By Tony Garritano
What’s going on in the mortgage market? What trends should you be aware of? Tony tells you in this daily column.

Market Analysis: A New LOS Debuts

*A New LOS Debuts*
**By Tony Garritano**

***A New LOS has hit the market. Automated underwriting and loan pricing technology provider PriceMyLoan has launched LendingQB, a 100% web browser-based mortgage lending platform. “With LendingQB, we believe we are doing more than just providing a ‘cloud computing’ loan origination system,” said Binh Dang, LendingQB’s managing partner. “We believe we are fundamentally changing the way that lenders use technology.” Here’s the scoop:

****Since 2004, PriceMyLoan has been providing lenders with technology to automate the underwriting and pricing of their loans. Over the past seven years, PriceMyLoan has had the unique opportunity to work closely with their clients and carefully observe their utilization of technology. “Each one of our clients had a valuable LOS story to tell us,” said Gigi Campbell, national sales director for LendingQB. “What became evident is their desire for a ‘one-stop shop’ lending system, and a system that would adapt to the way they work.”

****To that end, LendingQB was built to include a list of features, such as electronic documents with e-signatures; a full complement of tools for loan processing, underwriting, secondary marketing, closing and post-closing; and specialized tools for wholesale and retail environments, such as broker website portals and online consumer loan applications. Naturally, PriceMyLoan powers the automated underwriting and loan pricing aspects of the LendingQB platform.

****But the most innovative feature of LendingQB is not their technology, but the way that they work with their clients, says PriceMyLoan. “Lenders need more than just a piece of software,” said Campbell. “They need a technology partner that is willing to listen and respond to their specific needs. That’s the true value of our web-based model. We can reach directly into a client’s system and instantly deploy any changes they request. It creates a truly customized experience that molds to their particular workflow.”

****LendingQB positions itself as more than a technology provider; they want to be an active part of a lender’s team. “As a lending quarterback, we want to take the field with our clients and help lead them to success,” said Campbell. “Give us the ball and we’ll execute the plays that lead to higher productivity, higher profits and better business performance overall.”

****We at PROGRESS in Lending will keep you updated on the status of this new development.

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.

Market Analysis: We All Need A Good Laugh Once In A While

*We All Need A Laugh Once In A While*
**By Tony Garritano**

***Let’s face it, things aren’t great going into the holidays. But that doesn’t mean that your spirits should be low. Here’s something to cheer you up: Mortgage Cadence, LLC has produced a series of short films under the guise of “The Lender Blender” to the public. This series of shorts irreverently illustrates the dangers that come with mismanaged processes in the midst of an industry overhaul.

****Contrary to the light-hearted nature of these films, Mortgage Cadence is a solution-oriented system that continuously seeks to help lenders increase their return on investment and bottom line while maintaining compliance. The film portrayals of disarray and lack of compliance serve as a magnifying glass on some of the issues facing lenders today. Mortgage Cadence’s technology platform helps lenders minimize risk through the use of advanced technology. The product suite is proven to increase employee productivity through the elimination of paper and the creation of custom data-driven workflows.

****Along with a modern sense of humor, the videos strive to highlight the asset Mortgage Cadence can be for companies struggling with their lending processes. “The need for workflow automation to streamline processes and reduce risk is more important now than ever before,” stated John Levonick, chief legal and compliance officer for Mortgage Cadence. “Outdated processes and lack of compliance is unsuitable for a sustainable business where the risk of buybacks has never been greater. Despite the comedic nature of The Lender Blender, I hope it inspires lenders to reevaluate their lending practices to determine how they can increase efficiency while ensuring compliance.”

****By offering seamless automated workflow that is not only efficient and dynamic but also comes with a team of dedicated legal resources and subject matter experts, Mortgage Cadence can take your business from merely surviving to thriving. Staying compliant with the most recent regulations can feel like an added pressure, which is precisely why we are dedicated to focusing on the rules so you can focus on growing your business.

****You can find the video series located at thelenderblender.com or http://www.youtube.com/thelenderblender. The videos are also on the PROGRESS in Lending iPad app that you can download for free on iTunes. I know you need a good chuckle. These videos will do the trick.

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.

