourselves in position for a very strong and successful 2016! Thanks also to every NAMB Member who joined or renewed your membership in 2015. NAMB and NAMBPAC together are stronger than we’ve been in over a decade, and that is thanks to the dedicated mortgage professionals who continue to support our efforts year after year. Please accept my sincerest and most heartfelt

THANK YOU for all that you do for your Association and our industry! Best wishes for a healthy and prosperous New Year! Sincerely,

John G. Stevens, CRMS 2015-2016 NAMBPAC Committee Chair

2015 NAMBPAC Contributors Diamond-level Contributors ($5,000 maximum annual contribution) Ginny Ferguson, CMC .....CA Andy Harris, CRMS.........OR Fred Kreger, CMC ...........CA Olga Kucerak, CRMS.......TX Shane Lester, CMC, CRMS..AR David Luna, CRMS..........UT John Porter....................WA Lisa Severseike ...............IA Michelle Velez, CMC .......CA Kimber White ..................FL

Silver-level Contributors ($500+ annual contribution) Joel Berman...................NY Rick Bettencourt, CRMS...MA

Jill Gallagher Rick Gilbert, CRMS Gregory Graham Victoria Greer Scott Griffin Martin Hackford Steve Hakes Kelly Haney Mark Harcrow Melissa Hayes Lisa Hernandez Howard Howland John H. P. Hudson, CRMS Marvin Hudson David Hughson Ed Irwin, CMC Erik Janeczko Peaches Jensen, CMC Ryan Jones Jon Kaempfer Jason Kauffman Michael Kanuka Mike Kelso Kevin Kennedy Jonathan Kimura Edmund King Linda Knowlton Michael Kopiecki Marci LaBorde Laura Lawson Cathy Lee Kim Lewis Bobbie Lindner Anthony Lombardo Daniel Loughborough Lisa Lund Kelly Lynch

Angela MacKinnon Paul Marsh Wanda Martin Steve Matthews, CRMS John McCully Ashby McDonald Howard Miselman Joe Moody Marshall Moody Jim Morris Vernon Morrison Vicki Murphy Robert Murray Jim Nabors, II, CMC, CRMS Elena Neis Gary Ogami Matt Oliver Donald Opeka William Ormond Dennis Oshiro Raymond Oshman Sean O'Sullivan Norm Ottley Jim Pair, CMC Carrie Panacek Carlos Pazos Chris Peck Dawn Pemberton Richard Petano Jill Pfeiffer Claude Phillips Dean Rathbun Kathy Raven Donald Rizzo Jeanine A. Robbins Heather Rose Joan F. Ruth

Hartley Sappol Gary Schiller Julia Schloss Guy Schwartz, CMC Jeff Shealey, GMA Chris Shedd Mark Sheridan Ann Shipley Shawn Sidhu Timothy Simko Kane Smeltz Chris Smith Lynette Staley Mitch Stam Marc Starr John G. Stevens, CRMS Marvin Stockert Bob Sweeney, CRMS Diana Tardif Donald Thomas Douglas Turner Forrest Van Benthuysen Casey Van Winkle Dan Van Winkle Debbie Villarreal Bryan Ward Irving Webb Charles West James Wilson Edward Zadeh Benita Zimmerman

For additional information about NAMBPAC, please feel free to contact me or visit namb.org. John G. Stevens, CRMS • 2015-2016 NAMBPAC Chair JohnGStevens@Gmail.com * Federal Election Law requires NAMBPAC to use its best efforts to collect and report the name, address, occupation and employer of everyone who contributes $200 or more in a single year. If your contribution to NAMBPAC in 2015 is less than $200, your name may not appear on this list, but NAMBPAC is still very grateful for your generous support!


n National Mortgage Professional Magazine n JANUARY 2016

Gold-level Contributors ($1,000+ annual contribution) Ken Bates ......................CA Florida Association of Mortgage Professionals Federal PAC David Kane ....................FL Nathan Pierce, CRMS .....UT Valerie Saunders, CRMS..FL

Sustaining Contributors Richard Abazia Tanner Allen Todd Allen Chuck Anderson Rocke Andrews, CMC, CRMS Mike Aon Joseph Archer John Ardito Joe Ashton Mark Atanasoff James Bagnell, CRMS Nick Barayuga Karen S. Barnes Roshe Barooni Jim Barry, CMC Dave Beach Alexander Beadle Angel Bell Allycyn Bennett Chris Bettis Jeannine Bland Kenneth Blaudow Audrey Boissonou Jessi Bostic Douglas Braden David Bradley Tiffany Bradley Andy Brikho Jim Brown

Matt Brown Tina Broyles Andrea Buck George W. Burkley III Michael Burroughs Mark Cahoone Kenneth Campbell Joseph Cannarozzi Terry Casey Jim Chapman Eric Chauhan Arturo Chavez Charles D. Chedester, CRMS David Chellel Alan Cicchetti Brent Coleman Ruben Concepcion Ronald Crary John Crowell Dawn Cychner Tom Cychner Brady Day Keith DeLatte Michael Delzer Ray DeMar Donald DeRespinis Michael DeSantis Harry Dinham, CMC Bruce Dittmer James Dorney Jeffrey Drawdy George Duarte, CMC Dorothy Dumnich Tammy Engel Jim Ezell Antonina Friedland Mary Jane Galbiso


Platinum-level Contributors ($2,500+ annual contribution) John Councilman, ..........FL CMC, CRMS

Dana Chahidi..................CA Kay Cleland, CMC, CRMS...CO Don Frommeyer, CRMS....IN Linda McCoy, CRMS........AL Adam Stein .....................ID George Tribble................CA

Updated Dollar Amount HOEPA Fee, Loan Amount Triggers, Qualified Mortgage Points and Fees Thresholds By Melanie A. Feliciano Esq. Regulation Z requires that the Consumer Financial Protection Bureau (CFPB) to make annual adjustments to the dollar amount thresholds under the HOEPA "points and fees" provisions of Regulation Z §1026.32(a)(1)(ii) (Section 32) and the qualified mortgage "points and fees" provisions under Regulation Z §1026.43(e)(3)(ii) based on changes in the Consumer Price Index for All Urban Consumers (CPI-U). For 2016, the dollar amount adjustments reflect a two percent decrease in the CPI-U. HOEPA points and fees thresholds The CFPB issued a final rule, effective Jan. 1, 2016, providing that the dollar amount of the HOEPA fee-based trigger will decrease to $1,017. Additionally, the total loan amount threshold used to determine whether a loan is subject to the "total points and fees" provisions of HOEPA, or Section 32, is $20,350. The fee-based trigger is used to determine whether the total points and fees payable by the consumer at or before loan closing subjects that loan to Section 32. Section 32 applies, in part, to certain loans if the total points and fees payable by the consumer at or before loan closing exceed the greater of eight percent of the total loan amount or a dollar amount threshold. In addition to the Federal Section 32 test, this annual adjustment affects the anti-predatory loan laws in the following states: Colorado, Florida, Maryland, Massachusetts, Oklahoma, Pennsylvania, Texas and Utah. 26

Qualified mortgage points and fees thresholds In addition, the final rule updates the dollar amount thresholds for determining whether a loan is a qualified mortgage under the "points and fees" provision specified in Regulation Z Section 1026.43(e)(3)(ii), as follows:

No changes to 2016 conventional loan limits The Federal Housing Finance Agency (FHFA) has announced that, except for 39 counties in which high-cost area loan limits have increased, the 2016 maximum conforming loan limits for first-lien and second-lien loans will remain unchanged from the maximum conforming loan limits for 2015. Note that loan limits apply to the original loan amount of the mortgage loan, not to its balance at the time of purchase by Fannie Mae, and the loan origination date is the date of the note. For more detailed information about conventional conforming loan limits for 2016, please refer to Fannie Mae’s Lender Letter 2015-07 and Fannie Mae’s Web site. Melanie A. Feliciano Esq. is DocMagic Inc.’s chief legal officer and currently serves as editor-in-chief of DocMagic’s electronic compliance newsletter, The Compliance Wizard. She received her JD from the Georgetown University Law Center, and is licensed in California and Texas. She may be reached by phone at (800) 649-1362 or e-mail melanie@docmagic.com.

nmp news flash continued from page 16

Arch MI identifying Houston-The Woodlands-Sugarland as an “elevated risk” and four other markets–Austin-Round Rock, Dallas-Plano-Irving, Fort WorthArlington and San Antonio-New Braunfels– as a “moderate risk.” But despite the challenges faced in these markets, the Arch MI forecast for the U.S. housing scene as a whole is positive for the next two years. “Apart from these few exceptions, national prices should rise faster than inflation over the coming years due to a number of strong fundamentals, including: a shortage of homes for sale or rent, better than average affordability, and continued job growth of two to three million jobs a year,” said Ralph G. DeFranco, senior director of risk analytics and pricing at Arch MI.

OCC Ends Servicing Consent Orders Against Two Banks The Office of the Comptroller of the Currency (OCC) has terminated the mortgage servicing-related consent orders against JPMorgan Chase Bank and EverBank that were initially imposed against the financial institutions in April 2011 and later amended in February 2013 and June 2015. The termination follows the assessment by the regulator that both banks are now complying with their respective orders. The OCC stated that JPMorgan violated the 2011 consent order from Oct. 1, 2014 through June 30, 2015, adding in a press statement that the company “engaged in filing practices in bankruptcy courts with respect to payment change notices that did not comply with bankruptcy rules and constituted unsafe or unsound banking practices” between Dec. 1, 2011, and Nov. 19, 2013. The OCC imposed a $48 million penalty against the lender. The OCC also stated that EverBank violated its 2011 consent order by “improperly charging fees related to mortgage electronic registration system assignments, property inspections, and late fees to approximately 47,000 borrowers.” These fees were charged by Everbank between January 2011 and March 2015, and the OCC noted these fees occurred “outside the scope of the Independent Foreclosure Review and the 2013 IFR Payment Agreement.” EverBank has been issuing $1.6 million in remediation payments to borrowers that were charged these fees, and the OCC added a $1 million penalty against the lender.

Freddie Mac Top Multifamily Lender With $47.3 Billion in Volume for 2015 Freddie Mac has announced today that it has become the nation’s leader in multifamily lending for the first time, with $47.3 billion in loan purchase and bond guarantee volume


for its multifamily business in 2015, up from $28.3 billion the previous year. “We thank our dedicated Seller/Servicer network and loyal borrowers for enabling us to reach this historic volume milestone,” said David Brickman, executive vice president of Freddie Mac Multifamily. “I am very proud of the Freddie Mac team who worked tirelessly all year serving and supporting the market and ensuring that we were able to achieve this significant result. Our financing is in every corner of the multifamily market and more diverse than ever, reaching into small balance loans, manufactured housing communities, seniors, student and government subsidized properties. We are focused on increasing the availability of mortgage capital, especially to the affordable and workforce housing sectors where demand continues to far outstrip supply.” Of the total new business volume, approximately $17 billion was not subject to the Federal Housing Finance Agency (FHFA) loan purchase $30 billion cap and included certain loans for affordable housing, smaller multifamily properties, seniors housing and manufactured housing communities. “We had very strong growth in our loan purchase business in 2015, and expect our volumes this year to align with the market’s overall growth,” said Brickman. Freddie Mac Multifamily helps ensure an ample supply of affordable rental housing by purchasing and securitizing mortgages on apartment buildings nationwide. The loans range from $1 million to several billions and roughly 90 percent support rental units for low- and moderate-income households. Freddie Mac purchased more than $47 billion in multifamily mortgages in 2015, the majority of which were securitized, thus transferring the vast majority of the expected credit risk from taxpayers to private investors.

U.S. Still Reigns Among Global Real Estate Investors The land of the free and the home of the brave is also the best place for real estate investors to bring their money, according to the annual survey on global markets from the Association of Foreign Investors in Real Estate (AFIRE). “The investment opportunity is the United States, itself,” said James A. Fetgatter, CEO of AFIRE. “The real estate fundamentals are sound; the economy continues to remain strong; there are opportunities across all sectors of the real estate spectrum and in both gateway and secondary cities. The recent legislation bringing welcome relief from certain FIRPTA [Foreign Investment in Real Property Tax Act of 1980] taxes should provide additional incentives for foreign investment continued on page 89

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NMP Film Review The Big Short (That Almost Short-Circuited the World’s Economy)


By Richard H. Lovell or those of us who were directly or tangentially involved in the mortgage and real estate industries for the past 15 years or so, we probably do not need a reminder of what transpired. The roller coaster ride far surpasses any of the ups and downs that neither the Coney Island Cyclone nor the New York Mets could offer. While knowing the results of what happened are rather common knowledge (at least to those of us who were involved), the “WHY” it happened is a much lesser told tale. The real estate and mortgage worlds are once again humming, albeit at a somewhat lower pace and, perhaps, at a somewhat more cautious cadence. Or is it? In order to avoid the mistakes of the past, in order to ensure that we don’t find ourselves back in 2008, we need to understand what happened. We need to know why the mortgage and real estate markets and, virtually the entire United States (and perhaps the


world’s), economy were on the precipice of total collapse. We need to know why it took the U.S. government to bail out the banks, Wall Street and insurance companies. Perhaps we need to know why the United States is almost without exception the only major financial power that ever experiences a banking crisis. There have been earlier movies/documentaries that have attempted to explain what led us to the worst financial disaster since 1929. There was “The Inside Job” in 2010, the excellent must-watch HBO docudrama; “Too Big to Fail,” and the late 2015 movie, “99 Homes.” Both, especially the HBO offering, did a superb job in explaining some of what transpired. However, “The Big Short,” directed by Adam McKay, is different. At a time when Hollywood seems more interested in billion dollar blockbusters like “Star Wars: The Force Awakens,” they have made a very serious effort in a seemingly narrow area that, in fact, affected almost everyone in the United States and beyond! Despite its perceived limited

appeal for something out of Hollywood, “The Big Short” has already grossed $42.8 million in North America and $9.7 million in other territories for a worldwide total of $52.5 million at the box office (as of midJanuary). A word of warning: If you go to the movies with the hope of setting the mood for a romantic evening, this is NOT the movie to take your significant other to. Choose your movie mate wisely—the watching of this movie with someone who has neither the interest nor some expertise in the subject matter is like forcing someone to watch the actual Super Bowl game when all they are interested in are the commercials or the halftime show. “The Big Short” starts with a very serene scene with a young man walking in a palatial field balancing his young child on his shoulders. Flashed on the screen with a slight pause before revealing the second of two lines is the following Mark Twain quotation: “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so. How true as you will discover!”

The story, based upon the best-selling book by Michael Lewis, weaves its way from the staid world of the banking and insurance markets where the banker was everyone’s buddy. The man (not too many females worked in banking at that time) who you went to visit at the corner branch office. Banks took in deposits and lent money out at higher rates. That is how they made money. People bought bonds so their kids would have a little money when mom and dad passed on—they were safe and secure if not huge money makers. The stock market was there for the person living on Main Street to dabble in and maybe make a few bucks. While this is, of course, an over simplification with rose colored glasses, after seeing this movie and seeing how things were about to change, maybe not so much. The world changed, according to Lewis’ story, when Lewis Ranieri of Solomon Brothers (played by Rudy Eisenzoph for about 30 seconds of film) entered the scene. Lewis states that Mr. Lewis Ranieri (“The Big Short” is based “upon a true story”), changed

What was worse, these same borrowers would be back eight months later to refinance the same property—often without proof of income and again, the mortgage originator left with a $20,000 check. But we have learned from all that, right? We will never allow the U.S. to go back to that time in the mortgage lending history where it was more like selling snake oil and investing with Bernie Madoff, right? Unfortunately, while “The Big Short” may be a Hollywood movie, [SPOILER ALERT] it doesn’t have a fairytale ending. The downtrodden, heretofore unpopular young man doesn’t get what he believes to be the love of his life and walk away into the sunset. Too many people lost their homes, their jobs,

their families, their futures and their lives. While that often happens in movies, more often the perpetrators are hunted down and punished. Not the case in “The Big Short” nor in the United States. Despite all that was lost, mostly based upon greed, with only one or two exceptions, no one went to jail! The government bailed out Wall Street and the banks and, in many cases, those who were bailed out, did not use the bailout money for the benefit of homeowners. It was used to benefit those who created the mess. And again, no one went to jail! In fact, some like the CEO of JPMorgan Chase got a multimillion dollar bonus. This after Chase had to pay a multibillion dollar fine, and, in early January,

2016, agreed to pay an additional $48 million to settle claims against it for its handling of post-2008 mortgage servicing issues. But we did learn our lesson, right? We have put into place all the new rules to prevent this from happening again. No more prepayment penalties. More accurate disclosures (we all love the new TRID rules). We can never go back … right? The answer may lie at the very, very end of “The Big Short!” Richard H. Lovell is an attorney in Queens County, N.Y. His law practice is concentrated in the areas of real estate law, real estate lending and criminal law. For more information, visit LovellLawNewYork.com.



n National Mortgage Professional Magazine n JANUARY 2016

our lives more than Michael Jordan, the iPod and YouTube combined with a concept and three simple words: Mortgage-backed securities (MBS). The entire world was about to change— for the better, at least for a while. The cast of this movie was clearly chosen from Hollywood’s A-List: Christian Bale, Ryan Gosling and Steve Carrell (who played a terrific, serious role in the also true story, “Foxcatcher”). It includes lesser roles and cameos from other A-Listers like Marisa Tomei and Selena Gomez. What follows is the story of how Michael Burry (his real name, although many other names in the movie have been fictionalized), a physician turned eccentric fund manager, and expertly played by Bale). The good doctor began placing all of the fund money invested by his clients in the “short” market by betting on the impending financial catastrophe. What impending catastrophe? Burry’s theory, which turned out to be correct, was that the ever growing number of the residential mortgages upon which MBS were based, were virtually worthless. The banks were lending money to homeowners secured by properties where neither the homeowners nor the properties were deserving of those mortgage loans. To make matters worse, the investment bankers on Wall Street were collateralizing the investments of their clients with these doomed mortgage-based instruments. Investors believed that nothing was more secure than securities backed by mortgages on peoples’ homes. When most others saw what Burry was doing, they thought he was crazy. You will decide if he was. If you belong to that group of Americans described in the very beginning of this review, that is, those involved in the mortgage world), take a moment to revisit that Cyclone ride. Until 2008, most of us made a lot of money. Many of us followed the rules, both legal and ethical. Some took advantage of the loopholes in the law and with the blessing of an Administration that really wanted a “hands off” policy to avoid bursting the real estate bubble. For those with either short memories or who are too young to have experienced it, so many entities were making so much money that the profits became much more important than how those profits were being made. “The Big Short” aptly reminds us of this. As a closing attorney for more than 40 lenders in the early- to middle-2000s, I witnessed mortgage loan originators walking out of my office after a residential mortgage closing in the amount of, say, $400,000, with a payday of $20,000. Many of these mortgage loans were in excess of the purchase price, some with adjustable interest rate features and negative amortization! Very often, the borrower had absolutely no idea what they were obligating themselves to and their own attorneys at the closing did little to explain it to them.

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State of the Industry R

JANUARY 2016 n National Mortgage Professional


As we turn the page of the calendar and begin a new year, we enter the next 12 months with new hopes and expectations of how to grow business and enter the post-TRID mortgage marketplace. National Mortgage Professional Magazine gathered some of the industry’s forward-thinkers for a roundtable discussion on how they plan to face the year 2016. What follows is a lively dialogue between C-level executives, heads of trade associations and those on the frontlines, all sharing their goals and outlooks for the year 2016 and beyond.

National Mortgage Professional Magazine Presents

Roundtable Discussion About the panelists Rocke Andrews, CMC, CRMS President, NAMB—The Association of Mortgage Professionals Rocke Andrews, CMC, CRMS is broker/owner of Tucson, Ariz.-based Lending Arizona LLC. After a number of years in high-profile positions within NAMB—The Association of Mortgage Professionals, he became the association’s nationwide president in October of 2015 at the NAMB National conference in Las Vegas. Previously, Rocke served NAMB on the local level, holding several leadership positions in his home state, including statewide president, of the Arizona Association of Mortgage Professionals. Terry W. Clemans Executive Director, National Consumer Reporting Association (NCRA) Terry W. Clemans serves as executive director of National Consumer Reporting Association (NCRA). Headquartered in the Chicago suburb of Roselle, Ill., NCRA serves its members in the U.S. and Puerto Rico. NCRA’s membership includes two of every three mortgage credit reporting agencies in the U.S. that can produce a credit report that meets the requirements of Fannie Mae, Freddie Mac and HUD for mortgage lending.

Tom Salomone 2016 President, National Association of Realtors (NAR) Tom Salomone, a Realtor® from Coral Springs, Fla., is the 2016 President of the National Association of Realtors (NAR). NAR, The Voice for Real Estate®, is America’s largest trade association, representing one million Realtors® involved in all aspects of the residential and commercial real estate industries. Tom has been a licensed real estate agent for more than 40 years. He is a second generation REALTOR® and broker/owner of Real Estate II Inc., a firm specializing in residential real estate. Tom uses his experience in business and sports to serve the community through a number of different organizations, including the Boys & Girls Clubs of America. He has been a member of the Chamber of Commerce, a Coral Springs Charter School Business Sponsor, and a Water Control District Supervisor. He has coached more than 46 sports teams in local city leagues and been a member of the Amateur Athletic Union and the United States Specialty Sports Association. He volunteers with organizations to prevent heart disease and cancer and attends St. Andrew’s Church. He is the proud father of two sons, TJ and Bryce, and husband to Diana. Theodore W. Tozer President, Ginnie Mae Theodore W. Tozer was appointed by President Barack Obama and confirmed by the U.S. Senate to serve as President of Ginnie Mae on Feb. 24, 2010. With more than 30 years of experience in the mortgage, banking and securities industries, Tozer manages Ginnie Mae’s $1.5 trillion portfolio of mortgage-backed securities (MBS), which has grown by more than a half trillion dollars in less than four years. At Ginnie Mae, Tozer has brought renewed focus on bringing global capital into the American housing finance market and on strengthening industry partnerships by focusing on making Ginnie Mae more customer centric. Prior to Ginnie Mae, Tozer served as senior vice president of Capital Markets at National City Mortgage Company (NCM). During his tenure at NCM, the company was consistently profitable with growth in annual loan sales from $1 billion in 1989 to $106 billion in 2003. Tozer received his bachelor of science degree in accounting and finance from Indiana University and is a Certified Public Accountant and a Certified Management Accountant. He and his wife Sandy live in Fairfax, Va.


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Mat Ishbia President & CEO, United Wholesale Mortgage (UWM) Mat Ishbia is the president and CEO of United Wholesale Mortgage (UWM)–one of the fastest-growing wholesale mortgage lenders in the country. Under his leadership, he has taken UWM to new heights, growing the company into the nation’s No. 1 conventional wholesale lender. Ishbia is an entrepreneurial-minded executive who has excelled at blending his business acumen with an ability to build a unique workplace culture. Ishbia’s management expertise and dedication to a team-focused business approach have enabled him to intelligently grow a leading lending operation that is a highly reputable organization in the mortgage industry. Ishbia has been named one of the “Most Influential Mortgage Professionals Under 40” and one of the “25 Most Connected Mortgage Professionals” by National Mortgage Professional Magazine. Additional accolades include a spot on the Crain’s Detroit Business “40 Under 40” list; being recognized on the “30 in Their Thirties” list by DBusiness Magazine; being named a “Rising Star” and Vanguard Award winner by HousingWire; and recognition as a “Most Valuable Professional in Michigan” by Corp! Magazine.

Alexandra Rodriguez Marketing Director, Angel Oak Mortgage Solutions Alexandra Rodriguez is the marketing director at Angel Oak Mortgage Solutions, an Atlanta-based wholesale lender currently licensed in 24 states. Angel Oak provides alternative lending solutions for the sub-prime/non-prime industry. Alexandra joined the Angel Oak team in 2013 and has a background in marketing for multiple markets, including publishing, healthcare, and commercial real estate.


Donald J. Frommeyer, CRMS CEO, NAMB—The Association of Mortgage Professionals Donald J. Frommeyer, CRMS is currently chief executive officer for NAMB—The Association of Mortgage Professional. Don is a multiple-term national president of NAMB, and has served the association’s board of directors, on many of the association’s committees. He first got involved with NAMB on the local level, serving the Indiana state affiliate of NAMB in a number of roles, including statewide president. With 30-plus years in the industry, Frommeyer has gone to bat for the mortgage professional on multiple occasions over the years, often providing insight on the inner working of the industry to many elected officials in NAMB’s trips to Capitol Hill.

Rey Maninang Senior Vice President & National Sales Director, Carrington Mortgage Services LLC’s Wholesale Mortgage Lending Division Rey Maninang has been senior vice president and national sales director of the Wholesale Division at Carrington Mortgage Services LLC since August 2013. Previously, Rey served as senior vice president and national head of sales for PMAC Lending Services Inc.

State of the Industry R The discussion How will TRID impact the industry in 2016? Rocke Andrews: TRID is causing a few hiccups and slowdowns in the mortgage process now, but in a few months, lenders and brokers will adapt and business will be back to normal. The TRID disclosure does a better job of putting the broker on an even level with bank disclosures.

JANUARY 2016 n National Mortgage Professional Magazine n



Terry W. Clemans: TRID is creating some sleepless nights and tighter budgets, and as credit reporting companies, we have it fairly easy compared with the rest of the mortgage industry. Credit reports are specifically exempted from the fee restrictions consumers can pay prior to the Loan Estimate and the Intent to Proceed in §1026.19. That exemption, however, has not eliminated a lot of questions about the proper handling of credit reporting fees. Financial penalties for violating TRID can be huge. Willful violations, which some of the marketing plans I have heard about could easily fall under that category, could bankrupt a company if that organization falls under the wrong interpretation of a very complex ruling. This directly impacts the business’s bottom line as companies have to have higher budgets for all of the additional legal, compliance, and technologies required to avoid committing a violation. With any luck, it’s only those added expenses and not the potentially devastating impact of a fine for going with the wrong interpretation of some of the more ambiguous portions of TRID or consumer litigation over a different interpretation. Donald J. Frommeyer: I really think that it won’t impact it at all. We have had more than 90 days at this stage of going through the steps and it is really getting everyone to understand the why’s and what’s of exactly what is happening. You really need to make sure that the customer and the real estate agent knows what is going on, so with good, strong communication, we should be past all of the problems. Mat Ishbia: I don’t think that TRID will be considered a hot topic after the first quarter of 2016–people are going to get used to it and it will be considered the normal way of doing business. The industry is constantly changing and I think lenders will need to continue investing in compliance and technology to stay ahead of the curve. TRID has forced everyone to step up and invest a significant amount of money in compliance and technology, or risk losing business. In the past few months, many lenders have had to rely on vendors that they don’t have control over because of their lack of internal resources. Lenders will quickly realize that they either have to spend the time and money to be great or they’ll be left behind. Alexandra Rodriguez: The fourth quarter of 2015 really served as a transition period regarding TRID. Lenders have had the chance to adjust their processes to become compliant with the new regulations, which came fully into effect this October. However, lenders and borrowers are still assimilating and adapting to the new regulation. Now that the lender assumes responsibility for ensuring compliance, re-evaluation of technology, processes and communication will be necessary to ensure TRID compliance. The year 2016 should be significantly smoother as the industry transitions to a new normal, assuming lenders get up to speed on their TRID responsibilities and adjust processes where necessary. They should

ensure that application policies are clear, understandable and easily trackable. Tom Salomone: In the early stages, we are likely to see some bumps in the road as the industry continues to adjust to the new disclosures. NAR advised its members early on to consider longer time horizons on purchase contracts. In the long term, however, it is likely that we will see a diminished affect from Know Before You Owe as we move through the transition to the new disclosures. Theodore W. Tozer: Since Ginnie Mae does buy or originate mortgages or issue mortgage-backed securities (MBS) directly, we are not directly impacted by TRID. However, anything that affects the housing finance industry ultimately impacts the collateral that makes our MBS possible. As a policy matter, I support efforts to make mortgage terms more transparent to homebuyers, and to give these buyers enough lead time to understand these terms prior to closing. Remember, a mortgage is the largest transaction many people will make. So, we should err on the side of safety here. Of course, the new disclosures and timeframes will affect the mortgage industry. And, as with any new set of procedures, it will take a while to fully incorporate them into the normal course of business. But it will happen, certainly during 2016.

What do you feel will be the big breakthrough product in the industry in 2016? Rocke Andrews: I think the big breakthrough product will be allowing borrowers with past credit event problems to purchase on a more competitive interest rate … whether it is a change to FHA and GSE guidelines or a non-QM product from the growing non-conforming lending market. Terry W. Clemans: From a credit perspective, there are two key issues for 2016: Fannie Mae’s use of trended data, slated to roll out this summer, and what we hope will be the ability to use a modern credit score for mortgage underwriting sometime soon after that. Trended data is a whole new world for the mortgage underwriter, as it shows a much more complete picture of the consumers credit account histories other than just the on-time payment history and current balance data provided currently. One will have the ability to look back as far as two years at the balance each month, payment amount, and credit limit, including what you receive not about the payment being on time or not. As the name suggested, that added data shows the consumer’s spending and payment history trends, and how that trend impacts the consumers total credit utilization. This is a huge development that has proven very valuable in other lending sectors and mortgage lenders will be hearing more about it this as Fannie Mae nears its implementation and starts requiring the trended data in mid-2016. How this will impact the underwriting is yet to be determined since we are in uncharted territory with this new technology for mortgages. Could a person with a 750 credit score now be denied due to the new trended data exposing the consumer’s steady rise in credit consumption over the past 24 months? Supposes someone goes from a moderate credit utilization rate of 20 percent to one that is on the verge of being unsustainable at say 80 percent, yet still scores high enough to qualify under current guidelines.

