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TABLE OF CONTENTS
Volume 4, Number 10
A Special Look at “The Future of Mortgage Banking” It’s All About PR By Daniel Jacobs ................................................40 The Five Keys to Building a Successful Retail Division By John F. Cady ..........................................41 Who Knows What Tomorrow Will Bring?
America’s Choice Home Loans .......................... www.achlonline.com ............................................9 Amerisave Mortgage Corporation ...................... www.amerisavetpo.com ........................................33 Brokers Compliance Group................................ www.brokerscompliancegroup.com ..Inside Back Cover Calyx Software ................................................ www.calyxsoftware.com ......................................50 CBC National Bank .......................................... www.cbconnex.com ............................................27 Data Facts........................................................ www.datafacts.com ..............................................39
By Cathy Blaszyk..................................................................................42
Document Systems, Inc./DocMagic .................... www.docmagic.com ....................................28 & 29
Outsourcing: A Prescription for Continuity and Risk Management in Mortgage Banking
FindMortgageJobs.com .................................... www.findmortgagejobs.com ..........................18 & 44
By Judy Wheatley ................................................................................43
Going Mobile By Sanjeev Malaney ................................................45 Controlling Underwriting Risk By Chad J. Burhance ..............46
Features CFPB Issues Proposed Mortgage Servicing Rules
First Guaranty Mortgage Corp. .......................... www.fgmcwholesale.com ......................................19 Frost Mortgage Lending Group .......................... www.frostmortgage.com/nmp ..............................51 Guaranteed Home Mortgage Company .............. www.joinGHMC.com ............................................25 Icon Residential Lenders, LLC ............................ www.iconwholesale.com ........................................5 LoanOfficerSchool.com .................................... www.loanofficerschool.com ..................................42 Maximum Acceleration Coaching ...................... www.maccelcoach.com/webinars ..........................21
By Laurie Spira ......................................................................................4
Meadowbrook Financial Mortgage Bankers Corp. .. www.mortgagesalesjob.com ..................................11
The CFPB Begins Knocking on Doors
Menlo Park Funding ........................................ www.menloparkfunding.com ................................27
By Terry W. Clemans..............................................................................4
Bonded With NAMB: It’s Not Personal … Just Business By Mason Grashot, CPA ..........................................6 Pipeline Management in a Hedging Environment: More Art Than Science By Frank Fiore ........................................8 Slow Down, Take a Deep Breath and Execute
Mortgage Brokers Network Corp, Inc. ................ mortgagebrokersnetwork.com ..............................35 NAMB NATIONAL.............................................. www.nambnational.com ........................34, 37 & 38 NAPMW .......................................................... www.napmw.org ..................................................20 NFM, Inc. ........................................................ www.nfmbranch.com ..........................................23 PB Financial Group Corp. .................................. www.pbfinancialgrp.com ......................................50
By Al Crisanty ......................................................................................10
REMN (Real Estate Mortgage Network)................ www.remnwholesale.com ......................................7
NAMB Perspective ......................................................................12
Ridgewood Savings Bank .................................. www.ridgewoodbank.com ....................................31
National Mortgage Professional Magazine’s Legends of Lending: REMN—Talent, Teamwork and Intelligence By David J. Coster ..............................................14
Streetlinks LLC ................................................ www.streetlinks.com ....................Inside Front Cover
The Elite Performer: Improve Your Flexibility
For Managers Only: Managing for the Future (Part II) By Dave Hershman ..............................................................18 Got Rejection? By Bob Davies ......................................................22 Lykken on Lending: Leadership is Needed in Our Next President By David Lykken ......................................24 Loan Originator Compensation: Past is Prologue (Part I) By Jonathan Foxx..................................................................26 Fun, Photos and Featured Speakers at NAMB National By John Stevens..............................................34 Leveraging More Compliant Technology to Drive Sales By Todd Ballenger ..................................................36 Featured Exhibitors at the MBA’s 99th Annual Convention & Expo ........................48 Recruiting Professionals Without Wasting Valuable Resources ........................................................52
Columns NMP News Flash: October 2012 ....................................16 New to Market ................................................................27 NMP Calendar of Events ................................................56
United Wholesale Mortgage .............................. www.uwm.com ........................................Back Cover
Heard on the Street ........................................................6
The Bond Exchange .......................................... www.thebondexchange.com ................................49
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Buying Signals (Part I) By Kerry Johnson, MBA, Ph.D. ..............30
TagQuest ........................................................ www.tagquest.com ..............................................17
By Andy W. Harris, CRMS ....................................................................16
October 2012 Volume 4 • Number 10 1220 Wantagh Avenue • Wantagh, NY 11793-2202 Phone: (516) 409-5555 • Fax: (516) 409-4600 Web site: NationalMortgageProfessional.com STAFF Eric C. Peck Editor-in-Chief (516) 409-5555, ext. 312 email@example.com Joel M. Berman Publisher - CEO (516) 409-5555, ext. 310 firstname.lastname@example.org David Coster Senior Editor email@example.com Joey Arendt Art Director firstname.lastname@example.org Jon Blake Advertising Coordinator (516) 409-5555, ext. 301 email@example.com Beverly Koondel National Account Executive (516) 409-5555, ext. 316 firstname.lastname@example.org Tara Cook Billing Coordinator (516) 409-5555, ext. 324 email@example.com
ADVERTISING To receive any information regarding advertising rates, deadlines and requirements, please contact National Account Executive Beverly Koondel at (516) 409-5555, ext. 316 or e-mail firstname.lastname@example.org. ARTICLE SUBMISSIONS/PRESS RELEASES To submit any material, including articles and press releases, please contact Editor-in-Chief Eric C. Peck at (516) 409-5555, ext. 312 or e-mail email@example.com. The deadline for submissions is the first of the month prior to the target issue. SUBSCRIPTIONS To receive subscription information, please call (516) 409-5555, ext. 301; e-mail firstname.lastname@example.org or visit www.nationalmortgageprofessional.com. Any subscription changes may be made to the attention of “Circulation” via fax to (516) 409-4600. Statements, articles and opinions in National Mortgage Professional Magazine are the responsibility of the authors alone and do not imply the opinion or endorsement of NMP Media Corp., or the officers or members of National Association of Mortgage Brokers and its State Affiliates (NAMB), National Association of Professional Mortgage Women (NAPMW), National Credit Reporting Association (NCRA) and/or other state mortgage trade associations. Participation in NAMB, NAPMW, NCRA, and/or other state mortgage trade associations events, activities and/or publications is available on a non-discriminatory basis and does not reflect the endorsement of the product and/or services by NMP Media Corp., NAMB, NAPMW, NCRA, and other state mortgage trade associations. National Mortgage Professional Magazine, NAMB, NAPMW, NCRA, and/or other state mortgage trade associations do not make any misrepresentations or warranties concerning the regulatory and/or compliance aspects of advertisers, products or services and/or the editorial content contained in NMP Media Corp. publications. National Mortgage Professional Magazine and NMP Media Corp. reserve the right to edit, reject and/or postpone the publication of any articles, information or data.
When I was a kid, I loved playing musical chairs. I would look around and size up my competition and plan my strategy. I knew that if I didn’t do that, I could be one of the losers when the music stopped. Strangely enough, today’s mortgage market is like a game of musical chairs. The mortgage lenders and mortgage brokers who think the refi boom of today is their future may be left with no chair to land on when the music stops. Over the past month since our last edition, I’ve surveyed dozens of lenders and brokers regarding their mix of purchase business versus refi business. While some boasted about their refi volume and capacity concerns, it was those who said they regard the refis as a bonus and their plan is to build their purchases and consider the refis volume as an aberration. In this month’s installment of our Legends of Lending Series in this edition, Peter Norden, chief executive officer of Real Estate Mortgage Network (REMN) states it perfectly: “I do not believe that you can build a true, long-term business based on refinances. We view them [refis] as gravy.” The theme of this month’s edition is “The Future of Mortgage Banking.” For those who want a future in this industry, I would follow Peter’s philosophy and plan today to be in a better position when the music stops and develop your referral base to cultivate a purchase business as the foundation of your business.
Legends of Lending Our new Legends of Lending series (see page 14) gives us an opportunity to recognize the companies that have historically proven to be leaders and have supported the mortgage industry. This series provides an inside look at the management, philosophy and unique corporate culture that each brings to the table. This month, we are proud to feature Real Estate Mortgage Network (REMN) whose CEO Peter Norden has created a company whose diversified mortgage banking organization delivers for the retail, wholesale and correspondent channels. Along with Joe Amoroso, national director of sales for REMN’s wholesale division, the REMN team has clearly earned the designation of Legends of Lending and I hope each and every one of you enjoys the inside look this series will provide you with.
CFPB deadline looms … A quick reminder to all that the Consumer Financial Protection Bureau (CFPB) Truth-in-Lending Act (Regulation Z): Loan Originator Compensation Proposed Rule comment period ends Oct. 16, 2012. Don’t miss this opportunity to be heard and visit ConsumerFinance.gov to submit your comment. You cannot complain about the eventual final regulation if you did not invest the time to add your comment and input to the process.
The future looks bright … Back to the focus of this month’s issue ... we have put together some visionary ideas this month to help plan for the future direction of the marketplace. Daniel Jacobs of Residential Finance Corporation gets things underway on page 40 as he shares his thoughts on the development of relationships and how that development ties into future business. John F. Cady of Bay Equity Home Loans follows on page 41 and discusses ways in which to bring productivity and longevity to your retail division. Cathy Blaszyk of ClosingCorp addresses a number of wholesale volume and regulatory concerns the industry is faced with in her piece on page 42. Judy Wheatley of Indecomm Global Services takes a closer look at long-term risk management and outsourcing in her article on page 44. Sanjeev Malaney of Capsilon examines the future of mobile technology in the mortgage marketplace, and wrapping things up, Chad J. Burhance of NewOak Solutions discusses the evolution of the underwriting process in his article, “Controlling Underwriting Risk.”
The reemergence of the trade show … In the month of October, we are looking at some pretty exciting industry-related trade shows, including the 2012 Northeast Conference of Mortgage Brokers in Atlantic City, N.J., the National Reverse Mortgage Lenders Association Annual Meeting & Expo in San Antonio, Texas; and the Mortgage Bankers Association will pull out all the stops as it celebrates 99 years of industry excellence at its Annual Convention & Expo in Chicago. The inside word are that these events are nearing capacity, a great sign to those exhibiting to get their names out there and make the proper connections in the fourth quarter of 2012 to lead to potential business in 2013. In December, NAMB—The Association of Mortgage Professionals, will host its NAMB National Conference in Las Vegas from Dec. 7-10 at the MGM Grand. Already with a full slate of speakers and educational sessions lined up, NAMB is looking to bring the best and brightest to Vegas for three days of business-building and exchanging of ideas to take your career to the next level. The future of the reverse mortgage market, transitioning from broker to banker, social media and networking, appraisals, credit counseling, legislative, and regulatory updates and much more will be featured in this inaugural event … all geared toward positioning you for a very successful year ahead. For more information, visit NAMBNational.com. The future of mortgage banking, and all of the players who will be part of it, looks great … but only if you plan for it. Don’t be fooled into a false sense of security of the current refi market and how it is booming in nature or you may be left standing with no place to sit when this game of musical chairs stops! Sincerely,
Joel M. Berman, Publisher-CEO NMP Media Corp. email@example.com
National Mortgage Professional Magazine is published monthly by NMP Media Corp. Copyright © 2012 NMP Media Corp.
Where will you be when the music stops?
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The Association of Mortgage Professionals
National Association of Professional Mortgage Women
2701 West 15th Street, Suite 536 Plano, TX 75075 Phone #: (703) 342-5900 Fax #: (530) 484-2906 Web site: www.namb.org
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NAMB 2012-2013 Board of Directors
National Board of Directors 2012-2013
OFFICERS President—Donald J. Frommeyer, CRMS Amtrust Mortgage Funding Inc. 200 Medical Drive, Suite D Carmel, IN 46032 (317) 575-4355 firstname.lastname@example.org Vice President—Donald Fader, CRMS SMC Home Finance P.O. Box 1376 Kinston, NC 28503-1376 (252) 523-5800 email@example.com Treasurer—John Councilman, CMC, CRMS AMC Mortgage Corporation 2613 Fallston Road Fallston, MD 21047 (410) 557-6400 firstname.lastname@example.org Secretary—Olga Kucerak, CRMS Crown Lending 222 East Houston, Suite 1600 San Antonio, TX 78205 (210) 828-3384 email@example.com 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
DIRECTORS Rocke Andrews, CMC, CRMS Lending Arizona LLC 1996 North Kolb Tucson, AZ 85715 (520) 886-7283 email@example.com Fred Arnold, CMC American Family Funding 24961 The Old Road, Suite 101 Stevenson Ranch, CA 91381 (661) 284-1150 firstname.lastname@example.org
Deb Killian, CRMS GMAC 246 Federal Road, Unit C-24 Brookfield, CT 06804 (203) 778-9999, ext. 103 email@example.com Linda McCoy Mortgage Team 1 Inc. 6336 Picadilly Square Drive Mobile, AL 36609 (251) 610-0494 firstname.lastname@example.org
Vice President—Western Region Lyman King III, CMI, CME (916) 967-4653 email@example.com
Senior Vice President Christine Pollard (607) 226-1046 firstname.lastname@example.org
Secretary Sara Vasura (703) 255-7460 email@example.com
Vice President—Central Region Kelly Hendricks (314) 398-6840 firstname.lastname@example.org
Treasurer Jeanne Evans, CME (918) 431-0155 email@example.com
Vice President—Eastern Region Katrica J. Driscoll, MML, CME, CMI (919) 877-5683 firstname.lastname@example.org
Parliamentarian Hulene Works (972) 494-2788 email@example.com
National Credit Reporting Association Inc. 701 East Irving Park Road, Suite 306 Roselle, IL 60172 Phone #: (630) 539-1525 Fax #: (630) 539-1526 Web site: www.ncrainc.org
2012 Board of Directors & Staff Donald J. Unger President (303) 670-7993, ext. 222 firstname.lastname@example.org Daphne Large Vice President & Treasurer (901) 259-5105 email@example.com Tom Conwell Ex-Officio & Legislative Chair (800) 445-4922, ext. 1010 firstname.lastname@example.org Nancy Fedich Director–Conference Chair (908) 813-8555, ext. 3010 email@example.com Judy Ryan Director-Strategic Alliance Chair (800) 929-3400, ext. 201 jryan@Kroll.com Susan Cataldo Director–Education & Compliance Chair (404) 303-8656, ext. 204 firstname.lastname@example.org
William Bower Director–Tenant Screening Chair (800) 288-4757 email@example.com Mike Brown Director–Technology Chair (800) 925-6691, ext. 4350 firstname.lastname@example.org Maureen Devine Director–Education & Compliance Co-Chair (413) 736-4511 email@example.com Renee Erickson Director–New Membership & Elections Chair (800) 311-1585, ext. 2101 firstname.lastname@example.org Terry Clemans Executive Director (630) 539-1525 email@example.com Jan Gerber Office Manager/Membership Services (630) 539-1525 firstname.lastname@example.org
John Stevens Bank of England d/b/a ENG Lending 11650 South State Street, Ste. 350 Draper, UT 84120 (801) 427-7111 email@example.com
President-Elect Jill Kinsman (206) 344-7827 firstname.lastname@example.org
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Andy W. Harris, CRMS Vantage Mortgage Group 1596 SW Boones Ferry Road, Ste. 100 Lake Oswego, OR 97035 (503) 496-0431 email@example.com
Vice President—Northwestern Region Debbie Tofte, GML (425) 483-3359 firstname.lastname@example.org
Kay A. Cleland, CMC, CRMS KC Mortgage LLC 200 South Wilcox Street #224 Castle Rock, CO 80104 (720) 810-4917 email@example.com
President Candace M. Smith, CME (512) 306-6354 firstname.lastname@example.org
CFPB Issues Proposed Mortgage Servicing Rules By Laurie Spira
On Aug. 9, the Consumer Financial Protection Bureau (CFPB) proposed new mortgage servicing rules. The proposed rules would amend both Regulation Z and Regulation X to implement the Dodd-Frank Act provisions that relate to mortgage servicing. Published under the banner “No Surprises, No Runarounds,” the proposal covers the following major topics:
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I Periodicc billingg statements: The proposed rule would generally require that servicers of closed-end residential mortgage loans send a periodic statement for each billing cycle that meets specific timing, form and content requirements. The periodic statement would generally not apply for servicers that provide coupon books, as long as the coupon books meet certain requirements. I Adjustable-ratee mortgagee (ARM)) interestt ratee adjustmentt notices:: Under the proposed rule, servicers would have to provide a borrower who has an ARM with a notice 60 to 120 days before an adjustment that causes the payment to change. The servicer would also have to provide a notice 210 to 240 days prior to the first rate adjustment. d payofff statements: Servicers would generally I Promptt paymentt creditingg and be required to credit payments from borrowers on the day of receipt. If the borrower makes a partial payment, the payment may be held in a suspense account until the amount in the suspense account is sufficient to cover a full installment. A servicer would be required to send an accurate payoff balance to the consumer no later than seven days after receiving a written request. I Force-placed d insurance:: The proposed rule would prohibit servicers from charging a borrower for force-placed insurance unless the servicer has reason to believe that the borrower has failed to maintain hazard insurance and has provided required notices. Notices would be required at least 45 days before charging for force-placed insurance, and a second notice would be required no earlier than 30 days after the first notice. n and d information n requests: Servicers would be required to I Errorr resolution acknowledge a borrower’s written request for information or complaint of error within five days, and correct the error or respond to the borrower with the results of the investigation within 30 days. I Earlyy intervention n with h delinquentt borrowers: If a borrower’s payment is 30 days late, the servicer would be required to notify the borrower orally and let the borrower know that loss mitigation options may be available. If the payment is 40 days late, a written notice would be required. I Con ntinuityy off contactt forr delinquentt borrowers: Servicers would be required to assign dedicated contact personnel for a borrower no later than five days after providing the first notice of delinquency. Servicers would have to establish policies and procedures designed to ensure that the servicer’s personnel perform certain specified functions where applicable. n procedures: Servicers that offer loss mitigation options would I Losss mitigation be required to ensure that completed loss mitigation applications are evaluated before proceeding with a foreclosure sale. Loss mitigation applications must be reviewed and the borrower notified within five days if the application is incomplete. Within 30 days of receiving a complete application, the servicer must provide a response. If the request for loss mitigation is denied, the borrower must be allowed at least 14 days to appeal the decision. Appeals must be decided within 30 days by different personnel than those who denied the initial application. The servicer shall not proceed with foreclosure unless the servicer has denied the application and the time for the borrower to appeal has expired; the servicer has offered a loss mitigation option which was not accepted by the borrower within 14 days; or the borrower has failed to comply with the terms of a loss mitigation agreement. The CFPB invites the public to comment on the proposed mortgage servicing rules by Oct. 9, 2012. Formal comments may be submitted to www.regulations.gov; and interested parties may learn about, discuss, and react to the proposed rules in an informal, interactive environment at www.regulationroom.org. Lauriee Spiraa iss chieff compliancee officerr with h Torrance,, Calif.-based DocMagicc Inc.. Shee mayy bee reached d byy phonee att (800)) 649-1362,, ext.. 64466 or e-maill email@example.com.
The CFPB Begins Knocking on Doors By Terry W. Clemans
As you are reading this article, the Consumer Financial Protection Bureau (CFPB) has set up shop in, or is about to knock on, the door of a credit bureau near you for the first round of historic examinations. For the very first time, starting Sept. 30, 2012 as instructed by the Congress that created and granted them vast powers, the CFPB will be examining the credit reporting industry in a similar fashion as the Federal Deposit Insurance Corporation (FDIC) examines banks holding consumer deposits. This is the new world for non-depository companies like credit reporting agencies, as this is not a “for cause” examination due to complaints or violations. This is the new norm, in which any credit reporting agency deemed a “larger” participant can expect a visit at any time as of Sept. 30, 2012. The Dodd-Frank Act instructed the CFPB to first determine who the “larger” participants in the credit reporting industry were, and then set up the parameters to examine those entities for compliance with federal law. As I wrote about in National Mortgage Professional Magazine earlier this year (page 8 of the March 2012 issue), the “larger” participant was defined by the CFPB at a level that includes many mortgage credit reporting agencies. With the help of a strange accounting formula from the Small Business Administration (SBA), the actual number used by the SBA and CFPB of $7 million in annual receipts translates into mortgage credit reporting companies with just more than $4 million in revenues and about 15 employees. Not exactly what most people would consider a “larger” participant, but the rule has been made, and examinations are about to begin. The CFPB estimates this rule to cover about 30 companies, who account for 94 percent of the credit reporting market. To help understand the dynamics of the industry, it should be noted that the three largest credit reporting companies (which I refer to as the credit repositories, TransUnion, Experian and Equifax) issue more than three billion consumer reports annually and maintain the raw credit files on more than 200 million Americans. On Sept. 5, 2012, the CFPB released the procedures it will be using in examining credit and consumer reporting companies. These procedures will act as a field guide for CFPB examiners as they check these companies for compliance with the Fair Credit Reporting Act (FCRA) and other applicable laws. “Consumer reporting, and especially credit reporting, plays a significant role in a consumer’s life,” said CFPB Director Richard Cordray. “It can dictate whether or not a consumer is able to get a credit card, a mortgage, or a student loan. Our supervision program will benefit hundreds of millions of consumers by making sure these companies are playing fairly and by the rules, and our field guide will ensure that all companies are held to the same standards.” The CFPB release stated that examiners will be looking to specifically to verify that consumer reporting companies are focused on four key concerns: Using and providing accurate information: Examiners will assess whether companies have reasonable procedures in place to ensure accuracy of the information about consumers that appears in their reports. This will include looking at how companies screen information that they receive for accuracy and how companies match incoming information to a particular consumer’s file to make sure it appears on the right consumer’s report. Handling consumer disputes: Examiners will determine if reporting companies conduct reasonable investigations when consumers dispute the accuracy or completeness of their files. Examiners will also evaluate the systems, procedures, and policies used by the company for tracking, handling, investigating, and resolving consumer inquiries, disputes and complaints. Making disclosures available: Examiners will determine whether report-
continued on page 25
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Bonded With NAMB
It’s Not Personal ... It’s Just Business By Mason Grashot, CPA
Why does the bond carrier underwrite me personally when my bond covers my company? Because the majority of licensed businesses are closely-held, meaning they are each owned by either one individual or a very small group of individuals who are often intricately involved in the business itself, it is usually quite difficult to disassociate the financial success and stability (or struggles) of the business from that of its owner-operator(s).
How does my personal credit affect the ability of my company to be bonded?
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If there are problems in the owner’s personal life (such as an overextended lifestyle reflected in too much debt, health challenges reflected in unpaid medical bills, lack of attention reflected in late payments to creditors, etc.) that reach the point where they impact his or her personal credit condition, that scenario can be a leading indicator of increased pressure on the business to provide the financial support for the owner’s personal problems in spite of whether it is in the best interest of the business itself to do so. It can also provide a perspective as to the owner’s personal financial responsibility with the correlation that how he or she manages the financial affairs of the household is often indicative of the approach or tolerance applied to the business. Conversely (and retrospectively), problems in the business can have an indirect effect on the owner’s personal credit in situations where the owner increases personal debt or reduces personal income in order to support the business. The personal finances of the owneroperator are often available as a safety net for the business in the event the business is not healthy enough to support itself. A poor personal credit condition alerts the surety that the risk may be higher than average. The bond underwriters may apply conditions to the approval (such as non-standard premium rates or even collateral), or they will often simply decline to bond that company and wait to pledge their capital for a less-risky principal instead. Mason Grashot, CPA is president of The Bond Exchange, a national insurance agency focused on surety bonds with a unique specialty practice centered on the mortgage profession. As the endorsed strategic partner of NAMB—The Association of Mortgage Professionals, The Bond Exchange services thousands of surety bonds through programs designed specifically for the mortgage industry. For more information, call (501) 224-8895 or visit www.thebondexchange.com.
DocMagic Announces Partnership With LendingQB LendingQB has announced it has completed a seamless interface with DocMagic’s document production and compliance technology. The integrated solution provides users working in LendingQB’s loan origination system (LOS) with seamless access to DocMagic’s document preparation functionality. The companies partnered to make the process of ordering, sending, signing and receiving compliant mortgage documents as effortless as possible. The new interface embeds DocMagic‘s functionality within LendingQB’s LOS, preventing users from ever having to leave the environment in which they are accustomed to working in—LendingQB. All activities, from selecting document packages to auditing data, occurs in LendingQB’s centralized database, eliminating the need to re-key information and potential loan data mismatches, thus ensuring accuracy and compliance with all state and federal regulations. “Many LOS integrations that are completed today are not truly seamless and at one point force users to leave the LOS and perform actions such as data touch up and package ordering within the document provider’s system, without any data going back into the lender’s LOS,” said Steve Ribultan, director of business development at DocMagic. “While this method works, it isn’t ideal. On the other hand, the tight integration we have with LendingQB allows lenders to generate accurate compliant documents the first time— every time—while remaining in their native system of record, thus ensuring data consistency.”
Inlanta Mortgage Expands in the New England Area With the Addition of Alpine Mortgage Inlanta Mortgage has announced its expansion into the New England area with Alpine Mortgage LLC joining Inlanta. New Regional Vice President
Scott Reid and his team will be responsible for continuing Inlanta’s expansion throughout the New England region. New offices are now open in Manchester, N.H.; Newington, N.H.; Portland, Maine; and Augusta, Maine. The new branches will bring 20 new mortgage consultants to the Inlanta team, as well as seven support staff additions. “We are all extremely excited to be a part of Inlanta,” said Regional Vice President Scott Reid. “The Inlanta platform will allow our mortgage consultants to deliver the highest levels of customer service possible through innovative products, competitive pricing and enhanced operational efficiencies. In addition, Inlanta provides our staff with the required tools, resources and support to remain competitive in any market cycle.” By partnering with Inlanta, loan originators are able to focus their efforts on customers and their mortgage needs, while building new business and letting Inlanta’s operations and support staff take care of the process. “We are really excited about our expansion into the New England area. Since I am from the area, I am very familiar with the market and the quality mortgage professionals in the region and these new branches are already established as trusted mortgage professionals,” said Inlanta President Nicholas J. DelTorto. “By partnering with Inlanta, these originators will be able to offer more great products and services and allow them to grow their sales by using the tools we afford our mortgage sales team. With Scott and his team in place we want to continue to expand with the right people throughout New England.”
