What A Difference Three Days Make

The TILA-RESPA Integrated Disclosure rule (TRID) is scheduled to take effect on October 3 after nearly two years of industry-wide hand-wringing. And, while the industry has had ample time to prepare for the changing regulations, lenders and settlement partners continue to be particularly concerned about the so-called “3-day rule,” and how this review period might lengthen time to close.

In short, one of the requirements of TRID is that lenders must provide borrowers with the Closing Disclosure (CD) three business days before closing the loan. Unless the CD is hand-delivered, the time period will typically expand to six or seven days in advance of closing (three days in transit, three days for review, plus one day to cover a Sunday or Federal holiday, if applicable). This three-day review period has been a catalyst for lenders to re-evaluate their current loan processes to identify ways they can “buy back” time so as not to lengthen the time to close. Gone are the days when last-minute changes to loans were routine, and settlement agents were printing final disclosures minutes before arriving at the closing table. In fact, many industry insiders are expecting a one- to-two week delay in closings once TRID takes effect, and are predicting that closing dates may be pushed out even longer until the industry can adjust to the changes to deliverables and their related timelines.

Featured Sponsors:

[huge_it_gallery id=”2″]

How can the industry cope with the three-day review period without adding a week or more to the time to close? As lenders re-evaluate their loan processes, forward-thinking lenders will realize that technology that automates key steps throughout the loan process, including TRID tolerance checks, is critical to satisfying the three-day review period without lengthening time to close. The right technology automates key steps along the loan production cycle, from onboarding to post-close compliance checks, reducing labor by up to 80 percent. And, as a result, lenders who leverage technology to speed the loan process will enjoy a compelling competitive advantage in delivering faster, on-time closings.

For example, automated document recognition technology automatically identifies, names and indexes more than 250 common loan documents, speeding the onboarding of loans by as much as 90 percent. This technology also provides a missing documents report to alert lenders of any missing documents to ensure that lenders are onboarding complete, compliant loans. As another example, data extraction technology replaces the manual “stare and compare” model of humans visually scanning numerous documents to compare data across document to ensure data integrity. Instead, technology is able to automatically extract critical data from loan documents, compare values and run the data through rules engines, flagging any values that fall outside of established parameters and require review by a human. This exception-based approach reduces labor costs while ensuring a consistent, repeatable process that eliminates human error.  This automation saves valuable hours and days – time that can be allocated to complying with the three-day review period, and more.

Featured Sponsors:

[huge_it_gallery id=”3″]

Finally, electronic transaction and electronic closing capabilities, including E-Signatures, expedite the delivery and signing of mortgage-related documents, including borrower disclosures, saving the time required to print, assemble and ship physical documents. Not only do electronic transactions streamline the process and save valuable time, but they appeal to a new generation of consumers who have become more comfortable with electronic transactions in their everyday financial lives.

While TRID will ultimately improve the loan process for borrowers, it is likely to disrupt the loan life cycle for lenders, including lengthening time to close. Lenders can re-capture precious time along the loan life cycle by leveraging technology to automate key steps in the loan process, completing key tasks up to 80 percent faster. Rather than accepting that complying with TRID, including the three-day review period, will lengthen close times by a week or more, lenders should re-evaluate their entire loan process to understand where they can introduce technology to buy back hours, and days, from key steps in the loan manufacturing process – hours and days that are better allocated to the three-day review period, as well as other timeline-based deliverables.

About The Author

[author_bio]

From Compliance Comes Technology Opportunities

When it comes to rule integration efforts such as the TILA-RESPA Integrated Disclosures (TRID), the effort can sometimes feel thankless especially when the outcome—compliance— gets rolled into the day-to-day processes. There is no cheering…no standing ovation when compliance is a success. Instead, upon final implementation, the individuals and leaders involved in compliance efforts take their first deep breath and mumble “we made it.”

Well, I am here to tell you that when compliance initiatives are accomplished with long-term business strategy in sight, the outcome goes beyond survival: It becomes a lender’s competitive advantage. Here are three ways to make the most of major compliance initiatives.