National Mortgage Professional Magazine Presents

Roundtable Discussion The discussion Prior to the trended data, you would never see that consistent debt growth, only the amount of debt and payment of the month reported at the time of the mortgage application. How this ultimately impacts decisions has not been completely disclosed, however, as Fannie Mae’s CEO Timothy Mayopoulos disclosed in his address at the October MBA Annual Convention in San Diego, it will be a new requirement for next year. With regard to credit scores, the ability to use a credit score based on consumer spending patterns in recent times would be helpful. Currently, Fannie Mae and Freddie Mac require credit score models developed before the 2008 financial crisis. FICO 9.0 and VantageScore 3.0 are two to three score generations newer than the outdated FICO models that are now required, and both offer many benefits for both lenders and consumers. I mention VantageScore as it is a very viable option that was not available back when the last score update was implemented by Fannie Mae and Freddie Mac. As a strong believer that competition is much better for everyone, it is time for the use of a modern score and the ability for lenders to choose from either FICO or VantageScore (with the proper protections to prohibit “cherry picking” the best score) for mortgage underwriting. We hope for an announcement in 2016 with a changeover to the new score or choice of scores implemented before 2017, as this is long overdue. Donald J. Frommeyer: There are more and more companies coming into the lending arena, so competition will surely be on the rise. Also many companies are offering one-time close construction loans, and I think that will be a great product in 2016 because more builders are starting to come back.

Alexandra Rodriguez: Sub-prime! It’s not a matter of “if,” but “when,” interest rates will increase. When that happens, loan originators must look to alternative lending solutions to ensure their pipelines remain full. For subprime to maintain its momentum in the market in 2016, however, people need to understand how today’s subprime is different than in 2005 and 2006. Subprime before the financial crisis looked vastly different than the nonprime, or non-qualified mortgages (non-QM) of today. For example, today’s non-prime loans: Have an average credit score much higher than in 2006; require a downpayment (skin in the game); must have documented ability-to-repay (ATR); and are subject to tighter regulation.

Theodore W. Tozer: Perhaps not one product, but a continuation of important trends. For example, we have seen annual growth approaching 50 percent in Ginnie Mae MBS that contain reverse mortgages. These loans, backed by the FHA, are emerging as a key source of income for senior citizens who need to stretch out retirement savings over a longer life span. With the VA, people tend to overlook the importance of this mortgage program. But here’s the reality: VA loans are really popular. They represent about one-third of the loans within our annual MBS issuances. And this percentage was even higher—40 percent—until the FHA slashed its monthly premiums. As our foreign wars hopefully wind down, we expect to see more veterans re-entering the private workforce. And it’s important that Ginnie Mae be there to secure mortgage funds for them.

Do you think larger or smaller firms have the potential for greater growth in 2016? Rocke Andrews: I think the new disclosures and marketing will put the small shops at an advantage moving forward. They can adapt to technology and guideline changes faster and get the new products out to the street, thus maintaining a competitive edge in an ever-shifting marketplace. Terry W. Clemans: This is a really tough question, and one that has sparked several great debates in the credit reporting space over the years. The power and benefits obtained from economies of scale versus the nimbleness, flexibility and high touch customer service of smaller boutique operations. There is little doubt that the ever-increasing costs of raw credit data, technology, compliance, and legal issues, combined with constantly shrinking margins are making life tougher for all credit reporting firms, regardless of size. Today, there are less than 50 companies in the U.S. that can issue a mortgage credit report that meets federal lending guidelines, compared to more than 2,500 companies 30 years ago. Because of this, even the smallest companies have now reached a much larger size than ever before, so this debate has changed greatly over the past 30 years as the industry has consolidated. In 2016, just like other years the challenge in the mortgage credit reporting market, (which is not unlike mortgage origination or other mortgage settlement services) is the management of the business operation during the interest rate fluctuations. We all know these fluctuations can be like riding a rollercoaster, with ups, downs, and twists moving regardless of an


n National Mortgage Professional Magazine n JANUARY 2016

Rey Maninang: This year, purchase programs will become the focus of the mortgage industry, as refinances begin to slow down. Last year, changes to the Federal Housing Administration’s (FHA) mortgage insurance premiums drove a large wave of refinances, but as interest rates begin to rise this year, we will see more and more activity in purchase loans. The increased focus on purchase programs will likely be greatest for those that feature low downpayments, low fees, and less cash to close. Programs like these that are especially attractive to first-time homebuyers and allow for lower credit scores will see significant activity this year. Mortgage professionals and lenders that focus on simplifying the purchase process and providing on-time closings will put themselves in an excellent position to benefit from the growing purchase market this year.

Tom Salomone: Our industry continues to evolve and improve, with Realtors® finding new and innovative ways to serve clients. In fact, so much is happening that there’s no way to single out one major breakthrough. Instead, I believe we will see developments on a number of fronts. These include greater utilization of promising technologies like drones and esignatures, further improvements in the way Realtors® manage data, fresh ways to market to Millennials online, and a whole lot more.


Mat Ishbia: Purchase-focused products will be the main focus in 2016. Beyond that, I’m a believer that Fannie Mae’s HomeReady program will be strong, as will Freddie Mac’s Home Possible Advantage program. Those are two great affordability programs that get people into their dream home with minimum down payments, along with reduced mortgage insurance.

In 2016, we hope to see a change in continued understanding and continued growing acceptance as these products gain in the market. They’re a necessity for Americans who no longer fit the tight requirements needed to receive an agency loan. Because of these strict agency lending standards, so many worthy homeowners have been left out of the market; but, these subprime products are beginning to change that.

State of the Industry R The discussion organization’s business plan. Managing the customer service aspect during these times can be very difficult. The larger the company, the more people needed (or not needed), pending where you are at in the interest rate ride. In credit reporting, when a certain skill set is required to keep your firm out of the courtroom (from Fair Credit Reporting Act litigation), these fluctuations become even more difficult to handle and sometimes the smaller companies can adjust to the volume changes more efficiently. Personally, I believe that 2016 will be better for the smaller firms to grow, as declining origination volumes typically brings in more marginal loans that require greater efforts to close, which is the environment where these firms typically excel. Donald J. Frommeyer: I think the company that has two or three loan originators is going to be doing more business, but as a percentage, the smaller companies will grow at a bigger percentage. The important thing to remember is that business has been getting better over the last 15 months, and it will continue to do so as we enter 2016.

JANUARY 2016 n National Mortgage Professional Magazine n



Mat Ishbia: I think we’ll actually see a greater divide between larger and smaller firms in 2016, and the greatest impact will be on mid-sized companies. We’ll see more of these lenders choose to become broker firms again because that channel offers entrepreneurs and loan originators the greatest flexibility and growth opportunities. This will help the wholesale channel grow, as many mid-sized lenders won’t have the means or desire to build out underwriting staffs, compliance and quality control procedures. Rey Maninang: As we move into a more purchase-focused market, smaller firms will have significant opportunity for growth this year. These firms can more nimbly navigate the market as it changes and provide new programs in response to shifting demand. As more potential homebuyers move off the sidelines and into the housing market, mortgage professionals should pay close attention to demand from borrowers with less-than-perfect credit. Mortgage professionals and lenders with smaller firms will be better able to respond to increasing interest in purchase programs and create mortgage products with common-sense underwriting that can serve a wider audience. With these types of products, they will be well-positioned to serve today’s consumers as they move into the marketplace. Alexandra Rodriguez: Smaller firms absolutely have the potential for greater growth in 2016, primarily due to their flexibility with alternate lending. While big banks may not be willing to expand their portfolios to offer programs outside those offered through the GSEs, smaller firms have the ability to add additional programs to their product offerings to spur growth in the next year. Those firms that are nimble and willing to expand their product offerings to include non-agency loans stand to experience significant growth. There is a subset of Americans over 100 million strong that are underserved in the mortgage market. They simply don’t meet the strict QM guidelines and therefore represent a tremendous opportunity for lenders capable of satisfying their needs. Tom Salomone: The current economic environment presents challenges and opportunities for a range of business models, both large and small, and I wouldn’t handicap one over another. Rather, I believe that firms of all sizes stand to benefit from historically low rates and an improving economic condition

relative to the recession we saw just a few years ago. Of course there are challenges ahead, but there are also plenty of opportunities that can benefit large and small firms this year. Theodore W. Tozer: In percentage terms, smaller lenders will always have the growth advantage. Certainly, in recent years, we have seen the Issuer base of Ginnie Mae MBS move towards smaller lenders with different operating models. And in the conventional market, we have seen federal regulators and Congress create a more level playing field of competition through standardized guaranty fees. Thus, the edge going forward seems to favor smaller lenders. The one caveat: With smaller or no balance sheets, smaller lenders will need continued access to credit lines and otherwise remain liquid.

How has the current regulatory environment impacted your bottom line? Rocke Andrews: Increased regulations have increased origination costs and the time of the loan spent in the pipeline. This has impacted everyone, and in return, these costs must unfortunately be passed onto the consumer. Terry W. Clemans: It has certainly made tight profit margins much tighter. The actual cost of the new compliance requirements is still unknown, but clearly growing. Not only does the current regulatory environment have an impact to the bottom line, its impact is this combined with the constantly increasing consumer litigation from baseless claims. This combination has been a one-two punch to the bottom line of the mortgage credit reporting industry. Donald J. Frommeyer: You are always going to have increased costs when it comes to compliance because it takes more time and effort to both monitor regulations and abide by these mandates. These continued costs are driving profits lower and the overall cost of compliance will play a major factor in driving down profit in 2016 and beyond. The only thing that you can do to combat the necessary cost of compliance is to produce more closing volume. Mat Ishbia: UWM might be an outlier on this, but the current regulatory environment has actually helped our bottom line. We spent the time and money to invest in compliance and technology up front, so we’ve been able to grow our business. Contrary to what others have been experiencing, we’re able to close loans faster than we could before. As crazy as it sounds, UWM is closing loans in an average of 23 business days post-TRID compared to an average of 24 business days before TRID. The current regulatory environment shows that you can make compliance a competitive advantage for your business. Alexandra Rodriguez: Our products and processes have always taken into account the compliance regulations that are imposed on all mortgage lenders. While a regulation like TRID might change some processes, it has not negatively affected our turn times or our production. If anything, it makes it easier for both us and for our broker partners since we now take on the responsibility of issuing the Loan Estimate to the borrowers.

National Mortgage Professional Magazine Presents

Roundtable Discussion The discussion Furthermore, today’s strict QM lending guidelines play right into our business model, which focuses solely on non-prime mortgage products. We’re targeting borrowers that have been locked out of getting a mortgage because of those regulations. Tom Salomone: The National Association of Realtors® enjoys a strong working relationship with the federal agencies that oversee our industry. We recently hosted senior leadership from the Consumer Financial Protection Bureau, the Small Business Administration, and the Federal Housing Administration on a range of issues important to Realtors®, and we’re pleased with the working relationship we share with our partners. Of course, that doesn’t mean there isn’t work ahead. For example, we believe that FHA should consider additional measures to ease burdensome condo rules; that the CFPB should remain mindful of its commitment to show “sensitivity” towards good faith actors adapting to Know Before You Owe disclosures; and that it’s important to protect rules and provisions that help make real estate such an attractive investment, including the mortgage interest deduction. In the year ahead, we’ll be looking towards these and other major policies to advance the business of Realtors®, support consumers, and make homeownership a more attainable dream for creditworthy borrowers.

Any closing comments?

Terry W. Clemans: I have two. First, I encourage everyone to take notice of the information that will be coming out in the near future about Fannie Mae’s movement to trended data as discussed earlier. This will change the reports more than any development since the use of credit scores. Second, become more aware of and familiar with rules about the proper use, storage and disposal of credit information. Too often, business people who are very busy can get complacent with the credit data of which they are entrusted allowing for the unintended, but improper use of the credit data that can be devastating to both the consumer and the mortgage originators company. Data breaches are very costly and can be done in both digital and paper forms. These can lead to identity theft, which everyone knows is a major problem today. We all need to be better stewards of this consumer data that drives our businesses. Please take extra steps in 2016 to make sure your systems and paper waste are not used to fuel the identity theft problem. A way to be a better steward of the data is through NCRA’s Fair Credit

Rey Maninang: We expect that 2016 is going to be a positive year for the mortgage industry. Although refinances are likely to slow down some, the corresponding uptick in purchase business will bring new homebuyers to the market. We anticipate continued interest in purchase opportunities from consumers with lower credit scores, as well as expanded competition from lenders to serve those borrowers who have credit scores below 620. Alexandra Rodriguez: Angel Oak is excited and ready for 2016 to take off. We expect the industry to thrive and to become more open to the possibilities of alternative lending.

Tom Salomone: I’d simply add that although there are challenges ahead, I believe the future is bright for real estate, both for those of us in the industry and for consumers. A lot of good work has been done to move forward on some important issues, and I believe consumers and those of us in the industry will see continued opportunities for success in the year ahead. Theodore W. Tozer: For Ginnie Mae, we are trying to keep up with business growth and the transformation within our Issuer base. For example, in fiscal year 2015, Ginnie Mae surpassed Freddie Mac in total MBS issuances, and we even outpaced Fannie Mae during certain months. Why? The constituencies we serve—middle-class families, military veterans, underserved communities—have increasingly turned to the FHA, VA and other government mortgage programs, and we need to support all of them. So we expect our business volumes to remain high. With MBS investors, there is incredible demand for our securities, so we need to protect the integrity of the government guaranty. Lastly, we are working to implement a risk-management approach that can better support independent mortgage banks, enable a robust market for mortgage servicing rights, and otherwise ensure the safety and liquidity of the government mortgage market.


n National Mortgage Professional Magazine n JANUARY 2016

Rocke Andrews: The economy and the housing market is recovering and will hopefully return to once robust levels. The year 2016, in my opinion, will be a good year to be a mortgage loan originator.

Donald J. Frommeyer: I really feel that 2016 is going to be a great year. The economy is growing stronger, and you can see a lot of people starting to look at building homes, looking to upgrade their homes and looking to sell their homes. We really need a larger number of homes to hit the market because we have customers who can find the home they want and fulfill their dreams of homeownership.


Theodore W. Tozer: It has put pressure on our cost structure, as we seek to monitor new kinds of risks being posed by the Issuer base for Ginnie Mae MBS. We have seen traditional banks, our traditional Issuer, move out of the mortgage market, largely to due to repurchase risk posed by federal regulators and other government entities. As a direct result, independent mortgage banks have filled the void in the primary market. Indeed, independent mortgage banks now represent the majority of our Issuer base. However, the transactions they engage in are more complex than those of traditional banks. Thus, we have more points of risk to monitor, and across a larger book of business. Over time, that will drive up our costs.

Reporting Act (FCRA) Certification Program for mortgage company employees, who are referred to as the “end user” of the credit data. The FCRA and other federal and state laws have some very specific responsibilities for the proper use of credit reports that are not only important to fighting identity theft, but also in the proper handling of consumer disclosures when a less than best lending decision is made based on that credit report. Even people that have been in the industry for decades need to make sure they are doing things properly and we encourage everyone in the mortgage industry who has access to credit data become FCRA certified. Any NCRA member can help your staff become SAFC-MLP certified, which stands for the certification of Safe Access for Credit–Mortgage Loan Professional.


Cases and Regulations: 2016 Predictions BY JONATHAN FOXX

have noticed that there has been a spate of articles in the last few months about the regulatory events of 2015. Indeed, the highest profile event was the implementation of the rules governing TILA-RESPA Integration Disclosure (TRID). Looking back at history is important; after all, “what’s past is prologue,”1 as Shakespeare’s insight offers in The Tempest. Or is it? Can our vision be so blurred by the emoluments of the past that we lose sight of the recompense awaiting us in the future?


Enjoy’d no sooner but despised straight, Past reason hunted, and no sooner had Past reason hated, as a swallow’d bait On purpose laid to make the taker mad; Mad in pursuit and in possession so; Had, having, and in quest to have, extreme. Thus said Shakespeare in Sonnet 129, pouting how past sentiments can beguile future attractions in inscrutable ways, focused on consuming demands, whipped from one extreme to another, passionately meeting the madness of a gripping mission. Having gone through

2015’s glut of objections, tests, threats, claims, confrontations, defiances, demurs, provocations, remonstrances, ultimatums, impositions, exigencies, and importunities, perhaps now we should set our zealous pursuit of adaptation and expediency to the dispatch that is likely awaiting us in 2016. I propose to discuss two categories that, though separate in purpose and determinate qualities, are each intrinsic to the way residential mortgage lenders and originators, as well as other financial service entities involved in extending credit

through consumer loan products, will be responsive to the regulatory compliance environment in the year ahead: cases and regulations. Each often is rooted in the past, though usually springs to a trajectory into the future. Instead of traveling down Memory Lane, let’s take a modest excursion through the imminent happenings soon to come. In briefly discussing these cases and regulations, I hope to further stimulate public policy debates.

Cases Both the U.S. Supreme Court and the

Second Circuit will be prominent in deciding cases affecting the origination of mortgages in 2016. Also, the D.C. Circuit and the D.C. District Court will adjudicate pertinent cases. The range of consequences is considerable, from cases that could make it more difficult to consummate secondary market transactions to cases further limiting class actions. I believe the following five cases should be on a watch list.

PHH Corp. et al. v. Consumer Financial Protection Bureau2

Cordray’s opinion, “That means PHH is liable for each payment it accepted on or after July 21, 2008, even if the loan with which that payment was associated had closed prior to that date.” Thus the penalty changed as a result of a differing reading of the law, which increased PHH’s penalty by over 1,600 percent—from $6.4 million in Judge Elliot’s ruling, based on the amount borrowers paid on mortgages that closed on or after July 21, 2008 to the new penalty calculation of $109 million! To return to the present, PHH appealed the decision and the D.C. Circuit put a stay on the ruling. The firm argues that the due process clause bars the government from retroactively pun-

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ishing conduct that was recognized as lawful at the time. PHH is challenging the Bureau’s internal appeals process, which turned a $6.4 million penalty for a violation of RESPA into a $109 million penalty. The company is challenging the Director Cordray’s interpretation of RESPA, which gave the impetus to the escalation of the penalty. Furthermore, it is contesting the process under which Director Cordray is the sole party to hear a review of administrative rulings. If PHH prevails, the Bureau’s strategy of setting rules on the basis of enforcement actions rather than continued on page 40

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n National Mortgage Professional Magazine n JANUARY 2016

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I have been following this case since its inception. In its recent iteration, on Nov. 5, 2015 the Consumer Financial Protection Bureau (CFPB) stated in a brief filed with the D.C. Circuit that its $109 million disgorgement order against PHH Corp. in a mortgage reinsurance kickback case met all statutory requirements and should be allowed to stand in order to keep other companies from engaging in similar schemes. The CFPB contends that PHH incorrectly interpreted the Real Estate Settlement Procedures Act (RESPA) in its appeal of the $109 million disgorgement order. The Bureau and its Director, Richard Cordray, contend that they were correct in levying the foregoing penalty, which, they claim, serves as a necessary deterrent to other firms that might consider engaging in kickback schemes. To quote the Bureau itself: “Eliminating kickbacks is a primary goal of RESPA. If PHH is permitted to keep the fruits of its kickback scheme merely because it claims it believed its scheme was legal, this will encourage others to take advantage of areas of statutory uncertainty.” Further, the Bureau contests PHH’s claims that the agency’s ‘single-director structure,’ as opposed to ‘multimember-commission leadership,’ and funding through the Federal Reserve rather than the congressional appropriations process, violate the U.S. Constitution. To refresh the history of this matter, the Bureau had filed administrative claims against PHH in January 2014, alleging that when PHH originated mortgages, the financial institution referred consumers to mortgage insurers with which it had relationships. In exchange for this referral, the agency claimed, these insurers purchased reinsurance from PHH’s subsidiaries, and PHH took the reinsurance fees as kickbacks. The Bureau contended that PHH also charged more money for loans to consumers who did not buy mortgage insurance from one of its supposed kickback partners and, in general, charged consumers additional percentage points on their loans. Then, in June 2015, Director Cordray upheld a November 2014 ruling by Administrative Law Judge Cameron Elliot that PHH engaged in a mortgage insurance kickback scheme under RESPA; but, according to Director Corday, the judge incorrectly assessed the penalties.

Director Cordray’s position may be outlined, as follows: Rather than requiring that PHH face a penalty for kickbacks on mortgages that closed on or after July 21, 2008–three years before the CFPB took over RESPA enforcement from the U.S. Department of Housing and Urban Development–the firm should be penalized for each payment it received after that date, regardless of when the mortgage had closed. Mr. Cordray based his decision on the way mortgage reinsurance premiums are paid. Thus, rather than coming as a one-time payment at the closing date of a mortgage, such premiums are paid by borrowers each time they make a monthly mortgage payment. To take a line directly from Director

Ready, Set, Go!

cases and regulations continued from page 39

through the normative process of public rulemaking and judicial vetting would be compromised. Do you have a plan for growth in 2016? The mortgage industry has dramatically changed over the past seven or so years. It’s time to separate the winners from the losers! What separates the winners from the losers is how they deal with the changing economy. We are seeing better results with marketing now than we have seen in the last five years. Not just in response rates, but the results from closed loans and the return-on-investment (ROI) is all higher now than it has been in the last five years. Top mortgage companies are broadening the audience to target borrowers they haven’t targeted in years, this increases response rates. The companies with salespeople that go through the sales process described herein are closing at higher rates and holding more value. They’re making more per loan because they are building relationships with their customers, getting more referrals, and customers are coming back to their original loan officers. Here are the top selling techniques (in order) to keep your pipeline full: 1. Approach introduction This is the opening step where you introduce yourself; explain what you do and how it could benefit your prospect. You will also make sure they want the products and services you offer. Start building a relationship with the prospect and the information gathering begins. First impressions are essential to sales success. It sets the tone for the conversation and begins the relationship. 2. Qualification-investigation-discovery This is an extremely important step of the sales process and cannot be skipped. This step allows you to hear the prospects needs and wants. It will also let you know if anyone else needs to be present for the sale to take place. 40

3. Agreement based on the need–follow up on Step 2 In this step, you first repeat back to them what you heard in Step 2 (their wants and needs). Then, you present to them your product, or the best product for their situation and how it accomplishes their goals, fulfills their wants/needs. And lastly, find out if there is anyone else needed to move forward with the sale. 4. Sell the company Often forgotten about, this step is crucial in overcoming objections later. This is where you build confidence in the company. People don’t buy from people or companies they don’t trust. So don’t skip it! You’ve been building trust in yourself up to this point. Now it’s time to build trust in your company. 5. Fill the need-the presentation-the pitch Focus on the benefits rather than the features. This is also referred to as feature-benefit selling. Give them a feature of the product and then give them the benefit based on what you discovered in Step 2. 6. Close the sale–follow up–ask for referrals One of the main reason sales fail is because the sales person doesn’t ask for the sale. In short, go back to traditional sales practices and you will have higher close rates and get higher response rates from your marketing campaigns because the campaigns won’t need to be so specifically targeted for just one loan product anymore. TagQuest Inc. is a full-service marketing firm specializing in marketing for the mortgage industry. Call (888) 717-8980 or visit www.tagquest.com.


Midland Funding LLC et al. v. Saliha Madden3 The Supreme Court is about to determine if it will hear an appeal of the Second Circuit’s ruling in Manning v. Midland Funding, a decision that would subject to state usury claims all debt and consumer loans issued by a national bank and sold to a third party. The litigation stems from a class action that accused Midland Funding LLC and Midland Credit Management, Inc. of violating New York’s usury law. The claim at issue is whether the interest rates on Midland’s credit cards were higher than the state’s 16 percent limit. The effect of the Second Circuit’s decision has sent shock waves through the world of consumer loan products, such as credit cards, since, if upheld, it would set aside certain authorities under the National Bank Act; specifically, the right of banks to sell their products, where originated through a national bank, to purchasers of such debt without regard to state usury limits.

Spokeo Inc. v. Thomas Robins et al. and Campbell-Ewald Co. v. Gomez4

A word about the implications of defeating state statutes of repose. A statute of repose law cuts off the rights of all parties to bring a legal action. Certainty on the length of a window of vulnerability to lawsuits makes it possible to measure risk and the possible exposure to claims. In effect, a statute of repose bars the bringing of a suit after a set period of time, regardless of whether an injury has occurred or a claim has arisen. In this case, the FDIC argues that the Supreme Court’s ruling in another case, CTS Corp. v. Waldburger,6 which held that federal law does not preempt state statutes of repose, does not limit its ability to bring cases related to the failure of a bank during the recent financial crisis. The effect of not being able to bring litigation after the statute of repose has passed is significant: if the Second Circuit upholds the lower court ruling, regulators will not be able to bring cases, at least in the Second Circuit. In other words, much litigation brought by regulators may have their commencement several years ago, but now, if the statute of repose has ended, and, barring an extension, such litigation would be discontinued.

Consumer Financial Services Association of The litigation here involves an attempt America et al. v. Federal to limit the size and scope of class Deposit Insurance Corp.7 action lawsuits. It is being heard by the Supreme Court. There is a coupling of cases in this matter, the Spokeo case and the Campbell-Ewald case. In Spokeo, the decision will be whether consumers will be able to bring class action claims when they cannot point to any concrete harm meted out by the defendant. The ruling could limit the number of plaintiffs that can be included in a class action. Indeed, it might even proscribe some claims under the Fair Credit Reporting Act and other statutes. The nexus to Campbell-Ewald, a case that could allow companies to cut off class actions by merely making an offer to settle to the lead plaintiff, would likely make it much harder for large class actions to survive motions to dismiss.

FDIC v. Chase Mortgage Finance Inc.5 This case is in the Second Circuit from a lower court. The FDIC, acting as receiver for a failed bank, is seeking to overturn a lower court ruling that a lawsuit against Chase was time-barred. Essentially, the issue turns on whether the bank regulator can rely on federal law to defeat state statutes of repose to continue to bring cases, such as those that go back to the financial crisis. The court could move to limit the ability of regulators to continue to bring those actions if it rules in favor of Chase Mortgage Finance.

Operation Choke Point is at the root of this case, which is being tried in D.C. District Court. Operation Choke Point is an initiative of the U.S. Department of Justice (DOJ). Announced in 2013, the initiative investigates banks in the United States and the business they do with payment processors, payday lenders, and other companies believed to be at higher risk for fraud and money laundering. The purpose of this initiative is to enable the DOJ to cut off illegal business activities from the banking system. The pushback is that this initiative is more about politically unpopular activities than worries about fraud and money laundering. The plaintiff is the association that represents payday lenders. Take note that the DOJ is actually not the defendant in this case. The defendant is the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board (FRB), and the Office of the Comptroller of the Currency (OCC). Principally, the allegation is that the foregoing abused their supervisory powers by pressuring banks to cut off business relationships with payday lenders. Several issues are in contention, such as whether due process is being by-passed or the government is pressuring the financial industry to cut off the plaintiff’s access to banking services,

without first having shown that the targeted plaintiffs are violating the law. So far, the matter has survived a motion to dismiss from the regulators. Somewhat at stake is the increased regulatory oversight of banks since the financial crisis, in that there is a contention that the regulators have gone past the limits of their authorities.

Regulations As I see it, several areas of regulatory compliance will be developed extensively in 2016, most notably anti-money laundering (AML), cybersecurity, payday lending, mandatory arbitration, various technologies, and capital ratios. The New York State Department of Financial Services (DFS) seems to be taking the lead on cybersecurity and AML regulations. The Bureau has focused on increased oversight of payday lenders, prepaid cards, and consumer arbitration clauses. In addition, capital rules will come under more scrutiny by FRB, FDIC and the OCC.

Cybersecurity and Anti-Money Laundering

Consumer Financial Services Market The Bureau will continue to follow a rigorous, and aggressive, agenda in 2016, certainly evident in its challenges to the

way payday lending and debt collection are conducted, reducing the impact of mandatory arbitration clauses, and even setting rules for virtual currencies (such as Bitcoin) for prepaid cards. In March 2015, the Bureau issued a proposal to payday lenders that caused quite a stir in that lending space. In essence, the Bureau’s outline would mandate changes to many of the practices involving low income consumers, those most effected by payday lending. The proposal would curtail so-called “debt traps” by requiring companies to determine a borrower’s ability to repay small dollar, short term loans, similar to what is required now for mortgages. Additionally, the means by which lenders collect payment for those loans

will change. Having already sent the outline to a small business review panel, the Bureau expects to issue a formal proposal soon, followed by a final rule thereafter. One gets the impression that there will be huge battles forthcoming, but, inevitably, it is quite possible that ‘resistance is futile.’ Mandatory arbitration will also be on the battlefront, as the Bureau will be proceeding with rules that limit mandatory arbitration clauses in consumer credit contracts (i.e., credit cards). The Bureau wants to bar financial firms from inserting class action bans into arbitration clauses, among other continued on page 46

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n National Mortgage Professional Magazine n JANUARY 2016

The stage is set for significant rules to be implemented for cybersecurity and anti-money laundering processes. Leading the way is New York’s DFS. In November 2015, the DFS set forth standards for cybersecurity. The DFS has said that it will lay out the provisions in a full proposal at some point in the near future. What is known at this time are standards involving multifactor authentication requiring additional sign-in credentials above and beyond passwords for key databases, mandatory annual audits, and the appointment of a single officer to oversee information security. Our bank clients for the most part already have such protocols in place. However, non-banks will need to catch up to a more state-of-the-art cybersecurity program, irrespective of the costs. Implementing cybersecurity can be expensive and a full review should be undertaken for both cybersecurity and information security. The DFS has also set its sight on antimoney laundering regulations. Specifically, in December 2015 it issued a proposal that is expected to be become final in 2016. A salient requirement under the rule will mandate the compliance officer to sign off on a company’s anti-money laundering efforts. But, the responsibility will not end there. If certain failures occur that undercut compliance certification, the DFS would like to hold the compliance officer individually responsible; indeed, the responsibility could lead to criminal charges of lying to regulators in the event the certification is not entirely supported by evidence of implementation and testing. Holding compliance officers responsible for defects in certification is a tall order, not least of which could lead to difficulty employing individuals who would be willing to take on such personal liability. Why stop at compliance

officers? What not direct such personal liability to executive management or the board of directors? Where does the buck stop? Managing an AML program is very demanding. Certifying comprehensive, complete and total compliance of all vectors involved in such certification is very difficult to ensure, especially with the ever changing schemes of bad actors that seek to defeat the antimoney laundering protocols of the banking system.

heard street ON THE

Our Heard on the Street column is a chronicle of events, changes and passages in the lives of the people and companies shaping the mortgage industry.

