National Mortgage Professional Magazine March 2014

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n National Mortgage Professional Magazine n MARCH 2014

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The Mortgage Broker and Wholesale Channel Must Remain Viable for the Economy to Flourish By Paul Rozo NMP MEDIA CORP. 1220 WANTAGH AVENUE WANTAGH, NEW YORK 11793




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Down, but Definitely Not Out By Randy Wussler ..................70

Lykken on Leadership: Creating a Winning Culture ... Confidence

TPOs, Creditors, Compliance and Vendor Management By George L. Duarte, CMC ................................72

By David Lykken

Dinosaurs Do Purchases By Eric Weinstein ........................75

Why Building a Sustainable Purchase-Based Business May be Easier Than You Think By Ray Maninang ......73 Selling Your Business By Doug Reilly ..................................76 Appraisal Analytical Trends By Eugene Pasymowski ............78 Adapting to the New Era of QM & ATR By Frank W. Pilk ......80

40 Regulatory Compliance Outlook: Eight Steps to the Risk Assessment of Loan Production By Jonathan Foxx

It’s All About Jobs and the Economy By Jonathan Hornik ..81

FEATURES Finding Innovation in Standard Mail By K. Justin Restaino ....8 The Elite Performer By Andy W. Harris, CRMS ........................8 Lack of Technology Integration is the Weak Link in the Mortgage Value Chain By Clint Cornett ....................10 Compliance and Marketing 2014....................................16 AMCs: A Viable Option to Handle the Appraisal Process By Vladimir Bien-Aimé ............................................................18 A Message From MAA Chairwoman Amy Swaney ........18 NAMB Perspective ..........................................................20 A Guide to Ranking Well on Google in 2014 By Cody Miles ......................................................................24

60 NMP’s Inside Look: Secure Settlements Inc.

62 NMP Mortgage Professional of the Month: Donald Frommeyer, President of NAMB By Robert Ottone

Casey Stengel, Ernie Banks, Stan Musial … and Compliance? By Andrew Liput ......................................32 NMP’s Economic Commentary: Spring Thaw? By Dave Hershman ................................................................34

V I S I T Company

Web Site


A Page

AllRegs.............................................................. ..........................................................86 American Financial Resources Inc........................ ............................Inside Back Cover Appraisal Nation, LLC ........................................ ..............................................3 ...................................... ............................55, 73 & 86 Brokers Compliance Group.................................. ..................................35 ...................................................... ............................................................51 Calyx Software .................................................. ................................................29 Continental Home Loans, Inc. ............................ ......................................5 Document Systems, Inc./DocMagic ...................... ........................................................7 Easy Mortgage Apps............................................ ..........................................76 Emerald Creek Capital ........................................ ......................................17 First Guaranty Mortgage Corp. ............................ ..............................................................13 Global DMS........................................................ ......................................................11 .......................................................... ..............................................................74 Lykken On Lending ............................................ ............................................55 MAMP (Maryland Association of Mortgage Prof.) .. ......................................................78 MailerLeads, LLC ................................................ ............................Inside Front Cover Mastermind 2014 .............................................. ................................30 & 31 Maverick Funding Corp....................................... ............................................27 Menlo Park Funding .......................................... ....................................................15 Mortgage Matchmaker Conference ...................... ....................................61

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Voted By you the broker!



Tales From the Closing Table By Andrew Liput ..................36



ATR, QM and the Risk of Helping Consumers With Credit Issues By Chad Kusner ....................................38

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For Lead Generation, Old School Marketing Scores By Phil Hall ..........................................................................42


Do You Have a Strategy to Generate Purchase Loans By Tom Ward........................................................................46




What About Those Consumers Who Fall Outside of QM? By Terry W. Clemans ................................................46 1*

What Plans of Action Will Your Company Implement to Foster Growth? By Mike Lewis ....................48 A Non-Bank Lender’s View on CFPB Examinations By H. Burton Embry................................................................50

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AllRegs Launches Real Estate Settlement Procedures Act Policy Manual........................................52 NAPMW Report: March 2014 By Jill Kinsman ......................53

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The Business of Short Sales By Pam Marron ....................54 Thinking Outside the Box? (Part II) By Ryan W. Birtel ........56

The Last Domino to Fall By Jeff Knott ........................................68

COLUMNS New to Market................................................................12 NMP News Flash: March 2014 ......................................14 Heard on the Street ......................................................26 NMP Resource Registry ................................................82 NMP Calendar of Events ................................................87


Web Site


NAPMW ............................................................ ..........................................................49 NAWRB ............................................................ ............................................................25 New Penn Financial, LLC .................................... ....................................................59 Paramount Residential Mortgage Group, Inc. ...... ................................................37, 69 & 85 PB Financial Group Corp..................................... ..............................................75 Prime National Credit Repair .............................. ................................................61 REMN (Real Estate Mortgage Network) ................ ........................44 & 45 Ridgewood Savings Bank .................................... ..............................................79 Rushmore Loan Management Services LLC............ ......................................................9 Secure Settlements Inc. ...................................... ..........................................65 Simple Nexus .................................................... ..................................................72 Stearns.............................................................. ..................................................39 & 67 StreetLinks LLC .................................................. ......................................................33 TagQuest .......................................................... ........................................................47 Texas Mortgage Roundup.................................... ........................................67 The Bond Exchange............................................ ..........................................57 Titan List & Mailing Services, Inc. ........................ ........................................................19 U.S. Bank c/o Empower Media ............................ ..........................................41 United Northern Mortgage Bankers, Ltd. ............ ........................................1 & 88 United Wholesale Mortgage ................................ ................................................Back Cover Warehouse Lending Group .................................. ..................................65

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Taking the Lead By Jonathan Blackwell ................................66

New Challenges With an Older Population By Phil Hall ....64

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Texas Supreme Court Clarifies Discount Points By Melanie A. Feliciano Esq. ....................................................58

MARCH 2014 Volume 6 • Number 3


Trends in fashion, mortgage lending and more!

1220 Wantagh Avenue • Wantagh, NY 11793-2202 Phone: (516) 409-5555 • Fax: (516) 409-4600 Web site:

My daughter Stacy is a manager of a Men’s Wearhouse on Long Island, and she’s always talking about the latest fashion trends. She often discusses how easily her male audience shifts from season to season, captivated by whatever is considered the trend at that time and what outfits are in season. That concept seems to be mirrored in everything we do in life, especially in mortgage lending. Trends are a fact of life. Either one adapts to the trends of the day, or they may miss the opportunity to been seen and heard. But does walking to the beat of the latest trend mean you don’t have to develop your own individuality? Does it mean you blend in with the other trendsetters and exist day to day. Absolutely not! The mortgage profession, without question, has survived the hills and valleys of our economy and the successful men and women of the mortgage industry have learned how to use trends to set the foundation for them. They have leaned how to control these trends and not be part of a herd. While fashion trends involve the width of a lapel, whether to wear cuffs or no cuffs, etc., trends in the mortgage marketplace are governed by the economy, compliance and regulation. There is no easy way to define trends in the mortgage profession as there is in fashion or other industries. The myriad of complex factors that affect the mortgage profession at any given time is the trend that one has to deal with. By definition, one who follows trends is a trendsetter. I like to think of them instead as “early adopters.” They are the ones who have a voracious appetite to learn about new products, technology, marketing, and most importantly, compliance. They properly use the trends of the day in these disciplines to adopt and adapt their approach to surviving in this ever-changing marketplace. They are the ones who often capture the consumer when several originators are vying for the same purchase loan. So I urge you to go forth and wear the badge of “Mortgage Professional” proudly. Don’t follow the trends, but develop your own approach and let that be your trend. My daughter Stacy often looks at what I’m wearing and says, “Dad, do you know how old that look is?” I say, “Yes,” and tell her sometimes the best trend is to go against the trend and stand out. In closing, I’d like to coin a phrase that was abandoned by a well-known retailer that I have re-purposed for the mortgage profession. If you learn how to set your goals to meet the trends within the mortgage industry, while concurrently maintaining your own individuality, “You’re going to like the way you originate!” Sincerely,

STAFF Eric C. Peck Editor-in-Chief (516) 409-5555, ext. 312

Joel M. Berman Publisher - CEO (516) 409-5555, ext. 310

Joey Arendt Art Director (516) 409-5555, ext. 307

Beverly Bolnick National Sales Manager (516) 409-5555, ext. 316

Scott Koondel Operations Manager (516) 409-5555, ext. 324

Robert Peter Ottone Executive Editor (516) 409-5555, ext. 314

David J. Coster Senior Editor

Francine Miller Advertising Coordinator (516) 409-5555, ext. 301

Phil Hall Senior Editor

Brian Coleman Business Development Coordinator (516) 409-5555, ext. 311

ADVERTISING To receive any information regarding advertising rates, deadlines and requirements, please contact National Account Executive Beverly Koondel at (516) 409-5555, ext. 316 or e-mail

ARTICLE SUBMISSIONS/PRESS RELEASES To submit any material, including articles and press releases, please contact Editor-in-Chief Eric C. Peck at (516) 409-5555, ext. 312 or e-mail The deadline for submissions is the first of the month prior to the target issue.

SUBSCRIPTIONS To receive subscription information, please call (516) 409-5555, ext. 301; e-mail or visit Any subscription changes may be made to the attention of “Circulation” via fax to (516) 409-4600.

MARCH 2014 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.

Joel M. Berman, Publisher-CEO NMP Media Corp. • National Mortgage Professional Magazine is published monthly by NMP Media Corp. • Copyright © 2014 NMP Media Corp.


EDITORIAL CONTRIBUTORS Featured Editorial Contributors Terry W. Clemans

Pam Marron

George L. Duarte, CMC

Chad Kusner

Doug Reilly

Amy Swaney

H. Burton Embry

Mike Lewis

K. Justin Restaino

Melanie A. Feliciano Esq.

Rey Maninang

Paul Rozo

Jonathan Hornik

Cody Miles

Tom Ward

Jill Kinsman

Eugene Pasymowski

Eric Weinstein

Jeff Knott

Frank W. Pilk

Randy Wussler

Jonathan Foxx

Andy W. Harris, CRMS

Editorial Contributors Vladimir Bien-Aime

Dave Hershman

Ryan W. Birtel

Andrew Liput

Jonathan Blackwell

David Lykken

Clint Cornett


n National Mortgage Professional Magazine n MARCH 2014

NAMB The Association of Mortgage Professionals

National Association of Professional Mortgage Women

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

2013-2014 NAPMW National Board of Directors and Administration President Jill Kinsman (206) 344-7827

Vice President (Western Region) Anna Mackovska (323) 331-2222

Donald J. Frommeyer, CRMS (t/e 2014)—President Amtrust Mortgage Funding Inc. 200 Medical Drive, Suite D l Carmel, IN 46032 Phone: (317) 575-4355 l Fax: (317) 575-4360 E-mail:

President-Elect Christine Pollard (607) 226-1046

Secretary Cynthia Nutter (360) 449-6408

John Councilman, CMC, CRMS (t/e 2014) President-Elect AMC Mortgage Corporation 10136 Avalon Lake Circle l Fort Myers, FL 33913 Phone: (239) 267-2400 l E-mail:

Vice President (Central Region) Kelly Hendricks (314) 398-6840

Treasurer Jeanne Evans, CME (918) 431-0155

Rocke Andrews, CMC, CRMS (t/e 2014)—Vice President Lending Arizona LLC 1996 North Kolb l Tucson, AZ 85715 Phone: (520) 886-7283 l Fax: (520) 731-3388 E-mail:

Vice President (Eastern Region) Kimberly Rozell, CME (607) 229-5008

Parliamentarian Dawn Adams, GML, CMI (607) 329-4622

Kay A. Cleland, CMC, CRMS (t/e 2014)—Secretary KC Mortgage LLC 200 South Wilcox Street, #224 l Castle Rock, CO 80104 Office: (720) 810-4917 l Cell: (720) 670-0124 E-mail:

Vice President (Northwestern Region) Ken Perry, CMI, CME (360) 936-3010

Administrator Hulene Works (800) 827-3034

NAMB 2013-2014 Board of Directors OFFICERS

Andy W. Harris, CRMS (t/e 2014)—Treasurer Vantage Mortgage Group Inc 15962 SW Boones Ferry Road, Suite 100 l Lake Oswego, OR 97035 Direct: (503) 496-0431, ext. 302 l Cell: (503) 880-2427 E-mail:


Jim Pair, CMC (t/e 2014)—Immediate Past President Mortgage America Corpus Christi Inc. 22800 Bulverde Road, Apt. 1402 l San Antonio, TX 78261 Phone: (361) 774-7314 l E-mail:

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:

2013-2014 Board of Directors & Staff Maureen Devine President (413) 736-4511

William Bower Resident Screening Committee Liaison (888) 316-4242

Mike Brown Vice President/Treasurer (801) 925-6691, ext. 3777

Judy Ryan Strategic Alliance Committee Chair (410) 747-9551

Daphne Large Ex-Officio (901) 259-5105

Sharon Bieszk Director (262) 542-1700

Nancy Fedich Conference Committee Chair (908) 813-8555, ext. 3010

Mary Campbell Director (701) 239-9977

Rick Bettencourt, CRMS (t/e 2014) Mortgage Network 300 Rosewood Drive l Danvers, MA 01923 Phone: (978) 777-7500 l Fax: (855) 447-4350 E-mail:

Julie Wink Education Committee Liaison (901) 259-5105

Dean Wangsgard Director (801) 487-8781

Olga Kucerak, CRMS (t/e 2016) Crown Lending 328 West Mistletoe l San Antonio, TX 78212 Phone: (210) 828-3384 l Fax: (210) 828-3332 E-mail:

Tom Conwell Legislative Committee Liaison (800) 445-4922, ext. 1010

Terry Clemans Executive Director (630) 539-1525

Renee Erickson Membership & Elections Chair (866) 932-2715

Jan Gerber Office Manager & Member Services (630) 539-1525


MARCH 2014 n National Mortgage Professional Magazine n

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

Fred Kreger, CMC (t/e2016) American Family Funding 28368 Constellation Road, Ste. 398 l Santa Clarita, CA 91350 Phone: (661) 505-4311 l E-mail: Linda McCoy, CRMS (t/e 2016) Mortgage Team 1 Inc. 6336 Piccadilly Square Drive l Mobile, AL 36609 Phone: (251) 650-0805 l Fax: (251) 650-0808 E-mail: John Stevens, CRMS (t/e 2014) ENG Lending 11650 South State Street, Suite 350 l Draper, UT 84020 Phone: (801) 477-7111 l Fax: (866) 442-9937 E-mail: Valerie Saunders (t/e 2015) RE Financial Services 13033 West Lindburgh Avenue l Tampa, FL 33626 Phone: (866) 992-0785 l Fax: (866) 992-1024 E-mail:


n National Mortgage Professional Magazine n MARCH 2014

Finding Innovation in Standard Mail Strategies to Increase Your Direct Mail ROI By K. Justin Restaino Daily, adults can be exposed to up to 3,000 promotional messages, not including social interactions and e-mails, vying for their attention. With the vast ways of communication, consumers are quick to filter what they receive. Because of these filters, it’s a constant challenge to find cost-effective methods to reach out. However, direct mail continues to emerge as the top choice for companies looking to increase their sales. The challenge is to find new ways to achieve stronger mail results. Here are four ways you can increase your return on investment with direct mail. 1. Presorting mail to lower postage costs—even on smaller campaigns The biggest expense you’ll incur with direct mail is postage. To lower your postage investment, you can optimize standard bulk presort, which will reduce the work required by the USPS. If you are sending a high volume of mail, your savings will add up quickly. 2. Adding personalization to help you connect and engage with consumers The more you can connect with potential readers, the better your chances are of increasing your open and response rates. New technology now allows you to personalize your mailings, where you can now create messaging that identifies with the individual such as their preferences and purchase patterns. This messaging can help you increase both your open and response rates, while accomplishing the same direct mail costs as non-personalized offers.

MARCH 2014 n National Mortgage Professional Magazine n


3. Adding visual impact with color print In the past, direct mail was considered a low-creative communication tool, and there was not much emphasis on the impact visually. Marketers were more concerned with using it for its efficiency and effectiveness. Now, however, digital color printing is helping change the idea of how direct mail can and should look. Mail pieces can be personalized in bold, attention-grabbing color. Studies have shown that consumers are 70 percent more likely to open direct mail that is decorated with colored text and graphics on the front as opposed to mail that has only an address on the outside envelope. 4. Greater visibility into your mail stream It used to be that you would track your direct mail results by knowing the total volume mailed and then comparing your orders to determine your results. Today, new lead management technologies allow you to track individual responders. These new advances allow you to coordinate your multichannel efforts and maximize your return-on-investment (ROI). If you can track who receives an offer and at what stage they respond, you can fine-tune your customer engagement with them and mock that same engagement with customers who exhibit similar behaviors. Direct mail: Proven communication channel Direct mail continues to be a proven communication channel that increases efficiency and effectiveness with customers. By utilizing some of the strategies above, you can create impact, deliver relevancy and improve response rates with your direct mail campaigns. If you take the time to review your print and delivery options, you can raise the standards for what you can achieve with this great communications solution. K. Justin Restaino is vice president of Titan List & Mailing Services Inc. For more than 13 years, he has led Titan’s Mortgage Division, helping lenders of all capacities grow their businesses utilizing targeted direct mail. With a specialized focus in refinance and purchase markets, Restaino has the insight for proper data and mail application for success. He may be reached by phone at (800) 544-8060, ext. 204 or e-mail



elite performer Don’t Slow Down When Business Does By Andy W. Harris, CRMS

Many in the mortgage industry are experiencing a slow-down this first quarter of 2014. Peaks and valleys can occur in this industry due to seasonal or economic changes, but the goal is to always be growing. If you’re experienced a slow-down, it’s important not to get frustrated or worried and stay just as active and engaged as you are in a busy market. There may be some hidden opportunities to work on the things you’ve put off during the busy times. Here are a few ideas:

Update and contact your database Take the time to make sure all clients and prospects have been added to your database and send out a blast “reminder” and thank you for referrals. Include the reasons you work by referral and remind them to think of you when they hear family or friends talking about buying or refinancing, making sure they also know what state(s) you’re licensed in as applicable.

Look at Web sites and social media Now is a good time to check your company Web site(s) and others for corrections or updates to ensure content is relative, compliant, and produces consumer engagement. There are many online sources and business registry sites that may require updating and making sure data us accurate.

Marketing management If you’re currently investing in any kind of marketing, take time to update your return-on-investment (ROI) and tracking where business is coming from. Continue to invest in those areas that produce results, but pull-back and cut expenses on those that might be too costly with limited production.

Brainstorm and relax It’s good to take time and focus on some creative strategies and new ideas for this year. When you relax and provide your brain more time to think, it’s amazing the things that you can develop. Remember also that this is a full-time job. Don’t relax too much or get in the habit of closing early, but relax just enough to balance work and life and get the creative juices flowing.

Get updated on regulations and policy There were a few major regulatory changes this year. Didn’t take time to learn them or understand them? You might want to take a couple of hours each day until you’re up-to-speed and can better communicate with clients and business partners the analytics of what these regulations mean and don’t mean.

Don’t waste time Time is just as valuable when you’re slow as it is when you’re busy. The way you invest your time will also determine how slow or busy you will remain or become. When at the office, put priority on doing tasks that produce the best return for business growth. Don’t find yourself spending time on things that result in retraction. Andy W. Harris, CRMS is president and owner of Lake Oswego, Ore.-based Vantage Mortgage Group Inc. and 2010-2011 president of the Oregon Association of Mortgage Professionals. He may be reached by phone at (877) 496-0431, e-mail or visit

At Rushmore, we are always looking for solutions. Solutions in our constantly changing industry. Solutions to make you more successful. When was the last time a lender found solutions for you? Call Rushmore to find out why finding solutions is just one of the ways we have you top of mind.

n National Mortgage Professional Magazine n MARCH 2014

Rushmore Loan Management Ser for the extension of credit credit or a commitment to lend.. Intended 2014 ツゥ Rushmore Services vices LLC LLC.. All Rights Reser Reserved. ved.. Equal Housingg Lender Lender. r. Rushmor Rushmoree Loan Management Ser Services vices LLC LLC,, NMLS ID# 185729,, 15480 Laguna Canyon Canyon Road,, Suitee 100,, Irvine, Irvine, CA CA 92618.. 1.888.504.6700.. Not an offer offer for In for mortgage mortgage br okers. ers. Not intended inte for consumers. consumers. Rushmore Rushmore does not lend in Alaska, ka, Massachusetts, ka, Massachusetts, Missouri, Missouri, or Ne vada. Alabama Consumer Credit Exemption; Arkansas Mortgage Mortgage Banker-Broker-Servicer Bankker er-Br -Brokker er-Ser -Servicer (#101513);; Licensed by Credit (#21602); Alaska Mortgage Mortgage Lender (AK185729); Arizona Wholesale Lender Exemption; for brokers. for Nevada. by the Department of Corporations under the California California Residential Mortgage Mortgage Lending Act (#4131068); Colorado Wholesale Lender Ex emption (Regulated by Mortgage Lender (ML-185729); Delaware Delaware Mortgage Mortgage Lender (#012394); District of Columbia Mortgage Mortgage Lender by the Division of Real Estate); Connecticut Mortgage Department Exemption emption; tgage Licensee (MB.6760723); tgagee Lender (MLB185729);; Florida Mor r--Servicer (MLD622);; Georgia Mor tgage Lenderr Licensee (#24224);; Ha waii Mor tgage Loan Originator Compan ption;; Illinois Residential Mor 723);; Indiana DFI First Lien Mor tgage Lending (#18619);; Indiana Mortgage Lender-Servicer Mortgage Hawaii Mortgage Companyy (HI-185729);; Idaho Wholesale Lender Ex Exemption; Mortgage Mortgage wa Mor tgage Bank keer (MBK-2009 9-0083);; Kansas Super vised Loan (SL.0026265);; K entucky Mortgage Mortgage Company Company (MC71455);; Louisiana Residential Residentia Mortgage Mortgage Lending (#185729),, Maine Super er (SLM11886);; Mar yland Mortgage Mortgage Lender (#19168),, Michigan M DFI Subor dinate Lien Mor tgage Lending (#187644);; Io vised Lender Subordinate Mortgage Iowa Mortgage Banker (MBK-2009-0083); Supervised Kentucky Supervised Maryland Servicer (FL0017075); Michigan Secondary Mortgage Br okerr, Lender & Servicer Secondary Mor tgage Br okker er, Lender & Servicer Mortgage Banker Banker (#2071); Licensed by by the New Servicer (SR0017076); Minnesota Residential Mortgage Mortgage Originator (185729); Mississippi Mortgage Mortgage Lender (185729); Montana Mortgage Mortgage Lender (#185729); Nebraska Mortgage Mortgage Broker, Mortgage Broker, New Mortgage Loan Company Hampshire Banking Department Department Mor New Jersey Jersey Department Department of Banking and Insurance Residential Mortgage Carolina Mortgage Mortgage Lender (L-154769);; North tgage Bank er (#15265-MB),, Licensed bbyy the New Mortgage Lender (#186729),, New New Mexico Mortgage Company (185729);; North North Carolina North Dakota Dakko ota Money Moneey Broker Broker (MB102411); Hampshire Mortgage Banker Mortgage Broker Brokker e (MB001561); Oregon Mortgage Bank er窶年YS Department Department of Financial Ser vices ( #B501009); Ohio Mor Oregon Wholesale Lender Exemption; Department of Banking Mortgage Mortgage Lender (#39094); tgage Loan Act Cer tificate of Registration (SM501700.000); Oklahoma Mortgage Exemption; Licensed by by the Pennsylvania Pennsylvania Department Licensed Mortgage Banker窶年YS Services Mortgage Certificate olina Mor tgage Lender/Ser vicer (MLS-185729); South Dak Teennessee Mortgage Mortgage License (109273); Texas Texas e Exemption;V eermont Lender (#6411); Licensed by ota Mor tgage Lender (ML.04880); Tennessee Mortgage Banker Banker Registration; Utah Wholesale Lender Exemption; Rhode Island Licensed Lender (#20132838LL); South Car Carolina Mortgage Lender/Servicer Dakota Mortgage SML Mortgage Vermont by the aashington Cons Consumer Loan Compan est e Virginia Mortgage Mortgage Banker Bankkeer (#185729); Wyoming Wyoming Mortgage Mortgage Lender/Broker Lender/Brokkeer (#2250); (#22500);; Fannie Mae Seller/Servicer Seller/Servicer (#30519-000-4);; HUD FHA FH Title Virginia State Corporation Commission Lender License (MC-5664); W Washington Companyy (CL-185729); W West Mortgage Lender (ML-24836); Wisconsin Mortgage II (#3094100002);V Veeterans Affairs rs Lender (#902914-00-00);; USD DA A. (#3094100002);Veterans USDA.



Lack of Technology Integration is the Weak Link

By Clint Cornett n 1985, Harvard professor Michael Porter introduced the concept of “Value Chain” to the study and improvement of business enterprises. Very simply put, a value chain is a set of activities that an organization carries out to create value for its customers. It is a method of visualizing the end-to-end activities that a company must engage in deliver its goods or services to market. But the concept of value chain analysis is not simple in practice, as it involves, not only the identification of the major activities or “links,” but also the component processes that take place in each component part. In mortgage banking, a lack of technology integration could be the weak link in the value chains of numerous industry players that will separate the winners from the losers in the months and years ahead. Value chain analysis began in manufacturing but quickly was adopted within service industries generally, and in financial services in particular. Within the mortgage industry, value chain analysis has been employed to a limited degree by larger lenders and mortgage banking divisions of major banks. However, due to structural


changes within the mortgage banking industry, value chain analysis has become a necessity for lenders of all sizes as demands for cost containment, improved service, new business development, improved profitability, dramatically more strenuous regulatory compliance requirements and lower production volumes increase the risks of weak process links. Much like in manufacturing, a vulnerable area within mortgage banking are those points where one activity is completed and an in-stage product must be “handed-off” to another group of workers who will conduct the next steps in the production process. Lack of efficiency at these connection points can cause serious time loss, but more importantly can create quality control problems that produce exposure to serious market and regulatory risks. Within mortgage banking, the in-stage products of a loan are various assemblages of data. This data must be collected, validated, analyzed and passed on in a completely transparent, documentable

and instantly recallable fashion. Naturally, specialized technology and systems have been designed to facilitate these activities. However, when these disparate systems do not “connect” or “speak” to each other seamlessly, there is high probability of increased exposure to risk.

Mortgage market demands quality Quality products, such as loans that perform from first payment through payoff, are the only type of products acceptable in the new mortgage market. The regulatory system that has evolved since the mortgage crisis is one featuring shared risks by all participants from origination through servicing. Within this regulatory framework there are absolute standards being imposed on parties lower in the value chain by those higher in the chain. The secondary market participants, who are the ultimate customers of the lender, have instituted standards for risk management, trans-

“The regulatory system that has evolved since the mortgage crisis is one featuring shared risks by all participants from origination through servicing.”

parency and consistency. For the last several years, these secondary market players have been primarily the government-sponsored enterprises (GSEs), yet the field is soon to expand as nonqualified mortgage (QM) lending is initiated in 2014. These new market participants will be no less demanding of producers of mortgage loans. Consequently, lenders must be prepared to affirmatively demonstrate that their value-chain and its inherent processes, technologies and systems do not expose loan buyers to potentially unknown risks. In addition to the secondary market demands for tight process controls comes the competitive demand for maximum efficiency. One of the issues created by the sudden collapse of the mortgage banking system and the significant regulations established in its aftermath has been a lack of focus by many experienced lenders on production process improvement. When regulators demanded new actions by lenders, too often this led to the establishment of stand-alone processes or links in the value chain. Even more troublesome is the fact that many of these new processes were manual in nature due to the inability of much current technology to be effectively re-tasked to accomplish the new requirements. Not only are

in the Mortgage Value Chain these types of workarounds exposing the lender to potential risks going forward, but they simply aren’t sustainable in a lower volume lending environment when competing against newer lenders with more efficient processes and more effective technology integration.

of the mortgage crisis and developed using the flexible Software-as-aService (SaaS) model for the purpose of facilitating its ease of modification and ease of outside integration. Over the past year, we have completed several integration projects with other industry technology providers, and are currently working on several additional projects. All lenders should expect

similar efforts from all of their technology vendors. Lenders with weak links related to integration of technologies across the mortgage production value chain will find themselves failing to meet investor and regulatory requirements. This will likely subject them to loss of market share at the hands of lenders with more flexible and

better integrated systems, as well as, subject to dramatically higher regulatory risks. Clint Cornett is the founder and CEO of ValuTrac Software Inc., a software solutions provider to the appraisal management and mortgage lending industry. Clint may be reached by e-mail at

Regulatory volatility

A case in point

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The new regulatory framework that surrounds the appraisal process from appraiser selection, to records management to reporting provides an example of the importance of technology integration. Many lenders, including large banks instituted or simply continued their practice of managing this process manually through the use of spreadsheets and email programs. Unfortunately, these tools are simply not capable of providing the degree of control or detail that current regulations require relative to this vital component of the mortgage value chain— the value component itself! Current regulations require very specific data to be collected, managed and for it to be reportable. This includes individual appraiser information, reports and all transaction-related communications. Spreadsheets and e-mail simply cannot effectively accomplish these tasks at any degree of scale. Our appraisal management technology firm was born near the outset


Weak links in lender value chains have been exposed by the changes in regulations that have been introduced since 2009. Yet, the changes that are still to come are likely to expose even greater weaknesses. With the advent of the QM/QRM regulations in 2014 and the impact of audits by regulators based on these new rules, the ability to adapt quickly and with great flexibility will be essential. Inflexible technologies and stand-alone systems will not enable the type of response that will be necessary to succeed or perhaps even survive in such a volatile environment. Consequently, lenders have two choices: To continue the ad hoc workaround approach which may only address immediate process shortcomings, while exposing the lender to greater long-term risks; or begin to remake their value chain with technologies and systems that are easily modified to accommodate future regulatory and market requirements and easily integrated with other process technologies.

StreetLinks’ Appraisal Protection Program Continues Rapid Growth

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Appraisal management company (AMC) StreetLinks Lender Solutions has announced that their AppraiserPlus program continues to experience unprecedented growth and will set the bar for AMC compliance standards as the lending industry settles into 2014’s new regulatory requirements. Initially launched in August of 2013, the AppraiserPlus program significantly enhances the professional partnership between StreetLinks and appraisers by mitigating several common appraiser pain points. AppraiserPlus removes AMC micromanagement and, if the appraiser chooses, provides StreetLinks QX, the company’s automated appraisal review technology, directly to the appraiser’s desktop for added quality and efficiency. ApprasierPlus also provides payment within one day of the property inspection. Since the launch, qualifying appraisers have been accepted into the program daily, resulting in over 50 percent of all StreetLinks appraisal orders being processed through AppraiserPlus. “[AppraiserPlus] provides us with a robust, configurable quality review component that has truly streamlined our entire QC process,” said John Forsythe, president and CEO of Forsythe Appraisals LLC. “With AppraiserPlus, we field fewer status calls, allowing us to focus on getting orders completed with greater efficiency, higher quality, and reduced turn times, ultimately allowing us to fulfill a higher volume of work.” In addition to the positive feedback from appraisers, StreetLinks’ lender partners continue to benefit from the AppraiserPlus program, experiencing order completion times nearly one full business day faster than the national average turn time. But beyond the increased quality and service levels, lenders gain an added sense of security with the knowledge that they will not be held responsible for an AMC failing to pay the appraiser. “In recent years, prominent lenders have been left to cover millions of dol-

lars in unpaid appraiser fees,” said StreetLinks Chief Appraiser and SVP of Compliance Mike Floyd. “StreetLinks issues payment to AppraiserPlus appraisers within one business day of completing each inspection, helping lenders eliminate a key financial risk point.” And as the OCC’s new Third-Party Oversight guidance gains traction, this security will be an important component for lenders. The regulators have made it clear that both bank and non-bank lenders will be held responsible for the actions and compliance of their thirdparty agents moving forward. This includes appropriate procedures surrounding appraiser compensation, appraiser engagement, appraiser assignment, AMC-to-appraiser communications and how an AMC evaluates appraisers to be included on their panel. “Between new QM, ECOA and ThirdParty Oversight regulations coming into effect, many lenders aren’t prepared for the level of regulatory scrutiny they will face this year,” said Floyd. “Compliance and quality have always been at the top of our priority list as an organization. We’re excited that the AppraiserPlus program is not only enhancing the caliber of our services but will also help our lender and appraiser partners address Third-Party Oversight regulations with greater ease.” StreetLinks anticipates that they will approve an additional 5,000 AppraiserPlus appraisers in 2014, while respectively increasing the percentage of appraisal orders completed through the program.

UWM Launches New Broker-Friendly App United Wholesale Mortgage (UWM) has announced the development and launch of a feature rich mobile application for its broker community. The application arms brokers with robust functionality and easy access to loan information while in the field. “UWM’s new mobile application keeps our brokers in the know at all times by providing them with direct

access to much of the functionality that exists within EASE (Easiest Application System Ever), which is our broker portal,” said Mat Ishbia, president of United Wholesale Mortgage. “The use of technology and constant innovation are key components in how we make our brokers’ jobs easier. This mobile app is one of many exclusive tools that UWM has unveiled as a commitment to partnering with our clients.” UWM’s mobile app allows brokers to easily access rates, manage their pipelines, view borrower and loan details, check real-time status, receive alerts, manage conditions, lock loans and more. The real-time bi-directional communication the application provides between UWM’s underwriters, processors and account executives establishes increased transparency and shows any tasks that must be completed in order to expeditiously fund the loan.

SSI Creates ConsumerOriented Information Web site Secure Settlements Inc. (SSI) has created and published the mortgage industry’s first free non-governmental consumer information Web site. Located at, the site offers expert tips, a glossary of terms, suggests a borrower’s bill of rights, and provides resources to report fraud. The site is designed to empower consumers by helping them understand many of the complex terms and issues that comprise the mortgage closing process, while also instructing them what to expect when they close their mortgage loan. The site was conceived by Secure Settlements Inc. Founder Andrew Liput as a means of getting critical information into the hands of borrowers as a further risk management and fraud prevention tool to support SSI’s settlement agent fraud evaluation and reporting services. “In the wake of the CFPB’s decision to focus on improving the closing

experience for consumers and also enacting controls and guidelines to reduce the risk of fraud losses, this Web site is a perfect complement to their efforts,” said Liput. “Knowledge is power. We hope that every consumer preparing to close a mortgage transaction will visit this site to access important information and gain valuable tips to gain a better understanding of the process. We need consumers to drive better risk management industry-wide. They need proper information to do that.”

