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Issue 043 February 2011


Tips for Mortgage 30 10 Internet 20 Originators Wall Street Reform Leads FEATURE ARTICLE!

A revolution that needs a solution.

and Protection Act Title X: Bureau of Consumer Financial Protection.

to Generate More Leads

Up 54 Bringing The Rear Tom Deutsch, Executive Director, American Securitization Forum.





Positive Attitude





Positive Attitude


Issue 043


February 2011

Wall Street Reform and Consumer Protection Act


pg 45


pg 45


pg 46


pg 46


pg 46

Service Providers

pg 47

Title X: Bureau of Consumer Financial Protection.



Internet Mortgage Leads


Rocky Foroutan CeO, Lender411 A revolution that needs a solution.


Characteristics of Top Producing Loan Officers Tim Davis Mortgage Marketing and sales coach Where do you stand?

16 30

Take My Lead Justine Assal certified Mortgage consultant

Tips for Originators to Generate More Leads Cathy Blaszyk Vice President of LEnder Services ClosingCorp


February 2011

Seven New Ideas for Winning Agent Referrals LaKrishia Armour Marketing Content Specialist a la mode


EDITORIAL / CONTENT MANAGER Kristen Moser ACCOUNTING MANAGER Shawna Ingram Advertising Director Jessica Grizzle Advertising sales Heather Bopp

Editor's Forward

Production Manager Henry Suchman



Production Assistant Dawn Exner


APPRAISER sound off


What's your mortgage IQ?






COLUMNISTS & Contributing Authors Martin Andelman LaKrishia Armour Justine Assal Cathy Blaszyk Tim Davis Karen Deis Rocky Foroutan Peter Hébert Bill McKnight Stewart Mednick Rick Roque

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Editor's Forward

If you are not part of the solution, you are part of the problem. This seems to be a saying that has held much merit over the years. In today’s economic environment, it seems to have some relevance as well. However, I want to put a bit of a different spin on this mindset. When I was in the Navy, I served under an officer that had an “opendoor” policy. Basically, if you wanted to ask, tell, or otherwise speak to him, just knock on the door. I did that once. The first time I did, I had a complaint about an operational procedure. The complaint was well received by the officer. Instead of praise or validation, I was rebutted with a statement that blind-sided me. “So, Petty Officer Mednick, what is your suggested remedy to the problem?” “Sir?” “Are you suggesting that you can just come into my office with a problem and expect me to remedy it for you or anyone else? I should allocate resources to perform a task that you are already well-versed and knowledgeable and you can just as easily provide a recommendation or action plan?” “I just wanted to bring it to your attention, Sir.” “Well, you have, now bring to my attention a plan of action to resolve this issue. And moving forward, don’t ever come to me with a problem unless you have also a recommended solution….” Wow. A life lesson learned. So, to this day, should an issue in life ever cross my path that I feel warrants resolution, I will have a suggestion for resolution to follow. Now, The Niche Report receives many letters from the readership, and many are complaints about a myriad of things in the national spotlight, local to the reader, articles in the magazine, etc. Here is my challenge for all you wonderful readers for 2011: complain ‘til your heart is content, then suggest a solution. In any facet of your life, whether it is business, raising the kids, or talking to the significant other, suggest a solution to a problem about which you initiated the conversation. You may find a new perspective to the problem when you attempt to figure out a solution. And that is what this issue is about: solutions. The theme for this month is lead generation, but that is a solution to the problem of lack of business, right? Rocky Foroutan is the CEO of and has a fine article about solutions to generating great internet leads. Bill McKnight writes an excellent column about the problems with the new appraisal laws and how his ethics may be a solution. Tim Davis offers seven characteristics of a top performing loan officer as a solution to poor performance. Peter Hebert continues his exploration into Wall Street reform as a solution to the debacle of the last three years. Lead generation, technology, and the new laws are also topics of articles by our usual suspects of columnists and columns. So roll up your sleeves and let’s get cracking! Cheers!

Stewart Mednick Managing Editor




Internet Mortgage Leads A Revolution that Needs a Solution

by rocky foroutan


eads are the life blood of the mortgage industry. We all know it. Leads are what facilitate the connection between borrowers and lenders, and without the right information, you have got nothing… a few word-of-mouth referrals, maybe, but no dependable flow of fresh business. In my years as an internet marketer, I have seen a massive shift occur in the way prospecting is pursued in the mortgage industry. Postcards and cold calls were the name of the game twenty years ago, but these tools do not cut it on their own anymore. A full 85 percent of mortgage originations start with an internet search; with a borrower shopping online for the right mortgage. Marketers have spent the last decade and a half developing websites and online tools to enable consumers to match with lenders on the web. This was the genesis of the internet lead industry, and today, internet leads have become a standard asset; a necessary part of any lender’s marketing arsenal. However, as internet leads grew in popularity, more and more marketing companies tried to dip into the pot. As is the case in every rapidly growing market, fly-bynight operations spurred up, trying to take advantage of this increasing demand and started focusing on one thing only: generating more and more revenue. In some cases, it was no longer about connecting borrowers with the right 10

February 2011

lenders. Dubious practices artificially inflated the lead pool with phony information and scammers, and good leads were oversold. Lead quality, overall, plummeted. I talk to a lot of mortgage professionals in my line of work, and I hear much the same story from a lot of them, “Internet leads are a waste of time,” they say. “Internet leads are spam. They don’t convert.” I have come across three recurring reasons for the majority of this skepticism. • Greedy vendors. Leads are sold too many times. By the time you, the lender, contacts the lead, fifteen other lenders have already called. • Poor quality. Consumers are incented to fill out lead forms for all kinds of silly reasons (e.g. contests, sweepstakes, ...) and in some cases the forms have nothing to do with mortgages. • If the lead has disconnected his or her phone by the time you call or has given false information out of suspicion—which is well warranted these days— refund is unlikely from the company you bought the lead. I spent some time working with a few of my mortgage friends to brainstorm and develop solutions to each of these problems. The answers we discovered are not necessarily revolutionary or brilliant. They just make sense. And we think they might change the ways leads are bought and sold on the internet. In order to be effective, leads must be generated and sold through a platform built on three principles— transparency, quality, and support.


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Transparency If you knew fifteen other lenders had already called a specific lead, you would not bother purchasing it. But the massive lead mills make their money by selling leads dozens of times to buyers who do not know any better. They withhold information about the status of the leads they sell, and in the end, you are the one who ends up on the bad end of the deal. Transparency changes this. In a transparent system, leads are bought and sold in an open marketplace where all buyers are aware from the start how many times a lead can be purchased. Filters should be free to apply—the system would hardly be transparent otherwise. Information on when and where the lead was generated should be provided, as well as the search terms that brought the borrower to the lead capture page. This guarantees that the borrower is a recent “in-market consumer,” ready to buy, and not an internet spammer. When leads are sold multiple times, it hurts everyone involved, as well as the industry as a whole. Borrowers grow irritated after the first few lender calls and are not interested in hearing the next offer, much less evaluating it critically. If you want to play this game, you are forced to degrade your pitch into sound bytes and hype to snag whatever attention you can from the uninterested borrower. Our experience has shown that borrowers tend to

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respond favorably to the first three or four calls they receive. After all, they are shopping around. Any more than that and it gets overwhelming. This just makes sense. It isn’t rocket science.

Quality The other half of the equation is that the leads must, in fact, be worth purchasing. This means the leads must be generated legitimately, through honest marketing practices that will bring in the right consumers. The best platform for lead generation is a healthy mix of organic search engine traffic and targeted paid advertising. Organic search is one of the most trusted but complex internet marketing methods to implement. A strong marketing company will know how to leverage this tool to drive qualified traffic to its landing pages. To be truly effective, leads must be delivered in realtime; at the instant they are captured. Quality is highest when the lead is freshest. The system should provide lenders the opportunity to set filters and automatically receive leads directly from the landing pages that generate them as soon as the forms are filled out. That’s powerful marketing. Support All of this would be meaningless without the full support of a reputable company to rest upon. When you call a lead, the borrower has only interacted with the marketing company or its website. As a result, the brand of the marketing company acts as an introduction and must be trusted and recognizable. This is intangible support, something you can not hire out to a lead management system. Any dud leads must be returned without question as rapidly as possible. Ideally, the marketing company would have a live customer support representative on staff to assist with returns and process requests. The leads you purchase must integrate with your lead management software; no exceptions. If a marketing company tries to sell you their own proprietary lead management software, that company has not done its job. Conclusion Transparency, quality, and support are the principles that build a strong internet lead generation platform. Anything less is a waste of time. The internet has become the primary resource consumers use to start the mortgage process. With the right leads, you can be there to meet them every time. Rocky Foroutan is the CEO of, a rapidly growing online community for mortgage professionals. Lender411 offers an open and transparent platform for generation and delivery of high quality real-time internet leads. also offers the perfect venue for marketing and advertising mortgage services. Basic membership on the site is free. Rocky can be reached by email: or by phone: 888-333-6628 x11.

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Characteristics of Top Producing Loan Officers Where do you stand? By Tim Davis


hat makes a top-producing loan officer? Is it their system, their lead generation strategy, or is it something more? I am often asked by loan officers to give them the latest, greatest, and newest strategy that will propel them to the top of their industry. What I have discovered is that there are hundreds of ways to generate business and it is not the strategy that works. It is the individual loan officers’ characteristics PLUS the strategy (in action) that produces the results. For example, if I am working with a loan officer who has little or no confidence, there is not a system, plan, or strategy that will put multiple loans in his or her pipeline. Therefore, it is not the “system” that this loan officer needs, it is the confidence first, then the system. As I have had the honor and pleasure of coaching and working with originators all across the country, I have come across seven distinct characteristics of top producers that I want to share with you. I also want to challenge you to decide where you are in each of these areas and make the decision to improve any areas in which you fall short.