Stonegate Mortgage to Acquire NattyMac Stonegate Mortgage has announced the acquisition of NattyMac, a warehouse lender, from Guggenheim Partners. The financial terms of the deal were not disclosed. In March 2012, Stonegate announced plans to expand its thirdparty originations (TPOs) and servicing portfolio after completing a private equity transaction with Long Ridge Equity Partners, a New York-based private investment firm. Stonegate’s rev-
Prospect Mortgage Establishes New Construction Lending Division Prospect Mortgage has announced a new platform to finance new single-family and condominium homes nationwide, supporting homebuyers, home builders, developers, and real estate agents in an improving new construction market. Prospect Mortgage has assembled an experienced team with subdivision and condo construction, and appraisal expertise. Prospect is offering a product lineup to assist continued on page 10
Visit us at Booth #s 200 and 101 Northeast Conference of Mortgage Brokers October 9-11, 2012
DataQuick has announced that it has signed a purchase agreement to acquire the ATI Title Companies, d/b/a Rels Title, a title and settlement entity. Rels Title is currently a subsidiary of Rels Title Services LLC. The transaction is expected to close within 30 days. Milestone Advisors LLC, served as financial advisor to Rels Title Services LLC for this transaction. “DataQuick has a long and outstanding history of delivering central-
time. The current Rels Title management team, headed by Leslie Foster, will continue to lead operations, which will remain headquartered in Minnetonka, Minn. “DataQuick delivers a wide range of real estate information solutions to their customers,” said Foster, president of Rels Title. “We are confident that our customers will not only continue to receive the same great service they have become accustomed to, but they will also benefit tremendously from the breadth of complementary solutions available from DataQuick. In addition, we look forward to offering title and closing services to lenders that are currently customers of DataQuick.”
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DataQuick to Expand Title Business With Purchase of Rels Title
ized title services to the lending community,” said John Walsh, president of DataQuick. “Combining our expertise with Rels Title’s exceptional service capabilities, local presence and relationships, operational expertise and industry knowledge will allow us to provide a wider range of title and settlement services to the marketplace.” Rels Title offers nationwide escrow, title examinations, commitment and closing services; document preparation and recording services; and expedited ordering, processing and delivery all backed by local practice and regulation expertise. As part of the acquisition, the Rels Title name will be used for a period of
enues year-to-date have increased 340 percent over 2011 and its servicing portfolio also saw significant growth increasing 235 percent, led by its correspondent channel which has grown 519 percent over 2011. With the NattyMac acquisition, Stonegate has the opportunity to build on this momentum, adding the NattyMac warehouse platform and its processes to create an integrated warehouse and loan sale solution for its clients. Stonegate also intends to expand the platform by offering servicing flow transactions for Fannie Mae, Freddie Mac and Ginnie Mae eligible loans. “NattyMac has been providing warehouse financing to independent mortgage bankers since 2004 and unlike many of the bank owned warehouse lenders, they continued to do so during the credit crisis,” said Jim Cutillo, chief executive officer of Stonegate Mortgage. “We intend to ensure that the independent mortgage banker has access not only to warehouse financing, but liquidity for their agency loans.” As part of the agreement, John VanDolah, chief operating officer for NattyMac and his team of 20 employees will join Stonegate to maintain and enhance the leadership and management of the NattyMac business in its St. Petersburg, Fla. office. In addition, Stonegate will be opening a regional operations center in the NattyMac offices to handle the additional wholesale and correspondent volume. “Warehouse lending involves more than just funding loans, “ VanDolah said. “As a part of Stonegate Mortgage, we will now be able to offer NattyMac and Stonegate’s clients an integrated solution which will provide not only liquidity for agency eligible loans but also reduced compliance, collateral and operating risk. We have an immense respect for Stonegate and the business built by Jim Cutillo and his team. In a challenging era for the mortgage finance business, Stonegate has focused on responsibility, accountability and superior customer experiences not just in their retail business, but in their institutional business as well. This is an exciting opportunity for the team at NattyMac to join Stonegate and be a part of their growth and development.”
more. Why is one company so successful at running a wholesale platform and There are a number of another at a direct response platform? conflicting theories Why can one company be concentrated on what makes a in purchase transactions while another company successful is solely focused on refinances? Each when they enter into, of these pipelines will react differentor have been, operat- ly to market movement. Even within ing in a hedging environment. Some similar models, the ability to accuratepeople like to express a very deep ly report data in real-time, along with understanding of the secondary market the allocation of stages, risk factors, and how it correlated to their pipeline etc. can make or break performance and performance, while others feel it is levels. Also, it’s not only business truly dependent on the model that is models and data review and integrity being used to manage risk and execute that influence the results of a hedging a price. While these two ideas are very platform. Lock desk policies, manageimportant, truly successful hedging is a ment, level of flexibility, and tolerresult of balancing the two. This success ance to change margins based on maris dependent on some mortgage and ket activity are critical pieces of the market fundamentals as well. equation, as are other intangible items Breaking it down into its simplest (confidence in sales updates, operation form, the mortgage industry is based on capacity and efficiency, warehouse liqa series of assumptions and historical uidity, investor turn times, etc.). A behaviors that are tied to market move- pipeline is a living thing that continues ments. The best-efforts market is based to evolve as the market changes. It’s on a fall-out model that assumes a cer- not just the risk model or keeping an tain amount of activity based on rate eye on the mortgage-backed securities movements: Up, down or flat during (MBS) market that influences performthe lock period. The lack of a true finan- ance, but the overall management of cial commitment to deliver makes this the pipeline, data and internal decimarket the most expensive sion-making as well. and assumptive. The Another key compomandatory market is nent in understand“Breaking it down based on its name. ing your pipeline is into its simplest form, It consists of a conunderstanding tractual and the stages it the mortgage industry is financial reward undergoes. Most and your comhedging models based on a series of mitment to make assumpassumptions and historical tions that are deliver loans at the contracted based on stages behaviors that are levels regardless or milestones. of rate movement. The theory states tied to market It also comes with a that the earlier the penalty if you fall short stage, the less likely movements.” and do not meet your conthat loan is going to actualtracted delivery levels. The ability ly close. The later in the process, to fulfill delivery amounts in a timely the more likely that loan is going to fashion pays a premium as your coun- close. Even this thought process can terparties are covered via actual loan vary. Some firms can lock at applicasales or in cash (i.e. pair-off). This prac- tion, some at loan approval, some at tice is usually handled by firms commit- clear to close, and others at anytime ting to a lower amount than their actu- in between. In the age of quality conal pipeline, so there is a built-in vari- trol (QC) and loan origination software ance for fallout and market movement. (LOS) updates, new stages can be creThis is not actually a true hedging ated or have their definitions process, but rather, just making a small- changed. How can you possibly use a er bet of pipeline reaction. The ability standard model to assume these to properly understand your pipeline actions when you have so much variand how it reacts to rate movement is ance? The stages of the pipeline must truly what makes a successful model. be understood, monitored and clearly To truly understand that statement, defined in relation to your lock you need to break it down into a few process and policies. sections. When discussing pipelines, there are a number of terms often referUnderstand your pipeline enced time and time again: converYour pipeline is just that, pieces of sion, pull-through, and fall-out. Their aggregated data that only you can true relevance is to determine how understand. It is a fluid collection of active your company is in understandloans with varying data points that are ing and flushing out the open ever-changing. Origination platform, pipeline. If a company sits back and loan officer, office, region, office, rela- waits for the pipeline to respond, it is tionship, marketing sources, manage- taking a chance and the cost of hedgment oversight and their concentration ing can be costly and inefficient. Being within your pipeline all have an effect a banker provides you with some very on your pipeline. Many look at the valuable tools that can help in affectpipeline in aggregate and expect it to continued on page 38 react as others do. I could not disagree By Frank Fiore
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Pipeline Management in a Hedging Environment: More Art Than Science
“The main reason is because ACHL is a growing company and is committed to customer service, which I like."
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“After weighing my options I decided to go with America’s Choice Home Loans. The branch compensations is one of the best in the industry. They are committed to providing extraordinary customer service. ACHL will help me grow my branch into a mortgage powerhouse by equipping me with their proven tools and systems.”
“I joined America’s Choice Home loans because I felt like I was joining a family. They just jumped through hoops to get me on board and opened. They give me the tools needed to help me run and grow my business.”
“You know the old saying ‘Your company is only as good as your employees’ Jonny and his team have proven that statement to be true! I’ve had the pleasure to work with Jonny and his team for over 10 years. Once I had the opportunity to move and work with him and his team again I took it! It’s the right move!
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Slow Down, Take a Deep Breath and Execute By Al Crisanty
“Noo matterr how w busyy you u are,, you u mustt takee timee too makee the otherr person n feell important.” —Maryy Kayy Ash We are all extremely busy. But in our busyness, we must remember to do all the little things that differentiate the best from the rest. Whether it is in our interactions with co-workers or our customers, being busy is no excuse for failing to live up to the highest possible standards. Busyness does not justify being short with people or taking shortcuts in our work. Professionals always give their best. I recently read a new survey of loan officers that was conducted by the highly-regarded mortgage industry recruiting firm Hammerhouse LLC. The survey asked several hundred loan officers to rate their firms on six core business components: Leadership, Culture, Business, Operations, Technology and Geography. I asked Drew Waterhouse, managing partner at Hammerhouse what his primary goal was for the survey. “We wanted to take a snap shot in time regarding general satisfaction levels of loan officers with their firms—what’s going well and what needs improvement,” said Waterhouse. The results of the survey demonstrate that despite this being an incredibly busy time for lenders and loan officers, there is a widespread satisfaction among loan officers regarding their firms’ performance. A few positive findings of the survey included: I 91 percent of loan officers believe they were “born to do” or “love” their job I 89 percent of loan officers rated their firms highly on compensation, meeting service standards and pricing I 85 percent of loan officers rated their firm’s reputation as “excellent or “good”
These results say to me that many experienced loan officers and capable firms have found each other and are working hard to get the current job done—closing high volumes of primarily refinance business. But my concern comes from the survey answers that indicate room for improvement:
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I 32 percent of loan officers surveyed believe that their firm’s technology “needs an upgrade,” is “inadequate,” or “hurts my business” I 28 percent of loan officers rated their firm’s communication as being poor I 26 percent of loan officers were critical of their firm’s professional development efforts I 24 percent of loan officers believed that their leader’s vision and acceptance of loan officer input were areas of weakness These areas for targeted improvement: Technology, Communication, Professional Development, Vision and Inclusive Culture are all key ingredients of long-term business success. When things are busy, it is easy to brush aside these areas with excuses that often resemble: “We have to prioritize our activities given our workload. We can always improve our (insert any core business component being short-changed) later when things slow down.” The problem is that repetition creates habits, and habits are hard to break. For example, firms which are slow to integrate new technology now may accept the status quo and eventually overlook the need to do so in the future, and will likely remain at a significant competitive disadvantage. Similarly, lending firms that have a culture that fails to value loan officer input now, will struggle to change perceptions, improve morale, and retain top talent in the future. My advice is simple, slow down, take a deep breath and focus your resources and efforts on leveraging your core competencies in order to effectively execute your business strategy. Your team will be inspired by it, your customers will appreciate it and these changes aren’t just inevitable, but absolutely necessary for long-term success in the highly service-oriented, purchase market that will dominate our industry in the not too distant future. Al Crisanty is vice president of national wholesale production for 360 Mortgage Group and is responsible for overseeing regional sales managers as the company seeks to expand operations to all 50 states. Formerly the national wholesale director for Caliber Funding, Al was responsible for the development and expansion of Caliber’s wholesale production channel. Additionally, Al served as executive vice president of national production for American Home Mortgage, successfully transitioning the 500-member production team from Capital Commerce Mortgage Company. Al may be reached by phone at (916) 761-1624 or e-mail firstname.lastname@example.org. SPONSORED EDITORIAL
heard on the street
continued from page 7
buyers and builders with new home construction. The extended rate lock program allows eligible buyers to lock in their interest rate at the time a loan application is completed for an unfinished home. With the spec lock program, builders can lock in an interest rate on up to three new home construction projects for up to 120 days, and pass this interest rate on to their customers when the property sells. They also offer builders condo project approval services to alleviate paperwork and expedite projects. “We anticipated the marketplace comeback, and we’re excited about the role we can play in the continuing upswing,” said Doug Long, president of Prospect Mortgage Retail and Correspondent Lending. “Recent National Association of Home Builders’ statistics show single-family and multifamily permits increasing by double digits nationwide, with some areas in the Southeast and Mountain regions up 100 percent for multi-family construction permits. We look forward to partnering with more builders and homebuyers in coming months by offering unique products and resources through our New Construction Division.” Prospect Mortgage has also announced the launch of its Renovation Lending Correspondent Division to help lenders address the needs of their customers looking for renovation loans. “With so many REO and foreclosure properties available today, renovation lending has grown from a niche product to one of the best financing solutions in today’s market,” said Long. “Prospect Mortgage is the second-largest FHA 203(k) lender in the country, according to endorsement data from HUD [U.S. Department of Housing & Urban Development]. We’ve built a stellar reputation and achieved this position by focusing on our Renovation Lending Platform and consistently supporting it with a team of sales and operations specialists with more than a quarter century of renovation lending expertise. Through our new Correspondent Division, we’re excited to share our experience—and our commitment to renovation opportunities—by helping lenders offer the 203(k) product to capture new business and help more homebuyers.”
Fairway Independent Mortgage Trains LOs to Serve the Military F a i r w a y Independent Mortgage Corporation has kicked off its latest Boot Camp training program for employees to learn how to best serve military clients and become Military Mortgage Specialists. According to Louise Thaxton, branch manager and director of Fairway’s Military Mortgage
Specialist division, veterans and active duty military personnel often face unique challenges when seeking to purchase a home. Active duty military personnel are often a “targeted population” because many are young, financially inexperienced and transient, Thaxton said. The designation of Military Mortgage Specialist is exclusive to Fairway and provides a platform whereby loan professionals become thoroughly equipped to expertly handle the mortgage loan needs of active duty and veteran clients. The designation requires attendance at an initial two-day Boot Camp (or “basic training”), and is followed by a 90-day coaching, mentoring, and training program whereby individuals are coached and instructed on how to best meet the specific home loan needs and requirements of active duty military and veterans. “The men and women who have served or who are currently serving in the U.S. military deserve our very best,” Thaxton said. “Our military and their families sacrifice so much for our freedom, so the very least we can do as mortgage professionals is to go the extra mile with additional training.” Thaxton spoke on Sept. 20 in Tucson at Fairway’s third Boot Camp where Fairway, in partnership with the Boot Campaign and Military Warriors Support Foundation, presented a renovated mortgage-free home to a wounded veteran. Thaxton encourages active and retired service members to consider using a loan professional who has had experience in working with the military and veterans. She also highly encourages servicemen and women to use their VA eligibility when purchasing a home. Thaxton operates offices near two military bases in Louisiana—the Army base at Fort Polk and Barksdale Air Force Base in Bossier City. She was Fairway’s top producer in 2009, 2010 and 2011 for total units closed and number 14 the U.S. last year for total VA loans, according to Scotsman Guide.
Reverse Mortgage Solutions to be Acquired by Walter Investment Management Walter Investment Management Corporation has entered into a definitive agreement to purchase Reverse Mortgage Solutions Inc. (RMS) in a transaction valued at $120 million. Consideration in the transaction consists of $60 million of cash, $25 million of WAC stock and a $35 million seller MSR note. RMS, based in Spring, Texas, provides a full suite of services to the continued on page 20
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The President’s Corner: October 2012 ctober is here opinion. So please, look on the CFPB and the 10th Web site (ConsumerFinance.gov) and month of the see the dates that correspond with the year is in full swing. actions and send them a letter on each By the time you are of the subjects. We continue to participate with the reading this, we will be in the final stages other associations in a variety of difof completing plans ferent areas. John Hudson and Roy for the 2012 NAMB DeLoach have done a remarkable job National Conference in Las Vegas. of keeping on top of items from the There is still time to make your reser- CFPB, Small Business Administration vations and get there. I think of all of (SBA), and others. John recently spent the conferences that NAMB has pre- three days in Washington, D.C. meetsented over the past five years, this ing with Congressmen and federal one will be the best and you will get agencies. John has spent numerous hours of his own time representing the most out of when you attend. It is really important that you pay NAMB and the industry in all aspects attention to our Government Affairs of government affairs. John is also in Committee and their letters and pub- charge of the Legislative Conference we lications having to do with responses to will be hosting in Washington, D.C. this March, so his hands are the Consumer Financial Protection extremely full. Remember, Bureau (CFPB) and the John is also an account deadlines for those rep for Premier responses. The only All of the Nationwide way we can all help activities slated for Lending, doing change some of what he needs this is to respond NAMB National are for to do every day to these items in his regular and let them you, the mortgage paying job. know how you professional and to help John, I truly feel and what appreciate what needs to be done. you in your you do for us. We have always business. I have been presisaid that the greatest dent of NAMB si n c e force NAMB possesses N o v . 1 0 , 2011, and is our grassroots efforts t a k e i t from me, it is very chaland our ability to answer the call and respond in writing to legislators lenging. I would say that I get about and the agencies that ask for our 100 e-mails a day, 25-30 phone calls,
UTAH MORTGAGE PROFESSIONAL MAGAZINE
and numerous conference calls, inter- thanking them for their sponsorship views and lots of secretarial work each and their support of NAMB. and every day … and by no means am All of the activities slated for NAMB I complaining. I thrive on National are for you, the being busy, and I sure mortgage professional am. I am also open to and to help you in “We have always ideas from all of your business. We you, both mem- said that the greatest force have gone to bers and nongreat lengths to members, on NAMB possesses is our grass- get good speakwhat NAMB can roots efforts and our ability to ers and great do to try to demonstrations make your life answer the call and respond in and items that easier and betwill help you. ter doing mort- writing to legislators and the Please be sure to gages. So please, attend all of the agencies that ask for take the time and if functions and activiour opinion.” you have something ties, and be sure to that you think might help attend the session that will other members, perhaps you know help you build your social media and of a service or item that can help other online presence during the event. I members increase their business or am sure that you will enjoy it and get increase their membership, let us something out of it. know. All of our e-mails are on the Sincerely, NAMB Web site so it is easy to reach us by e-mail, phone or by mail. We want to hear from you so please, take a few minutes and do this. If you are reading this article while Donald J. Frommeyer, CRMS, you are at NAMB National, please President make sure that you go through and NAMB—The Association of thank all of our supporters in each of Mortgage Professionals the booths. These companies believe in NAMB and you as a mortgage professional. Please take the time to talk with them and if you are not already signed up to do business with them, take the initiative and ask for a package to complete. Just a little way of
The First Annual NAMB Benefit Golf Tournament Wednesday, October 17 Coyote Ridge Golf Club • 1640 W Hebron Parkway • Dallas 1:00 p.m. Tee Time Entry Fee of $100 per player/$400 per team Great prizes and giveaways including golf clubs, gift cards and the chance to win a BMW in the hole-in-one challenge. All proceeds to benefit NAMB—The Association of Mortgage Professionals.
For more information, visit www.originatorfest.com.
John Councilman, CMC, CRMS is vice president/chair of the Federal Housing Administration (FHA) Committee for NAMB The Association of Mortgage Professionals. He may be reached by phone at (410) 557-6400 or by e-mail at email@example.com.
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the top names in the legislative and regulatory arena, and speak to them personally. Originators join others from their states in a coordinated march on Capitol Hill offices. Every year, hundreds of originators speak with their elected Congressional officials under NAMB coordination and have excellent results. Finally, NAMB’s finances are in order. Previously, we had a staff member who was studying accounting. Now, we have a CPA firm with nonprofit experience providing NAMB’s accounting. NAMB is current on all of its monthly obligations. State chapters are paid their shares before the tenth of every month like clockwork. NAMB’s finances have never been more tightly run. We have the resources to meet our obligations. The good news is that reinventing NAMB has worked. It has actually made for a more efficient and effective trade association. It is a model of the 21st Century trade association. NAMB is here to stay. Your association is sound and ready to meet the challenges facing our industry. What is NAMB missing? It may be “you.” Sadly, more mortgage originators choose not to support their industry than those who do. Then, they wonder why members of Congress pass laws that harm originators. Politicians look at numbers and money. First, join NAMB. It is one of the most reasonably-priced trade association memberships. We should have thousands of originators marching on Capitol Hill, not just hundreds. Set aside a day this year to ensure you will continue to able to make a living and attend NAMB’s Legislative Conference. It’s not too late to contribute to NAMBPAC. When you join NAMB, we can keep you up to date on the issues that matter. We reinvented NAMB to help you. We offer all of the services for which NAMB has come to be known. We made membership cost less than it ever has been. It has never been easier and more important for you to become a part of the NAMB family. Do it now at NAMB.org. Better yet, if you are a member, get someone else in your company or a friend to join.
can only be done in Washington, D.C. participate in borrower-paid transacNAMB’s Executive Vice President Roy tions. FHA pulled back it collections DeLoach was acting as NAMB’s chief rule and still is accepting six percent henever I lobbyist, but his salary was far more seller contributions and just eased its meet some- than NAMB could continue to pay. It condo rules. All of these were suggesone in the was clear this reinventing had to be tions made by NAMB. NAMB has prehousing industry I radical and there was a very real risk it served lender-paid transactions am always asked, couldn’t be done. despite the political jargon that said “How is NAMB doing? It was decided that NAMB needed yield-spread premiums (YSPs) were Is NAMB weathering the storm? What seven core services, lobbying, mem- banned. Wow! Those are impressive is NAMB doing for me?” Those ques- bership, certification, public relations, accomplishments! tions take a little time to answer so I Internet services, meetings and As a committee chair, I was always cannot always give a detailed answer. accounting. The board sent out pro- frustrated that I could never tell if So, I decided to write an article about posals in all of these areas to see what someone on my committee was a what NAMB is doing and include a lit- could be obtained on a contract basis. member or current on their dues. tle recent history. When the responses came back, the NAMB membership is now fully comIn July of 2010, I took over as board took the bold step of replacing puterized online, and membership NAMB’s Treasurer. It wasn’t a job for all salaried staff with independent rosters are current. When your memwhich I volunteered. Someone who contractors. Roy DeLoach was retained bership is about to expire, you are had a twisted sense of humor must as NAMB’s contract lobbyist without the given several reminders to avoid any have nominated me. Things couldn’t responsibility of executive duties at a lapses. Harry Dinham also handles have looked darker for the mortgage huge cost saving. Harry Dinham, who certification. We are pleased that most industry and for NAMB. It looked as had managed NAMB’s state affiloriginators are renewing their though property values could sink to iate in Texas for many certification and new peocredit card levels. We had lost years, took over memple are choosing to Countrywide, Fannie Mae and Freddie bership and certificaobtain the only Mac were in bankruptcy and the big tion. Public relanational certifica“NAMB is banks were wobbling. Mortgage origi- tions was turned tion for originathe symbol that nators were leaving the business in o v e r t o N M P tors. NAMB is also droves. NAMB revenues had plummet- M e d i a C o r p . , an approved edupeople watch to see if ed far below operational expenses. publishers of cation provider The NAMB board wrestled with National Mortthe mortgage profession for the SAFE Act these issues for weeks and even gage Professional eight-hour is alive and months. As Industry Partners declared Magazine, and course. bankruptcy, their creditors demanded Internet services On the public viable.” money they had paid NAMB. We had were also handled by relations front, NAMB no idea how many of these situations NMP Media also with has a great magazine would exist. Convention attendance several other contractors. that is shared with two had fallen, leaving NAMB with mil- Meetings were contracted to seversmaller trade associations, National lions in hotel shortfalls. The easy way al different vendors, and a highly expe- Mortgage Professional Magazine. NAMB out would have been to declare rienced CPA firm took over NAMB’s leaders and other highly knowledgeable Chapter 11 bankruptcy. We could see accounting. experts provide many informative artithe headlines, “NAMB Declares NAMB’s office moved to Texas cles for the publication. On the elecBankruptcy” and decided that would where costs are much more reason- tronic front, you regularly see John not only damage our industry, it may able, while Roy DeLoach keeps a virtu- Hudson, NAMB’s Government Affairs damage the country. NAMB is the sym- al office in Washington, D.C. The real Committee chair, on YouTube and in bol that people watch to see if the question was, “Would it work?” The other videos. NAMB is also holding mortgage profession is alive and answer surprised us. It not only Webinars featuring CFPB director viable. A NAMB bankruptcy would worked, it has worked as well or better Richard Cordray and top law firms. have sent ripples throughout the than having a staff. One needs to look NAMB’s Web site is far better than it housing industry. We simply couldn’t no further than NAMB’s recent suc- ever has been. The site is more interdo that. The only other choice was to cesses on Capitol Hill to have confir- active and easier to navigate. reinvent NAMB. mation. Freed from his desk duties, Originators can sign up for memberNAMB was operating like every Mr. DeLoach has been able to keep ship or renew quickly with a credit other trade association in NAMB front and center with govern- card. It contains tons of information Washington, D.C. It had its executive ment entities. We regularly meet with and links. NAMB continues to make director and his support staff with a members of Congress, the director of improvements to the site every week. posh McLean, Va. address. D.C. area the CFPB, the FHA Commissioner, News from NAMB will keep members wages are among the highest in the leadership at the VA, the Appraisal up to date on your e-mail on a weekly nation making that a very expensive Foundation and the list goes contin- basis. way of doing business. NAMB had ues. NAMB had five members on the NAMB is the only mortgage originapared its D.C. staff, but they were still CFPB small business panel and was tor trade association that holds major too expensive for NAMB to survive. instrumental in convincing the CFPB national meetings. NAMB’s Legislative The single most important service that the flat-fee idea was bad for Conference has become a standard by NAMB provides its members is access industry and consumers. The new which other legislative conferences to the federal government and that CFPB proposed rule allows brokers to are measured. Originators get to hear By John Councilman, CMC, CRMS
REMN—Talent, Teamwork and Intelligence
eal Estate Mortgage Network Inc. (REMN) is a New Jersey-based mortgage company with a great deal of talent. Led by an experienced group of industry veterans that includes seven former corporate CEOs, the firm has integrated the knowledge of these proven leaders into a team poised to become one of the leading firms in the emerging mortgage industry. Thirty-six-year industry pioneer Peter Norden is the CEO and force behind REMN. By integrating talent from his past firms, from inside what was a regionally-focused retail operation and other top industry pros displaced in the aftermath of the crash, Norden has built a team as capable as any in the industry. According to Norden, “Basically, we have pooled all of our brains, talent and years of experience together with the idea to build what we consider to be one of the premiere mortgage banking entities in the country.” What is REMN hoping to build? Norden points to his recent past for a model—his former firm, Opteum Financial Services, is a diversified mortgage banking organization having successful retail, wholesale and correspondent channels. Norden explains, “That has been my model.
D A V I D
C O S T E R
“Talent wins games, but teamwork and intelligence wins championships” —Michael Jordan
My model is diversity, both from a channel perspective, as well as a geographical perspective.” Opteum did business in 48 states and Norden is expecting REMN to be a national player in all three channels as well. They are well on their way. Of course teamwork is essential for an organization with so many “star” players. Joe Amoroso, national director of sales for REMN’s wholesale operation put it this way, “We recognize what each one of us is good at, and are able to leverage that, as opposed to having wasted talent sitting on the bench.” As anyone who
watched Michael Jordan can attest however that sometimes you have to give your stars the freedom to be creative on their own. Amoroso describes REMN’s team concept in a similar manner saying: “The culture here is very entrepreneurial, where our managers are empowered to make decisions relative to their area of expertise. This enables us to respond quickly to changes as they develop. It works great as long, as we all share the same goals and understand what we are trying to achieve here.”
