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: The CFPB Concerns Most Lenders

*The CFPB Concerns Most Lenders*
*Research Reveals Compliance Woes**

***The Consumer Financial Protection Bureau has made designing a new disclosure form that combines the Truth in Lending Disclosure (TIL) and Good Faith Estimate (GFE) a top priority in 2012. The pending reform also ranks as lenders’ greatest compliance concern according to QuestSoft’s fourth annual compliance survey. What else are lenders concerned about? Here’s the full details:

****The combined TILA/GFE disclosure was cited by 48 percent of lenders as a high concern, with an additional 33 percent citing the reform as at least of medium concern. The survey, which polled 426 lenders on their level of anxiety for regulatory changes, also found fair lending exams, continued refunds and losses from the Real Estate Settlement Procedures Act (RESPA) fee tolerances (40 percent highest concern) and Dodd-Frank rule making (42 percent highest concern) as top issues.

****“The CFPB has been testing new disclosure forms for the past year, and we are expecting the final rule to be announced within weeks,” said Leonard Ryan, president of QuestSoft. “Factor in the CFPB’s position that consumers who do not receive proper disclosure should have the right to walk away from a loan, and it is no surprise that disclosure compliance is the top concern.”

****Ryan added that the overwhelming number of Dodd-Frank laws remains a high concern due to the uncertainty of what specific rules will be implemented, and their enforcement deadlines. RESPA Fee Tolerances were in the top three concerns for the second year in a row, polling as the second highest area of concern for 2011.


****“Dodd-Frank has listed seven new major reforms as its mandated priorities for 2012, but there is still uncertainty. These seven reforms are all required to have the final rule on or before January 21, 2013, and yet what exactly they will entail is unknown,” Ryan said. “This uncertainty naturally causes stress among lenders. Additionally, there is concern that the rush to comply with the law will result in final rules with unintended consequences.”

Understanding The News: Can You Calculate How Much Your LOS Saves You?

*Can You Calculate How Much Money Your LOS Saves You?*
**A New Report Quantified LOS ROI**

***Lenders never seem to be happy with their loan origination systems. And they’re right to be upset. Many LOS systems on the market are based on old technology and hinder the lender from truly advancing. Lenders become hostages to their LOS. Nonetheless, lenders need an LOS. So, how do you quantify the true return on investment? Origination vendor Blueberry Systems LLC released the independent findings of a MarketWise Advisors’ detailed ROI Analysis of the implementation of its RELAY loan origination system at Plano, TX based Starkey Mortgage. Here’s what the report found:

****“We are excited about the direct and measurable advantages that RELAY has already given us. We’re looking forward to the increased returns as time goes on,” said Starkey CIO Bill Burke. “But just as important to us has been the high level of service and the partnership they have developed with us. They are sincerely invested in our success.”

****Starkey Mortgage implemented RELAY in January 2012 and MarketWise Advisors closely analyzed the subsequent impact of the system on the lender’s loan origination operations. Based on the system’s performance, it found that in a typical implementation of RELAY, a mid-tier mortgage lender with $500M-$5B in annual origination would ultimately save nine hours of work, or approximately $287.75 per loan. Starkey Mortgage is well on the way towards achieving this objective ahead of plan. This operational impact spans all areas of origination, processing, closing, post-closing and secondary marketing and MarketWise projected direct ROI benefit at 5.07x payback with a peak efficiency levels within three years of implementation.

****“Based on our analysis, Blueberry Systems’ RELAY LOS offers a solid approach for lenders to manage business stages and the underlying data flow,” said Jordan Brown, CEO of MarketWise Advisors LLC. “It is also important to note that the indirect benefits of RELAY can potentially outweigh the direct benefits. These would include improvement of loan quality, data management, auditing framework, information security and process flow.”

****“RELAY has been thoughtfully designed with advanced technology and innovative strategies to help lenders manage their loan production pipelines efficiently and profitably. We are encouraged that MarketWise Advisors’ findings validate our value proposition,” said Wil Armstrong, a founder and CEO of Blueberry Systems. “We are proud to count Starkey Mortgage as a partner and are thrilled about their future prospects.”

