We’re not necessarily looking to break technology news, but we are looking to put it all into greater context for you. Right now we’re hearing:

Understanding The News: Are You Safe?

*Are You Prepared For Cyber Threats?*
**Cyber Crimes Are On The Rise**

***The threat posed by cyber criminals has become an increasingly real and growing concern in mortgage lending, and one that has attracted the attention of Congress, as evidenced by recent hearings by subcommittees of the House Committee on Financial Services. Fighting cyber crime is becoming a priority for more parties than ever before, from the Department of Homeland Security to private firms and insurance companies. As former Homeland Security Secretary Michael Chertoff recently said, “People often ask how much of a threat this is. It’s not a threat – it’s actually happening.” Chertoff’s consulting firm says cyber criminals cause over $100 billion in mayhem per year worldwide, and some believe it has exceeded drug trafficking in dollar volume. Here’s how you deal with these criminals:

****As a line of defense to protect its clients against loss caused by cyber crimes, mortgage loan origination software maker Mortgage Builder has carried “cyber liability insurance” (CLI) coverage for the last three years, well before the issue became public knowledge. It also has completed a SSAE 16 Type II audit. “We do not consider cyber liability insurance coverage to be just an option,” says Mortgage Builder Founder and CEO Keven Smith, “It’s a necessity. Cyber criminals have become more sophisticated as the amount of information available in cloud computing environments has grown. It is our responsibility to protect the sensitive information with which we are entrusted by both clients and borrowers.”

****A report by the Ponemon Institute, a U.S. based information security policy research center, states that the median cost of cyber crime increased by 56 percent over the last year and now costs companies an average of $6 million per year. (Source: Second Annual Cost of Cyber Crime Study, Ponemon Institute, August 2011). The information came from a self-report survey of 50 U.S. based businesses, and the company notes that many companies decline to report cyber crimes, implying the problem is actually far greater than previously thought.

****Bill Mitchell, Mortgage Builder’s vice president and national sales manager, notes that cyber liability insurance is not required for LOS providers, partially because the issue surfaced in earnest only in the last year. But more lenders, particularly the community banks that make up 70 percent of Mortgage Builder’s prospective clients, have become keenly interested in cyber crime protection. “A top-25 community bank that recently became a client found in their due diligence that many LOS providers lacked cyber liability insurance coverage,” he says. “It is rapidly becoming a requirement in RFPs (Requests for Proposals) among lenders when considering new loan origination software solutions.” Mortgage Builder carries the maximum policy available, Mitchell says, which includes coverage to $2 million per claim, but notes that higher limits may be available for lenders seeking supplemental coverage through their own providers.

****Mortgage Builder also sees a successful SSAE 16 Type II audit as an essential security safeguard, indicating that the American Institute of Certified Public Accountants has tested the organization’s ability to protect sensitive business data. This new audit designation replaces the SAS 70 Type II audit that represented the industry’s top audit designation up until this year. “This is another protection against information theft that is not required for LOS companies,” Mitchell states. “It involves on-site physical verifications of security measures, control objectives and activities by an approved, independent auditor. We recently passed our ninth consecutive audit with flying colors, and we are seeing more clients who appreciate the commitment it represents to safeguarding their information,” he says.

****“We hope for the best but we plan for the worst,” Keven Smith says. “Staying ahead of the requirements and keeping clients as protected as possible from cyber crime is our preferred method of doing business.”

Understanding The News: Credit Unions and Community Banks Search For Answers

*Don’t Credit Unions and Community Banks Deserve Help, Too?*
**Talking Loan Quality**

***As more community banks and credit unions beef up their mortgage presence, they need help. Mortgage isn’t their specialty and with all the new rules and regulations, it’s not easy. As a result, we are seeing new technology tools hit the market specifically designed to help this group. For example, PROGRESS in Lending has learned that Aklero Risk Analytics, a provider of automated data and document validity assurance, has unveiled DQx Scan, designed to meet the quality control needs of small lenders; particularly, community banks and credit unions.

