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Issue 039 October 2010 TheNicheReport.com

On Sale!

Full 1004 Single Family See “Page 7” for Details

America’s Fastest Growing AMC!

An Appraisal Partner That Helps You Create More Successful Closings!


the 10 Revisiting FHA 203(K) Want to talk about a Niche product?

18 What is Stopping


Loan Modifications? Foreclosures continue to grow.

33 Techspot

Credit Monitoring & The Counsel of a Loan Officer.

up 54 Bringing the Rear: Treasury Secretary Timothy Geithner

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Issue 039

October 2010



What is Stopping Loan Modifications?

pg 45 pg 45 pg 46 pg 46 pg 47

FOUNDER & PRESIDENT Robert Pegg robert@thenichereport.com

Foreclosures continue to grow.

William Matz

CO-FOUNDER & PRESIDENT David Pegg david@thenichereport.com MANAGING EDITOR Stewart Mednick stewart@thenichereport.com


Revisiting the FHA 203(K)


David Zuckerman branch manager weststar mortgage, inc. Want to talk about a Niche product?


30 42

9 Steps to Landing Agent Referrals

Bringing up the Rear Martin Andelman mandelman matters ml-implode.com Treasury Secretary Timothy Geithner.


molly dowdy evp of marketing a la mode, MORTGAGE SOLUTIONS DIV. Target real estate agents, but be picky.


from the editor's desk


Frank & BRian speak

Online Lead Generation



Dennis Yu ceo blitzlocal.com Help! My Facebook got Banned!







Center Stage with eMagic The Niche Report


EDITORIAL / CONTENT MANAGER Kristen Moser kristen@thenichereport.com

October 2010

ACCOUNTING MANAGER Shawna Ingram shawna@thenichereport.com Advertising Director Jessica Grizzle Jessica@thenichereport.com Advertising sales Heather Bopp Heather@thenichereport.com Production Manager Henry Suchman henry@thenichereport.com Production Assistant Dawn Exner dawn@thenichereport.com COLUMNISTS & Contributing Authors Martin Andelman Karen Deis Molly Dowdy Frank Garay William Matz Stewart Mednick Rick Roque Brian Stevens Dennis Yu David Zuckerman

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With mid-term elections on the horizon, the TV airwaves are abundant with negative campaign ads smattered with economy references. Each candidate for congress, governor, or even city council is focusing on the economy as this election’s hot button. President Obama even addressed the union stating that the economy is now the main focus of his administration … too little too late? With grateful appreciation to our soldiers who fought in support of Operation Iraqi Freedom, President Obama, in the wake of the last combatant unit, the Fourth Stryker Unit of the Second Infantry, pulling out of Iraq, claimed the end of over eight years of battle, but was very careful to not repeat the mistake of claiming, “mission accomplished,” because it is not. Over four thousand American soldiers, airmen, marines and sailors gave the ultimate sacrifice for freedom and democracy. Freedom and democracy define this great country, but also are used to tear it apart. The freedoms used by banks and other Wall Street oriented financial institutions over the last five years have caused a significant influence to the current state of the recession. Ben Bernanke, the Chairman of the Federal Reserve, has struggled with rate reductions, social security funding and medicare equality issues; all topics contributing to the heightened sense of urgency the American public has expressed. This month, loan modifications, or the lack there of, is a topic of the featured article. William Matz explores and enlightens the reader on the subject of foreclosures and why lenders have not been willing or able to help modify existing loans in lieu of foreclosure. If you are outraged by the government and financial sector handling of foreclosures, or the creation of them, then this article is for you. I do not want to overshadow the usual fantastic line-up of monthly columns and articles presented in this issue, I just want to bring present that the recession is rolling down hill faster everyday. Some say it is a “second dip.” I say the dip never ‘undipped’ it is just dipping at an increasing rate. This election can be pivotal to the long term financial condition of this country. Matz writes about congressional influence and how government agencies have not created a system that works…yet. Perhaps soon.

Stuart Mednick Official




Revisiting the FHA 203(K) Want to talk about a Niche Product!? by David zuckerman


n estimated one third of today’s existing home sales are some form of distressed sale. Whether a short sale or foreclosure, these homes often suffer from functional obsolescence, deferred maintenance, vandalism, and outright theft. The result is that the property fails to meet the perspective homebuyer’s expectations and the lenders underwriting guidelines for the minimum required condition of the subject property. This new reality presents a unique niche for today’s Loan Officers currently originating, or wanting to learn how to originate, FHA 203(k) rehabilitation loans. Unlike the traditional FHA 203(b) or 203(c) programs, the 203(k) program is used to rehabilitate and repair one to four unit single family properties. The Department of Housing and Urban Development’s (HUD) end goal with the 203(k) loan is to expand homeownership opportunities and to revitalize neighborhoods. In layman’s terms, the 203(k) program is a rehab loan. For Loan Officers currently originating traditional FHA loans incorporating the 203(k) into their product mix merits consideration, especially if the Loan Officer’s business model is purchase and Real Estate Agent centric. If you operate a Realtor referral base business model, reflect back on the transactions in which you receive the appraisal report and there are more pictures of deficiencies than pictures of the homes used as comparable sales. While the Realtors work through the bureaucracy of dealing with an asset manager to determine whether or not the bank will even pay for repairs, the appraisal report is being torn apart by the Underwriter who manifests each deficiency into another loan condition requiring inspection, certification, remediation, and testing. By offering the 203(k) program you avoid these types of issues. The traditional FHA loan requires that the 10

October 2010

subject property meet standards for health and safety prior to settlement. The 203(k) program allows for repairs, to be made after settlement, in order to bring the house up to HUD standards. Further, the homeowner’s personal wants and desires can be included into the rehab project. HUD is fairly liberal on the realm of remodeling a new homeowner is allowed, provided the repairs are not considered to be a “luxury.” For example, you cannot place a hot tub on the deck, but you can place a Jacuzzi bath in a bathroom. If the homebuyer wants to replace the current kitchen countertops with granite, even if the current countertops are perfectly functional, that should not be a problem with the Underwriter. At settlement a repair escrow account is created, as part of the new mortgage, to facilitate the payment to the contractors for their work to the subject property. The repair escrow account includes funds to make predetermined repairs and improvements to the property, a contingency reserve for cost overruns; inspection and title update fees and a few other miscellaneous items. A key benefit to the homebuyer is having just one mortgage loan and payment to cover both the purchase of the house and to fund the improvements from the repair escrow account. No longer do homebuyers have to utilize savings or highinterest credit cards to make home improvements. To implement these repairs and improvements HUD requires that work start within 30 days of settlement and finished no later than six months after settlement. To determine the base loan amount for a 203(k) loan, add the purchase price to the repair escrow amount and reduce by the minimum down payment of 3.5 percent or more. For a standard FHA loan the appraised value must equal or exceed the purchase price to avoid having the borrower make up the difference or having to have the

contract price lowered to sync up with the appraised value. For a 203(k) loan the appraiser is tasked with obtaining two values. The first value is the “as-is value,” which is the value of the property prior to any rehabilitation work. The second value is the “after completed value” which is the value of the property based on the items from the repair escrow account being completed. Like a standard FHA transaction the “as-is value” must be equal or exceed the purchase price in order to avoid having the borrower make up the difference at settlement or the sales price being negotiated lower. However, the combined purchase price and repair escrow budget can exceed by 110 percent (100 percent for a condominium) the “after completed value” before the borrower has to make up the difference or scale back the non-essential items being funded by the repair escrow account. There are two versions of the 203(k) loan. The full 203(k) loan is used whenever the repair escrow budget exceeds $35,000 and when certain types of repairs are made, which typically involve impacting the primary structure of the property. Examples include moving a load bearing wall or putting on an addition. The full 203(k) loan necessitates the use of a FHA Consultant to oversee the project and allows for up to five payments draws from the repair escrow account. The streamline 203(k) loan is used when the repair escrow budget is less than $35,000 and the repairs do not impact the physical structure of the property. Two payment draws are allowed in a streamline 203(k) loan. Loan Officers new to originating the 203(k) loans may be challenged in determining, early on in the process, whether to use the full 203(k) or streamline 203(k) loan; assuming that the end investor offers both 203(k) loan types. Frequently, a lender may offer only the streamline and not the full 203(k) loan. This becomes important if the repair budget increases to the point that the repair escrow account exceeds $35,000. Remember, the dollar amount that changes the streamline to the full 203(k) is a repair escrow account that exceeds $35,000, not repair invoices in excess of $35,000. Should a termite report identify any structural damage the loan will have to be processed as a full 203(k) and engage the use of a FHA 203(k) consultant to assist in determining the requirements of the project. Since the termite report information is of such importance this should be the first item order after contract ratification. Due to the 203(k) consultant providing a similar service to that of a home inspector, the Loan Officer may suggest to the homebuyer and their Realtor to delay ordering the home inspection. Should the termite report indicate structural damage to the property or the contractor estimates will result in the repair escrow account exceeding $35,000, a 203(k) consultant will be required and thus eliminating the value of the home inspection. The hardest part of originating a 203(k) loan is determining what needs to be listed on the contractor 12

October 2010

invoice. Assuming that the loan is being processed as a streamline 203(k) the homeowner working in conjunction with the Realtor, home inspector, and contractor will determine what is to be listed on the contractor proposal or invoice. This information is relayed to the appraiser who will in turn factor this into the “after completed value.” The appraiser may find additional deficiencies beyond those items being repaired on the contractor invoice. This would require the contractor to update the list of repairs to include the appraiser’s comments. Consequently, this causes (1) additional costs to borrower, (2) re-disclosing new loan terms to the borrower, and (3) going back to the appraiser so they can update the list of items being repaired. The learning curve for understanding the 203(k) may seem high; however, there is a wealth of information available on HUD’s website pertaining to the 203(k) loan. Further, loan origination software provides an automated 203(k) worksheet to assist in calculating the rehabilitation budget and loan amount. By taking the time to become proficient with the 203(k), Loan Officers can become the voice of opportunity to homebuyers looking to buy more house for less. Realtors need to be educated that the 203(k) helps a transaction from imploding over appraisal identified property deficiencies. Realtors may not like the longer time frame required to close on a 203(k) loan but this is far better than dealing with the time consuming process of negotiating with the seller regarding lender mandated repairs. For instance, with REO the bank may be unwilling to incur making repairs to a property in which there is no guaranty that the transaction will be finalized. Frequently, in short sales the seller simple cannot afford to make the repairs. Prior to 2008 many Listing Agents would recommend that their Clients not even consider an offer backed by government financing. Nevertheless, due to the changing nature of the housing market, in only a few short years FHA, VA, and USDA loans have become key drivers in the industry. How important the 203(k) loan will become over the next few years is a question that can only be answered in time. However, with an estimated two million foreclosures hitting the market over the next twelve months, the time is now for the 203(k) loan to fulfill its place as a vital component in the housing market, especially as the industry becomes more familiar with the benefits that this program offers. David Zuckerman is a Branch Manager and Mortgage Banker with WestStar Mortgage, Inc. Mr. Zuckerman has been a Licensed Loan Officer since 2003 and specializes in originating government-backed loans for first-time homebuyers. To help clarify the FHA 203(k) loan program, Mr. Zuckerman launched www. rehab203kloan.com which is the web’s premier source of information for consumers contemplating a renovation mortgage loan.



9 Steps To Landing Agent Referrals Target real estate agents, but be picky By molly dowdy


ome LOs invest in expensive advertising to drive borrowers to their door, and they do very well during booms. They cast a wide net and spend huge budgets. But returns on these expensive advertising campaigns dry up in down times. Worse, these campaigns miss out on the most lucrative source for steady, anti-cyclical new business – top producing real estate agents. Even in tough times, top producing agents are finding well-qualified buyers and selling houses. And the best mortgage brokers are teaming up with those agents.

