national mortgage professional magazine - september 2009
DESCRIPTION
Special look at the Future of Mortgage BankingTRANSCRIPT
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The NAMB Perspective
FHA Insider: FHA and the New Condo Approval Process: Will Lenders Take Advantage of This Change? By Jeff Mifsud
Partnering and Power Networking: The Double “P” Principle By Laura Lynn Burke
Forward on Reverse: HECM at 20: Leaders and Pioneers in U.S. Reverse Mortgage Series … A Visionary Non-Commercial Entrepreneur By Atare E. Agbamu, CRMS
Value Nation: Mortgage Professionals Living in Harmony With the HVCC By Charlie W. Elliott Jr., MAI, SRA
Viva Las Vegas: A Message From NAMB/WEST 2009 Committee Chair Joe Camarena
FTC’s New Leadership Making Aggressive Moves inConsumer Protection By Terry W. Clemans
NMP Mortgage Professional of the Month: Thomas R. Sirico,Executive Business Director of mortgageNOW inc.
The Secondary Market Overview: From Bonds to ProductionBy Dave Hershman
Regulatory Compliance Outlook: September 2009 … NewCategory of Sub-Prime Mortgage Loans By Jonathan Foxx
The Birth of an Agency By Jonathan Foxx
NMP’s Market Barometer By David Beadle
Ask Brian: Are You Mentally “Melted Down?” By Brian Sacks
Ask Tommy: Your QC Expert By Tommy A. Duncan
Trend Spotter: Is This Time Different? By Gibran Nicholas
A View From the “C” Suite: What Lies Ahead for MortgageLending? By David Lykken
The Future of Mortgage Banking By Tommy A. Duncan
Online Lending for the New Decade By J.P. Kelly
The Future of the Mortgage Industry: A discussion with theexecutive team at Residential Finance Corporation
Maximize Your Profits: Adopt Orphan Customers By Gary Opper
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September 2009Volume 1 • Number 5
1220 Wantagh Avenue • Wantagh, NY 11793-2202Phone: (516) 409-5555 / (888) 409-9770
Fax: (516) 409-4600Web site: www.nationalmortgageprofessional.com
Mortgage PROFESSIONALN A T I O N A L
M A G A Z I N E
Your source for the latest on originations, settlement, and servicing
STAFFEric C. Peck
Editor-in-Chief(516) 409-5555, ext. 312
Andrew T. BermanExecutive Vice President(516) 409-5555, ext. 333
Domenica TrafficandaArt Director
Karen KrizmanSenior National Account Executive
(516) 409-5555, ext. [email protected]
Beatrice MarcusOffice Manager
(516) 409-5555, ext. [email protected]
ADVERTISINGTo receive any information regarding advertising rates,deadlines and requirements, please contact SeniorNational Account Executive Karen Krizman at (516) 409-5555, ext. 326 or e-mail [email protected].
ARTICLE SUBMISSIONS/PRESS RELEASESTo submit any material, including articles and pressreleases, please contact Editor-in-Chief Eric C. Peck at(516) 409-5555, ext. 312 or e-mail [email protected]. The deadline for submissions is the first of themonth prior to the target issue.
SUBSCRIPTIONSTo receive subscription information, please contactOffice Manager Beatrice Marcus at (516) 409-5555, ext.301, e-mail [email protected] or visitwww.nationalmortgageprofessionalmagazine.com. Anysubscription changes may be made to the attention ofBeatrice Marcus via fax to (516) 409-4600 or [email protected].
Statements of fact and opinion in National MortgageProfessional Magazine are the responsibility of theauthors alone and do not imply an opinion on the part ofNMP Media Corp. National Mortgage ProfessionalMagazine reserves the right to edit, reject and/or post-pone the publication of any articles, information or data.
National Mortgage Professional Magazine is published monthly by NMP Media Corp.
Copyright © 2009 NMP Media Corp.
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A Message From NMP Media Corp. Executive Vice President Andrew T. Berman
The future of mortgage bankingThis month, we take are taking a look at the future of mortgage banking. I really wish I had a crystal ballto read into the future of the mortgage banking industry; however, there are certain factors you canalmost guarantee will impact this industry. These factors include such things as an increase online lend-ing. J.P. Kelly’s article “Online Lending for the New Decade” reveals some interesting facts on the worldon Internet lending, and J.P. makes a good case for why you should be spending company resources onbuilding your online presence (and I am not talking about the “virtual brochures” that we all had in2001). We also hope that the landscape of warehouse lending improves. David Lykken’s latest installmentin this “A View From the C-Suite” series tackles the topic of “What Lies Ahead for Mortgage Lending?”David also covers whether it’s even a good time to get out of the industry and how the industry is facing
extreme irrational regulation. Tommy A. Duncan also contributed a great piece looking toward the future of the industry withhis article, “The Future of Mortgage Banking.” As someone who works with some of the industry’s top mortgage firms, Tommyreveals his perspective on how to use technology to enhance customer service and deal with current and future regulations.Lastly, you will find some interesting point of views from executives of Residential Financial Corporation as they take part in aroundtable discussion as the dissect many aspects of the future of the mortgage banking industry.
The NAMB PerspectiveBe sure to check out this month’s “The NAMB Perspective” feature. In it, you will find informative articles on how certificationcan positively impact your business and increase your bottom line, and update on the Red Flags Rules that go into effect onNov. 1, and the use of a Twitter power tool that is EASY to use (yes, even for those who hardly know why Twitter even exists).
Viva Las Vegas!NAMB/WEST 2009 Committee Chair Joe Camarena shares with our readers why this year’s NAMB/WEST at the MGM Grandcould be the most important industry conference you have even been a part of. From powerful sessions on social network-ing, a full seminar on video marketing, an economic update by Stewart Information Services’ Ted Jones, plus various net-working events and an exhibit hall, so you should be sure that you book your room by Tuesday, Nov. 10 to take advantageof the deeply discounted NAMB group rates. NAMB has added some great content to the event this year, and in the process,has made the cost to attend much more affordable, that it’s a no-brainer to optimize this quick getaway to Vegas.
Mortgage Professional of the MonthThis month, we selected Thomas R. Sirico, Executive Business Director of mortgageNOW inc. as the NMP MortgageProfessional of the Month. Tom discusses the tools and tactics that keep him in business, from how his firm is dealingwith the Home Valuation Code of Conduct (HVCC), to what it takes to be successful in this marketplace.
And in the world of valuation ...Charlie W. Elliott shares with our readers how some mortgage professionals having been “Living in Harmony With theHVCC” in this month’s Value Nation column. While we are on the subject of appraisals, this month’s “Ask Tommy: YourQC Expert” By Tommy A. Duncan reviews some powerful uses of automated valuation models (AVMs).
Getting more loans!Be sure to check out Laura Lynn Burke’s “Partnering and Power Networking: The Double ‘P’ Principle.” Laura shareslots of back-to-basics sales tips, plus some new ideas that can be helpful to any originator. You can find more back-to-basics in Gary Opper’s “Maximize “our Profits: Adopt Orphan Customers.” If you just think it’s too tough out there togenerate loans, then this month’s “Ask Brian” column from Brian Sacks is required reading.
The future of mortgage banking certainly has no shortage of regulationNational Credit Reporting Association (NCRA) Executive Director Terry W. Clemans talks about the Consumer FinancialProtection Agency (CFPA) in his article, “FTC’s New Leadership Making Aggressive Moves in Consumer Protection.”Jonathan Foxx provides further detailed CFPA coverage with an item-by-item breakdown in his piece, “The Birth of anAgency.” Mr. Foxx also authored this month’s “Regulatory Compliance Outlook” on “New Category of Sub-PrimeMortgage Loans” as created by revisions to Regulation Z.
A new series on reverse mortgagesI just recently learned from “Forward on Reverse” author, Atare E. Agbamu, CRMS, that this year, the Home EquityConversation Mortgage (HECM) turns 20! As a tribute to HECM, Atare is launching his new “HECM at 20: Leaders andPioneers in the U.S. Reverse Mortgage Industry Series.” In his first installment, Atare interviews the father of the HECMprogram and reverse mortgages, Ken Scholen.
Using FHA on condos?In this month’s “FHA Insider,” Jeff Mifsud reviews “FHA and the New Condo Approval Process: Will Lenders TakeAdvantage of This Change?” Jeff provides a detailed overview of the 14 things you need to know about these changesthrough Mortgagee Letter 09-19.
The future of home pricing to rise?Gibran Nicholas, in this month’s “Trend Spotter: Is This Time Different?” column, provides you with four powerful argu-ments why housing prices should be headed up over the next few years. Was is the “Great Housing Bust” or the “GreatHousing Boom?” Gibran dissects the factors that impact the housing market and just where these factors are heading.
I thank you again for taking the time to review the latest copy of National Mortgage Professional Magazine. Our printpublication, in addition to the strength of our Web site, NationalMortgageProfessional.com, strives to bring you, themortgage professional, the latest in industry news and trends. The sea known as the mortgage industry has become atough one to navigate as of late, as we must sail through an up-and-down market, a struggling economy and a laun-dry list of regulatory changes and federal proposals designed to “fix” the economy. Let us serve as your guide throughthese seas, as we head into the latter part of 2009 and close out the first decade of the 21st Century.
Sincerely,
Andrew T. Berman, Executive Vice PresidentNMP Media Corp.
National Credit Reporting Association Inc.125 East Lake Street, Suite 200 � Bloomingdale, IL 60108
Phone: (630) 539-1525 � Fax: (630) 539-1526Web site: www.ncrainc.org
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The National Association of Mortgage Brokers
7900 Westpark Drive, Suite T-309 � McLean, VA 22102Phone: (703) 342-5900 � Fax: (703) 342-5905
Web site: www.namb.org
President—Jim Pair, CMCMortgage Associates Corpus Christi6262 Weber Road, Suite 208 � Corpus Christi, TX 78413(361) 853-9987 � [email protected]
President-Elect—William Howe, CMC, CRMSHowe Mortgage Corporation9414 E. San Salvador Drive, #236 � Scottsdale, AZ 85258(602) 200-8100 � [email protected]
Vice President—Michael D’Alonzo, CMCCreative Mortgage Group1126 Horsham Road, Suite D � Maple Glen, PA 19002(215) 657-9600 � [email protected]
Secretary—Penny Fagan, CRMSP. Fagan Mortgage Inc.222 East Moulton Street � Decatur, AL 35601(256) 355-5505 � [email protected]
Treasurer—Don Frommeyer, CRMSAmtrust Mortgage Funding Inc.200 Medical Drive, Suite D � Carmel, IN 46032(317) 575-4355 � [email protected]
Immediate Past President—Marc S. Savitt, CRMSThe Mortgage Center115 Aikens Center, Suite 20-B � Martinsburg, WV25401(304) 267-9040 � [email protected]
Joe CamarenaThe Mortgage Source10120 Southwest Nimbus Avenue, Suite C-7 � Portland, OR 97223(503) 443-1060 � [email protected]
Donald E. Fader, CRMSSMC Home FinanceP.O. Box 1376 � Kinston, NC 28503-1376(252) 523-5800 � [email protected]
Ginny Ferguson, CMCHeritage Valley Mortgage Inc.5700 Stoneridge Mall Road, Suite 150 � Pleasanton, CA 94588(925) 469-0100 � [email protected]
Denise LeonardMassachusetts Mortgage Association92 High Street, Unit T-41C � Medford, MA 02155(781) 393-9400 � [email protected]
Walt ScottExcalibur Financial Inc.175 Strafford Avenue, Suite 1 � Wayne, Pa. 19087(215) 669-3273 � [email protected]
Don StarksD.C. Starks Mortgage Associates Inc.141 South Main Street � Bourbonnais, IL 60914(815) 935-0710 � [email protected]
President—Judy Ryan(800) 929-3400, ext. [email protected]
Vice President—Marty Flynn(925) 831-3520, ext. [email protected]
Treasurer—Daphne Large(901) [email protected]
Ex-Officio—Nancy Fedich(908) 813-8555, ext. [email protected]
Director—Thomas Conwell(248) [email protected]
Director—Don Goldammer(661) [email protected]
Director—Sanford (Sandy) Lubin(805) [email protected]
Director—Dave Miller(317) [email protected]
Director—Donald J. Unger(303) 670-7993, ext. [email protected]
Director—Tom Swider(856) 787-9005, ext. [email protected]
Director—Donovan Williams(714) [email protected]
NCRA StaffExecutive Director—Terry Clemans(630) [email protected]
Office Manager/MembershipServices—Jan Gerber(630) [email protected]
Legal Counsel—James Sutton(972) [email protected]
PresidentLiz Roberts-Fajardo, GML(702) [email protected]
President-ElectGary Tumbiolo, CMI(919) [email protected]
Senior Vice PresidentSharon Patrick, MML, CMI(386) [email protected]
Vice President/Northwestern RegionJill M. Kinsman(206) [email protected]
Vice President/Western RegionTim Courtney(760) [email protected]
Vice President/Central RegionCandace Smith, CMI(512) [email protected]
Vice President/Greater NortheastRegionColleen-Therese McKeever, CMI(646) [email protected]
Vice President/Southeastern RegionJessica Edmonston(919) [email protected]
SecretaryLaurie Abisher, GML, CMI(661) [email protected]
TreasurerKay Talley, MML(919) [email protected]
ParliamentarianHulene Bridgman-Works(972) [email protected]
NAMB Board of Directors
National Association of ProfessionalMortgage Women
P.O. Box 140218 � Irving, TX 75014-0218Phone: (800) 827-3034 � Fax: (469) 524-5121
Web site: www.napmw.org
Officers
Directors
Board of Directors
National Board of Directors
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A Message From NAMBPresident Jim Pair, CMC
Awash in a sea of issuesWe are beginning this year by swimming through an ocean of turbulent legislativeand regulatory issues. Some of the issues that will have serious implications forour industry are:
� The Home Valuation Code of Conduct (HVCC);� HR 3126 (the Consumer Financial Protection Agency Act of 2009);� Federal Reserve Board proposed changes to regulation;� RESPA reform;� Healthcare reform efforts and the potential negative impact on small business;
and� The Senate companion bill to HR 1728 (Mortgage Reform and Anti-Predatory
Lending Act).
To learn more about these legislative and regulatory issues, visit the NationalAssociation of Mortgage Brokers Web site (www.namb.org) and watch for e-mailupdates from NAMB and how we are going to bat for you and our industry.Fortunately, we have a very able and effective Government Affairs Committee,comprised of volunteers who represent all sections of our nation, a legislativeNAMB staff headed by our Executive Director Roy DeLoach, and a very experi-enced and capable lobby team.
Our strongest asset to address these issues is our “grassroots” efforts. You haveresponded in the past to our calls-to-action and have made a significant impactwith your representatives and senators and various governmental agencies. Weneed to keep our grassroots efforts strong and continually engaged for the chal-lenges we will face this year.
One way to strengthen our grassroots campaign is for every member to visitwith their representative or senator while they are at home in your district.Since Congress is now on their summer recess, this is the perfect time to takeaction. Please call their district office and make an appointment to discuss ourindustry and the benefit and services we, as mortgage professionals, providethe consumer. You will be surprised at how little many of our representativesknow about our industry. This is your opportunity to provide them with a bet-ter understanding of the role of the mortgage broker and the benefits provid-ed by us to the economy and the consumer. If you will do this on a consistentbasis, you will have a positive response when you have to contact them on aspecific topic.
As I stressed in my last message to you, we must step up and support those whohave supported us. This means that we need a Political Action Committee (PAC)fund to help re-elect those who have supported our industry. Please log on towww.namb.org, click on the “Government Affairs” tab, click on “NAMBPAC” andclick on “Donate to NAMBPAC” and make a donation now.
Last but just as important, you need to participate in NAMB’s Lobby Day inWashington, D.C. This is where we hear from some of the major people who areproposing legislation or new rules and regulations. You have the opportunity togo to Capitol Hill and visit your congressman and senators about the issues ofmost concern to our industry and to the consumer.
Our success this coming year depends upon all these parts working together.Members working with our Government Affairs Committee, staff and the lobbyteam, the support of our PAC, you participation in our calls-to-action for our grass-roots efforts, and most importantly, visiting and working with your representativeand senator while they home in district. If we work together on all these fronts,we will continue to achieve the success we have enjoyed in the past.
Congress may be in recess, but it’s time we got to work!
Jim Pair, CMC is with Mortgage Associates Corpus Christi and is president ofthe National Association of Mortgage Brokers. He may be reached by e-mail [email protected].
For more information on the National Association of Mortgage Brokers, visit www.namb.org.
Certification? Certainly!A Message From NAMB CertificationsCommittee Chair Pava J. Leyrer, CMC,CRMS, CMP
Borrowers, money and trustAre you looking for ways to earn more money in an economy and legislative cli-mate that definitely does favor a mortgage broker and loan originator? I am “oldschool” and learned quickly, 32 years ago, that referrals and reputation were thekeys to my success or failure. Moving through various positions and companies inmy background, as with many I think, it became clear that education was and stillis a key component to becoming a true trusted professional.
As I heard about and learned what certification was, I spoke to many peoplewhether it really made a difference. The answer was always a resounding yes!Bill Howe, CMC, CRMS, spoke of the many referrals and consumer confidence ashe taught the first workshop I attended several years ago. Ginny Ferguson, CMC,spoke of specific borrowers who chose her over others in her area because of herdesignation.
I made the decision to become certified, but thought one would be enough.Working up the courage and time at the height of the mortgage boom seemedcrazy, but I was committed to getting it done. I realized in speaking with others
that is one of the hardest parts to obtaining a certification … time and procras-tination (plus a small amount of fear.) Yes fear. We are a highly competitive breedand the fear of possibly failing was not something I looked forward to even withmany years experience. Making a public announcement to my office and familyabout my goal was the best thing I did. I was constantly asked had I taken the testyet, when was I going to do it. I ended up taking the Certified ResidentialMortgage Specialist (CRMS) exam, and than less than three weeks later, theCertified Mortgage Consultant (CMC) exam. Looking back, I would not have doneit any other way.
I have personally had referrals directly from the National Association ofMortgage Brokers Web site (www.namb.org) where borrowers looked for someonein Michigan and chose me “Because I had more initials behind my name, I musthave more knowledge.” I have had many other NAMB colleagues refer borrowersbecause of my certifications. I very recently sent a referral to someone in San Josebecause he was the only one with a certification. It does make a difference inhow you are perceived, but more importantly, how you feel about yourself. Takethe challenge to obtain more than one.
The next step to more referrals and commitment to yourself and our industry is tobecome certified today. Contact any certified mortgage professional and we will gladlyassist you.
Pava J. Leyrer, CMC, CRMS, CMP is president and owner of Heritage NationalMortgage Corporation in Grandville, Mich., and Certifications Committee chair forthe National Association of Mortgage Brokers. She may be reached by phone at (616)534-4993 or e-mail [email protected].
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The Communications CornerA Powerful Mortgage Marketing Web 2.0Strategy: TweetGrid
By David Orsini
How powerful would it be if, as a mortgage professional, you couldtell when someone looking to refinance their home was unsatisfiedwith their current mortgage professional? Or, if another person isquestioning something about the rate they got from the broker they
are currently with? Or, what if you could tell when someone was interested inbuying a home in your city? This type of information is invaluable to any mort-gage professional. These are extremely hot leads to pursue … people who needyour help right away! Well these same people are putting this information rightout there on the Internet for anyone to see; you just have to know where to look.
I will be the first to admit; at first, I thought Twitter was stupid. In fact, I amstill not 100 percent sold on it. I have found ways to make it work for me for mybusiness, but why hundreds of thousands of regular people use it every day toannounce to the world what they are doing at that moment in time really doesnot make sense to me. That being said, if people want to tell the world theyneed the service I provide and I know how to find them telling the world that,then that is a positive thing for my business. So withoutmuch further adieu; I introduce to you the TweetGrid.
There are multiple social search engines designed tosearch your various social networking sites that can, insome form or another, yield similar results as TweetGrid.However, TweetGrid does not function like a normalsearch engine, other than the fact that you don’t need toset up any kind of an account to use it and it is complete-ly free. It is (as the name suggests) a grid where you cantype in multiple search phrases and the results are fed into the grid in real-time. In other words, you don’t searchfor one thing, see your results, and then search for anoth-er thing (refreshing the page), see your results, and so on.With TweetGrid, you can have up to nine searches takingplace simultaneously and in real-time. So as someone“Tweets” (I really hate saying that word, and hate typingit even more) the question “Am I being taken by my bro-ker?,” you can be one of the very first people to see it.Take a look at the included grid image. I have blurred outthe screen names of the “Twits” (users of Twitter?) to pro-tect the innocent; but you can see what they are typingthat match my search criteria.
As you can see; at the time I was writing this blog post,there was:
1. Someone thinking about buying another house as arental … maybe they need financing.
2. Three people house hunting in my home town of Atlanta … maybe they needfinancing as well. 3. About 11 days before their scheduled closing, someone is getting somebad vibes from their mortgage company … maybe they could use a secondopinion, you may not win the business this time since it is so close to clos-ing, but you could use this opportunity to earn their trust, then maybe addthem to your marketing campaign and be there to earn their business nexttime. 4. Someone who thinks they are being taken by their broker because theywere quoted a 0.5 higher interest rate because of the county they live in …come in with an honest quote and educate this prospect and I bet the busi-ness is yours.
And all of these examples are just from right now as I type this blog. Imay not be a big fan of the concept of Twitter, but as a business owner, Iknow that if people want to talk about needing my services then I certain-ly need to listen.
David Orsini is vice president of Top of Mind Networks and oversees theCRM division of the company. David specializes in building systems thathelp mortgage professionals maximize their relationships with their clientbase without having to lift a finger. He may be reached at (404) 943-9910or e-mail [email protected].
The Credit CornerRed Flag Rules Update
By Dave Wheeler
You may have seen the latest press releases indicating that the FederalTrade Commission’s (FTC) Red Flag Rule enforcement is now set to beginon Nov. 1, 2009. For those who have been following closely, you are alsoprobably aware that all brokers were supposed to be compliant with the
rules as of Nov. 1 of last year. While it may seem like this affords you additional timeto get compliant, it was only the enforcement date that was pushed back. Thatmeans that you still need to act quickly if you have yet to get your plan in place.
As a reminder, the Fair and Accurate Credit Transactions Act (FACTA) requires you tohave a written Identity Theft Prevention Program in place in your office. There are noexceptions to this regulation. The main point is that the FACT Act requires companies to:
� Develop a written plan to detect and respond to potential identity theft.� Train employees on detection and use the proper tools.� Update and review your program annually.� Your plan should outline your company’s potential to have identity theft occur, what
warning signs exist (Red Flags), how you detect those signs, and what responses are appro-priate (do you call the FBI if you can’t get a marriage license showing a name change?).
Examples of red flags include not only obvious signs, like a fraud alert on a creditreport, but also more subtle signs, such as a borrower only wanting to conduct businessvia phone, fax and e-mail, refusing to meet with third-party involved in the loan. Thisdoesn’t mean the borrower is a thief! It means that the potential for identity theft exists,and you are required to take additional steps to verify identity before proceeding withthe loan. How you choose to verify that identity should be written in your plan.
The National Association of Mortgage Brokers has partnered with Microbilt LLC(www.microbilt.com) and Majestic Security LLC (www.majesticsecurityidsafe.com) tooffer two different solutions to you. Information on both companies can be found atwww.namb.org. Click on the “Red Flag Compliance” graphic to view their solutions.These are meant to offer you two different ways to start becoming compliant. Pleaseread the information carefully and select which option is best suited for your business.Part of the proceeds will help NAMB continue to fight for you, and bring the latest infor-mation as it happens.
Once you have your plan written, you must train your appropriate staff on anyoperational changes and tools that you will be using. The additional identity ver-ification tools are usually readily available through our partners, as well as yourcurrent credit report provider. Many lenders require that these be submitted witheach loan. Please check with your lenders for their specific details. And finally,remember to update your program at least annually.
Dave Wheeler is a regional account executive with Credit Plus Inc. and a member ofthe NAMB Credit Scoring Committee. He may be reached by phone at (610) 462-3763or e-mail [email protected].
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FHA and the New Condo ApprovalProcess: Will Lenders TakeAdvantage of This Change?In the late 1990s, I did a lot of condofinancing. I developed a niche for myself,and a reputation for being able to suc-cessfully get builders’ condominium con-versions approved for Federal HousingAdministration (FHA) financing. It was amark of separation from the competi-tion, and it paid off well. Previously, onlythe FHA could grant approval to condo-minium projects for FHA financing.However, with the recent MortgageeLetter 09-19, this changes. Now, “… FHAwill allow lenders to determine projecteligibility, review project documentation… The requirements of this MortgageeLetter are effective for all case numbersassigned on or after Oct. 1, 2009.”
Lenders must have unconditionalDirect Endorsement (DE) authority andstaff with knowledge and expertise inreviewing and approving condominiumprojects. This FHA update is quite lengthy;I will provide you with the highlights here.
Here are the 14 things you need toknow about these changes:
1.New guides are applicable toProposed/Under Construction; ExistingConstruction or Conversions.
2. The Spot Loan Approval (SLA) process,as defined in Mortgage Letter 1996-41,is eliminated.
3. Project Approval is not required forFHA-to-FHA streamline refinance trans-actions or properties being sold by theU.S Department of Housing & UrbanDevelopment (HUD).
4. If a lender elects to approve the proj-ect, then environmental reviews willnot be required, but any known or dis-covered hazards (such as proximity to ahighway, landfill, railroad or airport)may make the project ineligible unlessremedied.
5. Association by-laws may now have aRight of First Refusal clause, unless itviolates discriminatory conduct underthe Fair Housing Act.
6. Property may utilize 25 percent of thetotal floor area for commercial purposes.
7. No more than 10 percent of the unitsmay be owned by one investor.
8. No more than 15 percent of the totalunits can be in arrears (more than 30days past due) of their condominiumassociation fee payment.
9. At least 50 percent of the total unitsmust be sold prior to endorsement ofany mortgage on a unit. This means youwon’t be able to close the loan until thispresale requirement has been met.Valid presales include an executed salesagreement and evidence that a lenderis willing to make the loan.
10. At least 50 percent of the units of aproject must be owner-occupied or soldto owners who intend to occupy theunits. On multi-phased projects, theowner-occupancy percentage is calculat-ed on the first declared phase and cumu-latively on subsequent phases if the own-ership of the condominium projectremains the same. If multi-phasingincludes separate ownership per phase,each phase is calculated individually. Nomore than 30 percent of the total unitscan be encumbered with FHA insurance.
11. Condo conversions no longerrequire the homeowners to be in con-trol of the association for one year. Thismeans condo conversion units will beeligible once the 50 percent presalerequirement is met.
12. Manufactured housing condomini-um projects are now eligible for FHAmortgage insurance.
13. Condominium project approvals willexpire two years from the date they areplaced on the list of approved condo-miniums. If a project has been previous-ly approved, lenders must certify thatthey are not aware of any change in cir-
continued on page 11
for life insurance and disability insur-ance. My clients were going to callsomeone, so why not my colleague?
I decided to go to school to learn taxpreparation. Why not, I already had aclient base and I have seen and workedwith their tax returns already. Taxpreparation is a great feature to tellyour first-time homebuyers that youoffer. When you close, you can tell themhow to prepare their amended taxreturn so they can get their tax credit(up to $8,000) now instead of waitinguntil next year.
Diversifying myself actually saved mea client. A past client referred his sisterto me, she had been calling the wrongnumber for days leaving messages Inever got. Finally, one of the realtors Iwork with called and said she had called
her and left messages ather office that she didn’tget either. The realtor whomade the initial contactfound out that she lost thedeal and gave me hernumber. She said she wastalking to another loanofficer, but I called andthere was a chance that Icould possibly save thedeal. I called her and toldher she was calling awrong number and I wassorry she missed me. Itold her it didn’t matter tome if she was workingwith another loan officer,but to call me when sheclosed and I would amendher tax returns and gether money now.
My point is … whatever you do, simply offer it and don’tpush it. If you feel the extra steps of class-es and tests aren’t for you, then partnerwith others who mirror your ethics.
We cannot do it all by ourselves, andthis is where partnering comes intoplay. Through partnering, we becomestronger by offering a greater array ofproducts and services. In today’s value-based market, the need to partner hasbecome even stronger.
There is marketing strength in num-bers when you create partnerships. Thenew terminology for partnering is “thepackaging of services and affinitygroups.” The salesperson who utilizespartnering becomes a more completeresource to their clients. Learn how tochoose a partner who mirrors your ethicsand maximizes your strengths, by creat-ing a synergy that increases the produc-tivity and profitability of both parties.
A partner is similar to a marriage, sochoose wisely. They will be speaking to
Staying connected and adding services isthe new way of marketing and staying inbusiness. Many mortgage brokers(bankers typically aren’t allowed to) arelooking for ways to service existingclients or attract new clients with multi-ple crossover products. If you are a mort-gage banker, you too can do this throughnetworking and building a team of otherindividuals you respect and trust to worktogether with your clients.
As for the mortgage broker, someproducts you may look into could be taxpreparation or tax negotiating services(referred out), mortgage insurance, lifeinsurance, disability insurance, legalservices, credit repair, loan modifica-tions, commercial loans, bi-weekly plansand other financial related services. Offeryour customers a center for one-stopshopping of all their finan-cial needs. You will needto educate yourself inmany of these areas, takea few classes, pass a test ortwo, but you have now cre-ated additional mar-ketable skills and knowl-edge. Everyone wants towork with knowledgeablepeople.
The idea of “one-stopshopping” is importantthese days since, as a society,we have become extremelyimpatient and time-sensi-tive, so the bundling of serv-ices and products is a wel-come solution.
It has been my experi-ence that if you offer aservice of true value, yourclients will tend to rely onyou for your expertise and professional-ism. Only market what you have theexpertise to handle, unless you team upwith another individual or group to mar-ket services together.
I have teamed up with many individ-uals in the past. I had a co-worker whomarketed legal plans to human resourcedepartment heads. They would allowhim to come into their company andmake a presentation on his products. Healways added that a “mortgage expert”would come along with him to answerany questions related to first-timehomebuying, purchasing investmentproperty, refinancing, funding collegetuition and adjustable rate mortgages.We did presentations with multiple com-panies and some organizations as well.Through this partnership, I did conductbusiness that I normally would not havehad. He also brought me into a couple ofchurches as well, a great place to meetpeople looking to buy homes.