1. COMMITMENT Top loan officers have made a full on commitment to themselves, their families, and their industry. They have 14

February 2011

decided that they are going to be the best they can and they will simply make it happen. They understand that the road to success is paved with speed bumps, broken pavement, and detours, but they have an unwavering spirit of commitment that simply will not derail them from their goal. At the root of their commitment is their understanding that building a business takes time, effort, and money. They are willing to invest all three. Coach’s question: At what level is your commitment? 2. CONFIDENCE Once a loan officer has made a full commitment, he or she knows that their confidence must match their desire. Confidence comes from two areas: 1) Knowledge of the business, and 2) Experience. Top loan officers spend time studying their craft. They understand the business both from the customer point of view as well as the larger economic picture. Once they have the knowledge, they will go into the market and call on the best referral partners. They accept rejection as part of the learning process and work to perfect their presentation and selling skills. Confidence comes and goes. When things do go wrong, deals fall apart, or agents get mad they dig into their confidence vault of motivational messages and fill their tank back up. Coach’s question: At what level is your confidence?

3. COMPETITIVENESS The desire to win is what drives top loan officers. They absolutely hate losing a loan to a competitor. They get up everyday with the single thought that they will originate a loan today. It is an expectation that they will win. At the heart of their competitiveness is the secret they know: The Loan Officer with the biggest Database of Relationships,wins…period. Loan officers will review their numbers against their personal goals on a regular basis and their internal drive will motivate them to exceed their goals. Competitiveness is simply an inner desire to win. I would personally write loans at times for little or no commission because I did not want my competition to have the deal. My ‘customer for life’campaign generated referrals and grew my business simply because I never let one get away. Coach’s question: How competitive are you? 4. FOCUS One thing I have definitely noticed is that top producers are always thinking, “I must originate a loan,” while they are at work. They refuse to be distracted by “new” strategies, although they do take the time to investigate them. They have a written business plan that included no more than three active marketing strategies. They become masters of their chosen marketing strategy. They will not implement a strategy that they are not committed to making work for them. They also understand their strengths and spend 80 percent of their time working in these areas. They will outsource tasks that are outside of their strength zone in order to stay focused. Another area they focus on is only working with the best referral partners. While they will accept business from a variety of sources, they will spend the majority of their energy seeking out and building relationships with top agents who are likeminded. Coach’s question: How is your focus? Are you easily distracted? 5. INVESTMENT I have yet to meet a top-producing loan officer that did not invest in his or her business. They will invest their own money into systems, coaching, and seminars that they will get a ROI from. They do not squander money, but they do understand that without the financial investment, they will not remain on the cutting edge of their business. They also do not wait for their company to make the investment. 99 percent of the time the money comes from theirown pocketbook. You will generally find in their possession, media containing interviews on best practices. Their desks will have subscriptions to this magazine, and they will often be found at the best industry seminars. I have also found that they have, at

some point, invested money into hiring an assistant. Lastly, they also schedule time to work on their business. I know of one loan officer who actually rented a hotel room on the beach for a weekend to work on her business plan. Coach’s question: If I looked at your checkbook ledger, how many checks were written for investment in your business?

6. DISCIPLINE Top-producers have a specific set of daily disciplines that they implement consistently. From checking their e-mail, to prospecting, and calling their database of clients, they have predetermined, specific times that they accomplish these task. It is their persistence that pays off. They will stay with a best practice until it delivers the results. Once they take on a task, they will remain consistent in implementation. They are also disciplined about family and personal time as well. Not every minute is spent on their business. They will take 2-4 vacations per year and enjoy the fruits of the business they have built. Coach’s question: Do you have a daily discipline routine from which you will not waiver? 7. ACTION Regardless of the plan, top-loan officers take action. The industry, customers, and referral partners are moving fast, so they need to always stay ahead of the pack. Once they hear about a strategy, they will quickly size it up, and then take immediate, swift, and decisive action. They will perfect their strategy over time, because of their commitment. Everything does not have to be perfect and they understand that 80 percent is good enough when it comes to getting started. Coach’s question: How quick are you to take action? In the end, the root of all of these characteristics is their “why.” They have clearly defined and understand what they want and why they want it. It could be their family’s or financial security. Whatever it is, it drives these seven areas. By taking the time to determine your why, you can begin your climb to the top. Tim Davis is a Mortgage Marketing and Sales Coach who works with loan officer and companies to increase their production, passion, and profitability. Davis is the host of The Originators Guide podcast on i-Tunes and you can find his video blogs at and http:// You can also follow him on Twitter @timdavisonline or facebook at timwdavis


take my lead! by justine assal


he mortgage industry is undergoing a complete renovation. If you have ever tried to live in a home that is being renovated, you can appreciate just how dusty and inconvenient it can be. While it certainly feels as though we are working in a construction zone at the moment, the focus for Mortgage Loan Originators have not changed; sales and production. Operations have kept us up with the changes and the new education requirements. Unless you can compete in the marketplace to develop leads, all of this new found knowledge is in vain. So how do you feed the pipeline with enough qualified leads to ensure that you are creating this a viable business model even with fallout? This is the one answer that does not change with time: it is the generation of leads! The enigma however, is how to acquire them! Lead generation does not happen overnight and is really the culmination of a set of habits and behaviors rather than a one-time action. In order to make the changes necessary to effect new results, begin by writing


February 2011

a plan. After all, as aptly stated by Lewis Carroll, “If you don’t know where you are going, any road will get you there.” Write down how many leads you obtain on a monthly basis and the source of each lead. Also, write down how much time you spend weekly on networking/ lead generation activities. This is the beginning of a roadmap that will enable you to chart your progress, quantifying what works. Now, you need a comprehensive list of ideas! Websites are the number one tool used for researching mortgages. Keeping on top of your website is an absolute must, not a luxury, if you intend to compete in today’s marketplace. This is the most daunting area for many people as our knowledge has not kept up with technology and we are apt to ignore and neglect with what we are uncomfortable. Fortunately, there are many unemployed college kids around that would be happy to help with this for a reasonable fee. You could consider a monthly cost for 3-4 hours and certainly improve upon your internet presence. Even if your website does not need a complete overhaul, it probably needs fresh content to ensure that you are keeping up with regulatory changes, this will also help to raise your

profile on the web and make your site more visible. Try not to panic over lack of computer knowledge as you can learn the basic skills to update information, start a blog, and connect to FaceBook and other social media. In today’s market, your website is a bigger representation of you than your office building, but you must spend the time helping borrowers to find it. Sticking your head in the sand is not the answer here as your website should be actively catching leads and if not, it is a waste of the time and money that you have already put into it. You can also use website updates as an opportunity to reach out to realtors and clients. Some template websites can make this easy by offering packages that include email flyers. If not, Constant Contact is always a great bet. Keep in touch regularly with program changes, industry updates, and get your website connected to as many realtor and referring partners as possible. This is time well spend and a true investment in your business plan. While the Website might be a net to reach out to potential borrowers, the rest is all about relationships! It is, and always will be, the way that business is done because ultimately, people are people and we all want to

work with those we feel comfortable. The old adage “out of sight, out of mind” also rings true and, therefore, you must be out and about networking in business groups and volunteering on committees. Always remember that your competition, at least the successful ones, are out doing the same. Committee work is not only important to be seen, but also to give potential referring realtors and contacts the opportunity to see your work ethic as a member of their team. This is an invaluable way to generate leads, especially if you are on committees within the local Realtor’s association. Step up to the plate and offer your time and knowledge; you will be surprised how well received your offer of time will be. Ultimately, all of this is about your image and being seen. Frequency of contact and how often you reach out to “touch” your clients and realtors through email, phone calls, personal contact and simply being out and about is important. If you imagine yourself as a brand, you are in complete control of the professional image, relevance and recognition of that brand. Visit real estate offices three to five times per week to speak at sales meetings. You should also set aside time to work on an informative email blast at


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least once every other week and update some text on your website. Leads come to you because you are actively seeking business and if you are spending your time in the office and not being visible on the internet and in your community, it stands to reason that people will forget you and the leads will dwindle down in numbers. As you start this process by writing your roadmap, you need to keep a daily record of your calls, visits, internet and social media touches, email campaigns and how many leads are generated through each source over a three month period. After the initial three month period, you will have ample data to support what is generating the most amounts of leads and what is not working well. As stated before, the generation of leads is the result of a culmination of behaviors. You must force those behaviors that have proven effective to become habits. It is always a good idea to watch what your more successful competitors do and emulate it, but with your own twist and personality. Remember, you only have to be a cut above the rest of the competition to stand out. Lead generation, therefore, is simply taking an active

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and assertive role in both your local and the internet communities and applying this as a focused effort towards your business production. It is not an enigma, but a well thought out plan that is acted upon consistently in order to achieve further success. Every aspect of the plan is a measurable ingredient on which you can decide how much time to spend. It is your roadmap to create more business and sustainable sources for referral.

Justine Assal originally hails from London, England and has lived in Central Florida on and off since the early 80’s. In 1999 she obtained her mortgage broker’s license and by 2000. Justine has obtained NAMB’s highest designation of Certified Mortgage Consultant and has served on NAMB’s Certification Committee. She is also a GRI 1 Finance instructor for the Florida Association of Realtors and serving as Vice Chair of the Orlando Realtors International Council 2009-2010.

