Executive Spotlight: Ben Wu of LoanScoreCard

BenWu_LoResBen Wu is executive director of LoanScoreCard, a leading provider of automated underwriting and compliance solutions and subsidiary of CalyxSoftware. Wu has more than 20 years of experience in the mortgage industry and is one of the founding members of CalyxSoftware. Joining the company in 1994, Wu developed the first Windows version of Point. Since then, Wu has been instrumental in the conception and implementation of several Calyx solutions, including Point Central, WebCaster and LoanScoreCard. Wu holds a bachelor’s degree from the University California Berkeley and a master’s degree in computer science from Stanford University. Here’s how he sees mortgage lending:

Q: Non-agency originations have grown significantly over the past year. What are some of the challenges that lenders face if they underwrite these loans manually?

BEN WU: The non-agency space is growing by leaps and bounds. Although it’s still a small portion of overall mortgage originations (representing less than 20% of all mortgages), it grew approximately 40% in 2015. From an originator’s perspective, manually underwriting these mortgages can take hours, sometimes days, for just one loan. These manual processes are also prone to human error and can expose you to compliance risk. For example, loan officers need to follow the different guidelines of different investors. But if each investor has a 100+ page document that the loan officer needs to follow, it’s practically impossible to originate correctly to all of these different guidelines. And of course, there’s the fear that if you don’t dot every “i” and cross every “t”, then you’re in a possible buy back situation, which could potentially put an originator out of business. Not only have lenders had to rework their entire workflow to be in compliance with QM agency loans, they have this additional growing need for what amounts to a separate workflow to ensure compliance and risk for non-agency originations.

Q: Are there any solutions available that can help them automate non-agency underwriting?

BEN WU: Our company offers a Custom Automated Underwriting System (AUS) that allows lenders to customize credit decisioning and safely originate compliant assets. Whether you’re a correspondent originator selling to secondary market investors or a bank or credit union originating loans to be held in portfolios, we can take whatever set of guidelines you are underwriting to and capture that within our engine. Custom AUS delivers an underwriting decision and an assessment report that includes a breakdown of every rule applied to that loan and whether you passed or failed that particular guideline—creating an audit trail for underwriting and ability-to-repay decisions. It can also accommodate third-party origination programs and helps ensure consistent, transparent credit policy application to prove Fair Lending. This automated solution helps underwriters focus on exceptions and the proper application of credit policy—improving efficiency and giving lenders greater peace of mind.

Q: It’s been six months since TRID has taken effect. What’s the impact been on your company and your clients?

BEN WU: TRID has been a learning experience for our entire industry. It’s presented enormous challenges for everyone: brokers, lenders, investors, LOSs, doc providers, settlement services companies, Realtors®, etc. I assume everyone has had horror stories about the early days of implementation and/or about less-common loan situations. Our clients primarily consist of small to mid-sized organizations and it’s not uncommon for these firms to operate without an IT department, a compliance officer or a system expert; leaving many business owners and originators who are trying to wear multiple hats. We’ve made some changes to help them better face these challenges, including increasing our support staff and the number of free resources available to help make the TRID transition as painless as possible.

Q: What’s the next big thing lenders should be focusing on?

BEN WU: Now that TRID has come and gone and the industry hasn’t completely imploded, the new Home Mortgage Disclosure Act (HMDA) data collection requirements is right around the corner. Based on the CFPB’s proposal, the final rule will dramatically increase reporting requirements and surprise lenders who have been lax on HMDA reporting and analysis, thus far. The new requirements will expand potential fair lending liability for covered institutions. Using the new information, regulators, advocacy groups and plaintiff’s attorneys will draw their own conclusions as to whether discriminatory lending patterns exists. In addition to mastering the new reporting requirements, prudent lenders will also take steps to analyze and explain their lending data.

Being able to demonstrate that a consistent, quality underwriting process is used to manufacture your assets will be essential for preparing for these new rules. The time to make process and technology changes is now and not next year when the rules take effect. If TRID has taught us anything, it’s that two years may sound like a long time to get ready—but it isn’t.

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.

Executive Spotlight: John Walsh of LERETA

John Walsh - CEOIndustry pioneer and visionary John Walsh is now CEO of Covina, Calif.-based LERETA, a national provider of property tax and flood hazard data for the real estate industry. Walsh leads an executive leadership team focused on providing the mortgage and insurance industries accuracy, responsiveness and innovative technology. In a long-ranging interview, John detailed his vision for the future of mortgage lending.