Another colleague of mine soldinsurance. I referred all clients to him
Partnering and Power Networking:The Double “P” Principle
“It has been myexperience that if
you offer a service oftrue value, your
clients will tend torely on you for your
expertise and professionalism.”
By Laura Lynn Burke
continued on page 9
into this market, the Great Recession’scredit implosion, which has stalledproduct development, and the col-lapse of house prices, which may leadto HECM principal limit factor reduc-tions for FY 2010.
What are some lessons you havelearned about seniors, the market,and the business?It’s not enough to assert that the pred-ators only operate on the fringes of themarket or that the loan product per seis not the problem. The reality is thatthe predators wield an enormous influ-ence over the public image of the prod-uct and the market and, therefore, thehealth of the industry. And the exis-tence of the product is, in fact, the nec-essary precondition for the financial
abuse that is perpetrated on reversemortgage borrowers. So the health ofthe industry is directly tied to the safe-ty of the consumer, and halfway meas-ures to restrain the predators will onlyresult in halfway protection for con-sumers and the industry.
A strong HECM counseling programcan be a major factor in protecting con-sumers and the industry. But all theefforts to strengthen the program willmean little unless an independentsource of reliable and adequate fund-ing can be created to support it.
Loan costs are a serious barrier tomarket growth. Consumers who wouldbe willing to accept lesser loan benefitsof various types in exchange for muchlower costs are the major untapped seg-ment of the reverse mortgage market.
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A Visionary Non-Commercial Entrepreneur
History matters. As HECM (Home EquityConversion Mortgage), and the multi-billion-dollar* reverse mortgage indus-try it has spawned, turn 20 this year, itis fitting that we take a moment toreflect on the industry’s first twodecades through the eyes and work ofthose who were not only present at itscreation, but also made significant con-tribution to its growth.
Nelson Hayes of Deering Savings &Loan made the first reverse mortgage inU. S. history to Nellie Young of Portland,Maine in 1961 (www.reverse.org/histo-ry.htm), but it would be 28 years beforea product and an industry wouldemerge.
Substantial and sustained researchand development (R&D) activitiesbegan in the late 1970s due to the workof a visionary non-commercial entre-preneur: Ken Scholen, the father of theHECM program and of reverse mort-gage industry in the U. S.
Ken Scholen directed the first threefederally-funded reverse mortgageresearch and development projects,organized the first three national con-ferences on reverse mortgages, andauthored the first three books onreverse mortgages. Also, Scholen ledefforts to pass the HECM program intolaw and developed the TALC (TotalAnnual Loan Cost) process in use to thisday. For his pace-setting work in HECMand reverse mortgages, Scholen receivedthe Federal Housing Administration(FHA) Commissioner’s Award in 1995.
As a consultant to AARP in the 1990sand as director of the AARPFoundation’s Reverse MortgageEducation Project from 1998 to 2007,Ken Scholen led more than 200 HECMcounselor training and consumer edu-cation sessions in 47 states and coordi-nated the creation of the national HECMcounselor examination and the proto-
type for the U.S. Department of Housing& Urban Development’s (HUD’s) HECMcounseling protocol. He also collaborat-ed in developing three software pro-grams for analyzing and comparingreverse mortgages.
After almost two years of trying, Irecently had the opportunity to catchup with Ken Scholen. The following arehis preliminary reflections on the pro-gram and the industry his vision andwork have created.
What attracted you to reverse mort-gages, and why did you commit to thebusiness?While working for the Wisconsin Boardon Aging in the mid-1970s, I methomeowners who needed a way toconvert their home equity into cash
without having to sell or make month-ly loan repayments. Some quickresearch uncovered a few largely theo-retical ways of doing this, but the con-cept was sufficiently promising that Ileft the Board to run a series of gov-ernment-sponsored R&D efforts overthe next few years. So my initial goalwas to spur the development of pro-grams and products to meet this need.The most important outcome of theR&D work was the initial HECM pro-gram proposal, but AARP was the onlynational organization that actively sup-ported it. HUD issued a report oppos-ing it and it took six years to gainCongressional approval.
After the HECM legislation wasenacted, my emphasis switched tohelping get the program off theground and providing consumer infor-mation and education about reversemortgages. When the market startedto grow, and it became apparent thatthe HECM counseling program was notready to meet this need, my focuschanged to expanding and improvingthe counseling program. It took a lotlonger than expected, but now thereappears to be broad support for amore detailed counseling protocol andindividual counselor standards,including an exam and continuingeducation requirements, and a strongprogram of individual counselor per-formance evaluation (a.k.a. “secretshopping”).
How has the industry changed sinceyou came in?The reverse mortgage industry did notexist when I got started, so everythingthat’s happened since then has been achange. Broad major developmentshave been the enactment of the HECMprogram, the development of a sec-ondary market, the creation of theNational Reverse Mortgage LendersAssociation (NRMLA), improvements inthe counseling program, theencroachment of financial predators continued on page 10
HECM at 20: Leaders and Pioneers in the U.S. Reverse Mortgage Industry Series How many news stories about
such cases would it take for thepublic to begin associating reverse
mortgages with “losing yourhome?”
—Ken Scholen
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Mortgage Professionals Living inHarmony With the HVCCThe change that we in the mortgage andhousing industries have experienced with-in the past year is amazing. As a result oflast fall’s elections, we have gone from arelatively conservative government to asignificantly more liberal one. The econo-my has tanked in a way that most of ushave never witnessed. Now with theHome Valuation Code of Conduct (HVCC)and other regulatory man-dates, some of us havebeen less than positiveabout our profession andour jobs.
Even the more soberamong us must acknowl-edge that things in ourindustry going forwardwill be at least different,if not more challenging.Since I am generally anoptimistic person, I tellmyself that there mustbe a silver lining up therebehind those clouds. Forevery door that closesanother opens. It is justmy job to interpret all ofthis and move in theright direction.
Since most of us donot want to change pro-fessions, I am going totake the position thatsomeone has to do mort-gages and that the mar-ket will take care of anyexcesses imposed upon us by the gov-ernment. Looking at it this way: I havecome to the following conclusions andencourage you to do likewise.
Half of the marketThe HVCC only applies to mortgagessold to Fannie Mae and Freddie Mac.They only make up part of the market.That changes on a daily basis, so let’ssay they are involved in half of the cur-rent market. That leaves 50 percent ofthe market not affected by HVCC.Federal Housing Administration (FHA)
loans are very popular right now, andthey are not affected by the HVCC. Thisis something for those of us consumedby all of the HVCC negativity, to takeheart about.
The other halfTo listen to some loan officers outthere, one would think the only way
they can make a living isto influence appraisersinto appraising propertyfor more than it is worth.I have too much confi-dence in the integrity ofour mortgage profession-als and too much confi-dence in our system tobelieve that. Fannie andFreddie are going to bebuying large numbers ofmortgages. Many if notmost will be approvedwithout having to bereaddressed in regard tothe appraisals. At timeswhen the appraisal mustbe questioned, there is aproper procedure fordoing this. If the apprais-al is wrong, it will mostlikely get changed. Thatleaves a few potentialloans that cannot andshould not be made. Isthat not what appraisalsare suppose to be about
and the way it should be?
In conclusion, the sky is not falling.To the extent that we think we seepieces of the sky falling, it will not allbe caused by the HVCC. Our worstenemy right now is the economy andthe sluggish housing market. Home val-ues are truly at a critically low level andthis is contributing to the fallout ofmany of our deals. Until the market sta-bilizes the road will be rocky.
“Even the more soberamong us must
acknowledge that thingsin our industry going
forward will be at leastdifferent, if not more
challenging. Since I amgenerally an optimisticperson, I tell myself that
there must be a silverlining up there behind
those clouds.”
By Charlie W. Elliott Jr., MAI, SRA
continued on page 12
NAMB reps meet withFHA Commissioner David Stevens
The National Associationof Mortgage Brokers
(NAMB) recently attended a meetingwith newly-appointed Federal HousingAdministration (FHA) CommissionerDavid Stevens to discuss mortgage bro-ker participation in the FHA program,among other important FHA issues.
“NAMB appreciated the opportunityto meet with Commissioner Stevens todiscuss the mortgage brokerage indus-try and its involvement with FHA,” saidNAMB President Jim Pair, CMC. “Webelieve it was an informative meetingfor both parties.”
During the meeting, CommissionerStevens discussed a number of issuesand fielded questions from NAMB offi-cials. Implementation of recentchanges to the Real Estate SettlementProcedures Act (RESPA), a potentialnationwide FHA loan limit, risk-basedpremiums, reverse mortgages (HECM),and condominium concerns were alltopics of discussion during the meeting.NAMB officials requested that the FHArelease additional “frequently askedquestions” on the new Good FaithEstimate (GFE) document to avoid fur-ther confusion in the industry.
“Commissioner Stevens clarified sev-eral issues and was able to expandmore on FHA policy,” said Pair. “NAMBlooks forward to working withCommissioner Stevens in the future.”For more information, visit www.namb.orgor www.fha.gov.
Murin and Montgomeryform advisory firm TheCollingwood Group
Former President andChief Executive Officerof the Ginnie MaeJoseph Murin, and for-
mer Federal Housing Administration(FHA) Commissioner Brian Montgomeryhave announced the formation of TheCollingwood Group LLC. The firm willprovide business advisory services toboards of directors and senior execu-tives of companies in the financial serv-ices industry.
In launching the new company, thetwo former government officials alsoannounced the immediate merger of
the new company with Capital FinancialSolutions LLC (CFS), a consulting firm co-founded by Brian O’Reilly and TimRood. Established in 2007, CFS has pro-vided services to companies in thefinancial services industry, includingthose requiring strategic business devel-opment, business and risk manage-ment, and business and technology sys-tems design and development services.
“There has never been a time moreimportant for the financial services indus-try to work hand-in-hand with the feder-al government to help restore stabilityand liquidity to the markets,” said Murin.“We will advise our clients on how theyoperate strategically in this environment,as markets continue to shift and the reg-ulatory landscape inevitably changes.”
O’Reilly and Rood will serve as managingdirectors and members of the manage-ment committee in The Collingwood Group.
“Our purpose is to help new clientsand existing CFS clients to continue togrow their business and to effectivelynavigate the business and public policyenvironment in some of the most chal-lenging economic conditions the nationhas ever known,” said Montgomery.
Murin was appointed CEO of GinnieMae in 2008. Prior to that time, heserved as chief executive officer ofLender Services Inc. He also served aschief executive officer of Basis100, aToronto-based publicly traded technol-ogy company. Earlier, he served as pres-ident of Century Mortgage Company.
Montgomery was Assistant Secretary forHousing-Federal Housing Commissionerfrom 2005-2009. He served as Acting U.S.Department of Housing and UrbanDevelopment (HUD) Secretary earlier thisyear. He joined HUD from the ExecutiveOffice of the President, where he served asDeputy Assistant to the President andCabinet Secretary.
According to Murin, the firm will focuson serving clients’ business developmentneeds in the federal government arena.“Americans are looking to Congress andthe Administration to provide strongleadership and innovative solutions tothe financial crisis,” Murin said. “To be asuccessful enterprise in the financial serv-ices industry will require the ability towork collaboratively with policymakers.”
Montgomery said while the financial
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This information is for use by mortgage professionals only and should not be distributed to or used byconsumers or other third-parties. Information is accurate as of date of printing and is subject to changewithout notice.Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A. © 2009Wells Fargo Bank, N.A. AllRights Reserved. #64153 4/09
Shared Vision, Shared Success.SM
WELLS FARGO WHOLESALE LENDING
Make YourWayWith A Lender Committed ToLeading Responsible ChangeWells FargoWholesale Lending is dedicated to working with mortgage brokers who are committedto five key principles for long-term industry success:
Responsibility: Ensure fair and responsible lending and borrower education are top priorities.
Quality: Produce high quality loans.
Controls: Better manage our collective risk and eliminate fraud.
Excellence: Create, promote and adhere to industry-leading standards of excellence.
Efficiency: Develop capabilities that drive greater efficiency and ease of use between ourcompanies.
Together, we will lead the way, helping to establish a foundation for a stronger, healthier andmore responsible industry.
Share in this vision. For more information, tools, ideas and market insights visit our Shared Vision,Shared Success.SM web site located on www.brokersfirst.com.
RESPONSIBILITY • QUALITY • CONTROLS • EXCELLENCE • EFFICIENCY
your clients and you will be speaking totheirs. Make it a two-way street. This opensnew doors for both of you … or all threeor four. You determine who will be a partyto your bundling of services network.
Those are new ideas of marketing,now remember the old ways … .it maybe painful to remember calling on real-tors, builders, businesses, past clients,old clients and yes, the cold call. Today’smarket calls for “Fall Back to Basics”planning. For those if us who have beenaround for a while, we are familiar withthe old ways of marketing, while somenewer loan officers are used to relyingon technology and rates themselves tobring the clients to our doors. Not intoday’s market, you need to bring theclient to your door.
I have made myself get out and callon realtors. I started hosting “Realtor’sOpen Houses.” I got two buyers for sit-ting in a house on a Saturday afternoonserving cookies. No, it doesn’t alwayswork that easy, but if you don’t do it atall, it won’t work at all.
I hosted a “Broker’s Open House” thefollowing Tuesday. Twenty realtorscame through whom I never metbefore. I brought lunch, a nominal costto meet 20 new brokers who had timeto talk and listen to me.
For starters, I was invited by one oftheir peers, so instant respect wasreceived. Second, they wanted to eat myfood, so they were nice to me. I showedoff some of the products I thought theymight not have and I did. Sure enough,most of them didn’t know those pro-grams still existed. I am hoping to getsome business from these new contacts,and I enjoyed meeting new people.
Sure, you can send e-mail marketingor purchase lists, but this cost was nomi-nal and gained instant rapport. Don’t getme wrong, I send postcards out on a reg-ular basis to my past clients and futureclients. I also send cards telling each bro-ker how much I enjoyed meeting themalong with a business card. Staying infront of new people is key to a strongmarketing plan. They don’t know me, soI would be easy to forget, but not if Idon’t let them. Don’t be obnoxious, butsubtitle reminders are great.
Stop and talk to builders in openhouses, as many have an inventory theyneed help moving. Offer them yourservices and marketing plans. You arethe expert in helping to keep the indus-try moving forward. Stop being anaysayer, no one needs to hear it anymore. Enough is enough. Moving for-ward is the key and having additionalsources of income helps.
In marketing to past present andfuture clients, there are four key referralsources:
1. Past clients2. Present clients3. Future clients4. Your own backyard!
Past clientsSend a note or monthly/bi-monthlynewsletter to every past client. Everytime you put your name in front ofthem, they will associate your name withyour business. They will perceive you asan expert in your field. This must bedone regularly; as if it is done sporadical-ly, you will lose your impact. Send to allof your clients, past, present and future.
It doesn’t matter whether you sende-mail notes, newsletters or postal mail.The Internet, however, is cost-effectiveand efficient. It will depend on your
market and the availability of Internetaddresses for e-mail contacts in choos-ing which method to use. Even if youchoose one over the other, I recom-mend crossing the two. Send thank youcards, birthday cards and other specialnotes in the mail because it is a tangiblereminder of who you are. E-mails aregreat, easy and get messages across, butare usually read one and then deleted.Some aren’t even read.
Future clientsI bet you’re wondering how futureclients can be a source of referrals? It’seasy: Give the best potential customerservice and go that one step above whatis expected. They will remember theeffort and time you invested. Many
times, I have received referrals fromfuture clients. This is the referral youhave the least control of, you neverasked for it, you never expected it, andyou have not cemented a true relation-ship with the referring source yet.
the double “p” principle continued from page 6
“Offer your customers a center forone-stop shopping of all their
financial needs. You will need toeducate yourself in many of theseareas, take a few classes, pass atest or two, but you have now created additional marketable
skills and knowledge.”
continued on page 12
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www.qcmortgage.com800-939-5383
Q Full Service QC/QA
Q Default Reviews
Q HVCC Reporting
Q IRS & SSA Reports
Q Contract Underwriting
Q Loan Imaging Storage
Q Software Lease/Purchase
Q Modification Reviews
What are the prospects and somechallenges for the reverse mortgageindustry, and why?The credit implosion is the most seriousimmediate problem, and there’s no way ofknowing how long its effects will be felt. But,until credit conditions improve, it will be dif-ficult to create the much lower-cost productsthat have the most potential for meeting abroader array of needs and expanding themarket. Other important goals include erad-icating the predatorswho have harmedthe market’s publicimage and fully fund-ing the counselorswhose work is so vitalto safeguarding con-sumers and theindustry.
The HECM pro-gram has somelong-festering prob-lems that need to beresolved. The structure of Ginnie Mae’ssecuritization program and the re-emer-gence of other secondary sales venues willincrease the likelihood of borrowers los-ing their homes via HECM-related proper-ty tax delinquencies. How many news sto-ries about such cases would it take for thepublic to begin associating reverse mort-gages with “losing your home?” On anoth-er front, will more stories about negativecreditline growth generate a class actionbefore this long-term problem is finallyresolved? And thanks to you, Atare, theproblems created by the “clarification” ofthe non-recourse limit have become morewidely recognized.
We also need to learn why borrowershave been voluntarily ending theirHECM loans so much sooner than any-one had expected and to seriously con-sider adjusting reverse mortgage bene-fit structures and risk premiums accord-ingly. Skewing any such changes towardlower loan costs would be one way toaddress the cost barrier.
What is your favorite reverse mort-gage story?There are too many unique borrower
stories to select just one, so here’s a tid-bit from the political realm. At the HUDpress conference announcing the origi-nal launch of the HECM demonstration,one of the program’s Congressionalsponsors was asked what would hap-pen at the end of a HECM’s loan term:Would the borrower be forced to sellthe home to repay the loan, or wouldthe lender take on the risk of extendingthe term? Apparently unaware that
HECMs would havean open-endedterm and the primepurpose of the pro-gram was to insureagainst the relatedrisk, he answeredthat it was a verygood question andhe would ask hisstaff to look into it!
*According toHUD data, outstanding value of HECMloans stand at $55.42 billion. Since1989, 544,300 HECMs have been origi-nated, and 431,025 HECMs were out-standing. Numbers are as of June2009.
Author and columnist, Atare E. Agbamu,CRMS is director of reverse mortgages atMinneapolis-based AdvisorNet MortgageLLC. A member of the BusinessWeekMarket Advisory Board, Agbamu isauthor of Think Reverse! and more than100 articles on reverse mortgages.Through his advisory firm, ThinkReverseLLC, Agbamu advises financial profes-sionals, institutions and regulatorsacross the country. In a 2007 nationalreport on reverse mortgages, the AARPcited Agbamu’s work. He can be reachedby phone at (612) 436-3711 or (612) 203-9434, and e-mail at [email protected] or [email protected].
Visit author Atare E.Agbamu’s blog athttp://thinkreverse.com for
his thoughts and insights onthe reverse mortgage marketplace.
forward on reverse continued from page 7
“A strong HECM counseling pro-gram can be a major factor in pro-tecting consumers and the indus-try. But all the efforts to strength-
en the program will mean littleunless an independent source of
reliable and adequate funding canbe created to support it.”
—Ken Scholen
news flash continued from page 8
services industry faces complex chal-lenges, the new firm’s approach will besimple. “We call it The CollingwoodModel and it boils down to threethings: Bring integrity and talent to thetable; find opportunities for clients togrow and become more competitive;create value for clients and the peoplethey serve. That’s how we look at ourmission,” said Montgomery.For more information, visit www.colling-woodllc.com.
New FHA-Making HomeAffordable loan modguidelines announced
U.S. Department of Housingand Urban DevelopmentSecretary Shaun Donovanhas announced that the Federal Housing
Administration (FHA) has implementedchanges to its loan modification programto ensure consistency with the ObamaAdministration’s Home AffordableModification Program. Beginning Aug.15,FHA borrowers are able to significantlyreduce their monthly mortgage paymentsby seeking a loan modification throughtheir current mortgage company or loanservicer under the new FHA-HomeAffordable Modification Program (FHA-HAMP).
The Helping Families Save TheirHomes Act of 2009, signed into law onMay 20, allows the FHA to give qualifiedFHA-insured borrowers the opportunity toreduce their monthly mortgage paymentby modifying the mortgage through FHA-HAMP. The FHA expected all servicers toimplement the changes by Aug.15. Theprogram permanently reduces a family’smonthly mortgage payment through theuse of a partial claim, which defers therepayment of mortgage principal throughan interest-free subordinate mortgagethat is not due until the first mortgage ispaid off. FHA has used the partial claimoption in the past, which allows a lenderto advance funds on behalf of a borrower,to reinstate a delinquent loan that was upto 12 months delinquent. Now, this pro-gram will allow HUD to bring the borrow-er’s payment down to an affordable level.This will be accomplished by bringing themortgage current, buying down the loanby up to 30 percent of the unpaid princi-pal balance and deferring these amountsin a partial claim.
FHA will pay an incentive to loan ser-vicers for each FHA loan modified under thisprogram. Mortgagee Letter 2009-23, alongwith detailed requirements for the FHA-Home Affordable Modification Program,was distributed to all FHA lenders as well.The implementation of this program willfurther the Obama Administration’s effortsto stabilize the housing market by helpinghomeowners stay current on their mort-gages and stay in their homes, therefore pre-venting the impact of foreclosures on fami-lies and communities.For more information, visit www.fha.gov.
Federal Reserve Boardapproves TALF extension
The Federal Reserve Boardand the Treasury Departmenthave announced the
approval of an extension to the TermAsset-Backed Securities Loan Facility (TALF)and that, at this time, they do not antici-pate any further additions to the types ofcollateral that are eligible for the facility.
Conditions in financial markets haveimproved considerably in recentmonths. Nonetheless, as deemed by theFed and Treasury Department, the mar-kets for asset-backed securities (ABS)backed by consumer and businessloans and for commercial mortgage-backed securities (CMBS) are stillimpaired and seem likely to remain sofor some time. To promote the flow ofcredit to businesses and householdsand to facilitate the financing of com-mercial properties, the Federal Reserveand Treasury approved extending TALFloans against newly issued ABS andlegacy CMBS through March 31, 2010.Because new CMBS deals can take a sig-nificant amount of time to arrange, theFederal Reserve and Treasury approvedTALF lending against newly issued CMBSthrough June 30, 2010. The Board willcontinue to monitor financial condi-tions and will consider whether unusu-al and exigent circumstances warrant afurther extension of the TALF to helppromote financial stability and eco-nomic growth in the future. TheFederal Reserve and Treasury had pre-viously authorized TALF loans throughDec. 31, 2009.
After having conducted a thor-ough analysis of a number of poten-tial candidates, the Federal Reserveand Treasury announced that theyare holding in abeyance any furtherexpansion in the types of collateraleligible for the TALF. The securitiesalready eligible for collateralizingTALF loans include the major types ofnewly issued, triple-A-rated ABSbacked by loans to consumers andbusinesses, and newly-issued andlegacy triple-A-rated CMBS. TheFederal Reserve and Treasury areprepared to reconsider their decisionif financial or economic develop-ments indicate that providing TALFfinancing for investors’ acquisitionsof additional types of securities iswarranted.For more information, visit www.federal-reserve.gov.
CMAC details the fivemost common mortgageviolations
Approximately 98 per-cent of all mortgagesare potentially eligible
to be renegotiated due to Truth-in-Lending Act (TILA) violations, according
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manufactured housing condo projects.This is a huge marketing opportunity,since this is now a wide open marketand controlled by the banks … but notfor long. Just make sure you have afunding source for the types of units thedeveloper will be offering.
Condo financing is a great niche tohave, and I had a lot of fun when I didit. A word caution … if you develop agood reputation for getting condosapproved, make sure you have a truerelationship with the developer thatwill bring you in to get their projectapproved, and that the developer isn’tjust using you for the approval with theintention of then using their long-standing lender (i.e., that does FHA
loans but lacks the know-how to getcondos approved). As you might guess,this once happened to me, and I don’twant it to happen to you.
Go FHA!
Jeff Mifsud founded Southfield, Mich.-based Mortgage Seminars LLC in 2004, hasbeen an FHA originator for 12 years, is acontributor to LoanToolbox.com and is aformer FHA underwriter. Jeff may bereached at (877) 342-9100 or [email protected].
Visit author Jeff Mifsud’s Website at http://mseminars.comfor tips and information on
FHA loans and details fromsome of the nation’s top FHA specialists.
cumstances since initial approval of theproject which would result in the proj-ect no longer complying with FHArequirements.
14. Whoever knowingly and willfullymakes or uses a document containingany false, fictitious or fraudulent state-ment or entry, in any matter in the juris-diction of any department or agency ofthe United States, shall be fined notmore than $1 million or imprisoned fornot more than 30 years, or both.
Some perspectives on the new process:� Although the FHA has now givenlenders the ability to process their owncondo approvals, it’s not a carte blancheto go out there and start financing con-dos. The lender must have staff knowl-edgeable about the process and very fewDE lenders have staff familiar with thecondo approval guides. In addition,what lenders are going to want the extraliability in processing and certifyingtheir own condo approvals? The lastthing lenders are looking for is more lia-bility. Given this reality, I foresee veryfew lenders participating in this offer.Lenders like Countrywide and Flagstarmay utilize this guide, since for years,they have had their own internal condoapproval departments apart from FHA. Ican see lenders involved in the re-certi-fication, since the lender will only becertifying that they know of no changesto the project that would disqualify it. Itwill be interesting to see how thelenders actually react to this guide.
� The decision to eliminate Spot LoanApprovals (SLAs), in my opinion, will denyownership to thousands of potentialcondo purchasers and will negativelyimpact condo sales across the country. Ithink this was a poor decision and the SLAshould be reinstated. SLAs allowed peopleto purchase a condo in a project withouthaving to go through the project approvalprocess. To have to approve an entire proj-ect for one buyer is not practical. I actuallydid this once for a buyer and it was a lot ofeffort for just one loan. In addition, there’sinherently less risk to HUD, since SLAs aretypically done in already-established con-dominium projects. It doesn’t make sensethat HUD would insure a higher risk unit ina new project (that has only a 50 percentpresale requirement) and yet and notinsure a unit in a well-established projectwith an SLA, which is clearly a lower risk. IfHUD truly wants Hope for Homeowners,then they should bring back the SLA.
� If you do work for a lender that is willingto take the risk in this program, the greatadvantages I see with these changes are:
1. The elimination of the environ-mental review.This was a huge deterrent for buildersdue to the expense involved, and one ofthe main objections that was difficult to
overcome for me to overcome wheneducating developers on the benefits ofgetting their condo approved with FHA.
2. No longer requiring that owners bein control of the association for oneyear on condo conversions.This change makes it a lot easier to getin with a developer that is convertingapartments to condos. I chose this asmy niche because it lacks the time toclose on new construction.
3. The allowance of FHA financing on
fha insider continued from page 6
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Residential Mortgage BankingBranch Program for Professionals
Guaranteed, an established and well-funded Mortgage Banker since 1992, is positioned to continue its prominence in the industry. As a leading FHA Direct
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Three important rules Rule #1If a past, present, or future client refersyou, take action now while the lead ishot. Remember, it is always easier totalk to someone expecting your call,warmed up for you by someone theyknow, like and trust than someone whohas not been referred to you.
You come highly recommended—don’tlet your referral source down. This is criticalfor future business. Make sure you take thetime to either personally call or handwritea special thank you note for the referral.Treat them like gold and with the utmostrespect because they thought enough ofyou in their busy day to refer you!
Rule #2Present clients are hot! Ask for referralsnow! Right now, they think you are won-derful and want the world to know theymade the best choice by choosing you.They will toot your horn. They have ahigh level of trust in you at this point. Nomatter what the product or service mightbe, they made a choice to buy from you.This is the best time to ask for a referral!
Rule #3Be prepared to network with futureclients. Always give two business cardsto everyone you meet! I always found itamazing that other people will pass outyour business cards for you.
A personal thank youIt is very important to remember to thankthe referring party. Keep them in the loop.Remember this person thought enough ofyou to refer you. This automatically qual-ifies them for a personal thank you.
The first choice is always by phone. Asimple: “Thank you for the referral, Ispoke with Mr. Smith today. I think I canhelp him. I just wanted you to knowhow much I appreciated your referral.
Let’s get together for coffee or lunch.”Don’t leave them hanging as to whetheror not you ever contacted or spoke totheir referral.
Sometimes, it is difficult to reach some-one. You can leave a brief message onvoicemail if available. “Hi, Joe, I received acall from Mr. Smith. He said you referredme to him. I just wanted to say thank youfor the referral and for thinking of me. Ihope you are doing well. Let’s get togethersoon.” End of conversation.
You made the referring person awarethat you spoke to Mr. Smith and thatyou appreciated the referral. I also fol-low up with a written thank you as well.
These are basic skills that haveworked and I believe will continue towork, so won’t you try partnering andfalling back to basics?
Laura Lynn Burke has been selected from anationwide search to be featured inStepping Stones to Success, a highly suc-cessful book series. The book features best-selling authors Deepak Chopra (The Powerof Purpose), Jack Canfield (Chicken Soupfor the Soul), Dr. Denis Waitley (featured inThe Secret) and Laura Lynn Burke(Networkolog) who are joined by otherwell-known authors each offering time-test-ed strategies for success in frank and inti-mate interviews. Laura is also the CEO andfounder of Footprints International d/b/aThe Mortgage Institute, a training and con-sulting company designed with you inmind. For more information, call (708)692-6199 or e-mail [email protected].
Visit author Laura LynnBurke’s Web site atwww.lauralynnburke.com
where she arms readers withthe information to “Prepare today fortomorrow’s changes to stay one stepahead of the competition.”
the double “p” principle continued from page 9
The new administration, whetheryou support it or not, is pumping arecord-shattering amount of moneyinto system to stimulate the economy.Much of this will help the housing mar-ket. This will occur in the form of taxincentives and more jobs available towould-be homeowners.
So it is about time that we all quitcomplaining and go to work doing whatwe do best, serving our customers.Appraisers too have been dealt a finan-cial blow within the past few months, sowe are in the same boat. Most apprais-ers are more than willing to take a sec-ond look at an appraisal that has comeunder question. We are not talkingmerely about the appraisal validating
each and every loan application, butalso flawed appraisals. There is a prop-er way to challenge appraisers who dosub-par work, and it is our responsibili-ty to do it. For those properties that donot qualify as collateral for a given loan,then is it not proper to find anotherdeal and move on?
My glass is half full and not halfempty. I hope that yours is also.