Target real estate agents, but be picky We all know most buyers shop for an agent or their home before thinking about where to get financing. If you’ve got great relationships with a few well-chosen agents, you’ll have a steady stream of referral clients coming, no matter what the economy does. But be careful. You don’t want to get referrals from any agent out there. Inexperienced agents may lean on you too much, or use you as a scapegoat when problems arise. Part timers aren’t closing enough deals to make your marketing efforts pay off, and specialty agents may be working with borrowers that aren’t profitable for you. So before you start marketing yourself to agents, make sure you specifically identify the agents you’re targeting. 14

October 2010

In addition to saving you a lot of time, money, and heartache, narrowing your focus to the most reputable top producers also gives your marketing an air of exclusivity. You’ll be surprised at how quickly top producing agents will respond to exclusivity. Just like everyone else, they like the recognition of being important and they’re flattered when you specifically seek a relationship with them. If marketing isn’t your primary strength, hiring experts to put these strategies into action is expensive. So I’ve put together a web page with a resources kit you can download for free. Just go to www.alamode.com/Niche and grab the files you want.

9 Secrets for successful agent marketing You’re probably already doing the basics like networking with professional organizations like your local MLS, Rotary, Chamber, charities, and so on. These tips are the extra ammunition that will set you apart from your competition and help you bag referrals from the right agents. 1. Deliver excellent service. It’s no secret. If you provide first rate client service, word will spread. We all know the most popular complaint amongst borrowers and their agents: Not knowing what’s going on with the loan, or misunderstandings that delay closings because of a lack of proactive communication. At all times, keep your borrowers, their agent, and anyone else involved in the transaction in the loop. Some website services will

go big or go home Get More Than Just Appraisal Management It’s cutthroat out there. If your current software (or lack thereof) is holding you back, it’s time to think big. CorvisaOne mortgage management software helps you stay competitive by giving you more control over daily workflow and better visibility into your business.

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do this for you automatically, saving you a lot of time. You’ll provide the outstanding service that naturally results in referrals, and you’ll save yourself time by avoiding all those status phone calls. 2. Get and publish testimonials from your happy clients. Testimonials work. Agents are interested in what other people have to say about you and these comments influence their decisions. But how do you get these testimonials? Testimonials rarely arrive unsolicited in your mailbox from exceedingly friendly clients. Yes, it does happen every once in a while (especially if your service is crazy good), but the vast majority of testimonials I publish are a direct result of proactively asking the client for their opinion. People are busy and often don’t think of taking the time to let you know they appreciate your service. But if you ask them, they’ll gladly help you out. In the resources kit for this article, I’ve included an effective template you can use to get testimonials from your own clients. 3. Ask for the referrals. Just like with testimonials, you don’t have to sit back and hope agents send referrals your way. Ask the agents you already know to send business your way and remind them that you appreciate their referrals and (most importantly) that you will treat their clients with the utmost care. 4. Thank them. Any time an agent sends a borrower your way, take the time to thank the agent if you want more referrals in the future. A quick hand written note is excellent, and even an e-mail will work, but it’s important to thank them. Think of it as yet another chance to pop up on their radar and a thank you note is one of the most underused, yet most effective marketing tools in our arsenal. People who send them stand out in the crowd. I’ve got some thank you

templates for you in the resource kit. Also, when the transaction is over and the borrower thinks you’re the best LO they’ve ever encountered, ask if they would let their agent know how pleased they were with you. When the agent knows you’ve made them look good, their next borrower will likely come your way. 5. Find them on Facebook or Twitter. Many of the most productive agents are active on Twitter and Facebook. They post listing photos on Flickr, advertise open houses and Facebook Events, and network like crazy. Become part of their online network so when they see your mailer or email, they remember you as a “friend,” “fan,” or “follower.” And when you find a top producer advertising open houses, be sure to follow the next tip. 6. Invest 15 minutes on Sundays. We all know where the busy agents are on the weekends – open houses. Besides the obvious things you can do like providing loan scenario flyers for the listing, financing flyers, and so on, take the opportunity to build a real relationship with the agent. Just drop by the open house with a stack of cards or brochures, bring them a Starbucks and talk for 10 minutes. You’ll be building a relationship that can really pay off in the future. Plus, you can meet potential borrowers directly when they’re touring open houses. 7. Send consistent E-mail campaigns E-mail marketing is cost effective and makes you look like a credible professional if you do it right. Agents publish their e-mail addresses all over the Internet, so building a good list is very easy. Get some effective, professional e-mail templates and send them consistently to the agents you’re targeting. Trust me – e-mail marketing works. It doesn’t necessarily rain leads every time you send a message (although it certainly can), but it builds over time if you’re consistent. 8. Become their source for current rate information. You can e-mail agents daily or weekly with rate lock advice that they’ll appreciate. Over time, you’ll become their go-to source for advice and you’re positioning yourself as the credible expert. To make it ridiculously simple, rate advice templates are available so you don’t even have to do the research yourself. The e-mail goes out every day or once a week with your brand all over it, and you don’t lift a finger. 9. Announce your strengths every chance you get. Most LOs don’t think about press releases, service announcements, or public relations, but it’s a very

effective way to get your name out there, differentiate yourself from your competition, and gain recognition and respect from agents in your area. There are countless opportunities in your business to get local media coverage and to e-mail your news to your agent contact list. You just have to be vigilant in looking for your excuses. For example, any time you adopt a new technology or buy a software package, you surely did it to save yourself and your clients’ time, to provide better service, comply with new regulations, or a combination of all of these things. These are great PR opportunities you can exploit to drive more clients to your door. Did you just invest in eSignature software? Let your contacts know you’re speeding up closings, providing superior protection for borrowers’ private information, and delivering better service. Do you have a new system for letting people know the status of their funding? Publicize what you’ve done and how it will eliminate the frustration many borrowers and agents feel during the closing process by e-mailing a newsletter, a press release, or even just a quick note. These communications can be a little challenging when you’re starting from scratch, but you’ll find templates in the resource kit to make it a breeze.

PrintPlace – www.PrintPlace.com. Their website is easy to use and you’ll be surprised at how affordable it is ($170 for 500 brochures). With prices that low, you can even experiment by printing brochures on different topics or targeted to specialty niches (like how you’re the best lender for first time buyers, relocating families, etc.) Use these tips to refine your current marketing efforts to real estate agents and I’m confident you’ll see a good increase in referrals. Don’t forget the free resources at www.alamode.com/Niche. They’ll give you a great starting point for executing effective campaigns to build profitable relationships that will sustain your business even during the roughest of times. Molly is the EVP of Marketing for a la mode’s Mortgage Solutions Division. She manages the advertising content in XSellerate, a la mode’s automatic marketing product for mortgage professionals. 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. Molly can be reached at Molly.Dowdy@ alamode.com or 1-800-ALAMODE.

10. Don’t waste their attention when you get it. With www.OSIExpress.com all of these tips, agents will check you out online or take a look at the brochure you’ve left at their open house. If you look fly-by-night, it’s game over. It would be like you E X P R E S S invited a bunch of important people to your house for a party, and they show up but you’re just sitting on the Amazing Software ~ Current Guidelines couch. No drinks. No food. You get the idea. Automatic Calculations ~ Accurate APR Since you’re putting so much effort into getting them e-Flyers to show up to the party, go the extra mile to ensure your Beautiful New Mediterranean Style Home ducks are in a row. Your website and printed materials AND (business cards, postcards, flyers, posters, etc.) must make Printable PDF’s you look like a credible partner. Make sure your website is professional, current, and informative. There’s nothing worse than finally capturing their attention, only to lose it forever with a bad impression. Mortgage Flyers By the way, it used to be that printing truly me o professional materials was only possible if you had a big H n Style ranea www.EZMortgageFlyers.com budget for designers and printing. But not anymore. I’ve eautiful New Mediter B produced dozens of pieces (in small quantities, too) with Uncle Sam has $$$’s for you! affordable national printers and I’m very impressed with the quality. They even have templates and artists to help you, so you don’t have to hire designers or know anything OSIIs now the rig about printing. I’ve used many of them you’ll see online, ht but my favorite national printer for these kinds of jobs is 866.674.1999 time to refin

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Finance Notes

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Seller/Lender Pays Total $ Required Total Payment



Located in a Family

Neighborhood. With nice Low Maintenance

Landscaping, it is Close

& Convenient to Schools, Shopping and Freeways.


This financing is designed to assist you in selecting the loan program that most closely suits your budget.

Financing is shown for comparison only. This is not an offer of credit or commitment to lend. Loans are subject to buyer/property qualification. Rates/fees are subject to change without notice. Total Cash Required may include prepaids/impounds, not cash reserves which may be required for some conventional loans. Total Payment may include taxes, insurance & mortgage insurance for loans when required, but does not include HOA.

APR shown is for 1st loans only. 2nd loans do not include prepaid finance charges. A full disclosure of your closing costs, including the APR, will be provided when you select a financing program and negotiate the purchase of a home.

Bob Smith, Senior Mortgage Consultant

Office: 888.555.1212 Cell: 800.123.4567 Email: bob@prospectmtg.com t 1234 Main Street, Hometown, 92869 ~ Licensed Mortgage Broker enUSA tate Ag Real Es 2322322 Whether you are a �irst time or step up ll Jones, Mary 23.4567 Cerealty.com homebuyer, Uncle Sam has a tax credit that 800.1 friendly @ can give you a bag of money. mary

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What is stopping loan modifications Foreclosures continue to grow

By william matz


y December 2009, lenders owned over one million foreclosed homes, but permanent loan modifications only reached 65,000, creating a renewed surge of outrage over the apparent unwillingness of lenders to offer alternatives to foreclosure. Why aren’t lenders rushing to embrace loan modifications when they yield a better outcome for the lender than foreclosure? It would seem to be a simple business decision. Commercial loans have utilized workouts successfully for years. So why have residential lenders welcomed modifications with the same enthusiasm reserved for root canals? Answering that question thoroughly will include exploring the labyrinthine world of mortgage securitization: mortgage-backed securities (MBS), Collateralized Debt Obligations (CDO), and Credit Default Swaps (CDS). Some major roadblocks to modifications spring directly from the incredible complexity of mortgage securities. So any discussion must include the problems attributable to securitization. This article addresses only the most common roadblocks. With several million distressed loans, there are more possible factors than the ones discussed here. But in most cases the causes will be those discussed here or variations thereof. Discussions of modifications often conflict because they use different meanings for “modification”. In this article “modification” will only refer to changes in loan terms consistent with the model initiated by the FDIC in

2008 and incorporated into the February 2009 Home Affordable Modification Program (HAMP). Any other changes will be considered “forbearances”. So what is blocking greater use of modifications, and what potentially better solution has been ignored? Administrative Incapacity. The mortgage crisis began in 2007 and erupted full-scale in 2008, catching lenders shockingly unprepared for the explosion of foreclosures and the flood of “real estate owned” (REO) into their inventories. Coupled with the collapse of many lenders, the survivors were nearly paralyzed. Then-C.E.O. Ken Lewis testified to Congress in June 2009, that Bank of America had hired 7,000 new employees in the prior year just to deal with loss mitigation. (His successor announced another 10,000 a year later.) That led to two obvious conclusions: 1) BofA was woefully understaffed in dealing with distressed loans for nearly two

years, and 2) BofA’s large new staff lacked experience, further delaying successful efforts. The Lewis testimony tends to confirm reports that loss mitigation specialists were each handling 1,000+ cases, making the likelihood of real resolution very low. Unfortunately, one by-product of the lenders’ unpreparedness was that some resorted to deceptive and dishonest ploys. Inside reports have lenders telling modification applicants to fax documents to numbers that receive at a shredder. Others were given unmonitored email addresses. One supervisor reported that his employees were paid a $1.00 bonus for each borrower call completed in less than five minutes, regardless of the outcome! Such desperate acts by panic-stricken lenders are inexcusable and only serve to increase frustration and make a bad situation worse. Similarly, there has been a huge, internal disconnect between lenders’ collection departments (responsible for foreclosures) and their loss mitigation departments (responsible for foreclosure alternatives, including modifications). Not only do the two departments apparently not talk to each other, but they often cannot even access each other’s information. So in many cases borrowers told modifications were in process or even approved, found out later the loans had been foreclosed. The situation becomes even more bizarre when the same lender has a first and second loan, and the borrower must deal with a third department for the second loan. So lender inability to administer modifications has severely limited successful implementation. Even if lenders recognize the potential benefits of modifications, there is still the question of whether lenders really have the capacity to implement them. Poor Packaging. Borrower chances of getting modifications depend upon the quality of the application package. Proof of borrower hardship and ability to pay a modified loan are essential. Unfortunately, as we are all aware, some modification companies and law firms took advantage of borrowers (although lender opposition remains the real culprit). Well-publicized examples of scam artists led to predictable legislative overreaction, such as California’s SB94 ban on all up front fees. The exit of most attorneys and legitimate modification companies from doing modifications means that borrowers who truly need assistance to put together a good application package now find it difficult or impossible to secure competent representation. So lenders, having snowed legislators with the mantra that “borrowers don’t need help for modifications,” can now deal with unrepresented borrowers and tell them whatever they want without fear of being questioned. It also means the quality of packages will be much lower, ensuring even more borrowers will be declined, which was the apparent lender goal all along. “Modifications Don’t Work”. Definitions are critical here. The first FDIC report on Indy Mac loans found a re-default rate of only 18%! That is remarkable given that economic

