Servion Mortgage Newsletter - November 2022

NOVEMBER 2022

In This Issue Partner Updates Insights from Servion’s Lending Conference • Offering e-Closings to Borrowers • Our Commitment to Customer Service • How to Help Buyers Feel Comfortable Purchasing a Home During Uncertain Market

Servion Mortgage Training: Insights into Top Trending Quality Control Issues How to Avoid the Headache of Undisclosed Liabilities Be Prepared for LIBOR Index Transition Servion Named One of Minnesota’s Best Realty Companies Save the Date: 2023 Lending Conference The Buzz: Recent Feedback

PARTNERffUPDATES

The Fall housing market continues to be different with mortgage rates rising and less availability of homes on the market. But there still has been plenty of demand from buyers and demand for Servion Mortgage’s support. We are thrilled to welcome our newest partners and grow all relationships with existing ones.

New Retail Lending Partner Green River Area Federal Credit Union Owensboro, KY

New Correspondent Partner Hercules First Federal Credit Union Taylorsville, UT

Relationship Expansions Arbuckle Federal Credit Union *Now using Wholesale FHA/VA and Contract Processing Arsenal Credit Union *Now using Retail Rio Grande Credit Union *Now using Wholesale FHA/VA SESLOC FCU *Now using Delegated Correspondent services TruStone Financial Credit Union *Now using Correspondent WyHy Federal Credit Union *Now using Correspondent, Wholesale FHA & VA, and Contract Processing LEARN ABOUT OUR PRODUCTS & PARTNERSHIP OPPORTUNITIES

MILITARY DISCOUNT Servion Title salutes our troops with an exclusive discount as a thank you for their service and dedication! We welcome all Active Duty members, Reserves, Veterans and Retirees including their immediate family members.

INSIGHTS FROM SERVION’S LENDING CONFERENCE Servion recently held a Lending Conference in St. Paul for our partners. Here is a summary of some of the information shared during the meeting.

OFFERING E-CLOSINGS TO BORROWERS

Here is the “crawl-walk-run” evolution Simplicity Credit Union used to guide their transition.

PHASE 1 – E-SIGN HYBRID Paper note, paper notary documents, all other electronic documents

PHASE 2 – E-NOTES HYBRID e-Note, paper notary documents, all other electronic documents KATHY BRANDL AND HANNAH HEIMAN SIMPLICITY CREDIT UNION With technology becoming a part of nearly every business transaction, it’s no surprise that the number of e-Closings is expected to increase over time. Representatives from Simplicity Credit Union in Marshfield, WI, recently participated in Servion’s Lending Conference and shared how their organization successfully transitioned to offering e-Closings to customers.

According to Simplicity, a closing doesn’t have to be 100% digital to be considered an e-Closing.

A closing that is partially electronic and partially paper is called a hybrid e-Closing.

Here are some of the top factors driving adoption of digital mortgage technology in next 12-18 months: • Customer expectations for a digitized mortgage process • Potential reduction in time-to-close • Organizational leadership is committed to digital transformation • Pressure from competitors who are adopting digital process • Need to find process efficiencies due to staffing tightness • Tightening margins due to expected decrease in demand for mortgages

FINAL PHASE - COMPLETELY ELECTRONIC e-Note, e-notarization of documents, all other electronic documents Their team experienced the following benefits: • Better experience – It’s a faster process internally and externally; customers can review documents prior to closing; credit unions can answer questions in advance • Convenience – No printing, copying, or scanning, nothing gets lost in mail. This makes the job easier for closing agents • Time saver for all partners • Improved security due to increased compliance; customers use an access code and process involves smart docs that can’t be edited. Younger borrowers appreciate security • Improved accuracy – There are no missed signatures, no audits needed • Post -closing efficiency – All documents are sent to federal channels at one time so there’s no need for oversight The transition for Simplicity Credit Union was extremely successful. In August 2022, Simplicity Credit Union processed 55 loans with 37 that included e-Notes. Only 8 closings required employees and customers to meet in-person at the office.