Black Knight Announces New HARP Streamlined Program

Black Knight Financial Services has announced that it is facilitating a Streamlined Subordination Program for Home Affordable Refinance Program (HARP) loans on behalf of many lenders and servicers in the mortgage industry. The goal of the program is to improve consumer access to HARP loans by enhancing the efficiency of the first lien refinance process. As part of this process, participating financial institutions agree to follow a standardized process to permit second liens to remain in the subordinate position upon the refinancing of the first lien. As a result, the HARP Streamlined Subordination Program can significantly reduce the timeline associated with completing HARP loans, while retaining safety and soundness for the second lien servicer and increasing borrower satisfaction. The HARP Streamlined Subordination Program is designed for no cashout rate and term refinance loans as defined by the Making Home Affordable Program. “All parties in the transaction benefit from this program,” said Al Verkuylen, executive vice president of Title and Escrow Strategy at ServiceLink, a Black Knight company. “In addition to the enhanced process efficiencies

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EWSFLASH l MARCH 2014 l NMP NEWSFLASH l MARCH 2014 l NMP NEWSFLAS Historical First Paperless eClosing Announced by DocMagic

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DocMagic Inc. has announced that its eSign compliant loan documents were chosen by Stewart Title and Mountain America Credit Union to complete the industry’s first ever eClosing of an FHA loan, in conjunction with Stewart’s eClosingRoom. DocMagic is the exclusive licensee of patent rights that enable its eSign technology. The FHA’s recent announcement supports the ability to eSign all documents with the exception of the note. The announcement states that the agency will begin accepting electronically signed notes by the end of the year. “eSign has never just been about the upfront disclosures,” said Tim Anderson, director of eServices for DocMagic. “That’s where we started and we’ve done that for a long time now. Our ability to use this technology to help lenders realize a fully paperless mortgage is the real story here. There really is no excuse now not to provide this service to borrowers, who have been demanding it for some time.” Anderson added that better compliance risk management is an additional benefit of paperless lending. “The ability to provide electronic proof as evidence of compliance will be critical for lenders in the future,” Anderson said. “When documents remain electronic, it’s easier to create and maintain an audit trail that can support the lender during a bank audit.” “Being the first lender in the country to conduct a live eClosing of an FHA loan and doing it with Stewart’s eClosingRoom platform powered by SureClose and DocMagic’s eSign enabled compliant loan documents is truly an exciting event for us,” said Amy Moser, vice president and mortgage services manager for Utah-based Mountain America Credit Union. “eClosing gives us a tremendous competitive advantage because it enables us to provide superior customer service to credit union members who demand an efficient loan experience.”

Nancy Pratt, director of eStrategy for PropertyInfo, the technology division for Stewart Title, said, “Our eClosingRoom platform enables lenders like Mountain America and title agencies not only to eSign, but also to eNotarize and eRecord the closing package in the title office, delivering a fully paperless eClosing experience for all participants. Stewart had its first electronic closing in May of 2005. Having the first FHA loan electronically closed in our system truly is a milestone for the mortgage industry.”

February Sees Spike in New Home Apps The Mortgage Bankers Association (MBA) estimates sales of new single-family homes were running at a seasonally adjusted annual rate of 533,000 units in February 2014, based on data from MBA’s Builder Applications Survey (BAS). The estimated sale pace for February is an increase of one percent from the revised January pace of 527,000 units. The sales pace for January was initially reported at 543,000 units. On an unadjusted basis, the MBA estimates that there were 43,000 new home sales in February 2014, an increase of 13 percent from 38,000 in January. The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors. Mortgage applications for new home purchases increased by 12 percent relative to the previous month. This change does not include any adjustment for typical seasonal patterns. By product type, conventional loans composed 65.1 percent of loan applications, FHA loans composed 16.5 percent, RHS/USDA loans composed 5.3 percent and VA loans composed 13 percent. The average loan size of new homes increased from $289,358 in January to $295,008 in February. MBA’s Builder Application Survey

tracks application volume from mortgage subsidiaries of home builders across the country. Utilizing this data, as well as data from other sources, MBA is able to provide an early estimate of new home sales volumes at the national, state, and metro level. This data also provides information regarding the types of loans used by new home buyers. Official new home sales estimates are conducted by the Census Bureau on a monthly basis. In that data, new home sales are recorded at contract signing, which is typically coincident with the mortgage application.

More Than Four Million U.S. Homes Return to Positive Equity in 2013 CoreLogic has released new analysis showing four million homes returned to positive equity in 2013, bringing the total number of mortgaged residential properties with equity to 42.7 million. The CoreLogic analysis indicates that nearly 6.5 million homes, or 13.3 percent of all residential properties with a mortgage, were still in negative equity at the end of 2013. Due to a small slowdown in the quarterly growth rate of the Home Price Index, the negative equity share was virtually unchanged from the end of the third quarter of 2013. Negative equity, often referred to as “underwater” or “upside down,” means that borrowers owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both. For the homes in negative equity status, the national aggregate value of negative equity was $398.4 billion for fourth quarter 2013, compared to $401.3 billion for third quarter 2013, a decrease of $2.9 billion. Of the 42.7 million residential properties with positive equity, 10 million have less than 20-percent equity. Borrowers with less than 20-percent

equity, referred to as “under-equitied,” may have a more difficult time obtaining new financing for their homes due to underwriting constraints. Underequitied mortgages accounted for 21.1 percent of all residential properties with a mortgage nationwide in 2013, with more than 1.6 million residential properties at less than five percent equity, referred to as near-negative equity. Properties that are near-negative equity are considered at risk if home prices fall. “The plight of the underwater borrower has improved dramatically since negative equity peaked in December 2009 when more than 12 million mortgaged homeowners were underwater,” said Mark Fleming, chief economist for CoreLogic. “Over the past four years, more than 5.5 million homeowners have regained equity, reducing their risk of foreclosure and unlocking pentup supply in the housing market.” “Stability and growth in the housing market are essential for a durable recovery of the U.S. economy,” said Anand Nallathambi, president and CEO of CoreLogic. “The rebound in home prices in 2013 helped four million property owners regain at least some positive equity in their largest asset—their home. We still have a long way to go to eliminate the negative equity overhang but significant progress is being made every day across most of the country.” Nevada had the highest percentage of mortgaged properties in negative equity at 30.4 percent, followed by Florida (28.1 percent), Arizona (21.5 percent), Ohio (19.0 percent) and Illinois (18.7 percent). These top five states combined account for 36.9 percent of negative equity in the United States. Of the 25 largest Core Based Statistical Areas (CBSAs) based on population, Orlando-Kissimmee-Sanford, Fla., had the highest percentage of mortgaged properties in negative equity at 31.5 percent, followed by TampaSt. Petersburg-Clearwater, Fla. (30.4 percent), Phoenix-Mesa-Scottsdale, Ariz. (22.1 percent), Chicago-NapervilleArlington Heights, Ill. (21.4 percent) and Atlanta-Sandy Springs-Roswell, Ga. (19.9 percent).

Of the total $398 billion in negative equity, first liens without home equity loans accounted for $205 billion aggregate negative equity, while first liens with home equity loans accounted for $193 billion. Approximately 3.9 million upsidedown borrowers hold first liens without home equity loans. The average mortgage balance for this group of borrowers is $219,000. The average underwater amount is $52,000. Approximately 2.6 million upsidedown borrowers hold both first and second liens. The average mortgage balance for this group of borrowers is $293,000. The average underwater amount is $75,000. The bulk of home equity for mortgaged properties is concentrated at the high end of the housing market. For example, 92 percent of homes valued at greater than $200,000 have equity compared with 81 percent of homes valued at less than $200,000.

CFPB Unveils New Consumer-Friendly HMDA Tool

The Bureau is considering changes to make it easier for mortgage lenders to provide better information. The bureau is also making it easier for the public to use the already-available public information. Taken together, these efforts can improve the quality and accessibility of mortgage loan information.

Senate Passes Flood Insurance Measure Industry trade groups have jointly applauded the U.S. Senate for approving flood insurance legislation that will provide muchneeded certainty to homeowners and financial stability for the National Flood Insurance Program (NFIP). HR 3370, the

Homeowner Flood Insurance Affordability Act, was approved by the House earlier this month and is expected to be signed into law shortly by President Obama. “By providing a more affordable rate structure for policyholders and repealing point-of-sale rate increases, the bill is a boon for home owners and home buyers,” said National Association of Home Builders (NAHB) Chairman Kevin Kelly, a home builder and developer from Wilmington, Del. “Further, it gives an important boost to home building and remodeling, while simultaneously shoring up the NFIP.” HR 3370 will help address some of continued on page 16


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n National Mortgage Professional Magazine n MARCH 2014

The Consumer Financial Protection Bureau (CFPB) is taking steps to improve information reported about the residential mortgage market to help better understand borrowers’ access to credit. As a first step in the rule-making process, the CFPB is convening a panel of small businesses to provide feedback on potential changes to mortgage information reported under the Home Mortgage Disclosure Act (HMDA). The Bureau is also unveiling a new online tool that makes it easier to navigate the publicly available HMDA data. “Today, we are asking for small businesses to provide feedback on ideas to improve the Home Mortgage Disclosure Act, which monitors the largest consumer financial market in the world,” said CFPB Director Richard Cordray. “We want there to be better information, better collection, and better access to this important information.” HMDA was enacted in 1975 to provide information that the public and financial regulators could use to monitor whether financial institutions were serving the housing needs of their communities and providing access to residential mortgage credit. The law requires lenders to disclose information about the home mortgage loans they sell to consumers. HMDA was later expanded to capture information useful for identifying possible discriminatory lending patterns. In the wake of the recent mortgage market crisis, the Dodd-Frank Act transferred HMDA rulemaking authority to the CFPB. The law directs the bureau to expand the HMDA dataset to include additional loan information that would be helpful in spotting troublesome trends. Each year, HMDA data is reported for

the vast majority of residential mortgage loans originated in the U.S. In 2012, this near-complete inventory of mortgages came from 7,400 financial institutions that reported data for approximately 18.7 million applications and loans. The information that institutions report includes: the name of the lender; the type and general location of the property; and the race, ethnicity, and sex of the applicant. Reported HMDA data also include information about the loan amount and whether the loan is for purchasing a home, refinancing an existing mortgage, or home improvement. The financial regulators share a subset of the HMDA data with the public after revising it to consider privacy interests.

Compliance and Marketing 2014: Safely Growing Your Business If you have ever done a significant amount of marketing, you have probably ran into or have heard of others running into problems with compliance (hoops to jump through to keep your marketing compliant). The mortgage industry and its marketing strategies are heavily regulated by the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB). These agencies were put in place to make sure consumers are not being taken advantage of by lenders or their marketing and with all the guideline changes in the mortgage industry, they are cracking down. Credit bureaus have paid hefty fines for allowing “pre-screened credit data” to fall into the wrong hands. Regulations are tightening up, and as a mortgage professional, it’s up to you to stay abreast of all these changes. We all want to earn a good living and grow our business. How can you stay current with all of these regulations?

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1. You can read the guidelines on the agency Web sites. 2. Make sure you work with a reputable marketing firm. This is key! There are lots of “marketing people” out there who don’t understand the guidelines. If they don’t know the rules, how can you expect them to be followed? 3. If you have a compliance department, use them! They have intimate knowledge of industry regulations and will make sure you don’t get into any hot water. 4. This is the most important of all … talk with your marketing company about it. If you use an outside marketing firm, you must absolutely take the time to talk with them and find out how much they know about the guidelines for the specific type of marketing that you do or are planning to do this year. Sure, it’s not their responsibility to make sure you follow the rules. But if you get into trouble, they will lose you as a client so any good company will always put your best interest first. We call it a win-win relationship. With the increase in oversight by the CFPB and FTC, consider the type of marketing that you’ve planned for the year. Does it involve telephone numbers? Will you be using “pre-screened credit data?” Do you know the guidelines for using such data? Lastly, just because these agencies are cracking down, it doesn’t mean that you cannot market! Whether you are writing FHA, VA, conventional or reverse mortgages … the mortgage industry is moving in the right direction again, and it’s important to stay ahead of your competition. Plan your growth, and find credible companies to work with. TagQuest customer spotlight Each month, we like to talk with our clients and find out how their campaigns are going. Here is what we heard from one of our mortgage professionals in Ohio. • 1,500 Mortgage Trigger Leads • 86 percent correct numbers • A 14.4 percent connect rate • Seven applications • Four closed loans • Two still in the pipeline • A total of $381.25 acquisition cost per closed loan to date —Josh J., Cleveland, Ohio Medford, Ore.-based TagQuest is a full-service marketing firm created specifically for the ever-changing business world. TagQuest assists companies with their direct marketing, advertising and branding needs, and knows what it takes to generate quality customers and, most importantly, how to retain those customers for years to come. TagQuest brings forth a unique opportunity to utilize our experience and expertise in varying consumer sales and marketing environments. For more information, call (866) 376-5540 or visit VIEW OUR MOST RECENT WEBINAR ON YOUTUBE Online readers please click on the link below, readers of the print edition, please copy the link and paste it into your browser.


nmp news flash continued from page 15

the costly and unintended consequences of the Biggert-Waters Flood Insurance Reform Act, including huge premium spikes and impacts on the sale, construction and remodeling of homes across the nation. “As the leading advocate for home and property owners, NAR applauds this bill for the relief and protection it will bring to businesses and families nationwide, who are experiencing financial hardship because of the extreme and sudden premium increases,” said National Association of Realtors (NAR) President Steve Brown. “We believe this legislation will bring relief to property owners by ensuring a slow and steady phase in of risk-based increases. The legislation provides a more affordable rate structure for policyholders; repeals the requirement that flood insurance premiums increase immediately to full actuarial rates for homes that are sold; and restores “grandfathering” for properties that were paying premiums applicable to their initial flood risk rating, allowing owners to pay premiums based on the original risk zone rather than updated flood risk zones. “ICBA supports today’s Senate vote to approve this much-needed flood insurance legislation, and we urge President Obama to quickly sign it into law,” Independent Community Bankers of America (ICBA) President and CEO Camden R. Fine said. “The Homeowner Flood Insurance Affordability Act will help ensure that sharp rate hikes will not make flood insurance unaffordable for many policyholders who built to code and followed the law every step of the way. ICBA thanks lawmakers in both chambers for their efforts to stop these devastating rate increases for our stillrecovering housing market.” The bill also requires the Federal Emergency Management Agency’s remapping process to take into account local flood control structures and provides reimbursement for successful consumer map appeals. Further, it restores the “substantial improvement threshold” that triggers a higher flood insurance rate to the historic 50 percent level of a structure’s fair market value, which is important for many remodelers across the nation.

Four-Million Plus Renters Aspire to Own a Home Over the Next Year Millions of current renters nationwide aspire to buy a home in the next year, according to the inaugural edition of the Zillow Housing Confidence Index (ZHCI), suggesting strong demand among potential first-time homebuyers if market conditions are favorable. But existing headwinds, including tight inventory, rising mortgage interest rates

and growing affordability problems in a handful of areas, may make it difficult for potential buyers to follow through on those aspirations as the market enters the busy spring home shopping season. In 19 of the 20 large metro areas surveyed, more than five percent of all residents indicated they wanted to buy a home in the next year. Among current renters, homeownership aspirations were particularly strong, with about 10 percent of all renters nationwide saying they would like to buy within the next 12 months. The vast majority of these respondents also said they were confident or somewhat confident they could afford homeownership now. If all renters that indicated they wanted to buy actually did purchase a home in the next year, it would represent more than 4.2 million first-time home sales, more than double the roughly 2.1 million first-time home buyers in 2013. Homeownership aspirations among current renters were the highest in Miami, Atlanta and Las Vegas, three metro areas that were among the hardest-hit by the housing recession, according to the Zillow Homeownership Aspirations Index (ZHAI), a component of the broader ZHCI. But despite strong desires to own a home, market conditions remain mixed for potential buyers. While inventory is up nationally compared to a year ago (up 11.1 percent), it still remains well below optimal levels, and has fallen year-over-year in eight of the 20 metro areas surveyed by the ZHCI. Recent data from the Census Bureau also indicates that the share of new homes built as rental units has grown, while the share of new construction dedicated to the kinds of single-family homes likely to be favored by first-time buyers is down. Mortgage interest rates are also on the rise, currently standing at about 4.2 percent nationally, according to the Zillow Mortgage Marketplace, well above 2013 lows of roughly 3.3 percent. And as interest rates rise, homes in a number of particularly hot markets, including San Francisco, Los Angeles, San Jose and San Diego, are already looking unaffordable for buyers with lower incomes, especially first-time buyers, as more income is devoted to mortgage payments. “For the housing market to continue its recovery, it is critical that homes are both available and remain affordable to meet the strong demand these survey results are predicting, particularly from first-time homebuyers,” said Zillow Chief Economist Dr. Stan Humphries. “Even after a wrenching housing recession, this data shows that the dream of homeownership remains very much alive and well, even in those areas that were hardest hit. But these aspirations continued on page 85


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AMCs: A Viable Option to Handle the Appraisal Process By Vladimir Bien-Aimé

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With the Consumer Protection Financial Bureau (CFPB) introducing more rules, frequently changing federal and state-based regulations, and what already exists in the Dodd-Frank Act that must be adhered to, it’s become more of a challenge for lenders to stay abreast of compliance than ever before. Since the mortgage industry quickly became an industry inundated with compliance rules in 2010, each year we wonder what will happen next and begin planning for what’s on the horizon. The implementation of the CFPB’s Qualified Mortgage (QM) rule on Jan. 10 of this year certainly compounded compliance matters. And as of Jan. 18, lenders must disclose to borrowers that they are entitled to a copy of any and all appraisals for first lien applications. This must be done within three days of the loan closing, but not prior to that. And the requirement applies whether the lender has approved or denied the loan application. It would seem that this isn’t overly difficult to manage, but with so many other regulatory concerns, it’s yet another example of a compliance detail which must be adhered to. It is clear that all of the existing and mounting new rules has driven up the cost to originate loans and has increased the threat of exposure and fines. Yet lenders must still find a way to operate efficiently and compliantly. As opposed to handling the appraisal process in-house, which is often unstructured and manual, many lenders outsource the bulk of the process using an appraisal management company (AMC). This is a proven and effective option when lenders take the time to select the best AMCs suited toward their business needs. Before engaging, lenders must make sure that the AMC is of high quality and has a good reputation. Using the right AMC, you’ll effectively outsource the appraisal process, lower costs, reduce risk and speed up turn times. As a general rule, the mortgage industry’s long-standing, more established AMCs are typically more reputable, have solid track records, and good service levels. When you are selecting your AMCs here are some key questions you should ask: l How long has the AMC been in business? l Can you verify that the AMC is truly licensed in the states they represent being able to operate in? l Do they have a strong product offering? l Do they employ knowledgeable and accessible staff? What is their staff attrition rate? l Are their established processes and procedures well-established? l Do they utilize sound technology? l Is the AMC partnership-oriented, versus transaction-oriented? l Have there been any complaints made against the AMC? l What is the AMC’s capability to supply the reporting necessary for your business records? In the event of an investigation or audit, you will have to show that the proper steps were compliantly taken in the appraisal process. Lastly, states have begun enacting their own legislation that AMCs must follow. Soon, all 50 states will have their own specific rules that will undoubtedly change, which is already onerous to keep up with and abide by. Be sure to investigate what type of solution or monitoring service your AMCs are using to in order to follow and adhere to new legislation. In closing, we’ve seen that utilizing reputable AMCs can increase loan processing efficiency and help ensure appraisal compliance, which, at the endof- the-day, is exactly what every lender is looking for. Vladimir Bien-Aimé is president and chief executive officer of Global DMS. Since co-founding Global DMS in 1999, Bien-Aime’ has grown the company to capture a leading share of the appraisal management segment, with a client base of over 20,000 unique users and a 100 percent retention rate among lender clients. He may be reached by phone at (877) 866-2747 or visit


MBA’s Mortgage Action Alliance

Members of Congress Want to Hear From You A Message From MAA Chairwoman Amy Swaney

s the Chair of the Mortgage Action Alliance (MAA), my most significant duty is to engage more real estate finance industry professionals in the legislative process and grow the industry’s voice in Washington, D.C. and state capitals nationwide. Becoming a grassroots advocate is easy—all you have to do is start your free MAA membership by enrolling online at—it’s what you do after you become a MAA member that’s important. Last month, I wrote about MBA’s National Advocacy Conference (NAC) taking place in Washington, D.C. on April 9-10. As active industry advocates, NAC is often referred to as our Super Bowl. It is the one time every year when our industry takes to the Hill to speak directly with members of Congress; and trust me … they want to hear from you. While MBA has a full team of government affairs professionals working every day on our behalf, it’s important to remember that our members of Congress are more interested in hearing from us, their constituents. As voting members of congressional districts around the country, it is our duty to speak up on the issues that are important to us. Attending NAC is your chance to sit face to face with your lawmakers and tell them your story about your companies, your employees, your colleagues and how every decision Congress makes affects yours business on a daily basis. When you become an active MAA member, you’ll receive all of the upto-date information you need to know before meeting with your members of Congress. Every week you’ll receive the MAA newsletter that outlines all of the work that MBA is doing on Capitol Hill and in


your state capital and you’ll have all of the information you need to talk about your business in the context of what’s happening in Washington. Additionally, in the weeks leading up to NAC, you can join us for an education Webinar that explains everything you’ll need to know about attending NAC—from the dos and don’ts of lobbying, to outlines and issue briefs of the top issues facing our industry. With that said, I challenge you to ask yourself, why not attend NAC? Why let members of Congress and their staff make decisions that affect your business without your input? Why not join industry colleagues from across the country to make sure Washington DC hears our voice on issues of real estate finance? I hope you will consider joining us as an active MAA member and also for NAC this April. We can only affect change when we speak up together, and every individual has the ability to raise our collective voice. Real estate finance industry professionals who wish to join or learn more about MAA can do so at, To learn more about the 2014 National Advocacy Conference please visit C2014, or contact MBA’s Assistant Director of Political Affairs Annie Gawkowski by phone at (202) 557-2816 or e-mail Amy Swaney, CMB is governmental relations officer and branch manager with Scottsdale, Ariz.-based Citywide Home Loans. Amy is also chair of the Mortgage Action Alliance (MAA), a voluntary, non-partisan and free nationwide grassroots lobbying network of real estate finance industry professionals, affiliated with the Mortgage Bankers Association (MBA). Amy may be reached by phone at (480) 822-6262, ext. 2164, e-mail or visit tionAlliance.


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NAMB PERSPECTIVE The President’s Corner: March 2014 t is really an eye-opening experience when you talk with the NAMB membership and you can relate firsthand as to what they are going through each and every day in their businesses. It has become very apparent that it is getting harder and harder for mortgage brokers to stay in business as a broker. In most cases, if you are a one or two person operation, you are going to survive because your costs are really low and you can meet your low threshold of expenses. If you are a company that employs a processor, have four or more originators and an office space and general overhead to cover, it is tough. At any given month, if an originator or two go on vacation or just slow down with loan volume, you can become a company that is struggling real quick. As I am writing this article, yet another company has pulled out of the wholesale lending marketplace. The ironic thing is that they are still in the business buying from correspondents and small wholesale mortgage companies. Just like Wells Fargo, Chase, and all of the other major companies that have shut off brokers, they are still buying third-party origination paper from the mid-sized mortgage companies that are doing a great job of buying from brokers. Many mid-sized mortgage companies are doing a great job of buying business to reach their goals. They, in turn, sell them to these companies that no longer buy directly from brokers, but they buy their paper. Why?


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Because these companies have the ability to buy back a loan if it goes awry for any reason. In common terms, they have bigger pockets and a vested interest. But you still have all of these companies buying from the broker because it is cheaper than having a brick and mortar and retail presence. Each broker is now making the decision to either stay a broker or move to become a mini-correspondent or even a true correspondent. Brokers still produce loans cheaper and better than most creditors. And the other fact is that everybody is brokering loans. Banks and credit unions are now in the broker market, are increasing their income and do not have the overhead of all of those different departments they need to service and close their own loans. This will continue to increase the brokered loans in the mortgage arena for years to come. As the market continues to evolve through rules by the Consumer Financial Protection Bureau (CFPB), the housing industry is a large force in our economy. It continues to drive a lot of factors that are critical in the housing industry. We are starting to see increases in building permits for homes and new residences all across America. The construction crews are just waiting for the weather to break to start building homes. Here in Indiana, it seems that people are now in a position to want to move out of the home that they have been in for five to seven years and look at moving to a slightly larger home or one that is in a different school district. I really feel that 2014 and 2015 are

What NAMB Membership Says About You By John Councilman, CMC, CRMS You may not realize it, but NAMB membership says quite a bit about you. On the other hand, choosing not to be a member says a lot as well. Your membership, or lack thereof, speaks volumes to the public, to your peers and, believe it or not, to you. First, NAMB membership says you care about your industry. NAMB is the only trade association that exclusively represents the interests of mortgage originators and mortgage professionals.

Yes, there are other associations but they either represent companies, not people, or other entities such as Realtors or appraisers. When you join NAMB, you are joining a group of mortgage professionals who shape the industry you work within. Whether it’s the SAFE Act, Dodd-Frank or rules mandated by the CFPB, NAMB has had a part in shaping all of these to the benefit of the industry and consumers. Your membership in NAMB gives the association the funds to hire lobbyists and send leaders to Washington. NAMB is much more than just lobbying though. NAMB pays a significant portion of its revenues to promote

going to be really good years for people to buy new homes and refinance. Yes, I said “REFINANCE!” As I have been saying for over six months, there is still a great refinance market out there if you work to get these refis. No longer are the phones going to ring off the hook, but if you work your referral network and talk mortgages to all of your friends and family, you can make a good living on those loans. So I say to all of the nay-sayers, refinances are still alive, but it will take a concerted effort to get them. The many options for streamlines and HARP loans are just waiting to be refinanced. I was thrilled to take part in a panel discussion at the Miami NMLS Conference in February. I was on a panel with two reps from the CFPB. We were talking about the LO compensation and the three percent rule. It’s amazing as to how they think that the originator earns all of the money. They really didn’t have an idea that this was the total compensation and all bills had to be paid from this for the office. I got to meet some regulators and many of them are really nice people. I learned a lot just sitting and listening to them talk and reflect on the mortgage business. I am now on the American Association of residential Mortgage Regulators (AARMR) Industry Panel and I should be able to represent industry very well. I will update you more on this panel in the next few months. Everyone needs to start making plans to attend the NAMB National Conference in September. We are going to be at the Luxor this year and are planning some great activities for all of those who attend. The opportunities for all originators will be getting better in the next two years, and this

will be a great time for you to increase your skills and understanding of the mortgage business for years to come. Please mark your calendar for Sept. 13-15, as this is going to be a great time. As a matter of fact, if your state has chosen you to be a delegate to represent your NAMB state affiliate at the Delegate Council Meeting, now is the time to start to make your plans to attend. This is a national meeting where the NAMB Delegate Council meets and we have a change in the status of the Board members and install the new Board. I would like to thank everyone who made our recent Legislative Conference a success, including all who took the time out of their busy schedules to attend. We only had 14 people not come who were registered and with the weather, we still were able to meet, have great conversations, listen to great speakers and see our representatives. And on a completely different note, I would like to give a great big shout out to Frank and Brian at the National Real Estate Post. It was nice of them to put together a show about NAMB on Capitol Hill and it was very appreciated. Please stay involved with each of your state affiliates and I thank all of you who are members of NAMB. We need more members, so if you know someone who is not a member, please get them to join today.

mortgage brokerage and correspondent lending. NAMB partners in the publication of this magazine, National Mortgage Professional Magazine, to bring you important information about the industry. NAMB has two public relations firms that constantly bring the perspective of the mortgage professional to the public. You will see NAMB quoted in the New York Times, Los Angeles Times, Washington Post, Wall Street Journal and virtually every major publication. NAMB is quoted and has been interviewed on CNN, ABC, CBS, NBC, public radio and television, and hundreds of more outlets nationwide. NAMB maintains a social media presence on LinkedIn, Facebook, Twitter and others that reach tens of thousands of people. Your membership makes all of this possible. Without NAMB, your perspective will never reach the media or the public.

Second, your reputation is enhanced by NAMB membership. It is a well-known fact that being able to identify with a major trade association in your advertising brings a higher level of credibility to you. People know that trade associations generally mean certain ethical codes and education. NAMB has a strict Code of Ethics and Best Business Practices. Recently, NAMB added a Lending Integrity Seal of Approval that members may use when they agree to abide by the association’s ethical standards. Should you desire to achieve to a higher level, NAMB offers professional designations. I have found that borrowers often ask what those initials mean. When I explain that they are dealing with a NAMB-certified originator who must abide by a strict Code of Ethics and take a rigorous test, they are impressed. I point out


Donald J. Frommeyer, CRMS NAMB President

NAMB PERSPECTIVE that when they are dealing with anyone who isn’t certified, they are working with someone who doesn’t have to live up to a code of ethics and may not be able to pass a tough test. I think that has sealed quite a few deals for me. Obtaining a Certified Mortgage Consultant (CMC) or Certified Residential Mortgage Specialist (CRMS) designation raises your reputation among peers. Everyone would like these designations, but they must put in the work to study for the tests and have the experience. A designation is something you can be proud of when you put the initials after your name. Just as a “CPA” or “MD”

demonstrates proficiency in their field, NAMB has created an opportunity for you to proudly display your accomplishment in the mortgage industry. If you desire to become an NAMB leader, these designations are mandatory. Finally, NAMB membership shows you are looking to the future. Making certain you have a strong reputation and your industry is sound shows that you are future-thinking. The opposite is someone who is in the industry for a short period until their reputation catches up with them or the refis dry up. I often check to see when someone is accused of wrongdoing to see if they

You Can Make a Difference By Jim Pair, CMC

Trends in NMLS Licensing and Registration By Rocke Andrews, CMC, CRMS

l There were 130,260 unique individuals licensed as mortgage loan originators (MLOs) working for 16,145 unique companies. This was an increase from Q4 of 8.4 percent of MLOs while the number of companies decreased 3.3 percent. l The states/territories with the largest percentage gains of state licensed companies were Rhode Island (23.8 percent), the Virgin Islands (30.8 percent), and Hawaii (30.5 percent). The greatest percentage increase of state-licensed MLOs were for North Dakota (106.9 percent), South Dakota (113.5 percent), Delaware (73.6 percent), Alaska (71

l There were a total of 16,145 unique companies holding a total of 34,994 state licenses for an average of 2.16 state licenses per company. l California led with the most licensed MLOs with 42,650, followed by Florida with 18,255 and Texas with 17,110. California also had the most companies with 6,965, substantially more than Florida with 1,901 and Texas with 1,530. New Jersey, North Carolina, Virginia and Ohio led all states with the most MLOs per company, averaging over 12 per company. l The states/territories with the least average MLOs per company were Virgin Islands, Puerto Rico, Vermont, Hawaii, North Dakota, Nebraska and West Virginia all averaging less than five MLOs per company. l There were a total of 130,260 unique

vice president, treasurer or secretary must have served as a director of NAMB. You may even nominate yourself if feel that you meet the basic qualifications. Before you nominate someone other than yourself, please check with that individual and request their permission to submit their nomination. Once the time for nominations has closed, the Nominating Committee will vet the nominees to determine who is best qualified to fill the vacancies and lead our association. A ballot will sent to each voting member of the association to cast their ballot for the nominees selected to fill the various positions. You have the right to write-in your choice to fill one of the positions on the ballot if you do not agree with the choices made by the Nominating Committee.

Do not stand on the sidelines and not participate in this process. It is your responsibility to be a part of the process to select the new leaders of your association. So many of you do nothing when asked and then complain when something happens that you do not like. In my estimation, you have given up the right to voice your opinion if you do not take a few minutes to make your nominations and e-mail them to the Nominating Committee. This is your opportunity to make a real difference in your association.

individual state licensed MLOs with a total of 331,293 state MLO licenses for an average of 2.54 state licenses per individual.

license and an active federal registration. There were 5,556 individual that were both state licensed and federally registered.

l Federally-registered MLOs (not licensed) increased 1.5 percent to a total of 405,423 working for a total of 10,845 different institutions (a decrease of 1.5 percent).

So, in summary, there were more individual MLOs both licensed and registered for a smaller number of state licensed and federal institutions. There was expected growth in the North and South Dakota shale oil regions. New York, not surprisingly, had substantially greater federally-registered than state-licensed MLOs as did, to a lesser degree, Florida. Originators increased following the minirefi boom of late 2012 and first half of 2013. We now have more registered and licensed MLOs chasing an approximate 30 percent reduction in overall mortgage loans. My guess is we will see a decrease in the numbers in the coming year. The reports I cited in this article can be found at: and

l The states/territories with greatest percentage increase in federally registered MLOs were Virgin Islands (10.3 percent), South Dakota (8.4 percent), West Virginia (7.8 percent) and Delaware (7.3 percent). Those with the largest percentage decrease in registered MLOs were Ohio (-8.8 percent), Texas (-4.0 percent), Puerto Rico (-2.7 percent) and Guam (-2.4 percent). l The states with the largest number of federally-registered MLOs were California (43,118), Texas (26,507), New York (25,065) and Florida ( 24,225). l The Federal Institutions averaged more than 37 registered MLOs per institution. There were 108 companies that hold both an approved state

John Councilman, CMC, CRMS of AMC Mortgage Corporation in Ft. Myers, Fla. is president-elect of NAMB—The Association of Mortgage Professionals. He may be reached by phone at (239) 267-2400 or email

Jim Pair, CMC is past president of NAMB—The Association of Mortgage Professionals and chairman of NAMB’s Nominating Committee. He may be reached by phone at (361) 774-7314 or email

Rocke Andrews, CMC, CRMS of Lending Arizona LLC in Tucson, Ariz. is vice president of NAMB—The Association of Mortgage Professionals. He may be reached by phone at (520) 886-7283 or email


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The NMLS has released and posted on their Web site on March 3 the results of their Fourth Quarter Audit of Loan Originators.

percent) and Iowa (89.7 percent).

hardship for anyone. It usually isn’t the cost that deters someone. It may very well be that they aren’t thinking about the future and their reputation. Peer expectations can be very healthy and very rewarding. There are a lot of great people you will come to know as a NAMB member. Make certain you join or renew today!

As a member of NAMB— The Association of Mortgage Professionals, you will soon have the opportunity to exercise your voice in selecting the leadership of your Association. At the recent Legislative Conference held in D.C. earlier in March, the Delegate Council elected the Nominating Committee for the coming year. The Committee is composed of members of NAMB from the different regions of the country. The Nominating Committee will be calling for nomina-

tions to fill at least three positions on the Board of Directors and nominations for the positions of vice president, treasurer and secretary. The call for nominations will go out within the next 30 days. The person you nominate must meet certain qualifications, such as being a Platinum Member of NAMB, hold a designation of CMC or CRMS, have a NMLS number and has demonstrated leadership on the local, state or national level. You are encouraged to nominate more than one person for the vacancies on the board and one nominee for the officers of the association. A nominee for

were an NAMB member. It is very rare that they were. I have found that NAMB members think of their job as a career. They are obviously less likely to jeopardize their future by doing something stupid. When someone is willing to put their hard-earned money into membership, it shows they are looking ahead. Every company should insist that its originators become NAMB members and show the Lending Integrity Seal. We need to show the public that we are serious about integrity. Joining NAMB is a great way to do that. NAMB membership dues are reasonable. They are designed not to create a

NAMB PERSPECTIVE Scenes From the NAMB 2014 Legislative & Regulatory Conference March 2-4 in Washington, D.C. Credit all photos: Robert Ottone

Raj Date of Fenway Summer with Dave Luna and Don Frommeyer of NAMB in D.C.

Members of NAMB’s Delegate Council discuss the QM rule and its impact on small broker business

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Doug Braden, Jayne Bail, Kay Cleland and Heidi Martin represented the Colorado Association of Mortgage Professionals at the 2014 NAMB Legislative & Regulatory Conference

Jonathan Foxx of Lenders Compliance Group addresses the Compliance Symposium

NAMB Director Fred Kreger moderates the legislative panel discussion

NAMB President Don Frommeyer meets with John R. Hammond IV, Deputy Chief of Staff for Congressman Marlin A. Stutzman (R-IN), during Lobby Day

Attendees listen to talking points to present to their elected officials for their meetings on Capitol Hill

with the new rules. As a result, there is a flood towards the correspondent model to somehow cope with the regulatory environment with QM regulations and restraints on broker compensation and fees. So, what is this “Correspondent Channel” and what are the benefits versus being a wholesale broker? There are two main types of a correspondent: A “Correspondent” and a “Mini-Correspondent” model. A “Correspondent” is a lender who underwrites, closes, and funds loans in their own name via a warehouse line of credit; usually selling the loans to an investor and securing a commitment on the interest rate, eliminating market risk. A “Mini-Correspondent” or “Mini-Corr” is a lender who performs all of the above functions, except the underwriting—which is provided by an approved third-party vendor or by the correspondent’s own closing team with prior approval from the investor, thus eliminating the credit risk in addition to the market risk.