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Wall Street Reform & Consumer Protection Act Title X: Bureau of consumer financial protection by peter hébert

Financial Stability Oversight Council The most noble of the titles within the Wall Street Reform and Consumer Protection Act is Title X, which establishes the Bureau of Consumer Financial Protection.1 The Bureau is to play a key role on the Financial Stability Oversight Council, which was established under Title I—Financial Stability, Subtitle A. This Council is the apex of the new regulatory apparatus. The Secretary of the U.S. Department of the Treasury will serve as the Council’s Chairperson. The other members of that Council will include: Chairman of the Federal Reserve Board of Governors Director of the Comptroller of the Currency; Director of the Bureau of Consumer Financial Protection; Chairman of the Securities and Exchange Commission; Chairperson of the Federal Deposit Insurance Corporation; Chairperson of the Commodity Futures Trading Commission; Director of the Federal Housing Finance Agency; Chairman of the National Credit Union Administration Board; and an Independent Presidential appointee with insurance experience. The Council has three overarching roles, which are to: First, identify risks to the financial stability of the United States that could arise from the material financial distress or failure, or ongoing activities, of large, inter-connected bank holding companies or nonbank financial companies, or that could arise outside the financial services marketplace; Second, promote market discipline, by eliminating expectations on the part of shareholders, creditors, and counter-parties of such companies that the Government will shield them from losses in the event of failure; and Third, respond to emerging threats to the stability of the United States financial system.2

Bureau of Consumer Financial Protection The Bureau was the brainchild of Elizabeth Warren. On her Facebook page Warren notes: Consumers can’t buy a toaster that has a one in five chance of bursting into flames, but they can enter into a mortgage that has the same one in five chance of putting them out on the street.3

The Bureau’s mission, according to Warren, is “to level the playing field for American families in the marketplace for consumer financial products and services.”4 Warren’s vision embraces the use of information technology to achieve three organizational goals.5 First, to monitor, be transparent, and ward off industry capture. Second, to collect and analyze data with the ability to update information, spot trends, and deliver government services twenty-four hours a day, seven days a week as problems occur, not years later. Third, to expand publicly available data so that more people can analyze information, spot problems, and craft solutions. The Bureau will be funded and have an operating budget of somewhere between $500 million and $646 million.6 Title X is 160 pages long and has eight subtitles with 87 sections. The Bureau, for the most part, will serve as the single agency for complaints that otherwise would have been directed to the other federal regulatory agencies.

Structure, Governance, and Functions Section 1011 of Subtitle A establishes the Bureau of Consumer Financial Protection to be overseen by a Director and Deputy Director. The President is responsible for nominating the Director with the advise and consent of the Senate. After approval, the Director will serve for a 5 year term. The Bureau’s main office will be in Washington, D.C. and in the cities where the Federal Reserve has regional branches. Though it is labeled “an independent” agency and clearly established as autonomous from both the Federal Reserve and Congress, the Bureau is embedded within the Federal Reserve.7 A healthy adversarial relationship with the financial sector is not yet apparent. Many of the Bureau’s roughly 2,000 employees will come from the other federal agencies that were stripped of their regulatory oversight—the same agencies that were 99 percent irrelevant. These employees will fall under the Federal Reserve’s retirement and thrift plans. The Bureau will appoint an Ombudsman to serve as a liaison between the public and the Bureau.8 The Bureau’s functional areas will include research, community affairs, and collecting and tracking complaints. The complaint section will be responsible for redirecting calls to state regulators, reporting to Congress, and sharing data with other regulators.9 The Director will establish an Office of Fair Lending and Equal Opportunity to oversee and enforce the Equal Credit Opportunity Act and the Home Mortgage Disclosure Act.10

The Director will establish an Office of Financial Education, “which shall be responsible for developing and implementing initiatives intended to educate and empower consumers to make better informed financial decisions.” This office will work with the Financial Literacy and Education Commission, which was established under the Fair and Accurate Credit Transactions Act of 2003 following the National Strategy for Financial Literacy that calls for: Building public awareness of available resources; Developing tailored, targeted materials and dissemination strategies; Tapping into effective partnerships; and Supporting research and evaluation of financial education programs.11 The Office of Financial Education will be responsible for: Financial counseling, including community-based financial counseling; Information to help consumer understand credit products, credit histories, and credit scores; Savings, borrowing, and other services found at mainstream financial institutions; Activities to help consumers understand educational expenses, financial aid applications, major purchases, and debt reduction plans; Help for consumers to develop long-term savings plans; and Wealth building and financial services during the preparation process to claim earned income tax credits and Federal benefits.12

Supervisory Authority The Bureau is empowered with exclusive supervisory

authority under Section 1025 of Subtitle B—General Powers of the Bureau. That oversight will be over very large banks, savings associations, credit unions, and their affiliates that have over $10 billion in assets.13 The current regulators will have back up enforcement responsibilities. Examples include:14 Bank of America–$2.8 trillion in assets. JPMorgan Chase & Co.–$2.175 trillion in assets. Citigroup Inc.–$1.9 trillion in assets. Wells Fargo & Co.– $1.3 trillion in assets. PNC Financial Services–$291 billion in assets. U.S. Bancorp–$266 billion in assets. Bank of New York Mellon Corp.–$237 billion in assets. SunTrust Banks Inc.–$189 billion in assets. State Street Corp.– $174 billion in assets. Capital One Financial Corp.–$161 billion in assets. BB&T Corp.–$152 billion in assets. Regions Financial Corp.–$146 billion in assets. Corner credit unions, typically with $200 million in assets, are not under the Bureau’s oversight. They did not create the financial crisis, were not named in class action lawsuits for predatory lending, and were not recipients of the Wall Street bailout. The Bureau’s supervisory powers empowered with limited supervisory authority under Section 1026 of Subtitle B concern financial institutions with less than $10 billion in assets. The institution’s existing regulators retain primary regulatory oversight and enforcement responsibilities. The Bureau will have the ability to request sample examination reports from the primary regulators.

Regulatory Oversight The Bureau will have regulatory oversight over the major transaction-related areas that include:15 Real Estate and Mortgage Lending— Real Estate Settlement Procedures Act, Truth in Lending Act, Equal Credit Opportunity Act, Home Mortgage Disclosure Act, Home Ownership and Equity Protection Act, Home Owner’s Protection Act, Interstate Land Sales Full Disclosure Act, S.A.F.E. Mortgage Licensing Act; and Billing and Debt Collections— Fair Credit Billing Act,

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Fair Credit Reporting Act, Fair Debt Collection Practices Act; and Privacy and Banking— Federal Deposit Insurance Act (limited sections), Fair Credit Reporting Act, Gramm-Leach-Bliley Act (limited sections), Electronic Fund Transfer Act, Truth in Savings Act, and the Omnibus Appropriations Act of 2009 (only section 626). The impact of this is that should the Bureau fail to deliver to protect consumers, only one federal agency will be blamed rather than all of them. The success of the new Bureau, however, should be measured by whether or not it will be able require credit card issuers to provide customers with contracts in 12 point type that require both parties to sign, without unilateral terms, and the opportunity for borrowers to have due process in the courts in the event of default rather than the industry’s circumvention of the Fifth Amendment right to due process.

Some of the Amendments Subtitle H is Conforming Amendments, and it addresses amendments and adjustments to 28 regulatory,

licensing, credit, banking, lending, real estate, debt collection, disclosure, telemarketing, and privacy laws. Section 1083 of Subtitle H amends the Alternative Mortgage Transactions Parity Act of 1982 and overrules “State constitution, law, or regulation that prohibits an alternative mortgage ... including any restriction on prepayment penalties or late charges.”16 Under Section 1088 of Subtitle H that amends the Fair Credit Reporting Act and Fair and Accurate Credit Transactions Act of 2003, the Bureau will: Establish and maintain guidelines for ... consumer reporting agencies regarding the accuracy and integrity of the information relating to consumers ... ; and prescribe regulations requiring each [entity] that furnishes information to a consumer reporting agency to establish reasonable policies and procedures for implementing the guidelines .... 17

This amendment will standardize credit data management and reporting. Section 1094 of Subtitle H amends the Home Mortgage Disclosure Act of 1975, which will result in a change to the Uniform Residential Loan Application (Form 1003) to reflect the number of and dollar amount of mortgages segmented by:

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Total points and fees paid at origination; The difference between the annual percentage rate and interest rate benchmarks; The terms in months for any prepayment penalty; The property value; The number of months in the initial fixed rate’s term; The presence of terms that would include other than a fully amortizing term; The loan’s term expressed as a number of months; The origination channel expressed as either retail, broker, or other; The loan originator’s unique identifier per the S.A.F.E. Mortgage Licensing Act of 2008; The real estate parcel number; and The credit score of each applicant.18 The more complete nature of the data collection in the Form 1003 will better permit regulators and watch groups to better understand the nature of both a lender and loan officer’s business patterns. Section 1096 amends the Home Ownership and Equity Protection Act of 1994 and authorizes the Bureau as the primary federal regulator to develop, implement, and enforce rules that prohibit unfair and deceptive trade practices.19 Section 1098 amends the Real Estate Settlement Procedures Act of 1974 and recognizes the Bureau as the primary federal regulator to publish “a single, integrated disclosure for mortgage loan transactions” in “readily understandable language” that incorporates the disclosure requirements of the Real Estate Settlement Procedures Act and the Truth in Lending Act.20 The Bureau shall have the power to administer and enforce these amended Acts. Section 1100 amends the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 to recognize the role of the Bureau as a backup authority to establish a licensing system and to work in conjunction with the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the National Credit Union Administration, and the Federal Deposit Insurance Corporation. Section 1100C amends the Telemarketing and Consumer Fraud and Abuse Prevention Act to authorize the Bureau to enforce the Act. Section 1100F amends the Fair Credit Reporting Act to require creditors to provide applicants with their credit score when an adverse decision is made.