Charlie W. Elliott Jr., MAI, SRA, is presi-dent of Elliott & Company Appraisers, anational real estate appraisal company.He can be reached at (800) 854-5889, e-mail [email protected] or visit hiscompany’s Web site, www.appraisalsany-where.com.
value nation continued from page 8
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Copyright © 2009 Emigrant Mortgage Company, Incorporated (Emigrant). All rights reserved. Emigrant is a subsidiary of Emigrant Bank, Member FDIC and is an Equal Opportunity Lender. All product names, company names and logotypes are servicemarks or trademarks of Emigrant in the United States and other countries. The information, products and services contained in this advertisement are believed to be correct but may include inaccuracies, typographical errors and/or omissions. Emigrant does not guarantee the accuracy of the data contained herein. This information is intended for mortgage and/or real estate professional use only and should not be distributed or presented to consumers or any other third parties. This is not an offer or guarantee to extend consumer credit. Program guidelines, terms and/or conditions are subject to change by Emigrant without notice. All loans are subject to submission of a complete application, underwriting review and credit and property approval by Emigrant. Not all products and/or programs are available in all states and/or localities and/or for all loan amounts. Certain products / program are offered through third parties. Other restrictions and limitations may apply. New York Licensed Residential Mortgage Lender: Exempt. Emigrant is registered or licensed with the Banking Departments or Divisions in CT, DE, FL, MA, NH, NJ, NY, PA and RI.
EQUAL HOUSING
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*Subject to state specific laws, regulations and Emigrant’s Geographic Restrictions. **Applicant(s) must have a FICO of 651 or greater for transactions with loan amounts above $3 Million.
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to a review of thousands of mortgagedocuments undertaken by theConsumer Mortgage Audit Center(CMAC). According to CMAC, a majorityof the violations tend to take the formof missing paperwork, bad Good FaithEstimates (GFEs), hidden and misrepre-sented payments, double-dipping bro-kers, and the lack of documentation ofincome for borrowers.
“Every day, the Consumer MortgageAudit Center conducts comprehensiveaudits of mortgage documentation,and every day we find egregious andoccasionally intentional mortgage vio-lations,” said Sylvia Alayon, vice presi-dent of operations for CMAC. “While notall mortgage violations are necessarilymalicious acts on the part of financialinstitutions, there are some basic areasevery consumer should look at beforesigning a mortgage.”
CMAC is a due diligence and consult-ing company specializing in the field ofmortgage forensic research and analy-sis. CMAC boasts a highly specializedteam of mortgage experts who are alsomembers of the American College ofForensic Examiners Institute and repre-sent a combined experience of over 80years in mortgage finance and law.
“Paperwork is never fun to dealwith, but there are ways homeowners
can tell if they’ve been victim to amortgage violation,” said Alayon.“Comparing the HUD-1 document,which buyers get at settlement to out-line most costs, with the same lender’sgood faith estimate is a great first step.If the figures on your HUD-1 and yourGFE look different, it may be time tocall an attorney.”For more information, visit www.truthin-audits.com.
HOPE NOW reports 25 percent surge in workouts in June
HOPE NOW, the privatesector alliance of mort-gage servicers, investors,
mortgage insurers and non-profit coun-selors, announced that in June, themortgage lending industry helped310,000 homeowners complete work-out solutions to stay in their homes—a25 percent increase over May.
In June, HOPE NOW members andthe mortgage lending industry modified96,000 mortgages compared to 101,000in May, a 5.1 percent drop and initiated214,000 repayment plans up from148,000 in May, a 44.9 percent increase.Since January 2009, more than 1.5 mil-lion homeowners have been helpedthrough mortgage workout plans.
For a second straight month, HOPENOW’s participating servicers in Junereported a slight drop in modificationsand a significant increase (more than40 percent) in repayment plans. Thisincrease is primarily attributed to ser-vicer participation in the ObamaAdministration’s Home AffordableModification program (HAMP).
“I am proud of the continued progressmade by HOPE NOW servicers and amconfident that they are aggressively andproactively using HAMP, as well as othersuccessful foreclosure prevention pro-grams, to help as many homeowners aspossible,” said Faith Schwartz, executivedirector of the HOPE NOW Alliance. “Wecontinue to work with the Administrationon the successful implementation andoutcome of HAMP for at-risk homeown-ers. These efforts are in the best interest ofconsumers as well as the U.S. economyoverall.”
There were 93,924 foreclosure salesin June, an increase of more than 13percent from the prior month. For thefirst time since HOPE NOW began col-lecting data, prime foreclosure sales inJune outpaced subprime sales by a two-to-one margin. HOPE NOW survey datasuggests a peak in subprime foreclosuresales occurred a year ago during thesecond quarter of 2008. The largestgain in reported prime loan foreclosuresales occurred in the recently endedsecond quarter of 2009 at 154,108. For more information, visitwww.hopenow.com.
Administration and servicers commit to fasterrelief via loan mods
Senior Obama Administrationofficials recently met with topexecutives from servicers par-ticipating in the Making
Home Affordable (MHA) loan modifica-tion program to discuss ways to improveeffectiveness and efficiency of the pro-gram. The meeting—led by TreasuryAssistant Secretary for FinancialInstitutions Michael S. Barr, TreasuryAssistant Secretary for Financial StabilityHerb Allison, Federal HousingAdministration (FHA) CommissionerDavid Stevens and U.S. Department ofHousing & Urban Development (HUD)Senior Advisor to the Secretary WilliamApgar—addressed challenges to modifi-cations, strategies for improvement,and collective goals that the servicersand Administration are committed toreaching.
“With over 200,000 trial loan modifi-cations already under way, we are ontrack to meet our goals,” said TreasurySecretary Tim Geithner. “Still, too manyhomeowners are at risk of foreclosureright now. This meeting was an oppor-tunity to identify ways to accelerate theprogram and bring relief faster.”
Servicers in attendance committedto significantly increasing the rate atwhich they are performing loan modifi-cations. The Administration has estab-
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NAMB/WEST will hold its third annual conference at the MGM Grand Hotel in LasVegas, Saturday-Tuesday, Dec. 5-8. As in the past, we anticipate a large turnout witha slate of exciting speakers and programs. This year’s theme is “Today’s Changes forTomorrow’s Opportunities.”
There has never been a better opportunity in our mortgage industry to buildup the tool chest to secure our future businesses and further ensure the protec-tion of consumers. Some of key highlights of the conference include:
� Face-to-face communication with hundreds of high quality brokers� Lower registration fees� Great low hotel rates� Exhibit booth prices at $500 less than last year’s rate� The best speakers in the mortgage market� Lots of social networking � And a fun, fun, fun conference!!!
This year’s will be as exciting as it gets. We have a full list of nation-ally-recognized speakers that will keep every one on top of their pro-fession! This year’s speakers program will be different than in the past.We have decided not to provide the continuing education (CE) curricu-lum since the Secure and Fair Enforcement for Mortgage Licensing Act(SAFE Act) will be coming down the pipeline and will facilitate thenational requirements. Our goal this year is to break down the mort-gage industry training and development into three segments:
1. Mortgage Industry Regulatory Update Sessions2. Sales and Marketing3. Social Media
NAMB WEST agenda at-a-glanceSunday, December 6Regulatory update sessionsThe year 2009 has been one of change and regulation and keeping upwith all of it is all quite confusing. That is why we have scheduled a fullsession to cover the topics that are affecting you most in your business.
9:00 a.m.-9:45 a.m.Economic UpdateDr. Ted Jones, Chief Economist, Stewart Title Join Dr. Ted C. Jones Ph.D., senior vice president and chief economist for Stewart TitleGuaranty Company, as he addresses the state of our industry and the economy. Dr.Jones will provide information regarding his ongoing research and support of the eco-nomic and financial analysis of what is affecting the economy today. Jones earned aPhD in finance with a minor in statistics and a master’s degree in land economics andreal estate from Texas A&M University. He holds a bachelor of science degree fromColorado State University. You will want to be sure to attend this information session.He is also the director of investor relations for Stewart Information Services Corporation.
10:00 a.m.-10:45 a.m.NAMB’s Regulatory & Legislative PanelOn Monday, Feb. 23, the National Association of Mortgage Brokers, with the sup-port of Baker & Hostetler LLP, filed a lawsuit with the United States District Courtfor the District of Columbia against the Federal Housing Finance Agency (FHFA)Director James B. Lockhart over the controversial Home Valuation Code of Conduct(HVCC) included in the appraisal agreements between the FHFA, Fannie Mae andFreddie Mac (GSEs), and New York Attorney General Andrew Cuomo. Attend this ses-
sion to find out critical updates to NAMB’s lawsuits and other regulatory updates.Join the panel of experts as they share updates on NAMB lawsuits, including
NAMB President Jim Pair, Past President and Government Affairs Committee ChairHarry Dinham, Chief Executive Officer Roy DeLoach, and other key NAMBGovernment Affairs team members.
11:00 a.m.-11:45 a.m.The SAFE ACT, MDIA, HVCC, Red Flags and OtherRegulatory UpdatesRESPA: New GFE and HUD-1, MDIA, HVCC, SAFE Act,Red Flags...Now What?This year, with all of the legislative and regulatory changes, an hour hardly seems likeenough time to cover all of the updates the rules governing the industry, but it will pro-vide an opportunity to give an overview of what has happened and what you need to do
to make certain you understand the new regulations and how they affectyour business. This will be one of the most important and informational-packed sessions of the NAMB/WEST! You will want to attend this session!
Join expert panelists including: Theresa C. Ballard, president ofBFO Solutions; Ken Perry, president of Broker Knowledge and GingerBell, CEO of Go2Training for this session.
Theresa C. Ballard’s BFO Solutions Inc. is a compliance compa-ny offering compliance audits, post secondary closing audits, andloan delivery and loan guarantee services. Her professional experi-ence spans 30-plus years in the mortgage banking industry, prima-rily in operations, underwriting and secondary marketing.Ballard’s experience includes quality control trainer for variousindustry organizations, including AllRegs, the National Associationof Mortgage Brokers and the California Association of MortgageBrokers. Theresa works closely with state and federal auditingagencies and has acted as an advisor to several state and federalagencies, including the Conference of State Banking Supervisors(CSBS), the American Association of Residential MortgageRegulators (AARMR) and the Nationwide Mortgage Lending System& Registry (NMLS&R). Theresa’s most recent focus has been on thedevelopment and implementation of quality control policies andprocedures for mortgage brokers, retail and wholesale lendingoperations and several community banks, as well as the actual exe-cution of quality control audits.
Ken Perry is president/CEO of Broker Knowledge Group, a training and consultingfirm that specializes in all matters related to real estate and finance. Ken believeseducation should be fun and has successfully taught thousands of people nation-wide, speaking to all facets of the real estate industry including real estate agents,mortgage brokers, bankers, title and escrow agents, as well as lenders. He is viewedas an expert on the national real estate market and current credit crisis, having beenone of the few experts to accurately forecast this current real estate market, andbeing one of the few who can deliver the information in a way most can understand.
Ginger Bell is CEO of Go2Training, a Web-based solution to locate, track and man-age continuing education and training. Ginger has more than 20 years of experiencewriting and leading workshops in public speaking, leadership, customer service,sales and continuing education. Ginger works with industry professionals, such asBarry Habib, Todd Duncan, Edward Jamison Esq., Sue Woodard and wholesalers towrite and obtain state approval for continuing education courses.
1:00 p.m.-2:00 p.m.HUD/RESPA RolloutWe have scheduled one of the key HUD representatives to present the HUD/RESPARollout that will take place on Jan. 1, 2010. This is a must-attend event for allmortgage professionals, and the session will detail how the new HUD RESPA formwill be used and processed.
“There has neverbeen a better oppor-tunity in our mort-
gage industry to buildup the tool chest tosecure our future
businesses and fur-ther ensure the pro-
tection of consumers.”
A Message From NAMB/WEST 2009 Committee Chair Joe CamarenaSaturday-Tuesday, December 5-8 • MGM Grand Hotel
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2:15 p.m.-4:00 p.m.Speed Dating Mortgage Style: Learn Who/What isAvailableSpeed dating is a formalized matchmaking process whose purpose is to encouragepeople to meet a large number of new people. Its origins are credited to Rabbi YaacovDeyo of Aish HaTorah, originally as a way to help Jewish singles meet and marry. Thefirst speed dating event took place at Pete’s Café in Beverly Hills in late 1998.Supporters argue that speed dating saves time, as most people quickly decide if theyare romantically compatible and first impressions are often permanent. Join NAMB asspeed dating is matched with mortgage lending, providing a platform for you to meeta wide selection of vendors who are “available” to help you in your business.
It’s really simple … 10 tables, 10 chairs, 10 min., 10 chances to meet the vendorof your dreams … or at least one who may be able to help you with your business!Move quickly from one table to the next to find out who will best fit what you arelooking for. Matches may include: Lenders, technology companies, or providers ofmarketing or compliance tools. It’s a fun way to find out what is new out there.Lenders will be available to discuss files too so bring your questions.
Fun, games and prizes will be included in this action-packed section. Be sureto join in the fun and excitement and who knows … maybe you will find that“perfect match.”
Sunday, December 62:15 p.m.-4:00 p.m.Double Your Profits Without Doubling Your WorkloadJoin Fred Arnold, president of American Family Funding and immediate past pres-ident of the California Association of Mortgage Brokers, as he leads this powerfulsession on breakthrough business-building action steps and superior selling tech-niques that will position you to:
� Boost your business sales to the next level;� Create sustainable business profits;� Build your referral base;� Create a sales machine and close sale after the sale;� Put more money in your Pocket, and � Much, much more!
It’s worth an hour of your time to find out what the top loan originators aredoing to create their success in this market.
Fred Arnold, throughout his 15 years in the mortgage industry, has held manyroles. His top producing team maintains a profitable and thriving loan originationbusiness, based 100 percent on referrals. While managing his mortgage team inSouthern California, Fred is also a highly sought-after speaker, trainer, writer andconsultant for the mortgage industry. Fred has his own financial radio show.
Monday, December 79:00 a.m.-10:50 a.m.Social Media: How to use Facebook, Twitter andBlogging to Build Your BusinessEveryone is a-twitter about Twitter, Facebook, Blogging and video. Questions runthe gamut from “What is it all about?” to “How do I use it for business?” Well, MarkMadsen is the expert when it comes to social media! In this jam-packed session,you will learn how to use these social media applications to:
� Network with others in your industry or community � Stay connected to customers and prospects � Monitor what is being said about your company, products, services, industry
and competition � Gather valuable feedback about products or services � Raise awareness about the company, product or service � Find answers and get advice � Offer proactive customer service � Promote events, products and services � Drive traffic to your Web site or blog � Share helpful content such as articles or blog posts � Generate leads
Be sure to attend this session and join Mark and his panel of experts who willshare the tricks to using social media tools to build your business.
11:00 a.m.-NoonUsing Video to Build your BusinessJoin Frank Garay, co-creator of Think Big Work Small, as he shares the secrets to suc-cessfully utilizing video and the Internet to grow your business.Thinkbigworksmall.com (TBWS) was founded in 2007 by a group of successful realestate and mortgage industry entrepreneurs. Born in the most battered market in thereal estate and mortgage industry’s history, Thinkbigworksmall.com was conceivedafter decades of observing how the most successful professionals always seem to worksmarter not harder. It was the little things they did that made all the difference. TBWS
was created to perfect and refine business tools and practices that take a minimumof effort or training, but that deliver significant, predictable results.
During a four-month study of nearly 1,000 industry professionals in 2008, the usersof TBWS’s Video Marketing Engine 2.0 showed a 67 percent increase in production overa control group during the same period. One small change in how they stayed in con-tact with their databases, through video, made all the difference for these real estateand mortgage professionals.
With version 3.0 due on the market in the fall of 2009 and TBWS’s newest prod-uct, Rate Alert, quickly becoming one of the most utilized and trusted rate moni-toring services in the world, TBWS has moved from an interesting concept to aproven success story in less than two years.
Exhibits and trade showThis year’s trade show is geared to drive in the affiliates and mortgage industrypartners. We have discounted the exhibit booths to make sure businesses acrossthe country can afford and come to the conference. Booth prices are $500 lessthan last year and include a hotel room for two nights, advertisement in NationalMortgage Professional Magazine and special recognition at the reception at theconclusion of the trade show.
Conference standardsWe are going to continue to have the standard activities at the conference as inthe past. However, we will bring back the national committee meetings duringthe first two days of the conference. In addition, we are going to have an OpeningReception on Saturday, Dec. 5 to bring our fellow mortgage friends together andprovide some social entertainment before we start the training and development.We will have the NAMB Delegate Council Meeting and Board Meeting towards theend of the conference so everyone can concentrate on the rest of the conference!
As in the past, our goal is to bring you a mortgage industry conference that willgive you the tools to keep you updated in our ever-changing industry and allow-ing the networking opportunities we welcome to stay in touch with our fellowfriends. We are offering lower registration fees, great hotel rates and a slate ofspeakers and learning opportunities for everyone who attends. Oh, and do notforget about those “after hours” parties that will be lining up by the time youunload your suitcases! We hope to see you in Vegas this December!
Joe Camarena is a member of the NAMB Board of Directors and chairman of theNAMB/WEST 2009 Committee. Joe is president of The Mortgage Source in Portland,Ore. and can be reached by phone at (503) 443-1060 or e-mail [email protected].
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Visit NAMBWEST.com for more details.
Saturday-Tuesday, December 5-8, 2009MGM Grand Hotel • Las Vegas
Make sure you book your hotel before November 10th to take advantage of the fabulous
group rates offered at MGM Grand Hotel.
Overview of schedule of events
Scheduled Sessions
• Economic Update by Dr. Ted Jones, Director of Investor Relations, Stewart Information Services Corporation
• Update from NAMB’s Government Affairs Team
• SAFE Act, MDIA, HVCC, Red Flags and Other Regulatory Updates Panel
• FHA the Best and Fastest Mortgage Finance Option forYour Clients Today, presented by Nancy West of FHA
• Speed Dating Mortgage Style – Learn who/what isavailable
• Double Your Profits Without Doubling Your Workload,presented by Fred Arnold
• Social Media: How to Use Facebook, Twitter & Blogging to Build Your Business, presented by Mark Madsen
• Using Video to Build Your Business, presented byFrank Garay, Co-Creator of Think Big Work Small
Saturday, December 5
NAMB/WEST Opening Reception
Sunday, December 6
Speakers, Education and Committee Meetings
Monday, December 7
Speakers in the Morning/Exhibit Hall in the Afternoon
Tuesday, December 8
Delegate Council Meeting in the Morning/NAMBBoard Meeting in the Afternoon
Exhibitors: Enjoy face-to-face
communication with hundreds of
high quality brokers
New bonuses for NAMB/WEST exhbitors:
• Free hotel room at the MGM Grand for two nights
• Free ad in National Mortgage Professional Magazine
• Free Monday Exhibitor Recognition Reception
• Opportunity to participate in “Speed Dating MortgageStyle” roundtables for all exhibiting companies
• Booth prices $500 less than last year
Don’t miss out on a great lineup of education and
networking events.
Don’t miss out on a great lineup of education and
networking events.
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of dollars by scammers who are exploit-ing the economic downturn.” The FTCalso recently announced two major con-sumer protection enforcement actions:One involving a nationwide crackdownagainst scammers and the other result-ing in a $3.7 million penalty.
In one of the actions, the FTC andEquifax subsidiary TALX Corporation,has agreed to settle charges that it vio-lated federal law by failing to providecertain disclosures to users of their con-sumer reports and to entities that pro-
vide information for con-sumer reports. The pro-posed settlement requiresTALX to pay the govern-ment a $350,000 civilpenalty and bars futureviolations.
TALX sells income andemployment historyinformation about con-sumers to lenders, pre-employment screeners,and others for use indetermining their eligibil-ity for credit, employ-ment or other purposes,which makes it a con-sumer reporting agencysubject to the Fair CreditReporting Act (FCRA),according to the FTC. Thecompany allegedly violat-ed the FCRA by not pro-viding the “Notice to
Users of Consumer Reports: Obligationsof Users Under the FCRA,” which noti-fies users of consumer reports of theirstatutory obligations, including notify-ing individuals if the user takes adverseaction against them based on their con-sumer report. The company also failedto provide the “Notice to Furnishers ofInformation: Obligations of FurnishersUnder the FCRA,” which notifies furnish-ers—entities that furnish informationfor consumer reports—of their obliga-tions to provide accurate information,correct and update inaccurate informa-tion, and reinvestigate consumer dis-putes.
Also in July, the FTC and CaliforniaAttorney General Jerry Brown,
While Congress is debating the future ofthe proposed centralized federalenforcement agency for the financialservices sector, one thing regardingenforcement has already been estab-lished: With or without the proposedConsumer Financial Protection Agency(CFPA), the Federal Trade Commission(FTC) is aggressively pursuing violations.
The FTC’s new Director for the Bureauof Consumer Protection is DavidVladeck, and in a little more than onemonth on the job, Vladeck’s actions havemade some strong state-ments about consumerprotection. In his first 45days, there has been thecreation of a task force tohelp repair consumercredit and prevent ques-tionable lending practices,as well as multiple settle-ments and litigations filed,many in the financial serv-ices sector. This confirmshis claim that the first pri-ority at the agency will bedealing with the rise ofconsumer financial fraudas a result of the econom-ic downturn.
On July 1, DirectorVladeck used his firstpress conference as headof the Bureau ofConsumer Protection toannounce a nationwide,joint federal/state law enforcement ini-tiative against scammers attempting totake advantage of consumers made vul-nerable by the poor economy. Thus far,“Operation Short Change” includes 15FTC cases, 44 law enforcement actionsby the Department of Justice, andactions by at least 13 states and theDistrict of Columbia. In its cases, theFTC alleged that defendants made falseand unsubstantiated claims via theInternet, infomercials, telemarketing,robocalls or print advertisements tomarket get-rich-quick and other similarschemes. Several of these schemes tar-geted consumers with mortgage- andcredit-related problems.
At the press conference, DirectorVladeck noted that “thousands of peo-ple have been swindled out of millions
“If these earlyannouncements areany indication, theFTC’s new Director
of ConsumerProtection Vladeck
may be just what theconsumer watchdogs
were looking for.”
FTC’s New Leadership MakingAggressive Moves in Consumer Protection
By Terry W. Clemans
continued on page 20
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Professional Magazine will focus on oneof the industry’s top players in our“Mortgage Professional of the Month”feature. Our readers are encouraged tocontact us by e-mail at [email protected] for consideration inbeing featured in a future “MortgageProfessional of the Month” column.
This month, we had a chance to chatwith Thomas R. Sirico, executive businessdirector of mortgageNOW inc., Red Bank,N.J. Born in Brooklyn, N.Y., Tom establishedLindenhurst, N.Y.-based MortgagelineFinancial Corporation in 1989, quicklybecoming one of the New York area’s toplenders. In 2000, he opened AmerihomeMortgage Corporation. Amerihome becamea top lender for new construction sites in theNew York area. Sirico’s experience and con-tacts helped him develop a vast branch net-work for HCI Mortgage Corporation, pro-ducing more than $500 million in sales.Currently with mortgageNOW, Tom is partof an executive team overseeing the expan-sion of sales. As a seasoned mortgage indus-try veteran with 20-plus years invested inthe industry, he has been responsible formore than $1 billion in sales over his career.He currently resides in Holmdel, N.J. withhis wife, Linda, and son, Thomas Michael.
What attracted you to the mortgageindustry?Back in the late 1980s, right after the crashof ‘87, I was introduced to the mortgageindustry by an attorney friend of mine. Atthe time, I was operating a men’s andwomen’s clothing store in Bensonhurst,Brooklyn, a borough of New York. Owninga women’s store during the disco era as a20-year-old had its perks. One day, I willput it all down on paper, and I do believeit will make a great sitcom. Anyway,through the years, I had made quite aname for myself dressing the ladies andthe men. The many contacts I madeserved me well as I transitioned into thebusiness. It was pretty surprising to every-one when I started writing mortgages asmy clothing business was doing quite well.
Then came October of 1987. I had speculated in real estate, so I was
familiar with the mortgage process. Istarted working at a Long Island compa-ny called Mortgage Plus Bankers. Withinin the first year, I was closing 20 loanseach month with an assistant. I washooked. In Staten Island, I worked prima-rily with builders. I would sit on new con-struction sites on the weekends and qual-ify people as they walked through themodel. I loved the interaction with help-
Thomas R. Sirico, Executive Business Director of mortgageNOW inc.
ing people buy a home. I would makeappointments on the spot to do applica-tions at their homes, sometimes I’d getthree applications done per night. Onenight, I took my wife with me on anevening of applications because she didn’tbelieve I was at people’s houses until mid-night. When I came down to the car afterthe third appointment at 12:30 a.m., withtears in her eyes, she said, “I will neverdoubt you again.” Having her supportover the years has been invaluable.
Most of my business was comprised ofpurchase transactions. I always went tomy closings. I thought, what better placeto network than at your own closings?You have the buyer and seller, two attor-neys, a title closer, and a selling and list-ing real estate agent all at the sametable! I quickly earned a reputation as areliable and trustworthy loan officer. Asmy business grew, so did my enthusiasm.So, I opened Mortgageline FinancialCorporation with a co-worker. We knewwhat it took to be successful, and I had abook of business ready to go. We got offto a great start and never looked back.Mortgageline became one of the premiermortgage bankers in New York.
What keeps you in the businessthrough decades of good and badmarkets?Answering that question at this momentin time makes one pause before theyanswer. I like searching out opportuni-ties and building relationships. I believethe challenges in our lives make us thepeople we are today. The decisions wemake influence the quality of the liveswe lead. That being said, I enjoy therelationships I have established andissues I learn about and deal with on adaily basis. Like every industry today,we need to adapt, improvise and over-come. Personally, I have benefited inhelping people through these challeng-ing times. In this industry, when busi-ness is good, it’s great! When it’s bad,let’s just say it’s challenging.
We know there are a lot of inde-pendent mortgage brokers consid-ering joining a larger firm likemortgageNOW inc. What are someof the factors that should go intomaking that decision?Mortgage brokers face a lot of chal-lenges now and in the future.Regulation will continue to direct themon how to conduct business, restrictaccess to capital and ultimately affectprofit margins. Aligning themselveswith a fully-certified direct lender, it myopinion, is the best way proceed. Forinstance, we are a Federal HousingAdministration (FHA) Direct EndorsedLender, which allows us to underwriteall files in-house and has enabled us tohave some of the fastest turn times inthe industry. We at mortgageNOWknow that in this market, the speedassociated with closing is essential. Weare confident that we will increaseone’s business by at least 50 percentbased on our model. That is evidencedthat most managers earn well over sixfigures at mortgageNOW. As a mortgagebanker, we are well-versed on all of thenew regulations being presented to theindustry. Compliance, cutting-edgetechnology, and access to investors areall elements that are in place to sup-port the transition from broker tobanker.
How has the recent Home ValuationCode of Conduct (HVCC) regulationsimpacted business at mortgage NOW?This regulation has certainly causedsome controversy, but adapt we must.We have currently adopted the changesin a compliant and seamless manner.Our COO has implemented innovative
“We at mortgageNOW know that, in this market, the speed
associated with closingis essential.”
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policies to minimize the delays due tothe disclosure rules, along with eachinvestor requirement, it has been chal-lenging. But we feel our procedureshave met all regulatory requirementsand without interrupting our course ofdaily operations to close loans.
As someone who manages a large net-work of branches, where do you seeyour branch managers and their loanofficers getting their business from?Originations vary on a number of con-ditions, location, the economy, and ofcourse, rates. Currently, we are happyto see the media has noticed the bot-toming out of home prices and lowinterests rates. This has sprung a resur-gence in purchase business that is pri-marily directed toward mortgageNOW’sbranches through our vast real estatenetwork. With the many short salesoccurring, it is not unusual that we canclose that transaction, as it is time-sen-sitive, generally within a week, much tothe delight of our real estate agents. Wehave increased our referral purchasebusiness 85 percent, we believe by our“speed to close” process.
Our business model also provides ourbranches with some of the best leads inthe business, as we were recognized byLendingTree and previewed in NationalMortgage Professional Magazine. We uti-lize a direct dialing service allowing livetransfer contact to magnify the volume ofcalls that the branches can make. Allleads are entered in our LoanX engine,which allows easy access to track leadsand manage their pipelines in an effi-cient and organized manner. It’s all partof our state-of-the-art technology thathas set’s us apart from our competition.
What tools must a mortgage origina-tor have to compete in today’s com-petitive marketplace?First and foremost, one must have a richknowledge of the business. Understandingwhat service you provide is paramount.Respecting your position as either a mort-gage broker or mortgage banker dictatesthat you know what you are talking about.As you can see, you have struck a nervewith me. As an originator, you are respon-sible for the largest investment in one’slife, a house. Giving our branches the sup-port they need is a top priority for us. Forinstance, our LoanX system helps our orig-
inators provide service and information tothe consumer in a quick and concise man-ner. It will price, pre-approve, track andupload conditions on each loan supplyingunsurpassed customer service. These sys-tems allow us to close our loans, on aver-age, of five to seven days, making our cus-tomers happy and increasing the referralbusiness of our branches. I am proud tosay that our loan officers are some of thehighest paid originators in the industry. Weare also very cognizant of the fact that pre-senting and explaining the process proper-ly is an obligation not to be taken lightly. Iam proud to say that mortgageNOW’sinterview and training process has helpedus become successful in this aspect.
How has mortgageNOW addressed thedecline in warehouse line providers?I believe this has been a challenge foreveryone in the industry … some morethan others. We fortunately have alwaysmaintained an excellent track record andhave maintained compliance with ourproviders. So much so, mortgageNOWhas added capacity which, in turn, hasincreased our volume on average of 75percent month-over-month.
How does mortgageNOW view thefuture of mortgage banking?We believe that some changes were need-ed for the most part. We have to remem-ber that there were some excesses that themarket took advantage of. The correctionshave been made and all signs point thatthe worst is behind us. FHA will continueto provide the financing the countryneeds as exampled by the government’scommitment of $350 billion to the pro-gram over the next five years. As a directlender of these funds and one of the topclosing FHA lenders in the country, we aremoving forward with some exciting addi-tions that will increase our business andmake us an attractive option for any mort-gage professional who wishes to attainsuccess in the industry.
“As an originator, you are responsible for the largest
investment in one’s life, a house.Representing and explaining theprocess properly is an obligation
not to be taken lightly.”