But there is far more to REMN than an experienced CEO and a group of proven partners and managers. There are more than 1,000 employees working together to build one of the leading mortgage companies in the postcrash era. Approximately 40 percent of the workforce has worked for CEO Norden or one of two other partners previously. This illustrates a loyalty that so many of REMN’s employees feel toward each other. When asked about this unusual atmosphere, Norden made it clear that he believed it to be one of the true strengths and attractions of the firm. He used words such as “family,” “personal,” “balance,” “help” and “security” to describe the working environment at REMN. In the ever-so-competitive mortgage marketplace, it takes more than simply talent to excel. At REMN, intelligence is also quite apparent. REMN’s experienced and observant leaders noticed an opportunity developing in their correspondent channel. Norden recalls: “Two years ago, my partners and I got together and we all felt that the correspondent lending portion of this industry was going to change dramatically. Largely due to Basel III accounting standards and the new regulations that were coming down on the banks—the five major banks
in particular, who were buying most of the product in the country. We felt that most of the correspondents would get out of the business or at least scale back. So, we felt that it was necessary that we were well-capitalized, very liquid and had the ability to securitize directly into the agencies.” Beyond the correspondent channel, Norden and his talented team also saw the opportunity to build a strong financial foundation for their firm through the development of a servicing portfolio. Retaining servicing rights on approximately 90 percent of their $5-$6 billion annual loan production today and expecting to maintain that retention rate as their production doubles to $1 billion/month by mid-2013, REMN is poised to build a healthy portfolio. REMN’s goal is to reach $20-$25 billion in their servicing portfolio within three years. When they achieve these numbers, it will provide $50-$60 million per year in steady non-market based cash-flow and capital for the firm. Norden describes it as “… an opportunity to build a portfolio with lower risks, higher quality underwriting, low coupons and low prepayment risks.” All this opportunity-seizing requires more people and more resources. On the human capital front, Norden says that REMN has grown by hundreds of people in the last two year, and has plans for the number of employees to grow by hundreds more in the next 12 months. One of the locations that will house these new employees is the firm’s recently opened, state-ofthe-art, operations center in Irvine, Calif. This facility will handle operations for both REMN’s western wholesale and national correspondent divisions. While more people are a necessity during boom times like we are currently seeing in the mortgage industry, they can quickly become a headache when production volumes fall. The coming event that we know will eventually arrive, when QE3,4 or 5 is discontinued or loses its effectiveness, it will mark the end of the refinance era. A special type of wisdom can often be found in those who not only see change coming, but are prepared to meet it head on. REMN is better-prepared than most for the end of the refinance era with purchase volume representing 62 percent of their overall production yearto-date. Norden wisely states it this way: “In every company that I have ever had or built in my career, we have always made sure that purchases were our priority and not refinances. I do not believe that you can build a true, long-term business based upon refinances. We view them as gravy. We view them as relatively easy trans-
“I do not believe that you can build a true, long-term business based upon refinances. We view them as gravy.” —Peter Norden Chief Executive Officer, REMN
actions that you consummate and do so very profitably and at a very highquality level. But, the reality is that you cannot build a business around it. Because once this refi bulge ends, there is going to be very little refinance activity going forward.” Norden sees a day of reckoning coming over the next two years for lenders that are too refinance-oriented. But in typical fashion, he sees a great opportunity to bring new tal-
ent and integrate them into a platform that is properly structured for long-term stability and success. Moreover, he also believes that firms that are relatively new to retaining servicing may struggle with the liabilities and obligations that accompany it. But again, he believes REMN is poised to pick up additional servicing portfolios from these unprepared firms. A sign of business savvy is to be aware of potential threats, to analyze them and to seek to mitigate their potential damage. REMN and Norden see threats in the unresolved regulatory overhaul the industry is facing. Some thoughts of Norden on this subject include: “I doubt that the federal government can successfully wind down Fannie and Freddie and eliminate them. If they did, I believe it would crush the housing market.” “I believe the government guarantee system has to stay in effect.” “Without a government guarantee private equity wouldn’t touch mortgage paper anywhere near where Fannie and Freddie’s yields are.” Talent, teamwork and intelligence—all three are present at REMN. Just as Michael Jordan managed to lead a diverse group of athletes to become hardworking, smart, multi-championship teams, Peter Norden and his partners, managers and employees have built a hardworking, intelligent mortgage banking organization that will likely make the most of the opportunities present in the industry today. Norden summed it up nicely: “After 36 years in the business, I can honestly say from my own per-
“The culture here is very entrepreneurial, where our managers are empowered to make decisions relative to their area of expertise.” —Joe Amoroso National Director of sales for REMN’s Wholesale Division
spective, that the opportunity to build a first-class, quality, professional mortgage banking operation where one can retain extremely high-quality servicing has never been better. I have never seen an opportunity like we are looking at today.” David J. Coster is senior editor of National Mortgage Professional Magazine. He may be reached by phone at (919) 559-2171 or e-mail firstname.lastname@example.org.
OCTOBER 2012 GSEs Complete More Than which also would create new jobs, 129,000 Foreclosure according to the National Association of Prevention Actions in Q2 Realtors (NAR).
Improve Your Flexibility hey say that the quality of life is enhanced by improving the range of motion in the joints of your body. Stretching and maintaining flexibility increases physical and mental relaxation, and also helps prevent stiffness and injury. If stretching our “physical” muscles can provide these benefits, than what benefits can come from stretching our “work” muscles and being more flexible in business? Would a more open environment allow for more opportunities? All too often, we get stuck in the same patterns and behaviors at work. While having effective systems and some consistency is important, many habits may limit what we can do and require constant change and adaptation to our surroundings. Being flexible at the workplace allows you to get along with others much more easily and be more open-minded to new ideas. It allows you to view things from a different perspective and re-evaluate things that may not work. In order to obtain the most favorable advancements in any career, having flexibility is a necessity. The demanding business world we live in requires new and innovative strategies, the use of new technologies, and doing things faster and smarter. We are all required to do more with less and to take on more than what our job description may define on paper. Pushing against change rather than embracing it through a more flexible work environment will bring limitations to those who remain stubborn in their ways. A greater range of ideas and openness can allow you to expand into new areas and try new things, with less resistance and less pressure. A study completed by the When Work Works initiative found that
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“The measure of intelligence is the ability to change.” —Albert Einstein
employees of flexible work environments report: Greater engagement on the job; Greater job satisfaction; Greater desire to stay with the organization; Better overall health; and Lower stress levels. Whether you are an employer or employee, make sure that you set or are set in a flexible work environment. The environment should embrace positive change, technology and creativity, but also be structured with effective and adaptable systems with set expectations for everyone. Having a positive and fun work environment will help balance work and life for any employee, while also benefiting customer service and company profits.
Tip of the month … The fourth quarter of 2012 is here. Have a plan and close out the year strong with daily, monthly and quarterly objections. Near the middle of the quarter, begin preparing your business and setting goals for 2013. Next year will be another major year of change, one with new regulations facing the mortgage and real estate industry. The only way to be prepared is to be informed. Andy W. Harris, CRMS is president and owner of Lake Oswego, Ore.-based Vantage Mortgage Group Inc. and 2010-2011 president of the Oregon Association of Mortgage Professionals. He may be reached by phone at (877) 496-0431 or e-mail email@example.com or visit AndyHarrisMortgage.com.
Fannie Mae and Freddie Mac have jointly completed more than 129,000 foreclosure prevention actions in the second quarter of 2012, bringing the total foreclosure prevention actions to 2.4 million since the start of conservatorship under the Federal Housing Finance Agency (FHFA) in 2008 with 1.2 million of those actions being permanent loan modifications. These actions, which have helped more than two million borrowers stay in their homes, are detailed in the FHFA’s second quarter 2012 Foreclosure Prevention Report. The Q2 2012 Foreclosure Prevention Report features new information on state delinquencies and an updated, interactive Borrower Assistance Map for Fannie Mae and Freddie Mac mortgages, with information on delinquencies, foreclosure prevention activities and real estate-owned (REO) properties. Also noted in the report: Fannie Mae and Freddie Mac completed approximately 129,000 foreclosure prevention actions in the second quarter of 2012, bringing the year-to-date total to 275,100. Nearly half of troubled borrowers who received loan modifications in the second quarter had their monthly payments reduced by more than 30 percent. Approximately 29 percent of loan modifications completed in the second quarter included principal forbearance. Foreclosure starts and foreclosure sales decreased in the second quarter. REO inventory declined for the seventh consecutive quarter as property dispositions continued to outpace property acquisitions during Q2.
NAR Report Finds Sensible Lending Standards Could Spur Rise in Home Sales and Job Creation New survey findings, combined with an analysis of historic credit scores and loan performance, show that home sales could be notably higher by returning to reasonably safe and sound lending standards,
“Sensible lending standards would permit 500,000 to 700,000 additional home sales in the coming year,” said Lawrence Yun, NAR chief economist. “The economic activity created through these additional home sales would add 250,000 to 350,000 jobs in related trades and services almost immediately, and without a cost impact.” A monthly survey of Realtors shows widespread concern over unreasonably tight credit conditions for residential mortgages. Respondents indicate that tight conditions are continuing, lenders are taking too long in approving applications, and that the information lenders require from borrowers is excessive. Some respondents expressed frustration that lenders appear to be focusing only on loans to individuals with the highest credit scores. Even though profits in the financial industry have climbed back strongly to prerecession levels, lending standards still remain unreasonably tight. “There is an unnecessarily high level of risk aversion among mortgage lenders and regulators, although many are sitting on large volumes of cash which could go a long way toward speeding our economic recovery,” said Yun. “A loosening of the overly restrictive lending standards is very much in order.” Respondents to the NAR survey report that 53 percent of loans in August went to borrowers with credit scores above 740. In comparison, only 41 percent of loans backed by Fannie Mae had FICO scores above 740 during the 2001 to 2004 time period, while 43 percent of Freddie Mac-backed loans were above 740. In 2011, about 75 percent of total loans purchased by Fannie Mae and Freddie Mac, which are now a smaller market share, had credit scores of 740 or above. There is a similar pattern for FHA loans. The Office of the Comptroller of the Currency (OCC) has defined a prime loan as having a FICO score of 660 and above. However, the average FICO score for denied applications on FHA loans was 669 in May of this year, well above the 656 average for loans actually originated in 2001. Loan performance over the past decade shows the 12-month default continued on page 21
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“Make sure you have clear objectives for the meetings: Training, recruitment, goal setting, etc. If you don’t know where you are going, you are much less likely to arrive at the destination.”
issue to discuss or some other emergency. In other words, when you schedule a meeting, your sales staff should not be thinking, “Uh-oh, what happened now?”
Managing for the Future: Conducting Effective Meetings (Part II) By Dave Hershman
anagers in this industry have a very uneven record regarding delivering sales meetings regularly and delivering them effectively. Today, scheduling effective meetings is even harder with many sales and operational people working in virtual locations. Fortunately, technology
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such as Webinars help in regards to virtual meetings. Here are some rules for meetings in general, and next month, I will present ideas specifically for making sales meetings more effective: Consistent: They should be held at regularly scheduled times so that employees can integrate meetings into their long-term schedules. They should not be called only when there is a dire
On-time: They should start on time. Consider penalties for those who are late—or, even better, awards for those who are on time! Make the penalties fun such as the last person brings coffee/doughnuts for everyone next time. Of course, this example only works for “in-person” meetings. However, I am sure you can think of ideas for virtual meetings. For example, give out an award to the first person on the line. Agenda: They should follow a published agenda. Good meetings follow a plan. It does not mean writing a novel—just a few bullet points. Invite participants to add items to the agenda. Unfinished items should carry over first on the next meeting’s agenda. Diverse: General staff meetings and specific meetings should both be held. Perhaps one might hold staff meetings one time per month and sales meetings three times per month. Or, start with a staff meeting and then break into groups. In other words, don’t ignore operational issues. Some meetings should be solely operational personnel, some solely sales personnel and some should combine the two groups. Training: Training should be an integral part of the meeting. It would be too much to have a regular meeting schedule and a regular training schedule: Employees still have to perform their jobs. Go over a short training topic meeting and add a larger topic periodically. Solicit advice as to what topics the employees need. And make sure you are not only training on company procedures, technology and products. Help them become better industry professionals as well. Time management: Cover other administrative tasks at the same meeting—but limit the focus so as not to take away from sales. Many don’t read e-mails or memos and you must address these issues live, even if brief.
Atmosphere—Keep the meetings positive: Improvement of performance is important, but it is important to keep individual criticism to a minimum. Handle individual criticisms in private. Do not let these sessions morph into complaint sessions, especially regarding issues over which the participants have no control. Sales meetings are notorious for falling back to the company’s rate policy or operational issues. Make a pact: If someone wants to change a policy, they must make a recommendation and it is to be placed on the next meeting agenda for vote. If you cannot change the policy (perhaps it is a corporate issue), encourage them to write an e-mail for the group with a recommendation. Integrate success stories and positive news to steer the group towards a positive atmosphere. Praise and awards are great agenda items. Objectives: Make sure you have clear objectives for the meetings: Training, recruitment, goal setting, etc. If you don’t know where you are going, you are much less likely to arrive at the destination. One objective you should have is to bring a big picture analysis. Many times meetings get stuck in the “minutiae” of what is happening every day. They miss the fact that everyone else in the industry is suffering the same fate. Bring articles up that talk about trends and where the industry is heading in the long term. Participate: Allow each employee to contribute: Perhaps you could have someone different conduct the meeting each time. Unless they become interactive, they will represent a form of one-way communication and that is not our objective. Also, having top leaders in the office/company conduct meetings is great management training. This serves a dual objective. Dave Hershman is a top author in the mortgage industry with seven books published, as well as hundreds of articles. Dave has delivered hundreds of keynote speeches, seminars and schools for the industry as well. He may be reached by e-mail at Dave@HershmanGroup.com or visit OriginationPro.com.
When did we forget that mortgage brokers are the face of each home loan?
www.FGMCwholesale.com (800) 296-2275
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efficient lending processes possible to ensure your clients are getting into new homes ... and that you’ll be the one handing them the keys.
In our crazy world of mortgage securitization and lender portfolios, it’s sometimes easy to forget that most homebuyers buy homes from people, not logos. For decades, the mortgage broker has been the trusted advisor to millions seeking the American Dream. FGMC hasn’t forgotten that, and we’re providing our brokers the widest range of loan products and the most
Three T hree Simple Reaso Reasons ons Education E duc d cation Organized for Organized for the purpose purpose of providing providing education education to to professionproffession e als in all phases off the mortgage mortgage industry, industry, N NAPMW NAPMW offers offers educaeducamanyy vvenues workshops held ar around tion via man enues – seminars and w orkshops k ound the on-line,, and National Conference ccountry, ountry, on-line a at at its Na tional EEducation ducation C onference held each h May. May. NAPMW NAP MW membership membersship gives gives you you exclusive exclusive access a cess to ac to timely educaeducaaffecting career tion regarding regarding the e regulations regulations aff ecting yyour o car our eer such as a webinar FREE TO TO MEMBERSS monthly monthly w ebinar on industry ind dustry updates updates AND education class offering our 8 hour NMLS continuing continuing educa tion cla ss off ffe ering (NMLS Provider P rovider # 1400309) 140030 09)
Leadership Leadership p If If you you believe believe in helping helping to to elevate elevate the educational edu ucational standards standards of this industry, industry, or assisting asssisting in developing developing the e most competent competent industry work industry w ork force, force, then you you believe believe in NAPMW. NA APMW.
To T o Join NAP NAPMW MW W visit: www.napmw.org w ww.napmw.o org or ccall: all: 1-800-827-3034 1 800 827-3034 1-800-8 827 8 3034 Have Ha ve Q Questions? uestion ns? Please ffeel eel free free to to e e-mail -m mail us a at: t: firstname.lastname@example.org napm email@example.com . om
Edgardo Torres has joined Equator as vice president of customer support.
Chad Mosley has been named senior vice president of business development for Mortgage Contracting Services LLC (MCS).
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John Cady has joined Bay Equity Home Loans as director of retail production.
Inlanta Mortgage has named Nicholas J. DelTorto as president of the company.
Carrington Mortgage Services has named Mark Allanach regional vice president of its mortgage lending division. Carrington Investment
NAPMW is a ccommunity NAPMW omm munity of near nearly ly 2,000 professionals prof o essionals acr across oss the Country C ountry who eng engage age in the mor mortgage tgage / ba banking anking industr industry. y. Men Men and w women omen from from all backgrounds backgrounds have have joined joined NAPMW NAPMW because excel whatt they do do.. Emplo Employers want they want want tto oe xcel e aatt wha yers who w ant eexcelxcellence lenc e from from their employees e employees engage eng with NAPMW N NAPMW for for up-to-date up-to-date education. educa tion. B Both oth professionals p professionals and emplo emp employers yers e have have found found there there is a plac place e ffor or them in n NAPMW. NAPMW W.
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Russ Tolleson has been named senior compliance officer of The Compliance Group Inc. (TCG).
Mortgage Professionals to Watch
Net work o kiing Networking
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NAPMW Butt sinc since women NAPMW is not a women’s women’s organization. organization. Bu ew omen make up the major majority profesity off professionals professionals in the mortgage/banking morrtgage/banking pr ofession, our purpose purpose is to to help them advance advance in business, business, personal, personal, and leadership development. de evelopment.
Services has named Kevin Cooke Jr. as its new managing director.
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reverse mortgage sector, including servicing, loan origination, asset management and technology. RMS has issued approximately $1.1 billion of reversemortgage backed Ginnie Mae securities (HBMS) in the first half of 2012, ranking it as the fourth largest reverse mortgage servicer and the second largest issuer of HMBS in the sector this year. RMS is majority-owned by funds managed by Jacobs Asset Management LLC (JAM). The acquisition of RMS will position Walter Investment as a full-service leader in the $140 billion reverse mortgage servicing sector with significant growth opportunities in each of the RMS businesses, all of which generate strong earnings and cash flow. The acquisition represents an attractive extension to Walter Investment’s highmargin, fee-for-service business model. “We are extremely pleased to add the RMS business to the Walter Investment portfolio,” said Mark J. O’Brien, chairman and chief executive officer of Walter Investment. “RMS is led by a very experienced and well-respected management team and has performed exceptionally well since its inception in 2007. RMS is viewed as a preeminent servicer and originator in the reverse mortgage industry. The sector has very attractive long-term growth prospects and is currently undergoing significant structural change, providing us with an opportunity to capitalize on those dynamics. We believe RMS is uniquely positioned to capitalize on this opportunity and to continue capturing greater market share in both its origination and servicing businesses. We believe the combined strengths of our businesses will enhance our ability to take advantage of these opportunities.”
continued from page 10
heard on the street
America’s Choice Home Loans (ACHL) has named Janet Pagan head of the firm’s new branch in Cliffside Park, N.J. Scott Bowling has been named branch manager of the Real Estate Mortgage Network Inc. (REMN) branch in Orlando, Fla. American Mortgage Network (AmNet) has announced the additions of Shelley Fryman and Greg Schatz as senior production executives. Joseph J. Murin, former president of Ginnie Mae, has been named chairman of the board of Chrysalis Holdings LLC and has been named president of NewDay USA. Lori Welch has joined GSF Mortgage as a loan officer in the firm’s Indianapolis office. continued on page 51
nmp news flash
continued from page 16
rate averaged just under 0.4 percent of mortgages in 2002 and 2003, which is considered normal. Twelve-month default rates peaked in 2007 at 3.0 percent for Fannie Mae loans and 2.5 percent for Freddie Mac loans, clearly showing the devastating impact of risky mortgages. Yun said homebuyers in recent years have been highly successful. Since 2009, the 12-month default rates have been abnormally low. Fannie Mae default rates have averaged 0.2 percent while Freddie Mac’s averaged 0.1 percent, which are notable given higher unemployment in the timeframe. Under normal conditions, existinghome sales should be in the range of 5.0 to 5.5 million. “Sales this year are projected to rise eight to 10 percent. Although welcoming, this still represents a sub-par performance of about 4.6 million sales,” Yun said. “These findings show we need to return to the sound underwriting standards that existed before the aberrations of the housing boom and bust cycle, and thoroughly re-examine current and impending regulatory rules that may cause excessively tight standards.”
FFIEC Releases Data on Mortgage Lending in 2011
Home purchase lending also fell, but by a more modest five percent. The overall volume of reported conventional, FHA-, and VA-related refinancing activity diminished slightly from 2010 to 2011. Although both the number of conventional and FHA-related refinancings fell from 2010 to 2011 (decreases of about 12 percent and 37 percent, respectively), the volume of VA-guaranteed refinancing activity rose significantly, increasing about 41 percent. The 2011 HMDA data also include information on loan pricing. The 2011 data reflect the second full year of data continued on page 37
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The Federal Financial Institutions Examination Council (FFIEC) has announced the availability of data on mortgage lending transactions at 7,632 U.S. financial institutions covered by the Home Mortgage Disclosure Act (HMDA). Covered institutions include banks, savings associations, credit unions, and mortgage companies. The HMDA data made available covers 2011 lending activity—applications, originations, purchases and sales of loans, denials, and other actions related to applications. The data released include disclosure statements for each financial institution, aggregate data for each metropolitan statistical area (MSA), nationwide summary statistics regarding lending patterns, and Loan/Application Registers (LARs) for each financial institution (LARs are modified to protect borrower privacy). The FFIEC prepares and distributes this information on behalf of its member agencies. The HMDA data show the disposition of loan applications and include information on loan amount; loan type (such as conventional, Federal Housing Administration, or Veterans Administration); purpose (home purchase, home improvement, or refinancing); property type (1- to 4-family, multifamily, or manufactured housing); property location (MSA, state, county,
and census tract); applicant characteristics (race, ethnicity, sex, and income); and pricing-related data. The data also show whether a loan is subject to the Home Ownership and Equity Protection Act and whether a loan is secured by a first or subordinate lien, or is unsecured. The data as released by the FFIEC include census tract characteristics (minority composition and income). For 2011, the number of reporting institutions of 7,632 fell nearly four percent from the number in 2010, continu-
ing a downward trend since 2006, when HMDA coverage included just over 8,900 lenders. The decline reflects mergers, acquisitions, and the failure of some institutions. The 2011 data include information on 11.7 million home loan applications (of which nearly 7.1 million resulted in loan originations) and 2.9 million loan purchases, for a total of nearly 14.7 million actions. The data also include information on 186,000 requests for preapprovals related to a home purchase that did not result in a loan. The total number of originated loans of all types and purposes reported fell by about 780,000, or 10 percent, from 2010, in part because of a 13 percent decline in refinancings.
Got Rejection? By Bob Davies When is the last time you got a real solid rejection? I’m talking about something right down to the core like a punch to the gut. I’m not referring to the deal that did not go through because the value came in too low and you personally paid for the appraisal out of your own pocket. I’m not talking about the borrower who said they had good credit and it didn’t turn out to be the case. I’m not referring to the deal where underwriting wanted bank statements and you knew the client would show declining income. Nor the time when you had to cancel a deal because it was a buy down and you didn’t think you could sell it on the secondary market as an owner-occupied. Or the time when there was a crack in the driveway and in the foundation and your deal was held up pending a geology report. I’m talking about a rejection that hit you right between the eyes. Here is one I saw several years ago and the image of the memory is still clear. I am a professional speaker so I’m in a transactional business. I provide for my retirement income through owning residential rental properties. I was sitting in a real estate broker’s office and I just happened to notice as I walked in several signs stating, “Affiliates by Appointment Only—This Means YOU!” These signs were all over the office. This broker just happened to also own a mortgage company, and although his real estate agents are independent contractors, he wanted them to use his company to finance the deals. He says it’s to keep control of the deal, but it’s no secret he wants that side of the transaction as well. Into the office walks a beautiful young lady. She is well dressed, and walks past the up desk, smiles and starts to walk over to a real estate agent’s desk, rate sheet in hand. The broker sees her, storms out of his office, runs over to her, takes her card, rips it up and throws it at her screaming, “This is how much I want to see you in my office, now get out!” She runs out of the office in tears and vows never to return. This is very harsh isn’t it? I wish I was making this up. I’m not. So what happened in her brain and what does this mean to her future. There are three major areas of the brain: The outer cortex, responsible for decisionmaking, analyzing and critical thinking; the inner limbic system, responsible for arousal, fear, fight or flight; and the brain stem, responsible for the auto-
All human performance is the avoidance of pain or the seeking of comfort!
Hereâ€™s what happens in your brain. You get a compelling cortical limbic loop. The cortex is stimulated by the decision to call on the office. The limbic system is stimulated by the avoidance of the highest level of perceived pain, the $100 penalty if you donâ€™t take the action. This works! You are overriding the current cortical-limbic loop that has calling on the real estate office as a threatening and dangerous task. The $100 fine is seen as more threatening then your previous negative
experience. You are compelled to avoid the highest level of pain. In this case you avoid the pain of the fine by going into that office. This is how you rewire the brain, referred to as brain plasticity. You are actually undoing a negative memory and rewriting it with a behavioral contract. Try it for yourself. Ask what is one activity you would like to accomplish this week that would be good for you to do, you are capable of doing it and you know you would not do it if you donâ€™t use a behavioral contract. Write it down. Put a $100 penalty if you donâ€™t do it by the end of the
week and give it to someone else and ask them to hold you accountable. You have now changed what you are in reference to and human nature will compel you to avoid the highest level of pain, not the rejection, but the $100 penalty. How do you avoid? By taking the action! Iâ€™ll hold you accountable. Send me your commitment by e-mail to email@example.com and its $100 if you donâ€™t do it. Watch what happens! Bob Davies of Lake Forest, Calif.-based High Performance Training Inc. may be reached by phone at (949) 8309192, e-mail firstname.lastname@example.org or visit www.bobdavies.com.
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Application: Tell another person that you will give them $100 if you donâ€™t call on this real estate office today and talk with at least three real estate agents. You see the components of a behavioral contract. Specific declaration: Visit a real estate office and speak with three realtors. (Accountability) conse-
quence for non-performanceâ€”pay another person a $100 fine if you donâ€™t do it.
nomic systems of breathing, heart rate, etc. Iâ€™m going to focus on the cortex and the limbic area. The cortex is the top layer that is activated when this woman makes a decision to grab some rate sheets and head out to visit this office. When she gets this tremendous rejection her limbic system sees this as life-threatening and creates what is called a cortical limbic loop where she forms a memory that then becomes generalized. The literal generalization is that calling on real estate offices is life threatening and must be avoided at all times. She doesnâ€™t know that this nonconscious loop has been formed. She just thinks that she is just too busy with productive activities to prioritize calling on another real estate office. Science knows differently. This is called â€œlearned helplessness.â€? She has had a previous traumatic experience that she has formed a protective memory to prevent it from happening again. This is also referred to as a post-traumatic episode. Just the thought of going into another real estate office is linked to great pain. The brain cannot distinguish between real or imagined pain. To this woman, going into a real estate office is real physical pain. Will she ever prospect again? Not without an intervention. This is the result of five million years of evolution. The human body has evolved to compel the individual to avoid the highest level of perceived pain for comfort, always. What then follows is rationalization, where we justify the avoidance. If you look deeper you will see that the core principle here is human avoidance. This is driven by the genetic coding to avoid the highest level of perceived pain. In order for this woman to get herself to take the action she is avoiding, she would need to leverage this human nature principle, or law. How would she do that? Simple â€Ś she needs to change what she perceives as the highest level of pain. She will be compelled to avoid that perception. That avoidance is an instinct! Hereâ€™s the secret â€Ś use behavioral contracting. Here are the components of a behavioral contract; specific declaration plus accountability. Accountability has two parts, the check-in and an enforceable consequence for non-performance.