1.) Technology Strategy vs. Forced Change

At this point, every lending technology provider is ready for TRID but some providers are more accustomed to strategic decision-making than others. There is a difference between making system changes and driving technology advancements. If your provider’s goal is to simply help lenders achieve the minimal level of compliance and keep them out of the spotlight, then the lending technology provider may be a little short-sighted.

Featured Sponsors:

[huge_it_gallery id=”2″]

Everyone knows that compliance is critical but technology decisions should not be a byproduct of compliance requirements. Instead, compliance should be one among many outcomes of technology advancement. Lending technology decisions should be made based on a need to improve origination performance with the ultimate question being “how can we add value to the lender’s operation?” While compliance can serve as inspiration for technology decisions, it should not be the only reason a technology change is made. For example, at Wipro Gallagher Solutions, we focus on how we can drive down compliance costs using automation, minimize user error, or innovate tools that accelerate the origination manufacturing process. Now, when we talk about being TRID-ready to our clients we are also talking about adding business value.

2.) Getting Rid of Technology Limitations

Though few may recognize it now, the time and effort spent upgrading from a legacy system to a system that can handle compliance needs will ultimately generate costs savings and optimize processes. While compliance with TRID and other Dodd-Frank rules have created significant financial, time and resource constraints for lenders it has also enabled them to rid of technology limitations and outdated systems. For some, TRID prompted lenders to consolidate systems and move to an enterprise-wide platform which allows them to improve operational oversight and minimize business risk. Others have taken the opportunity to move to a cloud-based lending system to minimize IT costs. Some are seeking out larger organizational changes such as channel expansion or adding mobility to their strategy. When switching systems, lenders are able to ensure regulatory compliance and address other business and technology needs.

Featured Sponsors:

[huge_it_gallery id=”3″]

3.) Customer Experience is Critical

For those lenders and technology providers that understand the business value of the TILA-RESPA Integrated Disclosures will keep in mind that the overarching goal of recent regulation is to create a more transparent lending process. It is important to keep in mind that while transparency is enforced by regulators, the demand for transparency is driven by the consumer. Implementing Dodd-Frank regulation is an opportunity to rebuild borrower confidence and strengthen relationships.

For many lenders and their technology providers, compliance integration presents an opportunity to replace outdated processes and infrastructures with a more borrower-centric approach. Lenders that focus only on business improvements (such as efficiencies and productivity) are missing the opportunity to align with borrower needs. Borrowers today seek a simplified, streamlined, and transparent experience. Changes prompted by compliance should reflect that demand wholeheartedly. A holistic transformation that extends from back-office optimization (meets the lender’s compliance and business needs) to customer-facing service (excels the borrower’s needs) will bring about competitive advantage. Lenders that keep the spirit of TRID and Dodd-Frank at the forefront and remember its intent can take the rule one step further to improve the quality and simplicity of lending. This effort might include the adoption of modern technologies such as mobility and web-based lending or it may mean greater investments in borrower education.

These are just a few opportunities to make the most from recent compliance changes, however each lender should seek to identify how TRID and other compliance initiatives present unique opportunities to capture more business, improve efficiencies and minimize business risk. By focusing on overall strategy, lenders can better evaluate how regulation will impact their business in the long run.

About The Author

[author_bio]

Transforming Customer Service Into An Agent Of Change

Every organization strives to serve its customers at a world-class level; however, taking customer service past the concept of a “help desk” is often an afterthought. Most companies view support as something similar to the 1990s Maytag commercials, where the lonely repairman is waiting for someone to call so he can spring to action. As a result, support is often seen as a cost — a necessary but basic function that does no more than resolve individual customer issues using entry-level employees.

I believe that this line of thinking is flawed. In my view, customer service can provide valuable insight into the organization and should be seen as an opportunity to collect data that will help drive improvements in lenders’ people, processes, and technology.