Angel Oak Announces $150 Million Securitization of Non-Prime Mortgages

JANUARY 2016 n National Mortgage Professional Magazine n



Angel Oak Capital Advisors LLC has announced the completion of its first securitization of non-prime whole loans. The loans, which total $150.4 million in aggregate, were originated by two of Angel Oak Capital’s affiliate companies—Angel Oak Mortgage Solutions and Angel Oak Home Loans. The securitization is the culmination of four years of careful planning and efforts to redevelop a market that has been non-existent for over seven years. “When Angel Oak was founded, we aimed to take advantage of dislocations in subprime residential mortgagebacked securities that were deeply undervalued following the financial crisis,” said Angel Oak Managing Partner and co-CEO Michael Fierman. “As those legacy products started to regain popularity, however, supply started to dry up. Strict credit standards put in place following the crisis made it extremely difficult for borrowers with imperfect credit to get a loan. This created a void in new originations and the corresponding securitized mortgage instruments.” The team at Angel Oak Capital noted this trend four years ago and developed a strategy to recreate the market. They launched two separate entities—Angel Oak Mortgage Solutions and Angel Oak Home Loans—to originate non-agency, non-prime non-qualified mortgages and qualified mortgage loans on both the wholesale and retail levels, respectively. The securitization’s collateral consists entirely of non-agency, non-prime mortgages. There is a difference, however, between the subprime products issued prior to the financial crisis and the non-prime mortgages within the security. “The loans originated by our affiliates strictly adhere to the eight pillars

of the ‘ability-to-repay’ regulation and require no less than a 20 percent downpayment,” said Sreeni Prabhu, the firm’s co-CEO and chief investment officer. “As a result, average credit scores are much higher for these loans. In fact, the weighted average FICO score for the 555 loans in the pool is over 680, which is 100 points higher than the average credit score of pre-crisis sub-prime loans.” The securitization is structured as approximately $135,318,000 of seniorand mezzanine-class offered certificates and $15,034,997 of subordinate-class non-offered certificates for a total deal size of $150,352,997. “Angel Oak has engaged a variety of external institutions throughout the lengthy and complicated process of developing this securitization,” said Angel Oak Head of Capital Markets John Hsu. “Without the help of our trusted partners, this enormous task would not have come to fruition.” These partners include: Nomura Securities International Inc., Select Portfolio Servicing Inc., Clayton Services LLC, American Mortgage Consultants Inc., U.S. Bank National Association and Katten Muchin Rosenman LLP.

Parkside Mortgage Trust Invests in First Mortgage Loan

Parkside Mortgage Trust Inc. has announced that it has commenced operations with the purchase of its first mortgage loan. The company is organized to operate as a Real Estate Investment Trust (REIT), and the nonagency loan will be serviced by its affiliate, Parkside Lending LLC, a national wholesale and correspondent lender

and servicer. “This effort has been in the works for the past three years and we’re proud that it has finally come to fruition,” said Matthew Ostrander, president and chairman of the board of Parkside Mortgage Trust. “We’re excited to be entering into the next phase of this enterprise and starting to invest in mortgages.” Parkside Mortgage Trust was formed by a management team led by Ostrander who also serves as chief executive officer of Parkside Lending, which was recently admitted as a member of the Federal Home Loan Bank of Cincinnati through its insurance subsidiary PSL Insurance Company LLC. In addition, Ostrander is a director with the California Mortgage Bankers Association (CMBA) Board, where he serves as the president of Residential Real Estate. He is also a member of the Freddie Mac Advisory Board.

Auction.com Rebrands as Ten-X

Auction.com has announced that it has rebranded the company as Ten-X, marking the company’s transition into an online marketplace where buyers, sellers, and the agents and brokers who represent them can buy and sell residential and commercial real estate. The company also announced plans to introduce new transaction platforms in March that will give sellers the option of choosing to transact either using an online auction or a more traditional non-auction process online. The company, which has facilitated the sales of over 200,000 residential and commercial properties totaling over $35 billion since 2007, began as a disposition platform for distressed assets. In recent years, Auction.com has

migrated towards higher quality, nondistressed assets. Nearly 60 percent of the commercial properties brought to sale in 2015 were traditional, high quality assets, including an office complex in Manhattan Beach, Calif., that sold for $96 million—the largest online transaction ever. Under the new brand, the company will feature three transaction platforms: Ten-X Commercial; TenX Homes, which will feature traditional, move-in ready residential properties; and Auction.com, which will continue to feature properties for residential real estate investors. “This announcement represents something far more significant than a name change,” said Ten-X Chief Executive Officer Tim Morse. “Our move to the Ten-X brand reflects our evolution into a marketplace for a much broader range of residential and commercial property types, and our expansion into new technology solutions that empower buyers, sellers and real estate professionals alike. Our vision is to make buying and selling real estate ten times better for everyone involved.” Ten-X will launch and demonstrate its new commercial and residential platforms—which will feature both auctions and more traditional transaction options—in March at the South by Southwest (SXSW) Interactive Festival in Austin, Texas. Both platforms will be optimized for use on desktop, tablet and smartphones. “We believe that, increasingly, people buying real estate want to be able to buy property whenever they want, wherever they happen to be, and on whatever type of computing device they’re using, and we plan to meet those requirements,” said Morse. Ten-X Commercial will launch as a national platform; Ten-X Homes will have a national footprint, but focus initially on four launch markets—Dallas, Denver, Miami and Phoenix. The company also plans to announce programs for the REALTOR audience and commercial real estate brokers in the first quarter. “As real estate moves online, we are

committed to providing buyers, sellers and real estate professionals more of what they need to transact successfully,” said Morse. “Ten-X offers a proven platform, a simplified process, and the information and tools that allow everyone to confidently buy and sell real estate online.”

Chronos Solutions to Acquire Cogent Road

and gives them additional opportunities to increase engagement in the increasingly dynamic housing market.”

GSF Mortgage Opens First Branch in Illinois

GSF Mortgage has named Sarkes Abbas as branch manager in the company first branch in the state of Illinois, in downtown Chicago. Abbas joins GSF with 15 years of mortgage industry experience. In order to grow, he accepted a branch manager position and went back to originating loans when he started a family.

Abbas plans to expand into the Massachusetts market with GSF Mortgage’s extensive products and services, including niche loans like GSF’s construction loan. Abbas offers impeccable customer service. He received a 5-star customer service award from Five Star Professional Chicago Magazine. He is sure to always treat his customers with respect and communicate with them in a professional manner. “I am impressed with Sarkes’ passion for success in the mortgage industry, as well as his grasp of the latest technologies,” said GSF Regional Manager Leo Spanuello. “He has a strong track continued on page 52





Freddie Mac Announces Partnership With Lenders One

Freddie Mac has announced a new relationship with the Lenders One Mortgage Cooperative that will give Lenders One members who are Freddie Mac Seller/Servicers pricing and execution benefits, enhanced access to mortgage products, and professional training and development opportunities. “Freddie Mac is pleased to team up

© Copyright 2007-2016 Carrington Mortgage Services, LLC headquartered at 1600 South Douglass Road, Suites 110 & 200A, Anaheim, CA 92806. 800-561-4567. NMLS ID 2600. Nationwide Mortgage Licensing System (NMLS) Consumer Access website: www.nmlsconsumeraccess.org. AZ: Mortgage Banker BK-0910745. CA: Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, File 413 0904. CO: Check license status of your mortgage loan originator at www.dora.state.co.us/real-estate/index.htm. GA: Georgia Residential Mortgage Licensee 22721. IL: Illinois Residential Mortgage Licensee. KS: Supervised Loan License SL.0000313. KY: Mortgage Loan Company License MC21112. MN: This is not an offer to enter into an interest rate lock agreement under Minnesota Law. MS: Licensed by the Mississippi Department of Banking and Consumer Finance. Mortgage Lender License 2600. MO: Missouri Company Registration 14-1746-A. In-State Office: Missouri Residential Mortgage Loan Broker License 14-1746-A1. 251 SW Noel, Lees Summit, MO 64063. NV: Mortgage Broker License 4068 (Residential Mortgage Lending). NH: Licensed by the New Hampshire Banking Department. NJ: Licensed by the N.J. Department of Banking and Insurance. NY: Licensed Mortgage Banker—NYS Department of Financial Services. New York Mortgage Banker License B500980/107664. OH: Ohio Mortgage Broker Act Certificate of Registration MB.804213.000; Ohio Mortgage Loan Act Certificate of Registration SM.501517.000. OR: Mortgage Lender License ML4886. PA: Licensed by the Department of Banking. RI: Rhode Island Licensed Lender, Lender License 20112809LL. VA: Licensed by the Virginia State Corporation Commission MC-5382. NMLS ID 2600 (www.nmlsconsumeraccess.org). WA: Consumer Loan License CL2600. Also licensed in AL, AR, CT, DE, DC, FL, ID, IN, IA, LA, ME, MD, MI, MT, NM, NC, OK, SC, TN, TX, UT, WV, WI and WY. NOTICE: All loans subject to credit, underwriting and property approval guidelines. Offered loan products may vary by state. There is no guarantee that all borrowers will qualify. Restrictions may apply. This is not a commitment to lend. Terms, conditions and programs are subject to change without notice. This information is for mortgage professionals only and is not intended for distribution to consumers. Carrington Mortgage Services is not acting on behalf of or at the direction of HUD/FHA or any government agency. All rights reserved.

n National Mortgage Professional Magazine n JANUARY 2016

Growing your business with the right partner has never been easier. Get started today with Carrington Mortgage Services.



Chronos Solutions has agreed to acquire Cogent Road, a San Diegobased mortgage technology company. The acquisition will allow Chronos to expand its suite of products and services supporting mortgage lenders as well as add a deep bench of mortgage technology talent. Cogent Road develops three core products for the mortgage origination market. The first, Funding Suite, is a credit and data purchasing platform designed for mortgage lenders. Funding Suite not only provides credit information but does so in a format that allows lenders to analyze ways to improve a borrower’s credit real time as well as tracks spend at the loan level. Tax Door is an automated tax transcript solution that allows users to order verified income data via Internal Revenue Service (IRS) tax transcripts without requiring signed 4506Ts. Tax Door has a 100 percent success rate, where the industry is used to one in the 15 percent range. The third, Roohmz, is one of the leading loan origination systems in the industry. “Cogent Road offers an incredible array of superior origination technology,” Chronos Solutions CEO Matt Martin said. “The combination of these products with Chronos’ already-formidable suite of origination solutions empowers us to deliver end-to-end service to originators of any size.” Cogent Road CEO William DiPaolo said, “Cogent Road prides itself on delivering flexible, robust technology designed to move the origination industry forward. In collaboration with Chronos’ wide variety of services and resources, we can deliver at elite levels virtually any service a mortgage lender might require.”

with Lenders One and help its members reach more eligible borrowers, achieve new efficiencies in the origination process and build strong, competitive businesses,” said Chris Boyle, senior vice president of Single Family Sales and Relationship Management, Freddie Mac. “We look forward to working with Lenders One’s leadership and members to achieve our shared commitment to help America’s working families become successful long-term homeowners.” “We are committed to forming valuable alliances for our members,” said Daniel Goldman, interim chief executive officer for Lenders One. “This relationship enables us to further support our members in growing originations



Five Principles for Staying Ahead of the Competition By David Lykken s we head into 2016, the market has never been so competitive in the mortgage industry. The economy does


JANUARY 2016 n National Mortgage Professional Magazine n



seem to be recovering, as far as employment is concerned, and I believe that it’s only going to get better. Nevertheless, wage growth has been stagnant and Millennials are waiting until they’re much further along to make their first home purchases than

previous generations. Add that to the growing number of regulations that seem to have no end, the challenges of availability in inventory, and the uncertainty in rates, and it becomes increasingly more difficult for organizations to succeed in the mortgage business.

In this environment, mediocrity will not suffice There was a time in the past when organizations could just skate by—riding the wave of industrywide growth. That is no longer the case. When growth of the pie has dramatically decreased, organizations in the mortgage business of today must truly be competitive in order to get the bigger slice. So, how do you do it? Of all the companies competing in the industry, how do you rise above the fray? If you’re doing the same things as everyone else, you’ll get the same results as everyone else. So, what should you do differently than the competition? In this article, I would like to suggest just a few things that can set you in the right direction toward staying ahead of the competition in 2016...

Focus on continuous improvement The mark of any high-achiever is that he is always looking toward the next victory. For the most successful among us, there is no mountaintop; there is only the next summit. As a leader in the mortgage industry, if you want to remain competitive, you’ve got to adopt this posture for your organization—and for yourself. Most organizations set business goals for growth, but it isn’t just about setting the goals; it’s about doing the necessary groundwork required to reach them. It’s one thing to plan for growth; it’s another thing to know how you’re actually going to

grow. When you set your yearly objectives for 2016, did you include within them action plans for steps you plan to take in order to meet those objectives. If not, you’re just dreaming. You’ve got to be specific and direct about what needs improvement within your organization and how you plan to improvement. And, in addition to the organization, you as a leader need to be deliberate about improving yourself. What books are you reading? What news are you following? What conferences are you attending? What daily habits are you developing in order to make you a better leader? If you aren’t doing anything differently than you did last year, you aren’t growing. The organization will follow the leadership. Continuously improve yourself; continuously improve your organization.

Measure everything in your business Maybe you’re reading this and thinking to yourself, “I’m already ahead of the competition.” Well, if that’s the case, good for you! But, do you know why you’re ahead of the competition—I mean, really know. Are you measuring the various aspects of your business to make sure your activities are correlating with positive results? The simple truth is that if you don’t measure your activities, you really don’t know why you’re failing or why you’re succeeding—you’re simply unlucky or lucky. So, if you are currently very successful, you can stay that way by measuring your activities and finding out what you should attribute that success to. If you wish you could be more successful (as most of us do, and should), then measuring your activities can help you understand what you need

to do differently in order to achieve that success. With all of the data and technology available to us today, there is no excuse for not tracking everything and analyzing it to improve your business. Still, not everyone will do it; so, if you do, you’ll be staying ahead of the competition.

Acquire and develop the best talent

Take advantage of networking and partnerships

head into 2017 and whatever competitive challenge the next year brings. David Lykken, a 43-year veteran of the mortgage industry, is president of Transformational Mortgage Solutions (TMS), a management consulting firm that provides transformative business strategies to owners and “C-Level” executives via consulting, executive coaching and various communications strategies. He is a frequent guest on FOX Business News and hosts his own weekly podcast called “Lykken On Lending” heard Monday’s at 1:00 p.m. ET at LykkenOnLending.com. David’s phone number is (512) 759-0999 and his email is David@TMS-Advisors.com.

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www.calhardmoney.com • e-mail scenarios to: info@calhardmoney.com PB Financial Group Corp. NMLS #357614/PB Financial Group Corp BRE #01522495 Disclosures: per FDIC Regulations Section 6500 Part 226, Subpart C, 226.24. The amount of each payment that will apply over the term of the loan is based on simple annual interest applied to the unpaid balance. Loans range from 1 day to 60 months, are interest only and include a balloon payment due at term. Finance charges apply. Payments do not include amounts per property taxes or insurance premiums. This is not a commitment to lend. Rates and points are subject to change without notice. NMLS #357614

n National Mortgage Professional Magazine n JANUARY 2016

Some of the best business opportunities I’ve received in my entire career have come from relationships I’ve developed through networking groups. People I’ve met through networking have become great business partners, profitable clients, trusted vendors, and simply really valuable resources. As a leader in the mortgage industry, if you want to really be competitive, you simply cannot operate in a vacuum. You’ve got to get out and interact with others in the industry. This can include joining professional networking groups, but it can also mean attending conferences or simply setting up lunch meeting with leaders of other companies in the business. Being an active networker will make you (and your organization) the go to resource. Networking is killing two birds with one stone: you’re enriching yourself as a leader and you’re marketing your organization simply by being present. If you’re actively seeking out networking opportunities, you’ll be among the most competitive in the business.

This last suggestion may have some mortgage professionals scratching their heads. Shouldn’t we be fighting against regulation rather than accommodating it? Well, yes and no. I strongly believe in joining advocacy groups like the Mortgage Bankers Association (MBA), so that we are appropriately represented in Washington, D.C. I’m all for lobbying for a better regulatory environment, as long as it’s done through the appropriate channels. But, at the end of the day, being among the first to follow the rules is going to provide security against noncompliance. Obviously, auditors are

most interested in investigating companies that demonstrate a consistent inability to comply with regulations. If your organizations becomes known for its speed and accuracy in complying with regulations, you will become less of a target. Developing a good relationship with regulators is the best way to ensure you’ll still be around tomorrow. Be a leader with your integrity; there is simply no better way to stay ahead of the competition than this. There will always be cheaters looking for shortcuts but, sooner or later, they will be find out. Don’t stoop to that level; be better than that. If you do, you’ll stand a much greater chance of still being around as we


As more students graduate college and enter into the workforce to discover career opportunities, I feel that the mortgage industry is falling short in capturing that talent. The market is flooded with smart and talented young people who are eager to find meaningful work, but so few of them are unaware that they can find it in the mortgage industry. If you can be the one to draw them in and take advantage of their potential, you can set yourself apart from all of the companies in the industry who are ignoring them. But, once you’ve acquired talent, the work doesn’t end there; you’ve got to place an emphasis on keeping that talent. You can’t just lure employees in with the promise of meaningful work; you’ve actually got to give it to them. You’ve got to provide the right mix of incentives, financial and otherwise, that make your employees proud to work for you. If you have happy and motivated employees, you will almost certainly get positive results. What if your organization—a company in the mortgage industry—made a list of “The Best Companies to Work For?” That would certainly set you apart from the competition! An organization is only as good as the people who work for it. Attract and keep the best of them.

Cooperate and collaborate with regulators

Non-Prime Mortgages Gain Steam Going Into 2016 By Tom Hutchens

JANUARY 2016 n National Mortgage Professional Magazine n



Non-prime mortgage origination volumes have been relatively minimal over the last few years, with less than $1 billion originated in 2015. However, recent events lend favorably to the outlook for 2016. It has taken a while for this segment of the mortgage market to ramp up again, as lenders work to adopt a non-QM lending process that fits with new regulations in the industry, but it appears that a major hurdle has been cleared: securitization. The second half of 2015 saw the first non-prime securitizations since before the housing crisis, with a handful of deals hitting the market (including Angel Oak’s $150 million deal in mid-December). Though we are still nowhere close to volumes seen before the housing crisis, the securitization of non-prime loans is a sign that momentum is heading in the right direction. The reemergence of these deals demonstrates that Wall Street, private equity and the non-prime mortgage market are back at the table together again and paints a positive outlook for mortgage liquidity. There is ample demand on both sides of the equation for these loans. About a third of all Americans have FICO scores lower than 650 and millions of potential borrowers are locked out of agency lending channels because of QM restrictions. The sub-prime borrowers of years past haven’t disappeared, they simply cannot secure lending through traditional agency channels. The success of 2015’s securitizations in the non-prime space speaks to just how strong investor demand is for higher-yielding mortgage bonds. Angel Oak’s deal and others in the market were oversubscribed by investors, painting a positive picture for demand of future securitizations. Lenders now know that, if they choose to originate non-prime loans, they have an alternate option to simply holding the loans on their own books. This is big for increasing liquidity in the underserved non-prime market and should lead to more lenders adopting a non-QM program in order to get a piece of the pie. We feel that the nascent non-prime market can only benefit as volume increases and more participants enter the space. A rising tide lifts all boats, and 2016 should see the non-prime tide swell significantly. In fact, Angel Oak projects originating close to $1 billion in non-prime originations next year and we expect other lenders will see big increases in volume, as well. Tom Hutchens is senior vice president of sales and marketing at Angel Oak Mortgage Solutions, an Atlanta-based wholesale lender currently licensed in 24 states. Tom has been in the real estate lending business for nearly 20 years. He may be reached by phone at (855) 539-4910 or e-mail info@angeloakms.com.


cases and regulations continued from page 41

things. A small business review panel received the Bureau’s outline in December 2015. Needless to say, mortgage industry members and associations are already getting ready for extensive, complex, and exhaustive actions and litigation to thwart the Bureau’s plans. With respect to debt collection and, to some extent, checking account overdraft fees, the Bureau will issue new rules governing those activities. But it is in the area of prepaid credit card transactions that I expect the Bureau to issue broad, final rules that will cause considerable consternation in that market. If the Bureau proceeds as planned, the final rules would require companies, for the first time, to limit a consumer’s losses when funds are stolen or the cards are lost, investigate and fix errors, provide free access to account information, and apply certain credit card protections if credit is offered in connection with a prepaid account. The broad casting of the final rule might bring consumer protection requirements to companies accepting Bitcoin, which would likely be comparable to similar requirements set by New York’s DFS in 2015, but this time on a national scale.

Capital rules still to come An important change to come in 2016 for banks will be the proposal regarding the so-called Net Stable Funding Ratio (NSFR). This concept comes from a proposal of the Basel Committee for Banking Supervision, a panel of global banking regulators. It is based on the view that bank funding mechanisms were accelerators of the 2008 financial crisis and thus a potential systemic hazard. During the financial crisis, several banks suffered a liquidity crunch, due to their over-reliance on short term, wholesale funding from the interbank lending market. As a result, the G20, an international forum for the governments and central bank governors from 20 major economies, launched an overhaul of banking regulation known as Basel III. In addition to changes in capital requirements, Basel III also contains two entirely new liquidity requirements: the net stable funding ratio (NSFR) and the liquidity coverage ratio (LCR). On Oct. 31 2014, the Basel Committee on Banking Supervision issued its final Net Stable Funding Ratio (it was initially proposed in 2010 and re-proposed in January 2014). The NSFR directly addresses long term liquidity needs. Both ratios are landmark requirements: it is planned that they will apply to all banks worldwide if they are engaged in international banking. Essentially, NSFR will mandate banks to hold sufficient cash or assets that can be quickly turned into cash to cover their potential losses over the course of a year. The prudential regulators are

expected to promulgate actionable rules at some point in 2016. However, the banks have complained that the Basel Committee’s proposal requires a level of liquidity that far outmatches the needs banks face. I doubt that their position will change the view of regulators, since the initiative is part of global interactions with counterparts vis-à-vis such capital requirements.

Conclusion As I began with Shakespeare, so I shall end with him, as follows: When law can do no right, Let it be lawful that law bar no wrong.8 This year brings new challenges, but also new opportunities. All things considered, it is best to take advantage of the latter, while being prepared for the former. We have much to be grateful for, having come through some pretty rough financial times. We ought to be vigilant, nimble, and receptive to change; but equally cautious and alert to any plans, whether from within or without, that could undermine the benefits we bring to the market. For many firms, there has been much learned and they are the stronger for having not only persisted but also flourished. As we encounter new challenges, I would hope that we can ban together for the good of all market participants, seeking ways and means to ensure a stable and protective financial environment for the loan products and services that serve the needs of consumers. Jonathan Foxx is president and managing director of Lenders Compliance Group, Brokers Compliance Group, Servicers Compliance Group and Vendors Compliance Group, national companies devoted to providing regulatory compliance advice and counsel to the mortgage industry. He may be contacted by phone at (516) 442-3456, by e-mail at JFoxx@LendersComplianceGroup.com or visit LendersComplianceGroup.com.

Footnotes 1—The Tempest, 2.1. 2—PHH Corp. et al. v. Consumer Financial Protection Bureau, Case 15-1177, U.S. Court of Appeals for the District of Columbia Circuit. 3—Midland Funding, LLC, et al., Petitioners v. Saliha Madden, Docketed: November 10, 2015, Case 15-610, U.S. Supreme Court. 4—Spokeo Inc. v. Thomas Robins et al., Case 131339, and Campbell-Ewald Co. v. Gomez, Case 14-857, U.S. Supreme Court. 5—FDIC v. Chase Mortgage Finance Inc. et al, Case 14-3648, U.S. Court of Appeals for the Second Circuit. 6—CTS Corp. v. Waldburger, Case 13-339, June 9, 2014, U.S. Supreme Court. 7—Consumer Financial Services Association of America et al. v. Federal Deposit Insurance Corp. et al., Case 1:14-cv-00953, U.S. District Court for the District of Columbia. 8—King John, 3.1.

National Mortgage Professional Magazine


Top Mortgage Employers


We polled our readers about their employers based on the following criteria: Corporate culture

Training resources


Long-term strategy

Industry participation

Marketing support

Day-to-day management



Internal communications

Based on the above criteria, we weighted factors that are more important to our readers (i.e. our readers told us that factors like corporate culture was considerably more important to them than speed of company). The resulting responses created the Mortgage Employer Company Score (MECS). We have broken down the results into national and regional categories.

n National Mortgage Professional Magazine n JANUARY 2016



National Mortgage Professional Magazine is proud to announce its annual list of Top Mortgage Employers.

A M E R I C A ’ S


1 0 0



( N A T I O N W I D E )

1st Advantage Mortgage, a Draper and Kramer Company

Everett Financial Inc., d/b/a Supreme Lending

Academy Mortgage

Fairway Independent Mortgage Corporation

Alderus Funding & Investments Inc.

First Centennial Mortgage Corporation

American Advisors Group

First Choice Loan Services Inc.

American Financial Resources Inc.

First Direct Lending LLC

American Neighborhood Mortgage Acceptance Company

First Guaranty Mortgage Corporation

(Annie Mac)

First Mortgage Company

American Security Mortgage Corporation

Flagstar Bank

AmeriFirst Financial Corporation

Franklin American Mortgage Company

Angel Oak Mortgage Solutions

Franklin First Financial

Associated Bank N.A.

Freedom Mortgage Corporation

Assurance Financial

Gateway Mortgage Group LLC

Atlantic Pacific Mortgage Corporation

Georgetown Mortgage

Axia Home Loans

Gold Star Mortgage Financial Group Corporation

Banc Home Loans

GSF Mortgage Corporation

Bay Equity LLC

Guaranteed Rate Inc.

Big Valley Mortgage

Guardian Mortgage Company Inc.

Caliber Home Loans Inc.

Guild Mortgage

Carrington Mortgage Services LLC

Home Point Financial

Catalyst Lending Inc.

HomeBridge Financial Services Inc.

Class Appraisal Inc.

HomeBridge Wholesale

CMG Financial

HomeTown Lenders

Colonial Savings

Indecomm Global Services

Colony American Finance

Inlanta Mortgage Inc.

Commerce Home Mortgage

InterLinc Mortgage Services

Credit Plus Inc.

JMAC Lending Inc.


Land Home Financial Services Inc.

Embrace Home Loans

LeaderOne Financial Corporation

Endeavor America Loan Services (The Money Source)

Loan Simple Inc.

Envoy Mortgage Ltd.

Loan Star Home Lending

Equity Prime Mortgage

McLean Mortgage Corporation

Equity Resources Inc.

MeadowBrook Financial Mortgage Bankers Corporation

A M E R I C A ’ S


1 0 0


( N A T I O N W I D E )



Megastar Financial Corporation

PHH Corporation

Midwest Equity Mortgage LLC

Platinum Home Mortgage Corporation

Mortgage Financial Services

Plaza Home Mortgage

Mountain West Financial Inc.

Primary Residential Mortgage Inc.

Movement Mortgage LLC

Quicken Loans

Neighborhood Loans

RCN Capital

New American Funding

REMN Wholesale

New Penn Financial

Residential Home Funding Corporation

New York Community BanCorp.

SecurityNational Mortgage Company

NFM Inc. d/b/a NFM Lending

SWBC Mortgage Corporation

Norcom Mortgage


NOVA Home Loans

Union Home Mortgage Corporation

Open Mortgage

United Mortgage Corporation

Pacific Union Financial

United Wholesale Mortgage

Paramount Residential Mortgage Group

Van Dyk Mortgage Corporation

Parkside Lending LLC

Waterstone Mortgage

Peak Mortgage

Weichert Financial Services

Peoples Mortgage Company

Wells Fargo Home Mortgage

Perl Mortgage



1 0



( M I D - A T L A N T I C ) Apex Home Loans

McLean Mortgage Corporation

Family First Funding LLC

Millennium Financial Group Inc. d/b/a Mlend

Fidelity Direct Mortgage

Mortgage Network Solutions LLC

George Mason Mortgage LLC

Residential Home Funding Corporation

Integrity Home Mortgage Corporation

Riverside Mortgage Group



1 0



( N O R T H E A S T ) Atlantic Coast Mortgage LLC

Residential Home Funding Corporation

Blue Water Mortgage


Colonial Mortgage Group

SD Capital Funding Corporation

First Equity Mortgage

Shamrock Financial Corporation

Investors Bank

Village Mortgage Company



1 0



( N O R T H W E S T ) Academy Mortgage Corporation

Commerce Home Mortgage

Alpine Mortgage Planning Inc.

Directors Mortgage d/b/a USA Direct Funding

American Pacific Mortgage Corporation

Mortgage Financial Services LLC

Axia Home Loans

Vantage Mortgage Group Inc.

Big Valley Mortgage

Washington First Mortgage Loan Corporation



1 0



( S O U T H E A S T ) Academy Mortgage Company

Catalyst Lending Inc.

Acopia Home Loans

HomeTown Lenders

Assurance Financial Group LLC

Mortgage Financial Services LLC

Atlantic Bay Mortgage Group

TJC Mortgage Inc.

Barnett Financial Services Inc.

Zeus Mortgage



1 0



( S O U T H W E S T ) Apex Home Loans

Global Mortgage

Academy Mortgage Corporation

Mortgage Financial Group Inc.

Brik Home Loans

Mortgage Financial Services

Capital Loan Associates

Peoples Mortgage Company

Catalyst Lending Inc.