Q: What trends do you expect in the mortgage lending industry over the next few years?

JOHN WALSH: There are several critical topics facing the mortgage industry over the next few years. According to Fannie Mae, the number one risk concern for mortgage lenders and servicers in 2016 is compliance. Will the hyper-regulation that has existed for the past several years continue or will the pendulum swing back to a more reasonable approach? Recently, one of the presidential candidates suggested that new regulation should require an ROI analysis. How does the cost of the new regulation, to both the government and the affected industry relate to the anticipated benefit? It’s an interesting idea. However, even if adopted, it is unlikely that the mortgage lending industry will see relief for several years. In the interim, regulations will continue to increase costs for both originators and servicers. This may be a particular problem in servicing where the revenue side of the equation is fixed. The obvious threat to both the mortgage industry and borrower is if this trend results in fewer firms willing to service or originate mortgages.

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Again, according to Fannie Mae, the number two risk concern in 2016 is mortgage origination levels. During the last four years mortgage originations have declined from $1.9 trillion to $1.6 trillion. This year the forecast is $1.5 trillion. At the same time, there is some room for optimism given housing starts have been steadily increasing since 2009. Today, they are currently less than 45% of the peak years of 2005 and 2006 and only 60% of housing starts in 2000. The average origination volume during the last 18 years is about $2.1 trillion. If the purchase market continues to grow, and can replace the refi market that the industry has been surviving on for the past several years, there is an argument that $2 trillion might be a “normal” origination level at some point in the future. However, if you eliminate the “boom” years of 2002 to 2006 from the equation, the average is only $1.7 trillion. Regardless, we are hearing from many of our clients that their intent is to grow their origination volume, particularly online, either based on overall market increase or increased market share.

Q: Do you see the landscape changing for vendors to the industry?

JOHN WALSH: Vendor management will continue to be a critical task for lenders and servicers and as a result, compliance will be a primary focus for vendors. This presents vendors with the same increasing cost challenges as lenders, but also creates opportunities to provide clients with better and innovative solutions for compliance. One downside of this is that the cost and complexity of vendor management has/is causing many lenders to limit the number of vendors they can engage. This is obviously a benefit to established firms such as LERETA that already have a solid market share. Regardless, the unintended consequence is that it has become harder for new vendors to enter the space. Over the long run, I think this will reduce the innovation introduced to the lending industry. Clearly this is not good for either the industry or borrowers.

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Q: What do you see as the LERETA’s current value proposition to the mortgage industry?

JOHN WALSH: This year is LERETA’s 30th year providing tax services and 25th year providing flood services to the mortgage industry. Today, we serve more than 4,000 lenders and servicers and add 10 to 15 new clients each month. Today, based on client count, we are the largest provider of tax services. We have achieved this success for a couple of reasons. First, compliance is obviously critical for all participants in the mortgage lending industry today. It is also fundamentally about protecting the lender’s asset but also protecting the homeowner. These challenges are compounded because of the complexities of tax service and the small number of staff firms can dedicate to tax service. LERETA provides clients with solutions that are compliant with all regulators. Second, our goal is not to sell an off-the-shelf product. Our clients have important and difficult jobs. Our focus is to help our clients do their jobs better and also to make their lives easier. We do that by working with them to understand their unique problems and then providing the solution that meets their needs. This may mean flexibility in the product, flexibility in technology and integration and flexibility in pricing terms. Frankly, this is unique in tax service. Part of this is just a mindset and commitment. Part of this is also the ability to understand our clients’ business. What allows us to do this better than others is our complete focus on tax and flood. We do not sell AVM’s, BPO’s appraisals. We just sell and service tax and flood. On average, our managers have more than 20 years’ experience in mortgage lending.

Q: Where do you see LERETA in the next couple of years?

JOHN WALSH: During the last five years, the company has increased in size fivefold. Our primary target market has been medium and regional lenders. As one of only two national tax service vendors, and the only one focused on this market, I expect our growth in this market to continue. On the other hand, up until the last couple of years, LERETA was not large enough to effectively compete for the largest lenders. That means that for about the last 10 years the largest lenders have had only one choice for tax service. Obviously having only one option for any product or service is not in the best interest of the customer. Sellers without competition have little incentive to innovate, little incentive to improve service and little incentive to provide a competitive price. In addition, some of these lenders are telling us that having only one option for a service that is critical to the lending process creates vendor management problems with their compliance groups. In short, we believe we can introduce a new level of competition to this market that will benefit of both lenders and consumers.