Market Analysis: Don’t Sit Back, Act

*Don’t Sit Back, Act*
**By Tony Garritano**

***Okay, the column today might not be for everyone, but I am so upset right now. Everyone who knows me knows how passionate I am about mortgage automation. Everyone who knows me also knows that I love the singing competition shows. Last night both of my passions came together and really made me think. Here’s what I concluded:

****First, too often lenders are failing today because they are not acting. The regulatory environment alone calls for lenders to automate. I scratch my head when I hear lenders aren’t doing something as simple as e-delivery. That’s a no-brainer. My mouth drops to the floor when I hear that some lenders are still using e-mail to send sensitive documents. WOW! You have to act Mr. Lender. You have to automate.

****Second, I’m a proud Dad of two great little boys. My boys are just amazing, if I do say so myself. However, I’ve always wanted a little girl. This year on the X-Factor (the new Simon Cowell singing competition) I have fallen in love with 14-year-old Rachel Crow. She was a baby born addicted to drugs, left behind by her birth parents. This nice couple adopted her and really gave her a second chance at life. Watching Rachel has touched my heart. Last night because of the inaction of one of the judges Rachel was sent home. I was, and still am, shocked and angry.

****Last night, for me, was just another example of how bad things happen when you don’t act. So, I hope lenders are reading this. Don’t delay. Now is the time to improve your process by moving to automate.

****And by the way, check this out:

httpv://www.youtube.com/watch?v=TvdN945-GPU

****Don’t tell me that this little girl isn’t amazing. She is the X-Factor.

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.

Market Analysis: Are You Confused?

*Are You Confused?*
**By Tony Garritano**

***I have been pleasantly surprised at to how well the industry has responded to the new appraisal rules. I remember the issues with RESPA. And loan officer compensation was tough for most to comply with when it hit earlier this year, too. I think the ease of compliance this time is due in part to how vendors have responded with quality educational pieces. For example, Global DMS did a great white paper. If you’re still confused, here’s how they describe all the changes:

****“UAD stands for Uniform Appraisal Dataset, and is a component of the Uniform Mortgage Data Program (UMDP). UCDP is the Uniform Collateral Data Portal, and is also a component of the UMDP. While these programs will work in conjunction with each other, there are distinct differences in the programs and the requirements.

****“The GSEs define the UAD program as:

****“All fields required for an appraisal submission for specific appraisal forms and standardizes definitions and responses for a key subset of fields. The UAD-compliant file can be delivered in either a PDF or an XML file. However the UAD program DOES NOT need to be delivered in an XML format. The MISMO 2.6 XML file is required for the UCDP, although you can submit a PDF file to the portal and the information can be extracted into an XML file for a fee.

****“The GSEs define UCDP as:

****“A single portal for the electronic submission of appraisal data files. Lenders will be required to use the UCDP to submit electronic appraisal data files that conform to all GSE requirements, including the Uniform Appraisal Dataset (UAD) when applicable, before the delivery date of the mortgage to Fannie Mae and Freddie Mac. The general UAD process will be driven by the appraisers. The appraiser will be responsible for delivering the appraisal file in the required UAD format. The delivery to the portal will be driven by the lender. The lender can deliver the file to the GSEs, or have an Appraisal Management Company (Agent) deliver the file on their behalf.”

****It was a great white paper. To read more go to the Global DMS website or the PROGRESS in Lending iPad app. It’s a great read!

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.

Market Analysis: We Live in A Data-Centric World

*We Live In A Data-Centric World*
**By Tony Garritano**

***With all of the emphasis on loan quality and transparency, the GSEs are now mandating a more data-centric approach. This trend is just going to continue. Investors need complete visibility into each and every loan, and data makes that possible. To this end, vendors are stepping up to make it easier for lenders to embrace the data. For example, ClosingCorp, an independent, real estate closing cost data and technology company that develops online data services for mortgage lenders, real estate professionals and consumers, has launched DART, a data service that provides recording fee and transfer tax amounts for title and settlement professionals to use for closing transactions. Here’s the scoop:

****DART delivers access to accurate recording fee and transfer tax information for any address in the U.S., and reflects unique requirements based on geographic location. DART’s highly sophisticated data engine also calculates Buyer/Seller splits, commonly called “who pays” rules, and has a strength or confidence level based on collected data of statutory and customary practices by geographic location.

****“Since title and settlement agents ultimately pay and file recording fees and transfer taxes, having timely access to the most reliable data available is critical,” said Paul Mass, president of ClosingCorp. “ClosingCorp now represents the only true “sole source” provider of all actual closing cost data that title and settlement professionals need. This additional offering complements our complete line of data solutions, which includes everything from title and settlement fees, to home inspection, home warranty, and other “Block 6” fees. We are pleased to enter the market and provide a very competitive, alternative data source to title and settlements agents who depend on accurate recording fee and transfer tax amounts to close a residential real estate transaction.”