By David Lykken
Leadership is Needed in Our Next President t’s about that time again. It’s the moment of truth—not just for a couple of politicians seeking the Holy Grail of their political careers, but also for the citizens of our beloved country. More than the presidential candidates demonstrating their values as leaders, we the people are demonstrating our values as followers. We are telling them how we want to be led. The question we need to ask ourselves is: “Are we telling them the right things?” On Tuesday, Nov. 6, 2012, we will be electing the 57th president of the United States of America. We’ve had some good presidents and some bad presidents in the centuries our country has been in existence but, after enabling 56 men to acquire such a prestigious position of leadership, you would have thought we’d have it all figured out by now. Yet even now, we are confused about just what we are looking for in a leader. There are an infinite number of things that we can look at when we are trying to decide which presidential candidate should be leading our country for the next four years. Some will look at policy. Where does the candidate stand on certain issues? What is his platform and how does it align with one’s political or ideological beliefs? Others will look at charisma. Does the candidate inspire me? Is he a good cheerleader—someone who can make me believe in myself and in my fellow man? While a candidate’s ability to inspire and where he stands on important issues are clearly important items to consider, I would argue that they are subsets of something far more important. If we really want to know whether or not a presidential candidate is fit for office, we will look at the one thing that bleeds into
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everything else: His character. Without character, there can be no trust. Sure, a candidate can take “the right side” on an issue but, without character, he will change his mind as soon as it’s convenient for him. Sure, a candidate can inspire us with hope for a better future but, without character, he will not feel compelled to translate that hope into a reality. It isn’t enough to be running in the “right party” or have the best stage presence around. We need something more. We need character. Character is what drives a man to be consistent in who he says he is, what he says he believes, and how he says he plans to solve problems. Character is what makes a leader keep his promises. Going into the 2012 election, I think we can all agree, what we need more than anything else is a candidate who will keep his promises. Character is best understood backwards. Sure, we can look at what the candidates are promising and judge their character based on that, but it doesn’t really mean anything. What really tells us whether or not the candidate in question has character is whether or not he had demonstrated it in the past. What lessons can we draw from the character demonstrated by the presidential candidates in what they’ve done so far? That is the question. Recently, incumbent President Barack Obama fell under scrutiny for denying a meeting with Israeli Prime Minister Benjamin Netanyahu. Israel has been a faithful ally of the United States and Obama has met with Netanyahu on all of his visits to the U.S. except for one—when Obama was on a foreign visit. This time, however, Obama wasn’t on a foreign visit. He was campaigning for re-election.
The White House, therefore, responded to Netanyahu’s request to meet with Obama during his visit to the United States for the U.N. General Assembly by saying, “The President’s schedule does not permit that.” Those who know a little more about the situation will understand Obama’s avoidance of Netanyahu as a political move. Netanyahu wants Obama to be more supportive of his efforts against Iran’s nuclear program, while Obama wants to avoid the issue. So, instead of meeting with Netanyahu and risking a confrontation so close to the election, Obama is using his busy schedule as a red herring to avoid a difficult discussion. Even worse than this fact is that the Obama is failing to admit that he doesn’t want to have the discussion. He’s clinging to the excuse of a busy schedule. That, my friends, is an example of a lack of character. There are several lessons on character that we can learn from Obama’s recent fiasco. First, character never avoids confrontation. Obama did not want to meet with Netanyahu, because he knew that the resulting conversation could cause some dissension. Character is stronger than that. When difficult situations arise, character doesn’t back down. Character meets challenges head on. When we are seeking a person to lead our country, we need someone whose character will remain intact no matter what comes his way. Another lesson we learn from Obama’s mishap is that character puts the interests of others above its own. Just a few months from re-election, Obama could not afford to alienate a large number of people. He needed to play the fence so that he could still be favored by enough people to get back into office. Because of that mindset,
“If we really want to know whether or not a presidential candidate is fit for office, we will look at the one thing that bleeds into everything else: His character.”
he disregarded Netanyahu and the concerns of an American ally, Israel. Character is self-sacrificing. When there is a choice between hurting someone else and hurting yourself, character is always willing to take the fall. When we go to the voting booths, we want to be sure to elect a servantleader; not a tyrant. A third lesson we can draw from Obama’s failure to meet with Netanyahu is that character produces consistent behavior. Up until this point, Obama had been willing to meet with Netanyahu when the Prime Minister visited the U.S. All of a sudden, though, he’s “too busy.” Character is the same today and tomorrow as it was yesterday. It is a foundational anchor to a person’s soul. It does not change with circumstances. Character is consistent. When we are looking for a new leader of our country, we need to keep in our mind how consistent the candidates have been in their behavior. A candidate with a strong sense of character does not flip-flop. One final lesson that we may draw from Obama’s snub of Netanyahu is that character always owns up to its mistakes. Obama never admitted that he was trying to avoid Netanyahu. He still maintains that he simply has been “too busy” to meet with the Prime Minister. Even after all of the
uproar, he still hasn’t apologized. No one is perfect. Everyone makes mistakes. Most of us even make terrible mistakes. But the greatest mistake of all is failing to own up to the mistakes that we do make. Character confesses. When Election Day rolls around, we need to look for a candidate who is willing to openly discuss the things he has done wrong. We need someone who seeks forgiveness rather than secrecy. Now, I am not going to tell you who to vote for. I’ve discussed Obama’s character flaws. Perhaps you could point out some instances in which Mitt Romney has demonstrated a lack of character. That’s not the point. The point I am trying to make is that we, as voters, need to be cognizant of the depth of character our candidates have. We need to take an open and honest look about who we are voting into office and the underlying character that will affect their policies and decisions. As voters preparing ourselves for the 2012 election, we need to be thinking about how each candidate’s character is going to play into his decision-making going forward. There are issues that will arise within the next four years that we cannot even imagine. We must have a candidate whose character is prepared to handle crisis, tragedy and conflict without dissembling and caving on his convictions. Let’s bring it down to a more narrow and relevant focus. Both candidates running for Presidential office in 2012, Mitt Romney and Barack Obama, are in agreement about dissolving Fannie Mae and Freddie Mac. But neither candidate can answer the question, “What
is going to replace them?” We need to have some sort of secondary market. Which candidate possesses the character that will drive him to make the best decisions regarding the housing crisis? Will it be Obama? Or will it be Romney? You decide. Regardless of which candidate is best-suited for the role of President of the United States, we need to be willing to face facts. We as a country are in desperate trouble. Times are not easy. The future of our domestic economy is uncertain. The future of our foreign relations is uncertain. The future of our family values is uncertain. Character is the only attribute in a man that equips him to deal with such uncertainty. Going forward, we need a leader who will have the character to take on any challenge that arises. Who will you be voting for come November … Barack Obama … Mitt Romney? I don’t know about you, but I’m voting for character. 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. 10, or e-mail email@example.com or firstname.lastname@example.org.
ing companies disclose to consumers their file information and credit scores when required to do so, and whether they have trained personnel to explain the information in their disclosures to consumers.
Terry W. Clemans is executive director of the National Credit Reporting Association Inc. (NCRA). He may be reached at (630) 539-1525 or e-mail email@example.com.
This examination process is likely going to be long term and potentially ongoing for some firms. It includes a preexamination scoping phase, review of information, data analysis, on-site examinations and regular communication with supervised entities. Then there could be follow-up monitoring and the
potential for examiners to report their findings to and work closely with the CFPB’s enforcement staff, who could take enforcement actions to address any findings they determine detrimental to consumers. The CFPB will follow a similar process and has already issued similar procedures for other industries under its supervision, and that includes mortgage originators, mortgage servicers, collection agencies and payday lenders. A copy of the “Examination Procedures for Larger Participants of the Consumer Reporting Market” is available online at: http://files.consumerfinance.gov/f/201209_cfpb_C onsumer_Reporting_Examination_P rocedures.pdf.
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Preventing fraud and identity theft: Examiners will look to see whether these companies are fulfilling the requirements to address identity theft and to protect active duty military consumers, through such means as fraud and active duty alerts, and blocking of reporting of information that stems from identity theft.
continued from page 4 NationalMortgageProfessional.com
the cfpb begins knocking on doors
Loan Originator Compensation: Past is Prologue (Part I)
By Jonathan Foxx
“In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.”—What Is Seen and What Is Not Seen1, Frédéric Bastiat ince April 6, 2011, mortgage loan originators (MLOs) have struggled to comply with the many requirements imposed on them by the MLO compensation provisions of the Truth in Lending Act (TILA),2 as amended by Title XIV of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). That date was the compliance effective date.3 Prior to that date, however, there were considerable and persistent efforts made to postpone its implementation. I tracked the burgeoning protests and litigation in a series of articles4 and newsletters.5 Associations resisted these TILA revisions on behalf of their membership. The National Association of Mortgage Brokers (NAMB) and the National Association of Independent Housing Professionals (NAIHP) sued the Federal Reserve Board of Governors (FRB). Amicus briefs were filed. Many members of Congress, from both sides of the aisle, also protested aspects of the new MLO compensation requirements. All for naught! April 6, 2011 arrived. Resistance was futile! The FRB had issued final rulemaking and official staff commentary with respect to the loan originator compensation rules and anti-steering provisions, but further guidance came to a virtual full stop on Jan. 26, 2011, when the FRB issued its Compliance Guide for Small Entities on Loan Originator Compensation and Steering.6 After that, the FRB offered some conference calls, a Webinar–which ostensibly cleared up some confusion, while causing other confusion–and provided occasional updates of the oral, rather than the written, official variety. In the meantime, the Consumer Financial Protection Bureau (CFPB) received its “enumerated authorities” on July 21, 2011. From that date forward, the CFPB was in charge of promulgating and administering these compensation guidelines.
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And on Oct. 6, 2011—exactly six months to the day when the rule became effective—the first examination guidelines for loan originator compensation were promulgated.7 In the State Non-depository Examiner Guidelines for Regulation Z—Loan Originator Compensation Rule, issued by the Multi-State Mortgage Committee (MMC),8 we were given a pretty good idea of the direction that federal and state regulators would be taking in their regulatory examinations for loan originator compensation.9 For the most part, my firm’s clients were prepared for implementation of the compensation rule, but we spent hundreds of hours preparing them for it, consisting of many conferences and meetings, which included very comprehensive reviews of employment agreements, compensation plans, disclosures, policies and procedures, and many other details, both logistical and systemic. Inevitably, I felt mortgage loan originators needed more information than was readily available. So, we consolidated our knowledgebase and offered the FAQs Outline—Loan Originator Compensation, a compendium of questions and answers about the MLO compensation requirements, first published on March 21, 2011 with 142 FAQs and 35 pages. About a year later, after 20 updates, the FAQs Outline was up to 450 FAQs and 147 pages!10 In this article, the first in a two-part series, I will consider the recent CFPB proposal, issued on Aug. 17, 2012, which contains certain proposed rules governing mortgage loan originations, especially relating to the MLO compensation guidelines in Regulation Z, the implementing regulation of TILA. Comments for this proposal are due by Oct. 16, 2012.11 In the second part of this series, I will explore these proposals in considerable depth, specifically their clarification of and expansion on existing regulations governing MLO compensation and qualifications. The CFPB does plan to implement new laws, including a restriction on the payment of upfront discount points, origination points, and fees on most mortgage loan transactions. For this reason, I will conclude this article with a brief, generic outline of certain proposals. To some extent, these new proposals exemplify the hurly-burly, rollercoaster ride we’ve been jaunting about on, in the on-going, elusive quest to implement the MLO compensation rule.
Small Business Review Panel
Payment of Discount Points
“There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.”—What Is Seen and What Is Not Seen12, Frédéric Bastiat
“It almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil.”—What Is Seen and What Is Not Seen18, Frédéric Bastiat
The CFPB is required to certify that a proposed rule will not have a significant, adverse, economic impact on a substantial number of small entities.13 The Small Business Regulatory Enforcement Fairness Act (SBREFA) provides the basis for a review, inasmuch as, among other things, “small businesses bear a disproportionate share of regulatory costs and burdens.”14 In order to comply with this requirement, the CFPB convened and chaired a Small Business Review Panel to consider the impact of the proposal and obtain feedback from representatives of the small entities that would be subject to the rule. When preparing the proposed rule and an initial regulatory flexibility analysis, the CFPB is expected to consider this panel’s findings. The panel consisted of representatives from the CFPB, the Chief Counsel for Advocacy of the Small Business Administration (SBA), and the Administrator of the Office of Information and Regulatory Affairs within the Office of Management and Budget (OMB).15 On the panel were socalled small entity representatives (SERs), individuals who represent the business entities that would be subject to the CFPB’s proposal.16 On July 11, 2012, the panel issued its report.17 Here are certain, salient topics that were reviewed by the panel: Payment of Discount Points Payment of Origination Points and Fees in Creditor-Paid Compensation Payment of Origination Points and Fees in Brokerage-Paid Compensation MLO Retirement Plans, ProfitSharing, and Bonuses Pricing Concessions and Point Banks MLO Qualification and Training Requirements Let us now consider the panel’s suggestions, concerns, resolutions, and recommendations.
Suggestions and Concerns The SERs expressed “puzzlement” about Dodd-Frank’s prohibition on points and fees, suggesting that “while there may be some consumer confusion about tradeoffs between rate, points, and fees, such confusion was not central to the mortgage market crisis or current foreclosure issues.” It is believed that the prohibition (or other restrictions contemplated by the CFPB) would be “disruptive” to the overall real estate market. Indeed, the view was held that market forces would themselves cause pressure on competition, along with the regulatory compliance requirements of MLO compensation and the integrated mortgage disclosures which the CFPB has designed.19 Suggestions for alternative resolutions were offered to the CFPB, such as improving disclosures, supplemental tools, and educational programs to help consumers better understand pricing tradeoffs. A request was urged for the CFPB to delay action until a study could be conducted of the current mortgage market to assess “post-crisis” business practices and conditions and the efficacy of recent regulations. Interesting and insightful concerns expressed by SERs included challenges involving (a) identifying restrictions in the existing rule on MLO concessions to address errors in the Good Faith Estimate or to cover rate lock extension fees, and (b) that MLOs tend to avoid consumers seeking low balance loans because MLOs’ compensation is set as a percentage of the loan balance, and (c) that rates and administrative fees have increased since promulgation of the MLO compensation rule. Finally, the SERs asked the CFPB to continued on page 31
Veros Announces Key Enhancements to its VeroSCORE Product
identifying UCDP issues that may conflict with the system’s known hard stops before the report is submitted.
Radian Launches MI Rate Finder App for iPhone Veros has announced a significant and iPad
Radian Guaranty Inc., the mortgage insurance (MI) subsidiary of Radian Group Inc., has announced the availability of its new MI rate finder app, Radian Rates, in the App Store. The free app, which is the first of its kind in the MI industry available for iPhone and iPad, is a mobile version of the company’s existing online rate finder and offers lenders on-the-go access to quick and reliable Radian MI rate quotes. Users input loan criteria and the app automatically calculates the MI rate for a variety of Radian products. Backed by the company’s published rates and guidelines, Radian Rates was designed for users to check eligibility and compare options to find the product that best fits their needs. “We know our customers are busy,” said Brien McMahon, Radian’s chief franchise officer and head of sales. “That’s why we’re always looking for innovative ways to make doing business with Radian quicker and easier. With the Radian Rates app, our lending partners can access our rates in seconds, wherever they are. Investing in this type of technology further demonstrates our commitment to being the MI partner of choice for lenders.”
continued on page 34
Capsilon, a provider of cloud-based document sharing, imaging and collaboration solutions for mortgage lenders, has released Katalyst 8, the newest version of the company’s electronic document management and collaboration solution, which includes a re-architected image conversion system, a sophisticated automated document recognition capability and a new desktop application.
Visit us at Booth # 103 Northeast Conference of Mortgage Brokers October 9-11, 2012
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Capsilon Releases Katalyst 8 to Boost Cloud-Based Collaboration
enhancement upgrade of its VeroSCORE product, which enables lenders to score the quality of appraisal reports in realtime. VeroSCORE uses sophisticated automated analysis that allows users to instantly determine whether an appraisal may be accepted or rejected outright, requires manual review, or needs further due diligence. The new VeroSCORE features an enhanced user interface, easily accessed via the web. It also emphasizes validation of the Uniform Appraisal Dataset (UAD) along with an included pre-check of each appraisal against known requirements prior to submission to Freddie Mac and Fannie Mae via the Uniform Collateral Delivery Portal (UCDP), an industry standard technology built by Veros. VeroSCORE’s impressive analytics have been made even more robust with additional rules to test the credibility of appraisals, as well as by leveraging the VeroVALUE automated valuation model (AVM) and the company’s Collateral Integrity Analysis (CIA) tool. VeroSCORE provides individual numeric scores on the “three Cs” of appraisal quality: completeness, compliance and credibility. Those scores are presented with an overall VeroSCORE ranging from 0-1000, along with suggested routing to achieve greater efficiency in the appraisal review process and overall due diligence. “VeroSCORE is of tremendous help for lenders desiring to test and improve quality on their incoming appraisals,” said Bill King, Veros director of valuation services. “It also allows AMCs to provide third-party validation on appraisals prior to going to their clients, and is an essential due diligence tool for mortgage investors when buying loan pools. The new VeroSCORE incorporates a number of analytic and reporting enhancements that reduce costs, improve efficiency and enable easier compliance.” He also notes that VeroSCORE allows lenders to respond more effectively to volume fluctuations by requiring less time for appraisal analysis, as well as
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Buying Signals (Part I) By Kerry Johnson, MBA, Ph.D.
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Have you ever been oversold? Have you ever talked so much that you talked yourself in, and then out of the sale? Sales is not a process of convincing someone to buy. A sale is made because you probed so well, you learned what they want and then recommended a solution to their problems. When you are new to sales, you try to talk people into buying. When you are more experienced, you try to listen for openings, and then try to talk them into buying. But professional salespeople are so elegant, they “listen” people into buying. This not only means you effectively probe for needs and wants. It also suggests that you pay more attention to how the prospect reacts to what you say. Some of those reactions are cues from your prospect they have heard enough and want you to move to the next stage of the process. Sometimes these cues indicate they want to buy. Kevin was referred to John by a mutual friend. The referral was so strong that the prospect opened up to John right away, and told him exactly what he needed. John listened to his prospect’s needs and then presented exactly what he wanted. John discussed the product like a master. He tailored every feature, and made them into benefits. He was on a roll. John kept talking, and talking and talking. After about an hour, the prospect looked down at this watch and excused himself. He had another appointment. He said, “I‘ll get back to you later. Was he a bad prospect? No, in fact he went out the next day and bought from a competitor. The truth is, John oversold him. He talked himself in, and then out of the sale. Chances are you are so concerned with what you are selling, that you fail to read people and also failing to notice their buying signals. You cannot make money unless you can close. You cannot close at the right time unless you can read your prospect’s buying signals. If you don’t know when to stop talking, you’ll sell by accident. Most sales are a complete accident. It occurs because you happen by chance to stop talking, and the prospect coincidentally is ready to buy. If you know how to listen, while also possessing some product knowledge, all you need is to stop talking.
As simple as this seems, 70 percent of your sales are lost because you don’t know when to close. Knowing when is more important than knowing how. If you have done a good job of gaining your prospect’s trust, he will usually close himself. Sometimes, you just have to be sharp enough to say, “What do you think” and then listen to what they say. It often will be, “Sounds Great.” But if you try to talk your prospect into submission, you’ll find yourself manipulating. When you do that, you’ll gain short term sales and long term losses. Your customer will cancel a few days later. But the right way to close is to notice that the prospect will show you innocuous, but obvious cues indicating when they want to buy. If you miss any one of those cues, you’ll miss the sale. Buying signals are a lot like moving through a submarine. You close the water-tight doors and then progress to the front of the boat. As your prospect displays buying signals, they are letting you know the watertight doors can close and you can move ahead. Rarely is a buying signal a sign that someone wants to sign the contract then and there. But it is a cue they want you to move ahead faster. Here are some of the verbal and nonverbal cues that will indicate when you have said enough:
Head nod This is one of the most basic of buying signals. Even beginners can recognize this cue. I was on the island of Madeira in Portugal recently, talking to attendees after my speech. One guy walked up to us and abruptly interrupted. He kept talking for what seemed like an hour. I looked over to my friend and noticed him nodding quickly up and down. The bore didn’t pick up on this signal. Each of us flashed the look of, “Are you as bored by this guy as I am?” We both smiled in agreement. When you see this cue, you should say, “I sense this is pretty familiar to you.” Or you can say, “Where have you heard this before.” Proud to display his knowledge, your prospect will tell you what he already knows. You can then move on to the next stage in the sales process.
Pupil dilation Several university studies have tested the hormonal and physical response people have to nude photos of the opposite sex. Whether the viewer is male or female, their pupils will expand to the degree they are aroused. I don’t think a mortgage will evoke the same excitement as a picture of someone in their birthday suit. But people can’t hide their emotions if you know what to look for. In Las Vegas high stakes poker, pros train themselves to avoid any emotion. They wear sunglasses so competitors can’t see their pupils dilate when they have a good hand. But there are other cues great poker players look for. According to British Body Language expert Desmond Morris, a player with a bad hand will look at his cards longer than if it’s a winner. This makes sense since the player is probably thinking about what he can draw or discard. Aristotle Onassis, the late great Greek shipping tycoon, was known to wear sunglasses constantly during business meetings. After losing a pair of sunglasses, he postponed one sit down until he could buy another. Women are much better at spotting these cues. Although Americans in general are the worst among developed nations at spotting these nuances. Virtually every country’s trade representatives have out-negotiated American officials in commerce and arms talks. This is largely because Americans don’t yet understand what people say is not always what they mean. And they often mean more than what they are willing to say.
“I want to hold it”
Another buying signal is possessiveness. If your prospect keeps a brochure or sheet of paper close to the vest, or holds it as you talk, he is showing a subtle buying sign. But if he promptly gives it
back to you, having barely glanced at it, he is signaling that your ideas aren’t worth looking at. If he slides your brochure across the table right back to you, you may want to retreat back to the probing stage. A Japanese businessman would feel deeply offended if you took his card and immediately stuck it into your pocket. You would honor him if you took a moment to read it with both hands, and then carefully placed it in your shirt or jacket pocket. I once went on an appointment with an inexperienced rep. During the presentation stage, the prospect was given a product brochure. He immediately pulled it across the table, closer to his chair. He held it in his hand during the rest of the meeting. To my amazement, the salesperson continued to talk for the next 45 minutes. I saw the prospect go from moderate interest to apathy within the first five minutes. The sales rep didn’t have a clue. I watched the salesperson snatch defeat from the jaws of victory. If you miss your chance to close, you may never get another.
The chin and nose rub When your prospect is ready to buy, she will rub her chin. But this in only one cue showing an imminent decision. He may also scratch his head or rub his nose. Any one of these is a strong indication that your prospect is in deep thought. If you keep trying to sell, you could possibly irritate him. Stop talking, especially if your prospect has suddenly broken eye contact. Your prospect really wants you to say, “What do you think?” With any buying signal, trial close by saying, “Does this sound good to you? Do you like this idea?” If they don’t say, “Great,” bless your ability to recognize when to stop talking. You may have pushed the prospect off the “cliff of no return.” Kerry Johnson, MBA, Ph.D. is a bestselling author and frequent speaker at mortgage origination meetings around the world. Peak Performance Coaching (his one-on-one coaching program) promises to increase your business by 80 percent in eight weeks. To see if you are a candidate for this fast track system, click on www.KerryJohnson.com/coaching and take a free evaluation test. He may be reached by phone at (800) 883-8787 or e-mail firstname.lastname@example.org.
loan originator compensation not adopt an automatic sunset for at least five years, in connection with any regulation relating to points and fees. Their view was that an automatic sunset would disrupt an already fragile market.
Resolution Although the SERs supported the CFPB in using its exemption authority to allow consumers to pay upfront discount points, there was considerable concern about the specific details of requirements to make these discount points bona fide. And there were differing opinions regarding the requirement that lenders offer a no-discount point loan, while indicating that a sizable number already offer such a loan.20
Recommendation 1. The CFPB should consider a proposal to allow consumers to pay upfront discount points and to solicit comment on mechanisms to ensure that the discount points are bona fide. 2. The panel recommended that the CFPB should solicit public comment on a proposed requirement that lenders make available a nodiscount point loan.
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Payment of Origination Points and Fees in Creditor-Paid Compensation â€œWhen a man is impressed by the effect that is seen and has not yet learned to discern the effects that are not seen, he indulges in deplorable habits, not only through natural inclination, but deliberately.â€?â€”What Is Seen and What Is Not Seen21, FrĂŠdĂŠric Bastiat
Suggestions and Concerns There was â€œsignificant confusionâ€? about the CFPBâ€™s proposal to prohibit origination fees from varying based on the amount of the loan. Several SERs had already â€œrestructured their MLO compensation to provide compensation as a flat percentage of the loan amount to comply with the Loan Originator Rule.â€? Consequently, the changes they had made already eliminated steering incentives. There seemed to be a disconnect, in effect, between prohibiting overall origination fees from varying based on the amount of the loan and Dodd-Frank, which specifically permits MLO compensation to vary with the amount of the loan.
