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Delinquencies in Pennsylvania Fall in Latest National MBA Survey
Plus Postage & Handling
Think Reverse! Table of Contents Part I: The new pillar of retirement security Part II: Marketing reverse mortgages: It’s all about education Part III: Originating reverse mortgages Part IV: Enhancing freedom: The essence of reverse mortgages Part V: A new frontier in mortgage lending
“Atare Agbamu is one of only a handful of people in the reverse mortgage arena who possesses a commanding understanding of the reverse mortgage industry. As an originator, he has hands-on experience educating seniors and their advisors. As author of the “Forward on Reverse” column in The Mortgage Press since 2002, Atare Agbamu communicates nationally with the housing finance community, bringing the unique insights and experience of an ardent reverse mortgage expert into a wider business context. “This book combines Atare’s keen insights and know-how with extensive research to create a first of its kind resource for the reverse mortgage industry. It offers a comprehensive overview of the industry plus detailed information on marketing and originating reverse mortgages. “Present and future reverse mortgage professionals and senior advisors will profit from decades of experience skillfully woven into this book. If you plan to succeed in this industry, this book is the place to start.” —Sarah F. Hulbert, President, Senior Financial Corporation and former four-term Co-Chair of NRMLA’s Board of Directors “When I first began reviewing the contents of this book, I became quite jealous ... Atare Agbamu has set down an impressive amount of information ... And he delivers it in an easy-to-read, simple-to-understand style that will make this book essential reading for all reverse mortgage professionals.” —from the Foreword by Jim Mahoney, Co-Founder and Former Chairman, Financial Freedom Senior Funding Corporation, and former four-term Co-Chair of NRMLA’s Board of Directors “The stories [Chapter 15: Profiles in Satisfaction] are the best vehicle to increase understanding and acceptance of reverse mortgages among us laypeople. They are very compelling ...” —Therese Cain, Executive Director, Minneapolis/St. Paul Chapter of Little Brothers—Friends of the Elderly “This book should be required reading for all new loan consultants originating reverse mortgages and is recommended for experienced ones as well. This book provides excellent insight and information on preparing ahead to provide the service our seniors deserve, to ensure a smooth loan process and shorten the time to closing. Most of the problems caused in the processing and closing of reverse mortgages come from inadequate preparation.” —Deanne Opstad, AVP, Senior Underwriter, Generation Mortgage Company
PENNSYLVANIA MORTGAGE PROFESSIONAL MAGAZINE O MARCH 2011
For more information, visit www.mortgagebankers.org.
The delinquency rate for mortgage loans on residential properties in Pennsylvania was 8.89 percent at the end of the fourth quarter of 2010, a decrease of 11 basis points from the third quarter of 2010, according to the Mortgage Bankers Association (MBA). The delinquency rate excludes loans in the process of foreclosure. The percentage of loans in Pennsylvania on which foreclosure was started during the quarter fell three basis points to 0.88 percent, while the percentage of loans in the foreclosure process at the end of the quarter rose 28 basis points to 3.24 percent. The delinquency rate for prime adjustable-rate mortgage (ARM) loans decreased 88 basis points to 11.43 percent and the rate for prime fixed-rate mortgage (FRM) loans decreased 11 basis points to 4.99 percent. The delinquency rate for the sub-prime ARM loans decreased 85 basis points to 31.95 percent, while the rate for sub-prime fixedrate loans decreased 12 basis points to 24.74 percent. The delinquency rates for FHA and VA loans were 12.66 percent and 8.76 percent, respectively—up 54 basis points for FHA loans and up 5 basis points for VA loans. The foreclosure starts rate for prime ARM loans in Pennsylvania increased 29 basis points to 1.6 percent, while the rate for prime fixed-rate loans decreased seven basis points to 0.56 percent. The foreclosure starts rate for sub-prime ARM loans increased 40 basis points to 3.83 percent, while the rate for sub-prime fixed-rate loans increased 11 basis points to 2.58 percent. The percentage of prime ARM loans in foreclosure increased 26 basis points to 6.63 percent and increased 20 basis points to 1.94 percent for prime fixed-rate loans. The rate for sub-prime ARM loans increased 83 basis points to 18.56 percent, while the rate for sub-prime fixed-rate loans increased 155 basis points to 9.17 percent. The percentage of FHA loans in foreclosure increased nine basis points to 2.39 percent. The percentage of VA loans in foreclosure increased six basis points to 2.4 percent. Among the 50 states and the District of Columbia, Pennsylvania ranked 21st in delinquencies and 40th in foreclosures started. Mississippi ranked first in delinquencies with a rate of 13.30 percent and Nevada ranked first in foreclosure starts with a rate of 2.95 percent. On a national level, the delinquency rate for mortgage loans on one- to four-unit residential properties was 8.93 percent on a non-seasonally adjusted basis, down 46 basis points from 9.39 percent in the third quarter of 2010. The seasonally adjusted delinquency rate on residential properties was 8.22 percent in the third quarter, down 91 basis points from last quarter’s seasonally adjusted rate. The non-seasonally adjusted percentage of loans in which foreclosure was started during the quarter increased seven basis points to 1.27 percent, while the non-seasonally adjusted percentage of loans in the foreclosure process at the end of the quarter rose 24 basis points to 4.63 percent.
At REMN, we understand that there’s nothing ordinary about focusing on what’s important:
MARCH 2011 O
PENNSYLVANIA MORTGAGE PROFESSIONAL MAGAZINE
our customers. We recognize that continued
We’re not afraid to be different.
business from our satisfied customers is the lifeblood of our business. We believe that every application is precious and treat each file with the respect – and urgency – it deserves. Even better, at REMN, same-day approvals are guaranteed. We promise extraordinary service in an ordinary world.
Learn more at www.remnwholesale.com * Same-day decisions guaranteed if file is received by 11 a.m. EST. Real Estate Mortgage Network, Inc. is located at 499 Thornall Street, Second Floor, Edison, NJ 08837. NMLS #6521. This information is for use by mortgage professionals only and should not be distributed to or used by consumers or third parties. Information is accurate as of date of printing and is subject to change without notice.
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National Mortgage Professional Magazine
TABLE OF CONTENTS RTGAGE PRO
Volume 3, Number 3
Accurate Quality Control .................................. www.accurateqc.com ............................................6 ACSB .............................................................. www.acsbco.com ................................................29
Special Focus on “Fighting and Preventing Fraud” CSI: Mortgage Fraud By Greg Holmes
BankFinancial.................................................. www.bankfinancial.com ......................................10 Bay Equity LLC ................................................ www.bayeq.com ....................................................4 Benchmark Mortgage ...................................... www.iambenchmark.info ..................................5, 23
Lenders Should Require Red Flag Compliance for Their Own Protection By Jim DeGeronimo Sr.
Fraud Prevention … The Starting Point By Casey Fleming
Calyx Software ................................................ www.calyxsoftware.com ......................................27 Comergence Compliance Monitoring, LLC .......... www.comergencecompliance.com ..................4 & 32 Elliott and Company Appraisers, Inc................... www.appraisalanywhere.com ................................24 Flagstar Wholesale Lending .............................. www.wholesale.flagstar.com ....................Back Cover Freedom Mortgage .......................................... www.fmbranch.com ......................Inside Back Cover Frost Mortgage Lending Group .......................... www.frostmortgage.com/nmp ..............................10 GSF Mortgage Corporation ................................ www.gsfprobranch.com ..............................PA4 & 31
Features The Broker’s Future By Steven A. Milner
Guaranteed Home Mortgage.............................. www.joinguaranteed.com ....................................19
HVCC Appraisal Ordering .................................. www.hvccappraisalordering.com ..........................24 Majestic Security LLC ........................................ www.majesticsecurityidsafe.com/nmp.htm ............13
FHA Insider: FHA Makes Changes to Annual MIP and Refi Transactions By Jeff Mifsud Lykken on Leadership: How Important is “Character” in Today’s Mortgage Industry By David Lykken
Forward on Reverse: FIT for Reverse Mortgage Lenders (Part VII) … Burn-Through Risk By Atare E. Agbamu 13
MortgageProShop.com...................................... www.mortgageproshop.com ..............................PA1 Mortgage Dashboard ........................................ www.mortgagedashboard.com ................................9 Nationwide Equities Corp. ................................ www.nwecorp.com ..............................................22 PB Financial Group Corp. .................................. pbfinancialgrp.com ..............................................29 REMN (Real Estate Mortgage Network)................ www.remnwholesale.com ..........................PA2 & 35 Ridgewood Savings Bank .................................. www.ridgewoodbank.com ....................................39
StreetLinks National Appraisal Services .............. www.streetlinks.com/SCORe ..........Inside Front Cover
NMP Mortgage Professional of the Month: Steve Haslam, President and Chief Executive Officer, StreetLinks Lender Solutions
Terrace Mortgage Company .............................. www.terracemortgage.com ..................................20
TMS Funding.................................................... www.tmsfunding.com ............................................7 United Northern Mortgage Bankers Ltd. ............ www.unitednorthern.jobs..............................11 & 34
Regulatory Compliance Outlook: March 2011 … Mortgage Call Reports By Jonathan Foxx
By Robert N. Arrington
Leaders on the Frontline: The Correct Response to Changes to Loan Officer Compensation By Stewart Hunter and Jim McMahan
The Secondary Market Overview: From Bonds Production … The Markets “Do the Egyptian”
USA Cares ........................................................ www.usacares.org ................................................14 US Mortgage .................................................... www.usmortgage.com ..........................................21 Windvest Corporation ...................................... www.windvestcorp.com ........................................15
Value Nation: How Will the Dodd-Frank Act Affect Appraisal Fees? By Charlie W. Elliott Jr., MAI, SRA, ASA
PENNSYLVANIA MORTGAGE PROFESSIONAL MAGAZINE
By Dave Hershman
Columns NMP News Flash: March 2011
Heard on the Street
New to Market
NMP Mortgage Professional Resource Registry
NMP Calendar of Events
The Top Five Reasons to Believe in Lending Again
March 2011 Volume 3 • Number 3
Mortgage PROFESSIONAL N A T I O N A L
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A Message From NMP Media Corp. Executive Vice President Andrew T. Berman Using Sun Tzu’s The Art of War for fighting fraud In this month’s issue, we take a closer look at fighting fraud. Mortgage companies face an ongoing battle with fraudsters who are constantly learning new tricks to keep ahead of mortgage lenders. Sun Tzu has said in The Art of War, “Every battle is won before it is ever fought.” In this section, Jim De Geronimo Sr. shares with us why “Lenders Should Require Red Flag Compliance for Their Own Protection.” This is a way to win the battle against identity theft by ensuring proper compliance to the Federal Trade Commission’s Red Flag rules. Sun Tzu also says, “Armed conflict cannot be waged until it has been financed.” A great example of that is using the right data and reporting tools to ensure that you rarely close loans that should of never gone past application. Greg Holmes goes over some of the data tools you are probably already using, as well as some tools you might have never thought of using to prevent fraudsters from infiltrating your pipeline. Last in the section is “Fraud Prevention: The Starting Point“ by Casey Fleming. Casey’s article really shows how to build your organization by having well-laid plans and calculations to ward off fraudsters trying to attack you and your business, including everything from a solid quality control (QC) plan to compensation programs.
Loan originator compensation As we face uncertain times with the pending April 1st implementation of the Federal Reserve Board’s loan originator compensation rules, there is no shortage of opinions and experts that claim to be an authority on the matter. The fact is, I don’t know if there is enough information out there to really be able to call yourself an authority. Some are calling it the end of the mortgage broker; however, I don’t see that happening. The rules create a clear uneven playing field for mortgage brokers, and thanks to the efforts of the National Association of Mortgage Brokers (NAMB) and other industry leaders, we have a solid chance of preserving the life of the mortgage broker, and more importantly, preserving the only access to local professionals that provides mortgages in many parts of the country. This month, I let a long-time friend of mine, Steven A. Milner, share his views on loan originator compensation and how it relates to the mortgage broker. He makes some valid points, but cannot say I agree with all of his arguments. Steven is a former mortgage broker and a very well-respected professional in the states that he is actively doing business. Be sure to read, “The Broker’s Future: An Overview of the New Commission Landscape” on page 8 of this issue. Also on the loan originator compensation subject is a piece from Stewart Hunter and Jim McMahan titled, “The Correct Response to Changes to Loan Officer Compensation.” On page 23. Stewart and Jim are taking the approach of learning to live with the rule changes, rather than fighting them. We all know change will happen. Will mortgage brokers at least be able to pay their loan officers? We sure hope so. In this article, Stewart and Jim stress that by working within the changes and finding a way that you and your loan officers can live with, you can survive and thrive through the Federal Reserve’s rule change.
How important is character? Right around the time that U.S. Department of Justice greed to drop a two-year criminal investigation into former Countrywide head Angelo Mozilo on charges of insider trading, David Lykken mentioned to me that he was writing about characteristics of a good leader in the mortgage industry. Through a blog post and feedback from Facebook, Dave asked the question, “How important is character in today’s mortgage industry?” He posted his thoughts, as well as some reader feedback, in this month’s installment of “Lykken on Leadership” on page 12.
Mortgage professional of the month This month, we had the pleasure of sitting with Steve Haslam, president and chief executive officer of StreetLinks Lender Solutions, a company that was built before appraiser independence or the Home Valuation Code of Conduct (HVCC) was on the lips of all mortgage professionals. Steve was using appraisal management companies (AMCs) to help put a divide between originators and appraisers. Through years of testing this system, he and his team developed a model that is helping lenders around the country accurately appraise properties using technology and a top team of nationwide value experts. Until next month …
Andrew T. Berman, Executive Vice President NMP Media Corp.
Lykken on Lending is a weekly 60-minute show hosted by mortgage veteran of 37 yrs, David Lykken, along with special guest Alice Alvey & Joe Farr as well as featured special guests. Each week we provide our listeners with up-to-the-minute information of what is happening in mortgage and housing industry.
Sign-on weekly at nmpmag.com/lykkenonlending
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NAMB Board of Directors Officers President—Michael D’Alonzo, CMC Creative Mortgage Group 1126 Horsham Road, Suite D Maple Glen, PA 19002 (215) 657-9600 firstname.lastname@example.org Vice President—Donald J. Frommeyer, CRMS Amtrust Mortgage Funding Inc. 200 Medical Drive, Suite D Carmel, IN 46032 (317) 575-4355 email@example.com Secretary—Virginia Ferguson, CMC Heritage Valley Mortgage Inc. 5700 Stoneridge Mall Road, Suite 225 Pleasanton, CA 94588 (925) 469-0100 firstname.lastname@example.org Treasurer—John Councilman, CMC,CRMS AMC Mortgage Corporation 2613 Fallston Road Fallston, MD 21047 (410) 557-6400 email@example.com Immediate Past President—Jim Pair, CMC Mortgage Associates Corpus Christi 6262 Weber Road, Suite 208 Corpus Christi, TX 78413 (361) 853-9987 firstname.lastname@example.org
Donald Fader, CRMS SMC Home Finance P.O. Box 1376 Kinston, NC 28503-1376 (252) 523-5800 email@example.com
Olga Kucerak, CRMS Crown Lending 222 East Houston, Suite 1600 San Antonio, TX 78205 (210) 828-3384 firstname.lastname@example.org Walter Scott Excalibur Financial Inc. 175 Strafford Avenue, Suite 1 Wayne, PA 19087 (215) 669-3273 email@example.com
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President-Elect Laurie Abshier, GML, CMI (661) 283-1262 E-Mail: email@example.com
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Senior Vice President Candace Smith, CMI, CME (512) 329-9040 email@example.com
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Wells Fargo Ends Reverse Mortgage Wholesale Program
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Bay Equity is “Your Lending Home” for: Agency FHA VA High LTV with MI Now lending in 10 western states and growing, Bay Equity offers brokers the programs, technology and service to prosper in today’s mortgage environment.
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Wells Fargo Wholesale Lending has decided to discontinue offering its Home Equity Conversion Mortgage (HECM) and reverse mortgage programs to the wholesale channel. Wells Fargo will be accepting reverse mortgage applications through the close of business on Friday, March 18, and its wholesale reverse pipeline must fund by Saturday, April 30. This announcement comes on the heels of Wells Fargo leading the reverse mortgage market with a 23.1 percent market share based on early January numbers reported by Reverse Market Insight. “This move allows us to focus on forward mortgages and our other products and programs, while proving stellar customer service,” said Kathleen Vaughan, executive vice president of Wells Fargo Wholesale Lending in a statement. This move by Wells Fargo comes on the heels of an early February announcement from Bank of America that they too are exiting the reverse mortgage business. “Wells Fargo is retreating from the broker business because they perceive it as too risky,” said Atare E. Agbamu, president of ThinkReverse LLC and author of Think Reverse!: The Complete Guide to Marketing and Originating Reverse Mortgages for Mortgage Professionals and Financial Advisors. The Wells Fargo Reverse Broker’s First Web site will remain open through March 18. According to the January Reverse Market Insight first Wholesale Leaders report of 2011, Wells Fargo’s 23.1 percent share of the market was ahead of Bank of America with an 18.2 percent market share and MetLife Bank with a 14.4 percent share. For more information, visit www.wellsfargo.com.
FHA Sets New Premium Structure for 15- and 30-Year Loans to Boost Capital Reserves Bay Equity is hiring qualified, experienced and motivated Account Executives and Sales Managers. Email cover letter and resume to firstname.lastname@example.org Currently lending in: California, Arizona, Washington, Oregon, Nevada, Utah, Colorado, Idaho, New Mexico and Montana. Soon to lend in Texas.
As part of ongoing efforts to strengthen the Federal Housing Administration’s (FHA) capital reserves, FHA Commissioner David
H. Stevens has announced a new premium structure for FHA-insured mortgage loans increasing its annual mortgage insurance premium (MIP) by a quarter of a percentage point (0.25) on all 30and 15-year loans. The upfront MIP will remain unchanged at one percent. This premium change was detailed in President Obama’s fiscal year 2012 budget and will impact new loans insured by FHA on or after April 18, 2011. “After careful consideration and analysis, we determined it was necessary to increase the annual mortgage insurance premium at this time in order to bolster the FHA’s capital reserves and help private capital return to the housing market,” said Stevens. “This quarter point increase in the annual MIP is a responsible step towards meeting the Congressionally mandated two percent reserve threshold, while allowing FHA to remain the most cost effective mortgage insurance option for borrowers with lower incomes and lower downpayments.” The proposed change was announced last week as part of the Obama Administration’s report to Congress, which outlined the Administration’s plan to reform the nation’s housing finance system. The Administration’s housing finance plan also recommended that Congress allow the present increase in FHA conforming loan limits to expire as scheduled on Oct. 1, 2011. This premium change enables FHA to increase revenues at a time that is critical to the ongoing stability of its Mutual Mortgage Insurance (MMI) fund, which had capital reserves of approximately $3.6 billion at the end of FY 2010. The change is estimated to contribute nearly $3 billion annually to the Fund, based on current volume projections. It is vital that HUD take action to ensure that FHA will continue to serve its dual mission of providing affordable homeownership options to underserved American families and first-time homebuyers while helping to stabilize the housing market during these tough times. On average, new FHA borrowers will pay approximately $30 more per month. This marginal increase is affordable for almost all homebuyers who continued on page 6
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would qualify for a new loan. Existing and HECM loans insured by FHA are not impacted by the pricing change. FHA will continue to play an important role in the nation’s mortgage market in 2011. President Obama’s FY 2012 budget projects the FHA will insure $218 billion in mortgage borrowing in 2012. These guarantees will support new home purchases and re-financed mortgages that significantly reduce borrower payments. For more information, visit www.hud.gov.
HOPE NOW: 1.76 Million Loan Mods Completed in 2010 HOPE NOW has released its final 2010 loan modification data, which shows that an estimated 1.76 million homeowners received permanent, affordable loan modifications from mortgage servicers in 2010. The reported data for December shows that, for the year 2010, servicers completed approximately 1.24 million proprietary loan modifications for homeowners and 512,712 Home Affordable Modification Program (HAMP) modifications (as reported by U.S. Department of the Treasury), for an estimated total of 1.76 million. This compares with 1.24 million total loan modifications in 2009, which included 66,938 permanent HAMP loan modifications. Of particular note in the December 2010 data is that 60-plus day delinquencies totaled 2.87 million, which represented a 30 percent decrease from the December 2009 figure of 4.13 million. Some of the highlights of the 2010 data include: Total permanent loan modifications were approximately 1.76 million, compared to 1.24 million in 2009. Loan modifications with reduced principal and interest payments accounted for approximately 81 percent (one million) of all proprietary modifications. Fixed-rate modifications (initial fixed period of five years or more) accounted for 84 percent (609,000) of all proprietary modifications. Completed foreclosure sales were approximately 1.07 million, compared with 947,000 in 2009. 60-plus days delinquencies for December 2010 were 2.87 million, which represented a 30 percent drop since December 2009 (4.13 million). “2010 was a very challenging year for the housing market, but HOPE NOW’s data continues to support the fact that significant strides have been made to avail homeowners of all options before going to foreclosure,” said Faith Schwartz, executive director of HOPE NOW. “Our top priority in 2011 will be to advance execution and
implementation of these options, while focusing on improving the customer experience for homeowners who are going through the foreclosure prevention process.” For more information, visit www.hopenow.com.
