The Fourth C In Successful Mortgage Lending

The industry today places more emphasis on the traditional three Cs of lending than we have seen in quite a long time. In the current environment of homogeneous loan products, however, the most successful mortgage operators value more than just character, capacity and cashflow; they value and nurture a great culture. A company’s culture defines how it delivers its products and services and has a profound effect on customer satisfaction. How does a company create a successful culture? Is one culture better than the other? Is there a “best” culture?

When we think of companies with great cultures we often think of ping pong tables, gaming rooms, free cafeterias and other notions marketed to the public by successful Silicon Valley tech firms. But a strong company culture goes deeper than games and a free lunch. At its root, a good culture stems from leadership deliberately creating an environment and experience based on what they want a company to stand for and mean in the lives of the people. To that end, there is no “best” culture, since different people value different things. It ultimately comes down to deciding what you believe in and becoming that as a company, through and through.

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How does a company go about creating a positive culture? It starts off by defining itself and its core values. Core values, mission statements and comments about culture must be more than mere references in the company’s employee handbook. They must be the very heart and soul of a company’s being. A company must define what is important, what is vital to its success and then live those values in everything it does. For example, if a company values integrity, it must ensure that from the top down it makes the right decisions even when it is difficult and when no one is looking. If it values fun, the company needs to have fun employee events. If it values community service, it should hold routine community outreach with its employees. But most of all, its values must transcend every aspect of the company’s operations on a daily basis.

Think of a successful company culture like an inviting patchwork quilt. Even if patchwork quilts are not really your thing, you have likely seen a quilt that struck you as surprisingly nice. It never seems manufactured, and it always feels authentic with its own distinctive style. Every core value truly carried out, every employee’s contribution, every satisfied and repeat customer and their referrals, the company’s competitive triumphs and challenges are all represented – each with its own patch – on the quilt. Each patch makes up part of the story of who a company is and the overall result has its own look and feel. That’s a company’s culture. And that is how employees and customers judge a company.

Take a moment to evaluate and strengthen your company’s unique and authentic culture quilt. You should find a unified, prideful and loyal workforce that delivers a higher quality of service to its customers with greater employee and customer retention and referral rates. These are the fundamental pieces of a culture quilt that translates into a great place to work.

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Preventing Loss Mitigation Delays

As the impact of the housing crisis continues, lenders are still frequently pursuing short sales, deeds-in-lieu and other workout plans, often at the initial request of the borrowers themselves. Especially in states such as New Jersey and Florida, where foreclosure timelines are typically extended and thus, more costly for lenders, these loss mitigation strategies present a better option for all parties involved. However, while foreclosure alternatives are known for having shorter timeframes, they are no stranger to delays of their own.

When it comes to today’s non-foreclosure solutions, a lender’s overall objective is to identify and successfully execute a plan that leads to the fastest possible resolution. While undoubtedly quicker than foreclosures the vast majority of the time, loss mitigation processes are often prolonged when the strategy changes. This most commonly occurs when a short sale transaction must transition to a deed-in-lieu. This increasingly common scenario can disrupt progression and inevitably requires added resources, leading to a more difficult, lengthier process for the homeowner.

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This March, Hope Now reported that, while loan modifications in January 2016 were down 10 percent from the previous month, deeds-in-lieu jumped 17 percent in the same timeframe. It is likely that many of these deed-in-lieu transactions originated as short sales. With this upward trend, lenders are beginning to realize the importance of making loss mitigation adjustments more quick and seamless, and are looking first to technology to help.

Traditionally, lenders have managed their short sale and deed-in-lieu processes separately – separate departments, different personnel. From an organizational perspective, this might work. However, should a circumstance require a change in the loss mitigation strategy, lenders are often forced to start the process over entirely. For instance, if during a short sale a borrower is unable to sell his or her home within a given timeframe, a lender must typically close out the short sale and shift the transaction to either a foreclosure or deed-in-lieu. When using disparate systems, the information housed in the short sale platform would be completely lost when the transaction converts, ultimately causing delays. Instead, lenders can benefit from a dual-path approach, which entails running courses for a short sale and deed-in-lieu simultaneously. Then, if approval on a deed-in-lieu is granted first, there is a smoother transition to REO. Or, if a short sale begins, yet must transition to a deed-in-lieu, there is no need for the lender to start the process from the beginning.