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First, I would like to welcome you to TheSecondary Market Overview, designednot only to keep you informed withregard to what is happening in the mar-kets, but more importantly, how itrelates to loan officer production withinour industry. What good is being knowl-edgeable about what is happening if youdon’t know how it will affect your busi-ness? To that end, we will try to makethis message as non-technical as possi-ble. My good friend, Eric Holloman, asecondary expert and chief executiveofficer of RateLink, will advise me on thetechnical aspects where necessary.
I have been writing about the mort-gage industry consistently for more thanfive years now and have been teachingloan officers how to become an expertin all areas, including the secondarymarkets for 30-plus years. The second-ary market led the real estate boom ear-lier this decade. It also led the collapseof real estate. And that is the message Iwant to give you in this opening col-umn—what caused the issues we facedand where might these issues lead us inthe future?
With regard to the future, I asked EricHolloman what are the most pressingissues that could have a major impactupon the secondary market in the com-ing months. Eric, pointed out three suchissues that we will be following closely—
� The fate of Fannie Mae and FreddieMac. First, Moody’s Investors Servicepredicted the “winding down” of theagencies. Then, the Mortgage BankersAssociation (MBA) called for the agen-cies to be replaced by private “coop-eratives.” Of course, the major mem-bers of the MBA have always compet-ed with the agencies.
� Will the industry be able to replacethe warehouse capacity it has lost?The credit and banking crises hascrippled the industry in this regard.Will the government provide a solu-tion through Ginnie Mae or anotherentity?
� As the real estate market begins itsrecovery, will the secondary market,and thus lenders, be able to loosencredit standards somewhat. Weknow we are not going back to the
“fog the mirror” days, but it wouldbe good for lenders not to requirepristine credit in order to purchase ahome for anything but FHA.
What happened to cause thesethings? Many trace the rise and fall ofthe real estate debacle to the sub-prime industry. Actually, it goes backfurther than that—much further. Icould trace it back to the GreatDepression, but I will start with a morecontemporary event. The Savings &Loan (S&L) Crisis of the late 1980s setthe stage for what happened 20 yearslater. How? Before the mid-1980s, theS&L industry was the major player inreal estate lending. In the mid-1980s,we had a real estate boom and a refi-nance boom driven by low rates. Soundfamiliar? Of course, back then, lowrates were defined as eight percent! Alittle perspective … earlier thatdecade, rates rose to above 15 percent.The bond market collapsed in March of1987 and rates went back to doubledigits overnight. After overbuilding, wehad a collapse in the real estate mar-ket. To exacerbate the problem, mostS&L institutions held loans in theirportfolio. There was little guidancefrom the feds on how to value thesemortgages. Back then, we chargedpoints on all mortgages, and it was notunusual for the S&L to book the pointsas income and put these loans, manyof which were adjustable, on the“books” at 100 percent of the value ofthe mortgage.
We now know what happens to thevalue of mortgages that are held by aninvestor when rates go up. The valuesgo down. Defaults increased and thatalso lowered the value of the holdingsof the S&Ls. Many of the buildingsdefaulting were commercial. Perhapsan S&L had a $10 million loss on alarge building. When that S&L neededto raise assets, they turned to sellmortgages in the portfolio, but whenthese were assessed, it turned out thatthey were tens of millions of dollarslower than their “booked” value. So, a$10 million loss all of a sudden turned
continued on page 27
Secondary Leads the Trends (Part I)Where we have been and where are we heading
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� On and after Thursday, Oct. 1, 2009,creditors will be required to imple-ment new rules, pursuant to revi-sions to Regulation Z issued by theFederal Reserve Board (FRB) on July14, 2008.1
� Regulation Z (12 CFR 226.35) definesa higher-priced mortgage loan as aconsumer credit transaction securedby the consumer’s principal dwellingwith an annual percentage rate (APR)exceeding a certain percentage.2
� Higher-priced mortgage loansinclude closed-end purchase money,refinancing and home equity loans.
� Exclusions: Home equity lines ofcredit (HELOCs), reverse mortgages,construction-only loans and bridgeloans with a term of no more than12 months.
Average prime offer rate� The classification as a higher-priced
mortgage loan is based on the fol-lowing:
� First liens: The APR exceeds the aver-age prime offer rate for a compara-ble transaction as of the rate-lockdate by 1.5 percent or more.
� Subordinate liens: The APR exceedsthe average prime offer rate for acomparable transaction as of therate-lock date by 3.5 percent ormore.
� On a weekly basis, the FRB will publishthe average prime offer rate for a widerange of transaction types on itsWebsite (www.federalreserve.gov).Initially, the FRB will base these rates onFreddie Mac’s Primary Mortgage MarketSurvey (PMMS), which contains weeklyaverage rates and points offered by arepresentative sample of creditors toprime borrowers seeking first-lien, con-ventional, conforming mortgages who
would have at least 20 percent equity.You can view the PMMS at: www.fred-diemac.com/dlink/html/PMMS/dis-play/PMMSOutputYr.jsp.
Four key consumer protections � Borrower ability: Lenders must take a
borrower’s ability to repay the loanfrom income and assets other than thehome’s value into account when mak-ing the loan. A lender complies, in part,by assessing repayment ability basedon the highest scheduled payment inthe first seven years of the loan. A bor-rower does not need to demonstrate a“pattern or practice,” in order to showthat a lender violated this prohibition.
� Verification of income and assets:Lenders must verify the income andassets they rely upon to determinerepayment ability.
� Prepayment penalty: Prepaymentpenalties are prohibited if the mort-gage payments can change in the firstfour years; and, for other higher-pricedloans, a prepayment penalty periodcannot last for more than two years.
� Escrow accounts: Lenders must estab-lish escrow accounts for property taxesand homeowner’s insurance for allfirst-lien mortgage loans.
Action stepsDevelop policies and procedures to:A. Determine a borrower’s:1. Current and expected income 2. Employment3. Assets (other than the collateral)4. Current obligations (i.e., credit, mort-gage related payments)
B. Determine a borrower’s income byutilizing:1. IRS Form W-2 and other incomereporting forms
New Category of Sub-Prime Mortgage Loans
Effective: October 1, 2009
2. Income tax returns3. Payroll receipts4. Records from banks and financialinstitutions5. Other supporting, verifiable docu-mentation
C. Assure that prepayment penalties,where permitted by law, meet allthese criteria:1. The amount of the periodic paymentof principal or interest (or both) does notchange during the loan’s first four years2. The penalty does not apply after theloan’s first two years3. The prepayment penalty does notresult from a refinancing by the samecreditor (or an affiliate of the creditor)
D. Establish escrow accounts:1. Prior to loan consummation (to col-lect for property taxes and propertyinsurance)2. With a provision to allow the borrow-er to opt out after the first year by giv-ing written notice to the creditor, if thecreditor is offering an opt out provision(although the creditor is not actuallyrequired to offer an opt out provision)
Submit your questions …Do you have a regulatory compliance
issue that you’d like to see addressed inthe Regulatory Compliance OutlookColumn? If so, e-mail your issue or con-cern to Jonathan Foxx at [email protected].
Jonathan Foxx, former chief complianceofficer for two of the country’s top pub-licly-traded residential mortgage loanoriginators, is the president and manag-ing director of Lenders ComplianceGroup, a mortgage risk managementfirm devoted to providing regulatorycompliance advice and counsel to themortgage industry. He may be contactedat (516) 442-3456 or by e-mail [email protected].
Footnotes1—The FRB has delayed the mandatorycompliance date for escrows for coveredloans secured by site-built homes untilApril 1, 2010 and until Oct. 1, 2010 forcovered loans secured by manufacturedhousing.2—I have written extensively on this inseveral Advisory Bulletins for ourclients. These can be found in theArchive of Lenders Compliance Group atwww.lenderscompliancegroup.com.See, inter alia, “FRB Finalizes Revisionto Regulation Z (TILA),” 07/28/08.
announced “Operation Loan Lies,” acoordinated national law enforcementeffort to crack down on mortgage mod-ification scams. The operation involves189 actions by 25 federal and stateagencies against defendants whodeceptively marketed foreclosure res-cue and mortgage modification servic-es. The FTC actions, which affect con-sumers throughout the nation, wereannounced in southern California,where the scams originated.
“These con artists see the high fore-closure rates as an opportunity to preyon people in distress,” FTC ChairmanJon Leibowitz stated in the release.“They promise to rescue homeowners introubled financial waters, but after theytake their money, they throw them ananchor instead of a lifeline. People fac-ing foreclosure should avoid any com-pany or individual that requires a fee inadvance, guarantees to stop a foreclo-sure or modify a loan, or advises thehomeowner to stop paying the mort-gage company.”
The FTC announced four other law-suits, bringing the number of mortgageforeclosure rescue and loan modifica-tion scam cases the Commission hasbrought to 14 since April. Twenty-threestate attorneys general and other agen-cies are participating in the operation,taking action against 178 companiesengaged in these types of deception.
To say Director Vladeck has hit theground running is putting it lightly! Thenew director was named to the position
after a handful of consumer watchdoggroups called for FTC Chairman Leibowitzto appoint someone with “a track recordas a genuine champion of consumerrights.” Prior to being named to the FTCpost Vladeck was co-director ofGeorgetown Law Center’s Institute forPublic Representation, a program for civilliberties, open government and regulatorylitigation. Prior to his time at GeorgetownLaw, he spent nearly 30 years with thePublic Citizen Litigation Group, a national,non-profit consumer advocacy organiza-tion that represents consumer interests inCongress, the executive branch and thecourts. Vladeck has argued a number ofFirst Amendment and civil rights casesbefore the Supreme Court, and more than60 cases before the Federal Courts ofAppeal and State Courts of Last Resort.
Let these actions serve as notice tomortgage originators about being incompliance with Federal laws. If theseearly announcements are any indica-tion, the FTC’s new Director of ConsumerProtection Vladeck may be just what theconsumer watchdogs were looking for.
Terry W. Clemans is the executive directorof the National Credit ReportingAssociation Inc. (NCRA). He may bereached at (630) 539-1525 or e-mail [email protected].
Visit the National CreditReporting Association Inc.(NCRA) on the Web at
www.ncrainc.org.
ftc’s new leadership continued from page 17
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You don’t need to be a credit expert tostart your own Credit Repair businessFortunately, with HTDI Financial’s Credit Services Or-
ganization (CSO) program, you will be able to handle
ALL aspects of your business except having to do the
actual repairs; we do that for you! We will train you on
how to handle these customers and you will have the
support you need every step of the way. We will make
you look like a Fortune 500 company even if you work
from home! YOU control how much money you make.
In fact, through our CRM, we give you the tools and
resources to harvest leads, manage prospects and mon-
itor their progress.
You don’t have to spend tens of thousands ofdollars for start-up costs for your own CreditRepair CompanyOnce you are set up in our system, you will get access
to software and tools that HTDI has spent over $1 mil-
lion on research and development. You don’t need to
spend an arm and a leg to start building your own
credit repair business. Here is a quote from a mortgage
company located in upstate New York who spent
months of research before choosing HTDI:
“Until last year, I owned a large mortgage com-
pany in upstate NY with over 125 employees. We
got hit hard during the mortgage industry crash
and had to close our doors. I was stuck in a posi-
tion with thousands of leads and customers that
couldn’t get qualified for anything. I decided to
start looking for a way to capitalize on my left
over resources and help people in the process. I
called many other credit repair companies and
was very unimpressed. One west coast based
company was charging $15,000 and had nothing
but negatives written about them on the Internet.
Then I found HTDI. They helped me to get
started at the beginning of this year and it has
been great. I have not only made great money
helping people to repair their credit, but I have re-
financed 8 of them and helped 6 buy houses that
would have never qualified with the new guide-
lines. The software is very user friendly and all of
my clients, affiliates and Brokers have increased
business because of it.”
Get those impossible to close dealsCLOSED!As the number of loan programs are shrinking, the bar
on credit scores keep rising. This program will allow
your borrowers to become “Mortgage Ready” as soon
as 45 days. As one of our CSO stated:
“I have many loan officers that are now able to
send their clients through the credit repair, raise
their scores, and then close the client’s loan that
they couldn’t close before due to bad credit! It
means more loans and more revenue for my loan
officers. Even better than that, it is very reward-
ing to be able to help a client regain their credit
and be able to get the loan they need.”
Get started in a business that is boomingand shows no signs of slowingThe credit industry, as a whole, is one of the most pow-
erful and profitable industries in existence. With
loans, insurance and even employment taken into con-
sideration individuals’ credit picture, the credit indus-
try is getting bigger every day.
Inside the credit industry, Credit Services is helping by
assisting consumers with getting back on track by re-
moving unverifiable and inaccurate negative items
from their credit reports. As a CSO, you can benefit in
being in a profitable industry and helping clients with
their futures.
“I’ve been in the mortgage business over 22 years.
A year ago, as the mortgage crisis worsened, I
began trying to find a way to help clients who
needed a better credit profile in order to get a
mortgage. Fortunately for both me and my
clients, I stumbled on HTDI. After a year of ex-
perience, I can honestly say the success rate is
100% and client satisfaction is through the roof.
All of my clients have seen significant improve-
ments, and some have experienced breathtaking
jumps in their credit scores, even on the first
round!
From Day One you can be sure your “back of-
fice” (HTDI) has you covered. They will execute
their part of the job seamlessly, with precision,
on time, and with total consistency. All you have
to do is SELL the service! Just sign people up, col-
lect the money, and send HTDI the paperwork
they need to get started. If you simply focus on
selling the service, you will make lots of money,
the work will get done, and you will never have
to worry about unhappy customers.
Although I got into it as a part timer, I now realize
this is an excellent full time business opportunity.
(Frankly, these days it’s probably a better business
than the mortgage business!) You could easily make
six figures in the first year with a minimal invest-
ment of money. How many opportunities like this
exist these days? What you must invest is your time
– SELL, SELL, SELL & SELL some more! Ulti-
mately, what you are selling is the professionalism
of HTDI, which is why this really rocks as a busi-
ness opportunity.”
We average one of the highest fix/deletion rates in the indus-try for the first 45 days of service. Shown below, in real-time,is the average percentage of fix/deletes per round.
If you are going to get involved in CreditRepair, be VERY CAREFULFirst you have “Fair Credit Reporting Act” (FCRA). The
FCRA holds credit bureaus and creditors to their report-
ing methods and has guidelines they must comply with.
There are numerous techniques that are used along with
similar laws to maximize results for each client. You must
know these laws inside out.
You can’t forget “Credit Repair Organizations Act.”
(CROA). Just like the FCRA, the CROA hold credit repair
companies to specific guidelines as well. If you choose
HTDI Financial for your backend processing, we will en-
sure you maintain compliance.
Lastly, you have applicable State Laws. Depending on
the state you wish to conduct business in, you may
have a state Credit Services Organizations act to com-
ply with.
As an active member in good standing of the National
Association of Credit Services Organizations, you can
be sure that we take our job very seriously, making sure
you stay compliant and your clients.
Why some Mortgage Professionals fail in Credit Repair while others
Make Serious Money
There is only one step you need to take; visit www.startacreditrepaircompany.com or
call us at 877-877-4834 option 5.
Mortgage Professionals make money in credit repair while getting borrowers Mortgage Ready!
Industry Leading Results
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news flash continued from page 13
lished a goal of reaching 500,000 trialmodifications begun by Nov. 1, 2009.
“I am confident that the best prac-tices shared today, combined withmore transparent reporting methods,better communication among all par-ties, and a strong commitment fromservicers, will ensure that we can rampup the MHA program’s pace to meetthese ambitious goals,” said HUDSecretary Shaun Donovan.
Administration officials detailedtheir plans to take three importantsteps to improve the program’s per-formance. First, to begin publiclyreporting results under the programbased on servicer-specific performance.This will include the number of trialmodification offers each servicer hasextended to eligible borrowers, thenumber of trial plans that are under-way, the number of final modifications,and eventually, the long term success ofthose modifications.
Second, to work with servicers to setmore exacting operational metrics tomeasure the performance of the pro-gram, such as average borrower waittime for inbound borrower inquiries,the completeness and accuracy ofinformation provided applicants, docu-ment handling, and response time forcompleted applications.
Third, in order to minimize the like-lihood that borrower applications areoverlooked or that applicants are inad-vertently denied a modification, theAdministration has also asked FreddieMac, in its role as compliance agent, todevelop a “second look” process pur-suant to which Freddie Mac will audit asample of MHA modification applica-tions that have been declined. FreddieMac will coordinate with servicers toaddress specific cases that arise and toaddress general operational weakness-es where errors prove more systematic. For more information, visit www.mak-inghomeaffordable.gov.
CMSA issues white paper on ObamaAdministration’s regulatory reform plan
The Commercial MortgageSecurities Association(CMSA) has issued a
white paper on the White House’s overallregulatory reform proposals, emphasiz-ing that the government’s financialrecovery and reform efforts shouldmaintain a consistent view towardsaddressing the unique challenges fac-ing the $3.5 trillion commercial mort-gage market.
“CMSA continues to fully supportpolicymaker efforts to help restore liq-uidity in the CMBS [commercial mort-gage-backed securities] and broadercommercial real estate market and, atthe same time, hopes that any financialreform efforts put forth do not distractfrom getting credit flowing again for
the broader market economy,” saidPatrick Sargent, president of CMSA.
The trade group’s white paper under-scores several distinctions betweenCMBS and other asset-backed securitiesmarkets, both relative to the structureof the securities and the underlying col-lateral, as well as the type and sophisti-cation of the borrowers themselves. Thewhite paper also recommends that anyAdministration financial reform propos-als should be customized to reflectsome of these distinctions.
“The new and unprecedented finan-
cial regulatory reform proposal wouldundoubtedly change the nature of allsecuritized credit markets at the heartof the Financial Stability Plan,” CMSA’spaper stated. “At a time when policy-makers hope to restart the CMBS mar-ket, certain aspects of such proposalcould have the opposite and unintend-ed result of stalling recovery efforts bymaking lenders less willing or able toextend loans and investors less willingor able to buy CMBS bonds—two criti-cal components to the flow of credit inthe commercial market.”
In the white paper, CMSA describes thefive specific issues it believes the ObamaAdministration should customize to reflectthe unique nature of the commercial mar-ket, including: a five percent retention by
originators and sponsors, the eliminationof the immediate recognition of “Gain onSale” by originators for a securitization,ratings differentiation, ABS issuers to dis-close loan level data, and a prohibition onthe hedging of the retained risk portion.For more information, visit www.cmsa-global.org.
MBA report: WellsFargo/Wachovia topscommercial/multifamilyservicers
The Mortgage BankersAssociation (MBA) hasreleased its mid-year rank-
ing of commercial and multifamily mort-
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news flash continued from page 21
gage servicers as of June 30, 2009.Topping the list of firms is WellsFargo/Wachovia Bank with $476.2 billionin U.S. master and primary servicing, fol-lowed by PNC Real Estate/Midland LoanServices with $308.5 billion, CapmarkFinance Inc. with $248.7 billion,KeyBank Real Estate Capital with $133.1billion, Bank of America with $132.2 bil-lion, and GEMSA Loan Services LP with$104.8 billion.
A primary servicer is generallyresponsible for collecting loan pay-ments from borrowers, performingproperty inspections and other proper-ty-related activities. A master servicertypically serves in a fiduciary capacityand is generally responsible for collect-ing cash and data from primary ser-vicers and then providing that cash anddata, through trustees, to investors.Unless otherwise noted, MBA tabula-tions that combine different roles donot double-count loans for which a sin-gle servicer performs multiple roles.
Wells Fargo/Wachovia Bank,PNC/Midland, Capmark, and Bank ofAmerica are the largest master and pri-mary servicers of commercial/multifami-ly loans in the U.S. CMBS, CDO and otherABS; GEMSA Loan Services, PrudentialAsset Resources, PNC/Midland, andNorthwestern Mutual are the largest ser-vicers for life companies; PNC/Midland,Wells Fargo/Wachovia Bank, DeutscheBank, and Capmark are the largestFannie Mae/Freddie Mac servicers.
JPMorgan Chase Bank ranks as thetop master and primary servicer ofcommercial bank and savings institu-tion loans; GEMSA the top credit com-pany, pension funds, REITs and invest-ment funds servicer; PNC/Midland thetop Federal Housing Administration(FHA) and Ginnie Mae servicer; WellsFargo/Wachovia the top for mortgagesin warehouse facilities; and Capmarkthe top for other investor type loans.
The MBA survey also collectedservicing volumes for loans on com-mercial/multifamily properties locat-ed outside the United States. HatfieldPhilips International ranks as thelargest master and primary servicerof non-U.S. commercial/multifamilymortgages, followed by DeutscheBank and Capmark.For more information, visit www.mort-gagebankers.org.
Obama Administrationreleases first loan modprogress report
The Obama Administrationhas released its first monthlyServicer Performance Reportdetailing the progress todate of the Making Home
Affordable (MHA) loan modificationprogram. The purpose of the report isto document the number of strugglinghomeowners already helped under theprogram, provide information on ser-
vicer performance and expand trans-parency around the initiative.
On Feb.18, the Obama Administrationannounced its comprehensive plan tostabilize the U.S. housing market. Twoweeks later, the Administration pub-lished detailed program guidelines andauthorized servicers to begin modifica-tions immediately. MHA provides $75 bil-lion for sustainable mortgage modifica-tions through the Home AffordableModification Program (HAMP).
MHA has made rapid progress in afew short months. Servicers coveringmore than 85 percent of loans in thecountry are already modifying loansunder the program. More than 400,000modification offers have been extendedand more than 230,000 trial modifica-tions have begun. This pace of modifi-cations puts the program on track tooffer assistance to up to three to fourmillion homeowners over the nextthree years.
The report discloses performanceon a servicer-by-servicer basis in orderto increase transparency for partici-pating institutions. The data showthat servicer performance has beenuneven. The Administration has askedservicers to ramp up implementationto a cumulative 500,000 trial modifi-cations started by Nov. 1, 2009. Thiswould more than double in threemonths the number of trial modifica-tions started in the first five months ofthe program.
The Administration is taking addi-tional steps to improve performance.On July 9, Treasury Secretary TimGeithner and U.S. Housing and UrbanDevelopment (HUD) Secretary ShaunDonovan wrote the CEOs of partici-pating servicers calling upon them toredouble their efforts to increasestaffing, improve borrower responsetimes and streamline the applicationprocess. Senior Administration offi-cials discussed the importance ofthese steps in a face-to-face meetingwith servicer executives on July 28.The Administration will developmore exacting metrics to measure thequality of borrower experience, suchas average borrower wait time forinbound inquiries, completeness andaccuracy of information providedapplicants, and response time forcompleted applications. As an addi-tional protection for borrowers, theAdministration has asked the pro-gram compliance agent, Freddie Mac,to develop a “second look” process toaudit MHA modification applicationsthat have been declined on an ongo-ing basis.
The Servicer Performance Report is avail-able online at www.treas.gov/press/releas-es/docs/MHA_public_report.pdf.For more information, visitwww.treas.gov.
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We are about to get a new federalagency. Historically speaking, federalagencies come into existence infre-quently. A recent agency, the FinancialCrimes Enforcement Network (FinCEN),was founded in 1990. Yet, the FederalAviation Administration (FAA) wasfounded in 1958, the Food and DrugAdministration (FDA) came into exis-tence in 1937, and the Federal Reservein 1913. The Federal Deposit InsuranceCorporation (FDIC) was founded 76years ago. Often, federal agencies arefounded as a reaction to, rather thanin anticipation of, a crisis. Regulationfollows where the supposedly unpre-dictable has happened. But there is akind of arrogance about our ability topredict, given our proclivity to believenarratives, basing our actions on retro-spective considerations, or relyingsolely on precedent to foresee thefuture. Regulation follows where thedangerously obvious has beenobscured by the opacity of politics andpower. We seek the comfort of a gov-ernment protector, a means to be keptsafe (or safer) when we take an airlineflight, eat our food, ingest our medi-cine, bank our money or borrowmoney to buy a home. And when theprotector fails to protect, as when theSecurities and Exchange Commission(SEC), founded in 1934, fails to enforceexisting regulations, resulting in theloss of billions of investors’ dollars in aPonzi Scheme, the government’sresponse is still reactive—still notanticipatory—and thus likely to resultin many more regulations.
We are about to get a new agency,called the Consumer FinancialProtection Agency (CFPA),1 yet anotherreactive response to the dangerouslyobvious. There will be turf wars between
the federal agencies to keep theirrespective, existing authorities awayfrom the CFPA; there will be debatesabout what and who will be regulated;and politics and power will work veryhard to obscure the facts and muddlethe solutions. Though Congress will nowdebate when it will become law andhow much authority itwill have, the CFPA is onthe way. As it makes itsascent on the regulato-ry horizon, let’s take aclose look at what wehave been told about it.
The Treasury released awhite paper, on June 17,2009, in tandem withPresident Barack Obama’sannouncement of a compre-hensive plan for regulatoryreform. Entitled “FinancialRegulatory Reform—A NewFoundation: RebuildingFinancial Supervision andRegulation”2, the proposaloutlines the Administration’srequirements to reformthe U.S. financial regula-tory system. If adoptedin its entirety, this robustand complicated docu-ment will become the blueprint forsignificant changes to the financialworld.3 The goal of the plan is toremediate the following four per-ceived, regulatory deficiencies thatpurportedly caused the recent finan-cial crisis:
1. Regulators imposed insufficient cap-ital and liquidity requirements (off-bal-ance sheet and trading assets); 2. Regulators did not take into accountthe harm that the failure of a large,
complex financial institution couldhave on the economy;3. Supervisory authority of large firmswas granted among many agencies andamongst a number of bank chartertypes, causing industry fragmentationand uncoordinated oversight betweenthe regulators; and,
4. Insufficient or no spe-cific oversight of signifi-cant non-bank financialenterprises, such asinvestment banks, moneymarket funds, hedgefunds, lenders, mortgageoriginators, and otherprivate pools of capital.
It is this fourth regula-tory deficiency that meetsthe mortgage industrydirectly and unequivocal-ly through the creation ofthe CFPA.4
A new frameworkThe fourth aspect of theplan, indicated above,centers on building a con-sumer protection agencyto oversee the kinds of
financial products heretofore outside ofthe purview of banking regulations.Such products as non-traditional andsub-prime mortgages, it is alleged,were often unsuited for consumers’needs. Banks and thrifts offered theseproducts, leading to widespread abuse.The plan, in effect, asserts that the mis-sion of federal and state bank regula-tors to promote safety and soundnesspotentially conflicts with consumerprotection goals. Thus, the remedy pro-posed is a new framework, consisting of
regulatory, legislative, and administra-tive reforms. Its goal will be to “reducegaps in federal supervision andenforcement; improve coordinationwith the states; set higher standardsfor financial intermediaries; and pro-mote consistent regulation of similarproducts.”5 This single, regulatoryagency, to be known as the ConsumerFinancial Protection Agency, will be afederal consumer advocacy agency,focused on consumer protection withrespect to financial products andservices. By becoming the primaryfederal financial consumer protec-tion supervisor, the new agency isexpected to provide accountability.The plan seeks for the agency broadauthorities to enable the fulfillmentof its mission, such as by expandingjurisdictions and implementing newregulatory guidelines to eliminateabuse, extending even to providingnew authorities to the Federal TradeCommission (FTC) and the Securitiesand Exchange Commission (SEC).
The CFPA structureThe plan’s recommendations toimplement the CFPA are premisedon granting “consolidated authorityover the closely related functions ofwriting rules, supervising and exam-ining institutions’ compliance, andadministratively enforcing viola-tions,” with the goal being to“reduce gaps in federal supervision;improve coordination among thestates; set higher standards forfinancial intermediaries; and pro-mote consistent regulation of simi-lar products.”6
There are eleven (11) features of theplan, which can be summarized in thefollowing table.7
“Often, federal agen-cies are founded as a
reaction to, ratherthan in anticipation
of, a crisis.Regulation follows
where the supposedlyunpredictable has
happened.”
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Proposal Purpose Authorities and Benefits
1. A single primary federal consumer protection supervisorto protect consumers of credit, savings, payment andother consumer financial products and services, and toregulate providers of such products and services.
Better promote accountability and help prevent regulatoryarbitrage. Federally-supervised institution no longer able tochoose its supervisor based on any consideration of real orperceived differences in agencies’ approaches to consumerprotection supervision and enforcement.
Supervisory, examination and enforcement authority.Should have the ability to act comprehensively to addressemerging consumer protection concerns.
2. Broad jurisdiction to protect consumers in consumerfinancial products and services such as credit, savings andpayment products.
Consumers have the information they need to make responsi-ble financial decisions, and be protected from abuse, unfair-ness, deception or discrimination. Markets operate fairly andefficiently with room for sustainable growth and innovation,and traditionally underserved consumers have access to lend-ing, investment and financial services.
Jurisdiction covers consumer financial services and prod-ucts (i.e., credit, savings and payment products), as well asinstitutions that issue, provide, or service these productsand provide services to the entities providing the financialproducts.
3. An independent agency with stable and robust funding. Director and a board, with the board representing a diverseset of viewpoints and experiences. At least one seat on theboard reserved for the head of a prudential regulator.8 Astable funding stream could come in part from fees assessedon entities and transactions.
Appointments and compensation of officers and profes-sional, financial, and technical staff on terms commensu-rate with those currently used by other independent finan-cial regulatory agencies.
4. Sole rule-making authority for consumer financial pro-tection statutes, as well as the ability to fill gaps throughrule-making.
Sole authority extends to promulgating and interpreting reg-ulations under existing consumer financial services and fairlending statutes (i.e., Truth-in-Lending Act [TILA], HomeOwnership and Equity Protection Act [HOEPA], Real EstateSettlement and Procedures Act [RESPA], CommunityReinvestment Act [CRA], Equal Credit Opportunity Act[ECOA], and Home Mortgage Disclosure Act [HMDA] and theFair Debt Collection Practices Act [FDCPA]).
Rule-making authority under any future consumer protec-tion laws addressing the consumer credit, savings, collec-tion or payment markets. Broad authority to adopt tailoredprotections—such as disclosures or restrictions on contractterms or sales practices—against unfairness, abuse ordeception, subject to the notice and comment proceduresof the Administrative Procedure Act.
5. Supervisory and enforcement authority and jurisdictionover all persons covered by the statutes that it imple-ments, including both insured depositories and the rangeof other firms not previously subject to comprehensivefederal supervision. Work with the Department of Justiceto enforce the statutes under its jurisdiction in federalcourt.