You Stray, You Pay Consumers can send their complaint to any of the complaint processing centers of any of the agencies and it will be forwarded by the receiving agency to the correct banking agency supervising that lender. Similarly, loan officers looking to kick competitors to the curb for failing to note the annual percentage rate when an interest rate is promoted in a radio or printed advertisement will not need to know that lender’s regulator in order to file a complaint. The Bureau of Consumer Financial Protection will be the single source of contact. Section 1017 of Subtitle A, the Bureau of Consumer Financial Protection, establishes and defines funding, penalties, and fines. This section establishes a Victims Relief Fund, which provides the means to compensate victims. When the Bureau secures a civil penalty against lenders in judicial or administrative actions, payments will be made to the victims where money penalties exist under Federal consumer financial laws.23 Challenge to National Charters and the Supreme Court Unabated predatory lending in the United States in part hinged on the Watters v. Wachovia case. Linda

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Watters, Michigan’s commissioner of the Office of Financial and Insurance Services, had the role of enforcing Michigan’s two lending laws: the Secondary Mortgage Loan Act of 1981 and the Mortgage Brokers, Lenders, and Servicers Licensing Act of 1987. These laws required lenders doing business in the state to register with the state and comply with its lending regulations. Wachovia Mortgage had complied with Michigan’s lending laws until January 1, 2003 when Wachovia Mortgage became a subsidiary of Wachovia Bank, N.A. On April 3, 2003, Wachovia Mortgage notified Watters, and said it would no longer comply with the state’s registration requirements, and stated that that it would continue originating mortgages in the state as it had for the last six years. Both Wachovia the parent company and its state-chartered mortgage subsidiary believed that they were in alignment with the federal law governing national banks. Watters responded and said that Wachovia Mortgage’s refusal to comply with state regulations would result in the company not being authorized to originate loans in Michigan, in effect issuing a cease-and-desist order. Wachovia by virtue of its national charter, preempted the state’s regulatory reach, and as a result, the lending powers of a nationally charted bank and its subsidiaries could not be curtailed by state law. Moreover, the Commerce Power of Congress was not reserved as a state right when it came to the regulation of subsidiaries of national banks. The Supreme Court decided the case on April 17, 2007, voted 5 to 3 in favor if Wachovia, and ruled that the Office of the Comptroller of the Currency had regulatory authority over operating subsidiaries of national banks that have state charters. According to RealtyTrac®, one out of every 235 homes in Michigan was in foreclosure in 2010 making that state the number three foreclosure hot spot in the nation. The Wall Street Reform Act nibbles at, clarifies, but does not completely undercut, the Supreme Court decision of April 17, 2007 in Watters v. Wachovia concerning the doctrine of preemption, which was rooted in the Tenth Amendment to the U.S. Constitution.24 That unpopular decision was enough for the nation’s governors and attorney generals to hoist the Gadson flag with the “Don’t Tread on Me” motto up the flag pole. Section 1042, Preservation of Enforcement Powers States of Subtitle D, Preservation of State Law empowers the Attorney Generals to sue nationally chartered banks in district or state courts to seek enforcement of any of the Bureau’s regulations. Section

1044, State Law Preemption Standards for National Banks and Subsidiaries Clarified, that “State consumer financial laws are preempted, only if—application of a State consumer financial law would have a discriminatory effect on national banks, in comparison with the effect of the law on a bank chartered by that State.” Moreover, Section 1047, Visitorial Standards for National Banks and Savings Associations, opens the door to visitorial and law enforcement powers by any state attorney general. The state attorneys general and state regulators are given the authority to fully enforce their state’s consumer financial laws. Moreover, this title stipulates that state attorneys general do have visitorial authorities to enforce state laws on nationally chartered banks. The most significant feature of this title is that it undercut the adverse impact that Watters v. Wachovia had on the states.

The Silence of Title X First, Congress established the Federal Reserve as a privately owned series of corporations owned by shareholders and member banks, authorized the Federal Reserve to act as a federal agency, and expected it to administer and enforce regulations to protect consumers. The track record of the Federal Reserve has demonstrated

that the agency was over tasked, it underperformed, and it under delivered. The creation of the Bureau of Consumer Financial Protection for 2011—98 years after the Federal Reserve was created—underscores the errors of having too many PhD economists at the helm to manage “the dismal science.” The Bureau of Consumer Financial Protection will assume its statutory duties on July 21, 2011. The U.S. Department of the Treasury is charged with getting the Bureau set up and can delay the Bureau’s assumption of powers for six months.25 Second, understanding inflation, not just the cost or terms of credit, is central to consumer financial protection. Title X as well as Title XI (the Audit the Fed provision) are silent on the money supply in the nation’s economy. On March 23, 2006, the Federal Reserve stopped publishing M3.26 By deemphasizing the role of the actual size of the money supply, the true inflation rate is concealed. Between 1776 and 1983, the M3 money supply grew by $2.5 trillion. Between 1983 and 1997, the M3 money supply grew by another $2.5 trillion. Between 1997 and 2001, the money supply again grew by $2.5 trillion.27 Mortgage lenders measure the health of their economy by an interest rate and the abundance of mortgage

products. For them, “inflation” will be measured in fee caps, which will necessitate more originations in order to break even. The academic textbooks, however, use the Consumer Price Index promoted by Keynesian economists as the measure of inflation. Neither are helpful, because true inflation is measured by the supply of money in circulation. So, the silence in Title X does not help lenders and consumers understand the relationship between finance and economics when the legislative focus is on interest rates and fees rather than the number of dollars in circulation and what that does to costs over time. Third, the emphasis on financial literacy lacks development of a meaningful curriculum for the public schools, colleges, and universities. In place of that, a priesthood of financial counselors is created which will have the consequence of creating another generation of in debt and dependent supplicants in parent-child relationships. This will not solve the core problem of a widespread lack of financial literacy. It addresses the need to provide seniors with special attention to be protected from unfair and deceptive lending practices, but the Wall Street Reform and Consumer Protection Act exempted reverse mortgages.

Regulatory Malfeasance In the September 24, 2010 issue of the Federal Registry, the Federal Reserve proposed amending a 42 year old extended right of rescission provided by the Truth in Lending Act.28 The three year rescission provision has been used by homeowners, who have discovered after closing, that their lender had violated the law in the application process by not providing all of the required disclosures. They discovered fraud. Homeowners in foreclosures have used forensic loan audits to uncover material disclosure violations in order to exercise their extended right of rescission. When successful, this defense against foreclosure forces the creditor to drop its security interest and its ability to foreclose. The homeowner then refinances and pays off the outstanding loan balance

minus the payments made and finance charges and fees financed at closing. The significance of the Federal Reserve’s proposal should not be downplayed, because it erodes the provisions of the defense to foreclosure provision in Subtitle B of Title XIV, the Mortgage Reform and Anti-Predatory Lending Act. The Federal Reserve’s proposal constitutes regulatory malfeasance given that Section 1022 of Title X establishes the Rule Making Authority under Subtitle B—General Powers of the Bureau.29 Not unlike the battle lines drawn in the fight that led to Watters v. Wachovia, the Mortgage Bankers Association leaned in favor of the Federal Reserve.30 In contrast, 16 national consumer and civil rights organizations, 33 state and local legal services programs, and 216 attorneys regularly representing homeowners fighting foreclosure opposed the proposal. In a joint letter to the Federal Reserve, they asked that any proposed regulatory changes be made after the Bureau assumes its statutory responsibilities on July 21, 2011.31 The Wall Street Reform and Consumer Protection Act produced industry fears that Congress had overreacted to consumer demands for financial reform. Between July and December of 2010, 325 organizations held 510 meetings with the Federal Reserve, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, and the Commodity Futures Trading Commission. In this lobbying effort to preempt the Bureau of Consumer Financial Protection, 90 percent were banks concerned about risk-retention requirements, fraud prevention, debit card fees, merchant fees, and notices of fees and exchange rates for consumers. Industry fears focused on the cost of compliance, not the intended benefit to the consumer. Peter Hébert is a mortgage finance and real estate industry subject-matter expert and CEC trainer with a master of business administration degree in finance and marketing from Mount St. Mary's University in Emmitsburg, Maryland. Hébert is the author of Mortgaged and Armed (Freedom House Press, July 2010), which is available on His upcoming books are The Collapse of Home Prices and the Foreclosure Crisis and Predator Nation. Both will be available in 2011. He can be reached at * Endnotes to this article will appear in the online version of The Niche Report, which can be found at after Feb. 15th.

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Tips for Loan Originators to Generate More Leads By Cathy Blaszyk


n this economy, mortgage professionals have to work a lot harder for a smaller book of business. Individuals and companies have had to cut their marketing budgets at a time when they need it most. Here are five cost-effective ways that loan originators can generate

more leads.

TIP #1: USE SOCIAL MEDIA. Cast the widest net at the lowest cost. While Social Media has been an effective way for businesses to market to consumers, B2B marketers can benefit by figuring out how to use these platforms to their advantage. Maintaining a Social Media presence takes time. Tools like Twitter, LinkedIn, and Facebook, should be used consistently to be effective. If you have the time and/or staff to manage multiple Social Media platforms, go for it. If not, consider focusing on one or two and doing that well. Facebook is becoming the first choice of many businesses because of its size (more than 500 million users), the SEO benefits of a business Facebook page, and the "wall" where they can converse with customers. (Facebook 30

February 2011

is very popular with real estate agents.) A Facebook business page can be used effectively with your personal profile to grow your sphere and establish yourself as a trusted expert on mortgage matters. Assuming you already have a Facebook personal profile with a number of “friends,” consider adding a business page. To do that, type “Facebook Pages” in the search field on your Facebook Home Page. There you will find a tutorial including how to set up a business page, build a presence, engage your audience and spread your message. After creating your business page, write a few interesting wall posts, add a relevant tab (like the free Real Estate tab provided in the Roost Social Media Toolkit, located in the left-hand column of your Home Page), post a photo, and add links to your Web site and professional blog if you have one. It’s important to engage your audience with insightful, topical content. Posts that get “Liked” and “Shared” (Facebook terms) end up in more feeds, which means greater exposure. It’s also important to maintain a regular cadence by posting at least once a day. The next step is to build a base of “fans” by inviting your Facebook friends to “Like” your page for regular local market insights and updates. To do this, from your business page click the “Suggest to Friends” link in the left–hand column. The Roost Publisher will also help you get friends to your page.