Understanding The News: New Website Builds On Clayton’s Reach

*New Website Builds On Clayton’s Reach*
**The Power Of The Web Continues**

***Clayton Holdings LLC, a provider of due diligence, underwriting, surveillance and default servicing to the residential and commercial mortgage and fixed-income industries, announced today that it launched its redesigned website. The company said that it designed the new site to better align it with the services that Clayton is currently providing to mortgage servicers, originators, commercial banks, investors, hedge funds and credit unions. Here’s the full story:

****“Over the past few years, the composition of our offerings has adapted to a changing market and client base,” explained Tom Donatacci, executive vice president of business development at Clayton. “Although loan file reviews and servicer surveillance remain the cornerstones of our business, we have grown our presence in commercial real estate due diligence and small balance servicing; additionally, we are very active in performing foreclosure reviews and assisting regulated institutions with their operational planning and regulatory compliance.”

****Donatacci added: “Our new website gives current and future clients a clear, intuitive way to learn about our services and solutions. Visitors to our site can stay current on Clayton, read articles on industry issues, see upcoming conference schedules, and reach the appropriate professionals quickly and effectively. Identifying the expertise to solve complex business problems with speed and efficiency has never been more important than in today’s market.”

****Clayton Holdings LLC, headquartered in Shelton, Connecticut, provides information and services that financial institutions, investors and government entities use to evaluate, acquire, securitize, service and monitor loans and asset-backed securities. Clayton offerings include residential and commercial loan due diligence, consulting, surveillance, staffing solutions, independent pricing, and risk-based analytics. The company provides customized residential and commercial special servicing solutions through its Quantum Servicing subsidiary and REO management, BPOs and a short sale program through its Green River Capital subsidiary.

Understanding The News: Good News On Delinquencies

*Good News On Delinquencies*
**New Data Shows Improvement**

***According to Equifax’s March National Consumer Credit Trends Report and Creditforest.com, a joint product of Equifax and Moody’s Analytics, total delinquent first mortgage balances are under $500 billion in March 2012, the lowest since Jan. 2009. As of March 2012 there were a total of 49.5 million outstanding first mortgages, nearly an 11% decrease from the peak of more than 55 million in March 2008. The decline is caused by high foreclosures and loan payoffs and low homebuyer demand. Of delinquencies within existing home equity credit lines, an overwhelming 79% come from loans originated from 2005 to 2007. The number of revolving home equity loans is at a five-year low, with 11.6 million outstanding as of March 2012. Credit levels are also continuing to drop, falling 25% from the peak of $1.3 trillion in 2008. Other highlights of the data include:

****First Mortgage

****>> Mortgage balances were 3.5% below their year-ago level in March, having now posted year-over-year declines in the previous 36 consecutive months.

****>> Seventy-one percent of all first mortgage delinquencies are from loans taken out in 2005-2007.

****>> The share of first mortgage loans transitioning from current status to 30-days past due is at its lowest level since June 2007.

****>> The share of first mortgages transitioning from 60-days past due to 90 days past due is at its lowest level in 59 months.

****>> Loans in severe delinquency status, defined as those 90 or more days past due or that have started the foreclosure process, has fallen steadily over the 24 months ended March 2012 and now stands at $477 billion.

****Home Equity Revolving Credit

****>> Existing balances have dropped 17% from March 2009 to 2012, as home loan originations struggle while foreclosures force write offs.

****>> New home equity lines of credit opened in January 2012 were 16% higher than the recession low of $4.3 billion in Jan. 2009, but 67% lower than Jan. 2008 ($15.2 billion).

****>> Utilization rates, the ratio of balance to credit limit, have stayed at or near 55% since March 2009, although since that time the available credit declined from $575 billion to less than $470 billion.

****Home Equity Installment Loans

****>> Home equity installment balances have dropped 46%, down to $150 billion in March 2012 from $275 billion in March 2008.

****>> In March 2011, delinquent balances in foreclosure totaled nearly $862 million. In March 2012, that number had decreased nearly 30% to $604 million, the lowest since mid-2007.