OUR COMMITMENT TO CUSTOMER SERVICE Brad Crandall, CEO The Servion Group

OVER THE NEXT FIVE YEARS, WE ARE FOCUSING ON THE FOLLOWING AREAS:

TRANSFORMATION Looking at our internal team effectiveness.

At Servion, we talk a lot about providing quality service and having a service mindset. We use BE THE SOLUTION as our mantra.

In fact, our mortgage team has set a goal to be the preferred underwriting team in the nation – with a plan to double the size of our underwriting, processing, closing, and correspondent departments in the next 3 to 5 years.

Our commitment to our partners: • We are flexible. We can flex and pivot in step with you, our partners.

• Our team is dedicated. I’ve always said that about the folks you work with at Servion. But the last couple of years were incredible proof of their commitment to serving.

• Our role is to offer scale and resources to help you be the best option for your borrowers.

Whatever may be happening in the world, our job is to be the solution for you.

TECHNOLOGY Investigating and investing in technology needs that propel our organization toward greater efficiency while also providing opportunities for offering valueadd solutions.

EXPERTISE Sharing our expertise, experience, and insight to simply help you stand out in your communities.

INNOVATION Being intentional about how we might do our business differently or solve for change in a better way so that we continue to be a viable and relevant solution for you.

TRAINING & EDUCATION Creating programs that keep individuals and teams consistent, collaborative, and growth-minded.

HOW TO HELP BUYERS FEEL COMFORTABLE PURCHASING A HOME DURING UNCERTAIN MARKET According to Fannie Mae research presented at the recent Lending Conference, housing sales have slowed amid affordability pressures. One key factor is interest rates that have risen rapidly since early August, surpassing 6 percent, hitting highest levels since 2008. As a result, yearover-year demand for housing is down as rates continue to increase.

Despite these challenging trends, single family housing is still attractive to many buyers, and there are several ways you can work with potential buyers, paying attention to their specific needs and tailoring a solution to help them feel more confident in proceeding with a home purchase.

Highlight the advantages of home ownership In many markets, rent payments can be very similar to house payments. But over time, owning a home can provide potential property value increases along with significant tax advantages.

Suggest a consultation with a tax advisor to explore these benefits.

Take time to ask buyers what they can afford Depending on their financial needs, you can create the right balance and flexibility in the amount of down payment they want to pay up front, closing costs and interest rates.

No matter what the market holds during the rest of the year and into 2023, you can rely on Servion Mortgage to be here to meet your needs and exceed your expectations.

Discuss the variety of mortgages available Suggesting an adjustable-rate mortgage could be the right solution for buyers looking for a lower interest rate in the short term and who are comfortable with a potential increase in interest rates that could match potential salary increases in the future.

Put current mortgage rates into context While there has been a lot of attention focused on recent mortgage rate increases, from a historical perspective, rates are still historically low.

Remind buyers that nothing is permanent Sometimes buyers need to be reminded that they are not locked into a particular interest rate forever.

There’s always the opportunity to re-finance a loan if interest rates fall in the future.

SERVION MORTGAGE TRAINING INSIGHTS INTO THE TOP TRENDING QUALITY CONTROL ISSUES As a mortgage lender, you perform a balancing act every day as you make decisions about what risks are worth taking. Your quality control process should help by positioning you to lend with the least amount of risk to your income.

Servion recently hosted a webinar to help you gain insight into the top trending quality control (QC) issues pertaining to loan estimates. The webinar covers the following topics: Knowledge of common errors and their appropriate fixes Ideas to implement into your own LOS to avoid errors in the future

To watch the webinar recording, click this link. Feel free to also share this link with your loan officers, processors or colleagues in charge of settings in the LOS. If you have additional questions, contact Rachel Mengelkoch, Training and Product Development Manager rmengelkoch@myservion.com

HOW TO AVOID THE HEADACHE OF UNDISCLOSED LIABILITIES WITH BROCK MILLER Q U A L I T Y C O N T R O L M A N AG E R

Assessing a borrower’s ability to repay their loan is key to accurately evaluating the risk of any mortgage loan. The debt-to-income calculation that helps lenders evaluate a borrower’s overall ability to repay is rendered inaccurate when a borrower doesn’t disclose all their existing liabilities, including new debts opened after application, for consideration in qualification.