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General Session Topics • The Future of the Securitization Market, Risk Retention, TBA Market, Reforming the GSE’s, Government Guarantees & More • MBA’s Report on Current Legislative/Regulatory Issues • Banks in the Mortgage Market • How to Use Social Networking: Facebook, Twitter, LO Websites, Blogs Exhibit Hall with Lunch Afternoon Session Topics • LO & Broker Compensation • Labor Law Issues (LO Overtime, Department Of Labor Opinion, Minimum Wage) Mortgage Bankers & Financial Institutions Panel: Independent Mortgage Bankers Mortgage Brokers (FHA Business, Use Of Compare Ratio’s, Etc.) Regulators Roundtable: Regulators from NJ, PA & NY Mortgage Fraud Panel: How To Detect And Avoid Mortgage Fraud Networking Cocktail Reception

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Continue to update the page with fresh content. Topical ideas can come from many sources. For example, go to Google News ( and search for a topic that would appeal to your readers, for example, “Mortgage Rates.” You will find links to the most recent news items for that term. Scroll to the bottom of the page and select “Create an E-mail Alert for Mortgage Rates.” You will then receive daily or weekly updates of fresh news items that you can post on your page or add with your own comments. Other sources for content: • • • • • • •

Industry trade association Web sites Industry publications Real estate publications National newspapers Local newspapers in your area Chamber of commerce newsletters Real estate blogs

TIP #2: BLOG. Learn to do it effectively. Be yourself. Read blogs you like and find a tone that you are comfortable with. Write as if you are having a conversation with a client or colleague. If you are producing content for your Facebook page, it shouldn’t be too difficult to expand that into blog posts. If you are already blogging, make sure you are doing it consistently, at least once a week. Focus on trends, statistics, local market information, new products and services, and anything else you think would be of interest to your readers. Talk about real life situations that have occurred in your business. Provide your opinions on the housing market nationally and/or locally. Comment on related news articles you’ve read. What’s going on with lending? What new products are out there? What’s

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happening with loan modifications? Be sure to link your blogs to your Facebook page and your Web site (plus additional Social Media or other sites you use such as Twitter). Include your e-mail address and invite people to ask questions. Publish questions and answers in future blogs.

TIP #3: GET ENDORSED. Leverage your satisfied customers. Turn satisfied customers into boosters. Here are some of the tactics you can use with your customers: • Invite them to become a “fan” on your Facebook page so you can keep them up to date. • Ask them to “Like” your Facebook page, thereby recommending it to others. • Ask them to write a two- or three-sentence testimonial and post it on your Web site and Facebook page (with their permission).

TIP #4: GET PERSONAL. Build more face-to-face relationships. Enough about Social Media. Don’t lose touch with people face-to-face. Much of your business can come from people who know you. Get involved by joining your local Realtor® organization as an affiliate or associate member. Attend the events and functions. Volunteer to serve on committees that are allowed for your membership category. Get to know people. Attend real estate caravans and open houses. Establish your credibility by becoming familiar with your local market, such as inventory, trends, what’s selling for how much. Reach consumers by becoming involved in community groups like the chamber of commerce, Rotary, Boys and Girls Club, etc. Remember, relationship building takes time. Get to know people and build their trust in you. They may seek you out for advice and, eventually for business. Tip #5: LOOK SMART. Position yourself as an expert in your community. Look for other avenues to gain exposure in your local market and position yourself as an expert. Contact your local newspaper and offer to write a bylined article on a topic related to your field that educates consumers. (Weeklies are more receptive than major metropolitan dailies.) Don’t advertise yourself—your exposure comes in the form of your byline and bio at the

end of the article. Once you establish yourself with your local newspaper, offer to write a regular column or Q&A where readers are encouraged to send questions. Connect with people on real estate and consumer Web sites that post consumer questions. Focus on those pertaining to your area of expertise in your community (don’t waste time advising someone who lives on the other side of the country). Offer your expertise where appropriate. Some examples: Active Rain: An active social network that helps real estate agents create business relationships both within the industry and with consumers. After registering, click your state at the top of the page, and then click on your city or county from the list on the left-hand column. Review the blogs and posts. You can post a link to your blogs, updates on new services you provide that are helpful for your customers, or your opinion about something happening in your community that pertains to housing. Registering and using many of the features are free, with more advanced tools and benefits available on a paid subscription basis. (Note: You do not have to write new blogs for every site. With a few tweaks, blogs can be used on several sites, getting a bigger bang for your buck. Just be sure your content matches your audience.) YELP: A consumer-oriented site that helps people find customer ratings for local businesses. After registering, navigate to your local city or county, then to the Real Estate tab, and the Mortgage Broker category. Ask former clients to post a review about your services. Monitor questions/posts related to mortgages and respond to those where you can be helpful. Zillow: Respond to consumer questions under the “Advice” section at the top of the page. Once you are in that section, type “Mortgage” in the “Questions, Keywords or Topics” search box, followed by your city in the next search box. There you will see a list of questions and the dates they were posted so that you can respond to those you feel are appropriate based on relevancy and how recently the question was posted.

Summary With the proliferation of Social Media and informational Web sites there is a deluge of information competing for attention. But there are also more ways to reach your customers if you rise above the “noise” by

providing content that is relevant, informative, and topical. Be concise and keep blogs short (300-400 words should do it). Don’t force people to wade through a long post to get to the heart of your message. Build your Web presence and expand your personal relationships. Offer to help people as opposed to promoting yourself. Building relationships and establishing yourself happens over time. Be patient, consistent and persistent.

Cathy Blaszyk, CMPS, RMA, is Vice President of Lender Services for ClosingCorp, a real estate information and data services company based in La Jolla, CA. ClosingCorp develops Web products to serve the needs of real estate professionals and consumers, including the SmartClosing Mortgage Calculator, the SmartGFE Service for loan originators and Closing. com. Blaszyk has spent two decades in the mortgage banking industry, representing direct lenders such as Bank of America and CitiMortgage, as well as serving as a mortgage broker.

seven New Ideas for Winning Agent Referrals By LaKrishia Armour


n the October 2010 issue of The Niche Report, my colleague, Molly Dowdy, wrote an article entitled “9 Steps to Landing Agent Referrals.” We were flooded with great feedback, so we thought a follow up with more ideas was in order.

Why is everyone after agent referrals now? Many agents have buyers who have fallen in love with a house, but haven’t secured financing and some agents have a strong preference for pre qualified buyers when showing. Either way, partnerships with successful agents ensure that you’ll have a constant flow of eager borrowers. First, as we mentioned in October’s article, we wanted to point out again that it’s important to have a specific group of agents that you target, and save your effort for those people. If you have limited resources, focus on those who are generating great income. By approaching only the strongest agents, you’ll see that you’ll get responses from those who are open to power partnerships. If you give them their due, they’ll show interest in working with you. Don’t worry, we’ve got a marketing cheat sheet We know not every LO has access to a never-ending penny bank when it comes to marketing. So as usual, we’ve put together a web page with an easy-to-follow marketing toolkit you can download for free. You can hop over to 34

February 2011 to download the packet. Go download the packet of free templates and tools now. We all know that even when we think the industry has dried up like a salty slug at the hands of a mischievous 8-year-old boy, top producing agents are still selling homes. Even in the toughest markets, the best agents have enough qualified buyers to make you very successful. Even better, we’re hearing that things are improving every day, so now’s the time to solidify your relationships so you’re reaping the rewards in the coming spring selling season.

7 Modern ways to win more referrals Up front, this isn’t going to be a boring rundown of the basics. You’ve been to plenty of industry events, happy hours, chamber mixers, and the like. You already know how to do that. These ideas are fresh, or new twists on classics, that’ll help you get in good with only the best agents. 1. Their benefit + how you’re different = sweet success Just like you’re bombarded by people wanting your business, agents hear from multiple loan officers every day. And the superstar agents are flooded with calls and marketing from LOs. Using a little empathy when approaching agents can go a long way. Now, this doesn’t mean bowing to their feet in servitude, but start thinking about your answer to their inevitable question, “What’s in it for me?” You know exactly what you hope to gain. Now, turn it around. What can an agent or REALTOR® gain from working with you? Let’s be real here: the agent doesn’t care about your gain, so

tell them what’s in it for THEM immediately. Keeping this at the forefront of your marketing and at the very beginning of your conversations is critical. After you’ve told them what’s in it for them, tell them how you’re different from the rest. If you’ve ever wished you knew just what to say to an agent to get their attention, try this formula: Their benefit + How you’re different. It’s a powerful one, two punch combo that will get their attention. 2. At open houses, leave them something that won’t get trashed Instead of leaving a boring stack of business cards or flyers at open houses, give them glossy plastic-coated cards that give answers to frequently asked questions about loans and financing, and/or a short glossary of frequently misunderstood financing terms, along with your contact information. You can use questions that you actually hear from borrowers on a daily basis or cruise the web for ideas. This gives potential borrowers something they can take along with them as a reference guide. And, they’re far more likely to pass it to their friends and family, too. Think about using QR codes so that they always have your contact info on hand. In the downloadable toolkit I mentioned earlier, I’ll include a template for an FAQ collateral piece, plus pricing and contact info for the plastic-coated printing best suited for this kind of project. It’s far cheaper than you think, I promise. And remember, as a bonus, these more professional and informative leave-behinds also make the agent look good because they’re providing important guidance instead of just random business cards. So you’ll be getting the attention of prospective borrowers and the agent. Two birds with one plastic coated card. 3. Pay your debts and make sure they know you did it Are you on the path to forming a great relationship with an agent? In order for a productive partnership to blossom, you’ve got to nurture it. In the November article, Molly mentioned how important it is to thank an agent for their referral. But let’s also take it a step further and reciprocate the lead. Warning: Don’t just tell the buyer to tell the agent that you sent them. That’s not enough. The buyer will likely forget. Instead, after you give your agent’s contact info to the client, give your agent a heads up that you’ve sent a referral their way. And, don’t forget the referral’s contact info so your agent can do a proactive follow-up. Be very clear by saying, “Remember when you sent Mike Jones to me for a loan on the Magnolia property? Well, I came across a potential buyer for you and wanted to return the favor. Here’s their contact info and I gave them yours, too. They’re expecting your call and I told them great things about you. Let me know how