conditions deteriorated significantly during that measuring period, and many defaults were due to unforeseen job losses. This performance, confirming the efficacy of the FDIC model, is all the more significant when combined with Sheila Bair’s November 2008 testimony to Congress that she expected her model to save 75% of the delinquent loans from foreclosure. Negative reports on “modifications” appear to treat any changes to loan terms as modifications, even three-month forbearances. But all those other “modifications” are merely band-aids, or, as I term them, “slow-rolling foreclosures”. The FDIC/HAMP model is the only one that looks for permanent solutions by ensuring that the housing payment will be only 31% of income. While there is no guarantee that the FDIC model will always have a high success rate, it should be obvious how critical it is to know the underlying methodology of any survey. Ironically, many re-defaults may be caused by approving modifications that did not truly qualify. Loan qualification requires that income be proven by W-2s and paystubs and/or tax returns, often using a two-year average. However, for modifications many lenders are using a shortcut: averaging deposits in the last three months bank statements. If deposits are unusually high during those three months (e.g. if the period includes a bonus, retirement account draw or payment upon completion of a job), income will be overstated. The resulting modified payment will thus not be based on an accurate reflection of borrower income, making borrower default likely when income is more typical. It is unclear if this atypical method of “proving” borrower income was intentional, as a means of approving more modifications when lenders were under massive public and political pressure. However, defaults after such poorly-analyzed modifications certainly do not reflect the efficacy of the FDIC model. Moral Hazard. Lenders have been very vocal in opposing modifications due to “moral hazard”, i.e. if they start granting modifications, more people will default and demand modifications. But this ignores that modifications require some hardship. Moreover, it is incredibly galling for lenders to oppose anything on moral grounds. The American banking industry has engaged in a despicable campaign to place the blame for the mortgage crisis anywhere except on its own doorstep. In 2008, Chase CEO Jamie Dimon tried to blame the crisis on mortgage brokers. But his ill-considered remarks ignored the following: • Who created the loan programs that caused problems? The banks! • Who underwrote the loans to ensure quality control? The banks! • Who trained the brokers/loan officers on loan requirements? The banks! • Who controlled pricing and allowed predatory terms/

rebates? The banks! • Whose loans have a higher level of fraud? The banks! • Whose “whiz kids” designed many destructive derivatives? Chase!* (*See Fool’s Gold by Gillian Tett for the full story.) Incredibly, in his testimony to the Financial Crisis Inquiry Commission in early 2010, the highly-regarded Dimon, a Harvard M.B.A., admitted, “We never stress-tested our products for [a large real estate price decline].” It is long past the time for the American banking industry (and its investment bank and ratings agencies accomplices) to accept some responsibility for its massive moral failings by embracing modifications instead of whining about moral hazard. In the ultimate case of hypocrisy, the American Bankers Association scolds homeowners about the moral necessity of paying their mortgages, while walking away from a $30 million deficiency after a short sale of its headquarters. Confusion. Lenders raise a superficially-appealing objection to modifications by noting that “the rules” were changing so quickly, they did not know what they could do. True, the crisis led to a lot of scrambling for solutions. But

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while HAMP became operational in mid-2009, the FDIC model on which HAMP was based came out in 2008 and was widely-known. Moreover, contract law leaves parties free to negotiate changes. Commercial lenders are well aware of this, having done workouts for years; there was no need to wait for permission to do that which was already legal. Note Ownership. Obtaining modifications is much more difficult if loans are securitized and/or borrowers must deal with servicers that do not own the notes. Even HAMP exempts servicers whose contracts forbid modifications. A complicating factor is that so many loans have been placed into the Mortgage Electronic Registration System (MERS). A loan is typically assigned to MERS, as nominee, immediately after recording. Thereafter, subsequent sales of notes and mortgages are done by MERS internally, not by public recording (by design, to avoid multiple recording fees). MERS executes assignments in blank. Finally, upon payoff or default, the blank assignments are completed to allow reconveyance or foreclosure. Until that final recording there is no public record of the current owner, if different than the original lender. Increasingly, courts scrutinize ownership claims when MERS is involved. Borrowers have been subjected to foreclosure by different parties claiming ownership of the notes. As such, where chains of title for notes and mortgages are not public record, there is a much greater likelihood that lenders will be required to prove ownership. One argument for requiring proof of ownership of the note for a MERS loan is that the assignment in blank converted the note into a bearer instrument, much like a bearer bond, for which the only acceptable proof of ownership is the original instrument. Please note a very important distinction here; contrary to some popular claims, this does not mean a borrower can defeat a foreclosure by simply demanding, “Show me the note.” Many foreclosures can be carried out legally without any requirement that lenders produce the notes, originals or even copies. However, if ownership is in issue, the inadequacy of MERS as proof thereof can delay or even defeat foreclosures, as pointed out in recent cases, including the Kansas Supreme Court’s landmark 2009 Kesler decision. An entirely separate – and potentially monumental – challenge to MERS is being decided in the courts. If MERS is not a properly-registered corporation in each state, its actions are illegal and could be void, throwing enforceability of up to 60-80% of loans into legal limbo. Initial indications are that the decision will be against MERS. States have brought yet another legal challenge to MERS, claiming that MERS is a scheme to deprive local government of recording fees. A related claim is that MERS clouds the very recording system that MERS seeks to use

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in its foreclosures. All of these challenges make the future of MERS very questionable. Internal Conflicts. Given the complexities of mortgage securities, it is not surprising that one of the least understood impediments to doing modifications is the inherent conflicts created by these instruments among the different classes of ownership. Let’s examine just two of the many potential conflicts that might be present. Suppose a group of mortgages is divided into three subgroups: the top 20%, the next 20%, and the bottom 60% (safest). Those three sub-groups would be re-packaged and sold. If a loan goes into default, the three have sharply different perspectives of a proper response to default. The 60% group thinks, “We have plenty of equity cushion; let’s just foreclose and get our money.” But the top 20% group thinks, “We’ll be wiped out in a foreclosure; let’s lower the rate, and/or extend the term, hoping to get something back.” Of course the 60% group sees no advantage in making any concessions. So without a contractual provision for modification, there is likely no practical alternative to foreclosure. (Remember that the two 20% groups got higher returns for the higher risk.) Many MBS involve Pooling and Servicing Agreements (PSA), under which servicers collect payments and remit the net proceeds to the investor pools. Often, PSA provide that in the event of default, servicers will be paid extra for the additional work; they also normally require servicers to advance any missed payment to the pool, to be repaid upon recovery. While some have suggested the former provision encourages foreclosures (for the extra fees), in reality it is the latter provision that is the problem. PSA typically require servicers to maximize return to the pools in defaults. If modifications yield the most, servicers should modify. However, PSA may prevent modifications outright or require investor approval, which may be impossible to obtain due to ownership fragmentation. Furthermore, even if allowed, PSA may be unclear as to what funds can be used to repay the servicers’ advances or may require that servicers receive shares of each modification payment. In the latter case it will take years

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before servicers are fully repaid; so servicers will predictably not find borrowers to be qualified for modifications. A detailed PSA discussion is at www.loanfraudinvestigations.com. Shared Loss Agreements. When banks fail and are taken into FDIC receivership, the FDIC seeks to sell off the assets so as to minimize the losses to the FDIC insurance fund. In connection with these sales the FDIC has entered over fifty Shared Loss Agreements (SLA). While SLA may increase the prices FDIC receives for assets, based on the One West SLA, the name is a misnomer, as SLA guarantee buyers a profit. The key is that losses are measured not from the purchase prices of loans, but from balances at purchase. If all of One West’s Indy Mac loans (purchased for 70% of balance) return zero, One West is guaranteed 74.5% reimbursement by FDIC. While SLA require buyers to minimize losses to FDIC by utilizing alternatives – including HAMP- buyers have every incentive to liquidate loans quickly rather than modify, as buyers typically make a much higher return than the discount factor prescribed for analyzing the NPV of modifications versus foreclosure. Not surprisingly, One West just reported 2009 profit on Indy Mac loans was $1.6 billion. For the actual SLA, see www.fdic.gov. Insurance. Insurance can greatly impact the possibility of obtaining modifications, including mortgage insurance (typically required for loans over 80% of value) and CDS. Unfortunately, if the agreements do not treat modifications as defaults, lenders must forego modifications and foreclose to collect on insurance or CDS. However, insurers, stung by massive losses on many loans of questionable quality are increasingly declining to pay claims, asserting that loans failed to meet the standards required for coverage. HAMP Misapplication/Manipulation. The FDIC/HAMP model to determine qualification for a modification is relatively simple. “Housing expense” is reduced to 31% using rate, term, and/or principal, as prescribed. Then the net present value (NPV) of the modified mortgage compared to the foreclosure value is calculated using a standardized program. If NPV favors modification, i.e. if the lender will make more money modifying than foreclosing, the modification, it is supposed to be granted. However, some factors entered into the program must be estimated, e.g. resale price, times to foreclose/resell, likelihood of re-default, etc. Results can be skewed by bad or deliberately false estimates. Furthermore, calculating modification income can be tricky, as it need not follow underwriting standards exactly. Given the high probability that one or more factors used may be unreasonable, denials of modifications should trigger close scrutiny of the input factors to determine if denials were truly warranted. HAMP Weakening. HAMP requires participating lenders to modify when the NPV is positive. However, as denials have been challenged, courts have been split on whether the

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borrowers have the right to sue if modifications are wrongfully denied. Some feel that the flexibility authorized for the input factors negates any mandatory duty. Others feel there is a duty to modify, if qualified, and to apply the test in good faith. Capital Impact. Impact to capital structure can work for or against modifications with regulated lenders. Due to its effect on required capital, a reduction or addition to capital has a greatly magnified effect on lending capability and hence, profitability. The effects have become less immediate due to relaxing the “mark-to-market” rules during this crisis. Consider Bank of America’s purchase of Countrywide. While the details of that purchase are not available, it is widely known that Countrywide had a large portfolio of Option ARMs, presumably purchased at a substantial discount. If the discount was large enough, foreclosure would result in a gain and addition to capital. But granting a modification might delay that capital addition for years. This creates an obvious incentive to foreclose, even if NPV favors a mod. The opposite can be true also. If foreclosing would create losses, lenders may prefer to modify to delay or even eliminate the losses and resultant reduction of capital. So it is critical to determine the true owner of the loan to know whether the owner has significant capital structure considerations. Tax Restrictions. Certain forms of securitized mortgage ownership, e.g. REMICs and REITs, have significant restrictions that may prevent modifications. While there have been proposals to relax some of the restrictions, it is clear that the complexity magnifies the above problem of Note Ownership (above) and may combine to make modifications unworkable as a practical matter. Lender Fraud/Deception. One disturbing trend has been the increasing evidence of lenders using sham modification offers to extract additional funds from borrowers. This could explain the huge disparity between trial and permanent modifications. A related factor may be that lenders want to delay taking additional REO into already-bloated inventories and use pretend modifications to get cash flow until they are ready to foreclose. This is certainly consistent with the large number of reports of borrowers having to send in the same documentation multiple times. However, lenders are learning that dealing with borrowers in bad faith can have severe consequences. Courts have imposed sanctions as severe as loss of the security (mortgage) to complete elimination of the debt where they find that the lenders have acted in bad faith or used improper collection practices. Some borrowers have also recovered money damages. Trends. Looking ahead, there is a mixed bag of good and bad news. Many variables preclude any definitive forecast, but it is possible to see some likely trends. The overall financial panic that engulfed the world from September 2008 to April 2009 has abated. Despite a slow