Is the correspondent channel a viable alternative for all brokers?

e are three months into 2014, and with the New Year came an initial reactionary shock due to the many regulatory changes, affecting both retail and wholesale mortgage lending channels. Many lenders, banks, brokers and loan originators who have withstood the turbulence of the new Consumer Financial Protection Bureau (CFPB) rules have conquered, yet again, the fear that the wholesale channel will be abolished. Subsequently, there appears to be an ever-so-slightly growing progression for mortgage lenders and banks


to turn their backs to the wholesale lending channel. If industry experts are correct, as much as 30 percent of wholesale lending will be cut by the end of 2014. As an example; the following lenders have terminated their wholesale channel and relationships with brokers: SunTrust Mortgage, Green Tree Servicing LLC, EverBank Financial Corporation, Bank of America, JPMorganChase, Mortgage Services, and most recently, Fifth Third Bank. Most of the lenders who have shut down their wholesale channel and terminated their relationships with mortgage brokers have indicated that they will continue to support the newfound “Correspondent Channel.” As PRMG has written in previous

releases, including “Brokers Don’t Jump Ship” and “Panic in the Air Tonight,” the company has advocated for the mortgage broker and the salvation of the wholesale mortgage origination channel. As I said back then, and I say to you now, “The mortgage broker and wholesale channel must remain viable for our industry and economy to flourish, and, most importantly, to ensure the consumer’s best interests are met.” Why would this be occurring? This probably is most likely due to the repression from the CFPB on the Qualified Mortgage (QM) and Abilityto-Repay (ATR) rules. Brokers are looking for an avenue to circumvent the revenue restrictions that come along

Paul Rozo is president and chief executive officer of PRMG, with its corporate offices based in Corona, Calif. He may be reached by phone at (951) 278-0000.

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By Paul Rozo


The Mortgage Broker and Wholesale Channel Must Remain Viable for the Economy to Flourish

First, you need to take a look at your market and evaluate your competition in determining if the correspondent route is right for you. Correspondent is certainly a feasible option, whether you are doing high balance loans or jumbo loans. On the other hand, if you are primarily dealing with lower loan amounts in your market, it might prove to be more advantageous to go Mini-Corr as it will provide some much-needed flexibility to help you cope with the new rules and regulatory changes. As for brokers who primarily do FHA business, the Mini-Corr is likely not a good fit for them. That being said, although it is crucial to maintain a strong wholesale division to remain competitive, the Correspondent Channel may be an ideal opportunity for brokers who feel they can greatly benefit from eliminating inherit risks associated with current QM regulations and restrictions. In closing, we do not foresee the wholesale channel becoming extinct. The opportunity for a broker to become a “banker” is an attractive alternative which offers the strength and stability of an established direct lender. Regardless, a smart broker can maximize results from either avenue of execution, whether they choose to stay true to their roots as a wholesale broker, or revamp as a correspondent.

A Guide to Ranking Well on G


By Cody Miles ’ve heard it said that as much as 70 percent of borrowers start looking for a mortgage online. If this is true, and it probably is, than the importance of search engine optimization (or SEO) cannot be overemphasized for loan officers. Your rank on a search engine is important. On average, 62 percent of users click on a search result within the first results page. Without proper SEO, many websites can remain invisible to search engines and shipwreck any online marketing attempts including social media. It can almost go without saying that low rankings can mean less visitors and ultimately less business.


In simple terms, Google displays search results based on a Web site’s relevance and authority. SEO, then, is the process of building a Web site that is both relevant to your audience and linked to by other wellmeaning sites. Unfortunately, SEO can be intimidating. The amount of information (and misinformation) on the Web can confuse and mystify the average Internet user. While outsourcing may be perfect for your business, choosing the right SEO company is no picnic either. Many “experts” (usually the one’s that crowd your inbox) will try to trick you into thinking SEO requires secret and scientific information. If you cannot hire a professional, here is a simple, step-by-step guide to

setting your Web site in motion for better search rankings:

1. Perform keyword research Google is an engine of discovery. They want to help searchers find the most relevant Web sites for their query. Therefore, it’s important to understand what words your audience is typing in Google when they’re trying to discover a service like yours. Understanding the search terms, or “Keywords,” that best fit your business or product is pivotal to the success of your SEO strategy. Performing “Keyword Research” is the foundation of all SEO. It is the process of determining who your audience is and how they are trying to discover you. When a borrower in Austin,

Texas uses Google to discover loan officers in their area, what are they going to search for? If the answer is “mortgage loan officer in Austin” or “Austin mortgage company,” these may become some of your targeted keywords. Think locally. Google is intent on finding the most geographically relevant results (and it doesn’t help an Austin loan officer getting web traffic from Denver). Remember to incorporate your location into your keywords so Google understands how to categorize you. Google’s Adwords Keyword Planner is a great tool for keyword research. Not only does it show you the monthly search volume of a keyword, but also how hard the competition is for ranking well on it. Some keywords are easier to

Google in 2014 rank for than others. For example, most companies will not rank well for search terms like “mortgage” (at least not like Zillow or Quicken Loans can), but “Austin mortgage” may be more reasonable. A successful keyword researcher will determine five to 10 keywords and rank them based on: l Relevance to their business l Monthly search volume l Competition

2. Optimize your site

At the end of the day, Google is looking for a quality Web site that continually provides helpful information for searchers. As Matt Cutts, head of Webspam at Google, said, “Focus on the user and all else will follow.” This is why I cannot stress enough the importance of creating and sustaining a helpful and dynamic blog on your site. Blogs are helpful because they help meet Google’s criteria for providing “fresh content.” Google gives each Web site a “freshness” score, which decays as the page gets older. It has been shown that fresh content is often preferred in the search results. Offering your visitors real value that is new and relevant can help give your site preference in Google’s eyes. Here are some guidelines for content creation: l Post often l Keep your post title under 70 characters l Limit meta descriptions to less than 160 characters l Longer content produces better search results l Include multi-media often l Use your keywords in your copy l Promote your blog on social media

Tip: Google wants to be able to trust you. Signing up for Google authorship breaks web anonymity and puts a face to your content. Also, Google gives preference to websites who have a Google authorship linked to it. If your Web site is hosted on a powerful content management system like Wordpress, take advantage of your blog. Start a series that gives tips to new borrowers or advice to seasoned ones. A Tip: Be careful of over-optimizing healthy blog is possibly the most powa keyword on a page. Google recog- erful weapon you have in the battle of nizes “keyword stuffing” and penal- search rankings. izes Web sites that do it. The key to SEO is subtlety. continued on page 61


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l Page title: Place your keyword at the beginning for best results. l H1, H2, etc. tags: Reinforce your keyword in these titles. l Body text: Sprinkle your keywords naturally through your body text. l URL: Google gives an edge to Web sites that have their keyword in the URL. l Images (Alt attributes): Google cannot “see” images. Include alt=”keyword” between the brackets of your image HTML. l Internal and external links: Link to other relevant sites, including other relevant pages on your Web site. l Meta description: This is the description found in the Google results. Include your keyword here as well.

3. Become a content creator

At this point, you’re a pro at keyword research. You’ve discovered five to 10 important search terms and ranked them in order of importance. Now, part-and-parcel of appearing relevant for your keywords is incorporating them into your Web site strategically. Think of Google like a person. When it’s trying to discover what you’re about it reads your URL, titles, body text, images and videos like a normal person. If the title of your site reads: “Joe Blow, Mortgage Broker,” it probably won’t categorize you under pizza delivery services. Likewise, it’s looking at the quality of your site. If your mortgage site looks like it was built in the 1990s (let’s face it, most do), Google is going to give the more modern page an edge over you. Google’s algorithm will look at almost every element of your Web site to determine how it should rank you. It’s important to place your keywords strategically on your Webpage. Below is a list of important elements to incorporate the results of your keyword research:

Google reads your site by its pages, not the site as a whole. To this end, different pages can target different keywords. If possible, it’s also important to track this information in order to discover which keywords produce better results. Beyond keywords, Google also uses a plethora of factors to determine a page’s relevance including; the anatomy of the page, permalink URL clarity, use of multimedia, loading speed, social media presence, use of outbound links, length of content and bounce rate.

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.

New Penn Acquires Resurgent Mortgage Servicing

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Shellpoint Partners LLC has announced that its wholly-owned subsidiary, New Penn Financial LLC finalized the acquisition of Resurgent Mortgage Servicing, which will now operate as Shellpoint Mortgage Servicing (SMS). “The acquisition of the mortgage servicing business from Resurgent Capital Services marks a significant milestone for Shellpoint as we implement our strategy to deliver financing solutions for homeowners in an evolving residential mortgage lending market,” said Bruce Williams, co-CEO of Shellpoint. “SMS will provide a quality experience for New Penn’s customers, while continuing its industry leading special servicing business focused on maximizing performance and returns for our third party clients.” “The acquisition by Shellpoint creates financial stability and the opportunity to better serve our clients and borrowers,” said Jack Navarro, president and CEO of SMS. “We look forward to supporting New Penn’s origination capabilities and continuing to enhance our capabilities for our third-party special servicing clients.” “The addition of a highly regarded servicer focused on providing a customer-friendly borrower experience will enhance our continued commitment to providing innovative homeownership solutions,” said Jerry Schiano, president and CEO of New Penn.

United Northern Mortgage Bankers Expands to West Coast

United Northern Mortgage Bankers Ltd. has announced that it is expanding to the West Coast. United Northern’s President Don Giorgio and Vice

President Heidi Frigano are proud to introduce their regional sales leader, Gregory Laks, who will be heading up United Northern’s West Coast Division. Laks is a top-producing manager with high level experience at both RMS/Security 1 and MetLife Bank, NA and has more than 16 years in the field and 10 years specifically spent in the reverse mortgage arena. “Being a producing manager,” said Laks, “I have gained a fair share of knowledge on what tools are needed to continue to be successful. The market [has been until United Northern] missing a true hybrid model ... [as] companies are either self-generated or call center [based]. I have learned that top producers that help more people usually intertwine in a leads base with their self-generated production.”

Forsythe Appraisals Announces Implementation of Global DMS Technology

Global DMS has announced that Forsythe Appraisals LLC is leveraging the eTrac Enterprise platform to manage appraisal ordering, tracking and review for all of its branch offices covering 40 major metropolitan areas across the country. The solution centralizes and streamlines operations and effectively replaced Forsythe Appraisals’ proprietary valuation management system. “Since implementing Global DMS’ platform, we have realized very measurable gains in efficiency, productivity and tracking while reducing our IT spend using their comprehensive Webbased appraisal management technology,” said John Forsythe, president and CEO of Forsythe Appraisals. “While our proprietary platform worked very well,

we saw greater efficiencies in Global DMS’ platform and how it meshed with our specific workflows and internal processes. Our users love the system and find it has made a big difference in how they do their jobs.” Forsythe Appraisals has a unique business model whereby its appraisers are exclusive W-2 employees that operate out of the company’s wholly-owned and operated branch locations. The branch model is proven to ensure continuity, consistent quality, and provide control over its processes. Forsythe Appraisals’ distinctive and dynamic business necessitates a flexible technology platform that can continuously adapt to its environment. Global DMS’ configurable eTrac Enterprise platform greatly reduces the extensive costs Forsythe Appraisals incurs to maintain, update new functionality and develop interfaces as it grows its operations. In addition, keeping in-house software up-to-date with constantly changing federal, state, GSE and Consumer Financial Protection Bureau (CFPB) compliance regulations can be time consuming and costly for any organization. Global DMS has the technology and talent to efficiently handle the entire appraisal process for Forsythe Appraisals. “The flexibility and configurability of our eTrac system has helped Forsythe Appraisals optimize its workflow and has had a very positive impact on its performance and bottom line. The considerable changes required to upgrade their proprietary platform would have been expensive and extensive,” said Vladimir BienAime, president and CEO of Global DMS. “Our solution currently processes thousands of appraisal transactions monthly for Forsythe Appraisals and has already helped improve performance, increase margins and position the company for scalable growth.”

GSF Expands Midwest Presence and Adds New Director of Marketing

GSF Mortgage has announced the addition of Jerome Anderson, who will oversee the GSF branch in Burnsville, Minn. This is the fourth addition in Minnesota for GSF Mortgage. Anderson started in the industry in 1991 as a part-time telemarketer for a mortgage company. In 1995, he transitioned into sales and has been a loan specialist ever since. His telemarketing background gave him a thorough understanding of the products. Anderson plans to expand his presence to surrounding states and the upper Midwest including Wisconsin and South Dakota. He will continue to utilize his telemarketing skills and also implement direct mail and referrals into his strategy. GSF has also announced that its Communications Manager Leah Marsh has been promoted to the position of director of marketing. Marsh has a strong background in sales and marketing. Prior to 1996, she managed a few retail stores. In 1992 she joined AOL and iVillage monitoring chat rooms and message boards, which were essentially social media before Facebook and Twitter. In 2001, Marsh investigated different business options and entered the real estate industry. She was a senior real estate specialist, managed relocations, and enjoyed working with first time homebuyers. Marsh and her former spouse created an engineering consulting company. She was responsible for all marketing efforts including Web design. Under her direction, Marsh plans to work with sales to build relationships with Realtors and gain referrals. She

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Creating a Winning Culture: Confidence By David Lykken or the past few months, I’ve been discussing the difference between companies that succeed and companies that fail. When you look at the main differentiator between successful companies and unsuccessful companies, it almost always boils down to one single idea: the organizational culture. The companies that succeed will contain leaders who create a vibrant, robust and inspiring culture for their people. The companies that fail will have leaders who create a poisonous, flimsy and discouraging culture. Either way, it always comes down to the culture. It’s the leaders of the company who set the bar for how the culture will develop. So, in the end, the quality of the culture is a reflection of the quality of the leadership. If we want to know how companies can create a winning culture, then,


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the best way to do that is to learn how the leaders of those companies can become better leaders. In my work with hundreds of companies, I’ve noticed a host of leadership traits that are absolutely essential for companies to create winning cultures. I’ve discussed two of them: Character and Conviction. Now, I want to discuss a leadership trait that has probably been on just about everyone’s list of top leadership qualities since the beginning of time. This month, I’m going to talk about Confidence. Great leaders not only feel confident in their work; they project that confidence for others to see. That’s how they get people to follow them. They don’t waver in doubt before making decisions. They move forward boldly. And, as a result, their followers feel more confident in their work as well. A culture thrives when its leaders are sure enough of what they’re doing to get the job done. There is one potential problem

with confidence, however, that I would like to address before moving forward. Without the proper mindset, it is possible for confidence to spiral into arrogance. In fact, some people fail to recognize the difference between the two. While these two ways of thinking may seem very similar, I’m actually going to argue that they are polar opposites. To do so, I would like to take a few moments to tell one of the greatest stories humankind has yet to hear. Let me tell you about David and Goliath. The Israelites were in conflict with their enemies, the Philistines, and were hiding from the fight for one simple reason—the Philistines had a champion among them. The hulking giant, Goliath, stood over nine feet tall and was decked out in elaborate battle gear. No Israelite dared approach him. Nevertheless, Goliath audaciously posed a challenge: If any single Israelite could defeat him in individual conflict, the Philistines would surrender to the Israelites and become their servants. However, if that warrior fell beneath Goliath’s sword, the Israelites would become the servants of the Philistines. Goliath was that certain that no one could defeat him. Goliath was that sure of his own abilities. He stood proudly on the battlefield, mocking his opponents and bragging of his own might. Goliath was arrogant. Then there was David. A small shepherd boy who spent his time chasing away bears and lions to protect his sheep, David was not even a part of the Israelite army. Carrying supplies to his brothers, who were in the army, David noticed that no one in all of Israel’s forces was will-

ing to accept Goliath’s challenge. So, he volunteered. Saul, the king of Israel, tried to dissuade him. “You can’t fight Goliath,” said Saul. “You’re just a kid, and he is a mighty warrior.” David answered his king by explaining how he had driven away lions and bears to protect his sheep. “The Lord that delivered me out of the paw of the lion, and out of the paw of the bear, he will deliver me from the hand of this Philistine.” So, the king finally relented. David approached Goliath with a sling and a bag of rocks. Goliath mocked David and his God, failing to belief that such a small, pathetic little man could bring him down. Nevertheless, David made this pronouncement: “Thou comest to me with a sword and with a spear and with a shield; but I come to thee in the name of the Lord of hosts, the God of the armies of Israel, whom thou hast defied.” With that, David took a single tone and slung it at Goliath. The rock hit the giant square in the forehead, and he fell to the ground—dead. When, we look at the story of David and Goliath, we tend to see Goliath as arrogant and David as confident. We don’t describe David as arrogant, though. Why don’t we? What is the difference between the character of these two men that enables us to make that distinction. Here’s what I think it boils down to: When you are arrogant, you take the credit; but, when you are confident, you take the responsibility. Goliath fought with the assurance of his own might; David did not give himself the credit for his strength—he attributed it to his God. When you look at leaders who por-

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tray a sense of confithe check. It was dence that inspires $500,000 signed by “It’s the leaders people to follow, there John D. Rockefeller— is almost always anothof the company the richest man in the er trait bubbling up world at the time. right alongside that who set the bar Encouraged, the busiconfidence—humility. nessman returned to Leaders who are confiwork with a renewed for how the dent, and not arrogant, sense of vigor. culture will are always extremely For the next few humble. They don’t months, the businesscredit themselves for develop. So, in man worked harder. He their strengths. They negotiated better deals the end, the exude a sense of gratiwith existing clients, he tude for all the people quality of the sought out new who have helped them accounts and develalong the way. They oped new lines of busiculture is a consider themselves ness, and he estabblessed to be in a posi- reflection of the lished better relationtion of leadership— ships with creditors. quality of the Here’s the thing: He not entitled. Arrogant people never even cashed the leadership.” think they deserve the check. Simply knowing credit for their that he had the investstrengths—they ment of such an imporbelieve that they’ve made it all on tant man behind him gave him the contheir own. Confident people are fidence to set to work. Three months aware of their strengths, but know later, he returned the check to the old that they could not have done it on man, uncashed. It turns out that all he their own. Then, once they are needed was a little confidence. aware of those blessings, confident I don’t know whether or not the leaders feel compelled to use them. story is true. It’s probably not, but it They see their strengths as a sign does illustrate a few important that they are responsible for mak- points. First, confidence can make all ing a difference. David saw that the difference. When we believe there was a need and he knew that strongly enough in something, we can he had the ability, so he took almost always bring it to pass. In psyaction. That’s what it means to be chology, they call it a self-fulfilling confident. prophecy. “Whatever the mind can When you are arrogant, people conceive and believe,” said Napoleon may pretend to follow you, but Hill, “it can achieve.” behind your back, they’re secretly The second thing this story illusplotting your downfall. When you are trates, though, is more subtle but confident, however, people are just as important. And it is this: You authentically attracted to you and have every reason to be confident. sincerely willing to follow you. When you think about all of the Confidence can inspire the ultimate people who have helped you in life culture in your organization. When and all of the circumstances that you are confident, you not only have provided valuable lessons for believe in yourself, but you also you to learn, how can you not be inspire your customers and your confident? Count your blessings. employees to believe in you. Chances are, you have much a The power of expectation has greater value invested in you than a always amazed me. When you believe check from a stranger. Confidence enough in something, you can often means taking all that has been bring it to pass by sheer will and invested in you and adopting the determination. “Whether you think willingness to use it. you can or think can’t,” Henry Ford How about it? Will you be confifamously said, “You are right.” dent? It can make all the difference. I once heard a fascinating story Your customers need; your people about a businessman who was strug- need it. You need it. So, accept the gling to keep his business afloat. He responsibility and get going. was losing deals, falling behind on bills, and having to cut back on his David Lykken is president of mortgage workforce. Discouraged, he went to a strategies and managing partner with bar and began to drink his troubles Mortgage Banking Solutions. He has away. While he was sulking all alone more than 35 years of industry expein self-pity, an old man approached rience and has garnered a national him and asked what was wrong. reputation, and has become a freWoefully, the businessman explained quent guest on FOX Business News his troubles at the company. with Neil Cavuto, Stuart Varney, Liz The old man thought for a moment Claman and Dave Asman with addiand then said, “Okay, I see your prob- tional guest appearances on the CBS lem.” With that, the old man wrote Evening News, Bloomberg TV and him a check. “Take this loan and, in radio. He may be reached by phone three months, I’ll meet you back at (512) 977-9900, ext. 10, or e-mail here. You can return the money to me then.” The businessman looked at or

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Casey Stengel, Ernie Banks, Stan Musial ... and Compliance? By Andrew Liput Spring is in the air, and for sports enthusiasts like me, that means one thing: Spring Training and the start of yet another baseball season. As I check out the Florida box scores, I cannot help but find some parallels between our National Pastime and the current state of the mortgage industry. l With the current down market, many lenders have thrown in the towel and instead are saying “Wait ‘til next year!” As the Brooklyn Dodgers found out time and time again (except for in 1955), a team that is focused on the future and not the present usually ends up on the losing side of the scoreboard. The Yankees beat the Dodgers nearly every year from 1947-1956 because their focus was “This is next year!” Lenders who are focused on growth and success despite a down market are finding it, while those who are just waiting it out until next season, may find that when the time comes, they will not be fielding a team. l Casey Stengel, who led the Yankees to 10 pennants and was saddled with managing the famously inept 1962 Mets, was known for his muddled language. Reporters often scratched their heads trying to understand his point, and as a result, Casey became the story which often took the heat off of his players. The regulators in D.C. appear to be speaking in “Stengelese” these days. Thousands of pages of regulatory requirements that meander from topic to topic and leave lenders who now are responsible for implementing them thinking: “What in the world does that mean?”

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l Attitude is everything in life. Chicago Cubs star Ernie Banks loved baseball. He knew he was privileged to be paid doing something he really enjoyed, and when he arrived at Wrigley Field for a day game, would often say, “Let’s play two!” I’ve noticed that those MLOs who really love what they do, who see their role as consumer-oriented not just another way to make money, find success no matter how tight the market might be. They show up for work every day, and instead of asking, “How am I going to get business?” say, “I’m going to close two!” l Stan Musial was one of the most gifted and respected players of his time. When he arrived at the ballpark, he would say: “I think I’ll get three hits today.” However, he was not a stat hog. Near the end of his career he had to be told by a fan that he was approaching 3000 hits. Musial was a team player first. He had a notorious workout regimen (rare for that time), supported his teammates, and encouraged preparation. Today, lenders need to encourage more teamwork and to take the appropriate steps to prepare for a new consumer- and compliancefocused marketplace. With the spring season now here and everyone thawed from this past winter’s deep freeze, the industry is poised to see higher originations and closed loan volume. As volume increases in a risky purchase market, it will benefit forward-thinking lenders to incorporate more risk management and quality control steps to avoid the type of fraud and defective loans that marked the last purchase boom from 2002-2008. As Yogi Berra reportedly said, "It's like deja vu all over again!” Play ball! Andrew Liput is president and CEO of Secure Settlements Inc., a company he founded after nearly 10 years studying the problem of escrow and closing fraud and the uninsured risks associated with mortgage closing professionals. He may be reached by e-mail at


heard on the street continued from page 26

our footprint to effectively meet the needs of borrowers on an international scale,” said Carrington Holding Company Chief Operating Officer Dave Gordon. “Considering the optimistic outlook for Scotland’s real estate and mortgage markets, along with expectations for how this year’s regulatory Maverick Expands Into changes will reshape the mortgage NY, Seeking New Talent Maverick Funding Corp- lending landscape in the UK, we believe oration has announced that Carrington’s entry into Scotland its expansion to New and the UK is well-timed.” York State. Maverick’s CEO, Ralph Vitiello Equity Loans Opens New states that, “Obtaining our New York Office in Maryland license will not only open many doors of opportunity but will also allow us to provide new consumers directly with our unparalleled services and competi- Equity Loans has announced that is has tive loan programs that the market opened a new office in Maryland, the company’s second in the state of demands.” President Michael Petruccelli added Maryland. The office will be led by in that he “looks forward to seizing this Equity Loans’ newest branch manager, new and exciting opportunity by tap- Carlos Martinez, a 12-year veteran of ping into an entirely new market seg- the industry. Prior to joining Equity ment and continuing to expand our Loans, Martinez was a branch manager community outreach.” He believes that and mortgage banker for New America this achievement will help foster Financial. Additionally, Martinez previgrowth, expansion, and prosperity for ously served as a branch manager and mortgage banker for Empire Financial Maverick in 2014. Maverick Funding is currently in the Services and served as a loan officer for process of actively recruiting the best Apex Funding. Martinez is fluent in mortgage professionals that the indus- three languages and earned a bachetry has to offer for its up and coming lor’s degree in business administration New York branch or Wholesale Division. from Montgomery College. “I am thrilled to join Equity Loans They are looking for individuals who adhere to their winning formula of because it is clear that the company has experience, unsurpassed knowledge, a solid executive team that is willing to excellent leadership capabilities and invest in talent and give Equity Loans’ offices and employees the support they stellar customer service skills. need to grow the business,” said Martinez. “Rockville is an ideal market Carrington Holding for Equity Loans to operate in because Acquires Scottish of its close proximity to Washington, Mortgage Brokerage D.C. as well as Northern Virginia, and not only do these markets have varying home prices, but they reflect the diverCarrington Holding Company LLC has sity of today’s borrower landscape.” “This new office supports Equity announced its entry into the United Kingdom with the purchase of Clear Loans’ mission of continued growth and Financial Solutions Limited (CFSL), a res- finding like-minded professionals who idential mortgage brokerage firm in are committed to making homeownerScotland. Carrington will re-brand and ship a reality for a wide range of boroperate the company under the name rowers,” said Kunjan “KP” Patel, CEO of Equity Loans. “Carlos’ solid background Carrington Mortgage UK Limited. Carrington plans to capitalize on its in the mortgage industry expands our proven competencies in the mortgage capabilities to serve today’s diverse lending business and leverage the exist- market and we know that he is an ing infrastructure of CFSL to build a instrumental addition to the Equity presence in many of Scotland’s larger Loans team. We look forward to serving metropolitan areas. In the immediate the Rockville community and its surfuture, the expansion plan for rounding areas.” Carrington Mortgage UK calls for adding additional offices in Scotland and estab- First American Set to lishing a centralized operations center Acquire Interthinx in that will support lead generation and $155 Million Deal mortgage processing. Longer term, Carrington plans to expand the company’s reach across the UK. “Carrington is acting on a timely busi- First American Financial Corporation ness and market opportunity in the UK has announced the signing of an agreethat allows us to actively leverage our core suite of capabilities and expand continued on page 52 also plans to increase social media interactions with staff and customers to give them more information to make educated decisions. Lastly, she will utilize inbound marketing efforts to create brand awareness and attract new business.


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M A G A Z I N E ’ S

economic commentary

SPRING THAW? ere is about the only thing I will predict. This winter is not lasting forever. It may seem like it has lasted forever, but a spring thaw will come. When it comes, we will see that many Americans will emerge from their homes with a bad case of cabin fever. What will we do when the weather is nice? Well, many will wash the salt off their cars. Others will go looking at cars, homes and furniture. Still others will start spring cleaning and see that they need to begin home improvement projects. The next question is … will they just look or will they buy? We know some will come out and spend. This will give a boost to the economy, but we don’t know how much of a lift the economy


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will experience. We do know that the winter slowdown is a temporary phenomenon, but we also know that shortterm factors can affect long-term performance. The winter lull could have a lasting effect upon growth in 2014 or if the consumer comes out roaring with our spring thaw it will be but a small speed bump in the road as opposed to a big winter pot hole. Did February’s jobs report give us a clue? It would have been easy to write off poor numbers to bad weather if we did not have two disappointing jobs reports preceding February’s release. As it turns out the number for February did not give us a clear picture. The new jobs created were 175,000 and this was slightly more than expected, but certainly not something that would make us forget December and

January. The unemployment rate rose slightly to 6.7 percent, which was slightly higher than expected, but the previous month the rate dropped by the same amount. The revision of the data from the previous two months also did not show a clear picture as the previous numbers were revised higher, but by a nominal amount. By the bond market’s reaction to the report, you would have thought that this report was smashingly good. The real interpretation is that the bond market feels that the report was just strong enough to convince the Federal Reserve Board to continue on the path of easing their purchases of Treasuries and Mortgage-Backed Securities (MBS). There may have been an idea that one more really weak employment report would have affected the Fed’s plans to

ease up on the pedal. The Fed’s Open Market Committee (FOMC) meets as this issue is going to publication but the consensus is now that the Fed will also be waiting until spring to make the determination with regard whether the winter may have affected the economy as a big vicious pothole instead of a speed bump. Like the Fed, we will have to wait for April showers to see how strong the thaw is going to be. 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 or visit


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TALES FROM THE CLOSING TABLE By Andrew Liput The 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 monthly column addresses the good, the bad and the ugly … Top industry news … mortgage origination is down 40-50 percent nationally, which is creating serious anxiety among the management at many banks and lenders. Anxiety often leads to layoffs and we are seeing much more of that these days. Those of us who have been following the industry for decades know that this is a cyclical business, and that eventually the customers come back and business picks up. Whether this will take place by the spring or summer is mere guesswork. From what I can tell, the Mortgage Bankers Association (MBA) is bullish, while many economists are riding a bear. Keep your chin up folks, things always get better!

You can’t make this stuff up! l A Tennessee title company owner was sentenced to more than four years in prison for orchestrating a straw buyer scheme and sending fraudulent mortgage documents to Chase Bank. She thought that “best practices” meant finding the best way to steal a bank’s money. l A Connecticut attorney, who was a young associate in a large law practice, pled guilty to committing mortgage fraud on 50 transactions where he acted as the closing attorney. His scheme helped conspirators cause $7 million in losses. He learned everything he knew from Al Pacino in the film “Devil’s Advocate.” l The former mayor of a town in New Jersey was indicted on multiple counts of mortgage fraud, identity theft and obstruction of justice and now faces 20 years in prison. He wanted to fill his war chest with money for a run for Congress. l An attorney out of Pennsylvania (home to Punxsutawney Phil) was sentenced in federal court to 11 years in prison following her conviction for a wide ranging mortgage fraud scheme. She was accused of conspiring with two settlement firms and a mortgage lender to commit fraud and now faces 11 years in prison. In her case, the groundhog definitely saw his shadow! l An Alabama man was convicted in a $15 million mortgage fraud scheme. During the investigation, it was learned that not only did he orchestrate the massive fraud with the assistance of several professionals, he also contacted another individual to kill the straw buyer! Testimony reflected that the “Hitman for Hire” lured the straw buyer to a wooded area and shot him multiple times. Fortunately, the victim survived the shooting. No need for Adrian Monk to figure this one out. Regulatory updates … the Consumer Financial Protection Bureau (CFPB) recently closed a public comment period where consumer input was solicited about the mortgage closing experience. You can read the comments at The Bureau received thousands of comments as part of its ongoing efforts to examine more ways to improve the closing process for borrowers and protect them, their assets and their private information from exploitation and harm. It is expected that the CFPB will be issuing more detailed guidelines for lenders and banks surrounding closing table safeguards in the near future. On the lighter side … two women were walking through the woods when a frog called out to them and said, “Help me, ladies! I am a real estate attorney who, through a curse, has been transformed into a frog. If one of you will kiss me, I’ll be returned to my former state!” One woman took out her purse, grabbed the frog, and stuffed it inside her handbag. The other woman said, “Didn’t you hear him? If you kiss him, he’ll turn into a real estate attorney!” The second woman replied, “Sure, but these days a talking frog is worth more than a real estate attorney!” Andrew Liput has been a corporate, real estate and banking attorney for more than 25 years He is the founder, chief executive officer and president of Secure Settlements Inc., the first data intelligence and risk analytics firm to offer specialized vendor management services addressing settlement agent risk to mortgage lenders and banks nationwide. He can be reached by e-mail at

ATR, QM and the Risk of Helping Consumers With Credit Issues “With QM and ATR enforced, lenders must now take all precautions to be sure that they are writing quality, transparent and performing loans.” By Chad Kusner s an owner of a credit service organization since 2007, I have focused my efforts on serving the mortgage and real estate industries. After 10 years as an originator, I recognized the opportunity to bring legitimate credit repair services to an underserved industry and ethical care to over deceived consumers. As I write this, our company has served more than 9,000 clients and continues to grow. As we move into a new era in mortgage lending, there is more regulation and oversight than ever before. The thought of taking DNA samples for applicants does not seem far-fetched any longer. The new qualified mortgage (QM) and ability-to-repay (ATR) rules not only restrict the criteria of new loans, they increase the potential liability of the originating lender for loans that do not meet QM criteria. With the increase in compliance, the question of what to do with consumers who have challenged or poor credit has moved to the forefront. In the past, there was an indifference to credit repair. Some saw the value in having a good source for referring their clients to credit repair. Some loan officers referred clients as a polite way to turn them down and others saw little or no use for credit repair at all. With QM and ATR enforced, lenders must now take all precautions to be sure that they are writing quality, transparent and performing loans. My organization has seen a wide range of reactions in regards to protocols on using credit repair organizations. Some lenders have sent us e-mails thanking us for our great work and optimism for a productive year. Some companies have modified their meth-


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ods of referring clients to us. A few lenders have placed moratoriums on referring any applicant for credit services. In the most extreme case, I spoke to a lender that banned the use of any credit simulation tools at all, even the ones provided by their credit reporting reseller like. I think it is important that before making any decision on what to do with the credit repair conundrum, you consider the following: l What percentage of your new opportunities have credit issues? l Have you researched the range of credit repair services to determine if there is actual value? l What percentage of your applicants are purchase clients? l What percentage of your applicants are interested in rent to own and land contracts? l Are you looking to differentiate yourself with your network of real estate agents and provide additional value? l How educated is your staff on credit reporting and consumer law? l How much time do you want your originators spending on applicants who cannot qualify at initial application? When I was originating, our average cost per closed loan was $850. Today, some of our clients have quoted numbers topping $1,700 per closed unit. With increasing costs and profits being limited, it is crucial to maximize every qualified opportunity. The reality is that credit repair is not something to be scared of in the world of QM. In fact, the right CRO partner can be an important resource to any lender if they operate in a manner that is fitting and compliant to all guidelines. I strongly recommend interviewing up to four credit repair companies. Find a

partner that you are confident will prove themselves to be an asset to your organization. By using the following tips, you can be sure that the applicants you refer come back as strong performing closeable transactions and receive ethical treatment during the process: 1. First and foremost, are they compliant with the Credit Repair Organizations Act (CROA)? 2. Are they members of National Association of Credit Services Organizations (NACSO), the trade association for the credit repair industry? 3. Are they brick and mortar or do they work from their home? 4. What are their credentials and what qualifies them to be a Credit Repair Organization (CRO)? 5. What is their prescreen process? How do they determine if applicants need repair and do they have standards by which they would turn down a file? 6. What is their repair process and or method? 7. Do they process all of their own work or do they outsource their disputing? 8. How will you know when a client is ready to reapply for their loan? 9. What consumer protections do they provide their clients (warranty or guarantee)? Carefully selecting the right credit services partner is critical to mitigating the risks involved with utilizing credit repair. We must be mindful that there are still bad actors out there. By having a strong reputable credit servicer, you can accomplish multiple goals. First, you can increase your applicant to closed loan ratio. This reduces cost per conversion and increases profitability. Qualified CROs will only enroll those who have been through an economic event and are not currently in financial distress.