Synergy Financial Group Inc.






n National Mortgage Professional Magazine n JANUARY 2016

The Long & Short: The Business of Short Sales

heard on the street continued from page 43

record of building teams of successful originators while keeping a focus on the best outcome for the borrower. I look forward to working with him to help establish GSF in the Chicago market.”

Mortgage Network Opens Downtown Boston Branch

Could Hardest Hit Funds Be Used for Underwater Homeowners? By Pam Marron

Millions of underwater mortgages still exist There are still 6.9 million underwater homeowners in the United States. Nearly 1.8 million of these homeowners have an interestonly Home Equity Line of Credit (HELOC) that is resetting to fully amortized payments over the next four years. Most of these homeowners are unable to obtain new refinancing because there is no refinance available for non-government-sponsored enterprise (GSE) conventional mortgages,1 or for second mortgages2 or HELOCs that are underwater. There is a way to provide refinancing for these homeowners. Use Hardest Hit Funds as a new second mortgage that would cover a pay down to a loan size for an FHA Short Refinance,3 available for all loan types except FHA, and for loans in a negative equity position. Use Hardest Hit Funds to cover a refinanced pay down to the FHA Short Refinance, a loan available for non-FHA mortgages that have negative equity, to a loan-to-value (LTV) of 97.75 percent for underwater non-GSE first mortgage holders. Then, use Hardest Hit Funds as a new second mortgage for over 1.8 mil52 lion HELOCs, many that are interest-only, and for high rate second mortgages unable to be refinanced due to negative equity.

JANUARY 2016 n National Mortgage Professional Magazine n


Why use Hardest Hit Funds? There is no cap on the combined loan-to-value (CLTV) when government entity funds are used for secondary financing.

Question on pay down, but no maximum CLTV is the key to new refinance The FHA Short Refinance has one criteria that is the reason you don’t see this loan often. The current lender must agree to pay down 10 percent of the loan balance in order for this loan to be put in place. A question arises on if another entity could pay down the 10 percent. In the recently revised HUD 4155.1,4 under Short Payoffs: For instances where the existing note holders5 are reluctant to write down indebtedness, a new subordinate lien may be executed for the amount by which the payoff is short. This reference is not stated again in the new FHA Handbook 4000.1 and under Write-off it states that the existing first lien holder must write off at least 10 percent of the unpaid principal balance.6 Putting aside the question on how the 10 percent principal reduction might be paid, it is clear in HUD Mortgagee Letters 2013-14 and 2014-23 that HUD allows the use of proceeds from federal, state or local government entities to extinguish a portion of negative equity. The valuable detail is that when second liens are extended and held by government entities, there is no maximum CLTV ratio. The FHA Short Refinance has a 115 percent cap on maximum CLTV, but no maximum CLTV ratio for second liens when held by governmental entities or instrumentalities of government. Hardest Hit Funds, an instrument of the government, could be used for the pay down to a 97.75 percent LTV that the FHA Short Refinance requires. There is also no maximum CLTV where secondary financing exists for the Fannie Mae DU REFI Plus, Freddie Mac Relief Refinance, FHA Streamline Refinance, VA Interest Rate Reduction Refinance Loan (IRRRL) and USDA refinance, and all allow for replacement refinancing of secondary mortgages. So risky secondary financing could be replaced with Hardest Hit Funds.

continued on page 87

Mortgage Network Inc. has opened a new branch office in downtown Boston and has added 12 veteran mortgage professionals to help borrowers take advantage of the rebounding housing market. The Boston office will focus on helping borrowers in the metropolitan Boston area and throughout New England with their home financing needs, offering a full range of products that include conventional, non-conventional, government and reverse mortgage loans. The new office is located in the heart of Boston’s financial district and will be led by Ben McKillop, a veteran mortgage leader with 15 years of lending experience in the Boston area. Prior to arriving at Mortgage Network, McKillop was a top-producing branch manager for MetLife Home Loans and later Residential Mortgage Services (RMS), where his office generated more than $600 million in funded mortgage volume over the past three years. Joining McKillop are several members of his former sales team at RMS, including Brian Cavanaugh. Cavanaugh is a senior mortgage banker with 13 years of mortgage banking experience in the Boston area. In 2013, he was recognized as one of the “25 Most Connected Mortgage Professionals” by National Mortgage Professional Magazine. Other members of the new Boston team include: Senior Loan Officers Ravi Pahuja and Sofia Travayiakis, and Loan Officers John Folino, Elisa Dawn Balboni and Nicholas Collins. The new Mortgage Network Boston location will also feature an operations team consisting of Diane Kenyon, Sarah Gibson, Shannon McKillop, Kyle Philbrook and Melissa Menice. “The new Boston location is an important milestone in Mortgage Network’s continued growth, as well as a huge opportunity,” said Mortgage Network Executive Vice President Brian Koss. “Even better is the fact that we are bringing on ten industry veterans who not only know the Boston market inside out, but who have successfully worked together for years. We are thrilled to welcome them aboard.” “I am delighted to be joining Mortgage Network, which is well known in the Boston market for its technology, its excellent support staff and fantastic customer service,” said Ben McKillop.

“Mortgage Network is unique in our marketplace for having relationships with more than two dozen local banks, which allows the company to provide borrowers with a wider variety of mortgage loan types than they could find anywhere else.”

NAHREP Announces New Leadership for 2016

The National Association of Hispanic Real Estate Professionals (NAHREP) has announced the appointment of Leo Pareja as 2016 president-elect and four new additions to the board. Pareja has been a real estate broker for over a decade and nationally recognized as an industry expert. “Leo Pareja is an outstanding example of the talented, successful professionals that make up our NAHREP membership”, said Gary Acosta, CEO and co-founder of NAHREP. “The year 2015 was an exciting year for our members and supporters as we grew our chapter programming, launched the Hispanic Wealth Project and our ’53 Million & One’ tour. We are excited to welcome Leo to our leadership team and look forward to an even more successful 2016.” Previously recognized as the number one Keller Williams agent in the world, Pareja is head of the Leo Pareja Team with Keller Williams in the Washington, D.C. area. He has been highly ranked on NAHREP’s Top 250 Latino Agents list since its inception, making it as the “#1 Agent” in 2013. In 2011, he was acknowledged as one of the “30 Under 30 Class” by Realtor Magazine and his team was ranked as the number five team in the U.S. by unit count according to the Wall Street Journal that same year. His tenure at NAHREP began in 2012 with the founding of the Metro D.C. Chapter and shortly after he was elected to become a director of the national board. Other additions to the board include Luis Padilla of RE/MAX Oceanside Realty in Miami, Fla.; Danny Hernandez of EVista Resources Realty in Kissimmee, Fla.; David Acosta of David Acosta Group in El Paso, Texas; and Pamela Valenciano of Solutions Real Estate in Carlsbad, Calif., all of whom have previously served as presidents of their local chapter boards. Outgoing board members include: Jason Madiedo, JJ Lopez, JR Martinez and Sergio Barajas. continued on page 80



n National Mortgage Professional Magazine n JANUARY 2016

Just Ask

JANUARY 2016 n National Mortgage Professional Magazine n




Eric Weinstein & Laura Burke nowledge is power. Power translates to success, whether it is dollars in your pocket, stronger leadership, increased bottom lines or peace of mind, we are here for you. This month, we are introducing a new column for questions relating to starting a business, managing a business, training, networking, tax-related issues, corporate security policy, fraud alerts and compliance. All


answers are for informational purpose only, and are not intended to practice law, or are meant to provide tax advice or tax opinions. After reviewing our information, we both recommend seeking legal counsel or the advice of a tax professional. Please e-mail us at JustAskEricandLaura@gmail.com to voice any questions or problems. We are here for you! Stop! Before you read this, look in this month’s magazine for Eric’s other column, “Can You Help a

Brother Out?” Read that first. This column will make more sense if you do it in order. Mike Eagleton from New York, N.Y. asks … Help! I screwed up and screwed up bad. I did a loan that closed for a nice elderly gentleman who wanted a 30-year loan. Somehow, I mistakenly put 300 months instead of 360. Not I nor the processors nor the borrower noticed it until after closing. The bank approved and closed it the

way it was submitted. Now he got his mortgage payment book and it is $100 higher than he thought. What do I do? Eric’s reply to Mike … The Bible teaches us that before we can ask the Lord for forgiveness, we must seek forgiveness from the person we have wronged. You obtain the borrowers forgiveness by making the situation right. You do whatever you can to ease the suffering you have caused. In this

k Eric & Laura case, I think you might owe him a free refinance, if it is at all possible. First, see what he wants that is within reason. That is your moral obligation. If this is a constant problem, you may want to consider a different line of work. And not an air traffic controller, that is for sure. This is a job of the mind, not of the body. You must have constant situational awareness, attention to detail and focus. If not, borrowers will suffer. That is not fair to them or the people that support you. Every mistake causes them work or grief. The truth is that not everyone is cut out to be a loan officer. The paperwork can be tedious and mind numbing at times, but every box must be filled out correctly or someone could get hurt.

Tillie Schmidt from Albuquerque, N.M. asks … I want to know if I can pay my wife or teenage son to help market my business, such as passing out flyers, and such and claim this as a deduction on my tax return. Laura’s response to Tillie … Yes, you can pay a family member “normal and customary” pay for a job they do for you. Keep a time record, and exactly what they are doing for you, could be data entry, passing out flyers, designing website, etc. and keep pay “normal and customary” for that type of job. Talk to your tax accountant for further details.

Laura’s rebuttal to Eric … Eric, there are some regulations based on “investment income”, and sheltering money, but for the most part, the IRS doesn’t even require a person (child or adult) to file a tax return unless they have unearned income over $1,050, or earned income over $6,300, so basically up to $6,300 is tax free income, zero percent income tax! Once an individual is over the $6,300, they do have to start paying taxes on the income over the $6,300 at a starting rate of 10 percent, it has nothing to do with what your parents are being taxed at.

fully addressed with a qualified tax professional. Disclaimer: All answers are for informational purpose only, and are not intended to practice law, or provide tax advice or tax opinions. After reviewing our information we recommend seeking legal counsel or the advice of a tax professional. Eric Weinstein worked in banking, on the commercial real estate side until 1991, when he fell in love with residential lending. He may be reached by phone at (703) 5058692 or e-mail EWeinstein4u@gmail.com. Laura Burke is an author and trainer with 20-plus years of experience in the mortgage marketplace. She may be reached by e-mail at LauraLynnBurke@gmail.com.

Eric & Laura welcome your questions, please send your inquiries to JustAskEricandLaura@gmail.com. 55

Loan Officers, Branch Managers and Teams,



Carrington Mortgage Services is adding retail branches today. IT’S TIME TO MAKE YOUR MOVE. Find out more about Carrington today and make the move to expand your business and career. CONTACT:

John Cervantes | RECRUITER John.Cervantes@CarringtonMH.com


Carrington is expanding nationwide and we need experienced managers and teams to join our organization. WE OFFER: Great compensation and benefits Operations focused on quality & speed of closing Marketing support and lead generation Licensing and compliance support Agent co-marketing programs Government loan programs from FICO of 550

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Join our career webinars, posted on Facebook at: www.Facebook.com/CarringtonHomeLoans www.CarringtonHomeLoans/CareerWebinar © Copyright 2007-2016 Carrington Mortgage Services, LLC headquartered at 1600 South Douglass Road, Suite s110 & 200A, Anaheim, CA 92806. 800-561-4567. NMLS ID 2600. Nationwide Mortgage Licensing System (NMLS) Consumer Access website: www.nmlsconsumeraccess.org. AZ: Mortgage Banker BK-0910745. CA: Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, File 413 0904. CO: To check license status of your mortgage loan originator, visit www.dora.state.co.us/real-estate/index. htm. GA: Georgia Residential Mortgage Licensee 22721. IL: Illinois Residential Mortgage Licensee. KS: Supervised Loan License SL.0000313. KY: Mortgage Loan Company License MC21112. MN: This is not an offer to enter into an interest rate lock agreement under Minnesota Law. MS: Licensed by the Mississippi Department of Banking and Consumer Finance. Mortgage Lender License 2600. MO: Missouri Company Registration 14-1746-A. In-State Office: Missouri Residential Mortgage Loan Broker License 14-1746-A1. 251 SW Noel, Lees Summit, MO 64063. NH: Licensed by the New Hampshire Banking Department. NJ: Licensed by the N.J. Department of Banking and Insurance. NV: Mortgage Broker License 4068 (Residential Mortgage Origination/Lending). NY: Licensed Mortgage Banker—NYS Department of Financial Services. New York Mortgage Banker License B500980/107664. OH: Ohio Mortgage Broker Act Certificate of Registration MB.804213.000; Ohio Mortgage Loan Act Certificate of Registration SM.501517.000. OR: Mortgage Lender License ML-4886. PA: Licensed by the Department of Banking. RI: Rhode Island Licensed Lender, Lender License 20112809LL. VA: Licensed by the Virginia State Corporation Commission MC-5382. NMLS ID 2600 (www.nmlsconsumeraccess. org). WA: Consumer Loan License CL-2600. Also licensed in AL, AR, CT, DE, DC, FL, ID, IN, IA, LA, MD, MI, MT, NE, NM, NC, OK, SC, SD, TN, TX, UT, WV, WI, WY. NOTICE: All loans are subject to credit, underwriting and property approval guidelines. Offered loan products may vary by state. There is no guarantee that all borrowers will qualify. Restrictions may apply. This is not a commitment to lend. Terms, conditions and programs are subject to change without notice. This information is for industry professionals only and is not intended for distribution to consumers. Carrington Mortgage Services is not acting on behalf of or at the direction of HUD/FHA or any government agency. All rights reserved.

n National Mortgage Professional Magazine n JANUARY 2016

Eric’s reply to Tillie … Here’s a funny thing in the tax code. If the family member is a dependent. Their tax rate is the same as yours. The IRS does this so rich people cannot shelter income by paying a child, which may be at a lower tax rate. I am not a tax accountant, so don’t take my word for this, it is just something I remember back from the olden days.

What many people fail to realize is that if your income is $400,000, you are not taxed a flat rate of 35 percent, we are on a tiered tax system, so the first $0-$9,725 is only taxed at 10 percent, and then from $9,276-$37,650, you are taxed the first 10 percent of $927.50 plus 15 percent of the amount over $9,275. So many times I will hear people say, they don’t care about a raise, or getting married will put them in another tax bracket. It could, but keep in mind how the tired structured works. What Eric is speaking about is on investment income; on investment income over $2,000, children will be taxed at the parents’ tax rate anyway, even if they file their own returns. This is a unique situation and should be


Laura’s reply to Mike … Mike, we all make mistakes, this one went through a lot of people, and second eyes, and no one caught it, not even the borrower at closing. I agree with Eric that you share in the responsibility of rectifying the error. I would think that the lender may help too, if the borrower qualified at 300 months, he should qualify at 360 months. However, before I went through all these hoops I would calculate exactly what his monthly difference is, does the rate change or remain the same. Have a serious conversation with the borrower to determine if a refinance is truly necessary and would make his monthly obligations easier, or was this a blessing in disguise? For example a $200,000 loan at a 30-year, 360 months monthly payment is $836.03 with total interest paid $135,971.07 (45.18 percent of the payment). The same $200,000.00 loan at a 25year, 300 months monthly payment is $1111.66 with total interest paid $133,499.49 (40.03 percent of the payments). The monthly difference is less than $300, it is $275.63, and the interest saved is $2,472. So perhaps building equity quicker and paying down the loan faster may look more appealing

after the initial “this isn’t what I wanted has passed.” But it may be an undue burden for the borrower and should be rectified in that case as quickly and with cost to the borrower. Although, in my mind, I don’t understand how the borrower could get through all those closing docs, with the mortgage payment, and term without catching it either.

“For most businesses, the hardest challenge is to balance what policies work and what policies bring the most value to the business, whether from a cost or human capital perspective.”

What It Takes to Be One of the Fastest Growing Companies in the U.S. By Steven Kaufman, CPA, MsEDE


There are many perks and benefits to every career field. In the arts, it’s the opportunity to grow creatively, while in retail or product development, it’s the chance to test new products before they’re released in the marketplace. In the mortgage industry, the effectiveness of mortgage operations is driven primarily by top talent, which creates a signifi-

cant advantage in today’s marketplace. This will undoubtedly define the next generation in the mortgage workforce. Staff performance is essential to the core of any business. It is the backbone upon which growth and success lies. To recruit and retain the best employees in sales, banking, human resources and other internal positions, employers must

JANUARY 2016 n National Mortgage Professional Magazine n


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This information is solely for mortgage professionals and should not be provided to consumers or third parties. Information is subject to change without notice. This is not a commitment to lend and there is no guarantee that all borrowers will qualify. All loans are subject to credit, underwriting, and property approval. Other restrictions may apply. FGMC is not acting on behalf of HUD, VA, FHA or any other agency of the federal government. First Guaranty Mortgage Corporation (Company NMLS ID 2917) is licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act; Regulated by the Division of Real Estate in the State of Colorado; Licensed by the Delaware State Bank Commissioner to engage in business in this State under License No. 2403 (renewed through 2015); Georgia Residential Mortgage Licensee; Illinois Residential Mortgage Licensee; KansasLicensed Mortgage Company; Licensed by the Mississippi Department of Banking and Consumer Finance; Licensed by the Nevada Division of Mortgage Lending to make loans secured by liens on real property; Licensed by the New Jersey Department of Banking and Insurance; Licensed Mortgage Banker – NYS Department of Financial Services, Licensee No. B500800 (d/b/a FGMC In Lieu of True Corporate Name First Guaranty Follow us on: Mortgage Corporation); Rhode Island Licensed Lender. For complete corporate and branch licensing information, visit www.fgmc.com or www.nmlsconsumeraccess.org.

updating it to allow for more flexible hours and vacation time. Employees are able to self-manage themselves and the system. Taking vacation time is encouraged because it allows each team member a certain work-life balance that is beneficial to the success of the company. Great ideas and innovation rarely happen if an employee is too burned out. Another incentive that every employee looks forward to is performance-structured bonuses. Creating a system of bonuses can also increase productivity in more ways than direct sales. Try implementing a bonus structure that includes perfect attendance by quarter. For instance, if an employee reports to work on time and has no unexcused days, they’re monetarily rewarded for it at the end of the quarter. Although performance-based bonus structures will vary in scope by company, it’s worth looking into whether or not it would be beneficial for your business. Another bonus structure that is compelling for many medium to large companies relates to solving company inefficiencies. For example, when an employee creates a solution to solve waste or inefficiency within the workplace they receive a monetary bonus in the form of a percentCompany-generated age of the funds saved by the company in the coming year. Not only does this reward incentives To understand how to retain good innovation, but it also encourages employemployees, you first need to know what ees to seek out solutions and be involved they’re looking for. Numerous studies in the direct success of the business. have shown that a good salary or wage with the opportunity to increase it over Professional time, along with benefits tailored to their development and training individual needs is an important factor. Engaging your employees or ensuring While the initial perk of any job is ade- employees are engaged and committed to quate pay, retaining experienced, top tal- their best work is both a benefit to the ent requires a bit more creativity. For employer as it is a benefit to the employexample, some companies opt to give ee. For businesses that have successfully their sales team a competitive salary in hired the right talent, you will realize that addition to a structured commission. For these employees are also committed to many employees, being empowered developing themselves both professional(financially or otherwise) to do their best ly and personally. Quite honestly, this is one of the biggest benefits most employevokes a sense of loyalty and trust. When employees were polled on their ees note for being with a company. It is ideal workplace, flexibility in hours and important to remember that an employer vacation usually rank at the top of the list. plays a major role in ensuring employees A flexible attendance policy has a low ini- are consistently evolving, being trained tial cost, but is often highly valued by and developing professionally. To keep employees and your company employees. If you have a policy that makes it difficult for employees to sched- updated on the latest developments in the ule vacation or take sick time, consider mortgage industry, employers should ensure employees are the best fit and are engaged and motivated. There are three core principles your business should rely on to retain talented team members: perks and incentives, continued professional development and a work-family culture. For most businesses, the hardest challenge is to balance what policies work and what policies bring the most value to the business, whether from a cost or human capital perspective. While a highly structured office seems like the easiest, most viable option, it rarely accomplishes the goal of increased productivity and typically causes higher employee turnover. The upfront costs of training, higher pay and other incentives, including flexible hours, is oftentimes a price most companies choose not to incur. However, when benefits such as these are implemented in a positive, work-family culture, team members value the company’s success as much as their own. These kinds of incentives have a greater impact on company culture and typically increase productivity which in turn leads to employees who are more innovative, engaged and loyal. Here are three key ways to cultivate a growing, invested team:

strongly encourage employees to seek out ongoing training. For most businesses, sponsoring an MBA or other graduatelevel program is financially out of the question. However, this doesn’t rule out shorter courses or development programs from local universities or trade organizations. For example, the Mortgage Bankers Association (MBA) and NAMB—The Association of Mortgage Professionals both offer online courses and certifications that are very cost-effective.

Developing a work-family culture The culture of a business has a substantial impact on its ability to execute its strategy and achieve business goals and objectives. If cultivated intentionally, the work culture can significantly improve the environment for both employees and the employer. With so many companies like Google, Facebook and Microsoft setting the stage

for the ideal work environment, it’s important that companies understand why this is necessary. While many companies may not be able to provide a work environment that lives up to this standard, every company can start by creating a unique work culture based on their business. Whether it’s in an open environment free of cubicles and walls or a more traditional office, creating a strong work culture is possible. While collaborative spaces should be available, the primary challenge in cultivating such an environment lies in the attitude of management. Managers should welcome and encourage new ideas, suggestions and thoughts. If there’s a problem, employees should feel that that there’s a safe place to discuss and resolve these issues. Whether this is achieved through one-on-one interactions or quick meetings with managers, the primary goal is building and encouraging a team centric workplace.

Another way to empower employees is through self-management. Managers should guide their teams in the right direction, but when top talent is hired they shouldn’t require micro-management. Employers should clearly establish the responsibilities for their employees and teams, while encouraging honesty and frequent follow-ups regarding work performance. Self-management can certainly be a high risk for some companies, so fully evaluating each employee and the office culture will be instrumental in determining whether this direction is right for your business. By understanding that great culture is transformative both internally and externally, employers can focus on empowering employees to be a part of the success and growth of the company. When employees are committed to the vision, values and direction of the company, they are more able to accomplish meaningful

contributions to the work-family culture. The mortgage industry has the opportunity to lead the nation in top talent and productivity. When employees are highly valued, innovation comes naturally. Taking intentional steps towards making your company’s team a powerhouse is imperative to success. Steven Kaufman, CPA, MsEDE, is a finance enthusiast and the chief acceleration officer and founder of Zeus Trust Company, which operates Zeus Crowdfunding, a real estate crowdfunding and investment platform. Steven is frequently interviewed by local and national news organizations like FOX, ABC, CBS, CNN and Bloomberg on the current financial markets. Kaufman has completed the Strategic Marketing Management Program at Harvard Business School and has a master’s degree in economic development and entrepreneurship from the University of Houston.

Comergence makes it easy to manage your company’s Safe Act compliance so your sales people can do what they do best: SUBMITTING AND CLOSING LOANS. Comergence allows us to design a process that meets our objectives of a quick, hassle-free process without giving up any of our due diligence requirements. - Bob, Lender

Giv Give e us a call at 714-489-8860 or visit us online to learn how how.. WWW.COMERGENCECOMPLIANCE GENCECOMPLIANCE.COM

n National Mortgage Professional Magazine n JANUARY 2016

When sales reps deal with TPO applications and supporting documentation, they aren’t closing loans. That means lost revenue opportunities - every month.




“In your sales career, your battles are not fought with weapons on foreign shores, but within the confines of your own mind. A truly committed salesperson does not have the luxury or the time for the self-indulgence of negative thinking.”—John Glen Stevens

Burn Your Boat … or, It Isn’t 2005 Anymore By John Glen Stevens & Russell Dee Warner

JANUARY 2016 n National Mortgage Professional Magazine n



The ancient Greek warriors were both feared and respected by their enemies. In battle, the Greeks established a welldeserved reputation for their unsurpassed bravery and unshakable commitment to victory. The key to their overwhelming success on the battlefield had far more to do with how the Greek commanders motivated the war-

riors than it did with issues of tactics or training. The Greeks were master motivators who understood how to use a “dramatic demonstration” to infuse a spirit of commitment into the heart of every warrior. Once the warriors had been offloaded from their boats onto their enemy’s shore, the Greek commanders

would shout out their first order, “Burn the boats!” The sight of burning boats removed any notion of retreat from their hearts and any thoughts of surrender from their heads. Imagine the tremendous psychological impact on the soldiers as they watched their boats being set to the torch. As the boats turned to ash and slipped quietly out of sight into the water, each man understood there was no turning back and the only way home was through victory. In your sales career, your battles are not fought with weapons on foreign shores, but within the confines of your own mind. A truly committed salesperson does not have the luxury or the time for the self-indulgence of negative thinking. The true underlying motivation for all success is a deep and unwavering commitment to the task at hand. The sales profession is a demanding and challenging career, but it is also personally rewarding and financially lucrative for those who are fully committed to becoming successful. If you are being pushed around mentally by thoughts of fear, anxiety, self-doubt and worry, it’s time to “Burn your boat” and become fully committed to your sales career, whether that commitment is to stay where you are today or make a move to a new company. “Until one is committed, there is hesitancy, the chance to draw back, always ineffectiveness. Concerning all acts of initiative and creation, there is one elementary truth the ignorance of which kills countless ideas and splendid plans: that the moment one definitely commits oneself, and then providence moves too. All sorts of things occur to help one that would never otherwise have occurred. A whole stream of events issues from the decision, raising in one’s favor all manner of unforeseen incidents, meetings and material assistance which no man could have dreamed would have come his way. Whatever you can do or dream you can, begin it. Boldness has genius, power and magic in it. Begin it now.” —Johann Wolfgang von Goethe How many times have we heard the cliché, “The grass is always greener on

the other side of the fence?” Has the phrase been dulled and overused by recruiters? Do we stay committed to where we are and work on our own grass, or take the leap of faith that some companies may have a greener, larger, more lucrative pasture of greener grass! Our fear of commitment comes from the feeling of being trapped in, fear of boredom, fear of loss of individuality and fear of oppression. Along with these fears comes the fear of compromising certain desires, needs, values and culture. We tend to want change when we do not believe in the values of the team we are on, or when they are holding us back from our full potential, or even trust that your leadership doesn’t have a vision of growth. With all of the changes that are occurring on almost a daily basis within our industry, it is often easy to allow our mind to wander back to the boats and look back towards the “Good ol’ days.” We cannot allow this to happen. Focus on the good that you accomplish every day. Wake and arise every morning with a goal in mind. What can I do, and how can I accomplish this? “Progress is impossible without change, and those who cannot change their minds cannot change anything.” —George Bernard Shaw Change is inevitable. Those who fight it are often left behind in the dust of progression or head back to their boats and get surpassed by others. Think back to those who decided that investing in candles was the right thing to do, since the light bulb would not ever take off. What about the buggy makers who mocked the automobile. Who are you in the industry? Are you blindly looking back on what used to be, instead of steadfastly focusing on what is coming? Burning your boat is believing in your company and leadership. Make sure before you get on that boat, that you are on the winning team! When you go out and battle in the sales arena, make sure you are equipped

“Burning your boat is believing in your company and leadership. Make sure before you get on that boat, that you are on the winning team!”—Russell Dee Warner

with the latest technology tools, master trainers, and a headquarters that will keep sending in supplies for you to be successful. It has often been said that by reading about your personal industry for one hour a day will make you an expert within your industry within a year. Be invested in your career, and become a leader knowing all about the changes, laws, and future of your industry. “A man only learns in two ways, one by reading, and the other by association with smarter people.” —Will Rogers

This is a practice that every single one of us should reach for. Set aside time that nothing is allowed to interrupt. Do it in an environment that will allow for you to focus 100 percent on the task at hand. Self-discipline is probably one of the most difficult challenges that we face. There are many distractions that we will face as we set out to burn our boats. “In reading the lives of great men, I found that the first victory they won was over themselves ... self-discipline with all of them came first.” —Harry S. Truman

As you take the time to do this never forget: “The difference between an amateur and a professional is in their habits. An amateur has amateur habits. A professional has professional habits. We can never free ourselves from habit. But we can replace bad habits with good ones.” —Steven Pressfield Our goal as a sales professional is to be just that, a professional. Stop looking back to what used to be, and focus on what is, and what is to come. If you do this, you will wake up every day excited to go to work, excited to help those whom you

meet, and happier than you have ever been. Jump in and commit to your career. Together, let us burn our boats! John Glen Stevens and Russell Dee Warner are the vice presidents of business development at Mountain West Financial Inc. Russ brings 20 years of wholesale and retail mortgage banking experience, with 17 of those years as VP of sales and marketing. Prior to joining Mountain West, John was an area manager for Bank of England. John is currently serving as vice president of NAMB—The Association of Mortgage Professionals and has was named NAMB Mortgage Professional of the Year in 2015.

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“In most cases, tomorrow’s branch managers will be today’s loan officers looking for new opportunities to grow.”

Do You Have What It Takes to Be a Branch Manager? By Terry LeBlanc

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With purchase mortgage originations expected to jump more than 20 percent this year to nearly $1 trillion, we can expect a comparable spike in hiring of branch managers and loan officers to handle the increased volume. Demand for branch managers will be most prominent in companies looking to expand their operations beyond

their current geographical footprint. In most cases, tomorrow’s branch managers will be today’s loan officers looking for new opportunities to grow. For many top producing loan officers, the move to branch manager seems like the next logical step in their careers. Perhaps they feel they have proven themselves as loan officers and

achieved their goals, and now need a new challenge. Maybe they are excited about the idea of building and coaching their own team of originators. After all, many top loan officers have already developed their own team of assistants or become leaders in the office or mentors to other loan officers. Or perhaps they simply want the additional responsibility and extra compensation that goes with the branch manager title. Maybe you fall into one or more of these categories, and are thinking about becoming a branch manager yourself. But you may also be wondering—do you really have what it takes to succeed?