it goes!” The key is to be transparent with your actions. In the marketing kit, we’ve got a couple of sample e-mails you can send out to your agent partners when you introduce a referral. 4. Niche-ing yourself is so three years ago – niche your targets instead We all know the market is generally too tight to pigeonhole your brand into one specialization like reverse mortgages, jumbo loans, first time buyers, etc. A few years ago, you could make a good living doing just that, but now you need to wear more hats. But how can you cover more ground without fading into the crowd? First, forget the rate sheet. It’s a necessity and you can do it automatically and easily. Everyone sends one, so it’s not going to be enough to make you stand out in the stacks of other rate sheets faxed to brokerages. Try the following two ideas instead. a) Deliver a few pieces of strategic loan program information to targeted brokerages and agents. For example, when you find a great loan program or special rates for military, present that relevant information to offices and agents located around military bases. Find an affordable down payment program? Target the first time buyer agents with that material. Got a good jumbo loan option? Hit the agents that specialize in luxury homes. If you have a good automated e-mail program that categorizes your contacts (XSellerate does this), it will be very easy to get sophisticated with your messaging for a much higher return. b) Check out a daily rate advice program like XSellerate’s Daily Rate Lock Advisory. Instead of just rates, it has expert commentary and advice on when to lock and when to float. There’s an update every single day, so you can send it to agents daily or you could opt to send it weekly instead. But, these advisories are e-mailed to your contacts with your branding on them. The advice is professional and would take you significant time to do on your own, but this is automated and you don’t lift a finger. It’s one of our favorite things – looking like a rock star without actually doing anything. 5. Use the B word No, not that B word. Blogging. I know, I know! Blogging was a buzzword a few years ago, but hear me out before you skip this paragraph. Blogging is a great way to share your expertise and gain search engine rank. Plus, most of you probably have blogs floating on the web,


untouched for years. Consider restarting it, but with a new strategic, very specific twist. Instead of the general purpose mortgage finance blog, write one specifically FOR AGENTS. Fill it with tips for avoiding pitfalls, creative ideas you’ve heard from other agents, other LOs, and information about financing in your area they can’t get anywhere else. If your blog has your unique expertise that will help them make more money, they’ll read it. No fluff – just unique information that will help them make more money. You’ll need to post to your blog at least once a week, but it’s not hard to do if your website has an easy built-in blogging tool. And, keep in mind that Facebook, or any other social network, is a great way to promote your posts. Don’t worry – in the downloadable resource kit, we’ve listed enough topic ideas to keep your blog for agents full of interesting, keyword-rich content for six months. 6. Use technology to make them look good If you have technology solutions for specific sets of borrowers, make sure agents know about this. It’s another one of those things that you can do behind the scenes that makes the agent look top-notch to their clients and gives them an incentive (their gain, remember) to send more referrals your way. For example, if you’re using SureDocs or any other e-Signature software, you can help agents close more relocation deals and close them faster and with better client service because borrowers can sign remotely and securely. Let your agent contacts know you’ve got the tools to make their job easier and make them look like Earth’s greatest agent, and you’ll answer that “what’s in it for me” question. 7. Get crazy creative So, this one costs you a little bit of cash, but the investment compared to the return makes it a no-brainer. Find a product that agents use and brand it. See a tape

measure keychain you like? Slap your logo on it, too. Nice little camera case? Slap your logo on it. These are things that actually get used by agents. And, we’ve added the contact info for a few places you can order from in the toolkit. But, if you want more of a kick, pick a promotional item that seems off base. My idea is a kitty litter scooper with the tagline “Taking the crap out of mortgage loans since 1999.” Something this creative will definitely take on a life of its own as people pass it around the office and email pictures of it to friends. And that exposure is just what you need to make yourself stand out in the crowd of hungry LOs. There are some great tips here, but in order for them to work, you’ve got to be ready to back up all this talk. That means you’ve branded yourself accordingly with a professional website, and most importantly – world class service. When you use these ideas, you’re going to see results. And, if you’re not fully prepared to build partnerships or ready to handle the agent referrals you’re going to get, you’ll definitely find yourself carrying an obscenely bad rep before you even have a chance to get started. Not good…at all. So, make sure you’ve got the basics taken care of before you form important partnerships. Use the tips here and the ideas in the marketing toolkit as added arsenal to your closet of marketing tricks. From information-based advertising, to offering relevant technology that closes difficult deals, to very memorable leave-behinds, you’ve got plenty of ingredients to get started. Go easy at first, or jump right into the big stuff, but get up and do something. No doubt you’ll start plenty of mutually beneficial money-making partnerships with successful agents in your area that will flood you with enough referrals to keep you busy. Don’t forget the free templates at Niche and don’t forget to send us your feedback – we love to hear from you. Armour is a marketing content specialist for a la mode. She produces advertising content in XSellerate, a la mode’s automatic marketing product for mortgage professionals, including campaigns for agent referrals. Since 2005, mortgage pros have sent over 73 million e-mails from XSellerate, and the product has generated an average of 40% more leads for Mortgage XSite clients using it. Armour can be reached at or 1-800-ALAMODE.


2011 The Love Affair is over Now that the Fed has gotten rid of the Mortgage Broker, the Loan Officer is next. by Rick Roque


e used to love loan officers. When volume is high and pipelines are plush, it is easy to applaud the talent of the sales staff. When volume dips, the sales staff gets blamed. The role of the sales professional is a thankless job. The expectation is always positive with little room for things to drop off. In the perception of the consumer, there is only one thing worse than a loan officer, and that is a mortgage broker. It is clear that the legislation in 2009 and 2010 were aimed at Mortgage Brokers, and for the most part, this dismantled this market segment to less than 10 percent of all loan origination volume in 2010 ($1.4B). 2011’s focus is not on the mortgage broker as much as it is on the loan officer. It is worth noting, the Broker however is not off the hook. With the end of the mini Eagle, increased net worth requirements, and the ever increasing number of disclosure requirements, the broker’s role is being siphoned off. With continued broker attrition estimated at around 10-15 percent by Access Mortgage Research (, the effects of the 2009 regulatory conditions are continuing to take their toll on this segment. (Writer’s note: It is worth noting, opinions vary regarding the future of the mortgage broker. Estimates are conservative around 10 percent to more aggressive at a 20-25 percent drop off in the number of licensed broker. As has been written in several preceding articles, my forecasts have brokers losing significant ground

to fewer than 10,000 licensees. This, in my estimation, is another 25 -28 percent through 2011). With the ABA and the banking lobby as powerful as they are in DC, loan officers for non-depository institutions are being brought to the wood shed by their elder brothers, or the ‘real bankers’ as they like to call themselves. This irony is clear for anyone who understands the cash flow and revenues for a depository with a growing mortgage division. As they watched mortgage brokers and mortgage bankers expand highly profitable businesses, the very service and product instruments they heavily criticized between 2004-2007 (e.g. Mortgage lending by non-depositories) are now the largest and most profitable departments to many of the same banks. In my M&A work with Depositories and Mortgage Operations, it is not uncommon to realize a 10:1 gain on revenues from your mortgage division versus traditional income channels from within the ‘bank.’ The mortgage division is a cash cow for depositories and even more so, a margin gain for the following reasons: Traditional compensation sales structures for their sales staff; little cost to Marketing and a very low Cost of Sales. What made working for a depository institution unattractive was a $35,000 year job with little commissionable earning potential. Now that non-depository mortgage lending makes up less than 20 percent of lending volume, and further regulatory constraints leave depository institutions exempt (e.g. licensing) from administrative burdens, the market (and its margins) is being pushed toward this poorly compensated culture of lending. Why pay sales people more than is


Techspot needed when you have sizable base of customers? Well, the new compensation rules effectively follow HUD’s recommendation in December of 2009 regarding Loan Officer Compensation to pay them hourly or a salary like most employees in a bank. It is clear bringing loan officer’s compensation into alignment is clearly the agenda, just how much will depend on future modifications and/or amendments to Dodd-Frank.

Changes in Compensation Impacts Technology Vendors The impact on compensation trickles down the industry. It is not just the mortgage operation that is impacted but the technology vendor. Occasionally, I will receive emails from technology executives saying, “Rick, you spend a lot of time on market dynamics and not enough time on technology.” My response to this is clear: technology vendors do not understand the intricacies of how to do a mortgage. An understanding of the market, leads the technologist to prioritize, and even forecast, what the technical priorities need to be, then to leverage current and future technologies to meet those needs. However, there is a capital crisis in mortgage technology. Therefore, it will be a test of time and investor patience to see if the undercapitalized or under performing companies have the staying power to make a difference. For as long as the mortgage

industry continues in its lulls and the economy at large remains uncertain, investor confidence in mortgage technology is going to remain flat. In my prediction, it will not peak interest until the market grows back to $2.0T (over 10M units). To support an increase of nearly 4,000,000 mortgages, there needs to be stable and sustainable (and gradual) economic growth on the supply side (stable job creation, low unemployment etc) and a rise in the international appetite for mortgage back securities. This may take 4 or more years of steady job growth and let’s hope so – my oldest will be looking at colleges and given the rate of college tuition, I think I will need this assumed economic growth. The point is the following: real disruptive innovation in mortgage technology that has a meaningful impact (in terms of market adoption) is several years away. Brad Eaton from A la Mode ( wrote a great article regarding the 10 year anniversary of ESIGN; 10 years!? Real innovation takes time in any industry but especially in banking when most practices are at least 6-8 years behind mainstream adoptive consumer driven technologies. (Ex. When I got my Master’s degree in Technology Management, I esigned for my student loans back in 1999) Today, a student esigns on what often amounts to be over $220,000 worth of student debt, right around the national average for a home. So why is this so difficult? It is about capital, market sizing and market incentives. It will not be until all three converge when innovative change takes its hold on mortgage technology. There are examples of a few mortgage technology firms who meet these three market opportunities, but most do not. Your job in the mortgage firm is to carefully select who they are and it is from people like me and others, who help firms accomplish this. What does this have to do with compensation changes in 2011? A great deal. Technology firms are scrambling to come up with a flexible enough framework to accommodate this important mandate. In the first Quarter, we will have some tools available to manage commissions however much of this will depend upon the resources of the tech firm. When tech firms are confronted with this – they sell: what they have, or the vision of what they will have.