George Washington University Study Examines the FHA and Policy Options to Reduce Risk According to a study released by the George Washington School of Business (GWSB), the Federal Housing Administration (FHA) moved into uncharted, risky territory as its market share and focus on higher balance mortgages increased sharply over the last few years. The report, “FHA Assessment Report: The Role and Reform of the Federal Housing Administration in a Recovering U.S. Housing Market,” was released by GWSB’s Center for Real Estate and Urban Analysis (CREUA) and was coauthored by Robert Van Order, professor of finance, and Anthony Yezer, professor of economics. The report recommends that FHA revert back to its traditional role: Helping first-time and low- to moderate-income homebuyers purchase homes, allowing the private sector to shoulder more of the risk associated with insuring larger loans. Specifically, the report finds that the 2008 expansion of FHA’s loan limits gives it the ability to insure nearly 90 percent of the available low downpayment market. As a result, FHA’s share of the home purchase market ballooned from more than six percent in 2007 to more than 56 percent in 2009. The report finds that loans valued at the highest levels—more than $350,000—perform approximately 20 percent worse than smaller loans that are within the historical scope of FHA. “Without question, FHA played a major role in keeping the housing market afloat during the economic collapse of 2008 and 2009, and we need to be careful about cutting back too rapidly,” said Dr. Van Order, Oliver T. Carr Professor of Real Estate and chair of CREUA. “However, these large loan sizes are unlikely in the long run to assist FHA in reaching its historical constituencies. Our research indicates that larger loans are likely to perform worse than FHA’s traditional market, and we are concerned that the rapid increase in FHA’s market share will be hard to manage.” The report analyzes FHA’s loan limits, observing that they have risen very rapidly since the credit crunch began. In 2006, FHA could insure loans of up to $362,790 in the higher cost markets. In response to the 2008 housing crisis FHA loan limits were revised to insure loans of up to $729,750 in higher cost markets. Congress extended these pre-crash
limits through 2011, while median home prices have significantly declined. The report finds that 95 percent of both African-American and Hispanic borrowers selecting FHA mortgages had loan amounts under $300,000. Thus, loan limits beyond this size are not reaching minority borrowers. Numerous administration officials within the U.S. Departments of the Treasury and Housing & Urban Development (HUD) have expressed their commitment to the government allowing for the return of private capital to the market. The report offers several policy solutions to accomplish this objective and reduce FHA’s “large and risky” market share. These include reverting back to using the current area median home price, rather than the 2008 number, as the basis for its regional limits and reducing the high and low end of FHA’s loan limits. For more information, visit http://business.gwu.edu/creua/.
Economic Recovery Act of 2008 (HERA) requires the FHFA to have two statutorily-designated supervision positions— the Deputy Director of the Division of Federal Home Loan Bank Regulation and the Deputy Director of the Division of Enterprise Regulation. HERA also requires that FHFA have a Deputy Director for Housing Mission and Goals. For more information, visit www.fhfa.gov.
Class Action Suit Filed Against Bank of America Over Foreclosure Activities Robbins Geller Rudman & Dowd LLP has announced that a class action lawsuit has been filed on behalf of an
institutional investor in the U.S. District Court for the Southern District of New York against Bank of America Corporation (BofA) alleging that defendants issued materially false and misleading statements regarding the company’s business. Defendants concealed defects in the recording of mortgages and improprieties with respect to the preparation of foreclosure paperwork that harmed BofA’s investors when BofA had to temporarily discontinue foreclosures and admit to the problems it was experiencing. For much of the class period, defendants also concealed that BofA had previously engaged in a practice known as “dollar rolling,” wherein it omitted billions of dollars in debt from its balance sheet reported to the public. As a result
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Federal Housing Finance Agency (FHFA) Acting Director Edward J. DeMarco has announced a restructuring of the agency’s safety and soundness and mission offices including the establishment of an integrated supervision structure and a revamped housing mission and policy division. Changes in the supervision program structure will promote greater uniformity and consistency in the examinations of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks (FHLBanks). FHFA plans to have the new structure in place by the end of the first quarter of 2011. The new housing mission team will focus on policy matters involving the conservatorship of Fannie Mae and Freddie Mac, including loss mitigation activities, public reporting on the activities of FHFA’s regulated entities, affordable housing, the state of the secondary mortgage market, and Dodd-Frank Actrelated activities. “With these changes, we are building on the strengths of our enterprise and Federal Home Loan Bank examination programs by integrating examination resources and standards,” said Acting Director DeMarco. “This integration and realignment of our supervision and examination resources, including the establishment of specialized risk teams for examinations of the enterprises and the FHLBanks, and the creation of a dedicated housing mission and policy team will place the agency in a better position to monitor safety and soundness at each regulated entity and to provide critical support to the Financial Stability Oversight Council, Congress, and the Administration on matters involving the country’s housing finance system.” The new structure is designed to improve the efficiency and effectiveness of operations agencywide and assure a clear alignment of the agency’s supervisory and housing mission and policy responsibilities. The Housing and
of defendants’ false statements, BofA’s stock traded at artificially inflated prices during the class period, reaching a high of $19.48 per share on April 15, 2010. Beginning in May 2010, BofA began disclosing aspects of its “repo-tomaturity” transactions (dollar rolling), claiming the transactions did not have a material impact on BofA’s balance sheet. Later, in October 2010, BofA announced a nationwide foreclosure halt pending a review of its foreclosure processes and whether there were irregularities with respect to its previously completed foreclosure activities. On Oct. 19, 2010, BofA announced its
The Broker’s Future An overview of the new commission landscape By Steven A. Milner
Disclaimer: The views expressed in the following article do not necessarily represent the views of National Mortgage Professional Magazine or the associations we represent. As a result of the new legislation that takes effect on April 1, 2011, mortgage brokerage firms and their loan officers (collectively known as “brokers”) will be faced with the game-changing decision of how to receive compensation going forward. There will be two options offered: 1. Receive compensation only from the lender in the form of a fixed percentage fee per loan (the broker will choose from multiple fixed percentage tiers); or 2. Receive compensation only from the consumer in the form of an origination fee (points).
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the loans in the secondary market. The legislation clearly defines the loan originator and the mortgage brokerage firm as the same entity (e.g. broker = loan originator = mortgage brokerage firm). This is an issue because if the broker decides to operate under the model of receiving compensation only from the consumer (origination points), they are forbidden from passing along that income to any of the loan originators working in the brokerage firm. “Proposed § 226.36(d)(2) would provide that, if a loan originator is compensated directly by the consumer for a transaction secured by real property or a dwelling, no other person may pay any compensation to the originator for that transaction.”
Both of these compensation options are coupled with serious drawbacks and issues unique to the broker. In addition to the “The unfortunate but above choices, compensainevitable conclusion tion to the broker will no of the new loan offilonger be able to vary with To reiterate, if the concer compensation the terms or conditions of sumer pays the brokerage the loan (interest rate). This legislation is that the firm origination points, means that brokers will no broker model will no then the brokerage firm longer be able to earn cannot share that payment longer be able to additional compensation with any of its loan origiexist in its current from “up-selling” an internators. This is because the format, if at all.” est rate to a consumer, nor law prohibits sharing comwill they have the ability to pensation and further concharge more for loans that require addi- siders the loan originator is the same tional work or time spent originating entity as the brokerage firm they work them. for. This implies that loan originators Lastly, the broker will be forced to can only receive a payment outside of comply with the new anti-steering origination income collected by the broprovisions which were designed to kerage firm, such as a salary. prevent brokers from directing or Additionally, a broker will not be “steering” a consumer to consum- able to switch compensation models mate a transaction based on the fact between receiving compensation that the broker will receive greater from the consumer or the lender on a compensation versus another type of loan-by-loan basis. In a situation loan they could have offered to the where the consumer refuses to pay consumer. To comply with this rule, origination points to the broker, the brokers will be required to disclose broker will be faced with the choice three pricing options per loan to the of losing the consumer or working for consumer: free (the broker, in this case, would (i) The lowest interest rate; have already chosen the lowest fixed (ii) The lowest interest rate and point percentage tier from the lender and combination; and will not be able to go back to the (iii) The lowest rate with the least risky lender to renegotiate). features. The unfortunate but inevitable Steven A. Milner has nearly 30 years of conclusion of the new loan officer experience in the mortgage industry, compensation legislation is that the having started his career as a loan offibroker model will no longer be able cer in 1981 in New York. Currently, to exist in its current format, if at all. Milner is the founder and chief executive In fact, a broker will be at a signifi- officer of U.S. Mortgage Corporation cant disadvantage to a lending insti- d/b/a Mortgage Concepts, a highly tution (mortgage bank), since lending esteemed new York State-licensed mortinstitutions are shielded from the gage banking corporation he founded in anti-steering prohibitions and can 1994. He may be reached by phone at continue to receive compensation (631) 580-2600, ext. 114 or e-mail tied to the interest rate from selling email@example.com.
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third quarter 2010 financial results, reporting a net loss of $7.3 billion and a diluted earnings per share loss of $0.77. BofA further reported receiving $18 billion in claims about faulty home loans that it may have to repurchase. On this news, BofA stock dropped $0.54 per share, to close at $11.80 per share on Oct. 19, 2010—a one-day decline of five percent and a nearly 42 percent decline from the stock’s class period high. According to the complaint filed, the true facts, which were known by the defendants but concealed from the investing public during the class period, were as follows: BofA did not have adequate personnel to process the huge numbers of foreclosed loans in its portfolio; BofA had not properly recorded many of its mortgages when originated or acquired, which would severely complicate the foreclosure process if it became necessary; Defendants failed to maintain proper internal controls related to processing of foreclosures; BofA’s failure to properly process both mortgages and foreclosures would impair the ability of BofA to dispose of bad loans; and BofA had engaged in a practice known internally as “dollar rolling” to remove billions of dollars of debt from its balance sheet over the prior years. For more information, visit www.rgrdlaw.com.
SEC Charges Former IndyMac Execs With Securities Fraud The Securities & Exchange Commission (SEC) has charged three former senior executives at IndyMac Bancorp with securities fraud for misleading investors about the mortgage lender’s deteriorating financial condition. The SEC alleges that former Chief Executive Officer Michael W. Perry and former CFOs A. Scott Keys and S. Blair Abernathy participated in the filing of false and misleading disclosures about the financial stability of IndyMac and its main subsidiary, IndyMac Bank FSB. The three executives regularly received internal reports about IndyMac’s deteriorating capital and liquidity positions in 2007 and 2008, but failed to ensure adequate disclosure of that information to investors as IndyMac sold millions of dollars in new stock. IndyMac Bank was a federally-chartered thrift institution regulated by the Office of Thrift Supervision (OTS) and headquartered in Pasadena, Calif. The OTS closed the bank on July 11, 2008, and placed it under Federal Deposit Insurance Corporation (FDIC) receivership. IndyMac filed for bankruptcy protection later that month. “These corporate executives made false and misleading disclosures about
IndyMac at a time when the company’s financial condition was rapidly deteriorating. Truthful and accurate disclosure to investors is particularly critical during a time of crisis, and the federal securities laws do not become optional when the news is negative,” said Lorin L. Reisner, Deputy Director of the SEC’s Division of Enforcement. According to the SEC’s complaints filed in U.S. District Court for the Central District of California, Perry and Keys defrauded new and existing IndyMac shareholders by making false and misleading statements about IndyMac’s financial condition in its 2007 annual report and in offering materials for the company’s sale of $100 million in new stock to investors. In early February 2008, IndyMac projected that it would return to profitability and continue to pay preferred dividends in 2008 without having to raise new capital. In late February 2008, Perry and Keys knew that contrary to the rosy projections released just two weeks earlier, IndyMac had begun raising new capital to protect IndyMac’s capital and liquidity positions. Specifically, Perry and Keys regularly received information that IndyMac’s financial condition was rapidly deteriorating and authorized new stock sales as a result. Yet they fraudulently failed to fully disclose IndyMac’s precarious financial condition in the 2007 annual report and the offering documents for the new stock sales. The SEC further alleges that Perry knew that rating downgrades in April 2008 on bonds held by IndyMac Bank had exacerbated its capital and liquidity positions to the extent that IndyMac had no choice but to suspend future preferred dividend payments by no later than May 2, 2008. This material information was not disclosed in IndyMac’s ongoing stock offerings. Perry also failed to disclose in various SEC filings or a May 2008 earnings conference call that IndyMac would not have been “wellcapitalized” at the end of its first quarter without departing from its traditional method for risk-weighting subprime assets and backdating an $18 million capital contribution. According to the SEC’s complaint, Abernathy replaced Keys as IndyMac’s CFO in April 2008. He similarly made false and misleading statements in the offering documents used in selling new IndyMac stock to investors despite regularly receiving internal reports about IndyMac’s deteriorating capital and liquidity positions. The SEC also alleges that in summer 2007 while serving as IndyMac’s executive vice president in charge of specialty lending, Abernathy made false and misleading statements about the quality of the loans in six IndyMac offerings of residential mortgage-backed securities (RMBS) totaling $2.5 billion. Abernathy received internal reports each month revealing that 12 to 18 percent of IndyMac’s loans continued on page 10
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contained misrepresentations regarding important loan and borrower characteristics. However, the RMBS offering documents stated that nothing had come to IndyMac’s attention that any loan included in the offering contained a misrepresentation. The SEC alleges that Abernathy failed to ensure that the quality of IndyMac’s loans was accurately disclosed and failed to disclose that information had come to IndyMac’s attention about loans containing misrepresentations. Abernathy agreed to settle the SEC’s charges without admitting or denying the allegations. He consented to the entry of an order that permanently restrains and enjoins him from violating Section 17(a)(2) and 17(a)(3) of the Securities Act and requires him to pay a $100,000 penalty, $25,000 in disgorgement, and prejudgment interest of $1,592.26. Abernathy also consented to the issuance of an administrative order pursuant to Rule 102(e) of the SEC’s Rules of Practice, suspending him from appearing or practicing before the SEC as an accountant. He has the right to apply for reinstatement after two years. For more information, visit www.sec.gov.
Trulia Survey Finds 78 Percent of Homeowners Feel Home Purchase is Their Top Investment Photo credit: Thinkstock Images
Trulia.com has released the results of its biannual “American Dream Survey,” which has tracked American attitudes towards homeownership since 2009. Harris Interactive conducted this online survey on Trulia’s behalf in January 2011 among 2,079 U.S. adults aged 18 and over. Although foreclosures and underwater homes continue to plague the current housing market, 70 percent of Americans still view homeownership as being part of their American Dream. In fact, more than three out of four homeowners (78 percent) say their homes are the best investment they ever made. Conversely, only 20 percent feel trapped in their “underwater” homes while 14 percent said they would walk away from their homes in a heartbeat if they could. “Contrary to popular belief, the
American Dream of homeownership has not turned into an American nightmare. In fact, we’re seeing a national resurgence of buyer and seller activity on Trulia.com,” said Pete Flint, chief executive officer of Trulia. “In January alone, we experienced an unprecedented level of site traffic including 11 million unique visitors— which is more than 70 percent year-overyear growth. We’ve seen leads to agents increase 60 percent year over year and are now experiencing 100,000 property views per minute.” Although many of today’s young adults came of age during the housing crash, more than one in four (26 percent) say their views on owning a home have become more positive over the past six months. With 88 percent of 1834 year old renters aspiring to be homeowners, this new generation of buyers will likely play a crucial role in stabilizing today’s uncertain real estate market. “Although the American Dream of homeownership remains surprisingly strong, it will not be an immediate reality for most people,” said Tara-Nicholle Nelson, consumer educator for Trulia. “Uncertainty has caused most would-be buyers across the nation to play a waiting game with the market, leading them to put their home purchases on hold for at least two years. However, new data shows that most renters in the South and West have long-term plans to buy, which is great news for America’s hardest-hit regions.” For more information, visit www.trulia.com.
Your turn National Mortgage Professional Magazine invites you to submit any information on regulatory changes, legislative updates, human interest stories or any other newsworthy items pertaining to the mortgage industry to the attention of:
NMP News Flash column Phone #: (516) 409-5555 E-mail: firstname.lastname@example.org Note: Submissions sent via e-mail are preferred. The deadline for submissions is the 1st of the month prior to the target issue.
and the month prior to closing (the payment due the month of closing can be included in the payoff). 2. Second liens must be subordinated to the new FHA first lien in their entirety.
FHA Makes Changes to Annual MIP and Refi Transactions On Feb. 14, the Federal Housing Administration (FHA) released Mortgagee Letter (ML) 11-10 and ML 11-11. ML 11-10 announced an increase to the annual Mortgage Insurance Premium (MIP) on standard FHA loan programs. ML 11-11 announced some changes to refinance transactions. This month’s article is dedicated to highlighting the most important aspects of these changes for you, along with a little commentary and perspective.
drastically. This, of course, translates into many more salaries to pay. When the housing and job markets fully recover and FHA volume decreases, it will be interesting to see if they shed the unneccessary positions as fast as the private sector does. Until then, the FHA will continue to be one of the most important loan programs available to MLOs and borrowers. Here are the seven things you need to know about these MIP changes:
Annual MIP changes
1. Changes are effective as of April 18, 2011.
In a U.S. Department of Housing & Urban Development (HUD) press release dated Feb. 24, 2011, Housing Commissioner David H. Stevens made the following statements regarding the MIP increase:
2. The Annual Insurance Premium will increase 0.25 percent for standard forward mortgages. The Upfront Mortgage Insurance remains at one percent.
5. Effective no later than April 15, 2011, lenders may now use the short Uniform Residential Loan Application (URLA) for non-credit qualifying streamline refinances only. 6. Effective no later than April 15, 2011, lenders no longer have to certify employment and income on streamline refinances.
8. Lenders cannot add closing costs, discount points, pre-paids or other costs to the loan balance on non-creditqualifying streamline refinances. Lenders can add closing costs and pre-paids (not discount points) only through a full-credit-qualifying refinance with an appraisal. To read this update regarding refinance changes in full, visit http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/11-11ml.pdf. As with any update that affects real estate agents, it is a good idea to use it as an opportunity to get this information out to your agents and be that trusted resource of FHA information in your community. Go FHA! Jeff Mifsud is founder of Michigan-based Mortgage Seminars LLC, a former FHA underwriter with 15-plus years of experience originating FHA loans, an FHA expert for LoanToolbox.com and creator of The FHA Originator, a monthly FHA newsletter. Jeff may be reached by phone at (248) 4038181 or visit www.MortgageSeminars.com. 11
3. The Annual Premium is now 1.15 percent for loan-to-values (LTVs) greater than 95 percent on 30-year loans. 4. The Annual Premium is now 1.10 percent for LTVs equal to or less than 95 percent on 30-year loans. 5. The Annual Premium is now 0.50 percent for LTVs greater than 90 percent on 15-year loans. 6. The Annual Premium is now 0.25 percent for LTVs equal to or less than 90 percent on 15-year loans. 7. Case numbers with no activity for six months will automatically be canceled (this rule includes case numbers pulled prior to April 18, 2011.
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To read this update regarding MIP in full, visit http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/11-10ml.pdf.
FHA refinance changes ML 11-11 provides guidance on the changes, as well as clarification on existing refinance guides. Given the length of the ML and all that it covers, it would be worthwhile for you to read this ML in its entirety. Here are the eight things you need to know about these clarifications and changes: 1. The borrower must be current on their mortgage for the month of closing
United Northern Mortgage Bankers, Ltd. Corporate NMLS ID# 7230 New York State Dept. - Licensed Mortgage Banker - License #100724 New Jersey Dept. of Banking and Insurance - Mortgage Lender - License #L0046623 Pennsylvania Dept. of Banking - Mortgage Lender - License #20887 Connecticut Dept. of Banking - Mortgage Lender - License #20372 Massachusetts Div. of Banks and Loan Agencies - Mortgage Lender & Mortgage Broker - License #MC5070 North Carolina Commissioner of Banks - Mortgage Lender - License #L140365 South Carolina State Board of Financial Institutions - Supervised Lender - License #S7, 461 Florida Dept. of Financial Institutions - Mortgage Lender - License #ML0700679 Senior Security Home Advantage is a lending area of United Northern Mortgage Bankers, Ltd. Direct FHA Endorsed Lender
The press release also noted that this will increase the sales price of an average home by about $30 per month, and help the FHA earn approximately $3 billion annually. “Make hay while the sun shines,” the saying goes, and this is exactly what FHA is doing: Capitalizing on this FHA-driven market. As mortgage loan originators (MLOs) who, at least at this point, heavily depend on FHA business to earn a living, it helps to understand why it makes sense for the FHA to raise their premiums at this time. For one thing, given the tight credit market that has caused so many thousands of borrowers to rely on FHA as their only loan option, it’s a perfect time for the FHA to make this change in order to re-capitalize their Mutual Mortgage Insurance fund. In addition, the FHA is currently dealing with the same dilemma any lender has to deal with when there is a sharp increase in volume: They have had to increase their staff
4. Effective no later than April 15, 2011, the following net tangible benefit scenarios must exist on all streamline refinances: A. The total of the new P&I and MI portion of the payment must decrease by at least five percent; or B. Refinancing from an adjustablerate mortgage (ARM) to a fixed product (see the chart in ML 11-11).
7. TOTAL Scorecard must not be used for streamline refinances.
“After careful consideration and analysis, we determined it was necessary to increase the annual mortgage insurance premium at this time in order to bolster the FHA’s capital reserves and help private capital return to the housing market. This quarter point increase in the annual MIP is a responsible step towards meeting the Congressionally-mandated two percent reserve threshold, while allowing FHA to remain the most cost-effective mortgage insurance option for borrowers with lower incomes and lower down payments.”
3. For all case numbers on investment property refinances assigned on or after April 15, 2011, the borrower must have occupied the subject property for the last 12 months to qualify for maximum streamline financing. If less than 12 months, a full credit-qualifying qualifying regular refinance is required with a maximum LTV of 85 percent.