****ClosingCorp’s initial version of DART will deliver the recording fees and transfer tax information via web services, enabling title/settlement companies and real estate solutions providers to seamlessly integrate the data into their current workflow. ClosingCorp provides a DART API to facilitate easy implementation of the service. The data is returned via XML for use within the requesting application.

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.

Market Analysis: Here’s Why We Need To Automate

*Here’s Why We Need To Automate*
**By Tony Garritano**

***I always preach about the benefits of automation. But I preach a lot. My kids say I’m a broken record when I talk to them about the value of doing well in school, for example. However, when it comes to automation, and the value of a good education, I’m right on both accounts and the data backs me up. PROGRESS in Lending has been told that CoreLogic released its October Home Price Index (HPI) which shows that home prices in the U.S. decreased 1.3 percent on a month-over-month basis, the third consecutive monthly decline. Let’s face it: with home prices continuing to decline lenders need to automate to be as efficient as possible and also to offer first-class service. Here’s what else the HPI found:

****According to the CoreLogic HPI, national home prices, including distressed sales, also declined by 3.9 percent on a year-over-year basis in October 2011 compared to October 2010. This follows a decline of 3.8 percent in September 2011 compared to September 2010. Excluding distressed sales, year-over-year prices declined by 0.5 percent in October 2011 compared to October 2010 and by 2.1 percent in September 2011 compared to September 2010. Distressed sales include short sales and real estate owned (REO) transactions.

****“Home prices continue to decline in response to the weak demand for housing. While many housing statistics are basically moving sideways, prices continue to correct for a supply and demand imbalance. Looking forward, our forecasts indicate flat growth through 2013,” said Mark Fleming, chief economist for CoreLogic.

****Highlights as of October 2011:

****>> Including distressed sales, the five states with the highest appreciation were:  West Virginia (+4.8 percent), South Dakota (+3.1 percent), New York (+3.0 percent), District of Columbia (+2.4 percent) and Alaska (+2.1 percent).

****>> Including distressed sales, the five states with the greatest depreciation were: Nevada (-12.1 percent), Illinois (-9.4 percent), Arizona (-8.1 percent), Minnesota (-7.9 percent) and Georgia (-7.3 percent).

****>> Excluding distressed sales, the five states with the highest appreciation were: South Carolina (+4.6 percent), Maine (+3.1 percent), New York (+3.1 percent), Alaska (+2.9 percent) and Kansas (+2.8 percent).

****>> Excluding distressed sales, the five states with the greatest depreciation were: Nevada (-8.8 percent), Arizona (-7.0 percent), Minnesota (-5.7 percent), Delaware (-3.9 percent) and Georgia (-3.6 percent).

****>> Including distressed transactions, the peak-to-current change in the national HPI (from April 2006 to October 2011) was -32.0 percent.  Excluding distressed transactions, the peak-to-current change in the HPI for the same period was -22.4 percent.

****>> Of the top 100 Core Based Statistical Areas (CBSAs) measured by population, 78 are showing year-over-year declines in October, two fewer than in September.

****If this data doesn’t scream out: “This industry needs to automate!” I don’t know what it will take to get this idea across.

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.

Market Analysis: Lean On Your Vendor

*Lean On Your Vendor*
**By Tony Garritano**

***Having trouble keeping up with new government programs and regulations? As I always say, that’s what technology is for. Vendors should do the heavy lifting for you. For example, PROGRESS in lending has learned that ISGN Corp. can assist lenders and servicers with their loan infrastructure needs in meeting the expected higher demand of distressed borrowers for the new streamlined federal Home Affordable Refinance Program (HARP). ISGN has been processing, underwriting and closing HARP loans for lenders and servicers in the original program for the past two years.

****ISGN can get lenders and servicers ready to meet the expected increase in HARP volume, primarily with three mortgage outsource opportunities. First, ISGN offers staffing augmentation that provides lenders with key personnel for processing, underwriting and closing HARP loans. Secondly, ISGN can provide component outsourcing in which ISGN handles an area of origination that might be a process constraint for a lender, such as processing, underwriting or closing.