****>> Total delinquency rates in March 2012 are 14% lower than in March 2011.

****“The residual effect from the recession and housing bust continues to be an obstacle for both lenders and borrowers in the housing market,” said Equifax Chief Economist Amy Crews Cutts. “We’re seeing effects of the economic recovery within existing accounts in the form of fewer delinquencies and foreclosures, but not a substantial amount of new activity as home sales and resulting new home financing fail to keep pace with payoffs and foreclosures.”

Understanding The News: Research Shows That Fraud Concerns Are Mounting

*Research Shows That Fraud Concerns Are Mounting*
**Industry Sees Fraud Rising**

***Ernst Publishing Company, a specialist in land recording requirements for almost two decades and processing more than 120,000,000 transactions annually, recently released the results of a title industry survey, revealing thoughts and perceptions held by industry insiders regarding mortgage fraud. The survey touched about 9,000 industry participants, many of whom provided detailed answers. And what they had to say about the state of mortgage fraud was not encouraging. Here’s the scoop:

****About 40% of respondents felt that fraud in real estate transactions had increased in the last year, while the respondents were evenly divided on the topic of which type of fraud they were most concerned about. Among the choices: “robo-signing,” identity theft, integrity of the record, fraud within the loan transaction, and foreclosure fraud.

****“It’s clear that lenders are viewing mortgage fraud as a very serious issue and a growing problem,” said Jan Clark, senior vice president of Ernst Publishing. “We discussed the results with members of the American Land Title Association and the Property Records Industry Association, and while our survey revealed that about half of respondents don’t believe a national recording system wouldn’t have any impact on fraudulent practices, the idea of a national registry provoked quite a debate.”

****The survey also revealed a lukewarm response to whether or not the CFPB/RESPA changes to the HUD and GFE had helped to mitigate fraud, with only about 20% saying they believed the new rules had a positive impact. Respondents felt that additional steps to combat fraud would be to improve technology solutions, increase notary responsibility, and further certifications for title agents and loan officers.

****Ernst Publishing does not offer fraud risk mitigation products or services, but performs research regularly on important industry issues as a service to the industry.

Understanding The News: Moving The Point-Of-Sale Forward

*Moving The Point-Of-Sale Forward*
**FIPCO Interfaces With Data-Vision**

***Data-Vision, Inc., a provider of Internet lending technologies that enable mortgage lenders to quickly and affordably implement innovative web portal and e-lending capabilities, announced that they have entered into a DU3.2 interface agreement with Financial Institution Products Corporation (FIPCO) A wholly owned subsidiary of the Wisconsin Bankers Association, FIPCO is widely regarded as a leader in financial services form sets, loan and deposit software and document imaging.

****Data-Vision President, Randy Schmidt, stated, “We are honored to be working with FIPCO. We welcome the opportunity to bring our industry leading online lending tools to FIPCO’s client base.”

****As the mortgage market evolves and borrowers demand more online lending tools from their lender, Data-Vision has a proven track record of delivering innovative products and services to the hundreds of financial institutions that it serves. They understand that being able to deliver a consistent borrower experience across all lending channels through a dynamic single online lending platform improves customer satisfaction in the most cost effective manner.

****FIPCO President, Pamela Kelly, stated, “We are pleased to offer the DU3.2 interface to Data Vision customers.  This interface will seamlessly integrate data from Data Vision into Financial Link® software, providing users with direct and timely access to accurate information, while virtually eliminating the potential for costly errors that can often result from duplicate data entry.”

Understanding The News: Servicing Leader Embraces New Cloud Technology

*Servicing Leader Embraces New Cloud Technology*
**DRI Launches New Cloud Solution**

***Default management software, DRI Management Systems has announced that its award-winning DRI Office is now available as Software as a Service (SaaS) through cloud computing. Users of DRI Office are able to access the platform over the Internet while the software and data are securely hosted on servers at a top-tier data center. Servicers benefit from the same or better service levels and performance than if the software programs were installed locally on end-user computers.