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Techspot 2011 Tech Trends Taking Shape: 7 Strategies for the Successful Mortgage Company There are several interesting trends taking shape already in 2011 mortgage origination. Mortgage companies are panicked to adjust their operation from focusing on refinance and streamlines to new purchase originations. The focus (again) is retail, new purchase business. Several Wholesale Operations are converting their A.E.s to focus on retail recruiting. With the wholesale channel in serious decline, their only chance to maintain volume is to grow their own native retail channel. The industry is being forced to cannibalize itself and its volume. The competition will not be easy and for those mortgage companies who think it will be are mistaken. The Federal Government slowed down the Housing / Mortgage industries to the lowest point nearly 12 years. As Jacob Gaffney recently wrote, “the western regulation may kill everything in mortgage finance the bailout tried to stimulate.” This is an interesting point. Banking is largely about managing risk and making (or losing) a great deal of money on managing this risk correctly. The federal and state regulatory trends have attempted to dissipate the risk in mortgage lending and as a result, demand declined erasing nearly a 12years of production growth. As I indicated in December’s issue, we are at 1997 / 1998 levels of mortgage production. With the prospect of another 30 percent decline in mortgage origination (across all channels), this reality, albeit slowly is sending shock waves across mortgage banking and brokerage firms across the country. One large Mortgage Lender who closed a company record setting month of over $500M in November of 2010 met this mark with a celebratory fear since over 60% of this volume was refinance business. On one hand they are preparing their organization (and setting expectations with the board) to return to $300M levels in 2011, and attempting to come up with creative strategies to gain market share in 2011. So to help, here is the 2011 roadmap for the successful mortgage operation. I outlined the key points for the mortgage executive and the corresponding questions for technology they should be asking. They are: 1. Cost Reduction - Production costs must be below 5060bps on every loan- how can your use of technology eliminate cycle times, compliance costs and manual touch points on the file? Ultimately this will mean head count reduction and the need to reduce your staff by 10-20 percent. 2. Minimize physical file touch points – this is worth a separate bullet; does your technology automate your process? Is there ‘hands off’ quality and compliance controls and verifications? 3. Centralize all of your information as soon as possible - Manage, Report and customize this information in the most flexible LOS solution you can afford. Technology, Automation and stability of the company are key factors in

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Techspot selecting a vendor. Has the company been around for longer than 5 years and has more than 1,000 clients? Can the vendor afford to lose 30-40% of their clients as many mortgage companies will lose 30% of volume? If the company has been around, have they struggled to innovate? What is their reputation? Have they lost market share? 4. Invest in a Compliance Officer and a Chief Information Officer - The right people in these roles are vital to the growth and success of your mortgage operation. The Chief Information Office is not a ‘techie’ but a technologist; one who can match key operational goals with the right technologies available in the marketplace. The key is the planning and execution of these solutions internally in order to realize these goals. I am always surprised at the number of mortgage operations who originate $70M-$120M/month who do not have either of these positions filled; yes this is true! It is amazing and it is prevalent. 5. Remove Overlays: 2011 is the rise of subprime With volume declining and mortgage companies embracing compliance driven technologies, there is growing appetite to lend to 580 or 600 borrowers. Why not? The average of FICO of the American Consumer is below a 640. There are many borrowers with stable employment, who pay their bills but have a low FICO because of a catastrophic event (e.g. divorce, short sales, negative equity etc). 2011 and 2012 is the year for these borrowers to buy a home. Those who have good credit have already purchased and refinance (as a national trend) their home; so now, it is time we open up the products in a responsible manner in order to assist in the eligibility and options of consumers. 6. Consumer Direct - Go consumer direct; it is critical to get to the consumer first before your competitor does. My goal in working with mortgage companies is to get them to get to the consumer before the consumer goes to the real estate agent. The goal for the mortgage company is to be the referral source to the Real Estate agent and not the other way around. There are a number of ways to accomplish this and I will write about this in future articles. What technologies build a relationship that transcends the mortgage transaction between the loan officer, your organization and the consumer? 7. Lending Centers - Focus on 10-15 lending centers in key markets around the country. Grow those operations organically. It is much easier to grow 10 lending centers to $50M/month than it is to grow 300 branches that are largely left to themselves for their growth. Rick Roque, former Management Team member at Calyx Software & non-operating owner of Menlo Company. If you have any comments on this article, feel free to call Rick at 408.914.5895 or by email:

Appraiser sound off

Friskies Flavored Spaghetti Sauce on Sale by bill mcknight


ou must be sitting there thinking, “Uh oh, another appraiser has gone completely off the deep end. Look at the title of this article!” Well, you might be right. I actually may have gone off the deep end but before I resign myself to that conclusion, let me explain. First of all, who doesn’t love spaghetti? After all it’s pasta, it’s comfort food. Don’t we all have memories of big spaghetti dinners with the family and isn’t a spaghetti feed one of the more popular fund raising events for your child’s sports team, the neighborhood association or your favorite church? Heck yeah! We all love spaghetti. But, would you love spaghetti if it was covered with Friskies flavored spaghetti sauce? Now, before you answer, consider these facts: Friskies flavored spaghetti sauce can be made in half the time of your mom’s favorite spaghetti sauce; all you do is open the can, dump the Friskies in the pan, add tomato sauce and heat. Plus Friskies is 1/4 the normal price of ground beef. Cheaper and faster is better, right? And it’s really gonna taste great, right? WRONG! It would taste like something only your cat would eat! So, if you wouldn’t eat spaghetti with Friskies flavored spaghetti sauce just because it’s

cheaper and faster, why, oh why, are you willing to make a mortgage financing decision based on an appraisal report that was produced by an appraiser who would take the cheapest fee and produce the fastest turn time? Remember when your mom taught you that you get what you pay for? Apparently, large lending institutions have forgotten this very important lesson. Amazingly, they have all had this memory lapse in spite of being in the aftermath of a huge historic gut punch resulting from the consequences of “you get what you pay for.” Remember the days of 100-120 percent loans with no money down and stated income? What did we get for that? What we got was a bunch of homeowners with no equity stake in a home that they could not pay for, who willingly walked away and defaulted on their cheap and easy loans! That’s what we got. So, I ask you, what are you getting when you insist on the cheapest and fastest appraisal product? Before I give you my “appraiser biased” answer, let’s look at the numbers. Last year, one of the largest Appraisal Management Companies sent out a notification to their appraiser contractors stating that 67 percent of appraisals performed by those contractors were being returned as deficient. SIXTY-SEVEN PERCENT! If only 33percent of reports pass muster, that is a failing grade in the real world! The unfortunate reality is that this large AMC notoriously


Appraiser sound off requires the fastest turn times and has historically paid the lowest fees. How embarrassing it must have been to have to send out this message to their appraisers. Rather than addressing the deficient appraisals with constructive process changes, they instead attempted to solve the problem by issuing new criteria to their already burned out and underpaid appraisers. Those additional criteria included aerial photos of the subject and screen shots of local MLS listings, all for no extra pay. These additional criteria did not include allowing their appraisers more time to adequately analyze and verify market data or to write meaningful market analyses. Now, do not misunderstand me. I am not suggesting that the cause of this problem lies solely on the shoulders of AMCs or lenders. I contend that a large part of the problem is a residential appraisal industry that is disjointed, undereducated and apathetic. It is my belief that a large percentage of residential appraisers do not fully understand the gravity of their assignments or what they certify to when they sign each report. The appraiser’s purpose in each transaction is, at the core of the matter, to protect the public trust. In a nutshell, an appraiser’s function is to provide an independent valuation impartially and with objectivity, which should result in opinions and conclusions that are knowledgeably developed, credible and meaningful to the users of that service. Unfortunately, there are those within our industry who do not subscribe to this idea, either through ignorance or intent, and therefore, lack the ability or desire to protect the public trust as a critical part of the appraisal process. It is my assertion that when an appraiser fully understands the true purpose and function of each assignment, the need to take the time to perform a thoughtful job with specific analysis of the market data and verified information to support the conclusions drawn will become self-evident. Once an appraiser has embraced the concept of protecting the public trust and is willing

to provide a product that is supported with fully verified market data and market driven adjustments, the idea of burning through an appraisal would be unthinkable and impossible. Moreover, the thought of accepting a $200 fee for a product that requires considerable time to research, analyze and verify market specific information would be out of the question. Instead of appraisers focused on protecting the public trust, what we now have is a glut of appraisers who feel extorted by the AMC’s insistence that “all of the other appraisers” are willing to accept the lower fees and fast turn times. Consequently, these appraisers feel that if they would like to continue to feed their families they also have to accept lower fees and faster turn times. Remember your mom saying, “If all the other kids are jumping off the Golden Gate Bridge does that mean you will too?” Well, no, Mom! I’m not jumping off with the other kids. I absolutely don’t care what they are doing. I know what my job is and I take pride in it. Ethics can be expensive and ethics might cause me to lose a client or two. Ultimately, I feel confident that the clients who value my ethics and skills will be able to make a more informed lending decision based on properly supported and verified information. I have been charged with protecting the public trust and I will continue to do so. If that responsibility takes time and full fees, that is my choice and my job. Oh, by the way, I won’t eat Friskies flavored spaghetti sauce! Will you? Bill McKnight is a Sacramento, CA area appraiser and an activist in the appraisal profession. He is Vice-President of the Sacramento Chapter of the Real Estate Appraisers Association. McKnight started the online Real Estate Appraisers Forum and is the co-creator of “The Appraisal Show.” McKnight is also active with the Sacramento Association of Realtors and says that his involvement with Realtor organizations gives him a broad view of the profession and unique access to industry leaders.