Q: How would you define mortgage industry innovation?

JOHN WALSH: I’d define mortgage industry innovation as products or services that make the lending process easier or faster; identify and/or reduce risk for lenders, investors and servicers; or materially reduce the cost of the lending process.  I would add the caveat that innovation is only if it is adopted.  We have seen numerous “innovative” solutions that sounded good, but for whatever reason they failed to achieve any meaningful adoption by the industry. Today, there is a significant focus on compliance solutions and services that may be siphoning off attention from other areas of innovation.  This is clearly a response to what lenders and servicers want and need.

Progress In Lending
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Executive Spotlight: Andy Pollock Of Clayton Consulting Services

Andy-PollockThis week, the spotlight shines on Andy Pollock, senior managing director of Clayton Consulting Services.

Q: The TRID rule has been in effect for three months. How has the industry responded to this rule, and what measurable impact is it having?

Andy Pollock: TRID reminded me a lot of Y2K: In the months leading up to both, everyone expected some sort of disaster, but that never really materialized. Because lenders had time for extensive preparations—including updating systems and procedures, training, and adding supplementary resources—TRID’s impact has been very minor.

According to the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey, the total average closing time for most loan types stayed relatively flat or showed only a slight increase between September and October. In addition, some real estate agents that closed home sales subject to TRID said the process went smoothly and others said that they extended potential closing timelines to accommodate any possible delays. That said, we’re still in the early stages of TRID, so only time will tell.

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Q: TRID was the latest in a series of regulations that reshaped mortgage banking. How has the level of quality control been impacted by these new regulations?

Andy Pollock: TRID was designed to eliminate confusion and surprises for the borrower. Unlike the previous Good Faith Estimate, the new forms under TRID itemize specific payment components, (e.g., the down payment, closing costs, prepaid costs, etc.) to ensure that the elements all add up to match the anticipated total cost. While TRID has improved borrower expectations, I think it’s also improved lender expectations and therefore loan quality control and asset quality.

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Q: Prior to joining Clayton, you previously served as president and chief executive officer at WDB Funding, an alternative commercial lending company. How can you compare the challenges between the commercial and residential sides of lending? 

Andy Pollock: Commercial and residential lending are not very different: when underwriting for either, lenders must capture the credit, collateral, capacity, intent and integrity for granting a loan. So the challenges remain the same—delivering the expertise of lending money and then getting the money back. Also, in my past life, I was the CEO of a large mortgage bank and ran my own consulting mortgage consulting firm, so my experience is well balanced on the residential side.

Q: What do you see as the state of the mortgage industry in 2016?

Andy Pollock: Overall, the origination market will probably be down or flat compared to 2015. I think we’ll see more new “fintech” entrants pop up and attempt to disrupt the traditional mortgage lending business by offering marketplace and consumer direct solutions. Of course, they may find themselves constrained by regulations, traditions, and industry expectations.

From an innovation perspective, I think the industry will still be trying to figure out when the millennials will be ready for homeownership, and the products they’ll need to achieve it. Also, I think there will be renewed interest in second mortgages, consumer loans and student loan refinancing and marketplace lending. And, heaven help us, even piggyback purchase lending might make a comeback.

Phil Hall has been (among other things) a United Nations-based radio journalist, the president of a public relations and marketing agency, a financial magazine editor, the author of six books and a horror movie actor. Also, as you will discover, he is not shy about stating his views.

Executive Spotlight: Jason Roth of ComplianceEase

Jason-RothToday, the spotlight is on technology and our guest expert is Jason Roth, chief technology officer at ComplianceEase.

Q: TRID has been in effect for nearly two months. What impact has it had on the current operations within the industry?

Jason Roth: TRID has certainly slowed things down as lenders ease into new procedures. The Mortgage Bankers Association’s Weekly Mortgage Applications Survey ending the week of October 2, 2015 showed a 25.5 percent jump in applications—implying that lenders tried to get in as many applications as possible under the pre-TRID forms and rules.

Our own data confirms this. Looking at a sample of more than 200,000 loans audited in ComplianceAnalyzer in October, there was clearly a gradual shift in volume towards TRID loans. In the first week after TRID was effective, only around 9 percent of loans audited were originated on TRID forms. That share increased to about 30 percent for the last week of October.

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By front-loading pre-TRID applications before the effective date, lenders have been able to limit the number of TRID loans that they have to work with and iron out any issues before the pipeline becomes mainly TRID loans.