Some SERs stated that they â€œgenerally opposed a flat fee for core underwriting and processing services.â€? It was noted that several types of other origination fees vary with the amount of the loan, including secondary market, loan level pricing adjustments, and on other determinative factors, such as geography and type of loan. Thus, they wanted the CFPB to state explicitly that it will not require a single fee to cover all origination costs, and that variances in particular types of origination fees would still be permitted, based on other factors besides the loan amount. And there are anomalies as well to be considered; for instance, the fact that certain government-sponsored lending programs require origination fees to be charged as a percentage of the loan. Further, it was suggested that an exemption should be provided for any passthrough fees relating to any flat fee requirement. Clearly, variances were a knotty subject. Prohibiting variances based on the amount of the loan would disadvantage borrowers with smaller loans, particularly low- and moderate-income borrowers. Thus, this led to a prediction that â€œbrokerage firms and creditors would have to set their fees under the new system using some sort of average price that would exceed current fees for smaller amount loans.â€? Ultimately, the outcome of such a prohibition would â€œnegatively impactâ€? access to credit, because shifting costs into the rate would trigger a status as a high-cost
mortgage. Some SER panelists suggested that a flat fee requirement should be limited to subprime loans. Other SERs stated that there are certain government loan programs, such as those of the U.S. Department of Veterans Affairs (VA), which prohibit fees exceeding one percent of the loan amount. So, if a flat fee exceeded that threshold, then the loan would not be permissible. Furthermore, prohibiting variances based on the amount of the loan would disadvantage smaller lenders, those that do not benefit from the same economies of scale available to larger lenders (i.e., the ability to hedge, or to cross-market other services and products). The affiliate compensation issue also came up. Clarification was sought for the definition of an â€œaffiliate.â€? Concern was raised about â€œthe idea of subjecting fees paid by consumers to affiliates to the same restrictions as fees paid to MLOs and creditors.â€? The point was made that affiliates have separate operations and pricing and do not share profits with their affiliated MLOs and creditors. Also, it was suggested that particular types of affiliates, such as real estate agents, should not be subject to a â€˜points and feesâ€™ provision.22
Resolution There was strong opposition to the requirement that origination fees should not vary with the size of the continued on page 32
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loan originator compensation loan. The opposition stemmed from the fact that the flat fee requirement is supposedly based on the view that the costs of origination varied for loans with different characteristics, such as geography and loan type, and GSEimposed loan level pricing adjustments that vary by loan size. Furthermore, the imposition of the flat fee requirement would disproportionately harm small lenders and would be “regressive” because borrowers with smaller loan amounts would likely be charged more than they are typically charged currently.
Recommendation 1. The CFPB should consider the potential costs and unintended consequences associated with a flat fee requirement before determining whether to propose it for comment. 2. The CFPB should propose and seek public comment on alternative approaches to exercising its exemption authority, in order to ensure that consumers are in a position to shop and receive fair value for origination points and fees, and to minimize adverse industry consequences.23
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Payment of Origination Points and Fees in Brokerage-Paid Compensation “Experience teaches efficaciously but brutally. It instructs us in all the effects of an act by making us feel them, and we cannot fail to learn eventually, from having been burned ourselves, that fire burns. I should prefer, in so far as possible, to replace this rude teacher with one more gentle: Foresight.”—What Is Seen and What Is Not Seen24, Frédéric Bastiat
Suggestions and Concerns There was strong support for the CFPB’s proposal to allow transactions with brokerage-paid compensation. This proposal permits a brokerage firm to pay to its broker employees a commission or other compensation tied to a particular transaction when a consumer pays the brokerage firm. By extension, this proposal would again make it possible for brokerage firms to split commissions with their MLO employees. The CFPB was considering this exception because it would be difficult for brokerage firms to pay their brokers’ commissions that varied based on the loan amount (viz., which is expressly permitted by Dodd-Frank), if the brokerage firms had to charge origination fees that do not vary based on loan amount. Although there was not signif-
continued from page 31
icant comment about this exception, the comments given were not without two interesting insights: (1) such an exception would not fix the broader problems with the general proposal to prohibit fees to vary based on the amount of the loan, and (2) some community banks have been discussing whether to create a separate brokerage firm for each originator.25
Resolution Although there was strong support for the proposal to allow brokerage firms to pay their employee brokers a commission or other compensation tied to a particular transaction when a consumer pays a brokerage firm—while also maintaining a general opposition to the flat fee requirement—nevertheless, there was no specific support for an exception to the requirement that would allow consumers to pay brokerage firms commissions that varied with the size of loans.
Recommendation 1. The CFPB should proceed with its proposal to allow brokerage firms to allow their employee brokers a commission or other compensation tied to a particular transaction when a consumer pays a brokerage firm. 2. Consider allowing consumers to pay brokerage firms commissions that vary with loan size in transactions with brokerage-paid compensation.26
MLO Retirement Plans, Profit-Sharing and Bonuses “Society is the aggregate of all the services that men perform for one another by compulsion or voluntarily, that is to say, public services and private services. The first, imposed and regulated by the law, which is not always easy to change when necessary, can long outlive their usefulness and still retain the name of public services, even when they are no longer anything but public nuisances.”—What Is Seen and What Is Not Seen27, Frédéric Bastiat
discriminate against their MLOs. Another view stated that using mortgage revenue as a standard would be “over-inclusive,” because the standard would capture income from all mortgage loans, including existing portfolio loans, rather than only newly originated loans. Steering incentives were somewhat controversial, inasmuch as one view asserted that “existing protections were so strong that additional concerns about incentives to steer consumers were not warranted.” Furthermore, the CFPB was urged to consider incentives, by questioning whether the incentives were significantly different for benefits structured as qualified plans versus non-qualified plans. Several observations were made regarding the CFPB’s proposal to “relax” requirements for qualified plans, since it was felt that the proposal would not help or would actively disadvantage particular segments of the industry. Amongst the concerns were (1) the proposal under consideration to allow nonqualified plans where a company’s revenues from mortgage-related business did not exceed a specified threshold, and thus would not help companies if mortgage revenue increased, (2) options involving qualified plans would not be helpful to small providers because the overhead involved in such plans makes them prohibitive for small companies, and (3) any mortgage-related revenue limit should be no lower than 50 percent. Suggestions included: (1) there should be no limit because any limit would disadvantage small businesses that only originate mortgages, and that no limit is necessary provided bonuses were not tied to any one particular loan’s terms, and (2) the exemption for qualified plans should be expanded to cover all non-qualified plans in the case of small, federally-insured depositories.
Resolution Clarification is needed on rules governing compensation to MLOs from retirement plans, profit-sharing, and bonuses. Further, the CFPB should analyze the incentive issues arising from qualified and non-qualified plans carefully before issuing clarifications on existing regulations or proposing new regulations. In addition, the CFPB was urged to consider relaxing the revenue test to exclude revenue derived from existing loans held in portfolio.
Recommendation Suggestions and Concerns There is some confusion regarding the current standards on whether to segregate MLOs from retirement and profitsharing plans, and bonuses that use funds derived from mortgage revenue. The view was that it is not “practicable for small companies to maintain two sets of benefits programs for MLOs and non-originators because of practical limitations on human resources systems and because employees are required to play many roles.” One position asserted that restrictions on bonuses compel businesses to
1. The CFPB should solicit public comment on the treatment of qualified and non-qualified plans and whether treating qualified plans differently than non-qualified plans would adversely affect small lenders and brokerages relative to large lenders and brokerages. 2. Moreover, the CFPB should seek public comment on the ramifications for small businesses and other businesses when setting the revenue limit at fifty percent of company revenue or at other levels.
Pricing Concessions and Point Banks “Schools of thought are vehement in their attack on those they call middlemen. They would willingly eliminate the capitalist, the banker, the speculator, the entrepreneur, the businessman, and the merchant, accusing them of interposing themselves between producer and consumer in order to fleece them both, without giving them anything of value. Or rather, the reformers would like to transfer to the state the work of the middlemen, for this work cannot be eliminated.”—What Is Seen and What Is Not Seen28, Frédéric Bastiat
Suggestions and Concerns We now move to certain issues that have been debated and belabored since the inception of the TILA compensation mandates. Although there was recognition that the CFPB was considering a proposal that would permit “pricing concessions where there are unforeseen circumstances,” the panel nevertheless suggested that concessions should be permitted in other situations, such as to correct bona fide errors or to compete with another lender’s offer. Some SERs stated that companies should be able to dock MLOs’ pay if their errors cost the companies money. There was a request to extend “flexibility” to companies to enable them to meet competing offers. Such flexibility, it was suggested, could be evidenced through the change in circumstances requirements and notices under the Real Estate Settlement Procedures Act (RESPA),29 thereby documenting that concessions are being given in appropriate circumstances. Indeed, such flexibility is particularly critical for small businesses to compete with large ones. A bit of deference to human nature came into discussions when one SER said that “allowing pricing concessions would reduce the current incentive to inflate charges on the Good Faith Estimate.” Whether reducing the “current incentive to inflate charges” on the Good Faith Estimate is a viable gambit in the context of such a suggestion to the CFPB is surely but one person’s opinion. Nevertheless, the essential point to be made is that brokers want the CFPB to permit more flexibility on the use of concessions in order to allow them to compete with direct lenders. Some suggested that brokerage firms (rather than their MLO employees) be permitted the flexibility to “grant concessions,” which, according to this view, would help provide appropriate controls. The controversial “point bank” system came through with thumbs-down results. Apparently, there was no SER using a point bank system in its business model. Indeed, the range of opposition to point banks starts with a disclaimer that it might be considered if necessary to be competitive, to concern that point banks create incentives for MLOs to upcharge some consumers in
order to create flexibility for themselves to provide concessions to other consumers, to the view that point banks would permit loan officers to treat one consumer better to the detriment of another, leading to fair lending concerns, and across the spectrum to the observation that banks would cause brokers to become excessively bound to a lender that provided them with the most points, thereby creating incentives to steer consumers to that lender. Needless to say, these sentiments led to the inevitable conclusion that it would be beneficial for the CFPB “to clarify the circumstances in which a factor used to determine compensation for MLOs was prohibited as a proxy for loan terms.”30
Resolution In general, the SERs supported the CFPB’s proposal to permit pricing concessions where there are “unforeseen circumstances.” Companies should have the flexibility to use concessions in other circumstances, including reducing an MLO’s compensation where an MLO’s error costs the company money. Point banks could lead to regulatory violations: the use of point banks could legitimize their use in such a way that they would place responsible MLOs on an uneven playing field with less responsible MLOs, including the possibilities of abuse in their use, causing allegations of fair lending and steering violations. Clarification is needed regarding when factors used to compensate MLOs functioned as proxies for loan terms.
Recommendation 1. The CFPB should continue to explore the use of pricing concessions and proceed with a proposal to allow pricing concessions where there are changes to terms not controlled by the MLO, the creditor, or affiliates.
Suggestions and Concerns Brokers expressed strong support for consistent MLO qualification standards, noting that many MLOs had switched to bank employment when the SAFE Act (SAFE) took effect, because they did not want to take tests under the new system. Therefore, a suggestion was put forward to develop a “single national platform” rather than allowing each state to set separate requirements. Indeed, it was further asserted that the CFPB’s proposal under consideration did not go far enough and should also impose the “same testing, training, and state licensing requirements on depository institution MLOs that were already imposed on non-depository institution MLOs.” One SER broker even stated that non-depository, institution-employed MLOs should not be permitted to “selfcertify” that they are qualified. In response, the SERs from depository institutions stated that they are already required by their prudential regulators to engage in vigorous screening of and training programs for their MLOs, and that “current standards are equivalent to the ones in the proposal under consideration.” So, in their view, the CFPB “should avoid layering on duplicative regulations and to coordinate closely with prudential regulators.” In fact, one depository SER opposed any requirement for loan officers of a depository institution to have to take the same training as that required for non-depository institution MLOs. Non-depository institution lenders stated that an exemption for bona fide nonprofit organizations under SAFE granted by the Department of Housing and Urban Development (HUD) had not actually helped non-profits, because many states had already decided to regulate them when the exemption was issued and had not repealed these regulations.33
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3. The CFPB should go forward with its proposal under consideration to clarify that point banks are compensation, specifying that the CFPB should propose limiting their use.
MLO Qualification and Training Requirements
1. The CFPB should solicit comment on ways to provide greater clarity about what is actually required for a MLO to meet the financial responsibility, character, and fitness criteria. 2. Clarification should be provided regarding what role, if any, an indicontinued on page 36
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4. Finally, the CFPB should use the proposed rule to clarify when a “factor” used to determine compensation for an MLO serves as a “proxy” for loan terms.31
There was support by broker SERS for the same testing, training, and state licensing standards for depositories and nondepositories, especially since many MLOs had switched to bank employment because they did not want to take tests under the new system when SAFE took effect. The CFPB should be urged to consider developing a single national platform rather than allowing each state to set separate requirements. Clearly, this is an area of considerable disagreement between depository and non-depository institutions. The depository institutions urged the CFPB to avoid imposing new or adding “duplicative or ambiguous” requirements.
2. Comment should be solicited on whether there are other situations where pricing concessions should be allowed to provide MLOs with flexibility where the risk of abuse is low.
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Fun, Photos and Featured Speakers At NAMB NATIONAL
Sunday-Monday, December 9-10, 2012 MGM Grand • Las Vegas, Nevada By John Stevens
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We’re creating a whole new, exciting NAMB National conference, coming on Dec. 9-10 at the fabulous MGM Grand in Las Vegas. But don’t just take my word for it. Go to www.nambnational.com to see what’s in store for you. When you’re in Las Vegas, you’re in for fun. Action is in the air, and the bright lights dazzle. But you don’t have to be on the Strip to see that. We’re putting a dazzling photo studio right in the center of the NAMB National exhibition hall. Every attendee who comes can get a free professional headshot taken, to use on your website, on your social media pages, in your advertising and on your business cards. That’s a $200 value, brought to you FREE as part of your NAMB National registration. And you’ll have plenty of places to use that professional photo, after all you’ll learn at NAMB National. We’ve got an amazing day of hands-on training ready for you on Sunday, Dec. 9. Don’t just think about social media – we’re going to build your sites for you! Want to know how to handle the growing demand for reverse mortgages? We’ve got you covered. And on Monday, Dec. 10, get ready for a day of some of the top mortgage leaders in the nation. Don’t miss our Featured Speaker series, including Bill Matthews, president of the NMLS, as he talks about licensing issues and concerns that affect us all. Meanwhile, Theodore Tozer will be with us. He’s the man who oversees Ginnie Mae, the agency that makes the market for FHA and VA loans, and which is fast becoming the second largest secondary market for mortgages in the country. If you’re looking for new wholesale or correspondent relationships, our Exhibit Hall is the place to be. And you’ll also find opportunities for new mortgage origination software, lead retrieval, and closing services that get your buyers in their homes faster – which also means faster commissions for you. There is no other national event for the loan origination community that is working so hard on your behalf. Whether you’re looking for compliance guidance, for ways to find and close more deals, for new products to offer your customers and prospects, you’ll find it when you join us in Las Vegas on Dec. 9-10. It’s NAMB National. We’re bigger and bolder than ever before. We’re mortgage professionals. And we’re roaring back! John Stevens is chairman of the NAMB NATIONAL conference. He is a member of the board of NAMB – The National Association of Mortgage Professionals, and is branch manager for ENG Lending in Utah.
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Katalyst 8 gives mortgage lenders a reliable and efficient process for document intake and image conversion, enabling them to work more collaboratively with loan participants to improve the lending process. The enhanced system substantially reduces conversion errors so no data is lost when converting paper documents to images, an issue many lenders face when receiving loan documents from third party originators and service providers. Katalyst 8 uses a combination of image conversion technologies to solve this widespread industry problem. In the rare event an image still fails to convert, lenders have access to the original file to ensure no important information is lost and the loan folder can be processed as usual. Capsilon’s new release also offers an advanced document recognition system that makes identification, naming and filing faster and more reliable, thus improving lenders’ overall workflow. Loan officers and other transaction participants typically handle hundreds of types of loan documents. The enhanced system automatically recognizes more than 250 industry-standard documents, alleviating the need for users to manually name them, and makes it faster and easier to go from file intake to loan fulfillment. System generated identifiers can be inserted into lender-authored documents for automatic recognition as well, and the system’s configurable document dictionary allows lenders to set up their own naming conventions to fit their processes. Manual re-naming is also supported, giving even more control to the user, ensuring that financial institutions can organize the loan folder to best fit their needs. The new desktop app increases productivity for loan officers, processors or other employees who access documents frequently or for longer periods of time. The desktop application accesses the Katalyst cloud service, just as the existing Web-based interface does, but provides more flexibility and faster responsiveness for users. Desktop features give users more power to easily filter, search and group documents to browse and process them more quickly. Users can also compare documents side-by-side, switch rapidly from thumbnails to fullsize views and create stacking orders of documents based on loan types, process phase or investor requirements. The desktop app allows users to work on multiple loan folders simultaneously for higher productivity. Viewing preferences can be altered to the user’s choice and automatically recalled, increasing productivity and ease-of-use for frequent users. “Katalyst 8 provides mortgage lenders an imaging and collaboration
solution that considerably improves and accelerates their lending processes,” said Sanjeev Malaney, CEO of Capsilon. “Katalyst’s newest release reduces errors, streamlines processes and offers a more complete collaboration experience giving banks, credit unions and other mortgage lenders the opportunity to improve document quality, conversion and storage which translates to improved customer service.”
Lenders One Introduces New Bundled Service Offering to Members
Lenders One Mortgage Cooperative has introduced its first Origination Services Bundle product to its members specifically designed to facilitate more efficient retail loan production. Working with select partners and Altisource, the initial Origination Services Bundle will include appraisal, flood certification, fraud report and Internal Revenue Service 4506T services provided at a discount compared to ordering them individually. “Lenders One strives to deliver products and services that improve our members’ performance,” said Jeff McGuiness, chief executive officer of Lenders One Mortgage Cooperative. “By leveraging Lenders One’s buying power, as well as the patented technology and scope of Altisource services, we are in a unique position to deliver meaningful product cost savings and loan processing efficiencies for our members.” The bundled services will be delivered via a custom portal powered by REALTrans, Altisource’s patented order management platform. The portal enables seamless, single-source ordering, tracking, messaging and fulfillment, which helps simplify the complex process of originating a residential home loan. “The bundle includes services that we were already ordering; however, through the bundle we were able to save money,” said Greg Grojean, Lenders One member and group senior vice president of Home State Bank NA. “We started using the bundle because we realized we could pass on the cost savings we received to our borrowers. This gives us a competitive edge in the marketplace as consumers are looking to work with lenders that are willing to go the extra mile for them.”
Advantage Systems Announces Web-Based Reporting Upgrade Advantage Systems, a provider of accounting and financial management tools for the mortgage industry, has announced it
upgraded its Web-based financial reporting solution to provide branch managers with daily access to a more comprehensive level of financial reporting that eliminates the need for managers to send more complex financial reports monthly. The new enhancements give users immediate access to more detailed financial reports. Users do not have to wait until month end for this level of financial reporting. These financial reports can be run at any time during the month. Users will get comfortable with one report all month long rather than a summarized version during the month and a detailed version at month end. This technology eliminates the time and the cost of sending out financial reports monthly and offers managers the capability to evaluate branch and loan profitability in real-time. “The new features incorporated into our Web-based financial reporting module provide mortgage lenders with the ability to manage their loan data more effectively and make the right decisions quickly,” said Brian Lynch, president and founder of Advantage Systems.
Mortgage Builder Software Set to Launch Revamped LOS
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M o r t g a g e Builder Software has announced plans of a newly redesigned origination platform. The next-generation Mortgage Builder LOS also bears a new name—the first name change in 14 years for the company’s flagship product. Known since 1998 as Mortgage Builder, the new platform will be named Architect. Mortgage Builder has been working on the new and improved platform for nearly two years in preparation for its October industrywide rollout. The re-architecture of Mortgage Builder’s core LOS solution includes a forward-looking plan and takes advantage of the most current technology available. The structure of Architect is built using WCF (Windows Communication Foundation), WPF (Windows Presentation Foundation), and XAML, all on a .NET framework. The new infrastructure of Architect will allow for continued growth in the platform as the industry and client needs
change. “With this new technology, we will be able to make swift changes for our customers system-wide as well as at the individual client level. This will greatly decrease time to delivery for product enhancements and client customizations,” said Kelli Himebaugh, corporate vice president at Mortgage Builder. “We took our time to make certain that we got it right,” said Keven Smith, Mortgage Builder president and CEO. “Architect builds on the popularity of the classic Mortgage Builder LOS and makes it even easier to use, with increased automation, a modern visual aesthetic that creates a more efficient working environment, and a seamless transition for current customers. At the same time, Architect is built to lower implementation timeframes and costs for new clients with its cloud-based engineering and additional features.” The same foundation technology is also being extended to its loan servicing software system, G/Serv. These infrastructure changes for the G/Serv platform are scheduled for completion early next year. Architect is joined by Blueprint, its advanced electronic document management (EDM) module for paperless lending and digital file delivery ease, and Surveyance, Mortgage Builder’s Web-based loan originator portal, featuring highly useful mobile applications components to maximize field time for loan officers and others. Both modules have been redesigned to work flawlessly within Architect, and have been renamed accordingly to reflect their recent enhancements and expanded functionality.
Leveraging More Compliant Technology to Drive Sales By Todd Ballenger
What if your organization had the technology to produce informative, more compliant, point-of-sale marketing pieces that could be customized and tailored in minutes for every client? Read on … In today’s era of compliance, it is challenging for mortgage loan originators (MLOs) to personally market themselves, as well as for banks and mortgage companies to provide the marketing flexibility MLOs need to drive sales. In a New York Times article titled “A Chance to Make Mortgage Shopping Easier,” author Richard Thaler writes about the CFPB’s inability thus far to create policy that would facilitate user-friendly shopping for mortgages by consumers. “…Why not unilaterally give all prospective borrowers complete information about your loans in a machine-readable (electronic) format as soon as you provide the initial quote? If enough lenders do this—listen up, credit unions, community banks and online lenders—the cottage industry of online mortgage advisers could get a jump-start, and mortgage shopping could finally enter the 21st Century.”
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The professor’s solution is a simple one in theory, but most companies lack the technology to produce accurate loan comparisons in an easy-to-read format. Hence, MLOs are left with the typical flyer: “Here’s why we’re the best company ...” “Here’s our rate ...” and based on recent surveys conducted by our company, note pads, handmade Excel spreadsheets, and LOS Good Faith Estimates (GFEs) are the top three cited tools for delivery of a client sales presentation. The federal government is aware of the positive impact technology can have on a consumer’s purchasing decisions. This past March, the White House hosted a summit on Smart Disclosure, an initiative to provide consumers with greater access to the information they need to make informed choices. Cass Sunstein, the Administrator of the Office of Information and Regulatory Affairs, stated that “Modern technologies are giving rise to a series of new possibilities for promoting informed decisions.” One such program that stands out as enabling companies to drive sales with compliant marketing, is the Borrow Smart Analysis technology by Mortgage Success Source LLC. Whether you’re a bank executive, an owner of a mortgage company, or an individual MLO, the Borrow Smart Analysis software will help you to quickly produce more compliant loan comparisons that double as marketing pieces, and can be integrated with your LOS system. As a manager or owner, you can gain control over MLO sales processes with Borrow Smart Analysis, without curtailing an MLO’s efforts to market themselves. This is big, as MLOs continue to send out non-compliant communications—creating liability for the organization, and suppressing potentially higher conversion rates that stem from a clear client presentation. In addition, archiving the Borrow Smart Analysis reports help protect your organization from Fair Lending violations as you can easily reflect on what a consumer has seen. As an MLO, you have the ability to easily produce reports that can help you gain more clients, by providing information that other MLOs can’t. A key feature of the Borrow Smart Analysis is that it’s easy for the MLO to produce and easy for the consumer to understand. Only about five pieces of information are needed to produce an easy-to-understand and informative report. In addition, real estate agents can also use the integrated Borrow Smart Mobile App, allowing agents to refer buyers directly to the MLO, after they use the unique two-question calculator tools to identify borrower buying power. Another great feature is the free video feature which allows an MLO to record a video explaining the report and then send a video link to their client. Gaining new clients and new referral partners, while remaining as compliant as possible, is a huge benefit of using the Borrow Smart Analysis technology. To learn more about the Borrow Smart Analysis technology and Mortgage Success Source’s Small Office Suite and Corporate Solution, visit MortgageSuccessSource.com or call (800) 963-1900. Todd Ballenger is President, Sales Solutions, Mortgage Success Source. He has 23 years of experience in the financial services industry as a licensed securities, insurance, real estate and mortgage lending professional. He may be reached by phone at (800) 963-1900 or e-mail email@example.com.
loan originator compensation vidual’s credit score should have in the required financial responsibility determination.34 3. Further, the CFPB should consider ways to ensure that depository institutions and non-profit organizations are not required to provide training that is duplicative of training they are already required to provide to their MLOs.35
Proposals “It is absolutely necessary to forget money, coins, bank notes, and the other media by which products pass from hand to hand, in order to see only the products themselves, which constitute the real substance of a loan.”—What Is Seen and What Is Not Seen36, Frédéric Bastiat I will touch briefly on certain proposals set forth by the CFPB in response to taking into consideration the recommendations of the Small Business Review Panel.37 My outline is meant to be not comprehensive, but suggestive of the overall direction of the CFPB’s views at this time.
Restriction on Upfront Points and/or Fees Before a lender or mortgage broker may impose upfront points and/or fees on a consumer, the lender must make available to the consumer a comparable, “alternative loan” with no upfront discount points, origination points, or fees that are retained by the creditor, broker, or an affiliate of either (a “zero-zero alternative”). [This requirement would not be triggered by pass-through fees to independent third parties that are not affiliated with the lender or mortgage broker.] The requirement would not apply where the consumer is unlikely to qualify for the zero-zero alternative. In transactions that do not involve a mortgage broker, there would be a safe harbor if, any time prior to application, the lender provides a consumer an individualized quote for a loan that includes upfront points and/or fees, and the lender also provides a quote for a zero-zero alternative. In transactions that do involve mortgage brokers, a safe harbor is provided under which lenders provide mortgage brokers with the pricing for all of their zerozero alternatives. Mortgage brokers then would provide quotes to consumers for the zero-zero alternatives when presenting different loan options to consumers. Related issues requiring comment include: Whether the CFPB should adopt a
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bona fide requirement to ensure that consumers receive value in return for paying upfront points and/or fees, and different options for structuring such a requirement. Whether additional adjustments to the proposal concerning the treatment of affiliate fees would make it easier for consumers to compare offers between two or more creditors. Whether to take a different approach concerning situations in which a consumer does not qualify for the zero-zero alternative. Whether to require information about zero-zero alternatives to be provided not just in connection with informal quotes, but also in advertising and at the time that consumers are provided disclosures within three days after application.
Restrictions on Loan Originator Compensation Adjust existing rules governing compensation to loan officers and mortgage brokers to account for DoddFrank mandates and to provide greater clarity and flexibility. Specifically, the proposal would: Continue the general ban on paying or receiving commissions or MLO compensation based on the terms of the transaction (other than loan amount), with some refinements: • Allow reductions in MLO compensation to cover unanticipated increases in closing costs from non-affiliated third parties under certain circumstances. • Clarify when a factor used as a basis for compensation is prohibited as a “proxy” for a transaction term. Clarify and revise restrictions on pooled compensation, profit-sharing, and bonus plans for loan originators, depending on the potential incentives to steer consumers to different transaction terms. Permit employers to make contributions from general profits derived from mortgage activity to 401(k) plans, employee stock plans, and other “qualified plans” under tax and employment law. Permit employers to pay bonuses or make contributions to nonqualified profit-sharing or retirement plans from general profits derived from mortgage activity if either: (1) the loan originator affected has originated five or fewer mortgage transactions during the last 12 months; or (2) the continued on page 39
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reported under revised loan pricing rules, which determine whether a loan is classified as “higher priced.” Lenders now report on loans with annual percentage rates (APRs) that are 1.5 percentage points for first lien loans and 3.5 percentage points for junior lien loans above the average prime offer rates (APORs), estimated using data reported by Freddie Mac in its Primary Mortgage Market Survey (PMMS).