This can cause a headache for both you and your borrower during the loan process or even after the loan has closed and funded.

may incur all the way through closing.

Borrowers can, and do with frequency, incur new debts after submitting the initial loan application and/ or after an initial credit report has been pulled, but prior to consummation.

Without proper borrower education by knowledgeable mortgage personnel this type of headache can start to become more of a recurring migraine for your institution.

These undisclosed debts are not factored into the borrower’s qualification and Undisclosed debts are defined final approval, which raises

by Fannie Mae as “any loan or the prospect of violating liability (e.g., auto, revolving, an investor’s underwriting installment, mortgage, or requirements. lease) that exists at the time the borrower closes on By educating your borrowers the subject loan and is not and mortgage personnel disclosed by the borrower on the risks of undisclosed during origination.” We’ve liabilities, you can protect added the emphasis on the your borrower’s loan approval phrase “exists at the time the as well as your institution’s borrower closes” because it’s mortgage income; avoiding a good reminder that we must a potential headache for be aware of any new debts or all parties involved. Nonliabilities that the borrower compliance with secondary

QUESTIONS?

market investor requirements is clearly not desirable due to the potential for repurchases, indemnifications or, even worse, the suspension and/ or termination of selling arrangements (which can occur with repeat breaches of your lender contract with your investor).

To put it simply, investors require that all debts and liabilities, whether opened prior to or during the loan origination process, be factored into the final approval of a mortgage loan.

Proper and complete analysis of a borrower’s ability to repay is crucial in accurately assessing the risk of any mortgage loan. This also ultimately helps predict the performance of any mortgage loan and therefore the overall suitability of a loan for sale on the secondary market. Below we have listed some potential solutions that your institution can easily implement in order to avoid landing in this type of predicament.

If you have additional questions about QC, contact Brock Miller, Servion’s Quality Control Manager at bmiller@myservion.com

QUALITY CONTROL. Simplified.

Manage your repurchase and compliance risk with confidence. We have worked with financial institutions to deliver mortgages for over 30 years. Now we are sharing our compliance expertise with you.

The Answer:

The Question:

How do you manage the regulations and guidelines that come with mortgage lending and servicing?

By taking advantage of Servion’s Quality Control Services.

Review Types Offered: f Servicing f Post-Closing f Pre-Funding

f Early Payment Default f Targeted

f Non-Originated f Appraisal

We understand your need to focus on quality, not quantity, while still having a quick turnaround time. You can count on that kind of personalized and detailed service with us. Visit myservion.com/qualitycontrol or contact our dedicated QC Manager, Brock Miller, at bmiller@myservion.com.

Be Prepared for LIBOR Index Transition For nearly four decades, the London Interbank Offered Rate (LIBOR) has been the benchmark global standard for a wide array of consumer and business loans including mortgages, consumer loans, business and corporate debt financing, and derivatives. But this will be changing on June 30 2023.

To prepare for the LIBOR cessation, lenders need to review any LIBOR ARM Notes that do not contain the index replacement language that was recommended by the ARRC in November 2019. The language recommended sellers to use ARM notes and riders with the ARRC replacement language for mortgages with Notes dates on and after June 1, 2020.

• From transferor servicers who are no longer in business, or • Originated at a time when policies and procedures did not require the use of Uniform Notes with standard replacement index language.