****Thirdly, ISGN offers end-to-end HARP loan outsourcing, in which ISGN processes, underwrites, closes and sets up loan funding. Lenders can manage their customer calls through a single point of contact, while ISGN handles the loan fulfillment. ISGN has the experts to manage remote lender client connections through technology, which enables ISGN to use its proprietary workflow in concert with a lender’s system to generate more efficiencies and lower costs.

****President Obama initiated the new expanded HARP 2.0 in October to aid more borrowers. Only approximately 838,000 Fannie Mae and Freddie Mac mortgages were refinanced in the original program. Today, the government estimates millions of more homeowners will be eligible for the new simplified HARP 2.0, which is the only government program designed for underwater borrowers who owe more than their house is worth. HARP 2.0 started accepting applications on December 1, 2011 for loans sold to Fannie Mae and Freddie Mac on or before May 31, 2009.

****The new streamlined HARP 2.0 should generate substantially more volume for lenders, because it removes the old loan-to-value ceiling of 125 percent, so the program is now available to homeowners in states such as Arizona and Florida where LTVs have exceeded 200 percent on many homes. It also makes it easier for lenders to participate by relaxing the rules concerning loan buybacks based on the representations and warranties of the original loan.

****“Lenders today are looking more strategically in an uncertain marketplace at the expected higher HARP loan volume,” said Scott Slifer, president of sales and marketing at ISGN. “They no longer consider it just a play to hire more staff. Now they want to determine what their core competencies are and outsource their other lending components.”

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.

Market Analysis: Putting Cloud Computing To The Test

*Putting Cloud Computing To The Test*
**By Tony Garritano**

***The National Institute of Standards and Technology (NIST) has taken a hard look at cloud computing. Cloud computing has been the subject of a great deal of commentary. Attempts to describe cloud computing in general terms, however, have been problematic because cloud computing is not a single kind of system, but instead spans a spectrum of underlying technologies, configuration possibilities, service models, and deployment models. As a result, the NIST released its definition of cloud computing along with some guidelines to ensure security. Here’s what they said:

****First, in defining cloud computing, the NIST noted, “A cloud computing system may be deployed privately or hosted on the premises of a cloud customer, may be shared among a limited number of trusted partners, may be hosted by a third party, or may be a publically accessible service, i.e., a public cloud. Depending on the kind of cloud deployment, the cloud may have limited private computing resources, or may have access to large quantities of remotely accessed resources. The different deployment models present a number of tradeoffs in how customers can control their resources, and the scale, cost, and availability of resources.”

****NIST went further to detail the economic considerations that users need to consider when going to the cloud. The institute said, “In outsourced and public deployment models, cloud computing provides convenient rental of computing resources: users pay service charges while using a service but need not pay large up-front acquisition costs to build a computing infrastructure. The reduction of up-front costs reduces the risks for pilot projects and experimental efforts, thus reducing a barrier to organizational flexibility, or agility. In outsourced and public deployment models, cloud computing also can provide elasticity, that is, the ability for customers to quickly request, receive, and later release as many resources as needed. By using an elastic cloud, customers may be able to avoid excessive costs from overprovisioning, i.e., building enough capacity for peak demand and then not using the capacity in non-peak periods. Whether or not cloud computing reduces overall costs for an organization depends on a careful analysis of all the costs of operation, compliance, and security, including costs to migrate to and, if necessary, migrate from a cloud.”

****While endorsing cloud computing overall, NIST did warn that users need to prepare for security. NIST pointed out, “Organizations should be aware of the security issues that exist in cloud computing and of applicable NIST publications such as NIST Special Publication (SP) 800-53. As complex networked systems, clouds are affected by traditional computer and network security issues such as the needs to provide data confidentiality, data integrity, and system availability. By imposing uniform management practices, clouds may be able to improve on some security update and response issues. Clouds, however, also have potential to aggregate an unprecedented quantity and variety of customer data in cloud data centers. This potential vulnerability requires a high degree of confidence and transparency that cloud providers can keep customer data isolated and protected. Also, cloud users and administrators rely heavily on Web browsers, so browser security failures can lead to cloud security breaches. The privacy and security of cloud computing depend primarily on whether the cloud service provider has implemented robust security controls and a sound privacy policy desired by their customers, the visibility that customers have into its performance, and how well it is managed.”