****“The aim is to provide these financial institutions with the same quality control capabilities that we provide to the largest lenders and investors,” said Brian K. Fitzpatrick. “They want fast, efficient, high-quality services and that’s what DQx Scan delivers to them.”

****The lender scans the loan documents, names the file, hits send and delivers the documents securely to Aklero, which classifies the documents and extracts critical loan data. An automated deficiency detection analysis is performed on both the documents and the data, before performing the most comprehensive and accurate quality control audit in the industry. In addition, Aklero will provide the scanner to the client.

****“With DQx Scan files never leave the lender’s premises, the files go securely into our platform to begin the classification of loan files, extraction and validation of key data elements, a process that is completed within 24 hours,” said Fitzpatrick. ”Depending on the needs of the lender, Aklero can perform quality control for specific functions such as pre-closing or at any point in the mortgage life cycle.”

****If the lender does not have their files previously scanned, DQx Scan eliminates the hassle of delivering loan files for audit. The solution reduces the time that the quality control process requires, saves money, and provides the most accurate and detailed quality control in the industry, because it validates data from source systems to the data contained in the documents, in a highly automated fashion.

****“These smaller institutions had few options for quickly delivering loan files for audit until now,” said Fitzpatrick. “DQx Scan ensures that smaller institutions will be able to eliminate the security issues and time consumption concerns with delivering loan files for audit.”

Understanding The News: Joining With HUD

*Partnering Up With HUD*
**Emphasizing Loan Quality**

***As everyone talks about the new government program to get more underwater loans modified, here’s some more government news: Matt Martin Real Estate Management (MMREM), a provider of real estate services, including asset disposition, financial advisory, and mortgage loan loss mitigation services, has been awarded a multi-year contract with its prime contracting partner, STS-MAAG, to provide Mortgage Insurance Endorsement (MIE) processing services for the U.S. Department of Housing and Urban Development (HUD), Denver Homeownership Center (HOC).

****The Mortgage Insurance Endorsement contract was made as part of HUD’s ongoing efforts to ensure effective oversight documentation tied to mortgage loan origination. MMREM, in conjunction with STS-MAAG, will review FHA Case Binders, verify Computerized Home Underwriting Management System (CHUMS) data integrity, and validate all loan closing packages.

****“In partnering with STS-MAAG and FHA, we are helping to meet the US Government’s goals of ensuring proper due diligence on FHA’s growing insured loan portfolio,” said MMREM Vice President of Business Development Noah Martin. “Our Quality Management Solution will help mitigate data quality and process compliance issues and assist in the important effort of keeping HUD’s portfolio strong.”

****“MMREM is well positioned to help government agencies efficiently manage rapidly increasing transaction volumes while overlaying robust risk management programs,” said Andrew Reamer, MMREM president and COO. “MMREM’s experience providing compliant asset management and loss mitigation services in a rapidly changing housing landscape greatly enhances the government’s ability to stabilize neighborhoods on a national scale while reducing costs to the US taxpayer,” he said.

****Matt Martin Real Estate Management (MMREM) is a small business financial services firm focused on delivering financial services to commercial and government clients. The firm, established in 2004, offers asset disposition, financial advisory, loss mitigation and acquisition services. MMREM provides services nationwide through six offices located in Arlington VA (Headquarters), Dallas TX, Austin TX, Philadelphia PA, Irvine, CA, and Atlanta, GA. MMREM is strengthened by a diverse management team, each possessing over 10 years of experience in the financial services field.

****Structured Training Services Inc. (STS) – Mortgage Assistance and Acquisition Group (MAAG), incorporated November 1998, provides property preservation, marketing and outreach, and information dissemination training while continuing to provide information technology and business consulting services to the Federal Government and private sector. The management team has over 40 years of experience and knowledge in developing, implementing, and administering training programs. STS-MAAG is an 8(a) certified and Minority Woman Owned Business (MWOB).