To prepare for the transition to a new index, servicers with LIBOR ARM Notes should review all such Notes and identify each variation of Notes that contain: • Non-standard index replacement language or no index replacement language, and/or

• Language that may require servicing data changes as a result of the implementation of a replacement Index Prior to this date, most Fannie Mae LIBOR (e.g., changes to margin) ARM Notes contain standard index replacement language stating that, “If Contact your Fannie Mae servicing the Index is no longer available, the Note managers about any notes for loans holder will choose a new index which is they service with non-standard index based upon comparable information.” replacement language or no replacement language as a result of their review. There However, some Notes may have either may be operational or other impacts non-standard index replacement language based on these non-standard documents. or no index replacement language. Notes that are more likely to have non-standard language are anticipated to be: • Found in older origination vintages (pre-2009)

To learn more about the LIBOR transition, here are additional resources.

Servion Named One of Minnesota’s Best Real Estate Companies Servion Realty was recently recognized by fellow Minnesotans as a Silver winner in the Best Real Estate Company category in the Star Tribune’s 2022 statewide Minnesota’s Best program.

The Minnesota’s Best competition had more than 67,000 businesses, organizations and individuals competing in the state’s premier Reader’s Choice Award program to be named in the top three spots of more than 370 categories. More than 750,000 votes were submitted showcasing how customers, fans and friends feel about their favorite local businesses and the pride they have for Minnesota.

“

Our commitment to work with and for our clients is the driving force behind everything we do. This award is a testament to our realtors and their dedication to serving our clients— both our credit union partners and community banks and the individual home buyers and sellers themselves.

Moreover, being named one of Minnesota’s Best after all the volatility in the real estate market over the last three years shows that we’ve been able to serve our clients well during an extremely challenging real estate market.”

CHRIS NOWAK VICE PRESIDENT SERVION REALTY

A complete list of the 2022 Minnesota’s Best winners can be found here. Servion Realty received Silver recognition in the Best Real Estate Company category.

Tired of Real Estate Agents Sending Your Borrowers to Other Lenders?

We developed the Go2Source Realtor Referral Network to address this “steering” problem. The network includes hand-picked agents who are committed to keeping borrowers with you, not sending them elsewhere. Your borrowers should remain yours, and Go2Source helps make that happen.

Benefits for Both Retail and Correspondent Partners Go2Source agents help your borrowers search, buy, sell and save on their transactions.

Go2Source agents are local to your area and carefully vetted for professionalism and service attributes.

Go2Source agents never steer the borrower to any other financial institution.

For just $30/year, we can help you get the word out about Go2Source with customizable print and digital materials.

What To Do Next Want more information?

Contact your Servion Account Executive.

Ready to connect a lead with a Go2Source Realtor®?

Visit: myservion.com/Go2Source

The Go2Source Realtor® Referral Network is managed by The Servion Group, which locates, vets and recommends real estate agents in cities across the country who then become part of the Go2Source-branded network.

LENDING CONFERENCE

OUR

WILL RETURN IN 2023!

We are thrilled to announce that we are planning to host our lending conference again in the fall of 2023!

After having to put this event on hold during the pandemic, it was so refreshing to be back in-person this year! Thank you to everyone who attended.

We’ll have more details in the coming months, but here’s what you should know for now.

Mortgage Sessions SEPTEMBER 18 AND 19 Business/Commercial Lending Sessions SEPTEMBER 20 Tentative Location THE ST PAUL HOTEL 350 MARKET ST ST PAUL, MN

Whether you’ve attended the conference before or this would be your first time, we are very excited to see all of you next September! Watch your emails for your official invitation, which we’ll be sending your way in late June or early July.

Excellent experience. Very courteous and well organized. About as painless as mortgage lending can be.

I wanted to tell you how much I appreciate you for having enough patience to work with me throughout this process. You did a great job keeping me on track and understanding my situation.

THE

BUZZ

Hear what our partners are saying about us!

I will recommend servion to others that are in the market of buying a house. Thank you very much for all you have done. It’s been a pleasure to have you both on my side.

I just want to say Thank you on behalf of my wife and myself for all of your assistance in helping us navigate this process. You have been the best resource that a couple could ask for in trying to get into their forever home!

651-631-3111 • myservion.com Servion Mortgage is a DBA of Servion, Inc. NMLS #1037. Equal Housing Lender.