****To clarify, NIST released guidelines on privacy and security around cloud computing. Proactive technology vendors within the mortgage space are both adopting cloud computing and seeking to educate the mortgage space on the benefits of this technology advancement. For example, PROGRESS in Lending has learned that eLynx, a portfolio company of American Capital, has released a new white paper that will help companies that utilize Cloud computing technology understand the recently released guidelines on security and privacy issued by the NIST. The paper, entitled “Data Security in the Cloud,” summarizes the government’s recommendations related to cloud-based services offered by eLynx to the financial services and real estate industries.

****“Too many companies have over-used the concept of cloud computing in an effort to gain a marketing advantage,” said Alan Matuszak, Vice President of Software Engineering and Operations for eLynx. “In the process, many executives in our industry find they have unanswered questions when it comes to data security and privacy as they relate to these advanced systems. This new paper answers some of those key questions.”

****eLynx has been offering cloud-based services for close to two decades. The company’s experienced executives contributed to the paper, which also outlines how eLynx meets or exceeds all NIST recommendations.

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.

Market Analysis: Lender Gets Immediate ROI

*Lender Gets Immediate ROI*
**By Tony Garritano**

***Market conditions remain volatile. Lenders need the right tools to enhance efficiency, promote transparency, increase customer satisfaction and remain profitable. For all these reasons and more, 1st Advantage Mortgage chose to implement business intelligence technology by Motivity Solutions, creators of the award-winning business management platform that helps mortgage-related companies get more business and more out of their business.

****The mortgage industry faces many problems. First, the foreclosure/default wave continues. Combined, Fannie Mae and Freddie Mac still hold more than 180,000 homes repossessed through foreclosure, known as REO, despite reductions in the third quarter. Second, new regulation shows no signs of letting up. For example, the Consumer Financial Protection Bureau is close to completing its redesign of the Good Faith Estimate form that home buyers receive after applying for a mortgage — but some industry groups believe the agency needs to test the disclosures on real loans. Lastly, the MBA predicts overall volume to be at a 15-year low next year.

****All of these conditions described mean that lenders are going to have to look hard at technology as a vehicle to remain competitive. The problem that lenders face in their quest for the right technology is they simply can’t afford to go with “unknown” or “untested” applications, which is precisely why 1st Advantage turned to Motivity Solutions. The lender was in search of technology that would instantly improve its operations and its bottom line, which it found in Movation, the flagship product of Motivity Solutions.

****In an uncertain market, lenders need to implement technology to promote certainty. How does it work? One of the dashboards is viewed daily by upper management to view lock activity. Specifically, 1st Advantage is looking to determine fluctuation in lock activity to plan resources and manage its all-important warehouse lines. The dashboard also shows trends in lock activity compared to loans that are submitted to processing to determine if there is a trend differential in lock versus float activity. This dashboard shows 1st Advantage the “bubble” as loans move through the pipeline. Now using this technology 1st Advantage can determine activity and volume as the loans progress to underwriting and closing to compare trends/match resource allocation based on this trend analysis.

****That’s just one example of how 1st Advantage is using one of the dashboards to get immediate ROI and greater visibility into their business. This technology also promotes accountability within 1st Advantage. Another dashboard is used to monitor loan officers closely to ensure that loan officers are submitting their files promptly to processing. The LO is actually compensated based on their ability to get their files in timely. They are also compensated based on how long their files take to get processed and underwritten. Loans displayed in the “Process Received Not Opened” status after 6 days is a flag to the manager to review and determine if there is an issue.

****If we turn to hard dollar savings realized, 1st Advantage uses yet another dashboard within Movation. A “Locks Due to Expire Report” is automatically sent to all loan officers if a file is within 5 days of lock expiration. This has made the sales force responsible for extending locks which in turn protects the client and company from costly re-pricing. The operations management uses dashboard reports that warn their staff if an appraisal or a credit underwrite is nearing its expiration. The use of exception based reporting has allowed 1st Advantage to highlight and focus on potential problem areas that can become costly mistakes. Other dashboards are used to advise management of investor purchase trends and warn staff about loans that are closed but not insured within a target range. All departments are monitored using Movation. The management team has adopted the use of these visualizers to proactively manage their respective departments. The COO and upper management have a real time view of changes taking place as volume fluctuates.