Bankruptcy, loss of job, divorce and medical events can wreak havoc to the most responsible consumer’s credit report. From a relationship perspective, you can provide added value to your real estate agent networks. The right CRO can help bolster the services you offer and provide a conduit of credit information to them. Redirecting credit questions to your CRO partner saves you time and allows you to focus on new transactions. This most definitely will increase the number of your referrals. Also, considering the complexity of credit reporting and consumer law. Your originators can quickly find their time monopolized by researching information, chasing documentation and writing letters. This redirects the time and attention needed to stay focused on new origination. As a loan officer of 10 years and CRO owner for seven, I still know only enough to be dangerous. I leave the heavy lifting to the experts in my organization. Last, what you may not know is that the credit repair industry itself is evolving. The once fraud ridden “letter jamming scam” is quickly become a consumer advocacy focused service that is proving invaluable to its agents the consumers that use the services. As we embark on this new era of mortgage lending, I hope that I have given some food for thought on the credit repair enigma. We look forward to facing the challenges together, now and in the future. Chad Kusner is president of Credit Repair Resources LLC. Chad is an accredited by the State of Ohio Department of Commerce and Ohio Supreme Court as a credit educator. Chad is also an Executive Director of NACSO, the National Association of Credit Services Organizations. He may be reached by email at


n National Mortgage Professional Magazine n MARCH 2014

Regulatory Compl Eight Steps Assess the level of retail and/or wholesale originated (broker or correspondent) mortgage loans relative to overall production. Significant increases or a disproportionate percentage can present the originator with substantial credit, pricing, recourse, and liquidity risk.

Determine whether the company has sufficient policies, procedures and staff to comply with requirements related to the origination of mortgage loans set forth in federal law, including RESPA (Regulation X) and TILA (Regulation Z), state law and investor requirements. The company should pay particular attention to the assessment of consumers’ ability to repay the loan, appraisal requirements, loan originator registration and licensing obligations, loan originator compensation limitations and disclosure requirements.

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Review the number and nature of quality control (QC), audit and consumer compliance findings. Originators should ensure that consumers have clear and balanced information about the menu of products being offered by the company. Failure to do so may be in violation of federal and state laws and regulations.

Assess the volume of nonconforming, sub-prime, AltA, or non-traditional mortgage loans originated by the originator and by the industry. The company should have a robust mortgage origination process (i.e., processing and underwriting) and several funding options to avoid potential liquidity issues. Rapid increases in such loans may signal a significant buildup of credit, operational, and compliance risks within the company and across the system.

Eight Steps

Review the company’s strategy to originate for the portfolio versus originating for sale, and determine the extent to which mortgage loans originated for sale are transferred to the portfolio. Portfolio increases beyond strategic plans may be representative of systemic or staffing issues in the origination process. Significant variations in standards used to underwrite loans for sale versus loans for the portfolio may be cause for concern.

to Assessing the Risks in Loan Production Determine whether the originator has high or an increasing level of policy exceptions. The pressure to acquire assets and achieve revenue targets may be driving the company to ignore characteristics that have been proven to cause higher levels of default and repurchase requests.

Determine whether the originator has a high level of missing documents on closed loans. High volumes and poorly defined prefunding review processes can lead to high levels of rejections or repurchase requests.

Determine whether the company is loosening underwriting standards without other compensating factors and adequate funding sources. Excessive underwriting flexibility without investor or senior management approval is likely to prove harmful to the company at different levels.

By Jonathan Foxx


he Consumer Financial Protection Bureau (CFPB) urges the importance of risk assessments. Indeed, its own risk assessment process is designed to evaluate on a consistent basis the extent of risk to consumers arising from the activities of a particular supervised entity and to identify the sources of that risk. In this article, I will provide a set of guidelines to assess certain risks associated with loan production.

liance Outlook to the Risk Assessment of Loan Production “Risk to consumers” is a key phrase used by the Bureau for the purpose of assessing risk. That is, risk assessments must be directed at determining the potential for consumers to suffer economic loss or other legally-cognizable injury as a result of a violation of federal consumer financial law.1 In order to determine the risk to consumers, a proper Risk Assessment should consider the interaction of two broad sets of factors: 1. The inherent risks in a particular line of business or the entity as a whole, and 2. The quality of controls implemented by the entity to manage and mitigate those risks. A Risk Assessment is actually undertaken by the CFPB during its supervision planning process to set priorities and focus examination and supervision activities. Inherent risks include factors that

increase the potential for unfair, deceptive or abusive acts or practices (UDAAP), for discrimination (i.e., fair lending), or for violations of other Federal consumer financial laws. It also includes factors that increase the compliance management challenges of a business and thereby increase the risk of such violations. With regards to the quality of risk controls, various factors are considered, including those factors relating to both managing and mitigating specific, inherent risks as well as the strength of an entity’s overall system of compliance management. The eight steps to the left can help a residential mortgage lender and originator to conduct risk assessments of individual lines of loan production.2 The risk assessment is not a determination of whether a violation of law exists; however, it is foundational in disclosing strengths and weaknesses in the loan flow process.3 The eight factors to the left bear on

inherent risk and relevant risk controls involving loan production. The CFPB’s examiners will conduct their own risk assessment and rate each relevant factor (i.e., low, moderate, or high inherent risk; strong, adequate, or weak risk controls and mitigation), and they will comment briefly on the basis for each rating and the issues to consider during the examination. These factors involving loan production, and other facets of a company (i.e., management and supervision, internal and external audits, information technology, secondary marketing, servicing, mortgage servicing asset, and so forth), factor into the ratings, taken as a whole, which result in a Risk Summary. The Risk Summary is the CFPB’s conclusion about whether the overall risk to consumers is low, moderate, or high. Furthermore, the Risk Summary also includes a judgment about the expected change in the overall risk (decreasing, increasing, or stable/unchanged), and when that

direction last changed. Finally, the Risk Summary is then included in the Examination Report issued by the Bureau. Jonathan Foxx is president and managing director of Lenders Compliance Group and Brokers Compliance Group, mortgage risk management firms devoted to providing regulatory compliance advice and counsel to the mortgage industry. He may be contacted at (516) 442-3456, by e-mail at, or visit or

Footnotes 1—Supervision and Examination Manual, Consumer Risk Assessment, V.2 (October 2012), Consumer Financial Protection Bureau. 2—Assessments of individual lines of business in large complex entities may be considered together to reach conclusions about the entity as a whole. 3—Mortgage Banking, Examination Procedures, pp. 92-93, Office of the Comptroller of the Currency, February 2014.

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n National Mortgage Professional Magazine n MARCH 2014

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For Lead

By Phil Hall eter Drucker once commented that the “Aim of marketing is to know and understand the customer so well, the product or service fits him and sells itself.” But even a business leader like Drucker might be perplexed when it comes to using marketing strategies for lead generation in the current mortgage world. After all, the surplus variety of marketing concepts coupled with the distinctive challenges facing housing market has created a truly unique environment where it often seems difficult to reach potential leads. While some mortgage marketing experts highlight the potential of evolving digital strategies, in some ways it appears that some old school marketing strategies are still proving their worth in driving lead generation. For Doug Walker, chief marketing officer at Brentwood, Tenn.-based Churchill Mortgage, a significant tool for lead generation is also one of the oldest marketing formats in use today. “One thing very interesting for us has been billboards,” Walker said. “This is a big surprise. We look at billboards as a brand name recognition vehicle. While we have definitely connected using billboards with larger markets, it also works in small markets if a loan officer has name recognition, which we put on the billboard. We’ve had people walking in off the street to our offices because of this old media approach.” The local approach is a key element for success, according to Bob Rubin, managing director of The Business Loan Connection LLC, based in Southfield, Mich. Rubin emphasizes the importance of a branch presence in a local market as a means of connecting with potential borrowers. “A lot of branches who have strong relations with real estate offices,” Rubin said. “It is important to get branch


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managers to engage their people with their communities.” Rubin notes that although some major financial services companies are closing branches across the country, their physical withdrawal from neighborhoods will benefit the companies that still have faith in the brick-andmortar retail approach. “Someone will get the managers [in the closed branches] who are key to setting up relations,” Rubin said. “They will be hired. While some people are shedding assets and opportunities, others are picking them up.” Joseph Semrani, assistant vice president/sales manager at M&T Bank-West Region Mortgage Division, is also a strong believer in the value of old-fashioned person-to-person communications. “We call ‘handshake marketing’– offering something of value for every closed deal,” said Semrani. “I ask myself: how can I approach Realtors with something of value? How can I be part of reaching his goal and how can I bring him in with all of my direct-toconsumer initiatives? By doing this, I am giving him something of value, not just seeking his business.” Semrani also recommends that with depository settings, branch personnel should be primary players in identifying potential leads. “We offer a variety of programs involving cross-selling opportunities,” added Semrani. “We always need to be proactive in our marketing and not watch as people reach elsewhere for products.” Another important approach for building person-to-person connections has been seminars. Heidi Frigano, executive vice president of marketing and business development at United Northern Mortgage Bankers Ltd. in Levittown, N.Y., relies on seminars to acquaint potential borrowers with her company. “Homebuying seminars generate

large amounts of leads,” said Frigano. “They provide something of value– attendees tend to want to do business with you. We host seminars four times a month; we’re licensed in 22 states and turnout depends on the areas where we are based. A great turnout is 50, and the average is between 20 and 30.”

and deliver a compelling message. For example, some members of our cooperative found success targeting radio messages at the third shift–they were able to get lots of radio time by buying overnight. Also, it is possible to take advantage of military base radio stations–they serve a captive audience that is incredibly mobile.”

In the mailbox, on the air Another seemingly old school marketing tactic that is still being successfully used is direct mail marketing. Semrani looks at this approach from an “if-itain’t-broke-don’t-fix-it” spectrum. “Direct mail has been going on forever,” said Semrani. “It’s proven and easy to measure.” Semrani acknowledges that direct mail marketing has higher costs than email marketing. Nonetheless, his company keeps its expenses down by handling all aspects of the direct mail campaigns in-house, with all creative and production input handled by the internal marketing operations. And while postal rates have risen recently, this has not been disruptive to M&T Bank’s mailings. “We share the costs across different cost centers,” Semrani said. “For postage on anything over 500 pieces, we get a significant discount. And with everything in our direct mail campaigns measuring the same size, we can bulk them and send them out together to maximize the discount we get on mailings.” Also, gaining a thumbs-up from industry marketing leaders is the oldest of the broadcast media formats: Radio. “Radio is one of the strongest pieces of the marketing puzzle,” said Kristi Kovalak, director of marketing at St. Louis-based Lenders One. “The cost to produce a radio spot is significantly lower than the amount to produce a TV spot–and it gives a full 60 seconds to deliver the message. Radio is still less fragmented than TV and is easier for you to figure out the target audience

The online challenge While older marketing strategies have yet to lose supporters, the newer school of online digital marketing is seen by some in the industry as a work in progress. “I think lenders have the knack of it– in theory,” said Kovalak. “It is hard to stay relevant in social media during the five years that the average consumer is not in the market [for a house].” Frigano notes that although many people may associate online marketing with attracting younger borrowers, online lead generation is a successful tool in attracting the older borrowers seeking out reverse mortgages. “The industry is trending on the reverse side for a want-based borrower,” Frigano explained. “On the reverse side, you can generate leads with more of a Web presence, using video to attract clients. Two years ago, using the Internet to generate reverse leads was null and void. Now, your 62-year-olds are more Net savvy.” Frigano adds that it is crucial not to align online marketing into a blatant advertisement. “Your campaign should be storybased and engage people,” she continued. “It needs to be more educational—not so much ‘Get Your Refi Here’— that’s advertising. From my own view, if you’re selling me, I tend to be turned off.” Walker notes that Churchill Mortgage is currently testing native advertising via Facebook, and that initial results have been strong. “These have the highest potential to reach

d Generation, Old School Marketing Scores your audience,” he said. However, Walker also notes that the nature of online marketing is changing as computer users move away from desktop machinery in favor of handheld devices. “Mobile is the way to be riding,” said Walker. “Sixty percent of Americans over the age of 12 have a smartphone, and their primary use of the smartphone is texting. Fifty percent of all email is being opened on mobile devices. Of course, people don’t want to fill out loan applications on mobile phones—the majority of shoppers are on iPads and tablets. And mobile users have shorter attention spans, while the best content for them tends to be more visual. We need to be meeting them where they are.” Leah Marsh, marketing director at Milwaukee-based GSF Mortgage, observes that online feedback plays an extremely important role in building lead generation. “We work with testimonial-based marketing,” said Marsh. “We’ve built a testimonial base for loan officer transactions and are seeing ROI based on testimonials. We already have a couple hundred five-star reviews on Zillow and very positive Better Business Bureau reviews.”

keting at United Wholesale Mortgage (UWM), the wholesale arm of Troy, Mich.-based United Shore Financial Services (USFS), notes that her company provides free tools to its clients to help them achieve their marketing-drives lead generation goals. “We have a marketing portal that has a huge variety of fliers that can be customized within second,” Lawson said. “Not only can our clients post these on social media, they can print them and

post them in local newspapers. At least half of our clients are using this—a lot of brokers do not have marketing resources and probably do not have the budget for lead generation.” Last month, Lawson’s company introduced UWM Track, which assists brokers in providing current status on loans to real estate agents, including when it was submitted to underwriting, conditions reviewed and the closing schedule. To provide assistance and guid-

ance, UWM also hosts Webinars on customizable marketing solutions for lead generation. “We see ourselves as educators—we truly partner,” Lawson said. “We hope that with quick training, brokers can pick this information up and use it.” Phil Hall is senior editor of National Mortgage Professional Magazine. He may be reached by e-mail at


The need to know

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Why the pursuit of leads is clearly important, the ultimate goal is to see the leads become customers. “Anyone can buy a lead,” said Angel Bell, vice president at Parsippany, N.J.based eLEND. “The billion dollar question remains: How can you use that lead to make money?” Bell states that marketing strategies are most successful when they focus on the human element at the core of the pursuit. “You have to really explore and understand the psychographic and demographic segmentation of leveraging lead generation before you can successfully influence behavioral decisions that turn a lead into sustainable revenue,” Bell continued. “We believe it’s crucial to invest in quality human capital that know how to build and leverage lead generation strategies—that’s truly what breeds success and proliferates business profitability. Another strategy that has served us well is to maintain flexibility. We set up our marketing game plan, as well as our internal systems, so that we are always able to adjust quickly to changes in the marketplace, whether that means reaching our customers through a new platform, or putting more resources behind a product that is gaining in popularity.” It also needs to be stressed that not everyone is a marketing expert. Laura Lawson, senior vice president of mar-

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Do You Have a Strategy to Generate Purchase Loans? Discover the new lead source that was always there ... Renters! By Tom Ward As we get through the first quarter of 2014, I think it’s pretty clear refinances are not coming back anytime soon. Over the last seven years, I’ve consulted countless mortgage companies, including individual branches, specifically on profitability. What I’m seeing today is that some companies are trying to cut their expenses in order to restore profitability. But we all know what the real issue is … it’s getting more loans. The challenge becomes how do we do it and where do we start? It was inevitable that the refinance model was going to end, and as I’ve been saying for years one of two things will happen: We will refinance the world at 3.5 percent or rates rise and it doesn’t make any sense for the homeowner to refinance. Let’s face it … for the last 10 years, the loan officer hasn’t had to prospect for new business. Why? Because all they had to do was manage their existing database—that was enough. Things like taking people to a lower rate, getting cash out due to equity rising to alltime highs, or moving their clients into bigger homes. Well … times have changed. It has come to the point where mortgage professionals need to have a solid lead acquisition process in place. If you’re going to be spending your time and money to develop new business, I think it’s important to be strategic. I’ve defined four categories of purchase business and their potential for lead acquisition:

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1. The move up or move down homebuyer: Their challenge is equity in their existing home. They’d love to move up or down, but just don’t have enough proceeds to make it happen … just yet. 2. The renter who’s had a foreclosure or short sale: They have two challenges: Not enough time has passed for them to be eligible to get a loan; and they have not done any planning to re-establish credit, save enough money, or pay off the debt they’ve accumulated. 3. The investor and second homebuyer: Investor loans tend to be very small and most are paying cash. The second homebuyer’s appetite is not as strong as it used to be. What does that leave you with? 4. The renter that has never owned a home: In my 25-plus year career, I have certainly seen some things, but the idiosyncrasies associated with this new Generation Y prospective homebuyer are … well let’s just say, different. My team and I spent nearly six months studying this renter and here’s what we discovered: l They take longer to make a decision l They don’t know who to trust l They do a lot of research, not always from the most reliable sources, and gather a tremendous amount of data before they make a decision l They change their mind with the slightest change in market conditions l They want to be homeowners (317 out of 318 renters we surveyed said they we’re going to buy a home sometime in the future) This is the only category that’s bulletproof: A lead source waiting to be harvested … the renter who has never owned a home before. They have no house to sell and no waiting period to be qualified for a mortgage. I believe creating an effective lead acquisition strategy for this particular buyer, building their plan and helping them navigate through the complex world of owning their first home, will have you well on your way to replacing those refinances. Until next month, go to for a free report and keep that path clear to discover how to develop your solid ongoing purchase lead acquisition source with renters! Tom Ward is founder of the Path2Buy Homeownership Coaching Program ( He may be reached by phone at (847) 970-4295 or e-mail


What About Those Consumers Who Fall Outside of QM? By Terry W. Clemans Just a few months into the era of qualified mortgage (QM) lending and loan origination levels are at lows last seen in 2008. Stories about consumers who seem like they should be able to qualify, but are unable to secure an approval, are on the rise. There has already been a hearing on Capitol Hill regarding the potential QM pitfalls and there are several entities looking at ways to approve more consumers without repeating previous mistakes that led to the very tight lending standards now in place. With claims of redlining, concerns about fair access to mortgage loans and disparate impact also increasing, pressure to improve the system will be coming soon. Complicating this matter are lingering problems with documenting the credit reports between borrowers who had a previous short sale, versus the borrowers who previously had an actual foreclosure. Additionally, the questions about the credit data accuracy levels typically associated with consumers on the border of credit worthiness and it becomes apparent that this is not an easy task. To accomplish this there needs to be improvement to the mortgage credit reporting process that provides an opportunity to better document the true credit risks of the non-QM consumer.

lowest allowed for the lender’s best rate; and l A greater than 25 point spread between the high and low scores

The solution comes from the mortgage credit reporting agencies: The participant in the mortgage industry best suited to document consumer credit data on a conflict free basis with regard to the outcome of the loan. Their only concern is for completeness and accuracy of the report so as to limit the legal liability they hold to both the consumer and the lender who hires them. The solution is a new report: The “QMCR–the Qualified Mortgage Credit Report” and “QMCR Score,” which would provide a deeper review of the consumer’s credit when a formula to detect credit concerns is triggered. This new report would include verifying disputed data and the inclusion of nontraditional or alternative data not currently reported to the National Credit Reporting Agencies (NCRAs). This report should be required to be built from the current tri-merged mortgage credit report, and triggered when the consumer’s specific credit history contains the following criteria:

In the current mortgage underwriting process, the middle credit score is the most important as it is used to price the loan by the lender. If that score is more than the score level predetermined by the lender at which consumers receive the best interest rate (using 720 as the score required for the best rate in this example), the lender proceeds with the current credit reporting process without change. If the middle score is less than the 720 example, and the other two credit scores not used in the pricing of the loan (the high and low of the three scores) have less than a 25 point difference between them, the lender again proceeds as before using a riskbased pricing model that is currently a standard practice in mortgage lending. When those high and low scores have more than a 25 point spread; however, the lender would be required to add the proposed QMCR to the current process. This change only occurs when the consumer’s specific credit situation warrants an additional credit review, which can be layered in as needed by the specific risks. After perpetration of the QMCR and the QMCR Score (approximately three business days) the loan could be sent back through the automated underwriting system for consideration of inclusion as a “qualified” loan for approval. It is imperative for both the safety of the lending institution and the mortgage applicant that this application is not underwritten with questionable credit data or potential missing accounts that could skew debt to income ratios. Many features of the QMCR would be similar to the time tested and proven Residential Mortgage Credit Report (RMCR) requirements that were drafted, and agreed to by Fannie, Freddie, HUD, FHA and VA as the only acceptable mortgage credit documentation prior to automated underwriting. The RMCR standards are still claimed to produce the best quality credit reports, but require manual underwriting by the GSEs. The new QMCR and Score would allow for automated underwriting and include a summary of the derogatory data on the consumer report for an added value of both accuracy and financial literacy. The summary would also include a statement about the disclo-

l A middle credit score less than the

continued on page 65

A proposed solution


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What Plans of Action Will Your Company Implement to

Foster Growth? By Mike Lewis



very business must deal with unforeseen events in the market. These can either create opportunities—new products, services or markets to be developed— or present threats to your business, including political regulations that eliminate services or add costs, the expansion of existing competitors, or the emergence of new competitors offering lower rates. The success of your company depends upon your ability to keep up with these events, and a well composed business plan, with appropriate action plans, can provide the means to that end. You can make adjustments as needed, modifying your current actions or adopting new ones to better achieve your objectives.

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The value of action plans Action plans are the muscles of a strategic plan—essentially, where the rubber meets the road. After assessing your capabilities and formulating your goals, you should familiarize yourself with the components of a good action plan: l Statement of Condition (What): Effectively, this is a statement and clarification of the problem that needs to be addressed. Examples include, “10 percent market share,” “60/40 ratio between refinance and new sale mortgage,” and “three main customers (channels) provide 80 percent of revenues.” l Rationale for the Action (Why): A continuation of the above, the rationale details why the condition is a problem. An example might be, “the projected market will see a drastic decline in refinance mortgage so that maintaining the 60/40 ratio misaligns assets with need.” l Description of the Action (How): Examples include the reassignment and training of existing employees to exploit the new sale market versus the refinance market. It might also include recruitment of experienced personnel from competitors, even a specific “star.” l Identity of the Responsible Party (Who): Specific employees or

departments should be identified to implement the action with appropriate authority and defined reporting responsibilities. l Measurable Objective (How Many): Some results are binary—the “star performer” was successfully hired or not—while others are measured in degrees, such as “15 percent annual revenue growth,” “average mortgage size of $250,000,” or “addition of two new major customers (channels).” l Date to be Accomplished (When): Action plans need deadlines in order to have teeth and convey importance to those responsible for their implementation. The care you take to define an action plan should be directly proportionate to the importance of the action being taken. If accomplishing your prospective action plan cannot add significantly to your bottom line, protect or increase your market share, enhance your customers’ experience, inspire your employees, or be critical to the implementation of other action plans, it is not worth the time and effort to develop. Depending upon the size of your company, you may need to limit the number of action plans you intend to put into place and whether those plans should be implemented simultaneously are sequentially. Action plans are not strategies, nor are they policies and procedures. They are invaluable tools by which a manager directs work, assigns resources, and measures results.

A look back to 2013 results While reviewing each of the following areas in order to better position your company for the new year, be sure to consider external factors that could affect your marketplace, including events that may throw it into chaos and opportunities it may present to grow your business.

For example, did you anticipate the major decline in re-financing activities and adjust your efforts to the new sales market? Were any of your marketing tactics especially successful? What would you have done differently if the situation were to arise again? Understanding where the bulk of your revenues originated in 2013 and the factors which stimulated or harmed your business is critical if you are to continue to grow revenue. Consider putting new plans into place for 2014 to reflect your expectations for the mortgage market in general. For example, if you expect overall revenues to decline, you may want to reconfigure your staff to reflect that. On the other hand, a decline in the market may be an opportunity for you to grow your business by being more aggressive. Keep in mind that your competitors are probably experiencing similar drops in revenue, potentially giving you an opportunity to capture greater market share either through acquisitions or launching a new, aggressive marketing and sales effort. And don’t forget to consider what you need to do to fend off an aggressive move by those competitors. If the majority of your business came from a few major customers, you should come up with ways to strengthen your relationships in the hopes of preventing a competitor’s camel from getting its nose under your tent. There is no single or best strategy, no cookie-cutter solution, to increase or protect revenues. Your plans should reflect the market and competitive conditions you face every day. Use this time early in the year to realign your assets to your best advantage, whether that means motivating your staff with a new incentive program or eliminating a particular service that failed to meet expectations in 2013.



Did 2013 revenues meet your expectations? If so, to what do you attribute your success? Did the various segments of your business perform as planned?

The objective of every business is to increase long-

term profitability. This can be achieved by either raising revenues while maintaining your current level of expenses, or by cutting expenses even though revenues remain level. The wisest move is to pursue both efforts simultaneously. When you review your expenses, start with those which represent the greatest percentages of your budget as well as any that have increased beyond expectations. For example, rent and utilities may have doubled because you moved into new space, which is under-

standable. However, office supplies may have tripled even though revenues were up 30 percent—this requires investigation. In many mortgage companies, personnel is typically the greatest expense. Leverage your people by either simplifying their work processes or providing technological help in the form of automation. Which option you choose should depend upon your existing customers’ needs, regulatory requirements, and the capacity and capabilities of your employees. Process improvement should be an ongoing exercise in every company. The people who do the work are the best source of ideas for making things more efficient and effective since they are the primary beneficiaries of any improvements. Scrutinizing your existing operation for inefficiencies—without hurting your customer experience—should be an ongoing process. Your findings should be the basis for the action plans you implement in this and the following years.

Customer satisfaction

Opportunities and threats

Having closed the books on the past year, now is the time to analyze and compare your results with the plans you prepared at the beginning of 2013. Wherever projections and results are misaligned, investigate the potential causes of the discrepancies. They could come from poor planning, poor implementation, unanticipated consequences, or a combination of all three factors. Delay making new action plans until you are certain you understand the cause of any issues with those of the previous year - reacting without adequate thought is more likely to compound problems than solve them. Remember the components of an action plan—what, why, how, who, how many, and when—as you develop new ones or revise existing ones. You may abandon some plans as ineffective, amend others to be more relevant, or create new ones where the need exists. Document, communicate, and implement each plan as appropriate, and during the coming year monitor your progress through constant scrutiny of your designated performance measures.

Final thoughts In the past five years, mortgage markets have endured substantial turmoil, meaning industry participants have been unusually challenged. Developing and managing by way of intelligently conceived action plans can improve results and protect your company from unexpected events. With such plans, you can go into the future confident that you have considered most of the factors that may affect your business, paving the way for growth in 2014 and beyond. What have your results been with action plans in the past? Mike Lewis is a retired business executive and personal finance columnist. He may be reached by e-mail at


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During the past 12 months, the business environment has changed, both providing new opportunities for growth and presenting new threats. As the result of chaos in the marketplace, many of your competitors may be revising their strategies. If one of them is forced to close its doors, you should consider increasing your market share by either purchasing the business at a discounted price or developing a marketing strategy aimed at those customers who no longer have a home. At the same time, it’s important to review those competitors who did exceptionally well during the last market cycle. In some cases, they may have introduced new marketing schemes or services that are especially attractive to potential customers. If their programs are worthwhile and can be adapted to your business, you would be wise to pursue a similar strategy. Generally speaking, any strategy which provides a competitive advantage to one business can

Revise strategy and document action plans for 2014

The key to every company’s success is day-in, day-out customer satisfaction. If you fail to meet your customers’ expectations, your business is sure to decline. Reviewing your performance requires defining specific metrics that can help you evaluate it, as well as understanding what your customers expect. Some companies regularly survey their patrons, while others rely on factual evidence such as repeat business percentage, error rates, customer response times, and customer complaints. All of these metrics are valid. Whatever your measure, the beginning of the year is the optimum time to review and implement any changes necessary to ensure your customers receive the best service possible from your company.

become a competitive necessity for others in the industry—in other words, it is usually better to lead than to follow. Threats, on the other hand, may appear in the form of new companies or the revitalization of existing competitors. Any time market share has changed significantly during the year, you should make every effort to understand the basis for the change. Business success is measured over a number of financial cycles, during which change is the only consistent factor. Your ability to develop a strong, growing company is directly dependent upon your ability to analyze the marketplace and identify those trends most likely to impact your industry and your company. With that knowledge, you can implement your own plans to prevent loss and, hopefully, gain advantage.

A Non-Bank Lender’s View on CFPB Examinations


MARCH 2014 n National Mortgage Professional Magazine n

By H. Burton Embry


f you are like me, you have read many articles written by attorneys regarding how to manage and prepare for a Consumer Financial Protection Bureau (CFPB) examination. However, the majority of these articles are written by outside counsel who don’t actually have to live with the examination or its results as you and I do. I would like to share with you some perspective from having been through a CFPB examination and provide you with some ideas to help with preparation and share some items to consider along the way. Those of you who know me are aware that I have spoken at numerous conferences and meetings around the country regarding CFPB examinations (as well as state examinations). I have discovered that significant misinformation exists about CFPB examinations. My company was among the initial group of companies to experience a CFPB examination at a time when very little was known about these exams and we didn’t know what to expect. While we are frequently examined at the state level, (and we receive examinations from HUD, VA, FHLMC, etc.), until now, non-bank mortgage lenders have not experienced examinations at the depth and level of a CFPB examination. States such as California, Washington,

Massachusetts, Illinois and North Carolina do a very thorough and detailed examination; however, their examinations are not as thorough as a CFPB examination. The CFPB examination is conducted based on your business model. Companies like mine who originate loans solely through a retail channel and service some loans will receive a different examination than a mortgage lender who conducts wholesale business and purchases loans through its correspondent channel. If you service loans, the CFPB will look closely at your servicing operation. Do you have affiliates? Expect the CFPB to look at them as well. The CFPB will do a thorough examination of all of your business activities. Having a very knowledgeable and experienced compliance staff is a must for a CFPB examination. Don’t expect to do well without it. Having an operations manager who also does compliance is not going to be satisfactory with the CFPB. You should know that the CFPB does their homework on your company before they visit your office. They will have analyzed your company’s HMDA data for the last two reportable years; reviewed all of the complaints on the CFPB portal and spoken with state regulators in the states where you are licensed. They may also obtain copies of your company’s most recent state examinations, invite the states to join them on the examination and share the results. The above information might not be

new for most of you considering how long the CFPB has been doing their examinations. However, there are some things that only someone who has been through an exam can share based on firsthand experience. First of all, don’t panic or freak out when you get a CFPB exam notification. There is no need to make like Paul Revere and run around the office yelling: “The CFPB is coming! The CFPB is coming!” You will likely find the CFPB examiners to be professional and down to earth. Their goal is not to find fault with your company. If you expect them to have a “gotcha” attitude, you will be disappointed. In our case, after we received notification that we had won the lottery and were chosen to receive a CFPB examination, we had a meeting with the CFPB Regional Director and the Supervisory Examiner/Field Manager in our corporate office to discuss the examination process. They did a great job of letting us know what to expect during the examination and that this was not a witch hunt of any kind and that they were not looking to put us out of business. They merely wanted to learn more about non-bank mortgage lenders. They also put us at ease when we inquired about having an attorney present during the process. They encouraged us to be transparent and not hide behind our attorneys. While acknowledging that this was ultimately our decision, they informed us that they would not have an attorney on-

site initially and if that were to change, they would tell us in advance. They were true to their word and I believe that our decision not to have an attorney on-site was the right one for us. However, our attorney was on standby just in case. We really appreciated this visit. After the visit, our lead examiner, called the “examiner-in-charge or EIC, took over the process. Being somewhat local to us, she stopped by to meet us prior to the examination, look at our facility and give us some information about what she needed and what to expect during the examination. Once on-site, we found the examiners were very accommodating. All of the examiners encouraged us to ask questions and actively worked to alleviate our concerns. They assured us that the CFPB was not looking to put us out of business. In case you are not fortunate enough to get a pre-examination visit, here are a few things you can do to help yourself and the examiners. Have at least one “point” person, maybe two, based on the model and size of your business and the scope of the examination. Make sure the examiners know how to get in touch with each point person if they need more information or want to set up a meeting. Split the areas of responsibility if you have more than one point person. You may also find the examiners have a tendency to walk around the office and talk to people. Meet with your

employees prior to the examination to review how they should conduct themselves and what to do if an examiner asks questions. That doesn’t mean that you don’t cooperate with the examiners or that employees should not be congenial, but you don’t want a careless employee talking about things that they don’t fully understand or trying to impress the examiners. Give the examiners plenty of room to work and as much privacy as possible. A large conference room works the best and you may need more than one. The conference room should have Internet connectivity and multiple phones. The examiners will tell you their specific needs. If possible, put them close to your Compliance Department or Legal Department—not next to your Underwriting or Sales Department. Try not to be intimidated by having 10 or more examiners in your office or having to deal with multiple requests for information at the same time. The EIC will manage the examiners and help them stay on track. You will need to work closely with the EIC to ensure they have the information they need, schedule meetings, etc. Make sure to introduce the EIC to your executive management team before the examination starts. Have a “kick-off” meeting so that the EIC and examiners can learn about your company and ask questions. This gives you the opportunity to put your company in the best light and explain your business model. Also, give

them a tour of your facility and discuss things like local restaurants and other amenities as most of the examiners will be visiting from out of town. One crucial thing that I learned is that administering the examination is more than a full-time job. While the examiners are on-site, the stress level can be very high. You must plan for other people to cover your normal job duties. Depending on the scope of the examination and size of the examination team, you will find yourself continually setting up and attending meetings, requesting additional information from other departments and clarifying information you just provided. During our exam, our director of compliance and I spent most of our normal business hours with the examiners and then used the evenings and weekends to catch up on our normal jobs. Adding to the fun, we had a state examination right in the middle of our CFPB examination. The state examiners actually worked from a nearby hotel because we were out of space. Talk about juggling multiple balls at one time! But the fact is, your business has to keep moving and you have to keep making and/or servicing loans while the examination is going on. This is the one area where I personally felt I did not adequately prepare. It was not the examiners fault. I wholly underestimated the amount of time we would spend with the examiners. I also recommend that you put your examination questionnaire information in a place where the examiners can easily access it electronically. They don’t want

tons of paper. Setting up electronic access will allow them to work from home and perhaps not spend as much time in your office. We set up a password protected website and arranged the content based on the order of the information requested in the CFPB’s introductory letter. This allowed us to monitor the information that was provided for each question in the letter and to monitor and review the additional information that was asked for during the examination. One question I get asked a lot at conferences and meetings is if there is a need to conduct a mock examination before the CFPB arrives. That is a difficult question to answer because it is fact dependent for each company. For example, how strong and experienced is your compliance staff? Do you have a lot of written policies and procedures? What is the culture of your organization as it relates to compliance? We did not do a mock exam but I know of some companies that did. To their credit, the CFPB has been very transparent on how they will conduct the examination and what they will review (view the CFPR Examination Manual at I am not aware of any differences in examination results that can be directly attributed to conducting mock exams or not. At this point, there may be enough information out about these examinations and how they are conducted to save you the money of doing a mock examination. However, that decision really is fact dependent on your company.