� Supervisory, examination and enforcement authorityover all entities subject to its regulations, including regu-lations implementing consumer protection, fair lending,and community reinvestment laws (i.e., CommunityReinvestment Act [CRA]), as well as entities subject toselected statutes for which existing rule-writing authoritydoes not exist or is limited (i.e., Fair Housing Act to theextent it covers mortgages, the Credit RepairOrganization Act, the Fair Debt Collection Practices Act,and provisions of the Fair Credit Reporting Act).
� Promote compliance by publishing supervisory guidanceindicating how it intends to administer the laws it imple-ments.
� Able to use other tools to promote compliance, such aspublishing best and worst practices based on surveys,mystery shopping, and information collected from super-vision and investigations.
� Assumes all responsibilities from the federal prudentialregulators for supervising banking institutions for com-pliance with consumer regulations (federal- or state-chartered). Jurisdiction extends to bank affiliates thatare not currently supervised by a federal regulator.9
� Interaction between itself and all prudential regulatorsof major matters and share confidential examinationreports with them, with action taken by the CFPA or reg-ulators.
� Supervisory and enforcement authority over non-bank-ing institutions, including enforcement powers (withsubpoena authority), over non-banking institutionswithin its jurisdiction.
� Able to request that the U.S. Attorney General bring anyaction necessary to enforce its subpoena authority or tobring any other enforcement action on its behalf in theappropriate court.
6. Regulatory reviews:� Pursue measures to promote effective regulation,
including conducting periodic reviews of regulations,an outside advisory council, and in coordination withthe Council.10
� Establish an outside advisory panel, akin to the FederalReserve’s Consumer Advisory Council, to promote theCFPA’s accountability and provide useful information onemerging industry practices.
Required to complete a regulatory study of each newlyenacted and existing regulation at least every three yearsafter the effective date, to assess the effectiveness ofenacted regulation, and allowing public comment on rec-ommendations for expanding, modifying or eliminating aregulation.
Interact with other agencies through the Council to pro-mote consistent treatment of similar products and toassure no product goes unregulated merely because ofuncertainty over jurisdiction. Through the Council, coordi-nate efforts with the SEC, the CFTC, and other state andfederal regulators to promote consistent, gap-free coverageof consumer and investor products and services. Agenciesrequired to report their work to Congress.
7. Strong rules promulgated to serve as a floor, not a ceil-ing. States have the ability to adopt and enforce stricterlaws.
Federally-chartered institutions to be subject to non-discrim-inatory state consumer protection and civil rights laws to thesame extent as other financial institutions. States to be ableto enforce these laws, as well as regulations of the CFPA,with respect to federally-chartered institutions, subject toappropriate arrangements with prudential supervisors.
States to have concurrent authority enforce regulations ofthe CFPA. CFPA promulgated federal rules under a pre-existing statute or its own organic rulemaking authorityshould override weaker state laws, but states should befree to adopt stricter laws. With respect to state bankssupervised by a federal prudential regulator, the CFPA tobe the primary consumer compliance supervisor at thefederal level.
8. Coordination of enforcement efforts with the states. Maintain consistency among the 50 states’ supervisory andenforcement efforts. The CFPA assumes responsibility forfederal efforts to help the states unify and strengthen stan-dards for registering and improving the quality of providersand intermediaries.
Authorized to establish or facilitate registration and licens-ing regimes for other financial service providers and inter-mediaries (i.e., debt collectors, debt counselors or mort-gage modification companies). The CFPA and stateenforcement agencies to use registration systems to help weed out bad actors.
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the birth of a new agency continued from page 3
Proposal Purpose Authorities and Benefits
9. A wide variety of tools to enable it to perform its func-tions effectively:� Research and data� Complaints� Financial education� Community affairs
� Research and data: Information used to improve regula-tions, promote compliance and encourage communitydevelopment.
� Complaints: Responsible for collecting and tracking com-plaints about consumer financial services and facilitatingcomplaint resolution with respect to federally-supervisedinstitutions. States retain primary responsibility for track-ing and facilitating resolution of complaints againstother institutions.
� Financial education: Streamline existing financial litera-cy, educate consumers about financial matters, improvetheir ability to manage their own financial affairs andmake their own judgments about the appropriateness ofcertain financial products.
� Community affairs: Promote community developmentinvestment, fair and impartial access to credit.
Engage in a wide variety of activities to help financial insti-tutions, community-based organizations, government enti-ties and the public understand and address financial serv-ices issues that affect low- and middle-income peopleacross various geographic regions.
10. Improve incentives for compliance by restricting orbanning mandatory arbitration clauses.
Gather information and study mandatory arbitration clausesin consumer financial services and products contracts todetermine to what extent, and in what contexts, they pro-mote fair adjudication and effective redress. If CFPA deter-mines that mandatory arbitration fails to achieve thesegoals, establish conditions for fair arbitration, or, if neces-sary, ban mandatory arbitration clauses in particular con-texts, such as mortgage loans.
Authority to restrict or ban mandatory arbitration clauses,since consumers often waive their rights to trial when sign-ing form contracts in taking out a loan, and that a privateparty dependent on large firms for their business willdecide the case without offering the right to appeal or apublic review of decisions.
11. The Federal Trade Commission (FTC) given better toolsto protect consumers.
FTC retains authority for dealing with fraud and sale of serv-ices like advance fee loans, credit repair, debt negotiationand foreclosure rescue/loan modification fraud.
CFPA authority is in coordination with FTC, with FTCremaining the lead federal consumer protection agency onmatters of data security. Front-end privacy protection onfinancial issues moved to the CFPA.11
DisclosuresThe Plan suggests a “proactive” approachto consumer disclosures, with an empha-sis on transparency, consisting of threedimensions:
1. Make mandatory disclosure formsclear, simple and concise, and testthem regularly.2. Require that disclosures and othercommunications with consumers bereasonable.3. Use technology to make disclosuresdynamic and relevant to the individualconsumer.
The CFPA would be authorized torequire that all disclosures and othercommunications with consumers bereasonable, balanced in their presenta-tion of benefits and clear and conspic-uous in their identification of costs,penalties and risks. Consequently, theplan calls for all mandatory disclosureforms to be clear, simple and concise.(The CFPA would determine which risksand costs should be highlighted.) Theplan also recommends that the CFPAestablish standards and procedures fortesting disclosures (including immunityfrom liability) for providers of con-sumer financial products and services.A reasonable communication wouldbalance the presentation of risks andbenefits and have a clear and conspic-uous description of significant productcosts and risks. This standard wouldapply to communications with cus-
tomers, marketing materials, and allmandatory disclosures.
The CFPA would be authorized toimplement a process under which aprovider, “acting reasonably and in goodfaith,” could obtain the equivalent of a“no-action” letter for disclosures and othercommunications for new products. Forexample, the CFPA could adopt a proce-dure under which aprovider petitions theCFPA for a determinationthat its product’s riskswere adequately disclosedby the mandatory modeldisclosure or marketingmaterials. The CFPA couldapprove use of themandatory model or mar-keting materials, or provide a waiver,admissible in court to defend against aclaim, for varying the model disclosure.Violations would be subject only to admin-istrative action, rather than civil liability.
Finally, the plan recommends utiliz-ing technology to improve disclosures,such as requiring Internet (online) cal-culators to compare the overall cost ofa mortgage. The CFPA is expected alsoto promote adoption of innovations inpoint-of-sale technology (i.e., allowingconsumers who use a credit card tochoose a payment plan for the pur-chase).
SimplicityThe proposal recommends that theCFPA be authorized to define standards
for “plain vanilla” products, such as“standardized” fixed term mortgageswithout prepayment penalties andrequire financial institutions to offersuch “plain vanilla” products alongsidethe institution’s other products. Suchstandards are to be “simpler and havestraightforward pricing,” and theseproducts are to be disclosed “promi-
nently, alongside what-ever other lawful prod-ucts” a provider choosesto offer.
Higher costloansThe CFPA would assumeresponsibility for theFederal Reserve Board
regulations that impose extra protec-tions and higher penalties on alterna-tive or higher cost loans. For instance,the CFPA could be authorized to addother mortgage types to the class ofproducts that receive additional scruti-ny, leaving only products which meetthe “plain vanilla” standards in the lessscrutinized class. And the CFPA wouldbe empowered to impose a strongwarning label on alternative products,require applicants to fill out a financialexperience questionnaire, or mandatethat providers obtain a written opt-outto “plain vanilla” products.
A new fairness doctrineThe CFPA would have the authority toregulate unfair and deceptive acts or
practices for all credit, savings andpayment products. The proposal alsocalls for the CFPA to have the author-ity to address overly complex finan-cial contracts. Perhaps this should becalled the “New Fairness Doctrine.” Itconsists of the following threeauthorities, in which the CFPA isauthorized to:
1. Regulate unfair, deceptive or abusiveacts or practices.2. Impose empirically justified andappropriately tailored duties of care onfinancial intermediaries.3. Apply consistent regulation to similarproducts.
The CFPA could ban certain practices,such as prepayment penalties, for cer-tain types of contracts or payments tomortgage originators, including yieldspread premiums, if disclosures werefound to be an inadequate protection.The CFPA could also adopt a “life ofloan” approach to mandate consumerprotections through the servicing andloss mitigation stages of the loan.Indeed, the plan even suggests that theCFPA could consider requiring mortgageoriginators to receive a portion of theircompensation over time, contingent onloan performance, rather than in a lumpsum at the time of origination.
There are recommendations in theplan to grant CFPA the authority toimpose “duties of care” on financialintermediaries (i.e., a duty of ‘best exe-
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cution’ on mortgage brokers withrespect to available mortgage loantypes and pricing). The proposal alsocalls for CFPA to apply consistent regu-lation to similar products, taking intoconsideration “consumer perceptions”of such products.
Community ReinvestmentAct (CRA) and accessAs described in the above-outlined table,a key feature of the CFPA would be theadministration of the CRA, and the planrecommends that the CFPA should havesole authority to evaluate financial insti-tutions for CRA compliance. This is inkeeping with the claim that a criticalpart of the CFPA’s mission is to promoteaccess to financial services, especiallyhouseholds and communities that tradi-tionally have had limited access.
The CFPA, therefore, would nowdetermine if a financial institution hada record of meeting the lending, invest-ment and services needs of its commu-nity under the CRA, and in connectionwith the approval of a merger applica-tion by the institution’s prudentialsupervisor. Additionally, the plan callsfor the CFPA to maintain a fair lendingunit with attorneys, compliance spe-cialists, economists and statisticians;and, importantly, it is to have primaryfair lending jurisdiction over federally-supervised institutions and concurrentauthority with the states over otherinstitutions. To promote fair lending,the CFPA would have the authority tocollect data on mortgage and smallbusiness lending, including expandingthe required data to be reported underHMDA. Critical new fields would beadded to HMDA data, such as a univer-sal loan identifier that permits tyingHMDA data to property databases andproprietary loan performance databas-es, or a flag for loans originated bymortgage brokers, or informationabout the type of interest rate (i.e.,fixed vs. variable).
Reinforcing consumerprotectionBy creating the CFPA, the ObamaAdministration hopes to bring newmeans to bear on consumer protec-tion, allowing it broad authority toimplement its initiatives through vari-ous enforcement mechanisms. Thereare five principles that guide its forma-tion: transparency, simplicity, fairness,accountability and access.12 To accom-plish these principles, consumer pro-tection mandates will be transferred tothe CFPA from the Comptroller of theCurrency (OCC), Federal DepositInsurance Corporation (FDIC), Board ofGovernors of the Federal ReserveSystem (FRB), Office of ThriftSupervision (OTS), Federal TradeCommission (FTC), and the NationalCredit Union Administration (NCUA).The regulations impacted by the CFPA’snew authorities will include the EqualCredit Opportunity Act (ECOA), FairCredit Reporting Act (FCRA) (except sec-tions 615(e), 624, and 628), AlternativeMortgage Transaction Parity Act
(AMTPA), Electronic Funds Transfer Act(EFTA), Fair Debt Collection PracticesAct (FDCPA), Federal Deposit InsuranceAct (FDIA) (subsections 43[c] through[f]), the Gramm-Leach-Bliley Act (GLBA)(sections 502 through 509), HomeMortgage Disclosure Act (HMDA),Community Reinvestment Act (CRA),Real Estate Settlement Procedures Act(RESPA), Secure and Fair Enforcementfor Mortgage Licensing Act (SAFE Act),Truth-in-Lending Act (TILA), and theTruth-in-Savings Act (TISA). Given suchbroad and sweeping responsibilitiesand authorities, the new ConsumerFinancial Protection Agency will bringabout new modalities of regulatoryguidance and enforcement methodolo-gies, fundamentally altering the finan-cial products and services industries.
Jonathan Foxx, former chief complianceofficer for two of the country’s top pub-licly-traded residential mortgage loanoriginators, is the president and manag-ing director of Lenders ComplianceGroup, a mortgage risk managementfirm devoted to providing regulatorycompliance advice and counsel to themortgage industry. He may be contactedat (516) 442-3456 or by e-mail [email protected].
For more information onauthor Jonathan Foxx, visitLenders Compliance Group
on the Web at www.lender-scompliancegroup.com.
Footnotes1—Consumer Financial ProtectionAgency Act of 2009, House Bill 3126.2—U.S. Department of Treasury, June17, 2009, TG-175: President Obama toAnnounce Comprehensive Plan forRegulatory Reform.3—Examples of substantial revisions, toname but two, include altering or elimi-nating the so-called “functional regula-tion” regime of the Gramm-Leach-BlileyAct (1999) and the interstate branchingapproval process of the Riegle-NealInterstate Banking and BranchingEfficiency Act (1994).4—The discussion provided herein isbased on a review of the FinancialRegulatory Reform: A New Foundation:Rebuilding Financial Supervision andRegulation, issued by the U.S.Department of Treasury on June 17,2009, and updated on August 11, 2009.5—Ibid. Pg. 55.6—Ibid. Pg. 56.7—Ibid. Pp. 57-63.8—Prudential regulation is regulationof deposit-taking institutions and super-vision of the conduct of these institu-tions and set-down requirements thatlimit their risk-taking. The aim of pru-dential regulation is to ensure the safe-ty of depositors’ funds and keep the sta-bility of the financial system.9—In a departure from the currentframework of federal bank charter pre-emption of state laws, the plan recom-mends that federally-chartered institu-tions be subject to nondiscriminatorystate consumer protection and civil
rights laws to the same extent as otherfinancial institutions. States would havethe ability to enforce these state lawsagainst federally-chartered institutionsas well as state-chartered institutionsand the ability to enforce the regula-tions of the CFPA against federally-char-tered institutions. 10—To address the need for coordinat-ed agency oversight and identificationof emerging risks, the Plan would createa Financial Services Oversight Council(Council). The Secretary of Treasurywould serve as the Council’s Chairman,and membership would include repre-sentatives of a many agencies, includingthe SEC, the Commodity Futures TradingCommission (CFTC), the Federal HousingFinance Agency (FHFA), and the new fed-
eral banking and consumer protectionagencies proposed in the plan itself.11—It is asserted that the FTC has aclear mission to protect consumers, butgenerally lacks jurisdiction over thebanking sector and has limited toolsand resources to promote robust com-pliance of nonbank institutions. Toquote the plan itself, “mortgage compa-nies not owned by banks fall into a reg-ulatory ‘no man’s land’ where no regu-lator exercises leadership and stateattorneys general are left to try to fillthe gap.” Op. Cit. Note 3, Pg. 56.12—“Strengthening Consumer Protection,”a synopsis of the five principles, is availableon the FinancialStability.gov Web site. It isone of several additional resources to theplan.
the secondary market overview continued from page 19
into a $40 or a $100 million loss. Froma bank’s perspective, if an asset islower in value than previously indicat-ed, this turns into a loss when the val-uation changes. This played out allover the country, and basically, thewhole industry collapsed.
Many changes came as a result of theS&L crisis. For one thing, appraisers werenow required to be licensed for the firsttime. Also, the Financial AccountingStandards Board (FASB) adopted “Mark-to-Market” rules. Without going into the tech-nical aspects, these rules basically discour-aged financial institutions from puttingmortgages in their portfolio. The way toavoid future risk in valuation was to sellthe loans. And that is where it started. Staytuned for the conclusion as to what hap-pened and some clues as to what will hap-pen in the future and how it may affectyour business.
In the meantime, let’s address morecurrent events. We have several factorsstill impacting the markets and they areconflicting. For one thing, the recoveryis starting to take shape, and as long asthere is positive economic news, thiswill put upward pressure on rates. Alsoexerting upward pressure on rates is the
tremendous amount of money the gov-ernment is borrowing. On the otherside of the coin, the credit markets havenot recovered. Though the feds areslowing their purchases of Treasuries,they will continue to purchase mort-gages. This will continue to keep thespread between Treasuries and mort-gages more narrow than they should beconsidering the credit crisis. Withunemployment hovering close to 10percent and tons of foreclosures stillhitting the real estate markets, the gov-ernment cannot afford for rates toincrease too fast and thereby jeopardiz-ing any recovery on the horizon. Theseconflicting forces are expected to keepvolatility in the markets high for theforeseeable future, with more risk tothe upside than down. That riskchanges only if we get significant pooreconomic news in the next 30 days …
Dave Hershman is an author for the mort-gage industry with eight books and sever-al hundred articles to his credit. He is alsohead of OriginationPro Mortgage Schooland a top industry speaker. He may bereached by phone at (800) 581-5678 or e-mail [email protected].
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news flash continued from page 22
NAHB report: Remodelingmarket activity buildsmomentum
Residential remodelingshowed modest gainsduring the second quar-ter of 2009 with increas-
es in all indicators, according to therecently released National Association ofHome Builders (NAHB) RemodelingMarket Index (RMI). The current marketconditions measure grew to 38.1 from34.5 in the first quarter. Future expecta-tions rose to 34.2 from 30 in the previ-ous quarter. The RMI measures remodel-er perceptions of market demand forcurrent and future residential remodel-ing projects. Any number over 50 indi-cates that the majority of remodelersview market conditions as improving.The RMI has been running below 50since the final quarter of 2005, followingdecreasing remodeling expendituressince that time.
“With more calls from home ownersand more projects under way, remodel-ers are seeing better activity in theirbusinesses,” said NAHB RemodelersChairman Greg Miedema, a remodelerfrom Tucson, Ariz. “Although remodel-ing jobs are still harder to find, home-owners are showing more interest inremodeling spending.”
Indicators for current remodeling
market conditions improved across allregions: 36.9 in the Northeast (from 35.7in the first quarter), 38.3 in the Midwest(from 36.1), 39.7 in the South (from 34.3),and 40.5 in the West (from 32.8). A signif-icant portion of the market improvementcame from the measure for major addi-tions and alterations (jobs worth $25,000or more) with a leap to 38.2 (from 32.7).Smaller growth was observed in the indi-cators for minor additions and alterna-tions (less than $25,000) at 41.5 (up from39.1), and maintenance and repair at33.6 (grew from 30.4).
All measures for future expectationsin the remodeling market increasedsignificantly. Remodelers reportedgrowth in calls for bids at 38.8 (from34.2 in the first quarter). The backlogof remodeling jobs jumped to 34.4(from 28.5). And appointments for pro-posals climbed to 40.3 (from 35.3).
“While remodelers remain cautious,they report business is looking a littlebetter after several challenging quar-ters,” said NAHB Chief Economist DavidCrowe. “Conditions for this quarter havereturned to nearly the levels of this timelast year. The uptick in the expectationscomponent suggests this trend will con-tinue as the entire housing marketbegins its recovery.”For more information, visitwww.nahb.org/remodel.
MBA survey: Q2 2009commercial/multifamilyoriginations up from Q1
Second quarter 2009commercial and multi-family mortgage loanoriginations were 50
percent higher than during the firstquarter of 2009, a quarter with verylittle activity, but remained 54 percentlower than during the same period lastyear, according to the MortgageBankers Association’s (MBA) QuarterlySurvey of Commercial/MultifamilyMortgage Bankers Originations.
“Commercial and multifamilymortgage originations continue tofeel the effects of the recession andthe credit crunch, with volumes 54percent below last year’s second quar-ter, and 83 percent below the peakseen in the second quarter of 2007,”said Jamie Woodwell, MBA’s vice pres-ident of commercial real estateresearch. “A 50 percent increase involumes between the first and secondquarter of this year follows a tradi-tional seasonal increase in the secondquarter. It also likely signals that com-mercial and multifamily mortgageoriginations bottomed in the firstquarter of 2009.”
The 54 percent overall decrease incommercial/multifamily lending activi-ty during the second quarter was drivenby decreases in originations for all prop-erty types. When compared to the sec-ond quarter of 2008, the decreaseincluded an 81 percent decrease in
loans for office properties, a 77 percentdecrease in loans for hotel properties, a70 percent decrease in loans for health-care properties, a 65 percent decreasein loans for industrial properties, a 51percent decrease in retail propertyloans and a 21 percent decrease in mul-tifamily property loans.
Among investor types, commercialbank portfolios saw a decrease of 83percent compared to last year’s secondquarter. There was also a 57 percentdecrease in loans for conduits for com-mercial mortgage-backed securities(CMBS), a 54 percent decrease in loansfor life insurance companies, and thedollar volume of loans for government-sponsored enterprises (or GSEs—FannieMae and Freddie Mac) saw a slightincrease of two percent.
Second quarter 2009 mortgageoriginations were 50 percent higherthan originations in the first quarter.Due to the low base of originations inthe first quarter, the percentageincreases seen in the second quarterare quite dramatic.
Among investor types, loans for con-duits for CMBS saw an increase in loanvolume of 471 percent compared to thefirst quarter, loans for life insurancecompanies saw an increase in loan vol-ume of 46 percent compared to firstquarter 2009, GSEs’ volume increasedby 39 percent during the same timespan, and originations for commercialbank portfolios increased six percentfrom the first quarter to second quarter2009.
Date Indicator Summary
A reading of “1” has the lowestimpact on rates, while “10” has thehighest. Although carefully verified,data are not guaranteed as to accura-cy or completeness. BestInfo Inc.cannot be held responsible for anydirect or incidental loss or liabilityincurred by applying any of the infor-mation or opinions in this feature.
Provided exclusively to NationalMortgage Professional Magazine byDavid Beadle, president of BestInfoInc., the BestRates cell, pager and email rate alert service for mortgageindustry subscribers. Send your inquiryto [email protected] forfull details on a free two-week trialsubscription.
September 16August Consumer PricesRate Impact
September 24August ExistingHome SalesRate Impact
September 24Weekly Jobless ClaimsRate Impact
September 29September ConsumerConfidenceRate Impact
The argument has been that “inflation is not a problem” at the present time. This is because the Federal Reserve his-torically has focused upon the Consumer Price Index (CPI) or the Personal Consumption Expenditures (PCE) index asthe “gold standard” for determining the level of price inflation. But, the true “early warning” system of what lies aheadmay be found in commodity prices. When they move into a bubble phase, there is likely to be trouble ahead. Currently,many economists are very worried about the stubbornly high level of oil prices in relationship to weakness indemand. And they are also concerned about the fact gold has remained in the area above $900 for a considerableperiod of time. While these commodities may be reacting to weakness in the dollar, that is also a major risk factor toa continuation of lower inflation levels.
The real estate sector has been on the rebound in recent months, with one-third of transactions related to the $8,000federal tax incentive to first-time buyers. It is set to expire on Nov. 30, which is creating a powerful impetus to hav-ing a signed contract in hand by the end of this month. In fact, this could turn into a “Cash for Clunkers-style” fren-zy as the deadline approaches. It has also been noted that the main sales push is at home prices below $250,000.The “move-up” market is reportedly very weak and jumbo loans remain hard to find at attractive rates. Therefore,when one looks at the home sales statistics, they have to be viewed in terms of this bifurcated marketplace. In otherwords, considerable additional progress will be required before the housing market can be declared to have recov-ered from its deep slump. New home sales will be released on Friday, Sept. 25.
The trend in new claims for state unemployment benefits has been relatively steady in the area near 566,000 for thepast month. This is still well above the peak level of 400,000 seen in the previous recession of 2001. As for contin-uing claims, they have now declined to six million from what had been just shy of seven million earlier in the sum-mer. While some optimists have said this shows the employment situation is improving, the skeptics say it is mere-ly evidence that many folks have been losing their benefits without finding a new job. The continuing claims figurefollowed by most economists is the one which tracks payments for the standard 26-week period. Congress hasextended benefits due to the length of the recession. But even those receiving the extra money are seeing their pay-ments run out, which could lead to more hardship as the current year comes to an end.
A key barometer of attitudes about employment is found in the monthly consumer confidence data, because the sur-veys ask questions about whether jobs are hard to find or easy to obtain. While there was a small improvement inthe August data, employers are remaining cautious. For one thing, some employers sought to avoid outright layoffsby cutting back on hours for existing workers. So, the first order of business in a recovery phase will be to restorethose workers to true “full time” status. This may delay the hiring of new employees beyond what was seen in pastrecessions. Furthermore, there has been a strong trend toward engaging the services of temporary workers, just incase a double-dip recession takes place. These trends may further delay a drop in the national unemployment rateuntil any recovery has developed a full head of steam.
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FRUSTRATEDBy other Hard Money Lenders?
ACC Mortgage can help. We are the bank. We are the decision maker.
ACC Mortgage can help you and your company close more loans.
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Submit your scenarios at WeApproveLoans.comor call 877-353-2233.
Compared to the first quarter of2009, second quarter originations forhealthcare properties saw a 173 per-cent increase. There was a 129 per-cent increase for hotel properties, a93 percent increase for retail proper-ties, a 73 percent increase for multi-family properties, a 28 percentdecrease for office properties and a46 percent decrease for industrialproperties.For more information, visit www.mort-gagebankers.org.
FDIC advances in Legacy Loans Program testing
The Federal DepositInsurance Corporation(FDIC) is taking thenext step in the
development of the Legacy LoansProgram (LLP). The LLP is part of thePublic-Private Investment Programannounced in March by the Secretary ofthe Treasury, the Federal Reserve, andthe FDIC, and was designed to helpbanks remove troubled loans andother assets from their balance sheetsso that banks could raise new capitaland be better-positioned to providelending to further the recovery of theU.S. economy.
In June, the FDIC indicated that itwould continue to develop this pro-gram by testing the LLP’s fundingmechanism through the sale ofreceivership assets. This step will allow
the FDIC to be ready to offer the LLP toopen banks as needed. The first testusing the LLP funding mechanism com-menced in late July. In the transactionto be offered, the receivership willtransfer a portfolio of residential mort-gage loans on a servicing released basisto a limited liability company (LLC) inexchange for an ownership interest inthe LLC. The LLC also will sell an equityinterest to an accredited investor, whowill be responsible for managing theportfolio of mortgage loans. Loan serv-icing must conform to either the HomeAffordable Modification Program(HAMP) guidelines or FDIC’s loan modi-fication program.
Accredited investors will be offeredan equity interest in the LLC under twodifferent options. The first option is onan all cash basis, which is how the FDIChas recently sold receivership assets,with an equity split of 80 percent (FDIC)and 20 percent (accredited investor).The second option is a sale with lever-age, under which the equity split will be50 percent (FDIC) and 50 percent(accredited investor).
The funding mechanism is financingoffered by the receivership to the LLCusing an amortizing note that is guaran-teed by the FDIC. Financing will beoffered with leverage of either four toone or six to one, depending upon cer-tain elections made in the bid submit-ted by the private investor. If the bidincorporates the six to one leveragealternative, then performance of the
underlying assets will be subject to cer-tain performance thresholds includingdelinquency status, loss severities, andprincipal repayments. If any one of theperformance thresholds is triggeredover the life of the note, then all of theprincipal cash flows that would havebeen distributed to the equity investorswould be applied instead to the reduc-tion of the note until the balance iszero. The performance thresholds willnot apply if the bid is based on thelower leverage option.
The FDIC will be protected againstlosses on the note guarantee by the lim-its on the amount of leverage (both interms of a maximum ratio and dollaramount), the mortgage loans collateral-izing the guarantee, and the guaranteefee. The FDIC will analyze the results ofthis sale to see how the LLP can best fur-ther the removal of troubled assetsfrom bank balance sheets, and in turnspur lending to further support thecredit needs of the economy.For more information, visit www.fdic.gov.
Home prices climb with1.2 percent rise
Integrated Asset Services LLC (IAS), adefault management and residentialcollateral valuations company, hasreleased its IAS360 House Price Index(HPI). Based upon the timeliest andmost granular data available in theindustry, the index for national house
prices moved ahead another 1.2 per-cent in June.
The IAS360 House Price Index is acomprehensive housing index trackingmonthly change in the median salesprice of detached single-family resi-dences across the U.S. The index, basedon all arms-length transactions, tracksdata of 15,000 neighborhoods, that rollup to report on the changes in 360counties, nine census divisions, fourregions and the nation overall. TheIAS360 House Price Index is deliveredon a monthly basis.
With June’s gains—the fourth con-secutive positive month—the U.S. hous-ing benchmark advanced 2.7 percentfor full second quarter 2009, virtuallyoffsetting the 2.6 percent decline acrossthe first three months of the year. TheIAS360 HPI is still down 16.7 percentfrom its high in June 2007.
Like May, all four U.S. census regionsreported positive numbers for themonth and in like order. For June, thenortheast was up 1.9 percent, the mid-west 1.8 percent, the south 1.2 percent,and the west 0.4 percent. While valuesshowed improvement in neighbor-hoods across the country, most upperend counties remained mired in a deepslump. In June, price declines contin-ued to accelerate for Putnam County,N.Y.; Morris County, N.J. and HowardCounty, Md.
“I think that a lot of this valuation
continued on page 30
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Dear Brian:I don’t mean to sound too sad here, butI am struggling. For years, I did reallywell, and then, like everyone else, mybusiness just sort of disappeared. It hastaken me many months just to try keep-ing my head above water.But I have to confess … my heart andmind are really off somewhere else mostof the time. I am not sure if this is theright place to ask you, but how do youstay positive even during a meltdown?Thanks.Anonymous, Maine
Dear Anonymous:I would suggest carefully reading thisarticle. In fact, you probably shouldread it several times and maybe shareit with your office and staff. The bigdifference between a successful per-son and an unsuccessful one is howthey deal with failure and defeat. Ihave told you many times that one ofmy strongest attributes is that I ampersistent. See, I don’t ever feeldefeated. Sure, I fail and not every-
Are You Now Mentally “Melted Down?”
thing goes as planned all the time.Sure, I will work hours, days andweeks, on a campaign and not get theresults I expected. That’s a terriblefeeling. By the way, Thomas Edisontried hundreds of experiments and hesaid the only reason he succeeded wasbecause he ran out of things that did-n’t work!