Q: What do you see as the most pressing tech challenges facing the industry?

Jason Roth: If you look at TRID and the newly finalized HMDA rule, it seems the most pressing challenges facing our industry center around capturing and retaining data.

Under TRID, lenders must have complete records of every change to every fee charged on a mortgage, along with supporting reasons for the change and subsequent re-disclosure to the borrower. This creates two challenges. First, there are new pieces of data that need to be collected and retained, many of which were not mandatory for compliance under previous TILA and RESPA disclosure requirements.

While it is possible to implement manual workarounds to store the information on spreadsheets or hard-copy documents, it only works in low-volume situations. It does not scale well and could lead to delays that impact the borrower’s experience.

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Second, the data all must be easily reportable to regulators and investors. If records are scattered throughout different systems or even stored on paper or as imaged documents, it will be very expensive to demonstrate compliance with TRID.

In addition, the new HMDA rule will require significant amounts of new data to be collected and, of course, organized in a way that is easily reportable for regulatory purposes. Moreover, to prevent unpleasant surprises, lenders will need to be performing data analysis on an ongoing basis, and not just when March comes around each year. All of these regulatory changes add up to big changes and big data.

Q: There are endless news stories on the threat to cyber security. How severe is this threat, and how is the industry responding to it?

Jason Roth: Although information security issues seem to have recently emerged as a common topic of coverage in the national news, financial services institutions have been wrestling with security and data handling issues for much longer. Since 1999, the Gramm-Leach-Bliley Act has mandated that financial institutions of all shapes and sizes safeguard customer information. In addition, investors and government agencies have long required that banks and lenders maintain security policies and procedures for the security of sensitive information; and the CFPB has made it clear that financial institutions are responsible for their own policies and procedures as well as those of their technology vendors.

In order to protect themselves from being buried by security audits, many in the industry have looked to standardization of their procedures to provide evidence of their security controls. For example, our company opted to complete an audit under AICPA’s SOC2 standard and the controls stipulated by their Information Security trust principle. We’re also members of the Shared Assessments group, a consortium that develops standardized information collection templates to maintain evidence of security controls.

Since many banks and lenders use these templates, it has been helpful for us to organize our own policies around those standards and saves a lot of time when responding to inquiries. There are also some efforts within workgroups established by the Mortgage Bankers Association to develop some agreed-upon security standards for mortgage lenders.

Q: What do you see as the major tech trends for 2016?

Jason Roth: There are many new financial services companies, armed with newer technology and fewer legacy systems, looking to “disrupt” the industry. Although they still face significant regulatory barriers to operate legally as a financial services institution in the United States, these new types of lenders will eventually start to pose a real threat to traditional lenders.

We’re seeing startups, like SoFi, build successful mortgage and student lending businesses by investing in technology that focuses on streamlining communications, improving borrower interaction and making the lending process more transparent in order to serve the millennial generation. These are things that are difficult for traditional financial services companies to do because they’re using traditional LOSs that don’t provide the borrower with visibility. Complete reinvention for traditional lenders will come incrementally over several years with several iterations of new technology.

But in the near term, the focus will be on developing innovative technology to create a superior customer experience.

Phil Hall has been (among other things) a United Nations-based radio journalist, the president of a public relations and marketing agency, a financial magazine editor, the author of six books and a horror movie actor. Also, as you will discover, he is not shy about stating his views.

Executive Spotlight: Selim Aissi of Ellie Mae

Selim-AissiThis week, the focus is on cybersecurity and our spotlight shines on Selim Aissi, chief security officer at Ellie Mae.

Q: It often seems that the news is full of stories of data breaches and cyber attacks. Just how dangerous is the current state of cybersecurity – in particular, for the U.S. financial services world?

Selim Aissi: It’s a real problem. As the financial ecosystem becomes increasingly digitized and interconnected, it becomes more vulnerable to cyber attacks and unauthorized access. We’ve seen many financial institutions targeted by attacks that have been reported in the media, but they aren’t alone.

We’re seeing a myriad of types of attacks in the financial space. They range from cyber criminals looking for financial gain, whether through theft and monetization of financial information or personal information, to disruptive attacks, money-transfer scams, ransomware and DDoS extortion attacks.

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The wide variety of cyber threats that exist means that we need to ensure that the right monitoring, detection and protection mechanisms are in place as part of our security programs. We also need to understand what’s happening around the world in terms of threat actors and attack scenarios and be ready to defend and protect against them.