October 2010

start, lenders are becoming familiar with workable models for loan modifications and workouts. In January 2010, borrowers received over 50,000 permanent modifications, almost the entire total for 2009; February was even better with 53,000. In March, the reported total was 230,000 permanent, with another 108,000 permanent approved and awaiting only borrower acceptance. By July, the reported total was 348,000. (Caution: The Hope Now alliance reports that through February 2010, total “modifications” were 148,000; however, only 52,000 were HAMP modifications.) Banks are strengthening, primarily due to borrowing from the Federal Reserve at essentially zero. Tentatively, it appears unemployment may have peaked. However, many problems still exist. Foreclosures have risen steadily and will hit another new high in 2010. Ominously, the Amherst Securities Group predicts that foreclosures of Option ARMs, one of the most troubled loan categories, will not peak until September 2011. Total delinquencies have risen to the highest level yet, 7.9 million. Commercial loans are showing rising defaults, but this is partially offset by greater lender familiarity with commercial workout models and by the smaller overall volume of commercial loans. A growing concern is that the collapse of the jumbo secondary market is being reflected in the rising level of defaults in jumbo loans. The scarcity of jumbo financing prevents even many creditworthy borrowers from refinancing to avoid default and similarly prevents many wouldbe buyers from buying, resulting in demand being artificially constrained by lack of financing. The high current volume of REO, amidst still-rising foreclosures suggests it will still take several years to liquidate the overhang and allow any reasonable level of residential construction to resume. So the residential market will not fully stabilize for several years. The termination of Fed MBS purchases and expiration of the purchase tax credits have added more stress to the housing market. The Best Solution? The FDIC/HAMP model has emerged as a valuable tool to help stabilize the real estate market after the body blow of 2007-9. It is pragmatic in that it attempts to align the interests of borrowers and lenders and is only used where both will be better off. However, there is another model, one that has been completely ignored, and it does an even better job of aligning borrower and lender interests. It does this by recognizing that lenders typically net only 60-70% of true fair market value when foreclosing after expenses and delays are taken into account. But one innovative feature makes a huge difference. So what is this great model? In July 2008, Congress passed Hope for Homeowners (H4H) (www.hud.gov/ hopeforhomeowners). H4H allowed a qualifying homeowner to take out a new 90% loan, with the net proceeds going to the old lender, which had to agree to the short payoff. But the critical feature was the owner agreed to share any appreciation, determined when the property sold or the new loan was

refinanced. The advantages to the owner are obvious: lower loan, lower payment, and immediate rebuilding of equity. By contrast FDIC/HAMP triggers principal reductions very rarely. So even with a lower payment, owners would look ahead and see many years without any equity. Faced with that prospect, not surprisingly, many owners give up and walk away. For lenders the principal payoff is usually more than foreclosure yields. H4H was to have helped 400,000 owners save their homes. But it appears it helped no more than fifty. Why? One obvious answer is timing. The September 2008 financial meltdown apparently pushed aside concern for the October H4H implementing regulations. Also H4H required owners to qualify for the new loan, eliminating many whose credit had already deteriorated. But the real problem with H4H appears to be that the shared appreciation would go to FHA, not to the lender that suffered the loss (although FHA could share with subordinate lenders). However, H4H could re-emerge, as it is expressly listed as an alternate method of complying with HAMP and some state programs. Not only should H4H re-emerge, it should be expanded. To give it maximum coverage, borrowers should either take out a new 90% loan at a different lender, or –for the credit-challenged- allow the existing lender to re-write the

loan in comparable manner. But the real key would be to allow FHA to share appreciation with the old first lender. Properly implemented in that manner, H4H could eliminate most of the looming bubble of “strategic defaults� by owners who could afford modified payments but give up in despair of ever regaining any equity. Conclusion. Clearly, modifications can work and benefit both parties. Unfortunately, for reasons summarized above and for internal policy reasons that lenders may not be disclosing, lenders have not embraced the concept, and foreclosures continue to grow. Until lenders see the overall benefits of modifications, hopefully along with a renewed H4H, there will only be slow, grinding progress toward resolution of the mortgage crisis, and that progress could stall or reverse in a still-fragile economy. We can only hope that lenders will finally begin to appreciate the long-term benefits to them and the nation of speeding up resolution of this crisis. Attorney/broker William P. Matz focuses his law practice on real estate, finance, and tax. Having also run an active mortgage business since 1992, he has a unique perspective on the mortgage crisis. He practices in Windsor, CA 95492, (707) 837-2161 ext. 121.

Frank & Brian Speak

Regulation confusion by frank garay & brian stevens


id anyone notice that changes made to YSP just clouded a certain level of transparency mortgage brokers had with their clients? In our state of California we've always had to disclose YSP on the Settlement Statement so we’ve always been held to a higher level of "fee disclosure" than our banking counterparts. However, as California type law began to permeate the entire country we started to see a move away from Brokered Channels in favor of Banking. Even if you disagree, it makes sense. It is human nature to try and secure the easiest and most lucrative deal one can get for his or her services. Unfortunately, the compensation clarity only clouded the issue, and this is only the beginning. In a very reactionary move, regulators decided to restrict Brokers YSP. At this point we are just rehashing what everyone knows but it’s getting me to my point. See, GFE 2010 made any YSP overage the sole property of the consumer. If a loan officer wanted to make more money they would need to charge more up front (on the gfe/settlement) and the borrower could then use their YSP overage to pay the lender's fee. Yeah Right. So the borrower was using "their money" to pay the "lender fee." Really? The borrower is supposed to know they're paying a fee with money they didn't even know they had. Really it's all too confusing. All I can say is, Thank God regulators have made all the new disclosures so difficult


October 2010

to understand that unsuspecting borrowers will never figure out what’s going. Or at minimum, what questions to appropriately ask their lender. Unfortunately GFE 2010 just further drove compensation transparency further underground. Many broker loan officers were just as confused as the clients and believed they were going to lose their income earning potential. We just looked at a mortgage banking rate sheet where the lender could make 3.5% on the back and that money would NEVER EVER, EVER appear on a closing statement to a potential homeowner. With that said, brokers kept moving to banking channels where they thought their income was secure. The problem is Banks are held to a different and lower standard of disclosure; though the loan officers found refuge for their income, the industry saw its transparency continuing to move underground. Who really pays in the end? The consumer. Once again, regulators are on the move and the results are going to be exactly the same. Now in an attempt to avoid what I've just outlined, it appears our fine folks in Washington have paved the way to completely end the loan officer’s ability to make YSP or SRP. Loan Officers will have to work for a set fee regardless of rate. In short, no premium pricing - because that will only screw the client. Here's the problem guys, it doesn't get rid of the existence of "overage", it simply

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Frank & Brian Speak

changes how the money gets handed out. Undoubtedly this will create a windfall of revenue for the banks because they'll be able to keep the compensation they once had to share with the loan officer. However, eventually some bank is going to figure out that he can give that money back to the loan officer in the form of "bonuses" and completely skirt all this crazy regulation. See, bonuses are completely legal and smaller banks will be able to entice the best loan officers with a better compensation package. Once this occurs we're back to square one but now there is ZERO transparency left for the unsuspecting consumer to know how much money their lender is making. Really, the best form of transparency was simply putting all the money on the Settlement statement and letting the consumer make the choice. One thing the government needs to understand is its citizens are not all idiots and it’s not their job to protect us like we're a group of defenseless 2 year olds. Let me put broker compensation this way - If Safeway is selling banana's for $1.09 per pound and Lucky's is selling them

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for $14.28 per pound, I'm going to buy my bananas at Safeway. I don't need the government going in there and telling the Del Monte sales man, the Lucky's checkers, and Baggers how to perform their jobs, just so we can understand the cost of banana’s better. I simply shop at Safeway until Lucky's pricing gets in line. Does that make sense? If someone is charging higher rates and fees, they'll price themselves out of the market and consumers will be the ultimate regulators policing these activities. Here's my final point, the anti broker activity has become so comprehensive that their mere existence is now in jeopardy. As mortgage brokers moved to banking we've seen the mom and pop shops whittled down and marginalized. What I failed to recognize is the effect this would have with the wholesalers. Wholesalers have seen their volume drop to the point that their business model is failing. In an attempt to keep their doors open and to stay viable in a changing market, many wholesalers moving toward retail and are rapidly and aggressively recruiting what is left of the mortgage brokers'. So not only are brokers finding more and more reasons to leave, they are finding more groups to happily take them in. As mortgage brokers die off, so does the most accountable wing in the lending world. Even if you don't agree or believe in my assertion you can’t disagree with the fact that consumers will have fewer choices. And fewer choices only hurts one person - the consumer. Thinkbigworksmall.com (TBWS) was founded in 2007 by a group of highly successful real estate and mortgage industry entrepreneurs. Born in the most battered market in the real estate and mortgage industrys history, Thinkbigworksmall.com was conceived after decades of observing how the most successful professionals always seem to work smarter not harder. Frank & Brian can be reached at tbwsdaily@gmail.com

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Help! My Facebook Got Banned!


f that has ever happened to you or a friend you know, you need to read this article. We’re going to discuss why it happens, what you can do about it, and how to protect yourself. If you use Facebook as part of your business—most mortgage brokers and real estate agents do, since they do business via personal relationships—consider this: You do not have rights on Facebook. They are a private company that is allowing you to use their system. And if you are using it for free, then you are not a customer. Even if you advertise, odds are that your dollars are not even a rounding error to them. Same is true of gmail or other services—just because they are ubiquitous doesn’t mean they must service you—though often they will. You might get banned for being completely innocent. Last week, a “win a free ipad” spam attack hit Facebook. I personally received a dozen Facebook messages from friends that I trust, asking me to enter this “contest”. Of course, I knew it was spam. But what was interesting is that many of these friends are professional internet marketers with strong passwords. Further, a few of them had their accounts shut down by Facebook. Here’s what happens when you’re banned.


October 2010

You’re not able to log in. Clicking on the FAQ page, Facebook tells you that due to security and technical reasons, that they’re not able to tell you why. It may be that you’ve sent too many friend requests, violated Facebook’s Statements of Rights and Responsibilities, had your account hacked, or maybe said something controversial. Political expressions are one example, such as the Alex Jones page, which was banned:

online lead generation have up to 5,000 friends—so if you’re at that level, be careful. That would take you a long time to build back up. • Make sure to back up your data — Most users are lazy and use Facebook as their address book, photo album, and so forth. If you lose your account, much of this valuable information may be lost forever. There are apps to export your friend list and contact information. I won’t list them here, since Facebook doesn’t allow this—so just do a Google search on “export friends list facebook”. Facebook is not an open system like Google’s Gmail, where you can export your email, contacts, and so forth—but there are ways to do it. • Cross reference your friend lists — Facebook is typically for your friends (for your profile), LinkedIn is for business contacts, Google Places is for customer reviews, Twitter is for casual conversation, your phone for people you call, and so forth. But consider crossing folks between them—not only because there is multiplied power here, but you can protect yourself if any one source goes down. • Be careful about advertising to your Facebook page

Or it may be that you’re TOO successful, as their algorithm detects and flags abnormally high growth. For example, our client Weekly World News was issued this warning for gaining 40,000 fans in 4 days. You have to verify your page or it gets frozen. As a mortgage broker, you cannot afford for your business to go down for whatever reason. Here is what to do about it: • Make sure you have a Facebook page, not just a profile — Pages are for businesses, while profiles are for people. Your page is less likely to be deleted than your profile. But if your page is deleted and your profile is the only admin on the page, your page dies, too. So make sure that you have multiple admins on your page—but not too many. We suspect that if you hire a disreputable agency, that if that agency gets in trouble, all their accounts could be banned, too. So make sure you are working with experts. • Don’t invite more than 5 friends per day — Facebook looks at how many friends you have, what percentage of friends accept, and your rate of growth, among other secret factors. A profile can

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online lead generation — There are viral benefits to buying Facebook ads and sending to your Facebook page. However, weigh that against the risk of your page being taken down by a robotic rule and you losing the entire investment you’ve made there. Back to what we discussed at the start of the article, remember that Facebook is a private company, not a regulated government utility. They don’t owe you anything. Use your Facebook page to drive familiarity of your business—but when people want to interact (get a mortgage quote, ask about rates, anything else), have that occur on your own site, so that you have the contact information. Make sure you get their email addresses. • Run your Facebook traffic to your regular website — The beauty of running your own site is that you are in control of it. And with social widgets provided by Facebook, Twitter, wordpress, and other tools, you can have social interaction occur in safety on your site. • Make a new personal account — This is what you’ll likely have to do if Facebook suspends your account. The cons are that you’ll have to start

from scratch and that Facebook could potentially kill this new account—which they say they will do. The pros are that you won’t have to fight to get your account back. And you can avoid a lot of heartache from emails that don’t get responses or get canned responses that say their decision is final. Of the suspended accounts I’ve seen, many from celebrities and people who “matter”, I can remember only two that have been able to get their account back— Robert Scoble, an influential blogger who “made a stink about it”, as he said, and Joel Comm. The good news is that if your profile is taken down, not all your content is necessarily zapped, too. Ask your friends to look for pictures that are tagged with you. Often shared content is still there. In the last few months, we’ve seen the number of random account suspensions increase dramatically. It could be Facebook having so many algorithms that they collide against one another to create unintended side effects. Or maybe the level of spam on Facebook is causing some users with compromised accounts to get suspended as a safety measure. Regardless, take the right measures to protect your mortgage brokerage. We definitely believe that you should still be on Facebook—just make sure you have your content and friends backed up, plus make Facebook part of an overall healthy marketing practice. And remember that even if you advertise, unless you are a household brand or celebrity, you are unlikely to get your account back. So change your passwords each month and don’t make it something easy to guess. We use lastpass.com (which is free) for many of our folks—it’s a great password storage and generator tool. Check it out. Next month, let’s talk about how to show up in local search results on Google. The local search space has heated up with Google Tags, Google Places, and a variety of changes to rankings that make it much easier for local businesses that have addresses to show up in the Local 7 Pack, 3 Pack, and 1 pack search results. We’ll discuss Google’s ranking algorithm and what simple steps you can take.