“‘Make hay while the sun shines,’ the saying goes, and this is exactly what FHA is doing: Capitalizing on this FHA-driven market.”
By David Lykken
How Important is “Character” in Today’s Mortgage Industry? I recently posted the above question and the following on the blog section of National Mortgage Professional Magazine’s Web site:
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“In October of 2010, Angelo Mozilo, the former iconic leader of not only Countrywide Financial Corporation, but of the industry, agreed to a $67.5 million settlement to avoid civil trial on fraud and insider trading charges brought by the Securities & Exchange Commission (SEC). Over this past weekend, it was determined by investigators that the former Countrywide chief executive will not face charges after being the subject of a criminal investigation. In spite of what may seem to be vindication for Angelo, he has lost something far more valuable than all the riches he gained. He lost the respect of an industry. Character compromised, costs more than fortunes made. What good does it do to gain the whole world if you lose your soul (i.e. your character)? Character has always been synonymous with leadership. We need to return to valuing character and what things it brings rather than valuing things at the cost of character.” I ended my blog with these questions: “What are your thoughts on leadership? What do look for in a company and its management before going to work for them? What do you look for in a leader?” The feedback and responses were encouraging. If you haven’t already done so, I would encourage you to login to this blog by going to http://nationalmortgageprofessional.c om/blog/how-important-charactertodays-mortgage-industry and read the comment trail that followed.
I want to believe that the comments posted in that blog represent the vast majority of Americans who seem to have a good sense of what makes for good “character” and what doesn’t. Here are a few of the comments that were posted on the blog. Tim posted a reply expressing his astonishment and dismay that Angelo was getting away with “millions of dollars that he swindled out of Americans.” This sentiment is shared by millions of Americans and thousands of hard-working mortgage professionals who are disgusted with the apparent attitude that “greed is good” and that we were duped into believing that guys like Angelo were leaders that we should respect. The pendulum is definitely swinging back to honoring and valuing those who work hard, make a decent living and live within their means. And for those who have been blessed with an unusual amount of success, Bill and Melinda Gates come to mind, we all respect and celebrate their extraordinary philanthropic efforts. In spite of Bill Gates’ “Take no prisoners” approach to competitors, most Americans have given him “a pass” on his vicious business practices largely because of his commitment to give away the vast majority of his wealth before he passes away. As a result, Bill Gates is universally recognized as a leader. R. Nolan commented that “Character = Backbone” and “Whether you are faced with tough economic times, physical threats or personal trials, you need backbone to face the storms.” R.
Nolan went on to write about what some men (referring to Angelo Mozilo) are willing to give up in exchange for “the almighty dollar.” I loved Andrew Berman’s response quoting Abraham Lincoln that “Nearly all men can stand adversity, but if you want to test a man‘s character, give him power.” For many, man’s struggle with extraordinary success and wealth seems to validate what the historian and moralist, Lord Acton, espoused when he wrote in 1887: “Power tends to corrupt and absolute power corrupts absolutely.”
“Good character should always be synonymous with true leadership.”
In an earlier article on this topic, I wrote that in times of economic and social upheaval that we see significant shifts in power and wealth. Old leaders fall and new leaders rise along with the companies they represent. Angelo Mozilo represents one of the “old fallen leaders.” The bigger question is: Who is rising up to take his place? It is important that we as an industry make sure that the next leader(s) do not suffer from the same character flaws. Considering what Lord Acton believed, this may seem idealistic. But I would ask Lord Acton this, “Shouldn’t we keep trying to overcome our human weaknesses?” Leaders will come and go, both good and bad. What concerns me the most is whether or not we will be equipped to recognize a true leader. That is the reason I am writing this series of articles. I was encouraged by Jillayne’s blog
post response where she outlined the character traits she admires in others. She wrote that she admires people who understand “responsibility” … those who conduct their affairs in such a way as to demonstrate “respect, justice, compassion, beneficence, non-malfeasance, loyalty, fidelity and integrity.” She went on to say that she also admires “people who have made mistakes and aren’t afraid to talk about what they learned from their mistakes.” She mentioned “the virtue of being humble” and other virtues, such as “patience, courage, being a good listener.” Like many of us, Jillayne recognizes that “there are people (leaders) who could care less about becoming a virtuous person or a good leader, but instead, care only about money and profits.” Given Lord Acton’s admonition, it is imperative that we recognize this human weakness and promote leaders that embrace the characteristics that Jillayne outlined. Furthermore, we as an industry need to hold our leaders accountable when we see them drifting off the standards of what makes for good character. Leaders need accountability partners. A good leader is open and accountable to those in their organization. I’ll be writing more on that topic in future articles. Last month, I wrote how we as a nation, and for that matter, we as an industry, are facing a serious leadership crisis. That is not to say that we do not have leaders out there walking among us, but again, my concern is that many, if not most, people struggle to recognize true leadership. As one person said to me after I recently continued on page 14
And the REAL customer is???
FIT for Reverse Mortgage Lenders: Part VII Burn-Through Risk assume they face burn-through risk, among other risks. How should you start the discussion at the loan interview? Let’s try this question: Mrs. Moja, your ability to live in your home over time and fully benefit from your reverse mortgage is very important to us at FreeFloat Bank. So, who can you call on regularly if you need help with things around the house or outside? The goal of the question is to spark discussion about issues seniors and lenders may not be thinking about, issues that could impact a senior’s ability to stay at home and benefit from the loan. Since burning through their reverse cash and defaulting on borrower obligations is neither in the lender’s nor the senior’s interest, the issue of steady help for seniors is relevant to the lender’s due diligence in reverse mortgage lending. As a defense against burn-through risk, steady help is to reverse mortgage lending what capital (or cushion) is to forward mortgages. Its absence is a risk factor, its presence is a risk mitigator.
In order for Lenders to remain compliant, their Broker Vendors must be compliant. Lenders are now asking for proof of compliance in order to continue a relationship.
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Visit author Atare E. Agbamu’s blog at thinkreverse.com for his thoughts and insights on the reverse mortgage marketplace.
State Auditors and Examiners are now asking you to show them your Red Flag Compliance.
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Atare E. Agbamu is author of Think Reverse! and more than 140 articles on reverse mortgages. Since 2002, he writes the nationally-distributed column, “Forward on Reverse.” A former director of reverse mortgages at Minneapolisbased AdvisorNet Mortgage LLC, Agbamu has years of hands-on experience marketing and originating reverse mortgages. Through his advisory, ThinkReverse LLC, Agbamu advises financial professionals, institutions and regulators across the country. In a 2007 national report on reverse mortgages, AARP cited Agbamu’s work. He can be reached by phone at (612) 203-9434 and e-mail at email@example.com.
Red Flag Compliance is the LAW!
What is your prospect’s burn-through risk? Knowing a prospect’s burnthrough risk could help both lender and prospect make better reverse mortgage lending decision. In traditional forward mortgage thinking, a borrower lacking adequate capital (or cushion, one of the “5 Cs of Credit or Banking”) carries a higher risk of default if cash flow disruption occurs through unemployment, disability or other adverse events. Similarly, in assessing a senior’s ability to stay at home and benefit from a reverse mortgage over time (the goal of the Financial Interview Tool or FIT), a lack of steady help with daily living activities can expose seniors to higher burn-through risk. Just what is burnthrough risk in reverse mortgages? Burn-through risk is the chance that seniors will use up their reverse capacity faster than usual and put in doubt their ability to stay at home and meet essential borrower obligations—taxes, homeowner’s insurance and home maintenance. What kinds of help are we talking about? Help with fixing leaky faucets, fighting weeds and mowing lawns, gathering information, shopping, domestic assistance, social support, personal care, case management, healthcare services, home maintenance and advocacy. The presence of steady help could ensure the timely payment of bills. It could also help with spotting a potential cognitive decline earlier and putting plans in place for care, power of attorney, healthcare directive and other life-planning tools. The death of a spouse or a partner, late-life divorce or separation, and distance from neighbors and relatives could affect the availability of steady help. Without steady help, seniors may be forced to use scarce reverse funds to pay for routine help ordinarily available to those with spouses, partners, neighbors and relatives. If your prospect’s FIT summary indicates risk factor number five, you can
Enforcement of the Red Flag Rule has Begun!
lykken on leadership
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“Mortgage Hero” could mean just about anything, depending on who you ask. A hero is often one who quietly works behind the scenes to accomplish things. Sometimes it results in a real attention-getting operation. Most often it’s something much less noticeable, but very important to the recipients of the project. The neighborhood around Albuquerque, N.M. most often sees Ben Mendoza, a loan officer with Frost Mortgage Banking Group, as a quiet hero. One thing they know about him for sure: If an event is military-related, he’ll be there. When Ben heard about the new USA Cares Military Family Housing Education (MFHE) course, designed to provide a clear understanding of how to work with military borrowers, he knew it fit with the lending approach he already used. “I feel that my unique approach in serving my military clients by providing them the important details to make an informed decision is met with great appreciation by the respective base Family Service Groups,” said Mendoza. His certification logo for the MFHE course helps those military clients to find him. Even though he’s been working with military servicemen and servicewomen for quite some time, he picked up a couple of tips to keep him current as “The local lending expert.” Ben is quite committed to this special group of men and women he loves to help. It’s very clear to him that the job they do each day is a sacrifice for his own freedom, and he’s determined that their work won’t go unnoticed. “I’m intricately familiar with the VA guidelines and passionate about serving this special client,” Ben said. His ability to provide the quality help they’ve earned and deserve is his way of giving back. Before working with the folks at Cannon and Kirtland Air Force Bases in New Mexico, Ben Mendoza was a familiar name around Washington state naval bases: Puget Sound Naval Shipyard, Keyport Naval Undersea Warfare Center, Kitsap Naval Base, Bremerton Naval Station, Bangor Naval Submarine Base, Whidbey Island Naval Air Station and Fort Lewis Army Base. In Ben’s own words: “I am happy to contribute to Frost Mortgage Banking Group’s involvement and support of our nation’s servicemen and women. Whether it’s providing tickets to sporting events for families, hosting barbeques or aiding in relocations across the country, Frost Mortgage has more than proven its commitment to our Armed Forces for which I am grateful and honored to participate.” Yes, that’s what we consider a “Mortgage Hero.” We extend to Ben Mendoza at Frost Mortgage Banking Group our deepest appreciation on behalf of service members worldwide and congratulate him for being a true “Mortgage Hero!” Contact him at (505) 385-2835 for your mortgage needs.
Ben Mendoza Loan Ofﬁcer
505-271-6210 ofﬁce 505-385-2835 cell 866-286-0206 fax firstname.lastname@example.org
Are you a “Mortgage Hero” or know of anyone who might be? We want to hear from you if you’ve completed the FREE Military Family Housing Education Course as Mortgage Heroes deserve to be recognized for their outstanding service to America’s servicemen and servicewomen. Please send a short bio to MFHE Program Manager Beverly Frase at Beverly.Frase@USACares.org.
spoke on this topic, “I am not sure if I could recognize a good leader if he or she walked up to me and slapped me in the face.” This person was really frustrated with who he thought were leaders … his leadership role models had let him down. It is for this very reason that I am reading and writing extensively on the subject of “leadership” and “leaders.” If you missed reading the previous articles I wrote on this topic, go back and retrieve them from the archives and read them. Also, watch for my blog posts on this topic throughout the month. In order to recognize our future leaders, we need to understand the seven basic characteristics (the “7-Cs”) of a strong leader. This month, the focus is on number one characteristic, “Character.” 1. Character: Of the 7-Cs, “Character” is what matters the most. Good character should always be synonymous with true leadership. More times than not, character is hammered out in adversity. Henry David Thoreau said, “You cannot dream yourself into character; you must hammer and forge your self to one.” It is a developed deep within by choice, and not found by chance. A lesser known Johann Wofgang von Goethe said, “Character is best formed in the stormy billows of the world.” Simply put, tough times create a good environment where strong character can be built. If there is anything good about the difficulties that lie ahead, it is that we will see the opportunity for the development of strong and good character. While those with a good or strong character are often viewed as intelligent, strong character doesn’t come through intellect. As Ralph Waldo Emerson said, “Character is higher than intellect.” Next month, I will be writing about the importance of “Conviction” which is second on the list of 7-Cs. 2. Conviction: As a leader, what you believe is critical, and the extent to which you believe it will make the difference between success or failure. A strong leader has to believe deeply in their mission and this belief has to come from deep in their heart. If you follow someone with deep convictions, but tat person is anchored in a poor or compromised character, the mission is most likely doomed to fail. That is why it is essential that we first focus on character. Then, over the coming months, I will be writing about the remaining 7-Cs of leadership which are as follows: 3. Confidence: A strong leader is one that is highly confident, but not arro-
continued from page 12
gant. Arrogance is a counterfeit byproduct of confidence. 4. Charismatic: Tomorrow’s leaders will have a genuine warmth about them. They will be “real,” as well as “relatable.” 5. Clear and concise: A strong leader knows where he or she is going and can communicate that plan clearly and concisely to others. 6. Conversant in the facts: A strong leader has a thorough understanding of all aspects of any issue and is able to effectively communicate their knowledge on that topic in a way that makes it easy for everyone in the organization to understand and take the appropriate action.
“Angelo Mozilo represents one of the ‘old fallen leaders.’ The bigger question is: Who is rising up to take his place?”
7. Compassionate: A compassionate leader is not a weak leader. The strongest leaders are some of the most compassionate. They can emotionally connect with those struggling without getting caught up in their struggles. So, what are your thoughts on all of this? Are you aspiring to be one of the leaders we so desperately need in our industry? If so, I would love to hear from you. Please e-mail me at email@example.com to comment. If you are looking for a speaker at your next industry event, please call me at (512) 977-9900, ext. 101. I welcome the opportunity to speak at your next industry event, and remember to check out my radio program, “Lykken on Lending,” by logging on to www.lykkenonlending.com. David Lykken is president of mortgage strategies and managing partner with Mortgage Banking Solutions. He has more than 35 years of industry experience and has garnered a national reputation, and has become a frequent guest on FOX Business News with Neil Cavuto, Stuart Varney, Liz Claman and Dave Asman with additional guest appearances on the CBS Evening News, Bloomberg TV and radio. He may be reached by phone at (512) 977-9900, ext. 101 or e-mail firstname.lastname@example.org. To listen to author David Lykken’s online radio show, “Lykken on Lending,” log on to www.lykkenonlending.com.
Kinecta Federal Credit Union’s Wholesale Division Expands to Handle Midwest Brokers
Interthinx Announces MortgageFlex Systems to Integrate FraudGUARD and PredProtect Interthinx has announced the integration of the Interthinx FraudGUARD and PredProtect products into the MortgageFlex Residential Lending System (RLS.Net). Interthinx is a provider of risk mitigation solutions in the areas of mortgage fraud, collateral valuation, regulatory compliance, audit services and loss forecasting. MortgageFlex was founded 30 years ago to simplify loan origination and servicing for lenders. The integration provides joint Interthinx and MortgageFlex customers the ability to perform fraud prevention and risk mitigation tests on loans before approval and to verify that approved loans are in compliance with hundreds of federal and state antipredatory lending requirements, including the HOEPA Section 35 and Truth-In-Lending Act (TILA) and Mortgage Disclosure Improvement Act (MDIA) tolerances.
OpenClose and QuestSoft Partner for Compliance With Multi-State Exam LEF Submission QuestSoft, a provider of mortgage compliance software and services for lenders, has integrated its Compliance EAGLE platform with OpenClose’s loan origination software (LOS), LenderAssist, to automate the preparation and submission of loan data for the new state exam procedures. As lenders begin preparing for the new multi-state lending exams, the new QuestSoft/OpenClose partnership will significantly ease the pressures upon lenders to remain compliant. Administered jointly by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR), the multistate exams for state-charted lenders began in January, with most states rolling out the exams later this year. Part of the new exam continued on page 19
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LenderLive Network Announces Expansion of Its Servicing Division
LenderLive Network Inc. has announced its expansion into private-labeled sub-servicing and specialty servicing. To manage the expanded loan servicing division, LenderLive has
“We’re very pleased to team with MortgageFlex to provide lenders an integrated FraudGUARD solution to minimize redundant work, reduce costly errors, close loans faster, provide secure data transmission for sensitive consumer information, and minimize losses due to fraud. In addition, the integration with PredProtect provides shared clients the ability to keep pace with the surge of new laws and increased enforcement by both regulators and investors,” said Mike Zwerner, senior vice president of Interthinx. Craig Bechtle, chief operating officer for MortgageFlex, said, “Delivering FraudGUARD and PredProtect via RLS.Net requires no mapping, no programming, and no additional integration costs for MortgageFlex customers. This is a major advantage for our customers.” For more information, visit www.interthinx.com or www.mortgageflex.com.
Kinecta Federal Credit Union has opened a Midwest Operations Center in Rosemont, Ill. as part of the credit union’s expansion of its wholesale mortgage lending division. The Manhattan Beach, Calif.based credit union has seen steady growth in its wholesale mortgage operation and to better serve its Midwest brokers, the new 20,000-sq.-ft. operations center will provide complete loan processing, underwriting, and funding services along with customer service for mortgage brokers. “Kinecta’s wholesale mortgage lending division has been a fairly recent development and its positive results to date have added value to our asset base, which benefits all of our credit union members,” said Brian Robinett, chief credit officer. Robinett was formerly the chief operating officer/chief credit and operations officer of the wholesale lending division at Countrywide. “In a challenging market, it is critical for us to provide exceptional service that meets the unique needs of our customers located in the central United States. This new center will do just that,” said Paul Perez, Midwest regional loan production manager. Currently operating in more than 17 states across the nation, Kinecta Federal Credit Union is a direct lender providing a range of fixed- and adjustable-rate mortgage (ARMs) for purchase or refinance. “We are fully staffed with mortgage professionals dedicated to this market, which makes it a win-win situation for Kinecta, our brokers and business partners,” said Jim Wojton, vice president of mortgage lending operations. For more information, visit www.loankinection.com.
tapped David Vida as its new chief strategy officer and executive vice president of loan servicing. The company operates through five divisions: Origination services, conduit services, settlement services, document preparation and loan servicing. For the past two years LenderLive has been a provider of component servicing solutions to servicers in the fulfillment of loan modifications and short sales. Through its expanded servicing division, LenderLive will offer traditional subservicing of performing assets, endto-end specialty servicing to help optimize the resolution of distressed assets and will continue to provide component servicing for loan modifications, short sales and real estate-owned (REO) asset management. Last year, the company was involved in 25 percent of all Home Affordable Modification Program (HAMP) loans in the country. Vida brings more than 20 years of experience in the mortgage industry to LenderLive. Most recently, he was the founder and chief executive officer of Acqura Loan Servicing and Strategic Recovery Group. He was also president and co-founder of City Mortgage Services and held senior roles at H&R Block Mortgage and Option One Mortgage Corporation. “We anticipate David’s level of
expertise and vast experience in servicing will help us tremendously with our expansion into loan servicing and his broader knowledge of the mortgage industry will help us align all of our services into a cohesive service offering,” said Rick Seehausen, chief executive officer of LenderLive. “For the past 11 years, LenderLive has produced a tremendous track record and garnered great respect in the financial services industry in delivering scalable, flexible and innovative solutions through its methodologies and proprietary technology,” Vida said. “We plan to further leverage the LenderLive platform and strategically integrate servicing into the company’s offerings and corporate culture.” For more information, visit www.lenderlive.com.
Steve Haslam, President and Chief Executive Officer StreetLinks Lender Solutions As a lender, I had utilized StreetLinks for several years. They were the best AMC I had ever worked with. As the regulatory environment for appraisal procurement was shaping up, I thought the purchase of StreetLinks was a move in a positive direction.
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Each month, National Mortgage Professional Magazine will focus on one of the industry’s top players in our “Mortgage Professional of the Month” feature. Our readers are encouraged to contact us by e-mail at email@example.com for consideration in being featured in a future “Mortgage Professional of the Month” column. This month, we had a chance to chat with Steve Haslam, president and CEO of StreetLinks Lender Solutions headquartered in Indianapolis. Steve began his career with Associates Financial Services in the late 1970’s as a manager in training in the consumer finance division. During his 12-year tenure there, he ran regional and national retail lending and operations platforms. Associates Financial was eventually bought by Citigroup and Steve moved on to the appraisal management industry after being recruited by LandSafe Inc., Steve was later recruited by NovaStar Financial to build up the company’s branch network and run the company’s retail channel. With the implementation of the Home Valuation Code of Conduct (HVCC), NovaStar purchased StreetLinks National Appraisal Services, the company that, despite a recent name
change to StreetLinks Lender Solutions, Haslam runs to this day. What was it that NovaStar saw in valuations and appraisals that made the company’s leadership decide to acquire StreetLinks? Throughout my 20-year lending career, I always believed that, sooner or later, an independent appraisal process would need to be enforced in the mortgage industry. I always used AMCs [appraisal management companies] to accomplish this because I always felt that the appraisal process should be separated from the origination process. I thought it was healthy for good loan performance and operatonal efficiency. It never made sense to tie up loan officers with appraisers from a time management standpoint and to avoid any potential conflict of interest. When there was word of the HVCC [Home Valuation Code of Conduct] coming on the scene in late 2008, it seemed that appraiser independence was finally being taken seriously and that there was going to be stricter enforcement.