Understanding The News: Embracing The Cloud

*The Cloud Has Finally Come Of Age*
**A New Consulting Service Forms**

***Acris Technology, the software development company behind Mortgage VCO, a full suite of cloud-based software applications and business support resources for mortgage bankers and lenders, has launched a new consulting service designed to help lenders and other financial service companies build an entirely cloud-based virtual corporate office. Named VCO Airlift, the new consulting program will identify the specific steps a lender needs to undertake to run a compliant, scalable, paperless, virtualized mortgage office without the expense and complexity of on-site servers, software, maintenance and upgrades, while taking into account the company’s existing software and business needs. Airlift will also pinpoint the savings in dollars that lenders will realize by freeing themselves from on-site servers and legacy systems and migrating to a virtual environment.

****Airlift specifically leverages lessons gained since Acris Technology has been managing and hosting virtualized platforms since its inception in 2005. Earlier this year, Acris Technology launched VCO Desk, a virtual office platform tailored specifically for the mortgage industry. Through a secure Citrix environment, VCO Desk enables racks of servers to be replaced by an array of hosted, load balanced virtual servers, allowing desktop users remote access to all of a company’s applications and data while providing greater IT power, scalability and security. Developed and refined over the course of years, VCO Desk had been in use privately for years by Laguna Hills, California-based Millennia Mortgage to process over $10 billion in funded loans.

****“Everyone is talking about cloud computing, yet it is not clearly understood by many small and mid-sized lenders in a way that makes it actionable,” says Martin Williams, CEO of Acris Technology. “Because we have ‘been there, done that’ with our own virtual office platform, VCO Desk, it occurred to us that we can guide others who are weighing this transformation but aren’t sure how to get there. We’re calling it VCO Airlift because it is designed to ‘lift’ companies into a cloud-based environment, where so much more is possible.”

****While some additional expense and equipment may be required to build a totally cloud-based mortgage office – such as procuring sufficient high-speed Internet service and configuring dual monitors for staff, for example – virtualization allows lenders to save an enormous amount of money that is normally spent on IT staff and on-site, physical servers, which typically handle email, database, file storage and other functions. In comparison, a virtual corporate office uses secure, remote servers to handle all of a company’s IT needs, while allowing staff to use emails, files, electronic documents, loan origination software and customer relationship management (CRM) tools just as they normally would. In addition, in most cases, lenders do not have to give up any of their current applications or software to place their business in the cloud.

****Once a lender signs up for Airlift, Acris consultants will perform a thorough analysis of the lender’s existing technology infrastructure and software applications and return with a clear set of steps indicating what the lender needs to create a virtual office, what challenges specific to the lender may exist, and the different options that are available. Participants in Airlift are under no obligation to buy Acris Technology products or services, but will benefit from a thorough report and access to online tools and resources for moving their business into the cloud.

****“With mortgage rates at all-time lows, now is an opportune time for many lenders to be considering a cloud-based future,” says Richard Johnston, president of Acris Technology. “Right away, they get greater data storage with automatic backups, better security and unlimited scalability to handle an increase in business – all with lower overhead. But they also get the ability to leverage mobile technology, add remote staff, and more easily manage today’s tough compliance challenges through a single, common platform.”

Understanding The News: LOS Stirs Things Up

*BREAKING Loan Origination System News*
**A New Approach**

***MortgageFlex Systems, Inc., a leading provider of mortgage lending solutions for over 30 years, announced today the official launch of the newest generation of LoanQuest, the company’s flagship enterprise loan origination system (LOS). The milestone release combines over 30 years of mortgage lending system functionality and experience with the latest generation of Microsoft technology. Here’s why the company thinks this LOS will stand out:

****Staying true to the company’s vision, the origination platform allows lenders to differentiate themselves from the competition by providing a lending solution that meets their unique needs while still being affordable and easy to maintain. The system provides extensive user configuration flexibility of the core system and a comprehensive, easy to use tool set for additional system tailoring. The technology platform puts lenders in control of their system functionality, not the vendor. Lenders can build to their strengths while enhancing staff performance, increasing capacity and improving quality and customer service.