Credit Monitoring & The Counsel of a Loan Officer Tackling the greatest contribution to loan origination by Rick Roque

Consumer Credit Crisis The national status and condition of individual consumer credit is at alarming levels. If one looks at the overall national consumer credit average the number falls around 690. The challenge with this is, if one looks at the prime home buying demographic between 25 and 45, that number drops to a frighteningly low 645. The consumer FICO in the average closed funded loan by the main investors in today’s market is a 740. This is a significant divide between what is being funded today and the millions of Americans who could qualify (and reliably pay) for their mortgage if it weren’t for the challenging underwriting environment we live in today. This trend has a number of ramifications on the U.S. economy, the housing market and of course, the mortgage industry as a whole. You don’t have to tell a sales manager that there are issues getting loans underwritten, qualified and funded. Rates are at historic lows yet the production level of mortgage companies across the United States are down by 30-40%. The shift in today’s hiring practices has moved from attracting the top sales professionals to aggressively looking for QA, Compliance and Secondary Marketing

executives with the goal of mitigating their risk and stretching their margins as the market fluctuates. As the economy continues to falter and exhibit negative and/or flat signs of growth, investors are constantly faced with losses and/or buy back pressures. This is the main reason why credit guidelines have not loosened. When you loan your best friend money, you give him flexible terms; when you loan someone money who hasn’t exhibited a reliable track record in paying you back, your terms and/or total loan amount tend to be a bit less flexible. Economic behavior is driven by human behavior; after all we are all just mere “people” making this economy move forward. Everyone talks about the importance of ‘consumer confidence’ but what matters ultimately is ‘investor confidence’ in the stability and direction of the market(s). One clearly fuels the other, but investor confidence tends to lag by 3-4months until a consistent 1 to 2 quarters worth of data reflects a market on the mend. This delayed reaction does very little for the small company looking for a loan to expand and thus add more jobs; or a bank looking to make an underwriting decision on a questionable borrower and file. So, what is the Sales Manager do? What is the loan officer to do? In 2010, MENLO’s research indicates just about 2 out of every 10 borrowers a loan officer pulls credit on, will actually receive a loan from that respective TheNicheReport.com


Techspot company. This front end ‘pull through’ ratio is both costly and inefficient. Think about this statistic from a different perspective: 8 out of every 10 borrower’s you pay money to pull credit on, walks out your door never to see you again. The main reason for this is the mismatch between what investors want in a borrower (740 FICO or above) and what borrowers presently have (low FICOs, low down-payments and no (to negative) equity in the homes they are in.) So, what do you do for those 8 borrowers that you are turning away largely due to low FICO scores and a lack of available loan products that can serve their needs?

The Dormition of Technology Innovation, 1999-2009 • Since 2007, I have been a strong advocate of consumer oriented services. I have always looked at the mortgage professional as a “financial advisor”. Growing up, I observed my Father and how he positioned his relationship with his real estate clients; he was a friend, advisor and most importantly a financial planner that provided insight on when a consumer should buy a home, the type of home to buy and how to finance it. After all in 1990, we were rolling into a recession; a 30 year fixed was 8.0-8.5%; the number of loan programs was about the same and underwriting requirements weren’t significantly different than they are today. So what has changed? The significantly lower rates today should make originating and closing loans so much easier – right? What has changed is the borrower. The average borrower has amassed a significant amount of debt. In 1990, the average consumer credit card debt was around $3,000; today this number is over $16,000. When the average household income has largely been flat ranging between $46K & $50K, this is a dangerous sign to the health and state of the economy as it relates to the housing market. With underwriting requirements are getting more and more stringent, average DTI levels cry out for someone to help the consumer. If mortgage professionals acting as a financial advisor do not, the Federal government will certainly take on the role of the mortgage professional and assume this responsibility on our behalf. The challenge is: our technology and systems are not set up to support the mentoring relationship between the loan officer and borrower; they are transactional in 34

October 2010

nature; Let me explain. Made widely popular with Calyx Software and their Point Loan Origination Software (LOS), the software was modeled after loan application “forms”. The concept of preparing the borrower for the mortgage transaction was not in the genesis of the software. A stack of loan applications were handled to Doug Chang, the founder and he meticulously coded each page for a local bank in San Francisco; thus the nearly two decade old market share leader in loan origination technology was born. The opportunity that aligned nicely with this is the growth in the housing industry from 1996 to 2007. There was no need to ‘nurture’ a relationship when there were mortgages to do. This established a 20 year old “tone” in mortgage technology that was sensitive to the needs of originating and processing mortgages but tone deaf to the needs of the qualifying borrower. Industry market leaders inspire a generation of competitors that effectively do what the industry leader does, but better at least, that is the goal of any start-up company looking to knock of the industry leader. So the downward spiral of mortgage technology began. It was the race for the loan officer with the goal of owning the origination platform. True innovation in the mortgage technology, from mass market and an ‘end to end’ standpoint(s) ended with the sale of Contour and Genesis to Ellie Mae in the 1990’s. We are in 2010, and It is arguable that there have been no disruptive technologies introduced to the market since Contour’s origination – banking and loan handling system(s) and Genesis’ thought leadership that evolved into The Ellie Mae Network (formerly known as ePass). Innovation went dormant until recently.

The Next Innovation Cycle: Credit Monitoring, Triggers and The Mentoring of the Borrower The next innovation frontier isn’t e- files; yes, this is important and it is a tremendous efficiency but this isn’t disruptive. What is disruptive are technologies that will assist borrowers who were otherwise ineligible and unqualifiable for a loan product to move them into a position of eligibility. This is done not by liberalizing qualifying guidelines, but quantifiably assisting borrowers to an improved credit status. That is the goal and the need. If you are losing 8 out of 10 borrowers due to ineligible circumstances, you are literally looking at both money and relationships fall through your fingers.

Techspot Lenderfeed Inc, (www.lenderfeed.com) is one company of several in the marketplace who are looking to make an impact in addressing this problem. Louis Zitting, mortgage and technology professional, and even less common, a former high producing loan officer for Primary Residential Mortgage. Louis developed a technology he calls “Monitor Base” that enables loan officers to monitor the status of a borrower’s Louis Zitting credit and automatically notify the loan officer(s) of changing credit circumstances. This solution is applicable to past leads, borrowers and friends. Lenderfeed’s target market is truly consumer focused services administered by the loan officer as the lead advisor and counselor on the mortgage transaction. At the heart of the technology is the opportunity that the loan officer can provide a longer term service to the borrower focused on helping them improve their credit and to provide them with the appropriate loan product information relative to their credit situation.

How does it work? Section six of the Fair Credit Reporting Act, provides the lender the ability to pre-screen a list of consumers; investors have done this for years giving them the opportunity to solicit your borrowers for refinance and new purchase opportunities. Now with MonitorBase, the loan officer can monitor the credit circumstance of the borrower and notify the borrower of their options. Mortgage Banks have a much greater capacity to personally serve consumers and to do so with shorter term times with more competitive options than your typical investor. Monitor-Base gives you tools that are traditionally leveraged by investors but due to the flexibility and focus of the mortgage lender, you have the opportunity to better serve them as a whole. This is not pre-screen credit lists – with this solution you aren't pulling a list of consumers who are at 620 and blindly soliciting them. This solution enables you to monitor an existing list of prospects & borrowers to track, “monitor” and then notify existing clients of their options as their credit score fluctuates; in 2007, Fair Issac did a study that Consumer credit scores fluctuate by 15-20 points over the course of a 90 day period. Until now, this

techspot fluctuation is invisible to the consumer and the mortgage advisor; with Monitor-Base, the loan officer can “monitor� this fluctuation and set alerts in place to be notified when a qualifying condition is met. This allows the loan officer to transition away from the ‘mortgage transaction’ and to a working relationship with the borrower to improve their credit worthiness. When the borrower gets into a stronger credit position and there is a matching loan program, by using Monitor-Base, you can inform the borrower of their respective options.

The process is compliant, easy and effective – just how effective? Look at the numbers. In 2009, using this technology, Louis and his team drove over $220M in origination volume as a result of using Monitor-Base. Loan officers are transactional to a fault; they either waiting for the business to come to them or they waste their time by attempting to manage their relationships manually with no automated way of prioritizing which leads to focus on and how to coach them accordingly. If you are dealing with a borrower who has had a bankruptcy within the last 2 years, or borrowers who have had foreclosures, a


      %$  %  #       %!$   &!  %    %!! !

    " !  !      !!!" 

FICO lower than 620 or a “mortgage late� – you can monitor those clients in Monitor-Base.

By setting your criteria in the software, you can be notified when one of your clients ‘clears’ any one of these condition or rather meets the established qualifying criteria that you have established in Monitor-Base. Once you’ve created the “alerts�, the pressure is off knowing that when the borrower is in an improved qualifying condition, you’ll be notified. It is because of this, you can focus on mentoring your clients regarding how to improve their credit and to improve their overall credit worthiness. I found the software easy to use, hands off and compliant. Lenderfeed ensures that all borrowers are notified when a qualifying condition is made so your mortgage firm can rest assured that all consumer privacy and notification requirements are satisfied. Total loan origination volume in 2010 has dropped from $1.9T in 2009 to an estimated $1.3T. The consumer demand for a mortgage, although flat really hasn’t changed. What have changed are the qualifying requirements and the credit worthiness of borrowers. This ‘gap’ couldn’t be greater. Given the reliable forecasts by economists who predict a steady-stagnant state through 2012, consumer ‘preparedness’ and the much needed credit improvement of borrowers. Companies like LenderFeed and tools like Monitor-Base are the new wave of solutions to cater to this long awaited trend. If you have any comments feel free to email me at rick@menlocompany.com or call me at 408.914.5895. Rick Roque runs a Technology & Mortgage Operations consultancy firm called MENLO (www.menlocompany. com).

Rules and Regulation headlines

Eating an Elephant One Bite at a Time – Dodd-Frank Financial Report Bill Warning! Don’t attend those expensive, webinars about the Dodd-Frank Financial Reform Bill—at least not yet anyway! Because you’ll be wasting your money! It doesn’t get fully implemented until 12 to 18 months from now! The Consumer Financial Protection Bureau and several other agencies have not even been established yet! So, we’ll chunk it down for you—over time! The first thing that the bill will be addressing within the next 90-days, in HR 4173-Title XIV-Subtitle F – Appraisal Activities, which is the death knoll for HVCC— 10 days earlier than originally planned. The good news is that the rules are pretty straightforward and pretty much exactly what people thought they should have been in the first place. No bribes! No intimidation! The even better news is that AMC’s get regulated and registered. Fees are going to be disclosed and an appraisal complaint hotline will be established! What You Should Know About FHA MIP Changes on October 4th! Tons have already been written about FHA, increased

MIP, decreased UFMIP and the effect it has on qualifying and payments! Remember to check your GFE’s and make sure they are in compliance. This may certainly qualify for a “changed circumstance”. HUD’s Actuaries have put in overtime on this MIP increase. Let’s say that the borrower decides to sell their home at the 7-year mark. With the new UFMIP, the loan amount is lower, but the MIP is higher. If you do the numbers over the 7-year time period, the amount of principal payment (just making regular monthly payments) is within 50 bucks of what the borrower has paid in MIP. The break-even is at about 84 months. I’m just saying that it’s no co-incidence! Brian Larrabee from www.EstateofMindInc.com ran did the math for me and it looks like after 7 years, HUD wins!