Do you feel the smaller regionalized lenders that have a smaller footprint are better off using self-managed appraisal technology? Technology in the appraisal process is appropriate if it is used properly and the lender has a stable of existing and properly-vetted appraisers. We always recognized the validity of a self-managed software platform, but we just never saw one we felt offered the best differentiation and best execution. We assessed whether to build this technology ourselves or whether to acquire someone in the market that could provide us with this option. That is when we discovered Corvisa. They had been on the market for less than a year, but built this wonderful technology, complete with compliance functions, tracking options, reporting mechanisms and accounting capabilities. Corvisa’s product had the ability to select appraisers on the basis of the proximity to the subject, service history and quality history, and allowed lenders to track their appraisal pipelines and keep a close watch on compliance. StreetLinks doesn’t believe in telling a lender what they need. We consult with the lender and find out about their lending model, lending footprint and their desired appraisal process flow. Then, we customize an appraisal fulfillment solution for their situation. In other words, we basically design a unique solution from our suite of valuation products, using the technology and processes that best serve that lender’s compliance and business needs.
So your acquisition of Corvisa has allowed you to design products or solutions around the needs of the lender, rather than saying “These are the products that we have.” Yes. Other companies do one or the other. Companies that offer only full AMC services attempt to persuade the lender that the AMC solution is the best and any other solution is wrong. If you look at advertisements for self-managed technology companies, they slam the AMC solution and tout that their technology solution is the best available. Quite frankly, that’s not the way to present a product. StreetLinks never did that, even when we only had a full AMC solution prior to “LenderX,” our self-managed solution. We just want to work with our customers to tailor the best solution for their business model. I think that’s the right way to approach the business.
“We envision ourselves in the next three to five years becoming the industry’s premier lending solution company.”
Is the Corvisa product something that is an installed product or is it a Software as a Solution (SaaS) service product? It’s now called StreetLinks LenderX and it’s an SaaS solution. It can also be easily integrated with the customer’s existing loan origination system (LOS). Our LenderX operations team works closely with the customer to make sure that their staff and appraisers are trained and all of the users and account preferences are properly loaded into the system. Which do you think, in the last five years, has been the greatest advancement in technology in the appraisal and valuation space? This is going to sound self-serving, but to
the best of my knowledge, any advancement on the appraisal technology side has only come from proprietary and innovative companies. The larger AMCs, in my view, are still stuck on old legacy technology. This has been advantageous for StreetLinks. When NovaStar acquired StreetLinks, the acquisition was based on our personal experiences with the company. We viewed us as acquiring a premier full-service and innovative AMC with the best technology platform in the AMC space. When we bought Corvisa late last year, we viewed that acquisition as the purchase of an innovative technology company. They had proprietarily built a best-of-breed lender-executed appraisal management software platform that we felt dwarfed anything else that was on the market. We found two companies in StreetLinks and Corvisa that excelled at what they do and that’s why we purchased them. It has made a huge difference for us.
What is your feeling about the current role of the mortgage broker?
What will be some other positive and/or negative influences of Dodd-Frank? I think the biggest positive of Dodd-Frank Act is that it basically unifies this menu of appraiser independence regulations. You had the HVCC that only dealt with conforming loans; FHA had their own version that was very similar to HVCC with some nuances that came out months later. You had different lenders that applied the HVCC rules to FHA loans prior to FHA coming out with their own. You had other lenders that ran one set of appraisal models against their conforming loans and then you had them run a different model against their FHA loans. Dodd-Frank solidifies appraiser independence procedures across all residential loans and lenders. DoddFrank acknowledges that appraiser independence is important and it is here to stay. We really won’t know of any downside until it is enacted. What’s the most difficult decision you ever had to make in your career? I think the most difficult decision I ever made was resigning from Associates
Do you have any mentors who have coached you through in the industry? The first person that comes to mind is Tom Slone who ran the U.S. consumer division when I was at Associates Financial. He started at Associates in his late teens and retired from that company many decades later. He worked his way up from an entry level consumer finance position to be the president of a Fortune 100 global consumer finance company. I always felt Tom guided my career at The Associates and moved me into areas of exposure where I could gain knowledge so that I could grow. Tom ultimately became president of Big Brothers & Big Sisters for a while. Tom would be the first person that comes to mind as kind of a business father. Lance Anderson, who serves as president and chief executive officer of NFI, the majority owner of StreetLinks, is another mentor of mine. I have been working alongside Lance for almost eight years now and he has been a great inspiration to me in many ways. He has been terrific to work with and I’ve learned a lot from him. Are there any particular management styles or techniques that you have implemented or utilized at StreetLinks or throughout your career? The frontline employees—those who communicate with our lender clients and appraisers—are really the folks who define our company’s personality and unique value proposition. Working with AMCs for 20 years as a lender, my chances of calling an AMC and getting the phone answered in three rings or having an e-mail message returned inside of 20 min. would be a rarity. Here at StreetLinks, we have three to five times the amount of people per continued on page 18
Do you feel that there are any improvements that need to be made to the appraiser independence process? I thought the spirit of the HVCC and its underlying lender/appraiser separation mandate was right and that it was really nothing new. Everyone should have been operating that way anyhow. What I didn’t like about the HVCC was the appraisal portability complications it created between competing lenders. If I originate a loan and want to flow or sell it to Bank A, and for some reason, the terms of the deal change and now I want to sell that loan to Bank B, it’s very difficult getting Bank B to take Bank A’s appraisal and to get that appraisal endorsed and moved over without additional work being done by the appraiser or without ordering a new appraisal. That slows the loan process down and ultimately costs the consumer and lender more time and money.
cer for a big retailer, you now have to operate by the same appraiser independence rules.
Financial after CitiGroup purchased the company. At the time, I had been with Associates for 12 years, working my way up from branch manager to national operations vice president. Leaving them was a tough decision, but it turned out to be a very positive thing because I was recruited by LandSafe Appraisal. They wanted somebody from the loan production side of the business who understood the AMC process and could run their captive AMC operations. I learned the inside mechanics of how and how not to run an AMC there. If I didn’t resign my position at The Associates, I don’t know if I would have had the opportunity to lead this company today.
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Do you feel that a lack of enforcement of appraisal independence rules had
Do you see the desired results in the marketplace as a result of appraisal independence or have there been unintended negative consequences? I think it is important to note that appraiser independence has always been on the books. Regulations that already existed called for independent, unbiased and non-influenced valuations. The only thing the newer regulations did, whether the HVCC, or the Federal Housing Administration’s version of the same, or now under DoddFrank, is to put some muscle and teeth into it. The industry, as a whole, is now taking this issue seriously. I have been around this industry for 30 years, observing all of this, and I do not view the regulation as a dramatic change for three reasons: First, I always operated that way; second, because it makes sense; and third, the rules always existed but they just weren’t properly enforced. This is the natural progression of something that wasn’t taken as seriously as it should have been, and now, because of the mortgage meltdown, it is.
“StreetLinks doesn’t believe in telling a lender what they need. We consult with the lender and find out about their lending model, lending footprint and their desired appraisal process flow. Then, we customize an appraisal fulfillment solution for their situation.”
StreetLinks has one of the best reputations as far as AMCs are concerned. Do you feel there is any point where a lender is better suited to handle the appraisal ordering process with their own appraisal desk, rather than using an AMC? Lenders have a few options. There is the methodology where you’re just running an appraisal desk without technology to help out. You just have dedicated staff in a separated office using spreadsheets and marker boards. I think lenders need to get away from that practice. I don’t know many lending operations where the people in the operational chain don’t ultimately report up to, in some way, a person who is responsible for the overall sales and loan production divisions of the company—which is prohibited under current regulations. The next way is to deploy software and technology that, if utilized correctly, will assure compliance as it relates to independent appraiser selection and provide tracking and reporting for functional, as well as audit and compliance, purposes. We recently entered this space with LenderX and we are very excited about it. Lender-executed, self-management technology has a strong place in the world of appraisal management today, especially for small- to mid-sized lenders that have built a solid panel of properly vetted appraisers. The full AMC is the way to go for larger lenders who are looking for quality, service and appraiser independence guarantees, and who want to eliminate the variable staffing costs and compliance headaches that can be associated with self-management.
something to do with the downfall of the mortgage marketplace? I think the mortgage meltdown was more the result of low interest rates, exotic loan products, looser lending standards and the government’s desire for everybody to own a home. The appraisal piece of the equation was the impetus of the mortgage meltdown.
Have there been any positive benefits to the mortgage broker due to appraiser independence? I empathize with the mortgage broker in regards to appraiser independence. I think when all of this started, the mortgage broker was unduly blamed for violating appraiser independence. I just don’t agree with that. I think the mortgage broker was seen as a scapegoat in the national mortgage crisis, but let’s face it, the mortgage broker was driving 60 to 70 percent of the originations in the country. Do I think that mortgage brokers abused appraiser independence and created a market collapse? Absolutely not. It’s like any other industry … the majority were fine. I don’t subscribe to the idea that the mortgage broker created the meltdown. I think it was the exotic loans— the no docs, limited doc, non-income verification loans, etc.—and the fact that the capital markets were buying those loans and wanted more and more of them. The good thing about Dodd-Frank is that it levels the playing field for all originators. Whether you’re a broker, correspondent, or a loan offi-
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order volume as any other national AMC. We put a lot of trust in our frontline employees who are responsible for tracking and fulfilling orders through the entire appraisal process. Their input is welcomed and encouraged Most of our really good ideas and improvements have come from the suggestions of our frontline personnel. They are the ones talking to the lenders and appraisers. These are the people who have to make the best impression and deliver quality service. Our people on the frontlines dictate the destiny of the company. We have grown our staff from 25 employees to over 300 employees in the past 18 months, and everybody in management today was promoted from within. We haven’t hired a manger from the outside. The original ownership team is still intact as well. Those who run the quality control department and are involved in all post-QC areas are licensed and experienced appraisers. Everybody in our company is treated like a mini-owner. Every StreetLinks employee participates in a profit-sharing plan every quarter. Our employees live and breathe StreetLinks. They feel they are adding value and feel special because they know that we do the business differently. They know that service is the backbone of our reputation and they take a lot of pride in those qualities. We have a very open management style at StreetLinks … I don’t even like to use the word “executive” because it sounds too lofty. We all have our doors open, we have suggestion boxes, we walk the floor, spend a lot of time with our people and we do a lot of charity work together as a team. I cannot tell you how much improvement we have derived just by having our doors open and having frontline employees come in and say, “Have you thought about doing it this way?” We have a great nucleus in our Indianapolis-based headquarters and there’s a great work ethic here. All I and the other leaders who have a door on their office do is set the vision, strategy and direction for the future. It’s the people on the floor that make or break our business. We just happen to have very great ones at StreetLinks and I have been very fortunate in that regard. Are there any books that have been influential in your development or a book that had a profound impact on your life? There are several books I go back to frequently for business management, time management and proper thinking. If I could pick one particular author, and there have been many, it would be Brian Tracy. Brian Tracy’s book, Maximum Achievement: Strategies and Skills That Will Unlock Your Hidden Powers to
continued from page 17
Succeed, was one of the first real personal development business books I ever read. I’m going back 30 years ago and Brian Tracy is still going and relevant today! I would say Brian has been the most influential person I’ve never met in that, through his writings and audio books, he did the most to shape my thinking in the business realm. Prior to getting involved in the finance industry, I worked for a national swimming pool company, Kayak Pool Corporation, where I started as a pool salesman and worked my way up to executive vice president of the company. When I started there, I ran leads and drove hours around the state of New York to sit in a home and give a swimming pool presentation that lasted two or three hours. I had all of Brian Tracy’s audio tapes in my car along for those rides, and my car was like a university on wheels. I wouldn’t listen to music or the news, I would just listen to Brian Tracy cassettes.
The frontline employees—those who communicate with our lender clients and appraisers—are really the folks who define our company’s personality and unique value proposition.”
What are some activities or hobbies that you enjoy out of the office? I love to play chess … I find it very relaxing. I also love going to my son’s hockey games. He started playing hockey when he was eight-years-old and he’s now 22 and a senior in college. I’ve probably been to every regional and national tournament that he’s ever been in. What does the future hold for StreetLinks and its customers? We recently redefined our company and legally changed our name from “StreetLinks National Appraisal Services” to “StreetLinks Lender Solutions.” We feel that there is enormous opportunity in other areas of the industry to differentiate and add value. Within the first half of 2011, we will be entering the broker price opinion (BPO) space and offering a differentiated, higher value, higher quality BPO product. We are also currently working on what we hope will be the best automated valuation technology and models the industry has seen … Intelligent Valuation Models or IVMs. We envision ourselves in the next three to five years becoming the industry’s premier lending solution company, not just an AMC, but a company that provides lenders with the best solutions in the valuation and lender services markets by delivering a variety of products that are better than what’s on the market today. Right now, that is what we are really focusing on and emphasizing.
Mortgage Call Reports The Nationwide Mortgage Licensing System (NMLS) Mortgage Call Report (MCR) filing will now be required, commencing with the first calendar quarter of 2011. It will be fully activated on the Nationwide Mortgage Licensing System & Registry (NMLSR) Web site in April 2011. Filing of the MCR is required by the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act)—the same Act that requires licensing and registration of mortgage loan originators (MLOs)1—as codified in the following provision: “MORTGAGE CALL REPORTS—Each mortgage licensee shall submit to the National Mortgage Licensing System and Registry reports of condition, which shall be in such form and shall contain such information as the Nationwide Mortgage Licensing System and Registry may require.”2 (My emphasis) The provision has come under intense debate, mostly based on the view that the state banking departments are overreaching in their authority to require the MCR. They are relying largely on the aforementioned provision for the authority. The Act pertains to licensing of loan originators who are employees of state licensed mortgage companies and registration of the loan originator employees of institutions regulated by the federal banking agencies. However, the state banking departments say that the mortgage licensee is not a loan originator, and that the reports of condition are, based on the Act, “A statement of condition on the company that employs licensed mortgage loan originators and its operations, including financial statements and production activity volumes reported per state.”3 So state banking departments maintain they have the authority to require companies, not just loan officers, to file the MCR. Maybe a particular state banking department may have or seek authority under its state law to require licensees to submit quarterly financial statements and loan activity reports, but I don’t find that authority under the Act. Without a statutory basis to extend the MCR filing requirement to mortgage companies, there seems to be a prima facie case here against the requirement for mortgage companies to submit through the NMLSR quarterly financial statements and quarterly reports on its mortgage activity. Public comments were concluded on this matter last spring, and resistance is futile—so here we go, like it or not!
FAQs Who-What-When-Where-How (But Not Why) Who Q: Who must file the MCR?4 A: All state-licensed companies and all state-registered companies that employ licensed mortgage loan originators. The vast majority of state agencies require by law or regulation that companies complete the MCR on behalf of their MLOs. Q: We are a subsidiary of a federal regulated institution. Do we file the MCR? A: Yes. Financial condition is for the licensed entity—results are not consolidated with a parent company. Q: We are a Fannie Mae and/or Freddie Mac Seller/Servicer and/or Ginnie Mae Issuer. Do we file the MCR? A: Non-Servicing Fannie and/or Freddie Seller/Servicer and/or Non-Pool Ginnie Mae Issuers employing state licensed MLOs must complete the MCR even if they have had no activity during the reporting period. continued on page 20
heard on the street
continued from page 15
Grant Lupo continued on page 22
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New Vista Asset Management, a San Diego, Calif.-based real estate-owned (REO) asset management firm, has acquired the REO asset management business unit of REDC Default Solutions LLC (REDC). Terms of the transaction were not disclosed. The asset management unit previously operated within REDC, which is a wholly-owned subsidiary of Irvine, Calif.-based Auction.com LLC (formerly Real Estate Disposition LLC), and offers outsourced residential asset management services for banks and other financial institutions. Widely recognized for consistently outstanding client results and nationwide real estate market expertise, the unit expands New Vista’s strong client portfolio and deepens the company’s com-
Hammerhouse LLC has announced the hiring of Grant Lupo as its new strategic growth partner.
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New Vista Acquires the Asset Management Business of REDC Default Solutions
mitment to providing solutions that propel America’s housing recovery. REDC’s asset management unit’s managers, employees, technology and client engagements transferred to New Vista as a result of the transaction, and become part of the Southern California company’s first full-scale, self-operated platform. “New Vista has always stood for the proposition that outstanding REO asset management performance can be achieved through strategies that also sustain communities, support homeownership, and provide access and
Mortgage Professionals to Watch
process requires lenders to submit a standardized Licensee Examination File (LEF) as required by regulation or upon request of state examiners. Compliance EAGLE, which is LEF-certified through RegulatorConnect, enables LenderAssist users to easily test loan files for compliance with federal, state and investor regulations and guidelines. “Staying abreast of every new regulation and law being mandated at the federal and state levels is overwhelming at best,” said Leonard Ryan, president of QuestSoft. “Lenders using Compliance EAGLE can focus their attention on closing loans and addressing those loans that flag alerts for possible non-compliance, instead of wasting hours trying to format data files or manually comb through portfolios.” Compliance EAGLE evaluates loan files against a comprehensive suite of compliance regulations and standards, including the Home Mortgage Disclosure Act (HMDA), Community Reinvestment Act (CRA) and flood determination requirements, as well as the Truth in Lending Act (TILA), and federal, state and local consumer and predatory lending laws. Additionally, Compliance EAGLE’s reviews are widely accepted by many secondary market investors. “Complying with both regulatory and investor demands is the top concern for lenders,” said J.P. Kelly, president of OpenClose. “QuestSoft’s Compliance EAGLE ensures that our customers will be able to easily test every loan for compliance with state regulations and prepare the LEF for submission to the regulators from data retrieved directly from within our software.” LenderAssist provides a full range of mortgage banking functionality, from origination document imaging, underwriting, secondary marketing, shipping and accounting, and post closing software. The software is 100 percent Web-based and provides the individual user with all the tools they need for efficient mortgage operations. For more information, visit www.openclose.com or www.questsoft.com.
opportunity for minority homebuyers and real estate professionals,” said Brian Hurley, president of New Vista. “Through our results-driven platform, we will broaden our market impact to achieve even better results for clients and communities alike.” “Our team is excited to join New Vista,” said Donita Thompson, former senior vice president of REDC, who became senior VP of REO operations for New Vista at the closing of the transaction. “We believe strongly in the company’s mission and are eager to focus our energies on driving the company’s REO performance and growth.” For more information, visit www.newvistareo.com.
regulatory compliance outlook
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Q: There are two different sections to the MCR. Which section do I complete? A: There are two sections: Standard and Expanded. All companies complete the Standard section of the MCR. Companies that are approved Fannie Mae or Freddie Mac Sellers/Servicers or are Ginnie Mae Issuers must complete the Expanded Section on a calendar quarterly basis. Also, the Expanded Section primarily consists of information collected on the Mortgage Bankersâ€™ Financial Reporting Form (MBFRF), as well as the production/origination data from the Standard Section.5 Companies completing the Expanded Section are not required to complete the annual financial portion of the Standard Section. Q: My state is not licensing yet through the NMLS. Do we still have to file an MCR? A: Some states are still not licensing via the NMLS; consequently, MLOs must submit Mortgage Call Reports if licensed in those states. Functionality will be available for individual MLOs to submit the Standard section of the NMLS Mortgage Call Report, if their employing companies do not submit the MCR on their behalf. (The vast majority of state agencies require by law or regulation that companies complete the report on behalf of their MLOs. Consult your state banking department for guidance.) Q: I am an individual MLO, not a company. Do I have to file an MCR? A: Certain states will require individual MLOs to submit mortgage call reports. It has not been determined if the functionality for such individual filings will be fully available at the time that the functionality for the company MCR is available.
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Q: Briefly, what is in the MCR? A: The MCR consists of production and financial reporting components. Q: Will the information on the MCR exclude the information required by state filing requirements? A: The financial condition fields in the report are in addition to any staterequired financial fields, although uniformity is sought overall for broad use by regulators. Q: Some fields in the MCR undoubtedly will not be related to my financial institution. What then? A: Companies will only be required to complete sections of the report that are relevant to its activities. Q: Can you provide an outline of what components are actually required in the MCR? A: Quarterly activity reporting for each state includes the following components: Application data; closed loan data; MLO data; required repurchases (mortgage lenders); and, lines of credit (mortgage lenders). The information is to be reflective of that quarter specified in the report and is not cumulative. Q: What if we also file annually. Are there additional components? A: Annual financial information by a company includes the balance sheet and the income statement. The financial condition report of the Standard section is due annually 90 days from a companyâ€™s fiscal year end. Q: Is the MCR an extensive report? A: There are two reports, a detailed (Expanded) and an abbreviated (Standard) version. The latter requires data in about three dozen fieldsâ€”and provides information about the MLO per state, per quarter.
When Q: When does the MCR get filed? A: Starting the second calendar quarter of 2011 for activity and financial information reflective of the first quarter of 2011. Functionality is expected to be available in the NMLSR by the end of April 2011. The MCR is filed on a calendar quarter basis and submitted through the NMLSR. Reports will be due within 45 days of the end of each quarter. After MCR access becomes available in April, the first quarterly reports are due May 15, 2011. Q: What will happen if an MCR is not filed? A: Failure to submit the NMLS Mortgage Call Report may result in the suspension and/or revocation of the financial institutionâ€™s license in the licenseeâ€™s state. If the MCR is not filed, some states have announced that they will result, at a minimum, in a deficiency notice on your license. A failure to cure the deficiency may cause continued on page 24
heard on the street
Michael Richardson has been named president of BrokerPriceOpinion.com. continued from page 19
The U.S. Department of the Treasury has announced the hiring of the leadership of the team for the Office of General Counsel within the Consumer Financial Protection Bureau (CFPB): Len Kennedy will serve as general counsel, Meredith Fuchs will serve as principal deputy general counsel, and both Roberto J. Gonzalez and Michael Gordon as deputy general counsel. Resource National Title Agency Inc. has appointed Keith Barker as
vice president of the national commercial division.