By the time an issue makes its way to the customer service team, it has typically affected the customer and has potentially damaged the brand. Many believe a fast response time and a satisfactory resolution can actually increase brand value. While this may be true in some cases, most complaints tarnish the brand and drive costs up. Also, because customers and staff were affected, it is likely that management and/or executive involvement is required to remedy the issue at hand. At Accenture Mortgage Cadence, we refer to this as the “cost snowball effect.” If issues are identified and addressed before they move to the next step, the cost is limited. If an issue is not identified and addressed, the cost to correct it snowballs as the number of individuals and teams involved increases. Taking steps to ensure customer service teams are properly versed in how to handle issues can help keep such issues from snowballing.

Featured Sponsors:

[huge_it_gallery id=”2″]

As lead of the Accenture Mortgage Cadence service team, I have spent the last two years refining our support process. We have found that the customer-facing support group should not simply be a “help desk.” In today’s complex business environment, these teams cannot simply follow a series of scripted questions and responses and expect to resolve customer issues. Most issues require a highly capable individual with the authority and skills to resolve specific issues and refer others to the appropriate subject matter experts.

To resolve an issue in a timely and complete fashion, the support team also needs direct access to the organization’s subject matter experts. Customer service should be responsible for driving continuous improvement across the organization. They do this by seeking root cause, determining what needs to be fixed, and identifying what actions need to occur to prevent that specific issue from appearing again.

Featured Sponsors:

[huge_it_gallery id=”3″]

In most organizations, support uses a ticketing system that includes varying amounts of data about the specific support incident. Typically there is a description of the incident, the potential resolution, and a field that classifies the type of incident that occurred. This data should be used in conjunction with feedback from support subject matter experts, looking at aggregated data to drive continuous improvement within specific individuals, teams, processes, applications and infrastructure.

Support within any organization should be viewed as much more than a cost factory. Instead, it should be viewed as a feedback mechanism that can drive continuous improvement throughout the organization. Properly structured, customer support should be an agent of change for people, processes, and technology.

About The Author

[author_bio]

Using E-Mail To Grow Your Business

What you put into your e-mail, when you send it, and who opens it can make or break your email campaign.

Here’s a closer look the importance of each of those factors, according to the following Constant Contact infographic.

Featured Sponsors:

[huge_it_gallery id=”2″]

What are you putting into your email? About 20 lines of text and three or fewer images result in optimal email campaign click-through rates, reports Constant Contact.

When to send your emails depends on the industry you’re in. Mondays at 7AM are ideal for restaurants. For accountants and financial advisers, however, Tuesdays at 6AM works best.

Featured Sponsors:

[huge_it_gallery id=”3″]

To find out more about the what, when, and who of successful emails, click or tap on the infographic.

150901-who-what-when-why-of-email-marketing-infographic

 

Compliantly Drive New Business

Regulation. It’s everywhere these days. And on the marketing side of every mortgage company’s operations, as much as any other, it means that management has to take a much more active role in ensuring its brand and its products are correctly and compliantly represented in the marketplace. Communications with prospects, customers and even referral partners – whether driven from the center or by loan originators – must be controlled, but without inhibiting genuine creativity and individual initiative.

A dynamic marketing automation solution establishes a controlled environment in which ingenuity and enterprise are able to flourish. The system does this by providing management with five levels of control over the players in the marketing process. All you have to do is decide what degree of control you want to exercise in relation to each of the system’s key functions. For example, you can make sure that Loan Officers are unable to edit company information or upload unacceptable graphics or run on-demand campaigns that breach corporate guidelines.

Featured Sponsors:

[huge_it_gallery id=”2″]

The levels of management control available in leading marketing automation are as follows, working down from the most to the least restrictive:

Prohibition: Different types of users can be prevented from accessing a system function, or even an entire page, by means of the solutions “permissions” capability.

Authorization: Marketing materials created by users at lower levels in the corporate hierarchy cannot be implemented until approved at the center.

Alert: A defined set of fields is monitored and changes reported via a feed on the solutions Home page, enabling quick action to remedy any departure from company policy.

Oversight: Users at higher levels in the corporate hierarchy can “impersonate” users at lower levels, giving management an instant window on the activities of Loan Officers.