What’s Good for the Goose… Mortgage loan officers who work for banks, credit unions and even Farm Credit will have to register for NMLS, just like everyone else. Background checks, finger prints and testing (internal). Registration begins January




2011, with 6 months for everyone to get tested and registered. But, there is an elephant in the room—these LO’s must also provide a 10-year employment history—so LO’s, can’t hide from their past by switching to a bank or credit union. And yes, it’s public info that’s going to be listed on the NMLS site. Oh, one more thing—anyone who quotes rates or negotiates terms will also have to be registered. The only exclusion is a bank teller, who might casually give a mortgage rate to customer—and has nothing to do with the application! This inclusion kinda evens the playing field between brokers and bankers!

Cure for the Cosmetically-Challenged Home $35,000 anybody? That’s the amount of available to an FHA borrower who wants to purchase an ‘ugly duckling” home and turn it into a “swan”. The cool part is that the repairs do NOT have to be FHA Required! Ugly paint and carpet; new appliances, they are all eligible. Plus

an additional $2,000 for energy efficient items. Several lenders offer the 203K Streamline and if you haven’t check it out lately, we have an Mortgage Talking Points™ for you and your real estate agents to help them sell more homes!

VA Gets into the Fray with the GFE’s and HUD-1’s. VA is very strict about what a veteran borrower can and cannot pay. Funny that they just discovered that the new GFE can make it impossible to know who is paying for what! Effective for all loan apps taken after October 1, VA will require certain charges to be itemized. Let you title reps and closing agents know now! Are pregnant women being discriminated against? Vice President Joe Biden thinks so and has HUD investigating the allegations that Fannie and Freddie are denying loans because of maternity/paternity leave. We scoured the guidelines and found nothing specifically addressing how the loan should be underwritten when someone is on leave. Do you get the distinct feeling that we’ll be hearing from the agencies about this shortly? Don’t throw away your HUD Settlement Costs Booklets yet! A new version was issued on July 15, but it just provides some “technical” wording. HUD’s not even saying what they changed and we don’t plan to read thru 48 pages to compare. Use what you have in stock right now and before you order any new ones, check www.hud. gov/respa to make sure you are getting the latest version (since there have been 5 updates since January 2010).

Karen Deis, the publisher of MortgageCurrentcy.com and President of Foundation Marketing, Inc., specializes in training real estate agents and loan originators on consumerdirect marketing strategies. She owned a real estate company, mortgage company and appraisal firm for 10 years and was a business partner with one of the largest builders in her area.

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any years ago, I was introduced to a book by author Don Miguel Ruiz, called The Four Agreements. I wrote a two part column in January and February, 2009 called the Golden Rules and used one of these agreements in my list of guidelines to follow. I thought that bringing these four concepts to light is appropriate for this column since much of the financial problems this country is experiencing, is a result of NOT following these four ideas. Let me just jump right in and introduce the basic foundation of the four agreements. The Four Agreements are:

1. Be Impeccable with your Word Speak with integrity. Say only what you mean. Avoid using the Word to speak against yourself or to gossip about others. Use the power of your Word in the direction of truth and love. 2. Don’t Take Anything Personally Nothing others do is because of you. What others say and do is a projection of their own reality, their own dream. When you are immune to the opinions and


October 2010

actions of others, you won’t be the victim of needless suffering.

3. Don’t Make Assumptions Find the courage to ask questions and to express what you really want. Communicate with others as clearly as you can to avoid misunderstandings, sadness and drama. With just this one agreement, you can completely transform your life. 4. Always Do Your Best Your best is going to change from moment to moment; it will be different when you are healthy as opposed to sick. Under any circumstance, simply do your best, and you will avoid self-judgment, self-abuse, and regret. Now, if these four agreements are applied to the corporate ethics, do you think we would be in such a pickle today? What if each of us applies these simple concepts in our personal and business life starting right now? The book develops each agreement and the philosophy behind each in a very easy to understand manor, and I would encourage each one to read the book. I believe that one’s word is more powerful than an act of congress.


To be impeccable with your word means that you ‘walk the talk.’ This in itself is a tool that can fix many broke agreements in the financial debacle of today. The tip this month is simple to state, but may be more difficult than suspected to maintain; try to be impeccable with your word, and see how your business, personal life and relationships flourish. Follow the other three agreements and you may become a changed person. Now, who wants to teach these to the leaders of our banks?

Stewart Mednick is a seasoned mortgage banker and published author. His writing focuses on relationship development, personal empowerment, customer satisfaction, marketing and sales techniques. Stewart is available for marketing consulting, personal coaching and training sessions. If you have a comment or a question for Stewart, contact him at 651-895-5122 or smednick1@netzero.net

Manaseh, Epharim & Associates Your source for commercial real estate financing. Funding nationwide and internationally!! Rates from 3.9%

Direct Private Lender www.MEANDASSOCIATES.COM 770-840-0112 or 770-840-0113 Fax: 678-302-6444


Center Stage with emagic

The Niche Report talks with Managing Director Chad Northington


Chad Northington, Managing Director, came to eMagic in 2007 with more than 20 years in the mortgage industry. Since its inception, Chad was an eMagic user. He has brought that user experience to eMagic. His understanding of what our customers need is invaluable to developing new products and enhancements. As Chad Northington eMagic’s Managing Director, Chad oversees everything from development to operations and marketing. Who is eMagic? eMagic is essentially a gateway to faster loan originating and processing. We’re a web-based mortgage technology company that helps originators and investors automate the mortgage lending process from start to finish in a multi-channel environment. For 10 years eMagic’s mission has been to provide affordable technology solutions. Our fundamental mission has never changed. We’re focused on helping mortgage professionals originate loans more efficiently. We work closely with our partners to continuously enhance our platform based on customer needs, thereby providing them the benefits of seamless automated loan origination. eMagic continues to enhance security in communication and document management and improve operational efficiencies to increase our customers’ profitability. How exactly does eMagic help mortgage originators and lenders?


October 2010

eMagic offers a broad array of benefits; but in response to today’s environment, we focus on managing expenses. Lenders have experienced a decline in origination volume and an increase in production and operational expenses. According to recent figures from the Mortgage Bankers Association, lenders suffered a 40% decline in average profit per loan in 2009’s fourth quarter compared to the previous years. A major contributor to that drop was the rise in production operating expenses. Costs rose from $4,402 per loan in the fourth quarter of 2009 to $5,147 per loan in the first quarter of 2010. This 32% drop in a loan’s average profit in the first quarter represents a serious concern for mortgage originators and lenders in terms of survival in an increasingly competitive market. Fortunately, eMagic can help automate the mortgage loan origination process by implementing paperless technology and reducing operational costs. Another clear benefit of paperless mortgages is a faster turnaround time during loan processing. The simple act of securely sending a loan package online cuts down on time spent on mailing files. Imagine an originator mailing a loan package to the underwriter, who then mails the same package to an alternative branch for processing. If underwriting determines that the package is incomplete, it’s mailed back to the originator. With eMagic, the same loan package would have taken only minutes – instead of days – to move from location to location, without the cost of overnight delivery. Implementing paperless technology also addresses security issues. Many companies still e-mail sensitive borrower information and documentation, putting


themselves and their borrowers at risk. E-mail poses a security risk to the financial institution and the borrower because the email path is not secure. eMagic’s secure messaging system minimizes this legal and security risk by allowing customers to “post” loan documents to our secure server, only accessible by those invited to view them. So, eMagic helps originators and lenders reduce costs? Absolutely. Mortgage technology doesn’t have to be expensive. There’s always been a myth that technology solutions need to be high-priced and uneconomical. We’re excited to prove that is flatly untrue. For example, consider eMagic’s document imaging solution found in our eDocs package. eDocs provides lenders and originators ways to significantly reduce paperrelated expenses. The average loan generates over 400 pieces of paper, and overnight delivery costs are trending up. A document imaging and file management system allows businesses to not only store all loan files securely online, but also deliver and share loan files electronically to everyone involved in the loan process. One customer used our secure online loan delivery system, which is currently found in eDocs, to electronically deliver 600 closing packages to the title company in 2009. The typical cost of mailing a loan package overnight is approximately $15 – meaning there was enough money saved on 600 loans to pay for 10 years of eMagic’s document imaging. And that’s just calculating a $9,000 savings on overnight costs alone. The paperless solutions found in eDocs also reduce printing, shredding and paper loan file storage costs. If you think about it, any time or anywhere you’re automating the mortgage loan process with eMagic’s various tools, you’re reducing the amount of resources and time it takes to perform that task, whether it be hunting down a paper loan document or manually pricing a loan. That reduced effort leads to lower operating costs and more time generating new business.

Does eMagic replace their current LOS? While eMagic contains a wide range of functionality that facilitates loan processing, it’s designed to work with lenders’ existing LOS’. Be implementing eMagic, lenders enjoy many of the benefits that come from the functionality in LOS upgrades – but without the money, work and headaches associated with actually upgrading it. Most customers benefit by using separate elements of eMagic to address gaps in their own loan origination process. In many cases, we consult with customers to determine how to best implement eMagic’s solutions in their unique operations and technology environment. eMagic customers generate leads using our customizable online mortgage application, view and track their pipeline of leads and loans, order services (such as Automated Underwriting, mortgage insurance, flood, credit and compliant initial disclosures), electronically compile and deliver loan folders to investors online, check loan status and communicate securely all on one application. Furthermore, they can archive these loans and access them for up to 7 years for pennies a file. eMagic just restructured its product lines, correct? We did. We streamlined and simplified our packages to better accommodate our customers. eMagic now offers three packages for mortgage originators ranging from free to just $70 a month. We also offer integrated powerful product and pricing engine tools and compliant initial disclosures. We’re simplifying our lender solutions as well. Free? eMagic is free? Our basic service is free, correct. eMagic makes the process of ordering mortgage-related products and services more efficient across all business channels and other parties to the loan – for free. Depending on what services they order – Automated Underwriting or credit, for example – they may be billed based on their vendor

CENTER STAGE or investor agreements. Our eDocs package, which I mentioned earlier, takes automation a step further by offering more robust document management and delivery tools. For $39.95 a month, eDocs saves customers delivery costs by allowing loan files and packages to be sent and stored electronically. It addresses security concerns by offering a secure messaging center for exchanging sensitive borrower information. It speeds up the initial disclosure process through eMagic’s eConsent-compliant secure messaging system. It tracks the loan every step of the way and keeps an audit trail of all activity, available to the customer with the click of a button.

Standing strong Grow with an established branching company

Join American Pacific Mortgage—the retail branching company whose strength is rooted in 20 years of experience serving branch managers and originators. • APM is a Direct Endorsed FHA • • • • • • •

• In branching Mortgage Bank—No YSP disclosure since 1990 At APM you can use your • More than established brand name 130 branches • Licensed in APM gives you a choice—Bank your 19 states loans or Broker your loans • Headquartered in APM offers Weekly Production Sacramento, CA Training APM provides Database Marketing Fulfillment APM has Multiple Established Warehouse Lines APM engages a Custom AMC Solution APM employees have access to Full Benefits

American Pacific Mortgage is currently growing throughout the Western U.S. For complete details call (866) 625-9352 or visit www.apmortgage.com

3000 Lava Ridge Court , Suite 200, Roseville, CA 95661 (866) 625-9352 info@apmortgage.com apmortgage.com



Is there any other benefit in using eMagic? Our MortgageApp package includes all the functionality of our eDocs package but also includes an online mortgage application. For $69.95 a month, eMagic customers can capture today’s borrowers’ information with a secure, customizable online mortgage application. The application’s lead information is integrated into the eMagic workflow, saving data entry and loan processing time. Many of today’s homebuyers prefer the convenience of shopping and applying for a loan online. If mortgage lenders don’t have a mortgage loan application on their websites, they’re sending customers to the competition. eMagic’s MortgageApp allows originators and lenders to select which fields appear on the application and which are required. They can remove items that may scare off potential leads who may not be ready to divulge so much sensitive information. As our customers can attest, eMagic provides affordable solutions that address some of the biggest challenges mortgage originators and lenders currently face. Our products ease the financial burden in this market by automating workflow, lowering processing costs associated with loan origination and speeding up turnaround time. And that translates to a successful, productive mortgage lending experience.