Elliott & Company Appraisers has promoted its vice president of client services Carlyle Holt to the position of vice president and general manager, and has promoted George Williams to the position of director.
John O’Brien has been hired by TMS Funding, the wholesale channel of Total Mortgage Services LLC, as wholesale account executive.
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Call Samara Gabbay 201-529-1401 or email: email@example.com “Work for yourself, not by yourself” Equal Housing Lender. © 2010 Nationwide Equities Corporation. Trade/service marks are the property of Hamilton Management Group and/or its subsidiaries. Some products may not be available in all states. NMLS Company ID:1401, Licensed Mortgage Banker: CT: License# 12304, FL: License# ML0701076, NJ: License# L046060, NY: License# B500883, PA: License# 22104
Greg Janicki has joined Real Estate Mortgage Network Inc. as southeast regional manager. Mortgage Guaranty Insurance Corporation (MGIC) has announced the promotion of Jerry Murphy to the position of vice president of field operations. CWCapital has hired Philip Brooks as senior vice president. Ed Hill has been appointed senior vice president of trustee operations for Prommis Solutions LLC. E.J. Kite has joined Wingspan Portfolio Advisors as senior vice president of information management. LoanMLS Inc. has named Robert Hodes as its director of institutional accounts. WFG National Title Insurance Company has named Thomas Klein Esq. senior vice president of the southeast region, Mark Knight as senior agency auditor and Keith Nolan as agency auditor. Integrated Asset Services LLC (IAS) has named John Burnett to the position of chief operating officer. Evan Kouvaras has been named director of customer service for MRG Document Technologies.
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: firstname.lastname@example.org Note: Submissions sent via e-mail are preferred. The deadline for submissions is the 1st of the month prior to the target issue.
The Top Five Reasons to Believe in Lending Again Leaders can capitalize on signs of a bright future By Robert N. Arrington
The Correct Response to Changes to Loan Officer Compensation By Stewart Hunter and Jim McMahan
Jim McMahan is president and Stewart Hunter is founding partner and core values officer for Dallas-based Benchmark Mortgage. You can find them both online at www.iambenchmark.info.
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Change is hard. But failure to adapt to an industry that is changing around you can be fatal. This April, we’ll see some lenders go through some hard times as they struggle to get new loan officer compensation packages right. We’ll also see their producers exit these companies. The difference between these two types of mortgage companies lies in their response to this sea change in our industry. The new loan officer compensation rule that is set to be implemented in less than a month will no longer allow brokers or loan officers to be compensated by yield-spread premiums (YSPs) or fees to both the borrower and the lender. This presents a problem in how to compensate good loan officers, especially, as some claim, since the new regulation does not provide sufficient or proper guidance on how to comply. Some people are undoubtedly hoping for some miracle that will keep this from taking place. But there can be no escaping that this is going to happen, and the only say we have in the matter is what attitude we take in our approach. We have the option of embracing this as an opportunity for growth or ignoring it and letting our loan officers and brokers fall by the wayside. Like anything else, this new regulation is a chance to educate ourselves and lead through the change. It’s our position that those who embrace this will gain a competitive advantage. Those who fight it are going to be left out. That’s the approach we have taken, and I’m very confident that by carefully considering this problem from the perspective of the borrower, the bank, the regulator and the loan officer, we will keep our company competitive through this confusion by being able to craft and communicate a clear compensation plan for the best-in-class loan officers. One way for good loan officers to approach this problem is through reverse engineering. Let me tell you what I mean. There was a time when a productive loan officer could structure his loans in a way that made him the most money. Lenders made this possible because they were desperate for the best originators and it made economic sense to the lender as well … those days are over. Today, a good originator, particularly a branch manager, needs to work backward, taking into account the actual overhead of running the business and then determining what is left when the bills are paid. By sharing as much of these proceeds as possible with the loan officers bringing in the business, companies can grow their businesses in the days ahead. To make this work, it’s important that the company maintain its own secondary market trading desk to make sure that the programs offered will be profitable enough to make a good loan officer compensation plan work. It’s important that lenders fully comply with these new rules, but it can be done in such a way that top originators can be attracted and maintained as long as the company uses this reverse engineering approach. We at Benchmark are preserving our current mindset about how we compensate our originators in the face of the changing rules. We will comply with the law—both the letter and its intent—but we will not punish our loan officers in the process. Our commitment to our branch managers and loan officers will be to pay them at a high level while never compromising our service levels and support. Any bank that wants to be successful going forward will do the same. There is no way around the new regulation, so we may as well welcome it. Let’s focus our energy on making it work, on compensating our loan officers in a way that complies, rather than on trying to fight it off or let it defeat us. We may not all get it right the first time, because anything that is new takes some time to get accustomed to. I believe that if you include your most important assets—your loan officers—in the dialogue and allow everyone to have a voice, your company will reach the best decisions for implementing your new compensation plan.
Are we seeing the light at the end of the 1. If you are reading this, recession? Perhaps. There are signs that you have likely survived the real estate market has reasons for the worst guarded optimism, normally a good indi- The real estate industry might not be cation that a recovery could indeed be completely out of the woods yet, and no underway. The big question is when will one knows exactly when things will the next leaders of this industry emerge? improve for good, but upbeat trends are The time is right to seize the opportuni- appearing. For instance, Fiserv Inc. noted ties of a new era, and capitalize on this that in the second and third quarters of chance to gain a lasting strategic advan- 2009, U.S. home prices increased two pertage over the competition. cent each quarter; and, Robert Shiller, the After several years of tremendous chal- Yale University economist who co-foundlenges throughout the resed the widely used Caseidential and commercial Shiller Index that bears his real estate industries, name, called the home glimmers of optimism are price rebound during the starting to shine more second half of 2009 “The brightly. And while there most dramatic turnaround” is still debate about exactsince he began charting ly when we can say the home prices in 1987. worst is over, some are National homebuilders finding ways to succeed. like Standard Pacific As the saying goes, you Homes and Beazer Homes cannot change the direcUSA Inc. are also starting to tion of the wind, but you see a return to profits, indican adjust your sails. cating tempered hope for a “The big question is Acting strategically during return to real estate as when will the next times like these is key. leaders of this industry usual. As Ian McCarthy, the The ingredients for chairman and chief execuemerge? The time is newfound profitability tive for Beazer Homes USA right to seize the are all here, and this Inc. told The Wall Street market turbulence could opportunities of a new Journal in February of indeed be the mother of era, and capitalize on 2010, “While it is premainnovation. The last part this chance to gain a ture to signal the beginning of the puzzle is the creof a sustainable recovery in lasting strategic ation of new jobs—a sitthe housing market, we are advantage over the uation most observers seeing indications that hiscompetition.” predict will be an ongotorically high levels of ing process. However, home affordability, home the savviest people in the industry rec- price stability, low mortgage interest ognize that even within this gloomy job rates, and homebuyer tax credits may be market, top economists are predicting beginning to balance out prospective unemployment may peak soon—possi- homebuyers’ concerns about falling bly as early as this summer—which will home prices, foreclosures and risk of job give jobless workers much more hope loss in most of our markets.” for finding employment. New jobs will The ultimate winners in this economy truly inspire greater consumer confi- will be the ones who go beyond surviving, dence, which together, can bring about and instead, discover ways to innovate the end to this historic economic down- their processes and products to capitalize turn. on the new demands of the future—reapBut more importantly, now that we ing the rewards of every new possibility. have identified the reasons for the historic market meltdown, we can act to 2. We now know exactly correct them. Just like investigating the what we need to do to fix cause of a fire so that the same disaster things doesn’t happen again, the mortgage Good, old-fashioned underwriting is once industry now has the capability to again the best approach to success. With renew our prosperity. Regulators will an end to talk of completely automated be involved, for sure. We cannot, how- decision-making processes, the industry is ever, rely on regulation to prevent focusing on figuring out the fastest and future problems. That’s the bad news. lowest-cost approaches to verifying an The good news is we can act on what applicant’s ability to repay the loan. we’ve learned about how products per“The era of easy money where you go form in both bull and bear market out and buy $800,000 worth of home is phases, and we can all start moving over,” according to Rose Quint, assisahead toward a healthier outlook, as tant vice president of survey research indicated by these five reasons we can all start believing in lending again. continued on page 25
regulatory compliance outlook
continued from page 20
civil monetary penalties to be issued against the company, prevent a company from renewing its license, and/or cause the company to receive license suspension or revocation.6 Consult your state banking department for guidance. Q: When is the MCR considered complete for each state? A: The MCR cannot be submitted until all state fields in which the institution is licensed are completed. For instance, if your company is licensed in New York and California, your report cannot be submitted if only the New York information has been completed: you must also complete the information for California.
Q: Is there a format to the MCR? A: The NMLS will implement an XML format. Licensees will input information into the data fields in the MCR on the NMLSR’s Web site. Q: We are licensed in many states. How are we supposed to file the MCR? A: Only one NMLS Mortgage Call Report is filed per company, per quarter, including breaking out data for each state in which the company is licensed and/or has licensed MLOs.
What to know and what to do7 The NMLS Mortgage Call Report will require substantial consolidation and careful formatting of information pertaining to many aspects of a mortgage loan originator’s loan origination platform(s). The following outline provides a brief overview of what you need to know and what you need to do.
What you need to know
Where Q: If the MCR is filed, do I also file a quarterly or annual report with the state banking department? A: Many state banking departments have indicated that they will accept the MCR in satisfaction of their respective state-specific reporting requirements. If state law requires an annual unaudited financial statement, the submission of the annual unaudited financial information through the NMLS Mortgage Call Report may satisfy the state’s annual unaudited financial statement filing requirement. Consult your state banking department for guidance. Q: We did no loan origination business in the calendar quarter. Must the MCR still be filed? A: Yes. Companies that did not have mortgage loan origination activity during a particular quarter will be able to indicate this on the MCR. Q: Is my MCR available to the public? A: Individual company reports are confidential, but will be available to regulators. Aggregate state, regional, or national data may be made publicly available.
All companies holding a state mortgage license or registration and companies employing MLOs licensed in any state using the NMLSR must complete the NMLS Mortgage Call Report on a calendar quarter basis and submit it through the NMLSR. The NMLS Mortgage Call Report is a single report of condition that reflects the entire mortgage activity and financial information of a company. An NMLS Filing or Processing Fee is expected for the submission of the NMLS Mortgage Call Report. Failure to submit the NMLS Mortgage Call Report will result, at a minimum, in a deficiency placed on the respective license. Failure to cure the deficiency before a renewal period will prevent renewal of the respective license or registration.
How Q: Is there a filing fee? A: A filing fee or processing fee is expected to be required. 24
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What you need to do Visit the NMLS Resource Center >> Popular Links >> Mortgage Call Report to find out what information your company will need to submit as part of the NMLS Mortgage Call Report. This information will be reported through NMLSR starting in the second calendar quarter of 2011 for the 2011 first calendar quarter activity and financial information. NMLSR functionality will enable companies to submit this data either manually or through an upload option. Your company must ensure the “Other Business” section of your MU1 record is accurate. All companies that are Fannie Mae (FNMA) or Freddie Mac (FHLMC) approved Seller/Servicers or Ginnie Mae (GNMA) authorized issuers are required to submit comprehensive call report information that is substantially similar to the information submitted as part of the Mortgage Bankers’ Financial Reporting Form (MBFRF). Companies not so authorized will submit less comprehensive call report information. Download Resources8 from the NMLS Resource Center >> Popular Links >> Mortgage Call Report Download Resources from the Mortgage Call Reports Toolbox in my firm’s Library at http://bit.ly/dPrpF3 Visit the NMLS Users Forum, at NMLSUsersForum.com. This is a Web space I developed for sharing knowledge about the NMLSR. The Web site contains resources and links to the forum on LinkedIn, Facebook, and Twitter.
Regulators claim that the MCR will enable them to determine exam schedules, calculate assessments, determine bond requirements, compile statewide reports, and monitor MLO activity. By the time of the first filing, report forms, instructions and filing requirements will be coordinated with many state banking departments. Agreements with state banking departments regarding enforcement actions at the state level will be under review or executed. Now is the time to prepare for filing the MCR in a timely manner and to become continued on page 29
top five reasons to believe for the National Association of Home Builders (NAHB). “Today, you have to put 20 percent down. And now that piggyback loans are not available, you are only going to buy what you need.” In this sense, a proven approach to underwriting can help simplify and expedite the loan process—and protect every lender from the threat of buybacks or fraud. Tomorrow’s market leaders have already begun retooling their processes to support this move back to the basics—perfectly positioning themselves for the recovery.
continued from page 23
struggle to adapt. And you can succeed by avoiding higher loan processing costs, while freeing your staff for more critical tasks. Independent loan verification from a trusted expert passes those burdens to a specialist, offering increased investor confidence, complete transparency, more consistent turnaround times, reduced costs and enhanced productivity.
5. Independent verification is available as protection against fraud and buybacks
MortgageDashboard Adds Compliance Alerts and 3. Significant societal pres- Criminal schemes and fraudulent “white Launches New Online sure is supporting a mort- lies” from borrowers have surely made Community life far more difficult for everyone else. As gage industry recovery MortgageDashboard
4. New processes can offset the challenges of new regulatory pressures
Xetus Announces New Loan Management System Xetus has announced the introduction of XetusOne Loan Management System (LMS), whose design and delivery allow lenders to conveniently manage loan activities through a Webbased platform. XetusOne allows for the comprehensive management of a loan— including origination, subordination or modification—throughout its lifecycle. The modern architecture of an LMS empowers lenders to transform their loan operations to address the realities of today’s lending environment. “A trend toward generalization has overtaken the lending industry,” said Xetus President and Chief Executive Officer Scott Stein. “Leaner, timestrapped banks and credit unions have been pressed into finding ways to manage more loans with fewer people, and XetusOne LMS overwhelmingly delivers that capability.” continued on page 30
Robert N. Arrington has served as Kroll Factual Data’s senior vice president of sales since 2004, a provider of independent verification services to mortgage lenders, banks, credit unions, property management firms, and other businesses. From 2000-2004, Arrington was involved in various management positions with the company, including acquisition and sales. He is a graduate of the University of San Francisco with a degree in business administration and earned an MBA from the University of the Incarnate Word in San Antonio, Texas. He may be reached by phone at (800) 929-3400 or e-mail firstname.lastname@example.org.
has announced the addition of Compliance Alerts or “C-Alerts” to its cloud-based loan origination system. “This new functionality makes it very easy for lenders to remain in full compliance and to know exactly when anyone inside their organization deviates from the requirements,” said Jorge Sauri, chief technology officer of MortgageDashboard. “By combining the on-screen alerts with the audit trail, banks can be assured that loan officers are meeting all investor and regulatory requirements and loan quality is exactly where they need it to be.” C-Alerts work by flashing a message across their proprietary “communication bar” within the LOS whenever any action relating to the loan takes the deal out of compliance. Lenders can set their own triggers, but most are already included in the software to catch statutory requirements. Examples of triggers include checking the interview date for compliance with the three-day disclosure rule and making sure the interest rate doesn’t change by more than an eighth of a percent without re-disclosing. Once an alert is triggered, the software automatically takes the loan officer to a notification page where they can clear the alert and bring the deal back into compliance. An audit trail automatically logs their action for management review. MortgageDashboard has also announced the launch of its new online community at www.mortgagedashboard.com. The site offers all of the typical marketing and tech support material you would expect from one of the industry’s top technology vendors, but then adds an online community that promises clients and prospects much more. “We are excited to unveil our new website as it marks a new chapter in client relations,” said Rory Lane, director of community engagement at MortgageDashboard. “Tech support is critical to our clients, but in today’s environment, the information we offer through the site’s growing community will help our customers make the most of our technology and develop their
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Tighter credit policies and stricter verification structures are surely here to stay. Lenders and investors, however, can avoid the higher costs, slower closings and increased risk that the industry is expecting. Most lenders would agree that there has been room for improvement within mortgage lending for quite some time. However, why would anyone bother changing processes during the peak? The time for improving those processes is now, starting first with the most costly and time-consuming. One example is the loan fulfillment process. Because no one wants a return to the grueling old days when it took days or weeks to verify all of the borrower’s information, a proven and streamlined approach to verification can bring benefits throughout your entire lending operation. In fact, launching a new, streamlined approach to verification will put you well ahead of the competitors who
a result of the strict new policies adopted by investors and insurers, lenders are now more susceptible to severe repercussions and sanctions brought about by the most devastating risk to loan security: The innocent error made by an insider. By trusting a reliable third-party loan verification expert, you can be sure of your information with representation and warranties that protect you from errors that cut into your profitability. Combine that with the trust and transparency gained by adopting a truly independent verification process, and it becomes clear that independent verification is a proven approach for ensuring safe, secure, and reliable loans. It’s time to take advantage of this uncertainty. Everyone knows real estate is cyclical. Busts follow booms and vice-versa. Even historically turbulent times like we’re experiencing now will eventually come to an end. Retooling your processes to improve mortgage performance will mean that you will maximize your profits and gain a competitive advantage that will serve you well now and when volumes climb again. Getting everyone on the path to recovery will take a tremendous effort from everyone in the real estate industry. And while it will not be easy or overnight, the power of belief will inspire some to see the opportunities in every challenge and reward those who position themselves well for this new era of mortgage lending.
At every step of the lending process, there is a serious thrust behind loosening the lending gridlock that has been a huge obstacle for the industry. Consider that late last year, income restrictions on homebuyer tax credits were increased through the Worker, Homeownership and Business Assistance Act of 2009, and the program extended the previous deadline, enabling eligible families to purchase new homes by July 1, 2010 and still qualify for up to a $6,500 tax credit. There are those who remain cautious about the impact this program will have. Nonetheless, it is clear that aggressive social pressure is providing an important psychological boost and economic incentives—especially as the traditionally active summer sales season arrives. Lastly, the market’s return to affordability—driven by home prices that now have a more realistic price-toincome ratio—will encourage investors to jump into the market and spur the next upward turn of the cycle.
loan officers. I look forward to taking the lead role in building this out.” More than just an explanation of company offerings, the new site features a great deal of multimedia content and training material in the Learning Center, as well as a community page with blogs and forums that encourage clients to take a more active role in their relationship with MortgageDashboard and each other. For fun, the software designers at MortgageDashboard have also buried within the Web site a retro arcade that features a number of video games from the 1980s to help loan officers recuperate in short bursts before getting back to moving deals swiftly through MortgageDashboard in an efficient, straight-through manner. “We have a lot of fun here,” said Rene F. Rodriguez, chief executive officer of MortgageDashboard. “But we take success very seriously. This new Web site will be an important tool for our customers and the training opportunities and community interaction available here will make them more effective at using our software and more importantly, closing more loans.” For more information, visit www.mortgagedashboard.com.
CSI: Mortgage Fraud Criminal minds are concocting new schemes and scams … can you keep pace? By Greg Holmes
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Many experienced mortgage lenders perpetrators are employing increasingare skilled at spotting a number of tried ly elaborate schemes and technological and true mortgage fraud techniques weapons—like phony phone centers like veteran crime scene investigators staffed with co-conspirators—to comlooking for tell-tale clues. But, today’s mit their crimes. fraudsters are developing increasingly Fortunately, the mortgage informacomplex schemes that exploit changing tion services industry is keeping pace, market conditions. Mortgage profes- providing lenders with a sophisticated sionals need to respond and keep pace arsenal of tools to detect, prevent and by utilizing all the resources that are combat fraud. These tools put critical available to help them detect and pre- information in mortgage professionals’ vent costly fraud. hands quickly, inexpenIt was a run-of-the-mill sively, and in a form that mortgage application. All allows them to take necthe documentation was essary actions immedithere: Employment verifiately. This kind of knowlcation, pay stubs … W-2s. edge is the best defense Everything seemed to be in against the bad guys and order—until the lender their bad intentions. looked beneath the surface. Armed with all of the Old favorites available evidence, the die hard mortgage professional could People who commit mortonly reach one conclusion: gage fraud generally have “Unfortunately, Mortgage fraud. And the two motivations: To purincreased regulation only question that remained chase a property they othwas, “What made the appli- and tightened lending erwise could not afford or cants think they could get to make a profit. Those practices in one area away with this?” who commit fraud for can lead to increased Comparing informahousing usually inflate illegal activity in tion on an applicant’s their income so that they other sectors where mortgage application with can get a home loan. standards and safeIRS data can reveal glaring Fraud for profit—also guards are still being discrepancies that don’t called industry insider developed.” pass muster as “honest fraud—generally involves mistakes.” Grossly overseveral people who work stated wages, exaggerated employment together to defraud a mortgage lender history, and unreported losses are just a or seller and then benefit financially few issues that can leap out in a side-by- from the sale of a property. side comparison. They demand an explaMany of the schemes that are used to nation—if one is possible—and should accomplish this illegal activity have bring the loan approval process to an been used for years. Some of the most immediate halt. common types of fraud involve appliUnfortunately, spotting mortgage cants who submit false employment fraud is usually not an open-and-shut information, lie about occupancy, or case. Unlike the crime scene dramas on deliver phony W-2 forms or pay stubs. television, mortgage fraud investiga- Improperly disclosed income informations don’t get resolved in 60 action- tion can sometimes be accidental, but packed minutes. They are tedious, in many cases, a closer examination time-consuming, costly and aggravat- reveals intentional misrepresentation. ing distractions for lenders. Worse yet, Another familiar fraud operation
involves people who conspire to purchase a property for a low price, obtain a dishonest appraisal that inflates the property’s value, and then quickly sell it for a profit. Fraudulent property flipping was common in the sub-prime heyday, but new regulations that require an independent appraisal and a third-party review for appraisal accuracy have made a significant dent in this type of scheme.