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Many in our industry believe that a loan officer with a great production track record automatically translates to being an effective branch manager. While great loan officers often do make great branch managers, the reality is that these two roles require some different skills. Just as we often see in sports, the best players don’t necessarily make the best coaches. Making sure that one is a good fit for branch management is key, and that means being a leader. After all, it’s not just your career on the line, but the careers of everyone you will be responsible for leading in your new role. A successful branch manager is a leader—a self-starter with initiative, vision and desire to succeed, a great communicator who understands the details but does not lose sight of the big picture. If you are someone who waits for direction or cannot make time to take on the additional responsibility of branch management, the job most definitely is not for you. Branch managers must be leaders outside the office, too. In fact, the importance of community involvement is probably one of the most overlooked functions of branch management. While participating in neighborhood events and community fundraisers may be inherently rewarding, it enables branch managers to reach out to potential borrowers as well as referral partners like Realtors and home builders. Community involvement also helps branch man-

agers fully comprehend the unique needs and desires of the neighborhoods they serve. As a branch manager, it will also be your job to evoke community spirit in the branch and get others in the office involved, leading by example.

Critical personality traits For branch managers to earn the trust of their colleagues and the community, they must have integrity, reliability, drive and professionalism. Have you developed a professional reputation for your integrity? If so, you know this does not happen overnight. Yet a track record of integrity is essential for any branch manager who hopes to build a successful office—especially if it is a newly opened branch in a new area for the company. Choosing what company to join in order to start a new branch requires due diligence. Regardless of the circumstance, an important question new branch managers must ask is whether their company will support their professional and financial growth or not. Most professionals are more interested in how much support they get from the company than compensation, which is a smart move when becoming a branch manager. Branch managers should align themselves with a growing company that is dedicated to empowering them and their teams with the products, service and support they need to excel. For example, successful branch managers need the backing of a production team committed to always closing loans on time, as well as management that has the mindset of helping branch managers and loan officers do the very same. In today’s highly regulated marketplace, branch managers also need a company that provides up-to-date-compliance resources, as well as companypaid training and excellent marketing support. In order to successfully recruit great loan officers, new branch managers also need to have a comfortable and professional office environment with the products necessary for their sales teams to compete and be successful themselves. Today’s loan officers are looking

for competitive compensation with products that have competitive pricing. But most important of all, good loan officers want excellent back office support, including disclosures, processing and underwriting, all with an eye on closing each loan on time, every time. While branch managers are responsible for the success of the branch, they must never be made to feel isolated or out of the loop from the home office, no matter how far they are from corporate headquarters. Here again, constant communication is the best defense against that happening. But the home office itself must create a reliable and consistent level of overall support to overcome a branch manager’s feelings of being on their own. My company, for example, provides branch managers with an open dialogue with our management team and our sales force. We invite them to visit our corporate office

and spend time with the underwriters, closers, and operational employees so that they already have a relationship formed before they begin. At the same time, new branch managers also need to ask themselves whether their company will provide them the autonomy to run their branch and make decisions as if they had an ownership interest. There should never be limits on the manager’s ability to earn money, for example, and the branch manager should enjoy a high degree of independence in managing the branch’s affairs and growing production in their respective markets. After all, who knows more about their local market and what will be effective than you, the branch manager? Branch managers also need a company that aims to make work fun and places family first. It’s no big secret that the companies that promote cama-

raderie and a family-oriented environment typically have the most successful branches. That kind of atmosphere helps everyone thrive, from branch manager to loan officers and everyone inside the office. It sounds too good to be true, but a quality branch manager can make it happen.

The sky’s the limit When equipped with the right traits, and with the support of a good company behind them, branch managers can do almost anything. That includes not only building their first branch, but being successful and established enough to open and manage other satellite branches in their market, earning as much as they want to. While not all great loan officers are destined to be great branch managers, the opportunities to jump into branch management have rarely been

greater than they are today. So what about you? With origination volume on the way up, are you ready to take your career to the next level? Terry LeBlanc is national sales manager at Assurance Financial in Baton Rouge, La. He has more than 25 years of mortgage banking experience and has worked in production and management roles for mortgage companies as well as depository institutions. Terry served as president of the Louisiana Mortgage Lenders Association (LMLA) in 2010, was the Government Affairs Representative for LMLA from 2011 through 2014, and was a founding member of the Louisiana Mortgage Lenders Foundation. Terry is also a member of the Mortgage Bankers Association and a Rotarian through the Rotary Club of Baton Rouge. He can be reached by TLeBlanc@LendTheWay.com or by phone at (225) 239-7944. 61


n National Mortgage Professional Magazine n JANUARY 2016

“In order to understand the needs and desires of our employees, we need to provide a healthy, welcoming culture in which employees feel safe enough to be honest.”

Nourishing Employees All Year Round By Kerry Elam Many times, we find our corporate culture is in a rut, following the well-worn path of similar programs from year to year. To keep employees engaged and motivated, it is vital to review programs, technologies, processes, procedures and benefits annually—and modify them as needed. Yet internal

JANUARY 2016 n National Mortgage Professional Magazine n



operations will not be effective conducting these reviews in a vacuum; they must focus on open communication to gauge the pulse of employees. As General Colin Powell said, “The day soldiers stop bringing you their problems is the day you have stopped leading them.”

Open communication In order to understand the needs and desires of our employees, we need to provide a healthy, welcoming culture in which employees feel safe enough to be honest. Knowing how to offer space and communicate effectively, without offending others, is an essential competency for all members of a firm, at all levels, starting with management. The most effective organizations  lead by example. When delicate situations are brought to management, how they are handled is a strong message to others, either encouraging or discouraging them from expressing openly. We all want to be thoroughly heard with compassion, and leaders must show us how it’s done. How can an organization be successful in creating a culture in which employees feel safe to speak truthfully? The first step is to instill accountability in all scenarios. As the managing director of human resources and operations, I consistently reiterate, “I want to understand what is going on, yet remember we all play a role in the situation. What is your role; how are you accountable?” I then remind the individual that we do not tolerate blaming in our firm as we all play a part in each situation. This may sound harsh, yet over the last 10 plus years, it has worked time and time again. The second step is to meet conflict head on and face-to-face when possible. If you are part of the situation, suggest that everyone involved meet in person or via conference call. In a recent scenario at Actualize Consulting, we had a team divided in discord. We needed to reestablish open, trusting communication, so we used a technique inspired by Thich Nhat Hanh’s “Watering Flowers” exercise of three simple prompts: 1. What are you grateful for? By starting with gratitude, the vibe immediately shifted from negative to positive. Each person shared gratitude after gratitude, which contagiously spread, opening the space for interpersonal connection as the team erupted into laughter.

2. What do you regret? As we moved to regret, the mood sobered, yet each person who had a regret was still able to sincerely apologize to those impacted. Forgiveness came quickly, showing that a simple apology goes a long way. For instance, one team member expressed regret for not checking his work, causing another team member to stay up all night correcting the error. Before this, the “all-nighter” team member had not known whether anyone really appreciated his sacrifice of a night’s sleep. He was content with simply being seen, and readily accepted the apology. 3. How were your feelings hurt? By the time we reached this question, all team members were feeling compassion among the team and many complaints that had been voiced before did not surface. The genuine conversations around regrets had satisfied the majority of the hurt feelings. Team members expressed the few remaining hurt feelings with intentional consideration and in pure honesty. In most cases, taking the time to ensure all parties are heard is enough to move forward in a positive light. Below are some additional suggestions on managing and resolving conflict at any level in the organization. l Shut down gossip: If someone starts speaking about a co-worker, do not participate, divert the conversation to a positive. l Seek resolution: By guiding understanding, agreement and consensus. l Listen fully: Often the person speaking will resolve their own issue if given the opportunity to vent to a kind ear. There are no guarantees that your communication efforts will be met with total compliance and agreement. However, as long as you genuinely strive to understand each other, and are cordial and respectful, you can still have a successful exchange. In today’s highly informational and technological

environment, spoken communication is more important than ever. Pick up the phone or meet in-person as often as possible for more rewarding relationships and bonds.

Effective internal operations While communication is vital, how the company is functioning and the benefits we offer our employees also impact longer-term retention. By consistently reviewing the company’s inner workings, asking for feedback and implementing change, we show the willingness to be our best and honor a culture of continuous improvement. The list below provides thought provoking prompts to use in reviewing your firm’s operations. l When was the last time you had a new insurance broker analyze

your current insurance plan? We desire, from what types of social had not reviewed our insurance in events to hold to how we can detail for years, and when a new improve our benefits to employees. broker bid for our business, we disWith this knowledge we can make covered significant cost savings with efficient, meaningful, and cost-effecincreased employee benefits. tive changes. l Is your goal setting and review l What retention programs do you process effective and efficient? Last offer? Consider a program such as a year, we streamlined our process profit sharing plan, which most 401k with three focus areas (Aspire, providers will offer at no charge. The Accountability and Acumen), yet we program benefits include additional were still using a cumbersome worktax deduction, vesting schedule for flow. For 2016, we removed the retention and more flexibility than workflow altogether by instead using 401k (you set the parameters for our Dropbox folders with one spreadinclusion, whereas 401k plans sheet with appropriate access perrequire you to offer the same benemissions. We are saving $4,000 annufit to each employee). ally with this small change! l What enhancements can you make l How often do you survey your to your vacation policy? Our more employees? We have found that surtenured employees were thrilled veys throughout the year ensure with the addition of more floating that we know what our employees holidays based on years of service.

In closing, effective communication skills—whether in dealing with a challenge or announcing an organizational change—foster success in life, work and relationships. Internal operations based on intentional communication and a willingness to change lead to an open, vibrant corporate culture that more easily fuels ongoing success. By focusing on compassionate and continuous communication, we can more accurately know our employees, quickly come to resolutions, and build a firm that nourishes our employees all year long. Kerry W. Elam is managing director of operations and human resources with Actualize Consulting. She may be reached by phone at (703) 868-1506, email kelam@actualizeconsulting.com or visit ActualizeConsulting.com. 63




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n National Mortgage Professional Magazine n JANUARY 2016




“Everyone wants to work for themselves, but nobody want to work by themselves. It takes a village to get a loan done nowadays. Make sure the support is there for them to make money for you.”

The Virtuous Boss By Eric Weinstein I recently attended a holiday party at a real estate agent’s office. I ran into a loan officer husband and wife team who used to work for me. Even though I was there to get business, and they are now my competitors, they pulled me aside to tell me how much they enjoyed working at my former company. In fact, they recently ran into another former Carteret Mortgage

JANUARY 2016 n National Mortgage Professional Magazine n



employee and told me all they could do was talk about how much they missed the old company. I don’t think they were just kissing my behind because why would they have to do that now, I am no longer their boss and I get that a lot from former employees, too many for it to just be an act. There is the distinct possibility they were being truthful. Maybe, they

really did like working there. So, what was it about the old organization that made it so much better than all the jobs they had before and after that? One word: ME! As a loan officer, when I started my company, I knew all the things I liked about the companies where I worked, and all the things that just irritated the heck out of me. I pledged that my company would be different. The loan officer’s happiness would be my main goal and the money would flow from there. Think about it. If they are happy, they tell other loan officers who are drawn to the outfit. If they are content, they don’t quit, which leads to lower turnover and no learning curve. In truth, it is MUCH cheaper to keep a good loan officer than to try to hire a new one. People do not like leaving their jobs. An employee would stay forever, if they could, because changing jobs is such a hassle. So, why not make it a good experience for them. I am continually amazed how the companies where I have worked previously and since cannot get this simple concept. Here are some tips if you own your own company;

Don’t screw with their money Even though it was a major inconvenience and cost a bit more time and money, I made payroll a weekly event, not once a month or bi-monthly like my former employers. People like me want their money and they want it now. There is absolutely no reason why, if I close a loan on the first of the month, I have to wait until the 15th of the next month to get paid … 45 days later! That was how it worked at a bank I was employed. I noticed the tellers and bank president were paid weekly. I brought it up to them, but the idea went nowhere. They just did not care. How much interest can they possibly earn holding my money extra month? Even though I just love the place where I work now, it takes them 30 days to cut expense reimbursement checks. What’s the hold up? It is just irritating. I got bills to pay and the bills won’t wait 45 days.

Praise in public, criticize in private We had a broadcast e-mail that went out every month called “The Winners List.” These were the top 10-15 monthly revenue earners for the month. Those on the list got a congratulatory call from me and an ill-fitting, putrid blue, baseball jacket. It was not much of a prize for the loan officers making $100,000 in the month just to get on the list. Yet, when they came to a company meeting, they wore that stupid jacket with pride. It signified success. They got their name up in lights and won the admiration of their peers. When they obtain all the money in the world, what is left to motivate your loan officers? Praise. Conversely, when they screwed up, and they did, as everyone does, it was a private call by me to them. “Fix the problem, not the blame “was my motto because that’s how I wanted to be treated by my boss.

Open door policy At my previous job, and to some extent, where I work now, I never wanted to talk to the boss. At this job, I know he is busy and do not want to bother him with any petty problems. At my previous job, well, he was just a … let’s call it just not a very nice word. The policy at my company was that everyone could call me if they had to, but I preferred they didn’t. I know that sound a bit “anatomical,” but when you have 4,000 employees, there are just not enough hours in the day. That is why I had a “mentor” program. Every employee was paired with a “mentor” (usually the person who hired them) who they could call day or night to ask a question or get some help. If their mentor didn’t know the answer, then they could call their mentor’s mentor. If that person didn’t know, you kept asking up the mentor chain, until you reached me. Ultimately, I was every one’s mentor since I hired the first person. You might say I was patient zero of the mentor system. Everyone needs someone to turn to once in a while. Some bosses don’t have time or just don’t want to be bothered. I can understand that, so

there should be a mechanism in place to handle that. Everyone wants to work for themselves, but nobody want to work by themselves. It takes a village to get a loan done nowadays. Make sure the support is there for them to make money for you.

Back office support We had a very simple rule at Carteret. If a question was asked once, we would answer it. If it was asked twice by two separate people, it went in the employee manual and on the Web site. The chances were that if two separate people had the same question, a hundred others did too, but were too shy to ask. Office employees were taught to first answer the question and then gently tell them where to find it on the Web site. Some of the common questions led to some really innovative things on our

Web site. You always got questions like, “What is so-and-so’s junk fees or mortgage clause? Who is our account rep there? What is their FHA lender number? We developed a “Lenders List.” This was a file they could download from our web site and search by lender. It contained all the human knowledge in the world about each particular lender and a comment section where you could praise or trash the lender based on your experience. Loan officer could send us “edits” for when information changed and we would keep it constantly updated. It was the first Wikipedia, before there was a Wikipedia. Wish I had patented that idea! Other links included: l “Why aren’t we paid as Statutory Employees?” linked to a paper I had

our CPA write when that came up on a few employees personal IRS audit. l “What is the Payroll status of my file?” which tracked the movement of the file through the post-closing audit process and finally payroll approved. l “What is my license status?” which tracked the coming expirations and renewals of loan officer licenses through the licensing department. l A ”Marketing Library” with media ready, compliance approved TV, radio and print advertisements, flyers, door knockers, etc. for the loan officer’s marketing needs. All this and more costs me tons of time and money, but it was for people who were paying my mortgage with their labors. I think having four kids helped me a lot. You love your kids and

you want them to get ahead. That’s how an employee should be treated. That’s how I wanted to be treated when I was a loan officer. Now granted, if you are a three man shop, this may not be feasible at this time. But now you know how to get there. Be a virtuous boss. Be good to people. It will come back to you tenfold. Eric Weinstein worked in banking, on the commercial real estate side until 1991, when he fell in love with residential lending. In 1995, he started a small mortgage company in his basement called Carteret Mortgage Corporation, which in 2003, grew to one of the largest mortgage broker companies in the United States. Eric is semi-retired, doing mortgages by referral only. He may be reached by phone at (703) 505-8692 or e-mail eweinstein4u@gmail.com. 65


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“Let’s face it: Not all, but many mortgage industry branch managers were put into their roles because they were good producers.”

Commit to Being a Leader Instead of a Manager in 2016 By Kevin Gillespie

As someone who works extensively on recruiting loan originators from all over the nation, one of the common complaints I often hear from these professionals is: “My current managers are not adding any value to my career. I know they are making money from my pro-

duction, but they are not helping me to grow my business. I want to learn, improve, and grow professionally, but my managers are not helping me accomplish this.” Let’s face it: Not all, but many mortgage industry branch managers

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were put into their roles because they were good producers. Yet, in most cases, these individuals have not been given the proper direction or training on how to lead a team of loan originators. These individuals are not necessarily bad managers; they just haven’t had the learning opportunities that would make them great managers. For many branch managers, it’s easy to perform within a comfort zone— which means focusing mainly on their own production and the blocking and tackling processes of management. They think they are doing what is expected of them, but are often not focused on the specific factors that will help them grow their branch’s business to the next level. With this in mind, it’s essential for branch managers—and others in leadership roles at the branch—to remind themselves of the difference between managing and leading a team. While an effective manager ensures that the dayto-day tasks are completed, an outstanding leader also ensures that he or she is doing everything possible to support, retain, and attract top talent. The first step to becoming an effective leader, rather than a manager, is to understand the basic differences between the two. A manager in the mortgage industry often exhibits the following characteristics: l Focuses most of their energies on aspects of the position that are process driven l Feels they are the liaison between the sales team and corporate l Works on keeping price exceptions to a minimum l Develops ads and promotions l Makes sure time cards are approved l Keeps processing on track l Calls underwriting and pushes through troubled loans l Gets lost in all the small details l Works on transactions in the system l Uses gift cards as a reward system for loan originators l Is interested in making sure the loan originators “like” them, so they will not leave the company l Often does not coach and hold team

members accountable, which results in weak bench strength l Holds time-draining meetings with loan originators, who receive little value from these gatherings l Deludes themselves from reality, thinking they are busy and doing the right things Keep in mind that most of the activities and responsibilities listed above are, in fact, important to a company’s success. Yet, when the branch manager focuses solely on these factors, he or she becomes blind to the aspects of the business that are necessary to help the loan originators grow professionally. A manager who exhibits only the characteristics listed above may be viewed as someone whose entire job is about controlling, restricting, halting, acting defensively, and relying on protective activities. On the other hand, a leader “is someone you choose to follow to a place you would not go by yourself,” as stated by author and lecturer Joel Barker. An effective leader often displays the following attributes: l Creates interest in a place where there was no previous interest l Sets standards with their team to get buy-in l Holds the team accountable to the standards they set: When those standards are executed and the goal is reached, the volume often takes care of itself; and when the volume target is not reached, usually the standards are either too low or are not being executed correctly l Sets a minimum number of contacts for their loan originators to make in a week l Set a minimum number of faceto-face appointments for their loan originators to have each week l Believes in their team l Sees more potential in the loan originator than the loan originator sees in him/herself l Determines areas of improvement

sale is made l Makes the tough decisions and has the necessary conversations l Uses intellectual honesty l Realizes that adversity creates opportunity l Celebrates the victories and uses positive reinforcement l Constantly finds ways to add value and help the team grow In short, when you think of a leader, think of someone who promotes growth, creates proactive solutions, makes things happen regardless of market or competition, and focuses on continuous improvement. One great example of leadership involves the story of a loan originator who was producing about $10 million a year. When the loan originator told her manager that she wanted to double her volume to $20 million, the manager explained that it would never happen. Frustrated, the loan originator contacted another branch manager, seeking coaching and guidance for her professional development. This branch manager—a true leader—began to help and coach the loan originator, who was not even on his team. The loan originator saw the value in having a manager who was focused on growth, and she made the move to be officially under his leadership. This past year, she

closed $25 million in volume—$5 million more than her already ambitious goal. When I talked to this loan originator, she explained how her new manager exemplifies all the characteristics of an effective leader. If you are ready to be an effective leader, rather than a manager, this year, ask yourself these questions: 1. Am I managing or leading more right now? 2. Who is someone in my life who saw more growth potential in me than I ever did in myself? What characteristics and approaches did this person exemplify that I could also use? 3. What can I do this year to be more of a leader, add value, and promote growth for my branch? Once you have satisfactory answers to each of these questions, you can begin developing the plans that will

help you to be a more effective leader. After all, the overall success of your loan originators and your branch depend heavily on the value you add to each team member’s professional growth, motivation, and goals. So, the next time you find yourself too focused on the small details of your position, take a moment to consider the larger picture – and how you are encouraging your team members to excel—and you will find that the details will take care of themselves. As chief operating officer for Waterstone Mortgage, Kevin Gillespie oversees several departments and works with the executive team to drive growth, develop strategies, and execute plans that ensure the company’s continued success. Kevin has held positions at all levels of the mortgage business, including loan originator, branch manager, regional manager, president and chief operating officer.


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n National Mortgage Professional Magazine n JANUARY 2016

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that are needed to promote growth l Pushes and nudges their team members while always maintaining a level of respect for them l Motivates their team to do better l Sells and proves to the loan originators why taking a complete application and adhering to the process will increase their income l Influences the producers to give a little more l Coaches over and through past programming, conditions, and behaviors the loan originators may have l Promotes training on product guidelines and loan structuring l Realizes prospecting and sales activity is key to a producer, so they help their producers track and manage time l Helps the loan originator leverage themselves to make more calls, contacts, and appointments. l Builds a support team for the loan originators l Often makes calls and goes on appointments with the loan originators l Works through scenarios l Helps overcome common objections l Work on scripts and practice those scripts with the team l Sell the loan originators on the benefit of growth and change l Tries to work on the sale before the

“I have always appreciated when a candidate asks questions that focus on helping the company achieve its objectives and not only just questions on how they can get ahead.”

Finding the Right Fit in a Sea of Applicants By Josh McKernan Saying yes felt like more of a reaction and less like a decision when I was presented with the opportunity to write this article. The topic, hiring and retaining employees, is something that I am very passionate about. Hiring is something that undoubtedly most companies have

to do at some point and many do quite often. The hiring process of an organization is one of the most integral components to achieving success. I have hired hundreds of employees in my current position and the only thing I enjoy more is retaining them! Being able to look

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around the office and say “That person does an excellent job and I hired them!” Finding an employee that matches your company’s corporate culture is one of the most important things to consider not only for your company’s success, but also the individual’s success. This can be a difficult thing to do because corporate culture is something that isn’t necessarily defined, but something that is developed organically over time. Will this person fit in is the question that needs to be answered, but make sure you are answering that question with a yes or no for the right reasons. Most offices are comprised of people from all different walks of life and I feel that is good thing. When asking yourself if someone will fit in with the corporate culture stay focused on answering the questions that pertain to achieving your company’s goals and not ones that have nothing to do with work. The interview is the first chance to get a sense for whether or not an applicant is a good match for your company’s corporate culture. Aside from matching the individual’s qualifications with the position they are applying for and their ability to answer the questions you would like them to answer, what should be at least equally as important are the questions they ask you. I have always appreciated when a candidate asks questions that focus on helping the company achieve its objectives and not only just questions on how they can get ahead. It is also preferable when a candidate asks questions that pertain to other aspects of the business and not just the one they are interviewing for. It demonstrates a clear interest in having a career with our company and not just landing another job. Beliefs are a major component of a company’s corporate culture. My company, Metro-West Appraisal, believes that when the team does well, we all do well. A company is only as strong as the team behind it.

It is very important that the employee not only understands his or her role, but the roles of the team members around them. Having a new employee spend some time getting to know the roles of the colleagues around them is something I would highly recommend. Nothing gives me more satisfaction than hiring employees that not only care about themselves and their position, but also those around them and the positions they occupy. I think it’s also important that your company’s beliefs not only exist with your internal employees, but also those in the field that represent the company. Educating the office staff on what your appraisers in the field do and how important they are to your business is very important. Understanding a company’s values is another very important part of an employee matching your company’s corporate culture. Providing outstanding customer service should be at the top of any company’s list and it’s important to hire employees that understand this. Valuing clients and each other is very important. If employees value each other it leads to better performance and better customer service. When we do not value each other, we do not work as well together and that decreases the likelihood that our customers will be provided with outstanding service. Without our clients and employees, our company, like many, would not exist. After you feel that you have hired the right candidate, retaining them is crucial. In my opinion, that process begins much sooner than most realize. I mentioned earlier that the interview was the first chance to find a candidate that matches your company’s corporate culture. It’s also the first opportunity to lay the ground work of retaining a valuable employee. One major challenge company’s in the appraisal industry may face is that a majority of the people they employee could be out in the field working as appraisers. In order to

did you go back to work and think, “I’m just going to go through the motions,� or were you motivated to figure out ways you could work harder and more efficiently? Having monthly or quarterly recognition awards for office employees and appraisers not only motivates, but also helps retain valuable team members. Recognition lets an employee know that they did a good job. Feedback will let them know specifically what they did well or what they need to improve on. I feel it’s very important to give and receive feedback. Giving an appraiser a monthly scorecard is an excellent way to provide and receive feedback. The feedback you give should be to help the individual improve. The feedback you solicit can be used to improve your company for your employees. Most employees want to be heard, they want a voice. I feel providing appraisers in the field follow up opportunities in the form of questionnaires, surveys and giving them a chance to make suggestions on how we can better support them helps improve morale. It also lets them know that what they think matters and because it does! Demonstrate to them that they are

not just a number, but a valued member of the team. Receiving feedback and actually doing something with it are two different things. In the appraisal industry, it could be something as simple as letting your appraisers set their own appointments as opposed to having the office setting them for them, or putting in place extra quality control tools and staff to assist those in the field. Keeping your appraisers informed about what is happening in the corporate office is a great way to let them know they are a part of the culture. It can be done with monthly or quarterly conference calls that pertain to any changes that have taken place with the company. Another good example could be giving them updates on any new customers the company may be working with or the efforts that have been made in that department. Being creative with compensation can is always a good way to retain appraisers. Many appraisers have several expenses associated with their work. Some would like to have the highest pay available and some would like prefer to take less salary or commission in order to have the comfort of many or all expenses being covered. Find out what’s

important to them and do everything in your power to get it for them. For some it would be covering continuing education, data sources, software, etc. In conclusion, a company is only as good as the employees behind it. When hiring in the appraisal industry look for individuals that come together as a team to achieve common goals. Try to gain perspective on all positions within your company and get to know your employees and what motivates them. When you get a better understanding of what employees are looking for, you will hire and retain more effectively. The answers are out there, ask the questions and take the time to get know what makes potential and current employees happy! Josh McKernan is assistant vice president of Expansion Operations for Metro-West Appraisal. Josh received his bachelor’s degree from Central Michigan University. Josh has hired several hundred residential appraisers and at least at least two dozen internal staff members over the past three years. He has been instrumental in doubling his current company’s staff, contributing to record-setting years.

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retain them, it is imperative that they understand that even though they are out in the field, they are huge part of the corporate culture. They are the face of the company when providing service to a borrower and to the client. I feel in our industry that often times they are undervalued, when in fact I consider them the “life blood� of any successful appraisal company. Making them feel a part of the corporate culture requires more effort than your typical office employee because most of them work remotely, but it is imperative to a company’s success in this industry. I have always felt that employees not only need to prove themselves to a company, but companies also need to prove themselves to an employee. I have found that keeping an office employee or appraiser happy starts by being open and honest with them. During an interview you want to make sure you are selling your company to worthy candidates, but you also want to make sure that you are up front about the challenges they may face if in a certain position. Leaving aspects of a position out or not being honest with a potential hire could lead to friction down the road. Situational questions pertaining to the position, accurately depicting a typical day in the position and describing where things may have gone wrong in the past are great ways of making sure a potential employee knows what they are up against. At the very least, a potential employee will respect your honesty. Getting to know your employees in the office and appraisers in the field as well as what motivates them is also a very important part of making them happy. Different people are motivated by different things. While money is a motivator to a lot of people, it’s not the only thing that motivates. Think about the last time you were told you did a good job. If it’s been a while, is it because you’re not doing a good job? Is it because your manager assumes that you know you are doing a good job? Recognition is an excellent way to express how much an employee means to your company. It will increase job satisfaction, motivation and give an employee a sense of where they stand. Think of a time when you were recognized—

“Don’t we ever learn? Why didn’t we have a recruitment plan in place all along?”

You Can Let Your Teeth Rot or Recruit New Loan Officers … Your Choice By Ralph LoVuolo Sr.

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Okay folks, what are you going to do now? What are you going to do to increase your business? What’s your plan? What great ideas did you put in place to get you through 2015. What’s your five-year plan? What do you absolutely know? What did you know at the end of 2015 that you could have enacted this year that would have helped you? What I’m finding from this vantage point is, very little. All too often, we wait. We wait till something seriously bad happens before we start to realize what’s going on. Ever notice how often we drive by a spot on one of our streets and say to ourselves, “This is really a bad spot. There really needs to be a speed bump put in here. I’ll call City Hall when I get home to let them know.” Meanwhile, we’re on our cellphone talking to someone, even mentioning what we just thought. Then we drive a couple of blocks and forget. I’m seeing so much chatter about how to increase business. Last year it wasn’t a problem … refis were aplenty. Even purchases were fueled by rates that challenged the floor. One of the

most often discussed ideas is to start to poach on the company down the street and get their loan officers to see our light. The light we shine is brighter than the light shining from the other companies. We have better service. We like our salespeople and operations staff more than they do. Don’t we ever learn? Why didn’t we have a recruitment plan in place all along? In 1993, I was consulting at a mortgage company in Brooklyn, N.Y. One of our part-time LOs was an older woman. She was standing next to the desk of another, much younger LO. He was complaining about his teeth and the pain he was suffering through. “When are you going to the dentist,” she asked. “I’m going soon,” the younger LO said. “I just hate the pain while I’m in the dentist’s chair.” “If you had just flossed every day like you were told by your mother, you wouldn’t be suffering right now,” she said. “And what about you,” he asked.