Reporting: A reporting module provides information that allows management to hold users at lower levels accountable for their performance.

Featured Sponsors:

[huge_it_gallery id=”3″]

AUTHORIZATION LOOP: Built into the solution is the ability to carefully manage marketing content and activities and to customize access ultimately reducing marketing compliance risk. A built-in authorization loop ensures that all content is approved by your nominated managers – for example: compliance officer, brand supervisor – before it’s made available for use in activity series and on-demand campaigns. When you copy, change or create any marketing material, the managers are notified by system-generated e-mail. They are free to approve or amend or even delete the item.

In today’s lending environment lenders need to focus on more than just TRID. It is critical for lenders to implement powerful marketing automation to properly handle marketing compliance and control. When looking to drive new borrowers to the point of sale do it compliantly with marketing automation.

About The Author

[author_bio]

Beefing Up Short Sales Bids With Expertise And Effort

Unlike with Uber and the ride-sharing revolution happening, there is no easily downloadable short sale management “app” that is going to instantly save you a lot of money and dramatically simplify your default servicing operation.  If someone creates one, they will be rewarded much like the founders of Uber because the problems plaguing servicers across the country are still widespread and increasingly complex. Servicers are more eager to avoid foreclosures than ever given extended timelines and high severities. So short sales are clearly an attractive alternative in many situations, but one of the biggest problems we see with short sales today is that original marketing plans start out way too low.  This occurs for a variety of reasons that evolve over time. However, the most effective strategies for elevating those marketing plan levels comes back to applying two old-fashioned solutions; expertise and effort.

The first challenge in avoiding under-valuing your property is understanding when a short sale should really be a deed-in-lieu of foreclosure so that you can make valuable repairs. The initial step is doing internal BPOs on every potential short sale opportunity so that you can begin to understand what, if anything, the house needs to make it eligible for FHA financing or to otherwise maximize value in a specific neighborhood. The servicer can then leverage the experience of the REO management team to assess the optimal strategy for the property. This is a point in the process where many property owners leave a lot of money on the table. We often spend tens of thousands of dollars when it makes sense from an ROI perspective. REO managers have become too focused on inventory management and too accustomed to sell “as-is” due to the priorities associated with the housing crisis. They need to re-discover the art of making impactful property improvements. It isn’t easy and it will usually take a few months, but the right servicer-REO manager combo can identify and execute on market-savvy rehab work that adds meaningful lift to the tail end of a disposition.

Featured Sponsors:

[huge_it_gallery id=”2″]

Effectively managing remediations can also keep you from listing properties too low. Many multi-unit properties in default are occupied by tenants and the landlord/owner (borrower) is uncooperative or absent. If the property has been identified as an at-risk property the owner can incur code violations for allowing the property to show signs of physical distress. Certain municipalities will fine the owner for providing services to the tenant for maintenance issues as minor as unclogging toilets or sending a locksmith to let a locked out tenant in the building. Often mortgagors can’t afford the upkeep or ignore remediating the complaints so the code violations can add up quickly. In these situations the servicer can save the note owner a lot of money by spending the time and using their expertise to carefully evaluate a prospective buyer’s remediation plan. Typically it is investors looking to rent or flip the property who are the natural buyers of homes requiring remediation plans given the added complexity and capital involved in the transaction. This makes sense and these buyers should be pursued if the plan is fair to the seller. But if the investor is asking for too much the servicer should be able to recognize it and step in. The servicer would then remediate the violations on its own to clear the items and likely end up selling the property at a better overall execution level.

Another pervasive challenge is the idea that a discount is always warranted simply because it is a short sale and the buyer will have to endure the pain of working with a large bank. But smaller and more nimble special servicers and their agent networks have developed skill sets doing short sales and even more specifically in 2nd lien negotiations and HAFA payouts given the volumes they have processed in recent years. They know who to call and how to facilitate a deal quickly at with the 2nd lien holders since those loans are highly concentrated among a few lenders. It just is not as slow and painful as many agents and borrowers assume with more counterparties today and it is servicer’s job to convincingly educate borrowers and on the under-appreciated efficiencies in the market.