New areas of concern Unfortunately, increased regulation and tightened lending practices in one area can lead to increased illegal activity in other sectors where standards and safeguards are still being developed. Foreclosure short sale real estate-owned (REO) properties are transactions that have attracted a high incidence of fraud, as have high-volume programs designed to aid the distressed real estate market, like mortgages insured by the Federal Housing Administration (FHA). Mortgage professionals surveying the market have also noticed the emergence of a number of new scams and schemes. These include: Bailing out the builder: Facing a stagnant market, some developers resort to inflating the value of their properties to cover the cost of buyer incentives like cash back at the closing. Dishonest “repayment:” Perpetrators of credit-enhancement fraud will sometimes file amended tax returns for prior years, sending the IRS checks for supposed back taxes to give the appearance of higher income. Other applicants try to get around underwriting requirements by adding themselves to the bank accounts of family members and friends. Fee for fraud: A number of scammers have offered to help homeowners facing foreclosure to negotiate with their lenders under the terms of the Emergency Economic Stabilization Act (EESA) and Housing and Economic Recovery Act (HERA). The perpetrator tells the homeowners that they must pay an upfront fee, when in fact no such fees are required to participate in a loan-modification program.
Reverse mortgage rip-offs: Senior citizens are the targets of fraud involving home equity conversion mortgages (HECMs), commonly called reverse mortgages, which are available to those 62 years of age and older. A typical case could involve an unscrupulous investor—or, even more distressingly, a family member or caregiver—purchasing an inexpensive bank-owned home and selling it at an inflated price to a senior straw buyer. Short sale scams: Homeowners facing foreclosure may be contacted by a con artist who promises to help them stay in their home if they deed their property to the perpetrator in a land trust. The homeowner is listed as the trust’s beneficiary and a real estate agent working with the perpetrator is named the trustor. A short sale is negotiated with the lender, but without the lender or the homeowner’s knowledge, the real estate agent quickly sells the property for a profit to another buyer. Victimized twice: Some fraudsters have contacted homeowners with offers to help them stave off foreclosure. The homeowners are conned into sending their house payments to the perpetrator, who files for bankruptcy on the owners’ behalf, but without the owners’ knowledge. The foreclosure is postponed because of the bankruptcy petition, giving owners a false sense of security, but the process restarts when no one attends the bankruptcy hearing.
Data: The best defense Facing this daunting array of creative malfeasance, mortgage professionals need to remain vigilant even as they keep their day-to-day focus on closing good loans and growing their business. The most efficient way to do this is to use all the applicant information that is available in a systematic way that helps uncover attempted mortgage fraud early in the application process. An excellent first step is for lenders to tap into Tax Return Verification (TRV) reports and other reports that enable them to confirm income and
screen applicant information against national databases. Suspicious information and discrepancies in employment history, Social Security numbers, addresses and phone numbers are highlighted so they can be investigated. TRV reports offer a streamlined method of verifying a borrower’s tax information by electronically comparing the income-related lines of the borrower’s tax return with the same lines on file with the IRS. Mortgage professionals also can tap into a comprehensive identity verification and application analysis service that compares application data to multi-source databases. This includes: An identity investigation report that identifies risk factors associated with an applicant’s name, Social Security number, address and phone number. An employment report that verifies the company address, phone number and year established, and conducts a reverse telephone look-up. A MERS system report that verifies the Social Security number associated with property lien information to identify potential misrepresentations. A subject property report that identifies a property’s current owner and provides its prior sales and refinance history, a brief legal description, and property characteristics.
A mortgage participant report that verifies the identification, licensing and certification of each person or company involved with the transaction. An occupancy and bankruptcy report, gathered from multiple third-party sources, that determines occupancy, length of time at the address, and whether the applicant has filed for bankruptcy. A savvy mortgage professional’s arsenal also includes running automated valuation models (AVMs) on all loans, and ordering a field review appraisal on properties. Additionally, files should always be reviewed for quality control before and after funding. Anti-fraud measures are, without a doubt, increasing the expense and time burdens shouldered by mortgage professionals. But today’s most technologically-advanced mortgage information services allow mortgage professionals to take the quality control and compliance steps necessary to catch fraud early, minimize its impact, and prevent it from being murder on your bottom line. Greg Holmes is national director of sales and marketing for Salisbury, Md.-based Credit Plus Inc., a provider of credit and mortgage information services since 1928. He may be reached by e-mail at email@example.com.
By Jim De Geronimo Sr.
e-mail: firstname.lastname@example.org visit: www.calyxsoftware.com
involving losses to lenders totaling $1 million or more. These are just a few glaring examples of why lenders should insist that their brokers and correspondents become compliant to the FACTA Red Flag Rule. Lenders must seriously consider their own liability when allowing their brokers or correspondents to originate loans without the proscribed identity verification protocols. Since the homeowner whose identity was used in the fraudulent transaction did not actually steal the money, they are not generally held liable to repay the lost funds. In almost every case of fraud involving identity misrepresentation, it is the lender who is most damaged by that type of criminal activity. The FACTA Red Flag Rule requires the broker or correspondent to have a written Red Flag policy in place. They must integrate this into their daily
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In a recent news release, Florida Attorney General Bill McCollum and the Florida Department of Law Enforcement announced the arrest of 10 members of a criminal mortgage fraud and identity theft operation. The group is charged with defrauding numerous financial institutions out of more than $8 million, and using the identities of unsuspecting individuals as part of the conspiracy to obtain mortgage loans. Senior Federal Bureau of Investigation (FBI) officials recently told Congress that identity misrepresentation tied to mortgage fraud continues to increase at an alarming rate. Identity theft and identity misrepresentation work hand-in-hand to fuel the fire of rampant mortgage fraud. The FBI also reports a 71 percent increase in pending mortgage fraud cases, with 66 percent of those cases
Lenders Should Require Red Flag Compliance for Their Own Protection
If that trend continues and lenders operations. It should be designed to help them identify Red Flags, which withhold funding or at the very least might indicate identity misrepresenta- insist on compliance from their brokers and correspondents tion or fraud when buildunless this critical step ing a new customer file. is taken, the mortgage The Rule also requires community will have no that third-party vendors be choice but to take this compliant. A vendor is responsibility seriously. considered anyone you Since the mortgage proshare sensitive customer fessional has direct coninformation with, where tact with the potential there is a reasonable borrower, they will chance that that informaalways remain the first tion could be lost, stolen line of defense for the or otherwise comprolender. Instituting these mised. To emphasize the danger, Privacy Rights “The FBI also reports procedures will, at the very least, help cut Clearing House reports a 71 percent increase down the number of that in just the last few in pending mortgage fraudulent loans caused years, more than 525 milfraud cases, with 66 by identity misrepresenlion sensitive records have percent of those cases tation. been lost, stolen or otherinvolving losses to It is important to wise compromised from lenders totaling $1 understand today’s realbusinesses across the million or more.” ity. The Red Flag Rule country, including mortindicates a much larger gage companies and lenders. Under the Red Flag Rule, the trend that we are seeing in both legisbroker or correspondent is considered a lation and in court decisions across the vendor of the lender, since sensitive country. Simply put, businesses are customer information moves back and being held to a higher standard then forth between them. Lenders are tech- ever before. There is one more very compelling nically working with non-compliant vendors when they work with non-com- reason why the broker or correspondent should also take responsibility pliant brokers or correspondents. Until lenders insist on compliance, for Red Flag scrutiny. It is incumbent much of the lending community will upon the broker or correspondent to remain part of the problem and con- protect their lending source. This tribute nothing to the solution. should automatically be part of every However, the Rule creates a perfect one’s “best business practices.” This opportunity for lenders to require their needs to be done not because it’s brokers and correspondents to be com- required, but because it’s the right pliant and require that they submit thing to do. proof that they have verified the customers’ identity. Taking the lead on Jim De Geronimo Sr. is president of this issue, some forward-thinking Concord, Ohio-based Majestic Security lenders have already informed their LLC. He may be reached by phone at (888) brokers and correspondents that com- 331-2332, e-mail information@majesticpliance to the Rule is a pre-requisite to securityidsafe.com or visit www.majesticsecurityllc.com. continue doing business with them.
Fraud Prevention … The Starting Point By Casey Fleming
PENNSYLVANIA MORTGAGE PROFESSIONAL MAGAZINE
I was tasked a while back with writing the advice, efficient and seamless processing, fraud prevention policy for a growing with stress-free results.” This tells your staff mortgage broker. My first thought was that you want them to focus on doing their “Well, this is an easy one I can knock out in job professionally and trusting the rewards an hour.” But then I sat down to write it … will come. Write a mission statement that tells the No matter how much I wrote policies and procedures and created quality con- world and your employees that you are a company that values ethics, trol (QC) review forms, I professionalism and comkept coming back to the mitment. Then, post this thought that if you had to mission statement promimanage quality by trying to nently where not only the find and eliminate fraud, public, but also your proyou were closing the barn duction staff, can see it door after the horse was every day. gone. What I mean is that I believe the foundation for Values are any fraud prevention policommunicated cy is your corporate culby the company ture, and in particular, the recruiting system way you articulate that culWhile many companies ture to those inside of your “Firing a high proclaim that they want to be an organization. ducer may be costly, honest, ethical, high-quality but I believe it is less lender, their recruiting and Values start with the company mis- costly than having to human resource (HR) policies sion statement put in place an anti- belie that claim. Start by looking carefully fraud system that is Your company at the values you proconstantly at odds branding starts mote as an organization. with your own interwith your recruitYou may have a mission nal culture.” ing advertising statement, for instance. I How many times have you would propose that your mission statement is the document that seen recruiting ads start with “Top prolays the foundation for your company ducers wanted.” Now I appreciate top culture. However, most mission state- producers as much as anyone, but ments that I read either fail to establish when you lead with that, you tend to a culture of values-based business or attract candidates for whom producworse, encourage a culture that doesn’t tion volume is the prime directive. Likewise, if you advertise high comvalue ethics or quality at all. For example: “We intend to become mission splits, you will undoubtedly the leading mortgage broker in the attract some high producers and maybe greater Megalopolis area” is quite com- some folks who care about quality. But mon, but hardly meaningful. How do you’ll primarily attract originators who you define “leading?” One person might care about making as much money as interpret this to mean you will do more possible on each deal. I’m not saying loans than any other, while another don’t offer a high split … I’m saying might interpret it to mean that you you may not want to lead with that in your recruiting advertising. intend to do better loans than anyone. Instead, craft recruiting ads to An even worse (but common) mission attract the attention of quality producstatement, however, is one that says: “We intend to become the largest mortgage ers with phrases such as “make a differbroker in the greater Megalopolis area.” ence” or “professional practice.” You While largest is open to interpretation, the will find a totally different kind of canclear message is that the company values didate responding to the ad. Look at your recruiting ads and ask yourself volume over everything else. A values-driven mission statement who you are trying to recruit. might include references to treating clients well, being honest or producing quality- Your conversation driven loan packages. For instance, “We with candidates is the intend to be known as the go-to lender in first QC gate the Megalopolis for honest, client-focused When I talk to candidates for the first time,
I am sometimes amazed at what they say. I wonder if they think things through or if they have ever listened to themselves. Many of them ask only about money. When I asked them questions about their experience, such as “Where do most of your leads come from?” or “Do you specialize in a particular niche?” their answers reveal that their only concern was how much money they would make, not how we could help them serve their clients better. The key, as in any interview with a candidate for any position, was to follow the 80/20 Rule—speak 20 percent of the time, and listen the other 80 percent. The candidate would soon reveal his or her nature. A candidate that is going to be a QC problem might specialize in a niche that carries typically high pay days, while a quality candidate would specialize in one that matched his or her technical strengths. A risky candidate is likely to get most of their business from new sources, such as advertising or company-generated leads, while a quality candidate might get most of their business from past client or strategic partner referrals. As you interview the candidate, listen carefully and they will tell you exactly what they intend to do by telling you what is important to them. Which is more important to them: Quality or income? Listen closely and they will tell you. Then, choose the candidates who care about their customers and have a long-term career point of view.
Your compensation policy reflects your values You want your production team to produce high-quality, fraud-free loans, but I would bet that your compensation policy is invariably tilted toward rewarding production volume. There is almost no exception to this, and I’ve never really understood it. If you provide resources, such as a desk, phone and computer to a loan originator, they must generate at least a certain amount of money to pay for it. On the other hand, we have all had highproducing agents that were far more trouble than they were worth. It’s what I have come to call the profit-to-noise ratio. Even so, we tend to develop our compensation policy to reward those who fund the most or produce the highest gross revenues. Rarely do we tie compensation into those factors that matter most to net profit: Quality of submissions, pull-through ratio or the future performance of mortgages originated. Why don’t we do this? It’s really no harder to measure or reward, and it doesn’t preclude volume incentives; it can indeed enhance them.
In one company, I set up quarterly awards for certain performance metrics. The originator with the highest commissions generated won the “Big Dog Award,” and literally got to keep a giant stuffed dog at his or her desk for the next quarter. The winner of the most creative solution for ethically solving a client’s challenge through creatively structuring a deal won the “Einstein Award,” and got to keep a large brain-teaser puzzle on their desk for the quarter. The key was that the solution had to be creative, and also had to solve the challenge in such a way that the solution was a clear win-win for everyone. The person with the highest quality submissions, measured by the fewest number of “issues” per submitted file (as identified by the processors) got the “Excellence Award,” and kept a large model of an expensive Mercedes-Benz on their desk for the next quarter. Each award winner also received a nice bonus check, right there at the awards “ceremony.” They could keep the check, but they had to fight to keep the Dog, the Puzzle, or the Mercedes-Benz model.
Build your compensation policy with the profit-to-noise ratio concept in mind Compensate production, of course, but compensate quality and ethics, too. Consistently high-quality packages, high pull-through rate, and maybe even high customer satisfaction ought to be reasons for an originator to make a higher split … after all, they’re more profitable to you because of their quality. You’ll notice I didn’t title this section “Your compensation policy should reflect your values.” I titled it “Your compensation policy reflects your values” because, whether you like it or not, it really does. If the only way for an originator to increase his or her income is to do more volume, what would you expect their priority to be?
Message from management—heard loud and clear I’ve worked for at least two large brokers who had extremely clear zero-tolerance fraud prevention policies, who also had high-producing originators or teams that were flagrantly violating the fraud policies all the time. It’s painful to fire your rainmakers, I will admit. But the message was very clear: We want you to avoid fraud and turn in high quality loans, unless you are a really high producer. Imagine the irony … you want everyone to be ethical, except the originators who are exposing you to the most risk by producing the most. Fighting fraud from the rank and file is
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much harder if you are turning a blind eye to it when it’s done by a high producer, or worse, when management engages in it. Firing a high producer may be costly, but I believe it is less costly than having to put in place an anti-fraud system that is constantly at odds with your own internal culture. Be willing to let go of the bad players no matter how much revenue they bring in.
In summary … Of course you have to have a formal zero-tolerance fraud policy, but that policy will be more difficult, more expensive and less effective if you don’t
start by looking in the mirror and asking the question: “What message am I sending to my production staff?” That’s where you need to start. Casey Fleming is business development manager for Comstock Mortgage. His primary focus is acquiring or building new Comstock Mortgage branch offices. Additionally, he develops training and coaching programs to help dedicated, professional loan consultants seeking to take their careers to the next level. He may be reached by phone at (408) 3483442, e-mail email@example.com or visit www.loanguide.com.
regulatory compliance outlook
continued from page 24
familiar with the actions needed for such filing for each and every quarter. Given that there are civil monetary penalties for failure to file the MCR, immediate attention to this filing requirement is an operational and administrative necessity.
Submit your questions … Do you have a regulatory compliance issue that you’d like to see addressed in the Regulatory Compliance Outlook Column? If so, e-mail your issue or concern to Jonathan Foxx at firstname.lastname@example.org. Jonathan Foxx, former chief compliance officer for two of the country’s top publicly-traded residential mortgage loan originators, is the president and managing director of Lenders Compliance Group, a mortgage risk management firm devoted to providing regulatory compliance advice and counsel to the mortgage industry. He may be contacted at (516) 442-3456 or by e-mail at email@example.com.
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Footnotes 1—The SAFE Mortgage Licensing Act of 2008 requires mortgage licensees to submit reports of condition to the Nationwide Mortgage Licensing System and Registry (NMLSR) in such form and containing such information as the NMLSR may require [12 USC 5014(e)]. 2—Subsection (e) of Section 1505 of the SAFE Act [12 USC 5104(e)]. 3—NMLS Call Report—Request for Public Comment, March 15, 2010, page 3. 4—This section constitutes a synopsis of NMLS Mortgage Call Report—Basics, Nationwide Mortgage Licensing System & Registry, and the following Presentations given at the “2011 NMLS User Conference & Training,” Feb. 7-10, 2011, Orlando, Fla.: NMLS Mortgage Call Report, Part I, and NMLS Mortgage Call Report, Part II, Stuart McKee—Assistant Finance Bureau Chief, Iowa Division of Banking and Darin Domingue—Deputy Chief Examiner, Louisiana Office of Financial Institutions. 5—The MBFRF collects activity and financial information on a quarterly basis from approved Fannie Mae, Freddie Mac Sellers/Servicers and Ginnie Mae Issuers. 6—As but one example of a state banking department policy regarding a failure to file the MCR, see letter to licensees, Re: NMLS Call Report/Annual Report, Department of Banking and Consumer Finance, State of Mississippi, issued by Traci McCain, Director, Mortgage Division, Feb. 16, 2011. 7—To provide a brief outline about appropriate action, I have looked at several directives from state banking departments, such as the Michigan Office of Financial and Insurance Regulation (OFIR), letter to Michigan Mortgage Licensee/Registrants, Mortgage Loan Originator Licensees and Sponsors, Attention: 2011 NMLS Mortgage Call Report Notification, Jan. 26, 2011. 8—Whether you visit the NMLSR Mortgage Call Report Web page or my firm’s Library, download and read the following documents: NMLS Mortgage Call Report Basics, Mortgage Call Report Standard Section—Entities: Loan Originators, Mortgage Call Report Expanded Section—Entities: Fannie Mae or Freddie Mac Seller/Servicer, or a Ginnie Mae Issuer, Field Definitions—Definitions and Instructions, and Examples: Wholesale, Retail, Reverse Lender and Broker.
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The Markets “Do the Egyptian”
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I could not resist this pun. Obviously, the situation in Egypt is no laughing matter. It brings to mind two important points. First, it is a prime example why predictions don’t work. On Thursday, Jan. 27, things were looking up. The Dow and the S&P were testing 12,000 and 1,200, respectively. Oil prices were down significantly from their highs above $90 per barrel. Then the unrest in Egypt exploded. You never want to have a crisis on a Friday when the traders are about to leave town for the weekend. The stock market dropped, oil prices rose and rates came down significantly. Come Monday, the markets opened their eyes and did not see the world collapsing. By Tuesday, CNN was running a story that the crisis should not affect the price of oil. By the end of the day on Tuesday, the markets had recovered all lost ground. So much for the dire predictions on that Friday, but tomorrow’s crisis, whatever it may be, may tell a different story. Add political instability to the wild cards that may impact our markets this coming year. The second point? The recession has been very hard on the average American … foreclosures, unemployment and more. Think about how hard it has been on poorer countries. No wonder there is major unrest. The head of the International Monetary Fund (IMF) recently warned that the lack of a recovery in many areas of the world could fuel the next crisis. We might say that inflation is not a problem because of slow economic growth, but when food and energy prices rise, it is a major problem for those who are struggling … including those in our own country. Maybe you can separate food and energy in statistics, but you cannot separate them from our budgets. Try cutting back on food. Speaking of predictions, who would have through that this winter would subject much of the country to massive storm after storm just at a time when everyone was getting so confident about the recovery? We barely get through the holiday shopping season unscathed, despite early storms and then January turned out to be a white out from the deep south to the northeast. No one knows at this point how
badly these storms will hurt our economy in the first quarter. Certainly, the employment report for January was definitively skewed. It’s tough to reach good numbers when people cannot get to their offices. We have had jobless claims fluctuate from 25,000 to 50,000 per week. These numbers are normally volatile, but not that volatile. Do you think snow can impact national numbers? How can we have a report come in with 100,000 less jobs created, yet unemployment goes down sharply? It just does not add up. Just file the weather under another category in which predictions are so difficult. Everybody thinks rates are rising this year. However, if we have more shocks overseas and natural disasters, nothing is etched in stone. Not that we are predicting these events. Our advice is to always be prepared for the unexpected. If the weather gets nicer (isn’t spring right around the corner?) and the world quiets down, the economy could continue marching along with its recovery. Outside of the employment report, the vast majority of the economic releases have actually been positive in the past few weeks. We believe that is why the stock market has been strong and bond market has been weak despite the interruptions—at least through the first few weeks of 2011. Now if we could only get the real estate markets showing some springlike strength. As we continue to emphasize, we cannot experience a real recovery without real estate. A jobless and a real estate “less” recovery do not add up. We will need both to feed upon each other positively to make the recovery strong and longer lasting. Dave Hershman is a leading author for the mortgage industry, with eight books and several hundred articles to his credit. He is also a top industry speaker. If you would like to stay ahead of what is happening in the markets, visit www.ratelink.originationpro.com for a free trial. Dave’s NewsletterPro Marketing System can be found at www.webinars.originationpro.com and he may be contacted by e-mail at email@example.com.
continued from page 25
XetusOne’s workflow also enhances overall efficiency and ease-of-use. By tracking milestones, assignment of tasks and setting of conditions, users may depend on it to consistently manage data, compliance, audit trail and statespecific documentation. XetusOne’s platform enables lending employees who originated a loan to also review subordination requests, restructure mature HELOCs, mitigate losses by modifying non-performing loans and analyze cash flow for a proprietary, HAMP or 2MP loan modification. All these loan responsibilities are performed on the same user interface and Web-delivered software platform. For more information, visit www.xetus.com.