By handling multiple loss mitigation options concurrently and within a common system, any notes or documents on file, messaging communication, property valuations and title work, all remain saved and can simply transfer should the strategy change. There is no need for information to be lost or for activities to be duplicated. Based on the frequency with which loss mitigation scenarios adjust, it is more important than ever for lenders to apply the methodology and technology to avoid further postponements, interruptions and confusion. Leaning on a single system as opposed to multiple platforms inherently provides lenders greater transparency throughout their loss mitigation departments while ensuring homeowners receive consistent and ongoing communication.

As many Americans continue to struggle to fulfill a mortgage, lenders remain responsible for both helping borrowers find an optimal resolution while preventing another downturn. The industry’s enduring need for loss mitigation solutions will continue to drive foreclosure alternatives. Given this, lenders should be updating their processes to ensure the short sales and deeds-in-lieu they pursue are handled in a way that results in the best possible outcome for the homeowners they serve.

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Are You In The Know About What The Regulators Have Done?

Did you know that in the year 2015, the FFIEC released eight regulatory updates? Five of these updates focused solely on operational risk management. It can be difficult to keep abreast of the growing importance of operational risk management in the financial industry. Staying current with all compliance regulations can be a full time job, a job that becomes even more daunting when added to an already long list of duties. As a result, many institutions have turned to outsourcing their technology as a cost-effective approach to managing their operational risk management. These institutions have found this approach to be a double-edged sword: on one hand they are minimizing the burden of manually managing tasks, but on the other they are utilizing several different systems that do not work together. The solution is to look for one vendor that can centralize all systems onto one platform.

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Regulators are not going away, and they are not letting up. The five most current FFIEC updates included changes to Appendix J, updated cybersecurity priorities, updated cybersecurity mitigation tasks, release of the Cybersecurity Self-Assessment tool, and revision to the IT Technology Examination Handbook, emphasizing the importance of managing enterprise-wide risk management. These five regulatory updates highlight disaster recovery planning, vendor management, and cyber incident response. The FFIEC along with all regulatory agencies are creating correlations between areas of operational risk in more ways than one. How can anyone possibly hope to keep up?

A common problem found in this industry is the vicious cycle of the “Band-Aid” approach. Implementing quick-fix systems and processes that will cover only these five regulatory updates is not economical or sensible. Perhaps these fixes will provide coverage for one year, but what happens when the FFIEC rolls out five new regulations? Continually seeking short-term solutions for current problems can leave one vulnerable to fines, penalties, and system inadequacies. A Band-Aid is useful small and short term issues but will not fix a bullet hole. The best solution for the long-term is to ensure continued compliance and to be proactive to regulatory agencies. The only solution is to centralize all operational risk management onto one platform.

Centralizing operational risk management onto one platform will allow your institution to breathe a sigh of relief. Vetting one vendor to handle all areas of operational risk will not only minimize your third party risk, but will also integrate all data into one area. For example, if your vendor management program is advising you that Vendor X is a high-risk vendor, while your disaster recovery program tells you that the processes completed using the technology of Vendor X have a low recovery time objective, there is certainly something amiss. If these two systems do not speak to each other, then these correlations will remain unseen. All areas of operational risk management are intertwined together, and they should be treated as such. Centralizing operational risk management can eliminate double data entry, reduce the amount of resources needed to manage the systems, and put you ahead of the regulators with a new and proactive approach.

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How To Keep Up

Overwhelmed by all the client projects you have to manage? Having a solid process can help you keep track of them.

One process is to break up all tasks by days and weeks, suggests the following Redbooth infographic. For example, every day, follow up on late tasks and monitor your team workload.

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Also, provide a weekly update for team and management, recommends Redbooth.

“You can scan the weeks ahead for potential roadblocks.”

Moreover, planning ahead for those team and client meetings can help them run more smoothly. “Let participants contribute to meeting agendas in advance,” states Redbooth.


Not Everyone Had Trouble With TRID

Fidelity Bank is a lender on the move. Started in 1905 as a small mortgage company in Wichita, Kansas, it is now a full service bank with branches throughout Kansas and Oklahoma, and which processes loans in all 50 states. A company with this much going on might be thrown off track by a regulatory change as large as TRID, but not Fidelity Bank – they were ready.

They learned about TRID developments early and often. As a result of their collaboration with the Compliance Department at Mortgage Builder, Fidelity Bank received frequent updates along with instructions on what to do about this complex regulatory change. “Mortgage Builder is on top of compliance,” said Barry Park, VP at Fidelity Bank. “They worried about TRID so we did not have to.” With timely and insightful updates they were able to fully prepare and begin testing well in advance of the go-live date.