Featured Sponsors:

[huge_it_gallery id=”3″]

The last challenge to short sale marketing plans (which I have room for in this column) is an ugly one; fraud. It is frighteningly common to see fraud where the borrower is in cahoots with an agent and a buyer (sometimes the borrower is actually also the new buyer) and they manage a short sale at a deep discount to market and then end up flipping the property three to six months later a much higher level. They will do “pocket listings” where they claim to have private showings and keep the property off the MLS. Others will flat out just ignore calls from the legitimate buying agents. The best way to fight this is to establish and use a trusted agent network. Another path is to demand that your properties are listed on the MLS. The MLS automatically feeds sites like realtor.com and Zillow in many areas which gives you an easy check. Lastly, whenever possible have someone local be sure there is a for sale sign on the property.

So you may not get all the way to an uber-esque valuation, but with some industry knowledge and attention, higher short sale executions are on the horizon.

About The Author

[author_bio]

Walzak Asks: REALLY!?

Today I was looking for some information on mortgage advisory groups just to see what’s out there. So I typed that group of words into my search engine and got nothing but real estate companies. REALLY! Since when do real estate agents know anything about mortgages? Sure they know that mortgage is spelled with a “t”, but beyond that I’m not sure what they know.

Featured Sponsors:

[huge_it_gallery id=”2″]

OK, to be fair, there are some well-educated, experienced real estate agents in the country and if you are lucky enough to find one they can be a big help throughout the process. Unfortunately, I have experienced way too many that fail to meet that criteria. For example, there was the real estate agent who was involved in the purchase of my current residence. Once we had found the house, she advised that we needed to look for a mortgage company and then suggested that she knew a loan officer who could work with us. When I purposely asked what we needed to do she advised that we “shouldn’t worry; the LO would fill out all the paperwork and all we would have to do was sign at closing.” REALLY! When I asked that a clause we inserted into the contract that required the property to appraise at the selling price or greater, the selling agent advised that she “can make sure that the appraisal comes in at price.” Of course she could! This was after we had negotiated the sales price of the house down the extra $100,000 the selling agent had listed it for. I had obtained numerous comps and knew what the value actually was. The seller was shocked that our offer was so low when the sales agent had listed it for so high. REALLY! Of course when the comps showed the true value she had no option but to advise her client to take our offer. No wonder housing prices escalated so much.   Then when I said I wanted to finance it with an 80-10-10 loan they both looked perplexed. I had to explain what I meant. And these are the people listed as mortgage advisors. REALLY!

Featured Sponsors:

[huge_it_gallery id=”3″]

To be fair, that was a while ago, so I had hoped that they had learned their lesson and were more knowledgeable about mortgages and the new regulations so that they really could at least assist their current clients.  Unfortunately that hope was dashed when I was talking to several agents and asked them how TRID was going to impact their business. The response I got was less than what I had hoped for. They readily confessed that they didn’t know much about TRID and what was involved. While they were aware and concerned that it may hold up closing, they had no idea why. Neither did they fully understand that there would be very different disclosures, what the limitation on fees were, and that there would be a very different Closing Disclosure. Their only question was “how can we get this waived?” REALLY! It wouldn’t surprise me if this problem was the impetus behind the TRID delay.

After all this industry has been through and all the regulations, examinations and scrutiny we are subject to, I have one question that has yet to be answered. Why are there no controls, requirements or limitations on Realtors? Where are the prohibitions against calling yourself a “mortgage advisor” when you have no idea what is required? And where is the CFPB? Aren’t they supposed to protect consumers? It sure seems liked they missed the boat on this one. Really!

About The Author

[author_bio]

The Non-Compliance Story

ComplianceEase, a provider of automated compliance solutions to the financial services industry, today released an analysis of compliance defects for closed loans and estimated that the cost of correcting these errors is increasing the cost of origination, on average, by approximately $28 for every loan. The analysis was based on a cross-section of 700,000 audits that were performed in ComplianceAnalyzer and RESPA Auditor during the first quarter of 2015. It found that 17 percent of the loans failed for Truth in Lending Act (TILA) reasons. Another 6 percent of the loans—or one in 15—failed for being outside of the Real Estate Settlement Procedures Act (RESPA) tolerances.