Comergence Launches LO Compensation Agreement Management and Administration Service Greg Schroeder, president of Comergence Compliance Monitoring, a provider of third-party originator (TPO) monitoring and due diligence solutions, has announced the release of CompEditor, a comprehensive tool to help lenders manage their Loan Originator Compensation Agreements as required by Federal Regulation Z: Loan Originator Compensation and Steering. Effective April 1, 2011, Section 226.25 of Federal Regulation Z, subsection (a) General Rule, requires for each transaction subject to the loan originator compensation provision that the creditor maintain records of compensation it provided to the loan originator for the transaction as well as the compensation agreement in effect on the date the interest rate was set for the transaction. The creditor must retain records to evidence compliance with Regulation Z for at least two years after a mortgage transaction is consummated. “By utilizing our comprehensive TPO management compliance system, Lenders can now use the document management portion of our system to initiate, distribute, renew and retain their Loan Originator Compensation Agreements and house these agreements within the complete and comprehensive Mortgage Broker profile database we establish for each lender,” said Schroeder. “Comergence Compliance Monitoring has worked diligently to establish processes that would constitute best practices for this portion of the Truth-in-Lending Act.” Schroeder notes that independent mortgage brokerages can also utilize the Comergence system for the management and administration of their requirements to produce, manage and maintain individual Loan Officer Compensation Agreements. “Our system can facilitate the sharing of these individual agreements with each
lender the mortgage broker is contracted with if the lender wishes to review them.” “The added service that CompEditor provides takes a heavy financial burden off the lenders to create systems on their own when their resources are already heavily taxed,” said Schroeder. For more information, visit www.comergencecompliance.com.
Lenders Compliance Group Head Forms NMLS Users Forum Jonathan Foxx, president and managing director of Lenders Compliance Group, has formed the NMLS Users Forum on LinkedIn. Invitations have been sent to industry participants. Membership is free, open to all, and is an Open Group, which will allow discussion visibility, indexing by search engines, and sharing to Twitter and Facebook. “My firm handles all the administrative functions involved in NMLS licensing for many mortgage originator entities and mortgage loan originators, and I have found that there is a need for greater familiarity with NMLS use and preparedness,” said Foxx. “That is why I formed the NMLS Users Forum, specifically to expand the knowledgebase of NMLS users and enable them to be more effective.” The NMLS Users Forum is for users of the Nationwide Mortgage Licensing System Registry (NMLS), which streamlines the licensing process for both regulatory agencies and the mortgage industry by providing a centralized and standardized system for mortgage licensing of mortgage loan originators and certain financial institutions. It is the official and sole system for companies and individuals seeking to apply for, amend, renew and surrender licenses managed in the NMLS on behalf of the jurisdiction’s governmental agencies. The NMLS unique identifier is a required disclosure in all participating states, D.C., and U.S. Territories. The NMLS Users Forum is not associated or affiliated with the Nationwide Mortgage Licensing System Registry or its creators, the Conference of State Bank Supervisors (CSBS) or the American Association of Residential Mortgage Regulators (AARMR). It is a completely independent forum and has been created for NMLS users to share their NMLS experiences. According to Foxx, the NMLS Users Forum on LinkedIn has been created “to empower, educate, and provide a space to discuss and share the NMLS licensing and registration experience,” while also finding answers to important questions. “If you license or register through NMLS, this forum is for you! The NMLS Users Forum will enable NMLS Users to exchange views, news, expertise, and
updates,” said Foxx in his notification to prospective members. “Members can provide comments and offer their solutions to other NMLS users.” For more information, visit www.lenderscompliancegroup.com.
Coester Releases Appraisal Smart Phone App Coester Appraisal Group has announced a new Smart Phone application, which is currently in beta testing, that connects Coester Appraisal Group with both staff and contracted appraisers, as well as with its lender and broker clients. The new application is in HTML5 format, an application compatible with multiple operating systems, including those used with the Apple iPhone and Blackberry, as well as any smart phone using the Google Android operating platform. The application will be available free of charge at www.CoesterAppraisals.com later this year. Users may use the application to order appraisals, check appraisal status, update appraisals, upload completed appraisals and pay for services through an integrated credit card processing service. The application features “ping” notifications, which allow Coester Appraisal Group to alert users and deliver messages virtually instantaneously. Once the application is downloaded onto a compatible mobile device, users can set
their preferences to dictate the situations in which they will receive notifications. Appraisers may choose to receive notifications for instances like open orders or outstanding conditions. Lenders and brokers may opt for instances that include scheduled on-site appointments, completed appraisals or uploaded appraisals. The application is part of Coester Appraisal Group’s strategic plan to build and incorporate new technologies that expedite the appraisal process, while also heightening quality, efficiency and user experience for lender/broker clients and for the company’s staff and outsourced appraisers. As part of this plan, the company is also building a searchable database of every appraisal completed by Coester Appraisal Group over the past 30-plus years, which will be complete by mid2011. This database will enable authorized users to conduct customized searches of completed appraisals, which can help them to determine and support “customary and reasonable” fees for appraisals, as mandated by the Dodd-Frank Act. “One of the reasons our clients and appraisers choose to work with us is because they know we are a techsavvy, forward thinking company,” said Brian Coester, chief executive officer of Coester Appraisal Group. “They know that we are committed to leveraging technology in a way that helps our clients and vendors. Our
app will allow us to get information to appraisers and lenders immediately, no matter where they are. Our thinking is this: if we can’t find the technology we need to further enhance the client or vendor experience, we’ll create it.” For more information, visit www.coesterappraisals.com.
Fannie Mae Launches Servicer ‘Report Card’ to Evaluate Foreclosure Avoidance Fannie Mae has announced the Servicer Total Achievement and Rewards (STAR) Program, a new effort designed to measure and evaluate mortgage servicers’ performance in supporting the housing recovery by helping homeowners avoid foreclosure. The STAR Program provides clear expectations and specific, consistent measurements to help Fannie Mae servicers increase focus on areas of critical importance to Fannie Mae. The program directly links servicer performance to homeowners the servicer has helped, and the customer’s experience with their servicer. “We created the STAR Program to promote transparency, accountability and excellence in mortgage servicing and to recognize those which consistently deliver strong, customer-driven results,” said Leslie Peeler, vice president of servicing portfolio manage-
ment. “The efforts of servicers are critical to preventing foreclosures and providing homeowners assistance. By creating measurable expectations for our servicers aligned with Fannie Mae’s business objectives, we hope to sharpen servicers’ focus and encourage them to continue to work with us toward our shared priority: keeping people in their homes.” A key component of the STAR Program is the Servicer Performance Scorecard, which provides monthly performance snapshots and trends for key performance indicators to help servicers effectively assess their progress. Top-ranked servicers will be eligible to receive incentive awards and recognition. Rankings of top performers will be made available to the public in an annual scorecard. “The STAR Program is an innovative approach in managing and evaluating servicers’ performance, and we believe it will improve customer satisfaction and overall housing outcomes for struggling customers,” said Jay Bray, executive vice president of Nationstar Mortgage. “We applaud Fannie Mae’s efforts to develop a comprehensive assessment and rewards program.” The STAR Program is part of Fannie Mae’s ongoing efforts to hold servicers accountable, help homeowners and stabilize communities. Fannie Mae continues continued on page 32
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new to market
continued from page 31
to conduct homeowner outreach across the country, which includes the opening of Mortgage Help Centers in Miami, Chicago, Atlanta, Los Angeles, Phoenix and Dallas/Fort Worth. The company also launched www.knowyouroptions.com and WaysHome, a free, interactive multimedia tool designed to educate homeowners about their options to avoid foreclosure, empower them to make informed decisions and motivate them to take action and seek help in 2011. For more information, visit www.fanniemae.com.
PCLender.com Joins With Motivity on Customized Data Reporting Technology
PCLender.com has announced an integration agreement with Motivity Solutions for its Movation Business Management Platform, where PCLender.com customers using the company’s InHouse Mortgage can utilize Movation’s innovative business intelligence functionality to better understand the performance and status of
their loan production and overall operations through real-time scorecards, dashboards, and dynamic, real-time reporting capabilities. Movation augments PCLender’s LOS software’s extensive database of record along with other relevant data sources, and seamlessly integrates Movation to efficiently extract relevant information to more effectively manage an organization’s complex mortgage operation. PCLender.com customers benefit by having access to their collective loan origination information from one central database system, in real-time that can be converted into actionable information through multiple business intelligence and reporting options. Some key benefits include: Easy
ISGN Adds New Functionality to Its LenStar Default Management Service Product
the broker approval desk.
Gets you all warm and fuzzy just thinking about having to approve and reapprove your brokers, now doesn’t it?
At Comergence, helping lenders holistically manage relationships with their mortgage broker clients is the most important thing we do. And with FHA now holding lenders accountable and responsible for approving brokers, there’s no better time than the present to have us show you how we can help with this important change to your business. For more information and to schedule an appointment, call 714.740.9000 or visit us at www.ComergenceCompliance.com Comergence is preferred by leading lenders nationwide.
©2011 Comergence Compliance Monitoring, LLC. All rights reserved.
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accessibility of Movation within InHouse Mortgage software for ondemand viewing of company information through an intuitive interface; quick access to real-time, drillable dashboards that provide essential information necessary to drive customers’ business; key Performance Indicators (KPIs) monitor individual operational activities with large-scale department, branch, and company goals; the ability to view high-level summary data graphically with the ability to drill down to loan level detail as needed. “We’re excited about our latest partnership with PCLender.com and equipping lenders with user-friendly functionality to maximize their business processes,” said Tyler Sherman, chief executive officer of Motivity Solutions. “Our combined technologies work well together to provide customers with a customized business intelligence and reporting solution that is quick and seamless to implement. Creating performance-driven cultures for our lenders is now a combined effort through this synergy relationship.” For more information, visit www.pclender.com or www.motivitysolutions.com.
ISGN has added new features to enhance its LenStar Default Management Service, providing servicers with the flexibility to create and set up their own business rules to more efficiently manage the default process with their attorneys and other vendors. The new LenStar features include vendor integration that provides real-time data exchange between LenStar servicers and their attorneys’ case management systems; and the flexibility for servicers to manage their vendor network through workgroups, bulletin boards, messaging and the approvals process. And the new features, offering seamless integration of LenStar and its vendor network using web services, are available at no cost to users, unlike other systems which charge for their services. The LenStar Default Management Service connects servicers with their chosen attorneys and automates the distribution of data between the servicer’s desktop and their attorney’s case management system. LenStar interfaces with all major servicing platforms. As delinquent loans and foreclosures remain on the rise, the challenge for servicers is managing their vendors through the default process in this increasingly volatile environment. The new LenStar features give servicers the ability to manage the sub-processes within the default process. The vendor integration feature improves the communication between attorneys and their LenStar clients, allowing attorneys to work out of their own case management systems while gaining
real-time access to LenStar and their servicer clients. LenStar servicers can set up their own business rules and manage their vendor network with the new bulletin board feature, enabling them to communicate globally with their vendor network and also specifically to vendors and attorneys. The new workgroup function allows LenStar servicers and their vendors to manage exceptions and workflows based on the servicer’s business requirements. The new approval process feature enables servicers to manage the process within their guidelines, giving them more controls over it. With the messaging feature the LenStar servicer is able to interact with internal users within its own organization or with their attorneys. For more information, visit www.isgn.com.
ManTech Releases Bullseye Mortgage Platform
Appraisal Institute Launches Green Valuation Program
The motivation resulted from somewhere than it does in this instance. To add anothbetween the massive loan losses caused er well-known phrase, creating laws is like by the recent recession, the advent of the making sausage … it’s not a pretty sight. I Home Valuation Code of Conduct (HVCC), am not sure which statement is more complaints from appraisers, as well as apropos; however, in addition to offering lobbying conducted by appraisal, mort- a bit of humor to an otherwise dry subject, gage brokerage and real estate sales they both contain kernels of truth. industry organizations. We are talking Let us visit a few key elements of the about the section of the massive, recent- law that resulted from those noble and ly enacted, Dodd-Frank Wall Street well-intended goals. Reform and Consumer Protection Act, which All AMCs are required mandates that appraisal to register in the states management companies in which they do busi(AMCs) register with the ness. Those operating Feds and in each state in in 50 states must regiswhich the AMC operates. ter in all 50 states. The The primary reason initial cost of registrafor this legislation was tion as published by noble. It was to protect states ready to begin the public interest, parthe process is as much ticularly the interest of as $5,000 per state, per consumers and home AMC. Annual renewals “The Appraisal loan borrowers, as well can be as high as as the soundness of our Institute reports that $2,000 in some states. banking system. As is the number of appraissometimes the case, the All AMCs are also ers has decreased in interest of the consumer recent years due to the required to register at was somehow overshadthe federal level. The recession and to what owed by the landslide of eventual cost of this is many have viewed as special interest, which unclear, but based low fees, which some influenced the legislaupon the language in tion. When we consider blame on management the legislation, it will companies.” the plethora of special range between $25 interests involved and and $50 annually per the huge economic impact that the appraiser working for AMCs. Based mortgage industry has on a variety of upon this estimate, an AMC having professions, this is easier to under5,000 appraisers will pay between stand. There is little wonder that there $125,000-$250,000 per year in fees. are many unintended consequences Some AMCs have reported that they from this otherwise well-intended law. intend to charge the fee to the appraisPrimary among the consequences is the ers on their approved list. Most AMCs likelihood that the Dodd-Frank Act will are expected to absorb the fee and cause a major spike in appraisal fees to incorporate it into their fee to banks. the consumer. The concept of registration, within There will, without question, be many itself, is not necessarily onerous or other costs of compliance experienced impractical; however, in this case, that by AMCs in following all regulatory appears to be true. We have all heard the rules and regulations. While there is phrase that the devil is in the details. continued on page 35 Never has that cliché had more meaning
continued on page 40
How Will the Dodd-Frank Act Affect Appraisal Fees?
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The Appraisal Institute has launched its Valuation of Sustainable Buildings Professional Development Program, educating appraisers on the intricacies of valuing high-performance residential and commercial buildings. The Appraisal Institute is the nation’s largest professional association of real estate appraisers. “There is a tremendous need for this type of education within the real estate sector,” said Appraisal Institute President Joseph C. Magdziarz, MAI, SRA. “High-performance buildings represent a rapidly growing area of the real estate market, and reliable valuations are critical both to banks’ risk management and to developers’ sound development practices. The Appraisal Institute is proud to continue its leading role in educating appraisers on such an important topic.” Home builders and others have complained that appraisers often don’t properly take into account “green” features when providing valuations. Building on existing Appraisal Institute education, the Valuation of Sustainable Buildings Professional Development Program is intended to arm professional appraisers with the most advanced guidance, case studies, methods and techniques on valuing high-performance buildings, positioning them as solution providers for the real estate sector.
By Charlie W. Elliott Jr., MAI, SRA, ASA
Mortech has announced the availability of Bullseye, a mortgage platform designed to speed the entire loan origination and underwriting process. Bullseye reduces the time spent closing loans by unifying numerous mortgage platforms in one seamless operation, redefining the way mortgage companies will approach the loan process. As part of a new technology built into Marksman, Bullseye links mortgage companies with national credit agencies and offers a complete automated underwriting system (AUS) including connectivity to Fannie Mae’s Desktop Underwriter or Freddie Mac’s Loan Prospector. The comprehensive industry-first also creates bi-directional communication with loan origination systems (LOS), provides a built-in document management system, simplifies locking routines and advances mark-tomarket reporting capabilities in a seamless system-to-system setting. “Analysts are predicting the time between application and closing is going to take even longer during 2011 due to increased regulations and verification processes,” said Mortech President Don Kracl. “This solution is going to accelerate the entire loan processing cycle by minimizing duplicate data entry, bringing decisioning closer to the point-of-sale and creating seamless communication from pre-lead to closing.” The platform connects mortgage originators with their preferred credit agencies so credit reports can be generated at the point-of-sale without leaving Marksman. Complete credit details required for an automated underwriting decision are parsed and auto-populated back into their Marksman account. After the credit report is pulled, the 1003 file can be submitted to the AUS, generating a decision with complete stipulations and conditions while simultaneously examining specific investor and company overlays. By getting early decisions from more restrictive investor and company specif-
ic overlays, this new preemptive approval strategy manages risk and exponentially increases the probability of loans getting the green light by DU/LP. The Document Management System, currently in beta, allows for easy management of all documents associated with a loan. Pertinent loan files can be stored internally within Marksman. Information is seamlessly transmitted back and forth automatically through Marksman to continuously maintain loan statuses, data from 1003 files and details from the borrower’s loan scenario with no manual data entry required. Secondary desks have access to increased locking and Mark-to-Market functionality through the Bullseye technology. After locks have been passed through the LOS, secondary can seamlessly run Mark-to-Market in bulk on demand, or nightly from Marksman to continually evaluate the company’s position against the current market. This provides mortgage companies access to real-time valuations of their company pipeline and the opportunity to uncover missed profits. The entire end-to-end solution expedites originating activity from point-of-sale to closing allowing for entirely new degrees of efficiencies. For more information, visit www.mortech-inc.com/bullseye.
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Investing in communities
MEMBER United Northern Mortgage Bankers, Ltd. Corporate NMLS ID# 7230 New York State Dept. - Licensed Mortgage Banker - License #100724 New Jersey Dept. of Banking and Insurance - Mortgage Lender - License #L0046623 Pennsylvania Dept. of Banking - Mortgage Lender - License #20887 Connecticut Dept. of Banking - Mortgage Lender - License #20372 Massachusetts Div. of Banks and Loan Agencies - Mortgage Lender & Mortgage Broker - License #MC5070 North Carolina Commissioner of Banks - Mortgage Lender - License #L140365 South Carolina State Board of Financial Institutions - Supervised Lender - License #S7, 461 Florida Dept. of Financial Institutions - Mortgage Lender - License #ML0700679 Senior Security Home Advantage is a lending area of United Northern Mortgage Bankers, Ltd. Direct FHA Endorsed Lender
continued from page 33
no way to know, as of this writing, Appraisers will be paid what these costs will be, suffice it to more say that they will easily pale those Fees to appraisers have not increased costs of registration outlined above. much, if at all, over the past 20 years. They deserve higher fees, particularly in some Each appraiser performing appraisals areas where the competition is stiff. The in federally-related transactions will language in the bill speaks to this issue. be required to personally pay a fee in While there will be concerns about subthe amount of $40 each year. If the scribing to a free market, there will also be roughly 92,000 appraisers in the pressure to pay appraisers more. We have United States pay this fee, it would fewer appraisers than we had in the past. amount to a tax of $3.68 million. The The Appraisal Institute reports that the appraisers will pass this along the number of appraisers has decreased in chain to the consumer. recent years due to the recession and to
Management companies will spend much more on compliance and fees. They will have no choice other than to pass this extra cost along to the consumer.
The effect of current state appraisal certification, educational and experience requirements mandates a program that tends to take appraisal trainees between three and five years to become licensed. Therefore, there is likely to be pressure on the market to increase appraisal fees for some time to come.
There are those who would say that management companies have been responsible for holding the fees down due to increased efficiency. Many appraisers will say that this is due in part to AMCs not paying them a fair fee. Whatever the reasons, fees to the customer are likely to increase.
Regulation of AMCs will not cause banks to use AMCs less It is likely that more banks will use AMCs to service their appraisals in continued on page 40
At REMN, we understand that there’s nothing ordinary about focusing on what’s important: our customers. We recognize that continued
We’re not afraid to be different.
business from our satisfied customers is the lifeblood of our business. We believe that every application is precious and treat each file with the respect – and urgency – it deserves. Even better, at REMN, same-day approvals are guaranteed. We promise extraordinary service in an ordinary world.
The new law will require transparency, forcing banks to separate AMC costs from the actual cost to the appraiser Learn more at www.remnwholesale.com * Same-day decisions guaranteed if file is received by 11 a.m. EST. Real Estate Mortgage Network, Inc. is located at 499 Thornall Street, Second Floor, Edison, NJ 08837. NMLS #6521. This information is for use by mortgage professionals only and should not be distributed to or used by consumers or third parties. Information is accurate as of date of printing and is subject to change without notice.
It stands to reason that banks will use this aspect of the law to recoup costs of overhead forgone in the past. This will result in many banks charging a higher fee to the customer, which covers both appraisal services and appraisal management services.