****“Small servicers today need the tools that larger players have,” said Fred Melgaard, executive vice president and COO at DRI Management Systems. “These include compliance tools; total staff coordination; a system that provides complete accountability; straight-through processing of all expenses all the way to the claim; system flexibility; and automation of manual processes.” Melgaard cites improvements in cloud delivery technology that enable DRI’s traditionally high standards for process flexibility and delivery to be realized using this convenient and cost-effective approach. “Every size and type of loan servicer today faces the same compliance and auditing challenges,” he says. “DRI Office keeps servicers ahead of compliance demands and arms them with a complete audit record automatically.”

****Using DRI in the Cloud, mortgage servicers are able to get their applications up and running faster, with easier manageability and practically zero maintenance. DRI Office in the Cloud frees IT professionals to focus on other mission-critical areas instead of maintaining local DRI Office host servers. There is no need for capital expenditures on hosting servers and infrastructure, equipment that only depreciates and becomes obsolete over time.

****“DRI Office in the Cloud results in rapid deployment, low start-up costs, scalability, broad network access, and measured service,” Melgaard added.

****A base fee provides the platform and a fixed amount of storage and/or computations, and thereafter pricing varies with usage. “Cloud services are proving to be a valuable approach for companies wanting to make their costs as variable as possible,” Melgaard says. “Servicers need every advantage when dealing with defaulting loans, and that includes watching the bottom line. We are constantly improving the functionality of DRI Office while leveraging cloud technology to provide flexibility and unprecedented client control over vital default management processes.”

Understanding The News: Companies Link To Ensure Compliance

*Companies Link To Ensure Compliance*
**Xerox Looks To Compliance Experts**

***Got compliance on your mind? Most lenders do. It’s a tough market from a regulatory standpoint and it’s going to get tougher. That’s why proactive vendors are stepping up to provide education and technology to help lenders keep compliant. Along these lines, Xerox Mortgage Services has some big plans. Here’s the scoop:

****MRG Document Technologies, a document preparation software and compliance technology, and Georgia-based Xerox Mortgage Services are combining their experience and expertise for an educational webinar that will provide lenders valuable insight into the ever changing regulatory challenges facing the market, and innovative approaches to overcoming them.

****Doing “business as usual” is no longer the answer for lenders who are looking to effectively deal with extremely complex regulatory requirements. The time to move the industry forward is now. Many lenders are unsure of how these changes will affect their business and what steps they need to take. To that end, they are turning to technology to support compliance and eliminate risks.

****The “Supporting Compliance Throughout the Loan Lifecycle” webinar, which will take place on Tuesday, May 15, 2012, at 1:30 pm EDT, will highlight the current state of the regulatory environment and what integrated partners are doing to assist the lending community. Discussion will focus on the importance of change and collaboration and how current rules and regulations are impacting lending.

****“The benefit of this collaborative, educational webinar is to assure the marketplace that their concerns are being heard and addressed by the vendor community – action is being taken,” said Kathleen Mantych, senior marketing director, MRG Document Technologies. “In this session, we’ll provide lenders with a “real world” view on the industry landscape and how collaboration between vendors combats the risk of non-compliance, state audits and potentially dramatic fines.”

****“Lenders can better support compliance when they have easier access to their data. Solutions such as MRG Document Technologies’ dynamic forms help lenders quickly adapt to new regulations and work more accurately as a result,” said Nancy Alley, vice president and general manager, Xerox Mortgage Services. “This webinar is an example of the benefit lenders gain from the BlitzDocs network, which consists of industry leading companies who have extensive expertise in their respective specialties.”

****MRG Document Technologies current collaboration with Xerox Mortgage Services enables their dynamic forms to be seamlessly passed into BlitzDocs for intelligent collaboration.

****Also, Medallion Analytics, a mortgage technology company that provides compliance and control across the entire loan origination process, announced that its Medallion QC Audit solution is now integrated with Xerox Mortgage Services’ BlitzDocs intelligent collaborative network.