“Do you floss every day?” “Are you crazy,” she retorted, “I’m too old, nothing I do is going to change these teeth.” “So wait a minute, you’re telling me to floss every day, and in fact if I would have done it every day, I wouldn’t be having this pain, but you’re too old? I think this conversation is over. What you’re saying doesn’t make any sense,” he said. To me, this entire conversation was so typical of most of the banter that we all have, some with ourselves, some with others. I was observing the typical American attitude. We have an idea that we really need to pay attention to—we get an idea that comes from a conversation with a friend; someone tells us something that, if we actually do this one thing, it will help us have a better and more fulfilled life. The standards that most of us live by. Let’s not make a plan. Let’s not really put any thought into the future. We all hate meetings, let’s just keep doing what we’re doing. In the mid-90s and a good friend of mine had his own mortgage brokerage company that had about 20 Los. Yet he had one person on payroll whose full-time job was to ensure that every active LO had to bring in one business card a week of any LO that they determined was their competition. This particular payroll person, a designated recruiter, was tasked to assemble an individual file on these competitors. My friend, the president of this firm made at least one call a day to recruit one of those people. The tenor of the market didn’t matter. This was done every day of every month of every year. Here are some things that the recruiter could do to help their company grow. Having floated these real actionable items to recruiters for many years, most of you will find these ideas a bit too “out of the box” to enact. But it is just for that reason why you should be doing them at your company. 1. Decide on a budget that will allow freedom of action. 2. Send a plaque to the target MLO that says “Number one salesperson at ABC Mortgage. And that company will be the recruiters’ company. 3. Have the president of the recruiter





call the top prospects at least one time a month. Have the top salesperson at the recruiters’ company call the recruit at least once a month. Have a personal letter from the company president written to the recruit at their home, letting the recruit know how much they want to work with them. Let the recruit know that individual coaching is available to help them do even more business. Be sure the recruit knows that if they do enough business, they can have their own processor and if they can show a certain level of business, they can bring their present processor with them.

Right now there is so much scrambling to figure out a plan to recruit LOs, I’m particularly astounded. Don’t we ever learn? In fact, I saw one comment in an often read blog that alluded to the fact that it is too late to put a recruiting plan into place. Too late? If it’s never too late to start to floss, which I’m pretty sure you’ll agree with, it’s never too late to begin to put any well thought out plan in place. And to use the same reasoning over and over that we hate meetings because it takes us away from what we’re doing is just as ludicrous. Have a meeting. Include the top brass. Make a list of your company strengths and weaknesses. Make a third list that states what it is that you would want a company to offer you if you were a successful LO. Then see what your budget will allow you to enact. Here’s what I promise you. If you don’t start a recruitment plan now, your teeth will rot. Ralph LoVuolo Sr. has more than 50 years in the mortgage Industry, with the last 30 as a coach. He is past president and founder of the New York Association of Mortgage Brokers, and long-time member of NAMB—The Association of Mortgage Professionals. He can be reached by phone at (917) 576-1230 or e-mail ralph@mortgagemotivator.com.

“This leaves us with a very important industry in which our workers tend to “wander” in without any background or preparation while the workforce gets older.”

Training and Mentoring Corner: The Aging of Our Industry By Dave Hershman

Dave Hershman is a top author in the mortgage industry with seven books published. He is also the founder of the OriginationPro Marketing System, and currently the director of branch support for McLean Mortgage. He may be reached by e-mail at dave@hershmangroup.com or visit OriginationPro.com.


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others because of the burden of new standards and regulations. All told, this has caused the average age of loan officers in the industry to be in excess of 50 years of age. What has happened is that companies who are expanding are “chasing” many of these remaining aging loan officers with big checks. Checks for someone who may be winding up their career but looking for one final big payday. In sports, free agency garners big pay days. However, the length of the contact is tied to the athlete’s age. Such a policy in business might be considered discriminatory. Yet, as the years go on, this issue will be one companies will have to face. This leaves us with a very important industry in which our workers tend to “wander” in without any background or preparation while the workforce gets older. Add the fact that licenses and education is needed for a large segment of the industry, and you can see the issue. And finding the candidates is just one of the issues. Preparing them for success is quite another issue. The implementation of licensing standards within the industry through the National Mortgage Licensing System and Registry has focused most school’s attention upon the 20 hours required for initial licensing and the eight hours needed for continuing education. Yet this training does not in any way prepare loan officers to succeed. Most of the focus is upon compliance and legal aspects of the industry. This is very important, but it will not help a loan officer bring business in the door and become an advisor to their clients. For that we need something much more comprehensive. The industry in general has had little training with regard to on how to assess candidates, as well as training and mentoring them. And we have a dearth

in which our workers tend to “wander” in without any background or preparation for the industry. This is why I have decided to refocus my attention to this issue, and I will be writing consistently about it in the coming year. It will include pieces on assessing non-experienced candidates, orientation, training, mentoring and more. For years, I presented a three-day live mortgage school, as well as the management conferences. The survival of our industry depends upon us spending resources in this direction and we need leaders to pave the way.


As important as this industry and homeownership is to America, there has been a failure of our society to prepare our children for a life of homeownership. We should point out that there are many areas in which we could better prepare our children—from knowledge about credit to investments and achieving retirement goals. But in this case our lack of basic training also leads to another problem. Because most children are not introduced to “real estate ownership” and especially “mortgages” in schools, including colleges, they are less likely to consider this avenue as a viable career path. Very few consider college as a preparation for working in the mortgage industry, unless perhaps their parents work in that industry. It seems that most people who work in the industry arrived at their positions through circumstance. Actually many become real estate agents or mortgage loan officers because they purchased a home and were frustrated by the process. It becomes a—“I can do this better than them”—mentality. Informal studies from decades of training has lead me to believe that up to 25 percent or more entered the industry through these circumstances. The demographics of the Millennium generation in the aftermath of the financial crisis and great recession of 2007 to 2009 has exacerbated this situation. Because of the depth of the crisis and slow recovery, the Millennium generation has delayed purchasing homes along with other major life events such as marriage. Though this trend is expected to change, Millennials are going to be older when they first buy. Thus, during the recession, many left the mortgage industry and they have not been replaced. Some left because of new standards such as background checks and licensing, others because they were not able to compete and still

of mentors because the average manager is a high producing sales manager with little time left for mentoring. It is just not lucrative enough for the average highest producing sales manager. In the past I have presented two-day management conferences around the country and during that time I took many surveys. It was not surprising that most hiring managers never checked references. Today, we think a licensing and a background suffices for a reference check. The procedures change, but not the mistakes. All in all, this dilemma can be considered a great opportunity for those who want to be mentors and companies who are going to lead the industry in the next decade. This can be considered an opportunity for candidates, as there will be a great demand for loan officers during the next few decades as the present workforce continues to age. Yet, it still leaves us with a very important industry

Operation VA SITREP

“Your VA Situation Report” By Richard M. Bettencourt Jr., CRMS, CMHS

The Veteran’s Money! Credit for Interest Rate Chosen I hope you all had a wonderful holiday season! I know me and my family did! It’s a time of year that I just absolutely adore … the opportunity to spend time with friends and family, do some charitable work, and hopefully, pay it forward. This month, I wanted to focus on a particular aspect of the VA home loan that, in my opinion, many industry professionals do not truly understand. Now, this is applicable no matter what channel you originate loans: Nondepository, mortgage broker, depository, small community bank or credit union. If I was in a room of 100 mortgage originators and asked the question: “What is the premium/credit over par pricing called?” I would bet 99 of them would yell out “Lender credit!” and you know what, those 99 would be wrong! The premium “Credit” over par pricing is actually defined by the Veterans Administration (VA) and called “Credit for Interest Rate Chosen.” I can assure you, if you are a mortgage originator and didn’t know that, don’t feel bad … you’re not alone. I would also venture that a majority of closers, processors, operations managers, and other industry professionals wouldn’t know it either.

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Why? Well, a few reasons, but for starters, the VA loan is a severely underutilized benefit that our veterans are oftentimes dissuaded from using because others in the transaction are more concerned with a paycheck than ensuring that the veteran gets the appropriate home loan. So, due to the underutilization, you lose sight of the guidance provided in VA Pamphlet 26-7. When you lose sight of what makes it special, it begins to take on the shapes, smells, colors and guidelines of other loans programs. This is something that we, as an industry, need to avoid, mixing VA with everything else! VA is in a category of its own, and definitely doesn’t need help from conventional, FHA, USDA or any other program. But, now that the uninformed has lumped the VA home loan in with all the others, that premium over par has turned itself into “Lender Credit.” When the veteran makes the decision to slightly increase his/her rate any credit over the par pricing or broker compensation agreement is now the veteran’s money and he/she can do just about anything they want to do with it! Let me give you an example on a loan one of my loan originators just closed … The veteran was provided an interest rate from a large online lender and the veteran was set to come to closing with a check for approximately $1,700. The buyer’s agent was a bit perplexed and thought that didn’t seem right, but after careful review of the Loan Estimate, we determined it was accurate! My loan originator, who has been training under me for over a year now, has a favorite loan to originate. Do you know what that is? Yup ... you guessed it VA! He and I spoke very briefly and he provided the following option to this Veteran: 1. Same rate! 2. Paid off a credit card at closing—using the Credit for Interest Rate Chosen! (yes, the veteran can pay off a credit card to qualify with Credit for Interest Rate Chosen). 3. Used remaining Credit for Interest Rate Chosen as a principal pay down on the mortgage we’re closing. 4. Closing costs were paid for by the seller! Now, if we were to do the math here, I’d say that was a swing of about $5,100 in favor of this veteran. Even the closing attorney asked, “How were you able to do this?” The simple answer was, “It’s a VA home loan!” A true Lender Credit cannot do any of the above! Well, if Lender Credit did do any of the above, its continued on page 87

MBA’s Mortgage Action Alliance A Message From MAA Chairman Fowler Williams


January 21st & 22nd, 2016


SPEAKERS & EXPO Hyatt Regency • Orange County 11999 Harbor Boulevard Garden Grove, CA 92840

Speakers include: Carl White (The Marketing Animals) Dave Savage and Anthony Savala (Mortgage Coach) Karen and Ken Bates (MIL Loans) Ginger Bell (Morf Media) 

Register at thecampsite.org/salescon2016 #MortgageCAMP For more information: Call 916.448.8236 or email info@thecampsite.org

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Fowler Williams is chairman of the Mortgage Bankers Association’s Mortgage Action Alliance. He is also president of Atlanta, Ga.-based Crescent Mortgage. He may be reached by phone at (800) 851-0263 or e-mail fwilliams@crescentmortgage.net.

Power of the Past, Force of the Future


y name is Fowler Williams. I am president of Crescent Mortgage in Atlanta, Ga., and I’m honored to serve as chairman of the Mortgage Action Alliance (MAA). We are a voluntary, non-partisan and free nationwide grassroots lobbying network of real estate finance industry professionals, affiliated with the Mortgage Bankers Association (MBA). MAA is dedicated to strengthening the industry’s voice and lobbying power in Washington, D.C. and state capitals across America. Many MAA members will be gathering at the Mortgage Bankers Association’s annual National Advocacy Conference which takes place Tuesday-Wednesday, April 12-13 at the Capital Hilton in Washington, D.C. Effective advocacy is a numbers game. We want you to join hundreds of your industry colleagues at the MBA National Advocacy Conference to be heard on the issues that threaten your business and to stand up for your industry and the borrowers that you serve. You are a voter, an employer and a constituent. Your voice matters. The Bill of Rights gives you the right to speak your mind. We give you the platform and the access to reach the decision makers who can listen. While we are bigger and stronger than ever before, we need to be even louder in 2016. A loud and cohesive voice is critical as we seek to shift the tone in our Nation’s capital from one of distrust to one of confidence in our industry. This is why our National Advocacy Conference is so important: It is the largest advocacy event of the year focused solely on the issues facing real estate finance. It is the one time during the year that we can collectively show Congress, including your elected officials, just how impactful and damaging proposed legislation can be to our businesses, consumers and the economy. “To be effective and show lawmakers that our industry really cares about the effects of their decisions, we need a show of force at this year’s National Advocacy Conference,” said MBA President and CEO David H. Stevens, CMB. “Advocacy is a numbers game and we need to show our strength by doubling the attendance that we have traditionally seen at this conference. I challenge each and every member company to show your commitment to positive industry change by sending at least one participant to this critical event.” Getting involved with MAA allows industry professionals to play an active role in how laws and regulations that affect the industry and consumers are created and carried out by lobbying and building relationships with policymakers. It only takes a moment to get started, and you do not have to be a member of MBA to enroll. The larger the group, the louder the voice! If you would like to run an MAA campaign, please contact Peter Shapiro at (202) 557-2933 or e-mail PShapiro@MBA.org to receive an enrollment campaign kit and learn more about how you can engage your colleagues and employees in MBA’s advocacy programs. Real estate finance industry professionals who wish to join or learn more about MAA can do so at MortgageActionAlliance.org. If you have any questions regarding MBA’s advocacy programs, please contact MBA’s Director of Political Affairs Annie Gawkowski by phone at (202) 557-2816 or e-mail AGawkowski@MBA.org.

2016 Sales and Marketing Convention:

Gauging the Pulse of the Industry Results of the October 2015 MBA Annual Convention Survey BY TOM LAMALFA


his is the 15th time since 2008 that this survey of senior mortgage banking executives has been conducted and distributed. It is completed twice annually, at the MBA’s Annual Convention in October and at the MBA’s National Secondary Market Conference each May. My convention experience consisted of attending a committee meeting, part of a general session, and completing two dozen surveys over two and onehalf days. I’ve been a full-time observer and student of the mortgage banking industry since 1977. The San Diego convention was my 33rd in as many years. The purpose of the survey is to capture some basic data and gather the opinions, ideas, values and expectations of senior executives on many of the business and industry’s key issues, topics and concerns. For this year’s convention, 24 meetings were arranged and surveys completed. The surveyed group consisted of six chief executive officers; seven presidents; seven executive vice presidents; and two each senior vice presidents and vice presidents. Excluding the CEOs and presidents, all of those surveyed work


in capital markets, operations or production. Of the 24 firms represented in the survey, nine produced more than $10 billion in 2014, 10 originated $1$10 billion, and the other five produced less than $1 billion in 2014. The executives surveyed represent 11 banks and 13 non-banks, including two homebuilder-owned firms, a mortgage brokerage, and a realtor-owned firm. One of the firms is Internet-based. Twelve of the firms only originate through retail, while the other 12 produce loans in at least two channels. Six of the 24 firms originate in retail, correspondent and broker wholesale. The surveyed group is carefully structured to be representative of the lending industry in terms of the size of firms and their operating channels. The 71-question questionnaire was drafted in the weeks before the conference, beta tested, and run past several industry folks for completeness and clarity. Except for the beta test group, all the surveys were completed face to face during meetings at the convention held Oct. 18-21, 2015. About 45 minutes was required to complete each survey. The project’s objective is to record the responses to the questions, compile

the information, prepare a report of the findings, and distribute it to those surveyed and other interested parties. The survey group consists almost solely of longstanding industry friends and business associates. All are industry veterans. Many have been part of the survey group since its inception. Most of those surveyed are close industry contacts who have helped keep me informed of intra-industry trends and developments over the course of years. Many have been colleagues for decades. However, five executives were surveyed for the first time and two new firms were included in the survey group. Although some of the questions are time specific and appear on these surveys only once or twice, many others are included in each and every survey. This polling process thus provides a dataset of responses over time. An analysis of the resulting longitudinal data shows patterns and trends along with new developments in the business and industry. For example, the sharply reduced buyback demands from the government-sponsored enterprises (GSEs) are clearly reflected in the substantial reduction in repurchases, as noted in recent surveys.

One reason for this series is to bring senior executives further into a public discussion of key issues and topics without drama and despite the sometimes controversial nature of the underlying subjects. Personally, I find the information collected to be relevant, interesting, insightful, informative, useful, and instructive for policymakers at a challenging time for the Consumer Financial Protection Bureau (CFPB), the Congress, the Federal Reserve, state and federal regulators, the Federal Housing Finance Agency (FHFA), the GSEs and the Obama Administration. It is not lost on anyone that the conservatorship is now 85 months old and Congress has accomplished nothing to address the two insolvencies and restore a healthy, vibrant mortgage market. Given who is being polled, it is recognized that the findings only reflect the responses of the mortgage banking industry, not a broader cross-section of the U.S. population. Since it wasn’t a random survey, there is nothing in the results that would necessarily apply outside the mortgage banking industry. Moreover, survey results are only valid as of a specific point in time. As we all know, things change, sometimes quick-

Questions 12 and 13 dealt with profitability, both on the part of the industry in general and the executives’ own individual firms more specifically. Expectations for industry profits in 2015 were mixed, with 14 of the 24 expecting industry profits to rise this year. Meanwhile, thus far in 2015, 17 executives indicated their own firm’s profits will be up YoY, two reported a decline, and four message no change. Questions 14 through 16 wanted to know if these 24 firms were originating more, less or the same volume of highLTVs, high-DTIs and low FICO loans this year than last. More was the response from 14 executives to LTVs. Only one exec reported fewer high-LTVs and another nine reported no change. For

high-DTIs, unchanged tallied 15 compared to four reporting more high-DTI loans and another five reporting fewer. As for low FICO lending, five were doing more of it compared to four doing less and 15 others disclosing no change. Question 17 wanted to know if those surveyed thought the peer-to-peer business model was framing the next set of credit risks. The question was skipped since too few were familiar with the model. Question 18 asked if FHA’s new Supplemental Performance Metric was a positive for lenders. Almost three times as many execs thought it was a plus when compared to those who thought otherwise. Question 19 wondered about pro-

posed changes to FHA’s claims procedures. Thirteen indicated the proposal was not good for lenders, more than four times the number of execs who thought otherwise. Another seven indicated they didn’t know if it was favorable or not. Question 20 inquired whether the combination of low interest rates, looser credit standards and a seller’s market was pushing up house prices. Indeed it is reported 16 of the 24 surveyed. Question 21 concerned Fannie Mae’s Collateral Underwriter and whether it was viewed as a valuable new appraisal tool for lenders and borrowers. Yes it is, said 18 execs comcontinued on page 81



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ly. That said, I think the findings well represent the expectations and thinking of the broader mortgage industry. Indeed, most readers of this report will likely find many more confirmations to their own thinking than surprises in the findings. However, there are some of the latter buried in the information. With that preface, it’s off to the questions, with the understanding that what follows is intended only as an elementary regurgitation of the responses, not a detailed, critical analysis of what was learned. (My analysis of the industry and its near-term direction is available for a fee.) Readers are advised to use the Scorecard as a guide in reading this text. Some of the questions and responses that I found especially interesting or surprising are in bold-face type. Question 1 asked those surveyed what they thought the interest rate on the 30-year conventional conforming fixed-rate mortgage would be at yearend 2015. The group average weighed in at 4.4 percent. The range of expectations was from 3.75 percent to 5.5 percent, but most responses were clustered between four and 4.5 percent. Question 2 wanted to know how much residential origination volume the execs expected this year. The unweighted group average was $1.3 trillion. The response range was from $950 billion to $2 trillion. Question 3 asked if their firm’s production was up, down or unchanged year to date compared to the same period last year. Twenty-three of the 24 surveyed said production volumes were up. Question 4 wanted to know what portion of their firm’s 2015 production is non-QM. All 24 executives report that non-QMs will account for far less than five percent of 2015 production, with an average of 1.5 percent. Questions 5 to 8 asked about YTD origination volume, specifically the portion of their total that was respectively refinance, agency conforming, jumbo and the combination of FHA, VA and RHS. On average, refinance volume accounted for 36.3 percent for the 24 firms surveyed. The range was from three percent to 85 percent. On average, 57.6 percent of the 24 firms’ volume to date was agency conforming, 9.6 percent was jumbo and 32.8 percent was government-insured. The ranges were very wide: 14 percent to 85 percent, zero to 86 percent, and one to 50 percent, respectively. Question 9 wanted to know if the executives’ firms experienced an increase in their FHA volume YTD. Only four of the 19 who answered didn’t report increased FHA volume. Question 10 inquired about the percentage of their firm’s YTD conventional production that exceeded an LTV of 80 percent. The average for the group was 28.5 percent, with a range of five percent to 87 percent. Question 11 asked what portion of 2015’s production will be conforming 97s. For the group, the average was 1.9 percent and the range was zero to six percent.

Searching for Growth Opportunities? Look where the grass could be greener—your declined applicants

BY GREG HOLMES & JIM RYAN e all have one … that guy in the neighborhood with the flawless lawn. And if we are truly honest with ourselves, we know it’s not a natural phenomenon. No, it’s likely a result of hard work and honest effort. While insufficient rain, weeds, and pests can ruin a yard’s appearance for most of us, that neighbor who fertilizes, aerates, weeds, waters and mows at just the right time and as often as necessary, well, his yard becomes more lush as every day passes. Tending to a lawn is in some ways like tending to a lending business. In the face of obstacles like a rising rate environment, a decline in applications, fewer refinances, and increased workloads due to new regulations such as TRID, the lender who takes charge by aggressively pursuing growth opportunities is the one whose business will be the healthiest in the long run. Growth opportunities can take many forms. Some seek growth by doing more with less. They cut costs, consolidate vendors and demand more from a smaller staff. Others streamline processes, sharpen their sales efforts, and engage in smarter marketing practices. It’s no secret that for greener pastures, most lenders today have to, among other things, improve their return-on-investment (ROI). We’re proposing that one of the most effective ways to do that is to focus on a huge opportunity for growth


that’s right outside your door: your declined applicants. By utilizing scoring tools in a variety of ways, you can help credit-challenged applicants become your credit-worthy borrowers.

Weeding out misconceptions and Millennial misunderstanding The majority of potential homebuyers put their home purchase plans on hold based on erroneous assumptions about their creditworthiness – in many cases they don’t even bother to see if they would qualify. In fact, according to a national consumer survey from loanDepot conducted by OmniTel in 2014,1 half don’t even know the credit score they need to qualify for a mortgage. And, of the small percentage of prospective borrowers that actually take steps to see if they would qualify, about 20 percent thought they needed a score higher than what’s actually required, with many believing their score must be at least 680 or higher. Let’s take these misconceptions a step further and focus on the Millennial generation because of its enormous size and the tremendous opportunity it represents. In another loanDepot survey that was conducted this past fall by OMNIWEB,2 half of the segment indicated they are extremely or very likely to buy a house in the next year. That’s a statistic that can-

not be ignored. However, this same demographic has significant obstacles to hurdle. When compared to the Baby Boomer generation, Millennials find themselves knee deep in a much thornier financial landscape. To sum it up, they face record levels of student loan debt, lower incomes and a relentlessly difficult job market. Spread on top of that their poor credit scores and lack of confidence in their credit management abilities, Millennials then become an enormous and difficult nut to crack. Consider some of the key findings of the OMNIWEB survey: l Less than half of Millennials (48 percent) know their credit score, compared to 60 percent of Baby Boomers. l Only 59 percent of Millennials think maintaining a good credit score is important, as compared to 73 percent of Boomers. l While 53 percent of Boomers believe they do a great job at managing their credit, only 37 percent of Millennials are that confident. l Only 15 percent of Boomers believe they could do a better job at managing credit as compared to 27 percent of Millennials. In spite of these statistics, the Millennial segment controls the very

future of homeownership because of its sheer size. Yet, this potential is being held back because of the very real financial issues Millennials face. Lenders, in turn, have no choice but to address their common misconceptions, help them improve their finances, and work toward mortgage loan approval.

What’s the root cause of Millennial credit woes? The lack of good credit education Student loans notwithstanding, most Millennials could use a crash course in how to responsibly take care of their finances. No credit, very little credit and poor credit are all problematic. And, putting fertilizer on weeds will only get you one thing—more weeds. The good news is, their behavior as consumers can be effectively changed through good credit education and lenders today have resources at their disposal to ensure they receive it. By using scoring tools, mortgage professionals can help credit challenged applicants eliminate erroneous data and errors on their credit reports which may result in an improvement to their score. However, these tools aren’t meant to work miracles. Rather, they are intended to ensure applicants are truly maximizing their potential to qualify for a mortgage. Lenders can use these tools to help poten-

tial borrowers possibly improve their financial standing by: l Removing derogatory information and accounts that were reported in error. l Updating an account that has been paid in full and closed. l Updating the status of a collection. l Updating a balance or paid-in-full status. l Updating an account to show that it was included in a bankruptcy.

With some industry experts predicting a

Footnotes 1—“Fear of Rejection Drives Almost Half of Today’s Potential Homebuyers Away From Housing Market.” PR Newswire. April 22, 2014. Source: loanDepot 2—“The Great Credit Divide: Millennials Struggle to Manage Their Credit While Boomers Express Confidence.” PR Newswire. Oct. 6, 2015. Source: loanDepot

Greg Holmes is national director of sales and marketing at Credit Plus Inc., a thirdparty verifications company serving the mortgage industry. Greg can be reached by e-mail at Info@CreditPlus.com. Jim Ryan is president of iQualifier, a service of Credit Plus Inc. iQualifier is an online program that features technology from CE Analytics and teaches consumers smart credit management. Jim can be reached by e-mail at GetSmart@iQualifier.com.

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n National Mortgage Professional Magazine n JANUARY 2016

How lenders should move forward

One of the most effective growth strategies for lenders to embrace is working with the applicants who have already reached out to them. Just because some do not qualify right out of the gate doesn’t mean they are unworkable. The tools available today can go a long way toward turning credit misconceptions into better financial decisionmaking, ultimately resulting in more mortgage loan approvals. They help reduce borrower acquisition costs and improve ROI. So, just like that neighbor with that great lawn, get out there and work with what you already have in your own backyard—your declined applicants.


Some scoring tools can simulate changes to a borrower’s credit file and predict the scores that may result from those changes. This innovative technology looks at the positive and negative factors influencing a borrower’s credit score. Then, it suggests actions that may positively impact their overall financial standing. The simulator demonstrates the impact that actions such as adding or removing accounts and correcting errors could have on the credit score—letting the lender potentially predict the results. Other scoring solutions come with credit experts who work directly with loan officers. They offer an in-depth analysis of each credit file and evaluate how various financial decisions may impact the applicant’s score and timeline. Personalized action plans are then created that the lender can review with their applicants, complete with specific, actionable recommendations. In fact, one such program randomly sampled declined loan applications that were rereviewed and found 83 percent of borrowers could have reached their goal. One of the newest approaches available to lenders is the establishment of a homebuyer’s club that gives declined applicants access to a credit management website which shows them how their financial behavior may affect their financial standing. It also provides applicants with a personalized action plan to help them better understand the connection between their financial decisions, credit scores, loan qualification and their interest rate. They even receive monthly credit reports to help them monitor their progress and monthly email notifications to help them stay on the path toward success. In addition, an online service is available which lets lenders view their applicants’ progress and monitor them every step of the way so they can help them meet their goals. By keeping an online eye on them, lenders can foster a relationship to help ensure their applicants turn to them when they are ready to buy a home. Lenders also benefit from this approach because it helps them improve the return on their marketing dollars by moving declined applicants back to their active pipeline. In essence, they are able to capture the money they would otherwise leave on the table when they reject an applicant.

slowdown in 2016, it’s time for lenders to get more aggressive with their marketing efforts. First, marketing materials should be audited to see if a change in messaging is warranted—one that acknowledges financial challenges and offers ways to address them. By taking an educational approach, especially where Millennials are concerned, lenders have a better chance of eliminating their misconceptions about credit and influencing their financial behavior for the better. Secondly, tools should be deployed to help declined applicants, especially Millennials, better understand exactly what their credit score means and the impact various decisions could make on their scores.


By Andrew Liput he mortgage closing transaction is the single largest financial transaction in the lives of most consumers, and it is also the riskiest stage of the mortgage process for lenders. While the vast majority of lawyers and notaries and title agents are experienced, ethical and diligent professionals, for a few the role of closing agent is too tempting a lure for selfish criminal intent. This column addresses the good, the bad and the ugly!


JANUARY 2016 n National Mortgage Professional Magazine n



Top industry news … Happy New Year? With a New Year brings, well, signs of new rules and regulations because the Consumer Financial Protection Bureau (CFPB) is still in business. Hot on the agenda besides monitoring proper TRID implementation are HMDA reporting changes, overall loan discrimination (disparate borrower treatment and disparate borrower impact) analysis and investigation, and further movement towards electronic mortgage closings. There are also rumblings that the CFPB will be carefully vetting lender loan origination compensation policies and practices to ensure that borrowers are receiving competitive, transparent and honest loan pricing. This latter issue may create allot of anxiety for lenders who to date have tried to remain attractive to MLOs by designing creative compensation arrangements involving various and diverse methods of calculating loan costs for different regions, branches and products. Given the agency’s zeal in penalizing lenders and vendors for alleged hidden fees and costs through referral relationships and related entities, originator compensation may just become the biggest regulatory story of 2016 and not the feared TRID monster.

You can’t make this stuff up! This month, like every month, we feature

some of the latest news about mortgage and closing fraud affecting our industry. These are real cases from around the country, only the names have been redacted to avoid threats of frivolous legal action … l In December 2015, the ringleader of a massive fraud scheme costing lenders more than $15 million and also involved 13 other co-conspirators was extradited to the U.S. and sentenced to five years in prison and five years of supervised release. Between 2005 and 2007, a real estate broker that also operated a title insurance company and the branch of a local brokerage business submitted fraudulent loan documents that falsified their clients’ income, employment and assets so that they could pocket the six percent commissions on the properties. They targeted Hispanic clients not proficient in spoken or written English who were unable to read and were unaware of false statements made by the perpetrators. These fraudulent loans allowed the borrowers to qualify for loans they could not afford to repay and most of them lost their homes to foreclosure. l A New Jersey attorney was disbarred, convicted and sentenced to up to 30 years in prison and $1 million in fines in November 2015 after admitting to his role in a $400,000 scheme the involved an accomplice who found straw buyers with good credit scores but not enough credit to qualify for mortgages. Others submitted applications in buyers’ names with inflated income and assets. The object being to profit from inflated sales prices in which the accomplices also received a cut. l In December 2015, two California women (one a real estate agent) were found guilty in a multi-million dollar mortgage fraud scheme that cost financial institutions more than $16 million. The defendants engaged in a

mortgage fraud scheme involving more than 30 properties in the Sacramento area, securing more than $30 million in residential mortgage loans purchased through straw buyers. One of the women, upon hearing of the FBI investigation even asked witnesses to lie for her and blamed a dead person for the fraud. l In December 2015, a Rhode Island lawyer and five others were indicted in an alleged mortgage fraud scheme that involved more than a dozen properties in both Rhode Island and Massachusetts. The attorney conspired with a real estate agent, a licensed loan originator, a loan processor, a real estate investor, and others from 2007 through 2014 that targeted five financial companies. Prospective homebuyers secured mortgages based on falsified applications and other phony documents. In many cases, the parties split thousands of dollars as a result of these misrepresentations. The conspirators concealed their involvement by conducting transactions under the names of various entities and individuals and at times used stolen identities.