ComplianceEase estimates the average RESPA reimbursement was $328 for the 6 percent of loans that failed the RESPA tolerance test and $740 for the 2 percent of all loans that had an uncured RESPA violation (i.e., an error discovered by an attorney, borrower, or regulator after closing). This means that these defects are adding, on average, $28 per loan to the costs of origination, and that’s before the new TILA-RESPA Integrated Disclosure (TRID) rule takes effect in October.

Featured Sponsors:

[huge_it_gallery id=”2″]

In addition to reimbursement, the new TRID rule has a three-tiered civil money penalty that can range from $5,000 per day to $1 million per day for “knowing violations.”

The analysis also showed that one year after the enactment of the Qualified Mortgage (QM) rule, 4.5 percent of QM loans failed Safe Harbor tests and 11 percent of loans were mis-categorized as to their QM status.

Featured Sponsors:

[huge_it_gallery id=”3″]

“Based on our analysis, closing defects are already an expensive problem for lenders under the current rules, and are about to get riskier and more expensive under TRID,” said John Vong, president of ComplianceEase. “Lenders and settlement service providers will need to work together so they can produce higher quality loans and not add to the already high costs of origination.”

About The Author

[author_bio]

What’s Your Success Mindset?

We all want to be successful, but it isn’t easy. I think we can agree that Bill Gates is a very successful man, but that wasn’t always the case. His first business failed miserably.

Yes, one of the successful people in the whole world couldn’t make any money at first. Gates’ first company, Traf-O-Data (a device which could read traffic tapes and process the data), flopped. When Gates and his partner, Paul Allen, tried to sell it, the product wouldn’t even work. Gates and Allen didn’t let that stop them from trying again though.

Featured Sponsors:

[huge_it_gallery id=”2″]

Here’s how Allen explained how the failure helped them: “Even thought Traf-O-Data wasn’t a roaring success, it was seminal in preparing us to make Microsoft’s first product a couple of years later.”

Similarly, we all think of Benjamin Franklin as a very smart and successful man, but he didn’t start out that way either. Franklin’s parent could only afford to put him through school for ten years. That didn’t stop the great man from pursuing his education. He taught himself through voracious reading, and eventually went on to invent the lightning rod and bifocals. Oh, and he became one of America’s Founding Fathers.

Featured Sponsors:

[huge_it_gallery id=”3″]

So, what do Gates and Franklin have in common? What makes certain people successful? According to John Maxwell in the article “What’s the One Thing all Successful People Have in Common?,” some would say it’s great ability or intelligence. But we all can probably think of someone who’s not particularly talented who’s doing quite well.

Others would point to a privileged upbringing. In other words, a head start via training or opportunities that others didn’t have. But many successful people can point to very humble beginnings or to major obstacles that didn’t set them up to win in life.

And what about naked ambition? Sure, there are some very cutthroat “successes” out there, but there are also just as many kind and unselfish people who are succeeding in their field.

In my years of learning and teaching about personal growth and leadership, Maxwell believes that he has discovered the one thing all successful people do have in common. It’s described very well by one of his favorite authors, Dale Carnegie:

“The biggest lesson I have ever learned is the stupendous importance of what we think. If I knew what you think, I would know what you are, for your thoughts make you what you are; by changing our thoughts we can change our lives.”

How we think: Maxwell believes that’s the key to success, because thinking comes before action. We can’t do things that lead to success until we think in a successful way.

So what does successful thinking look like? It’s more than anyone can communicate in a short article like this one. However, if we’re going to boil it down to one thing, successful people take calculated risks. If you want to be successful you have to put yourself out there. Don’t be content to follow the crowd and expect success just to land in your lap. You have go out into the world and get your own success.

About The Author

[author_bio]