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In the two years leading up to the TRID deadline, much activity was happening at Mortgage Builder and at Fidelity Bank. Mortgage Builder made significant modifications to its LOS platform to fully support TRID by the original August 1, 2015 deadline, but that was only half the task. Mortgage Builder spent a comparable amount of time with their customers helping them to prepare with training, workshops, conferences, and extensive online resources. “We used them all,” added Barry.

By October, the extended deadline, Fidelity Bank was more than ready and the roll-out went smoothly. The loan officers didn’t see any changes to their day-to-day routines and the back-office employees were well trained. Despite initial predictions, Fidelity team members found that they were closing loans in the same amount of time as before. In the event that they had any questions, Mortgage Builder was always on hand to provide answers and help with audits.

Barry, who has been in the industry for 18 years, knows he made the right choice in LOS vendors seven years ago. “With Mortgage Builder I feel ahead of the game. Regulatory changes are a fact of life and I know this bank will be as prepared for HMDA as we were with TRID.” He also looks to Mortgage Builder as a source for advanced mortgage technology, which is continuously helping him close more loans with less work by automating tasks that he and his team were used to doing by hand. His only comment: “We are spoiled.”

Moving forward, Fidelity Bank will continue to rapidly grow, and will be focusing on attracting more borrowers and establishing themselves in more cities. With compliance a non-issue and constant advances in loan automation, they will have no trouble succeeding.

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Be Strategic

Lenders and vendors alike need to be smart and strategic. In some cases that means knowing what you do best and going out and acquiring someone who does something that you don’t do that great so you can be great all around. We can’t all be good at everything.

For example, Caliber Home Loans, Inc., a leading residential mortgage origination and servicing company, has entered into a definitive agreement to acquire substantially all of the assets of First Priority Financial, a regional residential mortgage lender with branches and originators serving California, Oregon, Washington, Idaho and Iowa. The terms of the transaction were not disclosed.

Headquartered in Fairfield, California and founded nearly 40 years ago, First Priority Financial has more than 370 employees focused on providing clients with competitive home financing and a broad range of loan products. The acquisition will expand Caliber’s geographic footprint in the Western United States. Following the acquisition, Caliber will have a servicing portfolio of approximately $90 billion, licenses in 50 states, and a salesforce of more than 1,000 across more than 250 retail locations throughout the United States.

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“With the addition of First Priority Financial, Caliber continues its strategy of expanding into high-growth, regional markets with attractive long-term opportunities,” said Sanjiv Das, Chief Executive Officer of Caliber. “This combination will help build on Caliber’s retail production channel, particularly in the attractive Northern California market. We believe First Priority Financial is the right fit for Caliber as they share our strong customer-centric culture and we welcome their talented team to the Caliber family. We look forward to working together to better meet the unique financing needs of homeowners across the country.”

“Since our founding in 1977, we have made it our mission to grow with our industry and adapt to an evolving market,” said Michael Soldati, Chief Executive Officer and President of First Priority Financial.  “With this transaction, we are excited to achieve another important milestone in our history and join forces with Caliber, one of the country’s leading mortgage providers, to offer our customers a broader suite of lending services. Caliber’s national scale, as well as its direct access to capital markets, exceptional customer service and advanced technology, make it the ideal partner for First Priority Financial. As part of a more dynamic organization, we are confident we will be better positioned to serve our clients and enable them to obtain the very best loan for their unique situation.”

The transaction is expected to close by early July 2016.

And we’re seeing smart acquisitions on the vendor side of the business, as well. For example, Black Knight Financial Services recently acquired eLynx. eLynx solutions help automate paper-intensive processes, improve workflow, reduce costs and support compliance with industry regulations. Black Knight supports many of the nation’s largest mortgage lenders and servicers with a comprehensive, integrated solution suite. With the addition of eLynx’s capabilities to Black Knight’s current offerings, Black Knight will now offer lender clients:

>>  A flexible document delivery platform, which securely facilitates interchange between consumers, lenders, title providers and other transaction participants either electronically or via proprietary, integrated print and mail capabilities;

>>  A private-labeled, mobile-friendly consumer portal to support process transparency; collect and deliver documents throughout the loan lifecycle; and schedule inspections and closings;

>>  Connectivity to an industry-leading network of settlement agents; and

>> Support for data-validated electronic mortgage, including electronic document delivery (eDelivery), eSignature, eClosing, and eRecording as well as electronically registering and submitting the mortgage note to an electronic vault.