Another area where I get a lot of question is regarding the experience level of the examiners. Apparently a lot of you have heard that some of the examiners have little to no experience. In my personal experience, and based on what I have heard from others who have also had a CFPB examination, some examiners are more experienced than others. Most examination teams seem to be a mixed group when it comes to experience. That said, I give the examiners who examined us with little or no experience a lot of credit for being up front about their lack of experience and asking questions when necessary. While this contributed to the amount of time we spent with them, we were glad to answer their questions rather than having them make assumptions. You will also find that the strength and experience of your EIC will play an important role in how smoothly your examination goes, and, like examiners, some EICs are more experienced than others. I hope this information will be helpful if and when you get the call that “The CFPB is coming!” H. Burton Embry is senior vice president– enterprise risk management with Salt Lake City, Utah-based Primary Residential Mortgage Inc. (PRMI). He specializes in mortgage banking compliance and quality assurance and has more than 30 years of experience in mortgage banking compliance. He can be reached by e-mail at 51

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AllRegs Launches Real Estate Settlement Procedures Act (RESPA) Policy Manual AllRegs, the leading information provider for the mortgage industry, has released the Real Estate Settlement Procedures Act (RESPA) Policy Manual. This Policy Manual summarizes RESPA regulations and requirements for origination, as well as modified servicing requirements called for under Regulation X and the new Mortgage Servicing Rules provided for in the Dodd-Frank Act amendments. Although RESPA was originally passed by Congress in 1974, the Act continues to be modified with the latest amendments effective Jan. 10, 2014. These new rules modify and streamline existing servicing-related provisions of RESPA while implementing other provisions of Dodd-Frank addressing servicers’ obligations under RESPA. “Recent changes to RESPA requirements under the Dodd-Frank Act have increased servicer and originator responsibilities, opening up mortgage lenders to more severe penalties,” said Dan Thoms, executive vice president for AllRegs. “At AllRegs, we are always striving to help organizations improve their lending practices. Our new RESPA policy manual is designed to aid mortgage lenders in the development of policies integral to their compliance management system called for by the CFPB.” The AllRegs Real Estate Settlement Procedures Act (RESPA) Policy Manual will help mortgage professionals by doing the following:

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l Summarizing the federal regulation, covered transactions and violations under Regulation X l Defining key terms associated with the regulation l Outlining disclosure requirements of RESPA l Providing guidance for the six new servicing rules l Including an Appendix with sample formats and model disclosures required by the regulation AllRegs Policy Manuals are offered for a one-time purchase price per company. The templates are delivered in an MS Word document and can be personalized by the customer, using their company brand by performing a simple find and replace function, or customized to include their own internal policy and procedures. Additionally, AllRegs provides a variety of services to help mortgage professionals implement their new policy. Services include: Regular manual updates to follow recent policy changes, customization of manuals to match an organization’s brand and internal policies through Make It Mine, or publishing policies online in the same online database as their federal and state regulations. Additionally, the AllRegs Professional Services Team offers a comprehensive analysis of an organization’s policy manual library to ensure compliance of all the latest federal or state regulations and guidelines. These services help mortgage businesses rest assured that their policy library and business practices are ready for their next audit. For more information about AllRegs and its services, visit or contact AllRegs at (800) 848-4904, Monday through Friday, between the hours of 8:00 a.m. and 6:00 p.m. CT.


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ment with Verisk Analytics Inc. to acquire Interthinx Inc. Established in 1996, Interthinx provides solutions designed to help clients minimize risk, increase operational efficiencies, satisfy regulatory requirements, manage data verification and ensure compliance. The company is best known for FraudGUARD, its mortgage fraud analytics product. “The sweeping market and regulatory changes of the past several years have led to more demanding mortgage origination requirements,” said Dennis Gilmore, chief executive officer of First American Financial Corporation. “Our customers have expressed to us a desire for tighter integration between loan origination activities, loan quality verification processes, and title and settlement services. The purchase price is projected to be $155 million and the transaction is expected to close by March 31, 2014, subject to customary closing conditions, including certain regulatory reviews. The transaction is expected to be accretive to First American’s 2014 earnings. “We’re delighted by the opportunity to combine our expertise with that of First American, a company known for its integrity, innovation and solid commitment to the real estate community,” said Jeff Moyer, president of Interthinx.

Mortgage Network Expands With New Rhode Island Office Mortgage Network Inc. has opened a new branch office in Providence, R.I., focusing on helping borrowers throughout the Rhode Island and southeast Massachusetts region with their home financing needs, offering a full range of mortgage products, including conventional, non-conventional, government and reverse mortgage loans. “With the local real estate market on the upswing, we are very excited to be launching our first ever Rhode Island branch to help local borrowers take advantage of current home financing opportunities,” said Brian Koss, executive vice president of Mortgage Network. “We are particularly thrilled that we have Jesse leading our team. With his depth of mortgage expertise and knowledge of the local community, Mortgage Network’s future in Rhode Island looks very bright.” The new office will be led by Jesse Kenner, who has nine years of mortgage banking experience with extensive knowledge of FHA, VA, conventional and 203k mortgage loan products. Most recently, he served as a loan originator with Residential Mortgage Services serving the Providence area. Joining Kenner in the Providence branch are sales

manager Jonathan Salinger and loan officers Chris Wall, Sally Herreid and Ray Lambert. “Mortgage Network has long been known for its focus on delivering an excellent borrowing experience, so I am delighted to be coming on board,” Kenner said. “My mission is to leverage the company’s vast resources, wide range of mortgage products and competitive rates to help borrowers make the best home financing decisions possible, regardless of their particular need.”

Norcom Mortgage Opens New Massachusetts Location Norcom Mortgage has announced the grand opening of their Burlington, Mass. branch. Marc Ehrgott will be Norcom Mortgage’s branch manager at its newest Massachusetts location. Norcom CEO Phil DeFronzo said, “The addition of the Burlington branch further solidifies Norcom’s footprint in the Northeast and Marc’s outstanding dedication to the business and to his customers will represent Norcom in a powerful way.” Ehrgott has been a loan originator for almost 10 years after leaving a long career as an investment advisor at firms such as Morgan Stanley, Prudential Financial and Oppenheimer and Co. “I have empowered consumers with a higher level of understanding and expectations and feel it’s important to raise the bar of performance with a ‘service first’ mantra,” said Ehrgott.

Inlanta Mortgage Now Approved by Freddie Mac Inlanta Mortgage Inc. has been granted approval with Freddie Mac. Chartered by Congress in 1970 and commonly known as Freddie Mac, the Federal Home Loan Mortgage Corporation’s (FHLMC) mission is to provide liquidity, stability and affordability to the U.S. housing market. Approved lenders, like Inlanta Mortgage, can help people get lower housing costs and better access to home financing. “At a time when the quality of loans being originated is magnified, we were confident that Inlanta had the tools to not only meet the Freddie Mac requirements, but also has the technical expertise of our staff to provide the best experience for the consumer,” said Inlanta Mortgage Chief Operating Officer Jean Badciong. “We are looking forward to expanding on the opportunities to serve our originators and customers by leveraging the additional benefits the approval provides to Inlanta.” Freddie Mac agency approval means Inlanta can continue to broaden the

products and services offered to consumers through its professional loan origination staff. “These agency approvals are much more difficult to obtain today, so it speaks to the confidence and quality of the Inlanta platform rapidly changing mortgage origination market,” added Badciong. Inlanta Mortgage is a growing mortgage banking firm committed to quality mortgage lending, ethical operations and strong customer service. Over the past three years Inlanta has more than doubled its revenue and nearly doubled its employee base.

LRES Takes Assembly Line Approach to REO Management

Guaranteed Rate has announced that three firms recently joined the company. The transactions, structured as asset purchases, included Sun State Home Loans of Scottsdale, Ariz.; Nationwide Direct Mortgage of Carlsbad, Calif.; and Arbor Mortgage of Grand Rapids, Mich. The three firms have more than 50

Axis Appraisal Management Solutions has announced that it has entered into a letter of intent with Zaio Corporation in which Zaio would acquire Axis, subject to due diligence to be completed by April 15. Zaio provides customers in the property valuation, underwriting and lending industries with real-time access to certified appraisal reports from the company’s patented database of proactively maintained residential property valuations prepared by licensed appraisers across the U.S. “Axis’ leadership team will remain intact and continue to manage appraisal operations with the same level of unparalleled quality and customer service its industry partners have come to expect,” said Kim Perotti, executive vice president of Axis. “The Axis client base has grown dramatically to include the largest lenders and servicers, and one benefit of this transaction will be Axis’s ability to provide a deeper suite of services and products to those clients, including home inspections, evaluations, AVMs and BPOs—all through enhanced technology.” Axis is a privately held S-Corp and a national appraisal management company (AMC). It serves regional and national bankers, credit unions, attorneys, and homeowners with a highlycontinued on page 54


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Come Join Us for NAPMW’s Golden Celebration in the Emerald City! By Jill Kinsman


NAPMW began its journey 50 years ago when nine women came together to form an organization focused on the advancement of women to find careers in the field of mortgage lending and to provide its members with the highest quality of educational and networking opportunities possible for those in our industry. Since then, we have evolved as times have changed and new technologies have been put into place, however, our focus has continued to be on providing excellence in education to its members. Personal and professional development, leadership skills, mentoring, technology, marketing and other timely and industry relevant types of classes are what we provide our members so that they can continually educate themselves and help further their careers and their personal lives. Free Webinars are provided to our members on a variety of industry topics in addition to meetings and seminars held in locations all across the United States. Leadership development has made giant strides this year by providing Webinars and establishing a great online resource library for our members. There will also be both NAPMW leadership classes and general leadership training held at the National Education 53 Conference being held in Seattle in May. We hope you will take the opportunity to invest in yourself by looking at what NAPMW has to offer you and joining us at the 2014 National Education Conference in Seattle! Come and join us to celebrate 50 years of educational history and to participate in the education we have planned. Topics will include everything from social media, appraisal valuation, CFPB, FHA/VA updates, credit, customer service, financial planning, mentoring and so much more! There is an NMLS eight-hour class and the Certified Mortgage Instructor designation being offered on Wednesday, May 14. Opening Ceremonies will begin on Thursday, March 15 and the Conference will continue through Saturday, May 17 as we celebrate our history and look to the future in “Breaking New Ground” at our Installation Banquet on the evening of May 17. For more information, or to register, please visit Jill Kinsman of U.S. Bank is 2013-2014 NAPMW National President. She may be reached by phone at (206) 344-7827 or e-mail

n National Mortgage Professional Magazine n MARCH

Guaranteed Rate Announces Three New Acquisitions

Axis Appraisal Management Signs Letter of Intent With Zaio Corporation


LRES has announced its new real estate-owned (REO) operating model to increase efficiency and accommodate the influx of new clients with portfolios of assets in various stages of the foreclosure process. An assembly line operational system was developed to enable task managers to handle each stage of the life of the property from beginning to end. Previously, LRES employed the more traditional system whereby a single asset manager handled the entire servicing process. The new system added several positions to the REO department structure, including a premarketing coordinator, marketing coordinator, listing coordinator and closing coordinator. The restructured approach has allowed the department to handle additional REO inventory that facilitated 72 percent year-over-year growth. This is particularly significant considering the national decline in REO inventory. “We have enjoyed working with LRES and appreciate the attention and responsiveness they offer our account,” said Mary Grace Anderson, loan servicer at Generation Mortgage. “Over the past year, our growth in REO volume can be attributed to the restructured model as well as to the performance of our asset management team exceeding the industry-established Key Performance Indicators (KPIs),” said Roger Beane, CEO of LRES. “Our modified approach has increased efficiency to better serve our new and existing clients. We anticipate continued growth in 2014 and look forward to developing strong client relationships in the REO space.”

employees combined and represent more than $500 million in annual loan production volume. The three firms recently completed their transition to Guaranteed Rate after joining during the fourth quarter of 2013. “These three firms have a stellar reputation for customer service and employ some of the top loan originators in the country,” said Victor Ciardelli, president and CEO of Guaranteed Rate. “They are a perfect fit for Guaranteed Rate and help further our efforts to provide low rate, low fee mortgages in several key major markets.” Sun State Home Loans was founded in 1997 by Mike Metz. Sun State has been a leading lender in the PhoenixScottsdale area. Metz can also be heard regularly on KFNN-AM Radio in Phoenix, where he serves as their mortgage banking correspondent. With offices in the San Diego and Denver areas, Nationwide Direct was founded in 2009 by Glen Steward and Bonita Bischoff. This team has been added to Guaranteed Rate’s Online Division. Founded in 1998 by R.J. Kistka and headquartered in Grand Rapids, Mich., Arbor Mortgage has been a leading mortgage lender in Michigan and surrounding states operating a direct mortgage lending program. They also have offices in Indianapolis, Ind. and Richardson, Texas.

How Short Sellers Are Wrongly Coded as Foreclosures and Why Specific Short Sale Credit Code is Needed Now! By Pam Marron Mortgage credit of 2.2 million past short sellers and potentially 6.3 million still underwater homeowners who may have to short sell their home is being wrongly coded as a foreclosure and going undetected until a few years later when they attempt to get a conventional mortgage. Both Fannie Mae and Freddie Mac automated underwriting systems (AUS) are generating a mortgage denial, specifying the short sale as a foreclosure, which results in a loan denial and a seven year wait to get another conventional mortgage. Here’s why … Short sale credit code is borrowed from foreclosure codes in the Metro 2 system. After 90 days of mortgage delinquency, a pre-foreclosure code is applied, and after 120 days of delinquency, the foreclosure code is applied. Despite the top 100 loan servicers reaching an agreement with the Federal Housing Finance Agency (FHFA) in November of 2012 to allow consumers to short sell without being in default, lenders are still requiring underwater homeowners who must short sell their home to be delinquent on their mortgage first and the short sale process commonly exceeds 90 days. The probability of a foreclosure code applied to credit of past short sellers remains highly likely.

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l Sheer number affected is 8.5 million: RealtyTrac notes 2.2 million past short sellers in May 2013, while CoreLogic notes there are still 6.3 million underwater homeowners in the U.S. (effective Q3 2013). l Delay of millions back into the housing market: After a short sale, the shortest timeframe available to all for a new mortgage has been with Fannie Mae on a conventional 20 percent downpayment loan1. However, the erroneous foreclosure code for a short sale prompts a conventional mortgage denial, and the foreclosure requires a seven-year wait to get a conventional mortgage. Past short sellers can get an FHA mortgage three years after a short sale2, but then must pay FHA mortgage insurance. l There is a specific credit code for foreclosures, bankruptcy and collections: Why is it so hard to get a specific credit code for “short sale?” This gained huge support through June of 2013. The Fannie Mae AUS fix was ultimately done as the quickest way to solve the problem. l The Fannie Mae “fix,” Desktop Underwriter Version 9.1, clearly states multiple times “lender-instructed” in directions allowed for fix. Yet, the only time that the “fix” is allowed is if the Fannie Mae system sees a conflict in the narrative in back end raw data code (often only visible to IT techs at credit reporting agencies). Since the Nov. 16, 2013 Fannie Mae fix, I have only received the Fannie Mae message ONCE! The conflict in the narrative where Fannie Mae provides the availability of fix is greatly limited. l Now the problem is also with Freddie Mac, whose AUS system is coding past short sales as a foreclosure, resulting in a mortgage denial. This wasn’t previously a primary problem because Freddie Mac would not approve a past short seller for a new conventional mortgage until four years past the short sale. Freddie Mac denial cases were not as plentiful as Fannie Mae cases. Just recently in the same week, there were two cases where clients were four years-plus past a short sale, and both received a denial through Freddie Mac and Fannie Mae. l Though Fannie Mae allows a manual underwrite for these loans, only one lender was found in the entire U.S. that would do a manual underwrite. l Major press about “strategic defaulters” who can make their mortgage payments, but choose not to, has been very misleading. Delinquency requirements have continued on page 61

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qualified team of certified appraisers and experienced quality control appraisers and account managers with regional focus. “Collaborative evaluations diversify the types of opportunities for our elite panel of appraisers and afford a high standard of valuation products at various price points for our growing client base,” said Michael Simmons, senior vice president of Axis. “With these additional tools, we will now be in position to expand our footprint to a broader spectrum of clients. This transaction will open an exciting new chapter for Axis, Zaio, and its additional subsidiary, Valuation Vision.”



Mortgage Professionals to Watch l Mortgage Master has announced that it has opened its newest retail branch location in Houston, Texas, naming Michael Marlow branch manager of the new Houston office. Mortgage Master has also announced that it has promoted 23year mortgage industry veteran Jimmy Yerman as its new midAtlantic regional manager.





The Business of Short Sales

heard on the street

l Veteran mortgage banking professional Sally Herreid has joined Mortgage Network Inc. as a sales manager in the company’s Providence, R.I. branch. Augustin Wagner has also joined Mortgage Network Inc. as a loan officer in the company’s Conshohocken, Penn. branch office.




The Long & Short:

l RELTCO Inc. has named Paula L. Pautauros as its CEO; Dino Avdic as CFO; Mike Pezone and Mark Kyser as operations managers in the firm’s Tampa, Fla. office; and Doug O’Neal as national sales director. l GSF Mortgage has announced the addition of a second regional manager position as Cary White will develop and manage GSF branches in the state of Texas. GSF has also announced the addition of Stephen Exley as branch manager of its branch in The Woodlands, Texas area. In addition, GSF has announced a family-focused team to its Bolivar, Tenn. branch, led by Bobby Roberts, branch manager, who brings with


him, a staff of loan officers and processors, including his daughter, Amy Nuckolls, and son Phillip Roberts. The team also includes Jamie Watkins, loan officer, and LaWanda Vickers, processor. Total Mortgage Services LLC has announced the addition of Andy Pettola as executive vice president to lead the wholesale lending division, Total Mortgage Wholesale. 360 Mortgage Group LLC has announced the hiring of seven new account executives that will join the company’s sales professional teams in California, Maryland, Georgia, Indiana, Florida and Illinois, including Ryan Burchfield, Sally Thomas, Anthony Okolisan, Trudie Herring, Matt Burkel, Steve Lunenfeld and Gina Bell. Stonegate Mortgage Corporation has announced the promotion of Steve Landes to president of NattyMac, Stonegate Mortgage’s wholly-owned warehouse lending subsidiary. Carrington Mortgage Services LLC has announced the appointment of Harold Michaud as area manager for Northern California. Birchwood Credit Services Inc. has named Kelly Kasparian as regional sales manager for the New England region. The Mortgage Bankers Association (MBA) has announced that Marina Walsh, currently associate vice president of Industry Analysis, will be promoted to the position of vice president of industry analysis. Inlanta Mortgage is pleased to welcome previous team member, Dave Leeder, and veteran originator Dan Leeder to the company. Dave Leeder will manage the full-service mortgage banking branch in Madison, Wis. with his brother Dan Leeder, Client Relations Coordinator Kathy Leeder and Loan Partner Nicole Haag. Freedom Mortgage Corporation has appointed two long-time industry veterans as senior executives in the company’s recently formed Financial Institutions Partner Group, as Greg Gentek was named the division’s new SVP, and Rock Primas named VP of business development. Mortgage Guaranty Insurance Corporation (MGIC) has announced the addition of six veteran mortgage industry professionals to its sales team: Rob Deters as account manager for Central Indiana, Northern Kentucky and Ohio; Christie Buff as account manager for Western Florida; Carl Benefield as account manager for Louisiana; Trey Waters as account manager for Arkansas and Oklahoma; Laura Plunkett as account representative for Northern California and Nevada; and Andrew Amenson as an account representative over the Arizona and New Mexico regions.

l Lisa J. Aubrey has joined WFG National Title Insurance Company as a senior vice president and state manager for the company’s agency division in New Jersey and Pennsylvania. l RealtyTrac has announced that marketing and real estate specialist Rob Talbot has joined the company as senior vice president of marketing. l LRES has announced Richard Cimino has been named senior vice president and executive advisor, responsible for enhancing business development and leading several key strategic initiatives. l Centennial Mortgage Inc. (CMI) has announced the appointment of U.S. Department of Housing & Urban Development (HUD) veteran Reneé Greenman as managing director of the South Bend, Ind.-based company. l Caliber Home Loans Inc. has announced the appointment of Linda Steiner as regional vice president of wholesale for the Northern California Bay Area. l ReverseVision has added Jason Meches as chief technology officer.

l Fay Servicing has announced that Andy Laing has joined its executive team as its chief operating officer where he will lead all of the firm’s servicing, default, business intelligence and back office operations, as well as help manage new strategic initiatives.

Your turn National Mortgage Professional Magazine invites its readers to submit any information, events, passages, promotions, personal or professional occurrences that seem appropriate and/or other pertinent data to the attention of: Heard on the Street/Mortgage Professionals to Watch column Phone #: (516) 409-5555 E-mail: Note: Submissions sent via e-mail are preferred. The deadline for submissions is the 1st of the month prior to the target issue.

new to market continued from page 12

gained by the first lien originator and second lien servicer, the speed with which the subordination agreement is returned improves borrower satisfaction.”

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n National Mortgage Professional Magazine n MARCH 2014

a la mode has announced that Mercury Mobile, a new iOS app enabling appraisers to respond to new Mercury Network orders instantly, is now available at no charge for iPhone and iPad in the Apple App Store. An Android version of the app will also be available soon. Lenders and AMCs placing orders on the Mercury Network will see instantaneous turn time improvements, since it handles any type of Mercury order with no changes in workflow at the client or vendor ends. Mercury Mobile focuses on a single yet significant problem: Eliminating delays in the appraisal ordering process caused by appraisers being busy in the field doing inspections on other properties. With the free app, appraisers can immediately accept, negotiate, or decline a Mercury Network client order. The app results in faster operations for any Mercury Network lender or AMC, and appraisers eliminate lost opportunities to accept orders due to being out on field inspections. “Mercury Mobile showcases something easily overlooked in this space,” said Dave Biggers, a la mode’s founder and chairman, “which is that just offering a cool tool of some sort, whether simple or complex, isn’t sufficient. It has to be done by a company with the ability to penetrate the


a la mode Announces Mercury Mobile App and Expands SureReceipt to Curb ECOA Violations

market in sizable numbers, with a training, support, and distribution network reaching directly to the devices and desktops of enough appraisers that an impact is felt industry-wide almost overnight. With more appraisers nationwide using our software than all other brands combined, and with virtually all of the mobile appraisal market share, this new Mercury Mobile product meets all of those criteria. It matters.” a la mode’s Mercury Network has also announced the expansion of its SureReceipts service to a universally available eDisclosure compliance solution. SureReceipts securely sends any document to borrowers in compliance with disclosure requirements, and it automatically produces an audit trail on every send for compliance verification. SureReceipts can be deployed quickly by lenders of all sizes, and is now available as a stand-alone, Web-based service or as an API for integration in existing workflow systems. “We’ve heard from many lenders recently who could be in violation of the new ECOA Valuations Rule because they aren’t gathering the required borrower acknowledgements prior to electronic delivery of the appraisal, as required by ECOA’s E-Sign provisions,” said Jennifer Miller, president of a la mode’s Mortgage Solutions Division. “SureReceipts has long been integrated in Mercury Network, so lenders using Mercury as a vendor management platform have always had it. But opening it to any lender was a simple solution to a widespread compliance challenge, and keeping SureReceipts less expensive than the cost of postage

MARCH 2014 n National Mortgage Professional Magazine n

GSE Reform: Thinking O


Outside the Box? (Part II) By Ryan W. Birtel

Pre-mortgage crisis

times the amount of money it actually had been granted upfront, the thought being that the odds that a lot of mortgages experiencing losses at once were low and ultimately the U.S. Treasury was good for covering any unlikely shortfall. Private mortgage insurers were similarly under-funded relative to their obligations and obviously did not have a government guarantee. Given the concentrated systemic risk profile of those obligations it is not surprising that this industry made great advances in the 1920s, where rising housing prices insulated it from losses due to foreclosure, yet collapsed entirely in the 1930s when housing prices dropped. Nor was it surprising to see the industry rebound during the relative stability of the 1960s and experience its greatest growth in subsequent years in partnership with the GSEs, until it again collapsed entirely during the recent mortgage crisis. By chartering Fannie Mae and Freddie Mac as investment trusts with mandates to take concentrated and highly leveraged speculation on housing prices through the reliance on PMI while also mandating that the benefit of resulting appreciation be passed on to private investors, Congress had seemingly replicated the type of risk pyramiding which they had identified as a driving force behind the crash of 1929.

Securitization The increasing need to privatize housing finance risk led to more than just the reorganization of the NMAs and resurgence of PMI. Freddie Mac, Fannie

Mae and Ginnie Mae, the government’s one retained NMA, introduced a new form of investment trust to the capital markets called the mortgage-backed security (MBS). These trusts, while not full-blown operating companies like NMAs, served a similar purpose in that they became repositories for mortgage loans held for the benefit of the bond investors that financed the trust’s purchase of those loans. Private investors now had the option to invest directly in NMAs or choose to invest in specific portfolios of mortgages the NMAs securitized. From their inception in the 1970s to today, the popularity of MBS grew enormously as did investor sophistication. Sophistication meant investors required MBS to become more complex as a means to facilitate more complex investment strategies. Investors were able to take very specific positions regarding the movements of future interest rates, how borrowers would or would not repay their loans and, of course, the movement of housing prices. These trusts offered such compelling opportunity as investment vehicles that some investors could now find a rationale to participate in markets they would not otherwise, for example, the GSEs could buy bonds secured by mortgages that by themselves would not meet the conventional standards for GSE purchase. Perhaps the most enticing feature of MBS was the ability to ‘tranche’ the priority of how losses were allocated amongst their debt investors. continued on page 58

Because we bond thousands of mortgage companies across the country we use our buying power and leveraged competition among multiple surety companies to offer underwriting parameters and lower rates that other bond agencies only wish they had. Don’t wait for your bond’s expiration. Trade in your overpriced bond for a new bond – And start saving money today!

n National Mortgage Professional Magazine n MARCH 2014

We have them! Do you?


Without pouring over every detail of the 70 years spanning the creation of the first National Mortgage Association (NMA) and the failure of Fannie Mae and Freddie Mac, it is important to highlight how housing finance changed during that time through the visage of the Pecora Committee such that we can see more clearly the relationship between the market crashes in 1929 and 2008. After the 1930s, the government’s involvement in housing finance did in fact expand. As the economy transitioned from depression to a post-WWII expansion period, the demand for housing increased considerably. Having established FHA and Fannie Mae in such a fashion as to fill a void the private markets wished to avoid in the 30s, unless the government intentionally scaled back its support of housing, the private markets would find it too costly to compete, hence the government monopoly of the mortgage market could only grow. Growth took the form of ever increasing volumes of mortgages being purchased and insured, the expansion of mandate to affect greater growth in more challenged economic markets and ultimately in the level of speculation taken on housing prices. What had started as a pre-crisis norm of 50 percent LTV exposure for financial liquidity providers had increased in the 1930s to 60 percent for non-government insured mortgages and 80 percent for all but the lowest cost homes insured by FHA. These LTVs, never reduced during times of expansion, solidified as baselines which would be sporadically increased in response to periodic market distress or the desire to spur growth in a historically depressed market. FHA was insuring 95 percent LTV mortgages by 1954 and is today willing to supply 96.5 percent LTV mortgage insurance. The private capital markets would not sit out of the housing market forever. As the housing market grew, the government became increasingly concerned about its exposure and sought to begin significantly privatizing the market in 1968 and 1970 by chartering Fannie Mae and Freddie Mac, respectively, as shareholder owned entities. These GSEs would carry out the NMA role of supporting the secondary mortgage market, yet they would be tasked to handle non-government insured mortgages and would not themselves be guaranteed by the government. However, unlike 1938, these NMAs

would not be limited to dealing in 60 percent LTV mortgages. They would be allowed to take exposure to mortgages with the same LTV that FHA could with the caveat that the entity selling the mortgage to the GSE had to maintain a share of the risk or transfer that obligation to a private third party. Thus, the diversification hurdle would be met by these investment trusts not by avoiding high LTVs, but rather by relying on a promise from another institution. The strength of these promises would prove to have significant weight in deciding the level of speculation facilitated by NMAs and FHA. Private mortgage insurance (PMI) was another type of investment trust through which private investment capital could find its way back into housing finance. These companies are that third party willing to accept mortgage risks beyond what lenders and GSEs are normally limited to. Similar in construct to FHA, PMI companies provide insurance on the portion of mort-gage loans exceeding normal LTV limits a lender or investor would be restricted to, which, in the case of the GSEs, ranged from 7580 percent. This meant PMI companies were then, as they are now, typically exposed to loans ranging up to 95 percent LTV. That ‘window’ of risk between 75-95 percent is, by government standards, a concentrated exposure to housing price risk. Unfortunately, like most insurance companies, PMI companies do not hold enough cash to pay off all of their potential liabilities. FHA had been set up in 1934 with the ability to insure 200

Texas Supreme Court Clarifies Discount Points and Per Diem Interest Excluded From Three Percent Points and Fees By Melanie A. Feliciano Esq.

MARCH 2014 n National Mortgage Professional Magazine n


In June, 2013, the Supreme Court of Texas held in Finance Commission of Texas, et al. v. Norwood, et al., [] 2013 WL 3119481 (Tex. June 21, 2013), that discount points are not considered interest under Section 50(a)(6)(E) of the Texas Constitution [] and, therefore, should be included in the Texas home equity points and fees cap of three percent. In a Supplemental Opinion on a Motion for Rehearing [] of the Texas Supreme Court’s original opinion, published on Jan. 31, 2014, the Supreme Court clarified, among other things, that bona-fide discount points “to lower the loan interest rate, in effect, substitute for interest” and, accordingly, are not subject to the three percent cap. The original opinion in Norwood resulted in many Texas-licensed attorneys questioning the Supreme Court’s decision that bona fide discount points do not constitute interest. In addition, the opinion left open to question whether or not per diem interest actually constitutes interest. The Norwood opinion also seemed to adversely affect the use of powers of attorney for the closing of home equity loans. Confirming that the term “interest,” as used in Section 50(a)(6)(E) of the Texas Constitution, simply means the “amount determined by multiplying the loan principal by the interest rate,” the Texas Supreme Court clarified in its Supplemental Opinion the following: l Bona-fide discount points are not fees “necessary to originate, evaluate, maintain, record, insure or service” a home equity loan, but an option available to the borrower. Accordingly, bona-fide discount points constitute interest and are not subject to the three percent points and fees cap. l Per diem interest is still interest, though prepaid, and not subject to the three percent points and fees cap. In addition, the Texas Supreme Court confirmed its original opinion that a power of attorney is part of the “closing process” for a home equity loan, and Section 50(a)(6)(N) of the Texas Constitution precludes a borrower from closing the loan through an attorney-in-fact under a power of attorney not itself executed at the office of the lender, an attorney at law, or a title company. Based on the Supplemental Opinion, lenders’ internal audits and quality assurance processes may exclude bona fide discount points from the Texas home equity three percent points and fees limitation. Furthermore, if lenders were previously including per diem interest in the points and fees limitation, per diem interest may be excluded as well. 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


gse reform continued from page 57

Investment within MBS were pensation classes for at least three years? essentially stacked on each other such that, as losses were realized within and the ++Mandatory Arbitration loan portfolios, bond holders at the Financed Single-Premium Insurance bottom of the stack would have their Do your policies and procedures investments ‘written-down’ first. Once address provisions that: their class was deemed to have been ++Prohibit contracts or agreements fully written-down, loan losses would from requiring consumers to submit start eating away at the next class,mortand disputes concerning a residential so it would untilequity losses line would evengage loan orgohome of credit tually be allocated to the most senior to arbitration and prohibit applying or class. What made enticingor foragreebond interpreting suchthis contracts investors who felt that the pools of ments to waive federal statutory causes mortgages were not sufficiently diverse, of action? from either a financing borrower oforany collateral ++Prohibit premiperspective, is that they could simply ums or fees for credit insurance or debt request a class created which exhibcancellation orbe suspension in connecited greater cushion than existed at the tion with a consumer credit transaction pool’s stated LTV. This was particularly secured by a dwelling?20 important for financial liquidity providers, suchpolicies as GSEs, banks 2. Do your contain all and the insurance companies, which were relevant disclosures required by only the capitalized new rules? to absorb sporadic losses in their loansyou and use investments. This extra ++Do model disclosure cushion, called subordination, forms and language contained proved in the effective in many ways though would regulatory guidance? ultimately not the disclosures same as choosing ++If not, arebeyour clearly loans with a lower LTV begin with.are written in a way that toconsumers In time, the techniques used to turn likely to understand? loans into would be used ++Are thesecurities disclosures presented in a again to repackage securities into new way that is likely to call the consumer’s securities.toNew types and of significance investment attention the nature trusts were developed, or expanded, to of the information in the notice? create additional liquidity for MBS. For ++Have disclosures been reviewed example, collateralized debt obligaby compliance and audit? tions (CDOs) and structured investment vehicles allowed specialized 3. Have(SIVs) the policies been reviewed investors the ability to additionally by the board (or similar oversight funcdiversifyand or senior concentrate what were tions) management as already diversified or concentrated appropriate, the compliance officer, In a sense, these types investrisk firm, or legalofcounsel? ment trusts were able to replicate both ++Were any concerns identified at the regulated financial liquidity this level? providers found as well as the ++If yes, have today they been resolved? unregulated speculative trusts which were subjected to Pecora Committee 4. Do the policies reflect your actual investigation years earlier. practices? ++Do you have testing planned to Post-mortgage crisis confirm this?

reform efforts

Years of pro-cyclical policy 5. What processesgovernment do you have in and private market investment strateplace to ensure that policies are kept gies culminated into for an all unsustainable current and account changes in growth in residential housing prices the regulatory environment? which ultimately led to a 1929-esque ++Who is responsible for maintaincollapse of U.S. financial markets in ing content? 2008. The financial crisis, subsequent to 6. what seemed be you a correction Describe theto steps will take in to the relatively small sub-prime mortensure that new product development gage market, wasregulatory only in part defined considers new rules and by the failure of Fannie Mae and associated risks. Freddie Mac.compliance The breadth and cascad++Is the function repreing nature of the collapse revealed the sented in the new product development degree to which large financial instituprocess? tions were leveraging risk, and each other, compelling Congress again 7. Do your policies and once procedures to establish a committee to examine vary materially regionally, by delivery the causes scope of the crisis. On method, or and by legal entity? May 20, 2009, as part ++If practices vary: of the Fraud Enforcement Act, the ++Is testingand doneRecovery for each segment? Financial Crisis Inquiry Commission ++Are all policies individually (FCIC) was established. approved? Notwithstanding being ++What controls the are efforts in place to undertaken by this Commission, many ensure that regulatory updates are

others werefor studying the issue and forgaccounted in all policies? ing opinions as to how to repair and improve the automated markets going for-ward, 8. Have tools been including Congress and various indeupdated to reflect your new policies pendent researchers. I myself had, at and procedures? the++Have request they of the U.S.tested Department of been to confirm Housing accuracy?& Urban Development (HUD), submitted to HUD in May of 2010, a confidential Paper a 9. Have youWhite updated youroutlining risk assessproposal for the studychanges? of the ment to reflect the joint regulatory potential effectiveness of aprocedures particular ++Do your policies and securitization process for managing define a process for ongoing updatessysto temic housing price to risk. the risk assessment account for reguJust changes? as Congress had enacted major latory legislation prior to the release of the Pecora Committee report, did so “Confidence comes fromthey discipline again ahead of receiving any formal and training.”—Robert Kiyosaki21 FCIC conclusions. In July of 2010, with theTraining passing of the Dodd-Frank Act, Congress hoped define,component if not immeTraining is a tocritical of diately address, the major issues self-assessment and, indeed, it isrelated a pivto crisis that must be otalthe partfinancial of a compliance management resolved the U.S. regulatoryare agencies. system. by Policies statements guide Reform of the GSEs wasthe notemployees specifically, posts, but, inevitably, of however, part of its design and was left a financial institution must know the to be dealt with later. This to fact, many requirements related thealong comwith has been zero legislative pany’swhat regulatory compliance commitreform the GSEsthis since was enactments. of Consider listDFA a de minimis ed, speaks to the perceived complexity set of questions! of dealing issues that were 1. Have with you determined what effectraintively declared unaddressed by the ing needs to be developed? Pecora Committee years earlier, the 2. Have you determined whoi.e. needs nature training?of diversification of financial assets, proper reserves and the 3. Have you capital considered the following role of thein investment trust. questions developing training: As a reflex response to anbe economic ++What information will covered shock caused by losses on complex in the new training? investment ++What will strategies, the format be Congress for traindeclared in line one online, of Dodd-Frank that ing? (Instructor-led, et cetera.) its ++How goal of promoting financial stability will training vary based on in U.S. was first and foremost relatjobthe duties? ed ++How to “improving accountability and do you document complettransparency ed training? in the financial system.” From a financial stand++What are theengineering consequences for point, transparency means minimizing employees not completing training by the of deadline? pyramiding of investment the degree assigned trusts, whiletheaccountability relates to ++Have changes to the training how much of the curprogram been fullydecision-maker’s integrated into your rent is behind their and obligation to full cash training program ongoing lend, invest or insure, commonly known schedule? as 4. ‘skin inwill theyou game.’ Thisthe haschanges direct How roll out bearing on how certain institutions to your training program? manage what’s as be credit risk and ++When willknown training completed? ultimately how they themselves ++Do training timelines allowconfor tribute overall enoughtotime forsystemic staff to risk. fully underCredit riskrequirements is generally considered stand rule prior to the risk related to the worthiness of an entieffective dates? ty’s++Have ‘promiseyou to pay’ thetesting managedoneand any of ment of program such is, changes? in all likelihood, the training primary focus of lendersfor and investors 5. Who is responsible developing alike. When a prospective home buyer course content? wishes to borrow money, their relative ++Did you purchase content from likelihood paying back the loan is an outside of vendor? assessed based a variety of factors, ++How is on senior management such as their income orand credit score. involved in developing approving When company wishes to borrow course acontent? money they are in a similar ++How did scrutinized you determine that fashion, though institutional credit risk course content is adequate? is sometimes referred to as counterpar++What is the process for identifyty the mortgagechanges? crisis may ingrisk. the Where need for additional have been you sparked by the inability or 6. Have determined what trainunwillingness of certain subprime boring will be needed to address operarowers to make payments as promised, the crisis did not get its legs, so to speak,

until major institutions failed to make payments, as promised. Banks, insurance companies, GSEs, CDOs, SIVs, etc. had all made promises that, under certain circumstances, would require these investment trusts to make payments to each other. Some of these trusts make promises that cannot be fulfilled immediately in-total because they do not retain enough cash reserves to do so, i.e. under-funded, thus when a particular financial event ‘triggers’ circumstances outside of what was planned by those trusts, those trusts may fail to perform. When this happens to large counterparties it will, as seen in 1929 and 2008, lead to cascading failures of other counterparties creating systemic financial instability. If counterparty risk can be a systemic risk, then properly isolating that risk such that it can be reduced, avoided or otherwise transferred is essential to maintaining the diversification required that legitimizes the value of the investment trusts exposed to that counterparty risk. This is why the Dodd-Frank Act created the Financial Stability Oversight Council (FSOC) and tasked it with finding ways to better manage the systemic risk related to counterparty failures. Integral to this was the requirement that FSOC conduct, and submit to Congress, a feasibility study for the creation of a contingent capital requirement for certain financial

companies that were supervised by the Federal Reserve. This study, to be completed within two years of DoddFrank’s enactment, would help Congress understand how they might draw private investment capital into the financial markets contingent on certain catastrophic financial events occurring. This requirement would serve as a mechanism to improve transparency and accountability within financial liquidity providers while also taking financial burden off the U.S. Treasury. In August of 2010, the month following the enactment of Dodd-Frank, I began carrying out a feasibility analysis with Freddie Mac into the use of a type of contingent capital structure de-signed to eliminate counterparty credit risk while facilitating the sharing of catastrophic systemic risk with the private markets. Specifically, this involved identifying housing prices as the structural systemic risk within housing finance and using a simplified securitization process to isolate, price and transfer that risk without any reliance on ‘promises to pay.’ By January 2011 Freddie Mac had concluded that if they had used this process prior to the onset of the financial crisis then they would have avoided being placed under the conservatorship of the Federal Housing Finance Agency (FHFA). These results were shared with FHFA and FHA. Shortly thereafter, on Jan. 27, the