House Passes FHA’s Fiscal Solvency Act
First Mortgage Default Rate Remains Flat for Eighth Consecutive Month Data through August 2012, released by S&P Dow Jones Indices and Experian for the S&P/Experian Consumer Credit Default Indices, a measure of changes in consumer credit defaults, showed that most loan types saw a decrease in default rates including the national composite, which is now down for eight consecutive months. Four of the five continued on page 49
UTAH MORTGAGE PROFESSIONAL MAGAZINE OCTOBER 2012
The Federal Housing Administration (FHA) Fiscal Solvency Act of 2012 has been passed by the full House of Representatives by a vote of 402-7. The Fiscal Solvency Act includes provisions to strengthen and broaden the ability of the U.S. Department of Housing & Urban Development (HUD) to avoid or recoup losses for loans originated or underwritten by a mortgage lender which did not comply with FHA guidelines, as well as expand HUD’s ability to terminate the authority of poorly performing lenders to participate in FHA programs. “We are pleased that the bill passed by the House includes provisions that will allow FHA to continue its efforts to strengthen its enforcement capabilities in order to protect its insurance fund and American taxpayers,” said Acting FHA Commissioner Carol Galante. “We look forward to continuing to work with both chambers to enact final legislation to provide FHA with the tools it needs to build on the vital reforms implemented by this Administration.” U.S. Rep. Judy Biggert (R-IL) received approval of the House Committee on Financial Services in late March of the Fiscal Solvency Act of 2012, a measure she authored to prevent the FHA from edging closer to insolvency. Rep. Biggert, who chairs the Subcommittee on Insurance, Housing, and Community Opportunity, introduced HR 4264 after her subcommittee approved an initial draft on Feb. 7, 2012. “FHA’s declining financial position could cost taxpayers millions, and it threatens the stability of our housing market,” said Rep. Biggert. “We cannot afford another Fannie- and Freddiestyle bailout, and mortgage holders don’t need any more market uncertainty driving down their home values. This legislation will give HUD Secretary Donovan emergency tools to protect the solvency of the FHA. It allows the FHA to enforce stronger loan standards and crack down on bad lenders.”
The FHA insures more than $1 trillion worth of mortgages on more than seven million loans. As of November 2011, the FHA’s capital reserve fund was estimated at 0.24 percent—far short of the two percent required by statute. Due to deteriorating financial conditions, the Administration’s fiscal year 2013 budget projects that the FHA may require $688 million in taxpayer assistance to shore up its financial position. In order to mitigate finan-
cial risk within the FHA, HR 4264 would: Give HUD the authority to charge up to a maximum premium of 2.05 percent annually on mortgage insurance (MI); Establish a minimum annual premium for MI of 0.55 percent; Bar unscrupulous lenders from participating in the program; Require repayment of losses to FHA by lenders who committed fraud; Improve the FHA’s internal financial controls, transparency, and disclosure requirements; and Require the Government Accountability Office (GAO) to conduct an independent safety and soundness review of the FHA.
pipeline management ing your pipeline. Moving a closing date up or back, extending a lock commitment, or a float-down program can all provide sales with valuable tools that impact closings but are not picked up in any pipeline report. Pullthrough is not a simple calculation of locked volume divided by closed volume; these other factors must be accounted for. Additionally, a great sales process which pro-actively secures loans for timely delivery can be completely undone by an ineffi-
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cient shipping and post-closing process that continuously misses deadlines. These factors can erode profitability, even for those with the best market insight, risk models and lock policies. Now that we’ve addressed the pipeline and how essential its management is to true execution, let’s take a look at the hedging process and how it works in relation to your pipeline. In basic terms, hedging is the process by which lenders protect
themselves against interest rate/pricing risk, and it allows them to deliver loans on a mandatory, direct trade, or Assignment of Trade (AOT) basis. In a hedging environment, the lock desk processes a lock and commits a price to sales (the buy side price). Lenders are essentially “long the market,” seeing appreciation as the market rallies. But what happens when rates rise and the market value of the lock decreases? This is the market risk lenders look to offset through the hedge, or more specifically by selling To be Allocated (TBA) mortgage-backed securities (MBS). By selling, a lender is “short the market” and will see a gain when rates rise and the market value of the lock
falls. Lenders should short a percentage of locked volume based on historical pull-through. The final result here is a locked pipeline of loans which are “long” in the market along with a trade account of “short” positions to cover the interest rate risk. It often sounds confusing to many mortgage bankers, but it’s really a pretty simple equation. Most companies feel that if they hit their expected pull-through, they are covered. Others look at the bottom line, and if it’s in a black font rather than red, they’re doing well. These approaches drive me a bit crazy. Are lenders and secondary managers in this business to just make some money and retain the status quo in a challenging market, or are they looking to maximize revenue and net profit? When rates undergo a rapid shift (up or down) lenders need to take a closer look at the pipeline and manage it proactively. This probably sounds like a new idea to many secondary marketing departments, but they can actually manage the pipeline and increase revenue. Being passive is a big mistake. Every pipeline is unique, and its characteristics change daily. Understanding how the pipeline’s makeup reacts to market volatility and taking initiative to improve data are keys to managing a hedge position that’s custom-tailored for the firm. Lastly, the pipeline is constantly changing with varying levels of daily activity. Each day it has new locks coming in, existing locks coming off (either expiring or closing), loans moving up or out of stages, and loans being purchased. Within each of those actions, reporting must be fluid and effortless, while the fall out of those actions need to be analyzed and reacted to. Running a report and sending it over to be dropped into a model is too often a process that does little to benefit a company. This process will keep you safe, but does not tell the full story or provide a pro-active manner in managing the pipeline. Is anyone actually looking at the data in the reports for outliers and red flags in order to take corrective action? Is some of the data stale or dated? In summary, the unfortunate irony found too frequently in this industry is that hedging is supposed to minimize risk, but it can actually do just the opposite if the pipeline, data, and policies are not managed correctly. Lenders should not just rely on the hedge reports, particularly when the market is volatile. Managing your pipeline and ensuring the data is accurate and timely is key, along with accounting for the ever-changing allocation. Frank Fiore is president of Matchbox, a fullservice advisory and implementation partner to the mortgage banking industry. He may be reached by phone at (516) 2366711, e-mail firstname.lastname@example.org or visit www.matchboxllc.com.
loan originator compensation company’s mortgage business revenues are limited. The Bureau is proposing two alternatives 25 percent or 50 percent of total revenues, as the applicable test. The amounts of contributions and bonuses could not be based on the terms of the transactions that the individual had originated, even though contributions and bonuses could be funded from general mortgage profits. Continue the general prohibition on loan originators being compensated by both consumers and other parties, with some refinements: Allow mortgage brokerage firms that are paid by the consumer to pay their individual broker employees a commission on the transaction, so long as the commission is not based on the terms of the transaction. The proposal would clarify that certain funds contributed toward closing costs by sellers, home builders, home improvement contractors, or similar parties, are considered payments made directly to the loan originator by the consumer, when used to compensate a loan originator.
Past is Prologue continued from page 36
Loan Originator Qualification Requirements Implement a Dodd-Frank provision that requires both individual loan originators and their employers to be “qualified” and to include their license or registration numbers on certain specified loan documents. Where a loan originator is not already required to be licensed under SAFE, the proposal would require the employer to ensure that the loan originator meets character, fitness, and criminal background check standards that are equivalent to SAFE requirements and receives training commensurate with the loan originator’s duties. Employers would be required to ensure that their MLO employees are licensed or registered under SAFE, as applicable. Employers and the individual loan originators who are primarily responsible for a particular transaction would be required to list their license or registration numbers on certain key loan documents.
“Let us accustom ourselves, then, not to judge things solely by what is seen, but rather by what is not seen.”—What Is Seen and What Is Not Seen38, Frédéric Bastiat Whether deserved or not, the mortgage and real estate crisis focused attention on the roles of loan officers and mortgage brokers in the loan origination process. Prior to the crisis, according to the CFPB, “training and qualification standards for loan originators varied widely, and compensation structures frequently gave loan originators incentives to steer consumers into loans with higher rates or other unfavorable terms.”39 Now the CFPB is proposing new rules to implement Dodd-Frank requirements, as well as to revise and clarify existing regulations and guidance on loan originator compensation. In addition, the proposals are meant to address “broader consumer confusion about the relationship between certain upfront charges and loan interest rates.”40 Certain proposals, such as allowing lenders to continue making available loans with upfront points and/or fees, so long as they also make available an “alternative loan,” seem to be an attempt by the CFPB to be responsive to all market participants. The CFPB plans to issue final rules by January 2013. We will soon find out if,
and the extent to which, the public comments influence final rules that may be considered beneficial to the stability of residential mortgage lenders and originators. Jonathan Foxx, former chief compliance officer for two of the country’s top publicly-traded residential mortgage loan originators, is the president and managing director of Lenders Compliance Group, a mortgage risk management firm devoted to providing regulatory compliance advice and counsel to the mortgage industry. He may be contacted at (516) 442-3456 or by e-mail at email@example.com.
Footnotes 1—Bastiat, Frédéric, What Is Seen and What Is Not Seen, § 1.1, July 1850. “Ce qu’on voit et ce qu’on ne voit pas”, Oeuvres complètes de Frédéric Bastiat, mises en ordre, revues et annotées d’après les manuscrits de l’auteur: Harmonies économiques, 1864. Translations, where needed, are mine. See also Cain, Seymour, and George B. de Huszar, Irvington-onHudson, NY: The Foundation for Economic Education, Inc., 1995. Bastiat (1801-1850), political economist, proposed that “that which is not seen” is often the less desirable side of the issue in relation to making laws or economic decisions. 2—On Aug. 26, 2009, the Federal Reserve Board published a Proposed Rule in the Federal Register pertaining to closed-end credit. As part of that proposal, the FRB sought to prohibit certain compensation payments to loan originators and steering consumers to loans not in their interest because it would result in greater compensation for the loan originator. On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) was enacted continued on page 49
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The Future of the Mortgage Banking Industry ... It’s All About PR By Daniel Jacobs
I know what you are thinking …. but it’s not “PR” as in “public relations.” Well, sort of along those lines though. The PR here stands for “Process and Relationships.” Most of us know that originating loans now feels more about a process and less about the result. Beyond completing the origination process, meeting compliance requirements and ensuring sound lending practices, what will separate the winners from the losers in mortgage banking is how the players manage their relationships. Borrowers do not understand and do not like the increasingly tedious, mysterious and seemingly inefficient process of obtaining a mortgage. The professionals who explain the process best, who properly prepare borrowers, who provide better service and communication best, will define the next generation of mortgage bankers.
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Process vs. Result Let’s face it, with all of the regulatory changes and investor requirements, we find ourselves often more focused on the process of originating mortgages than the result of providing a timely, easy and pleasant experience and funding. Previously, our goal was to originate and close loans on time. Today, many mortgage professionals believe completing tasks in a prescribed order is more important than what actually gets done or when the loan is closed. The result is deadlines have lost meaning in favor of process workflows, pre-requisites and mandatory waiting periods between steps. These are the results of new regulations put in place to protect consumers. The future of mortgage banking rests on balancing the process-oriented requirements with keeping a focus on the result. Ultimately, our customers are not interested in why it takes so long to get a loan; they’re interested in closing on time with the loan terms they expect. We can be successful in creating raving fans of our customers while completing tasks correctly. We can do this by deciding what and when the desired result should be and completing the loan with a defined plan from start to finish.
Predictive vs. Reactive Consumers understand that obtaining a
mortgage today is far different than it was years ago. The media has done a very good job informing consumers that obtaining a mortgage is a different and more tedious process than before; but what they do not understand is why originators often do not better predict and explain the process. Top producing referral-based mortgage professionals have always been good at being more predictive than reactive, and have proactively explained to borrowers what to expect during the mortgage process. They explain it like a project/plan with the various steps that will take place and the expected time frames associated with each step. They warn the borrower about potential delays and the circumstances that could cause them, including ones the borrower can inadvertently cause. In this case, if there is a delay, the mortgage professional is able to remind the borrower that the delay was previously discussed and explain how it will affect the remainder of the process and reassess the expected completion. These professionals are not reacting to the delay with excuses and apologies. Instead, they underscore their value in helping guide the borrower through the mortgage maze from the beginning with Nostradamus-like predictive skills. Outlining a predictive plan for each loan, with full knowledge of the various detours that may arise, creates more realistic expectations for everyone involved. Each loan application has a series of steps, with each step taking a specific amount of time to complete. It is the responsibility of the mortgage professional to manage the transaction and relationship effectively. This means first creating a plan and then continually updating the borrower with timely updates, including letting them know where the process stands against the plan. The future of mortgage banking relies on mortgage professionals doing a better job at predicting and guiding borrowers through the process. This requires developing relationships rooted in proactive and timely communication. In the past, competition was limited to other mortgage professionals. However, technology and artificial intelligence is evolving quickly. If
we want mortgage professionals to continue to be identified by proper names rather than as “The Computers,” we must be better than the computers at guiding customers through the process to their desired result. That means we must stop being reactive and start being more predictive.
Empathy vs. Apathy
At 4:00 p.m. on the last Friday of every month, we all know that in every city and town across America, more homebuyers than we would like to admit are having that discussion with their moving company about storing all their belongings over the weekend because something got “The future of Transparent vs. delayed with their closing. mortgage banking Opaque rests on conforming to As I have spelled out, we Another characteristic similar transparency have become an industry needed to develop the relaovertaken by process versus and information tionships and results needresults, reaction versus presharing standards, ed to be successful is transadopted long ago by diction with a transparency parency. After we have set deficiency. other industries.” the expectations and the We often fall into the potential variables by being predictive, we trap of being apathetic versus empathetic. must consistently keep borrowers and Now, this is where we can really shine over related parties informed. As consumers any computer programmer’s genius by ourselves, we all expect automated developing empathetic relationships with updates and the ability to drill down into our customers. With empathy we feel or detail when we want. Think about the last can even anticipate the pain of the bortime you ordered something online. When rower experiencing the tedium of obtainyou placed the order, the retailer told you ing a mortgage. After all, we do it every if the item was in stock, the approximate day, albeit on a different side of the transshipping date and what method and how action. We must understand the stress and long shipping would take. anxiety of the first time homebuyer or the If the next day, the retailer realized move-up buyer with back-to-back closings. there was a component of your order not With that understanding and personal readily available, you received another experience of these anxieties ourselves we message alerting you of the mistake and develop empathy. And we can transform asking you how you would like to proceed. that empathy into becoming more resultsAssuming there was not an order error, you driven, more predictive and transparent. received an e-mail letting you know the Then expectations are met; we hold each item shipped and you likely received a link other accountable; we ensure avoidable to track your order. Five minutes after you delays are avoided and unavoidable delays signed for the package, you received a are communicated early enough to avoid notice alerting you that you signed for the dire consequences. And then everyone is package with instructions of who to alert if happier, the mortgage professional and it was not really you that received it. You the consumer have a more positive experido not have to call online retailers every ence and feel better about the process. day to get a status update because they The future of mortgage banking rests have mastered the art of transparency and on mortgage professionals developing automatic notifications. Interestingly, you empathetic relationships with everyone expected this level of transparency before involved in the process. This ensures that you even began the transaction, right? borrowers receive the level of service and The future of mortgage banking rests the overall experience they deserve. on conforming to similar transparency and information sharing standards, Defining the “customer” adopted long ago by other industries. We tend to think of the borrower as our Mortgage banking, as complex as we like only customer when in fact everyone to think it is, will be overtaken with a involved in the process is a customer. For more transparent, more predictive new the loan officer, the borrower is the cusentrant from the technology retailer busi- tomer, but so is the processor, the real ness if existing mortgage professionals do estate agent and other interested parties in not adapt to consumer information con- the transaction. For the processor, the loan sumption standards. originator and the underwriter are cus-
tomers in addition to the borrower. And for the mortgage banking company, employees are customers. Customers deserve to be treated with the same respect, dignity, sense of urgency and appreciation as we expect to be provided to ourselves by other service providers. Too often, businesses sanitize their terminology, which can change how they operate. A borrower can seem like a person in need, an employee can seem thankless in an environment of high unemployment, an appraiser can seem like an impeding obstacle. But really, a customer is a patron, someone who has chosen to do business with us and who are the sources of our paychecks and our family’s ability to live a decent life. In most cases, customers have choices of service providers and we should, internally and externally, define ourselves by how greatly we cherish and how well we service our customers. The future of mortgage banking rests on broadly defining our customers and treat-
ing them like customers should be treated. Sure, the future of mortgage banking is dependent on a lot of economic and other regulatory issues of which most of us do not have a lot of control. What each of us has complete control over is how well we develop and deploy our PR, processes and relationships. When we deliberately and successfully control our processes and nurture our relationships we will certainly have, you guessed it, good public relations! Daniel Jacobs is president of retail branching for Columbus, Ohio-based Residential Finance Corporation (RFC). The mortgage industry veteran is currently responsible for overseeing and expanding the company’s retail branching strategy, which offers branch managers the efficiency of a large, nationwide lender with the service and attention required to build a successful business in today’s marketplace. He may be reached by e-mail at firstname.lastname@example.org.
The Five Keys to Building a Succcessful Retail Division By John F. Cady be knocking down your door to work for you. Here’s what I believe is important in each category.
They come in one flavor, Vanilla, for the majority of lenders today. We all have the same loan programs (FNMA, FHLMC, GNMA). Some companies add jumbo, home-renovation programs, and city, county and state bond programs, but that’s
It’s by far the most important of all the categories. I have worked with and been mentored by some amazing people in my career. Roseanna McGill and Ron Bergum are two who come to mind. These are two incredibly different individuals who run their companies completely differently. However, the trait they “Never base the share is a belief in a strong success of a retail Service, service, company culture. I cannot mortgage company service express just how important on refinances. This should be an easy way that really is. Retail companies to excel and separate your- should always be built Many companies have self from your competitors. with purchase transno idea—nor do they have Unfortunately, service is any interest in knowing— actions in mind.” typically where most retail that building a solid commortgage companies fall short. The real pany culture can make or break them. estate industry lives in a world of 30-day Your employees want to come to a place closings, and mortgage companies should where they enjoy working, where they feel too—if they want to be successful. You like the company actually cares about must build your service levels and process- them and where they feel protected. They es with this in mind. More importantly, you want to know their leaders, not just their must hold everyone in the process names. They want to shake their hands accountable. To begin with, loan officers and hear their voices. They want to believe must turn in completed files, with all of the their leaders know them. They want to required documentation. Loan processors work for a company that hears their wants, should be submitting files—approvable needs, and more importantly, their ideas. and ready to be underwritten—within 10 Employees are a company’s foundation, days of origination. My goal for a processor and it’s what you build on. Loan officers, is no more than five conditions on any file. processors, and branch managers who Underwriting should normally run 48 love their company will tell everyone, from hours or less for the initial underwrite and their friends to your competitors. This 24 hours on conditions. Closing and fund- word-of-mouth will build a retail mortgage ing combined should run 24 hours or less. company faster than any army of The aim should be to fund every loan by recruiters, and best of all, it’s free! Culture the 27th day, giving the loan officers the is where you can spend the least amount ability to deliver to the customer a “best-in- of money but get the biggest bang for your class” experience. company. Even with the all the changes and new People regulations we see daily, I believe there is This category seems like a no-brainer. Hire no better time to be building a retail mortpeople who can do the job and it should all gage company. Companies performing at work out perfectly. Well, that’s not reality, the top of their game in rates, programs, and it takes a little more planning and service, people and culture will grow, effort than that. I have seen numerous increase market share and become the companies where employees just did their dominant lenders of tomorrow. own thing, and even the executive manI cannot wait to see who they are! agers didn’t seem to be on the same page. I have also seen companies where every- John F. Cady is director of retail production one was promoted from within. These for Bay Equity Home Loans, one of San companies became stagnant, with no new Francisco area’s most respected and successideas or inspiration for growth. Companies ful mortgage lending institutions. John is in need to be built with like-minded leaders, charge of building Bay Equity’s Retail both from within and outside. This way the Division from an already solid group of company gets a steady stream of fresh retail producers in areas across the country. input, while still staying true to its roots He can be reached by phone at (951) 453and culture. 6442 or e-mail email@example.com.
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These are pretty self-explanatory. “The lowest rate, every day, to every customer.” Traditionally, the “Rate Game” is dominated by the big banks and Internet lenders. It’s also something that has more importance in a refinance market. I consider refinances a side dish—they’re the gravy to the meat and potatoes of purchase business. Never base the success of a retail mortgage company on refinances. Retail companies should always be built with purchase transactions in mind. Purchases are sustainable business and are much less dependent on rates.
It shouldn’t be difficult for a mortgage company to build and maintain a successful retail division. However, with that said, the job is still much easier said than done. I have been in the unique and fortunate position of working for some very diverse companies, meeting with owners, presidents and managers from just about every company you can think of. No two companies are run the same way, nor do all of them have the same long-term goals. Some are very happy with 20 to 30 branches, some are trying to break the 100branch mark, and a few aim to be true “national players.” What I’ve learned is that a company’s success generally depends on its performance in five categories: Rates, Programs, Service, People and Culture. I have never seen a company excel at all five, but a company doesn’t need to in order to be “successful.” Companies that specialize in low rates typically don’t shine in service and culture. Companies that have a great culture sometimes are paying for it with higher rates. But, if you can be “best in class” in two of these categories and “above average” in two more, people will
really about it. The differentiation between one company and the next is usually small in this category. I have seen a few smaller companies offer more out-of-thebox programs, but I think it will be a long time before the mid- to large-sized mortgage companies will be adding these types of products back into their portfolios.
The Future of the Mortgage Banking Marketplace Who Knows What Tomorrow Will Bring? By Cathy Blaszyk An old adage states that only two things in life are certain: Death and taxes. Well, for the mortgage industry, another truth can be added to that: Regulations, and many more legislative changes on the horizon. Since the Consumer Financial Protection Bureau (CFPB) was established in 2011, the entity has been given the primary responsibility for regulating the financial protection of consumers from student loans to mortgages and everything in between. The result has been more
compliance requirements than the industry has ever dealt with in the past. While details of additional regulatory changes and their effect are uncertain, one thing is certain: The future of mortgage banking is poised for significant and dramatic changes.
RESPA changes likely One area that poses concern for lenders is the proposed change to the fee tolerances related to the Real Estate Settlement
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Interestingly, the resiProcedures Act (RESPA). In dential mortgage process is fact, some lenders believe the only major financial future changes and increastransaction in which historing stringency could drastiically, estimates have been cally affect their ability to given upfront instead of remain in business. actual costs. By providing The tolerances were origexact pricing at the begininally added to the Real ning within disclosure and Estate Settlement Proceclosing forms, lenders dures Act (RESPA) rule in could manage the “no vari2008 when the U.S. ation” issue all together. Department of Housing & Even items that previously Urban Development (HUD) “While details of issued the RESPA Reform additional regulatory were not held to tolerance, such as prepaid interest, Rule, which included subchanges and their hazard insurance or stantial changes to the effect are uncertain, impounds could be critique HUD-1 Settlement Stateone thing is certain: for “variations” if a lender is ment. The tolerances or The future of limits refer to the actual setmortgage banking is found low-balling those tlement charges that can poised for significant items to create an unfair competitive advantage. vary at closing from the and dramatic The current workload amounts stated on the Good changes.” and proposed regulatory Faith Estimate (GFE). The rule established three categories of settle- changes make it virtually impossible for ment charges and each category has differ- lenders to operate using templates, tables ent tolerances. At settlement, if the charges or manual call outs to get actual costs exceed the charges listed on the GFE by upfront for the disclosure process. They more than the permitted tolerances, the must now use technology to deliver acculender must cure, or resolve, the tolerance rate pricing upfront as well as throughout violation by reimbursing or crediting the the process as changes in circumstances borrower the amount by which the toler- occur. There is no room for guesswork in ance was exceeded. This has to be done at this environment, and also no sound reasettlement or within 30 calendar days after son for a lender to pay an exorbitant amount in cures annually when there are settlement. Fees associated with origination, under- systems available today that provide curwriting, discount points and transfer taxes rent, accurate, guaranteed rates from servare held to zero-tolerance. Under the pro- ice providers anywhere in the country. A posal from the CFPB, tolerances will now technology investment is a drop in the be called “variations” and the zero-toler- bucket compared to the hundreds of thouance category will expand to also include sands lenders currently dole out each year services that borrowers cannot shop for, in fines alone, and as the CFPB adds regubut are required to close a loan. These lations, technology is no longer nice to include services such as appraisals, flood have it is a necessity. certifications and credit reports. Under the CFPB proposal, lenders are accountable for Wholesale channel inaccurate quotes; if a price comes in high- concerns er, the lender will have to pay the differ- The CFPB’s proposed changes would also ence to the borrower. With the current fee greatly affect the wholesale channel. The structure, lenders already say they are decision by Wells Fargo to join the ranks of exceeding today’s 10 percent fee tolerance Chase, CitiMortgage and other banks in level with some of the services, and backing out of the market has already prospective changes would make them shaken things up quite a bit, giving brokers responsible for paying even more. In addi- less of a choice regarding what company tion, if a lender quotes services from one of with which to do business. A proposed new their affiliated providers and the borrower form from the CFPB will create more risk uses this provider, the lender will now be for wholesale lenders, who will be responheld to zero tolerance or allowed no varia- sible for the fee quotes originators provide tion from what was quoted at the time of to consumers on the disclosures and to application This will directly affect a ensure the disclosures are delivered within lender’s bottom lines and is one the rea- three business days. With this level of sons lenders are worried about the pro- accountability, wholesale lenders want to take this option of providing the disclosure posed change from the CFPB.
forms to consumers away from brokers and handle loan estimates themselves. Today, brokers are approved to place loans with several wholesale lenders. Often they do not monitor as closely as they should changes in fee information on documents to match each lender’s hard costs, such as underwriting and document preparation. Wholesale lenders accepting brokered loans must run a time consuming quality control process to ensure these fees are properly accounted for and other fees held to tolerance are accurately disclosed. If they find errors upfront, the wholesale lender must reject the file or face the responsibility for tolerance violations to the borrower if they accept the file. To prevent this added risk, wholesale lenders want their loan costs, based on loan type, hard coded into data solutions that brokers can access to deliver actual closing costs. Whether a wholesale lender continues to allow the broker to send the disclosure package to the borrower themselves or they implement a policy of disclosing for the broker, data solutions ensure accuracy upfront, expedited quality control processes, reduced risk to the wholesale lender and satisfied borrowers who obtain financing and costs that match those originally communicated to them.