I believe there are five critical elements for successfully protecting against such cyberattacks:

>> Always being prepared with an in-depth defense strategy

>> Instilling and maintaining a cybersecurity culture and awareness across the entire organization

>> Investing in threat intelligence and predictive analytics to identify actors, new vulnerabilities and emerging threat indicators

>> Ensuring we have the best talent and skillsets inside our cyber security organizations

>> Participating in public-private collaboration for shared threat intelligence and best practices

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Q: Where are most of today’s major cyber attacks coming from?

Selim Aissi: As I mentioned above, there are a number of different types of cyber criminals that are responsible for today’s attacks. They come from all around the world with varying backgrounds, abilities and motivations. My mission is to be prepared for any threat by leveraging state-of-the-art technology, intelligence and insight, as well as our team of talented security professionals.

Q: Do you believe that the financial services industry is doing a good job when it comes to IT security? And are there places where improvement could be implemented?

Selim Aissi: I think that the number and the magnitude of data breeches indicates the financial services industry still has a large opportunity to improve its security posture. There have been a lot of great improvements in terms of technologies, but oftentimes, the processes and the people aspects are not taken as seriously as tools. As a whole, financial services organizations need more focus on bringing in the right talent and using them for collaboration, sharing of information and best practices with other organizations, both in the public and private sectors.

Q: In your new role at Ellie Mae, what will be your top priorities?

Selim Aissi: I have many priorities. My first priority is to build and maintain a world-class security organization. Because security is such a huge concern to mortgage lenders, we’ve made a commitment to our clients to be a leader when it comes to security and data protection.

My other priorities include making security a key differentiator between ourselves and our competition and working to ensure that our cyber security agenda is clearly defined, articulated and agreed upon across our organization and with our Board of Directors. This involves having a long-term strategy for security that tracks alongside our long-term growth strategy for the company.

Last but certainly not least, one of my key priorities is to leverage the top talent in our organization as well as to establish strong public-private partnerships to enhance our shared intelligence. While the financial services industry has become more vulnerable to security threats, ensuring that Ellie Mae stays at the forefront of security controls will require a team effort.

Progress In Lending
The Place For Thought Leaders And Visionaries

Executive Spotlight: Douglas Obey, Author of Money and the Human Condition

Doug ObeyThis week, our spotlight shines on Douglas Obey, certified financial planner and author of the new book Money and the Human Condition.

Q: What inspired you to write Money and the Human Condition?

Douglas Obey: My frustration with the fact that in arguably the most capitalistic country on the planet, American’s have little if any understanding and knowledge about the economy, finance or investments or the opportunities available and beauty of living in a free capitalistic society. They work their lifetimes for money and never learn how to make money work for them.

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Q: How would you define the current state of the U.S. economy? And what do you see as the biggest threats to the economy?

Douglas Obey: The current state of the US economy is far weaker than reported. True unemployment is higher, corporate profits are lower and our debt, deficits and future obligations are weighing on the economy. Currently the biggest threat to the economy is the Federal Reserve making a policy misstep.

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Q: As a real estate investor, how would you define today’s housing market? And is this a good time for people to buy property?

Douglas Obey: I feel today’s housing market is fairly strong and one of the few bright spots in the economy. The financial crisis of 2008-2010 caused housing to slow creating a backlog of supply that is only now catching up with the demand as young people start looking to buy homes or rent apartments. This along with low rates has pushed up prices and rents in most parts of the country. This pent up demand provides a good backdrop for real estate making it a good time to buy.

Q: Out of the many people running for president, who has the best economic policy proposals?

Douglas Obey: I have heard very little in the way of specific economic policy proposals. Some have voiced opinions on taxes, some raising them (Hillary and Sanders) on wealthy Americans which would hurt growth, while most of the Republicans are either suggesting reducing taxes (Cruz and Santorum), pledging to oppose tax increases (Christie), or have good track records for lowering taxes (Bush, Jindal, and Perry). Trump’s idea of increasing taxes on companies moving jobs offshore and on hedge funds is anti-growth, but he is correct in opposing a flat tax which Paul and Huckabee seem to be promoting. A flat/fair tax would put additional burden on the middle class which is already suffering economically more than any other group.

Douglas Obey is online at www.dougobey.com. An earlier version of this interview appeared on Business-Superstar.com.

Phil Hall has been (among other things) a United Nations-based radio journalist, the president of a public relations and marketing agency, a financial magazine editor, the author of six books and a horror movie actor. Also, as you will discover, he is not shy about stating his views.