FCIC released its official Financial Crisis Inquiry Report, in which it was tasked to delve into the causes of the crisis without offering policy recommendations. The simple conclusion found was that “while the vulnerabilities that created the potential for crisis were years in the making, it was the collapse of the housing bubble” which permeated throughout the world economies with the use of mortgage-related securities, derivatives and insurance that could be deemed the cause. The phrase ‘home price(s)’ or ‘home value(s)’ occur about 150 times in the report and likewise, the term ‘derivative(s)’ is found about 300 times. Clearly, the financial market’s desire to share housing price risk was not balanced with its ability to do so using the conventional methods which had, overtime, concentrated both housing price and counterparty risk beyond what liquidity providers were capitalized to accept. In February 2011, senior Federal Reserve economists made a presentation to the Brookings Institute outlining the inability of the private MBS market and the PMI market to provide protection from catastrophic financial events. It was suggested that, due to the plethora of MBS investors that “do not engage in due diligence with regard to the value of the collateral underlying mortgage-backed securities” combined with the “high correlation of home prices” creating a systemic risk which can’t be diversified by private insurance trusts,

the key to the government adding liquidity to the market would be to offer explicit catastrophic loss insurance on MBS trusts. The authors suggest that the catastrophic insurance model could follow the pre-crisis GSE model, i.e. private capital in a ‘first loss’ position and the government in the last loss position, if modified by requiring the existing 80 percent LTV limits be pulled back to 60 percent LTV. Additional financing would be covered by the private markets in a non-guaranteed fashion through homeowner downpayments, PMI, second mortgages, etc. Though these trusts would be structured to pass all profits into private hands, it is fair to suggest that at a 60 percent LTV, the government would not be directly facilitating above market appreciation in housing prices. However, these economist highlight in a very specific way an issue related to accountability. To what extent should private MBS investors be expected to take risk to housing prices? Also, the 60 percent LTV level has been perceived historically to be a fairly well-diversified exposure not requiring government support. If accountability is related to ‘skin in the game’ wouldn’t too much skin be redundant? Why should the government charge qualified private investors for insurance against a risk they are already prepared to accept without insurance? Redundancy is a continued on page 86


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n National Mortgage Professional Magazine n MARCH 2014

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I N C .

Independent Risk Evaluation and Vendor Management Ready for Prime Time An Interview With Andrew Liput President and CEO of Secure Settlements Inc.

MARCH 2014 n National Mortgage Professional Magazine n


ndrew Liput is president and CEO of Secure Settlements Inc. (SSI), a leader in independent risk evaluation and vendor management for the mortgage industry. Based in Parsippany, N.J., SSI is the first company to offer a standardized risk management process and information database of fully riskassessed mortgage closing professionals that protects both consumers and lenders, thus reducing fraud and ensuring that federal regulatory expectations are met. The SSI process delivers an advanced closing fraud risk analysis and helps lenders meet the risk management expectations for qualified risk assessment of third-party vendor relationships, as outlined by Consumer Financial Protection Bureau (CFPB), Office of the Comptroller of the Currency (OCC), U.S. Department of Housing & Urban Development (HUD), Federal Deposit Insurance Corporation (FDIC), Fannie Mae, Freddie Mac and the National Credit Union Administration (NCUA). National Mortgage Professional Magazine recently sat down with Andrew to get an update on SSI.


Can you tell our readers the reasons/catalysts that drove you to start Secure Settlements Inc.? Liput: SSI began as a concept in 2002, when I was a closing agent for banks as an attorney. I found it remarkable that lenders would wire proceeds and send documents to the closing table without any effort to screen and evaluate, especially with their money “wet” and their collateral security documents unsigned. I also thought it was risky to send agents a borrower’s personal and financial information for privacy purposes

without some level of vetting for risk. This drove me to spend the next 10 years studying closing and escrow fraud cases, mortgage repurchase issues, the weaknesses of exclusionary lists and the over-reliance on the closing protection letter, as well as operational risk issues. During this period, I also sought valuable input from risk analysts at Lloyds of London, senior managers at Fidelity and First American, and several warehouse banks. All of this research and experience led to the creation of a proprietary risk evaluation program backed by technology that launched SSI in January of 2012. What are the keys to the success of SSI’s product offerings? Liput: Our process and staff are the best in the business. We don’t just repackage public data into a report. We collect 110 unique data points, subject them to a complex system of risk metrics that involves multiple public and private data sources. We take a position by having each file analyzed by experienced risk analysts for accuracy and assign a risk rating of high, caution or low. In addition, all public data is monitored 24/7, 365 days a year for changes, and all private data is verified at the source with the tracking of key information, including license and insurance expiration dates. Finally, we voluntarily comply with the spirit of FCRA [Fair Credit Reporting Act], by interacting directly

with the people we evaluate, holding the publication of any risk rating until the individual or entity has an opportunity to refute, clarify or explain any derogatory findings. We want to be fair, but most importantly, get it right. Where does SSI fit into the lending value chain? Liput: We are a key component of prefunding loan quality assurance and overall enterprise risk management. Thirdparty vendor management, particularly the evaluation and monitoring of closing agent risk is now an accepted regulatory mandate. The CFPB, FDIC, NCUA, OCC and HUD all consider the monitoring of third parties a key component of operational and reputational risk. Vetting improves loan quality and secondary market confidence, reducing the likelihood of repurchases and incidence of fraud losses, while demonstrating a commitment to consumer protection. What is SSI’s current client focus and what is the company’s business model? Liput: Our clients include national banks, community banks, mortgage lenders and credit unions. Our sweet-spot is lenders closing 50-500 loans monthly, who are committed to quality control and compliance, but do not have the resources and staffing to handle vetting services in-house. Larger banks that have a good internal solution will use SSI as a quality control check, much like lenders

send loans pre- and post-closing to evaluate processing and underwriting controls. Our key product remains our Closing Guard settlement agent vetting and monitoring system and national database of risk data. But, we also offer risk vetting for other key players in the mortgage process including employee screening to meet SAFE Act and GrahamLeach-Bliley data privacy and security requirements, and enterprise risk evaluation reports to assist lenders in assessing their quality control and loan quality assurance programs. Our key program is subscription-based, costing lenders on average 3/4s of a basis point per loan, while our other products are billed on a per report basis. What type of growth is the company experiencing? Liput: This year, we are poised to have our best year ever. Our business has grown significantly in the past six months, and since Jan. 10, 2014 when the CFPB’s qualified mortgage (QM) and Ability-to-Repay (ATR) rules became finalized, requests for demos and program details have significantly increased. The first quarter of 2014 will result in the largest increase in lender contracts in our history and include many big industry names. In the past, the industry was not ready for independent risk evaluation and vendor management because none ever existed. We had to conduct a great deal of education. The regulators helped us by universally adopting directives addressing the problems we were created to solve. Today, the notion of closing agent vetting, monitoring and reporting is widely accepted and generally embraced by even the most reluctant professionals. Recently, the American Bar Association (ABA) recognized that attorneys are not

exempt from vetting requirements. I actually participated in a nationwide Continuing Legal Education (CLE) program with Frank Pellegrini [immediate past president of the American Land Title Association] where this topic was addressed and wrote an article on the topic for an ABA publication. What new products is SSI developing and why? Liput: I like to think of myself as an innovator. SSI has yet to implement several of my concepts that we all believe will continue to improve risk management and protect consumers at the closing table. Some of our current projects that will be widely available in 2014 include the

industry’s first mobile app capturing quality control and best practices right at the closing table, a new multi-party risk report, online education and training for our agents to improve their knowledge of the mortgage process and fraud issues, and an insurance product that will stand behind the agents we vet and monitor, while covering lenders and consumers from losses as a result of negligence and fraud at the closing table. I am also proud of the free consumer information Web site that we launched in February, to empower the public to make better choices regarding closing agents and explaining what can be a very complex and intimidating process.

ranking well on google in 2014 continued from page 25

4. Grow a profile of backlinks

l l l l

Create content that readers share Sharing content on social media High authority directories Press releases 61

While this is only a basic introduction of search engine optimization, it can certainly point Web sites in the right direction for gaining more influence online. SEO is not just a good idea; it is essential to good business, and it’s becoming even more essential.




Cody Miles is the inbound marketing director for MortgageDashboard, a finance technology company devoted to designing and creating quality cloud-based mortgage software products. He may be reached by phone at (512) 630-5766 or e-mail

the long & short continued from page 54

been the criteria of almost every lender to approve a short sale. This practice is linked to receipt of loan servicing fees paid to lenders. However, the U.S. Treasury has confirmed that these fees can be paid to lenders even if the homeowner stays current.

There are fixes. Stay tuned. Pam Marron is senior loan officer with Bankers Mortgage of Pasco County. She may be reached by phone at (727) 375-8986 or e-mail

Footnotes l The Sept. 24, 2013 Audit Reports sent to government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, by the Office of the Inspector General (OIG) and the FHFA strongly suggests for both GSEs to go after mortgage deficiencies, and specifically, foreclosures. The majority of short sales with these GSEs are coded as foreclosures.

1—There is no wait timeframe on USDA mortgages, and FHA mortgages where either: (1) There are no “lates� prior to the short sale (FHA Mortgagee Letter 09-52); or (2) Where extenuating circumstances resulted in a 20 percent reduction of income sustained for six months or more through FHA Back to Work criteria (Mortgagee Letter 2013-26). There is no written criteria for wait time-frame on VA. 2—FHA requires a three-year wait if mortgage payments are late in the 12 months prior to the short sale (FHA Mortgagee Letter 09-52).

Financial F inancial DREAMS DREA MS


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n National Mortgage Professional Magazine n MARCH 2014

Simply put, link building is the method of getting other sites to link to your Web site. Google sees these “backlinks� as endorsements or recommendations, which increase the authority of your site in search results. All other things equal, Google still uses backlinks as a sort of internet popularity contest. The website with the best backlinks wins. A few years ago, companies could get away with outsourcing a company to generate 40,000 spam backlinks. Today, Google places penalties on Web sites with unnatural, manipulative link profiles. Using shady “black hat� SEO strategies like this ultimately do not pay off as Google prefers a Web site to grow backlinks naturally. Avoid link-building schemes, spammy guest blogging or excessive blog linkcommenting. Additionally, Google prefers quality of quantity. While you’re not going to rank for a high competition keyword with only a handful of backlinks, it’s important to recognize that Google places a lot of attention on where your backlinks come from. One or two backlinks with a high page rank (Google ranks Web pages from one to 10) are worth more than several hundred

low profile backlinks. When intentionally building a profile of backlinks, the golden rule is diversity and subtlety. A proper backlinking campaign should be natural and take time. The truth is, you cannot outsmart Google and any spike in backlinks could mean you’re not playing by the rules. Here are some safe and natural ways to build backlinks:



Donald Frommeyer

MARCH 2014 n National Mortgage Professional Magazine n


President of NAMB—The Association of Mortgage Professionals BY ROBERT OTTONE

n March 4, NAMB—The Association of Mortgage Professionals held the final day of its Annual Legislative & Regulatory Conference in Washington, D.C. After two days of panel discussions, industry meetings and planning, multiple contingents from across the nation made their way to Capitol Hill to lobby on behalf of the mortgage industry. Don Frommeyer, president of NAMB, was one such individual taking his agenda to representatives from Indiana on behalf of the industry. With 29-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 in the corridors of power. I was fortunate enough to sit with Frommeyer during lobby day at the Legislative & Regulatory Conference to talk about his career, his passions and how important lobby days, conferences and more are to the industry as a whole.


How did you get started in the industry? What do you do when outside the office? Frommeyer: I went to Sinclair

Community College and Ohio University. My true love was baseball, so after a year of college, I decided to head out and do some other things, so I transferred to Sinclair. Since then, I became involved with college and high school baseball as an umpire. I got into the finance business in 1975 and worked for 13 and a half years for a finance company, then went into the broker business in 1989 and basically, that’s what I’ve been doing ever since. In 2001, I went to work for a broker company. I was with a company based out of Detroit for a while, then went to work as a loan originator for a broker company. In 2002, I decided to open a new company. It’s been one of those things where we’ve always been moving toward becoming an independent mortgage broker. As far as NAMB is concerned, I got involved with state leadership in 2000, worked through there, became president of NAMB’s Indiana state affiliate in 2005, then in 2006, I was asked to apply for a board position on the national level because even when I was president of Indiana, I was very active with the national committees. I served on the model states statute committee, the awards committee and ethics committee. Those things

led to me joining the national board. In 2007, I joined the board as director, then climbed the ladder of different positions until I took over in November of 2011 as NAMB president. Do you think that climbing the NAMB ladder has helped you as president? Is there a way to presidency that circumvents climbing that ladder? Frommeyer: The professional path they want you take involves holding every position, especially the role of Committee Chair. The reason is that you get a better overall feel for how everything works. You learn to understand the ins and outs of what we really do and you get a good feeling for what the mission is really about. In the past couple of years, we haven’t had that ability because people, over time, have taken different positions or moved into a different industry, but we’ve been rebuilding our structure from scratch since 2011, when the association only had about $11,000 to its name. We’ve come a long way since then. The whole time, continually improving and pushing the professionalism of the mortgage professional. What is the biggest difficulty you face as president of NAMB? Frommeyer: The unique part of being

president of NAMB is that it’s all volunteer. In the early 2000s or so, we used to pay the president. The reason for that was it takes up a great deal of your time. I probably spend around 40 hours a week being president of the association. The other 40 hours a week are running my operation and originating loans. I was in Miami, Fla. just last week, then in Illinois, then home for a day, and the next day, flew out to D.C. As you can see, there is a lot of time and travel involved. Those are some of the things that require dedication, including the Legislative & Regulatory Conference we are currently at. It is not just volunteerism on my part though. I have a very strong support team of the Board members and Committee Chairs and their respective committees that are also in the same boat as I am. We have careers and families as well, and they too do their work on behalf of NAMB on a volunteer basis. I am truly thankful for the team that has supported me during my tenure as NAMB president. In September at the NAMB National event in Las Vegas, that’s when I’ll step down and there will be a new president of the association.


What are your feelings as you near the end of your term as NAMB president? Frommeyer: It’s been a part of my life for three years. It’s nice to get off the merrygo-round, even though I’m going to stay very active with NAMB. Just because you aren’t the president anymore doesn’t mean you aren’t still active with the association. I still have contacts and influences that I can use on behalf of NAMB. As you transition from president to past president, you’re still on the board and still very active with the daily responsibilities of NAMB presidency, and I do love this association.



with your legislator. That’s what this is all about. It’s a three-day situation where we try to do something that will prompt awareness. The first day was all about compliance, the second day we had speakers and put a panel together where we talk about the industry from different sectors. We’ve changed our lives from being strictly brokers to mortgage professionals now. You have to strive to make yourself better, and in doing so, it’s going to be easier to take your customer through the tools of what they have to do. What’s the biggest success story of the Lobby Day thus far? Frommeyer: They’re in tune with what’s going on. The process is to keep contact with these senators and representatives daily or weekly, as opposed to coming to them only today. They’re getting information from us regularly, from our grassroots efforts and the people that live in their districts. That’s what it’s all about. Most of these officials are very familiar with what we’re doing. While here in D.C., the Homeowner Flood Insurance Affordability Act (HR 3370) passed the House and we were able to see that first-hand. Passage of this bill protects homeowners and communities from much higher National Flood Insurance Program premiums. Flood insurance rate hikes under the Biggert-Waters Flood Insurance Reform Act of 2012 would have made flood insurance unaffordable for many of those we put in homes nationwide, and we happened to be here and witness the historic passage which will aid our housing market.

What does NAMB have in store for attendees this September when NAMB hosts NAMB National in Las Vegas? Talk a little bit about the impor- Frommeyer: We are about to host our tance of the NAMB Legislative & third most successful NAMB National as Regulatory Conference compared we speak here. The booths are already sold out, even without advertising. to other conferences. Frommeyer: The Legislative & Regulatory We’re expecting more people than last Conference basically puts you in tune year, possibly in the 2,000 range.

Instead of all speakers, we’re going to have panel discussions where attendees can engage with the panelists and directly receive information regarding the industry and how to move forward with the ideas presented. It’s all about the attendees. Do you have a speech written for when you step down at NAMB National? Frommeyer: I don’t know if I’m going to do a speech (laughs). Why? They’re probably going to want you to. Frommeyer: They probably will. You have to stop and think, I’ve been doing this for three years. The important thing to remember is that I haven’t done it alone. I’ve been lucky to have a great board of directors around me that aren’t all the same since I started, but we’ve always attacked things differently. My dad once made a comment to me that the thing that makes you successful is surrounding yourself with people who know what they’re doing. Make sure you hire people who are smarter than you, to make sure you have your bases covered. The board really cares about the community and their profession. They want to see it succeed. Is there anything in particular that you’re thinking of that could remain an issue for the industry now that we are into the era of the CFPB’s Qualified Mortgage (QM)? Frommeyer: I think we’re still going to have to work with the Consumer Financial Protection Bureau (CFPB) and work with the Senate Banking Committee so everything flows. One of the items I’ve been stressing is the fact that we really need to make a loan, no matter where you make it, the same. Whether it’s a credit union, bank, through a broker, it needs to be the same. It cannot be differ-

ent. A mortgage loan is a mortgage loan. That’s the way it needs to be looked at. So, when people go into a bank or a broker’s office, they’ll see the same type of loan, the same questions, and have to meet the same qualifications. That way, it’s not okay for one person to do it and for another to do it. It’ll take out some of that guesswork. Good originators do that anyway. Setting yourself apart as a mortgage professional with one of NAMB’s professional designations such as the Certified Residential Mortgage Specialist (CRMS) or Certified Mortgage Consultant (CMC) or the Lending Integrity Seal of Approval makes you stand out all the more to the homebuying public. Talk a little bit about your passion for umpiring and baseball. Why baseball? I’m an MLB-guy, so I’m wondering, what baseball is there in Indiana? I think of Larry Bird when I think of Indiana. Frommeyer: Most equate basketball with Indiana right? I grew up in Ohio, and it was basically football and baseball country. It’s been a passion of mine since I picked up my first glove. My dad was a catcher. I was a catcher. My daughter was a catcher, even though her softball honors were at third base. When she got to college, they moved her to third base because they needed one and already had a catcher on the roster. In reality, an umpire doesn’t have any fear. Catchers have the same mentality. When you’re looking at a ball coming in at around 90 miles per hour, you’re reaching up to catch it as a catcher, and as an umpire, you’ve have your eye on the ball and are paying attention to whether or not the batter swings. Did the ball hit the ground? Did it hit the batter? It’s all about concentration. As a catcher, you develop that concentration to catch the ball, so that’s continued on page 65


n National Mortgage Professional Magazine n MARCH 2014

What is it like working with other trade associations, such as the Mortgage Bankers Association, National Association of Realtors and National Association of Home Builders? Frommeyer: In a way, we are all intertwined. We all participate in one way, shape or form in the housing community, and therefore, it’s a necessity that we work together. We’re fortunate enough to have an excellent working relationship with the MBA. It’s one of those things where if I needed to talk to MBA President Dave Stevens right now, I could give him a call and he’d answer. We utilize our lobbyists a lot to make sure our positions are known. I make sure our legislative chairs are in contact with their representatives to ensure that they have an idea of what’s going on.

NAMB President Don Frommeyer meets with John R. Hammond IV, Deputy Chief of Staff for Congressman Marlin A. Stutzman (R-IN) during the NAMB 2014 Legislative & Regulatory Conference

How difficult is it to look at legislation and try to wrap your head around the barrage of regulations that govern the mortgage profession? Frommeyer: One of the things I’ve tried to do is surround myself with excellent people. Over the last three years, we’ve had three different government affairs guys involved with NAMB and they’ve done an excellent job. Their committee does an excellent job at deciphering things. I literally just don’t have the time to sit down and go over a 2,000-page document, so their larger committee puts together a synopsis and sends it my way. They really do a great job. There are times when I go back and read parts of what they are presenting in order to have a better understanding of where they’re coming from, but again, it’s all about surrounding yourself with good people. The association has done a great job of surrounding me with smart people who do their jobs well. I call on the board to help me with whatever their expertise is at that time.


New Challenges With an Older Population Financial Characteristics for Homeowners By Demographic Characteristics and Housing Structure Type All dollar figures are mean in 2010 dollars, with medians in square brackets.


Housing Equity



Mortgage Debt

Annual Mortgage Payments

Ages 55–59

166,413 [104,000]

98,663 [75,000]

512,272 [237,000]

140,511 [100,000]

17,093 [11,892]

Ages 60–64

188,132 [120,000]

92,736 [63,054]

530,568 [260,000]

129,793 [98,000]

16,245 [10,800]

Ages 65–69

187,928 [130,000]

76,882 [51,292]

630,984 [304,000]

127,733 [86,000]

14,657 [9,720]

Ages 70–74

192,119 [135,000]

63,905 [42,346]

572,862 [301,000]

129,714 [90,000]

14,719 [9,600]

Ages 75–79

187,393 [140,000]

54,103 [36,500]

557,809 [295,500]

102,978 [70,000]

10,718 [7,704]

Ages 80–84

202,883 [140,000]

44,505 [31,800]

548,502 [281,500]

104,504 [68,000]

10,012 [7,200]

Ages 85–89

173,990 [125,000]

36,917 [27,816]

525,041 [257,000]

130,067 [100,000]

9,289 [8,160]

Ages 90+

176,101 [140,000]

34,713 [21,600]

464,452 [262,350]

114,693 [70,000]

13,516 [6,000]


MARCH 2014 n National Mortgage Professional Magazine n


44,912 [30,000]

35,803 [29,149]

115,583 [52,500]

63,202 [45,000]

8,497 [6,000]

Single-Family Detached

191,482 [130,000]

78,680 [53,048]

576,153 [292,185]

130,731 [93,000]

15,586 [10,800]

Two-Family/ Duplex

212,293 [165,000]

75,270 [43,648]

492,265 [294,000]

176,987 [131,000]

19,956 [14,100]

Apartment/ Condo / Townhouse

249,824 [150,000]

85,115 [55,536]

806,030 [389,500]

155,765 [115,000]

18,159 [12,036]


138,694 [95,000]

104,607 [44,544]

459,482 [213,833]

111,815 [92,000]

12,092 [9,000]

*Wealth is defined as median (and mean) total household wealth. For this study, wealth is measured as the sum of housing equity, the value of vehicles, collectibles, businesses and financial assets, less the value of all debt. It excludes the net present value of public and private pension benefits. Source: Mortgage Bankers Association’s Research Institute for Housing America

By Phil Hall It is no secret that the American population is getting older. According to forecasts from the U.S. Department of Health and Human Services, there will be about 72.1 million older persons by 2030—and this will be more than twice the number recorded in 2000. Fourteen years ago, people 65 and older represented 12.4 percent of the total U.S. population; that demographic is

expected to be 19 percent of the population in 16 years. In view of these figures, one obvious question arises: is the housing market ready to accommodate this dramatic change in the population? In the new report, “A Profile of Housing and Health among Older Americans,” published by the Mortgage Bankers Association’s (MBA) Research Institute for Housing America (RIHA), the answer appears to be cautiously optimistic. “Housing demand over the next decade will be significantly impacted by

the aging of the U.S. population,” said Michael Fratantoni, executive director of the RIHA and chief economist and senior vice president of research and industry technology for the MBA. “Real estate finance must also evolve to meet these changing needs, whether older Americans age in place and continue to own their homes, or whether they rent.” The RIHA survey determined that as of 2010, there were more than 47 million near old and older American households, and 80 percent of these households were homeowners.

Furthermore, the median housing equity for older American homeowners was $125,000, while the median housingequity-to-income ratio was 2.4:1. Half of the typical older homeowner’s portfolio was composed of housing wealth, according to the survey. The survey’s data was somewhat less encouraging for older renters: 44 percent of older renters were found to be spending more than 30 percent of their annual gross income in paying rent, while older renters had nearly double the number of limitations in their abil-

ity to conduct daily activities relative to their contemporaries that owned their own residences. The survey’s authors felt that this data pointed to potential concerns on the availability of affordable rental housing for older Americans. “The study found older Americans who own their homes are more financially secure and generally experience fewer impediments to good health than their peers who rent,� said Professor Michael D. Eriksen of Texas Tech University, coauthor of the RIHA survey. “Owning a home provides the single largest asset in most Americans’ retirement portfolios, while renters have far more difficulty modifying their living space to adapt to any of the myriad physical ailments that tend to affect older people.� But for the mortgage industry, the expanding number of seniors brings about new concerns. For Rocke Andrews, vice president of NAMB—The Association of Mortgage Professionals and a broker at Lending Arizona LLC in Tucson, Ariz., a current challenge in loan origination for older borrowers is being seen in the qualification process. “Right now, we’re seeing a concern over the ability to repay ratio of 43 percent,� said Andrews. “A lot of older Americans are on fixed incomes and

retirement plans. There can be the ability to repay through asset depletion or other methods.â€? DesirĂŠe Patno, president and CEO of the National Association of Women in Real Estate Businesses, observes that locating the right type of residence for older homeowners can often taken a great deal of patience. “Finding single-level houses is a very big deal,â€? said Patno, noting that many older people are not comfortable with the staircase demands in two-level housing. “Not that many single-level homes being built. Also, not all older people want to live in a retirement community or a setting associated with being for the elderly.â€? Patno also notes that brokers that are eager to work with older borrowers often need to go the proverbial extra mile to locate them—and not in cyberspace. “This is a very different market,â€? she continues, noting that many older people prefer person-to-person communications rather than texting or e-mails. “You just cannot go on Facebook and say, ‘Here I am!’â€? Phil Hall is senior editor of National Mortgage Professional Magazine. He may be reached by e-mail at

consumers who fall outside of qm continued from page 46

safeguards that have protected the lending industry and consumers for decades. This is all possible with technology currently in place, if the industry wishes to embrace higher credit reporting quality. It has been said that to ignore history you doom yourself to repeat it. Are we going to repeat the previous errors or learn from them?

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$1 million - $10 million lines Ideal for mini-correspondents Competitive fees & interest rates No net worth requirement No non-use fee and no wire fee Warehouse line is non-captive Non-delegated underwriting

nmp professional of the month continued from page 63

why I decided that when I stepped out of baseball, it was one of those things where I felt umpiring would be perfect for me, because you have all of those qualities and traits that make you an umpire. I’ve been very fortunate to attend Major League Baseball umpire camps and meet professional umpires to improve my game. Those opportunities have made it exciting. Every year you try to better yourself with what you’re doing. Any parting words for our readers? Frommeyer: I think the thing you have

to remember is that, if you are passionate about what you do, stepping down from a leadership position doesn’t necessarily mean you won’t have a voice anymore. I am sure I’ll be vested in this industry and in NAMB in one way, shape or form, and I’m going to do everything I can to help shed a positive light on our industry. Robert Ottone is executive editor with National Mortgage Professional Magazine. He may be reached by phone at (516) 409-5555, ext. 314 or by e-mail at

Bridging the gap from broker to banker Contact: Stephen Bertrand 800-343-7160

n National Mortgage Professional Magazine n MARCH 2014

Terry W. Clemans is executive director of the National Consumer Reporting Association (NCRA). He may be reached by phone at (630) 539-1525 or e-mail


sure of all creditors, even those not being reported to the NCRAs, and the legal responsibility and benefit to report them to the mortgage consumer reporting agency to eliminate the conflict of interest of the mortgage originator potentially filtering debt to income altering disclosures. The QMCR and QMCR Score is a hybrid approach that incorporates the evaluation of more than 40 years of mortgage credit reporting processes. It includes the best practices of the automated underwriting technology systems that revolutionized the mortgage process in the mid-1990s, as well as the

taking the lead Are You Wasting Your Precious Five Seconds? Five tips for making the most of your “precious five”

MARCH 2014 n National Mortgage Professional Magazine n


By Jonathan Blackwell You’re familiar with the five second rule right? You know, the one where you’re allowed to eat the pizza you dropped on the floor as long as you get it in your belly before five seconds passes from ground to pie-hole? The “Five Second Rule” also has practical applications, especially in marketing. It is the amount of time you have to capture a reader’s attention. It must be used wisely. So, how do you make the most your precious five? Moreover, once you have their attention, how do you keep it and direct it towards your desired response: Clicking your Call to Action? Persuasive copywriting is both an art and a science. Like art and science, it can be taught and learned. But, like anything worth doing, copywriting takes practice. It also takes a blueprint and here it is.

Craft a compelling headline Eighty percent of potential readers only read one thing—the headline. It makes sense that you should devote 80 percent of your time crafting an attentiongrabber. The first rule of thumb is to always understand that you write for the reader. They want to know “What’s in it for Me?” Why should I carve five minutes out of my day to read you when I’m about to reach a new level on Candy Crush?

Conveying why they should continue reading all starts with the headline. They have problems, how are you going to solve them? The headline is a promise. A promise to solve one of their problems. If you want your precious five to turn into fruitful 15, then you must carry your momentum into the opener and …

Open with a boom! So you piqued their interest and earned the click with your stellar, attentiongrabbing headline. Your attention deficient stricken reader still has to determine if they want to invest the time in your content. You have to NAIL the opening too. There are several ways to accomplish this and they may vary depending on your target audience. For mortgage professionals, whose content lends itself to the mundane naturally, one of my favorites is the “SHOCKING STATISTIC” approach. If you’re paying attention and watch TV, I’ll bet you have seen H&R Block’s “Get Your Billion Back America” campaign. The marketers that came up with this campaign are total geniuses, period. They NAIL this formula, they grab your attention immediately through the “Shocking Statistic” approach and some clever, easy to understand analogy showing the “would be” hot dog vendor placing a stack of $500 on every seat in an empty stadium. Statistics are, surprisingly, compelling and also beautifully simple to manipulate into an attention grabbing opening.

Format your content for READABILITY (aka SCANAbility) In case you need a reminder because paying attention is difficult, you must format your post in way that serves those readers that scan and the reads that actually read and digest. That means no more than two lines before a break. Employ bold, italics and other formatting techniques. And always include arresting images and visuals. The latter holds the reader, especially the scanner, but it also is an easy way to make your post more search friendly. Keeping the reader engaged is nice, but who gives a shit if there are no readers to begin with right? They’ll tell you not to write for Google, they are dummies. You are writing for both your readers and the search engines. The minute you forget that basic premise of effective online copy is when you lose your traffic and lose your sales. Be pure, but not too pure and always remember why you are writing in the first place—to make money! Finally, use subheads. Not just for the sake of it, write exquisite subheads that draw the readers’ attention down through the article to the all-important call to action.

Toss in some bullet points I don’t think I need to repeat the attention deficit concept again, but bullet points are the perfect way to make sure the content scanner gets the gist. They are also great tools for formatting and for convey the main objectives of your content. l Convey points of emphasis

l Break up your text l Allow content scanners to get the gist l Use bullet points okay?

Close like Glengarry Glen Ross Seriously, close like it closing time at the bar. The attractive attention-grabber at the end of the bar just nailed a fourth glass of Pinot. Time to close. Walk straight up and ask … Close the Deal! In other words, simply ask for the sale. You’ll score it at least 25 percent of the time if you chose the right people to ask. If it does work, wake up, make some eggs and ask again. You won’t get the repeat sale unless you ask! So do it! Ask for the sale. Ask the waiter for a discount. Ask the McDonald’s drive thru at 11:00 a.m. if they still have biscuits. Then ask for the biscuit for free since it isn’t breakfast hours anymore and Heaven forbid they waste a delightful biscuit. Ask for extra croutons on your salad at lunch. Ask for a free coffee refill at Starbucks. Ask your boss to leave early so you can skip traffic. Ask! Seriously, just ask. The power of asking for what you want, especially if what you want will benefit the giver, is very under-realized by most. It just takes five seconds, the fabulous five is not limited to headlines and copy … it’s applicable to all things. Jonathan Blackwell is chief engagement officer for Jonathan may be reached by phone at (404) 551-3845 or e-mail

new to market continued from page 55

and mailing was a no-brainer.” SureReceipts is powered by a la mode’s SureDocs technology backbone, an eDisclosure solution used by tens of thousands of mortgage originators since 2006 to apply over 7.3 million compliant eSignatures. Lenders using SureReceipts to automate compliance with disclosure requirements will be leveraging the secure SureDocs custodial technology to deliver compliant eDisclosures. They will also eliminate error-prone manual processes, while dramatically decreasing their risk of costly penalties.