But, what you do next is the criticalthing! Do you say, “Boy, that was a lot ofwork and I spent a lot of money withno result. Let’s never try that again.” Or,do you say, “That didn’t work, but yet Iknow others succeed with that strategy,so let me go back and dissect this to seewhat went wrong and try again.” Thequestions you ask yourself and theresponses you give back are criticallyimportant.
I personally have spent 15 yearsdoing poorly to average and only thelast eight years earning high six toseven figures each year. Sure, it is mucheasier to give up, but that is not wherethe money is. The real money and suc-cess can be found by going deeper and
realizing that every failure, when prop-erly reviewed, is just another bump onthe road to success and what you wantto accomplish.
Let me make it even more basic.Have you ever gone for a bike ride? Wellthat is a prime example of what I amtrying to tell you here! If everyone whofell off their bike when they first startedriding quit riding bikes, then we wouldhave zero bike riders!
But, there is one more big lessonhere … It is the idea of limited thinking… the idea of focusing on all of thenegative aspects of this meltdown…the idea of thinking too much aboutyour competition. Of dwelling on all ofthe unethical things they may be doingto take away “your business,” as if thereis such a thing as “your business.”
It reminds me of the InsidersSeminar II we hosted a few years ago inChicago. One of my fellow “gurus” whois a great marketer decided to come tomy seminar to learn. Again … anotherlesson. Although he is a very successfulmarketing guru, he is still learning andfrom a competitor for that matter.
Or, am I really a “competitor?” I don’tsee us as “competitors” and there is cer-tainly more than one way to succeed inany field. But the feedback I got when heleft hurt and depressed me. It seemedthat everyone in attendance, almostwithout exception, were upset that heshowed up.
The problem … limited thinking.I was personally thrilled that he came
and wanted to learn, as it seemed like agreat compliment to me. But, everyonein the audience felt that it was a threat.
Here is what I was thinking, and heprobably was too.
I am not right for everyone … thereare 150,000-plus originators out thereand I can only handle 5,000 of themsuccessfully.
That is considered “abundant think-ing.” It’s the mentality when onethinks: “I have no competition.” Itreminds me of the question I am con-tinually asked by originators who arelooking into becoming a member ofour systems at www.loanofficerformu-la.com/join. Their question is usually,“How many others in my area haveyour system?” My answer is always:“Who cares?”
Let’s suppose there are 500 transac-tions that occur in your market eachmonth. How many could you possiblyhandle? Maybe 10, maybe 20, maybeeven 30? That leaves more than 470 foryour competition.
So stop the idea of “limited think-ing” and never give up!
Newsflash … There is business beingdone right now in your town … now goahead and get your share of it!
Dedicated to having buyers chas-ing you …
If you have a question you would likeBrian to answer in this column,please send an e-mail with “AskBrian Question” in the subject line [email protected].
Brian Sacks is CEO of www.loanofficerfor-mula.com. He has been an industry expertfor more than 25 years, closing 6,000-plusloans totaling $1 billion. You can readBrian’s 32-page special report entitled“The Death of Mortgage Origination as WeKnow It” and “The 10 Things You Must DoNow to Survive and Thrive” atwww.loanofficerformula.com/mp. Thisreport sells for $97 and has been down-loaded by more than 9,200 originatorsand company owners, but is free for alimited time for readers of NationalMortgage Professional Magazine. Hemay be reached by e-mail [email protected].
news flash continued from page 29
disparity reflects the immediateeffects of Washington‘s housing rescueplan,” said Dave McCarthy, presidentand CEO of Integrated Asset Services.“Everything so far has helped spursales of lower-priced homes, which, atleast in the short run, is producingwinners and losers.”
Among the nation’s 10 largest met-ropolitan statistical areas (MSAs)reported, only the Las Vegas housingmarket continued to slide with a dropof another 1.8 percent for the month.Boston and Chicago followed solid Maynumbers with increases of 2.9 percentand 1.3 percent, respectively, as didthe big California MSAs, with LosAngeles gaining 2.2 percent, SanFrancisco up 1.7 percent and San Diegoat 1.4 percent.
“The improvement in the more tra-ditional neighborhoods is encouraging,
but it’s easy to think there may be trou-ble lurking further up the food chain,”said McCarthy. For more information, visit www.iasreo.com.
Your turnNational Mortgage Professional Magazineinvites you to submit any information onregulatory changes, legislative updates,human interest stories or any othernewsworthy items pertaining to themortgage industry to the attention of:
NMP News Flash columnPhone #: (516) 409-5555
E-mail:[email protected]
Note: Submissions sent via e-mail arepreferred. The deadline for submissionsis the 1st of the month prior to the tar-get issue.
We are seeking nominations from our readers for the National MortgageProfessional Magazine’s “40 Under 40” feature, slated to appear in ourNovember 2009 edition.
Who qualifies: Anyone who is under the age of 40 and has had a majorimpact on the industry. This could be through innovation, association par-ticipation, sales force automation, community activism, management tech-niques, technology or any other significant method that has influenced ourindustry. We would need a short, three-line bio on you, along with a colorphoto and company contact info to complete the profile.
To be considered for the 40 Under 40 feature, visitNMPMag.com/submit40under40 to submit your nominations.
National Mortgage Professional Magazine Presents ... The 40 Under 40
The 40 Most Influential MortgageProfessionals Under 40
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Platinum Credit Services, Inc. will train and educate your staff of mortgage professionals on how to use and maximize our score enhancing software.
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BB&T assumes alldeposits of Colonial Bank
Colonial Bank ofMontgomery, Ala.,has been closed bythe Alabama State
Banking Department, which appointedthe Federal Deposit InsuranceCorporation (FDIC) as receiver. To pro-tect the depositors, the FDIC enteredinto a purchase and assumption agree-ment with Branch Banking and Trust(BB&T) of Winston-Salem, N.C., toassume all of the deposits of ColonialBank.
Colonial Bank’s 346 branches inAlabama, Florida, Georgia, Nevada andTexas have reopened and are operatingas branches of BB&T. Depositors ofColonial Bank will automaticallybecome depositors of BB&T. Depositswill continue to be insured by the FDIC.Customers should continue to use theirexisting branches until BB&T can fullyintegrate the deposit records ofColonial Bank.
As of June 30, 2009, Colonial Bankhad total assets of $25 billion and totaldeposits of approximately $20 billion.BB&T will purchase approximately $22billion in assets of Colonial Bank. TheFDIC will retain the remaining assets forlater disposition.
The FDIC and BB&T entered into aloss-share transaction on approximate-ly $15 billion of Colonial Bank’s assets.BB&T will share in the losses on theasset pools covered under the loss-share agreement. The loss-sharingarrangement is projected to maximizereturns on the assets covered by keep-ing them in the private sector. Theagreement is also expected to minimizethe disruptions for loan customers.
The FDIC estimates that the cost tothe Deposit Insurance Fund (DIF) will be$2.8 billion. BB&T’s acquisition of allthe deposits was the “least costly” reso-lution for the FDIC’s DIF compared toalternatives. Colonial Bank is the 74thFDIC-insured institution to fail in thenation in 2009.
“The past 18 months have been avery trying period in the financial serv-ices arena, but the FDIC and its staffhave performed as Congress envisionedwhen it created the corporation morethan 75 years ago,” said FDIC ChairmanSheila C. Bair. “After protecting almost$300 billion in deposits since the cur-rent financial crisis began, the FDIC’s
guarantee is as certain as ever. Ourindustry funded reserves have coveredall losses to date. In fact, losses fromtoday’s failures are lower than hadbeen projected. I commend our stafffor their excellent work in assuringonce again a smooth transition forbank customers with these resolutions.The FDIC continues to stand by thenation’s insured deposits with the fullfaith and credit of the U.S. government.No depositor has ever lost a penny oftheir insured deposits.”For more information, visit www.bbt.com.
Kroll Factual Data formspartnership with PrimeAlliance Solutions
Kroll Factual Data, aprovider of businessinformation solu-
tions to financial organizations,announced that it has partnered withTukwila, Wash.-based, Prime AllianceSolutions Inc., a provider of iMortgagesolutions for credit unions, to bring anintegrated offering of Kroll FactualData’s credit and flood technology serv-ices through Prime Alliance Solutions’loan origination software (LOS) plat-form.
The official launch is slated forSeptember and will be availablethrough Prime Alliance Solutions’ RetailLending Center and Loan FulfillmentCenter platforms to the 1,600 creditunions it serves nationwide. UtilizingKroll Factual Data’s flood and credittechnology, credit unions will experi-ence a seamless process with reducedcosts, while benefiting from a moreuser-friendly credit report format.
“Kroll Factual Data’s stability andlongevity in the industry made them aperfect preferred partner for us,” saidJoe Brancucci, chairman and CEO ofPrime Alliance Solutions Inc. “Creatingrelationships such as this one with KrollFactual Data provides our credit unionswith additional mortgage fraud protec-tion without the need to manage addi-tional vendor relationships.”
Credit unions can directly orderflood and credit reports from KrollFactual Data through Prime AllianceSolutions LOS. The convenience of nothaving to leave their system saves bothtime and money.
“The partnership with Prime
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Tommy: When performing reviews on appraisals, do you recommend an automatedvaluation model (AVM)?
Lately, there is a lot of press about large mortgage banks that used AVMs to de-termine property values for reducing Home Equity Lines of Credit (HELOCs)and now these financial institutions are faced with class-action lawsuits based onincorrect values as part of the allegations. One such suit, Michell Kimball v. Wash-ington Mutual Bank alleges that the bank used faulty AVMs to create a pretextfor its credit limit reduction and account suspension. After Ms. Kimball learnedthat her HELOC was frozen, she called customer service and was informed anAVM showed the property value had significantly declined. In disbelief, she chal-lenged the bank. She was required to use the bank’s “preferred” appraiser and a fullresidential appraisal was performed and the results of the appraisal valued theproperty was worth 1.5 times the AVM’s estimate. Mark one up for the appraiserand the consumer.
There are several other lawsuits in the works with similar type of claims wherefaulty AVMs were used. The adverse affects of the AVM product and the impactit is having on the consumer is beginning to surface, and I expect there will bemore outcry from industry leaders as consumer complaints surface.
The Home Valuation Code of Conduct (HVCC) lists the AVM as a form ofquality control on appraisals during the 10 percent sampling of Section VI.The AVM is much more affordable than a Field Review Appraisal however, Ilearned during my year deployment in the Global War on Terrorism that mod-eled data used in intelligence was often skewed and incorrect. We found our-selves having to use human intelligence to validate information that laterdiscredited the data models. I see the AVM having the same type of effect as Isaw during the war. One must know its limitation and for the best results, havea human to verify the information. Yes … an appraiser. Use an appraiser to val-idate collateral. A Field Review Appraisal or a drive-by is what we use, and yesit costs more than an AVM, but it puts an eye on the target and fills the gapsin performing appraisal audits.
I believe there should be a balance in technology and the way it is applied inthe mortgage industry. However, the AVM product has its place, but shortcutsmay end up being the long way. In the mortgage fraud cases Quality MortgageServices have performed, AVMs were never used. An appraisal, whether a fullappraisal or a field review, was used because the appraiser is the subject matterexpert and places more credibility on a licensed professional. An AVM cannottestify in a court of law and will not hold up in court because of problematicflawed information.
I believe the AVM is probably a good product during pre-funding and un-derwriting as something to support a desk review. However, a Field ReviewAppraisal is my product of choice during post-closing quality control. But, Ihave also seen where a Field Review Appraisal or another appraisal was or-dered during underwriting. It is difficult to say which method, desk review orAVM, was used to provoke the underwriter to order another appraisal or FieldReview Appraisal. What I do know if you want stronger supporting evidence,an appraiser is required.
By Tommy A. Duncan
Sponsored by
Tommy A. Duncan is executive vice president of Quality Mortgage Services LLC.For answers to your QC and FHA questions, please contact Tommy at (615) 591-2528, ext. 124 or e-mail [email protected]. You may also visit QualityMortgage Services LLC on the Web at www.qualitymortgageservices.com.
heard on the street continued from page 31
Alliance Solutions Inc. allows creditunions to transfer risk and increaseprofitability, while offering productsthat are known for their safety andsoundness,” said Jeff Gentry, vice presi-dent of Kroll Factual Data. “KrollFactual Data has been in the businessfor 25 years and continues to forge syn-ergistic partnerships demonstrating ourstability in this volatile market.”For more information, visit www.kroll-factualdata.com or www.primealliances-olutions.com.
Lenders One sets production record forfirst half of 2009
Lenders One MortgageCooperative, a nation-al alliance of more
than 135 independent mortgage bankers,announced that it has experienced a recordlevel of originations during the first half of2009. Lenders One member companiesoriginated $21.2 billion in loans during thesecond quarter, which surpassed first quar-ter volume of $17.3 billion. Broken downregionally, new and existing members inthe western states originated $7.9 billion ofthe recent quarter’s total volume. Midwestlenders followed with $7.6 billion, and eastcoast member companies recorded $5.7billion in production.
“Heavy refinance volumes, coupledwith low interest rates and the dedica-tion of our members have all con-tributed to this continued success,” saidScott Stern, chief executive officer ofLenders One. “These factors were com-plimented by our collective buyingpower that creates revenue-enhancing,cost-saving and market-share expand-ing opportunities for all members.”
As the secondary market progressestoward recovery and investors begin torevisit mortgages as viable investments,the Federal Housing Administration (FHA)remains a strong part of the industry,accounting for 43 percent, or $9 billion,of Lenders One’s second quarter origina-tions. Conventional products made up 52percent, or $11 billion, with jumbo loansrounding out the remaining five percent.
Stern also attributes some of theproduction volume to the similarincrease seen in Lenders One member-ship. At mid-year, the cooperative hadalready attracted 21 new membersfrom all across the country, which is inline to compete with the record 42 totalmembers it on-boarded in 2008.
“By staying committed to consumerswith products to refinance and pur-chase homes, our members continue tobe leaders in their market,” Stern said.For more information, visit www.lender-sone.com.
Two firms join NRMLA’sWholesale Lender Program
The National ReverseMortgage LendersAssociation (NRMLA) has
announced that Live Well Financial Inc. ofRichmond, Va., and Generation MortgageCompany of Atlanta as charter members ofthe association’s new Wholesale LendersProgram. Launched in July, the WholesaleLenders Program provides information tolenders and brokers on delivering reversemortgages to reputable investors. OtherWholesale Lender Program participantsinclude Senior Lending Network, Bank ofAmerica Home Loans, Metlife Home Loansand Genworth Financial Home EquityAccess Inc.
“Live Well Financial is pleased to joinNRMLA’s Wholesale Lender Program asa charter member,” said Chris Palumbo,senior vice president and COO of LiveWell Financial. “We look forward topartnering with NRMLA and all of itsmembers to help the reverse mortgageindustry continue its impressivegrowth.”
Sherry Apanay, senior vice presidentof wholesale lending at GenerationMortgage Company, said, “GenerationMortgage is pleased to support NRMLAand our industry in this new endeavor.Wholesale lenders working together forthe good of the reverse mortgageindustry should make us all stronger.”For more information, visit www.nrm-laonline.org.
NexBank and TheFunding Source createNexBank Mortgage
Dallas-based NexBank,a banking and finan-
cial services company and commercialmortgage lender, has announced theestablishment of NexBank Mortgagethrough a partnership with The FundingSource, a residential mortgage opera-tion based in Dallas, Texas. NexBankMortgage, which offers several residentialloan programs, from traditional mort-gages and Veterans Affairs (VA) loans toreverse mortgages, operates several fieldoffices with seasoned loan counselors.The Funding Source also has a mortgagetechnology platform that allows con-sumers to simplify the mortgage applica-tion process online, while still receivingservice from local experts. This partner-ship allows NexBank greater gains ofscale in originating loans as it joins itscurrent commercial and wholesale mort-gage lending activity with the residentialmortgage operation.
“NexBank is honored to have theopportunity to build a single operatingalliance with The Funding Source andthe company’s founder, Tish Ashley,”said NexBank President and ChiefExecutive Officer Davis Deadman.“Together, we have the capability tooffer consumers outstanding knowl-edge of the local market, expertise incrafting custom loan decisions andassurance to provide mortgages ofnearly any amount.”
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1. Go to www.ruralhomeloan.com2. Pick a low fixed rate for your borrower3. Set closing date then schedule dinner and drinks!
“Innovative Rural Financing since 1993”Lending in TX, NM, and OK
to some charts that contain the resultsof Professor Mayer’s research.
During the real estate boom years of2003-2006, the index values went wayabove the historical average in marketslike San Diego, Los Angeles, Phoenix andMiami. During those boom years, it wasmuch more affordable to rent a homeversus owning a home. Now that houseprices and mortgage rates have declinedso much, the index values have broken
far below the historicalaverage. This means thatit is now much moreaffordable to own a homeversus renting a home inthose markets.
Number two:Housing is moreaffordable nowthan at anypoint in recentmemoryThe National Association ofRealtors (NAR) has a niftystatistic they publish calledthe Housing AffordabilityIndex (HAI). The HAI meas-ures whether or not a typi-cal family could qualify fora mortgage loan on a typi-cal home. A typical homeis defined as the nationalmedian-priced, existingsingle-family home as cal-
culated by NAR. The typical family isdefined as one earning the median fam-ily income as reported by the U.S. Bureauof the Census. The prevailing mortgageinterest rate is the effective rate on loansclosed on existing homes.
An affordability index value of 100means that a family making the medianincome has exactly enough to qualify foran 80 percent mortgage on a median-priced home. For example, the indexvalue of 107.6 in the year 2006 meant thata median-income family had 107.6 per-cent of the income necessary to qualify fora conventional loan covering 80 percentof the home values at that time. So far in2009, the index value has averagedaround 171.6. This means that a median-income family has 171.6 percent of theincome needed to qualify for a median-priced home. In other words, owning ahome today is a whopping 59.48 percentmore affordable than it was in 2006!
Once upon a time, the housing marketand economy at large was full ofeuphoria and excitement. The GreatHousing Boom (GHB) of 2003-2006 wasrumored to be different than any otherboom in the entire history of the world.House prices were never expected tocome down from their lofty levels. “Thistime is different,” said all wise peoplein Everyoneisaguruland. Well, we’ve allseen how THAT turned out …
So, let’s try it again …Once upon a time, the
housing market and econ-omy at large was full ofdistress and depression.The Great Housing Bust(GHB) of 2007-2009 wasrumored to be differentthan any other downturnin entire history of the uni-verse. House prices werenever expected to go upfrom their modest levels.“This time is different,”said all the wise people inEveryoneisaguruland. Iwonder how THAT willturn out?
The great investor SirJohn Templeton onceremarked:
The four most expen-sive words in the Englishlanguage are “this time isdifferent.”
I agree; and hopefully you will toowhen you look at these four reasonswhy house prices are poised to (gasp) goup at some point over the next fewyears.
Number one: It costs lessto own a house than itdoes to rent oneOne way to figure out whether housingis over or undervalued, is to comparewhat it costs to buy a home versus whatit costs to rent a home. In fact, ProfessorChris Mayer, a world-renowned econo-mist from Columbia University, has cre-ated a very simple method of doing justthat. His method, called STATA, uses aseries of calculations to compare thecost of renting a home versus owning ahome in a certain marketplace givencurrent house prices and mortgagerates. Visit my blog at www.gibranni-cholas.com or “Facebook me” for a link
Is This Time Different?
BY GIBRAN NICHOLAS
Number three: The U.S.has a growing populationAccording to the US Census Bureau, thepopulation of the United States hasgrown by an average of 1.27 percentevery single year since 1900. At currentpopulation levels, this means that weare adding about three million peopleto our population annually. As our pop-ulation grows, we have about 1.3 to 1.5million new households that areformed each year. Over the last 30years, the average growth in new house-holds has been about 1.4 million eachyear. These can include people whograduate from college and enter theworkforce, and adults who are currentlyliving with their parents who decide tomove out on their own. Of course, thesepeople will need a place to live.
The growth in population isn’t theonly thing that will increase thedemand for new housing. In fact,
approximately 300,000 housing unitsare demolished each year. This is prima-rily due to functional obsolescencebecause houses become old and outdat-ed. This means that the demand fornew housing is about 1.7 million newunits each year in order to replace thedemolished homes and accommodatethe new households being formed eachyear.
Number four: Less homesare being builtIt’s no secret that many home buildersare going out of business and buildingless homes. In fact, the number of newhousing units being built went from apeak of 2.1 million in 2005 to less thanone million in 2008. New housing startsfor 2009 are also scheduled to come inbelow one million as the market contin-
“The great investorSir John Templetononce remarked: Thefour most expensivewords in the English
language are ‘thistime is different.’ I
agree; and hopefullyyou will too …”
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By David Lykken
Many today are asking themselves: “Whatis the future of mortgage lending?” Giventhe onslaught of new rules and regula-tions, and a seemingly endless number ofstories chronicling the closures and/or fail-ures of banks, warehouse lenders andmortgage companies, it is easy to under-stand why almost every C-level executive iswondering what the future holds for theindustry. In a time when the obstaclesseem to be multiplying and opportunitiesfading, it is important that the C-levelmaintains an intense focus on the coursethey chart for their company. But beencouraged C-level executive, as there areunprecedented opportunities such ashaven’t been seen in four decades. In fact,I will make this bold statement at the frontend of this article … “More wealth will becreated in the next five years in mortgagebanking than in the past 25 years!”
“How can this be?” you may ask. Theanswer is this threefold:
1. The need for a viable mortgageindustry has never been stronger forthe health and healing of our economy.2. The industry has been decimatedover the past couple of years and manycompanies, even some of the biggest,have closed their doors.3. The barriers of entry to our industryhave increased as a result of obstaclesfacing our industry, the two biggest ofwhich I have outlined below.
The foundation for my bullish view forour industry is based upon the fact that (1)homeownership/housing is the founda-tion and fabric of the United States econo-my and that (2) this requires a vibrant andhealthy mortgage industry. This article isdedicated to those of you who have madethe mortgage industry a “career of choice”as apposed to a “career of convenience.”
The mortgage industry …a career of choice or convenience?Those who entered the mortgage indus-try in the “good times” when there was
an abundance of “low hanging fruit”found it relatively easy to make anamazing amount of money. Our industrywas overrun in the last business cycle bywhat I refer to as “white collar migrantworkers” … those who saw an opportu-nity and “made hay while the sunshined.” For that migrant group, theirmortgage “career” was more of a careerof convenience than a career of choicerooted in commitment.Back then, it was easy andconvenient to have somany calling you to refi-nance that you couldn’tget to all the calls. It wasat a time when you had somany “easy-qual” loanprograms that you couldget almost anyone a mort-gage. It was when thecommission splits were athistorical highs and youwere making a fortuneand thought you deservedevery dollar of it becauseof what a genius youwere. It was a time whenyou would go to a partyand your friends enviedyou pulling up in anexpensive car and “living large.” Onlylater did we discover that the car, houseand lifestyle were financed to the max.But all of that was a mirage … it wasn’treal and our economy is suffering fromthe consequences of that season ofexcess. Not surprising, regulators areshowing up like firemen to a five alarmfire that has long since burned itself out.Nonetheless, they are determined “to dosomething” to make sure this never hap-pens again. Hmmm … what are thechances of them getting it right?
Rules and regulationsThe pendulum is swinging back from theextreme of “irrational exuberance” to anextreme of “irrational regulation.” Newobstacles, the likes of which this industryhas never before seen, are coming in theform of new rules and regulations that wewill have to deal with in this next business
cycle. Again, all of this is the result of anindustry that has been largely unregulat-ed. Gone are the “fog-the-mirror-and-sign-here” easy-qual loan programs. TheObama Administration has already setforth “new and improved” Regulation Zrules. If these proposed rules go unchal-lenged and unchanged, they will be effec-tive Nov. 23, 2009. One of the provisions ofthe new Regulation Z rules will allow thefederal government to regulate what loanoriginators can make. This is both a threatand an opportunity. This is the result ofwhat many outside observers viewed asloan originators steering consumers intoloan programs/products that were riskierand resulted in an epidemic of defaults
and foreclosures. Whetheror not you agree or dis-agree with this assessment,the argument for or againstthis issue is moot at thispoint. The new rules andregulations have beenalready written and are qui-etly going through the U.S.Department of Housing &Urban Development’s 120-day comment period. Loanoriginator compensationwill be regulated withinRegulation Z. What is a bitsurprising to me is how fewknow about the newRegulation Z rules and thateven fewer are making anyprotest. It makes me won-der if our industry is fight-
ing so many battles on so many fronts thatthey are distracted or maybe have simplyresigned themselves to the fact that all ofthis is happening with the mistakenthought that “there’s nothing they can doabout it.”
We are talking about topics such asthese every week on my weekly Internetradio program called “Lykken on Lending.”To listen, go to www.blogtalkradio.com andtype in “Lykken on Lending” in the “Search”box. You will be able to listen to each “live”broadcast, as well as all the archived pro-grams. I welcome you to tune in and listento us discuss the new HUD Regulation Zrule and what you can do about it. We alsotalk about all the other pending rules andregulations that are coming down the road.We are going from being a non-regulatedindustry to potentially being a grossly over-regulated industry. Most of us recognizethat regulation is not the answer. It will ulti-
mately result in increased costs and delaysto consumers. We only have to look to theHome Valuation Code of Conduct (HVCC)fiasco to know this to be a fact. HVCC wasrushed into law. Then, in less than a year,there were significant efforts to put a mora-torium on it or rescind it altogether; at leastthat is what appears to be happening at thetime this article was written.
Warehouse liquidityIf the reports of new rules and regula-tions weren’t enough, our industry isexperiencing one of the worst warehouselending liquidity droughts on record. InAugust, the takeover of Colonial Bank bythe feds sent shockwaves across an indus-try already traumatized and fragile by alitany of failures and closures. ColonialBank had quietly and steadily grown tobecome the largest warehouse lender inthe country, providing $4 billion in ware-house financing to a large number ofindependent mortgage bankers. Thinkwhat could have happened if Colonial’swarehouse lending facility had suddenlybeen shut down when the feds took overthe bank. The thought of that possibilityraised the anxiety levels to an all-timehigh for those independent mortgagebankers who had a Colonial warehouseline. And if Colonial’s warehouse unit hadbeen shut down, the consequences couldhave impacted almost everyone in theindustry.
The significance of the Colonial Bankfailure more vividly comes into focuswhen doing the following math … IfColonial’s $4 billion in warehousefinancing were to have suddenly goneaway, and if the average loan amounton the line was $175,000, it would haveimmediately resulted in 22,857 loansnot funding. And it is possible that thisnumber (22,875 loans) would go up bythe same multiple as the rate at whichthe mortgage banker was “turning”their warehouse line in a month.
Please note that a fair number ofmortgage bankers successfully ‘turn’their warehouse line anywhere fromone and a half to two or even threetimes a month. The expression “thenumber of times a mortgage banker can‘turn’ their warehouse line” means thenumber of times they can use the samewarehouse line dollars to: (1) Fund aloan, (2) Sell that loan and then (3) Fundanother loan. For example, if a mort-gage banker turns their $10 million line
“We are going frombeing a non-regulat-
ed industry topotentially being a
grossly over-regulat-ed industry.”
A View From the “C” Suite: WhatLies Ahead for Mortgage Lending?
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two times in a month, then, in effect,they could fund $20 million of mort-gage loans in a month and if they couldturn is three times a month, they couldfund $30 million dollars a month.
If Colonial’s warehouse banking cus-tomers turned their warehouse linestwo times a month, then more than $8billion dollars of funding would havebeen immediately removed from themarket. Without this happening, themortgage lending industry is alreadyexperiencing a capacity issue becauseof so many lenders going out of busi-ness, or if still in business, they arealready operating at maximum fundingcapacity. Is it any wonder when theFederal Deposit Insurance Corporation(FDIC) negotiated BB&T taking overColonial’s branches that FDIC requiredas a part of the deal that BB&T keepColonial’s warehouse banking unitoperational for a minimum of oneyear? If they hadn’t, it would have ugly.Taylor Bean &Whitaker (TB&W)had to close itsdoors as a result ofthe Colonial Bankfailure. Many mort-gage companieswould have eitherbeen forced out ofbusiness or forced to significantlyreduce their funding capacity.
Because of a serious warehouse fundingshortage in our country, it can take three tosix months at a minimum to obtain a newwarehouse line. Not only that, every ware-house lender still in business has “raisedthe bar” of minimum requirements. Sadly,many independent mortgage bankerswould not qualify today for a new ware-house line if they lost their existing line.
For the most part, most warehouselenders require the following:
1. Higher “tangible” net worth levels.Tangible is synonymous with cash or avery liquid asset. With the exception ofa few remaining “capture” warehouseline providers, it is difficult to get awarehouse line with less than $1 mil-lion tangible net worth. Most won’t talkunless there is a minimum tangible networth of $3 million, preferably more.
2. Almost without fail, every warehouselender requires a company be prof-itable for the past two years. Many com-panies have struggled with profitabilityover the past two years. As a result,many otherwise good companies arebeing turned down even if they haveturned the corner and are profitabletoday.
The warehouse liquidity crisis isn’t limit-ed to just smaller companies. To under-
score this point, consider the closure ofTB&W in August. The takeover of ColonialBank was the catalyst of this very largeindependent mortgage banker to close itsdoors. TB&W’s closure had a huge impacton many smaller independent mortgagecompanies who were selling them loans,the impact of which is still having an effect.
Again, this is a serious crisis that notonly threatens the survival of many inde-pendent mortgage bankers today, but alsoa significant percentage of the fundingcapacity that is badly needed to fuel andfacilitate the economic recovery thisnation so desperately needs. It has beensuggested that the lack of warehouse lineliquidity in the residential financial mar-kets could be the Achilles tendon of aneconomic recovery. As a result, the U.S.Treasury has been meeting with mortgagebankers and warehouse lenders. Therehas been talk of letting Fannie Mae,Freddie Mac and Ginnie Mae get involvedwith warehouse lending for a season, but
that now has lostmomentum with thedeparture of JoeMurin as presidentof Ginnie Mae. TheTreasury could domuch to alleviatethis crisis withoutspending one dollar
of tax payer money in the form of anoth-er bailout. One such possibility is to getthe Federal Home Loan Bank involved.Bottom line is that we need leadershipand action from the number one “C-LevelSuite” in the country, the White House …specifically, President Barack Obama andhis administration.