Executive Spotlight: Brian Coester of CoesterVMS

web-brian-coesterToday we spotlight the appraisal process. CoesterVMS is a nationwide appraisal management company that specializes in providing comprehensive management of appraisal operations for mortgage lenders. CoesterVMS’ in-house appraisal management solution combines the best service with the most advanced technology on the market. CoesterVMS guarantees all appraisal reports to fully comply with all regulations and guidelines. CoesterVMS CEO Brian Coester had this to say about the changing face of the appraisal process:

Q: Tell me what is going on at CoesterVMS today.

Brian Coester: Things are going very well at CoesterVMS. I know it sounds like a cliché, but it’s a great feeling to come to work every day and move the company and industry forward. We’re finally able to put into process all of the ideas and concepts for our customers and appraisers that we’ve been talking about and developing for the past few years. When we started, we purchased the applications we needed from other vendors, from appraisal management software to quality control software and using the standard integrations from all the LOS providers. During the past few years, we’ve been able to replace everything and build our own systems from scratch. As a result, we’ve developed a huge competitive advantage. Lenders are seeing our technological advantage. We’ve boarded more than 300 individual clients year to date and are currently adding three to four users per day. We have a complete solution for our clients, and we can control the entire process from end to end. However, with all that we do, we put customer service at the top of our list as we focus on providing great service to all of our clients and appraisers.

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Q: I hear that the company has had some issues with specific states can you tell us about that?

Brian Coester: I got into the appraisal management business as a field appraiser with a focus on providing quality appraisals to our lender clients. As a result, we experienced extremely explosive growth that was well beyond what I expected. During that time, we had oversights in administrative issues in a few states. Most of the issues came down to a misinterpretation of a state regulation. In all of those cases, once we identified the issue, it was immediately fixed. Furthermore, these oversights happened as regulations were newly implemented in 2010 through 2012. Since then, we have made compliance a priority. We submit to a third-party audit on a quarterly basis and have an extremely comprehensive compliance management system in place overseen by our internal auditors, compliance managers and legal team.

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Q: Where do you see valuations in the new mortgage landscape after the industry meltdown?

Brian Coester: Valuations have been always been a vital part of the mortgage industry. I love what Fannie Mae has done with Collateral Underwriter, and I am excited to see Freddie Mac and ultimately HUD implement similar technologies. I think the industry meltdown was a great wakeup call for the appraisal industry and mortgage lending relationship. Everyone quickly realized just how fragile the relationship is and how easily processes can get off track without proper oversight. Appraisal management companies will become a larger part of the process in the coming years and the idea of a lender managing it in-house appraisal staff will be a distant memory.

Q: What do you think it will take to truly get the industry on an upward trajectory?

Brian Coester: Valuations are at a turning point. The existing model does not work and many of the requirements need modification in order to move in a positive, upward direction. The first change is implementing less restrictive requirements to become an appraiser and more duties given to trainees. Second, the Uniform Standards of Professional Appraisal Practice (USPAP) definition of an appraisal needs to be broaden in scope. Currently, the definition of an appraisal according to USPAP is too burdensome to realistically allow alternative reports with lower price points to be used for HELOCs. Finally, we need to take a serious look at the way both AMCs and appraisers are regulated and how they function within such an environment.

Q: Where do you see CoesterVMS in three years?

Brian Coester: We’ve got so many amazing things in the works right now. It’s going to be great to see it all come to market during the next few years. We are in the process of developing several applications that will further meet the needs of lenders. In addition, we are working to further enhance our relationship with our network of appraisers.

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.

Executive Spotlight: Patrick F. Stone of Williston Financial Group

Pat-StoneThis week, the topic of conversation is technology and the Executive Spotlight shines on Patrick F. Stone, president and CEO of Williston Financial Group.

Q: Has technology improved the mortgage transaction process over the past five years? And on the flip side, has technology made things less efficient?

Patrick F. Stone: Yes, but we can still do a lot more. We’re still well behind many other industries when it comes to maximizing the benefits of technology.

Because we are such a segmented industry, it can be challenging to integrate or standardize all of the different technologies used today by Realtors, lenders, settlement agents and consumers. I suspect that it will take more than a little prodding to get us to that “cradle-to-grave” technology we’ve been talking about for years.

As to having a negative impact on technology, I don’t believe so at all. Technology is simply a tool. It will do as much or as little as the people using it allow it to do. If tech has made something less efficient, it’s probably because that business or person is using the wrong technology, or misusing it altogether.