****During the past three years, MortgageFlex strategically entered into an extensive R&D mode to rewrite its LOS from the ground up including a redesign of the database schema. LoanQuest retains all the functionality developed over the past 30 years while adding significant enhancements that take advantage of the latest technology. LoanQuest has been completely re-engineered utilizing Microsoft’s latest version of .NET architecture including several technologies not available in earlier versions of .NET.

****In laying a new technical foundation that will perform effectively for many years to come, the new technology offers significant productivity and quality control features including constantly running compliance logic, a powerful and flexible workflow system, a business rule engine, an imaging system, a product and pricing engine, a network of industry leading service partners, and support for web services and MISMO based interfaces. With LoanQuest, lenders will have peace of mind by being regulatory compliant, having data continuously updated and validated, eliminating data redundancies, reducing processes and processing time using business rules, automating tasks with workflow, and having an enterprise level system that addresses all lending channels including retail, wholesale, correspondent and conduit.

****Utilizing world class components such as Microsoft’s Workflow Foundation and InRule’s Business Rule Engine extend the capabilities of this version of LoanQuest far beyond previous versions and other solutions on the market. As a result, the value of MortgageFlex’s solution has increased substantially.

****“Lenders are looking to technology to meet their customer service needs in addition to improving their business efficiencies,” according to Craig Bechtle, chief operating officer of MortgageFlex. “Strict regulatory guidelines demand compliance and market requirements have lenders searching for an origination system that allows consumers easy access while saving the lender time and worry about compliance; we believe this next generation of LoanQuest meets these requirements. Loan quality has always been of paramount importance and now lenders can automate manual tasks by employing smart technology that simplifies and promotes the implementation of processes and services through the use of the rules engine. The melding of other technology features like task automation and business intelligence are accomplished by automating work flow steps together with the rules engine and imaging center which results in reduced labor costs while also improving quality,” Bechtle concluded.

****“The decision to make a deep-pocket technology investment, over 10 million dollars, was one we had in the planning stages for a quite a while before we committed to full blown development,” said Lester Dominick, president, MortgageFlex. “We were patient while we tested several versions of Microsoft’s .NET technology until a version was released that we were confident could deliver all the functionality we required and was stable and scalable. Our existing and new clients agree that this technology can take them to higher levels of customer interaction, increase compliance and help them achieve cost efficiencies while growing their businesses.”

****“Technology buying habits have changed dramatically since 2007,” continued Dominick. “Lenders began buying low-cost solutions that helped them survive in an unpredictable market that stifled growth. Now, lenders are actively competing and many are growing again and they require more sophisticated technology to accommodate those needs. The days of lenders buying just enough technology to get by are coming to a close. They require enterprise-level systems that allow them to automate complex workflows and grow with an ever-changing market.”

****MortgageFlex has been hosting clients for over 10 years, and both the company and its data centers are SSAE 16 audit certified. The hosting solution is unique among the “cloud” offerings in that each client has their own exclusive instance of the application and their own database. This model provides superior security compared to “multi-tenant” solutions and meets the stringent requirements of banks, credit unions, and other clients that desire a high level of security. The design also isolates system performance allowing individual lender performance tuning. Because the code for each client is managed separately, the client controls testing and the scheduling of updates. With multi-tenant systems there have been occurrences where a patch made to the shared code for one client brought down everyone on the shared system simultaneously. The system can also be installed in the client’s environment, with MortgageFlex technical assistance available.

****The demand for this technology has already landed the company 14 new clients ranging from mortgage bankers to community banks, Credit Union Service Organizations (CUSO), national banks, credit unions, as well as state housing finance agencies.