“This is an exciting step for Black Knight as we announce our first acquisition as a publicly traded company,” said Black Knight Executive Chairman Bill Foley. “Over the last two-and-a-half years, we have successfully implemented our business plan to restructure the company and develop a strong cross-selling organization. It is now time to begin executing our acquisition strategy to accelerate our growth profile and fill out our product offerings.”

“Integrating the strengths of Black Knight and eLynx will give clients an even sharper competitive edge, and will significantly expand Black Knight’s opportunities to cross-sell our comprehensive solutions,” said Black Knight President and CEO Tom Sanzone. “We believe this combination will continue to drive process standardization and efficiency throughout the loan lifecycle, and will positively impact industry initiatives focused on TRID, consumer advocacy and eMortgage adoption.”

“We are excited to become part of Black Knight, a company well known for providing leading technology to the mortgage industry,” said Sharon Matthews, CEO of eLynx. “I am confident eLynx and Black Knight clients will benefit from the combination of our powerful technologies and mutual commitment to delivering innovative solutions to the mortgage industry.”

I think we’ll see more strategic acquisitions like this going forward.

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How To Get Noticed

Every company struggles to get the attention of lenders. Every company wants that all-important first meeting. So, how do you do it? According to an article entitled “How Top Salespeople Land Hard-to-Get Meetings” written by Stu Heinecke published in the Harvard Business Review, Richard Branson famously said, “Succeeding in business is all about making connections.” Mr. Branson surely has little trouble getting anyone he wants on the phone, but the rest of us could use a little help.

This type of contact marketing can take many forms, but there are five takeaways you can use to make your own high-level connections:

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Deliver something of value. Here’s your chance to stand out, to be audacious, and to create a meaningful connection. The objective is not to attempt to bribe someone to meet with you, but to deliver something that makes a difference to the recipient. It should express your brand personality but contain absolutely no pitch. Your first mission is simply to create a connection, to establish yourself as someone they’ll want to listen to. While you might use search results and social media postings to try to determine an executive’s specific challenges and desires, there are also some simple assumptions you can use to open doors, based on universal desires shared by most business leaders. We all want more success, recognition, and income, but we also want to do the best job we can and leave a mark.

Offer something of further value. As your request for contact is received, it’s a good idea to include something additional as a reward for taking the proposed meeting or phone call. Some campaigns split a gift in two — a remote-control model sent with a note explaining that the withheld control unit will be delivered during the meeting, for instance. Although this has reportedly worked, it can come off as being too pushy. A far better approach would be to offer relevant research, a white paper, or a free audit of some aspect of the target executive’s business when the meeting takes place, as a way to provide the incentive you may need to actually get the meeting. The point is to continually add value to the connection building between you in a way that helps the executive do their job more effectively.

Include the executive assistant. Many sales reps do their best to avoid, circumvent, or trick the executive assistants they encounter, but that is a fatal mistake. Don’t think of assistants as gatekeepers; think of them as talent scouts, always on watch for extraordinary opportunities their executives would otherwise miss. Once they’ve rendered assistance, be sure to thank them with a modest but meaningful gift. If an assistant has been helpful to me, I often send a card. Whatever you send, don’t make it look like a bribe; a dozen roses is way too much, but a gift card is perfect. Just make sure it expresses your appreciation for their help.

Secure the meeting. Arranging a call or meeting can be painfully tedious as all parties attempt to coordinate openings in their schedules. You can either suffer the details or use one of many productivity tools on the market to get your meeting on calendars, such as Calendly,, ScheduleOnce, and TimeTrade. I recommend, an artificial intelligence agent that makes the necessary arrangements via email, from the initial request right on through to confirming meeting times on everyone’s calendars.

Connect, don’t pitch. Once you’ve gone through the trouble of arranging the meeting, it would be a waste to ruin it with a misguided pitch of your company’s product or service. So don’t do it. Instead, be ready to have an exploratory, but informed conversation about an issue by researching news stories or mentions in their social media feeds. Share other cases in which you’ve helped companies in their industry gain new competitive advantages, but never start the meeting assuming your offer is right for them. Be human, explore, and have a conversation.

The bottom line is that you have to produce a contact marketing campaign that makes you stand out as someone the recipient really needs to get to know. Do your research and figure out the sweet spot between what your future client needs most and why you’re the best person to help them reach their goals.