Mortech Adds LPMI Products to Mortgage Pricing Engine

Quandis Announces Upgrades to Its Public Records Search

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


n National Mortgage Professional Magazine n MARCH 2014

Quandis Inc. has announced that it has made significant enhancements to its automated searches of PACER (Public Access to Court Electronic Records), the United States Courts bankruptcy locater system. “The enhancements we made to our PACER bankruptcy locater solution further reduce the need to manually search regional courts,” said Greg Kent, vice president of data services at Quandis. “We’ve added a real-time docket pull as a search add-on. Once a search is initiated, the full docket is efficiently returned complete with an XML dataset and direct hyperlinks to case information.” The enhanced solution eliminates the need to add staff, saves huge amounts time, lowers costs, reduces errors, boosts employee productivity and returns court documents in a standardized, organized fashion to ensure data integrity. Moreover, current information is received in realtime from PACER to determine if a borrower has sought protection under federal bankruptcy laws, thus enabling organizations to compliantly initiate foreclosure proceedings. A constant automatic search of full docket bankruptcies on a regional court level returns all pending cases. Quandis’ PACER case locator service is used by servicers, lenders, default attorneys and outsourced third parties. The solution can be utilized as a standalone or as integrated with case management systems (CMSs), mortgage servicing applications and legacy systems.

Mortech, a Zillow business providing mortgage technology software solutions for mortgage bankers and secondary market teams, has announced the release of new LPMI products and functionality to the suite of Consumer Financial Protection Bureau (CFPB) compliance tools built into Mortech’s Marksman product and pricing engine. Mortech released the compliance tools last November to allow loan originators to manage compliance upon intake, prior to the loan application entering the loan origination system, and has been adding functionality since then. The newest tool added to the suite is a Lender Paid Mortgage Insurance (LPMI) module that allows the lender to pay the mortgage insurance (MI) premium for their mortgage customers. The one-time premium is added into the interest rate that is charged on the loan. Now, Marksman supports both LPMI and borrower-paid MI. If a borrower’s paid single premium is used, the points and fees calculation includes any portion of the premium that exceeds the FHA upfront mortgage insurance premium. “From a compliance standpoint, since the MI premium is added into the interest rate, the charge is completely excluded from the QM points and fees test,” said Tom Erickson, mortgage industry and compliance specialist at Mortech. “This will make it an attractive option for some lenders. If a borrower’s paid single premium is used, the points and fees calculation includes any portion of the premium that exceeds the Up-Front Mortgage Insurance Premium (UFMIP) charged on FHA loans, which is currently at 1.75 percent. This option is now built into Mortech’s software.” The Marksman Compliance Suite is a compliance management system designed to help lenders identify and address compliance issues early in the loan process, while providing the most accurate pricing available to borrowers, especially the specific compliance checks required for the Qualified Mortgage (QM) rule, including: APR/APOR rate check spread; applicable debt-to-income ratios;

lender fees and points calculation; nonqualification due to loan risk; and lender or Borrower Paid Mortgage Insurance. In addition to QM tests, Marksman also provides checks for higher-priced mortgage loans, Home Ownership and Equity Protection Act rules, investor eligibility through an exclusive partnership with AllRegs, and a workflow for anti-steering, where the loan officer can view and print an anti-steering disclosure form. All compliance tests are customizable, allowing loan managers to disable certain tests or make them mandatory. In addition, builtin auditing tools allow lenders to provide support in the case of a compliance audit.

FHA Accepts

E-Signed Records:

The Last Domino to Fall


MARCH 2014 n National Mortgage Professional Magazine n

By Jeff Knott The mortgage loan application process is notoriously lengthy, filled with delays and often confusing to the average consumer. Like everything else in their lives, applicants expect their mortgage experience to be more convenient and straightforward. Chicago lender, Guaranteed Rate, surveyed 1,000 people to identify just how much of a challenging headache the mortgage process is. Many indicated they would prefer a root canal. With evolving regulations and the new Qualified Mortgage (QM) rule—which many believe may make the process even more lengthy and daunting for consumers—this perception must be changed. One way lenders can promote a more expedient and consumerfriendly process seems rather simple— and it is. By incorporating practices that allow consumers to electronically sign and route documents securely, lenders can finally simplify a process that is widely known for being anything but easy. For instance, if an additional form needs to be signed by the applicant, it is much less of a burden and prevents further delays when the applicant can receive, sign and return the document from the convenience of his or her home without having to drive to the lenders’ office. Today’s regulatory environment holds the mortgage industry more

accountable than ever before. As a result, lenders need to alter their business methods to protect consumers and to satisfy the needs of the regulators, the obligations of the institution as well as the demands of the secondary market. Our consumer-empowered culture is influenced by everyday exchanges now taken for granted, like the capabilities we are afforded to handle any purchase or transaction—whether it be online or via mobile device—from virtually any location. It is time for lenders, and our industry as a whole, to look for ways to satisfy the demands of our consumer and change the cumbersome mortgage loan application process as we know it today. Increased regulatory scrutiny is certainly good in the long run; however, it has currently resulted in added challenges for consumers and lenders alike. Many prospective applicants wonder, based on new QM rules, if they will even qualify for a loan. Lenders have a more arduous task in thoroughly examining greater amounts of supporting documentation. Given the heightened mandate for compliance, paper-driven

processes are becoming more costly and difficult to manage. Capabilities such as electronic signatures and records afford lenders a paperless alternative, resulting in significant and ongoing backend benefits. The paper costs and associated expenses—filing, storage, courier expense, faxes—are virtually eliminated. At the same time, the other win for lenders is the creation of an enhanced online applicant experience that enables consumers to electronically consent, review, sign and transmit documents securely while communicating with all parties involved. Additionally, electronic signature will prove invaluable with the Consumer Financial Protection Bureau’s (CFPB) rule stating that all closing documents must be delivered at least three days prior to closing. The use of electronic documents will make meeting this deadline easier by reducing the amount of time it takes to complete and deliver documents. “Unfortunately, increased regulatory standards have made the mortgage loan origination process an even more challenging one for the borrower,”


explained Melanie Feliciano, ESRA board member and chief legal officer for DocMagic. “Although mortgage lending will always be document-centric, electronically sharing and signing documents allows for tighter controls by limiting the number of touch points documents pass through, greatly reducing the risk of documents being misplaced in the paper shuffle. Electronically signing and transferring records also boosts security, as paper files that many come into contact with can more easily be tampered with or altered.”

A major milestone for mortgages More consumers say they would prefer a digital or online mortgage process, and with rapidly evolving technology advancements, why haven’t electronic signatures been widely adopted? A long-awaited Federal Housing Administration (FHA) policy change has recently removed the barriers to using electronic signatures and records, simplifying the process for FHA mortgages. Beginning January 2014, FHA took an initial step to modernize and streamline the application process for FHAinsured loans. This step to extend the acceptance of e-signed records to FHA mortgage loan documents for insurance endorsements, servicing and loss mitigation, insurance claims and real estate owned property sales was publicized on Jan. 30 in the Mortgagee Letter

A digital era

but it also increases efficiency in the home-buying and loss mitigation processes, providing applicants a better lending experience. For so long, lenders have been focusing on one goal—electronic signatures—yet, they are only one piece of the puzzle. Now that lenders and servicers have the ability to store all documents electronically, it is important moving forward to expand the conversation to include electronic records, tamper-evident copies, and the related audit logs. Lenders can now look to retention protocols and streamlining processes to improve the customer experience, while keeping a good audit trail to retrieve documents years from the date they were filed. Lenders cannot

ignore the importance of electronic records for data retention and securing the relevant data associated with a loan transaction at all stages of its lifecycle. The recent FHA acceptance of electronic signature was the last major domino to fall, and coupled with other organizations’ policy changes, such as last year’s IRS decision to accept electronic signatures on 4506-T forms, all signs point to a future that consists of a completely electronic process. Jeff Knott is the secretary of the Electronic Signature and Records Association (ESRA) and AVP product management for Equifax Verification Services. He may be reached by e-mail at


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According to the California Association of Realtors (CAR), the average age of a first-time homebuyer is 31. This demographic is shaping their lives around technology due to increasing use of mobile technology and the convenience it adds to everyday life. A survey recently conducted by Aruba Network revealed that this generation’s use of technology is more popular than ever—and has no sign of abating. Of consumers polled, 70 percent had purchased a smartphone, and almost half had bought a tablet in the past 12 months, showing that convenience and flexibility is of upmost importance. Since these consumers are acquiring more devices than any other demographic, incorporating electronic records and e-signature functionality into a consumer engaging application process is necessary and will attract more business, certify secure compliance all the while increasing overall efficiency. FHA’s decision to align its requirements with common industry practices

creates an even greater business case for investing in electronic signature and record practices. Previously, a lender might have thought that an investment in e-signature was not wise without allowance of this signing method by the FHA. However now, for any lender with this product, the benefits of e-signatures are unquestionable. A process change or technology expenditure of any kind is never a simple decision; however, lenders who look at the costs associated with paper or regulatory non-compliance will recognize the apparent and significant cost savings that these investments make possible. Additionally, the e-signed record acceptance not only makes working with the FHA easier for lenders,

2014-03 issued by the U.S. Department of Housing & Urban Development (HUD). ESRA’s role in this policy change dates back to 2009, when our board members worked with FHA in its initial evaluation of the legality and security considerations as well as the business benefits of electronic signatures and records use. Kelly Purcell, ESRA member and executive vice president, Global Sales and Marketing for eSignSystems, commented, “Due to the prevalence of FHA loans in our current market, this policy change will have a significant impact on the industry as a whole. Now that the major roadblock inhibiting esignatures has been removed, more lenders will be encouraged to partake in adopting electronic processes—there is no longer any reason to deny all parties the benefits of this technology.” Prior to this announcement, FHA only accepted e-signatures on thirdparty documents that were included in loan files but were not created by lenders, therefore requiring lenders to navigate two processes—one for FHA and the other for conventional loans. Now that e-signed records are accepted, lenders no longer incur the burden of having different procedures in place for FHA mortgages, and they can now reduce costs while streamlining operations. The FHA policy change is expected to reduce the amount of incidents associated with lost paperwork, and make both the origination and loss mitigation processes easier for all parties. This momentous industry landmark paves the way for greater electronic record adoption and boosts the trend toward a paperless e-mortgage environment.

“… AVMs can provide a statistical validation of accuracy— and they are getting better at this all the time.”

Down, but Definitely Not Out: How AVMs are Surviving in Increasingly Hostile Territory By Randy Wussler

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Many lenders have begun to dramatically reduce their reliance on automated valuation models (AVMs) after several landmark regulatory changes enacted in the last few years limited their permissible use and increased the workload and cost associated with AVM use in some areas of the mortgage landscape. However, lenders should be careful to stop at “reduce” and not move to “eliminate” all AVM use. These advanced intelligence tools still offer multiple, tangible advantages at key stages of the mortgage lending cycle where their use remains very much in compliance with all relevant regulations and guidelines.

AVMs caught up in post-crisis regulatory backlash While there was plenty of blame to go around, one of the contributing factors to the real estate crash was lax lending policies on property valuations. Many lenders took shortcuts when a deeper

dive into understanding property value and condition was required. The government’s response was sweeping, but unfortunately it focused more on broad swipe limitations and controls rather than an evaluation of new underwriting rules from a cost benefit standpoint. AVMs, which were never a significant source for first origination lending, were nonetheless included in the comprehensive changes. The most far-reaching regulatory change for AVMs was the release of enhanced Interagency Appraisal and Evaluation Guidelines (IAEGs) in December 2010. The guidelines covered multiple areas, but two new requirements had the greatest impact on AVM usage: 1. Any valuation tool must address a property’s physical condition. 2. Valuation tools must assess whether supplemental intelligence such as local market conditions are impacting estimated property values.

These requirements severely limit the use of AVMs, as most models do not account for property condition or local market trends. Earlier this year, the Consumer Financial Protection Bureau (CFPB) enacted changes to Regulation B of the Equal Credit Opportunity Act (ECOA) that also affected AVM use. The changes require lenders to provide applicants with free copies of all appraisals and other written valuations (including AVMs) developed in connection with all credit applications to be secured by a first lien on a dwelling. On the surface, this regulation aims to improve consumer disclosure. However, based on lender feedback, it is also having the unintended (or perhaps intended) effect of compelling lenders to move away from AVMs in order to avoid the administrative burden of having to provide copies of AVM reports in addition to appraisals. Lenders are saying the added cost and workload of providing and explaining the AVM report to each new applicant (many of whom have never heard of an AVM) is not worth the benefits of this valuation strategy.

Advantages are tough to ignore Even with increased regulatory pressure, lenders, servicers and investors are still turning to AVMs for certain valuation requirements because of several key advantages, including: enhanced valuation accuracy, cost advantages, improved efficiency and even compliance benefits.

Validated accuracy provides greater certainty Unlike other valuation tools, AVMs can provide a statistical validation of accuracy—and they are getting better at this all the time. Most leading AVMs now offer a Forecast Standard Deviation (FSD) as a measure of accuracy in addition to the traditional confidence score. Whereas every AVM provider employs their own methodology in developing a confidence score, an FSD is a standardized, accepted statistical measure that assures users of the level of accuracy they can expect at different thresholds.

The table below demonstrates the valuation certainty the FSD can deliver. Of course, there is a hit rate trade off; specifically as users dial up a higher level of expected quality, they reduce the number of properties where enough data will be available to produce a valid valuation (see Figure 1).

The most cost-efficient valuation option Compared to other valuation tools, AVMs are cheap. Plain and simple. With the increasing cost of compliance and given an AVM’s clear pricing advantage, it is not hard to see why lenders would prefer to use an AVM wherever they can. Here is an overview breakdown of the average cost associated with different valuation solutions (see Figure 2).

The fastest valuation option While some valuation options can take up to 10 days, most leading AVMs offer Web-based access which allows for near instantaneous valuations of a property. This can become problematic for lenders who are under increasing pressure to speed their loan processing and servicing management workflows. So, when speed is of the essence, AVMs offer the clear advantage.

Enhancements enable IAEG compliance The enactment of the IAEGs rendered the use of AVMs, on their own, null and void at many stages of the mortgage lending cycle. However, when these tools are combined with other intelligence, AVMs can deliver a valuation that still delivers on the advantages detailed above while still being compliant. Specifically, many AVMs are now bundled with a low-cost report documenting the condition of the property. Some have also integrated overall market valuation trending report and a historical assessment of local distressed activity. Both of these add-ons ensure IAEG compliance while continuing to quickly deliver a cost-effective solution to lenders.

AVM sweet spots Given the advantages AVMs can deliver,


it is no surprise that many lenders continue to deploying these tools where they can—even in the face of increased regulation. DataQuick recently conducted a survey among a cross-section of small, medium and large lenders to identify the most common uses of AVMs in today’s lending cycle (see Figure 3). Given the restrictions of the aforementioned regulatory changes, the results of the survey are not surprising:

Randy Wussler is vice president of product management and marketing for San Diegobased DataQuick. He can be reached by email at or visit FIGURE 3

Percent of Respondents Indicating Their Use of AVMs for Different Mortgage Lending Applications


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The future of AVMs Regulatory changes have definitely relegated AVM usage to a much smaller, defined space within the mortgage lending cycle. But even in the wake of declining usage, lenders have benefited from both an increase in the number of AVMs available and improvements in the underlying sophistication of these


l AVMs are still viable for home equity lending because many of these transactions have a transaction value equal to or less than $250,000, making them exempt from the IAEGs. l Portfolio review involves no advancement of new monies, so AVM usage here is also exempt from IAEG requirements. Additionally, since a credit decision is not being made as a result of the use of the AVM, the use of these valuations does not require disclosure of the AVM report to the consumer under the new Regulation B changes. l The use of AVMs in refinance and first mortgage origination activity is likely for transactions with a transaction value that is equal to or less than $250,000 (another IAEG exemption). l QC activity is likely tied to efforts by lenders to verify and validate appraised values in their origination quality control efforts.

tools. In the absence of further legislation, this combination, along with the accuracy, cost and efficiency benefits AVMs deliver, will translate to lenders continuing to use AVMs wherever they can in the lending cycle.

“Rather than allow an avalanche of regulation and liability drive our market segments against each other, let’s turn these unfortunate circumstances into opportunities to work closer together to create efficiencies and drive down costs …”

TPOs, Creditors, Compliance and Vendor Management: Fear and Loathing or Opportunities? By George L. Duarte, CMC I’m writing this after attending a compliance discussion that consisted of a distinguished panel of Consumer Financial Protection Bureau (CFPB), industry and compliance experts, and an attorney. The takeaway for me as a small broker

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originator is that the liability is essentially limitless, from regulatory agencies and to private attorneys. Today’s compliance challenge is daunting for anyone, but for a smaller mortgage operation, it is overwhelm-

ing. Smaller shops don’t have compliance officers, staffers or rosters of attorneys to sift through thousands of pages of regulations, interpret their meaning and develop the compliance procedures and manuals required to remain in compliance. I’m told that the CFPB is astonished that this is the case. As it stands now, all loan originator and third-party originator shops, regardless of their size, were to have the full complement of compliance procedures and manuals necessary by Jan. 10, 2014. What we are also finding that lenders (creditors), with their legal and compliance advisors, all have their own interpretations on the regulations that can have a significant impact on the practices and procedures they require from their TPOs, with differences from one lender to another. Mix in the vendor management requirements placed on lenders, and it is inevitable that they will soon be requiring their brokers to provide all compliance materials required to prove that the broker is in compliance. Lenders will be required to do so by their regulators, and if the broker cannot provide the full suite of compliance materials required, the brokers will be suspended from doing business until they have them. This shoe could drop at any time, and is a truly terrifying situation for a small business broker/owner. I’m thinking that the obvious answer to this dilemma is for the lender/creditor to provide broker access and acceptance to the full suite of compliance materials that the lender’s compliance staffs have developed as part of the overall broker package approval. This way, the creditor can be assured that the broker has the lender approved and vetted materials specific to that creditor’s requirements. It benefits the broker because they don’t have to figure out how to develop and pay for their own custom compliance materials that still might not be in accordance of their particular creditor’s requirements. If a broker does business with several lenders as most do, then the broker would have access to and follow the compliance procedures of the specific lender they are sending the loan to. This would also satisfy the vendor man-

agement requirements the lenders are under. They would be assured of the compliance of the broker’s compliance efforts because the lender would be giving it to them, and requiring the broker to use them as part of the broker approval agreement. This is not much of a stretch at all, given the comprehensive complexity, reps and warrants that are in broker agreements now. Another idea in this marketplace with many lender/creditors looking to grow and distinguish themselves to prospective brokers is for the lender to provide loan processing services to the brokers they work with. This would be beneficial to the lenders because they would more closely monitor the processing of the loan, and use this also as a profit center. This would benefit many brokers who currently use independent contractor loan processors, or who have the overhead of loan processors on staff, by eliminating that overhead cost and management function. So what lenders are going to step up and explore these ideas? The ones who do will have a definite advantage in the marketplace and will have something significant to differentiate themselves instead of the usual “great rates, FNMA direct, great service, 24-hour underwriting” mantra that everyone is currently repeating. Rather than allow an avalanche of regulation and liability drive our market segments against each other, let’s turn these unfortunate circumstances into opportunities to work closer together to create efficiencies and drive down costs, get in compliance and deliver great mortgage loan products to consumers across our great nation. George L. Duarte, CMC is president, CEO and broker with Wentworth Enterprises Inc., parent company of Horizon Financial Associates, and Elite Real Estate Properties, real estate brokerage, located in Fremont, Calif. George has 27plus years in the mortgage industry and is the current statewide president of the California Association of Mortgage Professionals (CAMP). He may be reached by phone at (510) 377-9059 or e-mail

“Taking the time and initiative to carefully consider marketing orchestration and the value it will add to the long-term success of mortgage operations will be a major competitive advantage–and perhaps an instrumental conduit to the overall success of loan officer careers.”

Why Building a Sustainable Purchase-Based Business May Be Easier Than You Think By Rey Maninang

Understanding today’s borrowers and market challenges

Supporting the “average” borrower

Beyond the normal, inherent concerns involved in the homebuying process, today’s homebuyers are faced with a number of additional considerations, from shrinking inventory in desirable neighborhoods to multiple-offer scenarios. And, the threat of further increasing home prices and mortgage rates just adds to that stress. Even as home pricing has begun to level out, projections seem to indicate a slow and steady rise in mortgage rates—leaving some potential buyers feeling the pressure to buy sooner rather than later. What do all of these factors point to?

It should be noted that being considerate in meeting the needs of “certain” types of borrowers also means redefining what the “average” borrower looks like. Case in point: According to the U.S. Department of Housing & Urban Development (HUD), the average borrower credit score for the third quarter of 2013 dropped to 6931 (down five points from the previous year). So partnering with lenders that show a willingness to adjust their guidelines and expectations to more appropriately meet the needs of the changing market is beneficial for brokers looking to

continued on page 74


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The need to close quality loans quickly. In today’s market, brokers must be confident in their ability to lock in the best possible rate for their customers. This is imperative for both borrowers and the real estate agents who are compelled to move quickly or else risk losing a sale. However, having to move quickly doesn’t excuse hasty decision making in terms of understanding exactly what a potential borrower needs. Brokers need to be attentive to each potential borrower, taking the time to understand their unique needs in order to guide them toward lending products that are appropriate for their situation. Realistic expectations must be set right away and then reiterated throughout the qualification and funding process to avoid unnecessary disappointment. This means being honest and up front with borrowers concerning their options. And in order to do that, it’s important for brokers to stay up-to-speed on the full range of products available, keeping in mind which products may work best for certain borrowers, property types and situations.

helping people get—and stay—in homes they can afford in the long term. Government programs such as those from the Federal Housing Administration, Veterans Administration and United States Department of Agriculture should be thoroughly researched and considered as vehicles for enhancing a broker’s breadth of product—thus extending their reach. Additionally, brokers should become invested in building relationships with trusted title and escrow officers, attorneys and real estate agents who are willing to adjust their thinking

With the improvements realized in both the U.S. economy and housing market, more mortgage brokers are now reevaluating their product mix, shifting away from refinances to focus more intently on purchase-based business. While refinances continue to be somewhat of an industry staple, the increase in home values over the past year has improved the buying and selling power of borrowers previously underwater, in addition to stimulating the move-up market. Suddenly, people are far more interested in buying property than in finding out what they can get out of what they already own. While building a purchase-based business that is sustainable in the long term does take hard work and commitment, it really is a tangible goal for most brokers. To get things rolling, all that may be needed is a return to the most basic of business principles. Specifically, brokers need to understand their market and then figure out how to effectively deliver what is needed—both efficiently and responsibly.

increase their pool of loan applicants. Though borrowers in this relatively underserved market can sometimes be challenging to work with in terms of the time and processes involved, they also tend to be appreciative of brokers and their real estate agent partners who are willing to provide them with the support needed to obtain loans they might not have access to otherwise. And having a loyal customer base that will spread the word is a great way to grow a business! To be competitive in this space, brokers need to understand and appropriately utilize programs targeted toward

a sustainable purchase-based business continued from page 73

to help consumers handle today’s home buying challenges. In addition to being useful collaborative resources, these relationships will ultimately make up a broker’s referral network and drive future business opportunities.

Responsibility is still the key

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While the new lending environment may call for a more flexible approach, brokers need to have the proper procedures and processes in place to mitigate risk and remain compliant with current lending regulations. Diligence must be practiced in qualifying borrowers and ensuring that the programs suggested for them are well suited to their individual situation. Margins are defi-

nitely thinner than in previous years and there are serious monetary and reputation-based repercussions associated with pushing through loans that are substandard in any way. In an effort to encourage responsible lending practices and empower brokers to augment their businesses in ways that make sense, Carrington is in the process of creating an educational series aimed at helping mortgage professionals determine just how far outside of the box they can go when working with borrowers in the underserved (sub-640 FICO range) market. By enabling brokers to understand their own opportunities and limits within this space, we’re taking a big step toward getting more Americans into the homes they want—

and doing so responsibly. Above all, brokers should feel a certain responsibility to deliver on what they’ve promised. Failing to take that commitment seriously could mean process delays, having the borrower lose a property they are emotionally invested in to another party, or even losing the borrower altogether. Considering that each borrower has the potential to influence a broker’s business beyond the transaction at hand through referrals or repeat business, it makes sense to put whatever extra effort is needed into helping them achieve their home buying goals. If some of this seems like it should be common sense to most brokers, that’s because it is. Building a purchase-based business that is sustainable for the long term is well within reach for those brokers willing to step back and assess the current situation, appropriately utilize

the resources given to them, and then roll up their sleeves and get to work. Rey Maninang is senior vice president and national sales director for the Wholesale Lending Division of Carrington Mortgage Services LLC, responsible for overseeing the company’s wholesale production sales team, providing strategic direction and managing funded volume, profitability, revenue and recruitment to increase market share, operational and customer metrics, as well as driving customer service initiatives for growth and retention. He may be reached by phone at (949) 517-6190 or e-mail

Footnote 1—The U.S. Department of Housing and Urban Development’s “FHA Single-Family Mutual Mortgage Insurance Fund Programs” Quarterly Report to Congress, delivered Aug. 23, 2013.

“Real estate agents are looking to work with an older, experienced loan officer, not someone just starting out. Do you want to be the patient on a brain surgeon’s first day?”

Dinosaurs Do Purchases By Eric Weinstein So I recently got the following e-mail … Hello: I am contacting you to inform you about our next special focus in the March 2014 edition of National Mortgage Professional Magazine where we will be taking a closer look at “Trends in Mortgage Lending.” We are seeking your expert input on: The shift from a refi to a purchase-based market …

20 years, you may come to enjoy it. I do! Then you can join us dinosaurs. 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. These days, Eric is semiretired, doing mortgages by referral only. As he likes to put it, “He is either saving people money per month or helping them buy a new home. What a great job!” He may be reached by phone at (703) 505-8692 or email

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Here is my expert opinion. Yes, there has been a shift from refinances to purchases. BUT, since my editor will not allow me to publish a 72-word article, let me expand on this. As even a well-marinated turnip may be able to figure out, higher interest rates have led to a drastic reduction of refinances. For those just starting out in the industry, this is the apocalypse turned to reality. For us old dinosaurs, this is just another cycle we have been through. Here’s some advice, if you are new to the industry and are on 100 percent commission, just quit now. One of the few things I remember from my MBA is to always start a business in an up cycle, not one that’s down where you are about to lose your house and can’t afford the groceries cycle. Real estate agents are looking to work with an older, experienced loan officer, not someone just starting out. Do you want to be the patient on a brain surgeon’s first day? Here is what happened to me. I started working for a guy in 1993. He had an ad in the newspaper back then that brought in leads. The Internet was just a dream of Al Gore. Tuesday was the day to get my leads. We all had one day a week. But unlike the other loan officers, I came in every day. The other days were not my days, but I came in anyway. The boss was a huge believer in getting real estate agent relationships. He would say that refinances were for suckers and that we should be out there cultivating our agent connections. He would make fun of me for coming in. “Refinances come and go, but real estate agent business is consistent.” No matter what the rates are, people will always buy houses. Real estate agents are your retirement, and refinances are your bonus. He was right … to a point.

Sometimes, the other loan officers would skip their “Lead Day” and go out to see their agents instead, like he told them. I would take the calls and make tons of money. The other loan officers who went out and were new never got any business from the real estate agents. An agent can tell if you are new and they cannot afford to give up business that you might screw up. As much as they may like you, their commission is more important to them than your friendship, blood relationship or the donuts you bring them. They need someone smart, experienced, creative and who has been around. After the refinance business went away in 1994, I had done tons more deals doing refinances than they had done doing purchases. When I eventually went to see real estate agents, I was smarter than the average loan officer because I had seen so many different scenarios and knew the answers to their unusual borrower situations. A real estate agent wants the guy who can say “Yes” to a deal when five other loan officers have said “No” because they don’t know the guidelines as well. Experience wearing jeans wins out over a novice wearing a suit and tie bringing bagels. At the time I am writing this article, because I am e-mailed a month in advance to write this stuff and mortgage rates can change so drastically in a short time, rates have increased and my refinance business has dropped to practically nil. But, I have been doing this too long. I have my core group of real estate agents now who like me and send me their business. Not because I buy them lunch, but because they feel confident that I know what I am doing. And in their mind, they have already spent the commission they will make on the deal next month. A real estate agent has enough problems to worry about without having to fret over you screwing up the transaction because you don’t know it is three years after a bankruptcy on an FHA deal, not four. Out of that entire office of maybe 15 new loan officers, only three of us made it into a career as a 20-year veteran of the mortgage industry.

After hearing all this and you still want to be a loan officer in today’s purchase market, then kudos, stick with it. You may just have what it takes to not quit when things get rough. People think it is a get rich quick job. Granted, it is probably the least amount of work for the greatest amount of pay you could find. Seriously, people dig ditches for a month for the same pay we get on one deal. I am basically a lazy person, and I just can’t beat this job. You are either saving your customers money with a refinance or helping them buy a new home. But, it can be nervewracking, tedious, with lots pressure and a downright financial roller coaster. That is, when you are first starting out. After about

“To get the deal done, you will need to be flexible. Being clear about your priorities will help you decide when to bend and when to stand your ground.”

Selling Your Business: The Art of the Mortgage Operations Sale By Doug Reilly If you own a mortgage company, you’ve probably had more than one “Chicken Little” warn that the sky is falling. You’ve surely been told that your business model will not survive and it’s time to sell or merge with a larger company. As the industry consolidation continues, so will the warning calls. Nobody knows if the 76

transition. You may pay a team of attorneys, CPA’s, investment bankers, and business brokers to help you make the right decisions. But, like most people, you will try to keep the billable hours to a minimum. That means some of the nuances and details may not be covered. Although they may fall outside the scope of professional M&A advice, here are some basic, yet important things I’ve learned from my experience.

small independent brokers and bankers will survive, thrive or fail. But, we do know one thing … one day you will transfer ownership of your company to another party or shut down. When that time comes, Decide what your mortgage lending and manage- matters the most ment experience won’t help you When you find yourself engaged with negotiate the deal or navigate the a potential buyer, it can get pretty exciting. It can also become exhausting. Negotiations and due diligence can drag on. Deal terms can change creating anger and frustration. And, somehow, you still need to find the time to run your business. To prevent big mistakes, define your priorities and deal breakers now while you’re under less stress. Review them periodically and make changes when necThe only native app offering seamless intergration with your LOS! essary. This will help you stay focused Enhance the experience for your borrowers and realtors. and ensure you won’t lose sight of what matters most when the time comes to make decisions. To get the What differentiates Easy Mortgage deal done, you will need to be flexiApps LLC from everyone else? ble. Being clear about your priorities Open LOS and CRM Integration for full will help you decide when to bend automation and when to stand your ground.

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Create a plan Once you’ve decided what matters, define your goals and create a plan of action. Make sure your goals are written and measurable. Identify the steps that need to be taken, organize them into projects, and create timelines for completion. Select the responsible individuals for each project and create the follow up mechanism to measure progress, create accountability, and adapt when necessary.

Involve and align key players Your best people will need to be on board and excited. They are your leaders. They create the most value in your organization. Make sure they are

involved as a plan for the future is contemplated. Ensure that they will benefit from an eventual sale or merger. You may have reservations about engaging team members in this type of discussion. So, decide what topics are appropriate to discuss and set expectations about how decisions will be made. While, everyone should know their input is valued, they should also understand that you will make the ultimate decisions. If your team is not talking with you about the future and sustainability of your business, they are talking with someone else. Have the discussion together and let them help shape the decisions. When the time comes to announce a change, they will be able to take pride in the role they played as trusted advisors and become key promoters of the plan. They will help you deliver a consistent message and a clear direction.

Prepare for potential suitors Be ready to respond when an opportunity arises. Prepare a summary of your business and the opportunity it represents. When it comes time to present, update it and customize it to fit the specific situation and buyer. You don’t need to use a standard format. You can put it together in a way that you think makes sense and accentuates your strengths. At a minimum, be sure to include the following basics. l A company overview covering: l The history and planned threeyear future of the company l Legal and ownership structure l Licensing and physical footprints l Business model and strategy l Source of business l Key third party relationships (warehouse, investors, ABAs, desk rentals, etc.) l Core values l Financial statements for at least the past three years l Financial projections for at least the next one to two years

l Closed loan reports for the last two years and year-to-date l Employee census including job title, start date, position, compensation and benefits election.

Selecting the correct buyer

Full disclosure Share the material components of

It’s not over until it’s over

Continue running your business as usual until the deal is closed. It might make sense to hold off on major purchases and maybe even delay some hires. But, be careful. You may have Sign a Non-Disclosure several deals fall apart before finding something that works. Don’t wake up Agreement (NDA) You will provide and discuss confi- the morning after deal number three dential information. You need to pro- falls apart to find your company isn’t tect your company. Most companies prepared for tomorrow. will have a standard Non-Disclosure Agreement (NDA). Read the NDA, seek Lean into your new role legal counsel if needed, and request You probably will not be the presithe revisions you need in order to be dent or CEO anymore. It may not be comfortable sharing sensitive infor- easy to transition from having no boss to being a good employee. If you mation. can’t make that transition, you will Don’t do the limit your opportunity and those available to your team. Learning to deal on your own If the buyer is purchasing the stock of trust a team you didn’t build and your company, the deal can become learning to embrace decisions you pretty complicated. You will need would not have made is difficult. You qualified professionals that can offer will have an advantage over most advice, answer questions, and ensure managers. You’ve been in charge. You you understand all aspects of the know what you expected from team documents you sign. Even if the members and you understand what a buyer is just hiring you and your business owner faces on a daily basis. team without really buying anything, Embrace your new role and use your you should get professional advice. unique experience to excel in it. You may shut down the old entity after the transaction is complete. You Setting expectations: will need to understand the risks and Don’t overpromise … liabilities that could follow you per- over-deliver sonally. You may also need advice to No matter how well it goes, transacclose the doors properly and with as little expense as possible. Each transaction is unique and everyone’s budget has limitations. Only you can decide how much you’re willing to spend and what advice you really need. But, don’t do it on your own.

Expect the best, but plan for the worst Of course it’s important to decide how the millions will be shared when

tions are never easy and never go exactly as planned. So, be careful about the expectations you set. You will probably bring some team members in on the deal before the deal is done. It’s important that they are prepared for the deal close as well as being prepared for the deal to fall apart. Make sure they understand you aren’t going to close a deal that doesn’t make sense. That means they may put a lot of time and effort into more than one deal that goes nowhere. When you finalize a deal and make a formal announcement to your team, set realistic expectations. Make sure they are excited by the potential of the deal. But also make sure they understand it won’t be easy. To realize the potential the deal represents for everyone, they will need to be prepared for a lot of work as well as some bumps and bruises. There’s a lot to think about when it comes to selling your company or merging your team into another organization. If you haven’t thought about the tough questions and created a plan, then get started. Make sure your team knows what you’re thinking and has a voice in defining the future. In the end, teaming up with another company should be about taking a step forward. If the future isn’t brighter together, then stay apart. Doug Reilly, regional vice president for Interlinc Mortgage Services LLC, is the founder and former CEO of Consumers Mortgage Corporation (CMC) and The Home Lending Source (CMCO). His experience includes the purchase, and eventual sale, of three home health agencies, the sale of CMC, participation in the purchase of several mortgage companies by CMCO, and the eventual sale of CMCO. He may be reached by e-mail at

calendar of events N A T I O N A L



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n National Mortgage Professional Magazine n MARCH 2014

If the value of your company is primarily based on future loan volume, then you should expect your income to be tied to an earn-out. If you’re selling servicing, real estate or other assets, then you should be able to negotiate for payment up-front. Even in this scenario, it’s likely that the majority of your income will be tied to an earn-out. Make sure the buyer is financially sound and that their model and culture will be a good fit. Spend time getting to know the team you will depend upon. Make sure you can communicate well and get along. Investigate the on-boarding and integration process and talk with people who have recently been through it. Make sure you choose the right buyer and not just the one that dangles the biggest carrot. It may be the most important decision you make.

the deal goes well. Most people think that part through thoroughly. It’s what happens when things go poorly that is often overlooked or given little thought. Negotiating the upside could be the difference between rich and richer. Negotiating the downside may be the difference between losing everything and just changing jobs. So, negotiate the downside as if it’s going to happen. Then, put it behind you and go back to the optimistic view you’ll need to realize the upside.