The opportunity and thechallengeAt the beginning of this article, I madethis bold statement: “More wealth willbe created in the next five years inmortgage banking then in the previous25 years.” As outlined above, the roadto these potential treasures may betreacherous and tumultuous, but it willcome to pass … mark my word. Myhope is that for those of you who havemade mortgage banking your career ofchoice, will see these “obstacles” as“opportunities” to be overcome know-ing that doing so will position you to beone of the few that make so much. Thegood times typically don’t bring aboutenduring riches. Hardships, while neverpleasant for the season, cause our rootsto grow down deep, positioning us forthat which endures … something thatinvolves much more than just riches.
Above all else, and even moreimportant than any riches that could beearned, I challenge each of you to leavea legacy of excellence for the next gen-eration of mortgage bankers. We as an
industry need to return to puttingethics over earnings, principles overprofits and re-centering the AmericanDream of Homeownership on the ageold firm foundation of “secure athome” ownership, rather than “size ofhome” ownership.
Where obstacles abound, opportuni-ties much more abound. In the next fiveyears, we are going to have an abun-dance of both. Remember, the greaterthe obstacles, the greater the opportuni-ties … and the greater reward!
David Lykken is president, mortgagestrategies and managing partner withMortgage Banking Solutions. David has
more than 34 years of industry experienceand has garnered a national reputation.David has become a frequent guest on FOXBusiness News with Neil Cavuto, StuartVarney, Liz Claman and Dave Asman withadditional guest appearances on the CBSEvening News, Bloomberg TV and radio.He may be reached by phone at (512) 977-9900, ext. 101 or e-mail [email protected].
To listen to author DavidLykken’s online radio show,log on to www.blogtalkra-
dio.com and type in “Lykkenon Lending” in the “Search” box onthe right-hand side of the page.
“In fact, I will make this boldstatement at the front end of thisarticle … “More wealth will becreated in the next five years in
mortgage banking than in the past25 years!”
The Future of Mortgage Banking By Tommy A. Duncan
My company, like so many others, ischanging the way we conduct business tokeep up with the ever-changing marketand environment. We are focusing onseveral tenants in our business: Customerservice, technology and quality.
Customer service/phonesMake it a point that allphone calls are answered,even if someone dials adirect line. After four rings,the lines hunt and thephone dials the all lines thatare available or forwardsthe call on to an on-call rep-resentative. Customers wantto speak to a person regard-less if they are helped ornot. When customers call, itis usually a sense of urgencybecause they are trying toget approved with FederalHousing Administration(FHA) loans, a line of creditwith an investor or they arebeing audited. These thingsare important to the cus-tomer, and because theyare routine in daily opera-tions, every customermust be treated as if theyare the company’s sense ofurgency to support themin resolving their problems or concerns.
TechnologyCustomers want to feel that they aregetting the best when they ask for serv-ices. Show them the additional value oftechnology in providing their results.Customers want to feel that their infor-
mation is secure and protected, which iswhy every data center should make anSAS-70 Type II Certificate available.Customers want seamless integrationand processes, and providing thisthrough a variety of technologies inorder to reduce work load efforts forefficiency is what today’s customersexpect.
QualityThe end result or the finalproduct must be of greatquality from the perspec-tive of the customer. Ifyou have the best cus-tomer service and haveintegrated the best tech-nology, it will not matterif the final product hasnot met the customer’sexpectations. Two yearsago, my company (QualityMortgage Services), re-evaluated these three ten-ants of customer service,technology and quality,and set goals to strive tomake this our core com-petency. The results haveenabled us to gain morebusiness and grow as arespectable business inthe industry.
On the horizonThe change that we see on
the horizon that may be necessary tokeep up with an ever-changing market ischange itself. Everything is changing inthe industry. Those who do not changewith the industry will surely fail. In orderto stay current with the changes, one
“Yes, we are all impact-ed by regulatory and
legislative changes, butthere will continue to
be a demand for homeand property financing.The professionals whoplan and prepare for
these regulatorychanges will be the oneswho will be able to per-
form the financing.”
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must stay informed. Stay active withlocal, regional and national mortgageprofessional trade organizations, andreceive industry updates. Attend tradeshows and luncheons. Read, read andread some more because different tradepublications may take certain points ofview and you need to balance it all out.Be flexible and have the ability to lookahead to see how change will impactyour operations.
The changing regulatorylandscapeNew laws and policies are shaping theindustry. Whether you agree or disagreewith these changes, we all must adjustand adapt. All of the new policies andlaws will impact us all. Look at whatoccurred in 2008 and 2009: Red FlagRules, the Home Valuation Code ofConduct (HVCC), the Consumer ProtectionFinancial Agency (CPFA), Truth-in-Lendingand loan modifications are just a few.There are more changes that will requiremore flexibility and adjustment such as:How will the CPFA affect bank mortgageoriginators versus mortgage broker origi-nators? Will the new proposed changes toHVCC affect the larger lenders who con-trol appraisal management companies(AMCs) or who dictate to brokers whichAMC to use?
In 2010, I personally think the banksand large lenders will be mostly affectedby the proposed policies and laws thatwent into effect in 2009. I also feel thatwith Fannie Mae and Freddie Mac comingout of conservatorship, making loans willbecome easier. We have yet to see theimpact on the industry and the consumeras a result of the new Truth-in-Lendinglaws, CPFA, the Troubled Asset ReliefProgram (TARP) and the Term Asset-Backed Securities Loan Facility (TALF).
Technology leading thechargeThere are many new technologies avail-able that will take the mortgage bank-ing market to the next level. A few ofthese technologies lie in pre-fundingand post-closing quality control andquality assurance. Some lenders havestarted passing some pre-funding costsand responsibilities to the broker, suchas ordering tax transcript and verifyingSocial Security numbers. The MortgageBankers Association, in conjunctionwith Mortgage Industry StandardsMaintenance Organization (MISMO), ismaking benchmark progress with docu-ment standardization and data transferconsistency. An example is Freddie MacAnnouncement 09-14, which requiresthe appraisal to be uploaded in XML(Extensible Markup Language). AsMISMO continues to maintain technolo-gy standards within the industry, the
closer we get to the seamless network-ing of data in business transactionsbetween entities. The majority of ven-dors who support the industry seekMISMO approval. Those vendors whoare not MISMO-friendly will not be ableto perform services in the future.
With the industry so focused oncompliance and fraud prevention,more technology will fall in line to sup-port those who are most at-risk, such asinvestors and lenders. With the CPFAcoming online, the broker will havemore skin in the game, and many ofthese technologies will be pushed downat the origination level in order to pre-vent fraud and maintain compliance.
An example of this is the FinancialCrimes Enforcement Network (FinCEN),who recently announced that it is look-ing for an advance notice of proposedrule-making (ANPRM). FinCEN is lookingto solicit public comment on a widerange of questions pertaining to thepossible application of anti-moneylaundering (AML) program and suspi-cious activity report (SAR) regulations tonon-bank residential mortgage lendersand originators. This new initiative wasbrought about to target foreclosure res-cue scams and loan modification fraud.These initiatives are helping in thecoordination of information andresources across agencies to maximizetargeting and efficiency in fraud inves-tigations, alert financial institutions onemerging schemes, step up enforce-ment actions, and educate consumersto help those in financial trouble avoidbecoming the victims of a loan modifi-cation or foreclosure rescue scam.
FinCEN has never included the origi-nator in their efforts because it wasfocused on banks or larger financial insti-tutions. Because of the sheer number ofloan officer and brokers, FinCEN justincreased its capability. Every mortgageprofessional has a responsibility to reportfraud. I believe that trade organizationswill fully support FinCEN’s efforts. Havingthe brokers participate in this type oftechnology will lend greater credibility tothe retail side of the mortgage industry.To view the ANPRM, log on tohttp://edocket.access.gpo.gov/2009/pdf/E9-17117.pdf. To comment, log on towww.regulations.gov, select “Submit aComment” and type “RIN 1506” in thekeyword search box.
In order to survive, adaptation to theendless stream of regulatory and legisla-tive changes that are impacting theindustry is a must. The old saying “thestrong will survive and the weak will bedevoured by the strong” applies to themortgage industry. As a leader in youroperation, you must write out your corecompetency and revaluate them often.Analyze what technologies work and
which do not work. Evaluate what can bemore efficient in workflow process andother processes, and find or develop thetechnology to support it. Do not becomecomplacent in anything, and always treatthe customer as if they are your sense ofurgency. Know the law … policies andchanges that are taking place aroundyou. Be involved in the industry and sup-port the trade organizations. Worktoward credentials and require the sameof your staff. Read, read and read somemore … stay informed so that you canplan and prepare for the future. Keep thevision of the industry, regardless if youembrace this vision or not.
Yes, we are all impacted by regulatoryand legislative changes, but there willcontinue to be a demand for home andproperty financing. The professionalswho plan and prepare for these regulato-ry changes will be the ones who will be
able to perform the financing. The racehas already begun, and some havealready quit or lost. Some have restartedwith a new team. I am encouraged thatwe will continue forging onward byadapting and adjusting because businessis going to get better. This is an excitingtime in the mortgage industry and a veryinteresting time to be part of it.
Tommy A. Duncan is executive vice pres-ident of Quality Mortgage Services LLC.He may be reached by phone at (615)591-2528, ext. 124 or e-mail [email protected].
Visit author Tommy A. Duncan’sQuality Mortgage Services LLCWeb site at www.qualitymort-
gageservices.com for more infor-mation on quality control programs andcompliance solutions.
Online Lending for the New DecadeBy J.P. Kelly
Our cell phones, our cars, our games,our stores, our homes, and of course,our computers … we don’t just use theWeb, we are the Web. The Internet is sopervasive, so much anintegral part of our dailylives, it’s hard to believethat just eight years ago,half of the families in theUnited States did nothave Internet connec-tions. Now, according toNielson NetRatings, morethan 72 percent of house-holds have Internet con-nections. No wonder theWeb has become thedominant source ofresearch, social interac-tion and commerce forbusiness.
And consumers haveadopted the Internet asmore than just an infor-mation source. Accordingto the United StatesCensus Bureau, electroniccommerce generatedmore than $3.3 trillion insales in 2007, the most recent dataavailable. Don’t believe me? Google it.See what I mean? It has worked its wayinto our language as well.
Like many businesses, mortgagelenders have traditionally used theInternet only as a way to provide basiccompany contact information content
to provide a phone number and physi-cal address. But when it has come tousing a Web site to solicit and fosterloan applications, most lenders havemissed the gravy train. Estimates on thenumbers of loans originated online vary
between seven and 12percent. Instead of initiat-ing the transaction online,these lenders are missingout on the opportunity toclose loans.
This is not to say lendersare completely at fault.Early on, security concernsabout private data requiredwhen applying for a loanmade consumers skittish.However, as technologysecurity has grown, theconvenience of initiatingtransactions from the com-puter, and the lower cost ofmanaging accounts online,many lenders see this chan-nel growing as morelenders offer online mort-gage capabilities.
However, the days ofsimply slapping an AdobePDF version of a 1003 or a
short form to be followed by a series offollow-up calls by a loan officer are longgone. People want answers, includingrates, payments and whether they areapproved, now.
There are two primary keys to mak-ing a lender’s Web site a growth channelfor online mortgages. The first is creating
“What was once a virtual brochure andchannel for just deliv-ering information has
become an onlineplayground whereusers interact withfriends, family andplaces of business.”
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a site that is useful, informative and easyfor potential borrowers to find. The sec-ond is creating a work-flow to your back-office that removes obstacles andenables interested borrowers to beginthe loan process immediately and pre-vents rekeying or a laundry list of followup questions from your originators.
Where are you on the Web?The number one method borrowers useto locate information online is the searchengine. While Google is the current mar-ket leader, Microsoft’s Bing, Yahoo! andother sites also provide search results tomillions of Web surfers each day.
When you are sitting at your comput-er, do a search for “Mortgage Lenders,”followed by your state and/or city. Ifyou’re not on that first page, you willnot be found by potential borrowers.
So how can you ensure that your Website appears high on the results list ofyour potential customers? By utilizingsimple techniques, referred to by onlinemarketers as Search Engine Optimization(SEO), that makes your site search enginefriendly. These are not tricks orunscrupulous methods but focused mar-keting. It’s like a tall man wearing a redcap in a crowd. Easy to find.
A lot has been made of those “redhats” that Web site developers who cre-ate your Web site put in the code. Butthat’s just a small part of it in today’ssearch engine-crazed world. Relevantcontent is more crucial, which meansplacing articles, information and toolsthat are useful for a potential home-buyer on your site. This can includeitems such as mortgage preparationchecklists, daily interest rates, adviceon the mortgage process and a selec-tion of calculators.
It is not difficult to create this kind ofcontent … it’s just time consuming.Lenders can partner with online contentproviders to assist with developing a sitethat is search engine friendly and containscontent relevant to borrowers. These part-ners can provide articles, calculators, dailyrate updates and other tools that helpborrowers quickly find the informationthey need. This content must be keptfresh with updates as often as possible.
But like most things in technology,the devil is in the details. Two sitesmight look identical with the sameimages, colors and content. Build itright and you’ll rise to the top of thesearches. Build it wrong, and you’llnever be found. Scary but true.
Converting window shoppers to buyersThe biggest challenge in turning theonline mortgage portal into an origina-tion channel is converting Web site visi-tors to borrowers. Visitors to a lending
Web site ultimately seek one of threethings from the Web site: Research,contact information for initiating a loanin person or an online loan application.
Most visitors to the Web site aremerely seeking research. They may becomparing rates, learning about thelending process or vetting local lendersto see whom they wish to contact. Thebest way to keep these borrowers tiedto your lender is to encourage them totake action. Offer an informational e-mail newsletter with tips on buying ahome or regular rate updates. Invitethem to subscribe to an educationalblog or social networking page, such asFacebook or LinkedIn.
The next level of loan shopper isuncomfortable completing a transac-tion online, but they are interested inusing your loan office to originate theloan. There are two things that thisshopper needs. The first is simpleinstructions on how to call or visit theoffice to being the loan application. Thesecond is an online pre-qualificationform, which also requests that the loanofficer to contact the borrower. Onlinelending software should be able to pro-vide a form that links this form directlyinto the sales channel, so that origina-tors can follow-up on a qualified lead.
The final level is the online buyer.This borrower demands an onlinesystem that lets them search for theloan they want, provides a full mort-gage application online, supports theuploading of financial documenta-tion and initiates the underwritingprocess. The online lending systemshould be able to confirm receipt ofthe application and ensure that the
loan is immediately entered into theunderwriting workflow.
Though you can’t generalize aboutage, in general, the older the borrower,the less likely they are to apply or doany transaction online. Going after first-time homeowners or reverse mort-gages? Build your Web site accordingly.
Choosing an online lending systemToday’s market is about making money,and that begins on the Web with a well-built consumer-facing Web site. But whatthen? Lenders have several choices whenit comes to lending platforms. The over-whelming favorite choice? You guessedit—the one they have in place now.
No one likes change, and mostlenders tend to use software they know,warts and all. But the constant flow ofcosts on developing, implementing andmaintaining the software have prompt-ed even the most change-averselenders to consider changing to a Web-based lending platform that saves themtime and makes them money. Onlyonline loan origination software (LOS)systems can offer all that.
When selecting a mortgage softwarepartner, verify that the system will trulymake the loan application processmore efficient. Many online lendingprograms only provide nice-lookingWeb sites. When a customer needs tocontact the lender, the forms generatee-mails, which then must be processedby a loan originator before the cus-tomer can move to the next step in theloan process.
At best, this means time-consum-ing and error-prone data re-entry
into the LOS. At worst, this can meana delay in contacting the customer,enabling them to originate the loanwith a more responsive competitor.These days, all online lending sys-tems should tie directly into the LOS,eliminating the data re-entry andpushing the loan directly into theworkflow. The best systems also sup-port eMortgages, providing paperlessoptions for disclosures, closing docu-ments or even the signing.
Lenders should also seek an onlinepartner who will provide the toolsneeded improve SEO. These toolsinclude keyword testing and Web pagesenhanced to promote relevant searchterms. Lenders should also expect theironline lending system to provide thetools needed to build relationships withthe customers. Tools to manage e-mailnewsletter systems, online referral pro-grams and consumer-focused articlesare all available in today’s online lend-ing programs.
The World Wide Web has evolved sig-nificantly over the past two years—andit has changed us all. What was once avirtual brochure and channel for justdelivering information has become anonline playground where users interactwith friends, family and places of busi-ness. Build an online lending channelthat truly saves time and money whilesimultaneously building relationshipswith borrowers.
J.P. Kelly is president of operations forOpenClose, a developer of Web-basedmortgage lending software. For more infor-mation, e-mail [email protected] orvisit www.openclose.com.
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In the past 18 months, the mortgageindustry has undergone the greatestchanges and challenges since the GreatDepression. With the industry poised atthe crossroads of financial services andhousing—the nation’s two most chal-lenged sectors of the economy—mort-gage professionals everywhere are con-cerned about the future. In the follow-ing feature, the executive team atResidential Finance Corporation discuss-es the current state of affairs and wherethe mortgage industry may be headedin the coming months and years.
Regulatory issuesMichael Isaacs: We are very optimisticabout the industry’s future. Offsettingevery challenge are tremendous oppor-tunities for the companies that are bothwell-prepared and flexible enough toweather unforeseen obstacles that willcontinue to crop up. Challenges such asthe rapid influx of new legislationrequire lenders to keep up with all reg-ulatory and legislative changes—including those looming on the hori-zon. Regulatory compliance with thesenew laws can impact your business on adaily basis. Some of the recent lawsaffecting our operations leave grayareas and inconsistencies that need fur-ther clarification and simplification.Until the stream of new laws and regu-lations stabilizes, it will be difficult forus to deliver the range of services thatwe want to provide, lower pricing andshorten time-to-close. We need to seestabilization on both the legislative andregulatory fronts.
David Stein: Regulatory challenges arecreating so many new hurdles for mort-gage bankers and brokers that compli-ance is almost out of reach. Each arm ofCongress, each regulatory body of thefederal government, and each state has
their own agendas. Unfortunately, theseregulatory bodies sometimes work atcross purposes. As regulatory require-ments become more onerous, many goodcompanies won’t be able to comply andwill disappear. Rates go up when compe-tition goes down. As fewer lenders are leftstanding, consumers will suffer.Government regulators need to partnerwith the industry to avoid a credit crunch.Large industry investors need to buy andsell mortgages so bankers and brokershave a market to sell to investors andconsumers. Once regulators can learn tocreate better opportunities for the indus-try, consumers will win.
Darren Fleishman: We are all strug-gling with the increasing difficulty ofunderstanding and complying withthe rapid evolution of state and feder-al regulations. Most agree that somelevel of regulation is necessary, butthe current combination of state andfederal statutes makes compliancemuch more difficult than it needs tobe. Due to heavy compliance burdens,marginal lenders will continue to dropout of states that are no longer eco-nomically viable for them. Over thenext year, statutes and processesshould firm up and we can betterunderstand the cost of doing businessin this evolving market. However, itstill remains to be seen how this com-ponent of the mortgage arena willplay out. If done correctly, consumerswill be protected by regulations ensur-ing mortgage professionals are quali-fied to serve them. But, if done incor-rectly, onerous fees and regulationswill push out quality companies fromcompeting in multiple markets,regionally limiting choices for currentand potential homeowners. It seemslike we are headed towards “incorrect-ness,” but we will see.
Obi Egbuna: Rapidly changing stateand federal regulations require loanofficers to be more diligent than ever.Special training and regular refreshershave long been a primary focus of oursales department. Now it’s even moreimportant. Regulators need to realizethat some of their well-intentioned leg-islation designed to help consumerscould actually be hurting them. If morecompanies are choked out by unrealis-tic legislation, the consumer is the ulti-mate loser.
LicensingIsaacs: With licensing and complianceundergoing such drastic changes, we’veinvested a lot of time and money strength-ening our compliance department, addingstaff and increasing our budget.
Egbuna: Licensing is another seriousissue facing our industry that canpotentially constrain sales. We do busi-ness in 27 states and must stay on topof each state’s licensing changes. Lackof standardization means requirementsvary widely. Managing so many dis-parate compliance obligations adds toour cost of business.
Doug Harris: From an operations stand-point, shifting investor and secondarymarket requirements creates additionalcomplications. As a private mortgagebanker, we sell our loans into the second-ary market. We balance a group ofinvestors and have to meet their multi-ple, frequently-changing requirements.And when the ultimate secondaryinvestors, Fannie Mae, Freddie Mac andGinnie Mae each change their require-ments, we face even further operationalchanges. We’re constantly juggling tomaintain the highest levels of efficiencyand quality amidst managing ongoingchanges.
Stein: Lack of securitization and a small-er pool of institutional investors meansmortgage bankers and brokers must selltheir paper to a less competitive market.This small group of institutions has theability to manipulate or restrict the mar-ket, which again can hurt consumers.
Warehouse lines of creditFleishman: Availability of warehousecapacity is a serious industry-wide con-cern. The recent exit of major players hasonly exacerbated the issue. While creditavailability is likely to expand slowly,industry players will still face restrictionsin their ability to fund loans amid anenvironment of increasing fees and morerestrictive covenants. It’s no longer aquestion of having the capability to fundadditional growth, but rather of main-taining the same-sized pipeline at a sig-nificantly reduced capacity. Lendersmust take a very hard look at how theyoperate to maximize what capacity theydo have in this area. This step enabled usto do significantly more business underour own set of warehouse limitations.
Isaacs: Warehouse lines have been ourtop issue over the past two years. Thereneeds to be more liquidity in this areaof our business. Although obtainingwarehouse lines has eased somewhat,the leverage banks are providing ismuch different now. Lenders left stand-ing in the future will be the responsibleones that built balance sheets, focusedon profitability and increased net worthto maintain the necessary warehouselines to keep their funding at capacityto meet their demand.
Harris: Lack of investor confidence isone of the reasons we don’t have ade-quate warehouse lending capacity andthat the securitization of secondarymarkets is so disrupted. As the economy
The Future of the Mortgage IndustryA discussion with the executive team at Residential Finance Corporation
Michael IsaacsPresident of Residential
Finance Corporation
David SteinVice President of Residential
Finance Corporation
Darren FleishmanCFO of Residential Finance
Corporation
Obi EgbunaVice President, Sales of
Residential FinanceCorporation
Doug Harris, COO ofResidential Finance
Corporation
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begins to rebound and investor confi-dence returns, these troubles will sub-side. I’m always looking for efficiency.Warehouse capacity challenges requireme to be hyper-efficient. When produc-tion outpaces my ability to fund, I haveto turn the warehouse line faster to sup-port that funding capability. I’m alwaysworking to increase our quality andensure that we have the right investorsto purchase those loans quickly. Lookingforward, I expect warehouse capacity toshrink in the short term. This situationwill be exacerbated by Colonial Bank’srecent issues, since they representedapproximately 20 percent of existingwarehouse capacity in the industry.
Egbuna: From a sales standpoint,being a correspondent lender is one ofour competitive advantages, so havingwarehouse capacity and rapid turn-around directly impacts our salesforce. Fortunately we’ve extended ourcurrent line and added another line tostrengthen our competitive advantage.
ComplianceHarris: Compliance issues always pres-ent an operational challenge. Everynew directive requires changes toworkflow, embedding new proceduresinto our operations—changing forms,processes, checklists and everything,including controls. The new MDIA[Mortgage Disclosure ImprovementAct] regulations on disclosing informa-tion to borrowers really impacted ouroperations. A healthy future mustinclude the national standardizationof regulatory compliance and technol-ogy standards to allow the streamlin-ing of operations. With the help of theMortgage Industry Standards MaintenanceOrganization (MISMO), I believe that e-sign technology will be standardized andour future will be paperless.
Isaacs: Staying abreast of all currentand pending regulatory and legislativechanges on the horizon requires dailydedication.
Egbuna: Some compliance guidelineswill have to loosen for the benefit ofborrowers. For example, if a borrowerwith a lower credit score has historical-ly made timely payments, they shouldnot be shut out of a loan today.
Stein: Companies must devote signifi-cant resources to compliance andlicensing over the coming years to stayahead of regulations and remain com-pletely compliant with state and fed-eral laws. Companies that don’t makethis commitment will likely be shut-tered. Anyone planning to work in thisindustry over the coming years should
thoroughly investigate their (perspec-tive) employers to ensure they arecommitted enough to remain compli-ant. Otherwise, the company may notprovide them with a secure future.
Fleishman: For lenders that not nation-ally chartered, dealing with state-by-stateregulations has become an excessive andexpensive proposition posing uniqueand difficult compliance challenges.Consistency needs to be developed in areasonable manner to effectively protectconsumers without creating a business-ending burden for lenders.
Sizing up the competitionFleishman: The competitive landscapecontinues to change, with the shakeout ofweaker players of all sizes. Overwhelmingindustry challenges will perpetuate thistrend over the short term and unpre-pared lenders will fold very quickly. Butthe future is bright for those that preparefor sudden and unforeseen businessinterruptions as partners change creditcriteria, underwriting standards, and theability to write loans—coupled with theavailability of warehouse capacity andother essential elements of operating asuccessful franchise.
Harris: I expect continued consolidation,with the industry bifurcating into largeand small factions. The survivors will bethose who are nimble enough to quicklyrespond to the next challenge and thevery large institutions that can absorbchanges and consolidate mid-tier lenders.
Egbuna: Under-capitalized lenders willstruggle with the additional expense ofcompliance. Those that fail will leave aless competitive marketplace behind,to the detriment of the consumer leftfacing a smaller set of mortgage prod-uct options.
Isaacs: The competitive landscape oftoday’s mortgage industry looks verydifferent than it did two years ago. Andthree to five years from now, it will lookvery different than today, with less com-petition from fewer lenders and bro-kers. There will be a lot of consolidationbecause many lenders and brokers can-not profitably operate with the addi-tional overhead to support compliance,licensing and staff to deal with regulato-ry and legislative issues. Surviving com-panies will be larger and better regulat-ed. Companies that have survived thepast couple of years and are well-pre-pared for today’s more challenging busi-ness environment will find lighter com-petition and a more stable business cli-mate in the long run. In some ways, thiscleansing process has been healthy forthe industry, eliminating many bad and
unscrupulous brokers and lenders.Looking forward, the industry will con-sist of responsible companies that haveproven their ability to survive throughthe worst of times, and they’ll capitalizeon less competition.
Stein: Successful companies will com-pete using advanced marketing tech-niques to ensure new prospects daily.
The real estate marketFleishman: While the recession maycause fewer people to move or restrictthe ability for potential borrowers torefinance or purchase a home, mort-gages remain an essential part of themobility of American society. Peoplewill always continue to move, so thecompanies left standing in a less com-petitive environment will do very well.
Stein: Our nation lives and dies by its realestate markets as we’ve seen in the pastcouple of years. That will always continuebecause real estate is so important. Toown real estate, people will always needmortgages, so the future is very bright. Inthe near term, the government needs to
artificially keep interest rates low to stim-ulate real estate markets. Over the nextyear, I expect the industry will continue toenjoy historically low rates which canhelp strengthen business.
ConclusionHarris: Mortgage professionals mustmaintain operational agility, especiallyin this environment. You’ve got to beable to change on the fly, operate withplug-and-play components, cross-trainyour people, and have the ability to line-balance your operations. In today’s mar-ketplace, operational agility is critical.
Isaacs: Looking ahead as the economyturns around, there will be fewer, albeitmore heavily-regulated, players servinga growing pool of home buyers. Fororganizations that have taken steps tomanage the impact of the critical issuesfacing our industry today, I believe thatthe future looks bright.
For more information on Residential FinanceCorporation, visit www.resi-
dentialfinance.com.
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� Annual supply of new housing units:Less than one million
� Bottom line: Demand will becomegreater than the supply at somepoint in the future, and house priceswill rise.
Remember, there is no “nationalhousing market.” All real estate marketsare local. Therefore, a state likeMichigan that is losing population maytake longer to see house prices recoverand increase, while a state that is gain-ing population, like Texas, may seehouse prices go up much sooner.
So there you have it! This time is notdifferent, house prices will recover, andyou should be the one to gain morebusiness by communicating this toeveryone you know.
Gibran Nicholas is the founder and chair-man of the CMPS Institute, which admin-isters the Certified Mortgage PlanningSpecialist (CMPS) designation. The CMPSInstitute has enrolled more than 5,500members since its founding in 2005.Gibran is also the chairman of PublishedDaily, a customizable online magazine,newsletter and marketing service thathelps professionals transform theirclients and prospects into a referral-gen-erating sales force. He may be reached at(888) 608-9800, ext. 101 or [email protected].
Visit author Gibran Nicholas’sblog at http://gibranni-cholas.com where he shares
his insights on economics, realestate and financial issues, including thecurrent mortgage and credit crises.
trend spotter continued from page 33
ues to work off the excess supply of theboom years. Here’s an interestingbreakdown of new housing starts sincethe year 2000:
� 2000 = 1.6 million new units� 2001 = 1.7 million new units� 2002 = 1.7 million new units� 2003 = 1.9 million new units� 2004 = two million new units� 2005 = 2.1 million new units� 2006 = 1.8 million new units� 2007 = 1.3 million new units� 2008 = less than one million new
units� 2009 forecast = less than one million
units
As you can see, from 2000-2002, thesupply of new housing units each yearwas just about right in order to meetthe demand of 1.7 million as outlinedabove. However, things started to get abit out of whack with some oversupplyin the market between 2003 and 2006.Home values went into decline from2007-2009 as the market started work-ing through this oversupply.
However, sometime during the next12-24 months, the oversupply of hous-ing units will be completely absorbeddue to the demand issues that we out-lined above. In fact, if the trend contin-ues, there could even be a housingshortage at some point in the futureunless home builders start building newunits at a much quicker pace! Do themath yourself:
� Annual demand for new housingunits: Approximately 1.7 million newunits
heard on the street continued from page 32
The new partnership provides TheFunding Source with the resources of astrong local lender and the stability ofbeing part of a large and dynamicfinancial company.
All employees formerly with TheFunding Source will transition toNexBank Mortgage; 14 jobs in total.This brings NexBank’s employee total inits mortgage business lines to almost40, up from zero at this time last year.For more information, visitwww.nexbank.com.
LPS Real Estate Groupsigns agreement witheight HomeServices ofAmerica companies
Lender ProcessingServices Inc. (LPS), aprovider of integratedtechnology and serv-
ices to the mortgage and real estateindustries, has announced that it hassigned a multi-year agreement to pro-vide its rDesk Broker Suite of products,offered by its LPS Real Estate Groupdivision, to eight operating companiesthat are part of the HomeServices ofAmerica Inc. (HSoA) network.