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Unexpected Consequences

While everyone and their brother is eagerly denouncing the numerous issues associated with the TRID requirements including the associated costs to lenders and consumers, the uproar over delays in the process and delays in closing loans seems to have subsided. Now that we have experienced six months of working through the issues most individuals in the real estate community have come to terms with taking the extra time to close.

One unintended consequence was the recent uproar around TRID document requirements, specifically those having to do with the form itself. It seems that private investors became concerned about such things as font size and the width of the lines making up the boxes since they are exposed to civil liabilities if consumers want to sue them over these issues. However, as pointed out by members of the CFPB themselves, the chances of any judge allowing such a lawsuit to proceed are approximately nil. The CFPB even went so far as to issue a statement to calm down the market. Of course no one happened to mention that the alarmists were those due diligence firms that were conducting reviews and used this issue to increase their reviews to cover the tiniest of these issues; for an additional fee of course.

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There is however another consequence that doesn’t impact originations or the secondary market, but may result in having the greatest impact of all. It seems that many lenders are finding that when the loan is prepared for, or most often, when it returns from closing, there are TRID issues that need to be corrected. In order to make sure that these corrections are completed in the permitted time frame, loans are being checked and corrections made before their status is updated to close in the system. Why would this be a problem you ask? Well as in all processes, the output of one action is typically the input of the next. Therefore, it seems reasonable to assume that what happens after closing is likely to impact all of those post-close activities.

Let’s talk about servicing for example. Whether you are retaining servicing or selling it and transferring the loans to another servicer, getting the loan set-up in servicing as soon as possible is critical. If changing the loan status to “closed and funded” is delayed it can have a cascading effect on how well and how timely servicing is able to meet their notification requirements and get payment coupons to the borrowers. Long delays in “curing” these TRID problems could have a very negative impact.

Another example of this is Quality Control. While most think of QC as something that happens months after the loan is closed, it is in fact also dependent on the loan status being moved to closed. This has to be done within a short period at the beginning of the month immediately following the month in which the loans were closed. If the loan status change to closed is delayed, the sample selected may be missing a significant portion of the population from which to choose the sample. This can result in inaccurate totals of errors or result in reports that lead managers and/or investors to conclusions that cannot be supported by the population. This could lead to investor relationship issues and/or a pricing impact for some lenders. Based on these examples it seems probable that the impact of TRID will go a lot further and be a lot more expensive than was ever imagined.

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We Need Some New Ideas

There is a lot of talk about how to attract Millennials. There is a lot of talk about increased efficiency. There is a lot of talk about digital or electronic mortgages. But how do we do any/all of these things? We need some new ideas to attract younger borrowers and digitize the mortgage process. The same-old, same-old won’t work. Here’s what I mean:

I just read that Aspire Performance Improvement Ltd will launch a unique and innovative digital self-service maturity assessment and corporate diagnostic based business model.

Aspire focuses on empowering clients to conduct their own consultancy engagements by training client team members in the ASPIRE performance improvement engagement approach and use of the CXO Diagnostic model range. This is designed to help clients quickly pinpoint problems, issues and challenges and proactively solve them through interventions which help turnaround, stabilize, optimise, transform and drive business growth.

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The company’s vision is to operate as a transparent organisation which shares its intellectual property for the benefit of the majority and not just the privileged few. Aspire has started to publish its public training course schedule, via Eventbrite, and will also be running tailored in-house courses for clients and consultancy organisations who wish to use the Aspire approach and collateral with their clients.

Aspire expects to lower the average cost of a traditional consultancy engagement from the £200k to £500k engagement cost down to an agile technology enabled £35k-£75k cost, significantly increasing the likelihood of a positive return on investment from the interventions recommended.

The Managing Director of Aspire Performance Improvement, Robert Peopall, who has previously worked for leading business and technology consultancy firms HP, CSC and Ernst & Young in business transformation director roles stated, “We are extremely excited about taking a fresh innovative technology enabled approach to market that allows clients to solve their own problems in a standardized and repeatable manner reducing their dependency on expensive third party consultancy services. This is not to say that third party consultancy services are not a worthwhile investment, we are merely offering clients a choice; a different pragmatic and practical option that recognizes the scarce budgets and tough reality of today.”

Why do I bring this up? Because it’s an example of a company putting a new and innovative twist on an old practice to make substantial improvements. Why don’t we do this in mortgage lending?

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