Technology: The growing solution
Outsourcing: A Prescription for Continuity and Risk Management in Mortgage Banking By Judy Wheatley from the seasonality in the home purchase market and interest rate moves in the refinancing market. But the business has experienced radical changes in the last decade and the historic behavior of the market has been overwhelmed by
Over the years, outsourcing of business segments such as human resources, accounting and information technology has made significant inroads with U.S. corporations because it can help reduce costs and improve profitability. As of December 2011, the top 200 global outsourcing companies employed four million people and a fully one-third of their employees are located in the United States.1 Today, outsourcing is considered a standard business model as well as a nuanced business tool that can be used in new ways. The expansion of different sourcing arrangements is a growing trend made possible by advances in technology, especially from cloud computing and socio-economic pressures. For example, domestic outsourcing is gaining momentum. As a result, outsourcing companies may have U.S. as well as overseas operation centers. In some cases, U.S. federal and state governments are encouraging the development of domestic centers in economically depressed areas. This gives governments a regional economic boost. Outsource providers are creating new jobs that leverage work-from-home concepts, expanding the scope of local labor markets.
Hybrid delivery models offer choice HfS Research and PwC recently conducted a survey on the “Future of Global Business Services.” The purpose of their survey was to learn how organizations maximize their outsourcing strategies. In the financial services industry HfS and PwC found that approximately 75 percent of respondents use a hybrid or shared services delivery framework.2 In the mortgage industry, the typical shared service model is one where the mortgage lender staffs their mortgage operations such as underwriting, processing and closing at a base production level and then outsources functions above the base level. A fee-for-service pricing model is often ideal because it transforms fixed costs to variable costs. Mortgage lenders can maximize their flexibility and respond to the cyclical changes in required capacity and it does not demand that organizations add to their permanent human or physical capital. Providing customers with choices of where the services are to be performed can impact the success of the project. Outsource services may be conducted exclusively in the U.S., or entirely from operations centers outside of the U.S., or continued on page 44
The economic justification for outsourcing in mortgage originations is generally thought of in terms of the historic cyclicality of the underlying mortgage business. The source of this historical variation in mortgage originations emanates
Outsourcing evolves to an innovative business tool
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Cathy Blaszyk is vice president of lender services for ClosingCorp, a provider of residential real estate closing cost data and technologies for mortgage lenders, real estate professionals and consumers. She may be reached by e-mail at firstname.lastname@example.org.
periods of paucity and Collaboration and innodemand from the financial vation is also contributing crisis and the responses to to new outsourcing soluit. As we absorb ongoing tions. One result is the industry changes such as bundling of multiple busiHARP 2.0, and its impendness processes being outing demise, to the risks sourced to one supplier. At inherent in pending qualithe same time, many comfied residential mortgage panies are limiting their (QRM) rules, the horizon is number of service full of unforeseeable shocks providers and setting up in mortgage origination “champion-challenger” demand. With these roles between their suppli“The futures of changes in the market have ers. For example, multiple mortgage banking come new demands on and outsourcing are large mortgage lenders market participants. Ecooutsource a portion of intertwined. nomic and policy shocks their loan fulfillment funcThe growing have brought the role of tions including processing, complexity of outsourcing to a new and conventional underwritmortgage banking distinct level. ing, closing, and pre-fundwill be reflected in An ongoing outsourcing the work being asked ing audit to one or a few partnership can help a outsourcing companies. of outsourcing company with regulatory The service providers often partners.” surveillance and risk mancompete against each agement, as well as strategic business ini- other for the “champion” position. With tiatives. These capabilities provide com- competition, the lender enjoys quick panies with the flexibility to manage the turn-times and high quality from the changes that are inevitable in the mort- processes being performed. gage industry.
Cost-effective technology is available today to prepare for regulatory and compliance changes, including those proposed by the CFPB. These systems will be critical to give lenders and originators alike the ability to efficiently manage information as well as the control they must have to eliminate human error. A growing requirement also driven by the CFPB is electronic record keeping. The new regulatory agency is firmly rooted in
the importance of leveraging technology; therefore, it promotes the use of systems as much as possible. As an example, auditors will want to view entire pipelines at all stages in real-time as part of their examination. These change have and will continue to challenge companies that are not completely paperless because they cannot produce the information in the format that auditors want. Nevertheless, data providers, compliance services, electronic disclosures, automated document storage and management will continue to be growth areas within the industry, accelerated by these regulations. Not only will technology facilitate compliance, it will also make record retention much easier for lenders. The mortgage industry just recently overhauled its disclosure technology in 2009 for GFE and HUD-1 changes, among other ongoing requirements, such as Unfair and Deceptive Acts and Practices. With the ever-changing regulatory climate, it is safe to say the uncertainty is certain. The final implementation for the new combined Loan Estimate and Closing Document will most likely not happen until 2014. The CFPB has become an integral part of our future and will change the way companies conduct business. The proper use of technology to support data and compliance initiatives will help in the adjustment along with a firm understanding that change is inevitable and necessary to run a profitable, compliant business.
continued from page 43
a combination of both. Regardless of which delivery model is deployed, the key is transparency for the mortgage lender. In a successful outsourcing partnership, the supplier must be in sync with their clients’ culture and maintain outsource solutions, including delivery models that embrace their clients’ business strategies and corporate philosophy.
Outsourcing changes with industry and regulatory transformation
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The high rate of unemployment and the need to create jobs is on the minds of most Americans today. Mortgage company owners and shareholders are no different, but face profitability constraints. To help improve profitability, successful mortgage lenders are increasingly outsourcing a wider range of functions that they used to do in-house, freeing up their employees to focus on existing customers and developing new business. In addition to profitability, the transformation of the industry and the fallout
from the financial crisis are a focus of senior managers. Change is an opportunity as well as a risk. Regulatory reforms are shifting the structure of the industry. For example, the new Basel III requirements are causing some banks to downsize their mortgage business, which includes eliminating some of their production channels. At the same time, non-banks are growing and actively acquiring servicing rights and expanding their production channels. This industry flux brings human resources challenges which can be addressed with flexible outsourcing solutions. And they will be needed as new regulations come into play. Will a third version of the Home Affordable Refinance Program (HARP) pass the Senate and House of Representatives? What additional monetary policy changes will the Federal Reserve make to try and spur economic growth? Will there be changes to the tax code that makes homeownership less favorable? How will policy makers address the future of the secondary mortgage market after Fannie Mae and Freddie Mac? Will the
powers of the Consumer Financial Protection Bureau (CFPB) be diminished over time? These are all important questions that we don’t have answers for at this time. Perhaps after the upcoming presidential election there will be a better sense of direction, but one thing is guaranteed— the rate of change is accelerating. What we do know is the mortgage market has been jolted by past legislative shocks. The Dodd-Frank Act in 2010 gave birth to the CFPB. The CFPB is well on its way in developing, implementing and enforcing new consumer protection regulations. Qualified residential mortgage (QRM) requirements, national servicing standards, integrated mortgage disclosures, mortgage originator standards and loan officer (LO) compensation are just a few that will profoundly impact the industry. Organizations most likely to succeed in this environment must be flexible, nimble and prepared to effectively address market dynamics. As mortgage industry executives grapple with the impact of many policy issues, they must set a course for their companies with business objectives that successfully manage change and ensure regulatory compliance. Some specialized outsourcing providers are proficient at collaborating with their clients to plan, develop and implement solutions that accelerate the adoption of new or revised business processes as well as comply with regulatory and investor changes. A successful outsourcing partnership will ensure loan quality and mitigate compliance risk while increasing productivity and customer satisfaction.
Outsourcing and the future of mortgage banking Mortgage companies today want more than just cost reductions from their outsourcing partnerships. Increasing risk management, scalability and flexibility are also essential to outsourcing partnerships. This demands that mortgage lenders and their service providers meet adequate performance management and governance standards. Their regulators will require this. The CFPB expects mortgage lenders to have adequate service provider oversight to protect consumers. The CFPB requires institutions to conduct due diligence to verify their providers understand and are capable of complying with federal consumer financial law. Due diligence includes reviewing providers’ policies, procedures, internal controls and training materials. Statements of work must provide clear expectations regarding compli-
ance, as well as enforcement consequences for non-compliance. In addition mortgage bankers must have an effective governance program that monitors performance and takes prompt and decisive action when performance expectations are not met.3 The environment today is real-time. Outsource providers must continually monitor and measure their performance and engage in on-going communication with their client partners. Production and quality control (QC) reports need to be a shared product. Providers must be proactive in addressing detected weaknesses and implement performance improvement plans. Outsource providers must also be upto-date with the knowledge of new and pending regulatory and industry changes, and implementing training programs to ensure compliance. The futures of mortgage banking and outsourcing are intertwined. The growing complexity of mortgage banking will be reflected in the work being asked of outsourcing partners. In addition, outsource service providers are being asked to bear more business and regulatory risk. Limitation of liability, pre-defined direct damages, termination rights and service levels can often be challenging in contract negotiations. One of the reasons for service providers to assume more risk comes from the regulatory oversight requirements, but another important reason is that progressive lenders are demanding stronger partnerships with their providers. And for the mortgage industry and the outsourcing business, partnership these days increasingly means partnership in risk as well as partnership in return. Judy Wheatley is senior vice president at Indecomm Global Services, a business process outsourcing company. With 30 years of experience in the mortgage industry, Judy is a recognized expert in consulting and fulfillment services to residential mortgage lending clients. She received her Certified Mortgage Banker (CMB) designation in 2003 and her Accredited Residential Underwriter designation in 1993. She may be reached by email at email@example.com.
Footnotes 1—“International Association of Outsourcing Professionals’ 2011 Trends Forecast Shows Industry Redefined,” the Web site of IAOP, Dec. 23, 2011, page 1. 2—“The Future of Global Business Services”, HfS Research Ltd. and PwC, June 2012, slide 13, 3—CFPB Bulletin 2012-13, Consumer Financial Protection Bureau, April 13, 2012, pages 2-3.
Going Mobile By Sanjeev Malaney
In the fast-paced world we live in, with an abundance of cell phones and tablets everywhere we look, what difference does a cloud-based solution make for mortgage lenders, servicers or even aggregators and real estate professionals if they cannot access these important documents while out of the office? Mobile applications have had a significant impact in the way banks do business during the past few years and are now making their way into mortgage industry. Mobile electronic loan folders are just the beginning of the future of mobile for mortgage banking—the 21st Century solution for the electronic loan folder. Of course, the paperless solution will continue to bring value to the market and the mobile app cannot survive without its Web-browser or desktop interface counterparts, but the natural next step in this evolutionary business model is to take paperless mobile. What mortgage lender wants the burden of having to find wireless connections and power plugs for laptops at all times to determine the status of loan documents? Not to mention the inconveniences desktop computers create for mortgage professionals who are away from their desk. Mobile apps are the way of the world today. In a report released by Nielsen in May of 2012, the average number of apps each person has on their smart
Previously, the loan process required thousands of loan documents to be printed and physically mailed, or faxed and e-mailed, and the loan transaction process took months. Costs associated with copy paper, toner, printing and postage now seem outdated because of the development of cloud-based electronic document management systems. No longer do mortgage lenders have to send anything through snail mail; every single document can be accessed through the Web, thus generating cost savings and making turnaround times faster than ever. Paperless solutions have not only provided environmental benefits and convenience to all loan participants,
Moving forward: The next steps
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Paperless processes have changed the mortgage industry
but have also given third-party vendors and multiple people outside the organization the ability to share and access documents for viewing and editing purposes as needed. Not to mention, paperless solutions eliminate the risks of documents being lost in the mail and provide secure document storage. The cloud-based electronic document management system has enabled easy sharing and collaboration for all involved parties to access and edit documents from their computers and laptops; a significant change in the way loans were processed and closed previously with stacks of papers and endless filing.
It’s always hard to know what the future will hold, and in particular, what the future holds for the mortgage banking industry. With today’s weak economy and slow housing market, the upcoming presidential election and the ever-changing world around us, many things are not as certain as one might wish. However, one thing that is certain is homeowners will always have mortgages to pay off, which means lenders, servicers, investors and brokers must continually find ways to best serve their borrowers. Keeping up with today’s advances in technology is an essential step in the changing process. Business models continue to evolve over time as lenders continue to adopt new technologies, loan origination systems (LOS) are continually enhanced, and mortgage companies look for new ways to streamline their processes. Mortgage lending has come a long way for both borrowers and lenders thanks to the advancement of cloud-based platforms and paperless solutions for mortgage lenders and banks that save time and money, increase profitability and enhance loan production. But what comes next? Well, the future of mortgage banking is right at arms reach. In fact, it is in your hands … because mortgage banking is going mobile.
their requirements? That phone is 41. A modernis what an app does—it ized mobile app that gives enables users to have borrowers, lenders and constant access to vital mortgagers an electronic parts of the loan equaloan folder in the palm of tion, wherever they their hand for viewing, may be. As a mortgage status updates and loan banker, it is your information is the obviresponsibility to be ous next step in the conaccountable at all times tinued evolution of mortfor the loan transacgage banking. Apart from tion, meaning you keeping up with the rest must be able to proof the world and gaining a “But what comes competitive advantage, next? Well, the future vide loan participants with timely informaan app increases revenue of mortgage banking and return-on-investment is right at arms reach. tion that is factual. (ROI), further improves In fact, it is in your Mobility service response times, hands … because makes compliance with mortgage banking is increases business value government regulations going mobile.” In a time when loan volan easier task and provides users with constant knowledge of umes are low and a new generation is buying homes, a mobile loan folder the loan transaction status. Think about a few of the conse- gives all loan participants the ability to quences that can occur for mortgage take the mortgage loan to the next bankers who choose to not participate level, which increases overall business in moving forward with utilizing a value. One of the biggest benefits a mobile app. For starters, valuable cloud-based system provides is a secure time is lost. More time will be spent platform to work from. Files are conbehind a desk reviewing current loan stantly backed up so that no important documents and less time spent with data is lost in the event of a power outpotential borrowers and sales oppor- age or natural disaster. What about Big tunities, meaning loan transactions Data? These data sets are so large and if take longer and fewer transactions crucial information, and mass quantitake place. If a loan officer, account ties, were lost it may never be retrieved. executive or assistant is out viewing And worse, if Big Data were lost and properties, working while traveling or then found in the wrong hands, busiis continually conducting business nesses could suffer. Thankfully, a cloudoutside the office, they are not able to based system is secure and makes capview the loan folder and its status to turing, storing and searching for imporprovide any information to the office tant files much easier. With the mobile or borrower. But with the introduction app, none of the above-mentioned of mobile, nothing skips a beat. There challenges with paper systems are ever is no time delay in responses, because an issue. Whatever you may need is the information is in the palm of their right at your fingertips. Consider the previous way loan dochands. Secondly, if you are not a forward- uments were stored (in file cabinets) … thinker and accept change with the what an odd concept these days. Now, times, why should borrowers, servicers with cloud-based and mobile docuor investors choose to work with you? ment management systems, files are You will have a tough time explaining guaranteed to be retrievable the next why you are not an on-the-go mortgage day, or the next year, and the hundreds professional like the others, which of pages of loan documents are in one makes the competition as easier choice location. An insurance agent does not have one set of pages, while the closing to work with. Lastly, you will fall far behind other attorney has others. Instead, the storprofessionals and hinder the process. age location is singular and completely Do you not want to provide borrowers auditable. Long gone are the days of with the most recent status of their searching and filing. Everybody with loan documents and give lenders or access to the loan folder is able to colservicers an accurate answer when continued on page 46 asked about particular documents and
future of mortgage banking
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continued from page 45
laboratively work together; improving the communication chain, eliminating paper-based mistakes and increasing productivity all while taking us less space in the office with file cabinets, stacks of paper, printers and fax machines. If that does not increase business value, there is not much that will. Getting the loan transaction process started is also much easier with a cloudbased system because documents are automatically recognized and converted and gives the user the ability to customize the way they name and file each document. Much of the hard work is done for the user, which reduces timeconsuming manual labor and decreases the holding times on particular documents. Now the mobile app allows users to view these documents on-thego, in the correct order without any conversion issues because files are automatically recognized, allowing the user to leave the computer and carry on with other business.
increased risk, such as characterized as balanchigh LTV/CLTV, noning the credit underwritowner occupancy, ing management with reduced documentation the operational risk of products, and lower credmortgage origination. it scores. Each securitizaTechnology is a key comtion shelf had its own ponent of providing the methodology for detertransparency needed in mining sample pool size today’s mortgage marand selection. When ketplace. reviewing conformance In this article, we will with the guidelines, if focus on the various comsampling is used it needs ponents necessary for a “Technology is to be done to be reflecsatisfactory review of a a key component of tive of the total pool and legacy mortgage loan providing the underwriting, and how a transparency needed not just an “adverse” sample. technology-empowered in today’s mortgage and expert-driven process marketplace.” Today’s can provide the necessary transparent underwriting levels of audit and compliance.
to reach new markets and accommodate new buyers. It is rare that you find a 20- or 30-something-year-old today who does not have a smartphone or know what texting is. Children are learning about technology at such a young age, it is impossible to continue doing business the way it has been done in the past if you want to keep up with the upcoming generation. Mobile apps enable lenders, servicers and mortgagers to reach the newest generation of homebuyers with the most advanced technology in the mortgage industry in order to better educate and provide buyers with an improved experience. It is difficult to predict what will happen 2004-2007: Residential in the future, but one thing is for cer- mortgage loan originatain—mortgage banking is going tion and due diligence mobile and the best way to keep up is environment to adapt to this ever-changing tech- Given the rapid economic growth in nological environment. the U.S. (partially driven by global growth), the U.S. residential mortgage Sanjeev Malaney is co-founder and chief markets expanded rapidly. As a result, executive officer for Capsilon, a provider non-agency mortgage (Alt-A and subReaching new markets of cloud-based document sharing, imag- prime) guidelines and related underNow that mortgage lending is going ing and collaboration solutions for busi- writing processes accommodated mobile and lenders have the ability to nesses. He may be reached by phone at more flexible and complex criteria. utilize a mobile app for viewing and (800) 660-7183 or e-mail info@capDuring this time, the due diligence sharing loans documents they are able silon.com. function focused on verifying the key data points provided to the investors, inventorying key documents, and rerunning basic underwriting tests (such as LTV and DTI) based on the provided data. The due diligence reviews were often used to include or exclude loans from the subject pool intended for By Chad J. Burhance purchase or securitization. These Future residential mortgage loan tions will have a leg up over competi- reviews generally focused on the underwriting and approval processes tors in building the transparent under- information contained in the original will reflect the desire for greater trans- writing processes of the future. loan file. The originators represented parency in the underwriting process, Residential mortgages and the the various aspects of the underlying with a tight coupling of both what process by which they are underwritten data to the extent qualified in the review was actually done, and the phys- and ultimately approved have under- guidelines and other relevant docuical documentation to substantiate the gone significant changes in the post- mentations. Loans were usually newly process. credit crisis period. Going forward, originated, hence no historical loan The pace and extent to which under- there is a general desire for greater performance were available. Some writing processes evolve to incorporate transparency in the underwriting portion of the loan pool was also comthe lessons learned from the crisis will process, with a tight coupling of both prised of first time borrowers. depend upon the answer to a key ques- what review was actually done, and the Given expanded and more complex tion about pre-crisis originations: Were physical documentation to substantiate guidelines, typically some sample of losses due to the failure of the whole the process. loans from the general population mortgage industry to identify and proThis is not a new phenomenon. were selected for review against the vide early warnings for the systematic Instead, it is a realization that there are relevant guidelines. Samples were risks of 2004-2007 vintage loans? Firms things we can do better to integrate the either “random” or “adverse.” Adverse that employ technology and best prac- data with the decision making process samples were composed of loans with tices in re-underwriting legacy origina- for enhanced transparency. This can be features perceived to be indicators of
Controlling Underwriting Risk
requirements Many current mortgage due diligence projects on legacy loan pools are designed to review the original loan attributes versus the historical matching underwriting guidelines to establish conformance. The re-underwriting efforts are in response to the subsequent non-agency RMBS losses and designed to discover if any portion of such losses are potentially attributable to underwriting flaws that occurred at the time the loan was originated. Today, a key question remains: Are the losses due to the failure of the whole mortgage industry’s market practice evolution (origination, due diligence, securitization, rating, investor credit analysis and desire for higher yields) to identify and provide early warnings for the systematic risks that transpired during the credit crisis? Given the importance of the questions to be answered, many firms are looking for disciplined mortgage credit and compliance re-underwriting providers that can manage a wellorganized and targeted process. Though many companies provide reunderwriting services, it is important to realize that each company differs in terms of their individual process, their degree of customization, and the depth to which they go to recreate the original loan file and relevant guidelines. While it is convenient to make the assumption that underwriters perform a generic service and choose a provider on the basis of price, the wide-ranging nature of loan origination pre-credit crisis renders it neces-
Is it a self-contained system so that subject loan file, applicable guidelines, underwriter results and communications among underwriters and senior officers are housed in the same system? Does the system allow for the review process to be scripted and tested before a large number of loans have been reviewed? Does the system facilitate consistent and comprehensive review among a group of underwriters? Does the system facilitate real-time status updates of the overall loanby-loan review results? Does the system facilitate real-time monitoring and quality control (QC)? Can the system be used to identify, collect, and package documentation to support the loan-level findings? Does the system provide customizable data capture and reporting?
Once you are satisfied with a firmâ€™s specialized credentials and technology in mortgage credit and compliance in the context of historical re-underwriting or new frontline origination, ask for a demonstration which can take place in person or live. This will Does the system meet your needs for allow you to see the technology firsthand in conjunction with various confidentiality and data security?
projects the firm has successfully completed. During your meeting, be certain to ask about customization of the review process, as some mortgage credit and compliance re-underwriting provider processes may put clients in the same bucket when in actuality each project situation may be unique.
The future of mortgage underwriting Going forward, mortgage underwriting and approval processes will better integrate data and decision-making and balance credit underwriting management with the operational risk of mortgage origination. Firms which employ technology and a comprehensive view of underwriting risk in responding to or identifying, as the case may be, allegations relating to loan quality from legacy origination will be the most prepared to integrate best practices into future underwriting processes. Chad J. Burhance is head of NewOak Solutions. Burhance has more than 20 years of experience in financial services in roles spanning risk management, fixed-income trading and middle office functions. He may be reached by phone at (212) 209-0793 or e-mail firstname.lastname@example.org.
Your first step is to find a company that specializes in effectively responding to or identifying, as the case may be, all allegations relating to loan quality. The company must fully understand, identify and recreate the appropriate guidelines and governing agreements that apply to each loan. The company you chose should understand the entire origination and securitization process and have experience in responding to and resolving these issues. The provider should be
able to understand at deal level the relevance of post origination data, be able to identify potential remedial cures, and assess the materiality of each defect in the loan. The next step is to look at the credentials of the executives of the mortgage credit and compliance service provider being evaluated. How long have they been active in this space? What is their experience and expertise in the mortgage world? Are they seasoned in terms of seeing several cycles? Is the company experienced in litigation and loan repurchase matters? Once you have narrowed down several companies that specialize in mortgage credit and compliance services, inquire about their technology. A flexible technology system that can accommodate a variety of mortgage underwriting review processes and provide an integrated platform to manage process flow, data, and consistent analysis is critical. Absent such a system, any sizeable project quickly becomes unruly, with results dependent on the individual underwriter reviewing a given loan file. Key questions on technology may include the following:
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What to look for in a mortgage credit and compliance re-underwriting provider
sary to find a provider who can recreate the original loan underwriting parameters and admissibility criteria. In recreating the original loan parameters, identification of the correct product guidelines and loan approval timing and delivery is crucial. Failure to apply the appropriate rules for the individual loan accounts for many unfounded allegations. The recreation of these key elements is a time consuming, exacting process for several reasons. First, in the peak years, large originators offered dozens of loan products and/or acquired loans from numerous sources. Second, underwriting guidelines changed rapidly during the same years. Third, guidelines and documentation type definitions were not consistent across originators and Loan Purchase Agreements varied, particularly relating to the effective date governing the application of the underwriting guidelines. Some agreements specified the date of application while others used the date of funding or date of final loan delivery. The company you choose should understand the entire process of evaluating and resolving these issues. They should be able to understand at the deal level the relevance of post origination data in performing the reunderwriting task. The provider must be able to identify potential remedial cures and assess the materiality of each defect in the loan. Since selecting the right mortgage credit and compliance re-underwriter can be the leading factor in winning a litigation case, the below will be useful in choosing between underwriters.
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March 29, 1996, as Amended by P.L. 110-28, May 25, 2007 15—See Section 609(b) of the RFA, as amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) and the Dodd-Frank Wall Street Reform and Consumer Protection Act. 16—There were 17 SERs selected for the SBREFA process. The CFPB convened the Panel on May 9, 2012. The CFPB provided the SERs with an opportunity to submit written feedback or comments. The original due date was June 4, 2012, but at the request of several SERs, and in light of the additional calls, the deadline was extended to June 11, 2012. The CFPB received written comments from 11 of the SERs and shared these comments with the other members of the Panel. SERs were from commercial banks, credit unions, mortgage companies, mortgage brokers, and non-profit housing organizations. 17—Final Report of the Small Business Review Panel on CFPB’s Proposals Under Consideration for Residential Mortgage Loan Origination Standards Rulemaking, July 11, 2012. 18—Op.cit. 1, § 1.3. 19—Op.cit. 17, pp. 20-21. 20—Op.cit. 17, p 28. 21—Op.cit. 1, § 1.4. 22—Op.cit. 17, pp. 23-24. 23—Op.cit. 17, p. 28. 24—Op.cit. 1, § 1.5. 25—Op.cit. 17, p. 24. 26—Op.cit. 17, p. 28. 27—Op.cit. 1, § 1.95-1.96. 28—Op.cit. 1, § 1.99. 29—Real Estate Settlement Procedures Act (RESPA): Rule to Simplify and Improve the Process of Obtaining Mortgages and Reduce Consumer Settlement Costs, Final Rule, 24 CFR Parts 203 and 3500, Department of Housing and Urban Development, Federal Register, Volume 73, Number 222, November 17, 2008. 30—Op.cit. 17, pp. 25-26. 31—Op.cit. 17, p. 29. 32—Op.cit. 1, § 1.138. 33—Op.cit. 17, p. 26. 34—Credit scores may be considered in the criteria for evaluating a MLO’s financial responsibility. 35—Op.cit. 17, p. 30. 36—Op.cit. 1, § 1.205. 37—See also: Summary of Proposed Loan Originator Rules, Consumer Financial Protection Bureau, Aug. 17, 2012. 38—Op.cit. 1, § 1.47. 39—Op.cit. 37, Background. 40—Ibid.