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What's your mortgage IQ? BY MortgageCurrentcy

I received hundreds of questions again this month. The more the agencies update their ‘updates,’ the more confused we all become! Fannie/Freddie Seller Seconds: I have a buyer putting 10 percent down and would like the seller to hold a 10 percent second mortgage. What terms & conditions will be required for the seller-held 2nd? Mortgage Talking Points™ “Seller-Held Second Mortgage Rules”. Fannie Mae Rules for Seller-Held Seconds: • No negative amortization • No balloon within five years • Market rate of interest – must be within 2 percent of current standard rates for 2nd mortgages • No wrap-around with fist mortgage debt • Must fully amortize and have regular payments • No prepayment penalty • Cannot restrict pre-payment • Must qualify with payment in the housing ratio • Variable payment mortgages okay as long as they comply with all of the above and the payment remains the same for a 12-month time period. Freddie Mac Rules for Seller-Held Seconds: • No negative amortization

• • • •

No balloon with five years Regular monthly payments Must qualify with payment in housing ratio Must disclose terms to appraiser, including who is going to hold the 2nd mortgage • Rate on 1st mortgage must be fixed rate loan; rate on 2nd can be ARM or buy down • Variable rate loans ok if the payment remains constant for 12 months over the life of the loan and the rate cannot increase more than 1 percent each 12-month time period. Fannie Flex Loans: I understand that Flex 97 went away. Is that correct? Fannie did eliminate the Flex program, but they spread the features of the Flex program among all programs. The article from October should help you. Max LTV is still 97 percent. VA Short Sale Time Limit: What is the time limit for a new VA loan after a short sale (he had a conventional loan). He tells me he has spoken directly with the VA and has been told that two years from the date of sale is acceptable but I can not find anything in the guidelines. VA has no official written policy on short sales, but they have always treated them the same as foreclosures, which means that there is a two-year wait period from


WHAT IS YOUR MORTGAGE IQ? the date of the short sale. (I had to call my Regional Loan Center last year to find this out as well.) Also, investors may have additional, more stringent guidelines. FHA Purchase Repairs Appraisal came back with FHA required repairs. It is an REO and seller will not pay for repairs unless price is raised to cover them. Is this allowable after the loan has been underwritten, to change the purchase price on contract to cover required repairs? FHA does not prohibit this. However, if you change the contract your seller could take quite a while to "reapprove" the sales contract. Another option to consider is to add in the cost of repairs to the loan amount, which is allowable per FHA. See guidance below. Repairs and improvements required by the appraiser as essential for property eligibility and to be paid by the borrower may be added to the sales pricebefore calculating the mortgage amount. (The appraised value will reflect these requirements.) For the cost of repairs and improvements to be eligible for inclusion in the mortgage amount, the salescontract or addendum must identify the borrower as responsible for paying for or otherwise completing the repairs or improvements. The amount that may be added to the sales pricebefore calculating the maximum mortgage amount is the lowest of: a. The amount the value of the property exceeds the sales price; or b. The appraiser's estimate of repairs and improvements; or c. The amount of the contractor's bid, if available. Only repairs and improvements required by the appraiser may be included. Any repairs completed by the borrower on the property before the appraisal is made (866) 355-9944 The largest writer for Surety Bonds and E&O & Fidelity policies across the country.

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BRINGING UP THE REAR - continued from page 54

foreclosed on the properties, and both banks had CONCEDED that was the case. This was them bringing in the paperwork that was to prove otherwise. I just want to say that I would not have brought such absurd “proof,” if I had to argue my own case in traffic court. I would have been too embarrassed to do so… and I’m not a lawyer. That the attorneys for Wells Fargo and US Bankcorp would present this sort of crap to a judge is nothing short of astounding, if you ask me. Apparently, the justices agreed… in fact, in his opinion, Justice Cordy wrote: … what is surprising about these cases is not the statement of principles articulated by the court regarding title law and the law of foreclosure in Massachusetts, but rather the utter carelessness with which the plaintiff banks documented the titles to their assets.

Now, there was certainly more to the case… this is not intended to be a comprehensive review of all of the legal theories involved. But I want to make sure we all understand what’s at the core of this situation… what caused Bank of America, JPMorgan Chase, Wells Fargo, and GMAC, et al, to employ “robo-signers,” and attempt to foreclose using fraudulent affidavits claiming that each bank had lost the actual notes. All a bank has to do, as trustee of a given securitized trust, in order to foreclose legally, is to show up with the promissory note that was signed by the borrower and when the judge turns it over, he or she should see that it was assigned to the trust that is now trying to foreclose. Well, there is one more wrinkle worth mentioning. The note has to be assigned to the trust within a certain time frame because it’s a REMIC trust… a tax-exempt entity and the Internal Revenue Code’s rules on such transfers are very clear. The banks want us to believe that they all lost the notes with the assignments on the back… they all lost them… all at the same time. As I mentioned above and took directly from the court documents by the way, the banks brought in HUNDREDS of pages of supposed documentation to prove that the trusts did in fact hold the notes at the time of the foreclosure… that’s HUNDREDS OF PAGES… but not one assigned note. And remember, the bankers had plenty of time here… once they lost in the lower court, they filed motions to vacate and were given more time to bring in the proper paperwork. And this case went all the way to the Massachusetts Supreme Court, so it’s not like that happens in a hurry. In the end, the banks tried the argument… everybody’s doing it, so why can’t we do it too. My mother heard this argument from me once, and I was seven years old. She didn’t buy it, and I never tried it again. The court’s response was to say: … the legal principles and requirements we set forth are well established in our case law and our statutes. All that has changed is the (banks’) apparent failure to abide by those principles and requirements in the rush to sell mortgage-backed securities.

Why can’t the banks just show up with the note assigned

to the trust, as they are legally required, when they foreclose? Because they all lost them? Is that the story from the world’s largest banks… that they’re all having a problem losing stuff? It was a mass misplacement? The question, of course, is what happens next? What happens if the bank cannot establish that a note was assigned to a trust that now wants to foreclose? Does the amount owed become an unsecured debt, dischargeable in bankruptcy? And if the trust does not hold the note because it wasn’t ever assigned, who owns it? And where is it, damn it? A lot of people say that the homeowners shouldn’t get their homes free and clear under any circumstances. They say that in buying the homes in the first place, the homeowners gambled and lost… and therefore should lose their homes that they now can’t refinance and therefore can’t afford. But, according to that way of thinking, why shouldn’t they be able to discharge the debt that’s no longer secured by the mortgage… it would seem that they gambled and won. Gambling, one should remember, cuts both ways, does it not? I asked a friend of mine who is a fairly senior executive at a major bank, although not one of those mentioned here, and he said that he can’t imagine the banks losing them. He explains that the truck pulls up at his bank to take documents such as the notes in question to Iron Mountain, where they are expertly stored in a salt mine, of all places. And if you think Iron Mountain lost them, visit and get back to me. So, perhaps the banks didn’t lose the notes in question… perhaps they just don’t want to show them to anyone in court because when the judges flip them over to look at the back they will find that they were NOT ASSIGNED to the trusts as they were supposed to be. And then the investors will be something less than pleased that they were sold empty securities… mortgage-backed securities without the mortgage-backed part. And if they weren’t assigned to the tax-exempt REMIC trusts… well, then someone owes quite a bit in back taxes, doesn’t someone? I write a blog that sits squarely on the side of homeowners in this fight, but I didn’t say anything about this decision right away. The American Securitization Forum, however, did issue a statement immediately following the ruling: The ASF is pleased the Court validated the use of the conveyance language in securitization documents as being sufficient to prove transfers of mortgages under unique aspects of Massachusetts law.

And then… “The ASF is confident securitization transfers are valid and fully enforceable,” concludes the ASF’s Executive Director, Tom Deutsch. And there you have it, ladies and gentlemen… this month’s REAR… Tom Deutsch. And that’s all I have to say about that. Martin Andelman is a staff writer for The Niche Report. He also writes an almost daily column on ML-Implode called Mandelman Matters. He also publishes a Monthly Museletter and you can follow “Mandelman” on Twitter. Send your responses to Martin@



Bringing Up the rear Tom Deutsch, Executive Director, American Securitization Forum BY MARTIN ANDELMAN


ast month, the Massachusetts Supreme Court ruled against two banks, Wells Fargo and US Bankcorp, who had each foreclosed on homes and were now asking a judge to declare that they held clear title to the properties in fee simple. The decision was surprising to quite a few, and a major landmark for those on the foreclosure defense side of the fight. Bank stocks got pretty much creamed after the decision was announced. Foreclosure defense blogs went into sheer elation mode, and it’s easy to understand why… finally, a decision by a top court had gone their way, establishing that the rules of foreclosure weren’t some trivial set of technicalities. But, what was so amazing about the decision was not that it went against the banks. What was amazing was how the banks attempted to defend their positions. Here’s an overview of what happened… The judge ruled that the foreclosure sales were invalid because the notices of the sales named U.S. Bank and Wells Fargo, in their respective foreclosure actions, as the mortgage holders but neither had yet been assigned the mortgages. The judge found, based on each PLAINTIFF’S ASSERTIONS, that “the plaintiffs acquired the mortgages by assignment only after the foreclosure sales and thus had no interest in the mortgages being foreclosed at the time of the publication of the notices of sale or at the time of the foreclosure sales.” Now, that’s just stupid and I think we can all agree that banks should own homes before foreclosing on them, but that’s not the amazing part… The banks moved to vacate the judgments, and at the hearing they CONCEDED that each complaint alleged a postnotice, post-foreclosure sale assignment of the mortgages, but they now said that there were documents that would show a pre-notice, pre-foreclosure sale assignment of the mortgages. In

other words… okay, we did it wrong last time, but we’ve got our act together now, your Honor. The judge said okay, fine… go fetch them then. In response, the banks showed up with HUNDREDS OF PAGES OF DOCUMENTS, which they said established that the mortgages had been assigned to them before the foreclosures, and submitted them to the judge. Many of the documents the banks submitted to the court related to the creation of the securitized mortgage pools in which the mortgages in question were supposed to be included. US Bankcorp showed up with a private placement memorandum (“PPM”), a 273-page, unsigned offer of mortgage-backed securities to potential investors. Basically, a boilerplate document that could have been printed the day before, with language saying that mortgages “WILL BE” assigned to the trust and that “each mortgage loan will be identified in a schedule appearing as an exhibit to the Trust Agreement.” But, the bank didn’t provide any sort of schedule that should have listed the loan in question as being among the mortgages assigned in the trust agreement. Wells Fargo, in a variation on the same theme, provided the judge with a copy of the Pooling & Servicing Agreement (“PSA”), but the copy was downloaded from the Securities and Exchange Commission website and was not signed, so it didn’t contain the loan schedules referenced in the agreement that should have identified the mortgage in question as being included in the pool. In an attempt to make up for this obvious inadequacy, Wells Fargo also brought in a schedule that it said identified the loans assigned in the PSA, but the schedule did not list property addresses, names of mortgagors, or any number corresponding to the loan or servicing number on the mortgage in question. Now… let’s take a moment to review things… in both of these cases, the documents showed that the banks weren’t assigned the mortgages in question until after they had - continued on page 53


February 2011


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TNR - February 2011  

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