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Ultimately, technology has allowed increased productivity in all segments of the process, so we have to judge it as a meaningful positive.

Q: Can the TRID-related changes to the industry improve the transaction process, or will it make things worse?

Patrick F. Stone: Although it will certainly cause some difficulty in the initial weeks, I do think TRID will compel our industry to at least start to break through the silos that cause inefficiency, redundancy and overall wasted effort.  It’s certainly going to force originators and settlement services firms to interact and collaborate more meaningfully and consistently. The initial emphasis on data exchange has already opened the door to significant conversations around integration and process improvement.

Perhaps the most important impact of TRID, which has received little or no notice, is the impact on the fall-out ratio. Nationally, it seems about 70% of all opened refinance orders close, and about 80% of all opened resale orders close. The Combined Disclosure and the timing and process involved will lower the fall out rate. Any additional benefit derived from technological integration should also positively impact the fall-out rate.

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If at the end of the day, TRID results in a reduction in half of the “fall out” rate, all participants in the process could see up to a 10% increase in overall revenue with only about a 3.5% increase in expense.

Q: How has the mortgage industry embraced mobile technology? Is it doing a good job on this front, especially in regard to improving the transaction process? 

Patrick F. Stone: No. For most participants, engaging in mobile and interactive technologies is still an opportunity, not a reality. There are few if any applications currently experiencing meaningful use, outside of property research and document execution being used by Realtors and consumers.

Most process technologies do not have any mobile applications, with only a handful of lenders and settlement agents experimenting with potential usage. WEST, a WFG subsidiary, is beta testing a mobile “consumer dashboard,” which will allow the buyer and seller to tract the status of their transaction on their smart phone, but outside of that, most mobile technology usage is still limited to the front end of the transaction.

Q: Of course, all technology is subject to cybersecurity concerns. How would you grade the industry’s response to cyber threats?

Patrick F. Stone: “A” for effort, but maybe a “C” for execution. Cybersecurity is a growing concern, but most people fail to realize that it is a dynamic threat – one that continues to evolve and grow, not a one- time “I have fixed the problem” type of challenge.

Those firms that believe they simply have to hit a certain threshold or target with their cybersecurity, or simply make a one-time upgrade of sorts, will be extremely vulnerable to future threats. It’s not enough to plug in a system or procedure and then walk away. Cybercriminals are always evolving; always improving their tools and methods. So, any business out there which believes it can simply plug in a security process and then ignore it will probably be in for a rude surprise down the road.

Phil Hall has been (among other things) a United Nations-based radio journalist, the president of a public relations and marketing agency, a financial magazine editor, the author of six books and a horror movie actor. Also, as you will discover, he is not shy about stating his views.

Executive Spotlight: Nick Grant of LRES

Nick-GrantThis week, the Executive Spotlight shines on the appraisal sector, and the expert in the spotlight is Nick Grant, the new senior vice president of sales at LRES.

Q: How would you categorize the state of today’s appraisal sector?

Nick Grant: Currently the appraisal sector is extremely busy around the country across all segments within the industry from lending to legal valuations. The good news is that due to the high volume of work, the appraisers are at full employment capacity. This high volume has put stress on the industry due to the shrinking number of available appraisers. More appraisers are leaving the profession than are joining it for several reasons.

The average age of an appraiser, according to several different studies, is in the upper 50’s, meaning that many are approaching retirement or are ramping down the amount of work they are willing to do on a monthly basis. With the favorable interest rates we have been experiencing this year, the lending industry has really been impacted by the fewer number of appraisers, the appraisal delivery time has been extended causing issues with closing escrows on time as well as interest rate locks expiring.

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The reasons for the shrinking number of appraisers is that there are many barriers to entry to becoming an appraiser that not many are willing to endure: (1) College degree; (2) Extensive appraisal-related college level coursework; (3) 2,500 required hours of apprenticeship as a trainee appraiser with few money-making opportunities; (4) Lack of appraisers willing to mentor a trainee for that time commitment (1.5 years); and (5) Lack of institutional training centers as in years past with in-house appraisal departments (banks, savings and loans).

The Appraisal Subcommittee (ASC) needs to look into the not-too-distant future and strategize about what needs to be done to attract new and younger talent to the industry and amend some of the requirements so that new talent can earn a living while in training. Most lenders will not accept an appraisal that has a trainee appraiser signing the report along with their licensed/certified mentor, another issue which prohibits proper training and experience credit.