****BlitzDocs simplifies and accelerates the loan process by connecting participants so they can electronically collaborate. By adding Medallion’s QC Audit tool, BlitzDocs users will benefit from an automated quality control check, including a complete audit report within minutes – eliminating the need for manual review of each element and cutting loan processing time even further.

****“The combined capabilities of Medallion’s and Xerox Mortgage Services’ technologies demonstrate the power of next generation paperless mortgage processing, driving down cost and processing time, while dramatically enhancing quality and compliance,” said Joel Davidson, CEO of Medallion Analytics. “With Medallion’s unique ability to extract and analyze content from mortgage documents and convert it into usable data, not just images, Medallion gives loan originators a breakthrough solution to automate the entire pre- and post-close loan origination audit process.”

****Using Medallion’s technology, lenders can spot data integrity and compliance issues in real time, eliminating costly errors of manual review, while embracing evolving regulatory requirements — enabling loans to be processed dramatically faster for borrowers.

****“In today’s stringent environment, lenders need faster, easier ways to maintain accuracy and transparency of the data,” said Nancy Alley, vice president and general manager, Xerox Mortgage Services. “With the addition of Medallion QC Audit, Xerox Mortgage Services continues to improve the paperless mortgage process and provide additional compliance safeguards to our BlitzDocs users.”

Understanding The News: More Barriers To Adopting E-Signing Are Eliminated

*More Barriers To Adopting E-Signing Are Eliminated*
**The IRS Steps Up, Finally**

***The big news recently is that the IRS is about to accept electronic signatures on the 4506-T. Certainly, getting rid of this barrier to adopting e-signatures will be huge. The IRS initiatives, while benefiting the industry, also are expected to meet with public acceptance. A recent PEW Internet & American Life Project report indicates that more than two-thirds of adults feel it is important to complete government-related tasks online. The study, released on April 12, 2012, is available at www.PewInternet.org. But is the industry read to start e-signing right away? Here’s the scoop:

****First, National Credit-reporting System, Inc., a full-service consumer reporting agency specializing in income, identity and credit intelligence, is assisting the IRS in the development of its e-Signature and e-Transcripts initiatives, creating an electronic process that eliminates the need for the paper form 4506-T when requesting IRS tax transcripts. The IRS initiatives are part of NCS’ drive to provide lenders with new verification solutions that lower origination costs and speed loan closings.

****Cecil Bowman, senior vice president for government and industry relations at NCS, chaired the MBA committee on IRS 4506-T issues that is working with the IRS to create an electronic version of the 4506-T form. The form is used to request tax return data to verify borrower income, employment and finances. The e-Signature initiative has completed its Proof of Concept trials, and e-Transcripts will begin its Proof of Concept later this year.

****“We’ve moved the industry in the past 12 months to a position where the IRS is going to be able to go with an e-Signature capability on form 4506-T and get rid of the wet signature requirement,” said Bowman. “We also helped drive development of the end-to-end electronic capability that will provide income verification through e-Transcripts, not in days, but in minutes.”

****NCS is also continuing to enhance its proprietary internal software to provide greater decisioning and analysis capabilities for its clients. These enhancements are centered on parsing the data contained in the HTML formatted IRS transcripts. They also include incorporating additional data sources into new reports NCS is currently developing. NCS’ enhanced data parsing application provides customizable cash flow analysis and sort capabilities available in many delivery and format options, such as web services and XML.

****And vendors are ready. The desire to be able to e-sign is there. For example, DocMagic recently announced that it is fully prepared to provide electronic signatures under the IRS Income Verification Express Service, which will allow lenders in the future to use e-signatures on official requests for a borrower’s tax transcripts and thus streamline the mortgage origination process.

****According to the Mortgage Bankers Association, the Federal Housing Administration and the U.S. Internal Revenue Service will start allowing electronic signatures on the IRS 4506-T tax transcript request forms and on FHA loan documents sometime this year. The development is seen as an important step in streamlining loan approvals, as the current process of verifying a borrower’s income and financial profile can take days or even weeks. DocMagic has been working with some of the nation’s largest lenders, credit unions and service providers to prepare for the adoption of this milestone.