These eight companies have signedcontracts for a variety of rDesk BrokerSuite products, including broker andagent Web sites, lead and contact man-agement, comparative market analysis(CMA) and document management.The HSoA companies currently leverag-ing rDesk are: Edina Realty (which serv-ices North Dakota, Minnesota andWisconsin); Kansas City-based Reece &Nichols; Prudential California Realty;Long Realty Company in Arizona;CBSHome Real Estate in Omaha, Neb.;Champion Realty Inc. in Maryland; andHome Real Estate and Woods BrosRealty, both in Nebraska.
“Over the years, the rDesk BrokerSuite’s depth and breadth of contentand functionality have evolved, in greatpart, from input offered by innovative,market-leading brokers and thoughtleaders like the HSoA companies,” saidJohn Hensley, chief product and tech-nology officer with LPS Real EstateGroup. “Since its inception, the rDeskplatform has leveraged new technologyand standards to deliver brokers andagents a Web-based integrated solutionthat meets their growing businessneeds and keeps them ahead of theircompetition.”
An affiliate of Berkshire HathawayInc., Minneapolis-based HSoA is aprovider of homeownership servicesand has a nationwide network of com-panies in 19 states that offers integrat-ed real estate services, including bro-kerage services, mortgage originations,title and closing services, property andcasualty insurance, home warrantiesand other homeownership services.
“These companies are leaders intheir respective markets,” said Ron
Peltier, HomeServices chairman andCEO. “To further that leadership posi-tion, they must offer products and serv-ices that set them apart from the com-petition. rDesk is a product that bothstrengthens market presence andenhances the customer experience.”For more information, visit www.lpsreg.comor www.homeservices.com.
Mortgage Professionals to Watch� President Barack Obama has appoint-
ed Ben Bernanke to a second term asFederal Reserve chairman.
� LoanModDVD has signed JohnUlzheimer of Credit.com as an advisor.
� The U.S. Department of Housing &Urban Development has appointedShelley Poticha to the position ofsenior advisor for sustainable hous-ing and communities.
� Freddie Mac has named Bruce M.Witherell chief operating officer.
� Karen Binder has been named assis-tant vice president of marketing andspecial projects for IntegratedMortgage Solutions.
� Willie Bren has joined ChicagoBancorp as senior mortgage bankerin the firm’s Naperville, Ill. branch.
� Stuart M. Dorf has been named sen-ior vice president of XSite Validation.
� Dan Nissenbaum has been electedchairman of the National HousingConference (NHC).
� Robert M. Couch, former general
counsel to the U.S. Department ofHousing & Urban Development,has joined the banking and finan-cial services practices group of thelaw firm, Arant Boult Cummings.
� Universal Mortgage Inc. has addedcommercial loan expert HowardAbrams to its team.
� Resource Title Agency Inc. hasappointed Linda M. Short and DavidJ. Kozicki senior vice presidents.
� Realty Capital Securities LLC hasannounced the appointment of JeffKinney and Steve Williams as salesmanagers.
� The Appraisal Institute has hiredWilliam T. Zimmerman as chieffinancial officer.
� USA Funding Corporation ofBrookfield, Wis. has added MarkSwan and William Diehl as mort-gage advisors.
Your turnNational Mortgage Professional Magazineinvites its readers to submit any informa-tion, events, passages, promotions, per-sonal or professional occurrences thatseem appropriate and/or other perti-nent data to the attention of:
Heard on theStreet/Mortgage
Professionals to Watchcolumn
Phone #: (516) 409-5555E-mail: [email protected]
Note: Submissions sent via e-mail arepreferred. The deadline for submissionsis the 1st of the month prior to the tar-get issue.
Ben Bernanke
Robert Couch
John Ulzheimer
Shelley Poticha
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Informative Researchenhances its Red FlagsToolkit
Informative Research hasadded a sample “Policiesand Procedures” to itsBroker Red Flags Toolkit
to facilitate compliance with Red FlagsRules. Also included in the Toolkit are sum-maries of the Red Flags regulations, back-ground information from the Federal TradeCommission (FTC), and a step-by-step check-list, specific to brokers, for getting throughthe process with a comprehensive detection,prevention and mitigation program.
For brokers who do not service loans,the scope of identity theft procedures ismore narrow than for that of a tradition-al lender. However, all brokers large andsmall must create and document theirown program and the sample policiesand procedures will get them started.
As part of its suite of fraud and com-pliance solutions, Information Researchalso offers mortgage-specific identitytheft solutions including fraud alerts,direct to the SSA social security verifica-tion, as well as its own Red Flags RiskAddendum to the credit report. For more information, visit www.infor-mativeresearch.com.
DMD releases DataTracVersion 9.0 andCommissionTrac 2.0
Del Mar DataTrac Inc. (DMD), aprovider of loan automationsolutions for mortgage lenders,banks and credit unions, has
released version 9.0 of its workflowautomation platform. The 9.0 releaseencompasses the core products within thesuite, including new versions of DataTrac,WebTrac, DocumentTrac, InTrac, TracTools,AutoPrice and the Vendor Services Platform(VSP). This release addresses 246 productrequests. Version 9.0 is designed to facilitatefaster loan processing and underwriting,while reducing lenders’ risk in the face ofregulatory uncertainty. It features stream-lined user screens, new user roles and built-in compliance features.
Enhancements in Version 9.0 include:Updated underwriting worksheets withreorganized decisioning, credit and prop-erty information fields; improved newfields for appraisal, property and floodcertification information; revised countymanagement with new Fannie Mae loanlimits, county specific fields and a built-inadministrative utility to mass updatecounty-level data; refined underwriting,condition sign off (prior to funding), qual-
ity assurance (QA) and quality control (QC)user roles; enhanced integrations forpricing adjustments from product eligi-bility and pricing engine (PPE) partners;and improvements to better support
underwriting functionality, specificallyFederal Housing Administration (FHA)underwriting.
Version 9.0 also includes enhance-ments to DMD’s other software solutions,including DocumentTrac, an electronicdocument management solution formortgage bankers; InTrac, a point-of-sales solution and WebTrac, a Web-basedoriginator portal.
DMD has also announced the releaseof CommissionTrac 2.0, the company’snext generation commission solution.CommissionTrac 2.0 automates the cal-culation, timing, communication andreconciliation of commissions. Thesolution is a flexible and configurableapplication that eliminates costly andtime-consuming commission calcula-tions. Lenders traditionally complete
commission calculations in a manualfashion or with Microsoft Excel, eitherof which can be time consuming andoften, lead to inaccurate payments.
CommissionTrac automates everyaspect of the variable compensationworkload so that salespeople stay moti-vated and focused on originating andaccounting staff can both save time andbe more accurate with commission cal-culations. CommissionTrac 2.0 enableslenders to deliver a 24/7 Web-basedcommission pipeline, where salesagents can continuously monitor esti-mates and time disbursements.
“Nothing de-motivates a sales repfaster than messing up their commis-sions,” said Rob Katz, president of DMD.
continued on page 42
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new to market continued from page 41
“Accurately and quickly calculating, com-municating and paying sales commis-sions is important for lenders who wantto keep good loan officers focused onselling. This next generation ofCommissionTrac will enable managers toresolve problems before the checks getwritten, ensuring that no trust or produc-tivity is lost over sales commissions.”For more information, visit www.dmdinc.com.
Zoot launches credit riskmanagement solution
Zoot, a provider ofinstant credit-decision-
ing and loan origination solutions, hasunveiled the company’s newest solution,Zoot’s Credit Risk Lab. The solution wasdesigned to give credit risk managers theability to rapidly respond to changingmarket and consumer behavior. In a non-production environment, managers arenow able to experiment with new creditrisk policy strategies to make better creditdecisions, faster.
“The concept of the Credit Risk Lab orig-inated when Zoot was approached by atop-five financial institution that had beenlooking for several years, without success,for a way to deliver the most accurate, pre-dictive scorecards to the marketplacequickly and more efficiently,” said TomJohnson, vice president of product develop-ment at Zoot. “The financial institutionwanted to be able to create a new set ofunique, predictive credit characteristicswithout the significant time and cost delaysof its current process. The Credit Risk Laballows institutions to quickly evaluate con-sumer behavior against new ideas, usingtheir own performance data, and deter-mine whether or not the proposed policywill be effective. This helps financial institu-tions learn from experience, rather thansimply react to their environment.”
Zoot’s Credit Risk Lab provides lendersthe ability to shorten the cycle of makingchanges to attributes and scorecards todetermine what is most predictive in thecurrent environment. Business users havecomplete control over the entire cycle ofdeveloping an idea, coding attributes inthe tool, running the attribute tests andevaluating the results. The solution has anintuitive interface allowing users to experi-ment with unlimited variations of attributedefinitions to evaluate which will be themost effective (this can all be accom-plished without IT/programmer involve-ment). Using the data from that analysis,credit risk managers can then identify anew strategy in less than 48 hours.
“The first financial institution to imple-ment Zoot’s Credit Risk Lab projects savingsof more than $2 million in the first 12months following deployment,” said JamesA. Franklin, chief sales officer for Zoot.“There is a high demand within our prospectand client base for a solution that addressesmarket volatility in a timely way. This solu-tion brings increased operational efficiency,consistency in credit risk policy across alllines of business and the ability to quickly
address changing market conditions.”For more information, visit www.zootweb.com.
Lender Processing Serviceslaunches RediRefi suite anddeploys HMP functionality
Lender Processing ServicesInc. (LPS), a provider ofintegrated technologyand services to the mort-
gage and real estate industries, hasannounced its RediRefi suite of solutions isnow available to help lenders manage capac-ity challenges associated with loan refinanc-ing. LPS’ RediRefi program is a customizable,full-service solution that can help lendersimprove the success rate of their refinancecampaigns. RediRefi includes tools that auto-matically identify the loans that are eligiblefor and likely to refinance, pre-qualify thoseloans for a refinance offer, and execute a tar-geted marketing campaign. LPS then couplesthose tools with fulfillment services to providea complete streamlined refinance solution.
“RediRefi has the flexibility to support awide range of lenders’ needs, and isdesigned based on industry best practices,”said Grace Brasington, executive vice presi-dent of LPS’ strategic consulting services.“Regardless of whether you implement theend-to-end solution or specific compo-nents of RediRefi, lenders can expect to seedramatic improvements when they reengi-neer their processes by leveraging LPS’technology and consulting services.”
RediRefi has been developed in a mod-ular fashion, allowing lenders to select thespecific services they need to improve theircurrent refinance process. RediRefi includesdata and analytics models to identify loansat risk of prepayment; LPS’ powerfuleSignature platform, ClosingStream; andtools to optimize the refinance offer thatcan increase capture rates, manage thesolicitation process and streamline the loanfulfillment. Through strategic partnerships,LPS provides customer follow-up to ensurethat refinances are successfully completed.
LPS has also announced the release ofHome Affordable Modification Program(HMP) functionality for its LPS DesktopLoss Mitigation application. LPS DesktopLoss Mitigation is a component of theWeb-based LPS Desktop enterprise work-flow solution that enables servicers tostreamline business processes and man-age documents and invoices online. LPSincorporated the HMP functionality inresponse to the Homeowner Affordabilityand Stability Plan (HASP) introduced byPresident Barack Obama in February2009. HMP is the loan modification initia-tive of HASP, the government-sponsoredeffort to stabilize the housing market byaiding at-risk homeowners in danger oflosing their homes to foreclosure. As aresult of HMP, it is expected that servicerswill process approximately three to fourmillion home loan modifications.
LPS Desktop Loss Mitigation is a Web-based tool that can be deployed and scaledto manage any loss mitigation activity vol-ume. It also provides servicers an afford-
need of a mortgage. Encourage them toshare your business cards with those inneed of your services.
Wine and dineHave a barbecue, dinner party or asocial event for these abandoned indi-viduals. Use holidays to your advan-tage. Welcome these people to youroffice or a local establishment. Besure to bring plenty of information onyour company to hand out. Make sureto mark on the invitation to bring afriend.
Design a flyerCreate a flyer that is specificallydesigned to target your orphans. Makeyour flyers are fun, creative and inform-ative. Holidays are good themes to use
when creating flyers.These flyers can bemailed, faxed or even e-mailed to your orphans.
Free souvenirsTake some time to pro-duce magnets, pencils,pens, notepads, etc. withyour company name, logo,contact information andother important companyfacts. These items can bedisplayed in your officeand/or handed out at thefunctions earlier suggest-ed. The souvenirs will serveas take home “gifts” so thatyour orphans have areminder of your services.
ConclusionThese marketing strate-
gies will efficiently target these orphansand could greatly increase yourincome. Your profits could increase sig-nificantly if you implement these tac-tics. These are only a few suggestionsas to how you may successfully marketto orphans. If you are the mortgagecompany owner, have a meeting withyour employees and see if they cancome up with other effective market-ing strategies. Help your companybecome the Daddy Warbucks of themortgage industry by adopting theseorphaned mortgages.
Gary Opper is president of Weston, Fla.-based Approved Financial Corporation.Gary has been a mortgage lender andnote buyer since 1984, in addition tomortgage consulting. He has a CPA and aCFP license. Opper is past president of theFlorida Association of Mortgage BrokersMiami Chapter and the Florida Instituteof CPAs Gold Coast Chapter. He may bereached by phone at (954) 384-4557 or e-mail [email protected].
“You shall not ill-treat any … orphan.”—Exodus 22:21-23
Orphan mortgages and customers arepreviously closed and unclosed loans ofmortgage brokers that are no longeremployed by your company. When thesebrokers leave, they usually do not taketheir loans or customers with them.Take advantage of these leftovers andturn them into a gourmet feast for you!
Systematically review each unclosedloan in your office. Think of creativeways to close these orphans in a way inwhich your former colleague did notthink. Review each unclosed loan toestablish a new relationship with them.
Do not underestimate the potentialof these orphans. Frequently, theseorphans may find themselves in needof refinancing or mayhave relatives and friendswith similar needs.Nurture these orphans sothey will be apt to closewith you and recommendyou to those in need ofyour services.
Reestablish a rela-tionship with these indi-viduals. Before adoptingthis project, check withyour office manager forapproval. Once you havetheir permission, hereare a few suggestions asto how to adopt thesestrays:
� Send holiday andbirthday cards to yourorphans
� Set a date each monthto phone these individuals
� Arrange a dinner party or event forthese orphans
� Design a flyer, brochure or card toprompt your potential customers
� Produce magnets, pens, pencils, etc.as a reminder of your company
Holidays and birthdaysHave a special calendar specificallydesigned to keep you aware of cus-tomers’ birthdays and holidays. Onthese occasions, send a card wishingthem well. Be sure to include two busi-ness cards (one for them and one for afriend). Delegate someone in youroffice to be in charge of this calendar sothat you don’t forget these importantdates.
Pick up the phoneEach month, set aside a day to tele-phone your orphans. Be sure to rein-troduce yourself, your company andremind them of your services. Ask theseindividuals if they know of anyone in
Maximize Your Profits: Adopt Orphan Customers
“Do not underestimatethe potential of theseorphans. Frequently,these orphans mayfind themselves in
need of refinancing ormay have relativesand friends with similar needs.”
By Gary Opper
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“Atare Agbamu is one of only a handful of people in the reverse mortgage arena
who possesses a commanding understanding of the reverse mortgage industry.
As an originator, he has hands-on experience educating seniors and their advi-
sors. As author of the “Forward on Reverse” column in The Mortgage Press since
2002, Atare Agbamu communicates nationally with the housing finance commu-
nity, bringing the unique insights and experience of an ardent reverse mortgage
expert into a wider business context.
“This book combines Atare’s keen insights and know-how with extensive re-
search to create a first of its kind resource for the reverse mortgage industry. It offers a comprehen-
sive overview of the industry plus detailed information on marketing and originating reverse mortgages.
“Present and future reverse mortgage professionals and senior advisors will profit from
decades of experience skillfully woven into this book. If you plan to succeed in this industry, this
book is the place to start.”
—Sarah F. Hulbert, President, Senior Financial Corporation and former four-term Co-Chairof NRMLA’s Board of Directors
“When I first began reviewing the contents of this book, I became quite jealous ... Atare Agbamu
has set down an impressive amount of information ... And he delivers it in an easy-to-read,
simple-to-understand style that will make this book essential reading for all reverse mortgage
professionals.”
—from the Foreword by Jim Mahoney, Co-Founder and Former Chairman, Financial FreedomSenior Funding Corporation, and former four-term Co-Chair of NRMLA’s Board of Directors
“The stories [Chapter 15: Profiles in Satisfaction] are the best vehicle to increase understanding and
acceptance of reverse mortgages among us laypeople. They are very compelling ...”
—Therese Cain, Executive Director, Minneapolis/St. Paul Chapter of Little Brothers—Friendsof the Elderly
“This book should be required reading for all new loan consultants originating reverse mortgages
and is recommended for experienced ones as well. This book provides excellent insight and infor-
mation on preparing ahead to provide the service our seniors deserve, to ensure a smooth loan
process and shorten the time to closing. Most of the problems caused in the processing and clos-
ing of reverse mortgages come from inadequate preparation.”
—Deanne Opstad, AVP, Senior Underwriter, Generation Mortgage Company
Think Reverse!Table of Contents
Part I:
The new pillar of retirement security
Part II:
Marketing reverse mortgages: It’s all about education
Part III:
Originating reverse mortgages
Part IV:
Enhancing freedom: The essence of reverse mortgages
Part V:
A new frontier in mortgage lending
able, permanent solution that integrateswith major servicing platforms. LPSDesktop Loss Mitigation enables a servicerto automate its loan modification process,including loan assignment, queuing anddelivery of optimized workout options,loan modification document generationand online document execution.
LPS Desktop Loss Mitigation incorpo-rates a comprehensive rules engine thatallows servicers to automate the entireloss mitigation process according to theirspecific business requirements. Loan filesare automatically assigned and sent toservicer work queues, where net-present-value (NPV)-based decisioning tools helpthe servicer’s home retention specialiststo provide the best workout options forborrowers. Workout agreements flowthrough an automated, rules-basedapproval process, again based on ser-vicer-specified requirements, that endswith automated document creation andonline document execution. The applica-tion is configurable by client, investor,portfolio and loan type.For more information, visit www.lpsvcs.com.
LenderLive Networkdevelops contract under-writing system for Radian
LenderLive NetworkInc., a provider ofbusiness process
outsourcing and technology to the finan-cial industry, announced that it hasdeployed a comprehensive system forRadian Guaranty Inc.’s nationwide net-work of contract underwriters.
“With such an extensive group ofunderwriters that span the entire country,Radian needed a single system in place tomanage data and better distribute infor-mation to lenders,” said Rick Seehausen,president and CEO of LenderLive.
LenderLive has developed an enter-prise class system to serve as a workflowtool that will help Radian consolidate andstreamline its underwriting and cost-effec-tively meet fluctuating market demands.The end product is an enhancement ofLenderLive’s existing contract underwrit-ing platform and will be private-labeledwith the Radian brand.
“By automating our contract underwrit-ing processes within a single system, weenable Radian’s contract underwriters toinput and manage loans faster and moreaccurately,” said John Brady, vice presidentof business solutions at Radian. “In addi-tion, LenderLive provides Radian with theability to add additional services andprocesses as needed in the future.”
LenderLive’s contract underwriting serv-ices provide clients the ability to engage thecompany to perform either pre-purchaseloan underwriting to determine eligibilityand adherence with underwriting guide-lines, or to manage loan underwriting fromconditional approval through finalapproval. Contract underwriting is one ofthe component services available throughLenderLive’s contract services division,which offers a variety of outsourced servic-es, such as quality control, closing coordi-nation and contract processing. The com-pany has several other channels of busi-ness that provide comprehensive mort-
gage-related outsourcing services, includ-ing retail, wholesale, specialty originationand settlement services.For more information, visit www.lender-live.com or www.radian.biz.
MRG’s eConsent streamlinesRegulation Z compliance
MRG Document Technologies(MRG), a provider of mort-gage technologies to banks,
credit unions and other lenders, announcedthat its eConsent electronic disclosure deliv-ery system is now available to help lenderscomply with changes to Regulation Z thattook effect July 30th to implement theMortgage Disclosure Improvement Act of2008 (MDIA) resulting in an expansion of theTruth-in-Lending (TIL) disclosures.
The new changes expand the scope ofTIL disclosures for mortgage transactionsto include the need for disclosures for refi-nances and for mortgage loans ondwellings other than borrower’s primaryresidence, in addition to the disclosuresalready required for purchase and initialconstruction loans. Revised disclosures arerequired if the annual percentage rate(APR) changes to outside of the toleranceduring the loan process. As a result of re-disclosure, lenders must delay closings forthree additional days, for a total of sixdays, while they wait for borrowers toreceive the revised disclosures.
MRG’s eConsent allow lenders tohave verifiable proof that borrowersreceived re-disclosures on the day theywere delivered if the borrowers consentto the re-disclosure. MRG supplies thelenders with verifiable reports of whenthe borrower actually consented; thiscan shorten the disclosure deliverytime, with closings occurring three daysafter delivery date instead of six.
“Speeding up the closing process is abenefit to both lenders and borrowers,”said Marsha Williams, an attorney atMRG. “For lenders, it locks in interestrates, prevents borrowers from switch-ing to another lender and generatesinterest sooner. By delivering therevised disclosures electronically, bor-rowers close their loans sooner.”
MRG offers a browser-based system forthe preparation and delivery of compliantdocument packages, electronic disclosures,loan modifications and other services formortgage lenders, banks and credit unionsnationwide. MRG guarantees that its prod-ucts are in compliance with the mostrecent legislative and regulatory changes.For more information, visit www.mrgdocs.com.
Your turnNational Mortgage Professional Magazineinvites you to submit any informationpromoting new “niche” loan programs,new products or any other announce-ment related to the introduction of anew program, to the attention of:
New to Market columnPhone #: (516) 409-5555
E-mail: [email protected]
Note: Submissions sent via e-mail are pre-ferred. The deadline for submissions is the1st of the month prior to the target issue.
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SEPTEMBER 2009Tuesday, September 15
2009 Kansas Association of MortgageProfessionals Trade Show
Harrah’s North Kansas City Hotel & Casino
1 Riverboat DriveNorth Kansas City, Mo.
For more information, call (913) 764-5600 or visit www.ksamp.org.
Thursday-Friday, September 17-18Mortgage Bankers Association Human
Capital Management SymposiumMBA Headquarters1331 L Street NWWashington, D.C.
For more information, call (800) 793-6222 or visit
www.mortgagebankers.org.
Monday-Tuesday, September 21-2220th Annual Illinois Association of
Mortgage Professionals Fall Conference“Raise standards. Be accountable.
Increase your knowledge.”The Sheraton Hotel3400 Euclid Avenue
Arlington Heights, Ill.For more information, call (630) 916-
7720 or visit www.iamp.biz.
Tuesday, September 22New York Association of MortgageBrokers 21st Annual Convention“It’s Not Just Business as Usual!”
Melville Marriott1350 Old Walt Whitman Road
Melville, N.Y.For more information, call (914) 332-
6233 or visit www.nyamb.org.
Wednesday-Friday, Sept. 30-Oct. 222nd Annual New England Mortgage
Banking ConferenceRhode Island Convention Center1 Sabin Street • Providence, R.I.
For more information, call (617) 570-9114 or visit www.massmba.com.
OCTOBER 2009Friday-Saturday, October 2-3
Kentucky Association of MortgageProfessionals 2009 Annual Convention
Belterra Casino & Golf Resort777 Belterra Drive
Belterra, Ind.For more information, call (270) 929-
2836 or visit www.kyamp.net.
Monday-Tuesday, October 5-6Washington Association of Mortgage
Professionals 2009 Real Estate Lenders Conference
Meydenbauer Center11100 NE 6th Street
Bellevue, Wash.For more information, call (866) 425-
7250 or visit www.wamb.org.
Sunday-Wednesday, October 11-14Mortgage Bankers Association 96th
Annual Convention & ExpoSan Diego Convention Center
111 West Harbor DriveSan Diego
For more information, call (800) 793-6222 or visit
www.mortgagebankers.org.
Thursday, October 15Florida Association of Mortgage Brokers
Jacksonville Chapter2009 Annual Trade ShowHyatt Regency Riverfront
225 Coastline DriveJacksonville, Fla.
For more information, call (800) 289-9983 or visit www.famb.org.
Tuesday-Wednesday, October 20-21Arizona Association of Mortgage
Brokers 2010 Outlook & Expo“Expand Your Mind & Expand Your Business”
100 North Third AvenuePhoenix, Ariz.
For more information, call (480) 423-7334 or visit
www.mortgagemarketplacehome.com.
Wednesday-Thursday, October 21-22Indiana Association of Mortgage
Brokers 2009 Annual Expo &Educational Conference
Sheraton Indianapolis Hotel & Suites8787 Keystone Crossing
IndianapolisFor more information, call (317) 964-
1225 or visit www.inamb.com.
Wednesday-Friday, October 21-23Pennsylvania Association of MortgageBrokers and New Jersey Association ofMortgage Brokers Regional Conference
Trump Taj Mahal Casino Resort1000 Boardwalk at Virginia Avenue
Atlantic CityFor more information, call (973) 379-
7447 or visit www.njamb.org.
Friday, October 30Oregon Association of Mortgage
Professionals 2009 Annual Convention“The Best of the Best”
Location to be determinedFor more information, call (503) 670-8586 or visit www.oamponline.com.
NOVEMBER 2009Monday-Tuesday, November 2-3Virginia Association of MortgageBrokers 21st Annual Convention
Williamsburg Lodge310 South England StreetColonial Williamsburg, Va.
For more information, call (804) 285-7557 or visit www.vamb.org.
Tuesday, November 172009 Missouri Association of Mortgage
Brokers Trade Show & ConventionSt. Charles Convention Center and
Embassy Suites Hotel2 Convention Center Plaza
St. Charles, Mo.For more information, call (314) 909-
9747 or visit www.mamb.net.
DECEMBER 2009Saturday-Tuesday, December 5-8
NAMB/WESTMGM Grand Hotel & Casino
3799 Las Vegas Boulevard SouthLas Vegas
For more information, call (703) 342-5900 or visit www.namb.org.
FEBRUARY 2010Monday-Thursday, February 1-4
Mortgage Bankers AssociationCREF/Multifamily Housing
Convention & ExpoMandalay Bay Resort & Casino
3950 Las Vegas Boulevard SouthLas Vegas
For more information, call (800) 793-6222 or visit www.mortgagebankers.org.
Tuesday-Friday, February 23-26Mortgage Bankers Association NationalMortgage Servicing Conference & Expo
Manchester Grand Hyatt1 Market Place • San Diego
For more information, call (800) 793-6222 or visit www.mortgagebankers.org.
APRIL 2010Sunday-Wednesday, April 25-28
Mortgage Bankers Association NationalTechnology in Mortgage Banking
Conference & ExpoHyatt Regency Chicago
151 East Wackler Drive • ChicagoFor more information, call (800) 793-
6222 or visit www.mortgagebankers.org.
AUGUST 2010Wednesday-Friday, August 18-20California Association of MortgageBrokers 2010 Annual Convention &
Grand ExpositionHyatt Regency Long Beach
200 South Pine AvenueLong Beach Convention Center
300 East Ocean BoulevardLong Beach, Calif.
For more information, call (916) 448-8236 or visit www.cambweb.org.
To submit your entry for inclusion in the National Mortgage ProfessionalCalendar of Events, please e-mail the details of your event, along with
contact information, to [email protected].
COMPANY WEB SITE PAGEACC Mortgage .................................................. weapproveloans.com ............................................29
All Real Estate Solutions LLC.............................. allREsolutions.com ................................................15
BestRates ....................................................................................................................................37
Elliott and Company Appraisers Inc. .................. www.appraisalsanywhere.com ................................27
Emigrant Mortgage Company ............................ www.emigrantmortgage.com ..................................13
Entitle Direct Group.......................................... www.entitledirect.com/mortgage ......Inside Front Cover
First Source Capital Mortgage Inc. .................... www.ruralhomeloan.com ......................................33
Flagstar Bank .................................................. www.wholesale.flagstar.com ......................Back Cover
Franklin First Financial .................................... www.franklinfirstfinancial.com ................................39
Frost Mortgage Banking Group ................................................................................Inside Back Cover
Guaranteed Home Mortgage.............................. www.joinguaranteed.com ......................................12
HTDI Financial ................................................ www.startacreditrepaircompany.com ........................21
Informative Research........................................ www.informativeresearch.com ..................................7
Mortgage Now Inc. .......................................... www.mtgnow.com ................................................23
NAMB/West ...................................................... www.namb.org ....................................................16
NAPMW .......................................................... www.napmw.org ..................................................22
New York Appraisal Management Services Inc..... www.nyams.com ..................................................41
Platinum Credit Services Inc. ............................ www.platinumcreditservices.com ............................31
Presidents First Mortgage Bankers .................... www.presidentsfirst.com ........................................11
Quality Mortgage Services ................................ www.qcmortgage.com ....................................10 & 32
Think Reverse .................................................. www.mortgageproshop.com ....................................43
United Wholesale Mortgage .............................. www.uwmco.com ..................................................17
Wells Fargo Home Mortgage.............................. www.brokersfirst.com ..............................................9
A division of Primary Residential Mortgage, Inc.
If you would like to learn more about our BranchPartner business model, please inquire:
“I joined Frost Mortgage and immediately saw my rev-enue get back to what it used to be. I now have thetools I need to be successful in today’s market place.”
- Bill MorrisLancaster, OH
I’ve known about Greg Frost for 20 years. I trustedhim, joined his division and he has delivered on hispromise. His model works great!
- Jerry CoxTallahassee, FL
Greg is doing what he promised. Great pricing, fastunderwriting, on time closings! That’s all I needed andthat’s what Greg has delivered.
- David HoffmanWestlake Village, CA
Very competitive rates, common sense underwriting in48 hours, wet funding with docs...what more can I say?
- Jason RobertsSt. Louis, MO
Our semi-annual BranchPartner Master Mind Meet-ings are what really motivate me. Great mentoringand loads of business building ideas coupled with thehands on “How to.”
- Momi PointerTustin, CA
Is there another company that has as many Under-writers has Loan Processors? Greg has turned thatproverbial bottleneck into a slick funnel. Two daysfor a decision. Great!
- Kevin HodgeHunt Valley, MD
Regulation and Licensing Department, Financial Institutions Division #621 • Branch License #00621