****In totality, 1st Advantage has gained valuable insight into its business that has led to immediate return on investment. As the saying goes, knowledge is power. 1st Advantage has used the vast amount of visibility it now has into its operation to its betterment. For example, 1st Advantage has made tremendous strides to ensure that underwriting turn times are within 24 to 48 hours. Loans showing up in Movation that are outside of 1st Advantage’s tolerance require immediate attention. Using Movation, 1st Advantage has been able to see volume trends weeks before bottlenecks occur. Staff is added before it becomes an issue.

****The total picture here is that 1st Advantage has chosen to implement smart technology during a very volatile time in the mortgage industry to get instant return on investment and the strategy is working now that the lender is using Movation.

****Market conditions remain volatile. Lenders need the right tools to enhance efficiency, promote transparency, increase customer satisfaction and remain profitable. For all these reasons and more, 1st Advantage Mortgage chose to implement business intelligence technology by Motivity Solutions, creators of the award-winning business management platform that helps mortgage-related companies get more business and more out of their business.

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.

Market Analysis: Negative Equity Situation Still Bad

*Negative Equity Situation Still Looks Bad*
**By Tony Garritano**

***I’m always looking to share good data and research with you. PROGRESS has learned that CoreLogic released negative equity data showing that 10.7 million, or 22.1 percent, of all residential properties with a mortgage were in negative equity at the end of the third quarter of 2011. This is down slightly from 10.9 million properties, or 22.5 percent, in the second quarter. An additional 2.4 million borrowers had less than 5 percent equity, referred to as near-negative equity, in the third quarter. Together, negative equity and near-negative equity mortgages accounted for 27.1 percent of all residential properties with a mortgage nationwide in the third quarter, down from 27.5 in the previous quarter.

****Negative equity, often referred to as “underwater” or “upside-down,” is the condition in which borrowers owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both.

****“Although slightly down, negative equity remains very high and renders many borrowers vulnerable when negative economic shocks occur, such as job loss or illness. The nearly $700 billion mortgage debt overhang has touched many corners of the market, and this overhang is holding back the recovery of the housing market and broader economy,” said Mark Fleming, chief economist with CoreLogic.

****Data Highlights:

****>> Nevada has the highest negative equity percentage with 58 percent of all of its mortgaged properties underwater, followed by Arizona (47 percent), Florida (44 percent), Michigan (35 percent) and Georgia (30 percent). This is the first quarter that Georgia entered the top five, surpassing California which had been in the top five since tracking began in 2009.

****>> The top five states combined have an average negative equity ratio of 41.4 percent, while the remaining states have a combined average negative equity ratio of 17.6 percent.

****>> There are nearly 22 million borrowers, or 45 percent of all borrowers, that have mortgages with an 80 percent or more loan-to-value (LTV) ratio, and 69 percent of those mortgages have above-market interest rates of 5 percent or more.  Conversely, only 54 percent of borrowers who have less than 80 percent LTV have above-market interest rates.  While above-market interest rates make refinancing at today’s historically low rates a cost-effective step for qualified homeowners, it can be more difficult for borrowers with above-average LTV ratios to qualify for refinancing.

****>> Of the 10.7 million borrowers in negative equity, there are 6.3 million first liens without home equity loans that have an average mortgage balance of $222,000. They are underwater by an average of $52,000 which equates to an average LTV ratio of 131 percent. The negative equity share for the first lien-only borrowers was 18 percent, and 40 percent had an LTV of 80 percent or higher.

****>> The remaining 4.4 million negative equity borrowers hold first liens and home equity loans with an average mortgage balance of $309,000.  These borrowers are underwater by an average of $84,000 and have an average LTV of 137 percent.

****>> The negative equity share for first lien borrowers with home equity loans is 38 percent, or twice the share for first lien-only borrowers. Over 60 percent of borrowers with home equity loans have combined LTVs of 80 percent or higher.

>****>> Of the total $699 billion in aggregate negative equity, first liens without home equity loans account for $329 billion aggregate negative equity, while first liens with home equity loans account for $370 billion. CoreLogic estimates that of the $370 billion first liens with home equity loans, $190 billion is due to the first lien component.

****>> There are 8.6 million conventional loans in a negative equity position that have an average mortgage balance of $272,000 and are underwater by an average of $70,000.

****>> There are 1.5 million FHA loans in a negative equity position that have an average mortgage balance of $170,000 and are underwater by an average of $26,000.

****>> Given that bank portfolios account for 15 percent of all first lien mortgage loans, CoreLogic estimates that 1.6 million properties valued at $105 billion of aggregate negative equity are in bank portfolios.

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.