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Q: In your professional opinion, what are the key elements to successful customer service?

Nick Grant: Establishing realistic expectations. Managing those expectations with efficient follow-up meetings and phone calls. Staying on top of change and being proactive, not reactive.

Q: What should a company in the mortgage industry look for when recruiting candidates for sales positions?

Nick Grant: Consider attributes outside of the industry: Service, ability to accept change, problem solving, ability to think outside of the box. I believe experience is important but I also think we should bring young people into our business and train them. These younger candidates have great IT skills that will serve us well into the future.

Q: What will be you top priorities in your new role at LRES?

Nick Grant: Build a total sales environment that includes all departments. I’m all about team selling. Our service and operations departments’ strength is enabling our sales team to develop realistic expectations. I’ll also incorporate a lender place/REO insurance strategy to bring new business as well as grow our relationship with our existing clients.

Phil Hall has been (among other things) a United Nations-based radio journalist, the president of a public relations and marketing agency, a financial magazine editor, the author of six books and a horror movie actor. Also, as you will discover, he is not shy about stating his views.

Executive Spotlight on Shannon Cobb of ATPR

Shannon CobbThis week, Executive Spotlight returns, with the focus on Shannon Cobb, executive vice president at American Tax & Property Reporting Inc. (ATPR), a provider of technology focused solutions for the real estate and settlement services industry.

Q: It used to be true that a firm outsourcing its data reporting took a big risk in terms of quality, while opting for a better price. How has the use of outsourced searches or data reporting changed?

Shannon Cobb: You are absolutely right. Not very long ago, a firm ordering a simple title search from a data reporting company knew that it was quite possibly trading quality for speed and reduced cost. That has changed dramatically. A business providing a line of data products that have an effect on the mortgage transaction would be committing financial suicide to overlook the rising importance on quality and compliance.

Mortgage lenders are already seeing increased costs across the board. Lenders now are unwilling to take the risk of incorporating bad data or information into the process—at the possible cost of future business or even the scrutiny of an enforcement agency. Their investors (and regulators) expect that any kind of data reporting, title or otherwise, will be done accurately and thoroughly, not just quickly and at efficient pricing.

Q: The CFPB has told us that mortgage lenders will be held accountable for the actions of their “service providers.” How has the way in which your lending clients deal with their partners changed, and is it for the better?

Shannon Cobb: In our experience, mortgage lenders are putting an exponentially greater effort into understanding and monitoring the processes and products of their vendors. Their partners are expected to demonstrate how they operate; provide metrics as to their performance and be available for audit or site visit whenever the lender wishes.

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A lender cannot afford to be any less careful. I believe this is a good thing. There was a time when some lenders had virtually no involvement in the title and settlement process. Their increased involvement can only lead to more efficiency and improved quality in the long run.

Q: How do you think the TILA-RESPA Integrated Disclosures rule (TRID) will affect our industry in the long run?

Shannon Cobb: After the initial uncertainty fades, I actually believe TRID will force our industry to do some things it has needed to do (but hasn’t) for quite some time. As a practical matter, some of the requirements of TRID will force the mortgage lender to be in fairly consistent contact with its settlement partners.

There will no longer be a clear “handoff.” Lenders and their title or settlement partners will be forced to improve their communication as well as their ability to work on a document simultaneously. Some processes will be affected.

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Sometimes, I fear that our industry operates a bit too much in the silo from segment to segment. Often, this only adds to cost and impedes speed and efficiency. Although TRID will probably be challenging early on, as we adapt to it and grow accustomed to it, we may well find that it actually helps our industry in the long run, as well as the consumer.

Q: How does ATPR’s SmartProp (ATPR’s uninsured property search product) penetrate a title search report market that is already fairly crowded?

Shannon Cobb: Certainly, title and mortgage companies have a number of choices when it comes to processing property reports. However, ATPR is emphasizing the importance of the people behind the reporting.

We have one of the largest networks of abstractors in the nation backing our product. And we go to great lengths to train our support staff not only for their own responsibilities, but with a greater understanding of the entire mortgage process that we play a role in.

The mortgage industry, as we so often hear, is indeed a relationship-based business. So we are betting on the quality of our people combined with superior technology to really establish our presence. These efforts have helped us build immense trust with the lenders, title agents and attorneys that we are now servicing.

Phil Hall has been (among other things) a United Nations-based radio journalist, the president of a public relations and marketing agency, a financial magazine editor, the author of six books and a horror movie actor. Also, as you will discover, he is not shy about stating his views.