Keep your initial presentation focused on the numbers, important trends, and the indisputable facts. If the real value of your business is tied to things that can’t be proven or quantified (goodwill, such as reputation and culture), then it’s good to include these things. But, keep the intangibles to a minimum in the beginning. Drive the message home face-to-face after a relationship has begun to develop. Be cautious about the assumptions you make. For example, submitting projections that exceed historical growth or don’t fit with industry volume expectations can back fire. It can give the impression that you’ll be unrealistic when negotiating value. It may also reduce the buyer’s perception of your value as a manager. If the buyer believes your projected volume is unreasonable, they are likely to tie as much of your income to hitting those projections as possible. So, express your optimism verbally and keep the written projections conservative.

the deal before the buyer finds out on their own. Don’t be afraid to address inadequacies of the business. It shows confidence and awareness when addressed up front. If the buyer has to ask, your response and credibility will be diminished by the position you’re in. Put yourself in the right position by being the first to bring it up. You’re better off devaluing the deal than losing the buyer’s trust or ending up in court. Unless the buyer is purchasing the stock of your company, they shouldn’t be exposed to legacy risk from your past. If that’s the case, then focus on facts that could reduce income or volume, create legal or compliance risk, or negatively impact the buyer’s reputation.

“We are now at the threshold of applying sophisticated quantitative analytics (regression analysis) that can generate hedonic inferential statistics that test and verify the significance of comparable data and the credibility of the market value conclusion.”

Appraisal Analytical Trends: Regression Analysis and the Uniform Appraisal Dataset By Eugene Pasymowski

MARCH 2014 n National Mortgage Professional Magazine n


One of the trends in the mortgage industry that should see some advancement during the coming year is regression analysis used in real estate valuations. Fannie Mae and Freddie Mac recently developed the Uniform Appraisal Dataset (UAD) in order to improve the quality and consistency of

appraisal data in the Uniform Residential Appraisal Report (URAR). The UAD requires the use of standardized formats, abbreviations, ratings as well as definitions for the condition and quality of the subject property and comparable home sales. The good news is that this is just the

beginning of a trend toward implementing nationwide an integrated cloud storage/computing real estate appraisal regression model. This model is compliant with the Uniform Standards of Professional Appraisal Practice (USPAP). It generates credible market derived adjustments to the comparable sales to arrive at an estimated market value of the subject property. Furthermore, it allows for replication and forensic analysis by a review appraiser as well as by regulatory agencies. In short, no more guess work or fabricated adjustments to the comparable sales. Regression analysis can be adapted as a real estate appraiser centric USPAP compliant valuation methodology. It is not a socalled automated valuation model (AVM) or a broker price opinion (BPO) neither of which comply with the intent of USPAP. We are now at the threshold of applying sophisticated quantitative analytics (regression analysis) that can generate hedonic inferential statistics that test and verify the significance of comparable data and the credibility of the market value conclusion. The regression analysis is a simultaneous multivariate time-series ordinary least squares hedonic matrix algebra algorithm. Simply put, regression analysis is common sense quantified. Regression analysis uses hypothesis testing to verify if the hedonic adjustment factors, such as the number of bedrooms, gross living area, site area, etc., are actually statistically significant; meaning that they significantly affect the value estimate. The inferential “T” statistic generates a confidence level of 0 percent (not significant) to 100 percent (very significant) for each factor. Likewise the inferential “F” statistic generates a confidence level of 0 percent to 100 percent for the entire model that includes all the factors as a group. Now the bad news … the current 10year old URAR (dated March 2005) is functionally obsolete and must be revised in that it relies on a sample of only three comparable sales and as many as 18 adjustment factors. The maximum adjustment factors that can be calculated based on a sample of three sales is one. The typical URAR residential appraisal report has three comparable sales in a grid format with more than three dollar adjustments for factors such as number of bed-

rooms, number of bathrooms, gross living area in square feet, lot size and garage spaces. The respective formula is: Sample Size–1 (Intercept Constant) = Net Sample Size; and Net Sample Size Number of Adjustment Factors = Residual Degrees of Freedom (what data is left to calculate). A vast majority of the URAR rely on a sample of just three comparable sales. For example: 3 Sales - 1 = 2 - 5 Adjustment Factors = Negative 3 Residual Degrees of Freedom The sample size of three sales is too small. It is mathematically impossible to calculate five adjustment factors from a sample of three sales. The value conclusion is unsupported by a sufficient number of comparable sales and thus lacks market derived adjustments resulting in an estimated market value that is not credible. A random sample of 30-plus observations has been a generally accepted rule of thumb for statistical analysis. However for an every rule there is an exception, as is the case with real estate. According to Mark R. Linne, MAI; Jeffery A. Johnson, MAI; and Steven Kane in their book, Practical Application in Appraisal Valuation Modeling, published by The Appraisal Institute: “Most statistical theory is based on behavioral sciences, which include economics and psychology. Many specific methods for dealing with uncertainty have sprung directly from psychology since there tends to be a great amount of uncertainty involving human behavior. In real estate analysis, much more of the equation is known. For example, while it is debatable that a person with two felony convictions is twice as ‘bad’ as a person with one conviction, it is always true that a home of 2,000-square feet is twice as large as a home with an area of 1,000-square feet. The greater degree of certainty in most real estate data can allow for a little more leeway in the statistical rules of thumb developed for other fields. For example, the old rule that cites a minimum of 30 obser-

vations for meaningful modeling is probably too high given that the appraiser can test output from small market models using empirical appraisal knowledge. For example, a model with only 20 sales can still be tested in the real world using appraisal judgment much more readily than a 20-person sample of convicted felons can be used in a major psychological study.� It has been my 20-plus years of real estate appraisal experience in the application of regression analysis that a small sample can often result in a credible estimate of value if the sales are truly comparable to and competitive with the subject property. Using regression analysis with a larger sample size helps identify a sale that is an outlier (not comparable) that can be deleted and the regression analysis can be rerun to arrive at a more reliable estimate of market value. Regression analysis provides a visual

presentation of the real estate market. A plethora of perplexing and mystifying numbers is converted into easy to understand regression charts. Regression analysis then creates a market derived adjustment grid for the comparable sales to arrive at an estimate of the market value of the subject property. This makes adjustments for the known factors; market condition–time, gross living area (square foot) and floor level number. The final “bottom line� adjustment is for the variance in the marketplace (unknown factors) by deducting the calculated unique statistical residual for each comparable sale. The total of the positive and negative statistical residuals is always zero. By making adjustments for the known variables minus the unique statistical residual for each comparable sale (it is a mathematical truism) all the comparable sales are adjusted to the exactly same value conclusion. Regression analysis also generates easy

to understand charts that provide a visual display of the market dynamics affecting the subject property. Real estate appraisers are generally unfamiliar with statistical quantitative analysis, especially regression analysis, and have little if any understanding that a sufficient sample size is necessary to arrive at a credible value conclusion. In today’s market, it is imperative that the real estate appraisal profession maintain its competence consistent with current valuation methods as required by USPAP. In May 2013, The Appraisal Institute hosted a conference titled “Residential Collateral Valuation: Synchronizing Client Needs and Service Delivery� with the following consensus: “Participants recommended that education providers continue efforts advanced by the Appraisal Institute to integrate statistical analysis and geo-spatial capabilities into

appraisal and end-user education; to work with stakeholders to gain acceptance of technological needs; and to work with technology providers to bring cutting edge services to the real estate market.� The Fannie Mae and Freddie Mac UAD, coupled with a yet to be revised URAR, will together be a stepping stone towards implementing nationwide an integrated cloud storage/computing real estate appraisal regression model that is compliant with the USPAP. In the very near future, this trend will result in a quantum leap in real estate appraisal valuation methodology. Eugene Pasymowski, MAI is the chief valuation officer of EMC2DATA. His expertise is in the application of econometrics (regression analysis) to the valuation of residential, commercial and industrial real estate. He may be reached by phone at (888) 778-6640 or email

Markets may be volatile, but there’s one thing you can always count on, the total commitment of our Mor tgage Team. Loyalty, continuity of ser vice and our dedication to protecting the integrity of our relationships are just a few of the things that set us apar t.

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n National Mortgage Professional Magazine n MARCH 2014

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“Currently, fixed rate mortgages (vanilla loans) account for 93 percent of all mortgages originated since 2011 and are expected to continue to dominate market share of mortgage originations.”

Adapting to the New Era of QM and ATR By Frank W. Pilk

MARCH 2014 n National Mortgage Professional Magazine n


Well, the implementation date has arrived and the era of the Qualified Mortgage (QM) has begun. The mortgage origination industry now is regulated by new rules implemented by the Consumer Financial Protection Bureau (CFPB) on Jan. 10, 2014. These new rules, developed as a result of the financial crisis of 2007 and 2008, were designed to provide mortgage applicants and borrowers with additional rights and protection from harmful practices. These new rules also created new type of mortgage, the Qualified Mortgage (QM) designed to be safer and easier to understand. At the same time, CFPB also established minimum standards lenders must use to determine that consumers have the ability to repay the mortgages they are extended– Ability-to-Repay (ATR). There also is an aspect to the QM rule that determines whether a mortgage is “Higher-Priced” or “Non-Higher Priced” for both first or subordinate lien mortgages based on spread from APR to APOR. “Non-Higher Priced” mortgages receive “safe harbor” protection from consumer recourse, while “HigherPriced “mortgages have presumptive compliance with ATR rules. There are calculators on the Federal Financial Institutions Examination Council (FFIEC) Web site to determine one type from the other. In a nutshell, the general requirements of a QM are the following: No negative amortization, no interest only payments, no balloons, maximum loan term of 30 years or less, 43 percent or less debtto-income (DTI) ratio, a limit on points and fees of three percent or less (for mortgages > $100,000), and a limit on prepayment penalties. In regards to the ATR, there are eight factors that lenders must use to determine a consumer’s ability-to-repay: l Current income or assets to repay the loan l Current employment status l Monthly mortgage payment–higher of current or fully-indexed rate l Monthly payment on second or any

other loans to secure property l Monthly T&I, HOA, and/or ground rent l Debt, alimony, child support l Monthly DTI or residual income versus Gross Monthly Income l Credit history The final QM/ATR rules (as of May 29, 2013) applies to all closed-ended mortgage loans on one- to four-unit properties. There also are exceptions to the QM rule for small lenders related to the ban on balloon mortgages. The CFPB and the new QM/ATR regulations were a frequent topic of conversation at various impromptu lender meetings at the recent MBA National Mortgage Servicing Conference in Orlando this past February. But many of the lenders seemed less concerned about QM/ATR since many sell to Fannie Mae and Freddie Mac, and more apprehensive about pending CFPB initial interviews and future audits. The GSEs have received a temporary exemption from the 43 percent DTI requirement any loan that meets the requirements and is eligible for purchase, guarantee, or insurance by GSE, VA, FHA, or USDA is a QM, regardless of DTI. At the Conference, there also was concern expressed about the renewed discussions in the industry around the alternative servicing compensation structure that originally was considered by the Federal Housing Finance Agency (FHFA) back in late 2011. The concern is that reducing the servicing compensation structure from the current 25 basis points would severely impact lenders facing increased costs from the costs for new origination processes, compliance controls, and training as well as potentially higher foreclosure costs due to added consumer protections. Given the limit on points and fees for QM mortgages, lenders must now absorb these types of compliance costs that typically would have been passed along to borrowers in the past, thus straining already tight

mortgage origination margins. Despite the increased consumer protection aspects of the new QM/ATR regulations, there could be negative impacts to mortgage borrowers as well, including reduced mortgage options (elimination of “no doc” and “stated income” loans), limited credit availability (especially for consumers with higher DTI), and increased documentation requests. In addition, the increased costs to lenders to cover the costs of compliance could lead to higher borrowing costs and ultimately could lessen credit availability for borrowers. During the course of the last year, mortgage interest rates have risen and mortgage origination volumes, particularly mortgage refinance volumes, have dropped dramatically. According to the MBA, total mortgage originations dropped by 15 percent from 2012 to 2013 and will drop by 42 percent from 2012 to 2014. In addition to the total origination volumes declining, the market share of mortgage refinances to mortgage purchases has dropped from about 65/35 in 2012 to 60/40 in 2013 to a projected 35/65 in 2014.1 This dramatic drop in mortgage loan originations has caused many lenders to cut staff; others have exited the loan production business. But this slowdown also has afforded some lenders the time and staffing resources to implement the operational requirements, compliance controls and training necessitated by the QM/ATR regulations. Compliance also was a big topic of conversation at the MBA Servicing Conference. Many lenders are scrambling to be compliant with the new regulations and are desperate for qualified employees. For you job seekers in the mortgage industry, highlight “compliance” in your resume as often as possible to assure yourself of many additional hits on your postings. One lender noted that they were able to retain several valued, long-term employees by shifting them from the loan production process to their compliance area. Their first assignment was to collaborate with their current compliance officer on expanding and implementing enhanced processes and procedures. So what are the CFPB marching orders to lenders about the new QM/ATR regulations? CFPB Deputy Director Steven

Antonakes was quite direct in his address at the MBA Servicing Conference. He expressed concern about lack of progress the mortgage servicing industry has made in addressing customer complaints and hardships, telling mortgage servicers that the days of business as usual are over. The Deputy Director noted that servicers have had more than a year to prepare for implementation of the new regulations and CFPB has published readiness guides as well as rule summaries and video guidance to support them. He is expecting good faith efforts from all servicers in implementing the new regulations while continuing to assist about two million homeowners at high risk of foreclosure and the one-in-ten homeowners that remain underwater. Despite the hard-hitting tone of his address, Director Antonakes did recognize the extreme effort (in hours and dollars) that many servicers already have invested in preparing for the new rules and noted the valued their input and engagement in the rulemaking and implementation process. He went on to say, “It’s that kind of investment in compliance that was sorely lacking in the response to the financial crisis and it speaks well of fundamental changes in the financial services industry in general.” Despite the number and complexity of the new QM/ATR regulations, there is a bright side. Currently, fixed rate mortgages (vanilla loans) account for 93 percent of all mortgages originated since 20112 and are expected to continue to dominate market share of mortgage originations. QM/ATR was implemented to protect potential borrowers from dangerous mortgage products, unfair lender practices, and exorbitant fees and charges, so, given the preponderance of vanilla loan originations, conformance may not be as daunting as it first seems. Formerly financial services manager and product manager with Fannie Mae, Frank W. Pilk is currently senior manager at Actualize Consulting.

Footnotes 1—The Wall Street Journal, Market Watch, Oct. 29, 2013. 2—Securitization and the Fixed-Rate Mortgage, Andreas Fuster & James Vickery Federal Reserve Bank of New York Staff Reports, No. 594.

“There is capital available today and a tolerance to lend against real estate that we haven’t seen since 2002-2006.”

Mortgage Lending: It’s all About Jobs and the Economy By Jonathan Hornik

Jonathan Hornik is president of Navesink River Capital, in Freehold, N.J. He is a founding partner in the law firm of LaRocca Hornik Rosen Greenberg & Blaha where he serves as co-chair of the Real Estate and Finance Department. He may be reached by phone at (732) 409-1144 or e-mail


n National Mortgage Professional Magazine n MARCH 2014

transacting, there is increased competition to finance those deals. That exerts downward pressure on finance pricing and upward pressure on loan-to-value and loanto-costs, that lenders will need to go to close. With that said, new capital providers are entering the real estate finance world today. There is capital available today and a tolerance to lend against real estate that we haven’t seen since 2002-2006. And that’s a good thing for the market and pricing. One may ask, however, are we entering the “bubble” stage? Not necessarily, because this current real estate expansion is not being driven in part by the CMBS market, which is a fraction of its pre-recession size. The CMBS market expanded dramatically between 2001 and 2006, with such expansion requiring that mortgages be put into traunches and sold off to secondary markets. This demand and lack of regulatory oversight allowed originators to make loans that should not have been made when considering traditional real estate underwriting. Underwriting loans today is being done on a more traditional basis—requiring more equity, the borrowers or sponsors need a track record of success and the real estate assets need to be in strong rising markets that transact versus raw land located in rural areas with very illiquid markets. In general, I do not believe we are in a bubble like we were in 2007, but again, we’re starting to see the market heat up from competition. The picture does change depending upon geographic location. A deal priced in South Florida is different than a deal priced in Columbus, Ohio, for example. The market is very regionalized and very market-driven within those regions, and my advice to those lenders who feel that the space in which they have typically operated is becoming too competitive, take a step back and find a new “space.” If you’re having trouble competing in Manhattan, for example, New York’s outer boroughs, (the Bronx, Brooklyn and Queens) may be a better fit. Overall, capital is available to those

ney I am not signed on to paperless transactions. I’ve always said that the borrower has the best deal in the world, because when you close, he gets cash and a lender gets an IOU signed on a piece of paper. I don’t support removing that signed piece of paper. A paperless closing—the loans I’m discussing are all secured loans, which means a mortgage, deed or trust, or deed to secure debt, or other security instrument—needs to be filed in the proper land records where the property is located. In that case, you still require signatures and there are still certain rules within each jurisdiction about the form those security entrants need to be in order to create, attach and perfect your security interest. But beyond that, technology is improving the marketplace for more lenders that “do it right.” These lenders will continue to succeed and do well. And it’s not just about size—there is always a spot for the small- to mid-sized lenders in this business, for example. The personal attention they give is important. Large lenders will enter the space–some won’t want to directly originate smaller loans; some will just want to fund the smaller lenders. The bottom line in the mortgage financing equation is that real estate really drives the economy. There is nothing that generates more jobs than ground-up construction. Consider the construction of the traditional house and how many people it employs, from the workers who actually build the house, to the appliance and furniture manufacturers who furnish the house, to the bankers and brokers who complete the transaction. Indeed, once consumer confidence rises to a level where people are comfortable to invest in real estate again, and real estate begins transacting again to historical levels, the economy and the market will really begin to emerge from the after-effects of the deep recession we’ve experienced. We’re very optimistic for 2014.

The trends in mortgage lending historically reflect those of the bigger picture—everything from the state of the economy to, in the 21st Century, the impact of technology on the business transaction and everything in between. Today, the issue at hand is the ongoing rebound from the Great Recession. For the latter, it is the evolution of the “paperless” society, the emergence of social media and their impact on the financial transaction. To begin with, over the past 12 months, we have noticed a major shift in the private lending/finance markets with more private capital entering the picture as non-traditional lending sources. The traditional lending sources—national and regional banks and thrifts—are now competing with such non-traditional lenders as private equity, hedge funds, opportunity funds and finance companies. This has recently forced such non-traditional lending sources within the past year, to take a closer look at the real estate-based asset classes. The result is that the market has become more competitive—a good thing for borrowers, because they have more options. The latest trend in real estate secured lending are private lenders, backed by major REITs and hedge funds, that are making portfolio loans secured by single-family and multi-family rentals at prices that would be considered more in line with traditional conventional lenders. The pricing we’re seeing is five and six percent, with one point at the closing versus the typical nontraditional lending sources, coming from hard money/private/finance companies that are in the nine to 11 percent range, and one to six points. Why is this happening? First, it is an acknowledgement by the finance companies that the real estate market has stabilized and that, in fact, in a number of the major cities such as New York, Miami, Las Vegas, Los Angeles and Dallas the market has actually accelerated. Real estate is transacting again, and when real estate starts

lenders who are originating good quality loans. And we’re seeing a shift to ownership—a lot of the smart money wants to lend against occupied and stabilized real estate with long-term rents in order to capture that cash flow. What’s hot right now in the marketplace is the multifamily apartment sector and single-family rentals. There are a lot of people willing to lend against them—it’s very competitive. Indeed, there are an estimated 21 billion single-family rentals available for investment in this country. With companies seeking to finance those properties, it’s an exciting time, a shift in the business from the recent past when one could not find a loan. The more competitive, non-traditional lending sources are, the better it is for the market because of the increased number of transactions that occur at better pricing. We are also seeing a market shift from one dominated by refinancing to purchasebased financing transactions. Refinancing as a general market trend occurs when real estate is not transacting. For many real estate owners, the only real option over the last five years was to find another lender and pay points and fees and a higher interest rate in order to maintain their property. Now, with prices moving up in many markets, as mentioned, it makes increasing sense to transact. Owners have an opportunity to sell the property at a price above the original purchase and repay their existing lender—and that is driving the increase in purchase-based transactions. The market has become extremely competitive for private loans, and that is affecting pricing in terms of interest rates and points charged at the closing and the amount of prepaid interest necessary from the borrower at the closing. It also affects the loan-to-value or loan-to-costs, causing them to go up. That’s good for borrowers because they are going to get better deals. It’s not as good for lenders, on the other hand, because they may have to take more risk than they may otherwise be comfortable with. And technology has also asserted itself into the picture, as it has in many other industries. For example, social media like Facebook, LinkedIn, and e-mail blasts, are all great tools from a marketing perspective. And while paperless origination, processing and closing are an apparent trend, as a practicing attor-




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MARCH 2014 n National Mortgage Professional Magazine n

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EMERALD CREEK CAPITAL Gary Baxter, Associate Ph: 646-237-2561 COMMERCIAL REAL ESTATE FINANCING EMERALD CREEK CAPITAL, is a direct bridge lender, providing shortterm loans secured by commercial real estate nationwide. Our loans are fast, flexible and catered towards the specific requirements of each client. At Emerald Creek we recognize that many borrowers are in need of immediate financing. Our goal is to provide you with a flexible loan solution in the time frame you’re looking for. Opportunities for financing include but not limited to: • Office buildings -Apartment Complexes -Mixed use -Hospitality • Warehouse facilities -Light industrial space -Land plots –Retail • Residential Investment -Multi-Family/Owner Occupied Facilities Lending Parameters: • 1-3 year terms – Up to 65% LTV - $1-$25 Million - Close within 1-2 weeks One Penn Plaza – Suite 3406 | New York | NY | 10119

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n National Mortgage Professional Magazine n MARCH 2014




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nmp news flash continued from page 16

must also contend with the current reality, and in many areas, conditions remain difficult for buyers. The market is moving toward more balance between buyers and sellers, but it is a slow and uneven process.” The Zillow Housing Confidence Index, sponsored by Zillow, Inc. and developed by Pulsenomics LLC, is measured on a 0 to 100 scale, with readings above 50 indicating positive sentiment. The overall ZHCI for the U.S. stood at 63.7 at the start of the year. Of the 20 metro areas surveyed, 11 had individual confidence levels higher than the U.S. as a whole. The overall U.S. ZHAI among all households, which measures consumers’ plans to buy and their attitudes toward the social value of homeownership, stood at 62.4.

median age of Millennial home buyers was 29, their median income was $73,600 and they typically bought an 1,800-square foot home costing $180,000. The typical Gen X buyer was percent of recent purchases; fol- 40 years old, had a median income of lowed closely by Generation X , those $98,200, and purchased a 2,130born between 1965 and 1979, at 30 square foot home costing $250,000. NAR mailed a 122-question survey percent. Percentages of recent home pur- in July 2013 to a national sample of chases among earlier generations was 148,011 home buyers and sellers who notably lower; 16 percent were purchased their homes between July Younger Boomers, those born 2012 and June 2013, using a random between 1955 and 1964; 14 percent sample of county records. It generatwere Older Boomers, born between ed 8,767 usable responses, weighted 1946 and 1954; and 9 percent were to be representative of sales on a geofrom the Silent Generation, those graphic basis; the adjusted response born between 1925 and 1945. The rate was 6.1 percent.

Your turn National Mortgage Professional Magazine invites you to submit any information on regulatory changes, legislative updates, human interest stories or any other newsworthy items pertaining to the mortgage industry to the attention of: NMP News Flash column Phone #: (516) 409-5555 E-mail: Note: Submissions sent via e-mail are preferred. The deadline for submissions is the 1st of the month prior to the target issue.

Young Homebuyers See Homeownership as Long-Term Investment


n National Mortgage Professional Magazine n MARCH 2014

Young homebuyers remain optimistic and see their home as a good investment, while older buyers are more likely to trade down to a smaller property to match changing lifestyles, according to the 2014 National Association of Realtors Home Buyer and Seller Generational Trends study, which evaluates the generational differences of recent home buyers and sellers. Eight out of 10 recent buyers considered their home purchase a good financial investment, ranging from 87 percent for buyers age 33 and younger, to 74 percent for buyers 68 and older. “Given that Millennials are the largest generation in history after the baby boomers, it means there is a potential for strong underlying demand. Moreover, their aspiration and the long-term investment aspect to owning a home remain solid among young people,” said Lawrence Yun, NAR chief economist. “However, the challenges of tight credit, limited inventory, eroding affordability and high debt loads have limited the capacity of young people to own.” Twelve percent of all recent buyers had delayed their home purchase due to outstanding debt. Of the 20 percent of Millennial buyers who took longer to save for a downpayment, 56 percent cited student loan debt as the biggest obstacle. Fifteen percent of buyers aged 34 to 48 had delayed buying, with 35 percent citing student debt and 46 percent citing credit card debt. Even with the market frictions, the study found that the largest group of recent buyers was the Millennials, sometimes called Generation Y or Generation Next, those born between 1980 and 1995, who comprised 31

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MARCH 2014 n National Mortgage Professional Magazine n


continued from page 59

‘super-adequacy,’ another type of obsolescence, and is related to excessive costs and reduced quality. If this insurance is not redundant, then wouldn’t the government be insuring mortgages that qualified private investors would not invest in otherwise, even at a 60 percent LTV? Per Dodd-Frank, requiring private lenders and MBS investors to have more accountability will lead to greater financial stability and there’s probably no better starting point than allowing them to fully accept the risk related to the first 5060 percent of a home’s value. That same month, the U.S. Treasury and HUD submitted a joint report to Congress entitled “Reforming America’s Housing Finance Market.” The report outlines the Administration’s plan to rely on the private markets as the primary source of mortgage credit and to bear the burden for losses while carefully designing support for market stability by addressing the fundamental flaws that led to the financial crisis. With respect to reforming the GSEs, the report suggests, as a means to increasing private capital ahead of the GSEs guarantees, that the GSEs be encouraged to pursue protection from private insurers while supporting the GSEs gradually decreasing their LTV cap to 90 percent. These suggestions are clearly not meant to be considered reform efforts, but rather steps to maintain a pro-cyclical influence within a depressed market. The fundamental flaws are viewed as those having to do with the lack of capital reserves to deal with the rapid rise in home prices created by a mix of poor borrower credit analysis and complex securitization performed by the private lending and investor markets. The report’s assertion that “Fannie Mae and Freddie Mac were largely on the sidelines, while private markets generated increasingly risky mortgages” reflects an official position that borrower credit risk took a larger role in the crisis than the overall leverage to housing prices, the latter of which the GSEs had been created to expand. On March 30, at the request of Freddie Mac and FHA, I presented confidential details of the feasibility study conducted by myself and Freddie Mac to a group of senior analysts from the U.S. Treasury, HUD and representatives of the National Economic Council and Council of Economic Advisors. Freddie Mac’s conclusions were conveyed and I, on their behalf, requested permission from Treasury to allow Freddie Mac to execute an experimental ‘pilot’ transaction. One week later, Freddie Mac informed me that irrespective of the support for the strategy at FHFA, confirming feedback I’d already received directly, all new endeavors for the GSEs were on hold. Within weeks the senior-most executive at Freddie

Mac advocating for the pilot resigned in response to perceptions that FHFA was not approving business plans that were consistent with the long-term viability of the company. In May, at the suggestion of FHA, I made general presentations to the FHFA, FDIC, SEC and Federal Reserve highlighting the inability of existing ‘risk sharing’ methods to perform during catastrophic financial events and argued for the necessity and viability of a new strategy based on the contingent capital process studied by Freddie Mac. There was unanimous agreement that the financial markets would be more stable with this process than without, however, each agency was unclear if it was within their particular scope, or mandate, to promote implementation. The FDIC suggested that they do not in fact take systemic financial risk, instead it is passed through to Treasury, therefore Treasury must advocate for this type of risk management process. The Federal Reserve suggested that by focusing on borrower credit quality one would not need to be concerned with housing values, which would seem to corroborate the official position of Treasury and HUD while also conflicting with the logic conveyed by some of their own economists to the Brookings Institute three months earlier. On June 6, Treasury Secretary Timothy Geithner, while discussing capital standards for large financial institutions, and specifically the topic of additional surcharges of common equity, was quoted as saying that regulators “do not need to impose on top of that requirement any of the three proposed forms of additional capital—convertible, bail-in, contingent capital instruments or counter-cyclical capital requirements.” This statement is made a year before FSOC’s feasibility study of contingent capital is submitted to Congress and presumably without reviewing the results of Freddie Mac’s analysis. The decision to maintain the continuance of a purely pro-cyclical macroeconomic policy was made and would seem to propagate throughout housing finance. On Aug. 24, in response to my continued advocacy to prioritize a pilot transaction, Freddie Mac conveyed to me that they do not take housing price risk, instead it is passed through to Treasury, therefore Treasury must advocate for this type of risk management process. Ryan W. Birtel is founder and managing director of Eolith Advisory Ltd., an independent consulting firm that provides economic and financial advisory services related to the real estate and structured finance markets. He may be reached by phone at (646) 707-1502 or e-mail

calendar of events N A T I O N A L



APRIL 2014

Friday, April 25

Wednesday, May 7


Thursday, April 3

2014 Texas Mortgage Roundup Marriott Plaza San Antonio 555 South Alamo Street San Antonio, Texas For more information, call (860) 922-3441 or e-mail

Thursday-Friday, August 7-8

Monday, April 28

2014 Florida Association of Mortgage Professionals (FAMP) Central Florida Chapter Trade Show Hilton Orlando/Altamonte Springs 350 Northlake Boulevard Altamonte Springs, Fla. For more information, call (407) 399-6120 or e-mail

NYAMB—New York Association of Mortgage Professionals 21st Annual Wholesale Conference & Trade Show Brynwood Golf & Country Club 568 Bedford Road Armonk N.Y. For more information, call (914) 315-6644 or visit

Thursday-Saturday, May 15-17


50th Annual NAPMW National Education Conference Seattle Airport Marriott 3201 S. 176th Street • Seattle, Wash. For more information, call (800) 827-3034 or visit

Thursday-Saturday, September 4-6

2014 Maryland Association of Mortgage Professionals Annual Conference Annapolis Elks Lodge #622 2517 Solomons Island Road Edgewater, Md. For more information, call (410) 752-6262 or e-mail

Thursday, April 3 Florida Association of Mortgage Professionals (FAMP) Palm Beaches Chapter 2014 Annual Trade Show Embassy Suites 1601 Belvedere Road • West Palm Beach, Fla. For more information, call (561) 320-3267 or e-mail

2014 Mortgage Matchmaker: The BusinessBuilding Event for Mortgage Professionals River City Casino 777 River City Casino Boulevard St. Louis, Mo. For more information, call (860) 922-3441, e-mail or visit

MBA’s Commercial/Multifamily Servicing & Technology Conference 2014 Marriott New Orleans 555 Canal Street New Orleans, La. For more information, call (800) 793-6222 or visit

Mortgage Bankers Association of Georgia (MBAG) 2014 Annual Convention Hilton Sandestin Beach Golf Resort & Spa 4000 South Sandestin Boulevard Destin, Fla. For more information, call (478) 743-8612 or visit

Wednesday-Thursday. April 9-10

MBA’s Legal Issues and Regulatory Compliance Conference 2014 San Diego Marriott Marquis & Marina 333 West Harbor Drive San Diego, Calif. For more information, call (800) 793-6222 or visit

Sunday-Wednesday, May 18-21 Sunday-Wednesday, May 4-7

MBA’s National Advocacy Conference 2014 Omni Shoreham Hotel 2500 Calvert Street NW • Washington, D.C. For more information, call (800) 793-6222 or visit

Thursday, April 17 23rd Annual Rocky Mountain Mortgage Lenders Expo Denver Marriott Tech Center 490 South Syracuse Street • Denver, Colo. For more information, call (303) 773-9565 or visit

Tuesday, April 22

MBA’s National Secondary Market Conference & Expo 2014 New York Marriott Marquis 1535 Broadway • New York, N.Y. For more information, call (800) 793-6222 or visit JUNE 2014

Monday-Friday, June 2-6 Monday-Thursday, May 5-8 American Land Title Association (ALTA) 2014 Federal Conference & Lobby Day The Grand Hyatt 1000 H Street NW Washington, D.C. For more information, call (202) 296-3671 or visit

MBA’s Single-Family Rental Finance Summit 2014 Renaissance Arlington Capital View 2800 South Potomac Drive • Arlington, Va. For more information, call (800) 793-6222 or visit

To submit your entry for inclusion in the National Mortgage Professional Calendar of Events, please e-mail the details of your event, along with contact information, to

MISMO’s 2014 Spring Summit Dallas/Addison Marriott Quorum by the Galleria 14901 Dallas Parkway • Addison, Texas For more information, call (202) 557-2715 or visit

Wednesday-Thursday, June 4-5 2014 Mastermind Summit The Palms Hotel 4321 West Flamingo Road • Las Vegas, Nev. For more information, visit

Saturday-Monday, September 13-15 NAMB National 2014 Luxor Resort and Casino 3900 Las Vegas Blvd South Las Vegas For more information, call (860) 922-3441, e-mail or visit

Thursday, September 18 Hawaii Association of Mortgage Brokers (HAMB) 2014 Annual Conference & Trade Show Japanese Cultural Center of Hawaii 2454 Beretania Street Honolulu, Hawaii For more information, call (808) 783-4442 or visit OCTOBER 2014

Wednesday-Saturday, October 15-18 American Land Title Association (ALTA) 2014 Annual Convention The Westin Seattle 1900 5th Avenue Seattle, Wash. For more information, call (202) 296-3671 or visit

Sunday-Wednesday, October 19-22 JULY 2014

Monday-Wednesday, July 7-9 Ultimate Mortgage Expo 2014 Hotel Monteleone 214 Royal Street • New Orleans, La. For more information, call (860) 922-3441 or e-mail


MBA’s 101st Annual Convention & Expo Mandalay Bay Hotel & Casino 3950 South Las Vegas Boulevard Las Vegas For more information, call (800) 793-6222 or visit

n National Mortgage Professional Magazine n MARCH 2014

Friday-Sunday, May 16-18

Sunday-Wednesday, May 4-7

Florida Association of Mortgage Professionals 2014 Convention & Trade Show Rosen’s Shingle Creek 9939 Universal Boulevard Orlando, Fla. For more information, call (850) 942-6411 or visit

MAY 2014

Tuesday, April 8

2014 Louisiana Mortgage Lenders Association Education Conference New Orleans Hilton Riverside 2 Poydras Street New Orleans, La. For more information, call (225) 590-5722 or visit

MARCH 2014 n National Mortgage Professional Magazine n



Y YOU OU ORIGINATE, ORIGIN NATE, T W WE EC CLOSE, LOSE, IT’S THA THAT AT S SIMPLE. IMPLE. 877.552.8737 www d Lender NMLS 2826. AFR Wholesale, a division of American Financial Resources, Inc. is a nationwide wholesale residential mortgage lender and an approved lending institution. The company is a GNMA issuer, FNMA seller/servicer, FHA Mortgagee, USDA National Lender and VA Automatic Lender. This information is provided to assist business professionals. This is not an advertisement extended to the consumer, as defined by Section 226.2 of Regulation Z. - Equal Housing Lender - Equal Opportunity Employer. Corporate office located at 9 Sylvan Way, Parsippany, NJ 07054. AB020714