****DocMagic currently enables the electronic signing of loan documents and disclosures through its eSign solution. A vital part of eSign is DocMagic’s proprietary ClickSign technology, which digitally seals a borrower’s signature on key loan documents. DocMagic’s eSign platform, available to anyone who wants to create e-signatures at no cost, is fully compliant with both the eSIGN Act and the federal Uniform Electronic Transactions Act (UETA).

****Dominic Iannitti, president and CEO of DocMagic, said, “With electronic signatures, our clients and partners can increase the speed and efficiency of their operations, particularly on non-disclosure agreements, pre-disclosures and legal contracts.  When e-signatures are approved for 4506-T forms, we’ll be ready to go – and our clients will see even greater savings in time and paper.”

****But will lenders look to e-sign everything? Chuck Burke, chief operating officer of NCS, said, “As the popularity of customization of IRS data grows, NCS has correspondingly worked with the IRS to encourage and provide assistance for shrinking IRS turn times for the benefit of NCS and our industry as a whole. Every company in the industry depends on the IRS’ response.”

Understanding The News: Fraud Is On The Rise Again

*Fraud Is On The Rise Again*
**The Trend Is Troubling**

***Interthinx has released its annual Mortgage Fraud Report, which highlights some of the most significant mortgage fraud risk trends based on analysis of loan applications processed in 2011. According to the report, the Employment/Income Fraud Risk Index rose 14 percent during 2011 and has been on an upward trend for more than two years for a total increase of more than 45 percent. The Employment/Income Fraud Risk Index is particularly high for investor loans with an index of 310, which is almost three times the overall index value of 111 and is highest for high-value properties.

****More detailed points highlighted by Interthinx analysts include the following:

****>> The fraud hot spots for 2011 are very similar to those observed in 2010. The top six states with the highest overall levels of mortgage fraud risk in 2010 were again the riskiest six states in 2011. Mortgage fraud risk remained consistent from 2010 to 2011 in the Metropolitan Statistical Areas (MSAs) as well, with 16 of the 20 riskiest MSAs repeated from the previous year. This alarming degree of persistence suggests that it is going to be a long road back for these MSAs and states. They are all experiencing high levels of foreclosure activity, and the predominant mortgage fraud schemes center on distressed borrowers and properties.

****>> Nevada has the highest mortgage fraud risk in the nation, with a risk index value at 245, which is 99 points higher than the national mortgage fraud risk index of 146. Over the last eight years, Nevada has experienced a cycle of fraud leading to an artificial boom followed by a devastating bust resulting in the largest house price declines, unemployment rates, and foreclosure rates in the nation. High fraud risk, associated in particular with foreclosure and short sale schemes, contributed to Nevada retaining its position as the state with the highest mortgage fraud risk in the country for the third consecutive year.

****>> The entire Chicago MSA saw a dramatic decrease in high-risk transactions in 2011, with its risk index value falling from 174 in the first quarter to 146 in the fourth quarter. Increased media and lender scrutiny of fraud in these geographies may have played a role in this dramatic change.

****>> Five of the six New England states experienced large changes in fraud risk between 2010 and 2011. Rhode Island, Massachusetts, and New Hampshire are among the four states with the largest risk decreases, while Vermont and Connecticut both experienced large increases in fraud risk. This dichotomy could be caused by the movement of fraudsters between neighboring regions as they identify areas ripe for exploitation. Maine remained in the five lowest-risk states.

****>> The rise in the Employment/Income Fraud Risk Index over the past two years is likely the result of the decline in house prices being outpaced by the decline in the income of working households combined with more stringent underwriting and documentation requirements.

****>> Loan applications for investment properties continue to have very high fraud risk compared with owner-occupied properties.

****“Keeping our guard up as risk profiles shift requires our industry to think as creatively as the criminals,” said Kevin Coop, president of Interthinx. “That’s only possible when lenders have access to the best data and analytics available. By identifying risky correlations, such as high employment/income fraud risk on loans to investors for high-value properties, or pinpointing geographic pockets of risk, we provide actionable intelligence that lenders can use to mitigate risk.”