Special fraud alert! Several lenders have reported that they have been recently victimized by hackers stealing title and closing agent e-mail addresses and slightly modifying them, then sending modified wiring instructions to their closing departments. In two instances reported to me, wires were sent to a fraudulent account and the criminals made off with the proceeds. In another instance, the settlement agent was duped when wire instructions from an alleged estate representative caused them to wire net sales proceeds to a bogus account. In this case, the error was uncovered within 24 hours and the agent was able to notify the receiving bank which froze the account before the money was removed or moved. In

response some lenders are not accepting emailed or faxed wire instructions, but instead, are calling title and settlement agents to verify the account information directly and verbally.

On the lighter side … After a lengthy criminal trial in a much publicized mortgage fraud case, the jury finally ended its deliberations and entered the courtroom to deliver its verdict to the judge. The judge turned to the jury foreman and said, “Has the jury reached a verdict in this case?” “Yes we have, your honor,” the foreman responded. “Would you please pass it to me,” the judge declared, as he motioned for the bailiff to retrieve the verdict slip from the foreman. After the judge read the verdict himself, he delivered the verdict slip back to his bailiff to be returned to the foreman, and instructed him to read the verdict to the court. “We find the defendant not guilty of all four counts of real estate and mortgage fraud,” stated the foreman. The family and friends of the defendant jumped for joy and hugged each other shouting and smiling. The defendant’s attorney turned to his client and asked, “So, what do you think about that?” The defendant looked around the courtroom slowly with a bewildered look on his face and then turned to his attorney and said, “I’m confused. Does this mean that I have to give all the money back?” Andrew Liput has been a corporate, real estate and banking attorney for nearly 30 years He is the founder, CEO and president of Secure Insight, the first data intelligence and risk analytics firm to offer specialized vendor management services to mortgage lenders and banks nationwide addressing settlement agent risk. He can be reached by e-mail at ALiput@SecureInsight.com.



n National Mortgage Professional Magazine n JANUARY 2016

heard on the street continued from page 52

JANUARY 2016 n National Mortgage Professional Magazine n



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

l l



Mortgage Professionals to Watch


The statement “To be determined” seems to be the trend in today’s housing market. Many markets across the U.S. are hot. Homebuyers are ready, but just not enough homes are hitting the market to satisfy the demand. This can cause frustration certainly for any homebuyer, but especially first-time homebuyers finally trying to secure their first investment. For others, it’s a great time to sell, but then you face the issue of finding and buying a new home in this low inventory climate. I’m located in the Pacific Northwest (Portland/Seattle), and we’re seeing a huge demand and bidding wars on newly listed homes. In a matter of days or even minutes, homes in desired areas are receiving several offers, and I feel like I’m updating pre-qualification letters nearly two dozen times before an offer sticks with a client. I believe 2016 will be another great purchase year, but I certainly hope inventory improves and we see more people list their homes for sale. Obviously each area is unique. What are you seeing in your market and what suggestions do you have for your clients when they get frustrated? What suggestions have you provided to colleagues to help monitor TBD pipelines and stay on top of pre-qualified prospects? What behaviors, good or bad, have you seen from others in the market to make offers more competitive when financing is involved? Are you an originator? Send me your stories! To have topics considered in future editions, please e-mail me with “OrigiNation” in the Subject Line at AHarris@VantageMortgageGroup.com. These questions can be confidential or your name and company can be referenced if you wish.

l Vantage Production LLC has named Timothy Murphy to the post of executive vice president of sales.



By Andy W. Harris, CRMS

l LenderLive has announced that Jenny Klamfoth has joined the firm as regional account executive for the company’s Correspondent Lending Division.


To Be Determined

Joe Nery, partner with Nery, Richardson, LLC in Chicago, IL, now serving as president-elect, will be installed as the 2016 president at the association’s March conference in Washington, D.C. The remaining new members to the board will also be installed at that time. The complete 2016 NAHREP board of directors and leadership team are: Joe Nery, 2016 NAHREP president; Leo Pareja, 2016 NAHREP president-elect; Teresa Palacios Smith, immediate past president; Gary Acosta, co-founder & CEO; and Board Members David Acosta, Helen Archer, Jerry Ascencio, Armando Falcon, Danny Hernandez, Rich Hernandez, Daisy Lopez Cid, Juan Martinez, Liza Mendez, Luis Padilla and Pamela Valenciano.

l FormFree Holdings Corporation has announced that Jay Meadows has joined the company’s board of directors. l Kevin Peranio has been added to the senior executive leadership team at Paramount Residential Mortgage Group Inc. (PRMG). PRMG has also announced the promotion of Karen Nelson to corporate underwriting manager of the Correspondent Division. Mortgage Insurance l National Corporation (National MI), a subsidiary of NMI Holdings Inc., has announced that it has named Rick Renna as an account manager in the greater Boston region. l Scott Robinson, MAI, SRA, AI-GRS, of Salisbury, N.C., began his one-year




term as president of the Appraisal Institute on Jan. 1. NewDay USA has named Paul “Tim” Thompson III as its new chief financial officer. U.S. Bank has named Tom Wind president of U.S. Bank Home Mortgage. He succeeds Rick Aneshansel, who announced his retirement in early 2015. LeaderOne Financial has announced the promotion of Steven Light to the newly created position of executive vice president and chief strategy officer. GSF Mortgage has announced that Danielle Samaniego has joined the company as a mortgage loan originator in Centennial, Colo. GSF has also added Kirk Velez as mortgage loan originator in Punta Gorda, Fla., joining GSF with two years of mortgage industry experience and several years in the construction business. Michael Paplaczyk has joined GSF Mortgage as branch manager in Tampa, Fla., joining the company with 25 years of experience in the financial services industry, including insurance, investment and mortgage origination. Roostify has announced that it has named Iyad Darcazallie as chief financial officer and chief operating officer, and Scott Stein as vice president of sales. The Mortgage Bankers Association (MBA) has announced the promotion of Tamara King to the position of vice president of Residential Policy and Member Engagement. WFG National Title Insurance Company has appointed Morton “Mo” Manassaram to the role of senior vice president, regional manager for its Florida Agency Operations. Home Point Financial Corporation has announced that Lisa Patterson has joined the company as senior managing director of Third-Party Lending. Advantage Systems has announced it has hired Russ Suter as its newest software developer.

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: newsroom@nmpmediacorp.com Note: Submissions sent via e-mail are preferred. The deadline for submissions is the 1st of the month prior to the target issue.

gauging the pulse of the industry continued from page 75

pared to five who preferred to differ. Are money, freedom and choice driving bank LOs back to mortgage brokering was the core of Question 22. Two-thirds of those questioned said that these factors were combining to stimulate the mortgage brokerage and nonbank businesses. Question 23 wondered if those surveyed were buying, selling or both buying and selling servicing. Eight firms were doing both, seven were selling, and another nine were retaining servicing. Question 24 asked if those surveyed were hearing that g-fees were again widening out across the industry. Ten said no, nine said yes, and five said they really didn’t know one way or the other. Is Basel’s new capital rule affecting your mortgage company, was the gist of Question 25. On a scale of one to 10, respondents reported an average of 3.8, with a range of one to 10. Question 26 asked about buyback demands from the GSEs, whether they were up, down or unchanged from 2014’s level. They are down said 17 execs versus three who revealed higher repurchase demands and four who reported no change. Will HUD’s proposed certification guidelines force lenders to add back

overlays, Question 27 wondered. Nineteen execs indicated it will, more than six times the number of dissenters. Questions 28 through 33 dealt with underwriting standards: whether they were currently too tight at the GSEs; how low their firms would go on FICOs for FHA borrowers; if the FHA was digging too deep into credit risk; whether they expected agency credit standards to loosen further next year; and if they thought the HomeReady product was good for borrowers. The answers: five times more execs said the GSEs’ underwriting standards were not too tight than those thinking otherwise; 23 of 24 firms are at or under a 640 FICO for their FHA loans; five times more respondents said the FHA was digging too deep into credit risk than not; 11 times more executives think that GSE credit standards will loosen further in 2016; slightly more execs feel that the GSEs’ affordable housing goals are a bad idea in practice rather than a good one; and, twice as many execs report that the HomeReady program is beneficial for borrowers than not. Questions 34 and 35 asked about the CFPB, specifically whether the execs felt the bureau’s consumer complaint database was credible and whether they thought its new guidance would termi-

nate the use of Marketing Service Agreements (MSAs). The complaint database scored a 2.9 on our scale of one to 10, thus only modest credibility is given the system. The response range was 1 to 7. Meanwhile, MSAs are definitely on the way out according to 22 of the 24 respondents. Questions 36 and 37 wondered about the new rep and warrant framework. Was it reducing overlays and adding greater certainty for lenders? Thirteen of 23 firms have not reduced their overlays despite the new rep and warrant framework, while 17 of 24 execs gave either a grade of A or B to Fannie and Freddie for improved certainty, with the other seven handing out Cs. Question 38 inquired about the new insurance risk programs from the GSEs, the CASs and STACRs. Fourteen grades of A or B were passed out, with the balance being Cs. Questions 39 to 42 sought graded performance reviews from those surveyed for Fannie, Freddie, FHFA and CFPB. Fannie received two As, 14 Bs, seven Cs and one D. Freddie received five As, 15 Bs, three Cs, and one D. FHFA received one A, eight Bs, 14 Cs and one D. CFPB received one A, no Bs, nine Cs, ten Ds, and four Fs. Question 43 wanted to know which firms were members of one or another mortgage cooperative. Eleven firms were members of at least one co-op versus 13 that weren’t members of any. How attractive do the execs think the

mortgage market will be in 2015, asked Question 44? Nine of those surveyed thought that the market would be quite attractive next year compared to 15 who thought not. Compliance consumes about what percentage of your firm’s total operating costs, Question 45 sought to learn. For the group of 24 the average was 21 percent, with a range of from five percent to 35 percent. Question 46 wondered if the execs thought the housing recovery was gaining strength nationwide. It is, said 21 of the 24 surveyed. Question 47 asked how big a challenge it is recruiting and retaining strong LOs. On our scale of one to 10, it scored a 7.2, meaning a moderately difficult challenge. The range of responses was from one to 10. Are the execs expecting much growth in the (languishing) non-agency market in 2016, Question 48 inquired? No improvement is anticipated reported 22 of the 24 surveyed. Question 49 asked what letter grade the lenders would give the CFPB for regulatory clarity. The group’s grade rounded to a D+, with no As or Bs. Question 50 wanted to know if mortgage application defects were on the rise across the industry. Twice as many execs indicated they are not on the assent than those who reported to the contrary.


continued on page 91

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n National Mortgage Professional Magazine n JANUARY 2016

Are you ready to do something DIFFERENT to get off of your production roller-coaster?


“Doing the same thing over and over again and expecting different results.” - Albert Einstein


Alternative Credit Scoring Meets the Mortgage World By Phil Hall eps. Ed Royce (R-CA) and Terri Sewell (DAL) recently introduced HR 4211, the Credit Score Competition Act of 2015, a measure drafted to allow the government-sponsored enterprises (GSEs) to use other credit scoring models besides FICO. In offering this bill, the representatives challenged the problem that many low- and middleincome Americans face when considering homeownership—that have the wherewithal to responsibly pursue the American Dream, but are disqualified from consideration due to a low or non-existent FICO score. “Fannie Mae and Freddie Mac are the largest mortgage purchasers in the nation, but they rely on credit score models that don’t necessarily take into account something as simple as whether borrowers have paid their


rent on time,” said Rep. Sewell. “Homeownership is an integral part of the American Dream that shouldn’t be out of the reach for low-income, rural and minority borrowers who lack access to traditional forms of credit. This legislation takes an important step towards addressing this issue and helps make homeownership a reality for more Americans across the country.” For John Councilman, immediate past president of NAMB—The Association of Mortgage Professionals and president of Fort Myers, Fla.-based AMC Mortgage Corporation, the need to rethink credit scoring is long overdue. “There are many problems with the current system that shuts out creditworthy borrowers,” Councilman said. “One of the biggest offenders is medical collections. Often, the applicant isn’t even aware a problem exists due to delays or other issues with insurance payments. It is not uncommon to find a borrower who has an excellent pay-

ment history on installment and revolving credit that has a low score due to medical collections.” Councilman added that in today’s economy, it is too easy for many people to slip through the proverbial cracks when it comes to credit reporting. “Borrowers with skinny credit files are denied credit because they often use creditors who do not report to the bureaus,” Councilman continued. “A borrower who pays rent timely is given no credit for that history. Debt collectors exploit the outdated system regularly. Even FICO’s more recent score algorithms consider some of these improvements, but they have not been adopted by Fannie Mae and Freddie Mac.” For Mike Mondelli, senior vice president of the Chicago-headquartered TransUnion Alternative Data Services, the effort to end the FICO monopoly at the GSEs is a breakthrough in expanding alternative credit scoring practices

across the housing world. “The mortgage industry is not the leading industry when it comes to alternative credit scoring,” Mondelli observed. “The leaders in this are the auto industry and the consumer lending sector. But we are starting to see signs of adoption in mortgage space.” Actually, these changes are a return to previous practices from years gone by. “Alternative credit has been around forever,” said Terry Clemans, executive director of the National Consumer Reporting Association (NCRA), located in Roselle, Ill. “It was around prior to the creation the underwriting systems. In 1998, the standardization of multiple facets for requiring most of the credit reports changed that. But now, postfinancial crisis, we are going back in time and picking up some of the sound underwriting decisions that were done away with for speed and economy. Alternative credit is one of them.” But Clemans acknowledged that prior

and never really participated in the formal credit markets.” Cutts added that having the mortgage industry pursue alternative data further is a step in the right direction. “This is a whole new way to look at consumer,” she stated. “There is an opportunity to find really good credit risk among people who have not built up a presence in the credit market.” But embracing this concept will require some adjustment by many lenders. For starters, Clemans noted that automated underwriting systems are not set up to factor in this type of data, and many lenders are not eager to do their underwriting without automation.

“It is problematic to do a manual underwriting,” said Clemans. “The lending community seems more interest in the speed of underwriting. In the conventional loan world, it is pretty much nonexistent. With FHA and VA loans, it is not the case and is much easier to do manual underwriting for those loans.” Clemans also stated that using certain records as evidence of paying bills on time may also hold potentially disqualifying information. “Filing utility data could hurt consumers due to energy assistance programs that are available to low-income consumers,” Clemans added. Mondelli admitted that one major stumbling block in this matter involves

the lack of a standardized method to categorize alternative data. “We have to be careful because there are 10 to 15 different credit data bureaus and they are anything but uniform,” he said. But despite the challenges, the movement to upgrading the credit scoring process is seen as a win-win situation for mortgage professionals. “NAMB has long-advocated for improved credit score modeling,” said Councilman. “A change is past due.” Phil Hall is managing editor of National Mortgage Professional Magazine. He may be reached by e-mail at philh@nmpmediacorp.com.

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n National Mortgage Professional Magazine n JANUARY 2016

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to 2008, alternative credit sourcing was linked to mortgage fraud due to a significant conflict of interest in the underwriting practices by some originators. “You cannot have a loan originator in charge of verifying alternative credit,” Clemans said. “They have an interest in the loan going through. That is kind of like putting the mouse in charge of the cheese. The proper way to verify this is to have credit reporting agencies verify it.” And that’s where TransUnion comes in with its CreditVision Link product, which was introduced in October 2015 and promoted as the first credit score to “combine both trended credit bureau data and alternative data sources—creating a more precise picture of consumer risk and their ability to manage financial commitments in a single point.” TransUnion stated that this alternative credit scoring solution would allow lenders to “score approximately 95 percent of the U.S. adult population, including tens of millions of consumers who cannot be scored by traditional credit scores.” “We’re in process of testing this with both GSEs,” said Mondelli. “That’s going to take time [to complete], but we are in the process of broaden the box beyond the FICO box.” In fairness, FICO is not totally oblivious to alternative credit scoring. In April 2015, the company launched a pilot program with LexisNexis Risk Solutions and Equifax that allowed 12 of the largest credit card issuers in the U.S. to use alternative data to identify individuals that would be unable to obtain traditional credit under the traditional scoring process. For Amy Crews Cutts, chief economist at Atlanta-based Equifax, the bridge between alternative credit scoring and traditional credit scoring covers much common ground. “The concept is very much the same,” Cutts explained. “They have a particular goal in mind: the performance of the mortgage and the likelihood of default. The challenge is to create a statistically valid model that takes into account systematically reliable and robust characteristics for people who are successful in paying back the mortgage, while bettering the filters to check out people that are not likely to repay.” Cutts also pointed out that changing demographics and post-recession economics have made alternative credit scoring more relevant in determining creditworthiness. “Alternative credit looks at three groups of people,” Cutts continued. “First, those who recently moved to the U.S.—if they could have brought their credit histories from their former countries, most likely it would have looked pretty good. Second, there are young people that just graduated from high school or college and are having a very difficult time establishing credit. Many young people use debit cards, which are great for cash but not for building up a credit history. And, third, there are people who have been here for a while







$ $






JANUARY 2016 n National Mortgage Professional Magazine n



After several years in business as two separate entities, Caliber Funding and Vericrest Financial, Caliber Home Loans premiered in 2013. Many top executives, including Chairman and CEO Joe Anderson, were successful mortgage loan officers earlier in their careers. This enabled them to oversee the creation of a lender with a genuine understanding of today's homeowners, including their priorities and concerns. National Mortgage Professional Magazine spoke with John Bianchi, executive vice president of national retail lending, and Phil Shoemaker, executive vice president of wholesale lending, at Irving, Texasbased Caliber Home Loans on the company’s approach to today’s mortgage market. What makes Caliber different from its retail competitors? John Bianchi: A lot of people ask us that question. For us, it is our passion for what we do: assisting with keeping people in their homes and purchasing new homes. We retain the majority of our servicing, so our customers know who they work with through the life of their loan. I run the retail and consumer direct side of Caliber Home Loans, and I know how important it is to have a CEO like Joe Anderson, with experience from the ground up. Joe was a processor, a loan officer and an underwriter, and having someone at the helm who worked at every position makes the difference. It is surprising how many companies do not have that at the top. I was an originator as well, and I worked my way up through the last 25 years. When it comes to talking to loan officers, it is easier for me to relate to them because I’ve done what they are currently doing in the trenches. What makes Caliber different from its wholesale competitors? Phil Shoemaker: Culture is the key ingredient for any successful mortgage bank. It takes years to develop a great culture and only seconds to lose it with one bad decision. A great corporate culture is one where the leadership is humble, values their employees, and is focused on build-

ing an ethical, financially secure company. I believe Caliber’s culture is second to none. It’s the foundation of our longevity, and we work very hard to protect it. What does the company look for in potential employees? Bianchi: Like other companies, we are looking for the top producers. But at the end of the day, we’re looking for a cultural fit. It doesn’t matter how much production is done if there is no cultural fit—it just won’t work. I think about one of the big challenges in making a cultural fit: Despite all of the changes in Dodd-Frank and the Consumer Financial Protection Bureau, I have noticed that some loan officers care about this changing environment and how it affects them and their business practices, while others do not care as much. I get concerned when a loan officer I’ve interviewed asks, “Have you figured out how to get around these regulations?” I try to focus on finding the loan officer who cares about the customer, is a team player and cares about staying compliant. What is your forecast for the industry now that interest rates have finally begun to rise? Shoemaker: There will be substantial consolidation in the industry. The few companies like Caliber that have built service delivery models around purchase business, and are financially secure because of their balanced approach to originations and retaining servicing, will be the beneficiaries of the consolidation. We expect non-agency products to become a material part of the market. This is why we have worked the last two years to build our own proprietary suite of non-agency products. There is a large, untapped market of creditworthy borrowers who are able to demonstrate the ability to repay, but are underserved by the current agency and prime jumbo products available today. Caliber’s Portfolio Lending Product line gives us the ability to assist those underserved consumers and place them on the path of sustainable and responsible homeownership.

“Caliber is here for one reason: The customer, whether we are assisting with a refinance, helping a customer with a credit event to obtain a new home or a customer purchasing their first home, the customer comes first.” —John Bianchi, EVP of National Retail Lending, Caliber Home Loans There has been data from around the country suggesting that affordable housing is becoming more elusive to locate. In your opinion, what can be done to ensure greater housing affordability? Bianchi: There are numerous products across the industry designed to ensure affordable housing is available, including bonds and downpayment assistance programs. Caliber has developed programs to assist those who have experienced a credit event to once again enjoy homeownership. We need to educate the real estate community about these products. Personally, I would like to see the independent mortgage bankers take a similar approach to those of the banks who have Community Reinvestment Act (CRA) initiatives to assist low- to moderate-income families with affordable housing. There has been a great deal of talk over the past year on Millennials–or, to be more specific, the lack of them as homebuyers. What can be done to bring these younger people into homeownership? Bianchi: According to data from the National Association of Realtors (NAR), 42 percent of Millennials want to purchase a home in the next five years and 65 percent agree that owning a home is the American dream. Millennials prefer to buy homes before they get married, which is different from earlier generations. I think the Millennials–at least from the research that I’ve done–will be the largest homebuying population this year. What is holding a lot of them back is student loan debt, and they are incubating a

little longer in their families’ homes. But that could also be part of their saving strategy, which will help them prepare their finances to buy homes. How has TRID impacted Caliber’s operations? Shoemaker: I am extremely proud of Caliber’s TRID implementation and all of those who sacrificed nights and weekends with their families to get us through it. It was an incredible amount of work and I believe our implementation is spot-on. Initially, we saw a slight increase in our application to close turn time, but our sales and operations teams communicated and we quickly made adjustments to correct. We did not assume we knew what was best for our broker partners–instead, we listened to them before building a flexible process that empowers them to provide a better experience for their customers. This was only possible because of our culture and the fact that we own our technology. Many of our competitors continue to struggle with their technology vendors, while Caliber quickly enhanced our platform when changes were required. As a result, Caliber is one of the few wholesale lenders that saw a material increase in market share from the third quarter to the fourth quarter. I expect this trend to continue through the first half of 2016. What are some of Caliber’s current marketing strategies? Bianchi: Caliber’s primary marketing strategies revolves around our distributed sales force. As a national lender, we have

“Culture is the key ingredient for any successful mortgage bank. It takes years to develop a great culture and only seconds to lose it with one bad decision.”

Step Inside Ginnie Mae

—Phil Shoemaker, EVP of Wholesale Lending, Caliber Home Loans

What do you see as the company’s greatest challenges for 2016? Bianchi: Actually, I think we need to prepare for 2018 more than 2016. There will be turmoil in the marketplace, which will lead to recruiting and acquisition opportunities. Turmoil is not negative. We must think bigger and broadly, think forward but learn from the past. We will need to allocate capital smartly–both your money and your time. And most importantly, we cannot blur the lines between the company and the customer. Caliber is here for one reason: The customer, whether we are assisting with a refinance, helping a customer with a credit event to obtain a new home or a customer purchasing their first home, the customer comes first. With that focus, everything else will fall into place. If Caliber could be described in a single word, what would that word be? Bianchi: “Committed.” Caliber is committed to doing the right thing for the homeowner, business partner, employee, and company 100 percent of the time. We are committed to making responsible lending decisions. We are committed to this industry and are committed to the communities that we serve. Phil Hall is managing editor of National Mortgage Professional Magazine. He may be reached by e-mail at philh@nmpmediacorp.com.

What a Year It Was By Ted W. Tozer


recently sent Congress our annual report, covering fiscal year 2015. I would like to share with you some of the information I gave to senators and representatives. This past year might as well have been the busiest year ever for Ginnie Mae. When I looked at my year-end dashboard of key indicators, here is a sampling of what I saw: Key Indicator 2015 Results Growth Over 2014 Households financed ..............1.9 million..........................................Up 21% MBS issuances ........................$436 billion ........................................Up 44% MBS outstanding ....................$1.6 trillion ..........................................Up 5% Net income ............................$2.2 billion ..................Our biggest year ever! Capital reserves ....................$21.5 billion ........................................Up 11% You can definitely see a trend. Whether you measure our success by mission goals—bringing global capital into the housing finance market, business activity—the volume of issuances or financial strength—net income and capital reserves, every Ginnie Mae indicator substantially increased. In FY 2015, we saw Ginnie Mae help more Americans meet their housing 85 needs via FHA, VA and other government mortgage programs. Annual issuances in Ginnie Mae MBS were the second highest ever, and easily surpassed those from Freddie Mac. Although net income is not a primary driver of our business—we do not have private shareholders to cater to—we made more profit last year than Starbucks did in 2014. And we strengthened our capital position, an important source of taxpayer protection at a time when the other main sources of mortgage funding, Fannie Mae and Freddie Mac, are not allowed to rebuild their capital bases. But that is not all. During the year, Issuers preferred Ginnie Mae IIs versus Ginnie Mae Is by a 3:1 ratio, continuing a long-standing trend of Issuers taking advantage of the note rate flexibility of the Ginnie Mae II MBS. A newer trend, however: a jaw-dropping surge in Issuer use of our program, Pools Issued for Immediate Transfer (PIIT), which allows Issuers to fund loans and transfer the resulting mortgage servicing rights. In 2014, about 1,500 loan pools utilized PIIT. The 2015 figure? Almost 4,800, a whopping increase of more than 300 percent! More than any other figure, PIIT gives you insight on the broader picture at Ginnie Mae. It reflects the massive transformation occurring within our Issuer base, where non-depositories have gone from a small percentage to, now, a clear majority. Non-depositories frequently use PIIT, while traditional banks seldom do. This greater use of PIIT underscores the need to preserve a key element of risk management—cash is king—while enabling our Issuers to continue to fund mortgages. I have been discussing this topic with Issuers, commercial banks and others, which I will address in a future column. For Ginnie Mae, 2015 proved to be a quite a year. We experienced incredible success in many areas of our business. And we were pressed hard to keep up with the demands and changes within the market. So I do not expect the year ahead to be an easy one. But we start 2016 with a renewed purpose to fulfill our mission, a desire to make our business infrastructure more effective, and a commitment to make our business partners more successful. That makes for a full plate. Ted W. Tozer is was sworn in as president of Ginnie Mae on Feb. 24, 2010, bringing with him more than 30 years of experience in the mortgage, banking and securities industries. As president of Ginnie Mae, Tozer actively manages Ginnie Mae’s $1.5 trillion portfolio of mortgage-backed securities (MBS) and more than $460 billion in annual issuance.

n National Mortgage Professional Magazine n JANUARY 2016

How does Caliber approach social media? Bianchi: At the corporate level, we have a basic social media presence on both Facebook and LinkedIn, with the goal being to provide industry information that our business partners and consumer find relevant to the home lending/real estate community. At the corporate level, we post to Facebook three times daily. Loan originators are encouraged to participate in social media, and have guidelines on establishing a business page on both Facebook and LinkedIn.

What do you see as the near-term future for wholesale lending? Shoemaker: The wholesale market is positioned to gain additional material market share in the coming years. As the regulatory environment continues to stabilize, brokers that prematurely transitioned to banker careers will realize that the broker model still makes economic sense, and can be more effective at competing for a referral partner’s business. As the emerging non-agency market accelerates, brokers will benefit because they will be able to evolve with the market nimbly and with less risk by partnering with companies like Caliber. Additionally, brokers who migrated to a non-delegated correspondent model and were not able to achieve the scale necessary to be profitable will find it makes more financial sense to be a broker when the refinance business goes away. The costs associated with properly managing regulatory risk will far outweigh any perceived economic benefit, and smaller bankers will transition back to a broker model.


more than 800 loan officers and approximately 140 retail branches that represent our company, products and our brand in the local marketplace. We rely on their expertise to establish strong relationships with their business partners, real estate brokers and builders. They are provided the tools to position our products and services in the marketplace, while having the freedom to market themselves in the way that best fits their sales style. As mortgage professionals, they have a good understanding of what our company can provide and the wide array of products we offer to fit borrowers need. We have a propriety marketing platform called “AMP,” Automated Marketing Plus, that they can use to assist with all aspects of their marketing mix. If they advertise locally, do e-mail or direct mail campaigns, lunch and learns, seminars for first-time homebuyers, etc., they can access the most up-to-date, compliant marketing pieces from our Web-based platform to position the products correctly, compliantly and professionally, yet still have the ability to personalize the pieces to make them work for them. They also have the tools to stay in communication with their borrower and real estate broker/builder partners throughout the homebuyer process, via both e-mail and text message. Strong communication overall is a big part of the mix, since the homebuying process can be daunting to some. Each loan originator has an individual Web site that allows them to take an application online, and borrowers can easily upload documents to make the process much easier and more efficient. Once the loan closes, we have a large variety of ongoing customer campaigns to keep Caliber and the loan originator visible even after the loan is closes. The loan originator’s name appears on the monthly billing statement, and items such as mortgage anniversary cards, birthday cards and newsletters are available for further marketing opportunities.