****CUMAnet (Credit Union Mortgage Alliance Network), Basking Ridge, New Jersey,  originates and services first and second mortgages for 51 credit unions in their individual names, according to Jay Romanovsky, Credit Union Relations Officer for CUMAnet, who said “loan processing and fundings per head would increase dramatically” using the new technology, resulting in a “scalable model that will enable us to take on new clients.”

****Romanovsky said “fundings are up considerably” for credit unions and volumes are expected to remain strong, beyond the capacity of their former platform, which was manually intensive and missing the automation functions of the MortgageFlex system. “We really like the new system’s processing features and its ability to provide information to borrowers and members in a live environment, accessible via the Web,” he said.

****One of MortgageFlex’s latest clients, Guardian Mortgage, believes that communications should be open and easy with its customers. To facilitate that approach they wanted a system where a loan officer could start an application and then allow the borrower to finish it at their convenience. “With MortgageFlex, we will be able to respond to an application much faster than before,” said Greg Sweet, senior vice president, Guardian Mortgage Company. “Accuracy is also improved as we don’t need to re-enter application data into a different system to process the application.”

****“Lenders are seeking full featured products and LoanQuest has been honed to a rich functionality set during the last three decades by utilizing lenders and industry best practices,” stated Dominick. “We have thirty years of experience and focus in maintaining the absolute highest standards of compliance that is unmatched in the industry. The level of functionality clients have with our new LOS empowers them to effectively manage growth and capitalize on new marketplace opportunities.”

Understanding The News: The Hunt For Accuracy

*Decisioning Vendor Promotes Quality*
**New Portal Speaks to Precision**

***Optimal Blue, the developer of a Web-based platform that couples decisioning technology with content management for the mortgage industry, has launched its online broker origination portal and investor credit overlay tools. Comprehensive in scope, the origination portal incorporates a seamless integration with Fannie Mae’s Desktop Underwriter (DU) application, enabling lenders and originators to make informed credit decisions on conventional conforming and FHA loans. In addition, the rollout also includes investor credit overlays, showing users the underwriting and purchase stipulations unique to each investor merged with the DU findings.

****In this market providing the right access to tools at the point-of-sale is critical. It’s imperative that mortgage lenders have real-time information, from accurate, real-time product and pricing to accurate decisioning and underwriting technology. This engine has incorporated access to decisioning for brokers, retail loan officers and lenders, providing genuine efficiency gains that help originators and lenders increase pull through and further automate the workflow while protecting lenders again repurchase risk.

****According to Larry Huff, co-CEO of Optimal Blue, “Having DU in this space hasn’t been a competitive differentiator to date, but as more lenders focus on boosting their origination portal’s and back office capabilities , being able to offer them collectively with Fannie Mae’s Desktop Underwriter along with the investor overlays has been extremely appealing. In one view, customers can see the loan stipulations alongside the individual investor’s credit overlays. For processing, secondary marketing, underwriting and shipping departments, this is tremendously compelling – it provides a high level of confidence as to whether the loan will be purchased.”

****Optimal Blue’s eligibility has always been a core competency, so it was a natural progression for the company to focus on enhancing that aspect of the engine. Optimal Blue’s staff worked diligently to incorporate eligibility on the credit overlays at the investor level. For any lender, not being able to sell a loan can have significant financial ramifications. These investor credit overlays provide confidence that loans have been underwritten properly and can be sold.

****Huff continued, “Within one platform, originators and lenders have accurate, real-time pricing and eligibility, access to DU decisioning, and the most comprehensive credit overlays and secondary marketing tools in the industry.”

****The last year has been significant for Optimal Blue, having restructured its engine, released Loan Originator Compensation functionality, and now, releasing the DU integration and investor credit overlays. According to executive management, the company is continuing to work on several significant and complementary developments and plans to release those in the next few months.