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Regulatory cost will make a huge difference
Education and certification
Fees for appraisals to the consumer have not gone up substantially over the past few years
It is unclear why such high fees are necessary. Neither is it clear why it is necessary to have two layers of registration, federal and state, when one at the federal level would seem to be adequate. Also, one may ask why some states charge initiation fees of less than $500 when others charge $3,000, $4,000 and $5,000. What is clear is that those new costs, like the costs of other regulations imposed upon business and society by government, will be borne by the consumer. It is possible that many AMCs will be forced out of business by the additional costs of complying with these new regulations. As this occurs, AMCs will not disappear; the larger ones will become larger. This will create a less competitive market, placing upward pressure on appraisal fees. Some even question whether, after the advent of the new regulations, if AMC services will be any better and whether there will be less corruption, fraud or any of the other unsavory activities that the legislation was intended to prevent. Other unintended consequences of the new law will take their toll on small AMCs in many other ways. These will be broad-ranging and will manifest themselves in the form of AMCs forgoing business in states where they cannot afford to register with budgetary constraints preventing their acquisition of technology and human resources, designed to offer national coverage. In summary, be prepared for appraisal fees to the consumer to increase substantially when the new law is in full effect, two or three years down the road. This will happen for a number of reasons listed below.
what many have viewed as low fees, which some blame on management companies. The Appraisal Institute also reports that the number of certified appraisers in the United States decreased 6.6 percent from 2007 to roughly 92,000 in 2010. It also reports that nearly half of all appraisers are between the ages of 51 and 65.
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United Northern Mortgage Bankers......888-600-8808
Limited room available for established Team Leaders and Licensed Mortgage Originators. Become part of an established 30-year Mortgage Banker with a proven track record and success.
Brokers United ........................................877-710-0948 Consulting & Branch opportunities. Exclusive opportunities with a top Federally Chartered Bank, Mortgage Banker and/or Mortgage Banker/Broker Platform. Email Jeff Flees at firstname.lastname@example.org.
Our Compliance Team Will: Leverage your existing employees. Improve your productivity. Collaborate on projects. Make the most of your current technology. Bring innovation to your company. Be a strong cultural fit. Free you to focus on your core competencies. Give you access to world-class expertise. Lower your total operational costs.
Freedom Mortgage Corporation www.fmbranch.com email@example.com 800.220.9498 Freedom Mortgage Corporation, The BEST Branch Solution, Period.
Currently working with various bankers & federally chartered banks. Seeking established, new branches & Loan Officers Nationally. We are a top recruiting firm handling all types of mtg positions.
Call 888-409-9770 ext 4. to register your company.
WorkCenter CRM ....................................877.498.6888 A CRM & contact management solution designed for mortgage professionals. Automated campaigns & LOS synchronization make WorkCenter an intuitive timesaver for staying in touch with clients.
Abacus Mortgage Training and Education PO Box 780 Summerfield, NC 27358 888-341-7767 • www.GetYourEd.com NMLS approved 20 hour Prelicensing Education NMLS approved Continuing Education Live Classroom Instruction, Web Delivery and Private Events The SAFE-Smart ExamCram, Powerfully Innovative Test Prep
MSS Learning Center (800) 963-1900 www.MortgageSuccessSource.com Email: info@MortgageSuccessSource.com
DocVelocity www.docvelocity.com (877) 362-8356 firstname.lastname@example.org DocVelocity is an end-to-end paperless solution designed to simplify the loan origination experience. Imagine having all your documents in the loan process as electronic files, all online, from pre-approval to closing. DocVelocity provides: Fast and easy loan delivery to any lender … Automatic doc sorting, naming and filing … Real-time online document sharing for anyone you choose … Friendly and intuitive user interface … No start-up fees, and free training and support. DocVelocity addresses important compliance issues while giving your office the competitive advantage of being paperless. It streamlines all aspects of the mortgage process and most important, it does so in one easy-touse and inexpensive package. DocVelocity is the flagship product of Paperless Office Solutions, Inc., a wholly owned subsidiary of Flagstar Bancorp. Visit www.docvelocity.com to find out more.
North Lake College 5001 North MacArthur Blvd, Room T-231-C Irving, TX 75038 (972) 273-3467 • http://www.northlakecollege.edu/ North Lake College - Specialized Education In Mortgage Banking. Earn An Associates Degree in Mortgage Banking From the First Fully Accredited Mortgage Banking Degree Program in the U.S. For Information About Our 30 Year Program email:email@example.com.
Errors and Omissions Insurance CB Malaga Insurance Services LLC ......877-245-5887 Insurance broker providing errors & omissions (E&O) insurance to mortgage brokers and bankers. All loan types. Available in 22 states. www.CBspecialty.com
Time is running out...are you ready? Pass the S.A.F.E. Act Test, meet your 20 hours of Pre-licensure, and complete the 8 hours of Continuing Education you need • The Ultimate Test Prep Kit and Test Prep Boot Camps – Cover everything to pass the S.A.F.E. Act Test — on your first try.
Events Document Preparation 37
• 20-hour Pre-licensure - Packed with everything to successfully complete your pre-licensure requirements. • Continuing Education - Exciting, NMLS approved courses that meet your Continuing Education needs and build your business.
Mortgage Banking Systems - ProClose 1360 Beverly Rd. Ste 200, McLean, VA 22101 800-783-2283 · firstname.lastname@example.org www.ProClose.com ProClose provides compliant closing documents and software for Residential Mortgage Lending. Created with closers in mind, we help make a lender’s staff more efficient and supported.
NYC Real Estate Expo LLC Anthony Kazazis - Director email@example.com • www.nycrealestateexpo.com
646.210.2545 • 914.763.8008 “The Expo for Real Estate Professionals" For ongoing Networking Events throughout the year please visit www.nycnetworkgroup.com.
Best Rate Referrals ............................................800-811-1402
Hard Money/Private Lending
Mortgage marketing company with decades of combined experience providing quality leads, mailers, lists and dialer products. www.bestratereferrals.com & www.mortgageleads.org
Robertson | Anschutz 800-343-7160 firstname.lastname@example.org www.radocs.com/info.html
• Specializing in Official Snap Packs for Greater Open Rates • Envelope Mailers, Business Reply, Postcards and Much More • Targeted Mortgage Lists with Many Selects • Complete Design, Printing and Mailing Services
We are doing traditional subprime lending, fix & flip lending and hard money lending.
Document Preparation (SaaS)
Windvest Corporation ............................877-285-0777
Docs on Demand 800-343-7160 email@example.com www.docsondemand.info
Does Advertising in the Resource Registry Work? It just did! Call 888-409-9770 ext. 4 to Register your company.
Mortgage Loan Closing Document Preparation & Compliance Software Loan Documents and Compliance – Web-based/SaaS – Easy to Use Intuitive – Secure and Reliable – Integrates with Leading LOS Free Setup and Support – Extensive Compliance Audits
Specializing in rehab loans for property investors in So. CA. Up to 60% ARV, 12.99% fixed rate, 3.5-5 points, 1 yr. term. Fast & professional service since '94! Visit windvestcorp.com!
Access these listings online at nmpmag.com/directory_list
ACC Mortgage, Inc. 932 Hungerford Drive #6 • Rockville, MD 20850 240-314-0399 • 240-314-0336 fax WeApproveLoans.com
PENNSYLVANIA MORTGAGE PROFESSIONAL MAGAZINE
Your Complete Mortgage Marketing Solution. Call Us Today! (800) 922-9860 www.envisiondirect.net/catalog/mortgage.htm
Mortgage Loan Closing Document Preparation & Compliance Services Fulfillment Services Including Pre-Funding Review & Post-Closing Interfaces with Leading Loan Origination Software Systems Foreclosure – Loss Mitigation Services
Income Verification Services
MortgageLoan.com Advanced Data (800) 537 - 0458 www.advanceddata.com firstname.lastname@example.org Advanced Data is a leading national provider of data services, streamlining income and employment verification with proprietary software. Clients can submit 4506-T directly through Encompass360. Also ask about our AVM and flood services!
www.mortgageloan.com • 877-390-4750 MortgageLoan.com is the largest online directory for mortgage professionals and a favorite of consumers shopping for mortgage loans. Our network attract over one million visitors per month. Our paid lead program as well as our free lender directory will help you connect with targeted new consumer traffic from with high-intent consumers searching online for the right mortgage lender.
www.LendingForms.com Same Day Shipping (orders placed prior to 3pm et) 24/7 Secure e-Commerce Site Save 33-50% • • • •
HUD Settlement Cost Booklets CHARM Booklets Uniform Residential Loan Applications HUD Case Binders
Platinum Credit Services, Inc.................631-299-2084 Tax return vertification (4506 tax transcript done in less than 24 hours in most cases). Call Lorenzo Pugliano, President and CEO at 631-299-2084.
Sign up with the Premier Jumbo Lender www.ingloans.com 877.464.0555, option 2 Move your Jumbos to a better neighborhood. ING Mortgage is your home for Portfolio loans up to $3,000,000. We offer aggressive pricing and simple guidelines in all 50 states. Big Loans. Low Rates. Great Value.
Cruise4Two-Loan Incentives 1-866-541-8077 www.Cruise4Two.com
Comergence Compliance Monitoring, LLC 630 The City Drive South, Suite 205 • Orange, CA 92868 Office: 714-740-9000 www.ComergenceCompliance.com
Increase your Loans,Get the Edge & Generate More Referrals! Offer your clients a 5 Day 4 Night Cruise certificate for Two to Mexico, the Bahamas or the Western Caribbean (up to a $1798.00 value) only when they close a loan with you. Only $159.00 per certificate!!
Comergence Compliance Monitoring is the mortgage industry’s only Complete broker desk management software and outsource solution for TPO management and monitoring. We can supplement lenders inhouse management and monitoring resources departments.
Loan Management Systems
PENNSYLVANIA MORTGAGE PROFESSIONAL MAGAZINE
Xetus ....................................................877-GO-XETUS XetusOne is a powerful, easy-to-use loan management system that streamlines loan processing. Our affordable SaaS applications are lenders #1 choice for origination, subordination & modification.
Leads AAA Refi Leads.....AAA Refi Leads.....AAA Refi Leads Learn how I went from failure to success by mailing cheap refi letters from home, closed 71 loans & made $248,954.62 last yr. I’ll show you exactly how I did it. Go to: www.Refi-Leads.NET
Internet’s Leading Consumer Mortgage Marketplace Attracting over 7 million unique consumers every month www.Bankrate.com • 561-630-1257 Reach affluent and creditworthy consumers who are in-market and ready to transact. Bankrate is a consumer direct Web site, NOT a lead aggregator. Qualified leads for every sized budget, and pay only for performance. No set up fees! No contracts! No risk! • Reach self directed, highly qualified consumers that are actively searching for mortgage loans • Geo-targeting – reach the right consumers in the right markets • Our proprietary Advertiser Portal gives you complete control over your campaigns, budgets, and performance reports. • YOU determine your daily/weekly/monthly budget • Pay only for consumers who click on your listing • NO cancellation fees Try us risk-free! Call 561-630-1257 or visit www.bankrate.com/cpcprogram/ for more details.
Loan Origination Systems
(800) LOANS-15 www.mortgageconcepts.com Are you a broker/owner or current branch manager looking to expand your business into Mortgage Banking with FHA capabilities? Then our PARTNER BRANCH ADVANTAGE© program is perfect for you. We are offering you all the benefits of partnering with an established lender while still enjoying your independence. Mortgage Concepts is a nationwide FHA Direct Lender with a 16 year long reputation of excellence.
Calyx Software 800-362-2599 email@example.com www.calyxsoftware.com Calyx Software, the #1 provider of mortgage solutions is dedicated to offering reliable and affordable software that streamlines, integrates and optimizes the loan process. Find out how PointCentral can streamline your business and create compliant processes today.
YOUR SUCCESS IS OUR SUCCESS! For more information contact THOMAS R. SIRICO, Vice President of Business Development at (917) 923-1472 or email at firstname.lastname@example.org. We look forward to sharing our services with you!
Secondary Marketing Consulting Mortgage Builder Software 24370 Northwestern Highway, Suite 200 Southfield, MI 48075 800-460-5040 • www.mortgagebuilder.com End-to-end LOS system for multi-channel lending. PreQual thru Interim Servicing. Includes all back-office functionality; Underwriting,Secondary Marketing,Post Closing and much more SaaS, ASP and Client Server delivery options.
Broker to Banker Services.com ..........(951) 746-3075 We complete your applications for approval Save the time and hassle contact: brokertobankerservices.com
Intracoastal Abstract Co. Inc.................516-358-0505 Privately owned & operated full service title insurance agency in NY, NJ and FL, with affiliates throughout the US & Canada. Escrow Agent in Florida. www.intracoastalabstract.com.
TMSfunding Wholesale Lending 326 W Main Street â€˘ Milford, Ct. 06460 888.371.2989 â€˘ WWW.TMSFUNDING.COM Your Partner in Success!
Flagstar Wholesale Lending www.wholesale.flagstar.com (866) 945-9872 WLSC@flagstar.com
Wholesale/Correspondent BankFinancial ..........................................800-894-6900 We have money to lend for apartments, $250M to $2MM, up to 75% LTV. We offer competitive rates, fees & terms. Weâ€™re committed to helping you and your clients close the deal. Call us.
â€˘ â€˘ â€˘ â€˘
Flagstar Wholesale Lending, a division of Flagstar Bank, is one of the nationâ€™s largest wholesale and correspondent mortgage lenders, providing the technology, products, service and support that independent mortgage brokers, correspondents, and bankers need in todayâ€™s mortgage arena. In the ever-changing environment of mortgage banking, Flagstar takes pride in accommodating the specific needs of each customer. At Flagstar, we understand that you need every available advantage to stay ahead of the competition. This is why we provide multiple technology options to meet your needs to register, lock, underwrite, close, fund and deliver your loans. Our wholesale website (wholesale.flagstar.com) and the loan processing tool Loantrac provides our customers with the functionality that make it easier and faster to close loans, saving you time and money! Visit wholesale.flagstar.com to learn more.
Paperless! Quick and Easy! Top Tier Account Executives Committed to Wholesale Operations that Earn Your Business
Wholesale Reverse Mortgages
NATIONWIDE Equities Nationwide Equities Corporation 201-529-1401 www.nwecorp.com
88 Kearny Street, 3rd Floor San Francisco, CA 94108 Phone: (415) 632-5150 â€˘ Fax: (925) 226-1938 www.bayeq.com Now â€˘ Arizona â€˘ California â€˘ Colorado
For Licensed Mortgage Brokers in NY, NJ, CT, PA and FL No HUD Approval Required â€“ Live Help Desk Will Provide Training at Our Office or Yours 48 Hour Underwriting - Get Paid Within 48 Hours of Funding
Terrace Mortgage 4010 W. Boyscout Blvd., Suite 550 Tampa, FL 33607 866-934-4631 â€˘ www.terracemortgage.com
Wholesale Lending in: â€˘ Nevada â€˘ Texas â€˘ New Mexico â€˘ Utah â€˘ Oregon â€˘ Washington
We offer competitive pricing and fast turn-times for FHA, VA, Conventional, and USDA programs without having a retail presence in the industry. We are a wholesale lender with 22 years of experience and believe in exceptional service.
Call 888-409-9770 ext 4. to register your company.
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PENNSYLVANIA MORTGAGE PROFESSIONAL MAGAZINE
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continued from page 35
the future. This method of appraisal management permits a higher degree of appraiser independence, mandated by the legislation. In many cases, it will be more economical for the banks.
sumers go up as much as 100 percent in some markets. For the record, U.S. Rep. Michele Bachmann of Minnesota, shortly after the 112th Congress convened, introduced a bill to repeal the Dodd-Frank Act. Ironically, Rep. Bachmann’s bill offers its In the past, competition has seemed own brand of consumer protection. to be the primary driver of fees and has held costs to the consumer down. With Charlie W. Elliott Jr., MAI, SRA, is presithe new regulations and other forces in dent of Elliott & Company Appraisers, a the economy, including fewer appraisers national real estate appraisal company. to perform work, the cost of a tradition- He can be reached at (800) 854-5889, eal appraisal will increase significantly mail firstname.lastname@example.org or visit his over the next two or three years. Don’t company’s Web site, www.appraisalbe surprised if appraisal fees to the con- sanywhere.com.
new to market
PENNSYLVANIA MORTGAGE PROFESSIONAL MAGAZINE
continued from page 33
The Appraisal Institute’s program consists of three educational courses: the first, “Introduction to Green Buildings: Principles & Concepts;” the second, “Case Studies in Appraising Residential Green Buildings;” and the third, “Case Studies in Appraising Commercial Green Buildings.” All three courses, which have been approved for continuing education by the U.S. Green Building Council, will be taught multiple times in numerous locations throughout the country. “By advancing this knowledge base, the Appraisal Institute is further establishing its role as a leader in the real estate and appraisal profession,” Magdziarz said. “When we see a need, we address it.” He acknowledged that misconceptions about green valuation exist among many non-appraisers, including a failure to realize that cost does not always equal value. He noted that appraisers need to have all information from underwriters, builders, real estate agents and home inspectors related to energy efficient features in order to recognize them and to make appropriate, market-based adjustments. Appraisers frequently ask for ratings information, blueprints and specifications of properties’ conservation features and are not provided the information either because those involved in their construction, sale or financing mistakenly believe they are not applicable to the
appraisal process or because the data are not generally available. “As analysts of the real estate market, appraisers will look at the actions of buyers and sellers of real estate by analyzing data, conducting interviews and applying applicable approaches to value,” Magdziarz said. “A critical issue to the advancement of high-performance buildings is market recognition of the actual or perceived benefits of a green building. Do market participants view high-performance features as an enhancement to the market value of the property or as an over-enhancement? This is a critical question that will likely be unique to the particular property and local real estate market.” For more information, visit www.appraisalinstitute.org.
Your turn National Mortgage Professional Magazine invites you to submit any information promoting new “niche” loan programs, new products or any other announcement related to the introduction of a new program, to the attention of:
New to Market column Phone #: (516) 409-5555 E-mail: email@example.com Note: Submissions sent via e-mail are preferred. The deadline for submissions is the 1st of the month prior to the target issue.
• Daily updated mortgage • Find loan programs industry news • Discover local and • Industry blogs national events • Write your own blog • Get access to video
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 firstname.lastname@example.org. MARCH 2011
Wednesday-Thursday, March 23-24 Mortgage Bankers Association’s National Policy Conference Hyatt Regency Washington on Capitol Hill 400 New Jersey Avenue NW Washington, D.C. For more information, call (800) 7936222 or visit www.mortgagebankers.org.
Sunday-Wednesday, March 27-30 Mortgage Bankers Association’s National Technology in Mortgage Banking Conference & Expo The Westin Diplomat Resort & Spa 3555 South Ocean Drive Ft. Lauderdale, Fla. For more information, call (800) 7936222 or visit www.mortgagebankers.org.
Sunday-Wednesday, May 15-18 Mortgage Bankers Association’s Legal Issues/Regulatory Compliance Conference Boca Raton Resort 501 El Camino Real Boca Raton, Fla. For more information, call (800) 7936222 or visit www.mortgagebankers.org. JULY 2011
Wednesday-Saturday, July 20-23 Florida Association of Mortgage Professionals 2011 Convention “Reel in Success” Orlando World Center Marriott Resort 8701 World Center Drive Orlando, Fla. For more information, call (850) 9426411 or visit www.famb.org. SEPTEMBER 2011
Sunday-Wednesday, March 27-30
Thursday, September 8
Mortgage Bankers Association’s National Fraud Issues Conference The Westin Diplomat Resort & Spa 3555 South Ocean Drive Ft. Lauderdale, Fla. For more information, call (800) 7936222 or visit www.mortgagebankers.org.
Iowa Association of Mortgage Brokers 2011 Annual Convention & Education Location to be determined For more information, call (515) 210-4675 or visit www.iowamortgagebrokers.org.
2011 Minnesota Mortgage Association Convention & Exhibitor Showcase Sheraton Bloomington Hotel, Minneapolis South 7800 Normandale Boulevard Bloomington, Minn. For more information, call (952) 345-3240 or visit www.themma.org.
Sunday-Wednesday, May 1-4 Mortgage Bankers Association’s National Secondary Market Conference & Expo The New York Marriott Marquis 1535 Broadway New York, N.Y. For more information, call (800) 7936222 or visit www.mortgagebankers.org.
Thursday, September 15
Sunday-Wednesday, May 1-4
Mortgage Bankers Association’s Loan Production Conference The New York Marriott Marquis 1535 Broadway New York, N.Y. For more information, call (800) 7936222 or visit www.mortgagebankers.org.
Sunday-Wednesday, October 9-12
Sunday-Wednesday, May 15-18
Mortgage Bankers Association’s 98th Annual Convention & Expo The Hyatt Regency 151 East Wacker Drive Chicago, Ill. For more information, call (800) 793-6222 or visit www.mortgagebankers.org.
Mortgage Bankers Association’s Commercial/Multifamily Servicing & Technology Conference Chicago Marriott Downtown Magnificent Mile 540 North Michigan Avenue Chicago, Ill. For more information, call (800) 7936222 or visit www.mortgagebankers.org.
Kentucky Association of Mortgage Professionals 2011 Annual Convention & Trade Show Location to be determined Lexington, Ky. For more information, call (270) 9292836 or visit www.kyamp.net.
Friday, October 14
Nationwid e FHA Lend er Looking fo r: TO P P R O D U CER
Call for De tails!
T h e B E ST B r a n c h S o l u t i o n , P e r i o d .
www.Fmbranch.com 800.220.9498 Info@Fmbranch.com This information is provided to assist business professionals and is not an advertisement extended to the consumer, as defined by Section 226.2 of Regulation Z. Freedom Mortgage corporate office is located at: 907 Pleasant Valley Ave. Suite 3, Mount Laurel, NJ 08054. Lender NMLS ID: 2767. Licensed by the NJ Department of Banking and Insurance, License #9100861. All Rights Reserved.