JANUARY 2016 n National Mortgage Professional Magazine n



Uncovering Home Equity Cross-Sell Opportunities By Corey Hulbert The U.S. housing market continues to improve, and with it, the plight of homeowners, many of whom have been underwater on their mortgages since the financial crisis began. According to CoreLogic, homeowners with negative equity fell to 8.7 percent in the second quarter of 2015, the lowest that number has been since the crash. The company put the total number at 4.4 million as of June 30, down from 5.1 million in Q1. Analysts said just more than $309 billion worth of U.S. real estate was still underwater, from a financing perspective. But it’s getting better. Zillow looked at the same numbers for the second quarter and they put the percentage of homes with negative equity at 14.4 percent, down from 15 percent. Still, that’s a 19.3 percent decrease from a year earlier. Even better, Zillow said that the bottom third of the 7.4 million homeowners who were still underwater saw faster rates of growth in the values of their homes. The best news is that this growth in home values is impacting up to 60 percent of the properties across the country, which led Black Knight Financial

Services to conclude that total home equity has increased by nearly $1 trillion over the past year ($825 billion in the first five months of this year!), reaching its highest level since 2007. The company put total available home equity at $7.6 trillion, with about $4.5 trillion of it available to borrowers now. That’s a lot of new business waiting for lenders to originate. The question is: How do lenders find it?

Uncovering home equity opportunities Prior to the crash when most lenders got their new business by picking up a ringing phone, few origination teams had formal strategies for cross-selling products. Today, many institutions have embraced more sophisticated marketing methods for uncovering new business. However, compliance concerns have driven many banks to keep much of their prospecting work internal to avoid third-party risk. This works fine for home equity cross selling as the prospects the bank will target are often already in their portfolio or CRM. The first step many lenders that service their own loans take is to determine where equity is still present within their customer base by ordering a bulk valua-

tion report on their portfolio. This is an excellent initial qualifier, but it is not as easily accomplished if the originator has sold the loans upstream. Fortunately, the information the originator needs is still available from sources outside of the company. Having good access to third-party data can make the lender’s work significantly easier. In this, our industry isn’t unique. The legal profession has special libraries and databases available for attorneys just as the healthcare industry has medical journals and databases that practitioners use to make better diagnoses. What our industry has that sets us apart from all others is the public record archive managed independently by County Recorders in the 3,143 U.S. counties. While the exact documentation that must be recorded publicly varies by state, our industry has arguably the best archive of pertinent information about the primary asset we’re concerned with than any other industry anywhere. Of course, that may change if Google reaches its healthcare information goals. If that happens, there may be as many documents associated with your body as there are with your home, but that hasn’t happened yet. What this means for lenders is that

property reports can reveal the information they need to effectively target prospects for home equity loan or line solicitations. The best companies that provide these reports typically employ a national network of abstractors that dig into the local records and uncover the information lenders need to qualify crosssell prospects. For instance, a property report designed to determine the open liens on a piece of real estate will reveal whether a homeowner has one loan (typically just the purchase note) or two (the second being a home equity loan). When combined with a low-cost valuation report or AVM, lenders can quickly create viable marketing lists for cross-sell purposes. Black Knight says the average American homeowner with a mortgage has about $19,000 more equity in his or her home today than a year ago. Lenders who will be able to find these borrowers will be able to tap into this equity and earn more business in the future. Corey Hulbert is associate vice president and head of sales for SmartProp at ATPR Inc., a provider of technology-based solutions for the real estate lending and settlement services industries. He may be reached by e-mail at Corey.Hulbert@ATPRInc.com.

the long and short continued from page 52

Why a closer look at unused Hardest Hit Funds is needed Unused Hardest Hit Funds of $7.6 billion allocated in Feb. 2010 will go back to the U.S. Treasury on Dec. 31, 2017 when Hardest Hit Funds expire. Florida alone has more than a half-billion dollars still available in Hardest Hit Funds. Hardest Hit Funds are not included in the state budget, so they do not jeopardize other state programs.

The benefit for responsible underwater homeowners and Hardest Hit Funds Homeowners l Offer a discounted rate for a shorter term of this new replacement second mortgage. Combining a lower rate with a shorter term is the quickest method to regain equity, and an amortization schedule can show when positive equity will return. l Homeowners must be current on their mortgage. l Restructures financing for sustainable combined first and secondary financing and keeps homeowners in homes, preventing more short sales in underwater areas.

Hardest Hit Funds l Use these funds as a replacement second mortgage, not principal for-

giveness. Funds are paid back, replenishing this fund. l Applying funds as new secondary financing requires a smaller allocation of funds per eligible homeowner, allowing more to be served.

Footnotes 1—GSE: Government-sponsored enterprise loan, a conventional loan under Fannie Mae or Freddie Mac. 2—If HAMP received on first mortgage, HAMP Second Lien Modification Program (2MP) available for second mortgages on the same property (www.makinghomeaffordable.gov/steps/pages/ste p-2-program-2mp.aspx). 3—Pages 412-414: Refinance of Borrowers in Negative Equity Positions Program (Short Refi) FHA Handbook 4000.1, 9/14/2015 (http://portal.hud.gov/hudportal/documents/hud doc?id=40001HSGH.pdf). 4—FHA 4155.1 3.B.1.f/Short Payoffs: Page 7 (https://portal.hud.gov/hudportal/documents/hu ddoc?id=4155-1_3_secB.pdf) 5—Note holders: A person, a bank or organization that has lent money, for example in the form of a mortgage or bonds (http://dictionary.cambridge.org/us/dictionary/english/noteholder). 6—Page 414 of footnote #2.

Pam Marron (NMLS#: 246438) is senior loan originator with Innovative Mortgage Services Inc. (NMLS#: 250769) in Tampa Bay, Fla. She may be reached by phone at (727) 375-8986, e-mail pmarron@tampabay.rr.com or visit HousingCrisisStories.com, CloseWithPam.com or 8Problems.com.

continued from page 72


and that’s money that could be used to make the transaction or the veteran’s financial situation better! Do the right thing and use up every penny! Thanks again for taking the time to read my column! Do you have any questions about VA? If you do, please don’t hesitate to shoot me an e-mail at RBettencourt@MortgageNetwork.com and I’ll do my best to get you the answer so you can help someone who’s done so much for both you and me! If you haven’t already, please take a minute and thank a veteran. We owe them a lot more than they owe us! Richard M. Bettencourt Jr., CRMS, CMHS of Danvers, Mass.-based Mortgage Network is secretary of NAMB—The Association of Mortgage Professionals. He may be reached by phone at (978) 304-0818 or e-mail RBettencourt@MortgageNetwork.com.



calendar of events see page 93

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most likely due to a mistake during the origination process. Now, in closing, I would like to highlight something that doesn’t happen in the mortgage broker channel, but could happen in every other channel. Non-broker mortgage originators (bankers, community banks, credit unions, etc.) often have the option of providing credits when premium exceeds their par pricing. They can ultimately decide who or who does not receive a credit, a particular practice I have a major problem with and don’t follow. This has the potential to open up the originator and the company to a potential disparate treatment violation as defined by the CFPB and codified in Fair Lending. So, keep this in mind originators … when you “decide” to not provide those credits to a veteran, you are withholding the veteran’s money


operation va sitrep


TRID’s Long-Term Impact on Future Loan Offerings 2016 marks the beginning of the “Competitive Compliance Age” By Wes Miller

JANUARY 2016 n National Mortgage Professional Magazine n



TRID has changed many things in the mortgage industry, resulting in the need for new technologies, processes and procedures. There is no question; the regulation changed how a mortgage closing is conducted. There is one question, however, that needs answering, and it is one that not many people are asking yet: How will TRID affect the mortgage industry five years from now? Ten years? Fifteen? To answer this question, one needs to understand that the power players in this industry are not limited to the regulators. The regulators have power to enforce the rules, but ultimately aren’t the ones “driving the bus.” As Sam Walton, the founder of Walmart, once famously said: “There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.” Mortgage investors are the ultimate consumers of a loan product and TRID has changed the way they view loan risk. This shift in awareness will result in massive changes for the industry. Some of these changes include the fact that there is debate over the governmentsponsored enterprises (GSEs) exiting residential mortgage-backed securities (RMBS) by 2018, to lower risk for taxpayers and to attract private capital back into the market. TRID has created such turmoil in the marketplace. However, private investors have taken serious notice. These parties have remained mistrustful of RMBS since their experience back in 2008 and do not look favorably on additional risk sets. At best, they will be very guarded. This wariness will only worsen as non-compliant loans enter the secondary market. The Consumer Financial Protection Bureau (CFPB) has issued a letter to the Mortgage Bankers Association (MBA) with many reassuring points on this subject, one of the key ones being that errors in the Loan Estimate could be corrected in the Closing Disclosure. Richard Horn, previous senior counsel to the CFPB, expressed many concerns about this letter in his newsletter: l The CFPB issued these statements regarding cures and liability under TRID in the form of an informal letter. While this letter may weigh on the side of being helpful, it is uncertain how much deference, if any, a court would give to such an informal letter. l Determining which liability under TILA applies is the purview of the courts. When commenters asked the

CFPB to specify which statutory liability applied to different provisions under TRID, the CFPB responded that courts can use the statutory authority described in the section-by-section analysis to determine liability. In addition, there is some case law supporting the opposite position: that liability, including statutory damages, can apply to the initial TILA disclosures. l Courts may find that Loan Estimate violations cannot be cured by a later Closing Disclosure, because the harm at the shopping stage cannot be cured by a later accurate disclosure. To attract private label investors, the mortgage closing industry will have to wrap their TRID loans in something more protective than a QM sticker. Investors are beginning to demand additional representations and warrants. They want to see proof of compliance at a granular, technical level. Those that can provide the private mortgage investor with proof that these representations and warrants are true will have a significant competitive edge in the years to come. Private mortgage investors will, essentially, demand a better loan product. And the number one rule in sales is that the customer is always right. In an open letter to the Federal Housing Finance Agency (FHFA), the MBA advocated for the use of up-front risk sharing models. These models would derisk loans before they are packaged into RMBS, following the adage that an ounce

of prevention is worth a pound of cure. This approach would have substantial benefits, including, but not limited to: Credit risk competition with the viable outcome of increased access to mortgage credit to homebuyers, risk dispersed from the GSEs and of course private capital being restored to the RMBS market. The naturally ensuing question is simple, but is one that has stumped the industry since the RMBS market originated: how exactly does one “de-risk” a loan? The sarcastic rejoinder, many would argue, is such a task is impossible or it would have been done already. Technology, however, is continually overhauling the impossible into the imaginable, the imaginable into the feasible and the feasible into the standard. To believe something is impossible for an extended length of time is dangerous for businesses. De-risking a loan would require all communications, between the participating entities to be documented. It would require data verification on the official loan forms, ensuring that it is correct on all counts and all iterations. It would require proof that the Loan Estimate and the Closing Disclosure were delivered to the homebuyer as per the timing requirements. It would require evidence that funds were distributed to appropriate parties. These requirements and more would have to be followed for every loan in a securitized pool, in order to attract the mostly sidelined private label security (PLS) market in any sizeable quantity.

Remember, this was the group that arguably lost the most during the 2008 mortgage crisis. They need serious assurances to be motivated. However, if the industry relies on a human being to manually compare hundreds of pages of documents, the reality is that there will be errors. The cost of origination is already too high in the current mortgage landscape; consumers are paying too much and the margins aren’t what they should be. In order to make home buying affordable for everyone participating on a loan, all of these problems have to be replaced with technological advances. The long-term impact of such technologies will create increased competition for credit risk, giving investors more confidence to buy and more options to choose from. This is not an argument saying that the industry needs to return to the days of subprime loans. The future of mortgages will be dependent on using superior technology to validate and verify consumer-centric data and matching that data to investor criteria, ensuring a oneto-one match for risk vs. yield. This increased appetite will cause a shift in the secondary market’s dynamic. In the current setting, the RMBS market operates much like a restaurant that offers only one entrée. It is limited by the type of loan risk the mortgage industry produces. When more risk options are introduced, however, the private investor will begin to demand a variety of specific types of risk with different yield options. They will select the loan type they prefer from specific criteria, as if choosing ingredients to be included in a recipe. As a result, the market will begin catering to the mortgage investor’s preferences. This will set a precedent for a new type of mortgage supply chain that generates these types of loan risks, so they can be delivered to private RMBS investors. TRID has set in motion a wave of awareness among private mortgage investors. These entities are the ones who drive the mortgage market, by the simple fact they are the loan’s ultimate consumer. They will drive the mortgage industry to generate specific types of loan risk. They will change how a loan is originated. The long-term impact of TRID will drive the mortgage industry into the age of competitive compliance. Wes Miller is CEO and co-founder of ATS Secured, a new technology category for the real estate closing industry. Miller has extensive experience in developing and marketing both core and ancillary financial products. Wes has been recognized for his success in sales, customer service and training support staff.

nmp news flash continued from page 26

into the U.S. In an environment that is regarded both as the safest and most secure in the world, with a strong currency and the best opportunity for capital appreciation, the U.S. is the safest harbor.” According to the latest AFIRE survey, 60 percent of respondents said the U.S. offered the most stable and secure environment for real estate investments, far outpacing second-place Germany at 19 percent. Nearly half of respondents identified the U.S. for providing the best opportunity for capital appreciation—Brazil was a very distant second, at 17 percent while 85 percent of respondents expressed yearover-year confidence in the viability of the U.S. real estate market; By property types, U.S. multifamily and industrial opportunities tied for first place as the preferred investment target, with retail in third place, office properties in fourth and lodging in fifth. On a global city perspective, New York retained its number one position as the preferred location for real estate investment, followed by London in second, Los Angeles in third, Berlin in fourth and San Francisco in fifth. As for the real estate investors eager to take a chance in emerging markets, Brazil was the top choice, followed by China in second, Mexico and Chile in a tie for third and India and Peru in a tie for fifth place.

Four Banks Sued Over RMBS Losses

The National Reverse Mortgage Lenders Association (NRMLA) reports that an estimated $147 billion increase

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


n National Mortgage Professional Magazine n JANUARY 2016

NRMLA: Seniors Holding Nearly $6 Trillion in Home Equity

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:


Germany’s Commerzbank AG has filed lawsuits against a quartet of U.S. over more than $2 billion in losses related to residential mortgage-backed securities (RMBS) issued between 2005 and 2007. The Wall Street Journal, citing court documents that it viewed in U.S. District Court, is reporting that Commerzbank has targeted Bank of New York Mellon Corporation, Wells Fargo NA and HSBC Bank USA NA, plus Deutsche Bank AG ’s U.S. unit, Deutsche Bank National Trust Company in its litigation, charging that the banks did not monitor losses on the securities for which they acted as Commerzbank’s trustees. Commerzbank accuses the banks of failing the fulfill their respective “contractual and fiduciary duties.” Each bank is the subject of a separate lawsuit filed on Dec. 23 and Dec 24 in the U.S. District Court for the Southern District of New York. Commerzbank made no public announcement of the lawsuit and the four banks being sued have not issued public comments on the litigation.

in the aggregate value of homes owned by seniors drove their share of home equity to $5.76 trillion and rocketed the NRMLA/RiskSpan Reverse Mortgage Market Index (RMMI) to an all-time high in Q3 2015 of 200.19 from 195.42 in the second quarter. Mortgage debt held by seniors increased slightly from $1.45 trillion to $1.46 trillion last quarter, but the uptick was barely a dent in home equity levels, which have climbed steadily for 18 consecutive quarters. The Q3 numbers are based on a revised methodology that includes data

from the 2013 American Community Survey and the Federal Reserve’s Z. “The recalibrated index uncovered something we didn’t expect to see, which was that senior housing values outperformed the general population. In metro areas hard hit by the Great Recession, for example, senior home values were more resilient to declines. It’s great news for seniors who are considering tapping their housing wealth to support their retirement planning,” said NRMLA President and CEO Peter Bell. The changes in methodology and data source updates resulted in a very significant 37 percent increase in the aggregate value of senior equity.

What is Slowing the Adoption of Digital Transaction Management in the Mortgage Industry?


JANUARY 2016 n National Mortgage Professional Magazine n


By Stephen F. Bisbee In her mid-20s, my daughter pays a variety of bills and expenses that you would expect for someone launching a new life of their own. What may come as a surprise is she has never been into a bank and among her peers, she is far from alone in avoiding them. More than 75 percent of Americans between ages 18 to 44 say that mobile functionality is already vital to today’s current banking environment, and some estimates indicate that more than half of homebuyers complete their initial mortgage applications online. In today’s increasingly digital landscape, how quickly lenders can move their borrowers through the entire mortgage process can be the difference between helping secure the home of their dreams and losing their clientele. With consumers showing clear preferences to interact digitally—and knowing the return-on-investment (ROI) for those offering a digital mortgage process—why is adoption so slow? While I have spent most of the past 30-plus years understanding, developing and evangelizing the legal and technical requirements of how to successfully execute electronic mortgages and other digital transactions, the fact remains that most of the challenges to adopting these new processes remain social and psychological. I see the following as three main hurdles standing in the way of full digital adoption:

1. Inertia Change is simply hard. A fully-digital mortgage process requires all lending and banking partners to buy in and agree to their own digital transformation. Shifting the

processes of five different companies, to properly ensure the compliance of each piece, requires effort and a true willingness to adapt. This process revolution will always face opposition, as digital adoption is as much a cultural change as it is a literal operational change. While transformation across entire companies is not an easy feat, one of the first hurdles to its acceptance is disregarding the notion that digital capabilities require complex environments and infrastructures.

2. Layering Mortgages have dozens of steps and rounds of paperwork—so when a few of these steps are accessible digitally and a few are only offered in physical form, problems arise. Using a hybrid electronic processes slows overall adoption because the layering of formats requires additional effort to make the pieces of the mortgage puzzle fit, rather than enabling a seamless process. Unfortunately, most lenders still use these hybrid processes that pair together paper and digital. While this may work for a low-volume settlement office, replicating that process is nearly impossible with large volumes; and lacks a full chain of custody across the loan process.

3. Confidence In some industries, there is a lack of confidence in the security of digital processes. While there may still be skepticism around turning to technology for highly-sensitive processes, the fact is that technology adds layers of security that paper processes simply cannot offer. For example, in the paper world, someone can take a loan document, forge a signature and claim to have the originally executed document. However, with digital mortgages, parties can easily prove that the original

document never left the system, therefore any other documents are forgeries or copies. This is accomplished through a robust audit trail equipping assets to show who, what, when and why documents are accessed, modified or viewed. This record of any action taken within valuable documents secures consumers’ futures and livelihoods in ways the standard process is simply incapable of doing. Regardless of the hurdles lenders and financial institutions face when deciding whether to go digital, they do not nearly outweigh consumers’ demand and the numerous operational benefits of making the transition to fully-digital processes. And those within the industry agree. The CEO of Quicken Loans and the new chairman of the Mortgage Bankers Association (MBA) Bill Emerson recently affirmed this notion. “You have an opportunity to gain market share if you interact with people the way they are comfortable interacting,” Emerson said. Throughout the industry, mortgages need to grow in their capabilities to meet the demands of a fast-paced digital world, while helping those facilitating them to maintain the integrity of the process and ultimately their market relevance. Full adoption may take time, and may happen in phases, but digital mortgages are unavoidable and the answer to the needs of today’s consumers who have come to expect a level of convenience and security that simply cannot be offered through paper mortgages. Stephen F. Bisbee serves as president and CEO of eOriginal Inc., a provider of digital transaction management (DTM) solutions. Bisbee is a founder of eOriginal and is co-inventor of the eOriginal technologies. He may be reached by phone at (866) 364-3578.

gauging the pulse of the industry continued from page 81

Questions 65 and 66 sought feedback on FHFA Director Watt and HUD Secretary Castro. They scored a 5.7 and a 3.7 respectively, with a top score of 10. Watt and Castro had respective high scores of nine and seven for their overall job performance. Question 67 inquired whether the respondents favored Sen. Corker’s “Jumpstart GSE Reform� legislation. Eleven support it, five don’t and eight others were unfamiliar with the Senate Bill. Banks and non-banks were at the

indicated that they expect thinner margins next year, and 13 of 23 are dissatisfied with progress on the SS and the CSP. There you have it, a summary of what was learned from the survey research project at last week’s convention. Finally, my thanks to Tom Millon of the Capital Markets Cooperative for sponsoring this latest survey of top industry issues and topics. Tom LaMalfa is a 35-year veteran mortgage-market analyst and researcher. He has done pioneering work in the areas of secondary markets, wholesale mortgage banking, mortgage brokerages, financial benchmarking and GSE reform. He may be reached by e-mail at tom.lamalfa@gmail.com.



The NAWRB Women’s Homeownership Initiative (WHI) is dedicated to increasing women homeowners throughout the country. As women achieve homeownership, they will secure their progress and pave the way for future generations to do the same. Along with our advocacy work and WHI, NAWRB will champion the following goals in 2016:          • Increase mentorship among women, thereby helping future generations attain the security to succeed and grow • Increase vendor diversity and the utilization of women-owned businesses across the industry • Decrease women’s poverty level—30.9 percent of female-headed households with no husband present live in poverty, 40.5 percent of these households have children under 18 years of age        The professional world is evolving and NAWRB is here to help ensure that this change continues. Join NAWRB’s movement today!




n National Mortgage Professional Magazine n JANUARY 2016

Are expanded HMDA reporting requirements good for lenders, asked Question 51? Only three of 23 respondents said the expansion was a positive. Question 52 asked if the execs thought the homeownership rate would increase substantially in the next five years. Nearly three times as many said it would not grow substantially as answered that it would. Questions 53 through 59 dealt with different aspects of TRID. Six answers were sought: 1) How big of a challenge was it preparing for the October enactment date; 2) Was the real estate industry ready for its commencement; 3) Will 30-day closings disappear for some period of time; 4) Would loan locks be delayed; 5) How long will it take until it’s back to business as usual in the postTRID world; and 6) Are you expecting considerable backlash from consumers who experience delayed closings. As for the size of the challenge preparing for the October start date, it was an 8.8 on a scale to 10. The range was from five to 10. There were 16 scores above an eight. Was the real estate industry ready for TRID? It was not ready, said 19 of 23 surveyed. Yes, TRID will reduce the number of 30-day closings for a while, stated 15 of 24 execs; it will also slow lenders’ moves to lock, indicated 12 of 22 execs. More than twice as many respondents thought there would be significant consumer backlash from TRID. On average, the group indicated the return to normal would take 4.9 months. Question 56 wondered if those surveyed thought nonbanks would continue to be big buyers of servicing. Yes they will say 16 execs, compared to six who thought not and two who didn’t know. Question 60 questioned if the execs felt the recent Supreme Court decision on disparate impact theory would increase lenders’ exposure to legal actions. Three times as many of those surveyed agreed that heightened exposure would result from the ruling. Does your shop listen to the monthly briefings on risk from the International Center on Housing Risk, wondered Question 61. No we don’t, reported 20 of 22 execs responding. Question 62 asked if housing affordability was seen as waning nationwide. It is, reported 13 of those surveyed versus nine who thought not and two who confessed not knowing. Are you familiar with the Wealth Building Home Loan program, Question 63 queried? Yes we are, said 12 execs, compared to nine others who were unfamiliar with the mortgage product. Question 64 asked how satisfied the execs were with the GSEs new g-fee and LLPA structure. The response scored a 4.9 on the 10 point satisfaction scale. The range of answers was from one to seven.

heart of Question 68 and 69: 1) Has a huge amount of market share been lost by the largest banks; and 2) Do those surveyed expect the big banks to become more aggressive mortgage lenders in 2016? And what were the lenders’ responses to the two queries? All 24 execs agreed that a massive amount of share has been lost to the non-banks, but only five of them expect big banks to get more aggressive next year. The final two questions, Questions 70 and 71, queried about whether pricing competition would thin margins in 2016, and if they were satisfied with the progress being made on the Single Security and the Common Securitization Platform. Three times as many execs


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calendar of events N A T I O N A L




Thursday, March 10

MAY 2016

Sunday-Wednesday, January 31-February 3

Florida Association of Mortgage Professionals (FAMP) Gulf Coast Chapter 2016 Annual Trade Show “Think Outside the Box!” Higgins Hall 5225 North Himes Avenue • Tampa, Fla. For more information, call (727) 569-0556 or e-mail Debbie@DebbieCooleyMortgage.com.

Monday-Wednesday, May 16-18

Wednesday September 14

American Land Title Association (ALTA) Federal Conference & Lobby Day Renaissance Downtown 999 9th Street NW • Washington, D.C. For more information, call (202) 296-3671 or visit ALTA.org.

Texas Mortgage Roundup 2016 DoubleTree by Hilton Dallas Near the Galleria 4099 Valley View Lane Dallas, Texas For more information, call (860) 922-3441 visit TXMortgageRoundup.com.

Sunday-Thursday, March 13-17

JUNE 2016

Friday, September 16

2016 Regional Conference of Mortgage Bankers Associations Harrah’s Resort Waterfront Conference Center 777 Harrah’s Boulevard • Atlantic City, N.J. For more information, call (732) 596-7642 or visit MBANJ.com.

Sunday-Wednesday, June 5-8

OriginatorConnect 2016 Mohegan Sun 1 Mohegan Sun Boulevard Uncasville, Conn. For more information, call (860) 922-3441 or visit OriginatorConnect.com.

MBA’s 2016 CREF/Multifamily Housing Convention & Expo Hyatt Regency Orlando 9801 International Drive Orlando, Fla. For more information, call (800) 793-6222 or visit MBA.org. FEBRUARY 2016

Tuesday, February 9 NAMB Wholesale Summit Hyatt Regency 123 Losoya Street • San Antonio, Texas For more information, call (860) 922-3441 or visit http://conta.cc/1OjkFIK.

Wednesday, February 10

Tuesday, June 21 Great Northwest Mortgage Expo 2016 Embassy Suites Washington Square 9000 SW Washington Square Road • Tigard, Ore. For more information, call (860) 922-3441 or visit GreatNorthwestExpo.com.

Wednesday-Friday, March 16-18 Tuesday-Friday, February 16-19 MBA’s 2016 National Mortgage Servicing Conference & Expo Hyatt Regency Orlando 9801 International Drive • Orlando, Fla. For more information, call (800) 793-6222 or visit MBA.org.

American Land Title Association (ALTA) Business Strategies Conference JW Marriott Indianapolis 10 South West Street • Indianapolis For more information, call (202) 296-3671 or visit ALTA.org.

NAMB National 2016 The Luxor Resort & Hotel 3900 South Las Vegas Boulevard Las Vegas For more information, call (860) 719-1991 or visit NAMBNational.com. OCTOBER 2016

JULY 2016

Tuesday-Friday, October 4-7

Monday-Tuesday, July 11-12 Ultimate Mortgage Expo 2016 Hotel Monteleone 214 Royal Street • New Orleans For more information, call (860) 922-3441 or visit UltimateMortgageExpo.com.

American Land Title Association (ALTA) 110th Annual Convention Fairmont Scottsdale Princess 7575 East Princess Drive • Scottsdale, Ariz. For more information, call (202) 296-3671 or visit ALTA.org.

MARCH 2016

Saturday-Tuesday, April 9-12


Sunday-Wednesday, October 23-26

Thursday, March 3

NAMB 2016 Legislative & Regulatory Conference Hyatt Place National Mall 400 East Street SW Washington, D.C. For more information, call (860) 719-1991 or visit NAMB.org.

Wednesday-Saturday, August 17-20 Florida Association of Mortgage Professionals 2016 Annual Convention Omni Orlando Resort at ChampionsGate 1500 Masters Boulevard • ChampionsGate, Fla. For more information, call (850) 942-6411 or visit MyFAMP.org.

Mortgage Bankers Association 2016 Annual Convention Hynes Convention Center 900 Boylston Street • Boston, Mass. For more information, call (800) 793-6222 or visit MBA.org.

Monday-Tuesday, April 18-19

Thursday-Friday, August 18-19

Wednesday-Thursday, November 16-17

National Association of Professional Mortgage Women (NAPMW) 2016 Annual Convention The Luxor Resort & Hotel 3900 South Las Vegas Boulevard • Las Vegas For more information, call (860) 922-3441 or visit NAPMWAnnual.com.

Louisiana Mortgage Lenders Association 2016 Annual Education Conference New Orleans Riverside Hilton 2 Poydras Street • New Orleans, La. For information, call (225) 590-5722 or visit LMLA.com.

Mortgage Star Conference 2016 Canyons Resort 4000 Canyons Resort Drive Park City, Utah For more information, call (860) 922-3441 or visit Mortgage-Star.net.

Florida Association of Mortgage Professionals (FAMP) Broward Chapter 2016 Trade Show Bonaventure Hotel & Conference Center 200 Bonaventure Boulevard Weston, Fla. For more information, call (954) 986-0808 or e-mail dmiller8@prodigy.net.

Tuesday-Friday, March 8-11 NAMB East 2016 Westin Hilton Head Island Resort & Spa 2 Grasslawn Avenue • Hilton Head, S.C. For more information, call (860) 719-1991 or visit NAMBEast.com.


To submit your entry for inclusion in the National Mortgage Professional Calendar of Events, please e-mail the details of your event, along with contact information, to newsroom@nmpmediacorp.com. * Looking for additional exposure at key industry events? Call 516.409.5555, ext. 4 to discover how to maximize your event coverage.

Friday, November 18 Utah Association of Mortgage Professionals (UAMP) Expo 2016 Canyons Resort 4000 Canyons Resort Drive • Park City, Utah For more information, call (860) 922-3441 or visit UAMPExpo.com.


n National Mortgage Professional Magazine n JANUARY 2016

APRIL 2016

Saturday-Monday, September 24-26


Texas Mortgage Roundup 2016 Hyatt Regency San Antonio 123 Losoya Street • San Antonio, Texas For more information, call (860) 922-3441 visit TXMortgageRoundup.com.

Wednesday, March 16 American Land Title Association (ALTA) Social Media Summit JW Marriott Indianapolis 10 South West Street • Indianapolis For more information, call (202) 296-3671 or visit ALTA.org.

National Notary Association (NNA) 38th Annual Conference The Hyatt Regency Orange County 11999 Harbor Boulevard Garden Grove, Calif. For more information, call (844) 466-2266 or visit NationalNotary.org/Conference.





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