Prime & FHA Flagstar Wholesale Lending 866-945-9872

NetMore America, Inc. 877-490-3140

Presidents First Mortgage Bankers 800-507-0423

United Wholesale Mortgage 800-981-8898 ext. 5515

Offer a full array of FHA and Agency products, coupled with industryleading underwriting turn times and technology. 24-48 Turntimes, Inside Support, RESPA Help, Friction Free Technology, FHA for Brokers, We value Brokers!

Wholesale Lender; 24 hour turnaround time, online submissions, extensive product line 24/7 realtime access. Home of the 7 Day Paycheck. FHA & Conventional Underwriting in 24-48 Hours. Doublewide Manufactured now Available!

COMMERCIAL GreenLake Real Estate Fund, LLC 310-462-4637

Manaseh, Epharim & Associates 770-840-0112

MMG Capital LLC

Private direct commercial loans in CA and NV. All property types except raw land. Our latest fund was raised specifically for loans in this tough economy. We're eager to lend, so please call today! Acquisition, Refi’s, and Development Commercial Loans. Your source for international and domestic funding.

Asset-based Hard Money Loans; Nationwide Lender.



Remington Capital, Inc. 480-905-3239

Senior Financing, Mezzanine, Bridge Loans, Hard Money, Equity, and Joint Venture. All Property Types.

ADVERTISE YOUR NICHES HERE WITHIN Financing may not be available in all states. The above summaries are intended for Mortgage Professionals only, and not intended for distribution to consumers, as defined by Section 226.2 of Regulation Z, which implements the Truth-In-Lending Act. Information is subject to change without notice. Refer to each lender’s information on products, program, procedures, representations, and warranties for details.




HARD MONEY & NON-PRIME B & C LENDING IS BACK. If your client has equity, we have a loan. Loan amounts 100K to 2MM. We are the final decision makers, all decisions made at our location.

ACC Mortgage, Inc. 240-314-0399 X 19

First Mount Vernon

No seasoning requirements, No upfront commitment or processing fees, Minimum credit score 400 - DE, MD, VA, DC, NC, SC, GA, FL.

866-908-FMV1 (3681)

First Mount Vernon

Minimal documentation required, Combined Loan-to-Values to 105% - DE, MD, VA, DC, NC, SC, GA, FL.

866-908-FMV1 (3681)

GreenLake Real Estate Fund, LLC 310-462-4637

Manaseh, Epharim & Associates

Private direct commercial loans in CA and NV. All property types except raw land. Our latest fund was raised specifically for loans in this tough economy. We're eager to lend, so please call today!


Direct Lender with fast closings. Your source for international and domestic funding.

MMG Capital LLC

Asset-based Hard Money Loans; Nationwide Lender.



Remington Capital, Inc


Windvest Corporation

Up to 65% of valued collateral, fast closing.



REHAB LOANS for prperty investors. Direct lender on properties in So. California. 24 to 48 hour approvals. Rapid closing. Non-owner occupied. Up to 1-year term. Call for details to get your next deal approved! www.windvestcorp.com.

CONSTRUCTION Bismark Mortgage Company 800-350-7199 x106

Manaseh, Epharim & Associates 770-840-0112

Owner Builder and Spec Construction for residential AL, AK, AZ, CA, CO, GA, HI, ID, IL, IN, KY, ME, MD, MA, MI, MN, MO, NY, NV, NJ, NC, OH, OR, PA, TN, TX, UT, VA and WA. New construction and rehab loans for all types of commercial properties. Your source for international and domestic funding.

Financing may not be available in all states. The above summaries are intended for Mortgage Professionals only, and not intended for distribution to consumers, as defined by Section 226.2 of Regulation Z, which implements the Truth-In-Lending Act. Information is subject to change without notice. Refer to each lender’s information on products, program, procedures, representations, and warranties for details.


October 2010

Service provider classifieds

Service Provider Classifieds Compliance and Audit NEW

Certified Forensic Loan Auditors, LLC 310-432-6304

Providing Law Firms and Mortgage Professionals with premium Certified Forensic Loan Audits, Securitization Audits, Predatory Lending Lawsuits, TRO's, Lis Pendens, full service Litigation Support, Industry Training and Continuing Education MCLE.

Quality Mortgage Services 615-591-2528

Mortgage Compliance Solutions, Post Closing & Default Audits, HVCC Reporting, QC Software, Federal Regulatory Audits

Waquis 310-696-9515

We provide HUD Auditing and QC on every loan type

Credit Repair & Restoration NEW

HTDI Financial 877-877-4834 opt 5

Start your own credit repair company with our state of the art tracking software and dispute outsourcing options. Top notch support by a dedicated Account Expert.

Credit-Aid Software 800-257-1192

Credit Repair Software. Credit repair business opportunity.

CreditCRM 877-256-8162

The only full credit repair business in a box

Buildmyscores.com 206-377-9991

We offer a personal and customized approach to help bring complete restoration to your client’s credit. We’re committed to providing you with faster results and a greater opportunity for success.

Insurance Entitle Direct 877-936-8485 or 877-9ENTITLE

Hundreds of mortgage professionals have saved their borrowers up to 35% or more on their title insurance by recommending Entitle Direct.

Mortgage Insurance Agency 866-355-9944

State Licensed Surety Bonds, Errors & Omissions and Fidelity Bond coverage’s for Mortgage Bankers and Mortgage Brokers nationally.



Service provider classifieds

technology a la mode 1-800-252-6633 ext 309



AllRegs (800) 848-4904

Websites and marketing tools for real estate professionals

Products include single and multifamily underwriting & insuring guidelines, federal & state compliance laws and regulations, contract publishing services, policy and procedure manual templates, AllRegs Academy training programs and more

Applied Business Software 800-833-3343

Origination and Servicing software for hard money lenders.

Calyx 877-862-2599

Affordable software that streamlines and optimizes all phases of the loan process – from loan marketing through closing.

Corvisa LLC. 800-787-9054

Robust software suite includes appraisal management, business analytics, payment processing and more.

DocMagic 800-649-1362

The largest dedicated loan document production company in the country, delivers a fusion of solutions guaranteed to meet today's complex loan document challenges.

Xetus 877-GO-XETUS

Provides a powerful, easy-to-use loan origination system that streamlines mortgage loan processing.

Appraisal & AMC



AMC Links 866-439-9546

Our focus is creating more successful closings for our Lenders through our success oriented appraisal management services. Fast, 3-Day Turn Times, State Certified Appraisers, HVCC, FHA, TILA, Individual State and Dodd Frank Compliant


Corvisa LLC. 800-787-9054

Robust software suite includes appraisal management, business analytics, payment processing and more.

National Valuation Service 786-581-9171

Comprised of thousands of fully vetted Independent Business Owners who as Appraisers, provide valuation and consulting services in 50 States.

ValRev, LCC 323-302-9630

Online solutions to valuation challenges.

October 2010

Service provider classifieds

Training & education NEW NEW

AllRegs (800) 848-4904

Certified Forensic Loan Auditors, LLC 310-432-6304

AllRegs Academy offers online, audio and classroom training, continuing education, certifications, study guides, practical guides and customized training at your site on compliance, underwriting, servicing, FHA, VA, SAFE and more. Providing Law Firms and Mortgage Professionals with premium Certified Forensic Loan Audits, Securitization Audits, Predatory Lending Lawsuits, TRO's, Lis Pendens, full service Litigation Support, Industry Training and Continuing Education MCLE.

marketing & lead Gen CMG 702-290-9210


Lender 411


Mailer Leads

888-333-6628 (866) 783-4053 ext 14

OSI Express 866-674-1999

Get certified to sell the most powerful loan in the mortgage business today – The Home Ownership Accelerator – HomeOwnershipAccelerator.com Mortgage Leads & Internet Marketing. Sign up FREE on www.lender411.com. Check out testimonials of our existing members about the quality of our leads and the level of our service for web marketing. We are fast becoming the Gorilla in the market. Imagine having 50 prospects per loan officer that are already pre-approved calling you within 10 days from today! Our mailers are FICO and AVM based and are prequalified based on credit data. Prospects will be ready to finance when they call you! Not just mortgage flyers and open house flyers, we are a powerful financing analysis tool for refinance and purchase, greatly helping loan originators.

Branch Opportunities


American Pacific Mortgage 866-625-9352

Join American Pacific Mortgage and become a direct lender with the option of brokering

GSF Mortgage Corporation 877-494-4448

Be in business for yourself, but not by yourself. Join GSF Mortgage's Professional Branch Network! Enjoy freedom and stability and reap the rewards

Guaranteed Home Mortgage Company, Inc. 888-572-3602

Specialized Retail Platform for Experienced Loan Officers

Sierra Pacific Mortgage 800-447-3386

Retail Branches and Wholesale Lending Nationwide. Privately owned specializing in residential conforming, FHA, VA and Jumbo. Wholesale: www.spm1.com Retail: www.spmloans.com




All Credit Considered Mortgage B&C LENDING IS BACK www.weapproveloans.com National Sales Manager 240-314-0399 X 19 newloans@accmortgage.com

a la mode, inc. Websites and marketing tools for real estate professionals www.alamode.com 1-800-ALAMODE info@alamode.com

AllRegs Leading information provider for the mortgage industry www.allregs.com 800-848-4904 help@allregs.com

AMC Links Success oriented appraisal management services that focus on creating more successful closings for lenders. www.amclinks.com Rod Olson 866-439-9546 management@amclinks.com

American Pacific Mortgage Corporation One of the largest independent retail banking and branching companies in the country www.apmortgage.com Melissa Arntzen 866-625-9352 info@apmortgage.com


October 2010

Applied Business Software Origination and Servicing software for hard money lenders. www.TheMortgageOffice.com 800-833-3343 leadsmanagement@absnetwork.com

ATTENTION LENDERS!! Buyers of Distressed Debt NicheBuyers@gmail.com

Best Rate Referrals Specializes in direct marketing services www.bestratereferrals.com 800-811-1402

Bismark Mortgage Company Residential Construction Loans www.bismarkmortgage.com James Minarsich 800-350-7199 x106 loans@bismarkmortgage.com

BlitzLocal Provides our clients with every tool necessary to run a profitable internet marketing campaign www.blitzlocal.com 888-811-2448

Buildmyscores.com The leader in total credit restoration services. We’re committed to providing you with faster results and a greater opportunity for success, #1 trusted resource for credit restoration services. www.buildmyscores.com 206-377-9991 joseph@buildmyscores.com

Calyx Software Affordable software that streamlines and optimizes all phases of the loan process—from loan marketing through closing. www.calyxsoftware.com 877-862-2599 point72@calyxsoftware.com

Certified Forensic Loan Auditors, LLC Forensic Loan Audit & Mortgage Litigation Support Services www.certifiedforensicloanauditors.com Andrew Lehman Damion Emholtz | Tim Morris 310-432-6304 info@certifiedforensicloanauditors.com

CMG MORTGAGE INC One of the nation's leading wholesale mortgage banks with offices in San Ramon CA and Phoenix AZ www.cmgbanking.com John Cathro / Mike Lee 702-290-9210 / 925-708-2236 jcathro@cmgmortgage.com / mlee@cmgmortgage.com

Corvisa LLC Robust software suite includes appraisal management, business analytics, payment processing and more www.corvisa.com Matt Lautz 1-800-787-9054 sales@corvisa.com

Credit-Aid Software Credit Repair Software. Credit repair business opportunity www.credit-aid.com Barbara Starr 800-257-1192 sales@credit-aid.com


CreditCRM THE ONLY full credit repair business in a box www.creditcrm.com 877-256-8162