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loan types posted their lowest rate since the end of the 2007/2009 recession. Only the auto loan default rate increased, from 1.01 percent in July to 1.09 percent in August. The bank card default rate fell the most in August, from July’s 3.83 percent to 3.77 percent. The first mortgage default rate decreased slightly from 1.41 percent in July to 1.40 percent in August. At 0.72 percent, the second mortgage default rate fell to the lowest in its eight-plus year history. The composite index showed a post-recession low of 1.50 percent, slightly below July’s 1.51 percent. “While continuing to fall, most of the August changes in default rates were small compared to what we saw in the first half of the year” said David M. Blitzer, managing director and chairman of the Index Committee for S&P Dow Jones Indices. “As the consumers’ financial condition continues to improve their credit default rates showed small changes from July to August, in most cases the trend was either down or flat. “The auto loan rate rose eight basis points in August to 1.09 percent, but this was from July’s eight-plus year historic low. Bank card, first and second mortgage and composite default rates hit new post-recession lows. The first mortgage default rate has been down or flat for eight consecutive months, a good sign for the housing market. Second mortgage default rates were down in all but one of those same months. Bank card default rates fell the most in August, down six basis points to 3.77 percent, its lowest rate since February 2007, more than five years ago. “Miami’s default rate rose from July’s
post-recession low—2.62 percent in August, up from July’s 2.39 percent. Dallas’ and Chicago’s rates also rose in August, to 1.07 percent and 1.92 percent, respectively. This was the second month that default rates rose in Dallas, but 1.07 percent is still the lowest of the five cities we publish. Los Angeles was the only city where the default rates fell in August; 1.60 percent versus July’s 1.67 percent, a post-recession low for that city. New York remained flat at its 1.49 percent post-recession low. “While there has been a bit of volatility among loan types and cities, the basic trend has not changed. Consumers are continuing to repair their balance sheets, as evidenced by diminishing default rates. For the housing market, there are still a substantial number of loans outstanding that defaulted in the past and that segment of the market is still of concern. But for 2012, the drop in mortgage default rates is a good sign for the housing market and the consumer.”
Ellie Mae: Spike in Refis Increases Closing Time
49 Ellie Mae Inc. has released its Origination Insight Report for August 2012 which found that the time needed to close a mortgage has risen by nearly 25 percent over last year, an average of 40 days to an average of 49 days. The report also found that refinances were a primary factor for driving this change continued on page 50
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into law. Among other provisions, Title XIV of DoddFrank amended the Truth in Lending Act (TILA) to establish certain mortgage loan origination standards. And on July 21, 2011, pursuant to Title X of the Dodd-Frank, the Consumer Financial Protection Bureau received its exclusive rulemaking and examination authority from the Federal Reserve Board over Truth in Lending Act and its implementing regulation, Regulation Z. 3—Due to litigation, the April 1, 2011 implementation date was temporarily stayed. The stay was dissolved. The effective compliance implementation date of the Rule was April 6, 2011 4—For instance, Foxx, Jonathan, Landmark Financial Legislation: New Rules for Mortgage Originators–Part I: Reformation and Regulations, National Mortgage Professional Magazine, August 2010, Volume 2, Issue 8, pp. 28-42; Foxx, Jonathan, A New Era of Mortgage Reform–Part II: Legislation– Reactive or Proactive, National Mortgage Professional Magazine, September 2010, Volume 2, Issue 9, pp. 22-28; Foxx, Jonathan, A New Era of Mortgage Reform–Part III: Consumer Financial Protection–Bureau and Bureaucracy, October 2010, Volume 2, Issue 10, pp. 22-40; Foxx, Jonathan, The Birth of an Agency, in National Mortgage Professional Magazine, September 2009, Volume 1, Issue 5, pp. 24-27; and, Foxx, Jonathan, The CFPA Controversy: Asking the Tough Questions, in National Mortgage Professional Magazine, October 2009, Volume 1, Issue 6, pp. 22-25. All Newsletters and Articles through 2011 are available at: http://Publications.LendersComplianceGroup.com. 5—Visit my firm’s Library at www.Publications.LendersComplianceGroup.com, in the Mortgage Compliance and Compliance Alerts sections. See also, the Commentaries section: The Smoking Gun - Loan Originator Compensation (4/26/2011), First They Came For The Brokers! (4/12/2011), Lawsuit Gets An Assist! (3/28/2011), NAILTA Supports Goliath (3/21/2011), COMES NOW the House! (3/16/2011), COMES NOW the Senate! (3/14/2011), NAMB v. FRB: David 2.0 v. Goliath (3/11/2011), NAIHP v. FRB: David v. Goliath (3/10/2011), FRB: Mangles Affiliate Compensation (3/3/2011), Compensation: Coming or Going? (2/24/2011), Compensation: One Statute Too Many? (2/15/2011). 6—Compliance Guide to Small Entities, Regulation Z: Loan Originator Compensation and Steering, 12 CFR 226, Federal Reserve Board, January 26, 2011. 7—The State Non-depository Examiner Guidelines for Regulation Z - Loan Originator Compensation Rule is dated Oct. 6, 2011, although the announcement of its issuance was on Oct. 7, 2011. 8—The Multi-State Mortgage Committee (MMC) is a 10-state representative body created by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR). The MMC released this set of examiner guidelines to assist state regulators in implementing the FRB’s loan originator compensation restrictions under Regulation Z [12 C.F.R. § 226.36(d), (e)]. The MMC also issued the Mortgage Examination Manual, which provides information and criteria for the examination of multistate mortgage entities, and further provides guidance on examination planning and administration. 9—See Foxx, Jonathan, Loan Originator Compensation: The Regulatory Examination, National Mortgage Professional Magazine, November 2011, Volume 3, Number 11, pp. 6-34. 10—For more information about the FAQs Outline– Loan Originator Compensation, visit the Compensation section of my firm’s Library at www.LendersComplianceGroup.com. 11—12 CFR Part 1026, Bureau of Consumer Financial Protection, Truth in Lending Act (Regulation Z), Loan Originator Compensation, Proposed Rule with Request for Public Comment, Federal Register, Volume 77, Number 174, Sept. 7, 2012. 12—Op.cit. 1, § 1.2. 13—See the Regulatory Flexibility Act (RFA), Pub. L. 96-354, September 19, 1980, 94 Stat. 1164 (codified at 5 U.S.C. §§ 601-612). 14—Title II, Small Business Regulatory Enforcement Fairness Act of 1996, Section 202 (2), P.L. 104-121,
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in time. The Origination Insight Report draws its data and insights from a sampling of the significant volume of loan applications—more than 20 percent of all originations in the U.S.—that flow through Ellie Mae’s Encompass360 mortgage management software and Ellie Mae Network. To get a meaningful view of lender “pull-through,” Ellie Mae reviewed a sampling of loan applications initiated 90 days prior (i.e., the May applications) to calculate a closing rate for August 2012, which was 47.8 percent, compared to 45.8 percent in July 2012. “The 30-year note rates on closed loans continued to decline, dropping from 3.870 percent in July to 3.763 percent in August 2012. August’s rate was down nearly 100 basis points from the same time last year and the lowest point since we began tracking,” said Jonathan Corr, chief operating officer of Ellie Mae. “The percentage of ARMs also continued its decline to 2.7 percent in August 2012, the lowest point since we began tracking in August 2011, when the percentage of ARMs was 8.3 percent.” In 2011, the total volume of mortgages that ran through Ellie Mae’s Encompass360 mortgage management software was approximately two million loan applications, or 20 percent of all U.S. mortgage originations. “The closing rate for purchase loans increased for the fourth month in a row, from 58.7 percent in July to 60.1 percent in August,” said Corr. “The closing rate for refinances also increased, from 37.9 percent in July to 40.9 percent in August, and the time to close these refinances grew from 48 to 51 days.” The Origination Insight Report mines its application data from a robust sampling of approximately 33 percent of all mortgage applications that were initiated on the Encompass origination platform. Given the size of this sample and Ellie Mae’s market share, the company believes the Origination Insight Report is a strong proxy of the underwriting standards that are being employed by lenders across the country. “The percentage of refinances at 95 percent-plus LTV dropped for the third consecutive month, from 10.2 percent in June and 8.7 percent in July to 7.74 percent in August, a possible sign that HARP 2.0 continues to be cooling off, which is in line with what the Federal Housing Finance Agency has been reporting,” Corr said. The Origination Insight Report focuses on loans that closed or were denied in a specific month and compares their characteristics to similar loans that closed or were denied three and six months earlier. The closing rate is calculated on a 90-day cycle rather than on a monthly basis because most loan applications typically take one and a
half to two months from application to closing. Loans that do not close could still be active applications, or applications withdrawn by consumers or denied for incompleteness or non-qualification.
FHFA Steps Up QC and Transparency for GSE Loans The Federal Housing Finance Agency (FHFA) has announced that Fannie Mae and Freddie Mac are launching a new representation and warranty (rep and warranty) framework for conventional loans sold or delivered on or after Jan. 1, 2013. The new rep and warranty approach, part of a broader series of strategic initiatives called seller-servicer contract harmonization, aims to clarify a lender’s repurchase exposure and liability on future deliveries. “Ultimately, better quality loan originations and underwriting, along with consistent quality control, help maintain liquidity in the mortgage market while protecting Fannie Mae and Freddie Mac from loans not underwritten to prescribed standards,” said Edward J. DeMarco, Acting Director of the FHFA. “These efforts contribute to a firm foundation for a new, sustainable housing finance system for the future.” The objective of the new framework, developed at the direction of FHFA, is to clarify lenders’ repurchase exposure and liability on future deliveries. The new rep and warranty approach does not affect loans sold to Fannie Mae or Freddie Mac prior to Jan. 1, 2013. With this new framework: Lenders will be relieved of certain repurchase obligations for loans that meet specific payment requirements, for example, rep and warranty relief will be provided for loans with 36-months of consecutive, on-time payments; Home Affordable Refinance Program (HARP) loans will be eligible for rep and warranty relief after an acceptable payment history of only 12 months following the acquisition date; Information about exclusions for rep and warranty relief, such as violations of state, federal and local laws and regulations will be detailed; Fannie Mae and Freddie Mac will continue to make available for lenders a range of tools to help improve loan quality. The new model moves the focus of quality control reviews from the time a loan defaults up to the time the loan is delivered to Fannie Mae or Freddie Mac. An FHFA review of past repurchase requests issued by Fannie Mae and
Freddie Mac revealed that these requests were based on substantive underwriting and documentation deficiencies. These deficiencies have led to substantial losses for Fannie Mae and Freddie Mac, and hence, taxpayers. Fannie Mae and Freddie Mac will continue to work with their lenders to resolve contractual claims resulting from such deficiencies, arising primarily from loans originated before the conservatorships in September 2008. With the new model, FHFA is directing Fannie Mae and Freddie Mac to: Conduct quality control (QC) reviews earlier in the loan process, generally between 30 to 120 days after loan purchase; Establish consistent timelines for lenders to submit requested loan files for review; Evaluate loan files on a more comprehensive basis to ensure a focus on identifying significant deficiencies; Leverage data from the tools currently used by Fannie Mae and Freddie Mac to enable earlier identification of potentially defective loans; Make available more transparent appeals processes for lenders to appeal repurchase requests. The improvements to the representation and warranty process are key elements of the seller-servicer contract harmonization project that supports FHFA’s Strategic Plan for Enterprise Conservatorships announced earlier this year. Additional contract harmonization projects directed by FHFA, including servicer performance metrics and remedies for servicing breaches, will be announced in coming months.
tently closes loans “on time” 88 percent believe the relationship is “excellent” or “acceptable” between originators, managers and leaders 85 percent believe that the reputation of their firm is “outstanding” or “good” Key responses indicating room for improvement: 32 percent of professionals surveyed believe that their firm’s technology “needs an upgrade,” is “inadequate,” or “hurts my business” 28 percent of professionals surveyed believe that internal communications are “inconsistent,” “muddled,” “left open for individual interpretation” or essentially non-existent 26 percent stated that their firms had “no” professional development program or were “on my own” 24 percent believe their firm leader’s vision is “unclear,” “illogical,” “disconnected” or essentially non-existent 24 percent believe that originators have “insignificant,” “very little” or “no” impact on operations at their firms “Lessons for the industry from this survey are clear. First and foremost, experience matters—whether we are talking sales professionals, operational personnel, managers or leaders, effectiveness and efficiency,” said Drew Waterhouse, managing director and CEO of Hammerhouse. “In addition, a primary take-away for lenders from this survey is that going forward the ability to execute on business fundamentals including vision, strategy, communications, professional development and support, while also leveraging new technology, will separate the best origination firms from the also-rans.”
Joseph A. Smith Jr., Monitor of the National Mortgage Settlement, today released a report, “First Take: Progress Report From the Monitor of the National Mortgage Settlement,” outlining the settlement, steps his office has taken to implement it and progress made by the five banks that are parties to the settlement to date. “It has been nearly five months since the settlement went into effect, and I believe it is important to report on our progress,” said Smith. “This report is not required by the settlement and contains information given voluntarily to me by the banks. It is intended to be the basis of a national conversation about the servicers’ efforts to meet their obligations under the settlement.” “The report discloses that the banks have granted $10.56 billion in consumer relief to borrowers
director of customer engagement for Loan Resolution Corporation. Vericrest Financial Inc. has named John Sayre senior vice president of business development.
Your turn National Mortgage Professional Magazine invites its readers to submit any information, events, passages, promotions, personal or professional occurrences that seem appropriate and/or other pertinent data to the attention of:
Heard on the Street/Mortgage Professionals to Watch column Phone #: (516) 409-5555 E-mail: 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.
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Hammerhouse LLC, a national recruiting and strategic growth firm for the financial services industry, released the results of its 2012 Loan Officer Core Business Components Survey. The online survey of several hundred current mortgage originators across the United States sought to ascertain their views on issues related to the Core Business Components of residential mortgage lending: Leadership, Culture, Business, Operations, Technology and Geography. Key positive responses to survey questions: 91 percent of professionals survey indicated that they were “born to” do their job or “love” their job 89 percent believe that compensation at their firm is “fair and compliant” 89 percent believe that their firms meet industry service standards 89 percent believe their firm’s pricing is “consistent” and “competitive” 88 percent believe their firm consis-
Titan Lenders Corporation has named Bryan DeShasier as director of Titan Risk Management Services (TRMS). Residential Finance Corporation (RFC) has named Tim Ferrell director of digital strategy and Troy West as senior marketing analyst. RFC has also announced the promotions of Sean Burke to digital media coordinator and Annie Keener to marketing project manager. Jennifer Coe has been named business development executive at Churchill Mortgage. Frank V. McMahon has been named chief executive chairman of DataQuick. The Mortgage Bankers Association (MBA) has named Pete Mills senior vice president of residential policy and member services. Mark Weisgerber has been promoted to the position of chief operating officer of Equi-Trax Asset Solutions LP. Randy Johnson has joined Embrace Home Loans as the firm’s new senior vice president of corporate development. Lisa Binkley has been named senior vice president of Platinum Data. Daniel Cullum has been named
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Progress Report Released on Nationwide Mortgage Servicer Settlement
continued from page 20
Hammerhouse Survey Finds LOs Optimistic But See Room for Improvement
heard on the street
Recruiting Professionals Without Wasting Valuable Resources How much money is one good LO worth to your business? Recruiting mortgage professionals isn’t easy, especially in the highly-driven sales environment like the mortgage industry has to offer. Since the mortgage industry came back to life in the spring, we don’t hear about people having trouble finding leads anymore. Now, we hear about how hard it is to find good people to originate and process loans.
The problem …
Training new LOs and processors can be a daunting task. With all of the necessary licensing requirements, sales training and acclamation into your business, it can cost you valuable resources. How long does it take to effectively train someone in sales? Years? How about processing all that paperwork to complete a loan packet? Months? Anyone who has grown a mortgage business knows this and also knows how tough it can be to find good quality people, let alone someone with the capacity to understand what it takes to be successful in this industry. And for some reason, there is always that company that seems to have people knocking down the door to get in. How do they do it? For a few years now, there has been a quiet group of mortgage professionals that are amassing an army of people to work for them. The simple, yet absolutely necessary, solution is to go after people who are already in the business and not happy with their current employer. Take this to the bank. This is how every major mortgage company in the country has been growing. These people are already licensed, already know how to sell, already understand how to package loans for underwriting, and won’t cost you valuable time and money on training. Now the only question is how do you find these people? And once you do find them, how do you know when they aren’t happy with their current employer?
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between March 1 and June 30, 2012. Additionally, first lien principal reduction trials were offered and begun for about 28,000 homeowners, totaling approximately $3 billion of potential relief,” said Smith. “This information is self-reported and has not been confirmed by the professional firms working with me. Further, it represents gross dollar amounts and cannot be used to evaluate progress toward the banks’ $20 billion obligation.” In addition, the report provides an update on the banks’ implementation of the settlement’s servicing standards. “As of July 5, the servicers reported to me that 56 servicing standards have been incorporated into their business processes,” said Smith. “Implemen-tation of the mortgage servicing standards outlined in the settlement can be an important contribution to reform of the mortgage finance system. More hard work remains as the banks work to meet their obligations. My colleagues and I look forward to that work and to keeping policymakers and the public informed of our progress.”
The report contains a summary of the settlement and its terms, along with information on how Smith has set up the Office of Mortgage Settlement Oversight to carry out his duties as Monitor. The report also provides an update on servicing standards implementation and summarizes the data that servicers voluntarily provided to Smith as progress of relief given between March 1, 2012 and June 30, 2012.
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: 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.
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The solution … E-mail marketing is the solution you’ve been waiting for. Get your message out to thousands of people in just minutes, target by specific industry, geography and spend the least amount of money possible. We all know email marketing is cheap. It’s one of the cheapest forms of marketing available. And the reason why it works for recruiting is because it gives you the ability to target people when they are reading emails. Especially when they are not getting what they want from their current employer. Think about it, what’s the first thing you do when you get into work? Check your emails? And if you’re having a bad day, don’t you spend more time going through the spam file than you normally would? So does everyone else! You cannot just delete your spam file anymore. There are lots of important e-mails that accidentally get put in the spam folder. Now, YOU control the speed at which your company grows. Don’t let hiring professionals stand in the way of your success any longer. E-mail marketing will get you in front of the right people at the right time. Spend your time doing what you do best and let your marketing e-mails do all of your recruiting for you. You’ll get responses from qualified mortgage professionals who will want to meet with you. This tried and true method is the most basic, inexpensive and practical way to recruit good people. Those who have already figured it out early on have been using it successfully for years. NOW is your time … Medford, Ore.-based TagQuest is a full-service marketing firm created specifically for the ever-changing business world. TagQuest assists companies with their direct marketing, advertising and branding needs, and knows what it takes to generate quality customers and, most importantly, how to retain those customers for years to come. TagQuest brings forth a unique opportunity to utilize our experience and expertise in varying consumer sales and marketing environments. For more information, call (866) 376-5540 or visit Tagquest.com.
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Leads TagQuest ................................................................888-817-8980 CUSTOMIZE YOUR CAMPAIGNS! FHA - HARP - VA Leads, Loan Modification, Debt Consolidation, Direct Mail, Data List, Live Transfers, Internet Leads – tagquest.com
Robertson | Anschutz 800-343-7160 firstname.lastname@example.org www.radocs.com/info.html 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
Loan Origination Systems
Cost: Only $19.95 per month per physical office location. Watch for our 8 Hour NMLS Continuing Education Course
Call 516-409-5555, ext 4, to register your company.
Calyx Software 800-362-2599 email@example.com www.calyxsoftware.com
Access these listings online at
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.
8520 Macon Rd. Ste 2 Cordova, TN 38018 firstname.lastname@example.org | 615-477-7118
Icon Residential Lenders (888) 247-4207 www.iconwholesale.com
Icon Residential, a wholly owned subsidiary of Grand Bank N.A., is one of the nation’s leading Conforming, FHA and VA wholesale lenders. Our strength, success and longevity is derived from delivering customers service that exceeds our valued business partners expectations. With deep industry knowledge, financial stability and innovative technology we provide the solutions for our business partners to fund loans while avoiding risk.
MCMF developed My Guide, a Premier Credit & Financial Education Magazine that you can customize with your LOGO and Ad Pages to feature your organization as well as provide your borrowers a go-to-guide for credit and financial resources, empowering them to make the most informed financial decisions.
• • • • •
Direct Access to Underwriters Competitive Pricing Innovative Technology Paperless Solution Bank Funding
This 16 page, full color, quarterly publication, provides financial literacy tools in a concise, unbiased, easy to understand format. My Guide is offered in traditional magazine print, as well as our newest electronic flipbook version, bringing “flipping through a magazine” experience right to your desktop
United Wholesale Mortgage 800-981-8898 www.uwm.com UWM has a full set of mortgage products to meet all of your lending needs with Conventional, FHA, USDA (Rural Development), VA, Jumbo, HARP 2.0 and DU Refi Plus. With UWM’s ELITE program, you will receive the most aggressive conventional rates and pricing in the industry for your elite borrowers! Discover Lending Made Easy with United Wholesale Mortgage!
Contact me today to learn more about this one of a kind opportunity!
CBC National Bank 3010 Royal Boulevard South, Ste. 230 Alpharetta, GA 30022 888-486-4304
REMN has FHA, USDA, 203k, VA and Conventional solutions to fit the needs of your customers. But, at REMN, our most valuable product is our people. The REMN Sales and Operations Teams give you - and your loans - the time and attention that you deserve. Even better, at REMN, same-day approvals are guaranteed.* You can rely on us to get the little, yet vital, things taken care of on time.
CBC National Bank is one of the nation’s fastest growing wholesale lenders offering Conventional, FHA, VA, and USDA. The most important aspect of being a leader in today’s market is the ability to build and maintain a meaningful relationship with each customer. We understand that these meaningful relationships coupled with competitive pricing and efficient technology are the pillars of today’s lending environment.
Interested in joining our Wholesale Division? Send your resume to email@example.com
We are now hiring Account Executives in AL, TN, KY, VA, & MD. Contact Stu Ehrlich in our HR department at firstname.lastname@example.org for further details. Big Enough to MATTER…Small Enough to CARE
Veros Real Estate Solutions 2333 North Broadway, Suite 350 • Santa Ana, CA 92706 (866) 458-3767 www.veros.com • @verosres (Twitter)
The Resource Registry is a directory of lenders (wholesaler or retail that are recruiting), affiliated services and resources that is seen by more than 191,181 active Professionals.
Call 516-409-5555, ext. 4 to register your company.
Veros Real Estate Solutions is a premier technology leader in the mortgage industry and proven leader in enterprise risk management and collateral valuation services. Veros combines the power of predictive technology and data analytics for advanced automated solutions.
Mortgage Professional Resource Registry
NATIONAL MORTGAGE PROFESSIONAL MAGAZINE
Real Estate Mortgage Network, Inc. www.remnwholesale.com 866-933-6342
NATIONAL MORTGAGE PROFESSIONAL
calendar OF EVENTS
Calendar of Events, please e-mail the details of your event, along with contact information, to email@example.com. OCTOBER 2012 Tuesday-Thursday, October 9-11 2012 Northeast Conference of Mortgage Brokers Trump Taj Mahal Casino Resort 1000 Boardwalk Avenue Atlantic City, N.J. For more information, call (732) 596-1619 or visit NJAMB.org.
Thursday, October 25 Utah Association of Mortgage Professionals 2012 Annual Expo Noah’s 322 West 11000 South South Jordan, Utah For more information, call (801) 597-2122 or visit UAMB.org. NOVEMBER 2012 Wednesday-Friday, November 7-9 Mortgage Bankers Association (MBA) 2012 Independent Mortgage Bankers Conference The Fairmont Dallas 1717 North Akard Street Dallas, Texas For more information, call (800) 793-6222 or visit MortgageBankers.org.
FEBRUARY 2013 Sunday-Wednesday, February 3-6 2013 CREF/Multifamily Housing Convention & Expo Manchester Grand Hyatt San Diego 1 Market Place San Diego, Calif. For more information, call (800) 793-6222 or visit MortgageBankers.org. Tuesday-Friday, February 19-22 Mortgage Bankers Association (MBA) 2013 National Mortgage Servicing Conference & Expo Gaylord Texan Hotel & Convention Center 1501 Gaylord Trail Grapevine, Texas For more information, call (800) 793-6222 or visit MortgageBankers.org.
Wednesday, March 13 2013 Maryland Association of Mortgage Professionals Annual Conference Maritime Institute 692 Maritime Boulevard Linthicum Heights, Md. For more information, call (410) 752-6262 or visit www.mdmtgpros.org. APRIL 2013 Sunday-Wednesday, April 14-17 2013 National Technology in Mortgage Banking Conference & Expo Westin Diplomat 3555 South Ocean Drive Hollywood, Fla. For more information, call (800) 793-6222 or visit MortgageBankers.org.
MAY 2013 Sunday-Wednesday, May 5-8 Mortgage Bankers Association (MBA) 2013 National Secondary Market Conference & Expo New York Marriott Marquis 1535 Broadway New York, N.Y. For more information, call (800) 793-6222 or visit MortgageBankers.org. Sunday-Wednesday, May 19-22 Mortgage Bankers Association (MBA) 2013 Commercial/Multifamily Servicing & Technology Conference Arizona Biltmore 2400 East Missouri Avenue Phoenix, Ariz. For more information, call (800) 793-6222 or visit MortgageBankers.org. Sunday-Wednesday, May 19-22 Mortgage Bankers Association (MBA) 2013 Legal Issues/Regulatory Compliance Conference Boca Raton Hotel 501 East Camino Real Boca Raton, Fla. For more information, call (800) 793-6222 or visit MortgageBankers.org.
Sunday-Wednesday, October 21-24 Mortgage Bankers Association 99th Annual Convention & Expo The Hyatt Regency 151 East Wacker Drive • Chicago For more information, call (800) 793-6222 or visit MortgageBankers.org.
DECEMBER 2012 Friday-Monday, December 7-10 NAMB National 2012 MGM Grand 799 South Las Vegas Boulevard Las Vegas, Nev. For more information, call (972) 758-1151 or visit NAMB.org.
MARCH 2013 Wednesday-Saturday, March 6-9 Mortgage Bankers Association (MBA) 2013 Mid-Winter Housing Finance Conference The Ritz-Carlton Bachelor Gulch 130 Daybreak Ridge Avon, Colo. For more information, call (800) 793-6222 or visit MortgageBankers.org.
Sunday-Wednesday, April 14-17 Mortgage Bankers Association (MBA) 2013 National Fraud Issues Conference Westin Diplomat 3555 South Ocean Drive Hollywood, Fla. For more information, call (800) 793-6222 or visit MortgageBankers.org.
UTAH MORTGAGE PROFESSIONAL MAGAZINE
Monday-Wednesday, October 15-17 2012 National Reverse Mortgage Lenders Association (NRMLA) Annual Meeting & Expo Hyatt Regency Riverwalk 123 Losoya • San Antonio, Texas For more information, call (202) 939-1760 or visit NRMLAonline.org.
Wednesday-Friday, November 14-16 Mortgage Bankers Association (MBA) 2013 Accounting & Financial Management Conference The Westin Gaslamp Quarter 910 Broadway Circle San Diego, Calif. For more information, call (800) 793-6222 or visit MortgageBankers.org.
Thursday-Saturday, February 21-23 Mortgage Bankers Association (MBA) National Short Sale and REO Summit 2013 Gaylord Texan Hotel & Convention Center 1501 Gaylord Trail Grapevine, Texas For more information, call (800) 793-6222 or visit MortgageBankers.org.
To submit your entry for inclusion in the National Mortgage Professional
Visit us at Booth # 205 Northeast Conference of Mortgage Brokers October 9-11, 2012