DocMagic The largest dedicated loan document production company in the country, delivers a fusion of solutions guaranteed to meet today's complex loan document challenges www.docmagic.com 800-649-1362

ENTITLE DIRECT Savings up to 35% or more on title insurance in 30 states www.EntitleDirect.com/mortgage 877-936-8485 or 877-9ENTITLE SpecialistCenter@EntitleDirect.com

First Mount Vernon I.L.A. Privately-owned, equity-based lender which specializes in lending to borrowers who require fast closings www.FMV1.com 703-823-6800

GreenLake Real Estate Fund Private Commercial Lender in CA & NV Kamau Coleman 310-462-4637 kcoleman@greenlakefund.com

GSF Mortgage Corp Pro Branch, correspondent and wholesale opportunities www.gsfsales.com Debbie Beier 877-494-4448 dbeier@gsf-mortgage.com

Guaranteed Home Mortgage Company, Inc. Established and well-funded Mortgage Banker since 1992 www.ghmc.com and www.joinguaranteed.com Kelley Berkheiser or Louis Tesoriero 888-329-GHMC ltesoriero@ghmc.com

HTDI Financial Provides credit repair business options to increase revenue www.outsourcedisputes.com 877-877-4834 opt 6 sales@htdifinancial.com

Lender 411 Mortgage Leads and free Internet Marketing. Sign up FREE. www.lender411.com Rocky Foroutan 888-333-6628 x11 info@lender411.com

Manaseh, Epharim & Associates Domestic and international financier, offer up to 100% financing to qualified investors/ borrowers www.meandassociates.com R.D. Walker info@meandassociates.com 770-840-0112

MMG Capital LLC Asset-based Hard Money Lender; Nationwide www.mmgcap.com Chris Gleason 310-295-1121 (ext. 301) chris.gleason@mmgcap.com

The Mod Post www.TheModPost.com 877-812-4327

Mortgage Bankers Association National association representing the real estate finance industry www.mbaa.org Mailer Leads Lenders and Brokers who use our mailers are not only surviving -- they are thriving www.MailerLeads.com 866-783-4053 ext 14

MBSauthority.com Live MBS data and analysis, lock recommendations, newsletters, and more! FREE trial! www.MBSauthority.com Barry Corse 800-264-7135 x 2 bcorse@mbsauthority.com

The Mortgage Lender Implode-O-Meter Tracking the Housing Finance Breakdown... the WHOLE truth www.ml-implode.com

Mortgage Insurance Agency, Ltd. State Licensed Surety Bonds, Errors & Omissions, and Fidelity Bond coverages for Mortgage Bankers and Mortgage Brokers nationally www.mtgins.com David Jackson, President 866-355-9944 info@mtgins.com TheNicheReport.com



National Valuation Service, Inc Comprised of thousands of fully vetted Independent Business Owners who as Appraisers, provide valuation and consulting services in 50 states 786-581-9171 info@nvs.coop

NetMore America, Inc. Next Generation Mortgage Banker: Wholesale/Retail Branching www.netmoreamerica.com Michael Arnold 877-490-3140 contactus@netmoreamerica.com

OSI Express Not just mortgage flyers and open house flyers, We are a powerful financing analysis tool for refinance and purchase, greatly helping loan originators www.OSIExpress.com and www.EZMortgageFlyers.com OSI Customer Care 866-674-1999 customercare@osiexpress.com

Quality Mortgage Services, LLC Full Service Mortgage Compliance Solutions www.qcmortgage.com Contact: Chip Langley 615-591-2528 info@qcmortgage.com

Quick Qualifier Software Prequal & Marketing Software for Loan Officers www.mortgagesoftware.com Thor Skonnord 888-684-9273 thor@mortgagesoftware.com


October 2010

RateLink Providing mortgage professionals with timely and accurate data as a means to a competitive advantage www.ratelink.com 800-938-5193

Remington Capital, Inc Senior Financing, Mezzanine, Bridge Loans, Hard Money, Equity, and Joint Venture. All Property Types. www.remingtoncapitalinc.com 480-905-3239 apply@remingtoncapitalinc.com

ValRev, LLC Online Valuation Solutions www.ValRev.com Leland Shepherd 323-302-9632 lshepherd@valrev.com

Waquis We provide HUD Auditing and QC on every loan type www.waquis.com/qc Joe O'Neill 310-696-9515 joe@waquis.com

Sierra Pacific Mortgage Retail Branches and Wholesale Lending Nationwide 800-447-3386 info@spm1.com

Mortgage Social Media Marketing The Premiere Book on Social Media For Mortgage Finance Professionals! MortgageSocialMediaMarketing.com/ebook naomi@naomitrower.com

United Wholesale Mortgage Home of the 7 Day Paycheck. FHA & Conventional Underwriting in 24-48 Hours. Doublewide Manufactured now Available! www.uwmco.com Allen Beydoun 800-981-8898 ext. 5515 abeydoun@uwmco.com

Windvest Corporation Hard money lender, specializing in Rehab Loans www.windvestcorp.com Andre Jimenez John Ermin 877-285-0777 andre@windvestcorp.com john@windvestcorp.com

Xetus Provides a powerful, easy-to-use loan origination system www.xetus.com Scott Stein 650-237-1225 x123 sstein@xetus.com

BRINGING UP THE REAR - continued from page 54

didn’t give a damn about the economic stimulus… bridges, infrastructure, condoms, reseeding the mall in Washington, whatever. I was waiting for him to do something about the foreclosure crisis, that at the time of his inauguration was causing more Americans to circle the drain that any force since the Great Depression. It was abundantly clear then that the spread of the foreclosure crisis would bring a depression of a kind never imagined by the generations who would experience it this time around. So, Obama handed the ball off to Tim Geithner, the President of the New York Federal Reserve Bank, but entirely baffled by a tax return…. Oh, why not, people? Hope and change, remember? Look, he’s young like Obama… that Volker guy is old and Larry Summers doesn’t think chicks can do math. Geithner had been partly responsible for the decision to let Lehman Brothers go under, for the TARP fiasco, and for American International Group (AIG) paying its creditors in full with taxpayer money. So, it’s not like he didn’t have a track record. As president of the Federal Reserve Bank of New York, Geithner served under a board of directors headed by JPMorgan Chase CEO, Jamie Dimon. And as the pièce de résistance, for his chief of staff, Geithner chose a former lobbyist for Goldman Sachs. So, fine… better late then never for the journalists and bloggers… they finally agree with me when I say, HAMP is a prodigious failure. Now, I figured, we could get something done and save the country. But Treasury officials told the bloggers that they knew all along that it wouldn’t work, that homeowners would be foreclosed on left and right, but, they explained, that was okay with them. In fact, it was a good thing. They only wanted HAMP to slow down the pace of foreclosures because if they had come to quickly when the banks weren’t strong to handle them, they would have gone under. Officials pointed out that what may have been an agonizing process for individuals was a useful palliative for the system as a whole. No, I’m sorry but no, damn it. I don’t even know what a palliative is, but it doesn’t matter. No, no, no. Geithner, you elitist piece of garbage, you do not get to torture American citizens because you think it will benefit the banks. Who the hell do you think you are? Did my president know about this? Because you imply that he did, and if that’s the case then he should be impeached. No American president would ever condone what you are describing and if this one did, he is not fit to lead our country. Mr. Geithner… people have taken their own lives over what you’ve allowed to happen. Children have gone to bed night after night scared to death, not knowing why their parents are so afraid… or so angry. Marriages have ended.

Fathers have sat up at night wondering if their life insurance policies will pay off after suicide. And all of this and more continues to this day and yet there is no plan to change a thing. Because you’re happy that Wells Fargo isn’t suffering too terribly much. And why? Because Citibank or Bank of America would have gone under if the foreclosures would have come at a faster pace? Bull. You think that it’s because of HAMP that it’s taking banks a long time to foreclose? You’re a maroon, Tim. If banks were going to go under by foreclosing too quickly they would have slowed the pace themselves. We didn’t need you to invent a fake loan modification program and lie to the American people about it in order to slow down the pace of foreclosures. Besides they could have MODIFIED THE LOANS, Timmy. Before you showed up with HAMP, banks were modifying loans much more frequently. Is that what you wanted to do, STOP MODIFICATIONS? So you invented a program that would do just that by promising to modify 3-4 million loans? Did Obama know of your plan? Did the President of the United States know that this outcome would be considered a success? Is that what your cohorts at Treasury are saying… off the record, of course. Cowards. Mr. Geithner, you should be incarcerated for the rape of the American people. You know what caused this crisis and you know damn well that it wasn’t some guy in Stockton, California with a 600 FICO score, not making a mortgage payment. How do you sleep at night? Do you even know what you’ve done to countless thousands of people’s lives so that the banks wouldn’t have to foreclose too quickly? Or, maybe you’ve got something like a child labor program on your drawing board… next time are you guys at Treasury are going to be telling bloggers: Well, it must have been a strain on those kiddies, but hey look… productivity is up six points? The showers are on Mr. Geithner. We’ve seen, heard and felt enough of you. Resign now before you sink the Democratic Party’s control of the House. Because I’m here to tell you… there are hundreds of thousands of people that don’t respond to polls… until they arrive at theirs. And then they’ll close that curtain and see your face, remember the misery of HAMP… and they’ll cast their vote for fried chicken and salad before an incumbent, no matter who it is. Watch. And learn. Martin Andelman is a staff writer for The Niche Report. He also writes an almost daily column on Ml-Implode.com called Mandelman Matters. He also publishes a Monthly Museletter and you can follow "Mandelman" on Twitter. Send your reponses to martin@nichereportonline.com. TheNicheReport.com



Treasury Secretary Tim “Transparency” Geithner and his Band of Banking Sadists BY MARTIN ANDELMAN


eah, I know… you’re thinking I picked an easy target. Like, maybe I’m getting lazy. Almost like going hunting and shooting a deer wearing bifocals and pushing a walker. Well, not true, my jump-to-conclusions friend. I didn’t want to go after the man who thinks bankers should always be bailed out, but never imprisoned… the man who handles FASB like most people handle a Suggestion Box… the man who got investors to embrace pretending as part of a financial strategy… the only adult male to make Elizabeth Warren check YES on waterboarding. No, I didn’t want to bother with little Timmy Geithner, but after what went on when he invited a group of bloggers to Treasury in mid-August, he left me no choice. It’s almost like he wanted to be featured in this column. After all, Bernanke’s been here. Sheila the Care Bair’s been here. President Obama did a stint on these pages for a month at the beginning of 2010. I even welcomed Assistant Treasury Secretary Michael Barr into my Rear-of-the-Month Club in 2009, but until now… no Treasury Tim. Maybe he was feeling left out so he decided to do something so incredibly odious that he knew I would be powerless in the face of his jackassedness. Well, if that was the case, Timmy my boy… touchdown! You made it by a mile, my loathsome pal. In fact, just for future reference, you could have done something one tenth as hideous and hateful and I still 54

October 2010

would have scooted your cute little backside right to the front of the line of backsides that wait patiently for their chance to be brought up by me. So, I guess it’s very well done there. I’d like to think that, since you’re reading this in the latter part of September or even in October, you’ve already read about what went on at the Department of the Treasury back on August 16th and 18th when Tim decided to host an intimate gathering at which some of the country’s bestknown bloggers would get to listen to Treasury officials wax pathos, albeit anonymously, about a range of topics… most compellingly, about HAMP, the Home Affordable Modification Program. Or, as it should be known by the time you’re reading this, “Hopeless for Homeowners,” or possibly by a new acronym, which I’m guessing is either CRAMP or perhaps CRAP. I must admit, I have been having a ball lately reading all of the Johnny-come-lately journalists and bloggers who recently started claiming that they knew all along that HAMP was an abject failure, as if they’d been preaching that gospel since Inauguration Day, 2009. Why? Because I’m the only writer who’s been saying in no uncertain terms that HAMP was a tragic and cruel waste of time since the day Obama introduced it while giving a speech in Phoenix on February 19, 2009, if I remember correctly. Back then, no one else was saying “boo” about the new President’s plan… that was when he was still uber-smart and was favored to fix whatever it was that was broken in America and around the world. Me… I didn’t care what everyone was swooning over… - continued on page 53


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TNR - October 2010  

Feature Article What's Stopping Loan Modifications? by Bill Matz

TNR - October 2010  

Feature Article What's Stopping Loan Modifications? by Bill Matz

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